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 March 31, 2003

                         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 |_|

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|

      Number of shares outstanding of our only class of common stock as of May
9, 2003:

                                   288,985,073
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 March 31,
                                                                    2003     December 31,
                                                                (unaudited)      2002
                                                                -------------------------
                                                                      (in millions)
<S>                                                             <C>          <C>
Assets

Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
   (fair value: March 31--$1,683.9; December 31--$1,781.8) ..   $  1,653.7   $  1,732.2
   Available-for-sale--at fair value
   (cost: March 31--$46,954.4; December 31--$44,755.0) ......     48,570.9     45,847.3
   Trading securities--at fair value
   (cost: March 31--$20.5; December 31--$18.9) ..............         20.1         18.9
Equity securities:
   Available-for-sale--at fair value
   (cost: March 31--$618.0; December 31--$624.7) ............        707.8        672.3
   Trading securities--at fair value
   (cost: March 31--$337.0; December 31--$287.5) ............        296.7        296.3
Mortgage loans on real estate ...............................     12,047.2     11,805.7
Real estate .................................................        328.8        318.6
Policy loans ................................................      2,107.1      2,097.2
Short-term investments ......................................        263.7        211.2
Other invested assets .......................................      2,666.2      2,937.8
                                                                -----------------------

   Total Investments ........................................     68,662.2     65,937.5

Cash and cash equivalents ...................................      2,319.7      1,190.6
Accrued investment income ...................................        773.1        785.9
Premiums and accounts receivable ............................        236.5        217.1
Deferred policy acquisition costs ...........................      4,083.6      3,996.3
Reinsurance recoverable .....................................      1,647.9      1,777.2
Other assets ................................................      3,217.0      3,132.2
Separate account assets .....................................     20,606.6     20,827.3
                                                                -----------------------

   Total Assets .............................................   $101,546.6   $ 97,864.1
                                                                =======================
</TABLE>

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>
                                                                     March 31,
                                                                        2003      December 31,
                                                                    (unaudited)      2002
                                                                    -------------------------
                                                                          (in millions)
<S>                                                                 <C>           <C>
Liabilities and Shareholders' Equity

Liabilities
Future policy benefits ..........................................   $ 41,413.7    $ 39,657.0
Policyholders' funds ............................................     23,085.0      23,054.4
Consumer notes ..................................................        492.0         290.2
Unearned revenue ................................................        966.9         895.8
Unpaid claims and claim expense reserves ........................        218.5         205.6
Dividends payable to policyholders ..............................        579.2         585.7
Short-term debt .................................................        347.4         348.9
Long-term debt ..................................................      1,475.8       1,450.3
Income taxes ....................................................      1,352.4       1,096.8
Other liabilities ...............................................      4,053.3       3,078.3
Separate account liabilities ....................................     20,606.6      20,827.3
                                                                    ------------------------

   Total Liabilities ............................................     94,590.8      91,490.3

Minority interest ...............................................        160.5         162.7

Commitments and contingencies - Note 4

Shareholders' Equity
Common stock, $.01 par value; 2.0 billion shares authorized;
   318.9 million and 317.5 million shares issued, respectively ..          3.2           3.2
Additional paid in capital ......................................      5,141.6       5,127.9
Retained earnings ...............................................      1,867.2       1,614.0
Accumulated other comprehensive income ..........................        852.1         523.2
Treasury stock, at cost (29.9 million and 29.5 million
   shares, respectively) ........................................     (1,068.8)     (1,057.2)
                                                                    ------------------------

   Total Shareholders' Equity ...................................      6,795.3       6,211.1
                                                                    ------------------------

   Total Liabilities and Shareholders' Equity ...................   $101,546.6    $ 97,864.1
                                                                    ========================
</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
                                                                                         March 31,
                                                                                     2003        2002
                                                                                  ---------------------
                                                                                       (in millions)
<S>                                                                               <C>         <C>
Revenues
   Premiums ...................................................................   $   833.7   $   742.4
   Universal life and investment-type product fees ............................       202.4       194.4
   Net investment income ......................................................     1,029.3       969.9
   Net realized investment and other gains (losses), net of related
     amortization of deferred policy acquisition costs, amounts credited
     to participating pension contract holders and the policyholder dividend
     obligation ($(49.2) and $(21.0), respectively) ...........................        62.6       (85.7)
   Investment management revenues, commissions and other fees .................       125.1       147.8
   Other revenue ..............................................................        73.2        77.0
                                                                                  ---------------------

   Total revenues .............................................................     2,326.3     2,045.8

Benefits and expenses
   Benefits to policyholders, excluding amounts related to net realized
     investment and other gains (losses) credited to participating pension
     contract holders and the policyholder dividend obligation
     ($(42.7) and $(6.8), respectively) .......................................     1,357.0     1,232.4
   Other operating costs and expenses .........................................       393.7       399.7
   Amortization of deferred policy acquisition costs, excluding
     amounts related to net realized investment and other gains (losses)
     ($(6.5) and $(14.2), respectively) .......................................        79.9        70.3
   Dividends to policyholders .................................................       137.8       145.1
                                                                                  ---------------------

   Total benefits and expenses ................................................     1,968.4     1,847.5
                                                                                  ---------------------

Income before income taxes ....................................................       357.9       198.3
Income taxes ..................................................................       104.7        51.8
                                                                                  ---------------------

Net income ....................................................................   $   253.2   $   146.5
                                                                                  =====================

Basic earnings per common share:
Net income ....................................................................   $    0.88   $    0.49
                                                                                  ---------------------

Diluted earnings per common share:
Net income ....................................................................   $    0.88   $    0.49
                                                                                  ---------------------

Share data:
Weighted-average shares used in basic earnings
   per common share calculations ..............................................       287.4       296.4
       Dilutive securities:
       Stock options ..........................................................         0.9         2.8
       Non-vested stock .......................................................          --         0.8
                                                                                  ---------------------
Weighted-average shares used in diluted earnings
   per common share calculations ..............................................       288.3       300.0
                                                                                  ---------------------
</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 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 January 1, 2002.............    $ 3.2   $ 5,099.3   $ 1,206.7        $ 228.0       $  (672.2)  $ 5,865.0       297,430.1

Options exercised......................                  5.6                                                    5.6           370.3
Restricted stock issued................                  4.4                                                    4.4           637.8
Issuance of shares for board
   compensation........................                  0.1                                                    0.1             1.4
Treasury stock acquired................                                                          (105.2)     (105.2)       (2,723.9)

Comprehensive income:
   Net income..........................                            146.5                                      146.5

Other comprehensive income, net of tax:
   Net unrealized gains (losses).......                                          (110.2)                     (110.2)
   Net accumulated gains (losses)
     on cash flow hedges...............                                           (11.9)                      (11.9)
   Foreign currency translation
     adjustment........................                                            (0.6)                       (0.6)
   Minimum pension liability...........                                             1.2                         1.2
                                                                                                          -----------
Comprehensive income...................                                                                        25.0
                                          ------------------------------------------------------------------------------------------

Balance at March 31, 2002..............    $ 3.2   $ 5,109.4   $ 1,353.2        $ 106.5       $  (777.4)  $ 5,794.9       295,715.7
                                          ==========================================================================================

Balance at January 1, 2003.............    $ 3.2   $ 5,127.9   $ 1,614.0       $  523.2       $(1,057.2)  $ 6,211.1       287,978.6

Options exercised......................                  2.2                                                    2.2           153.0
Restricted stock issued................                 11.5                                                   11.5         1,245.5
Issuance of shares for board
   compensation........................                  --                                                                     2.2
Treasury stock acquired................                                                           (11.6)      (11.6)         (414.8)

Comprehensive income:
   Net income..........................                            253.2                                      253.2

Other comprehensive income, net of tax:
   Net unrealized gains (losses).......                                           277.1                       277.1
   Net accumulated gains (losses)
     on cash flow hedges...............                                             6.0                         6.0
   Foreign currency translation
     adjustment........................                                            44.3                        44.3
   Minimum pension liability...........                                             1.5                         1.5
                                                                                                          -----------
 Comprehensive income..................                                                                       582.1
                                          ------------------------------------------------------------------------------------------

Balance at March 31, 2003..............    $ 3.2   $ 5,141.6   $ 1,867.2       $  852.1       $(1,068.8)  $ 6,795.3       288,964.5
                                          ==========================================================================================
</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 CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            Three Months Ended
                                                                                                 March 31,
                                                                                             2003         2002
                                                                                          ----------------------
                                                                                               (in millions)
<S>                                                                                       <C>          <C>
Cash flows from operating activities:
   Net income .........................................................................   $   253.2    $   146.5
   Adjustments to reconcile net income to net cash provided by operating activities:
     Amortization of discount - fixed maturities ......................................       (17.4)       (26.9)
     Net realized investment and other (gains) losses .................................       (62.6)        85.7
     Change in deferred policy acquisition costs ......................................      (115.3)       (96.7)
     Depreciation and amortization ....................................................        16.2         18.4
     Net cash flows from trading securities ...........................................        (1.5)       (14.4)
     Decrease in accrued investment income ............................................        12.8         14.3
     (Increase) decrease in premiums and accounts receivable ..........................       (19.4)        25.5
     Decrease in other assets and other liabilities, net ..............................        39.5        101.9
     Increase in policy liabilities and accruals, net .................................       368.1        308.8
     Increase (decrease) increase in income taxes .....................................        85.8         (3.2)
                                                                                          ----------------------

       Net cash provided by operating activities ......................................       559.4        559.9

Cash flows from investing activities:
   Sales of:
     Fixed maturities available-for-sale ..............................................     2,773.2      1,023.0
     Equity securities available-for-sale .............................................        42.6         64.4
     Real estate ......................................................................         4.5          7.0
     Home office properties ...........................................................       887.6           --
     Short-term investments and other invested assets .................................        56.9         32.2
   Maturities, prepayments and scheduled redemptions of:
     Fixed maturities held-to-maturity ................................................        83.4         62.6
     Fixed maturities available-for-sale ..............................................     1,035.7        899.3
     Short-term investments and other invested assets .................................       200.5        119.2
     Mortgage loans on real estate ....................................................       217.4        281.8
   Purchases of:
     Fixed maturities held-to-maturity ................................................        (2.0)       (10.9)
     Fixed maturities available-for-sale ..............................................    (5,085.9)    (3,521.3)
     Equity securities available-for-sale .............................................       (36.0)       (47.4)
     Real estate ......................................................................        (9.8)        (1.4)
     Short-term investments and other invested assets .................................      (371.3)      (180.5)
   Mortgage loans on real estate issued ...............................................      (402.3)      (440.5)
   Other, net .........................................................................       (47.3)      (124.1)
                                                                                          ----------------------

       Net cash used in investing activities ..........................................   $  (652.8)   $(1,836.6)
</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 CASH FLOWS - (CONTINUED)

<TABLE>
<CAPTION>
                                                                                            Three Months Ended
                                                                                                 March 31,
                                                                                             2003         2002
                                                                                          ----------------------
                                                                                                   (in millions)
<S>                                                                                       <C>          <C>
Cash flows from financing activities:
   Acquisition of treasury stock ......................................................   $   (11.6)   $  (105.2)
   Universal life and investment-type contract deposits ...............................     2,873.4      2,895.1
   Universal life and investment-type contract maturities and withdrawals .............    (1,844.2)    (1,555.2)
   Issuance of consumer notes .........................................................       201.8           --
   Issuance of short term debt ........................................................        70.4           --
   Repayment of short-term debt .......................................................       (75.3)       (16.1)
   Repayment of long-term debt ........................................................        (2.6)        (3.2)
   Net increase in commercial paper ...................................................        10.6           --
                                                                                          ----------------------

       Net cash provided by financing activities ......................................     1,222.5      1,215.4
                                                                                          ----------------------

       Net increase (decrease) in cash and cash equivalents ...........................     1,129.1        (61.3)

       Cash and cash equivalents at beginning of period ...............................     1,190.6      1,313.7
                                                                                          ----------------------

       Cash and cash equivalents at end of period .....................................   $ 2,319.7    $ 1,252.4
                                                                                          ======================
</TABLE>

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


                                       7
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Note 1 -- Summary of Significant Accounting Policies

Business

John Hancock Financial Services, Inc. (the Company) is a diversified financial
services organization that provides a broad range of insurance and investment
products and investment management and advisory services.

Basis of Presentation

The accompanying unaudited consolidated financial statements of 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 Company's financial position and results of
operations. Operating results for the three month period ended March 31, 2003
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2003. These unaudited consolidated financial statements
should be read in conjunction with the Company's annual audited financial
statements as of December 31, 2002 included in the Company's Form 10-K for the
year ended December 31, 2002 filed with the United States Securities and
Exchange Commission (hereafter referred to as the Company's 2002 Form 10-K). The
Company's financial statements, news releases, quarterly financial supplements
and other information are available on the internet at www.jhancock.com, under
the link labeled "Investor Relations." In addition, all of the Company's United
States Securities and Exchange Commission filings are available on the internet
at www.sec.gov, under the name Hancock John Financial.

The balance sheet at December 31, 2002 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.

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

The acquisition described under the table below was recorded under the purchase
method of accounting and, accordingly, the operating results have been included
in the Company's consolidated results of operations from the date of
acquisition. The purchase price was allocated to the assets acquired and the
liabilities assumed based on estimated fair values, with the excess of the
applicable purchase price over the estimated fair values, if any, recorded as
goodwill. This acquisition was made by the Company in execution of its plan to
acquire businesses that have strategic value, meet its earnings requirements and
advance the growth of its current businesses. The table below presents actual
and proforma data, for comparative purposes, of revenue, net income and earnings
per share for the periods indicated, to demonstrate the proforma effect of the
acquisition as if it occurred on January 1, 2002.

                                             Three Months Ended March 31,
                                                        2002
                                        2003          Proforma           2002
                                     ------------------------------------------
                                        (in millions, except per share data)
      Revenue....................    $ 2,326.3       $ 2,057.8        $ 2,045.8

      Net income.................    $   253.2       $   147.2        $   146.5

      Earnings per share.........    $    0.88       $    0.49        $    0.49

On December 31, 2002, the Company acquired the fixed universal life insurance
business of Allmerica Financial Corporation (Allmerica) through a reinsurance
agreement for approximately $104.3 million. There was no impact on the Company's
results of operations from the acquired insurance business during 2002.


                                       8
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

Stock-Based Compensation

The Company has two stock-based compensation plans, which are described more
fully in the Company's 2002 Form 10-K. For the periods covered by this report,
the Company applies the recognition and measurement provisions of Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for stock-based
compensation grants made prior to January 1, 2003. No compensation expense is
reflected in net income for stock option grants to employees and non-employee
board members of the Company made prior to January 1, 2003. All options granted
under those plans had an exercise price equal to the market value of the
Company's common stock on the date of grant. The Company did recognize
compensation expense for grants of non-vested stock to employees and
non-employee board members and grants of stock options to non-employee general
agents. The Company adopted the fair value provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
as of January 1, 2003 and is utilizing the transition provisions described in
SFAS No. 148, on a prospective basis to awards granted after December 31, 2002.
Adoption of the fair value provisions of SFAS No. 123 will have a material
impact on the Company's net income. The Company has adopted the disclosure
provisions of SFAS No. 148. The following table illustrates the pro forma effect
on net income and earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123, to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                                      Three Months      Three Months
                                                                     Ended March 31,   Ended March 31,
                                                                          2003              2002
                                                                     ----------------------------------
                                                                    (in millions, except per share data)
<S>                                                                     <C>             <C>
Net income, as reported..........................................       $ 253.2           $ 146.5
Add: Stock-based employee compensation expense included in
   reported net income, net of related tax effects...............           0.6               0.2
Deduct: Total stock-based employee compensation expense
   determined under fair value method for all awards, net of
   related tax effects...........................................           9.8              13.8
                                                                     -------------      ------------
Pro forma net income ............................................       $ 244.0           $ 132.9
                                                                     =============      ============
Earnings per share
Basic:
      As reported................................................        $ 0.88            $ 0.49
      Pro forma .................................................          0.85              0.45
Diluted:
      As reported................................................          0.88              0.49
      Pro forma .................................................          0.85              0.44
</TABLE>

Recent Accounting Pronouncements

FASB Derivative Implementation Group Issue No. 36--Embedded Derivatives:
Bifurcation of a Debt Instrument that Incorporates Both Interest Rate Risk and
Credit Rate Risk Exposures that are Unrelated or Only Partially Related to the
Creditworthiness of the Issuer of that Instrument

In April 2003, the Financial Accounting Standards Board's (FASB's) Derivative
Implementation Group (DIG) released SFAS No. 133 Implementation Issue No. 36,
"Embedded Derivatives: Bifurcation of a Debt Instrument that Incorporates Both
Interest Rate Risk and Credit Rate Risk Exposures that are Unrelated or Only
Partially Related to the Creditworthiness of the Issuer of that Instrument" (DIG
B36). DIG B36 addresses whether SFAS No. 133 requires bifurcation of a debt
instrument into a debt host contract and an embedded derivative if the debt
instrument incorporates both interest rate risk and credit risk exposures that
are unrelated or only partially related to the creditworthiness of the issuer of
that instrument. Under DIG B36, modified coinsurance and coinsurance with funds
withheld reinsurance agreements as well as other types of receivables and
payables where interest is determined by reference to a pool of fixed maturity
assets or a total return debt index are examples of arrangements containing
embedded derivatives requiring bifurcation. The effective date of the
implementation guidance is October 1, 2003.

The Company has determined that certain of its reinsurance
receivables/(payables) and certain of its insurance products contain embedded
derivatives requiring bifurcation. The Company has not yet determined the fair
value of the related


                                       9
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

embedded derivatives in these products. Management believes that accounting for
these embedded derivatives in accordance with DIG B36 would not have a material
impact on the Company's consolidated financial position, results of operations
or cash flows.

FASB Interpretation 46--Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51

In January 2003, the FASB issued Interpretation 46, "Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51," (FIN 46) which clarifies
the consolidation accounting guidance of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," (ARB No. 51) to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entities to finance
their activities without additional subordinated financial support from other
parties. Such entities are known as variable interest entities (VIEs).

Controlling financial interests of a VIE are identified by the exposure of a
party to the VIE to a majority of either the expected losses or residual rewards
of the VIE, or both. Such parties are primary beneficiaries of the VIEs and FIN
46 requires that the primary beneficiary of a VIE consolidate the VIE. FIN 46
also requires new disclosures for significant relationships with VIEs, whether
or not consolidation accounting is either used or anticipated. The consolidation
requirements of FIN 46 apply immediately to VIEs created after January 31, 2003
and to VIEs in which an enterprise obtains an interest after that date. They
apply in the first fiscal year or interim period beginning after June 15, 2003
to VIEs in which an enterprise holds a variable interest that is acquired before
February 1, 2003.

The Company cannot, at this time, reliably estimate the future potential impact
of consolidating any VIEs with which it is involved. Additional liabilities
recognized as a result of consolidating VIEs with which the Company is involved
would not represent additional claims on the general assets of the Company;
rather, they would represent claims against additional assets recognized by the
Company as a result of consolidating the VIEs. Conversely, additional assets
recognized as a result of consolidating these VIEs would not represent
additional assets which the Company could use to satisfy claims against its
general assets, rather they would be used only to settle additional liabilities
recognized as a result of consolidating the VIEs. Refer to Note 3 below, and
Note 1 in the Company's 2002 Form 10-K for a more complete discussion of the
Company's relationships with VIEs, their assets and liabilities, and the
Company's maximum exposure to loss as a result of its involvement with them.

SFAS No. 148--Accounting for Stock-Based Compensation--Transition and
Disclosure, an amendment of FASB Statement No. 123

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation which is an optional alternative method of accounting presented in
SFAS No. 123, "Accounting for Stock Based Compensation." In addition, SFAS No.
148 amends the disclosure requirements of SFAS No. 123 to require more prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148's amendment of the transition and annual
disclosure provisions of SFAS No. 123 is effective for fiscal years ending after
December 2002. The Company adopted the fair value provisions of SFAS No. 123 on
January 1, 2003 and utilized the transition provisions described in SFAS No.
148, on a prospective basis to awards granted after December 31, 2002. In the
first quarter of 2003 the Company granted 630,000 stock options to senior
management and recorded $0.3 million, net of tax of $0.1 million, of related
compensation expense. The Company has adopted the disclosure provisions of SFAS
No. 148, see Note 1--Summary of Significant Accounting Policies, Stock-Based
Compensation above.

For the periods prior to January 1, 2003, Accounting Principles Board Opinion
(APB) No. 25, "Accounting for Stock Issued to Employees" was applied. APB No. 25
provides guidance on how to account for the issuance of stock and stock options
to employees. The Company adopted APB No. 25 upon its demutualization and IPO
effective February 1, 2000. Compensation cost for stock options, if any, is
measured as the excess of the quoted market price of the Company's stock at the
date of grant over the amount an employee must pay to acquire the stock.
Compensation cost is recognized over the requisite vesting periods based on
market value on the date of grant. APB No. 25 was amended by SFAS No. 123 to
require pro forma disclosures of net income and earnings per share as if a "fair
value" based method was used.


                                       10
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

On March 31, 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation, an interpretation of APB No.
25" (FIN 44). FIN 44 clarifies guidance for certain issues that arose in the
application of APB No. 25. The Company was required to adopt the Interpretation
on July 1, 2000. FIN 44 did not have a material impact on the Company's results
of operations or financial position.

FASB Interpretation No. 45--Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" (FIN 45). FIN 45 requires certain types of guarantees to
be recorded by the guarantor as liabilities at fair value. This differs from
current practice, which generally requires recognition of a liability only when
a potential loss is deemed to be probable and is reasonably estimable in amount.
FIN 45 does not apply to guarantees that are accounted for under existing
insurance accounting principles. FIN 45 requires more extensive disclosures of
certain other types of guarantees, including certain categories of guarantees
which are already accounted for under specialized accounting principles, such as
SFAS No. 133, even when the likelihood of making any payments under the
guarantee is remote.

Disclosure requirements are effective for financial statements of interim or
annual periods ending after December 31, 2002. Refer to the Company's 2002 Form
10-K. Initial recognition and initial measurement provisions are applicable on a
prospective basis to guarantees issued or modified after December 31, 2002. The
adoption of FIN 45 had no impact on the Company's consolidated financial
position, results of operations or cash flows.

SFAS No. 146--Accounting for Costs Associated with Exit or Disposal Activities

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 requires recognition of a
liability for exit or disposal costs, including restructuring costs, when the
liability is incurred rather than at the date of an entity's commitment to a
formal plan of action. SFAS No. 146 applies to one-time termination benefits
provided to current employees that are involuntarily terminated under the terms
of a one-time benefit arrangement. An ongoing benefit arrangement is presumed to
exist if a company has a past practice of providing similar benefits. SFAS No.
146 is effective for exit or disposal activities that are initiated after
December 31, 2002. Adoption of SFAS No. 146 had no impact on the Company's
financial position, results of operations or cash flows during the period ended
March 31, 2003.


                                       11
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information

In the first quarter of 2003 the Company implemented organizational changes
within the Corporate and Other Segment which resulted in the break-out of the
Maritime Life business as its own operating segment. The Maritime Life Segment
consists of our consolidated Canadian operations, principally those of our
Canadian life insurance business, The Maritime Life Assurance Company (Maritime
Life). The following discussion presents the results of our segments on a basis
consistent with the new organization structure. The reclassifications associated
with the realignment of our operating segments had no impact on segment
after-tax operating income, or net income of the Maritime Life, or Corporate and
Other Segments, other than to display these businesses separately.

The Company operates in the following six business segments: two segments
primarily serve domestic retail customers, two segments serve primarily domestic
institutional customers, one segment serves primarily Canadian retail and group
customers and our sixth segment is the Corporate and Other Segment, which
includes our remaining international operations, the corporate account and
run-off from several discontinued businesses lines. 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. Our Maritime Life Segment consists primarily of
the financial results of our Canadian operating subsidiary, Maritime Life. For
additional information about the Company's business segments, please refer to
the Company's 2002 Form 10-K.

The following table summarizes selected financial information by segment for the
periods and dates indicated, and reconciles segment revenues and segment
after-tax operating income to amounts reported in the unaudited consolidated
statements of income. Included in the Protection Segment for all periods
presented are the assets, liabilities, revenues and expenses of the closed
block. For additional information on the closed block see Note 5 - Closed Block
in the notes to the unaudited consolidated financial statements and the related
footnote in the Company's 2002 Form 10-K.

Amounts reported as segment adjustments in the tables below primarily relate to:

(i)   certain net realized investment and other gains (losses), net of related
      amortization adjustment for deferred policy acquisition costs, amounts
      credited to participating pension contractholder accounts and policyholder
      dividend obligation (the adjustment for net realized investment and other
      gains (losses) excludes gains and losses from mortgage securitizations
      because management views the related gains and losses as an integral part
      of the core business of those operations), and

(ii)  restructuring costs related to reducing staff in the home office and
      terminating certain operations outside the home office in 2002, costs of
      this nature are not reported as a segment adjustment for 2003.


                                       12
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                           Asset                   Investment    Maritime   Corporate
                                            Protection   Gathering       G&SFP     Management      Life     and Other   Consolidated
                                            ----------------------------------------------------------------------------------------
                                                                                 (in millions)
<S>                                         <C>          <C>          <C>          <C>          <C>         <C>          <C>
As of or for the three months ended
March 31, 2003
Revenues:
   Revenues from external
     customers ..........................   $   570.9    $   135.6    $    49.0    $    22.0    $   268.4   $   190.0    $  1,235.9
   Net investment income ................       347.9        166.0        431.4          4.2         84.5        (4.7)      1,029.3
   Inter-segment revenues ...............          --          0.3           --          6.4           --        (6.7)           --
                                            ---------------------------------------------------------------------------------------
   Segment revenues .....................       918.8        301.9        480.4         32.6        352.9       178.6       2,265.2
   Net realized investment and
     other gains (losses), net ..........       (31.2)       (37.7)      (135.9)          --          4.3       261.6          61.1
                                            ---------------------------------------------------------------------------------------
   Revenues .............................   $   887.6    $   264.2    $   344.5    $    32.6    $   357.2   $   440.2    $  2,326.3
                                            =======================================================================================
Net Income:
   Segment after-tax operating
     income .............................   $    74.3    $    40.0    $    85.8    $     5.6    $    20.2   $   (11.8)   $    214.1
   Net realized investment and
     other gains (losses) ...............       (19.9)       (24.1)       (85.9)          --          2.0       167.0          39.1
                                            ---------------------------------------------------------------------------------------
   Net income ...........................   $    54.4    $    15.9    $    (0.1)   $     5.6    $    22.2   $   155.2    $    253.2
                                            =======================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity
     method .............................   $     5.2    $     2.1    $     7.9    $    (0.1)          --   $     0.2    $     15.3
   Carrying value of investments
     accounted for by the equity
     method .............................       256.0        157.7        440.4         11.2           --       699.5       1,564.8
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) ...........................        40.9         33.9          0.5           --    $     3.4         1.2          79.9
   Segment assets .......................    32,231.6     17,264.4     35,071.3      2,389.8     11,085.1     3,504.4     101,546.6
</TABLE>


                                       13
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                           Asset                   Investment    Maritime   Corporate
                                            Protection   Gathering       G&SFP     Management      Life     and Other   Consolidated
                                            ----------------------------------------------------------------------------------------
                                                                                 (in millions)
<S>                                         <C>          <C>          <C>          <C>          <C>         <C>          <C>
As of or for the three months ended
March 31, 2002
Revenues:
   Revenues from external
     customers ..........................   $   537.1    $   151.8    $    50.6    $    16.9    $   219.9   $   184.5    $  1,160.8
   Net investment income ................       322.6        130.5        420.7          4.0         75.6        16.5         969.9
   Inter-segment revenues ...............          --           --           --          9.7           --        (9.7)           --
                                            ---------------------------------------------------------------------------------------
   Segment revenues .....................       859.7        282.3        471.3         30.6        295.5       191.3       2,130.7
   Net realized investment and
     other gains (losses), net ..........       (29.1)       (23.7)       (21.8)          --          1.0       (11.3)        (84.9)
                                            ---------------------------------------------------------------------------------------
   Revenues .............................   $   830.6    $   258.6    $   449.5    $    30.6    $   296.5   $   180.0    $  2,045.8
                                            =======================================================================================
Net Income:
   Segment after-tax operating
     income .............................   $    72.8    $    40.0    $    66.9    $     4.9    $    15.8   $     2.4    $    202.8
   Net realized investment and
     other gains (losses) ...............       (18.7)       (14.8)       (13.7)          --          1.8        (7.3)        (52.7)
   Restructuring charges ................        (3.2)        (1.4)        (0.3)          --           --         1.3          (3.6)
                                            ---------------------------------------------------------------------------------------
   Net income ...........................   $    50.9    $    23.8    $    52.9    $     4.9    $    17.6   $    (3.6)   $    146.5
                                            =======================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity
     method .............................   $     4.2    $     2.7    $     7.4    $    (0.1)          --   $    11.3    $     25.5
   Carrying value of investments
     accounted for by the equity
     method .............................       140.4         96.0        256.5          7.2           --       672.4       1,172.5
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) ...........................        39.1         21.6          0.4           --    $     8.3         0.9          70.3
   Segment assets .......................    28,905.2     15,173.8     32,308.4      2,258.1     10,600.8     3,373.9      92,620.2
</TABLE>


                                       14
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Relationships with Variable Interest Entities

The Company has relationships with various types of special purpose entities
(SPEs) and other entities, some of which are variable interest entities (VIEs)
as discussed in the Company's 2002 Form 10-K. Presented below are discussions of
the Company's significant relationships with and certain summarized financial
information for these entities.

As explained in the Company's 2002 Form 10-K, additional liabilities recognized
as a result of consolidating VIEs in which the Company is involved would not
represent additional claims on the general assets of the Company; rather, they
would represent claims against additional assets recognized by the Company as a
result of consolidating the VIEs. These additional liabilities are non-recourse
to the general assets of the Company. Conversely, additional assets recognized
as a result of consolidating these VIEs would not represent additional assets
which the Company could use to satisfy claims against its general assets, rather
they would be used only to settle additional liabilities recognized as a result
of consolidating the VIEs.

Collateralized Debt Obligations (CDOs)

The Company acts as investment advisor to certain asset backed investment
vehicles, commonly known as collateralized debt obligations (CDOs). The Company
also invests in the debt and/or equity of these CDOs, and in the debt and/or
equity of CDOs managed by others. CDOs raise capital by issuing debt and equity
securities, and use their capital to invest in portfolios of interest bearing
securities. The returns from a CDO's portfolio of investments are used by the
CDO to finance its operations including paying interest on its debt and paying
advisory fees and other expenses. Any net income or net loss is shared by the
CDO's equity owners and, in certain circumstances where we manage the CDO,
positive investment experience is shared by the Company through variable
performance management fees. Any net losses are borne first by the equity owners
to the extent of their investments, and then by debt owners in ascending order
of subordination or are borne by the issuer of separate account insurance
policies. See the Company's 2002 Form 10-K for a discussion of separate account
accounting.

If a CDO does not have sufficient controlling equity capital to finance its
expected losses at its origination, in accordance with FASB Interpretation No.
46--"Consolidation of Variable Interest Entities, an interpretation of ARB No.
51" (FIN 46), the CDO is defined as a VIE for purposes of determining and
evaluating the appropriate consolidation criteria. While all CDOs are not VIEs,
in accordance with FIN 46, where the Company is the primary beneficiary of the
CDO, and the CDO is a VIE, the Company will consolidate the financial statements
of the CDO into its own financial statements as of July 1, 2003.

In accordance with existing consolidation accounting principles, the Company
currently consolidates a CDO only when the Company owns a majority of the CDO's
equity, and will continue this practice for CDOs which are not considered VIEs.
The Company has not yet finalized its determination of whether each CDO should
be considered a VIE, or if each is a VIE, whether the Company would be the
primary beneficiary of each.

Owners of securities of CDOs advised by the Company have no recourse to the
Company's assets in the event of default by the CDO, unless the Company has
guaranteed such securities directly for investors. The Company's risk of loss
from any CDO it manages, or in which it invests, is limited to its investment in
the CDO and any such guarantees it may have made. All of these guarantees are
accounted for under existing insurance industry accounting principles, and the
guaranteed assets are recorded on the Company's consolidated balance sheets, at
their fair value, as separate account assets. The Company believes it is
reasonably possible that it may consolidate one or more of the CDOs which it
manages, or will be required to disclose information about them, or both,
commencing July 1, 2003, as a result of adopting FIN 46. The table below
presents summary financial data for CDOs which the Company manages, and data
relating to the Company's maximum exposure to loss as a result of its
relationships with them. The Company has determined that it is not the primary
beneficiary of nor is its relationship deemed significant with any CDO in which
it invests but does not manage and thus will not be required to consolidate or
disclose details about them. Credit ratings are provided by credit rating
agencies, and relate to the debt issued by the CDOs in which the Company has
invested.


                                       15
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Relationships with Variable Interest Entities - (continued)

                                                     March 31,    December 31,
                                                       2003           2002
                                                    --------------------------
                                                         (in millions)
Total size of Company-Managed CDOs (1)

Total assets .....................................   $ 7,678.8     $ 6,220.9
                                                     =========     =========

Total debt .......................................   $ 3,512.2     $ 3,564.4

Total other liabilities ..........................     3,955.3       2,429.7
                                                     ---------     ---------
Total liabilities ................................     7,467.5       5,994.1
Total equity .....................................       211.3         226.8
                                                     ---------     ---------

      Total liabilities and equity ...............   $ 7,678.8     $ 6,220.9
                                                     =========     =========

(1)   Certain data is reported with up to a one-year delay due to the delayed
      availability of audited financial statements of the Company-Managed CDOs.

<TABLE>
<CAPTION>
Maximum exposure of the Company to losses           March 31,           December 31,
from Company-Managed CDOS                             2003                  2002
                                             --------------------  --------------------
                                                   (in millions, except percents)

<S>                                             <C>       <C>         <C>       <C>
Investment in tranches of Company managed
CDOs, by credit rating (Moody's/Standard
& Poors):
Aaa/AAA (1) ..............................      $233.3     36.6%      $380.2     53.9%
Aa1/AA+  (1) .............................        85.7     13.5           --       --
A3/A- ....................................          --       --         14.5      2.1
Baa2/BBB .................................       218.0     34.2        218.0     30.9
Ba2/BB ...................................         7.0      1.1          7.0      1.0
B3/B- ....................................          --       --          6.0      0.8
Caa1/CCC+ ................................        12.2      1.9           --       --
Not rated (equity) .......................        81.2     12.7         79.8     11.3
                                             --------------------  --------------------
      Total Company exposure .............      $637.4    100.0%      $705.5    100.0%
                                             ====================  ====================
</TABLE>

      (1)   Reduction in exposure in Aaa/AAA tranche related to the repayment of
            principle balances of two CDOs ($61.3 million) and downgrade of a
            third CDO ($85.7 million) to Aa1/AA+.

The Company has determined that each of its relationships with any CDO which it
does not manage is not significant, and has therefore not included information
related to CDOs which it does not manage above.

"Tax-Credit" Housing Properties

The Company generates income tax benefits by investing in apartment properties
(the Properties) that qualify for low income housing and/or historic tax
credits. The Company invests in the Properties directly, and also invests
indirectly via limited partnership real estate investment funds (the Funds),
which are consolidated into the Company's financial statements. The Properties
are organized as limited partnerships or limited liability companies each having
a managing general partner or managing member. The Company is usually the sole
limited partner or investor member in each Property; it is not the general
partner or managing member of any Property.

The Properties typically raise additional capital by qualifying for long-term
debt, which at times is guaranteed or otherwise subsidized by federal or state
agencies, or by Fannie Mae. In certain cases, the Company invests in the
mortgages of the Properties, which are always non-recourse to the general assets
of the Company. In the event of default by the mortgagee of any Property, the
mortgage is subject to foreclosure. Conversely, the assets of the Properties are
not available to satisfy claims against the general assets of the Company. No
Property in which the Company has been involved has undergone foreclosure. The
Company's maximum loss in relation to the Properties is limited to its equity
investment in the Properties, any outstanding equity and mortgage commitments,
and, where the Company is the mortgagor, the outstanding balance of the
mortgages originated for the Properties.


                                       16
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Relationships with Variable Interest Entities - (continued)

The Company currently uses the equity method of accounting for its investments
in the Properties. The Company receives Federal income tax credits in
recognition of its investments in each of the Properties for a period of ten
years. In some cases, the Company receives distributions from the Properties
which are based on a portion of the actual cash flows.

The Company is evaluating whether the Properties are VIEs in accordance with FIN
46 and, if so, whether the Company is the primary beneficiary of each. The
Company considers it reasonably possible that it may consolidate each property,
or be required to disclose information about them, as a result of adopting FIN
46. The table below presents summary financial data for the Properties, and data
relating to the Company's maximum exposure to loss as a result of these
relationships.

                                                        March 31,  December 31,
                                                          2003        2002
                                                        ----------------------
                                                            (in millions)

Total size of the Properties (1)

Total assets .......................................    $  896.6    $  682.2
                                                        ========    ========

Total debt .........................................    $  535.6    $  396.4

Total other liabilities ............................       108.8       101.8
                                                        --------    --------
Total liabilities ..................................       644.4       498.2
Total equity .......................................       252.2       184.0
                                                        --------    --------

      Total liabilities and equity .................    $  896.6    $  682.2
                                                        ========    ========

(1)   Certain data is reported with up to a one-year delay, due to the delayed
      availability of audited financial statements of the Properties.

<TABLE>
<CAPTION>
                                                                   March 31,   December 31,
                                                                     2003          2002
                                                                  -------------------------
                                                                          (in millions)

<S>                                                                    <C>      <C>
Maximum exposure of the Company to losses from the Properties

Equity investment in the Properties ............................   $  279.5     $  177.0

Outstanding equity capital commitments to the Properties .......      126.1        139.4
Carrying value of mortgages for the Properties .................       63.3         65.2

Outstanding mortgage commitments to the Properties .............        5.1          5.1
                                                                   --------     --------

      Total Company exposure ...................................   $  474.0     $  386.7
                                                                   ========     ========
</TABLE>

Other Entities

The Company has a number of relationships with a disparate group of entities
(Other Entities), which result from the Company's direct investment in the
equity and/or debt of each Other Entity. Two are energy investment partnerships,
two are investment funds organized as limited partnerships, one is a ski resort
developer/operator, one is a step-van manufacturer and one is a steel spring
manufacturing company whose debt the Company invested in, and which subsequently
underwent a corporate reorganization. The Company is evaluating whether each is
a VIE, but considers it reasonably possible that it may consolidate one or more
of these entities or be required to disclose information about them, or both, as
a result of adopting FIN 46. The Company has made no guarantees to any other
parties involved with these entities, and has only one capital commitment to one
of the investment funds. The Company's maximum exposure to loss as a result of
its relationships with these entities is limited to its investment in their debt
and/or equity and its commitment to provide additional equity capital.


                                       17
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Relationships with Variable Interest Entities - (continued)

The table below presents summary financial data for the Other Entities, and data
relating to the Company's maximum exposure to loss as a result of its
relationships with the Other Entities.

                                                      March 31,   December 31,
                                                        2003          2002
                                                    ---------------------------
                                                        (in millions)

Total size of the Other Entities (1)

Total assets .....................................    $  304.1     $  301.6
                                                      ========     ========

Total debt .......................................    $  317.8     $  310.7
Total other liabilities ..........................        65.7         66.2
                                                      --------     --------
Total liabilities ................................       383.5        376.9
Total equity (2) .................................       (79.4)       (75.3)
                                                      --------     --------

     Total liabilities and equity ................    $  304.1     $  301.6
                                                      ========     ========

(1)   Certain data is reported with up to a one-year delay, due to the delayed
      availability of audited financial statements of the Other Entities.
(2)   The negative equity results primarily from the ski resort operator
      mentioned above. This entity had an accumulated deficit from prior
      operations, but is current on its debt service and is cash flow positive.
      The total equity shown above has not been adjusted to remove the portion
      attributable to other owners.

<TABLE>
<CAPTION>
                                                                           March 31,    December 31,
                                                                             2003           2002
                                                                         ----------------------------
                                                                                   (in millions)

<S>                                                                          <C>           <C>
Maximum exposure of the Company to losses from the
Other Entities (1)

Combined equity and debt investments in the Other Entities........           $154.5        $153.7
Outstanding capital commitment....................................             44.2            --
                                                                           ---------     ---------
     Total Company exposure.......................................           $198.7        $153.7
                                                                           =========     =========
</TABLE>

(1)   The Company's maximum exposure to loss as a result of its relationships
      with these entities is limited to its investment in their debt and/or
      equity and its commitment to provide additional equity capital to the
      investment fund noted above.

Note 4 -- Contingencies

Class Action

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 denied any
wrongdoing. The total 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 $9.4 million and $11.9 million at March 31, 2003
and December 31, 2002, respectively. There were no costs related to the
settlement incurred for the three months ended March 31, 2003 or 2002. 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 initial
estimates. In 1999, the Company updated its estimate of the cost of claims
subject to alternative dispute resolution relief and revised its reserve
estimate accordingly. The reserve estimate was further evaluated quarterly, and
was adjusted, in the fourth


                                       18
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 4 -- Contingencies - (continued)

quarter of 2001. The adjustment to the reserve in the fourth quarter of 2001 was
the result of the Company being able to better estimate the cost of settling the
remaining claims, which on average tend to be larger, more complicated claims.
The better estimate comes from experience with actual settlements on similar
claims.

Administration of the ADR component of the settlement continues to date.
Although some uncertainty remains as to the cost of claims in the final phase
(i.e., arbitration) of the ADR process, it is expected that the final cost of
the settlement will not differ materially from the amounts presently provided
for by the Company.

Harris Trust

Since 1983, the Company has been involved in complex litigation known as Harris
Trust and Savings Bank, as Trustee of Sperry Master Retirement Trust No. 2 v.
John Hancock Mutual Life Insurance Company (S.D.N.Y. Civ. 83-5491). After
successive appeals to the Second Circuit and to the U.S. Supreme Court, the case
was remanded to the District Court and tried to a Federal District Court judge
in 1997. The judge issued an opinion in November 2000.

In that opinion the Court found against the Company and awarded the Trust
approximately $13.8 million in relation to this claim together with unspecified
additional pre-judgment interest on this amount from October 1988. The Court
also found against the Company on issues of liability valuation and ERISA law.
Damages in the amount of approximately $5.7 million, together with unspecified
pre-judgment interest from December 1996, were awarded on these issues. As part
of the relief, the judge ordered the removal of Hancock as a fiduciary to the
plan. On April 11, 2001, the Court entered a judgment against the Company for
approximately $84.9 million, which includes damages to the plaintiff,
pre-judgment interest, attorney's fees and other costs.

On May 14, 2001 the Company filed an appeal in this case. On August 20, 2002,
the Second Circuit Court of Appeals issued a ruling, affirming in part,
reversing in part, and vacating in part the District Court's judgment in this
case. The Second Circuit Court of Appeals' opinion overturned substantial
portions of the District Court's opinion, representing the vast majority of the
lower court's award of damages and fees, and sent the matter back to the
District Court for further proceedings. The matter remains in litigation, and no
final judgment has been entered.

Notwithstanding what the Company believes to be the merits of its position in
this case, if unsuccessful, its ultimate liability, including fees, costs and
interest, could have a material adverse impact on net income. However, the
Company does not believe that any such liability would be material in relation
to its financial position or liquidity.

Reinsurance Recoverable

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 operations. The insurance business sold was
transferred to UNICARE through a 100% coinsurance agreement. 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 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 March 31, 2003, would not be material.


                                       19
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 4 -- Contingencies - (continued)

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.

Other Matters

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 March 31, 2003. 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.


                                       20
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 5 -- Closed Block

In connection with the Company's plan of reorganization for its demutualization
and initial public offering, the Company created a closed block for the benefit
of policies included therein. Additional information regarding the creation of
the closed block and relevant accounting issues is contained in the notes to
consolidated financial statements of the Company's December 31, 2002 Form 10-K.
The following table sets forth certain summarized financial information relating
to the closed block as of the dates indicated.

<TABLE>
<CAPTION>
                                                                                         March 31,
                                                                                            2003         December 31,
                                                                                        (unaudited)          2002
                                                                                        ------------------------------
                                                                                                (in millions)
<S>                                                                                     <C>                 <C>
Liabilities
Future policy benefits...............................................................    $10,561.7         $10,509.0
Policyholder dividend obligation.....................................................        321.9             288.9
Policyholders' funds.................................................................      1,503.0           1,504.0
Policyholder dividends payable.......................................................        434.4             432.3
Other closed block liabilities.......................................................        107.7             111.7
                                                                                        -----------------------------
   Total closed block liabilities....................................................    $12,928.7         $12,845.9
                                                                                        -----------------------------

Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
     (fair value: March 31--$87.1; December 31--$97.1)...............................    $    82.5           $  86.0
   Available-for-sale--at fair value
     (cost: March 31--$5,766.4; December 31--$5,580.2)...............................      6,089.0           5,823.2
Equity securities:
   Available-for-sale--at fair value
     (cost: March 31--$9.8; December 31--$10.5)......................................         10.8              12.4
Mortgage loans on real estate........................................................      1,673.4           1,665.8
Policy loans.........................................................................      1,556.2           1,555.1
Short-term investments...............................................................          0.5              25.2
Other invested assets................................................................        234.8             212.4
                                                                                        -----------------------------
   Total investments.................................................................      9,647.2           9,380.1

Cash and cash equivalents............................................................         93.2             244.0
Accrued investment income............................................................        150.8             156.3
Other closed block assets............................................................        325.5             327.6
                                                                                        -----------------------------
   Total closed block assets.........................................................    $10,216.7         $10,108.0
                                                                                        -----------------------------

Excess of reported closed block liabilities over assets
   designated to the closed block....................................................    $ 2,712.0         $ 2,737.9
                                                                                        -----------------------------

Portion of above representing other comprehensive income:
   Unrealized appreciation (depreciation), net of tax of $(111.5)
     million and $(84.0) million at March 31 and December 31,
     respectively....................................................................        207.2             155.9
   Allocated to the policyholder dividend obligation, net of tax of
     $114.4 million and $88.8 million at March 31 and December 31,
     respectively....................................................................       (212.4)           (164.9)
                                                                                        -----------------------------
       Total.........................................................................         (5.2)             (9.0)
                                                                                        -----------------------------

Maximum future earnings to be recognized from closed block
   assets and liabilities............................................................    $ 2,706.8         $ 2,728.9
                                                                                        =============================

Change in the policyholder dividend obligation:
   Balance at beginning of period....................................................    $   288.9         $   251.2
     Impact on net income before income taxes........................................        (40.0)            (70.8)
     Unrealized investment gains (losses)............................................         73.0             108.5
                                                                                        -----------------------------

   Balance at end of period..........................................................    $   321.9         $   288.9
                                                                                        =============================
</TABLE>


                                       21
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO 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 period indicated:

<TABLE>
<CAPTION>
                                                                                Three Months Ended March 31,
                                                                                    2003             2002
                                                                                ----------------------------
                                                                                         (unaudited)
<S>                                                                              <C>               <C>
Revenues
   Premiums..................................................................    $  224.4          $  236.4
   Net investment income.....................................................       164.6             166.5
   Net realized investment and other gains (losses), net of amounts
     credited to the policyholder dividend obligation of $(35.0)
     million and $(6.4) million, respectively................................        (1.2)             (1.2)
                                                                                ----------------------------
     Total closed block revenues.............................................       387.8             401.7

Benefits and Expenses
   Benefits to policyholders.................................................       245.6             258.4
   Change in the policyholder dividend obligation............................        (5.5)            (18.0)
   Other closed block operating costs and expenses...........................        (2.5)             (1.5)
   Dividends to policyholders................................................       117.0             126.0
                                                                                ----------------------------
     Total benefits and expenses.............................................       354.6             364.9
                                                                                ----------------------------
   Closed block revenues, net of closed block benefits and expenses
     and before income taxes ................................................        33.2              36.8
   Income taxes, net of amounts credited to the policyholder
     dividend obligation of $0.5 million and $(3.0) million, respectively....        11.4              12.5
                                                                                ----------------------------
     Closed block revenues, net of closed block benefits and expenses
       and income taxes .....................................................     $  21.8           $  24.3
                                                                                ============================
</TABLE>

Note 6 -- Severance

During the three months ended March 31, 2003, the Company continued its ongoing
Competitive Position Project (the project). This project was initiated in the
first quarter of 1999 to reduce costs and increase future operating efficiency
by consolidating portions of the Company's operations and is expected to
continue through at least 2003. The project consists primarily of reducing staff
in the home office and terminating certain operations outside the home office.

Since the inception of the project, approximately 1,460 employees have been
terminated. Benefits paid since the inception of the project were $103.4 million
through March 31, 2003. As of March 31, 2003 and December 31, 2002, the
liability for employee termination costs, included in other liabilities was
$15.4 million and $12.4 million, respectively. Employee termination costs net of
related curtailment pension and other post employment benefit related gains are
included in other operating costs and expenses and were $6.2 million and $5.0
million for the three months ended March 31, 2003 and 2002, respectively. The
total employee termination costs for the three months ended March 31, 2003
consisted of an estimated $6.2 million for planned terminations related to its
information technology outsourcing.


                                       22
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 7 -- Sale/Lease Back Transactions and Other Lease Obligations

On March 14, 2003, the Company sold three of its Home Office complex properties
to Beacon Capital Partners for $910.0 million. As part of the transaction, the
Company entered into a long-term lease of the space it now occupies in those
buildings and plans on continuing to use them as its corporate headquarters. As
a result of the sales-leaseback transaction, the Company recognized a current
realized gain of $233.8 million and a deferred profit of $247.7 million. A
capital lease obligation of $90.0 million was recorded for one of the
properties, which has a 15 year lease term. The other two properties have
operating leases which range from 5 to 12 years. The Company also provided
Beacon Capital Partners with a long-term sublease on the Company's parking
garage.

The future minimum lease payments by year and in the aggregate, under the
capital lease and under noncancelable operating leases related to those three
properties sold under a sales-leaseback transaction and the future sublease
rental income, consisted of the following at March 31, 2003:

<TABLE>
<CAPTION>
                                                                        Noncancelable   Income from
                                                          Capital        Operating       Operating
                                                           Leases          Leases          Lease
                                                        -------------   -------------   -------------
                                                                        (in millions)

<S>                                                            <C>            <C>              <C>
2003 .................................................         $ 6.9          $ 34.9           $ 1.3
2004 .................................................           8.3            40.2             1.3
2005 .................................................           8.0            39.1             1.3
2006..................................................           7.7            38.2             1.3
2007 .................................................           7.4            37.5             1.3
Thereafter ...........................................          54.5           140.5            78.5
                                                        -------------   -------------   -------------
Total minimum payment ................................          92.8          $330.4           $85.0
                                                                        =============   =============
Amounts representing interest ........................          (4.3)
                                                        -------------
Present value of net minimum lease payments...........          88.5
Current portion of capital lease obligations..........          (3.1)
                                                        -------------
Total.................................................         $85.4
                                                        =============
</TABLE>

Note 8 -- 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 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 9 - Goodwill and Other Intangible Assets

The carrying values of the Company's goodwill and other purchased intangible
assets are presented in the table below as of the dates presented. These assets
are included in other assets in the unaudited consolidated balance sheets.

                                               March 31,         December 31,
                                                 2003                2002
                                              --------------------------------
                                                       (in millions)
Goodwill................................       $ 264.8             $ 254.6

Management contracts....................           5.2                 5.2

Value of Business Acquired..............         495.2               481.7


                                       23
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company

The following condensed consolidating financial statements are provided in
compliance with Regulation S-X of the Securities and Exchange Commission (the
"Commission") and in accordance with Rule 12h-5 of the Commission.

John Hancock Variable Life Insurance Company (the Variable Company) is an
indirect wholly-owned subsidiary of JHFS. The Variable Company sells deferred
annuity contracts, which feature a market value adjustment and are registered
with the Commission. At March 31, 2003, JHFS provides a full and unconditional
guarantee of the Variable Company's obligation to pay amounts due to
contractholders on surrender, withdrawal or annuitization of the Variable
Company's deferred annuity contracts' market value adjustment interest. In
addition, JHFS guarantees all Variable Company's future issues of deferred
annuity contracts with such market value adjustments.

JHFS is an insurance holding company. The assets of JHFS consist primarily of
the outstanding capital stock of the Life Company, John Hancock Canadian
Holdings Limited and investments in other international subsidiaries. JHFS' cash
flow primarily consists of dividends from its operating subsidiaries and
proceeds from debt offerings offset by expenses, shareholder dividends and stock
repurchases. As a holding company, the Company's ability to meet its cash
requirements, including, but not limited to, paying interest on any debt, paying
expenses related to its affairs, paying dividends on its common stock and any
Board of Directors approved repurchase of its common stock pursuant to the Board
of Director's approved plan, substantially depends upon dividends from its
operating 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 statutory surplus or the
prior calendar year's statutory net gain from operations of the Life Company.
The ability of the Life Company, JHFS' 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. JHFS
currently does not expect such regulatory requirements to impair its ability to
meet its liquidity and capital needs. However, JHFS can give no assurance it
will declare or pay dividends on a regular basis.


                                       24
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (continued)

                      Condensed Consolidating Balance Sheet

<TABLE>
<CAPTION>
                                                            John Hancock
                                             John Hancock   Variable Life                                 Consolidated
                                              Financial       Insurance                                   John Hancock
                                               Services        Company        Other                        Financial
March 31, 2003                               (Guarantor)       (Issuer)    Subsidiaries   Eliminations   Services, Inc.
-----------------------------------------------------------------------------------------------------------------------
                                                                          (in millions)

<S>                                           <C>            <C>            <C>            <C>             <C>
Assets:
  Invested assets .......................             --     $  4,099.5     $ 64,031.4     $    531.3      $ 68,662.2
  Cash and cash equivalents .............     $     17.3          121.3        2,164.7           16.4         2,319.7
  Investment in unconsolidated
    subsidiaries ........................        7,595.4          115.4             --       (7,710.8)             --
  Other assets ..........................           25.0        1,514.4        8,469.8          (51.1)        9,958.1
  Separate account assets ...............             --        5,775.2       14,831.4             --        20,606.6
                                             ------------------------------------------------------------------------
Total Assets ............................     $  7,637.7     $ 11,625.8     $ 89,497.3     $ (7,214.2)     $101,546.6
                                             ========================================================================

Liabilities:
  Insurance liabilities .................             --     $  4,142.3     $ 61,674.2     $    446.8      $ 66,263.3
  Consumer notes ........................             --             --          492.0             --           492.0
  Debt ..................................     $    823.9             --          999.3             --         1,823.2
  Other liabilities .....................           18.5          574.2        4,878.6          (65.6)        5,405.7
  Separate account liabilities ..........             --        5,775.2       14,831.4             --        20,606.6
                                             ------------------------------------------------------------------------
Total Liabilities .......................          842.4       10,491.7     $ 82,875.5          381.2        94,590.8
                                             ------------------------------------------------------------------------
  Preferred shareholder's equity
    in subsidiary companies .............             --             --          160.5             --           160.5
  Shareholder's equity (1) ..............        6,795.3        1,134.1        6,461.3       (7,595.4)        6,795.3
                                             ------------------------------------------------------------------------
Total Liabilities, Preferred
Shareholders' Equity in Subsidiary
Companies and Shareholders' Equity (1) ..     $  7,637.7     $ 11,625.8     $ 89,497.3     $ (7,214.2)     $101,546.6
                                             ========================================================================
</TABLE>


                                       25
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (continued)

                      Condensed Consolidating Balance Sheet

<TABLE>
<CAPTION>
                                                           John Hancock
                                             John Hancock  Variable Life                               Consolidated
                                              Financial      Insurance                                 John Hancock
                                               Services       Company       Other                       Financial
December 31, 2002                            (Guarantor)      (Issuer)   Subsidiaries   Eliminations  Services, Inc.
--------------------------------------------------------------------------------------------------------------------
                                                                          (in millions)

<S>                                           <C>           <C>           <C>           <C>            <C>
Assets:
  Invested assets .......................            --     $ 3,703.0     $61,693.4     $   541.1      $65,937.5
  Cash and cash equivalents .............     $    14.6         200.7         973.1           2.2        1,190.6
  Investment in unconsolidated
    subsidiaries ........................       7,003.7         112.2            --      (7,115.9)            --
  Other assets ..........................          25.7       1,485.9       8,444.0         (46.9)       9,908.7
  Separate account assets ...............            --       5,883.7      14,943.6            --       20,827.3
                                             -------------------------------------------------------------------
Total Assets ............................     $ 7,044.0     $11,385.5     $86,054.1     $(6,619.5)     $97,864.1
                                             ===================================================================
Liabilities:
  Insurance liabilities .................            --     $ 3,888.8     $60,057.9     $   451.8      $64,398.5
  Consumer notes ........................            --            --         290.2            --          290.2
  Debt ..................................     $   813.2            --       1,051.0         (65.0)       1,799.2
  Other liabilities .....................          19.7         524.1       3,633.9          (2.6)       4,175.1
  Separate account liabilities ..........            --       5,883.7      14,943.6            --       20,827.3
                                             -------------------------------------------------------------------
Total Liabilities .......................         832.9      10,296.6     $79,976.6         384.2       91,490.3
                                             -------------------------------------------------------------------

  Preferred shareholder's equity in
    subsidiary companies ................            --            --         162.7            --          162.7
  Shareholder's equity (1) ..............       6,211.1       1,088.9       5,914.8      (7,003.7)       6,211.1
                                             -------------------------------------------------------------------
Total Liabilities, Preferred
Shareholders' Equity in Subsidiary
Companies and Shareholders' Equity (1) ..     $ 7,044.0     $11,385.5     $86,054.1     $(6,619.5)     $97,864.1
                                             ===================================================================
</TABLE>

(1)   Shareholder's equity includes common stock of JHFS at $.01 par value per
      share, 2.0 billion shares authorized, 318.9 million and 317.5 million
      shares issued as of March 31, 2003 and December 31, 2002, respectively,
      and JHFS treasury stock at cost of $1,068.8 million, or 29.9 million
      shares, and $1,057.2 million, or 29.5 million shares, as of March 31, 2003
      and December 31, 2002, respectively.


                                       26
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (continued)

                   Condensed Consolidating Statement of Income

<TABLE>
<CAPTION>
                                                         John Hancock
                                           John Hancock  Variable Life                               Consolidated
                                            Financial      Insurance                                 John Hancock
For the Three Month Period Ended             Services       Company        Other                       Financial
March 31, 2003                             (Guarantor)      (Issuer)    Subsidiaries   Eliminations  Services, Inc.
-------------------------------------------------------------------------------------------------------------------
                                                                       (in millions)

<S>                                           <C>           <C>             <C>         <C>            <C>
Revenues
  Premiums ..............................         --        $ 15.5          $819.1      $  (0.9)       $  833.7
  Universal life and investment-
    type product fees ...................         --          87.1           115.1          0.2           202.4
  Net investment income .................         --          66.6           953.7          9.0         1,029.3
  Net realized investment and other
    gains (losses) ......................         --          (5.8)           69.4         (1.0)           62.6
  Investment management revenues,
    commissions and other fees ..........         --            --           125.1           --           125.1
  Other revenue .........................         --            --            73.2           --            73.2
                                            -------------------------------------------------------------------
Total revenues ..........................         --         163.4          2,155.6         7.3         2,326.3

Benefits and expenses
  Benefits to policyholders .............         --          84.9          1,266.7         5.4         1,357.0
  Other operating costs and
    expenses ............................     $ 17.3          21.3           354.6          0.5           393.7
  Amortization of deferred
    acquisition costs ...................         --          15.8            64.1           --            79.9
  Dividend to policyholders .............         --           3.9           133.9           --           137.8
                                            -------------------------------------------------------------------
Total benefits and expenses .............       17.3         125.9          1,819.3         5.9         1,968.4

  Income (loss) before income taxes .....      (17.3)         37.5           336.3          1.4           357.9
  Income taxes ..........................       (7.7)         11.3           100.7          0.4           104.7
                                            -------------------------------------------------------------------
    Net income (loss) after taxes .......       (9.6)         26.2           235.6          1.0           253.2

  Equity in the net income of
    unconsolidated subsidiaries .........      262.8           1.0              --       (263.8)             --
                                            -------------------------------------------------------------------

Net income ..............................     $253.2        $ 27.2          $235.6      $(262.8)       $  253.2
                                            ===================================================================
</TABLE>


                                       27
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (continued)

                   Condensed Consolidating Statement of Income

<TABLE>
<CAPTION>
                                                           John Hancock
                                            John Hancock  Variable Life                               Consolidated
                                              Financial     Insurance                                 John Hancock
For the Three Month Period Ended              Services       Company        Other                       Financial
March 31, 2002                               (Guarantor)     (Issuer)    Subsidiaries   Eliminations  Services, Inc.
--------------------------------------------------------------------------------------------------------------------
                                                                      (in millions)

<S>                                           <C>           <C>           <C>           <C>             <C>
Revenues
  Premiums ..............................           --      $   13.2      $  730.2      $   (1.0)       $  742.4
  Universal life and investment-
    type product fees ...................           --          88.7         105.5           0.2           194.4
  Net investment income .................     $    0.6          53.6         907.1           8.6           969.9
  Net realized investment and other
    gains(losses) .......................           --         (11.9)        (73.3)         (0.5)          (85.7)
  Investment management revenues,
    commissions and other fees ..........           --            --         147.8            --           147.8
  Other revenue .........................           --           1.3          75.7            --            77.0
                                             -------------------------------------------------------------------
Total revenues ..........................          0.6         144.9       1,893.0           7.3         2,045.8

Benefits and expenses
  Benefits to policyholders .............           --          78.0       1,148.4           6.0         1,232.4
  Other operating costs and
    expenses ............................         14.7          15.7         369.1           0.2           399.7
  Amortization of deferred
    acquisition costs ...................           --           7.9          62.4            --            70.3
  Dividend to policyholders .............           --           4.8         140.3            --           145.1
                                             -------------------------------------------------------------------
Total benefits and expenses .............         14.7         106.4       1,720.2           6.2         1,847.5

  Income (loss) before income taxes .....        (14.1)         38.5         172.8           1.1           198.3
  Income taxes ..........................         (6.7)         12.5          45.5           0.5            51.8
                                             -------------------------------------------------------------------
    Net income (loss) after taxes .......         (7.4)         26.0         127.3           0.6           146.5

  Equity in the net income of
    unconsolidated subsidiaries .........        153.9           0.6            --        (154.5)             --
                                             -------------------------------------------------------------------

Net income ..............................     $  146.5      $   26.6      $  127.3      $ (153.9)       $  146.5
                                             ===================================================================
</TABLE>


                                       28
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (continued)

                Condensed Consolidating Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                John Hancock
                                                  John Hancock  Variable Life                               Consolidated
                                                   Financial     Insurance                                  John Hancock
For the Three Month Period Ended                   Services       Company        Other                        Financial
March 31, 2003                                    (Guarantor)     (Issuer)    Subsidiaries    Eliminations  Services, Inc.
--------------------------------------------------------------------------------------------------------------------------
                                                                               (in millions)

<S>                                                <C>           <C>           <C>             <C>             <C>
Net income ...................................     $  253.2      $   27.2      $  235.6        $ (262.8)       $  253.2
  Adjustments to reconcile net
    income to net cash provided by
    operating activities:
    Amortization of discount-fixed
      maturities .............................           --          (1.6)        (15.8)             --           (17.4)
    Equity in net income of
      unconsolidated subsidiaries ............       (262.8)         (1.0)           --           263.8              --
    Net realized investment and other
      (gains) losses .........................           --           5.8         (69.4)            1.0           (62.6)
    Change in deferred policy
      acquisition costs ......................           --           2.5        (117.8)             --          (115.3)
    Depreciation and amortization ............          0.4           0.1          15.5             0.2            16.2
    Net cash flows from trading securities ...           --            --          (1.5)             --            (1.5)
    Decrease (increase) in accrued
      investment income ......................           --          (4.0)         16.3             0.5            12.8
    (Increase) decrease in premiums and
      accounts receivable ....................           --          (0.3)        (19.7)            0.6           (19.4)
    Increase (decrease) in other assets and
      other liabilities, net .................         13.1         (21.5)         45.8             2.1            39.5
    Increase in policy liabilities and
      accruals, net ..........................           --          31.0         333.3             3.8           368.1
    (Decrease) increase in income taxes ......         (0.2)         33.3          52.4             0.3            85.8
                                                  ---------------------------------------------------------------------
    Net cash provided by
      operating activities ...................          3.7          71.5         474.7             9.5           559.4
Cash flows from investing activities:
Sales of:
    Fixed maturities available-for-sale ......           --          75.2       2,690.8             7.2         2,773.2
    Equity available-for-sale ................           --           0.2          42.4              --            42.6
    Real estate ..............................           --            --           4.5              --             4.5
    Home office properties ...................           --            --         887.6              --           887.6
    Short term investments and other
      invested assets ........................           --            --          56.9              --            56.9
Maturities, prepayments, and scheduled
  redemptions of:
    Fixed maturities held-to-maturity ........           --           1.5          81.7             0.2            83.4
    Fixed maturities
      available-for-sale .....................           --          54.8         963.9            17.0         1,035.7
    Short term investments and other
      invested assets ........................           --           7.7         192.7             0.1           200.5
    Mortgage loans on real estate ............           --          (0.7)        217.4             0.7           217.4
</TABLE>


                                       29
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (continued)

          Condensed Consolidating Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                John Hancock
                                                  John Hancock  Variable Life                               Consolidated
                                                   Financial     Insurance                                  John Hancock
For the Three Month Period Ended                   Services       Company        Other                        Financial
March 31, 2003                                    (Guarantor)     (Issuer)    Subsidiaries    Eliminations  Services, Inc.
--------------------------------------------------------------------------------------------------------------------------
                                                                               (in millions)

<S>                                                <C>           <C>           <C>             <C>             <C>
Purchases of:
    Fixed maturities held-to-maturity ........           --      $   11.3      $   (2.0)       $  (11.3)       $   (2.0)
    Fixed maturities available-for-sale ......           --        (461.9)     (4,624.0)             --        (5,085.9)
    Equity available-for-sale ................           --            --         (36.0)             --           (36.0)
    Real estate ..............................           --            --          (9.8)             --            (9.8)
    Short term investments and other
      invested assets ........................           --         (22.9)       (347.9)           (0.5)         (371.3)
    Mortgage loans on real estate issued .....           --         (40.2)       (360.3)           (1.8)         (402.3)
    Other, net ...............................           --          (3.1)        (46.1)            1.9           (47.3)
                                                  ---------------------------------------------------------------------
      Net cash (used in) provided by
        investing activities .................           --        (378.1)       (288.2)           13.5          (652.8)

    Cash flows from financing activities:
    Acquisition of treasury stock ............     $  (11.6)           --            --              --           (11.6)
    Universal life and investment-type
      contract deposits ......................           --         336.4       2,537.0              --         2,873.4
    Universal life and investment-type
      contract maturity ......................           --        (109.2)     (1,726.2)           (8.8)       (1,844.2)
    Issuance of consumer notes ...............           --            --         201.8              --           201.8
    Issuance of short term debt ..............           --            --          70.4              --            70.4
    Repayment of short term debt .............           --            --         (75.3)             --           (75.3)
    Repayment of long-term debt ..............           --            --          (2.6)             --            (2.6)
    Net increase in commercial paper .........         10.6            --            --              --            10.6
                                                  ---------------------------------------------------------------------
    Net cash (used in) provided by
      financing activities ...................         (1.0)        227.2       1,005.1            (8.8)        1,222.5
</TABLE>


                                       30
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (continued)

          Condensed Consolidating Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                John Hancock
                                                  John Hancock  Variable Life                               Consolidated
                                                   Financial     Insurance                                  John Hancock
For the Three Month Period Ended                   Services       Company        Other                        Financial
March 31, 2003                                    (Guarantor)     (Issuer)    Subsidiaries    Eliminations  Services, Inc.
--------------------------------------------------------------------------------------------------------------------------
                                                                               (in millions)

<S>                                                 <C>          <C>           <C>              <C>            <C>
   Net increase (decrease) in cash and
     cash equivalents ........................      $   2.7      $  (79.4)     $1,191.6         $  14.2        $1,129.1

Cash and cash equivalents at beginning
  of year ....................................         14.6         200.7         973.1             2.2         1,190.6
                                                  ---------------------------------------------------------------------

Cash and cash equivalents at end of
  period .....................................      $  17.3      $  121.3      $2,164.7         $  16.4        $2,319.7
                                                  =====================================================================
</TABLE>


                                       31
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (continued)

                Condensed Consolidating Statements of Cash Flows

<TABLE>
<CAPTION>
                                                            John Hancock
                                              John Hancock  Variable Life                                Consolidated
                                               Financial      Insurance                                  John Hancock
For the Three Month Period Ended                Services       Company        Other                        Financial
March 31, 2002                                (Guarantor)      (Issuer)    Subsidiaries   Eliminations  Services, Inc.
----------------------------------------------------------------------------------------------------------------------
                                                                            (in millions)

<S>                                              <C>           <C>         <C>             <C>             <C>
Net income .................................     $146.5        $ 26.6      $  127.3        $(153.9)        $  146.5
  Adjustments to reconcile net
    income to net cash provide by
    (used in) operating activities:
    Amortization of discount-fixed
      maturities ...........................         --          (0.1)        (26.6)         (0.2)            (26.9)
    Equity in net income of
      unconsolidated subsidiaries ..........     (153.9)         (0.6)           --         154.5                --
    Net realized investment and other
      (gains) losses .......................         --          11.9          73.3           0.5              85.7
    Change in deferred policy acquisition
      costs ................................         --         (32.2)        (64.5)           --             (96.7)
    Depreciation and amortization ..........        0.2          (0.3)         18.2           0.3              18.4
    Net cash flows from trading
      securities ...........................         --            --         (14.4)           --             (14.4)
    (Decrease) increase in accrued
      investment income ....................         --          (2.2)         16.1           0.4              14.3
    Decrease in premiums and accounts
      receivable ...........................         --           7.5          17.3           0.7              25.5
    Increase (decrease) in other assets
      and other liabilities, net ...........        7.0         (16.8)        112.6          (0.9)            101.9
    (Decrease) increase in policy
      liabilities and accruals, net ........         --         (45.3)        348.2           5.9             308.8
    Increase (decrease) in income taxes ....       12.3          (1.3)        (11.4)         (2.8)             (3.2)
                                              ---------------------------------------------------------------------
      Net cash provided by (used in)
        operating activities ...............       12.1         (52.8)        596.1           4.5             559.9
Cash flows from investing activities:
Sales of:
    Fixed maturities available-for-sale ....         --         214.6         804.6           3.8           1,023.0
    Equity available-for-sale ..............         --           1.5          62.9            --              64.4
    Real estate ............................         --            --           7.0            --               7.0
    Short term investments and other
      invested assets ......................         --            --          32.2            --              32.2
Maturities, prepayments, and scheduled
  redemptions of:
    Fixed maturities held-to-maturity ......         --           0.7          61.6           0.3              62.6
    Fixed maturities available-for-sale ....         --          25.4         863.1          10.8             899.3
    Short term investments and other
      invested assets ......................         --           0.8         118.4            --             119.2
    Mortgage loans on real estate ..........         --          10.1         270.1           1.6             281.8
</TABLE>


                                       32
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (continued)

          Condensed Consolidating Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                            John Hancock
                                              John Hancock  Variable Life                                Consolidated
                                               Financial      Insurance                                  John Hancock
For the Three Month Period Ended                Services       Company        Other                        Financial
March 31, 2002                                (Guarantor)      (Issuer)    Subsidiaries   Eliminations  Services, Inc.
----------------------------------------------------------------------------------------------------------------------
                                                                            (in millions)

<S>                                              <C>           <C>         <C>             <C>             <C>
Purchases of:
    Fixed maturities held-to-maturity ......         --        $ (1.1)     $   (9.8)           --          $  (10.9)
    Fixed maturities available-for-sale ....         --        (382.1)     (3,125.3)       $(13.9)         (3,521.3)
    Equity available-for-sale ..............         --          (3.4)        (43.6)         (0.4)            (47.4)
    Real estate ............................         --            --          (1.4)           --              (1.4)
    Short term investments and other
      invested assets ......................         --          (5.2)       (174.7)         (0.6)           (180.5)
    Mortgage loans on real estate
      issued ...............................         --         (24.4)       (414.4)         (1.7)           (440.5)
    Other, net .............................         --          (7.9)       (119.8)          3.6            (124.1)
    Capital contributed to
      unconsolidated subsidiaries ..........     $ (9.8)           --            --           9.8                --
    Dividends received from
      unconsolidated subsidiaries ..........       11.0            --            --         (11.0)               --
                                              ---------------------------------------------------------------------
    Net cash provided by (used in)
      investing activities .................        1.2        (171.0)     (1,669.1)          2.3          (1,836.6)

    Cash flows from financing activities:
    Capital contributions paid by
      parent ...............................         --            --           9.8          (9.8)               --
    Acquisition of treasury stock ..........     (105.2)           --            --            --            (105.2)
    Dividends paid on common stock .........         --            --         (11.0)         11.0                --
    Universal life and
      investment-type contract deposits ....         --         280.8       2,614.3            --           2,895.1
    Universal life and
      investment-type contract maturity ....         --        (115.6)     (1,429.6)        (10.0)         (1,555.2)
    Repayment of short-term debt ...........         --            --         (16.1)           --             (16.1)
    Repayment of long-term debt ............         --            --          (3.2)           --              (3.2)
                                              ---------------------------------------------------------------------
    Net cash (used in) provided by
      financing activities .................     (105.2)        165.2       1,164.2          (8.8)          1,215.4
</TABLE>


                                       33
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (continued)

          Condensed Consolidating Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                            John Hancock
                                              John Hancock  Variable Life                                Consolidated
                                               Financial      Insurance                                  John Hancock
For the Three Month Period Ended                Services       Company        Other                        Financial
March 31, 2002                                (Guarantor)      (Issuer)    Subsidiaries   Eliminations  Services, Inc.
----------------------------------------------------------------------------------------------------------------------
                                                                            (in millions)

<S>                                              <C>           <C>         <C>             <C>             <C>
   Net (decrease) increase in cash
     and cash equivalents ..................     $(91.9)       $(58.6)     $   91.2        $ (2.0)         $  (61.3)

Cash and cash equivalents at
  beginning of year ........................      109.4         108.4       1,088.9           7.0           1,313.7
                                              ---------------------------------------------------------------------

Cash and cash equivalents at end
  of period ................................     $ 17.5        $ 49.8      $1,180.1        $  5.0          $1,252.4
                                              =====================================================================
</TABLE>


                                       34
<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, JHFS or the Company) as of March 31, 2003,
compared with December 31, 2002, and its consolidated results of operations for
the three month periods ended March 31, 2003 and March 31, 2002, and, where
appropriate, factors that may affect future financial performance. This
discussion should be read in conjunction with the Company's MD&A and annual
audited financial statements as of December 31, 2002 included in the Company's
Form 10-K for the year ended December 31, 2002 filed with the United States
Securities and Exchange Commission (hereafter referred to as the Company's 2002
Form 10-K) and unaudited consolidated financial statements and related notes
included elsewhere in this Form 10-Q. The Company's financial statements, press
releases, analyst supplements and other information are available on the
internet at www.jhancock.com, under the link labeled "Investor Relations". In
addition, all of the Company's United States Securities and Exchange Commission
filings are available on the internet at www.sec.gov, under the name Hancock
John Financial Services.

      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--Forward-Looking Statements"
included herein for a discussion of factors that could cause or contribute to
such material differences.

Critical Accounting Policies

      General

      We have identified the accounting policies below as critical to our
business operations and understanding of our results of operations. For a
detailed discussion of the application of these and other accounting policies,
see Note 1--Summary of Significant Accounting Policies in the Notes to
Consolidated Financial Statements. Note that the application of these accounting
policies in the preparation of this report requires management to use judgments
involving assumptions and estimates concerning future results or other
developments including the likelihood, timing or amount of one or more future
transactions or events. There can be no assurance that actual results will not
differ from those estimates. These judgments are reviewed frequently by senior
management, and an understanding of them may enhance the reader's understanding
of the Company's financial statements. We have discussed the identification,
selection and disclosure of critical accounting estimates and policies with the
Audit Committee of the Board of Directors.

      Consolidation Accounting

      In January 2003, the Financial Accounting Standards Board issued
Interpretation 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51," (FIN 46) which clarifies the consolidation
accounting guidance of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," (ARB No. 51) to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. Such
entities are known as variable interest entities (VIEs). The discussion below
describes those entities which the Company has identified as reasonably possible
candidates for consolidation under FIN 46, which would require such
consolidation as of July 1, 2003.

      The Investment Management Segment of the Company manages invested assets
for customers under various fee-based arrangements. We use a variety of special
purpose entities (SPEs) to hold assets under management for customers under
these arrangements. These entities include investment vehicles commonly known as
collateralized debt obligations (CDOs). In certain cases various business units
of the Company make investments in the equity of these entities to support their
insurance liabilities. Results of one of the CDOs are consolidated with the
Company's financial results, while the remaining CDOs are not consolidated since
the Company's equity interest is minor and the Company does not guarantee
payment of the CDOs' liabilities, except for guarantees made to investors as
part of separate account contracts which are already included in separate
account liabilities in the Company's consolidated balance sheets.


                                       35
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      The Company generates income tax benefits by investing in apartment
properties (the Properties) that qualify for low income housing and/or historic
tax credits. The Company invests in the Properties directly, and also invests
indirectly via limited partnership real estate investment funds, which are
consolidated into the Company's financial statements. The Properties are
organized as limited partnerships or limited liability companies each having a
managing general partner or a managing member. The Company is usually the sole
limited partner or investor member in each Property; it is not the general
partner or managing member in any Property. The Properties typically raise
additional capital by qualifying for long term debt, which at times is
guaranteed or otherwise subsidized by federal or state agencies. In certain
cases, the Company invests in these mortgages of the Properties, which are
non-recourse to the general assets of the Company. In the event of default by a
mortgagee of a Property, the mortgage is subject to foreclosure.

      The Company has a number of relationships with a disparate group of
entities, which result from the Company's direct investment in their equity
and/or debt. Two of these entities are energy investment partnerships, two are
investment funds organized as a limited partnership, one is a ski resort
developer/operator, one is a stepvan manufacturer and one is a steel spring
manufacturing company in whose debt the Company invests, and which subsequently
underwent a corporate reorganization and we received preferred stock as part of
the restructuring. The Company has made no guarantees to any other parties
involved with these entities, and has no further equity or debt commitments to
them.

      The Company is evaluating whether each of these entities is a VIE, and if
so, whether consolidation accounting should be used for each. The Company
cannot, at this time, reliably estimate the future potential impact of
consolidating any potential VIE in which it is involved. However, additional
liabilities recognized as a result of consolidating any of these entities would
not represent additional claims on the general assets of the Company; rather,
they would represent claims against additional assets recognized by the Company
as a result of consolidating the VIEs. Conversely, additional assets recognized
as a result of consolidation would not represent additional assets which the
Company could use to satisfy claims against its general assets, rather they
would be used only to settle additional liabilities recognized as a result of
consolidation. The Company's maximum loss in relation to these entities is
limited to its investments in them, future equity commitments made, and where
the Company is the mortgagor, the outstanding balance of the mortgages
originated for the Properties, and outstanding mortgage commitments the Company
has made to the Properties. Therefore, the Company believes that these
transactions have no impact on the Company's liquidity and capital resources
beyond what is already presented in the consolidated financial statements and
notes thereto. It is the Company's intent to display any consolidated entities
clearly on the face of the balance sheets with appropriate disclosures.

      Amortization of Deferred Acquisition Costs

      Costs that vary with, and are related primarily to, the production of new
business have been deferred to the extent that they are deemed recoverable. Such
costs include commissions, certain costs of policy issue and underwriting, and
certain agency expenses. Similarly, any amounts assessed as initiation fees or
front-end loads are recorded as unearned revenue. The Company tests the
recoverability of its deferred policy acquisition costs, or DAC, annually with a
model that uses data such as market performance, lapse rates and expense levels.
We amortize DAC on term life and long-term care insurance ratably with premiums.
We amortize DAC on our annuity products and retail life insurance, other than
term, based on a percentage of the estimated gross profits over the life of the
policies, which are generally twenty years for annuities and thirty years for
life policies. Our estimated gross profits are computed based on assumptions
related to the underlying policies including mortality, lapse, expenses, and
asset growth rates. We amortize DAC and unearned revenue on these policies at a
constant percentage of gross profits over the life of the policies.

      Estimated gross profits, including net realized investment and other gains
(losses), are adjusted periodically to take into consideration the actual
experience to date and assumed changes in the remaining gross profits. When
estimated gross profits are adjusted, we also adjust the amortization of DAC to
maintain a constant amortization percentage over the life of the policies. Our
current estimated gross profits include certain judgments by our actuaries
concerning mortality, lapse and asset growth that are based on a combination of
actual Company experience and historical market experience of equity and fixed
income returns. Short-term variances of actual results from the judgments made
by management can impact quarter to quarter earnings. Our history has shown us
that the actual results over time for mortality, lapse and the combination of
investment returns and crediting rates (referred in the industry as interest
spread) for the life insurance and annuity products have reasonably followed the
long-term historical trends. In recent years, actual results for market
experience, or asset growth, have fluctuated considerably from historical trends
and the long-term assumptions made in calculating expected gross profits.

      The effects on the amortization of DAC and unearned revenues of revisions
to estimated gross margins and profits are reflected in earnings in the period
such revisions are made. Expected gross profits or expected gross margins are
discounted at periodically revised interest rates and are applied to the
remaining benefit period. At both March 31, 2003 and December 31, 2002, the
average discount rate was 8.4%, for participating traditional life insurance
products and 6.0% and 6.2%, respectively, for universal life products. The total
amortization period was 30 years for both participating traditional life
insurance products and universal life products.


                                       36
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      The Company's future assumptions with respect to the expected gross
profits in its variable life insurance business in the Protection Segment and
variable annuity business in the Asset Gathering Segment are 8%, gross of fees
(which are approximately 1% to 2%), for the long-term growth rate assumption and
13% gross of fees on average for the next five years.

      Sensitivity of Deferred Acquisition Costs Amortization. The level of DAC
amortization in the second quarter of 2003 will vary if separate account growth
rates vary from our current assumptions. The table below shows the estimated
increased (decreased) quarterly DAC amortization that will result if actual
separate account growth rates are different than the rates assumed in our DAC
models.

                                                               Asset
                                              Protection     Gathering    Total
                                              ----------     ---------    -----
                                                           (in millions)
18% .........................................  $ (0.9)       $ (1.6)    $ (2.5)
13% .........................................      --            --         --
 8% .........................................     0.9           1.7        2.6

      Benefits to Policyholders

      Reserves for future policy benefits of certain insurance products are
calculated using management's judgments of mortality, morbidity, lapse,
investment performance and expense levels that are based primarily on the
Company's past experience and are therefore reflective of the Company's proven
underwriting and investing abilities. Once these assumptions are made for a
given policy or group of policies, they will not be changed over the life of the
policy unless the Company recognizes a loss on the entire line of business. The
Company periodically reviews its policies for loss recognition and based on
management's judgment the Company from time to time may recognize a loss on
certain lines of business. Short-term variances of actual results from the
judgments made by management are reflected in current period earnings and can
impact quarter to quarter earnings.

      Investment in Debt and Equity Securities

      Impairments on our investment portfolio are recorded as a charge to income
in the period when the impairment is judged by management to occur. See the
General Account Investments section of this document and "Quantitative and
Qualitative Information About Market Risk--Credit Risk" section of this document
for a more detailed discussion of the investment officers' professional
judgments involved in determining impairments and fair values.

      Certain of our fixed income securities classified as held-to-maturity and
available-for-sale are not publicly traded, and quoted market prices are not
available from brokers or investment bankers on these securities. The change in
the fair value of the available-for-sale securities is recorded in other
comprehensive income as an unrealized gain or loss. We calculate the fair value
of these securities ourselves through the use of pricing models and discounted
cash flows calling for a substantial level of professional investment management
judgments. Our approach is based on currently available information, including
information obtained by reviewing similarly traded securities in the market, and
we believe it to be appropriate and fundamentally sound. However, different
pricing models or assumptions or changes in relevant current information could
produce different valuation results. The Company's pricing model takes into
account a number of factors based on current market conditions and trading
levels of similar securities. These include current market based factors related
to credit quality, country of issue, market sector and average investment life.
The resulting prices are then reviewed by the pricing analysts and members of
the Controller's Department. Our pricing analysts take appropriate action to
reduce valuation of securities where an event occurs which negatively impacts
the securities' value. Certain events that could impact the valuation of
securities include issuer credit ratings, business climate, management changes,
litigation and government actions, among others.

      As part of the valuation process we attempt to identify securities which
may have experienced an other than temporary decline in value, and thus require
the recognition of an impairment. To assist in identifying impairments, at the
end of each quarter our Investment Review Committee reviews all securities where
market value is less than ninety percent of amortized cost for three months or
more to determine whether impairments need to be taken. This committee includes
the head of workouts, the head of each industry team, and the head of portfolio
management. The analysis focuses on each company's or project's ability to
service its debts in a timely fashion and the length of time the security has
been trading below cost. The results of this analysis are reviewed by the Life
Company's Committee of Finance, a subcommittee of the Life Company's Board of
Directors, quarterly. To supplement this process, a quarterly review is made of
the entire fixed maturity portfolio to assess credit quality, including a review
of all impairments with the Life Company's Committee of Finance. See
"Management's Discussion and Analysis of Financial Condition and Analysis of
Financial Condition and Results of Operations--General Account Investments"
section of this document for a more detailed discussion of this process and the
judgments used therein.


                                       37
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      Benefit Plans

      The Company annually reviews its pension and other post-employment benefit
plan assumptions for the discount rate, the long-term rate of return on plan
assets, and the compensation increase rate. All assumptions are reviewed with
the Audit Committee.

      The assumed discount rate is set in the range of (a) the rate from the
December daily weighted average of long-term corporate bond yields (as published
by Moody's Investor Services for rating categories A, Aa, Aaa, and Baa) less a
5% allowance for expenses and default and (b) the rate from the rounded average
of the prior year's discount rate and the rate in (a) above. The discount rate
in effect for 2003 is 6.75%. A 0.25% increase in the discount rate would
decrease pension benefits Projected Benefit Obligation (PBO) and 2003 Net
Periodic Pension Cost (NPPC) by approximately $65.1 million and $4.9 million
respectively. A 0.25% increase in the discount rate would decrease other post-
employment benefits Accumulated Postretirement Benefit Obligation (APBO) and
2003 Net Periodic Benefit Cost (NPBC) by approximately $18.1 million and $1.2
million, respectively.

      The assumed long-term rate of return on plan assets is generally set at
the long-term rate expected to be earned (based on the Capital Asset Pricing
Model and similar tools) based on the long-term investment policy of the plans
and the various classes of the invested funds. For 2003 Net Periodic Pension
(and Benefit) cost, it is expected that an 8.75% long term rate of return
assumption will be used. A 0.25% increase in the long-term rate of return would
decrease 2003 NPPC by approximately $4.6 million and 2003 NPBC by approximately
$0.5 million. The expected return on plan assets is based on the fair market
value of the plan assets as of December 31, 2002. The target asset mix of the
plan is: 50% domestic stock, 15% international stock, 10% private equity, and
25% fixed income.

      The compensation rate increase assumption is generally set at a rate
consistent with current and expected long-term compensation and salary policy;
including inflation. A change in the compensation rate increase assumption can
be expected to move in the same direction as a change in the discount rate. A
0.25% decrease in the salary scale would decrease pension benefits PBO and NPPC
by approximately $8.3 million and $1.2 million respectively. Post employment
benefits are independent of compensation.

      The Company uses a 5% corridor for the amortization of actuarial
gains/losses. Actuarial gains/losses are amortized over approximately 13 years
for pension costs and over approximately 13 years for benefit costs.

      Prior service costs are amortized over approximately 9 years for pension
costs and over approximately 17 years for benefit costs.

      Income Taxes

      We establish reserves for possible penalty and interest payments to
various taxing authorities with respect to the admissability and timing of tax
deductions. Management makes judgments concerning the eventual outcome of these
items and reviews those judgments on an ongoing basis.

Reinsurance

      We reinsure portions of the risks we assume for our protection products.
The maximum amount of individual ordinary life insurance retained by us on any
life is $10 million under an individual policy and $20 million under a
second-to-die policy. As of January 1, 2001, we established additional
reinsurance programs, which limit our exposure to fluctuations in life claims
for individuals for whom the net amount at risk is $3 million or more. As of
January 1, 2001, the Company entered into agreements with two reinsurers
covering 50% of its closed block business. The reinsurance agreements are
structured so they will not affect policyholder dividends or any other financial
items reported within the closed block, which was established at the time of the
Life Company's demutualization to protect the reasonable dividend expectations
of certain participating life insurance policyholders.

      In addition, the Company has entered into reinsurance agreements to
specifically address insurance exposure to multiple life insurance claims as a
result of a catastrophic event. The Company has put into place, effective July
1, 2002, catastrophic reinsurance covering both individual and group policies
written by all of its U.S. life insurance subsidiaries. The deductible for
individual and group coverages combined is $25 million per occurrence and the
limit of coverage is $40 million per occurrence. Both the deductible and the
limit apply to the combined U.S. insurance subsidiaries. The Company has
supplemented this coverage by reinsuring all of its accidental death exposures
in excess of $100,000 per life under its group life insurance coverages, and 50%
of such exposures below $100,000. Should catastrophic reinsurance become
unavailable to the Company in the future, the absence of, or further limitations
on, reinsurance coverage, could adversely affect the Company's future net income
and financial position.


                                       38
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      By entering into reinsurance agreements with a diverse group of highly
rated reinsurers, we seek to control our exposure to losses. Our reinsurance,
however, does not discharge our legal obligations to pay policy claims on the
policies reinsured. As a result, we enter into reinsurance agreements only with
highly rated reinsurers. Nevertheless, there can be no assurance that all our
reinsurers will pay the claims we make against them. Failure of a reinsurer to
pay a claim could adversely affect our business, financial condition or results
of operations.

Economic Trends

      Economic trends impact profitability and sales of the Company. The impact
of economic trends on the Company's profitability are similar to their impact on
the financial markets. The Company estimates that a 1% increase (decrease) in
interest rates occurring evenly over a twelve month period, or an estimated 8
basis points per month, would increase (decrease) segment after tax operating
income by approximately $5 million, and a 5% increase (decrease) in equity
markets occurring evenly over a twelve month period, or an estimated 42 basis
points per month, would increase (decrease) segment after tax operating income
by approximately $10 million.

      The sales and other financial results of our retail business over the last
several years have been affected by general economic and industry trends.
Variable products, including variable life insurance and variable annuities,
until 2001 had accounted for the majority of recent increases in total premiums
and deposits for the insurance industry as a result of the strong equity market
growth in those years and the "baby boom" generation reaching its high-earnings
years and seeking tax-advantaged investments to prepare for retirement. This
trend has changed due to fluctuations in stock market performance and we have
seen investors return to fixed income products. Our diverse distribution network
and product offerings will assist in the maintenance of assets and provide for
sales growth. Although sales of traditional life insurance products have
experienced continued declines, sales of fixed annuity products and corporate
owned life insurance have increased. Universal life sales have also increased
for the Company and for the industry as a whole, due in part to the market's
demand for products of a fixed nature. With respect to our long-term care
insurance products, premiums have increased due to the aging of the population
and the expected inability of government entitlement programs to meet retirement
needs.

      Premiums and deposits of our individual annuity products increased 16.5%
to $1,078.6 million in 2003 as compared to 2002, driven by a 28.1% increase in
the fixed annuity business. Statutory premiums and deposits on our long-term
care insurance increased 21.6%, to $210.2 million in 2003 due to persistency and
strong growth in the business, while our variable life insurance product
deposits in 2003 decreased 20.8% to $227.5 million compared to 2002. The
policyholder account value in the universal life insurance product line
increased $1,200.4 million, or 41.5%, from 2002 due to the underlying growth and
the December 31, 2002 acquisition of Allmerica's fixed universal life insurance
business. Despite continued volatility in the equity markets during 2003, mutual
fund deposits increased $99.1 million or 11.2% to $981.1 million in 2003
compared to the prior year. In addition, redemptions decreased $185.9 million,
or 16.1%, to $968.3 million in 2003 due to conservation initiatives. We have
reduced operating expenses to protect profit margins as we work to stabilize and
grow assets under management in the mutual funds business. However, our mutual
fund operations are impacted by general market trends, and a continued downturn
in the mutual fund market may negatively affect our future operating results.

      Recent economic and industry trends also have affected the sales and
financial results of our institutional business. Sales of fund-type products
decreased $643.2 million, or 42.6%, to $867.0 million. The decrease was driven
by decreasing demand for GICs and increased market competition. Premiums on
group annuity products were down due to market competition and the low level of
interest rates which resulted in no large single premium annuity contracts being
placed during the first quarter of 2003. We continue to look for opportunistic
sales in the single premium group annuity market where our pricing standards are
met. Partially offsetting the decrease in sales was the introduction of a new
product in late 2002, SignatureNotes, which generated $211.9 million in sales in
2003. SignatureNotes is designed to generate sales from the conservative retail
investor looking for stable returns. The investment management services we
provide to domestic and international institutions include services and products
such as investment advisory client portfolios, individually managed and pooled
separate accounts, registered investment company funds, bond and mortgage
securitizations, collateralized bond obligation funds and mutual fund management
capabilities. Assets under management of our Investment Management Segment
decreased to $27,102.6 million as of March 31, 2003 from $27,491.4 million as of
December 31, 2002.

Transaction Affecting Comparability of Results of Operations

      The acquisition described under the table below was recorded under the
purchase method of accounting and, accordingly, the operating results have been
included in the Company's consolidated results of operations from the date of
acquisition. The purchase price was allocated to the assets acquired and the
liabilities assumed based on estimated fair values, with the excess of the
applicable purchase price over the estimated fair values, if any, recorded as
goodwill. This acquisition was made by the Company in execution of its plan to
acquire businesses that have strategic value, meet its earnings requirements and
advance the growth of its current businesses. The table below presents actual


                                       39
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


and proforma data, for comparative purposes, of revenue, net income and earnings
per share for the periods indicated, to demonstrate the proforma effect of the
acquisition as if it occurred on January 1, 2002.

                                               Three Months Ended March 31,
                                                          2002
                                            2003        Proforma         2002
                                         --------------------------------------
                                          (in millions, except per share data)

      Revenue........................    $ 2,326.3     $ 2,057.8      $ 2,045.8

      Net income.....................    $   253.2     $   147.2      $   146.5

      Earnings per share.............    $    0.88     $    0.49      $    0.49

      On December 31, 2002, the Company acquired the fixed universal life
insurance business of Allmerica Financial Corporation (Allmerica) through a
reinsurance agreement for approximately $104.3 million. There was no impact on
the Company's results of operations from the acquired insurance business during
2002.


                                       40
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


Results of Operations

      The table below presents the consolidated results of operations for the
periods presented.

<TABLE>
<CAPTION>
                                                                                     Three Months Ended March 31,
                                                                                     ----------------------------
                                                                                          2003         2002
                                                                                        --------     --------
                                                                                             (in millions)
<S>                                                                                     <C>          <C>
Revenues
Premiums ..........................................................................     $  833.7     $  742.4
Universal life and investment-type product fees ...................................        202.4        194.4
Net investment income .............................................................      1,029.3        969.9
Net realized investment and other gains (losses), net of related amortization of
   deferred policy acquisition costs, amounts credited to participating pension
   contractholders and the policyholder dividend obligation (1) ...................         62.6        (85.7)
Investment management revenues, commissions, and other fees .......................        125.1        147.8
Other revenue (expense) ...........................................................         73.2         77.0
                                                                                        --------     --------
      Total revenues ..............................................................      2,326.3      2,045.8

Benefits and expenses
Benefits to policyholders, excluding amounts related to net realized investment
   and other gains (losses) credited to participating pension contractholders
   and the policyholder dividend obligation (2) ...................................      1,357.0      1,232.4
Other operating costs and expenses ................................................        393.7        399.7
Amortization of deferred policy acquisition costs, excluding amounts related
   to net realized investment and other gains (losses) (3) ........................         79.9         70.3
Dividends to policyholders ........................................................        137.8        145.1
                                                                                        --------     --------
      Total benefits and expenses .................................................      1,968.4      1,847.5

Income before income taxes ........................................................        357.9        198.3
Income taxes ......................................................................        104.7         51.8
                                                                                        --------     --------

      Net income ..................................................................     $  253.2     $  146.5
                                                                                        ========     ========
</TABLE>

(1)   Net of related amortization of deferred policy acquisition costs, amounts
      credited to participating pension contractholders and the policyholder
      dividend obligation of $(49.2) million and $(21.0) million for the three
      months ended March 31, 2003 and 2002, respectively.

(2)   Excluding amounts related to net realized investment and other gains
      (losses) credited to participating pension contractholders and the
      policyholder dividend obligation of $(42.7) million and $(6.8) million for
      the three months ended 2003 and 2002, respectively.

(3)   Excluding amounts related to net realized investment and other gains
      (losses) of $(6.5) million and $(14.2) million for the three months ended
      2003 and 2002, respectively.

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

      During the first quarter of 2003, the Company implemented organizational
changes within the Corporate and Other Segment which resulted in the break-out
of the Maritime Life business as its own operating segment. The Maritime Life
Segment consists of our consolidated Canadian operations, principally those of
our Canadian life insurance business, The Maritime Life Assurance Company
(Maritime Life). The following discussion presents the results of our segments
on a basis consistent with the new organization structure. The reclassifications
associated with the realignment of our operating segments had no impact on
segment after-tax operating income, or net income of the Maritime Life or
Corporate and Other Segments, other than to display these businesses separately.

      Consolidated income before income taxes increased 80.5%, or $159.6
million, from the prior year. The increase was driven by growth in income before
income taxes of $240.4 million in the Corporate and Other Segment, $11.0 million
in the Maritime Life Segment, $7.7 million in the Protection Segment and $1.4
million in the Investment Management Segment. Partially offsetting these
increases was a decrease of $89.0 million in the Guaranteed and Structured
Financial Products Segment (G&SFP) and a decrease of $11.9 million in the Asset
Gathering Segment. The increase in the Corporate and Other Segment was driven by
growth in net realized investment and other gains of $272.9 million due to a
gain of $233.8 million (and a deferred profit of $247.7 million) on the sale of
the Company's home office properties during the first quarter of 2003. See Note
7 -- Sales / Lease-back Transactions in the notes to the unaudited consolidated
financial statements.


                                       41
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      Revenues increased 13.7%, or $280.5 million, from the prior year. The
increase in revenues was driven by the Corporate and Other Segment where net
realized investment and other gains increased $272.9 million due to a gain of
$233.8 million (and a deferred profit of $247.7 million) on the sale of the
Company's home office properties. Consolidated net realized investment and other
gains increased 173.0%, or $148.3 million from the prior year. See detail of
current period net realized investment and other gains (losses) in table below.
The change in net realized investment and other gains is the result of gain on
the sale of the Company's home office properties. The net realized investment
and other gains on the sale of the Home Office properties was partially offset
by other than temporary declines in value of fixed maturity securities of $231.2
million (including impairment losses of $221.9 million and $9.3 million of
previously recognized gains where the fixed maturity security was part of a
hedging relationship), the largest of which were on securities issued by; $37.6
million relating to a large, national farmer-owned diary co-operative, $25.9
million relating to a special purpose company created to sublease aircraft,
$27.3 million relating to a large, North American transportation provider, $14.1
million relating to a subordinated holding company structure comprised of
ownership interests in three power generation facilities, and $11.0 million
relating to securities secured by aircraft. The Company also incurred losses on
the other than temporary declines in value of the equity in collateralized bond
obligations and other invested assets of $9.2 million and other equity
securities of $19.2 million. For additional analysis regarding net realized
investment and other gains (losses), see General Account Investments in the
MD&A.

<TABLE>
<CAPTION>
                                                       Gross Gain    Gross Loss      Hedging    Net Realized Investment
For the Three Months Ended March 31, 2003  Impairment  on Disposal  on Disposal    Adjustments   and Other Gain (Loss)
                                           ----------------------------------------------------------------------------
                                                                         (in millions)
<S>                                           <C>         <C>         <C>            <C>                 <C>
Fixed maturity securities (1) (2).......      $(221.9)    $ 58.5      $ (32.9)       $ (74.5)            $(270.8)
Equity securities.......................        (19.2)      23.2         (2.1)            --                 1.9
Mortgage loans on real estate...........           --        4.4         (8.1)         (20.8)              (24.5)
Real estate.............................           --      236.4           --             --               236.4
Other invested assets...................         (9.2)      13.7           --             --                 4.5
Derivatives.............................           --         --           --           66.0                66.0
                                           ---------------------------------------------------------------------------
               Subtotal.................      $(250.3)    $336.2      $ (43.1)       $ (29.3)            $  13.5
                                           ===========================================================================

          Amortization adjustment for deferred policy acquisition costs......................                6.5
          Amounts credited to participating pension contractholders..........................               35.0
          Amounts credited to the policyholder dividend obligation...........................                7.6
                                                                                                   ------------------
               Total.........................................................................            $  62.6
                                                                                                   ==================
</TABLE>

(1)   Fixed Maturities gain on disposals includes $0.6 million of gains from
      previously impaired securities.

(2)   Fixed Maturities loss on disposals includes $17.3 million of credit
      related losses.

      The hedging adjustments in the fixed maturities and mortgage loans asset
classes are non-cash adjustments representing the amortization or reversal of
prior fair value adjustments on assets in those classes that were or are
designated as hedged items in fair value hedging relationships. The hedging
adjustments on the derivatives represent non-cash adjustments on derivative
instruments and on assets and liabilities designated as hedged items reflecting
the change in fair value of those items. The hedging adjustments of all asset
classes represent temporary gains or losses caused primarily by interest rate
movements that will reverse over time as the derivatives or assets mature.

      Premiums increased 12.3%, or $91.3 million, from the prior year. The
increase in premiums is due to an increase in the Maritime Life Segment of $51.0
million, driven by the group life & health business following pricing increases
from the prior year, a reinsurance recapture of significant portions of its
group life, accidental death and dismemberment and long term disability and
foreign exchange translation gains. Also contributing to the increase in
premiums was growth in the Protection Segment which increased $28.2 million
driven by the long-term care business. Premiums in the G&SFP Segment were weak
due to the impact of market competition and the low level of absolute interest
rates on sales of group annuity products which resulted in no large single
premium annuity contracts being placed during the first quarter of 2003. We
continue to look for opportunistic sales in the single premium group annuity
market where our pricing standards are met. The decrease to premiums in the
G&SFP Segment is offset by a decrease in benefits to policyholders as mentioned
below in the discussion of benefits and expenses, thus current profitability is
not impacted.


                                       42
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      Universal life and investment-type product fees increased 4.1%, or $8.0
million from the prior year. The growth in product fees was driven by the
Protection Segment, where product fees increased 3.9%, or $4.2 million.
Protection Segment product fees increase due to the universal life insurance
business where product fees increased of 51.6%, or $9.9 million, driven by the
acquisition of the Allmerica fixed universal life insurance business as of
December 31, 2002. Average account balance in the universal life insurance
business increased 42.9%, or $1,207.6 million, compared to the prior year due to
the underlying growth and also due to the Allmerica acquisition. Product fees
decreased $5.6 million in the variable life insurance business due to poor
separate account performance.

      Net investment income increased 6.1%, or $59.4 million, from the prior
year. The growth in net investment income was driven by the Asset Gathering
Segment which increased 27.1%, or $35.4 million, from the prior year on growth
on the fixed annuity business. Average invested assets in the fixed annuity
business increased 36.0%, or $2,524.2 million, while earned rates decreased. See
additional analysis in the Asset Gathering Segment MD&A. In addition, net
investment income increased in the Protection Segment by 7.9%, or $25.4 million,
from the prior year driven by the universal life insurance business. Universal
life insurance net investment income increased 31.6%, or $15.8 million, driven
by the acquisition of the Allmerica fixed universal life insurance business as
of December 31, 2002. G&SFP Segment net investment income experienced low growth
due to the decline in the average investment yield on invested assets to 6.19%
for the three months ended March 31, 2003. The decline in yield is impacted by
the fluctuation of the return on approximately $11 billion of the G&SFP Segment
asset portfolio which floats with market rates. The portfolio float is designed
to match the interest exposure of our asset portfolio to the exposure on our
liabilities. For additional analysis of net investment income and yields see the
General Account Investments section of this MD&A.

      Advisory fees decreased 15.4%, or $22.7 million, from the prior year. The
decrease in fees was driven by the Asset Gathering Segment which decreased
21.9%, or $25.5 million, driven by the mutual funds business. The mutual funds
business management advisory fees declined $17.9 million driven by a decline in
average assets under management of 11.5%, or $3,331.8 million. Advisory fees as
percentage of assets under management decreased 4 basis points due to a decline
in retail assets under management and an increase in institutional assets under
management. Institutional assets are generally charged lower fees than retail
assets.

      Other revenue decreased 4.9%, or $3.8 million, from the prior year. The
decline in other revenue is driven by the Maritime Life Segment where other
revenue declined by $5.0 million. This decline in other revenue was offset by
growth in the Protection Segment of $1.2 million due to the Federal long-term
care insurance business which officially began operation on October 1, 2002. The
Federal long-term care insurance business is a fee business where the Company
administers and supports employee long-term care insurance benefits offered by
the Federal Government to its employees. The Company's other revenue is largely
made up of Signature Fruit in the Corporate and Other Segment. Signature Fruit
generated $69.8 million and $69.4 million for the three months ended March 31,
2003 and 2002, respectively.

      Benefits to policyholders increased 10.1%, or $124.6 million, from the
prior year. The increase in benefits and expenses was driven by the Protection
Segment where benefits to policyholders increased $60.0 million, due to growth
in the long-term care insurance business. The long term care insurance business
experienced 50.2% growth in new premiums and strong persistency during the
period. In addition, the universal life insurance business experienced a $11.3
million, increase in benefits to policyholders driven by the acquisition of
Allmerica's fixed universal life insurance business. Benefits to policyholders
also increased in our Maritime Life Segment by 23.4%, or $46.5 million, due to
the growth in the group life & health business due to the reinsurance recapture
transaction and $10.2 million in foreign exchange translation gains. Also
driving the increase in benefits to policyholders was growth in the Asset
Gathering Segment's fixed annuity business, Asset Gathering Segment benefits to
policy holders increased 27.0%, or $26.9 million. The growth in the fixed
annuity business was driven by an increase of $11.2 million in premiums and an
increase in average invested assets. Average account balance in the fixed
annuity business increased 34.8%, or $2,376.5 million, while credited rates
decreased from the prior year by 70 basis points. Partially offsetting these
increases in benefits to policyholders was a decrease in the G&SFP Segment of
5.6%, or $19.5 million. Lower benefits to policyholders in the G&SFP Segment
were driven by a decrease in interest credited of 3.7%, or $9.7 million, due to
the reset on floating rate liabilities and lower reserves due to lower premiums,
down 13.3% or $5.2 million. Despite weak sales, average invested assets on
spread-based products in the G&SFP Segment increased 12.4%, or $2,795.6 million,
from the prior year.

      Amortization of deferred policy acquisition costs increased 13.6%, or $9.6
million, from the prior year. The increase in amortization of deferred policy
acquisition costs was driven by the Asset Gathering Segment which increased
56.9%, or $12.3 million from the prior year. Both the fixed and variable annuity
businesses experienced increased amortization of deferred policy acquisition
costs of approximately 57.0%. Amortization increased in the fixed annuity
business due to improved margins on the business compared to the prior year,


                                       43
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


interest spreads improved compared to the prior year. Amortization in the
variable annuity business increased due to poor separate account performance
during the period compared to the prior year. Our Maritime Life Segment
experienced a decline of approximately $4.9 million, in amortization of deferred
policy acquisition costs as a result of a review of deferrable acquisition cost
amortization completed in 2002 which lowered current DAC amortization.

      Operating costs and expenses decreased 1.5%, or $6.0 million. The decrease
in operating costs and expenses was driven by the Asset Gathering Segment, which
declined 20.5%, or $21.6 million, due to cost saving measures in the mutual
funds business. Operating costs and expenses declined by $13.6 million in the
mutual funds business due to cost control measures and lower commissions on
lower sales. In addition, Signator and Essex, two of the Company's distribution
subsidiaries in the Asset Gathering Segment, experienced lower commission
expense on lower load mutual fund sales compared to the prior year. Partially
offsetting these decreases was an increase of 7.8%, or $8.0 million, in our
Corporate and Other Segment, 10.9%, or $6.8 million, in our Maritime Life
Segment due to the lack of reinsurance allowances in the group life and health
business and the reinsurance recapture transaction, while expense increased
20.8%, or $3.2 million, in the G&SFP Segment on higher compensation costs. Also
included in other operating costs and expenses is $6.2 million for planned
terminations related to the information technology outsourcing. See Note 6 -
Severance to the unaudited consolidated financial statements Included in the
Company's operating cost and expense are all the operating expenses of Signature
Fruit in the Corporate and Other Segment. Signature Fruit generated operating
expenses $70.4 million and $68.0 million for the three months ended March 31,
2003 and 2002, respectively.

      Dividends to policyholders decreased 5.0%, or $7.3 million from the prior
year. The decrease in dividends to policyholders was driven by the Protection
Segment, which declined 7.5%, or $9.9 million, due to a decrease in the dividend
scale on traditional life insurance products.

      Income taxes were $104.7 million in 2003, compared to $51.8 million for
2002. Our effective tax rate was 29.3% in 2003, compared to 26.1% in 2002. The
higher effective tax rate was primarily due to increased tax on capital gains,
partially offset by increased affordable housing tax credits.


                                       44
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


Results of Operations by Segment and Adjustments to GAAP Reported Net Income

      In the first quarter of 2003 the Company implemented organizational
changes within the Corporate and Other Segment which resulted in the break-out
of the Maritime Life business as its own operating segment. The Maritime Life
Segment consists of our consolidated Canadian operations, principally those of
our Canadian life insurance business, The Maritime Life Assurance Company
(Maritime Life). The following MD&A discussion presents the results of our
segments on a basis consistent with the new organization structure. The
reclassifications associated with the realignment of our operating segments had
no impact on segment after-tax operating income, or net income of the Maritime
Life or Corporate and Other Segments.

      We operate our business in six segments: two segments primarily serve
domestic retail customers, two segments serve domestic institutional customers,
one segment primarily serves Canadian retail and group customers and our sixth
segment is the Corporate and Other Segment, which includes our remaining
international operations, the corporate account and several run-off businesses.
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. The Maritime Life Segment
consists primarily of the financial results of our Canadian operating
subsidiary, Maritime Life. For additional information about the Company's
business segments, please refer to the Company's 2002 Form 10-K.

      We evaluate segment performance and base management's incentives on
segment after-tax operating income, which excludes the effect of net realized
investment and other gains and losses and other identified transactions. In
addition, we believe most investors and analysts that follow our industry also
measure results on the same basis. Total segment after-tax operating income,
which is a non-GAAP financial measure, is determined by adjusting GAAP net
income for net realized investment and other gains and losses, 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. A reconciliation of segment after-tax
operating income, as adjusted, to GAAP reported net income precedes each segment
discussion.

<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                                         March 31,
                                                                ---------------------------
                                                                   2003             2002
                                                                ---------------------------
                                                                       (in millions)
<S>                                                              <C>               <C>
      Segment Data:
      Segment after-tax operating income:
         Protection Segment....................................  $  74.3           $  72.8
         Asset Gathering Segment...............................     40.0              40.0
                                                                ---------------------------
           Total Retail Segments...............................    114.3             112.8

         Guaranteed and Structured Financial Products
           Segment.............................................     85.8              66.9
         Investment Management Segment.........................      5.6               4.9
                                                                ---------------------------
           Total Institutional Segments........................     91.4              71.8

         Maritime Life Segment.................................     20.2              15.8
         Corporate and Other Segment...........................    (11.8)              2.4
                                                                ---------------------------
         Total segment after-tax operating income..............    214.1             202.8

      After-tax adjustments:
         Net realized investment and other gains (losses)......     39.1             (52.7)
         Restructuring charges.................................       --              (3.6)
                                                                ---------------------------
           Total after-tax adjustments.........................     39.1             (56.3)

      GAAP Reported:
                                                                ---------------------------
         Net income............................................  $ 253.2           $ 146.5
                                                                ===========================
</TABLE>


                                       45
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      Our GAAP reported net income was significantly affected by net realized
investment and other gains and losses and other identified transactions
presented above as after-tax adjustments. A description of these adjustments
follows.

      In all periods, net realized investment and other gains (losses), except
for gains and losses from mortgage securitizations, have been excluded from
segment after-tax operating income because such data are often excluded by
analysts and investors when evaluating the overall financial performance of
insurers. Net realized investment and other gains and losses from mortgage
securitizations 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 net realized investment and other gains (losses), (2)
the portion of net realized investment and other gains (losses) credited to
certain participating contractholder accounts and (3) the portion of net
realized investment and other gains (losses) credited to the policyholder
dividend obligation. We believe presenting net realized investment and other
gains (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 (losses) per the consolidated financial statements
and (b) the adjustment made for net realized investment and other gains (losses)
to calculate segment after-tax operating income for the three month periods
ended March 31, 2003 and 2002.

<TABLE>
<CAPTION>
                                                                               Three Months Ended
                                                                                    March 31,
                                                                              2003             2002
                                                                            --------------------------
                                                                                  (in millions)

<S>                                                                          <C>             <C>
      Net realized investment and other gains (losses)...................    $ 13.4          $ (106.7)
      Add amortization of deferred policy acquisition costs related
         to net realized investment and other gains (losses).............       6.5              14.2
      Add (less) amounts credited to participating pension
         contract holder accounts........................................       7.7               0.4
      Add amounts credited to the policyholder dividend
         obligation......................................................      35.0               6.4
                                                                            --------------------------
      Net realized investment and other gains (losses), net of related
         amortization of deferred policy acquisition costs, amounts
         credited to participating pension contractholders and the
         policyholder dividend obligation per unaudited
         consolidated financial statements...............................      62.6             (85.7)
      Add net realized investment and other gains (losses)
         attributable to mortgage securitizations and mezzanine
         funds...........................................................      (1.5)              0.8
                                                                            --------------------------
      Net realized investment and other gains (losses) - pre-tax.........      61.1             (84.9)
         adjustment to calculate segment operating income
      Less income tax effect.............................................     (22.0)             32.2
                                                                            --------------------------
      Net realized investment and other gains (losses) - after-tax
         adjustment to calculate segment operating income................    $ 39.1          $  (52.7)
                                                                            ==========================
</TABLE>

      The Company incurred after-tax restructuring charges to reduce costs and
increase future operating efficiency by consolidating portions of our
operations. Additional information regarding restructuring costs is included in
Note 6 -- Severance in the notes to the unaudited consolidated financial
statements. After-tax restructuring costs net of related curtailment pension and
other post employment benefit related gains, were $3.6 million (pre-tax of $5.5
million) for the three months ended March 31, 2002 and were excluded from
segment after-tax operating income. The Company incurred after-tax restructuring
costs of $4.0 million (pre-tax of $6.2 million) for the three months ended March
31, 2003 which are included in segment after-tax operating income. Therefore,
total segment after-tax operating income decreased approximately $7.6 million
(pre-tax $11.7 million) from the prior year due to the Company's change in
treatment of this adjustment to segment after-tax operating income.


                                       46
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


Protection Segment

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

<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                          March 31,
                                                                                  --------------------------
                                                                                     2003            2002
                                                                                  ----------      ----------
                                                                                        (in millions)
<S>                                                                               <C>             <C>
Operating Results:
Revenues
      Premiums ..............................................................     $    456.7      $    428.5
      Universal life and investment-type product fees .......................          112.5           108.3
      Net investment income .................................................          347.9           322.6
      Other revenue .........................................................            1.7             0.3
                                                                                  ----------      ----------
            Total revenues ..................................................          918.8           859.7
Benefits and expenses
      Benefits to policyholders .............................................          553.0           493.0
      Other operating costs and expenses ....................................           88.2            86.0
      Amortization of deferred policy acquisition costs, excluding amounts
         related to net realized investment and other gains (losses) ........           40.9            39.1
      Dividends to policyholders ............................................          121.7           131.6
                                                                                  ----------      ----------
            Total benefits and expenses .....................................          803.8           749.7

Segment pre-tax operating income(1) .........................................          115.0           110.0
Income taxes ................................................................           40.7            37.2
                                                                                  ----------      ----------

Segment after-tax operating income(1) .......................................           74.3            72.8
After-tax adjustments:(1)
      Net realized investment and other (losses) gains, net .................          (19.9)          (18.7)
      Restructuring charges .................................................             --            (3.2)
                                                                                  ----------      ----------
            Total after-tax adjustments .....................................          (19.9)          (21.9)

GAAP Reported:
Net income ..................................................................     $     54.4      $     50.9
                                                                                  ==========      ==========

Other Data:
Segment after-tax operating income (loss)
      Non-traditional life (variable life and universal life) ...............     $     29.2      $     26.9
      Traditional life ......................................................           23.8            29.3
      Long-term care ........................................................           20.0            16.8
      Federal Long-term care ................................................            1.5              --
      Other .................................................................           (0.2)           (0.2)
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this MD&A.


Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

      Segment after-tax operating income increased 2.1%, or $1.5 million, from
the prior year. Non-traditional life insurance business after-tax operating
income increased 8.6%, or $2.3 million, primarily due to increases in universal
life and investment-type product fees and net investment income, partially
offset by higher expenses and higher benefits to policyholders. Long-term care
insurance business after-tax operating income increased approximately 19.0%, or
$3.2 million, resulting from growth of the business. Federal long-term care
insurance business after-tax operating income increased $1.5 million as the
business was not in effect in the prior period. Traditional life insurance
business after-tax operating income decreased 18.8%, or $5.5 million, primarily
resulting from decreases in premiums and net investment income partially offset
by a decrease in total benefit and expenses, driven by lower dividends.


                                       47
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      Revenues increased 6.9%, or $59.1 million. Premiums increased 6.6%, or
$28.2 million, primarily due to long-term care insurance premiums, which
increased 21.1%, or $37.2 million, driven by business growth from higher sales
and continued lower lapses. Universal life and investment-type product fees
increased 3.9%, or $4.2 million, due primarily to cost of insurance fees of $7.0
million resulting from growth in the existing business and from the addition of
the Allmerica block of business assumed as of December 31, 2002. Segment net
investment income increased 7.8%, or $25.3 million, primarily due to a 14.3%
increase in average asset balances, partially offset by a 44 basis point
decrease in yields.

      Benefits and expenses increased 7.2%, or $54.1 million. Benefits to
policyholders increased 12.2%, or $60.0 million, due primarily to growth in
long-term care insurance business. Long-term care insurance business benefits
and expenses increased 22.9%, or $44.5 million, primarily due to additions to
reserves for premium growth and higher claim volume on growth of the business
during the period. Long-term care insurance business policies have increased to
624.4 thousand from 555.8 thousand in the prior year and open claims increased
to 5,761 from 4,724 in the prior year. The non-traditional life insurance
business had an increase in benefits to policyholders of $7.9 million, which was
driven by a $14.2 million increase in interest credited on higher current year
account balances and the addition of the Allmerica business as well as a $6.3
million increase in policy benefit reserves and other benefits due to growth and
change in sales mix. These increases were partially offset by lower death claims
paid net of reserves released and reinsurance ceded of $12.6 million due to not
repeating higher mortality experienced in the prior year. The traditional life
insurance line of business benefits to policyholders increased 3.1%, or $8.0
million due to higher death claims, net of reserves released and reinsurance
ceded. Dividends to policyholders decreased 7.5%, or $9.9 million, primarily due
to a dividend scale cut for the traditional life insurance business.
Amortization of deferred policy acquisition costs increased 4.6%, or $1.8
million, primarily due to the non-traditional life insurance business for
experience true-ups of $1.9 million and $1.1 million due to growth. In addition,
growth in the long-term care insurance business contributed $1.4 million to the
increase in amortization of deferred policy acquisition costs. These increases
were partially offset by a $2.6 million decrease in amortization of deferred
policy acquisition costs in the traditional life insurance business due to lower
contributions from the closed block. The Segment's effective tax rate on
operating income was 35.4% compared to 33.8% for the prior year. The increase
was primarily due to decreased deductions for general account dividends received
on common stock.


                                       48
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


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
                                                                                          March 31,
                                                                                 --------------------------
                                                                                    2003            2002
                                                                                 ----------      ----------
                                                                                      (in millions)
<S>                                                                              <C>             <C>
Operating Results:
Revenues
     Premiums ..............................................................     $     15.6      $      4.4
     Investment-type product fees ..........................................           29.1            30.2
     Net investment income .................................................          166.0           130.5
     Investment management revenues, commissions, and other fees ...........           91.1           116.6
     Other revenue (expense) ...............................................            0.1             0.6
                                                                                 ----------      ----------
         Total revenues ....................................................          301.9           282.3

Benefits and expenses
     Benefits to policyholders .............................................          126.4            99.5
     Other operating costs and expenses ....................................           83.3           102.7
     Amortization of deferred policy acquisition costs, excluding amounts
         related to net realized investment and other gains (losses) .......           33.9            21.6
                                                                                 ----------      ----------
         Total benefits and expenses .......................................          243.6           223.8

Segment pre-tax operating income (1) .......................................           58.3            58.5
Income taxes ...............................................................           18.3            18.5
                                                                                 ----------      ----------

Segment after-tax operating income (1) .....................................           40.0            40.0
                                                                                 ----------      ----------

After-tax adjustments (1):
     Net realized investment and other (losses) gains, net .................          (24.1)          (14.8)
     Restructuring charges .................................................             --            (1.4)
                                                                                 ----------      ----------
         Total after-tax adjustments .......................................          (24.1)          (16.2)

GAAP Reported:
     Net income ............................................................     $     15.9      $     23.8
                                                                                 ==========      ==========

Other Data:
Segment after-tax operating income
     Annuity ...............................................................     $     27.6      $     24.9
     Mutual funds ..........................................................            9.3            12.4
     Other .................................................................            3.1             2.7
Mutual fund assets under management, end of period .........................       25,595.7        28,783.7
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this MD&A.

Three Months Ended March 31, 2003 Compared to Three months Ended March 31, 2002

      Segment after-tax operating income was $40.0 million, unchanged from the
prior year period. Fixed annuity after-tax operating income increased 55.7%, or
$9.8 million from the prior year period. The fixed annuity business grew due to
higher net investment income, partially offset by higher interest credited on
account balance growth. Partially offsetting the increase in the fixed annuity
business were decreases of 97.3%, or $7.1 million, in after-tax operating income
in the variable annuity business compared to the prior year. The variable
annuity business suffered due to significant declines in the equity markets
leading to increased amortization of deferred policy acquisition costs and lower
fee revenue on lower average account balances. Mutual fund segment after-tax
operating income was $9.3 million, declining 25.0% or $3.1 million primarily due
to a 21.4%, or $17.9 million decrease in management advisory fees, partially
offset by an 20.2%, or $13.1 million decrease in operating expenses. Signature
Services after-tax operating income increased $1.4 million to $2.3 million,
driven by an increase in management advisory fees from the same period in 2002
and continued expense management. After-tax operating income for Essex, a
distribution subsidiary primarily serving the financial institution channel,
decreased $1.0 million from $1.2 million in the prior year. Signator Investors
after-tax operating income increased $0.2 million.


                                       49
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      Revenues increased 6.9%, or $19.6 million, from the prior year. The rise
in revenue was due to a $35.5 million increase in net investment income and an
$11.2 million increase in premiums, driven by the fixed annuity business. The
increase in net investment income was primarily due to increases in invested
assets backing fixed annuity products, partially offset by lower earned yields
in the portfolio. Average invested assets backing fixed annuity products
increased 36.0% to $9,536.7 million while the average investment yield decreased
from the prior year. These increases in revenue were partially offset by a
decrease in investment management revenues, primarily from the mutual fund
business, of 21.9%, or $25.5 million and a $1.1 million decrease in
investment-type product fees, primarily in the variable annuity business on
lower average fund values. Investment-type product fees decreased mostly due to
a decline in the average variable annuity fund values of 17.1%, or $1,073.1
million, to $5,210.3 million from the prior year period. Both market
depreciation of $49.4 million and net outflows of $135.1 drove this decrease in
average variable annuity fund values for the current year. For variable
annuities the mortality and expense fees as a percentage of average account
balances were 1.33% and 1.26% for the current and prior year periods.

      Investment management revenues, commissions, and other fees decreased
21.9%, or $25.5 million from the prior year. Average mutual fund assets under
management were $25,703.0, a decrease of $3,331.8 million, or 11.5% from the
prior year period. The decrease in average mutual fund assets under management
is primarily due to market depreciation of $3,573.0 million since March 31,
2002, including $125.9 million since December 31, 2002. The mutual fund business
experienced net redemptions of $22.8 million during the first quarter of 2003,
compared to net redemptions of $317.6 million in the prior year, an improvement
of $294.8 million. This change was primarily due to a increase in deposits of
$99.1 million and a decrease in redemptions of $185.9 million. The increase in
deposits was driven by $299.6 million in sales of the John Hancock Preferred
Income series of closed-end funds, partially offset by a $200.0 million decrease
in retail open-end mutual fund sales. The decrease in redemptions was primarily
due to a decrease in retail mutual fund redemptions of $185.7 million, caused by
declines in redemptions across a number of funds. Investment advisory fees
decreased 17.1%, or $7.1 million, to $34.2 million, from the prior period and
were 0.53% and 0.57% of average mutual fund assets under management for the
three months ended March 31, 2003 and 2002. Underwriting and distribution fees
decreased 27.1%, or $15.7 million, to $42.2 million compared to the prior year
period. Asset based 12b-1 fees declined by $8.4 million due to a decline in
retail mutual fund assets under management. Commission revenue declined by $7.3
million primarily due to lower load mutual fund sales. Shareholder service and
other fees were $14.7 million compared to $11.0 million in the prior year.

      Benefits and expenses increased 8.8%, or $19.8 million from the prior year
period. Benefits to policyholders increased 27.0%, or $26.9 million, primarily
due to a $16.0 million increase in interest credited on fixed annuity account
balances due to higher average account balances and $11.0 million higher reserve
provisions for life-contingent immediate fixed annuity fund values on higher
sales of these contract types. Partially offsetting the increase in benefits to
policyholders was a decline in other operating costs and expenses of 18.9%, or
$19.4 million, from the prior year period, primarily due to cost savings in the
mutual fund business. Amortization of deferred policy acquisition costs
increased 56.9%, or $12.3 million, primarily due to a $7.0 million increase in
the fixed annuity business driven by higher interest on account balances growth
and a $5.3 million increase in the variable annuity business due to the
previously mentioned decline in equity markets. The Segment's effective tax rate
on operating income was 31.4% compared to 31.6% for the prior year period.


                                       50
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


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
                                                                             March 31,
                                                                    --------------------------
                                                                       2003            2002
                                                                    ----------      ----------
                                                                           (in millions)
<S>                                                                 <C>             <C>
Operating Results:
Revenues
     Premiums .................................................     $     33.9      $     39.1
     Investment-type product fees .............................           14.5            11.4
     Net investment income ....................................          431.4           420.7
     Other revenue (expense) ..................................            0.6             0.1
                                                                    ----------      ----------
         Total revenues .......................................          480.4           471.3

Benefits and expenses
     Benefits to policyholders ................................          327.4           346.9
     Other operating costs and expenses .......................           19.3            15.4
     Dividends ................................................            8.8             8.8
                                                                    ----------      ----------
         Total benefits and expenses ..........................          355.5           371.1

Segment pre-tax operating income (1) ..........................          124.9           100.2
Income taxes ..................................................           39.1            33.3
                                                                    ----------      ----------

Segment after-tax operating income (1) ........................           85.8            66.9
                                                                    ----------      ----------

After-tax adjustments (1):
     Net realized investment and other (losses) gains, net ....          (85.9)          (13.7)
     Restructuring charges ....................................             --            (0.3)
                                                                    ----------      ----------
         Total after-tax adjustments ..........................          (85.9)          (14.0)

GAAP Reported:
     Net income ...............................................     $     (0.1)     $     52.9
                                                                    ==========      ==========

Other Data:
Segment after-tax operating income
  Spread-based products (2):
     GICs and funding agreements ..............................     $     57.7      $     45.3
     Single premium annuities .................................           21.8            15.8
     SignatureNotes ...........................................            1.5              --
     Other ....................................................            0.1              --
  Fee-based products ..........................................            4.7             5.8
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this MD&A.

(2)   All products are managed in one investment segment and the product results
      are reasonable estimates of the financial results.

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

      Segment after-tax operating income increased 28.3% or $18.9 million from
the prior year. Spread-based products after-tax operating income increased 32.7%
or $20.0 million, which was attributable to an increase in investment spreads of
25.1% or $24.7 million from the prior year. The growth in investment spreads was
a result of a higher average invested asset base, which increased 12.4% or $2.8
billion over the prior year, combined with an 18 basis point increase in the
interest rate margin. GICs and funding agreements accounted for 67.2% of segment
after-tax operating income compared to 67.7% in the prior year. On a total
company basis, GICs and funding agreements accounted for 27.0% of after-tax
operating income compared to 22.3% in the prior year. Fee-based products
after-tax operating income decreased 19.0% or $1.1 million from the prior year,
primarily due to higher operating expenses and lower earnings on risk-based
capital.

      Revenues increased 1.9% or $9.1 million from the prior year, primarily as
a result of higher net investment income. Premiums declined 13.3% or $5.2
million from the prior year, primarily as a result of lower group annuity
product sales. Investment-type product fees increased 27.2% or $3.1 million from
the prior year, primarily due to higher asset based fees. Despite declining


                                       51
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


interest rates, net investment income increased 2.5% or $10.7 million, primarily
due to growth in the spread-based average invested assets. The average yield on
invested assets decreased to 6.19%, reflecting the lower interest rate
environment in the current period. Net investment income varies with market
interest rates as the return on approximately $11 billion, or 43% of the asset
portfolio, floats with market rates. Matching the interest rate exposure on our
asset portfolio to the exposure on our liabilities is a central feature of our
asset/liability management process.

      Benefits and expenses decreased 4.2% or $15.6 million from the prior year.
The decrease was largely due to lower benefits to policyholders, partially
offset by an increase in operating expenses and costs. Benefits to policyholders
on spread-based products decreased 6.3% or $19.1 million primarily due to a
decrease in sales of single premium group annuity contracts combined with lower
interest credited on account balances. Spread-based interest credited decreased
3.7% or $9.8 million from the prior year. The decrease in interest credited was
due to a decline in the average interest credited rate on account balances for
spread-based products, as approximately $11 billion of liabilities with floating
rates reset and new business was added at market rates. The average crediting
rate fell to 4.45%. Partially offsetting this decrease was an increase in other
operating costs and expenses of 25.3% or $3.9 million from the prior year. The
increase was primarily due to higher pension and compensation costs. Dividends
to contractholders were $8.8 million for both periods. The segment's effective
tax rate on operating income was 31.3% compared to 33.2% for the prior year. The
decrease was primarily due to increased affordable housing tax credits.


                                       52
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


Investment Management Segment

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

                                                             Three Months Ended
                                                                  March 31,
                                                            --------------------
                                                              2003       2002
                                                            --------------------
                                                                (in millions)
Operating Results:
Revenues
     Net investment income................................   $  4.2      $  4.0
     Net realized investment and other
       gains (losses), net (1)............................      1.5        (0.8)
     Investment management revenues, commissions,
       and other fees.....................................     26.8        27.5
     Other revenue........................................      0.1        (0.1)
                                                            --------------------
           Total revenues.................................     32.6        30.6

Benefits and expenses
     Other operating costs and expenses...................     23.5        22.9
                                                            --------------------
     Total benefits and expenses..........................     23.5        22.9

Segment pre-tax operating income (1)......................      9.1         7.7
     Income taxes.........................................      3.5         2.8
                                                            --------------------
Segment after-tax operating income (1)....................      5.6         4.9
                                                            --------------------

GAAP Reported:
Net income................................................   $  5.6      $  4.9
                                                            ====================

(1)  See "Results of Operations by Segment and Adjustments to GAAP Reported Net
     Income" included in this MD&A. The Investment Management Segment did not
     contain any segment adjustments for the periods indicated.

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

      Segment after-tax operating income increased $0.7 million, or 14.3%, from
the prior year. The increase was primarily due to $2.3 million in higher net
realized investment and other gains (losses) on mortgage securitizations and
$0.7 million in lower commission expenses, partially offset by $1.3 million in
higher operating expenses and $0.7 million in lower fee income.

      Revenues increased $2.0 million, or 6.5%, from the prior year. Net
realized investment and other gains (losses) on mortgage securitizations
increased $2.3 million, to a gain of $1.5 million from a loss of $0.8 million in
the prior year. The increase in securitization gains resulted from higher
profitability on a similar volume of securitizations in the current year. Net
investment income was relatively flat at $4.2 million, up $0.2 million from the
prior year. Investment management revenues, commissions, and other fees
decreased $0.7 million, or 2.5%, from the prior year. At the Company's
institutional advisor, Independence Investment LLC, advisory fees were down $1.9
million, or 13.3% from the prior year, on $2.3 billion of lower assets under
management resulting from market depreciation of $3.5 billion and net sales of
$1.2 billion since the end of the prior year period. Fees declined $1.2 million
at the Company's Bond and Corporate Finance Group on lower assets under
management compared to the prior year. Commercial mortgage origination fees at
John Hancock Real Estate Finance declined $0.8 million from lower levels of
originations due to a more competitive mortgage origination market. The declines
were offset by increases in property management fee income of $1.5 million at
the Hancock Natural Resource Group from the new northwest property management
division established in December 2002, and higher acquisition fee income of $1.3
million at John Hancock Realty Advisors. Investment management revenue,
commissions and other fees were 0.39% and 0.38% of average advisory assets under
management for the current and prior year quarters, respectively.

      Total benefits and expenses increased $0.6 million, or 2.6% from the prior
year. Operating costs and expenses increased $1.3 million, or 5.9% from the
prior year. The increase was primarily due to $1.7 million in higher operating
expenses at the Hancock Natural Resource Group, which included $1.0 million of
expenses associated with the new northwest property management division
established in December 2002, and $0.5 million of increased incentive
compensation plan expenses. Operating expenses at Independence Investment LLC
declined $0.2 million, or 1.6%, based on ongoing cost reductions. At John
Hancock Real Estate Finance, operating expenses declined $0.2, or 7.7%, on lower
incentive compensation plan expenses. Operating costs and expenses were 0.34%
and 0.31% of average advisory assets under management for the


                                       53
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


current and prior year quarters, respectively. There were no commission expenses
at the Hancock Natural Resource Group, down from $0.7 million on significant new
timberland investors signed in the prior year. The Segment's effective tax rate
on operating income rose to 38.5% from 36.4% for the prior year, primarily due
to lower operating income at Independence Investment, LLC which has a lower
state tax liability form of business organization. The effective tax rate for
the Investment Management Segment remains higher than for our other business
segments due to state taxes on certain investment management subsidiaries, and
fewer tax benefits from portfolio holdings in this segment.


                                       54

<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


Maritime Life Segment

      In the first quarter of 2003 the Company implemented organizational
changes within the Corporate and Other Segment which resulted in the Company
reporting the Maritime Life business as its own operating segment for the first
time. The Maritime Life Segment consists of our consolidated Canadian
operations, principally those of our Canadian life insurance business, The
Maritime Life Assurance Company (Maritime Life). The reclassifications
associated with the realignment of our operating segments had no impact on
segment after-tax operating income, or net income of the Maritime Life, or
Corporate and Other Segments, other than to display these businesses separately.
The following table presents certain summary financial data relating to the
Maritime Life Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                                                Three Months Ended
                                                                                    March 31,
                                                                            --------------------------
                                                                               2003            2002
                                                                            ----------      ----------
                                                                                  (in millions)

<S>                                                                         <C>             <C>
Operating Results:
Revenues
   Premiums ...........................................................     $    215.7      $    164.7
   Investment-type product fees .......................................           44.7            43.2
   Net investment income ..............................................           84.5            75.6
   Investment management revenues, commissions, and other fees ........            6.3             5.6
   Other revenue ......................................................            1.7             6.4
                                                                            ----------      ----------
       Total revenues .................................................          352.9           295.5

Benefits and expenses
   Benefits to policyholders ..........................................          244.8           198.3
   Other operating costs and expenses .................................           69.0            62.2
   Amortization of deferred policy acquisition costs, excluding amounts
       related to net realized investment and other gains (losses) ....            3.4             8.3

   Dividends ..........................................................            3.9             2.5
                                                                            ----------      ----------
       Total benefits and expenses ....................................          321.1           271.3

Segment pre-tax operating income (1) ..................................           31.8            24.2
Income taxes ..........................................................           11.6             8.4
                                                                            ----------      ----------

Segment after-tax operating income (1) ................................           20.2            15.8
                                                                            ----------      ----------

After-tax adjustments (1):
   Net realized investment and other gains (losses), net ..............            2.0             1.8
                                                                            ----------      ----------
       Total after-tax adjustments ....................................            2.0             1.8

GAAP Reported:
   Net income .........................................................     $     22.2      $     17.6
                                                                            ==========      ==========

Other Data:
Segment after-tax operating income
 Spread-based products:
   Canadian protection ................................................     $     11.5      $      9.8
   Canadian asset gathering ...........................................            4.9             3.2
     Canadian group life & health .....................................            5.0             3.5
     Canadian corporate and other .....................................           (1.2)           (0.7)
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this MD&A.

Three Months Ended March 31, 2003 Compared to Three months Ended March 31, 2002

      Segment after-tax operating income was $20.2 million for the three months
ended March 31, 2003, an increase of $4.4 million, or 27.8%, from the result for
the three months ended March 31, 2002. This was driven by a $1.7 million
after-tax increase in earnings in the retail protection business due to growth
in living benefits products, $1.7 million after-tax increase in the asset
gathering business due to lower DAC amortization arising from the completion of
a review of deferrable


                                       55
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


acquisition costs for separate account products in the fourth quarter 2002
partially offset by $1.0 million lower fee revenue on lower separate account
assets, and $1.5 million after-tax improvement in the group life & health
business core earnings from pricing increases implemented last year.

      Total revenue increased $57.4 million or 19.4% including $18.3 million or
6.2% due to changes in the Canadian /US foreign exchange rates. Premiums
increased $51.0 million, including foreign exchange translation gains,
substantially in the group life & health business following a recapture of
significant portions of its group life, accidental death and dismemberment and
long term disability reinsurance. Retail protection premiums were up marginally
due to lower sales in traditional products offset by positive growth in living
benefits products. Asset gathering business product fees were down 3.0%, or 8.0%
after removing the foreign exchange impact, from the same period last year due
to the lower asset base upon which fees are calculated, stemming from falling
equity markets. Net investment income increased $8.9 million driven by foreign
exchange translation gains of $4.4 million and a higher asset base under
management, primarily from the reinsurance recapture transaction in the group
life & health business.

      Total benefits and expenses increased $49.8 million, or 18.4%, over the
same quarter last year. Changes in foreign exchange rates increased benefits and
expenses by $16.7 million or 6.2%. The group life & health business accounted
for $46.8 million of the increase, including $10.2 million from foreign exchange
translation gains, primarily due to the reinsurance recapture discussed above.
The review of deferrable acquisition cost amortization completed in 2002 has
resulted in lower DAC amortization versus the prior year.


                                       56
<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
                                                                    March 31,
                                                             -----------------------
                                                                 2003       2002
                                                             -----------------------
                                                                 (in millions)

<S>                                                            <C>          <C>
Operating Results:
Segment after-tax operating income(1)
   International operations ................................       --       $  1.2
   Corporate operations ....................................   $(13.0)        (0.6)
   Non-core businesses .....................................      1.2          1.8
                                                             ----------   ----------
         Total .............................................    (11.8)         2.4
After-tax adjustments(1):
   Net realized investment and other gains (losses), net ...    167.0         (7.3)
   Restructuring charges ...................................       --          1.3
                                                             ----------   ----------
         Total after-tax adjustments .......................    167.0         (6.0)
GAAP Reported:
Net income .................................................   $155.2       $ (3.6)
                                                             ==========   ==========
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this Management's Discussion and Analysis.

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

      Segment after-tax operating income from international operations decreased
$1.2 million from the prior year. Results from our Direct Foreign Operations,
which consist of operations in Southeast Asia and China, were $1.2 million
lower. The first quarter of 2003 was lower due to a $0.5 million DAC write off
in Thailand while the prior year period was $0.5 million higher due to favorable
adjustments to DAC in Singapore and investment income in Indonesia.

      Segment after-tax operating loss from corporate operations increased $12.4
million from the prior year. Investment income on corporate surplus was $9.0
million lower due to increased surplus requirements in our other business lines.
Investment income was $7.1 million lower primarily due to changes in estimates
to partnership funds and lease funds. Holding company interest expense increased
$0.8 million. Signature Fruit decreased by $1.6 million due to lower profit
margins. Our corporate owned life insurance program increased $6.7 million due
to an increase in the asset base and to improved performance of the assets
supporting the program. The Company incurred after-tax restructuring costs in
the corporate operations business of $4.0 million (pre-tax of $6.2 million) for
the three months ended March 31, 2003 which are included in segment after-tax
operating income. The Company's after-tax restructuring charges in the corporate
operations business of negative $1.3 million (pre-tax $2.3 million) due to
curtailment gains, for the three months ended March 31, 2002 were excluded from
segment after-tax income. Therefore segment after-tax operating income decreased
approximately $5.3 million (pre-tax $8.5 million) from the prior year due to the
Company's change in treatment of this adjustment to segment after-tax operating
income.

      Segment after tax operating income from non-core businesses decreased $0.6
million from the prior year. We continue with the orderly run-off of business
within this group.


                                       57
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


General Account Investments

      We manage our general account assets in investment segments that support
specific classes of product liabilities. These investment segments permit us to
implement investment policies that both support the financial characteristics of
the underlying liabilities, and also provide returns on our invested capital.
The investment segments also enable us to gauge the performance and
profitability of our various businesses.

Asset/Liability Risk Management

      Our primary investment objective is to maximize after-tax returns within
acceptable risk parameters. We are exposed to two primary types of investment
risk:

o     Interest rate risk, meaning changes in the market value of fixed maturity
      securities as interest rates change over time, and
o     Credit risk, meaning uncertainties associated with the continued ability
      of an obligor to make timely payments of principal and interest

      We use a variety of techniques to control interest rate risk in our
portfolio of assets and liabilities. In general, our risk management philosophy
is to limit the net impact of interest rate changes on our assets and
liabilities. Assets are invested predominantly in fixed income securities, and
the asset portfolio is matched with the liabilities so as to eliminate the
Company's exposure to changes in the overall level of interest rates. Each
investment segment holds bonds, mortgages, and other asset types that will
satisfy the projected cash needs of its underlying liabilities. Another
important aspect of our asset-liability management efforts is the use of
interest rate derivatives. We selectively apply derivative instruments, such as
interest rate swaps and futures, to reduce the interest rate risk inherent in
combined portfolios of assets and liabilities. For a more complete discussion of
our interest rate risk management practices, please see the Interest Rate Risk
section in the Quantitative and Qualitative Disclosures about Market Risk
section of this document.

      Management of credit risk is central to our business and we devote
considerable resources to the credit analysis underlying each investment
acquisition. Our corporate bond management group employs a staff of highly
specialized, experienced, and well-trained credit analysts. We rely on these
analysts' ability to analyze complex private financing transactions and to
acquire the investments needed to profitably fund our liability requirements. In
addition, when investing in private fixed maturity securities, we rely upon
broad access to proprietary management information, negotiated protective
covenants, call protection features and collateral protection.

      Our bond portfolio is reviewed on a continuous basis to assess the
integrity of current quality ratings. As circumstances warrant, specific
investments are "re-rated" with the adjusted quality ratings reflected in our
investment system. All bonds are evaluated regularly against the following
criteria:

o     material declines in the issuer's revenues or margins;
o     significant management or organizational changes;
o     significant uncertainty regarding the issuer's industry;
o     debt service coverage or cash flow ratios that fall below
      industry-specific thresholds;
o     violation of financial covenants; and
o     other business factors that relate to the issuer.

      Insurance product prices are impacted by investment results. Accordingly,
incorporated in insurance products prices are assumptions of expected default
losses over the long-term. Actual losses therefore vary above and below this
average, and the market value of the portfolio as a whole also changes as market
credit spreads move up and down during an economic cycle.

      John Hancock is able to hold to this investment strategy over the long
term, both because of its strong capital position, the fixed nature of its
liabilities and the matching of those liabilities with assets, and because of
the experience gained through many decades of a consistent investment
philosophy. We generally intend to hold all of our fixed maturity investments to
maturity to meet liability payments, and to ride out any unrealized gains and
losses over the long term.

Overall Composition of the General Account

      Invested assets, excluding separate accounts, totaled $71.0 billion and
$67.1 billion as of March 31, 2003 and December 31, 2002, respectively. Although
the portfolio composition has not significantly changed at March 31, 2003 as
compared to December 31, 2002, invested assets have grown 5.7% over the year,
with the cash and cash equivalent position


                                       58
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


increasing $1.1 billion or 94.8%, due to the sale of certain home office
properties. The following table shows the composition of investments in the
general account portfolio for the periods indicated.

<TABLE>
<CAPTION>
                                                        As of March 31,                  As of December 31,
                                                             2003                               2002
                                             ------------------------------------------------------------------------
                                                  Carrying             % of          Carrying             % of
                                                   Value              Total            Value             Total
                                             ------------------------------------------------------------------------
                                               (in millions)                      (in millions)
<S>                                              <C>                  <C>           <C>                  <C>
      Fixed maturity securities (1)........      $50,244.7             70.8%        $47,598.4             70.9%
      Mortgage loans (2)...................       12,047.2             17.0          11,805.7             17.6
      Real estate..........................          328.8              0.5             318.6              0.5
      Policy loans(3)......................        2,107.1              3.0           2,097.2              3.1
      Equity securities....................        1,004.5              1.4             968.6              1.4
      Other invested assets(4).............        2,666.2              3.7           2,937.8              4.4
      Short-term investments...............          263.7              0.4             211.2              0.3
      Cash and cash equivalents (5)........        2,319.7              3.2           1,190.6              1.8
                                             ------------------------------------------------------------------------
         Total invested assets.............      $70,981.9            100.0%        $67,128.1            100.0%
                                             ========================================================================
</TABLE>

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $596.1 million and
      $593.3 million as of March 31, 2003 and December 31, 2002, respectively.
      The total fair value of our fixed maturity security portfolio was
      $50,274.9 and $47,648.0 million, at March 31, 2003 and December 31, 2002,
      respectively.
(2)   The fair value for the mortgage loan portfolio was $13,076.8 million and
      $12,726.1 million as of March 31, 2003 and December 31, 2002,
      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)   Other invested assets as of December 31, 2002 contains a receivable of
      $471.1 million from Allmerica Financial Corporation (Allmerica) pursuant
      to the Company's agreement to reinsure Allmerica's fixed universal life
      insurance business. At March 31, 2003, the acquisition accounting is
      finalized and these assets are reflected in the appropriate line items in
      the portfolio detail above.
(5)   Cash and cash equivalents are included in total invested assets for the
      purposes of calculating yields on the income producing assets for the
      Company.

      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 on the basis of both cash flow and return requirements
of its products and by the level of investment risk.

      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).
The fixed maturity securities portfolio also includes redeemable preferred
stock. As of March 31, 2003, fixed maturity securities represented 70.8% of
general account invested assets with a carrying value of $50.2 billion,
comprised of 60.3% public securities and 39.7% 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 target the overall level of these bonds to no more than
10% of invested assets and to target the majority of that balance in the BB
category. The Company has established a long-term target of limiting investments
in below investment grade bonds to 8% of invested assets by 2005 for its U.S.
life insurance companies on a statutory accounting basis. 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 total
assets.

      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 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.


                                       59
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


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

                 Fixed Maturity Securities -- By Credit Quality

<TABLE>
<CAPTION>
                                                           As of March 31,              As of December 31,
                                                   ---------------------------------------------------------------
                                                                2003                           2002
                                                   ---------------------------------------------------------------
   SVO                 S&P Equivalent                  Carrying           % of        Carrying          % of
Rating(1)              Designation (2)              Value (3)(4)(5)       Total    Value (3)(4)(5)      Total
------------------------------------------------------------------------------------------------------------------
                                                     (in millions)                  (in millions)
<S>         <C>                                         <C>               <C>          <C>              <C>
    1       AAA/AA/A.............................       $22,275.3          44.9%       $20,635.7         43.9%
    2       BBB..................................        21,864.5          44.0         21,107.5         44.9
    3       BB...................................         2,620.3           5.3          2,626.7          5.6
    4       B....................................         1,591.9           3.2          1,223.5          2.6
    5       CCC and lower........................           597.9           1.2            776.4          1.7
    6       In or near default...................           698.7           1.4            635.3          1.3
                                                   ---------------------------------------------------------------
            Total................................       $49,648.6         100.0%        47,005.1        100.0%

            Redeemable preferred stock...........           596.1                          593.3
                                                   ------------------             -----------------
            Total fixed maturities...............       $50,244.7                      $47,598.4
                                                   ==================             =================
</TABLE>

(1)   For securities that are awaiting a 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)   Includes 358 and 394 securities that are awaiting an SVO rating, with a
      carrying value of $4,270.1 million as of March 31, 2003 and $5,232.8
      million as of December 31, 2002. Due to lags between the funding of an
      investment, the processing of final legal documents, the filing with the
      SVO, and the rating by the SVO, there will always be a number of unrated
      securities at each statement date.
(4)   Includes the effect of $50.0 million invested in the Company's
      credit-linked note program, $30.0 million of written credit default swaps
      on fixed maturity securities in the AAA/AA/A category and $20.0 million of
      written credit default swaps on fixed maturity securities in the BBB
      category. As of December 31, 2002 the Company had $55.0 million invested
      in the company's credit linked program, $10.0 million of written credit
      default swaps on fixed maturity securities in the AAA/AA/A category and
      $45.0 million of written credit default swaps on fixed maturity securities
      in the BBB category.
(5)   The Company entered into a credit enhancement agreement in the form of a
      guaranty from a AAA rated financial guarantor in 1996. To reflect the
      impact of this guaranty on the overall portfolio, the Company has
      presented securities covered in aggregate by the guaranty at rating levels
      provided by the SVO and Moody's that reflect the guaranty. As a result,
      $68.6 million of SVO Rating 2, $687.7 million of SVO Rating 3, and $164.7
      million of SVO Rating 4 underlying securities are included as $720.2
      million of SVO Rating 1, $150.6 million of SVO Rating 2 and $50.2 million
      of SVO Rating 3 as of March 31, 2003 and $94.0 million of SVO Rating 2,
      $718.0 million of SVO Rating 3, and $141.3 million of SVO Rating 4
      underlying securities are included as $753.2 million of SVO Rating 1,
      $150.1 million of SVO Rating 2 and $50.0 million of SVO Rating 3 as of
      December 31, 2002. The guaranty also contains a provision that the
      guarantor can recover from the Company certain amounts paid over the
      history of the program in the event a payment is required under the
      guaranty. As of March 31, 2003 and December 31, 2002, the maximum amount
      that can be recovered under this provision was $82.3 million.

      The table above sets forth the SVO ratings for the bond portfolio along
with an equivalent S&P rating agency designation. The majority of the fixed
maturity investments are investment grade, with 88.9% and 88.8% of fixed
maturity investments invested in Category 1 and 2 securities as of March 31,
2003 and December 31, 2002, respectively. Below investment grade bonds were
11.1% and 11.2% of fixed maturity investments and 7.8% of total invested assets
as of both March 31, 2003 and December 31, 2002, respectively. 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.

      Valuation techniques for the bond portfolio vary by security type and the
availability of market data. Pricing models and their underlying assumptions
impact the amount and timing of unrealized gains and losses recognized, and the
use of different pricing models or assumptions could produce different financial
results. External pricing services are used where available, broker dealer
quotes are used for thinly traded securities, and a spread pricing matrix is
used when price quotes are not available, which typically is the case for our
private placement securities. The spread pricing matrix is based on credit
quality, country of issue, market sector and average investment life and is
created for these dimensions through brokers' estimates of public spreads
derived from their respective publications. When utilizing the spread pricing
matrix, securities are valued through a discounted cash flow method where each
bond is assigned a spread from the aforementioned spread pricing matrix that is
added to the current U.S. Treasury rates to discount the cash flows of the
security. The spread assigned to each security is changed from month to month
based on changes in the market. Certain market events that could impact the
valuation of securities include issuer credit ratings, business climate,


                                       60
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


management changes, litigation, and government actions among others. The
resulting prices are then reviewed by the pricing analysts and members of the
Controller's Department. The Company's pricing analysts take appropriate actions
to reduce valuations of securities where such an event occurs which negatively
impacts the securities' value. Although the Company believes its estimates
reasonably reflect the fair value of those securities, the key assumptions about
risk premiums, performance of underlying collateral (if any), and other factors
involve significant assumptions and may not reflect those of an active market.
To the extent that bonds have longer maturity dates, management's estimate of
fair value may involve greater subjectivity since they involve judgment about
events well into the future. Every quarter, there is a comprehensive review of
all impaired securities and problem loans by a group consisting of the Chief
Investment Officer and the Bond Investment Committee. The valuation of impaired
bonds for which there is no quoted price is typically based on the present value
of the future cash flows expected to be received. If the company is likely to
continue operations, the estimate of future cash flows is typically based on the
expected operating cash flows of the company that are available to make payments
on the bonds. If the company is likely to liquidate, the estimate of future cash
flows is based on an estimate of the liquidation value of its net assets.

      As of March 31, 2003 and December 31, 2002, 47.6% and 49.9% of our below
investment grade bonds are in Category 3, the highest quality below investment
grade. Category 6 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 $698.7 and $635.3
million as of March 31, 2003 and December 31, 2002, respectively. For the three
month periods ended March 31, 2003 and year ending 2002, $6.3 million and $2.5
million of interest on bonds near default was included in accrued investment
income. Unless the Company reasonably expects to collect investment income on
bonds in or near default, the accrual will be ceased and any accrued income
reversed. Management judgment is used and the actual results could be materially
different.

      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 its
portfolios without incurring the risk of cash flow variability. The Company
believes the portion of its MBS/ABS portfolio subject to prepayment risk as of
March 31, 2003 and December 31, 2002 was limited to approximately $1,069 million
and $990 million, respectively, or 12.6% of our total MBS/ABS portfolio and 2.1%
of our total fixed maturity securities holdings, for both periods.

      The following table shows the composition by our internal industry
classification of the fixed maturity securities portfolio and the unrealized
gains and losses contained therein.

             Fixed Maturity Securities -- By Industry Classification

<TABLE>
<CAPTION>
                                                                       As of March 31, 2003
                                       -----------------------------------------------------------------------------------------
                                                                        Carrying
                                                                        Value of
                                                                       Securities
                                                                          with                   Carrying Value of
                                                                         Gross         Gross      Securities with      Gross
                                       Total Carrying  Net Unrealized  Unrealized    Unrealized   Gross Unrealized   Unrealized
                                            Value        Gain (Loss)     Gains         Gains          Losses           Losses
                                        --------------------------------------------------------------------------------------
                                                                           (in millions)
<S>                                     <C>           <C>          <C>          <C>             <C>             <C>
Corporate securities:
     Banking and finance............    $  6,449.2    $   269.0    $  5,255.9   $   321.9       $ 1,193.3       $    (52.9)
     Communications.................       2,793.6        160.5       2,587.9       198.1           205.7            (37.6)
     Government.....................       2,559.6        125.4       1,479.8       146.1         1,079.8            (20.7)
     Manufacturing..................       7,454.6        269.3       5,923.7       403.8         1,530.9           (134.5)
     Oil & gas......................       4,644.4        170.3       3,899.3       300.8           745.1           (130.5)
     Services/trade.................       2,688.6        135.5       2,283.6       168.7           405.0            (33.2)
     Transportation.................       2,950.6         35.6       2,074.3       181.9           876.3           (146.3)
       Utilities....................       9,209.2         99.8       6,352.8       453.7         2,856.4           (353.9)
       Other........................         167.5         12.5         150.5        13.4            17.0            (0.9)
                                       --------------------------------------------------------------------------------------
   Total Corporate Securities.......      38,917.3      1,277.9      30,007.8     2,188.4         8,909.5           (910.5)

Asset-backed and mortgage-
    backed securities...............       8,457.3        198.2       6,644.0       450.8         1,813.3           (252.6)
U.S. Treasury securities and
    obligations of U.S. government
    agencies........................         233.8          9.2         233.2         9.2             0.6              0.0
Debt securities issued by foreign
    governments (1).................       1,772.4        134.4       1,562.7       141.6           209.7             (7.2)
Obligations of states and political
    subdivisions....................         863.9         27.0         773.9        28.2            90.0             (1.2)
                                       --------------------------------------------------------------------------------------
     Total........................      $ 50,244.7    $ 1,646.7    $ 39,221.6   $ 2,818.2       $11,023.1       $ (1,171.5)
                                       ======================================================================================
</TABLE>

(1)   Includes $1,401.1 million in debt securities held in Maritime Life, our
      Canadian insurance subsidiary, and issued and fully supported by either
      the Canadian federal, provincial and municipal governments.


                                       61
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


             Fixed Maturity Securities -- By Industry Classification

<TABLE>
<CAPTION>
                                                                     As of December 31, 2002
                                       -----------------------------------------------------------------------------------------
                                                                        Carrying
                                                                        Value of
                                                                       Securities
                                                                          with                   Carrying Value of
                                                                         Gross         Gross      Securities with      Gross
                                       Total Carrying  Net Unrealized  Unrealized    Unrealized   Gross Unrealized   Unrealized
                                            Value        Gain (Loss)     Gains         Gains          Losses           Losses
                                       -----------------------------------------------------------------------------------------
                                                                            (in millions)
<S>                                       <C>           <C>             <C>           <C>           <C>              <C>
Corporate securities:
     Banking and finance............      $ 6,036.6     $  234.8        $ 4,872.9     $  286.8      $ 1,163.7        $   (52.0)
     Communications.................        2,317.5         87.7          1,867.3        140.0          450.2            (52.3)
     Government.....................        2,596.5        121.3          1,825.7        140.3          770.8            (19.0)
     Manufacturing..................        7,410.3        209.2          5,672.5        396.7        1,737.8           (187.5)
     Oil & gas......................        4,457.3         90.4          3,416.9        280.5        1,040.4           (190.1)
     Services / trade...............        2,553.0        132.2          2,196.8        149.2          356.2            (17.0)
     Transportation.................        2,900.9         37.8          2,194.0        167.7          706.9           (129.9)
       Utilities....................        9,087.5       (137.5)         5,937.5        400.8        3,150.0           (538.3)
       Other........................          158.7          9.8            148.5         11.2           10.2             (1.4)
                                       -----------------------------------------------------------------------------------------
   Total Corporate Securities.......       37,518.3        785.7         28,132.1      1,973.2        9,386.2         (1,187.5)

Asset-backed and mortgage-
    backed securities...............        7,853.8        145.6          6,133.1        424.1        1,720.7           (278.5)
U.S. Treasury securities and
    obligations of U.S. government
    agencies........................          221.7         10.7            205.9         10.9           15.8             (0.2)
Debt securities issued by foreign
    governments (1).................        1,663.4        175.5          1,643.0        178.4           20.4             (2.9)
Obligations of states and political
    subdivisions....................          341.2         24.4            337.8         24.5            3.4             (0.1)
                                       -----------------------------------------------------------------------------------------
     Total..........................      $47,598.4     $1,141.9        $36,451.9     $2,611.1      $11,146.5        $(1,469.2)
                                       =========================================================================================
</TABLE>

(1)   Includes $1,298.1 million in debt securities held in Maritime Life, our
      Canadian insurance subsidiary, and issued and fully supported by either
      the Canadian federal, provincial and municipal governments.

      As of March 31, 2003 and December 31, 2002, there are $2,818.2 million and
$2,611.1 million of gross unrealized gains and $1,171.5 million and $1,469.2
million of gross unrealized losses on the fixed maturities portfolio. The 2003
gross unrealized losses of $1,171.5 million include $1,017.8 million, or 86.9%,
of unrealized losses concentrated in the utilities, ABS\MBS, transportation,
manufacturing and oil/gas securities. The 2002 gross unrealized losses of
$1,469.2 million include $1,324.3 million, or 90.1%, of unrealized losses
concentrated in the utilities, manufacturing, oil and gas, transportation and
asset-backed and mortgage-backed securities. No sector has net unrealized losses
as of March 31, 2003. The tables above show gross losses before amounts that are
allocated to the closed block policyholders or participating pension
contractholders. Of the $1,171.5 million of gross unrealized losses in the
portfolio at March 31, 2003, $141.2 million is in the closed block and $51.3
million has been allocated to participating pension contractholders, leaving
$979.0 million of unrealized losses after such allocations. Of the $1,469.2
million of gross unrealized losses in the portfolio at December 31, 2002, $191.0
is in the closed block and $62.6 million has been allocated to participating
pension contractholders, leaving $1,215.6 of unrealized losses after such
allocations.

      Manufacturing: Manufacturing is a large, diverse sector encompassing
cyclical industries. Low commodity prices continue to pressure the subsectors of
mining, chemicals, metals, and forest products. When the economy recovers, these
cyclical subsectors should recover and the bonds of companies in these
subsectors should recover as well. We have financed these subsectors though
several economic cycles and will typically hold our investments until they
recover in value or mature. Our portfolio also benefits from our underwriting
process where we stress test each company's financial performance through a
recession scenario.


                                       62
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      Oil & Gas: In the Oil & Gas industry much of our unrealized loss arises
from companies in emerging markets, primarily Latin America and particularly in
Venezuela. Our philosophy in emerging markets is to generally lend to those
companies with dollar based export products such as oil companies. Emerging
markets continue to experience significant stress and bond prices across most
emerging market countries are down. However, our oil & gas investments are
faring well as these companies have dollar based revenues to pay their debts and
have continued to do so. In many cases, deals are structured so that all export
revenues first pass through an offshore trust and our debt service is paid
before any dollars are released back to the company. This type of transaction is
known as an export receivables deal. All of our Venezuelan transactions are
structured in this manner. The strike in Venezuela raised the risk profile of
our oil transactions in this country, because the investments we have in
Venezuela require oil production in order for these deals to produce payments.
The gross unrealized loss on our Venezuelan oil & gas holdings was $103.9
million and $107.7 million as of March 31, 2003 and December 31, 2002,
respectively. The structure of the Venezuelan investment deals contemplate
temporary disruptions in the oil flow, and hence have six month debt service
reserves to handle the interruption. Furthermore, the debt service coverages, at
full production, are very high so debt service can typically be paid at levels
well below full production. In the first quarter, oil production did increase in
Venezuela to the point where all our oil deals in that country now have adequate
debt service coverage. We believe the debt service reserves and strong debt
service coverages that have seen us through the current turmoil in Venezuela
demonstrate the strength of these transactions and thus we expect our Venezuelan
oil and gas based investments to recover.

      Transportation: The Transportation sector consists largely of air, rail,
and automotive manufacturers and service companies. All of these subsectors are
experiencing cyclical downturns, particularly the airline industry, having been
hit both by the recession and the fallout from September 11, 2001. While most
airlines are losing money, we lend to this industry almost exclusively on a
secured basis (approximately 99% of our loans are secured). These secured
airline financings are of two types: Equipment Trust Certificates (ETC's) and
Enhanced Equipment Trust Certificates (EETC's). The ETC's initially have an 80%
loan-to-value ratio and the EETC senior tranches initially have a 40-50%
loan-to-value and include a provision for a third party to pay interest for
eighteen months from a default. For us to lose money on an ETC, three things
must happen: the airline must default, the airline must decide it does not want
to fly our aircraft, and the aircraft must be worth less than our loan. When
lending to this industry, we underwrite both the airline and the aircraft. We've
been lending to this industry in this fashion for 25 years through several
economic cycles and have seen values on our secured airline bonds fall and
recover through these cycles. EETC's are classified as asset-backed securities
and account for $188.0 million and $181.1 million of the $252.6 million and
$278.5 million of gross unrealized loss in the asset-backed and mortgage-backed
securities category as of March 31, 2003 and December 31, 2002, respectively. In
the first quarter, the war with Iraq and the emergence of SARS further stressed
the airline industry. We do still expect, however, that the senior secured
nature of our loans to this industry will enable our holdings to recover as the
industry gets past these issues.

      Utilities. The Utility sector has faced a number of challenges over the
past few years including the California Power Crisis, the Enron bankruptcy and
the recession which slowed the growth in demand. More recently, there have been
issues around energy trading activities and the financial liquidity of some
large merchant industry players. These events caused a general widening in
utility and project finance bond spreads over the course of last year. We expect
continued stress in this sector as owners of merchant plants work through their
liquidity issues with the banks. Investors are likely to see continued
restructurings and/or bankruptcy filings from those companies unable to reach
agreement with the banks. Longer term we believe the reduction in power supply
from reduced capital expenditures and the shutting of inefficient plants will
support a gradual rise in power prices that will help this sector recover. Thus
far this year, there are a number of positive signs in this sector as power
prices have increased and, most importantly, banks are more willing to refinance
their maturing lines, albeit often on a secured basis. As a result, prices in
power sector bonds have improved significantly, as shown by the reduction in
gross unrealized loss on our utility sector bonds from $538.3 million as of
December 31, 2002 to $353.9 million on March 31, 2003.

     Asset-backed and mortgage-backed securities: As described above, as of
March 31, 2003 and December 31, 2002, the main driver of the unrealized loss in
this category is $188.0 million and $181.1 million of gross unrealized loss on
EETC's with a GAAP book value of $728.9 million and $754.0 million,
respectively. The $188.0 million and $181.1 million of gross unrealized loss on
EETC's represents 74% and 65% of the total gross unrealized loss in this
category. EETC's are financings secured by a pool of aircraft. The vast majority
of our EETC holdings ($722.1 million and $721.3 million of the $728.9 million
and $754.0 million) are the most senior tranches in the EETC structure. The most
senior tranches are generally structured to have an initial loan-to-value of
40-50%. Given the drop in airline passenger traffic and the financial
difficulties of most of the major carriers, aircraft values have dropped
significantly and hence EETC's have declined in price. We still expect, however,
that most of the senior tranche EETC have enough subordination and asset
coverage to ensure full and timely repayment. The major risk to this portfolio
is a further decline in passenger traffic due to increased terrorist activity,
further depressing aircraft values. Thus far, we have never lost money on a
senior tranche EETC even though some of aircraft backing our transactions have
been leased to airlines that have gone out of business. As airlines emerge from
bankruptcy and it becomes clear that most senior tranche EETC's have ample asset
coverage, we expect these bonds' prices will recover.


                                       63
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      The following table shows the composition by credit quality of the
securities with gross unrealized losses in our fixed maturity securities
portfolio.

          Unrealized Losses on Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                                     As of March 31, 2003
                                                 --------------------------------------------------------------
                                                  Carrying Value of
  SVO                S&P Equivalent              Securities with Gross  % of     Gross Unrealized     % of
Rating (1)          Designation (2)              Unrealized Losses (3)  Total       Losses (3)        Total
---------------------------------------------------------------------------------------------------------------
                                                   (in millions)                  (in millions)
<S>         <C>                                         <C>            <C>        <C>                <C>
   1        AAA/AA/A..........................          $ 4,343.5       40.1%     $  (140.8)          12.1%
   2        BBB...............................            3,103.4       28.7         (240.9)          20.7
   3        BB................................            1,640.5       15.1         (333.8)          28.7
   4        B.................................            1,024.1        9.5         (275.9)          23.8
   5        CCC and lower.....................              365.8        3.4         (119.1)          10.3
   6        In or near default................              346.2        3.2          (50.6)           4.4
                                                 --------------------------------------------------------------
            Total.............................           10,823.5      100.0%      (1,161.1)         100.0%

            Redeemable preferred stock........              199.6                     (10.4)
                                                 -------------------            ------------------
            Total.............................          $11,023.1                 $(1,171.5)
                                                 ===================            ==================
</TABLE>

(1)   With respect to securities that are awaiting a rating, the Company has
      assigned a rating based on an analysis that it believes is equivalent to
      that used by the SVO. Recent experience has shown that our ratings are
      generally comparable to those of the SVO.
(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.
(3)   Includes 52 securities with gross unrealized losses that are awaiting an
      SVO rating with a carrying value of $1,509.8 million and unrealized losses
      of $46.4 million. Due to lags between the funding of an investment, the
      processing of final legal documents, the filing with the SVO, and the
      rating by the SVO, there will always be a number of unrated securities at
      each statement date. Unrated securities comprised 13.7% and 4.0% of the
      total carrying value and total gross unrealized losses of securities in a
      loss position, including redeemable preferred stock, respectively.

<TABLE>
<CAPTION>
                                                                    As of December 31, 2002
                                                 --------------------------------------------------------------
                                                  Carrying Value of
  SVO                S&P Equivalent              Securities with Gross  % of     Gross Unrealized     % of
Rating (1)          Designation (2)              Unrealized Losses (3)  Total       Losses (3)        Total
---------------------------------------------------------------------------------------------------------------
                                                   (in millions)                  (in millions)
<S>         <C>                                         <C>            <C>        <C>                <C>
   1        AAA/AA/A..........................          $ 3,375.3       31.0%     $  (156.3)          10.7%
   2        BBB...............................            4,267.9       39.2         (387.3)          26.6
   3        BB................................            1,634.5       15.0         (414.4)          28.4
   4        B.................................              691.5        6.4         (222.6)          15.3
   5        CCC and lower.....................              541.8        5.0         (195.0)          13.4
   6        In or near default................              369.3        3.4          (82.1)           5.6
                                                 --------------------------------------------------------------
            Total.............................           10,880.3      100.0%      (1,457.7)         100.0%

            Redeemable preferred stock........              266.2                     (11.5)
                                                 -------------------            ----------------
            Total.............................          $11,146.5                 $(1,469.2)
                                                 ===================            ================
</TABLE>

(1)   With respect to securities that are awaiting a rating, the Company has
      assigned a rating based on an analysis that it believes is equivalent to
      that used by the SVO. Recent experience has shown that our ratings are
      generally comparable to those of the SVO.
(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.
(3)   Includes 71 securities with gross unrealized losses that are awaiting an
      SVO rating with a carrying value of $1,677.0 million and unrealized losses
      of $63.4 million, respectively. Due to lags between the funding of an
      investment, the processing of final legal documents, the filing with the
      SVO, and the rating by the SVO, there will always be a number of unrated
      securities at each statement date. Unrated securities comprised 15.0% and
      4.3% of the total carrying value and total gross unrealized losses of
      securities in a loss position, including redeemable preferred stock,
      respectively.


                                       64
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


  Unrealized Losses on Fixed Maturity Securities -- By Investment Grade and Age

<TABLE>
<CAPTION>
                                                                         As of March 31, 2003
                                          --------------------------------------------------------------------------------------
                                                       Investment Grade                        Below Investment Grade
                                          -------------------------------------------  -----------------------------------------
                                             Carrying Value                            Carrying Value
                                                  of                                        of
                                             Securities with                           Securities with
                                                 Gross                                     Gross
                                              Unrealized    Hedging         Market       Unrealized      Hedging        Market
                                                Losses    Adjustments    Depreciation      Losses      Adjustments  Depreciation
-------------------------------------------------------------------------------------  -----------------------------------------
                                                         (in millions)                                (in millions)
<S>                                           <C>             <C>          <C>            <C>          <C>             <C>
Three months or less..................        $2,583.9        $ (17.6)     $ (46.5)       $  333.0     $  (6.1)        $ (25.2)
Greater than three months to six
     months...........................         1,156.2          (14.9)       (23.0)          281.6        (3.5)          (31.2)
Greater than six months to nine
     months...........................           573.1          (23.0)       (37.0)          211.9        (5.0)          (54.7)
Greater than nine months to twelve
     months...........................           745.3          (42.9)        (1.6)          369.9       (19.0)          (27.3)
Greater than twelve months............         2,389.3          (85.9)       (89.3)        2,179.3       (85.7)         (521.7)
                                          -------------------------------------------  -----------------------------------------
     Total............................         7,447.8         (184.3)      (197.4)       $3,375.7      (119.3)         (660.1)

Redeemable preferred stock............           197.0           --          (10.4)            2.6         --             --
                                          -------------------------------------------  -----------------------------------------
     Total fixed maturities...........        $7,644.8        $(184.3)     $(207.8)       $3,378.3     $(119.3)        $(660.1)
                                          ===========================================  =========================================

<CAPTION>
                                                                        As of December 31, 2002
                                          --------------------------------------------------------------------------------------
                                                       Investment Grade                        Below Investment Grade
                                          -------------------------------------------  -----------------------------------------
                                             Carrying Value                            Carrying Value
                                                  of                                        of
                                             Securities with                           Securities with
                                                 Gross                                     Gross
                                              Unrealized    Hedging         Market       Unrealized      Hedging        Market
                                                Losses    Adjustments    Depreciation      Losses      Adjustments  Depreciation
-------------------------------------------------------------------------------------  -----------------------------------------
                                                        (in millions)                               (in millions)
<S>                                          <C>              <C>          <C>           <C>          <C>             <C>
Three months or less..................       $ 2,255.2        $ (19.2)     $ (48.7)      $  276.3     $   (2.2)       $  (13.0)
Greater than three months to six
     months...........................           952.4          (16.0)       (34.1)         406.2         (7.6)         (113.8)
Greater than six months to nine
     months...........................           909.1          (35.0)       (24.8)         566.4        (14.4)          (78.1)
Greater than nine months to twelve
     months...........................           423.9          (12.6)       (27.7)         393.4         (5.3)          (61.4)
Greater than twelve months............         3,102.6          (70.1)      (255.4)       1,594.8        (74.9)         (543.4)
                                          -------------------------------------------  -----------------------------------------
     Total............................         7,643.2         (152.9)      (390.7)       3,237.1       (104.4)         (809.7)

Redeemable preferred stock............           266.2           --          (11.5)          --            --             --
                                          -------------------------------------------  -----------------------------------------
     Total fixed maturities...........       $ 7,909.4        $(152.9)     $(402.2)      $3,237.1     $ (104.4)       $ (809.7)
                                          ===========================================  =========================================
</TABLE>

      The table above shows the Company's investment grade and below investment
grade securities that were in a loss position at March 31, 2003 and December 31,
2002, respectively, by the amount of time the security has been in a loss
position. Gross unrealized losses from hedging adjustments represents the amount
of the unrealized loss that results from the security being designated as a
hedged item in a fair value hedge. When a security is so designated, its cost
basis is adjusted in response to movements in interest rates. These adjustments,
which are non-cash and reverse over time as the asset and derivative mature,
impact the amount of unrealized loss on a security. The remaining portion of the
gross unrealized loss represents the impact of interest rates on the non-hedged
portion of the portfolio and unrealized losses due to creditworthiness on the
total fixed maturity portfolio.

      At March 31, 2003 and December 31, 2002, the fixed maturity securities had
a total gross unrealized loss of $867.9 million and $1,211.9 million, excluding
basis adjustments related to hedging relationships. Of these totals, $639.9
million and $887.9 million, respectively, is due to securities that have had
various amounts of unrealized loss for more than nine months. Of these balances,
$90.9 million and $283.1 million, respectively, comes from securities rated
investment grade. Unrealized losses on investment grade securities principally
relate to changes in interest rates or changes in credit spreads since the
securities were acquired. Credit rating agencies' statistics indicate that
investment grade securities have been found to be less likely to develop credit
concerns.


                                       65
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      As of March 31, 2003 and December 31, 2002, $549.0 million and $604.8
million, respectively, of the $867.9 million and $1,211.9 million resides in
below investment grade securities with various amounts of unrealized loss for
over nine months. At March 31, 2003, all of these securities are current as to
the payments of principal and interest with the exception of 4 securities with a
carrying value of $34.0 million and an unrealized loss of $17.9 million. Of the
total $549.0 million, $102.8 million traded above 80% of amortized cost at March
31, 2003 and an additional $281.5 million traded above 80% of amortized cost
within the last nine months, for a total of $384.3 million. Of the total $384.3
million in this category, utility related bonds make up $134.8 million. As
described earlier, the utility sector suffered from oversupply and slower than
expected demand last year. This led to many credit quality downgrades in the
sector and corresponding price declines. We have seen evidence of improvement in
the utility sector recently as companies have curtailed expansion plans and sold
assets to conserve cash flow and strengthen their balance sheets. On the other
hand, $160.2 million of this $384.3 million total comes from airline related
bonds and this sector has continued to deteriorate thus far in 2003. While, as
described earlier, we expect the secured nature of our positions to protect our
value, the increased stress in this industry is of concern.

      As of March 31, 2003, the remaining portion of the unrealized loss, $164.7
million, arises from below investment grade securities that have traded below 80
percent of amortized cost for over nine months. All of these bonds are current
on payments of principal and interest and we believe, based on currently
available information, that it is probable that these securities will continue
to pay based on their original terms. We carefully track these investments to
ensure our continued belief that their prices will recover. More detail on the
most significant securities that have traded below 80 percent of amortized cost
for over nine months is contained below:

      o     Four securities that have contracts with PDVSA, the Venezuelan
            national oil company accounted for $63.6 million. The increasing
            turbulence in Venezuela combined with a national strike that shut
            down oil production at the end of the year heightened credit
            concerns on these securities and caused their prices to decline.
            Since the end of the year, Venezuelan oil production has started up
            again, albeit at lower levels, but at sufficient levels to pay our
            debt service. The production levels have slowly increased and are
            expected to continue due to the importance of the oil sales to the
            Venezuelan economy. As this happens, we expect these prices to
            recover. $27.0 million relates to a holding that has an additional
            credit issue beyond its contracts with PDVSA. It is a fertilizer
            plant that has experienced operating problems. Its equity sponsors,
            however, have supported the project with additional contributions of
            equity and based on our review of this credit we expect their
            continued support. While there is risk the equity sponsors could
            drop their support, their past actions, strong capital positions,
            their large investment and the low cost nature of this project due
            to its inexpensive gas supply give us comfort in their continued
            support. $9.3 million is a loan to a refinery that purchases its
            crude supply from PDVSA. The refinery sells its output to a major US
            oil company. Those proceeds flow through an offshore trust, with our
            debt service paid first and the balance remitted to Venezuela. This
            financing has a six month debt service reserve and only requires
            production at about 60% of pre-strike levels for adequate debt
            service coverage. The production at this refinery is currently back
            to 100%. The final $27.3 million of loss is on two securities backed
            by the forward sale of oil from PDVSA to U.S. refiners. At current
            production levels, our debt service is covered over 5 times.

      o     Two structured transactions based in Argentina account for $32.9
            million. While the Argentine crisis has depressed the pricing level
            on these bonds, their payment flows continue as the flows are based
            on dollar priced commodities. Companies or structures with dollar
            based products should continue to generate sufficient revenues to
            service their debts, unlike companies with peso denominated revenues
            that have seen their revenues decline precipitously in dollar terms
            due to the depreciation of the peso.

            o     $28.6 million arises from another structured investment based
                  on oil and gas payments to another Argentine province. This
                  transaction benefits from (1) rights to 80% of the royalty
                  payments received by the province, (2) a six month debt
                  service reserve located in the U.S., and (3) a political risk
                  insurance policy from a major reinsurer that will take over
                  payments in the event the government imposes transfer or
                  currency conversion limitations. Currently, the major risk is
                  that the local oil and gas companies are making payments to
                  the province based on a fixed exchange rate rather than the
                  market exchange rate. While the province is working to correct
                  this, if it does not change we will need to dip into the debt
                  service reserve account for a portion of the debt service
                  payments this year and we will ultimately need to restructure
                  our rights to royalty payments to extend beyond the maturity
                  of our notes, so a restructuring would likely extend the term
                  of our note with interest.


                                       66
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


            o     $4.3 million arises from a structured receivables transaction
                  based on the export of soybeans from a major soybean producer
                  in Argentina. The international buyers of the soybeans make
                  payment to an offshore trust with our debt service paid before
                  any dollars flow back to the Argentine company. We expect this
                  structure to continue to protect our debt service payments.

      o     $9.3 million on a producer of manufactured homes. Overcapacity has
            hurt this industry and much of the production and retailing capacity
            has been removed over the past several years. This company is a
            leader in this industry and thus has been able to weather the
            downturn. As the industry recovers due to the reduction of capacity,
            so should the value of these bonds.

      o     $11.7 million on a large copper producer based in Mexico. This
            company has suffered from the cyclical downturn in copper prices
            over the past two years and insufficient capital expenditures to
            keep its costs competitive. The company's owners have addressed the
            latter issue by recently injecting fresh capital into the company to
            improve the efficiency of its operations. The expected improvement
            in copper prices due to the improving US economy should also help
            the company and hence the bond price.

      o     $2.5 million on a producer of coke, an input to the steel making
            process. This company produces coke almost exclusively for one plant
            of a steel company that filed for bankruptcy in 2002 and the
            resulting uncertainty drove down the bond's price. The plant this
            company supplies, however, is a top quartile producer and hence has
            continued to operate. Therefore our borrower has continued to be
            paid. Based on its contract with this low cost steel plant, we
            expect our borrower to continue to perform and our bonds to recover
            as the owner of the plant restructures its debts and emerges from
            bankruptcy.

      o     $15.3 million on two secured airline bonds. The larger portion,
            $12.4 million arises from a senior tranche EETC of an airline
            currently in bankruptcy. The EETC is current, however, as is has an
            18 month liquidity facility with which to make interest payments. In
            addition, the total loan balance of the senior tranche is still less
            than 80% of the current appraised value of the underlying aircraft.
            Hence we expect the market price of this bond to recover. The
            remaining $2.9 million loss is on an a subordinated tranche of a
            EETC for a major US airline not in bankruptcy. We do not expect this
            airline to file for bankruptcy and hence expect the bond to recover.

      o     $16.3 million on two energy companies with significant exposure to
            merchant pricing. The energy environment, as noted previously, has
            improved thus far this year with higher prices for power, reductions
            in leverage, and banks providing loans on a secured basis. We expect
            both of these companies to benefit from these trends and as they
            demonstrate an ability to refinance their maturing bank lines this
            year, we expect their bond prices to recover.

      o     $9.9 million on two bonds of a large telecommunications company. A
            major portion of the value of this company is derived from its local
            exchange business. The company has taken steps to deleverage and is
            expected to be in a breakeven cash flow position this year. As the
            company continues to reduce leverage through cost cutting and asset
            dispositions, we expect these securities to continue to recover in
            value.

      o     $2.0 million on an oil & gas pipeline owner and operator and energy
            trader. This company suffers from the energy-trading business
            fallout and the write-off of its telecommunications investments.
            Last year, however, it reduced a significant amount of debt through
            asset sales. It has a significant amount of debt maturing over the
            next several years, but also has adequate liquidity to meet these
            payments. We expect its bond prices to improve as it demonstrates
            this ability.

      The Company's investment grade and below investment grade bonds trading at
less than 80% of amortized cost for more than one year amounted to $126.4
million at March 31, 2003, down $29.4 million or 18.9% from December 31, 2002.
Three quarters of that amount is associated with U.S. dollar denominated
structured receivables in Venezuela and Argentina, many of which are analyzed in
the bullets above.


                                       67
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      The Company believes that after its comprehensive review of each
borrower's ability to meet the obligations of the notes, and based on
information available at this time, these securities will continue to pay as
scheduled, and the Company has the ability and the intent to hold these
securities until they recover in value or mature. The scheduled maturity dates
for securities in an unrealized loss position at March 31, 2003 and December 31,
2002 is shown below.

          Unrealized Losses on Fixed Maturity Securities -- By Maturity

<TABLE>
<CAPTION>
                                                                    March 31, 2003
                                                                    --------------
                                                        Carrying Value of           Gross
                                                       Securities with Gross      Unrealized
                                                         Unrealized Loss             Loss
                                                         ---------------             ----
                                                                      (in millions)

<S>                                                       <C>                 <C>
Due in one year or less.........................          $    548.9          $    (29.0)
Due after one year through five years...........             2,075.2              (198.0)
Due after five years through ten years..........             2,357.9              (324.7)
Due after ten years.............................             4,227.8              (367.2)
                                                    -----------------------------------------
                                                             9,209.8              (918.9)
Asset-backed and mortgage-backed securities.....             1,813.3              (252.6)
                                                    -----------------------------------------
      Total.....................................          $ 11,023.1          $ (1,171.5)
                                                    =========================================

<CAPTION>
                                                                 December 31, 2002
                                                                 -----------------
                                                         Carrying Value of          Gross
                                                        Securities with Gross    Unrealized
                                                          Unrealized Loss           Loss
                                                          ---------------           ----
                                                                   (in millions)

<S>                                                         <C>                <C>
Due in one year or less.........................            $    586.8         $    (37.9)
Due after one year through five years...........               2,574.9             (273.2)
Due after five years through ten years..........               2,573.1             (429.9)
Due after ten years.............................               3,691.0             (449.7)
                                                           -----------       ------------
                                                               9,425.8           (1,190.7)
Asset-backed and mortgage-backed securities.....               1,720.7             (278.5)
                                                           -----------        -----------
      Total.....................................            $ 11,146.5         $ (1,469.2)
                                                            ==========         ==========
</TABLE>


                                       68
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      As of March 31, 2003 we had 125 securities representing 31 credit
exposures that had an unrealized loss of $10 million or more. They include:

<TABLE>
<CAPTION>
                                                                                   Amortized     Unrealized
                                        Description of Issuer                         Cost          Loss
                                        ---------------------                         ----          ----
                                                                                        (in millions)
<S>                                                                                <C>           <C>
Venezuelan oil company with US dollar based flows............................      $  157.2      $ (42.0)
Secured Financings to large US airline.......................................         121.2        (37.2)
Argentinean trust holdings rights to oil and gas.............................          44.0        (28.6)
Joint Venture with a Venezuelan oil company..................................          41.3        (27.5)
Large US based merchant energy generator.....................................          99.5        (27.5)
Notes secured by leases on a pool of aircraft................................          53.5        (26.9)
Major US airline.............................................................         125.1        (26.1)
Secured Financings to large US airline.......................................          71.8        (26.0)
US natural gas fired power generator.........................................          84.1        (25.5)
Major US based airline.......................................................          84.1        (24.3)
Notes secured by leases on a pool of aircraft................................          76.8        (23.4)
Notes secured by leases on a pool of aircraft................................          35.2        (23.2)
Gas fired electric generation power plant....................................          72.2        (20.2)
US power generator with multiple plants......................................         108.0        (19.8)
Joint venture with a large Venezuelan oil company and a US oil company.......          62.3        (18.7)
Major US based airline.......................................................         118.9        (17.9)
Lease financings with US fossil fuel power generator.........................          84.6        (17.9)
Securitized investment of aircraft...........................................         197.3        (17.8)
US merchant energy generator.................................................          72.0        (17.1)
Major US airline.............................................................          59.5        (16.8)
Major US auto manufacturer...................................................         195.4        (16.2)
Joint venture with Venezuelan oil company....................................          56.7        (15.7)
Private toll road and bridge operator........................................          43.6        (14.8)
Notes secured by leases on a pool of  aircraft...............................          45.1        (12.8)
Major independent power and merchant energy generator........................          30.4        (12.2)
Large Mexican copper producer................................................          36.5        (12.1)
Unregulated energy generator and supplier....................................         125.5        (11.3)
Large chemical related producer of synthetic products Company................          65.9        (11.1)
International food retailer and food service.................................          28.0        (10.9)
Holding company of large US integrated power generator.......................          51.5        (10.7)
Finance subsidiary of US paper\wood company..................................         207.0        (10.3)
                                                                                  -----------------------
      Total..................................................................      $2,654.2      $(622.5)
                                                                                  =======================
</TABLE>

      A major driver in the valuation of the fixed income portfolio at March 31,
2003 and December 31, 2002 is the recent reduction in traded or quoted bond
prices across most industries, especially in the below investment grade
categories where, in the current environment, bond market investors are very
risk averse and have severely penalized issues where there is any uncertainty.
This effect was most pronounced in the reduction in the traded or quoted prices
of the bonds of many energy companies with merchant exposure. In the third and
fourth quarters of last year, the rating agencies downgraded a number of
companies that have exposure to the merchant energy sector. These downgrades in
turn created liquidity issues for a few companies and uncertainty at many
others. This market sentiment, which we believe to be temporary, has led to
significant reductions in the prices of virtually every energy company that has
any merchant exposure, including some in our portfolio and 8 on the list above.
We believe many of these issuers are taking the right steps to strengthen their
balance sheets through a combination of actions such as reducing capital
expenditures, scaling back trading operations, reducing dividends, and issuing
equity. Thus far this year, prices in power sector bonds have improved
significantly, as shown by the reduction in the gross unrealized loss on our
utility bonds from $538.3 million as of December 31, 2002 to $353.9 million on
March 31, 2003. Airlines are another sector under pressure and they represent 11
names on this list. Unlike the power sector, the airline sector continues to
struggle as it deals with the continued drop in traffic due to the war in Iraq
and SARS. We continue to believe, however, that the secured nature of our
investments will enable them to recover as the industry recovers. All of the
above securities have undergone thorough analysis by our investment
professionals, and at this time we believe that the borrowers have the financial
capacity to make all required contractual payments on the notes when due, and we
intend to hold these securities until they either mature or recover in value.


                                       69
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      Mortgage Loans. As of March 31, 2003 and December 31, 2002, the Company
held mortgage loans with a carrying value of $12.0 billion and $11.8 billion,
including $2.8 billion and $2.6 billion respectively, of agricultural loans and
$9.2 billion at each period end, of commercial loans. Impaired loans comprised
1.0% and 0.4% of the mortgage portfolio at March 31, 2003 and December 31, 2002,
respectively. The Company's average historical impaired loan percentage from
year ending 1997 through 2002 is 1.4%. This historical percentage is higher than
the current 1.0% because the historical percentage includes some remaining
problem assets of the 1990's real estate downturn, some of which are still held.
Maritime Life managed $1.6 billion and $1.5 billion, respectively, of which $0.8
billion and $0.7 billion, respectively, were government-insured by the Canada
Mortgage and Housing Corporation.

      The following table shows the Company's agricultural mortgage loan
portfolio by its three major sectors: agri-business, timber and production
agriculture.

<TABLE>
<CAPTION>
                                          As of March 31,                          As of December 31,
                             ----------------------------------------------------------------------------------------
                                                2003                                       2002
                             -------------------------------------------  -------------------------------------------
                               Amortized      Carrying     % of Total      Amortized    Carrying     % of Total
                                  Cost         Value     Carrying Value       Cost        Value    Carrying Value
                             -------------------------------------------  -------------------------------------------
                                     (in millions)                             (in millions)
<S>                             <C>           <C>               <C>        <C>          <C>            <C>
Agri-business..............     $1,677.5      $1,670.0           60.2%     $1,528.0     $1,522.0        57.8%
Timber.....................      1,096.5       1,077.8           38.9       1,091.5      1,087.8        41.3
Production agriculture.....         23.7          23.7            0.9          25.3         25.2         0.9
                             -------------------------------------------  -------------------------------------------
    Total..................     $2,797.7      $2,771.5          100.0%     $2,644.8     $2,635.0       100.0%
                             ===========================================  ===========================================
</TABLE>

      The following table shows the distribution of our mortgage loan portfolio
by property type as of the dates indicated. Our commercial mortgage loan
portfolio consists primarily of non-recourse fixed-rate mortgages on existing,
well-leased commercial properties.

                       Mortgage Loans -- By Property Type

<TABLE>
<CAPTION>
                                                As of March 31,                  As of December 31,
                                      -----------------------------------------------------------------------
                                                     2003                               2002
                                      -----------------------------------------------------------------------
                                          Carrying            % of           Carrying            % of
                                            Value            Total             Value            Total
                                      -----------------------------------------------------------------------
                                         (in millions)                     (in millions)
<S>                                        <C>               <C>              <C>               <C>
Apartment..........................        $ 2,052.8          17.0%           $ 2,063.4          17.5%
Office Buildings...................          2,983.4          24.8              2,974.6          25.2
Retail.............................          2,048.1          17.0              1,986.1          16.8
Agricultural.......................          2,771.5          23.0              2,635.0          22.3
Industrial.........................          1,096.2           9.1              1,085.8           9.2
Hotels.............................            475.9           4.0                481.1           4.1
Multi-Family.......................             39.0           0.3                 40.4           0.3
Mixed Use..........................            183.5           1.5                155.2           1.3
Other..............................            396.8           3.3                384.1           3.3
                                      -----------------------------------------------------------------------
     Total.........................        $12,047.2         100.0%           $11,805.7         100.0%
                                      =======================================================================
</TABLE>


                                       70
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      The following table shows the distribution of our mortgage loan portfolio
by geographical region, as defined by the American Council of Life Insurers
(ACLI).

                        Mortgage Loans -- By ACLI Region
<TABLE>
<CAPTION>
                                           As of March 31,                        As of December 31,
                           -----------------------------------------------------------------------------------
                                                2003                                     2002
                           -----------------------------------------------------------------------------------
                               Number       Carrying           % of            Carrying           % of
                              Of Loans        Value           Total             Value             Total
                           -----------------------------------------------------------------------------------
                                          (in millions)                      (in millions)
<S>                           <C>          <C>                <C>              <C>                <C>
East North Central.......       176        $ 1,091.4            9.1%           $ 1,102.0            9.3%
East South Central.......        68            432.2            3.6                430.9            3.6
Middle Atlantic..........       140          1,426.6           11.8              1,447.4           12.3
Mountain.................       111            484.6            4.0                492.2            4.2
New England..............       118            790.0            6.6                795.2            6.7
Pacific..................       362          2,183.9           18.1              2,139.2           18.1
South Atlantic...........       275          2,371.2           19.7              2,230.2           18.9
West North Central.......        87            446.7            3.7                450.5            3.8
West South Central.......       168            928.9            7.7                954.3            8.1
Canada...................       859          1,891.7           15.7              1,763.8           15.0
                           -----------------------------------------------------------------------------------
     Total...............     2,364        $12,047.2          100.0%           $11,805.7          100.0%
                           ===================================================================================
</TABLE>

                            Mortgage Loan Comparisons
<TABLE>
<CAPTION>
                                                   As of March 31,                    As of December 31,
                                          ------------------------------------------------------------------------
                                                        2003                                 2002
                                          ----------------------------------  -------------------------------------

                                              Carrying      % of Total             Carrying         % of Total
                                               Value      Mortgage Loans (1)        Value         Mortgage Loans (1)
                                          ----------------------------------  -------------------------------------
                                            (in millions)                        (in millions)
<S>                                             <C>               <C>              <C>                 <C>
Delinquent, not in foreclosure..........        $    2.5          0.0%             $    8.1            0.1%
Delinquent, in foreclosure..............            37.1          0.3                  44.4            0.4
Restructured............................            63.1          0.5                  54.8            0.5
Loans foreclosed during the period......             --           --                   26.0            0.2
Loans with valuation allowance..........            87.1          0.7                   8.9            0.1

                                          ----------------------------------  -------------------------------------
    Total                                       $  189.8          1.5%             $  142.2            1.3%
                                          ----------------------------------  -------------------------------------

Valuation allowance                             $   68.8                           $   61.8
                                          -----------------                   -------------------
</TABLE>

(1)   As of March 31, 2003 and December 31, 2002 the Company held mortgage loans
      with a carrying value of $12.0 billion and $11.8 billion, respectively.

      The table above shows the carrying values of our mortgage loan portfolio
that are delinquent but not in foreclosure, delinquent and in foreclosure,
restructured and foreclosed. The table also shows the respective ratios of these
items to the total carrying value of our mortgage loan portfolio. Mortgage loans
are classified as delinquent when they are 60 days or more past due as to the
payment of interest or principal. Mortgage loans are classified as restructured
when they are in good standing, but the basic terms, such as interest rate or
maturity date, have been modified as a result of a prior actual delinquency or
an imminent delinquency. All foreclosure decisions are based on a thorough
assessment of the property's quality and location and market conditions. The
decision may also reflect a plan to invest additional capital in a property to
make tenant improvements or renovations to secure a higher resale value at a
later date. Following foreclosure, we rely on our real estate investment group's
ability to manage foreclosed real estate for eventual return to investment real
estate status or outright sale.

      The allowance for losses on mortgage loans on real estate and real estate
to be disposed of is maintained at a level that is adequate enough to absorb
estimated probable credit losses. Management's periodic evaluation of the
adequacy of the allowance for losses is based on past experience, known and
inherent risks, adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated value of the
underlying security, the general composition of the portfolio, current economic
conditions and other factors. This evaluation is inherently subjective and is
susceptible to significant changes and no assurance can be given that the
allowances taken will in fact be adequate to cover all losses or that additional
valuation allowances or asset write-downs will not be required in the future.
The balance of the valuation allowance for mortgages as of March 31, 2003 and
December 31, 2002 is $68.8 and $61.8 million, respectively.


                                       71
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


Investment Results

      Net Investment Income

      The following table summarizes the Company's investment results for the
periods indicated:

<TABLE>
<CAPTION>
                                                                           For the Three Months Ended
                                                               March 31, 2003                     March 31, 2002
                                                     -----------------------------------------------------------------------
                                                           Yield            Amount            Yield            Amount
                                                     -----------------------------------------------------------------------
                                                                         (in millions)                      (in millions)
<S>                                                        <C>              <C>               <C>            <C>
General account assets-excluding policy loans
   Gross income...................................         6.28%            $ 1,051.5         6.95%          $     997.6
   Ending assets -excluding policy loans (1)......                           68,874.8                           57,873.5
Policy loans
   Gross income...................................         6.14%                 32.3         5.98%                 30.0
   Ending assets..................................                            2,107.1                            2,009.6
     Total gross income...........................         6.28%              1,083.8         6.92%              1,027.6
     Less: investment expenses....................                              (54.5)                             (57.7)
                                                                       ------------------                 ------------------
       Net investment income .....................         5.96%            $ 1,029.3         6.53%          $     969.9
                                                                       ==================                 ==================
</TABLE>

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

      Net investment income increased $59.4 million from the prior year. The
increase was primarily the result of asset growth and lower expenses partially
offset by the acquisition of lower yielding assets. Overall, the 2003 yield, net
of investment expenses, on the general account portfolio decreased to 5.96% from
6.53% in the prior year. The lower portfolio yield was driven primarily by lower
yields on investment acquisitions. The continued drop in short-term interest
rates during the year which impacts floating rate investments, also contributed
to the declining yield. The change in yields was impacted by the following
drivers:

      o     As of March 31, 2003 and March 31, 2002, the Company's asset
            portfolio had approximately $12 billion and $11 billion of
            floating-rate exposure (primarily LIBOR). This exposure was created
            mostly through interest rate swaps designed to match our
            floating-rate liability portfolio. As of March 31, 2003,
            approximately 92% of this exposure, excluding cash and short-term
            investments, was directly offset by exposure to floating-rate
            liabilities. Most of the remaining 8% of exposure is in floating
            rate assets acquired for their relative value and is accounted for
            in the portfolio's interest rate risk management plan. As a result
            of the drop in short term rates over the year, as well as the
            increase in exposure, floating-rate exposure reduced the portfolio
            yield by 13 basis points in the first quarter of 2003 compared to
            the prior period.

      o     Certain of our tax-preferenced investments (lease residual
            management and affordable housing limited partnerships) dilute the
            Company's net portfolio yield on a pre-tax basis. For the three
            month period ended March 31, 2003, this dilutive effect was 7 basis
            points, compared to 7 basis points in the prior year period.
            However, adjusting for taxes, these investments increased the
            Company's net income by $2.5 million for the three month period
            ended March 31, 2003 compared to the prior year.

      o     The inflow of new cash for the three month period ending March 31,
            2003 was invested at rates that were below the portfolio rate for
            the prior year period. In addition, maturing assets rolling over
            into new investments at rates less favorable than those available in
            2002 also contributed to the decline in yields.

      Offsetting the effects of these decreases to yields on investments was an
      increase in invested assets and a reduction in investment expenses. In the
      three month period ended March 31, 2003, average invested assets increased
      $9,616.1 million, or 16.2%, from the prior year period. In addition,
      investment expenses were reduced $3.2 million in the three month period
      ended March 31, 2003 compared to the prior year. Included are reductions
      in corporate complex expenses and in expenses associated with the
      Company's home office real estate.


                                       72
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


Net Realized Investment and Other Gain (Loss)

      The following table shows the Company's net realized investment and other
gains (losses) by asset class for the periods presented:

<TABLE>
<CAPTION>
                                                       Gross Gain    Gross Loss      Hedging    Net Realized Investment
For the Three Months Ended March 31, 2003  Impairment  on Disposal  on Disposal    Adjustments  and Other Gain (Loss)
                                          -----------------------------------------------------------------------------
                                                                         (in millions)
<S>                                          <C>         <C>           <C>           <C>                  <C>
Fixed maturity securities (1) (2).......     $ (221.9)   $   58.5      $ (32.9)      $ (74.5)             $(270.8)
Equity securities.......................        (19.2)       23.2         (2.1)          --                   1.9
Mortgage loans on real estate...........          --          4.4         (8.1)        (20.8)               (24.5)
Real estate.............................          -         236.4          --            --                 236.4
Other invested assets...................         (9.2)       13.7          --            --                   4.5
Derivatives.............................          --          --           --           66.0                 66.0
                                          -----------------------------------------------------------------------------
               Subtotal.................     $ (250.3)   $  336.2      $ (43.1)      $ (29.3)             $  13.5
                                          =============================================================================

          Amortization adjustment for deferred policy acquisition costs......................                 6.5
          Amounts credited to participating pension contractholders..........................                35.0
          Amounts credited to the policyholder dividend obligation...........................                 7.6
                                                                                                -----------------------
               Total.........................................................................             $  62.6
                                                                                                =======================
</TABLE>

(1)   Fixed Maturities gain on disposals includes $0.6 million of gains from
      previously impaired securities.

(2)   Fixed Maturities loss on disposals includes $17.3 million of credit
      related losses.

      The hedging adjustments in the fixed maturities and mortgage loans asset
classes are non-cash adjustments representing the amortization or reversal of
prior fair value adjustments on assets in those classes that were or are
designated as hedged items in fair value hedging relationships. The hedging
adjustments on the derivatives represent non-cash adjustments on derivative
instruments and on assets and liabilities designated as hedged items reflecting
the change in fair value of those items. The hedging adjustments of all asset
classes represent temporary gains or losses caused primarily by interest rate
movements that will reverse over time as the derivatives or assets mature.

      For the three month period ended March 31, 2003, net realized investment
and other gain was $62.6 million. Gross losses on impairments and on disposal of
investments - including bonds, equities, mortgages and other invested assets was
$293.4 million, excluding hedging adjustments.

      For the three month period ended March 31, 2003, we realized $63.6 million
of losses upon disposal of bonds. $30.7 million of this is due to the write-off
of hedging adjustments on these bonds and the remaining $32.9 million from the
actual losses on sale. These hedging adjustments are solely related to changes
in interest rates. We generally intend to hold securities in unrealized loss
positions until they mature or recover. However, we do sell bonds under certain
circumstances such as when new information causes us to change our assessment of
whether a bond will recover or perform according to its contractual terms, in
response to external events (such as a merger or a downgrade) that result in
investment guideline violations (such as single issuer or overall portfolio
credit quality limits), in response to extreme catastrophic events (such as
September 11, 2001) that result in industry or market wide disruption, or to
take advantage of tender offers. Sales generate both gains and losses. Gross
gains for the three month period ended March 31, 2003 exceeded gross losses.
Excluding the aforementioned hedging adjustments, we realized $58.5 million of
gains for the three month period ended March 31, 2003.

      Of the $32.9 million of realized losses, $29.9 million arose from the sale
of eight securities with $1 million or more of realized loss. The only
significant realized loss in the first quarter was $16.5 million on the sale of
the bonds of a major healthcare service provider. Late in the first quarter, the
SEC announced that they had discovered massive accounting fraud at that company
and thus its bond and stock prices plummeted. Due to this significant event and
the uncertainty over the future of the company due to the ongoing SEC
investigation, we sold our position. This was the only sale that we consider a
credit loss, i.e. sold at less than 80% of amortized cost. All other sales were
related to general portfolio management, including the sale of a number of below
investment grade bonds to maintain our exposure below 10% of invested assets on
a Statutory basis. All of these sales involved losses of less than $4 million
each, which included the following items over $1 million:

      o     $3.1 million on the sale of an oil & gas company's bonds by one of
            subsidiary managers. This manager sold this position to reduce its
            below investment grade exposure.
      o     $2.1 million on an unregulated generating company. This bond was
            sold after a downgrade created a credit limit violation
      o     $2.1 million on an oil & gas pipeline company in order to maintain
            our below investment grade holdings below 10% of invested assets for
            our U.S. life insurance companies on a statutory accounting basis.
      o     $2.0 million on US Treasuries that were sold as part of our ongoing
            asset/liability interest rate risk management.


                                       73
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      o     $1.8 million on a private equity as the final sale proceeds came in
            less than expected.
      o     $1.2 million on an energy holding company, in order to maintain our
            below investment grade holdings below 10% of invested assets on a
            statutory basis.
      o     $1.1 million on some guaranteed EETC bonds that were prepaid at par.
            These had been purchased at a premium.

      There were no other sales with losses more than $1 million and no other
sales of bonds at less than 80% of amortized cost, which we would consider as
credit losses. These sales helped reduce our below investment grade holdings and
accomplished other portfolio objectives.

      The Company has a process in place to identify securities that could
potentially have an impairment that is other than temporary. This process
involves monitoring market events that could impact issuers' credit ratings,
business climate, management changes, litigation and government actions, and
other similar factors. This process also involves monitoring late payments,
downgrades by rating agencies, key financial ratios, financial statements,
revenue forecasts and cash flow projections as indicators of credit issues.

      At the end of each quarter, our Investment Review Committee reviews all
securities where market value is less than ninety percent of amortized cost for
three months or more to determine whether impairments need to be taken. This
committee includes the head of workouts, the head of each industry team, the
head of portfolio management, and the chief investment officer. The analysis
focuses on each company's or project's ability to service its debts in a timely
fashion and the length of time the security has been trading below cost. The
results of this analysis are reviewed by both our external auditors and the Life
Company's Committee of Finance, a subcommittee of the Life Company's Board of
Directors, quarterly. This quarterly process includes a fresh assessment of the
credit quality of each investment in the entire fixed maturities portfolio.

      The Company considers relevant facts and circumstances in evaluating
whether the impairment of a security is other than temporary. Relevant facts and
circumstances considered include (1) the length of time the fair value has been
below cost; (2) the financial position of the issuer, including the current and
future impact of any specific events; and (3) the Company's ability and intent
to hold the security to maturity or until it recovers in value. To the extent
the Company determines that a security is deemed to be other than temporarily
impaired, the difference between amortized cost and fair value would be charged
to earnings.

      There are a number of significant risks and uncertainties inherent in the
process of monitoring impairments and determining if an impairment is other than
temporary. These risks and uncertainties include (1) the risk that our
assessment of an issuer's ability to meet all of its contractual obligations
will change based on changes in the credit characteristics of that issuer, (2)
the risk that the economic outlook will be worse than expected or have more of
an impact on the issuer than anticipated, (3) information, or fraudulent
financial statements, could be provided to our investment professionals who
determine the fair value estimates and other than temporary impairments, and (4)
the risk that new information obtained by us or changes in other facts and
circumstances lead us to change our intent to hold the security to maturity or
until it recovers in value. Any of these situations could result in a charge to
earnings in a future period.

       As disclosed in our discussion of the Results of Operations in this MD&A,
the Company recorded losses due to other than temporary impairments of fixed
maturity securities for the three month period ended March 31, 2003 of $231.2
million (including impairment losses of $221.9 million and $9.3 million of
previously recognized gains where the bond was part of a hedging relationship).
The following list shows the largest losses recognized during the quarter, the
related circumstances giving rise to the loss and a discussion of how those
circumstances impacted other material investments held. Unless noted otherwise,
all of the items shown are impairments of securities held at March 31, 2003.

      o     $37.6 million (including an impairment loss of $37.3 million and
            $0.3 million in previously recognized gains where the bonds were
            part of a hedging relationship) on fixed maturity securities
            relating to a large, national farmer-owned diary co-operative.
            Margins have been squeezed due to a supply/demand imbalance, high
            input costs and high leverage, due in part to a recent acquisition.
            Despite a large favorable outcome on a lawsuit, depressed commodity
            prices in this environment have continued to put pressure on the
            company to rationalize their operations as was evident in their
            recently released annual financial statements. Given our
            subordinated position in the capital structure, and unlikely
            improvement near term, we have impaired the security to the market
            level. We have no other loans to dairy companies that are impacted
            by this same combination of factors.

      o     $27.3 million on fixed maturity securities relating to a large North
            American transportation provider to a variety of industries that has
            struggled to emerge from bankruptcy due to litigation with a
            subsidiary, tax claims by the IRS, and most recently, a claim by a
            regulatory agency. We have further impaired the security and
            anticipate reorganization out of bankruptcy within the next two
            quarters. These circumstances are unique to this issuer.


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      o     $25.9 million (including an impairment loss of $23.2 million and
            $2.7 million in previously recognized gains where the bonds were
            part of a hedging relationship) on fixed maturity securities
            relating to a special purpose company created to sublease aircraft
            to two major US airlines. This investment is the subordinated
            tranche in a multi-tier structure of an Enhanced Equipment Trust
            Certificate (EETC). One of the airlines has recently indicated that
            it will not honor the original lease rates on the aircraft in this
            investment. Hence, with the loan exceeding the current value of the
            securities, we have impaired the security to the market level. While
            we have an investment in the senior tranche of this EETC, the senior
            tranche exposure is still less than the current market value of the
            underlying planes and the senior tranche enjoys an 18 month
            liquidity facility. Hence we do not anticipate a loss on the senior
            tranche.

      o     $14.1 million on fixed maturity securities relating to a
            subordinated holding company structure comprised of ownership
            interests in three power generation facilities in the western US.
            Due to the severe overcapacity in the power markets and the lack of
            an off take provider for the potential power generated from the
            plants, this subordinated interest in the facilities is unlikely to
            be able to be refinanced at its maturity date in the second quarter
            and hence we have fully impaired these securities, accordingly these
            securities have no remaining carrying value. The overcapacity in the
            power markets have put stress on all power producers as discussed in
            our sector commentary.

      o     $11.0 million on fixed maturity securities secured by aircraft
            leased by a large U.S. airline. This airline is seeking to reduce
            its lease rates as a small part of its larger efforts to reduce
            costs to avoid bankruptcy. This impairment is based on the expected
            reduction in the lease rates. We have $53.2 million of other EETC's
            backed by leases to this airline. The airline has not requested a
            change in the lease rates on the aircraft backing these investments.

      o     $9.7 million on fixed maturity securities relating to a manufacturer
            of composite and building materials. This company has struggled to
            emerge from bankruptcy due to numerous lawsuits and a disagreement
            between the banks and noteholders. Hence the price of these
            securities has declined and we are further impairing them down to
            current market levels. These circumstances are unique to this
            issuer.

      o     $9.6 million on fixed maturity securities relating to an unregulated
            power and pipeline energy company that became insolvent due to a
            fall in profitability in its merchant energy business, downgrades
            from the rating agencies, and a lack of liquidity due to the call on
            cash collateral requirements after the downgrades. We have impaired
            the security to market levels. The overcapacity in the power markets
            have put stress on all power producers as discussed in our sector
            commentary.

      o     $9.4 million on fixed maturity securities relating to a special
            purpose financing company which owns an interest in a gas fired
            power plant in the UK with long-term fixed price contracts that are
            significantly above market in today's depressed pricing environment.
            In early 2003, the banks decided to pursue a fire sale of the power
            plant. We have impaired this loan to the discounted value of our
            likely recovery from such a sale. We have two other loans with a
            total carrying value of $99.6 million to companies participating in
            the U.K. power market. $59.3 million is backed by a U.K. pump
            storage facility investment where debt service coverages have been
            reduced by the weak environment for power in the U.K., but we
            continue to anticipate positive debt service coverages for this
            investment. $40.3 million is a loan to the owner of a U.K. regional
            electric company. Regional electric companies have monopolies to
            distribute and supply power to their regions and hence are less
            affected by the over supply of power.

      o     $9.4 million (including an impairment loss of $7.5 million and $1.9
            million in previously recognized gains where the bonds were part of
            a hedging relationship) on fixed maturity securities relating to an
            asset backed pool of franchise loans primarily focused in the
            gas/convenience store sector. This sector has been hit hard by
            rising delinquencies by franchisees and significant declines in
            operating margins. During the 1st quarter of 2003, delinquencies
            increased by almost 50% from previous reports thus we have impaired
            the security according to EITF 99-20. We have $173.4 million of
            other exposure to franchise loan ABS, all of which are senior
            tranche and none of which currently require impairment under EITF
            99-20.


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      The Company recorded losses due to other than temporary impairments of CDO
equity and other invested assets of $9.2 million. Default rates on high yield
bonds (as reported by Moody's) in the three month period ended March 31, 2003
continued to be well above the average of the prior 20 years of 2.9%. Equity in
these CDOs take the first loss risk in a pool of high yield debt and hence under
perform in a high default rate environment. These impairments were recognized
using the guidance in EITF 99-20. We have a total remaining carrying value of
$44.6 million and $48.7 million of CDO equity as of March 31, 2003 and December
31, 2002, which is currently supported by expected cash flows.

      The Company also recognized losses on other than temporary impairments of
common stock of $19.2 million as the result of market values falling below cost
for more than six months, and a loss of $24.5 million on mortgage loans (of
which $20.8 million were losses on hedging adjustments). Included in this loss
is $8.9 million associated with losses on agriculture mortgages.

       Offsetting these losses were $58.5 million of gains on disposal of fixed
maturities (of which $25.2 million were gains resulting from the early
repayments by the borrower of private placement securities), gains of $23.2
million on the sale of equity securities as part of our overall investment
strategy of using equity gains to minimize credit losses in the long term, gains
of $13.7 million from the sale of other invested assets, and gains of $236.4
million resulting from the sale of real estate. Net derivative activity resulted
in a gain of $66.0 million resulting from a slightly larger impact from interest
rate changes on the Company's fair value of hedged and non-hedged items in
comparison to the changes in fair value of derivatives.

      For the three month period ended March 31, 2002, net realized investment
and other loss was $85.7 million. Gross losses on impairments and on disposal of
investments - including bonds, equities, mortgages and other invested assets
was $114.2 million, excluding hedging adjustments.

      The Company recorded losses due to other than temporary impairments of
fixed maturities of $45.9 million. The primary other than temporary impairments
on fixed maturities were $10.1 million on a water supply and distribution system
in Argentina and $8.3 million from a toll road in Argentina. Writedowns of
CBO/CDO fixed maturity investments were $37.2 million.


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.


Liquidity and Capital Resources

      Liquidity describes the ability of a company to generate sufficient cash
flows to meet the immediate needs to facilitate business operations. John
Hancock Financial Services, Inc. (the Company) is an insurance holding company.
The assets of the Company consist primarily of the outstanding capital stock of
the Life Company, John Hancock Canadian Holdings Limited (Maritime Life's
parent) and investments in other international subsidiaries. The Company's cash
flow primarily consists of dividends from its operating subsidiaries and
proceeds from the Company's debt offerings offset by expenses, shareholder
dividends and stock repurchases. As a holding company, the Company's ability to
meet its cash requirements, including, but not limited to, paying interest on
any debt, paying expenses related to its affairs, paying dividends on its common
stock and repurchasing the Company's common stock pursuant to the Board of
Director's approved plan, substantially depends upon dividends from its
operating 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 statutory
surplus or the prior calendar year's statutory net gain from operations of the
Life Company. The ability of the Life Company, JHFS' 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. JHFS currently does not expect such regulatory
requirements to impair its ability to meet its liquidity and capital needs.
However, JHFS can give no assurance it will declare or pay dividends on a
regular basis.

      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. Our
liquidity requirements relate principally to the liabilities associated with
various insurance, annuity, and structured investment products, and to the
funding of investments in new products, processes, and technology and general
operating expenses. Product liabilities include the payment of benefits under
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 March 31, 2003, $41,139.8 million, or 88.9% 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, Baa3 or higher for Moody's, or 1 or 2 by the National Association
of Insurance Commissioners). The remaining $5,508.8 million, or 11.1% of fixed
maturity investments, were rated non-investment grade. For additional discussion
of our investment portfolio see the General Account Investments section of 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 $559.4 million and $559.9
million for the three months ended March 31, 2003 and 2002, respectively. The
$0.5 million decrease in cash provided by operating activities for the first
three months in 2003 compared to the same period in 2002 resulted from increases
in premiums received, investment income and income taxes, offset by increased
benefits and expenses and reduced fee income.

      Net cash used in investing activities was $652.8 million and $1,836.6
million for the three months ended March 31, 2003 and 2002, respectively. The
$1,183.8 million decrease in cash used in the first three months of 2003 as
compared to the same period in 2002 resulted from a $887.6 million cash inflow
from the sale of Home Office properties in the first quarter of 2003 and a
$351.7 million reduction in net acquisitions of fixed maturities during the
three months ended March 31, 2003 as compared to the same period in the prior
year.

      Net cash provided by financing activities was $1,222.5 million and
$1,215.4 million for the three months ended March 31, 2003 and 2002,
respectively. The $7.1 million increase in the first three months of 2003 as
compared to the same period in 2002 resulted from $201.8 million in funds from
the Consumer Notes program initiated in the second half of 2002, and a $93.6
million decline in treasury stock acquired due to the suspension of the stock
repurchase program, offset by a slight decrease in deposits and increase in cash
payments made on withdrawals of universal life insurance and investment-type


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.


contracts. Deposits on such universal life insurance and investment-type
contracts exceeded withdrawals by $1,029.2 million and $1,339.9 million for the
three months ended March 31, 2003 and March 31, 2002, respectively.

      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 was authorized to 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. On June 21, 2002, the
Company's Board of Directors authorized a second increase of $500 million to the
stock repurchase program, bringing the total amount authorized to be used to
repurchase Company stock to $1.5 billion. Under the stock repurchase program,
purchases have been and 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. Through March 31, 2003, the Company
has repurchased 29.9 million shares with a total cost of $1,068.8 million, of
which 0.4 million shares were repurchased in 2003 at a cost of $11.6 million.
The 2003 repurchase activity consisted primarily of the acquisition of certain
restricted stock from key executives of the Company. The proceeds from some of
these purchases were used by the executives to repay loans under a discontinued
stock ownership and loan program. The outstanding loans under that program,
which were grandfathered under the Sarbanes-Oxley Act of 2002, have been repaid
in full at the request of the Company's Board of Directors. At March 31, 2003,
the Company was not actively repurchasing its common stock but will continue to
assess when it might resume repurchases of its common stock under the stock
repurchase program.

      Cash flow requirements are also supported by a committed line of credit of
$1.0 billion, through a syndication of banks including Fleet National Bank,
JPMorgan Chase, Citicorp USA, Inc., The Bank of New York, The Bank of Nova
Scotia, Fleet Securities, Inc. and JPMorgan Securities, Inc., and an effective
shelf registration statement which initially provided for the issuance, from
time to time, of up to $1 billion of the Company's debt and equity securities.
The line of credit agreement provides for two facilities: one for $500 million
pursuant to a 364-day commitment (renewed effective July 26, 2002) and a second
multi-year facility for $500 million (renewable in 2005). 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. On November 29, 2001, JHFS sold, under the $1.0 billion shelf
registration statement, $500.0 million in 7-year senior unsecured notes at a
coupon of 5.625% with the proceeds used for general corporate purposes. The
remaining capacity of the shelf registration is currently $500.0 million.

      As of March 31, 2003, we had $1,709.0 million of principal and interest
amounts of debt outstanding consisting of $498.9 million of medium-term bonds,
$447.4 million of surplus notes, $268.7 million of Canadian debt, $234.0 million
of other notes payable and $260.0 million in commercial paper. During the three
months ended March 31, 2003, the Company issued in aggregate $510 million in
commercial paper, of which $260 million was outstanding at March 31, 2003. In
addition, the Company has outstanding $492.0 million of consumer notes which are
redeemable upon the death of the holder, subject to an annual overall program
redemption limitation of 1% of the aggregate securities outstanding, or an
individual redemption limitation of $200,000 of aggregate principal, and mature
at a variety of specific dates in the future.

      The Company's primary operating subsidiary is John Hancock Life Insurance
Company. 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 the prior 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 periodic review of our reinsurers' financial
statements, financial strength ratings 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 recognized in our 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.


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.


Forward-Looking Statements

      The statements, analyses, and other information contained herein relating
to trends in John Hancock Financial Services, Inc.'s, (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 potential effects on the Company. Future events and their
effects on the Company 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 risks that (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)
new laws and regulations, including the recently enacted Sarbanes-Oxley Act of
2002, or changes to existing laws or regulations, (including, but not limited
to, those relating to the Federal Estate Tax Laws and the proposed Bush
Administration tax and savings initiatives), and the applications and
interpretations given to these laws and regulations, may adversely affect the
Company's sales of insurance and investment advisory products; (3) as a holding
company, we depend on dividends from our subsidiaries; Massachusetts insurance
law, and similar Canadian laws, may restrict the ability of John Hancock Life
Insurance Company and The Maritime Life Assurance Company to pay dividends
within the consolidated group; (4) we face increasing competition in our retail
businesses from mutual fund companies, banks and investment management firms as
well as from other insurance companies; (5) declines 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) due to acts of terrorism or other
hostilities, there could be business disruption, economic contraction, increased
mortality, morbidity and liability risks, generally, or investment losses that
could adversely affect our business; (7) our life insurance sales are highly
dependent on a third party distribution relationship; (8) customers may not be
responsive to new or existing products or distribution channels, (9) interest
rate volatility may adversely affect our profitability; (10) 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; (11) 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; (12) 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. 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 shareholders; (13) there are a number of
provisions in our Restated Certificate of Incorporation and by-laws, laws
applicable to us, agreements that we have entered into with our senior
management, and our shareholder rights plan, that will prevent or discourage
takeovers and business combinations that our shareholders might otherwise
consider to be in their best interests; (14) 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; (15) we face investment and credit
losses relating to our investment portfolio, including, without limitation, the
risks associated with the evaluation and determination by our investment
professionals of the fair value of investments as well as whether or not any
investments have been impaired on an other than temporary basis; (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 will adversely affect the
statutory surplus of John Hancock Life Insurance Company; (19) future
interpretations of NAIC Actuarial Guidelines may require us to establish
additional statutory reserves for guaranteed minimum death benefits under
variable annuity contracts; (20) we may be unable to retain personnel who are
key to our business; (21) we may incur losses from assumed reinsurance business
in respect of personal accident insurance and the occupational accident
component of workers compensation insurance; (22) litigation and regulatory
proceedings may result in financial losses, harm our reputation and divert
management resources, and (23) we may incur multiple life insurance claims as a
result of a catastrophic event which, because of higher deductibles and lower
limits under our reinsurance arrangements, could adversely affect the Company's
future net income and financial position.

      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.


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                      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 and investment operations.

      To mitigate capital market 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 Life
Insurance Company's and its U.S. Life Insurance subsidiaries' implementation of
the 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 the Company's Investment
Compliance Department and reviewed quarterly with senior management and the
Committee of Finance of the Company's wholly-owned subsidiary, John Hancock Life
Insurance Company, (the Company's Committee of Finance).

      The Company's principal capital market exposures are credit and interest
rate risk, which includes the impact of inflation, 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 interest. Interest rate risk pertains to the change in
fair value that occurs 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 and liabilities, 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 such as Moody's and
Standard & Poor's, 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, and (2) rating
agencies' quality-specific cohort default data. These tests have generally found
the Company's aggregate experience to be favorable relative to the external
benchmarks and consistent with priced-for-levels.

      The Company has a process in place that attempts to identify securities
that could potentially have an impairment that is other than temporary. This
process involves monitoring market events that could impact issuers' credit
ratings, business climate, management changes, acquisition, litigation and
government actions, and other similar factors. This process also involves
monitoring late payments, downgrades by rating agencies, key financial ratios,
financial statements, revenue forecasts and cash flow projections as indicators
of credit issues.

      At the end of each quarter, our Investment Review Committee reviews all
securities where market value is less than ninety percent of amortized cost for
three months or more to determine whether impairments need to be taken. This
committee includes the head of workouts, the head of each industry team, and the
head of portfolio management. The analysis focuses on each company's or
project's ability to service its debts in a timely fashion and the length of
time the security has been trading below cost. The results of the analysis are
reviewed by the Life Company's Committee of Finance, a subcommittee of the Life
Company's Board of Directors, quarterly. To supplement this process, a quarterly
review is made of the entire fixed maturity portfolio to assess credit quality,
including a review of all impairments with the Life Company's Committee of
Finance.

      The Company considers and documents relevant facts and circumstances in
evaluating whether the impairment of a security is other than temporary.
Relevant facts and circumstances considered include (1) the length of time the
fair value has been below cost; (2) the financial position of the issuer,
including the current and future impact of any specific events; and (3) the
Company's ability and intent to hold the security to maturity or until it
recovers in value. To the extent the Company determines that a security is
deemed to be other than temporarily impaired, the difference between amortized
cost and fair value would be charged to earnings.


                                       80
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      There are a number of significant risks and uncertainties inherent in the
process of monitoring impairments and determining if an impairment is other than
temporary. These risks and uncertainties include (1) the risk that our
assessment of an issuer's ability to meet all of its contractual obligations
will change based on changes in the credit characteristics of that issuer, (2)
the risk that the economic outlook will be worse than expected or have more of
an impact on the issuer than anticipated, (3) information, or fraudulent
financial statements, could be provided to our investment professionals who
determine the fair value estimates and other than temporary impairments and (4)
the risk that new information obtained by us or changes in other facts and
circumstances lead us to change our intent to hold the security to maturity or
until it recovers in value.

      Any of these situations could result in a charge to earnings in a future
period to the extent of the impairment charge recorded. Because the majority of
our portfolio is classified as available-for-sale and held at fair value with
the related unrealized gains (losses) recorded in shareholders' equity, the
charge to earnings should not have a significant impact on shareholders' equity.

      As of March 31, 2003 and December 31, 2002, the Company's fixed maturity
portfolio, excluding redeemable preferreds, was comprised of 88.9% and 88.8%
investment grade securities and 11.1% and 11.2% below-investment-grade
securities, respectively. 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 and Structured Financial
Products Segments.

      We manage interest rate sensitive segments of our business, and their
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) we apply sophisticated
duration-matching techniques to manage the segment's exposure to both parallel
and non-parallel yield curve movements. Typically this approach involves a
targeted duration mismatch of zero, with an operational tolerance of less than
+/- 18 days, with other techniques used for limiting exposure to non-parallel
risk. Duration measures the sensitivity of the fair value of assets and
liabilities to changes in interest rates. For example, should interest rates
increase by 100 basis points, the fair value of an asset with a 5-year duration
is expected to decrease in value by approximately 5.0%. For non-guaranteed rate
products we apply scenario-modeling techniques to develop investment policies
with what we believe to be the optimal risk/return tradeoff given our risk
constraints. Each scenario is based on near term reasonably possible
hypothetical changes in interest rates that illustrate the potential impact of
such events.

      We project asset and liability cash flows on guaranteed rate products and
then discount them against credit-specific interest rate curves to attain fair
values. Duration is then calculated by re-pricing these cash flows against a
modified or "shocked" interest rate curve and evaluating the change in fair
value versus the base case. As of March 31, 2003 and December 31, 2002, the fair
value of fixed maturity securities and mortgage loans supporting duration
managed liabilities was approximately $37,455.3 million and $36,143.0 million,
respectively. Based on the information and assumptions we use in our duration
calculations in effect as of March 31, 2003, we estimate that a 100 basis point
immediate, parallel increase in interest rates ("rate shock") would have no
effect on the net fair value, or surplus, of our duration managed assets and
liabilities based on our targeted mismatch of zero, but could be -/+ $18.7
million based on our operational tolerance of 18 days.

      The risk management method for non-guaranteed rate products, such as whole
life insurance or single premium deferred annuities, is less formulaic, but more
complex, due to the less predictable nature of the liability cash flows. For
these products, we manage interest rate risk based on scenario-based portfolio
modeling that seeks to identify the most appropriate investment strategy given
probable policyholder behavior and liability crediting needs under a wide range
of interest rate environments. As of March 31, 2003 and December 31, 2002, the
fair value of fixed maturity securities and mortgage loans supporting
liabilities managed under this modeling was approximately $35,441.4 million and
$32,982.6 million, respectively. A rate shock (as defined above) as of March 31,
2003 would decrease the fair value of these assets by $1,321.5 million, which we
estimate would be offset by a comparable change in the fair value of the
associated liabilities, thus minimizing the impact on surplus.


                                       81
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


Derivative Instruments

      The Company uses a variety of derivative financial instruments, including
swaps, caps, floors, and exchange traded futures contracts, in accordance with
Company investment policy. Permissible derivative applications include the
reduction of economic risk (i.e., hedging) related to changes in yields, prices,
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 speculative purposes.

      As of January 1, 2001, SFAS No. 133 became effective for all companies
reporting under GAAP in the United States. Briefly stated, SFAS No. 133 requires
that all derivative instruments must be recorded as either assets or liabilities
on the Company's balance sheet, with quarterly recognition thereafter of changes
in derivative fair values through its income statement. The income effect of
derivatives that meet all requirements of a "qualified hedge" under SFAS No. 133
guidance may be offset, in part or in its entirety, by recognition of changes in
fair value on specifically identified underlying hedged-items. These
hedged-items must be identified at the inception of the hedge and may consist of
assets, liabilities, firm commitments or forecasted transactions. Depending upon
the designated form of the hedge (i.e., fair value or cash flow), changes in
fair value must either be recorded immediately through income or through
shareholders' equity (other comprehensive income) for subsequent amortization
into income.

      Through the three months ended March 31, 2003 and 2002, the reported
income volatility attributable to SFAS No. 133 accounting treatment was $47.7
million and $3.3 million and well in line with our pre-SFAS No. 133
implementation expectations. We also reported income volatility of $2.9 million
and $25.4 million during the three months ended March 31, 2003 and 2002,
respectively, due to GAAP derivatives accounting treatment on options that
predated SFAS No. 133. This volatility relates to the "inherent ineffectiveness"
associated with marking-to-market each quarter out-of-the-money interest rate
and equity options. These options hedge interest rate and equity risks present
in certain of our asset and liability portfolios. The Company continues to seek
process improvements to further reduce expected income volatility, without
unduly hindering our objective of aggressively managing economic risks inherent
in its lines of business.

      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 hedging
interest rate risk as of March 31, 2003. 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 fair value 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 March 31, 2003
                                    ----------------------------------------------------------------------------------------
                                                                                            Fair Value
                                                                       -----------------------------------------------------
                                                          Weighted
                                        Notional        Average Term   -100 Basis Point       As of       +100 Basis Point
                                         Amount           (Years)         Change (2)         3/31/03         Change (2)
                                    ----------------------------------------------------------------------------------------
                                                            (in millions, except for weighted average term)
<S>                                     <C>                 <C>           <C>                <C>               <C>
Interest rate swaps...............      $ 22,718.2           9.2          $ (1,003.6)        $ (898.3)         $ (754.9)
CMT swaps.........................            69.9           0.9                 1.5              1.5               1.5
Futures contracts (1).............           173.2           6.7                (1.7)             0.1               2.0
Interest rate caps................         1,033.3           5.7                22.2             29.0              42.6
Interest rate floors..............         4,593.0           7.1               184.9             96.3              47.3
Swaptions.........................            30.0          22.2                (7.2)            (3.1)             (0.8)
                                    ------------------                 -----------------------------------------------------
   Totals.........................      $ 28,617.6           8.7          $   (803.9)        $ (774.5)         $ (662.3)
                                    ==================                 =====================================================
</TABLE>

(1)   Represents the notional value on open contracts as of March 31, 2003.
(2)   The selection of a 100 basis point immediate change in interest rates
      should not be construed as a prediction by us of future market events but
      rather as an illustration of the potential impact of such an event.


                                       82
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


      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 (a) the 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) quarterly
reporting of each counterparty's "potential exposure", (d) master netting
agreements, and (e) the use of collateral agreements. Futures contracts trade on
organized exchanges and have effectively no credit risk.

Equity Risk

       Equity risk is the possibility that we will incur economic losses due to
adverse changes in a particular common stock or warrant that we hold in our
portfolio. In order to reduce our exposure to market fluctuations on some of our
common stock portfolio, we use equity collar agreements. These equity collar
agreements limit the market value fluctuations on their underlying equity
securities. Our equity collars are comprised of an equal number of purchased put
options and written call options, each with strike rates equidistant from the
stock price at the time the contract is established. As of March 31, 2003 and
December 31, 2002, the fair value of our equity securities portfolio was $125.9
million and $152.9 million. The fair value of our equity collar agreements as of
March 31, 2003 and December 31, 2002 was $12.8 million and $12.6 million. A
hypothetical 15% decline in the March 31, 2003 value of the equity securities
would result in an unrealized loss of approximately $13.5 million. The selection
of a 15% immediate change in the value of equity securities should not be
construed as a prediction by us of future market events but rather as an
illustration of the potential impact of such an event. The fair value of any
unhedged common stock holdings will rise or fall with equity market and
company-specific trends. In certain cases the Company classifies its equity
holdings as trading securities. Gains and losses, both realized and unrealized,
on equity securities classified as trading, are part of investment returns
related to equity indexed universal life insurance policies sold at Maritime
Life and are included in benefits to policyholders. These holdings are
marked-to-market through the income statement, creating investment income
volatility that is effectively neutralized by changes in corresponding liability
reserves.

Foreign Currency Risk

        Foreign currency risk is the possibility that we will incur economic
losses due to adverse changes in foreign currency exchange rates. This risk
arises in part from our international operations and the issuance of certain
foreign currency-denominated funding agreements sold to non-qualified
institutional investors in the international market. We apply currency swap
agreements to hedge the exchange risk inherent in our funding agreements
denominated in foreign currencies. We also own fixed maturity securities that
are denominated in foreign currencies. We use derivatives to hedge the foreign
currency risk of these securities (both interest and principal payments). At
March 31, 2003 and December 31, 2002, the fair value of our foreign currency
denominated fixed maturity securities was approximately $967.7 million and
$799.3 million. The fair value of our currency swap agreements at March 31, 2003
and December 31, 2002 supporting foreign denominated bonds was $(66.4) million
and $(24.5) million.

      We estimate that as of March 31, 2003, a hypothetical 10% immediate change
in each of the foreign currency exchange rates to which we are exposed,
including the currency swap agreements, would result in no material change to
the net fair value of our foreign currency-denominated instruments identified
above. The selection of a 10% immediate change in all currency exchange rates
should not be construed as a prediction by us of future market events but rather
as an illustration of the potential impact of such an event. Our largest
individual currency exposure is to the Canadian dollar.

      The modeling technique we use to calculate our exposure does not take into
account correlation among foreign currency exchange rates or correlation among
various markets. Our actual experience may differ from the results noted above
due to the correlation assumptions utilized or if events occur that were not
included in the methodology, such as significant illiquidity or other market
events.

Effects of Inflation

      Inflation has not been a material factor in our operations during the past
decade in terms of our investment performance, expenses, or product sales.


                                       83
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


ITEM 4. CONTROLS and PROCEDURES

       Our Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation within 90 days of the filing date of this report, that
our disclosure controls and procedures are effective for gathering, analyzing
and disclosing the information we are required to disclose in our reports filed
under the Securities Exchange Act of 1934. There have been no significant
changes in our internal controls or in other factors that could significantly
affect these controls subsequent to the date of the previously mentioned
evaluation.

PART II -- OTHER INFORMATION

ITEM 6. EXHIBITS and REPORTS on FORM 8-K

a) Exhibits

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

2.2        Purchase and Sale Agreement between John Hancock Life Insurance
           Company, as seller, and Beacon Capital Strategic Partners, as
           purchaser, for the sale of certain John Hancock home office
           properties. @

10.2.2.1   Executive Employment Agreement between John Hancock Life Insurance
           Company, John Hancock Financial Services, Inc. and Thomas E.
           Moloney @ +

10.2.5.1   Amended and Restated Employment Continuation Agreement between John
           Hancock Life Insurance Company, John Hancock Financial Services,
           Inc. and Maureen Ford dated April 1, 2003. @ +

10.2.5.2   Executive Employment Agreement between John Hancock Life Insurance
           Company, John Hancock Financial Services, Inc. and Maureen Ford
           dated April 1, 2003. @ +

10.2.6.1   Executive Employment Agreement between John Hancock Life Insurance
           Company, John Hancock Financial Services, Inc. and Robert Walters @ +

10.2.8.1   Executive Employment Agreement between John Hancock Life Insurance
           Company, John Hancock Financial Services, Inc. and Wayne A. Budd @ +

10.2.9.1   Executive Employment Agreement between John Hancock Life Insurance
           Company, John Hancock Financial Services, Inc. and Deborah H.
           McAneny @ +

99.1       Chief Executive Officer certification pursuant to 18 U.S.C. Section
           1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002 @

99.2       Chief Financial Officer certification pursuant to 18 U.S.C. Section
           1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002 @

Any exhibit not included with this Form 10-K when furnished to any shareholder
of record will be furnished to such shareholder upon written request and payment
of up to $.25 per page plus postage (except no payment will be required for the
financial statements and schedules included in Exhibit 13 if not included). Such
requests should be directed to John Hancock Financial Services, Inc., Investor
Relations, John Hancock Place, Post Office Box 111, Boston, Massachusetts 02117.

----------
@     Filed herewith.
+     Management contract or compensatory plan or arrangement.


                                       84
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


b) Reports on Form 8-K.

      During the First Quarter of 2003 the Company filed the following Current
Reports on Form 8-K:

      On January 9, 2003, the Company filed a Current Report on Form 8-K, dated
January 8, 2003 reporting under Item 5 thereof the Company's agreement with
Allmerica Financial Corporation (Allmerica) to reinsure Allmerica's fixed
universal life insurance business.

      On February 7, 2003, the Company filed a Current Report on Form 8-K dated
February 7, 2003 reporting under Item 5 thereof the Company's operating and
financial results for the fourth quarter of 2002.

      On March 13, 2003, the Company filed a Current Report on Form 8-K, dated
March 13, 2003 reporting under Item 5 thereof that the Company's Canadian
operating subsidiary's, Maritime Life had entered into an agreement to assume
the insurance business of Liberty Health, a Canadian Division of Liberty
International, a subsidiary of US-based Liberty Mutual Group.

      On March 17, 2003, the Company filed a Current Report on Form 8-K dated
March 14, 2003 reporting under Item 5 thereof the Company's sale of three of its
home office complex properties.

       On March 21, 2003, the Company filed a Current Report on Form 8-K dated
March 20, 2003 furnishing under Item 9 thereof the Certifications of the
Company's Chief Executive and Chief Financial officers, as required by Section
906 of the Sarbanes-Oxley Act of 2002.


                                       85
<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: May 13, 2003                       By: /s/ THOMAS E. MOLONEY
                                             ---------------------
                                             Thomas E. Moloney
                                             Senior Executive Vice
                                             President and Chief Financial
                                             Officer


                                       86
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


                                 CERTIFICATIONS

      I, David F. D'Alessandro, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of John Hancock
      Financial Services, Inc.;
2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;
3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;
4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      have:
      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;
      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and
      c)    presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):
      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and
      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and
6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date: May 13, 2003


By: /s/ DAVID F. D'ALESSANDRO
    --------------------------------------
    David F. D'Alessandro
    Chairman, President and
    Chief Executive Officer and Director


                                       87
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.


                                 CERTIFICATIONS

      I, Thomas E. Moloney, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of John Hancock
      Financial Services, Inc.;
2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;
3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;
4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      have:
      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;
      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and
      c)    presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;
5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):
      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and
      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and
6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date: May 13, 2003


By: /s/ THOMAS E. MOLONEY
    --------------------------------------------
    Thomas E. Moloney
    Senior Executive Vice President and Chief
    Financial Officer


                                       88