<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                 _____________

                                   FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 5(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarter Ended September 30, 1996     Commission File No. 33-62895
-------------------------------------------------------------------------

                  John Hancock Variable Life Insurance Company
                  --------------------------------------------
             (Exact name of registrant as specified in its charter)

          Massachusetts                               04-2664016
-------------------------------------------------------------------------
 (State or other jurisdiction of                    I.R.S. Employer
 incorporation or organization)                     Identification No.)
 
 200 Clarendon Street, Boston, Massachusetts             02117
-------------------------------------------------------------------------
 (Address of principal executive offices               (Zip Code)
 
 Registrant's telephone number, including area code    (617)572-9196
                                                       -------------
                                     None
------------------------------------------------------------------------------
    (Former name, former address, and former fiscal year if changed since last
report.)

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) been subject to such filing requirements
for the past 90 days.

                              Yes X    No 
                                  -       -  

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE> 
<CAPTION> 

                                      Shares Outstanding
              Class                   at November 15, 1996
              -----                   --------------------
<S>                                   <C> 
     common stock,                           50,000
     $50 par value
</TABLE> 
<PAGE>
 
                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
                  --------------------------------------------
                                   FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1996

                               TABLE OF CONTENTS

                                                                      Page
                                                                      ----

PART I.   FINANCIAL INFORMATION

Item 1.   Unaudited Financial Statements
<TABLE>
<CAPTION>
<S>                                             <C> 
          Statements of Financial Position as of
          Septemeber 30, 1996, and
          December 31, 1995                             . . . . . . . .  2
 
          Statements of Operations and
          Unassigned Deficit for the
          Three Months and Nine Months Ended
          September 30, 1996, and 1995                  . . . . . . . .  3
 
          Statements of Cash Flows
          for the Nine Months Ended
          Septmeber 30, 1996 and 1995                   . . . . . . . .  4
 
          Statements of Stockholder's Equity
          for the Nine Months Ended
          September 30, 1996, and 1995                  . . . . . . . .  5
 
          Condensed Notes to Financial
          Statements                                    . . . . . . . .  6
 
Item 2.   Management's Discussion
          and Analysis                                  . . . . . . . .  7
 

PART II   OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K              . . . . . . . . 10

</TABLE>
SIGNATURES

        
<PAGE>
 
                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                        STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
 
 
                                                       (Unaudited)
                                                September 30   December 31
                                                    1996           1995
                                               ----------------------------
<S>                                            <C>            <C>
                                                      (In millions)
 
ASSETS
       Bonds                                      $  762.1      $  552.8
       Preferred stocks                                4.8           5.0
       Common stocks                                   1.3           1.7
       Investment in affiliates                       70.1          65.3
       Mortgage loans on real estate                 152.7         146.7
       Real estate                                    43.4          36.4
       Policy loans                                   75.5          61.8
       Cash and temporary cash investments             0.0          76.6
       Premiums due and deferred                      35.5          39.6
       Investment income due and accrued              21.9          18.6
       Other general account assets                   26.4          20.8
       Assets held in separate accounts            2,982.9       2,421.0
                                                   ---------------------
                     TOTAL ASSETS                 $4,176.6      $3,446.3
                                                   ===================== 
 
OBLIGATIONS AND STOCKHOLDER'S EQUITY
 
OBLIGATIONS
       Policy reserves                            $  802.2      $  671.1
       Federal income and other taxes payable         17.8          14.2
       Other accrued expenses                         93.7          79.9
       Asset valuation reserve                        15.7          15.4
       Obligations related to separate accounts    2,978.6       2,417.0
                                                   ---------------------
                     TOTAL OBLIGATIONS             3,908.0       3,197.6
 
STOCKHOLDER'S EQUITY
       Common Stock, $50 par value; authorized
        50,000 shares; issued and outstanding
        50,000 shares                                  2.5           2.5
       Paid-in capital                               377.5         377.5
       Unassigned deficit                           (111.4)       (131.3)
                                                   ---------------------
 
 
                     TOTAL STOCKHOLDER'S EQUITY      268.6         248.7
                                                   ---------------------     
           
     TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY    $4,176.6      $3,446.3
                                                   ====================== 
 
</TABLE>



See condensed notes to the financial statements (unaudited).

<PAGE>
 
                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
 
 
                                                                  (Unaudited)
                                                    Three months ended    Nine months ended
                                                      September 30          September 30
                                                -------------------------------------------
                                                    1996       1995      1996       1995
                                                 ----------  --------  ---------  ---------
<S>                                            <C>         <C>       <C>        <C>
                                                               (In millions)
 
INCOME
  Premiums                                         $ 198.1   $ 136.1    $ 683.5    $ 378.9
  Net investment income                               20.7      15.9       56.6       47.1
  Other, net                                          26.8      14.1      100.8       57.7
                                                  ----------------------------------------
                                                     245.6     166.1      840.9      483.7
 
BENEFITS AND EXPENSES
  Payments to policyholders and beneficiaries         57.3      50.0      175.4      161.3
  Additions to reserves to provide for future
    payments to policyholders and beneficiaries      141.2      64.5      483.3      165.3
  Expenses of providing service to 
    policyholders and obtaining new insurance         32.4      31.6      127.2      113.9
  State and miscellaneous taxes                        2.9       2.7       11.0        8.8
                                                  ----------------------------------------
                                                     233.8     148.8      796.9      449.3
                                                  ----------------------------------------
 
                   GAIN FROM OPERATIONS BEFORE
                  FEDERAL INCOME TAXES AND NET
               REALIZED CAPITAL GAINS (LOSSES)        11.8      17.3       44.0       34.4
 
Federal income taxes                                   8.0       6.9       24.6       19.9
                                                  ----------------------------------------
                         GAIN FROM OPERATIONS
                  BEFORE NET REALIZED CAPITAL
                               GAINS (LOSSES)         3.8      10.4       19.4       14.5
 
Net realized capital gains (losses)                    0.8       0.1       (0.2)      (0.6)
                                                  ----------------------------------------
                                     NET GAIN          4.6      10.5       19.2       13.9
 
Unassigned deficit at beginning of period           (114.8)   (157.7)    (131.3)    (162.1)
 
Net unrealized capital gains (losses)
 and other adjustments                                 0.8       1.1        2.0        2.0
 
Change in separate account surplus                     0.1       0.2        0.4        0.5
Other reserves and adjustments                        (2.1)      0.3       (1.7)       0.1
                                                  ----------------------------------------
 
          UNASSIGNED DEFICIT AT END OF PERIOD      $(111.4)  $(145.6)   $(111.4)   $(145.6)
                                                  ========================================
 
</TABLE>


See condensed notes to the financial statements (unaudited).

<PAGE>
 
                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
 
 
                                                        (Unaudited)
                                                     Nine months ended
                                                       September 30
                                                 ---------------------
                                                    1996       1995
                                                 ---------  ---------
<S>                                            <C>        <C>
                                                   (In millions)
 
Cash flows from operating activities:
 Insurance premiums                              $ 688.7    $ 383.4
 Net investment income                              55.4       46.1
 Benefits to policyholders and beneficiaries      (162.1)    (150.3)
 Dividends paid to policyholders                   (11.6)      (9.5)
 Insurance expenses and taxes                     (137.2)    (122.5)
 Net transfers to separate accounts               (369.3)    (149.4)
 Other, net                                         62.8       28.4
                                                ---------------------
   NET CASH PROVIDED FROM OPERATIONS               126.7       26.2
                                                ---------------------
 
Cash flows used in investing activities:
 Bond purchases                                   (420.3)     (53.3)
 Bond sales                                        168.8       16.7
 Bond maturities and scheduled redemptions          20.8       22.9
 Bond prepayments                                   18.7        5.3
 Stock purchases                                    (1.5)      (1.7)
 Proceeds from stock sales                           0.3        0.7
 Real estate purchases                             ( 6.5)     (15.5)
 Real estate sales                                   0.2        0.0
 Other invested assets purchases                    (0.2)       0.0
 Proceeds from the sale of other invested assets     1.0        0.0
 Mortgage loans issued                             (17.5)      (6.5)
 Mortgage loan repayments                           10.1       16.2
 Other, net                                         22.8      (34.6)
                                                ---------------------
    NET CASH USED IN INVESTING ACTIVITIES         (203.3)     (49.8)
                                                ---------------------
    DECREASE IN CASH AND TEMPORARY
                  CASH INVESTMENTS                 (76.6)     (23.6)
Cash and temporary cash investments at              
  beginning of year                                 76.6       76.0
                                                ---------------------
 
    CASH AND TEMPORARY CASH INVESTMENTS
                   AT THE END OF PERIOD          $   0.0    $  52.4
                                                =====================
 
</TABLE>



See condensed notes to the financial statements (unaudited).

<PAGE>
 
                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                       STATEMENTS OF STOCKHOLDER'S EQUITY


<TABLE>
<CAPTION>
 
 
                                                Common   Paid-in  Unassigned
                                                 Stock   Capital    Deficit     Total
                                              ---------------------------------------
<S>                                             <C>      <C>      <C>       <C>
                                                          (In millions)
For the nine months ended September 30, 1995
(unaudited)
Balance at January 1, 1995                         $ 25.0    $355.0  $(162.1)  $217.9
1995 Transactions:
       Net gain                                                         13.9     13.9
       Net unrealized capital gains and
        other adjustments                                                2.0      2.0
       Change in separate account surplus                                0.5      0.5
       Other reserves and adjustments                                    0.1      0.1
       Reclassification of paid-in capital          (22.5)     22.5               0.0
                                              ---------------------------------------
Balance at September 30, 1995                      $  2.5    $377.5   (145.6)  $234.4
                                              =======================================
 
For the nine months ended September 30, 1996
(unaudited)
Balance at January 1, 1996                         $  2.5    $377.5  $(131.3)  $248.7
1996 Transactions:
       Net gain                                                         19.2     19.2
       Net unrealized capital gains and
        other adjustments                                                2.0      2.0
       Change in separate account surplus                                0.4      0.4
       Other reserves and adjustments                                   (1.7)    (1.7)
                                              ---------------------------------------
Balance at September 30, 1996                      $  2.5    $377.5  $(111.4)  $268.6
                                              =======================================
 
</TABLE>


See condensed notes to the financial statements (unaudited).

<PAGE>
 
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

CONDENSED NOTES TO FINANCIAL STATEMENTS
(unaudited.)



NOTE 1--BASIS OF PRESENTATION

The accompanying unaudited interim financial statements have been prepared on
the basis of accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of the
National Association of Insurance Commissioners, which were considered generally
accepted accounting principles for a stock life insurance company wholly-owned
by a mutual company for years prior to 1996.  However, in April 1993, the
Financial Accounting Standard Board (FASB) issued Interpretation 40,
"Applicability of General Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises" (Interpretation).  The Interpretation, as
amended, is effective for 1996 annual financial statements and thereafter and no
longer will allow statutory-basis financial statements to be described as being
prepared in conformity with generally accepted accounting principles (GAAP).
Upon the effective date of the Interpretation, in order for their financial
statements to be described as being prepared in conformity with GAAP, mutual
life insurance companies will be required to adopt all applicable authoritative
GAAP pronouncements in any general-purpose financial statements that they may
issue.  John Hancock Variable Life Insurance Company (the Company) has not
quantified the effects of the application of the Interpretation on its financial
statements.

The Company has not yet determined whether for general purposes it will continue
to issue statutory-basis financial statements or statements adopting all
applicable authoritative GAAP pronouncements.  If the Company decides that its
general-purpose financial statements will be prepared in accordance with GAAP
rather than statutory accounting practices, the financial statements included
herein would have to be restated to reflect all applicable authoritative GAAP
pronouncements, including Statement of Financial Accounting Standards (SFAS)
Nos. 60, 97, and 113.

In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine months periods ended September 30, 1996
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1996.

<PAGE>
 
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS


   Financial Condition

   As of September 30, 1996, total assets grew by 21.2% to $4,176.6 million,
from $3,446.3 million at December 31, 1995.  This increase is principally due to
the growth in the separate accounts where assets increased by 23.2% during 1996
from $2,421.0 million at December 31, 1995, to $2,982.9 million at September 30,
1996. Total obligations grew by 22.2% to $3,908.0 million from $3,197.6 million
at December 31, 1995.  Most of this growth in total obligations was in the
separate accounts, which grew by $561.6 million during 1996, from $2,417.0
million at December 31, 1995, to $2,978.6 million at September 30, 1996.
Separate account assets and liabilities consist primarily of the fund balances
associated with variable life and annuity business.  The asset holdings include
fixed income, equity growth, total return real estate, and global mutual funds,
with liabilities representing amounts due to policyholders. Total stockholder's
equity grew by 8.0% from $248.7 million at December 31, 1995, to $268.6 million
at September 30, 1996.

   Investments

     The Company continues to address industry wide issues of asset quality and
liquidity that have emerged in recent years. JHVLICO's bond portfolio is highly
diversified.  It maintains  diversity by geographic region, industry group, and
limiting the size of  individual investments relative to the total portfolio.
For the past several years, the Company has invested new money predominantly in
long-term investment grade corporate bonds as a means of lowering the relative
proportion of assets invested in commercial mortgages.  As a result, the
Company's holdings in investment (NAIC SVO classes 1 and 2) and medium (NAIC SVO
class 3) grade bonds are 91.6% and 6.1%, respectively, of total general account
bonds at September 30, 1996. The corresponding percentages at December 31, 1995
were 90.1% and 6.7%, respectively.  Most of the medium grade bonds are private
placements that provide long-term financing for medium size companies.  These
bonds typically are protected by individually negotiated financial covenants
and/or collateral.  At September 30, 1996, the balance (NAIC SVO classes 4, 5,
and 6) of 2.3% of total general account bonds consists of lower grade bonds and
bonds in default.  Bonds in default represent 0.8% of total general account
bonds.

     Management believes the Company's commercial mortgage lending philosophy
and practices are sound.  The Company generally makes mortgage loans against
properties with proven track records and high occupancy levels, and typically
does not make construction or condominium loans nor lend more than 75% of the
property's value at the time of the loan.  To assist in the management of its
mortgage loans, the Company uses a computer-based mortgage risk analysis system.

     The Company has outstanding commitments to purchase long-term bonds and
issue real estate mortgages totaling $48.4 million and $45.3 million,
respectively at September 30, 1996.  The corresponding amounts at December 31,
1995 were $16.6 million and $5.4 million, respectively. The Company monitors the
creditworthiness of borrowers under long-term bond commitments and requires
collateral as deemed necessary.  The majority of these commitments expire in
1996 and 1997.

   Reserves and Obligations

     The Company's obligations principally consist of aggregate reserves for
life policies and contracts of $802.2 million in the general account and
obligations of $2,978.6 million in the separate accounts at September 30, 1996.
The corresponding amounts at December 31, 1995 were $671.1 million and $2,417.0
million, respectively. These liabilities are computed in 

<PAGE>
 
accordance with commonly accepted actuarial standards and are based on actuarial
assumptions which are in accordance with, or more conservative than, those
called for in state regulations. All reserves meet the requirements of the
insurance laws of the Commonwealth of Massachusetts. Intensive asset adequacy
testing was performed in 1995 for all reserves. As a result of that testing, no
additional reserves were established. Adequacy testing is done annually and
generally performed in the fourth quarter.

     The Company's total obligations include the Asset Valuation Reserve ("AVR")
required by the NAIC and state insurance regulatory authorities.  At September
30, 1996, and December 31, 1995, the AVR was $15.7 million and $15.4 million,
respectively.  The AVR contained voluntary contributions of $2.8 million in
1995.  There was no voluntary contribution made during the nine months ended
September 30, 1996.  Management believes the Company's level of reserve is
adequate and is made more conservative by the voluntary contributions.

     The AVR was established to stabilize statutory surplus from non-interest
related fluctuations in the market value of bonds, stocks, mortgage loans, real
estate and other invested assets.  The AVR generally captures realized and
unrealized capital gains or losses on such assets, other than those resulting
from changes in interest rates.  Each year, the amount of an insurer's AVR will
fluctuate as capital gains or losses are absorbed by the reserve.  To adjust for
such changes over time, an annual contribution must be made to the AVR equal to
20% of the difference between the maximum AVR (as determined annually according
to the type and quality of an insurer's assets) and the actual AVR.  The AVR
provisions permitted a phase-in period whereby the required contribution was 10%
in 1992, 15% in 1993, and the full 20% factor thereafter.

     Such contributions may result in a slower rate of growth of, or a reduction
to, surplus.  Changes in the AVR are accounted for as direct increases or
decreases in surplus.  The impact of the AVR on the surplus position of John
Hancock in the future will depend in part on the composition of the Company's
investment portfolio.

     The Interest Maintenance Reserve ("IMR") captures realized capital gains
and losses (net of taxes) on fixed income investments (primarily bonds and
mortgage loans) resulting from changes in interest rate levels.  These amounts
are not reflected in the Company's capital account and are amortized into net
investment income over the estimated remaining lives of the investments
disposed.  At September 30, 1996 and December 31, 1995  the balance of the IMR
was $5.7 million and $6.9 million, respectively. The impact of the IMR on the
surplus of the Company depends upon the amount of future interest related
capital gains and losses on fixed income investments.


   Results of Operations

     For the nine months ending September 30, 1996, the net gain from operations
was $19.2 million, $5.3 million higher than the same period during 1995. For the
quarter ending September 30, 1996, the  net gain from operations was $4.6
million, $5.9 million lower than the same period during 1995.

For the nine months ending September 30, 1996, total revenues increased by
73.8%, or $357.2 million to $840.9 million as compared to the same period during
1995. For the quarter ending September 30,1996, total revenues increased by
47.9%, or  $79.5 million as compared to the same period in 1995. For the nine
months ending September 30, 1996, premiums, net of premium 

<PAGE>
 
ceded to reinsurers, increased by 80.4% or $304.6 million to $683.5 as compared
to the same period during 1995. Of this nine month increase, $100.0 million was
due to sales of corporate owned life insurance. For the quarter ending September
30, 1996 premiums, net of premium ceded to reinsurers, increased by 45.6% or
$62.0 million as compared to the same period during 1995. For the nine months
ending September 30, 1996, net investment income increased by 20.1% or $9.5
million to $56.6 million as compared to the same period during 1995. For the
quarter ending September 30,1996, net investment income increased by 30.2% or
$4.8 million as compared to the same period during 1995. These increases can be
attributed to an increase in gross income on long-term bonds for the nine and
three month periods ended September 30, 1996 of $12.9 million, and $7.9 million,
respectively. The increase on long-term bond income was the result of an
increased asset base. For the nine months ending September 30, 1996, and for the
quarter ending September 30,1996, other income increased by $43.1 million and
$12.7 million, respectively compared to the same periods in 1995. These
increases were primarily attributable to the increase in commission and expense
allowances and reserve adjustments on reinsurance ceded.

For the nine months ending September 30, 1996, total benefits and expenses
increased by 77.4% or $347.6 million to $796.9 million as compared to the same
period during 1995. For the quarter ending September 30,1996 total benefits and
expenses increased by 57.1% or $85 million as compared to the same period during
1995. For the nine months ending September 30, 1996, benefit payments and
additions to reserves increased by 101.7% or $332.1 million to $658.7 million as
compared to the same period during 1995. For the quarter ending September
30,1996, benefit payments and additions to reserves increased by 73.4% or $84
million as compared to the same period during 1995. For the nine months ending
September 30, 1996, insurance expenses increased by 11.7% or $13.3 million to
$127.2 million as compared to the same period during 1995. For the quarter
ending September 30,1996, insurance expenses increased by 2.5% or $0.8 million
as compared to the same period during 1995. These increases in insurance
expenses were attributable largely to commission expense resulting from the sale
of new business.



     Liquidity and Capital Resources

     The Company's liquidity resources at September 30, 1996, include cash and
short-term investments of $0.0 million, public bonds of $311.0 million, and
investment grade private placement bonds of $401.1 million.  The corresponding
amounts at December 31, 1995 were $76.6 million, $206.2 million, and $294.7
million, respectively.  In addition, the Company's separate accounts are highly
liquid and are available to meet most outflow needs for variable life insurance.

     Management believes the liquidity resources above of $712.1 million as of
September 30, 1996, strongly position the Company to meet all its obligations to
policyholders and others.  Generally, the Company's financing needs are met by
means of funds provided by normal operations.  As of September 30, 1996 and year
end 1995, the Company had no outstanding borrowings from sources outside its
affiliated group.

     Total surplus, or stockholder's equity, including the AVR, is $284.3
million as of September 30, 1996 compared to $264.1 million as of December 31,
1995. The current statutory accounting treatment of deferred acquisition cost
("DAC") taxes results in an understatement of the Company's surplus, which will
persist during periods of growth in new business written. These taxes result
from federal income tax law that approximates acquisition expenses and then
spreads the corresponding tax deduction over a period of years. The result is a
DAC tax which is collected immediately and subsequently returned through tax
deduction in later years.

     Since it began its operations, the Company has received a total of $381.8
million in capital contributions from John Hancock, of which $377.5 million is
credited to paid-in capital and $2.5 million is credited to capital stock as of
September 30, 1996.  In 1993, $1.8 million of capital was 

<PAGE>
 
returned to John Hancock. To support the Company's operations, for the
indefinite future, John Hancock is committed to make additional capital
contributions if necessary to ensure that the Company maintains a positive net
worth. The Company's stockholder's equity, net of unassigned deficit, was $268.6
million at September 30, 1996 and $248.7 million at December 31, 1995.

<PAGE>
 
PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits
 
               27.  Financial Data Sheet

          (b)  Reports on Form 8-K

               None



                                   SIGNATURES

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

                              John Hancock Variable
                              Life Insurance Company
                              ----------------------------
                              (Registrant)

Date:  11-12-96               /s/ Henry D. Shaw
       --------               ----------------------------
                              Vice Chairman and President


Date:  11-12-96               /s/ Patrick F. Smith
       --------               ----------------------------
                              Controller