SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2003

                         Commission File Number: 1-15607

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

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

                               John Hancock Place
                               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 |_|

      Number of shares outstanding of our only class of common stock as of
August 1, 2003:

                                   289,165,892
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   June 30,
                                                                     2003      December 31,
                                                                 (Unaudited)      2002
                                                                ---------------------------
                                                                       (in millions)
Assets

<S>                                                             <C>            <C>
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
   (fair value: June 30-- $1,628.4; December 31--$1,781.8) ..   $    1,583.6   $    1,732.2
   Available-for-sale--at fair value
   (cost: June 30--$49,377.2; December 31--$44,755.0) .......       52,591.3       45,847.3
   Trading securities--at fair value
   (cost: June 30--$39.2;  December 31-- $18.9) .............           39.2           18.9
Equity securities:
   Available-for-sale--at fair value
   (cost: June 30--$647.7; December 31--$624.7) .............          769.0          672.3
   Trading securities--at fair value
   (cost: June 30--$379.6; December 31--$287.5) .............          359.4          296.3
Mortgage loans on real estate ...............................       12,434.3       11,805.7
Real estate .................................................          279.1          318.6
Policy loans ................................................        2,110.1        2,097.2
Short-term investments ......................................          288.4          211.2
Other invested assets .......................................        3,088.0        2,937.8
                                                                ------------   ------------

   Total Investments ........................................       73,542.4       65,937.5

Cash and cash equivalents ...................................        1,197.6        1,190.6
Accrued investment income ...................................          910.1          785.9
Premiums and accounts receivable ............................          290.5          217.1
Deferred policy acquisition costs ...........................        3,971.3        3,996.3
Reinsurance recoverable .....................................        2,146.0        1,777.2
Other assets ................................................        3,178.2        3,132.2
Separate account assets .....................................       22,557.5       20,827.3
                                                                ------------   ------------

   Total Assets .............................................   $  107,793.6   $   97,864.1
                                                                ============   ============
</TABLE>

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


                                       2
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   June 30,
                                                                     2003       December 31,
                                                                  (Unaudited)      2002
                                                                ----------------------------
                                                                        (in millions)
<S>                                                             <C>             <C>
Liabilities and Shareholders' Equity

Liabilities
Future policy benefits ......................................   $   43,590.4    $   39,657.0
Policyholders' funds ........................................       22,954.6        23,054.4
Consumer notes ..............................................          680.1           290.2
Unearned revenue ............................................          990.8           895.8
Unpaid claims and claim expense reserves ....................          222.1           205.6
Dividends payable to policyholders ..........................          606.3           585.7
Short-term debt .............................................          241.5           348.9
Long-term debt ..............................................        1,522.3         1,450.3
Income taxes ................................................        1,887.7         1,096.8
Other liabilities ...........................................        4,369.4         3,078.3
Separate account liabilities ................................       22,557.5        20,827.3
                                                                ------------    ------------

   Total Liabilities ........................................       99,622.7        91,490.3

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

Commitments and contingencies - Note 4

Shareholders' Equity
Common stock, $.01 par value; 2.0 billion shares authorized;
   319.1 million and 317.5 million shares issued,
   respectively .............................................            3.2             3.2
Additional paid in capital ..................................        5,147.4         5,127.9
Retained earnings ...........................................        2,157.1         1,614.0
Accumulated other comprehensive income ......................        1,771.5           523.2
Treasury stock, at cost (29.9 million and 29.5 million
   shares, respectively) ....................................       (1,068.8)       (1,057.2)
                                                                ------------    ------------

   Total Shareholders' Equity ...............................        8,010.4         6,211.1
                                                                ------------    ------------

   Total Liabilities and Shareholders' Equity ...............   $  107,793.6    $   97,864.1
                                                                ============    ============
</TABLE>

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


                                        3
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                  Three Months Ended       Six Months Ended
                                                                                       June 30,                 June 30,
                                                                                  2003         2002        2003         2002
                                                                               ----------------------------------------------
                                                                                    (in millions, except per share data)
<S>                                                                            <C>         <C>          <C>         <C>
Revenues
   Premiums ................................................................   $   914.4   $   963.6    $ 1,748.1   $ 1,706.0
   Universal life and investment-type product fees .........................       205.9       206.4        408.3       400.8
   Net investment income ...................................................     1,049.3       979.1      2,078.6     1,949.0
   Net realized investment and other gains (losses), net of related
     amortization of deferred policy acquisition costs, amounts credited
     to participating pension contractholders and the policyholder
     dividend obligation ($51.1 and $(12.1) for the three months ended
     June 30, 2003 and 2002 and $1.9 and $(33.1) for the six months ended
     June 30, 2003 and 2002, respectively) .................................        89.8      (139.0)       152.4      (224.7)
   Investment management revenues, commissions and other fees ..............       129.0       142.6        254.1       290.4
   Other revenue ...........................................................        59.4        49.7        132.6       126.7
                                                                               ---------   ---------    ---------   ---------

   Total revenues ..........................................................     2,447.8     2,202.4      4,774.1     4,248.2

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
     ($29.4 and $(3.7) for the three months ended June 30, 2003 and 2002
     and $(13.3) and $(10.5) for the six months ended June 30,
     2003 and 2002, respectively) ..........................................     1,394.4     1,466.4      2,751.4     2,698.8
   Other operating costs and expenses ......................................       421.0       383.6        814.7       783.3
   Amortization of deferred policy acquisition costs, excluding amounts
     related to net realized investment and other gains (losses) ($21.7
     and $(8.4) for the three months ended June 30, 2003 and 2002
     and $15.2 and $(22.6) for the six months ended June 30, 2003
     and 2002, respectively) ...............................................        73.5        78.5        153.4       148.8
   Dividends to policyholders ..............................................       144.8       149.6        282.6       294.7
                                                                               ---------   ---------    ---------   ---------

   Total benefits and expenses .............................................     2,033.7     2,078.1      4,002.1     3,925.6
                                                                               ---------   ---------    ---------   ---------

Income before income taxes .................................................       414.1       124.3        772.0       322.6
Income taxes ...............................................................       124.2        26.0        228.9        77.8
                                                                               ---------   ---------    ---------   ---------

Net income .................................................................   $   289.9   $    98.3    $   543.1   $   244.8
                                                                               =========   =========    =========   =========

Basic earnings per common share:
Net income .................................................................   $    1.01   $    0.34    $    1.89   $    0.83
                                                                               ---------   ---------    ---------   ---------

Diluted earnings per common share:
Net income .................................................................   $    1.00   $    0.33    $    1.88   $    0.82
                                                                               ---------   ---------    ---------   ---------

Share data:
Weighted-average shares used in basic earnings
   per common share calculations ...........................................       287.5       293.2        287.4       294.8
     Dilutive securities:
     Stock options .........................................................         0.9         1.6          0.9         1.9
     Non-vested stock ......................................................         0.1         0.3          0.1         0.3
                                                                               ---------   ---------    ---------   ---------
Weighted-average shares used in diluted earnings
   per common share calculations ...........................................       288.5       295.1        288.4       297.0
                                                                               =========   =========    =========   =========
</TABLE>

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


                                        4
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

<TABLE>
<CAPTION>
                                                     Additional             Accumulated Other              Total
                                            Common    Paid In     Retained    Comprehensive   Treasury  Shareholders'  Outstanding
                                            Stock     Capital     Earnings    Income (Loss)     Stock      Equity        Shares
                                          ----------------------------------------------------------------------------------------
                                                         (in millions, except outstanding share data in thousands)
<S>                                          <C>     <C>          <C>          <C>          <C>           <C>            <C>
Balance at April 1, 2002 .................   $ 3.2   $  5,109.4   $  1,353.2   $    106.5   $   (777.4)   $  5,794.9     295,715.7

Options exercised ........................                  3.9                                                  3.9         271.8
Restricted stock .........................                  1.1                                                  1.1            --
Forfeitures of restricted stock ..........                 (0.1)                                                (0.1)         (8.7)
Issuance of shares for board
   compensation ..........................                  0.1                                                  0.1           1.8
Treasury stock acquired ..................                                                      (141.4)       (141.4)     (3,787.7)

Comprehensive income:
   Net income ............................                              98.3                                    98.3

Other comprehensive income, net of tax:
   Net unrealized gains (losses) .........                                          152.8                      152.8
   Net accumulated gains (losses)
     on cash flow hedges .................                                           27.2                       27.2
   Foreign currency translation
     adjustment ..........................                                           29.2                       29.2
   Minimum pension liability .............                                            1.3                        1.3
                                                                                                          ----------
Comprehensive income .....................                                                                     308.8
                                          ----------------------------------------------------------------------------------------

Balance at June 30, 2002 .................   $ 3.2   $  5,114.4   $  1,451.5   $    317.0   $   (918.8)   $  5,967.3     292,192.9
                                          ========================================================================================

Balance at April 1, 2003 .................   $ 3.2   $  5,141.6   $  1,867.2   $    852.1   $ (1,068.8)   $  6,795.3     288,964.5

Options exercised ........................                  1.8                                                  1.8         125.6
Restricted stock .........................                  3.4                                                  3.4           0.1
Forfeitures of restricted stock ..........                 (0.1)                                                (0.1)         (2.2)
Issuance of shares for board
   compensation ..........................                  0.7                                                  0.7          25.0

Comprehensive income:
   Net income ............................                             289.9                                   289.9

Other comprehensive income, net of tax:
   Net unrealized gains (losses) .........                                          750.1                      750.1
   Net accumulated gains (losses)
     on cash flow hedges .................                                          103.1                      103.1
   Foreign currency translation
     adjustment ..........................                                           64.5                       64.5
   Minimum pension liability .............                                            1.7                        1.7
                                                                                                          ----------
Comprehensive income .....................                                                                   1,209.3
                                          ----------------------------------------------------------------------------------------

Balance at June 30, 2003 .................   $ 3.2   $  5,147.4   $  2,157.1   $  1,771.5   $ (1,068.8)   $  8,010.4     289,113.0
                                          ========================================================================================
</TABLE>

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


                                        5
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

<TABLE>
<CAPTION>
                                                     Additional              Accumulated Other              Total
                                            Common    Paid In      Retained    Comprehensive   Treasury  Shareholders'  Outstanding
                                            Stock     Capital      Earnings    Income (Loss)     Stock      Equity        Shares
                                          ----------------------------------------------------------------------------------------
                                                           (in millions, except outstanding share data, in thousands)
<S>                                          <C>     <C>          <C>          <C>          <C>           <C>            <C>
Balance at January 1, 2002 ...............   $ 3.2   $  5,099.3   $  1,206.7   $    228.0   $   (672.2)   $  5,865.0     297,430.1

Options exercised ........................                  9.5                                                  9.5         642.1
Restricted stock .........................                  5.5                                                  5.5         637.8
Forfeitures of restricted stock ..........                 (0.1)                                                (0.1)         (8.7)
Issuance of shares for board
   compensation ..........................                  0.2                                                  0.2           3.2
Treasury stock acquired ..................                                                      (246.6)       (246.6)     (6,511.6)

Comprehensive income:
   Net income ............................                             244.8                                   244.8

Other comprehensive income, net of tax:
   Net unrealized gains (losses) .........                                           42.6                       42.6
   Net accumulated gains (losses)
     on cash flow hedges .................                                           15.3                       15.3
   Foreign currency translation
     adjustment ..........................                                           28.6                       28.6
   Minimum pension liability .............                                            2.5                        2.5
                                                                                                          ----------
Comprehensive income .....................                                                                     333.8
                                          ----------------------------------------------------------------------------------------

Balance at June 30, 2002 .................   $ 3.2   $  5,114.4   $  1,451.5   $    317.0   $   (918.8)   $  5,967.3     292,192.9
                                          ========================================================================================

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 ........................                  4.0                                                  4.0         278.6
Restricted stock .........................                 14.9                                                 14.9       1,245.6
Forfeitures of restricted stock ..........                 (0.1)                                                (0.1)         (2.2)
Issuance of shares for board
   compensation ..........................                  0.7                                                  0.7          27.2
Treasury stock acquired ..................                                                       (11.6)        (11.6)       (414.8)

Comprehensive income:
   Net income ............................                             543.1                                   543.1

Other comprehensive income, net of tax:
   Net unrealized gains (losses) .........                                        1,027.2                    1,027.2
   Net accumulated gains (losses)
     on cash flow hedges .................                                          109.1                      109.1
   Foreign currency translation
     adjustment ..........................                                          108.8                      108.8
   Minimum pension liability .............                                            3.2                        3.2
                                                                                                          ----------
Comprehensive income .....................                                                                   1,791.4
                                          ----------------------------------------------------------------------------------------

Balance at June 30, 2003 .................   $ 3.2   $  5,147.4   $  2,157.1   $  1,771.5   $ (1,068.8)   $  8,010.4     289,113.0
                                          ========================================================================================
</TABLE>

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


                                        6
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                              Six Months Ended
                                                                                                  June 30,
                                                                                             2003          2002
                                                                                          ----------------------
                                                                                               (in millions)
<S>                                                                                       <C>          <C>
Cash flows from operating activities:
   Net income .........................................................................   $   543.1    $   244.8
   Adjustments to reconcile net income to net cash provided by operating activities:
     Amortization of discount - fixed maturities ......................................       (19.1)       (59.8)
     Net realized investment and other (gains) losses .................................      (152.4)       224.7
     Change in deferred policy acquisition costs ......................................      (216.2)      (179.0)
     Depreciation and amortization ....................................................        30.6         34.1
     Net cash flows from trading securities ...........................................       (83.4)        (9.0)
     Increase in accrued investment income ............................................      (124.2)       (75.4)
     (Increase) decrease in premiums and accounts receivable ..........................       (73.4)        20.3
     Increase in other assets and other liabilities, net ..............................      (176.8)       (58.2)
     Increase in policy liabilities and accruals, net .................................     1,456.6      1,126.8
     Increase in income taxes .........................................................       148.7         30.3
                                                                                          ---------    ---------

       Net cash provided by operating activities ......................................     1,333.5      1,299.6

Cash flows from investing activities:
   Sales of:
     Fixed maturities available-for-sale ..............................................     7,010.3      2,272.1
     Equity securities available-for-sale .............................................       195.5        183.5
     Real estate ......................................................................        65.6         35.9
     Short-term investments and other invested assets .................................       108.8         62.6
     Home Office properties ...........................................................       887.6           --
   Maturities, prepayments and scheduled redemptions of:
     Fixed maturities held-to-maturity ................................................       136.0         85.6
     Fixed maturities available-for-sale ..............................................     1,929.3      1,681.7
     Short-term investments and other invested assets .................................       400.9        220.1
     Mortgage loans on real estate ....................................................       588.3        679.7
   Purchases of:
     Fixed maturities held-to-maturity ................................................        (2.2)       (11.8)
     Fixed maturities available-for-sale ..............................................   (12,005.1)    (7,354.1)
     Equity securities available-for-sale .............................................      (180.0)      (103.5)
     Real estate ......................................................................       (14.6)        (4.3)
     Short-term investments and other invested assets .................................      (858.6)      (484.6)
    Mortgage loans on real estate issued ..............................................      (954.1)      (918.7)
    Net cash received related to acquisition of business ..............................        93.7           --
    Other, net ........................................................................      (198.4)      (169.6)
                                                                                          ---------    ---------

       Net cash used in investing activities ..........................................   $(2,797.0)   $(3,825.4)
</TABLE>

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


                                        7
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

         UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                 Six Months Ended
                                                                                      June 30,
                                                                                  2003       2002
                                                                               --------------------
                                                                                   (in millions)
<S>                                                                            <C>         <C>
Cash flows from financing activities:
   Acquisition of treasury stock ...........................................   $  (11.6)   $ (246.6)
   Universal life and investment-type contract deposits ....................    4,708.0     5,345.4
   Universal life and investment-type contract maturities and withdrawals ..   (3,509.1)   (3,003.7)
   Issuance of consumer notes ..............................................      389.9          --
   Issuance of short-term debt .............................................       70.8         9.3
   Repayment of long-term debt .............................................       (3.6)      (12.6)
   Repayment of short-term debt ............................................     (114.5)      (47.9)
   Net (decrease)increase in commercial paper ..............................      (59.4)       10.0
                                                                               --------    --------

       Net cash provided by financing activities ...........................    1,470.5     2,053.9
                                                                               --------    --------

       Net increase (decrease) in cash and cash equivalents ................        7.0      (471.9)

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

       Cash and cash equivalents at end of period ..........................   $1,197.6    $  841.8
                                                                               ========    ========
</TABLE>

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


                                        8
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Note 1 -- Summary of Significant Accounting Policies

Business

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

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, these unaudited consolidated financial statements contain all
adjustments, consisting of only normal and recurring adjustments, necessary for
a fair presentation of the Company's financial position and results of
operations. Operating results for the three and six month periods ended June 30,
2003 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2003. These unaudited consolidated financial statements
should be read in conjunction with the Company's annual audited financial
statements as of December 31, 2002 included in the Company's Form 10-K for the
year ended December 31, 2002 filed with the United States Securities and
Exchange Commission (hereafter referred to as the Company's 2002 Form 10-K). The
Company's financial statements, news releases, quarterly financial supplements
and other information are available on the internet at www.jhancock.com, under
the link labeled "Investor Relations." In addition, all of the Company's United
States Securities and Exchange Commission filings are available on the internet
at www.sec.gov, under the name Hancock John Financial.

The balance sheet at December 31, 2002, presented herein, has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.

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

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

The disposal described 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 table below presents actual and proforma data, for comparative
purposes, of revenue, net income and earnings per share for the periods
indicated, to demonstrate the proforma effect of the acquisition and of the
disposal as if they occurred on January 1, 2002.

<TABLE>
<CAPTION>
                                           Three Months Ended June 30,                      Six Months Ended June 30,
                                    2003                    2002                    2003                    2002
                                  Proforma      2003      Proforma      2002      Proforma       2003     Proforma       2002
                                 ----------------------------------------------------------------------------------------------
                                                              (in millions, except per share data)

<S>                               <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Revenue .......................   $ 2,434.1   $ 2,447.8   $ 2,177.7   $ 2,202.4   $ 4,729.3   $ 4,774.1   $ 4,200.0   $ 4,248.2

Net income ....................   $   288.0   $   289.9   $    97.9   $    98.3   $   540.3   $   543.1   $   248.3   $   244.8

Earnings per share ............   $    1.00   $    1.00   $    0.33   $    0.33   $    1.87   $    1.88   $    0.84   $    0.82
</TABLE>

Acquisition:

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


                                        9
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

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 is ceding all activity after May 1, 2003 to MetLife. The
transaction was recorded as of May 1, 2003, and is expected to close later in
2003, subject to regulatory approval.

Stock-Based Compensation

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

<TABLE>
<CAPTION>
                                                              Three Months Ended    Six Months Ended
                                                                   June 30,            June 30,
                                                               2003         2002    2003      2002
                                                              -------------------  -----------------
                                                                (in millions, except per share data)
<S>                                                            <C>       <C>       <C>       <C>
Net income, as reported ....................................   $ 289.9   $  98.3   $ 543.1   $ 244.8
Add: Stock-based employee compensation expense included
   in reported net income, net of related tax effects ......       4.8       1.9      14.6       3.3
Deduct: Total stock-based employee compensation expense
   determined under fair value method for all awards, net
   of related tax effects ..................................      10.4      14.5      29.3      29.5
                                                               -------   -------   -------   -------
Proforma net income ........................................   $ 284.3   $  85.7   $ 528.4   $ 218.6
                                                               =======   =======   =======   =======
Earnings per share
Basic:
      As reported ..........................................   $  1.01   $  0.34   $  1.89   $  0.83
      Proforma .............................................      0.99      0.29      1.84      0.74
Diluted:
      As reported ..........................................      1.00      0.33      1.88      0.82
      Proforma .............................................      0.99      0.29      1.83      0.74
</TABLE>


                                       10
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

Recent Accounting Pronouncements

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 contract holders.

SOP 03-1 will be effective for the Company's financial statements on January 1,
2004. The Company is currently evaluating the impact of adopting SOP 03-1 on its
consolidated financial position, results of operations or cash flows.

Statement of Financial Accounting Standards No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity"

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" (SFAS No. 150).
SFAS No.150 changes the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity. It requires that certain
financial instruments be classified as liabilities on issuer balance sheets,
including those instruments that are issued in shares and are mandatorily
redeemable, those instruments that are not issued in shares but give the issuer
an obligation to repurchase previously issued equity shares, and certain
financial instruments that give the issuer the option of settling an obligation
by issuing more equity shares. SFAS No. 150 is effective for all financial
instruments entered into or modified after May 31, 2003, and otherwise will be
effective for the Company on July 1, 2003. The adoption of SFAS No. 150 will
have no material impact on the Company's consolidated financial position,
results of operations or cash flows.

SFAS No. 149 - Amendment of Statement No. 133 on Derivative Instruments and
Hedging Activities

In April 2003, the FASB issued Statement of Financial Accounting Standards No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" (SFAS No. 149). SFAS No. 149 amends and clarifies financial
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities (SFAS No. 133). In particular,
SFAS No. 149 clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative, clarifies when a derivative
contains a financing component, amends the definition of an underlying to
conform it to language used in FASB Interpretation No. 45--"Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others", and amends certain other existing
pronouncements. Except for certain implementation guidance that is incorporated
in SFAS No. 149 and already effective, SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after June 30, 2003. The adoption of SFAS No. 149 will have no
material impact on the Company's consolidated financial position, results of
operations or cash flows.

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

In April 2003, the FASB's Derivative Implementation Group (DIG) released SFAS
No. 133 Implementation Issue No. 36, "Embedded Derivatives: Bifurcation of a
Debt Instrument that Incorporates Both Interest Rate Risk and Credit Rate Risk
Exposures that are Unrelated or Only Partially Related to the Creditworthiness
of the Issuer of that Instrument" (DIG B36). DIG B36 addresses whether SFAS
No.133 requires bifurcation of a debt instrument into a debt host contract and
an embedded derivative if the debt instrument incorporates both interest rate
risk and credit risk exposures that are unrelated or only partially


                                       11
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

related to the creditworthiness of the issuer of that instrument. Under DIG B36,
modified coinsurance and coinsurance with funds withheld reinsurance agreements
as well as other types of receivables and payables where interest is determined
by reference to a pool of fixed maturity assets or a total return debt index are
examples of arrangements containing embedded derivatives requiring bifurcation.
The effective date of the implementation guidance is October 1, 2003.

The Company has determined that certain of its reinsurance
receivables/(payables) and certain of its insurance products contain embedded
derivatives requiring bifurcation. The Company has not yet determined the fair
value of the related embedded derivatives in these products. Management believes
that accounting for these embedded derivatives in accordance with DIG B36 will
not have a material impact on the Company's consolidated financial position or
cash flows.

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

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

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

Additional liabilities recognized as a result of consolidating VIEs with which
the Company is involved would not represent additional claims on the general
assets of the Company; rather, they would represent claims against additional
assets recognized by the Company as a result of consolidating the VIEs. However,
it is possible that if we do consolidate some of the Company-managed CDOs, we
may report lower assets and capital in the short-term. Similarly, additional
assets recognized as a result of consolidating these VIEs would not represent
additional assets which the Company could use to satisfy claims against its
general assets, rather they would be used only to settle additional liabilities
recognized as a result of consolidating the VIEs. Refer to Note 3 below, and
Note 1 in the Company's 2002 Form 10-K for a more complete discussion of the
Company's relationships with VIEs, their assets and liabilities, and the
Company's maximum exposure to loss as a result of its involvement with them.

On July 1, 2003, FIN 46 became effective for those VIEs which the Company is the
primary beneficiary. The Company has elected to apply the provisions of FIN 46
prospectively, commencing on July 1, 2003 and is currently estimating the impact
on its consolidated financial position, results of operations and cash flows of
consolidating those VIEs for which the Company is the primary beneficiary.

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

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation which is an optional alternative method of accounting presented in
SFAS No. 123, "Accounting for Stock Based Compensation." In addition, SFAS No.
148 amends the disclosure requirements of SFAS No. 123 to require more prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148's amendment of the transition and annual
disclosure provisions of SFAS No. 123 is effective for fiscal years ending after
December 2002. The Company adopted the fair value provisions of SFAS No. 123 on
January 1, 2003 and utilized the transition provisions described in SFAS No.
148, on a prospective basis to awards granted after December 31, 2002. In the


                                       12
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

first six months of 2003 the Company granted 638,000 stock options to senior
management and recorded $0.6 million, net of tax of $0.3 million, of related
compensation expense. The Company has adopted the disclosure provisions of SFAS
No. 148, see Note 1--Summary of Significant Accounting Policies, Stock-Based
Compensation above.

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

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

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

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

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

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 requires recognition of a
liability for exit or disposal costs, including restructuring costs, when the
liability is incurred rather than at the date of an entity's commitment to a
formal plan of action. SFAS No. 146 applies to one-time termination benefits
provided to current employees that are involuntarily terminated under the terms
of a one-time benefit arrangement. An ongoing benefit arrangement is presumed to
exist if a company has a past practice of providing similar benefits. SFAS No.
146 is effective for exit or disposal activities that are initiated after
December 31, 2002. The adoption of SFAS No. 146 had no impact on the Company's
consolidated financial position, results of operations or cash flows during the
period ended June 30, 2003.


                                       13
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information

In the first quarter of 2003, the Company implemented organizational changes
within the Corporate and Other Segment which resulted in the break-out of the
Maritime Life business as its own operating segment and the reclassification of
2002 results for the Federal long-term care insurance business to the Protection
Segment. The Maritime Life Segment consists of our consolidated Canadian
operations, principally those of our Canadian life insurance business, The
Maritime Life Assurance Company (Maritime Life). The following discussion
presents the results of our segments on a basis consistent with the new
organization structure. The reclassifications associated with the realignment of
our operating segments had no impact on segment after-tax operating income, or
net income of the Maritime Life, or Corporate and Other Segments, other than to
display these businesses separately. The reclassification associated with the
Federal long-term care insurance business has no impact on segment after-tax
operating income, or net income of the business. The reclassification increased
Protection Segment after-tax operating income and decreased Corporate and Other
Segment after-tax operating income by $0.2 million and $0.3 million for the
three and six month periods ended June 30, 2002.

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

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

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

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

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

      (iii) the benefits to policyholders and expenses incurred relating to the
            settlement of a class action lawsuit against the Company involving a
            dispute regarding disclosure of costs on various modes of life
            insurance policy premium payment.


                                       14
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                            Asset                 Investment    Maritime   Corporate
                                              Protection  Gathering     G&SFP     Management      Life     and Other   Consolidated
                                             --------------------------------------------------------------------------------------
<S>                                          <C>         <C>         <C>          <C>         <C>          <C>           <C>
As of or for the three months ended                                              (in millions)
June 30, 2003
Revenues:
   Revenues from external
     customers ...........................   $   586.9   $   139.1   $     77.3   $    27.9   $    297.1   $    188.4    $  1,316.7
   Net investment income .................       353.8       176.9        416.2         7.5         95.9         (1.0)      1,049.3
   Inter-segment revenues ................          --         0.3           --         7.7           --         (8.0)           --
                                             --------------------------------------------------------------------------------------
   Segment revenues ......................       940.7       316.3        493.5        43.1        393.0        179.4       2,366.0
   Net realized investment and other
     gains (losses), net .................        27.4        20.2          9.7          --          3.7         20.8          81.8
                                             --------------------------------------------------------------------------------------
   Revenues ..............................   $   968.1   $   336.5   $    503.2   $    43.1   $    396.7   $    200.2    $  2,447.8
                                             ======================================================================================
Net Income:
   Segment after-tax operating
     Income ..............................   $    89.2   $    51.2   $     80.9   $    11.5   $     19.4   $    (16.1)   $    236.1
   Net realized investment and other
     gains (losses), net .................        17.4        12.8          6.9          --          3.5         13.2          53.8
                                             --------------------------------------------------------------------------------------
   Net income ............................   $   106.6   $    64.0   $     87.8   $    11.5   $     22.9   $     (2.9)   $    289.9
                                             ======================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ..   $     5.8   $     3.1   $     11.8   $     4.0           --   $      1.7    $     26.4
   Carrying value of investments
     accounted for under the equity
     method ..............................       308.9       201.9        505.8        14.4           --        753.2       1,784.2
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) ............................        49.6        19.1          0.6          --   $      3.7          0.5          73.5
   Segment assets ........................    34,023.6    18,204.5     36,316.3     2,579.2     12,666.7      4,003.3     107,793.6
</TABLE>


                                       15
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                             Asset                Investment    Maritime    Corporate
                                              Protection   Gathering    G&SFP     Management      Life      and Other  Consolidated
                                             --------------------------------------------------------------------------------------
<S>                                          <C>          <C>         <C>          <C>          <C>          <C>          <C>
As of or for the three months ended                                              (in millions)
June 30, 2002
Revenues:
   Revenues from external customers ......   $   547.6    $   145.5   $   215.9    $    22.9    $   224.8    $   207.4    $ 1,364.1
   Net investment income .................       330.3        140.5       431.9          3.6         79.8         (7.0)       979.1
   Inter-segment revenues ................          --           --          --          6.8           --         (6.8)          --
                                             --------------------------------------------------------------------------------------
   Segment revenues ......................       877.9        286.0       647.8         33.3        304.6        193.6      2,343.2
   Net realized investment and other
     gains (losses), net .................       (28.3)       (20.7)      (86.5)         0.6        (14.3)         8.4       (140.8)
                                             --------------------------------------------------------------------------------------
   Revenues ..............................   $   849.6    $   265.3   $   561.3    $    33.9    $   290.3    $   202.0    $ 2,202.4
                                             ======================================================================================
Net Income:
   Segment after-tax operating income ....   $    77.0    $    40.6   $    75.9    $     7.4    $    16.2    $    (3.6)   $   213.5
   Net realized investment and other
     gains (losses), net .................       (18.3)       (13.2)      (55.7)         0.5        (13.0)         5.2        (94.5)
   Class action lawsuit ..................       (18.7)          --          --           --           --         (0.8)       (19.5)
   Restructuring charges .................        (0.9)        (0.5)       (0.2)        (0.2)        (0.4)         1.0         (1.2)
                                             --------------------------------------------------------------------------------------
   Net income ............................   $    39.1    $    26.9   $    20.0    $     7.7    $     2.8    $     1.8    $    98.3
                                             ======================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ..   $     5.3    $     2.4   $    11.4    $     0.2           --    $     0.5    $    19.8
   Carrying value of investments
     accounted for under the equity
     method ..............................       149.3        103.9       280.1          8.3           --        680.9      1,222.5
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) ............................        38.7         28.8         0.7           --    $     9.6          0.7         78.5
   Segment assets ........................    29,284.0     15,294.0    32,840.4      2,089.8     10,914.4      3,119.9     93,542.5
</TABLE>


                                       16
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                            Asset                 Investment    Maritime    Corporate
                                              Protection  Gathering     G&SFP     Management      Life      and Other   Consolidated
                                             ---------------------------------------------------------------------------------------
<S>                                          <C>          <C>          <C>          <C>         <C>          <C>          <C>
As of or for the six months ended                                               (in millions)
June 30, 2003
Revenues:
   Revenues from external
     customers ...........................   $ 1,157.8    $   274.7    $   126.3    $    49.9   $    565.5   $   378.4    $  2,552.6
   Net investment income .................       701.7        342.9        847.6         11.7        180.4        (5.7)      2,078.6
   Inter-segment revenues ................          --          0.6           --         14.1           --       (14.7)           --
                                             ---------------------------------------------------------------------------------------
   Segment revenues ......................     1,859.5        618.2        973.9         75.7        745.9       358.0       4,631.2
   Net realized investment and other
     gains (losses), net .................        (3.8)       (17.5)      (126.2)          --          8.0       282.4         142.9
                                             ---------------------------------------------------------------------------------------
   Revenues ..............................   $ 1,855.7    $   600.7    $   847.7    $    75.7   $    753.9   $   640.4    $  4,774.1
                                             =======================================================================================
Net Income:
   Segment after-tax operating
     Income ..............................   $   163.5    $    91.2    $   166.7    $    17.1   $     39.6   $   (27.9)   $    450.2
   Net realized investment and other
     gains (losses), net .................        (2.5)       (11.3)       (79.0)          --          5.5       180.2          92.9
                                             ---------------------------------------------------------------------------------------
   Net income ............................   $   161.0    $    79.9    $    87.7    $    17.1   $     45.1   $   152.3    $    543.1
                                             =======================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ..   $    11.0    $     5.2    $    19.7    $     3.9           --   $     1.9    $     41.7
   Carrying value of investments
     accounted for under the equity
     method ..............................       308.9        201.9        505.8         14.4           --       753.2       1,784.2
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) ............................        90.5         53.0          1.1           --   $      7.1         1.7         153.4
   Segment assets ........................    34,023.6     18,204.5     36,316.3      2,579.2     12,666.7     4,003.3     107,793.6
</TABLE>


                                       17
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                            Asset                Investment     Maritime   Corporate
                                             Protection   Gathering    G&SFP     Management       Life     and Other   Consolidated
                                             --------------------------------------------------------------------------------------
<S>                                          <C>          <C>         <C>          <C>          <C>          <C>          <C>
As of or for the six months ended                                              (in millions)
June 30, 2002
Revenues:
   Revenues from external customers ......   $ 1,084.7    $   297.3   $   266.5    $    39.8    $   444.7    $   391.9    $ 2,524.9
   Net investment income .................       652.9        271.0       852.6          7.6        155.4          9.5      1,949.0
   Inter-segment revenues ................          --           --          --         16.5           --        (16.5)          --
                                             --------------------------------------------------------------------------------------
   Segment revenues ......................     1,737.6        568.3     1,119.1         63.9        600.1        384.9      4,473.9
   Net realized investment and other
     gains (losses), net .................       (57.4)       (44.4)     (108.3)         0.6        (13.3)        (2.9)      (225.7)
                                             --------------------------------------------------------------------------------------
   Revenues ..............................   $ 1,680.2    $   523.9   $ 1,010.8    $    64.5    $   586.8    $   382.0    $ 4,248.2
                                             ======================================================================================
Net Income:
   Segment after-tax operating income ....   $   149.8    $    80.6   $   142.8    $    12.3    $    32.0    $    (1.2)   $   416.3
   Net realized investment and other
     gains (losses), net .................       (37.0)       (28.0)      (69.4)         0.5        (11.2)        (2.1)      (147.2)
   Class action lawsuit ..................       (18.7)          --          --           --           --         (0.8)       (19.5)
   Restructuring charges .................        (4.1)        (1.9)       (0.5)        (0.2)        (0.4)         2.3         (4.8)
                                             --------------------------------------------------------------------------------------
   Net income ............................   $    90.0    $    50.7   $    72.9    $    12.6    $    20.4    $    (1.8)   $   244.8
                                             ======================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ..   $     9.5    $     5.1   $    18.8    $     0.1           --    $    11.8    $    45.3
   Carrying value of investments
     accounted for under the equity
     Method ..............................       149.3        103.9       280.1          8.3           --        680.9      1,222.5
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) ............................        77.8         50.4         1.1           --    $    17.9          1.6        148.8
   Segment assets ........................    29,284.0     15,294.0    32,840.4      2,089.8     10,914.4      3,119.9     93,542.5
</TABLE>


                                       18
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Relationships with Variable Interest Entities

      The Company has relationships with various types of special purpose
entities (SPEs) and other entities, some of which are variable interest entities
(VIEs) as discussed in Note 1--Summary of Significant Accounting Policies above.
Presented below are discussions of the Company's significant relationships with
and certain summarized financial information for these entities.

      As explained in Note 1--Summary of Significant Accounting Policies above,
additional liabilities recognized as a result of consolidating VIEs in which the
Company is involved would not represent additional claims on the general assets
of the Company; rather, they would represent claims against additional assets
recognized by the Company as a result of consolidating the VIEs. These
additional liabilities are non-recourse to the general assets of the Company.
Similarly, additional assets recognized as a result of consolidating these VIEs
would not represent additional assets which the Company could use to satisfy
claims against its general assets, rather they would be used only to settle
additional liabilities recognized as a result of consolidating the VIEs.

      Collateralized Debt Obligations (CDOs). The Company acts as investment
advisor to certain asset backed investment vehicles, commonly known as
collateralized debt obligations (CDOs). The Company also invests in the debt
and/or equity of these CDOs, and in the debt and/or equity of CDOs managed by
others. CDOs raise capital by issuing debt and equity securities, and use their
capital to invest in portfolios of interest bearing securities. The returns from
a CDO's portfolio of investments are used by the CDO to finance its operations
including paying interest on its debt and paying advisory fees and other
expenses. Any net income or net loss is shared by the CDO's equity owners and,
in certain circumstances where we manage the CDO, positive investment experience
is shared by the Company through variable performance management fees. Any net
losses are borne first by the equity owners to the extent of their investments,
and then by debt owners in ascending order of subordination or are borne by the
issuer of separate account insurance policies. See Note 1--Summary of
Significant Accounting Policies in the Company's 2002 10K for a discussion of
separate account accounting.

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

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

      Owners of securities of CDOs advised by the Company have no recourse to
the Company's assets in the event of default by the CDO, unless the Company has
guaranteed such securities directly for investors. The Company's risk of loss
from any CDO it manages, or in which it invests, is limited to its investment in
the CDO and any such guarantees it may have made. All of these guarantees are
accounted for under existing insurance industry accounting principles, and the
guaranteed assets are recorded on the Company's consolidated balance sheets, at
their fair value, as separate account assets. The Company believes it is
reasonably possible that it may consolidate one or more of the CDOs which it
manages, or will be required to disclose information about them, or both, as of
September 30, 2003, as a result of adopting FIN 46.

      The tables below present summary financial data for CDOs which the Company
manages, and data relating to the Company's maximum exposure to loss as a result
of its relationships with them. The Company has determined that it is not the
primary beneficiary of any CDO in which it invests but does not manage and thus
will not be required to consolidate any of them. Credit ratings are provided by
credit rating agencies, and relate to the debt issued by the CDOs in which the
Company has invested or guaranteed.


                                       19
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

                                                          June 30,  December 31,
                                                            2003       2002
                                                          ----------------------
                                                             (in millions)
Total size of Company-Managed CDOs

Total assets .........................................    $5,815.4      $6,089.2
                                                          ========      ========

Total debt ...........................................    $3,538.5      $3,574.1
Total other liabilities ..............................     2,253.9       2,432.7
                                                          --------      --------
Total liabilities ....................................     5,792.4       6,006.8
Total equity .........................................        23.0          82.4
                                                          --------      --------

Total liabilities and equity .........................    $5,815.4      $6,089.2
                                                          ========      ========

<TABLE>
<CAPTION>
Maximum exposure of the Company to losses                June 30,                December 31,
From Company-Managed CDO'S                                 2003                      2002
                                                  ----------------------------------------------
                                                         (in millions, except percents)
<S>                                               <C>           <C>          <C>           <C>
Investment in tranches of Company-Managed CDO's,
by credit rating (Moody's/Standard & Poors):
Aaa/AAA .....................................     $197.6         33.5%       $380.2         53.8%
Aa/AA .......................................       81.6         13.8            --           --
A/A- ........................................         --           --          14.5          2.1
Baa/BBB .....................................      217.9         37.0         218.0         30.9
Ba/BB .......................................        7.6          1.3           7.0          1.0
B/B- ........................................         --           --           6.0          0.9
Caa/CCC+ ....................................       12.2          2.1            --           --
Ca/C ........................................         --           --            --           --
Not rated (equity) ..........................       72.8         12.3          79.8         11.3
                                                  ------       ------        ------       ------
Total Company exposure ......................     $589.7        100.0%       $705.5        100.0%
                                                  ======       ======        ======       ======
</TABLE>

      The Company has determined that each of its relationships with any CDO
which it invests in but does not manage is not significant, and therefore is not
included in the preceding schedules.

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


                                       20
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

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

                                                         June 30,   December 31,
                                                          2003         2002
                                                         ----------------------
                                                             (in millions)
Total size of Other Entities (1)

Total assets ...................................         $291.9          $291.7
                                                         ======          ======

Total debt .....................................         $306.2           309.3
Total other liabilities ........................           61.1            61.9
                                                         ------          ------
Total liabilities ..............................          367.3           371.2
Total equity (2) ...............................          (75.4)          (79.5)
                                                         ------          ------

Total liabilities and equity ...................         $291.9          $291.7
                                                         ======          ======

      (1)   Certain data is reported with up to a six month delay, due to the
            delayed availability of audited financial statements of the Other
            Entities.

      (2)   The negative equity results primarily from the inclusion of the ski
            resort operator mentioned previously. This entity has an accumulated
            deficit from operations, but is current on its debt service and is
            cash flow positive. The total equity shown above has not been
            adjusted to remove the portion attributable to other beneficiaries
            of these entities.

<TABLE>
<CAPTION>
                                                                 June 30,   December 31,
                                                                  2003         2002
                                                                 -----------------------
                                                                     (in millions)
<S>                                                              <C>              <C>
Maximum exposure of the Company to losses from
Other Entities (1)
Combined equity and debt investments in the Other Entities ...   $181.1           $171.0
Outstanding capital commitments to Other Entities ............     43.2             44.2
                                                                 ------           ------
Total Company exposure .......................................   $224.3           $215.2
                                                                 ======           ======
</TABLE>

      (1)   The Company's maximum exposure to loss is limited to its investments
            of debt and equity securities of these entities, which are carried
            at fair value on the Company's financial statements and its
            commitment to provide additional equity capital as noted above.

Note 4 -- Contingencies

Harris Trust

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

In that opinion the Court found against the Company and awarded the Trust
approximately $13.8 million in relation to this claim together with unspecified
additional pre-judgment interest on this amount from October 1988. The Court
also found against the Company on issues of liability valuation and ERISA law.
Damages in the amount of approximately $5.7 million, together with


                                       21
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 4 -- Contingencies - (Continued)

unspecified pre-judgment interest from December 1996, were awarded on these
issues. As part of the relief, the judge ordered the removal of Hancock as a
fiduciary to the plan. On April 11, 2001, the Court entered a judgment against
the Company for approximately $84.9 million, which includes damages to the
plaintiff, pre-judgment interest, attorney's fees and other costs.

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

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

Reinsurance Recoverable

On February 28, 1997, the Company sold a major portion of its group insurance
business to UNICARE Life & Health Insurance Company (UNICARE), a wholly owned
subsidiary of WellPoint Health Networks, Inc. The business sold included the
Company's group accident and health business and related group life business and
Cost Care, Inc., Hancock Association Services Group and Tri-State, Inc., all of
which were indirect wholly-owned subsidiaries of the Company. The Company
retained its group long-term care operations. The insurance business sold was
transferred to UNICARE through a 100% coinsurance agreement. The Company remains
liable to its policyholders to the extent that UNICARE does not meet its
contractual obligations under the coinsurance agreement.

Through the Company's group health insurance operations, the Company entered
into a number of reinsurance arrangements in respect of personal accident
insurance and the occupational accident component of workers compensation
insurance, a portion of which was originated through a pool managed by Unicover
Managers, Inc. Under these arrangements, the Company both assumed risks as a
reinsurer, and also passed 95% of these risks on to other companies. This
business had originally been reinsured by a number of different companies, and
has become the subject of widespread disputes. The disputes concern the
placement of the business with reinsurers and recovery of the reinsurance. The
Company is engaged in disputes, including a number of legal proceedings, in
respect of this business. The risk to the Company is that other companies that
reinsured the business from the Company may seek to avoid their reinsurance
obligations. However, the Company believes that it has a reasonable legal
position in this matter. During the fourth quarter of 1999 and early 2000, the
Company received additional information about its exposure to losses under the
various reinsurance programs. As a result of this additional information and in
connection with global settlement discussions initiated in late 1999 with other
parties involved in the reinsurance programs, during the fourth quarter of 1999
the Company recognized a charge for uncollectible reinsurance of $133.7 million,
after tax, as its best estimate of its remaining loss exposure. The Company
believes that any exposure to loss from this issue, in addition to amounts
already provided for as of June 30, 2003, would not be material.

Reinsurance ceded contracts do not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the reinsurers.

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 June 30, 2003. It is the opinion
of management, after consultation with counsel, that the ultimate liability with
respect to these claims, if any, will not materially affect the financial
position, results of operations or liquidity of the Company.


                                       22
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 5 -- Closed Block

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

<TABLE>
<CAPTION>
                                                                          June 30,
                                                                            2003     December 31,
                                                                         (unaudited)     2002
                                                                         ------------------------
                                                                               (in millions)
<S>                                                                      <C>          <C>
Liabilities
Future policy benefits ...............................................   $10,603.7      $10,509.0
Policyholder dividend obligation .....................................       552.7          288.9
Policyholders' funds .................................................     1,504.9        1,504.0
Policyholder dividends payable .......................................       438.8          432.3
Other closed block liabilities .......................................       116.5          111.7
                                                                         ------------------------
   Total closed block liabilities ....................................   $13,216.6      $12,845.9
                                                                         ------------------------

Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
     (fair value: June 30--$80.1; December 31--$97.1) ................   $    75.5      $    86.0
   Available-for-sale--at fair value
     (cost: June 30--$5,800.2; December 31--$5,580.2) ................     6,331.4        5,823.2
Equity securities:
   Available-for-sale--at fair value
     (cost: June 30--$11.6; December 31--$10.5) ......................        12.2           12.4
Mortgage loans on real estate ........................................     1,686.2        1,665.8
Policy loans .........................................................     1,559.3        1,555.1
Short term investments ...............................................          --           25.2
Other invested assets ................................................       269.7          212.4
                                                                         ------------------------
   Total investments .................................................     9,934.3        9,380.1

Cash and cash equivalents ............................................       111.4          244.0
Accrued investment income ............................................       158.6          156.3
Other closed block assets ............................................       324.3          327.6
                                                                         ------------------------
   Total closed block assets .........................................   $10,528.6      $10,108.0
                                                                         ------------------------

Excess of reported closed block liabilities over assets
   designated to the closed block ....................................   $ 2,688.0      $ 2,737.9
                                                                         ------------------------

Portion of above representing other comprehensive income:
   Unrealized appreciation (depreciation), net of tax of $(185.9)
     million and $(84.0) million at June 30 and December 31,
     Respectively ....................................................       345.2          155.9
   Allocated to the policyholder dividend obligation, net of tax of
     $187.7 million and $88.8 million at June 30 and December 31,
     Respectively ....................................................      (348.6)        (164.9)
                                                                         ------------------------
       Total .........................................................        (3.4)          (9.0)
                                                                         ------------------------

Maximum future earnings to be recognized from closed block
   assets and liabilities ............................................   $ 2,684.6      $ 2,728.9
                                                                         ========================
</TABLE>


                                       23
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 5 -- Closed Block - (Continued)

                                                        June 30,
                                                          2003     December 31,
                                                       (unaudited)     2002
                                                       -----------------------
                                                            (in millions)
Change in the policyholder dividend obligation:
   Balance at beginning of period ..................   $288.9           $251.2
     Impact on net income before income taxes ......    (18.8)           (70.8)
     Unrealized investment gains (losses) ..........    282.6            108.5
                                                       -----------------------

   Balance at end of period ........................   $552.7           $288.9
                                                       =======================


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

<TABLE>
<CAPTION>
                                                                               Three Months Ended  Six Months Ended
                                                                                    June 30,           June 30,
                                                                                2003       2002     2003      2002
                                                                               ------------------------------------
                                                                                           (in millions)
<S>                                                                            <C>       <C>        <C>      <C>
Revenues
   Premiums ................................................................   $218.8    $231.6    $443.2    $468.0
   Net investment income ...................................................    161.7     166.7     326.3     333.2
   Net realized investment and other gains (losses), net of amounts
     credited to the policyholder dividend obligation of $23.8 million
     and $3.8 million for the three months ended June 30, 2003 and 2002,
     respectively and $(11.2) million and $(2.6) million
     for the six months ended June 30, 2003 and 2002, respectively .........     (1.1)     (1.5)     (2.3)     (2.7)
   Other closed block revenues .............................................      0.1        --       0.1        --
                                                                               ------------------------------------
     Total closed block revenues ...........................................    379.5     396.8     767.3     798.5

Benefits and Expenses
   Benefits to policyholders ...............................................    230.3     251.1     475.9     509.5
   Change in the policyholder dividend obligation ..........................     (3.2)    (17.7)     (8.7)    (35.7)
   Other closed block operating costs and expenses .........................     (1.9)     (0.7)     (4.4)     (2.2)
   Dividends to policyholders ..............................................    120.9     127.5     237.9     253.5
                                                                               ------------------------------------
     Total benefits and expenses ...........................................    346.1     360.2     700.7     725.1
                                                                               ------------------------------------

   Closed block revenues, net of closed block benefits and expenses,
     before income taxes ...................................................     33.4      36.6      66.6      73.4
   Income taxes, net of amounts credited to the policyholder
     dividend obligation of $0.6 million and $(0.1) million for the three
     months ended June 30, 2003 and 2002, respectively and $1.1 million
     and $(3.1) million for the six months ended June 30, 2003
     and 2002, respectively ................................................     11.9      12.5      23.3      25.0
                                                                               ------------------------------------

     Closed block revenues, net of closed block benefits and expenses,
       and income taxes ....................................................   $ 21.5    $ 24.1    $ 43.3    $ 48.4
                                                                               ====================================
</TABLE>


                                       24
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 6 -- Severance

During the three and six month periods ended June 30, 2003, the Company
continued its ongoing Competitive Position Project (the project). This project
was initiated in the first quarter of 1999 to reduce costs and increase future
operating efficiency by consolidating portions of the Company's operations and
is expected to continue through at least 2003. The project consists primarily of
reducing staff in the home office and terminating certain operations outside the
home office.

Since the inception of the project as well as from similar initiatives such as
our information technology outsourcing and the sale of the home office
properties, approximately 1,570 employees have been terminated. Benefits paid
since the inception of the project were $106.7 million through June 30, 2003. As
of June 30, 2003 and December 31, 2002, the liability for employee termination
costs, included in other liabilities was $12.9 million and $12.4 million,
respectively. Employee termination costs, net of related pension curtailment and
other post employment benefit related gains, are included in other operating
costs and expenses and were $3.2 million and $2.4 million for the three months
ended June 30, 2003 and 2002 and $9.4 million and $7.4 million for the six month
periods ended June 30, 2003 and 2002, respectively. The total employee
termination costs for the six month period ended June 30, 2003 included an
estimated $5.0 million for planned terminations related to our information
technology outsourcing.

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

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

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

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

<S>                                               <C>             <C>               <C>
2003 ..........................................   $  6.9          $ 34.7            $  1.3
2004 ..........................................      8.3            40.0               1.3
2005 ..........................................      8.0            38.9               1.3
2006 ..........................................      7.7            38.1               1.3
2007 ..........................................      7.4            37.2               1.3
Thereafter ....................................     54.5           131.7              78.5
                                                  ------          ------            ------
Total minimum payment .........................     92.8          $320.6            $ 85.0
                                                                  ======            ======
Amounts representing interest expense .........     (4.1)
                                                  ------
Present value of net minimum lease payments ...     88.7
Current portion of capital lease obligations ..     (3.0)
                                                  ------
Total .........................................   $ 85.7
                                                  ======
</TABLE>

Note 8 -- Related Party Transactions

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

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 $1.4 million and $2.0 million for the three months ended
June 30, 2003 and 2002, respectively, and $3.0 million and $3.9 million for the
six months ended June 30, 2003 and 2002, respectively.


                                       25
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 9 -- Goodwill and Other Intangible Assets

The carrying values of the Company's goodwill and other purchased intangible
assets are presented in the table below as of the dates presented. These assets
are included in other assets in the unaudited consolidated balance sheets.
Additional information about the Company's purchased intangible assets is
provided in the notes to the consolidated financial statements in the Company's
2002 10-K.

                                                    June 30,        December 31,
                                                     2003              2002
                                                    ----------------------------
                                                           (in millions)
Goodwill ......................................     $279.0               $254.6

Management contracts ..........................        5.3                  5.2

Value of business acquired ....................      504.0                481.7

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

The following condensed consolidating financial statements are provided in
compliance with Regulation S-X of the 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 June 30, 2003, JHFS provides a full and unconditional
guarantee of the Variable Company's obligation to pay amounts due to
contractholders on surrender, withdrawal or annuitization of the Variable
Company's deferred annuity contracts' market value adjustment interest. In
addition, JHFS guarantees 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 Life Company, John Hancock Canadian
Holdings Limited and investments in other international subsidiaries. JHFS' cash
flow primarily consists of dividends from its operating subsidiaries and
proceeds from debt offerings offset by expenses, shareholder dividends and stock
repurchases. As a holding company, the Company's ability to meet its cash
requirements, including, but not limited to, paying interest on any debt, paying
expenses related to its affairs, paying dividends on its common stock and any
Board of Directors approved repurchase of its common stock, 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. However, JHFS can give no assurance it
will declare or pay dividends on a regular basis.

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 192% as of December 31, 2002.


                                       26
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

                      Condensed Consolidating Balance Sheet


<TABLE>
<CAPTION>
                                                      John Hancock
                                        John Hancock  Variable Life                               Consolidated
                                          Financial     Insurance                                 John Hancock
                                          Services      Company        Other                        Financial
June 30, 2003                            (Guarantor)    (Issuer)   Subsidiaries    Eliminations   Services, Inc.
----------------------------------------------------------------------------------------------------------------
                                                                   (in millions)

<S>                                      <C>            <C>            <C>            <C>             <C>
Assets:
  Invested assets ....................           --     $  4,627.7     $ 68,359.4     $    555.3      $ 73,542.4
  Cash and cash equivalents ..........   $     27.3            4.3        1,159.3            6.7         1,197.6
  Investment in unconsolidated
    subsidiaries .....................      8,724.3          124.8             --       (8,849.1)             --
  Other assets .......................         23.6        1,510.0        9,092.5         (130.0)       10,496.1
  Separate account assets ............           --        6,279.1       16,278.4             --        22,557.5
                                         -----------------------------------------------------------------------
Total Assets .........................   $  8,775.2     $ 12,545.9     $ 94,889.6     $ (8,417.1)     $107,793.6
                                         =======================================================================

Liabilities:
  Insurance liabilities ..............           --     $  4,385.1     $ 63,534.2     $    444.9      $ 68,364.2
  Consumer notes .....................           --             --          680.1             --           680.1
  Debt ...............................   $    753.9           75.0        1,074.9         (140.0)        1,763.8
  Other liabilities ..................         10.9          598.9        5,645.0            2.3         6,257.1
  Separate account liabilities .......           --        6,279.1       16,278.4             --        22,557.5
                                         -----------------------------------------------------------------------
Total Liabilities ....................        764.8       11,338.1       87,212.6          307.2        99,622.7

  Preferred shareholders' equity in
    subsidiary companies .............           --             --          160.5             --           160.5
                                         -----------------------------------------------------------------------
  Shareholders' equity (1) ...........      8,010.4        1,207.8        7,516.5       (8,724.3)        8,010.4
                                         -----------------------------------------------------------------------
Total Liabilities, Preferred
Shareholders' Equity in Subsidiary
Companies and Shareholders'
Equity (1) ...........................   $  8,775.2     $ 12,545.9     $ 94,889.6     $ (8,417.1)     $107,793.6
                                         =======================================================================
</TABLE>


                                       27
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

                      Condensed Consolidating Balance Sheet

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

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

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

(1)   Shareholder's equity includes common stock of JHFS at $.01 par value per
      share, 2.0 billion shares authorized, 319.1 million and 317.5 million
      shares issued as of June 30, 2003 and December 31, 2002, respectively, and
      JHFS treasury stock at cost of $1,068.8 million, or 29.9 million shares,
      and $1,057.2 million, or 29.5 million shares, as of June 30, 2003 and
      December 31, 2002, respectively.


                                       28
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

                   Condensed Consolidating Statement of Income

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

<S>                                      <C>               <C>           <C>             <C>                   <C>
Revenues
  Premiums ...........................         --          $   15.3      $  898.8        $    0.3              $  914.4
  Universal life and investment-
     type product fees ...............         --              85.7         120.0             0.2                 205.9
  Net investment income ..............   $    0.1              65.9         974.8             8.5               1,049.3
  Net realized investment and other
     gains ...........................         --               2.0          83.7             4.1                  89.8
  Investment management revenues,
     commissions and other fees ......         --                --         129.0              --                 129.0
  Other revenue ......................         --                --          59.3             0.1                  59.4
                                         ------------------------------------------------------------------------------
Total revenues .......................        0.1             168.9       2,265.6            13.2               2,447.8

Benefits and expenses
  Benefits to policyholders ..........         --              81.8       1,307.4             5.2               1,394.4
  Other operating costs and
     expenses ........................       16.3              23.8         380.6             0.3                 421.0
  Amortization of deferred policy
     acquisition costs ...............         --              27.7          45.7             0.1                  73.5
  Dividends to policyholders .........         --               4.6         140.3            (0.1)                144.8
                                         ------------------------------------------------------------------------------
Total benefits and expenses ..........       16.3             137.9       1,874.0             5.5               2,033.7

  Income (loss) before income taxes ..      (16.2)             31.0         391.6             7.7                 414.1
  Income taxes .......................       (6.0)             11.8         115.7             2.7                 124.2
                                         ------------------------------------------------------------------------------
    Net income (loss) after taxes ....      (10.2)             19.2         275.9             5.0                 289.9

  Equity in the net income of
    unconsolidated subsidiaries ......      300.1               5.0            --          (305.1)                   --
                                         ------------------------------------------------------------------------------

Net income ...........................   $  289.9          $   24.2      $  275.9        $ (300.1)             $  289.9
                                         ==============================================================================
</TABLE>


                                       29
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

                   Condensed Consolidating Statement of Income

<TABLE>
<CAPTION>
                                              John Hancock   John Hancock
                                               Financial     Variable Life                                    Consolidated John
For the Three Month Period Ended                Services   Insurance Company       Other                      Hancock Financial
June 30, 2002                                 (Guarantor)      (Issuer)         Subsidiaries    Eliminations    Services, Inc.
-------------------------------------------------------------------------------------------------------------------------------
                                                                                 (in millions)

<S>                                            <C>               <C>               <C>               <C>               <C>
Revenues
  Premiums .................................         --          $   15.3          $  948.1          $    0.2          $  963.6
  Universal life and investment-
     type product fees .....................         --              85.2             121.0               0.2             206.4
  Net investment income ....................         --              56.3             914.1               8.7             979.1
  Net realized investment and other gains
    (losses) ...............................         --              (4.4)           (136.0)              1.4            (139.0)
  Investment management revenues,
    commissions and other fees .............         --                --             142.6                --             142.6
  Other revenue.............................   $    0.1              (0.1)             49.6               0.1              49.7
                                               --------------------------------------------------------------------------------
Total revenues .............................        0.1             152.3           2,039.4              10.6           2,202.4

Benefits and expenses
  Benefits to policyholders ................         --              91.9           1,369.0               5.5           1,466.4
  Other operating costs and
    expenses ...............................       13.6              10.6             359.1               0.3             383.6
  Amortization of deferred policy
    acquisition costs ......................         --               7.9              70.6                --              78.5
  Dividends to policyholders ...............         --               5.0             144.6                --             149.6
                                               --------------------------------------------------------------------------------
Total benefits and expenses ................       13.6             115.4           1,943.3               5.8           2,078.1

  Income (loss) before income taxes ........      (13.5)             36.9              96.1               4.8             124.3
  Income taxes .............................       (6.2)             11.3              19.6               1.3              26.0
                                               --------------------------------------------------------------------------------
    Net income (loss) after taxes ..........       (7.3)             25.6              76.5               3.5              98.3

  Equity in the net income of
    unconsolidated subsidiaries ............      105.6               3.5                --            (109.1)               --
                                               --------------------------------------------------------------------------------

Net income .................................   $   98.3          $   29.1          $   76.5          $ (105.6)         $   98.3
                                               ================================================================================
</TABLE>


                                       30
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

                   Condensed Consolidating Statement of Income

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

<S>                                            <C>               <C>               <C>              <C>               <C>
Revenues
  Premiums .................................         --          $   30.8          $1,717.9         $   (0.6)         $1,748.1
  Universal life and investment-
    type product fees ......................         --             172.8             235.1              0.4             408.3
  Net investment income ....................   $    0.1             132.5           1,928.5             17.5           2,078.6
  Net realized investment and other gains
    (losses) ...............................         --              (3.8)            153.1              3.1             152.4
  Investment management revenues,
    commissions and other fees .............         --                --             254.1               --             254.1
  Other revenue ............................         --                --             132.5              0.1             132.6
                                               -------------------------------------------------------------------------------
Total revenues .............................        0.1             332.3           4,421.2             20.5           4,774.1

Benefits and expenses
  Benefits to policyholders ................         --             166.7           2,574.1             10.6           2,751.4
  Other operating costs and
    expenses ...............................       33.6              45.1             735.2              0.8             814.7
  Amortization of deferred
    acquisition costs ......................         --              43.5             109.8              0.1             153.4
  Dividends to policyholders ...............         --               8.5             274.2             (0.1)            282.6
                                               -------------------------------------------------------------------------------
Total benefits and expenses ................       33.6             263.8           3,693.3             11.4           4,002.1

  Income (loss) before income taxes ........      (33.5)             68.5             727.9              9.1             772.0
  Income taxes .............................      (13.7)             23.1             216.4              3.1             228.9
                                               -------------------------------------------------------------------------------
    Net income (loss) after taxes ..........      (19.8)             45.4             511.5              6.0             543.1

  Equity in the net income of
    unconsolidated subsidiaries ............      562.9               6.0                --           (568.9)               --
                                               -------------------------------------------------------------------------------

Net income .................................   $  543.1          $   51.4          $  511.5         $ (562.9)         $  543.1
                                               ===============================================================================
</TABLE>


                                       31
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

                   Condensed Consolidating Statement of Income

<TABLE>
<CAPTION>
                                              John Hancock     John Hancock                                    Consolidated John
                                               Financial       Variable Life                                        Hancock
For the Six Month Period Ended                  Services     Insurance Company      Other                          Financial
June 30, 2002                                 (Guarantor)        (Issuer)        Subsidiaries     Eliminations   Services, Inc.
--------------------------------------------------------------------------------------------------------------------------------
                                                                        (in millions)

<S>                                            <C>               <C>               <C>               <C>               <C>
Revenues
  Premiums .................................         --          $   28.5          $1,678.3          $   (0.8)         $1,706.0
  Universal life and investment-
    type product fees ......................         --             173.9             226.5               0.4             400.8
  Net investment income ....................   $    0.6             109.9           1,821.2              17.3           1,949.0
  Net realized investment and other gains
    (losses) ...............................         --             (16.3)           (209.3)              0.9            (224.7)
  Investment management revenues,
    commissions and other fees .............         --                --             290.4                --             290.4
  Other revenue ............................        0.1               1.2             125.3               0.1             126.7
                                               --------------------------------------------------------------------------------
Total revenues .............................        0.7             297.2           3,932.4              17.9           4,248.2

Benefits and expenses
  Benefits to policyholders ................         --             169.9           2,517.4              11.5           2,698.8
  Other operating costs and expenses .......       28.3              26.3             728.2               0.5             783.3
  Amortization of deferred policy
    acquisition costs ......................         --              15.8             133.0                --             148.8
  Dividends to policyholders ...............         --               9.8             284.9                --             294.7
                                               --------------------------------------------------------------------------------
Total benefits and expenses ................       28.3             221.8           3,663.5              12.0           3,925.6

  Income (loss) before income taxes ........      (27.6)             75.4             268.9               5.9             322.6
  Income taxes .............................      (12.9)             23.8              65.1               1.8              77.8
                                               --------------------------------------------------------------------------------
    Net income (loss) after taxes ..........      (14.7)             51.6             203.8               4.1             244.8

  Equity in the net income of
    unconsolidated subsidiaries ............      259.5               4.1                --            (263.6)               --
                                               --------------------------------------------------------------------------------

Net income .................................   $  244.8          $   55.7          $  203.8          $ (259.5)         $  244.8
                                               ================================================================================
</TABLE>


                                       32
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

                 Condensed Consolidating Statement of Cash Flows

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

<S>                                                <C>            <C>          <C>            <C>              <C>
Net income .....................................   $  543.1       $   51.4     $  511.5       $ (562.9)        $  543.1
  Adjustments to reconcile net
   income to net cash provided by
   operating activities:
    Amortization of discount-fixed
     maturities ................................         --           (4.5)       (14.6)            --            (19.1)
    Equity in net income of
     unconsolidated subsidiaries ...............     (562.9)          (6.0)          --          568.9               --
    Net realized investment and other
     (gains) losses ............................         --            3.8       (153.1)          (3.1)          (152.4)
    Change in deferred policy acquisition
     costs .....................................         --          (31.4)      (184.9)           0.1           (216.2)
    Depreciation and amortization ..............        0.8            0.7         29.1             --             30.6
    Net cash flows from trading securities .....         --             --        (83.4)            --            (83.4)
    Increase in accrued investment income ......         --          (13.3)      (110.3)          (0.6)          (124.2)
    (Increase) decrease in premiums and
     accounts receivable .......................        3.8            1.0        (78.8)           0.6            (73.4)
    Increase (decrease) in other assets
     and other liabilities, net ................        8.0          (27.8)      (234.8)          77.8           (176.8)
    Increase in policy liabilities and
     accruals, net .............................         --           80.3      1,368.0            8.3          1,456.6
    Increase in income taxes ...................        0.3           30.5        116.2            1.7            148.7
                                                   --------------------------------------------------------------------
    Net cash (used in) provided by
     operating activities ......................       (6.9)          84.7      1,164.9           90.8          1,333.5
Cash flows from investing activities:
Sales of:
    Fixed maturities available-for-sale ........         --          214.2      6,779.8           16.3          7,010.3
    Equity securities available-for-sale .......         --           31.4        164.1             --            195.5
    Real estate ................................         --             --         65.6             --             65.6
    Short term investments and other
     invested assets ...........................         --            4.9        103.7            0.2            108.8
    Home Office properties .....................         --             --        887.6             --            887.6
Maturities, prepayments, and scheduled
 redemptions of:
    Fixed maturities held-to-maturity ..........         --            2.1        133.8            0.1            136.0
    Fixed maturities
    available-for-sale .........................         --          104.1      1,799.6           25.6          1,929.3
    Short term investments and other
     invested assets ...........................         --             --        400.9             --            400.9
    Mortgage loans on real estate ..............         --           28.0        558.9            1.4            588.3
</TABLE>


                                       33
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                 John       John Hancock
                                                Hancock    Variable Life                                    Consolidated
                                               Financial     Insurance                                      John Hancock
For the Six Month Period Ended                  Services      Company         Other                           Financial
June 30, 2003                                 (Guarantor)    (Issuer)      Subsidiaries      Eliminations   Services, Inc.
--------------------------------------------------------------------------------------------------------------------------
                                                                          (in millions)
<S>                                          <C>              <C>            <C>              <C>                <C>
Purchases of:
  Fixed maturities held-to-maturity ......          --               --      $    (2.2)              --          $    (2.2)
  Fixed maturities available-for-sale ....          --        $  (976.8)     (10,995.0)       $   (33.3)         (12,005.1)
  Equity securitiesavailable-for-sale ....          --            (61.5)        (118.1)            (0.4)            (180.0)
  Real estate ............................          --             (0.1)         (14.5)              --              (14.6)
  Short term investments and other
    invested assets ......................          --            (28.8)        (828.9)            (0.9)            (858.6)
  Mortgage loans on real estate issued ...          --            (99.4)        (850.9)            (3.8)            (954.1)
  Net cash received related to
    acquisition of business ..............          --               --           93.7               --               93.7
  Other, net .............................          --             (5.1)        (191.8)            (1.5)            (198.4)
  Capital contributed to unconsolidated
    subsidiaries .........................   $    (9.4)              --             --              9.4                 --
  Dividends received from
    unconsolidated subsidiaries ..........       100.0               --             --           (100.0)                --
                                             -----------------------------------------------------------------------------
    Net cash provided by (used in)
      investing activities ...............        90.6           (787.0)      (2,013.7)           (86.9)          (2,797.0)

  Cash flows from financing activities:
  Capital contributions paid by parent ...          --               --            9.4             (9.4)                --
  Acquisition of treasury stock ..........       (11.6)              --             --               --              (11.6)
  Dividends paid on common stock .........          --               --         (100.0)           100.0                 --
  Universal life and investment-type
    contract deposits ....................          --            632.4        4,075.6               --            4,708.0
  Universal life and investment-type
    contract maturities and withdrawals ..          --           (201.5)      (3,292.6)           (15.0)          (3,509.1)
  Issuance of consumer notes .............          --               --          389.9               --              389.9
  Issuance of short-term debt ............          --             75.0           70.8            (75.0)              70.8
  Repayment of long-term debt ............          --               --         (114.5)              --             (114.5)
  Repayment of short-term debt ...........          --               --           (3.6)              --               (3.6)
  Net decrease in commercial paper .......       (59.4)              --             --               --              (59.4)
                                             -----------------------------------------------------------------------------
  Net cash (used in) provided by
    financing activities .................       (71.0)           505.9        1,035.0              0.6            1,470.5
</TABLE>


                                       34
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

           Condensed Consolidating Statement of Cash Flows (continued)

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

<S>                                     <C>              <C>               <C>              <C>              <C>
   Net increase (decrease) in cash
     and cash equivalents ...........   $   12.7         $ (196.4)         $  186.2         $    4.5         $    7.0

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

Cash and cash equivalents at end
  of period .........................   $   27.3         $    4.3          $1,159.3         $    6.7         $1,197.6
                                        =============================================================================
</TABLE>


                                       35
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

                 Condensed Consolidating Statement of Cash Flows


<TABLE>
<CAPTION>
                                                  John Hancock    John Hancock
                                                   Financial      Variable Life                                   Consolidated John
For the Six Month Period Ended                      Services    Insurance Company     Other                       Hancock Financial
June 30, 2002                                     (Guarantor)       (Issuer)       Subsidiaries   Eliminations      Services, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                  (in millions)

<S>                                                <C>               <C>             <C>             <C>                 <C>
Net income .....................................   $  244.8          $   55.7        $  203.8        $ (259.5)           $  244.8
  Adjustments to reconcile net
    income to net cash provide by
    (used in) operating activities:
    Amortization of discount-fixed
      maturities ...............................         --               0.1           (59.6)           (0.3)              (59.8)
    Equity in net income of
      unconsolidated subsidiaries ..............     (259.5)             (4.1)             --           263.6                  --
    Net realized investment and other (gains)
      losses ...................................         --              16.3           209.3            (0.9)              224.7
    Change in deferred policy acquisition
      costs ....................................         --             (71.8)         (107.2)             --              (179.0)
    Depreciation and amortization ..............        0.4               0.2            33.1             0.4                34.1
    Net cash flows from trading securities .....         --                --            (9.0)             --                (9.0)
    Decrease in accrued investment income ......         --              (7.5)          (67.0)           (0.9)              (75.4)
    Decrease in premiums and accounts
      receivable ...............................         --               8.4            11.1             0.8                20.3
    Increase (decrease) in other assets and
      other liabilities, net ...................       41.3             (56.7)          (42.7)           (0.1)              (58.2)
    (Decrease) increase in policy
      liabilities and accruals, net ............         --             (42.4)        1,158.6            10.6             1,126.8
    Increase (decrease) in income taxes ........       12.4               1.0            19.1            (2.2)               30.3
                                                   ------------------------------------------------------------------------------
    Net cash provided by (used in)
      operating activities .....................       39.4            (100.8)        1,349.5            11.5             1,299.6
Cash flows from investing activities:
Sales of:
    Fixed maturities available-for-sale ........         --             245.6         2,019.9             6.6             2,272.1
    Equity available-for-sale ..................         --               3.8           178.7             1.0               183.5
    Real estate ................................         --               0.3            35.6              --                35.9
    Short term investments and other invested
      assets ...................................         --                --            62.6              --                62.6
Maturities, prepayments, and scheduled
  redemptions of:
    Fixed maturities held-to-maturity ..........         --               1.4            83.6             0.6                85.6
    Fixed maturities available-for-sale ........         --              65.8         1,599.3            16.6             1,681.7
    Short term investments and other invested
      assets ...................................         --               1.2           218.6             0.3               220.1
    Mortgage loans on real estate ..............         --              35.7           629.6            14.4               679.7
</TABLE>


                                       36
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                 John Hancock     John Hancock
                                                   Financial      Variable Life                                   Consolidated John
For the Six Month Period Ended                     Services     Insurance Company     Other                       Hancock Financial
June 30, 2002                                     (Guarantor)       (Issuer)       Subsidiaries    Eliminations    Services, Inc.
---------------------------------------------------------------------------------------------------------------------------------
                                                                                   (in millions)
<S>                                              <C>               <C>               <C>               <C>               <C>
Purchases of:
  Fixed maturities held-to-maturity ..........         --          $   (1.1)         $  (10.7)               --          $  (11.8)
  Fixed maturities available-for-sale ........         --            (593.0)         (6,728.0)         $  (33.1)         (7,354.1)
  Equity available-for-sale ..................         --              (5.5)            (96.6)             (1.4)           (103.5)
  Real estate ................................         --              (0.1)             (4.2)               --              (4.3)
  Short term investments and other invested
    assets ...................................         --              (9.0)           (474.5)             (1.1)           (484.6)
  Mortgage loans on real estate issued .......         --             (73.1)           (840.6)             (5.0)           (918.7)
  Other, net .................................         --             (18.9)           (154.4)              3.7            (169.6)
  Capital contributed to unconsolidated
    subsidiaries .............................   $  (18.3)               --                --              18.3                --
  Dividends received from unconsolidated
    subsidiaries .............................      111.0                --                --            (111.0)               --
                                                 --------------------------------------------------------------------------------
  Net cash provided by (used in) investing
    activities ...............................       92.7            (346.9)         (3,481.1)            (90.1)         (3,825.4)

  Cash flows from financing activities:
  Capital contributions paid by parent .......         --                --              18.3             (18.3)               --
  Acquisition of treasury stock ..............     (246.6)               --                --                --            (246.6)
  Dividends paid on common stock .............         --                --            (111.0)            111.0                --
  Universal life and investment-type
    contract deposits ........................         --             570.7           4,774.7                --           5,345.4
  Universal life and investment-type
    contract maturity ........................         --            (193.0)         (2,795.2)            (15.5)         (3,003.7)
  Issuance of short-term debt ................       10.0                --              (0.7)               --               9.3
  Repayment of short-term debt ...............         --                --             (47.9)               --             (47.9)
  Repayment of long-term debt ................         --                --             (12.6)               --             (12.6)
  Net increase in commercial paper ...........         --                --              10.0                --              10.0
                                                 --------------------------------------------------------------------------------
  Net cash (used in) provided by financing
    activities ...............................     (236.6)            377.7           1,835.6              77.2           2,053.9
</TABLE>


                                       37
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                               John Hancock                                  Consolidated
                                          John Hancock        Variable Life                                  John Hancock
For the Six Month Period Ended           Financial Services  Insurance Company     Other                       Financial
June 30, 2002                              (Guarantor)           (Issuer)       Subsidiaries  Eliminations   Services, Inc.
---------------------------------------------------------------------------------------------------------------------------
                                                                               (in millions)

<S>                                        <C>               <C>               <C>               <C>               <C>
   Net decrease in cash and cash
     equivalents ........................  $ (104.5)         $  (70.0)         $ (296.0)         $   (1.4)         $ (471.9)

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

Cash and cash equivalents at end of
  period ................................  $    4.9          $   38.4          $  792.9          $    5.6          $  841.8
                                           ================================================================================
</TABLE>


Note 11 -- Subsequent Events

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 period ended June 30, 2003.


                                       38
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

      Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of John Hancock Financial
Services, Inc. (John Hancock, JHFS or the Company) as of June 30, 2003, compared
with December 31, 2002, and its consolidated results of operations for the three
and six month periods ended June 30, 2003 and June 30, 2002, and, where
appropriate, factors that may affect future financial performance. This
discussion should be read in conjunction with the Company's MD&A and annual
audited financial statements as of December 31, 2002 included in the Company's
Form 10-K for the year ended December 31, 2002 filed with the United States
Securities and Exchange Commission (hereafter referred to as the Company's 2002
Form 10-K) and unaudited consolidated financial statements and related notes
included elsewhere in this Form 10-Q. The Company's financial statements, press
releases, analyst supplements and other information are available on the
internet at www.jhancock.com, under the link labeled "Investor Relations". In
addition, all of the Company's United States Securities and Exchange Commission
filings are available on the internet at www.sec.gov, under the name Hancock
John Financial Services.

      Statements, analyses, and other information contained in this report
relating to trends in the Company's operations and financial results, the
markets for the Company's products, the future development of the Company's
business, and the contingencies and uncertainties to which the Company may be
subject, as well as other statements including words such as "anticipate,"
"believe," "plan," "estimate," "intend," "will," "should," "may," and other
similar expressions, are "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995. Such statements are made based upon
management's current expectations and beliefs concerning future events and their
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.

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 2002 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.

      Consolidation Accounting

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

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

      The Company has a number of relationships with a disparate group of
entities, which result from the Company's direct investment in their equity
and/or debt. Two of these entities are energy investment partnerships, two are
investment funds organized as limited partnerships and three are operating
companies (a ski resort developer/operator, a stepvan


                                       39
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

manufacturer and a steel spring manufacturing company) in whose debt the Company
invests, and which subsequently underwent a corporate reorganization and we
received preferred stock as part of the restructuring. The Company has made no
guarantees to any other parties involved with these entities, and has only one
outstanding capital commitment to one of the investment funds.

      The Company is evaluating whether each of these entities is a VIE, and if
so, whether consolidation accounting should be used for each. The Company is
still estimating the future potential impact of consolidating any potential VIE
with which it is involved. However, additional liabilities recognized as a
result of consolidating any of these entities would not represent additional
claims on the general assets of the Company; rather, they would represent claims
against additional assets recognized by the Company as a result of consolidating
the VIEs. However it is possible that if we do consolidate some of the
Company-managed CDOs, we may report lower assets and capital in the short term.
Conversely, additional assets recognized as a result of consolidation would not
represent additional assets which the Company could use to satisfy claims
against its general assets, rather they would be used only to settle additional
liabilities recognized as a result of consolidation. The Company's maximum loss
in relation to these entities is limited to its investments in them, future
capital commitments made, and where the Company is the issuer of separate
account wrap guarantees to third party investors in these entities, the amount
of wrapped investments. Therefore, the Company believes that these transactions
have no impact on the Company's liquidity and capital resources beyond what is
already presented in the consolidated financial statements and notes thereto. It
is the Company's intent to display any consolidated entities clearly on the face
of the balance sheets with appropriate disclosures See Note 3 - Relationships
with Variable Interest Entities to the unaudited consolidated financial
statements.

      Amortization of Deferred Acquisition Costs

      Costs that vary with, and are related primarily to, the production of new
business have been deferred to the extent that they are deemed recoverable and
appear as an asset on our consolidated balance sheets. Such costs include
commissions, certain costs of policy issue and underwriting, and certain agency
expenses. Similarly, any amounts assessed as initiation fees or front-end loads
are recorded as unearned revenue. The Company tests the recoverability of the
asset recorded for deferred policy acquisition costs, or DAC, annually with a
model that uses data such as market performance, lapse rates and expense levels.
At June 30, 2003 the Company's DAC asset was $3,971.3 million, of 3.7% of total
assets. We amortize DAC on term life and long-term care insurance ratably with
premiums. We amortize DAC on our annuity products and retail life insurance,
other than term, based on a percentage of the estimated gross profits over the
life of the policies, which are generally twenty years for annuities and thirty
years for life policies. Our estimated gross profits are computed based on
assumptions related to the underlying policies including mortality, lapse,
expenses, and asset growth rates. We amortize DAC and unearned revenue on these
policies at a constant percentage of gross profits over the life of the
policies.

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

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

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


                                       40
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

                                                              Asset
                                               Protection   Gathering   Total
                                               ----------   ---------   -----
                                                        (in millions)
18%.......................................      $ (0.3)     $ (1.7)    $ (2.0)
13%.......................................          --          --         --
 8%.......................................         0.3         1.8        2.1

      Benefits to Policyholders

      The liability for "future policy benefits" is the largest liability
included in our consolidated balance sheets, 43.8% of total liabilities as of
June 30, 2003. Changes in this liability are generally reflected in the
"benefits to policyholders" caption 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. The
Company periodically reviews its policies for loss recognition and, based on
management's judgment, the Company from time to time may recognize a loss on
certain lines of business. Short-term variances of actual results from the
judgments made by management are reflected in current period earnings and can
impact quarter to quarter earnings.

      Investment in Debt and Equity Securities

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

      Certain of our fixed income securities classified as held-to-maturity and
available-for-sale are not publicly traded, and quoted market prices are not
available from brokers or investment bankers on these securities. The change in
the fair value of the available-for-sale securities is recorded in other
comprehensive income as an unrealized gain or loss. We calculate the fair value
of these securities ourselves through the use of pricing models and discounted
cash flows calling for a substantial level of professional investment management
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 Controller's Department. Our pricing analysts take appropriate action to
reduce 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, litigation
and government actions, among others.

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


                                       41
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Benefit Plans

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

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

      The assumed long-term rate of return on plan assets is generally set at
the long-term rate expected to be earned (based on the Capital Asset Pricing
Model and similar tools) based on the long-term investment policy of the plans
and the various classes of the invested funds. For 2003, net periodic pension
(and benefit) cost, 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 2003 NPPC by
approximately $4.6 million and 2003 NPBC by approximately $0.5 million. The
expected return on plan assets is based on the fair market value of the plan
assets as of December 31, 2002. The target asset mix of the plan is: 50%
domestic stock, 15% international stock, 10% private equity, and 25% fixed
income.

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

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

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

      Income Taxes

      Our reported effective tax rate on net income was 30.0% and 20.9% for the
three month periods ending June 30, 2003 and 2002, respectively, and 29.7% and
24.1% for the six month periods ending June 30, 2003 and 2002, respectively. 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 and changes to reserves that we
consider appropriate. 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 the 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.

      A number of years may elapse before a particular matter, for which we have
established a reserve, is audited and finally resolved. The Internal Revenue
Service is currently examining our tax returns for 1996 through 1998.


                                       42
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      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 within other liabilities.

Reinsurance

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

      In addition, the Company has entered into reinsurance agreements to
specifically address insurance exposure to multiple life insurance claims as a
result of a catastrophic event. The Company has put into place, effective July
1, 2002, catastrophic reinsurance covering both individual and group policies
written by all of its U.S. life insurance subsidiaries. Effective July 1, 2003,
the deductible for individual and group coverages combined was reduced from
$25.0 million to $17.5 million per occurrence and the limit of coverage is $40
million per occurrence. Both the deductible and the limit apply to the combined
U.S. insurance subsidiaries. The Company has supplemented this coverage by
reinsuring all of its accidental death exposures in excess of $100,000 per life
under its group life insurance coverages, and 50% of such exposures below
$100,000. Should catastrophic reinsurance become unavailable to the Company in
the future, the absence of, or further limitations on, reinsurance coverage
could adversely affect the Company's future net income and financial position.

      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.

Recent Earnings and Sales Guidance

      In its press release dated July 31, 2003 and its conference call with
financial analysts held on August 1, 2003, the Company reaffirmed its operating
earnings per share growth guidance for the balance of the current fiscal year at
7% to 11% based on continued business growth, an expectation of equity market
appreciation averaging 2% per quarter during the rest of the year, slightly
improving economic conditions and strengthening consumer confidence in the
second half of the year. The Company also reaffirmed its guidance for 2003 gross
investment losses, excluding hedging adjustments, of $650 million to $750
million compares to pre-tax gross investment losses of $876.5 million in 2002.
At the same time the Company believes the losses would be at the lower end of
the guidance. Due to the unpredictability of the timing and recognition of gains
and losses, especially such items as prepayment gains, hedging adjustments and
recoveries, as well as the unpredictable nature of certain other unusual or
non-recurring items that management believes are not indicative of ongoing
operational performance, guidance on GAAP net income cannot be readily
estimated. Accordingly, the Company is unable to provide guidance with respect
to, or a reconciliation of guidance on net operating income per share to GAAP
net income.

      Given weak consumer demand for equity-market life and accumulation
products, the low interest rate environment, legislative concerns, the continued
concerns about the economy and equity markets by high net worth customers and
highly competitive market conditions for spread-based products, the Company has
revised its sales guidance for several products for 2003. The Company now
expects that total retail annuity sales will be down 5-10% from last year and
that institutional spread-based product sales will be below last year's level.
Both core and total life sales are expected to decrease from the prior year by
15-20%, but we expect sales in the second half of the year to be roughly flat
with the second half of 2002. We expect long-term care sales to exceed our
previous guidance and increase by 35%-40% from 2002 levels.

Economic Trends

      Economic trends impact profitability and sales of the Company's products.
The impact of economic trends on the Company's profitability are similar to
their impact on the financial markets. The Company estimates that a 1% increase
(decrease) in interest rates occurring evenly over a twelve month period, or an
estimated 8 basis points per month, would increase (decrease) segment after tax
operating income by approximately $4 million, and a 5% increase (decrease) in
equity


                                       43
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

markets occurring evenly over a twelve month period, or an estimated 42 basis
points per month, would increase (decrease) segment after tax operating income
by approximately $10 million.

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

      Premiums and deposits of our individual annuity products decreased from a
strong prior year by 13.5% to $744.9 million for the three month period ended
June 30, 2003. Annuity premiums and deposits increased 2.0% to $1,817.1 million
for the six month period ended June 30, 2003. Premiums and deposits on our
long-term care insurance increased 22.9%, to $236.4 million and 22.0%, to $450.2
million for the three and six month periods ended June 30, 2003 due to strong
growth in the business and increasing renewal premiums, while our variable life
insurance product deposits in 2003 decreased 14.1%, to $211.6 million and 17.7%,
to $439.2 million, for the same time periods. The policyholder account value in
the universal life insurance product line increased $1,262.7 million, or 41.8%
and $1,214.8, or 44.4% for the three and six month period ended June 30, 2003
from the comparable periods, due to underlying growth and the December 31, 2002
acquisition of Allmerica's fixed universal life insurance business. Despite
continued volatility in the equity markets during 2003, mutual fund deposits
increased $608.6 million, or 65.1%, to $1,543.4 million and $707.7 million, or
39.0%, to $2,524.5 million for the three and six month periods ended June 30,
2003, respectively, due to sales of the John Hancock Preferred Income series of
closed end funds. However, redemptions increased $504.4 million, or 41.4%, to
$1,723.6 million and $318.5 million, or 13.4% to $2,691.9 million for the three
and six month periods ended June 30, 2003. The increase was primarily due to the
redemption of a large institutional advisory account in the second quarter,
partially offset by declines in redemptions of retail mutual funds. We have
reduced operating expenses to protect profit margins as we work to stabilize and
grow assets under management in the mutual funds business. However, our mutual
fund operations are impacted by general market trends, and a continued downturn
in the mutual fund market may negatively affect our future operating results.

      Recent economic and industry trends also have affected the sales and
financial results of our institutional business. Sales of fund-type products
decreased $486.7 million or 56.4% and $1,129.9 million, or 47.6% for the three
and six months ended June 30, 2003. The decrease was driven by decreasing demand
for GICs and increased market competition. Premiums on group annuity products
were down due to market competition and the low level of interest rates. We
continue to look for opportunistic sales in the single premium group annuity
market where our pricing standards are met. Partially offsetting the decrease in
sales was the introduction of a new product, SignatureNotes, in late 2002 which
generated sales of $405.2 million in 2003. SignatureNotes is designed to
generate sales from the conservative retail investor looking for protection of
principle and stable returns. The investment management services we provide to
domestic and international institutions include services and products such as
investment advisory client portfolios, individually managed and pooled separate
accounts, registered investment company funds, bond and mortgage
securitizations, collateralized bond obligation funds and mutual fund management
capabilities. Assets under management of our Investment Management Segment
increased to $29,485.2 million as of June 30, 2003 from $27,491.4 million as of
December 31, 2002.


                                       44
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Transactions Affecting Comparability of Results of Operations

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

       The disposal described 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 table below presents actual and proforma data, for
comparative purposes, of revenue, net income and earnings per share for the
periods indicated, to demonstrate the proforma effect of the acquisition and of
the disposal as if they occurred on January 1, 2002.

<TABLE>
<CAPTION>
                                        Three Months Ended June 30,                         Six Months Ended June 30,
                                 2003                     2002                      2003                     2002
                               Proforma       2003      Proforma       2002       Proforma       2003      Proforma       2002
                              -----------------------------------------------   ------------------------------------------------
                                                             (in millions, except per share data)

<S>                             <C>         <C>         <C>         <C>           <C>         <C>          <C>         <C>
Revenue .....................   $2,434.1    $2,447.8    $2,177.7    $2,202.4      $4,729.3    $4,774.1     $4,200.0    $4,248.2

Net income ..................   $  288.0    $  289.9    $   97.9    $   98.3      $  540.3    $  543.1     $  248.3    $  244.8

Earnings per share ..........   $   1.00    $   1.00    $   0.33    $   0.33      $   1.87    $   1.88     $   0.84    $   0.82
</TABLE>

Acquisition:

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

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 is ceding all activity after May 1, 2003 to
MetLife. The transaction was recorded as of May 1, 2003 and is expected to close
later in 2003, subject to regulatory approval.


                                       45
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Results of Operations

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

<TABLE>
<CAPTION>
                                                                          Three Months Ended         Six Months Ended
                                                                               June 30,                  June 30,
                                                                           2003        2002          2003        2002
                                                                          -------------------------------------------
                                                                                         (in millions)
<S>                                                                        <C>        <C>         <C>        <C>
Revenues
Premiums ...............................................................   $  914.4   $  963.6    $1,748.1   $1,706.0
Universal life and investment-type product fees ........................      205.9      206.4       408.3      400.8
Net investment income ..................................................    1,049.3      979.1     2,078.6    1,949.0
Net realized investment and other gains (losses), net of related
        amortization of deferred policy acquisition costs, amounts
        credited to participating pensions contractholders and the
        policyholder dividend obligation (1) ...........................       89.8     (139.0)      152.4     (224.7)
Investment management revenues, commissions, and other fees ............      129.0      142.6       254.1      290.4
Other revenue ..........................................................       59.4       49.7       132.6      126.7
                                                                           -------------------    -------------------
                Total revenues .........................................    2,447.8    2,202.4     4,774.1    4,248.2

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) .................................................    1,394.4    1,466.4     2,751.4    2,698.8
Other operating costs and expenses .....................................      421.0      383.6       814.7      783.3
Amortization of deferred policy acquisition costs, excluding
        amounts related to net realized investment and other gains
        (losses) (3) ...................................................       73.5       78.5       153.4      148.8
Dividends to policyholders .............................................      144.8      149.6       282.6      294.7
                                                                           -------------------    -------------------
                Total benefits and expenses ............................    2,033.7    2,078.1     4,002.1    3,925.6

Income before income taxes .............................................      414.1      124.3       772.0      322.6
Income taxes ...........................................................      124.2       26.0       228.9       77.8
                                                                           -------------------    -------------------

                Net income .............................................   $  289.9   $   98.3    $  543.1   $  244.8
                                                                           ===================    ===================
</TABLE>

(1)   Net of related amortization of deferred policy acquisition costs, amounts
      credited to participating pension contractholders and the policyholder
      dividend obligation of $51.1 million and $(12.1) million for the three
      months ended June 30, 2003 and 2002, respectively, and $1.9 million and
      $(33.1) million for the six months ended June 30, 2003 and 2002,
      respectively.

(2)   Excluding amounts related to net realized investment and other gains
      (losses) credited to participating pension contractholders and the
      policyholder dividend obligation of $29.4 million and $(3.7) million for
      the three months ended June 30, 2003 and 2002, respectively, and $(13.3)
      million and $(10.5) million for the six months ended June 30, 2003 and
      2002, respectively.

(3)   Excluding amounts related to net realized investment and other gains
      (losses) of $21.7 million and $(8.4) million for the three months ended
      June 30, 2003 and 2002, respectively and $15.2 million and $(22.6) million
      for the six months ended June 30, 2003, respectively.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

     During the first quarter of 2003, the Company implemented organizational
changes within the Corporate and Other Segment which resulted in the break-out
of the Maritime Life business as its own operating segment and the
reclassification of the 2002 results for the Federal long-term care insurance
business to the Protection Segment. The Maritime Life Segment consists of our
consolidated Canadian operations, principally those of our Canadian life
insurance business, The Maritime Life Assurance Company (Maritime Life). The
following discussion presents the results of our segments on a basis consistent
with the new organization structure. The reclassifications associated with the
realignment of our operating segments had no impact on segment after-tax
operating income, or net income of the Maritime Life or Corporate and Other
Segments, other than to display these


                                       46
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

businesses separately. The reclassification associated with the Federal
long-term care insurance business has no impact on segment after-tax operating
income, or net income of the business. The reclassification increased Protection
Segment after-tax operating income and decreased Corporate and Other Segment
after-tax operating income by $0.2 million for the three month period ended June
30, 2002.

     Consolidated income before income taxes increased 233.1%, or $289.8
million, for the three month period ended June 30, 2003 from the prior
comparable period. The increase was driven by growth in income before income
taxes of $103.0 million in the Guaranteed and Structured Financial Products
Segment (G&SFP), $94.9 million in the Protection Segment, $56.9 million in the
Asset Gathering Segment, $24.3 million in the Maritime Life Segment, $6.9
million in the Investment Management Segment and $3.8 million in the Corporate
and Other Segment. The increase in the consolidated income before income taxes
was driven by a $228.8 million improvement in net realized investment and other
gains and losses compared to the prior year. The improvement in net realized
investment gains and losses was driven by the $96.4 million increase in the
G&SFP Segment, $55.5 million in the Protection Segment, and $40.8 million in the
Asset Gathering Segment.

      Revenues increased 11.1%, or $245.4 million, from the prior year. The
increase in revenues was driven by the aforementioned increase in net realized
investment and other gains and losses compared to the prior year. Consolidated
net realized investment and other gains increased 164.6%, or $228.8 million,
from the prior year. See detail of current period net realized investment and
other gains (losses) in table below. The change in net realized investment and
other gains is the result of gain on disposal of fixed maturity securities of
$270.3 million and gains on disposals of equity securities of $11.4 million. The
Company realized approximately $49 million in gains on recoveries from the sale
of bonds that had previously been impaired, as a result of companies coming out
of bankruptcy and opportunistic sales where demand improved. The net realized
investment and other gains on the sale of fixed maturity securities was
partially offset by other than temporary declines in value of other fixed
maturity securities of $93.8 million and equity securities of $7.9 million. The
largest impairments were $25.0 million relating to a toll road, $13.6 million
relating to an Australian mining company and $11.0 million relating to a utility
brought into the bankruptcy of its parent. For additional analysis regarding net
realized investment and other gains (losses), see General Account Investments in
the MD&A.

<TABLE>
<CAPTION>

                                                                                                    Net Realized
                                                       Gross Gain    Gross Loss      Hedging         Investment
For the Three Months Ended June 30, 2003   Impairment  on Disposal  on Disposal    Adjustments  and Other Gain (Loss)
                                          ---------------------------------------------------------------------------
                                                                    (in millions)
<S>                                          <C>         <C>          <C>              <C>              <C>
Fixed maturity securities (1) (2) ..         $ (93.8)    $270.3       $(11.8)          $(80.2)          $ 84.5
Equity securities ..................            (7.9)      11.4         (3.2)              --              0.3
Mortgage loans on real estate ......              --       16.4         (3.8)           (12.0)             0.6
Real estate ........................              --        3.7         (2.9)              --              0.8
Other invested assets ..............            (1.1)       0.5         (5.9)              --             (6.5)
Derivatives ........................              --         --           --             61.2             61.2
                                         ----------------------------------------------------------------------------
               Subtotal ............         $(102.8)    $302.3       $(27.6)          $(31.0)          $140.9
                                         ============================================================================

          Amortization adjustment for deferred policy acquisition costs......................            (21.7)
          Amounts credited to participating pension contractholders..........................             (5.8)
          Amounts credited to the policyholder dividend obligation...........................            (23.6)
                                                                                                  -------------------
               Total.........................................................................           $ 89.8
                                                                                                  ===================
</TABLE>

(1)   Fixed Maturities gain on disposals includes $48.7 million of gains from
      previously impaired securities.
(2)   Fixed Maturities loss on disposals includes $5.7 million of credit related
      losses.

      The hedging adjustments in the fixed maturities and mortgage loans asset
classes are non-cash adjustments representing the amortization or reversal of
prior fair value adjustments on assets in those classes that were or are
designated as hedged items in 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.

     Premiums decreased 5.1%, or $49.2 million, from the prior year. The
decrease in premiums is due to a decrease in the G&SFP Segment of 68.2%, or
$134.3 million. Premiums in the G&SFP Segment were weak due to lower sales from
market competition and the low level of absolute interest rates on sales of
group annuity products. We continue to look for opportunistic sales in the
single premium group annuity market where our pricing standards are met. The
decrease in premiums in the G&SFP Segment is largely offset by a decrease in
benefits to policyholders as mentioned below in the discussion of benefits and
expenses, thus current profitability is not meaningfully impacted. Premiums also
declined in the Corporate and Other Segment by 16.1%, or $24.4 million, driven
by the sale of the group life business. These declines in premiums were
partially offset by increases in the Maritime Life Segment of 38.6%, or $66.3
million, driven by the group life & health


                                       47
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

business following a reinsurance recapture of significant portions of its group
life, accidental death and dismemberment and long term disability. In addition,
premiums in the Protection Segment increased by 7.5%, or $33.0 million, driven
by the long-term care insurance business which has experienced a fifty percent
increase in new premiums. The Asset Gathering Segment premiums increase by $10.0
million due to the fixed annuity business.

      Universal life and investment-type product fees were relatively flat over
the prior year, decreasing 0.2%, or $0.5 million. The decline in product fees
was driven by the G&SFP Segment where product fees declined 20.2%, or $3.8
million, due to the lower structured settlement sales. The sales of structured
settlement products decreased 55.7% to $76.1 million. In addition, Asset
Gathering's product fees declined 4.2%, or $1.3 million, on lower variable
annuity account balances. Average account balances in the variable annuity
business decreased by 11.5%, or $683.0 million. Product fees also declined in
the Corporate and Other Segment by $0.3 million. Partially offsetting these
declines in product fees was an increase driven by the Protection Segment, where
product fees increased 3.7%, or $4.0 million. Protection Segment product fees
increased due to the non-traditional life insurance business where product fees
increased 59.9%, or $11.5 million, driven by growth of the existing business and
the acquisition of the Allmerica fixed universal life insurance business as of
December 31, 2002. Average account balance in the non-traditional life insurance
business increased 11.8%, or $1,081.1 million, also due to the underlying growth
and to the Allmerica acquisition, partially offset by the effect of poor 2002
separate account performance. Product fees also increased $0.9 million in the
Maritime Life Segment due to foreign exchange translation gains of $3.3 million
from the strengthening Canadian dollar, partially offset by lower fees due to
lower assets under management.

     Net investment income increased 7.2%, or $70.2 million, from the prior
year. The growth in net investment income was driven by the Asset Gathering
Segment which increased 25.9%, or $36.4 million, on growth on the fixed annuity
business. Average invested assets in the fixed annuity business increased 35.7%,
or $2,728.5 million, while earned rates decreased by approximately 56 basis
points. See additional analysis in the Asset Gathering Segment MD&A. In
addition, net investment income increased in the Protection Segment by 7.1%, or
$23.5 million, driven by the non-traditional life insurance business.
Non-traditional life insurance net investment income increased 26.3%, or $16.4
million, driven by growth of the existing business and the acquisition of the
Allmerica fixed universal life insurance business as of December 31, 2002. Net
investment income in the Maritime Life Segment increased 20.2%, or $16.1
million, driven by growth in assets in the retail protection business and
beneficial changes in foreign exchange rates. In addition, net investment income
improved in the Corporate and Other Segment driven by a decrease in the lease
residual management investments. Net investment income increased $3.8 million in
the Investment Management Segment. These increases in net investment income were
partially offset by a decline in the G&SFP Segment. G&SFP Segment net investment
income declined by 3.6%, or $15.7 million, due to a decline in the average
investment yield on invested assets to 5.82% for the current period. The decline
in yield is impacted by the fluctuation of the return on approximately $12
billion of the G&SFP Segment asset portfolio which floats with market rates. The
floating rate exposure on our asset portfolio is managed to match the floating
rate exposure on our liability portfolio. For additional analysis of net
investment income and yields see the General Account Investments section of this
MD&A.

      Advisory fees decreased 9.5%, or $13.6 million, from the prior year. The
decrease in fees was driven by the Asset Gathering Segment which decreased
13.0%, or $14.3 million, driven by the mutual funds business. The mutual funds
business management advisory fees declined $12.4 million driven by a decline in
average assets under management of 3.4%, or $935.5 million. Advisory fees as
percentage of assets under management decreased 5 basis points due to an
increase in institutional and closed-end fund assets under management as a
percent of total asset under management. Institutional and closed-end fund
assets are generally charged lower fees than retail assets.

     Other revenue increased 19.5%, or $9.7 million, from the prior year. The
Company's other revenue is largely made up of Signature Fruit in the Corporate
and Other Segment. The increase in other revenue is driven by the $6.3 million
increase at Signature Fruit which generated revenue of $52.8 million for the
period. Other revenue also increased in the Protection Segment by $2.3 million
due to the Federal long-term care insurance business which officially began
operation on October 1, 2002. The Federal long-term care insurance business is a
fee business where the Company administers and supports employee long-term care
insurance benefits offered by the Federal Government to its employees.

     Benefits to policyholders decreased 4.9%, or $72.0 million, from the prior
year. The decrease in benefits to policyholders was driven by the G&SFP Segment
which declined 31.5%, or $159.5 million. Lower benefits to policyholders in the
G&SFP Segment were driven by the spread-based business where annuity benefits
decreased $136.1 million driven by a decrease in the sales of single premium
annuities. In addition, spread-based interest credited declined 5.8%, or $15.7
million, due to a decline in the average rate on account balances resulting from
the reset on floating rate liabilities. Despite current weak sales, average
invested assets on spread-based products in the G&SFP Segment increased 10.0%,
or $2,318.3 million, from the prior year. Benefits to policyholders also
declined by 30.1%, or $42.2 million, in the Corporate and Other Segment on the
sale of the group life business.


                                       48
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Partially offsetting these decreases in benefits to policyholders was an
increase in our Maritime Life Segment of 39.2%, or $77.5 million, due to growth
in the group life & health business primarily due to the reinsurance recapture
of a significant portion of life, accidental death and dismemberment and
long-term disability reinsurance and $19.0 million in foreign exchange
translation gains. In addition, benefits to policyholders in the Protection
Segment increased 5.3%, or $27.3 million, driven by an increase of $45.7 million
due to growth in the long-term care insurance business. The long term care
insurance business experienced 50.1% growth in new premiums and strong
persistency during the period. The increases in the Protection Segment were
offset by declines in the non-traditional life insurance and traditional life
insurance businesses. In addition, Protection Segment benefits to policyholders
in the prior year included $30.0 million from the settlement of the modal
premium class action lawsuit. Asset Gathering Segment benefits to policyholders
increased 23.2%, or $24.8 million, due to growth in the fixed annuity business.
The growth in benefits to policyholders in the fixed annuity business was driven
by an increase of $10.0 million in premiums and an increase in interest credited
driven by growth in average invested assets. Average account balance in the
fixed annuity benefits to policyholders business increased 33.1%, or $2,445.4
million, while credited rates decreased from the prior year by 79 basis points.

      Operating costs and expenses increased 9.7%, or $37.4 million. The
increase in operating costs and expenses was driven by the Corporate and Other
Segment, which increased 40.9%, or $33.5 million. The increase in Corporate and
Other Segment operating cost and expenses was due to increases in the corporate
account and Signature Fruit, all of whose expenses are included in this line of
the Corporate and Other Segment. The corporate account increases in expenses
were driven by a $12.8 million increase in deficiency interest and $7.3 million
increase in the net periodic pension costs. Signature Fruit expenses increased
$4.0 million to $53.8 million from the prior year. In addition, operating costs
and expenses increased 16.2%, or $11.1 million, in our Maritime Life Segment due
to reinsurance recapture discussed above, thus reducing reinsurance allowances
that help to offset operating expenses and $5.4 million in foreign exchange
translation losses. Operating costs and expenses in the Investment Management
Segment also increased 11.1%, or $2.4 million, due to higher incentive
compensation due to improved investment performance. Partially offsetting these
increases in operating costs and expenses was a decline of 7.2%, or $7.2
million, in the Protection Segment due to lower selling expenses. Asset
Gathering Segment operating costs and expenses declined by 1.1%, or $1.0
million, driven by the mutual funds business due to cost control measures and
decreased amortization of deferred selling commissions due to lower mutual fund
redemptions. In addition, Signator and Essex, two of the Company's distribution
subsidiaries in the Asset Gathering Segment, experienced lower commission
expense on lower load mutual fund sales compared to the prior year. In addition,
operating cost and expenses declined in the G&SFP Segment by 6.0%, or $1.2
million, on lower commission expense on lower sales. Also included in other
operating costs and expenses is $3.2 million for terminations related to the
information technology outsourcing as well as other initiatives and curtailment
and other post employment benefit related gains compared to $2.4 million in the
prior year. See Note 6 - Severance to the unaudited consolidated financial
statements.

      Amortization of deferred policy acquisition costs decreased 6.4%, or $5.0
million, from the prior year. The decrease in amortization of deferred policy
acquisition costs was driven by the Asset Gathering Segment which decreased
33.7%, or $9.7 million from the prior year. Our variable annuity businesses
experienced lower amortization of deferred policy acquisition costs of
approximately 107.5%, or $14.4 million. Amortization in the variable annuity
business decreased due to the extremely strong growth in the equity markets for
the quarter. Amortization increased in the fixed annuity business by $4.6
million due to account value growth compared to the prior year. Maritime Life
Segment amortization of deferred policy acquisition cost decreased by $5.9
million due to investment performance. Partially offsetting the declines in
amortization of deferred policy acquisition costs was an increase in
amortization in the Protection Segment of $10.9 million driven by growth in the
long-term care and non-traditional life insurance businesses.

     Dividends to policyholders decreased 3.2%, or $4.8 million from the prior
year. The decrease in dividends to policyholders was driven by the Protection
Segment, which declined 5.5%, or $7.4 million, due to a decrease in the dividend
scale on traditional life insurance products effective the beginning of this
year.

     Income taxes were $124.2 million in 2003, compared to $26.0 million for
2002. Our effective tax rate was 30.0% in 2003, compared to 20.9% in 2002. The
higher effective tax rate was primarily due to increased capital gains,
partially offset by increased affordable housing tax credits.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

     During the first quarter of 2003, the Company implemented organizational
changes within the Corporate and Other Segment which resulted in the break-out
of the Maritime Life business as its own operating segment and the
reclassification of 2002 results for the Federal long-term care insurance
business to the Protection Segment. The Maritime Life Segment consists of our
consolidated Canadian operations, principally those of our Canadian life
insurance business, The Maritime Life Assurance Company (Maritime Life). The
following discussion presents the results of our segments on a basis consistent
with the new organization structure. The reclassifications associated with the
realignment of our operating segments had no impact on segment after-tax
operating income, or net income of the Maritime Life or Corporate and Other
Segments, other than to display these


                                       49
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

businesses separately. The reclassification associated with the Federal
long-term care insurance business has no impact on segment after-tax operating
income, or net income of the business. The reclassification increased Protection
Segment after-tax operating income and decreased Corporate and Other Segment
after-tax operating income by $0.3 million for the six month period ended June
30, 2002.

     Consolidated income before income taxes increased 139.3%, or $449.4
million, from the prior year. The increase was driven by growth in income before
income taxes of $244.4 million in the Corporate and Other Segment, $102.6
million in the Protection Segment, $45.0 million in the Asset Gathering Segment,
$35.3 million in the Maritime Life Segment, $13.9 million in the G&SFP Segment
and $8.2 million in the Investment Management Segment. The increase in the
Corporate and Other Segment was driven by growth in net realized investment and
other gains of $285.1 million due to a gain of $233.8 million (and a deferred
profit of $247.7 million) on the sale of the Company's home office properties
during the first quarter of 2003. See Note 7 -- Sales / Lease-back Transactions
in the notes to the unaudited consolidated financial statements.

      Revenues increased 12.4%, or $525.9 million, from the prior year. The
increase in revenues was driven by the Corporate and Other Segment where net
realized investment and other gains increased $285.1 million due to a gain of
$233.8 million (and a deferred profit of $247.7 million) on the sale of the
Company's home office properties. Consolidated net realized investment and other
gains increased 167.8%, or $377.1 million from the prior year. See detail of
current period net realized investment and other gains (losses) in table below.
The change in net realized investment and other gains is the result of gains on
the disposal of fixed maturity securities and the sale of the Company's home
office properties. These net realized investment and other gains were partially
offset by other than temporary declines in value of fixed maturity securities of
$315.7 million and equity securities of $27.1 million The largest impairments
were $37.6 million relating to a large, national farmer-owned diary
co-operative, $27.3 million relating to a North American transportation
provider, $25.9 million related to a special purpose company created to sublease
aircraft, $25.0 million relating to a toll road, $14.1 million related to a
subordinated holding company structure comprised of ownership interests in three
power generation facilities, $13.6 million related to an Australian mining
company, and $11.0 million relating to a utility brought into bankruptcy by its
parent. For additional analysis regarding net realized investment and other
gains (losses), see General Account Investments in the MD&A.

<TABLE>
<CAPTION>

                                                                                                    Net Realized
                                                       Gross Gain    Gross Loss      Hedging         Investment
For the Six Months Ended June 30, 2003     Impairment  on Disposal  on Disposal    Adjustments  and Other Gain (Loss)
                                          ---------------------------------------------------------------------------
                                                                         (in millions)
<S>                                         <C>          <C>           <C>            <C>              <C>
Fixed maturity securities (1) (2) ..        $(315.7)     $328.8        $(44.6)       $(154.8)         $(186.3)
Equity securities ..................          (27.1)       34.6          (5.3)            --              2.2
Mortgage loans on real estate ......             --        20.8         (11.9)         (32.8)           (23.9)
Real estate ........................             --       240.1          (2.9)            --            237.2
Other invested assets ..............          (10.3)        9.7          (1.4)            --             (2.0)
Derivatives ........................            --           --            --          127.1            127.1
                                          ---------------------------------------------------------------------------
               Subtotal ............        $(353.1)     $634.0        $(66.1)        $(60.5)          $154.3
                                          ===========================================================================

          Amortization adjustment for deferred policy acquisition costs......................           (15.2)
          Amounts charged to participating pension contractholders...........................             1.9
          Amounts charged to the policyholder dividend obligation............................            11.4
                                                                                                ---------------------
               Total.........................................................................         $ 152.4
                                                                                                =====================
</TABLE>

(1)   Fixed Maturities gain on disposals includes $49.3 million of gains from
      previously impaired securities.
(2)   Fixed Maturities loss on disposals includes $22.9 million of credit
      related losses.

       The hedging adjustments in the fixed maturities and mortgage loans asset
classes are non-cash adjustments representing the amortization or reversal of
prior fair value adjustments on assets in those classes that were or are
designated as hedged items in fair value hedge. When an asset or liability is so
designated, its cost basis is adjusted in response to movement in interest rate.
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.

      Premiums increased 2.5%, or $42.1 million, from the prior year. The
increase in premiums is due to an increase in the Maritime Life Segment of
$117.3 million, driven by the group life & health business following a
reinsurance recapture of significant portions of its group life, accidental
death and dismemberment and long term disability. Also contributing to the
increase in premiums was growth in the Protection Segment which increased $61.2
million driven by the long-term care business and the Asset Gathering Segment,
where growth in the fixed annuity business drove premiums up 255.6%, or $21.1
million. Partially offsetting these increases were declines in premiums of
$139.5 million in the G&SFP Segment and $18.1 million in Corporate and Other
Segment. Premiums declined in


                                       50
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

the G&SFP Segment due to lower sales resulting from market competition and the
low level of absolute interest rates on sales of group annuity contracts. We
continue to look for opportunistic sales in the single premium group annuity
market where our pricing standards are met. The decrease in G&SFP Segment
premiums is offset by a decrease in benefits to policyholders as mentioned below
in the discussion of benefits and expenses, thus current profitability is not
impacted.

      Universal life and investment-type product fees increased 1.9%, or $7.5
million from the prior year. The growth in product fees was driven by the
Protection Segment, where product fees increased 3.8%, or $8.1 million. This
increase was due to the non-traditional life insurance business, driven by
growth of the existing business and the acquisition of the Allmerica fixed
universal life insurance business as of December 31, 2002. Average account
balance in the non-traditional life insurance business increased 13.1%, or
$1,180.9 million, compared to the prior year due to the underlying growth and
the Allmerica acquisition. In addition, Maritime Life Segment product fees
increased 2.7%, or $2.5 million, driven by foreign exchange translation gains of
$6.4 million, offset by a decline in fees on lower assets under management.
Partially offsetting the growth in product fees in the Protection Segment is a
decline of $2.4 million in product fees in the Asset Gathering Segment. Asset
Gathering Segment product fees earned in the variable annuity business decreased
12.4%, or $7.1 million, due to a 10.5% decline in average fund values. Declines
in variable annuity product fees were partially offset by growth in the fixed
annuity business where product fees increased $4.7 million due to a 22.4%
increase in the number of contracts inforce.

      Net investment income increased 6.6%, or $129.6 million, from the prior
year. The growth in net investment income was driven by the Asset Gathering
Segment which increased 26.5%, or $71.9 million, from the prior year on growth
on the fixed annuity business. Average invested assets in the fixed annuity
business increased 36.0%, or $2,609.4 million, while earned rates decreased. See
additional analysis in the Asset Gathering Segment MD&A. In addition, net
investment income increased in the Protection Segment by 7.5%, or $48.9 million,
from the prior year driven by the universal life insurance business.
Non-traditional life insurance net investment income increased 27.6%, or $33.3
million, driven by the growth of the business and the acquisition of the
Allmerica fixed universal life insurance business as of December 31, 2002. In
addition, net investment income increased by 16.1%, or $25.0 million, in the
Maritime Life Segment on growth in assets in retail protection and asset
gathering businesses and foreign exchange translation gains of $12.4 million.
Net investment income increased $4.1 million in the Investment Management
Segment. Partially offsetting these increases in net investment income was a
decline of 0.6%, or $5.0 million, in the G&SFP Segment. G&SFP Segment net
investment income decreased due to the decline in the average investment yield
on invested assets to 6.01% in the current period. The decline in yield is
impacted by the fluctuation of market rates driving the return on approximately
$12 billion of the G&SFP Segment asset portfolio which floats with market rates.
The floating rate exposure on our asset portfolio is managed to match the
floating rate exposure on our liability portfolio. For additional analysis of
net investment income and yields see the General Account Investments section of
this MD&A.

      Advisory fees decreased 12.5%, or $36.3 million, from the prior year. The
decrease in fees was driven by the Asset Gathering Segment which decreased
17.6%, or $39.9 million, driven by the mutual funds business. The mutual funds
business management advisory fees declined $30.2 million driven by a decline in
average assets under management of 7.5%, or $2,133.7 million. Advisory fees as
percentage of average assets under management decreased 4 basis points due to an
increase in institutional and closed-end fund assets under management as a
percent of total asset under management. Institutional and closed-end fund
assets are generally charged lower fees than retail assets.

      Other revenue increased 4.7%, or $5.9 million, from the prior year. The
Company's other revenue is largely made up of Signature Fruit in the Corporate
and Other Segment. Signature Fruit generated $122.6 million and $115.9 million
for the six months ended June 30, 2003 and 2002, respectively. The driver of the
increase in other revenue for the Company was the $6.7 million increase in
Signature Fruit revenue. In addition, other revenue increased $3.9 million in
the Protection Segment driven by the Federal long-term care insurance business
which officially began operation on October 1, 2002. The Federal long-term care
insurance business is a fee business where the Company administers and supports
employee long-term care insurance benefits offered by the Federal Government to
its employees. Partially offsetting these increases in other revenue was a
decline of $2.5 million in the Maritime Life Segment in the retail protection
business.

     Benefits to policyholders increased 1.9%, or $52.6 million, from the prior
year. The increase in benefits to policyholders was driven by the Maritime Life
Segment which increased 31.3%, or $123.9 million, due to the growth in the group
life & health business from the reinsurance recapture transaction and $35.8
million in foreign exchange translation gains. In addition, the Protection
Segment increased 8.7%, or $87.3 million, due to growth in the long-term care
insurance business. The long term care insurance business experienced 50.2%
growth in new premiums and strong persistency during the period. In addition,
the non-traditional life insurance business experienced a 3.7%, or $5.8 million
increase in benefits to policyholders driven by the acquisition of Allmerica's
fixed universal life insurance business. Also driving the increase in benefits
to policyholders was growth in the Asset Gathering Segment's fixed annuity


                                       51
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

business, Asset Gathering Segment benefits to policyholders increased 25.0%, or
$51.7 million. The growth in fixed annuity benefits to policyholders was driven
by an increase of $21.1 million in premiums and an increase in interest credited
on higher average invested assets. Average account balance in the fixed annuity
business increased 34.1%, or $2,393.8 million, while credited rates decreased 82
basis points from the prior year. Partially offsetting these increases in
benefits to policyholders was a decrease in the G&SFP Segment of 21.0%, or
$179.0 million. Lower benefits to policyholders in the G&SFP Segment were driven
by the spread-based business where annuity benefits decreased $147.3 million
driven by a decrease in sales of single premium annuities. In addition,
spread-based interest credited declined of 4.7%, or $25.4 million, due to a
decline in the average interest crediting rate on account balances driven by the
reset on floating rate liabilities. Average invested assets on spread-based
products in the G&SFP Segment increased 11.2%, or $2,555.7 million, from the
prior year. Corporate and Other benefits to policyholders declined $31.4 million
from the prior year driven by the sale of the group life business.

      Operating costs and expenses increased 4.0%, or $31.4 million. The
increase in the Company's operating costs and expenses were driven by the
Corporate and Other Segment, which increased 22.4%, or $41.5 million. The
increase in Corporate and Other Segment operating cost and expenses was due to
increases in the corporate account and Signature Fruit, all of whose expenses
are included in this line of the Corporate and Other Segment. The Corporate
account increases in expenses were driven by a $14.8 million increase in
deficiency interest and $17.0 million increase in the net periodic pension
costs. Signature Fruit operating expenses increased $6.4 million to $124.2
million from the prior year. Operating costs and expenses increased 13.6%, or
$17.8 million, in the Maritime Life Segment due to the discontinuation of
reinsurance allowances in the group life and health business, driven by the
reinsurance recapture transaction and $10.2 million in foreign currency
translation losses. In addition, operating costs and expenses increased $2.9
million in the Investment Management Segment and $2.0 million in the G&SFP
Segment due to higher compensation costs. Partially offsetting these increases
was a decrease in operating cost and expenses in the Asset Gathering Segment
driven by reductions in the mutual funds business on lower distribution and
selling expenses. In addition, Protection Segment operating costs and expenses
decreased 5.3%, or $10.0 million, driven by the deferral of expenses in the
long-term care insurance business. Also included in other operating costs and
expenses is $9.4 million for planned terminations related to the information
technology outsourcing as well as other initiatives and curtailment and other
post employment benefit related gains compared to $7.4 million in the prior
year. See Note 6 - Severance to the unaudited consolidated financial statements.

      Amortization of deferred policy acquisition costs increased 3.1%, or $4.6
million, from the prior year. The increase in amortization of deferred policy
acquisition costs was driven by the Protection Segment which increased 16.3%, or
$12.7 million from the prior year driven by growth in the long-term care and
non-traditional life insurance businesses. In addition, the Asset Gathering
Segment amortization of deferred policy acquisition costs increased 5.2%, or
$2.6 million. Amortization in the fixed annuity businesses increased 42.4%, or
$11.7 million, on growth of the business demonstrated by a 32.9% increases in
average reserves. Amortization in the variable annuity business decreased 39.6%,
or $9.0 million, due to improved separate account performance during the period
compared to the prior year. Amortization of deferred policy acquisition costs
decreased in the Maritime Life Segment by 60.3%, or $10.8 million, driven by
investment performance.

     Dividends to policyholders decreased 4.1%, or $12.1 million from the prior
year. The decrease in dividends to policyholders was driven by the Protection
Segment, which declined 6.5%, or $17.3 million, due to a decrease in the
dividend scale on traditional life insurance products effective the beginning of
this year.

     Income taxes were $228.9 million in 2003, compared to $77.8 million for
2002. Our effective tax rate was 29.7% in 2003, compared to 24.1% in 2002. The
higher effective tax rate was primarily due to increased capital gains,
partially offset by increased affordable housing tax credits.


                                       52
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

     In the first quarter of 2003 the Company implemented organizational changes
within the Corporate and Other Segment which resulted in the break-out of the
Maritime Life business as its own operating segment and the reclassification of
2002 results for the Federal long-term care insurance business to the Protection
Segment. The Maritime Life Segment consists of our consolidated Canadian
operations, principally those of our Canadian life insurance business, The
Maritime Life Assurance Company (Maritime Life). The following MD&A discussion
presents the results of our segments on a basis consistent with the new
organization structure. The reclassifications associated with the realignment of
our operating segments had no impact on segment after-tax operating income, or
net income of the Maritime Life or Corporate and Other Segments other than to
display these businesses separately. The reclassification associated with the
Federal long-term care insurance business has no impact on segment after-tax
operating income, or net income of the business. The reclassification increased
Protection Segment after-tax operating income and decreased Corporate and Other
Segment after-tax operating income by $0.2 million and $0.3 million for the
three and six month periods ended June 30, 2002.

     We operate our business in six segments; two segments primarily serve
domestic retail customers, two segments serve domestic institutional customers,
one segment primarily serves Canadian retail and group customers and our sixth
segment is the Corporate and Other Segment, which includes our remaining
international operations, the corporate account and several run-off businesses.
Our retail segments are the Protection Segment and the Asset Gathering Segment.
Our institutional segments are the Guaranteed and Structured Financial Products
(G&SFP) Segment and the Investment Management Segment. The Maritime Life Segment
consists primarily of the financial results of our Canadian operating
subsidiary, Maritime Life. For additional information about the Company's
business segments, please refer to the Company's 2002 Form 10-K.

     We evaluate segment performance and base some of management's incentives on
segment after-tax operating income, which excludes the effect of net realized
investment and other gains and losses and other identified transactions. In
addition, we believe most investors and analysts that follow our industry also
measure results on the same basis. Total segment after-tax operating income,
which is a non-GAAP financial measure, is determined by adjusting GAAP net
income for net realized investment and other gains and losses, and certain other
items which we believe are not indicative of overall operating trends. While
these items may be significant components in understanding and assessing our
consolidated financial performance, we believe that the presentation of segment
after-tax operating income enhances the understanding of our results of
operations by highlighting net income attributable to the normal, recurring
operations of the business. However, segment after-tax operating income is not a
substitute for net income determined in accordance with GAAP.


                                       53
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

<TABLE>
<CAPTION>
                                                                   Three Months Ended          Six Months Ended
                                                                        June 30,                   June 30,
                                                                    2003         2002          2003         2002
                                                                   ----------------------------------------------
                                                                                   (in millions)
<S>                                                                <C>          <C>          <C>          <C>
Segment Data:
Segment after-tax operating income:
   Protection Segment .......................................      $ 89.2       $ 77.0       $163.5       $149.8
   Asset Gathering Segment ..................................        51.2         40.6         91.2         80.6
                                                                   -------------------       -------------------
     Total Retail Segments ..................................       140.4        117.6        254.7        230.4

   Guaranteed and Structured Financial Products
     Segment ................................................        80.9         75.9        166.7        142.8
   Investment Management Segment ............................        11.5          7.4         17.1         12.3
                                                                   -------------------       -------------------
     Total Institutional Segments ...........................        92.4         83.3        183.8        155.1

   Maritime Life Segment ....................................        19.4         16.2         39.6         32.0
   Corporate and Other Segment ..............................       (16.1)        (3.6)       (27.9)        (1.2)
                                                                   -------------------       -------------------
     Total segment after-tax operating income .............         236.1        213.5        450.2        416.3

After-tax adjustments:
   Net realized investment and other gains (losses), net ....        53.8        (94.5)        92.9       (147.2)
   Class action lawsuit .....................................          --        (19.5)          --        (19.5)
   Restructuring charges ....................................          --         (1.2)          --         (4.8)
                                                                   -------------------       -------------------
     Total after-tax adjustments ............................        53.8       (115.2)        92.9       (171.5)

GAAP Reported:
                                                                   -------------------       -------------------
   Net income ...............................................      $289.9       $ 98.3       $543.1       $244.8
                                                                   ===================       ===================
</TABLE>

(1)   In 2002, during its start-up phase, the Federal long-term care insurance
      business was reported in the Corporate and Other Segment. Effective
      January 1, 2003, the program and its prior year results were reclassified
      from the Corporate and Other Segment to the Protection Segment.

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

      In all periods, net realized investment and other gains (losses), except
for gains and losses from mortgage securitizations, have been excluded from
segment after-tax operating income because such data are often excluded by
analysts and investors when evaluating the overall financial performance of
insurers. Net realized investment and other gains and losses from mortgage
securitizations were not excluded from segment after-tax operating income
because we view the related gains and losses as an integral part of the core
business of those operations.


                                       54
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Net realized investment and other gains (losses) have been reduced by: (1)
amortization of deferred policy acquisition costs to the extent that such
amortization results from net realized investment and other gains (losses), (2)
the portion of net realized investment and other gains (losses) credited to
participating pension contractholder accounts and (3) the portion of net
realized investment and other gains (losses) credited to the policyholder
dividend obligation. We believe presenting net realized investment and other
gains (losses) in this format provides information useful in evaluating our
operating performance. This presentation may not be comparable to presentations
made by other insurers. Summarized below is a reconciliation of (a) net realized
investment and other gains (losses) per the unaudited consolidated financial
statements and (b) the adjustment made for net realized investment and other
gains (losses) to calculate segment after-tax operating income for the periods
indicated.

<TABLE>
<CAPTION>
                                                                       Three Months Ended           Six Months Ended
                                                                            June 30,                    June 30,
                                                                       2003          2002          2003         2002
                                                                      -------------------------------------------------
                                                                                       (in millions)

<S>                                                                   <C>           <C>           <C>           <C>
Net realized investment and other gains (losses) ...............      $ 140.9       $(151.1)      $ 154.3       $(257.8)
Add amortization of deferred policy acquisition costs related
   to net realized investment and other gains (losses) .........        (21.7)          8.4         (15.2)         22.6
Add (less) amounts credited to participating pension contract
   holder accounts .............................................         (5.8)          7.5           1.9           7.9
Add (less) amounts credited to the policyholder dividend
   obligation ..................................................        (23.6)         (3.8)         11.4           2.6
                                                                      ----------------------      ----------------------
Net realized investment and other gains (losses), net of
   related amortization of deferred policy acquisition costs,
   amounts credited to participating pension contract holders
   and the policyholder dividend obligation per unaudited
   consolidated financial statements ...........................         89.8        (139.0)        152.4        (224.7)
Add net realized investment and other (gains) losses
   attributable to mortgage securitizations ....................         (8.0)         (1.8)         (9.5)         (1.0)
                                                                      ----------------------      ----------------------
Net realized investment and other gains (losses) -  pre-tax
   adjustment to calculate segment operating income ............         81.8        (140.8)        142.9        (225.7)
Less income tax effect .........................................        (28.0)         46.3         (50.0)         78.5
                                                                      ----------------------      ----------------------
Net realized investment and other gains (losses) -  after-tax
   adjustment to calculate segment operating income ............      $  53.8       $ (94.5)      $  92.9       $(147.2)
                                                                      ======================      ======================
</TABLE>

      The Company incurred after-tax restructuring charges to reduce costs and
increase future operating efficiency by consolidating portions of our
operations. Additional information regarding restructuring costs is included in
Note 6 -- Severance in the notes to the unaudited consolidated financial
statements. After-tax restructuring costs, net of related pension curtailment
and other post employment benefit related gains, were $1.2 million and $4.8
million for the three and six month periods ended June 30, 2002 and were
excluded from segment after-tax operating income. The Company incurred after-tax
restructuring costs of $2.1 million (pre-tax $3.2 million) and $6.1 million
(pre-tax of $9.4 million) for the three and six month periods ending June 30,
2003, respectively, which are included in segment after-tax operating income.
Therefore, if restructuring charges were treated similarly in the prior year,
2002 after-tax operating income as presented would have been lower by $1.2
million and $4.8 million for the three and six month periods ended June 30,
2002, respectively.

     In 2002, the Company incurred a $19.5 million after-tax charge related to
the settlement of the Modal Premium class action lawsuit. The settlement
agreement involves policyholders who paid premiums on a monthly, quarterly, or
semi-annual basis rather than annually. The settlement costs are intended to
provide for relief to class members and for legal and administrative costs
associated with the settlement. In entering into the settlement, the Company
specifically denied any wrongdoing.


                                       55
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Protection Segment

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

<TABLE>
<CAPTION>
                                                                    Three Months Ended          Six Months Ended
                                                                          June 30,                  June 30,
                                                                     2003        2002         2003           2002
                                                                    ------------------------------------------------
                                                                                      (in millions)
<S>                                                                 <C>         <C>          <C>            <C>
Operating Results:
Revenues
     Premiums ................................................      $473.4      $440.4       $  930.1       $  868.9
     Universal life and investment-type product fees .........       111.4       107.4          223.9          215.8
     Net investment income ...................................       353.8       330.3          701.7          652.9
     Other revenues ..........................................         2.1        (0.2)           3.8             --
                                                                    -------------------      -----------------------
         Total revenues ......................................       940.7       877.9        1,859.5        1,737.6

Benefits and expenses
     Benefits to policyholders ...............................       542.5       500.9        1,095.4          993.9
     Other operating costs and expenses ......................        92.3        83.5          180.5          169.5
     Amortization of deferred policy acquisition costs,
       excluding amounts related to net realized investment
       and other gains (losses) ..............................        49.6        38.7           90.5           77.8
     Dividends to policyholders ..............................       126.0       133.4          247.7          265.0
                                                                    -------------------      -----------------------
         Total benefits and expenses .........................       810.4       756.5        1,614.1        1,506.2

Segment pre-tax operating income (1) .........................       130.3       121.4          245.4          231.4
Income taxes .................................................        41.1        44.4           81.9           81.6
                                                                    -------------------      -----------------------

Segment after-tax operating income (1) .......................        89.2        77.0          163.5          149.8

After-tax adjustments: (1)
     Net realized investment and other gains (losses) ........        17.4       (18.3)          (2.5)         (37.0)
     Restructuring charges ...................................          --        (0.9)            --           (4.1)
     Class action lawsuit ....................................          --       (18.7)            --          (18.7)
                                                                    -------------------      -----------------------
         Total after-tax adjustments .........................        17.4       (37.9)          (2.5)         (59.8)

GAAP Reported:
Net income ...................................................      $106.6      $ 39.1       $  161.0       $   90.0
                                                                    ===================      =======================

Other Data:
Segment after-tax operating income (loss):
     Non-traditional life (variable and universal life) ......      $ 37.6      $ 30.7       $   66.8       $   57.5
     Traditional life ........................................        27.8        27.6           51.6           57.0
     Long-term care ..........................................        20.5        20.1           40.4           36.9
     Federal long-term care ..................................         1.5         0.2            3.1            0.3
     Other ...................................................         1.8        (1.6)           1.6           (1.9)
</TABLE>

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

(2)   In 2002, during its start-up phase, the Federal long-term care insurance
      business was reported in the Corporate and Other Segment. Effective
      January 1, 2003, the program and its prior year results were reclassified
      from the Corporate and Other Segment to the Protection Segment.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

     Segment after-tax operating income increased 15.8%, or $12.2 million, from
the prior year. Non-traditional life insurance business after-tax operating
income increased 22.5%, or $6.9 million, primarily due to increases in universal
life and investment-type product fees and net investment income, partially
offset by higher expenses. Traditional life insurance


                                       56
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

business after-tax operating income increased 0.7%, or $0.2 million. Long-term
care insurance business after-tax operating income increased approximately 2.0%,
or $0.4 million, resulting from growth of the business, mostly offset by higher
allocated expenses, lower portfolio yield rates and continued low lapse rates.
Federal long-term care insurance business after-tax operating income increased
$1.3 million as the business was in its start up phase in the prior period.

     Revenues increased 7.2%, or $62.8 million. Premiums increased 7.5%, or
$33.0 million, primarily due to long-term care insurance premiums, which
increased 22.9%, or $44.1 million, driven by business growth from higher sales
and continued lower lapses. This increase was partially offset by an $11.1
million decrease in premiums in the traditional life insurance business due to
the run off of the closed block. Universal life and investment-type product fees
increased 3.7%, or $4.0 million, due primarily to the increase in the cost of
insurance fees of $5.6 million resulting from growth in the existing business
and from the addition of the Allmerica block of business assumed as of December
31, 2002. Segment net investment income increased 7.1%, or $23.5 million,
primarily due to a 15.2% increase in average asset balances, partially offset by
a 54 basis point decrease in yields.

     Benefits and expenses increased 7.1%, or $53.8 million. Benefits to
policyholders increased 8.3%, or $41.5 million, due primarily to growth in the
long-term care insurance business. Long-term care insurance business benefits
and expenses increased 27.7%, or $57.5 million, primarily due to additions to
reserves for premium growth and higher claim volume on growth of the business
during the period. The long-term care insurance business claims are being
incurred at a rate lower than assumed in the pricing the product. Long-term care
insurance business polices have increased to 653.2 thousand from 568.2 thousand
in the prior year. Other operating costs and expenses increased $8.8 million
primarily due to severance, increase in benefit plan expenses and the addition
of the Allmerica block assumed. Dividends to policyholders decreased 5.5%, or
$7.4 million, primarily due to a dividend scale cut for the traditional life
insurance business. Amortization of deferred policy acquisition costs increased
28.2%, or $10.9 million, primarily due to a $7.0 million increase for the
non-traditional life insurance business for experience true-ups and growth and a
$7.5 million increase from the growth in the long-term care insurance business.
These increases were partially offset by a $3.5 million decrease in amortization
of deferred policy acquisition costs in the traditional life insurance business
due to lower contributions from the closed block. The Segment's effective tax
rate on operating income was 31.5% compared to 36.5% for the prior year. The
decrease was primarily due to an increase in affordable housing tax credits and
a decrease in the deficiency charge.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

     Segment after-tax operating income increased 9.1%, or $13.7 million, from
the prior year. Non-traditional life insurance business after-tax operating
income increased 16.2%, or $9.3 million, primarily due to increases in universal
life and investment-type product fees and net investment income, partially
offset by higher expenses and higher benefits to policyholders. Long-term care
insurance business after-tax operating income increased approximately 9.5%, or
$3.5 million, resulting from growth of the business. Federal long-term care
insurance business after-tax operating income increased $2.8 million as the
business was in its start up phase in the prior period. Traditional life
insurance business after-tax operating income decreased 9.5%, or $5.4 million,
primarily resulting from decreases in premiums and net investment income
partially offset by a decrease in total benefit and expenses, driven by lower
dividends.

     Revenues increased 7.0%, or $121.9 million. Premiums increased 7.0%, or
$61.2 million, primarily due to long-term care insurance premiums, which
increased 22.0%, or $81.3 million, driven by business growth from higher sales
and continued lower lapses. This increase was partially offset by a $20.1
decrease in premiums in the traditional life insurance business primarily due to
the run off of the closed block and the lower dividend scale causing purchase of
fewer paid up additions. Universal life and investment-type product fees
increased 3.8%, or $8.1 million, due primarily to the increase in the cost of
insurance fees of $12.6 million resulting from growth in the existing business
and from the addition of the Allmerica block of business assumed as of December
31, 2002. Segment net investment income increased 7.5%, or $48.8 million,
primarily due to a 14.8% increase in average asset balances, partially offset by
a 49 basis point decrease in yields.

     Benefits and expenses increased 7.2%, or $107.9 million. Benefits to
policyholders increased 10.2%, or $101.5 million, due primarily to growth in
long-term care insurance business. Long-term care insurance business benefits
and expenses increased 25.4%, or $102.1 million, primarily due to additions to
reserves for premium growth and higher claim volume on growth of the business
during the period. The long-term care business claims are being incurred at a
rate lower than assumed in pricing the product. Long-term care insurance
business policies have increased to 653.2 thousand from 568.2 thousand in the
prior year. The non-traditional life insurance business had an increase in
benefits to policyholders of $5.8 million, which was driven by a $26.7 million
increase in interest credited on higher current year account balances and the
addition of the Allmerica business. This increase was partially offset by lower
death claims paid net of reserves released and reinsurance ceded of $11.2
million due to not repeating higher mortality experienced in the prior year, and
a $9.8 million decrease in policy benefit reserves and other benefits due
primarily to lower enhanced cash value reserves. The traditional life insurance
line of business benefits to policyholders increased 1.2%, or $6.1 million due
to higher death claims, net of reserves released and reinsurance ceded. Other
operating costs and expenses increased 6.5%, or $11.0 million, due to severance,
increase in benefit plan


                                       57
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

expenses and the addition of the Allmerica block assumed. Dividends to
policyholders decreased 6.5%, or $17.3 million, primarily due to a dividend
scale cut for the traditional life insurance business. Amortization of deferred
policy acquisition costs increased 16.3%, or $12.7 million, primarily due to the
non-traditional life insurance business for experience true-ups of $12.5
million. In addition, growth in the long-term care insurance business
contributed $8.9 million to the increase in amortization of deferred policy
acquisition costs. These increases were partially offset by a $6.2 million
decrease in amortization of deferred policy acquisition costs in the traditional
life insurance business due to lower contributions from the closed block. The
Segment's effective tax rate on operating income was 33.4% compared to 35.2% for
the prior year. The decrease was primarily due to an increase in affordable
housing tax credits, a decrease in deficiency charge, and a net change in other
permanent differences.


                                       58
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Asset Gathering Segment

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

<TABLE>
<CAPTION>
                                                                            Three Months Ended               Six Months Ended
                                                                                 June 30,                        June 30,
                                                                           2003           2002             2003            2002
                                                                         -------------------------       -------------------------
                                                                                       (in millions)
<S>                                                                      <C>             <C>             <C>             <C>
Operating Results:
Revenues
     Premiums ......................................................     $    13.8       $     3.8       $    29.4       $     8.3
     Investment-type product fees ..................................          29.7            31.0            58.8            61.2
     Net investment income .........................................         176.9           140.5           342.9           271.0
     Investment management revenues, commissions
       and other fees ..............................................          96.0           110.3           187.0           226.9
     Other revenues ................................................          (0.1)            0.4             0.1             0.9
                                                                         -------------------------       -------------------------
          Total revenues ...........................................         316.3           286.0           618.2           568.3

Benefits and expenses
     Benefits to policyholders .....................................         131.8           107.0           258.2           206.5
     Other operating costs and expenses ............................          90.6            90.8           174.2           193.6
     Amortization of deferred policy acquisition costs, excluding
       amounts related to net realized investment and other gains
       (losses) ....................................................          19.1            28.8            53.0            50.4
                                                                         -------------------------       -------------------------
          Total benefits and expenses ..............................         241.5           226.6           485.4           450.5

Segment pre-tax operating income (1) ...............................          74.8            59.4           132.8           117.8
Income taxes .......................................................          23.6            18.8            41.6            37.2
                                                                         -------------------------       -------------------------

Segment after-tax operating income (1) .............................          51.2            40.6            91.2            80.6

After-tax adjustments: (1)
     Net realized investment and other gains (losses), net .........          12.8           (13.2)          (11.3)          (28.0)
     Restructuring charges .........................................            --            (0.5)             --            (1.9)
                                                                         -------------------------       -------------------------
          Total after-tax adjustments ..............................          12.8           (13.7)          (11.3)          (29.9)

GAAP Reported:
Net income .........................................................     $    64.0       $    26.9       $    79.9       $    50.7
                                                                         =========================       =========================

Other Data:
Segment after-tax operating income:
     Annuity(fixed and variable) ...................................     $    40.0       $    23.4       $    67.5       $    48.3
     Mutual funds ..................................................          11.2            14.5            20.5            27.0
     Other .........................................................            --             2.7             3.2             5.3
Mutual fund assets under management, end of period .................      27,544.4        26,227.4        27,544.4        26,227.4
</TABLE>

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

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

     Segment after-tax operating income was $51.2 million, an increase of 26.1%,
or $10.6 million, from the prior year. Fixed annuity after-tax operating income
increased 40.8%, or $8.0 million, due to account balance growth and higher
spreads. In addition to the increase in the fixed annuity business there was an
increase of $8.6 million in after-tax operating income in the variable annuity
business due to strong separate account performance. Offsetting the increase in
segment after-tax operating income in the annuity businesses was a decrease in
the mutual fund segment's after-tax operating income of 22.8% or $3.3 million
primarily due to a 15.2%, or $12.4 million, decrease in management advisory
fees, partially offset by a 12.1%, or $7.2 million decrease in operating
expenses. Signature Services after-tax operating income decreased $1.5 million,
driven by an increase in operating expenses. After-tax operating income for
Essex, a distribution subsidiary primarily serving the financial institution
channel, decreased $1.0 million and Signator Investors after-tax operating
income decreased $0.1 million.


                                       59
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     Revenues increased 10.6%, or $30.3 million, from the prior year period. The
rise in revenue was due to a $36.4 million increase in net investment income and
a $10.0 million increase in premiums, driven by the fixed annuity business. The
increase in net investment income was primarily due to increases in invested
assets backing fixed annuity products, partially offset by lower earned yields
in the portfolio. Average invested assets backing fixed annuity products
increased 35.7% to $10,361.4 million while the average investment yield
decreased from the prior year. These increases in revenue were partially offset
by a decrease in investment management revenues, primarily from the mutual fund
business, of 13.0%, or $14.3 million and a $1.3 million decrease in
investment-type product fees, primarily in the variable annuity business on
lower average fund values. Investment-type product fees decreased mostly due to
a decline in the average variable annuity fund values of 11.5%, or $683.0
million, to $5,280.2 million. The decrease in the assets under management was
due to poor separate account returns in the prior year. For variable annuities
the mortality and expense fees as a percentage of average account balances were
1.32% and 1.35% for the current and prior year periods.

     Investment management revenues, commissions, and other fees decreased
13.0%, or $14.3 million from the prior year. Average mutual fund assets under
management were $26,570.1 million, a decrease of $935.5 million, or 3.4% from
the prior year period. The decrease in average mutual fund assets under
management was primarily due to market depreciation of $1,444.3 million from
June 30, 2002 to March 31, 2003. Ending mutual fund assets under management
increased by $1,317.0 million or 5.0% from the prior year period due to $2,242.0
million in market appreciation during the current quarter. The mutual fund
business experienced net redemptions of $224.1 million during the second quarter
of 2003, as compared to net redemptions of $346.2 million in the prior year, a
change of $122.1 million. This change was primarily due to an increase in
deposits of $608.6 million, partially offset by an increase in redemptions of
$504.4 million. The increase in deposits was driven by $675.0 million in sales
of the John Hancock Preferred Income series of closed-end funds, partially
offset by the $126.9 million acquisition of the U.S. Global Leaders Growth Fund
in the prior period. The increase in redemptions was primarily due to the
redemption of a large institutional advisory account, partially offset by lower
retail mutual fund redemptions. Investment advisory fees decreased 10.7%, or
$4.3 million, to $35.9 million, from the prior period and were 0.54% and 0.59%
of average mutual fund assets under management for the three months ended June
30, 2003 and 2002. Underwriting and distribution fees decreased 18.0%, $10.0
million, to $45.6 million compared to the prior year period. Asset based 12b-1
fees declined by $5.8 million due to a decline in average retail mutual fund
assets under management. Commission revenue declined by $4.2 million primarily
due to lower contingent deferred sales charges on lower mutual fund redemptions.
Shareholder service and other fees were $14.3 million compared to $11.0 million
in the prior year.

     Benefits and expenses increased 6.6%, or $14.9 million from the prior year
period. Benefits to policyholders increased 23.2%, or $24.8 million, primarily
due to a $13.3 million increase in interest credited on fixed annuity account
balances due to higher average account balances and $14.1 million higher reserve
provisions for life-contingent immediate fixed annuity fund values on higher
sales of these contract types. Partially offsetting the increase in benefits to
policyholders was a decline in amortization of deferred policy acquisition costs
of 33.7%, or $9.7 million, from the prior year period, primarily due to a $14.4
million decrease in the variable annuity business due to strong separate account
performance in the current quarter. The Segment's effective tax rate on
operating income was 31.6% for both the three months ended June 30, 2003 and
2002.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

     Segment after-tax operating income was $91.2 million, an increase of 13.2%,
or $10.6 million from the prior year period. Fixed annuity after-tax operating
income increased 47.8%, or $17.8 million from June 30, 2002. The fixed annuity
business grew due to higher net investment income, partially offset by higher
interest credited on account balance growth. The variable annuity business
after-tax operating income increased 12.6%, or $1.4 million to $12.5 million for
the six month period ended June 30, 2003 compared to the prior year. The
variable annuity business increased due to strong separate account performance
in the current quarter. Mutual fund segment after-tax operating income was $20.5
million, declining 24.1% or $6.5 million primarily due to an 18.3%, or $30.2
million decrease in management advisory fees, partially offset by a 16.3%, or
$20.2 million decrease in operating expenses. Signature Services after-tax
operating income decreased $0.1 million to $1.8 million, driven by an increase
in operating expenses from 2002. After-tax operating income for Essex, a
distribution subsidiary primarily serving the financial institution channel,
decreased $1.8 million from $2.3 million in the prior year due to lower sales.
Signator Investors after-tax operating income increased $0.1 million.

     Revenues increased 8.8% or $49.9 million, from the prior year. The rise in
revenue was due to a $71.9 million increase in net investment income and a $21.1
million increase in premiums, driven by the fixed annuity business. The increase
in net investment income was primarily due to increases in invested assets
backing fixed annuity products, partially offset by lower earned yields in the
portfolio. Average invested assets backing fixed annuity products increased
36.0% to $9,865.7 million and the average investment yield decreased from the
prior year. These increases in revenue were partially offset by a decrease in
investment management revenues, primarily from the mutual fund business, of
17.6%, or $39.9 million and a $2.4 million decrease in investment-type product
fees, primarily in the variable annuity business on lower average fund values.
Investment-type product fees decreased mostly due to a decline in the average
variable annuity fund values of 10.5%, or $630.6 million, to $5,372.4 million
from the prior year period. The decrease in assets under management was due to
poor long-term separate account returns in the prior year. For variable
annuities the mortality and expense fees as a percentage of average account
balances were 1.29% and 1.33% for the current and prior year periods.


                                       60
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     Investment management revenues, commissions, and other fees decreased
17.6%, or $39.9 million from the prior year. Average mutual fund assets under
management were $26,136.5 million, a decrease of $2,133.7 million, or 7.5% from
the prior year period. The decrease in average mutual fund assets under
management is primarily due to market depreciation of $1,318.4 million from June
30, 2002 to December 31, 2002. Ending mutual fund assets under management
increased by $1,317.0 million or 5.0% from the prior year period due to $2,242.0
million in market appreciation during the current quarter. The mutual fund
business experienced net redemptions of $247.0 million during the first six
months of 2003, as compared to net redemptions of $663.8 million in the prior
year, a change of $416.8 million. This change was primarily due to an increase
in deposits of $707.7 million, partially offset by an increase in redemptions of
$318.5 million. The increase in deposits was driven by $974.6 million in sales
of the John Hancock Preferred Income series of closed-end funds, partially
offset by a $158.6 million decrease in retail open-end mutual fund sales and the
acquisition of the $126.9 million U.S. Global Leaders Growth Fund in the prior
period. The increase in redemptions was primarily due to large institutional
advisory account redemptions, partially offset by a decrease in retail open end
mutual fund redemptions of $502.0 million, caused by declined in redemptions
across a number of funds. Investment advisory fees decreased 14.0%, or $11.4
million, to $70.2 million, from the prior period and were 0.54% and 0.58% of
average mutual fund assets under management for the six months ended June 30,
2003 and 2002, respectively. Underwriting and distribution fees decreased 22.6%,
or $25.7 million, to $87.8 million compared to the prior year period. Asset
based 12b-1 fees declined by $14.2 million due to a decline in average retail
mutual fund assets under management. Commission revenue declined by $11.5
million primarily due to lower load mutual fund sales and lower contingent
deferred sales charges due to lower mutual fund redemptions. Shareholder service
and other fees were $29.0 million compared to $22.0 million in the prior year.

     Benefits and expenses increased 7.7%, or $34.9 million from the prior year
period. Benefits to policyholders increased 25.0%, or $51.7 million, primarily
due to a $29.3 million increase in interest credited on fixed annuity account
balances due to higher average account balances and $25.1 million higher reserve
provisions for life-contingent immediate fixed annuity fund values on higher
sales of these contract types. Partially offsetting the increase in benefits to
policyholders was a decline in other operating costs and expenses of 10.0% or
$19.4 million, from the prior year period, primarily due to cost savings and
lower distribution and selling expenses in the mutual fund business.
Amortization of deferred policy acquisition costs increased 5.2%, or $2.6
million, due to an $11.7 million increase in the fixed annuity business driven
by account balance growth, offset by a $9.0 million decrease in the variable
annuity business due to strong separate account performance in the current
period. The Segment's effective tax rate on operating income was 31.3% compared
to 31.6% for the prior year period.


                                       61
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Guaranteed and Structured Financial Products Segment

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

<TABLE>
<CAPTION>
                                                                        Three Months Ended         Six Months Ended
                                                                             June 30,                  June 30,
                                                                          2003       2002          2003       2002
                                                                       --------------------------------------------
                                                                                       (in millions)
<S>                                                                    <C>         <C>         <C>         <C>
Operating Results:
Revenues
     Premiums ......................................................   $   62.5    $  196.8    $   96.4    $  235.9
     Investment-type product fees ..................................       15.0        18.8        29.5        30.2
     Net investment income .........................................      416.2       431.9       847.6       852.6
     Other revenue .................................................       (0.2)        0.3         0.4         0.4
                                                                       --------------------    --------------------
        Total revenues .............................................      493.5       647.8       973.9     1,119.1

Benefits and expenses
     Benefits to policyholders .....................................      346.5       506.0       673.9       852.9
     Other operating costs and expenses ............................       19.3        20.2        38.1        35.3
     Amortization of deferred policy acquisition costs, excluding
        amounts related to net realized investment and other gains
        (losses) ...................................................        0.6         0.7         1.1         1.1
     Dividends .....................................................        8.7         8.8        17.5        17.5
                                                                       --------------------    --------------------
        Total benefits and expenses ................................      375.1       535.7       730.6       906.8

Segment pre-tax operating income (1) ...............................      118.4       112.1       243.3       212.3
Income taxes .......................................................       37.5        36.2        76.6        69.5
                                                                       --------------------    --------------------

Segment after-tax operating income (1) .............................       80.9        75.9       166.7       142.8

After-tax adjustments: (1)
     Net realized investment and other gains (losses), net .........        6.9       (55.7)      (79.0)      (69.4)
     Restructuring charges .........................................         --        (0.2)         --        (0.5)
                                                                       --------------------    --------------------
        Total after-tax adjustments ................................        6.9       (55.9)      (79.0)      (69.9)

GAAP Reported:
Net income .........................................................   $   87.8    $   20.0    $   87.7    $   72.9
                                                                       ====================    ====================

Other Data:
Segment after-tax operating income:
   Spread-based products ...........................................   $   76.0    $   70.3    $  157.1    $  131.3
   Fee-based products ..............................................        4.9         5.6         9.6        11.5
</TABLE>

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

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

         Segment after-tax operating income increased 6.6% or $5.0 million from
the prior year. Spread-based products after-tax operating income increased 8.1%
or $5.7 million, which was attributable to an increase in investment spreads of
5.4% or $5.6 million. The growth in investment spreads was a result of a higher
average invested asset base, which increased 10.0% or $2.3 billion over the
prior year, partially offset by a 13 basis point decrease in the interest rate
margin. On a total company basis, GICs and funding agreements accounted for
21.3% of after-tax operating income compared to 23.1% in the prior year.
Fee-based products after-tax operating income decreased 12.5% or $0.7 million,
primarily due to lower general account risk charges and lower earnings on
invested assets.

     Revenues decreased 23.8% or $154.3 million from the prior year, primarily
as a result of lower premiums. Premiums declined 68.2% or $134.3 million,
primarily as a result of lower group annuity product sales. Investment-type
product fees


                                       62
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

decreased 20.2% or $3.8 million, primarily due to lower structured settlement
sales. Net investment income decreased 3.6%, or $15.7 million, despite the
growth in the spread-based average invested assets, due to declining interest
rates. The average yield on invested assets decreased to 5.82%, reflecting the
lower interest rate environment in the current period. Net investment income
varies with market interest rates as the return on approximately $12 billion, or
47%, of the asset portfolio, floats with market rates. Matching the interest
rate exposure on our asset portfolio to the exposure on our liabilities is a
central feature of our asset/liability management process.

     Benefits and expenses decreased 30.0% or $160.6 million from the prior
year, primarily due to lower benefits to policyholders. Benefits to
policyholders on spread-based products decreased 33.4% or $151.7 million
primarily due to a decrease in sales of single premium group annuity contracts
combined with lower interest credited on account balances. Spread-based interest
credited decreased 5.7% or $15.5 million. The decrease in interest credited was
due to a decline in the average interest credited rate on account balances for
spread-based products, as approximately $11 billion of liabilities with floating
rates reset. The average crediting rate fell to 4.38%. Other operating costs and
expenses declined 4.5%, or $0.9 million, reflecting lower commissions, largely
offset by higher sponsorship and compensation expenses. Dividends to
contractholders were consistent at $8.7 million and $8.8 million, respectively,
for the three month periods ended June 30, 2003 and 2002. The segment's
effective tax rate on operating income was 31.7% compared to 32.3% for the prior
year. The decrease was primarily due to increased affordable housing tax
credits.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

         Segment after-tax operating income increased 16.7% or $23.9 million
from the prior year. Spread-based products after-tax operating income increased
19.6% or $25.8 million, which was attributable to an increase in investment
spreads of 15.0% or $30.2 million from the prior year. The growth in investment
spreads was a result of a higher average invested asset base, which increased
11.2% or $2.6 billion over the prior year, combined with a 3 basis point
increase in the interest rate margin. On a total company basis, GICs and funding
agreements accounted for 24.0% of after-tax operating income compared to 22.7%
in the prior year. Fee-based products after-tax operating income decreased 16.5%
or $1.9 million from the prior year, primarily due to lower general account risk
charges and lower earnings on risk-based capital.

     Revenues decreased 13.0% or $145.2 million from the prior year, primarily
as a result lower premiums. Premiums declined 59.1% or $139.5 million from the
prior year, primarily as a result of lower group annuity product sales.
Investment-type product fees decreased 2.3% or $0.7 million from the prior year,
primarily due to lower structured settlement sales. Net investment income
decreased 0.6% or $5.0 million, despite the growth in the spread-based average
invested assets. The average yield on invested assets decreased to 6.01%,
reflecting the lower interest rate environment in the current period. Net
investment income varies with market interest rates as the return on
approximately $12 billion, or 45% of the asset portfolio, floats with market
rates. Matching the interest rate exposure on our asset portfolio to the
exposure on our liabilities is a central feature of our asset/liability
management process.

     Benefits and expenses decreased 19.4% or $176.2 million from the prior
year. The decrease was largely due to lower benefits to policyholders, partially
offset by an increase in operating expenses and costs. Benefits to policyholders
on spread-based products decreased 22.6% or $170.9 million primarily due to a
decrease in sales of single premium group annuity contracts combined with lower
interest credited on account balances. Spread-based interest credited decreased
4.7% or $25.4 million from the prior year. The decrease in interest credited was
due to a decline in the average interest credited rate on account balances for
spread-based products, as approximately $11 billion of liabilities with floating
rates reset and new business was added at market rates. The average crediting
rate fell to 4.41%. Partially offsetting this decrease was an increase in other
operating costs and expenses of 7.9% or $2.8 million from the prior year. The
increase was primarily due to higher pension and compensation costs offset by
lower taxes, licenses, and fees. Dividends to contractholders were $17.5 million
for both periods. The segment's effective tax rate on operating income was 31.5%
compared to 32.7% for the prior year. The decrease was primarily due to
increased affordable housing tax credits.


                                       63
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Investment Management Segment

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

<TABLE>
<CAPTION>
                                                          Three Months Ended       Six Months Ended
                                                               June 30,               June 30,
                                                          2003        2002        2003        2002
                                                       ----------------------------------------------
                                                                        (in millions)
<S>                                                    <C>         <C>          <C>         <C>
Operating Results:
Revenues
      Net investment income ........................   $     7.5   $     3.6    $    11.7   $     7.6
      Net realized investment and other
        gains (losses) (1) .........................         8.0         1.7          9.5         1.0
      Investment management revenues, commissions
        and other fees .............................        27.6        27.8         54.4        55.3
      Other revenue ................................          --         0.2          0.1          --
                                                       ---------------------    ---------------------
          Total revenues ...........................        43.1        33.3         75.7        63.9

Benefits and expenses
      Other operating costs and expenses ...........        24.2        21.5         47.7        44.6
                                                       ---------------------    ---------------------
          Total benefits and expenses ..............        24.2        21.5         47.7        44.6

Segment pre-tax operating income (1) ...............        18.9        11.8         28.0        19.3
Income taxes .......................................         7.4         4.4         10.9         7.0
                                                       ---------------------    ---------------------

Segment after-tax operating income (1) .............        11.5         7.4         17.1        12.3

After-tax adjustments: (1)
     Net realized investment and other
        gains (losses) (1) .........................          --         0.5           --         0.5
     Restructuring charges .........................          --        (0.2)          --        (0.2)
                                                       ---------------------    ---------------------
          Total after-tax adjustments ..............          --         0.3           --         0.3

GAAP Reported:
Net income .........................................   $    11.5   $     7.7    $    17.1   $    12.6
                                                       =====================    =====================

Other Data:
    Segment assets under management, end
      of period (2) ................................   $29,872.1   $27,977.4    $29,872.1   $27,977.4
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this MD&A.
(2)   Includes general account cash and invested assets of $371.6 million and
      $350.0 million at June 30, 2003 and 2002, respectively.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

      Segment after-tax operating income increased $4.1 million, or 55.4%, from
the prior year. The increase was primarily due to $6.3 million in higher net
realized investment gains on mortgage securitizations and $3.9 million in higher
net investment income, partially offset by $2.7 million in higher operating
expenses.

      Revenues increased $9.8 million, or 29.4%, from the prior year. Net
realized investment gains on mortgage securitizations increased $6.3 million, to
a gain of $8.0 million, from a gain of $1.7 million in the prior year at John
Hancock Real Estate Finance. The increase in securitization gains resulted from
higher profitability on two securitizations this quarter. Net investment income
was up $3.9 million, primarily resulting from increases in equity method income
on limited partnership energy investments at John Hancock Energy Resources
Management due to the required adoption of fair value accounting at the limited
partnerships. Investment management revenues, commissions, and other fees were
relatively flat overall. Fee income increased $2.4 million at the Hancock
Natural Resource Group (HNRG) from a $1.7 million increase in property
management fees at the new northwest property management division established in
December of 2002, and $0.7 million in higher investment management fees on
higher assets under management. One of HNRG's strategies is to vertically
integrate the timber business and the establishment of the northwest property
management division is another step to implement that strategy. Commercial
mortgage origination fees at John Hancock Real Estate Finance increased $0.7
million from higher loan originations for the


                                       64
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Company's General Account. These increases in fee revenue were offset by a
decrease in advisory fees at the Company's institutional advisor, Independence
Investment LLC, of $1.2 million, or 13.0%. Average assets under management this
year at Independence Investment LLC were $0.6 billion less in spite of a $1.2
billion increase in actual assets under management since the end of the prior
year period. The lower fees at Independence Investment LLC reflect the lower
average assets under management, and a shift towards fixed income assets which
have lower fee rates, a one-time performance fee in the prior year period and
lower ongoing performance fees on CBO funds under management this year. Fee
income declined $1.0 million at John Hancock Realty Advisors mostly due to lower
acquisition activity. Fee income declined $0.5 million at the Company's Bond and
Corporate Finance Group on lower assets under management. Investment management
revenue, commissions and other fees were 0.39% of average advisory assets under
management for both the current and prior year quarters.

      Total benefits and expenses increased $2.7 million, or 12.6%, from the
prior year. Operating expenses increased $2.9 million, or 13.7%. The increase
was primarily due to $2.1 million, or 46.7%, in higher operating expenses at the
Hancock Natural Resource Group, which included $1.0 million of expenses
associated with the new northwest property management division established in
December of 2002 as discussed earlier, and $1.5 million of increased incentive
compensation plan expenses. Operating expenses at Independence Investment LLC
increased $0.9 million, or 8.0%, based on $0.6 million of increased incentive
compensation plan expenses and $0.4 million of increased severance costs
associated with the closing down of their high net worth management group. At
John Hancock Realty Advisors, operating expenses declined $0.3 million, or
27.3%, due to lower acquisition activity. Operating expenses were 0.34% and
0.30% of average advisory assets under management for the current and prior year
quarters, respectively. Commission expenses at the Hancock Natural Resource
Group were $0.2 million, down from $0.4 million, based on significant new
timberland investors signed in the prior year.

      The Segment's effective tax rate on operating income rose to 39.2% from
36.2% for the prior year, primarily due to lower operating income at
Independence Investment, LLC which has a lower state tax liability form of
business organization. The effective tax rate for the Investment Management
Segment remains higher than for our other business segments due to state taxes
on certain investment management subsidiaries, and fewer tax benefits from
portfolio holdings in this segment.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

      Segment after-tax operating income increased $4.8 million, or 39.0%, from
the prior year. The increase was primarily due to $8.5 million in higher net
realized investment gains on mortgage securitizations, $4.1 in higher net
investment income and $0.9 million in lower commission expenses, partially
offset by $4.1 million in higher operating expenses and $0.9 million in lower
fee income.

      Revenues increased $11.8 million, or 18.5%, from the prior year. Net
realized investment gains on mortgage securitizations increased $8.5 million, to
a gain of $9.5 million, from a gain of $1.0 million in the prior year at John
Hancock Real Estate Finance. The increase in securitization gains resulted from
higher profitability on two securitizations in the second quarter of 2003. Net
investment income increased $4.1 million, to $11.7 million, from $7.6 million in
the prior year, primarily resulting from increases in equity method income of
$3.9 million on limited partnership energy investments at John Hancock Energy
Resources Management due to the required adoption of fair value accounting at
the limited partnership. Investment management revenues, commissions, and other
fees decreased $0.9 million, or 1.6%, from the prior year. At the Company's
institutional advisor, Independence Investment LLC, advisory fees were down $3.8
million, or 13.1%, from the prior year. Average assets under management this
year at Independence Investment LLC were $0.3 billion less than in the prior
year period, in spite of a $1.2 billion increase in actual assets under
management since the end of the prior year period. The lower fees at
Independence Investment LLC reflect the lower average assets under management,
and a shift towards fixed income assets which have lower fee rates, a one-time
performance fee in the prior year period and lower ongoing performance fees on
CBO funds under management this year. Fees declined $1.6 million at the
Company's Bond and Corporate Finance Group on lower assets under management
compared to the prior year. These declines in fee revenue were offset by
increases in property management fee income of $3.2 million at the Hancock
Natural Resource Group from the new northwest property management division
established in December of 2002 and $1.0 million in higher management fee income
on higher assets under management. One of HNRG's strategies is to vertically
integrate the timber business and the establishment of the northwest property
management division is another step to implement that strategy. Management fee
income was up $0.4 million at John Hancock Realty Advisors on higher assets
under management. Investment management revenue, commissions and other fees were
0.39% of average advisory assets under management for both the current and prior
year periods.

      Total benefits and expenses increased $3.1 million, or 7.0%, from the
prior year. Operating expenses increased $4.1 million, or 9.4%, from the prior
year. The increase was primarily due to $3.9 million in higher operating
expenses at the Hancock Natural Resource Group, which included $2.1 million of
increased incentive compensation plan expenses, $1.9 million of expenses
associated with the new northwest property management division established in
December of 2002 and recovery of amounts expensed in the prior year period of
$0.8 million offset by $0.9 million in operating expense savings due to ongoing
cost reduction efforts. Operating expenses at Independence Investment LLC
increased $0.6 million, or 2.5%, resulting from increased compensation expense,
severance costs associated with the closing down of their high net worth
management


                                       65
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

group and non-recurring prior period reductions, offset by operating expense
savings from ongoing cost reduction efforts. Operating expenses at the other
investment management business units were relatively flat, declining $0.4
million, or 3.7% from the prior year. Operating expenses were 0.34% and 0.30% of
average advisory assets under management for the current and prior year periods,
respectively. Commission expenses at the Hancock Natural Resource Group declined
$0.9 million from $1.2 million in the prior year, based on significant new
timberland investors signed in the prior year.

      The Segment's effective tax rate on operating income rose to 38.9% from
36.3% for the prior year, primarily due to lower operating income at
Independence Investment, LLC which has a lower state tax liability form of
business organization. The effective tax rate for the Investment Management
Segment remains higher than for our other business segments due to state taxes
on certain investment management subsidiaries, and fewer tax benefits from
portfolio holdings in this segment.


                                       66
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Maritime Life Segment

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

<TABLE>
<CAPTION>
                                                                       Three Months Ended   Six Months Ended
                                                                            June 30,            June 30,
                                                                         2003      2002      2003      2002
                                                                        ------------------------------------
                                                                                   (in millions)
<S>                                                                     <C>       <C>       <C>       <C>
Operating Results:
Revenue
      Premiums ......................................................   $238.0    $171.7    $453.7    $336.4
      Investment-type product fees ..................................     48.5      47.6      93.3      90.8
      Net investment income .........................................     95.9      79.8     180.4     155.4
      Investment management revenues, commissions
        and other fees ..............................................      6.9       4.0      13.1       9.6
      Other revenue .................................................      3.7       1.5       5.4       7.9
                                                                        ----------------    ----------------
          Total revenues ............................................    393.0     304.6     745.9     600.1

Benefits and expenses
      Benefits to policyholders .....................................    275.3     197.8     520.1     396.2
      Other operating costs and expenses ............................     79.2      67.6     148.2     129.8
      Amortization of deferred policy acquisition costs, excluding
        amounts related to net realized investment and other gains
        (losses) ....................................................      3.7       9.6       7.1      17.9
      Dividends to policyholders ....................................      4.4       4.8       8.3       7.2
                                                                        ----------------    ----------------
          Total benefits and expenses ...............................    362.6     279.8     683.7     551.1

Segmen pre-tax operating income (1) .................................     30.4      24.8      62.2      49.0
Income taxes ........................................................     11.0       8.6      22.6      17.0
                                                                        ----------------    ----------------

Segment after-tax operating income (1) ..............................     19.4      16.2      39.6      32.0

After-tax adjustments: (1)
      Net realized investment and other gains (losses), net .........      3.5     (13.0)      5.5     (11.2)
      Restructuring charges .........................................       --      (0.4)       --      (0.4)
                                                                        ----------------    ----------------
          Total after-tax adjustments ...............................      3.5     (13.4)      5.5     (11.6)
GAAP Reported:
Net income ..........................................................   $ 22.9    $  2.8    $ 45.1    $ 20.4
                                                                        ================    ================

Other Data:
Segment after-tax operating income: (1)
      Canadian protection ...........................................   $  8.3    $  7.9    $ 19.8    $ 17.6
      Canadian asset gathering ......................................      6.9       2.9      11.9       6.1
      Canadian group life & health ..................................      4.6       7.2       9.7      10.7
      Canadian corporate & other ....................................     (0.4)     (1.8)     (1.8)     (2.4)
</TABLE>

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


                                       67
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

      Segment after-tax operating income was $19.4 million an increase of 19.8%,
or $3.2 million, from the prior year. This after-tax change equates to a pre-tax
change of $5.6 million, attributable to the following pre-tax items. Underlying
this improvement in segment after-tax operating income was a general
strengthening of the Canadian dollar, contributing $2.1 million. The asset
gathering business increased by $6.5 million due to $9.3 million lower
amortization of deferred policy acquisition costs (DAC) relating to the separate
account business, offset by $2.8 million lower fees and surrender experience.
Group life and health business decreased $3.6 million primarily due to $5.2
million of lower termination reserves for long-term disability products released
in the same quarter last year and $1.0 million lower experience gains in the
current quarter, offset by a $2.6 million improvement in the current quarter's
operations from pricing increases implemented in late 2002. The retail
protection business had higher pre-tax business growth and experience gains of
$3.8 million offset by reserve adjustments of $3.2 million, including a $1.4
million release of term life reserves in 2002 for good experience that was not
repeated. The corporate & other business improved by $2.0 million pre-tax from
the same quarter in the prior year primarily due to refinements in inter-segment
overhead allocations.

      Total revenue increased 29.0%, or $88.4 million, including $27.1 million,
or 8.9%, due to strengthening of the Canadian dollar. Premiums increased 38.6%,
or $66.3 million, driven by the group life & health business following a
recapture of significant portions of its group life, accidental death and
dismemberment and long term disability reinsurance. Premiums for retail
protection products increased 31.0%, or $8.0 million, including foreign exchange
translation gains of $2.3 million and growth in living benefits products.
Premiums in the asset gathering business increased $6.8 million, including
foreign exchange translation gains, due to sales of structured settlements and
other immediate annuities. Universal life and investment-type product fees
increased 1.9%, or $0.9 million, from the prior year due to foreign exchange
translation gains of $3.3 million offset by lower fees on lower levels of assets
under management. Net investment income increased $16.1 million, including $6.6
million of foreign exchange translation gains, driven by higher assets under
management. Management advisory fees increased 72.5%, or $2.9 million, from
increased administrative services only business.

      Total benefits and expenses increased 29.6%, or $82.8 million, from the
prior year due to strengthening of the Canadian dollar. Changes in foreign
exchange rates increased benefits and expenses by 8.9%, or $25.0 million.
Benefits to policyholders increased 39.2%, or $77.5 million, driven by a $51.6
million increase in the group life & health business due primarily to the
reinsurance recapture discussed above. In addition, benefits to policyholders
increased $12.0 million due to provision for future policy benefits in the
immediate annuity business and a $13.9 million increase in the individual life
products business on higher claims experience. Operating costs and expenses
increased 17.2%, or $11.6 million including foreign currency translation loss of
$5.4 million. DAC amortization is lower by $5.9 million due to improved
investment performance.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

      Segment after-tax operating income was $39.6 million, an increase of $7.6
million, or 23.8%, from the prior year. Underlying this improvement in segment
after-tax operating income is a general strengthening of the Canadian dollar,
contributing $4.3 million. The asset gathering business increased by $9.3
million pre-tax due to lower DAC amortization of $13.5 million, driven by
investment performance, offset by a $3.4 million decrease in fees from assets
under management and $0.8 million on lower experience margins. The retail
protection business increased 13.0%, or $3.6 million pre-tax, from the prior
year. The increase in the retail protection business was driven by $2.8 million
in foreign exchange translation gains and general business growth as well as
$2.4 million in positive experience. Changes in the reserves for future policy
benefits in both the comparable period last year and the current period resulted
in a net decrease of $1.6 million. The group life & health pre-tax operations
decreased 6.7%, or $1.1 million, driven by a $6.1 million improvement in core
results offset by a change in long-term disability termination assumptions in
the second quarter of 2002 that amounted to $9.9 million. In addition, current
experience factors contributed a further $2.7 million variance. The corporate &
other business contributed $1.4 million pre-tax.

      Total revenue increased 24.3%, or $145.8 million, driven by a $51.3
million, or 8.5%, increase due to strengthening of the Canadian dollar. Premiums
increased $117.3 million, driven by the group life & health business following a
recapture of significant portions of its group life, accidental death and
dismemberment and long term disability reinsurance. Premiums in the retail
protection business increased $9.7 million due to positive growth in living
benefits products and persistency in traditional life products. Universal life
and product fees increased $2.5 million from the prior year driven by a $6.4
million increase due to foreign exchange translation gains, partially offset by
decline in fees of 4.5% on lower assets under management. Net investment income
increased $25.0 million driven by both foreign exchange translation gains of
$12.4 million and increased income on higher assets under management in the
retail protection and asset gathering businesses.


                                       68
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Total benefits and expenses increased 24.1%, $132.6 million, from the
prior year. Underlying this increase in benefits and expenses is a general
strengthening of the Canadian dollar resulting in an increase of 8.5%, or $47.1
million. Benefits paid and accrued increased $123.9 million, including foreign
exchange translation gains of $35.8 million. The group life & health business
accounted for $89.9 million of this increase, primarily due to the reinsurance
recapture discussed above. Retail protection products increased $21.1 million of
the variance, driven by increased provisions for future policy benefits on
traditional life products while increased annuity reserves account for the
remainder. Operating costs and expenses increased 14.2%, or $18.4 million,
including foreign exchange translation losses of $10.2 million, driven by
operating costs partially offset by lower commissions. Operating expenses
increased by $26.8 million, including foreign exchange translation losses of
$8.7 million, largely driven by growth in the retail protection and asset
gathering businesses and $17.5 million of higher expenses in the group life &
health business due to $8.3 million of lower reinsurance allowances, and $9.2
million of higher operating expenses. Commissions are down $4.1 million, or
6.4%, due to slower sales in individual life and asset gathering products.
Amortization of DAC decreased $10.8 million from the prior year due to
investment performance.


                                       69
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Corporate and Other Segment

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

<TABLE>
<CAPTION>
                                                                Three Months Ended  Six Months Ended
                                                                     June 30,           June 30,
                                                                  2003      2002     2003      2002
                                                                ----------------    ----------------
                                                                                    (in millions)
<S>                                                             <C>       <C>       <C>       <C>
Operating Results:
Segment after-tax operating income(1)
      International operations ..............................   $  2.8    $  1.3    $  2.7    $  2.4
      Corporate operations ..................................    (19.5)     (6.0)    (32.5)     (6.6)
      Non-core businesses ...................................      0.6       1.1       1.9       3.0
                                                                ----------------    ----------------
          Total .............................................    (16.1)     (3.6)    (27.9)     (1.2)
After-tax adjustments: (1)
   Net realized investment and other gains (losses), net ....     13.2       5.2     180.2      (2.1)
   Restructuring charges ....................................       --       1.0        --       2.3
   Class action lawsuit .....................................       --      (0.8)       --      (0.8)
                                                                ----------------    ----------------
       Total after-tax adjustments ..........................     13.2       5.4     180.2      (0.6)

GAAP Reported:
Net income ..................................................   $ (2.9)   $  1.8    $152.3    $ (1.8)
                                                                ================    ================
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" included in this MD&A.
(2)   In 2002, during its start-up phase, the Federal long-term care insurance
      business was reported in the Corporate and Other Segment. Effective
      January 1, 2003, the program and its prior year results were reclassified
      from the Corporate and Other Segment to the Protection Segment.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

      Segment after-tax operating income from international operations increased
$1.5 million from the prior year. Direct Foreign Operations, which consist of
operations of affiliates in Southeast Asia and China, generated a $0.9 million
improvement in after-tax operating loss. The second quarter of 2003 was
favorable primarily due to lower foreign currency transaction losses and lower
policy reserves in Singapore partially offset by lower operating results in
Indonesia. Our International Group Program was $0.6 million higher due to higher
earned retention income.

      Segment after-tax operating loss from corporate operations increased $13.5
million from the prior year. Investment income on corporate surplus was $9.5
million lower due to increased surplus requirements in our other business lines.
Group Life after-tax operating income was $2.6 million lower reflecting a sale
transaction of the Group Life business to Metlife effective May 1, 2003.
Signature Fruit after-tax operating loss improved $1.8 million due to increased
case volume and lower overhead costs. Our corporate owned life insurance program
increased $9.7 million due to an increase in the asset base and to improved
performance of the assets supporting the program. Expense increases in our
corporate account were driven by a $4.1 million increase for employee costs, a
$7.3 million increase for pension costs and $1.5 million increase for benefit
costs.

      Segment after tax operating income from non-core businesses decreased $0.5
million from the prior year. We continue with the orderly run-off of business
within this group.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

      Segment after-tax operating income from international operations increased
$0.3 million from the prior year. Results from our Direct Foreign Operations,
which consist of operations in Southeast Asia and China, were $0.3 million
lower. Our International Group Program was $0.6 million higher due to higher
earned retention income.

      Segment after-tax operating loss from corporate operations increased $25.9
million from the prior year. Investment income on corporate surplus was $33.7
million lower due to $8.3 million lower net investment income and increased
surplus requirements in our other business lines. Group Life after-tax operating
income was $1.1 million lower reflecting a sale transaction of the Group Life
business to MetLife effective May 1, 2003. Our corporate owned life insurance
program increased $16.3 million due to an increase in the asset base and to
improved performance of the assets supporting the program. Other expense
increases in our corporate account were driven by a $9.6 million increase for
interest expense offset in part by operational savings.


                                       70
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     Segment after tax operating income from non-core businesses decreased $1.1
million from the prior year. We continue with the orderly run-off of business
within this group.


                                       71
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

General Account Investments

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

Asset/Liability Risk Management

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

o     Interest rate risk, meaning changes in the market value of fixed maturity
      securities as interest rates change over time, and

o     Credit risk, meaning uncertainties associated with the continued ability
      of an obligor to make timely payments of principal and interest.

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

      Management of credit risk is central to our business and we devote
considerable resources to the credit analysis underlying each investment
acquisition. Our corporate bond management group 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. Accordingly,
incorporated in insurance products prices are assumptions of expected default
losses over the long-term. Actual losses therefore vary above and below this
average, and the market value of the portfolio as a whole also changes as market
credit spreads move up and down during an economic cycle.

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


                                       72
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Overall Composition of the General Account

     Invested assets, excluding separate accounts, totaled $74.7 billion and
$67.1 billion as of June 30, 2003 and December 31, 2002, respectively. Although
the portfolio composition has not significantly changed at June 30, 2003 as
compared to December 31, 2002, invested assets have grown 11.3% over the year,
with the fixed maturity securities increasing $6.6 billion. The following table
shows the composition of investments in the general account portfolio.

<TABLE>
<CAPTION>
                                                    As of June 30,              As of December 31,
                                                         2003                          2002
                                            --------------------------------------------------------------
                                                Carrying         % of          Carrying         % of
                                                  Value          Total          Value           Total
                                            --------------------------------------------------------------
                                              (in millions)                 (in millions)
<S>                                              <C>              <C>        <C>                 <C>
Fixed maturity securities (1)............        $54,214.1        72.6%      $ 47,598.4          70.9%
Mortgage loans (2).......................         12,434.3        16.6         11,805.7          17.6
Real estate..............................            279.1         0.4            318.6           0.5
Policy loans (3).........................          2,110.1         2.8          2,097.2           3.1
Equity securities........................          1,128.4         1.5            968.6           1.4
Other invested assets (4)................          3,088.0         4.1          2,937.8           4.4
Short-term investments...................            288.4         0.4            211.2           0.3
Cash and cash equivalents (5)............          1,197.6         1.6          1,190.6           1.8
                                            --------------------------------------------------------------
       Total invested assets.............        $74,740.0       100.0%      $ 67,128.1         100.0%
                                            ==============================================================
</TABLE>

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $585.7 million and
      $593.3 million as of June 30, 2003 and December 31, 2002, respectively.
      The total fair value of the fixed maturity security portfolio was
      $54,258.9 million and $47,648.0 million, at June 30, 2003 and December 31,
      2002 respectively.
(2)   The fair value for the mortgage loan portfolio was $13,658.5 million and
      $12,726.1 million as of June 30, 2003 and December 31, 2002, respectively.
(3)   Policy loans are secured by the cash value of the underlying life
      insurance policies and do not mature in a conventional sense, but expire
      in conjunction with the related policy liabilities.
(4)   Other invested assets as of December 31, 2002 contains a receivable of
      $471.1 million from Allmerica Financial Corporation pursuant to the
      Company's agreement to reinsure Allmerica's fixed universal life insurance
      business. At June 30, 2003, the acquisition accounting was finalized and
      these assets are reflected in the proper line items in the portfolio
      detail above.
(5)   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 June 30, 2003, fixed maturity
securities represented 72.6% of general account invested assets with a carrying
value of $54.2 billion, comprised of 60.8% public securities and 39.2% 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. The Company has established a long-term target
of limiting investments in below investment grade bonds to 8% of invested assets
by 2005 for its U.S. life insurance companies on a statutory accounting basis.
Allocations are based on an assessment of relative value and the likelihood of
enhancing risk-adjusted portfolio returns. While the Company has profited from
the below-investment-grade asset class in the past, care is taken to manage its
growth strategically by limiting its size relative to the Company's total
assets.

      The Securities Valuation Office (SVO) of the National Association of
Insurance Commissioners evaluates all public and private bonds purchased as
investments by insurance companies. The SVO assigns one of six investment
categories to each security it reviews. Category 1 is the highest quality
rating, and Category 6 is the lowest. Categories 1 and 2 are the equivalent


                                       73
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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 June 30,                As of December 31,
                                                                   2003                            2002
                                                      ----------------------------------------------------------------
   SVO                  S&P Equivalent                    Carrying          % of          Carrying          % of
Rating (1)             Designation (2)                 Value (3)(4)(5)     Total      Value (3)(4)(5)      Total
----------------------------------------------------------------------------------------------------------------------
                                                        (in millions)                  (in millions)
<S>         <C>                                            <C>              <C>           <C>               <C>
    1       AAA/AA/A.............................          $24,050.4         44.8%        $20,635.7          43.9%
    2       BBB..................................           23,786.6         44.4          21,107.5          44.9
    3       BB...................................            2,347.9          4.4           2,626.7           5.6
    4       B....................................            1,695.1          3.1           1,223.5           2.6
    5       CCC and lower........................            1,169.5          2.2             776.4           1.7
    6       In or near default...................              578.9          1.1             635.3           1.3
                                                      ----------------------------------------------------------------
            Total................................           53,628.4        100.0%         47,005.1         100.0%

            Redeemable preferred stock...........              585.7                          593.3
                                                      ----------------------------------------------------------------
            Total Fixed Maturities...............          $54,214.1                      $47,598.4
                                                      ================================================================
</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 180 securities that are awaiting an SVO rating, with a carrying
      value of $3,518.4 million as of June 30, 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 $50.0 million invested in the Company's
      credit-linked note program, $30.0 million of written credit default swaps
      on fixed maturity securities in the AAA/AA/A category and $20.0 million of
      written credit default swaps on fixed maturity securities in the BBB
      category. As of December 31, 2002 the Company had $55.0 million invested
      in the Company's credit linked program, $10.0 million of written credit
      default swaps on fixed maturity securities in the AAA/AA/A category and
      $45.0 million of written credit default swaps on fixed maturity securities
      in the BBB category.
(5)   The Company entered into a credit enhancement agreement in the form of a
      guaranty from a AAA rated financial guarantor in 1996. To reflect the
      impact of this guaranty on the overall portfolio, the Company has
      presented securities covered in aggregate by the guaranty at rating levels
      provided by the SVO and Moody's that reflect the guaranty. As a result,
      $97.9 million of SVO Rating 2, $589.6 million of SVO Rating 3, and $211.8
      million of SVO Rating 4 underlying securities are included as $685.3
      million of SVO Rating 1, $160.5 million of SVO Rating 2 and $53.5 million
      of SVO Rating 3 as of June 30, 2003 and $94.0 million of SVO Rating 2,
      $718.0 million of SVO Rating 3, and $141.3 million of SVO Rating 4
      underlying securities are included as $753.2 million of SVO Rating 1,
      $150.1 million of SVO Rating 2 and $50.0 million of SVO Rating 3 as of
      December 31, 2002. The guaranty also contains a provision that the
      guarantor can recover from the Company certain amounts paid over the
      history of the program in the event a payment is required under the
      guaranty. As of June 30, 2003 and December 31, 2002, the maximum amount
      that can be recovered under this provision was $96.3 million and $82.3
      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 fixed
maturity investments are investment grade, with 89.2% and 88.8% of fixed
maturity investments invested in Category 1 and 2 securities as of June 30, 2003
and December 31, 2002, respectively. Below investment grade bonds were 10.8% and
11.2% of fixed maturity investments and 7.7% and 7.8% of total invested assets
as of June 30, 2003 and December 31, 2002, respectively. This allocation
reflects the Company strategy of avoiding the unpredictability of interest rate
risk in favor of relying on the Company's bond analysts' ability to better
predict credit or default risk. The bond analysts operate in an industry-based,
team-oriented structure that permits the evaluation of a wide range of below
investment grade offerings in a variety of industries resulting in a
well-diversified high yield portfolio.

     Valuation techniques for the bond portfolio vary by security type and the
availability of market data. Pricing models and their underlying assumptions
impact the amount and timing of unrealized gains and losses recognized, and the
use of different pricing models or assumptions could produce different financial
results. External pricing services are used where available,


                                       74
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

      As of June 30, 2003 and December 31, 2002, 40.5% and 49.9% of our below
investment grade bonds are in Category 3, the highest quality below investment
grade. Category 6 bonds, those in or near default, represent securities that
were originally acquired as long-term investments, but subsequently became
distressed. The carrying value of bonds in or near default was $578.9 million
and $635.3 million as of June 30, 2003 and December 31, 2002, respectively. As
of June 30, 2003 and December 31, 2002, $8.7 million and $10.7 million,
respectively of interest on bonds near default was included in accrued
investment income. Unless the Company reasonably expects to collect investment
income on bonds in or near default, the accrual will be ceased and any accrued
income reversed. Management judgment is used and the actual results could be
materially different.

      Bonds rated Category 5 by the SVO increased by $571.6 million for the
quarter and $393.1 million for the six month period ended June 30, 2003.
Approximately $159 million of the increase for the quarter was due to upgrades
of Category 6 bonds and market appreciation of existing bonds in this category.
The remaining increase is due primarily to the downgrade by the SVO of $435.2
million of bonds whose public ratings did not change during the quarter. These
bonds were either split rated or rated higher by the major rating agencies and
the SVO moved them to the lower level during the quarter. We do not believe that
these downgrades represent a deterioration in the credit of these securities and
we are appealing approximately $250 million of these downgrades with the SVO and
expect to see upgrades in the coming quarters.

      In keeping with the investment philosophy of tightly managing interest
rate risk, the Company's MBS & ABS holding 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
June 30, 2003 and December 31, 2002 was limited to approximately $1,482 million
and $990 million, respectively, or 16.6% and 12.6% of our total MBS/ABS
portfolio and 2.7% and 2.1% of our total fixed maturity securities holdings,
respectively.


                                       75
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

             Fixed Maturity Securities -- By Industry Classification

<TABLE>
<CAPTION>
                                                                          As of June 30, 2003
                                      ---------------------------------------------------------------------------------------------
                                                                        Carrying
                                                                        Value of
                                                                     Securities with               Carrying Value of
                                                            Net           Gross          Gross      Securities with        Gross
                                       Total Carrying   Unrealized     Unrealized     Unrealized   Gross Unrealized     Unrealized
                                            Value       Gain (Loss)       Gains          Gains          Losses            Losses
                                      ---------------------------------------------------------------------------------------------
                                                                             (in millions)
<S>                                        <C>           <C>           <C>              <C>             <C>               <C>
Corporate securities:
     Banking and finance............       $ 7,004.8     $  463.2      $ 6,241.9        $  478.1        $  762.9          $ (14.9)
     Communications.................         3,367.9        267.0        3,104.7           295.9           263.2            (28.9)
     Government.....................         3,022.7        151.5        1,584.6           168.6         1,438.1            (17.1)
     Manufacturing..................         7,961.0        521.9        6,744.6           619.2         1,216.4            (97.3)
     Oil & gas......................         5,074.5        375.5        4,469.9           453.8           604.6            (78.3)
     Services / trade...............         2,825.1        241.4        2,629.9           254.6           195.2            (13.2)
     Transportation.................         3,155.8        112.1        2,334.7           230.7           821.1           (118.6)
     Utilities......................         9,864.0        500.4        7,620.9           705.2         2,243.1           (204.8)
     Other..........................           188.9         18.7         185.9             18.8             3.0             (0.1)
                                      ---------------------------------------------------------------------------------------------
   Total corporate securities.......        42,464.7      2,651.7       34,917.1         3,224.9         7,547.6           (573.2)

Asset-backed and mortgage-
    backed securities...............         8,954.4        314.6        7,100.5           508.4         1,853.9           (193.8)
U.S. Treasury securities and
    obligations of U.S. government
    agencies........................           189.2          8.9          150.0             9.0            39.2             (0.1)
Debt securities issued by foreign
    governments (1) ................         1,925.8        251.7        1,813.4           257.4           112.4             (5.7)
Obligations of states and political
    subdivisions....................           680.0         32.0          461.8            33.3           218.2             (1.3)
                                     ---------------------------------------------------------------------------------------------
     Total..........................       $54,214.1     $3,258.9      $44,442.8        $4,033.0        $9,771.3          $(774.1)
                                      =============================================================================================
</TABLE>

(1)   Includes $1,641.7 million in debt securities held by Maritime Life, our
      Canadian insurance subsidiary, and issued and fully supported by the
      Canadian federal, provincial or municipal governments.


                                       76
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

             Fixed Maturity Securities -- By Industry Classification

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

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

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

      As of June 30, 2003 and December 31, 2002, there are gross unrealized
gains of $4,033.0 million and $2,611.1 million, and gross unrealized losses of
$774.1 million and $1,469.2 million on the fixed maturities portfolio. As of
June 30, 2003 gross unrealized losses of $774.1 million include $692.8 million,
or 89.5%, 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
are allocated to the closed block policyholders or participating pension
contractholders. Of the $774.1 million of gross unrealized losses in the
portfolio at June 30, 2003, $97.3 million was in the closed block and $33.3
million has been allocated to participating pension contractholders, leaving
$643.5 million of gross unrealized losses after such allocations. The 2002 gross
unrealized losses of $1,469.2 million included $1,324.3 million, or 90.1%, of
gross unrealized losses concentrated in the utilities, manufacturing, oil and
gas, transportation, and asset-backed and mortgage-backed securities. Only the
utilities sector has net unrealized losses as of December 31, 2002. The tables
above show gross unrealized losses before amounts that were allocated to the
closed block policyholders or participating pension contractholders. Of the
$1,469.2 million of gross unrealized losses in the portfolio at December 31,
2002, $191.0 is in the closed block and $62.6 million was allocated to
participating pension contractholders, leaving $1,215.6 million of gross
unrealized losses after such allocations.

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

      Oil & Gas: In the Oil & Gas industry, much of our unrealized loss arises
from companies in emerging markets, primarily Latin America and particularly in
Venezuela. Our philosophy in emerging markets is to generally lend to those
companies with


                                       77
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

dollar based export products such as oil companies. Emerging markets continue to
experience significant stress and bond prices across most emerging market
countries are down. However, our oil & gas investments are faring well as these
companies have dollar based revenues to pay their debts and have continued to do
so. In many cases, deals are structured so that all export revenues first pass
through an offshore trust and our debt service is then paid before any dollars
are released back to the company. This type of transaction is known as an export
receivables deal. All of our Venezuelan transactions are structured in this
manner. The strike in Venezuela raised the risk profile of our oil transactions
in this country, because the investments we have in Venezuela require oil
production in order for these deals to produce payments. The gross unrealized
loss on our Venezuelan oil and gas holdings was $64.4 million and $107.7 million
as of June 30, 2003 and December 31, 2002, respectively. The improvement in the
gross unrealized loss is largely due to the end of the Venezuelan oil strike and
the increases in oil production to approximately 80% of pre-strike levels. We
expect further price recovery in these bonds as the market becomes comfortable
that these production levels will continue.

      Transportation: The Transportation sector consists largely of air, rail,
and automotive manufacturers and service companies. All of these subsectors are
experiencing cyclical downturns, particularly the airline industry, having been
hit both by the recession and the fallout from September 11, 2001. While most
airlines are losing money, we lend to this industry almost exclusively on a
secured basis (approximately 99% of our loans are secured). These secured
airline financings are of two types: Equipment Trust Certificates (ETC's) and
Enhanced Equipment Trust Certificates (EETC's). The ETC's initially have an 80%
loan-to-value ratio and the EETC senior tranches initially have a 40-50%
loan-to-value and include a provision for a third party to pay interest for
eighteen months from a default. For us to lose money on an ETC, three things
must happen: the airline must default, the airline must decide it does not want
to fly our aircraft, and the aircraft must be worth less than our loan. When
lending to this industry, we underwrite both the airline and the aircraft. We've
been lending to this industry in this fashion for 25 years through several
economic cycles and have seen values on our secured airline bonds fall and
recover thorough these cycles. EETC's are classified as asset-backed securities
and they account for $113.5 million and $181.1 million of the $193.8 million and
$278.5 million of gross unrealized loss in the asset-backed and mortgage-backed
securities category as of June 30, 2003 and December 31, 2002, 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. We do still expect that the senior secured nature
of our loans to this industry will protect our holdings through this difficult
time.

      Utilities: The Utility sector has faced a number of challenges over the
past few years including the California Power Crisis, the Enron bankruptcy and
the recession which slowed the growth in demand. More recently, there have been
issues around energy trading activities and the financial liquidity of some
large merchant industry players. These events caused a general widening in
utility and project finance bond spreads over the course of 2002. We expect some
continued stress in this sector as owners of merchant plants work through their
liquidity issues with the banks. Investors are likely to see continued
restructurings and/or bankruptcy filings from those companies unable to reach
agreement with the banks. Longer term, we believe the reduction in power supply
from reduced capital expenditures and the shutting of inefficient plants will
support a gradual rise in power prices that will help this sector recover. Thus
far this year, there are a number of positive signs in this sector as power
prices have increased and, most importantly, banks are more willing to refinance
their maturing lines, albeit often on a secured basis. As a result, prices in
power sector bonds have improved significantly, as shown by the reduction in
gross unrealized loss on our utility sector bonds from $538.3 million as of
December 31, 2002 to $204.8 million as of June 30, 2003.

      Asset-backed and mortgage-backed securities: As described above, as of
June 30, 2003 and December 31, 2002, the main driver of the unrealized loss in
this category is $113.5 million and $181.1 million of gross unrealized loss on
EETC's with a GAAP book value of $695.5 million and $754.0 million,
respectively. This $113.5 million and $181.1 million of gross unrealized loss
represent 59% and 65% of the total gross unrealized loss in this category.
EETC's are financings secured by a pool of aircraft. The vast majority of our
EETC holdings ($688.3 million and $721.3 million of the $695.5 million and
$754.0 million) are the most senior tranches in the EETC structure. The most
senior tranches are generally structured to have an initial loan-to-value of
40-50%. Given the drop in airline passenger traffic and the financial
difficulties of most of the major carriers, aircraft values have dropped
significantly and hence EETC's have declined in price. We still expect, however,
that most of the senior tranche EETC have enough subordination and asset
coverage to ensure full and timely repayment. The major risk to this portfolio
is a further decline in passenger traffic due to an extended war or increased
terrorist activity, further depressing aircraft values. Thus far, we have never
lost money on a senior tranche EETC even though some of aircraft backing our
transactions have been leased to airlines that have gone out of business. As
airlines emerge from bankruptcy and it becomes clear that most senior tranche
EETC's have ample asset coverage, we expect these bonds' prices will recover.


                                       78
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      The following table shows the composition by credit quality of the
securities with gross unrealized losses in our fixed maturity securities
portfolio. Bonds rated Category 5 by the SVO increased by $137.9 million for the
six month period ended June 30, 2003, but the unrealized losses on these
securities decreased by $42.5 million over the same period. For the quarter,
bonds with gross unrealized losses rated Category 5 increased by $313.9 million
while the unrealized losses on these securities increased $33.4 million. The
change for the quarter is caused primarily by upgrades of Category 6 bonds and
downgrades by the SVO of securities that had split ratings or higher ratings by
the major rating agencies. We do not believe that these downgrades represent a
deterioration in the credit of these securities and we are appealing several of
these downgrades with the SVO and expect to see upgrades in the coming quarters.

          Unrealized Losses on Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                                          As of June 30, 2003
                                                   -------------------------------------------------------------------
                                                      Carrying Value of
    SVO                 S&P Equivalent              Securities with Gross     % of     Gross Unrealized
 Rating (1)             Designation (2)             Unrealized Losses (3)    Total        Losses (3)     % of Total
----------------------------------------------------------------------------------------------------------------------
                                                        (in millions)                   (in millions)
<S>              <C>                                       <C>                <C>           <C>             <C>
     1           AAA/AA/A.......................           $4,297.7            44.9%        $(113.7)         14.9%
     2           BBB............................            2,146.9            22.4          (133.4)         17.5
     3           BB.............................            1,088.2            11.4          (131.7)         17.2
     4           B..............................            1,091.4            11.4          (195.5)         25.6
     5           CCC and lower..................              679.7             7.1          (152.5)         20.0
     6           In or near default.............              270.4             2.8           (36.9)          4.8
                                                   -------------------------------------------------------------------
                 Total..........................            9,574.3           100.0%         (763.7)        100.0%

                 Redeemable preferred stock.....              197.0                           (10.4)
                                                   -------------------------------------------------------------------
                 Total..........................           $9,771.3                         $(774.1)
                                                   ===================================================================
</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 57 securities with gross unrealized losses are awaiting an SVO
      rating with a carrying value of $1,709.4 million and unrealized losses of
      $37.8 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 17.5% and 4.9% 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 Quality

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

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

(1)   With respect to securities that are awaiting 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 71 securities with gross unrealized losses are awaiting an SVO
      rating with a carrying value of $1,677.0 million and unrealized losses of
      $63.4 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 15.0% and 4.3% of the
      total carrying value and total gross unrealized losses of securities in a
      loss position, including redeemable preferred stock, respectively.


                                       79
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

<TABLE>
<CAPTION>
                                                                           As of June 30, 2003
                                        -------------------------------------------------------------------------------------------
                                                      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..................      $2,107.2         $  (5.2)      $ (46.3)        $  340.1       $  (8.4)    $ (43.7)
Greater than three months to
     six months.......................         931.2            (9.8)        (10.6)           289.9          (4.0)      (13.1)
Greater than six months to
     nine months......................         950.1           (11.5)        (10.8)           282.3          (4.0)      (13.8)
Greater than nine months to
     twelve months....................         236.1           (12.8)        (10.0)           176.2          (5.4)      (34.9)
Greater than twelve months............       2,220.1           (87.5)        (42.5)         2,041.1        (109.8)     (279.6)
                                        --------------------------------------------  ---------------------------------------------
Total.................................       6,444.7          (126.8)       (120.2)         3,129.6        (131.6)     (385.1)

Redeemable preferred stock............         197.0              --         (10.4)              --            --          --
                                        --------------------------------------------  ---------------------------------------------
Total.................................      $6,641.7         $(126.8)      $(130.6)        $3,129.6       $(131.6)    $(385.1)
                                        ============================================  =============================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                         As of December 31, 2002
                                        -------------------------------------------------------------------------------------------
                                                      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..................      $2,255.2         $ (19.2)      $ (48.7)        $  276.3       $  (2.2)    $ (13.0)
Greater than three months to
     six months.......................         952.4           (16.0)        (34.1)           406.2          (7.6)     (113.8)
Greater than six months to
     nine months......................         909.1           (35.0)        (24.8)           566.4         (14.4)      (78.1)
Greater than nine months to
     twelve months....................         423.9           (12.6)        (27.7)           393.4          (5.3)      (61.4)
Greater than twelve months............       3,102.6           (70.1)       (255.4)         1,594.8         (74.9)     (543.4)
                                        --------------------------------------------  ---------------------------------------------
Total.................................       7,643.2          (152.9)       (390.7)         3,237.1        (104.4)     (809.7)

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

      The tables above show the Company's investment grade and below investment
grade securities that were in a loss position at June 30, 2003 and December 31,
2002 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 June 30, 2003 and December 31, 2002, respectively, the fixed
maturity securities had a total gross unrealized loss of $515.7 million and
$1,211.9 million, excluding basis adjustments related to hedging relationships.
Of these totals, $367.0 million and $887.9 million, respectively, are due to
securities that have had various amounts of unrealized loss for more than nine
months. Of this, $52.5 million and $283.1 million, respectively comes from
securities rated investment grade. Unrealized losses on investment grade
securities principally relate to changes in interest rates or changes in credit
spreads since the securities were acquired. Credit rating agencies statistics
indicate that investment grade securities have been found to be less likely to
develop credit concerns.


                                       80
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      As of June 30, 2003 and December 31, 2002, $314.5 million and $604.8
million, respectively, of the $515.7 million and $1,211.9 million resided in
below investment grade securities with various amounts of unrealized loss for
over nine months. At June 30, 2003, all of these securities were current as to
the payments of principal and interest with the exception of 4 securities with a
carrying value of $9.6 million and an unrealized loss of $17.1 million. Of the
total $314.5 million, $137.2 million traded above 80% of amortized cost at June
30, 2003 and an additional $45.6 million traded above 80% of amortized cost
within the last nine months, for a total of $182.8 million. Of the total $182.8
million in this category, utility related bonds made up $68.1 million. As
described earlier, the utility sector suffered from oversupply and slower than
expected demand last year. This led to many credit quality downgrades in the
sector and corresponding price declines. We have seen evidence of improvement in
the utility sector recently as companies have curtailed expansion plans and sold
assets to conserve cash flow and strengthen their balance sheets. On the other
hand, $69.5 million of this $182.8 million total comes from airline related
bonds and this sector has continued to deteriorate thus far in 2003. While, as
described earlier, we expect the secured nature of our positions to protect our
value, the increased stress in this industry is of concern.

Unrealized Losses as of June 30, 2003

      As of June 30, 2003, the remaining portion of the unrealized loss, $131.7
million, arises from below investment grade securities that have traded below 80
percent of amortized cost for over nine months. All of these bonds are current
on payments of principal and interest and we believe, based on currently
available information that it is probable that these securities will continue to
pay based on their original terms. We carefully track these investments to
ensure our continued belief that their prices will recover. More detail on the
most significant securities is contained below:

      o     $45.4 million on five secured airline bonds. Three of the bonds
            account for the majority, $39.8 million, of the loss. These 3 bonds
            are all senior tranche, EETC's of an airline currently in
            bankruptcy. These EETC's, however, are all current due to the 18
            month liquidity facility with which to make interest payments. In
            all three cases, the total loan balance of the senior tranche is
            still less than the current appraised value of the underlying
            aircraft. Accordingly we expect the market price of this bond to
            recover. Another $3.6 million is on an ETC with a major US airline
            that we do not expect to file for bankruptcy and hence expect the
            bond to recover. The remaining $2.0 million loss is on a
            subordinated tranche of an EETC for a major US airline not in
            bankruptcy. We do not expect this airline to file for bankruptcy and
            hence expect the bond to recover.

      o     $22.0 million on a fertilizer plant that sources its natural gas
            from PDVSA, the Venezuelan oil company. While the cost of the
            natural gas is very inexpensive, there are concerns about the
            reliability of the supply. Furthermore the plant has experienced
            operating problems. Its equity sponsors, however, have supported the
            project with additional contributions of equity and based on our
            review of this credit we expect their continued support. Hence we
            expect the price to continue to recover.

      o     $18.6 million from a structured investment based on oil and gas
            payments to an Argentine province. This transaction benefits from
            (1) rights to 80% of the royalty payments received by the province,
            (2) a six month debt service reserve located in the U.S., and (3) a
            political risk insurance policy from a major reinsurer that will
            take over payments in the event the government imposes transfer or
            currency conversion limitations. Currently, the major risk is that
            the local oil and gas companies are making payments to the province
            based on a fixed exchange rate rather than the market exchange rate.
            While the province is working to correct this, if it does not change
            we will need to dip into the debt service reserve account for a
            portion of the debt service payments this year and we will
            ultimately need to restructure our rights to royalty payments to
            extend beyond the maturity of our notes, so a restructuring would
            likely extend the term of our note with interest.

      o     $11.6 million on a loan secured by a power plant in Mississippi. The
            plant is owned by a company currently in bankruptcy, but this asset
            has not been pulled into the bankruptcy and hence our loan is
            current. Our loan benefits from a 6 month debt service reserve with
            sufficient cash flow to cover debt service. We expect the equity in
            this project to be sold out of the bankrupt power company and the
            bond price to recover at that time.

      o     $8.2 million on a large copper producer based in Mexico. This
            company has suffered from the cyclical downturn in copper prices
            over the past two years and insufficient capital expenditures to
            keep its costs competitive. The company's owners have addressed the
            latter issue by recently injecting fresh capital into the company to
            improve the efficiency of its operations. The expected improvement
            in copper prices due to the improving U.S. economy should also help
            the company and hence the bond price.


                                       81
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      o     $6.3 million on the bond of a major telecommunications company. A
            major portion of the value of this company is derived from its local
            exchange business. The company has taken steps to deleverage and is
            expected to be in a positive cash flow position this year. As the
            company continues to reduce leverage through cost cutting and asset
            dispositions, we expect these securities to continue to recover in
            value.

      o     $5.0 million on a producer of manufactured homes. Overcapacity has
            hurt this industry and much of the production and retailing capacity
            has been removed over the past several years. This company is a
            leader in this industry and thus has been able to weather the
            downturn. As the industry recovers due to the reduction of capacity,
            so should the value of these bonds.

      o     $3.9 million from a structured receivables transaction based on the
            export of soybeans from a major soybean producer in Argentina. The
            international buyers of the soybeans make payment to an offshore
            trust with our debt service paid before any dollars flow back to the
            Argentine company. We expect this structure to continue to protect
            our debt service payments.

      o     $3.3 million on a senior tranche franchise loan asset backed
            security. The underlying franchise loans are primarily to the
            gas/convenience sector that has experienced stress from the large
            new entrants such as Walmart. Nevertheless, this senior tranche is
            current and, based on historical and projected delinquencies, we
            still expect to be paid in full and expect its price to recover.

      The Company's investment grade and below investment grade bonds trading at
less than 80% of amortized cost for more than one year amounted to $76.8 million
in June 30, 2003 down $79.0 million or 50.7% from December 31, 2002. Three
quarters of that amount is associated with U.S. dollar denominated structured
receivables in Venezuela and Argentina, many of which are analyzed above. The
Company believes, however, that after its comprehensive review of each
borrower's ability to meet the obligations of the notes, and based on
information available at this time, these securities will continue to pay as
scheduled, and the Company has the ability and the intent to hold these
securities until they recover in value or mature. The scheduled maturity dates
for securities in an unrealized loss position at June 30, 2003 and December 31,
2002 is shown below.

          Unrealized Losses on Fixed Maturity Securities -- By Maturity

<TABLE>
<CAPTION>
                                                                   June 30, 2003                  December 31, 2002
                                                           -------------------------------  -------------------------------
                                                            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...............................         $  413.3         $ (14.5)         $   586.8    $   (37.9)
Due after one year through five years.................          1,860.9          (114.3)           2,574.9       (273.2)
Due after five years through ten years................          1,673.7          (203.8)           2,573.1       (429.9)
Due after ten years...................................          3,969.5          (247.7)           3,691.0       (449.7)
                                                           -------------------------------  -------------------------------
                                                                7,917.4          (580.3)           9,425.8     (1,190.7)
Asset-backed and mortgage-backed securities...........          1,853.9          (193.8)           1,720.7       (278.5)
                                                           -------------------------------  -------------------------------

Total.................................................         $9,771.3         $(774.1)         $11,146.5    $(1,469.2)
                                                           ===============================  ===============================
</TABLE>


                                       82
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       As of June 30, 2003 we had 85 securities representing 17 credit exposures
that had an unrealized loss of $10 million or more. They include:

<TABLE>
<CAPTION>
      Description of Issuer                                                  Amortized Cost   Unrealized Loss
                                                                            ----------------------------------
                                                                                         (in millions)

<S>                                                                             <C>                 <C>
      Venezuelan oil company with US dollar based flows.................        $  156.8            $ (24.5)
      Major US airline .................................................            84.4              (23.7)
      Secured financings to large US airline ...........................           121.0              (23.3)
      Notes secured by leases on a pool of aircraft ....................            35.1              (22.7)
      Argentinean trust holding rights to oil and gas ..................            44.0              (22.0)
      US natural gas fired power generator .............................            85.4              (21.0)
      Joint venture with a Venezuelan oil company.......................            41.5              (19.4)
      Notes secured by leases on a pool of aircraft ....................            52.6              (18.5)
      Joint venture with a Venezuelan oil company.......................            63.3              (12.6)
      US merchant energy generator......................................            73.7              (12.6)
      Large US based merchant energy generator..........................           100.4              (12.3)
      US power generator with multiple plants  .........................           100.3              (12.3)
      Securitized investment of aircraft................................           186.3              (12.2)
      Major US airline..................................................           118.6              (11.9)
      Notes secured by leases on a pool of aircraft.....................            77.7              (11.4)
      Major US airline..................................................           150.8              (10.5)
      Finance subsidiary of US paper\wood products......................           207.0              (10.3)
                                                                           -------------------------------------
           Total........................................................        $1,698.9            $(281.2)
</TABLE>

      Unrealized losses improved during the second quarter of 2003. As of March
31, 2003, there were 125 securities with an unrealized loss of $10 million or
more with an amortized cost of $2,654.2 million and unrealized loss of $622.5
million. A major driver in the valuation of the fixed income portfolio at June
30, 2003 and December 31, 2002 was the recent reduction in traded or quoted bond
prices across most industries, especially in the below investment grade
categories where, in the current environment, bond market investors are very
risk averse and have severely penalized issues where there is any uncertainty.
This effect was most pronounced in the reduction in the traded or quoted prices
of the bonds of many energy companies with merchant exposure. In the third and
fourth quarters of 2002, the rating agencies downgraded a number of companies
that have exposure to the merchant energy sector. These downgrades in turn
created liquidity issues for a few companies and uncertainty at many others.
This market sentiment, which we believe to be temporary, has led to significant
reductions in the prices of virtually every energy company that has any merchant
exposure, including some in our portfolio and 4 on the list above. We believe
many of these issuers are taking the right steps to strengthen their balance
sheets through a combination of actions such as reducing capital expenditures,
scaling back trading operations, reducing dividends, and issuing equity. Thus
far this year, prices in power sector bonds have improved significantly, as
shown by the reduction in the gross unrealized loss on our utility bonds from
$538.3 million as of December 31, 2002 to $204.8 million as of June 30, 2003.
Airlines are another sector under pressure and they represent 8 names on this
list. Unlike the power sector, the airline sector continues to struggle as it
deals with the continued drop in traffic due to the war in Iraq and SARS. We
continue to believe, however, that the secured nature of our investments will
enable them to recover as the industry recovers. All of the above securities
have undergone thorough analysis by our investment professionals, and at this
time we believe that the borrowers have the financial capacity to make all
required contractual payments on the notes when due, and we intend to hold these
securities until they either mature or recover in value.

      Mortgage Loans. As of June 30, 2003 and December 31, 2002, the Company
held mortgage loans with a carrying value of $12.4 billion and $11.8 billion,
including $2.8 billion and $2.6 billion respectively, of agricultural loans at
each period end and $9.6 billion and $9.2 billion, respectively, of commercial
loans. Impaired loans comprised 1.1% and 0.4% of the mortgage portfolio as of
June 30, 2003 and December 31, 2002, respectively. The Company's average
historical impaired loan percentage during the period of 1997 through 2002 is
1.4%. This historical percentage is higher than the current 1.1% because the
historical percentage includes some remaining problem assets of the 1990's real
estate downturn, some of which are still held. Maritime Life managed $1.8
billion and $1.5 billion, respectively, of which $0.9 billion and $0.7 billion,
respectively, were government-insured by the Canada Mortgage and Housing
Corporation.


                                       83
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     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 June 30, 2003                     As of December 31, 2002
                                      ------------------------------------------  -----------------------------------------
                                        Amortized     Carrying      % of Total      Amortized    Carrying     % of Total
                                           Cost         Value     Carrying Value       Cost        Value    Carrying Value
                                      ------------------------------------------  -----------------------------------------
                                             (in millions)                              (in millions)
<S>                                     <C>          <C>             <C>           <C>          <C>             <C>
Agri-business.......................    $ 1,710.6    $ 1,707.7        60.4%        $ 1,528.0    $ 1,522.0        57.8%
Timber..............................      1,115.4      1,095.0        38.8           1,091.5      1,087.8        41.3
Production agriculture..............         22.7         22.6         0.8              25.3         25.2         0.9
                                      ------------------------------------------  -----------------------------------------
    Total                               $ 2,848.7    $ 2,825.3       100.0%        $ 2,644.8    $ 2,635.0       100.0%
                                      ==========================================  =========================================
</TABLE>

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

                        Mortgage Loans - By Property Type

<TABLE>
<CAPTION>
                                            As of June 30, 2003          As of December 31, 2002
                                      ---------------------------------------------------------------
                                          Carrying         % of          Carrying         % of
                                           Value           Total          Value           Total
                                      ---------------------------------------------------------------
                                       (in millions)                  (in millions)
<S>                                       <C>              <C>            <C>              <C>
Apartment..........................       $ 2,174.2         17.5%         $ 2,063.4         17.5%
Office Buildings...................         2,975.3         23.9            2,974.6         25.2
Retail.............................         2,102.5         16.9            1,986.1         16.8
Agricultural.......................         2,825.3         22.7            2,635.0         22.3
Industrial.........................         1,149.2          9.3            1,085.8          9.2
Hotels.............................           465.7          3.7              481.1          4.1
Multi-Family.......................            36.9          0.3               40.4          0.3
Mixed Use..........................           245.0          2.0              155.2          1.3
Other..............................           460.2          3.7              384.1          3.3
                                      ---------------------------------------------------------------
     Total.........................       $12,434.3        100.0%         $11,805.7        100.0%
                                      ===============================================================
</TABLE>

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

                        Mortgage Loans -- By ACLI Region

<TABLE>
<CAPTION>
                                            As of June 30, 2003                As of December 31, 2002
                                ----------------------------------------------------------------------------
                                   Number       Carrying         % of          Carrying          % of
                                  Of Loans       Value           Total           Value           Total
                                ----------------------------------------------------------------------------
                                             (in millions)                   (in millions)
<S>                                 <C>        <C>                <C>           <C>               <C>
East North Central...........         180       $ 1,136.1           9.1%        $ 1,102.0           9.3%
East South Central...........          68           423.1           3.4             430.9           3.6
Middle Atlantic..............         144         1,466.7          11.8           1,447.4          12.3
Mountain.....................         116           510.6           4.1             492.2           4.2
New England..................         118           771.3           6.2             795.2           6.7
Pacific......................         375         2,212.3          17.8           2,139.2          18.1
South Atlantic...............         294         2,430.9          19.6           2,230.2          18.9
West North Central...........          89           450.7           3.6             450.5           3.8
West South Central...........         176           914.5           7.4             954.3           8.1
Canada.......................         850         2,118.1          17.0           1,763.8          15.0
                                ----------------------------------------------------------------------------
     Total...................       2,410       $12,434.3         100.0%        $11,805.7         100.0%
                                ============================================================================
</TABLE>


                                       84
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

     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 June 30,                        As of December 31,
                                                               2003                                    2002
                                               -------------------------------------  ---------------------------------------
                                                   Carrying          % of Total            Carrying          % of Total
                                                     Value       Mortgage Loans (1)         Value        Mortgage Loans (1)
                                               -------------------------------------  ---------------------------------------
                                                 (in millions)                          (in millions)
<S>                                                    <C>              <C>                   <C>               <C>
Delinquent, not in foreclosure.............            $  2.5           --                    $  8.1            0.1%
Delinquent, in foreclosure.................              57.2           0.5                     44.4            0.4
Restructured...............................              59.5           0.5                     54.8            0.5
Loans foreclosed during period.............               --            --                      26.0            0.2
Other loans with valuation allowance (2)...              81.7           0.7                      8.9            0.1
                                               ------------------------------------------------------------------------------

   Total...................................            $200.9           1.7                   $142.2            1.3
                                               ------------------------------------------------------------------------------

Valuation allowance........................            $ 64.2                                 $ 61.8
                                               =================                       =================
</TABLE>

(1)   As of June 30, 2003 and December 31, 2002 the Company held mortgage loans
      with a carrying value of $12.4 billion and $11.8 billion, respectively.
(2)   Increase as of June, 30 2003 is from a U.S. based forest products company
      that filed for bankruptcy in June 2003.

     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 $64.2 million, or
0.5% of the carrying value of the portfolio as of June 30, 2003.


                                       85
<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                            Six Months Ended
                                               June 30, 2003        June 30, 2002         June 30, 2003          June 30, 2002
                                          ------------------------------------------------------------------------------------------
                                            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......................      5.99%    $ 1,059.2    6.75%   $   999.0   6.13%     $ 2,110.8    6.80%     $ 1,996.5
     Ending assets-excluding policy
         loans (1).....................                72,629.9             60,506.7              72,629.9               60,506.7
Policy loans
     Gross income......................      5.97%         31.5    6.21%        31.3   6.06%          63.7    6.09%          61.4
     Ending assets.....................                 2,110.1              2,022.1               2,110.1                2,022.1

         Total gross income............      5.99%    $ 1,090.7    6.73%   $ 1,030.3   6.13%     $ 2,174.5    6.77%     $ 2,057.9
         Less: investment expenses.....                   (41.4)               (51.2)                (95.9)                (108.9)
                                                      ----------           ----------            ----------             ----------
           Net investment income ......      5.76%    $ 1,049.3    6.40%   $   979.1   5.86%     $ 2,078.6    6.41%     $ 1,949.0
                                                      ==========           ==========            ==========             ==========
</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 June 30, 2003 Compared to Three Months Ended June 30, 2002

      Net investment income increased $70.2 million from the comparable prior
year period. The increase was primarily the result of asset growth and lower
investment expenses which were partially offset by the acquisition of lower
yielding assets. Overall, the yield for the three months ended June 30, 2003,
net of investment expenses, on the general account portfolio decreased to 5.76%
from 6.40% for the three months ended June 30, 2002. The lower portfolio yield
was driven primarily by lower yields on investment acquisitions. The continued
drop in short-term interest rates during the year, which affects the rate reset
on floating rate assets, also contributed to the declining yield. The change in
yields was impacted by the following drivers:

      o     As of June 30, 2003 and June 30, 2002, the Company's asset portfolio
            had approximately $13 billion and $12 billion of floating-rate
            exposure (primarily LIBOR). This exposure was created mostly through
            interest rate swaps designed to match our floating-rate liability
            portfolio. As of June 30, 2003, approximately 87% of this floating
            rate exposure, excluding the portion that is attributable to cash
            and short-term investments, was directly offset by exposure to
            floating-rate liabilities. Most of the remaining 13% 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.

      o     Certain of our tax-preferenced investments (lease residual
            management and affordable housing limited partnerships) dilute the
            Company's net portfolio yield on a pre-tax basis. For the three
            month period ended June 30, 2003, this dilutive effect was 9 basis
            points, compared to 12 basis points in the comparable prior year
            period. Adjusting for taxes, net income on these investments
            declined by $0.1 million for the three month period ended June 30,
            2003 compared to the three month period ended June 30, 2002.

      o     The inflow of new cash for the three month period ending June 30,
            2003 was invested at rates that were below the portfolio rate for
            the prior year period. In addition, maturing assets rolling over
            into new investments at rates less favorable than those available in
            2002 also contributed to the decline in yields.

      Offsetting the effects of these decreases to yields on investments was an
increase in invested assets and a reduction in investment expenses. In the three
month period ended June 30, 2003, average invested assets increased $11,655.0
million, or 19.0%, from the prior year period. In addition, investment expenses
were reduced $9.8 million in the three month period ended June 30, 2003 compared
to the prior year. Included are reductions in expenses associated with the sale
of the Company's home office real estate properties.


                                       86
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

      Net investment income increased $129.6 million from the comparable prior
year period. The increase was primarily the result of asset growth and lower
investment expenses which were partially offset by the acquisition of lower
yielding assets. Overall, the yield for the six months ended June 30, 2003, net
of investment expenses, on the general account portfolio decreased to 5.86% from
6.41% for the six months ended June 30, 2002. The lower portfolio yield was
driven primarily by lower yields on investment acquisitions. The continued drop
in short-term interest rates during the year, which affects the rate reset on
floating rate assets, also contributed to the declining yield. The change in
yields was impacted by the following drivers:

      o     As of June 30, 2003 and June 30, 2002, the Company's asset portfolio
            had approximately $13 billion and $12 billion of floating-rate
            exposure (primarily LIBOR). This exposure was created mostly through
            interest rate swaps designed to match our floating-rate liability
            portfolio. As of June 30, 2003, approximately 87% of this floating
            rate exposure, excluding the portion that is attributable to cash
            and short-term investments, was directly offset by exposure to
            floating-rate liabilities. Most of the remaining 13% 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.

      o     Certain of our tax-preferenced investments (lease residual
            management and affordable housing limited partnerships) dilute the
            Company's net portfolio yield on a pre-tax basis. For the six month
            period ended June 30, 2003, this dilutive effect was 8 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 $2.4 million for the six month period ended
            June 30, 2003 compared to the six month period ended June 30, 2002.

      o     The inflow of new cash for the six month period ending June 30, 2003
            was invested at rates that were below the portfolio rate for the
            prior year period. In addition, maturing assets rolling over into
            new investments at rates less favorable than those available in 2002
            also contributed to the decline in yields.

      Offsetting the effects of these decreases to yields on investments was an
increase in invested assets and a reduction in investment expenses. In the six
month period ended June 30, 2003, average invested assets increased $10,172.2
million, or 16.7%, from the prior year period. In addition, investment expenses
were reduced $13.0 million in the six month period ended June 30, 2003 compared
to the prior year. Included are reductions in corporate complex expenses and
expenses associated with the sale of the Company's home office real estate
properties.


                                       87
<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>
                                                                                                    Net Realized
                                                       Gross Gain    Gross Loss      Hedging         Investment
For the Three Months Ended June 30, 2003   Impairment  On Disposal  on Disposal    Adjustments  and Other Gain/(Loss)
                                          ----------------------------------------------------------------------------
                                                                         (in millions)
<S>                                           <C>          <C>          <C>           <C>                <C>
Fixed maturity securities (1) (2).......      $ (93.8)     $270.3       $(11.8)       $(80.2)            $ 84.5
Equity securities.......................         (7.9)       11.4         (3.2)           --                0.3
Mortgage loans on real estate...........           --        16.4         (3.8)        (12.0)               0.6
Real estate.............................           --         3.7         (2.9)           --                0.8
Other invested assets...................         (1.1)        0.5         (5.9)           --               (6.5)
Derivatives.............................           --          --           --          61.2               61.2
                                          ----------------------------------------------------------------------------
               Subtotal.................      $(102.8)     $302.3       $(27.6)       $(31.0)            $140.9
                                          ============================================================================

          Amortization adjustment for deferred policy acquisition costs......................             (21.7)
          Amounts credited to participating pension contractholders..........................              (5.8)
          Amounts credited to the policyholder dividend obligation...........................             (23.6)
                                                                                                ----------------------
               Total.........................................................................            $ 89.8
                                                                                                ======================
</TABLE>

(1)   Fixed Maturities gain on disposals includes $48.7 million of gains from
      previously impaired securities.
(2)   Fixed Maturities loss on disposals includes $5.7 million of credit related
      losses.

<TABLE>
<CAPTION>
                                                                                                    Net Realized
                                                       Gross Gain    Gross Loss      Hedging         Investment
For the Six Months Ended June 30, 2003    Impairment   on Disposal  on Disposal    Adjustments  and Other Gain/(Loss)
                                          ----------------------------------------------------------------------------
                                                                         (in millions)
<S>                                           <C>          <C>          <C>          <C>               <C>
Fixed maturity securities  (1) (2)......      $(315.7)     $328.8       $(44.6)      $(154.8)          $(186.3)
Equity securities.......................        (27.1)       34.6         (5.3)           --               2.2
Mortgage loans on real estate...........           --        20.8        (11.9)        (32.8)            (23.9)
Real estate.............................           --       240.1         (2.9)           --             237.2
Other invested assets...................        (10.3)        9.7         (1.4)           --              (2.0)
Derivatives.............................           --          --           --         127.1             127.1
                                          ----------------------------------------------------------------------------
               Subtotal.................      $(353.1)     $634.0       $(66.1)      $ (60.5)          $ 154.3
                                          ============================================================================

          Amortization adjustment for deferred policy acquisition costs......................            (15.2)
          Amounts charged to participating pension contractholders...........................              1.9
          Amounts charged to the policyholder dividend obligation............................             11.4
                                                                                                ----------------------
               Total.........................................................................          $ 152.4
                                                                                                ======================
</TABLE>

(1)   Fixed Maturities gain on disposals includes $49.3 million of gains from
      previously impaired securities.
(2)   Fixed Maturities loss on disposals includes $22.9 million of credit
      related losses.

      The hedging adjustments in the fixed maturities and mortgage loans asset
classes are non-cash adjustments representing the amortization or reversal of
prior fair value adjustments on assets in those classes that were or are
designated as hedged items in fair value hedge. When an asset or liability is so
designated, its cost basis is adjusted in response to movement in interest rate.
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 six month periods ended June 30, 2003, net realized
investment and other gains was $89.8 million and $152.4 million, respectively.
For the same time periods, gross losses on impairments and on disposal of
investments - including bonds, equities, mortgages and other invested assets was
$130.4 million and $419.2 million, respectively, excluding hedging adjustments.

       For the three and six month periods ended June 30, 2003, we realized
$270.3 million and $328.8 million of gains on disposal of fixed maturities
excluding hedging adjustments, respectively. These gains resulted from managing
our portfolios for


                                       88
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

tax optimization and ongoing portfolio positioning, as well as $5.7 million and
$22.9 million, respectively, of prepayments and approximately $48.7 million and
$49.3 million, respectively, from recoveries on sales of previously impaired
securities.

      For the three and six month periods ended June 30, 2003, we realized $11.8
million and $44.6 million, respectively, of losses upon disposal of bonds
excluding hedging adjustments. We generally intend to hold securities in
unrealized loss positions until they mature or recover. However, we do sell
bonds under certain circumstances such as when new information causes us to
change our assessment of whether a bond will recover or perform according to its
contractual terms, in response to external events (such as a merger or a
downgrade) that result in investment guideline violations (such as single issuer
or overall portfolio credit quality limits), in response to extreme catastrophic
events (such as September 11, 2001) that result in industry or market wide
disruption, or to take advantage of tender offers. Sales generate both gains and
losses.

      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, the Chief Investment Officer and the Corporate
Risk Officer who reports to the Chief Financial Officer. The analysis focuses on
each company's or project's ability to service its debts in a timely fashion and
the length of time the security has been trading below cost. The results of this
analysis are reviewed by both our external auditors and the Life Company's
Committee of Finance, a subcommittee of the Life Company's Board of Directors,
quarterly. This quarterly process includes a fresh assessment of the credit
quality of each investment in the entire fixed maturities portfolio.

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

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

      As disclosed in our discussion of the Results of Operations in this MD&A,
the Company recorded losses due to other than temporary impairments of fixed
maturity securities for three month period ended June 30, 2003 of $103.5 million
(including impairment losses of $93.8 million and $9.7 million of previously
recognized gains where the bond was part of a hedging relationship). The
following list shows the largest losses recognized during the quarter, the
related circumstances giving rise to the loss and a discussion of how those
circumstances impacted other material investments held. Unless noted otherwise,
all of the items shown are impairments of securities held at June 30, 2003,
including hedging adjustments.

Impairments and Losses on Disposals - Three Months Ended June 30, 2003

      o     $25.0 million on private fixed maturity securities (including an
            impairment loss of $19.8 million and $5.2 million in previously
            recognized gains where the bond was part of a hedging relationship)
            on a toll road where a new competing road has decreased the traffic
            on the toll road, as a result the project has been unable to service
            its debt. We have no other holdings affected by this situation.


                                       89
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      o     $13.6 million on private fixed maturity securities (including an
            impairment loss of $13.5 million and $0.1 million in previously
            recognized gain where the bond was part of a hedging relationship)
            on an Australian mining company. Due to weaker commodity prices,
            operational difficulties, and losses on currency transactions, the
            company is looking to restructure its debts or sell the company.
            While lower commodity prices affect a broad range of credits, the
            unique circumstances of this company are not present in our other
            investments.

      o     $11.0 million on public fixed maturity securities (including an
            impairment loss of $9.2 million and $1.8 million in previously
            recognized gains where the bond was part of a hedging relationship)
            on a utility brought into the bankruptcy of its parent that suffered
            from a significant amount of merchant energy exposure. Our bonds are
            secured by a pump storage facility. We have $42.6 million carrying
            value of bonds at the parent that were already impaired in a prior
            quarter.

      The $11.8 million of realized losses on sales of fixed maturity securities
for the three months ended June 30, 2003 almost entirely arose from the sale of
4 securities with $1.0 million or more of realized loss. Of these four
securities, the only significant credit loss was $4.8 million related to a power
provider with a large exposure to the merchant energy markets. As we became more
concerned that the banks would not renew their bank lines to this company, we
sold most of our position and impaired the remaining position during the quarter
and subsequently sold our remaining position in the security in early July. The
remaining sales were related to general portfolio management, including the sale
of below investment grade bonds to maintain our exposure below 10% of invested
assets on a statutory basis. The following are the largest drivers of losses on
sales over $1.0 million:

      o     $4.8 million credit loss on the sale of public bonds of a power
            provider referred to in the above paragraph

      o     $3.3 million on the sale of public bonds of a utility holding
            company where our position exceeded our single credit limits due to
            a downgrade of the company. This sale brought our holdings of this
            company in compliance within our limits.

      o     $2.6 million on US Treasuries that were sold as part of our ongoing
            asset/liability interest rate risk management.

      o     $1.1 million on the sale of public bonds of another power provider
            with a significant exposure to the merchant energy markets and our
            concern over their ability to renew their bank lines.

Impairments and Losses on Disposals - Six Months Ended June 30, 2003

      As disclosed in our discussion of the Results of Operations in this MD&A,
the Company recorded losses due to other than temporary impairments of fixed
maturity securities for the first six months of 2003 of $334.7 million
(including impairment losses of $315.7 million, and $19.0 million of previously
recognized gains where the bond was part of a hedging relationship). The
following list shows the largest losses recognized year to date, the related
circumstances giving rise to the loss and a discussion of how those
circumstances impacted other material investments held. Unless noted otherwise,
all of the items shown are impairments of securities held at June 30, 2003,
including hedging adjustments.

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

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

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



                                       90
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            planes and the senior tranche has an 18 month liquidity facility.
            Therefore, we do not anticipate a loss on the senior tranche.

      o     $25.0 million on private fixed maturity securities (including an
            impairment loss of $19.8 million and $5.2 million in previously
            recognized gains where the bond was part of a hedging relationship)
            on a toll road where a new competing road has decreased the traffic
            on the toll road and hence the project has been unable to service
            its debt. We have no other holdings affected by this situation.

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

      o     $13.6 million on private fixed maturity securities relating to an
            Australian mining company. Due to weaker commodity prices,
            operational difficulties, and losses on currency transactions, the
            company is looking to restructure its debts or sell the company.
            While lower commodity prices affect a broad range of credits, the
            unique circumstances of this company are not present in our other
            investments.

      o     $11.0 million on public fixed maturity securities (including an
            impairment loss of $9.2 million and $1.8 million in previously
            recognized gains where the bond was part of a hedging relationship)
            of a utility brought into the bankruptcy of its parent that suffered
            from a significant amount of merchant energy exposure. Our bonds are
            secured by a pump storage facility. We have $42.6 million carrying
            value of bonds at the parent that were already impaired in a prior
            quarter.

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

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

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

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

      o     $9.4 million (including an impairment loss of $7.5 million and $1.9
            million in previously recognized gains where the bonds were part of
            a hedging relationship) on public fixed maturity securities relating
            to an asset backed pool of franchise loans primarily focused in the
            gas/convenience store sector. This sector has been hit hard by
            rising delinquencies by franchisees and significant declines in
            operating margins. During the first quarter of 2003, delinquencies
            increased by almost 50% from previous reports thus we have impaired
            the security according to EITF


                                       91
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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            99-20. We have $151.0 million of other exposure to franchise loan
            ABS, all of which are senior tranches, and none of which currently
            require impairment under EITF 99-20.

      Of the $44.6 million of realized losses on sales of fixed maturity
securities for the six months ended June 30, 2003, $ 22.9 million was credit
related, $37.9 million arose from the sale of 8 securities with $1.0 million or
more of realized loss. The only significant realized losses year to date were
$16.7 million on the sale of the bonds of a major healthcare service provider
(late in the first quarter, the SEC announced that they had discovered massive
accounting fraud at that company and thus its bond and stock prices plummeted;
due to this significant event and the uncertainty over the future of the company
due to the ongoing SEC investigation, we sold our position), and $4.8 million on
the sale of bonds of a power provider with a large exposure to the merchant
energy markets. As we became more concerned that the banks would not renew their
bank lines to this company, we sold most of our position and impaired the
remaining position that was subsequently sold in early July. These were the only
sales of significance that we consider credit losses, i.e. sold at less than 80%
of amortized cost. All other sales were related to general portfolio management,
including the sale of a number of below investment grade bonds to maintain our
exposure below 10% of invested assets on a statutory basis. The following are
the losses on sales over $1.0 million:

      o     $16.7 million credit loss on the sale of public bonds of a major
            healthcare service provider as referred to in above paragraph

      o     $4.8 million credit loss on the sale of public bonds of a power
            provider referred to in the above paragraph.

      o     $4.6 million on US Treasuries that were sold as part of our ongoing
            asset/liability interest rate risk management.

      o     $3.3 million on the sale of public bonds of a utility holding
            company where our position exceeded our single credit limits due to
            a downgrade of the company. This sale brought our holdings of this
            company in compliance within our limits.

      o     $3.1 million on the sale of public bonds of an oil & gas company's
            bonds by one of subsidiary managers. This manager sold this position
            to reduce its below investment grade exposure.

      o     $2.2 million on the sale of public bonds of an oil & gas pipeline
            company in order to maintain our below investment grade holdings
            below 10% of invested assets on a Statutory basis.

      o     $2.1 million on the sale of public bonds of an unregulated power
            generating company. This bond was sold after a downgrade created a
            credit limit violation.

      o     $1.1 million on the sale of public bonds of another power provider
            with a significant exposure to the merchant energy markets and our
            concern over their ability to renew their bank lines.

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

      The Company recorded losses due to other than temporary impairments of CDO
equity and other invested assets of $1.1 million and $10.3 million for the three
and six month periods ended June 30, 2003, respectively. Equity in these CDOs
take the first loss risk in a pool of high yield debt and hence under perform in
a high yield default environment. These impairments were recognized using the
guidance in EITF 99-20. We have a total remaining carrying value of $44.1
million and $48.7 million of CDO equity as of June 30, 2003 and December 31,
2002, which is currently supported by expected cash flows.

      The Company also recognized losses on other than temporary impairments of
common stock of $7.9 million and $27.1 million for the three and six month
periods ended June 30, 2003, respectively, as the result of market values
falling below cost for more than six months.

      The Company recorded a gain of $0.6 million and a loss $23.9 million on
mortgage loans for the three and six month periods ended June 30, 2003 (of which
$12.0 million and $32.8 million, respectively were losses on hedging
adjustments). Included are losses of $8.0 million and $20.1 million respectively
for the three and six months ended June 30, 2003, associated with losses on
agriculture mortgages.

       There were also gains of $11.4 million and $34.6 million on the sale of
equity securities as part of our overall investment strategy of using equity
gains to minimize credit losses in the long term, gains of $0.5 million and $9.7
million from the sale of other invested assets, and gains of $3.7 million and
$240.1 million resulting from the sale of real estate for the three and six
month periods ended June 30, 2003, respectively. Net derivative activity
resulted in a gain of $61.2 million for the three months ended June 30, 2003 and
$127.1 million for the six months ended June 30, 2003, resulting from a slightly
larger impact


                                       92
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

from interest rate changes on the Company's fair value of hedged and non-hedged
items in comparison to the changes in fair value of its derivatives.

      For the three and six month period ended June 30, 2002, net realized
investment and other losses were $139.0 million and $224.7 million,
respectively. Gross losses on impairments and on disposal of investments -
including bonds, equities, mortgages, real estate, and other invested assets
were $278.7 million and $392.9 million, respectively, excluding hedging
adjustments.

      The Company recorded losses due to other than temporary impairments of
fixed maturities of $194.9 million and $280.0 million for the three and six
months periods ended June 30, 2002, excluding hedging adjustments. The primary
other than temporary impairments on fixed maturities for the six months ended
June 30, 2002 were $45.5 million on securities issued by the holding company of
a large domestic power producer that was downgraded to below investment grade
status in July 2002 due to liquidity concerns, $18.4 million on securities of an
Australian power project that failed to produce benefits expected from the
deregulation of that country's power industry, $22.1 million on structured
financings due as a result of ongoing negotiations with a borrower to
restructure debt, $15.0 million on a redeemable preferred stock of a large
domestic farm cooperative due to the cyclical nature of the business and a heavy
debt load, $19.2 million on redeemable preferred stock of a technology based
manufacturer of engineering products with a tight liquidity position, $14.4
million on a large energy company that filed for bankruptcy in late 2001, and
$10.1 million on a water supply and distribution system in Argentina. Writedowns
of CBO/CDO fixed maturity investments were $37.2 million recorded in the first
quarter of 2002.


                                       93
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Liquidity and Capital Resources

      Liquidity describes the ability of a company to generate sufficient cash
flows to meet the immediate needs to facilitate business operations. John
Hancock Financial Services, Inc. (the Company) is an insurance holding company.
The assets of the Company consist primarily of the outstanding capital stock of
the Life Company, John Hancock Canadian Holdings Limited (Maritime Life's
parent) and investments in other international subsidiaries. The Company's cash
flow primarily consists of dividends from its operating subsidiaries and
proceeds from the Company's debt offerings offset by expenses, shareholder
dividends and stock repurchases. As a holding company, the Company's ability to
meet its cash requirements, including, but not limited to, paying interest on
any debt, paying expenses related to its affairs, paying dividends on its common
stock and repurchasing the Company's common stock pursuant to the Board of
Director's approved plan, substantially depends upon dividends from its
operating subsidiaries.

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

      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 192% as of December 31, 2002.

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

      The liquidity of our insurance operations is also related to the overall
quality of our investments. As of June 30, 2003, $47,837.0 million, or 89.2% of
the fixed maturity securities held by us and rated by Standard & Poor's Ratings
Services, a division of the McGraw-Hill Companies, Inc. (S&P) or the National
Association of Insurance Commissioners were rated investment grade (BBB- or
higher by S&P, Baa3 or higher for Moody's, or 1 or 2 by the National Association
of Insurance Commissioners). The remaining $5,791.4 million, or 10.8% of fixed
maturity investments, were rated non-investment grade. For additional discussion
of our investment portfolio see the General Account Investments section of this
Management's Discussion and Analysis of Financial Condition and Results of
Segment Operations.

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

      Net cash provided by operating activities was $1,333.5 million and
$1,299.6 million for the six months ended June 30, 2003 and 2002, respectively.
The $33.9 million increase in cash provided by operating activities for the
first six months in 2003 compared to the same period in 2002 resulted from
increases in policy liabilities and accruals and investment income receipts,
offset by decrease to premium and fee receipts and increased expenses, taxes and
other assets net of other liabilities.


                                       94
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Net cash used in investing activities was $2,797.0 million and $3,825.4
million for the six months ended June 30, 2003 and 2002, respectively. The
$1,028.4 million decrease in cash used in the first six months of 2003 as
compared to the same period in 2002 resulted from a $887.6 million cash inflow
from the sale of Home Office properties in the first quarter of 2003 and a
$394.8 million reduction in net acquisitions of fixed maturities offset somewhat
by a $147.0 million increase in net acquisitions of short term investments and
other invested assets during the six months ended June 30, 2003 as compared to
the same period in the prior year.

       Net cash provided by financing activities was $1,470.5 million and
$2,053.9 million for the six months ended June 30, 2003 and 2002, respectively.
The $583.4 million decrease in the first six months of 2003 as compared to the
same period in 2002 resulted from a $637.4 million decrease in deposits and a
$505.4 million increase in cash payments made on withdrawals of universal life
insurance and investment-type contracts offset somewhat by $389.9 million in
funds from the Consumer Notes program initiated in the second half of 2002, and
a $235.0 million decline in treasury stock acquired due to the suspension of
activity under the stock repurchase program. Deposits on universal life
insurance and investment-type contracts exceeded withdrawals by $1,198.9 million
and $2,341.7 million for the six months ended June 30, 2003 and June 30, 2002,
respectively.

      On October 26, 2000, the Company announced that its Board of Directors
authorized a stock repurchase program, with no termination date, under which the
Company was authorized to purchase up to $500 million of its outstanding common
stock. On August 6, 2001, the Company's Board of Directors authorized a $500
million increase to the stock repurchase program. On June 21, 2002, the
Company's Board of Directors authorized a second increase of $500 million to the
stock repurchase program, bringing the total amount authorized to be used to
repurchase Company stock to $1.5 billion. Under the stock repurchase program,
purchases have been and will be made from time to time, depending on market
conditions, business opportunities and other factors, in the open market or
through privately negotiated transactions. Through June 30, 2003, the Company
has repurchased 29.9 million shares with a total cost of $1,068.8 million, of
which 0.4 million shares were repurchased in 2003 at a cost of $11.6 million.
The 2003 repurchase activity consisted primarily of the acquisition of certain
restricted stock from key executives of the Company. The proceeds from some of
these purchases were used by the executives to repay loans under a discontinued
stock ownership and loan program. The outstanding loans under that program,
which were grandfathered under the Sarbanes-Oxley Act of 2002, have been repaid
in full at the request of the Company's Board of Directors. At June 30, 2003,
the Company was not actively repurchasing its common stock but will continue to
assess when it might resume repurchases of its common stock under the stock
repurchase program.

      Cash flow requirements are also supported by a committed line of credit of
$1.0 billion, through a syndication of banks including Fleet National Bank,
JPMorgan Chase, Citicorp USA, Inc., The Bank of New York, The Bank of Nova
Scotia, Fleet Securities, Inc. and JPMorgan Securities, Inc., and an effective
shelf registration statement which initially provided for the issuance, from
time to time, of up to $1 billion of the Company's debt and equity securities.
The line of credit agreement provides for two facilities: one for $500 million
pursuant to a 364-day commitment (renewed effective July 25, 2003) and a second
multi-year facility for $500 million (renewable in 2005). The line of credit is
available for general corporate purposes. The line of credit agreement 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 operating company such that a downgrade would result
in higher fees. 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 June 30, 2003, we had $1,494.3 million of principal amounts of debt
outstanding consisting of $498.9 million of medium-term bonds, $447.5 million of
surplus notes, $293.1 million of Canadian debt, $64.9 million of other notes
payable (excluding $131.6 million in non-recourse debt for Signature Fruit and a
Signature Funding CDO) and $189.9 million in commercial paper. Also not included
here is the $137.9 million SFAS 133 fair value adjustment to interest rate swaps
held for the Surplus Notes. During the six months ended June 30, 2003, the
Company issued in aggregate $1,165.0 million in commercial paper, of which
$190.0 million was outstanding at June 30, 2003. In addition, the Company has
outstanding $680.1 million of consumer notes which are redeemable upon the death
of the holder, subject to an annual overall program redemption limitation of 1%
of the aggregate securities outstanding, or an individual redemption limitation
of $200,000 of aggregate principal, and mature at a variety of specific dates in
the future covenants in this program include, among others, limitations on
liens.


                                       95
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      $275 million 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 JHFS, or the
Life Company, as the case may be, rating levels fall below designated rating
levels. Currently, JHFS and the Life Company's ratings are several levels away
from a triggering event 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 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 are reported annually and
monitored continuously. The Company's risk-based capital ratios of all our
insurance subsidiaries as of year end were significantly above the ranges that
would require regulatory action.

      The following table summarizes the Company's information about contractual
obligations and other commercial commitments by due date and expiration date as
of June 30, 2003. Contractual obligations of the Company are those obligations
fixed by agreement as to dollar amount and date of payment. Other commercial
commitments are those commitments entered into by the Company with known
expiration dates. These obligations are inputs into the Company's asset
liability management system described elsewhere in this document.

                   Contractual Obligations as of June 30, 2003

<TABLE>
<CAPTION>
                                                                             Payments due by period
                                                     -----------------------------------------------------------------------
                                                                    Less than 1
                                                         Total          year       1-3 years     4-5 years   After 5 years
                                                     -----------------------------------------------------------------------
                                                                                 (in millions)
<S>                                                    <C>           <C>           <C>           <C>           <C>
Debt...............................................    $ 1,435.9     $   54.1      $   45.7      $   26.3      $ 1,309.8
Consumer notes.....................................      1,250.3         16.1          99.4         152.3          982.5
GIC's..............................................      7,004.3        943.4       2,971.0       1,390.3        1,699.6
Funding agreements.................................     14,072.5      1,060.6       4,864.1       3,516.8        4,631.0
Institutional structured settlements...............      1,671.9         17.5          36.7          38.7        1,579.0
Annuity certain contracts..........................      1,638.4        295.4         418.5         365.8          558.7
Investment commitments.............................      2,188.3      2,185.7           2.6            --             --
Other insurance liabilities........................         66.8         44.6            --           0.5           21.7
Operating lease obligations........................        952.9         57.0         200.7         181.5          513.7
Other long--term obligations........................          --           --            --            --             --
                                                     -----------------------------------------------------------------------
     Total contractual cash obligations............    $30,281.3     $4,674.4      $8,638.7      $5,672.2      $11,296.0
                                                     =======================================================================
</TABLE>

                Other Commercial Commitments as of June 30, 2003

<TABLE>
<CAPTION>
                                                                                Payments due by
                                                     -----------------------------------------------------------------------
                                                     Total Amounts  Less than 1
                                                       Committed        year       1-3 years     4-5 years    Over 5 years
                                                     -----------------------------------------------------------------------
                                                                                 (in millions)
<S>                                                       <C>          <C>           <C>           <C>              <C>
Lines of credit....................................          --           --            --            --             --
Standby letters of credit..........................       $ 0.1           --         $ 0.1            --             --
Guarantees.........................................         2.9        $ 0.6           1.5         $ 0.8             --
Standby repurchase obligations.....................          --           --            --            --             --
Other commercial commitments.......................          --           --            --            --             --
Other commitments..................................         0.7          0.7            --            --             --
                                                     -----------------------------------------------------------------------
     Total contractual cash obligations............       $ 3.7        $ 1.3         $ 1.6         $ 0.8             --
                                                     =======================================================================
</TABLE>

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

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


                                       96
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Forward-Looking Statements

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

      These forward-looking statements are subject to risks and uncertainties
including, but not limited to, the risks that (1) a significant downgrade in our
ratings for claims-paying ability and financial strength may lead to policy and
contract withdrawals and materially harm our ability to market our products; (2)
new laws and regulations, including the recently enacted Sarbanes-Oxley Act of
2002, or changes to existing laws or regulations, (including, but not limited
to, those relating to the Federal Estate Tax Laws and the proposed Bush
Administration tax and savings initiatives), and the applications and
interpretations given to these laws and regulations, may adversely affect the
Company's sales of insurance and investment advisory products; (3) as a holding
company, we depend on dividends from our subsidiaries; Massachusetts insurance
law, and similar Canadian laws, may restrict the ability of John Hancock Life
Insurance Company and The Maritime Life Assurance Company to pay dividends
within the consolidated group; (4) we face increasing competition in our retail
businesses from mutual fund companies, banks and investment management firms as
well as from other insurance companies; (5) declines or increased volatility in
the securities markets, and other economic factors, may adversely affect our
business, particularly our variable life insurance, mutual fund, variable
annuity and investment business; (6) due to acts of terrorism or other
hostilities, there could be business disruption, economic contraction, increased
mortality, morbidity and liability risks, generally, or investment losses that
could adversely affect our business; (7) our life insurance sales are highly
dependent on a third party distribution relationship; (8) customers may not be
responsive to new or existing products or distribution channels; (9) interest
rate volatility may adversely affect our profitability; (10) our net income and
revenues will suffer if customers surrender annuities and variable and universal
life insurance policies or redeem shares of our open-end mutual funds; (11) the
independent directors of our variable series trusts and of our mutual funds
could reduce the compensation paid to us or could terminate our contracts to
manage the funds; (12) under our Plan of Reorganization, we were required to
establish the closed block, a special arrangement for the benefit of a group of
our policyholders. We may have to fund deficiencies in our closed block, and any
overfunding of the closed block will benefit only the holders of policies
included in the closed block, not our shareholders; (13) there are a number of
provisions in our Restated Certificate of Incorporation and by-laws, laws
applicable to us, agreements that we have entered into with our senior
management, and our shareholder rights plan, that will prevent or discourage
takeovers and business combinations that our shareholders might otherwise
consider to be in their best interests; (14) we will face losses if the claims
on our insurance products, or reductions in rates of mortality on our annuity
products, are greater than we projected; (15) we face investment and credit
losses relating to our investment portfolio, including, without limitation, the
risks associated with the evaluation and determination by our investment
professionals of the fair value of investments as well as whether or not any
investments have been impaired on an other than temporary basis; (16) we may
experience volatility in net income due to changes in standards for accounting
for derivatives, consolidations and other changes or from new interpretations of
accounting standards that must be applied retroactively; (17) our United States
insurance companies are subject to risk-based capital requirements and possible
guaranty fund assessments; (18) the National Association of Insurance
Commissioners' codification of statutory accounting practices will adversely
affect the statutory surplus of John Hancock Life Insurance Company; (19) future
interpretations of NAIC Actuarial Guidelines may require us to establish
additional statutory reserves for guaranteed minimum death benefits under
variable annuity contracts; (20) we may be unable to retain personnel who are
key to our business; (21) we may incur losses from assumed reinsurance business
in respect of personal accident insurance and the occupational accident
component of workers compensation insurance; (22) litigation and regulatory
proceedings may result in financial losses, harm our reputation and divert
management resources; (23) we face unforeseen liabilities arising from an
acquisition and dispositions of businesses, and (24) we may incur multiple life
insurance claims as a result of a catastrophic event which, because of higher
deductibles and lower limits under our reinsurance arrangements, could adversely
affect the Company's future net income and financial position.

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


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<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Capital Markets Risk Management

      The Company maintains a disciplined, comprehensive approach to managing
capital market risks inherent in its business operations.

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

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

Credit Risk

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

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

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

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


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

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

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

      As of June 30, 2003 and December 31, 2002, the Company's fixed maturity
portfolio, excluding redeemable preferreds, was comprised of 89.2% and 88.8%
investment grade securities and 10.8% and 11.2% below-investment-grade
securities, respectively. These percentages are consistent with recent
experience and indicative of the Company's long-standing investment philosophy
of pursuing moderate amounts of credit risk in return for higher expected
returns. We believe that credit risk can be successfully managed given our
proprietary credit evaluation models and experienced personnel.

Interest Rate Risk

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

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

      We project asset, liability and derivatives cash flows on guaranteed rate
products and then discount them against credit-specific interest rate curves to
attain fair values. Duration is then calculated by re-pricing these cash flows
against a modified or "shocked" interest rate curve and evaluating the change in
fair value versus the base case. As of June 30, 2003 and December 31, 2002, the
fair value of fixed maturity securities and mortgage loans supporting duration
managed liabilities was approximately $38,785.2 million and $36,143.0 million,
respectively. Based on the information and assumptions we use in our duration
calculations in effect as of June 30, 2003, we estimate that a 100 basis point
immediate, parallel increase in interest rates ("rate shock") would have no
effect on the net fair value, or surplus, of our duration managed segments
(including derivatives), based on our targeted mismatch of zero, but could be
-/+ $19.4 million based on our operational tolerance of 18 days.

      The risk management method for non-guaranteed rate products, such as whole
life insurance or single premium deferred annuities, is less formulaic, but more
complex, due to the less predictable nature of the liability cash flows. For
these products, we manage interest rate risk based on scenario-based portfolio
modeling that seeks to identify the most appropriate investment strategy given
probable policyholder behavior and liability crediting needs under a wide range
of interest rate environments. As of June 30, 2003 and December 31, 2002, the
fair value of fixed maturity securities and mortgage loans supporting
liabilities managed under this modeling was approximately $36,781.8 million and
$32,982.6 million, respectively. A rate shock (as defined above) as of June 30,
2003 would decrease the fair value of these assets by $1,481.7 million, which we
estimate would be offset by a comparable change in the fair value of the
associated liabilities and derivatives, thus minimizing the impact on surplus.


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<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Derivative instruments such as futures contracts and interest rate swaps
are used to hedge interest rate risk in our asset and liability portfolios, in
support of our duration management programs. Under both interest rate risk
management methods described above, we perform comprehensive quarterly
assessments of interest rate risk and compare those results to our investment
guidelines. Any deviations outside of operational tolerances are immediately
correct using derivative instruments. Additionally, we monitor duration mismatch
on an effective "real time" basis and apply derivatives as needed to eliminate
deviations from our target duration mismatches.

Derivative Instruments

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

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

      The Company's Investment Compliance Unit monitors all derivatives activity
for consistency with internal policies and guidelines. All derivatives trading
activity is reported monthly to the Company's Committee of Finance for review,
with a comprehensive governance report provided jointly each quarter by the
Company's Derivatives Supervisory Officer and Chief Investment Compliance
Officer. The table below reflects the Company's derivative positions hedging
interest rate risk as of June 30, 2003. The notional amounts in the table
represent the basis on which pay or receive amounts are calculated and are not
reflective of credit risk. These exposures represent only a point in time and
will be subject to change as a result of ongoing portfolio and risk management
activities.

<TABLE>
<CAPTION>
                                                                   As of June 30, 2003
                                     ---------------------------------------------------------------------------------
                                                                                        Fair Value
                                                                      ------------------------------------------------
                                                         Weighted
                                         Notional      Average Term   -100 Basis Point     As of     +100 Basis Point
                                          Amount          (Years)        Change (2)       6/30/03       Change (2)
                                     ---------------------------------------------------------------------------------
                                                     (in millions, except for weighted average term)
<S>                                     <C>                  <C>          <C>               <C>            <C>
Interest rate swaps...............      $  24,378.1          9.5          $(1,017.6)        $(874.4)       $(711.3)
CMT swaps.........................             53.4          0.9                1.1             1.0            1.0
Futures contracts (1).............            223.2          7.1               (7.2)            0.5            8.8
Interest rate caps................          1,069.2          5.4               19.1            24.1           34.0
Interest rate floors..............          4,593.0          6.9              263.1           136.7           67.0
Swaptions.........................             30.0         21.9               (9.0)           (4.4)          (1.6)
                                     -----------------                ------------------------------------------------
   Totals.........................      $  30,346.9          9.0          $  (750.5)        $(716.5)       $(602.1)
                                     =================                ================================================
</TABLE>

(1)   Represents the notional value of open contracts as of June 30, 2002.
(2)   The selection of a 100 basis point immediate change in interest rates
      should not be construed as a prediction by us of future market events but
      rather as an illustration of the potential impact of such an event.

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


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Equity Risk

      Equity risk is the possibility that we will incur economic losses due to
adverse changes in a particular common stock or warrant that we hold in our
portfolio. In order to reduce our exposure to market fluctuations on some of our
common stock portfolio, we use equity collar agreements. These equity collar
agreements limit the market value fluctuations on their underlying equity
securities. Our equity collars are comprised of an equal number of purchased put
options and written call options, each with strike rates equidistant from the
stock price at the time the contract is established. As of June 30, 2003 and
December 31, 2002, the fair value of our equity securities portfolio was $172.6
million and $152.9 million. The fair value of our equity collar agreements as of
June 30, 2003 and December 31, 2002 was $3.6 million and $12.6 million. A
hypothetical 15% decline in the June 30, 2003 value of the equity securities
would result in an unrealized loss of approximately $20.0 million. The selection
of a 15% immediate change in the value of equity securities should not be
construed as a prediction by us of future market events but rather as an
illustration of the potential impact of such an event. The fair value of any
unhedged common stock holdings will rise or fall with equity market and
company-specific trends. In certain cases the Company classifies its equity
holdings as trading securities. Gains and losses, both realized and unrealized,
on equity securities classified as trading, are part of investment returns
related to equity indexed universal life insurance policies sold at Maritime
Life and are included in benefits to policyholders. These holdings are
marked-to-market through the income statement, creating investment income
volatility that is effectively neutralized by changes in corresponding liability
reserves.

Foreign Currency Risk

      Foreign currency risk is the possibility that we will incur economic
losses due to adverse changes in foreign currency exchange rates. This risk
arises in part from our international operations, our Maritime Life Segment and
the issuance of certain foreign currency-denominated funding agreements sold to
non-qualified institutional investors in the international market. We don not
hedge the exposure form our international operations or our Maritime Life
Segment. We apply currency swap agreements to hedge the exchange risk inherent
in our funding agreements denominated in foreign currencies. We also have
exposure that arises from owning fixed maturity securities that are denominated
in foreign currencies. We use currency swap agreements to hedge the foreign
currency risk of these securities (both interest and principal payments). At
June 30, 2003 and December 31, 2002, the fair value of our foreign currency
denominated fixed maturity securities was approximately $976.8 million and
$799.3 million. The fair value of our currency swap agreements at June 30, 2003
and December 31, 2002 supporting foreign denominated bonds was $(183.8) million
and $(24.5) million.

      We estimate that as of June 30, 2003, a hypothetical 10% immediate change
in each of the foreign currency exchange rates to which we are exposed,
including the currency swap agreements, would result in no material change to
the net fair value of our foreign currency-denominated instruments identified
above. The selection of a 10% immediate change in all currency exchange rates
should not be construed as a prediction by us of future market events but rather
as an illustration of the potential impact of such an event. Our largest
individual currency exposure is to the Canadian dollar.

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

Effects of Inflation

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


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<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 4. CONTROLS and PROCEDURES

      Our Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation as of the end of the period covered by this report,
that our disclosure controls and procedures are effective for gathering,
analyzing and disclosing the information we are required to disclose in our
reports filed under the Securities Exchange Act of 1934.

PART II - OTHER INFORMATION

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

      The matters set forth below were acted on at the annual meeting of the
stockholders of the Company held on May 12, 2003. The Company solicited proxies
for the annual meeting pursuant to the Securities and Exchange Commission's
Regulation 14; there was no solicitation in opposition to board of director's
nominees for director as listed in the Company's proxy statement.

      Robert E. Fast, Michael C. Hawley, R. Robert Popeo and Robert J. Tarr, Jr.
were each re-elected as directors to three-year terms ending on the date of the
annual meeting of stockholders in 2006 and when their successors are duly
elected and qualified.

      143,605,683 shares were voted in favor of Mr. Fast's election and
33,557,472 shares were withheld. 157,099,040 shares were voted in favor of Mr.
Hawley's election and 20,064,115 shares were withheld. 173,257,350 shares were
voted in favor of Mr. Popeo's election and 3,905,805 shares were withheld.
171,451,438 shares were voted in favor of Mr. Tarr's election and 5,711,717
shares were withheld.

ITEM 6. EXHIBITS and REPORTS on FORM 8-K

a)    Exhibits

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

10.1      Third Amendment dated as of July 25, 2003 to the $1,000,000,000 Credit
          Agreement dated as of August 3, 2000, as amended, among John Hancock
          Financial Services, Inc., John Hancock Life Insurance Company, The
          Banks listed therein, Fleet National Bank, as Co-Administrative Agent,
          JPMorgan Chase Bank, as Co-Administrative Agent, Citicorp USA, Inc.,
          as Syndication Agent, The Bank of New York, as Documentation Agent
          (364-Day Revolver) and Wachovia Bank, National Association as
          Documentation Agent (364-Day Revolver), Fleet Securities, Inc., and
          J.P. Morgan Securities, Inc., as Joint Bookrunners and Joint Lead
          Arrangers

10.2      Employment Continuation Agreement between John Hancock Life Insurance
          Company, John Hancock Financial Services, Inc. and James M. Benson
          dated April 1, 2003. +

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

-------
+         Management contract or compensatory plan or arrangement.


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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

b)    Reports on Form 8-K.

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

      On April 30, 2003, the Company filed a Current Report on Form 8-K dated
April 30, 2003 reporting under Item 5 thereof that beginning in 2003 the
operations of The Maritime Life Assurance Company ("Maritime Life"), its
Canadian insurance operations, would be reported as a separate operating
segment.

      On May 2, 2003, the Company filed a Current Report on Form 8-K, dated May
1, 2003 reporting under Item 5 and Item 7 thereof the Company's operating and
financial results for the first quarter of 2003.


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<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

SIGNATURES

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


                                           JOHN HANCOCK FINANCIAL SERVICES, INC.

Date: August 7, 2003                       By: /s/ THOMAS E. MOLONEY
                                               ---------------------
                                               Thomas E. Moloney
                                               Senior Executive Vice
                                               President and Chief Financial
                                               Officer


                                      104