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 September 30, 2004

                         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
                               Post Office Box 111
                           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 |_|

      As of November 5, 2004 there were outstanding 1,000 shares of common
stock, and 1 share of redeemable preferred stock, both $0.01 par value, of the
registrant, all of which were owned by John Hancock Holdings, LLC, a wholly
owned subsidiary of Manulife Financial Corporation.

                            Reduced Disclosure Format

The Registrant meets the conditions set forth in General Instruction H(1) (a)
and (b) of Form 10-Q and is therefore filing this Form with the Reduced
Disclosure Format.
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 September 30,
                                                                     2004        December 31,
                                                                  (Unaudited)        2003
                                                                 ----------------------------
                                                                         (in millions)
<S>                                                                <C>            <C>
Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
   (fair value: December 31--$1,523.0) .......................             --     $  1,498.6
   Available-for-sale--at fair value
   (cost: September 30 --$53,400.2; December 31--$48,896.8) ..     $ 54,087.4       51,887.0
   Trading securities--at fair value
   (cost: September 30 --$43.5; December 31-- $40.7) .........           42.2           42.2
Equity securities:
   Available-for-sale--at fair value
   (cost: September 30--$530.7; December 31 --$665.8) ........          539.0          795.1
   Trading securities--at fair value
   (cost: September 30--$520.0; December 31--$435.3) .........          515.8          448.4
Mortgage loans on real estate ................................       14,324.0       12,936.0
Real estate ..................................................          353.8          195.0
Policy loans .................................................        2,103.5        2,117.9
Short-term investments .......................................             --          121.6
Other invested assets ........................................        3,381.9        3,011.3
                                                                   ----------     ----------

   Total Investments .........................................       75,347.6       73,053.1

Cash and cash equivalents ....................................        1,497.6        3,121.6
Accrued investment income ....................................        1,049.4          756.0
Premiums and accounts receivable .............................          260.0          273.6
Goodwill .....................................................        4,417.2          345.0
Value of business acquired ...................................        3,814.1          550.5
Intangible assets ............................................        1,494.4            6.3
Deferred policy acquisition costs ............................          194.4        4,301.0
Reinsurance recoverable ......................................        2,178.3        2,095.5
Deferred tax asset ...........................................           31.2             --
Other assets .................................................        2,848.0        3,081.7
Separate account assets ......................................       22,974.8       24,121.9
                                                                   ----------     ----------

   Total Assets ..............................................     $116,107.0     $111,706.2
                                                                   ==========     ==========
</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>
                                                                                        September 30,
                                                                                             2004       December 31,
                                                                                         (Unaudited)        2003
                                                                                        ----------------------------
                                                                                                (in millions)
<S>                                                                                      <C>            <C>
Liabilities and Shareholder's Equity
Future policy benefits .............................................................     $ 51,569.5     $ 45,609.6
Policyholders' funds ...............................................................       21,603.2       22,728.1
Consumer notes .....................................................................        2,288.8        1,550.4
Unearned revenue ...................................................................           43.5        1,140.4
Unpaid claims and claim expense reserves ...........................................          282.4          346.2
Dividends payable to policyholders .................................................          487.2          600.6
Short-term debt ....................................................................          439.5          485.3
Long-term debt .....................................................................        1,746.1        1,410.0
Deferred tax liability .............................................................             --        1,813.4
Other liabilities ..................................................................        3,468.0        3,524.2
Separate account liabilities .......................................................       22,974.8       24,121.9
                                                                                         ----------     ----------

      Total Liabilities ............................................................      104,903.0      103,330.1

Minority interests .................................................................          160.4          160.4

Commitments and contingencies - Note 5

Shareholder's Equity
Preferred stock, $0.01 par value, 1 share authorized
     and issued at September 30, 2004 ..............................................             --             --
Common stock, $0.01 par value; 1,000 shares authorized, issued,
    and outstanding at September 30, 2004 and $0.01 par value; 2.0 billion shares
    authorized; 319.8 million shares issued at December 31, 2003 ...................             --            3.2
Additional paid in capital .........................................................       10,156.8        5,174.0
Retained earnings ..................................................................          301.2        2,318.7
Accumulated other comprehensive income .............................................          585.6        1,788.8
Treasury stock, at cost (30.0 million shares at December 31, 2003) .................             --       (1,069.0)
                                                                                         ----------     ----------

   Total Shareholder's Equity ......................................................       11,043.6        8,215.7
                                                                                         ----------     ----------

   Total Liabilities and Shareholder's Equity ......................................     $116,107.0     $111,706.2
                                                                                         ==========     ==========
</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
                                                                                         September 30,
                                                                                       2004        2003
                                                                                     --------------------
                                                                                         (in millions)
<S>                                                                                  <C>         <C>
Revenues
   Premiums ......................................................................   $1,116.7    $1,034.3
   Universal life and investment-type product fees ...............................      227.8       209.5
   Net investment income .........................................................      952.2     1,038.5
   Net realized investment and other gains (losses), net of related
     amortization of deferred policy acquisition costs and value of
     business acquired, amounts credited to participating pension
     contractholders and the policyholder dividend obligation
     ($0.7 and $(35.5) three months ended September 30, 2004 and
     2003, respectively) .........................................................      (53.1)      (58.3)
   Investment management revenues, commissions and other fees ....................      143.8       138.9
   Other revenue .................................................................       62.9        67.2
                                                                                     --------    --------

Total revenues ...................................................................    2,450.3     2,430.1

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
     ($9.9 and $(29.8) for the three months ended September 30, 2004
     and 2003, respectively) .....................................................    1,499.2     1,522.9
   Other operating costs and expenses ............................................      438.4       437.0
   Amortization of deferred policy acquisition costs and value of business
     acquired, excluding amounts related to net realized investment and other
     gains (losses) ($(9.2) and $(5.7) for the three months ended September 30,
     2004 and 2003, respectively) ................................................       70.0        67.0
   Dividends to policyholders ....................................................      126.0       161.0
                                                                                     --------    --------

   Total benefits and expenses ...................................................    2,133.6     2,187.9
                                                                                     --------    --------

Income before income taxes .......................................................      316.7       242.2

Income taxes .....................................................................      149.4        51.4
                                                                                     --------    --------

Net income .......................................................................   $  167.3    $  190.8
                                                                                     ========    ========
</TABLE>

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


                                       4
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

           UNAUDITED CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                   Period from        Period from      Nine Months
                                                                                  April 29, 2004    January 1, 2004       Ended
                                                                                     through            through       September 30,
                                                                                September 30, 2004   April 28, 2004       2003
                                                                                ----------------------------------------------------
                                                                                                   (in millions)
<S>                                                                                   <C>             <C>              <C>
Revenues
   Premiums .......................................................................   $1,844.1        $1,389.4         $2,782.4
   Universal life and investment-type product fees ................................      387.3           338.6            617.8
   Net investment income ..........................................................    1,597.0         1,452.2          3,117.1
   Net realized investment and other gains (losses), net of related
     amortization of deferred policy acquisition costs and value of business
     acquired, amounts credited to participating pension contract holders and
     the policyholder dividend obligation ($(15.4), $28.7
     and $(33.5), respectively) ...................................................      (67.2)           85.6             94.1
   Investment management revenues, commissions and other fees .....................      236.3           195.3            393.0
   Other revenue ..................................................................      102.1            94.4            199.8
                                                                                      --------        --------         --------

   Total revenues .................................................................    4,099.6         3,555.5          7,204.2

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
     ($(0.8), $39.9 and $(43.0), respectively) ....................................    2,486.2         2,143.0          4,274.3
   Other operating costs and expenses .............................................      721.9           653.9          1,246.3
   Amortization of  deferred policy acquisition costs
     and value of business acquired, excluding amounts related to net
     realized investment and other gains (losses) ($(14.6), $(11.2)
     and $9.5, respectively) ......................................................      126.0           167.6            225.8
   Dividends to policyholders .....................................................      213.0           163.1            443.6
                                                                                      --------        --------         --------

   Total benefits and expenses ....................................................    3,547.1         3,127.6          6,190.0
                                                                                      --------        --------         --------

Income before income taxes and cumulative effect of accounting change .............      552.5           427.9          1,014.2
Income taxes ......................................................................      251.3           127.8            280.3
                                                                                      --------        --------         --------

Net income before cumulative effect of accounting change ..........................      301.2           300.1            733.9
Cumulative effect of accounting change, net of tax- Note 2 ........................         --            37.0               --
                                                                                      --------        --------         --------

Net income ........................................................................   $  301.2        $  337.1         $  733.9
                                                                                      ========        ========         ========
</TABLE>

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


                                       5
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
                            AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                        Additional             Accumulated Other               Total
                                     Preferred  Common   Paid In    Retained    Comprehensive   Treasury  Shareholders'  Outstanding
                                       Stock    Stock    Capital    Earnings    Income (Loss)     Stock       Equity       Shares
                                     -----------------------------------------------------------------------------------------------
                                                        (in millions, except outstanding share data, in thousands)

<S>                                      <C>     <C>     <C>        <C>           <C>          <C>           <C>          <C>
Balance at July 1, 2003.............     --      $3.2    $5,147.4   $2,157.1      $1,771.5     $(1,068.8)    $8,010.4     289,113.0

Options exercised...................                          2.6                                                 2.6         164.3
Restricted stock....................                          3.5                                                 3.5            --
Forfeitures of restricted stock.....                                                                                           (2.6)
Issuance of shares for board
   compensation.....................                          0.1                                                 0.1           2.9

Treasury stock acquired.............                                                                (0.2)        (0.2)

Comprehensive income:
   Net income.......................                                   190.8                                    190.8

Other comprehensive income,
   net of tax:
   Net unrealized gains (losses)....                                                 (55.5)                     (55.5)
   Net accumulated gains (losses)
     on cash flow hedges............                                                 (36.9)                     (36.9)
   Foreign currency translation
     adjustment.....................                                                   0.7                        0.7
   Minimum pension liability........                                                   1.7                        1.7
                                                                                                             --------
Comprehensive income................                                                                            100.8

                                      ----------------------------------------------------------------------------------------------
Balance at September 30, 2003.......     --      $3.2    $5,153.6   $2,347.9      $1,681.5     $(1,069.0)    $8,117.2     289,277.6
                                      ==============================================================================================
</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 CHANGES IN SHAREHOLDER'S EQUITY
                     AND COMPREHENSIVE INCOME - (CONTINUED)

<TABLE>
<CAPTION>
                                                       Additional            Accumulated Other               Total
                                    Preferred  Common   Paid In    Retained    Comprehensive   Treasury  Shareholders's  Outstanding
                                      Stock    Stock    Capital    Earnings    Income (Loss)     Stock       Equity        Shares
                                    -----------------------------------------------------------------------------------------------
                                                       (in millions, except outstanding share data, in thousands)
<S>                                    <C>      <C>    <C>          <C>         <C>              <C>      <C>                <C>
Balance at July 1, 2004............    --       --     $10,156.8    $133.9      $(127.5)         --       $10,163.2          1.0

Comprehensive income:
   Net income......................                                  167.3                                    167.3

Other comprehensive income,
   net of tax:
   Net unrealized gains (losses)...                                               544.1                       544.1
   Net accumulated gains (losses)
     on cash flow hedges...........                                               183.0                       183.0
   Foreign currency translation
     adjustment....................                                               (14.0)                      (14.0)
   Minimum pension liability.......                                                  --                          --
                                                                                                          ---------
Comprehensive income...............                                                                           880.4

                                    -----------------------------------------------------------------------------------------------
Balance at September 30, 2004......    --       --     $10,156.8    $301.2      $ 585.6          --       $11,043.6         1.0
                                    ===============================================================================================
</TABLE>

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


                                       7
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

<TABLE>
<CAPTION>
                                                                                  Accumulated
                                                          Additional                 Other                   Total
                                      Preferred  Common    Paid In    Retained   Comprehensive  Treasury  Shareholders  Outstanding
                                        Stock     Stock    Capital    Earnings   Income (Loss)    Stock      Equity       Shares
                                      ----------------------------------------------------------------------------------------------
                                                        (in millions, except outstanding share data, in thousands)

<S>                                      <C>       <C>      <C>        <C>          <C>        <C>           <C>         <C>
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...................                             6.6                                              6.6        442.9
Restricted stock....................                            18.4                                             18.4      1,245.6
Forfeitures of restricted stock.....                            (0.1)                                            (0.1)        (4.8)
Issuance of shares for board
   compensation.....................                             0.8                                              0.8         30.1
Treasury stock acquired.............                                                               (11.8)       (11.8)      (414.8)

Comprehensive income:
   Net income.......................                                      733.9                                 733.9

Other comprehensive income,
   net of tax:
   Net unrealized gains (losses)....                                                   971.7                    971.7
   Net accumulated gains (losses)
     on cash flow hedges............                                                    72.2                     72.2
   Foreign currency translation
     adjustment.....................                                                   109.5                    109.5
   Minimum pension liability........                                                     4.9                      4.9
                                                                                                             --------
Comprehensive income................                                                                          1,892.2

                                      ----------------------------------------------------------------------------------------------
Balance at September 30, 2003.......     --        $3.2     $5,153.6   $2,347.9     $1,681.5   $(1,069.0)    $8,117.2   289,277.6
                                      ==============================================================================================
</TABLE>

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


                                       8
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

<TABLE>
<CAPTION>
                                                       Additional          Accumulated Other               Total       Outstanding
                                    Preferred  Common   Paid In   Retained   Comprehensive    Treasury  Shareholder's    Common
                                      Stock    Stock    Capital   Earnings   Income (Loss)      Stock      Equity        Shares
                                     -----------------------------------------------------------------------------------------------
                                                       (in millions, except outstanding share data, in thousands)

<S>                                     <C>    <C>     <C>         <C>         <C>           <C>          <C>           <C>
Balance at January 1, 2004..........    --     $ 3.2   $ 5,174.0   $2,318.7    $1,788.8      $(1,069.0)   $ 8,215.7      289,788.4

Options exercised...................             0.1       216.4                                              216.5        6,548.8
Restricted stock issued.............                         6.9                                                6.9          328.3
Forfeitures of restricted stock.....                                                                                          (0.3)
Issuance of shares for board
   compensation.....................                         0.2                                                0.2            4.1
Treasury stock acquired.............                                                             (33.1)       (33.1)      (7,709.6)
Comprehensive income:
   Net income.......................                                  337.1                                   337.1
Other comprehensive income,
   net of tax:
   Net unrealized gains (losses)....                                              (86.8)                      (86.8)
   Net accumulated gains (losses)
     on cash flow hedges............                                              (40.7)                      (40.7)
   Foreign currency translation
     adjustment.....................                                              (60.2)                      (60.2)
   Minimum pension liability........                                                1.0                         1.0
                                                                                                           --------
Comprehensive income................                                                                          150.4

                                    ------------------------------------------------------------------------------------------------
Balance at April 28, 2004...........    --     $ 3.3   $ 5,397.5   $2,655.8    $1,602.1      $(1,102.1)   $ 8,556.6      288,959.7
                                    ------------------------------------------------------------------------------------------------
Acquisition by Manulife Financial
Corporation:
  Sale of shareholders' equity......    --      (3.3)   (5,397.5)  (2,655.8)   (1,602.1)       1,102.1     (8,556.6)    (288,959.7)
  Manulife Financial Corporation
    purchase price..................                    10,417.0                                           10,417.0            1.0
  Merger with Jupiter Merger
    Corporation.....................                      (260.2)                                            (260.2)
                                    ------------------------------------------------------------------------------------------------
Balance at April 29, 2004               --        --   $10,156.8         --          --             --    $10,156.8            1.0
                                    ================================================================================================

Balance at April 29, 2004...........    --        --   $10,156.8         --          --             --    $10,156.8            1.0

Comprehensive income:
   Net income.......................                               $  301.2                                   301.2
Other comprehensive income,
   net of tax:
   Net unrealized gains (losses)....                                           $  382.6                       382.6
   Net accumulated gains (losses)
     on cash flow hedges............                                              178.6                       178.6
   Foreign currency translation
     adjustment.....................                                               24.4                        24.4
   Minimum pension liability........                                                 --                          --
                                                                                                          ---------
Comprehensive income................                                                                          886.8

                                    ------------------------------------------------------------------------------------------------
Balance at September 30, 2004.......    --        --   $10,156.8   $  301.2    $  585.6             --    $11,043.6            1.0
                                    ================================================================================================
</TABLE>

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


                                       9
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     For the period  For the period
                                                                                          from            from         For the nine
                                                                                     April 29, 2004  January 1, 2004   month period
                                                                                        through          through          ended
                                                                                     September 30,      April 28,     September 30,
                                                                                          2004            2004             2003
                                                                                     -----------------------------------------------
                                                                                                    (in millions)
<S>                                                                                    <C>             <C>             <C>
Cash flows from operating activities:
   Net income .....................................................................    $  301.2        $   337.1       $   733.9
   Adjustments to reconcile net income to net cash provided by
   operating activities:
     Amortization of  premium (discount) - fixed maturities .......................       281.0              0.7           (24.4)
     Net realized investment and other (gains) losses .............................        67.2            (85.6)          (94.1)
     Change in accounting principle ...............................................          --            (37.0)             --
     Change in deferred policy acquisition costs ..................................      (197.3)           (58.4)         (320.4)
     Depreciation and amortization ................................................       127.1             23.7            44.1
     Net cash flows from trading securities .......................................       (60.7)            (6.7)         (101.5)
     Increase in accrued investment income ........................................      (226.8)           (66.6)         (156.7)
     (Increase) decrease in premiums and accounts receivable ......................        (7.5)            21.1           (53.1)
     Increase (decrease)  in other assets and other liabilities, net ..............      (186.8)            32.7          (166.9)
     Increase in policy liabilities and accruals, net .............................       697.5            581.4         1,716.2
     Increase in income taxes .....................................................       231.5            132.3           166.0
                                                                                     -----------------------------------------------

       Net cash provided by operating activities ..................................     1,026.4            874.7         1,743.1

Cash flows from investing activities:
   Sales of:
     Fixed maturities available-for-sale ..........................................     1,186.4          2,849.2         9,481.7
     Equity securities available-for-sale .........................................       201.6            229.8           257.2
     Real estate ..................................................................         4.8             97.7            97.5
     Home office properties .......................................................          --               --           887.6
     Short-term investments and other invested assets .............................       158.8            133.4           162.6
   Maturities, prepayments and scheduled redemptions of:
     Fixed maturities held-to-maturity ............................................          --             41.2           190.9
     Fixed maturities available-for-sale ..........................................     2,222.1          1,593.5         2,902.5
     Short-term investments and other invested assets .............................        81.3            124.7           816.9
     Mortgage loans on real estate ................................................       629.2            684.7           976.6
   Purchases of:
     Fixed maturities held-to-maturity ............................................          --             (0.5)          (77.3)
     Fixed maturities available-for-sale ..........................................    (3,387.3)        (6,465.2)      (16,235.3)
     Equity securities available-for-sale .........................................       (49.1)          (134.2)         (260.6)
     Real estate ..................................................................      (111.2)            (6.9)          (32.7)
     Short-term investments and other invested assets .............................      (189.0)          (658.8)       (1,305.9)
   Mortgage loans on real estate issued ...........................................    (1,143.1)          (680.5)       (1,522.2)
   Net cash received related to the sale of business ..............................        35.0               --            (3.8)
   Other, net .....................................................................       (38.5)           148.0          (167.3)
                                                                                     -----------------------------------------------

       Net cash used in investing activities ......................................      (399.0)        (2,043.9)       (3,831.6)
</TABLE>

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


                                       10
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

         UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                     For the period  For the period
                                                                                          from            from         For the nine
                                                                                     April 29, 2004  January 1, 2004   month period
                                                                                        through          through          ended
                                                                                     September 30,      April 28,     September 30,
                                                                                          2004            2004             2003
                                                                                     -----------------------------------------------
                                                                                                    (in millions)
<S>                                                                                     <C>            <C>              <C>
Cash flows from financing activities:
   Acquisition of treasury stock ..................................................           --       $  (33.1)        $  (11.8)
   Universal life and investment-type contract deposits ...........................     $1,746.9        2,459.8          7,077.9
   Universal life and investment-type contract maturities and withdrawals .........     (3,516.7)      (2,521.1)        (5,304.0)
   Issuance of consumer notes .....................................................        317.3          372.2            769.4
   Increase in bank deposits ......................................................         67.8           93.6               --
   Issuance of short term debt ....................................................         88.7             --            148.4
   Repayment of short-term debt ...................................................        (30.4)         (41.8)          (127.9)
   Issuance of long-term debt .....................................................          2.1            0.3               --
   Repayment of long-term debt ....................................................         (2.4)          (1.2)            (4.6)
   Net increase (decrease) in commercial paper ....................................        187.2         (271.4)           (59.5)
                                                                                     -----------------------------------------------

       Net cash (used in) provided by financing activities ........................     (1,139.5)          57.3          2,487.9
                                                                                     -----------------------------------------------

       Net (decrease) increase in cash and cash equivalents .......................       (512.1)      (1,111.9)           399.4

       Cash and cash equivalents at beginning of period ...........................      2,009.7        3,121.6          1,190.6
                                                                                     -----------------------------------------------

       Cash and cash equivalents at end of period .................................     $1,497.6       $2,009.7         $1,590.0
                                                                                     ===============================================
</TABLE>

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


                                       11
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Change of Control

Effective April 28, 2004, Manulife Financial Corporation ("Manulife") acquired
all of the outstanding common shares of John Hancock Financial Services, Inc.
(JHFS or the Company) that were not already beneficially owned by Manulife as
general fund assets and JHFS became a wholly owned subsidiary of Manulife. The
combined entity has a more diversified product line and distribution
capabilities and expects to have improved operating efficiencies and a leading
position across all its core business lines.

Pursuant to the terms of the acquisition, the holders of JHFS common shares
received 1.1853 shares of Manulife stock for each JHFS common share.
Approximately 342 million Manulife common shares were issued at an ascribed
price of CDN $39.61 per share based on the volume weighted average closing stock
price of the common shares for the period from September 25, 2003 to September
30, 2003. In addition, all of the JHFS unvested stock options as of the date of
announcement of the acquisition on September 28, 2003, vested immediately prior
to the closing date and were exchanged for options exercisable for approximately
23 million Manulife common shares.

The acquisition of the Company's shares by Manulife was effected through the
merger of the Company with Jupiter Merger Corporation (Jupiter), a subsidiary of
Manulife, which was organized solely for the purpose of effecting the merger
with the Company. Prior to the merger, Jupiter had a note payable to MLI
Resources Inc., an affiliated Manulife entity in the amount of $260.7 million in
consideration for previously purchased shares of the Company, which were
cancelled upon merger.

The acquisition was accounted for using the purchase method under Statement of
Financial Accounting Standards (SFAS) No. 141 "Business Combinations" and SFAS
No. 142 "Goodwill and Other Intangible Assets". Under the purchase method of
accounting, the assets acquired and liabilities assumed were recorded at
estimated fair value at the date of acquisition. The Company is in the process
of completing the valuations of a portion of the assets acquired and liabilities
assumed; thus, the allocation of the purchase price is subject to refinement.

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed as of April 28, 2004 (in millions):

      Assets:                                                       Fair Value
                                                                 ---------------
      Fixed maturity securities.............................          $54,016.1
      Equity securities.....................................            1,170.4
      Mortgage loans........................................           13,731.0
      Policy loans..........................................            2,122.2
      Other invested assets.................................            3,659.5
      Goodwill..............................................            4,417.2
      Value of business acquired............................            3,886.0
      Intangible assets.....................................            1,488.9
      Deferred tax asset....................................              566.7
      Cash and cash equivalents.............................            2,009.4
      Reinsurance recoverable, net..........................            2,195.5
      Other assets acquired.................................            3,569.9
      Separate account assets...............................           23,121.1
                                                                 ---------------
                     Total assets acquired..................          115,953.9

      Liabilities:
      Policy liabilities....................................           75,818.2
      Other liabilities.....................................            6,597.6
      Separate accounts.....................................           23,121.1
                                                                 ---------------
                    Total liabilities assumed...............          105,536.9

      Net assets acquired...................................          $10,417.0
                                                                 ---------------


                                       12
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 1 -- Change of Control - (Continued)

Goodwill of $4,417.2 million has been allocated to the Company's business and
geographic segments, see Note 9-Goodwill and Other Intangible Assets. Of the
$4,417.2 million in goodwill, no material amount is expected to be deductible
for tax purposes. Value of business acquired is the present value of estimated
future profits of insurance policies in force related to businesses acquired by
Manulife, and has been allocated to the Company's business and geographic
segments, see Note 9-Goodwill and Other Intangible Assets.

Aside from goodwill and value of business acquired, intangible assets of
$1,488.9 million resulting from the acquisition consists of the JHFS brand name,
distribution network, investment management contracts and other investments
management contracts (comprised of licensing agreements and contractual rights).
Refer to Note 9-- Goodwill and Other Intangible Assets for a more complete
discussion of these intangible assets.

Note 2 -- Summary of Significant Accounting Policies

Business

John Hancock Financial Services, Inc. is a diversified financial services
organization that provides a broad range of insurance and investment products
and investment management and advisory services. Since April 28, 2004, the
Company operates as a subsidiary of Manulife. The "John Hancock" name is
Manulife's primary U.S. brand.

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 purchase accounting adjustments resulting from
Manulife's acquisition of the Company, (see Note 1- Change in Control), as well
as normal and recurring adjustments necessary for a fair presentation of the
Company's financial position and results of operations. Operating results for
the period from April 29, 2004 through September 30, 2004 (post-merger) and the
period from January 1, 2004 through April 28, 2004 (pre-merger) are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2004. These unaudited consolidated financial statements should be
read in conjunction with the Company's annual audited financial statements as of
December 31, 2003 included in the Company's Form 10-K for the year ended
December 31, 2003 filed with the United States Securities and Exchange
Commission (hereafter referred to as the Company's 2003 Form 10-K). The
Company's news releases and other information are available on the internet at
www.jhancock.com, and its financial statements are available at
www.manulife.com, under the link labeled "Securities Filings" on the "Investor
Relations" Page. 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, 2003, presented herein, has been derived from
the Company's audited consolidated 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 period amounts have been reclassified to conform to the current
period presentation.

Recent Acquisition / Disposal Activity

In addition to the acquisition of the Company by Manulife, the acquisition
described under the table below was recorded under the purchase method of
accounting and, accordingly, the operating results of the acquired business 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
purchase price over the estimated fair values 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 disposal described under the tables below was conducted in order to execute
the Company's strategy to focus resources on businesses in which it can have a
leadership position. The tables below presents actual and proforma data, for
comparative


                                       13
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (Continued)

purposes, of revenue and net income for the periods indicated, to demonstrate
the proforma effect of the acquisition and disposal as if they occurred on
January 1, 2003.

<TABLE>
<CAPTION>
                                                   Three Months Ended                        Three Months Ended
                                                     September 30,                             September 30,
                                                2004                                    2003
                                              Proforma              2004              Proforma                2003
                                        ------------------------------------------------------------------------------
                                                                           (in millions)

<S>                                         <C>                  <C>                  <C>                    <C>
Revenue.........................            $ 2,450.3            $ 2,450.3            $ 2,430.1              $ 2,430.1

Net income......................            $   167.3            $   167.3            $   190.8              $   190.8

<CAPTION>
                                       Period from April 29,          Period from January 1             Nine Months Ended
                                       through September 30,            through April 28,                 September 30,
                                        2004                          2004                            2003
                                      Proforma         2004         Proforma          2004          Proforma          2003
                                   -------------------------------------------------------------------------------------------
                                                                           (in millions)

<S>                                   <C>           <C>             <C>              <C>            <C>              <C>
Revenue.........................      $ 4,099.6     $ 4,099.6       $ 3,555.5        $ 3,555.5      $ 7,237.6        $ 7,204.2

Net income......................      $   301.2     $   301.2       $   337.1        $   337.1      $   735.6        $   733.9
</TABLE>

Acquisition:

On July 8, 2003, The Maritime Life Assurance Company (Maritime Life), a majority
owned Canadian subsidiary of the Company, completed its purchase of the
insurance business of Liberty Health, a Canadian division of US-based Liberty
Mutual Insurance Company, through a reinsurance agreement for approximately
$97.5 million. Through the agreement, Maritime Life assumed the entire business
of Liberty Health, including its group life, group disability and group health
divisions, as well as its individual health insurance business. There was no
impact on the Company's results of operations from the acquired insurance
business during the first six months of 2003.

Disposal:

On June 19, 2003, the Company agreed to sell its group life insurance business
through a reinsurance agreement with Metropolitan Life Insurance Company, Inc
(MetLife). The Company ceded all activity after May 1, 2003 to MetLife. The
transaction was recorded as of May 1, 2003, and closed November 4, 2003.

Stock-Based Compensation

For stock option grants made to employees prior to January 1, 2003, the Company
applied the recognition and measurement provisions of Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," which
resulted in no compensation expense recognized for these stock option grants to
employees. Prior to January 1, 2003 the Company recognized compensation expense
at the time of the grant or over the vesting period for grants of non-vested
stock to employees and non-employee board members and grants of stock options to
non-employee general agents and has continued this practice. 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. Effective January 1, 2003, the
Company adopted the fair value provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," the effect
of which is to record compensation expense for grants made subsequent to this
date. The following table illustrates the pro forma effect on net income as if
the Company had applied the fair value recognition provisions of SFAS No. 123 to
all stock-based employee compensation.


                                       14
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (Continued)

<TABLE>
<CAPTION>
                                                                                       Three Months        Three Months
                                                                                           Ended               Ended
                                                                                       September 30,       September 30,
                                                                                           2004                2003
                                                                                    ------------------- --------------------
                                                                                                (in millions)

<S>                                                                                      <C>                <C>
Net income, as reported..............................................                    $ 167.3            $ 190.8
Add: Stock-based employee compensation expense included in
   reported net income, net of related tax effects...................                        1.7                3.4
Deduct: Total stock-based employee compensation expense
   determined under fair value method for all awards, net of
   related tax effects...............................................                        1.7                9.7
                                                                                     ------------------ --------------------
Proforma net income .................................................                    $ 167.3            $ 184.5
                                                                                     ================== ====================

<CAPTION>
                                                                            Period from      Period from
                                                                             April 29,        January 1,       Nine Months
                                                                              through          through            Ended
                                                                           September 30,      April 28,       September 30,
                                                                                2004             2004              2003
                                                                          --------------- ------------------ -----------------
                                                                                             (in millions)

<S>                                                                            <C>              <C>               <C>
Net income, as reported..............................................          $301.2           $337.1            $733.9
Add: Stock-based employee compensation expense included in
   reported net income, net of related tax effects...................             2.9              5.4              18.0
Deduct: Total stock-based employee compensation expense determined under
   fair value method for all awards, net of related tax effects......             2.9              8.0              39.1
                                                                          --------------- ------------------ -----------------
Proforma net income .................................................          $301.2           $334.5            $712.8
                                                                          =============== ================== =================
</TABLE>

Recent Accounting Pronouncements

FASB Staff Position 106-2 - Accounting and Disclosure Requirements Related to
the Medicare Prescription Drug, Improvement and Modernization Act of 2003

In May, 2004, the FASB issued FASB Staff Position 106-2 - "Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug Improvement
and Modernization Act of 2003" (FSP 106-2). In accordance with FSP 106-2, the
Company recorded a $40.9 million reduction in the accumulated plan benefit
obligation as of the purchase accounting re-measurement date (April 28, 2004)
and a $1.0 million decrease in net periodic postretirement benefit costs for the
period April 29, 2004 through September 30, 2004.

On December 8, 2003, President Bush signed into law the bill referenced above,
which expands Medicare, primarily by adding a prescription drug benefit for
Medicare-eligible retirees starting in 2006. The Medicare Prescription Drug
Improvement and Modernization Act of 2003 (the Act) provides for special
tax-free subsidies to employers that offer plans with qualifying drug coverages
beginning in 2006. There are two broad groups of retirees receiving
employer-subsidized prescription drug benefits at the Company. The first group,
those who retired prior to January 1, 1992, receives a subsidy of between 90%
and 100% of total cost. Since this subsidy level will clearly meet the criteria
for qualifying drug coverage, the Company anticipates that the benefits it pays
after 2005 for pre-1992 retirees will be lower as a result of the new Medicare
provisions and has reflected that reduction in the other postretirement benefit
plan liability. With respect to the second group, those who retired on or after
January 1, 1992, the employer subsidy on prescription drug benefits is capped
and currently provides as low as 25% of total cost. Since final authoritative
accounting guidance has not yet been issued on determining whether a benefit
meets the actuarial criteria for qualifying drug coverage, the Company has
deferred recognition as permitted by FSP 106-2 for this group. The final
accounting guidance could require changes to previously reported information.


                                       15
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (Continued)

FASB Interpretation No. 46 (revised December 2003) - Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51

In December, 2003, the FASB re-issued Interpretation 46, "Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51," (FIN 46R) which
clarifies the consolidation accounting guidance of Accounting Research Bulletin
No. 51, "Consolidated Financial Statements," (ARB No. 51) to certain entities
for which controlling financial interests are not measurable by reference to
ownership of the equity of the entity. Such entities are known as variable
interest entities (VIEs).

Controlling financial interests of a VIE are defined as exposure of a party to
the VIE to a majority of either the expected variable losses or expected
variable returns of the VIE, or both. Such party is the primary beneficiary of
the VIE and FIN 46R requires that the primary beneficiary of a VIE consolidate
the VIE. FIN 46R also requires certain disclosures for significant relationships
with VIEs, whether or not consolidation accounting is either used or
anticipated. The consolidation requirements of FIN 46R were applied at December
31, 2003 for entities considered to be special purpose entities (SPEs), and
applied at March 31, 2004 for non-SPE entities.

The Company categorized its FIN 46R consolidation candidates into three
categories- 1) collateralized debt obligation funds it manages (CDO funds or
CDOs), which are SPEs, 2) low-income housing properties (the Properties) which
are not SPEs, and 3) assorted other entities (Other Entities) which are not
SPEs. The Company has determined that it should not consolidate any of the CDO
funds, Properties or Other Entities, therefore the adoption of FIN 46R had no
impact on the Company's consolidated financial position, results of operations
or cash flows.

Additional liabilities recognized as a result of consolidating any 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 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 4--Relationships with Variable Interest Entities for a more
complete discussion of the Company's significant relationships with VIEs, their
assets and liabilities, and the Company's maximum exposure to loss as a result
of its involvement with them.

Statement of Position 03-1 - Accounting and Reporting by Insurance Enterprises
for Certain Nontraditional Long Duration Contracts and for Separate Accounts

On July 7, 2003, the Accounting Standards Executive Committee (AcSEC) of the
American Institute of Certified Public Accountants (AICPA) issued Statement of
Position 03-1, "Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long Duration Contracts and for Separate Accounts" (SOP 03-1).
SOP 03-1 provides guidance on a number of topics unique to insurance
enterprises, including separate account presentation, interest in separate
accounts, gains and losses on the transfer of assets from the general account to
a separate account, liability valuation, returns based on a contractually
referenced pool of assets or index, accounting for contracts that contain death
or other insurance benefit features, accounting for reinsurance and other
similar contracts, accounting for annuitization benefits, and sales inducements
to contractholders. Refer to Note 12- Certain Separate Accounts for additional
disclosures required by SOP 03-1.

The Company adopted SOP 03-1 on January 1, 2004, which resulted in an increase
in shareholders' equity of $40.5 million (net of tax of $21.1 million). The
Company recorded an increase in net income of $37.0 million (net of tax of $19.3
million) and an increase in other comprehensive income of $3.5 million (net of
tax of $1.8 million) which were recorded as the cumulative effects of an
accounting change, on January 1, 2004. In addition, in conjunction with the
adoption of SOP 03-1 the Company reclassified $933.8 million in separate account
assets and liabilities to the corresponding general account balance sheet
accounts.


                                       16
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Segment Information

As a result of Manulife's acquisition of the Company, see Note 1- Change of
Control, the Company renamed and reorganized certain businesses within its
operating segments to better align the Company with its new parent, Manulife.
The Company renamed the Asset Gathering Segment as the Wealth Management Segment
and the Maritime Life Segment was renamed the Canada Segment. In addition, the
Institutional Investment Management Segment was moved to the Corporate and Other
Segment. Other realignments include moving Signator Investors, Inc. our agent
sales organization, from Wealth Management to Protection, and Group Life, Retail
Discontinued operations, discontinued health insurance operations and Creditor
from Corporate and Other to Protection. Direct Foreign Operations (DFO) and
International Group Plans (IGP) remain in international operations in our
Corporate and Other Segment while in Manulife's segment results DFO will be
reported in Asia, and IGP will be reported in Reinsurance. The financial results
for all periods have been reclassified to conform to the current period
presentation.

The Company operates in the following five business segments: two segments
primarily serve retail customers, one segment serves institutional customers,
one segment serves primarily Canadian retail and group customers and our fifth
segment is the Corporate and Other Segment, which includes our institutional
advisory business, the remaining international operations, the corporate account
and the impact of fluctuations in exchange rates between the Canadian and U.S.
dollar for our Canadian operations. Our retail segments are the Protection
Segment and the Wealth Management Segment, previously called Asset Gathering.
Our institutional segment is the Guaranteed and Structured Financial Products
Segment (G&SFP). Our Canada Segment consists primarily of the financial results
of our Canadian operating subsidiary, Maritime Life.

Prior to the merger, the Company operated in the following six business
segments: two segments served primarily domestic retail customers, two segments
served primarily domestic institutional customers, one segment served primarily
Canadian retail and group customers and our sixth segment was the Corporate and
Other Segment, which included our remaining international operations, the
corporate account and run-off from several discontinued business lines. Our
retail segments were the Protection Segment and the Asset Gathering Segment. Our
institutional segments were the Guaranteed and Structured Financial Products
(G&SFP) Segment and the Investment Management Segment. Our Maritime Life Segment
consisted primarily of the financial results of our Canadian operating
subsidiary, Maritime Life. For additional information about the Company's
pre-acquisition business segments, please refer to the Company's 2003 Form 10-K.

Subsequent to the merger, the Company changed its methodology for determining
how much capital is needed to support its operating segments and redeployed
capital according to the new methodology. As part of this process, the Company
moved certain tax preferenced investments from the operating segments to the
Corporate and Other Segment. These steps were taken as part of the alignment of
the Company's investment and capital allocation processes with those of its
parent, and they could have a material impact on each operating segment's
investment income and net income in future periods.

The following table summarizes selected financial information by segment for the
periods and dates indicated. 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 6 - Closed Block
in the notes to the unaudited consolidated financial statements and the related
footnote in the Company's 2003 Form 10-K.


                                       17
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                                  Wealth                             Corporate
                                                   Protection   Management    G&SFP       Canada     and Other  Consolidated
                                                ----------------------------------------------------------------------------
                                                                               (in millions)
<S>                                                <C>          <C>         <C>         <C>          <C>         <C>
As of or for the three months ended
September 30, 2004
Revenues:
   Revenues from external
     customers.............................        $   589.7    $   166.2   $    82.5   $   466.4    $  246.4    $  1,551.2
   Net investment income...................            311.7        150.4       307.7        94.4        88.0         952.2
   Net realized investment and other
     gains (losses), net...................            (1.9)        (20.4)      (36.1)        5.0         0.3         (53.1)
   Inter-segment revenues..................              --           0.3         0.2          --        (0.5)           --
                                                ----------------------------------------------------------------------------
   Revenues................................        $   899.5    $   296.5   $   354.3   $   565.8    $  334.2    $  2,450.3
                                                ============================================================================
Net Income:
   Net income..............................        $    85.5    $    43.2   $     9.0   $    31.7    $   (2.1)   $    167.3
                                                ============================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method....        $     5.5    $     1.2   $     8.5          --    $   13.5    $     28.7
   Carrying value of investments
     accounted for under the equity
     method................................            721.7        299.7       689.9          --       761.8       2,473.1
   Amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding
     amounts related to net realized
     investment and other gains
     (losses)..............................             27.2         19.4        14.3   $     8.5         0.6          70.0
   Segment assets..........................         39,926.7     19,249.0    35,695.2    16,755.4     4,480.7     116,107.0
</TABLE>


                                       18
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                                Wealth                                    Corporate
                                               Protection     Management       G&SFP         Canada       and Other    Consolidated
                                               ------------------------------------------------------------------------------------
                                                                               (in millions)
<S>                                            <C>            <C>            <C>            <C>            <C>           <C>
As of or for the three months ended
September 30, 2003
Revenues:
   Revenues from external
     customers ...........................     $   641.4      $    98.4      $   125.5      $   377.7      $  206.9      $  1,449.9
   Net investment income .................         364.5          179.1          403.5           96.1          (4.7)        1,038.5
   Net realized investment and other
     gains (losses), net .................          (3.7)         (11.4)         (44.4)           3.8          (2.6)          (58.3)
   Inter-segment revenues ................            --            0.3             --             --          (0.3)             --
                                               ------------------------------------------------------------------------------------
   Revenues ..............................     $ 1,002.2      $   266.4      $   484.6      $   477.6      $  199.3      $  2,430.1
                                               ====================================================================================
Net Income:
   Net income ............................     $    84.4      $    41.9      $    43.6      $    27.3      $   (6.4)     $    190.8
                                               ====================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ..     $     5.5      $     2.9      $     8.9             --      $   14.1      $     31.4
   Carrying value of investments
     accounted for under the equity
     method ..............................         313.5          215.5          565.0             --         744.7         1,838.7
   Amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding
     amounts related to net realized
     investment and other gains
     (losses) ............................          42.6           25.4            0.5      $    (3.6)          2.1            67.0
   Segment assets ........................      35,548.1       18,457.9       36,476.5       13,241.6       5,144.8       108,868.9
</TABLE>


                                       19
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                                Wealth                                Corporate
                                               Protection     Management     G&SFP         Canada     and Other   Consolidated
                                              --------------------------------------------------------------------------------
                                                                               (in millions)
<S>                                           <C>           <C>           <C>           <C>           <C>         <C>
As of or for the period from April 29,
2004 through September 30,
2004 Revenues:
   Revenues from external
     customers ...........................    $ 1,036.9     $   230.2     $   139.1     $   761.0     $  402.6    $  2,569.8
   Net investment income .................        534.9         254.9         512.9         155.4        138.9       1,597.0
   Net realized investment and other
     gains (losses), net .................         (7.0)        (29.6)        (32.1)          3.1         (1.6)        (67.2)
   Inter-segment revenues ................           --           0.5           0.3            --         (0.8)           --
                                              ------------------------------------------------------------------------------
   Revenues ..............................    $ 1,564.8     $   456.0     $   620.2     $   919.5     $  539.1    $  4,099.6
                                              ==============================================================================
Net Income:
   Net income ............................    $   159.5     $    74.5     $    40.5     $    47.0     $  (20.3)   $    301.2
                                              ==============================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ..    $    10.8     $     2.7     $    13.4            --     $    9.7    $     36.6
   Carrying value of investments
     accounted for under the equity
     method ..............................        721.7         299.7         689.9            --        761.8       2,473.1
   Amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding
     amounts related to net realized
     investment and other gains
     (losses) ............................         49.3          35.1          23.8     $    16.9          0.9         126.0
   Segment assets ........................     39,926.7      19,249.0      35,695.2      16,755.4      4,480.7     116,107.0
</TABLE>


                                       20
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                                Wealth                                Corporate
                                               Protection     Management     G&SFP         Canada     and Other   Consolidated
                                               -------------------------------------------------------------------------------
                                                                                (in millions)
<S>                                            <C>           <C>           <C>           <C>           <C>          <C>
For the period from January 1, 2004
through April 28, 2004
Revenues:
   Revenues from external
     customers ............................    $   901.8     $   116.6     $   124.3     $   525.6    $   349.4     $ 2,017.7
   Net investment income ..................        496.4         237.5         539.6         127.1         51.6       1,452.2
   Net realized investment and other
     gains (losses), net ..................        (13.1)         (1.5)         (7.4)          3.7        103.9          85.6
   Inter-segment revenues .................           --           0.4           0.2            --         (0.6)           --
                                               ------------------------------------------------------------------------------
   Revenues ...............................    $ 1,385.1     $   353.0     $   656.7     $   656.4    $   504.3     $ 3,555.5
                                               ==============================================================================
Net Income:
   Net income .............................    $    97.8     $    49.5     $    81.5     $    67.4    $    40.9     $   337.1
                                               ==============================================================================
Supplemental Information:
   Equity in net income accounted for
     by the equity method .................    $    11.4     $     3.1     $    11.5            --    $    45.1     $    71.1
   Amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding
     amounts related to net realized
     investment and other gains (losses) ..         83.6          50.0           0.7     $    27.0          6.3         167.6
</TABLE>


                                       21
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                               Wealth                                Corporate
                                              Protection     Management     G&SFP         Canada     and Other   Consolidated
                                              -------------------------------------------------------------------------------
                                                                                (in millions)
<S>                                           <C>           <C>           <C>           <C>           <C>          <C>
As of or for the nine months ended
September 30, 2003
Revenues:
   Revenues from external
     customers ...........................    $ 1,901.6     $   306.9     $   251.8     $   943.2    $   589.5     $  3,993.0
   Net investment income .................      1,079.8         521.6       1,251.1         276.5        (11.9)       3,117.1
   Net realized investment and other
     gains (losses), net .................         (7.0)        (28.9)       (170.6)         11.8        288.8           94.1
   Inter-segment revenues ................           --           0.9            --            --         (0.9)            --
                                              -------------------------------------------------------------------------------
   Revenues ..............................    $ 2,974.4     $   800.5     $ 1,332.3     $ 1,231.5        865.5     $  7,204.2
                                              ===============================================================================
Net Income:
   Net income ............................    $   250.8     $   120.9     $   131.3     $    72.4    $   158.5     $    733.9
                                              ===============================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ..    $    16.5     $     8.1     $    28.6            --    $    19.9     $     73.1
   Carrying value of investments
     accounted for under the equity
     method ..............................        313.5         215.5         565.0            --        744.7        1,838.7
   Amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding
     amounts related to net realized
     investment and other gains
     (losses) ............................        138.6          78.4           1.6     $     3.6          3.6          225.8
   Segment assets ........................     35,548.1      18,457.9      36,476.5      13,241.6      5,144.8      108,868.9
</TABLE>

Note 4 -- 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),
in accordance with FIN 46R, as discussed in Note 2--Summary of Significant
Accounting Policies. Presented below are discussions of the Company's
significant relationships with them, the Company's conclusions about whether the
Company should consolidate them, and certain summarized financial information
for them.

As explained in Note 2--Summary of Significant Accounting Policies, additional
liabilities recognized as a result of consolidating any 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. These
additional liabilities would be 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 Obligation Funds (CDOs). Since 1996, the Company has acted
as investment manager to certain asset backed investment vehicles, commonly
known as collateralized debt obligation funds (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 the Company manages the CDO, positive
investment experience is shared by the Company through variable performance
management fees. Any net losses in excess of the CDO equity are borne by the
debt owners in ascending order of subordination. Owners of securities issued by
CDOs that are managed by the Company have no recourse to the Company's assets in
the event of default by the CDO. The Company's risk of loss from any CDO it
manages, or in which it invests, is limited to its investment in the CDO.


                                       22
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 -- Relationships with Variable Interest Entities - (Continued)

In accordance with previous consolidation accounting principles (now superceded
by FIN 46R), the Company formerly consolidated a CDO only if the Company owned a
majority of the CDO's equity. The Company is now required to consolidate a CDO
when, in accordance with FIN 46R, the CDO is deemed to be a VIE, but only if the
Company is deemed to be the primary beneficiary of the CDO. For those CDOs which
are not deemed to be VIEs, the Company determines its consolidation status by
considering the control relationships among the equity owners of the CDOs. The
Company has determined whether each CDO should be considered a VIE, and while
most are VIEs, some are not. The Company has determined that it is not the
primary beneficiary of any CDO which is a VIE, and for those that are not VIEs,
the Company also does not have controlling financial interests. Therefore, the
Company does not use consolidation accounting for any of the CDOs which it
manages.

The Company believes that its relationships with its managed CDOs are
collectively significant, and accordingly provides, in the tables below, summary
financial data for all these CDOs 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 any CDO in which it invests
and does not manage and thus will not be required to consolidate any of them,
and considers that its relationships with them are not collectively significant,
therefore the Company does not disclose data for them. Credit ratings are
provided by nationally recognized credit rating agencies, and relate to the debt
issued by the CDOs in which the Company has invested.

                                                   September 30,    December 31,
                                                       2004            2003
                                                   -----------------------------
                                                          (in millions)
Total size of Company-Managed CDOs (1)

Total assets ..............................          $3,404.0         $4,922.2
                                                     ========         ========

Total debt ................................          $3,399.1         $4,158.2
Total other liabilities ...................               5.7            712.0
                                                     --------         --------
Total liabilities .........................           3,404.8          4,870.2
Total equity ..............................              (0.8)            52.0
                                                     --------         --------
Total liabilities and equity ..............          $3,404.0         $4,922.2
                                                     ========         ========

(1)   The reduction in size of the Company-Managed CDOs is primarily due to the
      liquidation, at maturity, of Declaration Funding 1 LTD, in May 2004.

<TABLE>
<CAPTION>
Maximum exposure of the Company to losses
from Company-Managed CDOs                                            September 30, 2004         December 31, 2003
                                                                     ---------------------------------------------
                                                                           (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 ........................................................      $161.8        57.1%       $201.0        35.6%
Aa1/AA+ ........................................................        73.7        26.1          75.7        13.4
Baa2/BBB .......................................................          --          --         218.0        38.8
B2 .............................................................          --          --           8.0         1.4
B3/B- ..........................................................         7.5         2.7            --          --
Caa1/CCC+ ......................................................        13.5         4.8          13.2         2.3
Not rated (equity) .............................................        26.4         9.3          48.1         8.5
                                                                      ------      ------        ------      ------
Total Company exposure .........................................      $282.9       100.0%       $564.0       100.0%
                                                                      ======      ======        ======      ======
</TABLE>

Low-Income Housing Properties. Since 1995, the Company has generated income tax
benefits by investing in apartment properties (the Properties) that qualify for
low income housing and/or historic tax credits. The Company initially invested
in the Properties directly, but now primarily 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 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.


                                       23
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 -- Relationships with Variable Interest Entities - (Continued)

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. The Company's maximum loss in relation to the
Properties is limited to its equity investment in the Properties, 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. The Company receives Federal
income tax credits in recognition of its investment 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 Property cash flows.

The Company has determined that it is not the primary beneficiary of any
Property, so the Company does not use consolidation accounting for any of them.
The Company believes that its relationships with the Properties are significant,
and accordingly, the disclosures in the tables below are provided. The tables
below present summary financial data for the Properties, and data relating to
the Company's maximum exposure to loss as a result of its relationships with
them.

                                                   September 30,    December 31,
                                                        2004            2003
                                                   -----------------------------
                                                         (in millions)
Total size of the Properties (1)

Total assets .................................       $1,103.9        $  982.7
                                                     ========        ========

Total debt ...................................       $  653.3        $  576.3
Total other liabilities ......................          122.7           116.6
                                                     --------        --------
Total liabilities ............................          776.0           692.9
Total equity .................................          327.9           289.8
                                                     --------        --------
Total liabilities and equity .................       $1,103.9        $  982.7
                                                     ========        ========

(1)   Property level data reported above is reported with three month delays
      due to the delayed availability of financial statements of the Funds.

<TABLE>
<CAPTION>
                                                                    September 30,  December 31
                                                                         2004         2003
                                                                    --------------------------
                                                                           (in millions)
<S>                                                                    <C>           <C>
Maximum exposure of the Company to losses from the Properties

Equity investment in the Properties (1) .........................      $  313.3      $  291.0
Outstanding equity capital commitments to the Properties ........          82.9         108.2
Carrying value of mortgages for the Properties ..................          67.3          62.8
Outstanding mortgage commitments to the Properties ..............           0.9           5.1
                                                                       --------      --------
Total Company exposure ..........................................      $  464.4      $  467.1
                                                                       ========      ========
</TABLE>

(1)   Equity investment in the Properties above is reported with three month
      delays due to the delayed availability of financial statements of the
      Funds.

Other Entities. The Company has investment relationships with a disparate group
of entities (Other Entities), which result from the Company's direct investment
in their debt and/or equity. This category includes energy investment
partnerships, investment funds organized as limited partnerships, and businesses
which have undergone debt restructurings and reorganizations and various other
relationships. The Company has determined that for each of these Other Entities
which are VIEs, the Company is not the primary beneficiary, and should not use
consolidation accounting for them. The Company believes that its relationships
with the Other Entities are not significant, and is accordingly not providing
summary financial data for them, or data relating to the Company's maximum
exposure to loss as a result of its relationships with them. These potential
losses are generally limited to amounts invested, which are included on the
Company's consolidated balance sheets in the appropriate investment categories.


                                       24
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 5 -- Commitments and Contingencies

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 and certain group life insurance
business without related group accident and health business. 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 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 certain disputes, including a number of related 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


                                       25
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 5 -- Commitments and Contingencies - (Continued)

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 September 30, 2004, would not be material to the
Company's financial position, results of operations or liquidity.
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 September 30, 2004. 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, results of operations or liquidity of the Company.


                                       26
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 -- 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 2003 Form 10-K. The following
tables set forth certain summarized financial information relating to the closed
block as of the dates indicated.

<TABLE>
<CAPTION>
                                                                                    September 30, 2004   December 31, 2003
                                                                                   ------------------------------------------
                                                                                                 (in millions)
Liabilities
<S>                                                                                       <C>               <C>
Future policy benefits..........................................................          $10,708.6         $10,690.6
Policyholder dividend obligation................................................              570.1             400.0
Policyholders' funds............................................................            1,506.1           1,511.9
Policyholder dividends payable..................................................              416.3             413.1
Other closed block liabilities..................................................               63.3              37.4
                                                                                   ------------------------------------------
   Total closed block liabilities...............................................          $13,264.4         $13,053.0
                                                                                   ------------------------------------------

Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
     (fair value: December 31--$69.6)...........................................                 --       $      66.0
   Available-for-sale--at fair value
     (cost: September 30--$6,489.9; December 31--$5,847.6)......................          $ 6,585.2           6,271.1
Equity securities:
   Available-for-sale--at fair value
     (cost: September 30--$6.8; December 31--$9.1)..............................                6.7               9.1
Mortgage loans on real estate...................................................            1,711.6           1,577.9
Policy loans....................................................................            1,539.5           1,554.0
Short-term investments..........................................................                 --               1.2
Other invested assets...........................................................              302.7             230.6
                                                                                   ------------------------------------------
   Total investments............................................................           10,145.7           9,709.9

Cash and cash equivalents.......................................................               65.4             248.3
Accrued investment income.......................................................              144.3             145.1
Other closed block assets.......................................................              310.6             308.6
                                                                                   ------------------------------------------
   Total closed block assets....................................................          $10,666.0         $10,411.9
                                                                                   ------------------------------------------

Excess of reported closed block liabilities over assets
   designated to the closed block...............................................          $ 2,598.4         $ 2,641.1
                                                                                   ------------------------------------------

Portion of above representing other comprehensive income:
   Unrealized (depreciation) appreciation, net of tax of $(35.5)
     million and ($148.0) million at September 30 and December 31,
     respectively...............................................................               66.2            275.3
   Allocated to the policyholder dividend obligation, net of tax of
     $35.7 million and $148.1 million at September 30 and December 31,
     respectively...............................................................              (66.3)          (275.1)
                                                                                   ------------------------------------------
       Total....................................................................               (0.1)             0.2
                                                                                   ------------------------------------------

Maximum future earnings to be recognized from closed block
   assets and liabilities.......................................................          $ 2,598.3        $ 2,641.3
                                                                                   ==========================================
</TABLE>


                                       27
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 -- Closed Block - (Continued)

<TABLE>
<CAPTION>
                                                                          Period from        Period from     Twelve months
                                                                       April 29, through      January 1,         ended
                                                                         September 30,         through       December 31,
                                                                             2004           April 28, 2004       2003
                                                                     -----------------------------------------------------
                                                                                          (in millions)
<S>                                                                          <C>               <C>               <C>
Changes in the policyholder dividend obligation:
   Balance at beginning of period..................................          $308.8            $400.0            $288.9
     Purchase accounting fair value adjustment.....................           208.4                --                --
     Impact on net income before income taxes......................           (49.3)             23.4             (57.9)
     Unrealized investment gains (losses)..........................           102.2            (114.6)            169.0
                                                                     ---------------------------------------------------
   Balance at end of period........................................          $570.1            $308.8            $400.0
                                                                     ===================================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                                       September 30,
                                                                                 2004                  2003
                                                                          --------------------------------------
                                                                                       (in millions)
<S>                                                                             <C>                   <C>
Revenues
   Premiums.............................................................        $205.8                $221.4
   Net investment income................................................         126.0                 161.2
   Net realized investment and other gains (losses), net of amounts
     credited to the policyholder dividend obligation of $12.0 million
     and $(22.5) million for the three months ended September 30, 2004
     and 2003, respectively.............................................           0.6                  (1.1)
   Other closed block revenues..........................................           0.1                  (0.3)
                                                                          --------------------------------------
     Total closed block revenues........................................         332.5                 381.2

Benefits and Expenses
   Benefits to policyholders............................................         226.4                 237.2
   Change in the policyholder dividend obligation.......................         (27.3)                 (2.6)
   Other closed block operating costs and expenses......................          (0.5)                 (0.5)
   Dividends to policyholders...........................................         100.0                 113.8
                                                                          --------------------------------------
     Total benefits and expenses........................................         298.6                 347.9
                                                                          --------------------------------------

   Closed block revenues, net of closed block benefits and expenses,
     before income taxes................................................          33.9                  33.3
   Income taxes, net of amounts credited to the policyholder
     dividend obligation of $0.9 million and $0.5 million for the three
     months ended September 30, 2004 and 2003, respectively ............          12.6                  12.0
                                                                          --------------------------------------
     Closed block revenues, net of closed block benefits and expenses,
       and income taxes.................................................         $21.3                $ 21.3
                                                                          ======================================
</TABLE>


                                       28
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 -- Closed Block - (Continued)

<TABLE>
<CAPTION>
                                                                                  Period from   Period from
                                                                                   April 29,     January 1,   Nine Months
                                                                                    through       through        Ended
                                                                                 September 30,   April 28,   September 30,
                                                                                      2004          2004         2003
                                                                                ------------------------------------------
                                                                                              (in millions)
<S>                                                                                   <C>           <C>        <C>
Revenues
   Premiums.............................................................              $337.7        $278.0     $  664.6
   Net investment income................................................               215.5         208.4        487.5
     Net realized investment and other gains (losses), net of amounts
     credited to the policyholder dividend obligation of $1.3 million
     and $33.7 million for the periods from April 29 through September
     30, 2004 and January 1 through April 28, 2004, respectively, and
     $(33.7) million for the nine months ended September 30, 2003.......                 1.0         (35.7)        (3.4)
   Other closed block revenues..........................................                  --          (0.2)        (0.2)
                                                                                ------------------------------------------
     Total closed block revenues........................................               554.2         450.5      1,148.5

Benefits and Expenses
   Benefits to policyholders............................................               380.6         310.9        713.1
   Change in the policyholder dividend obligation.......................               (52.0)        (11.2)       (11.3)
   Other closed block operating costs and expenses......................                (0.9)          0.9         (4.9)
   Dividends to policyholders...........................................               169.9         141.1        351.7
                                                                                ------------------------------------------
     Total benefits and expenses........................................               497.6         441.7      1,048.6
                                                                                ------------------------------------------

   Closed block revenues, net of closed block benefits and expenses,
     before income taxes................................................                56.6           8.8         99.9
   Income taxes, net of amounts credited to the policyholder
     dividend obligation of $1.6 million and $0.6 million for the periods from
     April 29 through September 30 and January 1 through April 28, 2004,
     respectively, and $1.6 million for the nine months ended
     September 30, 2003.................................................                20.2           2.3         35.3
                                                                                ------------------------------------------

     Closed block revenues, net of closed block benefits and expenses,
       and income taxes.................................................              $ 36.4          $6.5     $   64.6
                                                                                ==========================================
</TABLE>


                                       29
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 7 -- Restructuring Costs

Following the acquisition of the Company by Manulife on April 28, 2004, see Note
1 - Change of Control, Manulife developed a plan to integrate the operations of
the Company with its consolidated subsidiaries. Manulife expects the
restructuring to be substantially completed by the end of 2005. Restructuring
costs of $128.0 million were recognized by the Company as part of the purchase
transaction and consist primarily of exit and consolidation activities involving
operations, certain compensation costs, and facilities. The accruals for the
restructuring costs are included in other liabilities on the consolidated
balance sheets and in other operating costs and expenses on the consolidated
income statements.

The following details the amounts and status of restructuring costs (in
millions):

<TABLE>
<CAPTION>
                                                                 Amount
                                         Pre-acquisition        Utilized                     Amount Utilized
                                       Accruals January 1,   January 1, 2004                  April 29, 2004
                         Accrual           2004 through          through       Accrued at        through           Ending Balance
Type of Cost         January 1, 2004      April 28, 2004     April 28, 2004   acquisition   September 30, 2004   September 30, 2004
-----------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                  <C>              <C>              <C>             <C>                 <C>
Personnel.........        $12.0                $(0.8)           $2.5             $71.5           $10.6               $69.6
Facilities........           --                   --              --              56.5             2.2                54.3
                     --------------------------------------------------------------------------------------------------------------
     Total........        $12.0                $(0.8)           $2.5            $128.0           $12.8              $123.9
                     ==============================================================================================================
</TABLE>

Note 8 -- Related Party Transactions

The Company provides certain administrative and asset management services to its
employee benefit plans (the Plans). Fees paid to the Company by the Plans for
these services were $1.9 million and $1.7 million for the three month periods
ended September 30, 2004 and 2003, respectively, and $5.7 million and $4.7
million for the nine month periods ended September 30, 2004 and 2003,
respectively.

The Company, in the ordinary course of business, invests funds deposited with it
by customers and manages the resulting invested assets for growth and income for
customers. From time to time, successful investment strategies of the Company
may attract deposits from affiliates of the Company. At September 30,2004, the
Company managed approximately $12.0 million of investments for Manulife
affiliates which to date generated market-based revenue for the Company.

To effect the efficiencies of the merger with Manulife, the Company has an
arrangement with its parent, Manulife, to share the cost of certain corporate
services including, among others, personnel, property facilities, catastrophic
reinsurance coverage, and directors' and officers insurance. In addition,
synergies of sales agents are being found whereby the Company has an arrangement
for the compensation of its sales agents for cross-selling products of Manulife
affiliates. Operational efficiencies identified in the merger are subject to a
service agreement between the Company's primary operating subsidiary, John
Hancock Life Insurance Company (the Life Company), and its affiliate Manulife
U.S.A., a U.S.-based life insurance subsidiary of Manulife, whereby the Company
is obligated to provide certain services in support of Manulife U.S.A's
business. Further, under the service agreement Manulife U.S.A. is obligated to
provide compensation to the Company for services provided. Through September 30,
2004, there had not been a material level of business transacted under the
service agreement and no material receivable is owed to the Company at period
end.

Prior to its acquisition by Manulife effective April 28, 2004, the Company
reinsured certain portions of its closed block with Manulife. The Company
entered into these reinsurance contracts in order to facilitate its statutory
capital management process. These reinsurance contracts are primarily written on
a modified coinsurance basis where the related financial assets remain invested
at the Company. The closed block reinsurance agreement is a financial
reinsurance agreement and does not meet the risk transfer definition for U.S.
GAAP reporting purposes. The agreement is accounted for under deposit accounting
with only the reinsurance risk fee being reported on the U.S. GAAP income
statement. The U.S. GAAP financial statements do not report reinsurance ceded
premiums or reinsurance recoverable. The impact on our U.S. GAAP financial
statements present the fee recorded as payable to Manulife, which appears in
other operating costs and expenses in the Consolidated Statements of Income and
was $0.6 million for the period the Company operated as a subsidiary of
Manulife, April 29, 2004 through September 30, 2004.

The acquisition of the Company's shares by Manulife was effected through the
merger of the Company with Jupiter Merger Corporation (Jupiter), a subsidiary of
Manulife, which was organized solely for the purpose of effecting the merger
with the Company. Prior to the merger, Jupiter had a note payable to MLI
Resources, Inc., an affiliated Manulife entity, in the amount of $260.7 million
in consideration for previously purchased shares of the Company, which were
cancelled upon merger. Subsequent to the merger, the Company included in other
liabilities a $260.7 million promissory note payable to a subsidiary of
Manulife, which matures February 10, 2007, and bears interest at a rate of 0.25%
over the 90-day Canadian Bankers Acceptance Rate, and is payable quarterly. The
Company paid $3.4 million to Manulife under the terms of the promissory note
during the three month ended September 30, 2004. The $3.4 million payment
represents the May 2004 and August 2004 payments due under the promissory note.


                                       30
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 8 -- Related Party Transactions - (Continued)

Manulife, the Company's parent, has a liquidity pool in which a subsidiary of
the Company has invested its excess cash. The resulting economies of scale allow
Manulife to earn a spread over the amount it pays the subsidiary and the
subsidiary to earn improved returns on its excess cash. The subsidiary's
participation in the liquidity pool is evidenced by a demand promissory note
issued by Manulife, bearing interest at the one-month Canadian Bankers
Acceptance rate and maturing December 31, 2014. At September 30, 2004 the
balance outstanding was $189.1 million and is included in other assets on the
Company's Consolidated Balance Sheets. No such arrangement existed at December
31, 2003.

Amalgamation of Maritime Life into Manulife subsidiaries

In an effort to achieve operating efficiencies from the merger with JHFS, on
September 10, 2004, Manulife announced its intention to combine the Canadian
operations of MFC Insurance Company Limited, (MFC Insurance), a division of the
Company's parent Manulife, and Maritime Life Assurance Company (Maritime Life),
a subsidiary of JHFS. To effect the combination of the two organizations all of
the assets and liabilities of Maritime Life are to be transferred from JHFS to
MFC Insurance and Manulife intends to redeem or exchange all outstanding
Maritime Life preferred stock which includes Series A Cumulative Redeemable
Preferred Stock, Series 1 Non-Cumulative Redeemable Second Preferred Shares, and
Series 3 Non-Cumulative Redeemable Second Preferred Shares.

During the three months ended September 30, 2004, Maritime Life transferred
certain business to MFC Insurance, a division of the Company's parent. Effective
July 1, 2004, Maritime Life transferred $11.2 million in loans to non-employee
sales agents of Maritime Life for a cash payment of $8.5 million. In addition,
in July 2004 Maritime Life began an orderly transfer of its group pension
business to Manulife. In July 2004 Manulife became the pension record keeper for
a total of approximately $212.9 million of Maritime Life investment only group
pension business. As of September 30, 2004, approximately $206.2 million
continues to be reported as the assets/liabilities of Maritime Life, as such the
related earnings appear in its financial statements while approximately $6.7
million was transferred to Manulife. The $6.7 million transferred to Manulife is
comprised of $4.0 million of on-book GIC pension business and $2.7 million of
segregated funds business (where the holdings in Maritime funds have been
liquidated and either invested in an identical or similar fund already existing
in the Manulife fund platform).

Subsequent to September 30, 2004, Maritime Life continued its orderly transfer
of its group pension business to Manulife. In October 2004, approximately an
additional $63.3 million of business was transferred to Manulife. The $63.3
million transferred to Manulife in October 2004 is comprised of $40.3 million of
on-book GIC pension business and $23.0 million of segregated funds business. The
October 2004 transfers left approximately $142.9 million which continues to be
reported as the assets/liabilities of Maritime Life, as such the related
earnings appear in its financial statements.

Manulife plans to redeem all outstanding Maritime Series 1 Non-Cumulative
Redeemable Second Preferred Shares by December 31, 2004. On October 15, 2004,
all of the outstanding Maritime Life First Preferred Shares, Series A were
redeemed at their par value of CAD$25.00 per share.

On October 20, 2004, The Manufacturers Life Insurance Company's ("Manufacturers
Life") completed an offer with holders of Maritime Life's Second Preferred
Shares, Series 3 ("Series 3 Shares"), to exchange each Series 3 Share for one
Manufacturers Life Class A, Series 6 Preferred Share ("Series 6 Share"). Holders
of Series 3 Shares tendered 86% of shares outstanding for exchange of Series 6
Shares, which have the same economic terms as those of the Series 3 Shares.

For those Series 3 Shares not exchanged, Maritime Life's Board of Directors had
approved a by-law providing for the consolidation of the Series 3 Shares on the
basis of one consolidated Series 3 Share for each 1,000,000 existing Series 3
Shares. Manufacturers Life intends to vote all of the Series 3 Shares that it
acquired pursuant to the exchange offer in favor of the consolidation by-law,
which is pending approval of both Maritime Life's policyholders and preferred
shareholders on November 24, 2004. As a result of the consolidation and in
accordance with the by-law, holders of Series 3 Shares at the time of
consolidation will receive a cash payment for each of their Series 3 Shares
equal to CAD$26.82 plus accrued and unpaid dividends to the date immediately
prior to the consolidation.

Amalgamation of International Operations into Manulife subsidiaries

Effective September 30, 2004, a subsidiary holding company of JHFS, John Hancock
International Holdings (JHIH), sold an investment in a subsidiary, John Hancock
Life Assurance Corporation of Singapore (JHLAC), to a related party, Manulife
(Singapore) Pte Ltd.(Man/Singapore), for $35.0 million. Separately, JHIH paid a
dividend of $20.0 million to JHFS.


                                       31
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 9 -- Goodwill and Other Intangible Assets

The Company recognized several intangible assets which resulted from business
combinations including Manulife's acquisition of the Company, (see Note 1 -
Change of Control for additional discussion of the Manulife acquisition).

Unamortizable assets include goodwill, brand name and investment management
contracts. Goodwill is the excess of the cost to Manulife over the fair value of
the Company's identifiable assets acquired by Manulife in the recent merger in
business combinations. Brand name is the fair value of the Company's trademark
and trade name. Investment management contracts are the fair values of the
investment management relationships between the Company and each of the mutual
funds managed by the Company.

Amortizable assets include value of business acquired (VOBA), distribution
networks and other investment management contracts. VOBA is the present value of
estimated future profits of insurance policies in force related to businesses
acquired. VOBA has weighted average lives ranging from 6 to 17 years for various
insurance businesses. Distribution networks are values assigned to the Company's
networks of sales agents and producers responsible for procuring business.
Distribution networks have weighted average lives of 21 years. Other investment
management contracts are the values assigned to the Company's institutional
investment management contracts managed by its investment management
subsidiaries, and individual and group benefit contracts managed by its Canadian
subsidiary. Other investment management contracts have weighted average lives of
9 years. Collectively, these amortizable intangible assets have a weighted
average life of 14.7 years.

Brand name, distribution networks, and other investment management contracts
were initially recognized at the time of the acquisition of the Company by
Manulife. Goodwill, investment management contracts and VOBA were expanded in
scope and size as a result of the merger.

The Company will test unamortizable intangible assets for impairment on an
annual basis, and also in response to any events which both suggest that these
assets may be impaired (triggering events). Amortizable intangible assets will
be tested only in response to triggering events. The Company will test goodwill
using the two-step impairment testing program set forth in SFAS No. 142
"Goodwill and Other Intangible Assets." VOBA and the Company's other intangible
assets will be evaluated by comparing their fair values to their current
carrying values whenever they are tested. Impairments will be recorded whenever
an asset's fair value is deemed to be less than its carrying value.


                                       32
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 9 -- Goodwill and Other Intangible Assets - (continued)

The following tables contain summarized financial information for each of these
intangible assets as of the dates and periods indicated.

<TABLE>
<CAPTION>
                                                                                               Accumulated
                                                                                   Gross      Amortization        Net
                                                                                 Carrying       And Other       Carrying
                                                                                  Amount         Changes         Amount
                                                                              -----------------------------------------------
                                                                                              (in millions)
<S>                                                                              <C>               <C>         <C>
September 30, 2004
Unamortizable intangible assets:
         Goodwill.........................................................       $4,417.2              --      $4,417.2
         Brand name.......................................................          600.0              --         600.0
         Investment management contracts..................................          292.9              --         292.9
Amortizable intangible assets:
         Distribution networks............................................          457.1          $  3.5          460.6
         Other investment management contracts............................          138.9             2.0          140.9
         VOBA.............................................................        3,886.0           (71.9)       3,814.1
December 31, 2003
Unamortizable intangible assets:
          Goodwill........................................................       $  424.5          $(79.5)      $  345.0
          Mutual fund investment management contracts.....................           13.3            (7.0)           6.3
Amortizable intangible assets:
          VOBA............................................................          585.1           (34.6)         550.5
</TABLE>


                                       33
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 9 -- Goodwill and Other Intangible Assets - (Continued)

<TABLE>
<CAPTION>
                                                                                        Three Months          Three Months
                                                                                            Ended                Ended
                                                                                     September 30, 2004    September 30, 2003
                                                                                     ----------------------------------------
                                                                                                  (in millions)
<S>                                                                                         <C>                 <C>
Amortization expense:
Distribution networks, net of tax of $0.3 million and $- million, respectively ..           $  0.6                 --
Other investment management contracts, net of tax of $0.9 million and $-
   million, respectively ........................................................              1.8                 --
VOBA, net of tax of $17.9 million and $0.4 million, respectively.................             33.1              $ 0.7
                                                                                       ---------------------------------------
Total amortization expense, net of tax of $19.1 million and $0.4 million,
   respectively .................................................................           $ 35.5              $ 0.7
                                                                                       =======================================
</TABLE>

<TABLE>
<CAPTION>
                                                                             Period from       Period from
                                                                           April 29, 2004    January 1, 2004     Nine Months
                                                                               through           through            Ended
                                                                         September 30, 2004  April 28, 2004   September 30, 2003
                                                                         ---------------------------------------------------------
                                                                                              (in millions)
<S>                                                                            <C>                <C>               <C>
Amortization expense:
Distribution networks, net of tax of $0.5 million, $ - million
and $- million, respectively..........................................          $ 1.0                --                --
Other investment management contracts, net of tax of $1.5
million, $ - million and $ - million, respectively....................            2.9                --                --
VOBA, net of tax of $31.4 million, $3.1 million and $0.9
million, respectively.................................................           58.2             $ 5.7             $ 1.7
                                                                         ---------------------------------------------------------
Total amortization expense, net of tax of $33.4 million, $3.1
million and $0.9 million, respectively................................         $ 62.1             $ 5.7             $ 1.7
                                                                         =========================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                             Tax Effect     Net Expense
                                                                                             ----------     -----------
                                                                                                    (in millions)
<S>                                                                                           <C>            <C>
Estimated future amortization expense for the years ended December 31,
      2004..................................................................................  $ 23.6         $ 43.8
      2005..................................................................................    79.1          146.9
      2006..................................................................................    71.7          133.1
      2007..................................................................................    64.5          119.8
      2008..................................................................................    57.9          107.5
</TABLE>


                                       34
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 9 -- Goodwill and Other Intangible Assets - (Continued)

The following tables present the continuity of each of the Company's
unamortizable and amortizable intangible assets for the periods presented.

Unamortizable intangible assets:

<TABLE>
<CAPTION>
                                                                                         Corporate
                                                      Wealth                                and
                                      Protection    Management     G&SFP      Canada       Other     Consolidated
                                      ----------    ----------     -----      ------       -----     ------------
                                                                     (in millions)
<S>                                    <C>          <C>             <C>      <C>          <C>          <C>
Goodwill:
---------

Balance at January 1, 2004 ........    $   66.1     $   42.1           --    $  236.4     $    0.4     $  345.0
Foreign currency translation
   adjustment (1) .................          --           --           --       (13.0)          --        (13.0)
Goodwill derecognized (2) .........       (66.1)       (42.1)          --      (223.4)        (0.4)      (332.0)
Goodwill recognized (3) ...........     1,842.3      1,040.0           --     1,318.9        216.0      4,417.2
                                      -------------------------------------------------------------------------
Balance at September 30, 2004 .....    $1,842.3     $1,040.0           --    $1,318.9     $  216.0     $4,417.2
                                      =========================================================================
</TABLE>

(1)   Goodwill in the Canadian segment is subject to fluctuations in the value
      of the Canadian Dollar relative to the US Dollar.
(2)   Goodwill derecognized in the purchase transaction with Manulife.
(3)   Goodwill recognized in the purchase transaction with Manulife.

<TABLE>
<CAPTION>
                                                                                         Corporate
                                                      Wealth                                and
                                      Protection    Management     G&SFP      Canada       Other     Consolidated
                                      ----------    ----------     -----      ------       -----     ------------
                                                                     (in millions)
<S>                                    <C>          <C>             <C>      <C>          <C>          <C>
Goodwill:
---------
Balance at January 1, 2003 ........    $   66.1     $   42.1           --    $  146.0     $    0.4     $  254.6
Acquisitions(1) ...................          --           --           --        57.1           --         57.1
Foreign currency translation
   adjustment(2) ..................          --           --           --        33.3           --         33.3
                                      -------------------------------------------------------------------------
Balance at December 31, 2003 ......    $   66.1     $   42.1           --    $  236.4     $    0.4     $  345.0
                                      =========================================================================
</TABLE>

(1)   Goodwill recognized in the Canadian segment's acquisition of Liberty
      Health.
(2)   Goodwill in the Canadian segment was subject to fluctuations in the value
      of the Canadian Dollar relative to the US Dollar.


                                       35
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 9 -- Goodwill and Other Intangible Assets - (Continued)

Unamortizable intangible assets (continued):

<TABLE>
<CAPTION>
                                                                                         Corporate
                                                      Wealth                                and
                                      Protection    Management     G&SFP      Canada       Other     Consolidated
                                      ----------    ----------     -----      ------       -----     ------------
                                                                     (in millions)
<S>                                    <C>          <C>             <C>      <C>          <C>          <C>
Brand name:
-----------
Balance at January 1, 2004 ........          --           --           --          --           --           --
Brand name recognized (1) .........    $  364.4     $  209.0           --          --     $   26.6     $  600.0
                                      -------------------------------------------------------------------------
Balance at September 30, 2004 .....    $  364.4     $  209.0           --          --     $   26.6     $  600.0
                                      =========================================================================
</TABLE>

(1)   Brand name recognized in the purchase transaction with Manulife.

<TABLE>
<CAPTION>
                                                                                         Corporate
                                                      Wealth                                and
                                      Protection    Management     G&SFP      Canada       Other     Consolidated
                                      ----------    ----------     -----      ------       -----     ------------
                                                                     (in millions)
<S>                                    <C>          <C>             <C>      <C>          <C>          <C>
Investment management contracts:
--------------------------------
Balance at January 1, 2004 ........          --     $    6.3           --          --           --     $    6.3
Investment management
  contracts derecognized (1) ......          --         (6.3)          --          --           --         (6.3)
Investment management
  contracts recognized (2) ........          --        292.9           --          --           --        292.9
                                     --------------------------------------------------------------------------
Balance at September 30, 2004 .....          --     $  292.9           --          --           --     $  292.9
                                     ==========================================================================
</TABLE>

(1)   Investment management contracts derecognized in the purchase transaction
      with Manulife.
(2)   Investment management contracts recognized in the purchase transaction
      with Manulife.


                                       36
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 9 -- Goodwill and Other Intangible Assets - (Continued)

Unamortizable intangible assets (continued):

<TABLE>
<CAPTION>
                                                                                         Corporate
                                                      Wealth                                and
                                      Protection    Management     G&SFP      Canada       Other     Consolidated
                                      ----------    ----------     -----      ------       -----     ------------
                                                                     (in millions)
<S>                                    <C>          <C>             <C>      <C>          <C>          <C>
Investment management contracts:
--------------------------------
Balance at January 1, 2003 ........          --     $    5.2           --          --           --     $    5.2
Acquisitions(1) ...................          --          1.1           --          --           --          1.1
                                       ------------------------------------------------------------------------
Balance at December 31, 2003 ......          --     $    6.3           --          --           --     $    6.3
                                       ========================================================================
</TABLE>

(1)   This increase results from JH Fund's purchases of the mutual fund
      investment management contracts for the US Global Leaders Fund, Classic
      Value Fund, and Large Cap Select Fund in 2003.

Amortizable intangible assets:

<TABLE>
<CAPTION>
                                                                                          Corporate
                                                      Wealth                                and
                                      Protection    Management     G&SFP      Canada       Other     Consolidated
                                      ----------    ----------     -----      ------       -----     ------------
                                                                     (in millions)
<S>                                    <C>          <C>             <C>      <C>          <C>          <C>
Distribution networks:
----------------------
Balance at January 1, 2004 ........          --           --           --          --           --           --
Distribution networks
  recognized (1) ..................    $  308.6     $   88.6           --    $   59.9           --     $  457.1
Amortization ......................        (0.5)          --           --        (1.0)          --         (1.5)
Foreign currency translation
  adjustment ......................          --           --           --         5.0           --          5.0
                                     --------------------------------------------------------------------------
Balance at September 30, 2004 .....    $  308.1     $   88.6           --    $   63.9           --     $  460.6
                                     ==========================================================================
</TABLE>

(1)   Distribution networks recognized in the purchase transaction with
      Manulife.

<TABLE>
<CAPTION>
                                                                                              Corporate
                                                            Wealth                                and
                                            Protection    Management     G&SFP      Canada       Other     Consolidated
                                            ----------    ----------     -----      ------       -----     ------------
                                                                           (in millions)
<S>                                          <C>          <C>             <C>      <C>          <C>          <C>
Other investment management contracts:
--------------------------------------
Balance at January 1, 2004 ...............          --          --           --          --           --           --
Other investment management contracts
  recognized (1) .........................          --    $   20.3           --    $   77.2     $   41.4     $  138.9
Amortization .............................          --        (0.5)          --        (2.7)        (1.2)        (4.4)
Foreign currency translation
  adjustment .............................          --          --           --         6.4           --          6.4
                                           --------------------------------------------------------------------------
Balance at September 30, 2004 ............          --    $   19.8           --    $   80.9     $   40.2     $  140.9
                                           ==========================================================================
</TABLE>

(1)   Other investment management contracts recognized in the purchase
      transaction with Manulife.


                                       37
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 9 -- Goodwill and Other Intangible Assets - (Continued)

Amortizable intangible assets (continued):

<TABLE>
<CAPTION>
                                                                                         Corporate
                                                      Wealth                                and
                                      Protection    Management     G&SFP      Canada       Other     Consolidated
                                      ----------    ----------     -----      ------       -----     ------------
                                                                     (in millions)
<S>                                    <C>          <C>             <C>      <C>          <C>          <C>
VOBA:
-----
Balance at January 1, 2004 ........    $  232.8           --           --    $  317.7           --     $  550.5
Amortization ......................        (6.2)          --           --        (2.6)          --         (8.8)
Adjustment to unrealized gains on
  securities available for sale ...         5.5           --           --         4.8           --         10.3
Foreign currency translation
  adjustment (1) ..................          --           --           --       (15.6)          --        (15.6)
Other adjustments(2)(3) ...........        (1.4)          --           --       (60.7)          --        (62.1)
                                     --------------------------------------------------------------------------
Balance at April 28, 2004 .........    $  230.7           --           --    $  243.6           --     $  474.3
                                     ==========================================================================
</TABLE>

(1)   VOBA in the Canadian segment is subject to fluctuations in the value of
      the Canadian Dollar relative to the US Dollar.
(2)   VOBA related to the acquisition of the fixed universal life insurance
      business of Allmerica was adjusted to reflect adjustments to the purchase
      price accounting for the acquisition of that block of business.
(3)   VOBA in the Canadian segment was reduced as a result of the adoption of
      AICPA SOP 03-1.

<TABLE>
<CAPTION>
                                                                                         Corporate
                                                      Wealth                                and
                                      Protection    Management     G&SFP      Canada       Other     Consolidated
                                      ----------    ----------     -----      ------       -----     ------------
                                                                     (in millions)
<S>                                    <C>          <C>          <C>         <C>          <C>          <C>
VOBA:
-----
Balance at April 29, 2004 .........    $  230.7           --           --    $  243.6           --     $  474.3
VOBA derecognized (1) .............      (230.7)          --           --      (243.6)          --       (474.3)
VOBA recognized (2) ...............     2,402.2     $  474.9     $  247.8       756.3     $    4.8      3,886.0
Amortization ......................       (23.9)       (27.3)       (23.7)      (14.5)        (0.2)       (89.6)
Adjustment to unrealized gains on
  securities available for sale ...       (20.3)       (21.2)          --          --           --        (41.5)
Foreign currency translation
  adjustment (3) ..................          --           --           --        63.8           --         63.8
Other adjustments (4) .............          --           --           --          --         (4.6)        (4.6)
                                    ---------------------------------------------------------------------------
Balance at September 30, 2004 .....    $2,358.0     $  426.4     $  224.1    $  805.6           --     $3,814.1
                                    ===========================================================================
</TABLE>

(1)   VOBA derecognized in the purchase transaction with Manulife.
(2)   VOBA recognized in the purchase transaction with Manulife.
(3)   VOBA in the Canadian segment is subject to fluctuations in the value of
      the Canadian Dollar relative to the US Dollar.
(4)   JHFS' Singapore insurance operations (JHLAC) were acquired from
      JHFS by Man/Singapore on September 30, 2004.


                                       38
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 9 -- Goodwill and Other Intangible Assets - (Continued)

Amortizable intangible assets (continued):

<TABLE>
<CAPTION>
                                                                                         Corporate
                                                      Wealth                                and
                                      Protection    Management     G&SFP      Canada       Other     Consolidated
                                      ----------    ----------     -----      ------       -----     ------------
                                                                     (in millions)
<S>                                    <C>          <C>          <C>         <C>          <C>          <C>
VOBA:
-----
Balance at January 1, 2003 ........    $  244.1           --           --    $  237.6           --     $  481.7
Amortization ......................       (12.7)          --           --         8.3           --         (4.4)
Acquisitions (1) ..................          --           --           --        25.4           --         25.4
Adjustment to unrealized gains on
  securities available for sale ...        (2.8)          --           --        (9.3)          --        (12.1)
Foreign currency translation
  adjustment (2) ..................          --           --           --        55.7           --         55.7
Other adjustments(3) ..............         4.2           --           --          --           --          4.2
                                       ------------------------------------------------------------------------
Balance at December 31, 2003 ......    $  232.8           --           --    $  317.7           --     $  550.5
                                       ========================================================================
</TABLE>

(1)   VOBA recognized in the Canadian segment's acquisition of Liberty Health.
(2)   VOBA in the Canadian segment is subject to fluctuations in the value of
      the Canadian Dollar relative to the US Dollar.
(3)   An adjustment of $4.2 million was made to previously recorded VOBA
      relating to the acquisition of the fixed universal life insurance business
      of Allmerica, to reflect refinements in methods and assumptions
      implemented upon finalization of transition.


                                       39
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 10 -- Pension and Other Postretirement Benefit Plans

The Company maintains a number of pension and benefit plans for its eligible
employees and agents. The following table demonstrates the components of the
Company's net periodic benefit cost for the periods indicated. Through September
30, 2004, there is no significant difference to the pre-merger and post-merger
net periodic pension cost values so the following information is presented
without such distinction:

Net Periodic Benefit Cost

<TABLE>
<CAPTION>
                                            Three Months Ended September 30,             Nine Months Ended September 30,
                                         2004      2003       2004       2003         2004      2003       2004       2003
                                       ----------------------------------------------------------------------------------------
                                                             Other Postretirement                         Other Postretirement
                                        Pension Benefits           Benefits          Pension Benefits           Benefits
                                       ----------------------------------------------------------------------------------------
                                                                             (in millions)

<S>                                     <C>       <C>         <C>       <C>         <C>       <C>         <C>        <C>
Service cost ........................   $ 6.2     $ 7.3       $0.4      $0.4        $ 18.8    $ 21.9      $ 1.1      $ 1.2
Interest cost .......................    33.5      34.2        9.3       8.9         101.1     102.6       27.4       26.8
Expected return on plan assets ......   (45.0)    (40.7)      (5.2)     (4.4)       (136.1)   (122.2)     (15.7)     (13.1)
Amortization of transition asset ....      --      (0.3)        --        --          (0.2)     (0.8)        --         --
Amortization of prior service cost ..      --       1.9         --      (1.6)          2.2       5.7       (2.5)      (4.9)
Recognized actuarial gain ...........      --       7.9         --       1.7           9.0      23.6        4.2        5.0
Other ...............................      --       0.1         --        --            --       0.4         --         --
                                       ----------------------------------------------------------------------------------------
       Net periodic benefit cost ....   $(5.3)    $10.4       $4.5      $5.0        $ (5.2)   $ 31.2      $14.5      $15.0
                                       ========================================================================================
</TABLE>

Employer Contributions

The Company previously disclosed in its financial statements for the year ended
December 31, 2003, that it expected to contribute approximately $2 million to
its US qualified pension plan in 2004 and approximately $43 million to its US
non-qualified pension plans in 2004. As of September 30, 2004, $2.4 million of
contributions have been made to the US qualified plans, reaching the Company's
anticipated contribution level for the year ending December 31, 2004. As of
September 30, 2004, $35.9 million of the contributions have been made to the US
non-qualified plans, and the Company anticipates contributing another $7.1
million to reach a total of $43.0 million for the year ended December 31, 2004.

The Company's funding policy for its non-US qualified pension plans is to
contribute an amount at least equal to the minimum annual contribution required
under Canadian law. The funding policy for its non-qualified pension plans is to
contribute the amount of the benefit payments made during the year. As of
September 30, 2004, $1.6 million was contributed to non-US qualified pension
plans and $1.9 million was contributed to non-US non-qualified pension plans.

The Company's policy is to fund its US other postretirement benefits in amounts
at or below the annual tax qualified limits. As of September 30, 2004, $38.3
million was contributed to its US other post retirement benefit plans. The
Company expects to contribute approximately $50 million to its US other post
retirement benefit plans in 2004.

On December 8, 2003, President Bush signed into law a bill that expands
Medicare, primarily by adding a prescription drug benefit for Medicare-eligible
retirees starting in 2006. The Medicare Prescription Drug Improvement and
Modernization Act of 2003 (the Act) provides for special tax-free subsidies to
employers that offer plans with qualifying drug coverage beginning in 2006.
There are two broad groups of retirees receiving employer-subsidized
prescription drug benefits at the Company. The first group, those who retired
prior to January 1, 1992, receives a subsidy of between 90% and 100% of total
cost. Since this subsidy level will clearly meet the criteria for qualifying
drug coverage, the Company anticipates that the benefits it pays after 2005 for
pre-1992 retirees will be lower as a result of the new Medicare provisions. In
accordance with Financial Accounting Standards Board Staff Position FAS 106-2
(FSP FAS 106-2), the Company reflected a reduction in the accumulated plan
benefit obligation for this group of $40.9 million as of the purchase accounting
remeasurement (April 28, 2004) and reduced net periodic postretirement benefit
costs by $1.0 million for the period from April 29 through


                                       40
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 10 -- Pension and Other Postretirement Benefit Plans - (Continued)

September 30, 2004. With respect to the second group, those who retired on or
after January 1, 1992, the employer subsidy on prescription drug benefits is
capped. Since final authoritative accounting guidance has not yet been issued on
determining whether a benefit meets the actuarial criteria for qualifying drug
coverage, the Company has deferred recognition as permitted by FSP FAS 106-2 for
this group. The final accounting guidance could require changes to previously
reported information.

Note 11 -- 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 United States 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 September 30, 2004, 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 the 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 John Hancock Life Insurance Company (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,
or dividend payments to its parent, Manulife, see Note 1- Change in Control. 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 to its parent, 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 its 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.

Canadian insurance laws generally restrict the ability of Canadian insurance
companies to pay cash dividends in excess of prescribed limitations without
prior approval. Maritime Life, our Canadian life insurance subsidiary, is
subject to restrictions on dividend payments to its holding company, John
Hancock Canadian Holdings, Limited, by Canadian regulators. Maritime Life may
not make dividend payments which would make its minimum continuing capital and
surplus ratio fall below 150%, as required by the Office of the Superintendent
of Financial Institutions. Maritime Life's minimum continuing capital and
surplus ratio is measured annually, and was 184% as of December 31, 2003.


                                       41
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- 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
September  30, 2004                   (Guarantor)      (Issuer)      Subsidiaries    Eliminations   Services, Inc.
---------------------------------------------------------------------------------------------------------------------
                                                                     (in millions)

<S>                                    <C>            <C>             <C>            <C>               <C>
Assets:
  Invested assets ..................   $    18.6      $ 5,233.5       $ 69,551.8     $    543.7        $ 75,347.6
  Cash and cash equivalents ........        (4.5)          71.7          1,423.2            7.2           1,497.6
  Investment in unconsolidated
    subsidiaries ...................    12,302.1          133.6               --      (12,435.7)               --
  Other assets .....................       110.5        2,171.8         14,086.2          (81.5)         16,287.0
  Separate account assets ..........          --        6,835.9         16,138.9             --          22,974.8
                                     ----------------------------------------------------------------------------
Total Assets .......................    12,426.7       14,446.5        101,200.1      (11,966.3)        116,107.0
                                     ============================================================================

Liabilities:
  Insurance liabilities and
     consumer notes ................          --        5,206.9         70,638.7          429.0          76,274.6
  Debt .............................     1,203.9             --          1,076.7          (95.0)          2,185.6
  Other liabilities ................       179.2          411.2          2,875.8            1.8           3,468.0
  Separate account liabilities .....          --        6,835.9         16,138.9             --          22,974.8
                                     ----------------------------------------------------------------------------
Total Liabilities ..................     1,383.1       12,454.0         90,730.1          335.8         104,903.0

Preferred shareholders's equity
   in subsidiary companies .........          --             --            160.4             --             160.4
Shareholder's equity (1) ...........    11,043.6        1,992.5         10,309.6      (12,302.1)         11,043.6
                                     ----------------------------------------------------------------------------
Total Liabilities, Preferred
Shareholder's Equity in
Subsidiary Companies and
Shareholder's Equity (1) ...........   $12,426.7      $14,446.5       $101,200.1     $(11,966.3)       $116,107.0
                                     ============================================================================
</TABLE>

(1)   Shareholder's equity includes preferred stock at $0.01 par value per
      share, 1 share authorized, issued and outstanding at September 30, 2004
      and common stock of JHFS at $.01 par value per share, 1,000 shares and 2.0
      billion shares authorized, 1,000 and 319.8 million shares issued as of
      September 30, 2004 and December 31, 2003, respectively, and JHFS treasury
      stock at cost $1,069.0 million, or 30.0 million shares, at December 31,
      2003. JHFS had no treasury stock at September 30, 2004.


                                       42
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- 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, 2003                     (Guarantor)      (Issuer)      Subsidiaries    Eliminations   Services, Inc.
--------------------------------------------------------------------------------------------------------------------
                                                                     (in millions)
<S>                                    <C>            <C>              <C>            <C>               <C>

Assets:
  Invested assets ..................   $      5.0     $  4,810.2       $ 67,704.9     $    533.0        $ 73,053.1
  Cash and cash equivalents ........         17.6           49.4          3,036.3           18.3           3,121.6
  Investment in unconsolidated
    subsidiaries ...................      9,045.1          124.6               --       (9,169.7)               --
  Other assets .....................        161.5        1,581.7          9,875.6         (209.2)         11,409.6
  Separate account assets ..........           --        6,881.9         17,240.0             --          24,121.9
                                    ------------------------------------------------------------------------------
Total Assets .......................   $  9,229.2     $ 13,447.8       $ 97,856.8     $ (8,827.6)       $111,706.2
                                    ==============================================================================
Liabilities:
  Insurance liabilities and
    consumer notes .................           --     $  4,715.0       $ 66,822.2     $    438.1        $ 71,975.3
  Debt .............................   $    975.3             --          1,015.0          (95.0)          1,895.3
  Other liabilities ................         38.2          598.1          4,826.9         (125.6)          5,337.6
  Separate account liabilities .....           --        6,881.9         17,240.0             --          24,121.9
                                    ------------------------------------------------------------------------------
Total Liabilities ..................      1,013.5       12,195.0         89,904.1          217.5         103,330.1

Preferred shareholders' equity
  in subsidiary companies ..........           --             --            160.4             --             160.4
Shareholders' equity (1) ...........      8,215.7        1,252.8          7,792.3       (9,045.1)          8,215.7
                                    ------------------------------------------------------------------------------
Total Liabilities, Preferred
Shareholders' Equity in
Subsidiary Companies and
Shareholders' Equity (1) ...........   $  9,229.2     $ 13,447.8       $ 97,856.8     $ (8,827.6)       $111,706.2
                                    ==============================================================================
</TABLE>

(1)   Shareholder's equity includes preferred stock at $0.01 par value per
      share, 1 share authorized, issued and outstanding at September 30, 2004
      and common stock of JHFS at $.01 par value per share, 1,000 shares and 2.0
      billion shares authorized, 1,000 and 319.8 million shares issued as of
      September 30, 2004 and December 31, 2003, respectively, and JHFS treasury
      stock at cost $1,069.0 million, or 30.0 million shares, at December 31,
      2003. JHFS had no treasury stock at September 30, 2004.


                                       43
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- 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
September 30, 2004                      (Guarantor)      (Issuer)      Subsidiaries    Eliminations   Services, Inc.
---------------------------------------------------------------------------------------------------------------------
                                                                      (in millions)

<S>                                    <C>            <C>              <C>             <C>              <C>
Revenues
  Premiums .........................           --     $     14.7       $  1,101.8      $     0.2        $  1,116.7
  Universal life and investment-
    type product fees ..............           --           91.3            136.3            0.2             227.8
  Net investment income ............   $      0.3           56.7            888.5            6.7             952.2
  Net realized investment and
    other gains (losses) ...........           --           (9.7)           (42.2)          (1.2)            (53.1)
  Investment management
    revenues, commissions
    and other fees .................           --             --            143.8             --             143.8
  Other revenue ....................           --             --             62.9             --              62.9
                                    ------------------------------------------------------------------------------
Total revenues .....................          0.3          153.0          2,291.1            5.9           2,450.3

Benefits and expenses
  Benefits to policyholders ........           --           65.1          1,429.0            5.1           1,499.2
  Other operating costs and
    expenses .......................         13.7           25.3            399.7           (0.3)            438.4
  Amortization of deferred policy
    acquisition costs and value
    of business acquired............           --           14.8             54.8            0.4              70.0
  Dividends to policyholders .......           --            4.9            121.1             --             126.0
                                    ------------------------------------------------------------------------------
Total benefits and expenses ........         13.7          110.1          2,004.6            5.2           2,133.6

  Income (loss) before income
    taxes ..........................        (13.4)          42.9            286.5            0.7             316.7
  Income taxes .....................         (3.9)          15.3            137.9            0.1             149.4
                                    ------------------------------------------------------------------------------
  Net income (loss) after
    income taxes ...................         (9.5)          27.6            148.6            0.6             167.3

  Equity in the net income of
    unconsolidated subsidiaries ....        176.8            0.6               --         (177.4)               --
                                    ------------------------------------------------------------------------------

Net income .........................   $    167.3     $     28.2       $    148.6      $  (176.8)       $    167.3
                                    ==============================================================================
</TABLE>


                                       44
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- 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
September 30, 2003                    (Guarantor)      (Issuer)      Subsidiaries    Eliminations   Services, Inc.
--------------------------------------------------------------------------------------------------------------------
                                                                     (in millions)

<S>                                    <C>            <C>              <C>            <C>               <C>
Revenues
  Premiums .........................           --     $     14.6       $  1,019.4     $      0.3        $  1,034.3
  Universal life and investment-
    type product fees ..............           --           86.4            123.0            0.1             209.5
  Net investment income ............           --           71.0            959.1            8.4           1,038.5
  Net realized investment and
    other gains (losses) ...........           --          (10.5)           (40.6)          (7.2)            (58.3)
  Investment management
    revenues, commissions and
    other fees .....................           --             --            138.9             --             138.9
  Other revenue ....................           --            0.1             67.2           (0.1)             67.2
                                    ------------------------------------------------------------------------------
Total revenues .....................           --          161.6          2,267.0            1.5           2,430.1

Benefits and expenses
  Benefits to policyholders ........           --           86.8          1,430.9            5.2           1,522.9
  Other operating costs and
    expenses .......................   $     (1.1)          21.1            416.5            0.5             437.0
  Amortization of deferred policy
    acquisition costs and value
    of business acquired ...........           --            2.8             64.2             --              67.0
  Dividends to policyholders .......           --            4.3            156.6            0.1             161.0
                                    ------------------------------------------------------------------------------
Total benefits and expenses ........         (1.1)         115.0          2,068.2            5.8           2,187.9

  Income before income taxes .......          1.1           46.6            198.8           (4.3)            242.2
  Income taxes .....................         (1.3)          15.7             38.7           (1.7)             51.4
                                    ------------------------------------------------------------------------------
    Net income (loss) after
      income taxes .................          2.4           30.9            160.1           (2.6)            190.8

  Equity in the net income of
    unconsolidated subsidiaries ....        188.4           (2.6)              --         (185.8)               --
                                    ------------------------------------------------------------------------------

Net income .........................   $    190.8     $     28.3       $    160.1     $   (188.4)       $    190.8
                                    ==============================================================================
</TABLE>


                                       45
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- 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 Period From April 29, 2004       Services        Company         Other                         Financial
Through September 30, 2004             (Guarantor)      (Issuer)      Subsidiaries    Eliminations   Services, Inc.
---------------------------------------------------------------------------------------------------------------------
                                                                      (in millions)

<S>                                    <C>            <C>              <C>            <C>               <C>
Revenues
  Premiums .........................           --     $     27.9       $  1,815.7     $      0.5        $  1,844.1
  Universal life and investment-
    type product fees ..............           --          150.5            236.4            0.4             387.3
  Net investment income ............   $      0.2          101.9          1,483.8           11.1           1,597.0
  Net realized investment and
    other gains (losses) ...........           --           (8.7)           (56.4)          (2.1)            (67.2)
  Investment management
    revenues, commissions and
    other fees .....................           --             --            236.3             --             236.3
  Other revenue ....................           --             --            102.1             --             102.1
                                    ------------------------------------------------------------------------------
Total revenues .....................          0.2          271.6          3,817.9            9.9           4,099.6

Benefits and expenses
  Benefits to policyholders ........           --          117.6          2,360.2            8.4           2,486.2
  Other operating costs and
    expenses .......................         29.8           47.7            644.5           (0.1)            721.9
  Amortization of deferred policy
    acquisition costs and value
    of business acquired ...........           --           15.0            110.5            0.5             126.0
  Dividends to policyholders .......           --            7.8            205.2             --             213.0
                                    ------------------------------------------------------------------------------
Total benefits and expenses ........         29.8          188.1          3,320.4            8.8           3,547.1

  Income (loss) before income
    taxes ..........................        (29.6)          83.5            497.5            1.1             552.5
  Income taxes .....................         (8.4)          27.3            232.1            0.3             251.3
                                    ------------------------------------------------------------------------------
  Net income (loss) after
    income taxes ...................        (21.2)          56.2            265.4            0.8             301.2

  Equity in the net income of
    unconsolidated subsidiaries ....        322.4            0.8               --         (323.2)               --
                                    ------------------------------------------------------------------------------

Net income .........................   $    301.2     $     57.0       $    265.4     $   (322.4)       $    301.2
                                    ==============================================================================
</TABLE>


                                       46
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- 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 Period From January 1, 2004       Services        Company          Other                        Financial
Through April 28, 2004                  (Guarantor)       (Issuer)      Subsidiaries   Eliminations   Services, Inc.
--------------------------------------------------------------------------------------------------------------------
                                                                         (in millions)

<S>                                    <C>            <C>              <C>            <C>               <C>
Revenues
  Premiums .........................           --     $     26.4       $  1,364.0     $     (1.0)       $  1,389.4
  Universal life and investment-
    type product fees ..............           --          132.2            206.2            0.2             338.6
  Net investment income ............   $      0.1          101.9          1,339.2           11.0           1,452.2
  Net realized investment and
    other gains (losses) ...........           --           (1.4)            86.7            0.3              85.6
  Investment management
    revenues, commissions and
    other fees .....................           --             --            195.3             --             195.3
  Other revenue ....................           --            0.1             94.3             --              94.4
                                    ------------------------------------------------------------------------------
Total revenues .....................          0.1          259.2          3,285.7           10.5           3,555.5

Benefits and expenses
  Benefits to policyholders ........           --          121.2          2,015.3            6.5           2,143.0
  Other operating costs and
    expenses .......................         65.8           36.1            551.7            0.3             653.9
  Amortization of deferred policy
    acquisition costs and value
    of business aquired ............           --           33.0            134.6             --             167.6
  Dividends to policyholders .......           --            6.2            156.9             --             163.1
                                    ------------------------------------------------------------------------------
Total benefits and expenses ........         65.8          196.5          2,858.5            6.8           3,127.6

  Income (loss) before income
    taxes  and cumulative effect
    of accounting change ...........        (65.7)          62.7            427.2            3.7             427.9
  Income taxes .....................        (17.1)          20.6            123.1            1.2             127.8
                                    ------------------------------------------------------------------------------
    Net income (loss) before
      cumulative effect of
      accounting change ............        (48.6)          42.1            304.1            2.5             300.1

Cumulative effect of accounting
    change, net of tax .............           --           (3.0)            40.0             --              37.0

  Equity in the net income of
    unconsolidated subsidiaries ....        385.7            2.5               --         (388.2)               --
                                    ------------------------------------------------------------------------------

Net income .........................   $    337.1     $     41.6       $    344.1     $   (385.7)       $    337.1
                                    ==============================================================================
</TABLE>


                                       47
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- 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 Nine Month Period Ended           Services        Company          Other                        Financial
September  30, 2003                     (Guarantor)       (Issuer)      Subsidiaries   Eliminations   Services, Inc.
----------------------------------------------------------------------------------------------------------------------

<S>                                    <C>            <C>              <C>            <C>               <C>
Revenues
  Premiums .........................           --     $     45.4       $  2,737.3     $     (0.3)       $  2,782.4
  Universal life and investment-
    type product fees ..............           --          259.2            358.1            0.5             617.8
  Net investment income ............   $      0.1          203.5          2,887.6           25.9           3,117.1
  Net realized investment and
    other gains (losses) ...........           --          (14.3)           112.5           (4.1)             94.1
  Investment management
    revenues, commissions and
    other fees .....................           --             --            393.0             --             393.0
  Other revenue ....................           --            0.1            199.7             --             199.8
                                    ------------------------------------------------------------------------------
Total revenues .....................          0.1          493.9          6,688.2           22.0           7,204.2

Benefits and expenses
  Benefits to policyholders ........           --          253.5          4,005.0           15.8           4,274.3
  Other operating costs and
    expenses .......................         32.5           66.2          1,146.3            1.3           1,246.3
  Amortization of deferred policy
    acquisition costs and value
    of business acquired ...........           --           46.3            179.4            0.1             225.8
  Dividends to policyholders .......           --           12.8            430.8             --             443.6
                                    ------------------------------------------------------------------------------
Total benefits and expenses ........         32.5          378.8          5,761.5           17.2           6,190.0

  Income (loss) before income taxes         (32.4)         115.1            926.7            4.8           1,014.2
  Income taxes .....................        (15.0)          38.8            255.1            1.4             280.3
                                    ------------------------------------------------------------------------------
    Net income (loss) after
      income taxes .................        (17.4)          76.3            671.6            3.4             733.9

  Equity in the net income of
    unconsolidated subsidiaries ....        751.3            3.4               --         (754.7)               --
                                    ------------------------------------------------------------------------------

Net income .........................   $    733.9     $     79.7       $    671.6     $   (751.3)       $    733.9
                                    ==============================================================================
</TABLE>


                                       48
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Information Provided in Connection with Market Value Annuity of John
           Hancock Variable Life Insurance Company - (Continued)

                 Condensed Consolidating Statement of Cash Flows

<TABLE>
<CAPTION>
                                                            John Hancock
                                             John Hancock  Variable Life                                   Consolidated
                                              Financial      Insurance                                     John Hancock
For the Period From April 29, 2004             Services       Company          Other                        Financial
Through September 30, 2004                   (Guarantor)      (Issuer)      Subsidiaries   Eliminations   Services, Inc.
------------------------------------------------------------------------------------------------------------------------
                                                                          (in millions)

<S>                                             <C>             <C>            <C>             <C>              <C>
Net income ...............................      $ 301.2         $ 57.0         $  265.4        $(322.4)         $  301.2
  Adjustments to reconcile net
    income to net cash provided by
    (used in) operating activities:
    Amortization of discount-fixed
      maturities .........................           --           34.5            248.6           (2.1)            281.0
    Equity in net income of
      unconsolidated subsidiaries ........       (322.4)          (0.8)              --          323.2                --
    Net realized investment and
      other losses .......................           --            8.7             56.4            2.1              67.2
    Change in  value of business
      acquired and deferred policy
      acquisition costs ..................           --          (61.6)          (135.7)            --            (197.3)
    Depreciation and amortization ........          1.1           14.8            111.0            0.2             127.1
    Net cash flows from trading
      securities .........................           --             --            (60.7)            --             (60.7)
    Increase in accrued investment
      income .............................           --            0.7           (228.2)           0.7            (226.8)
    Decrease (increase) in premiums
      and accounts receivable ............         (0.5)           0.3             (7.3)            --              (7.5)
    (Increase)decrease in other assets
      and other liabilities, net .........       (170.1)          11.5            (24.3)          (3.9)           (186.8)
    Increase in policy liabilities
      and accruals, net ..................           --           71.7            631.8           (6.0)            697.5
    Increase(decrease) in income taxes ...        (51.1)          (2.3)           286.4           (1.5)            231.5
                                          ------------------------------------------------------------------------------
    Net cash (used in) provided by
      operating activities ...............       (241.8)         134.5          1,143.4           (9.7)          1,026.4

Cash flows from investing activities:
Sales of:
    Fixed maturities available-for-sale ..           --          112.5          1,063.6           10.3           1,186.4
    Equity securities available-for-sale .           --           15.0            185.5            1.1             201.6
    Real estate ..........................           --             --              4.8             --               4.8
    Short term investments and other
      invested assets ....................          3.5            9.4            145.4            0.5             158.8
Maturities, prepayments, and scheduled
  redemptions of:
    Fixed maturities
      available-for-sale .................           --           90.7          2,118.0           13.4           2,222.1
    Short term investments and other
      invested assets ....................           --          (22.5)           103.8             --              81.3
    Mortgage loans on real estate ........           --           52.7            573.7            2.8             629.2
</TABLE>


                                       49
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Information Provided in Connection with Market Value Annuity of John
           Hancock Variable Life Insurance Company - (Continued)

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                             John Hancock
                                              John Hancock   Variable Life                                   Consolidated
                                               Financial       Insurance                                     John Hancock
For the Period From April 29, 2004              Services        Company          Other                        Financial
Through September 30, 2004                    (Guarantor)       (Issuer)      Subsidiaries   Eliminations   Services, Inc.
--------------------------------------------------------------------------------------------------------------------------
                                                                         (in millions)
<S>                                             <C>            <C>            <C>              <C>             <C>
Purchases of:
  Fixed maturities available-for-sale ....      $   0.4        $(303.6)       $(3,065.2)       $ (18.9)        $(3,387.3)
  Equity securities available-for-sale ...           --          (14.0)           (35.1)            --             (49.1)
  Real estate ............................           --             --           (111.2)            --            (111.2)
  Short term investments and
    other invested assets ................           --          (11.7)          (176.1)          (1.2)           (189.0)
  Mortgage loans on real estate
    issued ...............................           --          (94.8)        (1,036.7)         (11.6)         (1,143.1)
  Other, net .............................           --           (3.6)           (39.8)           4.9             (38.5)
  Capital contributed to
    unconsolidated subsidiaries ..........         (9.5)            --               --            9.5                --
  Dividends received from
    unconsolidated subsidiaries ..........         19.8             --               --          (19.8)               --
  Net cash received related to sale
    of business ..........................         35.0             --               --             --              35.0
                                          ------------------------------------------------------------------------------
  Net cash provided by (used in)
    investing activities .................         49.2         (169.9)          (269.3)          (9.0)           (399.0)

  Cash flows from financing activities:
  Capital contributions paid by
    parent ...............................           --             --              9.5           (9.5)               --
  Dividends paid to parent ...............           --             --            (19.8)          19.8                --
  Universal life and investment-
    type contract deposits ...............           --          400.3          1,346.6             --           1,746.9
  Universal life and investment-
    type contract maturities and
    withdrawals ..........................           --         (214.0)        (3,303.0)           0.3          (3,516.7)
  Issuance of consumer notes .............           --             --            317.3             --             317.3
  Increase in bank deposits ..............           --             --             67.8             --              67.8
  Issuance of short-term debt ............           --             --             88.7             --              88.7
  Repayment of short-term debt ...........           --          (80.0)           (30.4)          80.0             (30.4)
  Issuance of long-term debt .............           --             --              2.1             --               2.1
  Repayment of long-term debt ............           --             --             (2.4)            --              (2.4)
  Net increase in commercial
    paper ................................        187.2             --               --             --             187.2
                                          ------------------------------------------------------------------------------
  Net cash provided by (used in)
    financing activities .................        187.2          106.3         (1,523.6)          90.6          (1,139.5)
</TABLE>


                                       50
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Information Provided in Connection with Market Value Annuity of John
           Hancock Variable Life Insurance Company - (Continued)

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                             John Hancock
                                            John Hancock    Variable Life                                   Consolidated
                                              Financial       Insurance                                     John Hancock
For the Period From April 29, 2004            Services         Company          Other                        Financial
Through September 30, 2004                   (Guarantor)       (Issuer)     Subsidiaries    Eliminations   Services, Inc.
-------------------------------------------------------------------------------------------------------------------------
                                                                       (in millions)
<S>                                          <C>            <C>              <C>            <C>               <C>
Net (decrease) increase in cash and
  cash equivalents .......................   $     (5.4)    $     70.9       $   (649.5)    $     71.9        $   (512.1)

Cash and cash equivalents at
  beginning of period ....................          0.9            0.8          2,072.7          (64.7)          2,009.7
                                          ------------------------------------------------------------------------------

Cash and cash equivalents at end of
  period .................................   $     (4.5)    $     71.7       $  1,423.2     $      7.2        $  1,497.6
                                          ==============================================================================
</TABLE>


                                       51
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Information Provided in Connection with Market Value Annuity of John
           Hancock Variable Life Insurance Company - (Continued)

                 Condensed Consolidating Statement of Cash Flows

<TABLE>
<CAPTION>
                                                            John Hancock
                                             John Hancock  Variable Life                                   Consolidated
                                              Financial      Insurance                                     John Hancock
For the Period From January 1, 2004            Services       Company          Other                        Financial
Through April 28, 2004                       (Guarantor)      (Issuer)      Subsidiaries   Eliminations   Services, Inc.
------------------------------------------------------------------------------------------------------------------------
                                                                          (in millions)

<S>                                          <C>            <C>              <C>            <C>               <C>
Net income ...............................   $    337.1     $     41.6       $    344.1     $   (385.7)       $    337.1
  Adjustments to reconcile net
    income to net cash provided by (used
    in) operating activities:
    Amortization of discount-fixed
      maturities .........................           --           (4.3)             5.2           (0.2)              0.7
    Equity in net income of
      unconsolidated subsidiaries ........       (385.7)          (2.5)              --          388.2                --
    Net realized investment and other
      losses .............................           --            1.1            (86.6)          (0.1)            (85.6)

    Change in accounting principle .......           --            3.0            (40.0)            --             (37.0)
    Change in deferred policy
      acquisition costs and value of
      business acquired ..................           --           (9.6)           (48.8)            --             (58.4)
    Depreciation and amortization ........          0.4            0.5             22.5            0.3              23.7
    Net cash flows from trading
      securities .........................           --             --             (6.7)            --              (6.7)
    Increase in accrued investment
      income .............................           --          (13.1)           (53.1)          (0.4)            (66.6)
    Decrease (increase) in premiums
      and accounts receivable ............           --            0.4             20.3            0.4              21.1
    (Increase)decrease in other assets
      and other liabilities, net .........        264.3          (58.6)          (184.2)          11.2              32.7
    Increase in policy liabilities and
      accruals, net ......................           --           42.8            532.6            6.0             581.4
    Increase(decrease) in income taxes ...         (7.3)           4.2            130.6            4.8             132.3
                                          ------------------------------------------------------------------------------
      Net cash provided by
        operating activities .............        208.8            5.5            635.9           24.5             874.7

Cash flows from investing activities:
Sales of:
    Fixed maturities available-for-sale ..           --           83.3          2,760.4            5.5           2,849.2
    Equity securities available-for-sale .           --           14.9            214.9             --             229.8
    Real estate ..........................           --            2.1             95.6             --              97.7
    Short term investments and other
      invested assets ....................          5.0            6.0            121.4            1.0             133.4
Maturities, prepayments, and scheduled
  redemptions of:
    Fixed maturities held-to-maturity ....           --            0.3             40.7            0.2              41.2
    Fixed maturities available for sale ..           --           81.9          1,487.9           23.7           1,593.5
    Short term investments and other
      invested assets ....................           --           26.2             98.5                            124.7
    Mortgage loans on real estate ........           --            6.5            674.6            3.6             684.7
</TABLE>


                                       52
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Information Provided in Connection with Market Value Annuity of John
           Hancock Variable Life Insurance Company - (Continued)

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                           John Hancock
                                           John Hancock   Variable Life                                    Consolidated
                                             Financial      Insurance                                      John Hancock
For the Period From January 1, 2004          Services        Company          Other                         Financial
Through April 28, 2004                      (Guarantor)      (Issuer)      Subsidiaries    Eliminations   Services, Inc.
-----------------------------------------------------------------------------------------------------------------------
                                                                     (in millions)
<S>                                          <C>            <C>              <C>            <C>               <C>
Purchases of:
    Fixed maturities held to maturity ....           --             --       $     (0.5)            --        $     (0.5)
    Fixed maturities available-for-sale ..   $    (19.0)    $   (213.5)        (6,190.2)    $    (42.5)         (6,465.2)
    Equity securities
      available-for-sale .................           --          (17.9)          (116.3)            --            (134.2)
    Real estate ..........................           --           (0.1)            (6.8)            --              (6.9)
    Short term investments and
      other invested assets ..............           --         (198.7)          (459.2)          (0.9)           (658.8)
    Mortgage loans on real estate
      issued .............................           --          (54.4)          (620.5)          (5.6)           (680.5)
    Other, net ...........................           --          (72.1)           223.2           (3.1)            148.0
    Capital contributed to
      unconsolidated subsidiaries ........         (7.0)            --               --            7.0                --
    Dividends received from
      unconsolidated subsidiaries ........        100.0             --               --         (100.0)               --
                                          ------------------------------------------------------------------------------
      Net cash provided by (used in)
        investing activities .............         79.0         (335.5)        (1,676.3)        (111.1)         (2,043.9)

    Cash flows from financing activities:
    Capital contributions paid by
      parent .............................           --             --              7.0           (7.0)               --
    Acquisition of treasury stock ........        (33.1)            --               --             --             (33.1)
    Dividends paid to parent .............           --             --           (100.0)         100.0                --
    Universal life and
      investment-type contract
      deposits ...........................           --          400.4          2,059.4             --           2,459.8
    Universal life and
      investment-type contract
      maturities and withdrawals .........           --         (199.0)        (2,312.7)          (9.4)         (2,521.1)
    Issuance of consumer notes ...........           --             --            372.2             --             372.2
    Increase in bank deposits ............           --             --             93.6             --              93.6
    Issuance of short-term debt ..........           --           88.0               --          (88.0)               --
    Repayment of short-term debt .........           --           (8.0)           (41.8)           8.0             (41.8)
    Issuance of long-term debt ...........           --             --              0.3             --               0.3
    Repayment of long-term debt ..........           --             --             (1.2)            --              (1.2)
    Net decrease in commercial paper .....       (271.4)            --               --             --            (271.4)
                                          ------------------------------------------------------------------------------
    Net cash (used in) provided by
      financing activities ...............   $   (304.5)    $    281.4       $     76.8     $      3.6        $     57.3
</TABLE>


                                       53
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Information Provided in Connection with Market Value Annuity of John
           Hancock Variable Life Insurance Company - (Continued)

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                             John Hancock
                                             John Hancock   Variable Life                                    Consolidated
                                              Financial       Insurance                                      John Hancock
For the Period From January 1, 2004            Services        Company          Other                         Financial
Through April 28, 2004                       (Guarantor)       (Issuer)      Subsidiaries    Eliminations   Services, Inc.
--------------------------------------------------------------------------------------------------------------------------
                                                                    (in millions)

<S>                                          <C>            <C>              <C>            <C>               <C>
Net decrease in cash and cash
  equivalents ............................   $    (16.7)    $    (48.6)      $   (963.6)    $    (83.0)       $ (1,111.9)

Cash and cash equivalents at
  beginning of period ....................         17.6           49.4          3,036.3           18.3           3,121.6
                                          ------------------------------------------------------------------------------

Cash and cash equivalents at end
  of period ..............................   $      0.9     $      0.8       $  2,072.7     $    (64.7)       $  2,009.7
                                          ==============================================================================
</TABLE>


                                       54
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Information Provided in Connection with Market Value Annuity of John
           Hancock Variable Life Insurance Company - (Continued)

                 Condensed Consolidating Statement of Cash Flows

<TABLE>
<CAPTION>
                                                           John Hancock
                                           John Hancock   Variable Life                                    Consolidated
                                            Financial       Insurance                                      John Hancock
For the Nine Month Period Ended              Services        Company          Other                         Financial
September 30, 2003                         (Guarantor)       (Issuer)      Subsidiaries    Eliminations   Services, Inc.
------------------------------------------------------------------------------------------------------------------------
                                                                        (in millions)

<S>                                          <C>            <C>              <C>            <C>               <C>
Net income ...............................   $    733.9     $     79.7       $    671.6     $   (751.3)       $    733.9
  Adjustments to reconcile net
    income to net cash provided by
    operating activities:
    Amortization of discount-fixed
      maturities .........................           --           (7.7)           (16.7)            --             (24.4)
    Equity in net income of
      unconsolidated subsidiaries ........       (751.3)          (3.4)              --          754.7                --
    Net realized investment and other
      (gains) losses .....................           --           14.3           (112.5)           4.1             (94.1)
    Change in deferred policy
      acquisition costs ..................           --          (64.7)          (255.8)           0.1            (320.4)
    Depreciation and amortization ........          1.2            1.5             41.4             --              44.1
    Net cash flows from trading
      securities .........................           --             --           (101.5)            --            (101.5)
    Increase in accrued investment
      income .............................           --          (20.1)          (136.5)          (0.1)           (156.7)
    Decrease (increase) in premiums and
      accounts receivable ................          3.8            2.2            (59.8)           0.7             (53.1)
    Increase (decrease) in other
      assets and other liabilities, net ..         18.8          (46.6)          (178.4)          39.3            (166.9)
    Increase in policy liabilities
      and accruals, net ..................           --          117.2          1,586.2           12.8           1,716.2
    Increase(decrease) in income taxes ...          5.3           44.6            122.6           (6.5)            166.0
                                              --------------------------------------------------------------------------
      Net cash provided by
        operating activities .............         11.7          117.0          1,560.6           53.8           1,743.1

Cash flows from investing activities:
Sales of:
    Fixed maturities available-for-sale ..           --          494.4          8,965.6           21.7           9,481.7
    Equity securities available-for-sale .           --           33.3            223.9             --             257.2
    Real estate ..........................           --             --             97.5             --              97.5
    Short term investments and other
      invested assets ....................           --            7.4            155.2             --             162.6
    Home Office properties ...............           --             --            887.6             --             887.6
Maturities, prepayments, and scheduled
redemptions of:
    Fixed maturities held-to-maturity ....           --            1.2            189.1            0.6             190.9
    Fixed maturities
    available-for-sale ...................           --          152.4          2,713.4           36.7           2,902.5
    Short term investments and other
      invested assets ....................           --             --            816.3            0.6             816.9
    Mortgage loans on real estate ........           --           50.5            916.3            9.8             976.6
</TABLE>


                                       55
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Information Provided in Connection with Market Value Annuity of John
           Hancock Variable Life Insurance Company - (Continued)

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                           John Hancock
                                           John Hancock   Variable Life                                    Consolidated
                                             Financial      Insurance                                      John Hancock
For the Nine Month Period Ended              Services        Company          Other                         Financial
September 30, 2003                          (Guarantor)      (Issuer)      Subsidiaries    Eliminations   Services, Inc.
------------------------------------------------------------------------------------------------------------------------
                                                                     (in millions)
<S>                                          <C>            <C>              <C>            <C>               <C>
Purchases of:
   Fixed maturities held-to-maturity .....           --             --       $    (77.3)            --        $    (77.3)
   Fixed maturities available-for-sale ...           --     $ (1,363.2)       (14,823.8)    $    (48.3)        (16,235.3)
   Equity securities
    available-for-sale ...................           --          (61.7)          (198.5)          (0.4)           (260.6)
   Real estate ...........................           --           (0.1)           (32.6)            --             (32.7)
   Short term investments and
     other invested assets ...............           --          (44.6)        (1,259.3)          (2.0)         (1,305.9)
   Mortgage loans on real estate
     issued ..............................           --         (171.2)        (1,344.9)          (6.1)         (1,522.2)
   Net cash paid related to
     acquisition of business .............           --             --             (3.8)            --              (3.8)
   Other, net ............................           --           (8.9)          (158.2)          (0.2)           (167.3)
   Capital contributed to
     unconsolidated subsidiaries .........   $    (39.4)            --               --           39.4                --
   Dividends received from
     unconsolidated subsidiaries .........        100.0             --               --         (100.0)               --
                                          ------------------------------------------------------------------------------
     Net cash provided by (used in)
       investing activities ..............         60.6         (910.5)        (2,933.5)         (48.2)         (3,831.6)

   Cash flows from financing activities:
   Capital contributions paid by
     parent ..............................           --             --             39.4          (39.4)               --
   Acquisition of treasury stock .........        (11.8)            --               --             --             (11.8)
   Dividends paid on common stock ........           --             --           (100.0)         100.0                --
   Universal life and investment-type
     contract deposits ...................           --          858.4          6,219.5             --           7,077.9
   Universal life and investment-type
     contract maturities and
     withdrawals .........................           --         (294.6)        (4,985.5)         (23.9)         (5,304.0)
   Issuance of consumer notes ............           --             --            769.4             --             769.4
   Issuance of short-term debt ...........           --          113.0            148.4         (113.0)            148.4
   Repayment of short-term debt ..........           --          (77.0)          (127.9)          77.0            (127.9)
   Repayment of long-term debt ...........           --             --             (4.6)            --              (4.6)
   Net decrease in commercial paper ......        (59.5)            --               --             --             (59.5)
                                          ------------------------------------------------------------------------------
   Net cash (used in) provided by
     financing activities ................        (71.3)         599.8          1,958.7            0.7           2,487.9
</TABLE>


                                       56
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Information Provided in Connection with Market Value Annuity of John
           Hancock Variable Life Insurance Company - (Continued)

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                            John Hancock
                                            John Hancock   Variable Life                                    Consolidated
                                             Financial       Insurance                                      John Hancock
For the Nine Month Period Ended               Services        Company          Other                         Financial
September 30, 2003                          (Guarantor)       (Issuer)      Subsidiaries    Eliminations   Services, Inc.
-------------------------------------------------------------------------------------------------------------------------
                                                                    (in millions)

<S>                                          <C>            <C>              <C>            <C>               <C>
   Net increase (decrease) in cash
    and cash equivalents .................   $      1.0     $   (193.7)      $    585.8     $      6.3        $    399.4

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

Cash and cash equivalents at end
  of period ..............................   $     15.6     $      7.0       $  1,558.9     $      8.5        $  1,590.0
                                          ==============================================================================
</TABLE>

Note 12 -- Certain Separate Accounts

The Company issues variable annuity contracts through its separate accounts for
which investment income and investment gains and losses accrue directly to, and
investment risk is borne by, the contract holder (traditional variable
annuities). The Company also issues variable life insurance and variable annuity
contracts which contain certain guarantees (variable contracts with guarantees)
which are discussed more fully below.

During 2004 and 2003, there were no gains or losses on transfers of assets from
the general account to the separate account. The assets supporting the variable
portion of both traditional variable annuities and variable contracts with
guarantees are carried at fair value and reported as summary total separate
account assets with an equivalent summary total reported for liabilities.
Amounts assessed against the contractholders for mortality, administrative, and
other services are included in revenue and changes in liabilities for minimum
guarantees are included in policyholder benefits in the Company's Statements of
Income. Separate account net investment income, net investment gains and losses,
and the related liability changes are offset within the same line item in the
Company's Statements of Income.

The deposits related to the variable life insurance contracts are invested in
separate accounts and the Company guarantees a specified death benefit if
certain specified premiums are paid by the policyholder, regardless of separate
account performance.

At September 30, 2004 and December 31, 2003, the Company had the following
variable life contracts with guarantees. For guarantees of amounts in the event
of death, the net amount at risk is defined as the excess of the initial sum
insured over the current sum insured for fixed premium variable life contracts,
and, for other variable life contracts, is equal to the sum insured when the
account value is assumed to be zero and the policy is still in force.

                                                   September 30,    December 31,
                                                        2004            2003
                                                   -----------------------------
                                                   (in millions, except for age)
Life contracts with guaranteed benefits
In the event of death
Account value..................................       $6,381.3      $6,249.4
Net amount at risk related to deposits ........         $130.2        $106.2
Average attained age of contractholders .......             44            46


                                       57
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 12 -- Certain Separate Accounts - (Continued)

The variable annuity contracts are issued through separate accounts and the
Company contractually guarantees to the contract holder either (a) return of no
less than total deposits made to the contract less any partial withdrawals, (b)
total deposits made to the contract less any partial withdrawals plus a minimum
return, (c) the highest contract value on a specified anniversary date minus any
withdrawals following the contract anniversary or (d) a combination benefit of
(b) and (c) above. Most business issued after May 2003 has a proportional
partial withdrawal benefit instead of a dollar-for-dollar relationship. These
variable annuity contract guarantees include benefits that are payable in the
event of death or annuitization, or at specified dates during the accumulation
period.

At September 30, 2004 and December 31, 2003, the Company had the following
variable contracts with guarantees. (Note that the Company's variable annuity
contracts with guarantees may offer more than one type of guarantee in each
contract; therefore, the amounts listed are not mutually exclusive.) For
guarantees of amounts in the event of death, the net amount at risk is defined
as the current guaranteed minimum death benefit in excess of the current account
balance at the balance sheet date. For guarantees of amounts at annuitization,
the net amount at risk is defined as the present value of the minimum guaranteed
annuity payments available to the contract holder determined in accordance with
the terms of the contract in excess of the current account balance. For
guarantees of accumulation balances, the net amount at risk is defined as the
guaranteed minimum accumulation balance minus the current account balance.

<TABLE>
<CAPTION>
                                                          September 30,   December 31,
                                                              2004           2003
                                                      -----------------------------------------
                                                      (in millions, except for age and percent)
<S>                                                        <C>              <C>
Return of net deposits
In the event of death
 Account value .....................................       $7,001.1         $6,776.9
 Net amount at risk ...............................          $485.1           $359.9
 Average attained age of contractholders ..........              58               58

Return of net deposits plus a minimum return
In the event of death
 Account value ....................................          $955.1         $1,051.7
 Net amount at risk ...............................          $246.3           $230.7
 Average attained age of contractholders ..........              64               63
 Guaranteed minimum return rate ...................              5%               5%
Accumulation at specified date
 Account value.....................................          $657.9           $636.0
 Net amount at risk................................           $22.3            $20.3
 Average attained age of contractholders...........              58               55
 Range of guaranteed minimum return rates..........              --                -
At annuitization
 Account value ....................................           200.3           $169.4
 Net amount at risk ...............................              --                -
 Average attained age of contractholders...........              57               57
 Range of guaranteed minimum return rates .........            4-5%             4-5%

Highest specified anniversary account value
minus withdrawals post anniversary
In the event of death
 Account value ....................................        $4,300.5         $3,959.3
 Net amount at risk ...............................          $545.8           $566.2
 Average attained age of contractholders ..........              57               56
</TABLE>


                                       58
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 12 -- Certain Separate Accounts - (Continued)

Account balances of variable contracts with guarantees were invested in variable
separate accounts in various mutual funds which included foreign and domestic
equities and bonds as shown below:

<TABLE>
<CAPTION>
                                                              September 30, 2004   December 31, 2003
                                                              --------------------------------------
Type of Fund                                                        Amount              Amount
                                                                    ------              ------
                                                                         (in millions)

<S>                                                               <C>                  <C>
Domestic Equity - Growth Funds.......................             $ 3,358.1            $ 3,409.0
Domestic Bond Funds..................................               2,634.4              2,737.9
Domestic Equity - Growth & Income Funds..............               2,261.0              2,341.2
Balanced Investment Funds............................               2,869.8              2,840.5
Domestic Equity - Value Funds........................                 978.2                865.0
Canadian Equity Funds................................               1,863.4              1,555.3
International Equity Funds...........................                 873.7                853.2
International Bond Funds.............................                 106.7                107.3
Hedge Funds..........................................                  37.9                 22.7
                                                                ------------         -----------
 Total ..............................................             $14,983.2            $14,732.1
                                                                ============         ===========
</TABLE>

The following summarizes the liabilities for guarantees on variable contracts
reflected in the general account:

<TABLE>
<CAPTION>
                                                      Guaranteed    Guaranteed    Guaranteed
                                                        Minimum      Minimum       Minimum
                                                         Death     Accumulation     Income
                                                        Benefit      Benefit       Benefit
                                                        (GMDB)        (GMAB)        (GMIB)      Totals
                                                      -------------------------------------------------
                                                                          (in millions)

<S>                                                     <C>           <C>           <C>          <C>
Balance at January 1, 2004 .....................        $32.9         $45.9         $ 1.0        $79.8
Incurred guarantee benefits ....................          5.3           7.6           0.5         13.4
Fair value adjustment at Manulife acquisition ..          4.0            --            --          4.0
Paid guarantee benefits ........................         (7.2)           --            --         (7.2)
                                                        -----         -----         -----        -----
Balance at September 30, 2004 ..................        $35.0         $53.5         $ 1.5        $90.0
                                                        =====         =====         =====        =====
</TABLE>

The GMDB liability is determined each period end by estimating the expected
value of death benefits in excess of the projected account balance and
recognizing the excess ratably over the accumulation period based on total
expected assessments. The Company regularly evaluates estimates used and adjusts
the additional liability balance, with a related charge or credit to benefit
expense, if actual experience or other evidence suggests that earlier
assumptions should be revised. The following assumptions and methodology were
used to determine the GMDB liability at September 30, 2004.

o     Data used included 200 and 1000 (for annuity and life contracts,
      respectively) stochastically generated investment performance scenarios.

o     Volatility assumptions depended on mix of investments by contract type and
      ranged between 13.8% (life products) and 19% (annuity products).

o     Life products used purchase GAAP mortality, lapse, mean investment
      performance, and discount rate assumptions included in the related
      deferred acquisition cost (DAC) and value of business acquired (VOBA)
      models which varied by product.


                                       59
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 12 -- Certain Separate Accounts - (Continued)

o     Mean investment performance assumptions for annuity contracts was 8.67%.

o     Annuity mortality was assumed to be 100% of the Annuity 2000 Table
      for the Life Company annuities and 100% of the a-83 Basic Table for
      Maritime annuities.

o     Annuity lapse rates vary by contract type and duration and range from 1%
      to 20%.

o     Annuity discount rate was 6.5%.

The guaranteed minimum income benefit (GMIB) liability represents the expected
value of the annuitization benefits in excess of the projected account balance
at the date of annuitization, recognizing the excess ratably over the
accumulation period based on total expected assessments. The Company regularly
evaluates estimates used and adjusts the additional liability balance, with a
related charge or credit to benefit expense, if actual experience or other
evidence suggests that earlier assumptions should be revised. The guaranteed
minimum accumulation benefit (GMAB) liability is determined each period end by
calculating the highest investment value occurring ten or more years prior to
each contract's maturity, applying the guaranteed rates of 75% or 100% depending
upon the type of contract and adjusting the results proportionately for any new
deposits or withdrawals within the final ten years to maturity.

Note 13 -- Subsequent Event

In October 2004, Manulife restructured its direct ownership of JHFS. As part of
the restructuring John Hancock Holdings, LLC, a Delaware LLC, a wholly-owned
subsidiary of Manulife, was formed as an intermediate holding company to hold
the shares of JHFS. The transaction had no financial impact on the Company.

As a result of integration of operations between the Company and its parent,
Manulife, the Company is in negotiations to sell its China operations. The
Company is divesting itself of its operations in China to accommodate Chinese
law, which allows only one license per Company. Manulife had an operation in
China prior to the merger with John Hancock.

Refer to the Related Party footnote to the unaudited consolidated financial
statements in this Form 10-Q for discussion of progress of amalgamation of
subsidiaries into Manulife subsequent to quarter end.


                                       60
<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 is presented in a condensed disclosure format pursuant to General
Instruction H(1)(a) and (b) of Form 10-Q. The management narrative for the
Company that follows should be read in conjunction with the unaudited interim
financial statements and related footnotes to the unaudited interim financial
statements included elsewhere herein, and with the Management's Discussion and
Analysis of Financial Condition and Results of Operations section included in
the Company's 2003 Annual Report on Form 10-K.

      The Company's news releases and other information are available on the
internet at www.jhancock.com, and its financial statements are available at
www.manulife.com, under the link labeled "Securities Filings" on the "Investor
Relations" Page. 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.

     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
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. 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.

Merger with Manulife Financial Corporation

      On April 28, 2004, the Company completed its merger agreement with
Manulife Financial Corporation (Manulife) and as of the close of business, JHFS
common stock stopped trading on the New York Stock Exchange. In accordance with
the agreement, each share of JHFS common stock was converted into 1.1853 shares
of Manulife stock. Commencing on April 28, 2004, the Company operates as a
subsidiary of Manulife and the John Hancock name is Manulife's primary U.S.
brand.

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 in the Company's 2003 Annual Report on Form
10-K. 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.

Purchase Accounting (PGAAP)

      In accordance with SFAS No. 141, "Business Combinations" the merger
transaction was accounted for as a purchase of John Hancock by Manulife. The
purchase method requires that John Hancock, the acquired company, adjust the
cost and reporting basis of its assets and liabilities to their fair values on
the acquisition date (the purchase adjustments).

      The determination of the purchase adjustments relating to investments
included utilization of independent price quotes where available and
management's own estimates and assumptions where independent price quotes were
unavailable. Other purchase adjustments also required significant management
estimates and assumptions. The purchase adjustments relating to intangible
assets, including goodwill, value of business acquired (VOBA), brand name and
others, and to liabilities, including policyholder reserves, and others,
required management to exercise significant judgment in assessing fair values.

      The Company is in the process of completing the valuations of a portion of
the assets acquired and liabilities assumed; thus the allocation of the purchase
price is subject to refinement.


                                       61
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      The Company's purchase adjustments resulted in a revalued balance sheet
which may result in future earnings trends which differ significantly from
historical trends. The Company does not anticipate any impact on its liquidity,
or ability to pay claims of policyholders, arising out of the purchase
accounting process related to the merger.

      Consolidation Accounting

      In December 2003, the Financial Accounting Standards Board re-issued
Interpretation 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51," (FIN 46R) which clarifies the consolidation
accounting guidance of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," (ARB No. 51) to certain entities for which controlling
interests are not measurable by reference to ownership in the equity of the
entity. Such entities are known as variable interest entities (VIEs).

      The Company has finalized its FIN 46R analysis for all of the entities
described below. The Company is not the primary beneficiary of any of them. For
many of these, the application of FIN 46R required estimation by the Company of
the future periodic cash flows and changes in fair values for each candidate,
starting as of the Company's original commitment to invest in and/or manage each
candidate, and extending out to the end of the full expected life of each. These
cash flows and fair values were then analyzed for variability, and this expected
variability was quantified and compared to total historical amounts invested in
each candidate's equity to help determine if each candidate is a VIE. The
Company also evaluated quantitative and non-quantitative aspects of control
relationships among the owners and decision makers of each candidate to help
determine if they are VIEs.

      For each candidate determined to be a VIE, the expected variable losses
and returns were then theoretically allocated out to the various investors and
other participants in each candidate, in order to determine if any party had
exposure to the majority of the expected variable losses or returns, in which
case that party is the primary beneficiary of the VIE. The Company used
significant levels of judgment while performing these quantitative and
qualitative assessments.

      The Company manages invested assets for its customers under various
fee-based arrangements using a variety of entities to hold these assets under
management, and since 1996, this has included investment vehicles commonly known
as collateralized debt obligations funds (CDOs). Various business units of the
Company sometimes invest in the debt or equity securities issued by these and
other CDOs to support their insurance liabilities.

      Since 1995, 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, but
primarily invests indirectly via limited partnership real estate investment
funds (The Funds). The Funds 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 or Fannie Mae. In certain cases, the Company invests in the mortgages
of the Properties.

      The Company has a number of relationships with a disparate group of
entities (Other Entities), which result from the Company's direct investment in
their equity and/or debt. This group includes energy investment partnerships,
investment funds organized as limited partnerships, and manufacturing companies
in whose debt the Company invests, and which subsequently underwent corporate
reorganizations.

      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 these consolidations. Conversely,
additional assets recognized as a result of these consolidations 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 these consolidations.

       The Company's maximum exposure to loss in relation to these entities is
limited to its investments in them, future debt and equity commitments made to
them, and where the Company is the mortgagor to the Properties, the outstanding
balance of the mortgages originated for them, and outstanding mortgage
commitments made to them. Therefore, the Company believes that the application
of FIN 46R has no potential impact on the Company's liquidity and capital
resources beyond what is already presented in the consolidated financial
statements and notes thereto.


                                       62
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      The Company discloses summary financial data and its maximum exposure to
losses for the CDOs and Properties in Note 4 - Relationships with Variable
Interest Entities in the notes to unaudited consolidated financial statements,
but does not do so for the Other Entities because the Company does not believe
these relationships are collectively significant.

      Intangible Assets

      The Company recognizes several intangible assets, all of which resulted
from business combinations. Valuation, and where applicable, amortization of
these assets require significant management estimates and judgment.

      Unamortizable assets include goodwill, brand name and investment
management contracts. Goodwill is the excess of the cost to Manulife over the
fair value of the Company's identifiable assets acquired by Manulife in the
recent merger. Brand name is the fair value assigned to the Company's trademark
and trade name. Investment management contracts are fair values of the
investment management relationships between the Company and each of the mutual
funds managed by the Company.

      Amortizable assets include value of business acquired (VOBA), distribution
networks and other investment management contracts. VOBA is the present value of
estimated future profits of insurance policies in force related to the Company's
businesses acquired by Manulife in the recent merger. VOBA has weighted average
lives ranging from 6 to 17 years for various insurance businesses. Distribution
networks are fair values assigned to the Company's networks of sales agents and
producers responsible for procuring business. Distribution networks have
weighted average lives of 21 years. Other investment management contracts are
the fair values assigned to the Company's individual and group benefit contracts
managed by its Canadian subsidiary. Other investment management contracts have
weighted average lives of 9 years. Collectively, these amortizable intangible
assets have a weighted average life of 14.7 years.

      The Company will test unamortizable intangible assets for impairment on an
annual basis, and also in response to any events which both suggest that these
assets may be impaired (triggering events). Amortizable intangible assets will
be tested only in response to triggering events. The Company will test goodwill
using the two-step impairment testing program set forth in SFAS No. 142
"Goodwill and Other Intangible Assets." VOBA and the Company's other intangible
assets will be evaluated by comparing their fair values to their current
carrying values whenever they are tested. Impairments will be recorded whenever
an asset's fair value is deemed to be less than its carrying value.

      Amortization of Deferred Acquisition Costs (DAC) and Value of Business
      Acquired (VOBA) Assets

Costs that vary with, and are related primarily to, the production of new
business are 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 has also recorded intangible
assets representing the present value of estimated future profits of insurance
policies inforce related to business acquired. The Company tests the
recoverability of its DAC and VOBA assets quarterly with a model that uses data
such as market performance, lapse rates and expense levels. We amortize DAC and
VOBA on term life and long-term care insurance ratably with premiums. We
amortize DAC and VOBA on our annuity products and retail life insurance, other
than term life insurance policies, based on a percentage of the estimated gross
profits over the lives of the policies. These policy lives are, generally, up to
thirty years for products supporting DAC and VOBA. 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, VOBA and
unearned revenue on these policies such that the percentage of gross profits
realized compared to the amount of DAC, VOBA and unearned revenue amortized is
constant 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 and
VOBA 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. As actual results for market
experience or asset growth fluctuate significantly from historical trends and
the long-term assumptions made in calculating expected gross profits, management
changes these assumptions periodically, as necessary.


                                       63
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Benefits to Policyholders

      The liability for future policy benefits is the largest liability included
in our consolidated balance sheets, equal to $51,569.5 million, or 49.2%, of
total liabilities as of September 30, 2004. Changes in this liability are
generally reflected in the benefits to policyholders in our consolidated
statements of income. This liability is primarily comprised of the present value
of estimated future payments to holders of life insurance and annuity products
based on certain management judgments. 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, or the Company is acquired. 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 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 available-for-sale
are not publicly traded, and quoted market prices are not available from brokers
or investment bankers on these securities. Changes in the fair values of the
available-for-sale securities are recorded in other comprehensive income as
unrealized gains and /or losses. We calculate the fair values of these
securities ourselves through the use of pricing models and discounted cash flows
calling for a substantial level of professional investment management judgment.
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
Security Operations Department. Our pricing analysts take appropriate action to
reduce the valuation of securities where an event occurs that negatively impacts
the securities' value. Certain events that could impact the valuation of
securities include issuer credit ratings, business climate, management changes
at the investee level, litigation, fraud 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 other than temporary impairment. To assist in identifying
these impairments, at the end of each quarter our Investment Review Committee
reviews all securities where market value has been less than ninety percent of
amortized cost for three months or more to determine whether other than
temporary 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 Credit Officer of Manulife. The analysis focuses on each investee
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 amortized cost. The results
of this analysis are reviewed quarterly by the Credit Committee at Manulife.
This committee includes Manulife's Chief Financial Officer, Chief Investment
Officer, Chief Risk Officer Chief Credit Officer, and other senior management.
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.

      Benefit Plans

      The Company reviewed 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 for incorporation in the measurements made as
of April 28, 2004 (the date of the Manulife acquisition of the Company) and for
net periodic costs for the calendar year. These assumptions are normally
incorporated in measurements made annually as of each December 31 and for the
subsequent calendar year resulting thereon.

      The assumed discount rate is set based on the published December 31st
Moody's Investor Services long-term corporate bond yield for rating category Aa.
The discount rate used in the April 28, 2004 mark to market of 2004's net
periodic pension cost was 6.0%. The discount rate originally in effect for 2004
was 6.25%. A 0.25% increase in the discount rate would decrease pension benefits
Projected Benefit Obligation (PBO) and 2004 Net Periodic Pension Cost (NPPC) by
approximately $57.6 million and $1.2 million respectively. A 0.25% increase in
the discount rate would decrease other post- employment benefits Accumulated
Postretirement Benefit Obligation (APBO) and 2004 Net Periodic Benefit Cost
(NPBC) by approximately $15.9 million and $1.2 million, respectively.


                                       64
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      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 2004, Net Periodic Pension
(and Benefit) Cost, an 8.75% long term rate of return assumption is being used.
A 0.25% increase in the long-term rate of return would decrease 2004 NPPC by
approximately $5.3 million and 2004 NPBC by approximately $0.6 million. The
expected return on plan assets prior to the acquisition by Manulife is based on
the fair market value of the plan assets as of December 31, 2003. Post merger,
the expected return on plan assets is based on the fair value of plan assets as
of April 28, 2004.

      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
4.0% compensation rate increase assumption is being used. A 0.25% increase in
the salary scale would increase 2004 pension benefits PBO and NPPC by
approximately $5.8 million and $0.6 million, respectively. Post employment
benefits are independent of compensation.

      The Company uses a 10% corridor for the amortization of actuarial
gains/losses. At the date of acquisition, actuarial gains and losses were set to
zero.

      On December 8, 2003, President Bush signed into law a bill that expands
Medicare, primarily by adding a prescription drug benefit for Medicare-eligible
retirees starting in 2006. The Medicare Prescription Drug Improvement and
Modernization Act of 2003 (the Act) provides for special tax-free subsidies to
employers that offer plans with qualifying drug coverages beginning in 2006.
There are two broad groups of retirees receiving employer-subsidized
prescription drug benefits at the Company. The first group, those who retired
prior to January 1, 1992, receives a subsidy of between 90% and 100% of total
cost. Since this subsidy level will clearly meet the criteria for qualifying
drug coverage, the Company anticipates that the benefits it pays after 2005 for
pre-1992 retirees will be lower as a result of the new Medicare provisions. In
accordance with Financial Accounting Standards Board Staff Position FAS 106-2
(FSP FAS 106-2), the Company reflected a reduction in the accumulated plan
benefit obligation for this group of $40.9 million as of the purchase accounting
remeasurement (April 28, 2004) and reduced net periodic postretirement benefit
costs by $1.0 million for the period from April 29 through September 30, 2004.
With respect to the second group, those who retired on or after January 1, 1992,
the employer subsidy on prescription drug benefits is capped and currently
provides as low as 25% of total cost. Since final authoritative accounting
guidance has not yet been issued on determining whether a benefit meets the
actuarial criteria for qualifying drug coverage, the Company has deferred
recognition as permitted by FSP FAS 106-2 for this group. The final accounting
guidance could require changes to previously reported information.

      Income Taxes

      Our reported effective tax rate on net income was 47.2% and 21.2% for the
three month periods ended September 30, 2004 and 2003 and 38.7% and 27.6% for
the nine month periods ended September 30, 2004 and 2003, respectively. The
increase in the effective tax rate during the period is due to changes in the
recognition of tax expense as a result of the purchase accounting for leveraged
leases as required by FASB Interpretation No. 21, "Accounting for Leases in a
Business Combination" and FASB Statement of Financial Accounting Standards No.
13, "Accounting for Leases". Our effective tax rate is based on expected income,
statutory tax rates and tax planning opportunities available to us. Significant
judgment is required in determining our effective tax rate and in evaluating our
tax positions. We establish reserves when, despite our belief that our tax
return positions are fully supportable, we believe that certain positions are
likely to be challenged and that we may not succeed. We adjust these reserves in
light of changing facts and circumstances, such as the progress of a tax audit.
Our effective tax rate includes the impact of reserve provisions, changes to
reserves that we consider appropriate and related interest. This rate is then
applied to our year-to-date operating results.

      Tax regulations require certain items to be included in the tax return at
different times than those items are reflected in the financial statements. As a
result, our effective tax rate reflected in our financial statements is
different than that reported in our tax return. Some of these differences are
permanent, such as affordable housing tax credits, and some are temporary
differences, such as depreciation expense. Temporary differences create deferred
tax assets and liabilities. Deferred tax assets generally represent items that
can be used as a tax deduction or credit in our tax return in future years for
which we have already recorded the tax benefit in our income statement. Our
policy is to establish valuation allowances for deferred tax assets when the
amount of expected future taxable income is not likely to support the use of the
deduction or credit. Deferred tax liabilities generally represent tax expense
recognized in our financial statements for which payment has been deferred or
expense for which we have already taken a deduction on our tax return, but have
not yet recognized as expense in our financial statements.


                                       65
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      A number of years may elapse before a particular matter, for which we have
established an accrued liability, is audited and finally resolved. The Internal
Revenue Service is currently examining our tax returns for 1999 through 2001.

      While it is often difficult to predict the final outcome or the timing of
resolution of any particular tax matter, we believe that our reserves reflect
the probable outcome of known tax contingencies. Our tax reserves are presented
in the balance sheet net in the deferred tax asset or in the deferred tax
liability for the respective period ends.

Reinsurance

      We reinsure portions of the risks we assume for our protection insurance
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 insurance
claims for individuals for whom the net amount at risk is $3 million or more. As
of January 1, 2001, the Company also entered into agreements with two reinsurers
covering 50% of its closed block business. One of these reinsurers is Manulife.
Effective April 28, 2004 the Company operates as a subsidiary of Manulife.
Effective December 31, 2003, the Company entered into an agreement with a third
reinsurer covering another 5% 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. The
Company's Canadian operation has a maximum individual ordinary life insurance
retention of mortality risk of $2.25 million. Group long term disability (LTD)
coverage is reinsured for any amounts over $5,250 per month. Lapse reinsurance
is also used extensively wherever significant lapse risk exists, e.g. Term to
100 products. A further special war risk reinsurance arrangement applies to a
large group client, providing coverage for life and LTD losses in excess of $7.5
million arising from war losses. 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 individual
life insurance policies written by all of its U.S. life insurance subsidiaries.
Effective July 1, 2004, the Company and its Canadian operations are covered by
its parent's catastrophic reinsurance under its global catastrophe reinsurance
program which covers the entire Manulife group of companies for losses in excess
of $50 million up to $150 million. This global catastrophe reinsurance covers
all terrorist acts in Canada; in the United States and elsewhere nuclear,
biological and chemical terrorist acts are not covered. 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.

      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.

Transactions Affecting Comparability of Results of Operations

In addition to the acquisition of the Company by Manulife, the acquisition
described under the table below was recorded under the purchase method of
accounting and, accordingly, the operating results of the acquired business 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
purchase price over the estimated fair values 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.


                                       66
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

The disposal described under the table below was conducted in order to execute
the Company's strategy to focus resources on businesses in which it can have a
leadership position. The tables below presents actual and proforma data, for
comparative purposes, of revenue and net income for the periods indicated, to
demonstrate the proforma effect of the acquisition and disposal as if they
occurred on January 1, 2003.

<TABLE>
<CAPTION>
                                          Three Months Ended               Three Months Ended
                                             September 30,                    September 30,
                                         2004                             2003
                                       Proforma          2004           Proforma          2003
                                       ---------------------------------------------------------
                                                             (in millions)

<S>                                    <C>              <C>             <C>            <C>
Revenue.........................       $ 2,450.3        $ 2,450.3       $ 2,430.1      $ 2,430.1

Net income......................       $   167.3        $   167.3       $   190.8      $   190.8

<CAPTION>
                                       Period from April 29,         Period from January 1             Nine Months Ended
                                       through September 30,            through April 28,                 September 30,
                                        2004                          2004                            2003
                                      Proforma         2004         Proforma          2004          Proforma          2003
                                   -----------------------------------------------------------------------------------------------
                                                                           (in millions)

<S>                                    <C>           <C>             <C>            <C>            <C>              <C>
Revenue.........................       $ 4,099.6     $ 4,099.6       $ 3,555.5      $ 3,555.5      $ 7,237.6        $ 7,204.2

Net income......................       $   301.2     $   301.2       $   337.1      $   337.1      $   735.6        $   733.9
</TABLE>

Acquisition:

On July 8, 2003, The Maritime Life Assurance Company (Maritime Life), a majority
owned Canadian subsidiary of the Company, completed its purchase of the
insurance business of Liberty Health, a Canadian division of US-based Liberty
Mutual Insurance Company, through a reinsurance agreement for approximately
$97.5 million. Through the agreement, Maritime Life assumed the entire business
of Liberty Health, including its group life, group disability and group health
divisions, as well as its individual health insurance business. There was no
impact on the Company's results of operations from the acquired insurance
business during the first six months of 2003.

Disposal:

On June 19, 2003, the Company agreed to sell its group life insurance business
through a reinsurance agreement with Metropolitan Life Insurance Company, Inc
(MetLife). The Company ceded all activity after May 1, 2003 to MetLife. The
transaction was recorded as of May 1, 2003, and closed November 4, 2003.

Subsequent Events

In October 2004, Manulife restructured its direct ownership of JHFS. As part of
the restructuring John Hancock Holdings, LLC, a Delaware LLC, a wholly-owned
subsidiary of Manulife, was formed as an intermediate holding company to hold
the shares of JHFS. The transaction had no financial impact on the Company.

As a result of integration of operations between the Company and its parent,
Manulife, the Company is in negotiations to sell its China operations. The
Company is divesting itself of its operations in China to accommodate Chinese
law, which allows only one license per Company. Manulife had an operation in
China prior to the merger with John Hancock.

Refer to the Note 8 - Related Party Transactions in the unaudited consolidated
financial statements in this Form 10-Q for a discussion of progress of
amalgamation of subsidiaries into Manulife subsequent to September 30, 2004.


                                       67
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Results of Operations

      To assist in the comparability of our financial results and to make it
easier to discuss and understand our results of operations, the following
discussion combines the predecessor period (January 1 through April 28, 2004)
with the successor period (April 29 through September 30, 2004) to present
combined results for the nine months ended September 30, 2004. The mixture of
financial results in this fashion combines historic GAAP and purchase GAAP
financial results.

      The tables below present the consolidated results of operations for the
periods presented:

<TABLE>
<CAPTION>
                                                                       Three Months Ended      Nine Months Ended
                                                                          September 30,           September 30,
                                                                        2004        2003        2004        2003
                                                                      -------------------------------------------
                                                                                     (in millions)
<S>                                                                   <C>         <C>         <C>        <C>
Revenues
Premiums ..........................................................   $1,116.7    $1,034.3    $3,233.5   $2,782.4
Universal life and investment-type product fees ...................      227.8       209.5       725.9      617.8
Net investment income .............................................      952.2     1,038.5     3,049.2    3,117.1
Net realized investment and other gains (losses), net of related
   amortization of deferred policy acquisition costs and
   value of business acquired, amounts credited to participating
   pensions contractholders and the policyholder dividend
   obligation (1) .................................................      (53.1)      (58.3)       18.4       94.1
Investment management revenues, commissions, and other fees .......      143.8       138.9       431.6      393.0
Other revenue .....................................................       62.9        67.2       196.5      199.8
                                                                      --------------------    -------------------
      Total revenues ..............................................    2,450.3     2,430.1     7,655.1    7,204.2

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) ........................................    1,499.2     1,522.9     4,629.2    4,274.3
Other operating costs and expenses ................................      438.4       437.0     1,375.8    1,246.3
Amortization of deferred policy acquisition costs and value of
   business acquired, excluding amounts related to net
   realized investment and other gains (losses) (3) ...............       70.0        67.0       293.6      225.8
Dividends to policyholders ........................................      126.0       161.0       376.1      443.6
                                                                      --------------------    -------------------
      Total benefits and expenses .................................    2,133.6     2,187.9     6,674.7    6,190.0

Income before income taxes ........................................      316.7       242.2       980.4    1,014.2
Income taxes ......................................................      149.4        51.4       379.1      280.3
                                                                      --------------------    -------------------

Net income before cumulative effect of accounting change ..........      167.3       190.8       601.3      733.9

Cumulative effect of accounting change, net of income tax .........         --          --        37.0         --
                                                                      --------------------    -------------------

      Net income ..................................................   $  167.3    $  190.8    $  638.3   $  733.9
                                                                      ====================    ===================
</TABLE>

(1)   Net of related amortization of deferred policy acquisition costs and value
      of business acquired, amounts credited to participating pension
      contractholders and the policyholder dividend obligation of $0.7 million
      and $(35.5) million for the three months ended September 30, 2004 and
      2003, respectively, and $13.3 million and $(33.5) million for the nine
      months ended September 30, 2004 and 2003, respectively.
(2)   Excluding amounts related to net realized investment and other gains
      (losses) credited to participating pension contractholders and the
      policyholder dividend obligation of $9.9 million and $(29.8) million for
      the three months ended September 30, 2004 and 2003, respectively, and
      $39.1 million and $(43.0) million for the nine months ended September
      30, 2004 and 2003, respectively.
(3)   Excluding amounts related to net realized investment and other gains
      (losses) of $(9.2) million and $(5.7) million for the three months ended
      September 30, 2004 and 2003, respectively, and $(25.8) million and $9.5
      million for the nine months ended September 30, 2004 and 2003,
      respectively.


                                       68
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Three Months Ended September 30, 2004 Compared to Three Months Ended
September 30, 2003

      As a result of Manulife's acquisition of the Company, see Note 1- Change
of Control, the Company renamed and reorganized certain businesses within its
operating segments to better align the Company with its new parent, Manulife.
The Company renamed the Asset Gathering Segment as the Wealth Management Segment
and the Maritime Life Segment was renamed the Canada Segment. In addition, the
Institutional Investment Management Segment was moved to the Corporate and Other
Segment. Other realignments include moving Signator Investors, Inc. our agent
sales organization, from Wealth Management to Protection, and Group Life, Retail
Discontinued operations, discontinued health insurance operations and Creditor
from Corporate and Other to Protection. Direct Foreign Operations (DFO) and
International Group Plans (IGP) remain in international operations in our
Corporate and Other Segment while in Manulife's segment results DFO will be
reported in Asia, and IGP will be reported in Reinsurance. The financial results
for all periods have been reclassified to conform to the current period
presentation.

      The Company operates in the following five business segments: two segments
primarily serve retail customers, one segment serves institutional customers,
one segment serves primarily Canadian retail and group customers and our fifth
segment is the Corporate and Other Segment, which includes our institutional
advisory business, the remaining international operations, and the corporate
account. Our retail segments are the Protection Segment and the Wealth
Management Segment, previously called Asset Gathering. Our institutional segment
is the Guaranteed and Structured Financial Products Segment (G&SFP). Our Canada
Segment consists primarily of the financial results of our Canadian operating
subsidiary, Maritime Life.

      Consolidated income before income taxes increased 30.8%, or $74.5 million,
for the three month period ended September 30, 2004 from the prior year. The
increase was driven by the impact of purchase accounting on tax preferenced
investments held in the Corporate and Other Segment, where income before taxes
increased $105.7 million. The benefit to income before income taxes of the
application of purchase accounting to tax preferenced investments does not flow
through to net income, or income after taxes. The application of purchase
accounting to the Company's tax preferenced investments in leveraged leases and
service contracts created discounts to cost which are being amortized to net
investment income over the term of the contract while provision for income taxes
increased for the higher earnings. A second driver of consolidated income before
income taxes was the long-term care insurance business which increased $13.9
million on improved investment income and lower amortization of DAC and VOBA
driven by purchase accounting (see further discussion in the amortization of DAC
and VOBA paragraph below). Partially offsetting these increases to income before
income taxes was a decrease in the G&SFP Segment of 80.8%, or $47.7 million. The
lower earnings in G&SFP were driven by lower investment income due to the impact
of purchase accounting and lower spreads driven by the interest rate
environment. In addition, the G&SFP Segment was subjected to increased
amortization of VOBA from prior years driven by the impact of purchase
accounting. The change in net realized investment and other gains (losses) is
the result of $9.9 million fewer impairments of securities. For additional
analysis regarding net realized investment and other gains (losses), see below
and General Account Investments in the MD&A.

      Premiums increased 8.0%, or $82.4 million, from the prior year. The
increase in premiums was due largely to a $77.2 million increase in our Canadian
operations driven by the retail protection business. In addition, premiums in
the long-term care insurance business increased by $22.3 million, or 8.9%,
primarily due to business growth resulting from strong renewal premiums.
Premiums also increased in the Corporate and Other Segment by $38.6 million
driven by the international group business. The change in Corporate and Other
Segment premiums from the prior year includes the impact of fluctuations in
currency exchange rates between the Canadian and U.S. dollar for our Canadian
operations of $25.9 million. Partially offsetting premium growth was a decrease
in the G&SFP Segment of 36.9%, or $40.4 million driven by a decline in sales of
structured settlements. Premiums in the traditional life insurance business
decreased $15.2 million due to lower single premiums from a lower dividend scale
and lower renewal premiums from run off of the closed block. In the Wealth
Management Segment premiums decreased $1.3 million on lower sales of single
premium immediate annuities.

      Universal life and investment-type product fees increased 8.7%, or $18.3
million, from the prior year. The increase in product fees was driven by a $12.0
million increase in our Canadian operations due primarily to the adoption of SOP
03-1. The adoption of this new accounting standard for long duration contracts
requires the reporting of universal life product fees on a received basis, by
replacing an "unearned revenue" reserve with a reserve for future policyholder
benefits. In addition, product fees on universal life insurance products
increased 25.9%, or $9.1 million, due primarily to a $6.7 million increase in
cost of insurance fees. Partially offsetting these increases in product fees was
a decrease in fees in the retail annuities business of $2.0 million due to lower
average account balances for variable annuities.

      Net investment income decreased 8.3%, or $86.3 million, from the prior
year. The yield, net of investment expenses, on the general account portfolio
decreased to 5.00% from 5.54% from the prior year. The decrease in yields were
driven by the April 28, 2004 asset mark to market done in accordance with
purchase accounting guidelines, for Manulife's acquisition of JHFS; lower
performance in the period on hedge fund of fund investments; at period end the
Company's asset portfolio had approximately $12 billion of floating-rate
exposure (primarily LIBOR) compared to $13 billion at September


                                       69
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

30, 2003. This exposure was created mostly through interest rate swaps designed
to match our floating-rate liability portfolio. As of September 30, 2004,
approximately 88% of this exposure, excluding cash and short-term investments,
was directly offset by exposure to floating-rate liabilities. Most of the
remaining 12% 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; certain of our tax-preferenced investments (affordable housing limited
partnerships and lease residual management) decreased the Company's net
portfolio pre-tax yield; the inflow of new cash and reinvestments within the
portfolio for the period were invested at rates that were below the portfolio
rate. Partially offsetting the decreased yield was an increase in
weighted-average invested assets of $1,241.9 million, or 1.66%, from the prior
year. For additional analysis regarding net investment income, see below and the
discussion under General Account Investments in the MD&A herein.

      Net realized investment and other gains (losses) improved 8.9%, or $5.2
million. See detail of current period net realized investment and other gains
(losses) in table below. The change in net realized investment and other gains
(losses) is the result of $9.9 million fewer impairments of securities. The
Company recorded $45.2 million in impairments of fixed maturity securities
compared to $71.2 million in the prior year. The largest impairments of fixed
maturity securities were $30.4 million on major U.S. airlines, and $14.0 million
relating to a manufacturer of parcel delivery vans. For additional analysis
regarding net realized investment and other gains(losses), see below and General
Account Investments in the MD&A.

<TABLE>
<CAPTION>
                                                Impairments
                                                    and      Gross Gain   Gross Loss      Hedging    Net Realized Investment
For the Three Months Ended September 30, 2004    Reserves    On Disposal  on Disposal   Adjustments   and Other Gain/(Loss)
                                               -----------------------------------------------------------------------------
                                                                             (in millions)
<S>                                              <C>           <C>         <C>           <C>                  <C>
Fixed maturity securities ................       $(45.2)       $58.0       $(20.9)       $  6.4               $ (1.7)
Equity securities ........................           --         13.2         (1.6)           --                 11.6
Mortgage loans on real estate ............        (11.6)         4.5         (7.6)          1.9                (12.8)
Real estate ..............................           --          2.4           --            --                  2.4
Other invested assets ....................         (6.7)         9.2         (2.3)           --                  0.2
Derivatives ..............................           --           --           --         (52.1)               (52.1)
                                               -----------------------------------------------------------------------------
               Subtotal ..................       $(63.5)       $87.3       $(32.4)       $(43.8)              $(52.4)
                                               -----------------------------------------------------------------------------

          Amortization adjustment for deferred policy acquisition costs
             and value of business acquired..................................................                    9.2
          Amounts credited to participating pension contractholders..........................                    2.1
          Amounts credited to the policyholder dividend obligation...........................                  (12.0)
                                                                                                   -------------------------
               Total.........................................................................                 $(53.1)
                                                                                                   =========================
</TABLE>

(1)   Fixed maturity securities gain on disposals includes $28.6 million of
      pre-payment gains.

       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 a fair value hedge. When an asset or liability is
so designated, its cost basis is adjusted in response to movement in interest
rates. These adjustments are non-cash and reverse with the passage of time as
the asset or liability and derivative mature. 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.

     Investment management revenues, commissions and other fees (advisory fees)
increased 3.5%, or $4.9 million, from the prior year. The increase in advisory
fees was driven by the Signator Financial Network's sales of Manulife product
during the period. Signator Financial Network's advisory fee increased $6.5
million, or 19.7%. Since the merger with Manulife, sales agents of the Company
have had a broader product group from which to sell, and have leveraged this
more diverse product base to increase their production, resulting in higher
advisory fee income for the Company. In the mutual fund business fees grew by
0.54%, or $0.4 million, over the prior year due to higher assets under
management on higher sales and market appreciation. In addition, advisory fees
in our Canadian operations increased $0.8 million, driven by new administrative
service only business. Advisory fees in our institutional asset management
business decreased 4.0% driven by lower advisory fees resulting from lower
assets under management.

      Other revenue decreased 6.4%, or $4.3 million, from the prior year. The
Company experienced decreases in other revenues in the Canadian operations of
$1.3 million, international operations of $1.6 million for the period, and $1.0
million due to the sale of the group life insurance business. Other revenue
consists principally of the revenues generated by Signature Fruit, a subsidiary
of the Company since April 2, 2001, which acquired certain assets and assumed
liabilities out of Tri Valley Growers, Inc., a cooperative association on that
date. Signature Fruit revenue increased $2.6 million, to $58.3 million for the
three months ended September 30, 2004 due to higher product sales. In addition,
other revenue includes Federal long-term care business fee revenue of


                                       70
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

$1.9 million for the three months ended September 30, 2004, a decrease of $0.3
million from the prior year.

      Benefits to policyholders decreased 1.6%, or $23.7 million, from the prior
year. The decrease in benefits to policyholders was driven by a decrease in
spread-based products of 23.0% or $80.6 million primarily due to lower annuities
and structured settlement sales and lower interest credited. Lower interest
credited was driven by the repricing of liability products at the date of the
merger with Manulife for purchase accounting which resulted in resetting the
crediting rates to a lower market rate. Despite the 6.5%, or $1.6 billion,
growth in the weighted average reserves for spread-based products, interest
credited on these products decreased $39.9 million driven by the repricing of
our liabilities at purchase date and resetting the crediting rates to current
market rates. Benefits to policyholders declined $34.4 million in the
traditional life insurance business driven by lower surrender benefits and a
decrease in the policyholder dividend obligation. The decrease in the
policyholder dividend obligation is the result of lower than expected investment
income partially offset by lower dividends. In addition, benefits to
policyholders decreased $37.8 million in the fixed annuities business driven by
lower interest credited. Partially offsetting these decreases was the group life
business increase of $20.1 million in benefits to policyholders compared to the
prior year due to a return of claim stabilization reserves to a single customer
in the prior year. The result of this transaction in the prior year was a
reduction in benefits to policyholder and an increase in dividends resulting in
no income impact. The group life business was sold effective May 1, 2003. In
addition, increases in benefits to policyholders in our Canadian operations of
$76.3 million was driven by the universal life insurance business and lower
sales of immediate annuities. In addition, benefits to policyholders increased
in the long-term care insurance business by $20.7 million, driven by growth in
the business. Demonstrating growth in the business was an increase in long-term
care insurance premiums of $22.3 million.

      Operating costs and expenses increased 0.3%, or $1.4 million. Total
operating costs and expenses were driven by increases of $8.1 million in the
universal life insurance business and $4.8 million in the long-term care
insurance business driven by growth in those businesses. The operating costs of
Signature Fruit increased $1.2 million to $59.1 million from the prior year.
Canadian operations operating costs and expenses decreased $9.6 million,
primarily due to synergies achieved through the Manulife acquisition. In
addition, operating costs and expenses decreased 26.1%, or $6.1 million, in the
G&SFP Segment driven by lower commissions and taxes, licenses and fees.

      Amortization of deferred policy acquisition costs and value of business
acquired increased 4.5%, or $3.0 million, from the prior year. The increase in
amortization of deferred policy acquisition costs (DAC) and value of business
acquired (VOBA) was driven by an increase of $56.6 million of VOBA amortization,
partially offset by a $53.6 million decrease in DAC amortization. The change in
amortization of these assets was driven by the impact of purchase accounting in
the merger with Manulife. Purchase accounting adjusted the historical deferred
policy acquisition asset to zero and created a new VOBA asset. The purchase
accounting changes in the DAC and VOBA assets and related amortization impacted
certain businesses more significantly than others. The G&SFP Segment
historically had an immaterial DAC asset and low levels of DAC amortization. The
purchase accounting applied to the merger with Manulife created a significant
VOBA asset in the G&SFP Segment, which did not exist previously. As a result
VOBA amortization in the G&SFP Segment increased $14.3 million.

      Dividends to policyholders decreased 21.7%, or $35.0 million from the
prior year. The decrease in dividends to policyholders was driven by dividends
in the traditional life insurance products which decreased 12.0%, or $13.7
million, due to a reduction in the dividend scale and a $22.4 million decrease
in dividends in the group life insurance business due to a return of claim
stabilization reserves to a single customer in the prior year. The result of
this transaction in the prior year was a reduction in benefits to policyholder
and an increase in dividends resulting in no income impact. Group life was sold
effective May 1, 2003.

      Income taxes were $149.4 million in the third quarter of 2004, compared to
$51.4 million for the third quarter of 2003. Our effective tax rate was 47.2% in
the third quarter of 2004, compared to 21.2% in the third quarter of 2003. The
higher effective tax rate was primarily due to changes in the recognition of tax
expense as a result of the purchase accounting for leveraged leases as required
by FASB Interpretation No. 21, "Accounting for Leases in a Business Combination"
and FASB Statement of Financial Accounting Standards No. 13, "Accounting for
Leases".


                                       71
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Nine Months Ended September 30, 2004 Compared to Nine Months Ended
September 30, 2003

      As a result of Manulife's acquisition of the Company, see Note 1- Change
of Control, the Company renamed and reorganized certain businesses within its
operating segments to better align the Company with its new parent, Manulife.
The Company renamed the Asset Gathering Segment as the Wealth Management Segment
and the Maritime Life Segment was renamed the Canada Segment. In addition, the
Institutional Investment Management Segment was moved to the Corporate and Other
Segment. Other realignments include moving Signator Investors, Inc. our agent
sales organization, from Wealth Management to Protection, and Group Life, Retail
Discontinued operations, discontinued health insurance operations and Creditor
from Corporate and Other to Protection. Direct Foreign Operations (DFO) and
International Group Plans (IGP) remain in international operations in our
Corporate and Other Segment while in Manulife's segment results DFO will be
reported in Asia, and IGP will be reported in Reinsurance. The financial results
for all periods have been reclassified to conform to the current period
presentation.

      The Company operates in the following five business segments: two segments
primarily serve retail customers, one segment serves institutional customers,
one segment serves primarily Canadian retail and group customers and our fifth
segment is the Corporate and Other Segment, which includes our institutional
advisory business, the remaining international operations, and the corporate
account. Our retail segments are the Protection Segment and the Wealth
Management Segment, previously called Asset Gathering. Our institutional segment
is the Guaranteed and Structured Financial Products Segment (G&SFP). Our Canada
Segment consists primarily of the financial results of our Canadian operating
subsidiary, Maritime Life.

      Consolidated income before income taxes decreased 3.3%, or $33.8 million,
for the nine month period ended September 30, 2004 from the prior year. The
decrease was driven by lower net realized investment and other gains. In the
first quarter of 2003 the Company recognized a gain of $233.8 million (and a
deferred profit of $247.7 million) on the sale of the Company's Home Office
properties. In addition, operating expenses increased 10.4%, or $129.5 million,
driven by $73.3 million in integration and transaction costs relating to the
recent merger with Manulife. Partially offsetting these items was growth in
universal life and investment product fees of 17.5%, or $108.1 million, and
9.8%, or $38.6 million, growth in advisory fees from the prior year. The
increase in product fees was driven by a 13.0% increase in average account
balance on universal life insurance products. The increase in advisory fees is
driven by 11.3% growth in average assets under management in the mutual fund
business compared to the prior year. The Company recorded an increase to net
income of $37.0 million (net of tax of $19.3 million) resulting from the
adoption of a new accounting pronouncement, Statement of Position 03-1 -
Accounting and Reporting by Insurance Enterprises for Certain Nontraditional
Long Duration Contracts and for Separate Accounts (SOP 03-1).

      Premiums increased 16.2%, or $451.1 million, from the prior year. The
increase in premiums was due largely to a $278.9 million increase in the
Canadian operations. The Canadian operations acquisition of the insurance
business of Liberty Health, a Canadian division of U.S.-based Liberty Mutual
Insurance Company and retention of in force business in the group life and
health products, as well as increased consumer product and structured settlement
sales drive the increase in premiums. In addition, premiums in the long-term
care insurance business increased by $110.6 million, or 15.8%, primarily due to
business growth resulting from strong renewal premiums. International operations
contributed to the increase in premiums with growth of $55.0 million compared to
the prior year. These increases in premiums were partially offset by a decrease
in the group life insurance business of $28.1 million due to the sale of the
group life insurance business, a decrease in the sales of single premium
annuities of $27.0 million, or 83.3%, driven by the interest rate environment
and a $38.0 million decrease in premiums in the traditional life insurance
business driven by lower single premiums from a lower dividend scale and lower
renewal premiums from run off of the closed block.

      Universal life and investment-type product fees increased 17.5%, or $108.1
million, over the prior year. The increase in product fees was driven by a $56.7
million increase in our Canadian operations due primarily to the adoption of SOP
03-1. In addition, product fees on universal life products increased 31.3%, or
$29.7 million, due primarily to a $19.3 million increase in cost of insurance
fees. Investment-type product fees increased 6.3%, or $15.4 million, in the
variable life business due primarily to the higher amortization of unearned
revenue which increased $8.1 million driven by unlocking for higher future death
claims in the first quarter of 2004. Partially offsetting these increases in
product fees was a decrease of 6.5%, or $5.7 million, in fees in the retail
annuities business.

      Net investment income decreased 2.2%, or $67.9 million, from the prior
year. The yield, net of investment expenses, on the general account portfolio
decreased to 5.30% from 5.84% in the prior year. The decrease in yields was
driven by the April 28, 2004 asset mark to market done in accordance with
purchase accounting guidelines, for Manulife's acquisition of JHFS; lower
performance in the period on hedge fund of fund investments; at period end the
Company's asset portfolio had approximately $12 billion of floating-rate
exposure (primarily LIBOR) compared to $13 billion at September 30, 2003. This
exposure was created mostly through interest rate swaps designed to match our
floating-rate liability portfolio. As of September 30, 2004, approximately 88%


                                       72
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

of this exposure, excluding cash and short-term investments, was directly offset
by exposure to floating-rate liabilities. Most of the remaining 12% 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; certain of our
tax-preferenced investments (affordable housing limited partnerships and lease
residual management) decreased the Company's net portfolio pre-tax yield; the
inflow of new cash and reinvestments within the portfolio for the period were
invested at rates that were below the portfolio rate. Partially offsetting the
decreased yield was an increase in weighted-average invested assets which grew
$5,366.5 million, or 7.54%, from the prior year. For additional analysis of net
investment income and yields see the General Account Investments section of this
MD&A.

      Net realized investment and other gains (losses) decreased 80.4%, or $75.7
million, due to the sale of the Home Office properties in the first quarter of
2003. The Company recognized a realized gain of $233.8 million (and a deferred
profit of $247.7 million) on the sale of the Company's Home Office properties in
the first quarter of 2003. See detail of current period net realized investment
and other gains (losses) in table below. The reduction in realized gains due to
the prior year sale of the Home Office was offset by a $242.9 million decrease
in impairments of fixed maturity securities, a decrease in impairments of equity
securities of $23.1 million partially offset by an increase of $33.6 million in
impairments of other invested assets. The largest impairments were $54.1 million
on fixed maturities of major U.S. airlines and $22.8 million related to other
investments in major U.S. airlines, $21.9 million on private placement
securities related to secured lease obligations of a regional retail food chain,
$27.9 million relating to a manufacturer of parcel delivery vans, $17.5 million
relating to one of the world's largest dairy companies, and $9.1 million on an
Argentinean water utility. For additional analysis regarding net realized
investment and other gains(losses), see below and General Account Investments in
the MD&A.

<TABLE>
<CAPTION>
                                                Impairments
                                                    and      Gross Gain   Gross Loss      Hedging    Net Realized Investment
For the Nine Months Ended September 30, 2004     Reserves    On Disposal  on Disposal   Adjustments   and Other Gain/(Loss)
                                               -----------------------------------------------------------------------------
                                                                             (in millions)
<S>                                              <C>           <C>         <C>           <C>                <C>
Fixed maturity securities ..............         $(144.0)      $217.5      $(53.2)       $ (70.7)           $(50.4)
Equity securities ......................            (6.2)       106.2        (3.5)            --              96.5
Mortgage loans on real estate ..........           (37.6)        21.7        (9.1)         (17.7)            (42.7)
Real estate ............................              --         80.4        (2.3)            --              78.1
Other invested assets ..................           (43.9)        18.4       (10.9)            --             (36.4)
Derivatives ............................              --           --          --          (13.4)            (13.4)
                                               -----------------------------------------------------------------------------
               Subtotal ................         $(231.7)      $444.2      $(79.0)       $(101.8)           $ 31.7
                                               -----------------------------------------------------------------------------

          Amortization adjustment for deferred policy acquisition costs
             and value of business acquired..................................................                 25.8
          Amounts credited to participating pension contractholders..........................                 (3.8)
          Amounts credited to the policyholder dividend obligation...........................                (35.3)
                                                                                                    ------------------------
               Total.........................................................................               $ 18.4
                                                                                                    ========================
</TABLE>

(1)   Fixed maturity securities gain on disposals includes $42.5 million of
      gains from previously impaired securities and $85.8 million of pre-payment
      gains.
(2)   Equity securities gain on disposal includes $9.3 million of gains from
      equity securities received as settlement compensation from an investee
      whose securities had previously been impaired.

       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 a fair value hedge. When an asset or liability is
so designated, its cost basis is adjusted in response to movement in interest
rates. These adjustments are non-cash and reverse with the passage of time as
the asset or liability and derivative mature. 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.

     Investment management revenues commissions, and other fees (advisory fees)
increased 9.8%, or $38.6 million, from the prior year. Advisory fees increased
in the mutual fund business by 8.4%, or $17.5 million, over the prior year due
to 11.3% higher assets under management. In addition, advisory fees increased
$11.4 million in the Canadian operations driven by the administrative service
only business acquired from Liberty Health. Advisory fees in our institutional
asset management business increased 5.8% despite a 4.1% decrease in weighted
average assets under management. The institutional asset management business
generated a 12.0% increase in deposits during the nine months ended September
30, 2004 from the prior year. In addition, advisory fees earned in the Signator
Financial Network increased due to sales of the Manulife product since the
merger.


                                       73
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Other revenue decreased 1.7%, or $3.3 million, from the prior year. Other
revenue consists principally of the revenues generated by Signature Fruit, a
subsidiary of the Company since April 2, 2001, which acquired certain assets and
assumed liabilities out of Tri Valley Growers, Inc., a cooperative association
on that date. Signature Fruit generated $172.6 million in revenue for the nine
months ended September 30, 2004, a decrease of $5.6 million from the prior year.
In addition, other revenue includes Federal long-term care business fee revenue
of $5.5 million for the nine months ended September 30, 2004, a decrease of $0.6
million from the prior year. In addition, the sale of the group life insurance
business in the prior year decreased other revenue by $2.0 million. Partially
offsetting these decreases was the sale of a run-off business which generated
$5.5 million in other revenue for the nine months ended September 30, 2004.

      Benefits to policyholders increased 8.3%, or $354.9 million, from the
prior year. The increase in benefits to policyholders was driven by a $277.7
million increase in our Canadian operations where we had acquired Liberty Health
and executed a reinsurance recapture transaction. In addition, benefits to
policyholders increased in the long-term care insurance business by $109.6
million, driven by growth in the business. Demonstrating growth in the business
was an increase in long-term care insurance premiums of $110.6 million. Benefits
to policyholders increased $50.3 million in the international business driven by
business growth, international business premiums increased $55.0 million. The
non-traditional life insurance business increased $25.1 million from the prior
year on higher interest credited driven by 13% growth in account values.
Partially offsetting these increases in benefits to policyholders was a $66.5
million decrease in spread-based products primarily due to lower interest
credited on the liabilities. Despite the 6.8%, or $1.6 billion, growth in the
weighted average reserves for spread-based products, interest credited on these
products decreased $73.8 million to $691.0 million driven by the repricing of
our liability portfolio at purchase date and resetting the crediting rates at
current market rates. The average crediting rate on spread-based products
decreased to 3.66%. Benefits to policyholders decreased $57.6 million in the
traditional life insurance business driven by a decrease in the closed block
policyholder dividend obligation due to lower net investment income. Also
partially offsetting the increase in benefits to policyholders was an $81.2
million decrease in the fixed annuity business primarily driven by the
amortization of the fixed annuity fair value reserve of $28.1 million, a reserve
established for purchase accounting resulting from Manulife's acquisition of the
Company, and a $41.4 million lower reserve provision for life-contingent
immediate annuities due to lower sales.

      Other operating costs and expenses increased 10.4%, or $129.5 million. The
increase was driven by a $53.5 million increase in corporate operations driven
by integration and transaction costs relating to the recent merger with
Manulife. In addition, operating costs and expenses increased $27.6 million, in
the Canadian operations due to Liberty Health's group life, group disability and
group health business acquired in the third quarter of 2003. Operating costs and
expense increased $17.5 million in the long-term care insurance business and
$11.1 million in the non-traditional life insurance business due to growth in
these product lines. Partially offsetting these increases was a decrease at
Signature Fruit of $7.6 million to $174.4 million from the prior year and a
decrease of $7.0 million due to the sale of the group life business.

      Amortization of deferred policy acquisition costs and value of business
acquired increased 30.0%, or $67.8 million, from the prior year. The increase in
amortization of deferred policy acquisition costs and value of business acquired
was driven by a $40.3 million increase in the Canadian operations due to the
impact of changes in assumed future premium levels, implementation of SOP 03-1
in the first quarter of 2004 and amortization of the VOBA asset created in the
merger with Manulife. In addition, amortization of deferred policy acquisition
costs and value of business acquired increased $22.8 million in the G&SFP
Segment driven by the VOBA asset established in this business due to purchase
accounting resulting from the merger with Manulife.

      Dividends to policyholders decreased 15.2%, or $67.5 million from the
prior year. The decrease in dividends to policyholders was driven by dividends
in the traditional life insurance products which decreased 11.5%, or $40.7
million, due to a reduction in the dividend scale and a $27.8 million decrease
in dividends due to a return of a claim stabilization reserve to a single
customer in the group life business in the prior year. The result of this
transaction in the prior year was a reduction in benefits to policyholders and
an increase in dividends resulting in no income impact. Group life was sold
effective May 1, 2003.

      Income taxes were $379.1 million in the first nine months of 2004,
compared to $280.3 million for the first nine months of 2003. Our effective tax
rate was 38.7% in the first nine months of 2004, compared to 27.6% in the first
nine months of 2003. The higher effective tax rate was primarily due to changes
in the recognition of tax expense as a result of the purchase accounting for
leveraged leases as required by FASB Interpretation No. 21, "Accounting for
Leases in a Business Combination" and FASB Statement of Financial Accounting
Standards No. 13, "Accounting for Leases".

      Cumulative effect of accounting change, net of tax, was $37.0 million.
During the nine months ended September 30, 2004, the Company adopted SOP 03-1
which requires specialized accounting for insurance companies related to
separate accounts, transfers of assets, liability valuations, returns based on a
contractually referenced pool of assets or index, accounting for contracts that
contain death or other insurance benefit features, accounting for reinsurance
and other similar contracts, accounting for annuitization benefits and sales
inducements to contractholders.


                                       74
<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.

      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 includes 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 as well as
other results (e.g. mortality, lapse). 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 hold securities with any unrealized gains and
losses over the long term. 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.


                                       75
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Overall Composition of the General Account

      Invested assets, excluding separate accounts totaled $76.8 billion and
$76.2 billion as of September 30, 2004 and December 31, 2003, respectively. On
April 28, 2004, as a result of Manulife's acquisition of John Hancock, assets
were marked to market, which became the new cost basis of those assets, in
accordance with purchase accounting guidelines. Also, the January 1, 2004
adoption of the new accounting pronouncement SOP 03-01, Accounting and Reporting
by Insurance Enterprises for Certain Non Traditional Long Duration Contracts and
for Separate Accounts, increased fixed maturity securities by $0.6 billion as of
September 30, 2004. The following table shows the composition of investments in
the general account portfolio.

<TABLE>
<CAPTION>
                                                     As of September 30,            As of December 31,
                                                             2004                          2003
                                                --------------------------------------------------------------
                                                    Carrying         % of         Carrying          % of
                                                      Value          Total          Value          Total
                                                --------------------------------------------------------------
                                                                        (in millions)
<S>                                                 <C>               <C>         <C>               <C>
Fixed maturity securities (1)............           $54,129.6          70.4%      $53,427.8          70.1%
Mortgage loans (2).......................            14,324.0          18.6        12,936.0          17.0
Real estate..............................               353.8           0.5           195.0           0.3
Policy loans (3).........................             2,103.5           2.7         2,117.9           2.8
Equity securities........................             1,054.8           1.4         1,243.5           1.6
Other invested assets ...................             3,381.9           4.4         3,011.3           4.0
Short-term investments...................                  --            --           121.6           0.2
Cash and cash equivalents (4)............             1,497.6           2.0         3,121.6           4.0
                                                --------------------------------------------------------------
       Total invested assets.............           $76,845.2         100.0%      $76,174.7         100.0%
                                                ==============================================================
</TABLE>

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $882.8 million and
      $606.3 million as of September 30, 2004 and December 31, 2003,
      respectively. The total fair value of the fixed maturity security
      portfolio was $54,129.6 million and $53,452.2 million, at September 30,
      2004 and December 31, 2003 respectively.
(2)   The fair value for the mortgage loan portfolio was $14,368.3 million and
      $13,979.5 million as of September 30, 2004 and December 31, 2003,
      respectively.
(3)   Policy loans are secured by the cash value of the underlying life
      insurance policies and do not mature in a conventional sense, but expire
      in conjunction with the related policy liabilities.
(4)   Cash and cash equivalents are included in total invested assets in the
      table above 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 primarily on the basis of 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 September 30, 2004, fixed maturity
securities represented 70.4% of general account invested assets with a carrying
value of $54.1 billion, comprised of 56.4% public securities and 43.6% private
securities. Each year, the Company directs the majority of net cash inflows into
investment grade fixed maturity securities. Typically, between 5% and 15% of
funds allocated to fixed maturity securities are invested in
below-investment-grade bonds while maintaining a policy to limit the overall
level of these bonds to no more than 10% of invested assets and the majority of
that balance in the BB category. As of September 30, 2004, the below investment
grade bonds were 6.5 % of invested assets, and 9.3% of total rated fixed
maturities. Rated fixed maturity securities exclude redeemable preferred stock.
The Company has established a long-term target of limiting investments in below
investment grade bonds to 9% and 8% of invested assets by year end 2004 and
2005, respectively, 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.


                                       76
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      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.

      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 September 30,             As of December 31,
                                                                2004                           2003
                                                  ----------------------------------------------------------------
    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.......................        $25,394.1           47.7%       $24,132.3          45.7%
     2          BBB............................         22,844.0           43.0         22,503.1          42.6
     3          BB.............................          2,405.3            4.5          2,999.3           5.7
     4          B..............................          1,712.0            3.2          1,922.4           3.6
     5          CCC and lower..................            764.1            1.4            853.5           1.6
     6          In or near default.............            127.3            0.2            410.9           0.8
                                                  ----------------------------------------------------------------
                     Subtotal..................         53,246.8          100.0%        52,821.5         100.0%
                Redeemable preferred
                    stock......................            882.8                           606.3
                                                  ----------------------------------------------------------------
                    Total fixed maturities.....        $54,129.6                       $53,427.8
                                                  ================================================================
</TABLE>

(1)   For securities that are awaiting an SVO rating, the Company has assigned a
      rating based on an analysis that it believes is equivalent to that used by
      the SVO.
(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.
(3)   Includes 78 securities that are awaiting an SVO rating, with a carrying
      value of $1,448.4 million as of September 30, 2004 and 175 securities that
      are awaiting an SVO rating, with a carrying value of $4,066.9 million at
      December 31, 2003. 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 $185.0 million notional invested in the Company's
      credit-linked note program, $165.0 million notional of written credit
      default swaps on fixed maturity securities in the AAA/AA/A category and
      $20.0 million notional of written credit default swaps on fixed maturity
      securities in the BBB category. As of December 31, 2003 the Company had
      $130.0 million notional invested in the Company's credit linked note
      program, $110.0 million notional written credit default swaps on fixed
      maturity securities in the AAA/AA/A category and $20.0 million notional
      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 an 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,
      $37.2 million of SVO Rating 2, $259.3 million of SVO Rating 3, $110.1
      million of SVO Rating 4, and $7.3 million of SVO Rating 5 underlying
      securities are included as $213.9 million of SVO Rating 1, $150.0 million
      of SVO Rating 2 and $50.0 million of SVO Rating 3 as of September 30, 2004
      and $421.0 million of SVO Rating 3, $185.2 million of SVO Rating 4, and
      $7.6 million of SVO Rating 5 underlying securities are included as $397.6
      million of SVO Rating 1, $162.1 million of SVO Rating 2 and $54.1 million
      of SVO Rating 3 as of December 31, 2003. 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 September 30, 2004 and December 31, 2003, the
      maximum amount that can be recovered under this provision was $125.0
      million and $112.8 million, respectively.

      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 rated
fixed maturity investments are investment grade, with 90.7% and 88.3% of rated
fixed maturity investments invested in Category 1 and 2 securities as of
September 30, 2004 and December 31, 2003, respectively. Below investment grade
bonds were 9.3% and 11.7% of fixed maturity investments rated by the SVO and
6.5% and 8.1% of total invested assets at September 30, 2004 and December 31,
2003, 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.


                                       77
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      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, which 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, management changes, litigation, and government
actions among others. The resulting prices are then reviewed by the pricing
analysts and members of the Security Operations 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 Manulife's Credit Committee, a group consisting of Manulife's
Chief Investment Officer, Chief Financial Officer, Chief Risk Officer, Chief
Credit Officer, and other senior management. 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 September 30, 2004 and December 31, 2003, 48.0% and 48.5% 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 $127.3 million and $410.9 million as of September 30, 2004 and December 31,
2003, respectively. As of September 30, 2004 and December 31, 2003, $0.3 million
and $4.1 million, of interest on bonds near default was included in accrued
investment income, respectively. 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 our
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
September 30, 2004 and December 31, 2003 was limited to approximately 23.9% and
23.3% of our total MBS/ABS portfolio and 4.5% and 3.5% of our total fixed
maturity securities holdings, respectively.


                                       78
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      The following exhibits show a distribution of gross unrealized loss in the
portfolio. As a result of Manulife's acquisition of the Company, the Company's
portfolio was marked to market through purchase accounting on April 28, 2004.
The gross unrealized loss position of the portfolio is fairly evenly distributed
across the portfolio. 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/Sector

<TABLE>
<CAPTION>
                                                                 Investment Grade As of September 30, 2004
                                           ------------------------------------------------------------------------------------
                                                                         Carrying                     Carrying
                                                                         Value of                     Value of
                                                                      Securities with              Securities with
                                               Total         Net           Gross         Gross          Gross          Gross
                                              Carrying    Unrealized    Unrealized     Unrealized    Unrealized     Unrealized
                                               Value     Gain (Loss)       Gains         Gains         Losses         Losses
                                           ------------------------------------------------------------------------------------
                                                                               (in millions)
<S>                                          <C>             <C>        <C>              <C>          <C>             <C>
Corporate securities:
     Banking and finance...............      $ 6,742.0       $ 78.1     $ 5,309.3        $ 92.6       $1,432.7        $ (14.5)
     Communications....................        2,940.4         30.9       2,498.4          35.7          442.0           (4.8)
     Government........................        2,714.6         44.6       2,235.9          45.4          478.7           (0.8)
     Manufacturing.....................        6,290.6         77.2       5,636.2          92.2          654.4          (15.0)
     Oil & gas.........................        3,984.5         63.3       3,554.0          68.2          430.5           (4.9)
     Services / trade..................        2,742.9         22.5       2,228.3          27.8          514.6           (5.3)
     Transportation....................        2,346.1         30.9       1,995.2          33.7          350.9           (2.8)
     Utilities.........................        7,810.5        113.3       6,881.5         120.0          929.0           (6.7)
     Other.............................          197.8         (1.7)       106.2            0.1           91.6           (1.8)
                                           ------------------------------------------------------------------------------------
   Total corporate securities..........       35,769.4        459.1      30,445.0         515.7        5,324.4          (56.6)

Asset-backed and mortgage-
    backed securities..................       10,282.6        102.6       7,174.4         146.3        3,108.2          (43.7)
U.S. Treasury securities and
    obligations of U.S. government
    agencies...........................          350.6          3.1         217.5           3.2          133.1           (0.1)
Debt securities issued by foreign
    governments (1) ...................        2,249.4         48.8       1,919.6          51.7          329.8           (2.9)
Obligations of states and political
    Subdivisions.......................          307.3         (0.1)         87.5           1.0          219.8           (1.1)
                                           ------------------------------------------------------------------------------------
     Total.............................      $48,959.3       $613.5     $39,844.0        $717.9       $9,115.3        $(104.4)
                                           ====================================================================================
</TABLE>

(1)   Includes $2,087.6 million in debt securities held by our Canadian
      insurance subsidiary and issued and fully supported by the Canadian
      federal, provincial or municipal governments.


                                       79
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

  Fixed Maturity Securities -- By Industry Classification/Sector - (continued)

<TABLE>
<CAPTION>
                                                           Below Investment Grade As of September 30, 2004
                                         -----------------------------------------------------------------------------------
                                                                      Carrying                    Carrying
                                                                      Value of                    Value of
                                                                   Securities with             Securities with
                                             Total         Net          Gross        Gross          Gross          Gross
                                            Carrying    Unrealized   Unrealized    Unrealized    Unrealized      Unrealized
                                             Value     Gain (Loss)      Gains        Gains         Losses          Losses
                                         -----------------------------------------------------------------------------------
                                                                            (in millions)
<S>                                         <C>            <C>         <C>           <C>          <C>             <C>
Corporate securities:
     Banking and finance..............      $   68.7       $  0.5      $   54.0      $  0.6       $   14.7        $  (0.1)
     Communications...................         235.9          2.3         128.9         8.3          107.0           (6.0)
     Government.......................          10.3           --           8.5          --            1.8             --
     Manufacturing....................       1,208.4         20.6         750.7        25.5          457.7           (4.9)
     Oil & gas........................         481.5         19.9         474.3        20.0            7.2           (0.1)
     Services / trade.................         306.2        (14.1)        148.2         2.5          158.0          (16.6)
     Transportation...................         335.9          2.0         154.3        14.8          181.6          (12.8)
     Utilities........................       2,091.6         28.0       1,464.6        36.4          627.0           (8.4)
     Other............................           3.8           --           --           --            3.8             --
                                         -----------------------------------------------------------------------------------
   Total corporate securities.........       4,742.3         59.2       3,183.5       108.1        1,558.8          (48.9)

Asset-backed and mortgage-
    backed securities.................         412.6         12.2         175.6        20.2          237.0           (8.0)
U.S. Treasury securities and
    obligations of U.S. government
    agencies..........................            --           --            --          --             --             --
Debt securities issued by foreign
    governments ......................          15.4          1.0          15.4         1.0             --             --
Obligations of states and political
    Subdivisions......................            --           --            --          --             --             --
                                         -----------------------------------------------------------------------------------
     Total............................      $5,170.3       $ 72.4      $3,374.5      $129.3       $1,795.8        $ (56.9)
                                         ===================================================================================
</TABLE>


                                       80
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

         Fixed Maturity Securities -- By Industry Classification/Sector

<TABLE>
<CAPTION>
                                                               Investment Grade as of December 31, 2003
                                         -----------------------------------------------------------------------------------
                                                                       Carrying                    Carrying
                                                                       Value of                    Value of
                                                                   Securities with              Securities with
                                             Total         Net          Gross         Gross          Gross          Gross
                                            Carrying    Unrealized    Unrealized    Unrealized    Unrealized     Unrealized
                                             Value     Gain (Loss)      Gains         Gains         Losses         Losses
                                         -----------------------------------------------------------------------------------
                                                                            (in millions)
<S>                                        <C>           <C>          <C>           <C>            <C>             <C>
Corporate securities:
     Banking and finance..............     $ 6,949.0     $  393.6     $ 6,083.4     $  406.6       $  865.6        $ (13.0)
     Communications...................       2,917.7        236.8       2,504.3        245.9          413.4           (9.1)
     Government.......................       3,180.5        133.6       2,134.8        140.9        1,045.7           (7.3)
     Manufacturing....................       6,405.7        394.6       5,382.6        426.1        1,023.1          (31.5)
     Oil & gas........................       3,975.1        349.4       3,804.6        355.0          170.5           (5.6)
     Services / trade.................       2,511.4        186.1       2,352.3        190.7          159.1           (4.6)
     Transportation...................       2,457.1        118.8       1,899.3        153.3          557.8          (34.5)
     Utilities........................       7,733.4        577.9       6,939.4        603.2          794.0          (25.3)

     Other............................         217.1         17.7         197.3         18.0           19.8           (0.3)
                                         -----------------------------------------------------------------------------------
   Total corporate securities.........      36,347.0      2,408.5      31,298.0      2,539.7        5,049.0         (131.2)

Asset-backed and mortgage-
    backed securities.................       7,746.9        231.4       5,868.0        312.8        1,878.9          (81.4)
U.S. Treasury securities and
    obligations of U.S. government
    agencies..........................         300.4          3.4         120.9          4.9          179.5           (1.5)
Debt securities issued by foreign
    governments (1)...................       2,183.8        240.6       2,049.2        242.8          134.6           (2.2)
Obligations of states and political
    Subdivisions......................         446.0         16.5         349.6         17.8           96.4           (1.3)
                                         -----------------------------------------------------------------------------------
     Total............................     $47,024.1     $2,900.4     $39,685.7     $3,118.0       $7,338.4        $(217.6)
                                         ===================================================================================
</TABLE>

(1)   Includes $1,905.2 million in debt securities held by our Canadian
      insurance subsidiary and issued and fully supported by the Canadian
      federal, provincial or municipal governments.


                                       81
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

   Fixed Maturity Securities -- By Industry Classification/Sector -(Continued)

<TABLE>
<CAPTION>
                                                          Below Investment Grade as of December 31, 2003
                                       ------------------------------------------------------------------------------------
                                                                      Carrying                    Carrying
                                                                      Value of                    Value of
                                                                  Securities with              Securities with
                                            Total         Net          Gross         Gross          Gross          Gross
                                          Carrying     Unrealized    Unrealized    Unrealized    Unrealized     Unrealized
                                            Value     Gain (Loss)      Gains         Gains         Losses         Losses
                                       ------------------------------------------------------------------------------------
                                                                           (in millions)
<S>                                        <C>            <C>         <C>            <C>          <C>            <C>
Corporate securities:
     Banking and finance.............      $  113.4       $ (3.6)     $   84.3       $  2.7       $   29.1       $  (6.3)
     Communications..................         209.3          8.4         110.9         17.7           98.4          (9.3)
     Government......................          11.0         (0.4)          1.5          0.2            9.5          (0.6)
     Manufacturing...................       1,433.7         62.7       1,008.0         94.0          425.7         (31.3)
     Oil & gas.......................         674.8        (31.5)        415.3         21.5          259.5         (53.0)
     Services / trade................         438.7         45.9         331.8         51.4          106.9          (5.5)
     Transportation..................         508.6        (14.3)        183.3         30.0          325.3         (44.3)
     Utilities.......................       2,615.7        107.2       1,846.0        154.4          769.7         (47.2)
     Other...........................           4.4          0.4           4.4          0.4             --            --
                                       -----------------------------------------------------------------------------------
   Total corporate securities........       6,009.6        174.8       3,985.5        372.3        2,024.1        (197.5)

Asset-backed and mortgage-
    backed securities................         381.1        (61.2)         47.7          2.3          333.4         (63.5)
Debt securities issued by foreign
    governments  ....................          13.0          0.6           8.9          0.7            4.1          (0.1)
                                       -----------------------------------------------------------------------------------
     Total...........................      $6,403.7       $114.2      $4,042.1       $375.3       $2,361.6       $(261.1)
                                       ===================================================================================
</TABLE>

      As of September 30, 2004 and December 31, 2003, there were gross
unrealized gains of $847.2 million and $3,493.3 million, and gross unrealized
losses of $161.3 million and $478.7 million on the fixed maturities portfolio.
As of September 30, 2004 gross unrealized losses of $161.3 million was fairly
evenly distributed across the portfolio. The tables above show gross unrealized
losses before amounts that are allocated to the closed block policyholders or
participating pension contractholders. Of the $161.3 million of gross unrealized
losses in the portfolio at September 30, 2004, $17.5 million was in the closed
block and $10.0 million has been allocated to participating pension
contractholders, leaving $133.8 million of gross unrealized losses after such
allocations. The 2003 gross unrealized losses of $478.7 million included $417.6
million, or 87.2%, of gross unrealized losses concentrated in the utilities,
manufacturing, oil and gas, transportation and asset-backed and mortgage-backed
securities. The tables above show gross unrealized losses before amounts that
were allocated to the closed block policyholders or participating pension
contractholders. Of the $478.7 million of gross unrealized losses in the
portfolio at December 31, 2003, $61.8 million was in the closed block and $20.2
million was allocated to participating pension contractholders, leaving $396.7
million of gross unrealized losses after such allocations.

      Unrealized losses can be created by rising interest rates or by rising
credit concerns and hence widening credit spreads. Credit concerns are apt to
play a larger role in the unrealized loss on below investment grade bonds and
hence the gross unrealized loss on the portfolio has been split between
investment grade and below investment grade bonds in the above tables. The gross
unrealized loss on below investment grade fixed maturity securities declined
from $261.1 million at December 31, 2003 to $56.9 million at September 30, 2004
primarily due to the marking to market of the portfolio at April 28, 2004. The
gross unrealized loss on September 30, 2004 was largely due to interest rate
changes since April 28, 2004 and is fairly evenly distributed across the
portfolio.

      We remain most concerned about the airline sector. We lend to this
industry almost exclusively on a secured basis (all of our current holdings 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 have 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 they account for $11.4 million and $58.6 million of


                                       82
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

the $51.7 million and $144.9 million of gross unrealized loss in the
asset-backed and mortgage-backed securities category as of September 30, 2004
and December 31, 2003, respectively. While the airline industry is making
positive strides in reducing its cost structure, a significant recovery in this
sector requires a growing economy and a pick up in business travel. In the most
recent quarter ending September 30, 2004, U.S. carriers have reported
disappointing results as continued increases in fuel prices have offset
increases in traffic. We do expect the airline sector to improve barring any new
terrorist events or a reversal of the course of the U.S. economy. We do still
expect that the senior secured nature of our loans to this industry will protect
our holdings through this difficult time.

      The following table shows the composition by credit quality of the
securities with gross unrealized losses in our fixed maturity securities
portfolio. The gross unrealized loss on investment grade bonds (those rated in
categories 1 and 2 by the SVO) decreased by $103.0 million in the nine month
period ending September 30, 2004 to $104.1 million. The gross unrealized loss on
below investment grade bonds (those rated in categories 3, 4, 5 and 6 by the
SVO) declined over this period, dropping by $204.5 million to a total of $56.0
million as of September 30, 2004 which was driven by the mark to market offset
by a subsequent increase in interest rates.

          Unrealized Losses on Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                                     As of September 30, 2004
                                                  ----------------------------------------------------------------
                                                   Carrying Value of
                                                    Securities with
                                                         Gross
   SVO                 S&P Equivalent                  Unrealized         % of      Gross Unrealized     % of
Rating (1)            Designation (2)                  Losses (3)         Total        Losses (3)        Total
------------------------------------------------------------------------------------------------------------------
                                                     (in millions)                  (in millions)
<S>            <C>                                       <C>              <C>           <C>             <C>
    1          AAA/AA/A.......................           $ 5,858.1         54.7%        $ (63.9)         39.9%
    2          BBB............................             3,174.8         29.6           (40.2)         25.2
    3          BB.............................               814.5          7.6           (27.2)         17.0
    4          B..............................               528.4          4.9            (9.8)          6.1
    5          CCC and lower..................               332.7          3.1           (17.3)         10.8
    6          In or near default.............                11.4          0.1            (1.7)          1.0
                                                  ----------------------------------------------------------------
                    Subtotal..................            10,719.9        100.0%         (160.1)        100.0%
               Redeemable preferred stock.....               191.2                         (1.2)
                                                  ----------------------------------------------------------------
                    Total.....................           $10,911.1                      $(161.3)
                                                  ================================================================
</TABLE>

(1)   With respect to securities that are awaiting 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 12 securities with gross unrealized losses that are awaiting an
      SVO rating with a carrying value of $109.9 million and unrealized losses
      of $1.7 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 1.0% and 1.05% of the
      total carrying value and total gross unrealized losses of securities in a
      loss position, including redeemable preferred stock, respectively.


                                       83
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

          Unrealized Losses on Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                                     As of December 31, 2003
                                                 -----------------------------------------------------------------
                                                   Carrying Value of
                                                    Securities with
  SVO                                                    Gross
Rating               S&P Equivalent                   Unrealized            % of     Gross Unrealized    % of
  (1)                Designation (2)                  Losses (3)            Total        Losses (3)      Total
------------------------------------------------------------------------------------------------------------------
                                                     (in millions)                  (in millions)

<S>                                                      <C>              <C>              <C>          <C>
   1         AAA/AA/A..........................          $4,860.6          51.3%           $ (99.2)      21.2%
   2         BBB...............................           2,247.6          23.7             (107.9)      23.1
   3         BB................................             673.2           7.1              (74.2)      15.9
   4         B.................................           1,069.7          11.3              (90.6)      19.4
   5         CCC and lower.....................             465.0           4.9              (84.8)      18.1
   6         In or near default................             151.3           1.7              (10.9)       2.3
                                                 -----------------------------------------------------------------
                     Subtotal..................           9,467.4         100.0%            (467.6)     100.0%
             Redeemable preferred stock........             232.6                            (11.1)
                                                 -----------------------------------------------------------------
                    Total......................          $9,700.0                          $(478.7)
                                                 =================================================================
</TABLE>

(1)   With respect to securities that are awaiting 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 59 securities with gross unrealized losses are awaiting an SVO
      rating with a carrying value of $1,798.1 million and unrealized losses of
      $27.4 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 18.5% and 5.7% of the
      total carrying value and total gross unrealized losses of securities in a
      loss position, including redeemable preferred stock, respectively.

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

<TABLE>
<CAPTION>
                                                                            As of September 30, 2004
                                            ----------------------------------------------------------------------------------------
                                                         Investment Grade                           Below Investment Grade
                                            --------------------------------------------  ------------------------------------------
                                            Carrying Value of                             Carrying Value of
                                             Securities with                               Securities with
                                             Gross Unrealized    Hedging       Market      Gross Unrealized   Hedging     Market
                                                  Losses       Adjustments  Depreciation        Losses      Adjustments Depreciation
                                            --------------------------------------------  ------------------------------------------
                                                              (in millions)                                (in millions)
<S>                                            <C>             <C>           <C>               <C>          <C>           <C>
Three months or less ......................    $1,332.5        $   (2.2)     $  (28.4)         $  431.6     $   (2.4)     $   (9.8)
Greater than three months to six months ...     7,700.4            (9.4)        (64.1)          1,255.4         (5.4)        (38.4)
Greater than six months to nine months ....          --              --            --                --           --            --
Greater than nine months to twelve months .          --              --            --                --           --            --
Greater than twelve months ................          --              --            --                --           --            --
                                            --------------------------------------------  ------------------------------------------
     Subtotal .............................     9,032.9           (11.6)        (92.5)          1,687.0         (7.8)        (48.2)
Redeemable preferred stock ................        82.4              --          (0.3)            108.8           --          (0.9)
                                            --------------------------------------------  ------------------------------------------
     Total ................................    $9,115.3        $  (11.6)     $  (92.8)         $1,795.8     $   (7.8)     $  (49.1)
                                            ============================================  ==========================================
</TABLE>


                                       84
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

<TABLE>
<CAPTION>
                                                                          As of December 31, 2003
                                              --------------------------------------------------------------------------------
                                                         Investment Grade                      Below Investment Grade
                                              -------------------------------------  -----------------------------------------
                                               Carrying                               Carrying
                                               Value of                               Value of
                                              Securities                             Securities
                                              with Gross                             with 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 .....................     $2,006.9   $  (12.3)   $  (19.2)       $  248.4     $   (3.8)       $   (7.5)
Greater than three months to six months ..      1,422.8       (5.6)      (28.3)          123.2         (1.8)           (1.1)
Greater than six months to nine months ...        947.3       (1.0)      (33.2)          125.2         (2.5)          (10.9)
Greater than nine months to twelve months         208.3      (14.0)       (7.8)          196.2         (1.2)           (2.8)
Greater than twelve months ...............      2,522.9      (43.7)      (42.0)        1,666.2        (61.7)         (167.2)
                                              -------------------------------------  -----------------------------------------
         Subtotal ........................      7,108.2      (76.6)     (130.5)        2,359.2        (71.0)         (189.5)
Redeemable preferred stock ...............        230.2       (0.1)      (10.4)            2.4           --            (0.6)
                                              -------------------------------------  -----------------------------------------
        Total ............................     $7,338.4   $  (76.7)   $ (140.9)       $2,361.6     $  (71.0)       $ (190.1)
                                              =====================================  =========================================
</TABLE>

      The tables above show the Company's investment grade and below investment
grade securities that were in a loss position at September 30, 2004 and December
31, 2003 by the amount of time the security has been in a loss position. Gross
unrealized losses from hedging adjustments represent 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 with the passage of 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.

      As of September 30, 2004 and December 31, 2003, respectively, the fixed
maturity securities had a total gross unrealized loss of $141.9 million and
$331.0 million, excluding basis adjustments related to hedging relationships. As
of September 30, 2004, the aging of securities reflects the mark to market on
April 28, 2004. 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.

      The scheduled maturity dates for securities in an unrealized loss position
at September 30, 2004 and December 31, 2003 is shown below.

          Unrealized Losses on Fixed Maturity Securities -- By Maturity

<TABLE>
<CAPTION>
                                                                  September 30, 2004             December 31, 2003
                                                             ----------------------------  ------------------------------
                                                              Carrying Value                Carrying Value
                                                              of Securities     Gross       of Securities      Gross
                                                                with Gross    Unrealized      with Gross    Unrealized
                                                             Unrealized Loss     Loss      Unrealized Loss     Loss
                                                             ----------------------------  ------------------------------
                                                                    (in millions)                  (in millions)

<S>                                                             <C>             <C>              <C>           <C>
Due in one year or less...................................      $ 1,021.9       $   (7.5)        $  403.3      $ (11.8)
Due after one year through five years.....................        2,932.8          (35.9)         1,538.5        (75.5)
Due after five years through ten years....................        1,720.9          (33.9)         2,042.9       (105.0)
Due after ten years.......................................        1,890.3          (32.3)         3,503.0       (141.5)
                                                             ----------------------------  ------------------------------
                                                                  7,565.9         (109.6)         7,487.7       (333.8)
Asset-backed and mortgage-backed securities...............        3,345.2          (51.7)         2,212.3       (144.9)
                                                             ----------------------------  ------------------------------
     Total................................................      $10,911.1       $ (161.3)        $9,700.0      $(478.7)
                                                             ============================  ==============================
</TABLE>


                                       85
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      As of September 30, 2004 there were 35 securities, with an unrealized loss
totaling $26.9 million, representing 2 credit exposures with unrealized losses
of $10 million or more. These credit exposures are in a recreational and real
estate-based company and a federally sponsored credit agency whose unrealized
loss is interest rate driven.

      As of December 31, 2003 there were 59 securities representing 9 credit
exposures with unrealized losses of $10 million or more, with an amortized cost
of $1,048.3 million and unrealized losses of $136.3 million. 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. We intend to hold these
securities until they either mature or recover in value.

      Mortgage Loans. As of September 30, 2004 and December 31, 2003, the
Company held mortgage loans with a carrying value of $14.3 billion and $12.9
billion, including $3.1 billion and $3.0 billion respectively, of agricultural
loans and $11.2 billion and $9.9 billion, respectively, of commercial loans.
Impaired loans comprised 0.6% and 1.0% of the mortgage portfolio as of September
30, 2004 and December 31, 2003, respectively. Maritime Life managed $2.4 billion
and $2.0 billion, respectively, of which $1.3 billion and $1.1 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 September 30, 2004                   As of December 31, 2003
                              ------------------------------------------  -----------------------------------------
                                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..............      $1,812.1     $1,799.2        58.8%         $1,864.4     $1,864.0        61.5%
Timber.....................       1,245.4      1,245.1        40.7%          1,174.6      1,146.5        37.8
Production agriculture.....          15.3         15.3         0.5%             19.0         19.0         0.7
                              ------------------------------------------  -----------------------------------------
    Total                        $3,072.8     $3,059.6       100.0%         $3,058.0     $3,029.5       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 fully, or
nearly fully, leased commercial properties.

                                  Mortgage Loans - By Property Type

                       As of September 30, 2004        As of December 31, 2003
                    ------------------------------------------------------------
                        Carrying         % of          Carrying         % of
                         Value           Total          Value           Total
                    ------------------------------------------------------------
                     (in millions)                  (in millions)
Apartment.........      $ 2,732.5         19.1%         $ 2,365.0         18.3%
Office Buildings..        2,765.4         19.3            2,711.5         21.0
Retail............        2,945.8         20.6            2,329.6         18.0
Agricultural......        3,059.6         21.3            3,029.5         23.4
Industrial........        1,234.0          8.6            1,180.4          9.1
Hotels............          466.9          3.3              473.2          3.7
Multi-Family......           15.3          0.1               27.2          0.2
Mixed Use.........          404.2          2.8              284.9          2.2
Other.............          700.3          4.9              534.7          4.1
                    ------------------------------------------------------------
     Total........      $14,324.0        100.0%         $12,936.0        100.0%
                    ============================================================


                                       86
<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

                         As of September 30, 2004       As of December 31, 2003
                       --------------------------------------------------------
                        Number    Carrying     % of        Carrying     % of
                       Of Loans     Value     Total         Value       Total
                       --------------------------------------------------------
                                (in millions)           (in millions)
East North Central...      141     $1,249.5      8.7%       $1,118.4       8.6%
East South Central...       40        447.8      3.1           412.2       3.2
Middle Atlantic......      119      1,669.3     11.7         1,449.5      11.2
Mountain.............       96        735.4      5.1           511.3       4.0
New England..........       93        935.0      6.5           869.6       6.7
Pacific..............      272      2,603.3     18.2         2,378.2      18.4
South Atlantic.......      209      2,526.0     17.6         2,378.3      18.4
West North Central...       69        450.1      3.1           434.5       3.4
West South Central...      118      1,071.1      7.5         1,024.1       7.9
Canada/Other.........      846      2,636.5     18.5         2,359.9      18.2
                       --------------------------------------------------------
     Total...........    2,003    $14,324.0    100.0%      $12,936.0     100.0%
                       ========================================================

      The following table 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.

                            Mortgage Loan Comparisons

<TABLE>
<CAPTION>
                                                           As of September 30,                    As of December 31,
                                                                   2004                                  2003
                                                   ------------------------------------  -------------------------------------
                                                      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 ..................     $  4.5              --                 $  2.6                 --
Delinquent, in foreclosure ......................       58.5             0.4%                  92.7                0.7%
Restructured ....................................       67.3             0.5                   87.8                0.7
Loans foreclosed during period ..................         --              --                   23.9                0.2
                                                   ------------------------------------  -------------------------------------
   Subtotal .....................................      130.3             0.9%                 207.0                1.6%
All other loans with valuation allowance ........       63.0             0.5%                   8.4                0.1%
                                                   ------------------------------------  -------------------------------------
   Total ........................................     $193.3             1.4%                $215.4                1.7%
                                                   ------------------------------------  -------------------------------------
Valuation allowance .............................     $ 20.0                                 $ 66.2
                                                   ===========                           ============
</TABLE>

(1)   As of September 30, 2004 and December 31, 2003 the Company held mortgage
      loans with a carrying value of $14.3 billion and $12.9 billion,
      respectively.

      The valuation allowance 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 valuation allowance for the mortgage loan portfolio was $20.0 million, or no
appreciable percent of the carrying value of the portfolio as of September 30,
2004. The decrease in the valuation allowance from December 31, 2003 was driven
by the purchase accounting mark to market on April 28, 2004.


                                       87
<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>
                                                             Three Months Ended                       Nine Months Ended
                                                  September 30, 2004   September 30, 2003   September 30, 2004   September 30, 2003
                                                 -----------------------------------------------------------------------------------
                                                  Yield     Amount     Yield     Amount    Yield     Amount    Yield      Amount
                                                 -----------------------------------------------------------------------------------
                                                        (in millions)       (in millions)        (in millions)       (in millions)
<S>                                              <C>     <C>          <C>     <C>          <C>     <C>          <C>     <C>
General account assets-excluding
Policy loans
   Gross income ...............................  5.16%   $   956.4    5.77%   $ 1,050.2    5.50%   $ 3,076.2    6.10%   $ 3,160.9
   Ending assets-excluding policy Loans (1) ...           74,741.7             73,044.8             74,741.7             73,044.8
Policy loans
   Gross income ...............................  5.66%        29.9    6.18%        32.5    5.76%        91.4    6.11%        96.2
   Ending assets ..............................            2,103.5              2,107.8              2,103.5              2,107.8
                                                                              ---------                                 ---------

      Total gross income ......................  5.18%   $   986.3    5.78%   $ 1,082.7    5.51%   $ 3,167.6    6.10%   $ 3,257.1
      Less: investment expenses ...............              (34.1)               (44.2)              (118.4)              (140.0)
                                                         ---------            ---------            ---------            ---------
        Net investment income .................  5.00%   $   952.2    5.54%   $ 1,038.5    5.30%   $ 3,049.2    5.84%   $ 3,117.1
                                                         =========            =========            =========            =========
</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.

Three Months Ended September 30, 2004 Compared to Three Months Ended
September 30, 2003

      Net investment income decreased $86.3 million from comparable prior year
period. The yield for the three months ended September 30, 2004, net of
investment expenses, on the general account portfolio decreased to 5.00% from
5.54% for the three months ended September 30, 2003. In summary, the change in
yields was driven by the following factors:

      o     On April 28, 2004, as a result of Manulife's acquisition of John
            Hancock, assets were marked to market in accordance with purchase
            accounting rules. The impact of the asset adjustment and related
            amortization was a reduction in yield of approximately 37 basis
            points for the third quarter of 2004 compared to the third quarter
            of 2003.

      o     Lower performance in the quarter on hedge fund of fund investments
            had a dilutive effect on the net portfolio yield on a pre-tax basis.
            The impact was approximately a 13 basis point reduction in portfolio
            yield in the third quarter of 2004 compared to the third quarter of
            2003.

      o     As of September 30, 2004, the Company's asset portfolio had
            approximately $12 billion of floating-rate exposure (primarily
            LIBOR). This compares to a $13 billion level of exposure as of
            September 30, 2003. This exposure was created mostly through
            interest rate swaps designed to match our floating-rate liability
            portfolio. As of September 30, 2004, approximately 88% of this
            exposure, excluding cash and short-term investments, was directly
            offset by exposure to floating-rate liabilities. Most of the
            remaining 12% 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. The impact was a reduction of 37
            basis points this quarter compared to 50 basis points a year ago.

      o     Certain of our tax-preferenced investments (affordable housing
            limited partnerships and lease residual management) dilute the
            Company's net portfolio yield on a pre-tax basis. For the three
            month period ended September 30, 2004, this dilutive effect was 7
            basis points, compared to 9 basis points in the comparable prior
            year period. However, adjusting for taxes, these investments
            increased the Company's net income by $0.5 million in the third
            quarter of 2004 compared to the third quarter of 2003.

      o     Investment expenses were reduced $10.1 million in the three month
            period ended September 30, 2004 compared to the prior year. Included
            are reductions in state income tax, home office real estate expenses
            (the majority of the home office real estate was sold in March
            2003), and miscellaneous expenses.


                                       88
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      o     The inflow of new cash for the three month period ending September
            30, 2004 was invested at rates that were below the portfolio rate.
            In addition, maturing assets were rolling over into new investments
            at rates below the portfolio rate. In the three month period ended
            September 30, 2004, weighted-average invested assets grew $1,241.9
            million, or 1.66%, from the prior year.

Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30,
2003

      Net investment income decreased $67.9 million from comparable prior year
period. The yield for the nine months ended September 30, 2004, net of
investment expenses, on the general account portfolio decreased to 5.30% from
5.84% for the nine months ended September 30, 2003. In summary, the change in
yields was driven by the following factors:

      o     On April 28, 2004, as a result of Manulife's acquisition of John
            Hancock, assets were marked to market in accordance with purchase
            accounting rules. The impact of the asset adjustment and related
            amortization was a reduction in yield of approximately 30 basis
            points for the nine months ended September 30, 2004 compared to the
            same period last year.

      o     Lower performance in the quarter on hedge fund of fund investments
            had a dilutive effect on the net portfolio yield on a pre-tax basis.
            The impact was approximately a 4 basis point reduction in portfolio
            yield for the nine months ended September 30, 2004 compared to the
            same period last year.

      o     As of September 30, 2004, the Company's asset portfolio had
            approximately $12 billion of floating-rate exposure (primarily
            LIBOR). This compares to a $13 billion level of exposure as of
            September 30, 2003. This exposure was created mostly through
            interest rate swaps designed to match our floating-rate liability
            portfolio. As of September 30, 2004, approximately 88% of this
            exposure, excluding cash and short-term investments, was directly
            offset by exposure to floating-rate liabilities. Most of the
            remaining 12% 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. The impact was 55 basis points
            this quarter compared to 63 basis points a year ago.

      o     Certain of our tax-preferenced investments (affordable housing
            limited partnerships and lease residual management) dilute the
            Company's net portfolio yield on a pre-tax basis. For the nine month
            period ended September 30, 2004, this dilutive effect was 8 basis
            points, compared to 8 basis points in the comparable prior year
            period. However, adjusting for taxes, these investments increased
            the Company's net income by $2.6 million for the nine months ended
            September 20, 2004 compared to the same period last year.

      o     Investment expenses were reduced $21.6 million in the nine month
            period ended September 30, 2004 compared to the prior year. Included
            are reductions in state income tax, home office real estate expenses
            (the majority of the home office real estate was sold in March
            2003), and miscellaneous expenses.

      o     The inflow of new cash for the nine month period ending September
            30, 2004 was invested at rates that were below the portfolio rate.
            In addition, maturing assets were rolling over into new investments
            at rates below the portfolio rate. In the nine month period ended
            September 30, 2004, weighted-average invested assets grew $5,366.5
            million, or 7.54%, from the prior year


                                       89
<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>
                                              Impairments
                                                  and       Gross Gain    Gross Loss       Hedging     Net Realized Investment
For the Three Months Ended September 30, 2004   Reserves   On Disposal   on Disposal     Adjustments    and Other Gain/(Loss)
                                              --------------------------------------------------------------------------------
                                                                              (in millions)
<S>                                             <C>           <C>          <C>             <C>                   <C>
Fixed maturity securities (1) ...............   $(45.2)       $ 58.0       $(20.9)         $  6.4                $ (1.7)
Equity securities ...........................       --          13.2         (1.6)             --                  11.6
Mortgage loans on real estate ...............    (11.6)          4.5         (7.6)            1.9                 (12.8)
Real estate .................................       --           2.4           --              --                   2.4
Other invested assets .......................     (6.7)          9.2         (2.3)             --                   0.2
Derivatives .................................       --            --           --           (52.1)                (52.1)
                                              --------------------------------------------------------------------------------
               Subtotal .....................   $(63.5)       $ 87.3       $(32.4)         $(43.8)                (52.4)
                                              --------------------------------------------------------------------------------

          Amortization adjustment for deferred policy acquisition costs
             and value of business acquired..................................................                       9.2
          Amounts credited to participating pension contractholders..........................                       2.1
          Amounts credited to the policyholder dividend obligation...........................                     (12.0)
                                                                                                      ------------------------
               Total.........................................................................                    $(53.1)
                                                                                                      ========================
</TABLE>

      (1)   Fixed maturity securities gain on disposals includes $28.6 million
            of pre-payment gains.

<TABLE>
<CAPTION>
                                             Impairments
                                                 and       Gross Gain   Gross Loss      Hedging    Net Realized Investment
For the Nine Months Ended September 30, 2004  Reserves    On Disposal   on Disposal   Adjustments   and Other Gain/(Loss)
                                             -----------------------------------------------------------------------------
                                                                            (in millions)
<S>                                           <C>           <C>          <C>           <C>                   <C>
Fixed maturity securities (1) ............    $(144.0)      $217.5       $(53.2)       $(70.7)               $(50.4)
Equity securities (2) ....................      (6.2)        106.2         (3.5)           --                  96.5
Mortgage loans on real estate ............     (37.6)         21.7         (9.1)        (17.7)                (42.7)
Real estate ..............................        --          80.4         (2.3)           --                  78.1
Other invested assets ....................     (43.9)         18.4        (10.9)           --                 (36.4)
Derivatives ..............................        --            --           --         (13.4)                (13.4)
                                             -----------------------------------------------------------------------------
               Subtotal ..................    $(231.7)      $444.2       $(79.0)       $(101.8)                31.7
                                             -----------------------------------------------------------------------------

          Amortization adjustment for deferred policy acquisition costs
             and value of business acquired..................................................                  25.8
          Amounts credited to participating pension contractholders..........................                  (3.8)
          Amounts credited to the policyholder dividend obligation...........................                 (35.3)
                                                                                                    ----------------------
               Total.........................................................................                $ 18.4
                                                                                                    ======================
</TABLE>

      (1)   Fixed maturity securities gain on disposals includes $42.5 million
            of gains from previously impaired securities and $85.8 million of
            pre-payment gains.
      (2)   Equity securities gain on disposal includes $9.3 million of gains
            from equity securities received as settlement compensation from an
            investee whose securities had previously been impaired.

      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 hedges. When an asset or liability is
so designated, its cost basis is adjusted in response to movement in interest
rates. These adjustments are non-cash and reverse with the passage of time as
the asset or liability and derivative mature. 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.

      For the three and nine month periods ended September 30, 2004 net realized
investment and other gains/(losses) was a loss of $53.1 million and a gain of
$18.4 million, respectively. For the same time period, gross losses on
impairments and on disposal of investments - including bonds, equities, real
estate, mortgages and other invested assets was $95.9 million and $310.7
million, respectively, excluding hedging adjustments. For the three and nine
month periods ended September 30, 2003, net realized investment and other


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

gains/(losses) were a loss of $58.3 million and a gain of $94.1 million,
respectively. Gross losses on impairments and disposals of investments,
excluding hedging adjustments, were $124.9 million and $548.6 million, for the
three and nine month periods ended September 30, 2003, respectively.

      For the three and nine month periods ended September 30, 2004,
respectively, realized gains on disposal of fixed maturities, excluding hedging
adjustments, were $58.0 million and $217.5 million, respectively. These gains
resulted from managing the portfolios for tax optimization and ongoing portfolio
positioning, as well as $28.6 million and $85.8 million of prepayments for the
three and nine month periods ended September 30, 2004, respectively. There were
no recoveries on sales of previously impaired securities and $42.5 million of
recoveries on sales of previously impaired securities, for the three and nine
month periods ended September 30, 2004, respectively.

      For the three and nine month period ended September 30, 2004, realized
losses on the disposal of fixed maturities, excluding hedging adjustments, were
$20.9 million and $53.2 million, respectively. The Company generally intends to
hold securities in unrealized loss positions until they mature or recover.
However, fixed maturities are sold under certain circumstances such as when new
information causes a change in the 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.

      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 Credit Officer of Manulife. 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
amortized cost. The results of this analysis are reviewed by the Credit
Committee at Manulife. This committee includes Manulife's Chief Financial
Officer, Chief Investment Officer, Chief Risk Officer, Chief Credit Officer, and
other senior management. 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) fraudulent information 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 three and nine month period ended September 30, 2004 of
$45.1 million and $158.3 million, respectively, (including impairment losses of
$45.2 million and $144.0 million, and a gain of $0.1 million and a loss of $14.3
million of previously recognized gains where the bond was part of a hedging
relationship, for three and nine month period ended September 30, 2004,
respectively).


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Impairments and Losses on Disposals - Three Months Ended September 30, 2004

      Of the $20.9 million of realized losses on sales of fixed maturity
securities for the three months ended September 30, 2004, there were no
significant credit losses. Most of the sales were related to general portfolio
management, largely due to redeploying high quality, liquid public bonds into
more permanent investments and the losses resulted from increasing interest
rates during the quarter.

      The Company recorded $45.2 million of other than temporary impairments on
fixed maturity securities for the three months ended September 30, 2004. These
impairments primarily relate to securities in the airline industry ($30.6
million) and manufacturer of parcel delivery vans ($14.0 million).

      The Company recorded losses due to other than temporary impairments of
lease investments and CDO and CBO equity investments of $6.7 million for three
month period ended September 30, 2004. Equity investments in CDOs and CBOs take
the first loss risk in a pool of high yield debt. We have a total remaining
carrying value of $39.3 million and $60.0 million of CDO equity as of September
30, 2004 and December 31, 2003, which is currently supported by expected cash
flows.

      The Company did not recognize any losses on other than temporary
impairments of common stock for the three month period ended September 30, 2004.

      The Company recorded a net loss of $12.8 million on mortgage loans for the
three month period ended September 30, 2004 (of which $1.9 million was gains on
hedging adjustments). Included in this loss is an $11.6 million increase to
reserves for a retailer and an agricultural products company, for the three
months ended September 30, 2004.

      There were also gains of $13.2 million on the sale of equity securities as
part of our overall investment strategy of using equity gains to offset credit
losses in the long term, gains of $9.2 million from the sale of other invested
assets, and gains of $2.4 million resulting from the sale of real estate for the
three month period ended September 30, 2004. Net derivative activity resulted in
a loss of $52.1 million for the three months ended September 30, 2004 resulting
from a slightly larger impact from interest rate changes on the Company's fair
value of hedged items in comparison to the changes in fair value of its
derivatives hedging those items and the change in the fair value of derivatives
that do not qualify for hedge accounting.

Impairments and Losses on Disposals - Nine Months Ended September 30, 2004

      Of the $53.2 million of realized losses on sales of fixed maturity
securities for the nine months ended September 30, 2004, there was a total of
$0.6 million in credit losses. Most of the sales were related to general
portfolio management, largely due to redeploying high quality, liquid public
bonds into more permanent investments and the losses resulted from increasing
interest rates during the period.

      The Company recorded $144.0 million of other than temporary impairments of
fixed maturity securities for the nine months ended September 30, 2004. These
impairments relate primarily to securities: in the airline industry ($54.1
million), of a manufacturer of parcel delivery vans ($27.9 million), of a
private placement related to secured lease obligations of a regional retail food
chain ($21.9 million) and of one of the world's largest dairy companies ($17.5
million).

      The Company recorded losses due to other than temporary impairments of
lease investments and CDO and CBO equity investments of $43.9 million for nine
month period ended September 30, 2004. The impairments on lease investments of
$37.0 million, primarily in the US airline industry, drove the total impairments
on other invested assets. There were $6.9 million in impairments on CDO and CBO
equity investments for the period. Equity investments in CDOs and CBOs take the
first loss risk in a pool of high yield debt. We have a total remaining carrying
value of $39.3 million and $60.0 million of CDO and CBO equity investments as of
September 30, 2004 and December 31, 2003, which is currently supported by
expected cash flows.

      The Company also recognized losses on other than temporary impairments of
common stock of $6.2 million for the nine month period ended September 30, 2004
as the result of market values falling below cost for more than nine months.

      The Company recorded a loss of $42.7 million on mortgage loans for the
nine month period ended September 30, 2004 (of which $17.7 million was losses on
hedging adjustments). Included in this loss is a $37.6 million increase to
reserves for a refrigeration warehouse company, a milling company, a retailer
and an agricultural products company, for the nine months ended September 30,
2004.


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      There were also gains of $106.2 million on the sale of equity securities
as part of our overall investment strategy of using equity gains to offset
credit losses in the long term, gains of $18.4 million from the sale of other
invested assets, and gains of $80.4 million resulting from the sale of real
estate for the nine month period ended September 30, 2004. Net derivative
activity resulted in a loss of $13.4 million for the nine months ended September
30, 2004 resulting from a slightly larger impact from interest rate changes on
the Company's fair value of hedged a items in comparison to the changes in fair
value of its derivatives hedging those items and the change in the fair value of
derivatives that do not qualify for hedge accounting.

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 subsidiaries both domestic and international.
The Company's cash flow primarily consists of dividends from its operating
subsidiaries and proceeds from the Company's debt offerings offset by expenses
or dividend payments to its parent Manulife. See the Merger with Manulife
Financial Corporation section of this MD&A. 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, and paying
dividends to its parent substantially depends upon dividends from its operating
subsidiaries.

      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.

Parent and Primary Operating Subsidiaries

      As of April 28, 2004, the Company is a wholly owned subsidiary of Manulife
Financial Corporation. The Company's primary insurance operations are those of
the Life Company and Maritime Life. 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.

      Canadian insurance laws generally restrict the ability of insurance
companies to pay cash dividends in excess of prescribed limitations without
prior approval. Maritime Life, our Canadian life insurance subsidiary, is
subject to restrictions on dividend payments to its holding company, John
Hancock Canadian Holdings, Ltd, by Canadian regulators. Maritime Life may not
make dividend payments which would make its minimum continuing capital and
surplus ratio fall below 150%, as required by the Office of the Superintendent
of Financial Institutions. Maritime Life's minimum continuing capital and
surplus ratio is measured annually, and was 184% as of December 31, 2003. The
Company did not request any dividend payment from Maritime Life in 2003, nor did
Maritime Life make any dividend payments to JHFS or its operating subsidiaries
in 2003.

      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.

      As noted above on April 28, 2004, JHFS completed its merger agreement with
Manulife and as of the close of business, JHFS stock stopped trading on the New
York Stock Exchange. In accordance with the agreement, each share of JHFS common
stock was converted into 1.1853 shares of Manulife stock. Since April 28, 2004,
the Company operates as a subsidiary of Manulife and the John Hancock name is


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Manulife's primary U.S. brand. Following the completion of the merger, Standard
and Poor's, Moody's, A.M. Best and Fitch affirmed all ratings. In addition,
Standard & Poor's upgraded the long-term counterparty credit and senior debt
ratings on John Hancock Financial Services, Inc. and the debt ratings John
Hancock Canadian Corp. to A+ from A. Dominion Bond Rating Service upgraded John
Hancock Financial Services' counter party credit rating rating to AA (low) from
A (high), upgraded John Hancock Canadian Corp.'s senior debt rating to AA (low)
from A (high) and upgraded Maritime Life Assurance Company's claims paying
ability rating to IC-1 from IC-2. In addition, Maritime Life's financial
strength ratings were upgraded to Aa3 from A1 by Moody's and to A++ from A+ by
A.M. Best. Maritime Life's A+ long term issuer rating remains on positive
outlook with Fitch.

      The liquidity of our insurance operations is also related to the overall
quality of our investments. As of September 30, 2004, $48,238.1 million, or
90.7% of the consolidated 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 $5,008.7
million, or 9.3% of rated fixed maturity investments, were rated non-investment
grade. $42,698.7 million, or 89.6% of the Life Company fixed maturity securities
held by us and rated by 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 $4,954.4 million, or 10.4% of the Life Company's rated fixed
maturity investments, were rated non-investment grade. In addition, $4,679.8
million, or 99.4% of the Maritime Life fixed maturity securities held by us and
rated by 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 $26.6
million, or 0.5% of the Maritime Life 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.

      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 December 31, 2003, 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.

Analysis of Consolidated Statements of Cash Flows

      Net cash provided by operating activities was $1,901.1 million and
$1,743.1 million for the nine months ended September 30, 2004 and 2003,
respectively. Cash flows from operating activities are affected by the timing of
premiums received, fees received, investment income and the payment of policy
related costs. The $158.0 million increase in the first nine months of 2004
compared to the same period in 2003 resulted primarily from a $796.8 million
increase in premiums, product fees and investment income received. These
increases were partially offset by increases in payments of policy related costs
of $724.7 million.

      Net cash used in investing activities was $2,442.9 million and $3,831.6
million for the nine months ended September 30, 2004 and 2003, respectively.
Changes in the cash provided by investing activities primarily relate to the
management of the Company's investment portfolios and the investment of excess
cash generated by operating and financing activities. Cash flows from investing
activities include those from the purchase or sales of product lines and asset
management such as the sale of the Home Office properties in 2003. In addition
to a comprehensive asset-liability management program that seeks to align the
financial and risk attributes of the Company's investment portfolio (including
cash and short term investments) with those of its liability contracts, we also
maintain a minimum cash balance and monitor available liquidity against
estimated liability needs under stressed market conditions. All of this leads to


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

a liquidity policy we think is prudent and is expected to amply support
liability needs even in these most stressed environments. The $1,388.7 million
decrease in cash used in the first nine months of 2004 as compared to the same
period in 2003 resulted primarily from a $2,028.4 million net reduction in cash
used from acquisitions, sales and maturities of fixed maturities and equity
securities available for sale, and $35.9 million in net cash provided from
mortgage maturities and issuance transactions. These decreased in cash used in
investing activities was partially offset by lower cash flows compared to the
prior year from the prior year sale of the Home Office properties for $887.6
million.

      Net cash used by financing activities was $1,082.2 million for the nine
months ended September 30, 2004, and the net cash provided by financing
activities was $2,487.9 million for the nine months ended September 30, 2003.
Changes in cash provided by financing activities primarily relate to the
execution of transactions with our customers demonstrated by deposits and
withdrawals under investment-type contracts and the payment of the Company's
annual dividend to shareholders. In addition, where advantageous or otherwise
necessary, the Company may issue equity securities or debt, borrowing or re-pay
corporate debt, or pay dividends to our parent, Manulife. The $3,570.1 million
decrease in the nine months of 2004 as compared to same period in 2003 resulted
from a $2,871.2 million decrease in deposits and a $733.8 million increase in
cash payments made on withdrawals of universal life insurance and
investment-type contracts offset partially by a $161.4 million increase in bank
deposits. The Company's ability to generate customer deposits in excess of
withdrawals is critical to our long-term growth.

Lines of Credit, Debt and Guarantees

      Cash flow requirements are also supported by a committed line of credit of
$500 million, through a syndication of banks including Fleet National Bank,
JPMorgan Chase, Credit Suisse First Boston, The Bank of New York, Barclays, The
Bank of Nova Scotia, Wachovia, Royal Bank of Canada, State Street Bank, Bank of
America, Bank One, BNP Paribas, Deutsche Bank, PNC Bank, Sovereign Bank,
Westdeutsche Landesbank, Comerica Bank and Northern Trust, 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 a multi-year facility for $500 million
(renewable in 2005). The line of credit is available for general corporate
purposes. The line of credit agreement has no material adverse change clause,
and includes, among others, the following covenants: minimum requirements for
JHFS shareholder's equity, maximum limit on the capitalization ratio and a
negative pledge clause (with exceptions) as well as limitations on subsidiary
debt. The line of credit also contains cross-acceleration provisions. The fee
structure is determined by the rating levels of JHFS or the Life Company. 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. Covenants contained in this issue include,
among others, limitations on the disposition of and liens on the stock of the
Life Company. This issue also contains cross-acceleration provisions. The
remaining capacity of the shelf registration is currently $500.0 million.

As of September 30, 2004, we had $2,185.6 million of principal and interest
amounts of debt outstanding consisting of $530.6 million of medium-term bonds,
$517.1 million of surplus notes, $339.6 million of Canadian debt, $33.0 million
of other notes payable (excluding $163.4 million in non-recourse debt for
Signature Fruit and an Australian farm management subsidiary), a $281.1 million
note payable to MLI Resources, Inc., a related party, and $297.2 million in
commercial paper. Also not included in these amounts is the $23.6 million SFAS
No. 133 fair value adjustment to interest rate swaps held for the Surplus Notes.
During the nine months ended September 30, 2004, the Company issued in aggregate
$2,073.5 million in commercial paper, of which $297.2 million was outstanding at
September 30, 2004. In addition, the Company has outstanding $2,288.8 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 various dates in the future. Covenants in this
program include, among others, limitations on liens. Coincident with the
acquisition of the Company's shares by Manulife, the Company merged with Jupiter
Merger Corporation (Jupiter), a subsidiary of Manulife, which was organized
solely for the purpose of effecting the merger with the Company. Prior to the
merger, Jupiter had a note payable to MLI Resources, Inc., an affiliated
Manulife entity, in the amount of $260.7 and held previously purchased shares of
the Company, which were cancelled upon merger. The value of this note payable on
the JHFS balance sheet will fluctuate with changes in the USD to CDN exchange
rates. The Company paid $3.4 million to Manulife under the terms of the
promissory note during the three month ended September 30, 2004. The $3.4
million payment represents the May 2004 and August 2004 payments due under the
promissory note.

      One hundred fifty million dollars in letters of credit for JH Reassurance
Company, guaranteed by the Company, are subject to rating triggers that require
the posting of deposits (within three business days) as additional collateral if
the ratings of JHFS or the Life Company fall below designated rating levels.
Currently, JHFS and the Life Company's ratings are several levels away from a
triggering event


                                       95
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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

for the guaranteed letters of credit. Failure to make such deposit under one or
more of the guaranteed letters of credit could trigger the cross-acceleration
provisions in other financing agreements, including the line of credit
referenced above. Certain of these guaranteed letters of credit incorporate the
financial covenants from the line of credit as well as contain cross-default and
cross-acceleration provisions.

      The Life Company guarantees certain mortgage securitizations transactions
the Company entered into with FNMA and FHLMC. This guarantee will persist until
the pool of mortgages is paid off in full by the mortgagees. The Life Company
must perform under this guarantee where the mortgagees fail to repay their
mortgages. The maximum amount of future payments the Life Company may be
required to make pursuant to the guarantee is up to 12.25% of the total
principal and interest for the FNMA securitization, or $7.6 million, and up to
10.5% of total principal and interest for the FHLMC securitization, or $10.0
million, at September 30, 2004.

      The Company has additional guarantees outstanding with affiliates, related
to market value annuity products in the Life Company and it subsidiary John
Hancock Variable Life Insurance Company (see Note 11-Information Provided in
Connection with Market Value Annuity of John Hancock Variable Life Insurance
Company) covering contracts with account values of $383.5 million, and $339.6
million in senior unsecured notes payable issued by John Hancock Canadian
Corporation, guaranteed by the Company at September 30, 2004.

Off Balance Sheet Arrangements

      The Company has relationships with a number of entities which are not
consolidated into the Company's consolidated financial statements. These
entities include qualified special purpose entities (QSPEs) and other special
purpose entities. In the course of its business the Company transfers assets to,
and in some cases, retains interests in QSPEs. The Company may also purchase
interests in QSPEs on the open market.

      The Company's primary use of QSPEs occurs in its commercial mortgage
banking subsidiary. The Company's commercial mortgage banking subsidiary
originates commercial mortgages and sells them to QSPEs which then issues
mortgage backed securities (MBS). The Company engages in this activity to earn
fees during the origination process, and to generate gains during the
securitization process. The Company maintains a portfolio of MBS securities, in
order to generate net investment income for its general account, and some of
these MBS securities were purchased from QSPEs to which we transferred
mortgages. The majority of the Company's MBS portfolio was purchased from
unrelated QSPEs.

      These QSPEs and other special purpose entities also include CDO funds we
manage and may also invest in, which are considered variable interest entities
and are discussed in detail in Note 4 - Relationships with Variable Interest
Entities to our consolidated financial statements. The Company generates fee
income from the CDO funds we manage, and generates net investment income from
CDOs we invest in, whether we manage them or not.

      The Company receives Federal income tax benefits from certain investments
made through variable interest entities.

      These off-balance sheet arrangements also include credit and collateral
support agreements with FNMA and FHMLC, through which the Company securitized
some of its mortgage investments, which provided a potential source of liquidity
to the Company.

      The Company's risk of loss from these entities is limited to its
investment in them. Consolidation of unconsolidated accounts from these entities
would inflate the Company's balance sheet but would not be reflective of
additional risk in these entities. In each, there are no potential liabilities
which might arise in the future as a result of these relationships that would
not be completely satisfied by the assets of that entity.


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Forward-Looking Statements

      The statements, analyses, and other information contained in this
Management's Discussion and Analysis (MD&A) and elsewhere in this Form 10-Q, in
connection with the merger with John Hancock and Manulife Financial Corporation,
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 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
(the Life Company) and The Maritime Life Assurance Company (Maritime Life) 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) a decline or
increased volatility in the securities markets, and other economic factors, may
adversely affect our business, particularly our variable life insurance, mutual
fund, variable annuity and investment business; (6) 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 sole shareholder; (13) we will
face losses if the claims on our insurance products, or reductions in rates of
mortality on our annuity products, are greater than we projected; (14) we face
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; (15) we may experience volatility in net income due to changes in
standards for accounting for derivatives and other changes; (16) our United
States insurance companies are subject to risk-based capital requirements and
possible guaranty fund assessments; (17) we may be unable to retain personnel
who are key to our business; (18) we may incur losses from assumed reinsurance
business in respect of personal accident insurance and the occupational accident
component of workers compensation insurance; (19) litigation and proceedings by
regulatory or governmental authorities may result in financial losses, harm our
reputation and divert management resources, (20) 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, and (21) in
connection with the merger between the Company and Manulife Financial
Corporation: we may not achieve the revenue synergies, cost savings and other
synergies contemplated by the merger; we may experience litigation related to
the merger; John Hancock's (including Maritime Life) and Manulife's
distributors, customers and policyholders may react negatively to the
transaction; we may encounter difficulties in promptly and effectively
integrating the businesses of John Hancock including Maritime Life, and
Manulife; we may not be able to retain the professional and management talent
necessary to operate the business; the transaction may result in diversion of
management time on merger and integration-related issues; and we may experience
increased exposure to exchange rate fluctuations and other unknown risks
associated with the merger.

      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.


                                       97
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omitted pursuant to General Instruction H(1)(a) and (b) of Form 10-Q.

ITEM 4. CONTROLS and PROCEDURES

      An evaluation was carried out under the supervision and with the
participation of the Company's management, including its Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934,
as amended). Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures were
effective as of the end of the period covered by this report.

      No change in the Company's internal control over financial reporting (as
defined in Rule 14-15f) of the Securities Exchange Act of 1934, as amended)
occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

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

31.1        Chief Executive Officer Certification Pursuant to Rules 13a-14 and
            15d-14 of the Securities Exchange Act of 1934

31.2        Chief Financial Officer Certification Pursuant to Rules 13a-14 and
            15d-14 of the Securities Exchange Act of 1934

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

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

----------

                                       98
<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: November 8, 2004                    By: /s/ THOMAS E. MOLONEY
                                              ----------------------
                                              Thomas E. Moloney
                                              Senior Executive Vice
                                              President and Chief Financial
                                              Officer