UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

             |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2001

                         Commission File Number: 1-15607

                      JOHN HANCOCK FINANCIAL SERVICES, INC.
                Exact name of registrant as specified in charter

            DELAWARE                                     04-3483032
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                               John Hancock Place
                           Boston, Massachusetts 02117
                    (Address of principal executive offices)

                                 (617) 572-6000
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

      Number of shares outstanding of our only class of common stock as of
August 3, 2001:

                                   303,793,015
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                           CONSOLIDATED BALANCE SHEETS

                                                          June 30,
                                                            2001    December 31,
                                                        (Unaudited)     2000
                                                         ----------------------
                                                             (in millions)
Assets

Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
   (fair value: 2001--$1,885.8; 2000--$11,651.2) ....... $ 1,909.8    $11,888.6
   Available-for-sale--at fair value
   (cost: 2001--$30,473.3; 2000--$15,829.7) ............  30,760.0     16,061.9
   Trading securities--at fair value
   (cost: 2001--$17.3) .................................      17.1           --
Equity securities:
   Available-for-sale--at fair value
   (cost: 2001--$867.6; 2000--$870.6) ..................   1,009.4      1,134.4
   Trading securities--at fair value
   (cost: 2001--$327.6; 2000--$193.4) ..................     290.0        231.6
Mortgage loans on real estate ..........................   8,858.0      8,969.4
Real estate ............................................     501.5        519.0
Policy loans ...........................................     438.3        428.6
Short-term investments .................................     177.5        151.9
Other invested assets ..................................   1,522.3      1,353.0
                                                         ----------------------

   Total Investments ...................................  45,483.9     40,738.4

Cash and cash equivalents ..............................   1,017.4      2,974.4
Accrued investment income ..............................     710.5        586.9
Premiums and accounts receivable .......................     363.1        210.8
Deferred policy acquisition costs ......................   2,650.1      2,528.1
Reinsurance recoverable ................................   1,872.4      1,958.6
Other assets ...........................................   2,470.0      2,191.3
Closed block assets - Note 5 ...........................   9,966.9      9,710.0
Separate accounts assets ...............................  24,000.1     26,454.8
                                                         ----------------------

   Total Assets ........................................ $88,534.4    $87,353.3
                                                         ======================


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


                                       2
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                   CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                         June 30,
                                                                                           2001        December 31,
                                                                                       (Unaudited)         2000
                                                                                       ----------------------------
                                                                                              (in millions)
<S>                                                                                      <C>             <C>
Liabilities and Shareholders' Equity

Liabilities
Future policy benefits..........................................................         $24,021.1       $22,996.4
Policyholders' funds............................................................          16,913.2        15,741.1
Unearned revenue................................................................             733.9           671.3
Unpaid claims and claim expense reserves........................................             225.3           253.7
Dividends payable to policyholders..............................................             127.8           130.8
Short-term debt.................................................................             114.8           245.3
Long-term debt..................................................................             740.6           534.0
Income taxes....................................................................             705.6           431.3
Other liabilities...............................................................           2,635.6         1,986.0
Closed block liabilities  -  Note 5.............................................          12,181.5        12,035.9
Separate accounts liabilities...................................................          24,000.1        26,454.8
                                                                                         -------------------------

   Total Liabilities............................................................          82,399.5        81,480.6

Minority interest...............................................................              95.9            93.5

Commitments and contingencies - Note 4

Shareholders' Equity
Common stock, $.01 par value; 2.0 billion shares authorized; 315.7 and 315.0
   million shares issued, 304.3 million and 312.0 million shares
   outstanding, in 2001 and 2000, respectively..................................               3.2             3.2
Additional paid in capital......................................................           5,094.4         5,086.4
Retained earnings...............................................................           1,049.3           700.6
Accumulated other comprehensive income..........................................             295.0            80.8
Treasury stock, at cost (11.4 million and 3.0 million
    shares, in 2001 and 2000, respectively).....................................            (402.9)          (91.8)
                                                                                         -------------------------

   Total Shareholders' Equity...................................................           6,039.0         5,779.2
                                                                                         -------------------------

   Total Liabilities and Shareholders' Equity...................................         $88,534.4       $87,353.3
                                                                                         =========================
</TABLE>

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


                                       3
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                                         Three Months Ended      Six Months Ended
                                                                                              June 30,               June 30,
                                                                                          2001        2000       2001        2000
                                                                                       --------------------   ---------------------
                                                                                                       (in millions)
<S>                                                                                    <C>         <C>         <C>         <C>
Revenues
   Premiums.........................................................................   $  564.6    $  729.6    $1,426.7    $1,261.2
   Universal life and investment-type product charges ..............................      181.9       181.2       361.6       386.2
   Net investment income ...........................................................      832.5       812.0     1,613.9     1,660.6
   Net realized investment and other gains (losses), net of related
     amortization of deferred policy acquisition costs and amounts credited to
     participating pension contract holders ($(9.0) and $(0.8) for the three
     months ended June 30, 2001 and 2000 and $(4.7) and $1.5 for the
     six months ended June 30, 2001 and June 30, 2000, respectively) ...............       (8.4)       63.0       (34.8)       81.3
   Investment management revenues, commissions and other fees ......................      155.3       186.3       306.5       415.6
   Other revenue ...................................................................       58.1         5.2        61.8         8.0
   Contribution from the closed block - Note 5 .....................................       16.4        22.6        36.7        51.3
                                                                                       --------------------   ---------------------

   Total revenues ..................................................................    1,800.4     1,999.9     3,772.4     3,864.2

Benefits and expenses
   Benefits to policyholders, excluding amounts related to net realized
     investment and other gains (losses) credited to participating pension
     contract holders ($(1.4) and $(2.5) for the three months ended June 30,
     2001 and 2000 and $0.9 and $4.6 for the six months ended June
     30, 2001 and June 30, 2000, respectively) .....................................    1,068.9     1,189.7     2,347.1     2,207.8
   Other operating costs and expenses ..............................................      398.2       395.9       753.6       821.7
   Amortization of deferred policy acquisition costs, excluding
     amounts related to net realized investment and other gains (losses)($(7.6)
     and $1.7, for the three months ended June 30, 2001 and 2000 and $(5.6) and
     $(3.1) for the six months ended June 30, 2001 and June 30, 2000,
     respectively) .................................................................       53.7        49.9       133.4        94.0
   Dividends to policyholders ......................................................       26.5        27.8        53.9        93.7
   Demutualization expenses ........................................................         --        (5.3)         --        10.6
                                                                                       --------------------   ---------------------

   Total benefits and expenses .....................................................    1,547.3     1,658.0     3,288.0     3,227.8
                                                                                       --------------------   ---------------------
Income before income taxes and cumulative
   effect of accounting changes ....................................................      253.1       341.9       484.4       636.4
Income taxes .......................................................................       72.3       109.5       142.9       212.5
                                                                                       --------------------   ---------------------

Income before cumulative effect of accounting changes ..............................      180.8       232.4       341.5       423.9

Cumulative effect of accounting changes, net of taxes - Note 1 .....................         --          --         7.2          --
                                                                                       --------------------   ---------------------

Net income..........................................................................   $  180.8    $  232.4    $  348.7    $  423.9
                                                                                       ====================   =====================
</TABLE>

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


                                       4
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

           UNAUDITED CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                              For the Period
                                                           Three Months      Three Months      Six Months       February 1
                                                              Ended             Ended             Ended           through
                                                          June 30, 2001     June 30, 2000     June 30, 2001    June 30, 2000
                                                       -----------------------------------------------------------------------
                                                                        (in millions, except per share data)
<S>                                                         <C>                 <C>               <C>               <C>
Basic earnings per common share:

Income before cumulative effect of accounting
   Changes ............................................     $   .59             $   .74           $  1.11           $  1.21

Cumulative effect of accounting changes ...............          --                  --               .02                --
                                                            ---------------------------------------------------------------

Net income ............................................     $   .59             $   .74           $  1.13           $  1.21
                                                            ===============================================================

Diluted earnings per common share:

Income before cumulative effect of accounting
   changes ............................................     $   .58             $   .73           $  1.10           $  1.20

Cumulative effect of accounting changes ...............          --                  --               .02                --
                                                            ---------------------------------------------------------------

Net income ............................................     $   .58             $   .73           $  1.12           $  1.20
                                                            ===============================================================

Share data:
Weighted-average shares used in basic earnings
   per common share calculations ......................       306.9               314.8             308.9             314.8

Dilutive securities:
Stock options .........................................         2.9                 1.4               2.6               1.0
Non-vested stock ......................................         0.3                 0.3               0.3               0.2
                                                            ---------------------------------------------------------------

Weighted-average shares used in diluted earnings
   per common share calculations ......................       310.1               316.5             311.8             316.0
                                                            ===============================================================
</TABLE>

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


                                       5
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                    Additional              Accumulated Other              Total       Outstanding
                                           Common    Paid In      Retained    Comprehensive   Treasury  Shareholders'     Shares
                                            Stock    Capital      Earnings    Income (Loss)     Stock      Equity     (in thousands)
                                          -----------------------------------------------------------------------------------------
                                                                              (in millions)
<S>                                          <C>      <C>          <C>            <C>          <C>        <C>            <C>
Balance at April 1, 2000.................    $3.2     $5,030.0     $  147.5       $ 19.4       $    --    $5,200.1       314,786.5

Restricted stock issued .................      --           --                                                               291.0
Additional paid in capital...............                 46.4                                                46.4

Comprehensive income:
   Net income............................                             232.4                                  232.4

Other comprehensive income, net of tax:
   Net unrealized gains (losses).........                                          (96.8)                    (96.8)
   Foreign currency translation
     adjustment..........................                                          (15.5)                    (15.5)
   Minimum pension liability.............                                           (5.5)                     (5.5)
                                                                                                        ------------
   Comprehensive income..................                                                                    114.6
                                          ------------------------------------------------------------------------------------------

Balance at June 30, 2000.................    $3.2     $5,076.4     $  379.9       $(98.4)      $    --    $5,361.1       315,077.5
                                          ==========================================================================================

<CAPTION>
                                                    Additional              Accumulated Other              Total       Outstanding
                                           Common    Paid In      Retained    Comprehensive   Treasury  Shareholders'     Shares
                                            Stock    Capital      Earnings    Income (Loss)     Stock      Equity     (in thousands)
                                          -----------------------------------------------------------------------------------------
                                                                              (in millions)
<S>                                          <C>      <C>          <C>           <C>           <C>        <C>            <C>
Balance at April 1, 2001.................    $3.2     $5,090.4     $  868.5      $ 330.7       $(217.5)   $6,075.3       308,785.1

Options exercised........................      --          4.0                                                 4.0           281.5
Forfeitures of restricted stock..........      --           --                                                                (1.2)
Treasury stock acquired..................                                                       (185.4)     (185.4)       (4,800.0)

Comprehensive income:
   Net income............................                             180.8                                  180.8

Other comprehensive income, net of tax:
   Net unrealized gains (losses).........                                          (38.7)                    (38.7)
   Net accumulated gains (losses)
     on cash flow hedges.................                                          (17.3)                    (17.3)
   Foreign currency translation
     adjustment..........................                                           20.3                      20.3

                                                                                                        ------------

   Comprehensive income..................                                                                    145.1
                                          ------------------------------------------------------------------------------------------

Balance at June 30, 2001.................    $3.2     $5,094.4     $1,049.3      $ 295.0       $(402.9)   $6,039.0       304,265.4
                                          ==========================================================================================
</TABLE>

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


                                       6
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     AND COMPREHENSIVE INCOME - (CONTINUED)

<TABLE>
<CAPTION>
                                                     Additional            Accumulated Other              Total       Outstanding
                                           Common     Paid In    Retained    Comprehensive   Treasury  Shareholders'     Shares
                                            Stock     Capital    Earnings    Income (Loss)     Stock      Equity     (in thousands)
                                          -----------------------------------------------------------------------------------------
                                                                              (in millions)
<S>                                          <C>      <C>       <C>            <C>            <C>        <C>
Balance at January 1, 2000...............    $ --     $     --  $ 4,825.0      $ (33.9)       $    --    $ 4,791.1             --

Demutualization transaction..............     2.2      3,373.3   (4,869.0)                                (1,493.5)     212,786.5
Initial public offering..................     1.0      1,656.7                                             1,657.7      102,000.0
Additional paid in capital...............                 46.4                                                46.4
Restricted stock issued .................      --           --                                                              291.0

Comprehensive income:
   Net income before demutualization.....                            44.0                                     44.0
   Net income after demutualization......                           379.9                                    379.9
                                          -----------------------------------------------------------------------------------------
   Net income for the period.............                           423.9                                    423.9

Other comprehensive income, net of tax:
   Net unrealized gains (losses).........                                        (46.2)                      (46.2)
   Foreign currency translation
     adjustment..........................                                         (7.3)                       (7.3)
   Minimum pension liability.............                                        (11.0)                      (11.0)
                                                                                                       -------------
   Comprehensive income..................                                                                    359.4
                                          -----------------------------------------------------------------------------------------

Balance at June 30, 2000.................    $3.2     $5,076.4  $   379.9      $ (98.4)       $    --    $ 5,361.1      315,077.5
                                          =========================================================================================

<CAPTION>
                                                     Additional            Accumulated Other              Total       Outstanding
                                           Common     Paid In    Retained    Comprehensive   Treasury  Shareholders'     Shares
                                            Stock     Capital    Earnings    Income (Loss)     Stock      Equity     (in thousands)
                                          -----------------------------------------------------------------------------------------
                                                                              (in millions)
<S>                                          <C>      <C>       <C>             <C>           <C>        <C>            <C>
Balance at January 1, 2001...............    $3.2     $5,086.4  $   700.6       $ 80.8        $ (91.8)   $ 5,779.2      311,988.9

Options exercised........................                  6.0                                                 6.0          599.2
Restricted stock issued..................                  2.0                                                 2.0           56.0
Forfeitures of restricted stock..........      --           --                                                               (1.2)
Treasury stock acquired..................                                                      (311.1)      (311.1)      (8,377.5)

Comprehensive income:
   Net income............................                           348.7                                    348.7

Other comprehensive income, net of tax:
   Net unrealized gains (losses).........                                          9.9                         9.9
   Net accumulated gains (losses)
     on cash flow hedges.................                                        (20.0)                      (20.0)
   Foreign currency translation
     adjustment..........................                                         (3.3)                       (3.3)

                                                                                                       -------------

   Comprehensive income..................                                                                    335.3
   Change in accounting principles.......                                        227.6                       227.6
                                          -----------------------------------------------------------------------------------------

Balance at June 30, 2001.................    $3.2     $5,094.4   $1,049.3       $295.0        $(402.9)    $6,039.0      304,265.4
                                          =========================================================================================
</TABLE>

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


                                       7
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                Six Months Ended
                                                                                                    June 30,
                                                                                               2001         2000
                                                                                            ----------------------
                                                                                                 (in millions)
<S>                                                                                         <C>          <C>
Cash flows from operating activities:
   Net income ...........................................................................   $   348.7    $   423.9
   Adjustments to reconcile net income to net cash provided by operating activities:
     Amortization of discount - fixed maturities ........................................       (80.1)       (46.2)
     Realized investment and other (gains) losses, net ..................................        34.8        (81.3)
     Change in deferred policy acquisition costs ........................................      (132.3)      (164.9)
     Depreciation and amortization ......................................................        41.4         57.1
     Net cash flows from trading securities .............................................       (75.5)      (162.7)
     Increase in accrued investment income ..............................................      (123.6)       (58.3)
     (Increase) decrease in premiums and accounts receivable ............................      (152.3)        14.0
     Decrease (increase) in other assets and other liabilities, net .....................        47.4       (291.9)
     Increase in policy liabilities and accruals, net ...................................     1,008.9        811.1
     Increase in income taxes ...........................................................       179.1        332.0
     Initial cash transferred to the closed block .......................................          --       (158.6)
     Contribution from the closed block .................................................       (36.7)       (51.3)
                                                                                            ----------------------

       Net cash provided by operating activities ........................................     1,059.8        622.9

Cash flows from investing activities:
   Sales of:
     Fixed maturities available-for-sale ................................................    10,501.6      2,643.3
     Equity securities available-for-sale ...............................................       289.1        150.0
     Real estate ........................................................................         0.6         26.3
     Short-term investments and other invested assets ...................................       108.4         16.1
   Maturities, prepayments and scheduled redemptions of:
     Fixed maturities held-to-maturity ..................................................       107.6        918.0
     Fixed maturities available-for-sale ................................................     1,392.7        640.1
     Short-term investments and other invested assets ...................................        57.4        404.2
     Mortgage loans on real estate ......................................................       651.5        566.7
   Purchases of:
     Fixed maturities held-to-maturity ..................................................       (31.6)      (888.0)
     Fixed maturities available-for-sale ................................................   (15,834.2)    (3,449.8)
     Equity securities available-for-sale ...............................................      (203.3)      (121.3)
     Real estate ........................................................................        (2.9)       (26.1)
     Short-term investments and other invested assets ...................................      (299.0)      (315.6)
     Mortgage loans on real estate issued ...............................................      (669.4)      (706.3)
     Cash (paid) received related to acquisition of business ............................       (41.0)       126.3
     Cash received on sale of subsidiary ................................................        12.8           --
     Other, net .........................................................................        69.3         12.4
                                                                                            ----------------------

       Net cash used in investing activities ............................................    (3,890.4)        (3.7)
</TABLE>

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


                                       8
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

         UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                Six Months Ended
                                                                                                    June 30,
                                                                                               2001         2000
                                                                                            ----------------------
                                                                                                 (in millions)
<S>                                                                                          <C>          <C>
Cash flows from financing activities:
   Issuance of common stock .............................................................   $      --    $ 1,704.1
   Payments to eligible policyholders under Plan of Reorganization ......................          --     (1,044.3)
   Acquisition of treasury stock ........................................................      (311.1)          --
   Universal life and investment-type contract deposits .................................     5,307.9      3,577.8
   Universal life and investment-type contract maturities and withdrawals ...............    (4,132.0)    (3,907.4)
   Issuance of long-term debt ...........................................................       145.2         10.0
   Repayment of long-term debt ..........................................................       (14.0)       (28.0)
   Net decrease in commercial paper .....................................................      (122.4)      (148.1)
                                                                                            ----------------------

       Net cash provided by financing activities ........................................       873.6        164.1
                                                                                            ----------------------

       Net (decrease) increase in cash and cash equivalents .............................    (1,957.0)       783.3

       Cash and cash equivalents at beginning of period .................................     2,974.4      1,817.9
                                                                                            ----------------------

       Cash and cash equivalents at end of period .......................................   $ 1,017.4    $ 2,601.2
                                                                                            ======================
</TABLE>

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


                                       9
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 1 -- Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of John Hancock
Financial Services, Inc. (the Company) have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, these
unaudited consolidated financial statements contain all adjustments, consisting
of only normal and recurring adjustments, necessary for a fair presentation of
the financial position and results of operations. Operating results for the
three and six month periods ended June 30, 2001 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2001. These
unaudited consolidated financial statements should be read in conjunction with
the Company's annual audited financial statements as of December 31, 2000
included in the Company's Form 10-K for the year ended December 31, 2000 filed
with the United States Securities and Exchange Commission (hereafter referred to
as the Company's 2000 Form 10-K).

The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.

Reorganization and Initial Public Offering

In connection with John Hancock Mutual Life Insurance Company's (the Mutual
Company) Plan of Reorganization (the Plan), effective February 1, 2000, the
Mutual Company converted from a mutual life insurance company to a stock life
insurance company (i.e. demutualized) and became a wholly-owned subsidiary of
John Hancock Financial Services, Inc., which is a holding company. All
policyholder membership interests in the Mutual Company were extinguished on
that date and eligible policyholders of the Mutual Company received, in the
aggregate, 212.8 million shares of common stock, $1,438.7 million of cash and
$43.7 million of policy credits as compensation. In addition, the Company
established a closed block, to fund the guaranteed benefits and dividends of
certain participating insurance policies. In connection with the Plan, the
Mutual Company changed its name to John Hancock Life Insurance Company (the Life
Company).

In addition, on February 1, 2000, the Company completed its initial public
offering (IPO) in which 102.0 million shares of common stock were issued at a
price of $17.00 per share. Net proceeds from the IPO were $1,657.7 million, of
which $105.7 million was retained by the Company and $1,552.0 million was
contributed to the Life Company.

Cumulative Effect of Accounting Change

During the first quarter of 2001, the Company changed the method of accounting
for the recognition of deferred gains and losses considered in the calculation
of the annual expense for its employee pension plan under Statement of Financial
Accounting Standards (SFAS) No. 87, "Employers' Accounting for Pensions," and
for its postretirement health and welfare plans under SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The Company changed
the method of recognizing gains and losses from deferral within a 10% corridor
and amortization of gains outside this corridor over the future working careers
of the participants to deferral within a 5% corridor and amortization of gains
and losses outside this corridor over the future working careers of the
participants. The new method is preferable because in the Company's situation,
it produces results that more closely match current economic realities of the
Company's retirement and welfare plans through the use of the current fair
values of assets while still mitigating the impact of extreme gains and losses.
As a result, on January 1, 2001, the Company recorded a credit of $18.6 million
(net of tax of $9.9 million), related to its employee benefit pension plans, and
a credit of $4.7 million (net of tax of $2.6 million), related to its
postretirement health and welfare plans. The total credit recorded as a
cumulative effect of an accounting change was $23.3 million (net of tax of $12.5
million), or $0.07 diluted earnings per share for the six months ended June 30,
2001. This change in accounting increased net income for the three and six month
periods ended June 30, 2001 by $1.1 million and $2.2 million, respectively. The
pro forma results, assuming this change in accounting had taken place as of the
beginning of 2001, would not be materially different from the reported results.


                                       10
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 1 -- Summary of Significant Accounting Policies -(Continued)

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." In June
1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement 133." This
Statement amends SFAS No. 133 to defer its effective date for one year, to
fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities." This Statement makes certain changes in the hedging provisions of
SFAS No. 133, and is effective concurrent with SFAS No. 133. As amended, SFAS
No. 133 requires all derivatives to be recognized on the balance sheet at fair
value, and establishes special accounting for the following three types of
hedges: fair value hedges, cash flow hedges, and hedges of foreign currency
exposures of net investments in foreign operations. Special accounting for
qualifying hedges provides for matching the timing of gain or loss recognition
on the hedging instrument with the recognition of the corresponding change in
value of the hedged item. If the derivative is accounted for as a hedge,
depending on the nature of the hedge, the change in the fair value of
derivatives is either offset against the change in the fair value of the hedged
asset, liability or firm commitment through earnings or recognized in other
comprehensive income until the change in value of the hedged item is recognized
in earnings. The ineffective portion of a derivative's change in fair value is
recognized immediately in earnings and is included in net realized and other
investment gains. As a result, such amounts are not included in the
determination of the Company's segment after tax operating income. In addition,
SFAS No. 133, as amended, precludes the designation of held-to-maturity fixed
maturity investment securities as hedged items in hedging relationships where
the hedged risk is interest rate risk.

On January 1, 2001, the Company adopted SFAS No. 133, as amended. The Company's
risk management philosophy has not changed as a result of adoption of the
Statement. The adoption of SFAS No. 133, as amended, resulted in a charge to
operations accounted for as a cumulative effect of accounting change of $16.1
million (net of tax of $8.3 million) as of January 1, 2001. In addition, as of
January 1, 2001, a $227.6 million (net of tax of $122.6 million) cumulative
effect of accounting change was recorded in other comprehensive income for the
transition adjustment in the adoption of SFAS 133, as amended, and the
reclassification of certain securities from the held-to-maturity category to the
available-for-sale category. The transition adjustment for the adoption of SFAS
133 resulted in an increase in other comprehensive income of $40.5 million (net
of tax of $21.8 million) that was accounted for as the cumulative effect of
accounting change. The adjustment for the reclassification of $12.1 billion of
the held-to-maturity fixed maturity investment portfolio to the
available-for-sale category resulted in an increase in other comprehensive
income of $187.1 million (net of tax of $100.8 million) as of January 1, 2001.

New Accounting Pronouncements

In July 2001, the FASB issued Statements of Financial Accounting Standards No.
141, "Business Combinations," and No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires that all business combinations be accounted for
under a single method - the purchase method. Use of the pooling-of-interests
method is no longer permitted. SFAS No. 141 also clarifies the criteria to
recognize intangible assets separately from goodwill. SFAS No. 142 requires that
goodwill and intangible assets deemed to have indefinite lives no longer be
amortized to earnings, but instead be reviewed at least annually for impairment.
Other intangible assets will continue to be amortized over their useful lives.

SFAS No. 141 requires that the purchase method of accounting be used for
business combinations initiated after June 30, 2001. SFAS No. 142 will be
effective January 1, 2002. The Company estimates that adoption of SFAS No. 142
will result in an increase in net income of approximately $10-$15 million for
the year ended December 31, 2002. During 2002, the Company will perform the
first of the required impairment tests of goodwill and of indefinite lived
intangible assets as of January 1, 2002 based on the guidance in SFAS No. 142.
The effect of these tests on the earnings and financial position of the Company
has not been determined at this time.


                                       11
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 1 -- Summary of Significant Accounting Policies -(Continued)

In December 2000, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position 00-3 (SOP 00-3), "Accounting by Insurance
Enterprises for Demutualizations and Formations of Mutual Insurance Holding
Companies and Certain Long-Duration Participating Contracts." SOP 00-3, which
was adopted with respect to accounting for demutualization expenses by the
Company effective December 15, 2000, requires that demutualization related
expenses be classified as a single line item within income from continuing
operations and should not be classified as an extraordinary item. The adoption
of SOP 00-3 resulted in the reclassification of demutualization expenses
previously recorded as an extraordinary item in the three and six month periods
ended June 30, 2000 of ($3.5) million (net of tax of ($1.8) million) and $10.2
million (net of tax of $0.4 million), respectively. The remaining provisions of
this SOP, which will require (1) the inclusion of all closed block activity
together with all other assets, liabilities, revenues and expenses and (2)
recognition of a policyholder dividend obligation that represents cumulative
actual closed block earnings in excess of expected periodic amounts calculated
at the date of the demutualization, are effective no later than December 31,
2001. See Note 5 for a summary description of the closed block assets,
liabilities, revenues and expenses, which do not include the policyholder
dividend obligation that will be required in 2001. The Company currently is
evaluating the effect that establishing the policyholder dividend obligation
will have on its results of operations and financial position. That impact is
not known at this time.

Codification

In March 1998, the National Association of Insurance Commissioners (NAIC)
adopted codified statutory accounting principles (Codification) effective
January 1, 2001. Codification changes prescribe statutory accounting practices
and results in changes to the accounting practices that the Company's domestic
life insurance subsidiaries use to prepare their statutory-basis financial
statements. The states of domicile of these subsidiaries adopted Codification as
the prescribed basis of accounting on which domestic insurers must report their
statutory-basis results effective January 1, 2001. The cumulative effect of
changes in accounting principles adopted to conform to the requirements of
Codification is reported as an adjustment to surplus in the statutory-basis
financial statements as of January 1, 2001. Although the implementation of
Codification reduced the Company's domestic life insurance subsidiaries'
statutory-basis capital and surplus, these subsidiaries remain in compliance
with all regulatory and contractual obligations.

Recent Acquisitions

On June 18, 2001, The Maritime Life Assurance Company (Maritime), majority-owned
Canadian subsidiary of the Company, signed a Share Purchase Agreement to
purchase all of Royal & Sun Alliance Life Insurance Company of Canada ("RSAF")
for an amount of approximately $153.7 million (USD). The purchase is expected to
close on October 1, 2001 subject to regulatory approvals. RSAF's business
includes life insurance, guaranteed interest savings and retirement products and
segregated funds.

On April 2, 2001, a subsidiary of the Company, Signature Fruit Company, LLC
(Signature Fruit), acquired certain assets and assumed certain liabilities out
of bankruptcy proceedings of Tri Valley Growers, Inc., a cooperative
association. The transaction was accounted for as a purchase and the results of
operations are included in the accompanying financial statements since the date
of acquisition. The fair values of assets acquired and liabilities assumed were
$252.1 million and $199.1 million, respectively. Net loss related to the
acquired operations was $1.2 million for the three months ended June 30, 2001.
The pro forma results for the three and six month periods ended June 30, 2001
and 2000, respectively, assuming the acquisition had taken place at the
beginning of the periods presented, would not be materially different from the
reported results.

On March 1, 2000, the Company acquired the individual long-term care insurance
business of Fortis, Inc. (Fortis). The pro forma results for the three and six
month periods ended June 30, 2000, assuming the acquisition of Fortis had taken
place as of the beginning of 2000, would not be materially different from the
reported results.


                                       12
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Segment Information

The Company operates in the following five business segments: two segments
primarily serve retail customers, two segments serve institutional customers and
our fifth segment is the Corporate and Other Segment, which includes our
international operations. Our retail segments are the Protection Segment and the
Asset Gathering Segment. Our institutional segments are the Guaranteed and
Structured Financial Products Segment (G&SFP) and the Investment Management
Segment. For additional information about the Company's business segments, refer
to the Company's 2000 Form 10-K.

The following tables summarize selected financial information by segment for the
three and six month periods ended or as of June 30, 2001 and 2000 and reconciles
segment revenues and segment after-tax operating income to amounts reported in
the unaudited consolidated statements of income (in millions). Included in the
Protection Segment for 2001 and 2000 are the closed block assets and
liabilities, as well as the contribution from the closed block, which is
reflected in "Revenues" in the table below (see Note 5).

<TABLE>
<CAPTION>
                                                             Retail                  Institutional
                                                Retail        Asset    Institutional   Investment    Corporate
                                              Protection    Gathering      G&SFP       Management    and Other    Consolidated
                                              --------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>            <C>            <C>          <C>
As of or for the three months ended
June 30, 2001
Revenues:
   Segment revenues .......................   $   461.3    $   294.9    $   516.9      $    30.9      $   516.6    $ 1,820.6
   Realized investment and other gains
     (losses), net ........................       (28.9)       (18.1)        (9.1)          (0.1)          36.0        (20.2)
                                              ------------------------------------------------------------------------------
   Revenues ...............................   $   432.4    $   276.8    $   507.8      $    30.8      $   552.6    $ 1,800.4
                                              ==============================================================================
   Net investment income ..................   $   146.9    $   122.8    $   464.7      $     3.7      $    94.4    $   832.5
Net Income:
   Segment after-tax operating
     income ...............................        79.5         37.4         59.6            4.6           18.3        199.4
   Realized investment and other gains
     (losses), net ........................       (18.2)       (11.2)        (6.2)            --           21.3        (14.3)
   Restructuring charges ..................        (1.6)        (1.9)        (0.6)          (0.1)          (0.1)        (4.3)
                                              ------------------------------------------------------------------------------
   Net income .............................   $    59.7    $    24.3    $    52.8      $     4.5      $    39.5    $   180.8
                                              ==============================================================================
Supplemental Information:
   Inter-segment revenues .................          --           --           --      $     6.6      $    (6.6)          --
   Equity in net income of investees
     accounted for by the equity method ...   $     2.5    $     2.8    $     4.7      $     0.4      $    15.7    $    26.1
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) .............................        27.1         13.6          0.9             --           12.1         53.7
   Segment assets .........................   $27,290.3    $14,306.0    $31,527.7      $ 2,961.6      $12,448.8    $88,534.4

</TABLE>


                                       13
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                             Retail                  Institutional
                                                Retail        Asset    Institutional   Investment    Corporate
                                              Protection    Gathering      G&SFP       Management    and Other    Consolidated
                                              --------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>            <C>            <C>          <C>
As of or for the three months ended
June 30, 2000
Revenues:
   Segment revenues .......................   $   416.5    $   299.5    $   720.9      $    48.7      $   454.7    $ 1,940.3
   Realized investment and other gains
     (losses), net ........................         6.7          4.0        (13.6)           0.6           61.9         59.6
                                              ------------------------------------------------------------------------------
   Revenues ...............................   $   423.2    $   303.5    $   707.3      $    49.3      $   516.6    $ 1,999.9
                                              ==============================================================================
   Net investment income ..................   $   146.1    $   113.3    $   424.8      $     4.7      $   123.1    $   812.0
Net Income:
   Segment after-tax operating
     income ...............................        57.0         29.3         56.9           11.0           29.5        183.7
   Realized investment and other gains
     (losses), net ........................         4.2          2.5         (8.4)           0.3           40.2         38.8
   Restructuring charges ..................        (0.6)        (0.1)        (0.1)            --             --         (0.8)
   Surplus tax ............................         2.9          0.1          1.5             --            2.7          7.2
   Demutulization expenses ................         2.4          0.5          0.4             --            0.2          3.5
   Other demutualization related
     costs ................................          --           --         (0.1)            --            0.1           --
                                              ------------------------------------------------------------------------------
   Net income .............................   $    65.9    $    32.3    $    50.2      $    11.3      $    72.7    $   232.4
                                              ==============================================================================
Supplemental Information:
   Inter-segment revenues .................          --           --           --      $    10.4      $   (10.4)          --
   Equity in net income of investees
     accounted for by the equity method ...   $     4.8    $     3.4    $     5.8      $     2.5      $    27.9    $    44.4
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment gains .....................        12.7         21.0          0.7             --           15.5         49.9
   Segment assets .........................   $26,662.3    $14,295.6    $30,982.2      $ 2,014.9      $12,446.9    $86,401.9
</TABLE>


                                       14
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                             Retail                  Institutional
                                                Retail        Asset    Institutional   Investment    Corporate
                                              Protection    Gathering      G&SFP       Management    and Other    Consolidated
                                              --------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>            <C>            <C>          <C>
As of or for the six months ended
June 30, 2001
Revenues:
   Segment revenues ........................  $   910.8    $   583.8    $ 1,376.2      $    66.5      $   881.6    $ 3,818.9
   Realized investment and other gains
     (losses), net .........................      (38.0)       (11.2)       (23.5)          (0.1)          26.3        (46.5)
                                              ------------------------------------------------------------------------------
   Revenues ................................  $   872.8    $   572.6    $ 1,352.7      $    66.4      $   907.9    $ 3,772.4
                                              ==============================================================================
   Net investment income ...................  $   292.4    $   242.6    $   931.8      $     9.2      $   137.9    $ 1,613.9
Net Income:
   Segment after-tax operating
     income ................................      152.1         68.9        118.6           10.0           40.3        389.9
   Realized investment and other gains
     (losses), net .........................      (23.7)        (6.6)       (14.4)          (0.1)          15.7        (29.1)
   Restructuring charges ...................       (2.8)       (15.1)        (0.7)          (0.5)          (0.2)       (19.3)
   Cumulative effect of accounting
     change ................................       11.7         (0.5)        (1.2)          (0.2)          (2.6)         7.2
                                              ------------------------------------------------------------------------------
   Net income ..............................  $   137.3    $    46.7    $   102.3      $     9.2      $    53.2    $   348.7
                                              ==============================================================================
Supplemental Information:
   Inter-segment revenues ..................         --           --           --      $    14.7      $   (14.7)          --
   Equity in net income of investees
     accounted for by the equity method  ...  $     4.8    $     3.9    $     8.1      $     0.4      $    28.3    $    45.5
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment gains ......................       55.9         37.0          1.5             --           39.0        133.4
   Segment assets ..........................  $27,290.3    $14,306.0    $31,527.7      $ 2,961.6      $12,448.8    $88,534.4
</TABLE>


                                       15
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                             Retail                  Institutional
                                                Retail        Asset    Institutional   Investment    Corporate
                                              Protection    Gathering      G&SFP       Management    and Other    Consolidated
                                              --------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>            <C>            <C>          <C>
As of or for the six months ended
June 30, 2000
Revenues:
   Segment revenues .......................   $   932.8    $   596.9    $ 1,207.1      $   127.9      $   920.3    $ 3,785.0
   Realized investment and other gains
     (losses), net ........................        14.5          5.9        (21.0)           0.6           79.2         79.2
                                              ------------------------------------------------------------------------------
   Revenues ...............................   $   947.3    $   602.8    $ 1,186.1      $   128.5      $   999.5    $ 3,864.2
                                              ==============================================================================
   Net investment income ..................   $   321.1    $   215.9    $   849.4      $    10.3      $   263.9    $ 1,660.6
Net Income:
   Segment after-tax operating
     income ...............................       129.6         65.6        112.1           32.4           49.4        389.1
   Realized investment and other gains
     (losses), net ........................         9.0          3.7        (13.1)           0.3           50.1         50.0
   Restructuring charges ..................        (3.6)        (1.0)        (2.2)            --           (0.9)        (7.7)
   Surplus tax ............................         2.9          0.1          1.5             --            2.7          7.2
   Demutualization expenses ...............        (0.2)        (0.1)        (0.2)            --           (9.7)       (10.2)
   Other demutualization related
     costs ................................        (6.7)        (1.4)        (1.7)            --           (0.4)       (10.2)
   Group pension dividend transfer ........          --           --          5.7             --             --          5.7
                                              ------------------------------------------------------------------------------
   Net income .............................   $   131.0    $    66.9    $   102.1      $    32.7      $    91.2    $   423.9
                                              ==============================================================================
Supplemental Information:
   Inter-segment revenues .................          --           --           --      $    21.5      $   (21.5)          --
   Equity in net income of investees
     accounted for by the equity method ...   $     5.7    $     3.2    $     6.3      $     8.0      $    58.5    $    81.7
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment gains .....................        26.2         36.1          1.4             --           30.3         94.0
   Segment assets .........................   $26,662.3    $14,295.6    $30,982.2      $ 2,014.9      $12,446.9    $86,401.9
</TABLE>

Note 3 -- Severance

As part of the Company's Competitive Position Project, the Company has initiated
a restructuring plan to reduce costs and increase future operating efficiency by
consolidating portions of its operations. The plan consists primarily of
reducing staff in the home office and terminating certain operations outside the
home office.

In connection with the restructuring plan, approximately 735 employees have been
or will be terminated. These employees are or have been associated with
operations in our Boston office and outside the home office. As of June 30, 2001
and December 31, 2000, the liability for employee termination costs, included in
other liabilities was $27.4 million and $20.6 million, respectively. Employee
termination costs, included in other operating costs and expenses, were $7.0
million and $2.2 million for the three months ended June 30, 2001 and 2000 and
$30.6 million and $13.0 million for the six months ended June 30, 2001 and 2000,
respectively. Of the total number of employees affected, approximately 637
employees were terminated as of June 30, 2001, having received benefit payments
of approximately $49.5 million.


                                       16
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 -- Contingencies

In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of June 30, 2001. It is the opinion
of management, after consultation with counsel, that the ultimate liability with
respect to these claims, if any, will not materially affect the financial
position or results of operations of the Company.

During 1997, the Company entered into a court-approved settlement relating to a
class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, the Company
specifically denied any wrongdoing. The reserve held in connection with the
settlement to provide for relief to class members and for legal and
administrative costs associated with the settlement amounted to $40.5 million
and $172.8 million at June 30, 2001 and December 31, 2000, respectively. There
were no additional reserves recorded related to the settlement for the three and
six month periods ended June 30, 2001 and 2000. The estimated reserve is based
on a number of factors, including the estimated cost per claim and the estimated
costs to administer the claims.

During 1996, management determined that it was probable that a settlement would
occur and that a minimum loss amount could be reasonably estimated. Accordingly,
the Company recorded its best estimate based on the information available at the
time. The terms of the settlement agreement were negotiated throughout 1997 and
approved by the court on December 31, 1997. In accordance with the terms of the
settlement agreement, the Company contacted class members during 1998 to
determine the actual type of relief to be sought by class members. The majority
of the responses from class members were received by the fourth quarter of 1998.
The type of relief sought by class members differed from the Company's previous
estimates, primarily due to additional outreach activities by regulatory
authorities during 1998 encouraging class members to consider alternative
dispute resolution relief. In 1999, the Company updated its estimate of the cost
of claims subject to alternative dispute resolution relief and revised its
reserve estimate accordingly.

Given the uncertainties associated with estimating the reserve, it is reasonably
possible that the final cost of the settlement could differ materially from the
amounts presently provided for by the Company. The Company will continue to
update its estimate of the final cost of the settlement as the claims are
processed and more specific information is developed, particularly as the actual
cost of the claims subject to alternative dispute resolution becomes available.
However, based on information available at the time, and the uncertainties
associated with the final claim processing and alternative dispute resolution,
the range of any additional cost related to the settlement cannot be estimated
with precision.

On February 28, 1997, the Company sold a major portion of its group insurance
business to UNICARE Life & Health Insurance Company (UNICARE), a wholly owned
subsidiary of WellPoint Health Networks, Inc. The business sold included the
Company's group accident and health business and related group life business and
Cost Care, Inc., Hancock Association Services Group and Tri-State, Inc., all of
which were indirect wholly owned subsidiaries of the Company. The Company
retained its group long-term care insurance operations. The insurance business
sold was transferred to UNICARE through a 100% coinsurance agreement. The
Company secured a $397.0 million letter of credit facility with a group of
banks. The banks have agreed to issue a letter of credit to the Company pursuant
to which the Company may draw up to $397.0 million for any claims not satisfied
by UNICARE under the coinsurance agreement after the Company has incurred the
first $113.0 million of losses from such claims. The amount available pursuant
to the letter of credit agreement and any letter of credit issued thereunder
automatically will be reduced on a scheduled basis consistent with the
anticipated run-off of liabilities related to the business reinsured under the
coinsurance agreement. The letter of credit facility was reduced to $127.0
million on March 1, 2001. The letter of credit and any letter of credit issued
thereunder are scheduled to expire on March 1, 2002. The Company remains liable
to its policyholders to the extent that UNICARE does not meet its contractual
obligations under the coinsurance agreement.

Through the Company's group health insurance operations, the Company entered
into a number of reinsurance arrangements in respect of personal accident
insurance and the occupational accident component of workers compensation
insurance, a portion of which was originated through a pool managed by Unicover
Managers, Inc. Under these arrangements, the Company both assumed risks as a
reinsurer and also passed 95% of these risks on to other companies. This
business had originally been reinsured by a number of different companies and
has become the subject of widespread disputes. The disputes concern the
placement of the business with reinsurers and recovery of the reinsurance. The
Company is engaged in disputes, including a number of legal proceedings, in
respect of this business. The risk to the Company is that other companies that
reinsured the business from the Company may seek to avoid their reinsurance
obligations. However, the


                                       17
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 -- Contingencies - (Continued)

Company believes that it has a reasonable legal position in this matter. During
the fourth quarter of 1999 and early 2000, the Company received additional
information about its exposure to losses under the various reinsurance programs.
As a result of this additional information and in connection with global
settlement discussions initiated in late 1999 with other parties involved in the
reinsurance programs, during the fourth quarter of 1999 the Company recognized a
charge for uncollectible reinsurance of $133.7 million, after tax, as its best
estimate of its remaining loss exposure. The Company believes that any exposure
to loss from this issue, in addition to amounts already provided for as of June
30, 2001, would not be material.

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 its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the reinsurers.

Note 5 -- Closed Block

Under the Plan, the Company created a closed block for the benefit of policies
included therein. The following table sets forth certain summarized financial
information relating to the closed block as of the dates indicated:

<TABLE>
<CAPTION>
                                                                      June 30,       December 31,
                                                                        2001             2000
                                                                     ---------------------------
                                                                            (in millions)
<S>                                                                  <C>               <C>
Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
     (fair value: June 30--$113.1; December 31--$2,327.4) .....      $   116.9         $ 2,269.9
   Available-for-sale--at fair value
     (cost: June 30--$5,068.9; December 31--$2,378.7) .........        5,146.6           2,353.0
Equity securities:
   Available-for-sale--at fair value
     (cost: June 30--$10.3; December 31--$5.3) ................           10.8               6.3
Mortgage loans on real estate .................................        1,899.5           1,930.6
Policy loans ..................................................        1,548.7           1,540.6
Short-term investments ........................................            6.1              62.1
Other invested assets .........................................           70.0              40.7
                                                                     ---------------------------
   Total Investments ..........................................        8,798.6           8,203.2

Cash and cash equivalents .....................................            4.5             305.6
Accrued investment income .....................................          173.1             149.3
Premiums and accounts receivable ..............................           21.4              27.1
Deferred policy acquisition costs .............................          878.8             947.3
Other assets ..................................................           90.5              77.5
                                                                     ---------------------------
   Total Closed Block Assets ..................................      $ 9,966.9         $ 9,710.0
                                                                     ===========================
Liabilities
Future policy benefits ........................................      $10,020.3         $ 9,910.5
Policyholders' funds ..........................................        1,481.0           1,459.5
Other liabilities .............................................          680.2             665.9
                                                                     ---------------------------
   Total Closed Block Liabilities .............................      $12,181.5         $12,035.9
                                                                     ===========================
</TABLE>


                                       18
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 5 -- Closed Block - (Continued)

The following table sets forth certain summarized financial information relating
to the closed block for the periods indicated:

<TABLE>
<CAPTION>
                                                         Three Months     Three Months      Six Months     For the Period
                                                            Ended            Ended            Ended          February 1
                                                           June 30,         June 30,         June 30,     Through June 30,
                                                             2001             2000             2001             2000
                                                         ------------------------------------------------------------------
                                                                                  (in millions)
<S>                                                        <C>              <C>              <C>              <C>
Revenues
   Premiums ............................................   $ 211.7          $ 229.9          $ 445.3          $ 401.8
   Net investment income ...............................     163.5            158.4            332.5            267.3
   Net realized investment and other
       gains (losses), net .............................     (11.9)            (3.2)            (9.2)            (0.1)
   Other closed block revenue (expense) ................        --              0.1              0.3             (0.2)
                                                           ----------------------------------------------------------
     Total closed block revenues .......................     363.3            385.2            768.9            668.8

Benefits and Expenses
   Benefits to policyholders ...........................     215.1            237.3            468.7            410.3
   Other operating costs and expenses ..................      (1.6)            (2.6)            (3.9)            (5.7)
   Amortization of deferred policy acquisition costs ...      15.1             19.9             39.3             28.4
   Dividends to policyholders ..........................     118.3            108.0            228.1            184.5
                                                           ----------------------------------------------------------
     Total closed block benefits and expenses ..........     346.9            362.6            732.2            617.5
                                                           ----------------------------------------------------------
     Contribution from the closed block ................   $  16.4          $  22.6          $  36.7          $  51.3
                                                           ==========================================================
</TABLE>

Note 6 -- Derivatives and Hedging Instruments

The Company uses various derivative instruments to hedge and manage its exposure
to changes in interest rate levels, foreign exchange rates, and equity market
prices, and to manage the duration of assets and liabilities.

The fair value of derivative instruments classified as assets at June 30, 2001
was $39.3 million, and appears on the consolidated balance sheet in other
assets. The fair value of derivative instruments classified as liabilities at
June 30, 2001 was $180.7 million, and appears on the consolidated balance sheet
in other liabilities.

In certain of these cases, the Company uses hedge accounting as allowed by SFAS
No. 133, as amended, by designating derivative instruments as either fair value
or cash flow hedges. For derivative instruments that are designated and qualify
as fair value hedges, the change in fair value of the derivative instrument as
well as the offsetting change in fair value of the hedged item are recorded in
net realized investment and other gains and losses. For derivative instruments
that are designated and qualify as cash flow hedges, the effective portion of
the change in fair value of the derivative instrument is recorded in other
comprehensive income, and then reclassified into income when the hedged item
affects income. Hedge effectiveness is assessed quarterly by a variety of
techniques including regression analysis and cumulative dollar offset. In
certain cases, there is no hedge ineffectiveness because the derivative
instrument was constructed such that all the terms of the derivative exactly
match the hedged risk in the hedged item.

For derivative instruments not designated as hedges, the change in fair value of
the derivative is recorded in net realized investment and other gains and
losses.

In cases where the Company receives or pays a premium as consideration for
entering into a derivative instrument (i.e., interest rate caps and floors,
swaptions, and equity collars), the premium is amortized into investment income
over the useful life of the derivative instrument. The fair value of such
premiums (i.e., the inherent ineffectiveness of the derivative) is excluded from
the assessment of hedge effectiveness and is included in net realized investment
and other gains and losses.


                                       19
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 -- Derivatives and Hedging Instruments - (Continued)

Fair Value Hedges

The Company uses interest rate futures contracts and interest rate swap
agreements as part of its overall strategies of managing the duration of assets
and liabilities or the average life of certain asset portfolios to specified
targets. Interest rate swap agreements are contracts with a counterparty to
exchange interest rate payments of a differing character (e.g., fixed-rate
payments exchanged for variable-rate payments) based on an underlying principal
balance (notional principal). The net differential to be paid or received on
interest rate swap agreements and currency rate swap agreements is accrued and
recognized as a component of net investment income.

The Company also manages interest rate exposure by using interest rate swap
agreements to modify certain liabilities, such as fixed rate debt and Constant
Maturity Treasuries (CMT) indexed liabilities, by converting them to a floating
rate.

The Company enters into interest rate cap agreements, cancelable interest rates
swap agreements, and written swaptions to manage the interest rate exposure of
options that are embedded in certain assets and liabilities. A written swaption
obligates the Company to enter into an interest rate agreement on the expiration
date, contingent on future interest rates. Interest rate cap and floor
agreements are contracts with a counterparty which require the payment of a
premium for the right to receive payments for the difference between the cap or
floor interest rate and a market interest rate on specified future dates based
on an underlying principal balance (notional principal). Amounts earned on
interest rate cap and floor agreements and swaptions are recorded as an
adjustment to net investment income.

The Company uses equity collar agreements to reduce its equity market exposure
with respect to certain common stock investments that the Company holds. A
collar consists of a written call option that limits the Company's potential for
gain from appreciation in the stock price as well as a purchased put option that
limits the Company's potential for loss from a decline in the stock price.

Currency rate swap agreements are used to manage the Company's exposure to
foreign exchange rate fluctuations. Currency rate swap agreements are contracts
to exchange the currencies of two different countries at the same rate of
exchange at specified future dates.

For the three and six month periods ended June 30, 2001, the Company recognized
a net gain of $8.4 million and $0.9 million, respectively, related to the
ineffective portion of its fair value hedges, and a net loss of $3.2 million and
$1.1 million, respectively, related to the portion of the hedging instruments
that were excluded from the assessment of hedge effectiveness. For the three
months ended June 30, 2001, all of the Company's hedged firm commitments
qualified as fair value hedges.

Cash Flow Hedges

The Company uses forward starting interest rate swap agreements to hedge the
variable cash flows associated with future asset acquisitions, which will
support the Company's long-term care insurance businesses. These agreements will
reduce the impact of future interest rate changes on the cost of acquiring
adequate assets to support the investment income assumptions used in pricing
these products.

The Company uses interest rate futures contracts to hedge the variable cash
flows associated with variable benefit payments that it will make on certain
annuity contracts.

The Company used interest rate floor agreements to hedge the interest rate risk
associated with minimum interest rate guarantees in certain of its life
insurance and annuity businesses.

For the three and six month periods ended June 30, 2001, the Company recognized
a net loss of $0.4 million and $0.5 million, respectively, related to the
ineffective portion of its cash flow hedges, and a net loss of $30.6 million and
$22.6 million, respectively, related to the portion of the hedging instruments
that was excluded from the assessment of hedge effectiveness. For the three and
six month periods ended June 30, 2001, all of the Company's hedged forecast
transactions qualified as cash flow hedges.


                                       20
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 -- Derivatives and Hedging Instruments - (Continued)

For the three and six month periods ended June 30, 2001, no amounts were
reclassified from other accumulated comprehensive income to earnings and it is
anticipated that approximately $3.8 million will be reclassified from other
accumulated comprehensive income to earnings within the next twelve months. The
maximum length for which variable cash flows are hedged is 24 years.

For the three and six month periods ended June 30, 2001, none of the Company's
cash flow hedges have been discontinued because it was probable that the
original forecasted transactions would not occur by the end of the originally
specified time period documented at inception of the hedging relationship.

The transition adjustment for the adoption of SFAS No. 133, as amended, resulted
in an increase in other comprehensive income of $23.0 million (net of tax of
$12.3 million) representing the accumulation in other comprehensive income of
the effective portion of the Company's cash flow hedges as of January 1, 2001.
As of June 30, 2001, $20.0 million of losses (net of tax of $10.8 million)
representing the effective portion of the change in fair value of derivative
instruments designated as cash flow hedges was added to accumulated other
comprehensive income, resulting in a balance of $3.0 million (net of tax of $1.6
million).

Derivatives Not Designated as Hedging Instruments

The Company enters into interest rate swap agreements, cancelable interest rate
swap agreements, interest rate futures contracts, and interest rate cap and
floor agreements to manage exposure to interest rates as described above under
Fair Value Hedges without designating the derivatives as hedging instruments.

The Company enters into equity indexed futures contracts and equity indexed
option contracts and equity swaps to generate investment return to be credited
to equity indexed universal life insurance policies. The gains and losses on
these derivatives are included in net investment income, and are offset by
crediting similar amounts to policyholders' accounts.

Note 7 -- Related Party Transactions

Certain directors of the Company are members or directors of other entities that
periodically perform services for or have other transactions with the Company.
Such transactions are either subject to bidding procedures or are otherwise
entered into on terms comparable to those that would be available to unrelated
third parties and are not material to the Company's results of operations or
financial condition.

Note 8 - Subsequent Events

Stock Repurchase Program

On October 26, 2000, the Company announced that its Board of Directors
authorized a stock repurchase program, with no termination date, under which the
Company will purchase up to $500 million of its outstanding common stock. On
August 6, 2001, the Company's board of directors authorized a $500 million
increase to the stock repurchase program, bringing the total amount authorized
to be used to repurchase Company stock to $1.0 billion. Under the stock
repurchase program, purchases will be made from time to time, depending on
market conditions, business opportunities and other factors, in the open market
or through privately negotiated transactions, and which may be, if deemed
appropriate, through a systematic program. During the six months ended June 30,
2001, the Company repurchased 8.4 million shares with a total cost of $311.1
million. Since the inception of the Program through June 30, 2001, the Company
has repurchased 11.4 million shares with a total cost of $402.9 million.


                                       21
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 2. MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS
of OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of John Hancock Financial
Services, Inc. (John Hancock or the Company) as of June 30, 2001, compared with
December 31, 2000, and its consolidated results of operations for the three and
six month periods ended June 30, 2001 and June 30, 2000, and, where appropriate,
factors that may affect future financial performance. The discussion of the
Company's consolidated financial results of operations includes the results of
the closed block for the six months ended June 30, 2001 and the period February
1, 2000 (the date the closed block became effective) through June 30, 2000
combined on a line by line basis with the results of operations outside the
closed block for such period, as further discussed below. This discussion should
be read in conjunction with the Company's MD&A and annual audited financial
statements as of December 31, 2000 included in the Company's Form 10-K for the
year ended December 31, 2000 filed with the United States Securities and
Exchange Commission (hereafter referred to as the Company's 2000 Form 10-K) and
unaudited consolidated financial statements and related notes included elsewhere
in this Form 10-Q.

Statements, analyses, and other information contained in this report relating to
trends in the Company's operations and financial results, the markets for the
Company's products, the future development of the Company's business, and the
contingencies and uncertainties to which the Company may be subject, as well as
other statements including words such as "anticipate," "believe," "plan,"
"estimate," "intend," "will," "should," "may," and other similar expressions,
are "forward-looking statements" under the Private Securities Litigation Reform
Act of 1995. Such statements are made based upon management's current
expectations and beliefs concerning future events and their effects on the
Company, which may not be those anticipated by management. The Company's actual
results may differ materially from the results anticipated in these
forward-looking statements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Important Factors that May Affect
Future Results" included herein for a discussion of factors that could cause or
contribute to such material differences.

The Reorganization and Initial Public Offering

The Board of Directors of John Hancock Mutual Life Insurance Company (the Mutual
Company) unanimously adopted the Plan of Reorganization (the Plan) on August 31,
1999. Under the terms of the Plan, effective February 1, 2000, the Mutual
Company converted from a mutual life insurance company to a stock life insurance
company (i.e. demutualized) and became a wholly-owned subsidiary of John Hancock
Financial Services, Inc., which is a holding company. All policyholder
membership interests in the Mutual Company were extinguished on that date and
eligible policyholders of the Mutual Company received, in aggregate, 212.8
million shares of common stock, $1,438.7 million of cash and $43.7 million of
policy credits as compensation. In connection with the reorganization, the
Mutual Company changed its name to John Hancock Life Insurance Company (the Life
Company).

In addition, on February 1, 2000, the Company completed its initial public
offering (IPO) in which 102.0 million shares of common stock were issued at a
price of $17.00 per share. Net proceeds from the IPO were $1,657.7 million, of
which $105.7 million was retained by the Company and $1,552.0 million was
contributed to the Life Company.

Under the Plan, as of February 1, 2000, the Life Company created a closed block
for the benefit of policies included therein. The purpose of the closed block is
to protect the policy dividend expectations of the policies included in the
closed block after demutualization. Unless the Commissioner of Insurance of the
Commonwealth of Massachusetts and, in certain circumstances the New York
Superintendent of Insurance, consent to an earlier termination, the closed block
will continue in effect until the date none of such policies are in-force. As of
February 1, 2000, the Company segregated closed block assets of $9,343.0
million, an amount that is expected to produce cash flows which, together with
anticipated revenues from policies included in the closed block, is expected to
be sufficient to provide for payment of policy benefits, taxes and direct asset
acquisition and disposal costs, and for continuation of policy dividend scales
payable in 1999, so long as the experience underlying such dividend scales
continues. The assets allocated to the closed block and any cash flows provided
by these assets will solely benefit the holders of policies included in the
closed block. As of February 1, 2000, when the closed block was established,
total closed block liabilities were $12,118.3 million.

If the assets allocated to the closed block, the cash flows therefrom and the
revenues from the closed block business prove to be insufficient to pay the
benefits guaranteed under the policies included in the closed block, the Life
Company will be required to make payments from its general funds in an amount
equal to the shortfall. We funded


                                       22
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

the closed block to provide for payment of guaranteed benefits on such policies
and for continuation of dividends paid under 1999 policy dividends scales,
assuming the experience underlying such dividend scales continues. Therefore, we
do not believe it will be necessary to use general funds to pay guaranteed
benefits on closed block business unless the closed block business experiences
substantial adverse deviations in investment, mortality, persistency or other
experience factors.

For additional information on the closed block see Note 5 to the unaudited
consolidated financial statements and the Company's 2000 Form 10-K.

The costs relating to the demutualization, excluding costs relating to the
offering, were approximately $129.1 million (net of income taxes of $20.4
million), of which $20.4 million (net of tax of $5.9 million) was recognized in
the six month period ending June 30, 2000. No demutualization costs were
incurred in 2001. Demutualization expenses include printing and mailing costs
and our aggregate cost of engaging independent accounting, actuarial, financial,
investment banking, legal and other consultants to advise us. In addition, our
costs include the costs of the staff and advisors of the Massachusetts Division
of Insurance and the New York Insurance Department as to the demutualization
process and related matters.

Results of Operations

The table below presents the consolidated results of operations for the three
and six month periods ended June 30, 2001 and 2000, respectively. For
comparability with prior periods, the table below includes the results of
operations of the closed block for the three and six month periods ended June
30, 2001, the three month period ended June 30, 2000 and the five month period
February 1, 2000 through June 30, 2000 within the six month period ended June
30, 2000 combined on a line by line basis with the results of operations outside
the closed block.

<TABLE>
<CAPTION>
                                                          Three months ended              Six months ended
                                                               June 30,                       June 30,
                                                          2001           2000           2001            2000
                                                  --------------------------------------------------------------
                                                                          (in millions)
         <S>                                            <C>            <C>            <C>             <C>
         Revenues (1)                                   $2,147.3       $2,362.5       $4,504.6        $4,481.7

         Benefits and expenses (1)                       1,894.2        2,020.6        4,020.2         3,845.3
                                                  ------------------------------------------------------------
         Income before income taxes and
            cumulative effect of accounting
            changes                                        253.1          341.9          484.4           636.4

         Income taxes                                       72.3          109.5          142.9           212.5
                                                  ------------------------------------------------------------

         Cumulative effect of accounting changes              --             --            7.2              --
                                                  ------------------------------------------------------------

         Net income                                     $  180.8       $  232.4       $  348.7        $  423.9
                                                  ============================================================
</TABLE>

(1)   Revenues and benefits and expenses above differ from the unaudited
      consolidated statements of income due to closed block expenses for the
      three and six month periods ended June 30, 2001 and the three month period
      ended June 30, 2000 and the period February 1, 2000 through June 30, 2000
      of $346.9 million, $362.6 million, $732.2 million and $617.5 million,
      respectively. These expenses are included in revenues through the
      contribution from the closed block on the unaudited consolidated
      statements of income for the three and six month periods ended June 30,
      2001 and 2000, respectively.

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Consolidated income before income taxes and cumulative effect of accounting
changes of $253.1 million for the three months ended June 30, 2001 decreased by
$88.8 million, or 26.0%, from that reported in the comparable prior year period,
primarily due to a decrease in net realized investment and other gains of $80.1
million. The Company generated $20.2 million in net realized investment and
other losses in the three months ended June 30, 2001, compared to $59.9 million
in net realized investment and other gains for the three months ended June 30,
2000. Net realized investment and other gains generated in 2000 were the result
of the initiative to divest the Company of real estate investments, while net
realized investment and other losses generated in 2001 were primarily the result
of deteriorating economic conditions offset by gains from the sale of equity
investments. Income before


                                       23
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

income taxes and cumulative effect of accounting changes in the Corporate and
Other Segment decreased $60.3 million primarily driven by the corporate
operations businesses in which investment income and net realized investment and
other gains decreased from the comparable prior year period. In addition, income
before income taxes and cumulative effect of accounting changes decreased $13.7
million in the Asset Gathering Segment primarily due to a decrease in
investment-type product fees. The Investment Management Segment decreased $11.6
million primarily due to lower advisory fees on lower average assets under
management in the current period and the receipt of a one-time lawsuit
settlement in the timber investment management unit and a performance fee earned
by the mezzanine fund manager in the second quarter of 2000. Income before
income taxes and cumulative effect of accounting changes decreased $8.1 million
in the Protection Segment driven by increased benefits to policyholders due to
growth in the individual long-term care insurance business and an increase in
amortization of deferred policy acquisition costs, partially offset by a
decrease in operating expenses. Partially offsetting these decreases in income
before income taxes and cumulative effect of accounting changes was an increase
in the Guaranteed and Structured Financial Products Segment (G&SFP) of $4.9
million, primarily due to an increase in net investment income resulting from an
increase in invested assets backing spread based products.

Revenues of $2,147.3 million for the three months ended June 30, 2001 decreased
$215.2 million, or 9.1%, compared to the three months ended June 30, 2000,
primarily due to a decrease of $199.6 million in the G&SFP Segment. The decrease
in G&SFP revenues is primarily due to a decrease in premiums associated with the
sale of single premium annuities business. Revenue decreased $26.7 million in
the Asset Gathering Segment, primarily due to net realized investment and other
losses of $18.1 million for the three months ended June 30, 2001 compared to
$4.0 million in gains in the comparable prior year period. In addition,
management advisory fee income and commission income decreased $19.7 million
primarily from the mutual funds business, partially offset by increased
investment income in the fixed annuity business. The Investment Management
Segment revenues decreased $18.4 million primarily due to lower advisory fees on
lower average assets under management in the current period and the receipt of a
$9.8 million one-time legal settlement in our timber management operation and a
$1.5 million performance fee received by the mezzanine fund manager in the
comparable prior year period. In addition, revenues decreased $6.7 million, or
0.8%, in the Protection Segment, primarily due to net realized investment and
other losses of $29.0 million compared to gains of $6.8 million in the
comparable prior year period. This decrease was partially offset by an increase
in premiums during the three months ended June 30, 2001 primarily due to growth
in the individual long-term care insurance business. These decreases in revenues
were partially offset by an increase in the Corporate and Other Segment, which
increased $36.2 million, or 6.8%. Premiums grew by $41.8, primarily driven by
the Company's majority-owned Canadian subsidiary, (Maritime) and other income
grew by $54.5 million primarily due to the acquisition of Signature Fruit, LLC,
a subsidiary who acquired certain assets and assumed certain liabilities out of
bankruptcy proceedings of Tri Valley Growers, Inc., in corporate operations.
Partially offsetting these increases in revenues within Corporate and Other was
a decrease in net realized investment and other gains of $25.8 million and a
decrease in net investment income of $28.7 million primarily due to the
utilization of capital for the stock buy back program, dividends paid to
shareholders and capital supplied for the growth of the retail and institutional
businesses.

Benefits and expenses of $1,894.2 million for the three months ended June 30,
2001 decreased $126.4 million, or 6.3%, compared to the three months ended June
30, 2000. The decrease is driven by G&SFP decreasing $204.5 million, or 32.2%,
primarily due to a decrease in reserves reflecting lower sales of single premium
annuities in the second quarter of 2001. Benefits and expenses in the Asset
Gathering Segment decreased $13.1 million primarily due to a decrease in
operating expenses and amortization of deferred policy acquisition costs.
Operating expenses decreased due to lower commission expense in the mutual fund
business driven by lower front-end load charge mutual fund sales and lower
redemptions of deferred sales charge mutual fund shares. Amortization of
deferred policy acquisition costs decreased primarily due to improved separate
account performance and lower lapses. In addition, expenses in the Investment
Management Segment decreased $6.8 million driven by lower operating expenses due
to a decline in incentive compensation payments in the comparable prior year
period and legal settlement in the timber investment management business in the
prior year period. Partially offsetting these decreases in benefits and expenses
was an increase in the Corporate and Other Segment of $96.6 million, primarily
due to an increase in policyholder benefits for Maritime increases in premiums,
and the impact of the acquisition of Signature Fruit. The Protection Segment
increased $1.4 million, or 0.2%, primarily due to an increase in the
amortization of deferred policy acquisition costs in both the traditional and
non-traditional products.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000


                                       24
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Consolidated income before income taxes and cumulative effect of accounting
changes of $484.4 million for the six months ended June 30, 2001 decreased by
$152.0 million, or 23.9%, from that reported in the comparable prior year
period, primarily due to a decrease in net realized investment and other gains
(losses) of $125.2 million. The Company generated $44.0 million in net realized
investment and other losses in the six months ended June 30, 2001, compared to
$81.2 million in net realized investment and other gains for the six months
ended June 30, 2000. Net realized investment and other gains generated in 2000
were the result of the initiative to divest the Company of real estate
investments, while losses generated in 2001 were primarily the result of
difficult economic conditions. Income before taxes and cumulative effect of
accounting changes in the Corporate and Other Segment decreased $76.9 million
primarily due to corporate operations which decreased $68.8 million on lower
realized gains and the inclusion of Signature Fruit in operating expenses.
Partially offsetting these decreases in the Corporate and Other Segment was an
increase in Maritime of $9.6 million, primarily due to favorable experience in
Maritime's individual life insurance business and group insurance business. The
Investment Management Segment income before income taxes and cumulative effect
of accounting changes decreased $39.5 million on lower advisory fee income
partially offset by lower operating expenses. Investment Management Segment
advisory fees decreased due to lower average asset under management in the
current period and one-time fees and lawsuit settlement in the timber investment
management unit and a performance fee earned by the mezzanine fund manager in
the prior year period. The Asset Gathering Segment decreased $32.8 million due
to lower commission income due to lower sales and redemptions in the mutual
funds business and lower net realized investment and other gains, partially
offset by lower operating expense. The Protection Segment decreased $2.7 million
primarily due to a change in net realized investment and other gains(losses) and
increased amortization of deferred policy acquisition costs during the period,
partially offset by lower operating expenses. Partially offsetting these
decreases in income before income taxes and cumulative effect of accounting
changes is a stable performance in the G&SFP Segment which increased due to
growth in its spread based business.

Revenues of $4,504.6 million for the six months ended June 30, 2001 increased
$22.9 million, or 0.5%, compared to the six months ended June 30, 2000,
including revenue growth of $166.5 million in the G&SFP Segment, an increase of
14.0%. The increase in G&SFP revenues is primarily due to the premium growth in
the single premium annuity business, which improved $103.0 million due to two
large sales in the first quarter of 2001. G&SFP net investment income also
increased resulting from an increase in invested assets backing spread based
products compared to the prior year period. Revenues increased $40.1 million, or
2.6%, in the Protection Segment, primarily due to an increase in premiums in the
individual long-term care insurance business and growth in net investment
income, partially offset by a decrease in net realized investment and other
gains. These increases in revenues were partially offset by a decrease in the
Corporate and Other Segment, which decreased $91.4 million, or 9.3%. Corporate
and Other's net investment income decreased $126.0 million driven by the
mark-to-market adjustments on equity securities backing universal life products
issued by Maritime, and nonrecurring investment income on IPO proceeds earned in
the prior year. Maritime's mark-to-market adjustments are largely offset by
changes to policyholder benefits and deferred acquisition costs. In addition,
realized gains from venture capital partnerships decreased by $19.5 million. The
Investment Management Segment revenues decreased $62.0 million, or 48.2%,
primarily due to nonrecurring advisory fee income. Investment Management Segment
advisory fee income in the prior year period included the receipt of a $45.3
million incentive fee in connection with the restructuring of a timber
management contract, as well as the lawsuit settlement, and a $6.1 million
performance fee received by the mezzanine fund manager. Asset Gathering Segment
revenues decreased $30.2 million, or 5.0%, primarily due to a decrease in
management advisory fees and commission income from the mutual funds business of
$55.4 million, driven by the impact of redemptions, market depreciation and
lower sales. These decreases were partially offset by an increase in net
investment income of $26.7 million driven by the fixed annuity business and
$21.1 million in increased premiums primarily due to the single premium
immediate annuity business.

Benefits and expenses of $4,020.2 million for the six months ended June 30, 2001
increased $174.9 million, or 4.5%, compared to the six months ended June 30,
2000. The increase is driven by G&SFP increasing $166.5 million, or 16.1%,
primarily due to an increase in reserves resulting from sales of single premium
annuities in the six months ended June 30, 2001. Benefits and expenses in the
Protection Segment increased $42.8 million, or 3.1%, primarily due to increases
in the benefits to policyholders for growth in the individual long-term care
insurance business and amortization of deferred policy acquisition costs,
partially offset by decreased operating expenses. The Asset Gathering Segment's
increase in benefits and expenses of $2.7 million, or 0.5%, is primarily due to
increased benefits to policyholders, partially offset by lower operating
expenses driven by lower commission expense in the mutual fund business on lower
front end load mutual fund sales and lower redemptions of deferred sales charge
mutual fund shares. Partially offsetting these increases in benefits and
expenses is a decrease of $22.6 million, or 30.8%, in the Investment Management
Segment driven by a decrease in operating expenses due to incentive


                                       25
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

compensation payments in the comparable prior year period associated with the
restructuring of a portfolio in the timber investment management business and
the legal settlement in the prior year period. In addition, the Corporate and
Other Segment benefits and expenses decreased $14.5 million or 1.8% driven by a
$78.8 million decrease in benefits to policyholders, primarily due to reduced
policyholder credits on reduced mark-to-market adjustments on equity securities
supporting Maritime's universal life policies and favorable experience in the
individual life insurance and group insurance lines of business, partially
offset by an increase in operating expenses in corporate operations, primarily
the result of the acquisition of Signature Fruit.

Results of Operations by Segment

We operate our business in five segments. Two segments primarily serve retail
customers, two segments serve institutional customers and our fifth segment is
the Corporate and Other Segment, which includes our international operations.
Our retail segments are the Protection Segment and the Asset Gathering Segment.
Our institutional segments are the Guaranteed and Structured Financial Products
Segment and the Investment Management Segment.

We evaluate segment performance and base management's incentives on segment
after-tax operating income, which excludes the effect of net realized investment
gains and losses and other unusual or non-recurring events and transactions.
Segment after-tax operating income is determined by adjusting GAAP net income
for net realized investment and other gains and losses, cumulative effect of
accounting changes, and certain other items which we believe are not indicative
of overall operating trends. While these items may be significant components in
understanding and assessing our consolidated financial performance, we believe
that the presentation of segment after-tax operating income enhances the
understanding of our results of operations by highlighting net income
attributable to the normal, recurring operations of the business. However,
segment after-tax operating income is not a substitute for net income determined
in accordance with GAAP.

A discussion of the adjustments to GAAP reported income, many of which affect
each operating segment, follows the table below. A reconciliation of segment
after-tax operating income, as adjusted, to GAAP reported net income precedes
each segment discussion.

<TABLE>
<CAPTION>
                                                                       Three months ended            Six months ended
                                                                            June 30,                     June 30,
                                                                     ------------------------------------------------------
                                                                         2001          2000           2001          2000
                                                                     ------------------------------------------------------
                                                                                          (in millions)
<S>                                                                   <C>            <C>           <C>           <C>
Segment Data: (1)
Segment after-tax operating income:
   Protection Segment.....................................            $  79.5        $ 57.0        $ 152.1       $ 129.6
   Asset Gathering Segment................................               37.4          29.3           68.9          65.6
                                                                      --------------------------------------------------
     Total Retail.........................................              116.9          86.3          221.0         195.2
   Guaranteed and Structured Financial Products
     Segment..............................................               59.6          56.9          118.6         112.1
   Investment Management Segment..........................                4.6          11.0           10.0          32.4
                                                                      --------------------------------------------------
     Total Institutional..................................               64.2          67.9          128.6         144.5
   Corporate and Other Segment............................               18.3          29.5           40.3          49.4
                                                                      --------------------------------------------------
   Total segment after-tax operating income...............              199.4         183.7          389.9         389.1

After-tax adjustments: (1)
   Realized investment and other gains (losses), net......              (14.3)         38.8          (29.1)         50.0
   Restructuring charges..................................               (4.3)         (0.8)         (19.3)         (7.7)
   Group pension dividend transfer........................                 --            --             --           5.7
   Demutualization expenses, net of tax...................                 --           3.5             --         (10.2)
   Other demutualization related costs....................                 --            --             --         (10.2)
   Surplus tax............................................                 --           7.2             --           7.2
                                                                      --------------------------------------------------
     Total after-tax adjustments..........................              (18.6)         48.7          (48.4)         34.8
                                                                      --------------------------------------------------
GAAP Reported:
   Income before cumulative effect
     of accounting changes................................              180.8         232.4          341.5         423.9
   Cumulative effect of accounting changes................                 --            --            7.2            --
                                                                      --------------------------------------------------
   Net income.............................................             $180.8       $ 232.4        $ 348.7       $ 423.9
                                                                      ==================================================
</TABLE>

(1) See "Adjustments to GAAP Reported Net Income" set forth below.

Adjustments to GAAP Reported Net Income


                                       26
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Our GAAP reported net income is affected by net realized investment and other
gains and losses and other unusual or non-recurring events and transactions
presented in the reconciliation of GAAP reported net income to segment after-tax
operating income in Note 2 - Segment Information in the notes to the unaudited
consolidated financial statements. A description of these adjustments follows.

In both periods, net realized investment and other gains and losses, except for
gains and losses from mortgage securitizations and mezzanine funds have been
excluded from segment after-tax operating income due to their volatility between
periods and because such data are often excluded by analysts and investors when
evaluating the overall financial performance of insurers.

The volatility between periods can be impacted by economic conditions, as well
as by changes in the volume of activity, which can be influenced by us and our
investment decisions. Realized investment gains and losses from mortgage
securitizations and mezzanine funds were not excluded from segment after-tax
operating income because we view the related gains and losses as an integral
part of the core business of those operations.

Net realized investment and other gains have been reduced by: (1) amortization
of deferred policy acquisition costs to the extent that such amortization
results from realized gains and losses and (2) the portion of realized gains and
losses credited to participating pension contract holder accounts. We believe
presenting realized investment and other gains and losses in this format
provides information useful in evaluating our operating performance. This
presentation may not be comparable to presentations made by other insurers.
Summarized below is a reconciliation of (a) net realized investment and other
gains per the unaudited consolidated financial statements and (b) the adjustment
made for net realized investment and other gains to calculate segment after-tax
operating income for the three and six month periods ended June 30, 2001 and
2000.

<TABLE>
<CAPTION>
                                                                     Three months ended     Six months ended
                                                                          June 30,              June 30,
                                                                     ---------------------------------------
                                                                       2001       2000       2001       2000
                                                                     ---------------------------------------
                                                                                  (in millions)
<S>                                                                  <C>         <C>       <C>         <C>
Net realized investment and other gains (losses) ................    $(12.7)     $59.1     $(55.5)     $79.7
Amortization of deferred policy acquisition costs related to
   net realized investment gains (losses) .......................       6.7       (1.8)       5.9       (3.1)
Amounts credited (charged) to participating pension contract
   holder accounts ..............................................     (14.4)       2.5        5.6        4.6
                                                                     ---------------------------------------
Net realized investment and other gains (losses), net of
   related amortization of deferred policy acquisition costs
   and amounts credited to participating pension contract
   holders per unaudited consolidated financial
   statements (1) ...............................................     (20.4)      59.8      (44.0)      81.2
Realized investment (gains) losses attributable to mortgage
   securitizations and mezzanine funds ..........................       0.1       (0.2)      (2.5)      (2.0)
                                                                     ---------------------------------------
Realized investment and other gains (losses), net - pre-tax
   adjustment to calculate segment operating income .............     (20.3)      59.6      (46.5)      79.2
Less income tax effect ..........................................       6.0      (20.8)      17.4      (29.2)
                                                                     ---------------------------------------
Realized investment and other gains (losses), net -
   after-tax adjustment to calculate segment operating income ...    $(14.3)     $38.8     $(29.1)     $50.0
                                                                     =======================================
</TABLE>

(1)   Net realized investment and other gains (losses), net of related
      amortization of deferred policy acquisition costs and amounts credited to
      participating pension contract holders for the three and six month periods
      ended June 30, 2001 and 2000, respectively, includes $(11.9) million and
      $(3.2) million and $(9.2) million and $(0.1) million, in net realized
      losses generated in the closed block. This balance is included in
      contribution from the closed block in the unaudited consolidated financial
      statements.

The Company incurred after-tax restructuring charges as part of its Competitive
Position Project, which was undertaken to reduce costs and increase future
operating efficiency by consolidating portions of our operations as well as
associated with the sale of the Retirement Plan business. Additional information
regarding restructuring costs is included in Note 3 - Severance in the notes to
the unaudited consolidated financial statements. After-tax restructuring costs
were $4.3 million and $0.8 million, for the three months ended June 30, 2001 and
2000, respectively and $19.3 million and $7.7 million for the six month periods
ended June 30, 2001 and 2000, respectively.


                                       27
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

During 1999, we recorded an amount related to the transfer of certain assets
from the Guaranteed and Structured Financial Products Segment to the corporate
account within the Corporate and Other Segment. The $5.7 million after-tax
credit occurring in the first quarter of 2000 is a change in estimate of this
transaction based on information that became available in 2000.

In December 2000, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 00-3. SOP 00-3 which was adopted with respect to
accounting for demutualization expenses by the Company effective December 31,
2000, requires that demutualization related expenses be classified as a single
line item within income from continuing operations and should not be classified
as an extraordinary item. The adoption of SOP 00-3 resulted in the
reclassification of demutualization expenses previously recorded as an
extraordinary item for the three and six month periods ended June 30, 2000 of
($3.5) million (net of tax of ($1.9) million) and $10.2 million (net of tax of
$0.4 million), respectively. No demutualization costs were recognized in 2001.
The Company considers demutualization expenses to be an adjustment to GAAP
recorded net income.

The Company incurred after-tax charges for other demutualization related
expenses to improve our financial analysis and financial reporting abilities.
These charges primarily included consulting fees and planning and expense
management costs. After-tax charges for other demutualization related expenses
were $10.2 million (net of tax of $5.4 million) for the six month period ended
June 30, 2000. No such costs were incurred in 2001.

Effective within the year 2000, the Company is no longer subject to the surplus
tax imposed on mutual life insurance companies. During the three and six month
periods ended June 30, 2000 the Company recognized a reduction in equity based
taxes of $7.2 million, resulting from a revised estimate related to prior years.
This after-tax credit was excluded from after-tax operating income for these
periods.


                                       28
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Retail-Protection Segment

The following table presents certain summary financial data relating to the
Protection Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                                   Three months ended             Six months ended
                                                                        June 30,                      June 30,
                                                                  2001            2000          2001           2000
                                                                -----------------------------------------------------
                                                                                    (in millions)
<S>                                                              <C>             <C>          <C>            <C>
Revenues (1)..............................................       $808.1          $779.1       $1,643.0       $1,550.3

Benefits and expenses.....................................        688.1           692.0        1,410.1        1,355.4

Income taxes..............................................         40.5            30.1           80.8           65.3
                                                                -----------------------------------------------------

Segment after-tax operating income (1)....................         79.5            57.0          152.1          129.6
                                                                -----------------------------------------------------

After-tax adjustments: (1)
   Realized investment and other gains
     (losses), net........................................        (18.2)            4.2          (23.7)           9.0
   Surplus tax............................................           --             2.9             --            2.9
   Demutualization expenses...............................           --             2.4             --           (6.9)
   Restructuring charges..................................         (1.6)           (0.6)          (2.8)          (3.6)
                                                                -----------------------------------------------------
Total after-tax adjustments...............................        (19.8)            8.9          (26.5)           1.4
                                                                -----------------------------------------------------

Income before cumulative effect of accounting changes.....         59.7            65.9          125.6          131.0
Cumulative effect of accounting changes, net of tax.......           --              --           11.7             --
                                                                -----------------------------------------------------
Net income................................................       $ 59.7          $ 65.9       $  137.3       $  131.0
                                                                =====================================================

Other Data:
Segment after-tax operating income:
   Non-traditional life (variable and universal life).....       $ 30.8          $ 21.9       $   61.9       $   48.1
   Traditional life.......................................         30.6            22.2           56.1           56.7
   Long-term care.........................................         17.6            13.9           35.5           25.9
   Other..................................................          0.5            (1.0)          (1.4)          (1.1)
                                                                -----------------------------------------------------
Segment after-tax operating income (1)....................       $ 79.5          $ 57.0       $  152.1       $  129.6
                                                                =====================================================
</TABLE>

(1) See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Segment after-tax operating income was $79.5 million for the three months ended
June 30, 2001, an increase of $22.5 million, or 39.5%, from $57.0 million for
the three months ended June 30, 2000. Non-traditional life insurance business
after-tax operating income increased $8.9 million, or 40.6%, primarily due to
increased fee income. Traditional life insurance business after-tax operating
income increased $8.4 million, or 37.8%, primarily resulting from reductions in
operating expenses. Individual long-term care insurance business after-tax
operating income increased $2.8 million, or 28.0%, resulting from lower
expenses, higher investment income, and positive morbidity gains. Group
long-term care insurance business after-tax operating income increased $0.9
million, or 23.1%, due to improved morbidity and higher investment income driven
by the growth of business and assets respectively.

Revenues were $808.1 million for the three months ended June 30, 2001, an
increase of $29.0 million, or 3.7%, from $779.1 million for the three months
ended June 30, 2000. Premiums increased $9.8 million, or 2.5%, primarily due to
individual long-term care insurance premiums, which increased $20.2 million, or
16.4%, driven by continued growth in the business and the Fortis acquisition.
Partially offsetting this increase was a decline in traditional life insurance
premiums of $12.6 million, or 5.3%, primarily caused by a decrease in term life
insurance premiums due to the impact on sales of Regulation XXX price increases
and decreased whole life insurance premiums due to customers' continued focus on
non-traditional life products. Universal life and investment-type product
charges consist primarily of cost of insurance fees and separate account fees
and were $101.9 million for the three months ended June 30, 2001, an increase of
$14.7 million, or 16.9%, from $87.2 million for the three months ended June 30,


                                       29
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

2000. This was primarily due to increases in both universal and variable life
insurance product fees of $7.2 million and $7.5 million, respectively, from the
comparable prior year period, primarily driven by advisory fee increases and
universal life account value increases. The segment's net investment income
increased $5.7 million, or 1.9%, primarily due to increased asset balances and
improved portfolio yields.

Benefits and expenses were $688.1 million for the three months ended June 30,
2001, a decrease of $ 3.9 million, or 0.6%, from $692.0 million for the three
months ended June 30, 2000. Benefits to policyholders increased $10.6 million,
or 2.5%, due to growth in the individual long-term care insurance business.
Individual long-term care insurance benefits increased primarily due to
additions to reserves from the expansion of this business. Other operating costs
and expenses decreased $31.8 million, or 26.3%, primarily due to a decrease of
$31.1 million in operating expenses on traditional life insurance products
mainly attributable to operating cost reductions. Dividends to policyholders
increased $7.9 million, or 6.8%, primarily due to increased dividends on
traditional life insurance products partially resulting from the implementation
of a revised acquisition modeling system. Amortization of deferred policy
acquisition costs increased $9.5 million, or 29.1%, due to increased
amortization resulting from revised projections of estimated gross profits based
upon changes in estimated future mortality and expense margins, and revised
estimates relating to the implementation of new modeling systems during the
period in both the traditional and non-traditional life products. The Segment's
effective tax rate on operating income was 33.8% and 34.6% for the three months
ended June 30, 2001 and 2000, respectively.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

Segment after-tax operating income was $152.1 million for the six months ended
June 30, 2001, an increase of $22.5 million, or 17.4%, from $129.6 million for
the six months ended June 30, 2000. Non-traditional life insurance business
after-tax operating income increased $13.8 million, or 28.7%, primarily due to
higher fee income and net investment income. Traditional life insurance business
after-tax operating income decreased $0.6 million, or 1.1%, primarily resulting
from higher amortization of deferred policy acquisitions costs related to
anticipated changes to future dividend scales, mostly offset by reductions in
operating expenses. Individual long-term care insurance business after-tax
operating income increased $6.2 million, or 33.0%, resulting from lower
expenses, higher investment income, and positive morbidity gains. Group
long-term care insurance business after-tax operating income increased $3.4
million, or 47.9%, due to improved morbidity, and improved investment income
driven by the growth in business.

Revenues were $1,643.0 million for the six months ended June 30, 2001, an
increase of $92.7 million, or 6.0%, from $1,550.3 million for the six months
ended June 30, 2000. Premiums increased $50.0 million, or 6.6%, primarily due to
individual long-term care insurance premiums, which increased $63.0 million, or
29.5%, driven by continued growth in the business and the Fortis acquisition.
Partially offsetting this increase was a decline in traditional life insurance
premiums of $17.5 million, or 3.5%, driven by a decrease in term life insurance
premiums due to the impact on sales of Regulation XXX price increases and
decreased whole life insurance premiums due to customers' continued focus on
non-traditional life products. Universal life and investment-type product
charges were $203.8 million for the six months ended June 30, 2001, an increase
of $5.2 million, or 2.6%, from $198.6 million for the six months ended June 30,
2000. This increase was due primarily to the universal life insurance product
fees, which increased by $9.6 million, or 34.2%, from the comparable prior year
period, primarily driven by increased fees due to higher account values. Segment
net investment income increased $36.4 million, or 6.2%, primarily due to
increased asset balances and improved portfolio yields.

Benefits and expenses were $1,410.1 million for the six months ended June 30,
2001, an increase of $54.7 million, or 4.0%, from $1,355.4 million for the six
months ended June 30, 2000. Benefits to policyholders increased $49.2 million,
or 5.8%, due to growth in the individual long-term care insurance business
driven by the Fortis acquisition. Individual long-term care insurance benefits
increased primarily due to additions to reserves for premium growth and to
higher claim volume from the expansion of this business. Other operating costs
and expenses decreased $36.8 million, or 17.0%, primarily due to a decrease of
$38.2 million in operating expenses on traditional life insurance products
mainly attributable to operating cost reductions. Dividends to policyholders
increased $1.8 million, or 0.8%, primarily due to increased dividends on
traditional life insurance products. Amortization of deferred policy acquisition
costs increased $40.5 million, or 74.0%, primarily due to increased amortization
resulting from a change in the dividend scale in traditional life products and
changes in estimated future mortality and expense margins in the non-traditional
life products. The Segment's effective tax rate on operating income was 34.7%
and 33.5% for the six months ended June 30, 2001 and 2000, respectively.


                                       30
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Retail-Asset Gathering Segment

     The following table presents certain summary financial data relating to the
Asset Gathering Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                                  Three months ended                 Six months ended
                                                                       June 30,                          June 30,
                                                                 2001            2000             2001             2000
                                                                --------------------------------------------------------
                                                                                      (in millions)
<S>                                                             <C>             <C>              <C>              <C>
Revenues (1)..............................................      $294.9          $299.5           $583.8           $596.9

Benefits and expenses.....................................       239.4           256.1            481.5            498.9

Income taxes..............................................        18.1            14.1             33.4             32.4
                                                                --------------------------------------------------------

Segment after-tax operating income (1)....................        37.4            29.3             68.9             65.6
                                                                --------------------------------------------------------

After-tax adjustments: (1)
  Realized investment and other
     gains, net...........................................       (11.2)            2.5             (6.6)             3.7
  Surplus tax.............................................          --             0.1               --              0.1
  Demutualizaton expenses, net of tax.....................          --             0.5               --             (0.1)
  Other demutualization related costs.....................          --              --               --             (1.4)
  Restructuring charges...................................        (1.9)           (0.1)           (15.1)            (1.0)
                                                                --------------------------------------------------------
Total after-tax adjustments...............................       (13.1)            3.0            (21.7)             1.3
                                                                --------------------------------------------------------

Income before cumulative effect of accounting changes.....        24.3            32.3             47.2             66.9
Cumulative effect of accounting changes...................          --              --             (0.5)              --
                                                                --------------------------------------------------------

Net income................................................      $ 24.3          $ 32.3           $ 46.7           $ 66.9
                                                                ========================================================

Other Data:
Segment after-tax operating income (loss):
   Annuity................................................      $ 21.5          $ 19.8           $ 41.7           $ 45.6
   Mutual funds...........................................        13.7            10.7             28.1             22.1
   Other..................................................         2.2            (1.2)            (0.9)            (2.1)
                                                                --------------------------------------------------------
Segment after-tax operating income........................      $ 37.4          $ 29.3           $ 68.9           $ 65.6
                                                                ========================================================
</TABLE>

(1) See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Segment after-tax operating income was $37.4 million for the three months ended
June 30, 2001, an increase of $8.1 million, or 27.6%, from $29.3 million
reported in the comparable prior year period. Annuity business after-tax
operating income was $21.5 million for the three months ended June 30, 2001, an
increase of $1.7 million, or 8.6%, primarily due to increased net investment
income and lower operating expenses, partially offset by increased benefits to
policyholders and reduced fees on variable annuity products. Mutual funds
after-tax operating income increased $3.0 million, or 28.0%, primarily due to
lower commissions and operating expenses that decreased $25.6 million, or 25.8%
from the comparable prior year period.

Revenues were $294.9 million for the three months ended June 30, 2001, a
decrease of $4.6 million, or 1.5%, from $299.5 million reported for the
comparable prior year period. The decrease in revenues was primarily due to
lower management advisory fees and commission income which decreased $19.7
million, or 14.2% driven by the mutual funds business due to a decrease in
average assets under management and lower sales. Net investment income was
$122.8 million for the three months ended June 30, 2001, an increase of $9.5
million, or 8.3%, from $113.3 million reported in the comparable prior year
period. Net investment income increased primarily due to increases in invested
assets backing fixed annuity products. Investment-type product fees were $32.6
million for the three months ended June 30, 2001, a decrease of $1.7 million, or
5.0%, from $34.3 million reported for the comparable prior year period. The
decrease in investment-type product fees is primarily due to a decline in the
average variable annuity reserves


                                       31
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

which decreased 16.4% to $6,530.7 million for the three months ended June 30,
2001 from $7,809.6 million reported in the comparable prior year period. The
decrease in average variable annuity reserves is driven by depreciation of the
equity markets. The mortality and expense fees as a percentage of average
account balances were 1.29% for the three months ended June 30, 2001 and 2000.

Investment management revenues, commissions, and other fees were $119.1 million
for the three months ended June 30, 2001, a decrease of $19.7 million, or 14.2%,
from $138.8 million for the comparable prior year period. Average mutual fund
assets under management were $30,139.3 million for the three months ended June
30, 2001, a decrease of $2,332.3 million or 7.2%, from $32,471.6 million
reported in the comparable prior year period, due to net redemptions and market
depreciation in latter half of the prior year. The mutual fund business
experienced net redemptions for the three months ended June 30, 2001 of $136.5
million compared to net redemptions of $60.4 million in the comparable prior
year period. Excluding the sale of the full service retirement business, the
mutual fund business incurred $186.8 million in net deposits for the three
months ended June 30, 2001. The redemptions related to the sale of the
full-service retirement plan business were $323.3 million. The mutual fund
business assets under management grew due to realized net market appreciation of
$1,625.4 million for the three months ended June 30, 2001 compared to $1,096.6
million of market depreciation in the comparable prior year period. Deposits and
reinvestments for the second quarter of 2001 increased to $1,529.7 million, an
increase of $210.8 million, or 16.0%, compared to $1,318.9 million in the
comparable prior year period. Investment advisory fees were $47.0 million for
the three months ended June 30, 2001, a decrease of $0.5 million, or 1.0%, from
$47.5 million reported in the comparable prior year period and were 0.62% and
0.59% of average mutual fund assets under management for the three months ended
June 30, 2001 and 2000, respectively. Underwriting and distribution fees
decreased $20.7 million, or 26.4%, to $57.6 million for the three months ended
June 30, 2001, primarily due to a decrease in front end load charge mutual fund
sales and lower deferred sales charges due to decreased redemptions. Shareholder
service and other fees were $14.7 million for the three months ended June 30,
2001.

Benefits and expenses decreased $16.7 million, or 6.5%, to $239.4 million for
the three months ended June 30, 2001 from $256.1 million reported in the
comparable prior year period. Benefits to policyholders increased $22.9 million,
or 25.5%, primarily due to an increase in interest credited on fixed annuity
account balances due to higher average account balances. Other operating costs
and expenses decreased $32.3 million, or 22.2%, to $112.9 million for the three
months ended June 30, 2001 from $145.2 million reported in the comparable prior
year period primarily due to the decrease in commission fees incurred in the
mutual fund business, the result of lower front-end load mutual fund sales and
lower deferred sales charges due to lower redemptions. In addition, operating
expenses decreased in the annuities and mutual fund businesses due to expense
reduction programs. The decrease in expenses in the mutual fund business was
driven by lower subadvisory asset based fees due to a decline in average assets
under management and the sale of the retirement plan record-keeping business.
Amortization of deferred policy acquisition costs decreased $7.3 million, or
34.8%, to $13.7 million for the three months ended June 30, 2001 from $21.0
million reported in the comparable prior year period, primarily in the variable
annuities business due to improved separate account performance and lower
lapses. The Segment's effective tax rate on operating income was 32.6% and 32.5%
for the three months ended June 30, 2001 and 2000, respectively.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

Segment after-tax operating income was $68.9 million for the six months ended
June 30, 2001, an increase of $3.3 million, or 5.0%, from $65.6 million reported
in the comparable prior year period. Annuity business after-tax operating income
was $41.7 million for the six months ended June 30, 2001, a decrease of $3.9
million, or 8.6%, primarily due an increase in benefits to policyholders,
partially offset by increased net investment income. Mutual funds after-tax
operating income increased $6.0 million, or 27.1%, primarily due to lower
commissions and operating expenses that decreased $59.0 million, or 28.3% from
the comparable prior year period, partially offset by lower management advisory
fees, commissions, and other fee revenue.

Revenues were $583.8 million for the six months ended June 30, 2001, a decrease
of $13.1 million, or 2.2%, from $596.9 million reported for the comparable prior
year period. The decrease in revenues was due to lower management advisory fees
and commission income which decreased $55.4 million, or 19.1% primarily from
the mutual funds business due to a decrease in average assets under management
and lower sales. Net investment income was $242.6 million for the six months
ended June 30, 2001, an increase of $26.7 million, or 12.4%, from $215.9 million
reported in the comparable prior year period. Net investment income increased
primarily due to increases in invested assets backing fixed annuity products.
Investment-type product fees were $65.4 million for the six months ended June
30, 2001, a decrease of $4.5 million, or 6.4%, from $69.9 million reported for
the comparable prior year period. The decrease in investment-type product fees
is primarily due to a decline in the average variable annuity reserves, driven
by depreciation of the equity markets and lapses in the latter half of the


                                       32
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

prior year. Average variable annuity reserves decreased 10.1% to $6,932.9
million for the six months ended June 30, 2001 from $7,712.8 million reported in
the comparable prior year period. The mortality and expense fees as a percentage
of average account balances were 1.24% and 1.36% for the six months ended June
30, 2001 and 2000, respectively.

Investment management revenues, commissions, and other fees were $234.4 million
for the six months ended June 30, 2001, a decrease of $55.4 million, or 19.1%,
from $289.8 million for the comparable prior year period. Average mutual fund
assets under management were $30,349.8 million for the six months ended June 30,
2001, a decrease of $2,322.6 million or 7.1%, from $32,672.4 million reported in
the comparable prior year period, due to redemptions and market depreciation in
the latter half of the prior year. The mutual fund business experienced net
deposits for the six months ended June 30, 2001 of $124.1 million compared to
net redemptions of $364.4 million in the comparable prior year period, despite
difficult market conditions in the six months ended June 30, 2001. The mutual
fund business incurred $257.3 million in net redemptions for the six months
ended June 30, 2001 related to the sale of the full-service retirement plan
business. Absent this one time event, the mutual fund business experienced net
deposits of $381.4 million for the same period. Deposits and reinvestments for
the six months ended June 30, 2001 include the funding of a $247 million
institutional advisory account. Investment advisory fees were $93.1 million for
the six months ended June 30, 2001, a decrease of $2.3 million, or 2.4%, from
$95.4 million reported in the comparable prior year period and were 0.61% and
0.59% of average mutual fund assets under management for the six months ended
June 30, 2001 and 2000, respectively. Underwriting and distribution fees
decreased $53.9 million, or 31.6%, to $116.6 million for the six months ended
June 30, 2001, primarily due to a decrease in front end load mutual fund sales
and lower deferred sales charges due to decreased redemptions. Shareholder
service and other fees were $24.9 million for the six months ended June 30, 2001
compared to $23.9 million reported in the comparable prior year period.

Benefits and expenses decreased $17.4 million, or 3.5%, to $481.5 million for
the six months ended June 30, 2001 from $498.9 million reported in the
comparable prior year period. Benefits to policyholders increased $48.5 million,
or 28.6%, primarily due to an increase in interest credited on fixed annuity
account balances due to higher average account balances. Other operating costs
and expenses decreased $66.9 million, or 22.8%, to $226.1 million for the six
months ended June 30, 2001 from $293.0 million reported in the comparable prior
year period. The decrease was primarily due to the decrease in commission fees
incurred in the mutual fund business, the result of lower front-end load mutual
fund sales and lower deferred sales charges due to lower redemptions. In
addition, mutual fund operating expenses decreased due to operating
efficiencies, lower subadvisory asset based fees due to a decline in average
assets under management, and the sale of the retirement plan record-keeping
business. Amortization of deferred policy acquisition costs increased $1.0
million to $37.1 million for the six months ended June 30, 2001 from $36.1
million reported in the comparable prior year period. The Segment's effective
tax rate on operating income was 32.6% and 33.0% for the six months ended June
30, 2001 and 2000, respectively.


                                       33
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Institutional-Guaranteed and Structured Financial Products Segment

The following table presents certain summary financial data relating to the
Guaranteed and Structured Financial Products Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                                  Three months ended               Six months ended
                                                                       June 30,                        June 30,
                                                                  2001           2000            2001            2000
                                                                 -----------------------------------------------------
                                                                                     (in millions)
<S>                                                              <C>             <C>          <C>             <C>
Revenues (1)..............................................       $516.9          $720.9       $1,376.2        $1,207.1

Benefits and expenses.....................................        428.1           634.1        1,198.8         1,036.1

Income taxes..............................................         29.2            29.9           58.8            58.9
                                                                 -----------------------------------------------------

Segment after-tax operating income (1)....................         59.6            56.9          118.6           112.1
                                                                 -----------------------------------------------------

After-tax adjustments: (1)
   Realized investment and other gains
     (losses), net........................................         (6.2)           (8.4)         (14.4)          (13.1)
   Restructuring charges..................................         (0.6)           (0.1)          (0.7)           (2.2)
   Surplus tax............................................           --             1.5             --             1.5
   Demutualization expenses, net of tax...................           --             0.4             --            (0.2)
   Other demutualization related costs....................           --            (0.1)            --            (1.7)
   Group pension dividend transfer........................           --              --             --             5.7
                                                                 -----------------------------------------------------
Total after-tax adjustments...............................         (6.8)           (6.7)         (15.1)          (10.0)
                                                                 -----------------------------------------------------

Income before cumulative effect of accounting changes.....         52.8            50.2          103.5           102.1
Cumulative effect of accounting changes net of tax........           --              --           (1.2)             --
                                                                 -----------------------------------------------------
Net income................................................       $ 52.8          $ 50.2       $  102.3        $  102.1
                                                                 =====================================================

Other Data:
Segment after-tax operating income:
   Spread-based products:
     GICs and funding agreements..........................       $ 38.2          $ 33.2       $   78.3        $   68.6
     Single premium annuities.............................         15.2            14.5           27.4            26.5
   Fee-based products.....................................          6.2             9.2           12.9            17.0
                                                                 -----------------------------------------------------
Segment after-tax operating income (1)....................       $ 59.6          $ 56.9       $  118.6        $  112.1
                                                                 =====================================================
</TABLE>

(1) See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Segment after-tax operating income was $59.6 million for the three months ended
June 30, 2001, an increase of $2.7 million, or 4.7%, from $56.9 million reported
in the comparable prior-year period. Spread-based product's after-tax operating
income was $53.4 million, an increase of $5.7 million, or 11.9%, from $47.7
million reported in the comparable prior year period, primarily due to increased
investment spreads as a result of an increase in average invested assets. On a
total-company basis, GICs and funding agreements accounted for 19.2% of
after-tax operating income for the three months ended June 30, 2001 as compared
to 18.1% in the comparable prior period. Fee-based products' after-tax operating
income was $6.2 million, a decrease of $3.0 million, or 32.6%, from $9.2 million
reported in the comparable prior year period, primarily due to lower asset-based
fees on Separate Account GICs.

Revenues decreased $204.0 million, or 28.3%, to $516.9 million for the three
months ended June 30, 2001 from $720.9 million reported in the comparable prior
year period, largely due to a $242.4 million decrease in premiums driven by
single premium annuities. Investment-type product charges were $15.8 million for
the three months ended June 30, 2001, a decrease of $1.5 million, or 8.7%,
primarily due to lower asset based fees on Separate Account GICs.
Investment-type product charges were 0.52% and 0.55% of average fee-based policy
reserves for the three months ended June 30, 2001 and 2000, respectively. Net
investment income increased $39.9 million, or 9.4%, to $464.7 million for the
three months ended June 30, 2001 compared to the prior year period, primarily as
a result of a


                                       34
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

higher level of average invested assets backing spread-based products. Average
invested assets backing spread-based products increased $4,335.9 million, or
25.9% to $21,045.2 million for the three months ended June 30, 2001 from
$16,709.3 million reported in the comparable prior year period. The average
investment yield on these invested assets decreased to 7.85% for the three
months ended June 30, 2001 compared to 8.79% reported in the prior year period,
reflecting the lower interest rate environment in the current period.

Benefits and expenses decreased $206.0 million, or 32.5%, to $428.1 million for
the three months ended June 30, 2001 from $634.1 million reported in the
comparable prior year period. The decrease was largely due to a $200.6 million
decrease in benefits to policyholders as a result of decreased sales of single
premium annuity contracts, which decreased the change in the annuity reserves by
$278.6 million. Interest credited on account balances for spread-based products
was $319.3 million for the three months ended June 30, 2001, an increase of
$41.1 million, or 14.8%, from $278.2 million reported in the comparable prior
year period. The increase in interest credited was due to an increase in average
account balances for spread-based products of $3,761.8 million to $19,725.2
million for the three months ended June 30, 2001 from $15,963.4 million reported
in the comparable prior year period partially offset by a decrease in the
average interest credited rate on account balances for spread-based products.
Other operating costs and expenses were $14.5 million for the three months ended
June 30, 2001, a decrease of $3.5 million, or 19.4%, from $18.0 million reported
in the comparable prior year period. The decrease was primarily due to lower
compensation expenses and lower systems expenses related to projects completed
during 2000. Dividends of $8.8 million for the three months ended June 30, 2001,
decreased $2.0 million, or 18.5%, from $10.8 million reported in the comparable
prior year period, reflecting a lower level of distributable surplus to
participating contract holder accounts. The Segment's effective tax rates on
operating income were 32.9% and 34.4% for the three months ended June 30, 2001
and 2000, respectively. The decrease in the effective tax rate is primarily due
to increases in certain tax credits and deductions in the current period.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

Segment after-tax operating income was $118.6 million for the six months ended
June 30, 2001, an increase of $6.5 million, or 5.8%, from $112.1 million
reported in the comparable prior-year period. Spread-based product after-tax
operating income was $105.7 million, an increase of $10.6 million, or 11.1%,
from $95.1 million reported in the comparable prior year period, primarily due
to increased investment spreads largely as a result of growth in the average
invested assets of $3,547.6 million to $20,280.6 million. On a total-company
basis, GICs and funding agreements accounted for 20.1% of after-tax operating
income for the six months ended June 30, 2001 as compared to 17.6% in the
comparable prior period. Fee-based product after-tax operating income was $12.9
million, a decrease of $4.1 million, or 24.1%, from $17.0 million reported in
the comparable prior year period, primarily due to lower asset-based fees on
Separate Account GICs.

Revenues increased $169.1 million, or 14.0%, to $1,376.2 million for the six
months ended June 30, 2001 from $1,207.1 million reported in the comparable
prior year period, largely due to a $90.4 million increase in premiums, which
follow sales proceeds of our annuity products. Investment-type product charges
were $30.8 million for the six months ended June 30, 2001, a decrease of $3.5
million, or 10.2%, primarily due to lower expense recoveries from participating
contracts. Investment-type product charges were 0.51% and 0.56% of average
fee-based policy reserves for the six months ended June 30, 2001 and 2000,
respectively. Net investment income increased $82.4 million, or 9.7%, to $931.8
million for the six months ended June 30, 2001 compared to the prior year
period, primarily as a result of a higher level of average invested assets
backing spread-based products. Average invested assets backing spread-based
products increased $3,547.7 million, or 21.2% to $20,280.7 million for the six
months ended June 30, 2001 from $16,733.0 million reported in the comparable
prior year period. The average investment yield on these invested assets
decreased to 8.16% for the six months ended June 30, 2001 compared to 8.69%
reported in the prior year period, reflecting the lower interest rate
environment in the current period.

Benefits and expenses increased $162.7 million, or 15.7%, to $1,198.8 million
for the six months ended June 30, 2001 from $1,036.1 million reported in the
comparable prior year period. The increase was largely due to a $169.8 million
increase in benefits to policyholders as a result of increased sales of single
premium annuity contracts, which increased the change in the annuity reserves by
$25.7 million. Interest credited on account balances for spread-based products
was $639.1 million for the six months ended June 30, 2001, an increase of $84.2
million, or 15.2%, from $554.9 million reported in the comparable prior year
period. The increase in interest credited was due to an increase in average
account balances for spread-based products of $3,127.2 million to $19,107.8
million for the six months ended June 30, 2001 from $15,980.6 million reported
in the comparable prior year period partially offset by a decrease in the
average interest credited rate on account balances for spread-based products.
The decrease in the average interest credited rate on account balances for
spread-based products reflects the lower interest rate environment in the
current period. Other operating costs and expenses were $26.8 million for the
six months ended


                                       35
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

June 30, 2001, a decrease of $6.5 million, or 19.5%, from $33.3 million reported
in the comparable prior year period. The decrease was primarily due to lower
compensation expenses and lower systems expenses related to projects completed
during 2000. Dividends of $17.5 million for the six months ended June 30, 2001,
decreased $0.8 million, or 4.4%, from $18.3 million reported in the comparable
prior year period, reflecting a lower level of distributable surplus to
participating contract holder accounts. The Segment's effective tax rates on
operating income were 33.1% and 34.5% for the six months ended June 30, 2001 and
2000, respectively. The decrease in the effective tax rate is primarily due to
increases in certain tax credits and deductions in the current period.


                                       36
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Institutional-Investment Management Segment

The following table presents certain summary financial data relating to the
Investment Management Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                                  Three months ended               Six months ended
                                                                       June 30,                        June 30,
                                                                  2001           2000            2001            2000
                                                                  ----------------------------------------------------
                                                                                     (in millions)
<S>                                                               <C>             <C>            <C>            <C>
Revenues (1)..............................................        $30.9           $48.7          $66.5          $127.9

Benefits and expenses.....................................         23.3            30.3           49.8            73.4

Income taxes..............................................          3.0             7.4            6.7            22.1
                                                                  ----------------------------------------------------

Segment after-tax operating income (1)....................          4.6            11.0           10.0            32.4
                                                                  ----------------------------------------------------

After-tax adjustments: (1)
   Realized investment and other gains, net...............           --             0.3           (0.1)            0.3
   Restructuring charges..................................         (0.1)             --           (0.5)             --
                                                                  ----------------------------------------------------
Total after-tax adjustments...............................         (0.1)            0.3           (0.6)            0.3
                                                                  ----------------------------------------------------

Income before cumulative effect of
   accounting changes.....................................          4.5            11.3            9.4            32.7
Cumulative effect of accounting changes...................           --              --           (0.2)             --
                                                                  ----------------------------------------------------
Net income................................................        $ 4.5           $11.3          $ 9.2          $ 32.7
                                                                  ====================================================
</TABLE>

(1) See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Segment after-tax operating income was $4.6 million for the three months ended
June 30, 2001, a decrease of $6.4 million, or 58.2%, from $11.0 million reported
in the comparable prior year period. The decrease was primarily due to lower
investment advisory fees.

Revenues decreased $17.8 million, or 36.6%, to $30.9 million for the three
months ended June 30, 2001 from $48.7 million reported in the comparable prior
year period. Net investment income was $3.7 million for the three months ended
June 30, 2001, a decrease of $1.0 million from $4.7 million reported in the
comparable prior year period, primarily due to the sale of Energy Investors
Management Company and other related subsidiaries in 2000. Investment management
revenues, commissions, and other fees decreased $16.1 million, or 37.2%, for the
three months ended June 30, 2001, primarily due to a decrease in investment
advisory fees, which decreased $15.7 million to $25.5 million for the three
months ended June 30, 2001 compared to $41.2 million reported in the prior year
period primarily due to a $9.8 million incentive fee receipt in connection with
settlement of a lawsuit and a $1.5 million performance fee received by the
mezzanine fund manager during the second quarter 2000, while the balance came
from lower assets under management in the segment in 2001. Investment management
revenues, commissions and other fees were 0.37% and 0.45% of average advisory
assets under management in 2001 and 2000, respectively. Mortgage origination and
servicing fees were $1.8 million for the three months ended June 30, 2001
compared to $2.1 million in 2000. Realized investment gains decreased $0.3
million for the three months ended June 30, 2001.

Benefits and expenses were $23.3 million for the three months ended June 30,
2001, a decrease of $7.0 million, or 23.1%, from $30.3 million reported in the
comparable prior year period. The decrease was primarily due to a $2.8 million
incentive compensation payment related to the receipt of the lawsuit settlement
in the timber management operation and a $0.9 million performance fee paid for
the management of the mezzanine fund during the second quarter 2000. Other
operating costs and expenses were 0.32% and 0.31% of average advisory assets
under management in 2001 and 2000, respectively. The Segment's effective tax
rate on operating income was 39.5% and 40.2% for the three months ended June 30,
2001 and 2000, respectively. The effective tax rate for the Institutional
Investment Management Segment is higher than our other business segments
primarily due to the state tax on certain subsidiaries.


                                       37
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

Segment after-tax operating income was $10.0 million for the six months ended
June 30, 2001, a decrease of $22.4 million, or 69.1%, from $32.4 million
reported in the comparable prior year period. The decrease was primarily due to
lower investment advisory fees from lower average assets under management in the
current period.

Revenues decreased $61.4 million, or 48.0%, to $66.5 million for the six months
ended June 30, 2001 from $127.9 million reported in the comparable prior year
period. Net investment income was $9.2 million for the six months ended June 30,
2001, a decrease of $1.1 million from reported in the comparable prior year
period, primarily due to the sale of Energy Investors Management Company and
other related subsidiaries in 2000. Investment management revenues, commissions,
and other fees decreased $60.0 million, or 52.3%, for the six months ended June
30, 2001, primarily due to a decrease in investment advisory fees, which
decreased $59.1 million to $52.0 million for the six months ended June 30, 2001
compared to $111.1 million reported in the prior year period. The decrease in
investment advisory fees was primarily due to lower assets under management in
the current year period, a $45.3 million incentive fee receipt in connection
with the restructuring of a timber management contract, and a $6.1 million
performance fee received by the mezzanine fund manager and a legal settlement
during the prior year period, associated with our timber management operation.
Investment management revenues, commissions and other fees were 0.36% and 0.59%
of average advisory assets under management in 2001 and 2000, respectively.
Mortgage origination and servicing fees were $2.8 million for the six months
ended June 30, 2001 compared to $3.7 million in 2000. Realized investment gains
increased $0.5 million for the six months ended June 30, 2001, primarily due to
larger collateralized mortgage-backed securitizations in the first quarter of
2001 as compared to the first quarter of 2000.

Benefits and expenses were $49.8 million for the six months ended June 30, 2001,
a decrease of $23.6 million, or 32.2%, from $73.4 million reported in the
comparable prior year period. The decrease was primarily due to a $13.5 million
incentive compensation payment related to the receipt of the incentive fee on
the timber management contract, a $3.6 million performance fee paid for the
management of the mezzanine fund and a legal settlement during the prior year
period in our timber management operation. Other operating costs and expenses
were 0.33% and 0.38% of average advisory assets under management in 2001 and
2000, respectively. The Segment's effective tax rate on operating income was
40.1% and 40.6% for the six months ended June 30, 2001 and 2000, respectively.
The effective tax rate for the Institutional Investment Management Segment is
higher than our other business segments primarily due to the state tax on
certain subsidiaries.


                                       38
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Corporate and Other Segment

The following table presents certain summary financial data relating to the
Corporate and Other Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                                  Three months ended               Six months ended
                                                                       June 30,                        June 30,
                                                                  2001           2000            2001            2000
                                                                 -----------------------------------------------------
                                                                     (in millions)                  (in millions)
<S>                                                              <C>             <C>            <C>             <C>
Revenues (1)..............................................       $516.6          $454.7         $881.6          $920.3

Benefits and expenses.....................................        508.1           412.2          849.4           852.5

Income taxes..............................................         (9.8)           13.0           (8.1)           18.4
                                                                 -----------------------------------------------------

Segment after-tax operating income (1)....................         18.3            29.5           40.3            49.4
                                                                 -----------------------------------------------------

After-tax adjustments: (1)
   Realized investment and other gains (losses), net......         21.3            40.2           15.7            50.1
   Restructuring charges..................................         (0.1)             --           (0.2)           (0.9)
   Surplus tax............................................           --             2.7             --             2.7
   Demutualization expenses, net of tax...................           --             0.2             --            (9.7)
   Other demutualization related costs....................           --             0.1             --            (0.4)
                                                                 -----------------------------------------------------
Total after-tax adjustments...............................         21.2            43.2           15.5            41.8
                                                                 -----------------------------------------------------

Income before cumulative effect of accounting changes.....         39.5            72.7           55.8            91.2
Cumulative effect of accounting changes...................           --              --           (2.6)             --
                                                                 -----------------------------------------------------
Net income................................................       $ 39.5          $ 72.7         $ 53.2          $ 91.2
                                                                 =====================================================
</TABLE>

(1) See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Segment after-tax operating income from international operations was $7.9
million for the three months ended June 30, 2001, an increase of $0.3 million
from $7.6 million reported in the comparable prior year period. The increase in
segment after-tax operating income is primarily due to The Maritime Life
Assurance Company, an indirect 100% owned Canadian subsidiary of the Company.
Increased benefit and claim costs/reduced fees from assets under management
associated with equity investment, expenses for integration related expenses and
employee benefits were more than offset by tax benefits associated with the
reduction in Canadian tax rates.

Segment after-tax operating income from corporate operations was $8.6 million
for the three months ended June 30, 2001, a decrease of $9.8 million from $18.4
million reported in the comparable prior year period. The decrease was primarily
due to lower investment income on corporate surplus due to greater surplus
requirements in our other business lines, and decreased net investment income
caused by the stock buyback program and dividends to stockholders paid for the
first time at the end of last year.

The Segment's effective tax rate on operating income was (115.3%) and 30.6% for
the three months ended June 30, 2001 and 2000, respectively. This rate decreased
primarily due to a decrease in the deferred tax liability associated with
contracts entered into to transfer the management of certain lease investment
residuals to a foreign jurisdiction and a reduction in Maritime's deferred tax
liability to reflect decreased Canadian tax rates.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

Segment after-tax operating income from international operations was $26.0
million for the six months ended June 30, 2001, an increase of $15.3 million
from $10.7 million reported in the comparable prior year period. The increase in
segment after-tax operating income is primarily due to Maritime where individual
life experienced favorable


                                       39
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

expense, mortality and investment margins and group insurance benefited from
rate strengthening, favorable claims experience and reinsurance programs that
were put in place in 2000.

Segment after-tax operating income from corporate operations was $10.8 million
for the six months ended June 30, 2001, a decrease of $25.0 million from $35.8
million reported in the comparable prior year period. The decrease was primarily
due to nonrecurring investment income on the proceeds from the IPO in 2000 as
well as lower investment income on corporate surplus due to greater surplus
requirements in our other business lines and the negative impact to net
investment income associated with the stock buyback program.

The Segment's effective tax rate on operating income was (25.2%) and 27.1% for
the six months ended June 30, 2001 and 2000, respectively. This rate decreased
primarily due to a decrease in the deferred tax liability associated with
contracts entered into to transfer the management of certain lease investment
residuals to a foreign jurisdiction and a reduction in Maritime's deferred tax
liability to reflect decreased Canadian tax rates.

General Account Investments

On the effective date of the Plan of Reorganization, the Company's invested
assets were allocated between the closed block and operations outside the closed
block. In view of the similar asset quality characteristics of the major asset
categories in the two portfolios, the invested assets in the closed block have
been combined with the Company's invested assets outside the closed block for
purposes of the following discussion and analysis.

Overall Composition of the General Account

Invested assets, excluding separate accounts, totaled $55.3 billion and $52.2
billion as of June 30, 2001 and December 31, 2000, respectively. The portfolio
composition has not significantly changed at June 30, 2001 as compared to
December 31, 2000. The following table shows the composition of investments in
our general account portfolio.

<TABLE>
<CAPTION>
                                          As of June 30,          As of December 31,
                                               2001                      2000
                                    -----------------------------------------------------
                                      Carrying       % of       Carrying       % of
                                        Value        Total        Value        Total
                                    -----------------------------------------------------
                                          (in millions)             (in millions)
<S>                                    <C>           <C>         <C>           <C>
Fixed maturity securities (1).....     $37,950.4      68.6%      $32,573.4      62.4%
Mortgage loans (2)................      10,757.5      19.5        10,900.0      20.9
Real estate.......................         501.5       0.9           519.0       1.0
Policy loans (3)..................       1,987.0       3.6         1,969.2       3.8
Equity securities.................       1,310.2       2.4         1,372.3       2.6
Other invested assets.............       1,592.3       2.9         1,393.7       2.6
Short-term investments............         183.6       0.3           214.0       0.4
Cash and cash equivalents (4).....       1,021.9       1.8         3,280.0       6.3
                                    -----------------------------------------------------
   Total invested assets (5)......     $55,304.4     100.0%      $52,221.6     100.0%
                                    =====================================================
</TABLE>

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $752.5 million and
      $735.3 million as of June 30, 2001 and December 31, 2000, respectively.
      Carrying value is composed of investments categorized as held-to-maturity,
      which are carried at amortized cost, and investments categorized as
      available-for-sale, which are carried at fair value. The total fair value
      of our fixed maturity security portfolio was $37,922.6 million and
      $32,393.5 million, at June 30, 2001 and December 31, 2000, respectively.

(2)   The fair value of the mortgage loan portfolio was $11,170.9 million and
      $11,359.6 million as of June 30, 2001 and December 31, 2000, respectively.

(3)   Policy loans are secured by the cash value of the underlying life
      insurance policies and do not mature in a conventional sense, but expire
      in conjunction with the related policy liabilities.

(4)   Cash and cash equivalents are included in total invested assets for the
      purposes of calculating yields on the income producing assets for the
      Company.

(5)  Total Investments on the Company's Consolidated Balance Sheet excludes
     amounts for cash and cash equivalents of $1,021.9 million and $3,280.0
     million as of June 30, 2001 and December 31, 2000 and closed block total
     investments of $8,798.6 million and $8,203.2 million as of June 30, 2001
     and December 31, 2000, respectively.

Consistent with the nature of the Company's product liabilities, assets are
heavily oriented toward fixed maturity securities. The Company determines the
allocation of assets primarily on the basis of cash flow and return requirements
of its products and by the level of investment risk.


                                       40
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Fixed Maturity Securities. The fixed maturity securities portfolio is
predominantly comprised of low risk, investment grade, publicly and privately
traded corporate bonds and senior tranches of asset-backed securities (ABS) and
mortgage-backed securities (MBS), with the balance invested in government bonds.
The fixed maturity securities portfolio also includes redeemable preferred
stock. As of June 30, 2001, fixed maturity securities represented 68.6% of
general account investment assets with a carrying value of $38.0 billion,
roughly comprised of 55% public securities and 45% private securities. Each year
the Company directs the majority of net cash inflows into investment grade fixed
maturity securities. Typically between 5% and 15% of funds allocated to fixed
maturity securities are invested in below-investment-grade bonds, while
maintaining a policy to limit the overall level of these bonds to no more than
10% of invested assets and the majority of that balance in the BB category.
Allocations are based on an assessment of relative value and the likelihood of
enhancing risk-adjusted portfolio returns. While the Company has profited from
the below-investment-grade asset class in the past, care is taken to manage its
growth strategically by limiting its size relative to the Company's net worth.

The following table shows the composition by issuer of the fixed maturity
securities portfolio.

                     Fixed Maturity Securities -- By Issuer

<TABLE>
<CAPTION>
                                          As of June 30,          As of December 31,
                                               2001                      2000
                                    -----------------------------------------------------
                                      Carrying       % of       Carrying       % of
                                        Value        Total        Value        Total
                                    -----------------------------------------------------
                                          (in millions)             (in millions)
<S>                                    <C>           <C>         <C>           <C>
Corporate securities..............     $30,150.5      79.4%      $25,193.6      77.4%
MBS/ABS...........................       6,069.2      16.0         5,483.5      16.8
U.S. Treasury securities and
   obligations of U.S. government
   agencies.......................         127.6       0.3           205.8       0.6
Debt securities issued by foreign
   governments....................       1,466.6       3.9         1,549.9       4.8
Obligations of states and political
   subdivisions...................         136.5       0.4           140.6       0.4
                                    -----------------------------------------------------
     Total........................     $37,950.4     100.0%      $32,573.4     100.0%
                                    =====================================================
</TABLE>

In keeping with the investment philosophy of tightly managing interest rate
risk, the Company's MBS & ABS holdings are heavily concentrated in commercial
MBS where the underlying loans are largely call protected, which means they are
not pre-payable without penalty prior to maturity at the option of the issuer.
By investing in MBS and ABS securities with relatively predictable repayments,
the Company adds high quality, liquid assets to the portfolios without incurring
the risk of cash flow variability. The Company believes the portion of the
MBS/ABS portfolio subject to prepayment risk as of June 30, 2001 and December
31, 2000 was limited to 12.4% and 3.3% of total MBS/ABS portfolio and 2.0% and
0.6% of total fixed maturity securities holdings, respectively. The increase is
due to a $500 million portfolio in a new duration neutral strategy used in the
corporate investment segment as a liquid alternative to a cash portfolio.

The Securities Valuation Office (SVO) of the National Association of Insurance
Commissioners evaluates all public and private bonds purchased as investments by
insurance companies. The SVO assigns one of six investment categories to each
security it reviews. Category 1 is the highest quality rating, and Category 6 is
the lowest. Categories 1 and 2 are the equivalent of investment grade debt as
defined by rating agencies such as Standard & Poor's (S&P) and Moody's (i.e.,
BBB-/Baa3 or higher), while Categories 3-6 are the equivalent of
below-investment grade securities. SVO ratings are reviewed and may be revised
at least once a year.

The following table sets forth the SVO ratings for our bond portfolio along with
an equivalent S&P rating agency designation. The majority of the bonds are
investment grade, with 87.7% invested in Category 1 and 2 securities as of June
30, 2001. Below investment grade bonds were 8.3% of total invested assets as of
June 30, 2001. This allocation reflects the Company strategy of avoiding the
unpredictability of interest rate risk in favor of relying on the Company's bond
analysts' ability to better predict credit or default risk. The bond analysts
operate in an industry-based, team-oriented structure that permits the
evaluation of a wide range of below investment grade offerings in a variety of
industries resulting in a well-diversified high yield portfolio. A majority
(61.7%) of below investment grade bonds are in category 3, the highest quality
below investment grade. Category 6


                                       41
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

bonds, those in or near default, represent securities that were originally
acquired as long-term investments, but subsequently became distressed. The
carrying value of bonds in or near default was $256.9 million and $216.7 million
as of June 30, 2001 and December 31, 2000, respectively. As of June 30, 2001 and
December 31, 2000, $5.9 million and $2.6 million, respectively, of interest on
bonds near default was included in accrued investment income. It is the
Company's policy to reverse any accrued investment income and cease accruing
interest income on bonds in default and accrue interest income on bonds near
default that the Company expects to collect.

                     Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                 As of June 30,                          As of December 31,
                                ---------------------------------------------------------------------------------
                                                      2001                                      2000
                                ---------------------------------------------------------------------------------
    SVO       S&P Equivalent             Carrying               % of                Carrying            % of
Rating (1)    Designation (2)            Value (3)              Total               Value (3)           Total
-----------------------------------------------------------------------------------------------------------------
                                       (in millions)                              (in millions)
     <S>   <C>                           <C>                    <C>                 <C>                <C>
     1     AAA/AA/A.............         $17,723.5               47.6%              $14,614.2           45.9%
     2     BBB..................          14,901.1               40.1                12,877.8           40.5
     3     BB...................           2,820.0                7.6                 2,793.3            8.8
     4     B....................           1,027.4                2.7                 1,066.4            3.3
     5     CCC and lower........             469.0                1.3                   269.7            0.8
     6     In or near default...             256.9                0.7                   216.7            0.7
                                ---------------------------------------------------------------------------------
           Total................         $37,197.9              100.0%              $31,838.1          100.0%
                                =================================================================================
</TABLE>

(1)   With respect to securities that are awaiting an SVO rating, the Company
      has assigned a rating based on an analysis that it believes is equivalent
      to that used by the SVO.

(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.

(3)   Does not include redeemable preferred stock with a carrying value of
      $752.5 million and $735.3 million as of June 30, 2001 and December 31,
      2000, respectively.

Mortgage Loans. As of June 30, 2001 and December 31, 2000, the Company held
mortgage loans with a carrying value of $10.8 billion and $10.9 billion,
respectively, including $2.5 billion at each period end of agricultural loans,
and $1.3 billion and $1.2 billion, respectively, of loans managed by our
majority-owned Canadian subsidiary, Maritime Life Assurance Company, of which
$0.6 billion at each period end were government-insured by the Canada Mortgage
and Housing Corporation (CMHC).


                                       42
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Investment Results

The following table summarizes the Company's investment results for the periods
indicated. Overall, the yield, net of investment expenses, on the general
account portfolio decreased from the three months ended and the six months ended
June 30, 2000. The lower yield was impacted by floating rate instruments which
reflect a decrease in the three-month LIBOR of 291 basis points, and the result
of scheduled maturities rolling over into new investments with less favorable
interest rates and narrower acquisition spreads than those present in our 2000
fixed maturity portfolio. The inflow of new cash was invested at rates that were
less than the overall portfolio earnings rate during the first half of 2000.
Indicative of this environment, between June 2000 and June 2001, the 10-year
U.S. Treasury rate fell by 62 basis points, while Moody's seasoned BAA spreads
fell by 31 basis points.

<TABLE>
<CAPTION>
                                            Three Months Ended                         Six Months Ended
                                       As of                 As of                 As of               As of
                                   June 30, 2001         June 30, 2000         June 30, 2001       June 30, 2000
                                ------------------------------------------------------------------------------------
                                  Yield    Amount       Yield      Amount     Yield     Amount    Yield    Amount
                                ------------------------------------------------------------------------------------
                                   (in millions)         (in millions)         (in millions)       (in millions)
<S>                             <C>      <C>             <C>    <C>            <C>     <C>        <C>      <C>
General account
assets-excluding policy loans
   Gross income                 7.81%    $ 1,027.1       8.31%  $   995.6      7.77%    2,011.8   8.42%    $ 2,005.7
   Ending assets-excluding
      policy loans                        53,317.4               48,465.7              53,317.4             48,465.7
Policy loans
   Gross income                 6.26%         31.0       6.27%       30.5      6.29%       62.2   6.18%         60.0
   Ending assets                           1,987.0                1,947.7                1987.0              1,947.7
     Total gross income         7.76%      1,058.1       8.23%    1,026.1      7.72%    2,074.0   8.34%      2,065.7
     Less: investment expenses               (62.1)                 (55.7)               (127.6)              (137.9)
                                         ---------              ---------              --------            ---------
       Net investment
          income (1)            7.30%     $  996.0       7.78%  $   970.4      7.24%    1,946.4   7.78%    $ 1,927.9
                                         =========              =========              ========            =========
</TABLE>

(1)   Total Company's net investment income as shown on the unaudited
      Consolidated Statements of Income excludes amounts for the closed block of
      $163.5 million and $158.4 million for the three months ended June 30, 2001
      and June 30, 2000, and $332.5 million and $267.3 million for the six
      months ended June 30, 2001 and the period from February 1, 2000 through
      June 30, 2000, respectively.

Liquidity and Capital Resources

Liquidity describes the ability of a company to generate sufficient cash flows
to meet the cash requirements of business operations. The assets of the Company
consist of the outstanding capital stock of the Life Company, and investments in
international subsidiaries. The Company's cash flow consists of dividends from
its subsidiaries offset by expenses and stock repurchases. As a holding company,
the Company's ability to meet its cash requirements, pay interest on any debt,
pay expenses related to its affairs and pay dividends on its common stock
substantially depends upon dividends from its subsidiaries.

State insurance laws generally restrict the ability of insurance companies to
pay cash dividends in excess of prescribed limitations without prior approval.
The Life Company's limit is the greater of 10% of the prior year-end statutory
surplus or the prior calendar year's statutory net gain from operations of the
Life Company. The ability of the Life Company, the Company's primary operating
subsidiary, to pay shareholder dividends is and will continue to be subject to
restrictions set forth in the insurance laws and regulations of Massachusetts,
its domiciliary state. The Massachusetts insurance law limits how and when the
Life Company can pay shareholder dividends. The Life Company, in the future,
could also be viewed as being commercially domiciled in New York. If so,
dividend payments may also be subject to New York's holding company act as well
as Massachusetts' law. The Company currently does not expect such regulatory
requirements to impair its ability to meet its liquidity and capital needs.
However, the Company can give no assurance it will declare or pay dividends on a
regular basis. No such dividends were declared or paid to shareholders in the
six months ended June 30, 2001 or 2000.

In March 2001, in accordance with a filing made with the Commissioner of
Insurance for the Commonwealth of Massachusetts, the Life Company paid a
dividend to the Company in the amount of $250.0 million. None of this dividend
was classified as extraordinary by state regulators. The funds from these
dividends, together with the net proceeds of the IPO, were principally
designated to repurchase common stock of the Company.


                                       43
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Sources of cash for the Company's insurance subsidiaries are from premiums,
deposits and charges on policies and contracts, investment income, maturing
investments, and proceeds from sales of investment assets. In addition to the
need for cash flow to meet operating expenses, our liquidity requirements relate
principally to the liabilities associated with various life insurance, annuity,
and structured investment products, and to the funding of investments in new
products, processes, and technologies. Product liabilities include the payment
of benefits under life insurance, annuity and structured investment products and
the payment of policy surrenders, withdrawals and policy loans. The Company
periodically adjusts its investment policy to respond to changes in short-term
and long-term cash requirements and provide adequate funds to pay benefits
without forced sales of investments.

The liquidity of our insurance operations is also related to the overall quality
of our investments. As of June 30, 2001, $32,624.6 million, or 87.7% of the
fixed maturity securities held by us and rated by Standard & Poor's Ratings
Services, a division of the McGraw-Hill Companies, Inc. (S&P) or the National
Association of Insurance Commissioners were rated investment grade (BBB or
higher by S&P or 1 or 2 by the National Association of Insurance Commissioners).
The remaining $4,573.3 million, or 12.3%, of fixed maturity investments, and
8.3% of invested assets, were rated non-investment grade. For additional
discussion of our investment portfolio see the General Account Investments
section above in this Management's Discussion and Analysis of Financial
Condition and Results of Segment Operations.

We employ an asset/liability management approach tailored to the specific
requirements of each of our product lines. Each product line has an investment
strategy based on the specific characteristics of the liabilities in the product
line. As part of this approach, we develop investment policies and operating
guidelines for each portfolio based upon the return objectives, risk tolerance,
liquidity, and tax and regulatory requirements of the underlying products and
business segments.

Net cash provided by operating activities was $1,059.8 million and $622.9
million for the six months ended June 30, 2001 and 2000, respectively. The
increase in 2001 compared to 2000 was primarily due to the initial cash transfer
to the closed block of $158.6 million during the first six months of 2000, which
did not recur in the current period. In addition, also contributing to the
increase in cash provided by operations was an increase in policy liabilities of
$197.8 million during the six months ended June 30, 2001.

Net cash used in investing activities was $3,890.4 million and $3.7 million for
the six months ended June 30, 2001 and 2000, respectively. The increase in cash
used in 2001 as compared to 2000 resulted from approximately $5,400 million of
acquisitions of fixed maturity securities in excess of sales of fixed maturity
securities during the six months ended June 30, 2001, compared to approximately
$1,700 million in the prior year period.

Net cash provided by financing activities was $873.6 million and $164.1 million,
for the six months ended June 30, 2001 and 2000, respectively. The increase in
2001 as compared to 2000 resulted from approximately $1,700.0 million increase
in deposits on universal life insurance and investment type contracts, partially
offset by approximately $220 million increase in cash payments made on
withdrawals of universal life insurance and investment-type contracts. This
activity was partially offset by non-recurring cash activity related to the IPO
in the first quarter of 2000. In addition, the Company used $311.1 million in
cash to acquire treasury stock during the six months ended June 30, 2001.

On June 7, 2001 President Bush signed into law The Economic Growth and Tax
Relief Act of 2000 (HR 1836). Among its many provisions the law creates three
distinct periods of estate law during the next 20 years. First, during tax years
2002 through 2009, it provides a lengthy phase-in period of estate tax rate
reductions and estate transfer exemption increases. Second, in 2010, the bill
provides a brief repeal period, eliminating the estate tax for one year. Third,
and lastly, commencing in 2011, the estate tax law reverts back to present law,
as if HR 1836 had never existed. The Company' expects that this law will
moderately impact the sales of survivorship products used in estate planning.
The Company expects to mitigate this effect through the sale of single life,
term life and corporate-owned life insurance (COLI) products, as well as through
ongoing collaboration with its producers to increase the sale of life insurance
products to meet consumers' protection and asset accumulation needs.

On October 26, 2000, the Company announced that its Board of Directors
authorized a stock repurchase program, with no termination date, under which the
Company will purchase up to $500 million of its outstanding common stock. On
August 6, 2001, the Company's board of directors authorized a $500 million
increase to the stock repurchase program, bringing the total amount authorized
to be used to repurchase Company stock to $1.0 billion. Under the stock
repurchase program, purchases will be made from time to time, depending on
market conditions, business opportunities and other factors, in the open market
or through privately negotiated transactions, and which


                                       44
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

may be, if deemed appropriate, through a systematic program. During the six
months ended June 30, 2001, the Company repurchased 8.4 million shares with a
total cost of $311.1 million. Since the inception of the Program through June
30, 2001, the Company has repurchased 11.4 million shares with a total cost of
$402.9 million.

Cash flow requirements also are supported by a committed line of credit of $1.0
billion. The line of credit agreement provides for two facilities: one for $500
million pursuant to a 364-day commitment (renewed as of August 3, 2001) and a
second for $500 million pursuant to a five-year facility. The line of credit is
available for general corporate purposes. The line of credit agreement contains
various covenants, among these being that shareholders' equity meet certain
requirements. To date, we have not borrowed any amounts under the line of
credit.

As of June 30, 2001, we had $855.4 million of debt outstanding consisting of
$114.8 million of debt classified as short term and $740.6 million classified as
long term, including $447.3 million of surplus notes. The commercial paper
program established at the Company has replaced the commercial paper program at
its indirect subsidiary, John Hancock Capital Corporation. During the six months
ended June 30, 2001, $200.0 million in commercial paper was issued by the
Company and $100.0 million was outstanding at June 30, 2001.

The Company has an effective shelf registration statement which provides for the
possible issuance, from time to time, of up to $1.0 billion of the Company's
debt and equity securities. To date, no debt or equity securities have been
issued under the shelf registration.

The risk-based capital standards for life insurance companies, as prescribed by
the National Association of Insurance Commissioners, establish a risk-based
capital ratio comparing adjusted surplus to required surplus for each of our
United States domiciled insurance subsidiaries. If the risk-based capital ratio
falls outside of acceptable ranges, regulatory action may be taken ranging from
increased information requirements to mandatory control by the domiciliary
insurance department. The risk-based capital ratios of all our insurance
subsidiaries as of year end were above the ranges that would require regulatory
action.

We maintain reinsurance programs designed to protect against large or unusual
losses. Based on our review of our reinsurers' financial statements and
reputations in the reinsurance marketplace, we believe that our reinsurers are
financially sound, and, therefore, that we have no significant exposure to
uncollectible reinsurance in excess of uncollectible amounts already recognized
in our unaudited consolidated financial statements.

Given the historical cash flow of our subsidiaries and current financial
results, management believes that the cash flow from the operating activities
over the next year will provide sufficient liquidity for our operations, as well
as to satisfy debt service obligations and to pay other operating expenses.
Although we anticipate that we will be able to meet our cash requirements, we
can give no assurances in this regard.

Important Factors that May Affect Future Results

The statements, analyses, and other information contained herein relating to
trends in the Company's operations and financial results, the markets for the
Company's products, the future development of the Company's business, and the
contingencies and uncertainties to which the Company may be subject, as well as
other statements including words such as "anticipate," "believe," "plan,"
"estimate," "expect," "intend," "will," "should," "may," and other similar
expressions, are "forward-looking statements" under the Private Securities
Litigation Reform Act of 1995. Such statements are made based upon management's
current expectations and beliefs concerning future events and their effects on
the Company, which may not be those anticipated by management. The Company's
actual results may differ materially from the results anticipated in these
forward-looking statements.

These forward-looking statements are subject to risks and uncertainties
including, but not limited to, the following: (1) a significant downgrade in our
ratings for claims-paying ability and financial strength may lead to policy and
contract withdrawals and materially harm our ability to market our products; (2)
elimination of Federal tax benefits for our products and other changes in laws
and regulations that could adversely affect sales of our insurance and
investment advisory products; (3) as a holding company, we depend on dividends
from our subsidiaries and the Massachusetts insurance law may restrict the
ability of the Life Company to pay dividends to us; (4) we face increasing
competition in our retail and institutional businesses from mutual fund
companies, banks and investment management firms as well as from other insurance
companies; (5) a decline or increased volatility in the securities markets, and
other economic factors, may adversely affect our business, particularly our
variable life insurance, mutual fund, variable annuity and investment business;
(6) our life insurance sales are highly dependent on a third party distribution
relationship; (7) customers may not be responsive to new or existing products or
distribution


                                       45
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

channels, (8) interest rate volatility may adversely affect our profitability;
(9) our net income and revenues will suffer if customers surrender annuities and
variable and universal life insurance policies or redeem shares of our open-end
mutual funds; (10) the independent directors of our variable series trusts and
of our mutual funds could reduce the compensation paid to us or could terminate
our contracts to manage the funds; (11) under our Plan of Reorganization, we
were required to establish the closed block, a special arrangement for the
benefit of a group of our policyholders, and we may have to fund deficiencies in
our closed block, and any overfunding of the closed block will benefit only the
holders of policies included in the closed block, not our stockholders; (12)
there are a number of provisions in our Plan of Reorganization, our Restated
Certificate of Incorporation and by-laws, laws applicable to us, agreements that
we have entered into with our senior management, and our stockholder rights
plan, that will prevent or discourage takeovers and business combinations that
our stockholders might otherwise consider to be in their best interests; (13) we
will face losses if the claims on our insurance products, or reductions in rates
of mortality on our annuity products, are greater than we projected; (14) we
face risks relating to our investment portfolio; (15) the market price of our
common stock may decline if persons who received common stock as compensation in
the reorganization sell their stock in the public market; (16) we may experience
volatility in net income due to changes in standards for accounting for
derivatives and other changes; (17) our United States insurance companies are
subject to risk-based capital requirements and possible guaranty fund
assessments; (18) the National Association of Insurance Commissioners'
codification of statutory accounting practices adversely affected the statutory
surplus of the Life Company; (19) we may be unable to retain personnel who are
key to our business; (20) we face risks from assumed reinsurance business in
respect of personal accident insurance and the occupational accident component
of workers compensation insurance; (21) litigation and regulatory proceedings
may result in financial losses, harm our reputation and divert management
resources, and (22) we face unforeseen liabilities arising from our acquisitions
and dispositions of businesses.

Readers are also directed to other risks and uncertainties discussed, as well as
to further discussion of the risks described above, in other documents filed by
the Company with the United States Securities and Exchange Commission. The
Company specifically disclaims any obligation to update or revise any
forward-looking information, whether as a result of new information, future
developments, or otherwise.


                                       46
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Capital Markets Risk Management

The Company maintains a disciplined, comprehensive approach to managing capital
market risks inherent in its business operations. To mitigate these risks, and
effectively support Company objectives, investment operations are organized and
staffed to focus investment management expertise on specific classes of
investments, with particular emphasis placed on private placement markets. In
addition, a dedicated unit of asset / liability risk management (ALM)
professionals centralizes the implementation of its interest rate risk
management program. As an integral component of its ALM program, derivative
instruments are used in accordance with risk reduction techniques established
through Company policy and with formal approval granted from the New York
Insurance Department. The Company's use of derivative instruments is monitored
on a regular basis by senior management and reviewed quarterly with the
Company's Committee of Finance.

The Company's principal capital market exposures are credit and interest rate
risk, although we have certain exposures to changes in equity prices and foreign
currency exchange rates. Credit risk pertains to the uncertainty associated with
the ability of an obligor or counterparty to continue to make timely and
complete payments of contractual principal and/or interest. Interest rate risk
pertains to the market value fluctuations that occur within fixed maturity
securities or liabilities as market interest rates move. Equity and foreign
currency risk pertain to price fluctuations, associated with the Company's
ownership of equity investments or non-US dollar denominated investments, driven
by dynamic market environments.

Credit Risk

The Company manages the credit risk inherent in its fixed maturity securities by
applying strict credit and underwriting standards, with specific limits
regarding the proportion of permissible below investment grade holdings. We also
diversify our fixed maturity securities with respect to investment quality,
issuer, industry, geographical, and property-type concentrations. Where
possible, consideration of external measures of creditworthiness, such as
ratings assigned by nationally recognized rating agencies, supplement our
internal credit analysis. The Company uses simulation models to examine the
probability distribution of credit losses to ensure that it can readily
withstand feasible adverse scenarios. In addition, the Company periodically
examines, on various levels of aggregation, its actual default loss experience
on significant asset classes to determine if the losses are consistent with the
(1) levels assumed in product pricing, (2) ACLI loss experience and (3) rating
agencies' quality-specific cohort default data. These tests have generally found
the Company's aggregate experience to be favorable relative to these external
benchmarks and consistent with priced for levels.

As of June 30, 2001, the Company's fixed maturity portfolio was comprised of
87.7% investment grade securities and 12.3% below-investment-grade securities.
These percentages are consistent with recent experience and indicative of the
Company's long-standing investment philosophy of pursuing moderate amounts of
credit risk in return for higher expected returns. We believe that credit risk
can be successfully managed given our proprietary credit evaluation models and
experienced personnel.

Interest Rate Risk

The Company maintains a tightly controlled approach to managing its potential
interest rate risk. Interest rate risk arises from many of our primary
activities, as we invest substantial funds in interest-sensitive assets to
support the issuance of our various interest-sensitive liabilities, primarily
within our Protection, Asset Gathering and Guaranteed & Structured Financial
Products Segments.

The Company manages interest rate sensitive segments of the business, and the
supporting investments, under one of two broadly defined risk management methods
designed to provide an appropriate matching of assets and liabilities. For
guaranteed rate products, where contractual liability cash flows are highly
predictable (e.g., GICs or immediate annuities) sophisticated duration-matching
techniques are utilized to manage the segment's exposure to both parallel and
non-parallel yield curve movements. Typically this type of management is
expressed as a duration tolerance of only +/- .05 years, with other measures
used for limiting exposure to non-parallel risk. For non-guaranteed rate
products, such as whole life insurance or single premium deferred annuities,
liability cash flows are less predictable. Therefore, a conventional
duration-matching strategy is less effective at managing the inherent risk. For
these products, we manage interest rate risk based on scenario-based portfolio
modeling that seeks to identify


                                       47
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

the most appropriate investment strategy given probable policyholder behavior
and liability crediting needs under a wide range of interest rate environments.

As of June 30, 2001, there have been no material changes to the interest rate
exposures as reported in the Company's 2000 Form 10-K.

Derivative Instruments

The Company uses a variety of derivative financial instruments, including swaps,
caps, floors, and exchange traded futures contracts, in accordance with Company
policy. Permissible derivative applications include the reduction of economic
risk (i.e., hedging) related to changes in yields, price, cash flows, and
currency exchange rates. In addition, certain limited applications of "income
generation" are allowed. Examples of this type of use include the purchase of
call options to offset the sale of embedded options in Company liability
issuance or the purchase of swaptions to offset the purchase of embedded put
options in certain investments. The Company does not make a market or trade
derivatives for the purpose of speculation.

The Company's Investment Compliance Unit monitors all derivatives activity for
consistency with internal policies and guidelines. All derivatives trading
activity is reported monthly to the Company's Committee of Finance for review,
with a comprehensive governance report provided jointly each quarter by the
Company's Derivatives Supervisory Officer and Chief Investment Compliance
Officer. The table below reflects the Company's derivative positions that are
managing interest rate risk as of June 30, 2001. The notional amounts in the
table represent the basis on which pay or receive amounts are calculated and are
not reflective of credit risk. These exposures represent only a point in time
and will be subject to change as a result of ongoing portfolio and risk
management activities.

<TABLE>
<CAPTION>
                                                              As of June 30, 2001
                                     -------------------------------------------------------------------------
                                                                                     Fair Value
                                                                 ---------------------------------------------
                                                     Weighted                                      +100 Basis
                                     Notional      Average Term   -100 Basis Point      As of         Point
                                      Amount          (Years)          Change          6/30/01        Change
                                     -------------------------------------------------------------------------
                                                (in millions, except for Weighted Average Term)
<S>                                   <C>                <C>          <C>               <C>            <C>
Interest rate swaps...............    $11,571.5           7.9         $(440.6)          $(207.8)       $18.2
CMT swaps.........................        458.0           1.2             5.3               5.3          5.3
Futures contracts.................      1,379.8           9.7           (45.1)             (2.2)        41.9
Interest rate caps................        337.0           5.3             1.3               3.0          6.0
Interest rate floors..............      8,328.0           8.9            83.3              34.6         15.1
Swaptions.........................         30.0          23.9            (2.2)             (0.9)        (0.3)
                                      ---------                       --------------------------------------
     Totals.......................    $22,104.3                       $(398.0)          $(168.0)       $86.2
                                      =========                       ======================================
</TABLE>

Our non-exchange-traded derivatives are exposed to the possibility of loss from
a counterparty failing to perform its obligations under terms of the derivative
contract. We believe the risk of incurring losses due to nonperformance by our
counterparties is remote. To manage this risk, Company procedures include the
(a) on-going evaluation of each counterparty's credit ratings, (b) the
application of credit limits and monitoring procedures based on an internally
developed, scenario-based, risk assessment system, (c) monthly reporting of each
counterparty's "potential exposure", (d) master netting agreements and, where
appropriate, (e) collateral agreements. Futures contracts trade on organized
exchanges and, therefore, have effectively no credit risk.


                                       48
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

PART II OTHER INFORMATION

ITEM 4. SUBMISSION of MATTERS to a VOTE of SECURITY HOLDERS

      The matters set forth below were acted on at the annual meeting of the
stockholders of the Company held on May 14, 2001. The Company solicited proxies
for the annual meeting pursuant to the Securities and Exchange Commission's
Regulation 14; there was no solicitation in opposition to board of director's
nominees for director as listed in the Company's proxy statement.

1. Samuel W. Bodman, Wayne A. Budd, Nelson S. Gifford and Judith A. McHale were
each re-elected as directors to three-year terms ending on the date of the
annual meeting of stockholders in 2004 and when their successors are duly
elected and qualified.

      167,462,042 shares were voted in favor of Mr. Bodman's election, and
1,217,726 shares were withheld. 167,469,149 shares were voted in favor of Mr.
Budd's election and 1,210,619 shares were withheld. 167,373,154 shares were
voted in favor of Mr. Gifford's election and 1,306,614 shares were withheld.
165,482,120 shares were voted in favor of Ms. McHale's election and 3,197,648
shares were withheld.

2. Stockholders approved the Company's amended and restated 1999 Long-Term Stock
Incentive Plan. As to this proposal, 112,934,783 shares were voted in favor,
28,938,394 shares were voted against, 2,535,185 shares were voted to abstain and
27,271,406 shares were subject to broker non-votes.

3. Stockholders approved the Company's Non-Employee Directors' Long-Term Stock
Incentive Plan. As to this proposal, 122,314,447 shares were voted in favor,
19,079,947 shares were voted against, 3,013,968 shares were voted to abstain and
27,271,406 shares were subject to broker non-votes.

4. Stockholders approved certain material terms relating to the Company's
Incentive Compensation Plan for Certain Senior Executives. As to this proposal,
151,368,122 shares were voted in favor, 13,637,257 shares were voted against and
3,674,389 shares were voted to abstain.


                                       49
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 6. EXHIBITS and REPORTS on FORM 8-K

(a) Exhibits

Exhibit
Number                               Description
------                               -----------

10.16    First Amendment dated as of July 27, 2001 to the Credit Agreement dated
         as of August 3, 2000 among John Hancock Financial Services, Inc., John
         Hancock Life Insurance Company, The Banks listed therein, Fleet
         National Bank, as Co-Administrative Agent, The Chase Manhattan Bank, as
         Co-Administrative Agent, Citicorp USA, Inc., as Syndication Agent,
         BankOne, NA as Documentation Agent (Multi-Year Revolver), The Bank of
         New York, as Co-Documentation Agent (364-Day Revolver) and The Bank of
         Nova Scotia, as Co-Documentation Agent (364-Day Revolver)and Fleet
         Securities, Inc., and J.P. Morgan Securities, Inc., as Joint Book
         Managers and Joint Lead Arrangers.

10.17    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and Kathleen M. Graveline.(+)

10.18    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and Thomas E. Moloney.(+)

10.19    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and David F. D'Alessandro.(+)

10.20    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and Derek Chilvers.(+)

10.21    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and Maureen Ford.(+)

10.22    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and Robert Walters.(+)

10.23    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and John M. DeCiccio.(+)

10.24    Employment Continuation Agreement between John Hancock Life Insurance
         Company, John Hancock Financial Services, Inc. and Wayne A. Budd.(+)

----------------
(+)   Management Contract or Compensatory Plan or Arrangement.

(b) Reports on Form 8-K.

On June 19, 2001, the Company filed a Current Report on Form 8-K, dated June 19,
2001, reporting under Item 5 thereof that Maritime Life, a wholly-owned
subsidiary of JHFS, had, on that date, signed an agreement to purchase Royal &
Sun Alliance Life Insurance Company of Canada, from its parent Royal & Sun
Alliance Insurance Group Plc of London, UK. No other reports on Form 8-K were
filed during the second quarter of 2001.


                                       50
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                          JOHN HANCOCK FINANCIAL SERVICES, INC.


Date: August 13, 2001                     By: /s/ THOMAS E. MOLONEY
                                              ---------------------
                                          Thomas E. Moloney
                                          Chief Financial Officer


<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                                  EXHIBIT INDEX

Exhibit
Number                                 Description
-------                                -----------

10.16    First Amendment dated as of July 27, 2001 to the Credit Agreement dated
         as of August 3, 2000 among John Hancock Financial Services, Inc., John
         Hancock Life Insurance Company, The Banks listed therein, Fleet
         National Bank, as Co-Administrative Agent, The Chase Manhattan Bank, as
         Co-Administrative Agent, Citicorp USA, Inc., as Syndication Agent,
         BankOne, NA as Documentation Agent (Multi-Year Revolver), The Bank of
         New York, as Co-Documentation Agent (364-Day Revolver) and The Bank of
         Nova Scotia, as Co-Documentation Agent (364-Day Revolver)and Fleet
         Securities, Inc., and J.P. Morgan Securities, Inc., as Joint Book
         Managers and Joint Lead Arrangers.

10.17    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and Kathleen M. Graveline.(+)

10.18    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and Thomas E. Moloney.(+)

10.19    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and David F. D'Alessandro.(+)

10.20    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and Derek Chilvers.(+)

10.21    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and Maureen Ford.(+)

10.22    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and Robert Walters.(+)

10.23    Amended and Restated Employment Continuation Agreement between John
         Hancock Life Insurance Company, John Hancock Financial Services, Inc.
         and John M. DeCiccio.(+)

10.24    Employment Continuation Agreement between John Hancock Life Insurance
         Company, John Hancock Financial Services, Inc. and Wayne A. Budd.(+)

----------------
(+)   Management Contract or Compensatory Plan or Arrangement.