485BPOS 1 filerevised.htm filerevised.htm
 
 
 

Registration Statement No. 333-143353
811-09137

As Filed with the Securities and Exchange Commission on May 1, 2014


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-6

REGISTRATION UNDER THE SECURITIES ACT OF 1933]

Post-Effective Amendment No.   20            R

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No.    106             R


Sun Life of Canada (U.S.) Variable Account I
Registrant

Sun Life Assurance Company of Canada (U.S.)
Depositor

96 Worcester Street
Wellesley Hills, Massachusetts 02481
Depositor's Address

1-800-700-6554
Depositor's Telephone Number

Michael S. Bloom
Vice President and General Counsel
Sun Life Assurance Company of Canada (U.S.)
96 Worcester Street
Wellesley Hills, Massachusetts 02481
Name and Address of Agent For Service


It is proposed that this filing will become effective (check appropriate box)

£ immediately upon filing pursuant to paragraph (b) of Rule 485
R on May 1, 2014 pursuant to paragraph (b) of Rule 485
£ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
£ on (date)pursuant to paragraph (a)(1) of Rule 485.

If appropriate, check the following box:
£ this post-effective amendment designates a new effective date for a previously filed post-effective amendment.




 
 
 




PART A





 
 
 

 
Sun Executive VUL
 
Sun Life of Canada (U.S.) Variable Account I
A Flexible Premium Variable Universal Life Insurance Policy
Prospectus
May 1, 2014

This prospectus describes the variable universal life insurance policy (the “Policy”) issued by Sun Life Assurance Company of Canada (U.S.) (“we”, “us” or “Company”) through Sun Life of Canada (U.S.) Variable Account I (the “Variable Account”), one of our separate accounts.  The Policy is being offered as an individual policy.  This prospectus contains important information You should understand before purchasing a Policy.  We use certain special terms which are defined in Appendix A.  You should read this prospectus carefully and keep it for future reference.  You may choose among a number of Sub-Accounts and a Fixed Account Option.  The Sub-Accounts in the Variable Account invest in shares of the following Funds:

ASSET ALLOCATION
LARGE CAP EQUITY
AllianceBernstein Balanced Wealth Strategy Portfolio (Class B)
American Funds Insurance Series® Growth-Income Fund (Class 2)
BlackRock Global Allocation V.I. Fund (Class III)
American Funds Insurance Series® Growth Fund (Class 2)
Fidelity® VIP Balanced Portfolio (Service Class 2)5
American Funds Insurance Series® Blue Chip Income and Growth
Franklin Founding Funds Allocation VIP Fund (Class 2)1,8, 9
Fund (Class 2)
Franklin Income VIP Fund (Class 2)10
Columbia Variable Portfolio - Marsico 21st Century Fund (Class 2)
Invesco V.I. Equity and Income Fund (Series II)
Fidelity® VIP Contrafund® Portfolio (Service Class 2)6
MFS® Conservative Allocation Portfolio (Initial Class)1
Fidelity® VIP Index 500 Portfolio (Service Class 2)6
MFS® Global Tactical Allocation Portfolio (Service Class)
Franklin Mutual Shares VIP Fund (Class 2)11
MFS® Growth Allocation Portfolio (Initial Class)1
Invesco V.I. Comstock Fund (Series II)
MFS® Moderate Allocation Portfolio (Initial Class)1
Invesco V.I. Core Equity Fund (Series I)
MFS® Total Return Series (Service Class)
MFS® Growth Series (Initial Class)
PIMCO Global Multi-Asset Managed Allocation Portfolio
MFS® Research Series (Initial Class)
(Administrative Class)1,16
MFS® Value Portfolio (Service Class)
EMERGING MARKETS BOND
MFS® Value Series (Initial Class)
PIMCO Emerging Markets Bond Portfolio (Administrative Class)
Oppenheimer Capital Appreciation Fund/VA (Service Shares)
EMERGING MARKETS EQUITY
Oppenheimer Main Street Fund/VA (Service Shares)2
MFS® Emerging Markets Equity Portfolio (Service Class)
MID CAP EQUITY
HIGH YIELD BOND
Fidelity® VIP Mid Cap Portfolio (Service Class 2)5
American Funds Insurance Series® High-Income Bond Fund
Invesco V.I. American Value Fund (Series II)
(Class 2)
MFS® Mid Cap Growth Series (Initial Class)
MFS® High Yield Portfolio (Initial Class)
MFS® Mid Cap Value Portfolio (Initial Class)
INFLATION-PROTECTED BOND
The Universal Institutional Funds, Inc. Mid Cap Growth Portfolio
MFS® Inflation-Adjusted Bond Portfolio (Initial Class)
(Class II Shares)3
PIMCO Real Return Portfolio (Administrative Class)2
REAL ESTATE EQUITY
INTERMEDIATE TERM BOND
MFS® Global Real Estate Portfolio (Initial Class)
American Funds Insurance Series® Bond Fund (Class 2)
SHORT TERM BOND
Franklin U.S. Government Securities VIP Fund (Class 2)2,12
MFS® Limited Maturity Portfolio (Initial Class)
MFS® Bond Portfolio (Service Class)
SMALL CAP EQUITY
MFS® Government Securities Portfolio (Service Class)
DWS Small Cap Index VIP (Class B)8
MFS® Research Bond Series (Initial Class)
Franklin Small Cap Value VIP Fund (Class 2)13
PIMCO Total Return Portfolio (Administrative Class)2
MFS® Blended Research Small Cap Equity Portfolio (Initial Class)
INTERNATIONAL/GLOBAL EQUITY
MFS® New Discovery Series (Initial Class)
AllianceBernstein International Value Portfolio (Class B)2
MFS® New Discovery Value Portfolio (Initial Class)
American Funds Insurance Series® International Fund (Class 2)
Wanger USA2,4
American Funds Insurance Series® Global Growth Fund (Class 2)
SPECIALTY/SECTOR EQUITY
American Funds Insurance Series® Global Growth and Income
MFS® Utilities Portfolio (Service Class)
Fund (Class 2)
SPECIALTY/SECTOR COMMODITY
Invesco V.I. International Growth Fund (Series I)
PIMCO CommodityRealReturn® Strategy Portfolio (Administrative
MFS® International Growth Portfolio (Service Class)
Class)
MFS® Research International Portfolio (Service Class)
TARGET DATE
Oppenheimer Global Fund/VA (Service Shares)
Fidelity® VIP Freedom 2015 Portfolio (Service Class 2)1,7,8
Templeton Growth VIP Fund (Class 2)14
Fidelity® VIP Freedom 2020 Portfolio (Service Class 2)1,7,8
INTERNATIONAL/GLOBAL SMALL/MID CAP EQUITY
Fidelity® VIP Freedom 2030 Portfolio (Service Class 2)1,7,8
American Funds Insurance Series® Global Small Capitalization
MULTI SECTOR BOND
Fund (Class 2)
Franklin Strategic Income VIP Fund (Class 2)15
First Eagle Overseas Variable Fund4
  
MONEY MARKET
  
MFS®  Money Market Portfolio (Initial Class)
  

 
 
 

1 This Fund is a fund-of-funds, which invests substantially all of its assets in shares of other mutual funds.  This Fund may be more expensive than other Funds available under your Contract, as a fund-of-funds indirectly pays a portion of the management fees and other expenses incurred by the underlying mutual funds in which it invests.  As a result, You will bear, directly, the expenses of the Fund and, indirectly, a portion of the expenses of the underlying funds.   These expenses reduce the investment returns of both the Fund and the underlying funds. 2 For Policies with Investment Start Dates on and after October 6, 2008, allocations to these investment options are not permitted.
3 The Universal Institutional Funds, Inc. Portfolio uses Morgan Stanley UIF Portfolio as a marketing name.
4 This Fund does not have different share classes.
5 This Portfolio is in Variable Insurance Products III.
6 This Portfolio is in Variable Insurance Products Fund II.
7 This Portfolio is in Variable Insurance Products Fund V.
8 On and after November 15, 2010, this investment option is not open to new premium or transfers.
9 Formerly Franklin Templeton VIP Founding Funds Allocation Fund.
10 Formerly Franklin Income Securities Fund.
11 Formerly Mutual Shares Securities Fund.
12 Formerly Franklin U.S. Government Fund.
13 Formerly Franklin Small Cap Value Securities Fund.
14 Formerly Templeton Growth Securities Fund.
15 Formerly Franklin Strategic Income Securities Fund.
16 Formerly PIMCO Global Multi-Asset Portfolio.

Sun Life Assurance Company of Canada (U.S.)
96 Worcester Street
Wellesley Hills, Massachusetts 02481
(888) 594-2654

Neither the Securities and Exchange Commission nor any state securities commission has approved these securities or determined that this prospectus is accurate or complete.  Any representation to the contrary is a criminal offense.

 
 
 

Table of Contents


Topic
Page

Risk/Benefit Summary of Policy
About Who We Are
The Variable Account
Fund Investment Advisers and Subadvisers                                                                                                                             [INSERT PAGE NUMBER]
Selection of Funds                                                                                                                             [INSERT PAGE NUMBER]
Fees and Expenses of the Funds                                                                                                                             [INSERT PAGE NUMBER]
Potential Conflicts                                                                                                                             [INSERT PAGE NUMBER]
Our General Account
About the Policy
Application and Issuance                                                                                                                             [INSERT PAGE NUMBER]
Death Benefit Compliance Test                                                                                                                             [INSERT PAGE NUMBER]
Initial Premium Payment                                                                                                                             [INSERT PAGE NUMBER]
Insurable Interest Requirement                                                                                                                             [INSERT PAGE NUMBER]
Right to Return Policy Period                                                                                                                             [INSERT PAGE NUMBER]
Asset Allocation                                                                                                                             [INSERT PAGE NUMBER]
Dollar Cost Averaging                                                                                                                             [INSERT PAGE NUMBER]
Asset Rebalancing                                                                                                                             [INSERT PAGE NUMBER]
Premium Payments
General Limitations                                                                                                                             [INSERT PAGE NUMBER]
Guideline Premium Test Limitations                                                                                                                             [INSERT PAGE NUMBER]
Planned Periodic Premiums                                                                                                                             [INSERT PAGE NUMBER]
Allocation of Net Premium                                                                                                                             [INSERT PAGE NUMBER]
Modified Endowment Contract                                                                                                                             [INSERT PAGE NUMBER]
Supplemental Insurance Face Amount
Death Benefit
Policy Proceeds                                                                                                                             [INSERT PAGE NUMBER]
Death Benefit Options                                                                                                                             [INSERT PAGE NUMBER]
Supplemental Insurance Death Benefit                                                                                                                             [INSERT PAGE NUMBER]
Changes in the Death Benefit Option                                                                                                                             [INSERT PAGE NUMBER]
Minimum Face Amount                                                                                                                             [INSERT PAGE NUMBER]
Changes in Face Amount                                                                                                                             [INSERT PAGE NUMBER]
Increases in Face Amount                                                                                                                             [INSERT PAGE NUMBER]
Decreases in Face Amount                                                                                                                             [INSERT PAGE NUMBER]
Account Value
Account Value for Investment Options                                                                                                                             [INSERT PAGE NUMBER]
Net Investment Factor                                                                                                                             [INSERT PAGE NUMBER]
Splitting Units                                                                                                                             [INSERT PAGE NUMBER]
Account Value in the Loan Account                                                                                                                             [INSERT PAGE NUMBER]
Insufficient Value                                                                                                                             [INSERT PAGE NUMBER]
Grace Period                                                                                                                             [INSERT PAGE NUMBER]
Insured's Attained Age 121 (or 100 if 1980 CSO applies)                                                                                                                             [INSERT PAGE NUMBER]
Supplemental Benefits
Charitable Giving Benefit Rider                                                                                                                             [INSERT PAGE NUMBER]
Waiver of Monthly Deductions Rider                                                                                                                             [INSERT PAGE NUMBER]
Payment of Stipulated Amount Rider                                                                                                                             [INSERT PAGE NUMBER]
Loan Lapse Protection Rider                                                                                                                             [INSERT PAGE NUMBER]
Travel Assistance Endorsement                                                                                                                             [INSERT PAGE NUMBER]
Enhancement Benefit                                                                                                                             [INSERT PAGE NUMBER]
Transfer Privileges
Short-Term Trading                                                                                                                             [INSERT PAGE NUMBER]
The Funds’ Harmful Trading Policies                                                                                                                             [INSERT PAGE NUMBER]
Accessing Your Account Value
Surrender                                                                                                                             [INSERT PAGE NUMBER]
Partial Surrenders                                                                                                                             [INSERT PAGE NUMBER]
Policy Loans                                                                                                                             [INSERT PAGE NUMBER]
Deferral of Payment                                                                                                                             [INSERT PAGE NUMBER]
Charges, Deductions and Refunds
Premium Expense Load                                                                                                                             [INSERT PAGE NUMBER]
Mortality and Expense Risk Charge                                                                                                                             [INSERT PAGE NUMBER]
Monthly Expense Charge                                                                                                                             [INSERT PAGE NUMBER]
Monthly Face Amount Charge                                                                                                                             [INSERT PAGE NUMBER]
Monthly Cost of Insurance                                                                                                                             [INSERT PAGE NUMBER]
Other Charges and Expenses                                                                                                                             [INSERT PAGE NUMBER]
Directed Deductions                                                                                                                             [INSERT PAGE NUMBER]
Reduction of Charges                                                                                                                             [INSERT PAGE NUMBER]
Termination of Policy
Reinstatement                                                                                                                             [INSERT PAGE NUMBER]
Other Policy Provisions
Alteration                                                                                                                             [INSERT PAGE NUMBER]
Assignments                                                                                                                             [INSERT PAGE NUMBER]
Owner and Beneficiary                                                                                                                             [INSERT PAGE NUMBER]
Reports to Owners                                                                                                                             [INSERT PAGE NUMBER]
Illustrations                                                                                                                             [INSERT PAGE NUMBER]
Misstatement of Age or Sex                                                                                                                             [INSERT PAGE NUMBER]
Suicide                                                                                                                             [INSERT PAGE NUMBER]
Incontestability                                                                                                                             [INSERT PAGE NUMBER]
Addition, Deletion or Substitution of Investments                                                                                                                             [INSERT PAGE NUMBER]
Nonparticipating                                                                                                                             [INSERT PAGE NUMBER]
Modification                                                                                                                             [INSERT PAGE NUMBER]
Entire Contract                                                                                                                             [INSERT PAGE NUMBER]
Voting Rights
Distribution of Policy
Federal Income Tax Considerations
Our Tax Status                                                                                                                             [INSERT PAGE NUMBER]
Taxation of Policy Proceeds                                                                                                                             [INSERT PAGE NUMBER]
Withholding                                                                                                                             [INSERT PAGE NUMBER]
Tax Return Disclosure                                                                                                                             [INSERT PAGE NUMBER]
Tax Shelter Regulations                                                                                                                             [INSERT PAGE NUMBER]
Alternative Minimum Tax                                                                                                                             [INSERT PAGE NUMBER]
Other Tax Considerations                                                                                                                             [INSERT PAGE NUMBER]
Medicare Tax on Investment Income                                                                                                                             [INSERT PAGE NUMBER]
Loan Lapse Protection Rider                                                                                                                             [INSERT PAGE NUMBER]
Life Insurance Purchases by Nonresident Aliens and Foreign Corporations                                                                                                                             [INSERT PAGE NUMBER]
Possible Tax Law Changes                                                                                                                             [INSERT PAGE NUMBER]
Other Information
State Regulation                                                                                                                             [INSERT PAGE NUMBER]
Legal Proceedings                                                                                                                             [INSERT PAGE NUMBER]
Experts                                                                                                                             [INSERT PAGE NUMBER]
Registration Statements                                                                                                                             [INSERT PAGE NUMBER]
Financial Statements                                                                                                                             [INSERT PAGE NUMBER]
Appendix A - Glossary of Policy Terms
Appendix B - PRIVACY POLICY


This prospectus does not constitute an offering in any jurisdiction where the offering would not be lawful. You should rely only on the information contained in this prospectus or in the prospectus or Statement of Additional Information of the underlying mutual funds. We have not authorized anyone to provide you with information that is different.


 
 
 

Risk/Benefit Summary of Policy

Use of Policy

The Policy provides corporations and other entities life insurance coverage on employees or other persons in whose lives they have an insurable interest.  It may be used in connection with various types of non-tax-qualified executive benefit plans.

Right to Return Period

You may return the Policy within 10 days (or a longer period if required by applicable state law) beginning when you receive the Policy and receive a refund.

Premium Payments

Generally, You must make a minimum Initial Premium payment that will sustain the Policy for three months from its Issue Date.

You choose the amount and timing of subsequent premium payments, within certain limits.

We allocate your net premium payments among the Policy's Sub-Accounts and the Fixed Account according to your instructions.

CONTRACT BENEFITS

Account Value

The Account Value equals

 
·
premiums, plus

 
·
investment performance of the Sub-Accounts, the Fixed Account and the Loan Account; less

 
·
any partial surrenders and Policy charges.

Accessing Your Account Value

Cash Surrender Value is

 
·
Account Value, less

 
·
Policy Debt, plus

 
·
any Enhancement Benefit.

You may borrow from us using the Account Value as collateral. Taking Policy loans may increase the risk of Policy lapse.

You may surrender the Policy for its Cash Surrender Value. Surrender of this Policy is discouraged in the early Policy Years because the Premium Expense Loads are higher in those years.

You may make a partial surrender of only a portion of the Cash Surrender Value once per year after the Policy has been in force for one year.  Reducing the Cash Surrender Value with a partial surrender may increase the risk of Policy lapse.

A partial surrender may cause a decrease in Total Face Amount of your Policy if the Net Amount at Risk after the partial surrender exceeds the Net Amount at Risk before the partial surrender.  The Net Amount at Risk equals the Death Benefit minus your Account Value.

 
 
 

Death Benefit Compliance Test

For favorable federal tax treatment, the Policy must meet one of the following standards-

 
·
the Guideline Premium Test, or

 
·
the Cash Value Accumulation Test.

You choose the applicable test.  You may not change your election.

Please see the Death Benefit Compliance Test paragraph in the About the Policy section of the prospectus for the Guideline Premium Test and Cash Value Accumulation Test definitions.

Mortality Tables

For Policies with an Investment Start Date on or before December 31, 2008, the 1980 Commissioners Standard Ordinary (“CSO”) Mortality Tables apply.  For Policies with an Investment Start Date on or after January 1, 2009, the 2001 Commissioners Standard Ordinary (“CSO”) Mortality Tables apply.

Death Benefit

Specified Face Amount is the minimum amount of life insurance in the Policy.  Supplemental Insurance Face Amount is the amount of supplemental life insurance You elect.

You have a choice of three death benefit options-

 
·
the Specified Face Amount (Option A); or

 
·
the Specified Face Amount plus your Gross Cash Surrender Value (Option B); or

 
·
the Specified Face Amount plus cumulative premiums paid (Option C).

You may change your death benefit option on any Policy Anniversary, subject to our underwriting rules then in effect.

At any time, You may-

 
·
increase the Specified Face Amount or Supplemental Insurance Face Amount, subject to satisfactory evidence of the Insured’s insurability; or

 
·
decrease the Specified Face Amount or Supplemental Insurance Face Amount to a level not less than the minimum specified in the Policy.

Investment Options

You may allocate your net premium payments among the Sub-Accounts and the Fixed Account.

You may transfer amounts from one Sub-Account to another or to the Fixed Account, subject to any limits that we or the Funds may impose.

You may transfer amounts from the Fixed Account, subject to our transfer rules in effect at time of transfer.

Supplemental Benefits

You may supplement the Policy with the following riders where available-

 
·
waiver of monthly deductions
 
·
payment of stipulated amount
 
·
loan lapse protection
 
·
charitable giving benefit
 
·
travel assistance

We will deduct the cost, if any, of the rider(s) from the Policy's Account Value on a monthly basis.

CONTRACT RISKS

The Variable Account

We have established a separate account (the “Variable Account”) to fund the variable insurance benefits under your Policy.

The assets of the Variable Account are free from our general creditor's claims.

The Variable Account is divided into Sub-Accounts.

Each Sub-Account invests exclusively in shares of a corresponding mutual fund.

When You choose Sub-Accounts in the Variable Account, your benefits will fluctuate because the benefits reflect the impact of certain economic conditions on the mutual funds underlying the Sub-Accounts You have elected.  These conditions include, but are not limited to

 
·
inflationary forces,

 
·
changes in rates of return available from different types of investments,

 
·
changes in employment rates and

 
·
the presence of international conflict.

With such Sub-Accounts, you assume all investment risk.  Investment risk is the risk of poor investment performance.

Poor investment performance can result in a loss of all or some of your investment.

A comprehensive discussion of the risks of such Sub-Accounts may be found in the underlying Fund's prospectus.

It is unsuitable to purchase a life insurance policy as a short-term savings vehicle because the Premium Expense Loads are highest in the early Policy Years.  Premium Expense Loads and other insurance-related charges are appropriate to a life insurance policy and not to a short-term savings vehicle.

Partial surrenders may only occur annually after Policy Year 1 and may not exceed the Account Value minus any outstanding Policy Debt.

What if Charges and Deductions Exceed Account Value less Policy Debt?

Your Policy may terminate if your Account Value less Policy Debt is insufficient to pay all charges and deductions then due.  If this occurs, we will send You written notice and allow you a 61 day grace period.  If You do not make a premium payment within the grace period sufficient to cover all charges and deductions due, the Policy will terminate at the end of the grace period.

Federal Tax Considerations

Purchase of, and transactions under, the Policy may have adverse or unfavorable tax consequences that you should consider.  You may wish to consult a qualified tax professional prior to purchase regarding tax treatment of death benefits and surrenders.

 
 
 

The following tables describe the fees and expenses that You will pay when buying, owning and surrendering the Policy. The first table describes the expenses that You will pay at the time that You buy the Policy and at the time of each subsequent premium payment.

TRANSACTION FEES
Charge
When Charge is Deducted
Amount Deducted
Premium Expense Load1
 
Maximum Charge on Premium up to and including Target Premium:
 
Maximum Charge on Premium in Excess of Target Premium:
 
 
Upon premium receipt
 
 
Upon premium receipt
(as a % of premium)
 
 
35%
 
5.0%
 
Illustration Charge
Upon fulfillment of illustration request in any Policy Year
 
$25.00 per illustration
Loan Lapse Protection Rider2
 
Maximum Charge:
On the Rider Exercise Date
(of Account Value)
 
3.5%

The next table describes the fees and expenses that You will pay periodically during the time You own the Policy, not including Fund fees and expenses.

PERIODIC CHARGES OTHER THAN FUND OPERATING EXPENSES
Charge
When Charge is Deducted
Amount Deducted
Cost of Insurance for Specified Face Amount3
 
At the beginning of each Policy Month
(per $1000 of Specified Face Amount Net Amount at Risk “SFANAR”)
Maximum Charge:
Minimum Charge:
Representative Owner Charge4:
(male, nonsmoker, preferred, medically 
underwritten, Issue Age 45, Policy Year 1)
$83.33
$0.01
$0.12
 
Cost of Insurance for Supplemental Insurance Face Amount3
At the beginning of each Policy Month
(per $1000 of Supplemental Insurance Face Amount Net Amount at Risk “SIFANAR”)
 
Maximum Charge:
Minimum Charge:
Representative Owner Charge4:
(male, nonsmoker, preferred, medically underwritten, Issue Age 45, Policy Year 1)
$83.33
$0.01
$0.12
 
Mortality and Expense Risk Charge5
 
Maximum Charge:
Daily
(on the assets allocated to the investment options in the Variable Accounts)
 
0.60%
Monthly Expense Charge
 
Maximum Charge:
Minimum Charge:
At the beginning of each Policy Month
  
 
 
$10.00
$5.00
Monthly Face Amount Charge11
 
Maximum Charge:
Minimum Charge:
Representative Owner Charge4
(Issue Age 45, Policy Year 1)
At the beginning of each Policy Month
(per $1000 of Specified Face Amount)
 
 
$0.20
$0.07
$0.07
Loan Interest6
At the end of each Policy Year
(as a % of Policy Debt)
 
4.0%
Flat Extra Charge7
At the beginning of each Policy Month
(per $1000 of Specified Face Amount and Supplemental Insurance Face Amount)
 
Maximum Charge:
    
 
$50.00

 
 
 

The next table describes the charges You will pay periodically during the time You own any riders attached to the Policy.

OPTIONAL CHARGES
Charge
When Charge is Deducted
Amount Deducted
Waiver of Monthly Deductions Rider8
 
Maximum Charge:
Minimum Charge:
Representative Owner Charge3:
(Issue Age 45)    
At the beginning of each Policy Month
(per $1000 of Specified Face Amount and Supplemental Insurance Face Amount)
 
$0.19
$0.01
$0.07
Payment of Stipulated Amount Rider10
 
Maximum Charge:
Minimum Charge:
Representative Owner Charge3:   
(male, Issue Age 45, benefit payable to age 70)  
At the beginning of each Policy Month
(per $100 of Stipulated Amount9)
 
 
$0.79
$0.14
$0.46
 

The next table describes the Fund fees and expenses that You will pay periodically during the time that You own the Policy. The table shows the minimum and maximum fees and expenses charged by any of the Funds and deducted from Fund assets for the year ended December 31, 2013. More detail concerning each Fund's fees and expenses is contained in the prospectus for each Fund.

ANNUAL FUND OPERATING EXPENSES
(deducted by each Fund on the average daily net asset value of each Fund)
Total Annual Fund Expenses (reflects management fees, distribution [and/or service](12b-1) fees and other expenses)
Minimum
Maximum
0.35%
1.71%

1
The elements making up the Premium Expense Loads are discussed on pages 24-25. The Loads are deducted from premium received. The Load on premium up to and including Target Premium will not exceed 35% in Policy Year 1, 12% in Policy Years 2-10 and 5% thereafter. The Load on premium in excess of Target Premium will not exceed 5%.
2
The rider charge equals the excess of 99.5% of the Account Value over the Policy Debt.  For additional detail for the Loan Lapse Protection Rider, please see page 20.
3
The charge varies based on the length of time the Policy has been in force, the Insured's Issue Age, sex, rating class, and applicable mortality tables. For Policies with an Investment Start Date on or before December 31, 2008, the 1980 Commissioners Standard Ordinary (“CSO”) Mortality Tables apply. For Policies with an Investment Start Date on or after January 1, 2009, the 2001 Commissioners Standard Ordinary (“CSO”) Mortality Tables apply. The charges shown may not be representative of the charge You may pay. Please contact your financial adviser for the particular charge applicable to You. The maximum charge possible is for an Insured male, smoker, standard, medically underwritten, Issue Age 80, Policy Year 40 (20 for 1980 CSO). The minimum possible is for an Insured female, nonsmoker, super preferred, medically underwritten, Issue Age 20, Policy Year 1. For substandard risk classifications, the Company reserves the right to charge up to 500% of the charges shown in the Fee Table. Please see the section entitled “Monthly Cost of Insurance” below for additional detail.
4
It is assumed the Owner and the Insured are the same person.  Charges shown are those currently applicable.
5
The Mortality and Expense Risk charge is deducted in all Policy Years. The charge shown is an annual charge. The charge is deducted on a daily basis.
6
Loan Interest is charged as a percentage of Policy Debt and is added to Policy Debt.  It is 4% in Policy Years 1-10 and 3.0% thereafter.  See the section entitled ”Policy Loans” below for additional detail regarding Loan Interest.
7
For Policies with Investment Start Dates before August 17, 2009, the maximum flat extra charge per $1000 of Specified Face Amount and Supplemental Insurance Face Amount is $20.00.
8
The maximum charge possible is for an Insured, Issue Age 55. The minimum charge possible is for an Insured, Issue Age 20. Charges vary by Issue Age only. The charges shown may not be representative of the charge You may pay. Please contact your financial adviser for the particular charge applicable to You.
9
To increase the variety of Stipulated Amounts electable, the charge imposed is per $100 of Stipulated Amount.
10
The maximum charge possible is for an Insured male, Issue Age 55, benefit payable to age 70. The minimum charge possible is for an Insured male, Issue Age 20, benefit payable to age 65. Charges vary based on the Insured's Issue Age, sex and duration of payment option. Disability rates for males are lower than females at younger ages and much higher for males than females at older ages. The use of rates for males provides an appropriate range of rates. The charges shown may not be representative of the charge You may pay. Please contact your financial adviser for the particular charge applicable to You.
11
The charge is based on the Specified Face Value Amount and the Issue Age of the Insured.  Please see the section entitled “Monthly Face Amount Charge” below for additional detail.

About Who We Are

We are a stock life insurance company incorporated under the laws of Delaware on January 12, 1970.  We do business in 49 states, the District of Columbia, Puerto Rico and the Virgin Islands.  We have an insurance company subsidiary that does business in New York. Our executive office mailing address is 96 Worcester Street, Wellesley Hills, Massachusetts  02481.

The parent of Sun Life Assurance Company of Canada (U.S.) is Delaware Life Holdings, LLC (“Delaware Life”), a limited liability company organized under the laws of the State of Delaware on December 12, 2012. Delaware Life is ultimately controlled by Todd L. Boehly and Mark R. Walter.

Delaware Life acquired the Company from Sun Life Financial, Inc. in August of 2013. The Company is no longer affiliated with Sun Life Financial, Inc. and the Sun Life names and marks are used under license. In accordance with the Company’s change of ownership, we expect the Company to change its name from “Sun Life Assurance Company of Canada (U.S.)” to “Delaware Life Insurance Company” during 2014.

The Variable Account

Sun Life of Canada (U.S.) Variable Account I is one of our separate accounts established in accordance with Delaware law on December 1, 1998. The Variable Account may also be used to fund benefits payable under other life insurance policies issued by us. We are obligated to pay all benefits payable under the Policy.

We own the assets of the Variable Account. The income, gains or losses, realized or unrealized, from assets allocated to the Variable Account are credited to or charged against the Variable Account without regard to our other income, gains or losses.

We will at all times maintain assets in the Variable Account with a total market value at least equal to the reserves and other liabilities relating to the variable benefits under all policies participating in the Variable Account and the Variable Account is fully funded for the purpose of Federal securities laws. The assets of the Variable Account are insulated from our general liabilities and may not be charged with our liabilities from our other business. Our obligations for the fixed account allocations and death benefits payable under the Policy are, however, our general corporate obligations.

The Variable Account is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940 (“1940 Act”) as a unit investment trust. That registration does not involve any supervision by the SEC of the management or investment practices or policies of the Variable Account.

The Variable Account may be deregistered if registration is no longer required under applicable Federal securities laws. We may continue, at our election, to operate the Variable Account as a unit investment trust or other form of investment company. All determinations will be made by our Board of Directors. In the event of any change in the registration status of the Variable Account, we will notify all policyholders and any regulatory authorities requiring notice of such change. We may amend the Policy to reflect the change and take such other action as may be necessary and appropriate to effect the change.

The Variable Account is divided into Sub-Accounts.  Each Sub-Account invests exclusively in shares of a corresponding investment portfolio of a registered investment company (commonly known as a mutual fund). We may in the future add new or delete existing Sub-Accounts. The income, gains or losses, realized or unrealized, from assets allocated to each Sub-Account are credited to or charged against that Sub-Account without regard to the other income, gains or losses of the other Sub-Accounts.

The Funds

The Policy offers several mutual fund options shown on page 1. Each Fund is a mutual fund registered under the Investment Company Act of 1940, or a separate series of shares of such a mutual fund. Each Fund has its own investment objectives, risks and expenses that determine its respective income and losses. There is no assurance that a portfolio will achieve its stated objective(s). You can lose money by investing in any of the Funds. In this regard we note, for example, that there can be no assurance that the MFS® Money Market Portfolio will be able to maintain a stable net asset value per share.  During extended periods of low interest rates, and partly as a result of insurance charges, the yield on the Money Market Sub-Account may become extremely low and possibly negative.

The investment objectives and policies of certain Funds may be similar to the investment objectives and policies of other mutual fund portfolios that share a similar name, investment adviser, investment sub-adviser or manager. The investment results of the Fund, however, may be higher, lower and/or unrelated to those mutual funds with shared characteristics. We do not guarantee or make any representation that the investment results of the portfolios will be comparable to any other portfolio, even those with the same investment adviser or manager.

Certain Funds may employ hedging strategies to provide for downside protection during sharp downward movements in equity markets.  The cost of these hedging strategies could limit the upside participation of the Fund in rising equity markets relative to other Funds.  You should consult with your registered representative to determine which combination of investment choices is appropriate for You.

More comprehensive information, including a discussion of potential risks, is found in the current prospectuses for the Funds (the “Fund Prospectuses”). The Fund Prospectuses should be read in connection with this prospectus. A copy of each Fund Prospectus may be obtained by calling 1-888-594-2654, or writing to Sun Life Assurance Company of Canada (U.S.), 96 Worcester Street, Wellesley Hills, MA 02481.

Fund Investment Advisers and Subadvisers

AllianceBernstein L.P. advises the AllianceBernstein Variable Products Series Fund, Inc. Portfolios. BlackRock Advisors, LLC advises the BlackRock Global Allocation V.I. Fund (with BlackRock Investment Management, LLC and BlackRock International Limited serving as subadvisers). Capital Research and Management Company advises the American Funds Insurance Series® Funds. Columbia Management Investment Advisers, LLC advises the Columbia Variable Portfolio - Marsico 21st Century Fund and Marsico Capital Management, LLC is the subadviser. Columbia Wanger Asset Management, LLC advises Wanger USA. Deutsche Investment Management Americas, Inc. advises the DWS Small Cap Index VIP with Northern Trust Investments, Inc. serving as subadviser.  Fidelity Management & Research Company advises the Fidelity® VIP Portfolios and advisory entities affiliated with Fidelity Management & Research Company subadvise the Fidelity® VIP Portfolios. First Eagle Investment Management, LLC advises the First Eagle Overseas Variable Fund.  Franklin Templeton Services, LLC administers the Franklin Founding Funds Allocation VIP Fund (with the following advising the underlying portfolios of the Fund:  Franklin Advisers, Inc. advising the Franklin Income VIP Fund, Franklin Mutual Advisers, LLC advising Franklin Mutual Shares VIP Fund and Templeton Global Advisers Limited advising Templeton Growth VIP Fund).  Franklin Advisers, Inc. advises the Franklin Income VIP Fund, Franklin Strategic Income VIP Fund and Franklin U.S. Government Securities VIP Fund.  Franklin Mutual Advisers, LLC advises the Franklin Mutual Shares VIP Fund.  Franklin Advisory Services, LLC advises the Franklin Small Cap Value VIP Fund. Invesco Advisers, Inc. advises the Invesco Funds. Massachusetts Financial Services Company advises the MFS® Portfolios and Series. Morgan Stanley Investment Management Inc. advises The Universal Institutional Funds, Inc. Mid Cap Growth Portfolio. OFI Global Asset Management, Inc. advises the Oppenheimer Fund/VAs. Pacific Investment Management Company LLC advises the PIMCO Variable Insurance Trust Portfolios. Strategic Advisers, Inc. advises the Fidelity® VIP Freedom Portfolios. Templeton Global Advisors Limited advises Templeton Growth VIP Fund.

Selection of Funds

The Funds offered through the Policy are selected by the Company.  We review the Funds periodically and may remove a Fund or limit its availability to new premiums and/or transfers of Account Value if we determine that a Fund no longer satisfies one or more of the selection criteria, and/or if the Fund has not attracted significant allocations from Policy owners.  We do not recommend or endorse any particular fund, and we do not provide investment advice. You bear the risk of any decline in your Account Value resulting from the performance of the Funds You have chosen.

We may consider various factors, including, but not limited to, asset class coverage, the alignment of the investment objectives of a Fund with our hedging strategy, the strength of an adviser's or sub-adviser's reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm.  Another factor that we may consider is whether the Fund or its service providers (e.g., the investment adviser or sub-advisers) or its affiliates will make payments to us or our affiliates in connection with certain administrative, marketing, and support services, or whether affiliates of the Fund can provide marketing and distribution support for the sale of the Policies.  Accordingly, we may receive compensation from an investment adviser, distributor and/or affiliate(s) of one or more of the Funds based upon an annual percentage of the average assets we hold in the investment options. These amounts, which may vary by adviser, are intended to compensate us for administrative and other services we provide to the Funds and/or affiliate(s) and may be significant. In addition, the Company or the principal underwriter of the Policies may receive 12b-1 fees (fees which may be levied against the total balance of a mutual fund's assets and may be used to pay marketing and distribution expenses of the Fund) deducted from certain Fund assets attributable to the Policy for providing distribution and shareholder support services to some investment options.

Fees and Expenses of the Funds

Fund shares are purchased at net asset value, which reflects the deduction of investment management fees and other expenses. The management fees are charged by each Fund's investment adviser for managing the Fund and selecting its portfolio of securities. Other expenses can include such items as interest expense on loans and contracts with transfer agents, custodians and other companies that provide services to the Fund, and actual expenses may vary. Because Fund fees and expenses are assessed at the Fund level, you will indirectly bear the fees and expenses of the Funds You select. The table presented earlier in this prospectus shows the range of fees and expenses paid by the Funds as a percentage of the average daily net asset value of each Fund. These fees and expenses are more fully described in the Fund Prospectuses.

Certain Funds invest substantially all of their assets in other funds (“funds of funds”).  As a result, You will pay fees and expenses at both fund levels, which will reduce your investment return.  In addition, funds of funds may have higher expenses than funds that invest directly in debt or equity securities.

Potential Conflicts

We, as well as other affiliated and unaffiliated insurance companies, may also purchase shares of the Funds on behalf of other separate accounts used to fund variable benefits payable under other variable life insurance and variable annuity contracts. As a result, it is possible, though we do not anticipate, that a material conflict may arise between the interests of our policyowners with respect to the Variable Account and those of other variable contractowners with respect to the other separate accounts that invest in the Funds. The Funds have agreed to monitor themselves for the existence of any material conflict between the interests of variable contractowners.  In the event of such a conflict involving a Fund, we will take any steps necessary to remedy the conflict including withdrawing the assets of the Variable Account from the Fund. If the Variable Account or another separate account withdraws its assets from a Fund for this reason, the Fund may be forced to sell its portfolio securities at disadvantageous prices which would negatively affect the investment performance of the corresponding Sub-Account.

Our General Account

Our general account consists of all of our assets other than those in our variable separate accounts. Subject to applicable law, we have sole discretion over the investment of our general account assets.

Interests in our general account offered through the Fixed Account investment option have not been registered under the Securities Act of 1933 and our general account has not been registered as an investment company under the Investment Company Act of 1940.

An allocation of premium to the Fixed Account does not entitle you to share in the investment experience of our general account.  Instead, we guarantee that your Fixed Account allocation will accrue interest daily at an effective annual rate of at least 3%, without regard to the actual investment experience of our general account. Interest in excess of the guaranteed rate may be applied to the amount in the Fixed Account at such increased rates and in such a manner as We may determine, based on Our expectations of future experience with respect to interest, mortality costs, persistency, expense, taxes, as well as the size, timing and frequency of deposits.

About the Policy

This prospectus describes the standard features of the Policy. The Policy, as issued, may differ in some respects due to the insurance laws and regulations of the state where the Policy is issued.

Application and Issuance

To apply for a Policy, You must submit an application to our Principal Office. We will then follow underwriting procedures designed to determine the insurability of the proposed Insured. We offer the Policy on a regular (or medical) underwriting, simplified underwriting, expanded guaranteed issue or guaranteed issue basis. The proposed Insured generally must be less than 71 years old for a Policy to be issued. For Policies underwritten on a medical or simplified basis, we may require that the proposed Insured undergo one or more medical examinations and that you provide us with such additional information as we may deem necessary, before an application is approved.

We will issue Policies on an expanded guaranteed issue or guaranteed issue basis with respect to certain groups of Insureds. Policies issued on such basis must be pre-approved based on information you provide to us on a master application and on certain other underwriting requirements which all members of a proposed group of Insureds must meet. Proposed Insureds must be acceptable risks based on our underwriting limits and standards. We will not issue a Policy until the underwriting process has been completed to our satisfaction. In addition, we reserve the right to reject an application that does not meet our underwriting requirements or to increase by no more than 500% the cost of insurance charges applicable to an Insured to cover the cost of the increased mortality risk borne by the Company.

Death Benefit Compliance Test

The Policy must, at all times, satisfy one of two legal standards for it to qualify as life insurance and thus be entitled to receive favorable tax treatment under applicable federal tax law. We will refer to these standards as the “Cash Value Accumulation Test” and the “Guideline Premium Test.” Under both tests, the Death Benefit must effectively always equal or exceed your Account Value multiplied by a certain percentage (the “Death Benefit Percentage”). The Death Benefit Percentages for the Guideline Premium Test vary by Attained Age, whereas those for the Cash Value Accumulation Test vary by Attained Age and sex. The Death Benefit Percentages for the Cash Value Accumulation Test, in general, are greater than those for the Guideline Premium Test. The Guideline Premium Test imposes limits on the amount of premium you may pay under the Policy, where the Cash Value Accumulation Test does not. You must specify in the Policy application which of these tests will apply to the Policy. You may not change your selection once the Policy has been issued. In general, if your primary objective is maximum accumulation of Account Value during the initial Policy Years, then the Cash Value Accumulation Test would be the more appropriate choice. If your primary objective is the most economically efficient method of obtaining a specified amount of coverage, then the Guideline Premium Test is generally more appropriate. Because your choice of tests depends on complex factors and may not be changed, You should consult with a qualified tax adviser before deciding.

Initial Premium Payment

Generally, you must make an Initial Premium payment that will sustain the Policy for three months from its Issue Date. The amount of Initial Premium is determined by the Specified Face Amount, Supplemental Insurance Face Amount, death benefit option election, death benefit compliance test election, optional rider election and risk and underwriting classification of the Insured. Pending approval of your application, we will allocate any premium payments You make to our general account. If your application is not approved, we will promptly return your premium payments.

Upon approval of your application, we will issue to You a Policy on the life of the Insured which will set forth your rights and our obligations. The Issue Date is the date specified as such in the Policy, from which Policy Anniversaries, Policy Years and Policy Months are measured. The Investment Start Date is the date the first premium is applied, which will be the later of-

 
·
the Issue Date, or

 
·
the date a premium is paid equal to or in excess of the specified Initial Premium.

Insurable Interest Requirement

You must have an insurable interest in the life of the Insured up to the full amount of insurance coverage.  Otherwise, the Policy will not qualify as life insurance under applicable state insurance and federal tax law. You should consult with a qualified adviser when determining the amount of coverage and before taking any action to increase the amount of existing coverage to ensure that You have an insurable interest for the full amount of coverage.

Right to Return Policy Period

If You are not satisfied with the Policy, You may return it by delivering or postmarking it to our Principal Office or to the sales representative through whom You purchased the Policy within 10 days from the date of receipt (the “Right to Return Policy Period”). If You return the Policy during the Right to Return Policy Period, the Policy will be deemed void and You will receive a refund equal to the sum of-

 
·
the difference between any premium payments made, including fees and charges, and the amounts allocated to the Investment Options;

 
·
the value of the amounts allocated to the Investment Options on the date the cancellation request is received by us or the sales representative through whom you purchased the Policy; and

 
·
any fees or charges imposed on amounts allocated to the Investment Options.

If required by applicable state insurance law, however, You will receive instead a refund equal to the greater of premium payments made and premium payments made with interest at the then rate paid by the Company on comparable fixed life insurance policies, without regard to the investment experience of the Variable Account. Unless You are entitled to receive a full refund of premium, You bear all of the investment risks with respect to the amount of any net premiums allocated to the Variable Account during the Right to Return Policy Period with respect to the Policy.

If You are entitled under applicable state law to receive a full refund during the Right to Return Policy Period, we will allocate the net premium payments to the MFS Money Market Fund Sub-Account during that period beginning on the Investment Start Date.  Upon expiration of the Right to Return Policy Period, we will reallocate your Account Value and allocate future net premium payments in accordance with your instructions.

Asset Allocation

One or more asset allocation programs may be made available in connection with the Policy, at no extra charge. Asset allocation is the process of investing in different asset classes -- such as equity funds, fixed income funds and money market funds -- depending on your personal investment goals, tolerance for risk, and investment time horizon. By spreading your money among a variety of asset classes, You may be able to reduce the risk and volatility of investing, although there are no guarantees, and asset allocation does not insure a profit or protect against loss in a declining market. Currently, You may select one of the asset allocation models, each of which represents a combination of Sub-Accounts with a different level of risk. These asset allocation models, as well as the terms and conditions of the asset allocation program, are fully described in a separate brochure. We may add or delete such programs in the future. If You elect an asset allocation program, we automatically rebalance your premium payments among the Sub-Accounts represented in the model You choose. We rebalance your premium payments on a quarterly basis, without further instruction from You. Our asset allocation programs are “static” programs. We do not change the original percentage allocations among the Sub-Accounts that are used for rebalancing purposes in your chosen model. We may, however, terminate the program or choose a different model. Also, the asset allocation models are reviewed and, as a result, may be substituted for new models and existing models may be terminated. If so, the new models will be offered only to Policies issued on or after the date the new model goes into effect or to Owners who elect an asset allocation program on or after that date. Owners of any existing asset allocation programs may make an independent decision to change their asset allocations at any time during the duration of an asset allocation model or after the asset allocation model has terminated. If an existing model is terminated, we will rebalance your Sub-Accounts to the percentage of allocations of the terminated model, unless You advise us otherwise. We will also allocate new premium to the percentage allocations of the terminated model unless otherwise instructed by You. You should consult your financial adviser periodically to consider whether the model You have selected is still appropriate for You or whether You wish to change your percentage allocations.

Dollar Cost Averaging

You may select, at no extra charge, a dollar cost averaging program by allocating a minimum of $5,000 to the MFS® Money Market Portfolio. Each month or quarter, a level amount will be transferred automatically, at no cost, to one or more Variable Sub-Accounts chosen by You, up to a maximum of twelve. The program continues until your Account Value allocated to the program is depleted or You elect to stop the program. The main objective of a dollar cost averaging program is to minimize the impact of short-term price fluctuations. Since the same dollar amount is transferred to other available Variable Sub-Accounts at set intervals, dollar cost averaging allows You to purchase more Units (and, indirectly, more Fund shares) when prices are low and fewer Units (and, indirectly, fewer Fund shares) when prices are high. Therefore, a lower average cost per Unit may be achieved over the long-term. A dollar cost averaging program allows You to take advantage of market fluctuations. However, it is important to understand that a dollar cost averaging program does not assure a profit or protect against loss in a declining market.

Asset Rebalancing

Once your money has been allocated among the Sub-Accounts, the earnings may cause the percentage invested in each Sub-Account to differ from your allocation instructions. You can direct us to automatically rebalance the Policy among your Sub-Accounts to return to your allocation percentages by selecting our asset rebalancing program. The rebalancing will be on a calendar quarter, semi-annual or annual basis, depending on your instructions. Rebalancing will not occur if the total Sub-Account allocations are less than $1,000.

There is no charge for asset rebalancing. In addition, rebalancing will not be counted against any limit we may place on your number of transfers in a Policy Year. You may not select dollar cost averaging and asset rebalancing at the same time. We reserve the right to waive the $1,000 minimum amount for asset rebalancing.

Premium Payments

In general, You may choose the frequency and amount of any additional premium payments subject to the limits described below. All premium payments must be made payable to Sun Life Assurance Company of Canada (U.S.) and mailed to our Principal Office.

General Limitations

We reserve the right to limit the number of premium payments we accept on an annual basis. No premium payment may be less than $100 without our consent, although we will accept a smaller premium payment if it is necessary to keep the Policy in force. We reserve the right to reject a premium payment that, if accepted, would cause the Policy, at its current Death Benefit, to no longer meet the definition of “life insurance” under the Internal Revenue Code. If You provide satisfactory evidence of insurability, we can retain the premium and increase the Death Benefit while maintaining the Policy’s “life insurance” status under the Internal Revenue Code.

Guideline Premium Test Limitations

The Guideline Premium Test limits the amount of premium You may pay per year.  We will not accept premium payments that would, in our opinion, exceeds these limits, if You have chosen this test as the applicable Death Benefit Compliance Test, unless You have expressly directed us to do so. We may require satisfactory evidence of insurability before we accept such a premium. We will inform You of the applicable maximum premium limitations for the coming years in our annual report to You. In contrast, the Cash Value Accumulation Test does not impose any additional limitations on the amount of premium You may pay.

Planned Periodic Premiums

While You are not required to make premium payments according to a fixed schedule, You may select a planned periodic premium schedule and corresponding billing period, subject to our premium limits. In general, the billing period must be annual, semiannual or quarterly. We will send reminder notices for the planned periodic premium at the beginning of each billing period unless reminder notices have been suspended as described below. You are not required, however, to pay the planned periodic premium; You may increase or decrease premium payments, subject to our limits, and You may skip a planned payment or make unscheduled payments. You may change your planned payment schedule or the billing period, subject to our approval. Depending on the investment performance of the Sub-Accounts You select, the planned periodic premium may not be sufficient to keep the Policy in force, and You may need to change your planned payment schedule or make additional payments in order to prevent termination of the Policy. We reserve the right to suspend reminder notices if premiums are not being paid (except for notices in connection with the grace period). We will notify You prior to suspending reminder notices. We will also suspend reminder notices at your written request.

Allocation of Net Premium

Net Premium is the amount You pay as premium minus the Premium Expense Load.  The Premium Expense Load covers State and Federal tax liabilities related to premium. We will allocate Net Premium among the Investment Options in accordance with your allocation instructions, except during the Right to Return Policy Period as described above. You will be required to specify initial allocation percentages at the time of application. While there are no limitations concerning the number of Investment Options to which Net Premium may be allocated, we reserve the right to impose minimum allocation amounts, as determined by the Fund, for any or all Investment Options.

You may change the allocation of future Net Premium at any time by submitting an acceptable request to us. An allocation change will be effective as of the date we receive your request for that change, provided that it is received on a Valuation Date before the close of the New York Stock Exchange. If a request is received on a day that is not a Valuation Date or after the close of the New York Stock Exchange on a Valuation Date, it will become effective on the next Valuation Date.

Modified Endowment Contract

Less favorable federal tax rules apply to life insurance policies that are defined as “Modified Endowment Contracts.” One way the Policy could become a Modified Endowment Contract is if You pay premiums in excess of applicable tax law limitations.

We will notify You or your sales representative within one business day if we receive a premium that would, in our opinion, cause the Policy to become a Modified Endowment Contract. We will not credit the premium unless we receive specific instructions from You to do so. Any such premium will be held, for a period not to exceed 90 days, in a non-interest bearing account. This premium will be refunded at the end of the 90 day period if we have not received specific instruction from You concerning the premium.



Supplemental Insurance Face Amount

The Policy may be issued with a Supplemental Insurance Face Amount which provides life insurance coverage on the life of the Insured equal to the amount of the Supplemental Insurance Death Benefit. You will be required to specify the initial Supplemental Insurance Face Amount in the policy application.

The cost of the Supplemental Insurance Face Amount will be included in the Monthly Cost of Insurance deduction. This deduction will cease when the Supplemental Insurance Face Amount is terminated. The applicable guaranteed maximum Monthly Cost of Insurance Rates for the Supplemental Insurance Death Benefit are the same as those for the Base Death Benefit.

Target Premium is the amount of premium specified as such in the Policy, used to determine the Premium Expense Load. Target Premium is equal to (the Specified Face Amount divided by 1000) multiplied by the Target Premium Factor. Total Face Amount is the sum of the Specified Face Amount and Supplemental Insurance Face Amount.

Two otherwise identical Policies with the same Total Face Amount will have different Target Premiums depending on how much of the Total Face Amount is attributable to the Specified Face Amount versus the Supplemental Insurance Face Amount. Target Premium will be lower for the Policy which has the greater Supplemental Insurance Face Amount because the Target Premium calculation uses the Specified Face Amount not the Total Face Amount.

The Supplemental Insurance Death Benefit will terminate on the earliest of-

 
·
our receipt of your written request for termination,

 
·
the lapse of the Policy because of insufficient value, or

 
·
the termination of the Policy.

Subject to our underwriting rules in effect at the time of request, You may choose to schedule increases in the Supplemental Insurance Face Amount at time of Policy application. No further evidence of insurability needs to be provided at the time increases are scheduled to go into effect. Further, no deterioration in the Insured’s health will negatively impact future scheduled increases. Persons interested in scheduled increases are generally those who are matching their insurance coverage amounts to their income and anticipate annual increases in compensation.  The amounts of scheduled increases and the dates those increases take effect are shown in the Policy Specifications section of the Policy. You must have elected death benefit option A or C to elect scheduled increases. If You have elected scheduled increases and change from death benefit option A or C, further scheduled increases will be cancelled as of the date of your change request. If You elect a decrease in the Specified Face Amount or the Supplemental Insurance Face Amount or change the amounts of scheduled increases or the dates those increases take effect, future scheduled increases will be cancelled as of the date of your election or change request.

Death Benefit

Policy Proceeds

If the Policy is in force at the time of the Insured’s death and we have received Due Proof of the Insured’s death, we will pay your designated beneficiary a lump sum amount equal to-

 
·
the amount of the Base Death Benefit, plus

 
·
the amount of the Supplemental Insurance Death Benefit, minus

 
·
the amount of any outstanding Policy Debt, plus

 
·
the amount of any other supplemental benefits.

The amount of the Base Death Benefit and Supplemental Insurance Death Benefit depends upon the death benefit option in effect at the time of the Insured’s death.


Death Benefit Options

The Policy has three death benefit options. You will be required to select one of them in the policy application.

Option A - Specified Face Amount. Under this option, the Base Death Benefit is the greater of-

 
·
the Policy’s Specified Face Amount, or

 
·
the Gross Cash Surrender Value multiplied by the applicable Death Benefit Percentage.

Option B - Specified Face Amount Plus Gross Cash Surrender Value. Under this option, the Base Death Benefit is the greater of-

 
·
the Specified Face Amount plus the Gross Cash Surrender Value, or

 
·
the Gross Cash Surrender value multiplied by the applicable Death Benefit Percentage.

Option C - Specified Face Amount Plus Cumulative Premiums Paid. Under this option, the Base Death Benefit is the greater of-

 
·
the Specified Face Amount plus the sum of all premiums paid less any partial surrenders, or

 
·
the Gross Cash Surrender Value multiplied by the applicable Death Benefit Percentage.

Option A provides a level amount of death benefit.  Option B provides a fluctuating death benefit due to the inclusion of the Gross Cash Surrender Value. While Option B provides a different death benefit than Option A, the monthly deduction for cost of insurance charges will be higher based on the Specified Face Amount Net Amount at Risk. Option C also provides a higher death benefit than Option A and may result in a higher monthly deduction for cost of insurance charges depending upon actual premium payments made. Ask your sales representative for an illustration to compare costs between Option B and Option C.

Supplemental Insurance Death Benefit

The Supplemental Insurance Death Benefit is the Total Death Benefit minus the Base Death Benefit.  For Option A, the Total Death Benefit is the greater of a) the Total Face Amount and b) the Gross Cash Surrender Value multiplied by the applicable Death Benefit Percentage.  For Option B, the Total Death Benefit is the greater of a) the Total Face Amount plus the Gross Cash Surrender Value and b) the Gross Cash Surrender Value multiplied by the applicable Death Benefit Percentage. For Option C, the Total Death Benefit is the greater of a) the Total Face Amount plus the sum of all premiums paid less any partial surrenders and b) the Gross Cash Surrender Value multiplied by the applicable Death Benefit Percentage. The Total Face Amount is equal to the Specified Face Amount plus the Supplemental Insurance Face Amount.

If the Insured dies while the Policy is in force, we will make a lump sum payment when we receive Due Proof of that death. The Death Benefit used to determine Policy Proceeds is based on the death benefit option, the Specified Face Amount and Supplemental Insurance Face Amount and Gross Cash Surrender Value in effect on the Insured’s date of death.

You should note that the Policy may not qualify as life insurance after the Insured’s Attained Age 100, which may result in adverse tax consequences. You should consult your tax advisor prior to continuing the Policy beyond the Insured’s Attained Age 100.

Changes in the Death Benefit Option

You may change the death benefit option, subject to our underwriting rules in effect at the time of the change. Requests for a change must be made in writing to us at our Principal Office. The effective date of the change will be the Policy Anniversary on or next following the date of receipt of your request in Good Order. Changing the death benefit option may have tax consequences.  You should consult a tax advisor before changing the death benefit option.




Minimum Face Amount

Total Face Amount is the sum of the Specified Face Amount and Supplemental Insurance Face Amount. In general, the Total Face Amount must be at least $100,000, of which the Specified Face Amount must be at least $10,000. We reserve the right to waive these minimums.

Changes in Face Amount

You may change the Specified Face Amount or Supplemental Insurance Face Amount, subject to our underwriting rules in effect at the time of the change. You must send your request for a change to us in writing. The Effective Date of Coverage for changes will be-

 
·
for any increase in coverage, the Monthly Anniversary Day that falls on or next follows the date we approve the supplemental application for the increase; and

 
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for any decrease in coverage, the Monthly Anniversary Day that falls on or next follows the date we receive your request in Good Order.

Changing the Specified Face Amount or Supplemental Insurance Face Amount may have tax consequences.  You should consult a tax advisor before any change to the Specified Face Amount or Supplemental Insurance Face Amount.

Increases in Face Amount

An increase in the Specified Face Amount and Supplemental Insurance Face Amount is subject to our underwriting rules in effect at the time of the increase. You may be required to submit satisfactory evidence of the Insured’s insurability. The cost of insurance charges applicable to an increase in Specified Face Amount and Supplemental Insurance Face Amount may be higher or lower than those charged on the original sums if the Insured’s health has changed to a degree that qualifies the Insured for a different risk classification. Additional policy specification pages will be provided to show the applicable guaranteed maximum cost of insurance charges applicable to any increase. Your financial adviser can provide an illustration to show the level of premium funding necessary to maintain coverage at the increased amounts.

Decreases in Face Amount

The Specified Face Amount may not decrease to less than the Minimum Specified Face Amount specified in the Policy. Similarly, a decrease in Specified Face Amount or Supplemental Insurance Face Amount may not decrease the Total Face Amount to an amount less than the Minimum Total Face Amount specified in the Policy. A decrease in face amount will be applied-

 
·
first, to the most recent increase, either Specified Face Amount or Supplemental Insurance Face Amount, if any, whichever is most recent. If issued at the same time, Supplemental Insurance Face Amount first;

 
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second, to the next most recent increases, either Specified Face Amount or Supplemental Insurance Face Amount, if any, in reverse chronological order. If issued at the same time, Supplemental Insurance Face Amount first;

 
·
third, to the initial Supplemental Insurance Face Amount, if any; and

 
·
finally, to the initial Specified Face Amount.

Account Value

Your Account Value is the sum of the amounts in each Investment Option plus the amount of the Loan Account. We measure the amounts in the Sub-Accounts in terms of Units and Unit Values. On any given day, the amount You have in a Sub-Account is equal to the Unit Value multiplied by the number of Units credited to You in that Sub-Account. The Units for each Sub-Account will have different Unit Values.

Amounts allocated to a Sub-Account will be used to purchase Units of that Sub-Account. Units are redeemed when You make partial surrenders, undertake policy loans or transfer amounts from a Sub-Account, and for payment of the Mortality and Expense Risk Charge, the Monthly Expense Charge, the Monthly Face Amount Charge and the Monthly Cost of Insurance Charge. The number of Units of each Sub-Account purchased or redeemed is determined by dividing the dollar amount of the transaction by the Unit Value for the Sub-Account. A Valuation Date is any day on which the New York Stock Exchange is open for business and valuation will occur at the close of the New York Stock Exchange. The New York Stock Exchange historically closes on weekends and the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Washington’s Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.

For the first Valuation Date of each Sub-Account, the Unit Value is established by us. The Unit Value for any subsequent Valuation Date is equal to the Unit Value for the preceding Valuation Date multiplied by the Net Investment Factor. The Unit Value of a Sub-Account for any Valuation Date is determined as of the close of the Valuation Period ending on that Valuation Date. The Valuation Period is the period of time from one determination of Unit Values to the next.

If accompanied by proper allocation instructions, a premium received in Good Order at our Principal Office is credited to the Policy on the same date it is received unless that date is not a Valuation Date or receipt is after the close of the New York Stock Exchange on a Valuation Date. In those instances, the premium will be credited on the next Valuation Date. If premium is to be allocated to a Sub-Account, the Unit Value of the Sub-Account will be that next determined after receipt of such premium.

The Investment Start Date is the date we apply your first premium payment, which will be the later of the Issue Date and the Business Day we approve the policy application.

Account Value for Investment Options

The Account Value on the Investment Start Date equals-

 
·
that portion of Net Premium received and allocated to the Investment Options, minus

 
·
the Monthly Expense Charges and Monthly Face Amount Charges due on the Issue Date and subsequent Monthly Anniversary Days through the Investment Start Date, minus

 
·
the Monthly Cost of Insurance deductions due from the Issue Date through the Investment Start Date.

The Account Value for Investment Options on subsequent Valuation Dates is equal to-

 
·
the Account Value attributable to each Sub-Account on the preceding Valuation Date multiplied by that Sub-Account’s Net Investment Factor, minus

 
·
the Daily Risk Percentage multiplied by the number of days in the Valuation Period multiplied by the Account Value in the Sub-Account, plus

 
·
the value of the Fixed Account on the preceding Valuation Date, accrued at interest, plus

 
·
that portion of Net Premium received and allocated to each Investment Option during the current Valuation Period, plus

 
·
any amounts transferred by You to the investment options during the current Valuation Period, minus

 
·
any amounts transferred by You from the investment options during the current Valuation Period, plus

 
·
that portion of any loan repayment, including repayment of loan interest, allocated to an Investment Option during the current Valuation Period, minus

 
·
that portion of any partial surrenders deducted from each Investment Option during the current Valuation Period, minus

 
·
that portion of any Policy loan transferred from each Investment Option to the Loan Account during the current Valuation Period, minus

 
·
any illustration charge assessed during the current Valuation Period, minus

 
·
if a Monthly Anniversary Day occurs during the current Valuation Period, that portion of the Monthly Expense Charge and Monthly Face Amount Charge for the Policy Month just beginning charged to each Investment Option, minus

 
·
if a Monthly Anniversary Day occurs during the current Valuation Period, that portion of the Monthly Cost of Insurance charged to each Investment Option.

Net Investment Factor

The Net Investment Factor is used to measure the Sub-Account’s investment performance from one Valuation Period to the next. This factor will be greater or less than or equal to one, corresponding to a positive or negative or to a lack of change in the Sub-Account’s investment performance for the preceding Valuation Period. Although we do not currently take any federal, state or local taxes into account when determining the Net Investment Factor, we reserve the right to do so. The Net Investment Factor for each Sub-Account for any Valuation Period is determined by dividing the net result of-

 
·
the net asset value of a Fund share held in the Sub-Account determined as of the end of the Valuation Period, plus

 
·
the amount of any dividend or other distribution declared on amounts held in the Sub-Account if the “ex-dividend date” occurs during the Valuation Period, which for some assets will not be credited with investment experience until the dividend is paid, plus or minus

 
·
a credit or charge with respect to any taxes reserved for by us, or paid by us if not previously reserved for, during the Valuation Period which are determined by us to be attributable to the operation of the Sub-Account,

 
·
by the net asset value of a Fund share held in the Sub-Account determined as of the end of the preceding Valuation Period.

The “ex-dividend date” is the date after which a Fund share begins trading without the dividend.

Splitting Units

We reserve the right to split or combine the value of Units.  In effecting any such change, strict equity will be preserved and no change will have a material effect on the benefits or other provisions of the Policy.

Account Value in the Loan Account

The Account Value in the Loan Account is zero on the Investment Start Date.

The Account Value in the Loan Account on any day after the Investment Start Date equals-

 
·
the Account Value in the Loan Account on the preceding day credited with interest at the rate specified in the Policy as the “interest credited on Loan Account rate” of 3%, plus

 
·
any amount transferred from any Investment Option to the Loan Account for Policy loans requested on that day; minus

 
·
any loan repayments made on that day.

Policy loans, with interest charged at the applicable rate, is “Policy Debt”. Policy Debt is not part of the Loan Account.  Policy Debt increases by unpaid loan interest and reduces the Policy Proceeds and the Cash Surrender Value.

Insufficient Value

The Policy may terminate if your Account Value minus Policy Debt is insufficient to pay all charges and deductions then due. If the Account Value minus the outstanding Policy Debt is less than or equal to zero on a Valuation Date, then the Policy will terminate for no value, subject to the grace period described below. The Policy will not lapse if the Loan Lapse Protection Rider is in effect and all conditions thereunder have been met.

Grace Period

If, on a Valuation Date, the Policy will terminate by reason of insufficient value, we will allow a grace period. This grace period will allow 61 calendar days from that Valuation Date for the payment of a Net Premium sufficient to cover the daily and monthly deductions due for charges under the Policy from the Account Value. Notice of premium due will be mailed to your last known address or the last known address of any assignee of record within 30 days of that Valuation Date. We will assume that your last known address is the address shown on the policy application (or notice of assignment), unless we have received satisfactory notice of a change in address. If the premium due is not paid during the grace period, then the Policy will terminate without value at the end of the 61 day period without further notice. The Policy will continue to remain in force during this grace period. If the Policy Proceeds become payable during the grace period, they will be reduced by any overdue deductions.

Insured's Attained Age 121 (or 100 if 1980 CSO applies)

At the Insured’s Attained Age 121 (100 if 1980 CSO applies), no further premium will be accepted. The Account Value will be determined in the same manner as it was prior to the Insured's Attained Age 121 (100 if 1980 CSO applies), except that no further deduction for Monthly Cost of Insurance, Monthly Expense Charge and Monthly Face Amount Charge will be made.

The Policy may not qualify as life insurance beyond the Insured’s Attained Age 100, which may result in adverse tax consequences. We recommend that You receive counsel from your tax advisor.

Supplemental Benefits

The following supplemental benefits may be available in your state.  Each rider or endorsement is subject to certain limitations and termination provisions. For additional information, please ask your sales representative.

Charitable Giving Benefit Rider

Under this rider, when Policy Proceeds are payable, we will pay a Charitable Gift Amount to the named Charitable Beneficiary. The Charitable Gift Amount is 1% of the Specified Face Amount and is an additional payment that does not diminish the Policy Proceeds paid to your beneficiary. The Charitable Beneficiary may be any organization considered exempt from federal taxation under Section 501(c) of the Internal Revenue Code and is listed in Section 170(c) of the Internal Revenue Code as an authorized recipient of charitable contributions. This rider may be elected at issue and may be discontinued at any time by making written request to the Company. The Charitable Gift Amount and the Charitable Beneficiary in effect on the Issue Date are shown in the Policy. There is no charge for this rider.

Waiver of Monthly Deductions Rider

Under this rider, we will waive the monthly deductions under the Policy and any optional riders for all months for which the Insured suffers a total disability if the Insured's total disability commences while this rider is in force and continues for six months. We will continue to waive the monthly deduction for as long as the disability continues. Waiver of monthly deductions means the Account Value will not be reduced by any monthly deductions each Monthly Anniversary Day during the period of total disability. We must receive due proof of the Insured’s total disability and due proof that the total disability has been continuous for six months before we will waive the monthly deductions. At that time, we will reverse the monthly deductions which had been taken for the past months of total disability and waive all monthly deductions going forward until total disability ceases. We may require from time to time additional proof that the disability is continuing, but not more frequently than once per year after the disability has continued for two years. The rider charge is deducted monthly from the Account Value. We use a Company-developed proprietary pricing table to determine the factor that corresponds with the Insured’s Issue Age and multiply this factor by each $1000 of Specified Face Amount and Supplemental Insurance Face Amount. This rider must be elected at issue only and may be discontinued at any time by making written request to the Company. If the rider is discontinued, the rider charge will also be discontinued. If the Waiver of Monthly Deductions Rider is elected, the Payment of Stipulated Amount Rider cannot be elected.

Payment of Stipulated Amount Rider

Under this rider, we will make a monthly payment of the “stipulated amount” into the Account Value when the Insured suffers a total disability, if the Insured's total disability commences while this rider is in force and continues for six months. You elect the stipulated amount on the application. We will continue to make a payment of that amount for as long as the disability continues but no later than the duration of the payment option elected (Insured's age 65 or 70).  Payment of the stipulated amount does not guarantee that the Account Value of the Policy will be sufficient to keep the Policy in force. We must receive due proof of the Insured’s total disability and due proof that the total disability has been continuous for six months before we will make a payment. At that time, we will credit the Account Value with the stipulated payment at the beginning of each month total disability continues. We may require from time to time additional proof that the disability is continuing, but not more frequently than once per year after the disability has continued for two years. The rider charge is deducted monthly from the Account Value. We use a Company-developed proprietary pricing table to determine the factor that corresponds with the Insured’s Issue Age and sex and multiply this factor by each $100 of stipulated amount. The rider charge will cease for the term the stipulated amount is being paid. This rider must be elected at issue only and may be discontinued at any time by making written request to the Company. If the rider is discontinued, the rider charge will also be discontinued. If the Payment of Stipulated Amount Rider is elected, the Waiver of Monthly Deductions Rider cannot be elected.

Loan Lapse Protection Rider

This rider is designed to protect the Policy from lapse should Policy Debt become the near equivalent of the Account Value. Under this rider, the Policy will not terminate for insufficient value on and after the Rider Exercise Date. The Rider Exercise Date is the earliest date on which all the following have occurred:

 
·
the Insured is 75 or older;
 
·
the Policy has been in force at least 15 years;
 
·
the outstanding Policy Debt is greater than the Specified Face Amount;
 
·
the outstanding Policy Debt equals or exceeds 96% of the Account Value;
 
·
not more than 30% of the Policy Debt has been a result of loan activity in the 36 months immediately preceding the Rider Exercise Date;
 
·
the sum of withdrawals made equals the sum of premiums paid; and
 
·
we have received your request to exercise the rider.

The rider charge is an administrative charge that applies on the Rider Exercise Date and equals the excess of 99.5% of the Account Value over the Policy Debt. By way of example, if the Account Value is $1,000,000 and the Policy Debt is $970,000, the charge is $25,000 which is the difference between 99.5% of the Account Value and the Policy Debt.

On the Rider Exercise Date, after deduction of the rider charge from the Account Value, the following will occur:

 
·
The Account Value in the Variable Sub-Accounts will be irrevocably transferred to the Fixed Account;
 
·
The Death Benefit will be changed to equal 105% of the Account Value;
 
·
Monthly Deductions will cease;
 
·
No further premium will be accepted;
 
·
Specified face amount increases and decreases will no longer be permitted; and
 
·
All supplemental riders will terminate.

The rider automatically attaches to every Policy at issue that has elected the Guideline Premium Test and may be discontinued upon written request to the Company.

You should be aware that the tax consequences of the Loan Lapse Protection Rider are uncertain. You should consult a tax adviser about the tax consequences of the Loan Lapse Protection Rider. Please see the Federal Income Tax Considerations section of this prospectus.

Travel Assistance Endorsement

This endorsement permits Covered Persons to avail themselves of some or all of the following services provided by a third party we designate when the Covered Person is 100 miles or more away from home:

 
·
Medical Consultation and Evaluation
 
·
Hospital Admission Guarantee
 
·
Emergency Evacuation
 
·
Critical Care Monitoring
 
·
Medically Supervised Repatriation
 
·
Prescription Assistance
 
·
Emergency Message Transmission
 
·
Emergency Trauma Counseling
 
·
Transportation to Join Patient
 
·
Care for Minor Children
 
·
Legal and Interpreter Referrals
 
·
Return of Mortal Remains

“Covered Persons” are defined as:

 
(a)
For a Policy which is not trust-owned, the Insured and their dependents.
 
(b)
For a Policy which is trust-owned, the Insured and their dependents only if the trustee, in his/her sole and exclusive discretion, elects to make the Covered Services available.

There is no charge for this endorsement. Ask your financial adviser for the brochure that provides additional detail about the endorsement.

Enhancement Benefit

An Enhancement Benefit may be provided if you surrender the Policy and such surrender is not made pursuant to an exchange under Section 1035 of the Internal Revenue Code (or any successor provision). The amount available for Policy loan or partial surrender will not increase by any Enhancement Benefit. The Enhancement Benefit represents a return of a portion of the charges paid under the Policy. When a charge is based on the Account Value, the Account Value will not include the Enhancement Benefit. When a charge is based on the Gross Cash Surrender Value, the Gross Cash Surrender Value, as defined, includes the Enhancement Benefit.

The payment of an Enhancement Benefit is at the discretion of the Company.  On a current basis, an Enhancement Benefit is available during the Enhancement Period (the first seven Policy Years) and is calculated as follows:

 
·
Prior to the payment of the initial Premium, the Enhancement Benefit is zero.

 
·
Whenever a Premium Expense Load, Monthly Expense Charge or Monthly Face Amount Charge is deducted during the Enhancement Period, the Enhancement Benefit is increased by 100% of each such load or charge and is then decreased each subsequent month during the Enhancement Period.

 
·
Whenever a Monthly Cost of Insurance charge is deducted during years 1-2 of the Enhancement Period, the Enhancement Benefit is increased by a percentage, which decreases over time, determined in accordance with the following formula:

 
·
[(14 - M) divided by 36] multiplied by 100 where M equals the number of months elapsed since the beginning of the Enhancement Period.

 
·
The Enhancement Benefit is zero after the end of the Enhancement Period.

The Enhancement Benefit is payable with respect to each Policy owned by the policyowner and is not contingent upon surrender of all such Policies.

Transfer Privileges

You normally may transfer all or a portion of your Account Value among Sub-Accounts and into the Fixed Account. Transfers from the Fixed Account may not exceed the greater of the transfer percentage multiplied by the highest Fixed Account value over the transfer period and the transfer minimum. The transfer percentage, transfer period and transfer minimum are shown in the Policy. Note: This transfer restriction may prolong the period of time it takes to transfer your Account Value in the Fixed Account to the Sub-Accounts and, therefore, You should carefully consider whether investment in the Fixed Account meets your needs and investment criteria.

We will make transfers pursuant to an acceptable request to our Principal Office. An “acceptable request” is one that is authorized by a person with proper authority, provides clear instruction to the Company, as administrator of the Variable Account, and is for a transaction that is not restricted by policies and procedures of the Variable Account or the Fund.

An acceptable transfer request will be processed as of the date our Principal Office receives your request provided that it is received on a Valuation Date before the close of the New York Stock Exchange. If an acceptable transfer request is received on a day that is not a Valuation Date or after the close of the New York Stock Exchange on a Valuation Date, it will be processed effective on the next Valuation Date.

You may transfer a specified dollar amount or a specified percentage of the Investment Option’s value.

All transfers are subject to our consent. We reserve the right to impose limitations on transfers, including, but not limited to-

 
·
the minimum amount that may be transferred;

 
·
the frequency of transfers; and

 
·
the minimum amount that may remain in a Sub-Account following a transfer from that Sub-Account.

We reserve the right to restrict amounts transferred to the Fixed Account from the Sub-Accounts.

We will notify you in writing of the imposition of a transfer limitation. We do not reserve any right to impose charges for transfers. Any restrictions on transfers will apply to all policyowners in a non-discriminatory fashion.

Short-Term Trading

The Policy is not designed for short-term trading. If You wish to employ such strategies, do not purchase a Policy. Transfer limits and other restrictions, described below, are subject to our ability to monitor transfer activity. Some Owners and their third party intermediaries engaging in short-term trading may employ a variety of strategies to avoid detection. Despite our efforts to prevent short-term trading, there is no assurance that we will be able to identify such Owners or intermediaries or curtail their trading. A failure to detect and curtail short-term trading could result in adverse consequences to Owners. Short-term trading can increase costs for all Owners as a result of excessive portfolio transaction fees. In addition, short-term trading can adversely affect a Fund's performance. If large amounts of money are suddenly transferred out of a Fund, the Fund's investment adviser cannot effectively invest in accordance with the Fund's investment objectives and policies.

The Company has policies and procedures to discourage frequent transfers of Account Value. As described above under “Transfer Privileges,” the Policy includes the right to limit the frequency of transfers.

Short-term trading activities whether by an individual, a firm or a third party authorized to initiate transfer requests on behalf of Owner(s) may be subject to other restrictions as well (including transfers to and from the Fixed Account Option). For example, we reserve the right to take actions against short-term trading which restrict your transfer privileges more narrowly than the policies described under “Transfer Privileges”, such as requiring transfer requests to be submitted in writing through regular first-class U.S., mail (e.g., no overnight, priority or courier delivery allowed), and refusing any and all transfer instructions into a Fund.

If we determine that a third party acting on your behalf is engaging (alone or in combination with transfers effected by you directly) in a pattern of short-term trading, we may refuse to process certain transfers requested by such a third party. We may also impose special restrictions on third parties that engage in reallocations of Policy values. We may limit the frequency of the transfer and prohibit exchanges into a Fund.

Should transfer instructions provide for a redemption out of a Fund with purchase into a Fund that is restricted, the policyowner’s transfer instructions will be considered a request that is not in Good Order. Therefore, neither side of the requested transaction will be honored. We will provide You notice that the transfer instructions were not executed.

We reserve the right to waive short-term trading restrictions, where permitted by law and not adverse to the interest of the relevant underlying Fund and other of the Company’s contract owners and Owners, in certain instances such as:

 
·
when a new broker of record is designated for the Policy;
 
·
when necessary in our view to avoid hardship to an Owner;
 
·
when underlying Funds are dissolved, merged or substituted.

If short-term trading results as a consequence of waiving the restrictions against short-term trading, it could expose Owners to certain risks. The short-term trading could increase costs for all Owners as a result of excessive portfolio transaction fees. In addition, the short-term trading could adversely affect a Fund's performance. If large amounts of money are suddenly transferred out of a Fund, the Fund's investment adviser cannot effectively invest in accordance with the Fund's investment objectives and policies. Unless the short-term trading policy and the permitted waivers of that policy are applied uniformly, some Owners may experience a different application of the policy and therefore may experience some of these risks. Too much discretion on our part in allowing the waivers of short-term trading policy could result in an unequal treatment of short-term traders by permitting some short-term traders to engage in short-term trading while prohibiting others from doing the same.

The Funds’ Harmful Trading Policies

In addition to the restrictions that we impose (as described above under Short-Term Trading and under Transfer Privileges), most of the Funds have adopted restrictions or other policies about transfers or other purchases and sales of the Funds’ shares. These policies (the “Funds’ Harmful Trading Policies”) are intended to protect the Fund from short-term trading or other trading practices that are potentially harmful to the Fund. The Funds’ Harmful Trading Policies may be more restrictive in some respects than the restrictions that we otherwise would impose, and the Funds may modify their Harmful Trading Policies from time to time.

We are legally obligated to provide (at the Funds’ request) information about each amount You cause to be deposited into a Fund (including by way of premium payments and transfers under your Policy) or removed from the Fund (including by way of withdrawals and transfers).  If a Fund identifies You as having violated the Fund’s Harmful Trading Policies, we are obligated, if the Fund requests, to restrict or prohibit any further deposits or exchanges by You (or a third party acting on your behalf) into that Fund.  Any such restriction or prohibition may remain in place indefinitely.

Accordingly, if You do not comply with any Fund’s Harmful Trading Policies, You (or a third party acting on your behalf) may be prohibited from directing any additional amounts into that Fund. You should review and comply with each Fund’s Harmful Trading Policies, which are disclosed in the Funds’ current prospectuses.

Funds may differ significantly as to such matters as: (a) the amount, format and frequency of information that the Funds request from us about transactions that our customers make; and (b) the extent and nature of any limits or restrictions that the Funds request us to impose upon such transactions. As a result of these differences, the costs borne by us and (directly or indirectly) by our customers may be significantly increased. Any such additional costs may outweigh any additional protection that would be provided to our customers, particularly in view of the protections already afforded by the trading restrictions that we impose as described above under Short-Term Trading and under Transfer Privileges. Also, if a Fund imposes more strict trading restrictions than are reasonably necessary under the circumstances, you could be deprived of potentially valuable flexibility to make transactions with respect to that Fund. For these and other reasons, we may disagree with the timing or substance of a Fund’s requests for information from us or with any transaction limits or restrictions that the Fund requests us to impose upon our customers. If any such disagreement with respect to a Fund cannot be satisfactorily resolved, the Fund might be restricted or, subject to obtaining any required regulatory approval, replaced as an investment option.

Accessing Your Account Value

Surrender

By written request, you may surrender the Policy for its Cash Surrender Value at any time. The date the surrender is processed, the insurance coverage and all other benefits under the Policy will terminate. The Cash Surrender Value is-

 
·
the Account Value, minus

 
·
the outstanding balance of any outstanding Policy Debt; plus

 
·
any Enhancement Benefit.

Surrendering your Policy may have tax consequences. See the Federal Income Tax Considerations section of this prospectus.

Partial Surrenders

You may make a partial surrender of the Policy once each Policy Year after the first Policy Year by request to our Principal Office in a form satisfactory to us. The amount of any partial surrender may not exceed the Account Value minus any outstanding Policy Debt. It will be payable in a lump sum.  Partial surrenders may have tax consequences. The Total Face Amount may be reduced in connection with a partial surrender depending on the then current risk status of the Insured.  The Insured may provide evidence of insurability. The Total Face Amount will not be reduced if the Insured remains an acceptable risk under our then current underwriting standards. If evidence is not provided or the Insured is not an acceptable risk, the Total Face Amount will be reduced to the extent necessary so that the Net Amount at Risk after the partial surrender does not exceed the Net Amount at Risk before the surrender.

You may allocate a partial surrender among the Investment Options. If you do not specify the allocation, then we will allocate the partial surrender among the Investment Options in the same proportion that the Account Value attributable to each Investment Option bears to the total Account Value less the Loan Account immediately prior to the partial surrender. A partial surrender will be allocated to a Sub-Account at the Unit Value of that Sub-Account next determined after receipt of the partial withdrawal request.

A partial surrender may have tax consequences. See the Federal Income Tax Considerations section of this prospectus.

Policy Loans

Using the Policy as collateral, You may request a policy loan of your Account Value, decreased by the balance of any outstanding Policy Debt on the date the policy loan is made and by the projected deductions due to the next Policy Anniversary. We will transfer Account Value equal to the amount of the policy loan from the Investment Options to the Loan Account on the date the policy loan is made.  Amounts in the Loan Account accrue interest daily at an effective annual rate of 3%.

You may allocate the policy loan among the Investment Options. If You do not specify the allocation, then we will allocate the policy loan among the Investment Options in the same proportion that the Account Value attributable to each Investment Option bears to the total Account Value less the Loan Account immediately prior to the policy loan.

Interest on the policy loan will accrue daily at an annual rate of 4% in Policy Years 1 through 10 and 3.0% thereafter. This interest will be due and payable to us in arrears on each Policy Anniversary.  Any unpaid interest will be added to the principal amount as an additional policy loan and will bear interest at the same rate and in the same manner as the prior policy loan.

Policy loans may have tax consequences, particularly if your Policy is classified as a Modified Endowment Contract. See the Federal Income Tax Considerations section of this prospectus.

Note: The Cash Surrender Value and the Policy Proceeds are reduced by the amount of any outstanding Policy Debt.

All amounts paid by You that we receive will be credited to the Policy as premium unless we have received acceptable notice that the funds are to be applied to repay a policy loan. It is generally advantageous to repay a loan rather than to make a premium payment, because premium payments incur expense charges but loan repayments do not. Loan repayments will first reduce the outstanding balance of the policy loan and then accrued but unpaid interest on such loans. We will accept repayment of any policy loan at any time while the Policy is in force. The amount of the loan repayment up to the outstanding balance of the policy loan will be transferred from the Loan Account to the Investment Options.  You may allocate the loan repayment among the Investment Options. If You do not specify the allocation, then we will allocate the loan repayment among the Investment Options in the same proportion that the Account Value attributable to each Investment Option bears to the total Account Value minus the Loan Account immediately prior to the loan repayment. We reserve the right to require that loan repayments, up to the amount of the loan allocated to the Fixed Account, first be allocated back to the Fixed Account.

Deferral of Payment

We will usually pay any amount due from the Variable Account within seven days after the Valuation Date following our receipt of notice for payment or, in the case of death of the Insured, Due Proof of such death. Payment of any amount payable from the Variable Account on death, surrender, partial surrender or policy loan may be postponed whenever-

 
·
the New York Stock Exchange is closed, other than customary weekend and holiday closing, or trading on that exchange is otherwise restricted;

 
·
the SEC, or other regulatory agency with jurisdiction, by order, permits postponement for the protection of policyowners;

 
·
an emergency exists as determined by the SEC, as a result of which disposal of securities is not reasonably practicable, or it is not reasonably practicable to determine the value of the assets of the Variable Account; or

 
·
mandated by applicable law.

In addition, if, pursuant to SEC rules, the MFS® Money Market Portfolio suspends payment of redemption proceeds in connection with a liquidation of the Fund, we will delay payment of any transfer, partial withdrawal, surrender, loan or death benefit from the Money Market Sub-Account until the Fund is liquidated.

If You have submitted a recent check or draft, we have the right to defer payment of surrenders, partial withdrawals, or death benefit proceeds until such check or draft has been honored,

We reserve the right to defer payment of any portion of the Cash Surrender Value, policy loan or partial surrender payable from the Fixed Account for a period not exceeding six months from the date we receive your surrender or loan request. We do not pay interest on the amount of any payments we defer.

If mandated under applicable law, we may be required to reject a premium payment and/or block a Policy and thereby refuse to pay any request for transfers, withdrawals, surrenders, loans or death benefits until instructions are received from the appropriate regulators.  We may also be required to provide additional information about You or your Account to governmental regulators.

Charges, Deductions and Refunds

Premium Expense Load

We deduct a load from each premium payment which includes two elements. One element covers State and Federal tax obligations. The second element covers costs of issuing and selling the Policy, including sales commission, marketing allowance to broker-dealers, cost of printing the prospectuses and marketing materials and advertising expenses. The costs of issuing the Policy are those that are not covered by other explicit charges, including the review of applications, processing the applications and establishing policyowner records. To the extent the costs exceed the Premium Expense Load, the Company will use general account assets, including any profits realized from the Mortality and Expense Risk Charges and Cost of Insurance charges. The tax element is an average of anticipated taxes and the policyowner may pay more or less than the actual tax obligations applicable to the Policy.

Currently, the Premium Expense Load for Policy Year 1 is 20% on each premium payment up to and including Target Premium, 9% in Policy Years 2-10 and 3.25% thereafter. The Premium Expense Load on each premium payment up to and including Target Premium will not exceed 35% for Policy Year 1, 12% for Policy Years 2-10 and 5% thereafter.

For Policies with Investment Start Dates before October 3, 2011, the current Premium Expense Load for Policy Year 1 is 3.5% on each premium payment in excess of Target Premium. For Policies with Investment Start Dates on and after October 3, 2011, the current Premium Expense Load for Policy Year 1 is 5.0% on each premium payment in excess of Target Premium. For all Policies, the current Premium Expense Load for Policy Years 2-10 is 3.5% on each premium payment in excess of Target Premium and 3.25% thereafter. The Premium Expense Load on each premium payment in excess of Target Premium will not exceed 5.0% in any Policy Year.

Target Premium varies based on the Specified Face Amount and the Insured’s Issue Age and sex. We may reduce or waive the Premium Expense Load for certain group or sponsored arrangements and corporate purchasers.

Mortality and Expense Risk Charge

We deduct a daily charge from the assets of the Variable Account for the mortality and expense risks we assume with respect to the Policy. We may realize a profit from this charge. This charge is based on the applicable Daily Risk Percentage, which we will from time to time determine based on our expectations of future interest, mortality experience, persistency, expenses, profit and taxes.  Expressed as an equivalent annual rate, the Daily Risk Percentage is guaranteed not to exceed 0.60% of assets. The mortality risk we assume is that the group of lives insured under the Policies may, on average, live for shorter periods of time than we estimated. The expense risk we assume is that our costs of issuing and administering Policies may be more than we estimated.

Monthly Expense Charge

We deduct a flat charge at the beginning of each month for administration costs. We will from time to time determine the applicable Monthly Expense Charge based on our expectations of future experience with respect to interest, mortality experience, persistency, expenses, profit and taxes, which will not exceed $10.00 in any Policy Month. The Monthly Expense Charge is currently $5.00.

Monthly Face Amount Charge

We deduct a Monthly Face Amount Charge for administration and issue costs. The charge is based on the Specified Face Amount and the Issue Age of the Insured.  The Monthly Face Amount Charge will not exceed $0.20 per $1000 of Specified Face Amount. The illustration provided at time of application will show your specific Monthly Face Amount Charge.

Monthly Cost of Insurance

We deduct a Monthly Cost of Insurance charge from your Account Value to cover anticipated costs of providing insurance coverage.  We may realize a profit from this charge.

The Monthly Cost of Insurance equals the sum of (1), (2), (3) and (4) where

 
(1)
is the Specified Face Amount Monthly Cost of Insurance Rate (described below) multiplied by the Specified Face Amount Net Amount at Risk divided by 1,000.  The Specified Face Amount Net Amount at Risk equals the Base Death Benefit less the Account Value*;

 
(2)
is the Supplemental Insurance Face Amount Monthly Cost of Insurance Rate (described below) multiplied by the Supplemental Insurance Face Amount Net Amount at Risk divided by 1,000.  The Supplemental Insurance Face Amount Net Amount at Risk equals the Supplemental Insurance Death Benefit, which is the Total Death Benefit minus the Base Death Benefit*;

 
(3)
is the monthly rider cost for any riders which are a part of the Policy (i.e. Waiver of Monthly Deductions , Payment of Stipulated Amount;

 
(4)
is any Flat Extra specified in Section 1 of the Policy.

*Item (1) above is expressed algebraically as:  the Specified Face Amount Monthly Cost of Insurance rate x [Specified Face Amount Net Amount at Risk ÷ 1000].  Item (2) above is expressed algebraically as: the Supplemental Insurance Face Amount Monthly Cost of Insurance rate x [Supplemental Insurance Face Amount Net Amount at Risk ÷ 1000].

The Account Value deduction occurs first to the initial Total Face Amount and second to successive increases.

The cost of insurance deductions described above are determined separately for the initial Specified Face Amount and the Supplemental Insurance Face Amount and each increase in Specified Face Amount or Supplemental Insurance Face Amount.

The Net Amount at Risk is affected by the performance of the Sub-Accounts to which premium is allocated, the cumulative premium paid, any Policy Debt, any partial surrenders, transaction fees and periodic charges. Monthly Cost of Insurance rates are currently based on the length of time the Policy has been in force, the Insured's sex (except for unisex Policies), Issue Age, Class, table rating, if any, and applicable mortality tables. We will, however, from time to time determine the applicable rates based on our expectations of future experience with respect to interest, mortality experience, persistency, expenses, profit and taxes. The expenses we consider will include, but not be limited to, any additional commissions we are required to pay as a result of any additional services that a corporate purchaser specifically requests or authorizes to be provided by our agent. Any variations will be based on uniformly applied criteria that do not discriminate unfairly against any owner. We anticipate the cost of insurance rates for coverage under the Policy to be less than the guaranteed maximum monthly rates shown in the Policy, unless the Insured has been rated a substandard risk. For Policies with an Investment Start Date on or before December 31, 2008, the cost of insurance rates are based on the 1980 Commissioners Standard Ordinary (“CSO”) Mortality Tables. For Policies with an Investment Start Date on or after January 1, 2009, the cost of insurance rates are based on the 2001 CSO Mortality Tables. Monthly cost of insurance rates for classes of Insureds with substandard risk ratings are based on multiples of the CSO Mortality Tables described above.

Other Charges and Expenses

We reserve the right to impose a charge for in-force illustrations, as more fully described in the section entitled “Illustrations” below. We currently do not impose a charge and guarantee any charge will not exceed $25.00. In addition, the interest charged for outstanding loans as well as the interest credited to the Loan Account is more fully described in the section entitled “Policy Loans” above.  Lastly, a flat extra charge may apply if an Insured is a substandard risk. A flat extra charge will not exceed $50.00 ($20.00 for Policies with Investment Start Dates before August 17, 2009) per $1000 of Specified Face Amount and Supplemental Insurance Face Amount. It is deducted from the Account Value on a monthly basis and covers the additional mortality risks of the Insured borne by the Company. A definition of “flat extra” is provided in the Glossary.

Directed Deductions

You have the ability to direct from which Investment Options the Mortality and Expense Risk Charge, Monthly Expense Charge, Monthly Face Amount Charge and Monthly Cost of Insurance Charge deductions are taken. The deductions will be allocated among the selected Investment Options in the same proportion that the Account Value attributable to each Investment Option bears to the total Account Value in all Investment Options selected. If You do not specify the allocation, or to the extent the total Account Value in all Investment Options selected is less than the deduction, deductions will be allocated among Investment Options in the same proportion that the Account Value attributable to each Investment Option bears to the total Account Value less the Loan Account immediately prior to the deduction.

Reduction of Charges

We reserve the right to reduce any of our charges and deductions in connection with the sale of the Policy if we expect that the sale may result in cost savings, subject to any requirements we may from time to time impose. We may change our requirements based on experience. We will determine the propriety and amount of any reduction. No reduction will be unfairly discriminatory against the interests of any owner.

Termination of Policy

The Policy will terminate on the earliest of-

 
·
the date we receive (in Good Order) your request to surrender,

 
·
the expiration date of the grace period due to insufficient value, or

 
·
the date of Insured’s death.

If a reinstatement right is required by the insurance law of the state of Policy issue, the following provision applies, regardless of your Investment Start Date. The time in which reinstatement may be requested and the amount sufficient to put the Policy in force may vary by state. Please contact your sales representative to determine if You have a reinstatement right, the time period during which reinstatement must be elected and the amount sufficient to put the Policy in force.

Reinstatement

Before the Insured's death, we may reinstate the Policy provided that the Policy has not been surrendered and You-

 
·
make a request for reinstatement within three years from the date of termination;
 
·
submit satisfactory evidence of insurability to us; and
 
·
pay an amount, as determined by us, sufficient to put the Policy in force.

An amount sufficient to put the Policy in force is:

 
·
the monthly deductions overdue at the end of the grace period; plus
 
·
any excess of Policy Debt over Cash Value at the end of the grace period; plus
 
·
three times the Monthly Cost of Insurance charges applicable at the date of reinstatement; plus
 
·
three times the Monthly Expense Charges applicable at the date of reinstatement; plus
 
·
three times the Monthly Face Amount Charges applicable at the date of reinstatement.

Any Policy Debt at the time the Policy is terminated must be repaid at time of reinstatement or carried over to the reinstated Policy.

Other Policy Provisions

Alteration

Our sales representatives do not have the authority to either alter or modify the Policy or to waive any of its provisions. The only persons with this authority are our president, actuary, secretary or one of our vice presidents.
Assignments

During the lifetime of the Insured, You may assign all or some of your rights under the Policy. All assignments must be filed at our Principal Office and must be in a form satisfactory to us. The assignment will then be effective as of the date You signed the form, subject to any action taken before it was recorded by us at our Principal Office. We are not responsible for the validity or legal effect of any assignment. Neither the Policy nor any of your rights or those of a beneficiary may be assigned or transferred without our permission.

Owner and Beneficiary

The owner has the sole and absolute power to exercise all rights and privileges under the Policy without the consent of any other person unless you provide otherwise by written notice. The beneficiary has no rights under the Policy until the death of the Insured. A beneficiary is any person or entity, named in our records as the proper recipient of the Policy Proceeds. You may change your beneficiary by sending notice in a form satisfactory to us. If there is no beneficiary living when the Insured dies, we will pay the Policy Proceeds under the Policy to you.  If you are also the Insured, the Policy Proceeds will be paid to your estate.

Every state has unclaimed property laws which generally declare life insurance policies to be abandoned after a period of inactivity of three to five years from the policy’s maturity date or date the death benefit is due and payable. For example, if the payment of a death benefit has been triggered, but, if after a thorough search, we are still unable to locate your beneficiary, or your beneficiary does not come forward to claim the death benefit in a timely manner, the death benefit will be paid to the abandoned property division or unclaimed property office of the state in which You or your beneficiary last resided, as shown on our books and records, or to our state of domicile. This “escheatment” is revocable, however, and the state is obligated to pay the death benefit if your beneficiary steps forward to claim it with the proper documentation.  To prevent such escheatment, it is important that You update your beneficiary designations, including full names and complete addresses, if and as they change.

Reports to Owners

We will send you a report at least once each Policy Year. The report will show current policy values, premiums paid and deductions made since the last report. It will also show the balance of any Policy Debt. Additionally, confirmations of individual transactions (e.g. premium payments, allocations, transfers) in the Policy will be sent at the time of the transaction.

Illustrations

Upon request, we will provide you with a hypothetical illustration of future Account Value and Death Benefits. Currently, we do not charge for the illustration but reserve the right to do so.  Any fee will not exceed $25.00.

Misstatement of Age or Sex

If the age or sex (unless a unisex Policy) of the Insured is stated incorrectly in the Policy application, the amounts payable by us will be adjusted.

     Misstatement discovered at death-The Death Benefit will be recalculated to that which would be purchased by the most recently charged Monthly Cost of Insurance rate for the correct age or sex (unless a unisex Policy).

     Misstatement discovered prior to death-The Account Value will be recalculated from the Issue Date using the Monthly Cost of Insurance rates based on the correct age or sex (unless a unisex Policy).

Suicide

If the Insured commits suicide within two years after the Investment Start Date, We will not pay any part of the Policy Proceeds. We will refund to You the Premiums paid, less the amount of any Policy Debt and less any Partial Surrenders.

Incontestability

All statements made in the application or in a supplemental application are representations and not warranties. We will rely on these statements when approving the issuance, increase in total face amount, increase in Death Benefit over premium paid, reinstatement, or change in death benefit option of the Policy. No statement can be used by us in defense of a claim unless the statement was made in the application or in a supplemental application and was a material misrepresentation. In the absence of fraud, after a Policy has been in force during the lifetime of the Insured for a period of two years from its Investment Start Date, we cannot contest it except for non-payment of premiums. However, any increase in the Total Face Amount which is effective after the Issue Date will be incontestable only after the increase has been in force during the lifetime of the Insured for two years from the effective date of coverage of the increase. Any increase in Death Benefit over premium paid or increase in Death Benefit due to a death benefit option change will be incontestable only after such increase has been in force during the lifetime of the Insured for two years from the date of the increase. Further, any reinstatement will be incontestable after the reinstated policy has been in force during the lifetime of the Insured for two years from the effective date of reinstatement.

Addition, Deletion or Substitution of Investments

Shares of any or all of the Funds may not always be available for purchase by the Sub-Accounts of the Variable Account or we may decide that further investment in any such shares is no longer appropriate.  In either event, shares of other registered open-end investment companies or unit investment trusts may be substituted both for Fund shares already purchased by the Variable Account and/or as the security to be purchased in the future, provided that these substitutions have been approved by the SEC. In addition, the investment policies of the Variable Account will not be changed without the approval of the Insurance Commissioner of the State of Delaware. We also reserve the right to eliminate or combine existing Sub-Accounts or to transfer assets between Sub-Accounts, subject to the approval of the Securities and Exchange Commission. In the event of any substitution or other act described above, we may make appropriate amendment to the Policy to reflect the substitution.

Nonparticipating

The Policy does not pay dividends. The Policy does not share in our profits or surplus earnings.

Modification

Upon notice to You, we may modify the Policy if that modification-

 
·
is necessary to make the Policy, the Variable Account or the Fixed Account comply with any law or regulation issued by a governmental agency to which we are subject;

 
·
is necessary to assure continued qualification of the Policy under the Internal Revenue Code or other federal or state laws as a life insurance policy;

 
·
is necessary to reflect a change in the operation of the Variable Account or the Sub-Accounts; or

 
·
adds, deletes or otherwise changes Investment Options.

When required, approval of the Securities and Exchange Commission will be obtained. We also reserve the right to modify certain provisions of the Policy as stated in those provisions. In the event of any such modification, we may make appropriate amendment to the Policy to reflect the modification.

Entire Contract

Your entire contract with us consists of the Policy, the application(s), any riders, any endorsements and any other attachments. Any hypothetical illustrations prepared in connection with the Policy do not form a part of our contract with you and are intended solely to provide information about possible future performance, based solely upon data available at the time such illustrations are prepared.

Voting Rights

We will vote shares of the Funds held in the Variable Account in accordance with instructions received from policyowners having interests in the corresponding Sub-Accounts, to the extent required by law. We will provide each policyowner who has interests in a Sub-Account with the proxy materials of the corresponding Fund, together with an appropriate form for the policyowner to submit its voting instructions to us. We will vote shares for which we receive no timely instructions, together with shares not attributable to any Policy, in the same proportion as those shares held by the Sub-Account for which we receive instructions. As a result of proportional voting, the instructions of a small number of policyowners could determine the outcome of a proposal subject to shareholder vote.

We will determine the number of shares for which you are entitled to provide voting instructions as of the record date established for the applicable Fund. This number is determined by dividing your Account Value in the Sub-Account, if any, by the net asset value of one share in the corresponding Fund. We may, if required by state insurance regulators, disregard voting instructions if the instructions require shares to be voted to cause a change in the subclassification or investment objective of one or more of the Funds, or to approve or disapprove an investment advisory contract for a Fund. In addition, we may disregard voting instructions in favor of any change in the investment policies or in any investment adviser or principal underwriter of a Fund. Our disapproval of any such change must be reasonable and, in the case of change in investment policies or investment adviser, based on a good faith determination that the change would be contrary to state law or otherwise inappropriate in light of the objectives and purposes of the Fund. If we disregard voting instructions, we will include a summary of and the reasons for that action in our next periodic report to policyowners.

We reserve the right to vote shares held in the Variable Account in our own right, if permitted by applicable law.

Distribution of Policy

The Policy is offered on a continuous basis. The Policy is sold by licensed insurance agents (“Selling Agents”) in those states where the Policy may be lawfully sold. Such Selling Agents will be registered representatives of affiliated or unaffiliated broker-dealer firms (“Selling Broker-Dealers”) registered under the Securities Exchange Act of 1934 who are members of the Financial Industry Regulatory Authority (“FINRA”) and who have entered into selling agreements with the Company and our general distributor, Clarendon Insurance Agency, Inc. (“Clarendon”), 96 Worcester Street, Wellesley Hills, Massachusetts 02481. Clarendon is a wholly-owned subsidiary of the Company, is registered with the SEC under the Securities Exchange Act of 1934 and is a member of FINRA.

The Company (or its affiliate, for the purposes of this section only, collectively, “the Company”), pays the Selling Broker-Dealers compensation for sale of the Policy. The Selling Agents who solicit sales of the Policy typically receive a portion of the compensation paid by the Company to the Selling Broker-Dealers in the form of commissions or other compensation, depending on the agreement between the Selling Broker-Dealer and their Selling Agent. This compensation is not paid directly by the Policy Owner or the Variable Account. The Company intends to recoup this compensation through fees and charges imposed under the Policy, and from profits on payments received by the Company for providing administrative, marketing, and other support and services to the Funds. The amount and timing of commissions the Company may pay to Selling Broker-Dealers is not expected to be more than 70% of premium paid in the first Policy Year and 20% per annum of premium paid in Policy Years two and after. We may also pay a commission of-

 
·
up to 0.15% per annum of Account Value for Policy Years one through twenty; and

 
·
up to 0.10% per annum of Account Value thereafter.

We may also pay up to an additional 0.15% per annum of Account Value to broker-dealers who provide additional services specifically requested or authorized by corporate purchasers. The Company may pay or allow other promotional incentives or payments in the form of cash or other compensation to the extent permitted by FINRA rules and other applicable laws and regulations and this compensation may be significant in amount.

The Company also pays compensation to wholesaling broker-dealers or other firms or intermediaries, in return for wholesaling services such as providing marketing and sales support, product training and administrative services to the Selling Agents of the Selling Broker-Dealers. This compensation may be significant and may be based on a percentage of premium, a percentage of Account Value and/or may be a fixed dollar amount.

In addition to the compensation described above, the Company may make additional cash payments (in certain circumstances referred to as “override” compensation) or reimbursements to Selling Broker-Dealers in recognition of their marketing and distribution, transaction processing and/or administrative services support. These payments are not offered to all Selling Broker-Dealers, and the terms of any particular agreement governing the payments may vary among Selling Broker-Dealers depending on, among other things, the level of and type of marketing and distribution support provided. Marketing and distribution support services may include, among other services, placement of the Company's products on the Selling Broker-Dealer's preferred or recommended list, access to the Selling Broker- Dealer's registered representatives for purposes of promoting sales of the Company's products, assistance in training and education for the Selling Agents, and opportunities for the Company to participate in sales conferences and educational seminars. The payments or reimbursements may be calculated as a percentage of the particular Selling Broker-Dealers actual or expected aggregate sales of our variable policies (including the Policy) or assets held within those policies and/or may be a fixed dollar amount. Broker-dealers receiving these additional payments may pass on some or all of the payments to the Selling Agent. The prospect of receiving, or the receipt of additional compensation as described above may provide Selling Broker-Dealers with an incentive to favor sales of the Policies over other variable life policies (or other investments) with respect to which the Selling Broker-Dealer does not receive additional compensation, or lower levels of additional compensation. You should take such payment arrangements into account when considering and evaluating any recommendation relating to the Policies.

In addition to selling our variable policies (including the Policy), some Selling Broker-Dealers or their affiliates may have other business relationships with the Company. Those other business relationships may include, for example, reinsurance agreements pursuant to which an affiliate of the Selling Broker-Dealer provides reinsurance to the Company relative to some or all of the Policies or other variable policies issued by the Company or its affiliates. The potential profits for a Selling Broker-Dealer or its affiliates (including its registered representatives) associated with such reinsurance arrangements could be significant in amount and could indirectly provide incentives to the Selling Broker-Dealer and its Selling Agents to recommend products for which they provide reinsurance over similar products which do not result in potential reinsurance profits to the Selling Broker-Dealer or its affiliate. The operation of an individual policy is not impacted by whether the policy is subject to a reinsurance arrangement between the Company and an affiliate of the Selling Broker-Dealer.

As discussed in the preceding paragraphs, the Selling Broker-Dealer may receive numerous forms of payments that, directly or indirectly, provide incentives to, and otherwise facilitate and encourage the offer and sale of the Policies by Selling Broker-Dealers and their registered representatives. Such payments may be significantly greater or less in connection with the Policies than in connection with other products offered and sold by the Company or by others. Accordingly, the payments described above may create a potential conflict of interest, as they may influence your Selling Broker-Dealer or registered representative to present a Policy to You instead of (or more favorably than) another product or products that might be preferable to You.

You should ask your Selling Agent for further information about what commissions or other compensation he or she, or the Selling Broker-Dealer for which he or she works, may receive in connection with your purchase of the Policy.

During 2011, 2012, and 2013, commissions were paid of $3,918,742, $635,460, and $301,305, respectively and Clarendon did not retain any commissions in connection with the distribution of the Policies.

Federal Income Tax Considerations

The following is a summary of our understanding of current federal income tax laws and is not intended as tax advice. You should be aware that Congress has the power to enact legislation affecting the tax treatment of life insurance contracts which could be applied retroactively. New judicial or administrative interpretation of federal income tax law may also affect the tax treatment of life insurance contracts. The Internal Revenue Code of 1986, as amended (the “Code”), is not in force in the Commonwealth of Puerto Rico but certain residents of Puerto Rico may be subject to the Code’s income tax provisions. Thus, this summary will apply to their Policies. For those residents not subject to such Code provisions, (1) some references in this summary will not apply to their Policies and (2) due to IRS Rev. Rul. 2004-75, as amplified by Rev. Rul. 2004-97, we will treat Puerto Rico Policy distributions and withdrawals occurring on and after January 1, 2005 as U.S.-source income that is subject to U.S. income tax withholding and reporting.

Any person contemplating the purchase of a Policy or any transaction involving a Policy should consult a qualified tax adviser. We do not make any representation or provide any guarantee regarding the federal, state or local tax treatment of any Policy or any transaction involving a Policy.

Our Tax Status

We are taxed as a life insurance company under Subchapter L of the Code. Although we account for the operations of the Variable Account separately from our other operations for purposes of federal income taxation, the Variable Account currently is not separately taxable as a regulated investment company or other taxable entity.

Taxes we pay, or reserve for, that are attributable to the earnings of the Variable Account could affect the Net Investment Factor, which in turn affects your Account Value. Under existing federal income tax law, however, the income (consisting primarily of interest, dividends and net capital gains) of the Variable Account, to the extent applied to increase reserves under the Policy, is not taxable to us. Similarly, no state or local income taxes are currently attributable to the earnings of the Variable Account. Therefore, we do not take any federal, state or local taxes into account when determining the Net Investment Factor. We may take taxes into account when determining the Net Investment Factor in future years if, due to a change in law, our tax status or otherwise, such taxes are attributable to the earnings of the Variable Account.

In calculating our corporate income tax liability, we derive certain corporate income tax benefits associated with the investment of company assets, including separate account assets that are treated as company assets under applicable income tax law. These benefits, which reduce our overall corporate income tax liability, may include dividends received deductions and foreign tax credits which can be material. We do not pass these benefits through to the Variable Account, principally because: (i) the great bulk of the benefits results from the dividends received deduction, which involves no reduction in the dollar amount of dividends that the Variable Account receives and (ii) under applicable income tax law, policyowners are not the owners of the assets generating the benefits.

Taxation of Policy Proceeds

Section 7702 of the Code provides certain tests for whether a policy will be treated as a “life insurance contract” for tax purposes. Provided that the policyowner of the Policy has an insurable interest in the Insured, we believe that the Policy meets these tests, and thus should receive the same federal income tax treatment as a fixed life insurance contract. As such, the Death Benefit under the Policy will generally be eligible for exclusion from the gross income of the beneficiary under Section 101 of the Code, and the policyowner will not be deemed to be in constructive receipt of the increases in Cash Surrender Values, including additions attributable to interest, dividends, appreciation or gains realized upon transfers among the Sub-Accounts and the Fixed Account, until actual receipt thereof.

However, You may be taxed on all of the accumulated income under the Policy on its maturity date and there can be no assurance that an election to extend the maturity date of the Policy will avoid that result. In addition, a corporate owner may be subject to alternative minimum tax on the annual increases in Cash Surrender Values and on the portion of the Death Benefit under the Policy that exceeds its Cash Surrender Value.

To qualify as a life insurance contract under Section 7702, the Policy must satisfy certain actuarial requirements. Section 7702 requires that actuarial calculations be based on mortality charges that meet the “reasonable mortality charge” requirements set forth in the Code, and other charges reasonably expected to be actually paid that are specified in the Policy. The law relating to reasonableness standards for mortality and other charges is based on statutory language and certain IRS pronouncements that do not address all relevant issues. Accordingly, although we believe that the mortality and other charges that are used in the calculations (including those used with respect to Policies issued to so-called “sub-standard risks”) meet the applicable requirements, we cannot be certain.  It is possible that future regulations will contain standards that would require us to modify the mortality and other charges used in the calculations, and we reserve the right to make any such modifications.

IRS Notice 2006-95 provides special guidance concerning the “reasonable mortality charge” requirements for certain changes made in 2009 or later to Policies with Investment Start Dates prior to 2009 based on 1980 Commissioners Standard Ordinary (CSO) Mortality Tables. The Notice provides a safe harbor which would not require such changes to cause a pre-2009 Policy to become subject to the 2001 CSO mortality tables for purposes of Section 7702 of the Code. If we determine that the safe harbor does not include a particular change, we will not permit You to make such change since to do so could cause your Policy to not qualify as life insurance under Section 7702. Before requesting a change under a pre-2009 Policy, You should consult with a qualified tax advisor on the potential impact of IRS Notice 2006-95.

For a variable contract like the Policy to qualify as life insurance for federal income tax purposes, it also must comply with the investment diversification rules found in Section 817 of the Code. We believe that the Variable Account complies with the diversification requirements prescribed by Section 1.817-5 of the Treasury Regulations. The IRS has stated that satisfaction of the diversification requirements described above by itself does not prevent a contract owner from being treated as the owner of separate account assets under an “owner control” test. If a contract owner is treated as the owner of separate account assets for tax purposes, the contract owner would be subject to taxation on the income and gains from the separate account assets.  In published revenue rulings through 1982 and then again in 2003, the IRS has stated that a variable contract owner will be considered the owner of separate account assets if the owner possesses incidents of ownership in those assets, such as the ability to exercise control over the investment of the assets. In Rev. Rul. 2003-91, the IRS considered certain variable annuity and variable life insurance contracts and concluded that the owners of the variable contracts would not be considered the owners of the contracts underlying assets for federal income tax purposes.

Rev. Rul. 2003-91 states that the determination of whether the owner of a variable contract possesses sufficient incidents of ownership over the assets underlying the variable contract so as to be deemed the owner of those assets for federal income tax purposes will depend on all the facts and circumstances. We do not believe that the differences between the Policy and the contracts described in Rev. Rul. 2003-91 with respect to the number of investment choices and the ability to transfer among investment choices should prevent the holding in Rev. Rul. 2003-91 from applying. Nevertheless, You should consult with a qualified tax adviser on the potential impact of the “owner control” rules of the IRS as they relate to the investment decisions and activities You may undertake with respect to the Policy.

The guidelines in Rev. Rul. 2003-91 do not address the treatment of a policyholder which is, or which is affiliated with, an investment manager. Any investment manager or affiliate who purchases a Policy assumes the risk that it may be treated as the owner of the investments underlying the Policy under the “owner control” rules because of the investment manager's control over assets held under the Policy. However, the diversification rules would permit an investment manager (or its affiliate) to hold a direct investment in an investment option under the Policy in certain limited circumstances. We do not believe that the application of the “owner control” rules to an investment manager (or its affiliate) should affect You.

In the future, the IRS and/or the Treasury Department may issue new rulings, interpretations or regulations on this subject.  Accordingly, we reserve the right to modify the Policy as necessary to attempt to prevent You from being considered the owner, for tax purposes, of the underlying assets. We also reserve the right to notify You if we determine that it is no longer practicable to maintain the Policy in a manner that was designed to prevent You from being considered the owner of the assets of the Separate Account. You bear the risk that You may be treated as the owner of Separate Account assets and taxed accordingly.

The tax consequences of distributions from, and loans taken from or secured by, a Policy depend on whether the Policy is classified as a Modified Endowment Contract under Section 7702A of the Code. Due to the flexibility of the payment of premiums and other rights You have under the Policy, classification of the Policy as a Modified Endowment Contract will depend upon the individual operation of each Policy. A Policy is a Modified Endowment Contract if the aggregate amount paid under the Policy at any time during the first seven Policy Years exceeds the sum of the net level premiums that would have been paid on or before such time if the Policy provided for paid up future benefits after the payment of seven level annual premiums. If there is a reduction in benefits during the first seven Policy Years, the foregoing computation is made as if the Policy originally had been issued at the reduced benefit level. If there is a “material change” to the Policy, the seven year testing period for Modified Endowment Contract status is restarted. A material change may occur, for example, unless there is an increase in the death benefit due to the payment of an unnecessary premium.  Unnecessary premiums are premiums paid into the Policy that are not needed to provide a death benefit equal to the lowest death benefit payable in the first seven Policy Years. A life insurance contract received in exchange for a Modified Endowment Contract also will be treated as a Modified Endowment Contract. We have undertaken measures to prevent payment of a premium from inadvertently causing the Policy to become a Modified Endowment Contract. In general, You should consult a qualified tax adviser before undertaking any transaction involving the Policy to determine whether such a transaction would cause the Policy to become a Modified Endowment Contract.

If a Policy is not a Modified Endowment Contract, cash distributions from the Policy are treated first as a nontaxable return of the owner’s Investment in the Policy (as defined below) and then as a distribution of the income earned under the Policy, which is subject to ordinary income tax. (An exception to this general rule occurs when a cash distribution is made in connection with certain reductions in the death benefit under the Policy in the first fifteen contract years. Such a cash distribution is taxed in whole or in part as ordinary income.) Loans from, or secured by, a Policy that is not a Modified Endowment Contract generally are treated as bona fide indebtedness, and thus are not included in the owner’s gross income. However, the tax treatment of loans from such a Policy after the tenth Policy Year is uncertain.  You should consult a tax adviser regarding such loans.

If a Policy is a Modified Endowment Contract, distributions from the Policy are treated as ordinary income subject to ordinary income tax up to the amount equal to the excess of the Account Value (which includes unpaid policy loans) immediately before the distribution over the Investment in the Policy (as defined below). Loans taken from, or secured by, such a Policy, as well as due but unpaid interest thereon, are taxed in the same manner as distributions from the Policy. A 10% additional tax is imposed on the portion of any distribution from, or loan taken from or secured by, a Modified Endowment Contract that is included in income except when the distribution or loan is made on or after the owner attains age 59 1/2, is attributable to the policyowner’s becoming disabled, or is part of a series of substantially equal periodic payments for the life (or life expectancy) of the policyowner or the joint lives (or joint life expectancies ) of the policyowner and the policyowner’s Beneficiary. These exceptions are not likely to apply where the Policy is not owned by an individual (or held in trust for an individual). For purposes of the computations described in this paragraph, all Modified Endowment Contracts issued by us to the same policyowner during any calendar year are treated as one Modified Endowment Contract. If a Policy becomes a Modified Endowment Contract, distributions that occur during the Policy Year will be taxed as distributions from a Modified Endowment Contract. In addition, distributions from a Policy within two (2) years before it becomes a Modified Endowment Contract may be taxed retroactively as distributions from a Modified Endowment Contract.

There are substantial limits on the deductibility of policy loan interest on a federal income tax return. You should consult a qualified tax adviser regarding such deductions.

Upon the complete maturity, surrender or lapse of the Policy, the amount by which the sum of the Policy’s Cash Surrender Value and any unpaid Policy Debt exceeds the policyowner’s Investment in the Policy (as defined below) is treated as ordinary income subject to tax and, if the Policy is a Modified Endowment Contract, the 10% additional tax discussed above may also apply. Any loss incurred upon surrender generally is not deductible. Any corporation that is subject to the alternative minimum tax will also have to make a separate computation of the Investment in the Policy and the gain resulting from the maturity of the Policy, or a surrender or lapse of the Policy for purposes of that tax.

The term “Investment in the Policy” means-

 
·
the aggregate amount of any premiums or other consideration paid for a Policy, minus

 
·
the aggregate amount received under the Policy which is excluded from the policyowner’s gross income (other than loan amounts), plus

 
·
the amount of any loan from, or secured by, the Policy that is a Modified Endowment Contract (as defined above) to the extent that such amount is included in the policyowner’s gross income.

The “Investment in the Policy” is increased by any unpaid Policy Debt on a Policy that is a Modified Endowment Contract in order to prevent double taxation of income. Since the Policy Debt was treated as a taxable distribution at the time the Policy Debt was incurred, the failure to increase the “Investment in the Policy” by the Policy Debt would cause such amount to be taxed again upon a Policy surrender or lapse.

The amount realized that is taken into account in computing the gain on the complete surrender or lapse of a Policy will include any unpaid Policy Debt on a Policy that is a Modified Endowment Contract even though that amount has already been treated as a taxable distribution.

If a Policy is not a Modified Endowment Contract, then the Investment in the Policy is not affected by the receipt of a loan from, or secured by a Policy, unless the loan is treated as a distribution.

Whether or not the Policy is a Modified Endowment Contract, however, no payment of the principal of, or the interest due under, any loan from or secured by a Policy will affect the amount of the Investment in the Policy.

A policyowner generally will not recognize gain upon the exchange of the Policy for another life insurance policy issued by us or another insurance company, except to the extent that the policyowner receives cash in the exchange or is relieved of policy indebtedness as a result of the exchange.  In no event will the gain recognized exceed the amount by which the Policy’s Account Value (which includes unpaid policy loans) exceeds the policyowner’s Investment in the Policy.

A transfer of the Policy, a change in the policyowner, a change in the beneficiary, certain other changes to the Policy and particular uses of the Policy (including use in a so called “split-dollar” arrangement) may have tax consequences depending upon the particular circumstances and should not be undertaken prior to consulting with a qualified tax adviser. For instance, if you transfer the Policy or designate a new policyowner in return for valuable consideration (or, in some cases, if the transferor is relieved of a liability as a result of the transfer), then the Death Benefit payable upon the death of the Insured may in certain circumstances be includible in your taxable income to the extent that the Death Benefit exceeds the prior consideration paid for the transfer and any premiums and other amounts paid later by the transferee. Further, in such a case, if the consideration received exceeds your Investment in the Policy, the difference will be taxed to You as ordinary income.

The Code denies the income tax-free treatment of death benefits payable under an employer-owned life insurance contract unless certain notice and consent requirements are met and either (1) certain rules relating to the insured employee’s status are satisfied or (2) certain rules relating to the payment of the amount received under the contract to, or for the benefit of, certain beneficiaries or successors of the insured employee are satisfied. These rules apply to life insurance contracts owned by corporations (including S corporations), individual sole proprietors, estates and trusts and partnerships that are engaged in a trade or business. Any business contemplating the purchase of a Policy on the life of an employee should consult with its legal and tax advisors regarding the applicability of these Code provisions to the proposed purchase.

A tax adviser should also be consulted with respect to the Treasury’s split dollar regulations if You have purchased or are considering the purchase of a Policy for a split dollar insurance plan. Any business contemplating the purchase of a new life insurance contract or a change in an existing contract should consult a tax adviser.  There may also be an indirect tax upon the income in the Policy or the proceeds of a Policy under the federal corporate alternative minimum tax, if the policyowner is subject to that tax.

Federal, as well as state and local, estate, inheritance and other tax consequences of ownership or receipt of Policy Proceeds will depend on your individual circumstances and those of the beneficiary.

Withholding

We will withhold and remit to the U.S. Government a part of the taxable portion of each distribution unless, prior to the distribution, the Owner provides us his or her taxpayer identification number and instructs us (in the manner prescribed) not to withhold. The Owner may credit against his or her federal income tax liability for the year of distribution any amounts that we withhold.

Tax Return Disclosure

We believe that the purchase of a Policy is not currently subject to the income tax return disclosure requirements of Code Section 6011 and Treasury Regulation Section 1.6011-4. However, it is your responsibility, in consultation with your tax and legal counsel and advisers, to make your own determination as to the applicability of the disclosure requirements of Code Section 6011 and Treasury Regulation Section 1.6011-4 to your federal income tax return.

Under Code Section 6111 and Temporary Treasury Regulation Section 301.6111-1T, we are required to register with the IRS any offerings or sales of Policies that are considered tax shelters. We believe that registration would not be required under current regulations with respect to sales of the offering or sale of a Policy.

We believe that the customer list requirements of Code Section 6112 and Treasury Regulation Section 301.6112-1 are not currently applicable to such offerings and sales.

Tax Shelter Regulations

Prospective Policy owners that are corporations should consult a tax adviser about the treatment of the Policy under the Treasury Regulations applicable to corporate tax shelters.

Alternative Minimum Tax

There may also be an indirect tax upon the income in the Policy or the proceeds of a Policy under the federal corporate alternative minimum tax, if the owner is subject to that tax.

Other Tax Considerations

The transfer of the Policy or designation of a beneficiary may have federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes.  For example, the transfer of the Policy to, or the designation as a beneficiary of, or the payment of proceeds to, a person who is assigned to a generation which is two or more generations below the generation assignment of the owner may have generation skipping transfer tax consequences under federal tax law.  The individual situation of each Policy owner or beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of Policy proceeds will be treated for purposes of federal, state and local estate, inheritance, generation skipping and other taxes.

Under certain circumstances, the Code may impose a generation-skipping transfer (“GST”) tax when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner. Regulations issued under the Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS.

For 2014, the federal estate tax, gift tax, and GST tax exemptions and maximum rates are $5,340,000 and 40%, respectively. 

The potential application of these taxes underscores the importance of seeking guidance from a qualified adviser to help ensure that your estate plan adequately addresses your needs and those of your beneficiaries under all possible scenarios.

The uncertainty as to how the current law might be modified in coming years underscores the importance of seeking guidance from a qualified adviser to help ensure that your estate plan adequately addresses your needs and those of your beneficiaries under all possible scenarios.

Medicare Tax on Investment Income

Beginning in 2013, the newly enacted 3.8% Medicare tax on investment income applies to individuals whose income exceeds certain threshold amounts. You should consult a tax adviser about the impact of this new tax on distributions from the Policy.

Loan Lapse Protection Rider

This Policy may be purchased with the intention of accumulating cash value on a tax-free basis for some period (for example, until retirement) and then periodically borrowing from the Policy, relying on the Loan Lapse Protection Rider to keep the Policy from lapsing.  The aim of this strategy is to continue borrowing from the Policy until its cash value is just enough to pay off the Policy loans that have been taken out.  Anyone contemplating taking advantage of this strategy should be aware that it involves several risks.  First, this strategy will fail to achieve its goal if the Policy is a Modified Endowment Contract or becomes a Modified Endowment Contract after the periodic borrowing begins.  Second, this strategy has not been ruled on by the Internal Revenue Service or the courts and it may be subject to challenge by the IRS, because it is possible that loans under this Policy will be treated as taxable distributions.  Finally, there is a significant risk that poor investment performance, together with ongoing deductions for insurance charges, will lead to a substantial decline in the Policy’s cash value that could result in the Policy being treated for tax purposes as having lapsed.  In that event, assuming Policy loans have not already been subject to tax as distributions, a significant tax liability could arise when the lapse is deemed to have occurred.  Anyone considering purchasing the Policy with the Loan Lapse Protection Rider should, before purchasing the Policy, consult a competent tax adviser about the tax risks inherent in exercising the Loan Lapse Protection Rider.

Life Insurance Purchases by Nonresident Aliens and Foreign Corporations

Purchasers that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from life insurance policies at a 30% rate, unless a lower treaty rate applies.  In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser’s country of citizenship or residence.  Prospective purchasers that are not U.S. citizens or residents are advised to consult with a qualified tax adviser regarding U.S. and foreign taxation with respect to a life insurance policy purchase.

Possible Tax Law Changes

Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Policy could change by legislation or otherwise.  Consult a tax adviser with respect to legislative developments and their effect on the Policy.

Other Information

State Regulation

We are subject to the laws of Delaware governing life insurance companies and to regulation by Delaware's Commissioner of Insurance, whose agents periodically conduct an examination of our financial condition and business operations. We are also subject to the insurance laws and regulations of the jurisdictions in which we are authorized to do business.

We are required to file an annual statement with the insurance regulatory authority of those jurisdictions where we are authorized to do business relating to our business operations and financial condition as of December 31st of the preceding year.

Legal Proceedings

We, like other insurance companies, are involved in lawsuits, including class action lawsuits. Although the outcome of any litigation cannot be predicted with certainty, we believe that, at the present time, there are no pending or threatened lawsuits that are reasonably likely to have a material adverse effect on the Variable Account, on the ability of Clarendon Insurance Agency, Inc. to perform under its principal underwriting agreement, or on our ability to meet our obligations under the Policies.

Experts

Actuarial matters concerning the Policy have been examined by Philip Johnson, FSA, MAAA, Assistant Vice President.

Registration Statements

This prospectus is part of a registration statement that has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, with respect to the Policy. It does not contain all of the information set forth in the registration statement and the exhibits filed as part of the registration statement.  You may refer to the registration statement for additional information about us, the Variable Account, the underlying Funds and the Policy.

Financial Statements

Our financial statements, provided in the Statement of Additional Information, should be considered only as bearing on our ability to meet our obligations with respect to the death benefit and our assumption of the mortality and expense risks. They should not be considered as bearing on the investment performance of the Variable Account or shares of any Fund held in the Variable Account. Instructions on how to obtain the Statement of Additional Information are provided on the last page of this prospectus.




 
 
 

Appendix A -
Glossary of Policy Terms

Account Value - The sum of the amounts in each Sub-Account of the Variable Account, the Fixed Account and the amount of the Loan Account. Account Value does not include Policy Debt. Policy Debt, which includes the amount of loans and interest charged, is not deducted from Account Value. It is reflected in the amounts received upon surrender or payment of Policy Proceeds. It is also reflected in the amount of total Account Value that may be borrowed against.

Anniversary - The same day in each succeeding year as the day of the year corresponding to the Issue Date.

Attained Age - The Insured's Issue Age plus the number of completed Policy Years.

Base Death Benefit - The death benefit under the Policy, exclusive of any Supplemental Insurance Death Benefit or any other supplemental benefits.

Business Day - Any day that we are open for business.

Cash Surrender Value - The Gross Cash Surrender Value less the balance of any outstanding Policy Debt.

Class - The risk, underwriting, and substandard table rating, if any, classification of the Insured.

Daily Risk Percentage - The applicable daily rate for deduction of the mortality and expense risk charge.

Death Benefit - The sum of the Base Death Benefit and any Supplemental Insurance Death Benefit. For purposes of calculating the Death Benefit, the Account Value will be increased by the value provided by the Enhancement Benefit.

Death Benefit Percentage - A percentage prescribed by the Internal Revenue Code to insure the death benefit provided under the Policy meets the definition of “life insurance” under the Internal Revenue Code.

Due Proof - Such evidence as we may reasonably require in order to establish that Policy Proceeds are due and payable.  Generally, evidence will consist of the Insured’s death certificate.

Fixed Account - The portion of the Account Value funded by assets invested in our General Account.

Flat Extra - An additional charge imposed if the Insured is a substandard risk. It is a flat dollar charge per $1000 of Specified Face Amount and any Supplemental Insurance Face Amount.

Fund - A mutual fund in which a Sub-Account invests.

General Account - The assets held by us other than those allocated to the Sub-Accounts of the Variable Account or any of our other separate accounts.

Good Order - An instruction that is received by the Company, that is sufficiently complete and clear, along with all forms, information and supporting legal documentation (including any required spousal or joint owner’s consents) so that the Company does not need to exercise any discretion to follow such instruction. All orders to process a withdrawal request, a loan request, a request to surrender your Policy, a fund transfer request, or a death benefit claim must be in good order.

Gross Cash Surrender Value - The Account Value increased by any Enhancement Benefit.

Initial Premium - The amount necessary to put the coverage in force. It is generally an amount sufficient to keep the Policy in force for three months.

Insured - The person on whose life the Policy is issued.

Investment Option - The Fixed Account and any of the Sub-Accounts of the Variable Account.

Investment Start Date - The date the first premium is applied, which will be the later of

 
·
the Issue Date or

 
·
the Business Day we approve the application for a Policy.

Issue Age - The Insured's age as of the Insured's birthday nearest the Issue Date.

Issue Date - The date specified in the Policy, from which Policy Anniversaries, Policy Years and Policy Months are measured.

Loan Account - An account established for the Policy, the value of which is the principal amount of any outstanding loan against the Policy, plus credited interest thereon.

Monthly Anniversary Day - The same day in each succeeding month as the day of the month corresponding to the Issue Date.

Monthly Cost of Insurance - A deduction made on a monthly basis for the Specified Face Amount, any Supplemental Insurance Face Amount and additional benefits provided by rider.

Monthly Expense Charge - A per Policy deduction made on a monthly basis for administration costs.

Monthly Face Amount Charge - A monthly deduction, based on the Specified Face Amount, for administration and issue costs.

Net Amount at Risk – The Net Amount at Risk equals the Death Benefit minus the Account Value.

Net Premium - The amount you pay as the premium minus the Premium Expense Load.

Policy - The form issued by Sun Life Assurance Company of Canada (U.S.) which evidences the insurance coverage provided and is a contract between the policyowner and the Company.

Policy Debt - The principal amount of any outstanding loans against the Policy, plus accrued but unpaid interest on such loans.

Policy Month - A one-month period commencing on the Issue Date or any Monthly Anniversary Day and ending on the next Monthly Anniversary Day.

Policy Proceeds - The amount determined in accordance with the terms of the Policy that is payable at the death of the Insured.

Policy Year - A one-year period commencing on the Issue Date or any Anniversary and ending on the next Anniversary.

Premium Expense Load - The percentage charge applied to premium. It includes two elements.  One element is for state and federal tax obligations and the other element is a sales load to cover costs related to policy issuance.

Principal Office - 96 Worcester Street, Wellesley Hills, Massachusetts, 02481, or such other address as We may hereafter specify to You by written notice.

SEC - Securities and Exchange Commission.

Specified Face Amount - The amount of life insurance coverage you request, as specified in the Policy.

Sub-Accounts - Sub-Accounts into which the assets of the Variable Account are divided, each of which corresponds to an investment choice available to you.

Supplemental Insurance Death Benefit - The death benefit associated with the Supplemental Insurance Face Amount.

Supplemental Insurance Face Amount - The amount of additional life insurance coverage you request as specified in the Policy.

Target Premium - An amount of premium specified as such in the Policy, used to determine our Premium Expense Load deductions.

Target Premium Factor - Factors that are approximately equal to the Seven Pay Premium factors referenced in the Internal Revenue Code.

Total Face Amount - The sum of the Specified Face Amount and Supplemental Insurance Face Amount.

Unit - A unit of measurement that we use to calculate the value of each Sub-Account.

Unit Value - The value of each Unit of assets in a Sub-Account.

Valuation Date - A day that the New York Stock Exchange is open for business. We will determine Unit Values for each Valuation Date as of the close of the New York Stock Exchange on that Valuation Date.

Valuation Period - The period of time from one Valuation Date to the next Valuation Date.

Variable Account - Sun Life of Canada (U.S.) Variable Account I, one of our separate accounts, established for the purpose of funding variable insurance benefits payable under the Policy.

You - is the owner of the Policy.


 
 
 

Appendix B -
PRIVACY POLICY

Introduction

Protecting your privacy is important to us.  Whether You are an existing customer or considering a relationship with us, we recognize that You have an interest in how we may collect, use and share information about You.

We understand and appreciate the trust and confidence You place in us, and we take seriously our obligation to maintain the confidentiality and security of your personal information.

We invite You to review this Privacy Policy which outlines how we use and protect that information.

Collection of Nonpublic Personal Information by the Company

Collecting personal information from You is essential to our ability to offer You high-quality investment, retirement and insurance products.  When You apply for a product or service from us, we need to obtain information from You to determine whether we can provide it to You.  As part of that process, we may collect information about You, known as nonpublic personal information, from the following sources:

·
Information we receive from You on applications or other forms, such as your name, address, social security number and date of birth;
   
·
Information about your transactions with us, our affiliates or others, such as other life insurance policies or annuities that You may own; and
   
·
 Information we receive from a consumer reporting agency, such as a credit report.

Limited Use and Sharing of Nonpublic Personal Information by the Company

We use the nonpublic personal information we collect to help us provide the products and services You have requested and to maintain and service your accounts.  Once we obtain nonpublic personal information from You, we do not disclose it to any third party except as permitted or required by law.

We may share your nonpublic personal information within Delaware Life to help us develop innovative financial products and services and to allow our member companies to inform You about them.  The Delaware Life group of companies provides a wide variety of financial products and services including individual life insurance, and individual fixed and variable annuities.

We also may disclose your nonpublic personal information to companies that help in conducting our business or perform services on our behalf, or to other financial institutions with which we have joint marketing agreements.  The Company is highly selective in choosing these companies, and we require them to comply with strict standards regarding the security and confidentiality of our customers’ nonpublic personal information.  These companies may use and disclose the information provided to them only for the purpose for which it is provided, as permitted by law.

There also may be times when the Company is required to disclose its customers’ nonpublic personal information, such as when complying with federal, state or local laws, when responding to a subpoena, or when complying with an inquiry by a governmental agency or regulator.

Our Treatment of Information About Former Customers

Our protection of your nonpublic personal information extends beyond the period of your customer relationship with us.  If your customer relationship with us ends, we will not disclose your information to nonaffiliated third parties other than as permitted or required by law.

Security of Your Nonpublic Personal Information

We maintain physical, electronic and procedural safeguards that comply with federal and state regulations to safeguard your nonpublic personal information from unauthorized use or improper access.

Employee Access to Your Nonpublic Personal Information

We restrict access to your nonpublic personal information to those employees who have a business need to know that information in order to provide products or services to you or to maintain your accounts.  Our employees are governed by a strict code of conduct and are required to maintain the confidentiality of customer information.

Questions

If you have questions about our privacy practices and policy please contact the Privacy Officer at Privacy@delawarelife.com.

All concerns will be handled discreetly and confidentially.

 
 
 

The SAI includes additional information about Sun Life of Canada (U.S.) Variable Account I and is incorporated herein by reference. The SAI and personalized illustrations of death benefits, cash surrender values and cash values are available upon request. There is no charge for the SAI. We currently do not charge for personalized illustrations but reserve the right to do so. You may make inquiries about the Policy, request an SAI and request a personalized illustration by calling 1-888-594-2654.

You can review and copy the complete registration statement (including the SAI) which contains additional information about us, the Policy and the Variable Account at the SEC's Public Reference Room in Washington, D.C. To find out more about this public service, call the Securities and Exchange Commission at 202-551-8090. Reports and other information about the Policy and its mutual fund investment options are also available on the SEC's website (www.sec.gov), or you can receive copies of this information, for a duplication fee, by writing the Public Reference Section, Securities and Exchange Commission, 100 F Street, NE, Washington, D.C.  20549.









































Securities Act of 1933 File No. 333-143353
  
Investment Company Act File No. 811-09137
  


 
 
 



PART B


 
 
 





STATEMENT OF ADDITIONAL INFORMATION

SUN EXECUTIVE

VARIABLE UNIVERSAL LIFE POLICY

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I

May 1, 2014

This Statement of Additional Information (SAI) is not a prospectus but it relates to, and should be read in conjunction with, the Sun Executive VUL prospectus, dated May 1, 2014.  The prospectus is available, at no charge, by writing Sun Life Assurance Company of Canada (U.S.) (“the Company”) at 96 Worcester Street, Wellesley Hills, MA  02481 or calling 1-800-700-6554.


TABLE OF CONTENTS

THE COMPANY AND THE VARIABLE ACCOUNT
  
CUSTODIAN
  
EXPERTS
  
DISTRIBUTION AND UNDERWRITING OF POLICY
  
THE POLICY
  
FINANCIAL STATEMENTS OF THE COMPANY
  
FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT
  




 
 
 


THE COMPANY AND THE VARIABLE ACCOUNT

The corporate parent of Sun Life Assurance Company of Canada (U.S.) is Delaware Life Holdings, LLC (“Delaware Life”). Delaware Life is a limited liability company organized under the laws of the State of Delaware on December 12, 2012.  Delaware Life is ultimately controlled by Todd L. Boehly and Mark R. Walter. Messrs. Boehly and Walter ultimately control the Company through the following intervening companies: Delaware Life, Delaware Life Holdings Parent, LLC, Delaware Life Holdings Parent II, LLC, Delaware Life Equity Investors, LLC, DLICM, LLC and DLICT, LLC. The nature of the business of Messrs. Boehly and Walter and these intervening companies is investing in companies engaged in the business of life insurance and annuities.

Sun Life Assurance Company of Canada (U.S) is a stock life insurance company incorporated under the laws of Delaware on January 12, 1970.

We established Variable Account I on December 1, 1998, pursuant to a resolution of our Board of Directors.  The Variable Account is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940 (“1940 Act”) as a unit investment trust.

CUSTODIAN

We are the Custodian of the assets of the Variable Account.  We will purchase Fund shares at net asset value in connection with amounts allocated to the Sub-Accounts in accordance with your instructions, and we will redeem Fund shares at net asset value for the purpose of meeting the contractual obligations of the Variable Account and paying charges relative to the Variable Account. The Variable Account will be fully funded at all times for the purposes of the Federal securities laws.

EXPERTS


The statutory-basis financial statements of Sun Life Assurance Company of Canada (U.S.) (the “Company”) as of December 31, 2013 and for the year ended December 31, 2013 (which report expresses an unmodified opinion in accordance with accounting practices prescribed or permitted by the Insurance Department of the State of Delaware and includes an emphasis-of-matter paragraph relating to the Company’s quasi reorganization), included in this Statement of Additional Information have been so included in reliance on the report of  PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. Their office is located at185 Asylum Street, Suite 2400, Hartford, Connecticut 06103.

The financial statements of Sun Life of Canada (U.S.) Variable Account I as of December 31, 2013 and for the year ended December 31, 2013, included in this Statement of Additional Information have been so included in reliance on the report of  PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

The statutory-basis financial statements of Sun Life Assurance Company of Canada (U.S.) (the “Company”) as of December 31, 2012 and for each of the two years in the period ended December 31, 2012 (which report expresses an unmodified opinion in accordance with accounting practices prescribed or permitted by the Insurance Department of the State of Delaware and includes an emphasis-of-matter paragraph relating to the Company adopting Statement of Statutory Accounting Principle (“SSAP”) No. 101 Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10 in 2012 and another matter paragraph relating to significant balances and transactions with affiliates), included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. Their office is located at 200 Berkeley Street, Boston, Massachusetts 02116.

The financial statements of Sun Life of Canada (U.S.) Variable Account I, as of December 31, 2012 and for the year ended December 31, 2012, included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

DISTRIBUTION AND UNDERWRITING OF THE POLICY

The Policy is offered on a continuous basis.  The Policy is sold by licensed insurance agents (“Selling Agents”) in those states where the Policy may be lawfully sold.  Such Selling Agents will be registered representatives of affiliated and unaffiliated broker-dealer firms (“Selling Broker-Dealers”) registered under the Securities Exchange Act of 1934 who are members of the Financial Industry Regulatory Authority (“FINRA”) and who have entered into selling agreements with the Company and our general distributor, Clarendon Insurance Agency, Inc. (“Clarendon”), 96 Worcester Street, Wellesley Hills, Massachusetts 02481.  Clarendon is a wholly-owned subsidiary of the Company, is registered with the SEC under the Securities Exchange Act of 1934 and is a member of FINRA.

The Company (or its affiliates, for the purposes of this section only, collectively, “the Company”), pays the Selling Broker-Dealers compensation for sale of the Policy.  The Selling Agents who solicit sales of the Policy typically receive a portion of the compensation paid by the Company to the Selling Broker-Dealers in the form of commissions or other compensation, depending on the agreement between the Selling Broker-Dealer and their Selling Agent.  This compensation is not paid directly by the Policy Owner or the Variable Account.  The Company intends to recoup this compensation through fees and charges imposed under the Policy, and from profits on payments received by the Company for providing administrative, marketing, and other support and services to the Funds.  The amount and timing of commissions the Company may pay to Selling Broker-Dealers is not expected to be more than 70% of premium paid in the first Policy Year and 20% per annum of premium paid in Policy Years two and after.  We may also pay a commission of-

-up to 0.15% per annum of Account Value for Policy Years one through twenty; and

-up to 0.10% per annum of Account Value thereafter.

We may also pay up to an additional 0.15% per annum to broker-dealers who provide additional services specifically requested or authorized by corporate purchasers.  The Company may pay or allow other promotional incentives or payments in the form of cash or other compensation to the extent permitted by FINRA rules and other applicable laws and regulations and this compensation may be significant in amount.

The Company also pays compensation to wholesaling broker-dealers or other firms or intermediaries, including, in some cases, payments to affiliates of the Company such as Sun Life Financial Distributors, Inc., in return for wholesaling services such as providing marketing and sales support, product training and administrative services to the Selling Agents of the Selling Broker-Dealers.  This compensation may be significant and may be based on a percentage of premium, a percentage of Account Value and/or may be a fixed dollar amount.

In addition to the compensation described above, the Company may make additional cash payments (in certain circumstances referred to as “override” compensation) or reimbursements to Selling Broker-Dealers in recognition of their marketing and distribution, transaction processing and/or administrative services support.  These payments are not offered to all Selling Broker-Dealers, and the terms of any particular agreement governing the payments may vary among Selling Broker-Dealers depending on, among other things, the level of and type of marketing and distribution support provided.  Marketing and distribution support services may include, among other services, placement of the Company's products on the Selling Broker-Dealer's preferred or recommended list, access to the Selling Broker-Dealer's registered representatives for purposes of promoting sales of the Company's products, assistance in training and education for the Selling Agents, and opportunities for the Company to participate in sales conferences and educational seminars. The payments or reimbursements may be calculated as a percentage of the particular Selling Broker-Dealers actual or expected aggregate sales of our variable policies (including the Policy) or assets held within those policies and/or may be a fixed dollar amount.  Broker-dealers receiving these additional payments may pass on some or all of the payments to the Selling Agent.  The prospect of receiving, or the receipt of additional compensation as described above may provide Selling Broker-Dealers with an incentive to favor sales of the Policies over other variable life policies (or other investments) with respect to which the Selling Broker-Dealer does not receive additional compensation, or lower levels of additional compensation.  You should take such payment arrangements into account when considering and evaluating any recommendation relating to the Policies.

In addition to selling our variable policies (including the Policy), some Selling Broker-Dealers or their affiliates may have other business relationships with the Company.  Those other business relationships may include, for example, reinsurance agreements pursuant to which an affiliate of the Selling Broker-Dealer provides reinsurance to the Company relative to some or all of the Policies or other variable policies issued by the Company or its affiliates.  The potential profits for a Selling Broker-Dealer or its affiliates (including its registered representatives) associated with such reinsurance arrangements could be significant in amount and could indirectly provide incentives to the Selling Broker-Dealer and its Selling Agents to recommend products for which they provide reinsurance over similar products which do not result in potential reinsurance profits to the Selling Broker-Dealer or its affiliate.  The operation of an individual policy is not impacted by whether the policy is subject to a reinsurance arrangement between the Company and an affiliate of the Selling Broker-Dealer.

As discussed in the preceding paragraphs, the Selling Broker-Dealer may receive numerous forms of payments that, directly or indirectly, provide incentives to, and otherwise facilitate and encourage the offer and sale of the Policies by Selling Broker-Dealers and their registered representatives.  Such payments may be significantly greater or less in connection with the Policies than in connection with other products offered and sold by the Company or by others.  Accordingly, the payments described above may create a potential conflict of interest, as they may influence your Selling Broker-Dealer or registered representative to present a Policy to You instead of (or more favorably than) another product or products that might be preferable to You.

You should ask your Selling Agent for further information about what commissions or other compensation he or she, or the Selling Broker-Dealer for which he or she works, may receive in connection with your purchase of the Policy.

Total commissions paid by the Variable Account to, but not retained by, Clarendon during 2011, 2012 and 2013, were approximately $7,802,022, $2,070,990, and $1,155,203, respectively.

THE POLICY

To apply for a Policy, you must submit an application to our Service Office.  We will then follow underwriting procedures designed to determine the insurability of the proposed Insured.  We offer the Policy on a regular (or medical) underwriting, simplified underwriting, expanded guaranteed issue or guaranteed issue basis.  The proposed Insured generally must be less than 71 years old for a Policy to be issued.  For Policies underwritten on a medical or simplified basis, we may require that the proposed Insured undergo one or more medical examinations and that you provide us with such additional information as we may deem necessary, before an application is approved.  We will issue Policies on an expanded guaranteed issue or guaranteed issue basis with respect to certain groups of Insureds.  Policies issued on such basis must be pre-approved based on information you provide to us on a master application and on certain other underwriting requirements which all members of a proposed group of Insureds must meet.  Proposed Insureds must be acceptable risks based on our underwriting limits and standards.  We will not issue a Policy until the underwriting process has been completed to our satisfaction.  In addition, we reserve the right to reject an application that does not meet our underwriting requirements or to increase by no more than 500% the cost of insurance charges applicable to an Insured to cover the cost of the increased mortality risk borne by the Company.  For Policies with an Investment Start Date on or before December 31, 2008, the cost of insurance rates are based on the 1980 Commissioners Standard Ordinary (“CSO”) Mortality Tables.  For Policies with an Investment Start Date on or after January 1, 2009, the cost of insurance rates are based on the 2001 Commissioners Standard Ordinary Mortality Tables.

Premium Expense Load. We deduct a load from each premium payment which includes two elements.  One element covers State and Federal tax obligations.  The second element covers costs of issuing and selling the Policy, including sales commission, marketing allowance to broker-dealers, cost of printing the prospectuses and marketing materials and advertising expenses.  The costs of issuing the Policy are those that are not covered by other explicit charges, including the review of applications, processing the applications and establishing policyowner records.  To the extent the costs exceed the Premium Expense Load, the Company will use general account assets, including any profits realized from the Mortality and Expense Risk Charges and Cost of Insurance charges.  The tax element is an average of anticipated taxes and the policyowner may pay more or less than the actual tax obligations applicable to the Policy.

Currently, the Premium Expense Load for Policy Year 1 is 20% on each premium payment up to and including Target Premium, 9% in Policy Years 2-10 and 3.25% thereafter.  The Premium Expense Load on each premium payment up to and including Target Premium will not exceed 35% for Policy Year 1, 12% for Policy Years 2-10 and 5% thereafter.

For Policies with Investment Start Dates before October 3, 2011, the current Premium Expense Load for Policy Year 1 is 3.5% on each premium payment in excess of Target Premium.  For Policies with Investment Start Dates on and after October 3, 2011, the current Premium Expense Load for Policy Year 1 is 5.0% on each premium payment in excess of Target Premium. For all Policies, the current Premium Expense Load for Policy Years 2-10 is 3.5% on each premium payment in excess of Target Premium and 3.25% thereafter.  The Premium Expense Load on each premium payment in excess of Target Premium will not exceed 5.0% in any Policy Year.

Target Premium varies based on the Total Face Amount and the Insured’s Issue Age and sex.  We may reduce or waive the Premium Expense Load for certain group or sponsored arrangements and corporate purchasers.

Reduction of Charges.  We reserve the right to reduce any of our charges and deductions in connection with the sale of the Policy if we expect that the sale may result in cost savings, subject to any requirements we may from time to time impose.  We may change our requirements based on experience.  We will determine the propriety and amount of any reduction.  No reduction will be unfairly discriminatory against the interests of any class of policyowner.

Increase in Face Amount.  You may request an increase in the Specified Face Amount or Supplemental Insurance Face Amount.  You may need to provide satisfactory evidence of the Insured's insurability.  Once requested, an increase will become effective at the next monthly anniversary day on or following our approval of your request.

If there are increases in the Specified Face Amount or Supplemental Insurance Face Amount other than increases caused by changes in the death benefit option, the cost of insurance charge is determined separately for the initial Specified Face Amount and initial Supplemental Insurance Face Amount and each increase in the Specified Face Amount and Supplemental Face Amount.  The cost of insurance charges applicable to an increase in Specified Face Amount and Supplemental Insurance Face Amount may be higher or lower than those charged on the original sums if the Insured’s health has changed to a degree that qualifies the Insured for a different risk classification.



 
 
 


FINANCIAL STATEMENTS

The financial statements of the Variable Account and Sun Life Assurance Company of Canada (U.S.) are included in this Statement of Additional Information.  The statutory-basis financial statements of Sun Life Assurance Company of Canada (U.S.) are provided as relevant to its ability to meet its financial obligations under the Policies and should not be considered as bearing on the investment performance of the assets held in the Variable Account.

 
 
 

 
Independent Auditor’s Report
 


To the Board of Directors and Stockholders of
   Sun Life Assurance Company of Canada (U.S.)

We have audited the accompanying statutory financial statements of Sun Life Assurance Company of Canada (U.S.), which comprise the statutory statements of admitted assets, liabilities and capital stock and surplus as of December 31, 2013 and the related statutory statements of operations,  of changes in capital stock and surplus, and of cash flows for the year then ended.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting practices prescribed or permitted by the Delaware Department of Insurance.  Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial statements based on our audit.  We conducted our audit in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.  The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.  Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note 1 to the financial statements, the financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the Delaware Department of Insurance, which is a basis of accounting other than accounting principles generally accepted in the United States of America.
 
 
The effects on the financial statements of the variances between the statutory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2013, or the results of its operations or its cash flows for the year then ended.

Opinion on Statutory Basis of Accounting

In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities and capital stock and surplus of the Company as of December 31, 2013, and the results of its operations and its cash flows for the year then ended, in accordance with the accounting practices prescribed or permitted by the Delaware Department of Insurance described in Note 1.

Emphasis of Matter

As described in Note 15, the Company recorded a restatement of gross paid-in and contributed surplus and unassigned funds under a quasi-reorganization in the current year.  Our opinion is not modified with respect to this matter.



/s/ PricewaterhouseCoopers LLP

April 29, 2014
Hartford, CT

 
 
 

INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Sun Life Assurance Company of Canada (U.S.)
1 Sun Life Executive Park
Wellesley, Massachusetts 02481



We have audited the accompanying statutory-basis financial statements of Sun Life Assurance Company of Canada (U.S.) (the "Company"), which comprise the statutory-basis statements of admitted assets, liabilities, and capital stock and surplus as of December 31, 2012 and 2011, and the related statutory-basis statements of operations, changes in capital stock and surplus, and cash flows for each of the three years in the period ended December 31, 2012, and the related notes to the statutory-basis financial statements.

Management’s Responsibility for the Statutory-Basis Financial Statements

Management is responsible for the preparation and fair presentation of these statutory-basis financial statements in accordance with the accounting practices prescribed or permitted by the Insurance Department of the State of Delaware. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these statutory-basis financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statutory-basis financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statutory-basis financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the statutory-basis financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the statutory-basis financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statutory-basis financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Basis for Adverse Opinion on Accounting Principles Generally Accepted in the United States of America

As described in Note 1 of the statutory-basis financial statements, the statutory-basis financial statements are prepared by Sun Life Assurance Company of Canada (U.S) using accounting practices prescribed or permitted by the Insurance Department of the State of Delaware, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to meet the requirements of the Insurance Department of the State of Delaware.

The effects on the statutory-basis financial statements of the variances between the regulatory basis of accounting described in Note 1 to the statutory-basis financial statements and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

Adverse Opinion on Accounting Principles Generally Accepted in the United States of America

In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on Accounting Principles Generally Accepted in the United States of America paragraph, the statutory-basis financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position Sun Life Assurance Company of Canada (U.S.) as of December 31, 2012 and 2011, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2012.





Opinion on Regulatory Basis of Accounting

In our opinion, the statutory-basis financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities, and capital stock and surplus of Sun Life Assurance Company of Canada (U.S.) as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in accordance with the accounting practices prescribed or permitted by the Insurance Department of the State of Delaware as described in Note 1 to the statutory-basis financial statements.

Emphasis-of-Matter

As discussed in Note 1 to the statutory-basis financial statements, in 2012, the Company adopted Statement of Statutory Accounting Principle (“SSAP”) No. 101 Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10.

Other Matter

As discussed in Note 2 to the statutory-basis financial statements, the accompanying statutory-basis financial statements reflect significant balances and transactions with affiliates. The Company’s admitted assets, liabilities, and capital stock and surplus and results of its operations and cash flows may have been different if these balances and transactions had been with unrelated parties.

/s/ Deloitte & Touche LLP

Boston, Massachusetts
April 24, 2013





 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
 
(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)
 
STATUTORY STATEMENTS of admitted assets, liabilities and capital stock and surplus
AS OF DECEMBER 31, 2013 and 2012 (in thousands except share and per share data)

ADMITTED ASSETS
2013
  
2012
  
LIABILITIES, CAPITAL STOCK AND SURPLUS
2013
  
2012
GENERAL ACCOUNT ASSETS:
        
GENERAL ACCOUNT LIABILITIES:
      
Debt securities
$              4,759,852
  
$          7,308,199
  
Aggregate reserve for life contracts
$       6,682,361
$          6,750,774
Preferred stocks
23,150
  
23,000
  
Liability for deposit-type contracts
184,482
  
1,128,331
Common stocks
401,403
  
414,206
  
Contract claims
32,048
  
19,805
Mortgage loans on real estate
748,309
  
814,612
  
Other amounts payable on reinsurance
3,754
  
789
Properties held for the production of income
60,239
  
100,798
  
Interest maintenance reserve
-
  
64,711
Properties held for sale
39,319
  
93,033
  
Commissions to agents due or accrued
8,413
  
7,949
Cash, cash equivalents and short-term investments
1,440,125
  
341,431
  
General expenses due or accrued
57,097
  
20,733
Contract loans
537,058
  
564,071
  
Transfers from Separate Accounts due or accrued
(825,956)
  
(861,565)
Derivatives
174,613
  
312,424
  
Taxes, licenses and fees due or accrued
1,997
  
11,545
Other invested assets
192,397
  
121,773
  
Unearned investment income
13
  
114
Receivable for securities
46,716
  
3,382
  
Amounts withheld or retained by the Company
1,198
  
722
Investment income due and accrued
71,544
  
100,290
  
Remittances and items not allocated
1,289
  
1,581
Amounts recoverable from reinsurers
30,901
  
34,077
  
Borrowed money and accrued interest thereon
-
  
100,002
Current federal and foreign income tax recoverable
19,238
  
36,749
  
Asset valuation reserve
68,961
  
47,141
Net deferred tax asset
184,237
  
161,198
  
Payable for securities
438,039
  
1,030
Receivables from parent, subsidiaries and affiliates
570
  
70,954
  
Reinsurance in unauthorized companies
16
  
14
Other assets
34,789
  
12,588
  
Funds held under reinsurance treaties with unauthorized  reinsurers
252,457
  
285,222
         
Funds held under coinsurance
-
  
1,374,125
         
Derivatives
321,947
  
182,053
         
Other liabilities
97,376
  
142,310
Total general account assets
8,764,460
  
10,512,785
  
Total general account liabilities
7,325,492
  
9,277,386
SEPARATE ACCOUNT ASSETS
30,514,738
  
31,948,727
  
SEPARATE ACCOUNT LIABLITIES
30,543,286
  
31,948,272
         
Total liabilities
37,868,778
  
41,225,658
                   
         
CAPITAL STOCK AND SURPLUS:
      
         
Common capital stock, $1,000 par value - 10,000 shares
      
         
authorized; 6,437 shares issued and outstanding
6,437
  
6,437
         
Surplus notes
  
565,000
  
565,000
         
Gross paid in and contributed surplus
653,698
  
2,588,377
         
Unassigned funds
185,285
  
(1,923,960)
         
Total surplus
  
1,403,983
  
1,229,417
         
Total capital stock and surplus
1,410,420
  
1,235,854
                   
TOTAL ADMITTED ASSETS                                          
$39,279,198
  
$42,461,512
  
TOTAL LIABILITIES, CAPITAL STOCK AND SURPLUS
$39,279,198
  
$42,461,512
See notes to statutory financial statements.
                  



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
 
(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)
 
STATUTORY STATEMENTS of operations
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 and 2011 (in thousands)

 
2013
  
2012
  
2011
INCOME:
          
Premiums and annuity considerations
$        1,559,375
  
$           415,915
  
$        3,230,219
Considerations for supplementary contracts with life contingencies
23,283
  
18,123
  
11,474
Net investment (loss) income
(318,661)
  
613
  
605,357
Amortization of interest maintenance reserve
19,884
  
13,396
  
15,205
Commissions and expense allowances on reinsurance ceded
5,402
  
(557)
  
1,789
Reserve adjustments on reinsurance ceded
(141)
  
170
  
3,115
Income from fees associated with investment management, administration and contract guarantees from Separate Accounts
541,274
  
539,845
  
524,948
Other income
118,236
  
134,495
  
129,179
Total Income
1,948,652
  
1,122,000
  
4,521,286
BENEFITS AND EXPENSES:
          
Death benefits
119,471
  
35,535
  
29,376
Annuity benefits
714,186
  
756,487
  
765,760
Surrender benefits and withdrawals for life contracts
2,996,819
  
2,781,813
  
2,713,462
Interest and adjustments on contracts or deposit-type contract funds
(26,269)
  
(5,342)
  
2,747
Payments on supplementary contracts with life contingencies
14,146
  
11,929
  
12,561
(Decrease) increase in aggregate reserves for life and accident and health policies and contracts
(68,412)
  
(550,180)
  
380,852
Total Benefits
3,749,941
  
3,030,242
  
3,904,758
Commissions on premiums, annuity considerations and
deposit-type contract funds (direct business only)
105,117
  
109,722
  
272,446
Commissions and expense allowances on reinsurance assumed
132
  
131
  
132
General insurance expenses
191,813
  
152,556
  
207,334
Insurance taxes, licenses and fees, excluding federal income taxes
5,658
  
10,032
  
16,522
Net transfers (from) to Separate Accounts, net of reinsurance
(2,657,842)
  
(2,215,192)
  
463,339
Other deductions
67,601
  
76,306
  
80,010
Total Benefits and Expenses
1,462,420
  
1,163,797
  
4,944,541
           
Net income (loss) from operations before federal income tax benefit and net realized capital gains (losses)
486,232
  
(41,797)
  
(423,255)
Federal income tax benefit, excluding tax on
capital gains (losses)
(84,275)
  
(84,977)
  
(37,926)
Net income (loss) from operations after federal income taxes and before net realized capital gains (losses)
570,507
  
43,180
  
(385,329)
Net realized capital gains (losses) less capital gains tax and
transfers to the interest maintenance reserve
112,373
  
(443,936)
  
(131,722)
NET INCOME (LOSS)
$           682,880
  
$          (400,756)
  
$         (517,051)
See notes to statutory financial statements.
          



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
 
(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)
 
STATUTORY STATEMENTS of changes in capital stock and surplus
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 and 2011 (in thousands)

 
2013
  
2012
  
2011
CAPITAL STOCK AND SURPLUS, BEGINNING OF YEAR
$           1,235,854
  
$           1,315,271
  
$           1,879,856
Net income (loss)
682,880
  
(400,756)
  
(517,051)
Change in net unrealized capital (losses) gains, net of deferred income tax
(232,924)
  
158,563
  
230,011
Change in net unrealized foreign exchange capital (losses) gains
(4,954)
  
3,872
  
(5,354)
Change in net deferred income tax
(202,295)
  
(287,767)
  
169,379
Change in non-admitted assets
64,940
  
355,645
  
(40,194)
Change in liability for reinsurance in unauthorized companies
(2)
  
(7)
  
(8)
Change in asset valuation reserve
(21,820)
  
141,040
  
(106,042)
Changes in Separate Accounts surplus
(29,004)
  
54
  
(13)
Cumulative effect of changes in accounting principles (Note 1)
-
  
21,800
  
-
Decrease in surplus paid in
(82,794)
  
-
  
-
Dividends to stockholders
-
  
-
  
(300,000)
Stock option excess tax benefit
539
  
(184)
  
982
Increase in unassigned surplus - quasi reorganization
1,851,883
  
-
  
-
Decrease in gross paid in and contributed surplus - quasi reorganization
(1,851,883)
  
-
  
-
Surplus change from SSAP 10R
-
  
(71,677)
  
3,705
CAPITAL STOCK AND SURPLUS, END OF YEAR
$           1,410,420
  
$           1,235,854
  
$           1,315,271
See notes to statutory financial statements.
          




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
 
(A Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)
 
STATUTORY STATEMENTs OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 and 2011 (IN THOUSANDS)

 
2013
  
2012
  
2011
CASH FROM OPERATIONS:
          
Premiums collected net of reinsurance
$             1,582,658
  
 $               428,308
  
 $          3,261,075
Net investment income
408,807
  
492,927
  
508,625
Federal and foreign income taxes received
73,478
  
56,336
  
30,269
Miscellaneous income
671,892
  
707,003
  
671,323
Total receipts
2,736,835
  
1,684,574
  
4,471,292
Benefits and loss related payments
3,806,068
  
3,768,957
  
3,632,429
Net transfers (from) to Separate Accounts
(2,693,451)
  
(2,307,128)
  
528,821
Commissions, expenses paid and aggregate write-ins for deductions
388,367
  
277,329
  
497,711
Total payments
1,500,984
  
1,739,158
  
4,658,961
Net cash from operations
1,235,851
  
(54,584)
  
(187,669)
CASH FROM INVESTMENTS:
          
Proceeds from investments sold, matured, repaid or received
5,056,787
  
2,404,110
  
3,278,741
Cost of investments acquired
(2,719,801)
  
(2,642,421)
  
(1,865,311)
Net increase in contract loans and premium notes
27,009
  
18,509
  
6,378
Net cash from investments
2,363,995
  
(219,802)
  
1,419,808
CASH FROM FINANCING AND MISCELLANEOUS SOURCES:
          
Capital and paid in surplus, less treasury stock
(82,796)
  
-
  
-
Borrowed funds
(100,002)
  
(18,003)
  
(99,998)
Net deposits on deposit-type contracts and other liabilities
(943,849)
  
(64,737)
  
(1,298,514)
Dividends to stockholders
-
  
-
  
(300,000)
Other cash provided (used)
(1,374,505)
  
(48,603)
  
6,567
Net cash from financing and miscellaneous sources
(2,501,152)
  
(131,343)
  
(1,691,945)
Net change in cash, cash equivalents, and short-term investments
1,098,694
  
(405,729)
  
(459,806)
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS:
          
Beginning of year
341,431
  
747,160
  
1,206,966
End of year
$             1,440,125
  
$               341,431
  
$               747,160
 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
          
 
2013
  
2012
  
2011
Exchanges of debt securities
$                 82,024
  
$                 18,951
  
$                 49,042
Transfer of mortgages to other invested assets
11,816
  
41,120
  
23,400
Transfer of mortgages out of other invested assets
54,474
  
-
  
-
Transfer of real estate to other invested assets
11,637
  
-
  
-
Distribution of previously wholly-owned subsidiary to Former Parent
70,700
  
-
  
-
Quasi-reorganization
1,851,883
  
-
  
-
Premium related to SPWL recapture
1,331,908
  
-
  
-
Transfer of bonds to preferred stock
-
  
-
  
16,000
Transfer of other invested assets to real estate
-
  
-
  
28,921
See notes to statutory financial statements.
          



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL

Sun Life Assurance Company of Canada (U.S.) (the “Company”) is a stock life insurance company incorporated under the laws of Delaware.  The Company is a direct wholly-owned subsidiary of Delaware Life Holdings, LLC (the “Parent”), a Delaware limited liability company.  Prior to August 2, 2013, the Company was a direct wholly-owned subsidiary of Sun Life of Canada (U.S.) Holdings, Inc. (the “Former Parent”) and an indirect wholly-owned subsidiary of Sun Life Assurance Company of Canada - U.S. Operations Holdings, Inc. (“SLC - U.S. Ops Holdings”).  SLC – U.S. Ops Holdings is an indirect wholly-owned subsidiary of Sun Life Financial Inc. (“SLF”), a reporting company under the Securities Exchange Act of 1934.  On December 17, 2012, SLF announced the execution of a definitive agreement to sell its domestic U.S. annuity business and certain life insurance businesses to the Parent including all of the issued and outstanding shares of the Company (the “Sale Transaction”).  After receiving all required regulatory approvals, the Sale Transaction closed on August 2, 2013 with an effective date of August 1, 2013.  In connection with the Sale Transaction and after receiving necessary regulatory approvals, certain transactions were executed prior to close.  (Refer to Note 2 for additional information.)

The Company is authorized to transact business in 49 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.  In addition, the Company’s wholly-owned subsidiary, Sun Life Insurance and Annuity Company of New York (“SLNY”), is authorized to transact business in the State of New York and Rhode Island.  The business of the Company and its subsidiaries includes a variety of wealth accumulation products, protection products and institutional investment contracts.  These products included individual and group fixed and variable annuities, individual and group variable life insurance, individual universal life insurance, group life, group disability, dental and stop loss insurance and funding agreements.

In the normal course of business, the Company and its wholly-owned subsidiary, SLNY, reinsure portions of their individual life insurance, annuity, group life insurance, group disability income and stop loss exposure with both affiliated and unaffiliated companies using traditional indemnity reinsurance agreements.

During the first quarter of 2012, the Company and SLNY received all necessary insurance regulatory approvals to amend the fixed investment option period in their combination fixed and variable annuity contracts and other contracts to remove any negative market value adjustment (“MVA”) that can decrease the amount of the withdrawal proceeds.  (Refer to Note 12 for additional information concerning MVA contracts.)  The Company and SLNY filed amendments to the associated registration statements to include the contract amendments and to remove from registration any fixed investment options that remained unsold. The U.S. Securities and Exchange Commission (the “SEC”) declared the associated amended registration statements effective on March 22, 2012.  As a result of the foregoing, the fixed investment option period in the contracts is no longer considered a “security” under the Securities Act of 1933, and the Company subsequently filed Form 15 on March 23, 2012 to provide notice of suspension of its duty to file reports under Section 15(d) of the Securities Exchange Act of 1934.  No other changes were made to the contracts, and all other terms and conditions of the contracts remain unchanged.  The contract amendments described above did not have a material impact on the Company’s financial position.






 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

On December 12, 2011, SLF announced the completion of a major strategic review of its businesses.  As a result of this strategic review, SLF announced that it would close its domestic U.S. variable annuity and individual life products to new sales effective December 30, 2011.  The Company, therefore, closed its variable annuity and individual life products to new sales effective December 30, 2011 and its corporate-owned life insurance was closed to new sales effective January 31, 2012, with certain limited exceptions.

The Company, through its subsidiary, SLNY, continued to offer group life, disability, dental and stop loss insurance.  Effective July 31, 2013, SLNY ceded 100% of its net group life, disability, dental and stop-loss insurance to an affiliate of SLF.

On September 27, 2013, following completion of the Sale Transaction, the Company’s Board of Directors authorized the Company to issue funding agreements, fixed annuities, variable annuities, single premium life insurance and private placement products on a fixed and variable basis and to utilize its existing Separate Accounts in connection therewith.  On November 4, 2013, the Company began writing new annuity business with the launch of a fixed annuity.


BASIS OF PRESENTATION

The accompanying statutory financial statements of the Company are presented on the basis of accounting principles prescribed or permitted by the Delaware Department of Insurance (the “Department”).  The Department recognizes only statutory accounting principles prescribed or permitted by the State of Delaware for determining and reporting the financial condition and results of operations of an insurance company and for determining its solvency under the Delaware Insurance Law.  The National Association of Insurance Commissioners’ (“NAIC”) Accounting Practices and Procedures Manual (“NAIC SAP”) has been adopted as a component of prescribed or permitted principles by the State of Delaware.  As of December 31, 2009 and until December 31, 2012, the Company had received a permitted practice from the Insurance Commissioner of the State of Delaware (the “Commissioner”) related to Statement of Statutory Accounting Principles (“SSAP”) No. 97, Investments in Subsidiary, Controlled and Affiliated Entities, A Replacement of SSAP No. 88 (“SSAP No. 97”), specifically paragraph 8.b.i to record the unaudited statutory equity of the Company’s previously wholly-owned subsidiary, Independence Life and Annuity Company (“ILAC”), as an admitted asset.  ILAC was not required to prepare audited financial statements under regulations adopted in its respective states of domicile, Delaware and Rhode Island, for the years ended 2012 and 2011, respectively.  Effective December 10, 2012, after receiving regulatory approval, ILAC redomesticated from the State of Rhode Island to the State of Delaware. The Company would not have triggered a regulatory event if the permitted practice had not been used.  During the first quarter of 2013, the Company distributed all of the issued and outstanding shares of ILAC to the Former Parent.  (Refer to Note 2 for additional information concerning the Company’s change of control on August 2, 2013, effective August 1, 2013.)








 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTINUED)

A reconciliation of the Company’s capital and surplus between NAIC SAP and practices prescribed and permitted by the State of Delaware is shown below.  There is no difference in the Company’s net income (loss) between NAIC SSAP and practices prescribed and permitted by the State of Delaware.

(In Thousands)
State of
Domicile
  
2013
  
2012
  
2011
SURPLUS
              
Company state basis
Delaware
  
$1,410,420
  
$1,235,854
  
$1,315,271
State Permitted Practice that increase
              
NAIC SAP: unaudited subsidiary
Delaware
  
-
  
64,186
  
61,818
NAIC SAP
    
$1,410,420
  
$1,171,668
  
$1,253,453


Accounting principles and procedures of the NAIC as prescribed or permitted by the Department comprise a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (“GAAP”).  The more significant differences that affect the Company are as follows:

Under statutory accounting principles, financial statements are not consolidated.  Investments in domestic life insurance subsidiaries, as defined by SSAP No. 97 are carried at their audited net statutory equity value.  The changes in value are recorded directly to surplus.  Non-public, non-insurance subsidiaries and controlled partnerships are carried at audited GAAP equity value.  Dividends paid by subsidiaries to the Company are included in the Company’s net investment income.

Statutory accounting principles do not recognize the following assets or liabilities, which are recognized under GAAP: deferred policy acquisition costs, unearned premium reserve and statutory non-admitted assets. Deferred policy acquisition costs do create a temporary tax difference as disclosed in Note 14.  An asset valuation reserve (“AVR”) and interest maintenance reserve (“IMR”) are established under statutory accounting principles but not under GAAP.  Methods for calculating real estate investment valuation allowances differ under statutory accounting principles and GAAP.  Actuarial assumptions and reserving methods differ under statutory accounting principles and GAAP.  There are certain limitations on net deferred tax assets (“DTAs”) under statutory accounting principles. The MVA contracts are classified within the General Account under GAAP, but are classified within the Separate Account under statutory accounting principles.







 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
(CONTINUED)

Under GAAP, investments in fixed maturity securities classified as available-for-sale or trading are carried at aggregate fair value.  Changes in unrealized gains and losses are reported net of taxes in a separate component of stockholder’s equity for available-for-sale securities and changes in unrealized gains and losses on trading securities are recorded in net investment income.  Fixed maturity securities are generally carried at amortized cost under statutory accounting principles.

All derivatives are used for hedging purposes; however, the Company does not currently believe that the cost of employing hedge accounting is cost justified.  As a result, derivatives are carried at market value on both a U.S. GAAP and NAIC basis.  Unrealized gains and losses on derivatives are recognized in income for U.S. GAAP purposes and flow through surplus on an NAIC basis.

USE OF ESTIMATES

The preparation of financial statements in conformity with statutory accounting principles prescribed or permitted by the State of Delaware requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities.  It also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period.  Actual results could differ from those estimates.  The most significant estimates are those used in determining the fair value of financial instruments, allowance for loan losses, aggregate reserves for life policies and contracts, deferred income taxes, provision for income taxes and other-than-temporary-impairments (“OTTI”) of investments.

CORRECTION OF ERRORS

The Company did not have any correction of errors during 2013 or 2012.  Adjustments were recorded during 2011 to correct the Company’s prior year contract loan balances which were overstated due to inaccurate interest rates on certain loan balances related to single premium whole life (“SPWL”) policies. The adjustments were as follows: a decrease to Contract loans of $107.2 million, an increase to Amounts recoverable from reinsurers of $3.0 million, an increase to Other liabilities of $2.3 million, and a decrease to Funds held under coinsurance of $106.5 million. These adjustments did not have an impact on the Company’s surplus or net income for the period the adjustment was made or prior periods due to the 100% funds-withheld reinsurance agreement with the Company’s former affiliate, Sun Life Assurance Company of Canada (“SLOC”), including its United States Branch (the “U.S. Branch”).

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform with the current year financial statement presentation.

FINANCIAL INSTRUMENTS

In the normal course of business, the Company enters into transactions involving various types of financial instruments, including cash equivalents, short-term investments, debt and equity securities and mortgage loans.  These instruments involve credit risk and also may be subject to risk of loss due to interest rate fluctuation.  The Company evaluates and monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize losses.


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES             (CONTINUED)

SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by the Company in preparing the accompanying statutory-based financial statements:

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash, cash equivalents and short-term investments are highly liquid securities.  The Company’s cash equivalents primarily include cash, commercial paper and money market investments which have an original term to maturity of less than three months.  Short-term investments include debt instruments with a term to maturity exceeding three months, but less than one year on the date of acquisition.  Cash equivalents and short-term investments are stated at amortized cost, which approximates fair value.

INVESTMENTS

Debt Securities

Investments in debt securities including bonds, mortgage-backed securities (“MBS”) and asset-backed securities (“ABS”) are stated at amortized cost using the scientific method.  Where the NAIC rating has fallen to 6 and the fair value has fallen below amortized cost, they are stated at fair value.  Adjustments to the value of MBS and ABS securities based on changes in cash flows, including those related to changes in prepayment assumptions, are made retrospectively.  As part of this process, a third-party vendor for each security type was appointed by the NAIC to develop a revised NAIC rating methodology.  The ratings for these residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”) were determined by comparing the insurer’s carrying value divided by remaining par value to price ranges provided by the third-party vendors corresponding to each NAIC designation.  Comparisons were initially made to the model based on amortized cost.  Where the resulting rating was a NAIC 6 per the model, further comparison based on fair value was required which, in some cases, resulted in a higher final NAIC rating.

The definition of structured securities under SSAP No. 43R, Loan Backed and Structured Securities – Revised (“SSAP No. 43R”), was modified in 2011 to include within the category of ABS certain debt securities that were previously classified by the Company as issuer obligations.  The types of securities reclassified under the revised definition included certain equipment trust certificates, guaranteed contracts, secured leases and secured contracts.  Note that certain types of ABS and MBS securities do not follow the revised rating methodology described above, including, but not limited to, equipment trust certificates, credit tenant loans, 5*/6* securities, interest only securities, and those with Securities Valuation Office (“SVO”) assigned NAIC designations.  Interest income on bonds, MBS, and ABS is recognized when earned based upon estimated principal repayments, if applicable.  For debt securities subject to prepayment risk, yields are recalculated and asset balances adjusted periodically so that expected return on future cash flows matches the expected return over the life of the investment from acquisition.  If the collection of all contractual cash flows is not probable, an OTTI may be indicated.  The process of analyzing securities for an OTTI adjustment is further described in Note 3.




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES             (CONTINUED)

Preferred Stocks, Common Stocks and Other Equity Investments

Preferred stocks with an NAIC designation of 1 through 3 are stated at amortized cost.  Those with NAIC designations of 4 through 6 are stated at the lower of amortized cost or fair value.  Common stocks are stated at fair value except investments in subsidiaries.  The latter are carried based on the underlying statutory equity of the subsidiary.  The Company accounts for its investments in subsidiaries in accordance with SSAP No. 97 with the exception of the prior permitted practice granted by the Commissioner discussed previously.  The Company has ownership interests in joint ventures and partnerships which are carried at values based on the underlying equity of the investee in accordance with SSAP No. 48, Joint Ventures, Partnerships and Limited Liability Companies (“SSAP No. 48”), and SSAP No. 93, Accounting for Low Income Housing Tax Credit Property Investments (“SSAP No. 93”).  Audited financial statements are received on an annual basis.  OTTI on stocks is evaluated under the methodology described in Note 3.

Mortgage Loans

Mortgage loans are stated at unpaid principal balances, net of provisions for estimated losses.  Mortgage loans acquired at a premium or discount are stated at amortized cost using the effective interest rate method, net of provisions for estimated losses.  Purchases and sales of mortgage loans are recognized or derecognized in the Company’s balance sheet on the loan’s trade date, which is the date that the Company commits to purchase or sell the loan.  Transaction costs on mortgage loans are capitalized on initial recognition and are recognized in the Company’s Statement of Operations using the effective interest rate method.  Mortgage loans, which primarily include commercial first mortgages, 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 property’s value at the time that the original loan is made.  The Company regularly assesses the value of the collateral.

A mortgage loan is considered impaired when it is probable that the principal or interest is not collectible in accordance with the contractual terms of the loan. When a mortgage loan is classified as impaired, allowances for credit losses are established to adjust the carrying value of the loan to its net recoverable amount.

The allowance for credit losses are estimated using the present value of expected cash flows discounted at the loan’s effective interest rate or the fair value of the collateral, if the loan is collateral dependent.  A specific allowance for loan loss is established for an impaired loan if the present value of expected cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral less cost to sell, is less than the recorded amount of the loan.  The full extent of impairment in the mortgage portfolio cannot be assessed solely by reviewing these loans individually.  A general allowance for loan loss is established based on an assessment of past loss experience on groups of loans with similar characteristics and current economic conditions.  While management believes that it uses the best information available to establish the loan loss allowances, future adjustments may become necessary if economic conditions differ from the assumptions used in calculating them.

Interest income is recognized on impaired mortgage loans when the collection of contractually specified future cash flows is probable, in which case cash receipts are recorded in accordance with the effective interest rate method.  Interest income is not




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES             (CONTINUED)

recognized on impaired mortgage loans and these mortgage loans are placed on non-accrual status when the collection of contractually specified future cash flows is not probable, in which case cash receipts are applied in the following order: first against the carrying value of the loan, then against the provision, and then to income.  The accrual of interest resumes when the collection of contractually specified future cash flows becomes probable based on certain facts and circumstances.

Changes in allowances for losses are recorded as changes in unrealized gains and losses to surplus.  Once the conditions causing impairment improve and future payments are reasonably assured, the mortgages are no longer classified as impaired and the Company resumes accrual of income.  However, if the original terms of the contract have been changed resulting in the Company providing an economic concession to the borrower at below market rates, then the mortgage is reclassified as restructured.

If the conditions causing impairment do not improve and future payments remain unassured, the Company typically derecognizes the asset through disposition or foreclosure.  Uncollectible collateral-dependent loans are written off through realized losses for any difference between the carrying value and amount received for the underlying property at the time of disposition or foreclosure.

Real Estate

Real estate includes properties held for investment and properties held for sale. Real estate held for investment is stated at depreciated cost using the straight-line method net of encumbrances.  Properties held for sale are carried at the lower of depreciated cost or fair value less encumbrances and disposition costs.

Contract Loans

Contract loans are carried at the amount of outstanding principal balance.  Contract loans are collateralized by the related insurance policy and do not exceed the net cash surrender value of such policy.

Asset Valuation Reserve and Interest Maintenance Reserve

The AVR is established as a liability based upon a formula prescribed by the NAIC to offset potential credit-related investment losses on all invested assets, with changes in the AVR charged or credited directly to surplus.  The IMR is established as a liability to capture realized gains and losses, net of income tax, on the sale of fixed income investments, principally bonds, mortgage loans and derivatives, resulting from changes in the general level of interest rates, and is amortized into income over the remaining years to expected maturity of the assets sold.

Derivatives

As part of the Company’s overall risk management policy, the Company uses interest rate swaps, over the counter (“OTC”) and listed options, exchange-traded futures, currency forwards, currency swaps and swaptions.  Swaps purchased are stated at fair value and changes in fair value are recorded through unrealized gains/losses within surplus.


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                (CONTINUED)

The Company utilized interest rate swaps to hedge interest rate risk arising from the variability of cash flows due to certain variable rate funding agreements.  These swaps were designated as cash flow hedges.  Interest rate swaps that qualify for hedge accounting treatment were recognized in a manner consistent with the hedged item, at amortized cost.  At the date of designation, the fair value of the associated interest rate swap which had previously been recorded as an unrealized loss to surplus is fixed with subsequent amortization into income through the related policy’s maturity date.  In the event a swap is not proven highly effective, it is stated at fair value and then changes in fair value are recorded through unrealized gains/losses within surplus. These swaps were used to hedge the Medium Term Note program which matured in October, 2013.

The Company utilizes OTC put options and exchange traded futures on the Standard & Poor’s 500 Composite Stock Price Index (the “S&P 500 Index”) and other indices to hedge against stock market exposure inherent in the mortality and expense risk charges and guaranteed minimum death and living benefit features of the Company's variable annuities.  These options are stated at fair value.  Changes in fair value for options purchased on January 1, 2003 and after are recorded in unrealized gains/losses within surplus.  The Company also purchases OTC and listed call options and exchange traded futures on the S&P 500 Index and other indices to economically hedge its obligation under certain fixed indexed annuity contracts.  The interest credited on these 1, 3, 5, 7 and 10 year term products are based on the changes in the S&P 500 Index.

The Company uses currency swaps to hedge against the risk of fluctuations in foreign currency exchange rates.  Currency swaps are marked to market.  Changes in fair value are recorded as unrealized gains/losses within surplus.  Swaptions are utilized by the Company to hedge exposure to interest rate risk.  At the trade date of a swaption, a premium is paid to the counterparty and recorded as an asset.  At expiration, swaptions either cash settle for value, settle into an interest rate swap or expire worthless.  Swaptions are marked to market and changes in fair value are recorded in unrealized gains/losses within surplus.  Credit valuation adjustments (“CVAs”) are necessary to properly reflect the component of fair value of derivative instruments that arises from default risk.  CVAs are based on a methodology that uses credit default swap (“CDS”) spreads as a key input in determining an implied level of expected loss over the total life of the derivative contract.  Where no observable CDS spreads are available, the counterparty’s or the Company’s credit spreads derived from bond yields are used instead.  CVAs are intended to achieve a fair value of the underlying contracts and are normally based on publicly available information.  The CVAs also take into account contractual factors designed to reduce the Company’s credit exposure to each counterparty, such as collateral and legal rights of offset.  CVAs are not recorded for interest rate swaps used as cash flow hedges when proven highly effective.

POLICY AND CONTRACT RESERVES

The reserves for life insurance and annuity contracts are computed in accordance with presently accepted actuarial standards, and are based on actuarial assumptions and methods (including use of published mortality tables and prescribed interest rates) which produce reserves at least as great as those required by law and/or contract provisions.






 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES             (CONTINUED)

Liabilities for unpaid claims consist of the estimated amount payable for claims reported but not yet settled and an estimate of claims incurred but not reported.  The amounts reported are 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 adjustments are determined to be required.

INCOME TAXES
 
 
The Company accounts for current and deferred income taxes and recognizes reserves for income tax contingencies in accordance with SSAP No. 101, Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10 (“SSAP No. 101”).  Under the applicable asset and liability method for recording deferred income taxes, deferred taxes are recognized when assets and liabilities have different values for financial statement and tax reporting purposes, using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on DTAs and deferred tax liabilities (“DTLs”) is recognized in the period that includes the enactment date.  Valuation allowances on DTAs are estimated based on the Company’s assessment of the realizability of such amounts.  Refer to Note 14 of the Company’s financial statements for further discussion of the Company’s income taxes.

INCOME AND EXPENSES

Life premiums are recognized as income over the premium paying period of the related policies.  Annuity considerations are recognized as revenue when received.  Expenses, such as commissions and other costs applicable to the acquisition of new business are charged to operations as incurred.

SEPARATE ACCOUNTS

The Company has established unitized Separate Accounts applicable to various classes of contracts providing for variable benefits.  Contracts for which funds are invested in the variable Separate Accounts include individual and group life and annuity contracts.

The Company has also established non-unitized separate accounts for certain contracts that include a MVA feature associated with fixed rates, including for amounts allocated to the fixed portion of certain combination fixed and variable deferred annuity contracts.  The assets of the non-unitized Separate Accounts are not legally insulated and can be used to satisfy claims resulting from the general account.  (See Note 12 for additional information.)

Net investment income, capital gains and losses, and changes in mutual fund asset values on the variable Separate Accounts are allocated to policyholders and therefore do not affect the operating results of the Company.  Assets held in the variable Separate Accounts are carried at fair value. The investment risk of such securities is retained by the contractholder.  The Company earns separate account fees for providing administrative services and bearing the mortality risks related to contracts for which funds are invested in variable Separate Accounts.






 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES             (CONTINUED)

The activity of the variable Separate Accounts is not reflected in the Company’s financial statements except for the following:
 
·
The fees that the Company receives, which are assessed periodically and recognized as revenue when assessed.

 
·
The activity related to the guaranteed minimum death benefit, guaranteed minimum accumulation benefit and guaranteed minimum withdrawal benefit, which is reflected in the Company’s financial statements.

 
·
Premiums and withdrawals with offsetting transfers to/from the variable Separate Accounts are reflected in the Statement of Operations.

 
·
Transfers from the variable Separate Accounts due and accrued, which include accrued expense allowances receivable from the variable Separate Accounts and the aggregate surplus (income) due and accrued from MVA contracts.

 
·
The dividends-received-deduction (“DRD”), which is included in the Company’s income tax expense, is calculated based upon the variable Separate Accounts’ assets held in connection with variable contracts.

ACCOUNTING PRONOUNCEMENTS

New and Adopted Accounting Pronouncements

Effective January 1, 2013, the NAIC adopted SSAP No. 104 Share-Based Payments (“SSAP No. 104”).  SSAP No. 104 provides statutory accounting principles for transactions in which an entity exchanges its equity instruments with employees in share-based payment transactions and adopts, with modification, GAAP guidance for stock options and stock purchase plans within GAAP Accounting Standards Codification Topic 718.  The adoption of the statement did not have a significant impact on the financial statements of the Company.

Effective January 1, 2013, the NAIC adopted SSAP No. 103, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“SSAP No. 103”).  SSAP No. 103 replaces SSAP No. 91R of the same name and establishes new conditions for when a transferred financial asset is accounted for as a sale in addition to removing the concept of a qualifying special-purpose entity. The adoption of the standard did not have a significant impact on the financial statements of the Company.











 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES             (CONTINUED)

Effective January 1, 2012, the NAIC adopted SSAP No. 101.  Under SSAP No. 101, DTAs are admitted based on a realization threshold limitation table.  The Company recorded the following changes in surplus as of January 1, 2012 a result of the adoption:

(In Thousands)
  
Reclassification of SSAP No. 10R
write-in within surplus
$      71,677
Change in non-admitted DTA as a
result of adoption
(49,877)
Cumulative effect of change in
accounting principle
$      21,800

Prior to the adoption of SSAP No. 101, the Company accounted for income taxes under SSAP No. 10R, Income Taxes – Revised, A Temporary Replacement of SSAP No. 10 (“SSAP No. 10R”), which provided for a three-year reversal period and 15% of adjusted surplus.  The application of SSAP No. 10R resulted in an increase of $71.7 million in the Company’s surplus at December 31, 2011.

Effective January 1, 2012, the NAIC revised the disclosure requirements of SSAP No. 100, Fair Value Measurements, to clarify the disclosures of the fair value of financial instruments. The changes in the disclosures have been reflected in Note 13.

Effective December 31, 2011, the NAIC adopted SSAP No. 5R, Liabilities, Contingencies and Impairments of Assets (“SSAP No. 5R”).   SSAP No. 5R requires entities to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee, even if the likelihood of having to make payments under the guarantee is remote.  Guarantees made to/or on behalf of a wholly-owned subsidiary, and inter-company and related party guarantees that are considered “unlimited”, are exempted from the initial liability recognition.  As such, the guidance did not have a significant impact upon adoption.  The additional disclosures required by SSAP No. 5R have been incorporated in Note 2.

Effective January 1, 2011, the NAIC adopted changes to SSAP No. 43R.  These changes included broadening the definition of loan-backed and structured securities (“LBSS”) and clarification of the requirement to bifurcate realized gains and losses between the AVR and the IMR.  Neither of the changes had a material impact on the Company's statutory net income or surplus.

Effective January 1, 2011, the NAIC adopted SSAP No. 35R, Guaranty Fund and Other Assessments (“SSAP No. 35R”).  SSAP No. 35R modifies the conditions required before recognizing liabilities for insurance-related assessments.  The liability is not recognized until the event obligating an entity to pay an imposed or probable assessment has occurred.  The adoption of SSAP No. 35R did not have a significant impact on the financial statements of the Company.






 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES             (CONTINUED)

Accounting Standards Not Yet Adopted

Effective January 1, 2014, the NAIC adopted SSAP No. 105, Working Capital Finance Investments (“SSAP No. 105”).  SSAP No. 105 amends SSAP No. 20, Nonadmitted Assets, to allow working capital finance investments as admitted assets to the extent they conform to the requirements of this statement. The Company currently does not have any working capital investments as of the effective date.

2.
RELATED PARTY TRANSACTIONS

The Company has significant transactions with affiliates and former affiliates.  Intercompany revenues and expenses recognized under these agreements may not necessarily be indicative of costs that would be incurred if the Company operated on a stand-alone basis and if these transactions were with unrelated parties.  Below is a summary of significant transactions with affiliates and former affiliates for the reporting period.

Investments in Subsidiaries

The Company directly or indirectly owned all of the outstanding shares or members interest of the following entities, which are recorded as investments in subsidiaries in the common stock balance of the Company’s statutory financial statements:

 
·
SLNY (owned as of December 31, 2013 and 2012)
 
·
ILAC (owned as of December 31, 2012 and distributed to Former Parent during 2013)
 
·
Clarendon Insurance Agency, Inc., (“Clarendon”) a registered broker-dealer (owned as of December 31, 2013 and 2012)
 
·
SLF Private Placement Investment Company I, LLC (carried at a zero equity value and owned as of December 31, 2013 and 2012)
 
·
DL Information Services Canada Inc., (“DL Canada”) (formed during 2013 and owned as of December 31, 2013)
 
·
DL Information Services Ireland Limited, (“DL Ireland”) (formed during 2013 and owned as of December 31, 2013)
 
·
SL Investment DELRE Holdings 2009-1, LLC, (the “LLC”) (owned as of December 31, 2013 and 2012)

In addition, SLNY Private Placement Investment Company I, LLC, which was owned by SLNY and carried at a zero equity value, was dissolved during the fourth quarter of 2012.




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


2.
RELATED PARTY TRANSACTIONS (CONTINUED)

Summarized combined financial information of the Company’s subsidiaries, are as follows:

 
Years Ended December 31,
(In Thousands)
2013
  
2012
Assets
$    3,196,021
  
$    3,733,791
Liabilities
2,794,618
  
3,239,634
Total net assets
$      401,403
  
$      494,157
Total revenues
$      105,629
  
$      272,476
Operating expenses
84,442
  
216,718
Income tax expense
295
  
16,379
Net gain
$        20,892
  
$        39,379

The net asset is recorded in common stocks and other invested assets on the balance sheet.  The net gain is recorded in surplus through the change in unrealized capital gain (loss) in the statement of changes in capital stock and surplus.

The Company does not own shares of an upstream intermediate entity or ultimate parent, directly or indirectly, via a downstream subsidiary, controlled, or affiliated entity.

Reinsurance Related Agreements

As more fully described in Note 9, the Company is party to reinsurance transactions with affiliates.

On July 31, 2013, the Company consented to a Novation Agreement between its former affiliate, the U.S. Branch, and an affiliate, Sun Life Reinsurance (Barbados) No. 3 Corp. ("Barbco 3").  Pursuant to the Novation Agreement, Barbco 3 was substituted as reinsurer under the June 12, 2000 reinsurance agreement between the Company and the U.S. Branch, whereby the Company ceded to the U.S. Branch, on a yearly renewable term basis, certain risks under group flexible premium variable universal life policies.  The U.S. Branch transferred $241 million of invested assets and accrued interest and $33 million of cash to Barbco 3 to support the assigned liabilities. The Novation Agreement and transfers were effective upon the close of the Sale Transaction.

In December 2012, the Board of Directors of the Company approved the recapture of 100 percent of the risks under certain SPWL policies that were reinsured to its former affiliate, SLOC, pursuant to a December 31, 2003 reinsurance agreement.  The transaction was effective for the first quarter of 2013, and the Company recorded a decrease to surplus of approximately $34.7 million.

The Company has a reinsurance agreement with Barbco 3, an affiliate, to cede all of the risks associated with certain in-force corporate and bank-owned variable universal life and private placement variable universal life policies on a combination coinsurance and coinsurance with funds-withheld. (Refer to Note 9 for more detail.)

Capital Transactions

In December 2012, the Company’s Board of Directors approved the extraordinary distribution of all of the issued and outstanding shares of the Company’s previously wholly-owned subsidiary, ILAC, to the Former Parent.  The Company received regulatory approval and ILAC was distributed effective January 1, 2013.  The net impact to the Company's surplus was a decrease of $64.2 million.  The Company recorded the distribution as a return of gross paid in and contributed surplus.

 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


2.
RELATED PARTY TRANSACTIONS (CONTINUED)

The Company did not receive any capital contributions from the Parent or Former Parent during the years ended December 31, 2013, 2012 and 2011.  No dividends were paid during the years ended December 31, 2013 and 2012.  During the year ended December 31, 2011, the Company paid an extraordinary cash dividend of $300.0 million to the Former Parent.

Other Invested Assets

The Company also owned the membership interest of the LLC. During 2013, mortgages with a value of $11.8 million were transferred to the Company’s subsidiary, the LLC, and $54.5 million was transferred from the LLC.  The LLC distributed capital of $19.4 million to the Company.

Mortgages transferred into the LLC in 2012 were valued at approximately $41.1 million, representing both book and market values.

Debt and Surplus Note Transactions

The details of borrowed money due affiliates and former affiliates at December 31, 2013 were as follows (amounts in thousands):

Issue Date
Payees
Type
Rate
Maturity
Principal/
Carrying Value
  
Interest Expense
Year Ended
December 31, 2013
09/19/2006
Sun Life Financial Global Funding III, L.L.C.
Demand
Libor plus 0.35%
10/06/2013
$           -
  
$           496
 
Total borrowed money
      
$           -
  
496

The details of borrowed money due affiliates and former affiliates at December 31, 2012 were as follows (amounts in thousands):

Issue Date
Payees
Type
Rate
Maturity
    
Interest Expense
Year Ended
December 31, 2012
07/22/2002
Sun Life Assurance Company of Canada, U.S. Branch
Promissory
5.710%
06/30/2012
$               -
  
$               514
09/19/2006
Sun Life Financial Global Funding III, L.L.C.
Demand
Libor plus 0.35%
10/06/2013
100,000
  
836
 
Total borrowed money
      
$100,000
  
$           1,350

On June 26, 2013, Sun Life Financial Insurance and Annuity Company (Bermuda) Ltd, an affiliate now known as Delaware Life Insurance and Annuity Company (Bermuda) Ltd. (“DLIAC”), issued a floating rate revolving credit note payable to the Company, pursuant to which DLIAC can borrow up to $40 million from the Company.  The interest on outstanding principal is based on LIBOR plus 0.60%.  The interest will accrue monthly and be payable on the last day of the fiscal quarter starting on September 30, 2013.  The note will mature on June 30, 2015.  No balance was outstanding at December 31, 2013.


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


2.
RELATED PARTY TRANSACTIONS (CONTINUED)

As of December 31, 2011, the Company had an $18.0 million outstanding promissory note that was originally issued to a former affiliate, Sun Life (Hungary) Group Financing Limited Company (“Sun Life (Hungary) LLC”), for which the Company paid interest semi-annually.  On June 2, 2011, Sun Life (Hungry) LLC sold the $18.0 million note to SLOC, a former affiliate.  With the exception of the change in lenders, this transaction did not have any impact on the terms of the promissory note.  Effective June 2, 2011, the Company began paying the related interest to SLOC. On June 29, 2012, the Company paid the $18.0 million of outstanding principal, plus $0.5 million in accrued interest to SLOC due to the maturity of the note.  Related to this note, the Company incurred interest expense of $0.5 million and $1.0 million for the years ended December 31, 2012 and 2011, respectively.

Surplus notes previously issued by the Company to Sun Life Financial (U.S.) Finance, Inc. (“Sun Life Finance”), a former affiliate, were transferred as part of the Sale Transaction. 
 
As of December 31, 2013 and 2012, the Company had $565.0 million of surplus notes outstanding.  During 2013, the Company entered into an agreement with Deutsche Bank Trust Company Americas (“DBTCA”), whereby the surplus notes are taken into custody by the bank on behalf of the holders of the surplus notes (the “Noteholders”).  DBTCA collects all surplus note payments and distributes such funds to the Noteholders.  The DBTCA agreement allows the Noteholders to transfer any part of the surplus notes they hold, subject to the consent of the Company and with proper notice given to DBTCA.  As of December 31, 2013, the Noteholders are as follows:

 
·
DLICM, LLC
 
·
DLICT, LLC
 
·
DLPR, LLC
 
·
EquiTrust Life Insurance Company
 
·
Guggenheim Life and Annuity Company
 
·
Heritage Life Insurance Company
 
·
Midland National Life Insurance Company
 
·
North American Company for Life and Health Insurance
 
·
Paragon Life Insurance Company of Indiana
 
·
Security Benefit Life Insurance Company

The details of outstanding surplus notes at December 31, 2013 were as follows (amounts in thousands):

                 
Interest
  
             
Principal/
  
Paid
  
             
Carrying
  
Year Ended
  
Issue Date
Type
Rate
Maturity
  
Face Amount
  
Value
  
December 31, 2013
  
12/15/1995
Surplus
6.150%
12/15/2027
  
$        150,000
  
$      150,000
  
$                   9,225
  
12/15/1995
Surplus
7.626%
12/15/2032
  
150,000
  
150,000
  
11,439
  
12/15/1995
Surplus
6.150%
12/15/2027
  
7,500
  
7,500
  
461
  
12/15/1995
Surplus
7.626%
12/15/2032
  
7,500
  
7,500
  
572
  
12/22/1997
Surplus
8.625%
11/06/2027
  
250,000
  
250,000
  
21,563
  
         
$        565,000
  
$      565,000
  
$                 43,260
  


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

2.
RELATED PARTY TRANSACTIONS (CONTINUED)

The details of outstanding surplus notes due to a former affiliate, Sun Life Finance, at December 31, 2012 were as follows (amounts in thousands):

                 
Interest
  
             
Principal/
  
Paid
  
             
Carrying
  
Year Ended
  
Issue Date
Type
Rate
Maturity
  
Face Amount
  
Value
  
December 31, 2012
  
12/15/1995
Surplus
6.150%
12/15/2027
  
$        150,000
  
$      150,000
  
$                   9,225
  
12/15/1995
Surplus
7.626%
12/15/2032
  
150,000
  
150,000
  
10,991
  
12/15/1995
Surplus
6.150%
12/15/2027
  
7,500
  
7,500
  
461
  
12/15/1995
Surplus
7.626%
12/15/2032
  
7,500
  
7,500
  
483
  
12/22/1997
Surplus
8.625%
11/06/2027
  
250,000
  
250,000
  
21,563
  
         
$        565,000
  
$      565,000
  
$                 42,723
  

The surplus notes and accrued interest thereon, are subordinate to payments due to policyholders, claimant and beneficiary claims; as well as all other classes of creditors other than surplus note holders. After payment in full of certain obligations set forth in 18 Del. C. s. 5918, and prior to any payment to a shareholder in respect of such shareholder’s ownership interest in the Company, the holder of the surplus note shall be entitled to receive payment in full of all amounts due to the note holder.  Any redemption shall be subject to the prior written consent of the Commissioner.

During 2012, the Company applied for and received approval from the Department for certain modifications to two surplus notes payable to Sun Life Finance. The modifications extended the maturity dates on both surplus notes from December 15, 2015 to December 15, 2032, changed the interest rates from 6.125% per annum and 7.25% per annum to 7.626% per annum and modified the prepayment language in both surplus notes.  These changes were effective October 1, 2012.  The Company expensed $43.3 million, $42.7 million and $42.6 million for interest on these surplus notes for years ended December 31, 2013, 2012 and 2011, respectively.  Total interest paid through December 31, 2013 is approximately $727.0 million.  There have been no principal payments since original issuance of the above notes.

Each accrual and payment of interest on surplus notes may be made only with the prior approval from the Commissioner and only to the extent the Company has sufficient surplus earnings to make such payment.  The Company received approval for all payments and the related accrual in the amount of $4.3 million, as of December 31, 2013.

Institutional Investments Contracts

On September 12, 2006, the Company issued two floating rate funding agreements totaling $900.0 million to a former affiliate, Sun Life Financial Global Funding III, L.L.C. (“LLC III”), which matured on October 6, 2013.  On April 7, 2008, the Company issued a third floating rate funding agreement totaling $5.8 million to LLC III, which matured on December 1, 2011.  The Company paid $5.9 million to LLC III, including $0.01 million in interest due to the maturity of the third funding agreement.  Total interest credited for these three funding agreements was $3.0 million, $7.3 million and $5.9 million for the years ended December 31, 2013, 2012 and 2011, respectively.  On September 19, 2006, the Company also issued a $100.0 million floating rate demand note payable to LLC III which was paid during October 2013.  For interest on this demand note, the Company expensed $0.5 million, $0.8 million and $0.7 million for years ended December 31, 2013, 2012 and 2011, respectively. The Company entered into an interest rate swap agreement with LLC III with an aggregate notional amount of $900.0 million that effectively converted the floating rate payment obligations under the funding agreements to fixed rate obligations.



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

2.
RELATED PARTY TRANSACTIONS (CONTINUED)

As part of the Sale Transaction, the Company transferred bonds and cash with a value of $1,024 million to an escrow account, which was used to settle the Company's obligations related to (1) the two floating rate funding agreements totaling $900 million issued to a former affiliate, LLC III due in October, 2013, (2) an interest rate swap with LLC III that effectively converted the floating rate payment obligations under the funding agreements to fixed rate obligations, and (3) a $100 million floating rate demand note issued to LLC III due in October 2013.  The Former Parent agreed to pay any shortage of funds in the escrow account to settle the funding agreements, the interest rate swap, and the demand note.  Excess funds in the escrow account after settlement of the funding agreements, interest rate swap, and the demand note totaling $12.1 million, were paid to the Former Parent.

The account values related to these funding agreements issued to LLC III were reported in the Company’s Statutory Statements of Admitted Assets, Liabilities, and Capital Stock and Surplus as a component of liability for deposit-type contracts.

On May 17, 2006, the Company issued a floating rate funding agreement of $900.0 million to Sun Life Financial Global Funding II, L.L.C. (“LLC II”), a former affiliate.  On April 7, 2008, the Company issued an additional floating rate funding agreement totaling $7.5 million to LLC II.  On July 1, 2011 and July 19, 2011, the Company paid $901.3 million and $7.5 million to LLC II due to the maturity of these two funding agreements.  The payments included $1.3 million of accrued interest. Total interest credited for these two funding agreements was $2.6 million for the year ended December 31, 2011.

The Company also issued a $100.0 million floating rate demand note payable to LLC II on May 24, 2006.    On July 19, 2011, the Company paid $100.0 million to LLC II, including $0.01 million in interest due to the maturity of the floating rate demand note.  For interest on this demand note, the Company expensed $0.3 million for the year ended December 31, 2011.

The Company had entered into an interest rate swap agreement with LLC II with an aggregate notional amount of $900.0 million that effectively converted the floating rate payment obligations under the funding agreement to fixed rate obligations.  This interest swap agreement expired on July 6, 2011 due to the maturity of the underlying floating rate funding agreement with LLC II.

Administrative Service Agreements and Other

The Company is party to various related party agreements.  Certain agreements with former affiliates were amended or terminated upon the close of the Sale Transaction described in Note 1.

For periods prior to August 1, 2013

From January 1, 2011 to July 31, 2013, the Company participated in a pension plan and other retirement plans sponsored by a former affiliate, Sun Life Financial (U.S.) Services Company, Inc. (“Sun Life Services”). Expenses under these plans were allocated to participating companies pursuant to approved inter-company agreements. The allocated expenses to the Company from Sun Life Services were $3.0 million, $18.0 million and $21.9 million for the period ended July 31, 2013 and the years ended December 31, 2012 and 2011, respectively.

On December 31, 2009 the Company transferred assets to Sun Life Services, which resulted in a sale-leaseback transaction.  At the time of the transfer, the Company established a liability, which represented the cost of certain of the assets transferred, and had been amortizing the liability over the remaining useful life of the assets on a straight-line basis.  During December, 2012, the value of the assets transferred were written down to zero, and the remaining liability was amortized into income.  The write-off resulted in an increase to surplus of approximately $8.6 million, pre-tax, as the leased assets had been previously non-admitted.  The Company has no remaining future minimum lease payments related to these assets.


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

2.
RELATED PARTY TRANSACTIONS (CONTINUED)

Pursuant to an administrative services agreement between the Company and Sun Life Services, a former affiliate, Sun Life Services agreed to provide human resource services (e.g., recruiting and maintaining appropriately trained and qualified personnel and equipment necessary for the performance of actuarial, financial, legal, administrative, and other operational support functions) to the Company, and the Company agreed to reimburse Sun Life Services for the cost of such services, plus an arms-length based profit margin to be agreed upon by the parties.  Total expenses under this agreement were $38.7 million, $75.1 million and $91.1 million for the period ended July 31, 2013, and the years ended December 31, 2012 and 2011, respectively.  This agreement terminated in connection with the Sale Transaction.

The Company had an administrative services agreement with SLOC, a former affiliate, under which the Company provided various administrative services to SLOC upon request.  Pursuant to this agreement, the Company recorded reimbursements of $48.7 million, $129.6 million and $99.3 million for the period ended July 31, 2013, and the years ended December 31, 2012 and 2011, respectively.  This agreement terminated in connection with the Sale Transaction.

The Company had an administrative services agreement with SLOC, which provides that SLOC would furnish, as requested, certain services and facilities to the Company on a cost-reimbursement basis.  Expenses under this agreement amounted to approximately $12.2 million, $7.5 million, and $12.6 million for the period ended July 31, 2013, and the years ended December 31, 2012 and 2011, respectively.  This agreement terminated in connection with the Sale Transaction.

The Company had an administrative services agreement with Sun Life Information Services Canada, Inc. ("SLISC"), a former affiliate, under which SLISC provided administrative and support services to the Company in connection with the Company’s insurance and annuity business.  Expenses under this agreement amounted to approximately $10.6 million, $18.4 million and $19.3 million for the period ended July 31, 2013, and the years ended December 31, 2012 and 2011, respectively.  This agreement terminated in connection with the Sale Transaction.

The Company had service agreements with Sun Life Information Services Ireland Limited ("SLISIL"), a former affiliate, under which SLISIL provided various insurance related and information systems services to the Company.  Expenses under these agreements amounted to approximately $14.1 million, $25.3 million and $22.6 million for the period ended July 31, 2013, and the years ended December 31, 2012 and 2011, respectively.  These agreements terminated in connection with the Sale Transaction.

The Company had an administrative services agreement with SLC - U.S. Ops Holdings, a former affiliate, under which the Company provided administrative and investor services with respect to certain open-end management investment companies for which a former affiliate, Massachusetts Financial Services Company (“MFS”), served as the investment adviser, and which were offered to certain of the Company’s Separate Accounts established in connection with variable annuity contracts issued by the Company.  Amounts received under this agreement amounted to approximately $11.4 million, $14.2 million and $12.7 million for the period ended July 31, 2013, and the years ended December 31, 2012 and 2011, respectively.  This agreement terminated in connection with the Sale Transaction.



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

2.
RELATED PARTY TRANSACTIONS (CONTINUED)

During 2012 and 2011, the Company paid $10.2 million and $35.9 million, respectively, in commission fees to Sun Life Financial Distributors, Inc. (“SLFD”), a former affiliate and broker dealer.

For period after August 1, 2013

 
The Company sponsors the Delaware Life Insurance Company 401(k) Savings Plan that qualifies under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) and includes a retirement investment account feature that qualifies under Section 401(a) of the Internal Revenue Code (the “RIA”).  Income and expenses under the 401(k) Plan and the RIA are allocated to participating companies pursuant to approved intercompany agreements. The total expenses for the period August 1, 2013 to December 31, 2013 were $1.4 million, of which $0.1 million was allocated to its subsidiary, SLNY.

The Company has a management services agreement with its subsidiary, SLNY, whereby the Company furnishes certain investment, actuarial, and administrative services to SLNY on a cost-reimbursement basis.  The Company received reimbursements related to this agreement of $12.1 million, $30.0 million and $31.2 million for the years ended December 31, 2013, 2012 and 2011, respectively.

The Company has an administrative services agreement with a former affiliate, Sun Capital Advisers LLC (“SCA”), an investment adviser, under which the Company provides administrative services with respect to certain open-end investment management companies for which SCA serves as the investment adviser, and which are offered to certain of the Company's Separate Accounts established in connection with variable contracts issued by the Company. Amounts received under this agreement amounted to approximately $4.1 million, $16.4 million and $16.6 million for the years ended December 31, 2013, 2012 and 2011.  The Company paid $8.5 million, $15.7 million and $17.9 million in investment management fees to SCA under a separate investment services agreement for the years ended December 31, 2013, 2012 and 2011, respectively.

The Company previously leased office space to its former affiliate, SLOC, under lease agreements with terms originally expiring on December 31, 2014. This lease was revised on January 1, 2013 in conjunction with the sale of the property to a former affiliate, the U.S. Branch.  Rent received by the Company under the leases amounted to approximately $12.6 million and $12.1 million for the years 2012 and 2011, respectively.  Rental income is reported as a component of net investment income.  (Refer to Note 17 for amount of lease commitments.)

In connection with the change in control disclosed in Note 1, the Company’s controlling persons agreed the Company would comply with the filing and other requirements contained in Section 5005(a) of the Delaware Insurance Code with respect to any transaction subject to Section 5005(a)(2) between (a) the Company, and (b) (I) Guggenheim Capital, LLC or a subsidiary thereof, or (II) Sammons Enterprises, Inc. or a subsidiary thereof.  The following are agreements between the Company and entities that are deemed affiliates of the Company for the purpose of filing and other requirements contained in Section 5005(a) of the Delaware Insurance Code.

 
1.
An investment management agreement between the Company and Guggenheim Partners Investment Management, LLC (“GPIM”), whereby GPIM provides investment management services for certain of the Company’s investments.  Expenses under this agreement amounted to approximately $6.7 million for the year ended December 31, 2013.



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

 
2.   RELATED PARTY TRANSACTIONS (CONTINUED)

 
2.
A services agreement between the Company and Guggenheim Commercial Real Estate Finance, LLC (“GCREF”), whereby GCREF provides mortgage loan sourcing, origination and administration services to the Company.  There were no expenses related to this agreement for the year ended December 31, 2013.

 
3.
A services agreement between the Company and Guggenheim Insurance Services, LLC (“GIS”), whereby GIS provides certain personnel, facilities, systems and equipment in conjunction with the provision of accounting and general services, insurance services and other advisory services to the Company.  Expenses under this agreement amounted to approximately $25.5 million for the year ended December 31, 2013.

 
4.
A services agreement between the Company and se2, llc ("se2"), under which se2 provides annuity and life insurance policy servicing and third party administrator services to the Company. Expenses under this agreement amounted to approximately $0.1 million for the year ended December 31, 2013.

The Company has an administrative services agreement dated January 1, 2002 with DLIAC, an affiliate, pursuant to which the Company performs various administrative services on behalf of DLIAC.

The Company has an administrative services agreement dated December 1, 2008 with its subsidiary, Clarendon, pursuant to which the Company provides services and facilities in connection with Clarendon’s business of supporting the wholesale distribution of the Company’s variable insurance and annuity products.

The Company has an administrative and tax services agreement dated January 1, 2010 with Barbco 3, an affiliate, pursuant to which the Company provides administrative and tax services to Barbco 3 on a cost- reimbursement basis.

The Company has an assignment and assumption agreement with the Parent, pursuant to which the Parent assigns to the Company all of the Parent’s right, title and interest in and to, and the Company assumes the obligations of the Parent under, a transition services agreement dated as of August 2, 2013 between the Parent and SLC - U.S. Ops Holdings, Inc.
 
 
The Company has an assignment and assumption agreement with the Parent, pursuant to which the Parent assigns to the Company all of the Parent’s right, title and interest in and to, and the Company assumes the obligations of the Parent under, a purchaser transition services agreement dated as of August 2, 2013 between the Parent and SLC - U.S. Ops Holdings.

The Company has an administrative services agreement with its subsidiary, DL Ireland, pursuant to which DL Ireland provides administrative and support services to the Company and its U.S. affiliates.

The Company has an administrative services agreement with its subsidiary, DL Canada, pursuant to which DL Canada provides administrative and support services to the Company and its U.S. affiliates.

The Company has a principal underwriter’s agreement dated April 1, 2002 with Clarendon, a subsidiary, pursuant to which Clarendon serves as principal underwriter and distributor for all variable insurance products issued by the Company.

The Company had $0.6 million and $71.0 million due from related parties at December 31, 2013 and 2012, respectively, and had $1.7 million and $18.5 million due to related parties, recorded as a component of Other liabilities, at December 31, 2013


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

2.
RELATED PARTY TRANSACTIONS (CONTINUED)

and 2012, respectively, under the terms of various management and service contracts which provide for cash settlements on a quarterly or more frequent basis.

Other Sale Related Transactions

During 2013, the Company sold its home office real estate property and three other properties (collectively, the “Property”) to the U.S. Branch, a former affiliate, for a total sale price of $88.0 million.  The Property was recorded as Properties held for sale as of December 31, 2012.  The sale price was equal to the fair market value of the Property, including personal property, fixtures, and equipment installed in or attached to the Property.  The sale of the Property resulted in a gain of $32.3 million.

During the second quarter of 2013, two of the Company's real estate subsidiaries, 7101 France Avenue, LLC and 7101 France Avenue Manager, LLC, were dissolved.  The conduit loan secured by the real estate owned by 7101 France Avenue, LLC was paid and the assets relating to the property were conveyed to the Company.

In connection with the Sale Transaction these assets were subsequently sold to the U.S. Branch, a former affiliate, at fair market value totaling $16.5 million and resulted in a pre-tax gain of $4.9 million.  In addition, one of the Company’s real estate subsidiaries, Sun MetroNorth, LLC, was sold to the U.S. Branch at fair market value totaling $4.9 million, resulting in a loss of $1.5 million.

Four additional real estate properties were also sold to the U.S. Branch, a former affiliate, totaling $44.5 million, resulting in a gain of $6.8 million including one property from the Company’s Separate Accounts for fair value of $0.6 million and a loss of $0.3 million.

The Company sold several mortgage loans to a former affiliate, SLOC, including the U.S. Branch, totaling $28.0 million, resulting in a gain of $0.7 million.  This amount included $7.0 million in mortgage loans from the Company’s Separate Accounts.  The Company also purchased mortgage loans from the U.S. Branch and other former and existing affiliates totaling $34.6 million.

On July 30, 2013, the Company sold a portfolio of externally-managed RMBS and CMBS to a former affiliate, SLOC, at fair market value, totaling $821 million (including $283 million purchased by the U.S. Branch, a former affiliate).  Realized gains of approximately $108 million were recognized upon the sale of the securities.

The Company, as successor to Keyport Life Insurance Company (“Keyport”), which merged with and into the Company at close of business on December 31, 2003, unconditionally guaranteed the full and punctual payment when due of any obligations of its previously wholly-owned subsidiary, ILAC, arising out of or in connection with any insurance or annuity contract (“Contract”) issued by ILAC on or after June 25, 1998. No Contracts were issued by ILAC after June 25, 1998.  In conjunction with the Sale Transaction and the Company’s distribution of ILAC to the Former Parent, this guarantee was terminated in 2013.

The Company, as successor to Keyport, unconditionally guarantees the full and punctual payment when due of any obligations of Keyport Benefit Life Insurance Company (“KBL”) arising out of or in connection with any Contract issued by KBL on or after June 25, 1998 and before December 31, 2002, the date that KBL merged with and into the Company’s wholly-owned subsidiary, SLNY. The purpose of this guaranty was to enhance the financial strength of KBL.  The liability of the Company under the guaranty is unlimited to any specific sum. The guaranty will not exceed contractual obligations to the policyholders of the contracts.  The cash surrender value of these policies at December 31, 2013 was approximately $324.5 million.  At December 31, 2013 and 2012, there was no liability accrued under this guaranty.


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


2.
RELATED PARTY TRANSACTIONS (CONTINUED)

The Company guarantees on a subordinated basis all amounts payable by SLNY to holders of certain deferred combination fixed and variable annuity contracts (“MVA Contracts”) issued by SLNY which include the option to earn a guaranteed fixed return for specified periods (“Guarantee Period”). The Company unconditionally and irrevocably guarantees the full and punctual payment when due of all amounts payable by SLNY from a Guarantee Period to any holder. The guarantee is subject to no preconditions other than the failure by SLNY to pay when due any Guarantee Period interests. SLNY registered such Guarantee Period interests under the Securities Act of 1933 with the SEC.  Under the SEC’s rules, implementation of the guarantee permitted SLNY to stop filing periodic reports with the SEC pursuant to the Securities Exchange Act of 1934, and the purpose of the guarantee was to achieve that result.  The Company’s guarantee in this regard guarantees the payment of amounts payable by SLNY from a Guarantee Period but does not guarantee any other obligations of SLNY under the MVA Contracts.

The obligations under the guarantee are unsecured obligations of the Company and subordinate in right of payment to the prior payment in full of all other obligations of the Company, except for guarantees which by their terms are designated as ranking equally in right of payment with or subordinate to this guarantee.  The liability of the Company under the guaranty is unlimited to any specific sum.  The guaranty will not exceed contractual obligations to the policyholders of the MVA Contracts.  The total account value of these policies was approximately $10.9 million.  At December 31, 2013 and 2012, there is no liability accrued under this guaranty.

The Company guaranteed the full and timely payment of the obligations of SLFD, as tenant under a commercial office lease dated April 13, 2007.  Prior to December 31, 2011, SLFD provided written notice to the landlord of its intention to terminate the lease effective January 14, 2013 and paid $3.5 million in surrender considerations.  The maximum potential amount of future payments (undiscounted) that the guarantor could have been required to make under the guarantee was $0.  This guarantee terminated with the termination of the office lease.

The Company recorded tax benefits (expenses) from stock options of approximately $0.5 million, $(0.2) million and $1.0 million for the years ended December 31, 2013, 2012 and 2011, respectively. Employees of the Company’s former affiliates were participants in a restricted share unit (“RSU”) plan with the Company’s former indirect parent, SLF.

Under the RSU plan, participants were granted units that were equivalent to one common share of SLF stock and had a fair value of a common share of SLF stock on the date of grant.  RSUs earned dividend equivalents in the form of additional RSUs at the same rate as the dividends on common shares of SLF stock.  The redemption value, upon vesting, was the fair value of an equal number of common shares of SLF stock.  The Company incurred expenses of $7.0 million, $7.8 million and $5.7 million relating to RSUs for the years ended December 31, 2013, 2012 and 2011, respectively.




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


 
3.  DEBT SECURITIES AND PREFERRED STOCKS

The statement value and fair value of the Company’s debt securities and preferred stocks were as follows:

   
December 31, 2013
(In Thousands)
  
Statement
Value
  
Gross Unrealized Gains
  
Gross Unrealized Losses
  
Estimated Fair Value
Debt Securities:
                
U.S. Governments
$
623,251
$
1,302
$
(6,975)
$
617,578
All Other Governments
  
27,412
  
1,047
      
28,459
U.S. States, Territories and Possessions (Direct and Guaranteed)
  
6,236
  
86
  
-
  
6,322
U.S. Special Revenue and Special Assessment Obligations and all Non-Guaranteed Obligations of Agencies and Authorities of Governments and Their Political Subdivisions
  
96,525
  
2,893
  
(4,026)
  
95,392
Industrial and Miscellaneous (Unaffiliated)
  
3,813,093
  
131,022
  
(55,717)
  
3,888,398
Hybrid Securities
  
193,335
  
9,162
  
(4,853)
  
197,644
Total debt securities
$
4,759,852
$
145,512
$
(71,571)
$
4,833,793
Preferred Stocks
$
23,150
$
104
$
(1,558)
$
21,696

 
December 31, 2012
(In Thousands)
  
Statement
Value
  
Gross Unrealized Gains
  
Gross Unrealized Losses
  
Estimated Fair Value
Foreign Government
$
3,211
$
441
$
-
$
3,652
U.S. State, Municipals and Political Subdivisions
  
1,058
  
22
  
(14)
  
1,066
U.S. Treasury & Agency
  
1,099,088
  
2,974
  
(954)
  
1,101,108
Residential Mortgage Backed Securities
  
672,085
  
12,385
  
(25)
  
684,445
Commercial Mortgage Backed Securities
  
616,847
  
38,538
  
(7,109)
  
648,276
Corporate
  
4,504,111
  
350,525
  
(25,611)
  
4,829,025
Asset Backed Securities
  
411,799
  
53,507
  
(1,439)
  
463,867
Total
$
7,308,199
$
458,392
$
(35,152)
$
7,731,439

The statement value and estimated fair value by maturity periods for debt securities, other than ABS and MBS are shown below.  Actual maturities may differ from contractual maturities on ABS and MBS because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties; accordingly, the contractual maturities for those securities are not shown.



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


3.
DEBT SECURITIES AND PREFERRED STOCKS (CONTINUED)

(In Thousands)
December 31, 2013
 
Statement
  
Estimated
 
Value
  
Fair Value
Due in one year or less
$      155,798
  
$      156,722
Due after one year through five years
1,259,283
  
1,294,484
Due after five years through ten years
1,044,241
  
1,041,703
Due after ten years
1,068,620
  
1,102,440
Total before asset and mortgage-backed securities
3,527,942
  
3,595,349
Asset and mortgage-backed securities
1,231,910
  
1,238,444
Total
$    4,759,852
  
$    4,833,793

Proceeds from sales and maturities of investments in debt securities during 2013, 2012 and 2011, were $4.1 billion, $2.2 billion, and $3.0 billion, including non-cash transactions of $82.0 million, $19.0 million, and $49.0 million, respectively; gross gains were $264.3 million, $56.8 million and $98.5 million, respectively; and gross losses were $23.4 million, $31.0 million and $26.0 million, respectively.

Debt securities included above with a statement value of approximately $4.2 million for both years ended December 31, 2013 and 2012 were on deposit with governmental authorities as required by law.

Investment grade debt securities were 96.3% and 93.6% of the Company’s total debt securities as of December 31, 2013 and 2012, respectively.

The fair values of publicly traded debt securities are determined using three primary pricing methods: third-party pricing services, non-binding broker quotes and pricing models.  Prices are first sought from third- party pricing services with the remaining unpriced securities priced using one of the other two methods.  For privately-placed fixed maturity securities, fair values are estimated using model prices or broker quotes.  A portion of privately-placed fixed maturity securities (typically SEC Rule 144A securities) are priced using market prices.

Structured securities, such as ABS, RMBS and CMBS, are priced using third-party pricing services, a fair value model, or independent broker quotations.  Typical inputs used by these three pricing methods include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids and/or estimated cash flows and prepayment speeds.  In addition, estimates of expected future prepayments are factors in determining the price of ABS, RMBS and CMBS.  These estimates are based on the underlying collateral and structure of the security, as well as prepayment speeds previously experienced in the market at interest rate levels projected for the underlying collateral.  Actual prepayment experience may vary from these estimates. Exposure to any single issuer is less than 10% of net admitted assets.

The fair value of the Company’s preferred stocks is first based on quoted market prices.  Similar to fixed-maturity securities, the Company uses pricing services and broker quotes to price preferred stocks for which the quoted market price is not available.


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

3.
DEBT SECURITIES AND PREFERRED STOCKS (CONTINUED)

Other-than-temporary-impairment

The Company recognizes and measures OTTI for ABS and MBS in accordance with SSAP No. 43R. In accordance with SSAP No. 43R, if the fair value of a structured security is less than its amortized cost basis at the balance sheet date, the Company assesses whether the impairment is an OTTI.  When an OTTI has occurred, the amount of OTTI recognized in earnings is the difference between the amortized cost basis of the security and the present value of its expected future cash flows discounted at the effective interest rate implicit in the security.

If the Company intends to sell the structured security, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, an OTTI is considered to have occurred.  The amount of the OTTI recognized in earnings is the difference between the amortized cost basis and the fair value of the security.

If the Company does not intend to sell the structured security, or it is not more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the Company performs cash flow based testing to determine if the present value of its expected future cash flows discounted at the effective interest rate implicit in the security is less than its amortized cost basis.

Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third parties, along with assumptions and judgments about the future performance of the underlying collateral.  Losses incurred on the respective portfolios are based on loss models using assumptions about key systematic risks such as unemployment rates and housing prices and loan specific information such as delinquency rates and loan-to-value ratios.

OTTI was recognized during 2013 on LBSS that the Company had intent to sell in conjunction with the Sale Transaction, as defined in Note 1.  Refer to details in Note 19.  The OTTI balances under SSAP No. 43R where the present value of expected cash flows are less than amortized cost as of December 31, 2013 are also detailed in Note 19.

If the fair value of a debt security, other than those subject to SSAP No. 43R, is less than its amortized cost basis at the balance sheet date, the Company assesses whether the impairment is an OTTI.  When an OTTI has occurred, the amount of OTTI recognized in earnings is the difference between the amortized cost basis of the security and its fair value.

If the Company intends to sell the debt security, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, an OTTI is considered to have occurred.  If the Company does not intend to sell the debt security, or it is not more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the Company employs a portfolio monitoring process to identify securities that are OTTI.

The Company has a Credit Committee comprised of investment and finance professionals which meets at least quarterly to review individual issues or issuers that may be of concern.  In determining whether a security is OTTI, the Credit Committee considers the factors described below.  The process involves a quarterly screening of all securities where fair value is less than the amortized cost basis.  Discrete credit events, such as a ratings downgrade, are also used to identify securities that may be OTTI.  The securities identified are then evaluated based on issuer-specific facts and circumstances, such as the issuer’s ability to meet current and future interest and principal payments, an evaluation of the issuer’s financial position and its near-term recovery prospects, difficulties being experienced by an issuer’s parent or affiliate, and management’s assessment of the outlook for the issuer’s sector.  In making these evaluations, the Credit Committee exercises considerable judgment.  Based on this evaluation, issues or issuers are considered for inclusion on one of the Company’s following credit lists:

“Monitor List”- Management has concluded that the Company’s amortized cost will be recovered through timely collection of all contractually specified cash flows, but that changes in issuer-specific facts and circumstances require monitoring on a quarterly basis.  No OTTI charge is recorded in the Company’s Statements of Operations for unrealized loss on securities related to these issuers.

 
 
 


SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

3.
DEBT SECURITIES AND PREFERRED STOCKS (CONTINUED)

“Watch List”- Management has concluded that the Company’s amortized cost will be recovered through timely collection of all contractually specified cash flows, but that changes in issuer-specific facts and circumstances require continued monitoring during the quarter.  A security is moved from the Monitor List to the Watch List when changes in issuer-specific facts and circumstances increase the possibility that a security may become impaired within the next 24 months.  No OTTI charge is recorded in the Company’s Statements of Operations for unrealized loss on securities related to these issuers.

“Impaired List”- Management has concluded that the Company has the intent to sell the security, it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, or the amortized cost basis of the security is not expected to be recovered due to expected delays or shortfalls in the contractually specified cash flows.  For these investments, the amount of OTTI recognized in the Company’s Statements of Operations is the difference between the amortized cost basis of the security and its fair value or discounted cash flows.

Should it be determined that a security is other than temporarily impaired, the Company records a loss through an appropriate adjustment in carrying value.  As of December 31, 2013 and 2012, the Company incurred write-downs of debt securities totaling $38.6 million and $367.6 million, respectively, including those subject to SSAP No. 43R and those which the Company had the intent to sell in connection with the Sale Transaction defined in Note 1.  Of these amounts, no OTTI was related to sub-prime as of December 31, 2013, as compared to $68.4 million as of December 31, 2012.  For the year ended December 31, 2011, the Company incurred write-downs of debt securities totaling $111.4 million, of which $10.1 million was related to sub-prime.

There are inherent risks and uncertainties in management’s evaluation of securities for OTTI.  These risks and uncertainties include factors both external and internal to the Company, such as general economic conditions, an issuer’s financial condition or near-term recovery prospects, market interest rates, unforeseen events which affect one or more issuers or industry sectors, and portfolio management parameters, including asset mix, interest rate risk, portfolio diversification, duration matching, and greater than expected liquidity needs.  All of these factors could impact management’s evaluation of securities for OTTI.


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

 
3.   DEBT SECURITIES AND PREFERRED STOCKS (CONTINUED)

The gross unrealized losses and fair value of investments, which have been deemed temporarily impaired, aggregated by investment category, number of securities and length of time that securities have been in an unrealized loss position at December 31, 2013 are as follows (in thousands except # of securities):

 
Less than 12 months
  
12 months or more
  
Total
     
Fair
  
Unrealized
      
Fair
  
Unrealized
      
Fair
  
Unrealized
 
#
  
Value
  
Losses
  
#
  
Value
  
Losses
  
#
  
Value
  
Losses
Debt Securities:
                                  
U.S. Governments
6
 
$   147,222
  
$      (6,975)
  
              -
  
$               -
  
$                -
  
6
  
$   147,222
  
$     (6,975)
                                   
U.S. States, Territories and
1
  
139
  
-
  
-
  
-
  
-
  
1
  
139
  
-
Possessions (Direct and Guaranteed)
                                  
                                   
 
35
  
59,777
  
(4,025)
  
1
  
81
  
(1)
  
36
  
59,858
  
(4,026)
U.S. Special Revenue and Special Assessment
                                  
Obligations and all Non-Guaranteed Obligations
                                  
of Agencies and Authorities of Governments and
                                  
Their Political Subdivisions
                                  
                                   
Industrial and Miscellaneous (Unaffiliated)
174
  
1,226,159
  
(55,717)
  
4
  
8
  
-
  
178
  
1,226,167
  
(55,717)
                                   
Hybrid Securities
6
  
44,479
  
(3,589)
  
1
  
5,670
  
(1,264)
  
7
  
50,149
  
(4,853)
Total debt securities
222
  
$1,477,776
  
$    (70,306)
  
            6
  
$      5,759
  
$     (1,265)
  
228
  
$1,483,535
  
$    (71,571)
                                   
Preferred Stocks
2
  
$     20,441
  
$      (1,558)
  
-
  
$             -
  
$               -
  
2
  
$     20,441
  
$     (1,558)

The gross unrealized losses and fair value of investments, which have been deemed temporarily impaired, aggregated by investment category, number of securities and length of time that securities have been in an unrealized loss position at December 31, 2012 are as follows (in thousands except # of securities):

 
Less than 12 months
  
12 months or more
  
Total
     
Fair
  
Unrealized
      
Fair
  
Unrealized
      
Fair
  
Unrealized
 
#
  
Value
  
Losses
  
#
  
Value
  
Losses
  
#
  
Value
  
Losses
Asset Backed Securities
3
  
$      2,951
  
$             (36)
  
3
  
$        6 ,247
  
$        (1,403)
  
6
  
$      9,198
  
$     (1,439)
                                   
Commercial Mortgage Backed Securities
2
  
6,852
  
(63)
  
6
  
9,043
  
(7,046)
  
8
  
15,895
  
(7,109)
                                   
Corporate
52
  
220,145
  
(9,731)
  
18
  
116,941
  
(15,880)
  
70
  
337,086
  
(25,611)
                                   
Residential Mortgage Backed Securities
1
  
84
  
(1)
  
7
  
6,229
  
(24)
  
8
  
6,313
  
(25)
                                   
U.S. State, Municipals and Political Subdivisions
1
  
234
  
(14)
  
-
  
-
  
-
  
1
  
234
  
(14)
U.S. Treasury and Agency
3
  
208,831
  
(954)
  
-
  
-
  
-
  
3
  
208,831
  
(954)
Total
62
  
$   439,097
  
$    (10,799)
  
34
  
$   138,460
  
$    (24,353)
  
96
  
$   577,557
  
$    (35,152)

As summarized in the table below, the Company had indirect exposure to sub-prime loans with book adjusted carrying value of $1.5 million as of December 31, 2013.  This represented approximately two-tenths of a percent of the Company’s total invested assets. In terms of managing and mitigating sub-prime mortgage risk, the Company’s overall exposure to these investments was minimal, as shown below (in thousands):
       
Book/Adjusted
    
       
Carrying Value
    
       
(excluding
    
Type
  
Actual Cost
  
interest)
  
Fair Value
Residential mortgage backed securities
  
$          1,135
  
$          1,135
  
$          1,132
Collateralized debt obligations
  
404
  
404
  
400
   
$          1,539
  
$          1,539
  
$          1,532

 
 

 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

3.
DEBT SECURITIES AND PREFERRED STOCKS (CONTINUED)

As summarized in the table below, the Company had indirect exposure to residential sub-prime and Alt-A loans with book adjusted carrying values of $122.9 million and $81.9 million, respectively, as of December 31, 2012.  This represented approximately 2.0% of the Company’s total invested assets. Alt-A loans are generally residential loans made to borrowers with credit profiles that are stronger than sub-prime but weaker than prime. Of these investments 96.2 % were issued before 2007 and 65.0% have a NAIC 1 rating (in thousands).

Type
  
Actual Cost
  
Book Adjusted
Carrying Value
(excluding interest)
Fair Value
Sub-prime: Residential asset backed securities
  
 $      122,907
  
 $           122,873
  
 $        123,665
Alt-A loans: Residential asset backed securities
  
           81,893
  
                81,918
  
             81,974
   
 $      204,800
  
 $           204,791
  
 $        205,639
             
There were no credit impairments recorded in 2013 on LBSS held as of December 31, 2013 pursuant to SSAP No. 43R.

4.
MORTGAGE LOANS

The Company invests in commercial first mortgage loans throughout the United States.  Investments are diversified by property type and geographic area.  The Company monitors the condition of the mortgage loans in its portfolio.  In those cases where mortgages have been restructured, appropriate allowances for losses have been made.  In those cases where, in management’s judgment, the mortgage loans’ values are impaired, appropriate losses are recorded.




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

4.
MORTGAGE LOANS (CONTINUED)

The following table shows the geographical distribution of the statement value of the mortgage loans portfolio for the years ended December 31:

(In Thousands)
2013
  
2012
Alabama
$          9,228
  
$        10,539
Alaska
5,111
  
5,286
Arizona
14,286
  
15,908
California
52,347
  
54,122
Colorado
22,198
  
11,412
District of Columbia
12,043
  
12,404
Florida
84,375
  
58,522
Georgia
20,220
  
22,376
Idaho
1,748
  
1,798
Illinois
35,545
  
35,002
Indiana
1,622
  
1,878
Iowa
-
  
64
Kansas
1,627
  
1,707
Kentucky
18,122
  
19,479
Louisiana
9,734
  
11,765
Maine
-
  
633
Maryland
13,562
  
12,476
Massachusetts
5,011
  
11,239
Michigan
8,363
  
8,610
Minnesota
17,138
  
12,529
Missouri
34,663
  
36,711
Mississippi
3,100
  
3,193
Montana
1,495
  
1,588
Nebraska
2,241
  
2,386
Nevada
-
  
7,779
New Jersey
7,232
  
16,040
New Mexico
5,274
  
8,045
New York
97,390
  
114,727
North Carolina
21,028
  
22,914
North Dakota
249
  
566
Ohio
40,080
  
42,028
Oklahoma
483
  
1,215
Oregon
14,265
  
17,966
Pennsylvania
34,515
  
39,167
Rhode Island
552
  
729
South Carolina
23,771
  
25,064
Tennessee
10,651
  
14,905
Texas
84,865
  
105,580
Utah
23,984
  
25,682
Virginia
3,371
  
3,721
Washington
11,925
  
20,793
West Virginia
3,663
  
3,867
Wisconsin
2,784
  
3,043
General allowance for loan loss
(11,552)
  
(10,846)
Total Mortgage Loans on Real Estate
$      748,309
  
$      814,612

 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

4.
MORTGAGE LOANS (CONTINUED)

The Company had no outstanding mortgage loan commitments on real estate as of December 31, 2013 and 2012.

The Company originated one mortgage loan with a total cost of $15.9 million during the year ended December 31, 2013 with a rate of 4.54% and originated ten commercial mortgage loans with a total cost of $14.1 million during the year ended December 31, 2012 with rates ranging from 3.9% to 7.5%.  During the years ended December 31, 2013 and 2012, the Company did not reduce interest rates on any outstanding mortgage loans.  Mortgage loans are collateralized by the related properties and generally are no more than 75% of the properties’ value at the time the original loan is made.

A loan is considered impaired when it is probable that the principal or interest is not collectible in accordance with the contractual terms of the loan.  The allowance for credit losses is estimated using the present value of expected cash flows discounted at the loan’s effective interest rate or the fair value of the collateral, if the loan is collateral dependent.  A specific allowance for loan loss is established for an impaired loan if the present value of expected cash flows discounted at the loan’s effective interest rate, or the fair value of the loan collateral, less cost to sell, is less than the recorded amount of the loan.  The specific allowance for loan loss was $4.2 million and $4.9 million at December 31, 2013 and 2012, respectively.  A general allowance for loan loss is established based on an assessment of past loss experience on groups of loans with similar characteristics and current economic conditions.  The general allowance for loan loss was $11.5 million and $10.8 million at December 31, 2013 and 2012, respectively.  While management believes that it uses the best information available to establish the allowances, future adjustments may become necessary if economic conditions differ from the assumptions used in calculating them. At December 31, 2013, the Company individually and collectively evaluated loans with a gross carrying value of $764.0 million and $747.8 million, respectively.  At December 31, 2012, the Company individually and collectively evaluated loans with a gross carrying value of $830.3 million and $813.3 million, respectively.

As of December 31, 2013 the Company held 14 restructured loans with a gross book value of $34.9 million.  Should the Company hold any troubled debt, the Company may modify the terms of a loan by adjusting the interest rate, extending the maturity date, or both.

Delinquency status is determined based upon the occurrence of a missed contract payment.  There were no loans past due greater than 90 days at December 31, 2013 and 2012.

The Company accrues interest income on impaired loans to the extent it is deemed collectible.  Otherwise, receipts on non-performing loans are not recognized as interest income until the loan is no longer impaired, is sold, or is otherwise made whole.  Any cash collected during the period where the loan is impaired is applied to lower its carrying value.







 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

4.
MORTGAGE LOANS (CONTINUED)

Other information is as follows:

Age Analysis of Mortgage Loans:

     
Residential
  
Commercial
        
 
Farm
  
Insured
  
All Other
  
Insured
  
All Other
  
Mezzanine
  
Total
(In Thousands)
                          
Current Year
                          
 
Recorded Investment (All)
                          
   
Current
$     -
  
$        -
  
$                  -
  
$        -
  
$755,805
  
$              -
  
$755,805
     
30 - 59 Days Past Due
-
  
-
  
-
  
-
  
8,231
  
-
  
8,231
     
60 - 89 Days Past Due
-
  
-
  
-
  
-
  
-
  
-
  
-
     
90 - 179 Days Past Due
-
  
-
  
-
  
-
  
-
  
-
  
-
     
180 + Days Past Due
-
  
-
  
-
  
-
  
-
  
-
  
-
                           
 
Accruing Interest 90-179 Days Past Due
                          
   
Recorded Investment
$     -
  
$        -
  
$                  -
  
$        -
  
$            -
  
$              -
  
$           -
   
Interest Accrued
-
  
-
  
-
  
-
  
-
  
-
  
-
                           
 
Accruing Interest 180+ Days Past Due
                          
   
Recorded Investment
$     -
  
$        -
  
$                  -
  
$        -
  
$            -
  
$              -
  
$           -
   
Interest Accrued
-
  
-
  
-
  
-
  
-
  
-
  
-
                           
 
Interest Reduced
                          
   
Recorded Investment
$     -
  
$        -
  
$                  -
  
$        -
  
$            -
  
$              -
  
$           -
   
Number of Loans
-
  
-
  
-
  
-
  
-
  
-
  
-
   
Percent Reduced
            0%
  
           0%
  
            0%
  
            0%
  
            0%
  
            0%
  
            0%
                           
Prior Year
                          
 
Recorded Investment
                          
   
Current
$     -
  
$        -
  
$                  -
  
$        -
  
$830,313
  
$              -
  
$830,313
     
30 - 59 Days Past Due
-
  
-
  
-
  
-
  
-
  
-
  
-
     
60 - 89 Days Past Due
-
  
-
  
-
  
-
  
-
  
-
  
-
     
90 - 179 Days Past Due
-
  
-
  
-
  
-
  
-
  
-
  
-
     
180 + Days Past Due
-
  
-
  
-
  
-
  
-
  
-
  
-
                           
 
Accruing Interest 90-179 Days Past Due
                          
   
Recorded Investment
$     -
  
$        -
  
$                  -
  
$        -
  
$            -
  
$              -
  
$           -
   
Interest Accrued
-
  
-
  
-
  
-
  
-
  
-
  
-
                           
 
Accruing Interest 180+ Days Past Due
                          
   
Recorded Investment
$     -
  
$        -
  
$                  -
  
$        -
  
$            -
  
$              -
  
$           -
   
Interest Accrued
-
  
-
  
-
  
-
  
-
  
-
  
-
                           
 
Interest Reduced
                          
   
Recorded Investment
$     -
  
$        -
  
$                  -
  
$        -
  
$            -
  
$              -
  
$           -
   
Number of Loans
-
  
-
  
-
  
-
  
-
  
-
  
-
   
Percent Reduced
            0%
  
            0%
  
            0%
  
            0%
  
            0%
  
            0%
  
            0%

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

4.
MORTGAGE LOANS (CONTINUED)

Investment in Impaired Loans With or Without Allowance for Credit Losses:

     
Residential
  
Commercial
        
 
Farm
  
Insured
  
All Other
  
Insured
  
All Other
  
Mezzanine
  
Total
(In Thousands)
                          
Current Year
                          
 
With Allowance for Credit Losses
$     -
  
$        -
  
$                -
  
$        -
  
$  20,454
  
$              -
  
$  20,454
 
No Allowance for Credit Losses
$     -
  
$        -
  
$                -
  
$        -
  
$  34,918
  
$              -
  
$  34,918
                           
Prior Year
                          
 
With Allowance for Credit Losses
$     -
  
$        -
  
$                -
  
$        -
  
$  17,016
  
$              -
  
$  17,016
 
No Allowance for Credit Losses
$     -
  
$        -
  
$                -
  
$        -
  
$           -
  
$              -
  
$            -

Investment in Impaired Loans - Average Recorded Investment, Interest Income Recognized, Recorded Investment on Nonaccrual Status and Amount of Interest Income Recognized Using a Cash-Basis Method of Accounting:

     
Residential
  
Commercial
        
 
Farm
  
Insured
  
All Other
  
Insured
  
All Other
  
Mezzanine
  
Total
(In Thousands)
                          
Current Year
                          
 
Average Recorded Investment
$     -
  
$        -
  
$           -
  
$        -
  
$   2,517
  
$              -
  
$    2,517
 
Interest Income Recognized
-
  
-
  
-
  
-
  
204
  
-
  
204
 
Recorded Investments on
                          
 
Nonaccrual Status
-
  
-
  
-
  
-
  
20,454
  
-
  
20,454
 
Amount of Interest Income
                          
 
Recognized Using a Cash-
                          
 
Basis Method of Accounting
-
  
-
  
-
  
-
  
-
  
-
  
-
                           
Prior Year
                          
 
Average Recorded Investment
$     -
  
$        -
  
$           -
  
$        -
  
$   1,702
  
$              -
  
$    1,702
 
Interest Income Recognized
-
  
-
  
-
  
-
  
-
  
-
  
-
 
Recorded Investments on
                          
 
Nonaccrual Status
-
  
-
  
-
  
-
  
17,016
  
-
  
17,016
 
Amount of Interest Income
                          
 
Recognized Using a Cash-
                          
 
Basis Method of Accounting
-
  
-
  
-
  
-
  
-
  
-
  
-

Allowance for Credit Losses:

 
2013
  
2012
  
2011
(In Thousands)
          
Balance at beginning of period
$               15,701
  
$               34,498
  
$               30,145
Additions charged to operations
1,851
  
5,872
  
15,479
Direct write-downs charged against the allowances
(96)
  
(15,715)
  
(4,037)
Recoveries of amounts previously charged off
(1,729)
  
(8,954)
  
(7,089)
Balance at end of period
$               15,727
  
$              15,701
  
$               34,498

 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

4.
MORTGAGE LOANS (CONTINUED)

The credit quality indicator for the Company’s mortgage loans is an internal risk-rated measure based on the borrowers’ ability to pay and the value of the underlying collateral.  The internal risk rating is related to an increasing likelihood of loss, with a low quality rating representing the category in which a loss is first expected.  The following table shows the recorded investment of the Company’s mortgage loans, net of allowances for credit losses, disaggregated by credit quality indicator as of December 31, 2013 and 2012:

(In Thousands)
        
         
Internal Risk Rating
  
2013
  
2012
AAA
  
$                      -
  
$                     -
AA
  
26,964
  
25,920
A
  
25,763
  
10,478
BBB
  
131,846
  
199,344
BB and Lower
  
524,091
  
577,555
Impaired
  
55,372
  
17,016
Total
  
$          764,036
  
$         830,313
         
Total allowance for loan loss
  
(15,727)
  
(15,701)
Mortgage Loans on Real Estate
  
$          748,309
  
$         814,612

The following table provides an aging of past due commercial mortgage loans as of December 31, 2013 and 2012, based on the recorded investment net of allowances for credit losses.

(In Thousands)
        
         
   
2013
  
2012
Current
  
$          755,805
  
$           830,313
         
30-59 Days Past Due
  
8,231
  
-
60-89 Days Past Due
  
-
  
-
Greater Than 90 Days - Accruing
  
-
  
-
Greater Than 90 Days - Not Accruing
  
-
  
-
Total Past Due
  
$          8,231
  
$                      -
         
Total allowance for loan loss
  
(15,727)
  
(15,701)
Total Mortgage Loans on Real Estate
  
$          748,309
  
$           814,612


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


5.
REAL ESTATE

The Company held four real estate properties for sale at the end of the statement period.  One of the properties was originally acquired by foreclosure from the Company’s mortgage portfolio and the remaining three were acquired through purchase. The properties are expected to be sold within the next statement period.

The Company sold five properties during 2013 that resulted in net realized gains of $44.3 million.  This amount is shown in the Company's Statement of Operations as part of net realized capital gains and losses.  All five properties were disposed of to a former related party in conjunction with the Sale Transaction defined in Note 1.

The Company sold five properties during 2012 including four properties previously impaired that resulted in total net realized gains of $3.4 million as compared to one property sold during 2011 for a net loss of $0.1 million.  These amounts are shown in the Company's Statement of Operations as part of net realized capital gains and losses.

The Company recognized four impairment losses on real estate as of December 31, 2012, as compared to no impairment losses recorded for 2013 or 2011.  All four properties were real estate moved to held for sale during 2012 and were impaired for $1.5 million based on estimated fair value less costs to sell.  The properties were sold during the year for a total realized gain of $0.7 million.  The impairments are shown in the Company's Statement of Operations as part of net realized capital gains and losses.

6.
INVESTMENT GAINS AND LOSSES

Realized capital gains and losses on debt securities, preferred stock, mortgages and interest rate swaps which relate to changes in levels of interest rates are charged or credited to the IMR, net of tax, and amortized into income over the remaining contractual life of the security sold.  Realized gains and losses from the remaining investments are reported, net of tax, on the Statement of Operations, but are not included in the computation of net gain from operations.

Changes in unrealized gains and losses from investments are reported as a component of Capital Stock and Surplus, net of deferred income taxes.






 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

6.
INVESTMENT GAINS AND LOSSES (CONTINUED)

 
Years Ended December 31,
 
2013
  
2012
  
2011
(In Thousands)
          
Realized gains (losses):
          
 
Debt securities
$     202,265
  
$     (341,475)
  
$       (38,604)
 
Preferred stocks
-
  
71
  
(111)
 
Common stocks
761
  
917
  
67
 
Common stocks of affiliates
50,283
  
-
  
(9)
 
Mortgage loans
246
  
(25,080)
  
(7,140)
 
Real estate
44,289
  
1,924
  
(77)
 
Cash, cash equivalents and short-terms
108
  
(1)
  
15
 
Other invested assets
(1,965)
  
476
  
(223)
 
Derivative instruments
(185,784)
  
(38,009)
  
(48,513)
Subtotal
110,203
  
(401,177)
  
(94,595)
Capital gains tax expense (benefit)
28,847
  
(2,216)
  
(1,288)
Net realized gains (losses)
81,356
  
(398,961)
  
(93,307)
(Gains) losses transferred to IMR (net of taxes)
31,017
  
(44,975)
  
(38,415)
Total
$     112,373
  
$     (443,936)
  
$     (131,722)
           

 
Years Ended December 31,
 
2013
  
2012
  
2011
(In Thousands)
          
Changes in net unrealized capital (losses)
          
gains, net of deferred income tax:
          
 
Debt securities
  $         (2,692)
  
$        162,954
  
$          19,089
 
Common stocks
-
  
(25)
  
(166)
 
Common stocks of affiliates
7,614
  
46,080
  
12,375
 
Mortgage loans
(17)
  
12,218
  
(2,829)
 
Derivative instruments
(237,782)
  
(61,068)
  
205,495
 
Other invested assets
(47)
  
(1,596)
  
(3,953)
Total
$       (232,924)
  
$        158,563
  
$        230,011
           

Deferred tax netted in unrealized capital (losses) gains above, except for common stock of affiliates and other affiliated invested assets, was ($129.5) million, $60.6 million and $117.2 million at December 31, 2013, 2012 and 2011, respectively.


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


7.
NET INVESTMENT INCOME

Net investment income consisted of:

 
Years Ended December 31,
(In Thousands)
2013
  
2012
  
2011
           
Debt securities (unaffiliated)
$       260,539
  
$      357,153
  
$      420,578
Preferred stocks
1,342
  
1,336
  
1,139
Common stocks
13
  
-
  
-
Mortgage loans
48,116
  
56,621
  
63,059
Real estate
19,232
  
28,693
  
25,810
Contract loans
23,299
  
24,446
  
31,580
Cash, cash equivalents and short-terms
14,023
  
510
  
819
Derivative instruments
(616,216)
  
(394,532)
  
131,554
Other invested assets
9,854
  
5,660
  
8,818
Other investment income
3,141
  
554
  
3,446
Gross investment (loss) income
(236,657)
  
80,441
  
686,803
           
Interest expense on surplus notes
43,260
  
42,752
  
42,583
Investment expenses and other interest expense
          
 on borrowed money
38,744
  
37,076
  
38,863
Net investment (loss) income
$     (318,661)
  
$             613
  
$      605,357
           

The Company’s policy is to exclude investment income due and accrued with amounts that are over 90 days past due or where the collection of interest is uncertain.  The total amount of investment income due and accrued excluded from surplus for the years ended December 31, 2013, 2012 and 2011 was $4.0 thousand, $0.2 million, and $0.1 million, respectively.

8.
DERIVATIVES

The Company uses derivatives for hedging or replication purposes only.  Interest rate swaps are mainly employed for duration matching purposes.  Combination swaps, comprised of currency and equity returns in combination with interest rate swaps, were used to hedge the Company’s European Medium Term Note program, which matured in 2011.  Beginning in the second quarter of 2005 and continuing into 2006, the Company marketed guaranteed investment contracts to unrelated third parties and entered into funding agreements and interest rate swaps as part of this guaranteed investment program.  The interest rate swaps allowed the Company to lock U.S. dollar fixed rate payments for the life of the contracts.  The Company designated existing interest rate swaps as a cash flow hedge of variable cash payments to be made under the respective funding agreements.  To qualify for hedge accounting treatment, the swap had to be highly effective in mitigating the designated risk of the hedged item.  Effectiveness of the hedge was formally assessed and documented at the inception of each hedging relationship and quarterly throughout the life of the hedging relationship.



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

8.
DERIVATIVES (CONTINUED)

Options are used to hedge equity exposure embedded in contracts issued by the Company and to hedge equity exposure embedded in fixed and variable annuity products.  Futures are used to hedge equity exposure included in the equity indexed annuities, as well as the guaranteed minimum death and living benefit features of the Company’s variable annuities. Currency forwards and swaps are used to hedge changes in foreign currency exchange rates.

Interest rate swaps as well as options, swaptions, and currency swaps are reported at fair value with the unrealized gain or loss reported as an adjustment to surplus.  All futures are marked to market and settled on a daily basis with the gain or loss reported as a component of investment income.  CVAs are necessary to properly reflect the component of fair value of derivative instruments that arises from default risk.  CVAs are based on a methodology that uses CDS spreads as a key input in determining an implied level of expected loss over the total life of the derivative contact. Where no observable CDS spreads are available, the counterparty or Company credit spreads derived from bond yields are used instead.  CVAs are intended to achieve a fair value of the underlying contracts and are normally based on publicly-available information. The CVAs also take into account contractual factors designed to reduce the Company’s credit exposure to each counterparty, such as collateral and legal rights of offset.

CVAs are not recorded for interest rate swaps used as cash flow hedges when proven highly effective.  The Company accounts for its interest rate swaps used as cash flow hedges in accordance with the guidance in SSAP No. 86, Accounting for Derivative Instruments and Hedging, Income Generation, and Replication (Synthetic Asset) Transactions, (“SSAP No. 86”).  In accordance with SSAP No. 86, derivatives that qualify for hedge accounting are recognized in a manner consistent with the hedged item.  The interest rate swaps employed by the Company were designated as cash flow hedges of specific funding agreements; and accordingly, if proven highly effective, the swap will be reported at amortized cost, consistent with the hedged funding agreement.  At initial designation, the fair values of the swaps were recorded into surplus with subsequent amortization into income through the maturity date of the funding agreements.  In the event that a swap is not proven highly effective, it will be recorded at fair value with unrealized gains/losses recorded to surplus. At December 31, 2012, all hedges were highly effective.

Market risk is the risk of loss due to market price changes of the derivative instrument or underlying security or index.  To mitigate this risk the Company matches the market sensitivity of the hedge with the market sensitivity of the underlying asset or liability being hedged.

Credit risk is the counterparty credit risk or risk of loss as a result of default or a decline in market value stemming from a credit downgrade of the counterparty to the derivative transaction.  The Company minimizes this risk by entering into derivatives only with counterparties that meet certain criteria, by utilizing standardized agreements, and by limiting counterparty concentrations.

All derivative transactions are covered under standardized contractual agreements with counterparties, all of which include credit-related contingent features.  Certain counterparty relationships also may include supplementary agreements with tailored terms, such as additional triggers for early terminations, acceptable practices related to cross-transaction netting, and minimum thresholds for determining collateral.







 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

8.
DERIVATIVES (CONTINUED)

Credit-related triggers include failure to pay or deliver on an obligation past certain grace periods, bankruptcy or the downgrade of credit ratings to below a stipulated level.  These triggers apply to both the Company and its counterparty.

At December 31, 2013 and 2012, the Company pledged $371.3 million and $185.2 million, respectively, in U.S. Treasury securities as collateral to counterparties.  At December 31, 2013 and 2012, counterparties pledged to the Company $86.8 million and $175.2 million, respectively, in collateral comprised of cash and U.S. Treasury securities.

Derivatives are carried in accordance with SSAP No. 86.  The Company’s underlying notional or principal amounts associated with open derivatives positions were as follows:

 
Outstanding at
 
December 31, 2013
 
(per SSAP No. 86)
               
(In Thousands)
Notional
  
Fair Value/
        
 
Principal
  
Statement
  
Amortized
  
Unrealized
 
Amounts
  
Value
  
Cost
  
Gain (Loss)
               
Non-hedging interest rate swaps
$    3,658,000
  
$     (270,235)
  
$                 -
  
$     (270,235)
Currency swaps
67,500
  
(8,553)
  
-
  
(8,553)
Payor swaptions
3,040,000
  
14,432
  
11,911
  
2,521
Receiver swaptions
75,000
  
412
  
2,126
  
(1,714)
Equity index options
2,361,498
  
122,790
  
94,785
  
28,005
Total
$    9,201,998
  
$     (141,154)
  
$     108,822
  
$     (249,976)
               

 
Outstanding at
 
December 31, 2012
 
(per SSAP No. 86)
               
(In Thousands)
Notional
  
Fair Value/
        
 
Principal
  
Statement
  
Amortized
  
Unrealized
 
Amounts
  
Value
  
Cost
  
Gain (Loss)
               
Non-hedging interest rate swaps
$    5,618,430
  
$      148,367
  
$                  -
  
$      148,367
Hedging interest rate swaps
900,000
  
(33,863)
  
(7,065)
  
(26,798)
Currency swaps
67,500
  
(9,149)
  
-
  
(9,149)
Payor swaptions
3,115,000
  
12,994
  
14,037
  
(1,043)
Equity index options
861,101
  
35,432
  
57,766
  
(22,334)
Total
$  10,562,031
  
$      153,781
  
$        64,738
  
$        89,043
               



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


8.
DERIVATIVES (CONTINUED)

At December 31, 2013 and 2012, open futures contracts had a notional value of $3,803.8 million and $5,223.7 million and a fair value of $(6.2) million and $(50.2) million, respectively.  These amounts do not include the component of variation margin that has already been cash settled.

9.
REINSURANCE

Reinsurance ceded contracts do not relieve the Company from its obligations to policyholders.  The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet the obligations assumed under the reinsurance agreement.  To minimize its exposure to significant losses from reinsurer insolvencies, the Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of credit risk.  Management believes that any liability arising from this contingency is unlikely.

On July 31, 2013, the Company consented to a Novation Agreement between the U.S. Branch, a former affiliate, and Barbco 3.  Pursuant to the Novation Agreement, Barbco 3 was substituted as reinsurer under a June 12, 2000 reinsurance agreement between the Company and the U.S. Branch, whereby the Company ceded to the U.S. Branch, on a yearly renewable term basis, certain risks under group flexible premium variable universal life policies.  Refer to Note 2 for further details.

The Company manages a closed block of SPWL insurance policies, a retirement-oriented tax-advantaged life insurance product.  The Company discontinued sales of SPWLs in response to certain tax law changes in the 1980s.  The Company had SPWL policyholder balances of $1.3 billion and $1.4 billion as of December 31, 2013 and 2012, respectively.  On December 31, 2003, this entire block of business was reinsured on a funds withheld basis with SLOC, a former affiliate company.  As discussed in Note 2, in connection with the Sale Transaction, the Company recaptured 100% of the risks reinsured pursuant to this agreement.  The recapture occurred during the first quarter of 2013.

The Company  has a reinsurance agreement with Barbco 3, an affiliate, to cede all of the risks associated with certain in-force corporate and bank-owned variable universal life and private placement variable universal life policies on a combination coinsurance and coinsurance with funds-withheld.  This agreement also provided for the ceding of new business written after the effective date.

Effective January 1, 2010, the Company and Barbco 3 amended the agreement to include coverage of certain corporate and bank-owned variable universal life and private placement variable universal life insurance cases sold between December 31, 2009 and March 31, 2010, inclusive.  Reinsurance coverage continued for all cases sold prior to April 1, 2010.  However, cases sold on or after April 1, 2010 have not been reinsured.  This amendment also enabled the Company to discontinue reinsuring a portion of the covered business that was previously reinsured on a modified coinsurance basis, effective April 1, 2010.  The discontinuance of the business reinsured on a modified coinsurance basis did not have a material impact on the Company’s financial statements.

The Company has agreements with several unrelated companies, which provide for reinsurance of portions of the net-amount-at-risk under certain individual variable universal life, individual universal life, individual private placement variable universal life, corporate and bank-owned life insurance policies.  These amounts are reinsured on either a monthly renewable, yearly renewable term, or modified coinsurance basis.




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


9.
REINSURANCE (CONTINUED)

The Company has agreements with unrelated companies that provide for reinsurance of guaranteed minimum death benefits under certain variable annuity contracts.  These amounts are reinsured on a monthly renewable term basis.

The effects of reinsurance were as follows:

 
Years Ended December 31,
(In Thousands)
2013
  
2012
  
2011
           
Premiums and annuity considerations:
          
 
Direct
$        238,879
  
$       453,109
  
$     3,349,441
 
Recaptured amount from former affiliate - SPWL
1,331,908
  
-
  
-
 
Ceded - Affiliated (former affiliate effective August 2, 2013)
(18,449)
  
-
  
-
 
Ceded - Affiliated
20,104
  
(24,101)
  
(98,654)
 
Ceded - Non-Affiliated
(13,067)
  
(13,093)
  
(20,568)
Net premiums and annuity considerations
$     1,559,375
  
$       415,915
  
$     3,230,219
           
Insurance and other individual policy benefits and claims:
          
 
Direct
$        938,717
  
$       968,595
  
$        957,552
 
Assumed - Non-Affiliated
9,254
  
5,503
  
6,679
 
Recaptured amount from former affiliate - SPWL
(27,904)
  
-
  
-
 
Ceded - Affiliated (former affiliate effective August 2, 2013)
(19,825)
  
-
  
-
 
Ceded - Affiliated
(22,462)
  
(145,408)
  
(147,092)
 
Ceded - Non-Affiliated
(29,977)
  
(24,739)
  
(9,442)
Net policy benefits and claims
$        847,803
  
$       803,951
  
$        807,697
           







 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


10.
RESERVES FOR LIFE CONTRACTS AND DEPOSIT TYPE CONTRACTS

The reserves for life insurance and annuity contracts are computed in accordance with presently accepted actuarial standards, and are based on actuarial assumptions and methods (including use of published mortality tables and prescribed interest rates and methodologies) which produce reserves at least as great as those required by law and contract provisions.

Deduction of deferred fractional premiums upon death of the insured and return of any portion of the final premium for the period beyond the date of death are not applicable to the business of the Company.  Surrender values are not promised in excess of reserves legally computed.

For policies with annual extra premiums, additional reserves are held equal to one-half the extra premium.  Extra premiums on single premium policies are amortized over ten years.  Policies issued with premiums corresponding to ages higher than the true ages are valued at the rated-up ages.  Policies issued subject to
a lien are valued as if the full amount were payable without any deduction.  For interest sensitive policies, substandard mortality is reflected in the cost of insurance charges.

As of December 31, 2013 and 2012, the Company had $16.0 million and $18.7 million, respectively, of insurance in force (direct and assumed), for which gross premiums were less than the net premiums according to the standard of valuation required by the State of Delaware.  Reserves (direct and assumed) to cover the above insurance as of December 31, 2013 and 2012 totaled $2.6 million and $3.2 million, respectively.

The Tabular Interest has been determined by formula as described in the NAIC instructions, except for some business for which the Tabular Interest is determined from basic policy data for reserving.  The Tabular less Actual Reserve Released has been determined by formula as described in the NAIC instructions. The Tabular Cost has been determined by formula as described in the NAIC instructions, except for universal life products which use cost of insurance and some business which uses basic policy data for reserving.  The Tabular Interest on funds not involving life contingencies was determined from the interest credited to the deposits, except for certain guaranteed interest contracts for which Tabular Interest on funds is determined by formula as described in the instructions.  Other than normal updates of reserves, the only significant reserve changes as of December 31, 2013 and 2012 were the changes in additional reserves held due to asset adequacy analysis testing.  Direct asset adequacy reserves were $236.4 million at December 31, 2013 and 2012, respectively.






 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


11.
WITHDRAWAL CHARACTERISTICS OF ANNUITY RESERVES AND DEPOSIT LIABILITIES

The withdrawal characteristics of general account and separate account annuity reserves and deposits are as follows:

(In Thousands)
General
Account
  
Separate
Account with
Guarantees
  
Separate Account
Nonguaranteed
  
Total
12/31/2013
  
% of Total
 
                   
Subject to discretionary withdrawal:
                  
 
With fair value adjustment
$               -
  
$1,223,241
  
$                -
  
$1,223,241
  
5%
 
At book value less current surrender charge of 5% or more
1,746,504
  
-
  
-
  
1,746,504
  
7%
 
At fair value
-
  
-
  
18,451,703
  
18,451,703
  
76%
 
Total with adjustment or at fair value
$1,746,504
  
$1,223,241
  
$18,451,703
  
$21,421,448
  
88%
 
At book value without adjustment
                  
 
(minimal or no charge or adjustment)
$  2,127,038
  
$                -
  
$                -
  
    $        2,127,038
  
9%
Not subject to discretionary withdrawal
827,001
  
-
  
27,588
  
854,589
  
3%
Total (Gross: Direct +Assumed)
4,700,543
  
1,223,241
  
18,479,291
  
24,403,075
  
100%
Reinsurance ceded
30,022
  
-
  
-
  
30,022
    
Total (net)
$4,670,521
  
$1,223,241
  
$18,479,291
  
$24,373,053
    

(In Thousands)
General
Account
  
Separate
Account with
Guarantees
  
Separate Account
Nonguaranteed
  
Total
12/31/2012
  
 
% of Total
 
                   
Subject to discretionary withdrawal:
                  
 
With fair value adjustment
$               -
  
        $   1,644,686
  
$                -
  
  $   1,644,686
  
6%
 
At book value less current surrender charge of 5% or more
2,204,320
  
-
  
-
  
          2,204,320
  
9%
 
At fair value
-
  
-
  
18,324,602
  
        18,324,602
  
70%
 
Total with adjustment or at fair value
$2,204,320
  
    $   1,644,686
  
    $18,324,602
  
 $     22,173,608
  
85%
 
At book value without adjustment
                  
 
(minimal or no charge or adjustment)
$2,099,491
  
$                -
  
$                -
  
$2,099,491
  
8%
Not subject to discretionary withdrawal
1,786,178
  
-
  
27,031
  
           1,813,209
  
7%
Total (Gross: Direct +Assumed)
6,089,989
  
           1,644,686
  
18,351,633
  
         26,086,308
  
100%
Reinsurance ceded
32,494
  
-
  
-
  
              32,494
    
Total (net)
  
$6,057,495
  
    $      1,644,686
  
$18,351,633
  
 $   26,053,814
    

 
 



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

12.
SEPARATE ACCOUNTS

The Company has established unitized Separate Accounts applicable to various classes of contracts providing for variable benefits.  Contracts for which funds are invested in unitized variable Separate Accounts include individual and group life and annuity contracts.  The assets (securities) in these unitized accounts are carried at fair value and the investment risk associated with such assets is retained by the contractholder.  These variable products provide minimum death benefits, and in certain annuity contracts, minimum accumulation or withdrawal benefits.  The minimum guaranteed benefit reserves associated with the unitized Separate Accounts are reported in Aggregate reserves for life contracts in the Company’s Statements of Admitted Assets, Liabilities, and Capital Stock and Surplus.

The Company has also established non-unitized Separate Accounts for certain contracts that include a MVA feature associated with fixed rates, including for amounts allocated to the fixed portion of certain combination fixed and variable deferred annuity contracts.  The assets in the variable deferred annuity Separate Account are carried at fair value. For some MVA Contracts, the assets in the fixed deferred annuity account are carried on a general account basis.

The Company earns separate account fees for providing administrative services and bearing the mortality risks related to variable contracts.  Net investment income, capital gains and losses, and changes in mutual fund asset values on variable Separate Accounts are allocated to policyholders and therefore are not reflected in the Statements of Operations of the general account.
 
 
For the current reporting year, the Company reported assets and liabilities from the following products into a Separate Account:

 
·
Sun Life (U.S.) Variable Life
 
·
Sun Life (U.S.) Variable Annuity
 
·
Sun Life (U.S.) Market Value Adjusted Annuity

A majority of the variable Separate Account assets are legally insulated from the Company’s general account whereas the non-unitized Separate Account assets are not legally insulated.  The legal insulation of the Separate Account assets prevents such assets from being generally available to satisfy claims resulting from the general account.  In accordance with the domiciliary state procedures for approving items within the Separate Account, the Separate Account classification of legally insulated, vs. not legally insulated, is supported by section 2932 of the Delaware Insurance Code.

The Company maintained separate account assets totaling $30,514.7 million and $31,948.7 million as of December 31, 2013 and 2012, respectively.  As of December 31, 2013 and 2012, the Company’s separate account assets included legally insulated assets of $28,916.1 million and $30,012.1 million, respectively.



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


12.
SEPARATE ACCOUNTS (CONTINUED)

The assets legally insulated and non-legally insulated from the general account as of December 31, 2013 are attributed to the following products/transactions:

Product / Transactions
Legally Insulated
  
Non- Legally
 
Assets
  
Insulated Assets
       
(In millions)
      
Sun Life (U.S.) Variable Life
$          9,987.9
  
$                    -
Sun Life (U.S.) Variable Annuity
          18,928.2
  
-
Sun Life (U.S.) Market Value Adjusted Annuity
-
  
            1,598.6
Total
$        28,916.1
  
$          1,598.6

Separate account liabilities are determined in accordance with prescribed actuarial methodologies, which approximate the fair value of the related assets less applicable surrender charges.  The resulting surplus is recorded in the general account Statement of Operations as a component of Net Transfers (from) to Separate Accounts.  The variable Separate Accounts are non-guaranteed Separate Accounts, wherein the policyholder assumes substantially all the investment risks and rewards, and MVA Separate Accounts are guaranteed Separate Accounts, wherein the Company contractually guarantees either a minimum return or account value to the policyholder.  In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the general account.

The Company had $25,902.5 million and $25,687.6 million of non-guaranteed Separate Account reserves and $1,223.2 million and $1,644.7 million of guaranteed Separate Account reserves as of December 31, 2013 and 2012, respectively.

As of December 31, 2013 and 2012, the general account of the Company had a maximum guarantee for Separate Account liabilities of $20,132.6 million and $22,695.0 million, respectively.

To compensate the general account for the risk taken, the Separate Account paid risk charges of $238.7 million, $191.1 million and $182.3 million during the years ended December 31, 2013, 2012 and 2011, respectively.

For the years ended December 31, 2013, 2012 and 2011, the Company’s general account paid $115.6 million, $110.1 million and $88.4 million for Separate Account guarantees, respectively.

The Company does not engage in securities lending transactions within the Separate Account.



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


12.
SEPARATE ACCOUNTS (CONTINUED)

An analysis of the separate account reserves as of December 31, 2013 is as follows:

(In Thousands)
Nonindexed
        
 
Guarantee
  
Nonguaranteed
    
 
Less than/
  
Separate
    
 
equal to 4%
  
Accounts
  
Total
Premiums, considerations
          
or deposits for year ended
          
12/31/2013
$            12,624
  
$         275,246
  
$         287,870
Reserves at 12/31/2013
          
For accounts with assets at:
          
Fair Value
296,456
  
25,902,465
  
26,198,921
Amortized Cost
926,785
  
-
  
926,785
Total Reserves
$       1,223,241
  
$    25,902,465
  
$    27,125,706
By withdrawal characteristics:
          
With FV adjustment
$      1,223,241
  
$                       -
  
$      1,223,241
At fair value
-
  
25,874,877
  
25,874,877
Subtotal
1,223,241
  
25,874,877
  
27,098,118
Not subject to discretionary
          
withdrawal
    
27,588
  
27,588
Total
$      1,223,241
  
$    25,902,465
  
$    27,125,706



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

 
12.  SEPARATE ACCOUNTS (CONTINUED)

An analysis of the separate account reserves as of December 31, 2012 is as follows:

(In Thousands)
Nonindexed
        
 
Guarantee
  
Nonguaranteed
    
 
Less than/
  
Separate
    
 
equal to 4%
  
Accounts
  
Total
Premiums, considerations
          
or deposits for year ended
          
12/31/2012
$        (164,491)
  
$         635,210
  
$         470,719
Reserves at 12/31/2012
          
For accounts with assets at:
          
Fair Value
350,650
  
25,687,602
  
26,038,252
Amortized Cost
1,294,036
  
-
  
1,294,036
Total Reserves
$      1,644,686
  
$    25,687,602
  
$    27,332,288
By withdrawal characteristics:
          
With FV adjustment
$      1,644,686
  
$                       -
  
$      1,644,686
At fair value
-
  
25,660,571
  
25,660,571
Subtotal
1,644,686
  
25,660,571
  
27,305,257
Not subject to discretionary
          
withdrawal
    
27,031
  
27,031
Total
$      1,644,686
  
$    25,687,602
  
$    27,332,288

Below is the reconciliation of Net Transfers from Separate Accounts (from) to the Statement of Operations of the Separate Account Statement to the Statement of Operations of the Company:

 
Years Ended December 31,
(In Thousands)
2013
  
2012
  
2011
           
Transfers to Separate Accounts
$287,870
  
$470,719 
  
$2,734,402 
Transfers from Separate Accounts
(2,945,712)
  
(2,685,911)
  
(2,271,063)
Net Transfers (from) to Separate Accounts on the Statement of Operations
$(2,657,842)
  
$(2,215,192)
  
$463,339 



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


13.
FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  In determining fair value, the Company uses various methods including market, income and cost approaches.  The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company has categorized its financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique.  The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value in the Company’s Statements of Admitted Assets, Liabilities, and Capital Stock and Surplus are categorized as follows:

Level 1

·  
Unadjusted quoted prices for identical assets or liabilities in an active market.
 

The types of assets and liabilities utilizing Level 1 valuations include U.S. Treasury and agency securities, investments in publicly-traded mutual funds with quoted market prices, and exchange traded derivatives.

Level 2

·  
Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly.
 

Level 2 inputs include the following:

· Quoted prices for similar assets or liabilities in active markets,
· Quoted prices for identical or similar assets or liabilities in non-active markets,
· Inputs other than quoted market prices that are observable, and
 
· Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

The types of assets and liabilities utilizing Level 2 valuations generally include U.S. Government securities not backed by the full faith and credit of the government, municipal bonds, structured notes, certain ABS (including collateralized debt obligations, RMBS, CMBS), certain corporate debt, certain private equity investments and certain derivatives.




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


13.
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

Level 3

·  
Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.  They reflect management's opinions regarding the assumptions a market participant would use in pricing the asset or liability.  Generally, the types of assets and liabilities utilizing Level 3 valuations are certain ABS, RMBS, and CMBS, certain corporate debt, certain private equity investments, certain mutual fund holdings, and certain derivatives.
 

There were no significant changes made in valuation techniques during 2013 or 2012.

The Company’s assets and liabilities by classification measured at fair value as of December 31, 2013 were as follows:

(In Thousands)
              
Description for each class of asset or liability
Level 1
  
Level 2
  
Level 3
  
Total
Assets at fair value:
              
Debt securities - Unaffiliated (c)
        
 
    
 
Asset-backed securities
  $                  -
  
    $                    -
  
    $            1,637
  
$        1,637
 
Residential mortgage-backed securities
-
  
527
  
-
  
527
 
Commercial mortgage-backed securities
-
  
-
  
9,751
  
9,751
 
Industrial and miscellaneous
-
  
-
  
-
  
-
Derivative Assets (e)
              
 
Interest Rate contracts
904
  
50,473
  
-
  
51,377
 
Equity contracts
7,650
  
97,293
  
17,909
  
122,852
 
FX contracts
384
  
-
  
-
  
384
Separate Accounts assets (d)
21,817,296
  
5,663,362
  
585,422
  
28,066,080
Total assets at fair value
$  21,826,234
  
$  5,811,655
  
    $        614,719
  
$28,252,608
Liabilities at fair value:
              
Separate Accounts (d)
$               -
  
$   (23,791)
  
   $                    -
  
$   (23,791)
Derivative Liabilities (e)
              
 
Interest Rate contracts
(827)
  
(305,864)
  
-
  
(306,691)
 
Equity Contracts
(6,234)
  
-
  
-
  
(6,234)
 
FX contracts
(468)
  
(8,554)
  
-
  
(9,022)
Total liabilities at fair value
$        (7,529)
  
$ (338,209)
  
$                    -
  
$ (345,738)








 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


 
13.  FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The Company’s assets and liabilities by classification measured at fair value as of December 31, 2012 were as follows:

(In Thousands)
              
Description for each class of asset or liability
 
Level 1
  
Level 2
  
Level 3
  
Total
Assets at fair value:
              
Preferred stock - Unaffiliated (a)
              
 
Industrial and miscellaneous
$                    -
  
     $                  -
  
$                  -
  
$                     -
Common stock - Unaffiliated (b)
              
 
Industrial and miscellaneous
-
  
-
  
-
  
-
Debt securities - Unaffiliated (c)
              
 
Asset-backed securities
-
  
-
  
19,405
  
19,405
 
Residential mortgage-backed securities
-
  
37,869
  
6,486
  
44,355
 
Commercial mortgage-backed securities
-
  
13,718
      
13,718
 
Industrial and miscellaneous
-
  
-
  
-
  
-
Derivative Assets (e)
              
 
Interest Rate contracts
8
  
269,898
  
-
  
269,906
 
Equity contracts
36,780
  
4,563
      
41,343
 
FX contracts
839
  
337
  
-
  
1,176
Separate Accounts assets (d)
21,405,998
  
6,476,234
  
508,231
  
28,390,463
Total assets at fair value
$    21,443,625
  
$  6,802,619
  
$   534,122
  
$   28,780,366
Liabilities at fair value:
              
Separate Accounts (d)
$                    -
  
$      (58,247)
  
$                 -
  
$     (58,247)
Derivative Liabilities (e)
              
 
Interest Rate contracts
(3,353)
  
(108,873)
  
-
  
(112,226)
 
Equity Contracts
(51,763)
  
-
  
-
  
(51,763)
 
FX contracts
(1,849)
  
(9,149)
  
-
  
(10,998)
Total liabilities at fair value
$        (56,965)
  
$      (176,269)
  
$                 -
  
$      (233,234)


 
(a) Preferred stocks with NAIC designations between 4 and 6 are carried at the lower of amortized cost or fair value.  Where fair value is less than amortized cost, amounts are included in the table above.

(b) Common stocks are carried at fair value.

 
(c) Debt securities with NAIC designations of 6 are carried at the lower of amortized cost or fair value. Where fair value is less than amortized cost, amounts are included in the table above.

 
(d) Separate Account assets include invested assets carried at fair value, but exclude debt securities and preferred stocks where market risk is guaranteed by the Company and assets carried at amortized cost based on the respective NAIC rating, as well as $1,387.4 million and $2,186.6 million of investment income and receivables due at December 31, 2013 and 2012, respectively, which are included in the Separate Account assets on the Statement of Admitted Assets, Liabilities, and Capital Stock and Surplus.  Separate Account liabilities include derivative liabilities carried at fair value.

(e) The derivatives included in the leveling descriptions are carried at fair value.




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


13.
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

None of the Company’s assets measured at fair value transferred between Levels 1 and 2 during the years ended December 31, 2013 and December 31, 2012.

The following table is a reconciliation of the beginning and ending balances for assets and liabilities which were categorized as Level 3 for the twelve-month period ended December 31, 2013:

 
Beginning
Transfers Into
Transfers Out
Total gains
Total gains
Purchases
Issuances
Sales
Settlements
Ending
 
Balance at
Level 3
of Level 3
and (losses)
and (losses)
        
Balance at
 
1/1/2013
    
included in
included in
        
12/31/2013
(In Thousands)
      
Net Income
Surplus
          
Assets:
                    
Common stock
$         -
$        -
$         -
$         -
$        -
$       -
$       -
$       -
$         -
$        -
Debt securities - Unaffiliated
                    
 
Asset-backed securities
19,405
-
-
807
26
89
-
-
(18,690)
1,637
 
Residential mortgage-backed securities
6,486
-
-
(1,109)
-
-
-
(4,610)
(767)
-
 
Commercial mortgage-backed securities
-
10,790
-
(518)
(4,416)
-
-
-
3,895
9,751
 
Industrial and miscellaneous
-
-
-
-
-
-
-
-
-
-
Derivative Assets
-
-
(7,844)
-
3,930
21,823
-
-
-
17,909
Separate Accounts assets
508,231
75,447
(15,879)
(185)
30,808
82,737
-
(59,680)
(36,057)
585,422
Total Assets
$     534,122
$    86,237
$    (23,723)
$     (1,005)
$   30,348
$   104,649
$        -
$   (64,290)
$   (51,619)
$    614,719

The following table is a reconciliation of the beginning and ending balances for assets and liabilities which were categorized as Level 3 for the twelve-month period ended December 31, 2012:

 
Beginning
Transfers Into
Transfers Out
Total gains
Total gains
Purchases
Issuances
Sales
Settlements
Ending
 
Balance at
Level 3
of Level 3
and (losses)
and (losses)
        
Balance at
 
1/1/2012
    
included in
included in
        
12/31/2012
(In Thousands)
      
Net Income
Surplus
          
Assets:
                    
Common stock
$      3,824
$        -
$         -
$         670
$        16
$       -
$       -
$     (4,510)
$         -
$        -
Debt securities - Unaffiliated
                    
 
Asset-backed securities
23,157
16
(8,425)
(1,220)
7,018
-
-
(618)
(523)
19,405
 
Residential mortgage-backed securities
29,857
4,381
(27,719)
(4,885)
5,671
-
-
-
(819)
6,486
 
Industrial and miscellaneous
-
-
-
-
-
-
-
-
-
-
Derivative Assets
5,193
-
-
-
-
-
-
-
(5,193)
-
Separate Accounts assets
518,053
31,673
(4,931)
585
8,078
266,219
11,512
( 266,621)
(56,337)
508,231
Total Assets
$     580,084
$    36,070
$    (41,075)
$     (4,850)
$   20,783
$   266,219
$    11,512
$   (271,749)
$   (62,872)
$    534,122


The Company transfers assets into or out of Level 3 at the fair value as of the beginning of the reporting period.  Transfers made were the result of changes in the level of observability of inputs used to price the assets or changes in NAIC ratings.





 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


13.
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The table below presents the balances of Level 3 assets measured at fair value with their corresponding pricing sources as of December 31, 2013:

 
Valuation
  
Significant
  
Fair Value
  
Range
  
Weighted
 
Techniques
  
Unobservable
          
Average
     
Inputs
            
(In Thousands)
                  
Debt securities - Unaffiliated
                  
Asset-backed securities
Held at Cost
  
N/A
  
         $               1,548
  
N/A
  
N/A
 
Matrix Pricing
  
Spreads
  
89
  
N/A
  
N/A
Commercial mortgage-backed securities
Matrix Pricing
  
Discount Rates
  
9,751
  
3-34%
  
21%
Derivative Assets
                  
Separate Accounts assets
Matrix Pricing
  
Spreads
  
11,435
  
N/A
  
N/A
 
Market Pricing
  
Quoted Prices
  
110,715
  
87-123
  
$         102
Total Assets
        
$          133,538
        
                   

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of December 31, 2013:

(In Thousands)
Aggregate
  
Admitted
              
Not Practicable
Type of Financial Instrument
Fair Value
  
Assets
  
Level 1
  
Level 2
  
Level 3
  
(Carrying Value)
Cash, cash equivalents and
                      
 short-term investments
$     1,440,125
  
$1,440,125
  
$   374,434
  
$1,065,691
  
$
  
$              -
Debt securities
4,833,793
  
4,759,852
  
604,633
  
2,383,464
  
1,845,696
  
-
Preferred stocks
21,696
  
23,150
  
-
  
20,599
  
1,097
  
-
Mortgages loans on real estate
779,201
  
748,309
  
-
  
-
  
779,201
  
-
Derivatives – options and swaptions
137,634
  
137,634
  
7,587
  
112,138
  
17,909
  
-
Derivatives – swaps and forwards
35,629
  
35,629
  
-
  
35,629
  
-
  
-
Derivatives- futures
1,350
  
1,350
  
1,350
  
-
  
-
  
-
Contract loans
536,003
  
537,058
  
-
  
-
  
536,003
  
-
Other invested assets
184,991
  
183,199
  
-
  
19,098
  
165,893
  
-
Separate account assets
29,158,501
  
29,127,294
  
21,875,212
  
6,393,515
  
889,774
  
-
                       
Contractholder deposit funds and other
                      
policyholder liabilities
(185,647)
  
(184,482)
  
                              -
  
-
  
(185,647)
  
-
Derivatives – swaps and forwards
(314,418)
  
(314,418)
  
-
  
(314,418)
  
-
  
-
Derivatives- futures
(7,529)
  
(7,529)
  
(7,529)
  
-
  
-
  
-
Separate account liabilities
(32,595)
  
(32,595)
  
-
  
-
  
(32,595)
  
-
                       



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

13.
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The following table presents the carrying amounts and estimated fair value of the Company’s financial instruments as of December 31, 2012:

(In Thousands)
                        
   
Aggregate
  
Admitted
              
Not Practicable
Type of Financial Instrument
  
Fair Value
  
Assets
  
Level 1
  
Level 2
  
Level 3
  
(Carrying Value)
                         
Cash, cash equivalents and
  
$   341,431
  
$   341,431
  
$  341,431
  
$              -
  
$              -
  
$                    -
 
short-term investments
                        
Debt securities
  
7,731,439
  
7,308,199
  
1,101,108
  
6,326,443
  
303,888
  
-
Preferred stocks
  
22,833
  
23,000
  
-
  
21,677
  
1,156
  
-
Mortgages loans on real estate
  
870,010
  
814,612
  
-
  
-
  
870,010
  
-
Derivatives – options and swaptions
  
48,426
  
48,426
  
30,869
  
17,557
  
-
  
-
Derivatives – swaps and forwards
  
257,241
  
257,241
  
-
  
257,241
  
-
  
-
Derivatives- futures
  
6,758
  
6,758
  
6,758
  
-
  
-
  
-
Contract loans
  
610,742
  
564,071
  
-
  
-
  
610,742
  
-
Other invested assets
  
33,668
  
30,569
  
-
  
20,542
  
13,126
  
-
Separate account assets
  
29,859,238
  
29,761,545
  
21,456,900
  
7,711,370
  
690,968
  
-
                         
Contractholder deposit funds and other
                        
policyholder liabilities
  
(1,088,797)
  
(1,128,331)
  
-
  
-
  
(1,088,797)
  
-
Long-term debt to affiliates
  
(100,000)
  
(100,000)
  
-
  
-
  
(100,000)
  
-
Derivatives – swaps and forwards
  
(151,886)
  
(125,088)
  
-
  
(151,886)
  
-
  
-
Derivatives- futures
  
(56,965)
  
(56,965)
  
(56,965)
  
-
  
-
  
-
Separate account liabilities
  
(91,958)
  
(91,958)
  
-
  
(58,247)
  
(33,711)
  
-

The methods and assumptions that the Company uses in determining the estimated fair value of its financial instruments are summarized below:

Cash, cash equivalents and short-term investments – The carrying value for cash, cash equivalents and short-term investments approximates fair value due to the short-term nature and liquidity of the balances.

Debt securities – The Company determines the fair value of its publicly-traded fixed maturity securities using three primary pricing methods: third-party pricing services, non-binding broker quotes and pricing models.  Prices are first sought from third-party pricing services with the remaining unpriced securities priced using one of the other two methods.  Third-party pricing services derive the security prices through recently reported trades for identical or similar securities with adjustments for trading volumes and market observable information through the reporting date.  In the event that there are no recent market trades, pricing services and brokers may use pricing models to develop a security price based on future expected cash flows discounted at an estimated market rate using collateral performance and vintages.  The Company generally does not adjust quotes or prices obtained from brokers or pricing services.

Structured securities, such as ABS, RMBS and CMBS, are priced using third-party pricing services, a fair value model, or independent broker quotations.  Typical inputs used by these three pricing methods include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids and/or estimated cash flows and prepayment speeds.

In addition, estimates of expected future prepayments are factors in determining the price of ABS, RMBS and CMBS.  These estimates are based on the underlying collateral and structure of the security, as well as prepayment speeds previously experienced in the market at interest rate levels projected for the underlying collateral.  Actual prepayment experience may vary from these estimates.


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

13.
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

For privately-placed fixed maturity securities, fair values are estimated using model prices or broker quotes. A portion of privately-placed fixed maturity securities (typically SEC Rule 144A securities) are priced using market prices.

The Company’s ability to liquidate positions in privately-placed fixed securities and mortgages could be impacted to a significant degree by the lack of an actively-traded market.  Although the Company believes that its estimates reasonably reflect the fair value of those instruments, its key assumptions about risk-free interest rates, risk premiums, performance of underlying collateral (if any) and other factors may not reflect those of an active market.

Common and Preferred Stocks – The fair value of the Company’s equity securities not accounted for under the equity method is first based on quoted market prices.  Similar to fixed-maturity securities, the Company uses pricing services and broker quotes to price the equity securities for which the quoted market price is not available.

Mortgage loans – The fair values of mortgage loans are estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Derivatives - The fair values of swaps are based on current settlement values, dealer quotes and market prices.  Fair values for options and futures are also based on dealer quotes, internal models and market prices.

Contract loans - The fair value of policy loans is determined by estimating future policy loan cash flows and discounting the cash flows at a current market interest rate.

Other invested assets - Other invested assets (excluding investments accounted for under the equity method) include low income housing tax credits (“LIHTC”), surplus debentures, collateral loans and equipment lease trusts.  The fair value of LIHTCs and equipment leases approximate their carrying values. The fair values of surplus debentures and collateral loans are based upon the same methods used for other private placements as described above.

Separate Accounts – The estimated fair values of assets and liabilities are valued with the same methodology described above.  The difference between Separate Account assets and liabilities reflected above and the total recognized in the Statements of Admitted Assets, Liabilities and Capital and Surplus represents amounts that are considered non-financial instruments.

Contractholder deposit funds - The fair values of the Company’s general account liabilities under investment-type contracts (insurance and annuity contracts that do not involve mortality or morbidity risks) are estimated using discounted cash flow analyses or surrender values.  Those contracts that are deemed to have short-term guarantees have a carrying amount equal to the estimated fair value.

Debt - The fair value of debt is based on future cash flows discounted at the stated interest rate, considering all appropriate terms of the related agreements.  Due to certain provisions included in such agreements, whereby the issuer of the notes has the ability to call each note at par, the fair value is equal to par value.  Debt includes borrowed money and surplus funds.



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

14.                 FEDERAL INCOME TAXES

The application of SSAP No. 101 requires a company to evaluate the recoverability of DTAs and to establish a valuation allowance if necessary to reduce the DTA to an amount which is more likely than not to be realized.  Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance.  In connection with the Sale Transaction as defined in Note 1, the Company and its Former Parent will make an election under Treasury Regulation Section 1.1502-36(d) for the Former Parent to retain the Company’s tax attributes as of July 31, 2013 related to the Company’s net operating loss carryforward, capital loss carryforward and deferred acquisition cost.  The Sale Transaction closed on August 2, 2013 with an effective date of August 1, 2013 and the DTAs related to these items were transferred to the Former Parent as of July 31, 2013.  Therefore, since the valuation allowance recorded at December 31, 2012 was related specifically to these items and the fact that they were to be retained by the Former Parent, the valuation allowance was released on July 31, 2013.

The following table provides the components of the Company’s net DTAs and DTLs as of December 31, 2013 and 2012.

(In Thousands)
  
December 31, 2013
  
December 31, 2012
  
Change
Description
  
Ordinary
  
Capital
  
Total
  
Ordinary
  
Capital
  
Total
  
Ordinary
  
Capital
  
Total
                                     
Gross Deferred Tax Assets
  
$ 552,009
  
$    5,856
  
$ 557,865
  
$1,156,141
  
$   17,856
  
$1,173,997
  
$(604,132)
  
$       (12,000)
  
$(616,132)
Statutory Valuation Allowance Adjustments
  
-
  
-
  
-
  
(361,941)
  
(17,856)
  
(379,797)
  
361,941
  
17,856
  
379,797
Adjusted Gross Deferred Tax Assets
  
552,009
  
5,856
  
557,865
  
794,200
  
-
  
794,200
  
(242,191)
  
5,856
  
(236,335)
Deferred Tax Assets Nonadmitted
  
291,163
  
5,853
  
297,016
  
392,830
  
-
  
392,830
  
(101,667)
  
5,853
  
(95,814)
Subtotal Net Admitted Deferred Tax Assets
  
260,846
  
3
  
260,849
  
401,370
  
-
  
401,370
  
(140,524)
  
3
  
(140,521)
Deferred Tax Liabilities
  
76,609
  
3
  
76,612
  
240,172
  
-
  
240,172
  
(163,563)
  
3
  
(163,560)
Net Admitted Deferred Tax Assets /
                                    
 (Net Deferred Tax Liabilities)
  
$ 184,237
  
$           -
  
$ 184,237
  
$ 161,198
  
$             -
  
$   161,198
  
$   23,039
  
$                   -
  
$    23,039
 
 
The following table provides component amounts of the Company's net admitted DTA calculation by tax character.

     
December 31, 2013
  
December 31, 2012
  
Change
(In Thousands)
                                    
Description
  
Ordinary
  
Capital
  
Total
  
Ordinary
  
Capital
  
Total
  
Ordinary
  
Capital
  
Total
                                     
Admission Calculation Components
                                    
SSAP No. 101
                                    
 
(a) Admitted Pursuant to 11.a.
  
$           -
  
$           -
  
$            -
  
$            -
  
$            -
  
$           -
  
$            -
  
$            -
  
$            -
 
(b) Admitted Pursuant to 11.b.
                                    
 
  (lesser of 11.b.i. or 11.b.ii.)
  
184,237
  
-
  
184,237
  
161,198
  
-
  
161,198
  
23,039
  
-
  
23,039
   
(c) 11.b.i
      
-
  
-
  
234,926
  
-
  
-
  
459,248
  
-
  
-
  
-
   
(d) 11.b.ii
      
-
  
-
  
184,237
  
-
  
-
  
161,198
  
-
  
-
  
-
 
(e) Admitted Pursuant to 11.c.
  
76,609
  
3
  
76,612
  
240,172
  
-
  
240,172
  
(163,563)
  
3
  
(163,560)
 
(f) Total admitted under 11.a. - 11.c.
  
260,846
  
3
  
260,849
  
401,370
  
-
  
401,370
  
(140,524)
  
3
  
(140,521)
 
(g) Deferred Tax Liabilities
  
76,609
  
3
  
76,612
  
240,172
  
-
  
240,172
  
(163,563)
  
3
  
(163,560)
 
Net admitted Deferred Tax Assets
                                    
 
 Deferred Tax Liabilities
  
$ 184,237
  
$            -
  
$184,237
  
$161,198
  
$            -
  
$161,198
  
$  23,039
  
$            -
  
$  23,039

   
2013
  
2012
         
Ratio Percentage Used To Determine Recovery Period
        
And Threshold Limitation Amount
  
1175%
  
893%
         
Amount Of Adjusted Capital And Surplus Used To
        
Determine Recovery Period And Threshold Limitation
        
Above
  
$    1,226,182,653
  
$  1,074,655,679
         


 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

14.
FEDERAL INCOME TAXES (CONTINUED)

The following table provides the impact of tax planning strategies, if used in the Company's SSAP No. 101 calculation, on adjusted gross and net admitted DTAs.

 
December 31, 2013
  
December 31, 2012
  
Change
(In Thousands)
                      
Description
Ordinary
  
Capital
  
Ordinary
  
Capital
  
Ordinary
  
Capital
Impact of Tax Planning Strategies
                      
Determination of Adjusted Gross Deferred Tax Assets
                      
and Net Admitted Deferred Tax Assets, by Tax
                      
Character as a Percentage.
                      
Adjusted Gross Deferred Tax Assets
$        552,009
  
$         5,856
  
$        794,200
  
$                      -
  
$       (242,191)
  
$         5,856
Percentage of Adjusted Gross Deferred Tax Assets
                      
by Tax Character Attributable to the
                      
Impact of Tax Planning Strategies
0.00%
  
0.00%
  
0.00%
  
0.00%
  
0.00%
  
0.00%
Net Admitted Adjusted Gross Deferred Tax Assets
$        260,846
  
$                3
  
$         401,370
  
$                      -
  
$       (140,524)
  
$                   3
Percentage of Net Admitted Adjusted
                      
Gross Deferred Tax Assets by Tax Character Because
                      
of the Impact of Tax Planning Strategies
0.00%
  
0.00%
  
0.00%
  
0.00%
  
0.00%
  
0.00%


The Company did not utilize tax planning strategies in the calculation of its adjusted gross DTAs and net admitted DTAs.

The Company has no temporary difference for which a DTL has not been established.

The following tables provide the Company's significant components of income taxes incurred and the changes in DTAs and DTLs.

(In Thousands)
December 31, 2013
  
December 31, 2012
  
December 31, 2011
Current Income Tax
          
Federal tax benefit from operations
$                            (84,275)
  
$                             (84,977)
  
$                               (37,926)
Federal tax expense on prior period adjustment
-
  
-
  
-
Federal income tax on net capital gains
28,847
  
(2,216)
  
9,659
Utilization of capital loss carry-forwards
-
  
-
  
(10,948)
Federal tax (benefit) expense on stock options
(539)
  
184
  
(982)
Current income tax benefit
$                             (55,967)
  
$                            (87,009)
  
$                               (40,197)
           










 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


14.
FEDERAL INCOME TAXES (CONTINUED)

(In Thousands)
December 31, 2013
  
December 31, 2013
  
Change
Deferred Tax Assets:
          
           
Ordinary
          
Policyholder reserves
$                242,306
  
$                517,331
  
$       (275,025)
Investments
204,640
  
213,028
  
(8,388)
Deferred acquisition costs
2,753
  
119,385
  
(116,632)
Net operating loss carry-forward
59,040
  
242,556
  
(183,516)
Other (including items <5% of total ordinary tax assets)
43,270
  
63,841
  
(20,571)
Total ordinary Deferred Tax Assets
$                552,009
  
$             1,156,141
  
$       (604,132)
Statutory valuation allowance adjustment
                           -
  
                361,941
  
       (361,941)
Nonadmitted
291,163
  
392,830
  
(101,667)
Admitted ordinary Deferred Tax Assets
$                260,846
  
$                401,370
  
$       (140,524)
Capital:
          
Investments
-
  
-
  
-
Net capital loss carry-forward
5,856
  
17,856
  
(12,000)
Subtotal
$                    5,856
  
$                  17,856
  
$          (12,000)
Statutory valuation allowance adjustment
                           -
  
                  17,856
  
         (17,856)
Nonadmitted
5,853
  
-
  
5,853
Admitted capital Deferred Tax Assets
          $                           3
  
         $                           -
  
        $                    3
Admitted Deferred Tax Assets
$                 260,849
  
$                401,370
  
$       (140,521)
Deferred Tax Liabilities:
          
Ordinary
          
Investments
$                           -
  
$                135,748
  
$       (135,748)
Policyholder reserves
76,332
  
89,539
  
(13,207)
Other (including items <5% of total ordinary tax liabilities)
277
  
14,885
  
(14,608)
Subtotal
$                  76,609
  
$                240,172
  
$       (163,563)
Capital:
          
Investments
3
  
-
  
3
Subtotal
$                           3
  
$                            -
  
$                     3
Deferred Tax Liabilities
$                  76,612
  
$                240,172
  
$       (163,560)
Net admitted Deferred Tax Assets / Deferred Tax Liabilities
$                184,237
  
$                161,198
  
$          23,039




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


14.
FEDERAL INCOME TAXES (CONTINUED)

The change in net deferred income taxes is comprised of the following:

(In Thousands)
            
Description
  
December 31, 2013
  
December 31, 2012
  
Change
Total Deferred Tax Assets
  
$        557,865
  
$       1,173,997
  
$         (616,132)
Total Deferred Tax Liabilities
  
76,612
  
240,172
  
(163,560)
Net Deferred Tax Assets / Deferred Tax Liabilities
  
$        481,253
  
$          933,825
  
$         (452,572)
Statutory valuation allowance
  
-
  
(379,797)
  
379,797
Net Deferred Tax Assets / Deferred Tax Liabilities
  
$        481,253
  
$          554,028
  
$           (72,775)
             
Tax effect of unrealized (gains)/losses
          
129,520
Change in net deferred income tax
          
$         (202,295)

The provision for federal income taxes incurred for the current year is different from that which would be obtained by applying the statutory federal income tax rate of 35% to income before income taxes.  The significant items causing this difference at December 31, 2013, 2012 and 2011 were as follows:

(In Thousands)
  
December 31, 2013
  
December 31, 2012
  
December 31, 2011
                                     
Description
  
Amount
  
Tax Effect @ 35%
  
Effective Tax Rate
  
Amount
  
Tax Effect @ 35%
  
Effective Tax Rate
  
Amount
  
Tax Effect @ 35%
  
Effective Tax Rate
Net gain from operations
  
$        486,232
  
$          170,182
  
28.5%
  
$              (41,797)
  
$       (14,629)
  
3.3%
  
$  (423,255)
  
$     (148,139)
  
28.6%
Pre-tax capital gains - Pre IMR
      
38,571
  
6.5%
      
(140,412)
  
31.7%
      
(33,108)
  
6.4%
Dividends Received Deduction
      
(14,000)
  
-2.3%
      
(14,000)
  
3.2%
      
(14,000)
  
2.7%
Tax Credits
      
(4,752)
  
-0.8%
      
(4,739)
  
1.1%
      
(4,281)
  
0.8%
Non-deductible expenses
      
496
  
0.1%
      
545
  
-0.1%
      
669
  
-0.1%
Change in tax contingency reserves
      
(2,271)
  
-0.4%
      
(1,860)
  
0.4%
      
1,676
  
-0.3%
Reversal of IMR
      
(20,514)
  
-3.4%
      
(4,743)
  
1.1%
      
(8,270)
  
1.6%
Change in non-admitted assets
      
(2,259)
  
-0.4%
      
4,763
  
-1.1%
      
1,605
  
-0.3%
Prior year adjustments
      
(572)
  
-0.1%
      
(2,455)
  
0.6%
      
(5,728)
  
1.1%
Retained Deferred Tax Asset
      
347,765
  
58.2%
      
-
  
0.0%
      
-
  
0.0%
Change in statutory valuation allowance
    
(379,797)
  
-63.7%
      
379,797
  
85.9%
      
-
  
0.0%
Other
      
13,479
  
2.3%
      
(1,509)
  
0.3%
      
-
  
0.0%
Total statutory income taxes
      
$         146,328
  
24.5%
      
$      200,758
  
-45.4%
      
$      (209,576)
  
40.5%
                                     
Federal income taxes incurred
      
$         (55,967)
  
-9.4%
      
$       (87,009)
  
19.6%
      
$       (40,197)
  
7.8%
Change in net deferred income taxes
      
       202,295
  
33.9%
    
 
      287,767
  
-65.0%
      
(169,379)
  
32.7%
Total statutory income taxes
      
$        146,328
  
24.5%
      
$      200,758
  
-45.4%
      
$     (209,576)
  
40.5%

At December 31, 2013, the Company had $168.8 million of net operating loss carryforwards, which will begin to expire, if not utilized, in 2028.  At December 31, 2013, the Company had $16.7 million of capital loss carryforwards which will expire if not utilized in 2018.  At December 31, 2013, the Company had $12.5 million of foreign tax credit carryforwards, which will begin to expire if not utilized, in 2020.  At December 31, 2013, the Company had $10.1 million of LIHTC carryforwards, which will begin to expire, if not utilized, in 2030.  At December 31, 2013, the Company had no minimum tax credit carryforwards.





 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


14.
FEDERAL INCOME TAXES (CONTINUED)

At December 31, 2013, the Company has no income taxes incurred in the current or preceding years that will be available for recoupment in the event of future net losses.

The Company has no deposits admitted under section 6603 of the Internal Revenue code.

A reconciliation of the beginning and ending balances of tax contingencies computed in accordance with SSAP No. 101 and SSAP No. 5R is as follows:

(In Thousands)
  
2013
  
2012
Balance, beginning of year
  
$         1,477
  
$            1,477
Gross increases related to tax positions in prior years
  
1,820
  
-
Gross decreases related to tax positions in prior years
  
-
  
-
Gross increases related to tax positions in current year
  
-
  
-
Settlements with Former Parent
  
(3,297)
  
-
Close of tax examinations/statutes of limitations
  
-
  
-
Balance, end of year
  
$                 -
  
$            1,477

The Company recognizes interest accrued related to unrecognized tax benefits (“UTB”) in income tax expense.  The Company had no accrued interest balance as of December 31, 2013.  The Company had an accrued interest balance of $6.3 million as of December 31, 2012. The Company recognized $0.5 million and $2.9 million in gross interest benefit related to UTB during the years ended December 31, 2013 and 2012, respectively.  The Company has not accrued any penalties related to UTB.

Tax years prior to 2003 are closed to examination and audit adjustments under the applicable statute of limitations.  The Company is subject to ongoing examinations for subsequent tax years as a member of the Former Parent’s consolidated federal income tax returns.  Tax years 2007, 2008 and 2009 for the consolidated return are in the initial stages of the appeals process.  The 2003 through 2006 tax years for the consolidated return are still in the appeals process with the Internal Revenue Service (the “IRS”).  Although the Company remains jointly and severally liable for consolidated tax liabilities, the Company is held harmless by the Former Parent in accordance with the Sale Transaction agreement and believes that the possibility of a tax liability for the pre-sale tax years is remote.  Additionally, the Company does not believe it has any uncertain tax positions for its federal income tax return that would be material to its financial condition, results of income, or cash flows.  Therefore, the Company did not record a liability for UTB at December 31, 2013.  As of December 31, 2013, there were no positions for which management believes it is reasonably possible that the total amounts of tax contingencies will significantly increase within 12 months of the reporting date.




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


14.
FEDERAL INCOME TAXES (CONTINUED)

The Company will file a consolidated federal income tax return for the stub period January 1, 2013 to July 31, 2013 with the following affiliates and former affiliates:

Sun Life Assurance Company of Canada - U.S. Operations Holdings, Inc.
  
Professional Insurance Company
Sun Life Financial (U.S.) Holdings, Inc.
  
Massachusetts Financial Services Company
Sun Life Financial (Japan), Inc.
  
MFS Investment Management K.K.
Sun Life Financial (U.S.) Finance, Inc.
  
MFS Fund Distributors, Inc.
Sun Canada Financial Co.
  
MFS Service Center, Inc.
Sun Life Financial Distributors, Inc.
  
MFS Institutional Advisors, Inc.
Clarendon Insurance Agency, Inc.*
  
MFS Heritage Trust Company
Sun Life of Canada (U.S.) Holdings, Inc.
  
California Benefits Dental Plan
Sun Life of Canada (U.S.) Financial Services Holdings, Inc.
  
Sun Life Administrators (U.S.), Inc.
Independence Life and Annuity Company
  
Dental Holdings, Inc.
Sun Life Insurance and Annuity Company of New York*
  
Sun Life Financial (U.S.) Services Company, Inc.
Sun Life Financial (U.S.) Reinsurance Company
    

*As a result of the Sale Transaction described in Note 1, the Company and its affiliates exited the consolidated group mentioned above as of August 2, 2013.  The Company will file a separate consolidated federal income tax return for the period August 1, 2013 to December 31, 2013 with its subsidiary, SLNY, and will continue to do so in future tax years under Internal Revenue Code Section 1504 (c)(1).  Clarendon will file a stand-alone tax return through 2018 until it is allowed to join the new consolidated group in 2019 per Internal Revenue Code Section 1504 (c)(2)(A).

The method of allocation of the total consolidated federal income tax among the members of the consolidated tax group is subject to written agreements, approved by the Board of Directors.  Under these agreements, income tax amounts are allocated based upon the separately calculated liability of each consolidated member of the group with credit provided for losses that were utilized by other group members.  Following the Sale Transaction, the Company exited the Former Parent’s consolidated federal income tax return and is no longer a party to the tax allocation agreement with its former affiliates.  Final tax settlements were agreed to with the Former Parent and no future tax allocations are expected to occur with the Former Parent.

For periods after the Sale Transaction, a formal tax allocation agreement has not yet been implemented, but the methodology remains the same except that the members of the group have changed.  Allocation is based upon separate return calculations with current credit (benefit) given for losses and tax attributes that are utilized by the consolidated group.  Intercompany tax balances are settled on a quarterly basis and a final true up is made after the filing of the federal income tax return, as prescribed by the terms of the agreement.







 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


15.
CAPITAL STOCK AND SURPLUS AND DIVIDEND RESTRICTIONS

As of December 31, 2013 and 2012, the Company had 6,437 shares issued and outstanding with a par value of $1000 per share.

The Company’s ability to pay dividends is subject to certain statutory restrictions. The State of Delaware has enacted laws governing the payment of dividends to stockholders by domestic insurers.  Pursuant to Delaware's statute, the maximum amount of dividends and other distributions that a domestic insurer may pay in any twelve-month period without the prior approval of the Commissioner is limited to the greater of:  (i) 10% of its statutory surplus as of the preceding December 31; or (ii) the Company's statutory net gain from operations for the preceding calendar year.  Any dividends to be paid by an insurer, whether or not in excess of the aforementioned threshold, from a source other than statutory surplus would also require the prior approval of the Commissioner.  In connection with the change in control of the Company effective August 1, 2013, any portion of a dividend which would cause the Company’s total adjusted capital as of the most recent calendar quarter end to fall below three hundred percent of Company Action Level NAIC risk-based capital as of such calendar quarter end, after taking into account the payment of such dividend, requires the prior approval of the Department.

No dividends were paid to the Parent or Former Parent during 2013 or 2012.  Extraordinary dividends of $300 million were paid to the Former Parent during 2011.

As discussed in Note 2, there were two distributions from gross paid in and contributed surplus during 2013, to the Former Parent.

The Company recorded a restatement of gross paid-in and contributed surplus and unassigned funds under a quasi-reorganization pursuant to SSAP No. 72, Surplus and Quasi-reorganizations.  The restatement was recorded as of June 30, 2013 and did not change the Company’s total surplus. The quasi-reorganization was approved by the Department.

The impact of the quasi-reorganization was as follows:

(In Thousands)
        
   
Change in Year Surplus
  
Change in Gross Paid-in and
   
(Unassigned Funds)
  
Contributed Surplus
         
2013
  
$                       1,851,883
  
$                      (1,851,883)

*Reset of surplus effective June 30, 2013.  Unassigned surplus adjusted for the net impact of OTTI recorded on hybrid securities totaling $12,589,924.




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


16.
RISK-BASED CAPITAL

Life and health insurance companies are subject to certain Risk-based Capital (“RBC”) requirements as specified by the NAIC.  The RBC requirements provide a method for measuring the minimum acceptable amount of adjusted capital that a life insurer should have, as determined under statutory accounting principles, taking into account the risk characteristics of its investments and products.  The Company has met the minimum RBC requirements at December 31, 2013 and 2012.

17.
COMMITMENTS AND CONTINGENT LIABILITIES

Contingent commitments

The Company had commitments for partnership investments of $3.7 million and $11.5 million as of December 31, 2013 and 2012, respectively.

Regulatory and industry developments

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.  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 pursuant to these laws may be used as credits for a portion of the associated premium taxes.

The liquidation of Executive Life Insurance Company, along with other insolvencies reported by the National Organization of Life and Health Insurance Guaranty Associations, will result in retrospective premium-based guaranty fund assessments against the Company.  Based on the best information available, the Company has recorded an accrued liability of $4.1 million and $10.2 million for guaranty fund assessments as of December 31, 2013 and 2012, respectively.  The Company does not know the period over which the guaranty fund assessments are expected to be paid.

The Company has not established any asset for premium tax credits or policy surcharges as their recoveries are not estimable.

Litigation, Income Taxes and Other Matters

In Revenue Ruling 2007-61, issued on September 25, 2007, the IRS announced its intention to issue regulations with respect to certain computational aspects of the DRD on separate account assets held in connection with variable annuity contracts.  Revenue Ruling 2007-61 suspended Revenue Ruling 2007-54, issued on August 16, 2007, that purported to change accepted industry and IRS interpretations of the statutes governing computational questions impacting the DRD.  On May 30, 2010, the IRS issued an Industry Director Directive which makes it clear that IRS interpretations prior to Revenue Ruling 2007-54 should be followed until new regulations are issued.






 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


17.
COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

New DRD regulations that the IRS proposes for issuance on this matter will be subject to public comment, at which time the insurance industry and other interested parties will have the opportunity to raise comments and questions about the content, scope, and application of new regulations.  This issue was included in the 2012-2013 Priority Guidance Plan, issued on November 19, 2012, as one of the projects the IRS intended to work on in 2013.  The IRS did not reach any conclusion in 2013 and therefore included the issue again in the 2013-2014 Priority Guidance Plan issued on January 29, 2014.  The timing, substance, and effective date of the new regulations are unknown, but they could result in the elimination of some or all of the separate account DRD tax benefit that the Company ultimately receives.  For the years ended December 31, 2013, 2012 and 2011, the Company’s financial statements reflect benefits of $13.4 million, $11.6 million and $13.8 million, respectively, related to the separate account DRD.

The Company is not aware of any contingent liabilities arising from litigation or other matters that could have a material effect upon the financial condition, results of operations or cash flows of the Company.

Indemnities

In the normal course of its business, the Company has entered into agreements that include indemnities in favor of third parties, such as contracts with advisors and consultants, outsourcing agreements, underwriting and agency agreements, information technology agreements, distribution agreements, and service agreements.  The Company has also agreed to indemnify its directors, officers and employees in accordance with the Company’s by-laws.  The Company believes any potential liability under these agreements is neither probable nor estimable.  Therefore, the Company has not recorded any associated liability.

Under the Stock Purchase Agreement (“SPA”) among SLF and its affiliates and the Parent, SLF is required to indemnify the Parent, the acquired companies, including the Company and SLNY, and their respective affiliates from and against (i) breach by SLF of customary representations, warranties and covenants of SLF set forth in the SPA and (ii) other specified matters, including losses arising from pending or threatened litigation as of the signing or closing of the Sale Transaction (August 2, 2013), certain excluded assets that were transferred from the acquired companies to SLF and its affiliates at or prior to closing of the Sale Transaction, including the group insurance business previously conducted by SLNY, certain environmental liability and certain liabilities arising under unclaimed property law.

Pledged or Restricted Assets

The following assets were restricted at December 31, 2013 and reported in the current financial statements:

 
·
Repurchase agreements posted collateral which were reported as bonds and preferred stocks.
 
·
Reverse repurchase agreements posted cash collateral which was reported as cash equivalents.
 
·
Certain bonds were on deposit with governmental authorities as required by law.
 
·
Certain cash deposits were held in a mortgage escrow account (see "Other restricted assets" below)
 
·
Derivative cash collateral received was reported as cash equivalents (see “Assets pledged as collateral not captured in other categories” below.)





 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


17.
COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

The following are restricted assets (including pledged assets):

 
Gross Restricted
                     
(In Thousands)
Current Year
      
Percentage
                   
Admitted Restricted to Total Admitted Assets
                   
     
Total Separate Account (S/A) Restricted Assets
        
Gross Restricted Total Assets
 
Total General Account (G/A)
G/A Supporting S/A Activity
  
Total From Prior Year
Increase/ (Decrease)
Total Current Year Admitted Restricted
Description of Assets
S/A Assets  Supporting G/A Activity
Total
                     
Subject to contractual obligation for which liability is not shown
$          -
$         -
$          -
$         -
$          -
$          -
$           -
$           -
0%
0%
Collateral held under security lending agreements
-
-
-
-
-
-
-
-
0%
0%
Subject to repurchase agreements
449,188
-
-
-
449,188
-
449,188
449,188
1%
1%
Subject to reverse repurchase agreements
499,591
-
-
-
499,591
-
499,591
499,591
1%
1%
Subject to dollar repurchase agreements
-
-
-
-
-
-
-
-
0%
0%
Subject to dollar reverse repurchase agreements
-
-
-
-
-
-
-
-
0%
0%
Placed under option contracts
-
-
-
-
-
-
-
-
0%
0%
Letter stock or securities restricted as to sale
-
-
-
-
-
-
-
-
0%
0%
On deposit with states
4,223
-
-
-
4,223
4,225
(2)
4,223
0%
0%
On deposit with other regulatory bodies
-
-
-
-
-
-
-
-
0%
0%
Pledged as collateral not captured in other categories
60,610
-
-
-
60,610
88,952
 
(28,342)
60,610
0%
0%
Other restricted assets
7,222
-
-
-
7,222
  
7,222
7,222
0%
0%
Total
$   1,020,834
$         -
$          -
$         -
$1,020,834
$    93,177
$    927,657
$   1,020,834
2%
2%

The following are assets pledged as collateral in other categories (contracts that share similar characteristics, such as reinsurance and derivatives, are reported in the aggregate).


 
Gross Restricted
                     
(In Thousands)
Current Year
      
Percentage
                   
Admitted Restricted to Total Admitted Assets
                   
     
Total Separate Account (S/A) Restricted Assets
        
Gross Restricted Total Assets
 
Total General Account (G/A)
G/A Supporting S/A Activity
  
Total From Prior Year
Increase/ (Decrease)
Total Current Year Admitted Restricted
Description of Assets
S/A Assets  Supporting G/A Activity
Total
                     
Derivative collateral
$       60,610
$         -
$          -
$         -
$    60,610
$    88,952
$    (28,342)
$       60,610
0%
0%
                     
Total
$       60,610
$         -
$          -
$         -
$    60,610
$    88,952
$    (28,342)
$       60,610
0%
0%



 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011


17.
COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

The following are Other restricted assets pledged as collateral in other categories (contracts that share similar characteristics, such as reinsurance and derivatives, are reported in the aggregate).

 
Gross Restricted
                     
(In Thousands)
Current Year
      
Percentage
                   
Admitted Restricted to Total Admitted Assets
                   
     
Total Separate Account (S/A) Restricted Assets
        
Gross Restricted Total Assets
 
Total General Account (G/A)
G/A Supporting S/A Activity
  
Total From Prior Year
Increase/ (Decrease)
Total Current Year Admitted Restricted
Description of Assets
S/A Assets  Supporting G/A Activity
Total
                     
Mortgage escrow
$       7,222
$         -
$          -
$         -
$    7,222
$           -
$       7,222
$       7,222
0%
0%
                     
Total
$       7,222
$         -
$          -
$         -
$    7,222
$           -
$       7,222
$       7,222
0%
0%

Lease Commitments

Effective August 1, 2013, the Company entered into a lease agreement for its home office.  Rental expenses for 2013 were $0.9 million.  Future minimum lease payments are $3.6 million.

From January 1, 2011 to July 31, 2013, the Company leased equipment under non-cancelable operating lease agreements.  Rental expenses, including allocated amounts, for 2013, 2012 and 2011 were approximately $2.5 million, $5.4 million and $5.7 million, respectively.

 
 
18.
SUBSEQUENT EVENTS

On March 26, 2014, the Company paid an ordinary dividend of $185.0 million to the Parent.

On April 1, 2014, the Company entered into a $500.0 million Revolving Credit Facility (the"Facility") with Bank of America Merrill Lynch.  Borrowings under the Facility may be used for general corporate purposes.  Borrowings bear interest at LIBOR + 125 basis points, with a commitment fee of 30 basis points for any unused portion of the Facility, and the Facility has a 180 day tenor.  The Facility is secured by certain securities held in an account established for this purpose, and borrowings are limited to a specified percentage of the value of the securities in this account.

Subsequent events were evaluated through the issuance of the audited statutory financial statements, which were made available on April 29, 2014.  No events were identified subsequent to the filing of the Company’s Annual Statement on March 1, 2014, other than those disclosed above.




 
 
 

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Delaware Life Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013 AND 2012 AND FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

19.
SSAP No. 43R: OTHER THAN TEMPORARY IMPAIRMENTS
 
 
The following OTTI were recognized during the statement year on LBSS that the Company had either the intent to sell or the inability to hold until recovery.


   
(1)
  
(2)
  
(3)
   
Amortized Cost
  
OTTI Recognized in Loss
  
Fair Value
   
Basis Before OTTI
          
1 - (2a + 2b)
       
2(a)
  
2(b)
    
(In Thousands)
      
Interest
  
Non-Interest
    
                 
                 
a. Intent to sell
  
$        320,782
  
$              -
  
$              26,568
  
$  294,214
b. Inability or lack of intent to retain the investment in the
-
  
-
  
-
  
-
security for a period of time sufficient to recover the
              
amortized cost basis
                

 

 


 
 
 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Sun Life Assurance Company of Canada (U.S.) and the Participants of Sun Life Assurance Company of Canada (U.S.) Variable Account I:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of Alger Growth & Income Portfolio I-2 Sub-Account, Alger Mid Cap Growth Portfolio I-2 Sub-Account, Alger Small Cap Growth Portfolio I-2 Sub-Account, AllianceBernstein VPS Balanced Wealth Strategy Portfolio (Class B) Sub-Account, AllianceBernstein VPS Global Thematic Growth Portfolio (Class B) Sub-Account, AllianceBernstein VPS Growth and Income Portfolio (Class B) Sub-Account, AllianceBernstein VPS International Value Portfolio (Class B) Sub-Account, American Funds Insurance Series Blue Chip Income Growth Fund Class 2 Sub-Account, American Funds Insurance Series Bond Fund Class 2 Sub-Account, American Funds Insurance Series Global Growth Fund Class 2 Sub-Account, American Funds Insurance Series Global Growth Income Fund Class 2 Sub-Account, American Funds Insurance Series Global Small Capitalization Fund Class 2 Sub-Account, American Funds Insurance Series Growth Fund Class 2 Sub-Account, American Funds Insurance Series Growth Income Fund Class 2 Sub-Account, American Funds Insurance Series High Income Bond Fund Class 2 Sub-Account, American Funds Insurance Series International Fund Class 2 Sub-Account, BlackRock Global Allocation V.I. Fund (Class III) Sub-Account, Columbia Variable Portfolio - Marsico 21st Century Fund Class 2 Sub-Account, Delaware VIP Smid Cap Growth Series Standard Class Sub-Account, Dreyfus IP MidCap Stock Portfolio (Initial Shares) Sub-Account, DWS Small Mid Cap Value VIP Class A Sub-Account, DWS Small Cap Index VIP - Class B Sub-Account, Fidelity VIP Balanced Portfolio (Service Class 2) Sub-Account, Fidelity VIP Contrafund Portfolio (Service Class 2) Sub-Account, Fidelity VIP Contrafund Portfolio (Service Class) Sub-Account, Fidelity VIP Freedom 2020 Portfolio (Service Class 2) Sub-Account, Fidelity VIP Freedom 2030 Portfolio (Service Class 2) Sub-Account, Fidelity VIP Growth Portfolio (Service Class) Sub-Account, Fidelity VIP Index 500 Portfolio (Service Class 2) Sub-Account, Fidelity VIP Index 500 Portfolio (Service Class) Sub-Account, Fidelity VIP Mid Cap Portfolio (Service Class 2) Sub-Account, Fidelity VIP Money Market Portfolio (Service Class) Sub-Account, Fidelity VIP Overseas Portfolio (Service Class) Sub-Account, First Eagle Overseas Variable Fund Sub-Account, Franklin Templeton VIP Founding Funds Allocation Fund (Class 2) Sub-Account, Franklin Templeton VIP Franklin Income Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Franklin Small Cap Value Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Franklin Strategic Income Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Franklin U.S. Government Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Mutual Shares Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Templeton Foreign Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Templeton Growth Securities Fund (Class 2) Sub-Account, Goldman Sachs VIT Large Cap Value Fund I Class Sub-Account, Goldman Sachs VIT Mid Cap Value Fund I Sub-Account, Goldman Sachs VIT Strategic International Fund (I Shares) Sub-Account, Goldman Sachs VIT Structured Small Cap Equity Fund (I Shares) Sub-Account, Goldman Sachs VIT Structured U.S. Equity Fund (I Shares) Sub-Account, Invesco V.I. Core Equity Fund I Sub-Account, Invesco V.I. International Growth Fund I Sub-Account, Invesco V.I. Small Cap Equity Fund I Sub-Account, Invesco V.I. American Franchise Fund Series I Sub-Account, Invesco V.I. American Value Fund Series II Sub-Account, Invesco V.I. Comstock Fund Series II Sub-Account, Invesco V.I. Equity and Income Fund II Sub-Account, Invesco V.I. Growth and Income Fund I Sub-Account, Invesco V.I. Mid Cap Growth Fund Series I Sub-Account, M Large Cap Value Fund Sub-Account, M Capital Appreciation Fund Sub-Account, M International Equity Fund Sub-Account, M Large Cap Growth Fund Sub-Account, MFS VIT I Growth Series Initial Class Sub-Account, MFS VIT I Mid Cap Growth Series Initial Class Sub-Account, MFS VIT I New Discovery Series Initial Class Sub-Account, MFS VIT I Research Bond Series Initial Class Sub-Account, MFS VIT I Research Series Initial Class Sub-Account, MFS VIT I Value Series Initial Class Sub-Account, MFS VIT II Blended Research Core Equity Portfolio I Class Sub-Account, MFS VIT II Bond Portfolio S Class Sub-Account, MFS VIT II Emerging Markets Equity Portfolio S Class Sub-Account, MFS VIT II Global Tactical Allocation Portfolio S Class Sub-Account, MFS VIT II Government Securities Portfolio I Class Sub-Account, MFS VIT II Government Securities Portfolio S Class Sub-Account, MFS VIT II High Yield Portfolio Initial Class Sub-Account, MFS VIT II International Growth Portfolio I Class Sub-Account, MFS VIT II International Growth Portfolio S Class Sub-Account, MFS VIT II Massachusetts Investors Growth Stock Portfolio I Class Sub-Account, MFS VIT II Money Market Portfolio Initial Class Sub-Account, MFS VIT II New Discovery Portfolio I Class Sub-Account, MFS VIT II Research International Portfolio S Class Sub-Account, MFS VIT Total Return Series Initial Class Sub-Account, MFS VIT Total Return Series Service Class Sub-Account, MFS VIT II Utilities Portfolio I Class Sub-Account, MFS VIT II Utilities Portfolio S Class Sub-Account, MFS VIT II Value Portfolio I Class Sub-Account, MFS VIT II Value Portfolio S Class Sub-Account, MFS VIT III Blended Research Small Cap Portfolio Initial Class Sub-Account, MFS VIT III Conservative Allocation Portfolio Initial Class Sub-Account, MFS VIT III Global Real Estate Portfolio Initial Class Sub-Account, MFS VIT III Growth Allocation Portfolio Initial Class Sub-Account, MFS VIT III Inflation Adjusted Bond Portfolio Initial Class Sub-Account, MFS VIT III Limited Maturity Portfolio Initial Class Sub-Account, MFS VIT III Mid Cap Value Portfolio Initial Class Sub-Account, MFS VIT III Moderate Allocation Portfolio Initial Class Sub-Account, MFS VIT III New Discovery Value Portfolio Initial Class Sub-Account, Morgan Stanley UIF Mid Cap Growth Portfolio Class II Sub-Account, Oppenheimer Capital Appreciation Fund/VA (Non-Service Shares) Sub-Account, Oppenheimer Capital Appreciation Fund/VA (Service Shares) Sub-Account, Oppenheimer Global Fund/VA (Service Shares)  Sub-Account, Oppenheimer Main Street Fund/VA (Service Shares) Sub-Account, PIMCO VIT CommodityRealReturnTM Strategy Portfolio Admin Class Sub-Account, PIMCO VIT Emerging Markets Bond Portfolio Admin Class Sub-Account, PIMCO VIT Global Multi- Asset Portfolio Admin. Class Sub-Account, PIMCO VIT Real Return Portfolio Admin Class Sub-Account, PIMCO VIT Total Return Portfolio Admin Class Sub-Account, T. Rowe Price Blue Chip Growth Portfolio Sub-Account, and Wanger USA Sub-Account at December 31, 2013, and the results of each of their operations, and the changes in each of their net assets for the year then ended, in conformity with accounting principles generally accepted in the United States of America.  These financial statements are the responsibility of the Sun Life Assurance Company of Canada (U.S.)’s management; our responsibility is to express an opinion on these financial statements based on our audit.  We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audit, which included confirmation of securities at December 31, 2013 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.


/s/ PricewaterhouseCoopers LLP





April 29, 2014
Hartford, CT



 
 
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Participants of Sun Life of Canada (U.S.) Variable Account I and the Board of Directors of Sun Life Assurance Company of Canada (U.S.) (the “Sponsor”):

We have audited the accompanying statements of assets and liabilities of Alger Growth & Income Portfolio I-2 Sub-Account, Alger Mid Cap Growth Portfolio I-2 Sub-Account, Alger Small Cap Growth Portfolio I-2 Sub-Account, AllianceBernstein VPS Balanced Wealth Strategy Portfolio (Class B) Sub-Account, AllianceBernstein VPS Global Thematic Growth Portfolio (Class B) Sub-Account, AllianceBernstein VPS Growth and Income Portfolio (Class B) Sub-Account, AllianceBernstein VPS International Value Portfolio (Class B) Sub-Account, American Funds Insurance Series Blue Chip Income Growth Fund Class 2 Sub-Account, American Funds Insurance Series Bond Fund Class 2 Sub-Account, American Funds Insurance Series Global Growth Fund Class 2 Sub-Account, American Funds Insurance Series Global Growth Income Fund Class 2 Sub-Account, American Funds Insurance Series Global Small Capitalization Fund Class 2 Sub-Account, American Funds Insurance Series Growth Fund Class 2 Sub-Account, American Funds Insurance Series Growth Income Fund Class 2 Sub-Account, American Funds Insurance Series High Income Bond Fund Class 2 Sub-Account, American Funds Insurance Series International Fund Class 2 Sub-Account, BlackRock Global Allocation V.I. Fund (Class III) Sub-Account, Columbia Variable Portfolio - Marsico 21st Century Fund Class 2 Sub-Account, Delaware VIP Smid Cap Growth Series Standard Class Sub-Account, Dreyfus IP MidCap Stock Portfolio (Initial Shares) Sub-Account, DWS Dreman Small Mid Cap Value VIP - Class A Sub-Account, DWS Small Cap Index VIP - Class B Sub-Account, Fidelity VIP Balanced Portfolio (Service Class 2) Sub-Account, Fidelity VIP Contrafund Portfolio (Service Class 2) Sub-Account, Fidelity VIP Contrafund Portfolio (Service Class) Sub-Account, Fidelity VIP Freedom 2015 Portfolio (Service Class 2) Sub-Account, Fidelity VIP Freedom 2020 Portfolio (Service Class 2) Sub-Account, Fidelity VIP Freedom 2030 Portfolio (Service Class 2) Sub-Account, Fidelity VIP Growth Portfolio (Service Class) Sub-Account, Fidelity VIP Index 500 Portfolio (Service Class 2) Sub-Account, Fidelity VIP Index 500 Portfolio (Service Class) Sub-Account, Fidelity VIP Mid Cap Portfolio (Service Class 2) Sub-Account, Fidelity VIP Money Market Portfolio (Service Class) Sub-Account, Fidelity VIP Overseas Portfolio (Service Class) Sub-Account, First Eagle Overseas Variable Fund Sub-Account, Franklin Templeton VIP Founding Funds Allocation Fund (Class 2) Sub-Account, Franklin Templeton VIP Franklin Income Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Franklin Small Cap Value Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Franklin Strategic Income Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Franklin U.S. Government Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Mutual Shares Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Templeton Foreign Securities Fund (Class 2) Sub-Account, Franklin Templeton VIP Templeton Growth Securities Fund (Class 2) Sub-Account, Goldman Sachs VIT Large Cap Value Fund I Class Sub-Account, Goldman Sachs VIT Mid Cap Value Fund I Sub-Account, Goldman Sachs VIT Strategic International Fund (I Shares) Sub-Account, Goldman Sachs VIT Structured Small Cap Equity Fund (I Shares) Sub-Account, Goldman Sachs VIT Structured U.S. Equity Fund (I Shares) Sub-Account, Invesco V.I. Capital Appreciation Fund (Series I) Sub-Account, Invesco V.I. Capital Development Fund (Series I) Sub-Account, Invesco V.I. Core Equity Fund I Sub-Account, Invesco V.I. International Growth Fund I Sub-Account, Invesco V.I. Small Cap Equity Fund I Sub-Account, Invesco Van Kampen V.I. American Franchise Fund (Series I) Sub-Account, Invesco Van Kampen V.I. American Value Fund (Series II) Sub-Account, Invesco Van Kampen V.I. Comstock Fund Series II Sub-Account, Invesco Van Kampen V.I. Equity and Income Fund II Sub-Account, Invesco Van Kampen V.I. Growth and Income Fund I Sub-Account, Invesco Van Kampen V.I. Mid Cap Growth Fund (Series I) Sub-Account, M Business Opportunity Value Fund Sub-Account, M Capital Appreciation Fund Sub-Account, M International Equity Fund Sub-Account, M Large Cap Growth Fund Sub-Account, MFS Growth Portfolio Initial Class Sub-Account, MFS VIT I Growth Series Initial Class Sub-Account, MFS VIT I Mid Cap Growth Series Initial Class Sub-Account, MFS VIT I New Discovery Series Initial Class Sub-Account, MFS VIT I Research Bond Series Initial Class Sub-Account, MFS VIT I Research Series Initial Class Sub-Account, MFS VIT I Value Series Initial Class Sub-Account, MFS VIT II Blended Research Core Equity Portfolio I Class Sub-Account, MFS VIT II Bond Portfolio S Class Sub-Account, MFS VIT II Emerging Markets Equity Portfolio S Class Sub-Account, MFS VIT II Global Tactical Allocation Portfolio S Class Sub-Account, MFS VIT II Government Securities Portfolio I Class Sub-Account, MFS VIT II Government Securities Portfolio S Class Sub-Account, MFS VIT II High Yield Portfolio Initial Class Sub-Account, MFS VIT II International Growth Portfolio I Class Sub-Account, MFS VIT II International Growth Portfolio S Class Sub-Account, MFS VIT II Massachusetts Investors Growth Stock Portfolio I Class Sub-Account, MFS VIT II Money Market Portfolio Initial Class Sub-Account, MFS VIT II New Discovery Portfolio I Class Sub-Account, MFS VIT II Research International Portfolio S Class Sub-Account, MFS VIT II Total Return Portfolio I Class Sub-Account, MFS VIT II Total Return Portfolio S Class Sub-Account, MFS VIT II Utilities Portfolio I Class Sub-Account, MFS VIT II Utilities Portfolio S Class Sub-Account, MFS VIT II Value Portfolio I Class Sub-Account, MFS VIT II Value Portfolio S Class Sub-Account, MFS VIT III Blended Research Small Cap Portfolio Initial Class Sub-Account, MFS VIT III Conservative Allocation Portfolio Initial Class Sub-Account, MFS VIT III Global Real Estate Portfolio Initial Class Sub-Account, MFS

 
 
 

VIT III Growth Allocation Portfolio Initial Class Sub-Account, MFS VIT III Inflation Adjusted Bond Portfolio Initial Class Sub-Account, MFS VIT III Limited Maturity Portfolio Initial Class Sub-Account, MFS VIT III Mid Cap Value Portfolio Initial Class Sub-Account, MFS VIT III Moderate Allocation Portfolio Initial Class Sub-Account, MFS VIT III New Discovery Value Portfolio Initial Class Sub-Account, Morgan Stanley UIF Mid Cap Growth Portfolio Class II Sub-Account, Oppenheimer Capital Appreciation Fund/VA (Non-Service Shares) Sub-Account, Oppenheimer Capital Appreciation Fund/VA (Service Shares) Sub-Account, Oppenheimer Global Securities Fund/VA (Service Shares) Sub-Account, Oppenheimer Main Street Fund/VA (Service Shares) Sub-Account, PIMCO VIT CommodityRealReturnTM Strategy Portfolio Admin Class Sub-Account, PIMCO VIT Emerging Markets Bond Portfolio Admin Class Sub-Account, PIMCO VIT Global Multi- Asset Portfolio Admin. Class Sub-Account, PIMCO VIT Real Return Portfolio Admin Class Sub-Account, PIMCO VIT Total Return Portfolio Admin Class Sub-Account, SC AllianceBernstein International Value (Initial Class) Sub-Account, SC BlackRock International Index Fund (Initial Class) Sub-Account, SC BlackRock Large Cap Index Fund (Initial Class) Sub-Account, SC Davis Venture Value Fund (Initial Class) Sub-Account, SC Invesco Small Cap Growth Initial Class Sub-Account, SC Lord Abbett Growth & Income Fund (Initial Class) Sub-Account, SC PIMCO High Yield Fund (Initial Class) Sub-Account, SC PIMCO Total Return (Initial Class) Sub-Account, SC WMC Blue Chip Mid Cap Fund (Initial Class) Sub-Account, SC WMC Large Cap Growth Fund (Initial Class) Sub-Account, Sun Capital Investment Grade Bond Fund (Initial Class) Sub-Account, Sun Capital Money Market Fund (Initial Class) Sub-Account, T. Rowe Price Blue Chip Growth Portfolio Sub-Account, and Wanger USA Sub-Account of Sun Life of Canada (U.S.) Variable Account I (collectively the "Sub-Accounts"), as of December 31, 2012, and the related statements of operations and the statements of changes in net assets for each of the periods presented.  These financial statements are the responsibility of the Sponsor’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Sub-Accounts are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Sub-Accounts’ internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the mutual fund companies.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Sub-Accounts as of December 31, 2012, and the results of their operations and the changes in their net assets for each of the periods presented in conformity with accounting principles generally accepted in the United States of America.



/s/ Deloitte & Touche LLP

Boston, Massachusetts
April 24, 2013



 
 
 

 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2013
 
Assets:Investments at fair value:Alger Growth & Income Portfolio I-2 Sub-Account (AL2)Alger Mid Cap Growth Portfolio I-2 Sub-Account (AL4)Alger Small Cap Growth Portfolio I-2 Sub-Account (AL3)AllianceBernstein VPS Balanced Wealth Strategy Portfolio (Class B) Sub-Account (AVB) AllianceBernstein VPS Global Thematic Growth Portfolio (Class B) Sub-Account (AN2) AllianceBernstein VPS Growth and Income Portfolio (Class B) Sub-Account (AN3) AllianceBernstein VPS International Value Portfolio (Class B) Sub-Account (IVB) American Funds Insurance Series Blue Chip Income Growth Fund Class 2 Sub-Account (308) American Funds Insurance Series Bond Fund Class 2 Sub-Account (301)American Funds Insurance Series Global Growth Fund Class 2 Sub-Account (304) American Funds Insurance Series Global Growth Income Fund Class 2 Sub-Account (307)American Funds Insurance Series Global Small Capitalization Fund Class 2 Sub-Account (306)American Funds Insurance Series Growth Fund Class 2 Sub-Account (303)American Funds Insurance Series Growth Income Fund Class 2 Sub-Account (302)American Funds Insurance Series High Income Bond Fund Class 2 Sub-Account (305)American Funds Insurance Series International Fund Class 2 Sub-Account (300)BlackRock Global Allocation V.I. Fund (Class III) Sub-Account (9XX)Columbia Variable Portfolio - Marsico 21st Century Fund Class 2 Sub-Account (MCC)Delaware VIP Smid Cap Growth Series Standard Class Sub-Account (DGO)Dreyfus IP MidCap Stock Portfolio (Initial Shares) Sub-Account (DMC)DWS Small Cap Index VIP - Class B Sub-Account (SSC)DWS Small Mid Cap Value VIP Class A Sub-Account (SCV)Fidelity VIP Balanced Portfolio (Service Class 2) Sub-Account (FVB)Fidelity VIP Contrafund Portfolio (Service Class 2) Sub-Account (FL1)Fidelity VIP Contrafund Portfolio (Service Class) Sub-Account (FL6)1Fidelity VIP Freedom 2015 Portfolio (Service Class 2) Sub-Account (F15)Fidelity VIP Freedom 2020 Portfolio (Service Class 2) Sub-Account (F20)Fidelity VIP Freedom 2030 Portfolio (Service Class 2) Sub-Account (F30)Fidelity VIP Growth Portfolio (Service Class) Sub-Account (FL8)Fidelity VIP Index 500 Portfolio (Service Class 2) Sub-Account (FIS)Fidelity VIP Index 500 Portfolio (Service Class) Sub-Account (FL4)Fidelity VIP Mid Cap Portfolio (Service Class 2) Sub-Account (FVM)Fidelity VIP Money Market Portfolio (Service Class) Sub-Account (FL5)Fidelity VIP Overseas Portfolio (Service Class) Sub-Account (FL7)First Eagle Overseas Variable Fund Sub-Account (SGI)Franklin Templeton VIP Founding Funds Allocation Fund (Class 2) Sub-Account (S17)Franklin Templeton VIP Franklin Income Securities Fund (Class 2) Sub-Account (ISC)Franklin Templeton VIP Franklin Small Cap Value Securities Fund (Class 2) Sub-Account (FVS)Franklin Templeton VIP Franklin Strategic Income Securities Fund (Class 2) Sub-Account (SIC)Franklin Templeton VIP Franklin U.S. Government Securities Fund (Class 2) Sub-Account (FGF)Franklin Templeton VIP Mutual Shares Securities Fund (Class 2) Sub-Account (FMS)Franklin Templeton VIP Templeton Foreign Securities Fund (Class 2) Sub-Account (FTI)Franklin Templeton VIP Templeton Growth Securities Fund (Class 2) Sub-Account (FTG)Goldman Sachs VIT Large Cap Value Fund I Class Sub-Account (GS4)Goldman Sachs VIT Mid Cap Value Fund I Sub-Account (GS8)Goldman Sachs VIT Strategic International Fund (I Shares) Sub-Account (GS5)Goldman Sachs VIT Structured Small Cap Equity Fund (I Shares) Sub-Account (GS2)Goldman Sachs VIT Structured U.S. Equity Fund (I Shares) Sub-Account (GS3)Invesco V.I. American Franchise Fund Series I Sub-Account (FFG)Invesco V.I. American Value Fund Series II Sub-Account (VKC)1Share amount is less than 1 share.
Shares
Cost
Value
6,329
$            61,425
$            94,108
40,956
438,693
751,541
719
15,521
23,484
20,795
224,945
283,855
3,989
57,026
80,496
125,319
2,209,409
3,445,010
9,395
125,041
139,610
42,734
429,377
556,396
21,546
237,373
228,603
38,257
849,629
1,144,655
89,579
906,224
1,120,636
24,317
487,300
614,014
13,487
783,179
1,051,170
7,994
269,393
402,906
174,731
1,991,917
1,920,295
41,950
724,184
887,239
194,001
2,807,887
3,022,529
38,614
451,588
639,443
36,052
896,895
1,167,721
190,065
2,331,149
3,966,657
202,563
2,088,939
3,581,305
170,775
1,793,520
2,916,841
18,719
285,547
327,017
83,325
2,133,300
2,813,892
212,778
4,939,698
7,285,517
-
1
1
25,666
280,825
321,850
8,977
91,190
114,729
41,976
1,487,662
2,392,617
56,142
7,450,419
10,361,657
94,374
12,130,945
17,531,908
65,501
2,066,160
2,331,848
6,095,282
6,095,282
6,095,282
403,815
5,872,985
8,302,432
61,871
1,764,150
1,841,280
28,991
203,907
215,110
44,139
645,020
709,314
71,418
1,180,758
1,719,021
124,781
1,560,427
1,534,809
4
50
48
98,362
1,652,873
2,127,566
466,326
6,344,690
8,039,457
133,897
1,551,844
2,039,246
18,340
177,703
230,901
18,436
263,395
343,642
36,493
267,096
380,623
16,976
170,488
255,827
245,804
2,463,335
4,060,684
17,177
641,608
869,679
41,835
632,939
825,400

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 

SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2013
      
Assets (continued):
Shares
Cost
Value
Investments at fair value (continued):
      
Invesco V.I. Comstock Fund Series II Sub-Account (VLC)
45,634
$              544,767
$              806,808
Invesco V.I. Core Equity Fund I Sub-Account (AI3)
28,963
760,997
1,113,037
Invesco V.I. Equity and Income Fund Series II Sub-Account (VKU)
32,973
506,880
610,666
Invesco V.I. Growth and Income Fund Series I Sub-Account (VGI)
62,821
1,215,002
1,651,568
Invesco V.I. International Growth Fund I Sub-Account (AI4)
181,630
5,057,927
6,415,154
Invesco V.I. Mid Cap Growth Fund Series I Sub-Account (FFI)
30,867
124,016
165,140
Invesco V.I. Small Cap Equity Fund I Sub-Account (ASC)
7,774
122,286
197,776
M Capital Appreciation Fund Sub-Account (MCA)
21,766
538,429
646,671
M International Equity Fund Sub-Account (MBI)
111,268
1,308,441
1,463,174
M Large Cap Growth Fund Sub-Account (MTC)
44,177
815,208
1,092,934
M Large Cap Value Fund Sub-Account (MBO)
42,382
486,046
583,602
MFS VIT Total Return Series Initial Class Sub-Account (GGC)
144,401
3,197,696
3,384,754
MFS VIT Total Return Series Service Class Sub-Account (GGE)
9,107
199,092
210,546
MFS VIT I Growth Series Initial Class Sub-Account (FFL)
13,900
398,084
543,076
MFS VIT I Mid Cap Growth Series Initial Class Sub-Account (FFJ)
504,823
3,277,279
4,543,411
MFS VIT I New Discovery Series Initial Class Sub-Account (FFS)
42,198
770,005
931,319
MFS VIT I Research Bond Series Initial Class Sub-Account (FFQ)
545,719
7,343,738
7,165,286
MFS VIT I Research Series Initial Class Sub-Account (FFM)
165,751
3,614,302
4,763,697
MFS VIT I Value Series Initial Class Sub-Account (FFO)
200,297
3,020,980
3,861,733
MFS VIT II Blended Research Core Equity Portfolio I Class Sub-Account (MIT)
31,330
983,297
1,513,562
MFS VIT II Bond Portfolio S Class Sub-Account (MF7)
69,825
835,690
799,496
MFS VIT II Emerging Markets Equity Portfolio S Class Sub-Account (EM1)
118,626
1,769,862
1,695,166
MFS VIT II Global Tactical Allocation Portfolio S Class Sub-Account (GT2)
2,320
34,235
37,096
MFS VIT II Government Securities Portfolio I Class Sub-Account (GSS)
164,657
2,184,638
2,096,086
MFS VIT II Government Securities Portfolio S Class Sub-Account (MFK)
50,345
673,873
635,856

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 

SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2013
      
Assets (continued):
Shares
Cost
Value
Investments at fair value (continued):
      
MFS VIT II High Yield Portfolio Initial Class Sub-Account (HYS)
868,024
$         5,160,359
$         5,451,191
MFS VIT II International Growth Portfolio I Class Sub-Account (IGS)
65,759
783,164
971,260
MFS VIT II International Growth Portfolio S Class Sub-Account (IG1)
33,864
414,091
496,446
MFS VIT II Massachusetts Investors Growth Stock Portfolio I Class Sub-Account (MIS)
151,905
1,958,669
2,629,471
MFS VIT II Money Market Portfolio Initial Class Sub-Account (MMS)
8,679,631
8,679,631
8,679,631
MFS VIT II New Discovery Portfolio I Class Sub-Account (NWD)
120,138
1,963,550
2,789,594
MFS VIT II Research International Portfolio S Class Sub-Account (RI1)
151,188
2,311,408
2,405,406
MFS VIT II Utilities Portfolio I Class Sub-Account (UTS)
72,857
1,560,568
1,923,417
MFS VIT II Utilities Portfolio S Class Sub-Account (MFE)
10,583
247,613
276,120
MFS VIT II Value Portfolio I Class Sub-Account (MVS)
118,849
1,597,160
2,026,382
MFS VIT II Value Portfolio S Class Sub-Account (MV1)
156,992
2,092,421
2,648,460
MFS VIT III Blended Research Small Cap Portfolio Initial Class Sub-Account (SCB)
239,364
3,168,167
4,365,994
MFS VIT III Conservative Allocation Portfolio Initial Class Sub-Account (111)
355,978
4,071,700
4,132,908
MFS VIT III Global Real Estate Portfolio Initial Class Sub-Account (SC3)
322,641
3,723,357
4,010,429
MFS VIT III Growth Allocation Portfolio Initial Class Sub-Account (113)
178,449
2,039,500
2,175,299
MFS VIT III Inflation Adjusted Bond Portfolio Initial Class Sub-Account (115)
146,546
1,613,256
1,471,324
MFS VIT III Limited Maturity Portfolio Initial Class Sub-Account (SDC)
660,721
6,771,975
6,818,642
MFS VIT III Mid Cap Value Portfolio Initial Class Sub-Account (SGC)
581,213
4,955,516
5,841,195
MFS VIT III Moderate Allocation Portfolio Initial Class Sub-Account (112)
320,768
3,916,748
4,176,399
MFS VIT III New Discovery Value Portfolio Initial Class Sub-Account (117)
81,338
801,886
985,823
Morgan Stanley UIF Mid Cap Growth Portfolio Class II Sub-Account (VKM)
78,292
926,981
1,115,664
Oppenheimer Capital Appreciation Fund/VA (Non-Service Shares) Sub-Account (OCF)
13,824
518,952
800,137
Oppenheimer Capital Appreciation Fund/VA (Service Shares) Sub-Account (OCA)
485
20,099
27,799
Oppenheimer Global Fund/VA (Service Shares) Sub-Account (OGG)
2,472
70,985
100,059
Oppenheimer Main Street Fund/VA (Service Shares) Sub-Account (OMG)
3,306
67,227
102,444
PIMCO VIT CommodityRealReturnTM Strategy Portfolio Admin Class Sub-Account (PCR)
89,075
662,666
532,669
PIMCO VIT Emerging Markets Bond Portfolio Admin Class Sub-Account (PMB)
314,132
4,199,416
4,221,931
PIMCO VIT Global Multi- Asset Portfolio Admin. Class Sub-Account (SBJ)
8,188
100,846
92,768
PIMCO VIT Real Return Portfolio Admin Class Sub-Account (PRR)
252,616
3,526,269
3,182,967
PIMCO VIT Total Return Portfolio Admin Class Sub-Account (PTR)
970,493
10,917,545
10,656,011
T. Rowe Price Blue Chip Growth Portfolio Sub-Account (TBC)
277,993
3,105,119
5,276,317
Wanger USA Sub-Account (USC)
5,451
157,727
224,217
Total investments
  
204,422,252
248,645,859
Total assets
  
$       204,422,252
$        248,645,859
Liabilities:
      
Payable to Sponsor
    
$                -
Total liabilities
    
-
Net Assets
    
 $       248,645,859

 
 
..The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2013
 

Net Assets:
Units
  
Value
     
AL2
6,432
$
94,108
AL4
34,326
  
751,541
AL3
1,321
  
23,484
AVB
17,785
  
283,855
AN2
8,737
  
80,496
AN3
193,255
  
3,445,010
IVB
19,775
  
139,610
308
29,824
  
556,396
301
17,896
  
228,603
304
56,235
  
1,144,655
307
59,315
  
1,120,636
306
32,156
  
614,014
303
51,520
  
1,051,170
302
20,747
  
402,906
305
111,336
  
1,920,295
300
52,513
  
887,239
9XX
192,412
  
3,022,529
MCC
56,797
  
639,443
DGO
35,094
  
1,167,721
DMC
165,398
  
3,966,657
SSC
114,644
  
3,581,305
SCV
109,736
  
2,916,841
FVB
17,230
  
327,017
FL1
213,306
  
2,813,892
FL6
281,867
  
7,285,517
F152
-
  
1
F20
25,704
  
321,850
F30
9,206
  
114,729
FL8
158,269
  
2,392,617
FIS
750,573
  
10,361,657
FL4
994,277
  
17,531,908
FVM
159,674
  
2,331,848
FL5
490,302
  
6,095,282
FL7
461,623
  
8,302,432
SGI
133,405
  
1,841,280
S17
12,031
  
215,110

 
 
2Unit Amount is less than 1 unit.
 
The accompanying notes are an integral part of these financial statements.
 
-

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2013
 

 
Units
  
Value
Net Assets (continued):
      
ISC
51,093
$
709,314
FVS
103,101
  
1,719,021
SIC
104,330
  
1,534,809
FGF
4
  
48
FMS
170,822
  
2,127,566
FTI
275,095
  
8,039,457
FTG
77,941
  
2,039,246
GS4
13,161
  
230,901
GS8
13,724
  
343,642
GS5
28,828
  
380,623
GS2
9,483
  
255,827
GS3
242,755
  
4,060,684
FFG
63,666
  
869,679
VKC
38,565
  
825,400
VLC
55,856
  
806,808
AI3
74,505
  
1,113,037
VKU
34,800
  
610,666
VGI
75,572
  
1,651,568
AI4
372,696
  
6,415,154
FFI
12,203
  
165,140
ASC
12,522
  
197,776
MCA
38,195
  
646,671
MBI
153,834
  
1,463,174
MTC
75,900
  
1,092,934
MBO
43,243
  
583,602
GGC
315,166
  
3,384,754
GGE
19,559
  
210,546
FFL
38,630
  
543,076
FFJ
317,305
  
4,543,411
FFS
63,083
  
931,319
FFQ
722,781
  
7,165,286
FFM
347,428
  
4,763,697
FFO
275,117
  
3,861,733
MIT
83,046
  
1,513,562

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2013
 

 
Units
  
Value
Net Assets (continued):
      
MF7
54,066
$
799,496
EM1
206,587
  
1,695,166
GT2
3,084
  
37,096
GSS
118,047
  
2,096,086
MFK
52,965
  
635,856
HYS
271,269
  
5,451,191
IGS
55,440
  
971,260
IG1
28,603
  
496,446
MIS
171,206
  
2,629,471
MMS
868,403
  
8,679,631
NWD
122,477
  
2,789,594
RI1
240,636
  
2,405,406
UTS
65,130
  
1,923,417
MFE
19,654
  
276,120
MVS
88,069
  
2,026,382
MV1
189,923
  
2,648,460
SCB
193,144
  
4,365,994
111
274,651
  
4,132,908
SC3
193,547
  
4,010,429
113
117,253
  
2,175,299
115
114,887
  
1,471,324
SDC
597,676
  
6,818,642
SGC
355,612
  
5,841,195
112
246,081
  
4,176,399
117
49,946
  
985,823
VKM
45,356
  
1,115,664
OCF
43,398
  
800,137
OCA
2,303
  
27,799
OGG
7,672
  
100,059
OMG
7,655
  
102,444
PCR
61,978
  
532,669
PMB
178,348
  
4,221,931
SBJ
9,203
  
92,768
PRR
180,329
  
3,182,967
PTR
574,968
  
10,656,011
 

 

 

 

 

 

 

 

 
                         The accompanying notes are an integral part of these financial statements.


 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2013
 
Units                                     Value
 
Net Assets (continued):
 
TBC
215,415
$
5,276,317
USC
14,032
  
224,217
Total net assets
  
$
248,645,859

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS
 
FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
Dividend income
Net realized and change in unrealized gains (losses):
  
AL2
Sub-Account
  
AL4
Sub-Account
  
AL3
Sub-Account
$
1,736
$
2,229
$
-
Net realized gains (losses) on sale of investments
  
2,731
  
49,952
  
3,615
Realized gain distributions
  
-
  
-
  
2,855
Net realized gains (losses)
  
2,731
  
49,952
  
6,470
Net change in unrealized appreciation (depreciation)
  
18,500
  
154,884
  
1,099
Net realized and change in unrealized gains (losses)
  
21,231
  
204,836
  
7,569
Increase (decrease) in net assets from operations
$
22,967
$
207,065
$
7,569

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
Dividend income
Net realized and change in unrealized gains (losses): Net realized gains (losses) on sale of investments Realized gain distributions
  
AVB
Sub-Account
  
AN2
Sub-Account
  
AN3
Sub-Account
$
6,148
5,197
-
$
16
1,270
-
$
35,774
(76,393)
-
Net realized gains (losses)
  
5,197
  
1,270
  
(76,393)
Net change in unrealized appreciation (depreciation)
  
30,077
  
14,162
  
974,554
Net realized and change in unrealized gains (losses)
  
35,274
  
15,432
  
898,161
Increase (decrease) in net assets from operations
$
41,422
$
15,448
$
933,935

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
Dividend income
Net realized and change in unrealized gains (losses): Net realized gains (losses) on sale of investments Realized gain distributions
  
IVB
Sub-Account
308
Sub-Account
  
301
Sub-Account
$
7,430
1,564
-
$                    9,550
93,409
-
$
4,124
4,515
2,478
Net realized gains (losses)
  
1,564
93,409
  
6,993
Net change in unrealized appreciation (depreciation)
  
15,112
77,691
  
(15,992)
Net realized and change in unrealized gains (losses)
  
16,676
171,100
  
(8,999)
Increase (decrease) in net assets from operations
$
24,106
$                 180,650
$
(4,875)

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
304
Sub-Account
307
Sub-Account
306
Sub-Account
     
Dividend income
$                 12,835
$                 33,655
$                  4,678
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
39,367
16,348
8,677
Realized gain distributions
-
-
-
Net realized gains (losses)
39,367
16,348
8,677
Net change in unrealized appreciation (depreciation)
209,995
151,800
121,810
Net realized and change in unrealized gains (losses)
249,362
168,148
130,487
Increase (decrease) in net assets from operations
$                262,197
$                201,803
$              135,165

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
303
Sub-Account
  
302
Sub-Account
305
Sub-Account
       
Dividend income
$                   8,818
$
4,833
$              112,739
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
43,450
  
10,412
45,715
Realized gain distributions
-
  
-
-
Net realized gains (losses)
43,450
  
10,412
45,715
Net change in unrealized appreciation (depreciation)
193,784
  
84,805
(69,530)
Net realized and change in unrealized gains (losses)
237,234
  
95,217
(23,815)
Increase (decrease) in net assets from operations
$                246,052
$           100,050
$                 88,924

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
300
Sub-Account
9XX
Sub-Account
  
MCC
Sub-Account
       
Dividend income
$                  11,154
$                 30,540
$
1,285
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
43,565
47,867
  
19,908
Realized gain distributions
-
119,641
  
-
Net realized gains (losses)
43,565
167,508
  
19,908
Net change in unrealized appreciation (depreciation)
117,508
200,017
  
166,960
Net realized and change in unrealized gains (losses)
161,073
367,525
  
186,868
Increase (decrease) in net assets from operations
$172,227
 
172,227
$              398,065
$              188,153

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
  
DGO
Sub-Account
DMC
Sub-Account
SSC
Sub-Account
       
Dividend income
$
209
$                 51,637
$                 47,134
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
  
145,677
111,922
179,931
Realized gain distributions
  
46,424
-
132,537
Net realized gains (losses)
  
192,101
111,922
312,468
Net change in unrealized appreciation (depreciation)
  
130,818
920,890
715,028
Net realized and change in unrealized gains (losses)
  
322,919
1,032,812
1,027,496
Increase (decrease) in net assets from operations
$           323,128
$            1,084,449
 $              1,074,630

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
SCV
Sub-Account
  
FVB
Sub-Account
FL1
Sub-Account
       
Dividend income
$                 28,316
$
4,137
$                 21,208
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
89,282
  
5,080
82,317
Realized gain distributions
-
  
13,173
743
Net realized gains (losses)
89,282
  
18,253
83,060
Net change in unrealized appreciation (depreciation)
656,355
  
28,959
486,528
Net realized and change in unrealized gains (losses)
745,637
  
47,212
569,588
Increase (decrease) in net assets from operations
$                773,953
$             51,349
$              590,796

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
FL6
Sub-Account
  
F15
Sub-Account
F20
Sub-Account
       
Dividend income
$                  64,811
$
13
$                    4,773
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
(76,316)
  
4,378
2,595
Realized gain distributions
1,900
  
503
3,733
Net realized gains (losses)
(74,416)
  
4,881
6,328
Net change in unrealized appreciation (depreciation)
1,886,187
  
(211)
28,361
Net realized and change in unrealized gains (losses)
1,811,771
  
4,670
34,689
Increase (decrease) in net assets from operations
$             1,876,582
$
4,683
$                39,462

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
  
F30
Sub-Account
FL8
Sub-Account
FIS
Sub-Account
       
Dividend income
$
1,600
$                  4,064
$              157,868
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
  
1,168
33,506
344,354
Realized gain distributions
  
1,443
1,467
96,101
Net realized gains (losses)
  
2,611
34,973
440,455
Net change in unrealized appreciation (depreciation)
  
15,416
617,205
1,991,915
Net realized and change in unrealized gains (losses)
  
18,027
652,178
2,432,370
Increase (decrease) in net assets from operations
$            19,627
$              656,242
$            2,590,238

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
FL4
Sub-Account
FVM
Sub-Account
  
FL5
Sub-Account
       
Dividend income
$                290,205
$                  5,728
$
648
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
29,688
21,554
  
-
Realized gain distributions
152,465
271,490
  
-
Net realized gains (losses)
182,153
293,044
  
-
Net change in unrealized appreciation (depreciation)
3,808,473
304,479
  
-
Net realized and change in unrealized gains (losses)
3,990,626
597,523
  
-
Increase (decrease) in net assets from operations
$             4,280,831
$              603,251
$
648

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
FL7
Sub-Account
SGI
Sub-Account
S17
Sub-Account
     
Dividend income
$                  95,049
$                30,804
$                 21,756
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
(240,201)
21,718
605
Realized gain distributions
28,236
94,539
31,728
Net realized gains (losses)
(211,965)
116,257
32,333
Net change in unrealized appreciation (depreciation)
2,116,745
67,084
(14,283)
Net realized and change in unrealized gains (losses)
1,904,780
183,341
18,050
Increase (decrease) in net assets from operations
$             1,999,829
$              214,145
$                 39,806

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
ISC
Sub-Account
FVS
Sub-Account
SIC
Sub-Account
     
Dividend income
$                 40,666
$                 20,445
$                 89,499
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
12,286
58,423
(1,161)
Realized gain distributions
-
26,385
19,246
Net realized gains (losses)
12,286
84,808
18,085
Net change in unrealized appreciation (depreciation)
32,132
368,789
(56,832)
Net realized and change in unrealized gains (losses)
44,418
453,597
(38,747)
Increase (decrease) in net assets from operations
  $                  85,084
$              474,042
$                 50,752

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
  
FGF
Sub-Account
FMS
Sub-Account
FTI
Sub-Account
       
Dividend income
$
1
$                37,598
$              167,397
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
  
-
54,832
(345,764)
Realized gain distributions
  
-
-
-
Net realized gains (losses)
  
-
54,832
(345,764)
Net change in unrealized appreciation (depreciation)
  
(2)
356,460
1,671,709
Net realized and change in unrealized gains (losses)
  
(2)
411,292
1,325,945
Increase (decrease) in net assets from operations
$
(1)
$              448,890
$            1,493,342

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
FTG
Sub-Account
  
GS4
Sub-Account
  
GS8
Sub-Account
         
Dividend income
$                  48,674
$
2,598
$
2,691
Net realized and change in unrealized gains (losses):
          
Net realized gains (losses) on sale of investments
(68,928)
  
4,431
  
4,915
Realized gain distributions
-
  
24,821
  
25,964
Net realized gains (losses)
(68,928)
  
29,252
  
30,879
Net change in unrealized appreciation (depreciation)
514,435
  
27,312
  
59,231
Net realized and change in unrealized gains (losses)
445,507
  
56,564
  
90,110
Increase (decrease) in net assets from operations
$                 494,181
$            59,162
$             92,801

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
GS5
Sub-Account
GS2
Sub-Account
GS3
Sub-Account
     
Dividend income
$                   6,564
$                  2,303
$                 41,711
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
11,651
8,695
113,715
Realized gain distributions
-
29,066
-
Net realized gains (losses)
11,651
37,761
113,715
Net change in unrealized appreciation (depreciation)
62,750
30,016
1,001,057
Net realized and change in unrealized gains (losses)
74,401
67,777
1,114,772
Increase (decrease) in net assets from operations
$                  80,965
$                 70,080
$            1,156,483

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
FFG
Sub-Account
  
VKC
Sub-Account
VLC
Sub-Account
       
Dividend income
$                  3,441
$
4,208
$                 10,545
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
16,177
  
48,427
58,207
Realized gain distributions
-
  
-
-
Net realized gains (losses)
16,177
  
48,427
58,207
Net change in unrealized appreciation (depreciation)
244,899
  
168,384
165,525
Net realized and change in unrealized gains (losses)
261,076
  
216,811
223,732
Increase (decrease) in net assets from operations
$              264,517
$           221,019
$              234,277

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
AI3
Sub-Account
  
VKU
Sub-Account
VGI
Sub-Account
       
Dividend income
$                    14,081
$
7,604
$                 20,027
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
40,447
  
38,567
88,510
Realized gain distributions
-
  
-
11,840
Net realized gains (losses)
40,447
  
38,567
100,350
Net change in unrealized appreciation (depreciation)
205,070
  
68,941
286,269
Net realized and change in unrealized gains (losses)
245,517
  
107,508
386,619
Increase (decrease) in net assets from operations
$                259,598
$           115,112
$              406,646

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
AI4
Sub-Account
FFI
Sub-Account
  
ASC
Sub-Account
       
Dividend income
$                 96,284
$                    598
$
15
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
765,261
1,501
  
3,095
Realized gain distributions
-
-
  
1,775
Net realized gains (losses)
765,261
1,501
  
4,870
Net change in unrealized appreciation (depreciation)
415,700
43,386
  
50,550
Net realized and change in unrealized gains (losses)
1,180,961
44,887
  
55,420
Increase (decrease) in net assets from operations
 $              1,277,245
$                 45,485
$                 55,435

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
MCA
Sub-Account
MBI
Sub-Account
MTC
Sub-Account
     
Dividend income
$                     -
$                 31,878
$                  5,994
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
17,997
20,999
68,022
Realized gain distributions
55,835
-
52,352
Net realized gains (losses)
73,832
20,999
120,374
Net change in unrealized appreciation (depreciation)
113,580
122,837
178,210
Net realized and change in unrealized gains (losses)
187,412
143,836
298,584
Increase (decrease) in net assets from operations
 $                 187,412
 $                175,714
$              304,578

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
MBO
Sub-Account
GGC
Sub-Account
GGE
Sub-Account
     
Dividend income
$                  15,448
$                 57,079
$                  3,060
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
71,540
1,606
56
Realized gain distributions
45,386
-
-
Net realized gains (losses)
116,926
1,606
56
Net change in unrealized appreciation (depreciation)
40,541
187,058
11,454
Net realized and change in unrealized gains (losses)
157,467
188,664
11,510
Increase (decrease) in net assets from operations
 $                  172,915
$              245,743
$                 14,570

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
  
FFL
Sub-Account
FFJ
Sub-Account
FFS
Sub-Account
       
Dividend income
$
1,245
$                     -
$                     -
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
  
22,050
121,329
62,300
Realized gain distributions
  
3,945
15,500
5,410
Net realized gains (losses)
  
25,995
136,829
67,710
Net change in unrealized appreciation (depreciation)
  
136,211
1,186,713
142,163
Net realized and change in unrealized gains (losses)
  
162,206
1,323,542
209,873
Increase (decrease) in net assets from operations
$           163,451
$            1,323,542
$              209,873

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
FFQ
Sub-Account
FFM
Sub-Account
FFO
Sub-Account
     
Dividend income
$                 86,098
$                14,313
$                 42,364
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
(18,940)
141,657
138,975
Realized gain distributions
32,184
10,666
10,958
Net realized gains (losses)
13,244
152,323
149,933
Net change in unrealized appreciation (depreciation)
(178,517)
1,092,779
825,341
Net realized and change in unrealized gains (losses)
(165,273)
1,245,102
975,274
Increase (decrease) in net assets from operations
$                (79,175)
$            1,259,415
$            1,017,638

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
MIT
Sub-Account
MF7
Sub-Account
EM1
Sub-Account
     
Dividend income
$                30,759
$                 37,766
$                28,053
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
117,219
20
(77,897)
Realized gain distributions
-
16,111
-
Net realized gains (losses)
117,219
16,131
(77,897)
Net change in unrealized appreciation (depreciation)
294,424
(60,425)
(60,121)
Net realized and change in unrealized gains (losses)
411,643
(44,294)
(138,018)
Increase (decrease) in net assets from operations
$              442,402
  $                  (6,528)
$             (109,965)

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
  
GT2
Sub-Account
GSS
Sub-Account
MFK
Sub-Account
       
Dividend income
$
844
$                 48,679
$                12,397
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
  
414
67,049
(8,329)
Realized gain distributions
  
-
17,661
5,135
Net realized gains (losses)
  
414
84,710
(3,194)
Net change in unrealized appreciation (depreciation)
  
1,582
(196,047)
(30,493)
Net realized and change in unrealized gains (losses)
  
1,996
(111,337)
(33,687)
Increase (decrease) in net assets from operations
$
2,840
$                (62,658)
$              (21,290)

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
HYS
Sub-Account
IGS
Sub-Account
  
IG1
Sub-Account
       
Dividend income
$              136,098
$                 11,333
$
4,985
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
191,587
1,547
  
11,689
Realized gain distributions
-
532
  
284
Net realized gains (losses)
191,587
2,079
  
11,973
Net change in unrealized appreciation (depreciation)
58,245
102,148
  
42,260
Net realized and change in unrealized gains (losses)
249,832
104,227
  
54,233
Increase (decrease) in net assets from operations
$              385,930
$              115,560
$             59,218

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
MIS
Sub-Account
NWD
Sub-Account
  
RI1
Sub-Account
       
Dividend income
$                 17,358
$                     -
$
1,156
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
223,729
168,122
  
34,075
Realized gain distributions
-
38,609
  
-
Net realized gains (losses)
223,729
206,731
  
34,075
Net change in unrealized appreciation (depreciation)
346,801
630,887
  
82,205
Net realized and change in unrealized gains (losses)
570,530
837,618
  
116,280
Increase (decrease) in net assets from operations
$              587,888
$                837,618
$                117,436

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
TRS
Sub-Account1
  
MFJ
Sub-Account1
UTS
Sub-Account
       
Dividend income
$                127,563
$
6,666
$                50,919
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
391,587
  
12,700
81,645
Realized gain distributions
172,358
  
10,084
130,680
Net realized gains (losses)
563,945
  
22,784
212,325
Net change in unrealized appreciation (depreciation)
(362,313)
  
(11,310)
77,882
Net realized and change in unrealized gains (losses)
201,632
  
11,474
290,207
Increase (decrease) in net assets from operations
$              329,195
$            18,140
$              341,126

 
 
1These Sub-Accounts were closed and merged into new Sub-Accounts during 2013 and therefore do not appear on the Statement of Assets and Liabilities as of December 31, 2013. See Note 1 for additional information around merged Sub-Accounts.
 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
MFE
Sub-Account
MVS
Sub-Account
MV1
Sub-Account
     
Dividend income
$                 6,457
$                51,826
$                 61,874
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
65,628
263,307
29,741
Realized gain distributions
18,257
103,800
135,839
Net realized gains (losses)
83,885
367,107
165,580
Net change in unrealized appreciation (depreciation)
(14,637)
211,164
460,023
Net realized and change in unrealized gains (losses)
69,248
578,271
625,603
Increase (decrease) in net assets from operations
$                75,705
$              630,097
 $                 687,477

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
SCB
Sub-Account
111
Sub-Account
SC3
Sub-Account
     
Dividend income
$                 60,887
$              152,873
$              216,094
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
280,839
12,615
(153,896)
Realized gain distributions
234,573
368,894
-
Net realized gains (losses)
515,412
381,509
(153,896)
Net change in unrealized appreciation (depreciation)
786,052
(89,625)
131,129
Net realized and change in unrealized gains (losses)
1,301,464
291,884
(22,767)
Increase (decrease) in net assets from operations
 $              1,362,351
$              444,757
$              193,327

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
113
Sub-Account
115
Sub-Account
SDC
Sub-Account
     
Dividend income
$                59,545
$                     -
$                  9,086
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
1,098
10,356
11,613
Realized gain distributions
205,701
90,361
19,548
Net realized gains (losses)
206,799
100,717
31,161
Net change in unrealized appreciation (depreciation)
200,400
(195,524)
8,501
Net realized and change in unrealized gains (losses)
407,199
(94,807)
39,662
Increase (decrease) in net assets from operations
$              466,744
$                (94,807)
$                48,748

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
SGC
Sub-Account
112
Sub-Account
117
Sub-Account
     
Dividend income
$                59,261
$                 65,589
$                  6,195
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
308,430
220,209
1,198
Realized gain distributions
781,102
152,051
5,689
Net realized gains (losses)
1,089,532
372,260
6,887
Net change in unrealized appreciation (depreciation)
401,845
189,030
195,326
Net realized and change in unrealized gains (losses)
1,491,377
561,290
202,213
Increase (decrease) in net assets from operations
$            1,550,638
$              626,879
$                208,408

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
Dividend income
Net realized and change in unrealized gains (losses): Net realized gains (losses) on sale of investments Realized gain distributions
VKM
Sub-Account
OCF
Sub-Account
  
OCA
Sub-Account
$                  2,351
4,427
22,224
$                  7,188
8,253
-
$
276
2,901
-
Net realized gains (losses)
26,651
8,253
  
2,901
Net change in unrealized appreciation (depreciation)
274,546
174,461
  
4,467
Net realized and change in unrealized gains (losses)
301,197
182,714
  
7,368
Increase (decrease) in net assets from operations
$              303,548
$              189,902
$
7,644

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
OGG
Sub-Account
OMG
Sub-Account
PCR
Sub-Account
     
Dividend income
 $                     1,090
$                  1,149
$                 10,230
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
11,550
28,505
(59,528)
Realized gain distributions
-
-
-
Net realized gains (losses)
11,550
28,505
(59,528)
Net change in unrealized appreciation (depreciation)
8,449
7,458
(45,962)
Net realized and change in unrealized gains (losses)
19,999
35,963
(105,490)
Increase (decrease) in net assets from operations
$                 21,089
$                 37,112
$                (95,260)

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
PMB
Sub-Account
SBJ
Sub-Account
PRR
Sub-Account
     
Dividend income
$                223,335
$                  2,815
$                58,156
Net realized and change in unrealized gains (losses):
      
Net realized gains (losses) on sale of investments
43,559
(632)
142,138
Realized gain distributions
36,556
-
25,678
Net realized gains (losses)
80,115
(632)
167,816
Net change in unrealized appreciation (depreciation)
(636,254)
(8,817)
(544,494)
Net realized and change in unrealized gains (losses)
(556,139)
(9,449)
(376,678)
Increase (decrease) in net assets from operations
$              (332,804)
$                 (6,634)
$             (318,522)

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR-ENDED DECEMBER 31, 2013
 

Income:
PTR
Sub-Account
TBC
Sub-Account
  
USC
Sub-Account
       
Dividend income
$              234,639
 $                   1,389
$
247
Net realized and change in unrealized gains (losses):
        
Net realized gains (losses) on sale of investments
45,284
377,660
  
2,636
Realized gain distributions
92,884
-
  
15,673
Net realized gains (losses)
138,168
377,660
  
18,309
Net change in unrealized appreciation (depreciation)
(595,094)
1,207,426
  
34,637
Net realized and change in unrealized gains (losses)
(456,926)
1,585,086
  
52,946
Increase (decrease) in net assets from operations
$             (222,287)
$            1,586,475
$                53,193

 
 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS
 
FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   
AL2 Sub-Account
  
AL4 Sub-Account
 
December 31,
2013
  
December 31,
2012
  
December 31,
2013
  
December 31,
2012
Operations:
                
Net investment income (loss)
$
1,736
$
2,800
$
2,229
$
-
Net realized gains (losses)
  
2,731
  
2,373
  
49,952
  
(9,562)
Net change in unrealized appreciation/ depreciation
  
18,500
  
4,940
  
154,884
  
101,023
Increase (decrease) in net assets from operations
  
22,967
  
10,113
  
207,065
  
91,461
Contract Owner Transactions:
                
Purchase payments received
  
4
  
(76)
  
39,633
  
34,481
Transfers between Sub-Accounts (including the Fixed Account), net
  
(6)
  
-
  
(52,359)
  
(42,184)
Withdrawals, surrenders, annuitizations and contract charges
  
(6,027)
  
(3,787)
  
(10,335)
  
(14,601)
Mortality and expense risk charges
  
(348)
  
(367)
  
(3,640)
  
(3,597)
Charges for life insurance protection and monthly administration charge
  
(3,280)
  
(9,075)
  
(31,757)
  
(32,735)
Net increase (decrease) from contract owner transactions
  
(9,657)
  
(13,305)
  
(58,458)
  
(58,636)
Total increase (decrease) in net assets
  
13,310
  
(3,192)
  
148,607
  
32,825
Net assets at beginning of year
  
80,798
  
83,990
  
602,934
  
570,109
Net assets at end of year
$
94,108
$
80,798
$
751,541
$
602,934

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

     Operations:
      Net investment income (loss)
  
AL3 Sub-Account
AVB Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
  
December 31,
2012
$
             -                   $
$                    -
 $                    6,148
$
4,841
Net realized gains (losses)
  
6,470
6,411
5,197
  
1,827
Net change in unrealized appreciation/ depreciation
  
1,099
(3,538)
30,077
  
23,994
Increase (decrease) in net assets from operations
  
7,569
2,873
41,422
  
30,662
Contract Owner Transactions:
            
Purchase payments received
  
                 -
-
10,421
  
13,357
Transfers between Sub-Accounts (including the Fixed Account), net
  
-
-
6,484
  
15,882
Withdrawals, surrenders, annuitizations and contract charges
  
(6,106)
(664)
(3,313)
  
-
Mortality and expense risk charges
  
(75)
(76)
(593)
  
(561)
Charges for life insurance protection and monthly administration charge
  
(1,957)
(1,726)
(28,438)
  
(27,830)
Net increase (decrease) from contract owner transactions
  
(8,138)
(2,466)
(15,439)
  
848
Total increase (decrease) in net assets
  
(569)
407
25,983
  
31,510
Net assets at beginning of year
  
24,053
23,646
257,872
  
226,362
Net assets at end of year
$
               23,484$
24,053
$            283,855
$
257,872

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

Operations:
Net investment income (loss)
  
AN2 Sub-Account
AN3 Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
$
16
$              -
$             35,774
$            37,201
Net realized gains (losses)
  
1,270
1,582
(76,393)
(83,564)
Net change in unrealized appreciation/ depreciation
  
14,162
7,838
974,554
481,559
Increase (decrease) in net assets from operations
  
15,448
9,420
933,935
435,196
Contract Owner Transactions:
          
Purchase payments received
  
-
-
187,243
215,479
Transfers between Sub-Accounts (including the Fixed Account), net
  
(138)
-
(197,799)
(69,942)
Withdrawals, surrenders, annuitizations and contract charges
  
(316)
(10,833)
(187,092)
(97,292)
Mortality and expense risk charges
  
(349)
(548)
(16,346)
(16,464)
Charges for life insurance protection and monthly administration charge
  
(5,467)
(6,596)
(150,705)
(163,203)
Net increase (decrease) from contract owner transactions
  
(6,270)
(17,977)
(364,699)
(131,422)
Total increase (decrease) in net assets
  
9,178
(8,557)
569,236
303,774
Net assets at beginning of year
  
71,318
79,875
2,875,774
2,572,000
Net assets at end of year
$
80,496
$           71,318
$          3,445,010
$         2,875,774

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   
IVB Sub-Account
308 Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Operations:
          
Net investment income (loss)
$
7,430
$             1,030
$              9,550$
15,386
Net realized gains (losses)
  
1,564
(2,258)
93,409
13,508
Net change in unrealized appreciation/ depreciation
  
15,112
10,707
77,691
45,035
Increase (decrease) in net assets from operations
  
24,106
9,479
180,650
73,929
Contract Owner Transactions:
          
Purchase payments received
  
16,202
8,650
43,174
46,239
Transfers between Sub-Accounts (including the Fixed Account), net
  
29,812
1,043
(382,145)
177,740
Withdrawals, surrenders, annuitizations and contract charges
  
(307)
(7,711)
(41,880)
(1,695)
Mortality and expense risk charges
  
(461)
(319)
(1,126)
(1,701)
Charges for life insurance protection and monthly administration charge
  
(7,112)
(7,364)
(18,319)
(21,171)
Net increase (decrease) from contract owner transactions
  
38,134
(5,701)
(400,296)
199,412
Total increase (decrease) in net assets
  
62,240
3,778
(219,646)
273,341
Net assets at beginning of year
77,370
73,592
                   776,042                                502,701
Net assets at end of year
$             139,610
$           77,370
$            556,396                     $776,042

 
The accompanying notes are an integral part of these financial statements.
 

 
 
 


 

 

 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

Operations:
Net investment income (loss)
Net realized gains (losses)
Net change in unrealized appreciation/ depreciation
Increase (decrease) in net assets from operations
301 Sub-Account
304 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
$                4,124
6,993
(15,992)
$             6,470
5,289
2,452
$             12,835
39,367
209,995
$             7,684
7,693
103,648
(4,875)
14,211
262,197
119,025
Contract Owner Transactions:
        
Purchase payments received
26,618
48,346
85,163
23,713
Transfers between Sub-Accounts (including the Fixed Account), net
(4,208)
(48,529)
(41,592)
451,201
Withdrawals, surrenders, annuitizations and contract charges
(41,661)
(11,010)
(38,682)
(11,640)
Mortality and expense risk charges
(464)
(536)
(2,078)
(1,487)
Charges for life insurance protection and monthly administration charge
(10,056)
(14,003)
(16,104)
(17,706)
Net increase (decrease) from contract owner transactions
(29,771)
(25,732)
(13,293)
444,081
Total increase (decrease) in net assets
(34,646)
(11,521)
248,904
563,106
Net assets at beginning of year
263,249
274,770
895,751
332,645
Net assets at end of year
$             228,603
$           263,249
$          1,144,655
$           895,751

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

 
307 Sub-Account
306 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Operations:
        
Net investment income (loss)
$              33,655
$            20,259
$              4,678$
6,031
Net realized gains (losses)
16,348
(2,647)
8,677
745
Net change in unrealized appreciation/ depreciation
151,800
75,976
121,810
64,505
Increase (decrease) in net assets from operations
201,803
93,588
135,165
71,281
Contract Owner Transactions:
        
Purchase payments received
124,213
69,578
68,847
70,112
Transfers between Sub-Accounts (including the Fixed Account), net
3,266
492,857
(6,669)
(63,791)
Withdrawals, surrenders, annuitizations and contract charges
(2,835)
(2,423)
(36,093)
(1,825)
Mortality and expense risk charges
(2,163)
(1,484)
(1,130)
(930)
Charges for life insurance protection and monthly administration charge
(26,862)
(20,652)
(12,341)
(15,170)
Net increase (decrease) from contract owner transactions
95,619
537,876
12,614
(11,604)
Total increase (decrease) in net assets
297,422
631,464
147,779
59,677
Net assets at beginning of year
823,214
191,750
$                 466,235                                406,558
Net assets at end of year
$           1,120,636
$           823,214
$            614,014                     $466,235

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
303 Sub-Account
302 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$                8,818
$             6,835
$              4,833$
5,148
Net realized gains (losses)
43,450
21,393
10,412
1,626
Net change in unrealized appreciation/ depreciation
193,784
73,641
84,805
40,434
Increase (decrease) in net assets from operations
246,052
101,869
100,050
47,208
Contract Owner Transactions:
        
Purchase payments received
99,067
89,168
22,042
26,243
Transfers between Sub-Accounts (including the Fixed Account), net
(34,592)
268,376
8,471
13,966
Withdrawals, surrenders, annuitizations and contract charges
(112,464)
(1,843)
(49,304)
(3,211)
Mortality and expense risk charges
(1,933)
(1,594)
(686)
(626)
Charges for life insurance protection and monthly administration charge
(26,874)
(24,986)
(8,103)
(8,098)
Net increase (decrease) from contract owner transactions
(76,796)
329,121
(27,580)
28,274
Total increase (decrease) in net assets
169,256
430,990
72,470
75,482
Net assets at beginning of year
881,914
450,924
$                330,436                               254,954
Net assets at end of year
$           1,051,170
$           881,914
$            402,906                     $330,436

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

Operations:
305 Sub-Account
300 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$             112,739$
51,470
$             11,154
$            14,943
Net realized gains (losses)
45,715
(17,444)
43,565
(744)
Net change in unrealized appreciation/ depreciation
(69,530)
76,120
117,508
144,227
Increase (decrease) in net assets from operations
88,924
110,146
172,227
158,426
Contract Owner Transactions:
        
Purchase payments received
97,163
86,384
81,071
94,545
Transfers between Sub-Accounts (including the Fixed Account), net
1,022,207
(517,141)
13,783
9,748
Withdrawals, surrenders, annuitizations and contract charges
(48,526)
(9,148)
(410,031)
(7,499)
Mortality and expense risk charges
(3,142)
(1,805)
(1,690)
(1,960)
Charges for life insurance protection and monthly administration charge
(29,903)
(26,029)
(25,200)
(32,349)
Net increase (decrease) from contract owner transactions
1,037,799
(467,739)
(342,067)
62,485
Total increase (decrease) in net assets
1,126,723
(357,593)
(169,840)
220,911
Net assets at beginning of year
                     793,5721,151,165
1,057,079
836,168
Net assets at end of year
  $           1,920,295                       $              793,572
$            887,239
$         1,057,079

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

 
9XX Sub-Account
MCC Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Operations:
        
Net investment income (loss)
$              30,540$
44,832
$              1,285
$                -
Net realized gains (losses)
167,508
49,108
19,908
21,860
Net change in unrealized appreciation/ depreciation
200,017
194,477
166,960
27,043
Increase (decrease) in net assets from operations
398,065
288,417
188,153
48,903
Contract Owner Transactions:
        
Purchase payments received
267,832
310,547
52,576
64,800
Transfers between Sub-Accounts (including the Fixed Account), net
104,840
(20,652)
(37,733)
1,855
Withdrawals, surrenders, annuitizations and contract charges
(632,379)
(177,977)
(890)
(68,497)
Mortality and expense risk charges
(11,511)
(12,560)
(2,152)
(1,950)
Charges for life insurance protection and monthly administration charge
(151,974)
(170,003)
(24,065)
(29,777)
Net increase (decrease) from contract owner transactions
(423,192)
(70,645)
(12,264)
(33,569)
Total increase (decrease) in net assets
(25,127)
217,772
175,889
15,334
Net assets at beginning of year
                 3,047,6562,829,884
463,554
448,220
Net assets at end of year
$           3,022,529                     $3,047,656
$           639,443
$          463,554

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
  
DGO Sub-Account
DMC Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$
209
$             1,646
$            51,637
$            12,815
Net realized gains (losses)
  
192,101
93,960
111,922
(28,831)
Net change in unrealized appreciation/ depreciation
  
130,818
(31,377)
920,890
539,079
Increase (decrease) in net assets from operations
  
323,128
64,229
1,084,449
523,063
Contract Owner Transactions:
          
Purchase payments received
  
79,627
69,511
225,668
218,327
Transfers between Sub-Accounts (including the Fixed Account), net
  
128,129
24,328
(254,615)
158,750
Withdrawals, surrenders, annuitizations and contract charges
  
(5,600)
(8,466)
(135,213)
(108,683)
Mortality and expense risk charges
  
(4,414)
(3,218)
(16,101)
(14,344)
Charges for life insurance protection and monthly administration charge
  
(60,099)
(50,775)
(178,672)
(178,192)
Net increase (decrease) from contract owner transactions
  
137,643
31,380
(358,933)
75,858
Total increase (decrease) in net assets
  
460,771
95,609
725,516
598,921
Net assets at beginning of year
706,950
611,341
3,241,141
2,642,220
Net assets at end of year
     $         1,167,721
$           706,950
$         3,966,657
$         3,241,141

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
SSC Sub-Account
SCV Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$             47,134
$           20,075
$             28,316$
25,663
Net realized gains (losses)
312,468
(90,804)
89,282
24,058
Net change in unrealized appreciation/ depreciation
715,028
541,928
656,355
238,474
Increase (decrease) in net assets from operations
1,074,630
471,199
773,953
288,195
Contract Owner Transactions:
        
Purchase payments received
60,123
67,715
120,849
141,272
Transfers between Sub-Accounts (including the Fixed Account), net
(384,429)
(264,222)
(138,353)
(23,967)
Withdrawals, surrenders, annuitizations and contract charges
(144,160)
(156,713)
(45,858)
(64,393)
Mortality and expense risk charges
(15,158)
(17,347)
(12,870)
(13,101)
Charges for life insurance protection and monthly administration charge
(133,634)
(159,896)
(108,399)
(111,368)
Net increase (decrease) from contract owner transactions
(617,258)
(530,463)
(184,631)
(71,557)
Total increase (decrease) in net assets
457,372
(59,264)
589,322
216,638
Net assets at beginning of year
3,123,933
3,183,197
$             2,327,519                                2,110,881
Net assets at end of year
$           3,581,305
$         3,123,933
$          2,916,841                     $   2,327,519

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
FVB Sub-Account
FL1 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$              4,137
$            3,675
$            21,208$
19,614
Net realized gains (losses)
18,253
23,677
83,060
25,275
Net change in unrealized appreciation/ depreciation
28,959
4,305
486,528
188,431
Increase (decrease) in net assets from operations
51,349
31,657
590,796
233,320
Contract Owner Transactions:
        
Purchase payments received
53,279
53,229
309,214
334,456
Transfers between Sub-Accounts (including the Fixed Account), net
15,013
30,488
449,947
(42,570)
Withdrawals, surrenders, annuitizations and contract charges
(2,147)
(42,366)
(204,235)
(4,228)
Mortality and expense risk charges
(1,090)
(875)
(5,468)
(4,349)
Charges for life insurance protection and monthly administration charge
(36,271)
(29,216)
(101,915)
(102,521)
Net increase (decrease) from contract owner transactions
28,784
11,260
447,543
180,788
Total increase (decrease) in net assets
80,133
42,917
1,038,339
414,108
Net assets at beginning of year
246,884
203,967
$             1,775,553                                1,361,445
Net assets at end of year
$            327,017
$          246,884
$          2,813,892                    $    1,775,553

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
FL6 Sub-Account
  
F15 Sub-Account
December 31,
2013
December 31,
2012
  
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$              64,811
$            86,278
$
13
$              813
Net realized gains (losses)
(74,416)
(166,110)
  
4,881
65,827
Net change in unrealized appreciation/ depreciation
1,886,187
1,075,311
  
(211)
(32,400)
Increase (decrease) in net assets from operations
1,876,582
995,479
  
4,683
34,240
Contract Owner Transactions:
          
Purchase payments received
312,516
330,571
  
12,142
56,195
Transfers between Sub-Accounts (including the Fixed Account), net
(1,120,853)
37,844
  
(14,146)
-
Withdrawals, surrenders, annuitizations and contract charges
(430,752)
(124,844)
  
(48,345)
(325,333)
Mortality and expense risk charges
(32,758)
(38,278)
  
(73)
(632)
Charges for life insurance protection and monthly administration charge
(283,225)
(369,828)
  
(1,254)
(19,661)
Net increase (decrease) from contract owner transactions
(1,555,072)
(164,535)
  
(51,676)
(289,431)
Total increase (decrease) in net assets
321,510
830,944
  
(46,993)
(255,191)
Net assets at beginning of year
6,964,007
6,133,063
  
46,994
302,185
Net assets at end of year
$           7,285,517
$         6,964,007
$
1
$           46,994

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
F20 Sub-Account
F30 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$              4,773
$             4,297
$             1,600$
1,619
Net realized gains (losses)
6,328
10,864
2,611
18,380
Net change in unrealized appreciation/ depreciation
28,361
12,547
15,416
8,561
Increase (decrease) in net assets from operations
39,462
27,708
19,627
28,560
Contract Owner Transactions:
        
Purchase payments received
63,604
70,070
13,433
39,726
Transfers between Sub-Accounts (including the Fixed Account), net
-
-
(59)
2
Withdrawals, surrenders, annuitizations and contract charges
-
(41,171)
-
(178,273)
Mortality and expense risk charges
(664)
(558)
(401)
(583)
Charges for life insurance protection and monthly administration charge
(24,181)
(24,015)
(4,753)
(8,912)
Net increase (decrease) from contract owner transactions
38,759
4,326
8,220
(148,040)
Total increase (decrease) in net assets
78,221
32,034
27,847
(119,480)
Net assets at beginning of year
243,629
211,595
86,882
206,362
Net assets at end of year
$            321,850
$          243,629
$           114,729$
86,882

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
FL8 Sub-Account
FIS Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$                4,064$
9,617
$           157,868
$          158,913
Net realized gains (losses)
34,973
17,853
440,455
474,634
Net change in unrealized appreciation/ depreciation
617,205
233,559
1,991,915
588,659
Increase (decrease) in net assets from operations
656,242
261,029
2,590,238
1,222,206
Contract Owner Transactions:
        
Purchase payments received
103,439
70,598
442,540
591,282
Transfers between Sub-Accounts (including the Fixed Account), net
(95,163)
(104,624)
(230,021)
(1,046,913)
Withdrawals, surrenders, annuitizations and contract charges
(103,822)
(3,051)
(849,065)
(20,714)
Mortality and expense risk charges
(10,252)
(10,381)
(23,681)
(20,907)
Charges for life insurance protection and monthly administration charge
(78,251)
(87,744)
(223,970)
(240,924)
Net increase (decrease) from contract owner transactions
(184,049)
(135,202)
(884,197)
(738,176)
Total increase (decrease) in net assets
472,193
125,827
1,706,041
484,030
Net assets at beginning of year
$               1,920,4241,794,597
8,655,616
8,171,586
Net assets at end of year
$           2,392,617                     $1,920,424
$         10,361,657
$         8,655,616

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
FL4 Sub-Account
FVM Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$            290,205
$          253,843
$              5,728
$             6,150
Net realized gains (losses)
182,153
(262,976)
293,044
197,461
Net change in unrealized appreciation/ depreciation
3,808,473
1,775,368
304,479
(12,954)
Increase (decrease) in net assets from operations
4,280,831
1,766,235
603,251
190,657
Contract Owner Transactions:
        
Purchase payments received
1,037,884
1,012,076
203,219
208,653
Transfers between Sub-Accounts (including the Fixed Account), net
324,287
(765,589)
4,628
93,383
Withdrawals, surrenders, annuitizations and contract charges
33,056
(378,229)
(49,868)
(39,849)
Mortality and expense risk charges
(73,646)
(62,497)
(4,867)
(3,727)
Charges for life insurance protection and monthly administration charge
(932,309)
(886,152)
(65,080)
(63,054)
Net increase (decrease) from contract owner transactions
389,272
(1,080,391)
88,032
195,406
Total increase (decrease) in net assets
4,670,103
685,844
691,283
386,063
Net assets at beginning of year
12,861,805
12,175,961
1,640,565
1,254,502
Net assets at end of year
$         17,531,908
$        12,861,805
$          2,331,848
$         1,640,565

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

Operations:
Net investment income (loss)
Net realized gains (losses)
Net change in unrealized appreciation/ depreciation
Increase (decrease) in net assets from operations
FL5 Sub-Account
FL7 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
$                  648
-
-
$             3,401
-
-
$             95,049
(211,965)
2,116,745
$           128,014
(379,178)
1,441,874
648
3,401
1,999,829
1,190,710
Contract Owner Transactions:
        
Purchase payments received
684,675
759,321
481,758
517,446
Transfers between Sub-Accounts (including the Fixed Account), net
(1,084,102)
2,657,865
(838,616)
529,288
Withdrawals, surrenders, annuitizations and contract charges
(576,968)
(2,350,957)
(127,067)
(202,849)
Mortality and expense risk charges
(37,005)
(45,560)
(45,062)
(40,210)
Charges for life insurance protection and monthly administration charge
(545,110)
(702,621)
(366,941)
(392,902)
Net increase (decrease) from contract owner transactions
(1,558,510)
318,048
(895,928)
410,773
Total increase (decrease) in net assets
(1,557,862)
321,449
1,103,901
1,601,483
Net assets at beginning of year
7,653,144
7,331,695
7,198,531
5,597,048
Net assets at end of year
$           6,095,282
$         7,653,144
$          8,302,432
$         7,198,531

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
SGI Sub-Account
  
S17 Sub-Account
December 31,
2013
December 31,
2012
  
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$              30,804
$           12,591
$
21,756
$             3,932
Net realized gains (losses)
116,257
148,701
  
32,333
736
Net change in unrealized appreciation/ depreciation
67,084
74,245
  
(14,283)
16,252
Increase (decrease) in net assets from operations
214,145
235,537
  
39,806
20,920
Contract Owner Transactions:
          
Purchase payments received
245,484
346,205
  
13,910
14,056
Transfers between Sub-Accounts (including the Fixed Account), net
(39,439)
(413,668)
  
-
-
Withdrawals, surrenders, annuitizations and contract charges
(188,887)
(54,171)
  
(12)
(11)
Mortality and expense risk charges
(4,040)
(4,078)
  
(453)
(369)
Charges for life insurance protection and monthly administration charge
(92,011)
(110,044)
  
(3,965)
(4,452)
Net increase (decrease) from contract owner transactions
(78,893)
(235,756)
  
9,480
9,224
Total increase (decrease) in net assets
135,252
(219)
  
49,286
30,144
Net assets at beginning of year
1,706,028
1,706,247
165,824
135,680
Net assets at end of year
$           1,841,280
$         1,706,028
$            215,110
$          165,824

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
ISC Sub-Account
FVS Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$             40,666
$           40,113
$            20,445
$             8,384
Net realized gains (losses)
12,286
7,929
84,808
103,449
Net change in unrealized appreciation/ depreciation
32,132
24,177
368,789
109,063
Increase (decrease) in net assets from operations
85,084
72,219
474,042
220,896
Contract Owner Transactions:
        
Purchase payments received
62,163
71,261
119,155
153,900
Transfers between Sub-Accounts (including the Fixed Account), net
4,977
(4,230)
(41,049)
(245,347)
Withdrawals, surrenders, annuitizations and contract charges
(54,792)
(7,172)
(116,161)
(36,509)
Mortality and expense risk charges
(1,087)
(1,012)
(3,414)
(2,744)
Charges for life insurance protection and monthly administration charge
(31,901)
(34,073)
(52,889)
(60,955)
Net increase (decrease) from contract owner transactions
(20,640)
24,774
(94,358)
(191,655)
Total increase (decrease) in net assets
64,444
96,993
379,684
29,241
Net assets at beginning of year
644,870
547,877
1,339,337
1,310,096
Net assets at end of year
$            709,314
$          644,870
$          1,719,021
$         1,339,337

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

     Operations:
SIC Sub-Account
  
FGF Sub-Account
December 31,
2013
December 31,
2012
  
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$              89,499
$          105,696
$
1    $
1
Net realized gains (losses)
18,085
2,690
  
-
1
Net change in unrealized appreciation/ depreciation
(56,832)
49,963
  
(2)
(1)
Increase (decrease) in net assets from operations
50,752
158,349
  
(1)
1
Contract Owner Transactions:
          
Purchase payments received
158,772
113,457
  
16
11
Transfers between Sub-Accounts (including the Fixed Account), net
9,265
386,572
  
-
-
Withdrawals, surrenders, annuitizations and contract charges
(207,295)
(19,153)
  
-
-
Mortality and expense risk charges
(3,351)
(3,050)
  
-
-
Charges for life insurance protection and monthly administration charge
(62,034)
(63,957)
  
(11)
(16)
Net increase (decrease) from contract owner transactions
(104,643)
413,869
  
5
(5)
Total increase (decrease) in net assets
(53,891)
572,218
  
4
(4)
Net assets at beginning of year
1,588,700
1,016,482
  
44
48
Net assets at end of year
$           1,534,809
$        1,588,700
$
48      $
44

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
FMS Sub-Account
FTI Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$              37,598
$           31,574
$           167,397
$           163,591
Net realized gains (losses)
54,832
9,376
(345,764)
(201,827)
Net change in unrealized appreciation/ depreciation
356,460
131,298
1,671,709
957,423
Increase (decrease) in net assets from operations
448,890
172,248
1,493,342
919,187
Contract Owner Transactions:
        
Purchase payments received
144,766
112,920
451,912
387,368
Transfers between Sub-Accounts (including the Fixed Account), net
36,077
513,720
1,669,104
(191,811)
Withdrawals, surrenders, annuitizations and contract charges
(61,398)
(3,665)
(868,071)
(247,758)
Mortality and expense risk charges
(4,319)
(3,634)
(36,526)
(33,259)
Charges for life insurance protection and monthly administration charge
(57,756)
(58,001)
(410,962)
(333,885)
Net increase (decrease) from contract owner transactions
57,370
561,340
805,457
(419,345)
Total increase (decrease) in net assets
506,260
733,588
2,298,799
499,842
Net assets at beginning of year
1,621,306
887,718
5,740,658
5,240,816
Net assets at end of year
$           2,127,566
$        1,621,306
$          8,039,457
$         5,740,658

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
FTG Sub-Account
  
GS4 Sub-Account
December 31,
2013
December 31,
2012
  
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$             48,674$
33,181
$
2,598
$             2,514
Net realized gains (losses)
(68,928)
(97,081)
  
29,252
22,913
Net change in unrealized appreciation/ depreciation
514,435
372,077
  
27,312
10,474
Increase (decrease) in net assets from operations
494,181
308,177
  
59,162
35,901
Contract Owner Transactions:
          
Purchase payments received
128,293
112,750
  
5,014
5,033
Transfers between Sub-Accounts (including the Fixed Account), net
(124,874)
(104,390)
  
(4,300)
(66,972)
Withdrawals, surrenders, annuitizations and contract charges
(22,131)
(36,218)
  
-
(1,137)
Mortality and expense risk charges
(9,973)
(10,506)
  
(679)
(607)
Charges for life insurance protection and monthly administration charge
(105,047)
(101,578)
  
(10,467)
(9,309)
Net increase (decrease) from contract owner transactions
(133,732)
(139,942)
  
(10,432)
(72,992)
Total increase (decrease) in net assets
360,449
168,235
  
48,730
(37,091)
Net assets at beginning of year
$               1,678,7971,510,562
182,171
219,262
Net assets at end of year
$           2,039,246                     $1,678,797
$           230,901
$           182,171

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

Operations:
Net investment income (loss)
GS8 Sub-Account
GS5 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
$                2,691
$            3,843
$             6,564
$             8,004
Net realized gains (losses)
30,879
(2,323)
11,651
(10,234)
Net change in unrealized appreciation/ depreciation
59,231
52,906
62,750
84,042
Increase (decrease) in net assets from operations
92,801
54,426
80,965
81,812
Contract Owner Transactions:
        
Purchase payments received
                     -
-
17,025
22,453
Transfers between Sub-Accounts (including the Fixed Account), net
(49,655)
(220)
(18,187)
1,940
Withdrawals, surrenders, annuitizations and contract charges
(23,433)
(3,024)
(50,141)
(109,119)
Mortality and expense risk charges
(1,855)
(1,937)
(1,261)
(1,647)
Charges for life insurance protection and monthly administration charge
(11,777)
(14,100)
(26,436)
(36,534)
Net increase (decrease) from contract owner transactions
(86,720)
(19,281)
(79,000)
(122,907)
Total increase (decrease) in net assets
6,081
35,145
1,965
(41,095)
Net assets at beginning of year
337,561
302,416
378,658
419,753
Net assets at end of year
$             343,642
$          337,561
$           380,623
$           378,658

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
GS2 Sub-Account
GS3 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$                2,303
$            2,371
$            41,711$
57,684
Net realized gains (losses)
37,761
4,355
113,715
(38,970)
Net change in unrealized appreciation/ depreciation
30,016
17,958
1,001,057
411,326
Increase (decrease) in net assets from operations
70,080
24,684
1,156,483
430,040
Contract Owner Transactions:
        
Purchase payments received
7,311
8,151
180,428
166,548
Transfers between Sub-Accounts (including the Fixed Account), net
(1,937)
(6,531)
(153,975)
(178,943)
Withdrawals, surrenders, annuitizations and contract charges
(7,900)
(9,639)
(143,883)
(150,525)
Mortality and expense risk charges
(779)
(682)
(18,648)
(18,502)
Charges for life insurance protection and monthly administration charge
(12,938)
(12,457)
(157,272)
(162,153)
Net increase (decrease) from contract owner transactions
(16,243)
(21,158)
(293,350)
(343,575)
Total increase (decrease) in net assets
53,837
3,526
863,133
86,465
Net assets at beginning of year
201,990
198,464
               3,197,551                                3,111,086
Net assets at end of year
$             255,827
$          201,990
$           4,060,684                     $    3,197,551

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

 
FFG Sub-Account
VKC Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Operations:
        
Net investment income (loss)
$                3,441
$                -
$              4,208
$              1,100
Net realized gains (losses)
16,177
(5,114)
48,427
4,452
Net change in unrealized appreciation/ depreciation
244,899
(16,828)
168,384
20,572
Increase (decrease) in net assets from operations
264,517
(21,942)
221,019
26,124
Contract Owner Transactions:
        
Purchase payments received
42,313
35,092
20,856
13,877
Transfers between Sub-Accounts (including the Fixed Account), net
(18,398)
797,820
470,799
19,081
Withdrawals, surrenders, annuitizations and contract charges
(71,797)
(59,122)
(19,058)
(1,327)
Mortality and expense risk charges
(2,712)
(2,035)
(641)
(396)
Charges for life insurance protection and monthly administration charge
(53,831)
(40,226)
(68,712)
(8,280)
Net increase (decrease) from contract owner transactions
(104,425)
731,529
403,244
22,955
Total increase (decrease) in net assets
160,092
709,587
624,263
49,079
Net assets at beginning of year
709,587
-
201,137
152,058
Net assets at end of year
$            869,679
$          709,587
$            825,400
$           201,137

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

  Operations:
VLC Sub-Account
AI3 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$              10,545
$            10,552
$             14,081$
8,462
Net realized gains (losses)
58,207
20,347
40,447
45,477
Net change in unrealized appreciation/ depreciation
165,525
86,841
205,070
71,329
Increase (decrease) in net assets from operations
234,277
117,740
259,598
125,268
Contract Owner Transactions:
        
Purchase payments received
35,507
45,015
53,018
58,011
Transfers between Sub-Accounts (including the Fixed Account), net
(72,839)
63,260
(11,120)
(81,600)
Withdrawals, surrenders, annuitizations and contract charges
(98,559)
(455)
(82,975)
(19,736)
Mortality and expense risk charges
(1,028)
(960)
(3,555)
(4,165)
Charges for life insurance protection and monthly administration charge
(35,593)
(37,826)
(45,145)
(61,478)
Net increase (decrease) from contract owner transactions
(172,512)
69,034
(89,777)
(108,968)
Total increase (decrease) in net assets
61,765
186,774
169,821
16,300
Net assets at beginning of year
745,043
558,269
                  943,216                               926,916
Net assets at end of year
$             806,808
$           745,043
$          1,113,037                      $943,216

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
  
VKU Sub-Account
VGI Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$
7,604
$             6,293
$            20,027
$           24,834
Net realized gains (losses)
  
38,567
1,309
100,350
64,820
Net change in unrealized appreciation/ depreciation
  
68,941
31,819
286,269
117,393
Increase (decrease) in net assets from operations
  
115,112
39,421
406,646
207,047
Contract Owner Transactions:
          
Purchase payments received
  
71,156
38,464
68,794
71,127
Transfers between Sub-Accounts (including the Fixed Account), net
  
(73,139)
190,439
(2,602)
(232,951)
Withdrawals, surrenders, annuitizations and contract charges
  
(743)
(79)
(43,824)
(234,498)
Mortality and expense risk charges
  
(1,101)
(589)
-
-
Charges for life insurance protection and monthly administration charge
  
(38,117)
(16,734)
(65,206)
(70,998)
Net increase (decrease) from contract owner transactions
  
(41,944)
211,501
(42,838)
(467,320)
Total increase (decrease) in net assets
  
73,168
250,922
363,808
(260,273)
Net assets at beginning of year
537,498
286,576
1,287,760
1,548,033
Net assets at end of year
$             610,666
$          537,498
$          1,651,568
$         1,287,760

 
The accompanying notes are an integral part of these financial statements.
 

 
 
 


 

 

 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
AI4 Sub-Account
FFI Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$              96,284
$          107,219
$                598
$                -
Net realized gains (losses)
765,261
4,388
1,501
(358)
Net change in unrealized appreciation/ depreciation
415,700
886,845
43,386
(2,262)
Increase (decrease) in net assets from operations
1,277,245
998,452
45,485
(2,620)
Contract Owner Transactions:
        
Purchase payments received
318,080
294,540
-
259
Transfers between Sub-Accounts (including the Fixed Account), net
(2,065,412)
465,148
4,221
131,558
Withdrawals, surrenders, annuitizations and contract charges
(231,509)
(256,263)
(7,863)
(19)
Mortality and expense risk charges
(38,325)
(37,625)
(862)
(545)
Charges for life insurance protection and monthly administration charge
(269,812)
(381,571)
(2,636)
(1,838)
Net increase (decrease) from contract owner transactions
(2,286,978)
84,229
(7,140)
129,415
Total increase (decrease) in net assets
(1,009,733)
1,082,681
38,345
126,795
Net assets at beginning of year
7,424,887
6,342,206
126,795
-
Net assets at end of year
$           6,415,154
$        7,424,887
$            165,140
$           126,795

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

Operations:
Net investment income (loss)
ASC Sub-Account
MCA Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
$                   15
$              -
$                 -
$             1,481
Net realized gains (losses)
4,870
2,723
73,832
57,082
Net change in unrealized appreciation/ depreciation
50,550
18,325
113,580
28,949
Increase (decrease) in net assets from operations
55,435
21,048
187,412
87,512
Contract Owner Transactions:
        
Purchase payments received
                     -
-
35,467
58,726
Transfers between Sub-Accounts (including the Fixed Account), net
(1,447)
(1,620)
(16,628)
(137,110)
Withdrawals, surrenders, annuitizations and contract charges
(5,157)
(14,795)
11,532
(9,300)
Mortality and expense risk charges
(951)
(1,078)
(1,183)
(1,392)
Charges for life insurance protection and monthly administration charge
(4,965)
(7,216)
(45,945)
(58,027)
Net increase (decrease) from contract owner transactions
(12,520)
(24,709)
(16,757)
(147,103)
Total increase (decrease) in net assets
42,915
(3,661)
170,655
(59,591)
Net assets at beginning of year
154,861
158,522
476,016
535,607
Net assets at end of year
$             197,776
$          154,861
$            646,671
$          476,016

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
MBI Sub-Account
  
MTC Sub-Account
December 31,
2013
December 31,
2012
  
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$              31,878
$           16,122
$
5,994
$              367
Net realized gains (losses)
20,999
(7,297)
  
120,374
66,166
Net change in unrealized appreciation/ depreciation
122,837
126,754
  
178,210
70,121
Increase (decrease) in net assets from operations
175,714
135,579
  
304,578
136,654
Contract Owner Transactions:
          
Purchase payments received
79,046
97,018
  
69,670
103,316
Transfers between Sub-Accounts (including the Fixed Account), net
457,116
80,659
  
(71,017)
2,565
Withdrawals, surrenders, annuitizations and contract charges
(13,600)
(13,930)
  
5,015
(19,744)
Mortality and expense risk charges
(2,762)
(1,953)
  
(1,939)
(1,632)
Charges for life insurance protection and monthly administration charge
(67,888)
(68,960)
  
(67,633)
(84,972)
Net increase (decrease) from contract owner transactions
451,912
92,834
  
(65,904)
(467)
Total increase (decrease) in net assets
627,626
228,413
  
238,674
136,187
Net assets at beginning of year
835,548
607,135
854,260
718,073
Net assets at end of year
$           1,463,174
$          835,548
$          1,092,934
$          854,260

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
MBO Sub-Account
GGC Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$             15,448
$             4,033
$             57,079
$                -
Net realized gains (losses)
116,926
29,532
1,606
-
Net change in unrealized appreciation/ depreciation
40,541
47,817
187,058
-
Increase (decrease) in net assets from operations
172,915
81,382
245,743
-
Contract Owner Transactions:
        
Purchase payments received
57,521
55,645
48,592
-
Transfers between Sub-Accounts (including the Fixed Account), net
(145,269)
(91,636)
3,191,009
-
Withdrawals, surrenders, annuitizations and contract charges
(12,347)
(7,128)
(28,887)
-
Mortality and expense risk charges
(1,673)
(1,663)
(4,987)
-
Charges for life insurance protection and monthly administration charge
(48,669)
(53,517)
(66,716)
-
Net increase (decrease) from contract owner transactions
(150,437)
(98,299)
3,139,011
-
Total increase (decrease) in net assets
22,478
(16,917)
3,384,754
-
Net assets at beginning of year
561,124
578,041
-
-
Net assets at end of year
$            583,602
$          561,124
$          3,384,754
$                -

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

Operations:
Net investment income (loss)
GGE Sub-Account
FFL Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
$                3,060
$              -
$                1,245
$              -
Net realized gains (losses)
56
-
25,995
243
Net change in unrealized appreciation/ depreciation
11,454
-
136,211
8,781
Increase (decrease) in net assets from operations
14,570
-
163,451
9,024
Contract Owner Transactions:
        
Purchase payments received
12,318
-
20,372
2,305
Transfers between Sub-Accounts (including the Fixed Account), net
187,301
-
(3,328)
484,855
Withdrawals, surrenders, annuitizations and contract charges
-
-
(82,736)
(4,907)
Mortality and expense risk charges
(196)
-
(1,611)
(329)
Charges for life insurance protection and monthly administration charge
(3,447)
-
(36,164)
(7,856)
Net increase (decrease) from contract owner transactions
195,976
-
(103,467)
474,068
Total increase (decrease) in net assets
210,546
-
59,984
483,092
Net assets at beginning of year
-
-
483,092
-
Net assets at end of year
$             210,546
$                     -
$             543,076
$          483,092

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
     Net investment income (loss)
FFJ Sub-Account
FFS Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
$                  -
$             -
$                -
$             -
Net realized gains (losses)
136,829
73
67,710
280
Net change in unrealized appreciation/ depreciation
1,186,713
79,419
142,163
19,151
Increase (decrease) in net assets from operations
1,323,542
79,492
209,873
19,431
Contract Owner Transactions:
        
Purchase payments received
143,483
5,148
58,657
1,061
Transfers between Sub-Accounts (including the Fixed Account), net
(206,344)
3,935,743
174,647
519,494
Withdrawals, surrenders, annuitizations and contract charges
(564,275)
(201)
(29,694)
(233)
Mortality and expense risk charges
(13,938)
(1,084)
(1,970)
(143)
Charges for life insurance protection and monthly administration charge
(148,306)
(9,849)
(18,089)
(1,715)
Net increase (decrease) from contract owner transactions
(789,380)
3,929,757
183,551
518,464
Total increase (decrease) in net assets
534,162
4,009,249
393,424
537,895
Net assets at beginning of year
4,009,249
-
537,895
-
Net assets at end of year
$           4,543,411
$        4,009,249
$           931,319
$          537,895

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
FFQ Sub-Account
FFM Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$             86,098
$                -
$             14,313
$                -
Net realized gains (losses)
13,244
(53)
152,323
95
Net change in unrealized appreciation/ depreciation
(178,517)
65
1,092,779
56,616
Increase (decrease) in net assets from operations
(79,175)
12
1,259,415
56,711
Contract Owner Transactions:
        
Purchase payments received
1,043,858
20,726
251,441
12,111
Transfers between Sub-Accounts (including the Fixed Account), net
(763,204)
8,447,478
(819,514)
4,687,159
Withdrawals, surrenders, annuitizations and contract charges
(1,012,944)
(10,556)
(464,463)
(1,900)
Mortality and expense risk charges
(25,679)
(1,954)
(18,443)
(1,683)
Charges for life insurance protection and monthly administration charge
(413,430)
(39,846)
(184,081)
(13,056)
Net increase (decrease) from contract owner transactions
(1,171,399)
8,415,848
(1,235,060)
4,682,631
Total increase (decrease) in net assets
(1,250,574)
8,415,860
24,355
4,739,342
Net assets at beginning of year
8,415,860
-
4,739,342
-
Net assets at end of year
$          7,165,286
$         8,415,860
$          4,763,697
$         4,739,342

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
FFO Sub-Account
MIT Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$             42,364
$              -
$             30,759
$           21,234
Net realized gains (losses)
149,933
220
117,219
28,311
Net change in unrealized appreciation/ depreciation
825,341
15,412
294,424
137,902
Increase (decrease) in net assets from operations
1,017,638
15,632
442,402
187,447
Contract Owner Transactions:
        
Purchase payments received
226,977
8,139
58,440
84,329
Transfers between Sub-Accounts (including the Fixed Account), net
722,767
2,465,348
(52,187)
(131,694)
Withdrawals, surrenders, annuitizations and contract charges
(323,286)
(3)
(107,781)
(78,043)
Mortality and expense risk charges
(16,235)
(735)
(6,371)
(6,434)
Charges for life insurance protection and monthly administration charge
(244,149)
(10,360)
(73,534)
(86,913)
Net increase (decrease) from contract owner transactions
366,074
2,462,389
(181,433)
(218,755)
Total increase (decrease) in net assets
1,383,712
2,478,021
260,969
(31,308)
Net assets at beginning of year
2,478,021
-
1,252,593
1,283,901
Net assets at end of year
$           3,861,733
$        2,478,021
$          1,513,562
$         1,252,593

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
MF7 Sub-Account
EM1 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$              37,766
$           33,592
$            28,053
$           14,351
Net realized gains (losses)
16,131
33,497
(77,897)
71,583
Net change in unrealized appreciation/ depreciation
(60,425)
18,540
(60,121)
199,165
Increase (decrease) in net assets from operations
(6,528)
85,629
(109,965)
285,099
Contract Owner Transactions:
        
Purchase payments received
33,851
90,973
166,149
164,747
Transfers between Sub-Accounts (including the Fixed Account), net
99,349
(504,694)
(38,850)
(42,345)
Withdrawals, surrenders, annuitizations and contract charges
1,955
(5,240)
(37,383)
(52,433)
Mortality and expense risk charges
(2,343)
(1,874)
(4,198)
(3,605)
Charges for life insurance protection and monthly administration charge
(40,662)
(34,424)
(62,762)
(62,439)
Net increase (decrease) from contract owner transactions
92,150
(455,259)
22,956
3,925
Total increase (decrease) in net assets
85,622
(369,630)
(87,009)
289,024
Net assets at beginning of year
713,874
1,083,504
1,782,175
1,493,151
Net assets at end of year
$            799,496
$          713,874
$          1,695,166
$        1,782,175

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

     Operations:
GT2 Sub-Account
GSS Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$                 844
$              625
$            48,679
$           114,068
Net realized gains (losses)
414
16
84,710
61,437
Net change in unrealized appreciation/ depreciation
1,582
1,279
(196,047)
(85,699)
Increase (decrease) in net assets from operations
2,840
1,920
(62,658)
89,806
Contract Owner Transactions:
        
Purchase payments received
4,081
19,444
121,624
143,023
Transfers between Sub-Accounts (including the Fixed Account), net
1,836
16,823
(1,119,339)
(67,678)
Withdrawals, surrenders, annuitizations and contract charges
(5,751)
279
(165,100)
(96,328)
Mortality and expense risk charges
(58)
(65)
(12,874)
(19,064)
Charges for life insurance protection and monthly administration charge
(2,146)
(2,107)
(129,403)
(295,371)
Net increase (decrease) from contract owner transactions
(2,038)
34,374
(1,305,092)
(335,418)
Total increase (decrease) in net assets
802
36,294
(1,367,750)
(245,612)
Net assets at beginning of year
36,294
-
3,463,836
3,709,448
Net assets at end of year
$             37,096
$           36,294
$          2,096,086
$         3,463,836

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
MFK Sub-Account
HYS Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$              12,397
$           30,621
$           136,098
$          216,945
Net realized gains (losses)
(3,194)
20,024
191,587
37,893
Net change in unrealized appreciation/ depreciation
(30,493)
(29,091)
58,245
305,105
Increase (decrease) in net assets from operations
(21,290)
21,554
385,930
559,943
Contract Owner Transactions:
        
Purchase payments received
79,227
107,184
620,270
139,315
Transfers between Sub-Accounts (including the Fixed Account), net
(468,622)
323,946
(2,146,520)
2,426,178
Withdrawals, surrenders, annuitizations and contract charges
(55,643)
(3,664)
(415,589)
(270,624)
Mortality and expense risk charges
(1,719)
(2,459)
(24,429)
(18,967)
Charges for life insurance protection and monthly administration charge
(26,703)
(47,115)
(347,362)
(332,707)
Net increase (decrease) from contract owner transactions
(473,460)
377,892
(2,313,630)
1,943,195
Total increase (decrease) in net assets
(494,750)
399,446
(1,927,700)
2,503,138
Net assets at beginning of year
1,130,606
731,160
7,378,891
4,875,753
Net assets at end of year
$             635,856
$         1,130,606
$          5,451,191
$         7,378,891

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   Operations:
IGS Sub-Account
  
IG1 Sub-Account
December 31,
2013
December 31,
2012
  
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$              11,333$
8,478
$
4,985
$             3,060
Net realized gains (losses)
2,079
3,387
  
11,973
(14,303)
Net change in unrealized appreciation/ depreciation
102,148
125,826
  
42,260
117,402
Increase (decrease) in net assets from operations
115,560
137,691
  
59,218
106,159
Contract Owner Transactions:
          
Purchase payments received
12,001
19,818
  
66,062
106,030
Transfers between Sub-Accounts (including the Fixed Account), net
66,441
137,367
  
(13,020)
(439,944)
Withdrawals, surrenders, annuitizations and contract charges
(35,800)
2,240
  
(27,129)
(5,973)
Mortality and expense risk charges
(4,989)
(4,327)
  
(1,544)
(1,676)
Charges for life insurance protection and monthly administration charge
(22,987)
(20,456)
  
(20,710)
(25,402)
Net increase (decrease) from contract owner transactions
14,666
134,642
  
3,659
(366,965)
Total increase (decrease) in net assets
130,226
272,333
  
62,877
(260,806)
Net assets at beginning of year
                                                    841,034             568,701
433,569
694,375
Net assets at end of year
 $                                  971,260                     841,034
496,446
$          433,569

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

Operations:
Net investment income (loss)
Net realized gains (losses)
Net change in unrealized appreciation/ depreciation
Increase (decrease) in net assets from operations
MIS Sub-Account
MMS Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
$              17,358
223,729
346,801
$             5,689
88,032
156,167
$                  -
-
-
$                 -
-
-
587,888
249,888
-
-
Contract Owner Transactions:
        
Purchase payments received
106,043
97,955
2,339,644
72,644
Transfers between Sub-Accounts (including the Fixed Account), net
1,126,099
(103,760)
93,700
9,064,204
Withdrawals, surrenders, annuitizations and contract charges
(437,354)
(245,484)
(2,641,329)
695,841
Mortality and expense risk charges
(9,799)
(6,648)
(34,122)
(2,567)
Charges for life insurance protection and monthly administration charge
(165,307)
(90,121)
(866,105)
(42,279)
Net increase (decrease) from contract owner transactions
619,682
(348,058)
(1,108,212)
9,787,843
Total increase (decrease) in net assets
1,207,570
(98,170)
(1,108,212)
9,787,843
Net assets at beginning of year
1,421,901
1,520,071
9,787,843
-
Net assets at end of year
$           2,629,471
$         1,421,901
$           8,679,631
$          9,787,843

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

Operations:
Net investment income (loss)
NWD Sub-Account
December 31,
2013
December 31,
2012
$                  -
$               -
Net realized gains (losses)
206,731
248,260
Net change in unrealized appreciation/ depreciation
630,887
132,231
Increase (decrease) in net assets from operations
837,618
380,491
Contract Owner Transactions:
    
Purchase payments received
106,598
104,532
Transfers between Sub-Accounts (including the Fixed Account), net
(70,818)
28,494
Withdrawals, surrenders, annuitizations and contract charges
(14,251)
(110,726)
Mortality and expense risk charges
(9,436)
(9,470)
Charges for life insurance protection and monthly administration charge
(124,188)
(115,174)
Net increase (decrease) from contract owner transactions
(112,095)
(102,344)
Total increase (decrease) in net assets
725,523
278,147
Net assets at beginning of year
2,064,071
1,785,924
Net assets at end of year
$           2,789,594
$         2,064,071

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

 
RI1 Sub-Account
  
TRS Sub-Account
December 31,
2013
  
December 31,
2012
  
December 31,
2013
December 31,
2012
Operations:
            
Net investment income (loss)
$                 1,156
$
2,439
$
127,563
$             91,218
Net realized gains (losses)
34,075
  
1,565
  
563,945
(68,051)
Net change in unrealized appreciation/ depreciation
82,205
  
12,992
  
(362,313)
369,685
Increase (decrease) in net assets from operations
117,436
  
16,996
  
329,195
392,852
Contract Owner Transactions:
            
Purchase payments received
32,696
  
37,321
  
101,847
138,375
Transfers between Sub-Accounts (including the Fixed Account), net
2,045,855
  
151,062
  
(3,390,195)
7,234
Withdrawals, surrenders, annuitizations and contract charges
(13,505)
  
(928)
  
(299,831)
(504,698)
Mortality and expense risk charges
(927)
  
(343)
  
(8,657)
(16,890)
Charges for life insurance protection and monthly administration charge
(18,796)
  
(13,202)
  
(117,578)
(227,125)
Net increase (decrease) from contract owner transactions
2,045,323
  
173,910
  
(3,714,414)
(603,104)
Total increase (decrease) in net assets
2,162,759
  
190,906
  
(3,385,219)
(210,252)
Net assets at beginning of year
242,647
  
51,741
  
3,385,219
3,595,471
Net assets at end of year
$            2,405,406
$
242,647
$
-
$           3,385,219

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   
MFJ Sub-Account
UTS Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Operations:
          
Net investment income (loss)
$
6,666
$             3,430
$              50,919
$             85,213
Net realized gains (losses)
  
22,784
757
212,325
(59,622)
Net change in unrealized appreciation/ depreciation
  
(11,310)
9,294
77,882
212,517
Increase (decrease) in net assets from operations
  
18,140
13,481
341,126
238,108
Contract Owner Transactions:
          
Purchase payments received
  
17,822
34,167
97,496
102,166
Transfers between Sub-Accounts (including the Fixed Account), net
  
(170,407)
10,291
(55,280)
(159)
Withdrawals, surrenders, annuitizations and contract charges
  
(11,329)
(931)
(103,779)
(198,930)
Mortality and expense risk charges
  
(364)
(434)
(8,211)
(7,561)
Charges for life insurance protection and monthly administration charge
  
(7,767)
(8,160)
(96,223)
(112,425)
Net increase (decrease) from contract owner transactions
  
(172,045)
34,933
(165,997)
(216,909)
Total increase (decrease) in net assets
  
(153,905)
48,414
175,129
21,199
Net assets at beginning of year
  
153,905
105,491
1,748,288
1,727,089
Net assets at end of year
$
-
$           153,905
$           1,923,417
$          1,748,288

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
MFE Sub-Account
MVS Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$                 6,457
$           25,349
$             51,826$
45,114
Net realized gains (losses)
83,885
26,944
367,107
20,917
Net change in unrealized appreciation/ depreciation
(14,637)
21,390
211,164
304,788
Increase (decrease) in net assets from operations
75,705
73,683
630,097
370,819
Contract Owner Transactions:
        
Purchase payments received
41,634
47,960
72,240
107,492
Transfers between Sub-Accounts (including the Fixed Account), net
(379,067)
(157,209)
(846,742)
(74,631)
Withdrawals, surrenders, annuitizations and contract charges
843
(18,294)
(74,623)
(217,984)
Mortality and expense risk charges
(726)
(983)
(9,784)
(13,396)
Charges for life insurance protection and monthly administration charge
(30,209)
(41,018)
(95,124)
(182,400)
Net increase (decrease) from contract owner transactions
(367,525)
(169,544)
(954,033)
(380,919)
Total increase (decrease) in net assets
(291,820)
(95,861)
(323,936)
(10,100)
Net assets at beginning of year
567,940
663,801
               2,350,318                                2,360,418
Net assets at end of year
$             276,120
$          567,940
$          2,026,382                     $   2,350,318

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

     Operations:
  
MV1 Sub-Account
SCB Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$
61,874
$           28,278
$             60,887$
16,156
Net realized gains (losses)
  
165,580
100,895
515,412
148,831
Net change in unrealized appreciation/ depreciation
  
460,023
120,659
786,052
203,103
Increase (decrease) in net assets from operations
  
687,477
249,832
1,362,351
368,090
Contract Owner Transactions:
          
Purchase payments received
  
199,101
172,934
255,919
269,062
Transfers between Sub-Accounts (including the Fixed Account), net
  
21,948
198,258
210,409
318,284
Withdrawals, surrenders, annuitizations and contract charges
  
(84,180)
(40,322)
(209,577)
(45,033)
Mortality and expense risk charges
  
(5,790)
(4,535)
(2,108)
(11,029)
Charges for life insurance protection and monthly administration charge
  
(97,850)
(90,008)
(231,077)
(195,617)
Net increase (decrease) from contract owner transactions
  
33,229
236,327
23,566
335,667
Total increase (decrease) in net assets
  
720,706
486,159
1,385,917
703,757
Net assets at beginning of year
1,927,754
1,441,595
                2,980,077                2,276,320
Net assets at end of year
$           2,648,460
$         1,927,754
 $          4,365,994  $                                  2,980,077

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

     Operations:
111 Sub-Account
SC3 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$             152,873
$           162,063
$            216,094$
39,449
Net realized gains (losses)
381,509
258,466
(153,896)
(341,567)
Net change in unrealized appreciation/ depreciation
(89,625)
54,248
131,129
1,298,170
Increase (decrease) in net assets from operations
444,757
474,777
193,327
996,052
Contract Owner Transactions:
        
Purchase payments received
318,156
339,934
237,941
316,529
Transfers between Sub-Accounts (including the Fixed Account), net
(1,113,430)
(507,060)
(125,427)
(458,077)
Withdrawals, surrenders, annuitizations and contract charges
(294,033)
(539,054)
(194,090)
(117,020)
Mortality and expense risk charges
(7,923)
(11,964)
(2,239)
(17,028)
Charges for life insurance protection and monthly administration charge
(237,588)
(240,428)
(184,089)
(187,126)
Net increase (decrease) from contract owner transactions
(1,334,818)
(958,572)
(267,904)
(462,722)
Total increase (decrease) in net assets
(890,061)
(483,795)
(74,577)
533,330
Net assets at beginning of year
5,022,969
5,506,764
                 4,085,006              3,551,676
Net assets at end of year
$           4,132,908
$         5,022,969
$          4,010,429                     $           4,085,006

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   
113 Sub-Account
115 Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Operations:
          
Net investment income (loss)
$
               59,545$
58,551
$                 -      $
15,344
Net realized gains (losses)
  
206,799
99,691
100,717
153,291
Net change in unrealized appreciation/ depreciation
  
200,400
89,280
(195,524)
(34,666)
Increase (decrease) in net assets from operations
  
466,744
247,522
(94,807)
133,969
Contract Owner Transactions:
          
Purchase payments received
  
371,652
308,350
165,091
178,037
Transfers between Sub-Accounts (including the Fixed Account), net
  
(904,845)
408,476
(150,865)
4,742
Withdrawals, surrenders, annuitizations and contract charges
  
(22,524)
(24,519)
(244,913)
(38,250)
Mortality and expense risk charges
  
(5,554)
(7,079)
(2,132)
(4,732)
Charges for life insurance protection and monthly administration charge
  
(135,374)
(159,902)
(99,706)
(89,286)
Net increase (decrease) from contract owner transactions
  
(696,645)
525,326
(332,525)
50,511
Total increase (decrease) in net assets
  
(229,901)
772,848
(427,332)
184,480
Net assets at beginning of year
                 2,405,2001,632,352
               1,898,656                                1,714,176
Net assets at end of year
$           2,175,299                     $2,405,200
$          1,471,324                     $   1,898,656

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

      Operations:
  
SDC Sub-Account
SGC Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$
9,086
$            80,342
$             59,261$
41,911
Net realized gains (losses)
  
31,161
10,802
1,089,532
713,843
Net change in unrealized appreciation/ depreciation
  
8,501
62,979
401,845
(161,722)
Increase (decrease) in net assets from operations
  
48,748
154,123
1,550,638
594,032
Contract Owner Transactions:
          
Purchase payments received
  
371,131
737,662
311,329
252,866
Transfers between Sub-Accounts (including the Fixed Account), net
  
4,630
208,147
496,712
(40,389)
Withdrawals, surrenders, annuitizations and contract charges
  
(231,263)
(440,247)
(406,406)
(167,163)
Mortality and expense risk charges
  
(2,909)
(35,169)
(1,733)
(11,001)
Charges for life insurance protection and monthly administration charge
  
(339,967)
(359,241)
(237,016)
(205,568)
Net increase (decrease) from contract owner transactions
  
(198,378)
111,152
162,886
(171,255)
Total increase (decrease) in net assets
  
(149,630)
265,275
1,713,524
422,777
Net assets at beginning of year
6,968,272
6,702,997
                4,127,671              3,704,894
Net assets at end of year
$           6,818,642
$         6,968,272
$          5,841,195                     $          4,127,671

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

     Operations:
112 Sub-Account
117 Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$              65,589
$            70,717
$              6,195$
321
Net realized gains (losses)
372,260
83,881
6,887
5,727
Net change in unrealized appreciation/ depreciation
189,030
109,192
195,326
24,452
Increase (decrease) in net assets from operations
626,879
263,790
208,408
30,500
Contract Owner Transactions:
        
Purchase payments received
366,893
453,121
71,213
54,215
Transfers between Sub-Accounts (including the Fixed Account), net
2,979,281
193,145
313,551
63,043
Withdrawals, surrenders, annuitizations and contract charges
(2,521,148)
(109,884)
(22,512)
(4,504)
Mortality and expense risk charges
(6,504)
(6,829)
(1,374)
(1,099)
Charges for life insurance protection and monthly administration charge
(184,559)
(156,202)
(14,299)
(11,919)
Net increase (decrease) from contract owner transactions
633,963
373,351
346,579
99,736
Total increase (decrease) in net assets
1,260,842
637,141
554,987
130,236
Net assets at beginning of year
2,915,557
2,278,416
                   430,836                 300,600
Net assets at end of year
$           4,176,399
$         2,915,557
$            985,823                     $            430,836

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

       Operations:
       Net investment income (loss)
VKM Sub-Account
OCF Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
$                2,351
$              -
$              7,188
$             4,245
Net realized gains (losses)
26,651
59,906
8,253
(6,855)
Net change in unrealized appreciation/ depreciation
274,546
(64,872)
174,461
87,193
Increase (decrease) in net assets from operations
303,548
(4,966)
189,902
84,583
Contract Owner Transactions:
        
Purchase payments received
130,464
61,649
59,326
60,823
Transfers between Sub-Accounts (including the Fixed Account), net
(12,280)
520,573
408
(19,163)
Withdrawals, surrenders, annuitizations and contract charges
(36,002)
(2,680)
(53,733)
(35,983)
Mortality and expense risk charges
(2,171)
(1,640)
(4,567)
(3,947)
Charges for life insurance protection and monthly administration charge
(34,306)
(25,387)
(37,965)
(43,765)
Net increase (decrease) from contract owner transactions
45,705
552,515
(36,531)
(42,035)
Total increase (decrease) in net assets
349,253
547,549
153,371
42,548
Net assets at beginning of year
766,411
218,862
646,766
604,218
Net assets at end of year
$           1,115,664
$           766,411
$           800,137
$           646,766

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

   
OCA Sub-Account
OGG Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Operations:
          
Net investment income (loss)
$
                    276$
123
$             1,090$
1,609
Net realized gains (losses)
  
2,901
381
11,550
310
Net change in unrealized appreciation/ depreciation
  
4,467
3,340
8,449
14,307
Increase (decrease) in net assets from operations
  
7,644
3,844
21,089
16,226
Contract Owner Transactions:
          
Purchase payments received
  
4,665
4,665
18,970
8,432
Transfers between Sub-Accounts (including the Fixed Account), net
  
(166)
40
445
118
Withdrawals, surrenders, annuitizations and contract charges
  
(11,448)
-
(33,525)
-
Mortality and expense risk charges
  
(188)
(192)
(353)
(294)
Charges for life insurance protection and monthly administration charge
  
(3,390)
(3,202)
(3,656)
(2,156)
Net increase (decrease) from contract owner transactions
  
(10,527)
1,311
(18,119)
6,100
Total increase (decrease) in net assets
  
(2,883)
5,155
2,970
22,326
Net assets at beginning of year
  
30,682
25,527
97,089
74,763
Net assets at end of year
$
               27,799$
30,682
$           100,059$
97,089

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

      Operations:
  
OMG Sub-Account
PCR Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$
           1,149$
965
$             10,230$
16,294
Net realized gains (losses)
  
28,505
2,071
(59,528)
8,132
Net change in unrealized appreciation/ depreciation
  
7,458
18,452
(45,962)
8,166
Increase (decrease) in net assets from operations
  
37,112
21,488
(95,260)
32,592
Contract Owner Transactions:
          
Purchase payments received
  
13,819
13,735
86,743
98,725
Transfers between Sub-Accounts (including the Fixed Account), net
  
(1,491)
(1,685)
(20,170)
25,623
Withdrawals, surrenders, annuitizations and contract charges
  
(94,759)
(23)
(39,713)
(12,694)
Mortality and expense risk charges
  
(394)
(412)
(1,567)
(1,497)
Charges for life insurance protection and monthly administration charge
  
(5,428)
(7,585)
(42,229)
(45,023)
Net increase (decrease) from contract owner transactions
  
(88,253)
4,030
(16,936)
65,134
Total increase (decrease) in net assets
  
(51,141)
25,518
(112,196)
97,726
Net assets at beginning of year
                   153,585                                128,067
                  644,865                               547,139
Net assets at end of year
$            102,444                     $153,585
$            532,669                     $644,865

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

      Operations:
PMB Sub-Account
SBJ Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$            223,335
$          228,098
$              2,815
$             1,880
Net realized gains (losses)
80,115
44,024
(632)
259
Net change in unrealized appreciation/ depreciation
(636,254)
482,191
(8,817)
2,032
Increase (decrease) in net assets from operations
(332,804)
754,313
(6,634)
4,171
Contract Owner Transactions:
        
Purchase payments received
357,512
341,447
10,778
6,288
Transfers between Sub-Accounts (including the Fixed Account), net
(201,512)
190,523
33,960
13,261
Withdrawals, surrenders, annuitizations and contract charges
(215,068)
(274,235)
-
-
Mortality and expense risk charges
(17,844)
(19,274)
(197)
(118)
Charges for life insurance protection and monthly administration charge
(254,921)
(307,229)
(4,651)
(3,702)
Net increase (decrease) from contract owner transactions
(331,833)
(68,768)
39,890
15,729
Total increase (decrease) in net assets
(664,637)
685,545
33,256
19,900
Net assets at beginning of year
4,886,568
4,201,023
59,512
39,612
Net assets at end of year
$           4,221,931
$        4,886,568
$            92,768
$           59,512

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

Operations:
  
PRR Sub-Account
PTR Sub-Account
 
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
         
Net investment income (loss)
$
58,156
$            40,189
$           234,639
$          276,481
Net realized gains (losses)
  
167,816
329,856
138,168
293,325
Net change in unrealized appreciation/ depreciation
  
(544,494)
(50,365)
(595,094)
404,029
Increase (decrease) in net assets from operations
  
(318,522)
319,680
(222,287)
973,835
Contract Owner Transactions:
          
Purchase payments received
  
208,620
268,089
604,924
917,501
Transfers between Sub-Accounts (including the Fixed Account), net
  
634,420
(417,355)
379,815
(551)
Withdrawals, surrenders, annuitizations and contract charges
  
(491,160)
(153,706)
(231,422)
(314,315)
Mortality and expense risk charges
  
(16,446)
(19,685)
(51,091)
(53,658)
Charges for life insurance protection and monthly administration charge
  
(233,318)
(246,526)
(650,967)
(665,408)
Net increase (decrease) from contract owner transactions
  
102,116
(569,183)
51,259
(116,431)
Total increase (decrease) in net assets
  
(216,406)
(249,503)
(171,028)
857,404
Net assets at beginning of year
3,399,373
3,648,876
10,827,039
9,969,635
Net assets at end of year
$           3,182,967
$         3,399,373
$        10,656,011
$        10,827,039

 
The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS-ENDED DECEMBER 31, 2013 AND 2012
 

    Operations:
TBC Sub-Account
USC Sub-Account
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
       
Net investment income (loss)
$                1,389
$             5,940
$                247       $
480
Net realized gains (losses)
377,660
81,675
18,309
8,118
Net change in unrealized appreciation/ depreciation
1,207,426
569,945
34,637
15,584
Increase (decrease) in net assets from operations
1,586,475
657,560
53,193
24,182
Contract Owner Transactions:
        
Purchase payments received
262,431
265,717
20,815
20,756
Transfers between Sub-Accounts (including the Fixed Account), net
(203,014)
(20,199)
(2,489)
(1,547)
Withdrawals, surrenders, annuitizations and contract charges
(106,148)
(279,119)
(21)
(15)
Mortality and expense risk charges
(20,036)
(20,433)
(461)
(350)
Charges for life insurance protection and monthly administration charge
(247,200)
(255,983)
(3,905)
(3,633)
Net increase (decrease) from contract owner transactions
(313,967)
(310,017)
13,939
15,211
Total increase (decrease) in net assets
1,272,508
347,543
67,132
39,393
Net assets at beginning of year
4,003,809
3,656,266
                  157,085                               117,692
Net assets at end of year
$           5,276,317
$         4,003,809
$            224,217                     $157,085

 
                                                           The accompanying notes are an integral part of these financial statements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

 
NOTES TO FINANCIAL STATEMENTS
 
FOR THE YEAR ENDED DECEMBER 31, 2013

 
1. BUSINESS AND ORGANIZATION

Sun Life of Canada (U.S.) Variable Account I (the “Variable Account”) is a separate account of Sun Life Assurance Company of Canada (U.S.) (the “Sponsor”) and was established on August 25, 1999 as a funding vehicle for the variable portion of Futurity Variable Universal Life (“VUL”) contracts, Futurity Protector VUL contracts, Futurity Protector II VUL contracts,  Futurity Accumulator VUL contracts, Futurity Accumulator II VUL contracts, Futurity Survivorship VUL contracts, Futurity Survivorship II VUL contracts, Sun Executive VUL contracts, Sun Prime VUL contracts, Sun Protector VUL contracts, Sun Prime Survivorship VUL contracts and certain other individual variable universal life insurance contracts (the “Contracts”) issued by the Sponsor. The Variable Account is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, as a unit investment trust existing in accordance with the regulations of the Delaware Insurance Department.

The assets of the Variable Account are divided into “Sub-Accounts”. Each Sub-Account is invested in shares of a specific mutual fund (collectively the “Funds”), or series thereof, registered under the Investment Company Act of 1940, as amended.  The contract owners of the Variable Account direct the deposits into the Sub-Accounts of the Variable Account.

Under applicable insurance law, the assets and liabilities of the Variable Account are clearly identified and distinguished from the Sponsor’s other assets and liabilities.  Assets applicable to the Variable Account are not chargeable with liabilities arising out of any other business the Sponsor may conduct.

On December 17, 2012, Sun Life Financial Inc., the Sponsor’s indirect parent company, announced the execution of a definitive agreement to sell its domestic U.S. annuity business and certain life insurance businesses to Delaware Life Holdings, LLC, a Delaware limited liability company (“the Sale Transaction”).  As part of the Sale Transaction, Delaware Life Holdings, LLC would acquire all of the issued and outstanding shares of the Sponsor.  After receiving all required regulatory approvals, the Sale Transaction closed on August 2, 2013 with an effective date of August 1, 2013.

A summary of the name changes related to Sub-Accounts held by the contract owners of the Variable Account during the current year, is as follows:

Sub-Account
Previous Name
Effective Date
FFI
Invesco Van Kampen V.I. Mid Cap Growth Fund Series I
April 29, 2013
VGI
Invesco Van Kampen V.I. Growth and Income Fund Series I
April 29, 2013
VKU
Invesco Van Kampen V.I. Equity and Income Fund Series II
April 29, 2013
VLC
Invesco Van Kampen V.I. Comstock Fund Series II
April 29, 2013
FFG
Invesco Van Kampen V.I. American Franchise Fund Series I
April 29, 2013
VKC
Invesco Van Kampen V.I. American Value Fund Series II
April 29, 2013
OGG
Oppenheimer Global Securities Fund/VA (Service Shares)
April 30, 2013
MBO
M Business Opportunity Value Fund
May 1, 2013
SCV
DWS Dreman Small Mid Cap Value VIP Class A
May 1, 2013


The following Sub-Accounts merged with new or existing Sub-Accounts during the current year:

Closed Sub-Account
New Sub-Account
Effective Date
TRS
GGC
August 16, 2013
MFJ
GGE
August 16, 2013






 
 
 


SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

 
1. BUSINESS AND ORGANIZATION (CONTINUED)

The commencement date related to sub-accounts held by the contract owners of the Variable Account (if commenced within the past five years) related to sub-accounts held, is as follows:

Sub-Account
Effective Date
GGC, GGE
August 16, 2013
FFL, FFJ, FFS, FFQ, FFM, FFO, MMS
December 10, 2012

FFG, FFI
April 30, 2012

               AAH
               SBB1, SBJ1, GT22
 
               May 2, 2011
               November 15, 2010
SBB1, SBJ1, GT22
November 15, 2010
 
 

1
1First activity in Sub-Account  2011
2 First activity in Sub-Account 2012

The following are sub-accounts held by the contract owners of the Variable Account with commencement dates earlier than the past five years, but for which the first activity occurred within the last five years:
Sub-Account
Year of First Activity
F15
2009
116
2009
117
2009
IGS
2009
IG1
2009






 


 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).  The preparation of financial statements in conformity with GAAP requires the Sponsor’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from these estimates.

Investment Valuation and Transactions
Investments made in mutual funds are carried at fair value and are valued at their closing net asset value as determined by the respective mutual fund, which in turn value their investments at fair value, as of December 31, 2013.  Transactions are recorded on a trade date basis.  Realized gains and losses on sales of investments are determined on the first in, first out basis.  Dividend income and realized gain distributions are reinvested in additional fund shares and recognized on the ex-dividend date.

Units
The number of units credited is determined by dividing the dollar amount allocated to a Sub-Account by the unit value for that Sub-Account for the period during which the purchase payment was received.  The unit value for each Sub-Account is established at $10.00 for the first period of that Sub-Account and is subsequently measured based on the performance of the investments and the contract charges selected by the contract holder, as discussed in note 5.

Purchase Payments
Upon issuance of new contracts, the initial purchase payment is credited to the contract in the form of units.  All subsequent purchase payments are applied using the unit values for the period during which the purchase payment is received.


 
 
 



SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Transfers
Transfers between Sub-Accounts requested by contract owners are recorded in the new Sub-Account upon receipt of the redemption proceeds at the net asset value at the time of receipt.  In addition, transfers can be made between the Sub-Accounts and the “Fixed Account”.  The Fixed Account is part of the general account of the Sponsor in which purchase payments or contract values may be allocated or transferred.

Contract Loans
Contract holders are permitted to borrow against the cash value of their accounts.  The loan proceeds are deducted from the Variable Account and recorded in the Sponsor’s general account as an asset.  Contract loan activity is reflected in the withdrawals, surrenders and surrender charges line on the Statement of Changes in Net Assets.

Federal Income Taxes
The operations of the Variable Account are part of the operations of the Sponsor and are not taxed separately. The Sponsor qualifies for the federal income tax treatment granted to life insurance companies under Subchapter L of the Internal Revenue Code (the “Code”). Under existing federal income tax law, investment income and realized gain distributions earned by the Variable Account on contract owner reserves are not taxable, and therefore, no provision has been made for federal income taxes.  In the event of a change in applicable tax law, the Sponsor will review this policy and if necessary a provision may be made in future years.

Accounting for Uncertain Tax Provisions
The 2003 through 2013 tax years generally remain subject to examination by U.S. federal and most state tax authorities. Although the Sponsor remains jointly and severally liable for consolidated tax liabilities, the Sponsor is held harmless by its former parent in accordance with the Sale Transaction and believes that the possibility of a tax liability for the pre-sale tax years is remote. Additionally, management evaluates whether or not there are uncertain tax positions that require financial statement recognition and has determined that no reserves for uncertain tax positions are required as of December 31, 2013.

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the period. The most significant estimate is the fair value measurements of investments.  Actual results could vary from the amounts derived from management's estimates.

Subsequent events
Management has evaluated events subsequent to December 31, 2013 noting there are no subsequent events requiring accounting adjustments or disclosure.

New and Adopted Accounting Pronouncements
In January 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”.  This ASU clarifies the scope of offsetting disclosure requirements in ASU 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities”.  Under ASU 2013-01, the disclosure requirements would apply to derivative instruments accounted for in accordance with ASC 815 “Derivatives and Hedging”, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending arrangements that are either offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement.  Entities with other types of financial assets and financial liabilities subject to a master netting arrangement or similar agreement also are affected because these amendments make them no longer subject to the disclosure requirements in ASU No. 2011-11.



 
 
 



SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

New and Adopted Accounting Pronouncements (Continued)
Effective January 1, 2013, companies are required to disclose (a) gross amounts of recognized assets and liabilities; (b) gross amounts offset in the statement of financial position; (c) net amounts of assets and liabilities presented in the statement of financial position; (d) gross amounts subject to an enforceable master netting agreement not offset in the statements of financial position; and (e) net amounts after deducting (d) from (c). The disclosure should be presented in tabular format (unless another format is more appropriate) separately for assets and liabilities. The intent of the new disclosure is to enable users of financial statements to understand the effect of those arrangements on its financial position and to allow investors to better compare financial statements prepared under GAAP with financial statements prepared under International Financial Reporting Standards (“IFRS”).  The Variable Account adopted ASU 2013-01 on January 1, 2013 and the adoption did not have a significant impact on the Variable Account’s financial statements.

In October 2012, FASB issued ASU 2012-04, “Technical Corrections and Improvements”.  The amendments in this update cover a wide range of Topics in the Codification. The technical corrections (Section A) are divided into three main categories: (1) Source literature amendments – amendments to carry forward the original intent of certain pre-Codification authoritative literature that was inadvertently altered during the Codification process, (2) Guidance clarification and reference corrections – changes in wording and references to avoid misapplication or misinterpretation of guidance, and (3) Relocated guidance – moving guidance from one part of the Codification to another to correct instances in which the scope of pre-Codification guidance may have been unintentionally narrowed or broadened during the Codification process. The purpose of Section B of ASU 2012-04 is to conform the use of the term “fair value” throughout the Codification “to fully reflect the fair value measurement and disclosure requirements” of Accounting Standards Codification (“ASC”) Topic 820 “Fair Value Measurement”. These provisions are effective upon issuance, except for amendments that are subject to transition guidance discussed below. The Variable Account adopted the provisions of ASU 2012-04 on October 1, 2012.  The adoption did not impact the Variable Account’s financial statements or disclosures.

On January 1, 2013, the Variable Account adopted the amendments to ASU 2012-04 that are subject to transition guidance.  The adoption did not impact the Variable Account’s financial statements or disclosures.

In May 2011, FASB  issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and IFRS,” which change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements.  Some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements, while other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.  Many of the requirements in this update are not meant to result in a change in application of the requirements of Topic 820, but to improve upon an entity’s consistency in application across jurisdictions to ensure that GAAP and IFRS fair value measurement and disclosure requirements are described in the same way.  The amendments in ASU 2011-04 are effective, on a retrospective basis, for fiscal years and interim periods within those fiscal years beginning after December 15, 2011.  On January 1, 2012, the Variable Account adopted the provisions of ASU 2011-04. The adoption did not impact the Variable Account’s financial statements or disclosures.

Accounting Pronouncements Not Yet Adopted
In June 2013, FASB issued ASU No. 2013-08, “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements,” Which amends the criteria an entity would need to meet to qualify as an investment company under ASC 946.  The amendments clarify the characteristics of an investment company and provide comprehensive guidance for assessing whether an entity is an investment company.  ASU 2013-08 also requires entities to disclose their status as an investment company and investment companies to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting.  The amendments in ASU 2013-08 are effective for an entity’s interim and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application is prohibited.  The Variable Account will adopt ASU 2013-08 and does not expect its requirements to have a significant impact on the Variable Account’s financial statements.




 
 
 



SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

3.  FAIR VALUE MEASUREMENTS

The Sub-Accounts’ investments are carried at fair value.  Fair value is an exit price, representing the amount that would be received from a sale of an asset or paid to transfer a liability in an orderly transaction between market participants.  As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.  As a basis for considering such assumptions, U.S. GAAP establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value (i.e., Level 1, 2 and 3). Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Variable Account has the ability to access at the measurement date. Level 2 inputs are observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities. Level 3 inputs are unobservable inputs reflecting the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability. Topic 820 requires that a fair value measurement technique include an adjustment for risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model, if market participants would also include such an adjustment.

The Variable Account has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three level hierarchy described above.  If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

As of December 31, 2013, the inputs used to price the Funds are observable and represent Level 1 assets under the Topic 820 hierarchy levels. There were no Level 2 or 3 investments in the Variable Account during the year ended December 31, 2013. As of December 31, 2013, the Level 1 assets held by the Variable Account was $249 million.  There were no transfers between levels during the period.

4. RELATED PARTY TRANSACTIONS

As of December 31, 2013, Massachusetts Financial Services Company (“MFS”), an affiliate of the Sponsor, is the investment advisor to certain of the Funds and charges a management fee at an annual rate ranging from 0.40% to 1.05% of the Funds’ average daily net assets.

MFS does not charge a management fee for Sub-Accounts 111, 112 and 113.

For additional related party transactions, see Note 5.

5. CONTRACT CHARGES

Mortality and expense risk charges
Charges for mortality and expense risks are based on the value of the Sub-Account and are deducted from the contract’s account value, through the redemption of fund units for the mortality and expense risks assumed by the Sponsor. For the Sun Executive Product this charge is deducted daily over the duration of the policy, and is guaranteed not to exceed an annual rate of 0.60% of the Variable Account assets. For the Single Life (Futurity VUL, Protector VUL, Protector II VUL, Accumulator VUL, Accumulator II VUL, Sun Prime VUL and Sun Protector VUL) and Survivorship Products (Survivorship VUL, Survivorship II VUL and Sun Prime Survivorship VUL) the charge is deducted monthly with the maximum deduction not exceeding an annual rate of 0.75% of the Variable Account assets over a range of five to 15 policy years, depending on the product purchased. Thereafter, the effective annual rates range from 0.10% to 0.20% for the Single Life Products, and 0.20% to 0.36% for the Survivorship Products.








 
 
 



SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

5. CONTRACT CHARGES (CONTINUED)

Administration charges
An account administration fee (“Account Fee”) is deducted from the participant’s account to reimburse the Sponsor for certain administrative expenses and issuances costs.  For the Sun Executive Product, the monthly expense charge of $5 to $10 is deducted over the duration of the policy, combined with a monthly charge based on the specified face amount of the policy. The monthly charge for the Single Life Products ranges from $8 to $10 for all policy years, combined with a monthly face amount charge for the first 5 to 20 policy years following policy issue, or each specified face amount increase, depending on the product purchased.  For the Futurity Survivorship II Product, the monthly expense charge is deducted for the first 10 policy years, and for the first 10 policy years following the effective date of each specified face amount increase. The charge is based on the specified face amount or increase thereof, times a rate determined by the age, sex and rating class of each insured. For the Sun Prime Survivorship Product, the monthly expense charge is $10 for all policy years, combined with a monthly face amount charge for the first 10 policy years, and for the first 10 policy years following the effective date of each specified face amount increase. The charge is based on the specified face amount or increase thereof, times a rate determined by the age, sex and rating class of each insured.

Sales charges
Certain charges are deducted from the premium before it is allocated by Sub-Account.  For the Sun Executive Product the charge on premiums up to and including Target Premium will not exceed 35% in Policy Year 1, 12% in Policy Years 2-10 and 5% thereafter.  The charge on premium in excess of Target Premium will not exceed 5%.  The current charge for the Single Life Products can range from 5.25% to 15.00% of premium payments, depending on the product and riders purchased. For the Futurity Survivorship and Futurity Survivorship II Product, the charge is 6% of premiums, and is guaranteed not to exceed 8%. For the Sun Prime Survivorship Product, the charge is 18.50% of premiums, and is guaranteed not to exceed 25%.

Charges for Life Insurance Protection
On the monthly anniversary of the contract, the cost of insurance is deducted from each Sub-Account through a redemption of units to cover the anticipated cost of providing life insurance. The charge is based on the length of time a policy has been in force and other factors, including issue age, sex and rating class of the insured, and will not exceed the guaranteed maximum monthly cost of insurance rates based on the applicable Commissioner’s Standard Ordinary Smoker and Nonsmoker Mortality Tables.

Surrender charges
A surrender charge (contingent deferred sales charge) may be deducted to cover certain expenses relating to the sale of the contract if the contract holder requests a full withdrawal prior to reaching the pay-out phase.  The surrender charge is based on certain factors, including the specified face amount, the insured’s age, sex and rating class. For the Futurity Survivorship Product, the surrender charge period will generally end after 15 policy years from the date of policy issue, or 15 policy years from the effective date of each specified face amount increase. For the Single Life Products, depending on the product purchased, the surrender charge can apply to the first 9 to 15 policy years following the date of policy issue, or the respective policy years from the effective date of each specified face amount increase. The Sun Executive Product and Sun Prime Survivorship Product do not currently impose such surrender charges. Surrender charges when deducted are retained by the Sponsor.

Premium Taxes
A deduction, when applicable, is made for premium taxes or similar state or local taxes.  It is currently the policy of the Sponsor to deduct the taxes from the premium payment.









 
 
 



SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

 
Purchases
  
Sales
AL2
$
1,738
  
$
9,659
AL4
  
35,358
    
91,587
AL3
  
2,855
    
8,138
AVB
  
32,455
    
41,746
AN2
  
16
    
6,270
AN3
  
220,508
    
549,433
IVB
  
57,332
    
11,768
308
  
82,206
    
472,952
301
  
81,969
    
105,138
304
  
249,814
    
250,272
307
  
231,486
    
102,212
306
  
122,148
    
104,856
303
  
195,843
    
263,821
302
  
35,271
    
58,018
305
  
3,077,098
    
1,926,560
300
  
99,158
    
430,071
9XX
  
827,043
    
1,100,054
MCC
  
83,427
    
94,406
DGO
  
439,748
    
255,472
DMC
  
325,430
    
632,726
SSC
  
367,438
    
805,025
SCV
  
197,361
    
353,676
FVB
  
86,507
    
40,413
FL1
  
851,161
    
381,667
FL6
  
354,083
    
1,842,444
F15
  
12,693
    
63,853
F20
  
71,827
    
24,562
F30
  
16,241
    
4,978
FL8
  
161,753
    
340,271
FIS
  
858,502
    
1,488,730
FL4
  
2,595,817
    
1,763,875
FVM
  
611,240
    
245,990
FL5
  
1,132,556
    
2,690,418
FL7
  
501,549
    
1,274,192
SGI
  
447,573
    
401,123
S17
  
67,992
    
5,028
ISC
  
156,064
    
136,038
FVS
  
246,270
    
293,798
6. INVESTMENT PURCHASES AND SALES

The cost of purchases and proceeds from sales of investments for the year ended December 31, 2013 were as follows:



 


 
 
 


SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

6. INVESTMENT PURCHASES AND SALES (CONTINUED)
 
Purchases
  
Sales
SIC
$
377,476
  
$
373,374
FGF
  
17
    
11
FMS
  
374,820
    
279,852
FTI
  
2,429,563
    
1,456,709
FTG
  
175,637
    
260,695
GS4
  
32,663
    
15,676
GS8
  
61,243
    
119,308
GS5
  
27,957
    
100,393
GS2
  
37,418
    
22,292
GS3
  
233,188
    
484,827
FFG
  
46,259
    
147,243
VKC
  
661,695
    
254,243
VLC
  
75,552
    
237,519
AI3
  
63,093
    
138,789
VKU
  
253,227
    
287,567
VGI
  
315,259
    
326,230
AI4
  
1,440,972
    
3,631,666
FFI
  
5,197
    
11,739
ASC
  
1,790
    
12,520
MCA
  
174,845
    
135,767
MBI
  
715,808
    
232,018
MTC
  
263,177
    
270,735
MBO
  
225,424
    
315,027
GGC
  
3,288,314
    
92,224
GGE
  
202,343
    
3,307
FFL
  
34,022
    
132,299
FFJ
  
198,892
    
972,772
FFS
  
680,729
    
491,768
FFQ
  
1,420,130
    
2,473,247
FFM
  
236,760
    
1,446,841
FFO
  
1,341,746
    
922,350
MIT
  
201,272
    
351,946
MF7
  
345,769
    
199,742
EM1
  
718,026
    
667,017
GT2
  
6,767
    
7,961
GSS
  
173,045
    
1,411,797
MFK
  
197,289
    
653,217
HYS
  
958,370
    
3,135,902
IGS
  
87,839
    
61,308
IG1
  
81,243
    
72,315
MIS
  
1,264,372
    
627,332
MMS
  
7,720,229
    
8,828,441
NWD
  
271,138
    
344,624

 
 
 


SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

 
6. INVESTMENT PURCHASES AND SALES (CONTINUED)
 
Purchases
  
Sales
RI1
$
2,263,889
  
$
217,410
TRS
  
490,432
    
3,904,925
MFJ
  
110,657
    
265,952
UTS
  
329,411
    
313,809
MFE
  
78,323
    
421,134
MVS
  
252,360
    
1,050,767
MV1
  
430,027
    
199,085
SCB
  
936,613
    
617,587
111
  
831,319
    
1,644,370
SC3
  
563,407
    
615,217
113
  
705,427
    
1,136,826
115
  
579,813
    
821,977
SDC
  
659,805
    
829,549
SGC
  
1,828,253
    
825,004
112
  
3,729,088
    
2,877,485
117
  
438,933
    
80,470
VKM
  
256,004
    
185,724
OCF
  
84,579
    
113,922
OCA
  
4,492
    
14,743
OGG
  
31,454
    
48,483
OMG
  
14,215
    
101,319
PCR
  
159,786
    
166,492
PMB
  
911,878
    
983,820
SBJ
  
52,455
    
9,750
PRR
  
1,148,195
    
962,245
PTR
  
2,024,209
    
1,645,427
TBC
  
1,015,719
    
1,328,297
USC
  
36,458
    
6,599

 





 
 
 


SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

7. CHANGES IN UNITS OUTSTANDING

The changes in units outstanding for the year ended December 31, 2013 were as follows:
         
Net Increase (Decrease)
 
Units
Issued
Units Redeemed
           AL2
-
  
758
  
(758)
AL4
2,087
  
5,165
  
(3,078)
AL3
(12)
  
520
  
(532)
AVB
1,102
  
2,108
  
(1,006)
AN2
-
  
779
  
(779)
AN3
12,311
  
36,289
  
(23,978)
IVB
7,632
  
1,307
  
6,325
308
2,750
  
28,250
  
(25,500)
301
2,027
  
4,294
  
(2,267)
304
3,921
  
4,533
  
(612)
307
7,897
  
1,974
  
5,923
306
4,557
  
3,722
  
835
303
6,084
  
10,800
  
(4,716)
302
2,179
  
4,148
  
(1,969)
305
67,184
  
4,896
  
62,288
300
6,540
  
30,128
  
(23,588)
9XX
25,987
  
55,497
  
(29,510)
MCC
7,159
  
8,829
  
(1,670)
DGO
7,807
  
2,635
  
5,172
DMC
10,703
  
27,727
  
(17,024)
SSC
2,312
  
26,053
  
(23,741)
SCV
5,850
  
14,787
  
(8,937)
FVB
4,090
  
2,366
  
1,724
FL1
62,849
  
25,798
  
37,051
FL6
14,654
  
87,570
  
(72,916)
F15
981
  
5,155
  
(4,174)
F20
5,259
  
2,054
  
3,205
F30
1,212
  
470
  
742
FL8
8,071
  
22,431
  
(14,360)
FIS
38,279
  
114,760
  
(76,481)
FL4
89,260
  
63,752
  
25,508
FVM
16,626
  
9,584
  
7,042
FL5
55,386
  
181,459
  
(126,073)
FL7
32,564
  
93,124
  
(60,560)
SGI
20,459
  
27,034
  
(6,575)
S17
810
  
258
  
552
ISC
5,966
  
7,800
  
(1,834)
FVS
8,004
  
14,342
  
(6,338)


 
 
 


SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

7. CHANGES IN UNITS OUTSTANDING (CONTINUED)

 
Units
  
Units
  
Net Increase (Decrease)
 
Issued
Redeemed
SIC
11,631
  
18,875
  
         (7,244)
FGF
3
  
2
  
1
FMS
12,169
  
8,309
  
3,860
FTI
87,139
  
54,048
  
33,091
FTG
5,107
  
10,431
  
         (5,324)
GS4
310
  
955
  
       (645)
GS8
(40)
  
4,127
  
       (4,167)
GS5
1,485
  
8,374
  
       (6,889)
GS2
287
  
925
  
         (638)
GS3
12,429
  
32,637
  
        (20,208)
FFG
3,680
  
12,763
  
         (9,083)
VKC
31,661
  
5,693
  
25,968
VLC
2,905
  
17,018
  
(14,113)
AI3
4,160
  
11,204
  
(7,044)
VKU
5,814
  
9,241
  
(3,427)
VGI
5,637
  
9,147
  
       (3,510)
AI4
19,918
  
163,126
  
(143,208)
FFI
375
  
1,009
  
       (634)
ASC
(19)
  
538
  
       (557)
MCA
1,998
  
2,942
  
(944)
MBI
61,276
  
9,629
  
           51,647
MTC
5,149
  
10,020
  
       (4,871)
MBO
4,803
  
17,365
  
(12,562)
GGC
325,266
  
10,100
  
315,166
GGE
19,923
  
364
  
19,559
FFL
1,645
  
9,998
  
(8,353)
FFJ
12,517
  
81,380
  
(68,863)
FFS
14,766
  
3,149
  
11,617
FFQ
104,373
  
221,499
  
       (117,126)
FFM
22,777
  
134,655
  
       (111,878)
FFO
91,409
  
56,176
  
35,233
MIT
3,493
  
14,337
  
(10,844)
MF7
8,723
  
2,688
  
6,035
EM1
8,157
  
7,030
  
1,127
GT2
552
  
743
  
(191)
GSS
6,731
  
78,961
  
(72,230)
MFK
6,440
  
44,923
  
       (38,483)
HYS
43,016
  
203,468
  
       (160,452)
IGS
5,118
  
          4,161
  
957
IG1
3,719
  
3,513
  
206
MIS
95,395
  
47,418
  
47,977
MMS
242,493
  
352,931
  
       (110,438)
NWD
5,168
  
10,601
  
(5,433)

 
 
 


SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

7. CHANGES IN UNITS OUTSTANDING (CONTINUED)

 
Units
Issued
  
Units Redeemed
  
Net Increase (Decrease)
RI1
215,246
  
3,441
  
211,805
TRS
5,440
  
203,857
  
       (198,417)
MFJ
1,413
  
15,051
  
       (13,638)
UTS
3,484
  
9,416
  
(5,932)
MFE
3,282
  
32,258
  
(28,976)
MVS
3,827
  
54,369
  
(50,542)
MV1
17,555
  
14,916
  
2,639
SCB
75,651
  
71,828
  
3,823
111
21,896
  
113,759
  
(91,863)
SC3
14,511
  
30,849
  
(16,338)
 113
22,204
  
63,825
  
(41,621)
 115
12,833
  
38,680
  
(25,847)
SDC
33,210
  
50,743
  
(17,533)
SGC
54,375
  
43,414
  
10,961
112
239,086
  
193,789
  
45,297
117
21,542
  
2,138
  
19,404
VKM
7,193
  
4,673
  
2,520
OCF
3,457
  
5,571
  
(2,114)
OCA
437
  
1,424
  
(987)
OGG
1,910
  
3,691
  
(1,781)
OMG
1,164
  
8,595
  
(7,431)
PCR
10,366
  
12,390
  
(2,024)
PMB
11,191
  
21,578
  
(10,387)
SBJ
4,202
  
455
  
3,747
PRR
27,640
  
24,292
  
3,348
PTR
11,661
  
11,054
  
607
TBC
12,680
  
27,850
  
(15,170)
USC
1,319
  
436
  
883
           
           
           
           
           
           













 
 
 

SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

7. CHANGES IN UNITS OUTSTANDING (CONTINUED)

The changes in units outstanding for the year ended December 31, 2012 were as follows:

 
Units
Issued
  
Units Redeemed
  
Net Increase (Decrease)
AL2
(6)
  
1,028
  
(1,034)
AL4
2,174
  
5,871
  
(3,697)
AL3
-
  
176
  
(176)
AVB
3,148
  
3,057
  
91
AN2
-
  
2,552
  
(2,552)
AN3
17,301
  
27,853
  
(10,552)
IVB
1,972
  
3,132
  
(1,160)
308
16,300
  
1,788
  
14,512
301
3,782
  
5,795
  
(2,013)
304
33,125
  
2,151
  
30,974
307
40,542
  
1,770
  
38,772
306
5,776
  
6,732
  
(956)
303
24,267
  
1,929
  
22,338
302
3,021
  
897
  
2,124
305
5,882
  
37,733
  
(31,851)
300
8,556
  
3,430
  
5,126
9XX
20,573
  
25,253
  
(4,680)
MCC
8,646
  
12,999
  
(4,353)
DGO
3,571
  
2,377
  
1,194
DMC
22,055
  
17,619
  
4,436
SCV
7,418
  
11,176
  
(3,758)
SSC
3,182
  
28,111
  
(24,929)
FVB
5,953
  
5,152
  
801
FL1
35,703
  
16,404
  
19,299
FL6
19,218
  
27,801
  
(8,583)
F15
5,022
  
30,886
  
(25,864)
F20
6,544
  
6,140
  
404
F30
3,943
  
18,635
  
(14,692)
FL8
6,357
  
18,531
  
(12,174)
FIS
60,719
  
136,522
  
(75,803)
FL4
86,948
  
179,765
  
(92,817)
FVM
29,246
  
10,325
  
18,921
FL5
275,193
  
249,580
  
25,613
FL7
83,454
  
50,704
  
32,750
SGI
30,512
  
51,290
  
(20,778)
S17
984
  
338
  
646
ISC
6,532
  
4,261
  
2,271
FVS
13,886
  
31,179
  
(17,293)
SIC
37,554
  
6,471
  
31,083
FGF
2
  
3
  
(1)
FMS
69,797
  
7,273
  
62,524
FTI
17,713
  
36,888
  
(19,175)


 
 
 

SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

7. CHANGES IN UNITS OUTSTANDING (CONTINUED)

 
Units
  
Units
  
Net Increase (Decrease)
 
Issued
Redeemed
FTG
         5,950
  
       13,335
  
         (7,385)
GS4
            399
  
         6,182
  
         (5,783)
GS8
              -
  
         1,096
  
         (1,096)
GS5
         2,544
  
       15,364
  
       (12,820)
GS2
            408
  
         1,466
  
         (1,058)
GS3
        14,321
  
       43,864
  
       (29,543)
AI1
         1,883
  
       87,035
  
       (85,152)
AAH
              -
  
       14,642
  
       (14,642)
 AI3
         4,914
  
       14,145
  
         (9,231)
 AI4
      365,147
  
     324,662
  
        40,485
 ASC
              -
  
         2,169
  
         (2,169)
 FFG
        82,831
  
       10,082
  
        72,749
 VKC
         2,079
  
            631
  
          1,448
 VLC
        11,950
  
         4,331
  
          7,619
VKU
        16,561
  
         1,259
  
        15,302
 VGI
         4,545
  
       34,409
  
       (29,864)
 FFI
        13,076
  
            239
  
        12,837
MBO
         6,579
  
       18,201
  
       (11,622)
MCA
         5,020
  
       17,595
  
       (12,575)
MBI
        24,073
  
       11,495
  
        12,578
MTC
        53,733
  
       53,970
  
           (237)
EGS
              -
  
       20,022
  
       (20,022)
FFL
        48,280
  
         1,297
  
        46,983
FFJ
      387,262
  
         1,094
  
      386,168
 FFS
        51,673
  
            207
  
        51,466
 FFQ
      845,132
  
         5,225
  
      839,907
 FFM
      460,938
  
         1,632
  
      459,306
 FFO
      240,965
  
         1,081
  
      239,884
 MIT
         6,668
  
       23,966
  
       (17,298)
 MF7
         6,572
  
       39,462
  
       (32,890)
 EM1
        54,650
  
       53,348
  
          1,302
 GT2
         3,456
  
            181
  
          3,275
 GSS
         7,912
  
       26,467
  
       (18,555)
MFK
        35,329
  
         4,362
  
        30,967
HYS
      236,380
  
       57,337
  
      179,043
IGS
        12,039
  
         1,727
  
        10,312
IG1
         7,503
  
       33,472
  
       (25,969)
MIS
         9,056
  
       41,234
  
       (32,178)
MMS
      913,738
  
        (65,103)
  
      978,841
NWD
         7,890
  
       13,960
  
         (6,070)
RI1
        23,485
  
         1,804
  
        21,681
TRS
         8,177
  
       42,048
  
       (33,871)
MFJ
         4,148
  
            889
  
          3,259
UTS
         4,162
  
       12,999
  
         (8,837)
MFE
         4,561
  
       20,684
  
       (16,123)
MVS
         6,594
  
       29,961
  
       (23,367)
MV1
        39,056
  
       14,190
  
        24,866

 
 
 


SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))

7. CHANGES IN UNITS OUTSTANDING (CONTINUED)

 
Units
Issued
  
Units Redeemed
  
Net Increase (Decrease)
 SCB
        46,907
  
       20,099
  
        26,808
 111
        25,182
  
       96,192
  
       (71,010)
 SC3
        29,074
  
       71,576
  
       (42,502)
 113
        50,856
  
       13,586
  
        37,270
 115
        13,877
  
       10,042
  
          3,835
 SDC
        86,998
  
       76,774
  
        10,224
 SGC
        23,786
  
       39,895
  
       (16,109)
 112
        47,246
  
       19,953
  
        27,293
 117
         8,373
  
         1,251
  
          7,122
VKM
31,155
  
1,590
  
29,565
OCF
4,361
  
7,375
  
(3,014)
OCA
609
  
440
  
169
OGG
904
  
259
  
645
OMG
1,418
  
1,002
  
416
PCR
12,928
  
6,156
  
6,772
PMB
36,193
  
22,435
  
13,758
SBJ
1,868
  
365
  
1,503
PRR
13,089
  
40,877
  
(27,788)
PTR
16,194
  
18,249
  
(2,055)
118
1,785
  
79,764
  
(77,979)
SBB
4,026
  
7,692
  
(3,666)
SCM
470
  
11,898
  
(11,428)
SC7
18,686
  
371,820
  
(353,134)
116
3,745
  
37,238
  
(33,493)
SLC
18,251
  
289,792
  
(271,541)
SPC
10,006
  
233,773
  
(223,767)
114
48,231
  
411,193
  
(362,962)
SC5
10,081
  
235,755
  
(225,674)
LCG
2,329
  
35,478
  
(33,149)
SC2
10,378
  
233,390
  
(223,012)
SC1
257,588
  
1,067,192
  
(809,604)
TBC
15,811
  
34,258
  
(18,447)
USC
1,812
  
484
  
1,328
           


8. TAX DIVERSIFICATION REQUIREMENTS

Under the provisions of Section 817(h) of the Code, a variable life contract, other than a pension plan contract, is not treated as a life contract for federal tax purposes for any period in which the investments of the segregated asset account on which the contract is based are not adequately diversified.  The Code provides that the “adequately diversified” requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of Treasury.  The Sponsor believes that the Variable Account satisfies the current requirements of the regulations, and it intends that the Variable Account will continue to meet such requirements.

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS
 
The summary of units outstanding, unit value (some of which may be rounded), net assets, investment income ratios, expense ratios (excluding expenses of the underlying funds) and the total return, for each of the five years in the period ended December 31, is as follows:
 
   
At December 31,
  
For the years ended December 31,
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
AL2
            
2013
6,432
$13.6559       to
 $17.5799
$94,108
1.96%
29.27%              to      29.92%
2012
7,190
10.5638                 to
13.5586
80,798
3.29
11.78             to        12.34
2011
8,224
9.4503                 to
12.0932
83,990
1.71
  5.91              to          6.51
2010
9,335
8.9170                 to
11.4186
90,830
1.38
11.62             to        12.27
2009
14,249
7.9823                 to
10.2303
124,190
2.56
31.40             to        32.17
AL4
            
2013
34,326
21.8945
  
751,541
0.33
35.84
2012
37,404
16.1179
  
602,934
-
16.21
2011
41,101
13.8697
  
570,109
0.34
(8.27)
2010
46,543
15.1209
  
703,828
-
19.38
2009
40,214
12.6660
  
509,393
-
51.70
AL3
            
2013
1,321
16.1179                 to
18.2306
23,484
-
33.59             to        33.99
2012
1,853
12.0650                 to
17.7359
24,053
-
11.94             to        12.50
2011
2,029
10.7782                 to
15.7653
23,646
-
(3.73)         to      (3.18)
2010
2,229
11.1881                 to
16.2836
27,023
-
24.56             to        25.29
2009
7,746
8.9741                 to
12.9964
88,656
-
44.66             to        45.51
AVB
            
2013
17,785
15.9607
  
283,855
2.25
16.27
2012
18,791
13.4400                 to
13.7269
257,872
1.95
12.81             to        13.38
2011
18,700
11.9139                 to
12.1075
226,362
2.10
(3.54)         to      (3.06)
2010
17,310
12.3508                 to
12.4892
216,133
2.37
9.75             to        24.89
2009
13,643
11.2538                 to
11.3233
154,457
0.01
12.54             to        13.23
AN2
            
2013
8,737
9.2129
  
80,496
0.02
22.93
2012
9,516
7.4946
  
71,318
-
13.24
2011
12,068
6.6183
  
79,875
0.34
(23.41)
2010
14,395
8.6410
  
124,392
2.08
18.58
2009
17,597
7.2870
  
128,238
-
53.14
AN3
            
2013
193,255
17.8263
  
3,445,010
1.13
34.59
2012
217,233
13.2447
  
2,875,774
1.34
17.24
2011
227,785
11.2967
  
2,572,000
1.10
6.07
2010
262,202
10.6502
  
2,791,330
0.00
12.80
2009
272,847
9.4418
  
2,574,972
3.58
20.35

 
 

 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
IVB
          
2013
19,775
$7.0600
$139,610
6.37%
22.73%
2012
13,450
5.7525
77,370
1.39
14.19
2011
14,610
5.0375
73,592
4.14
(19.44)
2010
13,069
6.2528
81,707
2.79
4.30
2009
13,687
5.9951
82,050
1.20
34.36
308
          
2013
29,824
18.6562
556,396
1.66
33.00
2012
55,324
14.0272
776,042
2.15
13.88
2011
40,812
12.3172
502,701
2.05
(0.90)
2010
29,356
12.4293
364,887
2.14
12.33
2009
556
11.0654
6,146
3.65
10.65
301
          
2013
17,896
12.7743
228,603
1.77
(2.16)
2012
20,163
13.0561
263,249
2.40
5.37
2011
22,176
12.3903
274,770
3.89
6.10
2010
9,889
11.6776
115,486
3.88
6.44
2009
1,326
10.9707
14,542
5.71
9.71
304
          
2013
56,235
20.3549
1,144,655
1.27
29.18
2012
56,847
15.7574
895,751
1.05
22.56
2011
25,873
12.8566
332,645
1.68
(8.89)
2010
12,385
14.1104
174,760
1.79
11.75
2009
58
12.6273
729
2.42
26.27
307
          
2013
59,315
18.8928
1,120,636
3.40
22.53
2012
53,392
15.4184
823,214
3.27
17.56
2011
14,620
13.1158
191,750
2.48
(4.85)
2010
11,707
13.7846
161,376
3.40
11.78
2009
1,676
12.3316
20,672
8.27
23.32
306
          
2013
32,156
19.0950
614,014
0.86
28.28
2012
31,321
14.8857
466,235
1.32
18.18
2011
32,277
12.5960
406,558
1.39
(19.14)
2010
19,556
15.5782
304,652
2.05
22.41
2009
4,455
12.7259
56,695
0.34
27.26

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
  
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
303
51,520
$20.4029
  
$1,051,170
0.95%
30.10%
  
2013
2012
56,236
15.6823
  
881,914
0.93
17.89
  
2011
33,898
13.3024
  
450,924
0.68
(4.28)
  
2010
18,092
13.8967
  
251,423
0.95
18.68
  
2009
8,866
11.7094
  
103,806
1.45
17.09
  
302
              
2013
20,747
19.4211
  
402,906
1.41
33.50
  
2012
22,716
14.5477
  
330,436
1.69
17.48
  
2011
20,592
12.3829
  
254,954
1.68
(1.83)
  
2010
16,813
12.6137
  
212,067
2.32
11.43
  
2009
2,117
11.3203
  
23,960
5.64
13.20
  
305
              
2013
111,336
17.2478
  
1,920,295
7.18
6.60
  
2012
49,048
16.1794
  
793,572
5.72
13.70
  
2011
80,899
14.2296
  
1,151,165
10.50
1.92
  
2010
44,624
13.9616
  
623,022
13.07
15.07
  
2009
14,322
12.1330
  
173,779
9.82
21.33
  
300
              
2013
52,513
16.8957
  
887,239
1.30
21.63
  
2012
76,101
13.8906
  
1,057,079
1.58
17.91
  
2011
70,975
11.7810
  
836,168
2.16
(13.96)
  
2010
38,360
13.6930
  
525,259
3.11
7.23
  
2009
4,108
12.7694
  
52,457
2.25
43.07
  
9XX
              
2013
192,412
15.3107                 to
15.7157
3,022,529
1.07
13.85            to
14.42
2012
221,922
13.4486                 to
13.7356
3,047,656
1.47
9.42            to
9.97
2011
226,602
12.2592                 to
12.4907
2,829,884
2.53
(4.18)      to
(3.64)
2010
172,870
12.7945                 to
12.9626
2,240,625
1.96
9.12            to
28.19
2009
34,581
11.7250                 to
11.8099
408,326
2.84
18.10            to
20.92
MCC
              
2013
56,797
11.2586
  
639,443
0.24
42.00
  
2012
58,467
7.9287
  
463,554
-
11.12
  
2011
62,820
7.1351
  
448,220
-
(12.11)
  
2010
36,631
8.1186
  
297,396
-
17.12
  
2009
22,760
6.9316
  
157,767
-
26.80
  

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
  
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
DGO
35,094
$33.3896
  
$1,167,721
0.02%
41.32%
  
2013
2012
29,922
23.6262
  
706,950
0.23
11.02
  
2011
28,728
21.2807
  
611,341
1.05
8.13
  
2010
32,110
19.6807
  
631,929
-
36.32
  
2009
41,016
14.4372
  
592,145
-
45.41
  
DMC
              
2013
165,398
22.9159                 to
24.0203
3,966,657
1.39
34.32            to
34.99
2012
182,422
17.0096                 to
17.7939
3,241,141
0.45
19.08            to
19.67
2011
177,986
14.2417                 to
14.8685
2,642,220
0.51
(0.17)       to
0.39
2010
206,355
14.2662                 to
14.8101
3,050,528
0.98
26.36            to
27.10
2009
216,472
11.2904                 to
11.6526
2,517,864
1.41
34.72            to
35.51
SSC
              
2013
114,644
15.4572                 to
34.7192
3,581,305
1.41
38.31
  
2012
138,385
11.1760                 to
25.1030
3,123,933
0.64
15.88
  
2011
163,314
9.6446                 to
21.6633
3,183,197
0.59
(4.58)
  
2010
237,937
10.1071                 to
22.7021
4,661,978
0.60
1.07            to
26.11
2009
226,705
8.0147                 to
18.0024
3,687,150
1.57
(19.85)     to
26.27
SCV
              
2013
109,736
26.6110
  
2,916,841
1.11
35.24
  
2012
118,673
19.6769
  
2,327,519
1.13
13.77
  
2011
122,431
17.2961
  
2,110,881
1.08
(6.08)
  
2010
135,081
18.4156
  
2,480,292
1.27
23.07
  
2009
145,012
14.9638
  
2,163,984
2.05
29.70
  
FVB
              
2013
17,230
18.5319                 to
19.0220
327,017
1.41
17.23            to
19.28
2012
15,506
15.6138                 to
15.9471
246,884
1.52
14.25            to
14.82
2011
14,705
13.6666                 to
13.8888
203,967
1.69
(7.49)       to
(3.83)
2010
9,005
14.2812                 to
14.4412
129,852
1.62
17.17            to
17.76
2009
7,528
12.1884                 to
12.2637
92,255
3.10
22.64            to
38.32
FL1
              
2013
213,306
13.1918
  
2,813,892
0.98
30.95
  
2012
176,255
10.0737
  
1,775,553
1.17
16.14
  
2011
156,956
8.6738
  
1,361,445
0.93
(2.78)
  
2010
94,080
8.9222
  
839,443
1.54
16.93
  
2009
44,287
7.6306
  
337,981
2.08
35.47
  

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
  
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
FL6
281,867 354,783 363,366 419,393 438,267
$25.8584 19.7174 16.9527 17.4119 14.8682
$7,285,517 6,964,007 6,133,063 7,274,453 6,492,311
0.94% 1.27 0.89 1.12 1.26
31.14% 16.31 (2.64) 17.11 35.66
  
2013 2012 2011 2010 2009
F15
            
2013
-
-
1
0.03
12.67
  
2012
4,174
11.2574
46,994
0.26
11.90
  
2011
30,038
10.0599
302,185
1.99
(0.52)
  
2010
26,240
10.1121
265,345
2.26
12.79
  
2009
21,535
9.6972
193,076
4.34
(10.34)
  
F20
            
2013
25,704
12.5215
321,850
1.76
15.63
  
2012
22,499
10.8286
243,629
1.82
13.07
  
2011
22,095
9.5768
211,595
2.47
(1.24)
  
2010
16,601
9.6972
160,980
2.71
14.33
  
2009
11,047
8.4819
93,695
4.92
28.55
  
F30
            
2013
9,206
12.4624
114,729
1.58
 21.41
  
2012
8,464
10.2649
86,882
0.76
15.18
  
2011
23,156
8.9119
206,362
1.89
(2.83)
  
2010
22,548
9.1714
206,801
2.22
15.89
  
2009
16,583
7.9139
131,235
2.24
(20.86)     to
31.18
FL8
            
2013
158,269
15.1174
2,392,617
0.19
36.20
  
2012
172,629
11.0992
1,920,424
0.49
14.54
  
2011
184,803
9.6898
1,794,597
0.25
0.14
  
2010
195,049
9.6762
1,891,211
0.17
24.06
  
2009
219,951
7.7999
1,718,714
0.32
28.15
  
FIS
            
2013
750,573
13.8050
10,361,657
1.68
31.91
  
2012
827,054
10.4656
8,655,616
1.91
15.63
  
2011
902,857
9.0508
8,171,586
1.94
1.78
  
2010
697,609
8.8922
6,203,239
2.83
14.73
  
2009
134,563
7.7507
1,042,911
3.12
(22.49)     to
26.30

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
  
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
FL4
994,277
$17.6328
  
$17,531,908
1.85%
32.11%
  
2013
2012
968,769
13.3472
  
12,861,805
2.15
15.81
  
2011
1,061,586
11.5253
  
12,175,961
1.75
1.93
  
2010
1,193,231
11.3072
  
13,434,002
1.92
14.91
  
2009
1,254,971
9.8400
  
12,298,049
2.62
26.48
  
FVM
              
2013
159,674
14.6038
  
2,331,848
0.29
35.87
  
2012
152,632
10.7485
  
1,640,565
0.43
14.56
  
2011
133,711
9.3822
  
1,254,502
0.03
(10.85)
  
2010
100,572
10.5243
  
1,058,455
0.19
28.57
  
2009
26,624
8.1856
  
217,937
0.60
39.75
  
FL5
              
2013
490,302
12.4312
  
6,095,282
0.01
0.01
  
2012
616,375
12.4300
  
7,653,144
0.04
0.04
  
2011
590,762
12.4248
  
7,331,695
0.03
0.03
  
2010
676,079
12.4214
  
8,389,376
0.08
0.14
  
2009
786,330
12.4036
  
9,744,873
0.63
0.62
  
FL7
              
2013
461,623
17.9856
  
8,302,432
1.27
30.38
  
2012
522,183
13.7952
  
7,198,531
2.05
20.54
  
2011
489,433
11.4445
  
5,597,048
1.24
(17.23)
  
2010
554,945
13.8263
  
7,667,704
1.37
12.99
  
2009
552,943
12.2366
  
6,761,509
2.15
26.44
  
SGI
              
2013
133,405
13.8022
  
1,841,280
1.80
13.25
  
2012
139,980
12.1877
  
1,706,028
0.73
14.83
  
2011
160,758
10.6137
  
1,706,247
1.31
(6.29)
  
2010
122,675
11.3266
  
1,389,509
2.80
19.17
  
2009
32,107
9.5047
  
305,187
0.81
20.25
  
S17
              
2013
12,031
17.8792
  
215,110
11.62
23.77
  
2012
11,479
14.4455
  
165,824
2.69
15.33
  
2011
10,833
12.5251
  
135,680
0.01
(1.54)
  
2010
9,432
12.5563                 to
12.7212
119,953
2.60
9.61            to
27.21
2009
7,704
11.4552                 to
11.5381
88,885
7.03
14.55            to
30.25

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
  
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
ISC
            
2013
51,093
$13.8828
$709,314
6.21%
13.94%
  
2012
52,927
12.1842
644,870
6.70
12.65
  
2011
50,656
10.8157
547,877
5.57
2.38
  
2010
30,528
10.5639
322,495
5.84
12.67
  
2009
6,230
9.3758
58,414
8.34
(6.24)     to
35.59
FVS
            
2013
103,101
16.6731
1,719,021
1.33
36.24
  
2012
109,439
12.2382
1,339,337
0.67
18.39
  
2011
126,732
10.3374
1,310,096
0.68
(3.76)
  
2010
91,906
10.7413
987,208
0.87
28.22
  
2009
37,465
8.3771
313,866
1.66
29.16
  
SIC
            
2013
104,330
14.7111
1,534,809
5.87
3.32
  
2012
111,574
14.2391
1,588,700
7.65
12.75
  
2011
80,491
12.6286
1,016,482
5.87
2.57
  
2010
40,158
12.3117
494,415
4.27
10.91
  
2009
2,648
11.1002
29,386
5.29
11.00            to
25.75
FGF
            
2013
4
12.5090
48
2.86
(2.24)
  
2012
3
12.7954
44
2.55
1.89
  
2011
4
12.5585
48
3.92
5.68
  
2010
4
11.8835
51
3.60
5.28
  
2009
5
11.2872
55
3.80
3.09
  
FMS
            
2013
170,822
12.4548
2,127,566
2.06
28.26
  
2012
166,962
9.7106
1,621,306
2.28
14.24
  
2011
104,438
8.4999
887,718
2.60
(1.04)
  
2010
91,255
8.5894
783,823
1.62
11.19
  
2009
49,917
7.7247
385,592
1.85
26.05
  
FTI
            
2013
275,095
29.2248
8,039,457
2.39
22.97
  
2012
242,004
23.7658
5,740,658
3.00
18.23
  
2011
261,179
20.1009
5,240,816
1.74
(10.63)
  
2010
240,504
22.4927
5,399,375
1.90
8.41
  
2009
254,053
20.7486
5,261,668
3.23
37.04
  

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
FTG
                  
2013
77,941
$17.3889
to
$26.4637
$2,039,246
2.64%
28.04% to
30.82%
2012
83,265
13.3587
to
20.2291
1,678,797
2.06
20.46            to
21.07
2011
90,650
11.0608
to
16.7091
1,510,562
1.27
(14.64)    to
(6.97)
2010
85,633
11.9804
to
17.9619
1,534,051
1.38
6.86
to
7.39
2009
90,397
11.2113
to
16.7253
1,508,570
3.21
12.11
to
31.10
GS4
                  
2013
13,161
17.1945
to
18.0401
230,901
1.24
32.57
to
32.97
2012
13,806
12.9316
to
13.6081
182,171
1.36
18.53
to
18.89
2011
19,589
10.8769
to
11.4803
219,262
1.19
(7.58) to
(7.51)
2010
19,838
11.7685
to
12.4128
240,204
0.84
10.55
to
10.64
2009
19,022
10.6454
to
11.2187
207,559
1.46
17.63
to
17.73
GS8
                  
2013
13,724
24.0094
to
25.1664
343,642
0.84
32.23
to
32.89
2012
17,891
18.1028
to
18.9374
337,561
1.19
17.88
to
18.47
2011
18,987
15.3115
to
15.9853
302,416
0.70
(6.90) to
(6.38)
2010
22,774
16.4470
to
17.0738
387,522
0.68
24.27
to
25.00
2009
26,778
13.2345
to
13.6591
364,473
1.68
32.38
to
33.15
GS5
                  
2013
28,828
12.2295
to
14.1350
380,623
1.76
23.59
to
23.96
2012
35,717
9.8956
to
11.4033
378,658
1.83
20.63
to
20.99
2011
48,537
8.2033
to
9.4249
419,753
2.99
(15.53) to
(15.47)
2010
61,709
9.7046
to
11.1574
636,285
1.53
9.72
to
9.81
2009
67,408
8.8373
to
10.1689
634,451
1.68
27.94
to
28.05
GS2
                  
2013
9,483
26.6002
to
27.3000
255,827
1.00
34.95
to
35.35
2012
10,121
19.7114
to
20.1697
201,990
1.16
12.27
to
12.60
2011
11,179
17.5575
to
17.9120
198,464
0.73
0.11
to
0.17
2010
13,549
17.5269
to
17.8929
240,185
0.56
29.36
to
29.47
2009
15,260
13.5372
to
13.8317
209,035
1.08
26.93
to
27.04
GS3
                  
2013
242,755
15.1048
to
16.9808
4,060,684
1.14
36.83
to
37.52
2012
262,963
11.0388
to
12.3481
3,197,551
1.80
13.89
to
14.46
2011
292,506
9.6928
to
10.7884
3,111,086
1.71
3.46
to
4.05
2010
327,730
9.3624
to
10.3689
3,340,788
1.53
12.19
to
12.84
2009
341,643
8.3384
to
9.1889
3,088,790
2.02
20.44
to
21.15

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
AI1
-
$-
  
$-
-%
15.17% to
15.36%
2012
2011
85,152
6.7917                 to
8.4665
706,098
0.15
(8.43) to
(7.91)
2010
147,153
7.4119                 to
9.2459
1,335,427
0.78
14.82            to
15.49
2009
181,051
6.4500                 to
8.0528
1,414,000
0.62
20.37            to
21.08
AAH
              
2012
-
  
-
-
-
13.57
  
2011
14,642
8.23
  
120,564
-
(17.66)
  
FFG
              
2013
63,666
13.5640                 to
13.6781
869,679
0.45
39.44            to
40.14
2012
72,749
9.7275                 to
9.7606
709,587
-
(2.83)      to
(2.50)
VKC
              
2013
38,565
20.8629                 to
21.4148
825,400
0.52
33.27            to
33.93
2012
12,597
15.6551                 to
15.9893
201,137
0.64
16.49            to
17.08
2011
11,149
13.4388                 to
13.6573
152,058
0.80
0.33            to
0.83
2010
5,148
13.3952                 to
13.5453
69,355
0.64
21.57            to
35.45
2009
2,614
11.0182                 to
11.0863
28,882
0.36
10.86            to
38.47
VLC
              
2013
55,856
14.4445
  
806,808
1.37
35.65
  
2012
69,969
10.6482
  
745,043
1.57
18.92
  
2011
62,350
8.9538
  
558,269
1.14
(2.11)
  
2010
27,012
9.1465
  
247,070
0.02
15.70
  
2009
19,098
7.9057
  
150,981
6.15
(20.94)     to
28.41
AI3
              
2013
74,505
14.1109                 to
17.9226
1,113,037
1.38
28.61            to
29.25
2012
81,549
10.9407                 to
13.8668
943,216
0.87
13.31            to
13.88
2011
90,780
9.6071                 to
12.1764
926,916
0.94
(0.63)       to
(0.06)
2010
97,700
9.6131                 to
12.1841
1,011,712
0.97
8.92            to
9.56
2009
108,278
8.7747                 to
11.1214
1,038,205
1.85
(12.25)     to
28.30
VKU
              
2013
34,800
17.5121                 to
17.5890
610,666
1.50
24.89
  
2012
38,227
14.0226                 to
14.0842
537,498
1.82
12.39
  
2011
22,925
12.4770                 to
12.5317
286,576
0.95
(1.30)       to
25.32
2010
3,333
12.6413                 to
12.6968
42,321
2.08
12.03            to
26.97
2009
1,794
11.3333
  
20,329
-
13.33
  

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
  
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
VGI
75,572 79,082 108,946 69,331 69,574
$21.8565 16.3009 14.2200 14.5115 12.8977
  
$1,651,568 1,287,760 1,548,033 1,004,889
895,999
1.44% 1.58 1.42 0.10 4.08
34.08% 14.63 (2.01) 12.51 24.37
  
2013 2012 2011 2010 2009
AI4
              
2013
372,696
11.1545                 to
23.1849
6,415,154
1.28
18.42            to
19.01
2012
515,904
9.3725                 to
19.4810
7,424,887
1.52
14.96            to
15.53
2011
475,419
8.1125                 to
16.8620
6,342,206
1.59
(7.27)      to
(6.74)
2010
513,133
8.6989                 to
18.0808
7,685,763
2.32
12.21            to
12.86
2009
536,272
7.7075                 to
16.0202
7,145,969
1.49
34.45            to
35.24
FFI
              
2013
12,203
13.5330
  
165,140
0.41
37.01
  
2012
12,837
9.8771
  
126,795
-
(1.72)
  
ASC
              
2013
12,522
16.2757
  
197,776
0.01
37.46
  
2012
13,079
11.8400
  
154,861
-
13.89
  
2011
15,248
10.3956
  
158,522
-
(0.73)
  
2010
21,093
10.4716
  
220,879
-
28.54
  
2009
24,263
8.1467
  
200,682
0.17
21.29
  
MCA
              
2013
38,195
16.9304
  
646,671
-
39.20
  
2012
39,139
12.1622
  
476,016
0.29
17.43
  
2011
51,714
10.3568
  
535,607
-
(7.22)
  
2010
44,656
11.1630
  
498,518
0.19
27.00
  
2009
28,284
8.7895
  
248,616
0.05
48.61
  
MBI
              
2013
153,834
9.5114
  
1,463,174
2.67
16.32
  
2012
102,187
8.1766
  
835,548
2.22
20.68
  
2011
89,609
6.7754
  
607,135
3.67
(13.56)
  
2010
64,672
7.8383
  
506,914
4.44
4.61
  
2009
37,634
7.4931
  
281,990
3.70
25.28
  
MTC
              
2013
75,900
14.3997
  
1,092,934
0.59
36.15
  
2012
80,771
10.5763
  
854,260
0.05
19.31
  
2011
81,008
8.8642
  
718,073
-
(0.80)
  
2010
51,752
8.9358
  
462,446
0.34
23.06
  
2009
34,068
7.2611
  
247,366
0.56
37.40
  

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
EGS
-
$-
  
                      $-
0.05%
13.68%    to
14.04%
2012
2011
20,022
7.3965                 to
10.9284
208,270
0.15
(1.01)      to
(0.45)
2010
26,428
7.4671                 to
10.9780
279,891
0.09
15.14            to
15.81
2009
29,997
6.4798                 to
9.4973
274,202
0.28
36.93            to
37.74
MBO
              
2013
43,243
13.4958
  
583,602
2.62
34.22
  
2012
55,805
10.0550
  
561,124
0.72
17.29
  
2011
67,427
8.5728
  
578,041
0.35
(4.11)
  
2010
50,504
8.9405
  
451,527
0.74
9.27
  
2009
33,125
8.1817
  
271,021
0.66
24.58
  
GGC
              
2013
315,166
10.7218                 to
10.7420
3,384,754
1.74
7.22            to
7.42
GGE
              
2013
19,559
10.7647
  
210,546
1.56
7.65
  
FFL
              
2013
38,630
13.8679                 to
14.1718
543,076
0.24
36.17            to
36.85
2012
46,983
10.1336                 to
10.3556
483,092
-
1.34            to
2.52
FFJ
              
2013
317,305
14.0505                 to
14.3632
4,543,411
-
37.04            to
37.72
2012
386,168
10.2022                 to
10.4293
4,009,249
-
1.99            to
2.02
FFS
              
2013
63,083
14.6747                 to
15.0012
931,319
-
40.82            to
41.52
2012
51,466
10.3694                 to
10.6001
537,895
-
3.66            to
3.69
FFQ
              
2013
722,781
9.8784                 to
9.9335
7,165,286
1.13
(1.53)      to
(1.03)
2012
839,907
10.0000                 to
10.0372
8,415,860
-
(0.03)      to
0.00
FFM
              
2013
347,428
13.3878                 to
13.6598
4,763,697
0.32
32.28
  
2012
459,306
10.1204                 to
10.3261
4,739,342
-
1.20
  

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
  
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
FFO
              
2013
275,117
$13.6741                 to
$14.0471
$3,861,733
1.22%
32.57%             to      35.89%
2012
239,884
10.0629                 to
10.3374
2,478,021
-
0.63
  
MIT
              
2013
83,046
17.2120                 to
18.6960
1,513,562
2.11
35.72             to
36.40
2012
93,890
12.6441                 to
13.7069
1,252,593
1.66
14.80             to
15.37
2011
111,188
10.9812                 to
11.8804
1,283,901
1.89
1.40             to
1.97
2010
126,427
10.8299                 to
11.6506
1,428,524
1.81
15.79             to
16.46
2009
127,111
9.3535                 to
10.0037
1,233,549
2.23
24.53             to
25.26
MF7
              
2013
54,066
14.7872
  
799,496
4.47
(0.51)
  
2012
48,031
14.8628
  
713,874
4.65
11.00
  
2011
80,921
13.3896
  
1,083,504
3.97
6.30
  
2010
25,272
12.5956
  
318,313
3.28
10.67
  
2009
2,540
11.3812
  
28,911
2.67
13.81             to
27.66
EM1
              
2013
206,587
8.2055
  
1,695,166
1.46
(5.40)
  
2012
205,460
8.6740
  
1,782,175
0.88
18.60
  
2011
204,158
7.3135
  
1,493,151
0.36
(18.72)
  
2010
155,279
8.9983
  
1,397,278
0.68
23.47
  
2009
103,123
7.2881
  
751,594
1.75
68.13
  
GT2
              
2013
3,084
12.0299
  
37,096
2.44
8.54
  
2012
3,275
11.0831
  
36,294
1.96
5.95             to
8.65
GSS
              
2013
118,047
17.6732                 to
18.8134
2,096,086
2.02
(3.08)       to
(2.59)
2012
190,277
18.1437                 to
19.3530
3,463,836
3.17
2.02             to
2.53
2011
208,832
17.6963                 to
18.9136
3,709,448
3.51
6.79             to
7.40
2010
276,581
16.4771                 to
17.7103
4,588,328
3.53
4.14             to
4.75
2009
309,497
15.7297                 to
17.0060
4,899,415
5.04
3.89             to
4.49

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
  
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
MFK
52,965
$12.0053
  
$635,856
1.86%
(2.90%)
  
2013
2012
91,448
12.3633
  
1,130,606
3.16
2.27
  
2011
60,481
12.0889
  
731,160
4.40
7.11
  
2010
15,505
11.2864
  
174,994
2.54
4.49
  
2009
5,383
10.8010
  
58,143
4.93
8.01
  
HYS
              
2013
271,269
10.7133                 to
23.7031
5,451,191
2.23
5.90            to
6.42
2012
431,721
10.0666                 to
22.2721
7,378,891
5.20
0.67            to
14.91
2011
252,678
17.9290                 to
19.3827
4,875,753
5.80
3.55            to
4.13
2010
257,764
17.3030                 to
18.6131
4,778,452
7.65
14.86            to
15.53
2009
159,208
15.0516                 to
16.1108
2,548,049
9.45
49.48            to
50.36
IGS
              
2013
55,440
17.1373                 to
17.5906
971,260
1.29
13.35            to
13.92
2012
54,483
15.1187                 to
15.4414
841,034
1.04
19.30            to
19.90
2011
44,171
12.6403                 to
12.8791
568,701
0.95
 (11.40)    to
(10.89)
2010
35,401
14.2663                 to
14.4537
511,122
0.73
15.16            to
42.93
2009
18,986
12.5510                 to
12.5510
238,299
0.62
25.51
  
IG1
              
2013
28,603
17.3562
  
496,446
1.09
13.68
  
2012
28,397
15.2681
  
433,569
0.56
19.54
  
2011
54,366
12.7724
  
694,375
0.92
(11.11)
  
2010
41,732
14.3691
  
599,657
0.16
14.86            to
43.69
2009
3,223
12.5096
  
40,322
0.05
25.10
  
MIS
              
2013
171,206
12.6914                 to
15.5244
2,629,471
0.76
29.74            to
30.39
2012
123,229
9.7819                 to
11.9060
1,421,901
0.40
16.66            to
17.25
2011
155,407
8.3847                 to
10.1545
1,520,071
0.58
0.23            to
0.79
2010
174,320
8.3601                 to
10.0744
1,690,399
0.32
12.49            to
13.15
2009
179,443
7.4252                 to
8.9034
1,531,181
0.85
39.32            to
40.14
MMS
              
2013
868,403
9.9446                 to
10.0000
8,679,631
-
(0.50)       to
-
2012
978,841
9.9943                 to
10.0000
9,787,843
-
(0.03)       to
-

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
NWD
              
2013
122,477
$22.4420       to
$33.0067
$2,789,594.00
-%
40.74%to
41.44%
2012
127,910
15.8668                 to
23.3827
2,064,071
-
20.62            to
21.22
2011
133,980
13.0891                 to
19.3280
1,785,924
-
(10.88)     to
(10.37)
2010
111,942
14.6037                 to
21.6870
1,673,771
-
35.79            to
36.58
2009
115,441
10.6921                 to
15.9710
1,265,806
-
62.01            to
62.96
RI1
              
2013
240,636
9.9960
  
2,405,406
0.24
18.77
  
2012
28,831
8.4161
  
242,647
1.95
16.29
  
2011
7,150
7.2374
  
51,741
1.78
(11.06)
  
2010
4,969
8.1373
  
40,422
0.98
(18.63)     to
10.34
2009
3,154
7.3750
  
23,261
1.75
30.50
  
TRS
              
2013
-
  
-
-
3.91
10.43            to
10.77
2012
198,417
16.7084                 to
18.9798
3,385,219
2.53
10.78            to
11.34
2011
232,288
15.0067                 to
17.1322
3,595,471
2.68
1.35            to
1.93
2010
262,145
14.7232                 to
16.8923
3,993,230
2.68
9.33            to
9.97
2009
282,974
13.3889                 to
15.4383
3,945,708
3.67
33.89            to
54.38
MFJ
              
2013
-
  
-
-
3.42
10.63
  
2012
13,638
11.2844
  
153,905
2.42
11.02
  
2011
10,379
10.1647
  
105,491
1.00
1.66
  
2010
4,599
9.9991
  
45,980
2.23
(0.01)      to
9.69
2009
2,973
9.1158
  
27,102
0.80
(8.84)      to
17.81
UTS
              
2013
65,130
28.9529                 to
34.7758
1,923,417
2.77
20.01            to
20.61
2012
71,062
24.0054                 to
28.8909
1,748,288
4.83
13.58            to
14.15
2011
79,899
21.0293                 to
25.3599
1,727,089
3.45
6.52            to
7.12
2010
83,920
19.6313                 to
23.8084
1,705,118
3.19
13.24            to
13.90
2009
92,392
17.2354                 to
21.0250
1,656,708
4.91
32.60            to
33.37
MFE
              
2013
19,654
14.0490
  
276,120
1.55
20.29
  
2012
48,630
11.6788
  
567,940
4.37
13.92
  
2011
64,753
10.2515
  
663,801
3.56
6.84
  
2010
29,895
9.5953
  
286,853
2.83
(4.05)      to
13.60
2009
5,833
8.4464
  
49,268
5.11
33.10
  

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
MVS
              
2013
88,069
$22.0230       to
$23.0843
$2,026,382
2.61%
35.19%    to
35.86%
2012
138,611
16.2423                 to
16.9911
2,350,318
1.84
15.64            to
16.22
2011
161,978
14.0038                 to
14.6201
2,360,418
1.55
 (0.56)     to
0.00
2010
185,161
14.0833                 to
14.6201
2,699,635
1.47
10.86            to
11.51
2009
185,355
12.7038                 to
13.1113
2,424,022
1.77
19.89            to
27.04
MV1
              
2013
189,923
13.9449
  
2,648,460
2.69
35.48
  
2012
187,284
10.2932
  
1,927,754
1.66
15.97
  
2011
162,418
8.8757
  
1,441,595
1.30
(0.29)
  
2010
74,964
8.9013
  
667,299
1.01
11.22
  
2009
35,020
8.0030
  
280,285
1.44
20.30
  
SCB
              
2013
193,144
16.0342                 to
26.5251
4,365,994
1.65
44.99            to
45.71
2012
189,321
11.0040                 to
18.2037
2,980,077
0.61
14.16            to
14.74
2011
162,513
9.5907                 to
15.8657
2,276,320
0.43
(5.41)      to
(4.87)
2010
143,736
10.0819                 to
16.6783
2,187,095
0.36
23.74            to
24.46
2009
161,111
8.1003                 to
13.4002
1,981,215
0.06
35.97            to
36.77
111
              
2013
274,651
14.7187                 to
15.0567
4,132,908
3.15
9.60            to
9.82
2012
366,514
13.4294                 to
13.7104
5,022,969
2.96
8.68            to
8.90
2011
437,524
12.3570                 to
12.5903
5,506,764
1.43
(0.59)      to
0.97
2010
405,216
12.4697
  
5,052,908
1.34
9.92
  
2009
145,753
11.3444
  
1,653,486
0.64
13.44            to
19.37
SC3
              
2013
193,547
9.5941                 to
34.6665
4,010,429
5.32
4.46            to
4.99
2012
209,885
9.1385                 to
33.0863
4,085,006
1.04
29.39            to
30.03
2011
252,387
7.0278                 to
25.4954
3,551,676
7.12
(8.11)            to
(7.59)
2010
222,762
7.6052                 to
27.7467
3,672,500
12.76
14.61            to
15.28
2009
157,830
6.5971                 to
24.2097
2,788,136
3.90
29.33            to
30.09
113
              
2013
117,253
18.1420                 to
18.5586
2,175,299
2.61
22.32            to
22.56
2012
158,874
14.8320                 to
15.1424
2,405,200
2.69
12.55            to
12.78
2011
121,604
13.1779                 to
13.4267
1,632,352
1.91
(4.21)      to
(3.66)
2010
80,587
13.7567                 to
13.9373
1,122,915
1.52
13.14            to
13.80
2009
19,238
12.1592                 to
12.2472
235,505
0.32
21.59            to
27.17

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
115
              
2013
114,887
$12.5216       to
$12.8092
$1,471,324
-%
(5.26%)   to
(5.07%)
2012
140,734
13.2165                 to
13.4930
1,898,656
0.85
7.53             to
7.75
2011
136,899
12.2909                 to
12.5230
1,714,176
2.21
11.29             to
11.92
2010
89,839
11.0441                 to
11.1892
1,005,235
1.31
5.25             to
10.44
2009
53,223
10.5659                 to
10.6312
565,763
2.08
5.66             to
8.74
SDC
              
2013
597,676
11.1014                 to
11.4254
6,818,642
0.13
0.21             to
0.71
2012
615,209
11.0780                 to
11.3447
6,968,272
1.15
1.73             to
2.24
2011
604,985
10.8570                 to
11.0956
6,702,997
1.18
(0.04)      to
0.53
2010
599,053
10.8615                 to
11.0376
6,601,874
1.50
1.82             to
2.41
2009
577,989
10.6676                 to
10.7775
6,222,095
1.93
3.78             to
7.77
SGC
              
2013
355,612
16.2884                 to
17.5439
5,841,195
1.18
36.91
  
2012
344,651
11.8971                 to
12.8141
4,127,671
1.05
16.38
  
2011
360,760
10.2226                 to
11.0105
3,704,894
1.05
2.47
  
2010
356,693
9.9760                 to
10.7449
3,567,096
-
22.13
  
2009
384,587
8.1685                 to
8.7981
3,144,711
1.30
(18.31)    to
25.68
112
              
2013
246,081
16.6073                 to
16.9887
4,176,399
1.70
16.63             to
16.87
2012
200,784
14.2389                 to
14.5369
2,915,557
2.70
10.34             to
10.56
2011
173,491
12.9042                 to
13.1478
2,278,416
1.42
(2.11)      to
(1.56)
2010
126,462
13.1828                 to
13.3559
1,687,203
1.56
11.53             to
33.56
2009
32,499
11.8200                 to
11.9056
386,045
0.31
18.20             to
23.91
117
              
2013
49,946
19.2351                 to
19.7439
985,823
0.99
39.24             to
39.94
2012
30,542
13.8140                 to
14.1090
430,836
0.09
9.35             to
9.90
2011
23,420
12.5999                 to
12.8379
300,600
0.65
(6.85)      to
(6.32)
2010
11,660
13.5522                 to
13.7041
159,745
-
21.02             to
35.26
2009
2,459
11.1984                 to
11.2676
27,680
1.38
11.98             to
12.68
VKM
              
2013
45,356
24.5980
  
1,115,664
0.25
37.48
  
2012
42,836
17.8917
  
766,411
-
8.49
  
2011
13,271
16.4916
  
218,862
0.27
(7.17)
  
2010
6,663
17.7663
  
118,378
-
32.27        toto
77.66
2009
1,040
13.4320
  
13,963
-
34.32
  

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
  
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
OCF
              
2013
43,398
$18.4371
  
$800,137
0.99%
29.74%
  
2012
45,512
14.2109
  
646,766
0.65
14.12
  
2011
48,526
12.4528
  
604,218
0.35
(1.15)
  
2010
48,194
12.5976
  
607,056
0.18
9.42
  
2009
47,919
11.5134
  
551,652
0.32
44.52
  
OCA
              
2013
2,303
12.0715
  
27,799
0.89
29.43
  
2012
3,290
9.3268
  
30,682
0.40
13.81
  
2011
3,121
8.1953
  
25,527
0.16
(1.37)
  
2010
8,980
8.3095
  
74,599
0.00
9.14
  
2009
3,297
7.6134
  
25,098
0.01
44.15
  
OGG
              
2013
7,672
13.0427
  
100,059
1.28
26.99
  
2012
9,453
10.2707
  
97,089
1.91
20.95
  
2011
8,808
8.4916
  
74,763
0.95
(8.53)
  
2010
5,177
9.2831
  
48,052
0.59
(7.17)     to
15.70
2009
1,642
8.0233
  
13,169
2.01
39.35
  
OMG
              
2013
7,655
13.3798
  
102,444
0.89
31.44
  
2012
15,086
10.1796
  
153,585
0.66
16.61
  
2011
14,670
8.7297
  
128,067
0.55
(0.31)
  
2010
13,823
8.7572
  
121,044
0.84
15.82
  
2009
12,870
7.5607
  
97,309
1.50
27.99
  
PCR
              
2013
61,978
8.5945
  
532,669
1.75
(14.70)
  
2012
64,002
10.0757
  
644,865
2.77
5.39
  
2011
57,230
9.5603
  
547,139
14.30
(7.56)
  
2010
43,470
10.3420
  
449,565
16.55
24.52
  
2009
40,495
8.3053
  
336,330
7.29
41.53
  
PMB
              
2013
178,348
14.5925                 to
32.2082
4,221,931
5.00
(6.97)
  
2012
188,735
15.6854                 to
34.6206
4,886,568
4.93
17.90
  
2011
174,977
13.3036                 to
29.3634
4,201,023
5.31
6.33
  
2010
155,695
12.5115                 to
27.6151
3,753,961
4.91
12.17
  
2009
136,232
11.1541                 to
24.6192
3,134,697
6.03
30.59
  

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
SBJ
9,203
5,456
3,953
$10.0478
10.9058
10.0170
to
to
to
$10.2626
11.1390
10.2312
$92,768
59,512
39,612
3.29%
3.49
0.26
(8.80%)     to
8.87
0.17             to
(7.87%)
2.31
2013
2012
2011
PRR
                
2013
180,329
13.4859
to
17.9076
3,182,967
1.73
(9.22)
  
2012
176,981
14.8553
to
19.7259
3,399,373
1.07
8.76
  
2011
204,769
13.6585
to
18.1368
3,648,876
2.06
11.68
  
2010
154,708
12.2301
to
16.2401
2,469,614
1.45
8.11
  
2009
153,834
11.3126
to
15.0218
2,258,403
3.04
18.39
  
PTR
                
2013
574,968
14.7170
to
18.8108
10,656,011
2.20
(1.96)
  
2012
574,361
15.0114
to
19.1871
10,827,039
2.57
9.60
  
2011
576,416
13.6961
to
17.5060
9,969,635
2.63
3.61
  
2010
530,884
13.2187
to
16.8958
8,881,409
2.42
8.12
  
2009
586,094
12.2264
to
15.6274
9,076,763
5.15
14.07
  
118
                
2012
-
    
-
-
7.13
11.09             to
11.30
2011
77,979
  9.7106
to
9.8941
771,473
2.38
(16.68)      to
(16.21)
2010
52,453
11.6551
to
11.8082
619,332
0.00
4.62             to
16.55
2009
2,968
11.2870
  
33,503
3.08
12.87             to
29.71
SBB
                
2012
-
    
-
-
6.66
13.26             to
13.76
2011
3,666
    
9.0862
33,306
-
(9.14)
  
SCM
                
2012
-
    
-
-
3.55
12.82             to
13.35
2011
11,428
12.6757
to
14.1198
158,295
0.59
1.08             to
1.58
2010
26,767
12.5406
to
13.9000
368,667
-
16.18             to
16.76
2009
29,869
10.7941
to
11.9048
353,648
1.11
7.94             to
21.09
SC7
                
2012
-
    
-
-
1.79
10.40
  
2011
353,134
8.5814
to
12.6636
4,208,994
0.88
(3.77)
  
2010
346,780
8.9175
to
13.1597
4,338,414
0.49
12.92
  
2009
331,884
7.8970
to
11.6536
3,760,214
0.43
29.39
  

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
     
At December 31,
  
For the years ended December 31,
 
Units
  
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
116
                  
2012
-
$
    
-
$-
-%
14.01%    to
14.54%
2011
33,493
  
13.7075
to
13.9664
467,702
-
(10.54)    to
(0.92)
2010
4,887
  
13.9392
to
14.0954
68,832
-
25.45            to
26.08
2009
1,517
  
11.1114
to
11.1801
16,926
-
11.11            to
11.80
SLC
                  
2012
-
      
-
-
1.63
10.20
  
2011
271,541
  
8.7955
to
10.1221
2,395,000
0.61
(6.15)
  
2010
288,025
  
9.3719
to
10.7854
2,704,837
-
17.19
  
2009
296,551
  
7.9975
to
9.2036
2,377,189
0.73
(20.03)    to
17.85
SPC
                  
2012
-
      
-
-
6.52
13.22
  
2011
223,767
  
12.5553
to
13.1245
2,835,451
7.31
4.28
  
2010
228,363
  
12.0400
to
12.5857
2,785,173
7.48
12.70
  
2009
300,721
  
10.6827
to
11.1670
3,225,503
8.46
6.83            to
30.76
114
                  
2012
-
      
-
-
3.14
7.72            to
8.22
2011
362,962
  
12.3616
to
12.5960
4,568,180
2.72
3.11            to
3.70
2010
208,954
  
11.9884
to
12.1468
2,537,894
2.29
7.01            to
19.88
2009
53,262
  
11.2246
to
11.2948
600,483
2.59
8.90            to
12.95
SC5
                  
2012
-
      
-
-
0.39
16.71            to
17.25
2011
225,674
  
9.3434
to
27.5608
3,451,304
0.06
(8.31)      to
(7.78)
2010
218,203
  
10.1321
to
30.0571
3,914,458
0.06
22.45            to
23.17
2009
194,532
  
8.2261
to
24.5456
3,052,889
0.03
29.32            to
30.07
LCG
                  
2012
-
      
-
-
0.74
11.58            to
12.10
2011
33,149
  
8.6400
to
8.9036
287,970
0.30
(5.07)      to
(4.53)
2010
29,304
  
9.0502
to
9.3263
267,553
0.28
18.80            to
19.50
2009
31,492
  
7.5736
to
7.8046
242,060
0.20
36.43            to
37.23
SC2
                  
2012
-
      
-
-
2.39
5.94            to
6.44
2011
223,012
  
12.2286
to
18.3020
3,472,207
3.64
6.47            to
7.07
2010
261,580
  
11.4212
to
17.1906
3,858,481
3.53
7.06            to
7.69
2009
262,230
  
10.6059
to
16.0569
3,618,688
4.55
20.34            to
21.05

 
 
 


 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(A Separate Account of Sun Life Assurance Company of Canada (U.S.))
 
9. FINANCIAL HIGHLIGHTS (CONTINUED)
 
   
At December 31,
  
For the years ended December 31,
  
 
Units
Unit Value
lowest to highest3
Net
Assets
Investment
Income
Ratio1
Total Return
lowest to highest2
SC1
-
$
-
$                -
0.08%
(0.39%) to
0.08%
2012
2011
809,604
10.3602                   to
12.3157
8,725,014
0.14
(0.42) to
0.15
2010
659,419
10.3449                   to
12.3673
7,199,078
0.19
(0.39) to
0.19
2009
720,959
10.3253                   to
12.4161
7,830,436
0.24
(0.34) to
0.25
TBC
              
2013
215,415
24.4964
  
5,276,317
0.03
41.15
  
2012
230,585
17.3545
  
4,003,809
0.15
18.26
  
2011
249,032
14.6748
  
3,656,266
-
1.52
  
2010
237,324
14.4558
  
3,432,417
-
16.39
  
2009
254,018
12.4201
  
3,156,405
-
42.18
  
USC
              
2013
14,032
15.9788
  
224,217
0.13
33.75
  
2012
13,149
11.9465
  
157,085
0.36
20.02
  
2011
11,821
9.9541
  
117,692
-
(3.49)
  
2010
9,991
10.3144
  
103,073
-
23.35
  
2009
8,177
8.3618
  
68,380
-
42.23
  

 
 
1 Represents the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. The ratio excludes those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Accounts invest.
 
2 Ratio represents the total return for the year indicated, including changes in the value of the underlying fund, and expenses assessed through the reduction of units. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in reduction in the total return presented.
 
3 These unit values are not a direct calculation of net assets over the number of units allocated to the Sub-Account.



 

 
 
 


 
 
 


PART C

ITEM 26.  EXHIBITS

A.
Resolution of the Board of Directors of Sun Life Assurance Company of Canada (U.S.), dated October 29, 1998, authorizing the establishment of Sun Life of Canada (U.S.) Variable Account I (Incorporated herein by reference to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form S-6, File No. 333-68601, filed with the Securities and Exchange Commission on December 9, 1998.)
     
B.
None.
     
C.
(1)
Principal Underwriting Agreement (Incorporated herein by reference to Post-Effective Amendment No. 11 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-100829, filed with the Securities and Exchange Commission on April 30, 2009.)
     
 
(2)
Amendment One to the Principal Underwriting Agreement (Incorporated herein by reference to Post-Effective Amendment No. 11 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-100829, filed with the Securities and Exchange Commission on April 30, 2009.)
     
 
(3)
Amendment Two to Principal Underwriting Agreement. (Incorporated herein by reference to Post-Effective Amendment No. 12 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-100829, filed with the Securities and Exchange Commission on April 27, 2010.)
     
 
(4)
Amendment Three to Principal Underwriting Agreement. (Incorporated herein by reference to Post-Effective Amendment No. 12 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-100829, filed with the Securities and Exchange Commission on April 27, 2010.)
     
 
(5)
Sales Operations and General Agent Agreement.  (Incorporated herein by reference to Post-Effective Amendment No. 22 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-65048, filed with the Securities and Exchange Commission on April 27, 2012.)
     
D.
(1)
Flexible Premium Combination Fixed and Variable Life Insurance Policy  (Incorporated by reference to Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on May 30, 2007.)
     
 
(2)
Charitable Giving Benefit Rider (Incorporated herein by reference to Pre-Effective Amendment No. 2 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on September 19, 2007.)
     
 
(3)
Payment of Stipulated Amount Rider (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form S-6, File No. 333-68601, filed with the Securities and Exchange Commission on April 27, 1999.)
     
 
(4)
Waiver of Monthly Deductions Rider (Incorporated herein by reference to Pre-Effective Amendment No. 2 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on September 19, 2007.)
     
 
(5)
Travel Assistance Endorsement (Incorporated herein by reference to Pre-Effective Amendment No. 2 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on September 19, 2007.)
     
 
(6)
Loan Lapse Protection Rider (Incorporated herein by reference to Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-144628, filed with the Securities and Exchange Commission on July 17, 2007.)
     
 
(7)
 Scheduled Increases Endorsement (Incorporated herein by reference to Post-Effective Amendment No. 7 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on May 20, 2009.)
     
E.
(1)
Application for Flexible Premium Combination Fixed and Variable Life Insurance Policy (Incorporated by reference to Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on May 30, 2007.)
     
 
(2)
Application for Flexible Premium Combination Fixed and Variable Life Insurance Policy (Incorporated by reference to Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on May 30, 2007.)
     
 
(3)
Application for Flexible Premium Combination Fixed and Variable Life Insurance Policy (Incorporated by reference to Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on May 30, 2007.)
     
     
 
(4)
Application for Flexible Premium Combination Fixed and Variable Life Insurance Policy (Incorporated by reference to Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on May 30, 2007.)
     
     
 
(5)
Consent Form (Incorporated by reference to Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on May 30, 2007.)
     
 
(6)
Scheduled Increases Application. (Incorporated herein by reference to Post-Effective Amendment No. 7 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on May 20, 2009.)
     
F.
(1)
Certificate of Incorporation of Sun Life Assurance Company of Canada (U.S.) (Incorporated herein by reference to the Depositor's Form 10-K, File No. 333-82824, filed with the Securities and Exchange Commission on March 29, 2004.)
     
 
(2)
Bylaws of the Depositor, as amended March 19, 2004 (Incorporated herein by reference to the Depositor's Form 10-K, File No. 333-82824, filed with the Securities and Exchange Commission on March 29, 2004.)
     
G.
Specimen Reinsurance Contract.  (Incorporated herein by reference to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-100829, filed with the Securities and Exchange Commission on October 30, 2002.)
     
H.
(1)
Participation Agreement, dated February 17, 1998, by and among AIM Variable Insurance Funds, Inc., AIM Distributors, Inc., Sun Life Assurance Company of Canada (U.S.), and Clarendon Insurance Agency, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 1 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account F on Form N-4, Exhibit 8d, File No. 333-82957, filed with the Securities and Exchange Commission on February 3, 2000.)
     
 
(2)
Amended and Restated Participation Agreement, dated September 1, 2004, by and among Sun Life Assurance Company of Canada (U.S.), Variable Insurance Products Fund and Fidelity Distributors Corporation (Incorporated herein by reference to Post-Effective Amendment No. 8 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account F on Form N-4, Exhibit 8g, File No. 333-83516, filed with the Securities and Exchange Commission on April 28, 2005.)
     
 
(3)
Participation Agreement, dated May 1, 2001, by and among Sun Life Assurance Company of Canada (U.S.), Clarendon Insurance Agency, Inc., Alliance Capital Management L.P. and Alliance Fund Distributors, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 10 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account F on Form N-4, Exhibit 8k, File No. 333-82957, filed with the Securities and Exchange Commission on April 23, 2004.)
 
    
 
(4)
Participation Agreement, dated September 16, 2002, by and among the Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc., Sun Life Insurance and Annuity Company of New York and Sun Life Assurance Company of Canada (U.S.) (Incorporated herein by reference to the Registration Statement of KBL Variable Account A on Form N-4, Exhibit 8g, File No. 333-102278, filed with the Securities and Exchange Commission on December 31, 2002.)
     
 
(5)
Participation Agreement, dated February 17, 1998, by and among Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co., and Sun Life Assurance Company of Canada (U.S.) (Incorporated herein by reference to Post-Effective Amendment No. 13 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account F on Form N-4, Exhibit 8b, File No. 033-41628, filed with the Securities and Exchange Commission on April 26, 1999.)
     
 
(6)
Participation Agreement, dated July 15, 2002, by and among Sun Life Assurance Company of Canada (U.S.), Deutsche Asset Management VIT Funds and Deutsche Asset Management, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 2 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, Exhibit 8o, File No. 333-65048, filed with the Securities and Exchange Commission on July 3, 2002.)
     
 
(7)
Participation Agreement, dated September 30, 2002, by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, First Eagle Sogen Variable Funds, Inc. and Arnhold and S. Bleichroeder, Inc. (Incorporated herein by reference to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, Exhibit H9, File No. 333-143353, filed with the Securities and Exchange Commission on May 30, 2007.)
     
 
(8)
Participation Agreement, dated September 12, 2002, by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, PIMCO Variable Insurance Trust and PIMCO Funds Distributors LLC. (Incorporated herein by reference to Post-Effective Amendment No. 3 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, Exhibit H10, File No. 333-59662, filed with the Securities and Exchange Commission on February 26, 2003.)
     
 
(9)
Participation Agreement, dated December 1, 2004, by and among Wanger Advisors Trust, Columbia Funds Distributor, Inc., Sun Life Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York.  (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account J on Form N-6, Exhibit H20, File No. 333-136435, filed with the Securities and Exchange Commission on August 9, 2006.)
 
    
 
(10)
Participation Agreement, dated May 1, 2004, by and among Sun Life Assurance Company of Canada (U.S.), The Universal Institutional Funds, Inc., Morgan Stanley & Co. Incorporated and Morgan Stanley Investment Management Inc. (Incorporated herein by reference to Post-Effective Amendment 5 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-111688, filed with the Securities and Exchange Commission on April 27, 2007.)
     
 
(11)
Participation Agreement, dated August 6, 2004, by and among Sun Life Insurance and Annuity Company of New York, Van Kampen Life Investments Trust, Van Kampen Funds Inc., Van Kampen Asset Management. (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, Exhibit H16, File No. 333-100831, filed with the Securities and Exchange Commission on April 29, 2005.)
     
 
(12)
Participation Agreement, dated December 31, 2002, by and among Oppenheimer Variable Account Funds, OppenheimerFunds, Inc. and Sun Life Assurance Company of Canada (U.S.) (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, Exhibit H17, File No. 333-100831, filed with the Securities and Exchange Commission on April 29, 2005.)
     
 
(13)
Restated Participation Agreement, dated April 1, 2007, by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, Independence Life and Annuity Company, Columbia Funds Variable Insurance Trust I, Columbia Management Advisors, LLC and Columbia Management Distributors, Inc. (Incorporated herein by reference to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, Exhibit H15, File No. 333-143353, filed with the Securities and Exchange Commission on May 30, 2007.)
     
 
(14)
Participation Agreement, dated May 13, 2004, by and among Sun Life Assurance Company of Canada (U.S.), Merrill Lynch Variable Series Funds, Inc., Merrill Lynch Investment Managers, L.P. and FAM Distributors, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 2 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-111688, filed with the Securities and Exchange Commission on December 30, 2005.)
     
 
(15)
Participation Agreement, dated October 1, 2008, by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, American Funds Insurance Series and Capital Research and Management Company.  (Incorporated by reference to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 111688, filed with the Securities and Exchange Commission on September 22, 2008.)
     
 
(16)
Participation Agreement, dated December 10, 2012, by and among MFS Variable Insurance Trusts I, II and III, Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York and Massachusetts Financial Services Company. (Incorporated herein by reference to Post-Effective Amendment No. 24 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-65048, filed with the Securities and Exchange Commission on December 10, 2012.)
     
I.
Third Party Administration Agreement between Andesa TPA, Inc. and Sun Life Assurance Company of Canada. (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-65048, filed with the Securities and Exchange Commission on October 1, 2002.)
     
J.
(1)
Powers of Attorney for Homer J. Holland and Richard E. Kipper (filed herewith). Powers of Attorney (Incorporated herein by reference to Post-Effective Amendment No. 19 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed with the Securities and Exchange Commission on August 19, 2013.)
     
 
(2)
Resolution of the Board of Directors of the Depositor dated August 2, 2013, authorizing the use of Powers of Attorney for Officer signatures. (Incorporated herein by reference to Post-Effective Amendment No. 48 to the Registration Statement on Form N-4, File No. 333-83516, filed with the Securities and Exchange Commission on August 19, 2013.)
     
K.
Legal Opinion.
     
L.
None.
     
M.
None.
     
N.
Consents of Independent Auditors
     
O.
None.
     
P.
None.
     
Q.
None.

ITEM 27.  DIRECTORS AND OFFICERS OF THE DEPOSITOR

Name and Principal
Business Address
Positions and Offices
With Depositor
   
Dennis A. Cullen
811 Turnberry Lane
Northbrook, IL 60062
Director
   
Homer J. Holland
c/o Holland Partners, Inc.
P.O. Box 832
Carefree, AZ 85377-0832
Director
   
Richard E. Kipper
P.O. Box 529
Woody Creek, CO 81656
Director
   
David E. Sams, Jr.
Sun Life Assurance Company of Canada (U.S.)
96 Worcester Street
Wellesley Hills, MA  02481
Chief Executive Officer and Director
   
Andrew F. Kenney
Sun Life Assurance Company of Canada (U.S.)
96 Worcester Street
Wellesley Hills, MA 02481
Chief Investment Officer
   
James D. Purvis
Sun Life Assurance Company of Canada (U.S.)
96 Worcester Street
Wellesley Hills, MA 02481
Chief Operating Officer and Treasurer
   
Daniel J. Towriss
Sun Life Assurance Company of Canada (U.S.)
96 Worcester Street
Wellesley Hills, MA 02481
President, Chief Actuary, Chief Risk Officer and
Director
   
Kenneth A. McCullum
Sun Life Assurance Company of Canada (U.S.)
96 Worcester Street
Wellesley Hills, MA 02481
Executive Vice President, Business Development
and In Force Management
   
Michael S. Bloom
Sun Life Assurance Company of Canada (U.S.)
96 Worcester Street
Wellesley Hills, MA 02481
Vice President and General Counsel and
Secretary
   
Robert S. Sabatino
Sun Life Assurance Company of Canada (U.S.)
96 Worcester Street
Wellesley Hills, MA 02481
Vice President, Information Technology and Operations
   
Michelle Wilcon
Sun Life Assurance Company of Canada (U.S.)
96 Worcester Street
Wellesley Hills, MA 02481
Vice President, Human Resources and Internal
Communications

ITEM 28.  PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR THE REGISTRANT

No person is directly or indirectly controlled by the Registrant. The Registrant is a separate account of Sun Life Assurance Company of Canada (U.S.), which is controlled by Delaware Life Holdings, LLC.

The organization chart of Delaware Life Holdings, LLC is incorporated by reference to Post-Effective Amendment No. 49 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account F on Form N-4, File No. 333-83516, filed May 1, 2014.

None of the companies listed in such organization chart is a subsidiary of the Registrant; therefore, the only financial statements being filed are those of Sun Life Assurance Company of Canada (U.S.).

ITEM 29.  INDEMNIFICATION

Pursuant to Section 145 of the Delaware Corporation Law, Article 8 of the By-laws of Sun Life Assurance Company of Canada (U.S.) provides for the indemnification of directors, officers and employees of Sun Life Assurance Company of Canada (U.S.).  Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Sun Life Assurance Company of Canada (U.S.) pursuant to the certificate of incorporation, by-laws, or otherwise, Sun Life (U.S.) has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by Sun Life (U.S.) of expenses incurred or paid by a director, officer, controlling person of Sun Life (U.S.) in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Sun Life (U.S.) will submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Act, unless in the opinion of their counsel the matter has been settled by controlling precedent, and will be governed by the final adjudication of such issue.

ITEM 30.  PRINCIPAL UNDERWRITERS

(a) Clarendon Insurance Agency, Inc., which is a wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.), acts as general distributor for the Registrant, Sun Life of Canada (U.S.) Variable Accounts C, D, E, F, G, K and L, Keyport Variable Account A, KMA Variable Account, Keyport Variable Account I, KBL Variable Account A, KBL Variable Annuity Account and Sun Life (N.Y.) Variable Accounts A, B, C, D and N.

(b)
Name and Principal
Position and Offices
 
Business Address*
with Underwriter
     
 
Kenneth A. McCullum
President and Director
 
Michael K. Moran
Financial Operations Principal and Treasurer and Director
 
Michael S. Bloom
Secretary and Director
 
Thomas Seitz
Vice President, Distribution
 
Kathleen T. Baron
Chief Compliance Officer
 
Wayne P. Farmer
Tax Officer
 
Maryellen Percuoco
Clerk and Assistant Secretary

* The principal business address of all directors and officers of the principal underwriter is 96 Worcester Street, Wellesley Hills, Massachusetts 02481.

(c)  Inapplicable.

ITEM 31.  LOCATION OF ACCOUNTS AND RECORDS

Accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are maintained, in whole or in part, by Sun Life Assurance Company of Canada (U.S.) at its offices at 96 Worcester Street, Wellesley Hills, Massachusetts 02481 or at the offices of Clarendon Insurance Agency, Inc., at 96 Worcester Street, Wellesley Hills, Massachusetts 02481.

ITEM 32.  MANAGEMENT SERVICES

Not applicable.

ITEM 33.  FEE REPRESENTATION

Sun Life Assurance Company of Canada (U.S.) (“Sun Life of Canada (U.S.)”) hereby represents that the aggregate fees and charges under the Policy are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Sun Life of Canada (U.S.).


 
 
 


SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements of Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment to the Registration Statement and has duly caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf, in the Town of Wellesley Hills, and Commonwealth of Massachusetts on this 1st day of May, 2014.

 
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
 
(Registrant)
   
 
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
 
(Depositor)
   
 
By: /s/ Daniel J. Towriss*
 
Daniel J. Towriss
 
President

*By:
/s/ Kenneth N. Crowley
 
Kenneth N. Crowley
 
Senior Counsel

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed by the following persons in the capacities with the Depositor, Sun Life Assurance Company of Canada (U.S.), and on the dates indicated.

SIGNATURE
TITLE
DATE
     
     
/s/ David E. Sams, Jr.*
Chief Executive Officer and Director
May 1, 2014
David E. Sams, Jr.
(Principal Executive Officer)
  
     
/s/ Michael K. Moran*
Vice President and Controller
May 1, 2014
Michael K. Moran
(Principal Financial Officer and Principal Accounting Officer)
  
     
     
*By: /s/ Kenneth N. Crowley
Attorney-in-Fact for:
May 1, 2014
Kenneth N. Crowley
Dennis A. Cullen, Director
  
 
Homer J. Holland, Director
  
 
Richard E. Kipper, Director
  
 
Daniel J. Towriss, Director
  

*Kenneth N. Crowley has signed this document on the indicated date on behalf of the above Directors and Officers for the Depositor pursuant to powers of attorney duly executed by such persons and a resolution of the Board of Directors authorizing use of powers of attorney for Officer signatures.  Resolution of the Board of Directors is incorporated herein by reference to Post-Effective Amendment No. 48 to the Registration Statement on Form N-4, File No. 333-83516, filed on August 19, 2013.  Powers of attorney are incorporated herein by reference to Post-Effective Amendment No. 19 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-143353, filed on August 19, 2013. Powers of attorney for Messrs. Holland and Kipper are included herein as Exhibit J(1).



 
 
 

EXHIBIT INDEX

J(1)
Powers of Attorney for Messrs. Holland and Kipper
   
K
Legal Opinion
   
N
Consents of Independent Auditors
   
 
Representation of Counsel Pursuant to Rule 485(b)