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

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 2001

                        Commission File Number: 33-62895

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
                Exact name of registrant as specified in charter

          MASSACHUSETTS                                          04-2664016
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                              200 Clarendon Street
                           Boston, Massachusetts 02117
                    (Address of principal executive offices)

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

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

                Number of shares outstanding of our only class of
                        common stock as of May 11, 2001:

                                     50,000

<PAGE>

PART I    FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             March 31,
                                                                               2001          December 31,
                                                                            (Unaudited)          2000
                                                                           -------------------------------
                                                                                    (in millions)
<S>                                                                          <C>              <C>
Assets

Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
    (fair value: 2001--$82.5; 2000--$686.8)..........................        $    83.1        $   715.4
   Available-for-sale--at fair value
    (cost: 2001--$1,765.6, 2000--$1,018.8)...........................          1,795.8          1,011.8
Equity securities:
   Available-for-sale--at fair value
    (cost: 2001--$11.0; 2000--$7.1)..................................              9.5              8.1
Mortgage loans on real estate........................................            562.2            554.8
Real estate..........................................................             24.5             23.9
Policy loans.........................................................            345.0            334.2
Short-term investments...............................................             14.8             21.7
Other invested assets................................................             35.0             34.8
                                                                             --------------------------

   Total Investments.................................................          2,869.9          2,704.7

Cash and cash equivalents............................................            166.6            277.3
Accrued investment income............................................             58.6             52.1
Premiums and accounts receivable.....................................              2.6              7.0
Deferred policy acquisition costs....................................          1,000.0            994.1
Reinsurance recoverable .............................................             89.9             48.4
Other assets.........................................................             57.5             28.2
Separate accounts assets.............................................          7,227.1          8,082.9
                                                                             --------------------------

   Total Assets......................................................        $11,472.2        $12,194.7
                                                                             ==========================
</TABLE>

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


                                       2
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                   CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                            March 31,
                                                                               2001           December 31,
                                                                           (Unaudited)            2000
                                                                          --------------------------------
                                                                                   (in millions)
<S>                                                                         <C>                <C>
Liabilities and Shareholder's Equity

Liabilities
Future policy benefits...............................................       $  2,853.6         $ 2,754.2
Policyholders' funds.................................................              8.5              14.2
Unearned revenue.....................................................            214.2             212.0
Unpaid claims and claim expense reserves.............................             16.4              11.1
Dividends payable to policyholders...................................              0.2               0.1
Income taxes.........................................................            100.1              64.2
Other liabilities....................................................            204.7             250.4
Separate accounts liabilities........................................          7,227.1           8,082.9
                                                                            ----------------------------

   Total Liabilities.................................................         10,624.8          11,389.1

Commitments and contingencies

Shareholder's Equity
Common stock, $50 par value; 50,000 shares authorized; 50,000
   shares issued and outstanding ....................................              2.5               2.5
Additional paid in capital...........................................            572.4             572.4
Retained earnings....................................................            263.1             232.9
Accumulated other comprehensive income...............................              9.4              (2.2)
                                                                            ----------------------------

   Total Shareholder's Equity........................................            847.4             805.6
                                                                            ----------------------------

   Total Liabilities and Shareholder's Equity........................       $ 11,472.2         $12,194.7
                                                                            ============================
</TABLE>

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


                                       3
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                Three Months Ended
                                                                                     March 31,
                                                                              2001              2000
                                                                            --------------------------
                                                                                   (in millions)
<S>                                                                          <C>              <C>
Revenues
  Premiums .........................................................         $  15.4          $   9.9
  Universal life and investment-type product charges ...............            96.3             95.8
  Net investment income ............................................            56.6             49.9
  Net realized investment and other gains (losses), net of related
    amortization of deferred policy acquisition costs ($(0.2)
    and $ - , respectively) ........................................             0.6             (4.4)
  Other revenue ....................................................             0.1              0.1
                                                                             ------------------------
     Total revenues ................................................           169.0            151.3

Benefits and Expenses
  Benefits to policyholders ........................................            61.7             69.5
  Other operating costs and expenses ...............................            23.5             15.3
  Amortization of deferred policy acquisition costs, excluding
    amounts related to net realized investment losses ($(0.2) and
    $ - , respectively) ............................................            25.7              6.4
  Dividends to policyholders .......................................             5.3              6.4
                                                                             ------------------------
     Total benefits and expenses ...................................           116.2             97.6
                                                                             ------------------------
Income before income taxes and cumulative
     effect of accounting change ...................................            52.8             53.7
Income taxes .......................................................            21.0             18.3
                                                                             ------------------------
Income before cumulative effect of accounting change ...............            31.8             35.4

Cumulative effect of accounting change, net of
  tax - Note 1 .....................................................            (1.6)              --
                                                                             ------------------------
Net income .........................................................         $  30.2          $  35.4
                                                                             ========================
</TABLE>

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


                                       4
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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

<TABLE>
<CAPTION>
                                                                         Accumulated                  Outstanding
                                             Additional                     Other          Total        Shares
                                  Common      Paid In     Retained      Comprehensive  Shareholder's     (in
                                   Stock      Capital     Earnings          Income         Equity       thousands)
                                 ---------------------------------------------------------------------------------
                                                                        (in millions)
<S>                                <C>         <C>          <C>           <C>              <C>           <C>
Balance at January 1, 2000......   $2.5        $572.4       $133.5        $ (13.4)         $695.0        50.0

Comprehensive income:
 Net income ....................                              35.4                           35.4

Other comprehensive income,
  net of tax:
  Net unrealized gains..........                                              3.6             3.6
                                                                                        ---------
Comprehensive income............                                                             39.0
                                 ---------------------------------------------------------------------------------
Balance at March 31, 2000.......   $2.5        $572.4       $168.9        $  (9.8)         $737.6        50.0
                                 =================================================================================

<CAPTION>
                                                                         Accumulated                  Outstanding
                                             Additional                     Other          Total        Shares
                                  Common      Paid In     Retained      Comprehensive  Shareholder's     (in
                                   Stock      Capital     Earnings          Income         Equity      thousands)
                                 ---------------------------------------------------------------------------------
                                                                        (in millions)
<S>                                <C>         <C>          <C>             <C>            <C>           <C>
Balance at January 1, 2001......   $2.5        $572.4       $232.9          $(2.2)         $805.6        50.0

Comprehensive income:
 Net income.....................                              30.2                           30.2

 Other comprehensive income,
  net of tax:
  Net unrealized gains..........                                              4.4             4.4
                                                                                        ---------
Comprehensive income............                                                             34.6
Change in accounting principle..                                              7.2             7.2
                                 ---------------------------------------------------------------------------------
Balance at March 31, 2001.......   $2.5        $572.4       $263.1          $ 9.4          $847.1        50.0
                                 =================================================================================
</TABLE>

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


                                       5
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                                  March 31,
                                                                                              2001          2000
                                                                                             --------------------
                                                                                                (in millions)
<S>                                                                                          <C>           <C>
Cash flows from operating activities:
   Net income ..........................................................................     $ 30.2        $ 35.4
   Adjustments to reconcile net income to net cash provided by operating activities:
      Amortization of discount - fixed maturities ......................................       (2.7)         (0.4)
      Net realized investment and other (losses) gains, net ............................       (0.6)          4.4
      Change in deferred policy acquisition costs ......................................      (14.8)        (35.7)
      Depreciation and amortization ....................................................        0.2           0.2
      Increase in accrued investment income ............................................       (6.4)         (2.8)
      Decrease in premiums and accounts receivable .....................................        4.3           9.5
      (Increase) Decrease in other assets and other liabilities, net ...................     (119.6)         16.1
      Increase (Decrease) in policy liabilities and accruals, net ......................       66.7         (80.4)
      Increase in income taxes .........................................................       31.9          21.2
                                                                                             --------------------
                   Net cash used in operating activities ...............................      (10.2)        (32.5)

Cash flows from investing activities:
     Sales of:
      Fixed maturities available-for-sale ..............................................       24.4          80.1
      Equity securities available-for-sale .............................................        0.1           0.7
     Maturities, prepayments and scheduled redemptions of:
      Fixed maturities held-to-maturity ................................................        0.8          16.2
      Fixed maturities available-for-sale ..............................................       26.0          17.1
      Short-term investments and other invested assets .................................       21.7          10.1
      Mortgage loans on real estate ....................................................        6.4           9.2
     Purchases of:
      Fixed maturities held-to-maturity ................................................         --         (29.5)
      Fixed maturities available-for-sale ..............................................     (162.6)       (138.9)
      Equity securities available-for-sale .............................................       (4.7)         (0.1)
      Real estate ......................................................................       (0.1)         (0.1)
      Short-term investments and other invested assets .................................      (16.8)         (6.6)
      Mortgage loans on real estate issued .............................................      (14.5)         (0.3)
      Other, net .......................................................................      (17.5)        (12.7)
                                                                                             --------------------
                Net cash used in investing activities ..................................     (136.8)        (54.8)

Cash flows from financing activities:
   Universal life and investment-type contract deposits ................................      231.4         261.1
   Universal life and investment-type contract maturities and
       withdrawals .....................................................................     (195.1)       (109.9)
                                                                                             --------------------
          Net cash provided by financing activities ....................................       36.3         151.2
                                                                                             --------------------
          Net increase (decrease) in cash and cash equivalents .........................     (110.7)         63.9

Cash and cash equivalents at beginning of period .......................................      277.3         259.6
                                                                                             --------------------
          Cash and cash equivalents at end of period ...................................     $166.6        $323.5
                                                                                             ====================
</TABLE>

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


                                       6
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies

Basis of Presentation

      The accompanying unaudited consolidated financial statements of John
Hancock Variable Life Insurance Company (the Company), a wholly-owned subsidiary
of John Hancock Life Insurance Company (John Hancock or the Parent), have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, these unaudited consolidated
financial statements contain all adjustments, consisting of only normal and
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations. Operating results for the three-month period
ended March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2001. These unaudited consolidated
financial statements should be read in conjunction with the Company's annual
audited financial statements as of December 31, 2000 included in the Company's
Form 10-K for the year ended December 31, 2000 filed with the Securities and
Exchange Commission (hereafter referred to as the Company's 2000 Form 10-K.
Prior to 2000, the Company did not prepare its financial statements in
accordance with accounting principles generally accepted in the United States
and financial information on such basis currently is not readily available for
earlier periods. Comparative financial statements prepared on a statutory-basis
are included in the Company's 2000 Form 10-K).

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

Reorganization and Initial Public Offering

Pursuant to a Plan of Reorganization approved by the policyholders and the
Commonwealth of Massachusetts Division of Insurance, effective February 1, 2000,
John Hancock converted from a mutual life insurance company to a stock life
insurance company (i.e., demutualized) and became a wholly owned subsidiary of
John Hancock Financial Services, Inc., which is a holding company. In connection
with the reorganization, John Hancock changed its name to John Hancock Life
Insurance Company. In addition, on February 1, 2000, John Hancock Financial
Services, Inc. completed its initial public offering and 102 million shares of
common stock were issued at an initial public offering price of $17 per share.


                                       7
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Cumulative Effect of Accounting Change

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

On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended. The adoption of SFAS No. 133,
as amended, resulted in a charge to operations of $1.6 million (net of tax of
$0.4 million) as of January 1, 2001. In addition, as of January 1, 2001, a $7.2
million (net of tax of $3.9 million) cumulative effect of accounting change was
recorded in other comprehensive income for the transition adjustment in the
adoption of SFAS 133, as amended, and the reclassification of certain securities
from the held-to-maturity category to the available-for-sale category. The
transition adjustment for the adoption of SFAS 133 resulted in an increase in
other comprehensive income of $0.8 million (net of tax of $0.4 million) that was
accounted for as the cumulative effect of accounting change. The adjustment for
the reclassification of $0.6 billion of the held-to-maturity fixed maturity
investment portfolio to the available-for-sale category resulted in an increase
in other comprehensive income of $6.4 million (net of tax of $3.4 million) as of
January 1, 2001.


                                       8
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Codification

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

Note 2 - Transactions with Parent

John Hancock provides the Company with personnel, property and facilities in
carrying out certain of its corporate functions. John Hancock annually
determines a fee (the parent company service fee) for these services and
facilities based on a number of criteria, which are periodically revised to
reflect continuing changes in the Company's operations. The parent company
service fee is included in other operating costs and expenses within the
Company's income statements. John Hancock charged the Company a service fee of
$38.5 million and $48.5 million for the three months ended March 31, 2001 and
2000, respectively. As of March 31, 2001, the Company owed John Hancock $14.6
million related to these services, which is included in other liabilities. John
Hancock has guaranteed that, if necessary, it will make additional capital
contributions to prevent the Company's shareholder's equity from declining below
$1.0 million.

Note 3 -- Segment Information

The Company's reportable segments are strategic business units offering
different products and services. The reportable segments are managed separately,
as they focus on different products, markets or distribution channels.

Retail-Protection Segment. Offers a variety of individual life insurance,
including participating whole life, term life, universal life and variable life
insurance. Products are distributed through multiple distribution channels,
including insurance agents and brokers and alternative distribution channels
that include banks, financial planners, direct marketing and the Internet.

Retail-Asset Gathering Segment. Offers individual annuities, consisting of fixed
deferred annuities, fixed immediate annuities, single premium immediate
annuities, and variable annuities. This segment distributes its products through
distribution channels including insurance agents and brokers affiliated with the
Company, securities brokerage firms, financial planners, and banks.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Allocations of net investment income
are based on the amount of assets allocated to each segment. Other costs and
operating expenses are allocated to each segment based on a review of the nature
of such costs, cost allocations utilizing time studies, and other relevant
allocation methodologies.


                                       9
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 -- Segment Information - (Continued)

Management of the Company evaluates performance based on segment after-tax
operating income, which excludes the effect of net realized investment and other
gains or losses and other unusual or non-recurring events and transactions.
Segment after-tax operating income is determined by adjusting GAAP net income
for net realized investment and other gains and losses and certain other items
which management believes are not indicative of overall operating trends. While
these items may be significant components in understanding and assessing the
Company's financial performance, management believes that the presentation of
after-tax operating income enhances its understanding of the Company's results
of operations by highlighting net income attributable to the normal, recurring
operations of the business.

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; (ii) benefits to
policyholders and expenses incurred relating to the settlement of a class action
lawsuit against the Company involving certain individual life insurance policies
sold from 1979 through 1996; (iii) restructuring costs related to our
distribution systems and retail operations.

The following table summarizes selected financial information by segment for the
three months ended March 31, 2001 and 2000, respectively, and reconciles segment
revenues and segment after-tax operating income to amounts reported in the
consolidated statements of income (in millions):

<TABLE>
<CAPTION>
                                                                             Retail
                                                                Retail       Asset
As of or for the three-months ended March 31, 2001:           Protection    Gathering     Consolidated
                                                             ------------------------------------------
<S>                                                           <C>           <C>             <C>
Revenues:
      Segment revenues ...............................        $   156.9     $    11.5       $   168.4
      Net realized investment and
          other gains, net ...........................              0.6            --             0.6
                                                              ---------------------------------------
      Revenues .......................................        $   157.5     $    11.5       $   169.0
                                                              =======================================
      Net investment income ..........................        $    57.2     $    (0.6)      $    56.6
Net Income:
      Segment after-tax operating income .............        $    31.7     $    (0.3)      $    31.4
      Net realized investment and
          other gains, net ...........................              0.4            --             0.4
      Change in accounting principle .................             (1.6)           --            (1.6)
                                                              ---------------------------------------
      Net income .....................................        $    30.5     $    (0.3)      $    30.2
                                                              =======================================
Supplemental Information:
      Equity in net income of investees accounted
          for by the equity method ...................        $     0.5            --       $     0.5
      Amortization of deferred policy
          acquisition costs ..........................             18.6     $     7.1            25.7
      Segment assets .................................          8,976.7       2,495.5        11,472.2
</TABLE>


                                       10
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                                             Retail
                                                                Retail       Asset
As of or for the three-months ended March 31, 2000:           Protection    Gathering   Consolidated
                                                             ----------------------------------------
<S>                                                           <C>           <C>             <C>
Revenues:
      Segment revenues .....................................   $   144.2    $    11.5    $   155.7
      Net realized investment and
           other losses, net ...............................        (1.3)        (3.1)        (4.4)
                                                               -----------------------------------
      Revenues .............................................   $   142.9    $     8.4    $   151.3
                                                               ===================================
      Net investment income ................................   $    50.8    $    (0.9)   $    49.9
Net Income:
      Segment after-tax operating income ...................   $    34.1    $     5.0    $    39.1
      Realized investment losses, net ......................        (0.9)        (2.0)        (2.9)
      Restructuring charges ................................        (0.2)          --         (0.2)
      Other demutualization related costs ..................        (0.5)        (0.1)        (0.6)
                                                               -----------------------------------
      Net income ...........................................   $    32.5    $     2.9    $    35.4
                                                               ===================================
Supplemental Information:
      Equity in net income of investees accounted
           for by the equity method ........................   $     0.1           --    $     0.1
      Amortization of deferred policy acquisition costs ....         2.6    $     3.8          6.4
      Segment assets .......................................     9,435.5      3,009.4     12,444.9
</TABLE>

The Company operates only in the United States and has no reportable major
customers. Revenues are attributed to countries based on the location of
customers.

Note 4 - Derivatives and Hedging Instruments

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

The fair value of derivative instruments classified as assets at March 31, 2001
was $10.5 million, and appears on the Consolidated Balance Sheet in other
assets. The fair value of derivative instruments classified as liabilities at
March 31, 2001 was $7.3 million, and appears on the Consolidated Balance Sheet
in other liabilities.

In certain of these cases, the Company uses hedge accounting as allowed by SFAS
133, as amended, by designating derivative instruments as either fair value or
cash flow hedges. For derivative instruments that are designated as fair value
hedges, the change in fair value of the derivative instrument as well as the
offsetting change in fair value of the hedged item are recorded in realized
investment gains and losses. The change in value of the hedged item is used to
adjust its cost basis on a quarterly basis and is amortized into investment
income over its remaining life, beginning either immediately or when the hedge
designation is removed. For derivative instruments that are designated and
qualify as cash flow hedges, the effective portion of the change in fair value
of the derivative instrument is recorded in other comprehensive income, and then
reclassified into income when the hedged item affects income. Hedge
effectiveness is assessed quarterly by a variety of techniques including
regression analysis and cumulative dollar offset. In certain cases zero hedge
ineffectiveness is assumed because the derivative instrument was constructed
such that all the terms of the derivative exactly match the hedged risk in the
hedged item. The ineffective portion is recorded in realized investment gains
and losses.

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

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


                                       11
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - Derivatives and Hedging Instruments - (Continued)

Fair Value Hedges

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

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

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

For the three months ended March 31, 2001, the Company recognized a net loss of
$0.3 million related to the ineffective portion of its fair value hedges, and a
net gain of $0.1 million related to the portion of the hedging instruments that
were excluded from the assessment of hedge effectiveness. For the three months
ended March 31, 2001, none of the Company's hedged firm commitments no longer
qualified as fair value hedges.

Cash Flow Hedges

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

For the three months ended March 31, 2001, the Company recognized no gains or
losses related to the ineffective portion of its cash flow hedges, and a net
gain of $0.2 million related to the portion of the hedging instruments that was
excluded from the assessment of hedge effectiveness. For the three months ended
March 31, 2001, none of the Company's hedged forecasted transactions no longer
qualified as cash flow hedges.


                                       12
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - Derivatives and Hedging Instruments - (Continued)

For the three months ended March 31, 2001, no amounts were reclassified from
other accumulated comprehensive income to earnings and it is anticipated that no
amounts will be reclassified from other accumulated comprehensive income to
earnings within the next twelve months. The Company does not enter into hedging
transaction for variable cash flows thus the Company currently has no maximum
length for which variable cash flows are hedged.

For the three month's ended March 31, 2001, none of the Company's cash flow
hedges have been discontinued because of the probability that the original
forecasted transaction would not occur by the end of the originally specified
time period documented at inception of the hedging relationship.

There was no transition adjustment for the adoption of the statement
representing the accumulation in other comprehensive income of the effective
portion of the Company's cash flow hedges as of January 1, 2001. There were no
losses incurred for the effective portion of the change in fair value of
derivative instruments designated as cash flow hedges and added to accumulated
other comprehensive income.

Derivatives Not Designated as Hedging Instruments

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


                                       13
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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 Variable
Life Insurance Company (the Company) as of March 31, 2001, compared with
December 31, 2000, and its consolidated results of operations for the
three-month periods ended March 31, 2001 and March 31, 2000, 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, 2000 included in the Company's
Form 10-K for the year ended December 31, 2000 filed with the Securities and
Exchange Commission (hereafter referred to as the Company's 2000 Form 10-K.
Prior to 2000, the Company did not prepare its financial statements in
accordance with accounting principles generally accepted in the United States
and financial information on such basis currently is not readily available for
earlier periods. Comparative financial statements prepared on a statutory-basis
are included in the Company's 2000 Form 10-K and unaudited consolidated
financial statements and related notes included elsewhere in this Form 10-Q.

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

Overview

We are a leading life insurance company providing a broad range of products and
services in the retail market, which offers insurance protection and asset
gathering products and services primarily to retail consumers.

Our revenues are derived principally from:

      o     premiums on individual life insurance and annuities with life
            contingencies;

      o     product charges from variable and universal life insurance products
            and annuities;

      o     net investment income and realized investment gains on general
            account assets.

Our expenses consist principally of insurance benefits provided to
policyholders, interest credited on policyholders' general account balances,
dividends to policyholders, other operating costs and expenses, which include
commissions and general business expenses, net of expenses deferred,
amortization of deferred policy acquisition costs, and premium and income taxes.

Our profitability depends in large part upon: (1) the adequacy of our product
pricing, which is primarily a function of competitive conditions, our ability to
assess and manage trends in mortality and morbidity experience, our ability to
generate investment earnings and our ability to maintain expenses in accordance
with pricing assumptions and (2) the maintenance of our target spreads between
the rate of earnings on our investments and rates credited on policyholders'
general account balances.

Our sales and financial results over the last several years have been affected
by general economic and industry trends. Variable products, including variable
life insurance and variable annuities, have 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 recent years and the "baby boom"
generation reaching its high-earnings years and seeking tax-advantaged
investments to prepare for retirement.


                                       14
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Results of Operations

      The table below presents the consolidated results of operations for the
three-months ended March 31, 2001 and 2000, respectively.

                                                         Three-months ended
                                                              March 31,
                                                      ----------------------
                                                       2001            2000
                                                       ----            ----
                                                           (in millions)

      Revenues ....................................   $169.0          $151.3

      Benefits and expenses .......................    116.2            97.6
                                                      ----------------------
      Income before income taxes and
          cumulative effect of accounting
          change ..................................     52.8            53.7

      Income taxes ................................     21.0            18.3
                                                      ----------------------
      Cumulative effect of accounting change ......     (1.6)             --
                                                      ----------------------
      Net income ..................................   $ 30.2          $ 35.4
                                                      ======================

Three-Months Ended March 31, 2000 Compared to Three-Months Ended March 31, 1999

      Consolidated income before income taxes and cumulative effect of
accounting change of $52.8 million, for the three-months ended March 31, 2001
decreased by $0.9 million, or 1.7%, from that reported in the comparable prior
year period. The Protection Segment's income before income taxes and cumulative
effect of accounting change increased $3.8 million, or 7.7%, for the
three-months ended March 31, 2001 compared to the three-months ended March 31,
2000 due to an increase in investment income of $6.4 million, or 12.6%, and
premiums of $5.5 million, or 55.6%, while benefits to policyholders decreased
$9.5 million. Partially offsetting these changes was an increase in amortization
of deferred policy acquisition costs of $16.0 million, or 615.4%. Partially
offsetting Protection's increase in income before income taxes and cumulative
effect of accounting change was a $4.7 million, or 102.2%, decrease in the Asset
Gathering Segment for the three-months ended March 31, 2001 from that reported
in the comparable prior year period. The decrease in Asset Gathering was
primarily due to $0.1 million, or 0.8%, decrease in investment-type product
charges while amortization of deferred policy acquisition costs increased $3.3
million, or 86.8%. The decrease in investment-type product charges and the
increase in amortization of deferred policy acquisition costs was primarily due
to the confluence of poor separate account performance during the period and
increased lapses of variable annuities. In addition, amortization of deferred
policy acquisition costs increased resulting from revised estimates relating to
the implementation of new modeling systems. The Company generated $0.6 million
in net realized investment and other gains in the first quarter of 2001, while
generating $4.4 million in net realized investment and other losses for
comparable prior year period.

      Revenues of $169.0 million for the three-months ended March 31, 2001
increased $17.7 million, or 11.7%, compared to the three-months ended March 31,
2000, primarily due to a $14.6 million, or 10.2%, increase in revenues in the
Protection Segment. The Protection Segment's increase in revenues was primarily
driven by a $6.1 million increase in net investment income and a $5.5 million
increase in premiums. Growth in net investment income and premiums is being
driven by growth in the in-force, primarily in term products. Revenues in the
Asset Gathering Segment increased $3.1 million, or 36.9%, primarily due to an
improvement in net realized investment and other gains and losses of
approximately $3.1 million, or 100%.

      Benefits and expenses of $116.2 million for the three-months ended March
31, 2001 increased $18.6 million, or 19.1%, compared to the three-months ended
March 31, 2000, primarily due to an increase of $10.8 million, or 11.5%, in the
Protection Segment. The increase in Protection was driven by a $16.0 million
increase in amortization of deferred policy acquisition costs due to poor
separate account performance, revised projections of estimated gross profits
based upon changes in estimated future mortality and expense margins, and
revised estimates relating to the implementation of new modeling systems during
the quarter. Protection's increase in amortization of deferred policy
acquisition costs was partially offset by a $9.5 million decrease in benefits to
policyholders due to lower claim volume compared to the prior year period.
Benefits and expenses in the Asset Gathering Segment increased $7.8 million, or
205.3%, for the quarter ended March 31, 2001, primarily due to a $3.3 million
increase in amortization of deferred policy acquisition costs and a $1.7 million
increase in benefits to policyholders. The increase in amortization of deferred
policy acquisition costs is driven by poor separate account performance and
revised estimates relating to the implementation of new modeling systems, while
the increase in benefits to policyholders due to increased lapses in variable
annuities.


                                       15
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Results of Operations by Segment

We operate our business in two business segments, the Protection Segment and the
Asset Gathering Segment. Both of our business segments primarily serve retail
customers. The Company's reportable segments are strategic business units
offering different products and services, and are managed separately, as they
focus on different products, markets or distribution channels.

Retail-Protection Segment. Offers a variety of individual life insurance,
including participating whole life, term life, universal life and variable life
insurance. Products are distributed through multiple distribution channels,
including insurance agents and brokers and alternative distribution channels
that include banks, financial planners, direct marketing and the Internet.

Retail-Asset Gathering Segment. Offers individual annuities, consisting of fixed
deferred annuities, fixed immediate annuities, single premium immediate
annuities, and variable annuities. This segment distributes its products through
distribution channels including insurance agents and brokers affiliated with the
Company, securities brokerage firms, financial planners, and banks.

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

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

                                                      Three-months ended
                                                           March 31,
                                                      2001         2000
                                                     -----        -----
Segment Data: (1)                                       (in millions)
Segment after-tax operating income:
  Protection Segment .............................    31.7         34.1
  Asset Gathering Segment ........................    (0.3)         5.0
                                                     -----        -----
  Total segment after-tax operating income .......    31.4         39.1

After-tax adjustments: (1)
  Net realized investment and
    other gains (losses), net (1) ................     0.4         (2.9)
  Other demutualization expenses .................      --         (0.6)
  Restructuring charges ..........................      --         (0.2)
                                                     -----        -----
Total after-tax adjustments ......................     0.4         (3.7)
                                                     -----        -----
  GAAP Reported:
  Income before cumulative effect
    of accounting change .........................    31.8         35.4
  Cumulative effect of accounting change .........    (1.6)          --
                                                     -----        -----
  Net income .....................................   $30.2        $35.4
                                                     =====        =====

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


                                       16
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Adjustments to GAAP Reported Net Income

      Our GAAP reported net income was affected by net realized investment gains
and losses and other unusual or non-recurring events and transactions presented
in the reconciliation of GAAP reported net income to segment after-tax operating
income in Note 3 - Segment Information in the notes to the unaudited
consolidated financial statements. A description of these adjustments follows.

      In both periods, net realized investment gains and losses have been
excluded from segment after-tax operating income due to their volatility between
periods and because such data are often excluded by analysts and investors when
evaluating the overall financial performance of insurers. The volatility between
periods can be impacted by fluctuations in the market, as well as by changes in
the volume of activity, which can be influenced by us and our investment
decisions.

      Net realized investment and other gains and losses have been reduced by
amortization of deferred policy acquisition costs to the extent that such
amortization results from net realized investment and other gains and losses. We
believe presenting realized investment and other gains and losses in this format
provides information useful in evaluating our operating performance. This
presentation may not be comparable to presentations made by other insurers.
Summarized below is a reconciliation of (a) net realized investment and other
gains per the unaudited consolidated financial statements and (b) the adjustment
made for net realized investment gains to calculate segment after-tax operating
income for the three-months ended March 31, 2001 and 2000.

                                                           Three-months ended
                                                                March 31,
                                                             2001       2000
                                                             ----       ----
                                                             (in millions)
Net realized investment and
     other gains (losses) ................................  $ 0.8      $(4.4)

Less amortization of deferred policy acquisition
   costs related to net realized investment and
   other gains ...........................................   (0.2)        --
                                                            -----      -----
Net realized investment and other gains, net of
   related amortization of deferred policy
   acquisition costs per unaudited consolidated
   financial statements (1) ..............................    0.6       (4.4)

Less income tax effect ...................................   (0.2)       1.5
                                                            -----      -----

Net realized investment and other gains (losses),
   net - after-tax adjustment to calculate segment
   operating income ......................................  $ 0.4      $(2.9)
                                                            =====      =====

The Company incurred restructuring charges to reduce costs and increase future
operating efficiency by consolidating portions of our operations. After-tax
restructuring costs were $0.2 million for the three-months ended March 31, 2000.
No such costs were incurred in the three months ended March 31, 2001.

The Company incurred expenses to improve our financial analysis and financial
reporting abilities which were made in conjunction with the demutualization of
John Hancock. These charges primarily included consulting fees and planning and
expense management costs. After-tax charges for these other demutualization
related costs were $0.6 million for the three-months ended March 31, 2000. No
such costs were incurred in 2001.


                                       17
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Retail-Protection Segment

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

                                                            Three-months ended
                                                                 March 31,
                                                              2001       2000
                                                            ------------------
                                                               (in millions)

Revenues (1) ............................................   $ 156.9    $ 144.2

Benefits and expenses ...................................     104.6       92.6

Income taxes ............................................      20.6       17.5
                                                            ------------------
Segment after-tax operating income (1) ..................      31.7       34.1
                                                            ------------------
After-tax adjustments: (1)
   Net realized investment and other
       gains (losses), net ..............................       0.4       (0.9)
   Other demutualization related costs ..................        --       (0.5)
   Restructuring charges ................................        --       (0.2)
                                                            ------------------
Total after-tax adjustments .............................       0.4       (1.6)
                                                            ------------------
GAAP Reported:
Income before cumulative effect
    of accounting change ................................      32.1       32.5
Cumulative effect of accounting
    change, net of tax ..................................      (1.6)        --
                                                            ------------------
Net income ..............................................   $  30.5    $  32.5
                                                            ==================
Other Data:
Segment after-tax operating income:
   Non-traditional life (variable and universal
       life) ............................................   $  33.3    $  33.8
   Traditional life .....................................      (1.6)       0.3
                                                            ------------------
Segment after-tax operating income (1) ..................   $  31.7    $  34.1
                                                            ==================

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

Three-Months Ended March 31, 2001 Compared to Three-Months Ended March 31, 2000

     Segment after-tax operating income was $31.7 million for the three-months
ended March 31, 2001, a decrease of $2.4 million, or 7.0%, from $34.1 million
for the three-months ended March 31, 2000. The decrease in the Protection
Segment's after-tax operating income is primarily due to a $16.0 million
increase in amortization of deferred policy acquisition costs and a $6.6 million
increase in other operating costs and expenses. Partially offsetting the
increased expenses was an increase in investment income of $6.4 million, an
increase in premiums of $5.5 million and a decrease in benefits to policyholders
decreased $9.5 million.

     Revenues were $156.9 million for the three-months ended March 31, 2001, an
increase of $12.7 million, or 8.8%, from $144.2 million for the three-months
ended March 31, 2000. Revenue growth was primarily driven by a $6.4 million
increase in net investment income and a $5.5 million increase in premiums. The
increase in net investment income and premiums is driven by growth in the
in-force, primarily in term products.

     Benefits and expenses were $104.6 million for the three-months ended March
31, 2001, an increase of $12.0 million, or 13.0%, from $92.6 million for the
three-months ended March 31, 2000. Amortization of


                                       18
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

deferred policy acquisition costs increased $16.0 million, or 615.4%, due to
poor separate account performance, revised projections of estimated gross
profits based upon changes in estimated future mortality and expense margins and
revised estimates relating to the implementation of new modeling systems. In
addition, operating expenses increased $6.6 million, primarily due to growth in
the in-force. Partially offsetting these increases was a decrease in benefits to
policyholders, which decreased $9.5 million, or 13.8%, driven by a decrease due
to lower claim volume compared to the prior year period.

Retail-Asset Gathering Segment

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

                                                        Three-months ended
                                                            March 31,
                                                       2001          2000
                                                       ------------------
                                                         (in millions)
Revenues (1) ........................................  $11.5        $11.5

Benefits and expenses ...............................   11.6          3.7

Income taxes ........................................    0.2          2.8
                                                       ------------------
Segment after-tax operating
   (loss) income (1) ................................   (0.3)         5.0
                                                       ------------------
After-tax adjustments: (1)
   Net realized investment and
       other (losses), net ..........................     --         (2.0)
   Other demutualization related costs ..............     --         (0.1)
                                                       ------------------
Total after-tax adjustments .........................     --         (2.1)
                                                       ------------------
GAAP Reported:
Income before cumulative effect
    of accounting change ............................  $(0.3)       $ 2.9
Cumulative effect of accounting change ..............     --           --
                                                       ------------------
Net income ..........................................  $(0.3)       $ 2.9
                                                       ==================

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

Three-Months Ended March 31, 2001 Compared to Three-months Ended March 31, 2000

Segment after-tax operating loss was $0.3 million for the three-months ended
March 31, 2001, a decrease of $5.3 million, or 106.0%, from the comparable prior
year period. The decrease in Asset Gathering was primarily due to $0.1 million,
or 0.8%, decrease in universal life and investment-type product charges while
amortization of deferred policy acquisition costs increased $3.3 million, or
86.8%. The decrease in investment-type product charges and the increase in
amortization of deferred policy acquisition costs was primarily due to the
confluence of poor separate account performance during the period and increased
lapses of variable annuities. In addition, amortization of deferred policy
acquisition costs increased due to revised estimates relating to the
implementation of new modeling systems.


                                       19
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Revenues were $11.5 million for the three-months ended March 31, 2001, which
represented no change from revenues reported for the comparable prior year
period. Revenue consists primarily of $12.3 million in investment-type product
charges on variable annuity products, which decreased $0.1 million from the
prior period. Investment-type product charges on variable annuity products
remained stable despite poor separate account performance due to increased
levels of lapses in the variable annuity products. Surrender fees generated when
a variable annuity lapses partially offset the lower management and advisory
fees due to lower account balances after lapse. In addition, the Company
increased its fee rates in the fourth quarter of 2000 which were effective for
the entire three-month period ended March 31, 2001.

Benefits and expenses increased $7.9 million, or 213.5%, to $11.6 million for
the three-months ended March 31, 2001 from $3.7 million reported in the
comparable prior year period. The increase in benefits and expenses is primarily
due to a $3.3 million increase in amortization of deferred policy acquisition
costs driven by poor separate account performance and revised estimates relating
to the implementation of new modeling systems. In addition, benefits to
policyholders increased $1.7 million primarily due to increased lapses in the
variable annuity business.

General Account Investments

Overall Composition of the General Account

Invested assets, excluding separate accounts, totaled $3.0 billion and $3.0
billion as of March 31, 2001 and December 31, 2000, respectively. The portfolio
composition has not significantly changed at March 31, 2001 as compared to
December 31, 2000. The following table shows the composition of investments in
our general account portfolio.

                                       As of March 31,      As of December 31,
                                            2001                  2000
                                     -----------------------------------------
                                     Carrying      % of      Carrying    % of
                                       Value       Total       Value     Total
                                     -----------------------------------------
                                       (in millions)           (in millions)
Fixed maturity securities (1) ....   $1,878.9       61.8%     1,727.2    57.9%
Mortgage loans (2) ...............      562.2       18.5        554.8    18.6
Real estate ......................       24.5        0.8         23.9     0.8
Policy loans (3) .................      345.0       11.4        334.2    11.2
Equity securities ................        9.5        0.3          8.1     0.3
Other invested assets ............       35.0        1.2         34.8     1.2
Short-term investments ...........       14.8        0.5         21.7     0.7
Cash and cash equivalents (4) ....      166.6        5.5        277.3     9.3
                                     --------     ------     --------   ------
    Total invested assets ........   $3,036.5     100.0%     $2,982.0   100.0%
                                     ========     ======     ========   ======

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $43.9 million and
      $42.4 million as of March 31, 2001 and December 31, 2000, respectively.
      Carrying value is composed of investments categorized as held-to-maturity,
      which are carried at amortized cost, and investments categorized as
      available-for-sale, which are carried at fair value. The total fair value
      of our fixed maturity security portfolio was $1,878.3 and $1,698.6
      million, at March 31, 2001 and December 31, 2000, respectively.

(2)   The fair value for our mortgage loan portfolio was $587.9 and $574.3
      million as of March 31, 2001 and December 31, 2000, respectively.

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

(4)   Cash and cash equivalents are included in total invested assets for the
      purposes of calculating yields on the income producing assets for the
      Company. Cash and cash equivalents are not considered part of Total
      Investments as shown on the consolidated balance sheet of the Company of
      $2,869.9 million and $2,704.7 million at March 31, 2001 and December 31,
      2000, respectively.


                                       20
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Consistent with the nature of our product liabilities, our assets are heavily
oriented toward fixed maturity securities. We determine the allocation of our
assets primarily on the basis of cash flow and return requirements of our
products and secondarily by the level of investment risk.

Fixed Maturity Securities. Our fixed maturity securities portfolio is
predominantly comprised of low risk, investment grade, publicly and privately
traded corporate bonds and senior tranches of asset-backed securities (ABS) and
mortgage-backed securities (MBS), with the balance invested in government bonds.
Our fixed maturity securities portfolio also includes redeemable preferred
stock. As of March 31, 2001, fixed maturity securities represented 61.8% of
general account investment assets with a carrying value of $1,878.9 billion,
roughly comprised of 51% public securities and 49% private securities. Each year
we direct the majority of our net cash inflows into investment grade fixed
maturity securities. We typically invest between 10% and 12% of funds allocated
to fixed maturity securities in below-investment-grade bonds while maintaining
our policy to limit the overall level of these bonds to no more than 10% of
invested assets and two-thirds of that balance in the BB category. Allocations
are based on our assessment of relative value and the likelihood of enhancing
risk-adjusted portfolio returns. While the general account 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 our total invested assets.

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

                     Fixed Maturity Securities -- By Issuer

<TABLE>
<CAPTION>
                                                    As of March 31,     As of December 31,
                                                         2001                 2000
                                                   ---------------------------------------
                                                   Carrying   % of      Carrying     % of
                                                     Value    Total       Value      Total
                                                   ---------------------------------------
                                                     (in millions)         (in millions)
<S>                                                <C>       <C>        <C>         <C>
Corporate securities..........................     $1,590.1   84.6%     $1,428.6     82.7%
MBS/ABS.......................................        258.8   13.8%        268.2     15.5%
U.S. Treasury securities and obligations of
   U.S. government agencies...................         16.5    0.9%         16.7      1.0%
Debt securities issued by foreign
   Governments................................         10.7    0.6%         10.9      0.6%
Obligations of states and political
   Subdivisions...............................          2.8    0.1%          2.8      0.2%
                                                   --------  ------     --------    ------
     Total....................................     $1,878.9  100.0%     $1,727.2    100.0%
                                                   ========  ======     ========    ======
</TABLE>

      Our MBS and ABS holdings, in keeping with our investment philosophy of
tightly managing interest rate risk, 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,
rather than in residential MBS where the underlying loans have no call
protection. By investing in MBS and ABS securities with relatively predictable
repayments, we add high quality, liquid assets to our portfolios without
incurring the risk of excessive cash flow in periods of low interest rates or a
cash flow deficit in periods of high interest rates.

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


                                       21
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

The following table sets forth the SVO ratings for our bond portfolio along with
an equivalent S&P rating agency designation. The majority of our bonds are
investment grade, with 85.2% invested in Category 1 and 2 securities as of March
31, 2001. As a percent of total invested assets, our below investment grade
bonds, at 8.9 % as of March 31, 2001, are higher than the American Council of
Life Insurers (ACLI) industry average of 5.9%, last published as of December 31,
1999. This allocation reflects our strategy of avoiding the unpredictability of
interest rate risk in favor of relying on our bond analysts' ability to better
predict credit or default risk. Our bond analysts operate in an industry-based,
team-oriented structure that permits the evaluation of a wide range of below
investment grade offerings in a variety of industries resulting in a
well-diversified high yield portfolio. A majority (66.8%) of our below
investment grade bonds are in category 3, the highest quality below investment
grade. Category 6 bonds represent securities that were originally acquired as
long-term investments, but subsequently became distressed. The fair value of
bonds in or near default was $17.0 million and $18.3 million as of March 31,
2001 and December 31, 2000, respectively. For the three months ended March 31,
2001 and 2000, $0.7 million and $0.3 million of net investment income on bonds
in or near default was recognized in net investment income, respectively. As of
March 31, 2001 and December 31, 2000, $0.5 million and $0.4 million of interest
on bonds in or near default was included in accrued investment income,
respectively. It is the Company's policy to reverse any accrued investment
income and cease accruing interest income on bonds in default and accrue
interest income on bonds near default that the Company expects to collect.

                 Fixed Maturity Securities -- By Credit Quality

<TABLE>
<CAPTION>
                                                As of March 31,             As of December 31,
                                          -------------------------------------------------------
                                                     2001                          2000
                                          -------------------------------------------------------
     SVO            S&P Equivalent          Carrying          % of        Carrying          % of
  Rating (1)        Designation (2)         Value (3)        Total        Value (3)         Total
-------------------------------------------------------------------------------------------------
                                          (in millions)                (in millions)
<S>                                           <C>            <C>           <C>              <C>
     1        AAA/AA/A.................         $754.1        41.1%          $634.2          37.6%
     2        BBB......................          809.8        44.1            774.5          46.0
     3        BB.......................          181.0         9.9            187.2          11.1
     4        B........................           58.1         3.2             61.4           3.7
     5        CCC and lower............           15.0         0.8              9.2           0.5
     6        In or near default.......           17.0         0.9             18.3           1.1
                                          -------------------------------------------------------
              Total....................       $1,835.0       100.0%        $1,684.8         100.0%
                                          =======================================================
</TABLE>

(1)   With respect to securities that are awaiting an SVO rating, we have
      assigned a rating based on an analysis that we believe is equivalent to
      that used by the SVO.
(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.
(3)   Does not include redeemable preferred stock with a carrying value of $43.9
      million and $42.4 million as of March 31, 2001 and December 31, 2000,
      respectively.


                                       22
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Investment Results

     The following table summarizes the Company's investment results for the
periods indicated. Overall, the yield, net of investment expenses, on our
general account portfolio increased by 25 basis points from the three-months
ended March 31, 2000. This is the result of shifting from lower yielding cash
assets to higher yielding assets and from investing new cash at above the 7.27%
portfolio rate for the period ending March 31, 2000.

                                               As of                 As of
                                          March 31, 2001        March 31, 2000
                                      ------------------------------------------
                                         Yield     Amount      Yield     Amount
                                      ------------------------------------------
                                            (in millions)          (in millions)
General account assets-excluding
policy loans
  Gross income                            8.00%     $53.4       7.83%     $48.0
  Ending assets-excluding policy
    loans                                         2,691.5               2,507.7
Policy loans
  Gross income                            7.07%       6.0       5.76%       4.2
  Ending assets                                     345.0                 296.1

   Total gross income                     7.90%      59.4       7.61%      52.2
    Less: investment expenses                        (2.8)                 (2.3)
                                                  -------               -------
      Net investment income               7.52%     $56.6       7.27%     $49.9
                                                  =======               =======

Liquidity and Capital Resources

      Liquidity describes the ability of a company to generate sufficient cash
flows to meet the cash requirements of business operations. Historically, our
principal cash flow sources have been premiums, deposits and charges on
policies, investment income, maturing investments and proceeds from sales of
investment assets. In addition to the need for cash flow to meet operating
expenses, our liquidity requirements relate principally to the liabilities
associated with our various life insurance and annuity products and to the
funding of investments in new products, processes and technologies.

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

      The liquidity of our insurance operations is also related to the overall
quality of our investments. As of March 31, 2001, $1,878.9 million, or 61.8% of
the investment portfolio is held in fixed maturity securities. In addition, the
Company held $181.4 million, or 6.0%, in cash and short-term investments at
March 31, 2001. For additional discussion of our investment portfolio see the
General Account Investments section above in this Management's Discussion and
Analysis of Financial Condition and Results of Segment Operations.


                                       23
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

      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 used in operating activities was $10.2 million and $32.5 million
for the three months ended March 31, 2001 and 2000, respectively. The decrease
in 2001 compared to 2000 resulted primarily due to the net change in deferred
policy acquisition costs due to the implementation of new modeling systems,
partially offset by a decrease in net income of $4.3 million.

Net cash used in investing activities was $136.8 million and $54.8 million for
the three months ended March 31, 2001 and 2000, respectively. The increase in
cash used in investing activities in 2001 as compared to 2000 resulted from
fewer sales and increased acquisitions of fixed maturities during the three
months ended March 31, 2001, an increase in net purchases of $79.4 million.
Increased acquisitions of short-term investments and mortgage loans was offset
by maturities, prepayments and scheduled redemptions of fixed maturities and
short-term investments.

Net cash provided by financing activities was $36.3 million and $151.2 million,
for the three months ended March 31, 2001 and 2000, respectively. The decrease
in 2001 as compared to 2000 resulted from an increase in cash payments made on
withdrawals of universal life insurance and investment-type contracts and a
reduction in cash payments received as deposits of universal life insurance and
investment-type contracts. Deposits on such universal life insurance and
investment-type contracts exceeded withdrawals by $36.3 million for the three
months ended March 31, 2001.

Given our historical cash flows and that of our wholly owned subsidiary 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 and 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.


                                       24
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Important Factors that May Affect Future Results

      The statements, analyses, and other information contained herein relating
to trends in the Company's operations and financial results, the markets for the
Company's products, the future development of the Company's business, and the
contingencies and uncertainties to which the Company may be subject, as well as
other statements including words such as "anticipate," "believe," "plan,"
"estimate," "expect," "intend," "will," "should," "may," and other similar
expressions, are "forward-looking statements" under the Private Securities
Litigation Reform Act of 1995. Such statements are made based upon management's
current expectations and beliefs concerning future events and their effects on
the Company, which may not be those anticipated by management. Our 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)
elimination of Federal tax benefits for our products and other changes in laws
and regulations (including in particular the possible amendment or repeal of the
Federal Estate Tax) which the Company expects would adversely affect sales of
our insurance and investment advisory products; (3) we face increasing
competition from mutual fund companies, banks and investment management firms as
well as from other insurance companies; (4) a decline or increased volatility in
the securities markets, and other economic factors, may adversely affect
variable life insurance and variable annuity businesses; (5) our life insurance
sales are highly dependent on a third party distribution relationship; (6)
customers may not be responsive to new or existing products or distribution
channels, (7) interest rate volatility may adversely affect our profitability;
(8) our net income and revenues will suffer if customers surrender annuities and
variable and universal life insurance policies; (9) 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; (10) we face risks relating to
our investment portfolio; (11) we may experience volatility in net income due to
changes in standards for accounting for derivatives and other changes; (12) we
are subject to risk-based capital requirements and possible guaranty fund
assessments; (13) the National Association of Insurance Commissioners'
codification of statutory accounting practices adversely affected our statutory
surplus; (14) John Hancock may be unable to retain personnel who are key to our
business; (15) litigation and regulatory proceedings may result in financial
losses, harm our reputation and divert management resources, and (16) we face
unforeseen liabilities arising from our acquisitions and dispositions of
businesses.

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


                                       25
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Capital Markets Risk Management

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

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

Credit Risk

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

      As of March 31, 2001, the Company's fixed maturity portfolio was comprised
of 85.2% investment grade securities and 14.8% below-investment-grade
securities. These percentages are consistent with recent experience and
indicative of the Company's long-standing investment philosophy of pursuing
moderate amounts of credit risk in return for higher expected returns. We
believe that credit risk can be successfully managed given our proprietary
credit evaluation models and experienced personnel.

Interest Rate Risk

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


                                       26
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

      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., 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 type of management is expressed as a
duration mismatch tolerance of only +/- .05 years, with other measures used for
limiting exposure to non-parallel risk. For non-guaranteed rate products, such
as whole life insurance or single premium deferred annuities, liability cash
flows are less predictable. Therefore, a conventional duration-matching strategy
is less effective at managing the inherent risk. For these products, we manage
interest rate risk based on scenario-based portfolio modeling that seeks to
identify the most appropriate investment strategy given probable policyholder
behavior and liability crediting needs under a wide range of interest rate
environments.

      As of March 31, 2001, there have been no material changes to the interest
rate exposures as reported in the Company's 2000 Form 10-K.

Derivative Instruments

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

      The Company's Investment Compliance Unit monitors all derivatives activity
for consistency with internal policies and guidelines. All derivatives trading
activity is reported monthly to the Company's Committee of Finance for review,
with a comprehensive governance report provided jointly each quarter by the
Company's Derivatives Supervisory Officer and Chief Investment Compliance
Officer. The table below reflects the Company's derivative positions as of March
31, 2001. The notional amounts in the table represent the basis on which pay or
receive amounts are calculated and are not reflective of credit risk. These
exposures represent only a point in time and will be subject to change as a
result of ongoing portfolio and risk management activities.

<TABLE>
<CAPTION>
                                                          As of March 31, 2001
                              ----------------------------------------------------------------------------
                                                                              Fair Value
                                                              --------------------------------------------
                                              Weighted
                              Notional      Average Term       -100 Basis                      +100 Basis
                               Amount         (Years)         Point Change    As of 3/31/01   Point Change
                              --------      ------------      ------------    -------------   ------------
                                             (in millions, except for Weighted Average Term)
<S>                           <C>                <C>             <C>             <C>             <C>
Interest rate swaps.....      $1,350.0           4.5             $ (17.9)        $ (0.5)         $15.2
Futures contracts (1)...          19.3           6.9                (1.1)          (0.1)           1.1
Interest rate caps......         239.4           4.6                 0.8            2.0            4.3
Interest rate floors....         361.4           6.7                 3.2            1.6            0.5
                              --------                           -------------------------------------
      Totals............      $1,970.1           4.9             $ (15.0)         $ 3.0          $21.1
                              ========                           =====================================
</TABLE>

----------
(1)   Represents the notional value on open contracts as of March 31, 2001.

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


                                       27
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

ITEM 6. EXHIBITS and REPORTS on FORM 8-K

(a)   Exhibits

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

NONE

b)    Reports on Form 8-K.

There were no reports on Form 8-K required to be filed during the period covered
by this report.


                                       28
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on the dates indicated.


JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY


By: /s/ MICHELE G. VAN LEER
    -------------------------------------------                     May 15, 2001
    Michele G. Van Leer
    Vice Chairman and President


By: /s/ EARL W. BAUCOM
    -------------------------------------------                     May 15, 2001
    Earl W. Baucom
    Controller
    (Principal Accounting Officer)


                                       29