Registration Statement No. 333-144626

                           811-04633

As Filed with the Securities and Exchange Commission on September 17, 2008

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-6

REGISTRATION UNDER THE SECURITIES ACT OF 1933                [ X ]

Pre-Effective Amendment No. ____          [  ]

Post-Effective Amendment No.__2__         [ X ]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940          [ X ]

Amendment No._29___          [ X ]

Sun Life (N.Y.) Variable Account D

Registrant

Sun Life Insurance and Annuity Company of New York

Depositor

60 East 42nd Street, Suite 1115

New York, New York  10165

Depositor's Address

1-866-702-6998

Depositor's Telephone Number

Sandra DaDalt

Assistant Vice President and Senior Counsel

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

One Sun Life Executive Park

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.

[  ]  on May 1, 2008 pursuant to paragraph (b) of Rule 485.

[  ]  60 days after filing pursuant to paragraph (a)(1) of Rule 485.

[ x ]  on October 3, 2008 pursuant to paragraph (a)(1) of Rule 485.

[  ]  This post-effective amendment designates a new effective date for a previously filed post-effective amendment.

This Amendment No. 2 to the Registration Statement on Form N-6 (the "Registration Statement") (File Nos. 333-144626, 811-04633) is being filed pursuant to Rule 485(a) under the Securities Act of 1933. This Amendment does not otherwise delete, amend, or supersede any prospectus, statement of additional information, exhibit, or other information contained in Pre-Effective Amendment No. 1 to the Registration Statement, as filed with the Securities and Exchange Commission on April 28, 2008.

PART A

Sun Protector Variable Universal Life Insurance

Sun Life (N.Y.) Variable Account D

A Flexible Premium Combination Fixed and Variable Universal Life Insurance Policy

Prospectus

October 3, 2008

This prospectus describes a combination fixed and variable universal life insurance policy (the "Policy") issued by Sun Life Insurance and Annuity Company of New York ("we", "us" or "Company"), a member of the Sun Life Financial group of companies, through Sun Life (N.Y.) Variable Account D, 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 Variable Sub-Accounts and a Fixed Account.  The Variable Sub-Accounts invest in shares of the following Funds:

ASSET ALLOCATION	LARGE CAP EQUITY
AllianceBernstein VPS Balanced Wealth Strategy Portfolio (Class B)	AIM V.I. Core Equity Fund (Series I)
BlackRock Global Allocation V.I. Fund (Class III)	AllianceBernstein VPS Wealth Appreciation Strategy Portfolio (Class B)
Fidelity VIP Balanced Portfolio (Service Class 2)	Columbia Marsico 21st Century Fund, Variable Series – Class B
Franklin Income Securities Fund (Class 2)	Fidelity VIP Contrafund® Portfolio (Service Class 2)
Franklin Templeton VIP Founding Funds Allocation Fund (Class 2)	Fidelity VIP Index 500 Portfolio (Service Class 2)
MFS Total Return Portfolio (S Class)	Franklin Mutual Shares Securities Fund (Class 2)
SCSM Ibbotson Balanced Fund (Initial Class)**	Goldman Sachs VIT Structured U.S. Equity Fund (S Shares)
SCSM Ibbotson Growth Fund (Initial Class)**	MFS® Value Portfolio (S Class)
SCSM Ibbotson Moderate Fund (Initial Class)**	Oppenheimer Capital Appreciation Fund/VA (Service Shares)
Van Kampen UIF Equity & Income Portfolio (Class II Shares)	Oppenheimer Main Street Fund/VA (Service Shares)*
EMERGING MARKETS BOND	SCSM Davis Venture Value Fund (Initial Class)
PIMCO VIT Emerging Markets Bond Portfolio (Administrative Class)	SCSM FI Large Cap Growth Fund (Initial Class)
EMERGING MARKETS EQUITY	SCSM Lord Abbett Growth and Income Portfolio (Initial Class)
MFS® Emerging Markets Equity Portfolio (S Class)	SCSM Oppenheimer Large Cap Core Fund (Initial Class)
HIGH YIELD BOND	Van Kampen LIT Comstock Portfolio (Class 2 Shares)
SCSM PIMCO High Yield Fund (Initial Class)	MONEY MARKET
INFLATION-PROTECTED BOND	Sun Capital Money Market Fund (Initial Class)
PIMCO VIT Real Return Portfolio (Administrative Class)*	MULTI SECTOR BOND
SCSM BlackRock Inflation Protected Bond Fund (Initial Class)	Franklin Strategic Income Securities Fund (Class 2)
INTERMEDIATE TERM BOND	REAL ESTATE EQUITY
Franklin U.S. Government Fund (Class 2)*	Sun Capital Global Real Estate Fund® (Initial Class)
MFS® Bond Portfolio (S Class)	SHORT TERM BOND
MFS® Government Securities Portfolio (S Class)	SCSM Goldman Sachs Short Duration Fund (Initial Class)
PIMCO VIT Total Return Portfolio (Administrative Class)	SMALL CAP EQUITY
SCSM PIMCO Total Return Fund (Initial Class)	DWS Small Cap Index VIP (Class B)
Sun Capital Investment Grade Bond Fund (Initial Class)	Franklin Small Cap Value Securities Fund (Class 2)
INTERNATIONAL/GLOBAL EQUITY	SCSM AIM Small Cap Growth Fund (Initial Class)
AIM V.I. International Growth Fund (Series I)	SCSM Dreman Small Cap Value Fund (Initial Class)
AllianceBernstein VPS International Value Portfolio (Class B)*	SCSM Oppenheimer Main Street Small Cap Fund (Initial Class)
MFS® International Growth Portfolio (S Class)	Wanger USA*
MFS® Research International Portfolio (S Class)	SPECIALTY/SECTOR EQUITY
Oppenheimer Global Securities Fund/VA (Service Shares)	MFS® Utilities Portfolio (S Class)
SCSM AllianceBernstein International Value Fund (Initial Class)	SPECIALTY/SECTOR COMMODITY
Templeton Growth Securities Fund (Class 2)	PIMCO VIT Commodity RealReturn Strategy Portfolio (Administrative Class)
MID CAP EQUITY	TARGET DATE
Fidelity VIP Mid Cap Portfolio (Service Class 2)	Fidelity VIP Freedom 2015 Portfolio (Service Class 2)**
SCSM Blue Chip Mid Cap Fund (Initial Class)	Fidelity VIP Freedom 2020 Portfolio (Service Class 2)**
SCSM Goldman Sachs Mid-Cap Value Fund (Initial Class)	Fidelity VIP Freedom 2030 Portfolio (Service Class 2)**
Van Kampen UIF Mid Cap Growth Portfolio (Class II Shares)	INTERNATIONAL/GLOBAL SMALL/MID CAP EQUITY
Van Kampen UIF U.S. Mid Cap Value Portfolio (Class II Shares)	First Eagle Overseas Variable Fund

Invesco Aim Advisors, Inc. advises the AIM Funds and subadvises SCSM AIM Small Cap Growth Fund.  Advisory entities affiliated with Invesco Aim Advisors, Inc. subadvise the AIM Funds.  AllianceBernstein L.P. advises the AllianceBernstein VPS Portfolios and subadvises the SCSM AllianceBernstein International Value Fund.  BlackRock Financial Management, Inc. advises the BlackRock Global Allocation V.I. Fund and subadvises SCSM BlackRock Inflation Protected Bond Fund.  Columbia Management Advisors, LLC advises the Columbia Marsico 21st Century Fund and Marsico Capital Management, LLC is the subadviser.  Deutsche Investment Management Americas, Inc. advises the DWS Small Cap Index VIP.  Dreman Value Management, LLC subadvises SCSM Dreman Small Cap Value Fund.  Fidelity Management & Research Company advises the Fidelity Portfolios.  Arnhold and S. Bleichroeder Advisers, LLC advises the First Eagle Overseas Variable Fund.  Franklin Templeton Services, LLC administers the Franklin Templeton Founding Funds Allocation Fund (with the following advising the underlying portfolios of the Fund:  Franklin Advisers, Inc. advising the Franklin Income Securities Fund, Franklin Mutual Advisers LLC advising Mutual Shares Securities Fund and Templeton Global Advisers Limited advising Templeton Growth Securities Fund).  Franklin Advisers, Inc. advises the Franklin Income Securities Fund, Franklin Strategic Income Securities Fund and Franklin U.S. Government Fund.  Franklin Advisory Services, LLC advises the Franklin Mutual Shares Securities Fund and the Franklin Small Cap Value Securities Fund.  Goldman Sachs Asset Management, L.P. advises the Goldman Sachs VIT Structured U.S. Equity Fund and subadvises SCSM Goldman Sachs Mid-Cap Value Fund and the SCSM Goldman Sachs Short Duration Fund.  Ibbotson Associations, Inc. subadvises SCSM Ibbotson Balanced Fund, SCSM Ibbotson Growth Fund and SCSM Ibbotson Moderate Fund.  Lord, Abbett & Co. LLC advises the Lord Abbett Portfolios and subadvises the SCSM Lord Abbett Growth and Income Fund.  Massachusetts Financial Services Company, our affiliate, advises the MFS Portfolios.  Morgan Stanley Investment Management Inc. advises the Van Kampen UIF Portfolios. OppenheimerFunds, Inc. advises the Oppenheimer Fund/VAs and subadvises SCSM Oppenheimer Large Cap Core Fund and SCSM Oppenheimer Main Street Small Cap Fund.  Pacific Investment Management Company LLC advises the PIMCO Portfolios and subadvises the SCSM PIMCO High Yield Fund and SCSM PIMCO Total Return Fund.  Sun Capital Advisers, LLC, our affiliate, advises the Sun Capital Funds.  Davis Advisors is the subadviser of the SCSM Davis Venture Value Fund. Pyramis Global Advisors, LLC is the subadviser of the SCSM FI Large Cap Growth Fund.  Templeton Global Advisors Limited advises Templeton Growth Securities Fund.  Van Kampen Asset Management advises the Van Kampen LIT Comstock Portfolio.  Columbia Wanger Asset Management, LP advises Wanger USA.

*For Policies issued on or after October 6, 2008, these Funds are not available for investment by the Variable Sub-Accounts.

**These are Fund of Funds investment options and the expenses of these Funds include the Fund-level expenses of the underlying Funds as well.  These investment options may be more expensive than Funds that do not invest in other Funds.

Sun Life Insurance and Annuity Company of New York

Service Office:  One Sun Life Executive Park

Wellesley Hills, Massachusetts 02481

(866) 702-6998

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 [INSERT PAGE NUMBER]

Sun Life Insurance and Annuity Company of New York [INSERT PAGE NUMBER]

The Variable Account [INSERT PAGE NUMBER]

The Funds [INSERT PAGE NUMBER]

Fees and Expenses of the Funds [INSERT PAGE NUMBER]

Our General Account [INSERT PAGE NUMBER]

Investment Programs [INSERT PAGE NUMBER]

Dollar Cost Averaging [INSERT PAGE NUMBER]

Asset Rebalancing [INSERT PAGE NUMBER]

Asset Allocation [INSERT PAGE NUMBER]

About the Policy [INSERT PAGE NUMBER]

Policy Application, Issuance and Initial Premium [INSERT PAGE NUMBER]

Death Benefit Compliance Test [INSERT PAGE NUMBER]

Right of Return Period [INSERT PAGE NUMBER]

Premium Payments [INSERT PAGE NUMBER]

Premium [INSERT PAGE NUMBER]

Guideline Premium Test Limitations [INSERT PAGE NUMBER]

Net Premiums [INSERT PAGE NUMBER]

Allocation of Net Premium [INSERT PAGE NUMBER]

Planned Periodic Premiums [INSERT PAGE NUMBER]

Death Benefit [INSERT PAGE NUMBER]

Death Benefit Options [INSERT PAGE NUMBER]

Changes in the Death Benefit Option [INSERT PAGE NUMBER]

Changes in SFA and SIA [INSERT PAGE NUMBER]

Minimum Changes [INSERT PAGE NUMBER]

Increases [INSERT PAGE NUMBER]

Decreases [INSERT PAGE NUMBER]

Accessing Your Account Value [INSERT PAGE NUMBER]

Surrenders and Surrender Charges [INSERT PAGE NUMBER]

Partial Withdrawals [INSERT PAGE NUMBER]

Policy Loans [INSERT PAGE NUMBER]

Short-Term Trading [INSERT PAGE NUMBER]

The Funds’ Harmful Trading Policies [INSERT PAGE NUMBER]

Transfer Privileges [INSERT PAGE NUMBER]

Account Value [INSERT PAGE NUMBER]

Account Value of the Variable Sub-Accounts [INSERT PAGE NUMBER]

Net Investment Factor [INSERT PAGE NUMBER]

Splitting Units [INSERT PAGE NUMBER]

Insufficient Value [INSERT PAGE NUMBER]

Grace Period [INSERT PAGE NUMBER]

Lapse Protection Value [INSERT PAGE NUMBER]

No-Lapse Protection Period [INSERT PAGE NUMBER]

Charges and Deductions [INSERT PAGE NUMBER]

Premium Expense Charge [INSERT PAGE NUMBER]

Mortality and Expense Risk Charge [INSERT PAGE NUMBER]

Monthly Expense Charge [INSERT PAGE NUMBER]

Monthly Cost of Insurance [INSERT PAGE NUMBER]

Monthly Cost of Insurance Rates [INSERT PAGE NUMBER]

Other Charges and Deductions [INSERT PAGE NUMBER]

Reduced Charges [INSERT PAGE NUMBER]

Supplemental Benefits [INSERT PAGE NUMBER]

Accelerated Benefits Rider [INSERT PAGE NUMBER]

Charitable Giving Benefit Rider [INSERT PAGE NUMBER]

Waiver of Monthly Deductions Rider [INSERT PAGE NUMBER]

Payment of Stipulated Amount Rider [INSERT PAGE NUMBER]

Surrender Charge Modification Rider [INSERT PAGE NUMBER]

Loan Lapse Protection Rider [INSERT PAGE NUMBER]

No-Lapse Protection Rider [INSERT PAGE NUMBER]

Travel Assistance Endorsement [INSERT PAGE NUMBER]

Termination of Policy [INSERT PAGE NUMBER]

Reinstatement [INSERT PAGE NUMBER]

Deferral of Payment [INSERT PAGE NUMBER]

Rights of Owner [INSERT PAGE NUMBER]

Rights of Beneficiary [INSERT PAGE NUMBER]

Other Policy Provisions [INSERT PAGE NUMBER]

Addition, Deletion or Substitution of Investments [INSERT PAGE NUMBER]

Entire Contract [INSERT PAGE NUMBER]

Alteration [INSERT PAGE NUMBER]

Modification [INSERT PAGE NUMBER]

Assignments [INSERT PAGE NUMBER]

Nonparticipating [INSERT PAGE NUMBER]

Misstatement of Age or Sex [INSERT PAGE NUMBER]

Suicide [INSERT PAGE NUMBER]

Incontestability [INSERT PAGE NUMBER]

Report to Owner [INSERT PAGE NUMBER]

Performance Information [INSERT PAGE NUMBER]

Portfolio Performance [INSERT PAGE NUMBER]

Adjusted Non-Standardized Portfolio Performance [INSERT PAGE NUMBER]

Other Information [INSERT PAGE NUMBER]

Federal Income Tax Considerations [INSERT PAGE NUMBER]

Our Tax Status [INSERT PAGE NUMBER]

Taxation of Policy Proceeds [INSERT PAGE NUMBER]

Withholding [INSERT PAGE NUMBER]

Tax Return Disclosure [INSERT PAGE NUMBER]

Distribution of Policy [INSERT PAGE NUMBER]

Voting Rights [INSERT PAGE NUMBER]

Other Information [INSERT PAGE NUMBER]

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 Terms [INSERT PAGE NUMBER]

Appendix B - Table of Death Benefit Percentages [INSERT PAGE NUMBER]

Appendix C - Privacy Policy [INSERT PAGE NUMBER]

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 Funds.  We have not authorized anyone to provide You with information that is different.

Risk/Benefit Summary of Policy

Right of Return Period

You may return the Policy within 10 days from the date of receipt of the Policy and receive a refund of premium paid with interest at the then rate paid by the Company on comparable fixed life insurance policies.

Premium Payments

-   Generally, You must make a minimum Initial Premium payment equal to two Minimum Monthly Premiums.  The minimum Initial Premium is shown in the illustration for the Policy and is shown in the Policy.

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

-   You may allocate your net premium payments among the Policy's available Sub-Accounts.

CONTRACT BENEFITS

Account Value

Account Value is the sum of the amounts in each Sub-Account with respect to the Policy.

The Policy's Account Value will reflect-

-   the premiums You pay;

-   the investment performance of the Variable Sub-Accounts You select, and/or the interest credited to the Fixed Account;

-   any loans or partial withdrawals;

-   the charges we deduct under the Policy.

Accessing the Policy’s Account Value

-   You may borrow from us using your Account Value as collateral.

-   You may surrender the Policy for its Cash Surrender Value.  Cash Surrender Value is Account Value minus any surrender charges and the amount of any Policy Debt.  The surrender charge period ends 15 years after you purchase the Policy or after You increase the Specified Face Amount of the Policy.

-   You may make a partial withdrawal of some of the Policy’s Cash Surrender Value after the Policy has been in force for one year.  A partial withdrawal will cause a decrease in the Specified Face Amount and any Supplemental Insurance Amount of the Policy if your death benefit option is Option A.  Reducing the Cash Surrender Value with a partial withdrawal may increase the risk of Policy lapse.

Death Benefit Compliance Test

-   For favorable federal tax treatment, the Policy must meet the Guideline Premium Test.

-   Please see the Death Benefit Compliance Test paragraph in the About the Policy section of the prospectus for the Guideline Premium Test definition.

Death Benefit

If the Policy is in force at the time we receive due proof of the Insured's death, we will pay the beneficiary an amount based on the death benefit option in effect, plus any supplemental benefits added to the Policy, less Policy Debt and any overdue monthly deductions.

Specified Face Amount (“SFA”) is the minimum amount of life insurance in the Policy.  Supplemental Insurance Amount (“SIA”) is the amount of supplemental term life insurance you elect.

SIA has separate cost of insurance charges associated with it.  At this time, those charges are lower than SFA charges for the same coverage.  IF SIA is combined with SFA, the same amount of premium paid for the combined coverage as compared to all SFA coverage will generate faster cash value accumulation within the Policy.   SIA will terminate at the policy anniversary on which the Insured is Attained Age 121.

-   You have a choice of two death benefit options-

-   the SFA plus any SIA(Option A); or

-   the sum of the SFA, any SIA and the Account Value of the Policy (Option B).

-      After the first Policy Year, You may change the SFA and SIA.

-      After the Policy Date, You may change the death benefit option.

Investment Options

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

-   You may transfer amounts from one Variable Sub-Account to another, subject to any limits that we or the Funds may impose.  We will notify You in writing of any such limitations.

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

Reinstatement

If the Policy terminates due to insufficient value, we will reinstate it within three years at your request, subject to certain conditions.

Supplemental Benefits

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

-   accelerated benefits

-   waiver of monthly deductions

-   payment of stipulated amount

-   surrender charge modification

-   loan lapse protection

-   no-lapse protection

-   charitable giving

-   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

The assets attributable to the Policies are held in a variable separate account.  The assets of the variable separate account are free from our general creditor's claims.  The variable separate account is divided into Variable Sub-Accounts.  Each Variable Sub-Account invests exclusively in shares of a corresponding mutual fund.   When You choose Variable 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 Variable 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 Variable 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 Variable 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 surrender charges are highest in the early Policy Years.  Cost of insurance and other insurance-related charges are appropriate to a life insurance policy and not to a short-term savings vehicle.

Partial withdrawals may only occur annually after Policy Year 1.  During Policy Years 2-10, the maximum partial withdrawal amount is 20% of the Cash Surrender Value.  Thereafter, the maximum partial withdrawal amount is the Cash Surrender Value.  Additionally, the Specified Face Amount remaining after a partial withdrawal cannot be less than $100,000.

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

Unless No-Lapse Protection is in effect, the Policy will terminate at the beginning of any Policy Month if the Account Value less Policy Debt on a Processing Date is less than the charges and deductions then due.  We will send you notice and allow You a 61 day Grace Period.  If, within the Grace Period, you do not make a premium payment sufficient to cover all charges and deductions due, the Policy will terminate at the end of the Grace Period.  If the Policy terminates, all coverage ceases and no benefits are payable.

No-Lapse Protection

The Policy will not terminate during the No-Lapse Guarantee Period if the Lapse Protection Value less Policy Debt is greater than zero.  The No-Lapse Guarantee Period is based on the planned periodic premium You pay and the Insured's age, sex and rating classification.

No-Lapse Protection is not available for Policies with Death Benefit Option B.

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, loans 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 fees and expenses that You will pay at the time that You buy the Policy, surrender the Policy or transfer amounts between Investment Options.

TRANSACTION FEES
Charge	When Charge is Deducted	Amount Deducted
Premium Expense Charge1, 14 (3.25% of this Charge is used for state and federal tax obligations) Maximum Charge:	Upon premium receipt	(as a % of premium) 7.50%
Surrender Charge	Upon policy surrender before the fifteenth Policy Year and upon surrender of a Policy increase before fourteen years have elapsed from the increase effective date	(per $1000 of SFA)
Maximum Charge: Minimum Charge: Representative Owner Charge3: (male, preferred, non-tobacco, Issue Age 45, Policy Year 1)		$47.412 $0.232                                                  $30.12
Loan Lapse Protection Rider4 . Maximum Charge:	On the Rider Exercise Date	(of Account Value) 3.5%
Transfer Fee Maximum Charge: Current Charge:	Upon each transfer in excess of 12 in a Policy Year	$15.00 $0.00

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 SFA     Maximum Charge: Minimum Charge: Representative Owner Charge: (male, preferred, non-tobacco, Issue Age 45, Policy Year 1)	At the beginning of each Policy Month	(per $1000 of SFA Net Amount at Risk) $27.635, 14 $0.025, 14 $0.06
Cost of Insurance for SIA     Maximum Charge: Minimum Charge: Representative Owner Charge: (male, preferred, non-tobacco, Issue Age 45, Policy Year 1)	At the beginning of each Policy Month	(per $1000 of SIA Net Amount at Risk) $27.635 $0.025 $0.06
Mortality and Expense Risk Charge6	At the beginning of each Policy Month	(on the assets allocated to the Variable Sub-Accounts)
Maximum Charge:			0.75%
Monthly Expense Charge7, 14 Maximum Charge: Minimum Charge: Representative Owner Charge: (male, preferred, non-tobacco, Issue Age 45)	At the beginning of each Policy Month	$10.00 + $1.60 per $1000 of SFA and SIA $10.00 + $0.02 per $1000 of SFA and SIA $10.00 + $0.06 per $1000 of SFA and SIA
Loan Interest8	At the end of each Policy Year	(as a % of Policy Debt) 5.0%
Flat Extra Charge Maximum Charge:	At the beginning of each Policy Month	(per $1000 of SFA and SIA)
			$20.00

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 Rider Maximum Charge: Minimum Charge: Representative Owner Charge: (Issue Age 45)	At the beginning of each Policy Month	(per $1000 of SFA and SIA)
			$0.189 $0.019
		$0.07
Payment of Stipulated Amount Rider Maximum Charge: Minimum Charge:	At the beginning of each Policy Month	(per $100 of Stipulated Amount10)
		$0.7911 $0.1311                                                 $0.45
Representative Owner Charge: (male, Issue Age 45, benefit payable to age 70)
Surrender Charge Modification Rider12 Maximum Charge:	At the beginning of each Policy Month	(per $1000 of Initial SFA)
			$0.02
No-Lapse Protection Rider Maximum Charge: Minimum Charge:	At the beginning of each Policy Month	(per $1000 of Total Net Amount at Risk)
			$7.2913 $0.0413
Representative Owner Charge: (male, preferred, non-tobacco, Issue Age 45)			$0.12

The next item shows the minimum and maximum total operating expenses charged by the Funds that You may pay periodically during the time that You own the Policy.  More detail concerning each Fund's fees and expenses is contained in the prospectus for each Fund.

TOTAL ANNUAL FUND OPERATING EXPENSES (deducted by each Fund on the average daily net asset value of each Fund)	Minimum	Maximum
Total Annual Fund Expenses (expenses that are deducted from Fund assets, including management fees, distribution and/or service (12b-1) fees, and other expenses)	0.35%	2.15%

1The elements making up the Premium Expense Charge are discussed on page 24.  The Charge is deducted from premium received. .

2The maximum charge possible is for an Insured male, standard, tobacco, Issue Age 65, Policy Year 1.  The minimum possible is for an Insured female, super preferred, non-tobacco, Issue Age 20, Policy Year 15.  The charge varies based on the Specified Face Amount, the length of time the Policy has been in force, the Insured’s Issue Age, sex and rating class. 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.

3It is assumed the Owner and the Insured are the same person.

4The 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 27.

5The maximum charge possible is the charge for an Insured male, standard, tobacco, Issue Age 85, Policy Year 15.  The minimum charge possible is for an Insured female, super preferred, non-tobacco, Issue Age 20, Policy Year 1.  The charges vary based on the length of time the Policy has been in force and the Insured’s Issue Age, sex and rating class. 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.

For substandard risk classifications, the Company reserves the right to charge up to 500% of the cost of insurance charges shown in the Fee Table.  Please see page 25 of the prospectus for additional detail.

6The monthly rate is shown in the table. The annual percentage is 0.60% for Policy Years 1-10, 0.20% for Policy Years 11-20 and 0.10% thereafter.

7The monthly expense charge is $10.00 in all Policy Years plus a charge per $1000 of SFA and SIA for the first 20 Policy Years following the Issue Date and for the first 20 Policy Years following the effective date of any increase in SFA and SIA.  The maximum charge possible is for an Insured male, standard, tobacco, Issue Age 85.  The minimum charge possible is for an Insured female, super preferred, non-tobacco, Issue Age 20. The charge varies based on the Insured's Issue Age, sex and rating class. 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.

8Loan Interest is charged as a percentage of Policy Debt and is added to Policy Debt.  The Loan Interest is 5.0% in Policy Years 1-20 and 3.0% thereafter.

9The 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.

10To increase the variety of Stipulated Amounts electable, the charge imposed is per $100 of Stipulated Amount.

11The maximum charge possible is for an Insured male, Issue Age 55, benefit payable to age 70.  The minimum charge possibleis 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.

12The charge applies only during the first Policy Year.

13The maximum charge possible is for an Insured male, standard, tobacco, Issue Age 85, Policy Year 15.  The minimum charge possible is for an Insured female, super preferred, non-tobacco, Issue Age 20, Policy Year 1.  The charges vary based on the length of time the Policy has been in force, the duration of the rider, the Insured’s Issue Age, sex and rating class. 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.

14The maximum charge possible is for an Insured male, standard, tobacco, Issue Age 85, Policy Year 15.  The minimum charge possible is for an Insured female, super preferred, non-tobacco, Issue Age 20, Policy Year 1.  The charges vary based on the Insured’s Issue Age, sex and rating class. 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.

Sun Life Insurance and Annuity Company of New York

We are a stock life insurance company incorporated under the laws of New York on May 25, 1983.  Our Home Office is located at 60 East 42nd Street, Suite 1115, New York, New York 10165. We are ultimately controlled by Sun Life Financial Inc. ("Sun Life Financial").  Sun Life Financial, a corporation organized in Canada, is a reporting company under the Securities Exchange Act of 1934 with common shares listed on the Toronto, New York and Philippine stock exchanges.

The Variable Account

We established Sun Life (N.Y.) Variable Account D on April 24, 2003, pursuant to a resolution of our Board of Directors.  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 policies 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.  Registration under the 1940 Act does not involve any supervision by the SEC of the management or investment practices or policies of the Variable Account.

The Variable Account is divided into Variable Sub-Accounts.  Each Variable 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 Variable Sub-Accounts.  The income, gains or losses, realized or unrealized, from assets allocated to each Variable Sub-Account are credited to or charged against that Variable Sub-Account without regard to the other income, gains or losses of the other Variable Sub-Accounts.  All amounts allocated to a Variable Sub-Account will be used to purchase shares of the corresponding mutual fund.  The Variable Sub-Accounts will at all times be fully invested in mutual fund shares.  The Variable Account may contain certain variable sub-accounts which are not available under the Policy.

The Funds

The Policy offers a number of 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.  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 without charge by calling (866) 702-6998, or writing to Sun Life Insurance and Annuity Company of New York, Service Office:  One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.

Although the investment objectives and policies of the Funds may be similar to those of other mutual funds managed by the Funds' investment advisers, the investment results of the Funds can differ significantly from those of such other mutual funds.  Some of the Funds' investment advisers may compensate us for administering the Funds as investment options under the Policy.  Such compensation is paid from advisers' assets.

The Funds may also be available to separate accounts offering variable annuity and variable life products of other affiliated and unaffiliated insurance companies, as well as our other separate accounts.  Although we do not anticipate any disadvantages in this, there is a possibility that a material conflict may arise between the interests of the Variable Account and one or more of the other separate accounts participating in the Funds.  A conflict may occur due to a change in law affecting the operations of variable life and variable annuity separate accounts, differences in the voting instructions of policyowners and those of other companies, or some other reason.  In the event of conflict, we will take any steps necessary to protect policyowners, including withdrawal of the Variable Account from participation in the Funds which are involved in the conflict or substitution of shares of other Funds.

Fees and Expenses of the Funds

Fund shares are purchased at net asset value, which reflects the deduction of investment management fees and certain other expenses.  The management fees are charged by each Fund's investment adviser for managing the Fund and selecting its portfolio of securities.  Other Fund 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.

The Fund expenses are assessed at the Fund level and are not direct charges against Variable Account assets or reductions from Cash Values.  These expenses are taken into consideration in computing each Fund's net asset value, which is the share price used to calculate the Unit Values of the Variable Account.  Thus, You indirectly bear the fees and expenses of the Funds You select.  The table presented earlier shows a range of annual expenses paid by the Funds on the average daily net asset value of each Fund.

The management fees and other expenses of the Funds are more fully described in the Fund Prospectuses.  The information relating to the Fund expenses was provided by the Fund and was not independently verified by us.

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.

The Fixed Account is not a security and the general account is not an investment company.  Interests in our general account offered through the Fixed Account 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.

You may allocate net premiums to the Fixed Account and may transfer a portion of your investments in the Variable Sub-Accounts to the Fixed Account.  You may also transfer a portion of your investment in the Fixed Account to any of the Variable Sub-Accounts.  Transfers may be subject to certain restrictions.  Please see pages 20-21 for more detail regarding transfer restrictions.

An investment in the Fixed Account does not entitle You to share in the investment experience of our general account.  Instead, we guarantee that your fixed account investment will accrue interest daily at an effective annual rate of at least 3%, without regard to the actual investment experience of our general account.  We may, at our sole discretion, credit a higher rate of interest, but are not obligated to do so.

Investment Programs

Dollar Cost Averaging.  You may select, at no extra charge, a dollar cost averaging program by allocating a minimum of $5,000 to a Sub-Account designated by us.  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 modify, suspend or terminate this program at anytime.  We also reserve the right to waive the $1,000 minimum amount for asset rebalancing.

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 Variable 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 Variable 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 Variable 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 Variable 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.

About the Policy

Policy Application, Issuance and Initial Premium

To purchase a Policy, You must first submit an application to our Service Office.  We may then follow certain underwriting procedures designed to determine the insurability of the proposed Insured.  We offer the Policy on a regular (medical) underwriting basis.  We may require medical examinations and further information before the proposed application is approved.  Proposed Insureds must be acceptable risks based on our underwriting limits and standards.  A Policy cannot be issued until the underwriting process has been completed to our satisfaction.  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.

You must specify certain information in the application, including the Specified Face Amount, the death benefit option and supplemental benefits, if any.  The Specified Face Amount may not be decreased below $100,000-the “Minimum Specified Face Amount.”

While your application is being reviewed, we may make available to You temporary life insurance coverage if You have signed a Policy Application and, at that same time, submitted a separate signed application for temporary coverage and made an advance payment.  The temporary coverage, if available, begins on the date that separate application for it is signed, has a maximum amount and is subject to other conditions.

Pending approval of your application, any advance payments will be held in our general account.  Upon approval of the application, we will issue to You a Policy on the life of the Insured.  The Issue Date is the date we produce the Policy on our system and is specified in the Policy.  The Investment Start Date is the date the first premium is applied, which will be the later of-

-the Issue Date,

-the Policy Date or

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

If an application is not approved, we will promptly return all advance payments to You.

Death Benefit Compliance Test.  The Policy must, at all times, satisfy the Guideline Premium Test for it to qualify as life insurance and thus be entitled to receive favorable tax treatment under applicable federal tax law.    Under this test, 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 age.  The Guideline Premium Test imposes limits on the amount of premium You may pay under the Policy.

Right of Return Period

If You are not satisfied with the Policy, it may be returned by delivering or mailing it to our Service Office or to the representative from whom the Policy was purchased within 10 days from the date of receipt of the Policy (the "Right of Return Period").

A Policy returned under this provision will be deemed void.  You will receive a refund equal to the sum of all premium payments made with interest at the then rate paid by the Company on comparable fixed life insurance policies.

We will allocate the net premium payments to the Fixed Account during the Right of Return Period.  Upon expiration of the Right of Return Period, as measured from the Issue Date, plus five days, the Account Value in the Fixed Account will be transferred to the Sub-Accounts in accordance with your allocation instructions.

Premium Payments

All premium payments must be made payable to Sun Life Insurance and Annuity Company of New York and mailed to our Service Office.  The minimum Initial Premium is, generally, two Minimum Monthly Premiums.  The amount of Minimum Monthly Premium is determined by the Specified Face Amount, Supplemental Insurance Face Amount, death benefit option election, optional rider election and risk and underwriting classification of the Insured.  Additional premium payments may be paid to us subject to the limitations described below.  We will not reject any premium payment necessary to maintain coverage and will provide You with notice if additional premium is required to maintain coverage.

Premium.  We reserve the right to limit the number of premium payments we accept in a year.  No premium payment may be less than $50 without our consent, although we will accept a smaller premium payment if 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.

We will not accept premium payments that would, in our opinion, cause the Policy to fail to qualify as life insurance under applicable federal tax law.  If a premium payment is made in excess of these limits, we will accept only that portion of the premium within those limits, and will refund the remainder to You.

Specified Face Amount and Supplemental Insurance Face Amount increases and decreases will impact the level of premium You need to pay to maintain coverage.  Your financial adviser can provide an illustration showing the effects on premium funding of Specified Face Amount and Supplemental Insurance Face Amount changes.

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, exceed these limits, 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.

Net Premiums.  The net premium is the amount You pay as the premium less the Premium Expense Charge.The Premium Expense Charge is a sales load and covers Federal and State tax liabilities related to premium.

Allocation of Net Premium.  Except as otherwise described herein, net premium will be allocated in accordance with your allocation percentages.  You must allocate at least 1% of net premium to any Sub-Account You choose. Percentages must be in whole numbers.  We reserve the right to limit the number of Sub-Accounts to which You may allocate your Account Value to not more than 20 Sub-Accounts.  You may change your allocation percentages at any time by telephone or written request to our Service Office.  Telephone requests will be honored only if we have a properly completed telephone authorization form for You on file.  We, our affiliates and the representative from whom You purchased the Policy will not be responsible for losses resulting from acting upon telephone requests reasonably believed to be genuine.  We will use reasonable procedures to confirm that instructions communicated by telephone are genuine.  You will be required to identify yourself by name and a personal identification number for transactions initiated by telephone.  An allocation change will be effective as of the date we receive notice of that change.

Planned Periodic Premiums.  While You are not required to make additional premium payments according to a fixed schedule, You may select a planned periodic premium schedule and corresponding billing period, subject to our limits.  We will send You reminder notices for the planned periodic premium at each billing period as specified in the Policy, 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 the planned periodic premium 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 will suspend reminder notices at your written request, and 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.

Death Benefit

If the Policy is in force at the time of the Insured's death, we will pay the beneficiary an amount based on the death benefit option in effect once we have received Due Proof of the Insured's death.  The amount payable will be:

-the amount of the selected death benefit option, plus

-any amounts payable under any supplemental benefits added to the Policy, minus

-the value of any Policy Debt on the date of the Insured's death, minus

-any overdue monthly deductions if death occurs during a grace period.

We will pay this amount to the beneficiary in one lump sum, unless we and the beneficiary agree on another form of settlement.  You may select between two death benefit options.  You may change the death benefit option at any time.

Death Benefit Options.  The Policy has two death benefit options. You will be required to select one of them in the Policy application. A Policy will not be issued unless a death benefit option election is made.

 Option A.  Under this option, the death benefit is the greater of-

-the Policy’s SFA plus the SIA, or

-the Account Value multiplied by the applicable death benefit percentage shown in the Policy.

 Option B.  Under this option, the death benefit is the greater of-

-the sum of the SFA, SIA and the Account Value, or

-the Account Value multiplied by the applicable death benefit percentage shown in the Policy.

Option A provides a level amount of death benefit.  Option B provides an increasing amount of death benefit due to the inclusion of the Account Value.  While Option B provides a higher death benefit than Option A, the monthly deduction for cost of insurance charges will be higher based on the Total Net Amount at Risk.  Also, if Option B is elected, No-Lapse Protection, as provided by the Policy or by rider, is not available.

Changes in the Death Benefit Option.  You may request a change in the death benefit option.  Changes in the death benefit option are subject to our underwriting rules in effect at the time of change.  Requests for a change must be made in writing to Us.  The effective date of the change will be the Anniversary on or next following the date We approve your request.

If you change from Option A to Option B, a decrease equal to the Policy’s Account Value on the effective date of the change will be applied as follows:  first, to increases which remain in force, beginning with the most recent, be it SFA or SIA; second, to the initial SIA if it remains in force; lastly, to the initial SFA.  By way of example, presume an Option A Policy is issued with $250,000 of SFA and $150,000 of SIA.  After issue, You increase the SIA by $100,000 to $250,000 and later increase the SFA by $50,000 to $300,000.  At the time a change to Option B is requested, the Account Value is $175,000 and the total death benefit needs to be reduced by this sum.  The most recent $50,000 SFA increase is eliminated.  The next most recent $100,000 SIA increase is eliminated.  The original SIA is reduced by $25,000 to $125,000.

If You change from Option B to Option A, an increase equal to the Policy’s Account Value on the effective date of the change will be applied as follows:  first, to increases which remain in force, beginning with the most recent, be it SFA or SIA; second, to the initial SIA if it remains in force; lastly to the initial SFA.

Changes in SFA and SIA

You may increase or decrease the SFA and SIA of the Policy within certain limits.

Minimum Changes.  Each increase in the SFA and SIA must be at least $100,000.  We reserve the right to change the minimum amount by which You may change the SFA and SIA.

Increases.  After the first policy anniversary, You may request an increase in the SFA and SIA.  You must provide satisfactory evidence of the Insured's insurability. An increase is not allowed if the Insured's Attained Age is greater than 80 on the effective date of the increase.  The cost of insurance charges and monthly expense charges applicable to an increase in SFA and SIA 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. Once requested, an increase will become effective at the next policy anniversary following our approval of your request. Your financial adviser can provide an illustration to show the level of premium funding necessary to maintain coverage at the increased SFA and SIA.

Decreases.  The SFA and SIA can be decreased after the first policy anniversary.  A decrease will become effective at the beginning of the next Policy Month following our approval of your request.  The SFA after the decrease must be at least $100,000.  Surrender charges will apply to decreases in the SFA during the surrender charge period except for decreases in the SFA resulting from any change in the death benefit option or any partial withdrawal.  For purposes of determining surrender charges on the SFA and later cost of insurance charges for the SFA and SIA, we will apply a decrease in the following order-

-first, to the most recent increase in SIA;

-second, to the next most recent increases in SIA, in reverse chronological order;

-third, to the initial SIA;

-fourth, to the most recent increase in SFA;

-fifth, to the next most recent increases in SFA, in reverse chronological order; and

-lastly, to the initial SFA.

By way of example, presume a Policy is issued with $250,000 of SFA and $150,000 of SIA.  After issue, You increase the SIA by $100,000 to $250,000 and later increase the SFA by $50,000 to $300,000.  You then request a decrease of $200,000. The most recent $100,000 SIA increase is eliminated.  The original SIA is reduced by $150,000 to $50,000.

Accessing Your Account Value

Surrenders and Surrender Charges

You may surrender the Policy for its Cash Surrender Value at any time while the Insured is living.  If You do, the insurance coverage and all other benefits under the Policy will terminate.  If You surrender the Policy and receive its Cash Surrender Value, You may incur surrender charges, taxes and tax penalties.

Cash Surrender Value is the Policy's Account Value less the sum of-

-the outstanding balance of any Policy Debt; and

-any surrender charges.

We will deduct surrender charges from your Account Value if You surrender the Policy or request a decrease in the SFA during the surrender charge period.  There are separate surrender charges for the initial SFA and any increase in the SFA You request.  The surrender charge period will start on the Policy's Issue Date and on the effective date for the increase, respectively.

We will determine your Cash Surrender Value at the next close of business on the New York Stock Exchange after we receive your written request for surrender at our Service Office.

If You surrender the Policy in the first 14 years or within the first 14 years after an increase in the SFA, we will apply a surrender charge to the initial SFA and to each increase in the SFA other than an increase resulting from a change in the death benefit option.   The surrender charge will be calculated separately for the initial SFA and each increase in the SFA.  The surrender charge will be an amount based on certain factors, including the Policy's SFA and the Insured's age, sex and rating class.  The following are examples of surrender charges at representative Issue Ages.

First Year Surrender Charges Per $1,000 of SFA (Preferred Non-tobacco Male)
Issue Age 25 $13.33	Issue Age 35 $16.00	Issue Age 45 $30.12
Issue Age 55 $41.49	Issue Age 65 $47.30	Issue Age 75 $47.04

A surrender charge will be applied for each decrease in the SFA except for decreases in the SFA resulting from any change in death benefit option or any partial withdrawal.  These surrender charges will be applied in the following order:

-first, to the most recent increase;

-second, to the next most recent increases, in reverse chronological order; and

-third, to the initial SFA.

On a decrease in the initial SFA, You will pay a proportion of the full surrender charge based on the ratio of the face amount decrease to the initial SFA.  The surrender charge You pay on a decrease that is less than the full amount of an increase in SFA will be calculated on the same basis.  Future surrender charges will be reduced by any surrender charges incurred for a decrease in the SFA.

You may allocate any surrender charges resulting from a decrease in the SFA among the Sub-Accounts.  If You do not specify the allocation, then the surrender charges will be allocated proportionally among the Sub-Accounts.

Partial Withdrawals

You may make a partial withdrawal of the Policy once each Policy Year after the first Policy Year by written request to us.  Each partial withdrawal must be for at least $500.

During Policy Years 2-10, the maximum partial withdrawal amount is 20% of the Cash Surrender Value.  Thereafter, the maximum partial withdrawal amount is the Cash Surrender Value.  Additionally, the SFA remaining after a partial withdrawal cannot be less than $100,000.

If the applicable death benefit option is Option A, the SFA and any SIA will be decreased by the amount of the partial withdrawal.  We will apply the decrease to the initial SFA and SIA and to each increase in SFA and SIA in the following order-

-first, to the initial SIA;

-second, to the oldest increases in SIA, in chronological order;

-third, to the most recent increase in SIA;

-fourth, to the initial SFA, up to the $100,000 minimum;

-fifth, to the oldest increases in SFA, in chronological order; and

-lastly, to the most recent increase in SFA.

Unless You specify otherwise, the partial withdrawal will be allocated proportionally among the Sub-Accounts.  We will not accept requests for a partial withdrawal if the SFA remaining in force after the partial withdrawal would be less than the minimum SFA.  A partial withdrawal will be allocated to a Variable Sub-Account at the Unit Value of that Variable Sub-Account next determined after receipt of the partial withdrawal request.  A partial withdrawal may result in taxes and tax penalties.

Policy Loans

Using the Policy as collateral, You may request a policy loan of up to 90% of the Policy's Cash Value, decreased by the amount of any outstanding Policy Debt on the date the policy loan is made.  The Policy will terminate for no value subject to a grace period if the Policy Debt exceeds the Cash Value.  No-Lapse Protection and the Loan Lapse Protection Rider may prevent this termination.  Although the No-Lapse Protection (provided by Policy or rider) and the Loan Lapse Protection Rider may prevent Policy termination, the conditions under which they apply differ widely, including the length of time the Policy has been in force and the age of the policyowner.  Please see the No-Lapse Protection section for the Policy, the No-Lapse Protection Rider section and the Loan Lapse Protection Rider section for additional detail.

You may allocate the policy loan among the Sub-Accounts.  If You do not specify the allocation, then the policy loan will be allocated proportionally among the Sub-Accounts.  Loan amounts allocated to the Variable Sub-Accounts will be transferred to the Fixed Account.  We will periodically credit interest at an effective annual rate of 3% on the loaned values of the Fixed Account.

Interest on the policy loan will accrue daily at 5% annually for 20 Policy Years.  Thereafter, the rate is 3%.  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 will be assessed in the same manner as the prior policy loan.

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

All funds we receive from You will be credited to the Policy as premium unless we have received written notice, in a form satisfactory to us, that the funds are for loan repayment.  In the event You have a loan against the Policy, it is generally advantageous to repay the loan rather than make a premium payment because premium payments incur expense charges whereas 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.  When loan repayments reduce the loan balance allocated to the Fixed Account, the amount of repayment is allocated to the Sub-Accounts per the allocation instructions in effect on the date of repayment.

A policy loan, whether or not repaid, will affect the Policy Proceeds payable upon the Insured's death and the Account Value because the investment results of the Sub-Accounts will apply only to the non-loaned portion of the Account Value.  The longer a loan is outstanding, the greater the effect is likely to be and, depending on the investment results of the Sub-Accounts while the loan is outstanding, the effect could be favorable or unfavorable.

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 Variable Account has policies and procedures to discourage frequent transfers of Account Value.  As described below under "Transfer Privileges," the Policy includes limiting the number and timing of certain transfers, subject to exceptions described in that section and exceptions designed to protect the interest of individual Owners.  The Company also reserves the right to charge a fee for 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).  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.  In particular, we will treat as short-term trading activity and refuse to process any transfer that is requested by an authorized third party within 30 days of a previous transfer (whether the earlier transfer was requested by You or a third party acting on your behalf).  We may also impose special restrictions on third parties that engage in reallocations of Policy values.  We may limit the frequency of the transfer or 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 interests of the relevant underlying Fund and other of the Company’s contract owners and Owners, in the following instances:

-when a new broker of record is designated for the Policy;

-when the Owner changes;

-when control of the Policy passes to the designated beneficiary upon the death of the Insured;

-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 below 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 below 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.

Transfer Privileges

Subject to the above special restrictions and to our rules as they may exist from time to time and to any limits that may be imposed by the Funds, You may at any time transfer to another Sub-Account all or a portion of the Account Value allocated to a Sub-Account.  There is usually no charge imposed on transfers; however, we reserve the right to impose a transfer charge of $15 for each transfer above 12 transfers in any Policy Year.  We will make transfers pursuant to an authorized written or telephone request to us.  Telephone requests will be honored only if we have a properly completed telephone authorization form for You on file.  We, our affiliates and the representative from whom You purchased the Policy will not be responsible for losses resulting from acting upon telephone requests reasonably believed to be genuine.  We will use reasonable procedures to confirm that instructions communicated by telephone are genuine.  For transactions initiated by telephone, You will be required to identify yourself by name and a personal identification number.

Transfers may be requested by indicating the transfer of either a specified dollar amount or a specified percentage of the Fixed Account or the Variable Sub-Account's value from which the transfer will be made.  If You request a transfer based on a specified percentage of the Fixed Account or the Variable Sub-Account's value, that percentage will be converted into a request for the transfer of a specified dollar amount based on application of the specified percentage to the Fixed Account or the Variable Sub-Account's value at the time the request is received.  We reserve the right to limit the number of Sub-Accounts to which You may allocate your Account Value to not more than 20.

An acceptable transfer request will be executed as of the date our Service Office receives your request provided that it is received on a Valuation Date before the close of the NYSE.  An “acceptable transfer 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, the Fund or us.  If an acceptable transfer request is received on a day that is not a Valuation Date or after the close of the NYSE on a Valuation Date, it will be executed effective on the next Valuation Date.  The Unit Value of Variable Sub-Accounts affected by a transfer request will be that next determined after receipt of such transfer request.

Transfer privileges are subject to our consent.  We reserve the right to impose limitations on transfers, including, but not limited to: (1) the minimum amount that may be transferred; (2) the frequency of transfers; and (3) the minimum amount that may remain in a Sub-Account following a transfer from that Sub-Account.  We will notify You in writing of any such limitations.  If your Policy so states in its text or via endorsement, thirty days must elapse between each transfer.

Transfers from the Fixed Account to the Variable Sub-Accounts are limited to one transfer annually equaling 25% of the value of the Fixed Account at the end of the prior Policy Year or $5,000, whichever is greater.

We reserve the right to restrict amounts transferred to the Fixed Account from the Variable Sub-Accounts.  However, if You object to a material change in the investment objective of a Variable Sub-Account under your Policy, You may transfer the Account Value in the affected Variable Sub-Account to the Fixed Account within 60 days after the effective date of the material change.

Account Value

Your Account Value is the sum of the values of each Variable Sub-Account plus the value of the Fixed Account.  The Account Value varies depending upon the Premiums paid, Premium Expense Charges, Mortality and Expense Risk Charges, Monthly Expense Charges, Monthly Cost of Insurance charges, partial withdrawals, fees, policy loans and the net investment factor (described below).

The minimum guaranteed interest rate applicable to the values in the Fixed Account is 3% annually.  Interest in excess of the guaranteed rate may be applied in such a manner as we may determine, based on our expectations of future interest, mortality costs, persistency, expenses and taxes. Interest credited will be computed on a compound interest basis.

Account Value of the Variable Sub-Accounts.  We measure the amounts in the Variable Sub-Accounts in terms of Units and Unit Values.  On any given date, the amount You have in a Variable Sub-Account is equal to the Unit Value multiplied by the number of Units credited to You in that Variable Sub-Account.  Amounts allocated to a Variable Sub-Account will be used to purchase Units of that Variable Sub-Account.  Units are redeemed when You make partial withdrawals, undertake policy loans or transfer amounts from a Variable Sub-Account, and for the payment of Monthly Expense Charges, Monthly Cost of Insurance charges, Mortality and Expense Risk Charges and other fees.  The number of Units of each Variable Sub-Account purchased or redeemed is determined by dividing the dollar amount of the transaction by the Unit Value for the Variable Sub-Account.  A Valuation Date is any day on which the NYSE is open for business and valuation will occur at the close of the NYSE. The NYSE 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 and Christmas.  For the first Valuation Date of each Variable Sub-Account, the Unit Value is established at $10.00.  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 (determined as provided below).  The Unit Value of a Variable 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 at our Service 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 NYSE on a Valuation Date.  In those instances, the premium will be credited on the next Valuation Date.  The Investment Start Date is the date we apply your first premium payment, which will be the later of the Issue Date, the Policy Date or the Valuation Date we receive a premium equal to or in excess of the Initial Premium.  If premium is to be allocated to a Variable Sub-Account, the Unit Value of the Variable Sub-Account will be that next determined after receipt of such premium.

The Account Value on the Investment Start Date equals:

-the net premium received, minus

-the monthly deductions due on the Policy Date and subsequent Monthly Anniversary Days through the Investment Start Date charged to the Variable Sub-Accounts and the Fixed Account.

The Account Value on subsequent Valuation Dates is equal to:

-the Account Value attributable to each Variable Sub-Account on the preceding Valuation Date multiplied by that Variable Sub-Account’s Net Investment Factor, 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 Sub-Account during the current Valuation Period, plus

-any amounts transferred by You to a Sub-Account from another Sub-Account during the current Valuation Period, minus

-any amounts transferred by You from a Sub-Account to another Sub-Account during the current Valuation Period, plus

-that portion of any loan repayment, including repayment of loan interest, allocated to the Fixed Account during the current Valuation Period, minus

-that portion of any partial withdrawal deducted from each Sub-Account during the current Valuation Period, minus

-that portion of any surrender charges associated with a decrease in the Specified Face Amount charged to a Sub-Account during the current Valuation Period, minus

-if a Monthly Anniversary Day occurs during the current Valuation Period, that portion of the Monthly Cost of Insurance Charge, Monthly Expense Charge and Mortality and Expense Risk Charge for the Policy Month just beginning charged to each Sub-Account.

Net Investment Factor.  The net investment factor for each Variable Sub-Account for any Valuation Period is the quotient of (1) divided by (2) where:

(1) is the net result of-

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

-the per share amount of any dividend or other distribution declared on Fund shares held in the Variable Sub-Account if the "ex-dividend" date occurs during the Valuation Period, plus or minus

-a per share 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 Variable Sub-Account; and

(2) is the net asset value of a Fund share held in the Variable 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.

The net investment factor may be greater or less than one.

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.

Insufficient Value. The Policy will terminate for no value, subject to a grace period described below if, on a Processing Date the Policy’s Account Value less Policy Debt is equal to or less than zero.

Policy termination will not occur if:

1.   You pay premium sufficient to keep the Policy in force prior to the end of the grace period;

2.   No-Lapse Protection is in effect and the Lapse Protection Value less Policy Debt is greater than zero; or

3.   The Loan Lapse Protection Rider is in effect and all conditions thereunder have been met.

Please see the “Supplemental Benefits” section for additional information regarding the Loan Lapse Protection Rider and No-Lapse Protection provided by rider.

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 days from that Valuation Date for the payment of a premium sufficient to keep the Policy in force.  Notice of premium due will be mailed to your last known address and the last known address of any assignee of record.  We will assume that your last known address is the address shown on the Policy Application (or notice of assignment), unless we receive written notice of a change in address in a form satisfactory to us.  If the premium due is not paid within 61 days after the beginning of the grace period, then the Policy and all rights to benefits will terminate without value at the end of the 61 day period.  The Policy will continue to remain in force during this grace period.  If the Policy Proceeds become payable by us during the grace period, then any overdue monthly deductions will be deducted from the amount payable by us.

Lapse Protection Value.  The Policy provides for protection against lapse if You pay sufficient net premium to keep the Lapse Protection Value less Policy Debt greater than zero.  The Company incurs additional risk and related additional cost for the guarantee that the Policy will not lapse even if investment performance is unfavorable and the actual Account Vale becomes zero. In its calculation of Lapse Protection Value and premium for the selected duration (as discussed in the No-Lapse Protection Period section below), the Company uses a different Premium Expense Charge, Cost of Insurance Charge and Monthly Expense Charge than that actually charged as described in the Charges and Deductions section in its calculation of Lapse Protection Value.

To illustrate the difference in charges, we assume a Representative Owner is a male, preferred, non-tobacco, Issue Age 45, Policy Year 1.

Charge	Actual Charges	Used in Calculation of Lapse Protection Value
Premium Expense Charge	7.5% of premium	8.0% of premium
Cost of Insurance Charge	$0.06 per $1000 of Total Net Amount at Risk	$0.38 per $1000 of Total Net Amount at Risk
Monthly Expense Charge	$10.00 + $0.06 per $1000 of Specified Face Amount	$10.00

No-Lapse Protection Period.   No-Lapse Protection will eliminate the impact of poor investment performance and risk of Policy termination because the Account Value is not used to determine if lapse has occurred.  If You pay sufficient premiums to keep the Lapse Protection Value less Policy Debt greater than zero, your Policy will not lapse.  With the assistance of your financial advisor, You determine the length of time the No-Lapse Protection is in effect by the amount of premium You pay into the Policy.  It is also affected by the Insured’s Issue Age, sex and rating classification.  The length of time the No-Lapse Protection is in effect is called the No-Lapse Protection Period.  It can extend to the Insured’s Attained Age 121.  Ask your financial advisor for an illustration at time of application to determine what premium outlay would be required to sustain different No-Lapse Protection Periods.

The annual report You receive will advise whether the premiums paid result in the Lapse Protection Value being greater than zero, and, if no further premium is received, how long the No-Lapse Protection will last.

Charges and Deductions

The monthly deductions described below are the Premium Expense Charges, Mortality and Expense Risk Charges, Monthly Expense Charges, Monthly Costs of Insurance and the charges for any supplemental benefits.

There are no monthly deductions other than the Mortality and Expense Risk Charge after the policy anniversary on which the Insured is Attained Age 100.

Premium Expense Charge.  We will deduct a Premium Expense Charge from each premium payment upon receipt. Three and one-quarter percent of the charge is used to pay federal, state and local tax obligations.

The remainder of the Premium Expense Charge is a sales load used for agent compensation and other issue costs.  For all Policy Years, the maximum Premium Expense Charge is 7.50%.  Currently, the Premium Expense Charge for Policy Years 11 and thereafter is 3.5%.

Mortality and Expense Risk Charge.  This charge is for the mortality and expense risks we assume with respect to the Policy.  It is a percentage of the Account Value of the Variable Sub-Accounts and, unless You direct otherwise, is deducted proportionally from the Account Value of the Sub-Accounts each month.  We may realize a profit from this charge.

The Mortality and Expense Risk Charge percentage is 0.75% annually for Policy Years 1 through 10 and 0.12% annually thereafter.

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 will deduct from your Account Value monthly a charge of $10.00 in all years and a monthly charge based on the SFA and SIA for the first 20 Policy Years following the issuance of the Policy and the first 20 Policy Years following the effective date of each increase in the SFA and SIA, if any, based on the amount of the increase.  Minimum and maximum Monthly Expense Charges are shown in the Fee Table.  The Monthly Expense Charge is based on the age, sex and rating class of the Insured.  Unless You direct otherwise, the Monthly Expense Charges will be deducted proportionally from the amounts in the Sub-Accounts and covers administration expenses and issuance costs. The illustration provided at time of application will show your specific Monthly Expense 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.  Minimum and maximum Monthly Cost of Insurance charges are shown in the Fee Table.  Unless You direct otherwise, the Monthly Cost of Insurance deduction will be charged proportionally to the amounts in the Sub-Accounts.

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

(1)   is the Monthly Cost of Insurance rate times  the Total Net Amount at Risk divided by 1,000*;

(2)   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, Surrender Charge Modification and No-Lapse Protection); and

(3)   is any additional insurance charge calculated, as specified in the Policy, for substandard risk classifications, which can be up to 500% of the charge shown in the Fee Table.

*Item (1) above is expressed algebraically as: the Monthly Cost of Insurance rate [Total Net Amount at Risk ÷ 1000].  Please see Appendix A, Glossary of Terms, for definitions of the Total Net Amount at Risk and its components.

The Total Net Amount at Riskequals:

-the death benefit divided by 1.00247; minus

-your Account Value on the Processing Date prior to assessing the monthly deductions.

The Total 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 withdrawals, transaction fees and periodic charges.

If there are increases in the SFA and SIA other than increases caused by changes in the death benefit option, the cost of insurance charge described above is determined separately for the initial SFA and SIA and each increase in the SFA and SIA.  In calculating the Total Net Amount at Risk, your Account Value will first be allocated to the initial SFA and then to the SIA and then to each increase in the SFA or SIA in the order in which the increases were made.  By way of example, assume the initial death benefit is $500,000, there is a later increase in Specified Face Amount of $400,000 and the Account Value is $600,000.  The net amount at risk of the initial death benefit is $500,000 divided by 1.00247 less $500,000 of Account Value divided by 1.00247. The Account Value must be divided at this stage by 1.00247 because it is incorrect to assign more Account Value than there is initial death benefit.  To determine the net amount at risk of the $400,000 Specified Face Amount increase, we take the $400,000 and divide by 1.00247 then subtract the remaining Account Value of $101,232 (which is the result of $500,000 divided by 1.00247 from the initial death benefit net amount at risk calculation).  So the net amount at risk of the initial death benefit is zero and the net amount at risk of the Specified Face Amount increase is $297,782.

Monthly Cost of Insurance Rates.  The Monthly Cost of Insurance rates (except for any such rate applicable to an increase in the SFA and SIA) are based on the length of time the Policy has been in force, the duration of the SIA, and the Insured's sex, Issue Age and rating class.  The Monthly Cost of Insurance rates applicable to each increase in the SFA and SIA are based on the length of time the increase has been in force and the Insured's sex, Issue Age and rating class.  The Monthly Cost of Insurance rates will be determined by us from time to time based on our expectations of future experience with respect to mortality costs, persistency, interest rates, expenses and taxes.  The rates for the Policy will not exceed the Guaranteed Maximum Monthly Cost of Insurance Rates based on the 2001 Commissioner's Standard Ordinary Smoker and Nonsmoker Mortality Tables.

Other Charges and Deductions.  Interest charged on outstanding loans as well as the interest credited to loaned values of the Fixed Account is more fully described at page 18.  Additionally, a flat extra charge may apply if an Insured is a substandard risk.  A flat extra charge will not exceed $20.00 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.

Reduced Charges

We may waive charges in connection with Policies sold to Company or affiliate company’s officers, directors, employees and immediate family members of those parties.  We also reserve the right to reduce the Premium Expense Charge, Monthly Expense Charge and Mortality and Expense Risk Charge.  We will provide You prompt notice of any reduction.  Reductions will be based on uniformly applied criteria that do not discriminate unfairly against any person.

Supplemental Benefits

The following supplemental benefit riders may be available in your state. Each rider is subject to certain limitations and termination provisions.  Any rider charges imposed are necessary to cover the expense borne by the Company for providing the additional benefits provided by the riders.  For additional information on the riders, please ask your financial adviser.

Accelerated Benefits Rider.  Under this rider, we will pay You, at your written request in a form satisfactory to us, an "accelerated benefit" if the Insured is terminally ill.  An Insured is considered "terminally ill" if the Insured has a life expectancy of 12 months or less due to illness or physical condition.  (This time period may be more or less in some states.)

The accelerated benefit payment will be equal to that portion of the Policy's death benefit requested by You, not to exceed 75% of the amount of the death benefit, subject to certain reductions.  Reductions to the accelerated benefit payment include the following:

a.   a 12 month discount percentage which will not exceed the greater of the current yield on 90-day Treasury bills and the current maximum statutory adjustable loan interest rate; and

b.   the amount of Policy Debt in excess of the Accelerated Amount.

This rider is free of charge, attaches to all Policies at issue and may be discontinued upon written request to the Company.

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.  The Charitable Gift Amount and the Charitable Beneficiary in effect on the Issue Date are shown in the Policy.  The rider must be elected at issue and can be discontinued upon written request to the Company.  There is no charge for this rider.

Waiver of Monthly Deductions Rider.  Under this rider, we will waive the monthly deductions for 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 deductions 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 SFA and SIA. The rider must be elected at issue and may be discontinued upon written request to the Company.  If the rider is discontinued, the rider charge will cease.  If You elect this rider, You may not elect the Payment of Stipulated Amount Rider.

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 of past total disability and 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 that factor by each $100 of Stipulated Amount.  The rider charge will cease for the term the stipulated amount is being paid.  The rider must be elected at issue and may be discontinued upon written request to the Company.  If the rider is discontinued, the rider charge will cease.  The rider may not be elected if the Waiver of Monthly Deductions Rider has been elected.

Surrender Charge Modification Rider.  Under this rider, we will waive a portion of the applicable surrender charges if You fully surrender the Policy during the first three Policy Years.  For Policy Year 1, 100% of the surrender charge will be waived.  75% of the surrender charge will be waived in Policy Year 2 and 50% in Policy Year 3.  The charge for the rider is a monthly per $1000 of initial SFA which is the same for all policyholders. It is deducted for the first Policy Year only and is shown in the Policy.  The rider must be elected at issue and may be discontinued upon written request to the Company.  If the rider is discontinued, the rider charge will cease.

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 SFA and SIA;

-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 99.5% of the excess 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 99.5% of the difference between 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;

-SFA and SIA increases and decreases will no longer be permitted; and

-All supplemental riders (other than the accelerated benefit rider) will terminate.

The rider automatically attaches to every Policy at issue and may be discontinued upon written request to the Company.

No-Lapse Protection Rider.  The No-Lapse Protection provided by this rider works the same as the No-Lapse Protection provided by the Policy.  However, under this rider, You must elect to allocate Account Value to (i) the Fixed Account or (ii) any designated Variable Sub-Account or static asset allocation model available for use with this rider.  The designated Variable Sub-Accounts and static asset allocation model(s) will tend to be more conservative and as such may limit your investment return.  If you do not allocate and maintain Account Value accordingly, this rider will terminate.  The Variable Sub-Accounts designated for use with this rider are the Variable Sub-Accounts that invest in Franklin Templeton VIP Founding Funds Allocation Fund, AllianceBernstein VPS Balanced Wealth Strategy Portfolio, Fidelity VIP Freedom 2015 Portfolio, Fidelity VIP Freedom 2020 Portfolio, Fidelity VIP Freedom 2030 Portfolio, MFS® Total Return Portfolio, BlackRock Global Allocation V.I. Fund, Fidelity VIP Balanced Portfolio, Van Kampen UIF Equity & Income Portfolio, SCSM Ibbotson Balanced Fund, SCSM Ibbotson Growth Fund and SCSM Ibbotson Moderate Fund.  We reserve the right to declare a particular Variable Sub-Account no longer suitable for allocation under this rider.  Any Account Value in such a Variable Sub-Account can remain in that Variable Sub-Account without causing this rider to terminate.  However, all future allocations of Account Value may only be made to Variable Sub-Accounts that are then designated as suitable for this rider.  We will supplement the prospectus and send advance notice to policyholders of any change in Variable Sub-Accounts designated for use with this rider.

Because of the requirement for allocation to more conservative Variable Sub-Accounts, asset allocation model(s) and the Fixed Account, the risk of poor investment performance is lessened.  Thus, the cost to the Company, referred to as the Lapse Protection Value, is less.  Accordingly, premium necessary to keep the Lapse Protection Value less Policy Debt greater than zero under this rider is considerably less than the premium necessary to keep the Lapse Protection Value less Policy Debt greater than zero under the Policy without this rider.

We are compensated for this reduction in premium funding levels by an offsetting rider charge.

The charge for this rider is equal to the rider charge percentage shown in the Policy then multiplied by the Total Net Amount at Risk.  The rider charge varies based on the Insured’s Issue Age, sex and risk classification.  This rider must be elected at issue.  You may discontinue this rider upon written request to the Company.  If discontinued, the rider charge will cease.

Ask your financial advisor for an illustration at time of application to show how premium funding levels and hypothetical investment returns are different for the same No-Lapse Protection Period between the No-Lapse Protection provided under the Policy and the No-Lapse Protection provided by this rider.  The illustration will also show the impact of the No-Lapse Protection Rider charges on Account Value.

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 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.

The endorsement automatically attached to every Policy at issue and is provided at no charge.  Ask your financial adviser for the brochure that provides additional detail about the Endorsement.

Termination of Policy

The Policy will terminate on the earlier of the date we receive your request to surrender, the expiration date of the Grace Period without payment of premium due or the date of death of the Insured.

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 not less than:

-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.

Although the Policy may be reinstated, the No-Lapse Protection under the Policy and the No-Lapse Protection Rider no longer apply.  Once the Policy has terminated for no value, the Lapse Protection Value cannot be reinstated.

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

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 written notice satisfactory to us giving rise to such payment or, in the case of death of the Insured, Due Proof of such death. Payment is subject to our rights under the Policy's incontestability and suicide provisions. Payment of any amount payable from the Variable Account on death, surrender, partial withdrawal or policy loan may be postponed whenever:

-the New York Stock Exchange is closed other than customary weekend and holiday closing, or trading on the NYSE is otherwise restricted, as determined by the Securities and Exchange Commission;

-the Securities and Exchange Commission, by order, permits postponement for the protection of policyowners; or

-an emergency exists as determined by the Securities and Exchange Commission, 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.

We may defer payment from the Fixed Account for a period up to six months.

Rights of Owner

While the Insured is alive, unless You have assigned any of these rights, You may:

-transfer ownership to a new owner;

-name a contingent owner who will automatically become the owner of the Policy if You die before the Insured;

-change or revoke a contingent owner;

-change or revoke a beneficiary;

-exercise all other rights in the Policy;

-increase or decrease the SFA and SIA, subject to the other provisions of the Policy;

-change the death benefit option, subject to the other provisions of the Policy.

When You transfer your rights to a new owner, You automatically revoke any prior contingent owner designation.  When You want to change or revoke a prior beneficiary designation, You have to specify that action.  You do not affect a prior beneficiary when You merely transfer ownership, or change or revoke a contingent owner designation.

You do not need the consent of a beneficiary or a contingent owner in order to exercise any of your rights.  However, You must give us written notice satisfactory to us of the requested action.  Your request will then, except as otherwise specified herein, be effective as of the date You signed the form, subject to any action taken before we received it.

Rights of Beneficiary

The beneficiary has no rights in the Policy until the death of the Insured.  If a beneficiary is alive at that time, the beneficiary will be entitled to payment of the Policy Proceeds as they become due.

Other Policy Provisions

Addition, Deletion or Substitution of Investments.  We may decide to add new Variable Sub-Accounts at any time.  Also, shares of any or all of the Funds may not always be available for purchase by 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 Securities and Exchange Commission, to the extent necessary.  In addition, the investment policies of the Variable Sub-Accounts will not be changed without the approval of the Insurance Superintendent of the State of New York.  We also reserve the right to eliminate or combine existing Variable Sub-Accounts or to transfer assets between Variable Sub-Accounts, subject to the approval of the Securities and Exchange Commission. In the event of any substitution or other act described in this paragraph, we will notify You and make any appropriate endorsement to the Policy to reflect the substitution.

Entire Contract.  Your entire contract with us consists solely of the Policy, including the attached copy of the Policy Application and any attached copies of supplemental applications and any riders and endorsements.

Alteration.  Financial advisors do not have any 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.

Modification.  Upon notice to You, we may modify the Policy if such a modification-

-is necessary to make the Policy or the Variable Account comply with any law or regulation issued by a governmental agency to which we are or the Variable Account is 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 Variable Sub-Account 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 endorsement to the Policy to reflect such modification.

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 Service Office and must be in written form satisfactory to us.  The assignment will then be effective as of the date You signed the form, subject to any action taken before we acknowledge receipt. We are not responsible for the validity or legal effect of any assignment.

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

Misstatement of Age or Sex.  If the age or sex of the Insured is stated incorrectly, the amounts payable by us will be adjusted as follows:

     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.

     Misstatement discovered prior to death-Your Account Value will be recalculated from the Policy Date using the Monthly Cost of Insurance Rates based on the correct age or sex.

Suicide.  If the Insured, whether sane or insane, commits suicide within two years after the Policy's Issue Date, we will not pay any part of the Policy Proceeds.  We will refund the premiums paid, less the amount of any Policy Debt and any partial withdrawals.

If the Insured, whether sane or insane, commits suicide within two years after the effective date of an increase in the SFA or SIA, then our liability as to that increase will be the cost of insurance for that increase.

Incontestability.  All statements made in the application or in a supplemental application are representations and not warranties.  We relied and will rely on those statements when approving the issuance, increase in SFA, increase in SIA, increase in death benefit over premium paid, change in death benefit option or reinstatement 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.  After the Policy has been in force during the lifetime of the Insured for a period of two years from its Issue Date, we cannot contest it except for non-payment of premiums.  However, any increase in SFA or SIA which is effective after the Issue Date will be incontestable only after such increase has been in force during the lifetime of the Insured for two years from the effective date of such 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.  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 the reinstatement.

Report to Owner.  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 outstanding policy loans and accrued interest on such loans.  There is no charge for this report.  Additionally, confirmations of individual transactions (e.g. premium payments, allocations, transfers) in the Policy will be sent at the time of the transaction.

Performance Information

We may sometimes publish performance information related to the Fund, the Variable Account or the Policy in advertising, sales literature and other promotional materials.  This information is based on past investment results and is not an indication of future performance.

Portfolio Performance

We may publish a mutual fund portfolio's total return or average annual total return. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gains.  Average annual total return is a hypothetical rate of return that, if achieved annually, would have produced the same total return over a stated period if performance had been constant over the entire period.  Average annual total returns smooth variations in performance, and are not the same as actual year-by-year results.

We may also publish a mutual fund portfolio's yield.  Yield refers to the income generated by an investment in a portfolio over a given period of time, expressed as an annual percentage rate.  When a yield assumes that income earned is reinvested, it is called an effective yield.  Seven-day yield illustrates the income earned by an investment in a money market fund over a recent seven-day period.

Total returns and yields quoted for a mutual fund portfolio include the investment management fees and other expenses of the portfolio, but do not include charges and deductions attributable to the Policy.  These expenses would reduce the performance quoted.

Adjusted Non-Standardized Portfolio Performance

We may publish a mutual fund portfolio's total return and yields adjusted for charges against the assets of the Variable Account.

We may publish total return and yield quotations based on the period of time that a mutual fund portfolio has been in existence.  The results for any period prior to any Policy being offered will be calculated as if the Policy had been offered during that period of time, with all charges assumed to be those applicable to the Policy.

Other Information

Performance information may be compared, in reports and promotional literature, to:

-the S&P 500, Dow Jones Industrial Average, Lehman Brothers Aggregate Bond Index or other unmanaged indices so that investors may compare the Variable Sub-Account results with those of a group of unmanaged securities widely regarded by investors as representative of the securities markets in general;

-other groups of variable life variable accounts or other investment products tracked by Lipper Analytical Services, a widely used independent research firm which ranks mutual funds and other investment products by overall performance, investment objectives, and assets, or tracked by other services, companies, publications, or persons, such as Morningstar, Inc., who rank such investment products on overall performance or other criteria; or

-the Consumer Price Index (a measure for inflation) to assess the real rate of return from an investment in the Variable Sub-Account.  Unmanaged indices may assume the reinvestment of dividends but generally do not reflect deductions for administrative and management expenses.

We may provide Policy information on various topics of interest to You and other prospective policyowners.  These topics may include:

-the relationship between sectors of the economy and the economy as a whole and its effect on various securities markets;

-investment strategies and techniques (such as value investing, dollar cost averaging, asset allocation, constant ratio transfer and account rebalancing);

-the advantages and disadvantages of investing in tax-deferred and taxable investments;

-customer profiles and hypothetical purchase and investment scenarios;

-financial management and tax and retirement planning; and

-investment alternatives to certificates of deposit and other financial instruments, including comparisons between a Policy and the characteristics of, and market for, such financial instruments.

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.  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.

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 competent tax adviser on the potential impact of the investor 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, because the diversification rules would permit an investment manager (or its affiliate) to hold a direct investment in an investment option under the Policy, 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 Variable Account.  You bear the risk that You may be treated as the owner of Variable 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 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” 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.

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 percent 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.

There are substantial limits on the deductibility of policy loan interest.  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 the 10% additional tax discussed above may apply also.  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 owner’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.

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 Pension Protection Act of 2006 added a new section to the Code that denies the 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.  The new 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 the new legislation to the proposed purchase.

A tax adviser should also be consulted with respect to the 2003 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 tax return disclosure requirements of IRC 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 IRC Section 6011 and Treasury Regulation Section 1.6011-4 to your federal tax return.

Under IRC Section 6111 and Temporary Treasury Regulation Section 301.6111, 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 IRC Section 6112 and Treasury Regulation Section 301.6112-1 are not currently applicable to such offerings and sales.

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 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"), One Sun Life Executive Park, 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 the promotion and 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 may vary depending on the selling agreement but is not expected to be more than 90% of the first Policy Year’sTtarget Premium plus 3% of the premium in excess of the Target Premium.  Target Premium varies based on the Insured's Issue Age, sex and rating class.  Commissions will not exceed 3% of the premium received in Policy Year’s 2-10 and 2% of the premium received thereafter.  If a Surrender Charge Modification Rider is attached to the Policy, commissions will not exceed 31.5% of target premium received in Policy Years 1-3, 3% of premium received in Policy Years 4-10 and 2% of the premium received thereafter.

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.

Clarendon retains no commissions in connection with the distribution of the Policies.

Voting Rights

We are the legal owner of all shares of the Funds held in the Sub-Accounts of the Variable Account, and as such have the right to vote upon matters that are required by the Investment Company Act of 1940 to be approved or ratified by the shareholders of the Funds and to vote upon any other matters that may be voted upon at a shareholders' meeting.  We will, however, vote shares held in the Sub-Accounts of the Variable Account in accordance with instructions received from policyowners who have an interest in those respective Sub-Accounts. 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 vote shares held in each Variable Sub-Account for which no timely instructions from policyowners are received, together with shares not attributable to a Policy, in the same proportion as those shares in that Variable Sub-Account for which instructions are received.  Should the applicable federal securities laws change so as to permit us to vote shares held in the Variable Account in our own right, we may elect to do so.

The number of shares in each Variable Sub-Account for which a policyowner may give instructions is determined by dividing the portion of the Account Value derived from participation in that Variable Sub-Account, if any, by the value of one share of the corresponding Fund.  We will determine the number as of a date we choose, but not more than 90 days before the shareholders' meeting.  Fractional votes are counted.  Voting instructions will be solicited in writing at least 14 days prior to the shareholders' meeting.

We may, if required by state insurance regulators, disregard voting instructions if those instructions would require shares to be voted so as to cause a change in the sub-classification or investment policies of one or more of the Funds, or to approve or disapprove an investment management contract.  In addition, we may disregard voting instructions that would require changes in the investment policies or investment adviser, provided that we reasonably disapprove of those changes in accordance with applicable federal regulations.  If we disregard voting instructions, we will advise You of that action and our reasons for it in our next communication to policyowners.

Other Information

State Regulation

We are subject to the laws of New York governing life insurance companies and to regulation by New York's Superintendent 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

There are no pending legal proceedings which would have a material adverse effect on the Variable Account.  We are engaged in various kinds of routine litigation which, in our judgment, is not material to the Variable Account.

Experts

Actuarial matters concerning the Policy have been examined by Ronald Klein, FSA, MAAA, Assistant Vice President, Product Management.

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 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 should refer to the registration statement for further information concerning the Variable Account, Sun Life Insurance and Annuity Company of New York, the mutual fund investment options 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 Fund shares 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 Terms

Account Value-The sum of the amounts in each Variable Sub-Account and the Fixed Account with respect to a Policy.  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 policy date.

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

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

Cash Value-Account Value less any surrender charges.

Cash Surrender Value-The Cash Value decreased by the balance of any outstanding Policy Debt.

Class-The risk and underwriting classification of the Insured.

Due Proof-Such evidence as we may reasonably require in order to establish that a benefit is 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 SFA and any SIA.

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

Initial Premium-The amount necessary to put the coverage in force. Generally, this is two Minimum Monthly Premiums.  The Initial Premium is shown in the Policy.

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

Investment Start Date-The date the first premium is applied, which will be the later of the Issue Date, the Policy Date or the date a premium is paid equal to or in excess of the specified Initial Premium.

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

Issue Date-The date we produce a Policy from our system as specified in the Policy.

Minimum Monthly Premium – The Initial Premium is generally two Minimum Monthly Premiums.  The Minimum Monthly Premium is determined by the SFA, SIA, death benefit option election, optional rider election and the risk and underwriting classification of the Insured.

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

Monthly Cost of Insurance-A deduction made on a monthly basis for the SFA and SIA provided by the Policy and for the Waiver of Monthly Deductions rider, Payment of Stipulated Amount rider, Surrender Charge Modification rider and No-Lapse Protection rider.

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

Mortality and Expense Risk Charge-The annual rate deducted monthly from the Account Value for the mortality and expense risk we assume by issuing the Policy.

No-Lapse Protection Period – The term when the Policy will not terminate if the Lapse Protection Value is greater than zero.  The No-Lapse Protection Period is based on the planned periodic premium and the age, sex and risk classification of the Insured.  It is not available to policyowners who elect Death Benefit Option B.

Policy-The form issued by Sun Life Insurance and Annuity Company of New York which evidences the insurance coverage provided and is a contract between the policyowner and the Company.

Policy Application-The application for a Policy, a copy of which is attached to and incorporated in the Policy.

Policy Date-The date shown in the Policy Specifications from which the Insured’s Issue Age is established and from which Monthly Deductions reduce the Account Value.

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

Policy Month-A Policy Month is a one-month period commencing on the Policy 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 which is payable at the death of the Insured.  This amount is the death benefit, decreased by the amount of any outstanding Policy Debt and any unpaid charges and deductions, and increased by the amounts payable under any supplemental benefits.

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

Premium Expense Charge-A percentage charge deducted from each premium payment.

Processing Date-The first Valuation Date on or next following a Monthly Anniversary Day.

Service Office-Sun Life Assurance Company of Canada (U.S.), One Sun Life Executive Park, Wellesley Hills, Massachusetts, 02481, or such other address as we may hereafter specify to You by written notice.

SFA Net Amount at Risk – The Specified Face Amount of the Certificate less the Account Value attributable to the Specified Face Amount.

SIA Net Amount at Risk – The Supplemental Insurance Amount of the Certificate less the Account Value attributable to the Supplemental Insurance Amount.

Specified Face Amount (“SFA”)-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, and the Fixed Account.

Supplemental Insurance Amount (“SIA”)-The amount of supplemental life insurance coverage You request as specified in the Policy.  The SIA terminates no later than the Insured’s Attained Age 121.

Target Premium-An amount of premium specified as such in the Policy, used to determine the amount of commissions paid by the Company to the Selling Broker-Dealer.

Total Net Amount at Risk – The Total Net Amount at Risk is the SFA Net Amount at Risk plus the SIA Net Amount at Risk.  The Total Net Amount at Riskequals:

- the death benefit divided by 1.00247; minus

- your Account Value on the Processing Date prior to assessing the monthly deductions.

The level of premium funding you choose will impact the Total Net Amount at Risk because the Account Value is a factor in its determination.  The higher the Account Value, the lower the cost of insurance charge deductions because they are based on SFA Net Amount at Risk and SIA Net Amount at Risk.

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

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

Valuation Date-Any 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 a Valuation Date.

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

Variable Account-Sun Life (N.Y.) Variable Account D.

Variable 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.

You – is the owner of the Policy.

Appendix B

Table of Death Benefit Percentages

Age	Applicable Percentage	Age	Applicable Percentage
20	250%	60	130%
21	250%	61	128%
22	250%	62	126%
23	250%	63	124%
24	250%	64	122%
25	250%	65	120%
26	250%	66	119%
27	250%	67	118%
28	250%	68	117%
29	250%	69	116%
30	250%	70	115%
31	250%	71	113%
32	250%	72	111%
33	250%	73	109%
34	250%	74	107%
35	250%	75	105%
36	250%	76	105%
37	250%	77	105%
38	250%	78	105%
39	250%	79	105%
40	250%	80	105%
41	243%	81	105%
42	236%	82	105%
43	229%	83	105%
44	222%	84	105%
45	215%	85	105%
46	209%	86	105%
47	203%	87	105%
48	197%	88	105%
49	191%	89	105%
50	185%	90	105%
51	178%	91	104%
52	171%	92	103%
53	164%	93	102%
54	157%	94	101%
55	150%	95+	100%
56	146%
57	142%
58	138%
59	134%

Appendix C

Privacy Policy

Introduction

At the Sun Life Financial group of companies, 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.

Sun Life Financial has a long tradition of safeguarding the privacy of its customers’ information. 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 Sun Life Financial

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 Sun Life Financial

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 Sun Life Financial to help us develop innovative financial products and services and to allow our member companies to inform you about them.  The Sun Life Financial group of companies provides a wide variety of financial products and services including individual life insurance, individual fixed and variable annuities and group life, disability, and medical stop-loss insurance.

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.  Sun Life Financial 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 Sun Life Financial 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.

The following Sun Life Financial member companies have adopted this Notice.  Other Sun Life Financial affiliated companies have adopted their own privacy policies.  Please check their websites for details.

Insurance Companies	Distributors/Broker-Dealers/Underwriters
Sun Life Assurance Company of Canada (U.S. Operations)	Clarendon Insurance Agency, Inc.
Sun Life Assurance Company of Canada (U.S.)	Sun Life Financial Distributors, Inc.
Sun Life Insurance and Annuity Company of New York	IFMG of Oklahoma, Inc.
Independence Life and Annuity Company	IFS Agencies, Inc.
	IFS Agencies of Alabama, Inc.
	IFS Agencies of New Mexico, Inc.
	IFS Insurance Agencies of Ohio, Inc.
	IFS Insurance Agencies of Texas, Inc.
	Independent Financial Marketing Group, Inc.
	IFMG Securities, Inc.
	LSC Insurance Agency of Arizona, Inc.

The SAI includes additional information about Sun Life (N.Y.) Variable Account D and is incorporated herein by reference.  The SAI and personalized illustrations of death benefits, cash surrender values and cash values are available upon request, at no charge.  You may make inquiries about the Policy, request an SAI and request a personalized illustration by calling 1-866-702-6998.

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, N.E., Washington, D.C.  20549.

Securities Act of 1933 File No. 333-144626

Investment Company Act. File No. 811-04633

PART B

STATEMENT OF ADDITIONAL INFORMATION

SUN PROTECTOR

VARIABLE UNIVERSAL LIFE POLICY

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

SUN LIFE (N.Y.) VARIABLE ACCOUNT D

October 3, 2008

This Statement of Additional Information (SAI) is not a prospectus but it relates to, and should be read in conjunction with, the Sun Protector Variable Universal Life Insurance prospectus, dated October 3, 2008.  The prospectus is available, at no charge, by writing Sun Life Insurance and Annuity Company of New York ("the Company") at One Sun Life Executive Park, Wellesley Hills, MA  02481 or calling 1-866-702-6998.

TABLE OF CONTENTS

THE COMPANY AND THE VARIABLE ACCOUNT	2
CUSTODIAN	2
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	2
DISTRIBUTION AND UNDERWRITING OF POLICY	2
THE POLICY	3
FINANCIAL STATEMENTS OF SEPARATE ACCOUNT D	5
FINANCIAL STATEMENTS OF THE COMPANY	31

THE COMPANY AND THE VARIABLE ACCOUNT

Sun Life Financial Inc. ("Sun Life Financial"), a reporting company under the Securities Exchange Act of 1934 with common shares listed on the Toronto, New York and Philippine stock exchanges, is the ultimate corporate parent of Sun Life Insurance and Annuity Company of New York.

Sun Life (N.Y.) Variable Account D was established on April 24, 2003 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 Variable 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 purposes of Federal securities laws.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The consolidated financial statements of Sun Life Insurance and Annuity Company of New York 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 (which report, dated April 18, 2008, accompanying such financial statements expresses an unqualified opinion and includes an explanatory paragraph, referring to the adoption of the provisions of the Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No.109”), and has been so 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.

The financial statements of Sun Life (N.Y.) Variable Account D that are 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 (which report, dated April 18, 2008, accompanying the financial statements expresses an unqualified opinion) and has been so 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"), One Sun Life Executive Park, 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 the promotion and 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 may vary depending on the selling agreement but is not expected to be more than 90% of the first Policy Year’s Target Premium plus 3% of the premium in excess of Target Premium.  Target Premium varies based on the Insured's age, sex and rating class.  Commissions will not exceed 3% of the premium received in Policy Years 2-10 and 2% of the premium received thereafter.  If a Surrender Charge Modification Rider is attached to the Policy, commissions will not exceed 31.5% of Target Premium received in Policy Years 1-3, 3% of premium received in Policy Years 4-10 and 2% of premium received thereafter.

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.

Clarendon retains no commissions in connection with the distribution of the Policies.

THE POLICY

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 basis.  We may require medical examinations and further information before the proposed application is approved.   Proposed Insureds must be acceptable risks based on our underwriting limits and standards.  A Policy cannot be issued until the underwriting process has been completed to our satisfaction.  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.  The cost of insurance charges are based on the 2001 Commissioner's Standard Ordinary Smoker and Nonsmoker Mortality Table.

3

Premium Expense Charge.   We will deduct a Premium Expense Charge from each premium payment upon receipt.  Three and one-quarter percent of the charge is used to pay federal, state and local tax obligations.

The remainder of the Premium Expense Charge is as sales load used for agent compensation and other issue costs.  For all Policy Years, the maximum Premium Expense Charge is 7.50%.  Currently, the Premium Expense Charge for Policy Years 11 and thereafter is 3.5%.

Increase in Face Amount.  After the first policy anniversary, you may request an increase in the Specified Face Amount (“SFA”) or Supplemental Insurance Amount (“SIA”).  You must provide satisfactory evidence of the Insured's insurability.  Once requested, an increase will become effective at the next policy anniversary following our approval of your request.  The Policy does not allow for an increase if the Insured's Attained Age is greater than 80 on the effective date of the increase.

If there are increases in the SFA and SIA other than increases caused by changes in the death benefit option, the cost of insurance charge and monthly expense charge is determined separately for the initial SFA and SIA and each increase in SFA and SIA.  The cost of insurance charges and monthly expense charges applicable to an increase in SFA and SIA 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.  In calculating the net amount at risk, your Account Value will first be allocated to the initial SFA and then to the SIA and then to each increase in the SFA or SIA in the order in which the increases were made.

FINANCIAL STATEMENTS

The financial statements of the Variable Account and Sun Life Insurance and Annuity Company of New York are included in this Statement of Additional Information by amendment.  The consolidated financial statements of Sun Life Insurance and Annuity Company of New York 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.

Sun Life (N.Y.) Variable Account D

Statements of Assets and Liabilities - December 31, 2007

Assets:
Investment in	Shares		Cost		Value
AIM Variable Insurance Funds, Inc.
V.I. International Growth Fund Sub-Account (AI4)		1,240	$	41,632	$	41,700
The Alger American Fund
Mid Cap Growth Portfolio Sub-Account (AL4)		3,247		67,056		76,702
AllianceBernstein Variable Product Series Fund, Inc.
Growth and Income Portfolio Sub-Account (AN3)		2,304		57,203		61,174
Delaware Management Company
VIP Growth Opportunities Series Sub-Account (DGO)		818		17,811		17,476
Dreyfus Investment Portfolios
MidCap Stock Portfolio Sub-Account (DMC)		4,566		79,656		70,861
Fidelity Variable Insurance Products Fund:
Fidelity VIP Index 500 Portfolio Sub-Account (FL4)		707		101,556		115,773
Fidelity VIP Money Market Portfolio Sub-Account (FL5)		170,882		170,882		170,883
Fidelity VIP ContrafundTM Portfolio Sub-Account (FL6)		1,245		38,671		34,619
Fidelity VIP Overseas Portfolio Sub-Account (FL7)		5,524		108,635		139,315
Fidelity VIP Growth Portfolio Sub-Account (FL8)		1,043		32,896		46,916
Franklin Templeton Variable Insurance Products Trust
Templeton Foreign Securities Fund Sub-Account (FTI)		5,433		85,924		110,022
Goldman Sachs Variable Insurance Trust
VIT Structured US Equity Fund Sub-Account (GS3)		3,788		47,861		49,846
Mid Cap Value Fund Sub-Account (GS8)		9		147		128
Lord Abbett Series Fund, Inc.
Growth & Income Portfolio Sub-Account (LA1)		388		11,609		10,831
Mid Cap Value Portfolio Sub-Account (LA2)		1,987		42,444		37,562
MFS/Sun Life Series Trust
Government Securities Series Sub-Account (GSS)		1,728		21,941		22,270
High Yield Series Sub-Account (HYS)		9,843		66,557		64,570
Massachusetts Investors Growth Stock Series Sub-Account (MIS)		152		1,793		1,776
Massachusetts Investors Trust Series Sub-Account (MIT)		15		501		528
New Discovery Series Sub-Account (NWD)		9		160		153
Total Return Series Sub-Account (TRS)		278		5,534		5,419
Utilities Series Sub-Account (UTS)		36		965		1,064
Value Series Sub-Account (MVS)		3,340		53,538		62,723
Oppenheimer Variable Account Funds
Capital Appreciation Fund Sub-Account (OCF)		95		4,220		4,477
PIMCO Variable Insurance Trust
High Yield Portfolio Sub-Account (PHY)		2,416		19,847		19,449
Low Duration Portfolio Sub-Account (PLD)		18,228		184,895		187,744
Emerging Markets Bond Portfolio Sub-Account (PMB)		8,145		111,029		111,348
Real Return Portfolio Sub-Account (PRR)		401		4,815		5,046
Total Return Portfolio Sub-Account (PTR)		6,009		62,322		63,031
Scudder VIT Funds
Scudder VIT Small Cap Index Fund Sub-Account (SSC)		1,901		28,136		27,944
Scudder Variable Series II
SVS Dreman Small Cap Value Portfolio Sub-Account (SCV)		1,996		39,021		40,169
Sun Capital Advisers Trust
Sun Capital Investment Grade Bond Fund Sub-Account (SC2)		2,849		28,255		27,008
Sun Capital Real Estate Fund Sub-Account (SC3)		3,231		64,519		58,942
Sun Capital Blue Chip Mid Cap Fund Sub-Account (SC5)		3,100		61,455		55,645
Sun Capital Davis Venture Value Fund Sub-Account (SC7)		3,114		35,638		42,506
Sun Capital Oppenheimer Main Street Small Cap Fund Sub-Account (SCB)		315		4,872		4,084
Sun Capital All Cap Fund Sub-Account (SCM)		68		861		728

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Assets and Liabilities - December 31, 2007 – continued

Assets - continued:
Investment in – continued:	Shares		Cost		Value
T. Rowe Price Equity Series, Inc.
T. Rowe Price Blue Chip Growth Portfolio Sub-Account (TBC)		6,968	$	70,225	$	82,297
Van Kampen Life Insurance Trust
LIT Growth & Income Portfolio Sub-Account (VGI)		22		468		479
Net Assets Applicable to Contract Owners			$	1,775,550	$	1,873,208
Net Assets Applicable to Contract Owners
			Units		Value
AIM Variable Insurance Funds, Inc.
AI4				2,099	$	41,700
The Alger American Fund
AL4				3,826		76,702
AllianceBernstein Variable Product Series Fund, Inc.
AN3				4,624		61,174
Delaware Management Company
DGO				1,046		17,476
Dreyfus Investment Portfolios
DMC				4,910		70,861
Fidelity Variable Insurance Products Fund
FL4				9,366		115,773
FL5				14,269		170,883
FL6				1,813		34,619
FL7				8,081		139,315
FL8				4,067		46,916
Franklin Templeton Variable Insurance Products Trust
FTI				4,333		110,022
Goldman Sachs Variable Insurance Trust
GS3				4,140		49,846
GS8				8		128
Lord Abbett Series Fund, Inc.
LA1				740		10,831
LA2				2,538		37,562
MFS/Sun Life Series Trust
GSS				1,606		22,270
HYS				4,238		64,570
MIS				176		1,776
MIT				43		528
NWD				14		153
TRS				375		5,419
UTS				52		1,064
MVS				3,883		62,723
Oppenheimer Variable Account Funds
OCF				306		4,477

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Assets and Liabilities - December 31, 2007 – continued

Net Assets Applicable to Contract Owners – continued

	Units		Value
PIMCO Variable Insurance Trust
PHY		1,130		19,449
PLD		16,560		187,744
PMB		5,046		111,348
PRR		370		5,046
PTR		4,824		63,031
Scudder VIT Funds
SSC		1,287		27,944
Scudder Variable Series II
SCV		2,318		40,169
Sun Capital Advisers Trust
SC2		1,901		27,008
SC3		2,120		58,942
SC5		2,936		55,645
SC7		2,935		42,506
SCB		258		4,084
SCM		47		728
T. Rowe Price Equity Series, Inc.
TBC		5,417		82,297
Van Kampen Life Insurance Trust
VGI		31		479
Net Assets			$	1,873,208

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Operations - Year Ended December 31, 2007

	AI4		AL4		AN3		DGO
	Sub-Account		Sub-Account		Sub-Account		Sub-Account (e)
Income:
Dividend income	$	169	$	-	$	662	$	-
Realized and Unrealized gains (losses):
Realized gains (losses) on investment transactions:
Realized gains (losses) on sales of fund shares	$	122	$	141	$	649	$	(5)
Realized gain distributions		-		4,280		2,722		-
Net realized gains (losses)	$	122	$	4,421	$	3,371	$	(5)
Net unrealized appreciation (depreciation) on investments:
End of year	$	68	$	9,646	$	3,971	$	(335)
Beginning of year		56		749		5,636		-
Change in unrealized appreciation (depreciation)	$	12	$	8,897	$	(1,665)	$	(335)
Realized and unrealized gains (losses)	$	134	$	13,318	$	1,706	$	(340)
Increase (Decrease) in net assets from operations	$	303	$	13,318	$	2,368	$	(340)
	DMC		FL4		FL5		FL6
	Sub-Account		Sub-Account		Sub-Account		Sub-Account
Income:
Dividend income	$	278	$	3,842	$	7,930	$	278
Realized and Unrealized gains (losses):
Realized gains (losses) on investment transactions:
Realized gains (losses) on sale of fund shares	$	(287)	$	1,812	$	-	$	324
Realized gain distributions		7,902		-		-		8,303
Net realized gains (losses)	$	7,615	$	1,812	$	-	$	8,627
Net unrealized appreciation (depreciation) on investments:
End of year	$	(8,795)	$	14,217	$	-	$	(4,052)
Beginning of year		(1,456)		14,641		-		(205)
Change in unrealized appreciation (depreciation)	$	(7,339)	$	(424)	$	-	$	(3,847)
Realized and unrealized gains (losses)	$	276	$	1,388	$	-	$	4,780
Increase (Decrease) in net assets from operations	$	554	$	5,230	$	7,930	$	5,058

(e) For the period May 1, 2007 (commencement of operations) through December 31, 2007.

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Operations - Year Ended December 31, 2007 – continued

	FL7			FL8			FTI			GS3
	Sub-Account			Sub-Account			Sub-Account			Sub-Account
Income:
Dividend income	$	4,034		$	261		$	1,964	$		557
Realized and Unrealized gains (losses):
Realized gains (losses) on investment transactions:
Realized gains (losses) on sales of fund shares	$	2,906		$	407		$	1,955	$		430
Realized gain distributions		7,831			39			4,479			3,908
Net realized gains (losses)	$	10,737		$	446		$	6,434	$		4,338
Net unrealized appreciation (depreciation) on investments:
End of year	$	30,680		$	14,020		$	24,098	$		1,985
Beginning of year		26,001			4,593			18,412			7,782
Change in unrealized appreciation (depreciation)	$	4,679		$	9,427		$	5,686	$		(5,797)
Realized and unrealized gains (losses)	$	15,416		$	9,873		$	12,120	$		(1,459)
Increase (Decrease) in net assets from operations	$	19,450		$	10,134		$	14,084	$		(902)
	GS8			LA1			LA2			GSS
	Sub-Account			Sub-Account			Sub-Account			Sub-Account
Income:
Dividend income	$		1	$		136	$	172	$		891
Realized and Unrealized gains (losses):
Realized gains (losses) on investment transactions:
Realized gains (losses) on sale of fund shares	$		1	$		96	$	123	$		(51)
Realized gain distributions			19			749		5,056			-
Net realized gains (losses)	$		20	$		845	$	5,179	$		(51)
Net unrealized appreciation (depreciation) on investments:
End of year	$		(19)	$		(778)	$	(4,882)	$		329
Beginning of year			(4)			144		517			(207)
Change in unrealized appreciation (depreciation)	$		(15)	$		(922)	$	(5,399)	$		536
Realized and unrealized gains (losses)	$		5	$		(77)	$	(220)	$		485
Increase (Decrease) in net assets from operations	$		6	$		59	$	(48)	$		1,376

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Operations - Year Ended December 31, 2007 – continued

	HYS		MIS		MIT		NWD
	Sub-Account		Sub-Account (e)		Sub-Account		Sub-Account
Income:
Dividend income	$	4,630	$	-	$	6	$	-
Realized and Unrealized gains (losses):
Realized gains (losses) on investment transactions:
Realized gains (losses) on sales of fund shares	$	(262)	$	-	$	19	$	7
Realized gain distributions		-		-		-		3
Net realized gains (losses)	$	(262)	$	-	$	19	$	10
Net unrealized appreciation (depreciation) on investments:
End of year	$	(1,987)	$	(17)	$	27	$	(7)
Beginning of year		1,235		-		29		3
Change in unrealized appreciation (depreciation)	$	(3,222)	$	(17)	$	(2)	$	(10)
Realized and unrealized gains (losses)	$	(3,484)	$	(17)	$	17	$	-
Increase (Decrease) in net assets from operations	$	1,146	$	(17)	$	23	$	-
	TRS		UTS		MVS		OCF
	Sub-Account		Sub-Account		Sub-Account		Sub-Account
Income:
Dividend income	$	3	$	6	$	962	$	1
Realized and Unrealized gains (losses):
Realized gains (losses) on investment transactions:
Realized gains (losses) on sale of fund shares	$	-	$	77	$	410	$	50
Realized gain distributions		4		-		3,495		-
Net realized gains (losses)	$	4	$	77	$	3,905	$	50
Net unrealized appreciation (depreciation) on investments:
End of year	$	(115)	$	99	$	9,185	$	257
Beginning of year		2		44		9,360		22
Change in unrealized appreciation (depreciation)	$	(117)	$	55	$	(175)	$	235
Realized and unrealized gains (losses)	$	(113)	$	132	$	3,730	$	285
Increase (Decrease) in net assets from operations	$	(110)	$	138	$	4,692	$	286
(e) For the period May 1, 2007 (commencement of operations) through December 31, 2007.

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Operations - Year Ended December 31, 2007 – continued

	PHY		PLD		PMB		PRR
	Sub-Account		Sub-Account		Sub-Account		Sub-Account
Income:
Dividend income	$	682	$	8,282	$	5,124	$	181
Realized and Unrealized gains (losses):
Realized gains (losses) on investment transactions:
Realized gains (losses) on sales of fund shares	$	(5)	$	(140)	$	172	$	(18)
Realized gain distributions		-		-		2,192		12
Net realized gains (losses)	$	(5)	$	(140)	$	2,364	$	(6)
Net unrealized appreciation (depreciation) on investments:
End of year	$	(398)	$	2,849	$	319	$	231
Beginning of year		6		(1,613)		2,453		(26)
Change in unrealized appreciation (depreciation)	$	(404)	$	4,462	$	(2,134)	$	257
Realized and unrealized gains (losses)	$	(409)	$	4,322	$	230	$	251
Increase (Decrease) in net assets from operations	$	273	$	12,604	$	5,354	$	432
	PTR		SSC		SCV		SC2
	Sub-Account		Sub-Account		Sub-Account		Sub-Account
Income:
Dividend income	$	2,792		155		394		1,315
Realized and Unrealized gains (losses):
Realized gains (losses) on investment transactions:
Realized gains (losses) on sales of fund shares	$	(96)		340		292		(63)
Realized gain distributions		-		1,622		5,691		-
Net realized gains (losses)	$	(96)		1,962		5,983		(63)
Net unrealized appreciation (depreciation) on investments:
End of year	$	709		(192)		1,148		(1,247)
Beginning of year		(1,597)		2,765		6,293		(936)
Change in unrealized appreciation (depreciation)	$	2,306		(2,957)		(5,145)		(311)
Realized and unrealized gains (losses)	$	2,210		(995)		838		(374)
Increase (Decrease) in net assets from operations	$	5,002		(840)		1,232		941

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Operations - Year Ended December 31, 2007 – continued

	SC3		SC5		SC7		SCB
	Sub-Account		Sub-Account		Sub-Account		Sub-Account
Income:
Dividend income	$	966	$	630	$	239	$	-
Realized and Unrealized gains (losses):
Realized gains (losses) on investment transactions:
Realized gains (losses) on sales of fund shares	$	1,100	$	84	$	398	$	18
Realized gain distributions		8,048		9,530		-		422
Net realized gains (losses)	$	9,148	$	9,614	$	398	$	440
Net unrealized appreciation (depreciation) on investments:
End of year	$	(5,577)	$	(5,810)	$	6,868	$	(788)
Beginning of year		13,450		(313)		6,131		22
Change in unrealized appreciation (depreciation)	$	(19,027)	$	(5,497)	$	737	$	(810)
Realized and unrealized gains (losses)	$	(9,879)	$	4,117	$	1,135	$	(370)
Increase (Decrease) in net assets from operations	$	(8,913)	$	4,747	$	1,374	$	(370)
	SCM		TBC		VGI
	Sub-Account (e)		Sub-Account		Sub-Account
Income:
Dividend income	$	7	$	348	$	4
Realized and Unrealized gains (losses):
Realized gains (losses) on investment transactions:
Realized gains (losses) on sales of fund shares	$	(6)	$	973	$	14
Realized gain distributions		49		-		8
Net realized gains (losses)	$	43	$	973	$	22
Net unrealized appreciation (depreciation) on investments:
End of year	$	(133)	$	12,072	$	11
Beginning of year		-		6,313		31
Change in unrealized appreciation (depreciation)	$	(133)	$	5,759	$	(20)
Realized and unrealized gains (losses)	$	(90)	$	6,732	$	2
Increase (Decrease) in net assets from operations	$	(83)	$	7,080	$	6
(e) For the period May 1, 2007 (commencement of operations) through December 31, 2007.

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Changes in Net Assets

	AI4						AL4						AN3						DGO					DMC
	Sub-Account						Sub-Account						Sub-Account						Sub-Account					Sub-Account
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Period Ended			Year Ended		Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,		December 31,			December 31,
	2007			2006			2007			2006			2007			2006			2007 (e)			2006		2007			2006
Operations:
Net investment income	$	169		$	3		$	-		$	-		$	662		$	518		$	-		$	-	$	278		$	198
Net realized gains (losses)		122			41			4,421			3,797			3,371			2,728			(5	)		-		7,615			8,505
Net unrealized gains (losses)		12			36			8,897			(1,127	)		(1,665	)		4,215			(335	)		-		(7,339	)		(4,590	)
Increase (Decrease) in net assets from
operations	$	303		$	80		$	13,318		$	2,670		$	2,368		$	7,461		$	(340	)	$	-	$	554		$	4,113
Contract Owner Transactions:
Purchase payments received	$	419		$	46		$	364		$	398		$	10,046		$	7,994		$	-		$	-	$	13,114		$	10,288
Net transfers between Sub-Accounts and
Fixed Account		41,740			-			36,167			41			1,028			6,933			18,053			-		(1,879	)		13,219
Withdrawals and surrenders		-			-			-			-			(359	)		(35	)		-			-		(495	)		(49	)
Mortality and expense risk charges		(128	)		(2	)		(290	)		(166	)		(362	)		(306	)		(54	)		-		(434	)		(342	)
Charges for life insurance protection and
monthly administration charge		(893	)		(98	)		(1,710	)		(1,101	)		(4,249	)		(3,914	)		(183	)		-		(5,406	)		(5,041	)
Increase (decrease) in net assets from
contract owner activity	$	41,138		$	(54)		$	34,531		$	(828	)	$	6,104		$	10,672		$	17,816		$	-	$	4,900		$	18,075
Increase (decrease) in net assets	$	41,441		$	26		$	47,849		$	1,842		$	8,472		$	18,133		$	17,476		$	-	$	5,454		$	22,188
Net Assets:
Beginning of year	$	259		$	233		$	28,853		$	27,011		$	52,702		$	34,569		$	-		$	-	$	65,407		$	43,219
End of year	$	41,700		$	259		$	76,702		$	28,853		$	61,174		$	52,702		$	17,476		$	-	$	70,861		$	65,407
Unit Transactions:
Beginning of year		15			17			1,893			1,952			4,178			3,206			-			-		4,600			3,276
Purchased		22			5			19			27			759			704			-			-		859			753
Transferred between Sub-Accounts and Fixed
Accumulation Account		2,113			-			2,026			3			67			641			1,061			-		(127	)		968
Withdrawn, surrendered, and redeemed
for contract charges		(51	)		(7	)		(112	)		(89	)		(380	)		(373	)		(15	)		-		(422	)		(397	)
End of year		2,099			15			3,826			1,893			4,624			4,178			1,046			-		4,910			4,600

(e) For the period May 1, 2007 (commencement of operations) through December 31, 2007.

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Changes in Net Assets – continued

	FL4						FL5						FL6						FL7						FL8
	Sub-Account						Sub-Account						Sub-Account						Sub-Account						Sub-Account
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2006			2007			2006			2007			2006			2007			2006			2007			2006
Operations:
Net investment income	$	3,842		$	1,315		$	7,930		$	5,807		$	278		$	295		$	4,034		$	733		$	261		$	104
Net realized gains (losses)		1,812			869			-			-			8,627			2,454			10,737			2,438			446			127
Net unrealized gains (losses)		(424	)		11,268			-			-			(3,847	)		(607	)		4,679			13,585			9,427			2,236
Increase (Decrease) in net assets from
operations	$	5,230		$	13,452		$	7,930		$	5,807		$	5,058		$	2,142		$	19,450		$	16,756		$	10,134		$	2,467
Contract Owner Transactions:
Purchase payments received	$	19,597		$	15,251		$	86,144		$	22,044		$	2,720		$	2,380		$	16,247		$	12,362		$	181		$	181
Net transfers between Sub-Accounts and
Fixed Account		(2,648	)		13,878			(21,862	)		24,354			161			21,852			(564	)		11,197			-			-
Withdrawals and surrenders		(679	)		(67	)		(5	)		-			-			-			(695	)		(70	)		-			-
Mortality and expense risk charges		(653	)		(550	)		(1,005	)		(798	)		(182	)		(139	)		(633	)		(534	)		(298	)		(274	)
Charges for life insurance protection and
monthly administration charge		(8,275	)		(7,572	)		(47,032	)		(39,739	)		(1,359	)		(1,165	)		(8,536	)		(7,250	)		(1,571	)		(1,327	)
Increase (decrease) in net assets from
contract owner activity	$	7,342		$	20,940		$	16,240		$	5,861		$	1,340		$	22,928		$	5,819		$	15,705		$	(1,688	)	$	(1,420	)
Increase (decrease) in net assets	$	12,572		$	34,392		$	24,170		$	11,668		$	6,398		$	25,070		$	25,269		$	32,461		$	8,446		$	1,047
Net Assets:
Beginning of year	$	103,201		$	68,809		$	146,713		$	135,045		$	28,221		$	3,151		$	114,046		$	81,585		$	38,470		$	37,423
End of year	$	115,773		$	103,201		$	170,883		$	146,713		$	34,619		$	28,221		$	139,315		$	114,046		$	46,916		$	38,470
Unit Transactions:
Beginning of year		8,794			6,780			12,875			12,416			1,736			216			7,753			6,542			4,231			4,393
Purchased		1,576			1,422			7,383			1,949			155			159			996			926			18			21
Transferred between Sub-Accounts and Fixed
Accumulation Account		(223	)		1,354			(1,882	)		2,150			8			1,447			(60	)		875			-			-
Withdrawn, surrendered, and redeemed
for contract charges		(781	)		(762	)		(4,107	)		(3,640	)		(86	)		(86	)		(608	)		(590	)		(182	)		(183	)
End of year		9,366			8,794			14,269			12,875			1,813			1,736			8,081			7,753			4,067			4,231

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Changes in Net Assets – continued

	FTI						GS3						GS8						LA1						LA2
	Sub-Account						Sub-Account						Sub-Account						Sub-Account						Sub-Account
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2006			2007			2006			2007			2006			2007			2006			2007			2006
Operations:
Net investment income	$	1,964		$	939		$	557		$	492		$	1		$	2		$	136		$	34		$	172		$	159
Net realized gains (losses)		6,434			1,031			4,338			230			20			23			845			105			5,179			2,562
Net unrealized gains (losses)		5,686			12,944			(5,797	)		4,778			(15	)		1			(922	)		144			(5,399	)		925
Increase (Decrease) in net assets from
operations	$	14,084		$	14,914		$	(902	)	$	5,500		$	6		$	26		$	59		$	283		$	(48	)	$	3,646
Contract Owner Transactions:
Purchase payments received	$	13,790		$	8,323		$	517		$	523		$	-		$	77		$	3,224		$	-		$	1,892		$	1,722
Net transfers between Sub-Accounts and
Fixed Account		1,938			8,578			5,264			41			1			-			5,902			3,230			4,691			41
Withdrawals and surrenders		(364	)		(34	)		-			-			-			-			-			-			-			-
Mortality and expense risk charges		(517	)		(426	)		(300	)		(265	)		(1	)		(1	)		(49	)		(14	)		(214	)		(180	)
Charges for life insurance protection and
monthly administration charge		(6,201	)		(5,350	)		(2,304	)		(1,727	)		(58	)		(66	)		(1,076	)		(728	)		(1,712	)		(1,297	)
Increase (decrease) in net assets from
contract owner activity	$	8,646		$	11,091		$	3,177		$	(1,428	)	$	(58	)	$	10		$	8,001		$	2,488		$	4,657		$	286
Increase (decrease) in net assets	$	22,730		$	26,005		$	2,275		$	4,072		$	(52	)	$	36		$	8,060		$	2,771		$	4,609		$	3,932
Net Assets:
Beginning of year	$	87,292		$	61,287		$	47,571		$	43,499		$	180		$	144		$	2,771		$	-		$	32,953		$	29,021
End of year	$	110,022		$	87,292		$	49,846		$	47,571		$	128		$	180		$	10,831		$	2,771		$	37,562		$	32,953
Unit Transactions:
Beginning of year		3,969			3,384			3,887			4,012			11			11			196			-			2,240			2,214
Purchased		590			425			42			45			-			5			224			-			124			132
Transferred between Sub-Accounts and Fixed
Accumulation Account		72			454			420			4			-			-			396			251			299			3
Withdrawn, surrendered, and redeemed
for contract charges		(298	)		(294	)		(209	)		(174	)		(3	)		(5	)		(76	)		(55	)		(125	)		(109	)
End of year		4,333			3,969			4,140			3,887			8			11			740			196			2,538			2,240

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Changes in Net Assets – continued

	GSS						HYS						MIS					MIT						NWD
	Sub-Account						Sub-Account						Sub-Account					Sub-Account						Sub-Account
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended		Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,		December 31,			December 31,			December 31,			December 31,
	2007			2006			2007			2006			2007 (e)			2006		2007			2006			2007			2006
Operations:
Net investment income	$	891		$	739		$	4,630		$	4,541		$	-		$	-	$	6		$	3		$	-		$	-
Net realized gains (losses)		(51	)		(51	)		(262	)		(234	)		-			-		19			15			10			1
Net unrealized gains (losses)		536			(87	)		(3,222	)		1,436			(17	)		-		(2	)		16			(10	)		3
Increase (Decrease) in net assets from
operations	$	1,376		$	601		$	1,146		$	5,743		$	(17	)	$	-	$	23		$	34		$	-		$	4
Contract Owner Transactions:
Purchase payments received	$	2,061		$	2,061		$	3,805		$	3,805		$	-		$	-	$	328		$	158		$	168		$	43
Net transfers between Sub-Accounts and
Fixed Account		3,306			789			1,630			560			1,818			-		-			-			(1	)		47
Withdrawals and surrenders		(5	)		-			(11	)		-			-			-		-			-			-			-
Mortality and expense risk charges		(125	)		(107	)		(411	)		(374	)		(2	)		-		(3	)		(2	)		(1	)		-
Charges for life insurance protection and
monthly administration charge		(981	)		(921	)		(2,980	)		(2,635	)		(23	)		-		(110	)		(103	)		(77	)		(30	)
Increase (decrease) in net assets from
contract owner activity	$	4,256		$	1,822		$	2,033		$	1,356		$	1,793		$	-	$	215		$	53		$	89		$	60
Increase (decrease) in net assets	$	5,632		$	2,423		$	3,179		$	7,099		$	1,776		$	-	$	238		$	87		$	89		$	64
Net Assets:
Beginning of year	$	16,638		$	14,215		$	61,391		$	54,292		$	-		$	-	$	290		$	203		$	64		$	-
End of year	$	22,270		$	16,638		$	64,570		$	61,391		$	1,776		$	-	$	528		$	290		$	153		$	64
Unit Transactions:
Beginning of year		1,286			1,139			4,107			4,010			-			-		25			20			6			-
Purchased		157			165			248			270			-			-		27			15			15			4
Transferred between Sub-Accounts and Fixed
Accumulation Account		247			64			105			41			178			-		-			-			-			5
Withdrawn, surrendered, and redeemed
for contract charges		(84	)		(82	)		(222	)		(214	)		(2	)		-		(9	)		(10	)		(7	)		(3	)
End of year		1,606			1,286			4,238			4,107			176			-		43			25			14			6

(e) For the period May 1, 2007 (commencement of operations) through December 31, 2007.

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Changes in Net Assets – continued

	TRS				UTS				MVS				OCF				PHY
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
	2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income	$	3	$	-	$	6	$	6	$	962	$	790	$	1	$	1	$	682	$	22
Net realized gains (losses)		4		1		77		24		3,905		2,131		50		13		(5)		-
Net unrealized gains (losses)		(117)		2		55		32		(175)		7,365		235		9		(404)		7
Increase (Decrease) in net assets from
operations	$	(110)	$	3	$	138	$	62	$	4,692	$	10,286	$	286	$	23	$	273	$	29
Contract Owner Transactions:
Purchase payments received	$	168	$	41	$	417	$	121	$	1,279	$	1,279	$	666	$	201	$	200	$	200
Net transfers between Sub-Accounts and
Fixed Account		5,452		47		507		47		763		-		3,505		47		18,966		-
Withdrawals and surrenders		-		-		-		-		-		-		-		-		-		-
Mortality and expense risk charges		(6)		-		(4)		(1)		(350)		(311)		(16)		(2)		(58)		(2)
Charges for life insurance protection and
monthly administration charge		(146)		(30)		(266)		(101)		(2,248)		(1,775)		(352)		(161)		(293)		(94)
Increase (decrease) in net assets from
contract owner activity	$	5,468	$	58	$	654	$	66	$	(556)	$	(807)	$	3,803	$	85	$	18,815	$	104
Increase (decrease) in net assets	$	5,358	$	61	$	792	$	128	$	4,136	$	9,479	$	4,089	$	108	$	19,088	$	133
Net Assets:
Beginning of year	$	61	$	-	$	272	$	144	$	58,587	$	49,108	$	388	$	280	$	361	$	228
End of year	$	5,419	$	61	$	1,064	$	272	$	62,723	$	58,587	$	4,477	$	388	$	19,449	$	361
Unit Transactions:
Beginning of year		4		-		17		12		3,914		3,968		30		24		22		15
Purchased		12		3		23		9		86		100		48		16		12		13
Transferred between Sub-Accounts and Fixed
Accumulation Account		369		4		27		3		47		-		254		4		1,117		-
Withdrawn, surrendered, and redeemed
for contract charges		(10)		(3)		(15)		(7)		(164)		(154)		(26)		(14)		(21)		(6)
End of year		375		4		52		17		3,883		3,914		306		30		1,130		22

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Changes in Net Assets – continued

	PLD				PMB				PRR				PTR				SSC
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
	2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income	$	8,282	$	6,393	$	5,124	$	3,286	$	181	$	14	$	2,792	$	2,293	$	155	$	72
Net realized gains (losses)		(140)		(249)		2,364		966		(6)		8		(96)		147		1,962		1,137
Net unrealized gains (losses)		4,462		(128)		(2,134)		1,378		257		(24)		2,306		(405)		(2,957)		2,049
Increase (Decrease) in net assets from
operations	$	12,604	$	6,016	$	5,354	$	5,630	$	432	$	(2)	$	5,002	$	2,035	$	(840)	$	3,258
Contract Owner Transactions:
Purchase payments received	$	15,993	$	14,112	$	6,319	$	5,169	$	3,588	$	364	$	4,919	$	4,017	$	5,660	$	3,979
Net transfers between Sub-Accounts and
Fixed Account		8,602		12,682		37,658		4,471		1,168		41		2,475		7,271		1,293		4,206
Withdrawals and surrenders		(201)		-		(91)		-		-		-		(137)		(12)		(219)		(24)
Mortality and expense risk charges		(1,191)		(1,032)		(545)		(382)		(22)		(2)		(397)		(344)		(158)		(123)
Charges for life insurance protection and
monthly administration charge		(9,262)		(8,551)		(4,324)		(3,508)		(603)		(180)		(3,651)		(3,560)		(2,541)		(2,047)
Increase (decrease) in net assets from
contract owner activity	$	13,941	$	17,211	$	39,017	$	5,750	$	4,131	$	223	$	3,209	$	7,372	$	4,035	$	5,991
Increase (decrease) in net assets	$	26,545	$	23,227	$	44,371	$	11,380	$	4,563	$	221	$	8,211	$	9,407	$	3,195	$	9,249
Net Assets:
Beginning of year	$	161,199	$	137,972	$	66,977	$	55,597	$	483	$	262	$	54,820	$	45,413	$	24,749	$	15,500
End of year	$	187,744	$	161,199	$	111,348	$	66,977		5,046	$	483	$	63,031	$	54,820	$	27,944	$	24,749
Unit Transactions:
Beginning of year		15,264		13,585		3,211		2,913		39		21		4,561		3,924		1,115		818
Purchased		1,482		1,368		296		265		286		29		402		345		245		193
Transferred between Sub-Accounts and Fixed
Accumulation Account		793		1,242		1,770		232		93		3		198		627		55		210
Withdrawn, surrendered, and redeemed
for contract charges		(979)		(931)		(231)		(199)		(48)		(14)		(337)		(335)		(128)		(106)
End of year		16,560		15,264		5,046		3,211		370		39		4,824		4,561		1,287		1,115

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Changes in Net Assets – continued

	SCV					SC2			SC3				SC5				SC7
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
	2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income	$	394	$	262	$	1,315	$	1,277	$	966	$	946	$	630	$	-		239		241
Net realized gains (losses)		5,983		2,780		(63)		233		9,148		3,777		9,614		5,211		398		152
Net unrealized gains (losses)		(5,145)		4,627		(311)		(207)		(19,027)		13,882		(5,497)		(2,074)		737		4,261
Increase (Decrease) in net assets from
operations	$	1,232	$	7,669	$	941	$	1,303	$	(8,913)	$	18,605	$	4,747	$	3,137	$	1,374	$	4,654
Contract Owner Transactions:
Purchase payments received	$	2,070	$	2,068	$	-	$	-	$	5,883	$	4,424	$	3,392	$	21	$	364	$	362
Net transfers between Sub-Accounts and
Fixed Account		420		41		2,254		-		41		743		18,053		3,277		7,015		41
Withdrawals and surrenders										(217)		(24)
Mortality and expense risk charges		(215)		(184)		(177)		(161)		(330)		(298)		(262)		(175)		(237)		(195)
Charges for life insurance protection and
monthly administration charge		(1,558)		(1,301)		(1,169)		(919)		(3,677)		(3,266)		(2,194)		(1,634)		(1,771)		(1,290)
Increase (decrease) in net assets from
contract owner activity	$	717	$	624	$	908	$	(1,080)	$	1,700	$	1,579	$	18,989	$	1,489	$	5,371	$	(1,082)
Increase (decrease) in net assets	$	1,949	$	8,293	$	1,849	$	223	$	(7,213)	$	20,184	$	23,736	$	4,626	$	6,745	$	3,572
Net Assets:
Beginning of year	$	38,220	$	29,927	$	25,159	$	24,936	$	66,155	$	45,971	$	31,909	$	27,283	$	35,761	$	32,189
End of year	$	40,169	$	38,220	$	27,008	$	25,159	$	58,942	$	66,155	$	55,645	$	31,909	$	42,506	$	35,761
Unit Transactions:
Beginning of year		2,273		2,226		1,837		1,919		2,067		1,996		1,943		1,849		2,574		2,659
Purchased		121		141		-		-		186		161		192		3		25		28
Transferred between Sub-Accounts and Fixed
Accumulation Account		24		3		160		-		2		41		933		208		475		3
Withdrawn, surrendered, and redeemed
for contract charges		(100)		(97)		(96)		(82)		(135)		(131)		(132)		(117)		(139)		(116)
End of year		2,318		2,273		1,901		1,837		2,120		2,067		2,936		1,943		2,935		2,574

See notes to financial statements

Sun Life (N.Y.) Variable Account D

Statements of Changes in Net Assets – continued

	SCB				SCM				TBC				VGI
	Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended		Year Ended		Period Ended		Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
	2007		2006		2007 (e)		2006		2007		2006		2007		2006
Operations:
Net investment income	$	-	$	-	$	7	$	-	$	348	$	146	$	4	$	1
Net realized gains (losses)		440		11		43		-		973		367		22		15
Net unrealized gains (losses)		(810)		23		(133)		-		5,759		3,954		(20)		18
Increase (Decrease) in net assets from
operations	$	(370)	$	34	$	(83)	$	-	$	7,080	$	4,467	$	6	$	34
Contract Owner Transactions:
Purchase payments received	$	182	$	181	$	-	$	-	$	9,874	$	7,699	$	158	$	158
Net transfers between Sub-Accounts and
Fixed Account		4,235		20		1,015		-		19,264		9,113		180		-
Withdrawals and surrenders										(358)		(33)
Mortality and expense risk charges		(15)		(1)		(3)		-		(393)		(275)		(2)		(1)
Charges for life insurance protection and
monthly administration charge		(240)		(101)		(201)		-		(4,523)		(3,805)		(101)		(75)
Increase (decrease) in net assets from
contract owner activity	$	4,162	$	99	$	811	$	-	$	23,864	$	12,699	$	235	$	82
Increase (decrease) in net assets	$	3,792	$	133	$	728	$	-	$	30,944	$	17,166	$	241	$	116
Net Assets:
Beginning of year	$	292	$	159	$	-	$	-	$	51,353	$	34,187	$	238	$	122
End of year	$	4,084	$	292	$	728	$	-	$	82,297	$	51,353	$	479	$	238
Unit Transactions:
Beginning of year		18		11		-		-		3,811		2,782		16		10
Purchased		11		12		-		-		677		616		11		12
Transferred between Sub-Accounts and Fixed
Accumulation Account		244		1		59		-		1,292		740		11		-
Withdrawn, surrendered, and redeemed
for contract charges		(15)		(6)		(12)		-		(363)		(327)		(7)		(6)
End of year		258		18		47		-		5,417		3,811		31		16

(e) For the period May 1, 2007 (commencement of operations) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (N.Y.) Variable Account D

Notes to Financial Statements

(1) Organization

1.Sun Life (N.Y.) Variable Account A (the “Variable Account”), a separate account of Sun Life Insurance and Annuity Company of  New York (the “Sponsor”) was established on April 24, 2003 as a funding vehicle for the variable portion of certain individual variable universal life insurance contracts.  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.

2.The assets of the Variable Account are divided into Sub-Accounts.  Each Sub-Account is invested in shares of a single corresponding investment portfolio of one of the following mutual funds:

3.

4.AIM V.I. International Growth Fund Sub-Account, Alger American Mid Cap Growth Portfolio Sub-Account, AllianceBernstein VP Growth and Income Portfolio Sub-Account, Delaware VIP Growth Opportunities Series Sub-Account, Dreyfus MidCap Stock Portfolio Sub-Account, Fidelity VIP Index 500 Portfolio Sub-Account, Fidelity VIP Money Market Portfolio Sub-Account, Fidelity VIP Contrafund Portfolio Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account, Fidelity VIP Growth Portfolio Sub-Account, Franklin Templeton Foreign Securities Sub-Account, Goldman Sachs Structured US Equity Sub-Account, Goldman Sachs Mid Cap Value Fund Sub-Account, Lord Abbett Growth and Income Portfolio Sub-Account, Lord Abbett Mid-Cap Value Portfolio Sub-Account, MFS/Sun Life Series Trust Government Securities Series Sub-Account, MFS/Sun Life Series Trust High Yield Series Sub-Account, MFS/Sun Life Series Trust Massachusetts Investors Growth Stock Series Sub-Account, MFS/Sun Life Series Trust Massachusetts Investors Trust Series Sub-Account, MFS/Sun Life Series Trust New Discovery Series Sub-Account, MFS/Sun Life Series Trust Total Return Series Sub-Account, MFS/Sun Life Series Trust Utilities Series Sub-Account, MFS/Sun Life Series Trust Value Series Sub-Account, Oppenheimer Capital Appreciation Fund Sub-Account, PIMCO High Yield Portfolio Sub-Account, PIMCO Low Duration Fund Sub-Account, PIMCO Emerging Markets Bond Portfolio Sub-Account, PIMCO Real Return Portfolio Sub-Account, PIMCO Total Return Portfolio Sub-Account, Scudder VIT Small Cap Index Fund Sub-Account, Scudder SVS Dreman Small Cap Value Portfolio Sub-Account, Sun Capital Investment Grade Bond Fund Sub-Account, Sun Capital Real Estate Fund Sub-Account, Sun Capital Blue Chip Mid-Cap Fund Sub-Account, Sun Capital Davis Venture Value Fund  Sub-Account, Sun Capital Oppenheimer Main Street Small Cap Fund Sub-Account, Sun Capital All Cap Fund Sub-Account, T. Rowe Price Blue Chip Growth Portfolio Sub-Account and Van Kampen LIT Growth & Income Portfolio Sub-Account (collectively the “Funds” or “Sub-Accounts”).

5.

6.The Variable Account exists in accordance with the regulations of the New York State Insurance Department.  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.

(2) Significant Accounting Policies

General

7.The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires the Sponsor’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of investment income, realized and unrealized gains or losses during the reporting period.  Actual results could differ from those estimates.

Investment Valuations

8.Investments in the Funds are recorded at their net asset value and are carried at market value.  Transactions are recorded on a trade date basis.  Realized gains and losses on sales of shares of the Funds are determined on the first in, first out basis.  Dividend income and realized gain distributions received by the Sub-Accounts are reinvested in additional Fund shares and are recognized on the ex-distribution date.

Federal Income Tax Status

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. Under existing federal income tax law, investment income and capital gains earned by the Variable Account on contract owner reserves are not currently subject to tax by the contract owner.

Sun Life of Canada (N.Y.) Variable Account D

Notes to Financial Statements - continued

(2) Significant Accounting Policies - continued

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes –an interpretation of FASB Statement No. 109” (“FIN48”).  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109, Accounting for Income Taxes”.  This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  FIN 48 is effective during the first required financial reporting period for fiscal years beginning after December 15, 2006.  The Sub-Accounts adopted FIN 48 on January 1, 2007.  The Sub-Accounts are not responsible for the payment or recording of income taxes and therefore the adoption of FIN 48 did not have an impact on the financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements, but does not change existing guidance as to whether or not an instrument is carried at fair value.

SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be exchanged to sell an asset or transfer a liability in an orderly transaction between market participants.  The statement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (“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 Company 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.  SFAS No. 157 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.  Quantitative and qualitative disclosures will focus on the inputs used to measure fair value for both recurring and non-recurring fair value measurements and the effects of the measurements in the financial statements.

The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007, and are to be applied prospectively, except for changes in fair value measurements that result from the initial application of SFAS No. 157, which are to be recorded as an adjustment to opening retained earnings in the year of adoption.  Sponsor of the Sub-Accounts will adopt SFAS No. 157 effective January 1, 2008 and will apply the provisions of the statement prospectively to assets and liabilities measured and disclosed at fair value.  The adoption of SFAS No. 157 is not expected to have a material impact on the Sub-Account's financial position or results of operations.

(3) Contract Charges and Related Party Transactions

9.

10.The Sponsor sells both a Survivorship Variable Universal Life Insurance Product (“Survivorship Product”) and Single Life Variable Universal Life Products (“Single Life Products”).  The contract charges for these products are as follows:

11.

12.Mortality and Expense Risk – A mortality and expense risk charge based on the value of the Variable Account is deducted at the monthly anniversary date from the contract’s account value, through the reduction of unit values for the mortality and expense risks assumed by the Sponsor.  The maximum deduction is at an effective annual rate of .60%, for policy years one through 10 for the Single Life Products, and policy years one through 15 for the Survivorship Product.  Thereafter, the effective annual rate is .10% for the Single Life Products and .20% for the Survivorship Product, respectively.

13.Administration Charges - For the Single Life Products, a monthly charge of $8 is deducted in all policy years, as well as a monthly charge based on the specified face amount is deducted in the first 10 policy years, and for the first 10 policy years following the effective date of each specified face amount increase.  For the Survivorship 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.  These monthly charges are deducted from each contract’s account value to cover administrative expenses and issuance costs.

Sun Life of Canada (N.Y.) Variable Account D

Notes to Financial Statements - continued

(3) Contract Charges and Related Party Transactions - continued

14.Charges for Life Insurance Protection – A monthly cost of insurance charge is deducted from the contract’s account value to cover anticipated costs of providing insurance coverage.  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 each insured, and will not exceed the guaranteed maximum monthly cost of insurance rates based on the 1980 Commissioner’s Standard Ordinary smoker and non-smoker mortality tables.

15.

16.Sales Charge - The Sponsor deducts a sales charge from premiums at the time of purchase.  For the Single Life Products the current charge is 5.25% of the amount of premium.  The maximum charge is guaranteed not to exceed 7.25%.  For the Survivorship Product, the charge is based on certain factors, including the specified face amount, age, sex, and rating class of the insured.  The current charge is 6% of premiums, and is guaranteed not to exceed 8%.

17.

18.Surrender Charge - A surrender charge may be deducted to cover certain expenses relating to the sale of the contract.  The surrender charge is based on certain factors, including the specified face amount, the insured’s age, sex and rating class. For the 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, the Futurity Protector II and Futurity Accumulator II products, the surrender charge applies to the first 12 and nine years respectively, from the date of policy issuance, or the respective policy years from the effective date of each specified face amount increase.  Surrender charges are deducted and retained by the Sponsor.   These amounts are included in the “Withdrawals and Surrenders” line on the Statement of Changes in Net Assets for each Sub-Account.

19.Massachusetts Financial Services Company is the investment adviser to the MFS/Sun Life Series Trust.  Sun Capital Advisers LLC is the investment adviser to Sun Capital Advisers Trust.  Both are affiliates of the Sponsor and charge management fees at an effective annual rate ranging from .50% to .75% and .50% to .95% of average net asset value, respectively.

 (4) Investment Purchases and Sales

The following table shows the aggregate cost of shares purchased and proceeds from the sales of investments of the Funds for each Sub-Account for the year ended December 31, 2007:

	Purchases		Sales
AIM Variable Insurance Funds, Inc.
V.I. International Growth Fund Sub-Account (AI4)		$                       42,348		$                     1,041
The Alger American Fund
Mid Cap Growth Portfolio Sub-Account (AL4)		40,751		1,940
AllianceBernstein Variable Product Series Fund, Inc.
Growth and Income Portfolio Sub-Account (AN3)		15,011		5,523
Delaware Management Company
VIP Growth Opportunities Series Sub-Account (DGO)		18,053		237
Dreyfus Investment Portfolios
MidCap Stock Portfolio Sub-Account (DMC)		19,907		6,827
Fidelity Variable Insurance Products Fund
Fidelity VIP Index 500 Portfolio Sub-Account (FL4)		21,277		10,093
Fidelity VIP Money Market Portfolio Sub-Account (FL5)		91,071		66,903
Fidelity VIP ContrafundTM Portfolio Sub-Account (FL6)		11,420		1,499
Fidelity VIP Overseas Portfolio Sub-Account (FL7)		27,817		10,133
Fidelity VIP Growth Portfolio Sub-Account (FL8)		481		1,869
Franklin Templeton Variable Insurance Products Trust
Templeton Foreign Securities FundSub-Account (FTI)		22,659		7,570
Goldman Sachs Variable Insurance Trust
VIT Structured US Equity Fund Sub-Account (GS3)		10,133		2,491
Mid Cap Value Fund Sub-Account (GS8)		21		59
Lord Abbett Series Fund, Inc.
Growth & Income Portfolio Sub-Account (LA1)		10,010		1,124
Mid Cap Value Portfolio Sub-Account (LA2)		11,706		1,821

Sun Life of Canada (N.Y.) Variable Account D

Notes to Financial Statements - continued

(4) Investment Purchases and Sales - continued

	Purchases		Sales
MFS/Sun Life Series Trust
Government Securities Series Sub-Account (GSS)		$                        6,117		$                        970
High Yield Series Sub-Account (HYS)		9,643		2,980
Massachusetts Investors Growth Stock Series Sub-Account (MIS)		1,818		25
Massachusetts Investors Trust Series Sub-Account (MIT)		329		108
New Discovery Series Sub-Account (NWD)		170		78
Total Return Series Sub-Account (TRS)		5,627		153
Utilities Series Sub-Account (UTS)		912		252
Value Series Sub-Account (MVS)		6,304		2,403
Oppenheimer Variable Account Funds
Capital Appreciation Fund Sub-Account (OCF)		4,149		345
PIMCO Variable Insurance Trust
High Yield Portfolio Sub-Account (PHY)		19,838		341
Low Duration Portfolio Sub-Account (PLD)		30,933		8,710
Emerging Markets Bond Portfolio Sub-Account (PMB)		50,301		3,968
Real Return Porfolio Sub-Account (PRR)		4,862		538
Total Return Portfolio Sub-Account (PTR)		9,337		3,336
Scudder VIT Funds
Scudder VIT Small Cap Index Fund Sub-Account (SSC)		8,718		2,906
Scudder Variable Series II
SVS Dreman Small Cap Value Portfolio Sub-Account (SCV)		8,507		1,705
Sun Capital Advisers Trust
Sun Capital Investment Grade Bond Fund Sub-Account (SC2)		3,460		1,237
Sun Capital Real Estate Fund Sub-Account (SC3)		15,075		4,361
Sun Capital Blue Chip Mid Cap Fund Sub-Account (SC5)		31,600		2,451
Sun Capital Davis Venture Value Fund Sub-Account (SC7)		7,561		1,951
Sun Capital Oppenheimer Main Street Small Cap Fund Sub-Account (SCB)		4,823		239
Sun Capital All Cap Fund Sub-Account (SCM)		1,071		204
T. Rowe Price Equity Series, Inc.
T.Rowe Price Blue Chip Growth Portfolio Sub-Account (TBC)		28,788		4,576
Van Kampen Life Insurance Trust
LIT Growth & Income Portfolio Sub-Account (VGI)		350		103

Sun Life (N.Y.) Variable Account D

Notes to Financial Statements – continued

(5) Financial Highlights
The summary of units outstanding, unit values, net assets, investment income ratio and the total return for the years in the period ended December 31, is as follows:
	At December 31					For year ended December 31
						Investment		Total
	Units	Unit Value		Net Assets		Income Ratio*		Return **
AI4
December 31,2007	2,099	$	19.8683	$	41,700	0.84	%		14.71	%
December 31,2006	15		17.3200		259	0.96			28.23
December 31,2005	17		13.5100		233	1.96			19.99
December 31,2004	-		-		-	-			-
AL4
December 31,2007	3,826		20.0484		76,702	-			31.55
December 31,2006	1,893		15.2400		28,853	-			10.14
December 31,2005	1,952		13.8400		27,011	-			7.56
December 31,2004 (d)	-		-		-	-			-
AN3
December 31,2007	4,624		13.2284		61,174	1.17			4.82
December 31,2006	4,178		12.6153		52,702	1.16			16.98
December 31,2005	3,206		10.7800		34,569	1.20			4.60
December 31,2004	521		10.3100		5,373	0.04			28.94
DGO
December 31,2007 (e)	1,046		16.7006		17,476	-			(1.88)
DMC
December 31,2007	4,910		14.4327		70,861	0.39			1.50
December 31,2006	4,600		14.2197		65,407	-			0.08
December 31,2005	3,276		13.2000		43,219	0.03			9.17
December 31,2004 (d)	572		12.0900		6,921	0.56			20.89
FL4
December 31,2007	9,366		12.3616		115,773	3.45			5.38
December 31,2006	8,794		11.7349		103,201	1.49			15.61
December 31,2005	6,780		10.1500		68,809	0.98			4.71
December 31,2004	1,075		9.6900		10,418	-			8.05
FL5
December 31,2007	14,269		11.9776		170,883	4.95			5.07
December 31,2006	12,875		11.3954		146,713	4.60			4.77
December 31,2005	12,416		10.8800		135,045	3.37			2.93
December 31,2004	138		10.5700		1,458	0.62			0.58
FL6
December 31,2007	1,813		19.0976		34,619	0.88			17.52
December 31,2006	1,736		16.2522		28,221	1.30			11.59
December 31,2005	216		14.5600		3,151	-			17.56
December 31,2004	-		12.4600		-	-			7.96
FL7
December 31,2007	8,081		17.2402		139,315	3.16			17.20
December 31,2006	7,753		14.7092		114,046	0.74			17.95
December 31,2005	6,542		12.4700		81,585	0.24			18.97
December 31,2004	771		10.4800		8,083	-			11.44
FL8
December 31,2007	4,067		11.5349		46,916	0.61			26.90
December 31,2006	4,231		9.0919		38,470	0.28			6.73
December 31,2005	4,393		8.5200		37,423	-			5.67
December 31,2004	18		8.0600		147	-			(0.25)
(d) For the period August 6, 2004 (commencement of operations) through December 31, 2004.
(e) For the period May 1, 2007 (commencement of operations) through December 31, 2007.

Sun Life (N.Y.) Variable Account D

Notes to Financial Statements – continued

(5) Financial Highlights – continued
	At December 31					For year ended December 31
						Investment		Total
	Units	Unit Value		Net Assets		Income Ratio*		Return **
FTI
December 31,2007	4,333	$	25.3936	$	110,022	1.97	%		15.48	%
December 31,2006	3,969		21.9940		87,292	1.24			21.44
December 31,2005	3,384		18.1100		61,287	0.72			10.17
December 31,2004	290		16.4400		4,771	-			11.69
GS3
December 31,2007	4,140		12.0395		49,846	1.13			(1.64)
December 31,2006	3,887		12.2387		47,571	1.09			12.89
December 31,2005	4,012		10.8400		43,499	1.65			14.34
December 31,2004	-		-		-	-			-
GS8
December 31,2007	8		16.2960		128	0.65			3.20
December 31,2006 (a)	11		15.7901		180	0.90			16.16
December 31,2005	11		13.5900		144	1.43			14.93
December 31,2004 (d)	-		-		-	-			-
LA1
December 31,2007	740		14.6341		10,831	1.68			3.42
December 31,2006 (b)	196		14.1477		2,771	1.52			10.67
LA2
December 31,2007	2,538		14.7973		37,562	0.47			0.59
December 31,2006	2,240		14.7119		32,953	0.53			12.23
December 31,2005	2,214		13.1100		29,021	0.92			14.09
December 31,2004 (d)	-		-		-	-			-
GSS
December 31,2007	1,606		13.8681		22,270	4.72			7.17
December 31,2006	1,286		12.9393		16,638	4.77			3.68
December 31,2005	1,139		12.4800		14,215	4.58			2.30
December 31,2004	116		12.2000		1,414				1.70
HYS
December 31,2007	4,238		15.2339		64,570	7.24			1.90
December 31,2006	4,107		14.9459		61,391	7.91			10.39
December 31,2005	4,010		13.5400		54,292	4.94			2.19
December 31,2004	217		13.2500		2,876				9.42
MIS
December 31,2007 (e)	176		10.1192		1,776				(0.89)
MIT
December 31,2007	43		12.2773		528	1.27			5.93
December 31,2006	25		11.5879		290	0.92			13.30
December 31,2005	20		10.2300		203	1.33			12.65
December 31,2004	-		-		-	-			-
NWD
December 31,2007	14		10.8576		153	-			2.53
December 31,2006 (b)	6		10.5867		64	-			9.29
TRS
December 31,2007	375		14.4521		5,419	0.21			4.35
December 31,2006 (b)	4		13.8535		61	-			10.18
(a) Effective May 1, 2006, Goldman Sachs Mid Cap Value Fund is closed to new premium or transfers.
(b) For the period May 2006 (commencement of operations) through December 31, 2006.
(d) For the period August 6, 2004 (commencement of operations) through December 31, 2004.
(e) For the period May 1, 2007 (commencement of operations) through December 31, 2007.

Sun Life (N.Y.) Variable Account D

Notes to Financial Statements – continued

(5) Financial Highlights – continued
	At December 31					For year ended December 31
						Investment		Total
	Units	Unit Value		Net Assets		Income Ratio*		Return **
UTS
December 31,2007	52	$	20.5326	$	1,064	0.82	%		28.57	%
December 31,2006	17		15.9689		272	2.93			32.28
December 31,2005	12		12.0700		144	1.25			17.82
December 31,2004	-		-		-	-			-
MVS
December 31,2007	3,883		16.1546		62,723	1.55			7.91
December 31,2006	3,914		14.9684		58,587	1.48			20.96
December 31,2005	3,968		12.3800		49,108	0.15			6.05
December 31,2004 (d)	-		-		-	-			-
OCF
December 31,2007	306		14.6226		4,477	0.03			14.15
December 31,2006	30		12.8101		388	0.26			7.95
December 31,2005	24		11.8700		280	-			11.33
December 31,2004 (d)	-		-		-	-			-
PHY
December 31,2007	1,130		17.2179		19,449	7.70			3.54
December 31,2006	22		16.6338		361	6.66			9.10
December 31,2005	15		15.2500		228	6.70			4.13
December 31,2004	7		14.6400		100	4.43			8.47
PLD
December 31,2007	16,560		11.3395		187,744	4.76			7.38
December 31,2006	15,264		10.5606		161,199	4.22			3.98
December 31,2005	13,585		10.1600		137,972	3.17			1.01
December 31,2004 (d)	1,016		10.0500		10,215	0.58			0.55
PMB
December 31,2007	5,046		22.0744		111,348	5.88			5.82
December 31,2006	3,211		20.8600		66,977	5.34			9.28
December 31,2005	2,913		19.0900		55,597	5.43			10.78
December 31,2004	217		17.2300		3,738	2.60			9.61
PRR
December 31,2007	370		13.6509		5,046	4.65			10.62
December 31,2006	39		12.3350		483	4.19			0.72
December 31,2005	21		12.2500		262	3.02			0.84
December 31,2004	-		-		-	-			-
PTR
December 31,2007	4,824		13.0720		63,031	4.81			8.75
December 31,2006	4,561		12.0190		54,820	4.44			3.85
December 31,2005	3,924		11.5700		45,413	3.94			2.45
December 31,2004	242		11.3000		2,737	1.24			4.94
SSC
December 31,2007	1,287		21.7084		27,944	0.58			(2.17)
December 31,2006	1,115		22.1874		24,749	0.35			17.19
December 31,2005	818		18.9300		15,500	0.40			3.99
December 31,2004	140		18.2100		2,540	-			15.65
SCV
December 31,2007	2,318		17.3273		40,169	0.96			3.08
December 31,2006	2,273		16.8134		38,220	0.76			25.06
December 31,2005	2,226		13.4400		29,927	-			12.82
December 31,2004 (d)	-		-		-	-			-

(d) For the period August 6, 2004 (commencement of operations) through December 31, 2004.

Sun Life (N.Y.) Variable Account D

Notes to Financial Statements – continued

(5) Financial Highlights – continued
	At December 31					For year ended December 31
						Investment		Total
	Units	Unit Value		Net Assets		Income Ratio*		Return **
SC2
December 31,2007	1,901	$	14.2092	$	27,008	5.14	%		3.79	%
December 31,2006	1,837		13.6942		25,159	5.15			5.41
December 31,2005	1,919		12.9900		24,936	4.99			0.33
December 31,2004	-		12.7400		-	-			3.24
SC3
December 31,2007	2,120		27.8070		58,942	1.49			(13.13)
December 31,2006	2,067		32.0107		66,155	1.66			38.96
December 31,2005	1,996		23.0400		45,971	2.54			9.67
December 31,2004	146		21.0000		3,072	-			25.15
SC5
December 31,2007	2,936		18.9491		55,645	1.38			15.40
December 31,2006	1,943		16.4196		31,909	-			11.30
December 31,2005	1,849		14.7500		27,283	0.19			9.71
December 31,2004	-		12.6500		-	-			10.11
SC7
December 31,2007	2,935		14.4812		42,506	0.59			4.26
December 31,2006	2,574		13.8930		35,761	0.72			14.77
December 31,2005	2,659		12.1100		32,189	1.51			7.00
December 31,2004	-		11.0300		-	-			2.38
SCB
December 31,2007	258		15.8003		4,084	-			(1.43)
December 31,2006	18		16.0313		292	-			13.60
December 31,2005	11		14.1100		159	-			4.33
December 31,2004	4		13.5300		51	-			9.41
SCM
December 31,2007 (e)	47		15.6196		728	0.85			(9.77)
TBC
December 31,2007	5,417		15.1935		82,297	0.52			12.71
December 31,2006	3,811		13.4763		51,353	0.34			9.67
December 31,2005	2,782		12.2900		34,187	0.18			5.94
December 31,2004 (d)	450		11.6000		5,220	0.87			16.00
VGI
December 31,2007	31		15.2588		479	0.99			2.82
December 31,2006	16		14.8432		238	0.58			16.23
December 31,2005	10		12.7700		122	-			12.21
December 31,2004 (d)	-		-		-	-			-

(d) For the period August 6, 2004 (commencement of operations) through December 31, 2004.

(e) For the period May 1, 2007 (commencement of operations) through December 31, 2007.

* These amounts represent 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. These ratios exclude those expenses that result in the direct reduction 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-Account invests. Balances have been annualized for Sub-Accounts in existence for less than one year.

** These amounts represent the total return for the period indicated, including changes in the value of the underlying fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated, or for the period commencing with the first trade date within the fund to the end of the reporting period.

Sun Life (N.Y.) Variable Account D

Notes to Financial Statements – continued

(6) Tax Diversification Requirements

Under the provisions of Section 817(h) of the Internal Revenue Code (the “Code”), a variable contract, other than a contract issued in connection with certain types of employee benefit plans, is not treated as a life insurance 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 Internal Revenue Service has issued regulations under Section 817(h) of the Code which allows the contract owner to avoid current taxation of both current and built-up earnings of the contract. The Sponsor believes that the Sub-Account satisfies the current requirements of the regulations, and it intends that the Sub-Account will continue to meet such requirements.

Report of Independent Registered Public Accounting Firm

·To the Participants in Sun Life (N.Y.) Variable Account D and the Board of Directors of Sun Life Insurance and Annuity Company of New York (the “Sponsor”):

We have audited the accompanying statements of condition of AIM V. I. International Growth Fund Sub-Account, Alger American Mid Cap Growth Portfolio Sub-Account, AllianceBernstein Variable Product Series Growth and Income Portfolio Sub-Account, Delaware Management Company VIP Growth Opportunities Series, Dreyfus Investment MidCap Stock Portfolio Sub-Account, Fidelity VIP Index 500 Portfolio Sub-Account, Fidelity VIP Money Market Portfolio Sub-Account, Fidelity VIP ContrafundTM Portfolio Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account, Fidelity VIP Growth Portfolio Sub-Account, Franklin Templeton Foreign Securities Fund Sub-Account, Goldman Sachs VIT Structured US Equity Fund Sub-Account, Goldman Sachs Mid Cap Value Fund Sub-Account, Lord Abbett Growth & Income Portfolio Sub-Account, Lord Abbett Mid Cap Value Portfolio Sub-Account, MFS/Sun Life Series Trust Government Securities Series Sub-Account, MFS/Sun Life Series Trust High Yield Series Sub-Account, MFS/Sun Life Series Trust Massachusetts Investors Growth Stock Series Sub-Account, MFS/Sun Life Series Trust Massachusetts Investors Trust Series Sub-Account, MFS/Sun Life Series Trust New Discovery Series Sub-Account, MFS/Sun Life Series Trust Total Return Series Sub-Account, MFS/Sun Life Series Trust Utilities Series Sub-Account, MFS/Sun Life Series Trust Value Series Sub-Account, Oppenheimer Variable Capital Appreciation Fund Sub-Account, PIMCO Variable Insurance Trust High Yield Portfolio Sub-Account, PIMCO Variable Insurance Trust Low Duration Portfolio Sub-Account, PIMCO Variable Insurance Trust Emerging Markets Bond Portfolio Sub-Account, PIMCO Variable Insurance Trust Real Return Portfolio Sub-Account, PIMCO Variable Insurance Trust Total Return Portfolio Sub-Account, Scudder VIT Small Cap Index Fund Sub-Account, Scudder Variable Series II SVS Dreman Small Cap Value Portfolio Sub-Account, Sun Capital Investment Grade Bond Fund Sub-Account, Sun Capital Real Estate Fund Sub-Account, Sun Capital Blue Chip Mid Cap Fund Sub-Account, Sun Capital Davis Venture Value Fund Sub-Account, Sun Capital Oppenheimer Main Street Small Cap Fund Sub-Account, Sun Capital All Cap Fund Sub-Account, T. Rowe Price Blue Chip Growth Portfolio Sub-Account, and Van Kampen LIT Growth & Income Portfolio Sub-Account of Sun Life (N.Y.) Variable Account D (collectively the “Sub-Accounts”), as of December 31, 2007, and the related statements of operations for the year then ended and the statements of changes in net assets for each of the two years in the period then ended. 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, 2007, by correspondence with the custodian. 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, 2007, the results of their operations for the year then ended and the changes in their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

April 18, 2008

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

CONSOLIDATED STATEMENTS OF INCOME

(in thousands)

For the Years Ended December 31,

	2007		2006		2005
Revenues:
Premiums and annuity considerations	$	90,882	$	38,322	$	32,247
Net investment income		94,309		97,365		94,264
Net losses on embedded derivatives		(3,967)		-		-
Net realized investment losses		(3,487)		(6,081)		(4,086)
Fee and other income		26,648		21,083		13,578
Total revenues		204,385		150,689		136,003
Benefits and Expenses:
Interest credited		51,390		56,379		69,641
Policyowner benefits		69,309		29,257		25,663
Amortization of deferred policy acquisition costs and value of business and customer relationships acquired		19,921		18,422		9,491
Other operating expenses		36,417		22,988		23,489
Total benefits and expenses		177,037		127,046		128,284
Income before income tax expense		27,348		23,643		7,719
Income tax expense		8,941		7,410		2,278
Net income	$	18,407	$	16,233	$	5,441

The accompanying notes are an integral part of the consolidated  financial statements.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	December 31, 2007		December 31, 2006
ASSETS
Investments:
Available-for-sale fixed maturities at fair value (amortized cost of $1,318,448 and $1,460,077 in 2007 and 2006, respectively)	$	1,288,568	$	1,463,043
Mortgage loans		170,205		161,292
Policy loans		118		139
Other invested assets		69,138		65,922
Cash and cash equivalents		65,901		54,231
Total investments and cash		1,593,930		1,744,627
Accrued investment income		15,245		15,125
Deferred policy acquisition costs		118,126		85,021
Value of business and customer renewals acquired		16,071		-
Goodwill and other intangible assets		52,488		37,788
Receivable for investments sold		615		1,244
Reinsurance receivable		123,214		5,906
Other assets		21,870		15,146
Separate account assets		929,008		796,827
Total assets	$	2,870,567	$	2,701,684
LIABILITIES
Contractholder deposit funds and other policy liabilities	$	1,285,259	$	1,437,396
Future contract and policy benefits		93,001		54,100
Net deferred income tax liability		1,045		6,953
Payable for investments purchased		635		5,735
Accrued expenses and taxes		21,625		-
Reinsurance payable to affiliate		117,367		-
Other liabilities		107,458		90,517
Separate account liabilities		929,008		796,827
Total liabilities		2,555,398		2,391,528
Commitments and contingencies – Note 19
STOCKHOLDER’S EQUITY
Common stock, $350 par value – 6,001 shares authorized;
6,001 shares issued and outstanding in 2007 and 2006		2,100		2,100
Additional paid-in capital		239,963		239,963
Accumulated other comprehensive (loss) income		(11,924)		1,432
Retained earnings		85,030		66,661
Total stockholder’s equity		315,169		310,156
Total liabilities and stockholder’s equity	$	2,870,567	$	2,701,684

The accompanying notes are an integral part of the consolidated  financial statements.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

For the Years Ended December 31,

	2007		2006		2005
Net income	$	18,407	$	16,233	$	5,441
Other comprehensive (loss) income:
Change in unrealized holding losses on available-for-sale
securities, net of tax and policyholder amounts (1)		(12,676)		(4,375)		(10,760)
Reclassification adjustments of realized investment (gains) losses
into net income (2)		(680)		6,295		(4,211)
Other comprehensive (loss) income		(13,356)		1,920		(14,971)
Comprehensive income (loss)	$	5,051	$	18,153	$	(9,530)

(1)   Net of tax benefit of $6.8 million, $2.4 million and $5.8 million for the years ended December 31, 2007, 2006 and 2005, respectively.

(2)   Net of tax expense (benefit) of $0.4 million, $(3.4) million and $2.3 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The accompanying notes are an integral part of the consolidated financial statements.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(in thousands)

For the Years Ended December 31,

	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholder’s Equity
Balance at December 31, 2004		2,100		239,963		14,483		44,987		301,533
Net income		-		-		-		5,441		5,441
Other comprehensive loss		-		-		(14,971)		-		(14,971)
Balance at December 31, 2005		2,100		239,963		(488)		50,428		292,003
Net income		-		-		-		16,233		16,233
Other comprehensive income		-		-		1,920		-		1,920
Balance at December 31, 2006	$	2,100	$	239,963	$	1,432	$	66,661	$	310,156
Cumulative effect of accounting changes, net of tax		-		-		-		(38)		(38)
Net income		-		-		-		18,407		18,407
Other comprehensive income		-		-		(13,356)		-		(13,356)
Balance at December 31, 2007	$	2,100	$	239,963	$	(11,924)	$	85,030	$	315,169

The accompanying notes are an integral part of the consolidated financial statements.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Years Ended December 31,

	2007		2006		2005
Cash Flows From Operating Activities:
Net income	$	18,407	$	16,233	$	5,441
Adjustments to reconcile net income to net cash provided by
operating activities:
Net amortization of premiums and accretion of discounts		1,782		3,956		7,224
Amortization of deferred policy acquisition costs and value of business and customer renewals acquired		19,921		18,422		9,491
Depreciation and amortization		164		-		-
Net losses on embedded derivatives		3,967		-		-
Net realized investment losses		3,487		6,081		4,086
Interest credited to contractholder deposits		51,390		56,379		69,641
Deferred federal income taxes		290		10,193		(947)
Changes in assets and liabilities:
Additions to deferred policy acquisitions costs and value of business and customer renewals acquired		(56,650)		(23,909)		(9,646)
Accrued investment income		(120)		3,275		844
Net reinsurance receivable/payable		59		(20)		495
Future contract and policy benefits		39,436		3,106		736
Other, net		7,330		(24,855)		29,109
Net cash provided by operating activities		89,463		68,861		116,474
Cash Flows From Investing Activities:
Sales, maturities and repayments of:
Available-for-sale fixed maturities		337,825		757,662		673,665
Mortgage loans		40,526		29,415		7,584
Other invested assets		24		-		-
Purchases of:
Available-for-sale fixed maturities		(205,932)		(549,218)		(568,813)
Mortgage loans		(49,460)		(46,285)		(15,445)
Other invested assets		(3,231)		(65,858)		-
Net change in policy loans		21		49		(35)
Net change in other investments		3,231		65,845		-
Net cash provided by investing activities		123,004		191,610		96,956

Continued on next page

The accompanying notes are an integral part of the consolidated financial statements.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in thousands)

For the Years Ended December 31,

	2007		2006		2005
Cash Flows From Financing Activities
Additions to contractholder deposit funds	$	180,702	$	121,837	$	53,495
Withdrawals from contractholder deposit funds		(388,199)		(382,617)		(255,647)
Other, net		6,700		-		-
Net cash used in financing activities		(200,797)		(260,780)		(202,152)
Net change in cash and cash equivalents		11,670		(309)		11,278
Cash and cash equivalents, beginning of year		54,231		54,540		43,262
Cash and cash equivalents, end of year	$	65,901	$	54,231	$	54,540
Supplemental Cash Flow Information
Income taxes (paid) refunded	$	(67)	$	-	$	274
Interest paid		-		-		-

The accompanying notes are an integral part of the consolidated financial statements.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

1.  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Sun Life Insurance and Annuity Company of New York (“the Company”) engages in the sale of individual and group fixed and variable annuity contracts, individual and group life insurance, group disability, group dental and group stop loss insurance in the State of New York.  These products are distributed through individual insurance agents, financial planners, insurance brokers and broker-dealers to both the tax-qualified and non-tax-qualified markets.  The Company's fixed and variable annuity contracts contain a fixed investment option, where interest is paid at a guaranteed rate for a specified period of time, and withdrawals made before the end of the specified period may be subject to a market value adjustment that can increase or decrease the amount of the withdrawal proceeds (the “fixed investment option period”).

The Company is a direct wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.) (“Sun Life U.S.”).  The Company is also an indirect wholly-owned subsidiary of Sun Life Assurance Company of Canada - U.S. Operations Holdings, Inc. (“SLC - U.S. Ops Holdings”) and is an indirect wholly-owned subsidiary of Sun Life Financial Inc. (“SLF”), a reporting company under the Securities Exchange Act of 1934.  SLF and its subsidiaries are collectively referred to herein as “Sun Life Financial.”

Effective December 31, 2007, the Company entered into a reinsurance agreement with Sun Life Assurance Company of Canada (“SLOC”), an affiliate, under which SLOC will fund a portion of the statutory reserves required by New York Regulation 147, which is substantially similar to Actuarial Guideline 38 (“AXXX reserves”), as adopted by the National Association of Insurance Commissioners (“the NAIC”), attributable to certain individual universal life (“UL”) policies sold by the Company.  Under the agreement, the Company ceded, and SLOC assumed, on a funds withheld 90% coinsurance basis, certain in-force policies at December 31, 2007.  Future new business also will be reinsured under this agreement.

Effective September 27, 2007, Sun Life U.S. provided a full and unconditional guarantee (the “guarantee”) of the Company's obligation related to its contracts’ fixed investment option period for policies currently in-force or sold on or after that date.  The guarantee has relieved the Company of its obligation to file annual, quarterly, and current reports with the Securities and Exchange Commission on Form 10-K, Form 10-Q, and Form 8-K.

Effective May 31, 2007, Sun Life Financial completed its acquisition of Employee Benefits Group (“EBG”) from Genworth Financial, Inc. (“Genworth”).  Also effective May 31, 2007, the Company entered into a series of agreements with Sun Life and Health Insurance Company (U.S.) (“SLHIC”), one of the acquired companies (formerly named Genworth Life and Health Insurance Company), through which the New York issued business of SLHIC was transferred to the Company.  These agreements include a 100% coinsurance agreement for all existing and future new business issued in New York, a renewal rights agreement under which the Company has exclusive rights to renew in-force business assumed under the reinsurance agreement and an administrative service agreement under which the Company has agreed to assume direct responsibility for all sales and administration of existing and new business issued in New York (collectively, “the SLHIC asset transfer”).  These agreements, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” were treated as a transfer of net assets between entities under common control.  The Company paid $40 million of total consideration to SLHIC.  SLHIC transferred assets at a carrying value of approximately $72 million, including $38.7 million of goodwill and other intangibles, as well as policyholder and other liabilities of approximately $32 million to the Company.  The Group Protection Segment of the Company reflects a significant increase in business as a result of these agreements.  These agreements have allowed the Company to expand its product offerings to include group dental insurance.

In 2006, the Company organized a subsidiary, SLNY Private Placement Investment Company I, LLC, to serve as an unregistered variable investment trust in support of the Company's private placement variable universal life and variable annuity business activities.  This trust remains inactive as of December 31, 2007.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

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

General (continued)

The Company had a greater than or equal to 20%, but less than 50%, interest in two variable interest entities (“VIEs”) at December 31, 2007.  The Company is a creditor in one trust and one limited liability company.  The Company’s maximum exposure to loss related to both VIEs is the investments’ carrying value, which was $9.2 million at December 31, 2007.  The investments in these two VIEs mature in October 2009 and May 2017.  As the Company will not absorb a majority of the VIEs’ expected losses or receive a majority of the expected returns, the Company is not required to consolidate these VIEs, in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (revised December 2003)" (“FIN 46(R)”).

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for stock life insurance companies.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  The most significant estimates are those used in determining fair value of financial instruments, goodwill, deferred policy acquisition costs (“DAC”), value of business acquired (“VOBA”), the liabilities for future contract and policyholder benefits and other-than-temporary impairments of investments.  Actual results could differ from those estimates.

Financial Instruments

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

Cash and Cash Equivalents

Cash and cash equivalents include cash, commercial paper, money market investments and short-term bank participations.  All such investments have maturities of three months or less when purchased and are considered cash equivalents for purposes of reporting cash flows.

Investments

The Company accounts for its investments in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.”  At the time of purchase, fixed maturity securities are classified based on the Company's intent as either held-to-maturity, trading or available-for-sale.  In order for a security to be classified as held-to-maturity, the Company must have positive intent and ability to hold the security to maturity.  Securities held to maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts.  Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading.  Trading securities are carried at aggregate fair value with changes in market value reported as a component of net investment income.  Securities that do not meet the held-to-maturity or trading criterion are classified as available-for-sale.  Included with available-for-sale fixed maturities are mortgage-backed securities in the To Be Announced (“TBA”) form.  The Company records TBA purchases on the trade date and the corresponding payable is recorded as an outstanding liability in payable for investments purchased until the settlement date of the transaction.  Available-for-sale securities are carried at fair value with the unrealized gains or losses reported in other comprehensive income.  The Company does not typically invest in trading securities and its investment portfolios at December 31, 2007 and 2006 do not include any fixed maturity trading securities.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

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

Investments (continued)

The Company determines the fair value of its publicly-traded fixed maturities using four primary pricing methods: third-party pricing services, independent dealer quotes, pricing matrices, and pricing models.  Prices are first sought from third-party pricing services; the remaining unpriced securities are priced using one of the remaining three 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 matrices and models to develop a security price based on future expected cash flows discounted at an estimated market rate using collateral performance and vintages.

Structured securities, such as collateralized mortgage obligations (“CMO”), commercial mortgage-backed securities (“CMBS”), and asset-backed securities (“ABS”), are priced using a matrix, fair value model or independent broker quotations.  CMBS securities, which are a subset of the Company's CMO holdings, are priced using the last sale price of the day or a broker quote, if no sales were transacted that day.  Other types of CMO, and ABS, are priced using matrices, models 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, MBS, CMBS, and CMOs.  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.

For privately-placed fixed maturities, fair values are estimated using matrices, which take into account credit spreads for publicly-traded securities of similar credit risk, maturity, prepayment and liquidity characteristics.  A portion of privately-placed fixed maturities are also priced using market prices or dealer quotes.  The fair values of mortgages 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.

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.

The Company performs a monthly analysis on the prices received from third parties to assess if the prices represent a reasonable estimate of the fair value.  The process is both quantitative and qualitative and includes back testing of recent trades, review of key assumptions such as spreads, duration, credit rating, and on-going review of third-party pricing services methodologies.  In the event that a more appropriate fair value is justified, the price received from a third-party pricing services is adjusted accordingly.   The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between knowledgeable, unrelated willing parties using inputs, including estimates and assumptions, a market participant would utilize.

The Company's accounting policy for impairment requires recognition of an other-than-temporary impairment write-down on a security if it is determined that the Company anticipates that it will be unable to recover all amounts due under the contractual obligations of the security.  Additionally, in the event that securities that are expected to be sold before the fair value of the security recovers to amortized cost, an other-than-temporary impairment charge is also taken.

Some structured securities, typically those rated single A or below, are subject to Emerging Issues Task Force Issue No.  99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continued to Be Held by a Transferor in Securitized Financial Assets” (“EITF 99-20”).  EITF 99-20 requires the Company to periodically update its best estimate of cash flows over the life of the security.  In the event that the present value of the estimated cash flows is less than amortized cost, an other-than-temporary impairment charge is recorded.  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.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

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

Investments (continued)

Impairments are classified as either credit-related or interest-related.  The Company categorizes impairments as credit-related if it anticipates that the issuers will be unable to pay all principal and interest amounts due, according to the contractual terms of the security or if the decline in fair value of the security is driven by issuer-specific credit events.  The Company characterizes impairments as interest-related if the depression in fair value of the security was due to changes in interest or general credit spread widening and for which the Company has determined it no longer has the intent or ability to hold a security until recovery to amortized cost.  Once an other-than-temporary impairment charge has been recorded, the Company continues to review the other-than-temporarily impaired securities for additional impairment.  The net realized loss is recorded in the income statement as the difference between the fair value and the amortized cost of the security.

The Company incurred realized losses totaling $4.8 million, $0.8 million and $5.5 million for the years ended December 31, 2007, 2006 and 2005, respectively, for other-than-temporary impairments.  Of the $4.8 million in realized losses for other-than-temporary impairments for the year ended December 31, 2007, all impairments were deemed to be credit-related.

The Company discontinues the accrual of income on its holdings for issuers that are in default.  Investment income would not have increased materially for the years ended December 31, 2007, 2006 and 2005 if these holdings had been performing.

Mortgage loans are stated at unpaid principal balances, net of provisions for estimated losses.  Mortgage loans acquired at a premium or discount are carried at amortized values, net of provisions for estimated losses.  Loans include commercial first mortgage loans and are diversified by property type and geographic area throughout the United States.  Mortgage loans are collateralized by the related properties and generally are no more than 75% of each property’s value at the time that the original loan is made.

A mortgage loan is recognized as impaired when it is probable that the principal or interest is not collectible in accordance with the contractual terms of the loan.  Measurement of impairment is based on the lower of the present value of expected future cash flows discounted at the loan’s effective interest rate, or on the loan’s observable market price.  A specific valuation allowance is established if the fair value of the impaired loan is less than the recorded amount.  Loans are also charged against the allowance when determined to be uncollectible.  The allowance is based on a continuing review of the loan portfolio, past loss experience and current economic conditions, which may affect the borrower’s ability to pay.  While management believes that it uses the best information available to establish the allowance, future adjustments to the allowance may become necessary if economic conditions differ from the assumptions used in making the evaluation.

Policy loans are carried at the amount of the outstanding principal balance.  The loans are collateralized by the respective insurance policy and do not exceed the excess of the net cash surrender value of the policy.

Realized gains and losses on the sales of investments are recognized in operations at the date of sale and are determined using the average cost method.  When an impairment of a specific available-for-sale investment is determined to be other-than-temporary, a realized investment loss is recorded.  Changes in the provision for estimated losses on mortgage loans and real estate are included in net realized investment gains and losses.

Interest income is recorded on the accrual basis. Investments are placed in a non-accrual status when management believes that the borrower's financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of principal and interest is doubtful.  When an investment is placed in non-accrual status, all interest accrued is reversed against current period interest income.  Interest accruals are resumed on such investments only when the investments have performed on a sustained basis for a reasonable period of time and when, in the judgment of management, the investments are estimated to be fully collectible as to both principal and interest.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

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

Deferred Policy Acquisition Costs

Acquisition costs consist of commissions, underwriting and other costs, which vary with and are primarily related to the production of new business.  Acquisition costs related to investment-type contracts, primarily deferred annuity, universal life and guaranteed investment contracts (“GICs”), are deferred and amortized with interest in proportion to the present value of estimated gross profits to be realized over the estimated lives of the contracts.  Estimated gross profits are composed of net investment income, net realized investment gains and losses, life and variable annuity fees, surrender charges, interest credited, policyholder benefits and direct variable administrative expenses.

Estimating future gross profit is a complex process requiring considerable judgment and the forecasting of events into the future based on historical information and actuarial assumptions.  These assumptions are subject to an annual review process.  Changes in any of the assumptions that serve to increase or decrease the estimated future gross profits will cause the amortization of DAC to decrease or increase, respectively, in the current period.  During 2007 and 2006, changes in estimated future gross profits were driven by recent experience and expectations of future performance and are related mainly to changes in lapse assumptions, future growth rates of capital markets assumptions, and expense assumptions.  Changes in these assumptions resulted in (a decrease) an increase in DAC amortization of $(3.3) million and $4.7 million for the years ended December, 31, 2007 and 2006, respectively.

The amortization is reviewed regularly and adjusted, as appropriate, retrospectively when the Company records actual profits and revises its estimate of future gross profits to be realized from this group of products, including realized gains and losses from investments.

Although recovery of DAC is not assured, the Company believes it is more likely than not that all of these costs will be recovered from future profits.  The amount of DAC considered recoverable, however, could be reduced in the near term if the future estimates of gross profits are reduced.

DAC is also adjusted for amounts relating to unrealized investment gains and losses.  This adjustment, net of tax, is included with unrealized investment gains or losses that are recorded in accumulated other comprehensive (loss) income.  DAC was increased (decreased) by $11.8 million and $(0.5) million at December 31, 2007 and 2006, respectively, relating to this adjustment.

Value of Business and Customer Renewals Acquired

VOBA represents the actuarially determined present value of projected future gross profits from the in-force policies included in the SLHIC asset transfer at May 31, 2007.  This amount is amortized in proportion to the projected premium income over the period to the first renewal of the transferred business.

A portion of the assets that were transferred to the Company under the SLHIC asset transfer are the value of customer renewals acquired (“VOCRA”).  VOCRA represents the actuarially determined present value of projected future profits arising from these in-force policies acquired at May 31, 2007 to these policies’ next renewal dates.  This amount is amortized in proportion to the projected premium income over the period from the first renewal date to the end of the projected life of the policies.

Other Assets

Property, equipment, and leasehold improvements, which are included in other assets, are stated at cost, less accumulated depreciation and amortization.  Depreciation is calculated using the straight-line or accelerated method over the estimated useful lives of the related assets, which generally range from 3 to 10 years.  Amortization of leasehold improvements is calculated using the straight-line method over the lesser of the term of the lease or the estimated useful life of the improvements.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

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

Policy Liabilities and Accruals

Future contract and policy benefit liabilities include amounts reserved for future policy benefits payable upon contingent events as well as liabilities for unpaid claims due as of the statement date.  Such liabilities are established in amounts adequate to meet the estimated future obligations of policies in force.

Policy reserves for annuity contracts include liabilities held for group pension and payout annuity payments and liabilities held for product guarantees on variable annuity products, such as guaranteed minimum death benefits (“GMDB”).  Reserves for pension and payout annuity contracts are calculated using the best-estimate interest and decrement assumptions.  Loss recognition testing is done periodically to make sure that these assumptions remain adequate.  For the year ended December 31, 2007, no additional reserves were deemed required as a result of the loss recognition testing.  Reserves for GMDB are calculated according to the methodology of the American Institute of Certified Public Accountants (the “AICPA”) Statement of Position 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts” (“SOP 03-1”), whereby the expected benefits provided by the guarantees are spread over the duration of the contract in proportion to the benefit assessments.

Policy reserves for UL contracts are held for benefit coverages that are not fully provided for in the policy account value.  These include rider coverages and conversions from group policies.

Policy reserves for group life and health contracts are calculated using standard actuarial methods recognized by the American Academy of Actuaries.  For the tabular reserves, discount rates are based on the Company’s earned investment yield and the morbidity and mortality tables used are standard industry tables modified to reflect the Company’s actual experience when appropriate.  In particular, for the Company’s group known claim reserves, the mortality and morbidity tables for the early durations of claims are based exclusively on the Company’s experience, incorporating factors such as age at disability, sex and elimination periods.  These reserves are computed at amounts that, with interest compounded annually at assumed rates, are expected to meet the Company’s future obligations.

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 amount reported is based upon historical experience, adjusted for trends and current circumstances.  Management believes that the recorded liability is sufficient to provide for the associated claims adjustment expenses.  Revisions of these estimates are included in operations in the year such refinements are determined.

Contractholder deposit funds consist of policy values that accrue to the holders of universal life-type contracts and investment-related products such as deferred annuities.  The liabilities consist of deposits received plus interest credited, less accumulated policyholder charges, assessments, partial withdrawals and surrenders.  The liabilities are not reduced by surrender charges.

Revenue and Expenses

Premiums for traditional individual life and annuity products are considered earned revenue when due.  Premiums related to group disability insurance and group stop loss are recognized as earned revenue pro-rata over the contract period.  The unexpired portion of these premiums is recorded as unearned premiums.  Revenue from universal-type and investment-related products includes charges for cost of insurance (mortality), initiation and administration of the policy, and surrender charges.  Revenue is recognized when the charges are assessed, except that any portion of an assessment that relates to services to be provided in future years is deferred and recognized over the period during which the services are provided.

Benefits and expenses related to traditional life, annuity and disability contracts, including group policies, are recognized when incurred in a manner designed to match them with related premium revenue and to spread income recognition over the expected life of the policy.  For universal life-type and investment-type contracts, expenses include interest credited to policyholders’ accounts and death benefits in excess of account values, which are recognized as incurred.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

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

Other Operating Expenses

Operating expenses primarily represent allocated compensation and general and administrative expenses.  Management believes intercompany expenses are calculated on a reasonable basis; however, these amounts may not necessarily be indicative of the costs that would be incurred if the Company operated on a stand-alone basis.

Income Taxes

The Company will participate in a consolidated federal income tax return with Sun Life U.S. and other affiliates for the year ended December 31, 2007.  The Company filed a stand-alone federal income tax return for the years ended December 31, 2006 and 2005.

Deferred income taxes are recognized when assets and liabilities have different values for financial statement and tax reporting purposes, and for other temporary taxable and deductible differences as defined by SFAS No. 109, “Accounting for Income Taxes.”  These differences primarily result from policy reserves, policy acquisition expenses and unrealized gains or losses on investments.

Separate Accounts

The Company has established separate accounts applicable to various classes of contracts providing variable benefits.  Contracts for which funds are invested in separate accounts include variable life insurance and individual qualified and non-qualified variable annuity contracts.  Assets and liabilities of the separate accounts, representing net deposits and accumulated net investment earnings, less fees, held primarily for the benefit of contractholders, are shown as separate captions in the consolidated financial statements.  Assets held in the separate accounts are carried at fair value and the investment risk of such securities is retained by the contractholder.  The activity of the separate accounts is not reflected in the Company’s consolidated financial statements except for: (1) the fees the Company receives, which are assessed periodically and recognized as revenue when assessed; and, (2) the activity related to the GMDB, guaranteed minimum accumulation benefit (“GMAB”) and guaranteed minimum withdrawal benefit (“GMWB”) which is reflected in the Company’s consolidated financial statements and accompanying notes.

ACCOUNTING PRONOUNCEMENTS

New and Adopted Accounting Pronouncements

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which became effective for fiscal years beginning after December 15, 2006.  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  The Company adopted FIN 48 on January 1, 2007, and recognized an increase of $38 thousand in the liability for unrecognized tax benefits (“UTBs”) and related net interest, and an offsetting decrease in its January 1, 2007 balance of retained earnings.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140,” requiring all separately recognized servicing assets and liabilities to be initially measured at fair value and permits entities to choose to either subsequently measure servicing rights at fair value and report changes in fair value in earnings, or amortize servicing rights in proportion to, and over the estimated net servicing income or loss and assess the rights for impairment or the need for an increased obligation.  The option to subsequently measure servicing rights at fair value allows entities which utilize derivative instruments to hedge their servicing rights to account for such hedging relationships at fair value and avoid the complications of hedge accounting under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”  SFAS No. 156 was effective for fiscal years beginning after September 15, 2006.  The adoption of this statement did not have a material impact on the Company’s financial position or results of operations.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

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

ACCOUNTING PRONOUNCEMENTS (CONTINUED)

New and Adopted Accounting Pronouncements (continued)

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statements No. 133 and 140.”  This statement amended SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and resolves issues addressed in SFAS No. 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.”  The Company began applying SFAS No. 155 to all financial instruments acquired, issued or subject to a remeasurement event beginning January 1, 2007.  The election did not have a material impact on the Company’s results of operations.

In September 2005, the AICPA issued Statement of Position 05-1, “Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts” (“SOP 05-1”).  SOP 05-1 provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts.  The adoption of SOP 05-1 on January 1, 2007 did not have a material impact on the Company’s consolidated financial condition and results of operations.

Accounting Standards Not Yet Adopted

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” which permits entities to choose to measure many financial instruments and certain other items at fair value (the “FV option”).  The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 and all interim periods within those fiscal years.

As of January 1, 2008, the Company has adopted the FV option for all available-for-sale fixed maturity securities attributable to certain life, health and annuity products.  At December 31, 2007, such available-for-sale securities had an amortized cost of $1,118 million and a fair value of $1,113 million.  The adoption of the FV option does not relieve the Company from its obligation to monitor those available-for-sale securities that are in an unrealized loss position at December 31, 2007, which the Company will continue to do through its current portfolio monitoring process.

The FV option adoption will result in a cumulative-effect adjustment to the opening balance of retained earnings, accumulated other comprehensive income, DAC, VOBA, deferred tax asset and certain other liabilities.  The Company is currently assessing the impact of the effects of this adoption.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements, but does not change existing guidance as to whether or not an instrument is carried at fair value.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

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

ACCOUNTING PRONOUNCEMENTS (CONTINUED)

Accounting Standards Not Yet Adopted (continued)

SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be exchanged to sell an asset or transfer a liability in an orderly transaction between market participants.  The statement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (“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 Company 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.  SFAS No. 157 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.  Quantitative and qualitative disclosures will focus on the inputs used to measure fair value for both recurring and non-recurring fair value measurements and the effects of the measurements in the financial statements.

The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007, and are to be applied prospectively, except for changes in fair value measurements that result from the initial application of SFAS No. 157, which are to be recorded as an adjustment to opening retained earnings in the year of adoption.  Effective January 1, 2008, the Company adopted SFAS No. 157 and applied the provisions of the statement prospectively to assets and liabilities measured and disclosed at fair value.  The Company is currently assessing the impact of SFAS No. 157 on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”). This statement replaces SFAS No. 141 and establishes the principles and requirements for how the acquirer in a business combination: (a) measures and recognizes the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquired entity, (b) measures and recognizes positive goodwill acquired or a gain from bargain purchase (negative goodwill), and (c) determines the disclosure information that is useful to users of financial statements in evaluating the nature and financial effects of the business combination. Some of the significant changes to the existing accounting guidance on business combinations made by SFAS No. 141(R) include the following:

•   Most of the identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree shall be measured at their acquisition-date fair values rather than SFAS No. 141’s requirement to allocate the cost of an acquisition to individual assets acquired and liabilities assumed based on their estimated fair values;  

•   Acquisition-related costs incurred by the acquirer shall be expensed in the periods in which the costs are incurred rather than included in the cost of the acquired entity;  

•   Goodwill shall be measured as the excess of the consideration transferred, including the fair value of any contingent consideration, plus the fair value of any noncontrolling interest in the acquired entity, over the fair values of the acquired identifiable net assets, rather than measured as the excess of the cost of the acquired entity over the estimated fair values of the acquired identifiable net assets;

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

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

ACCOUNTING PRONOUNCEMENTS (CONTINUED)

Accounting Standards Not Yet Adopted (continued)

•   Contractual pre-acquisition contingencies are to be recognized at their acquisition date fair values and noncontractual pre-acquisition contingencies are to be recognized at their acquisition date fair values only if it is more likely than not that the contingency gives rise to an asset or liability, whereas SFAS No. 141 generally permitted the deferred recognition of pre-acquisition contingencies until the recognition criteria of SFAS No. 5, “Accounting for Contingencies” were met; and  

•   Contingent consideration shall be recognized at the acquisition date rather than when the contingency is resolved and consideration is issued or becomes issuable.

SFAS No. 141(R) is effective for and shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, with earlier adoption prohibited. Assets and liabilities that arose from business combinations with acquisition dates prior to the SFAS No. 141(R) effective date shall not be adjusted upon adoption of SFAS No. 141(R) with certain exceptions for acquired deferred tax assets and acquired income tax positions. The Company expects to adopt SFAS No. 141(R) on January 1, 2009, and has not yet determined the effect of SFAS No. 141(R) on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.”  This statement amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements” (“ARB 51”). Noncontrolling interest refers to the minority interest portion of the equity of a subsidiary that is not attributable directly or indirectly to a parent. SFAS No. 160 establishes accounting and reporting standards that require for-profit entities that prepare consolidated financial statements to: (a) present noncontrolling interests as a component of equity, separate from the parent’s equity, (b) separately present the amount of consolidated net income attributable to noncontrolling interests in the income statement, (c) consistently account for changes in a parent’s ownership interests in a subsidiary in which the parent entity has a controlling financial interest as equity transactions, (d) require an entity to measure at fair value its remaining interest in a subsidiary that is deconsolidated, (e) require an entity to provide sufficient disclosures that identify and clearly distinguish between interests of the parent and interests of noncontrolling owners. SFAS No. 160 applies to all for-profit entities that prepare consolidated financial statements, and affects those for-profit entities that have outstanding noncontrolling interests in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 with earlier adoption prohibited. The Company expects to adopt SFAS No. 160 on January 1, 2009 and has not yet determined the effect of SFAS No. 160 on its consolidated financial statements.

In June 2007, the AICPA issued Statement of Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies” (“SOP 07-1”).  SOP 07-1 provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies (“the Guide”).  This statement also addresses whether the specialized industry accounting principles of the Guide should be retained by a parent company in consolidation or by an investor that has the ability to exercise significant influence over the investment company and applies the equity method of accounting to its investment in the entity.  In addition, SOP 07-1 includes certain disclosure requirements for parent companies and equity method investors in investment companies that retain investment company accounting in the parent company’s consolidated financial statements or the financial statements of an equity method investor.  SOP 07-1 is effective for fiscal years beginning on or after December 15, 2007, with earlier application encouraged; however, in November 2007, the FASB decided to (1) delay indefinitely the effective date of the SOP and (2) prohibit adoption of the SOP for an entity that has not early adopted the SOP.  The Company did not early adopt SOP 07-1.  SOP 07-1 as currently issued is not expected to have a material impact on the Company’s consolidated financial condition or results of operations.

 SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

2. GOODWILL AND OTHER INTANGIBLE ASSET

Goodwill represents the difference between the purchase price paid and the fair value of the net assets acquired in connection with the Company’s business acquisitions.  Goodwill of $37.8 million, allocated to the Company’s Wealth Management Segment, is attributable to the 2002 acquisition of Keyport Benefit Life Insurance Company (“KBL”), which was a wholly-owned subsidiary of Keyport Life Insurance Company.  Goodwill of $7.4 million, allocated to the Company’s Group Protection Segment, is attributable to the SLHIC asset transfer.  Additional information on the Company’s business segments is presented in Note 15.

An intangible asset with a gross carrying amount of $7.5 million and a net amortized balance of $7.3 million, allocated to the Group Protection Segment, is also attributable to the SLHIC asset transfer and represents the value of established distribution channels.  This intangible asset has an estimated useful life of 25 years.  Using a half-year convention and the straight-line method, the Company amortized $149 thousand for this intangible for the year ended December 31, 2007.  The Company estimates amortization of $299 thousand for this intangible for each of the five succeeding fiscal years.

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and indefinite-lived assets are tested for impairment on an annual basis.  The Company completed the required impairment tests during the second quarter of 2007 and concluded that these assets were not impaired.

3. SIGNIFICANT TRANSACTIONS WITH AFFILIATES

The following is a summary of affiliated transactions for those affiliates that are not consolidated in the Company’s financial statements.

The Company has agreements with Sun Life U.S. and certain affiliates, under which the Company receives, as requested, certain investment and administrative services on a cost-reimbursement basis.  Expenses under these agreements amounted to approximately $26.5 million, $14.5 million and $16.0 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The Company had $9.8 million and $1.0 million due to related parties at December 31, 2007 and 2006, respectively, and $16.1 million and $5.6 million due from related parties at December 31, 2007 and 2006, respectively.

During 2007, 2006 and 2005, the Company paid $2.0 million, $1.4 million and $1.0 million, respectively, in commission fees to Sun Life Financial Distributors, Inc.

During the years ended December 31, 2006 and 2005, the Company paid $1.5 million and $2.8 million, respectively, in commission fees to Independent Financial Marketing Group, Inc. (“IFMG”).  Effective November 7, 2007, IFMG was sold by Sun Life Financial and is no longer an affiliate of the Company.  IFMG will continue to distribute the Company’s products.  For that period of time in 2007 for when it was still affiliated, the Company paid $1.0 million in commission fees to IFMG.

During 2007, 2006 and 2005, the Company paid $1.3 million, $1.3 million and 1.5 million, respectively, in investment advisory fees to Sun Capital Advisers LLC, a registered investment adviser.

Effective December 31, 2007, the Company entered into a reinsurance agreement with SLOC, under which SLOC will fund a portion of the AXXX reserves attributable to certain individual UL policies sold by the Company.  Under the agreement, the Company ceded, and SLOC assumed, on a funds withheld 90% coinsurance basis, certain in-force policies at December 31, 2007.  Future new business also will be reinsured under this agreement.  At December 31, 2007, pursuant to this agreement, the Company ceded $63.1 million of policyholder balances, and recorded a funds withheld payable to SLOC of $71.6 million.  The Company also has received from SLOC a ceding commission of $54.2 million and recorded a deferred gain of $45.7 million.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

3. SIGNIFICANT TRANSACTIONS WITH AFFILIATES (continued)

Effective May 31, 2007, Sun Life Financial completed its acquisition of EBG.  Also effective May 31, 2007, the Company entered into a series of agreements with SLHIC, one of the acquired companies, through which the New York-issued business of SLHIC was transferred to the Company.  These agreements include a 100% coinsurance agreement for all existing and future new business issued in New York, a renewal rights agreement under which the Company has exclusive rights to renew in-force business assumed under the reinsurance agreement and an administrative service agreement under which the Company has agreed to assume direct responsibility for all sales and administration of existing and new business issued in New York.  These agreements, in accordance SFAS No. 141, were treated as a transfer of net assets between entities under common control.  The Company paid $40 million of total consideration to SLHIC.  SLHIC transferred assets to the Company at a carrying value of approximately $72 million, including $38.7 million of goodwill and other intangibles, as well as policyholder and other liabilities of approximately $32 million.

As part of the SLHIC asset transfer, the Company received certain intangible assets totaling $31.3 million.  These include the value of distribution, VOBA, and VOCRA.  The value of distribution acquired of $7.5 million is subject to amortization on a straight-line basis over its projected economic life of 25 years.  VOBA of $7.6 million is subject to amortization based upon expected premium income over the period from acquisition to the first customer renewal, which is generally not more than two years.  VOCRA of $16.2 million is subject to amortization based upon expected premium income over the projected life of the inforce business acquired, which is 20 years.  For the year ended December 31, 2007, the Company recorded $0.1 million, $5.9 million, and $1.9 million for amortization of the value of distribution, VOBA, and VOCRA, respectively.

Goodwill and value of distribution related to this transaction also have been presented in Note 2.

As more fully described in Note 9, the Company participates in a pension plan and other post-retirement benefit plans sponsored by Sun Life U.S.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

4. INVESTMENTS

Fixed Maturities

The amortized cost and fair value of the Company’s fixed maturities were as follows (in 000’s):

	December 31, 2007
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available-for-sale fixed maturities:
Non-corporate securities
Asset backed securities	$	23,653	$	75	$	(210)	$	23,518
Collateralized mortgage obligations		74,027		441		(783)		73,685
Mortgage-backed securities		4,780		123		-		4,903
Foreign government and agency securities		3,570		129		-		3,699
U.S. treasury and agency securities		4,999		414		-		5,413
Total non-corporate securities		111,029		1,182		(993)		111,218
Corporate securities
Basic industry		14,169		120		(272)		14,017
Capital goods		80,959		624		(1,379)		80,204
Communications		97,081		1,761		(1,066)		97,776
Consumer cyclical		90,088		445		(3,970)		86,563
Consumer noncyclical		54,292		436		(502)		54,226
Energy		51,459		670		(457)		51,672
Finance		658,821		1,868		(29,468)		631,221
Technology		25,500		40		(405)		25,135
Transportation		12,926		373		(267)		13,032
Utilities		89,372		1,957		(917)		90,412
Other		32,752		355		(15)		33,092
Total corporate securities		1,207,419		8,649		(38,718)		1,177,350
Total available-for-sale fixed maturities	$	1,318,448	$	9,831	$	(39,711)	$	1,288,568

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (continued)

	December 31, 2006
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available-for-sale fixed maturities:
Non-corporate securities
Asset backed securities	$	27,539	$	213	$	(171)	$	27,581
Collateralized mortgage obligations		60,756		129		(514)		60,371
Mortgage-backed securities		47,339		79		(707)		46,711
Foreign government and agency securities		5,662		174		(20)		5,816
U.S. treasury and agency securities		5,897		88		(4)		5,981
Total non-corporate securities		147,193		683		(1,416)		146,460
Corporate securities
Basic industry		8,057		152		(59)		8,150
Capital goods		114,508		1,023		(494)		115,037
Communications		142,346		1,619		(1,573)		142,392
Consumer cyclical		119,327		740		(1,447)		118,620
Consumer noncyclical		39,116		291		(308)		39,099
Energy		43,472		472		(248)		43,696
Finance		691,623		4,892		(2,482)		694,033
Technology		7,000		-		(405)		6,595
Transportation		27,481		331		(53)		27,759
Utilities		97,842		2,202		(1,296)		98,748
Other		22,112		344		(2)		22,454
Total corporate securities		1,312,884		12,066		(8,367)		1,316,583
Total available-for-sale fixed maturities	$	1,460,077	$	12,749	$	(9,783)	$	1,463,043

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (Continued)

The amortized cost and estimated fair value by maturity periods for fixed maturity investments are shown below (in 000’s).  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.

		December 31, 2007
		Amortized Cost		Fair Value
Maturities of available-for-sale fixed securities:
	Due in one year or less	$	76,790	$	76,236
	Due after one year through five years		483,297		474,938
	Due after five years through ten years		365,312		354,804
	Due after ten years		290,589		280,484
	Subtotal – Maturities available-for-sale		1,215,988		1,186,462
ABS, CMO and MBS securities			102,460		102,106
Total – Available-for-sale		$	1,318,448	$	1,288,568

Gross gains of $2.0 million, $3.4 million and $4.6 million, and gross losses of $1.0 million, $10.2 million and $3.2 million were realized on the sale of fixed maturities for the years ended December 31, 2007, 2006 and 2005, respectively.

Fixed maturities with an amortized cost of approximately $0.4 million and $0.5 million at December 31, 2007 and 2006, respectively, were on deposit with governmental authorities as required by law.

As of December 31, 2007 and 2006, 95.8% and 96.2%, respectively, of the Company’s fixed maturities were investment grade.  Investment grade securities are those that are rated “BBB” or better by nationally recognized statistical rating organizations.  The Company incurred realized losses totaling $4.8 million, $0.8 million and $5.5 million for the years ended December 31, 2007, 2006 and 2005, respectively, for other-than-temporary impairments.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (continued)

Overview of the Company's Investment Holdings and Portfolio Monitoring Processes

At December 31, 2007, the Company held $1.6 billion in invested assets and cash.  Of this balance, $1.3 billion was invested in fixed-maturity securities designated as available-for-sale.  Of the $1.3 billion of available-for-sale fixed maturities, securities with a fair value of $913.4 million were in an unrealized loss position totaling $39.7 million.  At December 31, 2007, 90.8% of securities in an unrealized loss position, based on fair value, were securities with fair value to amortized cost percentages of greater than or equal to 90%.  The total unrealized loss position for such securities was $24.3 million.

In the available-for-sale fixed maturity portfolio, securities with a fair value of $54.6 million, representing 3.4% of the total invested asset balance, were comprised of below-investment-grade or not-rated securities.  Of the total of the securities that were below-investment-grade or not-rated at December 31, 2007, securities with a fair value of $27.6 million, representing 1.7% of the total invested asset balance, were in an unrealized loss position that totaled $2.9 million.  At December 31, 2007, 72% of these securities in an unrealized loss position, based on fair value, were securities with fair value to amortized cost percentages of greater than or equal to 90%.

The Company’s portfolio monitoring process is designed to identify securities that may be other-than-temporarily impaired.  The Company has a Credit Committee comprised of professionals from the investment and accounting functions that meets at least quarterly to review individual issues or issuers that may be of concern.  The process involves a quarterly screening of all impaired securities, with particular attention given to identification of those securities whose fair value to amortized cost percentages have been less than 80% for an extended period of time.  Additionally, the Company screens all sales transactions which generated realized losses in excess of $150 thousand and 10% of amortized cost in order to identify identical securities or issuers which the Company continues to hold.  Discrete credit events, such as a ratings downgrade, are also used to identify securities that may be other-than-temporarily impaired.  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 condition 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.  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 fair value will increase enough to recover the Company’s amortized cost but that changes in issuer-specific facts and circumstances require monitoring on a quarterly basis.  As of December 31, 2007, no securities were included on the Company’s Monitor List.

“Watch List” – Management has concluded that the fair value will increase enough to recover the Company’s amortized cost but that changes in issuer-specific facts and circumstances require continued monitoring during the quarter.  As of December 31, 2007, securities with an amortized cost of $11.4 million and a fair value of $10.4 million were included on the Company’s Watch List.  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.

“Impaired List” – Management has concluded that the fair value will not increase enough to recover the Company’s amortized cost and an other-than-temporary impairment charge is recorded to income or the security is sold and a realized loss is recorded as a charge to income.  Impairments are classified as either credit-related or interest-related.  The Company categorizes impairments as credit-related if there are current concerns regarding the issuers’ ability to pay all principal and interest amounts due, according to the contractual terms of the security or if the decline in fair value of the security is driven by issuer-specific credit events.  The Company characterizes impairments as interest-related if the depression in fair value of the security was due to changes in interest or general credit spread widening and for which the Company has determined it no longer has the intent or ability to hold a security until recovery to amortized cost.  For the year ended December 31, 2007, other-than-temporary impairments of $4.8 million were recorded as a charge to income.  Of this balance, all impairments were deemed to be credit-related.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

Overview of the Company's Investment Holdings and Portfolio Monitoring Processes (continued)

At each balance sheet date, management also evaluates securities in an unrealized loss position and determines if the Company has the intent and ability to hold the securities until recovery.  If events or circumstances change, such as unexpected changes in the creditworthiness of the issuer, unanticipated changes in interest rates and/or credit spreads, changes in tax laws or accounting rules, changes in statutory capital requirements, or greater than expected liquidity needs, management will reconsider whether the Company has the intent and ability to hold a security until recovery.  If subsequent to the balance sheet date and due to an unexpected change in circumstances, the Company determines that it no longer intends to hold a security until recovery, a loss is recognized in net income in the period in which the intent to hold to recovery no longer exists.

There are inherent risks and uncertainties in management’s evaluation of securities for other-than-temporary impairment.  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 other-than-temporary impairment.

The Company discontinues accruing income on all of its holdings for issuers that are in default.  Investment income would not have increased materially if these holdings had been performing.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (Continued)

Overview of the Company's Investment Holdings and Portfolio Monitoring Processes (continued)

Unrealized Losses

The following table shows the fair value and gross unrealized losses of the Company’s available-for-sale fixed maturity investments, which were deemed to be temporarily impaired, aggregated by investment category, industry sector, number of securities, and length of time that the individual securities had been in an unrealized loss position at December 31, 2007 (dollar amounts in 000’s):

	Less than Twelve Months			Twelve Months or More			Total
	#	Fair Value	Gross Unrealized Losses	#	Fair Value	Gross Unrealized Losses	#	Fair Value	Gross Unrealized Losses
Non-Corporate Securities
Asset backed securities	-	$                -	$                -	16	$     12,806	$         (210)	16	$     12,806	$         (210)
Collateralized mortgage obligations	7	7,941	(69)	28	31,957	(714)	35	39,898	(783)
Total Non-Corporate	7	7,941	(69)	44	44,763	(924)	51	52,704	(993)
Corporate Securities
Basic industry	5	8,461	(237)	1	962	(35)	6	9,423	(272)
Capital goods	14	52,401	(1,105)	3	7,918	(274)	17	60,319	(1,379)
Communications	15	46,697	(489)	6	7,572	(577)	21	54,269	(1,066)
Consumer cyclical	20	45,627	(2,158)	8	18,374	(1,812)	28	64,001	(3,970)
Consumer noncyclical	4	18,084	(113)	3	5,422	(389)	7	23,506	(502)
Energy	8	27,776	(401)	3	2,078	(56)	11	29,854	(457)
Finance	131	489,555	(25,280)	36	48,825	(4,188)	167	538,380	(29,468)
Technology	4	15,938	(44)	1	6,639	(361)	5	22,577	(405)
Transportation	6	5,557	(237)	1	739	(30)	7	6,296	(267)
Utilities	16	21,624	(251)	11	21,019	(666)	27	42,643	(917)
Other	5	7,393	(1)	1	2,015	(14)	6	9,408	(15)
Total Corporate Securities	228	739,113	(30,316)	74	121,563	(8,402)	302	860,676	(38,718)
Grand Total	235	$    747,054	$     (30,385)	118	$   166,326	$      (9,326)	353	$   913,380	$    (39,711)

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (Continued)

Overview of the Company's Investment Holdings and Portfolio Monitoring Processes (continued)

Unrealized Losses (continued)

The following table shows the fair value and gross unrealized losses of the Company’s available-for-sale fixed maturity investments, which were deemed to be temporarily impaired, aggregated by investment category, industry sector, number of securities, and length of time that the individual securities had been in an unrealized loss position at December 31, 2006 (dollar amounts in 000’s):

	Less than Twelve Months			Twelve Months or More			Total
	#	Fair Value	Gross Unrealized Losses	#	Fair Value	Gross Unrealized Losses	#	Fair Value	Gross Unrealized Losses
Non-Corporate Securities
Asset backed securities	-	$              -	$              -	4	$      8,593	$        (171)	4	$      8,593	$        (171)
Collateralized mortgage obligations	4	6,530	(38)	16	28,111	(476)	20	34,641	(514)
Mortgage-backed securities	8	5,191	(28)	27	30,088	(679)	35	35,279	(707)
Foreign government and agency securities	-	-	-	1	985	(20)	1	985	(20)
U.S. treasury and agency securities	1	315	(3)	1	747	(1)	2	1,062	(4)
Total Non-Corporate	13	12,036	(69)	49	68,524	(1,347)	62	80,560	(1,416)
Corporate Securities
Basic industry	-	-	-	2	1,960	(59)	2	1,960	(59)
Capital goods	4	16,008	(53)	4	15,147	(442)	8	31,155	(495)
Communications	6	16,214	(114)	16	32,831	(1,459)	22	49,045	(1,573)
Consumer cyclical	9	22,117	(223)	15	57,674	(1,224)	24	79,791	(1,447)
Consumer noncyclical	2	3,157	(76)	3	4,567	(231)	5	7,724	(307)
Energy	4	6,636	(116)	3	3,186	(132)	7	9,822	(248)
Finance	27	82,283	(529)	32	66,138	(1,953)	59	148,421	(2,482)
Technology	-	-	-	1	6,595	(405)	1	6,595	(405)
Transportation	2	3,674	(24)	1	793	(29)	3	4,467	(53)
Utilities	9	11,438	(196)	10	27,897	(1,100)	19	39,335	(1,296)
Other	1	2,020	(2)	-	-	-	1	2,020	(2)
Total Corporate	64	163,547	(1,333)	87	216,788	(7,034)	151	380,335	(8,367)
Grand Total	77	$  175,583	$     (1,402)	136	$  285,312	$  (8,381)	213	$  460,895	$     (9,783)

The Company’s available-for-sale fixed maturity gross unrealized loss position as of December 31, 2007 was $29.9 million greater than at December 31, 2006.  The increase in unrealized losses was primarily due to general credit spread widening, partially offset by a decrease in interest rates.  Credit spreads widened primarily due to the deterioration of the sub-prime mortgage market and other liquidity disruptions, impacting the overall credit market.

Deterioration in the U.S. housing market, combined with tightened lending conditions and the market’s flight to quality securities, as well as the increased likelihood of a U.S. recession, also caused credit spreads to widen considerably.  The sectors and industries most significantly impacted include mortgage originators, home builders, financial lenders, residential and commercial mortgage-backed investments, and other structured products, including consumer loan backed investments.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (Continued)

Overview of the Company's Investment Holdings and Portfolio Monitoring Processes (continued)

Unrealized Losses (continued)

The sectors in the Company’s portfolio that recognized the largest unrealized losses were the Finance and Consumer Cyclical sectors.  As of December 31, 2007, there were 167 securities accounting for unrealized losses of $29.5 million in the Finance sector.  Of these unrealized losses, 98.6% were related to investment-grade issues (rated AAA through BBB-).  As of December 31, 2007, there were 28 securities accounting for unrealized losses of $4.0 million in the Consumer Cyclical sector.  Of these unrealized losses, 49.5% were related to investment-grade issues (rated AAA through BBB-).  All securities held at December 31, 2007 were subject to the Company’s portfolio monitoring process.

Because securities issued by the same issuer with different CUSIP numbers typically have different investment characteristics, such as secured or unsecured, shorter or longer maturities, or different interest rates, management’s analyses of unrealized and realized losses are performed at the CUSIP number level.  The Company also considers the credit condition of issuers at the entity level and considers various issues affecting an issuer collectively as facts and circumstances warrant.

Realized Losses

The sales of securities in the year ended December 31, 2007, which were in an unrealized loss position at the time of sale were primarily due to actual liquidity needs that were different from anticipated liquidity needs.  Management responded by selling certain securities that were in an unrealized gain position and by reconsidering the Company’s intent to hold certain securities that were in an unrealized loss position until recovery and selling them at a loss.  The objective of these sales was to keep the portfolio optimally balanced and diversified with respect to asset mix, interest rate risk, yield, duration, and credit quality.

During the year ended December 31, 2007, the Company recorded realized losses totaling $0.6 million on sales of securities with an aggregate fair value of $46.9 million.  The average percentage of selling price to amortized cost was 98.6%.  The largest single trading loss during the year ended December 31, 2007 was $0.2 million.

Mortgage Loans

The Company invests in commercial first mortgage loans throughout the United States.  Investments are diversified by property type and geographic area.  Mortgage loans are collateralized by the related properties and generally are no more than 75% of each property’s value at the time that the original loan is made.

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 loan’s value has been impaired, appropriate losses are recorded.  The Company had no restructured mortgage loans at December 31, 2007 and 2006, respectively.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (Continued)

Mortgage Loans (continued)

Mortgage loans comprise the following property types (in 000’s):

	December 31,
Property Type:	2007		2006
Office building	$	47,284	$	52,777
Residential		1,609		1,700
Retail		79,356		66,564
Industrial/warehouse		32,672		31,842
Other		9,520		8,645
Valuation allowance		(236)		(236)
Total	$	170,205	$	161,292

Mortgage loans comprise the following geographic regions (in 000’s):

	December 31,
Geographic region:	2007		2006
Alabama	$	1,838	$	-
Arizona		6,322		5,485
California		5,579		10,481
Colorado		9,812		5,773
Delaware		-		11,279
Florida		16,151		22,592
Georgia		8,453		7,206
Idaho		578		594
Illinois		1,919		1,987
Indiana		6,722		6,114
Kansas		2,664		2,729
Louisiana		1,475		-
Maryland		9,972		10,345
Massachusetts		486		536
Michigan		3,136		324
Minnesota		528		550
Mississippi		738		770
Missouri		8,266		7,297
Nevada		57		1,184
New Jersey		6,598		9,305
New Mexico		697		-
New York		17,357		15,256
North Carolina		3,018		3,261
Ohio		11,252		9,806
Oregon		994		-
Pennsylvania		10,163		7,360
South Carolina		-		537
Tennessee		2,100		-
Texas		27,725		14,535
Utah		2,292		2,492
Virginia		3,549		3,730
Valuation allowance		(236)		(236)
Total	$	170,205	$	161,292

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (Continued)

Mortgage Loans (continued)

At December 31, 2007, scheduled mortgage loan maturities were as follows (in 000’s):

2008	$	4,699
2009		192
2010		1,027
2011		11,440
2012		5,173
Thereafter		147,674
Total	$	170,205

Actual maturities could differ from contractual maturities because borrowers may have the right to prepay obligations, with or without prepayment penalties, and loans may be refinanced.

The Company has made funding commitments of mortgage loans on real estate and other loans into the future.  The outstanding funding commitments for these mortgages amounted to $3.4 million and $7.8 million at December 31, 2007 and 2006, respectively.

Securities Lending

On May 1, 2006, the Company established a securities lending program which requires the borrower to provide collateral on a daily basis in amounts in excess of 102% of the fair value of the applicable securities loaned.  The Company retains effective control over all loaned securities and, therefore, continues to report such loaned securities as fixed maturities in its consolidated balance sheet.

Cash collateral received on securities lending transactions is reflected in other invested assets with an offsetting liability recognized in other liabilities for the obligation to return the collateral.  The fair value of collateral held and included in other invested assets was $69.1 million and $65.8 million at December 31, 2007 and 2006, respectively.  Fee income earned on securities lending transactions was $0.2 million and $0.1 million for the years ended December 31, 2007 and 2006, respectively.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

5. NET REALIZED INVESTMENT LOSSES

Net realized investment losses consisted of the following for the years ended December 31 (in 000’s):

	2007		2006		2005
Fixed maturities	$	1,028	$	(6,834)	$	1,462
Mortgage loans		(21)		-		-
Short-term investments		18		-		(2)
Other-than-temporary impairments		(4,823)		(771)		(5,546)
Sales of previously impaired assets		311		1,524		-
Total	$	(3,487)	$	(6,081)	$	(4,086)

6. NET INVESTMENT INCOME

Net investment income consisted of the following for the years ended December 31 (in 000’s):

	2007		2006		2005
Fixed maturities	$	84,065	$	88,091	$	87,428
Mortgage loans		11,249		10,017		8,500
Other		266		591		(211)
Gross investment income		95,580		98,699		95,717
Less: Investment expenses		1,271		1,334		1,453
Net investment income	$	94,309	$	97,365	$	94,264

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, “Disclosure about Fair Value of Financial Instruments,” excludes certain insurance liabilities and other non-financial instruments from its disclosure requirements.  The fair value amounts presented herein do not include the expected interest margin (interest earnings over interest credited) to be earned in the future on investment-type products or other intangible items.  Accordingly, the aggregate fair value amounts presented herein do not necessarily represent the underlying value to the Company.  Likewise, care should be exercised in deriving conclusions about the Company's business or financial condition based on the fair value information presented herein.

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at December 31 (in 000’s):

		2007		2006
		Carrying	Estimated	Carrying	Estimated
		Amount	Fair Value	Amount	Fair Value
Financial assets:
	Cash and cash equivalents	$          65,901	$          65,901	$          54,231	$          54,231
	Fixed maturities	1,288,568	1,288,568	1,463,043	1,463,043
	Equity securities	-	-	17	17
	Mortgage loans	170,205	172,128	161,292	162,268
	Policy loans	118	118	139	139
	Separate account assets	929,008	929,008	796,827	796,827
Financial liabilities:
	Contractholder deposit funds and other policy liabilities	1,285,259	1,187,534	1,437,396	1,397,225
	Separate account liabilities	929,008	929,008	796,827	796,827

The following methods were used by the Company in determining the estimated fair value of its financial instruments:

Cash and cash equivalents: The fair values of cash and cash equivalents are estimated to be cost plus accrued interest.

Fixed maturities and equity securities: The Company determines the fair value of its publicly-traded fixed maturities using four primary pricing methods: third-party pricing services, independent dealer quotes, pricing matrices, and pricing models.  Prices are first sought from third-party pricing services; the remaining unpriced securities are priced using one of the remaining three 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 matrices and models to develop a security price based on future expected cash flows discounted at an estimated market rate using collateral performance and vintages.

Structured securities, such as CMO, CMBS, and ABS, are priced using a matrix, fair value model or independent broker quotations.  CMBS securities, which are a subset of the Company's CMO holdings, are priced using the last sale price of the day or a broker quote, if no sales were transacted that day.  Other CMOs and ABS are priced using matrices, models and 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, MBS, CMBS, and CMO.  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 INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

7. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

For privately-placed fixed maturities, fair values are estimated using matrices, which take into account credit spreads for publicly-traded securities of similar credit risk, maturity, prepayment and liquidity characteristics.  A portion of privately-placed fixed maturities are also priced using market prices or dealer quotes.  The fair values of mortgages 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.

The fair value of equity securities are based on quoted market prices.  Equity securities are included as a component of other invested assets.

Mortgage loans: The fair values of mortgage are estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Policy loans: Policy loans are stated at unpaid principal balances, which approximate fair value.

Separate account assets and liabilities: The estimated fair value of assets held in separate accounts is based on quoted market prices.  The fair value of liabilities related to separate accounts is the amount payable on demand, which excludes surrender charges.

Contractholder deposit funds and other policy liabilities: The fair values of the Company’s general account insurance reserves and contractholder deposits under investment-type contracts (insurance, annuity and pension contracts that do not involve mortality or morbidity risks) are estimated using discounted cash flow analyses or surrender values based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for all contracts being valued.  Those contracts that are deemed to have short-term guarantees have a carrying amount equal to the estimated market value.  The fair values of other deposits with future maturity dates are estimated using discounted cash flows.  GMABs and GMWBs are considered to be derivatives under SFAS No. 133, and are included in contractholder deposit funds.  The fair value of the embedded derivatives is calculated stochastically using risk neutral scenarios over a fifty-year projection.  Policyholder assumptions are based on experience studies and industry standards.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

8. 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 from this contingency is unlikely.  The following discussion is organized by the Company’s business segments involved in reinsurance agreements.  Additional information on the Company's business segments is presented in Note 15.

Group Protection Segment

The Company has an agreement with an unrelated company whereby the unrelated company reinsures the mortality risks of the Company’s group life contracts.  Under this agreement, certain group life mortality benefits are reinsured on a yearly- renewable term basis.  The agreement provides that the unrelated company will reinsure amounts in excess of $0.7 million per claim for group life contracts ceded by the Company.

The Company has an agreement with an unrelated company whereby the unrelated company reinsures the morbidity risks of the Company’s group stop loss contracts.  Under this agreement, certain stop loss benefits are reinsured on a yearly-renewable term basis.  The agreement provides that the unrelated company will reinsure specific claims for amounts in excess of $1.0 million per claim for stop loss contracts ceded by the Company.  The retention limit was raised to $1.5 million for policies sold or renewed on or after January 1, 2006.

The Company has an agreement with an unrelated company whereby the unrelated company reinsures the morbidity risks of the Company’s group long-term disability contracts.  Under this agreement, certain long-term disability benefits are reinsured on a yearly-renewable term basis.  The agreement provides that the unrelated company will reinsure amounts in excess of $4 thousand per claim per month for long-term disability contracts ceded by the Company.  The retention limit was raised to $9 thousand per claim per month for claims incurred on or after January 1, 2006.

The Company has an agreement with an unrelated company whereby the unrelated company reinsures 100% of the risks on a quota share basis for certain specific group life and disability policies.

The Company has an agreement, effective May 31, 2007, to assume the net risks of an affiliate, SLHIC, for its New York-issued policies.

The effects of reinsurance were as follows (in 000’s):

		For the Years Ended December 31,
		2007		2006		2005
Premiums and annuity considerations:
	Direct	$	47,194	$	40,773	$	34,863
	Assumed – Affiliated		46,582		-		-
	Ceded – Non-affiliated		2,894		2,451		2,616
Net premiums and annuity considerations		$	90,882	$	38,322	$	32,247
Policyowner benefits:
	Direct	$	43,967	$	31,579	$	27,388
	Assumed – Affiliated		30,018		-		-
	Ceded – Non-affiliated		4,676		2,322		1,725
Net policyowner benefits		$	69,309	$	29,257	$	25,663

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

8. REINSURANCE (Continued)

Group Protection Segment (continued)

The Company is contingently liable for the portion of the policies reinsured under each of its existing reinsurance agreements in the event the reinsurance companies are unable to pay their portion of any reinsured claim.  Management believes that any liability from this contingency is unlikely.  However, to limit the possibility of such losses, the Company regularly evaluates the financial condition of its reinsurers and monitors concentration of credit risk.

The following schedule reflects related party reinsurance information as recorded in income for the year ended December 31, 2007 (in 000's).

	2007
Assumed premiums	$	46,582
Assumed benefits, included in policyowner benefits	$	30,018
Assumed commissions, included in other operating expenses	$	4,583

The Company had no related party reinsurance transactions for the years ended December 31, 2006 or 2005.

Individual Protection Segment

Effective December 31, 2007, the Company entered into a reinsurance agreement with SLOC, under which SLOC will fund a portion of the AXXX reserves attributable to certain individual UL policies sold by the Company.  Under the agreement, the Company ceded, and SLOC assumed, on a funds withheld 90% coinsurance basis, certain in-force policies at December 31, 2007.  Future new business also will be reinsured under this agreement.  At December 31, 2007, pursuant to this agreement, the Company ceded $63.1 million of policyholder balances, and recorded a funds withheld payable to SLOC of $71.6 million.  The Company also has received from SLOC a ceding commission of $54.2 million and recorded a deferred gain of $45.7 million.

9.  RETIREMENT PLANS

Pension Plan

The Company participates in a non-contributory defined benefit pension plan (the “Pension Plan”) that is sponsored by Sun Life U.S., which is directly liable for the related obligations.  Benefits under the Pension Plan are based on years of service and employees’ average compensation.  The Company is allocated a portion of the Pension Plan’s expenses, or allocated a credit if expected return on plan assets exceeds the Pension Plan’s expenses.  The allocated (credit) expenses were $(165) thousand, $(38) thousand and $211 thousand for the years ended December 31, 2007, 2006 and 2005, respectively.  Included in the 2005 allocation is a curtailment charge of $205 thousand related to changes in the Pension Plan.

401(k) Savings Plan

The Company participates in a savings plan that qualifies under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) sponsored by Sun Life U.S. for which substantially all employees of at least age 21 are eligible to participate at date of hire.  Employer contributions are matched up to a specified amount of the employee’s contributions to the 401(k) Plan.  The Company’s portion of this employer contribution was $21 thousand, $45 thousand, and $16 thousand for the years ended December 31, 2007, 2006 and 2005, respectively.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

9.  RETIREMENT PLANS (Continued)

Other Post-Retirement Benefit Plans

The Company participates in a plan sponsored by Sun Life U.S. that provides certain health, dental and life insurance benefits (“post-retirement benefits”) for retired employees and dependents.  Substantially all employees of the participating companies may become eligible for these benefits if they reach normal retirement age, or retire early upon satisfying an alternate age-plus-service condition.  Life insurance benefits are generally set at a fixed amount.  The Company is allocated a portion of these post-retirement benefit plan expenses.  The allocated expenses were $9 thousand, $13 thousand and $8 thousand for the years ended December 31, 2007, 2006 and 2005, respectively.

10. FEDERAL INCOME TAXES

The Company adopted FIN 48 on January 1, 2007.  FIN 48 establishes a comprehensive reporting model which addresses how a business entity should recognize, measure, present and disclose uncertain tax positions that the entity has taken or plans to take on a tax return.

As a result of the implementation of FIN 48, the Company recognized an increase of $38 thousand in the liability for unrecognized tax benefits (“UTBs”) and related net interest, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.  The liability for UTBs related to permanent and temporary tax adjustments, exclusive of interest, was $2.5 million as of December 31, 2007 ($0.6 million as of January 1, 2007).  Of this total, $256 thousand of tax benefits would favorably affect the Company’s effective tax rate if the tax benefits were recognized in the financial statements.  In addition, consistent with the provisions of FIN 48, the Company reclassified $2.3 million of income taxes from deferred tax liabilities to accrued expenses and taxes at December 31, 2007.

The net increase in the tax liability, excluding accrued interest, of $1,966 thousand since the date of adoption resulted from the following (in 000’s):

Balance at January 1, 2007	$            554
Gross increases related to tax positions in prior years	2,464
Gross decreases related to tax positions in prior years	(498)
Gross increases related to tax positions in current year	-
Settlements	-
Close of tax examinations / statutes of limitations	-
Balance at December 31, 2007	$         2,520

The Company records interest and penalties related to income taxes as a component of other income or expense in the consolidated statements of operations.  The Company recognized $38 thousand of net interest and penalties as at January 1, 2007.  During the years ended December 31, 2007, the Company recognized an additional $75 thousand in gross interest and penalties related to UTBs.

While the Company expects the amount of unrecognized tax liabilities to change in the next twelve months, it does not expect the change to have a significant impact on its results of operations or financial position.

The Company’s federal income tax returns are periodically audited by the Internal Revenue Service (“IRS”), and provisions are made in the consolidated financial statements in anticipation of the results of these audits.  In August 2006, the IRS issued a Revenue Agent’s Report for the Company’s tax years 2001 and 2002.  The Company is currently at the Appeals Division of the IRS with respect to the tax years 2001 and 2002.  In the first quarter of 2007, the IRS commenced an examination of the Company’s U.S. federal income tax returns for the tax years 2003 and 2004.  This examination is anticipated to be completed by August 1, 2008.  While the final outcome of the appeal and ongoing tax examinations is not determinable, the Company does not believe that any adjustments would be material to its financial position.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

10. FEDERAL INCOME TAXES (continued)

The Company's accounting records for tax years 2001 through 2007 remain subject to examination by the IRS.

The Company will participate in a consolidated federal income tax return with Sun Life U.S. and other affiliates for the year ended December 31, 2007.  The Company filed a stand-alone federal income tax return for the years ended December 31, 2006 and 2005.  A summary of the components of federal income tax expense (benefit) in the statements of income for the years ended December 31, is as follows (in 000’s):

	2007		2006		2005
Federal income tax expense (benefit):
Current	$	8,651	$	(2,783)	$	3,225
Deferred		290		10,193		(947)
Total federal income tax expense	$	8,941	$	7,410	$	2,278

Federal income taxes attributable to operations are different from the amounts determined by multiplying income before federal income taxes by the statutory federal income tax rate of 35%.  The Company’s effective rate differed from the statutory federal income tax rate as follows (in 000’s):

	2007		2006		2005
Federal income tax expense at statutory rate	$	9,571	$	8,275	$	2,702
Prior year adjustments, including settlements		(208)		(340)		(424)
Separate account dividend received deduction		(438)		(525)		-
Other permanent items		16		-		-
Total federal income tax expense	$	8,941	$	7,410	$	2,278

Net deferred income tax (liabilities) assets represent the tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes.  The components of the Company’s deferred tax assets and liabilities as of December 31 were as follows (in 000’s):

	2007		2006
Deferred tax assets:
Actuarial liabilities	$	31,025	$	4,555
Net operating loss		-		7,954
Investments, net		1,532		762
Total deferred tax assets		32,557		13,271
Deferred tax liabilities:
Deferred policy acquisition costs		(31,110)		(18,836)
Other		(2,492)		(1,388)
Total deferred tax liabilities		(33,602)		(20,224)
Net deferred tax liability	$	(1,045)	$	(6,953)

The Company had a federal income tax payment of $67 thousand for the year ended December 31, 2007.  The Company had no net income tax payments for the year ended December 31, 2006.  The Company received income tax refunds of approximately $274 thousand for the year ended December 31, 2005.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

11. LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES

Activity in the liability for unpaid claims and claims adjustment expenses, which is related to the Company’s stop loss, group life and group disability insurance products is summarized below (in 000’s):

		2007		2006
Balance at January 1		$	36,689	$	33,141
Less: reinsurance recoverable			(5,906)		(5,886)
Net balance at January 1			30,783		27,255
Incurred related to:
	Current year		96,377		26,644
	Prior years		(1,805)		(1,294)
Total incurred			94,572		25,350
Paid losses related to:
	Current year		(47,531)		(14,881)
	Prior years		(8,867)		(6,941)
Total paid			(56,398)		(21,822)
Balance at December 31			74,878		36,689
Less: reinsurance recoverable			(5,921)		(5,906)
Net balance at December 31		$	68,957	$	30,783

The Company regularly updates its estimates of liabilities for unpaid claims and claims adjustment expenses as new information becomes available and events occur which may impact the resolution of unsettled claims.  Changes in prior estimates are recorded in results of operations in the year such changes are determined.

As a result of changes in estimates of insured events in prior years, the liability for unpaid claims and claims adjustment expense decreased by $1.8 million and $1.3 million in 2007 and 2006, respectively.  The favorable development experienced in both years was driven mainly by better than expected loss experience in group life.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

12.  LIABILITIES FOR CONTRACT GUARANTEES

As disclosed in Note 1, the Company records its reserves for GMDBs in accordance with SOP 03-1, whereby the expected benefits provided by the guarantees are spread over the duration of the contract in proportion to the benefit assessments.  The major provisions of SOP 03-1 that affect the Company require:

• Establishment of reserves primarily related to death benefit and income benefit guarantees provided under variable annuity contracts.

• Deferral of sales inducements that meet certain criteria, and amortization using the same method used for DAC.

• Reporting and measuring the Company’s interest in its separate accounts as investments.

The Company offers various guarantees to certain policyholders including a return of no less than (a) total deposits made on the contract adjusted for any customer withdrawals, (b) total deposits made on the contract adjusted for any customer withdrawals plus a minimum return, or (c) the highest contract value on a specified anniversary date minus any customer withdrawals following the contract anniversary.  These guarantees include benefits that are payable in the event of death, upon annuitization, or at specified dates during the accumulation period of an annuity.

The table below represents information regarding the Company’s variable annuity contracts with guarantees at December 31, 2007 (in 000’s):

Benefit Type	Account Balance		Net Amount at Risk (a)		Average Attained Age
Minimum Death	$	1,005,573	$	24,860	63.8
Minimum Accumulation or Withdrawal	$	395,132	$	581	60.7

(a) Net amount at risk represents the difference between the guaranteed benefit and account balance.

The table below represents information regarding the Company’s variable annuity contracts with guarantees at December 31, 2006 (in 000’s):

Benefit Type	Account Balance		Net Amount at Risk (a)		Average Attained Age
Minimum Death	$	895,458	$	31,752	63.8
Minimum Accumulation or Withdrawal	$	232,257	$	6	60.2

(a) Net amount at risk represents the difference between the guaranteed benefit and account balance.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

12.  LIABILITIES FOR CONTRACT GUARANTEES (continued)

The following roll-forward summarizes the reserve for the GMDB for the years ended December 31, (in 000’s):

	2007		2006
Balance at January 1	$	681	$	681
Benefit Ratio Change / Assumption Changes		183		84
Incurred guaranteed benefits		603		840
Paid guaranteed benefits		(806)		(972)
Interest		49		48
Balance at December 31	$	710	$	681

Because the Company has not issued products that contain a guaranteed minimum income benefit (“GMIB”), there was no requirement for a GMIB reserve as of December 31, 2007.

The liability for death benefit guarantees is established equal to a benefit ratio multiplied by the cumulative contract charges earned, plus accrued interest and less contract benefit payments.  The benefit ratio is calculated as the estimated present value of all expected contract benefits divided by the present value of all expected contract charges.  The benefit ratio may be in excess of 100%.  For guarantees in the event of death, benefits represent the current guaranteed minimum death payments in excess of the current account balance.  For guarantees at annuitization, benefits represent the present value of the minimum guaranteed annuity benefits in excess of the current account balance.

Projected benefits and assessments used in determining the liability for guarantees are developed using models and stochastic scenarios that are also used in the development of estimated future gross profits.  Underlying assumptions for the liability related to income benefits include assumed future annuitization elections based upon factors such as eligibility conditions and the annuitant’s attained age.

The liability for guarantees is re-evaluated regularly, and adjustments are made to the liability balance through a charge or credit to policyowner benefits.

GMABs and GMWBs are considered to be derivatives under SFAS No. 133, and are recorded at fair value through earnings.  The fair value of the embedded derivatives is calculated stochastically using risk neutral scenarios over a fifty-year projection.  Policyholder assumptions are based on experience studies.  The net balance of GMABs and GMWBs constituted (a liability) an asset in the amount of $(3.6) million and $0.4 million at December 31, 2007 and 2006, respectively.

13. DEFERRED POLICY ACQUISITION COSTS

The changes in DAC for the years ended December 31 were as follow (in 000’s):

	2007		2006
Balance at January 1	$	85,021	$	80,640
Acquisition costs deferred		32,796		24,163
Amortized to expense during year		(12,138)		(18,422)
Adjustment related to change in unrealized
investment (gains) losses during year		12,447		(1,360)
Balance at December 31	$	118,126	$	85,021

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

14. VALUE OF BUSINESS AND CUSTOMER RENEWALS ACQUIRED

The changes in VOBA and VOCRA for the year ended December 31, 2007 were as follows (in 000's):

	2007
Balance at January 1	$	-
Amount capitalized resulting from the SLHIC asset transfer		23,854
Amortized to expense during the year		(7,783)
Balance at December 31	$	16,071

Additions to VOBA and VOCRA were a result of the SLHIC asset transfer, as described in Note 1.  VOBA transferred was $7.6 million and VOCRA transferred was $16.2 million.

15. SEGMENT INFORMATION

The Company conducts business principally in three operating segments and maintains a Corporate Segment to provide for the capital needs of the three operating segments and to engage in other financing-related activities.  Each segment is defined consistently with the way results are evaluated by the chief operating decision-maker.

Net investment income is allocated based on segmented assets by line of business.  Allocations of operating expenses among segments are made using both standard rates and actual expenses incurred.  Management evaluates the results of the operating segments on an after-tax basis.  The Company does not materially depend on one or a few customers, brokers or agents for a significant portion of its operations.

Effective January 1, 2006, the Company adopted a new capital allocation methodology for measurement of segment operating results to be more closely aligned with rating agency standards.  The changes impact the amount of capital and income on capital that is allocated to the Company’s Wealth Management, Individual Protection and Group Protection Segments from the Corporate Segment.

Wealth Management

The Wealth Management Segment markets, sells and administers fixed and variable annuity products.

Group Protection

The Group Protection Segment markets, sells and administers group life, stop loss, long-term disability and short-term disability, and group dental insurance products.  These products are sold to small and mid-size employers that provide group benefits for their employees.

Individual Protection

The Individual Protection Segment markets, sells and administers universal life insurance, variable universal life insurance and conversions from the Company’s group life product.

Corporate

The Corporate Segment includes the unallocated capital of the Company and items not otherwise attributable to the other segments.

 SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

15. SEGMENT INFORMATION (continued)

The following amounts pertained to the various business segments (in 000’s):

Year ended December 31, 2007
	Wealth		Group		Individual
	Management		Protection		Protection		Corporate		Totals
Total Revenues	$	93,074	$	93,253	$	15,646	$	2,412	$	204,385
Total Expenditures		80,877		93,232		7,019		(4,091)		177,037
Pretax Income		12,197		21		8,627		6,503		27,348
Net Income	$	8,274	$	13	$	5,608	$	4,512	$	18,407
Total Assets	$	2,308,807	$	120,942	$	371,845	$	68,973	$	2,870,567
Year ended December 31, 2006
	Wealth		Group		Individual
	Management		Protection		Protection		Corporate		Totals
Total Revenues	$	97,296	$	39,833	$	8,226	$	5,334	$	150,689
Total Expenditures		86,956		35,356		7,662		(2,928)		127,046
Pretax Income		10,340		4,477		564		8,262		23,643
Net Income	$	7,803	$	2,910	$	366	$	5,154	$	16,233
Total Assets	$	2,357,623	$	80,969	$	123,752	$	139,340	$	2,701,684
Year ended December 31, 2005
	Wealth		Group		Individual
	Management		Protection		Protection		Corporate		Totals
Total Revenues	$	101,854	$	32,604	$	1,366	$	179	$	136,003
Total Expenditures		94,084		32,333		1,899		(32)		128,284
Pretax Income (Loss)		7,770		271		(533)		211		7,719
Net Income (Loss)	$	5,475	$	176	$	(347)	$	137	$	5,441
Total Assets	$	2,649,575	$	55,319	$	10,575	$	1,069	$	2,716,538

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

15. SEGMENT INFORMATION (continued)

As described earlier, effective January 1, 2006, the Company adopted a new capital allocation methodology for measurement of segment operating results to be more closely aligned with rating agency standards.  The following provides a summary of the amounts allocated from the Corporate Segment to the other segments related to the allocation of income on capital for the years presented (in 000’s):

Year ended December 31, 2007
	Wealth		Group		Individual
	Management		Protection		Protection		Corporate		Totals
Pretax income (loss)	$	2,903	$	648	$	3,708	$	(7,259)	$	-
Year ended December 31, 2006
Pretax income (loss)	$	4,401	$	775	$	814	$	(5,990)	$	-
Year ended December 31, 2005
Pretax income (loss)	$	12,379	$	362	$	-	$	(12,741)	$	-

16. REGULATORY FINANCIAL INFORMATION

The Company is required to file quarterly and annual statements with the New York State Insurance Department prepared on a statutory accounting basis prescribed or permitted by the State of New York.  For the years ended December 31, 2007, 2006 and 2005, there were no permitted practices followed.  Statutory net income and capital stock and surplus differ from net income and stockholder’s equity reported in accordance with GAAP for stock life insurance companies primarily because, under statutory basis accounting, policy acquisition costs are expensed when incurred, reserves are based on different assumptions, investments are valued differently, and income tax expense reflects only taxes paid or currently payable.

The Company’s statutory capital and surplus, and net (loss) income were as follows (in 000’s):

	Unaudited for the Years ended December 31,
	2007	2006	2005
Statutory capital and surplus	$      206,952	$      132,693	$      180,009
Statutory net loss	(25,380)	(51,183)	(11,841)

17. DIVIDEND RESTRICTIONS

The Company’s ability to pay dividends is subject to certain statutory restrictions.  The State of New York has enacted laws governing the payment of dividends to stockholders by domestic insurers.  New York law permits a domestic stock life insurance company to distribute a dividend to its shareholders without prior notice to the New York Superintendent of Insurance where the aggregate amount of such dividends in any calendar year does not exceed the lesser of: (i) ten percent of its surplus to policyholders as of the immediately preceding calendar year; or (ii) its net gain from operations for the immediately preceding calendar year, not including realized capital gains.  The Company is permitted to pay dividends up to a maximum of $20.7 million in 2008 without prior approval from the New York Superintendent of Insurance.  No dividends were paid by the Company during 2007, 2006 or 2005.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

18. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The components of accumulated other comprehensive (loss) income as of December 31, were as follows (in 000’s):

	2007		2006		2005
Unrealized (losses) gains on available-for-sale securities	$	(29,880)	$	2,976	$	(1,785)
Changes in reserves due to unrealized (losses) gains on available-for-sale securities		(592)		(452)		(3)
Changes in DAC due to unrealized (losses) gains on available-for-sale securities		11,780		(537)		823
Tax effect and other		6,768		(555)		477
Accumulated other comprehensive (loss) income	$	(11,924)	$	1,432	$	(488)

19. COMMITMENTS AND CONTINGENCIES

Regulatory and Industry Developments

Under the insurance guaranty fund laws of New York, insurers licensed to do business in the State of New York can be assessed by state insurance guaranty associations for certain obligations of insolvent insurance companies to policyholders and claimants.  The insurance guaranty laws of New York provide, however, that an assessment may be excused or deferred if it would threaten an insurer’s insolvency 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.

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 dividends received deduction (the “DRD”) on separate account assets held in connection with variable annuity contracts.  Revenue Ruling 2006-61 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.  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.  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 year ended December 31, 2007, the Company recorded a benefit of $438 thousand 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.

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2007, 2006 and 2005

19. COMMITMENTS AND CONTINGENCIES (Continued)

Indemnities

In the normal course of 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 and certain of its officers and employees in accordance with the Company’s by-laws.  The Company believes any potential liability under these agreements is neither probable nor estimatable.  Therefore, the Company has not recorded any associated liability.

Lease Commitments

The Company leases various facilities and equipment under non-cancelable operating leases with terms of up to 10 years.  As of December 31, 2007, minimum future lease payments under such leases were as follows (in 000’s):

2008	$             283
2009	283
2010	44
Total	$             610

Total rental expense for the years ended December 31, 2007, 2006 and 2005 was $1.5 million, $0.8 million and $1.0 million, respectively.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of

Sun Life Insurance and Annuity Company of New York

Wellesley Hills, Massachusetts

We have audited the accompanying consolidated balance sheets of Sun Life Insurance and Annuity Company of New York and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the related consolidated statements of income, comprehensive income, stockholder’s equity, and cash flows for each of the three years in the period ended December 31, 2007.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on the 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 Company is not required to have, nor were we engaged to perform, an audit of its 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 Company's 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.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Sun Life Insurance and Annuity Company of New York and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2007, the Company adopted the provisions of the Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No.109”.

DELOITTE & TOUCHE LLP

Boston, Massachusetts

April 18, 2008

PART C

ITEM 26.  EXHIBITS

A. Resolution of the Board of Directors of Sun Life Insurance and Annuity Company of New York, dated April 24, 2003, authorizing the establishment of Sun Life (N.Y.) Variable Account D (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-105437, filed with the Securities and Exchange Commission on May 21, 2003.)

B. None.

C. Principal Underwriting Agreement between Sun Life Insurance and Annuity Company of New York and Clarendon Insurance Agency, Inc., dated February 1, 2003 (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-105437, filed with the Securities and Exchange Commission on May 21, 2003.)

D.          (1)   Flexible Premium Combination Fixed and Variable Universal Life Insurance Policy. (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-144626, filed with the Securities and Exchange Commission on July 17, 2007.)

(2)   Charitable Giving Benefit Rider. (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-144626, filed with the Securities and Exchange Commission on July 17, 2007.)

(3)   Payment of Stipulated Premium Rider (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-105437, filed with the Securities and Exchange Commission on May 21, 2003.)

(4)   Waiver of Monthly Deductions Rider. (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-105437, filed with the Securities and Exchange Commission on May 21, 2003.)

(5)   Travel Assistance Endorsement. (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-144626, filed with the Securities and Exchange Commission on July 17, 2007.)

(6)   Loan Lapse Protection Rider. (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-144626, filed with the Securities and Exchange Commission on July 17, 2007.)

(7)   Accelerated Death Benefit Rider (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-105437, filed with the Securities and Exchange Commission on May 21, 2003.)

(8)    Surrender Charge Modification Rider. (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-144626, filed with the Securities and Exchange Commission on July 17, 2007.)

(9)   No Lapse Protection Rider.

E. Application. (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-144626, filed with the Securities and Exchange Commission on July 17, 2007.)

F. Charter and By-Laws of Sun Life Insurance and Annuity Company of New York (Incorporated herein by reference to the Depositor's Quarterly Report on Form 10-Q, File No. 333-01079, filed with the Securities and Exchange Commission on May 14, 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 April 17, 2000, by and among AIM Variable Insurance Funds, Inc., AIM Distributors, Inc., Sun Life Insurance and Annuity Company of New York and Clarendon Insurance Agency, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 23 to the Registration Statement of Sun Life (N.Y.) Variable Account C on Form N-4, Exhibit 8d, File No. 333-67864, filed with the Securities and Exchange Commission on November 6, 2002.)

 (2)     Amended and Restated Participation Agreement, dated December 13, 2004, by and among Sun Capital Advisers Trust, Sun Capital Advisers, Inc., Sun Life Insurance and Annuity Company of New York and Sun Life Assurance Company of Canada (U.S.) (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 8e, File No. 333-83516, filed with the Securities and Exchange Commission on April 28, 2005.)

(3)      Amended and Restated Participation Agreement, dated September 1, 2004, by and among Sun Life Insurance and Annuity Company of New York, Variable Insurance Products Fund and Fidelity Distributors Corporation (Incorporated herein by reference to Post-Effective Amendment No. 1 to the Registration Statement of Sun Life (N.Y.) Variable Account C on Form N-4, Exhibit 8e, File No. 333-119151, filed with the Securities and Exchange Commission on May 2, 2005.)

(4)      Participation Agreement, dated September 1, 2001, by and among Sun Life Insurance and Annuity Company of New York, Clarendon Insurance Agency, Inc., Alliance Capital Management L.P. and Alliance Fund Distributors, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 7 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account F on Form N-4, Exhibit 8l, File No. 333-82957, filed with the Securities and Exchange Commission on July 27, 2001.)

(5)      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.)

(6a)    Participation Agreement, dated February 17, 1998, by and among Sun Life Assurance Company of Canada (U.S.) and Lord, Abbett & Co. (Incorporated herein by reference to Post-Effective Amendment No. 8 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, Exhibit 8i, File No. 333-13087, filed with the Securities and Exchange Commission on April 26, 2002.)

(6b) Amendment 1, dated April 17, 2000, to Participation Agreement by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York and Lord, Abbett & Co. (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account J on Form N-6, Exhibit 6b, File No. 333-136433, filed with the Securities and Exchange Commission on August 9, 2006.)

(7)      Amended and Restated Participation Agreement, dated November 6, 2002,by and among MFS/Sun Life Series Trust, Sun Life Insurance and Annuity Company of New York, Sun Life Assurance Company of Canada (U.S.), and Massachusetts Financial Services Company (Incorporated herein by reference to Post-Effective Amendment No. 3 to the Registration Statement of Sun Life (N.Y.) Variable Account C on Form N-4, Exhibit 8a, File No. 333-107983, filed with the Securities and Exchange Commission on May 28, 2004.)

(8a)    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.)

(8b) Amendment 3, dated April 17, 2000, to the Participation Agreement by and among Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co., 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 16b, File No. 333-136433, filed with the Securities and Exchange Commission on August 9, 2006.)

 (9)      Participation Agreement, dated August 1, 2003, by and among Sun Life Insurance and Annuity Company of New York, Deutsche Asset Management VIT Funds and Deutsche Asset Management, Inc. (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account J on Form N-6, Exhibit H10, File No. 333-136433, filed with the Securities and Exchange Commission on August 9, 2006.)

(10) Participation Agreement, dated September 16, 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.)

(11) Participation Agreement, dated December 31, 2002, by and among Oppenheimer Variable Account Funds, OppenheimerFunds, Inc. and Sun Life Insurance and Annuity Company of New York (Incorporated herein by reference to Post-Effective Amendment No. 3 to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, Exhibit H17, File 333-105438, filed with the Securities and Exchange Commission on May 2, 2005.)

(12)    Participation Agreement, dated August 6, 2004, by and among Sun Life Insurance and Annuity Company of New York, Van Kampen Life Investment Trust, Van Kampen Funds, Inc., Van Kampen Asset Management (Incorporated herein by reference to Post-Effective Amendment No. 3 to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, Exhibit H16, File 333-105438, filed with the Securities and Exchange Commission on May 2, 2005.)

(13) 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.)

20.   (14)           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 Post-Effective Amendment No. 1 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, Exhibit H22, File No. 333-111688, filed with the Securities and Exchange Commission on April 27, 2007.)

21.

(15)    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.)

(16a)   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.)

(16b)  Amendment 1, dated October 1, 2006, to the Participation Agreement by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, Merrill Lynch Variable Series Funds, Inc., Merrill Lynch Investment Managers, L.P. and FAM Distributors, Inc. (Incorporated herein by reference to Post-Effective Amendment 1 to the Registration Statement of Sun Life (N.Y.) Variable Account J on Form N-6, Exhibit 15b, File No. 333-136435, filed with the Securities and Exchange Commission on April 27, 2007.)

I. (1) Administrative Services Agreement  by and between Sun Life Assurance Company of Canada, Sun Life Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York, dated November 21, 2000 (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account D on Form N-6, File No. 333-105437, filed with the Securities and Exchange Commission on May 21, 2003.)

(2)           Amendment No. 1, dated January 1, 2002, to the Administrative Services Agreement by and between Sun Life Assurance Company of Canada, Sun Life Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York, dated November 21, 2000.  (Incorporated herein by reference to Post-Effective Amendment No. 1 to the Registration Statement on Form N-4, File No. 333-119151, filed with the Securities and Exchange Commission on April 28, 2005.)

(3)           Third Party Administration Agreement between Sun Life Insurance and Annuity Company of New York and McCamish Systems, LLC.  (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-6, File No. 333-144626, filed with the Securities and Exchange Commission on April 28, 2008.)

J.            (1) Powers of Attorney.  (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-6, File No. 333-144626, filed with the Securities and Exchange Commission on April 28, 2008.)

(2) Resolution of the Board of Directors of the Depositor dated July 24, 2003, authorizing the use of Powers of Attorney for Officer signatures. (Incorporated herein by reference to Post-Effective Amendment No. 3 to the Registration Statement of Keyport Variable Account A on Form N-4, File No. 333-100475, filed with the Securities and Exchange Commission on April 23, 2004.)

K. Legal Opinion.

L.           None.

M.           None.

N. Consent of Registered Independent Accounting Firm.

O.           None.

P.           None.

Q.           None.

ITEM 27.  DIRECTORS AND OFFICERS OF THE DEPOSITOR

Name and Principal Business Address Positions and Offices With Depositor

Thomas A. Bogart Sun Life Assurance Company of Canada 150 King Street West Toronto, ON  M5H 1J9	Director
Scott M. Davis Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA  02481	Director and Senior Vice President and General Counsel
Ronald H. Friesen Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA  02481	Director and Senior Vice President and Chief Financial Officer and Treasurer
Leila Heckman Bear Stearns Asset Management 383 Madison Avenue New York, NY  10179	Director
Donald B. Henderson, Jr. Dewey & LeBoeuf, L.L.P. 125 West 55th Street New York, NY  10019	Director
Peter R. O’Flinn 344 Cream Hill Road West Cornwall, CT  06796	Director
Barbara Z. Shattuck Shattuck Hammond Partners LLC 630 Fifth Avenue, Suite 2950 New York NY  10019	Director
David K. Stevenson 47 Village Avenue, Unit 301 Dedham, MA  02026	Director
Robert C. Salipante Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Director and Chairman and President
James M.A. Anderson Sun Life Assurance Company of Canada 150 King Street West Toronto, Ontario Canada M5H 1J9	Executive Vice President and Chief Investment Officer
Keith Gubbay Sun Life Assurance Company of Canada  (U.S.) One Sun Life Executive Park Wellesley Hills, MA  02481	Director and Senior Vice President and Chief Actuary
Michael S. Bloom Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Assistant Vice President and Senior Counsel and Secretary
Michael E. Shunney Sun Life Assurance Company of Canada  (U.S.) One Sun Life Executive Park Wellesley Hills, MA  02481	Director and Senior Vice President and General Manager, Sun Life Financial Distribution Group
Michele G. Van Leer Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Director and Senior Vice President and General Manager, Retail Insurance and Annuity Division
Maura E. Slattery Machold Sun Life Assurance Company of Canada  (U.S.) One Sun Life Executive Park Wellesley Hills, MA  02481	Vice President, Human Resources
John R. Wright Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Executive Vice President, Sun Life Financial U.S. Operations
Janet Whitehouse Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Director and Senior Vice President and General Manager, Employee Benefits Group

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 Insurance and Annuity Company of New York, a wholly-owned subsidiary of Sun Life of Canada (U.S.),which is ultimately controlled by Sun Life Financial.

The organization chart of Sun Life Financial is incorporated by reference to Post-Effective Amendment No. 25 to the Registration Statement on Form N-6 of Sun Life of Canada (U.S.) Variable Account F, File No. 333-83516, filed February 12, 2008.

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 Insurance and Annuity Company of New York.

ITEM 29.  INDEMNIFICATION

Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Sun Life Insurance and Annuity Company of New York pursuant to the certificate of incorporation, by-laws, or otherwise, Sun Life (N.Y.) 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 (N.Y.) of expenses incurred or paid by a director, officer, controlling person of Sun Life (N.Y.) 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 (N.Y.) will, unless in the opinion of their counsel that matter has been settled by controlling precedent,  submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Act 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, I and K, Keyport Variable Account A, KMA Variable Account, Keyport Variable Account I, KBL Variable Account A, KBL Variable Annuity Account, Sun Life (N.Y.) Variable Accounts A, B, C, J and N and Money Market Variable Account, High Yield Variable Account, Capital Appreciation Variable Account, Government Securities Variable Account, World Governments Variable Account, Total Return Variable Account and Managed Sectors Variable Account.

(b)

Name and Principal	Position and Offices
Business Address*	with Underwriter
James J. Cahill	President
Scott M. Davis	Director
Michele G. Van Leer	Director
Ronald H. Friesen	Director
Ann B. Teixeira	Assistant Vice President, Compliance
Michael S. Bloom	Secretary
Kathleen T. Baron	Chief Compliance Officer
Michael L. Gentile	Vice President
William T. Evers	Assistant Vice President and Senior Counsel
Jane F. Jette	Financial/Operations Principal and Treasurer
Alyssa M. Gair	Assistant Secretary
Michelle D’Albero	Counsel

* The principal business address of all directors and officers of the principal underwriter is One Sun Life Executive Park, 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 Insurance ad Annuity Company of New York, in whole or in part, at its Home Office at 60 East 42nd Street, Suite 1115, New York, New York 10165, at the offices of Clarendon Insurance Agency, Inc., at One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481 or at the offices of Sun Life Assurance Company of Canada (U.S.), at One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.

ITEM 32.  MANAGEMENT SERVICES

Not applicable.

ITEM 33.  FEE REPRESENTATION

Sun Life Insurance and Annuity Company of New York 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 Insurance and Annuity Company of New York.

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 for effectiveness of this Post-Effective Amendment to the Registration Statement and has 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 12th day of September, 2008.

SUN LIFE (N.Y.) VARIABLE ACCOUNT D

(Registrant)

SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK

(Depositor)

By: /s/ Robert C. Salipante

Robert C. Salipante

President

Attest:	/s/ Sandra M. DaDalt
	Sandra M. DaDalt
	Assistant Vice President & Senior Counsel
As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities with the Depositor, Sun Life Insurance and Annuity Company of New York, and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ Robert C. Salipante	President and Chairman and Director	September 12, 2008
Robert C. Salipante	(Principal Executive Officer)
/s/ Ronald H. Friesen	Senior Vice President and Chief Financial	September 12, 2008
Ronald H. Friesen	Officer and Treasurer and Director
	(Principal Financial Officer)
/s/ Michael K. Moran	Vice President and Chief Accounting Officer	September 12, 2008
Michael K. Moran
	(Principal Accounting Officer)
By:  /s/ Sandra M. DaDalt	Attorney-in-Fact for:	September 12, 2008
Sandra M. DaDalt
	Keith Gubbay, Director
	Janet Whitehouse, Director
	Donald B. Henderson, Jr., Director
	Peter R. O’Flinn, Director
	David K. Stevenson, Director
	Barbara Z. Shattuck, Director
	Leila Heckman, Director
	Thomas A. Bogart, Director
	Scott M. Davis, Director
	Michele G. Van Leer, Director

*Sandra M. DaDalt has signed this document on the indicated date on behalf of the above Directors and Officers of 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 Board of Directors is incorporated herein by reference to Post-Effective Amendment No. 3 to the Registration Statement on Form N-4 (File No. 333-100475) filed on April 23, 2004.

EXHIBIT INDEX

D9	Rider
K	Legal Opinion
N	Consent of Independent Registered Public Accounting Firm