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 June 30, 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 of             (I.R.S. Employer Identification No.)
incorporation or organization)

                              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
August 3, 2001:

                                     50,000
<PAGE>

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                         June 30,
                                                                                           2001         December 31,
                                                                                        (Unaudited)        2000
                                                                                   ---------------------------------
                                                                                              (in millions)
<S>                                                                                      <C>             <C>
Assets

Investments
Fixed maturities:
  Held-to-maturity--at amortized cost
  (fair value: 2001--$80.5; 2000--$686.8).......................................         $    82.3       $   715.4
  Available-for-sale--at fair value
  (cost: 2001--$1,969.5; 2000--$1,018.8)........................................           1,990.7         1,011.8
Equity securities:
  Available-for-sale--at fair value
  (cost: 2001--$12.9; 2000--$7.1)...............................................               9.5             8.1
Mortgage loans on real estate...................................................             549.7           554.8
Real estate.....................................................................              24.6            23.9
Policy loans....................................................................             342.5           334.2
Short-term investments..........................................................               3.3            21.7
Other invested assets...........................................................              49.1            34.8
                                                                                   ---------------------------------

  Total Investments.............................................................           3,051.7         2,704.7

Cash and cash equivalents.......................................................              49.6           277.3
Accrued investment income.......................................................              64.1            52.1
Premiums and accounts receivable................................................               2.4             7.0
Deferred policy acquisition costs...............................................           1,019.7           994.1
Reinsurance recoverable ........................................................              97.4            48.4
Other assets....................................................................              50.9            28.2
Separate accounts assets........................................................           7,223.7         8,082.9
                                                                                   ---------------------------------

  Total Assets..................................................................         $11,559.5       $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>
                                                                                      June 30,
                                                                                        2001           December 31,
                                                                                     (Unaudited)           2000
                                                                                  ----------------------------------
                                                                                             (in millions)
<S>                                                                                   <C>               <C>
Liabilities and Shareholder's Equity

Liabilities
Future policy benefits..........................................................      $ 2,902.7         $ 2,754.2
Policyholders' funds............................................................            7.2              14.2
Unearned revenue................................................................          220.3             212.0
Unpaid claims and claim expense reserves........................................           16.5              11.1
Dividends payable to policyholders..............................................            0.2               0.1
Income taxes....................................................................          129.5              64.2
Other liabilities...............................................................          172.2             250.4
Separate accounts liabilities...................................................        7,223.7           8,082.9
                                                                                  ----------------------------------

  Total Liabilities.............................................................       10,672.3          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...............................................................          299.3             232.9
Accumulated other comprehensive income (loss)...................................           13.0              (2.2)
                                                                                  ----------------------------------

  Total Shareholder's Equity....................................................          887.2             805.6

  Total Liabilities and Shareholder's Equity....................................      $11,559.5         $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       Six Months Ended
                                                                                June 30,                June 30,
                                                                            2001        2000        2001        2000
                                                                        -------------------------------------------------
                                                                                         (in millions)
<S>                                                                        <C>         <C>         <C>         <C>
Revenues
  Premiums..............................................................   $ 16.3      $  5.0      $ 31.7      $ 14.9
  Universal life and investment-type product charges ...................     88.9        72.7       185.2       168.5
  Net investment income ................................................     53.9        53.2       110.5       103.1
  Net realized investment and other gains (losses), net of related
    amortization of deferred policy acquisition costs ($0.9
    and $(0.6) for the three months ended June 30, 2001 and 2000 and
    $1.1 and $(0.6) for the six months ended June 30, 2001 and 2000,
    respectively) ......................................................       --        (7.2)        0.6       (11.6)
  Other revenue ........................................................       --          --         0.1         0.1
                                                                        -------------------------------------------------

    Total revenues......................................................    159.1       123.7       328.1       275.0

Benefits and Expenses
  Benefits to policyholders ............................................     66.6        46.1       128.3       115.6
  Other operating costs and expenses ...................................     20.1        32.7        43.6        48.0
  Amortization of deferred policy acquisition costs, excluding
    amounts related to net realized investment gains (losses) ($0.9 and
    $(0.6) for the three months ended June 30, 2001 and 2000 and $1.1
    and $(0.6) for the six months ended June 30, 2001 and 2000,
    respectively).......................................................     11.8        11.9        37.5        18.3
  Dividends to policyholders ...........................................      5.6         6.5        10.9        12.9
                                                                        -------------------------------------------------

      Total benefits and expenses ......................................    104.1        97.2       220.3       194.8
                                                                        -------------------------------------------------

Income before income taxes and cumulative
  effect of accounting change ..........................................     55.0        26.5       107.8        80.2
Income taxes ...........................................................     18.8         6.3        39.8        24.6
                                                                        -------------------------------------------------

Income before cumulative effect of accounting change ...................     36.2        20.2        68.0        55.6

Cumulative effect of accounting change, net of tax - Note 1.............       --          --        (1.6)         --
                                                                        -------------------------------------------------
Net income .............................................................   $ 36.2      $ 20.2      $ 66.4      $ 55.6
                                                                        =================================================
</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
                                                     Additional                  Other           Total      Outstanding
                                           Common     Paid In    Retained    Comprehensive   Shareholder's     Shares
                                            Stock     Capital    Earnings       Income          Equity     (in thousands)
                                         ---------------------------------------------------------------------------------
                                                                          (in millions)
<S>                                          <C>      <C>          <C>         <C>             <C>              <C>
Balance at April 1, 2000............         $2.5     $572.4       $168.9      $ (9.8)         $734.0           50.0

Comprehensive income:
  Net income .......................                                 20.2                        20.2

Other comprehensive income, net of tax:
  Net unrealized losses.............                                             (2.7)           (2.7)
                                                                                            ----------------
Comprehensive income................                                                             17.5
                                         ---------------------------------------------------------------------------------

Balance at June 30, 2000............         $2.5     $572.4       $189.1      $(12.5)         $751.5           50.0
                                         =================================================================================

<CAPTION>
                                                                              Accumulated
                                                     Additional                  Other           Total      Outstanding
                                           Common     Paid In    Retained    Comprehensive   Shareholder's     Shares
                                            Stock     Capital    Earnings       Income          Equity     (in thousands)
                                         ---------------------------------------------------------------------------------
                                                                          (in millions)
<S>                                          <C>      <C>          <C>         <C>             <C>              <C>
Balance at April 1, 2001............         $2.5     $572.4       $263.1      $  9.4          $847.4           50.0

Comprehensive income:
  Net income........................                                 36.2                        36.2

Other comprehensive income, net of tax:
  Net unrealized gains..............                                              3.6             3.6
                                                                                            ----------------
Comprehensive income................                                                             39.8
                                         ---------------------------------------------------------------------------------

Balance at June 30, 2001............         $2.5     $572.4       $299.3      $ 13.0          $887.2           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 CHANGES IN SHAREHOLDER'S EQUITY
                            AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                              Accumulated
                                                     Additional                  Other           Total      Outstanding
                                           Common     Paid In    Retained    Comprehensive   Shareholder's     Shares
                                            Stock     Capital    Earnings       Income          Equity     (in 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 .......................                                 55.6                        55.6

Other comprehensive income, net of tax:
  Net unrealized gains..............                                              0.9             0.9
                                                                                            ----------------
Comprehensive income................                                                             56.5
                                         ---------------------------------------------------------------------------------

Balance at June 30, 2000............         $2.5     $572.4       $189.1      $(12.5)         $751.5           50.0
                                         =================================================================================

<CAPTION>
                                                                              Accumulated
                                                     Additional                  Other           Total      Outstanding
                                           Common     Paid In    Retained    Comprehensive   Shareholder's     Shares
                                            Stock     Capital    Earnings       Income          Equity     (in 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........................                                 66.4                        66.4

Other comprehensive income, net of tax:
  Net unrealized gains..............                                              8.0             8.0
                                                                                            ----------------
Comprehensive income................                                                             74.4
Change in accounting principle                                                    7.2             7.2
                                         ---------------------------------------------------------------------------------

Balance at June 30, 2001............         $2.5     $572.4       $299.3      $ 13.0          $887.2           50.0
                                         =================================================================================
</TABLE>

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


                                        6
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                Six Months Ended
                                                                                                    June 30,
                                                                                                 2001       2000
                                                                                              ----------------------
                                                                                                  (in millions)
<S>                                                                                             <C>        <C>
Cash flows from operating activities:
  Net income ...........................................................................        $  66.4    $  55.6
  Adjustments to reconcile net income to net cash provided by operating activities:
    Amortization of discount - fixed maturities ........................................           (0.2)      (0.2)
    Net realized investment and other (losses) gains, net ..............................           (0.6)      11.6
    Change in deferred policy acquisition costs ........................................          (30.4)     (66.9)
    Depreciation and amortization ......................................................            0.3        0.3
    Increase in accrued investment income ..............................................          (12.0)      (7.6)
    Decrease in premiums and accounts receivable .......................................            4.6        6.6
    (Increase) decrease in other assets and other liabilities, net .....................         (152.4)      24.3
    Increase (decrease) in policy liabilities and accruals, net ........................          203.2     (158.5)
    Increase in income taxes ...........................................................           61.5       44.7
                                                                                              ----------------------

      Net cash provided by (used in) operating activities ..............................          140.4      (90.1)

Cash flows from investing activities:
  Sales of:
    Fixed maturities available-for-sale ................................................           41.7      127.3
    Equity securities available-for-sale ...............................................            4.4        0.7
    Short-term investments and other invested assets ...................................            2.0         --
  Maturities, prepayments and scheduled redemptions of:
    Fixed maturities held-to-maturity ..................................................            2.0       40.5
    Fixed maturities available-for-sale ................................................           88.6       38.0
    Short-term investments and other invested assets ...................................           33.2       10.6
    Mortgage loans on real estate ......................................................           35.6       20.0
  Purchases of:
    Fixed maturities held-to-maturity ..................................................           (1.2)     (73.7)
    Fixed maturities available-for-sale ................................................         (460.7)    (253.5)
    Equity securities available-for-sale ...............................................           (1.2)      (0.1)
    Real estate ........................................................................           (0.3)      (0.1)
    Short-term investments and other invested assets ...................................          (22.6)     (14.2)
    Mortgage loans on real estate issued ...............................................          (27.8)     (61.4)
    Other, net .........................................................................          (15.6)     (43.0)
                                                                                              ----------------------

      Net cash used in investing activities ............................................         (321.9)    (208.9)

Cash flows from financing activities:
  Universal life and investment-type contract deposits .................................          454.5      550.5
  Universal life and investment-type contract maturities and withdrawals ...............         (500.7)    (223.5)
                                                                                              ----------------------

      Net cash (used in) provided by financing activities ..............................          (46.2)     327.0
                                                                                              ----------------------

      Net (decrease) increase in cash and cash equivalents .............................         (227.7)      28.0

Cash and cash equivalents at beginning of period .......................................          277.3      259.6
                                                                                              ----------------------

      Cash and cash equivalents at end of period .......................................        $  49.6    $ 287.6
                                                                                              ======================
</TABLE>

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


                                        7
<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 accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, these unaudited consolidated financial statements contain all
adjustments, consisting of only normal and recurring adjustments, necessary for
a fair presentation of the financial position and results of operations.
Operating results for the three and six month periods ended June 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ending 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 accounting principles generally accepted in the United
States for complete financial statements.

Reorganization and Initial Public Offering

Pursuant to a Plan of Reorganization approved by its 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.

Cumulative Effect of Accounting Change

In June 1998, the Financial Accounting Standards Board (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." 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 change in
value of the hedged item. If the derivative is accounted for as a hedge,
depending on the nature of the hedge, the change in the fair value of
derivatives is either offset against the change in the fair value of the hedged
asset, liability or firm commitment through earnings or recognized in other
comprehensive income until the change in value of the hedged item is recognized
in earnings. The ineffective portion of a derivative's change in fair value is
recognized immediately in earnings and is included in net realized and other
investment gains. As a result, such amounts are not included in the
determination of the Company's segment after tax operating income. 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.


                                        8
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended. The Company's risk management
philosophy has not changed as a result of adoption of the Statement. 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 No. 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
No. 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.

Codification

In March 1998, the National Association of Insurance Commissioners (NAIC)
adopted codified statutory accounting principles (Codification) that became
effective January 1, 2001. Codification changes prescribe statutory accounting
practices and results in changes to the accounting practices that the Company
uses to prepare its statutory-basis financial statements. The state of domicile
of the Company adopted Codification as the prescribed basis of accounting on
which 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 reduced the Company's
statutory-basis capital and surplus, the Company 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
$41.5 million, $80.1 million, $32.1 million and $80.6 million for the three and
six month periods ended June 30, 2001 and 2000, respectively. As of June 30,
2001, the Company owed John Hancock $13.3 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, 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.


                                        9
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 -- Segment Information - (Continued)

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.

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)
restructuring costs related to our distribution systems and retail operations;
and (iii) the surplus tax.

The following table summarizes selected financial information by segment for the
three and six month periods ended June 30, 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 June 30, 2001:                      Protection     Gathering       Consolidated
                                                                      -------------------------------------------------
<S>                                                                     <C>             <C>             <C>
Revenues:
  Segment revenues................................................      $   148.1       $    11.0       $    159.1
  Net realized investment and other losses, net...................             --              --               --
                                                                      -------------------------------------------------
  Revenues........................................................      $   148.1       $    11.0       $    159.1
                                                                      =================================================

  Net investment income...........................................      $    54.7       $    (0.8)      $     53.9

Net Income:
  Segment after-tax operating income..............................      $    32.7       $     3.7       $     36.4
    Net realized investment and other losses, net.................           (0.2)             --             (0.2)
                                                                      -------------------------------------------------
   Net income.....................................................      $    32.5       $     3.7       $     36.2
                                                                      =================================================

Supplemental Information:
  Equity in net income of investees accounted
    for by the equity method......................................      $    (1.8)             --       $     (1.8)
  Amortization of deferred policy acquisition costs...............            9.4       $     2.4             11.8
  Segment assets..................................................      $ 9,409.3       $ 2,150.2       $ 11,559.5
</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 June 30, 2000:                      Protection     Gathering       Consolidated
                                                                      -------------------------------------------------
<S>                                                                     <C>             <C>             <C>
Revenues:
  Segment revenues................................................      $   118.9       $    12.0       $    130.9
  Net realized investment and other (losses), net.................           (4.1)           (3.1)            (7.2)
                                                                      -------------------------------------------------
  Revenues........................................................      $   114.8             8.9       $    123.7
                                                                      =================================================
  Net investment income...........................................      $    53.9       $    (0.7)      $     53.2

Net Income:
  Segment after-tax operating income..............................      $    22.0       $     1.1       $     23.1
    Net realized investment and other (losses), net...............           (2.6)           (2.0)            (4.6)
    Surplus tax...................................................            1.7              --              1.7
                                                                      -------------------------------------------------
  Net income......................................................      $    21.1       $    (0.9)      $     20.2
                                                                      =================================================

Supplemental Information:
  Equity in net income of investees accounted
    for by the equity method......................................      $     0.5              --       $      0.5
  Amortization of deferred policy
    acquisition costs.............................................            6.9             5.0             11.9
  Segment assets..................................................      $ 9,507.3       $ 3,031.1       $ 12,538.4

<CAPTION>
                                                                                        Retail
                                                                          Retail         Asset
As of or for the six months ended June 30, 2001:                        Protection     Gathering       Consolidated
                                                                      -------------------------------------------------
<S>                                                                     <C>             <C>             <C>
Revenues:
  Segment revenues................................................      $   305.0       $    22.5       $    327.5
  Net realized investment and other gains, net....................            0.6              --              0.6
                                                                      -------------------------------------------------
  Revenues........................................................      $   305.6       $    22.5       $    328.1
                                                                      =================================================

  Net investment income...........................................      $   111.9       $    (1.4)      $    110.5

Net Income:
  Segment after-tax operating income..............................      $    64.4       $     3.4       $     67.8
    Net realized investment and other gains, net..................            0.2              --              0.2
    Change in accounting principle................................           (1.6)             --             (1.6)
                                                                      -------------------------------------------------
  Net income......................................................      $    63.0       $     3.4       $     66.4
                                                                      =================================================

Supplemental Information:
  Equity in net income of investees accounted
    for by the equity method......................................      $    (1.3)             --       $     (1.3)
  Amortization of deferred policy acquisition costs...............           28.0       $     9.5             37.5
  Segment assets..................................................      $ 9,409.3       $ 2,150.2       $ 11,559.5
</TABLE>


                                       11
<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 six months ended June 30, 2000:                        Protection     Gathering       Consolidated
                                                                      -------------------------------------------------
<S>                                                                     <C>             <C>             <C>
Revenues:
  Segment revenues................................................      $   263.1       $    23.5       $    286.6
  Net realized investment and other losses, net...................           (5.4)           (6.2)           (11.6)
                                                                      -------------------------------------------------
  Revenues........................................................      $   257.7       $    17.3       $    275.0
                                                                      =================================================

  Net investment income...........................................      $   104.7       $    (1.6)      $    103.1

Net Income:
  Segment after-tax operating income..............................      $    56.1       $     6.1       $     62.2
    Net realized investment and other losses, net.................           (3.5)           (4.0)            (7.5)
    Surplus tax...................................................            1.7              --              1.7
    Restructuring charges.........................................           (0.2)             --             (0.2)
    Other demutualization related costs...........................           (0.5)           (0.1)            (0.6)
                                                                      -------------------------------------------------
  Net income......................................................      $    53.6       $     2.0       $     55.6
                                                                      =================================================

Supplemental Information:
  Equity in net income of investees accounted
    for by the equity method......................................      $     0.6              --       $      0.6
  Amortization of deferred policy acquisition costs...............            9.5       $     8.8             18.3
  Segment assets..................................................      $ 9,507.3       $ 3,031.1       $ 12,538.4
</TABLE>

The Company operates only in the United States and has no reportable major
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 of assets and liabilities.

The fair value of derivative instruments classified as assets at June 30, 2001
was $18.7 million, and appears on the Consolidated Balance Sheet in other
assets. The fair value of derivative instruments classified as liabilities at
June 30, 2001 was $5.1 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
No. 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. 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, there is no
hedge ineffectiveness because the derivative instrument was constructed such
that all the terms of the derivative exactly match the hedged risk in the hedged
item.

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


                                       12
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 -- Derivatives and Hedging Instruments - (Continued)

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.

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 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 and six month periods ended June 30, 2001, the Company recognized
a net gain of $0.2 million and a net loss of $0.1 million, respectively, related
to the ineffective portion of its fair value hedges, and a net loss of $0.3
million and $0.2 million, respectively, related to the portion of the hedging
instruments that were excluded from the assessment of hedge effectiveness. For
the three months ended June 30, 2001, all of the Company's hedged firm
commitments 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 and six month periods ended June 30, 2001, the Company recognized
no gains or losses related to the ineffective portion of its cash flow hedges,
and a net loss of $2.7 million and $2.5 million, respectively, related to the
portion of the hedging instruments that was excluded from the assessment of
hedge effectiveness. For the three and six month periods ended June 30, 2001,
all of the Company's hedged forecasted transactions qualified as cash flow
hedges.

For the three and six month periods ended June 30, 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 and six month periods ended June 30, 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


                                       13
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 -- Derivatives and Hedging Instruments - (Continued)

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 Hedges without designating
the derivatives as hedging instruments.


                                       14
<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 June 30, 2001, compared with December
31, 2000, and its consolidated results of operations for the three and six month
periods ended June 30, 2001 and June 30, 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.


                                       15
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Results of Operations

The table below presents the consolidated results of operations for the three
and six month periods ended June 30, 2001 and 2000, respectively.

<TABLE>
<CAPTION>
                                                         Three months ended          Six months ended
                                                              June 30,                    June 30,
                                                    --------------------------------------------------------
                                                         2001          2000          2001          2000
                                                         ----          ----          ----          ----
                                                                         (in millions)
<S>                                                     <C>           <C>           <C>           <C>
Revenues                                                $159.1        $123.7        $328.1        $275.0

Benefits and expenses                                    104.1          97.2         220.3         194.8
                                                    --------------------------------------------------------

Income before income taxes and
  cumulative effect of accounting
  change                                                  55.0          26.5         107.8          80.2

Income taxes                                              18.8           6.3          39.8          24.6

Cumulative effect of accounting change                      --            --          (1.6)           --
                                                    --------------------------------------------------------

Net income                                              $ 36.2        $ 20.2        $ 66.4        $ 55.6
                                                    ========================================================
</TABLE>

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

      Consolidated income before income taxes and cumulative effect of
accounting change of $55.0 million, for the three months ended June 30, 2001
increased by $28.5 million, or 107.5%, from that reported in the comparable
prior year period. The Protection Segment's income before income taxes and
cumulative effect of accounting change increased $19.8 million, or 67.1%, for
the three months ended June 30, 2001 compared to the three months ended June 30,
2000 primarily due to an increase in universal life and investment-type product
charges of $17.3 million, or 28.8%, and premiums of $11.3 million, or 226.0%,
while benefits to policyholders increased $20.1 million partially offset by a
decrease in operating expenses. Income before income taxes and cumulative effect
of accounting change in the Asset Gathering Segment was $5.7 million, an
increase of $8.7 million, or 290.0%, for the three months ended June 30, 2001
from that reported in the comparable prior year period. The increase in Asset
Gathering was primarily due to no net realized investment and other losses and
lower operating expenses in the current period.

      Revenues of $159.1 million for the three months ended June 30, 2001
increased $35.4 million, or 28.6%, compared to the three months ended June 30,
2000, primarily due to a $33.3 million, or 29.0%, increase in revenues in the
Protection Segment. The Protection Segment's increase in revenues was primarily
driven by a $17.3 million increase in universal life and investment-type product
charges and a $11.3 million increase in premiums. Growth in universal life and
investment-type product charges and premiums is being driven by growth in the
in-force and an increase in fees on variable life insurance products. Revenues
in the Asset Gathering Segment increased $2.1 million, or 23.6%, primarily due
to net realized investment and other losses of $3.1 million in the prior year
and none in 2001.

      Benefits and expenses of $104.1 million for the three months ended June
30, 2001 increased $6.9 million, or 7.1%, compared to the three months ended
June 30, 2000, primarily due to an increase of $13.5 million, or 15.8%, in the
Protection Segment. The increase in Protection was driven by a $20.1 million
increase in benefits to policyholders driven by growth in the in-force.
Protection's increase in benefits to policyholders was partially offset by a
$8.2 million decrease in other operating costs and expenses due to operating
cost reductions. Benefits and expenses in the Asset Gathering Segment decreased
$6.6 million, or 55.5%, for the quarter ended June 30, 2001, primarily due to a
$4.4 million decrease in other operating costs and expenses. The decrease in
other operating costs and expenses is driven by our cost reduction program.


                                       16
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

      Consolidated income before income taxes and cumulative effect of
accounting change of $107.8 million, for the six months ended June 30, 2001
increased by $27.6 million, or 34.4%, from that reported in the comparable prior
year period. The Protection Segment's income before income taxes and cumulative
effect of accounting change increased $23.6 million, or 30.0%, for the six
months ended June 30, 2001 compared to the six months ended June 30, 2000 due to
an increase in universal life and investment-type product charges of $17.9
million, or 12.5%, and premiums of $16.8 million, or 112.8%, while operating
expenses decreased $2.8 million. Partially offsetting these changes was an
increase in amortization of deferred policy acquisition costs of $18.5 million.
Income before income taxes and cumulative effect of accounting change in the
Asset Gathering Segment increased $4.0 million, or 250.0% for the six months
ended June 30, 2001 from that reported in the comparable prior year period. The
increase in Asset Gathering was primarily due to a $6.2 million in net realized
investment and other losses in the prior year and none in 2001.

      Revenues of $328.1 million for the six months ended June 30, 2001
increased $53.1 million, or 19.3%, compared to the six months ended June 30,
2000, primarily due to a $47.9 million, or 18.6%, increase in revenues in the
Protection Segment. The Protection Segment's increase in revenues was primarily
driven by a $17.9 million increase in universal life and investment-type product
charges, a $16.8 million increase in premiums, and a $7.2 million increase in
net investment income. Growth in universal life and investment-type product
charges and premiums is being driven by growth in the in-force and an increase
in fees on variable life insurance products. Revenues in the Asset Gathering
Segment increased $5.2 million, or 30.1%, primarily due to net realized
investment and other losses of approximately $6.2 million in the prior year and
none in 2001.

      Benefits and expenses of $220.3 million for the six months ended June 30,
2001 increased $25.5 million, or 13.1%, compared to the six months ended June
30, 2000, primarily due to an increase of $24.3 million, or 13.6%, in the
Protection Segment. The increase in Protection was driven by a $18.5 million
increase in amortization of deferred policy acquisition costs due to poor
separate account performance for the period and revised estimates relating to
the implementation of new modeling systems during the period. Protection's
increase in amortization of deferred policy acquisition costs was partially
offset by a $2.8 million decrease in operating expenses due to our cost
reduction program. Benefits and expenses in the Asset Gathering Segment
increased $1.2 million, or 7.6%, for the six months ended June 30, 2001,
primarily due to a $2.1 million increase in benefits to policyholders. The
increase in benefits to policyholders is due to payments to policyholders under
the guaranteed minimum death benefit feature of the variable annuity products
and growth in fixed fund interest credits due to the dollar cost averaging
feature of the variable annuity products.

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, 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


                                       17
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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.

<TABLE>
<CAPTION>
                                                           Three months ended      Six months ended
                                                                June 30,               June 30,
                                                         -----------------------------------------------
                                                            2001        2000        2001       2000
                                                         -----------------------------------------------
                                                                         (in millions)
<S>                                                         <C>         <C>         <C>        <C>
Segment Data: (1)
Segment after-tax operating income:
  Protection Segment.................................       $32.7       $22.0       $64.4      $56.1
  Asset Gathering Segment............................         3.7         1.1         3.4        6.1
                                                         -----------------------------------------------
  Total segment after-tax operating income...........        36.4        23.1        67.8       62.2

After-tax adjustments: (1)
  Net realized investment and
    other gains (losses), net........................        (0.2)       (4.6)        0.2       (7.5)
  Surplus Tax........................................          --         1.7          --        1.7
  Other demutualization related costs................          --          --          --       (0.6)
  Restructuring charges..............................          --          --          --       (0.2)
                                                         -----------------------------------------------
  Total after-tax adjustments........................        (0.2)       (2.9)        0.2       (6.6)
                                                         -----------------------------------------------

GAAP Reported:
  Income before cumulative effect
    of accounting change.............................        36.2        20.2        68.0       55.6
  Cumulative effect of accounting change.............          --          --        (1.6)        --
                                                         -----------------------------------------------
  Net income.........................................       $36.2       $20.2       $66.4      $55.6
                                                         ===============================================
</TABLE>

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

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 and other 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 such 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 and six
month periods ended June 30, 2001 and 2000.


                                       18
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
                                                              Three months ended             Six months ended
                                                                   June 30,                      June 30,
                                                             2001           2000           2001            2000
                                                        --------------------------------------------------------------
                                                                                (in millions)
<S>                                                         <C>            <C>             <C>             <C>
Net realized investment and other gains (losses)........     $0.9          $(7.8)          $ 1.7           $(12.2)

Less amortization of deferred policy acquisition
  costs related to net realized investment and other
  gains.................................................     (0.9)           0.6            (1.1)             0.6
                                                        --------------------------------------------------------------
Net realized investment and other gains,
  net of related amortization of deferred policy
  acquisition costs per unaudited consolidated
  financial statements .................................       --           (7.2)            0.6            (11.6)

Less income tax effect..................................     (0.2)           2.6            (0.4)             4.1
                                                        --------------------------------------------------------------
Net realized investment and other gains (losses),
  net - after-tax adjustment to calculate segment
  operating income......................................    $(0.2)         $(4.6)          $ 0.2           $ (7.5)
                                                        ==============================================================
</TABLE>

As part of the parent Company's Competitive Position Project the Company has
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 six month periods ended June 30, 2000. No such
costs were incurred in the three months ended June 30, 2001 and 2000, or the six
months ended June 30, 2001, respectively.

During the prior period 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 six month period
ended June 30, 2000. No such costs were incurred in 2001.


                                       19
<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.

<TABLE>
<CAPTION>
                                                                Three months ended       Six months ended
                                                                     June 30,                June 30,
                                                                 2001        2000        2001        2000
                                                             -------------------------------------------------
                                                                              (in millions)
<S>                                                             <C>         <C>         <C>         <C>
Revenues (1) ...........................................        $148.1      $118.9      $305.0      $263.1

Benefits and expenses...................................          98.8        85.3       203.4       177.9

Income taxes............................................          16.6        11.6        37.2        29.1
                                                             -------------------------------------------------
Segment after-tax operating income (1) .................          32.7        22.0        64.4        56.1
                                                             -------------------------------------------------

After-tax adjustments: (1)
  Net realized investment and other gains
    (losses), net.......................................          (0.2)       (2.6)        0.2        (3.5)
  Other demutualization related costs...................            --          --          --        (0.5)
  Surplus tax...........................................            --         1.7          --         1.7
  Restructuring charges.................................            --          --          --        (0.2)
                                                             -------------------------------------------------
Total after-tax adjustments.............................          (0.2)       (0.9)        0.2        (2.5)

GAAP Reported:
Income before cumulative effect of accounting
  change................................................          32.5        21.1        64.6        53.6
  Cumulative effect of accounting
    change, net of tax..................................            --          --        (1.6)         --
                                                             -------------------------------------------------
Net income..............................................        $ 32.5      $ 21.1      $ 63.0      $ 53.6
                                                             =================================================
</TABLE>

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

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Segment after-tax operating income was $32.7 million for the three months ended
June 30, 2001, an increase of $10.7 million, or 48.6%, from $22.0 million for
the three months ended June 30, 2000. The increase in the Protection Segment's
after-tax operating income is primarily due to a $17.3 million increase in
universal life and investment-type charges and a $8.2 million decrease in other
operating costs and expenses. Partially offsetting this was an increase in
benefits to policyholders of $20.1 million due to growth in the in-force.

Revenues were $148.1 million for the three months ended June 30, 2001, an
increase of $29.2 million, or 24.6%, from $118.9 million for the three months
ended June 30, 2000. Revenue growth was primarily driven by a $17.3 million
increase in universal life and investment-type charges and a $11.3 million
increase in premiums. The increase in universal life and investment-type product
charges and premiums is driven by growth in the in-force and an increase in fees
on variable life insurance products.

Benefits and expenses were $98.8 million for the three months ended June 30,
2001, an increase of $13.5 million, or 15.8%, from $85.3 million for the three
months ended June 30, 2000. Benefits to policyholders increased $20.1 million,
or 45.7% primarily due to growth in the in-force. Partially offsetting the
increase in benefits to policyholders was an $8.2 million decrease in other
operating costs and expenses driven by our cost reduction program.


                                       20
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

Segment after-tax operating income was $64.4 million for the six months ended
June 30, 2001, an increase of $8.3 million, or 14.8%, from $56.1 million for the
six months ended June 30, 2000. The increase in the Protection Segment's
after-tax operating income is primarily due to a $17.9 million increase in
universal life and investment-type product charges, a $16.8 million increase in
premiums and a $7.2 million increase in net investment income. Partially
offsetting these items was an increase in benefits to policyholders of $10.6
million, and an increase in amortization of deferred policy acquisition costs of
$18.5 million.

Revenues were $305.0 million for the six months ended June 30, 2001, an increase
of $41.9 million, or 15.9%, from $263.1 million for the six months ended June
30, 2000. Revenue growth was primarily driven by a $17.9 million increase in
universal life and investment-type product charges, a $16.8 million increase in
premiums and a $7.2 million increase in net investment income. The increase in
universal life and investment-type product charges, premiums and net investment
income is driven by growth in the in-force and an increase in fees on variable
life insurance products.

Benefits and expenses were $203.4 million for the six months ended June 30,
2001, an increase of $25.5 million, or 14.3%, from $177.9 million for the six
months ended June 30, 2000. Amortization of deferred policy acquisition costs
increased $18.5 million, or 194.7%, due to poor separate account performance for
the period and revised estimates relating to the implementation of new modeling
systems. In addition, benefits to policyholders increased $10.6 million,
primarily due to growth in the in-force. Partially offsetting these increases
was a decrease in other operating costs and expenses of $1.6 million.

Retail-Asset Gathering Segment

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

<TABLE>
<CAPTION>
                                                                Three months ended       Six months ended
                                                                     June 30,                June 30,
                                                                 2001        2000        2001        2000
                                                             -------------------------------------------------
                                                                              (in millions)
<S>                                                              <C>         <C>         <C>          <C>
Revenues (1) .........................................           $11.0       $12.0       $22.5       $23.5

Benefits and expenses.................................             5.3        11.9        16.9        15.6

Income taxes..........................................             2.0        (1.0)        2.2         1.8
                                                             -------------------------------------------------

Segment after-tax operating income (1) ...............             3.7         1.1         3.4         6.1
                                                             -------------------------------------------------

After-tax adjustments: (1) ...........................
  Net realized investment and other losses, net.......              --        (2.0)         --        (4.0)
  Other demutualization related costs.................              --          --          --        (0.1)
                                                             -------------------------------------------------
Total after-tax adjustments...........................              --        (2.0)         --        (4.1)

GAAP Reported:
                                                             -------------------------------------------------
Net income (loss).....................................           $ 3.7       $(0.9)      $ 3.4        $2.0
                                                             =================================================
</TABLE>

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

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Segment after-tax operating income was $3.7 million for the three months ended
June 30, 2001, an increase of $2.6 million, or 236.4%, from the comparable prior
year period. The increase in Asset Gathering was primarily due to $4.4 million,
or 91.7%, decrease in other operating costs and expenses and a decrease in
amortization of deferred policy acquisition costs of $2.6 million, or 52.0%.
Investment-type product charges decreased $1.1 million.


                                       21
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

Revenues were $11.0 million for the three months ended June 30, 2001 a decrease
of $1.0 million, or 8.3%, from the comparable prior year period. Revenue
consists primarily of $11.6 million in investment-type product charges on
variable annuity products, which decreased $1.1 million from the prior period.
Investment-type product charges on variable annuity products remained stable
despite difficult market conditions for the separate accounts. Partially
offsetting the impact of a decline in average variable annuity reserves, the
Company increased its product fees in the fourth quarter of 2000 which were
effective for the entire three month period ended June 30, 2001.

Benefits and expenses decreased $6.6 million, or 55.5%, to $5.3 million for the
three months ended June 30, 2001 from $11.9 million reported in the comparable
prior year period. The decrease in benefits and expenses is primarily due to a
$4.4 million decrease in other operating cost and expenses resulting from our
cost reduction program. In addition, amortization of deferred policy acquisition
costs decreased $2.6 million.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

Segment after-tax operating income was $3.4 million for the six months ended
June 30, 2001, a decrease of $2.7 million, or 44.3%, from the comparable prior
year period. The decrease was primarily due to an increase of $2.1 million in
benefits to policyholders.

Revenues were $22.5 million for the six months ended June 30, 2001, a decrease
of $1.0 million, or 4.3%, from the comparable prior year period. Revenue
consists primarily of $23.9 million in investment-type product charges on
variable annuity products, which decreased $1.2 million from the prior period.
Partially offsetting a decline in average variable annuity reserves, the Company
increased its product fees in the fourth quarter of 2000, which were effective
for the entire six month period ended June 30, 2001.

Benefits and expenses increased $1.3 million, or 8.3%, to $16.9 million for the
six months ended June 30, 2001 from $15.6 million reported in the comparable
prior year period. The increase in benefits and expenses is primarily due to a
$2.1 million increase in benefits to policyholders from higher interest credited
on fixed funds of variable annuity products and payments to policyholders under
the guaranteed minimum death benefit feature of the variable annuity products.
In addition, amortization of deferred policy acquisition costs increased $0.7
million, or 8.0%. Partially offsetting these increases was a decrease in other
operating costs and expenses resulting from our cost reduction program.


                                       22
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

General Account Investments

Overall Composition of the General Account

Invested assets, excluding separate accounts, totaled $3.1 billion and $3.0
billion as of June 30, 2001 and December 31, 2000, respectively. The portfolio
composition has not significantly changed at June 30, 2001 as compared to
December 31, 2000. The following table shows the composition of investments in
our general account portfolio.

<TABLE>
<CAPTION>
                                              As of June 30,             As of December 31,
                                                   2001                         2000
                                      -----------------------------------------------------------
                                        Carrying         % of          Carrying        % of
                                          Value          Total          Value         Total
                                      -----------------------------------------------------------
                                      (in millions)                  (in millions)
<S>                                      <C>             <C>            <C>           <C>
Fixed maturity securities (1)            $2,073.0         66.8%         $1,727.2       57.9%
Mortgage loans (2)                          549.7         17.7%            554.8       18.6
Real estate                                  24.6           .8%             23.9        0.8
Policy loans (3)                            342.5         11.0%            334.2       11.2
Equity securities                             9.5           .3%              8.1        0.3
Other invested assets                        49.1          1.7%             34.8        1.2
Short-term investments                        3.3           .1%             21.7        0.7
Cash and cash equivalents (4)                49.6          1.6%            277.3        9.3
                                      -----------------------------------------------------------

  Total invested assets (5)              $3,101.3        100.0%         $2,982.0      100.0%
                                      ===========================================================
</TABLE>

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $44.0 million and
      $42.4 million as of June 30, 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 the fixed maturity security portfolio was $2,071.2 and $1,698.6
      million, at June 30, 2001 and December 31, 2000, respectively.

(2)   The fair value of the mortgage loan portfolio was $567.7 and $467.3
      million as of June 30, 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
      $3,051.7 million and $2,704.7 million at June 30, 2001 and December 31,
      2000, respectively.

(5)   Total Investments on the Company's Consolidated Balance Sheet excludes
      amounts for cash and cash equivalents of $49.6 million and $277.3 million
      as of June 30, 2001 and December 31, 2000, respectively.

Consistent with the nature of the Company's product liabilities, assets are
heavily oriented toward fixed maturity securities. The Company determines the
allocation of assets primarily on the basis of cash flow and return requirements
of its products and by the level of investment risk.

Fixed Maturity Securities. The fixed maturity securities portfolio is
predominantly comprised of low risk, investment grade, publicly and privately
traded corporate bonds and senior tranches of asset-backed securities (ABS) and
mortgage-backed securities (MBS), with the balance invested in government bonds.
The fixed maturity securities portfolio also includes redeemable preferred
stock. As of June 30, 2001, fixed maturity securities represented 66.8% of
general account investment assets with a carrying value of $2.1 billion, roughly
comprised of 57% public securities and 43% private securities. Each year the
Company directs the majority of its net cash inflows into investment grade fixed
maturity securities. Typically between 5% and 15% of funds allocated to fixed
maturity securities are invested in below-investment-grade bonds while
maintaining a policy to limit the overall level of these bonds to no more than
10% of invested assets and the majority of that balance in the BB category.
Allocations are based on an assessment of relative value and the likelihood of
enhancing risk-adjusted portfolio returns. While the Company has profited from
the below-investment-grade asset class in the past, care is taken to manage its
growth strategically by limiting its size relative to the Company's net worth.


                                       23
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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

                     Fixed Maturity Securities -- By Issuer

<TABLE>
<CAPTION>
                                                 As of June 30,         As of December 31,
                                                      2001                     2000
                                            ----------------------------------------------------
                                              Carrying      % of       Carrying        % of
                                                Value       Total        Value        Total
                                            ----------------------------------------------------
v                                                 (in millions)             (in millions)
<S>                                           <C>           <C>        <C>            <C>
Corporate securities....................      $1,751.4       84.5%     $1,428.6        82.7%
MBS/ABS.................................         289.4       14.0%        268.2        15.5%
U.S. Treasury securities and obligations of
  U.S. government agencies..............          19.0         .9%         16.7         1.0%
Debt securities issued by foreign
  Governments...........................          11.4         .5%         10.9         0.6%
Obligations of states and political
  Subdivisions..........................           1.8         .1%          2.8         0.2%
                                            ----------------------------------------------------
Total...................................      $2,073.0      100.0%     $1,727.2       100.0%
                                            ====================================================
</TABLE>

      In keeping with the investment philosophy of tightly managing interest
rate risk, the Company's MBS & ABS holdings are heavily concentrated in
commercial MBS where the underlying loans are largely call protected, which
means they are not pre-payable without penalty prior to maturity at the option
of the issuer. By investing in MBS and ABS securities with relatively
predictable repayments, the Company adds high quality, liquid assets to the
portfolios without incurring the risk of cash flow variability.

      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 Standard & Poors
(S&P) and Moody's (i.e., BBB-/Baa3 or higher), while Categories 3-6 are the
equivalent of below-investment grade securities. SVO ratings are reviewed and
may be revised at least once a year.

The following table sets forth the SVO ratings for the Company's bond portfolio
along with an equivalent S&P rating agency designation. The majority of bonds
are investment grade, with 86.7% invested in Category 1 and 2 securities as of
June 30, 2001. Below investment grade bonds were 8.7% of total invested assets
as of June 30, 2001. This allocation reflects the Company's strategy of avoiding
the unpredictability of interest rate risk in favor of relying on the bond
analysts' ability to better predict credit or default risk. The bond analysts
operate in an industry-based, team-oriented structure that permits the
evaluation of a wide range of below investment grade offerings in a variety of
industries resulting in a well-diversified high yield portfolio. A majority
(65.4%) of below investment grade bonds are in category 3, the highest quality
below investment grade. Category 6 bonds, those in or near default, represent
securities that were originally acquired as long-term investments, but
subsequently became distressed. The carrying value of bonds in or near default
was $18.7 million and $18.3 million as of June 30, 2001 and December 31, 2000,
respectively.


                                       24
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                 Fixed Maturity Securities -- By Credit Quality

<TABLE>
<CAPTION>
                                                                    As of June 30,              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>              <C>
        1        AAA/AA/A............................           $  827.6         40.8%       $  634.2          37.6%
        2        BBB.................................              930.7         45.9           774.5          46.0
        3        BB..................................              177.1          8.7           187.2          11.1
        4        B...................................               50.9          2.5            61.4           3.7
        5        CCC and lower.......................               24.0          1.2             9.2           0.5
        6        In or near default..................               18.7           .9            18.3           1.1
                                                             ------------------------------------------------------------
                 Total...............................           $2,029.0        100.0%       $1,684.8         100.0%
                                                             ============================================================
</TABLE>

(1)   With respect to securities that are awaiting an SVO rating, the Company
      has assigned a rating based on an analysis that it believes is equivalent
      to that used by the SVO.

(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.

(3)   Does not include redeemable preferred stock with a carrying value of $44.0
      million and $42.4 million as of June 30, 2001 and December 31, 2000,
      respectively.

Investment Results

The following table summarizes the Company's investment results for the periods
indicated. Overall, the yield, net of investment expenses, on the general
account portfolio decreased from the three months ended and the six months ended
June 30, 2000. The lower yield was the result of scheduled maturities rolling
over into new investments with less favorable interest rates and narrower
acquisition spreads than those present in our 2000 fixed maturity portfolio. The
inflow of new cash was invested at rates that were less than the overall
portfolio earnings rate during the first half of 2000. Indicative of this
environment, between June 2000 and June 2001, the 10-year U.S. Treasury rate
fell 62 basis points, while Moody's seasoned BAA spreads fell by 31 basis
points.

<TABLE>
<CAPTION>
                                               Three Months Ended                         Six Months Ended
                                            As of               As of               As of                As of
                                        June 30, 2001       June 30, 2000       June 30, 2001        June 30, 2000
                                    -----------------------------------------------------------------------------------
                                      Yield    Amount    Yield      Amount     Yield     Amount     Yield     Amount
                                    -----------------------------------------------------------------------------------
                                            (in millions)       (in millions)        (in millions)        (in millions)
<S>                                   <C>     <C>        <C>       <C>         <C>      <C>         <C>      <C>
General account assets-excluding
policy loans
  Gross income                        7.34%   $   50.0   7.94%     $   50.7    7.65%    $  103.4    7.90%    $   98.7
  Ending assets-excluding policy
    Loans                                      2,758.8              2,597.7              2,758.8              2,597.7
Policy loans
  Gross income                        5.93%        5.1   5.55%          4.2    6.56%        11.1    5.64%         8.4
  Ending assets                                  342.5                308.8                342.5                308.8

    Total gross income                7.18%       55.1   7.69%         54.9    7.53%       114.5    7.66%       107.1
    Less: investment expenses                     (1.2)                (1.7)                (4.0)                (4.0)
                                            ------------         ------------          ------------        ------------
      Net investment income           7.03%   $   53.9   7.45%     $   53.2    7.27%    $  110.5    7.38%    $  103.1
                                            ============         ============          ============        ============
</TABLE>

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.


                                       25
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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 June 30, 2001, $1,758.3 million, or 86.7% of the fixed
maturity securities held by us and rated by Standard & Poor's Ratings Services,
a division of the McGraw-Hill Companies, Inc. (S&P) or the National Association
of Insurance Commissioners were rated investment grade (BBB or higher by S&P or
1 or 2 by the National Association of Insurance Commissioners). The remaining
$270.7 million, or 13.3%, of fixed maturity investments, and 8.7% of invested
assets, were rated non-investment grade. 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.

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

Net cash provided by (used in) operating activities was $140.4 million and
$(90.1) million for the six months ended June 30, 2001 and 2000, respectively.
The increase in 2001 compared to 2000 resulted primarily due to an increase in
policy liabilities , an increase in net income of $10.8 million and a smaller
increase in deferred policy acquisition costs than in the prior period. These
increases were partially offset by increases in other assets.

Net cash used in investing activities was $321.9 million and $208.9 million for
the six months ended June 30, 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 six months ended
June 30, 2001, an increase in net purchases of $220.3 million. Partially
offsetting these uses of cash was an increase in maturities, prepayments and
scheduled redemptions of fixed maturities, short-term investments and mortgage
loans.

Net cash (provided by) used in financing activities was $(46.2) million and
$327.0 million, for the six months ended June 30, 2001 and 2000, respectively.
The decrease in 2001 as compared to 2000 resulted from an increase in cash
payments made on maturities and 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. Maturities and
withdrawals on universal life insurance and investment-type contracts exceeded
withdrawals by $46.2 million for the six months ended June 30, 2001.

We maintain reinsurance programs designed to protect against large or unusual
losses. Based on our review of our reinsurers' financial statements and
reputations in the reinsurance marketplace, we believe that our reinsurers are
financially sound, and, therefore, that we have so significant exposure to
uncollectable reinsurance in excess of uncollectable amounts already recognized
in our unaudited consolidated financial statements. The Company has also entered
into reinsurance agreements which transfers risks and profits to John Hancock
Life Insurance Company, the parent. The reinsurance agreements provide
reinsurance expense allowances to reimburse the Company for the related
expenses. The agreements cover variable annuity, variable life insurance and
term life insurance contracts issued by the Company.

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.


                                       26
<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 following: (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 that could adversely affect sales of our life insurance and
annuity 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.

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.


                                       27
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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 June 30, 2001, the Company's fixed maturity portfolio was comprised of
86.7% investment grade securities and 13.3% 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.

The Company manages interest rate sensitive segments of the business, and the
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) sophisticated duration-matching
techniques are utilized 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 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 June 30, 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 Parent's Investment Compliance Unit monitors all derivatives activity for
consistency with internal policies and guidelines. All derivatives trading
activity is reported monthly to the Parent's Committee of Finance for review,
with a comprehensive governance report provided jointly each quarter by the
Parent's Derivatives Supervisory Officer and Chief Investment Compliance
Officer. The table below reflects the Company's derivative positions as of June
30, 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.


                                       28
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
                                                                 As of June 30, 2001
                                    -------------------------------------------------------------------------------
                                                                                    Fair Value
                                                                 --------------------------------------------------
                                                     Weighted
                                       Notional    Average Term     -100 Basis                      +100 Basis
                                        Amount        (Years)      Point Change    As of 6/30/01   Point Change
                                    -------------------------------------------------------------------------------
                                                   (in millions, except for Weighted Average Term)
<S>                                     <C>             <C>            <C>              <C>            <C>
Interest rate swaps............         $1,295.0        4.3            $(9.3)           $ 7.2          $22.3
Futures contracts..............             37.4        8.1             (2.3)             0.2            2.2
Interest rate caps.............            239.4        6.3              1.2              2.8            5.7
Interest rate floors...........            485.4        9.0              1.5              2.9            6.9
                                    ---------------              --------------------------------------------------
    Totals.....................         $2,057.2                       $(8.9)           $13.1          $37.1
                                    ===============              ==================================================
</TABLE>

--------------

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.


                                       29
<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.


                                       30
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                                   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/ Ronald J. Bocage
                                        ------------------------
August 14, 2001                     Ronald J. Bocage
                                    Vice President and Counsel


                                    By: /s/ Earl W. Baucom
                                        ------------------------
August 14, 2001                     Earl W. Baucom
                                    Controller
                                    (Principal Accounting Officer)


                                       31