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

                                    FORM 10-K

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

                            FOR THE FISCAL YEAR ENDED
                                DECEMBER 31, 2002
                          COMMISSION FILE NO. 333-45862

                       JOHN HANCOCK LIFE INSURANCE COMPANY
             (Exact name of registrant as specified in its charter)

          MASSACHUSETTS                                          04-1414660
 (State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                               John Hancock Place
                                   PO Box 0111
                           Boston, Massachusetts 02117
                                 (617) 572-6000
                        (Address, including zip code, and
                    telephone number, including area code, of
                    Registrant's principal executive offices)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
  Title of each class                 Name of each exchange on which registered

--------------------------------------------------------------------------------
 $18,718,000  5.00% Notes Due 2012          New York Stock Exchange, Inc.

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE
--------------------------------------------------------------------------------
                                (Title of class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_| Not Applicable.

The registrant meets the conditions set forth in General Instructions I(1)(a)
and (b) of Form 10-K and is therefore filing this Form 10-K with reduced
disclosure format.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|

At March 24, 2003 there were outstanding 1,000 shares of common stock, $10,000
par value per share, of the registrant, all of which were owned by John Hancock
Financial Services, Inc.
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

CONTENTS

    FORWARD-LOOKING STATEMENTS.............................................    3
    NON-GAAP FINANICAL MEASURES............................................    4

PART I.....................................................................    4

    ITEM 1. BUSINESS OF JOHN HANCOCK LIFE INSURANCE COMPANY................    4
    ITEM 2. PROPERTIES.....................................................   34
    ITEM 3. LEGAL PROCEEDINGS..............................................   34
    ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............   35

PART II....................................................................   35

    ITEM 5. MARKET FOR JOHN HANCOCK LIFE INSURANCE COMPANY COMMON STOCK
            AND RELATED SHAREHOLDER MATTERS................................   35
    ITEM 6. SELECTED FINANCIAL DATA........................................   36
    ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS......................................   37
    ITEM 7A.QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK.....   90
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................   94
    ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE.......................................   94

PART III...................................................................   94

    ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF JOHN HANCOCK LIFE
             INSURANCE COMPANY.............................................   94
    ITEM 11. EXECUTIVE COMPENSATION........................................   94
    ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT....................................................   94
    ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................   94
    ITEM 14. CONTROLS AND PROCEDURES.......................................   94

PART IV....................................................................   94

    ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
             ON FORM 8-K...................................................   94

<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Forward-Looking Statements

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

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

      Readers are also directed to other risks and uncertainties discussed, as
well as to further discussion of the risks described above, in other documents
that may be filed by the Company with the United States Securities and Exchange
Commission from time to time. 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.


                                        3
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Non-GAAP Financial Measures

      A non-GAAP financial measure is a numerical measure of a company's
performance, financial position, or cash flows that excludes (includes) amounts
that are not normally excluded (included) in the most directly comparable
measure calculated and presented in accordance with generally accepted
accounting principles (GAAP) in the United States.

      In this report we use a non-GAAP financial measure called "segment after
tax operating income" in our discussion of Results of Operations by Segment.
Please see "Adjustments to GAAP Reported Net Income" in this report or Note 13 -
Segment Information, for a description of segment after tax operating income and
a reconciliation of that measure to net income.

      We also use a variety of other measures in this report that we do not
consider non-GAAP financial measures because they do not have GAAP counterparts
and are operational measures rather than measures of performance, financial
position, or cash flows in our financial statements. Two examples of these
measures are Sales and Assets Under Management. Sales represents a measure,
defined by the Life Insurance Marketing Research Association (LIMRA), of the
amount of new business we have sold during the period rather than a measure of
revenue. Assets Under Management is an industry measure of a base upon which fee
revenue is earned, which is composed of both assets owned and assets managed for
third parties.

PART I

ITEM 1. Business of John Hancock Life Insurance Company

      John Hancock Life Insurance Company (John Hancock, or the Company) is one
of the nation's leading financial services companies, providing a broad array of
insurance and investment products and services to retail and institutional
customers, primarily in North America. Our principal executive offices are
located at John Hancock Place, Boston, Massachusetts 02117. Our corporate
internet address is www.jhancock.com.

      The Board of Directors of John Hancock Mutual Life Insurance Company,
founded in 1862, unanimously adopted a Plan of Reorganization effective February
1, 2000 and John Hancock Mutual Life Insurance Company converted from a mutual
life insurance company to a stock life insurance company, John Hancock Life
Insurance Company, and became a wholly-owned subsidiary of John Hancock
Financial Services, Inc., a holding company. Also on February 1, 2000, John
Hancock Financial Services, Inc. completed an initial public offering of
102,000,000 shares of its common stock, par value $0.01 per share.

      We operate our business in five segments. Two segments serve primarily
retail customers, and two segments serve primarily institutional customers. Our
fifth segment is the Corporate and Other Segment.

      Our retail segments are the Protection Segment and the Asset Gathering
Segment. The Protection Segment offers variable life, universal life, whole
life, term life, and individual and group long-term care insurance products. The
Asset Gathering Segment offers variable and fixed, deferred and immediate
annuities, and mutual funds. Our retail business also includes our retail
distribution and customer service operations.

      According to the latest publicly available data, with respect to the
United States, the Company is the eighth largest writer of individual life
insurance based on new and recurring individual life sales, the third largest
writer of individual variable universal life insurance and the tenth largest
writer of individual universal life insurance. We believe we are the second
largest writer of individual long-term care insurance and the top provider of
group long-term care insurance based on total premiums in force. As of December
31, 2002, we were the 21st largest writer of individual annuity contracts, based
on LIMRA sales data. Our mutual fund subsidiary ranked 18th among
non-proprietary broker-sold U.S. asset managers in terms of total long-term,
open-end assets under management as of December 31, 2002.


                                        4
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Our institutional segments are the Guaranteed and Structured Financial
Products Segment and the Investment Management Segment. The Guaranteed and
Structured Financial Products Segment offers a wide variety of spread-based and
fee-based investment products and services. The spread-based products provide
the customer with some form of guaranteed return. The Investment Management
Segment consists of investment management services and products marketed to
institutions. This business is primarily fee-based and investment management
products generally do not offer guarantees.

      Our Corporate and Other Segment consists primarily of our international
group insurance operations, corporate operations and non-core businesses that
are either in the process of winding down (i.e., are in "run-off") or have been
divested.

      As of December 31, 2002 and 2001, respectively, our total assets under
management were $117.6 billion and $114.8 billion, which includes $25.8 billion
and $29.3 billion of assets invested in the Company's retail mutual funds. Total
shareholder's equity, excluding net unrealized capital gains on securities, was
$5.9 billion and $5.4 billion as of December 31, 2002 and 2001, respectively. In
addition, John Hancock generated $6.5 billion and $7.1 billion in revenues and
$458.9 million and $573.9 million in net income in 2002 and 2001, respectively.


                                        5
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Protection Segment

Overview

      Through our Protection Segment, we offer a variety of non-traditional and
traditional life insurance products and individual and group long-term care
insurance products. Our non-traditional life insurance products include variable
life and universal life insurance. Our traditional life insurance products
include whole life insurance and term life insurance.

      The Protection Segment has traditionally been our largest business
segment, contributing 47.1%, 41.4% and 39.6% of consolidated operating revenues
and 40.0%, 37.6% and 33.7% of consolidated segment after-tax operating income in
the years ended December 31, 2002, 2001 and 2000, respectively. The Protection
Segment generated revenues of $3,259.2 million, $3,054.7 million and $2,887.0
million and segment after-tax operating income of $309.7 million, $284.3 million
and $238.8 million in 2002, 2001, and 2000, respectively. The Protection Segment
has achieved the following financial results for the periods indicated:
<TABLE>
<CAPTION>
                                                   As of or for the Years Ended December 31,
                                                           2002        2001        2000
                                                   -----------------------------------------
                                                             (in millions)
<S>                                                 <C>           <C>         <C>
Sales (new premiums and deposits) (1):
Non-traditional life--excluding COLI and BOLI (2)
     Variable life ..............................   $     116.0   $   124.5   $   152.5
     Universal life .............................          65.2        30.4        18.4
Traditional life--excluding COLI (2)
     Whole life .................................           5.8         6.1         8.4
     Term life ..................................          39.3        33.0        36.3
COLI and BOLI
     Variable life--COLI ........................          66.6        90.5        38.6
     Universal life--COLI .......................          23.1        22.1        14.8
     Universal life--BOLI .......................           6.3        12.2         0.8
Individual long-term care (3) ...................         132.5       102.2       100.1
Group long-term care (4) ........................          16.6        16.8        11.5
                                                   ------------  ----------  ----------
         Total ..................................   $     471.4   $   437.8   $   381.4
                                                   ============  ==========  ==========
Assets:
Non-traditional life ............................   $  12,147.0   $11,163.2   $10,433.5
Traditional life (5) ............................      14,810.4    14,190.4    13,903.3
Individual long-term care .......................       3,732.1     2,705.8     2,227.2
Group long-term care ............................       1,038.5       801.5       480.6
Other ...........................................          44.9        51.6        46.9
Intra-segment eliminations ......................            --          --          --
                                                   ------------  ----------  ----------
         Total ..................................   $  31,772.9   $28,912.5   $27,091.5
                                                   ============  ==========  ==========
</TABLE>

(1)   Sales represents a measure, defined by LIMRA, of the amount of new
      business we have sold during the period rather than a measure of revenue.

(2)   Individual life insurance sales exclude (a) excess premiums, which are
      premiums that build cash value but do not purchase face amounts of
      insurance on variable life and universal life insurance products and (b)
      premiums on corporate owned life insurance (COLI) and bank owned life
      insurance (BOLI) policies covering more than 200 lives. Sales include 10%
      of single premium payments on universal and whole life insurance products.

(3)   Individual long-term care sales were revised for private label sales,
      including an additional $2.3 million in the year ended 2000 and Fortis
      Reinsurance premiums, including $23.9 million for the year ended 2000.

(4)   Group long-term care sales were revised to include new enrollments and
      coverage additions of $5.4 million in 2000.

(5)   The 2000 balance was adjusted to reflect the adoption of the provisions of
      Statement of Position (SOP) 00-3, "Accounting by Insurance Enterprises for
      Demutualization and Formations of Mutual Insurance Holding Companies and
      Certain Long-Duration Participating Contracts," as outlined in Note 1 to
      the consolidated financial statements. The result was $41.6 million
      additional assets for the traditional life product line as of December 31,
      2000.


                                        6
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Products and Markets

      The attractive demographics of an aging population are a key growth driver
for our industry. The boomer generation is healthier, wealthier, and living
longer. They need products to manage wealth, provide a stream of income, provide
protection and manage longevity risk. John Hancock provides an array of life
insurance solutions to meet consumer's needs, from pure protection to
retirement, estate planning, and small business plans.

      Our products are marketed through a variety of distribution channels. The
success of this product marketing is contingent upon the successful selling
efforts of career agents, insurance brokers, financial consultants and other
distributors of our financial services. We refer to these individuals
collectively as "producers", since it is their ability to secure new life
insurance, annuity, and long term care insurance contracts - as well as retain
existing contracts - that produces sales, continued revenue flows, earnings and
products that sustain the continued profitability of our company. Providing
outstanding service to our producers is a primary focus. We continually develop
tools and processes to make it "easy to do business with John Hancock". In 2002,
we launched several new tools. One, the first web-based illustration and inforce
management system, called eHansel, helps producers make new business proposals
and manage their current clients. Later in the year, we announced enhancements
to this system, adding an advanced online presentation system that instantly
creates customized illustrations and sales presentations. Another, an income
analysis tool that includes estate planning analysis, enables producers to
easily demonstrate comprehensive financial strategies to their clients.

      The sales and other financial results of our retail business over the last
several years have been affected by general economic and industry trends. The
appreciation of equity markets in the 1990's resulted in variable life insurance
products accounting for the majority of increases in total life insurance
premiums and deposits for the insurance industry. This trend reversed in 2001
and 2002 due to declines in equity market performance and we have seen investors
return to stable investment products. Although sales of traditional life
insurance products have experienced declines, sales of single life insurance,
universal life insurance and term life insurance and corporate life insurance
have increased. With respect to our long-term care insurance products, premiums
have increased due to the aging of the population and the expected inability of
government entitlement programs to meet retirement needs.

      With a diversified and competitive portfolio of both fixed and variable
products, and comprehensive sales support tools for producers, we have been able
to serve our customers in all market conditions, and generate strong business
and earnings growth.

      The Company's sales of individual life insurance in 2002 consisted of 57%
variable life, 29% universal life and 14% traditional life. The Company's sales
of individual life insurance (excluding COLI and BOLI) in 2002 consisted of 51%
variable life, 29% universal life and 20% traditional life. Term life sales
represented 87% of traditional life product sales for the year ended December
31, 2002.

      Individual Life Insurance.

      o     Variable Life Insurance. Variable universal life insurance is the
            primary variable life insurance product. It provides life insurance
            coverage and an investment return linked to an underlying portfolio
            of investments chosen by the policyholder. Our core variable life
            products, Medallion EDGE and PLUS, offer an attractive combination
            of performance, features and fund selection for clients who can
            accept a level of market risk, providing design flexibility to meet
            both death benefit and accumulation objectives.

            Our variable life insurance product portfolio includes joint
            (second-to-die) and corporate owned life insurance products, as well
            as single life policies. Second-to-die products are typically used
            for estate planning purposes and insure two lives rather than one,
            with the policy proceeds paid after the death of both insured
            individuals. Corporate owned life insurance products are sold to
            corporations for a variety of reasons, including, to fund special
            deferred compensation plans and benefit programs for key employees.

            We were among the first insurance companies to offer variable life
            insurance products, beginning in 1980, and we believe the length of
            our experience in this market is a competitive strength. In 2001, we
            introduced an innovative product feature that combined a variable
            life insurance policy with a long-term care insurance feature.

      o     Universal Life Insurance. Our universal life insurance products meet
            a range of needs, from providing pure, low cost life insurance
            coverage to products with strong accumulation and income options.
            The life insurance coverage and cash value that increases based on a
            credited interest rate which is periodically reset. These policies
            generally permit policyholders to use any increase in cash value to
            vary the amount of insurance coverage and the timing and amount of
            premium payments. In 2002, we expanded our universal life insurance
            portfolio to include a new highly flexible product that focuses on
            cash accumulation and offers LifeCare, a long-term care benefit


                                        7
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            rider. Ideal for the unstable market environment, this product
            offers clients insurance protection and cash accumulation, without
            exposure to stock market volatility. Our universal life insurance
            product portfolio also includes corporate owned life insurance and
            bank owned life insurance products which are sold to corporations
            including banks to fund post-retirement employee benefit plan
            liabilities. We participate in both the corporate and bank owned
            life insurance markets selectively, as profitable sales
            opportunities arise.

            On December 31, 2002, we acquired the fixed universal life insurance
            business of Allmerica Financial Corporation (Allmerica). Under the
            agreement, we receive certain assets, reserves and a re-occurring
            stream of premium payments on the business. We assume liability for
            Allmerica's fixed universal life insurance policies, including
            claims payments and any other policy obligations. The deal provided
            for Allmerica's in-force fixed universal life insurance business to
            be administered by us, following a transition period. This
            transaction gave us a more sizeable block of fixed universal life
            insurance business that will provide economies of scale, and allow
            us to spread expenses over a broader base. The acquisition also
            enables us to leverage our investment capabilities to benefit
            policyholders and investors.

      o     Traditional Life Insurance Products. Our traditional life insurance
            products include single life and joint life (second-to-die) whole
            life insurance, and term life insurance. Participating whole life
            insurance combines a death benefit with a cash value that generally
            increases gradually in amount over a period of years, and typically
            pays a policy dividend. Term life insurance provides only a death
            benefit, does not build up cash value, and does not pay a dividend.
            In 2002 we revamped our term portfolio to improve pricing and make
            the product available to a wider range of age groups.

            Long-Term Care Insurance.

            We entered the individual long-term care (LTC) insurance market in
      1987 and the group long-term care insurance market in 1988 and acquired
      the long-term care insurance business of Fortis, Inc. (Fortis) in March
      2000. Our long-term care insurance products provide protection against the
      large and escalating costs of home health care, assisted living, and
      nursing home care. With the aging population, the expected inability of
      government entitlement programs to meet retirement long-term care needs,
      and a growing public awareness of long-term care insurance, we believe
      there is excellent growth potential for the long-term care insurance
      market. Our long-term care insurance products are reimbursement products,
      which provide benefits only for documented nursing home, assisted living
      or home or health care expenses. These products are sold on a guaranteed
      renewable basis, meaning that we are required to renew the policies each
      year as long as the premium is paid. However, this also gives us the
      ability to reset the price of the product prospectively, if needed. Our
      claims history on these products has been favorable relative to our
      pricing assumptions.

      o     Individual Long-Term Care Insurance. Our individual long-term care
            insurance products are sold to pre-retired and retired customers.
            The insured typically pays the premium for this product. In 2002, we
            launched two new long-term care insurance products, Essential Care
            and Custom Care. Custom Care was the first long-term care insurance
            policy with a benefit that allows up to four extended family members
            to be covered by the same policy.

      o     Group Long-Term Care Insurance. Our group long-term care insurance
            products are sold through employer-sponsored plans to employees and
            retirees, and their eligible relatives. The insured, not the
            employer, generally pays the premium for this insurance although
            there is a growing trend among employers to purchase a "core" plan
            on behalf of their employees, with the option for those employees to
            "buy up" for additional amounts of coverage. Following selection of
            one of our plans by an employer, we market our products directly to
            the employee base. The principal market for our group long-term care
            insurance products is companies with over 4,000 employees and
            retirees. We also pursue smaller employers with 1,000 or more
            employees and retirees in selected industries. In 2002, we
            introduced a next-generation Group Long-Term Care insurance product,
            CareCHOICE, with new features and enhanced benefits. This product
            provides employers more choice in customizing a plan for their
            employees.

            In 2002, we completed the rollout of the new Federal Long-term Care
            Insurance Program (the program) which John Hancock and MetLife were
            jointly awareded at the end of 2001. The program is expected to be
            the largest long-term care program in the country and the
            government's decision to provide access to long-term care insurance
            is expected to increase awareness of the product among consumers and
            employers.

            John Hancock and MetLife joined together to build Long Term Care
            Partners, LLC to administer the plan and support a successful
            enrollment program. As of December 31, 2002, the program generated


                                        8
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            over 225,000 applicants, of which approximately 135,000 were
            approved, representing approximately $170 million in annualized
            premium. The plan first became effective October 1, 2002, and is not
            expected to have an impact on earnings until 2003.

      The following table demonstrates total statutory premiums and deposits,
which is the premium we report on the annual statements we file with insurance
regulators, life insurance in force and GAAP reserves for our individual life
and long-term insurance care products. In addition to premium from sales of new
life and long-term care insurance policies, which we refer to as "sales,"
statutory premiums and deposits includes revenues from renewals of policies, 10%
of single premium payments, and premiums from reinsurance assumed by us. We
deduct from this measure the premiums that we cede to our reinsurers.

                             Selected Financial Data
                  Individual Life and Long-Term Care Insurance

<TABLE>
<CAPTION>
                                              As of or for the Years Ended December 31,
                                                  2002          2001           2000
                                              ------------------------------------------
                                                            (in millions)
<S>                                            <C>          <C>            <C>
Total statutory premiums and deposits:
Variable life..............................    $     926.8  $      948.5   $      922.0
Universal life (1) (2).....................        1,030.9         456.1          173.5
Traditional life...........................        1,035.9         997.3          965.5
Individual long-term care..................          393.5         331.0          277.3
Group long-term care.......................           57.7           6.3           14.7
                                              ------------------------------------------
    Total..................................    $   3,444.8  $    2,739.2   $    2,353.0
                                              ==========================================
Life insurance in force:
Variable life..............................    $  57,331.8  $   58,104.4   $   57,716.2
Universal life (2).........................       18,594.4      10,604.5        9,085.6
Traditional life...........................       73,335.7      71,166.0       66,989.3
                                              ------------------------------------------
    Total..................................    $ 149,261.9  $  139,874.9   $  133,791.1
                                              ==========================================
GAAP Reserves:
Variable life..............................    $   6,064.0  $    6,479.9   $    6,517.1
Universal life (2).........................        3,876.4       2,758.1        2,268.7
Traditional life (3).......................       11,084.0      10,632.2       10,104.8
Individual long-term care..................        1,413.8       1,138.8          909.1
Group long-term care.......................          279.7         237.4          238.8
                                              ------------------------------------------
    Total..................................    $  22,717.9  $   21,246.4   $   20,038.5
                                              ==========================================
</TABLE>

(1)   Includes bank owned life insurance premiums of $200.0 million and $52.5
      million for the years ended December 31, 2001 and 2000. There were no such
      premiums for the year ended December 31, 2002.

(2)   Includes $639.7 million in deposits, $5,651.3 million in life insurance in
      force and $649.8 million in GAAP reserves for the year ended December 31,
      2002 related to the acquisition of Allmerica's fixed universal life
      insurance business as of December 31, 2002.

(3)   The 2000 balance was adjusted to reflect the adoption of the provisions of
      SOP 00-3, "Accounting by Insurance Enterprises for Demutualization and
      Formations of Mutual Insurance Holding Companies and Certain Long-Duration
      Participating Contracts" as outlined in Note 1 to the consolidated
      financial statements. The result was $74.2 million additional reserves for
      the traditional life product line as of December 31, 2000.

Distribution

      Protection products are distributed through multiple distribution channels
including Signator, M Financial Group, Banks, the Internet, and through Group
and private label relationships. Our strategy is to provide competitive products
and outstanding service through multiple distribution channels.

      Signator. Signator, created in 1999, is a separate distribution
subsidiary. Signator is comprised of Career Agents and Signator Brokerage,
Direct Brokerage and Broker/Dealers.

      The Signator Career Agency system includes approximately 1,650 career
sales personnel. We have transitioned our Career Agents to financial advisors by
providing them with highly tailored financial planning tools and market support,
as


                                        9
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

well as an open architecture system which enables them to sell other companies'
products. This structure has enabled us to recruit, develop and retain top
producers.

      Because we believe the biggest growth opportunity exists in the brokerage
arena we have made significant strides to expand into this marketplace. The
brokerage channel distributes life and long-term care insurance products through
producer groups, brokerage general agencies, independent broker dealers, wire
houses and banks. The John Hancock Direct Brokerage unit has a regional
brokerage staff, internal wholesaling unit, account executive and marketing team
of its own that grows and manages relationships to drive sales. We focus on
relationships with firms that produce in excess of one million dollars in target
premium per year.

      M Financial Group. M Financial Group is a national producer group founded
in 1978 comprised of approximately 105 life insurance producing firms with
approximately 425 individual producers operating exclusively in the upper end of
the wealth transfer and executive benefit markets. The life insurance companies
in the consolidated Company have been either the first or second largest
provider of life insurance products to the M Financial Group in each of the past
three years, although the member firms also sell the products of other prominent
U.S. life insurance companies. For the year 2002, the life insurance companies
in the consolidated Company were the largest provider.

      We have jointly developed a proprietary life insurance product line with M
Financial Group to meet the distinct requirements of its producers. We also
offer four proprietary investment options of M Fund, Inc. on all variable life
insurance products sold by M Financial Group members, in addition to the
investment options supported by the variable series trust (VST). In 2000, we
became the first provider to roll out Magnastar, M Group's proprietary private
placement life insurance product, co-manufactured by M Life, John Hancock Life
Insurance Company and John Hancock Variable Life Insurance Company.

      In addition to these proprietary products, we provide a number of
exclusive services to M Financial Group members, including a deferred
compensation plan, dedicated sales, underwriting and services teams and
participation in special marketing events, as well as M Financial Group
sponsored systems and technology initiatives. In addition, M Life Insurance
Company shares the insurance risk, through reinsurance, on 50% of most of our
policies that its members sell. These products and services and this reinsurance
arrangement serve to align M Financial Group producers' incentives with ours.

      During 2000, the Life Company was the only provider to extend debt
financing for M Financial Holdings, Inc.'s purchase of one of its own COLI
firms, to assist it in the first step of its long-term aggregation process.

      The business generated by M Financial Group producers has experienced
lower termination or non-renewal (referred to in the industry as "lapse") and
mortality rates than the industry average.

      e-Business & Retail Partnerships. This unit, launched in 1996, complements
our traditional sales efforts. Through this unit, we sell term life insurance
over the Internet and on the telephone directly to consumers. Consumers can call
a toll-free number or go directly to our web site to get information, obtain a
quote or start an application.

      Banks. We offer a full line of life and individual long-term care
insurance products through banks that have established an insurance sales force.
Sales of insurance products in this channel build on our well developed sales of
fixed and variable annuity and mutual fund product sales in the bank channel.

      Group sales force. Group long-term care insurance products are marketed by
a dedicated sales force located in major cities around the country. The sales
force works closely with consultants, brokers, and other intermediaries to
generate sales and grow existing accounts.

      Private label arrangements. We administer an individual long-term care
insurance product which was sold in prior years through another insurer under a
private label arrangement.

      The table below shows Protection Segment sales by distribution channel for
the periods indicated. Individual life insurance sales exclude excess premiums,
which are premiums that build cash value but do not purchase any additional face
amount of insurance, on variable life and universal life insurance products and
premiums on corporate owned life insurance and bank owned life insurance
policies covering more than 200 lives. Sales include 10% of single premium
payments on universal life and whole life insurance policies. Group long-term
care sales include (i) sales made to new employer groups initially effective in
the year, (ii) new enrollees in existing group account, (iii) sales constituting
increased coverage to existing insureds, (iv) and sales to non-employer groups
and new employees added to a group. COLI is sold only by Signator, M Financial
Group and through banks. BOLI is sold only by Signator and M Financial Group.


                                       10
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                Protection Segment Sales by Distribution Channel

<TABLE>
<CAPTION>
                                                     For the Years Ended December 31,
                                                        2002      2001       2000
                                                     --------------------------------
                                                             (in millions)
<S>                                                  <C>       <C>        <C>
Signator: (1)
     Individual life--excluding COLI and BOLI (2)..  $ 151.4   $ 137.7    $ 136.0
     Individual life--COLI.........................     57.7      74.2       23.7
     Individual long-term care (3).................    128.5      98.6       97.3
M Financial Group:
     Individual life--excluding COLI...............     60.9      45.9       59.9
     Individual life--COLI.........................     32.0      38.4       29.7
     Individual long-term care.....................      0.6       0.2        0.2
e-Business & Retail Partnerships:
     Individual life...............................     14.0      10.4       19.5
     Individual long term care.....................      1.0       0.9         --
Dedicated Sales Force:
     Group long-term care (4)......................     16.6      16.8       11.5

BOLI...............................................      6.3      12.2        0.8

Other:
     Individual life...............................       --        --        0.2
     Individual long-term care (5).................      2.4       2.5        2.6
Total: (7)
     Individual life--excluding COLI and BOLI......    226.3     194.0      215.6
     Individual life--COLI and BOLI................     96.0     124.8       54.2
     Individual long-term care (6).................    132.5     102.2      100.1
     Group long-term care..........................     16.6      16.8       11.5
</TABLE>

(1)   Signator includes sales by the Signator Financial Network as well as all
      insurance brokerage sales, sales through broker/dealers, sales through
      financial institutions, and sales related to Fortis.

(2)   Revised to include broker/dealer and financial institution sales of $7.0
      million for the year ended December 31, 2000.

(3)   Revised to include broker/dealer sales of $7.3 million, financial
      institution sales of $1.0 million, e-business sales of $0.2 million, and
      Fortis Reinsurance premiums of $23.9 million, for the year ended December
      31, 2000.

(4)   Revised to include new enrollments and coverage additions of $5.4 million
      for the year ended December 31, 2000.

(5)   Revised to include private label sales of $2.3 million and exclude
      e-business sales of $0.2 million in 2000.

(6)   Individual long-term care insurance sales were revised for private label
      sales, including an additional $2.3 million in the year yended 2000 and
      Fortis Reinsurance premiums, including $23.9 million, for the year ended
      2000.

(7)   Sales represents a measure, defined by LIMRA, of the amount of new
      business we have sold during the period rather than a measure of revenue.

Underwriting

      Insurance underwriting involves a determination of the type and amount of
risk that an insurer is willing to accept and the premium to be charged.
Underwriting also determines the amount and type of reinsurance levels
appropriate for a particular type of risk. By utilizing reinsurance, we can
limit our risk and, at times improve product pricing.

      Our underwriting standards for life insurance are intended to result in
the issuance of policies that produce mortality experience consistent with the
assumptions used in product pricing. Our underwriting is based on our historical
mortality experience, as well as the experience of the insurance industry and of
the general population. We continually compare our underwriting standards
against the industry to mitigate our exposure to higher risk business and to
stay abreast of industry trends. For individual long-term care insurance
products, we use separate but similar underwriting criteria appropriate to the
morbidity risks insured. Our overall profitability depends to a large extent on
the degree to which our mortality and/or morbidity experience matches our
pricing assumptions. Our life and long-term care insurance underwriters evaluate
policy applications on the basis of the information provided by the applicant
and others. We implemented new programs to improve


                                       11
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

our underwriting process. These include the Telephone Interview Program, which
permits eligible long-term care insurance clients to be interviewed over the
telephone by trained nurses, replacing the collection of a physician's statement
in 50% of the cases, leading to lower costs and faster cycle times, without any
loss of required underwriting information. We also implemented the STAR (System
to Assess Risk) underwriting system in 2000 to improve the risk assessment
process through automation which has resulted in a reduction of cycle times,
improved productivity and a reduction of total costs. As an organization we
continue to review our underwriting processes to further reduce our unit costs
by streamlining our underwriting tools and increasing policy taken rates.

      Group long-term care insurance underwriting is conducted on both the
employer group level and the individual level. Our group long-term care
insurance corporate customers generally offer their employees the opportunity to
purchase coverage on a "guaranteed-issue" basis, meaning that all employees are
eligible for insurance coverage, and offer individually underwritten coverage to
family members. We rely on our experience in underwriting large groups in order
to set prices that take into account the underwriting arrangements, the general
health conditions of the corporate customers' employees, the specifics of the
negotiated plan design, and other demographic and morbidity trends. Group
products are written on a guaranteed renewable basis, which permits repricing if
necessary.

      Our corporate owned and bank owned life insurance policies covering
multiple lives are issued on a guaranteed issue basis, where the amount of
insurance issued per life on a guaranteed basis is related to the total number
of lives being covered and the particular need for which the product is being
purchased. Guaranteed issue underwriting applies to employees actively at work,
and product pricing reflects the additional guaranteed issue underwriting risk.

Reserves

      We establish and report liabilities for future policy benefits on our
balance sheet to meet the obligations under our insurance policies and
contracts. Our liability for variable life insurance and universal life
insurance policies and contracts is equal to the cumulative account balances.
Cumulative account balances include deposits plus credited interest less expense
and mortality fees and withdrawals. Future policy benefits for our traditional
life, individual long-term care and group long-term care insurance policies are
calculated based on a set of actuarial assumptions that we establish and
maintain throughout the lives of the policies. Our assumptions include
investment yields, mortality, morbidity and expenses.

Competition

      We face significant competition in all our retail protection businesses.
Our competitors include other large and highly rated insurance carriers as well
as certain banks, securities brokerage firms, investment advisors and other
financial intermediaries marketing annuities and mutual funds. Some of these
competitors have greater financial strength and resources and have penetrated
more markets. We believe that we distinguish ourselves from our competitors
through the combination of:

      o     our strong and reputable brand name;

      o     our strong financial ratings;

      o     our broad range of competitive and innovative products and our
            ability to create unique product combinations for various
            distribution channels;

      o     the depth of our experience as one of the first companies to offer
            variable life insurance, individual long-term care insurance and
            group long-term care insurance;

      o     our brand penetration within each channel of distribution; and

      o     our dedication to customer service.

      Competition also exists for agents and other distributors of insurance
products. Much of this competition is based on the pricing of products and the
agent or distributor compensation structure. We believe that our competitive
strengths coupled with the advantages of our Signator network will enable us to
compete successfully to attract and retain top quality agents and distributors.

Reinsurance

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


                                       12
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

the time of the Life Company's demutualization to protect the reasonable
dividend expectations of certain participating life insurance policyholders.

      In addition, the Company has entered into reinsurance agreements to
specifically address insurance exposure to multiple life insurance claims as a
result of a catastrophic event. The Company has put into place, effective July
1, 2002, catastrophic reinsurance covering both individual and group policies
written by all of its U.S. life insurance subsidiaries. The deductible for
individual and group coverages combined is $25 million per occurrence and the
limit of coverage is $40 million per occurrence. Both the deductible and the
limit apply to the combined U.S. insurance subsidiaries. The Company has
supplemented this coverage by reinsuring all of its accidental death exposures
in excess of $100,000 per life under its group life insurance coverages, and 50%
of such exposures below $100,000. Should catastrophic reinsurance become
unavailable to the Company in the future, the absence of, or further limitations
on, reinsurance coverage, could adversely affect the Company's future net income
and financial position.

      Our long-term care business units reinsure with John Hancock Reassurance
Company, LTD (JHReCo), a wholly owned subsidiary of JHFS. Group Long Term Care
ceded 50% of all business issued prior to 1997 to JHReC0 in 2001 (up from 40% in
2002 and 30% in 1999) and 50% of all new business issued in 1997 and later.
Retail Long-Term Care also cedes business to JHReCo; 50% of all new business
1997 and later is ceded to JHReCo and 50% of business assumed from Fortis in
retro-ceded to JHReCo.

      Our non-traditional life insurance business reinsures with JHReCo 100% of
the risk associated with the no lapse guarantee benefit present in the
protection universal life insurance products. This reinsurance agreement was
effective in 2001 and includes policies issued in years 2001 and later. In
addition, the traditional life insurance business entered into a reinsurance
agreement with JHReCo to reinsure 50% its retained level premium term business
written by the Company's subsidiary, John Hancock Variable Life Insurance
Company. The agreement was effective in 2002 and includes inforce policies.

      By entering into reinsurance agreements with a diverse group of highly
rated reinsurers, we seek to control our exposure to losses. Our reinsurance,
however, does not discharge our legal obligations to pay policy claims on the
policies reinsured. As a result, we enter into reinsurance agreements only with
highly rated reinsurers. Nevertheless, there can be no assurance that all our
reinsurers will pay the claims we make against them. Failure of a reinsurer to
pay a claim could adversely affect our business, financial condition or results
of operations.

      For a further description of operating results, see Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Protection Segment, included elsewhere in this Form 10-K.


                                       13
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Asset Gathering Segment

Overview

      Through our Asset Gathering Segment, we offer individual annuities, mutual
fund products and investment management services. Individual annuities include
variable and fixed annuities, both immediate and deferred. Mutual fund products
primarily consist of open-end mutual funds and closed-end funds. Our investment
management services include retirement services, and the management of
institutional accounts. In this segment, we also include the results of
Signator, John Hancock Signature Services, our servicing subsidiary, First
Signature Bank & Trust Company, our limited-service banking subsidiary, and
Essex Corporation, one of the nation's largest intermediaries between banks and
product manufacturers for annuities.

      The Asset Gathering Segment contributed 16.3%, 15.7% and 16.4% of
consolidated operating revenues and 16.9%, 19.6% and 18.2% of consolidated
segment after-tax operating income in the years ended December 31, 2002, 2001
and 2000, respectively. The Asset Gathering Segment generated operating revenues
of $1,124.8 million, $1,155.0 million and $1,195.9 million and segment after-tax
operating income of $130.7 million, $148.3 million and $128.8 million in 2002,
2001 and 2000, respectively. The Asset Gathering Segment has achieved the
following financial results for the periods indicated:

                                   As of or for the Years Ended December 31,
                                        2002        2001        2000
                                   -----------------------------------------
                                               (in millions)
Sales: (1)
Variable annuities (2).....        $    746.1     $    639.6     $  1,120.8
Fixed annuities (2)........           2,690.6        1,478.0          880.4
John Hancock Funds (3).....           4,737.6        5,001.4        5,307.0
                                   -----------------------------------------
     Total.................        $  8,147.3     $  7,119.0     $  7,308.2
                                   =========================================

Assets:
Variable annuities.........        $  5,702.4     $  6,750.0     $  7,425.3
Fixed annuities............           9,935.8        7,428.2        5,988.4
John Hancock Funds.........             245.4          338.4          410.5
Other .....................             169.2          223.9          243.0
                                   -----------------------------------------

     Total.................        $ 16,052.8     $ 14,740.5     $ 14,067.2
                                   =========================================

Assets Under Management:
Variable annuities.........        $  5,327.4     $  6,357.1     $  7,116.0
Fixed annuities............           9,226.2        6,876.6        5,640.8
John Hancock Funds (4).....          25,810.3       29,285.8       31,725.8

(1)   Sales represents a measure, defined by LIMRA, of the amount of new
      business we have sold during the period rather than a measure of revenue.

(2)   Represents statutory annual statement values. Statutory revenues include
      premiums and deposits on variable and fixed annuities. Statutory premiums
      and deposits differ from GAAP premiums because GAAP requires that variable
      and certain fixed annuity products be accounted for using deposit
      accounting. Deposit accounting excludes from revenue the premiums and
      deposits received on these products. Fixed annuity sales include
      considerations from supplemental contracts. Variable annuity sales exclude
      safe harbor internal exchanges of $92.0 million, $1,910.5 million and
      $25.0 million, respectively, in 2002, 2001 and 2000.

(3)   Mutual fund and institutional asset sales are defined as new inflows of
      funds from investors into our investment products. Sales of mutual fund
      products are recorded on the trade date. Sales of institutional investment
      products are recorded on the date a firm commitment is established.

(4)   Includes $3.4 billion, $3.6 billion and $2.9 billion of our general
      account assets and assets managed for certain John Hancock subsidiaries
      and assets managed for variable annuities as of December 31, 2002, 2001
      and 2000, respectively.


                                       14
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Products and Markets

Annuities

      We offer variable and fixed annuities, both immediate and deferred, to a
broad range of consumers through multiple distribution channels. Annuities may
be deferred, where assets accumulate until the contract is surrendered, the
contractholder dies, or the contractholder begins receiving benefits under an
annuity payout option; or immediate, where payments begin within one year of
issue and continue for a fixed period of time or for life with or without a
period certain.

      Variable annuities are separate account products, where the contractholder
bears the investment risk and has the right to allocate funds among various
separate investment subaccounts. Our major source of revenues from variable
annuities is mortality and expense fees charged to the contractholder, generally
determined as a percentage of the market value of the underlying variable assets
under management. Our Revolution series variable annuity product line,
introduced in the fourth quarter of 2000, was the first in the industry to offer
assistance with the cost of long-term care, with no underwriting. Revolution is
targeted to the needs of aging consumers who want to accumulate funds for
retirement and provide a hedge against the cost of long-term care. Revolution
sales comprised 94% and 88% of total variable annuity sales for the years ended
December 31, 2002 and 2001, respectively.

      Fixed annuities are general account products, where we bear the investment
risk as funds are invested in our general account and a stated interest rate is
credited to the contractholders' accounts. Our major source of income from fixed
annuities is the spread between the investment income earned on the underlying
general account assets and the interest credited to contractholders' accounts.

      Investment management skills are critical to the growth and profitability
of our annuity business. The investments we offer for our variable annuity and
variable life products are part of a collection of funds called The Variable
Series. Within this collection is a subgroup of investment options called the
Variable Series Trust (VST), subadvised funds managed by some of the world's
premier money managers, which John Hancock, as investment adviser, is
responsible for overseeing. As the investment adviser, John Hancock oversees the
subadvisers to ensure their investment styles remain consistent. All our fixed
annuity assets are managed internally.

      The relative proportion of our total annuity sales represented by fixed
and variable annuities is generally driven by the relative performance of the
equity and fixed income markets. The Company's total annuity deposits were
comprised of 78.2% fixed annuity and 21.8% variable annuity for the year ended
December 31, 2002 and 69.7% fixed annuity and 30.3% variable annuity for the
year ended December 31, 2001. The following table presents certain information
regarding our annuity reserve activity for the periods indicated:

                            Annuity Reserve Activity

<TABLE>
<CAPTION>
                                                                      As of or for the Years Ended December 31,
                                                                           2002         2001        2000
                                                                      ---------------------------------------
                                                                                   (in millions)
<S>                                                                    <C>         <C>          <C>
Variable Annuities:
Reserves, beginning of year.......................................     $  6,323.1   $  7,182.8   $  7,683.2
     Deposits and other policy credits (1)........................          747.9        641.3      1,162.3
     Interest credited and investment performance.................         (778.4)      (570.9)      (538.3)
     Surrenders and benefits......................................         (880.7)      (814.8)      (997.6)
     Product fees.................................................         (109.4)      (115.3)      (126.8)
                                                                      ----------------------------------------
Reserves, end of year.............................................     $  5,302.5   $  6,323.1   $  7,182.8
                                                                      ========================================
Fixed Annuities:
Reserves, beginning of year.......................................     $  6,497.4   $  5,365.8   $  4,946.4
     Premiums, deposits and other policy credits (1)..............        2,690.6      1,478.0        899.1
     Interest credited............................................          394.1        344.7        291.0
     Surrenders and benefits......................................         (810.9)      (680.7)      (759.2)
     Product fees.................................................           (9.4)       (10.4)       (11.5)
                                                                      ----------------------------------------
Reserves, end of year.............................................     $  8,761.8   $  6,497.4   $  5,365.8
                                                                      ========================================
Total Annuities:
Reserves, beginning of year.......................................     $ 12,820.5   $ 12,548.6   $ 12,629.6
     Premiums, deposits and other policy credits (1) (2)..........        3,438.5      2,119.3      2,061.4
     Interest credited and investment performance.................         (384.3)      (226.2)      (247.3)
     Surrenders and benefits......................................       (1,691.6)    (1,495.5)    (1,756.8)
     Product fees.................................................         (118.8)      (125.7)      (138.3)
                                                                      ----------------------------------------
Reserves, end of year.............................................     $ 14,064.3   $ 12,820.5   $ 12,548.6
                                                                      ========================================
</TABLE>


                                       15
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

(1)   Included in this line for the year ended December 31, 2000 are policy
      credits of $18.7 million for fixed annuity and $16.5 million for variable
      annuity which were added to annuity reserves as part of the
      demutualization.

(2)   Variable annuity deposits exclude internal exchanges as part of the safe
      harbor internal exchange program of $92.0 million, $1,910.5 million and
      $25.0 million for the years ending December 31, 2002, 2001 and 2000,
      respectively.

John Hancock Funds

      We offer a variety of mutual fund products and related investment
management services through John Hancock Funds. We employ a team style in the
management of our funds. These teams manage portfolios in accordance with a
variety of specified strategies, which we believe gives us a competitive
advantage over competitors, many of whom deploy only one style across a family
of funds. As of December 31, 2002, our fixed income and equity research staffs
included over 61 portfolio managers and analysts with an average of 18 years of
experience. We are recruiting additional investment professionals to enhance our
capabilities across both fundamental and quantitative analysis and investment
styles. This ongoing commitment to investment research further enables us to
develop new products intended to strengthen our fund offerings, across a broad
array of investment styles. In addition, our investment staff is supplemented by
subadvisory arrangements with third-parties and other John Hancock units. We
also actively pursue the acquisition of top performing mutual funds, which can
be sold through our distribution system. While the business includes primarily
assets managed for third-party retail clients, the investment professionals
providing these services also manage assets underlying our general account and
separate account products, as well as variable life, annuity products and
Maritime Life.

      Mutual Funds. John Hancock Funds offers a broad array of open-end mutual
            funds and closed-end funds to a broad base of consumers across
            varying income levels. Open-end mutual funds are subject to
            redemption at any time by investors. After their initial public
            offering, the shares of closed-end funds are not subject to
            redemption and, accordingly, represent a more stable base of assets
            than open-end funds. As of December 31, 2002, 59.3% of our mutual
            fund assets under management were invested in open-end mutual funds.
            We also offer our mutual funds as investment options in variable
            annuities and variable life insurance products. Our product
            offerings cover both domestic and international equity and
            fixed-income markets. In 2002, the Company added six new funds to
            its investment offerings. Four new open-end funds were offered:
            Classic Value Fund, U.S. Global Leaders Growth Funds, Large Cap
            Spectrum Fund and High Income Fund. The U.S. Global Leaders Growth
            Fund was acquired from Yeager, Wood & Marshall, Inc. in May 2002 and
            the classic Value Fund was acquired from Pzena Investment
            Management, LLC, in November 2002. In addition, two new closed-end
            funds were offered; John Hancock Preferred Income Fund and John
            Hancock Preferred Income Fund II.

      Retirement Services. We offer traditional IRA programs and a complete line
            of retirement products, including: 401(k) plans and sole proprietor
            401(k) plans, SIMPLE IRA and SIMPLE 401(k) plans for companies with
            no more than 100 eligible employees and no other qualified plan;
            Simplified Employee Pensions for companies of any size, including
            self-employed persons, partnerships and corporations; and Roth IRA
            plans for individuals.

      Institutional Services. Through funds and private accounts, John Hancock
            Funds manages assets for public pension plans, high net-worth
            individuals, corporate pension plans, pooled separate accounts,
            union pension plans, foundations and endowments.


                                       16
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      The following tables present certain information regarding the assets
under management by John Hancock Funds for the periods indicated:

                  Total Assets Under Management By Asset Class

                                                     As of December 31,
                                               2002         2001         2000
                                           -------------------------------------
                                                           (in millions)
Assets Under Management:
Domestic equity and balanced..............  $13,727.7    $17,898.4    $21,244.4
International equity and balanced.........      309.3        391.3        548.3
Domestic and international fixed income...   11,773.3     10,996.1      9,933.1
                                           -------------------------------------
     Total assets under management (1)....  $25,810.3    $29,285.8    $31,725.8
                                           =====================================

                               Asset Flow Summary

<TABLE>
<CAPTION>
                                                     For the Years Ended December 31,
                                                     2002         2001          2000
                                                ----------------------------------------
                                                              (in millions)
<S>                                              <C>           <C>          <C>
Retail Mutual Funds:
Assets under management, beginning of year.....  $ 22,876.2    $ 26,541.4   $ 27,842.4
     Deposits and reinvestments................     4,056.6       3,958.7      5,333.6
     Redemptions and withdrawals...............    (3,817.2)     (4,300.8)    (5,394.1)
     Net money market funds....................      (205.4)       (205.5)       (90.9)
     Market appreciation (depreciation)........    (3,387.1)     (2,770.2)      (713.7)
     Fees......................................      (290.1)       (347.5)      (435.9)
                                                ----------------------------------------
Assets under management, end of year (1).......  $ 19,233.0    $ 22,876.1   $ 26,541.4
                                                ========================================
Institutional Investment Management:
Assets under management, beginning of year.....  $  6,409.6    $  5,184.4   $  4,854.2
     Deposits and reinvestments................     1,198.2       1,924.4        677.1
     Redemptions and withdrawals...............      (853.1)       (822.3)      (571.2)
     Market appreciation (depreciation)........      (160.9)        137.2        237.3
     Fees......................................       (16.5)        (14.0)       (13.0)
                                                ----------------------------------------
Assets under management, end of year...........  $  6,577.3    $  6,409.7   $  5,184.4
                                                ========================================
Total:
Assets under management, beginning of year.....  $ 29,285.8    $ 31,725.8   $ 32,696.6
     Deposits and reinvestments................     5,254.8       5,883.1      6,010.7
     Redemptions and withdrawals...............    (4,670.3)     (5,123.1)    (5,965.2)
     Net money market funds....................      (205.4)       (205.5)       (90.9)
     Market appreciation (depreciation)........    (3,548.0)     (2,633.0)      (476.4)
     Fees......................................      (306.6)       (361.5)      (448.9)
                                                ----------------------------------------
Assets under management, end of year (1).......  $ 25,810.3    $ 29,285.8   $ 31,725.8
                                                ========================================
</TABLE>

(1)   Retail mutual fund assets under management includes $2.5 billion, $3.7
      billion and $5.3 billion in retirement plan assets at December 31, 2002,
      2001 and 2000, respectively.

Distribution

      Asset Gathering products are distributed through Signator, independent
broker/dealers, banks, directly to state lottery commissions and both directly
and through consultants to institutions and retirement plan sponsors.

      Signator. Signator, a subsidary of the Company, through its broker/dealer
and insurance agency subsidiaries, is a key distribution channel for our
variable annuities. We also sell fixed annuities, mutual funds, 401(k) programs
and other retirement programs through these entities.

      Essex Corporation. Essex, a subsidiary of the Company, is one of the
nation's largest intermediaries between banks and product manufacturers for
annuities. Essex is the Company's primary distribution channel for selling
annuities through mid-market banks. Essex has primarily focused on selling fixed
annuities and strives to grow variable annuity sales. Essex also serves as an
intermediary in the distribution of mutual funds. Essex's primary source of
income is commissions on sales of these products.


                                       17
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Broker/Dealers. Broker/dealers, which include regional and national
brokerage firms and financial planners, are the primary distribution channel for
our mutual funds. Broker/dealers also sell our fixed and variable annuities. We
support this distribution channel with an internal network of wholesalers. These
wholesalers meet directly with broker/dealers and financial planners and are
supported by an extensive home office sales staff.

      Pension Consultants. We market investment management services to pension
consultants nationwide who provide advisory services to plan sponsors. Marketing
efforts are supported by dedicated client relationship officers who keep clients
updated on portfolio performance information.

      Banks. Starting with sales of fixed annuities, we have expanded our
offerings through banks to include mutual funds and variable annuities. Starting
in 1998, we added additional products to our bank offerings. We believe we are
well positioned to take advantage of the growth opportunity we see for multiple
product offerings, coupled with added value marketing programs and customized
service support for banks.


                                       18
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      The table below shows Asset Gathering Segment sales by distribution
channel for the periods indicated.

              Asset Gathering Segment Sales by Distribution Channel

                                           For the Years Ended December 31,
                                           2002          2001           2000
                                      ----------------------------------------
                                                    (in millions)
Broker/Dealers:
     Variable annuities (1).........   $   133.9      $  145.2      $  334.7
     Fixed annuities................        70.4          40.5           1.3
     Mutual funds...................     3,504.4       2,816.6       3,930.3
Signator:
     Variable annuities (1).........       305.8         414.0         653.0
     Fixed annuities................       243.1         131.9          80.6
     Mutual funds...................       270.2         367.5         616.6
Pension Consultants:
     Mutual funds...................       911.7       1,700.6         596.6
Financial Institutions:
     Variable annuities.............       277.9          60.0         154.7
     Fixed annuities................     2,189.0       1,268.9         742.0
     Mutual funds...................        51.3         116.7         163.5
e-Business and Retail Partnerships..        30.1          19.2           0.7
Other (2)...........................       188.3          37.9          34.2
                                      ----------------------------------------
     Total..........................   $ 8,176.1      $7,119.0      $7,308.2
                                      ========================================

(1)   Sales represents a measure, defined by LIMRA, of the amount of new
      business we have sold during the period rather than a measure of revenue.

(2)   Variable annuity deposits exclude internal exchanges as part of the safe
      harbor internal exchange program of $92.0 million, $1,910.5 million and
      $25.0 million, respectively, for the years ending December 31, 2002, 2001
      and 2000.

(3)   Other includes single premium immediate annuities, including
      lottery-related payout contracts, and supplemental contracts involving
      life contingencies.

Reserves

      We establish and report liabilities for future policy benefits on our
balance sheet to meet the obligations under our annuity contracts. Our liability
for variable annuity contracts and deferred fixed annuity contracts is equal to
the cumulative account balances. Cumulative account balances include deposits
plus credited interest or change in investment value less expense and mortality
fees, as applicable, and withdrawals. Future policy benefits on our immediate
fixed annuity contracts are calculated based on a set of actuarial assumptions
that we establish and maintain throughout the lives of the contracts.

Competition

      We face substantial competition in all aspects of our asset gathering
business. The annuity business is highly competitive. We compete with a large
number of insurance companies, investment management firms, mutual fund
companies, banks and others in the sale of annuities. We compete for mutual fund
business with hundreds of fund companies. Many of our competitors in the mutual
fund industry are larger, have been established for a longer period of time,
offer less expensive products, have deeper penetration in key distribution
channels and have more resources than us.

      Competition in the asset gathering business is based on several factors.
These include investment performance and the ability to successfully penetrate
distribution channels, to offer effective service to intermediaries and
consumers, to develop products to meet the changing needs of various consumer
segments, to charge competitive fees and to control expenses.

      We believe the Asset Gathering Segment is well positioned to increase
assets under management in the face of this competition. Our competitive
strengths include the ability to:

      o     deliver strong investment performance, and enhance this performance
            by expanding the depth and breadth of fundamental research,
            portfolio management teams, and investment professionals;


                                       19
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      o     develop new products and expand into new markets; and

      o     provide excellent service to investors and distributors.

Service Organizations

      Within the Asset Gathering Segment, we also include our servicing
subsidiary, John Hancock Signature Services.

      John Hancock Signature Services combines and coordinates customer service
functions for life insurance, annuity and mutual fund customers. The services
provided by John Hancock Signature Services, Inc. include new business
processing underwriting, contract change services, claims processing, premium
collection and processing, billing, and preparation of annual and quarterly
statements. Through this subsidiary, we seek to provide an integrated and
comprehensive customer service function on a cost-effective basis. This system
permits a customer to have a single point of contact for most servicing needs.

Banking Products and Services

      First Signature Bank & Trust Company is a limited-service bank, which
accepts demand deposits but does not make commercial loans. It provides consumer
banking products and services to our customers. First Signature Bank & Trust
Company had $100.5 million and $156.5 million in assets as of December 31, 2002
and 2001.

      For a further description of operating results, see Management's
Discussion and Analysis of Financial Condition and Results of Operations - Asset
Gathering Segment, included elsewhere in this Form 10-K.


                                       20
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Guaranteed and Structured Financial Products Segment

Overview

      Through our Guaranteed and Structured Financial Products Segment (G&SFP),
we offer a variety of specialized products and services to qualified defined
benefit and defined contribution retirement plans, and other domestic and
international investors. Our products include non-guaranteed, partially
guaranteed and fully guaranteed general account and separate account investment
options. We distribute these products through home office and regional sales
representatives either directly to institutional buyers or indirectly through
financial intermediaries, consultants and brokers.

      The G&SFP Segment contributed 25.6%, 32.1% and 33.3% of consolidated
operating revenues and 34.7%, 31.5% and 29.9% of consolidated segment after-tax
operating income in the years ended December 31, 2002, 2001 and 2000,
respectively. The G&SFP Segment generated revenues of $1,768.4 million, $2,369.5
million and $2,427.2 million and segment after-tax operating income of $268.7
million, $238.0 million and $211.6 million in 2002, 2001 and 2000, respectively.
G&SFP Segment financial information is summarized below:

<TABLE>
<CAPTION>
                                                                                       As of December 31,
                                                                             2002             2001              2000
                                                                      ---------------------------------------------------
                                                                                         (in millions)
<S>                                                                       <C>                <C>               <C>
Assets Under Management:
Spread-based products................................................     $24,872.3          $22,444.5         $19,492.1
Fee-based products...................................................       8,402.6            8,448.4          10,827.7
                                                                      ----------------  ---------------  ----------------
Total................................................................     $33,274.9          $30,892.9         $30,319.8
                                                                      ================  ===============  ================

Spread-based Premiums and Deposits:

Fund-type products...................................................     $ 3,847.9          $ 4,718.8         $ 4,442.0
Single premium annuities.............................................           1.2              465.5             594.8
SignatureNotes.......................................................         290.2                 --                --
                                                                      ----------------  ---------------  ----------------
Total Spread-based Premiums and Deposits.............................     $ 4,139.3          $ 5,184.3         $ 5,036.8
                                                                      ================  ===============  ================

Fee-based Premiums and Deposits:
General account participating pension fund-type products and
     annuity contracts...............................................     $   529.3          $   468.9         $   467.0
Structured separate accounts.........................................         483.9               77.4              50.3
Other separate account contracts.....................................         (26.1)             130.6             223.9
                                                                      ----------------  ---------------  ----------------
     Total Fee-based Premiums and Deposits...........................     $   987.1          $   676.9         $   741.2
                                                                      ================  ===============  ================
</TABLE>

      Premiums and deposits above differ from GAAP premiums because GAAP
requires that premiums on general account GICs, funding agreements, general
account participating pension products, structured separate accounts, separate
account annuities and separate investment accounts be accounted for using
deposit accounting. Deposit accounting excludes the contributions and deposits
received on find-type products from revenue and generally shows only the fees
and investment income earned from these products as revenues.

Products and Markets

      The G&SFP Segment offers spread-based products and fee-based products in a
variety of markets. Spread-based products serve the larger and faster growing
segment of the market. Fee-based products are typically niche products that have
less overall growth potential. The general account Guaranteed Investment
Contract (GIC) has been our predominant product issued in the qualified defined
contribution plan market. Single premium and separate account annuities are
primarily limited to qualified and non-qualified defined benefit plans. Funding
agreements are issued to non-qualified domestic and international institutional
investors. By working closely with our customers to develop customized
investment programs, we have built a leading market share in several important
markets, including general account GICs, funding agreements and single premium
annuities.


                                       21
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Spread-Based Products. Our spread-based products provide a guaranteed rate
of return to the customer. We derive earnings on these products primarily from
the difference between the investment returns on the supporting assets and the
guaranteed returns provided to customers. Our spread-based products include:

o     Fund-type products. Our fund-type products consist of the following:

      General account GICs. GICs are annuity contracts that pay a guaranteed
      rate of return. GICs are primarily marketed to sponsors of tax-qualified
      retirement plans such as 401(k) plans. The guaranteed rate of return on
      GICs can be a fixed rate or a floating rate based on an external market
      index.

      Funding agreements. Funding agreements are investment contracts that pay a
      guaranteed rate of return. Funding agreements generally are issued to
      corporations, mutual funds and other institutional investors and, unlike
      GICs, are not typically used to fund retirement plans. The guaranteed rate
      of return on funding agreements can be a fixed rate or a floating rate
      based on an external market index.

o     Single premium annuities. Single premium annuities are immediate or
      deferred annuity contracts which provide for payments of a guaranteed
      amount commencing at a specified time, typically at retirement. These
      annuities are sold primarily to defined benefit plan closeouts. The two
      most common types of annuities are the straight life annuity, which makes
      payments for the life of a retired annuitant, and the joint and survivor
      annuity, which continues to make payments to a spouse after the death of
      the annuitant. We also provide structured settlements, which provide a
      tax-free stream of periodic payments to individuals who receive awards or
      settlements in personal physical injury disputes. We have broadened our
      offerings to include a structuring program for attorney's fees, allowing
      counsel to defer legal fees as taxable disbursements into the future.

o     SignatureNotes. SignatureNotes are debt securities issued directly by the
      Life Company to retail investors via a broker-dealer network. These debt
      securities, available to investors in $1,000 increments, are offered
      weekly under a $3 billion shelf registration with varying terms and
      maturity dates, as permitted in the prospectus.

      Fee-Based Products. Our fee-based products generally pass the investment
results of invested assets through to the contractholder with no, or minimal,
guarantees. We derive earnings on these products primarily from expense, risk,
and profit charges that are generally assessed on the basis of assets under
management. Fee-based businesses provide relatively stable revenues and have
lower capital requirements than our spread-based businesses. Our fee-based
products include:

o     Participating general account fund-type products and annuity contracts.
      These products are funding vehicles for pension plans that pass investment
      results through to the contractholder, after risk and profit charges.
      Annuity guarantees for these products are supported by asset adequacy
      requirements under which assets must be maintained at levels at least 5%
      above the annuity reserve. If the level of assets held under the contract
      falls below this threshold, we may liquidate assets equal to the annuity
      reserve and apply the assets to purchase a fully guaranteed annuity.

o     Structured Separate Accounts. These products pass the investment results
      of a separate account through to the contractholder and contain only
      minimal guarantees. Contractholders may select from among flexible
      investment options provided by our various investment managers. The
      structured separate account business leverages the strong marketing
      relationships developed with our general account GIC customers.

o     Participating separate account annuities. These products are funding
      vehicles for pension plans which offer customers an insured
      pension-funding program in conjunction with a broad range of investment
      options, including both equity and fixed-income investment classes. The
      risk associated with providing these annuities is mitigated by excess
      collateral maintenance requirements, which vary depending on the
      investment option selected. If the collateral falls below the maintenance
      requirements, we may liquidate assets equal to the annuity reserve and
      apply the assets to purchase a fully guaranteed annuity.

o     Separate investment accounts. These are non-guaranteed group annuity
      contracts under which assets are held in a separate account. We typically
      use affiliated investment advisors to manage these assets. We may also use
      non-affiliated investment managers if the customer so requires. Because
      these products do not provide guarantees, most


                                       22
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      new sales of separate investment accounts are reported in the Investment
      Management Segment. Existing agreements, however, continue to be reported
      in and serviced by the Guaranteed and Structured Financial Products
      Segment because of customer relationships.

Distribution

      We distribute our guaranteed and structured financial products through a
variety of channels. General account GICs and structured separate accounts are
sold through our regional representatives to plan sponsors, or to GIC managers
who represent plan sponsors. Funding agreements are sold either directly,
through brokers, or through investment banks in the form of medium-term notes.
SignatureNotes are distributed through a retail brokerage network. Annuities are
sold through pension consultants who represent defined benefit plan sponsors or
through brokers who receive a commission for sales of our products. Structured
settlements annuities are offered through a group of broker companies
specializing in dispute resolution.

      We have an experienced sales staff that develops and maintains
relationships with target customers, consultants, and other financial
intermediaries. We believe that our consistent market presence over the past two
decades has created strong and valuable relationships with a large segment of
the customer base.

Spread-Based Products Risk Management

      Because of the significant guarantees provided as part of our spread-based
product offerings, risk management is particularly important in this line of
business. To facilitate risk management, we segregate and manage the assets
supporting our spread-based products separately from the rest of our general
account. Our risk management strategy incorporates a sophisticated
asset/liability matching system that is based on:

o     Managing interest rate exposure by closely matching the relative
      sensitivity of asset and liability values to interest rate changes, i.e.
      controlling the "duration mismatch" of assets and liabilities.

o     Using sophisticated systems and processes to project cash flows for each
      asset and each liability and to measure with precision the sensitivity of
      assets and liabilities to interest rate changes.

o     Writing contracts that typically have a predictable maturity structure and
      do not have premature surrender or redemption provisions.

o     Monitoring all contribution and withdrawal activity in each contract to
      anticipate deviations from expected cash flows.

o     Establishing working groups with representatives from our various business
      units, to facilitate interaction among investment management, sales
      management, risk management, financial management and the pricing staff.

      For additional information, see Quantitative and Qualitative Information
about Market Risk, included elsewhere in this Form 10-K.

Underwriting

      Underwriting is most significant for the following products in this
segment:

o     General Account GICs. In developing pricing proposals for new contracts,
      our underwriters estimate both base-line cash flows and also likely
      variance from the base line due to plan participants reallocating assets
      from the "stable value" option of their defined contribution plan. Our
      underwriters utilize customized pricing models that generate plan-specific
      risk charges for each customer's book value payment provision. If these
      pricing models project the risk of losses exceeding customary thresholds,
      instead of rejecting the business, our underwriters can modify the
      proposal by suggesting the use of risk reduction techniques designed to
      shift some of the risk of redemptions back to the plan or to a third
      party.


                                       23
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

o     Single Premium Annuities. We underwrite immediate annuities using recent
      mortality experience and an assumption of continued improvement in
      annuitant longevity. We underwrite deferred annuities by analyzing
      mortality risk and the expected time to retirement.

Reserves

      We establish and report liabilities for contractholders' funds and future
policy benefits to meet the obligations on our policies and contracts. Our
liability for fund-type products, and fee-based products is equal to the
cumulative account balances for these products. Cumulative account balances
include deposits plus credited interest or investment earnings less expense
charges and withdrawals. Future policy benefits for our single premium annuity
contracts are calculated based on a set of actuarial assumptions that we
establish and maintain throughout the lives of the contracts. Our assumptions
include investment yields, mortality and the expected time to retirement.

Competition

      Our Guaranteed and Structured Financial Products Segment operates in a
variety of highly competitive institutional markets. Although a large number of
companies offer these products, the market is concentrated. Through the first
three quarters of 2002, five insurers, including the Life Company, issued
approximately 44% of total GICs and funding agreements issued by U.S. insurance
companies reporting to LIMRA; and six insurers, including the Life Company,
issued more than 88% of total single premium annuities. Our competitors include
a variety of well-recognized insurance companies, domestic and foreign banks and
other institutional investment advisors.

      With the introduction of SignatureNotes we became the first insurer to
enter the retail market to compete with other issuers of direct access notes,
including both financial and non-financial firms.

      We believe that we are able to compete successfully in our markets as a
result of our strong financial ratings, brand name, investment management
expertise, national distribution, flexible product design and competitive
pricing. Competition in this market is restricted almost exclusively to
insurance companies with superior or excellent financial ratings. The
requirement for strong financial ratings reduces pressure on margins by limiting
the number of potential competitors and by lowering our cost of funds.

      For a further description of operating results, see Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Guaranteed and Structured Financial Products Segment included elsewhere in this
Form 10-K.


                                       24
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Investment Management Segment

Overview

      Through our Investment Management Segment, we provide investment
management services to domestic and international institutions. While this
segment includes primarily assets managed for third-party institutional clients,
the investment professionals providing these services also manage assets
underlying our general account and separate account products, as well as
variable life and annuity and mutual fund products. The Investment Management
Segment attracts funds from corporate and public pension plan sponsors, banks,
insurance companies, mutual funds, and other domestic and international
institutions.

      The Investment Management Segment represented 23.7%, 25.1% and 27.8% of
our total assets under management as of December 31, 2002, 2001 and 2000, which
were $117.6 billion, $114.8 billion and $117.2 billion, respectively. The
Investment Management Segment contributed $124.6 million, $143.2 million and
$212.0 million of consolidated operating revenues and $21.2 million, $29.8
million and $46.8 million of consolidated segment after-tax operating income in
the years ended December 31, 2002, 2001 and 2000, respectively.

Products and Markets

      The Investment Management Segment is primarily a fee-based investment
advisory business in which we do not offer guarantees to our customers. We
provide a variety of investment structures, such as investment advisory client
portfolios, individually managed and pooled separate accounts, registered
investment company funds, bond and mortgage securitizations, and mutual fund
management capabilities.

      Our investment management expertise covers a wide range of private and
publicly-traded asset classes and is based on fundamental research and
disciplined, quantitatively-based analysis and asset-liability management. Our
private fixed income, equity, commercial mortgage and alternative asset
operations have strong credit analysis capabilities and deal origination
expertise. These operations enjoy broad networks of relationships with
intermediaries giving them early access to new investment opportunities.

      The capabilities of the Investment Management Segment include:

      Public Fixed Income and Equity Investments. Through Independence
Investment LLC, we provide active stock and bond management to pension funds,
endowments, and other institutions. We provide core, value, growth, medium-cap,
small-cap, balanced and market neutral investment strategies. We also offer
international stock and bond management.

      In addition, we offer active, quantitative investment management services
in the high quality fixed income markets, with a special emphasis on structuring
and managing portfolios of asset-backed securities and Treasury securities
combined, when appropriate, with various derivative strategies. These portfolios
are either managed directly for investors or structured as collateralized debt
obligations (CDOs).

      Private Fixed Income, Equity and Alternative Asset Class Investments. We
manage funds for external institutional clients investing in private
fixed-income and equity securities and alternative asset classes. Our strength
is in private placement corporate securities, structured and innovative
transactions and niche investment opportunities. Our completed offerings include
a mezzanine fund investing primarily in subordinated debt with equity
participation features and collateralized bond obligation funds, which have been
marketed domestically and internationally to banks, insurance companies, brokers
and other clients outside of the pension market.

      We are a leading domestic and international manager of equity timberland
for large tax-exempt institutional investors, and are among the largest managers
of equity farmland investments. This segment also originates, services and
securitizes commercial mortgages. In addition, we sponsor affordable housing
investments that qualify for Federal tax credits.


                                       25
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      The following tables present certain information regarding the assets
under management by the Investment Management Segment for the periods indicated:

                  Total Assets Under Management By Asset Class

<TABLE>
<CAPTION>
                                                                         As of December 31,
                                                                 2002           2001            2000
                                                          ----------------------------------------------
                                                                            (in millions)
<S>                                                           <C>             <C>             <C>
Assets Under Management:
Domestic equity and balanced..........................        $11,159.9       $14,952.7       $19,099.3
International equity and balanced.....................          1,417.0         1,512.6         1,840.1
Domestic and international fixed income...............         11,758.0         9,385.7         8,469.3
Timber, farmland and independent power................          3,156.5         2,919.6         3,136.0
                                                          ----------------------------------------------
     Total assets under management (2) (3)............        $27,491.4       $28,770.6       $32,544.7
                                                          ==============================================
</TABLE>

                               Asset Flow Summary

<TABLE>
<CAPTION>
                                                                         As of December 31,
                                                                 2002            2001            2000
                                                          ----------------------------------------------
                                                                            (in millions)
<S>                                                           <C>             <C>             <C>
Assets Under Management:
Assets under management, beginning of year (1) (4)....        $28,770.6       $32,544.7       $40,047.2
Sales and reinvestments...............................          4,638.6         3,506.7         3,648.3
Redemptions and withdrawals...........................         (2,804.6)       (5,304.8)       (9,708.7)
Market (depreciation) appreciation....................         (3,113.2)       (1,976.0)       (1,442.1)
                                                          ----------------------------------------------
Assets under management, end of year (2) (3)..........        $27,491.4       $28,770.6       $32,544.7
                                                          ==============================================
</TABLE>

(1)   Includes $1,234.6 million, $1,120.1 million and $1,060.8 million of assets
      managed by subsidiaries for our general account as of January 1, 2002,
      2001 and 2000, respectively.

(2)   Does not include $383.1 million, $151.3 million and $106.9 million of
      general account cash and invested assets as of December 31, 2002, 2001 and
      2000, respectively.

(3)   Includes $1,612.0 million, $1,234.6 million and $1,120.1 million of assets
      managed by subsidiaries for our general account for the year ended
      December 31, 2002, 2001 and 2000, respectively.

(4)   Does not include $151.3 million, $106.9 million and $164.5 million of
      general account cash and invested assets as of January 1, 2002, 2001 and
      2000, respectively.

Distribution

      We sell our investment management products and services through multiple
distribution channels. Marketing to pension funds, endowments, foundations and
other institutional clients is conducted primarily by our experienced sales
professionals and dedicated marketing and client relationship staff. Products
are also offered through independent marketing specialists, consulting firms,
and investment banking firms.

Competition

      The institutional asset management industry is highly competitive. We
compete with other investment management firms, insurance companies, banks and
mutual fund companies, many of who are larger and have greater resources than
us. Consolidation activity in recent years has increased the concentration of
competitors within the industry.

      We believe the fundamental elements of competitive success are investment
performance and customer service. Our competitive strategy focuses on attracting
assets through superior performance. Consistent with this strategy, we
continually evaluate opportunities to develop internally, acquire, or divest
investment management units and strive to improve our investment management
products and services. In addition, we believe our leading role in
non-traditional asset classes helps to create a distinct and competitively
advantageous profile in the institutional asset management marketplace.


                                       26
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Corporate and Other Segment

Overview

      Our Corporate and Other Segment consists primarily of our international
operations, corporate operations and non-core businesses that are either in the
process of winding down (i.e., are in "run-off") or have been divested. This
segment contributed approximately 9.3%, 8.8% and 7.9% of consolidated segment
operating revenues and 5.7%, 7.3% and 11.6% of consolidated after-tax operating
income in the years ended December 31, 2002, 2001 and 2000, respectively. The
Corporate and Other Segment generated operating revenues of $644.2 million,
$650.6 million and $577.0 million and segment after-tax operating income of
$44.3 million, $55.4 million and $82.4 million in 2002, 2001 and 2000,
respectively.

          The Corporate and Other Segment assets are summarized below:

                                          For the Years Ended December 31,
                                        2002           2001           2000
                                --------------- --------------- ----------------
                                                  (in millions)
Assets:
International operations.....      $     87.4      $     71.9      $     65.1
Corporate operations.........         7,658.6         6,634.7         5,604.6
Non-core businesses..........         1,060.8         1,004.0         1,106.1
Intra-segment eliminations...        (6,163.3)       (4,542.6)       (3,808.1)
                                --------------- --------------- ----------------
     Total...................      $  2,643.5      $  3,168.0      $  2,967.7
                                =============== =============== ================

International Operations

      Our international operations consist primarily of the international group
insurance program. The international group insurance program consists of an
international network of 48 insurers that coordinate and/or reinsure group life,
health, disability and pension coverage for foreign and globally mobile
employees of multinational companies in 51 countries and territories.

Corporate Operations

      Corporate operations consist principally of (1) investment and treasury
activities, and assets, investment income, interest expense and other expenses
not specifically allocated to segments and (2) group life insurance operations.
Our group life insurance business generated $154.1 million, $225.8 million and
$240.6 million in premiums in the years ended December 31, 2002, 2001, and 2000,
respectively. Also included in corporate operations is the revenues and expenses
of Signature Fruit, a subsidiary of the Company, which purchased certain assets
and assumed certain liabilities out of bankruptcy proceedings of Tri Valley
Growers, Inc., a cooperative association, for approximately $53.0 million on
April 1, 2001. Signature Fruit generated $235.9 million and $177.8 million in
revenues and $241.3 million and $183.1 million in expenses for the years ended
December 31, 2002 and 2001, respectively. No revenue or expense related to
Signature Fruit is in the Company's income statement for the year ended December
31, 2000.

Non-Core Businesses

      We have certain non-core businesses that have been divested or put in
run-off, reflecting a strategic decision to focus on our retail and
institutional businesses. Non-core businesses consist primarily of run-off
property and casualty insurance companies that were sold in 1999, a portion of
our group life and accident and health business and related subsidiaries that
were sold in 1997, and other small subsidiaries in various stages of running-off
their operations.

      For a further description of operating results, see Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Corporate and Other Segment, included elsewhere in this Form 10-K.


                                       27
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                       JOHN HANCOCK LIFE INSURANCE COMPANY

General Account Investments

General Account and Separate Accounts

      Our investments include assets held in our general account and assets held
in numerous separate accounts. We manage our general account assets in
investment segments that support specific classes of product liabilities. These
investment segments permit us to implement investment policies that both support
the financial characteristics of the underlying liabilities and also provide
returns on our invested capital. The investment segments also enable us to gauge
the performance and profitability of our various business segments and product
lines.

      Separate account assets are managed in accordance with specific investment
contracts. We generally do not bear any investment risk on assets held in
separate accounts, but rather receive investment management fees based on levels
of assets under management, measured at fair value, as well as mortality fees,
policy administration fees and surrender charges. Generally, assets held in
separate accounts are not available to satisfy general account obligations.

      For a further description of our investments, see Management's Discussion
and Analysis of Financial Condition and Results of Operations - General Account
Investments, included elsewhere in this Form 10-K.

Ratings

      Insurance companies are rated by rating agencies based upon factors
relevant to policyholders. Ratings provide both industry participants and
insurance consumers meaningful information on specific insurance companies.
Insurer financial strength (IFS) ratings are opinions of a company's ability to
pay obligations to policyholders and contractholders on a timely basis. IFS
ratings are based on many factors, both quantitative and qualitative, such as
evaluations of a company's balance sheet strength, operating performance,
business profile, liquidity, financial flexibility and management quality. As of
December 31, 2002, John Hancock Life Insurance Company is rated A++ (Superior,
highest rating) by A.M. Best, AA (Very Strong, third highest rating) by Fitch,
AA (Very Strong, third highest rating) by S&P, and Aa3 (Excellent, fourth
highest rating) by Moody's.

      We believe that our strong ratings are an important factor in marketing
our products to our distributors and customers, since ratings information is
broadly disseminated and generally used throughout the industry. Our ratings
reflect each rating agency's current opinion of our financial strength,
operating performance and ability to meet our obligations to policyholders, and
are not evaluations directed toward the protection of investors. Such ratings
are neither a rating of securities nor a recommendation to buy, hold or sell any
security.

REGULATION

General

      Our business is subject to extensive regulation at both the state and
Federal level, including regulation under state insurance and Federal and state
securities laws.

State Insurance Regulation

      The Company and its insurance subsidiaries are subject to supervision and
regulation by the insurance authorities in each jurisdiction in which they
transact business. Currently, we are licensed to transact business in all fifty
states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam,
the Northern Mariana Islands, and several Asian countries, including one city in
the People's Republic of China and therefore are subject to regulation in all
these jurisdictions. Most states have laws and regulations governing such issues
as: what lines of business a company may engage in; underwriting practices,
including a company's ability to request results of applicants' genetic tests;
what premium rates may be charged in various lines of business; what products a
company may sell; mandating certain insurance benefits and policy forms; minimum
rates for accumulation of cash values and maximum rates for policy loans;
licensing of insurance companies and agents; advertising and marketing
practices; statutory accounting and reporting requirements; reserve requirements
and solvency standards; admitted statutory assets; the appropriate mix of
investments; dividend payments; transactions with affiliates; and


                                       28
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

level of ownership regarding acquisitions of control. State insurance
departments periodically review the business and operations of an insurance
company by examining its financial condition and how its agents sell its
products. Our insurance subsidiaries are also required to file various reports
relating to their financial condition, including quarterly filings and detailed
annual financial statements. This is required in each jurisdiction where an
insurance business is licensed.

      State insurance regulatory authorities and other state law enforcement
agencies and attorneys general from time to time make inquiries concerning
whether our insurance businesses are in compliance with the regulations covering
their businesses. We reasonably and promptly respond to such inquiries and take
corrective action if warranted.

      The New York and Vermont insurance departments have ongoing market conduct
examinations involving John Hancock Life Insurance Company and John Hancock
Variable Life Insurance Company. The Company believes that it conducts its
business in accordance with all applicable state regulations and does not expect
that the outcome of these examinations will have a material impact on our
business, financial condition or results of operations.

      State insurance regulators and the National Association of Insurance
Commissioners are continually re-examining existing laws and regulations. Among
other things, these laws and regulations may focus on insurance company
investments, financial reporting and solvency issues, risk-adjusted capital
guidelines, interpretations of existing laws, the development of new laws, the
implementation of non-statutory guidelines and the circumstances under which
dividends may be paid.

Regulation Governing Potential Acquisitions of Control

      We are subject to regulation under the insurance holding company statutes
of the states in which our insurance subsidiaries are organized, principally
Massachusetts, which is the state of domicile of the Company. The Massachusetts
insurance law contains provisions which, in general, provide that the
acquisition or change of "control" of a domestic insurer or of any person that
controls a domestic insurer cannot be consummated without the prior approval of
the Massachusetts Commissioner of Insurance. In general, a presumption of
"control" arises from the ownership, control, possession with the power to vote
or possession of proxies with respect to, 10% or more of the voting securities
of an insurer or of a person that controls an insurer. A person seeking to
acquire control, directly or indirectly, of a Massachusetts insurance company or
of any person controlling a Massachusetts insurance company must file an
application for approval of the acquisition of control with the Massachusetts
Commissioner of Insurance and obtain the approval of the Massachusetts
Commissioner of Insurance before consummating the acquisition.

      The restrictions described above may deter, delay or prevent a future
acquisition of control, including transactions that could be perceived as
advantageous to our sole shareholder, JHFS.

Regulation of Dividends and Other Payments from Insurance Subsidiaries

      As a result of the demutualization of John Hancock Mutual Life Insurance
Company, a parent holding company, called John Hancock Financial Services, Inc.,
has been created. John Hancock Financial Services, Inc. (JHFS) is a holding
company and its primary asset is the outstanding capital stock of John Hancock
Life Insurance Company. As an insurance holding company, JHFS depends primarily
on dividends from John Hancock Life Insurance Company to pay dividends to its
shareholders, pay operating expenses and implement its capital management
strategies. Any inability of John Hancock Life Insurance Company to pay
dividends to JHFS in the future in an amount sufficient for JHFS to pay
dividends to its shareholders, meet its cash obligations and implement its
capital management strategies, may materially adversely affect the market price
of JHFS common stock and its business, financial condition or results of
operations.

      The Massachusetts insurance law limits how and when John Hancock Life
Insurance Company can pay dividends to JHFS. Under the Massachusetts insurance
law, no insurer may pay any shareholder dividend from any source other than
statutory unassigned funds without the prior approval of the Massachusetts
Commission of Insurance. The Massachusetts insurance holding company act
requires that a report be given to the Massachusetts Commissioner of Insurance
no later than five days following declaration, and at least ten days' prior to
payment, of any dividend or distribution by a Massachusetts insurance company.
Further, this act provides that no extraordinary dividend may be paid without
thirty days' prior written notice to the Massachusetts Commissioner of
Insurance, and only if the Massachusetts Commissioner of Insurance has not
disapproved, or has approved, the payment within the thirty day notice period.
An extraordinary dividend is any dividend or distribution of cash or other
property whose fair market value, together with other dividends or distributions
made within the


                                       29
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

preceding twelve months, exceeds the greater of (1) 10% of an insurance
company's surplus as regards policyholders as of the preceding December 31, or
(2) a life insurance company's statutory net gain from operations for the twelve
months ending on the preceding December 31. Although not currently viewed as
such, the Company, in the future, could also be viewed as being commercially
domiciled in New York and, if so, dividend payments may also be subject to New
York's insurance holding company act as well as Massachusetts law.

Surplus and Capital Requirements

      Insurance regulators have the discretionary authority, in connection with
the ongoing licensing of our insurance businesses, to limit or prohibit the
ability to issue new policies if, in the regulators' judgment, the insurer is
not maintaining a minimum amount of surplus or is in hazardous financial
condition. Limits may also be established on the ability to issue new life
insurance policies and annuity contracts above an amount based upon the face
amount and premiums of policies of a similar type issued in the prior year.

Risk-Based Capital

      The National Association of Insurance Commissioners (NAIC) has established
risk-based capital (RBC) standards for life insurance companies as well as a
model act to apply such standards at the state level. The model act provides
that life insurance companies must submit an annual risk-based capital report to
state regulators reporting their risk-based capital based on five categories of
risk: asset risk-affiliates, asset risk-other, insurance risk, interest rate
risk and business risk. The formula is intended to be used by insurance
regulators as an early warning tool to identify possible weakly capitalized
companies for purposes of initiating further regulatory action.

      In 2001, the NAIC changed the risked-based capital formula, which resulted
in lower RBC charges or a higher risk-based capital ratio. The most significant
change made by NAIC is to tax effect the RBC, which is similar to reducing the
risk factors being applied to the different risk categories. One other change
was the creation of a common stock asset risk category and its treatment in the
covariance calculation. This change also lowered RBC. John Hancock took certain
actions to improve the risk-based capital ratio. The two most significant
actions were the partial reinsurance of the closed block and the upstreaming of
some of the Company's foreign insurance affiliates to JHFS. John Hancock Life
Insurance Company exceeded the level of risk-based capital that would require it
to propose actions to correct a deficiency by 205 percent as of December 31,
2002.

Statutory Investment Valuation Reserves

      Life insurance companies are required to establish an asset valuation
reserve (AVR) consisting of two components: (i) a "default component," which
provides for future credit-related losses on fixed maturity investments, and
(ii) an "equity component," which provides for losses on all types of equity
investments, including equity securities and real estate. Insurers also are
required to establish an interest maintenance reserve (IMR) for net realized
capital gains and losses on fixed maturity securities, net of tax, related to
changes in interest rates. The IMR is required to be amortized into statutory
earnings on a basis reflecting the remaining period to maturity of the fixed
maturity securities sold. These reserves are required by state insurance
regulatory authorities to be established as a liability on a life insurer's
statutory financial statements, but do not affect our financial statements
prepared in accordance with GAAP. Although future additions to AVR will reduce
the future statutory capital and surplus of John Hancock Life Insurance Company,
we do not believe that the impact under current regulations of such reserve
requirements will materially affect the ability of John Hancock Life Insurance
Company to increase its statutory capital and surplus and pay future dividends
to John Hancock Financial Services, Inc.

IRIS Ratios

      The National Association of Insurance Commissioners has developed a set of
financial tests known as the Insurance Regulatory Information System (IRIS) for
early identification of companies which may require special attention by
insurance regulators. Insurance companies submit data on an annual basis to the
National Association of Insurance Commissioners. This data is used to calculate
ratios covering various categories of financial data, with defined "usual
ranges" for each category. IRIS consists of 13 key financial ratios for life
insurance companies. An insurance company may fall out of the usual range with
respect to one or more ratios because of specific transactions that are in
themselves immaterial or eliminated


                                       30
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

at the consolidated level. Departure from the usual range on four or more of the
ratios may lead to inquiries from individual states' insurance departments.
During the five-year period ended December 31, 2002, John Hancock Life Insurance
Company was outside the usual range for Net Change in Capital Surplus ratio for
the year 2000, and the Change in Product Mix and Change in Reserving ratios in
2001. The Change in Capital Surplus ratio fell outside the usual range in 2000
because of the demutualization transaction. Specifically, under the applicable
statutory accounting rules, the Company was required to exclude the proceeds
from the stock offering from surplus while the demutualization consideration
paid in cash was deducted from surplus, thereby distorting the ratio. This
adjustment did not recur in the years 2001 and 2002. The unusual ratios in 2001
were the result of the implementation of new statutory accounting rules and are
not expected to recur. During the same period, John Hancock Variable Life
Insurance Company and Investors Partner Life Insurance Company, which are wholly
owned direct and indirect subsidiaries of John Hancock Life Insurance Company,
respectively, had several ratios outside of the usual range. John Hancock
Variable Life Insurance Company had eight unusual ratios, all of which resulted
from growth in the business and the effect of reinsurance contracts with John
Hancock Life Insurance Company. Investors Partner Life Insurance Company had ten
unusual ratios due to the fact it writes no new business.

Regulation of Investments

      Our insurance businesses are subject to state laws and regulations that
require diversification of their investment portfolios. Some of these laws and
regulations also limit the amount of investments in specified investment
categories, such as below investment grade fixed maturity securities, equity
real estate, other equity investments and derivatives. Failure to comply with
these laws and regulations would cause investments exceeding regulatory
limitations to be treated as nonadmitted assets for purposes of measuring
statutory surplus, in some instances, requiring divestiture. State regulatory
authorities from the domiciliary states of our insurance subsidiaries have not
indicated any non-compliance with any such regulations.

Valuation of Life Insurance Policies Model Regulation

      The National Association of Insurance Commissioners has adopted a revision
to the Valuation of Life Insurance Policies Model Regulation (known as Revised
XXX). This model regulation established new minimum statutory reserve
requirements for certain individual life insurance policies written in the
future. Massachusetts adopted the Regulation effective January 1, 2001 and we
established increased reserves to be consistent with the new minimum standards
with respect to policies issued after the effective date of the regulation. In
addition, we revised our term life insurance products with guaranteed premium
periods and is in the process of revising and expanding our universal life
insurance products with no-lapse guarantees.

Federal Insurance Initiatives and Legislation

      Although the Federal government generally does not directly regulate the
insurance business, federal initiatives often have an impact on our business.
Current and proposed measures that may significantly affect the insurance
business generally include limitations on anti-trust immunity, minimum solvency
requirements and health care reform.

      On November 12, 1999, the Gramm-Leach-Bliley Act of 1999 became law,
implementing fundamental changes in the regulation of the financial services
industry in the United States. The act permits the transformation of the already
converging banking, insurance and securities industries by permitting mergers
that combine commercial banks, insurers and securities firms under one holding
company. Under the act, national banks retain their existing ability to sell
insurance products in some circumstances. In addition, bank holding companies
that qualify and elect to be treated as "financial holding companies" may engage
in activities, and acquire companies engaged in activities, that are "financial"
in nature or "incidental" or "complementary" to such financial activities,
including acting as principal, agent or broker in selling life, property and
casualty and other forms of insurance, including annuities. A financial holding
company can own any kind of insurance company or insurance broker or agent, but
its bank subsidiary cannot own the insurance company. Under state law, the
financial holding company would need to apply to the insurance commissioner in
the insurer's state of domicile for prior approval of the acquisition of the
insurer, and the act provides that the commissioner, in considering the
application, may not discriminate against the financial holding company because
it is affiliated with a bank. Under the act, no state may prevent or interfere
with affiliations between banks and insurers, insurance agents or brokers, or
the licensing of a bank or affiliate as an insurer or agent or broker.


                                       31
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      On October 26, 2001, the International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001 was enacted into law as part of the USA
PATRIOT Act. Among its many provisions the law requires that financial
institutions adopt anti-money laundering programs that include policies,
procedures and controls to detect and prevent money laundering, designate a
compliance officer to oversee the program and provide for employee training, and
periodic audits in accordance with regulations to be issued by the U.S. Treasury
Department. The Company has developed a program designed to fully comply with
the applicable provisions of the Act and the related Treasury Regulations.

Tax Legislation

      Currently, under the Internal Revenue Code, holders of many life insurance
and annuity products, including both traditional and variable products, are
entitled to tax-favored treatment on these products. For example, income tax
payable by policyholders on investment earnings under traditional and variable
life insurance and annuity products which are owned by natural persons is
deferred during the product's accumulation period and is payable, if at all,
only when the insurance or annuity benefits are actually paid or to be paid.
Also, for example, interest on loans up to $50,000 secured by the cash value of
life insurance policies owned by businesses on key employees is eligible for
deduction even though investment earnings during the accumulation period are
tax-deferred.

      In the past, legislation has been proposed that would have curtailed the
tax-favored treatment of some of our insurance and annuity products. If any such
proposals were enacted, market demand for such products would be adversely
affected. In addition, the Economic Growth and Tax Relief Reconciliation Act of
2001 (EGTRRA), enacted by Congress in 2001, provides for the gradual reduction
and eventual elimination of Federal estate taxes by the year 2010. But EGTRRA
also contains a sunset provision, which would reinstate Federal estate taxes in
the year 2011, based on the Internal Revenue Code in effect prior to the
enactment of EGTRRA. Many insurance products are designed and sold to help
policyholders reduce the effect of Federal estate taxation on their estates. The
enactment of EGTRRA has adversely affected sales of certain of our insurance and
investment advisory products, but this effect is mitigated somewhat by the
sunset provision. If the sunset provision of EGTRRA is eliminated in the future,
the adverse affect on the sales of these products could increase. In addition,
sales of split dollar life insurance products have been adversely affected by
proposed changes being considered by the Internal Revenue Service. Recently the
President of the United States of America has also put forth proposals that
would significantly increase tax-favored savings vehicles for individuals. These
proposals, if enacted in its current form, could adversely affect the sale of
our tax-favored annuity products.

Securities Laws

      Certain of our investment advisory activities are subject to federal and
state securities laws and regulations. Our mutual funds are registered under the
Securities Act of 1933, as amended (the "Securities Act"), and the Investment
Company Act. All of our separate investment accounts that fund retail variable
annuity contracts and retail variable life insurance products issued by us,
other than those which fund private placement investment options that are exempt
from registration or support fixed rate investment options that are also exempt
from registration, are registered both under the Securities Act and the
Investment Company Act. Institutional products such as group annuity contracts,
guaranteed investment contracts and funding agreements are sold to tax qualified
pension plans or are sold to other sophisticated investors as "private
placements," and are exempt from registration under both acts. Some of our
subsidiaries are registered as broker/dealers under the Securities Exchange Act
of 1934, as amended (the "Securities Exchange Act"), and with the National
Association of Securities Dealers, Inc., and a number are registered as
investment advisers under the Investment Advisers Act of 1940. One subsidiary is
registered as a commodity pool operator and also as a commodity trading advisor
under the Commodity Exchange Act. Our insurance companies or other subsidiaries
also own or manage other investment vehicles that are exempt from registration
under the Securities Act and the Investment Company Act but may be subject to
other requirements of those laws, such as antifraud provisions and the terms of
applicable exemptions. We are also subject to similar laws and regulations in
the states and foreign countries in which we provide investment advisory
services, offer the products described above or non-variable life and annuity
products or conduct other securities and investment related activities.


                                       32
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Environmental Considerations

      As owners and operators of real property, we are subject to extensive
federal, state and local environmental laws and regulations. Inherent in such
ownership and operation is the risk that there may be potential environmental
liabilities and costs in connection with any required remediation of such
properties. When deemed appropriate, we routinely conduct environmental
assessments for real estate being acquired for investment and before taking
title to property acquired through foreclosure or deed in lieu of foreclosure.
Based on these environmental assessments and compliance with our internal
environmental procedures, we believe that any costs associated with compliance
with environmental laws and regulations or any remediation of such properties
would not be material to our consolidated financial position or results of
operations. Furthermore, although we hold equity positions in subsidiaries and
investments that could potentially be subject to environmental liabilities, we
believe, based on our assessment of the business and properties of these
companies and our level of involvement in the operation and management of such
companies, that we would not be subject to any environmental liabilities with
respect to these investments which would have a material adverse effect on our
business, financial position or results of operations.

ERISA Considerations

      Certain of our lines of business, including our management of employee
benefit plan assets in our advisory capacity in separate accounts, are subject
to the requirements of ERISA. In addition, the Small Business Job Protection
Act, which we refer to as the SBJPA, offers insurers protection from potential
litigation exposure prompted by the 1993 U.S. Supreme Court decision in John
Hancock Mutual Life Insurance Company v. Harris Trust & Savings Bank, which we
refer to as the Harris Trust Decision, in which the Court held that, with
respect to a portion of the funds held under certain general account group
annuity contracts, an insurer is subject to the fiduciary requirements of ERISA.
The pertinent SBJPA provisions provide that insurers are protected from
liability for breaches of fiduciary duties under ERISA for past actions with
respect to their general account contracts. However, insurers remain subject to
federal criminal law and liable for actions brought by the U.S. Secretary of
Labor alleging breaches of fiduciary duties that also constitute a violation of
federal or state criminal law. The SBJPA also provides that contracts issued
from an insurer's general account on or before December 31, 1998, that are not
guaranteed benefit policies, will not be subject to ERISA's fiduciary
requirements if they meet the requirements of regulations issued by the United
States Department of Labor. The SBJPA further provides that contracts issued
from an insurer's general account after December 31, 1998 that are not
guaranteed benefit policies will be subject to ERISA. In January 2000, the
Department of Labor published a regulation pursuant to the SBJPA which provides,
among other things, that if an employee benefit plan acquired an insurance
policy (other than a guaranteed benefit policy) issued on or before December 31,
1998 that is supported by the assets of the insurer's general account, the
plan's assets for purposes of ERISA will not be deemed to include any of the
assets of the insurer's general account, provided that the requirements of the
regulation are met. Accordingly, if those requirements are met, the insurer is
not subject to the fiduciary obligations of ERISA in connection with such an
insurance policy. These requirements include detailed disclosures to be made to
the employee benefit plan and the requirement that the insurer must permit the
policyholder to terminate the policy on 90 days' notice and receive without
penalty, at the policyholder's option, either (1) the accumulated fund balance
(which may be subject to market value adjustment) or (2) a book value payment of
such amount in annual installments with interest. John Hancock Life Insurance
Company has implemented procedures to comply with the requirements set forth
therein to secure the exemption provided by the regulations from the fiduciary
obligations of ERISA. However, John Hancock Life Insurance Company's exposure to
disintermediation risk could increase due to the termination options that it
would be required to provide to policyholders. Any such increase, however, would
not be material. Since there has been no final ruling in the Harris Trust case
(described under "Item 3. Legal Proceedings" in this Form 10-K), we are unable
at this time to determine the effects of the decision, and therefore cannot
compare the litigation risk to the disintermediation risk created by compliance
with the regulations. With respect to employee welfare benefit plans subject to
ERISA, Congress periodically has considered amendments to the law's Federal
preemption provision, which would expose John Hancock Life Insurance Company,
and the insurance industry generally, to state law causes of action, and
accompanying extra-contractual (e.g., punitive) damages in lawsuits involving,
for example, group life and group disability claims. To date, all such
amendments to ERISA have been defeated.


                                       33
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Employees

      As of January 6, 2003, we employed approximately 4,915 people. We believe
our relations with our employees are satisfactory.

ITEM 2. Properties

      Our home office consists of a 60-story landmark office tower and five
other buildings located in Boston, Massachusetts. We occupy approximately 38.5%
of the 3.2 million rentable square feet of space in these buildings. The balance
of the space in these buildings is rented to commercial tenants. In addition, we
lease office space throughout the United States as needed for our operations,
including for our sales force. We believe that our current facilities are
adequate for our current and expected needs. On March 14, 2003, the Company sold
three of its Home Office complex properties to Beacon Capital Partners for
$910.0 million. As part of the transaction, the Company also provided Beacon
Capital Partners with a long-term sub-lease of the Company's parking garage.
JHFS entered into a long-term lease of the space it now occupies in those
buildings, the Company plans on continuing to use them as its corporate
headquarters.

ITEM 3. Legal Proceedings

Sales Practice Class Action Settlement

      Over the past several years, companies engaged in the life insurance
business have faced extensive claims, including class-action lawsuits, alleging
improper marketing and sales of individual life insurance policies or annuities.
On December 31, 1997, the United States District Court for the District of
Massachusetts approved a settlement of a nationwide class action lawsuit
regarding sales practices against John Hancock Mutual Life Insurance Company,
John Hancock Variable Life Insurance Company and John Hancock Distributors,
Inc., captioned Duhaime, et al. v. John Hancock Mutual Life Insurance Company,
John Hancock Variable Life Insurance Company and John Hancock Distributors, Inc.
With certain limited exceptions, the class that is bound by the terms of the
settlement includes persons and entities who at any time during the class period
(January 1, 1979 through December 31, 1996) had an ownership interest in one or
more of our whole life, universal life or variable life insurance policies (and
certain annuities and mutual funds) issued during the class period.

      In conjunction with this settlement, we had a total reserve that stood at
$11.9 million and $52.7 million at December 31, 2002 and 2001, respectively. We
incurred settlement related costs of $30.0 million in 2001. No such costs were
incurred in 2002, or 2000. In 1999, the Company updated its estimate of the cost
of claims subject to alternative dispute resolution (ADR) relief and revised its
reserve estimate accordingly. The reserve estimate was further evaluated
quarterly, and was adjusted as noted above in 2001. The adjustment to the
reserve in 2001 was the result of the Company being able to better estimate the
cost of settling the remaining claims, which on average tend to be the larger
more complicated claims. The better estimate is from experience with actual
settlement of similar claims.

      Administration of the ADR component of the settlement continues to date.
Although some uncertainty remains as to the cost of claims in the final phase
(i.e. arbitration) of the ADR process, it is expected that the final cost of the
settlement will not differ materially from the amounts presently provided for by
the Company.

Harris Trust Litigation

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

In that opinion the Court found against the Company and awarded the Trust
approximately $13.8 million in relation to this claim together with unspecified
additional pre-judgment interest on this amount from October 1988. The Court
also found against the Company on issues of liability valuation and ERISA law.
Damages in the amount of approximately $5.7 million, together with unspecified
pre-judgment interest from December 1996, were awarded on these issues. As part
of the relief, the judge ordered the removal of Hancock as a fiduciary to the
plan. On April 11, 2001, the Court entered a judgment against the


                                       34
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Company for approximately $84.9 million, which includes damages to the
plaintiff, pre-judgment interest, attorney's fees and other costs.

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

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

Modal Premium Litigation

On July 19, 2002, the Company announced it had entered into a class action
lawsuit settlement agreement involving policyholders who paid premiums on a
monthly, quarterly or semiannual basis, rather than annually. The class action
lawsuit, known as the "Modal Premium" action, was filed in a New Mexico state
court. As a result of the settlement, the Company established a $30.0 million
reserve ($19.5 million after taxes) as of June 30, 2002 to provide for economic
relief in the form of a Settlement Death Benefit to the approximately 1.5
million class members who purchased various insurance products from the Company
and paid on a monthly, quarterly or semi-annual basis. The reserve also provides
for the legal and administrative costs associated with the settlement. In
entering into the settlement, the Company specifically denied any wrongdoing.
The Settlement Death Benefit Period began on February 19, 2003 and extends for
either nine or twelve months, depending upon the age of the class member.
Although some uncertainty remains as to the final cost of the settlement, it is
expected that it will not differ materially from the amounts presently provided
for by the Company.


Other Legal and Regulatory Proceedings

      We are regularly involved in other litigation, both as a defendant and as
a plaintiff. The litigation naming us as a defendant ordinarily involves our
activities as a provider of insurance protection products, as well as an
investment adviser, employer and taxpayer. In addition, state regulatory bodies,
the United States Securities and Exchange Commission, the National Association
of Securities Dealers, Inc. and other regulatory bodies regularly make inquiries
and, from time to time conduct examinations concerning our compliance with,
among other things, insurance laws, securities laws, and laws governing the
activities of broker/dealers. We do not believe at this time that the ultimate
resolution of any of these legal or regulatory matters that are currently
pending, either individually or in the aggregate, will have a material adverse
effect on our financial condition or results of operations.

ITEM 4. Submission of Matters to a Vote of Security Holders

      Omitted.

PART II

ITEM 5. Market for John Hancock Life Insurance Company Common Stock and Related
        Stockholder Matters

      No trading market exists for John Hancock Life Insurance Company (the
Company) common stock because John Hancock Financial Services, Inc. (JHFS) owns
all of the Company's common stock. The Company paid $111.0 million and $550.1
million in dividends to JHFS in 2002 and 2001, respectively. The 2002 dividends
were paid in cash, while the 2001 dividends included $250.0 million in cash plus
a transfer of the Company's remaining portion of John Hancock Canadian Holdings
Limited and certain international subsidiaries held by the Company with a
combined carrying value of $300.1 million at December 31, 2001. The transfer has
been accounted for as a transfer of entities under common control. As a result
of the transfer, all current and prior period consolidated financial data has
been restated to exclude the results of operations, financial position, and cash
flows of these transferred foreign subsidiaries from the Company's financial
statements. No gain or loss was recognized on the transfer transaction. See
Regulation of Dividends and Other Payments from Insurance Subsidiaries in the
Business section for a discussion of the limitations of the Company and its
subsidiaries to pay dividends.


                                       35
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      As of March 24, 2003, the Company had issued and outstanding 1,000 shares
of common stock at a par value of $10,000 per share.

ITEM 6. Selected Financial Data

     Omitted.


                                       36
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

      Management's discussion and analysis reviews our consolidated and segment
financial condition as of December 31, 2002 and 2001, the consolidated results
of operations for the years ended December 31, 2002, 2001, and 2000 and, where
appropriate, factors that may affect future financial performance. This
discussion should be read in conjunction with the audited consolidated financial
statements and related notes, included elsewhere in this Form 10-K.

Forward-Looking Statements

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

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

      Readers are also directed to other risks and uncertainties discussed, as
well as to further discussion of the risks described above, in other documents
that may be filed by the Company with the United States Securities and Exchange
Commission from time to time. 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.


                                       37
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Non-GAAP Financial Measures

      A non-GAAP financial measure is a numerical measure of a company's
performance, financial position, or cash flows that excludes (includes) amounts
that are not normally excluded (included) in the most directly comparable
measure calculated and presented in accordance with generally accepted
accounting principles (GAAP) in the United States.

      In this report we use a non-GAAP financial measure called "segment after
tax operating income" in our discussion of Results of Operations by Segment.
Please see "Adjustments to GAAP Reported Net Income" in this report or Note 13 -
Segment Information, for a description of segment after tax operating income and
a reconciliation of that measure to net income.

      We also use a variety of other measures in this report that we do not
consider non-GAAP financial measures because they do not have GAAP counterparts
and are operational measures rather than measures of performance, financial
position, or cash flows in our financial statements. Two examples of these
measures are Sales and Assets Under Management. Sales represents a measure,
defined by the Life Insurance Marketing Research Association (LIMRA), of the
amount of new business we have sold during the period rather than a measure of
revenue. Assets Under Management is an industry measure of a base upon which fee
revenue is earned, which is composed of both assets owned and assets managed for
third parties.

Overview

      John Hancock Life Insurance Company (John Hancock, or the Company) is a
leading financial services company providing a broad range of products and
services in two major businesses: (1) the retail business, which offers
insurance protection and asset gathering products and services primarily to
retail consumers; and (2) the institutional business, which offers guaranteed
and structured financial products and investment management products and
services primarily to institutional customers. Our retail business is comprised
of the Protection Segment and Asset Gathering Segment while our institutional
business is comprised of the Guaranteed and Structured Financial Products
Segment and the Investment Management Segment. In addition, we have a Corporate
and Other Segment.

      Our revenues are derived principally from:

      o     premiums on individual life insurance, individual and group
            long-term care insurance, annuities with life contingencies, single
            premium annuity contracts and group life insurance;

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

      o     asset management fees from mutual fund and investment management
            products ;

      o     sales charges and commissions derived from sales of investment and
            insurance products and distribution fees; and

      o     net investment income and net realized investment and other gains
            and (losses) 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; (2) the amount of assets under management;
and (3) the maintenance of our target spreads between the rate of earnings on
our investments and credited rates on policyholders' general account balances.

The Reorganization

      The Board of Directors of John Hancock Mutual Life Insurance Company
unanimously adopted the Plan of Reorganization on August 31, 1999. Under the
terms of the Plan of Reorganization, effective February 1, 2000, John Hancock
Mutual Life Insurance Company converted from a mutual life insurance company to
a stock life insurance company and became a wholly owned subsidiary of John
Hancock Financial Services, Inc., which is a holding company. In connection with
the reorganization, John Hancock Mutual Life Insurance Company changed its name
to John Hancock Life Insurance Company (the Company).

      Under the Plan of Reorganization, as of February 1, 2000, John Hancock
Life Insurance Company, created a closed block for the benefit of policies
included therein. The purpose of the closed block is to protect the policy
dividend expectations of the policies included in the closed block after
demutualization. Unless the Massachusetts Commissioner of Insurance and, in
certain circumstances, the New York Superintendent of Insurance, consent to an
earlier termination, the closed block will continue in effect until the date
none of such policies is in force. As of February 1, 2000, John Hancock Life
Insurance Company segregated closed block assets of $9,343.0 million, an amount
that is expected to produce cash flows which, together with anticipated revenues
from policies included in the closed block, is expected to be reasonably


                                       38
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

sufficient to provide for payment of policy benefits, taxes and direct asset
acquisition and disposal costs, and for continuation of policy dividend scales
payable in 1999, so long as the experience underlying such dividend scales
continues. The assets allocated to the closed block and any cash flows provided
by these assets will solely benefit the holders of policies included in the
closed block. Total closed block liabilities were $12,118.3 million as of
February 1, 2000.

      For additional information on the creation of the closed block see Note 7
to the consolidated financial statements.

      Costs relating to the demutualization, excluding costs relating to the
offering, were $129.1 million net of income taxes, of which $17.0 million was
recognized in the year ended December 31, 2000. Demutualization expenses include
printing and mailing costs and our aggregate cost of engaging independent
accounting, actuarial, financial, investment banking, legal and other
consultants to advise us. In addition, our costs include the costs of the staff
and advisors of the Massachusetts Division of Insurance, the New York Insurance
Department as to the demutualization process and related matters.

Critical Accounting Policies

      General

      We have identified the accounting policies below as critical to our
business operations and understanding of our results of operations. For a
detailed discussion of the application of these and other accounting policies,
see Note 1--Summary of Significant Accounting Policies in the Notes to
Consolidated Financial Statements. Note that the application of these accounting
policies in the preparation of this report requires management to use judgments
involving assumptions and estimates concerning future results or other
developments including the likelihood, timing or amount of one or more future
transactions or events. There can be no assurance that actual results will not
differ from those estimates. These judgments are reviewed frequently by senior
management, and an understanding of them may enhance the reader's understanding
of the Company's financial statements. We have discussed the identification,
selection and disclosure of critical accounting estimates and policies, with the
Audit Committee of the Board of Directors.

      Consolidation Accounting

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

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

      The Company generates income tax benefits by investing in apartment
properties (the Properties) that qualify for low income housing and/or historic
tax credits. The Company invests in the Properties directly, and also invests
indirectly via limited partnership real estate investment funds, which are
consolidated into the Company's financial statements. The Properties are
organized as limited partnerships or limited liability companies each having a
managing general partner or a managing member. The Company is usually the sole
limited partner or investor member in each Property; it is not the general
partner or managing member in any Property. The Properties typically raise
additional capital by qualifying for long term debt, which at times is
guaranteed or otherwise subsidized by federal or state agencies. In certain
cases, the Company invests in these mortgages of the Properties, which are
non-recourse to the general assets of the Company. In the event of default by a
mortgagee of a Property, the mortgage is subject to foreclosure.

      The Company has a number of relationships with a disparate group of
entities, which result from the Company's direct investment in their equity
and/or debt. Two of these entities are energy investments partnerships, one is
an investment fund organized as a limited partnership and one is a manufacturing
company in whose debt the Company invested, and which subsequently underwent a
corporate reorganization and we received preferred stock as part of the
restructuring. The Company has made no guarantees to any other parties involved
with these entities, and has no further equity or debt commitments to them.


                                       39
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      The Company is evaluating whether each of these entities is a VIE, and if
so, whether consolidation accounting should be used for each. The Company
cannot, at this time, reliably estimate the future potential impact of
consolidating any potential VIE with which it is involved. However, additional
liabilities recognized as a result of consolidating any of these entities would
not represent additional claims on the general assets of the Company; rather,
they would represent claims against additional assets recognized by the Company
as a result of consolidating the VIEs. Conversely, additional assets recognized
as a result of consolidation would not represent additional assets which the
Company could use to satisfy claims against its general assets, rather they
would be used only to settle additional liabilities recognized as a result of
consolidation. The Company's maximum loss in relation to these entities is
limited to its investments in them, future equity commitments made, and where
the Company is the mortgagor, the outstanding balance of the mortgages
originated for the Properties, and outstanding mortgage commitments the Company
has made to the Properties. Therefore, the Company believes that these
transactions have no impact on the Company's liquidity and capital resources
beyond what is already presented in the consolidated financial statements and
notes thereto. It is the Company's intent to display any consolidated entities
clearly on the face of the balance sheets with appropriate disclosures.

      Amortization of Deferred Acquisition Costs

      Costs that vary with, and are related primarily to, the production of new
business have been deferred to the extent that they are deemed recoverable. Such
costs include commissions, certain costs of policy issue and underwriting, and
certain agency expenses. Similarly, any amounts assessed as initiation fees or
front-end loads are recorded as unearned revenue. The Company tests the
recoverability of its deferred policy acquisition costs, or DAC, quarterly with
a model that uses data such as market performance, lapse rates and expense
levels. We amortize DAC on term life and long-term care insurance ratably with
premiums. We amortize DAC on our annuity products and retail life insurance,
other than term, based on a percentage of the estimated gross profits over the
life of the policies, which are generally twenty years for annuities and thirty
years for life policies. Our estimated gross profits are computed based on
assumptions related to the underlying policies including mortality, lapse,
expenses, and asset growth rates. We amortize DAC and unearned revenue on these
policies such that the percentage of gross profits to the amount of DAC and
unearned revenue amortized is constant over the life of the policies.

      Estimated gross profits, including net realized investment and other gains
(losses), are adjusted periodically to take into consideration the actual
experience to date and assumed changes in the remaining gross profits. When
estimated gross profits are adjusted, we also adjust the amortization of DAC to
maintain a constant amortization percentage over the life of the policies. Our
current estimated gross profits include certain judgments by our actuaries
concerning mortality, lapse and asset growth that are based on a combination of
actual Company experience and historical market experience of equity and fixed
income returns. Short-term variances of actual results from the judgments made
by management can impact quarter to quarter earnings. Our history has shown us
that the actual results over time for mortality, lapse and the combination of
investment returns and crediting rates (referred in the industry as interest
spread) for the life insurance and annuity products have reasonably followed the
long-term historical trends. In recent years, actual results for market
experience, or asset growth, have fluctuated considerably from historical trends
and the long-term assumptions made in calculating expected gross profits. As a
result, we changed some of these long-term assumptions in Q3 2002, as further
described below.

      Q3 2002 Unlockings: As of September 30, 2002, the Company changed several
future assumptions with respect to the expected gross profits in its variable
life insurance business in the Protection Segment and variable annuity business
in the Asset Gathering Segment. First, we lowered the long-term growth rate
assumption from 9% to 8% gross of fees (which are approximately 1% to 2%).
Second, we lowered the average rates for the next five years from the mid-teens
to 13% gross of fees. Finally, we increased certain fee rates on these policies
(the variable series trust (VST) fee increase). These three changes are referred
to collectively elsewhere in this document as the Q3 2002 Unlocking. The result
of these changes in assumptions was a net acceleration of amortization of DAC of
$36.1 million in the variable annuity business in the Asset Gathering Segment
and $13.1 million (net of $12.3 million of unearned revenue and $2.5 million in
policy benefit reserves) in the variable life insurance business in the
Protection Segment. The impact on net income of the Q3 2002 Unlockings to Q3
2002 income was a reduction of approximately $27.5 million. The accelerated
amortization will reduce the total amortization of DAC in future periods, but
will accelerate the amortization in the short term.


                                       40
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Sensitivity of Deferred Policy Acquisition Costs Amortization in 2002

      If we made different assumptions, there would be a change in DAC
amortization and income before taxes. The table below shows the increased
(decreased) quarterly DAC amortization for several different scenarios which
would have occurred in Q4 2002 if the indicated scenario assumptions had been
used in Q4 2002.

<TABLE>
<CAPTION>
                                                                          Protection     Asset Gathering       Total
                                                                        -----------------------------------------------
                                                                                          (in millions)
<S>                                                                         <C>              <C>              <C>
        long-term and short-term growth rate assumption of 8%,
           gross of fees..........................................          $ 10.0           $ 22.5           $ 32.5
        long-term and short-term growth rate assumption of 9%,
           gross of fees..........................................             3.6             16.7             20.3
        long-term growth rate assumption of 9%, gross of fees,
           and short-term growth rate of 13%, gross of fees.......            (7.2)            (1.7)            (8.9)

      Sensitivity of Deferred Acquisition Costs Amortization in 2003
</TABLE>

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

                                                     Asset
                                  Protection       Gathering       Total
                               ---------------------------------------------
                                               (in millions)
           18%.............      $ (0.9)           $ (5.3)         $ (6.2)
           13%.............          --                --              --
            8%.............         1.3               6.7             8.0

      Benefits to Policyholders

      Reserves for future policy benefits of certain insurance products are
calculated using management's judgments of mortality, morbidity, lapse,
investment performance and expense levels that are based primarily on the
Company's past experience and are therefore reflective of the Company's proven
underwriting and investing abilities. Once these assumptions are made for a
given policy or group of policies, they will not be changed over the life of the
policy unless the Company recognizes a loss on the entire line of business. The
Company periodically reviews its policies for loss recognition and based on
management's judgment the Company from time to time may recognize a loss on
certain lines of business. Short-term variances of actual results from the
judgments made by management are reflected in current period earnings and can
impact quarter to quarter earnings.

      Investment in Debt and Equity Securities

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


                                       41
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Certain of our fixed income securities classified as held-to-maturity and
available-for-sale are not publicly traded, and quoted market prices are not
available from brokers or investment bankers on these securities. The change in
the fair value of the available-for-sale securities is recorded in other
comprehensive income as an unrealized gain or loss. We calculate the fair value
of these securities ourselves through the use of pricing models and discounted
cash flows calling for a substantial level of professional investment management
judgments. Our approach is based on currently available information, including
information obtained by reviewing similarly traded securities in the market, and
we believe it to be appropriate and fundamentally sound. However, different
pricing models or assumptions or changes in relevant current information could
produce different valuation results. The Company's pricing model takes into
account a number of factors based on current market conditions and trading
levels of similar securities. These include current market based factors related
to credit quality, country of issue, market sector and average investment life.
The resulting prices are then reviewed by the pricing analysts and members of
the Controller's Department. Our pricing analysts take appropriate action to
reduce valuation of securities where an event occurs which negatively impacts
the securities' value. Certain events that could impact the valuation of
securities include issuer credit ratings, business climate, management changes,
litigation and government actions, among others.

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

      Benefit Plans

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

      The assumed discount rate is set in the range of (a) the rate from the
December daily weighted average of long-term corporate bond yields (as published
by Moody's Investor Services for rating categories A, Aa, Aaa, and Baa) less a
5% allowance for expenses and default and (b) the rate from the rounded average
of the prior year's discount rate and the rate in (a) above. In 2002 the Company
set the rate at 6.75%. A 0.25% increase in the discount rate would decrease
pension benefits Projected Benefit Obligation (PBO) and 2003 Net Periodic
Pension Cost (NPPC) by approximately $65.1 million and $4.9 million
respectively. A 0.25% increase in the discount rate would decrease other
post-employment benefits Accumulated Postretirement Benefit Obligation (APBO)
and 2003 Net Periodic Benefit Cost (NPBC) by approximately $18.1 million and
$1.2 million respectively.

      The assumed long-term rate of return on plan assets is generally set at
the long-term rate expected to be earned (based on the Capital Asset Pricing
Model and similar tools) based on the long-term investment policy of the plans
and the various classes of the invested funds. For 2003 Net Periodic Pension
(and Benefit) cost, it is expected that an 8.75% long term rate of return
assumption will be used. A 0.25% increase in the long-term rate of return would
decrease 2003 NPPC by approximately $4.6 million and 2003 NPBC by approximately
$0.5 million. The expected return on plan assets is based on the fair market
value of the plan assets as of December 31, 2002. The target asset mix of the
plan is: 50% domestic stock, 15% international stock, 10% private equity, and
25% fixed income.

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

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


                                       42
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

      Income Taxes

We establish reserves for possible penalty and interest payments to various
taxing authorities with respect to the admissability and timing of tax
deductions. Management makes judgments concerning the eventual outcome of these
items and reviews those judgments on an ongoing basis.

Economic Trends

      Economic trends impact profitability and sales of the Company. The impact
of economic trends on the Company's profitability are similar to their impact on
the financial markets. The Company estimates that a full year increase
(decrease) in interest rates of 1.0 % would increase (decrease) segment after
tax operating income by approximately $4 million, and that a full year increase
(decrease) in equity markets of 5% would increase (decrease) segment after tax
operating income by approximately $10 million.

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

      Premiums and deposits of our individual annuity products increased 62.2%
to $3,438.5 million in 2002 as compared to 2001, driven by an 82.0% increase in
the fixed annuity business. Our variable life insurance product deposits in 2002
increased 2.3% to $926.8 million compared to 2001, while premiums and deposits
on our long-term care insurance increased 31.9%, to $467.8 million in 2002 due
to persistency and strong growth in the business. Continued volatility in the
equity markets during 2002 led to a decrease in mutual fund deposits of $628.3
million, or 10.7%, to $5,254.8 million in 2002. In addition, redemptions
decreased $452.8 million, or 8.8%, to $4,670.3 million in 2002 due to
conservation initiatives. We have reduced operating expenses to protect profit
margins as we work to stabilize and grow assets under management in the mutual
funds business. However, our mutual fund operations are impacted by general
market trends, and a continued downturn in the mutual fund market may negatively
affect our future operating results.

      Recent economic and industry trends also have affected the sales and
financial results of our institutional business. Sales of fund-type products
decreased $782.6 million, or 16.9%, to $3,852.5 million. The decrease was driven
by decreasing demand for GICs and increased market competition. Premiums from
single premium annuity contracts decreased $464.3 million, or 99.7%, to $1.2
million in 2002, primarily due to reinsuring a larger portion of single premium
annuity sales. We continue to look for opportunistic sales in the single premium
annuity market where our pricing standards are met. Partially offsetting the
decrease in sales was the introduction of a new product, SignatureNotes, which
generated $303.4 million in sales in 2002. SignatureNotes is designed to
generate sales from the conservative retail investor looking for stable returns.
Moreover, our investment management services provided to domestic and
international institutions include services and products such as investment
advisory client portfolios, individually managed and pooled separate accounts,
registered investment company funds, bond and mortgage securitizations,
collateralized bond obligation funds and mutual fund management capabilities.
Assets under management of our Investment Management Segment decreased to
$27,491.4 million as of December 31, 2002 from $28,770.6 million as of December
31, 2001.


                                       43
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Transactions Affecting Comparability of Results of Operations

The acquisitions described under the table below were recorded under the
purchase method of accounting and, accordingly, the operating results have been
included in the Company's consolidated results of operations from the applicable
date of acquisition. Each purchase price was allocated to the assets acquired
and the liabilities assumed based on estimated fair values, with the excess of
the applicable purchase price over the estimated fair values of the acquired
assets and liabilities, if any, recorded as goodwill. These businesses or books
of business generally were acquired by the Company in execution of its plan to
acquire businesses and products that have strategic value, meet its earnings
requirements and advance the growth of its current businesses. The following
table presents actual and proforma data for comparative purposes, for the
periods indicated to demonstrate the proforma effect of the acquisitions as if
they occurred on January 1, 2000.

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                      2002                          2001                          2000
                                    Proforma         2002         Proforma         2001         Proforma        2000
                                 --------------------------------------------------------------------------------------
                                  (uanaudited)                  (uanaudited)                  (uanaudited)

<S>                                 <C>            <C>            <C>            <C>           <C>           <C>
Revenue......................       $ 6,557.2      $ 6,469.8      $ 7,266.5      $ 7,124.0     $ 7,715.1     $ 7,374.2

Net income...................       $   471.5      $   458.9      $   582.7      $   573.9     $   791.7     $   792.2
</TABLE>

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

On April 2, 2001, a subsidiary of the Company, Signature Fruit Company, LLC
(Signature Fruit), purchased certain assets and assumed certain liabilities out
of the bankruptcy proceedings of Tri Valley Growers, Inc., a cooperative
association, for approximately $53.0 million in assumed debt. The net losses
related to the acquired operations included in the Company's results from the
date of acquisition through December 31, 2001 were $3.4 million.

On March 1, 2000, the Company acquired the individual long-term care insurance
business of Fortis, Inc. (Fortis) through a coinsurance agreement for
approximately $165.0 million. The net income relating to the acquired operations
is included in the Company's results from the date of acquisition through
December 31, 2000.

Event Occurring Subsequent to Year End

The 2002 results include a realized loss of $25.7 million related to a claim
received on February 24, 2003 in connection with a prior year's disposal of a
fixed maturities security. This loss resulted in a reduction of $16.7 million to
the GAAP net income for 2002 as previously reported in our fourth quarter
earnings release which was filed on form 8-K with the Securities and Exchange
Commission on February 7, 2003.


                                       44
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Results of Operations

      The table below presents our consolidated results of operations and
consolidated financial information for the periods indicated.

<TABLE>
<CAPTION>
                                                                                   For the Years Ended December 31,
                                                                                2002              2001             2000
                                                                           --------------------------------------------------
                                                                                              (in millions)
<S>                                                                           <C>               <C>               <C>
Revenues
     Premiums............................................................     $ 1,984.2         $ 2,351.9         $ 2,390.7
     Universal life and investment - type product fees...................         606.0             600.8             591.4
     Net investment income...............................................       3,581.0           3,646.2           3,563.9
     Net realized investment and other gains (losses), net of related
         amortization of deferred policy acquisition costs, amounts
         credited to participating pension contractholders and the
         policyholder dividend obligation (1)............................        (450.5)           (245.8)             78.3
     Investment management revenues, commissions, and other fees.........         507.6             585.1             746.5
     Other revenue (expense).............................................         241.5             185.8               3.4
                                                                           ---------------   ---------------   --------------

         Total revenues..................................................       6,469.8           7,124.0           7,374.2

Benefits and expenses
     Benefits to policyholders, excluding amounts related to net realized
         investment and other gains (losses) credited to participating pension
         contractholders and the policyholder
         dividend obligation (2).........................................       3,805.2           4,328.1           4,247.4
     Other operating costs and expenses..................................       1,227.5           1,227.8           1,288.8
     Amortization of deferred policy acquisition costs, excluding amounts
         related to net realized investment and other gains (losses) (3).         313.4             249.0             187.1
     Dividends to policyholders..........................................         556.2             551.7             539.2
     Demutualization expenses............................................            --                --              10.6
                                                                           ---------------   ---------------   --------------

     Total benefits and expenses.........................................       5,902.3           6,356.6           6,273.1
                                                                           ---------------   ---------------   --------------

Income before income taxes and cumulative effect of accounting
     changes.............................................................         567.5             767.4           1,101.1

Income taxes.............................................................         108.6             200.7             308.9
                                                                           ---------------   ---------------   --------------

Income before cumulative effect of accounting changes....................         458.9             566.7             792.2
Cumulative effect of accounting changes, net of taxes (4)................            --               7.2                --
                                                                           ---------------   ---------------   --------------

Net income...............................................................     $   458.9         $   573.9         $   792.2
                                                                           ===============   ===============   ==============
</TABLE>

(1)   Net of related amortization of deferred policy acquisition costs, amounts
      credited to participating pension contractholders and the policyholder
      dividend obligation of $(74.2) million, $(4.1) million, and $11.6 million
      for the years ended December 31, 2002, 2001, and 2000, respectively.
(2)   Excluding amounts related to net realized investment and other gains
      (losses) credited to participating pension contractholders and the
      policyholder dividend obligation of $(35.3) million, $25.3 million, and
      $21.0 million for the years ended December 31, 2002, 2001, and 2000,
      respectively.
(3)   Excluding amounts related to net realized investment and other gains
      (losses) of $(38.9) million, $(29.4) million, and $(9.4) million for the
      years ended December 31, 2002, 2001, and 2000, respectively.
(4)   Cumulative effect of accounting changes is shown net of taxes of $(4.2)
      million for 2001. There were no cumulative effect of accounting changes in
      2002 and 2000.


                                       45
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

      The following discussion reflects the adoption of Statement of Position
(SOP) 00-3, "Accounting by Insurance Enterprises for Demutualizations and
Formation of Mutual Insurance Holding Companies and Certain Long-Duration
Participating Contracts" for all periods subsequent to the adoption of the
closed block on February 1, 2000. In addition, the following discussion reflects
the December, 2001 transfer of both the Company's remaining portion of John
Hancock Canadian Holdings Limited and certain international subsidiaries held by
the Company, with a total carrying value of $300.1 million at December 31, 2001
to its parent, JHFS, in the form of a dividend. The transfer has been accounted
for as a transfer of entities under common control. As a result of the transfer
of interests, all prior period consolidated financial data has been restated to
exclude the results of operations, financial position, and cash flows of these
transferred foreign subsidiaries from the Company's financial statements. No
gain or loss was recognized on the transfer transaction.

      Consolidated income before income taxes and cumulative effect of
accounting changes decreased 26.0%, or $199.9 million, from the prior year. The
decrease in consolidated income before income taxes was driven by $450.5 million
in net realized investment and other losses for the year ended December 31,
2002, compared to $245.8 million in net realized investment and other losses in
the prior year. The $450.5 million in net realized investment and other losses
in 2002 are net of $23.3 million in net realized investment and other losses
allocated to the participating pension contractholders and $11.9 million in net
realized investment and other losses allocated to the policyholder dividend
obligation in 2002. Net realized investment and other losses in the current
period were driven by losses recognized on other than temporary declines in
value of fixed maturity securities of $603.0 million (including impairment
losses of $565.9 million and $37.1 million of previously recognized gains where
the bond was part of a hedging relationship). The largest impairments were
write-downs on United Airlines of approximately $99 million, US Airways of
approximately $42 million, NRG Energy of approximately $46 million, PG&E
National Energy Group of approximately $32 million, Wilton Trust of
approximately $32 million, Petroleum Geo-Services of approximately $28 million,
Power Facilities of approximately $19 million, Corporate Durango of
approximately $17 million, WorldCom of approximately $12 million, Autopistas Del
Sol of approximately $12 million and Aguas Argentina of approximately $10
million. Additional losses were recorded for other than temporary declines in
the equity in collateralized bond obligations of $61.3 million and other equity
securities of $26.9 million during 2002. (See General Account Investments in
this MD&A).

      The Company incurred losses on disposal of fixed maturity securities of
$116.8 million, losses on disposal of real estate investments of $36.5 million,
losses on disposal of equity securities of $21.5 million, losses on disposal of
other invested assets of $12.7 million and losses on disposal of mortgage loans
on real estate of $1.2 million. Gains were realized on disposal of fixed
maturity securities of $163.3 million, gains on disposal of equity securities of
$149.5 million, gains on the sale of interest rate floors of $63.8 million,
gains on disposal of mortgage loans on real estate of $55.2 million, gains on
disposal of real estate of $10.5 million, and gains on disposal of other
invested assets of $10.8 million.

      The decrease in income before income taxes and cumulative effect of
accounting changes was primarily attributable to decreases of $147.4 million in
the Guaranteed and Structured Financial Products (G&SFP) Segment, a decrease of
$92.6 million in the Corporate and Other Segment, and a decrease of $12.0
million in the Investment Management Segment. These decreases in income before
income taxes and cumulative effect of accounting changes were partially offset
by an increase of $41.6 million in the Protection Segment, and a $10.3 million
increase in the Asset Gathering Segment. The decrease in the G&SFP Segment was
primarily due to net realized investment and other losses, which increased
$192.8 million, and lower net investment income, which decreased $130.6 million
driven by floating interest rates, these decreases in revenue were partially
offset by lower reserves. The decrease in the Corporate and Other Segment was
primarily due to a $50.3 million decrease in net investment income and a $54.7
million change in net realized investment and other losses, these decreases in
revenue were partially offset by lower reserves. The decrease in the Investment
Management Segment is driven by a $13.5 million decrease in net investment
income and a $3.1 million decrease in management advisory fees due to lower
assets under management, partially offset by a decrease in operating expenses
driven by lower interest expense. The Protection Segment experienced an increase
in income before income taxes and cumulative effect of accounting changes
primarily driven by an increase of $17.9 million in universal life product fees,
primarily due to growth in non-traditional life insurance products.

      In addition, the Asset Gathering Segment's income before income taxes and
cumulative effect of accounting changes increased due to a decrease in operating
costs and expenses, driven by cost saving in the mutual funds business and
company wide cost reduction programs.


                                       46
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Premium revenue decreased 15.6%, or $367.7 million, from the prior year.
The decrease was primarily due to a $465.0 million decrease in premiums in the
G&SFP Segment, driven by the Company reinsuring a larger portion of single
premium annuity sales than in the prior year with a corresponding decrease in
benefits to policyholders. In addition, sales of single premium annuities are
lower than in the prior year due to our selectivity in the business. We continue
to look for opportunistic sales in the single premium annuity market where our
pricing standards are met. The decrease in premiums in the G&SFP Segment was
partially offset by an increase in premiums in the Protection Segment of $142.1
million driven primarily by long-term care insurance premiums, which increased
31.9%, or $113.1 million and traditional life insurance premiums which
increased 2.9%, or $29.0 million.

      Universal life and investment-type product fees increased 0.8%, or $5.2
million, from the prior year. These product fees consist primarily of cost of
insurance fees on our variable life insurance and universal life insurance
products and mortality and expense fees on our variable annuity products. The
increase was primarily due to growth in average account values in universal life
insurance products and variable life product fee increases.

      Net investment income decreased $65.2 million from the prior year. The
decrease was primarily the result of lower yields, partially offset by asset
growth and lower investment expenses. Overall, the 2002 yield, net of investment
expenses, on the general account portfolio decreased to 6.29% from 7.25% in the
prior year. The lower yield was driven primarily by the sharp drop in short-term
rates during the year, which impacts floating rate investments, and lower yields
on investment acquisitions. The change in yields were impacted by the following
drivers:

o     As of December 31, 2002, the Company's asset portfolio had approximately
      $12 billion of floating-rate exposure (primarily LIBOR). This compares to
      $8.9 billion of exposure as of December 31, 2001. This exposure was
      created mostly through interest rate swaps designed to match our
      floating-rate liability portfolio. As of December 31, 2002, approximately
      90% of this exposure, excluding cash and short-term investments, was
      directly offset by exposure to floating-rate liabilities. Most of the
      remaining 10% of exposure is in floating-rate assets acquired for their
      relative value and is accounted for in the portfolio's interest rate risk
      management plan. As a result of the drop in short term rates over the
      year, as well as the increase in exposure, this floating-rate exposure
      reduced the portfolio yield by 60 basis points in 2002 compared to the
      prior year.

o     Certain of our tax-preferenced investments (lease residual management and
      affordable housing limited partnerships) dilute the Company's net
      portfolio yield on a pre-tax basis. In 2002, this dilutive effect was 10
      basis points, compared to 8 basis points in 2001. However, adjusting for
      taxes, these investment increased the Company's after-tax earnings by $7.9
      million in 2002 relative to 2001.

o     Due to the late timing of the transaction, the previously described
      acquisition of the Allmerica fixed universal life insurance business in
      December 2002, resulted in an increase of $0.5 billion in invested assets,
      which reduced 2002 net investment income yields by 3 basis points. The
      assets related to the transaction were recorded on the last day of the
      year. Consequently, the Company earned no investment income on these
      assets in 2002.

o     The inflow of new cash for the year ending December 31, 2002 was invested
      at market rates that were below the portfolio rate. In addition, maturing
      assets rolling over into new investments at market rates less favorable
      than those available in 2001 also contributed to the decline in yields.

      Partially offsetting the effects of these decreases to yields on
investments was an increase in invested assets and a reduction in investment
expenses. In 2002, average invested assets grew $6,583.1 million, or 13.1% from
the prior year. In addition, investment expenses were reduced $15.5 million in
2002 compared to the prior year. Also included are reductions in corporate
operating expenses and in depreciation expenses associated with the sale of the
Company's home office real estate.

      Net realized investment and other losses increased 83.3%, or $204.7
million, from the prior year. The increase was driven by other than temporary
declines in value of fixed maturity securities of $603.0 million (including
impairment losses of $565.9 million and $37.1 million of preciously recognized
gains where the bond was part of a hedging relationship), the largest of which
were on securities issued by United Airlines, US Airways, Enron and affiliates,
NRG Energy Group, among others; additional detail is provided previously and in
General Account Investments in this MD&A. The Company also incurred losses on
the other than temporary declines in value of the equity in collateralized bond
obligations of $61.3 million and other equity securities of $26.9 million. In
addition, the Company incurred losses on disposal of real estate of $36.5


                                       47
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

million. For additional analysis regarding net realized investment and other
losses, see General Account Investments in this MD&A.

      Investment management revenues, commissions, and other fees decreased
11.9%, or $77.5 million, from the prior year. The decrease in fee revenue was
the result of lower average assets under management in the mutual funds
business. Assets under management decreased 13.5%, or $3,475.5 million, compared
to the prior year. Underwriting and distribution fees decreased 12.0%, or $27.8
million, primarily due to the decrease in front-end load mutual fund sales, and
accordingly, commission revenue and distribution fees. Mutual fund advisory fees
declined 14.2%, or $25.3 million, in 2002, primarily due to lower average assets
under management.

      Other revenue increased 30.0%, or $55.7 million, from the prior year. The
increase in other revenue is due to the Signature Fruit transaction in 2001, and
is offset by Signature Fruit's expenses in other operating costs and expenses.
The increase in revenues is due to the inclusion of the results of Signature
Fruit for the nine months subsequent to the transaction in 2001. Signature Fruit
is included in other revenue for all of 2002. Signature Fruit, a subsidiary of
the Company as of April 2, 2001, acquired certain assets and assumed certain
liabilities out of bankruptcy proceedings of Tri Valley Growers, Inc., a
cooperative association. The revenues and expenses of Signature Fruit are
included in the Company's income statement in other revenue and other operating
costs and expenses, respectively. Signature Fruit generated $235.9 million and
$177.8 million in revenue in the years ended December 31, 2002 and 2001,
respectively.

      Benefits to policyholders decreased 12.1%, or $522.9 million, from the
prior year. The decrease in benefits to policyholders was driven by a decrease
in the G&SFP Segment of 36.5%, or $682.4 million. Benefits to policyholders in
G&SFP Segment spread-based products decreased 36.5%, or $682.5 million, from the
prior year, due to increased level of reinsurance arrangements and lower
interest credited. Interest credited decreased 15.3%, or $184.1 million from the
prior year. The decrease in interest credited was due to a decline in the
average interest credited rate on account balances for spread-based products,
due to the reset of approximately $10 billion of liabilities with floating rates
and new business added at current market rates. The average crediting rate fell
to 4.85% from 6.33% in the prior year. Partially offsetting the decrease in
benefits to policyholders in the G&SFP Segment was an increase in the Protection
Segment of 11.5%, or $184.3 million primarily due to growth in the long-term
care insurance business where the Company increased reserves for premium growth
and higher claim volume. In addition, benefits to policyholders increased in the
non-traditional life insurance business due to growth in the in-force. The
non-traditional life insurance business had an increase in benefits to
policyholders of 20.8%, or $50.1 million, primarily due to a $29.0 million
increase in interest credited on higher current year account balances, and also
driven by a $15.3 million increase in death claims, net of reserves released.

      Other operating costs and expenses decreased $0.3 million from the prior
year, despite an increase of $58.2 million in other operating costs and expenses
related to Signature Fruit., which was included in only part of the prior year's
results. The decrease was primarily due to cost containment measures. The Asset
Gathering Segment other operating costs and expenses decreased $75.6 million
driven by lower salary and commission expense in the mutual fund business. In
addition, other operating costs and expenses decreased $5.9 million in the
Investment Management Segment driven by lower interest expense from lower
average levels of warehoused commercial mortgages held for sale and lower
average interest rates during 2002. Included in other operating costs and
expenses was $241.3 million in operating costs of Signature Fruit in 2002. The
increase in Signature Fruit other operating costs and expenses is due to their
inclusion in the 2002 results for the full year while included only for nine
months in 2001 after its formation.

      Amortization of deferred policy acquisition costs increased 25.9%, or
$64.4 million, from the prior year. The increase in amortization of deferred
policy acquisition costs was primarily due to the $64.0 million Q3 2002
Unlocking of the Company's deferred policy acquisition costs (DAC) asset, which
increased amortization of the DAC asset. Amortization of deferred policy
acquisition costs increased due to the Q3 2002 Unlocking of the DAC asset based
on changes in the future investment return assumptions and lowering the
long-term growth rate assumption from 9% to 8%, gross of fees (which are
approximately 1% to 2%). In addition, we lowered the average rates for the next
five years from the mid-teens to 13%, gross of fees. We also increased certain
fee rates on these policies (the VST fee increase). These changes in assumptions
resulted in the Q3 2002 Unlocking of the DAC asset, which impacted the Asset
Gathering and Protection Segments (See Note 1 - Summary of Significant
Accounting Policies in the notes to consolidated financial statements and
Critical Accounting Policies in this MD&A).

      Dividends to policyholders increased 1.0%, or $4.5 million from the prior
year. The increase in dividends to policyholders was driven by the Protection
Segment, which increased 2.3%, or $11.6 million. This increase was due to the
lowering of the dividend scale during the year partially offset by growth in
reserves and aging of the in-force business on traditional life insurance
products. Traditional life insurance products average reserves increased
approximately 4.2% from the prior period.


                                       48
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Income taxes were $108.6 million in 2002, compared to $200.7 million for
2001. Our effective tax rate was 19.1% in 2002, as compared to 26.2% in 2001.
The lower effective tax rate was primarily due to beneficial impact of
additional option contracts under the lease residual management strategy, a
decrease in the provision for prior year federal income tax audit issues, and
increased affordable housing tax credits.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

      The following discussion reflects the adoption of Statement of Position
(SOP) 00-3, "Accounting by Insurance Enterprises for Demutualizations and
Formation of Mutual Insurance Holding Companies and Certain Long-Duration
Participating Contracts" for all periods subsequent to the adoption of the
closed block on February 1, 2000. In addition, the following discussion reflects
the December, 2001 transfer of both the Company's remaining portion of John
Hancock Canadian Holdings Limited and certain international subsidiaries held by
the Company, with a total carrying value of $300.1 million at December 31, 2001,
to its parent, JHFS, in the form of a dividend. The transfer has been accounted
for as a de-pooling of interests. As a result of the de-pooling of interests,
all current and prior period consolidated financial data has been restated to
exclude the results of operations, financial position, and cash flows of these
transferred foreign subsidiaries from the Company's financial statements. No
gain or loss was recognized on the transfer transaction. Consolidated income
before income taxes and cumulative effect of accounting changes of $767.4
million for the year ended December 31, 2001 decreased by $333.7 million, or
30.3%, as compared to consolidated income before income taxes and cumulative
effect of accounting changes of $1,101.1 million for the year ended December 31,
2000. The decrease in consolidated income before income taxes was driven by
$245.8 million in net realized investment and other losses for the year ended
December 31, 2001, compared to $78.3 million in net realized investment and
other gains for the year ended December 31, 2000. The $245.8 million in net
realized investment and other losses in 2001 are net of $42.3 million in net
realized investment and other gains allocated to the participating pension
contractholders and $17.0 million in net realized investment and other losses
allocated to the policyholder dividend obligation in 2001. The change in net
realized investment and other gains (losses) is the result of debt write-downs
of approximately $380.7 million driven by write-downs on securities of issuers
affiliated with Enron Corporation, the Argentina government and other
investments in that country, K-Mart Corporation and equity interests in certain
collateralized debt obligations (CDO). The Company's Enron Corporation related
debt write-downs were mitigated by approximately $77.3 million in net realized
investment and other gains in credit swap protection. In addition, partially
offsetting the debt write-down were $224.8 million in net realized investment
and other gains on common stock sold during the year.

      The decrease in income before income taxes and cumulative effect of
accounting changes was primarily attributable to decreases of $220.2 million in
the Corporate and Other Segment, $72.5 million in the Asset Gathering Segment,
$41.5 million in the Investment Management Segment, and $24.2 million in the
Guaranteed and Structured Financial Products Segment (G&SFP). These decreases in
income before income taxes and cumulative effect of accounting changes were
partially offset by a $24.7 million increase in the Protection Segment. The
decrease in the Corporate and Other Segment was primarily due to lower net
realized investment and other gains (losses), which decreased $116.5 million,
and lower net investment income, which decreased $131.2 million. The decrease in
the Asset Gathering Segment was primarily due to a $70.2 million increase in net
realized investment and other losses primarily related to the annuity business
and an increase in expenses in the mutual funds business which are one-time in
nature related primarily to the sale of the full service retirement business.
The decrease in the Investment Management Segment is driven by a $74.8 million
decrease in management advisory fees due to lower assets under management,
partially offset by a decrease in operating expenses primarily due to
non-recurring prior year amounts related to timber management contracts and
performance fees paid for the management of the mezzanine fund and lower
compensation expense in the current period. The decrease in the G&SFP Segment is
primarily due to decreases in the fee businesses on lower average reserves
driven by customer withdrawals and an increase in net realized investment and
other losses of $56.4 million. The Protection Segment experienced an increase in
income before income taxes and cumulative effect of accounting changes primarily
due to fee revenues on growth in non-traditional life insurance business,
partially offset by an increase in net realized investment and other losses of
$73.7 million.

      Premium revenue was $2,351.9 million for 2001, a decrease of $38.8
million, or 1.6%, from $2,390.7 million in 2000. The decrease was primarily due
to a $137.1 million decrease in premiums in the G&SFP Segment, driven by
reinsuring a larger portion of single premium annuity sales. The decrease in
G&SFP was partially offset by a $68.3 million increase in premiums in the
Protection Segment, driven by an increase of $45.6 in the long-term care
business. Renewal premiums are growing due to the acquisition of the Fortis
long-term care business in the prior year. Premiums in the Corporate and Other
segment increased by $18.5 million primarily due to the international group
insurance program, in addition, premiums increased in the Asset Gathering
Segment by $11.5 million primarily due to continued growth in the single premium
annuity business.


                                       49
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Universal life and investment-type product fees were $600.8 million for
2001, an increase of $9.4 million, or 1.6%, from $591.4 million in 2000. These
product fees consist primarily of cost of insurance fees on our variable life
insurance and universal life insurance products and mortality and expense fees
on our variable annuity products. The increase was primarily due to growth in
the average account values in universal life insurance products, partially
offset by lower average account balances in variable annuities and surrender
fees.

      Net investment income was $3,646.2 million for 2001, an increase of $82.3
million, or 2.3%, from $3,563.9 million in 2000. The increase was primarily the
result of higher average invested assets, which increased $4,580.3 million, or
10.0%, to $50,355.7 million in 2001, as compared to $45,775.4 million in 2000,
partially offset by a lower net yield on average invested assets which decreased
to 7.24% in 2001. The decrease in yield from the prior year is consistent with
the average market rates in 2001 compared to 2000. The average 10-year U.S.
Treasury rate in 2001 was 101 basis points lower than in 2000.

      Net realized investment and other losses were $245.8 million for 2001, a
decrease of $324.1 million from net realized investment and other gains of $78.3
million in 2000. The decrease was driven by debt write-downs on securities of
issuers affiliated with Enron Corporation, the Argentina government and other
investments in that country, K-Mart Corporation and CDO. Partially offsetting
debt losses were net realized investment and other gains on common stock of
$224.8 million and approximately $77.3 million in net realized investment and
other gains on credit swap protection investment strategy.

      Investment management revenues, commissions, and other fees were $585.1
million, a decrease of $161.4 million, or 21.6%, from $746.5 million in 2000.
The decrease in fee revenue was the result of lower assets under management.
Assets under management decreased $2,411.2 million compared to the prior year
period. Underwriting and distribution fees decreased $72.1 million, or 23.7%, to
$232.5 million in 2001 primarily due to the decrease in front-end load mutual
fund sales, and accordingly, commission revenue. Mutual fund advisory fees
declined $16.3 million in 2001, primarily due to lower average assets under
management.

      Other revenue was $185.8 million in 2001, an increase of $182.4 million
from $3.4 million reported in 2000. The increase in other revenue is due to the
Signature Fruit transaction in 2001. Signature Fruit, a subsidiary of the
Company as of April 2, 2001, acquired certain assets and assumed certain
liabilities out of bankruptcy proceedings of Tri Valley Growers, Inc., a
cooperative association. The revenues and expenses of Signature Fruit are
included in the Company's income statement in other revenue and other operating
costs and expenses, respectively. Signature Fruit generated $177.8 million in
revenue in the year ended December 31, 2001.

      Benefits to policyholders were $4,328.1 million for 2001, an increase of
$80.7 million, or 1.9%, from $4,247.4 million in 2000. The increase in benefits
to policyholders was primarily driven by an increase in interest credited on
fixed annuity account balances and growth in the long-term care insurance
business on additions to reserves for premium growth and higher claim volume
from the expansion of the long-term care insurance business. In addition,
benefits to policyholders increased in the Corporate and Other Segment primarily
due to a $30.0 million pre-tax charge in connection with the class action
settlement involving individual life insurance policies sold from 1979 through
1996. These increases in benefit to policyholders were partially offset by a
decrease in the G&SFP Segment, primarily due to reinsuring a larger proportion
of single premium annuity contracts.

      Other operating costs and expenses were $1,227.8 million for 2001, a
decrease of $61.0 million, or 4.7%, from $1,288.8 million for 2000. The decrease
was primarily due to cost containment measures and lower commission expense in
the mutual fund business on lower front-end load charge mutual fund sales and
lowered deferred sales charges due to lower redemptions. In addition, lower
compensation costs in our Investment Management Segment resulted from lower
assets under management. Partially offsetting the decreases in other operating
costs and expenses, was the inclusion of $183.0 million in operating costs of
Signature Fruit in this balance in 2001.

      Amortization of deferred policy acquisition costs was $249.0 million for
2001, an increase of $61.9 million, or 33.1%, from $187.1 million for 2000. The
increase was primarily due to higher amortization expense on non-traditional
life insurance business resulting from improved gross profits in this business
during 2001.

      Dividends to policyholders were $551.7 million in 2001, an increase of
$12.5 million, or 2.3%, from $539.2 million in 2000. The increase primarily
resulted from an increase in the dividend scale and aging of the in-force
business on traditional insurance business.

      No demutualization costs were incurred during the year ended December 31,
2001. Demutualization expenses were $10.6 million for 2000. These expenses
include printing and mailing fees, fees of the regulators' advisors and our
financial,


                                       50
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

legal, actuarial and accounting advisors. While demutualization expenses were
previously classified as an extraordinary item in our financial results, recent
accounting literature now requires demutualization expenses to be classified as
a single line item within income from continuing operations.

      Income taxes were $200.7 million in 2001, compared to $308.9 million for
2000. Our effective tax rate was 26.2% in 2001, as compared to 28.1% in 2000.
The lower effective tax rate was primarily due to a decrease in the deferred tax
liability associated with the lease residual management strategy, lower state
taxes associated with conversions of Independence Investment Associates and our
non life subsidiary holding company to limited liability corporations, and
increased affordable housing tax credits. Increased tax benefits associated with
dividends received deductions and employee stock ownership plan interest
exclusions also contributed to the overall effective tax rate decrease.

Results of Operations by Segment

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

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

<TABLE>
<CAPTION>
                                                                                   For the Years Ended December 31,
                                                                              2002               2001              2000
                                                                         ----------------   ----------------  ----------------
                                                                                             (in millions)
<S>                                                                           <C>                <C>               <C>
Segment Data: (1)
Segment after-tax operating income:
     Protection Segment..............................................         $  309.7           $  284.3          $  238.8
     Asset Gathering Segment.........................................            130.7              148.3             128.8
                                                                         ----------------   ----------------  ----------------
         Total Retail Segments.......................................            440.4              432.6             367.6

     Guaranteed and Structured Financial Products Segment............            268.7              238.0             211.6
     Investment Management Segment...................................             21.2               29.8              46.8
                                                                         ----------------   ----------------  ----------------
         Total Institutional Segments................................            289.9              267.8             258.4

     Corporate and Other Segment.....................................             44.3               55.4              82.4
                                                                         ----------------   ----------------  ----------------
         Total segment after-tax operating income....................            774.6              755.8             708.4

After-tax adjustments: (1)
     Net realized investment and other gains (losses), net ..........           (285.8)            (157.5)             51.6
     Class action lawsuit............................................            (19.5)             (19.5)               --
     Restructuring charges...........................................            (10.4)             (25.4)            (12.0)
     Group pension dividend transfer.................................               --                 --               5.7
     Demutualization expenses........................................               --                 --               2.5
     Other demutualization related costs.............................               --                 --             (10.0)
     Surplus tax.....................................................               --               13.3              46.0
                                                                         ----------------   ----------------  ----------------
         Total after-tax adjustments.................................           (315.7)             (189.1)             83.8
                                                                         ----------------   ----------------  ----------------

GAAP Reported:
     Income before cumulative effect of accounting changes...........            458.9              566.7             792.2
     Cumulative effect of accounting changes, net of tax.............                                 7.2                --
                                                                         ----------------   ----------------  ----------------
     Net income......................................................         $  458.9           $  573.9          $  792.2
                                                                         ================   ================  ================
</TABLE>


                                       51
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

(1) See "Adjustments to GAAP Reported Net Income" included in this Management's
    Discussion and Analysis.

Adjustments to GAAP Reported Net Income

      Our GAAP reported net income was significantly affected by net realized
investment and other gains (losses) and unusual or non-recurring events and
transactions presented above as after-tax adjustments. A description of these
adjustments follows.

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

      Net realized investment and other gains (losses) have been reduced by: (1)
amortization of deferred policy acquisition costs to the extent that such
amortization results from net realized investment and other gains (losses), (2)
the portion of net realized investment and other gains (losses) credited to
certain participating contractholder accounts and (3) the portion of net
realized investment and other gains (losses) credited to the policyholder
dividend obligation. We believe presenting net realized investment and other
gains (losses) in this format provides information useful in evaluating our
operating performance. This presentation may not be comparable to presentations
made by other insurers. Summarized below is a reconciliation of (a) net realized
investment and other gains (losses) per the consolidated financial statements
and (b) the adjustment made for net realized investment and other gains (losses)
to calculate segment after-tax operating income for the years ended December 31,
2002, 2001 and 2000.

<TABLE>
<CAPTION>
                                                                                            For the Years Ended December 31,
                                                                                        2002             2001              2000
                                                                                  -------------------------------------------------
                                                                                                   (in millions)

<S>                                                                                  <C>              <C>                 <C>
Net realized investment and other gains (losses)................................     $ (524.7)        $ (249.9)           $ 89.9
Add amortization of deferred policy acquisition costs related to net
     realized investment and other gains (losses)...............................         38.9             29.4               9.4
Add amounts credited to participating pension contractholder accounts...........         23.4            (42.3)             (6.9)
Add amounts credited to the closed block policyholder
     dividend obligation........................................................         11.9             17.0             (14.1)
                                                                                  --------------   --------------    --------------

Net  realized investment and other gains (losses), net of related amortization
     of deferred policy acquisition costs, amounts credited to participating
     pension contractholders and amounts credited to the closed block
     policyholder dividend obligation per consolidated
     financial statements.......................................................       (450.5)          (245.8)             78.3
Add net realized investment and other gains (losses) attributable to
     mortgage securitizations...................................................         (0.9)            (3.2)             (3.2)
                                                                                  --------------   --------------    --------------
Net realized investment and other gains (losses), net-- pre-tax                        (451.4)          (249.0)             75.1
     adjustment to calculate segment operating income...........................
Income tax effect...............................................................        165.6             91.5             (23.5)
                                                                                  --------------   --------------    --------------

Net realized investment and other gains (losses), net-- after-tax
     adjustment to calculate segment operating income...........................     $ (285.8)        $ (157.5)           $ 51.6
                                                                                  ==============   ==============    ==============
</TABLE>

      During 2002, the Company incurred a $19.5 million after-tax charge related
to the settlement of the Modal Premium class action lawsuit. The settlement
agreement involves policyholders who paid premiums on a monthly, quarterly, or
semi-annual basis rather than annually. The settlement costs are intended to
provide for relief to class members and for legal and administrative costs
associated with the settlement. In entering into the settlement, the Company
specifically denied any wrongdoing. Although some uncertainty remains as to the
entire cost of claims, it is expected that the final cost of the settlement will
not differ materially from the amounts presently provided by the Company.


                                       52
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      During 1997, the Company entered into a court-approved settlement relating
to a class action lawsuit involving certain individual life insurance policies
sold from 1979 through 1996. In entering into the settlement, the Company
specifically denied any wrongdoing. The total reserve held in connection with
the settlement to provide for relief to class members and for legal and
administrative costs associated with the settlement amounted to $11.9 million,
and $52.7 million at December 31, 2002, and 2001, respectively. Costs incurred
related to the settlement were $19.5 million, after tax, in 2001. No such costs
were incurred in 2002, or 2000. The estimated reserve is based on a number of
factors, including the estimated cost per claim and the estimated costs to
administer the claims.

      During 2002, 2001 and 2000, we incurred restructuring charges as part of a
plan to reduce costs and increase future operating efficiency by consolidating
portions of our operations. The plan consists primarily of reducing staff in the
home office.

      During 2001 and 2000, we recorded amounts for the transfer of certain
assets from the Guaranteed and Structured Financial Products Segment to the
corporate account. These assets included investments in certain subsidiaries and
the home office real estate complex (collectively, corporate purpose assets).
Certain group contracts have participating features, under which crediting rates
and dividends are affected directly by portfolio earnings. Certain participating
contractholders participate in contract experience related to net investment and
other realized gains (losses) in the general account. These participating
contractholders were compensated for transferred assets based on the fair value
of the assets transferred. The difference between the fair value and carrying
value of the assets transferred were credited to affected participating
contractholders through the crediting rates and dividends on their contracts.

      In December 2000, the American Institute of Certified Public Accountants
(AICPA) issued SOP 00-3, "Accounting by Insurance Enterprises for
Demutualizations and Formations of Mutual Insurance Holding Companies and
Certain Long-Duration Participating Contracts." The SOP, which was adopted with
respect to accounting for demutualization expenses by the Company on December
31, 2000, requires that demutualization related expenses be classified as a
single line item within income from continuing operations and should not be
classified as an extraordinary item. The adoption of SOP 00-3 resulted in the
reclassification of demutualization expenses previously recorded as an
extraordinary item in 1999 of $93.6 million, after tax. In addition, the Company
recognized $6.8 million, after tax credit, of demutualization expenses for the
year ended December 31, 2000. The Company considers demutulization of expenses
to be an adjustment to GAAP recorded net income.

      During 2000, we incurred other demutualization related costs to improve
our financial analysis and financial reporting abilities. These charges
primarily included consulting fees and planning and expense management costs.
The Company considers these other demutualization related costs to be an
adjustment to GAAP reported net income.

      We had been subject to the surplus tax imposed on mutual life insurance
companies which disallows a portion of mutual life insurance company's
policyholder dividends as a deduction from taxable income. As a stock company,
we are no longer subject to surplus tax and have excluded the surplus tax from
segment after-tax operating income in all periods.

      Amortization of Goodwill

      The excess of cost over the fair value of the net assets of businesses
acquired was $108.6 million and $116.0 million at December 31, 2002 and 2001,
respectively. Prior to 2002, goodwill was amortized on a systematic basis over
periods not exceeding 40 years, which periods corresponded with the benefits
estimated to be derived from the acquisitions. Accumulated amortization and
other changes were $58.1 million at both December 31, 2002 and 2001,
respectively. Amortization expense included in other operating costs and
expenses was $11.3 million in 2001 and 2000, respectively. No amortization of
goodwill occurred in 2002 pursuant to current accounting guidance. The Company
evaluates goodwill for impairment using valuations of reporting units and book
value multiples and by reference to similar multiples of publicly traded peers
annually and also whenever significant events or changes indicate an impairment
may exist. If the fair value analysis does not support the goodwill recorded, an
impairment would be recognized resulting in a charge to current operations to
reduce the carrying value of the goodwill to its fair value based on the
valuation of the related reporting units.


                                       53
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

The following table shows the amount of goodwill amortization by applicable
segment:

<TABLE>
<CAPTION>
                                                                                 For the Years Ended December 31
                                                                             2002             2001              2000
                                                                        --------------------------------------------------
                                                                                          (in millions)
<S>                                                                            <C>             <C>              <C>
Amortization of Goodwill:
     Protection Segment..............................................          --              $  4.0           $  3.3
     Asset Gathering Segment.........................................          --                 6.8              6.8
                                                                        ---------------   --------------   ---------------
         Total Retail Segments.......................................                            10.8             10.1

     Guaranteed and Structured Financial Products Segment............          --                  --               --
     Investment Management Segment...................................          --                 0.5              1.1
                                                                        ---------------   --------------   ---------------
         Total Institutional Segments................................                             0.5              1.1

     Corporate and Other Segment.....................................          --                  --               --
                                                                        ---------------   --------------   ---------------
         Total goodwill amortization expense.........................          --               $11.3            $11.2
                                                                        ===============   ==============   ===============
</TABLE>

Segment Allocations

      We allocate surplus to the segments in amounts sufficient to support the
associated liabilities of each segment and to maintain capital levels consistent
with the overall business segment and corporate strategies. Allocations of net
investment income are based on the assets owned by 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 allocation
methodologies.


                                       54
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

 Protection Segment

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

<TABLE>
<CAPTION>
                                                                                      For the Years Ended December 31,
                                                                                   2002            2001             2000
                                                                               -----------------------------------------------
                                                                                               (in millions)
<S>                                                                               <C>             <C>              <C>
Operating Results:
Revenues
     Premiums                                                                     $1,506.0        $1,363.9         $1,295.6
     Universal life and investment-type product fees.....................            441.8           423.9            388.3
     Net investment income...............................................          1,310.7         1,258.5          1,196.3
     Other revenue.......................................................              0.7             8.4              6.8
                                                                               --------------  --------------   --------------
         Total revenues..................................................          3,259.2         3,054.7          2,887.0

Benefits and expenses
     Benefits to policyholders (3).......................................          1,773.4         1,603.3          1,550.1
     Other operating costs and expenses..................................            323.3           339.2            397.4
     Amortization of deferred policy acquisition costs, excluding amounts
         related to net realized and other investment gains (losses) (3).            171.1           171.3            106.0
     Dividends to policyholders..........................................            511.5           499.9            475.6
                                                                               --------------  --------------   --------------
         Total benefits and expenses.....................................          2,779.3         2,613.7          2,529.1

Segment pre-tax operating income (1)(3)..................................            479.9           441.0            357.9

Income taxes (3).........................................................            170.2           156.7            119.1
                                                                               --------------  --------------   --------------

Segment after-tax operating income (1)(3)................................            309.7           284.3            238.8

After-tax adjustments: (1)
     Net realized investment and other (losses) gains, net (3)...........            (41.4)          (62.2)           (18.2)
     Class action lawsuit................................................            (18.7)             --               --
     Restructuring charges...............................................             (5.7)           (4.4)            (6.7)
     Demutualization expenses............................................               --              --              1.6
     Other demutualization related costs.................................               --              --             (6.8)
     Surplus tax.........................................................               --             9.6             20.8
                                                                               --------------  --------------   --------------
         Total after-tax adjustments (3).................................            (65.8)          (57.0)            (9.3)
                                                                               --------------  --------------   --------------

GAAP Reported:
Income before cumulative effect of accounting changes (3)................            243.9           227.3            229.5
Cumulative effect of accounting changes, net of tax......................               --            11.7               --
                                                                               --------------  --------------   --------------
Net income (3)...........................................................           $243.9        $  239.0         $  229.5
                                                                               ==============  ==============   ==============
Amortization of goodwill, net of tax.....................................               --             2.6              2.2
                                                                               --------------  --------------   --------------
Net income before amortization of goodwill (3)...........................           $243.9        $  241.6         $  231.7
                                                                               ==============  ==============   ==============

Other Data:
Segment after-tax operating income (loss)
     Non-traditional life (variable life and universal life).............           $119.7        $  121.0        $    97.0
     Traditional life (3)................................................            110.6           107.8             97.1
     Long-term care......................................................             83.6            58.6             46.6
     Other...............................................................             (4.3)           (3.1)            (1.9)
Statutory premiums (2)
     Variable life.......................................................            926.8           948.5            922.0
     Universal life......................................................          1,030.9           456.1            173.5
     Traditional life....................................................          1,035.9           997.3            965.5
     Long-term care......................................................            451.2           337.3            292.0
</TABLE>


                                       55
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

(1)   See "Adjustments to GAAP Reported Net Income" included in this
      Management's Discussion and Analysis.
(2)   Statutory data have been derived from the annual statements of John
      Hancock Life Insurance Company (formerly John Hancock Mutual Life
      Insurance Company), John Hancock Variable Life Insurance Company and
      Investors Partner Life Insurance Company (formerly John Hancock Life
      Insurance Company of America) as filed with insurance regulatory
      authorities and prepared in accordance with statutory accounting
      practices. Universal life statutory premiums includes a $639.7 million
      deposit related to the acquisition of Allmerica's fixed universal life
      insurance business.
(3)   Previously published 2000 amounts were adjusted for the adoption of the
      provisions of SOP 00-3, "Accounting by Insurance Enterprises for
      Demutualization and Formations of Mutual Insurance Holding Companies and
      Certain Long-Duration Participating Contracts" as outlined in Note 1 to
      the consolidated financial statements.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

      Segment after-tax operating income increased 8.9%, or $25.4 million, from
the prior year. Traditional life insurance business after-tax operating income
increased 2.6%, or $2.8 million, primarily due to increased premiums and lower
amortization of deferred acquisition costs offset by increased benefits to
policyholders and lower net investment income. Long-term care insurance segment
after-tax operating income increased 42.7%, or $25.0 million, resulting from
growth in the business and improved unit expenses. Non-traditional life
insurance segment after-tax operating income decreased 1.1%, or $1.3 million,
primarily due to higher amortization of deferred policy acquisition costs driven
by the Q3 2002 Unlocking of the deferred policy acquisition costs (DAC) asset
and higher benefits to policyholders, partially offset by increased universal
life and product-type fee income and lower operating costs and expenses.
Increased net investment income more than offset increased interest credited,
resulting in higher universal life spread on the growing block of business.

      Revenues increased 6.7%, or $204.5 million. Premiums increased 10.4%, or
$142.1 million, primarily due to long-term care insurance premiums, which
increased 31.9%, or $113.1 million, driven by continued growth overall in the
business. In addition, traditional life insurance premiums increased 2.9%, or
$29.0 million, primarily due to the return of renewal premiums in the prior year
of $34.4 million as part of the resolution of the class action lawsuit, offset
by a corresponding change in the benefit reserves. Universal life and
investment-type product fees increased 4.2%, or $17.9 million due primarily to
increased expense charges of $11.8 million. Mostly offsetting this increase in
amortization of deferred revenue was lower amortization in the current year due
in part to lower gross profits from lower separate account performance and poor
mortality. Segment net investment income increased 4.2%, or $52.2 million,
primarily due to a 9.7% increase in average asset balances, partially offset by
a 40 basis point decrease in yields.

      Benefits and expenses increased 6.3%, or $165.6 million. Benefits to
policyholders increased 10.6%, or $170.1 million, primarily due to growth in the
long-term care insurance business and non-traditional life insurance business in
force. Long-term care insurance benefits and expenses increased 26.8%, or $109.9
million, primarily due to additions to reserves for premium growth and higher
claim volume driven by business growth. Long-term care insurance business
average policies have increased to 604.2 thousand from 538.7 thousand in the
prior year and open claims increased to 5,449 from 4,483 in the prior year. The
non-traditional life insurance business had an increase in benefits to
policyholders of 21.4%, or $51.7 million, primarily due to a $29.0 million
increase in interest credited on higher current year account balances, and also
driven by a $15.3 million increase in death claims, net of reserves released.
Other operating costs and expenses decreased 4.7%, or $15.9 million primarily
due to a decrease of $30.4 million in operating expenses primarily due to
expense reductions. Amortization of deferred policy acquisition costs decreased
0.1%, or $0.2 million, primarily due to the non-traditional life insurance
business driven by the $27.9 million Q3 Unlocking of DAC asset (See Note 1 -
Summary of Significant Accounting Policies in the notes to the unaudited
financial statements and the Critical Accounting Policies in this MD&A). This
was offset by a decrease in amortization of deferred policy acquisition costs in
the traditional life insurance business of $19.7 million, due to improved
persistency of term insurance, and lower margins. Dividends to policyholders
increased 2.3%, or $11.6 million, due to a higher dividend scale and aging of
the in-force business on traditional life insurance products. The Segment's
effective tax rate on operating income was 35.5% for both 2002 and 2001.


                                       56
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

      Segment after-tax operating income was $284.3 million in 2001, an increase
of $45.5 million, or 19.1%, from $238.8 million in 2000. Non-traditional life
insurance segment after-tax operating income increased $24.0 million, or 24.7%,
primarily due to higher fee income and an increase in net investment income
partially offset by increased amortization of deferred policy acquisition costs.
Traditional life insurance segment after-tax operating income increased $10.7
million, or 11.0%, primarily resulting from lower operating expenses partially
offset by increased benefits to policyholders. Long-term care insurance segment
after-tax operating income increased $12.0 million, or 25.8%, resulting from
growth in the business, higher investment income and positive morbidity gains.

      Total revenues were $3,054.7 million in 2001, an increase of $167.7
million, or 5.8%, from $2,887.0 million in 2000. Premiums increased $68.3
million, or 5.3%, primarily due to an increase in long-term care insurance
premiums, which increased $45.6 million, or 14.7%, driven by continued growth in
the business. Universal life and investment-type product fees consist primarily
of cost of insurance fees and separate account fees and were $423.9 million in
2001, an increase of $35.6 million, or 9.2%, from $388.3 million in 2000. The
increase was primarily due to growth in average account values and variable life
products fee increases. Net investment income increased $62.2 million, or 5.2%,
primarily due to increased asset balances.

      Total benefits and expenses were $2,613.7 million in 2001, an increase of
$84.6 million, or 3.3%, from $2,529.1 million in 2000. Benefits to policyholders
increased $53.2 million, or 3.4%, due to growth in the long-term care insurance
business. Long-term care insurance benefits increased $49.9 million primarily
due to additions to reserves for premium growth and to higher claim volume from
the expansion of the business. Other operating costs and expenses decreased
$58.2 million, or 14.6%, to $339.2 million in 2001 from $397.4 million in 2000,
primarily due to a decrease of $51.3 million in operating expenses on
traditional life insurance products mainly attributable to ongoing operating
cost reduction programs. Amortization of deferred policy acquisition costs of
$171.3 million in 2001 increased $65.3 million, or 61.6%, from $106.0 million in
2000 primarily due to higher gross profits on non-traditional life products.
Dividends to policyholders increased $24.3 million, or 5.1%, due to a higher
dividend scale and aging of the in-force business on traditional life insurance
products. The segment's effective tax rate on operating income increased to
35.5% in 2001 from 33.3% in 2000, primarily due to a tax charge in 2001
associated with the closed block policyholder dividend obligation.

      Amortization of goodwill in 2001 and 2000 relates to the acquisition of
the individual long-term care insurance business from Fortis during 2000.


                                       57
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Asset Gathering Segment

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

<TABLE>
<CAPTION>
                                                                                     For the Years Ended December 31,
                                                                                 2002              2001             2000
                                                                             -------------------------------------------------
                                                                                              (in millions)
<S>                                                                            <C>              <C>              <C>
Operating Results:
Revenues
     Premiums                                                                  $     29.2       $     74.8       $     63.4
     Investment-type product fees........................................           118.6            125.6            138.3
     Net investment income...............................................           575.7            498.5            445.8
     Investment management revenues, commissions, and other fees.........           400.2            456.4            547.1
     Other revenue (expense).............................................             1.1             (0.3)             1.3
                                                                             --------------   ---------------  ---------------
         Total revenues..................................................         1,124.8          1,155.0          1,195.9

Benefits and expenses
     Benefits to policyholders...........................................           446.7            441.6            371.3
     Other operating costs and expenses..................................           343.6            424.4            552.9
     Amortization of deferred policy acquisition costs, excluding amounts
         related to net realized investment and other gains (losses).....           140.5             75.0             78.8
     Dividends to policyholders..........................................             0.1              0.1              0.1
                                                                             --------------   ---------------  ---------------
         Total benefits and expenses.....................................           930.9            941.1          1,003.1

Segment pre-tax operating income (1).....................................           193.9            213.9            192.8

Income taxes.............................................................            63.2             65.6             64.0
                                                                             --------------   ---------------  ---------------

Segment after-tax operating income (1)...................................           130.7            148.3            128.8

After-tax adjustments (1):
     Net realized investment and other (losses) gains, net...............           (25.7)           (34.7)            18.6
     Restructuring charges...............................................            (6.1)           (17.6)            (1.4)
     Demutualization expenses............................................              --               --              0.4
     Other demutualization related costs.................................              --               --             (1.3)
     Surplus tax.........................................................              --              0.2              0.6
                                                                             --------------   ---------------  ---------------
         Total after-tax adjustments.....................................           (31.8)           (52.1)            16.9
                                                                             --------------   ---------------  ---------------

GAAP Reported:
     Income before cumulative effect of accounting changes...............            98.9             96.2            145.7
     Cumulative effect of accounting changes, net of tax.................              --             (0.5)              --
                                                                             --------------   ---------------  ---------------
     Net income..........................................................      $     98.9       $     95.7       $    145.7
                                                                             ==============   ===============  ===============
     Amortization of goodwill, net of tax................................              --              4.5              4.5
                                                                             --------------   ---------------  ---------------
     Net income before amortization of goodwill..........................      $     98.9       $    100.2       $    150.2
                                                                             ==============   ===============  ===============

Other Data:
Segment after-tax operating income
     Annuity.............................................................      $     73.4       $     90.3       $     87.5
     Mutual funds........................................................            52.1             55.5             46.3
     Other...............................................................             5.2              2.5             (5.0)
Annuity premiums and deposits (2)
     Fixed...............................................................         2,668.0          1,463.5            854.3
     Variable (3)........................................................           746.1            639.6          1,120.8
Mutual fund assets under management, end of year.........................        25,810.3         29,285.8         31,725.8
</TABLE>


                                       58
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

(1)   See "Adjustments to GAAP Reported Net Income" included in this
      Management's Discussion and Analysis.
(2)   Statutory data have been derived from the annual statements of John
      Hancock Life Insurance Company and John Hancock Variable Life Insurance
      Company, as filed with insurance regulatory authorities and prepared in
      accordance with statutory accounting practices.
(3)   Variable annuity deposits exclude internal exchanges as part of the safe
      harbor internal exchange program of $92.0 million, $1,910.5 million and
      $25.0 million, respectively, for the years ending December 31, 2002, 2001
      and 2000.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

      Segment after-tax operating income decreased 11.9%, or $17.6 million from
the prior year. The decrease in segment after-tax operating income was driven by
a $31.1 million decrease in the variable annuity business. The variable annuity
business suffered due to significant declines in the equity markets leading to
increased amortization of deferred policy acquisition costs driven by the Q3
Unlocking (See Note 1 - Summary of Significant Accounting Policies in the notes
to the consolidated financial statements and Critical Accounting Policies in
this MD&A). Partially offsetting the losses in the variable annuity business was
growth of 20.7%, or $14.3 million, in after-tax operating income in the fixed
annuity business driven by higher net investment income, partially offset by
higher interest credited on account balance growth. Mutual fund segment
after-tax operating income was $52.1 million, declining 6.1% or $3.4 million
primarily due to a 15.2%, or $55.1 million decrease in management advisory fees,
partially offset by an 18.0%, or $50.2 million decrease in operating expenses.
After-tax operating income for Essex, a distribution subsidiary primarily
serving the financial institution channel, decreased $2.3 million from $2.6
million, during the same period in 2001. First Signature Bank after-tax
operating income decreased $0.6 million. Signature Services after-tax operating
income increased $1.7 million, driven by an increase in management advisory fees
from the same period in 2001 and continued expense management. Signator
Investors after-tax operating income increased $3.8 million.

      Revenues decreased 2.6%, or $30.2 million, from the prior year. The
decrease in revenue was due to a $56.2 million decline in investment management
revenues driven by the mutual fund business, a $45.5 million decline in premiums
in the fixed annuity business on lower life-contingent fixed annuity sales and a
$6.9 million decrease in investment-type product fees, primarily in the variable
annuity business on lower average fund values. These declines in revenue were
partially offset by an increase of 15.5%, or $77.2 million in net investment
income. The increase in net investment income was primarily due to increases in
invested assets backing fixed annuity products, partially offset by lower earned
yields in the portfolio. Average invested assets backing fixed annuity products
increased 29.1% to $7,719.2 million while the average investment yield decreased
77 basis points. Investment-type product fees decreased 5.5%, or $6.9 million,
mostly due to a decline in the average variable annuity fund values of 13.9%, or
$940.2 million, to $5,812.8 million from the prior year. Both market
depreciation of $778.4 million and net outflows of $242.2 drove this decrease in
average variable annuity fund values for the current year. For variable
annuities the mortality and expense fees as a percentage of average account
balances were 1.29% and 1.22% for the current and prior year periods.

      Investment management revenues, commissions, and other fees decreased
12.3%, or $56.2 million from the prior year. Average mutual fund assets under
management were $26,803.3, a decrease of $2,757.9 million, or 9.3% from the
prior year. The decrease in average mutual fund assets under management is
primarily due to market depreciation of $3,548.0 million since December 31,
2001. The mutual fund business experienced net deposits of $379.1 million during
2002, compared to net deposits of $554.5 million in the prior year, a decline of
$175.4 million. This change was primarily due to a decrease in deposits of
$628.3 million driven by a decrease in retail open-end funds sales and
institutional advisory account deposits in the current year compared to the
prior year. The decrease was partially offset by $1,391.1 million in sales of
the John Hancock Preferred Income series of closed-end funds, the acquisition of
the U.S. Global Leaders Growth Fund, which had $238.5 million in sales and a
$62.7 million increase in private managed account sales. In addition, the sale
of the full service retirement plan business during 2001 contributed to the
decrease in deposits in the current period. Investment advisory fees decreased
14.3%, or $25.4 million, to $152.3 million, from the prior period and were 0.57%
and 0.60% of average mutual fund assets under management for the years ended
December 31, 2002 and 2001. Underwriting and distribution fees decreased 12.0%,
or $27.8 million, to $204.7 million compared to the prior period, primarily due
to a decrease in front end load mutual fund sales, resulting in a decrease of
$23.3 million in fees and accordingly, commission revenue. The decrease also
included a $4.5 million decrease in distribution and other fees. Shareholder
service and other fees were $66.3 million compared to $46.4 million in the prior
year.


                                       59
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Benefits and expenses decreased 1.1%, or $10.2 million from the prior
year. Driving the decrease was a decline in other operating costs and expenses
of 19.0%, or $80.8 million, from the prior year, primarily due to cost savings
in the mutual fund business as well as company wide cost reduction programs,
which drove the decline in expenses in the other Asset Gathering segment
businesses. Benefits to policyholders increased 1.2%, or $5.1 million, primarily
due to a $50.4 million increase in interest credited on fixed annuity account
balances due to higher average account balances and $5.2 million in higher
guaranteed minimum death benefit claims, partially offset by $49.6 million lower
reserve provisions for life-contingent immediate fixed annuity fund values on
lower sales of these contract types. Amortization of deferred policy acquisition
costs increased 87.3%, or $65.5 million, primarily due to the variable annuity
business driven by the $36.1 million Q3 Unlocking of the DAC asset mentioned
previously. The Segment's effective tax rate on operating income was 32.6%
compared to 30.6% for the prior year. The increase in the rate is due to lower
dividends received deductions in the current period associated with lower
dividends received on stocks in the variable annuity separate account investment
funds.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

      Segment after-tax operating income was $148.3 million in 2001, an increase
of $19.5 million, or 15.1%, from $128.8 million in 2000. Mutual fund segment
after-tax operating income increased $9.2 million, or 19.9%, primarily due to a
decrease in operating expenses, partially offset by a decrease in management
advisory fees. Segment after-tax operating income increased $7.5 million in
other Asset Gathering businesses, driven by John Hancock Signature Services.
Annuity segment after-tax operating income increased $2.8 million, or 3.2%,
primarily due to decreased operating expense related to distribution in variable
annuities. The fixed annuity business remained stable despite decreasing
investment spread, due to growth in invested assets. Spreads on fixed annuities
decreased 42 basis points for the year ended December 31, 2001.

      Total revenues decreased $40.9 million, or 3.4%, to $1,155.0 million in
2001 from $1,195.9 million in 2000, primarily driven by lower investment
management revenues. The decrease in investment management revenues was
partially offset by growth in net investment income of $52.7 million, or 11.8%,
and premiums of $11.4 million, or 18.0%. Net investment income increased
primarily due to a higher level of invested assets backing fixed annuity
products. The average investment yield on invested assets backing fixed annuity
products decreased 23 basis points in 2001, reflecting lower market interest
rates on new fixed income investments. Premiums increased due to continued
growth in the single premium immediate annuity business. Investment-type product
fees decreased $12.7 million, or 9.2%, due to a decrease in average variable
fund values, which decreased 9.1% from 2000. Mortality and expense fees as a
percentage of average account balances decreased 16 basis points in 2001, while
the advisory fees increased 12 basis points.

      Investment management revenues, commissions, and other fees decreased
$90.7 million, or 16.6%, to $456.4 million in 2001 from $547.1 million in 2000.
Average mutual fund assets under management decreased $3,044.0 million, or 9.3%,
to $29,561.2 million in 2001 from $32,605.2 million in 2000, primarily due to
market depreciation of $2,633.0 million in 2001. During 2001, redemptions
decreased $842.1 million compared to the prior year. The result was net deposits
of $554.5 million for the year ended December 31, 2001 compared to net
redemptions of $45.5 million for the year ended December 31, 2000, an
improvement of $600.0 million. Redemptions improved despite $538.0 million in
redemptions for the year ended December 31, 2001, related to the sale of the
full service retirement plan business. Absent the impact on assets under
management of the sale of the full service retirement plan business, the mutual
fund business experienced net deposits of $1,092.5 million for the same period.
The improvement in net deposits is primarily due to the marketing of both retail
investment management services and increased sales of institutional separate
accounts and private managed accounts. Investment advisory fees decreased $16.3
million, or 8.4%, to $177.6 million in 2001 and were 0.60% and 0.59% of average
mutual fund assets under management for the years ended December 31, 2001 and
2000, respectively. Underwriting and distribution fees decreased $72.1 million,
or 23.7%, to $232.5 million in 2001 primarily due to the decrease in front-end
load mutual fund sales and, accordingly, commission revenue. Shareholder service
and other fees were $46.4 million in 2001 compared to $48.6 million in 2000,
primarily reflecting lower assets under management.


                                       60
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Total benefits and expenses decreased $62.0 million, or 6.2%, to $941.1
million in 2001 from $1,003.1 million in 2000. Benefits to policyholders
increased $70.3 million, or 18.9%, primarily due to an increase in interest
credited on fixed annuity account balances of $50.2 million. In addition,
benefits to policyholders increased due to growth in immediate annuities.
Premiums on immediate annuities increased $11.3 million, or 19.1%, for the year
ended December 31, 2001. Interest credited on fixed annuity account balances
increased primarily due to higher average fixed annuity account balances in
2001. In addition to the increase in average fixed annuity account balances, the
average interest credited rate on fixed annuity account balances increased 19
basis points in 2001. The average interest credited rate pattern is dependent
upon the general trend of market interest rates, frequency of credited rate
resets, bonus interest on new sales and business mix. Other operating costs and
expenses decreased $128.5 million, or 23.2%, to $424.4 million in 2001 from
$552.9 million in 2000. The decrease was primarily due to a decrease in
operating expenses. Company wide cost reduction programs and the sale of the
full service retirement plan business drove cost savings in the mutual fund
business. The commission expenses incurred in the mutual funds business
decreased primarily due to lower front-end load charge mutual fund sales and
lower deferred sales charges due to lower redemptions. Amortization of deferred
policy acquisition costs decreased $3.8 million, or 4.8%, to $75.0 million in
2001 from $78.8 million in 2000, largely due to favorable lapse and separate
account experience in the variable annuity product line. The segment's effective
tax rate on operating income was 30.6% and 33.2% in 2001 and 2000, respectively.
The decrease in the effective tax rate is primarily due to increased dividend
received deductions in variable annuity separate accounts and a one-time tax
charge in 2000 associated with the repatriation of the mutual fund business'
United Kingdom subsidiary.

      Amortization of goodwill did not change from the prior year. No new
acquisitions were entered into by the Asset Gathering Segment in 2001.


                                       61
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Guaranteed and Structured Financial Products Segment

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

<TABLE>
<CAPTION>
                                                                                    For the Years Ended December 31,
                                                                                 2002              2001             2000
                                                                           ---------------   ---------------  ---------------
                                                                                             (in millions)
<S>                                                                           <C>               <C>              <C>
Operating Results:
Revenues
     Premiums                                                                 $   18.3          $   483.2        $   620.3
     Investment-type product fees........................................         45.4               51.4             64.7
     Net investment income...............................................      1,703.9            1,834.5          1,741.9
     Net realized investment and other gains (losses), net (1)...........           --                 --               --
     Other revenue.......................................................          0.8                0.4              0.3
                                                                           ---------------   ---------------  ---------------
         Total revenues..................................................      1,768.4            2,369.5          2,427.2

Benefits and expenses
     Benefits to policyholders, excluding amounts related to net
         realized investment and other gains (losses) credited to
         participating pension contractholders...........................      1,186.8            1,869.3          1,972.4
     Other operating costs and expenses..................................        134.4              105.3             88.6
     Amortization of deferred policy acquisition costs...................          2.2                2.4              2.6
     Dividends to policyholders..........................................         44.2               36.1             43.5
                                                                           ---------------   ---------------  ---------------
         Total benefits and expenses.....................................      1,367.6            2,013.1          2,107.1

Segment pre-tax operating income (1).....................................        400.8              356.4            320.1

Income taxes.............................................................        132.1              118.4            108.5
                                                                           ---------------   ---------------  ---------------

Segment after-tax operating income (1)...................................        268.7              238.0            211.6

After-tax adjustments: (1)
     Net realized investment and other (losses) gains, net...............       (199.6)             (77.0)           (40.5)
     Restructuring charges...............................................         (0.6)              (1.2)            (2.6)
     Group pension dividend transfer.....................................           --                 --              5.7
     Demutualization expenses............................................           --                 --              0.4
     Other demutualization related costs.................................           --                 --             (1.7)
     Surplus tax.........................................................           --                2.6              6.5
                                                                           ---------------   ---------------  ---------------
         Total after-tax adjustments, net of tax.........................       (200.2)             (75.6)           (32.2)
                                                                           ---------------   ---------------  ---------------

GAAP Reported:
     Income before cumulative effect of accounting changes...............     $   68.5          $   162.4       $    179.4
     Cumulative effect of accounting changes, net of tax.................           --               (1.2)              --
                                                                           ---------------   ---------------  ---------------
Net income...............................................................     $   68.5          $   161.2       $    179.4
                                                                           ===============   ===============  ===============
</TABLE>


                                       62
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
                                                                                    For the Years Ended December 31,
                                                                                 2002              2001             2000
                                                                           --------------------------------------------------
                                                                                             (in millions)

<S>                                                                           <C>               <C>             <C>
Other Data:
Segment after-tax operating income
     Spread-based products...............................................     $   246.4         $   214.5       $    178.1
     Fee-based products..................................................          22.3              23.5             33.5
Premiums and deposits
     Spread-based products
         Fund-type products..............................................       3,847.9           4,718.8          4,442.0
         Single premium annuities........................................           1.2             465.5            594.8
         SignatureNotes..................................................         290.2                --               --
     Fee-based products
         Participating contracts and conversion annuity contracts........         529.3             468.9            467.0
         Structured Separate Accounts ...................................         483.9              77.4             50.3
         Other separate account contracts................................         (26.1)            130.6            223.9
</TABLE>

(1) See "Adjustments to GAAP Reported Net Income" included in this Management's
    Discussion and Analysis.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

      Segment after-tax operating income increased 12.9%, or $30.7 million from
the prior year. Spread-based products after-tax operating income increased
14.9%, or $31.9 million from the prior year, driven by a 39.7%, or $657.6
million decrease in benefits to policyholders, offset by a decrease in premiums
of 99.8%, or $461.9 million and a decrease in net investment income of 6.9%, or
$110.0 million. Lower benefits to policyholders reflect an increased level of
reinsurance arrangements, resulting in a lower increase in policy reserves. The
decrease in benefits to policyholders in the spread-based business was offset by
an increase in operating costs of 48.2%, or $36.1 million related to higher
level of reinsurance arrangements. Fee-based products after-tax operating income
decreased $1.2 million from the prior year, primarily due to lower risk-based
capital and lower underwriting gains.

      Revenues decreased 25.4%, or $601.1 million from the prior year, driven by
a decline in premiums of 96.2%, or $464.9 million from the prior year reflecting
the lower sales volume and increased level of reinsurance arrangements. Net
investment income also decreased 7.1%, or $130.6 million, driven by lower
spread-based net investment income of 6.9%, or $110.0 million, from the prior
year, despite growth of 11.1%, or $2.3 billion in the average invested asset
base. Net investment income declined as the average investment yield fell to
6.43% from the prior year. The decrease in the average investment yield is a
reflection of the declining interest rate environment in the current period. Net
investment income varies with market interest rates because the return on
approximately $10 billion, or 43% of the asset portfolio floats with market
rates. Matching the interest rate exposure on our asset portfolio to the
exposure on our liabilities is a central feature of our asset/liability
management process.

      Benefits and expenses decreased 32.1%, or $645.5 million from the prior
year, driven by lower benefits to policyholders of 36.5%, or $682.5 million in
the current year. Spread-based benefits to policyholders decreased due to
increased level of reinsurance arrangements and lower interest credited.
Interest credited decreased 15.3%, or $184.1 million from the prior year. The
decrease resulted from the decline in the average interest credited rate on
account balances, due to the reset of liabilities with floating rates and new
business added at current market rates. The average interest credited rate fell
to 4.85% from 6.33% in the prior year. Offsetting the decrease in benefits to
policyholders was an increase in other operating costs and expenses of 27.6%, or
$29.1 million from the prior year. This increase was primarily due to the
increased level of reinsurance arrangements. Dividends to policyholders
increased 22.4%, or $8.1 million from the prior year. The Segment's effective
tax rate was 33.0% compared to 33.2% in the prior year.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

      Segment after-tax operating income was $238.0 million in 2001, an increase
of $26.4 million, or 12.5% from $211.6 million in 2000. Spread-based products'
after-tax operating income increased $36.4 million, or 20.4%, to $214.5 million
in 2001 from $178.1 million in 2000 primarily due to higher investment spread as
a result of an increase in average invested assets backing spread-based
products. Fee-based products' after-tax operating income decreased $10.0
million, or 29.9%, to $23.5 million in 2001 from $33.5 million in 2000 primarily
due to the transfer of non-participating annuities to the spread-based products
at year end 2000.


                                       63
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Total revenues decreased $57.7 million, or 2.4%, to $2,369.5 million in
2001 from $2,427.2 million in 2000, primarily due to a $137.1 million decrease
in premiums, the result of reinsuring a larger portion of single premium annuity
sales, partially offset by increased investment income. Investment-type product
fees were $51.4 million for 2001, a decrease of $13.3 million, or 20.6%,
primarily due to lower general account expense recoveries and slower Structured
Separate Account sales in the current year. Investment-type product fees were
0.51% and 0.56% of average fee-based policy reserves in 2001 and 2000,
respectively. The decrease primarily reflects lower expense charges on
participating contracts and the impact of slower sales in the current year. Net
investment income increased $92.6 million, or 5.3%, to $1,834.5 million in 2001
from $1,741.9 million in 2000, mainly due to the growth of average invested
assets on spread-based products. Average invested assets backing spread-based
products increased $3,844.1 million, or 22.8%, to $20,703.3 million in 2001 from
$16,859.2 million in 2000 as a result of increased sales of spread-based
products. The average investment yield on these invested assets decreased to
7.66% in 2001 compared to 8.65% in 2000, as a result of declining market
interest rates.

      Total benefits and expenses decreased $94.0 million, or 4.5%, to $2,013.1
million in 2001 from $2,107.1 million in 2000, primarily due to the decrease in
benefits to policyholders as a result of reinsuring a larger proportion of
single premium annuity contracts, partially offset by an increase in interest
credited. The increase in interest credited was driven by higher average account
balances for spread-based products which were up $3,020.0 million to $18,996.5
million in 2001 from $15,976.5 million in 2000, partially offset by a decrease
in the average interest credited rate on account balances for spread-based
products. The average interest credited rate was 6.33% in 2001 compared to 7.18%
in 2000 as a result of declining market interest rates. Other operating costs
and expenses were $105.3 million in 2001, an increase of $16.7 million, or
18.8%, from $88.6 million in 2000. The increase was primarily due to the
increased level of reinsurance arrangements. The increase in operating expenses
from these arrangements is offset in lower benefits to policyholders. Dividends
of $36.1 million in 2001, decreased $7.4 million, or 17.0%, from $43.5 million
in 2000, reflecting a lower level of distributable surplus to participating
contractholder accounts. The segment's effective tax rate on operating income
was 33.2% in 2001, as compared to 33.9% in 2000.


                                       64
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Investment Management Segment

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

<TABLE>
<CAPTION>
                                                                                For the Years Ended December 31,
                                                                  ----------------------------------------------------------
                                                                            2002                2001               2000
                                                                  ----------------------------------------------------------
                                                                                        (in millions)
<S>                                                                 <C>                 <C>                 <C>
Operating Results:
Revenues
   Net investment income......................................      $       15.1        $       28.7        $       22.7
   Net realized investment and other gains (losses),
     net (1)..................................................               1.2                 3.2                 3.2
   Investment management revenues,
     commissions, and other fees..............................             108.2               111.3               186.1
   Other revenue..............................................               0.1                  --                  --
                                                                  -------------------  -------------------  ----------------
     Total revenues...........................................             124.6               143.2               212.0

Benefits and expenses
   Other operating costs and expenses.........................              90.9                96.4               132.7
                                                                  -------------------  -------------------  ----------------
     Total benefits and expenses..............................              90.9                96.4               132.7

Segment pre-tax operating income (1)..........................              33.7                46.8                79.3

Income taxes..................................................              12.5                17.0                32.5
                                                                  -------------------  -------------------  ----------------

Segment after-tax operating income (1)........................              21.2                29.8                46.8

After-tax adjustments: (1)
   Net realized investment and other
     gains (losses)...........................................               0.4                (0.2)                4.4
   Restructuring charges......................................              (0.8)               (0.9)                 --
   Surplus tax................................................                --                 0.1                  --
                                                                  -------------------  -------------------  ----------------

   Total after-tax adjustments................................              (0.4)               (1.0)                4.4
                                                                  -------------------  -------------------  ----------------

GAAP Reported:
   Income before cumulative effect of
     accounting changes.......................................      $       20.8        $       28.8        $       51.2
   Cumulative effect of accounting changes,
     net of tax...............................................                --                (0.2)                 --
                                                                  -------------------  -------------------  ----------------
Net income....................................................      $       20.8        $       28.6        $       51.2
                                                                  ===================  ===================  ================
Amortization of goodwill, net of tax..........................                --                 0.5                 0.8
                                                                  -------------------  -------------------  ----------------

Net income before amortization of goodwill....................      $       20.8        $       29.1        $       52.0
                                                                  ===================  ===================  ================

Other Data:
Assets under management, end of year (2)......................      $   27,874.7        $   28,921.8        $   32,651.6
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" included in this
      Management's Discussion and Analysis.
(2)   Includes general account cash and invested assets of $383.1 million,
      $151.3 million, and $106.9 million as of December 31, 2002, 2001 and 2000,
      respectively.


                                       65
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

      Segment after-tax operating income decreased $8.6 million, or 28.9%, from
the prior year. The decline was primarily due to a drop of $13.6 million, or
47.4%, in net investment income, offset by a decrease of $5.5 million, or 5.7%,
in benefits and expenses. The decrease in net investment income resulted
primarily from non-recurring prior year income on the sales of investments at
John Hancock Energy Resources Management and from a lower level of commercial
mortgages held for sale this year at John Hancock Real Estate Finance. The
decrease in expenses was primarily due to lower interest expense at John Hancock
Real Estate Finance and operating expense savings at Hancock Natural Resources
Group, offset by increased operating expenses at Independence Investments LLC
due to higher compensation this year.

      Revenues decreased $18.6 million, or 13.0%, from the prior year. Net
investment income declined $13.6 million, or 47.4%, to $15.1 million. Net
investment income was down $6.6 million, or 95.7%, at John Hancock Energy
Resources Management due to prior year income recognized from investment
partnerships on the liquidation of underlying investments and down $5.4 million,
or 37.8%, at John Hancock Real Estate Finance due to a lower average level of
warehoused commercial mortgages. Investment management revenues, commissions,
and other fees decreased $3.1 million, or 2.8% from the prior year. Advisory
fees at Independence Investment LLC were down $8.6 million, or 13.6% based on
declines in average assets under management which resulted from market
depreciation of $3.0 billion offset by $1.1 billion of net sales. John Hancock
Realty Advisors saw an increase of $3.5 million, or 61.4%, in higher portfolio
acquisition fees based on higher acquisition activity compared to the prior
year. Hancock Natural Resources Group saw an increase of $2.4 million, or 11.4%
over the prior year, primarily based on higher management fees earned from
higher assets under management. Mortgage origination and servicing fees at John
Hancock Real Estate Finance were $6.6 million for both 2002 and 2001. Investment
management revenues, commissions and other fees were 0.39% and 0.38% of average
advisory assets under management in 2002 and 2001, respectively, for the
segment. Net realized gains were down $2.0 million, or 62.5% at John Hancock
Real Estate Finance, primarily due to a lower level of commercial mortgage
securitizations.

      Other operating costs and expenses declined $5.5 million, or 5.7% from the
prior year. John Hancock Real Estate Finance had $5.7 million lower interest
expense compared to 2001, based on lower average levels of borrowings to support
lower average levels of warehoused commercial mortgages, and lower prevailing
interest rates. Operating expenses were down $4.9 million at Hancock Natural
Resources Group based on ongoing cost reduction efforts partially offset by
higher incentive compensation expense this year. Independence Investment LLC
operating expenses were up $5.2 million due to compensation increases over the
prior year. The segment's effective tax rate on operating income was 37.1%
compared to 36.2% in the prior year. The underlying effective tax rate for the
Investment Management Segment remains higher than for our other business
segments due to state taxes on certain investment management subsidiaries, and
fewer tax benefits from portfolio holdings in this segment.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

      Segment after-tax operating income was $29.8 million in 2001, a decrease
of $17.0 million, or 36.3%, from $46.8 million in 2000. The decrease was
primarily due to lower investment advisory fees, resulting from the
non-recurrence of prior-year one-time events and from lower average assets under
management in 2001, partially offset by lower operating expenses in 2001.

      Total revenues decreased $68.8 million, or 32.6%, to $143.2 million in
2001 from $212.0 million in 2000. Net investment income was $28.7 million in
2001, an increase of $6.0 million from $22.7 million in 2000. Investment
management revenues, commissions, and other fees decreased $74.8 million, or
40.2% in 2001, due primarily to a decrease in investment advisory fees, which
decreased $75.9 million to $104.7 million compared to $180.6 million reported in
2000. The decrease in investment advisory fees was primarily due to $60.6
million of non-recurring prior year items; $45.3 million in incentive fees
received in connection with the restructuring of timber management contracts,
and $15.3 million in performance fees earned by the mezzanine fund manager.
Also, asset-based advisory fees decreased $17.2 million at Independence
Investment LLC on lower average assets under management resulting from net
redemptions and market declines during the year. Investment management revenues,
commissions and other fees were .38% and .50% of average advisory assets under
management in 2001 and 2000, respectively, for the segment. Mortgage origination
and servicing fees were $6.6 million compared to $5.4 million in 2000. Net
realized investment and other gains (losses) were flat at $3.2 million for both
2001 and 2000.


                                       66
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Other operating costs and expenses were $96.4 million in 2001, a decrease
of $36.3 million, or 27.4%, from $132.7 million in 2000. The decrease was
primarily due to two non-recurring prior year amounts; $15.7 million in
incentive compensation payments related to the receipt of incentive fees on
timber management contracts and $9.1 million in performance fees paid for the
management of the mezzanine fund. Operating expenses were down $14.7 million at
Independence Investment LLC, based on lower compensation levels and the results
of an overall expense management program. Operating expenses were down $5.2
million at John Hancock Real Estate Finance, primarily from lower borrowing
costs due to lower lending activity and lower interest rates, and also from
savings from on-going expense management efforts. The segment's effective tax
rate on operating income was 36.2% and 41.0% in 2001 and 2000, respectively. The
decrease in the effective tax rate is primarily due to lower state taxes
associated with the conversion of Independence Investment Associates to a
limited liability corporation.

Corporate and Other Segment

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

<TABLE>
<CAPTION>
                                                                                       For the Years Ended December 31,
                                                                                    2002            2001             2000
                                                                               -----------------------------------------------
                                                                                                (in millions)
<S>                                                                               <C>             <C>              <C>
Operating Results:
Segment after-tax operating income (loss) (1)
     International operations............................................         $   7.4         $   3.5          $   5.4
     Corporate operations................................................            33.2            42.7             69.4
     Non-core businesses.................................................             3.7             9.2              7.6
                                                                               --------------  --------------   --------------
         Total...........................................................            44.3            55.4             82.4

After-tax adjustments (1):
     Net realized investment and other gains (losses), net...............           (19.5)           16.6             87.3
     Class action lawsuit................................................            (0.8)          (19.5)              --
     Restructuring charges...............................................             2.8            (1.3)            (1.3)
     Demutualization expenses............................................              --              --              0.1
     Other demutualization related costs.................................              --              --             (0.2)
     Surplus tax.........................................................              --             0.8             18.1
                                                                               --------------  --------------   --------------
         Total after-tax adjustments.....................................           (17.5)           (3.4)           104.0
                                                                               --------------  --------------   --------------

GAAP Reported:
     Income (loss) before cumulative effect of accounting changes........         $  26.8         $  52.0          $ 186.4
     Cumulative effect of accounting changes, net of tax.................              --            (2.6)              --
                                                                               --------------  --------------   --------------
Net income (loss)........................................................         $  26.8         $  49.4          $ 186.4
                                                                               ==============  ==============   ==============
Amortization of goodwill, net of tax.....................................              --              --               --
                                                                               --------------  --------------   --------------
Net income (loss) before amortization of goodwill........................         $  26.8         $  49.4          $ 186.4
                                                                               ==============  ==============   ==============
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" included in this
      Management's Discussion and Analysis.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

      After-tax operating income from international operations increased $3.9
million or 111.4% over the prior year primarily due to favorable foreign
currency fluctuations within our international group insurance program.

      After-tax operating income from corporate operations decreased $9.5
million or 22.2% compared to 2001. The change was due to a decrease in net
periodic pension credits of $21.1 million, a decrease of $1.7 million in other
post employment benefit credits, increased taxes licenses and fees of $3.4
million and increased interest expense of $0.7 million. Partially offsetting
these decreases was the impact of our corporate-owned life insurance program.
The corporate-owned life insurance program's results were $20.8 million
favorable due an increase in the asset base and improved performance of the
underlying assets.


                                       67
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      After-tax operating income from non-core businesses decreased $5.5 million
or 59.8% from the prior year. We continue with the orderly run-off of business
in this segment.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

      After-tax operating income from international operations decreased $1.9
million or 35.2% compared to 2000 due to strong deficit recoveries in 2000
within our international group insurance program.

      After-tax operating income from corporate operations decreased $26.7
million or 38.5% compared to 2000. This decrease was caused by lower net
investment income attributable to our use of cash for stockholder dividends and
the stock buyback program, interest earned in 2000 on the IPO proceeds and worse
performance within our portfolio of equity method investments.

      After-tax operating income from non-core businesses increased $1.6 million
or 21.1% over 2000.

General Account Investments

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

Asset/Liability Risk Management

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

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

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

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

      Management of credit risk is central to our business and we devote
considerable resources to the credit analysis underlying each investment
acquisition. Our corporate bond management group employs a staff of highly
specialized, experienced, and well-trained credit analysts. We rely on these
analysts' ability to analyze complex private financing transactions and to
acquire the investments needed to profitably fund our liability requirements. In
addition, when investing in private fixed maturity securities, we rely upon
broad access to proprietary management information, negotiated protective
covenants, call protection features and collateral protection.

      Our bond portfolio is reviewed on a continuous basis to assess the
integrity of current quality ratings. As circumstances warrant, specific
investments are "re-rated" with the adjusted quality ratings reflected in our
investment system. All bonds are evaluated regularly against the following
criteria:

o     material declines in the issuer's revenues or margins;

o     significant management or organizational changes;

o     significant uncertainty regarding the issuer's industry;

o     debt service coverage or cash flow ratios that fall below
      industry-specific thresholds;

o     violation of financial covenants; and

o     other business factors that relate to the issuer.


                                       68
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Insurance product prices are impacted by investment results. Accordingly,
incorporated in insurance products prices is assumptions of expected default
losses over the long-term. Actual losses therefore vary above and below this
average, and the market value of the portfolio as a whole also changes as market
credit spreads move up and down during an economic cycle.

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

Overall Composition of the General Account

      Invested assets, excluding separate accounts, totaled $60.6 billion and
$53.3 billion as of December 31, 2002 and December 31, 2001, respectively.
Although the portfolio composition has not significantly changed at December 31,
2002 as compared to December 31, 2001, invested assets have grown 13.6% over the
year. Included in this amount are $0.5 billion of invested assets from the
previously discussed acquisition of the fixed universal life insurance business.
Due to the timing of this transaction no income was earned on these assets in
2002. The following table shows the composition of investments in the general
account portfolio.

<TABLE>
<CAPTION>
                                                     As of December 31,              As of December 31,
                                                            2002                            2001
                                            -----------------------------------------------------------------
                                                 Carrying          % of            Carrying         % of
                                                  Value            Total            Value           Total
                                            -----------------------------------------------------------------
                                              (in millions)                     (in millions)
<S>                                            <C>                  <C>           <C>                <C>
Fixed maturity securities (1)............      $ 43,773.3           72.3%         $ 37,995.6         71.3%
Mortgage loans (2).......................        10,296.5           17.0             9,667.0         18.1
Real estate..............................           255.3            0.4               380.4          0.7
Policy loans (3).........................         2,014.2            3.3             1,927.0          3.6
Equity securities........................           350.3            0.6               563.7          1.1
Other invested assets (4)................         2,839.1            4.7             1,676.9          3.1
Short-term investments...................           137.3            0.2                78.6          0.2
Cash and cash equivalents (5)............           897.0            1.5             1,025.3          1.9
                                            -----------------------------------------------------------------
Total invested assets....................      $ 60,563.0          100.0%         $ 53,314.5        100.0%
                                            =================================================================
</TABLE>

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $590.2 million and
      $691.8 million as of December 31, 2002 and December 31, 2001,
      respectively. The total fair value of the fixed maturity security
      portfolio was $43,823.5 million and $37,980.3 million, at December 31,
      2002 and December 31, 2001, respectively.
(2)   The fair value for the mortgage loan portfolio was $11,220.7 million and
      $10,215.0 million as of December 31, 2002 and December 31, 2001,
      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. Policy loan amounts
      include $75.6 million from the acquisition of Allmerica Financial
      Corporation's fixed universal life insurance business.
(4)   Other invested assets as of December 31, 2002 contains a receivable of
      $471.1 million from Allmerica Financial Corporation pursuant to the
      Company's agreement to reinsure Allmerica's fixed universal life insurance
      business. Additional detail about the credit quality of the investments
      underlying the premium receivable is provided at the end of this
      investments discussion.
(5)   Cash and cash equivalents are included in total invested assets in the
      table above for the purposes of calculating yields on the income producing
      assets for the Company.

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


                                       69
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Fixed Maturity Securities. The fixed maturity securities portfolio is
predominantly comprised of low risk, investment grade, publicly and privately
traded corporate bonds and senior tranches of asset-backed securities (ABS) and
mortgage-backed securities (MBS). The fixed maturity securities portfolio also
includes redeemable preferred stock. As of December 31, 2002, fixed maturity
securities represented 72.3% of general account invested assets with a carrying
value of $43.8 billion, comprised of 56.4% public securities and 43.6% private
securities. Each year, the Company directs the majority of net cash inflows into
investment grade fixed maturity securities. Typically, between 5% and 15% of
funds allocated to fixed maturity securities are invested in
below-investment-grade bonds while maintaining a policy to limit the overall
level of these bonds to no more than 10% of invested assets and the majority of
that balance in the BB category. Allocations are based on an assessment of
relative value and the likelihood of enhancing risk-adjusted portfolio returns.
While the Company has profited from the below-investment-grade asset class in
the past, care is taken to manage its growth strategically by limiting its size
relative to the Company's total assets.

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

      The table below sets forth the SVO ratings for the bond portfolio along
with an equivalent S&P rating agency designation. The majority of the fixed
maturity investments are investment grade, with 88.0% and 87.4% of fixed
maturity investments invested in Category 1 and 2 securities as of December 31,
2002 and 2001, respectively. Below investment grade bonds were 12.0% and 12.6%
of fixed maturity investments and 8.6% and 8.8% of total invested assets as of
December 31, 2002 and 2001, respectively. This allocation reflects the Company
strategy of avoiding the unpredictability of interest rate risk in favor of
relying on the Company's bond analysts' ability to better predict credit or
default risk. The bond analysts operate in an industry-based, team-oriented
structure that permits the evaluation of a wide range of below investment grade
offerings in a variety of industries resulting in a well-diversified high yield
portfolio.

      Valuation techniques for the bond portfolio vary by security type and the
availability of market data. Pricing models and their underlying assumptions
impact the amount and timing of unrealized gains and losses recognized, and the
use of different pricing models or assumptions could produce different financial
results. External pricing services are used where available, broker dealer
quotes are used for thinly traded securities, and a spread pricing matrix is
used when price quotes are not available, which typically is the case for our
private placement securities. The spread pricing matrix is based on credit
quality, country of issue, market sector and average investment life and is
created for these dimensions through brokers' estimates of public spreads
derived from their respective publications. When utilizing the spread pricing
matrix, securities are valued by utilizing a discounted cash flow method where
each bond is assigned a spread, that is added to the current U.S. Treasury rates
to discount the cash flows of the security. The spread assigned to each security
is changed from month to month based on changes in the market. Certain market
events that could impact the valuation of securities include issuer credit
ratings, business climate, management changes, litigation, and government
actions among others. The resulting prices are then reviewed by the pricing
analysts and members of the Controller's Department. The Company's pricing
analysts take appropriate actions to reduce valuations of securities where such
an event occurs which negatively impacts the securities' value. Although the
Company believes its estimates reasonably reflect the fair value of those
securities, the key assumptions about risk premiums, performance of underlying
collateral (if any) and other factors involve significant assumptions and may
not reflect those of an active market. To the extent that bonds have longer
maturity dates, management's estimate of fair value may involve greater
subjectivity since they involve judgment about events well into the future.
Then, every quarter, there is a comprehensive review of all impaired securities
and problem loans by a group consisting of the CIO and the Bond Investment
Committee. The valuation of impaired bonds for which there is no quoted price is
typically based on the total value of the company relative to the amount of debt
and other obligations outstanding. If the company is likely to continue
operations, the valuation is typically based on a market multiple of expected
cash flow. If the company is likely to liquidate, the valuation centers on the
liquidation value of its assets.

      49.7% of our below investment grade bonds are in Category 3, the highest
quality below investment grade. Category 6 bonds, those in or near default,
represent securities that were originally acquired as long-term investments, but
subsequently became distressed. The carrying value of bonds in or near default
was $620.0 million and $388.7 million as of December 31, 2002 and 2001,
respectively. For the years ended December 31, 2002 and 2001, $10.7 million and
$2.4 million, respectively of interest on bonds near default was included in
accrued investment income. Unless the Company reasonably expects to collect
investment income on bonds in or near default, the accrual will be ceased and
any accrued income reversed. Management judgment is used and the actual results
could be materially different.


                                       70
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                 Fixed Maturity Securities -- By Credit Quality

<TABLE>
<CAPTION>
                                                                  As of December 31,
                                             -------------------------------------------------------------
                                                          2002                          2001
                                             -------------------------------------------------------------
  SVO            S&P Equivalent                   Carrying          % of         Carrying         % of
Rating(1)        Designation (2)                Value (3) (4)       Total        Value (3)        Total
----------------------------------------------------------------------------------------------------------
                                                (in millions)                 (in millions)
<S>          <C>                                  <C>               <C>         <C>              <C>
    1        AAA/AA/A.......................      $17,590.5         40.7%       $14,336.9        38.4%
    2        BBB............................       20,406.6         47.3         18,275.9        49.0
    3        BB.............................        2,574.9          6.0          2,771.9         7.4
    4        B..............................        1,215.3          2.8          1,095.1         2.9
    5        CCC and lower..................          775.8          1.8            435.3         1.2
    6        In or near default.............          620.0          1.4            388.7         1.1
                                             -------------------------------------------------------------
             Total..........................       43,183.1        100.0%        37,303.8       100.0%

             Redeemable Preferred
                Stock..................               590.2                         691.8
                                             -------------------------------------------------------------
             Total Fixed Maturities....           $43,773.3                     $37,995.6
                                             =============================================================
</TABLE>

(1)   For securities that are awaiting an SVO rating, the Company has assigned a
      rating based on an analysis that it believes is equivalent to that used by
      the SVO.
(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.
(3)   Includes 208 securities that are awaiting an SVO rating, with a carrying
      value of $4,767.4 million as of December 31, 2002. Due to lags between the
      funding of an investment, the processing of final legal documents, the
      filing with the SVO, and the rating by the SVO, there will always be a
      number of unrated securities at each statement date.
(4)   Includes the effect of $55.0 million invested in our credit-linked note
      program, $10.0 million in credit default swaps on fixed maturity
      securities in the AAA/AA/A category and $45.0 million of credit default
      swaps on fixed maturity securities in the BBB category. There were no
      credit default swaps in 2001.

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

             Fixed Maturity Securities -- By Industry Classification

<TABLE>
<CAPTION>
                                                                 As of December 31, 2002
                                    ----------------------------------------------------------------------------------
                                                                  Carrying
                                                                  Value of               Carrying Value
                                                                 Securities               of Securities
                                        Total                    with Gross    Gross       with Gross        Gross
                                       Carrying   Net Unrealized Unrealized  Unrealized    Unrealized      Unrealized
                                        Value       Gain (Loss)    Gains       Gains         Losses          Losses
                                    ----------------------------------------------------------------------------------
                                                                      (in millions)
<S>                                   <C>            <C>         <C>         <C>          <C>              <C>
Corporate securities:
     Banking and finance..........    $ 5,469.0      $ 213.2     $ 4,361.7   $   264.0    $ 1,107.3        $   (50.8)
     Communications...............      2,204.5         86.4       1,815.8       137.6        388.7            (51.2)
     Government...................      2,570.5        120.7       1,805.1       139.7        765.4            (19.0)
     Manufacturing................      7,211.3        202.4       5,502.8       384.6      1,708.5           (182.2)
     Oil & gas....................      4,318.1         85.0       3,305.7       274.4      1,012.4           (189.4)
     Services / trade.............      2,422.5        118.9       2,088.6       135.4        333.9            (16.5)
     Transportation...............      2,740.5         28.9       2,044.4       158.2        696.1           (129.3)
     Utilities....................      8,482.3       (168.3)      5,426.7       354.0      3,055.6           (522.3)
     Other........................          0.1           --            --          --          0.1               --
                                    ----------------------------------------------------------------------------------
   Total Corporate Securities.....     35,418.8        687.2      26,350.8     1,847.9      9,068.0         (1,160.7)

Asset-backed and mortgage-
    backed securities.............      7,523.1        138.0       5,858.9       414.0      1,664.2           (276.0)
U.S. Treasury securities and
    obligations of U.S. government
    agencies......................        184.4          8.7         183.3         8.7          1.1             (0.0)
Debt securities issued by foreign
    Governments ..................        325.0         33.5         316.9        36.0          8.1             (2.5)
Obligations of states and political
    Subdivisions..................        322.0         22.6         318.7        22.6          3.3             (0.0)
                                    ----------------------------------------------------------------------------------
     Total........................    $43,773.3      $ 890.0     $33,028.6   $ 2,329.2    $10,744.7        $(1,439.2)
                                    ==================================================================================
</TABLE>


                                       71
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

             Fixed Maturity Securities -- By Industry Classification

<TABLE>
<CAPTION>
                                                                 As of December 31, 2001
                                    ----------------------------------------------------------------------------------
                                                                 Carrying
                                                                 Value of               Carrying Value
                                                                Securities              of Securities
                                        Total         Net       with Gross      Gross     with Gross        Gross
                                      Carrying     Unrealized   Unrealized    Unrealized  Unrealized      Unrealized
                                       Value       Gain (Loss)     Gains        Gains       Losses          Losses
                                    ----------------------------------------------------------------------------------
                                                                      (in millions)
<S>                                   <C>            <C>         <C>         <C>          <C>              <C>
Corporate securities:
     Banking and finance..........    $ 4,218.7      $  60.8     $ 2,503.6   $   118.4    $ 1,715.1        $   (57.6)
     Communications...............      1,911.4         64.3       1,530.8        93.8        380.6            (29.5)
     Government...................      1,070.0         64.1         729.5        70.2        340.5             (6.1)
     Manufacturing................      7,363.8         (4.5)      4,208.9       250.5      3,154.9           (255.0)
     Oil & gas....................      3,994.9          7.3       2,354.5       137.4      1,640.4           (130.1)
     Services / trade.............      2,240.8         55.5       1,596.6        91.3        644.2            (35.8)
     Transportation...............      2,906.2        (61.1)      1,421.4       101.5      1,484.8           (162.6)
     Utilities..................        7,272.6         51.1       4,072.6       268.7      3,200.0           (217.6)
     Other......................             --           --            --          --           --               --
                                    ----------------------------------------------------------------------------------
   Total Corporate Securities.....     30,978.4        237.5      18,417.9     1,131.8     12,560.5           (894.3)

Asset-backed and mortgage-
    backed securities.............      6,124.1         (2.2)      3,832.3       139.6      2,291.8           (141.8)
U.S. Treasury securities and
    obligations of U.S. government
    agencies......................        291.9         (2.6)         79.2         3.9        212.7             (6.5)

Debt securities issued by foreign
    Governments ..................        497.7         40.8         400.8        44.7         96.9             (3.9)
Obligations of states and political
    Subdivisions..................        103.5          5.3          96.6         5.5          6.9             (0.2)
                                    ----------------------------------------------------------------------------------
     Total........................    $37,995.6      $ 278.8     $22,826.8   $ 1,325.5    $15,168.8        $(1,046.7)
                                    ==================================================================================
</TABLE>

      As of December 31, 2002 and December 31, 2001, there are gross unrealized
gains of $2,329.2 million and $1,325.5 million, and gross unrealized losses of
$1,439.2 million and $1,046.7 million on the fixed maturities portfolio. The
2002 gross unrealized losses of $1,439.2 million include $1,299.2 million, or
90.3%, of gross unrealized losses concentrated in the utilities, manufacturing,
oil and gas, transportation, and asset-backed and mortgage-backed securities.
Only the utilities sector has net unrealized losses. The tables above show gross
unrealized losses before amounts that are allocated to the closed block
policyholders or participating pension contractholders. Of the $1,439.2 million
of gross unrealized losses in the portfolio at December 31, 2002, $191.0 is in
the closed block and $62.6 million has been allocated to participating pension
contractholders, leaving $1,185.6 of gross unrealized losses after such
allocations. The 2001 gross unrealized losses of $1,046.7 million include $907.1
million, or 86.7%, of unrealized losses concentrated in the utilities,
manufacturing, oil and gas, transportation, asset-backed and mortgage backed
securities. Only the transportation, manufacturing and ABS/MBS sectors has net
unrealized losses. Of the $1,046.7 million of gross unrealized losses in the
portfolio at December 31, 2001, $122.1 is in the closed block and $44.2 million
has been allocated to participating pension contractholders, leaving $880.4 of
gross unrealized losses after such allocations.

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

      Oil & Gas: In the Oil & Gas industry much of our unrealized loss arises
from companies in emerging markets, primarily Latin America and particularly in
Venezuela. Our philosophy in emerging markets is to generally lend to those
companies with dollar based export products such as oil companies. Emerging
markets continue to experience significant stress and bond prices across most
emerging market countries are down. However, our oil & gas investments are
faring well as these


                                       72
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

companies have dollar based revenues to pay their debts and have continued to do
so. In many cases, deals are structured so that all export revenues first pass
through an offshore trust and our debt service is then paid before any dollars
are released back to the company. This type of transaction is known as an export
receivables deal. All of our Venezuelan transactions are structured in this
manner. The strike in Venezuela raised the risk profile of our oil transactions
in this country, because the investments we have in Venezuela require oil
production in order for these deals to produce payments. The gross unrealized
loss on our Venezuelan oil and gas holdings was $105.5 million as of December
31, 2002. The structure of the Venezuelan investment deals contemplate temporary
disruptions in the oil flow and hence have six month debt service reserves to
handle the interruption. We believe these debt services reserves will see us
through the current turmoil in Venezula and expect our Venezuelan oil and gas
based investments deals to recover.

      Transportation: The Transportation sector consists largely of air, rail,
and automotive manufacturers and service companies. All of these subsectors are
experiencing cyclical downturns, particularly the airline industry, having been
hit both by the recession and the fallout from September 11, 2001. While most
airlines are losing money, we lend to this industry almost exclusively on a
secured basis (approximately 99% of our loans are secured). These secured
airline financings are of two types: Equipment Trust Certificates (ETC's) and
Enhanced Equipment Trust Certificates (EETC's). The ETC's initially have an 80%
loan-to-value ratio and the EETC senior tranches initially have a 40-50%
loan-to-value and include a provision for a third party to pay interest for
eighteen months from a default. For us to lose money on an ETC, three things
must happen: the airline must default, the airline must decide it does not want
to fly our aircraft, and the aircraft must be worth less than our loan. When
lending to this industry, we underwrite both the airline and the aircraft. We've
been lending to this industry in this fashion for 25 years through several
economic cycles and have seen values on our secured airline bonds fall and
recover thorough these cycles. EETC's are classified as asset-backed securities
and they account for $180.1 million of the $276.0 million gross unrealized loss
in the asset-backed and mortgage-backed securities category.

      Utilities: The Utility sector has faced a number of challenges over the
past few years including the California Power Crisis, the Enron bankruptcy and
the recession which slowed the growth in demand. More recently, there have been
issues around energy trading activities and the financial liquidity of some
large merchant industry players. These events caused a general widening in
utility and project finance bond spreads over the course of the year. We expect
continued stress in this sector as owners of merchant plants work through their
liquidity issues with the banks. Investors are likely to see continued
restructurings and/or bankruptcy filings from those companies unable to reach
agreement with the banks. Longer term we believe the reduction in power supply
from reduced capital expenditures and the shutting of inefficient plants will
support a gradual rise in power prices that will help this sector recover.

      Asset-backed and mortgage-backed securities: As described above, the main
driver of the unrealized loss in this category is $180.1 million of gross
unrealized loss on EETC's with a GAAP book value of $745.8 million. This $180.1
million of gross unrealized loss represents 65% of the total gross unrealized
loss in this category. EETC's are financings secured by a pool of aircraft. The
vast majority of our EETC holdings ($713.1 million of the $745.8 million) are
the most senior tranches in the EETC structure. The most senior tranches are
generally structured to have an initial loan-to-value of 40-50%. Given the drop
in airline passenger traffic and the financial difficulties of most of the major
carriers, aircraft values have dropped significantly and hence EETC's have
declined in price. We still expect, however, that most of the senior tranche
EETC have enough subordination and asset coverage to ensure full and timely
repayment. The major risk to this portfolio is a further decline in passenger
traffic due to an extended war or increased terrorist activity, further
depressing aircraft values. Thus far, we have never lost money on a senior
tranche EETC even though some of aircraft backing our transactions have been
leased to airlines that have gone out of business. As airlines emerge from
bankruptcy and it becomes clear that most senior tranche EETC's have ample asset
coverage, we expect these bonds' prices will recover.


                                       73
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      The following table shows the composition by credit quality of the
securities with gross unrealized losses in our fixed maturity securities
portfolio.

          Unrealized Losses on Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                             As of December 31, 2002
                                          ---------------------------------------------------------------

                                            Carrying Value of
                                            Securities with
   SVO            S&P Equivalent            Gross Unrealized      % of    Gross Unrealized
Rating (1)        Designation (2)               Losses (3)        Total      Losses (3)      % of Total
---------------------------------------------------------------------------------------------------------
                                               (in millions)               (in millions)
<S>            <C>                               <C>              <C>        <C>               <C>
    1          AAA/AA/A.................         $ 3,134.5        29.9%      $(148.2)          10.4%
    2          BBB......................           4,109.8        39.2        (376.7)          26.4
    3          BB.......................           1,622.1        15.5        (410.3)          28.7
    4          B........................             708.5         6.8        (218.4)          15.3
    5          CCC and lower............             541.2         5.2        (193.6)          13.6
    6          In or near default.......             362.4         3.4         (80.5)           5.6
                                          ---------------------------------------------------------------
               Total....................          10,478.5       100.0%     (1,427.7)         100.0%

               Redeemable Preferred                  266.2                     (11.5)
                                          ---------------------------------------------------------------
               Total....................         $10,744.7                 $(1,439.2)
                                          ===============================================================
</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. Recent experience has shown that our ratings are
      generally comparable to those of the SVO.
(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.
(3)   Includes 59 securities with gross unrealized losses that are awaiting an
      SVO rating with a carrying value of $1,658.1 million and unrealized losses
      of $62.7 million. Due to lags between the funding of an investment, the
      processing of final legal documents, the filing with the SVO, and the
      rating by the SVO, there will always be a number of unrated securities at
      each statement date. Unrated securities comprised 15.4% and 4.4% of the
      total carrying value and total gross unrealized losses of securities in a
      loss position, including redeemable preferred stock, respectively.

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

<TABLE>
<CAPTION>
                                                                        As of December 31, 2002
                                               ---------------------------------------------------------------------------
                                                          Investment Grade                 Below Investment Grade
                                               ---------------------------------------------------------------------------
                                               Carrying Value                      Carrying Value
                                                    of                                  of
                                                Securities                           Securities
                                                with Gross                           with Gross
                                                Unrealized     Hedging     Market    Unrealized   Hedging       Market
                                                  Losses     Adjustments Depreciation  Losses   Adjustments  Depreciation
--------------------------------------------------------------------------------------------------------------------------
                                               (in millions)                        (in millions)
<S>                                               <C>        <C>         <C>         <C>        <C>         <C>
Three months or less .........................    $2,159.6   $  (19.3)   $  (46.9)   $  272.5   $   (2.2)   $  (12.9)
Greater than three months to six months ......       868.6      (15.7)      (31.6)      398.2       (6.9)     (110.3)
Greater than six months to nine months .......       914.3      (36.3)      (23.9)      561.3      (14.3)      (77.8)
Greater than nine months to twelve months ....       293.3       (9.7)      (23.6)      388.9       (4.7)      (59.6)
Greater than twelve months ...................     3,008.5      (69.8)     (248.1)    1,613.3      (75.3)     (538.8)
                                               ---------------------------------------------------------------------------
    Total ....................................     7,244.3     (150.8)     (374.1)    3,234.2     (103.4)     (799.4)
                                               ---------------------------------------------------------------------------

Redeemable Preferred Stock ...................       266.2         --       (11.5)         --         --          --
                                               ---------------------------------------------------------------------------
     Total ...................................    $7,510.5   $ (150.8)   $ (385.6)   $3,234.2   $ (103.4)   $ (799.4)
                                               ===========================================================================
</TABLE>

The table above shows the Company's investment grade and below investment grade
securities that were in a loss position at December 31, 2002 by the amount of
time the security has been in a loss position. Gross unrealized losses from
hedging adjustments represents the amount of the unrealized loss that results
from the security being designated as a hedged item in a fair value hedge. When
a security is so designated, its cost basis is adjusted in response to movements
in interest rates. These adjustments, which are non-cash and reverse over time
as the asset and derivative mature, impact the amount of unrealized loss on a
security. The remaining portion of the gross unrealized loss represents the
impact of interest rates on the non-hedged portion of the portfolio and
unrealized losses due to creditworthiness on the total fixed maturity portfolio.


                                       74
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      At, December 31, 2002, the fixed maturity securities had a total gross
unrealized loss of $1,185.0 million, excluding basis adjustments related to
hedging relationships. Of this total, $870.1 million is due to securities that
have had various amounts of unrealized loss for more than nine months. Of this,
$271.7 million comes from securities rated investment grade. Unrealized losses
on investment grade securities principally relate to changes in interest rates
or changes in credit spreads since the securities were acquired. Credit rating
agencies statistics indicate that investment grade securities have been found to
be less likely to develop credit concerns.

      As of December 31, 2002, $598.4 million of the $1,185.0 million resides in
below investment grade securities with various amounts of unrealized loss for
over nine months. All of these securities are current as to the payments of
principal and interest with the exception of 11 securities with a carrying value
of $56.9 million and an unrealized loss of $0.3 million. Of the total $598.4
million, $68.5 million traded above 80% of amortized cost at December 31, 2002
and an additional $352.6 million traded above 80% of amortized cost within the
last nine months, for a total of $421.1 million. Of the total $421.1 million in
this category, utility related bonds make up over half, $211.3 million. As
described earlier, the utility sector suffered from oversupply and slower than
expected demand last year. This led to many credit quality downgrades in the
sector and corresponding price declines. We have seen evidence of improvement in
the utility sector recently as companies have curtailed expansion plans and sold
assets to conserve cash flow and strengthen their balance sheets. On the other
hand, $122.2 million of this $421.1 million total comes from airline related
bonds and this sector has continued to deteriorate thus far in 2003. While, as
described earlier, we expect the secured nature of our positions to protect our
value, the increased stress in this industry is of concern.

      The remaining portion of the unrealized loss, $177.3 million, arises from
below investment grade securities that have traded below 80 percent of amortized
cost for over nine months. All of these bonds are current on payments of
principal and interest and we believe, based on currently available information,
that it is probable that these securities will continue to pay based on their
original terms. We carefully track these investments to ensure our continued
belief that their prices will recover. More detail on the most significant
securities is contained below:

      o     Two securities that have contracts with PDVSA, the Venezuelan
            national oil company accounted for $38.4 million. The increasing
            turbulence in Venezuela combined with a national strike that shut
            down oil production at the end of the year heightened credit
            concerns on these securities and caused their prices to decline.
            Since the end of the year, Venezuelan oil production has started up
            again, albeit at lower levels. The production levels have slowly
            increased and are expected to continue due to the importance of the
            oil sales to the Venezuelan economy. As this happens, we expect
            these prices to recover. $25.6 million relates to a holding that has
            an additional credit issue beyond its contracts with PDVSA. It is a
            fertilizer plant that has experienced operating problems. Its equity
            sponsors, however, have supported the project with additional
            contributions of equity and based on our review of this credit we
            expect their continued support. While there is risk the equity
            sponsors could drop their support, their past actions, strong
            capital positions, their large investment and the low cost nature of
            this project due to its inexpensive gas supply give us comfort in
            their continued support. $12.8 million is a loan to a refinery that
            purchases its crude supply from PDVSA. The refinery sells its output
            to a major US oil company. Those proceeds flow through an offshore
            trust, with our debt service paid first and the balance remitted to
            Venezuela. This financing has a six month debt service reserve and
            only requires production at about 60% of pre-strike levels for
            adequate debt service coverage. The production at this refinery is
            currently back to 100%.

      o     Four structured transactions based in Argentina account for $43.4
            million. While the Argentine crisis has depressed the pricing level
            on these bonds, their payment flows continue as the flows are based
            on dollar priced commodities. Companies or structures with dollar
            based products should continue to generate sufficient revenues to
            service their debts, unlike companies with peso denominated revenues
            that have seen their revenues decline precipitously in dollar terms
            due to the depreciation of the peso.

            o     $28.6 million arises from another structured investment based
                  on oil and gas payments to another Argentine province. This
                  transaction benefits from (1) rights to 80% of the royalty
                  payments received by the province, (2) a six month debt
                  service reserve located in the U.S., and (3) a political risk
                  insurance policy from a major reinsurer that will take over
                  payments in the event the government imposes transfer or
                  currency conversion limitations. Currently, the major risk is
                  that the local oil and gas companies are making payments to
                  the province based on a fixed exchange rate rather than the
                  market exchange rate. While the province is working to correct
                  this, if it does not change we will need to dip into the debt
                  service reserve account for a portion of the debt service
                  payments this year and we will ultimately need to restructure
                  our rights to royalty payments to extend beyond the maturity
                  of our notes, so a restructuring would likely extend the term
                  of our note with interest.


                                       75
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            o     $10.0 million of unrealized loss is on a loan to an Argentine
                  oil company not in the form of a structured receivables
                  transaction. This company, however, derives its revenue from
                  dollar based energy products and hence it has the ability to
                  service its dollar denominated debt. It is current on all its
                  debt obligations and we expect it to remain so. The value of
                  this company was validated in the fourth quarter when a
                  company outside of Argentina purchased a controlling share of
                  the company for $1.1 billion.

            o     $4.4 million arises from a structured receivables transaction
                  based on the export of soybeans from a major soybean producer
                  in Argentina. The international buyers of the soybeans make
                  payment to an offshore trust with our debt service paid before
                  any dollars flow back to the Argentine company. We expect this
                  structure to continue to protect our debt service payments.

            o     The remaining $0.4 million arises from a holding
                  collateralized by royalty payments made by oil and gas
                  companies to an Argentine province. This deal matures in 2003
                  and we fully expect to be paid as scheduled.

      o     $32.3 million on a large, national farmer-owned dairy cooperative.
            Margins have been squeezed as demand for their products has softened
            and thus prices have declined. The depressed price of our notes is a
            function of this cyclical downturn, the subordinated nature of our
            position, and a lack of trading in these bonds. We expect the price
            to recover as the company's margins improve due to a combination of
            lowered costs from restructuring efforts and increasing demand for
            its products as the economy improves.

      o     $11.8 million on a franchise loan-backed structured transaction,
            with the franchise loans primarily in the gas/convenience sector.
            Delinquencies are higher than anticipated primarily due to the
            stress in the gas/convenience sector due to pressure from the large
            discounters. Still, at the current level of delinquencies we expect
            to receive our debt service as originally anticipated and thus, no
            impairment is appropriate. While there is some risk the
            delinquencies could rise, we would expect a gradual decline in the
            delinquency rate as the weakest loans have already defaulted.

      o     $12.9 million on a producer of manufactured homes. Overcapacity has
            hurt this industry and much of the production and retailing capacity
            has been removed over the past several years. This company is a
            leader in this industry and thus has been able to weather the
            downturn. As the industry recovers due to the reduction of capacity,
            so should the value of these bonds.

      o     $11.3 million on a large copper producer based in Mexico. This
            company has suffered from the cyclical downturn in copper prices
            over the past two years and due to insufficient capital expenditures
            to keep its costs competitive. The company's owners have addressed
            the latter issue by recently injecting fresh capital into the
            company to improve the efficiency of its operations. The expected
            improvement in copper prices due to the improving US economy will
            also help the company and hence the bond price.

      o     $11.7 million on a North American chemical producer that has
            suffered through the cyclical downturn in chemical prices and thus
            has violated financial covenants. The lenders have worked with the
            company to restructure these covenants. The company has sufficient
            liquidity to weather this downturn and return to profitability as
            prices recover. A recent comprehensive business assessment of the
            company performed by an outside consultant valued the company at
            twice its outstanding debt.

      o     $3.5 million on a producer of coke, an input to the steel making
            process. This company produces coke almost exclusively for one plant
            of a steel company that filed for bankruptcy in 2002 and the
            resulting uncertainty drove down the bond's price. The plant this
            company supplies, however, is a top quartile producer and hence has
            continued to operate. Therefore our borrower has continued to be
            paid. Based on its contract with this low cost steel plant, we
            expect our borrower to continue to perform and our bonds to recover
            as the owner of the plant restructures its debts and emerges from
            bankruptcy.


                                       76
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      The Company believes, however, that after its comprehensive review of each
borrower's ability to meet the obligations of the notes, and based on
information available at this time, these securities will continue to pay as
scheduled, and the Company has the ability and the intent to hold these
securities until they recover in value or mature. The scheduled maturity dates
for securities in an unrealized loss position at December 31, 2002 is shown in
the next table.

          Unrealized Losses on Fixed Maturity Securities -- By Maturity

<TABLE>
<CAPTION>
                                                               December 31, 2002
                                                     ---------------------------------------
                                                      Carrying Value of
                                                       Securities with      Gross Unrealized
                                                     Gross Unrealized Loss        Loss
                                                     ---------------------------------------
                                                                   (in millions)

<S>                                                         <C>                 <C>
Due in one year or less...........................       $    554.9          $    (35.5)
Due after one year through five years.............          2,473.7              (268.4)
Due after five years through ten years............          2,478.4              (418.6)
Due after ten years...............................          3,573.5              (440.7)
                                                     ---------------------------------------
                                                            9,080.5            (1,163.2)

Asset-backed and mortgage-backed securities.......          1,664.2              (276.0)
                                                     ---------------------------------------

Total.............................................       $ 10,744.7          $ (1,439.2)
                                                     =======================================
</TABLE>


                                       77
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

As of December 31, 2002 we had 76 securities representing 35 credit exposures
that had an unrealized loss of $10 million or more. They include:

<TABLE>
<CAPTION>
                                                                                           Amortized      Unrealized Loss
      Description of Issuer                                                                   Cost
                                                                                               (in millions)
<S>                                                                                       <C>                <C>
      Large US Based merchant energy generator                                            $   95.0           $ (43.2)
      Unregulated energy generator and supplier                                              116.9             (40.6)
      Notes secured by leases on a pool of aircraft                                           76.6             (41.1)
      US power generator with multiple plants                                                107.3             (32.5)
      Venezuelan oil company with US dollar based flows                                      154.9             (34.1)
      US based agricultural cooperative                                                       57.6             (32.3)
      Lease financing with US fossil fuel power generator                                     65.7             (23.7)
      Argentinean trust holding rights to oil and gas royalty                                 44.0             (28.6)
      US merchant energy generator                                                            67.1             (22.9)
      Joint venture with a Venezuelan oil company                                             38.8             (25.6)
      US natural gas fired power generator                                                    80.4             (23.9)
      Notes secured by leases on a pool of aircraft                                           76.4             (24.3)
      Notes secured by leases on a pool of aircraft                                           35.5             (22.9)
      Joint venture with a Venezuelan oil company and two large US oil companies              53.9             (19.5)
      Joint venture with a large Venezuelan oil company and a US oil company                  58.4             (17.6)
      Large US electric utility holding company                                               52.0             (16.4)
      Franchise loan backed transaction                                                       41.5             (17.9)
      Joint venture in three US gas fired cogeneration power plants                           46.9             (15.6)
      Large integrated energy company                                                         91.5             (18.7)
      Secured financings with a large US airline                                              63.7             (13.4)
      Holding company of large US integrated power generator                                  73.1             (12.3)
      Private toll road and bridge operator in US                                             39.6             (12.9)
      US integrated producer of petrochemicals and related products                           62.9             (12.3)
      Major independent power and merchant energy generator                                   30.4             (14.7)
      Financing of a restructured power contract with a major US utility                      38.3             (13.2)
      Norwegian subsidiary of US oil field service company                                    28.3             (12.7)
      US telecommunications company                                                           44.7             (11.9)
      Financing of multiple offshore power projects by US power/energy Company                57.0             (12.4)
      Major US homebuilder                                                                    23.7             (12.9)
      Large US regulated utility                                                             147.4             (12.1)
      Large Mexican copper producer                                                           36.0             (11.3)
      Secured financings to large US airline                                                  23.9             (10.5)
      Mid size US multi-line insurance company                                                20.9             (10.5)
      Finance subsidiary of US paper/wood products manufacturer                              207.0             (10.4)
      Argentinean oil company with US based flows                                             30.3             (10.0)
                                                                                          --------           -------
      Total                                                                               $2,287.6           $(694.9)
                                                                                          ========           =======
</TABLE>

      A major driver in the valuation of the fixed income portfolio at December
31, 2002 is the recent reduction in traded or quoted bond prices across most
industries, especially in the below investment grade categories where, in the
current environment, bond market investors are very risk averse and have
severely penalized issues where there is any uncertainty. This effect was most
pronounced in the reduction in the traded or quoted prices of the bonds of many
energy companies with merchant exposure. In the third quarter, the rating
agencies downgraded a number of companies that have exposure to the merchant
energy sector. These downgrades in turn created liquidity issues for a few
companies and uncertainty at many others. This market sentiment, which we
believe to be temporary, has led to significant reductions in the prices of
virtually every energy company that has any merchant exposure, including some in
our portfolio and 15 on the list above. We believe many of these issuers are
taking the right steps to strengthen their balance sheets through a combination
of actions such as reducing capital expenditures, scaling back trading
operations, reducing dividends, and issuing equity. All of the above securities
have undergone thorough analysis by our investment professionals, and at this
time we believe that the borrowers have the financial capacity to make all
required contractual payments on the notes when due, and we intend to hold these
securities until they either mature or recover in value.


                                       78
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      In keeping with the investment philosophy of tightly managing interest
rate risk, the Company's MBS & ABS holdings are heavily concentrated in
commercial MBS where the underlying loans are largely call protected, which
means they are not pre-payable without penalty prior to maturity at the option
of the issuer. By investing in MBS and ABS securities with relatively
predictable repayments, the Company adds high quality, liquid assets to our
portfolios without incurring the risk of cash flow variability. The Company
believes the portion of our MBS/ABS portfolio subject to prepayment risk as of
December 31, 2002 and December 31, 2001 was limited to 13.1% and 10.4% of our
total MBS/ABS portfolio and 2.3% and 1.7% of our total fixed maturity securities
holdings, respectively.

      Mortgage Loans. As of December 31, 2002 and 2001, the Company held
mortgage loans with a carrying value of $10.3 billion and $9.7 billion,
including $2.6 billion and $2.5 billion respectively, of agricultural loans at
each period end and $7.7 billion and $7.2 billion, respectively, of commercial
loans. Impaired loans comprised 1.3% of the mortgage portfolio at December 31,
2002. The Company's average historical impaired loan percentage during the
period of 1997 through 2002 is 1.5%. This historical percentage is higher than
the current 1.3% because the historical percentage includes some remaining
problem assets of the 1990's real estate downturn, some of which are still held.

      The following table shows the Company's agricultural mortgage loan
portfolio by its three major sectors: agri-business, timber and production
agriculture.

<TABLE>
<CAPTION>
                                                               As of December 31,
                                              2002                                       2001
                           ------------------------------------------- -----------------------------------------
                             Amortized     Carrying     % of Total       Amortized    Carrying     % of Total
                                Cost        Value     Carrying Value        Cost       Value     Carrying Value
                           ------------------------------------------- -----------------------------------------
                                   (in millions)                              (in millions)
<S>                           <C>          <C>             <C>            <C>          <C>            <C>
Agri-business.............    $1,526.8     $1,520.8        57.7%          $1,480.6     $1,432.7       57.9%
Timber....................     1,090.4      1,086.7        41.3            1,017.5      1,009.5       40.8
Production agriculture....        25.3         25.1         1.0               34.1         33.8        1.3
                           ------------------------------------------- -----------------------------------------
    Total                     $2,642.5     $2,632.6       100.0%          $2,532.2     $2,476.0      100.0%
                           =========================================== =========================================
</TABLE>

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


                                       79
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                        Mortgage Loans - By Property Type

<TABLE>
<CAPTION>
                                                                As of December 31,
                                      -----------------------------------------------------------------------
                                                     2002                               2001
                                      -----------------------------------------------------------------------
                                          Carrying            % of           Carrying            % of
                                            Value            Total             Value            Total
                                      -----------------------------------------------------------------------
                                        (in millions)                      (in millions)
<S>                                        <C>                <C>            <C>                 <C>
Apartment..........................        $ 1,408.4          13.7%          $  1,590.3          16.5%
Office Buildings...................          2,779.9          27.0              2,578.3          26.6
Retail.............................          1,779.3          17.3              1,419.3          14.7
Agricultural.......................          2,632.6          25.6              2,476.0          25.6
Industrial.........................            916.5           8.9                804.0           8.3
Hotels.............................            447.3           4.3                448.4           4.6
Multi-Family.......................              1.4           0.0                  1.8           0.1
Mixed Use..........................            155.2           1.5                107.3           1.1
Other..............................            175.9           1.7                241.6           2.5
                                      --------------------------------------------------------------------
     Total.........................        $10,296.5         100.0%          $  9,667.0         100.0%
                                      ====================================================================
</TABLE>

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

                        Mortgage Loans -- By ACLI Region

<TABLE>
<CAPTION>
                                                           As of December 31,
                           -------------------------------------------------------------------------------
                                                2002                                     2001
                           -------------------------------------------------------------------------------
                               Number       Carrying           % of            Carrying           % of
                              Of Loans        Value           Total             Value             Total
                           -------------------------------------------------------------------------------
                                         (in millions)                       (in millions)
<S>                             <C>        <C>                 <C>              <C>                <C>
East North Central.......       141        $ 1,102.0           10.7%            $1,061.7           11.0%
East South Central.......        36            430.5            4.2                457.7            4.7
Middle Atlantic..........       112          1,447.4           14.1              1,478.2           15.3
Mountain.................        91            488.5            4.7                414.3            4.3
New England..............       103            794.7            7.7                884.8            9.2
Pacific..................       252          2,134.5           20.7              1,802.2           18.6
South Atlantic...........       191          2,229.5           21.7              2,082.3           21.5
West North Central.......        70            450.5            4.4                382.0            4.0
West South Central.......       128            952.2            9.2                900.2            9.3
Canada...................         8            266.7            2.6                203.6            2.1
                           -------------------------------------------------------------------------------
     Total...............     1,132        $10,296.5          100.0%            $9,667.0          100.0%
                           ===============================================================================
</TABLE>

                            Mortgage Loan Comparisons

<TABLE>
<CAPTION>
                                              As of December 31,                   As of December 31,
                                                    2002                                 2001
                                    ------------------------------------  ------------------------------------
                                           Carrying       % of Total           Carrying       % of Total
                                            Value      Mortgage Loans (1)        Value      Mortgage Loans (1)
                                    ------------------------------------  ------------------------------------
                                         (in millions)                       (in millions)
<S>                                         <C>              <C>                <C>               <C>
Delinquent, not in foreclosure ..           $  6.1           0.1%               $  29.6           0.3%
Delinquent, in foreclosure ......             44.4           0.4                   14.2           0.1
Restructured ....................             54.8           0.5                  285.4           3.0
                                    --------------------------------------------------------------------------

   Subtotal .....................            105.3           1.0                  329.2           3.4

Loans foreclosed during period ..             25.8           0.3                    5.0           0.1
                                    ------------------------------------  ------------------------------------
    Total .......................           $131.1           1.3%               $ 334.2           3.5%
                                    ====================================  ====================================
</TABLE>

(1)   As of December 31, 2002 and December 31, 2001 the Company held mortgage
      loans with a carrying value of $10.3 billion and $9.7 billion,
      respectively.


                                       80
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      The table above shows the carrying values of our mortgage loan portfolio
that are delinquent but not in foreclosure, delinquent and in foreclosure,
restructured and foreclosed. The table also shows the respective ratios of these
items to the total carrying value of our mortgage loan portfolio. Mortgage loans
are classified as delinquent when they are 60 days or more past due as to the
payment of interest or principal. Mortgage loans are classified as restructured
when they are in good standing, but the basic terms, such as interest rate or
maturity date, have been modified as a result of a prior actual delinquency or
an imminent delinquency. All foreclosure decisions are based on a thorough
assessment of the property's quality and location and market conditions. The
decision may also reflect a plan to invest additional capital in a property to
make tenant improvements or renovations to secure a higher resale value at a
later date. Following foreclosure, we rely on our real estate investment group's
ability to manage foreclosed real estate for eventual return to investment real
estate status or outright sale.

      The allowance for losses on mortgage loans on real estate and real estate
to be disposed of is maintained at a level that is adequate enough to absorb
estimated probable credit losses. Management's periodic evaluation of the
adequacy of the allowance for losses is based on past experience, known and
inherent risks, adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated value of the
underlying security, the general composition of the portfolio, current economic
conditions and other factors. This evaluation is inherently subjective and is
susceptible to significant changes and no assurance can be given that the
allowances taken will in fact be adequate to cover all losses or that additional
valuation allowances or asset write-downs will not be required in the future.
The portion of the investment valuation allowances for the mortgage loan
portfolio was $61.7 million, or 0.6% of the carrying value before reserves as of
December 31, 2002. The portion of investment valuation allowance for our real
estate to be disposed of was $83.6 million or 0.9% of carrying value before
reserves as of December 31, 2001.

Investment Results

Net Investment Income. The following table summarizes the Company's investment
results for the periods indicated:

<TABLE>
<CAPTION>
                                                                           For the Years Ended
                                                                               December 31
                                                   --------------------------------------------------------------------
                                                           2002                  2001                   2000
                                                     Yield     Amount      Yield      Amount      Yield      Amount
                                                   --------------------------------------------------------------------
                                                       (in millions)         (in millions)          (in millions)
<S>                                                  <C>      <C>           <C>      <C>           <C>      <C>
General account assets-excluding policy loans
   Gross income..................................    6.70%    $ 3,685.9     7.79%    $ 3,768.3     8.44%    $ 3,706.3
   Ending invested assets (1)-excluding policy
     loans.......................................              58,548.8               51,387.5               45,501.9
Policy loans
   Gross income..................................    6.10%        120.1     6.20%        118.4     5.99%        112.7
   Ending assets.................................               2,014.2                1,927.0                1,894.9
   Total gross income............................    6.68%      3,806.0     7.73%      3,886.7     8.34%      3,819.0
   Less: investment expenses.....................                (225.0)                (240.5)                (255.1)
                                                             -----------            -----------            -----------
     Net investment income.......................    6.29%    $ 3,581.0     7.25%    $ 3,646.2     7.79%    $ 3,563.9
                                                             ===========            ===========            ===========
</TABLE>

(1)   Cash and cash equivalents are included in invested assets in the table
      above for the purposes of calculating yields on income producing assets
      for the Company.

      Net investment income decreased $65.2 million from the prior year. The
decrease was primarily the result of lower yields, partially offset by asset
growth and lower investment expenses. Overall, the 2002 yield, net of investment
expenses, on the general account portfolio decreased to 6.29% from 7.25% in the
prior year. The lower portfolio yield was driven primarily by the sharp drop in
short-term interest rates during the year, which impacts floating rate
investments and lower yields on investment acquisitions. The change in yields
was impacted by the following drivers:

o     As of December 31, 2002, the Company's asset portfolio had approximately
      $12.0 billion of floating-rate exposure (primarily LIBOR). This compares
      to $8.9 billion of exposure as of December 31, 2001. This exposure was
      created mostly through interest rate swaps designed to match our
      floating-rate liability portfolio. As of December 31, 2002, approximately
      90% of this exposure, excluding cash and short-term investments, was
      directly offset by exposure to floating-rate liabilities. Most of the
      remaining 10% of exposure is in floating-rate assets acquired for their
      relative value and is accounted for in the portfolio's interest rate risk
      management plan. As a result of the drop in short term rates over the
      year, as well as the increase in exposure, this floating-rate exposure
      reduced the portfolio yield by 60 basis points in 2002 compared to the
      prior year.


                                       81
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

o     Certain of our tax-preferenced investments (lease residual management and
      affordable housing limited partnerships) dilute the Company's net
      portfolio yield on a pre-tax basis. In 2002, this dilutive effect was 10
      basis points, compared to 8 basis points in 2001. However, adjusting for
      taxes, these investments increased the Company's net income by $7.9
      million in 2002 relative to 2001.

o     Due to the late timing of the transaction, the previously described
      acquisition of the Allmerica fixed universal life insurance business in
      December 2002, resulted in a $0.5 billion invested asset increase, which
      reduced 2002 net investment income yields by 3 basis points. The assets
      related to the transaction were recorded on the last day of the year.
      Consequently, no investment income was earned by the Company in 2002 on
      these assets.

o     The inflow of new cash for the twelve-month period ending December 31,
      2002 was invested at rates that were less than the overall portfolio
      earnings rate during 2001. In addition, maturing assets rolling over into
      new investments at rates less favorable than those present in the 2001
      also contributed to the decline in yields.

Partially offsetting the effects of these decreases to yields on investments was
an increase in invested assets and a reduction in investment expenses. In 2002,
weighted-average invested assets grew $6,583.1 million, or 13.1%, from the prior
year. In addition, investment expenses were reduced $15.5 million in 2002
compared to the prior year. Also included are reductions in corporate complex
expenses and in depreciation expenses associated with the planned sale of the
Company's home office real estate.

Net Realized Investment and Other Gain/Loss. The following table shows the
Company's net realized investment and other gains (losses) by asset class for
the periods presented:

<TABLE>
<CAPTION>
                                                                                                     Net Realized
                                                       Gross Gain   Gross Loss      Hedging           Investment
For the Year Ended December 31, 2002       Impairment  on Disposal  on Disposal   Adjustments    and Other Gain/(Loss)
(in millions)                             ----------------------------------------------------------------------------
<S>                                        <C>          <C>         <C>           <C>                  <C>
Fixed maturity securities                  $ (565.9)    $ 163.3     $ (116.8)     $ (141.5)            $ (660.9)
Equity securities                             (26.9)      149.6        (21.5)           --                101.2
Mortgage loans on real estate                    --        55.2         (1.2)        (35.9)                18.1
Real estate                                      --        10.5        (36.5)           --                (26.0)
Other invested assets                         (61.3)       10.8        (12.7)           --                (63.2)
Derivatives                                      --        63.8           --          42.4                106.2
----------------------------------------------------------------------------------------------------------------------
               Subtotal                    $ (654.1)    $ 453.2     $ (188.7)     $ (135.0)            $ (524.6)
======================================================================================================================
          Amortization adjustment for deferred policy acquisition costs                                    38.9
          Amounts credited to participating pension contractholders                                        23.3
          Amounts credited to the policyholder dividend obligation                                         11.9
----------------------------------------------------------------------------------------------------------------------
               Total                                                                                   $ (450.5)
======================================================================================================================

<CAPTION>
                                                                                                      Net Realized
                                                       Gross Gain   Gross Loss      Hedging            Investment
For the Year Ended December 31, 2001       Impairment  on Disposal  on Disposal   Adjustments    And Other Gain/(Loss)
(in millions)                             ----------------------------------------------------------------------------
<S>                                        <C>          <C>          <C>           <C>                 <C>
Fixed maturity securities                  $ (398.7)    $ 166.9      $ (90.4)      $ (70.4)            $ (392.6)
Equity securities                             (59.3)      266.2        (41.2)           --                165.7
Mortgage loans on real estate                    --        31.9        (48.8)         (6.4)               (23.3)
Real estate                                      --         8.1        (56.0)           --                (47.9)
Other invested assets                         (58.0)       21.5        (52.1)           --                (88.6)
Derivatives                                      --          --           --         136.8                136.8
----------------------------------------------------------------------------------------------------------------------
               Subtotal                    $ (516.0)    $ 494.6      $(288.5)      $  60.0             $ (249.9)
======================================================================================================================
          Amortization adjustment for deferred policy acquisition costs                                    29.4
          Amounts credited to participating pension contractholders                                       (42.3)
          Amounts credited to the policyholder dividend obligation                                         17.0
----------------------------------------------------------------------------------------------------------------------
               Total                                                                                   $ (245.8)
======================================================================================================================
</TABLE>

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


                                       82
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

the change in fair value of those items. The hedging adjustments of all asset
classes represent temporary gains or losses caused primarily by interest rate
movements that will reverse over time as the derivatives or assets mature.

      In 2002 we realized $154.4 million of losses upon disposal of bonds. $37.6
million of this is due to the write-off of hedging adjustments on these bonds
and the remaining $116.8 million from the actual loss on the sale. These hedging
adjustments are solely related to changes in interest rates. We generally intend
to hold securities in unrealized loss positions until they recover. However, we
do sell bonds to manage the portfolio for a variety of reasons, including
managing interest rate risk, managing maximum credit exposures by rating, and in
order to maximize our risk adjusted returns. Sales generate both gains and
losses. Gross gains in 2002 exceeded gross losses. Excluding the aforementioned
hedging adjustments, we realized $163.3 million of gains in 2002.

      Of the $116.8 million of realized losses, $85.1 million arose from the
sale of securities with $1 million or more of realized loss. $25.7 million was
related to a claim received on February 24, 2003 related to a prior year
disposal and $21.7 million came from a bond that defaulted rather abruptly due
to specific issues related to classification of expense and possible fraud,
going from investment grade to default. Had the bond not been immediately sold,
it would have been impaired. The next largest realized loss, $7.5 million, was
on US Treasury sales. We use Treasuries to hedge interest rate risk and this
loss was simply due to changes in interest rates. We realized a $5.5 million
loss on the sale of a utility bond after a rating downgrade caused our position
in the utility sector to exceed our maximum guidelines. $4.2 million and $1.5
million of losses on 2 bonds resulted from the sale of holding company bonds and
purchase of operating company bonds in the same credit family. These "swaps"
were done to maximize relative value as we improved our credit standing for a
modest yield give-up.

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

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

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

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

      As disclosed in our discussion of the Results of Operations in this MD&A,
the Company recorded losses due to other than temporary impairments of fixed
maturity securities for the year ended December 31, 2002 of $603.0 million
(including impairment losses of $565.9 million and $37.1 million of previously
recognized gains where the bond was part of a hedging relationship). The
following list shows the largest losses recognized during the quarter, the
related circumstances giving rise to the loss and a discussion of how those
circumstances impacted other material investments held. Unless noted otherwise,
all of the items shown are impairments of securities held at December 31, 2002.


                                       83
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      o     $113.2 million (including an impairment loss of $99.4 million and
            $13.8 million in previously recognized gains where the bonds were
            part of a hedging relationship) on fixed maturity securities
            relating to a national airline that faced heavy operating losses due
            to the economic downturn, a high cost structure, and competition
            from low-cost carriers. This national airline filed for Chapter 11
            bankruptcy protection. We also have $88.9 million in Enhanced
            Equipment Trust Certificates (EETC) investments with this national
            airline on which we do not anticipate a loss due to very low initial
            loan-to-values and the attractiveness of the underlying aircraft.

      o     $56.1 million on a large energy company that filed for Chapter 11
            bankruptcy protection in late 2001. $47.6 million is on redeemable
            preferred stock secured by equity investments in energy storage and
            transportation assets in Latin America, predominantly Argentina.
            Continued economic weakness and devaluation of the Argentina Peso
            suggested the value of the investments securing the Company's
            redeemable preferred stock has dropped significantly. Consequently,
            we impaired the redeemable preferred stock investments and have now
            assigned no value to these assets. The remaining $8.5 million is for
            a bond issuer affiliated with this large energy company.

      o     $33.5 million (including an impairment loss of $31.7 million and
            $1.8 million in previously recognized gains where the bonds were
            part of a hedging relationship) on fixed maturity securities for a
            unregulated power and pipeline energy company. The unregulated power
            and pipeline energy company's problems stem from a decline in
            profits in its merchant energy business plus the high debt leverage
            from a plant construction program. We also took a $5.1 million
            impairment loss on a secured loan to a subsidiary of this company.
            The oversupply of power in the market is generally hurting all
            utilities as previously described in our investment sector analysis.

      o     $31.6 million of fixed maturity investments of U.K. based projects
            providing power and other essential services to an industrial
            complex. The projects suffered from a combination of high leverage
            and excess capacity in the U.K. power market. We have two other
            loans with a total carrying value of $99.2 million to companies
            participating in the U.K. power market. $59.0 million is backed by a
            U.K. pump storage facility investment where debt service coverages
            have been reduced by the weak environment for power in the U.K., but
            we continue to anticipate positive debt service coverages for this
            investment. $40.2 million is a loan to the owner of a U.K. regional
            electric company. Regional electric companies have monopolies to
            distribute and supply power to their regions and hence are less
            affected by the over supply of power.

      o     $48.0 million (including an impairment loss of $41.6 million and
            $6.4 million in previously recognized gains where the fixed
            maturities were part of a hedging relationship) on secured
            financings backed by an airline, or its subsidiaries that filed for
            Chapter 11 bankruptcy protection during the third quarter. With the
            bankruptcy filing, the airline had the right to affirm or reject
            certain leases on aircraft, which underlie these collaterized
            structured financing investments. We have resolved most of the lease
            terms, including rates, but continue to negotiate new lease rates on
            any aircraft leases that were rejected and have written down these
            loans to fair value based on the appraised value of the underlying
            aircraft. We have $85.9 million of other secured investments with
            this airline that are guaranteed by AA or higher rated guarantors
            and $33.5 million rated investment grade that are not guaranteed.
            Finally, we have $22 million in equity leveraged leases that were
            affirmed. Hence, we expect no payment defaults and no loss on these
            investments.

      o     $45.5 million on securities issued by the holding company of a large
            domestic power producer that was downgraded to below investment
            grade status in July due to liquidity concerns. We also hold senior
            debt of $61.0 million at various projects of subsidiaries of this
            holding company that is supported by the cash flows of those
            projects and does not depend on the financial support of the parent.
            The oversupply of power in the market is generally hurting all
            utilities as previously described in our investment sector analysis.

      o     $35.3 million on issuers affiliated with the Argentina government
            and other investments in that country, due to the continued
            political and economic difficulties of that country. We hold a
            number of other investments in Argentina that we expect to collect
            according to the original terms of the agreements. They consist of
            mainly oil and gas investments dependent upon U.S. dollar based cash
            flows. We intend to hold these until they recover or mature.

      o     $33.8 million on securities issued by a large telecommunications
            company that filed for bankruptcy in July. $22.0 million of this
            amount was the loss on sale of holdings that were sold in response
            to the issuer losing its investment grade rating. While the issuer
            had specific issues related to classification of expenses and
            possible fraud, the telecommunications industry in general is under
            extreme pressure. Our exposure in this sector has typically been
            limited to large investment grade names with solid assets backing
            the investments. We continue to carefully monitor developments
            within the sector.


                                       84
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      o     $28.3 million on fixed maturity securities relating to an oil field
            service company. This oil field service company's problems stem from
            a combination of excess industry capacity and high leverage. We do
            hold another $33.5 million investment in this Company which is
            secured and, based on that security, is expected to continue its
            scheduled payments.

      o     $19.2 million on redeemable preferred stock of a technology based
            manufacturer of engineering products with a tight liquidity
            position. The circumstances of this impairment has no impact on
            other investments.

      o     $19.0 million on securities of an Australian power project that
            failed to produce the benefits expected from the deregulation of
            that country's power industry. The circumstances of this impairment
            has no impact on other investments.

      o     $24.8 million on redeemable preferred stock of a large domestic farm
            cooperative due to the cyclical nature of the business and a heavy
            debt load. The circumstances of this impairment has no impact on
            other investments.

      o     $13.6 million on securities of a diversified producer of single-use,
            specialty medical products. This diversified producer of single-use,
            specialty medical products' cash flow deteriorated significantly due
            to increased competition and the loss of a major customer. The
            circumstances of this impaired investment has no impact on other
            investments.

      o     $9.9 million on subordinated private placement securities funding a
            toll road between the US and Mexico. We also hold $27.0 million of
            senior securities in this project. The regulatory authorities are
            working on the sale of this toll road which we expect to result in
            the full recovery of these senior bonds.

      o     $16.9 million on securities issued by a Mexican producer of
            corrugated boxes and newsprint. During the 1990's this company grew
            by acquisitions financed with debt. Today this company suffers from
            high leverage and low prices for newsprint and containerboard. The
            circumstances of this impairment has no impact on other investments.

The Company recorded losses due to other than temporary impairments of CDO
equity investments of $61.3 million. Default rates on high yield bonds (as
reported by Moody's) in 2002 were well above the average of the prior 20 years
of 2.9%. Equity in these CDOs take the first loss risk in a pool of high yield
debt and hence underperform in a high yield default environment. These
impairments were recognized using the guidance in EITF 99-20. We have a total
remaining carrying value of $48.7 million of CDO equity as of December 31, 2002,
which is currently supported by expected cash flows.

The Company also recognized losses on other than temporary impairments of equity
securities of $26.9 million as the result of market values falling below cost
for more than six months, and loss on disposal of $36.5 million on real estate
as the declining real estate market impacts some of our foreclosed properties
held for sale. Offsetting these losses were $163.3 million of gains on disposal
of fixed maturities resulting primarily from gains on sale and fee income from
the early repayment by the borrower of private placement securities, gains of
$149.6 million on the sale of equity securities as part of our overall
investment strategy of using equity gains to minimize credit losses in the long
term and gains of $55.2 million on the disposal of mortgage loans resulting
primarily from pre-payments.

Receivable from Allmerica Financial Corporation

As of December 31, 2002 the Company acquired the fixed universal life insurance
business of Allmerica Financial Corporation (Allmerica). The result of this
reinsurance agreement was the obligation of Allmerica to transfer $471.1 million
in financial assets and the rights and obligations to approximately 48,000 fixed
universal life insurance policies to the Company. The obligation to transfer
these assets was created at the signing of the agreement on December 31, 2002
therefore the receivable was recorded at an estimated balance. The $471.1
million premium receivable at December 31, 2002 has been offset by fixed
maturity securities at a carrying value of $470.3 million and $0.8 million in
cash and cash equivalents and $75.6 million in policy loans have also been
recorded as of December 31, 2002.


                                       85
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

  Fixed Maturity Securities -- By Industry Classification included in Allmerica
                               Premium Receivable

                                                     As of December 31, 2002
                                                      Total Carrying Value
                                                    -------------------------
                                                         (in millions)
Corporate securities:
  Banking and finance.............................          $ 23.1
  Communications..................................            57.4
  Manufacturing...................................            55.7
  Oil & gas.......................................            23.0
  Services / trade................................            75.0
  Transportation..................................            11.1
  Utilities.......................................
                                                    -------------------------
  Total Corporate Securities......................           245.3

Asset-backed and mortgage-backed securities.......           225.0

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

    Total.........................................          $470.3
                                                    =========================

      Fixed Maturity Securities -- By Credit Quality included in Allmerica
                               Premium Receivable

                                                            As of December 31,
                                                                  2002
                                                     ---------------------------
                            S&P Equivalent               Carrying         % of
SVO Rating (1)              Designation (2)              Value (3)        Total
--------------------------------------------------------------------------------
                                                       (in millions)
        1             AAA/AA/A..................          $300.9         64.0%
        2             BBB.......................           169.4         36.0
        3             BB........................
        4             B.........................
        5             CCC and lower.............
        6             In or near default........
                                                     ---------------------------
                      Total.....................          $470.3        100.0%
                                                     ===========================


                                       86
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Liquidity and Capital Resources

      Liquidity describes the ability of a company to generate sufficient cash
flows to meet the immediate needs to facilitate business operations.
Historically, our principal cash flow sources have been premiums, deposits and
charges on policies and contracts, investment income, maturing investments, and
proceeds from sales of investment assets. Our liquidity requirements relate
principally to the liabilities associated with our various life insurance,
annuity, and structured investment products, and to the funding of investments
in new products, processes, and technologies and general operating expenses.
Product liabilities include the payment of benefits under life insurance,
annuity and structured investment products and the payment of policy surrenders,
withdrawals and policy loans. The Company periodically adjusts its investment
policy to respond to changes in short-term and long-term cash requirements and
provide adequate funds to pay benefits without forced sales of investments.

      The Company is wholly-owned by, and the primary operating subsidiary of,
John Hancock Financial Services, Inc. (JHFS). As an insurance holding company,
JHFS is reliant on dividends from its operating subsidiaries for its operating
cash flows. State insurance laws generally restrict the ability of insurance
companies to pay cash dividends in excess of prescribed limitations without
prior approval from the applicable state insurance commissioner. The Company's
limit is the greater of 10% of the statutory surplus or the prior calendar
year's statutory net gain from operations. The ability of the Company to pay
shareholder dividends is and will continue to be subject to restrictions set
forth in the insurance laws and regulations of Massachusetts, its domiciliary
state. The Massachusetts insurance law limits how and when the Company can pay
shareholder dividends. The Company, in the future, could also be viewed as being
commercially domiciled in New York. If so, dividend payments may also be subject
to New York's holding company act as well as Massachusetts law.

      Currently, the Company does not expect such regulatory requirements to
impair its ability to dividend sufficient cash flows to sustain JHFS' liquidity
and capital needs. However, the Company can give no assurance it will declare or
pay dividends on a regular basis.

      In February and May 2002, the Commissioner of Insurance for the
Commonwealth of Massachusetts approved, and the Company paid, dividends to JHFS
in the amount of $11.0 million and $100.0 million respectively. Both dividend
payments were cash transfers. None of these dividends were classified as
extraordinary by state regulators.

      The liquidity of our insurance operations is also related to the overall
quality of our investments. As of December 31, 2002, $37,997.1 million, or 88.0%
of the fixed maturity securities held by us and rated by Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, Inc. (S&P) or the
National Association of Insurance Commissioners were rated investment grade
(BBB- or higher by S&P, Baa3 or higher for Moody's, or 1 or 2 by the National
Association of Insurance Commissioners). The remaining $5,186.0 million, or
12.0% of fixed maturity investments were rated non-investment grade. For
additional discussion of our investment portfolio see the General Account
Investments section of this Management's Discussion and Analysis of Financial
Condition and Results of Segment Operations.

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

      Net cash provided by operating activities was $2,466.6 million, $2,774.9
million, and $2,043.2 million for the years ended December 31, 2002, 2001 and
2000, respectively. Cash flows from operating activities are affected by the
timing of premiums received, fees received and investment income. The $308.3
million decrease in 2002 as compared to 2001 is largely attributable to a
decrease in premium received of $376.4 million, an increase in operating
expenses of $78.9 million and an increase in income taxes paid of $106.0
million, partially offset by a decrease in policyholder benefits of $281.5
million. The net increase in 2001 as compared to 2000 is primarily due to a
decrease in policyholder benefits, a smaller increase in other assets net of
other liabilities and an increase in investment income received.

      Net cash used in investing activities was $6,212.6 million, $6,551.1
million and $1,371.8 million for the years ended December 31, 2002, 2001, and
2000, respectively. Changes in the cash provided by investing activities
primarily relate to the management of the Company's investment portfolios and
the investment of excess capital generated by operating and financing
activities. The net cash used in investing activities decreased by $338.5
million in 2002 compared to 2001 primarily due to decreases in net acquisitions
of fixed maturities, partially offset by net issuances of mortgages and
purchases of other invested assets, and increased net purchases of short-term
investments. The decrease in cash used in 2001 compared to 2000 resulted
primarily from a decrease in net acquisitions of fixed maturity securities.


                                       87
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Net cash provided by financing activities was $3,617.7 million, $1,835.2
million and $691.9 million, for the years ended December 31, 2002, 2001 and
2000, respectively. Changes in cash provided by financing activities primarily
relate to excess deposits or withdrawals under investment type contracts, the
issuance of debt and borrowings or re-payments of the Company's debt. The
increase in 2002 as compared to 2001 is attributed to a smaller decrease in
universal life and investment-type contract deposits of $1,520.9 million, as
compared to increase of cash payments on withdrawals of $2,766.4 million, new
issuance of consumer notes and the prior year cessation of the commercial paper
program. The increase in 2001 as compared to 2000 resulted from a larger
increase in deposits received on universal life insurance and investment-type
contracts than withdrawals or surrenders.

      Cash flow requirements are also supported by a committed line of credit of
$1.0 billion, through a syndication of banks including Fleet National Bank,
JPMorgan Chase, Citicorp USA, Inc., The Bank of New York, The Bank of Nova
Scotia, Fleet Securities, Inc. and JP Morgan Securities, Inc. The line of credit
agreement provides for two facilities: one for $500 million pursuant to a
364-day commitment (renewed effective July 26, 2002) and a second for $500
million (renewable in 2005). The line of credit is available for general
corporate purposes. The line of credit agreement contains various covenants,
among these being that statutory total capital and surplus plus asset valuation
reserve meet certain requirements. To date, we have not borrowed any amounts
under the line of credit.

      As of December 31, 2002, we had $689.7 million of principal and interest
amounts of debt outstanding consisting of $447.4 million of surplus notes, and
$356.0 million of other notes payable, including current maturities and a fair
value adjustment for interest rate swaps. A new commercial paper program has
been established at the Company that has replaced the commercial paper program
that was in place at the Company's indirect subsidiary, John Hancock Capital
Corporation, and there were no commercial paper borrowings outstanding at
December 31, 2002.

      A primary liquidity concern with respect to life insurance and annuity
products is the risk of early policyholder and contractholder withdrawal. The
following table summarizes our annuity policy reserves and deposit fund
liabilities for the contractholder's ability to withdraw funds for the indicated
periods:

<TABLE>
<CAPTION>
                                                                                          As of December 31,
                                                                                       2002                    2001
                                                                           -------------------------------------------------
                                                                              Amount          %         Amount        %
                                                                           -------------------------------------------------
                                                                           (in millions)             (in millions)
<S>                                                                           <C>           <C>        <C>          <C>
Not subject to discretionary withdrawal provisions.....................       $28,820.2      78.8%     $25,846.3     81.7%
Subject to discretionary withdrawal adjustment:
     With market value adjustment......................................          (228.7)     (0.6)           7.6      0.0
     At contract value.................................................         2,535.8       6.9        2,312.4      7.3
Subject to discretionary withdrawal at contract value
     less surrender charge.............................................         5,455.6      14.9        3,493.3     11.0
                                                                           -------------------------------------------------
Total annuity reserves and deposit funds liability.....................       $36,582.9     100.0%     $31,659.6    100.0%
                                                                           =================================================
</TABLE>

      Individual life insurance policies are less susceptible to withdrawal than
are individual annuity contracts because policyholders may incur surrender
charges and undergo a new underwriting process in order to obtain a new
insurance policy. Annuity benefits under group annuity contracts are generally
not subject to early withdrawal. As indicated in the table above, there is a
substantial percentage of annuity reserves and deposit fund liabilities that are
not subject to withdrawal. As a matter of policy, we seek to include provisions
limiting withdrawal rights from general account institutional structured
investment products. These include GICs and funding agreements sold to plan
sponsors where the contract prohibits the contractholder from making withdrawals
other than on a scheduled maturity date. In addition, none of these obligations
can be accelerated based on any change in the Company's credit rating.

      Individual life insurance policies (other than term life insurance
policies) increase in cash value over their lives. Policyholders have the right
to borrow from us an amount generally up to the cash value of their policy at
any time. As of December 31, 2002, we had approximately $18.6 billion in cash
values in which policyholders have rights to policy loans. The majority of cash
values eligible for policy loans are at variable interest rates which are reset
annually on the policy anniversary. Moreover, a portion of our fixed interest
rate policy loans have features that provide for reduced crediting rates on the
portion of cash values loaned. The amount of policy loans has remained
consistent over the past three years, at approximately $2.0 billion, $1.6
billion of which are in the closed block at December 31, 2002.


                                       88
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

The following table summarizes the Company's information about contractual
obligations by due date as of December 31, 2002. Contractual obligations of the
Company are those obligations fixed by agreement as to dollar amount and date of
payment. These obligations are inputs into the Company's asset liability
management system described elsewhere in this document. Other commercial
commitments are those commitments entered into by the Company with known
expiration dates. No such other commercial commitments existed at December 31,
2002.

Contractual Obligations

<TABLE>
<CAPTION>
                                                                             Payments due by period
                                                     -----------------------------------------------------------------------
                                                                     Less than 1
                                                            Total        year       1-3 years     4-5 years   After 5 years
                                                     -----------------------------------------------------------------------
                                                                                 (in millions)
<S>                                                      <C>           <C>           <C>           <C>           <C>
Debt...............................................      $   689.7     $   99.5      $   48.2      $   29.3      $   512.7
Consumer notes.....................................          296.0           --           4.8          39.0          252.2
GIC's..............................................        6,855.9      1,558.7       2,687.8       1,136.2        1,473.2
Funding agreements.................................       13,988.2      2,032.2       4,516.3       3,303.8        4,135.9
Institutional structured settlements...............        3,209.9         15.5          31.9          32.4        3,130.1
Annuity certain....................................       12,120.1        651.7       1,323.6       1,116.9        9,028.0
Investment commitments.............................        1,714.5      1,714.5            --            --             --
Operating lease obligations........................          103.2         21.2          34.7          17.4           29.9
                                                     -----------------------------------------------------------------------
     Total contractual cash obligations............      $38,977.5     $6,093.3      $8,647.3      $5,675.0      $18,562.0
                                                     =======================================================================
</TABLE>

      The risk-based capital standards for life insurance companies, as
prescribed by the National Association of Insurance Commissioners, establish a
risk-based capital ratio comparing adjusted surplus to required surplus for each
of our United States domiciled insurance subsidiaries. If the risk-based capital
ratio falls outside of acceptable ranges, regulatory action may be taken ranging
from increased information requirements to mandatory control by the domiciliary
insurance department. The risk-based capital ratios of all our insurance
subsidiaries as of December 31, 2002, were above the ranges that would require
regulatory action.

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

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


                                       89
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

ITEM 7A. Quantitative and Qualitative Disclosure about Market Risk

Capital Markets Risk Management

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

      To mitigate capital market 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 Company's
and its U.S. Life Insurance subsidiaries' implementation of the interest rate
risk management program. As an integral component of its ALM program, derivative
instruments are used in accordance with risk reduction techniques established
through Company policy and with formal approval granted from the New York
Insurance Department. The Company's use of derivative instruments is monitored
on a regular basis by the Company's Investment Compliance Department and
reviewed quarterly with senior management and the Committee of Finance.

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

Credit Risk

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

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

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

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


                                       90
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

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

      As of December 31, 2002 and 2001, the Company's fixed maturity portfolio
was comprised of 88.0% and 87.4% investment grade securities and 12.0% and 12.6%
below-investment-grade securities, respectively. These percentages are
consistent with recent experience and indicative of the Company's long-standing
investment philosophy of pursuing moderate amounts of credit risk in return for
higher expected returns. We believe that credit risk can be successfully managed
given our proprietary credit evaluation models and experienced personnel.

Interest Rate Risk

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

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

      We project asset and liability cash flows on guaranteed rate products and
then discount them against credit-specific interest rate curves to attain fair
values. Duration is then calculated by re-pricing these cash flows against a
modified or "shocked" interest rate curve and evaluating the change in fair
value versus the base case. As of December 31, 2002 and 2001, the fair value of
fixed maturity securities and mortgage loans supporting duration managed
liabilities was approximately $31,645.9 million and $27,788.4 million,
respectively. Based on the information and assumptions we use in our duration
calculations in effect as of December 31, 2002, we estimate that a 100 basis
point immediate, parallel increase in interest rates ("rate shock") would have
no effect on the net fair value, or surplus, of our duration managed assets and
liabilities based on our targeted mismatch of zero, but could be -/+ $15.8
million based on our operational tolerance of +/- 18 days years.

      The risk management method for non-guaranteed rate products, such as whole
life insurance or single premium deferred annuities, is less formulaic, but more
complex, due to the less predictable nature of the liability cash flows. For
these products, we manage interest rate risk based on scenario-based portfolio
modeling that seeks to identify the most appropriate investment strategy given
probable policyholder behavior and liability crediting needs under a wide range
of interest rate environments. As of December 31, 2002 and 2001, the fair value
of fixed maturity securities and mortgage loans supporting liabilities managed
under this modeling was approximately $28,003.8 million and $23,091.2 million,
respectively. A rate shock (as defined above) as of December 31, 2002 would
decrease the fair value of these assets by $1,037.1 million, which we estimate
would be offset by a comparable change in the fair value of the associated
liabilities, thus minimizing the impact on surplus.


                                       91
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Derivative Instruments

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

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

      Through the year ended December 31, 2002, the reported income volatility
attributable to SFAS No. 133 accounting treatment was $21.6 million and well in
line with our pre-SFAS No. 133 implementation expectations. We also reported
income volatility of $101.4 million during 2002 due to GAAP derivatives
accounting treatment on options that predated SFAS No. 133. This volatility
relates to the "inherent ineffectiveness" associated with marking-to-market each
quarter out-of-the-money interest rate and equity options. These options hedge
interest rate and equity risks present in certain of our asset and liability
portfolios. The Company continues to seek process improvements to further reduce
expected income volatility, without unduly hindering our objective of
aggressively managing economic risks inherent in its lines of business.

      The Company's Investment Compliance Unit monitors all derivatives activity
for consistency with internal policies and guidelines. All derivatives trading
activity is reported monthly to the Company's Committee of Finance for review,
with a comprehensive governance report provided jointly each quarter by the
Company's Derivatives Supervisory Officer and Chief Investment Compliance
Officer. The table below reflects the Company's derivative positions hedging
interest rate risk as of December 31, 2002. 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 fair value exposures represent only a point in
time and will be subject to change as a result of ongoing portfolio and risk
management activities.

<TABLE>
<CAPTION>
                                                        As of December 31, 2002
                                                                         Fair Value
                                                           ------------------------------------------
                                               Weighted-   -100 Basis                   +100 Basis
                               Notional      Average Term    Point         As of          Point
                                Amount         (Years)      Change (2)    12/31/02      Change (2)
                             ------------------------------------------------------------------------
                                         (in millions, except for Weighted-Average Term)

<S>                           <C>                <C>          <C>         <C>           <C>
Interest rate swaps........   $  20,853.3         9.2         $ (981.8)   $ (842.1)       (686.8)
CMT swaps..................         155.7         0.6              2.1         2.0           2.0
Futures contracts (1)......         292.4         6.5              4.6         0.2          (4.6)
Interest rate caps.........         709.3         5.3             13.4        15.9          23.1
Interest rate floors.......       4,593.0         7.3            194.2        93.2          40.1
Swaptions..................          30.0        22.4             (7.0)       (3.2)         (1.0)
                             --------------                ------------------------------------------
     Totals................   $  26,633.7         8.7         $ (774.5)   $ (734.0)     $ (627.2)
                             ==============                ==========================================
</TABLE>

(1)   Represents the notional value on open contracts as of December 31, 2002.
(2)   The selection of a 100 basis point immediate change in interest rates
      should not be construed as a prediction by us of future market events but
      rather as an illustration of the potential impact of such an event.

      Our non-exchange-traded derivatives are exposed to the possibility of loss
from a counterparty failing to perform its obligations under terms of the
derivative contract. We believe the risk of incurring losses due to
nonperformance by our counterparties is remote. To manage this risk, Company
procedures include (a) the 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)


                                       92
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

quarterly reporting of each counterparty's "potential exposure", (d) master
netting agreements, and (e) the use of collateral agreements. Futures contracts
trade on organized exchanges and have effectively no credit risk.

Equity Risk

      Equity risk is the possibility that we will incur economic losses due to
adverse changes in a particular common stock or warrant that we hold in our
portfolio. In order to reduce our exposure to market fluctuations on some of our
common stock portfolio, we use equity collar agreements. These equity collar
agreements limit the market value fluctuations on their underlying equity
securities. Our equity collars are comprised of an equal number of purchased put
options and written call options, each with strike rates equidistant from the
stock price at the time the contract is established. As of December 31, 2002,
the fair value of our common stock portfolio was $149.7 million. The fair value
of our equity collar agreements as of December 31, 2002 was $12.4 million. A
hypothetical 15% decline in the December 31, 2002 value of the equity securities
would result in an unrealized loss of approximately $17.2 million. The selection
of a 15% immediate change in the value of equity securities should not be
construed as a prediction by us of future market events but rather as an
illustration of the potential impact of such an event. The fair value of any
unhedged common stock holdings will rise or fall with equity market and
company-specific trends. In certain cases the Company classifies its equity
holdings as trading securities. These holdings are marked-to-market through the
income statement, creating investment income volatility that is effectively
neutralized by changes in corresponding liability reserves.

Foreign Currency Risk

      Foreign currency risk is the possibility that we will incur economic
losses due to adverse changes in foreign currency exchange rates. This risk
arises in part from our international operations and the issuance of certain
foreign currency-denominated funding agreements sold to non-qualified
institutional investors in the international market. We apply currency swap
agreements to hedge the exchange risk inherent in our investments and funding
agreements denominated in foreign currencies. We also own fixed maturity
securities that are denominated in foreign currencies. We use derivatives to
hedge the foreign currency risk of these securities (both interest and principal
payments). At December 31, 2002, the fair value of our foreign currency
denominated fixed maturity securities was approximately $775.2 million. The fair
value of our currency swap agreements at December 31, 2002 supporting foreign
denominated bonds was $(21.9) million.

      We estimate that as of December 31, 2002, a hypothetical 10% immediate
change in each of the foreign currency exchange rates to which we are exposed,
including the currency swap agreements, would result in no material change to
the net fair value of our foreign currency-denominated instruments identified
above. The selection of a 10% immediate change in all currency exchange rates
should not be construed as a prediction by us of future market events but rather
as an illustration of the potential impact of such an event.

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

Effects of Inflation

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


                                       93
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

ITEM 8. Financial Statements and Supplementary Data

      See Index to Consolidated Financial Statements and Schedules elsewhere in
this Form 10-K.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure

      None.

PART III

ITEM 10. Directors and Executive Officers of John Hancock Life Insurance Company

      Omitted.

ITEM 11. Executive Compensation

      Omitted.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

      Omitted.

ITEM 13. Certain Relationships and Related Transactions

      Omitted.

ITEM 14. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have concluded, based on
their evaluation within 90 days of the filing date of this report, that our
disclosure controls and procedures are effective for gathering, analyzing and
disclosing the information we are required to disclose in our reports filed
under the Securities Exchange Act of 1934. There have been no significant
changes in our internal controls or in other factors that could significantly
affect these controls subsequent to the date of the previously mentioned
evaluation.

PART IV

ITEM 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K

(a) Documents filed as part of this report:

      1.    CONSOLIDATED FINANCIAL STATEMENTS. See Index to Audited Consolidated
            Financial Statements and Schedules included elsewhere herein.

      2.    CONSOLIDATED FINANCIAL STATEMENT SCHEDULES. See Index to Audited
            Consolidated Financial Statements and Schedules included elsewhere
            herein.

      3.    EXHIBITS.

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

2.1         Plan of Reorganization **
3.1         Restated Articles of Organization and Articles of Amendment of John
            Hancock Life Insurance Company #
3.2         Amended and Restated By-laws of John Hancock Life Insurance
            Company*
10.1        Credit Agreement dated as of August 3, 2000, among John Hancock
            Financial Services, Inc., John Hancock Life Insurance Company, John
            Hancock Capital Corporation, The Banks listed therein, Fleet
            National Bank, as Co-Administrative Agent, The Chase Manhattan Bank,
            as Co-Administrative Agent, Citicorp USA, Inc., as Syndication
            Agent, and BankOne, NA as Documentation Agent, and FleetBoston
            Robertson Stephens, Inc., and Chase Securities, Inc., as Joint Book
            Managers and Joint Lead Arrangers. ***
10.1.2      Second Amendment dated as of July 26, 2002 to the Credit Agreement
            dated as of August 3, 2000 among John Hancock Financial Services,
            Inc., John Hancock Life Insurance Company, the Banks listed therein,
            Fleet National Bank, as Co-Administrative Agent, JPMorgan Chase
            Bank, as Co-Administrative Agent, Citicorp USA, Inc., as Syndication
            Agent, The Bank of New York, as Co-Documentation Agent (364-Day
            Revolver) and The Bank of Nova Scotia, as Co-Documentation Agent
            (364-Day Revolver), Fleet Securities, Inc., and J.P. Morgan
            Securities, Inc., as Joint Bookrunners and Joint Lead Arrangers.****

                                       94
<PAGE>

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

10.2.1      Employment Continuation Agreement between John Hancock Life
            Insurance Company, John Hancock Financial Services, Inc. and Michael
            A. Bell##+
10.2.2      Second Amended and Restated Employment Continuation Agreement
            between John Hancock Life Insurance Company, John Hancock Financial
            Services, Inc. and Thomas E. Moloney##+
10.2.3      Second Amended and Restated Employment Continuation Agreement
            between John Hancock Life Insurance Company, John Hancock Financial
            Services, Inc. and David F. D'Alessandro##+
10.2.3.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and David F.
            D'Alessandro ****+
10.2.4      Second Amended and Restated Employment Continuation Agreement
            between John Hancock Life Insurance Company, John Hancock Financial
            Services, Inc. and Derek Chilvers##+
10.2.4.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and Derek Chilvers
            ****+
10.2.5      Second Amended and Restated Employment Continuation Agreement
            between John Hancock Life Insurance Company, John Hancock Financial
            Services, Inc. and Maureen Ford##+
10.2.5.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and Maureen Ford
            ****+
10.2.6      Second Amended and Restated Employment Continuation Agreement
            between John Hancock Life Insurance Company, John Hancock Financial
            Services, Inc. and Robert Walters##+
10.2.7      Amended and Restated Employment Continuation Agreement between John
            Hancock Life Insurance Company, John Hancock Financial Services,
            Inc. and John M. DeCiccio##+
10.2.8      Amended and Restated Employment Continuation Agreement between John
            Hancock Life Insurance Company, John Hancock Financial Services,
            Inc. and Wayne A. Budd##+
10.2.9      Amended and Restated Employment Continuation Agreement between John
            Hancock Life Insurance Company, John Hancock Financial Services, Inc
            and Deborah H. McAneny ****+
10.2.9.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and Deborah H.
            McAneny ****+10.3 Fiscal Agency Agreement, dated as of February 25,
            1994 by and between John Hancock Mutual Life Insurance Company, as
            Issuer, and First National Bank of Boston, as Fiscal Agent **
10.4        Reinsurance Agreement, dated as of July 30, 1992 by and between John
            Hancock Mutual Life Insurance Company and Provident Life and
            Accident Insurance Company **
10.5        Reinsurance Agreement, dated as of July 30, 1992 by and between John
            Hancock Mutual Life Insurance Company and Provident Life and
            Accident Insurance Company **
10.6        Coinsurance Agreement, dated as of March 1, 1997 by and between John
            Hancock Financial Life Insurance Company and UNICARE Life & Health
            Insurance Company **
10.7        Letter of Credit Agreement, dated as of January 2, 1997 by and among
            John Hancock Mutual Life Insurance Company, Banks named therein and
            Morgan Guaranty Trust Company of New York as Issuing Bank and Agent
            **
10.8        Long-Term Incentive Plan for Senior Executives (as Amended and
            Restated Effective February 6, 2003) **** +
10.9        Incentive Compensation Plan for Certain Senior Executives (as
            Amended and Restated Effective February 6, 2003) **** +
10.10       Form of Shareholder Rights Agreement **+
10.10.1     Amendment No. 1 to the Rights Agreement (As Adopted on March 4,
            2002)@@@+
10.11       1999 Long-Term Stock Incentive Plan (As Amended and Restated as of
            May 14, 2001)###+
10.13       Deferred Compensation Plan for Non-Employee Directors **** +
10.14       Non-Employee Directors' Long-Term Stock Incentive Plan **** +
10.15       Deferred Compensation Plan for Executives @+
23.1        Consent of Independent Auditors ####


                                       95
<PAGE>

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

The principal amount of debt outstanding under each instrument (excepting those
listed above) defining the rights of holders of our long-term debt does not
exceed ten percent (10%) of our total assets on a consolidated basis. The
Company agrees to furnish the SEC, upon request, a copy of each instrument
defining the rights of holders of our long-term debt.

      Any exhibit not included with this Form 10-K when furnished to any
shareholder of record will be furnished to such shareholder upon written request
and payment of up to $.25 per page plus postage. Such requests should be
directed to John Hancock Financial Services, Inc., Investor Relations, John
Hancock Place, Post Office Box 111, Boston, Massachusetts 02117.

*           Previously filed as an exhibit to the John Hancock Life Insurance
            Company annual report on form 10-K for the year ended December 31,
            2001 and incorporated by reference herein.
**          Previously filed as an exhibit to John Hancock Financial Services,
            Inc.'s S-1 Registration Statement (file no. 333-87271), and
            incorporated by reference herein.
***         Previously filed as an exhibit to the John Hancock Financial
            Services, Inc.'s quarterly report on Form 10-Q for the quarter ended
            June 30, 2000, and incorporated by reference herein.
****        Previously filed as an exhibit to John Hancock Financial Services,
            Inc.'s annual report on Form 10-K for the year ended December 31,
            2002, and incorporated by reference herein.
@           Previously filed as an exhibit to John Hancock Financial Services,
            Inc.'s annual report on Form 10-K for the year ended December 31,
            2001, and incorporated by reference herein.
+           Management Contract or Compensatory Plan or Arrangement.
#           Previously filed as an exhibit to the John Hancock Life Insurance
            Company annual report on form 10-K for the year ended December 31,
            2000 and incorporated by reference herein.
##          Previously filed as an exhibit to John Hancock Financial Services,
            Inc.'s quarterly report on Form 10-Q for the quarter ended September
            30, 2001, and incorporated by reference herein.
###         Previously filed with John Hancock Financial Services, Inc.
            definitive proxy statement for the 2001 annual meeting of
            shareholders, and incorporated by reference herein.
####        Filed herewith.

(b) Reports on Form 8-K.

During the Fourth Quarter of 2002 the Company filed the following Current
Reports on Form 8-K:

On October 25, 2002, the Company filed a Current Report on Form 8-K, dated
October 25, 2002 reporting under Item 5 thereof the Company's issuance of
$894,000 aggregate principal amount of floating rate SignatureNotes due October
15, 2006.

On October 28, 2002, the Company filed a Current Report on Form 8-K, dated
October 25, 2002, reporting under Item 5 thereof the expected impact of certain
"deferred acquisition cost" issues on third quarter results.

On November 1, 2002, the Company filed a Current Report on Form 8-K, dated
October 31, 2002 reporting under Item 5 thereof the consolidated operating and
financial results for the third quarter of 2002 of its parent John Hancock
Financial Services, Inc.

On November 5, 2002, the Company filed a Current Report on Form 8-K, dated
November 5, 2002 reporting under Item 5 thereof the Company's issuance of
$2,358,000 aggregate principal amount of floating rate SignatureNotes due
November 15, 2006.


                                       96
<PAGE>

On November 14, 2002, the Company filed a Current Report on Form 8-K, dated
November 12, 2002 reporting under Item 5 thereof the Company's issuance of
$2,183,000 aggregate principal amount of floating rate SignatureNotes due
November 15, 2006.

On November 14, 2002, the Company filed a Current Report on Form 8-K, dated
November 14, 2002 furnishing under Item 9 thereof the Certifications of the
Company's Chief Executive and Chief Financial officers, as required by Section
906 of the Sarbanes-Oxley Act of 2002.

On November 18, 2002, the Company filed a Current Report on Form 8-K, dated
November 14, 2002 reporting under Item 5 thereof certain rating action taken by
Moody's Investors Service, Inc.

On November 19, 2002, the Company filed a Current Report on Form 8-K, dated
November 18, 2002 reporting under Item 5 thereof the Company's issuance of
$175,000 aggregate principal amount of floating rate SignatureNotes due November
15, 2006.

On November 27, 2002, the Company filed a Current Report on Form 8-K, dated
November 26, 2002 reporting under Item 5 thereof the Company's plan to sell
three key home office complex properties.

On December 10, 2002, the Company filed a Current Report on Form 8-K, dated
December 10, 2002 reporting under Item 5 thereof its exposure in light of the
bankruptcy filing of UAL Corp.


                                       97
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

               INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Auditors............................................   F-2

Audited Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2002 and 2001..............   F-3

Consolidated Statements of Income for the Years Ended December 31, 2002,
      2001 and 2000.......................................................   F-5

Consolidated Statements of Changes in Shareholder's Equity and Comprehensive
      Income for the Years Ended December 31, 2002, 2001 and 2000.........   F-6

Consolidated Statements of Cash Flows for the Years Ended December 31,
      2002, 2001 and 2000.................................................   F-7

Notes to Consolidated Financial Statements................................   F-9


                                       F-1
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
John Hancock Life Insurance Company

We have audited the accompanying consolidated balance sheets of John Hancock
Life Insurance Company (the Company) as of December 31, 2002 and 2001, and the
related consolidated statements of income, changes in shareholder's equity and
comprehensive income, and cash flows for each of the three years in the period
ended December 31, 2002. Our audits also included the financial statement
schedules listed in the Index at Item 15(a). These financial statements and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of John Hancock Life
Insurance Company at December 31, 2002 and 2001, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.

As discussed in Note 1 to the consolidated financial statements, in 2002 the
Company changed its method of accounting for goodwill and other intangible
assets and in 2001 the Company changed its method of accounting for its employee
pension plan and postretirement health and welfare plans and derivatives.


                                                          /s/ ERNST & YOUNG LLP

Boston, Massachusetts
March 14, 2003


                                       F-2
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                           CONSOLIDATED BALANCE SHEETS

                                                               December 31,
                                                          2002            2001
                                                      --------------------------
                                                            (in millions)
Assets

Investments - Notes 3 and 5 Fixed maturities:
     Held-to-maturity--at amortized cost
     (fair value: 2002--$1,777.2; 2001--$1,908.2)...  $  1,727.0      $  1,923.5
     Available-for-sale--at fair value
     (cost: 2002--$41,206.5; 2001--$35,778.0).......    42,046.3        36,072.1
Equity securities:
     Available-for-sale--at fair value
     (cost: 2002--$307.5; 2001--$433.1).............       349.6           562.3
     Trading securities--at fair value
     (cost: 2002--$0.3; 2001--$2.7).................         0.7             1.4
Mortgage loans on real estate.......................    10,296.5         9,667.0
Real estate.........................................       255.3           380.4
Policy loans........................................     2,014.2         1,927.0
Short-term investments..............................       137.3            78.6
Other invested assets...............................     2,839.1         1,676.9
                                                      ----------      ----------

     Total Investments..............................    59,666.0        52,289.2

Cash and cash equivalents...........................       897.0         1,025.3
Accrued investment income...........................       743.2           745.9
Premiums and accounts receivable....................       114.1           117.2
Deferred policy acquisition costs...................     3,352.6         3,186.3
Reinsurance recoverable - Note 10...................     2,958.9         2,464.3
Other assets........................................     2,660.3         2,298.4
Separate account assets.............................    17,414.9        18,998.1
                                                      ----------      ----------

     Total Assets...................................  $ 87,807.0      $ 81,124.7
                                                      ==========      ==========

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


                                       F-3
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                   CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

                                                               December 31,
                                                           2002           2001
                                                       -------------------------
                                                             (in millions)
Liabilities and Shareholder's Equity

Liabilities
Future policy benefits..............................   $ 34,233.8     $ 29,715.0
Policyholders' funds................................     22,571.0       20,530.3
Consumer notes - Note 8.............................        290.2             --
Unearned revenue....................................        368.9          346.0
Unpaid claims and claim expense reserves............        160.7          203.8
Dividends payable to policyholders..................        463.0          472.8
Short-term debt - Note 8............................         99.5          124.6
Long-term debt - Note 8.............................        703.9          661.7
Income taxes - Note 6...............................        925.0          803.9
Other liabilities...................................      4,397.3        3,632.5
Separate account liabilities........................     17,414.9       18,998.1
                                                       ----------     ----------

     Total Liabilities..............................     81,628.2       75,488.7

Minority interest - Note 9..........................          7.3           28.8

Commitments and contingencies - Note 12

Shareholder's Equity - Note 13
Common stock, $10,000 par value; 1,000 shares
   authorized and outstanding.......................         10.0           10.0
Additional paid in capital..........................      4,763.2        4,763.4
Retained earnings...................................        956.1          608.2
Accumulated other comprehensive income..............        442.2          225.6
                                                       ----------     ----------
     Total Shareholder's Equity.....................      6,171.5        5,607.2
                                                       ----------     ----------

     Total Liabilities and Shareholder's Equity.....   $ 87,807.0     $ 81,124.7
                                                       ==========     ==========

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


                                       F-4
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,
                                                                                      2002            2001             2000
                                                                                 -----------------------------------------------
                                                                                                 (in millions)
<S>                                                                                <C>             <C>              <C>
Revenues
     Premiums...............................................................       $ 1,984.2       $ 2,351.9        $ 2,390.7
     Universal life and investment-type product charges.....................           606.0           600.8            591.4
     Net investment income - Note 3.........................................         3,581.0         3,646.2          3,563.9
     Net realized investment and other gains (losses), net of related
         amortization of deferred policy acquisition costs, amounts
         Credited to participating pension contractholders and the
         policyholder dividend obligation ($(74.2), $(4.1) and $11.6,
         respectively) - Notes 1, 3 and 14..................................          (450.5)         (245.8)            78.3
     Investment management revenues, commissions and other fees.............           507.6           585.1            746.5
     Other revenue .........................................................           241.5           185.8              3.4
                                                                                 --------------  --------------   --------------
         Total revenues.....................................................         6,469.8         7,124.0          7,374.2

Benefits and expenses
     Benefits to policyholders, excluding amounts related to net realized
         investment and other gains (losses) credited to participating pension
         contractholders and the policyholder dividend obligation ($(35.3),
         $25.3, and $21.0, respectively) - Notes 1, 3 and 14................         3,805.2         4,328.1          4,247.4
     Other operating costs and expenses.....................................         1,227.5         1,227.8          1,288.8
     Amortization of deferred policy acquisition costs, excluding amounts
         related to net realized investment and other gains (losses)
         ($(38.9) $(29.4) and $(9.4), respectively) - Notes 1, 3 and 14.....           313.4           249.0            187.1
     Dividends to policyholders.............................................           556.2           551.7            539.2
     Demutualization expenses...............................................              --              --             10.6
                                                                                 --------------  --------------   --------------
         Total benefits and expenses........................................         5,902.3         6,356.6          6,273.1
                                                                                 --------------  --------------   --------------

Income before income taxes and cumulative effect of accounting changes......           567.5           767.4          1,101.1

Income taxes - Note 6.......................................................           108.6           200.7            308.9
                                                                                 --------------  --------------   --------------

Income before cumulative effect of accounting changes.......................           458.9           566.7            792.2

Cumulative effect of accounting changes, net of income tax - Note 1.........              --             7.2               --
                                                                                 --------------  --------------   --------------

Net income..................................................................       $   458.9       $   573.9        $   792.2
                                                                                 ==============  ==============   ==============
</TABLE>

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


                                       F-5
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

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

<S>                                                 <C>      <C>        <C>             <C>           <C>              <C>
Balance at January 1, 2000                              --          --  $ 4,352.5       $   5.4       $ 4,357.9           --

   Demutualization transaction...............       $ 10.0   $ 4,722.1   (4,394.4)                        337.7        1,000

   Comprehensive income:
     Net income before demutualization.......                                41.9                          41.9
     Net income after demutualization........                               750.3                         750.3
                                                                        -----------                  --------------
       Net income............................                               792.2                         792.2

     Other comprehensive income, net of tax:
       Net unrealized investment gains.......                                              54.6            54.6
       Foreign currency translation
         adjustment..........................                                              (1.5)           (1.5)
       Minimum pension liability.............                                               8.2             8.2
                                                                                                     --------------
   Comprehensive income......................                                                             853.5

   Capital contributions from parent
       company...............................                     42.5                                     42.5
   Dividend paid to parent company...........                              (466.0)                       (466.0)
                                                  -----------------------------------------------------------------------------

Balance at December 31, 2000.................         10.0     4,764.6      284.3          66.7         5,125.6        1,000

   Demutualization transaction...............                     (1.2 )                                   (1.2)

   Comprehensive income:
     Net income..............................                               573.9                         573.9

     Other comprehensive income, net of tax:
       Net unrealized investment losses......                                             (81.1)          (81.1)
       Foreign currency translation
         adjustment..........................                                               1.0             1.0
       Minimum pension liability.............                                              15.2            15.2
       Cash flow hedges......................                                              (3.8)           (3.8)
                                                                                                     --------------
   Comprehensive income......................                                                             505.2

   Dividend paid to parent company...........                              (250.0)                       (250.0)
   Change in accounting principles...........                                             227.6           227.6
                                                  -----------------------------------------------------------------------------

Balance at December 31, 2001..............            10.0     4,763.4      608.2         225.6         5,607.2        1,000

   Demutualization transaction...............                     (0.2 )                                   (0.2)

   Comprehensive income:
     Net income..............................                               458.9                         458.9

     Other comprehensive income, net of tax:
       Net unrealized investment gains ......                                              65.7            65.7
       Minimum pension liability.............                                             (24.4)          (24.4)
       Cash flow hedges......................                                             175.3           175.3
                                                                                                     --------------
   Comprehensive income......................                                                             675.5

   Dividends paid to parent company..........                              (111.0)                       (111.0)
                                                  -----------------------------------------------------------------------------

Balance at December 31, 2002..............          $ 10.0   $ 4,763.2      956.1       $ 442.2       $ 6,171.5        1,000
                                                  =============================================================================
</TABLE>

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


                                       F-6
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,
                                                                               2002              2001             2000
                                                                       ---------------------------------------------------
                                                                                           (in millions)
<S>                                                                      <C>               <C>                <C>
Cash flows from operating activities:
     Net income....................................................      $     458.9       $     573.9        $   792.2
         Adjustments to reconcile net income to net cash
         provided by operating activities:
              Amortization of discount - fixed maturities..........            (78.3)           (134.0)          (102.9)
              Net realized investment and other (gains) losses.....            450.5             245.8            (78.3)
              Change in deferred policy acquisition costs..........           (194.1)           (204.0)          (235.4)
              Depreciation and amortization........................             47.4              72.1             78.8
              Net cash flows from trading securities...............              0.7               0.2             (0.1)
              Decrease (increase) in accrued investment income.....              2.7             (46.5)           (89.8)
              Decrease in premiums and accounts Receivable.........              3.1              11.8              8.4
              Increase in other assets and other liabilities, net..           (308.4)           (263.5)          (464.5)
              Increase in policy liabilities and accruals, net.....          2,086.8           2,323.7          1,798.1
              Increase (decrease) in income taxes..................             (2.7)            195.4            336.7
                                                                       ----------------  ---------------  ----------------

                  Net cash provided by operating activities........          2,466.6           2,774.9          2,043.2

Cash flows used in investing activities:
     Sales of:
         Fixed maturities available-for-sale.......................          4,897.1          16,058.9          4,360.5
         Equity securities available-for-sale......................            316.4             614.6            669.9
         Real estate...............................................            127.7              53.8             59.8
         Short-term investments and other invested assets..........            458.7             113.4             81.5
     Maturities, prepayments and scheduled redemptions of:
         Fixed maturities held-to-maturity.........................            214.2             241.8          1,807.2
         Fixed maturities available-for-sale.......................          2,720.1           3,087.0          1,490.0
         Short-term investments and other invested assets..........            149.3             168.4            418.8
         Mortgage loans on real estate.............................          1,520.6           1,342.0          1,447.4
     Purchases of:
         Fixed maturities held-to-maturity.........................            (27.6)            (66.7)        (2,092.4)
         Fixed maturities available-for-sale.......................        (12,984.7)        (26,321.9)        (6,961.4)
         Equity securities available-for-sale......................            (90.9)           (285.8)          (425.3)
         Real estate...............................................             (8.1)            (52.8)           (58.7)
         Short-term investments and other invested assets..........         (1,369.2)           (448.5)          (784.8)
     Mortgage loans on real estate issued..........................         (2,036.5)         (1,204.5)        (1,499.9)
     Net cash (paid) received related to acquisition/sale
         of businesses.............................................               --             (28.2)           141.3
     Other, net....................................................            (99.7)            177.4            (25.7)
                                                                       ----------------  ---------------  ----------------

              Net cash used in investing activities................      $  (6,212.6)      $  (6,551.1)       $(1,371.8)
</TABLE>

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


                                       F-7
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                 2002              2001             2000
                                                                          --------------------------------------------------
                                                                                            (in millions)
<S>                                                                          <C>               <C>               <C>
Cash flows from financing activities:
     Issuance of common stock......................................                  --                --        $    10.0
     Contribution from Parent......................................                  --                --          1,552.0
     Payments to eligible policyholders under Plan of
         Reorganization............................................                  --                --         (1,076.7)
     Dividend paid to parent company...............................          $   (111.0)       $   (250.0)          (466.0)
     Universal life and investment-type contract deposits..........             8,999.4          10,520.3          7,918.2
     Universal life and investment-type contract maturities and
         withdrawals...............................................            (5,505.4)         (8,271.8)        (7,034.2)
     Issuance of consumer notes....................................               290.2                --               --
     Issuance of short-term debt...................................                92.8             105.4               --
     Issuance of long-term debt....................................                20.0               6.5             20.0
     Repayment of short-tem debt...................................              (110.6)            (23.0)              --
     Repayment of long-term debt...................................               (57.7)            (29.9)           (73.2)
     Net decrease in commercial paper..............................                --              (222.3)          (158.2)
                                                                          ---------------   ---------------  ---------------

     Net cash provided by financing activities.....................             3,617.7           1,835.2            691.9
                                                                          ---------------   ---------------  ---------------

     Net (decrease) increase in cash and cash equivalents..........              (128.3)         (1,941.0)         1,363.3

Cash and cash equivalents at beginning of year.....................             1,025.3           2,966.3          1,603.0
                                                                          ---------------   ---------------  ---------------

Cash and cash equivalents at end of year...........................          $    897.0        $  1,025.3        $ 2,966.3
                                                                          ===============   ===============  ===============
</TABLE>

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


                                       F-8
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies

Business

John Hancock Life Insurance Company, (the Company), formerly known as John
Hancock Mutual Life Insurance Company (the Mutual Company), is a diversified
financial services organization that provides a broad range of insurance and
investment products and investment management and advisory services.

Basis of Presentation

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.

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

The accompanying consolidated financial statements include the accounts of the
Company and its majority-owned and controlled subsidiaries, and investment
partnerships, other equity investments and special purpose entities (SPEs) in
which the Company has a controlling financial interest. All significant
intercompany transactions and balances have been eliminated.

Partnerships, joint venture interests and other equity investments in which the
Company does not have a controlling financial interest, but has significant
influence, are recorded using the equity method of accounting and are included
in other invested assets. SPEs in which the Company does not have a controlling
financial interest are accounted for under guidance appropriate to each
relationship, whether the Company invests in the debt or equity securities of
the SPE, issues funding agreements to the SPE, manages the SPE as investment
advisor, or performs other services for them. Please refer to the Recent
Accounting Pronouncements section below for a discussion of new accounting
guidance relative to Variable Interest Entities (VIEs).

In December 2001, the Company transferred both its remaining portion of John
Hancock Canadian Holdings Limited and certain international subsidiaries held by
the Company, with a carrying value at December 31, 2001 of $300.1 million, to
its parent, John Hancock Financial Services, Inc. (JHFS or the Parent Company),
which is a holding company, in the form of a dividend. The transfer was
accounted for as a transfer of entities under common control. As a result of the
transfer, all current and prior period consolidated financial data was restated
to exclude the results of operations, financial position, and cash flows of
these transferred foreign subsidiaries from the Company's financial statements.
No gain or loss was recognized on the transaction.

Recent Acquisitions

The acquisitions described under the table below were recorded under the
purchase method of accounting and, accordingly, the operating results have been
included in the Company's consolidated results of operations from the applicable
date of acquisition. Each purchase price was allocated to the assets acquired
and the liabilities assumed based on estimated fair values, with the excess, if
any, of the applicable purchase price over the estimated fair values of the
acquired assets and liabilities recorded as goodwill. These entities or books of
business generally were acquired by the Company in execution of its plan to
acquire businesses that have strategic value, meet its earnings requirements and
advance the growth of its current businesses. The following table presents
actual and proforma data for comparative purposes, for the periods indicated to
demonstrate the proforma effect of all acquisitions as if they occurred on
January 1, 2000.


                                       F-9
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                      2002                          2001                          2000
                                    Proforma         2002         Proforma         2001         Proforma        2000
                                 -----------------------------------------------------------------------------------------
                                                           (in millions, except per share data)
                                   (unaudited)                   (unaudited)                  (unaudited)

<S>                                 <C>            <C>            <C>            <C>           <C>           <C>
Revenue........................     $ 6,557.2      $ 6,469.8      $ 7,266.5      $ 7,124.0     $ 7,715.1     $ 7,374.2

Net income.....................     $   471.5      $   458.9      $   582.7      $   573.9     $   791.7     $   792.2
</TABLE>

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

On April 2, 2001, a subsidiary of the Company, Signature Fruit Company, LLC
(Signature Fruit), purchased certain assets and assumed certain liabilities out
of the bankruptcy proceedings of Tri Valley Growers, Inc., a cooperative
association, for approximately $53.0 million. The net losses related to the
acquired operations included in the Company's results from the date of
acquisition through December 31, 2001 were $3.4 million.

On March 1, 2000, the Company acquired the individual long-term care insurance
business of Fortis, Inc. (Fortis) through a coinsurance agreement for
approximately $165.0 million. The net income relating to the acquired operations
is included in the Company's results from the date of acquisition through
December 31, 2000.

Reorganization

In connection with the Mutual Company's Plan of Reorganization (the Plan),
effective February 1, 2000, the Mutual Company converted from a mutual life
insurance company to a stock life insurance company (i.e., demutualized) and
became a wholly-owned subsidiary of JHFS. All policyholder membership interests
in the Mutual Company were extinguished on that date and eligible policyholders
of the Mutual Company received, in the aggregate, 212.8 million shares of common
stock of JHFS, $1,438.7 million of cash and $43.7 million of policy credits as
compensation. In addition, the Company established a closed block to fund the
guaranteed benefits and dividends of certain participating insurance policies.
In connection with the Plan, the Mutual Company changed its name to John Hancock
Life Insurance Company.

In addition, on February 1, 2000, JHFS completed its initial public offering
(IPO), in which 102.0 million shares of common stock were issued at a price of
$17.00 per share. Net proceeds from the IPO were $1,657.7 million, of which
$105.7 million was retained by JHFS and $1,552.0 million was contributed to the
Company.

Investments

The Company classifies its debt and equity investment securities into one of
three categories: held-to-maturity, available-for-sale or trading. The Company
determines the appropriate classification of debt securities at the time of
purchase and re-evaluates such designation as of each balance sheet date. Fixed
maturity investments include bonds, mortgage-backed securities, and redeemable
preferred stock and are classified as held-to-maturity or available-for-sale.
Those bonds and mortgage-backed securities that the Company has the positive
intent and ability to hold to maturity are classified as held-to-maturity and
are carried at amortized cost. Fixed maturity investments not classified as
held-to-maturity are classified as available-for-sale and are carried at fair
value. Unrealized gains and losses related to available-for-sale securities are
reflected in shareholder's equity, net of related amortization of deferred
policy acquisition costs, amounts credited to participating pension
contractholders, amounts credited to the policyholder dividend obligation, and
applicable taxes. Interest income is generally recorded on an accrual basis. The
amortized cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization is included in investment
income. The amortized cost of fixed maturity investments is adjusted for
impairments in value deemed to be other than temporary and such adjustments are
reported as a component of net realized investment and other gains (losses).


                                      F-10
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

For the mortgage-backed bond portion of the fixed maturity investment portfolio,
the Company recognizes income using a constant effective yield based on
anticipated prepayments and the estimated economic life of the securities. When
actual prepayments differ significantly from anticipated prepayments, the
effective yield is recalculated to reflect actual payments to date plus
anticipated future payments, and any resulting adjustment is included in net
investment income.

Equity securities include common stock and non-redeemable preferred stock.
Equity securities that have readily determinable fair values are carried at fair
value. For equity securities that the Company has classified as
available-for-sale, unrealized gains and losses are reflected in shareholder's
equity, as described above for available-for-sale fixed maturity securities.
Impairments in value deemed to be other than temporary are reported as a
component of net realized investment and other gains (losses). Gains and losses,
both realized and unrealized, on equity securities classified as trading are
included in net realized investment and other gains (losses).

Mortgage loans on real estate are carried at unpaid principal balances adjusted
for amortization of premium or discount, less allowance for probable losses.
When it is probable that the Company will be unable to collect all amounts of
principal and interest due according to the contractual terms of the mortgage
loan agreement, the loan is deemed to be impaired and a valuation allowance for
probable losses is established. The valuation allowance is based on the present
value of the expected future cash flows, discounted at the loan's original
effective interest rate or is based on the collateral value of the loan if the
loan is collateral dependent. The Company estimates this level to be adequate to
absorb estimated probable credit losses that exist at the balance sheet date.
Any change to the valuation allowance for mortgage loans on real estate is
reported as a component of net realized investment and other gains (losses).
Interest received on impaired mortgage loans on real estate is included in
interest income in the period received. If foreclosure becomes probable, the
measurement method used is based on the collateral value. Foreclosed real estate
is then recorded at the collateral's fair value at the date of foreclosure,
which establishes a new cost basis.

Investment real estate, which the Company has the intent to hold for the
production of income, is carried at depreciated cost, using the straight-line
method of depreciation, less adjustments for impairments in value. In those
cases where it is determined that the carrying amount of investment real estate
is not recoverable, an impairment loss is recognized based on the difference
between the depreciated cost and fair value of the asset. The Company reports
impairment losses as part of net realized investment and other gains (losses).

Real estate to be disposed of, including the Company's Home Office, which is
held in the Corporate and Other Segment, is carried at the lower of cost or fair
value less costs to sell. Any change to the valuation allowance for real estate
to be disposed of is reported as a component of net realized investment and
other gains (losses). The Company does not depreciate real estate to be disposed
of. During the fourth quarter of 2002, the Company announced its intent to sell
the majority of its Home Office real estate and ceased depreciating its Home
Office real estate held for sale. As of December 31, 2002 the Home Office real
estate held for sale had a carrying value of $314.6 million and was reported in
other assets on the consolidated balance sheets. The carrying value of the
Company's other real estate to be disposed of was $143.8 million and $280.0
million at December 31, 2002 and 2001, respectively and is reported in real
estate in the Investment section of the consolidated balance sheets.

Policy loans are carried at unpaid principal balances, which approximate fair
value.

Short-term investments are carried at amortized cost, which approximates fair
value.

Net realized investment and other gains (losses), other than those related to
separate accounts for which the Company does not bear the investment risk, are
determined on the basis of specific identification and are reported net of
related amortization of deferred policy acquisition costs, amounts credited to
participating pension contractholder accounts, and amounts credited to the
policyholder dividend obligation.

Derivative Financial 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. All derivative
instruments are carried on the consolidated balance sheets at fair value.


                                      F-11
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

In certain cases, the Company uses hedge accounting as allowed by Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
by designating derivative instruments as either fair value hedges or cash flow
hedges. For derivative instruments that are designated and qualify as fair value
hedges, any change in fair value of the derivative instrument as well as the
offsetting change in fair value of the hedged items are recorded in net realized
investment and other gains (losses). For fair value hedges, when the derivative
has been terminated, a final fair value change will be recorded in net realized
investment and other gains (losses), as well as the offsetting changes in fair
value for the hedged item. At maturity, expiry or sale of the hedged item, a
final fair value change for the hedged item will be recorded in net realized
investment and other gains (losses), as well as the offsetting changes in fair
value for the derivative.

Basis adjustments are amortized into income through net realized investment and
other gains (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. When a cash flow
hedge is terminated, the effective portion of the accumulated derivative gain or
loss will continue to be reported in other comprehensive income and then
reclassified into income when the hedged item affects income. If it is
determined that the forecasted transaction is not probable of occurring, the
accumulated derivative gain or loss included in other comprehensive income would
be immediately recognized in earnings.

Hedge effectiveness is assessed quarterly using a variety of techniques
including regression analysis and cumulative dollar offset. When it is
determined that a derivative is not effective as a hedge, the Company
discontinues hedge accounting. 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.

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 term of the derivative instrument. The change in 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 net realized investment
and other gains (losses). Changes in fair value of derivatives that are not
hedges are included in net realized investment and other gains (losses).

Cash and Cash Equivalents

Cash and cash equivalents include cash and all highly liquid debt investments
with a remaining maturity of three months or less when purchased.

Deferred Policy Acquisition Costs

Deferred acquisition costs (DAC) are costs that vary with, and are related
primarily to, the production of new business and have been deferred to the
extent that they are deemed recoverable. Such costs include commissions, certain
costs of policy issue and underwriting, and certain agency expenses. The Company
tests the recoverability of its DAC quarterly with a model that uses data such
as market performance, lapse rates and expense levels. As of December 31, 2002,
the Company's DAC costs are deemed recoverable.

Similarly, any amounts assessed as initiation fees, or front-end loads are
recorded as unearned revenue. For non-participating term life and long-term care
insurance products, such costs are being amortized over the premium-paying
period of the related policies using assumptions consistent with those used in
computing policy benefit reserves. For participating traditional life insurance
policies, such costs are being amortized over the life of the contracts at a
constant rate based on the present value of the estimated gross margin amounts
expected to be realized over the lives of the contracts.

Estimated gross margin amounts include anticipated premiums and investment
results less claims and administrative expenses, changes in the net level
premium reserve and expected annual policyholder dividends. For universal life
insurance contracts and investment-type products, such costs and revenues are
being amortized generally in proportion to the present value of expected gross
profits arising principally from surrender charges, investment results and
mortality and expense margins.


                                      F-12
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

In the development of expected gross profits, the Company is required to
estimate the growth in the policyholder account balances upon which certain
asset-based fees are charged. In doing so, the Company assumes that, over the
long term, account balances will grow from investment performance. The rate of
growth takes into account the current fixed income/equity mix of account
balances as well as historical fixed income and equity returns. The Company also
assumes that historical variances from the long-term rate will reverse over the
next five-year period. The resulting rates for the next five years are reviewed
for reasonableness, and they are raised or lowered if they produce an annual
growth rate that the Company believes to be unreasonable.

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

As of September 30, 2002, the Company changed several future assumptions with
respect to the expected gross profits in its variable life and variable annuity
businesses. First, we lowered the long-term growth rate assumption from 9%, to
8%, gross of fees. Second, we lowered the average growth rates for the next five
years from the mid-teens to 13%. In addition, we increased certain fee rates on
these policies (the variable series trust (VST) fee increase). These three
changes are referred to collectively as the Q3 Unlocking. The direct effect of
the Q3 Unlocking at September 30, 2002 was an acceleration of amortization of
DAC of $36.1 million in the variable annuity business in the Asset Gathering
Segment and $13.1 million (net of $12.3 million of unearned revenue and $2.5
million in policy benefit reserves) in the variable life business in the
Protection Segment. The impact on net income of the Q3 Unlocking was a reduction
of approximately $27.5 million. Total amortization of DAC, including the
acceleration of amortization of DAC mentioned above, was $313.4 million, $249.0
million and $187.1 million for the years ended December 31, 2002, 2001 and 2000,
respectively.

Amortization of DAC is allocated to: (1) net realized investment and other gains
(losses) for those products in which such gains (losses) have a direct impact on
the amortization of DAC; (2) unrealized investment gains and losses, net of tax,
to provide for the effect on the DAC asset that would result from the
realization of unrealized gains and losses on assets backing participating
traditional life insurance and universal life and investment-type contracts; and
(3) a separate component of benefits and expenses to reflect amortization
related to the gross margins or profits, excluding realized gains and losses,
relating to policies and contracts in force.

Net realized investment and other gains (losses) related to certain products
have a direct impact on the amortization of DAC as such gains and losses affect
the amount and timing of profit emergence. Accordingly, to the extent that such
amortization results from net realized investment and other gains (losses),
management believes that presenting realized investment gains and losses net of
related amortization of DAC provides information useful in evaluating the
operating performance of the Company. This presentation may not be comparable to
presentations made by other insurers.

Reinsurance

The Company utilizes reinsurance agreements to provide for greater
diversification of business, allowing management to control exposure to
potential losses arising from large risks and provide additional capacity for
growth.

Assets and liabilities related to reinsurance ceded contracts are reported on a
gross basis. The accompanying statements of income reflect premiums, benefits
and settlement expenses net of reinsurance ceded. Reinsurance premiums,
commissions, expense reimbursements, benefits and reserves related to reinsured
business are accounted for on bases consistent with those used in accounting for
the original policies issued and the terms of the reinsurance contracts. The
Company remains liable to its policyholders to the extent that counterparties to
reinsurance ceded contracts do not meet their contractual obligations.

Goodwill and Other Intangible Assets

The excess of cost over the fair value of net assets of businesses acquired in
business combinations (goodwill) is recognized as indefinite-lived intangible
assets which are included in other assets in the consolidated balance sheets.
Starting in 2002, goodwill is not amortized, rather it is reviewed for
impairment annually using valuations of reporting units based on earnings and
book value multiples and by reference to similar multiples of publicly traded
peers, and additionally reviewed whenever significant events or changing
circumstances indicate that an impairment may exist. Prior to 2002, goodwill
relating to


                                      F-13
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

acquisitions completed before July 1, 2001 was amortized on a systematic basis
over periods not exceeding 40 years.

The Company records intangible assets representing the present value of
estimated future profits of insurance policies inforce related to businesses
acquired. These assets are recorded as the value of business acquired (VOBA),
and are included in other assets in the consolidated balance sheets. VOBA is
amortized over the related policy periods, up to 30 years. VOBA amortization
expense is recognized each period in proportion to the change in the present
value of expected gross profits, or in proportion to the recognition of premiums
related to the policies acquired, depending on the nature of the policies
acquired.

The cost of mutual fund investment management contracts acquired is recorded as
indefinite-lived intangible assets and is included in other assets in the
consolidated balance sheets. These management contract intangible assets are not
amortized, instead they are reviewed for impairment using the same testing
regimen as is used for goodwill. Refer to Note 17 - Goodwill and Other
Intangible Assets for presentation of summarized financial information regarding
all of these intangible assets.

Separate Accounts

Separate account assets and liabilities reported in the accompanying
consolidated balance sheets represent funds that are administered and invested
by the Company to meet specific investment objectives of the contractholders.
Net investment income and net realized investment and other gains (losses)
generally accrue directly to such contractholders who bear the investment risk,
subject, in some cases, to principal guarantees and minimum guaranteed rates of
income. The assets of each separate account are legally segregated and are not
subject to claims that arise out of any other business of the Company. Separate
account assets are reported at fair value. Deposits, net investment income and
net realized investment and other gains (losses) of separate accounts are not
included in the revenues of the Company. Fees charged to contractholders,
principally mortality, policy administration and surrender charges, are included
in universal life and investment-type product charges.

Future Policy Benefits and Policyholders' Funds

Future policy benefits for participating traditional life insurance policies are
based on the net level premium method. This net level premium reserve is
calculated using the guaranteed mortality and dividend fund interest rates,
which range from 2.5% to 6.2%. The liability for annual dividends represents the
accrual of annual dividends earned. Settlement dividends are accrued in
proportion to gross margins over the life of the contract.

For non-participating traditional life insurance policies, future policy
benefits are estimated using a net level premium method on the basis of
actuarial assumptions as to mortality, persistency, interest and expenses
established at policy issue. Assumptions established at policy issue as to
mortality and persistency are based on the Company's experience, which, together
with interest and expense assumptions, include a margin for adverse deviation.
Benefit liabilities for annuities during the accumulation period are equal to
accumulated contractholders' fund balances and after annuitization are equal to
the present value of expected future payments. Interest rates used in
establishing such liabilities range from 2.5% to 9.5% for life insurance
liabilities, from 2.0% to 14.2% for individual annuity liabilities and from 2.0%
to 11.3% for group annuity liabilities.

Future policy benefits for long-term care insurance policies are based on the
net level premium method. Assumptions established at policy issue as to
mortality, morbidity, persistency, interest and expenses, which include a margin
for adverse deviation, are based on estimates developed by management. Interest
rates used in establishing such liabilities range from 6.0% to 8.5%.

Liabilities for unpaid claims and claim expenses include estimates of payments
to be made on reported individual and group life, long-term care, and group
accident and health insurance claims and estimates of incurred but not reported
claims based on historical claims development patterns.

Estimates of future policy benefit reserves, claim reserves and expenses are
reviewed continually and adjusted as necessary; such adjustments are reflected
in current earnings. Although considerable variability is inherent in such
estimates, management believes that future policy benefit reserves and unpaid
claims and claims expense reserves are adequate.


                                      F-14
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

Policyholders' funds for universal life and investment-type products, including
guaranteed investment contracts and funding agreements, are equal to the
policyholder account values before surrender charges. Policy benefits that are
charged to expense include benefit claims incurred in the period in excess of
related policy account balances and interest credited to policyholders' account
balances. Interest crediting rates range from 4.25% to 7.17% for universal life
products and from 1.4% to 13.8% for investment-type products.

Major components of policyholders' funds presented in the consolidated balance
sheets are summarized as follows:

<TABLE>
<CAPTION>
                                                                             December 31
                                                                           2002         2001
                                                                     ---------------------------
                                                                            (in millions)
<S>                                                                    <C>          <C>
Liabilities for policyholders' funds
     Guaranteed investment contracts.............................      $  5,952.4   $  6,808.5
     U.S. funding agreements.....................................           143.4         67.1
     Global funding agreements backing medium-term notes.........        12,264.7      9,490.4
     Other investment-type contracts.............................         2,274.3      2,247.7
                                                                     ---------------------------

         Total liabilities for investment type contracts.........        20,634.8     18,613.7

Liabilities for individual annuities.............................            54.8         56.6
Universal life and other reserves................................         1,881.4      1,860.0
                                                                     ---------------------------

         Total liabilities for policyholders' funds..............      $ 22,571.0   $ 20,530.3
                                                                     ===========================
</TABLE>

Global Funding Agreements

The Company has two distribution programs for global funding agreements that
back medium-term notes sold world-wide. Under these programs, global funding
agreements are purchased by special purpose entities (SPEs) that fund their
purchases of the global funding agreements with the proceeds from their issuance
of medium-term notes to investors. These entities pledge the global funding
agreements as security for the repayment of their medium-term notes, but the
notes are non-recourse to the Company and its subsidiaries. Under the two
distribution programs, as of December 31, 2002 and 2001, the Company had $12.0
billion and $9.5 billion, respectively, of global funding agreements
outstanding. These global funding agreements are investment products that pay a
stated rate of interest on the principal amount and repay the principal at
maturity, and may not be terminated or surrendered prior to maturity. Claims for
principal and interest under these kinds of global funding agreements are
afforded equal priority to claims of life insurance and annuity policyholders
under the insolvency provisions of the Massachusetts Insurance Laws. If a
medium-term note issued by one of the SPEs is denominated in a currency
different from the currency of the related global funding agreement, the Company
also enters into a currency swap with the SPE, or with a third party, to match
currencies. Similarly, the Company may enter into an interest rate swap with the
SPE to match the interest rate characteristics of the global funding agreement
to those of the related medium-term note.

Under the first program, established in May 1998 for $2.5 billion, expanded to
$7.5 billion in 1999, an SPE issued medium-term notes in Europe, Asia and
Australia. As of December 31, 2002 and 2001, there was $3.8 billion and $3.9
billion, respectively, outstanding under this program. This SPE is consolidated
in the Company's financial statements. The medium-term notes issued by this SPE
are reported with global funding agreements in the Company's consolidated
balance sheets.

Under the second program, established in June 2000, for $5.0 billion, expanded
to $7.5 billion in 2001 and expanded again to $10.0 billion in 2002, an SPE
issued medium-term notes in Europe, Asia, and to institutional investors in the
United States. As of December 31, 2002 and 2001, there was $8.2 billion and $5.6
billion, respectively, outstanding under this program. This SPE is a qualifying
special purpose entity (QSPE) in accordance with SFAS No. 140 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities",
and is therefore not consolidated in the Company's financial statements. The
funding agreements backing the related medium-term notes are included in
policyholders' funds in the Company's consolidated balance sheets.


                                      F-15
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

At December 31, 2002, the annual contractual maturities of global funding
agreements on notes issued under both programs were as follows: 2003 - $1,761.0
million; 2004 - $2,004.5 million; 2005 - $1,897.0 million; 2006 - $2,144.5
million; 2007 - $661.6 million; 2008 and thereafter - $3,531.8 million.

Participating Insurance

Participating business represents approximately 81.6%, 76.6%, and 86.3% of the
Company's life insurance in force, 96.3%, 98.1%, and 97.9% of the number of life
insurance policies in force, and 92.5%, 92.1% and 99.6%, of life insurance
premiums in 2002, 2001 and 2000, respectively.

The portion of earnings allocated to participating pension contractholders and
closed block policyholders that cannot be expected to inure to the Company is
excluded from net income and shareholder's equity.

The amount of policyholders' dividends to be paid is approved annually by the
Company's Board of Directors. The determination of the amount of policyholder
dividends is complex and varies by policy type. In general, the aggregate amount
of policyholders' dividends is related to actual interest, mortality, morbidity,
persistency and expense experience for the year and is also based on
management's judgment as to the appropriate level of statutory surplus to be
retained by the Company. For policies included in the closed block, expense
experience is not included in determining policyholders' dividends.

Revenue Recognition

Premiums from participating and non-participating traditional life insurance and
annuity policies with life contingencies are recognized as income when due.

Premiums from universal life and investment-type contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period against policyholders' account
balances for mortality charges, policy administration charges and surrender
charges.

Premiums for contracts with a single premium or a limited number of premium
payments, due over a significantly shorter period than the total period over
which benefits are provided, are recorded in income when due. The portion of
such premium that is not required to provide for all benefits and expenses is
deferred and recognized in income in a constant relationship to insurance in
force or, for annuities, the amount of expected future benefit payments.

Premiums from long-term care insurance contracts are recognized as income when
due. Premiums from group life and health insurance contracts are recognized as
income over the period to which the premiums relate in proportion to the amount
of insurance protection provided.

Investment advisory, transfer agent, distribution and service fees are
recognized as revenues when services are performed. Commissions related to
security transactions and related expenses are recognized as income on the trade
date. Contingent deferred selling charge commissions are recognized as income in
the year received. Selling commissions paid to the selling broker/dealer for
sales of mutual funds that do not have a front-end sales charge are deferred and
amortized on a straight-line basis over periods not exceeding six years. This is
the approximate period of time expected to be benefited and during which fees
earned pursuant to Rule 12b-1 distribution plans are received from the funds and
contingent deferred sales charges are received from shareholders of the funds.

Stock-Based Compensation

At December 31, 2002, the Company has two stock-based compensation plans, which
are described more fully in Note 16 - Stock Compensation Plans. For the periods
covered by this report, the Company applies the recognition and measurement
provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations in accounting for those
plans. No compensation expense is reflected in net income for stock option
grants to employees and non-employee board members of the Company. All options
granted under those plans had an exercise price equal to the market value of
JHFS common stock on the date of grant. The Company did recognize compensation
expense for grants of non-vested stock to employees and non-employee board
members and grants of stock options to non-


                                      F-16
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

employee general agents. See Note 16 - Stock Compensation Plans for additional
discussion. The following table illustrates the pro forma effect on net income
if the Company had applied the fair value recognition provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," to stock-based employee
compensation.

<TABLE>
<CAPTION>
                                                                           For the period
                                                                             February 1       Year Ended
                                        Year Ended        Year Ended          through      December 31, 2000
                                        December 31,      December 31,      December 31,       Pro Forma
                                           2002              2001              2000          (unaudited)
                                      --------------------------------------------------------------------
                                                                  (in millions)

<S>                                      <C>                <C>               <C>              <C>
Net income, as reported...........       $ 458.9            $573.9            $750.3           $792.2
Add: Stock-based employee
   compensation expense
   included in reported net
   income, net of related tax
   effects........................           0.9               0.8                --               --
Deduct: Total stock-based
   employee compensation
   expense determined under
   fair value method for all
   awards, net of related tax
   effects (unaudited)............          55.0              34.1               1.5              2.2
                                      --------------------------------------------------------------------
Pro forma net income
   (unaudited)....................       $ 404.8            $540.6            $748.8           $790.0
                                      ====================================================================
</TABLE>

Federal Income Taxes

The provision for federal income taxes includes amounts currently payable or
recoverable and deferred income taxes, computed under the liability method,
resulting from temporary differences between the tax basis and book basis of
assets and liabilities. A valuation allowance is established for deferred tax
assets when it is more likely than not that an amount will not be realized.
Foreign subsidiaries and U.S. subsidiaries operating outside of the United
States are taxed under applicable foreign statutory rates.

Foreign Currency Translation

The assets and liabilities of operations in foreign currencies are translated
into United States dollars at current exchange rates. Revenues and expenses are
translated at average rates during the year. The resulting net translation
adjustments for each year are accumulated and included in shareholder's equity.
Gains or losses on foreign currency transactions are reflected in earnings.

Severance

During 2002, the Company continued its ongoing Competitive Position Project.
This project was initiated in the first quarter of 1999 to reduce costs and
increase future operating efficiency by consolidating portions of the Company's
operations and is expected to continue through at least 2003. The project
consists primarily of reducing staff in the home office and terminating certain
operations outside the home office.

Since the inception of the project, approximately 1,400 employees have been
terminated. As of December 31, 2002 and 2001, the liability for employee
termination costs included in other liabilities was $12.4 million and $18.0
million, respectively. Employee termination costs, net of related pension and
other post employment benefit curtailment gains, are included in other operating
costs and expenses and were $18.6 million, $40.0 million and $18.8 million for
the years ended December 31, 2002, 2001 and 2000, respectively. Benefits paid
since the inception of the project were $97.1 million through December 31, 2002.


                                      F-17
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

Cumulative Effect of Accounting Changes

During the first quarter of 2001, the Company changed the method of accounting
for the recognition of deferred gains and losses considered in the calculation
of the annual expense for its employee pension plan under SFAS No. 87,
"Employers' Accounting for Pensions," and for its postretirement health and
welfare plans under SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The Company changed the method of recognizing
gains and losses from deferral within a 10% corridor and amortization of gains
outside this corridor over the future working careers of the participants to
deferral within a 5% corridor and amortization of gains and losses outside this
corridor over the future working careers of the participants. The new method is
preferable because in the Company's situation, it produces results that more
closely match current economic realities of the Company's retirement and welfare
plans through the use of the current fair values of assets while still
mitigating the impact of extreme gains and losses. As a result, on January 1,
2001, the Company recorded a credit of $18.6 million (net of tax of $9.9
million), related to its employee benefit pension plans, and a credit of $4.7
million (net of tax of $2.6 million), related to its postretirement health and
welfare plans. The total credit recorded as a cumulative effect of an accounting
change was $23.3 million (net of tax of $12.5 million) for the year ended
December 31, 2001. This change in accounting increased net income for the year
ended December 31, 2001 by $4.4 million. The unaudited pro forma results for the
years ended December 31, 2001 and 2000, assuming this change in accounting had
taken place as of the beginning of 2001 and 2000, would not be materially
different from the reported results.

On January 1, 2001, the Company adopted SFAS No. 133, as amended by SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of FASB Statement 133." The adoption of SFAS No. 133,
as amended, resulted in a charge to operations accounted for as a cumulative
effect of accounting change of $16.1 million (net of tax benefit of $8.3
million) as of January 1, 2001. In addition, as of January 1, 2001, a $227.6
million (net of tax of $122.6 million) cumulative effect of accounting change
was recorded in other comprehensive income for (1) the transition adjustment in
the adoption of SFAS No. 133, as amended, an increase of $40.5 million (net of
tax of $21.8 million), and (2) the reclassification of $12.1 billion in
securities from the held-to-maturity category to the available-for-sale
category, an increase of $187.1 million (net of tax of $100.8 million).

Recent Accounting Pronouncements

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

In February 2002, the Derivative Implementation Group (DIG) exposed for comment
SFAS No. 133 Implementation Issue No. 36, "Embedded Derivatives: Bifurcation of
a Debt Instrument that Incorporates Both Interest Rate Risk and Credit Rate Risk
Exposures that are Unrelated or Only Partially Related to the Creditworthiness
of the Issuer of that Instrument" (DIG B36). DIG B36 addresses whether FAS 133
requires bifurcation of a debt instrument into a debt host contract and an
embedded derivative if the debt instrument incorporates both interest rate risk
and credit risk exposures that are unrelated or only partially related to the
creditworthiness of the issuer of that instrument. Under DIG B36 modified
coinsurance and coinsurance with funds withheld reinsurance agreements as well
as other types of receivables and payables where interest is determined by
reference to a pool of fixed maturity assets or a total return debt index are
examples of arrangements containing embedded derivatives requiring bifurcation.
DIG B36 is not expected to be finalized by the FASB until the second quarter of
2003.

If DIG B36 is finalized in its current form, the Company has determined that
certain of its reinsurance receivables/(payables) and certain of its insurance
products would contain embedded derivatives requiring bifurcation. The Company
has not yet determined the fair value of the related embedded derivatives in
these products. Management believes that the embedded derivatives would not
have a material impact on the Company's consolidated financial position, results
of operations or cash flows.

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

In January 2003, the FASB issued Interpretation 46, "Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51," (FIN 46) which clarifies
the consolidation accounting guidance of Accounting Research Bulletin No. 51,


                                      F-18
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

"Consolidated Financial Statements," (ARB No. 51) to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
Such entities are known as variable interest entities (VIEs).

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

The Company cannot, at this time, reliably estimate the future potential impact
of consolidating any VIEs with which it is involved. Additional liabilities
recognized as a result of consolidating VIEs with which the Company is involved
would not represent additional claims on the general assets of the Company;
rather, they would represent claims against additional assets recognized by the
Company as a result of consolidating the VIEs. Conversely, additional assets
recognized as a result of consolidating these VIEs would not represent
additional assets which the Company could use to satisfy claims against its
general assets, rather they would be used only to settle additional liabilities
recognized as a result of consolidating the VIEs. Refer to Note 4 -
Relationships with Variable Interest Entities for a more complete discussion of
the Company's relationships with VIEs, their assets and liabilities, and the
Company's maximum exposure to loss as a result of its involvement with them.

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

In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of SFAS No. 123." SFAS
No. 148 provides alternative methods of transition for a voluntary change to the
fair value method of accounting for stock-based employee compensation which is
an optional alternative method of accounting presented in SFAS No. 123,
"Accounting for Stock-Based Compensation." In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require more prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. SFAS No. 148's amendment of the transition and annual disclosure
provisions of SFAS No. 123 are effective for fiscal years ending after December
15, 2002. The Company will adopt the fair value provisions of SFAS No. 123 as of
January 1, 2003 and utilize the transition provisions described in SFAS No. 148,
on a prospective basis to awards granted after December 31, 2002. Adoption of
the fair value provisions of SFAS No. 123 will have a material impact on the
Company's net income. The Company has adopted the disclosure provisions of SFAS
No. 148, see Note 1 - Summary of Significant Accounting Policies, Stock-Based
Compensation above, and Note 16 - Stock Compensation Plans.

For the periods covered by this report, Accounting Principles Board Opinion
(APB) No. 25, "Accounting for Stock Issued to Employees" was applied. APB No. 25
provides guidance on how to account for the issuance of stock and stock options
to employees. The Company adopted APB No. 25 upon its demutualization and JHFS'
IPO effective February 1, 2000. Compensation cost for stock options, if any, is
measured as the excess of the quoted market price of JHFS' stock at the date of
grant over the amount an employee must pay to acquire the stock. Any resulting
compensation cost is recognized over the requisite vesting period based on
market value on the date of the grant. APB No. 25 was amended by SFAS No. 123,
to require pro forma disclosures of net income and earnings per share as if a
"fair value" based method was used. On March 31, 2000, the FASB issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB No. 25" (FIN 44). FIN 44 clarifies
guidance for certain issues that arose in the application of APB No. 25. The
Company was required to adopt the Interpretation on July 1, 2000. FIN 44 did not
have a material impact on the Company's results of operations or financial
position.


                                      F-19
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

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

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

Disclosure requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002. Refer to Note 12 - Commitments,
Guarantees and Contingencies. Initial recognition and initial measurement
provisions are applicable on a prospective bais to guarantees issued or modified
after December 31, 2002. The Company cannot determine the impact, if any, of
adopting FIN 45.

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

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

SFAS No. 142 - Goodwill and Other Intangible Assets

In January 2002, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 requires that goodwill and other intangible
assets deemed to have indefinite lives no longer be amortized to earnings, but
instead be reviewed at least annually for impairment. Intangible assets with
definite lives will continue to be amortized over their useful lives. The
Company's adoption of SFAS No. 142 on January 1, 2002, and the cessation of
amortization of previously amortizable goodwill and management contracts
resulted in an increase in net income of $7.4 million (net of tax of $3.4
million) for the year ended December 31, 2002. The Company has performed the
required initial impairment tests of goodwill and management contracts as of
January 1, 2002, and has also performed the first annual impairment test as of
September 30, 2002, based on the guidance in SFAS No. 142. The Company evaluated
the goodwill and indefinite lived management contracts for impairment using
valuations of reporting units based on earnings and book value multiples and by
reference to similar multiples of publicly traded peers. No goodwill or
management contract impairments resulted from these required impairment tests.

Issue 01-10 - Accounting for the Impact of the Terrorist Attacks of September
11, 2001

In September 2001, FASB's Emerging Issues Task Force (EITF) reached a consensus
on Issue 01-10, "Accounting for the Impact of the Terrorist Attacks of September
11, 2001." Issue 01-10 presents guidance relative to accounting for and
financial reporting of the events of September 11, 2001 (the Events), including
both how and when to measure, record and report losses and any resulting
liabilities which are directly attributable to the Events. Based on a
comprehensive review of the Company's operations, the Company believes that the
Events had no material financial impact on the Company's results of operations
or financial position.


                                      F-20
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

SFAS No. 141 - Business Combinations

In June 2001, the FASB issued SFAS No. 141, "Business Combinations." SFAS No.
141 requires that all business combinations be accounted for under a single
method, the purchase method. Use of the pooling-of-interests method is no longer
permitted. SFAS No. 141 also clarifies the criteria to recognize intangible
assets separately from goodwill, and prohibits the amortization of goodwill
relating to acquisitions completed after July 1, 2001. SFAS No. 141 is effective
for business combinations initiated after June 30, 2001.

Issue No. 99-20 - Recognition of Interest Income and Impairment on Purchased and
Retained Beneficial Interests in Securitized Financial Assets

In January 2001, the FASB's Emerging Issues Task Force (EITF) reached a
consensus on Issue No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets."
Issue 99-20 requires investors in certain asset-backed securities to record
changes in their estimated yield on a prospective basis and specifies evaluation
methods with which to evaluate these securities for an other-than-temporary
decline in value. The adoption of EITF 99-20 did not have a material financial
impact on the Company's results of operations or financial position.

Statement of Position 00-3 - Accounting by Insurance Enterprises for
Demutualizations and Formations of Mutual Insurance Holding Companies and
Certain Long-Duration Participating Contracts

In December 2000, the AICPA issued SOP 00-3, "Accounting by Insurance
Enterprises for Demutualizations and Formations of Mutual Insurance Holding
Companies and Certain Long-Duration Participating Contracts." The SOP, which was
adopted with respect to accounting for demutualization expenses by the Company
on December 31, 2000, requires that demutualization related expenses be
classified as a single line item within income from continuing operations and
should not be classified as an extraordinary item. On October 1, 2001, the
Company adopted the remaining provisions of SOP 00-3 which required the
reclassification of $9,710.0 million and $12,035.9 million of closed block
assets and liabilities, respectively at December 31, 2000, and $1,467.7 million
and $1,343.6 million of closed block revenues, and benefits and expenses,
respectively, for the period from February 1, 2000 (date of demutualization) to
December 31, 2000, all of which were reclassified to other existing asset,
liability, revenue, and benefit and expense accounts. The required
implementation of SOP 00-3 also resulted in a reduction of net income of $20.2
million (net of tax of $6.6 million), for the period from February 1, 2000 to
December 31, 2000 and $3.4 million (net of tax of $1.8 million), for the nine
months ended September 30, 2001. Previously reported net income included higher
than expected closed block results primarily due to higher investment earnings
and better mortality and lapse experience, which upon the adoption of SOP 00-3,
were excluded from net income and set up in the PDO liability. Finally, adoption
also resulted in the recognition of a policyholder dividend obligation of $77.0
million at December 31, 2000, which represents cumulative actual closed block
earnings in excess of expected periodic amounts calculated at the date of the
demutualization. See Note 7 for a summary description of the closed block
assets, liabilities, revenues and expenses.


                                      F-21
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

SFAS No. 140 - Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." SFAS No. 140 provides new accounting
and reporting standards which are based on consistent application of a financial
components approach that focuses on control. Under this approach, after a
transfer of financial assets, the Company recognizes the financial and servicing
assets it controls and the liabilities it has incurred, derecognizes financial
assets when control has been surrendered, and derecognizes liabilities when
extinguished. SFAS No. 140 provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. SFAS No. 140 is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after March 31, 2001. The
adoption of SFAS No. 140 did not have a material impact on the Company's results
of operations or financial position.

Codification

In March 1998, the National Association of Insurance Commissioners (NAIC)
adopted codified statutory accounting principles (Codification) effective
January 1, 2001. Codification changes prescribed statutory accounting practices
and resulted in changes to the accounting practices that the Company and its
domestic life insurance subsidiaries use to prepare their statutory-basis
financial statements. The states of domicile of the Company and its domestic
life insurance subsidiaries have adopted Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis results
effective January 1, 2001. The cumulative effect of changes in accounting
principles adopted to conform to the requirements of Codification is reported as
an adjustment to surplus in the statutory-basis financial statements as of
January 1, 2001. Implementation of Codification did not have a material impact
on the Company's domestic life insurance subsidiaries' statutory-basis capital
and surplus, and these companies remain in compliance with all regulatory and
contractual obligations.


                                      F-22
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Related Party Transactions

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

The Company provides JHFS, its parent, with personnel, property, and facilities
in carrying out certain of its corporate functions. The Company 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. The Company charged JHFS service fees of $23.0
million, $28.5 million and $19.8 million for the years ending December 31, 2002,
2001 and 2000, respectively. As of December 31, 2002, JHFS was current in its
payments to the Company related to these services.

The Company provides certain administrative and asset management services to its
pension plans and employee welfare trust (the Plans). Fees paid to the Company
for these services were $6.9 million, $8.4 million and $6.4 million during the
years ended December 31, 2002, 2001 and 2000, respectively.

During the year ended 2002, the Company paid approximately $180.0 million in
premiums to an affiliate, John Hancock Insurance Company of Vermont (JHIC of
Vermont) for certain insurance services. Approximately $100.0 million of these
premiums were for corporate owned life insurance (COLI), which provides
insurance coverage for key management employees. The death benefit on this COLI
product would cover the cost of replacing these employees, including recruiting,
training, and development. The remaining $80.0 million were in Trust Owned
Health Insurance (TOHI) premiums, a funding vehicle for postretirement medical
benefit plans, which offers customers an insured medical benefit-funding program
in conjunction with a broad range of investment options.

The Company has reinsured certain portions of its long term care insurance and
group pension businesses with John Hancock Reassurance Company, Ltd. of Bermuda
(JHReCo), an affiliate and wholly owned subsidiary of JHFS. The Company entered
into these reinsurance contracts in order to facilitate its capital management
process. These reinsurance contracts are primarily written on a funds withheld
basis where the related financial assets remain invested at the Company. As a
result, the Company recorded a liability for coinsurance amounts withheld from
JHReCo of $1,631.5 million and $1,158.9 million at December 31, 2002 and 2001,
respectively, which are included with other liabilities in the consolidated
balance sheets and recorded reinsurance recoverable from JHReCo of $2,043.7
million and $1,504.6 million at December 31, 2002 and 2001, respectively, which
are included with other reinsurance recoverables on the consolidated balance
sheets. Premiums ceded to JHReCo were $596.8 million, $740.8 million and $396.7
during the years ended December 31, 2002, 2001 and 2000 respectively.

During the year ended 2002, the Company reinsured certain portions of its group
pension businesses with an affiliate, JHIC of Vermont. The Company entered into
these reinsurance contracts in order to facilitate its capital management
process. These reinsurance contracts are primarily written on a funds withheld
basis where the related financial assets remain invested at the Company. As a
result, the Company recorded a liability for coinsurance amounts withheld from
JHIC of Vermont of $98.6 million at December 31, 2002, which is included with
other liabilities in the consolidated balance sheets. At December 31, 2002, the
Company had not recorded any reinsurance recoverable from JHIC of Vermont.
Reinsurance recoverable is typically recorded with other reinsurance
recoverables on the consolidated balance sheet. Premiums ceded by the Company to
JHIC of Vermont were $0.8 million during the year ended December 31, 2002.


                                      F-23
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments

The following information summarizes the components of net investment income and
net realized investment and other gains (losses):

<TABLE>
<CAPTION>
                                                                                       Years Ended December 31,
                                                                                 2002            2001             2000
                                                                          ------------------------------------------------
                                                                                           (in millions)
<S>                                                                           <C>              <C>             <C>
Net Investment Income
    Fixed maturities.................................................        $3,017.3         $2,721.2        $2,456.2
    Equity securities................................................            10.6             29.7            23.3
    Mortgage loans on real estate....................................           775.8            774.4           796.2
    Real estate......................................................            72.1             67.7            82.7
    Policy loans.....................................................           120.1            118.4           112.7
    Short-term investments...........................................            20.5             73.9           147.1
    Other............................................................          (210.4)           101.4           200.7
                                                                          ---------------  --------------  ---------------
    Gross investment income..........................................         3,806.0          3,886.7         3,818.9

        Less investment expenses.....................................           225.0            240.5           255.0
                                                                          ---------------  --------------  ---------------

Net investment income.................................................        $3,581.0        $3,646.2        $3,563.9
                                                                          ---------------  --------------  ---------------

Net realized investment and other gains (losses), net of related
    amortization of deferred policy acquisition costs, amounts
    credited to the policyholder dividend obligation and amounts
    credited to participating pension contractholders
    Fixed maturities.................................................          (660.9)          (392.6)       $ (135.3)
    Equity securities................................................           101.2            165.7           196.1
    Mortgage loans on real estate and real estate to be disposed of..            (7.9)           (71.2)          (15.2)
    Derivatives and other invested assets............................            43.0             48.2            44.3
    Amortization adjustment for deferred policy acquisition costs....            38.9             29.4             9.4
    Amounts credited to the policyholder dividend obligation.........            11.9             17.0           (14.1)
    Amounts credited to participating pension contractholders........            23.3            (42.3)           (6.9)
                                                                          ---------------  --------------  ---------------

Net realized investment and other gains (losses), net of related
    amortization of deferred policy acquisition costs, amounts
    credited to the policyholder dividend obligation and amounts
    credited to participating pension contractholders................        $ (450.5)        $ (245.8)       $   78.3
                                                                          ===============  ==============  ===============
</TABLE>


                                      F-24
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments - (continued)

Gross gains of $320.0 million in 2002, $433.1 million in 2001 and $294.6 million
in 2000, and gross losses of $176.0 million in 2002, $150.6 million in 2001 and
$123.6 million in 2000, were realized on the sale of available-for-sale
securities.

The Company's investments in held-to-maturity securities and available-for-sale
securities are summarized below:

<TABLE>
<CAPTION>
                                                                                 Gross        Gross
                                                                  Amortized    Unrealized   Unrealized      Fair
                                                                     Cost        Gains        Losses       Value
                                                                 ----------------------------------------------------
                                                                                    (in millions)
<S>                                                                <C>         <C>          <C>           <C>
December 31, 2002
Held-to-Maturity:

Corporate securities..........................................     $  1,189.6  $   32.2     $    4.5      $ 1,217.3

Mortgage-backed securities....................................          533.3      30.0          7.6          555.7

Obligations of states and political subdivisions..............            4.1       0.1           --            4.2
                                                                 ----------------------------------------------------

     Total fixed maturities held-to-maturity..................     $  1,727.0  $   62.3     $   12.1      $ 1,777.2
                                                                 ====================================================

Available-for-Sale:

Corporate securities..........................................     $ 33,569.7  $1,815.7     $1,156.2      $34,229.2

Mortgage-backed securities....................................        6,874.2     384.0        268.4        6,989.8

Obligations of states and political subdivisions..............          295.4      22.5           --          317.9

Debt securities issued by foreign governments.................          291.5      36.0          2.5          325.0

U.S. Treasury securities and obligations of
     U.S. government corporations and agencies................          175.7       8.7           --          184.4
                                                                 ----------------------------------------------------

Fixed maturities available-for-sale...........................       41,206.5   2,266.9      1,427.1       42,046.3

Equity securities.............................................          307.5      69.4         27.3          349.6
                                                                 ----------------------------------------------------

     Total fixed maturities and equity securities
         available-for-sale...................................     $ 41,514.0  $2,336.3     $1,454.4      $42,395.9
                                                                 ====================================================
</TABLE>


                                      F-25
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments - (continued)

<TABLE>
<CAPTION>
                                                                                       Gross        Gross
                                                                        Amortized    Unrealized   Unrealized      Fair
                                                                           Cost        Gains        Losses       Value
                                                                       ----------------------------------------------------
                                                                                          (in millions)
<S>                                                                     <C>           <C>          <C>         <C>
December 31, 2001
Held-to-Maturity:

Corporate securities...............................................     $  1,073.9    $    28.3    $    15.2   $  1,087.0

Mortgage-backed securities.........................................          844.9         14.5         43.0        816.4

Obligations of states and political subdivisions...................            4.7          0.1           --          4.8
                                                                       ----------------------------------------------------

     Total fixed maturities held-to-maturity.......................     $  1,923.5    $    42.9    $    58.2   $  1,908.2
                                                                       ====================================================

Available-for-Sale:

Corporate securities...............................................     $ 29,680.2    $ 1,103.5    $   879.1   $ 29,904.6

Mortgage-backed securities.........................................        5,252.7        125.1         98.7      5,279.1

Obligations of states and political subdivisions...................           93.3          5.5          0.2         98.6

Debt securities issued by foreign governments......................          457.1         44.7          4.0        497.8

U.S. Treasury securities and obligations of
     U.S. government corporations and agencies.....................          294.7          3.8          6.5        292.0
                                                                       ----------------------------------------------------

Fixed maturities available-for-sale................................       35,778.0      1,282.6        988.5     36,072.1

Equity securities..................................................          433.1        175.5         46.3        562.3
                                                                       ----------------------------------------------------

     Total fixed maturities and equity securities
         available-for-sale........................................     $ 36,211.1    $ 1,458.1    $ 1,034.8   $ 36,634.4
                                                                       ====================================================
</TABLE>


                                      F-26
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments - (continued)

The amortized cost and fair value of fixed maturities at December 31, 2002, by
contractual maturity, are shown below:

                                                 Amortized              Fair
                                                   Cost                 Value
                                               ---------------------------------
                                                         (in millions)
Held-to-Maturity:
Due in one year or less.....................     $    17.7          $      18.1
Due after one year through five years.......          30.7                 42.3
Due after five years through ten years......         194.1                200.3
Due after ten years.........................         951.2                960.8
                                               ---------------   ---------------
                                                   1,193.7              1,221.5

Mortgage-backed securities..................         533.3                555.7
                                               ---------------   ---------------

Total.......................................     $ 1,727.0          $   1,777.2
                                               ===============   ===============

Available-for-Sale:
Due in one year or less.....................     $ 2,049.3          $   2,090.1
Due after one year through five years.......      10,509.1             10,700.3
Due after five years through ten years......      12,421.6             12,768.1
Due after ten years.........................       9,352.3              9,498.0
                                               ---------------   ---------------
                                                  34,332.3             35,056.5

Mortgage-backed securities..................       6,874.2              6,989.8
                                               ---------------   ---------------

Total.......................................     $41,206.5          $  42,046.3
                                               ===============   ===============

Expected maturities may differ from contractual maturities because eligible
borrowers may exercise their right to call or prepay obligations with or without
call or prepayment penalties.

The change in net unrealized gains (losses) on trading securities that has been
included in earnings during 2002, 2001 and 2000 amounted to $1.7 million, $(1.8)
million and $0.1 million, respectively.

The Company participates in a security lending program for the purpose of
enhancing income on securities held. At December 31, 2002 and 2001, $625.5
million and $775.4 million, respectively, of the Company's securities, at market
value, were on loan to various brokers/dealers, and were fully collateralized by
cash and highly liquid securities. The market value of the loaned securities is
monitored on a daily basis, and the collateral is maintained at a level of at
least 102.0% of the loaned securities' market value.

For 2002, 2001 and 2000, investment results passed through to participating
pension contractholders as interest credited to policyholders' account balances
amounted to $168.3 million, $170.5 million and $171.7 million, respectively.


                                      F-27
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments - (continued)

Mortgage loans on real estate are evaluated periodically as part of the
Company's loan review procedures and are considered impaired when, based on
current information and events, it is probable that the Company will be unable
to collect all amounts due according to the contractual terms of the loan
agreement. The allowance for losses is maintained at a level believed adequate
by management to absorb estimated probable credit losses that exist at the
balance sheet date. Management's periodic evaluation of the adequacy of the
allowance for losses is based on the Company's past loan loss experience, known
and inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay (including the timing of future payments), the
estimated value of the underlying collateral, composition of the loan portfolio,
current economic conditions and other relevant factors. This evaluation is
inherently subjective as it requires estimating the amounts and timing of future
cash flows expected to be received on impaired mortgage loans that may be
susceptible to significant change.

Changes in the allowance for probable losses on mortgage loans on real estate
and real estate to be disposed of are summarized below.

<TABLE>
<CAPTION>
                                                                  Balance at                                  Balance at
                                                                  Beginning                                     End of
                                                                   of Year      Additions      Deductions        Year
                                                                ---------------------------------------------------------
                                                                                      (in millions)
<S>                                                                 <C>           <C>            <C>            <C>
Year ended December 31, 2002
     Mortgage loans on real estate..........................        $ 112.8       $   8.0        $  59.1        $  61.7
     Real estate to be disposed of..........................           83.6          29.6          113.2             --
                                                                ---------------------------------------------------------
Total                                                               $ 196.4       $  37.6        $ 172.3        $  61.7
                                                                =========================================================

Year ended December 31, 2001
     Mortgage loans on real estate..........................        $  81.6       $  37.8        $   6.6        $ 112.8
     Real estate to be disposed of..........................           43.5          46.0            5.9           83.6
                                                                ---------------------------------------------------------
Total                                                               $ 125.1       $  83.8        $  12.5        $ 196.4
                                                                =========================================================

Year ended December 31, 2000
     Mortgage loans on real estate..........................        $ 107.9       $   4.6        $  30.9        $  81.6
     Real estate to be disposed of..........................           58.1          17.1           31.7           43.5
                                                                ---------------------------------------------------------
Total                                                               $ 166.0       $  21.7        $  62.6        $ 125.1
                                                                =========================================================
</TABLE>

At December 31, 2001 and 2000, the total recorded investment in mortgage loans
that are considered to be impaired under SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," along with the related provision for losses were as
follows:

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                                  2002             2001
                                                                              -------------------------------
                                                                                      (in millions)

<S>                                                                               <C>             <C>
Impaired mortgage loans on real estate with provision for losses...........       $ 57.2          $ 92.5
Provision for losses.......................................................        (17.1)          (42.6)
                                                                              --------------  ---------------
Net impaired mortgage loans on real estate.................................       $ 40.1          $ 49.9
                                                                              ==============  ===============
</TABLE>


                                      F-28
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments - (continued)

The average recorded investment in impaired loans and the interest income
recognized on impaired loans were as follows:

                                                       Years Ended December 31,
                                                       2002     2001      2000
                                                     ---------------------------
                                                             (in millions)

Average recorded investment in impaired loans.......  $ 74.9  $ 62.5    $ 100.3
Interest income recognized on impaired loans........     5.0     8.4        2.9

The payment terms of mortgage loans on real estate may be restructured or
modified from time to time. Generally, the terms of the restructured mortgage
loans call for the Company to receive some form or combination of an equity
participation in the underlying collateral, excess cash flows or an effective
yield at the maturity of the loans sufficient to meet the original terms of the
loans.

Restructured mortgage loans aggregated $54.8 million and $285.4 million as of
December 31, 2002 and 2001, respectively. The expected gross interest income
that would have been recorded had the loans been current in accordance with the
original loan agreements and the actual interest income recorded were as
follows:

                                             Years Ended December 31,
                                     2002              2001             2000
                                  ----------------------------------------------
                                                  (in millions)
Expected.....................       $ 4.8             $24.3            $16.7
Actual.......................         4.7              23.0             16.6

At December 31, 2002, the mortgage portfolio was diversified by specific
collateral property type and geographic region as displayed below:

<TABLE>
<CAPTION>
Collateral                                       Carrying        Geographic                                      Carrying
Property Type                                     Amount         Concentration                                    Amount
----------------------------------------------------------------------------------------------------------------------------
                                              (in millions)                                                   (in millions)
<S>                                            <C>               <C>                                           <C>
Apartments..............................       $   1,416.8       East North Central......................      $   1,108.6
Hotels..................................             450.0       East South Central......................            433.1
Industrial..............................             921.9       Middle Atlantic.........................          1,456.1
Office buildings........................           2,796.4       Mountain................................            491.4
Retail..................................           1,790.0       New England.............................            799.5
Multi family............................               1.4       Pacific.................................          2,147.5
Mixed Use...............................             156.1       South Atlantic..........................          2,242.7
Agricultural............................           2,648.6       West North Central......................            453.2
Other...................................             177.0       West South Central......................            957.8
                                                                 Canada/Other............................            268.3

Allowance for losses....................             (61.7)      Allowance for losses....................            (61.7)
                                               --------------                                                  -------------

Total...................................       $  10,296.5       Total...................................      $  10,296.5
                                               ==============                                                  =============
</TABLE>

Mortgage loans with outstanding principal balances of $18.1 million, bonds with
amortized cost of $365.0 million and real estate with a carrying value of $0.5
million were non-income producing for the year ended December 31, 2002.


                                      F-29
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments - (continued)

The Company originates commercial mortgages and sells them to Commercial
Mortgage Backed Securities Trusts (Trusts), and in certain cases, retains
servicing rights to the mortgages sold. These Trusts are QSPEs in accordance
with SFAS No. 140 and therefore, as transferor of financial assets to these
Trusts, the Company is prohibited from using consolidation accounting for its
relationships with them. In accordance with FIN 46, this prohibition will
continue. During 2002, 2001 and 2000, the Company sold $343.5 million, $542.9
million and $359.2 million of commercial mortgage loans in securitization
transactions, respectively, for which it received net proceeds of $345.2
million, $546.5 million and $362.2 million, respectively, from which it
recognized pre-tax gains of $1.9 million, $4.1 million and $3.4 million,
respectively, and from which it retained servicing assets of $0.3 million, $0.5
million and $0.4 million, respectively. The Company's mortgage servicing assets
were valued, in the aggregate, at $1.3 million and $1.2 million at December 31,
2002 and 2001, respectively.

Depreciation expense on investment real estate was $3.0 million, $4.6 million,
and $7.9 million in 2002, 2001, and 2000, respectively. Accumulated depreciation
was $49.4 million and $65.1 million at December 31, 2002 and 2001, respectively.

Investments in other assets, which include unconsolidated joint ventures,
partnerships, and limited liability corporations, accounted for using the equity
method of accounting totaled $1,341.0 million and $1,062.1 million at December
31, 2002 and 2001, respectively. Total combined assets of such investments were
$13,864.9 million and $12,541.6 million (consisting primarily of investments),
and total combined liabilities were $2,107.5 million and $1,108.6 million
(including $1,109.6 million and $580.0 million of loans payable) at December 31,
2002 and 2001, respectively. Total combined revenues and expenses of these
investments in 2002 were $779.9 million and $819.1 million, respectively,
resulting in ($39.2) million of total combined loss from operations. Total
combined revenues and expenses were $942.5 million and $645.2 million,
respectively, resulting in 297.3 million of total combined income from operation
in 2001. Net investment income on investments accounted for on the equity method
totaled $67.7 million, $56.4 million and $143.8 million in 2002, 2001, and 2000,
respectively.


                                      F-30
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 - Relationships with Variable Interest Entities

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

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

Collateralized Debt Obligations (CDOs)

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

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

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

Owners of securities of CDOs advised by the Company have no recourse to the
Company's assets in the event of default by the CDO, unless the Company has
guaranteed such securities directly for investors. The Company's risk of loss
from any CDO it manages, or in which it invests, is limited to its investment in
the CDO and any such guarantees it may have made. All of these guarantees are
accounted for under existing insurance industry accounting principles, and the
guaranteed assets are recorded on the Company's consolidated balance sheet, at
their fair value, as separate account assets. The Company believes it is
reasonably possible that it may consolidate one or more of the CDOs which it
manages, or will be required to disclose information related to them, or both,
as of September 30, 2003, as a result of adopting FIN 46. The table below
presents summary financial data for CDOs which the Company manages, and data
relating to the Company's maximum exposure to loss as a result of its
relationships with them. The Company has determined that it is not the primary
beneficiary of any CDO in which it invests in but does not manage and thus will
not be required to consolidate any of them. Credit ratings are provided by
credit rating agencies, and relate to the debt issued by the CDOs in which the
Company has invested.


                                      F-31
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 - Relationships with Variable Interest Entities (continued)

                                                        December 31
                                                  2002              2001
                                              -------------------------------
                                                       (in millions)
Total size of Company-Managed CDOs
Total assets..............................      $6,220.9        $6,368.3
                                              ===============================

     Total debt...........................       3,564.4         3,436.0
     Total other liabilities..............       2,429.7         2,664.3
                                              -------------------------------
Total liabilities.........................       5,994.1         6,100.3
                                              -------------------------------
Total equity..............................         226.8           268.0
                                              -------------------------------
Total liabilities and equity..............      $6,220.9        $6,368.3
                                              ===============================

<TABLE>
<CAPTION>
                                                                                 December 31
                                                                            2002                2001
                                                                     -----------------------------------
                                                                       (in millions, except percents)
<S>                                                                   <C>       <C>      <C>       <C>
Maximum exposure of the Company to losses from Company-Managed CDOs
Investments in Tranches of Company-managed CDOs, by credit
rating (Moody's / Standard & Poor's):
   Aaa/AAA ..................................................         $380.2     53.8%   $502.9     58.9%
   A3/A- ....................................................           14.5      2.1      14.5      1.7
   Baa2/BBB .................................................          218.0     31.0     218.0     25.6
   Ba2/BB ...................................................            7.0      1.0      18.5      2.2
   B3/B- ....................................................            6.0      0.8        --       --
   Not rated (equity) .......................................           79.8     11.3      98.9     11.6
                                                                     -----------------------------------
Total Company exposure ......................................         $705.5    100.0%   $852.8    100.0%
                                                                     ===================================
</TABLE>

The Company has determined that each of its relationships with any CDO which it
does not manage is not significant, and has therefore not included information
related to CDOs which it does not manage above.

Low-Income Housing Properties

The Company generates income tax benefits by investing in apartment properties
(the Properties) that qualify for low income housing and/or historic tax
credits. The Company invests in the Properties directly, and also invests
indirectly via limited partnership real estate investment funds (the Funds), and
which are consolidated into the Company's financial statements. The Properties
are each organized as limited partnerships or limited liability companies each
having a managing general partner or a managing member. The Company is usually
the sole limited partner or investor member in each Property; it is not the
general partner or managing member in any Property.

The Properties typically raise additional capital by qualifying for long-term
debt, which at times is guaranteed or otherwise subsidized by federal or state
agencies, or by Fannie Mae. In certain cases, the Company invests in the
mortgages of the Properties, which are non-recourse to the general assets of the
Company. In the event of default by a mortgagee of a Property, the mortgage is
subject to foreclosure. Conversely, the assets of the Properties are not
available to satisfy claims against the general assets of the Company. No
Property in which the Company has been involved has undergone foreclosure. The
Company's maximum loss in relation to the Properties is limited to its equity
investment in the Properties, future equity commitments made, and where the
Company is the mortgagor, the outstanding balance of the mortgages originated
for the Properties, and outstanding mortgage commitments the Company has made to
the Properties.

The Company currently uses the equity method of accounting for its investments
in the Properties. In some cases, the Company receives distributions from the
Properties which are based on a portion of the actual cash flows and receives
Federal income tax credits in recognition of its investments in each of the
Properties for a period of ten years.


                                      F-32
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 - Relationships with Variable Interest Entities (continued)

The Company is evaluating whether the Properties are VIEs in accordance with FIN
46. The Company considers it reasonably possible that it may consolidate each
property, or be required to disclose information about them, as a result of
adopting FIN 46. The table below presents summary financial data for the
Properties, and data relating to the Company's maximum exposure to loss as a
result of these relationships.

                                                       December 31,
                                                 2002                2001
                                           ----------------------------------
                                                      (in millions)
Total size of Properties (1)
Total assets...........................      $  682.2              $ 550.2
                                           ==================================

     Total debt .......................         396.4                326.6
     Total other liabilities ..........         101.8                 81.1
                                           ----------------------------------
Total liabilities .....................         498.2                407.7
                                           ----------------------------------
Total equity ..........................         184.0                142.5
                                           ----------------------------------
Total liabilities and equity ..........      $  682.2              $ 550.2
                                           ==================================

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                       2002                  2001
                                                                  ------------------------------------
                                                                             (in millions)
<S>                                                                  <C>                    <C>
Maximum exposure of the Company to losses from Properties
Equity investment in the Properties (1).....................         $177.0                 $134.3
Outstanding equity capital commitments to the Properties....          139.4                  102.9
Carrying value of mortgages for the Properties..............           65.2                   62.5
Outstanding mortgage commitments to the Properties..........            5.1                    4.8
                                                                  ------------------------------------
Total Company exposure......................................         $386.7                 $304.5
                                                                  ====================================
</TABLE>

(1)   Certain data is reported with a one-year delay, due to the delayed
      availability of audited financial statements of the Funds.

Other

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


                                      F-33
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 - Relationships with Variable Interest Entities (continued)

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

<TABLE>
<CAPTION>
                                                                                  December 31
                                                                        2002                           2001
                                                                 ----------------------------------------------
                                                                                 (in millions)
<S>                                                                  <C>                            <C>
Total size of Other Entities (1)
Total assets ..............................................          $ 301.6                        $ 339.7
                                                                 ==============================================

     Total debt ...........................................            310.7                          308.3
     Total other liabilities ..............................             66.2                           88.0
                                                                 ----------------------------------------------
Total liabilities .........................................            376.9                          396.3
                                                                 ----------------------------------------------
Total equity (2)...........................................            (75.3)                         (56.6)
                                                                 ----------------------------------------------
Total liabilities and equity  .............................          $ 301.6                        $ 339.7
                                                                 ==============================================

<CAPTION>

                                                                                  December 31
                                                                       2002                           2001
                                                                 ----------------------------------------------
                                                                                 (in millions)
<S>                                                                  <C>                            <C>
Maximum exposure of the Company to losses from Other Entities
Combined equity and debt investments in the Other Entites..          $ 153.7                        $ 126.8
                                                                 ----------------------------------------------
Total Company exposure.....................................          $ 153.7                        $ 126.8
                                                                 ==============================================
</TABLE>

(1)   Certain data is reported with a one-year delay, due to the delayed
      availability of audited financial statements of the Other Entities.

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

Note 5 -- Derivatives and Hedging Instruments

The fair value of derivative instruments classified as assets at December 31,
2002 and 2001 were $346.9 million and $331.2 million, respectively, and appear
on the consolidated balance sheet in other assets. The fair value of derivative
instruments classified as liabilities at December 31, 2002 and 2001were $1,165.2
million and $580.0 million, respectively, and appear on the consolidated balance
sheet in other liabilities.

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 is accrued and recognized as a component of net
investment income.

The Company also manages interest rate exposure by using interest rate swap
agreements to modify certain liabilities, such as fixed rate debt and Constant
Maturity Treasuries (CMT) indexed liabilities, by converting them to a
LIBOR-based floating rate.

The Company enters into purchased interest rate cap agreements, cancelable
interest rate swap agreements, and written swaptions to manage the interest rate
exposure of options that are embedded in certain assets and liabilities. A
written swaption obligates the Company to enter into an interest rate agreement
on the expiration date contingent on future interest rates. Purchased interest
rate cap and floor agreements are contracts with a counterparty which require
the payment of a premium for the right to receive payments for the difference
between the cap or floor interest rate


                                      F-34
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 5 -- Derivatives and Hedging Instruments (continued)

and a market interest rate on specified future dates based on an underlying
principal balance (notional principal). Amounts earned on interest rate cap and
floor agreements and swaptions are recorded as an adjustment to 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. The net differential to be paid or received
on currency rate swap agreements is accrued and recognized as a component of net
investment income.

For the years ended December 31, 2002 and 2001, the Company recognized a net
loss of $ 19.5 million and a net loss of $16.5 million, respectively, related to
the ineffective portion of its fair value hedges, and a net loss of $ 6.4
million and a net gain of $1.9 million, respectively, related to the portion of
the hedging instruments that were excluded from the assessment of hedge
effectiveness. Both of these amounts are recorded in net realized investment and
other gains and losses. For years ended December 31, 2002 and 2001, all of the
Company's hedged firm commitments qualified as fair value hedges.

Cash Flow Hedges

The Company uses forward starting interest rate swap agreements to hedge the
variable cash flows associated with future fixed income asset acquisitions,
which will support the Company's long-term care and life insurance businesses.
These agreements will reduce the impact of future interest rate changes on the
cost of acquiring adequate assets to support the investment income assumptions
used in pricing these products. During the periods in the future when the
acquired assets are held by the Company, the accumulated gain or loss will be
amortized into investment income as a yield adjustment on the assets.

The Company used interest rate futures contracts to hedge the variable cash
flows associated with variable benefit payments that it will make on certain
annuity contracts. Amounts are reclassified from other comprehensive income when
benefit payments are made.

For the years ended December 31, 2002 and 2001, the Company recognized a gain of
$7.2 million and a loss of $0.2 million, respectively, related to the
ineffective portion of its cash flow hedges. These amounts are recorded in net
realized investment and other gains and losses. For the years ended December 31,
2002 and 2001, all of the Company's hedged forecast transactions qualified as
cash flow hedges.

For the years ended December 31, 2002 and 2001, a net gain of $0.5 million and a
net loss of $0.2 million, respectively, were reclassified from other accumulated
comprehensive income to earnings. It is anticipated that approximately $3.5
million will be reclassified from other accumulated comprehensive income to
earnings within the next twelve months. The maximum length for which variable
cash flows are hedged is 24 years.

For the years ended December 31, 2002 and 2001, none of the Company's cash flow
hedges have been discontinued because it was probable that the original
forecasted transactions would not occur by the end of the originally specified
time period documented at inception of the hedging relationship.

The transition adjustment for the adoption of SFAS No. 133, as amended, resulted
in an increase in other comprehensive income of $23.0 million (net of tax of
$12.3 million) representing the accumulation in other comprehensive income of
the effective portion of the Company's cash flow hedges as of January 1, 2001.
For the years ended December 31, 2002 and 2001, $175.4 million of gains (net of
tax of $94.5 million) and $3.8 million of loss (net of tax of $2.1 million)
representing the effective portion of the change in fair value of derivative
instruments designated as cash flow hedges was added to accumulated other
comprehensive income, resulting in balances of $194.5 million (net of tax of
$104.8 million) and $19.1 million (net of tax of $10.3 million), respectively.


                                      F-35
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 5 -- Derivatives and Hedging Instruments (continued)

Derivatives Not Designated as Hedging Instruments

The Company enters into interest rate swap agreements, cancelable interest rate
swap agreements, total return swaps, 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.

In addition, the Company uses interest rate floor agreements to hedge the
interest rate risk associated with minimum interest rate guarantees in certain
of its life insurance and annuity businesses without designating the derivatives
as hedging instruments.

Note 6 -- Income Taxes

The Company participates in the filing of a life/non-life insurance consolidated
federal income tax return. The life insurance company sub-group includes three
domestic life insurance companies (the Company, John Hancock Variable Life
Insurance Company and Investors Partner Life Insurance Company) and a Bermuda
life insurance company (John Hancock Reassurance Company, Ltd.) that is treated
as a U.S. company for federal income tax purposes. The non-life insurance
company subgroup consists of John Hancock Financial Services, Inc., John Hancock
Subsidiaries, LLC and John Hancock International Holdings, Inc.

In addition to taxes on operations, mutual life insurance companies are charged
an equity base tax. The Mutual Company was a mutual life insurance company for
the entire year 1999, therefore it was subject to the re-computation of its 1999
equity base tax liability in its 2000 tax return. The equity base tax is
determined by application of an industry-based earnings rate to the Mutual
Company's average equity base, as defined by the Internal Revenue Code. The
industry earnings rate is determined by the Internal Revenue Service (IRS) and
is not finalized until the subsequent year.

Income before income taxes and cumulative effect of accounting changes includes
the following:

<TABLE>
<CAPTION>
                                                                                   Years Ended December 31,
                                                                         2002                2001               2000
                                                                  -----------------------------------------------------------
                                                                                        (in millions)

<S>                                                                     <C>                 <C>               <C>
Domestic........................................................        $559.5              $761.8            $1,093.5
Foreign ........................................................           8.0                 5.6                 7.6
                                                                  -------------------  -------------------  -----------------

Income before income taxes and cumulative effect of
    accounting changes .........................................        $567.5              $767.4            $1,101.1
                                                                  ===================  ===================  =================
</TABLE>

The components of income taxes were as follows:

<TABLE>
<CAPTION>
                                                                                  Years Ended December 31,
                                                                          2002                2001               2000
                                                                  ---------------------------------------------------------
                                                                                        (in millions)

<S>                                                                     <C>               <C>                 <C>
Current taxes:
   Federal......................................................        $ 93.4            $   (9.9)           $   15.7
   Foreign......................................................           2.0                 3.1                 1.2
   State........................................................           4.6                 4.6                12.0
                                                                  -------------------  -------------------  ---------------
                                                                         100.0                (2.2)               28.9
                                                                  -------------------  -------------------  ---------------

Deferred taxes:
   Federal......................................................          14.6               210.5               279.4
   Foreign......................................................           0.7                (0.9)                1.6
   State........................................................          (6.7)               (6.7)               (1.0)
                                                                  -------------------  -------------------  ---------------
                                                                           8.6               202.9               280.0
                                                                  -------------------  -------------------  ---------------

Total income taxes                                                      $108.6            $  200.7            $  308.9
                                                                  ===================  ==================  ================
</TABLE>


                                      F-36
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 -- Income Taxes - (continued)

A reconciliation of income taxes computed by applying the federal income tax
rate to income before income taxes and the consolidated income tax expense
charged to operations follows:

                                              Years Ended December 31,
                                        2002           2001            2000
                                      ----------------------------------------
                                                  (in millions)

Tax at 35%...........................  $198.6         $268.6          $385.4
Add (deduct):
   Equity base tax...................      --          (13.4)          (46.0)
   Prior year taxes..................    (2.7)           9.9            (0.3)
   Tax credits.......................   (36.4)         (28.1)          (20.6)
   Foreign taxes.....................     2.0            1.3             0.4
   Tax exempt investment income......   (25.7)         (25.7)          (11.5)
   Lease income......................   (25.5)            --              --
   Other.............................    (1.7)         (11.9)            1.5
                                      ---------  -----------------  ----------

     Total income taxes..............  $108.6         $200.7          $308.9
                                      =========  =================  ==========

The significant components of the Company's deferred tax assets and liabilities
were as follows:

                                                               December 31,
                                                             2002       2001(1)
                                                        ------------------------
                                                              (in millions)
Deferred tax assets:
   Policy reserve adjustments.........................   $  550.2     $  555.4
   Other employee benefits............................      154.5        144.8
   Book over tax basis of investments.................      329.6        268.9
   Dividends payable to policyholders.................      135.2        158.6
   Interest...........................................       32.5         26.0
                                                        ------------  ----------
     Total deferred tax assets........................    1,202.0      1,153.7
                                                        ------------  ----------

Deferred tax liabilities:
   Deferred policy acquisition costs..................      879.4        829.0
   Depreciation.......................................       13.3         27.7
   Basis in partnerships..............................       65.1         61.7
   Market discount on bonds...........................       18.9         18.0
   Pension plan expense...............................       73.9         80.3
   Capitalized charges related to mutual funds........       12.7         31.5
   Lease income.......................................      772.7        623.9
   Unrealized gains...................................      156.4        135.8
   Other..............................................       29.9         48.7
                                                        ------------  ----------
     Total deferred tax liabilities...................    2,022.3      1,856.6
                                                        ------------  ----------

     Net deferred tax liabilities.....................   $  820.3     $  702.9
                                                        ============  ==========

(1)   Reclassifications of certain prior year data have been made for
      comparative purposes.

The Company made income tax payments of $104.9 million and $3.7 million, and
received an income tax refund of $21.7 million in 2002, 2001 and 2000,
respectively.


                                      F-37
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 7 -- Closed Block

As of February 1, 2000, the Company established a closed block for the benefit
of certain classes of individual or joint traditional participating whole life
insurance policies for which the Company had a dividend scale payable in 1999
and individual term life insurance policies that were in force on February 1,
2000. Assets were allocated to the closed block in an amount that, together with
anticipated revenues from policies included in the closed block, was reasonably
expected to be sufficient to support such business, including provision for
payment of benefits, direct asset acquisition and disposition costs, and taxes,
and for continuation of dividend scales payable in 1999, assuming experience
underlying such dividend scales continues. Assets allocated to the closed block
inure solely to the benefit of the holders of the policies included in the
closed block and will not revert to the benefit of the shareholders of the
Company. No reallocation, transfer, borrowing, or lending of assets can be made
between the closed block and other portions of the Company's general account,
any of its separate accounts, or any affiliate of the Company without approval
of the Massachusetts Division of Insurance.

If, over time, the aggregate performance of the closed block assets and policies
is better than was assumed in funding the closed block, dividends to
policyholders will be increased. If, over time, the aggregate performance of the
closed block assets and policies is less favorable than was assumed in the
funding, dividends to policyholders could be reduced.

The assets and liabilities allocated to the closed block are recorded in the
Company's financial statements on the same basis as other similar assets and
liabilities. The carrying amount of closed block liabilities in excess of the
carrying amount of closed block assets at the date of demutualization (adjusted
to eliminate the impact of related amounts in accumulated other comprehensive
income) represents the maximum future earnings from the assets and liabilities
designated to the closed block that can be recognized in income over the period
the policies in the closed block remain in force. The Company has developed an
actuarial calculation of the timing of such maximum future shareholder earnings,
and this is the basis of the policyholder dividend obligation.

If actual cumulative earnings are greater than expected cumulative earnings,
only expected earnings will be recognized in income. Actual cumulative earnings
in excess of expected cumulative earnings represents undistributed accumulated
earnings attributable to policyholders, which are recorded as a policyholder
dividend obligation because the excess will be paid to closed block
policyholders as an additional policyholder dividend unless otherwise offset by
future performance of the closed block that is less favorable than originally
expected. If actual cumulative performance is less favorable than expected, only
actual earnings will be recognized in income.

The principal cash flow items that affect the amount of closed block assets and
liabilities are premiums, net investment income, purchases and sales of
investments, policyholders' benefits, policyholder dividends, premium taxes,
guaranty fund assessments, and income taxes. The principal income and expense
items excluded from the closed block are management and maintenance expenses,
commissions and net investment income and realized investment gains and losses
of investment assets outside the closed block that support the closed block
business, all of which enter into the determination of total gross margins of
closed block policies for the purpose of the amortization of deferred
acquisition costs. The amounts shown in the following tables for assets,
liabilities, revenues and expenses of the closed block are those that enter into
the determination of amounts that are to be paid to policyholders.


                                      F-38
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 7 -- Closed Block - (continued)

The following tables set forth certain summarized financial information relating
to the closed block as of the dates indicated:

<TABLE>
<CAPTION>
                                                                               December 31,
                                                                            2002        2001
                                                                        -----------------------
                                                                             (in millions)
<S>                                                                      <C>          <C>
Liabilities
Future policy benefits ...............................................   $10,509.0    $10,198.7
Policyholder dividend obligation .....................................       288.9        251.2
Policyholders' funds .................................................     1,504.0      1,460.9
Policyholder dividends payable .......................................       432.3        433.4
Other closed block liabilities .......................................       111.7         53.7
                                                                         ---------    ---------
   Total closed block liabilities ....................................   $12,845.9    $12,397.9
                                                                         ---------    ---------

Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
     (fair value: 2002--$97.1; 2001--$100.7) .........................   $    86.0    $   103.3
   Available-for-sale--at fair value
     (cost: 2002--$5,580.2; 2001--$5,204.0) ..........................     5,823.2      5,320.7
Equity securities:
   Available-for-sale--at fair value
     (cost: 2002--$10.5; 2001--$8.8) .................................        12.4         13.4
Mortgage loans on real estate ........................................     1,665.8      1,837.0
Policy loans .........................................................     1,555.1      1,551.9
Short-term investments ...............................................        25.2           --
Other invested assets ................................................       212.4         83.1
                                                                         ---------    ---------
   Total investments .................................................     9,380.1      8,909.4

Cash and cash equivalents ............................................       244.0        192.1
Accrued investment income ............................................       156.3        158.9
Other closed block assets ............................................       327.6        297.5
                                                                         ---------    ---------
   Total closed block assets .........................................   $10,108.0    $ 9,557.9
                                                                         ---------    ---------

Excess of reported closed block liabilities over assets
   designated to the closed block ....................................   $ 2,737.9    $ 2,840.0
                                                                         ---------    ---------

Portion of above representing other comprehensive income:
   Unrealized appreciation (depreciation), net of tax of $(84.0)
     million and $(43.3) million at 2002 and 2001, respectively ......       155.9         80.1
   Allocated to the policyholder dividend obligation, net of
     tax of $88.8 million and $50.8 million at 2002 and 2001,
     respectively ....................................................      (164.9)       (94.4)
                                                                         ---------    ---------
       Total .........................................................        (9.0)       (14.3)
                                                                         ---------    ---------

Maximum future earnings to be recognized from closed block
   assets and liabilities ............................................   $ 2,728.9    $ 2,825.7
                                                                         =========    =========
</TABLE>


                                      F-39
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 7 -- Closed Block - (continued)

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                               2002               2001
                                                                            ------------------------------
                                                                                   (in millions)
<S>                                                                          <C>                 <C>
Change in the policyholder dividend obligation:
   Balance at beginning of period..........................................  $  251.2            $  77.0
     Impact on net income before income taxes..............................     (70.8)              42.5
     Unrealized investment gains (losses)..................................     108.5               67.1
     Cumulative effect of change in accounting principle (1)...............        --               64.6
                                                                            --------------    ------------

   Balance at end of period................................................  $  288.9          $   251.2
                                                                            ==============    ============
</TABLE>

(1)   The cumulative effect of change in accounting principle represents the
      impact of transferring fixed maturities from held-to-maturity to
      available-for-sale as part of the adoption of SFAS No. 133 effective
      January 1, 2001. See Note 1.

<TABLE>
<CAPTION>
                                                                                                            For the period
                                                                                                          February 1 through
                                                                               Years Ended December 31,       December 31,
                                                                                 2002           2001             2000
                                                                        ----------------------------------------------------
                                                                                           (in millions)
<S>                                                                           <C>           <C>               <C>
Revenues
   Premiums..........................................................         $  969.9      $   940.0         $    865.0
   Net investment income.............................................            663.9          667.5              591.6
   Net realized investment and other gains (losses), net of amounts
     credited to the policyholder dividend obligation of $(11.9)
     million, $(17.0) million and $14.1 million, respectively........             (5.2)          (3.6)              (2.9)
   Other closed block revenues.......................................              0.1            0.6               (0.6)
                                                                        ----------------------------------------------------
     Total closed block revenues.....................................          1,628.7        1,604.5            1,453.1

Benefits and Expenses
   Benefits to policyholders.........................................          1,057.6          924.4              870.0
   Change in the policyholder dividend obligation....................            (60.2)          54.9               46.6
   Other closed block operating costs and expenses...................             (5.2)          (6.3)             (10.0)
   Dividends to policyholders........................................            489.7          474.9              407.1
                                                                        ----------------------------------------------------
     Total benefits and expenses.....................................          1,481.9        1,447.9            1,313.7
                                                                        ----------------------------------------------------

   Closed block revenues, net of closed block benefits and
     expenses, before income taxes and cumulative
     effect of accounting change.....................................            146.8          156.6              139.4
   Income taxes, net of amounts credited to the policyholder
     dividend obligation of $1.3 million, $4.6 million, and
     $2.8 million, respectively......................................             50.0           53.0               52.3
                                                                        ----------------------------------------------------
     Closed block revenues, net of closed block benefits
       and expenses and income taxes, before cumulative effect
       of accounting change..........................................             96.8          103.6               87.1
                                                                        ----------------------------------------------------
     Cumulative effect of accounting change, net of tax..............               --           (1.4)                --
                                                                        ----------------------------------------------------
     Closed block revenues, net of closed block benefits
       and expenses, income taxes and the cumulative effect of
       accounting change.............................................         $   96.8      $   102.2         $     87.1
                                                                        ====================================================
</TABLE>


                                      F-40
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 7 -- Closed Block - (continued)

Maximum future earnings from closed block assets and liabilities:

                                                   Year Ended December 31,
                                                   2002              2001
                                            -----------------------------------
                                                       (in millions)
Beginning of period........................    $ 2,825.7         $  2,927.9
End of period..............................      2,728.9            2,825.7
                                            -----------------  ----------------
   Change during period....................    $   (96.8)        $   (102.2)
                                            =================  ================

Note 8 -- Debt and Line of Credit

Short-term and long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                              2002               2001
                                                                      ------------------------------------
                                                                                   (in millions)
<S>                                                                       <C>                  <C>
Short-term debt:
   Current maturities of long-term debt.............................      $   99.5             $ 124.6

Long-term debt:
   Surplus notes, 7.38% maturing in 2024 (1)........................         447.4               447.3
   Notes payable, interest ranging from 4.67% to 12.0%,
     due in varying amounts to 2013.................................         242.3               296.0
                                                                      -------------------  ---------------
Total long-term debt................................................         689.7               743.3

Less current maturities.............................................         (99.5)             (124.6)
                                                                      -------------------  ---------------
Long-term debt......................................................         590.2               618.7
                                                                      -------------------  ---------------

   Total long and short-term debt before fair value adjustments.....         689.7               743.3

Fair value adjustments related to interest rate swaps (1)...........         113.7                43.0
                                                                      -------------------  ---------------

Total long and short-term debt after fair value adjustments.........      $  803.4             $ 786.3
                                                                      ===================  ===============

Consumer notes:
   Notes payable, interest ranging from 2.65% to 6.00%
     due in varying amounts to 2032.................................      $  290.2                  --
                                                                      ===================  ===============
</TABLE>

(1)   As part of its interest rate management, the Company uses interest rate
      swaps to convert the interest expense on the Surplus Notes from fixed to
      variable. Under FAS 133, these swaps are designated as fair value hedges,
      which results in the carrying value of the notes being adjusted for
      changes in fair value.

The issuance of Surplus Notes by the Company was approved by the Massachusetts
Commissioner of Insurance, and any payments of interest or principal on the
Surplus Notes requires the prior approval of the Massachusetts Commissioner of
Insurance. The notes payable consists of debt issued by various other operating
subsidiaries of the Company.

At December 31, 2002, the Company had a committed line of credit through a group
of banks including Fleet National Bank, JPMorgan Chase, Citicorp USA, Inc., The
Bank of New York, The Bank of Nova Scotia, Fleet Securities, Inc. and JPMorgan
Securities, Inc., totaling $1.0 billion, $500.0 million pursuant to a 364-day
commitment (renewed effective July 26, 2002) and $500.0 million pursuant to a
multi-year facility (renewable in 2005). The banks will commit, when requested,
to loan funds at prevailing interest rates as determined in accordance with the
line of credit agreement. Under the terms of the agreement, the Company is
required to maintain certain minimum levels of net worth and comply with certain
other covenants, which were met at December 31, 2002. At December 31, 2002, the
Company had no outstanding borrowings under the agreement.


                                      F-41
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 8 -- Debt and Line of Credit - (continued)

Aggregate maturities of long-term debt are as follows: 2003--$99.5 million;
2004--$19.7 million; 2005--$28.5 million; 2006--$16.3 million; 2007--$13.0
million and thereafter--$512.7 million.

Interest expense on debt, included in other operating costs and expenses, was
$52.6 million, $59.0 million and $62.6 million in 2002, 2001 and 2000,
respectively. Interest paid amounted to $47.0 in 2002, $55.8 million in 2001,
and $63.4 million in 2000.

Consumer Notes

The Company issues consumer notes through its SignatureNotes program.
SignatureNotes is an investment product sold through a broker-dealer network to
retail customers in the form of publicly traded fixed and/or floating rate
securities. SignatureNotes are issued weekly with a variety of maturities,
interest rates, and call provisions. SignatureNotes may be redeemed upon the
death of the holder, subject to an annual overall program redemption limitation
of 1% of the aggregate securities outstanding, or $1,000,000, or an individual
redemption limitation of $200,000 of aggregate principal.

Aggregate maturities of consumer notes are as follows: 2005--$4.8 million;
2006--$12.2 million; 2007--$26.8 million and thereafter--$252.2 million. As of
December 31, 2002, there are no maturities of consumer notes in 2003 or 2004.

Interest expense on consumer notes, included in benefits to policyholders, was
$2.5 million in 2002. No interest expense was incurred in 2001 and 2000.
Interest paid amounted to $1.4 million in 2002. No interest was paid in 2001 or
2000.

Note 9 -- Minority Interest

Minority interest relates to preferred stock issued by Signature Tomato, a
subsidiary of Signature Fruit, a subsidiary of the Company, which acquired
certain assets and assumed certain liabilities out of bankruptcy proceedings of
Tri-Valley Growers, Inc., a cooperative association, and equity interests in
consolidated partnerships. For financial reporting purposes, the assets, the
liabilities, and earnings of Signature Fruit and the partnerships are
consolidated in the Company's financial statements.

In conjunction with the transaction discussed above, Signature Tomato, a
subsidiary of Signature Fruit, issued $2.1 million of 14.24% cumulative, voting
preferred stock in exchange for debt. In addition, Signature Fruit sold 3.0% of
its Class A membership shares to outside third parties with put options
exercisable in a period from one to three years from acquisition. The minority
interest in the equity of consolidated partnerships of approximately $5.2
million reflects the original investment by minority shareholders in various
consolidated partnerships, along with their proportional share of the earnings
or losses of these partnerships.

The minority interest in the equity of unconsolidated partnerships reflect the
original investment by minority shareholders in a consolidated partnership,
along with their proportional share of the earnings or losses of this
partnership.

Note 10 -- Reinsurance

The effect of reinsurance on premiums written and earned was as follows:

<TABLE>
<CAPTION>
                                                  2002                         2001                          2000
                                                Premiums                     Premiums                      Premiums
                                         Written        Earned        Written        Earned         Written        Earned
                                     ---------------------------------------------------------------------------------------
                                                                          (in millions)
<S>                                    <C>           <C>            <C>           <C>             <C>           <C>
Life, Health and Annuity:
   Direct........................      $  2,570.1    $  2,565.0     $  3,076.8    $  3,080.7      $  3,181.1    $  3,180.3
   Assumed.......................           469.3         469.3          427.7         427.7           465.3         465.4
   Ceded.........................        (1,050.1)     (1,050.1)      (1,156.5)     (1,156.5)       (1,255.0)     (1,255.0)
                                     -----------------------------  ---------------------------  -----------------------------
     Net life, health and
     annuity premiums............      $  1,989.3    $  1,984.2     $  2,348.0    $  2,351.9      $  2,391.4    $  2,390.7
                                     =============================  ===========================  =============================
</TABLE>

For the years ended December 31, 2002, 2001 and 2000, benefits to policyholders
under life, health and annuity ceded reinsurance contracts were $645.9 million,
$552.7 million, and $649.4 million, respectively.


                                      F-42
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 10 -- Reinsurance - (continued)

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

Through the Company's group health insurance operations, the Company entered
into a number of reinsurance arrangements in respect of personal accident
insurance and the occupational accident component of workers compensation
insurance, a portion of which was originated through a pool managed by Unicover
Managers, Inc. Under these arrangements, the Company both assumed risks as a
reinsurer, and also passed 95% of these risks on to other companies. This
business had originally been reinsured by a number of different companies, and
has become the subject of widespread disputes. The disputes concern the
placement of the business with reinsurers and recovery of the reinsurance. The
Company is engaged in disputes, including a number of legal proceedings, in
respect of this business. The risk to the Company is that other companies that
reinsured the business from the Company may seek to avoid their reinsurance
obligations. However, the Company believes that it has a reasonable legal
position in this matter. During the fourth quarter of 1999 and early 2000, the
Company received additional information about its exposure to losses under the
various reinsurance programs. As a result of this additional information and in
connection with global settlement discussions initiated in late 1999 with other
parties involved in the reinsurance programs, during the fourth quarter of 1999
the Company recognized a charge for uncollectible reinsurance of $133.7 million,
after tax, as its best estimate of its remaining loss exposure. The Company
believes that any exposure to loss from this issue, in addition to amounts
already provided for as of December 31, 2002, would not be material.

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


                                      F-43
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Pension Benefit Plans and Other Postretirement Benefit Plans

The Company provides pension benefits to substantially all employees and general
agency personnel. These benefits are provided through both qualified and
non-qualified defined benefit and qualified defined contribution pension plans.
Through the non-qualified defined benefit plans, the Company provides
supplemental pension benefits to employees with salaries and/or pension benefits
in excess of the qualified plan limits imposed by U.S. tax law. Prior to 2002,
pension benefits under the Company's defined benefit plans were also based on
years of service and final average compensation (generally during the three
years prior to retirement). In 2001, the defined benefit pension plans were
amended to a cash balance basis under which benefits are based on career average
compensation. Under grandfathering rules, employees within 5 years of early
retirement eligibility or employees over age 40 and with at least 10 years of
service will receive pension benefits based on the greater of the benefit from
the cash balance basis or the prior final average salary basis. This amendment
became effective on January 1, 2002. Benefits related to the Company's defined
benefit pension plans paid to employees and retirees covered by annuity
contracts issued by the Company amounted to $141.8 million in 2002, $115.9
million in 2001, and $102.2 million in 2000. Plan assets consist principally of
listed domestic and international equity securities, private equity securities
including timber and agricultural real estate, corporate obligations, and U.S.
and foreign government securities.

The Company's funding policy for qualified defined benefit plans is to
contribute annually an amount at least equal to the minimum annual contribution
required under the Employee Retirement Income Security Act (ERISA) and other
applicable laws, and, generally, not greater than the maximum amount that can be
deducted for federal income tax purposes. In 2002 and 2001, $3.0 million and
$0.0 million, respectively, were contributed to these plans. $3.0 million was
contributed to only one plan to ensure that the plan's assets continued to
exceed the plan's Accumulated Benefit Obligation. This contribution is not
deductible for 2002, but is expected to be deductible for 2003. The funding
policy for non-qualified defined benefit plans is to contribute the amount of
the benefit payments made during the year.

The Company recognized a loss of $41.2 million in 2002 and a gain of $19.7
million in 2001 in other comprehensive income, before taxes from the increase in
the additional minimum liability (less the increase in the intangible asset)
over the value at the end of the prior year.

Defined contribution plans include The Investment Incentive Plan and the Savings
and Investment Plan. The expense for defined contribution plans was $10.4
million, $10.6 million, and $8.3 million, in 2002, 2001 and 2000, respectively.

In addition to the Company's defined benefit pension plans, the Company has
employee welfare plans for medical, dental, and life insurance covering most of
its retired employees and general agency personnel. Substantially all employees
may become eligible for these benefits if they reach certain age and service
requirements while employed by the Company. The postretirement health care and
dental coverages are contributory based for post January 1, 1992 non-union
retirees. A small portion of pre-January 1, 1992 non-union retirees also
contribute. The applicable contributions are based on the number of years of
service.

The Company's policy is to fund postretirement benefits in amounts at or below
the annual tax qualified limits. As of December 31, 2002 and 2001, plan assets
related to non-union employees were comprised of an irrevocable health insurance
contract to provide future health benefits to retirees and a 401(h) account
under the pension plan. The plan assets underlying the insurance contract are
comprised of approximately 60% equity securities and 40% fixed income
investments. The plan assets in the 401(h) account are comprised of
approximately 75% equity securities and 25% fixed income investments. Plan
assets related to union employees were comprised of approximately 60% equity
securities and 40% fixed income investments, held in a 501(c) (9) trust.


                                      F-44
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Pension Benefit Plans and Other Postretirement Benefit Plans -
(continued)

The changes in benefit obligation and plan assets related to the Company's
qualified and nonqualified benefit plans are summarized as follows:

<TABLE>
<CAPTION>
                                                                        Years Ended December 31,
                                                                                             Other Postretirement
                                                              Pension Benefits                    Benefits
                                                     --------------------------------------------------------------
                                                           2002           2001              2002            2001
                                                     --------------------------------------------------------------
                                                                              (in millions)
<S>                                                    <C>           <C>               <C>             <C>
Change in benefit obligation:
   Benefit obligation at beginning of year.........    $  1,933.1    $  1,803.6        $   441.4       $   486.8
   Service cost....................................          27.8          30.7              4.0             5.9
   Interest cost...................................         133.9         129.1             33.5            31.8
   Amendments......................................           9.9          50.1               --           (48.3)
   Actuarial loss (gain)...........................          91.9          46.7            143.9            (1.3)
   Benefits paid...................................        (161.0)       (127.1)           (37.4)          (29.6)
   Curtailment.....................................          (6.3)           --             (1.1)           (3.9)
                                                     -----------------------------  -------------------------------
   Benefit obligation at end of year...............       2,029.3       1,933.1            584.3           441.4
                                                     -----------------------------  -------------------------------

Change in plan assets:
   Fair value of plan assets at beginning
     of year.......................................       2,196.9       2,410.9            245.7           261.4
   Actual return on plan assets....................        (201.5)       (105.8)           (25.5)           (6.7)
   Employer contribution...........................          26.6          18.9             21.4            20.6
   Employee contribution...........................            --            --              3.9             6.5
   Benefits paid...................................        (161.0)       (127.1)           (41.3)          (36.1)
                                                     -----------------------------  -------------------------------
   Fair value of plan assets at end of year........       1,861.0       2,196.9            204.2           245.7
                                                     -----------------------------  -------------------------------

Funded status......................................        (168.3)        263.8           (380.1)         (195.7)
Unrecognized actuarial loss (gain).................         511.5          24.3             98.8           (95.3)
Unrecognized prior service cost....................          67.9          67.9            (42.3)          (47.5)
Unrecognized net transition asset..................           0.1           0.1               --              --
                                                     -----------------------------  -------------------------------
Prepaid (accrued) benefit cost, net................    $    411.2     $   356.1        $  (323.6)      $  (338.5)
                                                     =============================  ===============================

Amounts recognized in the consolidated
balance sheets consist of:
     Prepaid benefit cost..........................    $    581.7     $   523.9
     Accrued benefit liability including
       minimum liability...........................        (275.1)       (231.6)
     Intangible asset..............................           0.1           0.5
     Accumulated other comprehensive income........         104.5          63.3
                                                      ----------------------------
Net amount recognized..............................    $    411.2     $   356.1
                                                      ============================
</TABLE>


                                      F-45
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Pension Benefits Plans and Other Postretirement Benefit Plans -
(continued)

The assumptions used in accounting for the Company's qualified and nonqualified
benefit plans were as follows:

                                             Years Ended December 31,
                                                                  Other
                                       Pension Benefits  Postretirement Benefits
                                      ------------------------------------------
                                        2002     2001        2002     2001
                                      ------------------------------------------

Discount rate........................  6.75%     7.25%       6.75%     7.25%
Expected return on plan assets.......  9.50%     9.50%       9.50%     9.50%
Rate of compensation increase........  3.50%     4.20%         --        --

The expected return on plan assets rates shown above are the rates used in
computing the net periodic costs for the year. The rates of compensation
increase and the discount rate shown above are the rates used in computing the
year-end measurements and for computing the net periodic costs for the following
year.

For measurement purposes, a 10.0% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 2003. The rate was assumed to
decrease gradually to 5.25% in 2008 and remain at that level thereafter.

For the prior valuation, an 8.0% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 2002. The rate was assumed to
decrease gradually to 5.25% in 2006 and remain at that level thereafter.

The net periodic benefit (credit) cost related to the Company's qualified and
nonqualified benefit plans includes the following components:

<TABLE>
<CAPTION>
                                                                       Year Ended December 31
                                                                                                      Other
                                                        Pension Benefits                        Postretirement Benefits
                                         ---------------------------------------------------------------------------------------
                                                2002          2001          2000           2002           2001          2000
                                         ---------------------------------------------------------------------------------------
                                                                               (in millions)
<S>                                         <C>           <C>           <C>              <C>           <C>           <C>
Service cost............................    $   27.8      $   30.7      $   34.0         $  4.0        $   5.9       $   7.8
Interest cost...........................       133.9         129.1         129.2           33.5           31.8          30.9
Expected return on plan assets..........      (201.5)       (223.8)       (209.9)         (22.8)         (24.4)        (24.1)
Amortization of transition asset........         0.1           0.1         (12.0)            --             --            --
Amortization of prior service cost......         7.0           6.5           4.6           (3.2)          (2.2)         (0.2)
Recognized actuarial gain...............         7.6         (18.3)         (9.3)          (1.9)          (6.8)         (8.7)
Other...................................          --            --            --             --           (3.9)           --
                                         ------------------------------------------  -------------------------------------------
   Net periodic benefit (credit) cost...    $  (25.1)     $  (75.7)     $  (63.4)        $  9.6        $   0.4       $   5.7
                                         ==========================================  ===========================================
</TABLE>

Assumed health care cost trend rates have a significant effect on the amounts
reported for the healthcare plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:

<TABLE>
<CAPTION>
                                                                                        1-Percentage       1-Percentage
                                                                                        Point Increase     Point Decrease
                                                                                      --------------------------------------
                                                                                                  (in millions)

<S>                                                                                          <C>               <C>
Effect on total of service and interest costs in 2002..............................          $ 3.4             $ (3.1)
Effect on postretirement benefit obligations as of December 31, 2002...............           45.0              (41.5)
</TABLE>

The information that follows shows supplemental information for the Company's
defined benefit pension plans. Certain key summary data is shown separately for
qualified plans and non-qualified plans.


                                      F-46
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Pension Benefit Plans and Other Postretirement Benefit Plans -
(continued)

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                             --------------------------------------------------------------------------------
                                                               2002                                      2001
                                             --------------------------------------------------------------------------------

                                             --------------------------------------------------------------------------------
                                              Qualified    Nonqualified                 Qualified    Nonqualified
                                                Plans         Plans         Total         Plans         Plans         Total
                                             --------------------------------------------------------------------------------

                                                                               (in millions)

<S>                                           <C>           <C>          <C>           <C>           <C>           <C>
Benefit obligation at the end of year......   $ 1,727.4     $   301.9    $  2,029.3    $ 1,674.4     $   258.7     $ 1,933.1
Fair value of plan assets at end of year...     1,855.8           5.2       1,861.0      2,192.3           4.6       2,196.9
                                             --------------------------------------------------------------------------------
Funded status..............................       128.4        (296.7)       (168.3)       517.9        (254.1)        263.8
Unrecognized net actuarial (gain)loss             374.7         136.8         511.5        (65.7)         90.0          24.3
Unrecognized prior service cost............        78.6         (10.7)         67.9         71.7          (3.8)         67.9
Unrecognized transition (asset)liability             --           0.1           0.1           --           0.1           0.1
                                             --------------------------------------------------------------------------------
Prepaid benefit (accrued) cost.............   $   581.7     $  (170.5)   $    411.2    $   523.9     $  (167.8)    $   356.1

Prepaid benefit cost.......................   $   581.7            --    $    581.7    $   523.9            --     $   523.9
Accrued benefit liability including
    minimum liability......................          --     $  (275.1)       (275.1)          --     $  (231.6)       (231.6)
Intangible asset...........................          --           0.1           0.1           --           0.5           0.5
Accumulated other comprehensive
  income...................................          --         104.5         104.5           --          63.3          63.3
                                             --------------------------------------------------------------------------------
    Net amount recognized..................   $   581.7     $  (170.5)   $    411.2    $   523.9     $  (167.8)    $   356.1
                                             --------------------------------------------------------------------------------
Service cost...............................   $    26.1     $     1.7    $     27.8    $    26.0     $     4.7     $    30.7
Interest cost..............................       115.9          18.0         133.9        110.1          19.0         129.1
Expected return on plan assets.............      (201.3)         (0.2)       (201.5)      (223.7)         (0.1)       (223.8)
Amortization of transition asset...........          --           0.1           0.1           --           0.1           0.1
Amortization of prior service cost.........         6.5           0.5           7.0          4.5           2.0           6.5
Recognized actuarial gain..................         1.5           6.1           7.6        (24.8)          6.5         (18.3)
                                             --------------------------------------------------------------------------------
   Net periodic benefit (credit) cost......   $   (51.3)    $    26.2    $    (25.1)   $  (107.9)    $    32.2     $   (75.7)
                                             ================================================================================
</TABLE>

Note 12 -- Commitments, Guarantees and Contingencies

Commitments

The Company has extended commitments to purchase fixed maturity investments,
preferred and common stock, and other invested assets and to issue mortgage
loans on real estate totaling $485.2 million, $0.3 million, $729.9 million and
$279.8 million, respectively at December 31, 2002. If funded, loans related to
real estate mortgages would be fully collateralized by related properties. The
Company monitors the creditworthiness of borrowers under long-term bond
commitments and requires collateral as deemed necessary. The estimated fair
values of the commitments described above aggregate $1.2 billion at December 31,
2001. The majority of these commitments expire in 2003.


                                      F-47
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 12 -- Commitments, Guarantees and Contingencies -(continued)

Guarantees

In the course of business the Company enters into guarantees which vary in
nature and purpose. The following guarantee is disclosed pursuant to FASB
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others".

The Company guarantees certain mortgage securitizations transactions the Company
entered into with FNMA and FHLMC. This guarantee will persist until the pool of
mortgages is paid off in full by the mortgagees. The Company must perform under
this guarantee where the mortgagees fail to repay their mortgages. The maximum
amount of future payments the Company may be required to make pursuant to the
guarantee is approximately equivalent to the December 31, 2002 aggregate
outstanding principal balance of the pool of FNMA loans of $19.2 million and the
FHMLC loans of $20.1 million.

Contingencies

Class Action

During 1997, the Company entered into a court-approved settlement relating to a
class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, the Company
specifically denied any wrongdoing. The total reserve held in connection with
the settlement to provide for relief to class members and for legal and
administrative costs associated with the settlement amounted to $11.9 million
and $52.7 million at December 31, 2002 and 2001, respectively. The Company
incurred no costs related to the settlement in 2002 or 2000. Costs incurred
related to the settlement were $30.0 million in 2001. The estimated reserve is
based on a number of factors, including the estimated cost per claim and the
estimated costs to administer the claims.

During 1996, management determined that it was probable that a settlement would
occur and that a minimum loss amount could be reasonably estimated. The Company
recorded its best estimate based on the information available at the time. The
terms of the settlement agreement were negotiated throughout 1997 and approved
by the court on December 31, 1997. In accordance with the terms of the
settlement agreement, the Company contacted class members during 1998 to
determine the actual type of relief to be sought by class members. The majority
of the responses from class members were received by the fourth quarter of 1998.
The type of relief sought by class members differed from the Company's initial
estimates. In 1999, the Company updated its estimate of the cost of claims
subject to alternative dispute resolution relief and revised its reserve
estimate accordingly. The reserve estimate was further evaluated quarterly, and
was adjusted as noted above, in 2001. The adjustment to the reserve in the
fourth quarter of 2001 was the result of the Company being able to better
estimate the cost of settling the remaining claims, which on average tend to be
larger, more complicated claims. The better estimate comes from experience with
actual settlements on similar claims.

Administration of the alternative dispute resolution (ADR) component of the
settlement continues to date. Although some uncertainty remains as to the cost
of claims in the final phase (i.e., arbitration) of the ADR process, it is
expected that the final cost of the settlement will not differ materially from
the amounts presently provided for by the Company.

Harris Trust

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

In that opinion the Court found against the Company and awarded the Trust
approximately $13.8 million in relation to this claim together with unspecified
additional pre-judgment interest on this amount from October 1988. The Court
also found against the Company on issues of liability valuation and ERISA law.
Damages in the amount of approximately $5.7 million, together with unspecified
pre-judgment interest from December 1996, were awarded on these issues. As part
of the relief, the judge ordered the removal of Hancock as a fiduciary to the
plan. On April 11, 2001, the Court entered a judgment against the Company for
approximately $84.9 million, which includes damages to the plaintiff,
pre-judgment interest, attorney's fees and other costs.


                                      F-48
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 12 -- Commitments, Guarantees and Contingencies -(continued)

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

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

Modal Premium Litigation

On July 19, 2002, the Company announced it had entered into a class action
lawsuit settlement agreement involving policyholders who paid premiums on a
monthly, quarterly or semiannual basis, rather than annually. The class action
lawsuit, known as the "Modal Premium" action, was filed in a New Mexico state
court. As a result of the settlement, the Company established a $30.0 million
reserve ($19.5 million after taxes) as of June 30, 2002 to provide for economic
relief in the form of a Settlement Death Benefit to the approximately 1.5
million class members who purchased various insurance products from the Company
and paid on a monthly, quarterly or semi-annual basis. The reserve also provides
for the legal and administrative costs associated with the settlement. In
entering into the settlement, the Company specifically denied any wrongdoing.
The Settlement Death Benefit Period began on February 19, 2003 and extends for
either nine or twelve months, depending upon the age of the class member.
Although some uncertainty remains as to the final cost of the settlement, it is
expected that it will not differ materially from the amounts presently provided
for by the Company.

Other

In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 2002. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.


                                      F-49
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 - Shareholder's Equity

(a) Common Stock

As result of the Reorganization, as described in Note 1, the Company converted
to a stock life insurance company. The Company has one class of capital stock,
common stock ($10,000 par value, 1,000 shares authorized and outstanding). All
of the outstanding common stock of the Company is owned by JHFS, the parent.

(b) Other Comprehensive Income

The components of accumulated other comprehensive income are as follows:

<TABLE>
<CAPTION>
                                                                       Net
                                                                    Accumulated     Foreign                   Accumulated
                                                          Net       Gain (Loss)     Currency      Minimum        Other
                                                       Unrealized     on Cash     Translation     Pension    Comprehensive
                                                     Gains (Losses) Flow Hedges    Adjustment    Liability       Income
                                                     -----------------------------------------------------------------------
                                                                                 (in millions)
<S>                                                     <C>             <C>          <C>          <C>          <C>
Balance at December 31, 1999.......................     $   69.1        --           $ (2.5)      $ (61.2)     $    5.4
Gross unrealized gains (losses) (net of
   deferred income tax benefit of $8.1
   million)........................................        (12.7)       --               --            --         (12.7)
Reclassification adjustment for gains
   (losses), realized in net income (net of
   tax expense of $59.8 million)...................        111.2        --               --            --         111.2
Adjustment for participating group annuity
   contracts (net of deferred income tax
   benefit of $3.6 million)........................         (6.8)       --               --            --          (6.8)
Adjustment for deferred policy acquisition
    costs and present value of future profits
    (net of deferred income tax benefit of
    $15.4 million).................................        (28.3)       --               --            --         (28.3)
Adjustment for policyholder dividend
   obligation (net of deferred income tax benefit
   of $4.7 million)................................         (8.8)       --               --            --          (8.8)
                                                     -----------------------------------------------------------------------
Net unrealized gains (losses)......................         54.6        --               --            --          54.6
Foreign currency translation adjustment............           --        --             (1.5)           --          (1.5)
Minimum pension liability (net of deferred
   income tax expense of $4.4 million).............           --        --               --           8.2           8.2
                                                     -----------------------------------------------------------------------
Balance at December 31, 2000.......................     $  123.7        --           $ (4.0)      $ (53.0)     $   66.7
                                                     -----------------------------------------------------------------------
</TABLE>


                                      F-50
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 - Shareholder's Equity - (continued)

<TABLE>
<CAPTION>
                                                                       Net
                                                                    Accumulated     Foreign                   Accumulated
                                                          Net       Gain (Loss)     Currency      Minimum        Other
                                                       Unrealized     on Cash     Translation     Pension    Comprehensive
                                                     Gains (Losses) Flow Hedges    Adjustment    Liability       Income
                                                     -----------------------------------------------------------------------
                                                                                  (in millions)
<S>                                                      <C>          <C>            <C>          <C>            <C>
Balance at December 31, 2000.......................      $ 123.7           --        $ (4.0)      $ (53.0)       $  66.7
Gross unrealized gains (losses) (net of
   deferred income tax benefit of $49.1 million)...        (88.3)          --            --            --          (88.3)
Reclassification adjustment for gains
   (losses), realized in net income (net of
   tax expense of $80.8 million)...................        150.1           --            --            --          150.1
Adjustment for participating group annuity
   contracts (net of deferred income tax
   benefit of $5.1 million)........................         (9.5)          --            --            --           (9.5)
Adjustment for deferred policy acquisition
   costs and present value of future profits
   (net of deferred income tax benefit of
   $25.8 million)..................................        (47.8)          --            --            --          (47.8)
Adjustment for policyholder dividend obligation
   (net of tax expense of $46.1 million)...........        (85.6)          --            --            --          (85.6)
                                                     -----------------------------------------------------------------------
Net unrealized gains (losses)......................        (81.1)          --            --                        (81.1)
Foreign currency translation adjustment............           --           --           1.0            --            1.0
Minimum pension liability (net of deferred
   income tax expense of $8.2 million).............           --           --            --          15.2           15.2
Net accumulated gains (losses) on cash
   flow hedges (net of tax benefit of
   $2.1 million)...................................           --         (3.8)           --            --           (3.8)
Change in accounting principle (net of
   income tax expense of $122.6 million)...........        204.7         22.9            --            --          227.6
                                                     -----------------------------------------------------------------------
Balance at December 31, 2001.......................      $ 247.3      $  19.1        $ (3.0)      $ (37.8)       $ 225.6
                                                     =======================================================================

Gross unrealized gains (losses) (net of
   deferred income tax expense of $32.1 million)...         87.2           --            --            --           87.2
Reclassification adjustment for gains
   (losses), realized in net income (net of
   income tax benefit of $61.6 million)............        114.4           --            --            --          114.4
Adjustment for participating group annuity
   contracts (net of deferred income tax
   benefit of $14.6 million).......................        (27.2)          --            --            --          (27.2)
Adjustment for deferred policy acquisition
   costs and present value of future profits
   (net of deferred income tax benefit of
   $20.5 million)..................................        (38.0)          --            --            --          (38.0)
Adjustment for policyholder dividend obligation                                                        --
   (net of deferred income tax expense of
   $38.0 million)..................................        (70.7)          --            --            --          (70.7)
                                                     -----------------------------------------------------------------------
Net unrealized gains (losses)......................         65.7           --            --            --           65.7
Foreign currency translation adjustment............           --           --            --            --             --
Minimum pension liability (net of deferred
   income tax benefit of $13.2 million)............           --           --            --         (24.4)         (24.4)
Net accumulated gains (losses) on cash
   flow hedges (net of income tax expense of
   $94.5 million)..................................           --        175.3            --            --          175.3
                                                     -----------------------------------------------------------------------
Balance at December 31, 2002.......................      $ 313.0      $ 194.4        $ (3.0)      $ (62.2)       $ 442.2
                                                     =======================================================================
</TABLE>


                                      F-51
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 - Shareholder's Equity - (continued)

Net unrealized investment and other gains (losses), included in the consolidated
balance sheets as a component of shareholder's equity, are summarized as
follows:

<TABLE>
<CAPTION>
                                                                                For the Years Ended December 31,
                                                                            2002               2001              2000
                                                                     -------------------------------------------------------
                                                                                          (in millions)
<S>                                                                       <C>                <C>                <C>
Balance, end of year comprises:
   Unrealized investment gains (losses) on:
     Fixed maturities............................................         $  839.8           $ 294.1            $ 103.0
     Equity investments..........................................             42.1             129.2              258.5
     Derivatives and other.......................................             41.7             205.0             (155.8)
                                                                     -----------------  -------------------  ---------------
Total............................................................            923.6             628.3              205.7

Amounts of unrealized investment (gains) losses
   attributable to:
     Participating group annuity contracts.......................            (90.8)            (49.0)             (34.4)
     Deferred policy acquisition cost and
       present value of future profits...........................           (109.5)            (51.0)              22.6
     Policyholder dividend obligation............................           (253.8)           (145.2)             (13.5)
     Deferred federal income taxes...............................           (156.4)           (135.8)             (56.7)
                                                                     -----------------  -------------------  ---------------
Total............................................................           (610.6)           (381.0)             (82.0)
                                                                     -----------------  -------------------  ---------------

Net unrealized investment gains..................................         $  313.0           $ 247.3            $ 123.7
                                                                     =================  ===================  ===============
</TABLE>

(c) Statutory Results

The Company adopted the new codified statutory accounting principles
(Codification) effective January 1, 2001. Codification changes prescribe
statutory accounting practices and results in changes to the accounting
practices that the Company and its domestic life insurance subsidiaries use to
prepare their statutory-basis financial statements.

The Company and its domestic insurance subsidiaries prepare their
statutory-basis financial statements in accordance with accounting practices
prescribed or permitted by the state of domicile. For the Company, the
Commonwealth of Massachusetts only recognizes statutory accounting practices
prescribed or permitted by Massachusetts insurance regulations and laws. The
National Association of Insurance Commissioners' "Accounting Practices and
Procedures" manual (NAIC SAP) has been adopted as a component of prescribed or
permitted practices by Massachusetts. The Commissioner of Insurance has the
right to permit other specific practices that deviate from prescribed practices,
otherwise known as permitted practices.

From time to time the Company has requested permission from the Commonwealth of
Massachusetts Division of Insurance for a permitted accounting practice. The
Company currently has three permitted practices which relate to an admitted
asset for the pension plan prepaid expense, an admitted asset for the start-up
and launch costs due from the experience fund of the Federal Long-Term Care
Program, and an admitted asset for an after-tax ceding commission in the
acquisition of the fixed universal life insurance business of Allmerica
Financial.

Prior to 2001, the Commissioner had provided the Company approval to recognize
as an admitted asset the pension plan prepaid expense in accordance with the
requirements of SFAS No. 87, "Employers' Accounting for Pensions." Beginning in
2001, the Commissioner has provided the Company with approval to phase-in over a
three-year period the impact of implementing the material provisions of
statutory SSAP No. 8, "Pensions." As a result of this permitted practice, the
Company's reported statutory surplus as of December 31, 2002 is increased by
$159.7 million over what it would be under NAIC SAP. Statutory net income is not
impacted by this permitted practice.

During 2002, the Company received permission from the Commonwealth of
Massachusetts Division of Insurance to record an admitted asset for the Federal
Long-Term Care Program start-up and launch costs due from its experience fund of
$19.3 million at December 31, 2002.


                                      F-52
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 - Shareholder's Equity - (continued)

During 2002, the Company received permission from the Commonwealth of
Massachusetts Division of Insurance to record an admitted asset for the
after-tax ceding commission in the acquisition of the fixed universal life
insurance business of Allmerica Financial of $60.5 million at December 31, 2002,
which will be amortized over five years. There are no other material permitted
practices.

Statutory net income and surplus include the accounts of the Company and its
variable life insurance subsidiary, John Hancock Variable Life Insurance
Company, including its wholly-owned subsidiary, Investors Partner Life Insurance
Company. Investors Guaranty Life Insurance Company, a former subsidiary of the
Company, was sold in 2001, and its statutory net income for the period January
1, 2001 to May 22, 2001 and for the year 2000, and its statutory surplus at
December 31, 2000, are included in the table below.

                                   As of or for the Years Ended December 31
                                   2002             2001             2000
                               ------------------------------------------------
                                               (in millions)
Statutory net income.......     $   271.7        $   631.4        $   617.6

Statutory surplus..........     $ 3,524.1        $ 3,513.6        $ 3,700.5

Massachusetts has enacted laws governing the payment of dividends by insurers.
Under Massachusetts insurance law, no insurer may pay any shareholder dividends
from any source other than statutory unassigned funds without the prior approval
of the Massachusetts Division of Insurance. Massachusetts law also limits the
dividends an insurer may pay in any twelve month period, without the prior
permission of the Massachusetts Division of Insurance, to the greater of (i) 10%
of its statutory policyholders' surplus as of the preceding December 31 or (ii)
the individual company's statutory net gain from operations for the preceding
calendar year, if such insurer is a life company.

Note 14 -- 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.

Protection Segment. Offers a variety of individual life insurance and individual
and group long-term care insurance products, including participating whole life,
term life, universal life, variable life, and retail and group long-term care
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.

Asset Gathering Segment. Offers individual annuities and mutual fund products
and services. Individual annuities consist of fixed deferred annuities, fixed
immediate annuities, single premium immediate annuities, and variable annuities.
Mutual fund products and services primarily consist of open-end mutual funds and
closed end funds. This segment distributes its products through distribution
channels including insurance agents and brokers affiliated with the Company,
securities brokerage firms, financial planners, and banks.

Guaranteed and Structured Financial Products (G&SFP) Segment. Offers a variety
of retirement products to qualified defined benefit plans, defined contribution
plans and non-qualified buyers. The Company's products include guaranteed
investment contracts, funding agreements, single premium annuities, and general
account participating annuities and fund type products. These contracts provide
non-guaranteed, partially guaranteed, and fully guaranteed investment options
through general and separate account products. The segment distributes its
products through a combination of dedicated regional representatives, pension
consultants and investment professionals. The segment's new consumer notes
program distributes primarily through brokers affiliated with the Company and
securities brokerage firms.

Investment Management Segment. Offers a wide range of investment management
products and services to investors covering a variety of private and publicly
traded asset classes including fixed income, equity, mortgage loans, and real
estate. This segment distributes its products through a combination of dedicated
sales and marketing professionals, independent marketing specialists, and
investment professionals.

Corporate and Other Segment. Primarily consists of the Company's international
group insurance program, certain corporate operations, and businesses that are
either disposed or in run-off. The international group insurance program
consists of an


                                      F-53
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 14 -- Segment Information - (continued)

international network of 46 insurers that coordinate and/or reinsure group life,
health, disability and pension coverage for foreign and globally mobile
employees of multinational companies in 50 countries and territories. Corporate
operations primarily include certain financing activities, income on capital not
specifically allocated to the reporting segments and certain non-recurring
expenses not allocated to the segments. The disposed businesses primarily
consist of group health insurance and related group life insurance, property and
casualty insurance and selected broker/dealer operations.

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 (losses) and 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 (losses), including gains and losses on
disposals of businesses 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 after-tax adjustments to segment net income in the tables
below primarily relate to:

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

(ii)  a 2002 charge to benefits to policyholders and expenses incurred relating
      to the settlement of a class action lawsuit against the Company involving
      a dispute regarding disclosure of costs on various modes of life insurance
      policy premium payment and a 2001 charge to benefits to policyholders and
      expenses incurred relating to the settlement of a class action lawsuit
      against the Company involving certain individual life insurance policies
      sold from 1979 through 1996;

(iii) restructuring costs related to reducing staff in the home office and
      terminating certain operations outside the home office;

(iv)  the surplus tax on mutual life insurance companies which, as a stock
      company is no longer applicable to the Company;

(v)   cumulative effect of accounting changes;

(vi)  a charge for one time costs associated with the demutualization process;
      and

(vii) a 2000 charge for a group pension dividend resulting from demutualization
      related asset transfers and the formation of a corporate account.


                                      F-54
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 14 -- Segment Information - (continued)

The following table summarizes selected financial information by segment for the
year ended or as of December 31 and reconciles segment revenues and segment
after-tax operating income to amounts reported in the consolidated statements of
income (in millions):

<TABLE>
<CAPTION>
                                                               Asset                  Investment    Corporate
2002                                            Protection    Gathering      G&SFP     Management    and Other   Consolidated
                                               --------------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>          <C>          <C>          <C>
Revenues:
   Revenues from external customers ...........   $ 1,948.5    $   548.0    $    64.5    $    76.0    $   703.2    $ 3,340.2
   Net investment income ......................     1,310.7        575.7      1,703.9         15.1        (24.4)     3,581.0
   Inter-segment revenues .....................          --          1.1           --         33.5        (34.6)          --
                                               --------------------------------------------------------------------------------
   Segment revenues ...........................     3,259.2      1,124.8      1,768.4        124.6        644.2      6,921.2
   Net realized investment and other
     gains (losses) ...........................       (65.1)       (42.5)      (313.8)         0.4        (30.4)      (451.4)
                                               --------------------------------------------------------------------------------
   Revenues ...................................   $ 3,194.1    $ 1,082.3    $ 1,454.6    $   125.0    $   613.8    $ 6,469.8
                                               ================================================================================
Net Income:
   Segment after-tax operating income .........   $   309.7    $   130.7    $   268.7    $    21.2    $    44.3    $   774.6
   Realized investment gains (losses) .........       (41.4)       (25.7)      (199.6)         0.4        (19.5)      (285.8)
   Class action lawsuit .......................       (18.7)          --           --           --         (0.8)       (19.5)
   Restructuring charges ......................        (5.7)        (6.1)        (0.6)        (0.8)         2.8        (10.4)
                                               --------------------------------------------------------------------------------
   Net income .................................   $   243.9    $    98.9    $    68.5    $    20.8    $    26.8    $   458.9
                                               ================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method .......   $    17.9    $     8.7    $    34.5    $     0.3    $     3.4    $    64.8
   Amortization of deferred policy
     acquisition costs ........................       171.1        140.5          2.2           --         (0.4)       313.4
   Interest expense ...........................         0.5          0.5           --          6.7         44.9         52.6
   Income tax expense .........................       133.4         42.5         17.6         12.2        (97.1)       108.6
   Segment assets .............................    31,772.9     16,052.8     34,967.0      2,370.8      2,643.5     87,807.0
Net Realized Investment and other Gains
(Losses) Data:
   Net realized investment and other gains
     (losses) .................................   $   (87.8)   $   (70.9)   $  (337.2)   $     1.6    $   (30.4)   $  (524.7)
   Less amortization of deferred policy
     acquisition costs related to net
     realized investment and other gains
     (losses) .................................        10.8         28.1           --           --           --         38.9
   Less amounts credited to participating
     pension contractholder accounts ..........          --           --         23.4           --           --         23.4
   Add amounts credited to the policyholder
     dividend obligation ......................        11.9           --           --           --           --         11.9
                                               --------------------------------------------------------------------------------
   Net realized investment and other gains
     (losses), net of related amortization
     of deferred policy acquisition costs,
     amounts credited to participating
     pension contractholders and amounts
     credited to the policyholder dividend
     obligation -- per the consolidated
     financial statements .....................       (65.1)       (42.8)      (313.8)         1.6        (30.4)      (450.5)
   Less net realized investment and other
     gains (losses) attributable to
     mortgage securitizations .................          --          0.3           --         (1.2)          --         (0.9)
                                               --------------------------------------------------------------------------------
   Net realized investment and other gains
     (losses), net-pre-tax adjustment made
     to calculate segment operating income ....       (65.1)       (42.5)      (313.8)         0.4        (30.4)      (451.4)
   Less income tax effect .....................        23.7         16.8        114.2           --         10.9        165.6
                                               --------------------------------------------------------------------------------
   Net realized investment and other gains
     (losses), net-after-tax adjustment made
     to calculate segment operating income ....   $   (41.4)   $   (25.7)   $  (199.6)   $     0.4    $   (19.5)   $  (285.8)
                                               ================================================================================
</TABLE>


                                      F-55
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 14 -- Segment Information - (continued)

<TABLE>
<CAPTION>
                                                                Asset                  Investment    Corporate
2001                                            Protection    Gathering      G&SFP     Management    and Other  Consolidated
                                                ------------------------------------------------------------------------------
<S>                                                <C>          <C>          <C>          <C>          <C>          <C>
Revenues:
   Revenues from external customers ..........     $ 1,796.2    $   656.5    $   535.0    $    86.5    $   652.6    $ 3,726.8
   Net investment income .....................       1,258.5        498.5      1,834.5         28.7         26.0      3,646.2
   Inter-segment revenues ....................            --           --           --         28.0        (28.0)          --
                                                ------------------------------------------------------------------------------
   Segment revenues ..........................       3,054.7      1,155.0      2,369.5        143.2        650.6      7,373.0
   Net realized investment and other
     gains (losses) ..........................         (98.1)       (54.8)      (121.1)        (0.2)        25.2       (249.0)
                                                ------------------------------------------------------------------------------
   Revenues ..................................     $ 2,956.6    $ 1,100.2    $ 2,248.4    $   143.0    $   675.8    $ 7,124.0
                                                ==============================================================================
Net Income:
   Segment after-tax operating income ........     $   284.3    $   148.3    $   238.0    $    29.8    $    55.4    $   755.8
   Realized investment gains (losses) ........         (62.2)       (34.7)       (77.0)        (0.2)        16.6       (157.5)
   Class action lawsuit ......................            --           --           --           --        (19.5)       (19.5)
   Restructuring charges .....................          (4.4)       (17.6)        (1.2)        (0.9)        (1.3)       (25.4)
   Surplus tax ...............................           9.6          0.2          2.6          0.1          0.8         13.3
   Cumulative effect of accounting
     changes, net of tax .....................          11.7         (0.5)        (1.2)        (0.2)        (2.6)         7.2
                                                ------------------------------------------------------------------------------
   Net income ................................     $   239.0    $    95.7    $   161.2    $    28.6    $    49.4    $   573.9
                                                ==============================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ......     $    12.9    $     7.0        $24.8    $     6.9    $     4.8    $    56.4
   Amortization of deferred policy
     acquisition costs .......................         171.3         75.0          2.4           --          0.3        249.0
   Interest expense ..........................           0.9          1.9           --         12.4         43.8         59.0
   Income tax expense ........................         108.8         35.0         71.0         16.2        (30.3)       200.7
   Segment assets ............................      28,912.5     14,740.5     32,253.9      2,049.8      3,168.0     81,124.7
Net Realized Investment and other Gains
(Losses) Data:
   Net realized investment and other gains
     (losses) ................................        (122.9)       (76.4)       (78.8)         3.0         25.2       (249.9)
   Less amortization of deferred policy
     acquisition costs related to net
     realized investment and other gains
     (losses) ................................           7.8         21.6           --           --           --         29.4
   Less amounts credited to participating
     pension contractholder accounts .........            --           --        (42.3)          --           --        (42.3)
   Add amounts credited to the policyholder
     dividend obligation .....................          17.0           --           --           --           --         17.0
                                                ------------------------------------------------------------------------------
   Net realized  investment  and other gains
     (losses), net of related amortization of
     deferred policy acquisition costs,
     amounts credited to participating pension
     contractholders and amounts credited to
     the policyholder dividend obligation --
     per the consolidated financial
     statements ..............................         (98.1)       (54.8)      (121.1)         3.0         25.2       (245.8)
   Less net realized investment and other
     gains (losses) attributable to
     mortgage securitizations ................            --           --           --         (3.2)          --         (3.2)
                                                ------------------------------------------------------------------------------
   Net realized investment and other gains
     (losses), net-pre-tax adjustment made
     to calculate segment operating income ...         (98.1)       (54.8)      (121.1)        (0.2)        25.2       (249.0)
   Less income tax effect ....................          35.9         20.1         44.1           --         (8.6)        91.5
                                                ------------------------------------------------------------------------------
   Net realized investment and other gains
     (losses), net-after-tax adjustment made
     to calculate segment operating
     income ..................................     $   (62.2)   $   (34.7)   $   (77.0)   $    (0.2)   $    16.6    $  (157.5)
                                                ==============================================================================
</TABLE>


                                      F-56
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 14 -- Segment Information (continued)

<TABLE>
<CAPTION>
                                                                   Asset                  Investment    Corporate
2000                                               Protection    Gathering      G&SFP     Management    and Other  Consolidated
                                                 ------------------------------------------------------------------------------
<S>                                                 <C>          <C>          <C>          <C>          <C>          <C>
Revenues:
   Revenues from external customers ...........     $ 1,690.7    $   750.1    $   685.3    $   150.2    $   458.9    $ 3,735.2
   Net investment income ......................       1,196.3        445.8      1,741.9         22.7        157.2      3,563.9
   Inter-segment revenues .....................            --           --           --         39.1        (39.1)          --
                                                 ------------------------------------------------------------------------------
   Segment revenues ...........................       2,887.0      1,195.9      2,427.2        212.0        577.0      7,299.1
   Net realized investment and other
     gains (losses) ...........................         (24.4)        15.4        (64.7)         7.1        141.7         75.1
                                                 ------------------------------------------------------------------------------
   Revenues ...................................     $ 2,862.6    $ 1,211.3    $ 2,362.5    $   219.1    $   718.7    $ 7,374.2
                                                 ==============================================================================
Net Income:
   Segment after-tax operating income .........         238.8        128.8        211.6         46.8         82.4        708.4
   Realized investment gains (losses) .........         (18.2)        18.6        (40.5)         4.4         87.3         51.6
   Restructuring charges ......................          (6.7)        (1.4)        (2.6)          --         (1.3)       (12.0)
   Surplus tax ................................          20.8          0.6          6.5           --         18.1         46.0
   Demutualization expenses ...................           1.6          0.4          0.4           --          0.1          2.5
   Other demutualization related costs ........          (6.8)        (1.3)        (1.7)          --         (0.2)       (10.0)
   Group pension dividend transfer ............            --           --          5.7           --           --          5.7
                                                 ------------------------------------------------------------------------------
   Net income .................................     $   229.5    $   145.7    $   179.4    $    51.2    $   186.4    $   792.2
                                                 ==============================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method .......     $     7.5    $     3.5    $    11.2    $    16.8    $   104.8    $   143.8
   Amortization of deferred policy
     acquisition costs ........................         106.0         78.8          2.6           --         (0.3)       187.1
   Interest expense ...........................           2.9          3.5          1.0         12.1         43.1         62.6
   Income tax expense .........................          82.0         57.9         78.3         35.2         55.5        308.9
   Segment assets .............................      27,091.5     14,067.2     31,161.1      3,124.5      2,967.7     78,412.0
Net Realized Investment and other Gains
(Losses) Data:
   Net realized investment and other gains
     (losses) .................................         (23.2)        18.9        (57.8)        10.3        141.7         89.9
   Less amortization of deferred policy
     acquisition costs related to net
     realized investment and other gains
     (losses) .................................          12.9         (3.5)          --           --           --          9.4
   Less amounts credited to participating
     pension contractholder accounts ..........            --           --         (6.9)          --           --         (6.9)
     Less amounts credited to policyholder
     dividend obligation ......................         (14.1)          --           --           --           --        (14.1)
                                                 ------------------------------------------------------------------------------
   Net realized investment and other gains
     (losses), net of related amortization
     of deferred policy acquisition costs,
     amounts credited to participating
     pension contractholders and amounts
     credited to the policyholder dividend
     obligation -- per consolidated financial
     statements ...............................         (24.4)        15.4        (64.7)        10.3        141.7         78.3
   Less net realized investment and other
     gains (losses) attributable to
     mortgage securitizations .................            --           --           --         (3.2)          --         (3.2)
                                                 ------------------------------------------------------------------------------
   Net realized investment and other gains
     (losses), net-pre-tax adjustment made
     to calculate segment operating income ....         (24.4)        15.4        (64.7)         7.1        141.7         75.1
   Less income tax effect .....................           6.2          3.2         24.2         (2.7)       (54.4)       (23.5)
                                                 ------------------------------------------------------------------------------
   Net realized investment and other gains
     (losses), net-after-tax adjustment
     made to calculate segment operating
     income ...................................     $   (18.2)   $    18.6    $   (40.5)   $     4.4    $    87.3    $    51.6
                                                 ==============================================================================
</TABLE>


                                      F-57
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 14 -- Segment Information (continued)

The Company operates primarily in the United States and also in Indonesia. In
addition, the international program consists of a network of 46 insurers that
coordinate and/or reinsure group life, health, disability and pension coverage
for foreign and globally mobile employees of multinational companies in 50
countries and territories. The following table summarizes selected financial
information by geographic location for the year ended or at December 31:

                                                                 Income Before
                                                               Income Taxes and
                                                                  Cumulative
                                       Long-Lived                 Effect of
Location                    Revenues     Assets       Assets  Accounting Changes
-------------------------------------------------------------------------------
                                            (in millions)
2002
United States...........    $6,191.6    $ 525.1     $87,719.6    $  556.8
Foreign -- other........       278.2        0.6          87.4        10.7
                          -----------------------------------------------------
                            $6,469.8    $ 525.7     $87,807.0    $  567.5
                          =====================================================
2001
United States...........    $6,917.4    $ 533.8     $81,052.9    $  761.4
Foreign -- other........       206.6        0.6          71.8         6.0
                          -----------------------------------------------------
                            $7,124.0    $ 534.4     $81,124.7    $  767.4
                          =====================================================
2000
United States...........    $7,201.4    $ 419.6     $78,346.9    $1,093.4
Foreign -- other........       172.8        0.3          65.1         7.7
                          -----------------------------------------------------
                            $7,374.2    $ 419.9     $78,412.0    $1,101.1
                          =====================================================

The Company has no reportable major customers and revenues are attributed to
countries based on the location of customers.


                                      F-58
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 15 -- Fair Value of Financial Instruments

The following discussion outlines the methodologies and assumptions used to
determine the fair value of the Company's financial instruments. The aggregate
fair value amounts presented herein do not represent the underlying value of the
Company and, accordingly, care should be exercised in drawing conclusions about
the Company's business or financial condition based on the fair value
information presented herein.

The following methods and assumptions were used by the Company to determine the
fair values of financial instruments:

      Fair values for publicly traded fixed maturities (including redeemable
      preferred stocks) are obtained from an independent pricing service. Fair
      values for private placement securities and fixed maturities not provided
      by the independent pricing service are estimated by the Company by
      discounting expected future cash flows using a current market rate
      applicable to the yield, credit quality and maturity of the investments.
      Quarterly, a review is made of the entire fixed maturity portfolio to
      assess credit quality, including a review of all impairments with the
      Company's Committee of Finance, a sub-committee to the Board of Directors.
      At the end of each quarter our Investment Review Committee reviews all
      securities trading below ninety cents on the dollar to determine whether
      impairments need to be taken. The results of this quarterly analysis are
      reviewed by the Company's Committee of Finance. The fair value for equity
      securities is based on quoted market prices.

      The fair value for mortgage loans on real estate is estimated using
      discounted cash flow analyses using interest rates adjusted to reflect the
      credit characteristics of the loans. Mortgage loans with similar
      characteristics and credit risks are aggregated into qualitative
      categories for purposes of the fair value calculations. Fair values for
      impaired mortgage loans are measured based either on the present value of
      expected future cash flows discounted at the loan's effective interest
      rate or the fair value of the underlying collateral for loans that are
      collateral dependent.

      The carrying amount in the balance sheet for policy loans, short-term
      investments and cash and cash equivalents approximates their respective
      fair values.

      The fair value of the Company's long-term debt is estimated using
      discounted cash flows based on the Company's incremental borrowing rates
      for similar types of borrowing arrangements. Carrying amounts for
      short-term borrowings approximate fair value.

      Fair values for the Company's guaranteed investment contracts and funding
      agreements are estimated using discounted cash flow calculations based on
      interest rates currently being offered for similar contracts with
      maturities consistent with those remaining for the contracts being valued.
      The fair value for fixed-rate deferred annuities is the cash surrender
      value, which represents the account value less applicable surrender
      charges. Fair values for immediate annuities without life contingencies
      and supplementary contracts without life contingencies are estimated based
      on discounted cash flow calculations using current market rates.

      The Company's derivatives include futures contracts, interest rate swap,
      cap and floor agreements, swaptions, currency rate swap agreements and
      equity collar agreements. Fair values for these contracts are based on
      current settlement values. These values are based on quoted market prices
      for the financial futures contracts and brokerage quotes that utilize
      pricing models or formulas using current assumptions for all swaps and
      other agreements.

      The fair value for commitments approximates the amount of the initial
      commitment.


                                      F-59
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 15 -- Fair Value of Financial Instruments (continued)

The following table presents the carrying amounts and fair values of the
Company's financial instruments:

<TABLE>
<CAPTION>
                                                                     December 31,
                                                  ----------------------------------------------
                                                            2002                     2001
                                                  ----------------------------------------------
                                                   Carrying      Fair       Carrying      Fair
                                                    Value        Value       Value        Value
                                                  ----------------------------------------------
                                                                    (in millions)
<S>                                               <C>         <C>          <C>         <C>
Assets:
   Fixed maturities:
     Held-to-maturity .........................   $ 1,727.0   $ 1,777.2    $ 1,923.5   $ 1,908.2
     Available-for-sale .......................    42,046.3    42,046.3     36,072.1    36,072.1
   Equity securities:
     Available-for-sale .......................       349.6       349.6        562.3       562.3
     Trading securities .......................         0.7         0.7          1.4         1.4
   Mortgage loans on real estate ..............    10,296.5    11,220.7      9,667.0    10,215.0
   Policy loans ...............................     2,014.2     2,014.2      1,927.0     1,927.0
   Short-term investments .....................       137.3       137.3         78.6        78.6
   Cash and cash equivalents ..................       897.0       897.0      1,025.3     1,025.3
Derivatives:
     Futures contracts, net ...................         0.3         0.3           --          --
     Interest rate swap agreements ............       165.4       165.4         24.9        24.9
     Interest rate swap CMT ...................         1.7         1.7          7.5         7.5
     Interest rate cap agreements .............        15.9        15.9          3.6         3.6
     Interest rate floor agreements ...........        93.2        93.2         56.5        56.5
     Currency rate swap agreements ............       281.7       281.7        401.6       401.6
     Equity collar agreements .................        12.8        12.8         16.7        16.7

Liabilities:
   Consumer notes .............................       290.2       272.9           --          --
   Debt .......................................       803.4       643.3        786.3       758.8
   Guaranteed investment contracts and
     funding agreements .......................    17,961.3    18,022.2     16,142.7    15,947.0
   Fixed rate deferred and immediate annuities      8,466.9     8,310.6      6,212.2     6,123.3
   Supplementary contracts without life
     contingencies ............................        52.8        59.1         54.4        58.4
Derivatives:
   Futures contracts, net .....................         0.2         0.2          0.9         0.9
   Interest rate swap agreements ..............     1,229.1     1,229.1        420.3       420.3
   Interest rate swaption agreements ..........         3.2         3.2          1.3         1.3
   Currency rate swap agreements ..............       156.8       156.8        318.2       318.2
   Equity collar agreements ...................          --          --         18.9        18.9
   Equity swaps ...............................          --          --          0.1         0.1
Commitments ...................................          --    (1,537.9)          --    (1,241.3)
</TABLE>


                                      F-60
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 - Stock Compensation Plans

On January 5, 2000, the Company, as sole shareholder of John Hancock Financial
Services, Inc., approved and adopted the 1999 Long-Term Stock Incentive Plan
(the Incentive Plan), which originally had been approved by the Board of
Directors (the Board) of the Company on August 31, 1999. Under the Incentive
Plan, which became effective on February 1, 2000, the effective date of the Plan
of Reorganization of the Company, options of JHFS common stock granted may be
either non-qualified options or incentive stock options qualifying under Section
422 of the Internal Revenue Code. The Incentive Plan objectives include
attracting and retaining the best personnel, providing for additional
performance incentives, and promoting the success of the Company by providing
employees the opportunity to acquire JHFS' common stock. In 2001, JHFS' Board
adopted and the JHFS stockholders approved the amended and restated 1999
Long-Term Stock Incentive Plan (as amended, the Long-Term Stock Incentive Plan)
and the Non-Employee Directors' Long-Term Stock Incentive Plan (the Directors'
Plan, collectively, the Incentive Plans).

The maximum number of shares of JHFS common stock available under the Long-Term
Stock Incentive Plan is 40,741,403. In addition, no more than 8,148,281 of these
shares shall be available for stock awards. The maximum number of shares that
may be granted as incentive stock options is 32,593,122 shares. The aggregate
number of shares that may be covered by awards for any one participant over the
period that the Long-Term Stock Incentive Plan is in effect shall not exceed
8,148,281 shares. Subject to these overall limits, there is no annual limit on
the number of stock options or stock awards that may be granted in any one year.

The maximum number of shares of JHFS common stock available in the Non-Employee
Directors' Long-Term Stock Incentive Plan is 1,000,000 shares of common stock.
Pursuant to the Non-Employee Directors' Long-Term Stock Incentive Plan, each
director receives 50% of the annual retainer paid to eligible directors in the
form of stock awards. Where a director elects to have the remaining 50% of their
retainer invested in shares of JHFS' common stock through open market purchases
the Company grants a partial matching stock award, which is forfeitable.
Commencing on April 1, 2002, the matching stock award is transferred from the
Non-Employee Directors' Long-Term Stock Incentive Plan. In addition, on JHFS
stockholder approval of the Non-Employee Directors' Long-Term Stock Incentive
Plan, each non-employee director received a non-qualified stock option award of
15,000 shares. As any new non-employee director is appointed that person will
receive an initial option award of 15,000 shares and annually thereafter, at the
date of the JHFS' annual meeting, each will receive non-qualified stock option
awards for 5,000 shares.

<TABLE>
<CAPTION>
                                                                                                  Number of JHFS shares
                                                                                             remaining available for future
                             Number of JHFS shares to        Weighted-average exercise            issuance under equity
                             be issued upon exercise           price of outstanding           compensation plans (excluding
                             of outstanding options,           options, warrants and            JHFS shares reflected in
Plan Category                  warrants and rights                    rights                           column (a))
                            ---------------------------     ----------------------------     --------------------------------
                                      (a)                              (b)                                 (c)
                                 (in thousands)                                                       (in thousands)
<S>                                  <C>                              <C>                               <C>
Equity compensation plans
approved by JHFS
stockholders                         22,312.8                         $ 34.39                           15,169.3

Equity compensation plans
not approved by JHFS
stockholders                               --                              --                                 --
                            ---------------------------     ----------------------------     --------------------------------

Total                                22,312.8                         $ 34.39                           15,169.3
                            ===========================     ============================     ================================
</TABLE>

The Incentive Plans have options exercisable at the dates listed in the table
below. JHFS granted 10.6 million options to the Company's employees during the
year ended December 31, 2002. Options outstanding under the Long-Term Incentive
Plan were granted at a price equal to the market value of the JHFS stock on the
date of grant, vest over a two-year period, and expire five years after the
grant date. Options outstanding under the Non-Employee Director's Long-Term
Stock Incentive Plan were granted at a price equal to the market value of the
stock on the date of grant, vest immediately, and expire five years after grant
date. During 2002, JHFS granted approximately 1.1 million options to the
Company's employees as part of its incentive compensation program. These options
were granted at market value, vested on the date of grant and expire five years
after grant.


                                      F-61
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 -- Stock Compensation Plans (continued)

The status of stock options under the Incentive Plans are summarized below as of
December 31:

<TABLE>
<CAPTION>
                                                                                 JHFS Shares
                                        Number of            Weighted-             subject          Weighted-average
                                       JHFS Shares            average           to exercisable         exercise
                                      (in thousands)        exercise price         options          price per share
                                   ----------------------------------------------------------------------------------
<S>                                    <C>                    <C>                 <C>                   <C>
Outstanding at February 1, 2000              --                    --
     Granted                            4,066.8               $ 14.06
     Exercised                              0.2                 13.94
     Canceled                             260.2                 13.94
                                   ----------------------------------------------------------------------------------
Outstanding at December 31, 2000        3,806.4               $ 14.07
                                   ==================================================================================
     Granted                           10,819.9               $ 35.96
     Exercised                            726.5                 14.05
     Canceled                             969.6                 29.61
                                   ----------------------------------------------------------------------------------
Outstanding at December 31, 2001       12,930.2               $ 31.21             2,270.5               $26.03
                                   ==================================================================================
     Granted                           10,571.6               $ 36.94
     Exercised                            848.7                 14.74
     Canceled                             340.3                 35.38
                                   ----------------------------------------------------------------------------------
Outstanding at December 31, 2002       22,312.8               $ 34.39             8,911.2               $30.48
                                   ==================================================================================
</TABLE>

Through December 31, 2002, the Company accounted for stock-based compensation
using the intrinsic value method prescribed by APB Opinion No. 25, under which
no compensation cost for stock options is recognized for stock option awards
granted at or above fair market value, with the exception of the Signator Stock
Option Program. Had compensation expense for the remaining Company's stock-based
compensation plan been determined based upon fair values at the grant dates for
awards under the plan in accordance with SFAS No. 123, the Company's income
would have been reduced to the pro forma amounts indicated below. Stock option
awards granted after December 31, 2002 will be accounted for using the fair
value method prescribed by SFAS No. 123, Accounting for Stock-Based
Compensation.

The estimated weighted-average fair value per share using the Black-Scholes
option valuation model is $7.70, $9.35, and $3.66 respectively, for the years
ending December 31, 2002, 2001 and 2000, using the following assumptions:

                            2002            2001             2000
                       ---------------------------------------------------
Expected term              3 years       3-5 years         2-5 years
Risk free rate (1)          2.51%       4.6% - 6.0%       4.8% - 5.6%
Dividend yield              1.05%           1.0%             1.8%
Expected volatility         28.8%          32.0%             24.0%

(1) Dependent on grant date.


                                      F-62
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 -- Stock Compensation Plans (continued)

For the purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

<TABLE>
<CAPTION>
                                                                  For the period
                                                                    February 1        Year Ended
                                       Year Ended    Year Ended      through      December 31, 2000
                                       December 31,  December 31,   December 31,      Pro Forma
                                          2002          2001           2000          (unaudited)
                                       ------------------------------------------------------------
                                                            (in millions)

<S>                                    <C>            <C>            <C>               <C>
Net income, as reported ............   $ 458.9        $ 573.9        $ 750.3           $792.23
Add: Stock-based employee
   compensation expense
   included in reported net
   income, net of related tax
   effects .........................       0.9            0.8             --                --
Deduct: Total stock-based
   employee compensation
   expense determined under
   fair value method for all
   awards, net of related tax
   effects (unaudited) .............      55.0           34.1            1.5               2.2
                                       ------------------------------------------------------------
Pro forma net income
   (unaudited) .....................   $ 404.8        $ 540.6        $ 748.8           $ 790.0
                                       ============================================================
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 2002:

<TABLE>
<CAPTION>
                                      Weighted-average
                       Number of        remaining                           Number of
                        options         contractual                         exercisable         Weighted-average
   Range of          outstanding at        life         Weighted-average    options at          exercise price of
 exercise price         12/31/02          (years)        exercise price      12/31/02          exercisable options
-----------------------------------------------------------------------------------------------------------------
                    (in thousands)                                        (in thousands)
<S>                      <C>               <C>             <C>               <C>                  <C>
$12.49 - $16.65          1,953.3           2.2             $ 13.94           1,953.2              $ 13.94
$20.81 - $24.97             35.0           2.6               23.59              35.0                23.59
$24.97 - $29.13          2,364.7           5.0               28.96                --                   --
$29.13 - $33.30          1,387.3           4.9               30.45           1,137.3                30.61
$33.30 - $37.46          8,996.3           3.2               35.51           4,999.8                35.55
$37.46 - $41.62          7,576.2           3.9               40.96             785.9                39.41
-----------------------------------------------------------------------------------------------------------------
                        22,312.8           3.6             $ 34.39           8,911.2              $ 30.48
                   ==============================================================================================
</TABLE>

Under the Signator Stock Option Program, pursuant to the Long-Term Stock
Incentive Plan, which was implemented in 2001, JHFS granted 270,270 stock
options during February 2002 at a grant price of $37.57 per share and 20,000
stock options at a grant price of $40.50 per share during March 2002. During
February 2001, JHFS granted 343,739 stock options at a grant price of $35.53 per
share. All stock option awards under the Signator Stock Option Program were
granted to non-employee general agents at a price equal to the market value of
the stock on the date of grant. The stock options vest over a two-year period,
subject to continued participation in the John Hancock sales program and
attainment of established, individual sales goals. After one year of vesting, an
agent is allowed to exercise 50% of the stock options granted. The Company
amortizes compensation expense for the grant over a 24-month period commencing
on grant date at a fair value of $7.83, $8.44 and $9.24 per option determined by
the Black-Scholes Option valuation model for the February 2002, March 2002 and
February 2001 grants, respectively. In accordance with EITF No. 96-18
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling Goods or Services", the expense
related to option grants under the Signator Stock Option Program is adjusted to
a current fair value at each reporting period. Total amortization expense
recognized for the year ended December 31, 2002 was $1.4 million. Total
amortization expense for 2001 was


                                      F-63
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 -- Stock Compensation Plans (continued)

$1.3 million. The total grant date fair value of the stock options granted under
the program from January 1, 2002 through December 31, 2002, is $2.3 million and
from January 1, 2001 through December 31, 2001, is $3.1 million. During 2002 and
2001, 67,457 and 4,737 stock options were forfeited with a total grant date
price of $0.5 million and $0.01 million, respectively. The outstanding option
balance for the 2002 and 2001 grants under the Signator Stock Options Grant
Program are 290,270 and 271,545, respectively, at December 31, 2002.

In 2002, the Company anticipates a $12 million tax deduction on its tax return
for employee stock option compensation. The Company plans to file its 2002 tax
return by September 15, 2003. In 2001, the Company deducted $12.4 million on its
tax return for employee stock option compensation. In 2000, the year of JHFS'
initial public offering, the Company deducted an immaterial amount on its tax
return for employee stock option compensation.

Stock Grants to Non-Executives

During March 2000, JHFS granted 281,084 shares of non-vested stock to key
personnel at a weighted- average grant price per share of $14.34. These grants
of non-vested stock are forfeitable and vest at three or five years of service
with the Company. The total grant-date exercise price of the non-vested stock
granted from January 1, 2000 through December 31, 2000 is $4.0 million. During
2002, 2001and 2000, 5,445, 12,142 and 50,837 shares of non-vested stock were
forfeited with a total grant date exercise price of $0.1, $0.2 and $0.7 million,
respectively. The outstanding share balance in the 2000 plan is 212,660 as of
December 31, 2002.

During February and March 2001, JHFS granted 265,391 total shares of non-vested
stock to key personnel. The program was funded with cash and the shares were
purchased on the open market at the weighted-average grant price of $37.22 per
share. These grants of non-vested stock are forfeitable and vest at three years
of service with the Company. The total grant-date exercise price of the
non-vested stock granted from January 1, 2001 through December 31, 2001 is $9.9
million. During 2002 and 2001, 3,520 and 16,414 shares of non-vested stock were
forfeited with a total grant-date exercise price of $0.1 million and $0.6
million, respectively. The outstanding share balance in the 2001 plan is 245,457
at December 31, 2002.

During February 2002, JHFS granted 153,900 total shares of non-vested stock to
key personnel. The program was funded with cash and the shares were purchased on
the open market at the weighted-average grant price of $38.22 per share. These
grants of non-vested stock are forfeitable and vest at three years of service
with the Company. The total grant-date exercise price of the non-vested stock
granted from January 1, 2002 through December 31, 2002 is $5.9 million. During
2002, 66 shares of non-vested stock were forfeited with a total grant-date price
of $0.01 million. The outstanding share balance in the 2002 plan is 153,834 at
December 31, 2002.

Stock Grants to Executives

During 2001, JHFS granted 72,749 shares of non-vested stock to executive
officers at a weighted-average grant price per share of $35.72. These grants of
non-vested stock are forfeitable and vest at three or five years of service with
the Company. The Company amortizes compensation expense for the grant over the
vesting period. Total amortization for the period ending December 31, 2002 and
2001, was $0.4 and $0.3 million, respectively. The total grant-date price of the
non-vested stock granted from January 1, 2001 through December 31, 2001, is $2.6
million. During 2001, 14,000 shares of non-vested stock were forfeited with a
total grant-date price of $0.5 million. There were no forfeitures in 2002. The
outstanding share balance of these grants is 58,749 at December 31, 2002.

During January 2002, JHFS granted 550,000 shares of non-vested stock to the
Company's policy committee at a weighted-average grant price per share of
$41.62. These grants of non-vested stock are forfeitable and vest at five years
of service with the Company. The Company amortizes compensation expense for the
grant over the vesting period. Total amortization for the period ending December
31, 2002 was $4.6 million. The total grant-date price of the non-vested stock
granted from January 1, 2002 through December 31, 2002, is $22.9 million. There
were no forfeitures of this grant during 2002. The outstanding share balance of
this grant is 550,000 at December 31, 2002.

During February 2002, JHFS granted 87,401 shares of non-vested stock to
executive officers at a weighted-average grant price per share of $38.22. These
grants of non-vested stock are forfeitable and vest at three years of service
with the Company. The total grant-date exercise price of the non-vested stock
granted from January 1, 2002 through December 31, 2002, is $3.3 million. There
were no forfeitures of this grant during 2002. The outstanding share balance of
this grant is 87,401 at December 31, 2002.


                                      F-64
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 -- Stock Compensation Plans (continued)

Stock Grants to Board Members

During 2002 and 2001, JHFS issued 7,504 and 3,129 shares to Non-Employee
Directors as payment of 50% of their quarterly retainer, respectively. These
shares are not forfeitable and vest immediately. The total grant-date exercise
price of this stock issued to non-employee directors from January 1, 2002
through December 31, 2002 is $0.3 million and from January 1, 2001 through
December 31, 2001 is $0.1 million. In addition, in July 2001, the Company
implemented a plan that would allow directors, at their discretion, to invest
the second half of their quarterly retainer in the Company's common stock in
lieu of receiving cash. The Company will match any investment at a rate of 50%.
The restricted stock given as matching shares is forfeitable and vests over
three years. For the period from July 1, 2001 through March 31, 2002, the
restricted stock given as matching shares was purchased on the open market. As
of April 1, 2002, the restricted stock given as matching shares is granted from
the Non-Employee Long Term Stock Incentive Plan. At December 31, 2002 and 2001,
484 and 256 shares were matched under the program at a weighted-average grant
price per share of $36.22 and $39.07, respectively. Of these shares, 120 were
purchased on the open market and 364 were transferred from the Non-Employee
Directors' Long-Term Stock Incentive Plan. Total expense recognized for the
period ending December 31, 2002 and 2001 was $0.04 million and $0.01 million,
respectively.

Stock Compensation Activity Subsequent to Year End

During January 2003, the Compensation Committee of the Board of Directors
approved stock and stock option grants to the Policy Committee and certain key
employees of the Company. The equity grants were made in compliance with the
terms of the Long-Term Stock Incentive Plan. A total of 1.2 million shares of
non-vested stock was granted, with a total grant date price of $32.9 million. A
total of 0.5 million options were granted, with a grant date fair value of $6.0
per option as determined by the Black-Scholes option valuation model.


                                      F-65
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 17 -- Goodwill and Other Intangible Assets

The Company recognizes purchased intangible assets which result from business
combinations; goodwill, the value of business acquired (VOBA), and mutual fund
investment management contracts acquired (management contracts). The excess of
the cost over the fair value of identifiable assets acquired in business
combinations is recorded as goodwill. The present value of estimated future
profits of insurance policies in force related to businesses acquired is
recorded as VOBA.

The management contract assets relate to the Company's mutual fund subsidiary,
John Hancock Funds, Inc. (JHFunds) which purchased mutual fund investment
contracts as part of its plan to grow its mutual fund management business. These
contracts are identifiable intangible assets which are deemed to be indefinitely
renewable by the Company, and are therefore indefinite lived assets under the
guidance of SFAS 142.

The following tables set forth certain summarized financial information relating
to the Company's purchased intangible assets as of the dates and periods
indicated.

<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                       Gross Carrying   Amortization    Net Carrying
                                                          Amount      and Other Changes    Amount
                                                      -----------------------------------------------
                                                                       (in millions)
<S>                                                       <C>              <C>             <C>
December 31, 2002
Unamortizable intangible assets:
   Goodwill .........................................     $166.7           $(58.1)         $108.6
   Management contracts .............................       12.2             (7.0)            5.2
Amortizable intangible assets:
   VOBA .............................................      201.7            (24.5)          177.2

December 31, 2001
Unamortizable intangible assets:
   Goodwill .........................................     $174.1           $(58.1)         $116.0
   Management contracts .............................        9.0             (7.0)            2.0
Amortizable intangible assets:
   VOBA .............................................       97.4            (21.2)           76.2
</TABLE>

<TABLE>
<CAPTION>
Aggregate amortization expense                                                   For the Years Ended December 31,
                                                                             2002              2001             2000
-------------------------------------------------------------------------------------------------------------------------
                                                                                          (in millions)
<S>                                                                         <C>               <C>              <C>
Goodwill amortization, net of tax of $ - million, $3.6 million and
   $3.2 million, respectively ......................................          --              $7.7             $ 8.1
Management contract amortization, net of tax of $ - million, $0.4
   million and  $0.4 million, respectively..........................          --               0.7               0.7
VOBA amortization, net of tax of $1.1 million,  $0.8 million and
   $0.7 million, respectively.......................................        $2.0               1.5               1.4
-------------------------------------------------------------------------------------------------------------------------
Aggregate amortization expense, net of tax of $1.1 million,  $4.8
   million and $4.3 million, respectively...........................        $2.0              $9.9             $10.2
=========================================================================================================================
</TABLE>


                                      F-66
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 17 -- Goodwill and Other Intangible Assets - (continued)

Estimated future aggregate amortization expense for the years ended
   December 31,

                                                 Tax Effect       Net Expense
                                             -----------------------------------
                                                        (in millions)
2003......................................         $ 4.2            $ 7.8

2004......................................         $ 4.1            $ 7.6

2005......................................         $ 4.7            $ 8.6

2006......................................         $ 4.5            $ 8.4

2007......................................         $ 4.1            $ 7.6


The changes in the carrying value of goodwill, presented for each business
segment, for the periods indicated, are as follows:

<TABLE>
<CAPTION>
                                                              Asset                   Investment    Corporate
                                               Protection    Gathering      G&SFP     Management    and Other   Consolidated
                                            --------------------------------------------------------------------------------
                                                                             (in millions)

<S>                                            <C>           <C>              <C>        <C>           <C>        <C>
Goodwill balance at January 1, 2001........    $  76.5       $  48.9          --         $  0.9        $ 4.9      $ 131.2
Changes to goodwill during 2001:
    Amortization...........................       (4.0)         (6.8)         --           (0.5)          --        (11.3)
    Goodwill acquired......................         --            --          --             --           --           --
    Other adjustments (1) (2)..............        1.0            --          --             --         (4.9)        (3.9)
                                            --------------------------------------------------------------------------------
Goodwill balance at December 31, 2001......    $  73.5       $  42.1          --         $  0.4           --      $ 116.0
                                            ================================================================================
</TABLE>

(1)   Purchase price adjustments relating to the 1999 acquisition of the Fortis
      long term care insurance business resulted in an adjustment to goodwill
      relating to the Fortis business of $1.0 million.
(2)   The Company sold its Investors Guaranty Life Insurance Company business
      (IGL) in 2001 and as a result, disposed of $4.9 million of remaining
      goodwill related to IGL.

<TABLE>
<CAPTION>
                                                              Asset                  Investment    Corporate
                                              Protection    Gathering      G&SFP     Management    and Other   Consolidated
                                            --------------------------------------------------------------------------------
                                                                             (in millions)

<S>                                           <C>            <C>             <C>       <C>             <C>       <C>
Goodwill balance at January 1, 2002........   $   73.5       $  42.1         --        $  0.4          --        $ 116.0
Changes to goodwill during 2002:
    Amortization...........................         --            --         --            --          --             --
    Goodwill acquired......................         --            --         --            --          --             --
    Other adjustments (1)..................       (7.4)           --         --            --          --           (7.4)
                                            --------------------------------------------------------------------------------
Goodwill balance at December 31, 2002......   $   66.1       $  42.1         --        $  0.4          --        $ 108.6
                                            ================================================================================
</TABLE>

(1)   Purchase price negotiations with Fortis, Inc. were concluded during the
      first quarter of 2002, resulting in an adjustment of $(7.3) million to the
      goodwill related to the Company's 1999 acquisition of Fortis' long term
      care insurance business. Legal fees associated with these negotiations
      were finalized in the second quarter of 2002, resulting in a further
      adjustment to goodwill of $(0.1) million.


                                      F-67
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 17 -- Goodwill and Other Intangible Assets - (continued)

The changes in the carrying value of VOBA, presented for each business segment,
for the periods indicated, are as follows:

<TABLE>
<CAPTION>
                                                                 Asset               Investment    Corporate
                                                 Protection    Gathering   G&SFP     Management    and Other  Consolidated
                                               -----------------------------------------------------------------------------
                                                                           (in millions)
<S>                                               <C>            <C>        <C>         <C>           <C>       <C>
VOBA balance at January 1, 2001...............    $  81.3        --         --          --            --        $  81.3
Amortization and other changes during 2001:
    Amortization..............................       (2.3)       --         --          --            --           (2.3)
    Adjustment to unrealized gains on
       securities available-for-sale..........       (2.8)       --         --          --            --           (2.8)
                                               -----------------------------------------------------------------------------
VOBA balance at December 31, 2001.............    $  76.2        --         --          --            --        $  76.2
                                               =============================================================================
<CAPTION>
                                                                 Asset               Investment    Corporate
                                                 Protection    Gathering   G&SFP     Management    and Other   Consolidated
                                               -----------------------------------------------------------------------------
                                                                             (in millions)
<S>                                              <C>              <C>        <C>         <C>          <C>       <C>
VOBA balance at January 1, 2002...............   $   76.2         --         --          --           --        $  76.2
Amortization and other changes during 2002:
    Amortization..............................       (3.1)        --         --          --           --           (3.1)
    VOBA acquired (1).........................      104.3         --         --          --           --          104.3
    Adjustment to unrealized gains on
       securities available-for-sale..........       (0.2)        --         --          --           --           (0.2)
                                               -----------------------------------------------------------------------------
VOBA balance at December 31, 2002.............   $  177.2         --         --          --           --        $ 177.2
                                               =============================================================================
</TABLE>

(1)   The Company acquired a block of insurance business from Allmerica
      Financial Corporation on December 31, 2002, as discussed in Note 1 -
      Summary of Significant Accounting Policies above. This balance reflects
      the Company's best estimate of the VOBA as of December 31, 2002, however,
      this valuation is not complete and further future refinement of this
      estimate may be necessary.

The changes in the carrying value of management contracts, presented for each
business segment, for the periods indicated, are as follows:

<TABLE>
<CAPTION>
                                                                 Asset               Investment    Corporate
                                                 Protection    Gathering   G&SFP     Management    and Other  Consolidated
                                               -----------------------------------------------------------------------------
                                                                           (in millions)
<S>                                                   <C>        <C>         <C>         <C>          <C>        <C>
Management contracts balance at
    January 1, 2001...........................        --         $ 3.0       --          --           --         $ 3.0
Amortization and other changes during 2001:
    Amortization..............................        --          (1.0)      --          --           --          (1.0)
    Other adjustments.........................        --            --       --          --           --            --
                                               -----------------------------------------------------------------------------
Management contracts balance at
    December 31, 2001.........................        --         $ 2.0       --          --           --         $ 2.0
                                               =============================================================================
</TABLE>


                                      F-68
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 17 -- Goodwill and Other Intangible Assets - (continued)

<TABLE>
<CAPTION>
                                                                 Asset               Investment    Corporate
                                                 Protection    Gathering   G&SFP     Management    and Other   Consolidated
                                               -----------------------------------------------------------------------------
                                                                            (in millions)
<S>                                                  <C>          <C>        <C>          <C>          <C>       <C>
Management contracts balance at
    January 1, 2002                                  --           $ 2.0      --           --           --        $ 2.0
Amortization and other changes during 2002:
   Amortization...............................       --              --      --           --           --           --
   Management contracts acquired during the
     period (1)...............................       --             3.2      --           --           --          3.2
                                               -----------------------------------------------------------------------------
Management contracts balance at
    December 31, 2002.........................       --           $ 5.2      --           --           --        $ 5.2
                                               =============================================================================
</TABLE>

(1)   This increase results from JHFund's purchase of the management contracts
      for the U.S. Global Leaders Growth Fund and the Pzena Focused Value Fund
      in 2002.

The net income of the Company, if the Company had not amortized goodwill and
management contracts prior to the adoption of SFAS No. 142, would have been as
follows:

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                           2002              2001            2000
                                                       ----------------------------------------------
                                                                        (in millions)
<S>                                                      <C>              <C>             <C>
Net income:
As reported.........................................     $ 458.9          $ 573.9         $ 792.2

Goodwill amortization, net of tax...................          --              7.7             8.1
Management contract amortization, net of tax........          --              0.7             0.7
                                                       ----------------------------------------------
Proforma (unaudited)................................     $ 458.9          $ 582.3         $ 801.0
                                                       ==============================================
</TABLE>

Note 18 - Subsequent Events

On March 14, 2003, the Company sold three of its Home Office complex properties
to Beacon Capital Partners for $910.0 million. As part of the transaction, the
Company also provided Beacon Capital Partners with a long-term sub-lease of the
Company's parking garage. The Company entered into a long-term lease of the
space it now occupies in those buildings and plans on continuing to use them as
its corporate headquarters.


                                      F-69
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 19 -- Quarterly Results of Operations (unaudited)

The following is a summary of unaudited quarterly results of operations for 2002
and 2001:

<TABLE>
<CAPTION>
                                                            2002                                        2001
                                         ------------------------------------------------------------------------------------------
                                            March    June     September   December      March       June      September  December
-----------------------------------------------------------------------------------------------------------------------------------
                                                                             (in millions)
<S>                                     <C>        <C>        <C>         <C>         <C>         <C>         <C>        <C>
Premiums and other considerations ..... $  803.6   $  834.9   $  817.9    $  882.9    $  751.3    $  826.7    $  778.0   $1,367.6
Net investment income .................    887.7      888.8      878.4       926.1       918.0       913.9       920.3      894.0
Net realized investment and other
   losses, net of related
   amortization of deferred policy
   acquisition costs, amounts credited
   to participating pension
   contractholders, and the
   policyholder dividend obligation ...    (86.1)    (125.4)     (37.8)     (201.2)      (25.0)      (12.6)      (58.9)    (149.3)
                                         ------------------------------------------------------------------------------------------
Total revenues ........................  1,605.2    1,598.3    1,658.5     1,607.8     1,644.3     1,728.0     1,639.4    2,112.3

Benefits and expenses .................  1,424.9    1,472.4    1,490.1     1,514.9     1,442.5     1,471.6     1,420.5    2,022.0
                                         ------------------------------------------------------------------------------------------
Income before income taxes and
   cumulative effect of accounting
   changes ............................    180.3      125.9      168.4        92.9       201.8       256.4       218.9       90.3
Cumulative effect of accounting
   changes, net of tax ................       --         --         --          --         7.2          --          --         --
                                         ------------------------------------------------------------------------------------------
Net income (a) ........................ $  131.8   $  101.6   $  133.3    $   92.2    $  148.5    $  182.0    $  158.7   $   84.7
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)   Balances reclassified for the adoption of the provisions of SOP 00-3, as
      outlined in Note 1- Summary of Significant Accounting Policies to the
      consolidated financial statements above. The adoption impacted net income
      by $(0.1) million, $2.4 million and $(5.9) million for the three months
      ended March 31, June 30 and September 30, 2001, respectively.


                                      F-70
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                     SCHEDULE I -- SUMMARY OF INVESTMENTS -
                    OTHER THAN INVESTMENTS IN RELATED PARTIES
                             As of December 31, 2002
                                  (in millions)

<TABLE>
<CAPTION>
Column A                                                   Column B   Column C      Column D
                                                                                 AMOUNT AT WHICH
                                                                                  SHOWN IN THE
                                                                                  CONSOLIDATED
TYPE OF INVESTMENT                                         COST (2)    VALUE     BALANCE SHEET
------------------------------------------------------------------------------------------------
<S>                                                      <C>         <C>         <C>
Fixed maturity securities, available-for-sale:
Bonds:
United States government and government
agencies and authorities .............................   $   195.2   $   204.0   $   204.0
States, municipalities and political subdivisions ....       444.8       467.7       467.7
Foreign governments ..................................       291.5       325.0       325.0
Public utilities .....................................     4,355.3     4,308.0     4,308.0
Convertibles and bonds with warrants attached ........       447.0       462.4       462.4
All other corporate bonds ............................    34,899.2    35,689.0    35,689.0
Certificates of deposits .............................         0.0          --          --
Redeemable preferred stock ...........................       573.5       590.2       590.2
                                                         ---------------------------------------
Total fixed maturity securities, available-for-sale ..   $41,206.5   $42,046.3   $42,046.3
                                                         ---------------------------------------
Equity securities, available-for-sale:
Common stocks:
Public utilities .....................................          --          --          --
Banks, trust and insurance companies .................          --          --          --
Industrial, miscellaneous and all other ..............   $   230.3   $   273.0   $   273.0
Non-redeemable preferred stock .......................        77.2        76.6        76.6
                                                         ---------------------------------------
Total equity securities, available-for-sale ..........   $   307.5   $   349.6   $   349.6
                                                         ---------------------------------------
Fixed maturity securities, held-to-maturity:
Bonds
United States government and government
agencies and authorities .............................   $    15.3   $    16.1   $    15.3
States, municipalities and political subdivisions ....       369.9       383.3       369.9
Foreign governments ..................................          --          --          --
Public utilities .....................................       142.0       141.9       142.0
Convertibles and bonds with warrants attached ........          --          --          --
All other corporate bonds ............................     1,199.8     1,235.9     1,199.8
Certificates of deposits .............................          --          --          --
Redeemable preferred stock ...........................          --          --          --
                                                         ---------------------------------------
Total fixed maturity securities, held-to-maturity ....   $ 1,727.0   $ 1,777.2   $ 1,727.0
                                                         ---------------------------------------
</TABLE>

The condensed financial information should be read in conjunction with the
audited consolidated financial statements and notes thereto.


                                      F-71
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                     SCHEDULE I -- SUMMARY OF INVESTMENTS -
             OTHER THAN INVESTMENTS IN RELATED PARTIES - (CONTINUED)
                             As of December 31, 2002
                                  (in millions)

Column A                                      Column B  Column C    Column D
                                                                 AMOUNT AT WHICH
                                                                  SHOWN IN THE
                                                                  CONSOLIDATED
TYPE OF INVESTMENT                            COST (2)   VALUE    BALANCE SHEET
--------------------------------------------------------------------------------
Equity securities, trading:
Common stocks:
Public utilities...........................         --       --           --
Banks, trust and insurance companies.......         --       --           --
Industrial, miscellaneous and all other....  $     0.3     $0.7    $     0.7
Non-redeemable preferred stock.............         --       --           --
                                            ------------------------------------
Total equity securities, trading...........  $     0.3     $0.7    $     0.7
                                            ------------------------------------
Mortgage loans on real estate, net (1).....  $10,407.6     XXXX    $10,296.5
Real estate, net:
Investment properties (1)..................      222.6     XXXX        173.2
Acquired in satisfaction of debt (1).......       85.9     XXXX         82.1
Policy loans...............................    2,014.2     XXXX      2,014.2
Other long-term investments (2)............    2,839.1     XXXX      2,839.1
Short-term investments.....................      137.3     XXXX        137.3
                                            ------------------------------------
Total investments..........................  $58,894.8     XXXX    $59,666.0
                                            ====================================

(1)   Difference between Column B and Column D is primarily due to valuation
      allowances and accumulated depreciation of real estate. See notes to the
      audited consolidated financial statements.
(2)   Difference between Column B and Column C is primarily due to operating
      gains (losses) of investments in limited partnerships.

The condensed financial information should be read in conjunction with the
audited consolidated financial statements and notes thereto.


                                      F-72
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

               SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION

   As of December 31, 2002, 2001 and 2000 and for each of the years then ended
                                  (in millions)

<TABLE>
<CAPTION>
Column A                       Column B     Column C       Column D         Column E     Column F

                                             FUTURE                         OTHER
                                             POLICY                         POLICY
                                            BENEFITS,                       CLAIMS
                               DEFERRED      LOSSES,                         AND
                                POLICY     CLAIMS AND                      BENEFITS
                             ACQUISITION      LOSS         UNEARNED        PAYABLE       PREMIUM
         SEGMENT                COSTS       EXPENSES     PREMIUMS (1)        (1)         REVENUE
<S>                          <C>           <C>           <C>            <C>            <C>
2002:
Protection ...............   $ 2,657.8     $20,715.3     $   300.3      $   108.2      $ 1,506.0
Asset Gathering ..........       681.2       8,952.8            --            0.1           29.3
Guaranteed & Structured
   Financial Products ....         8.6      26,845.4          68.6            2.9           18.3
Investment Management ....          --         225.0            --             --             --
Corporate & Other ........         5.0         819.5            --           49.5          430.6
                             -------------------------------------------------------------------
     Total ...............   $ 3,352.6     $57,558.0     $   368.9      $   160.7      $ 1,984.2
                             ===================================================================

2001:
Protection ...............   $ 2,557.1     $18,369.2     $   280.4      $   102.0      $ 1,363.8
Asset Gathering ..........       616.2       6,689.4            --            0.1           74.8
Guaranteed & Structured
   Financial Products ....         8.8      24,375.1          65.7            4.9          483.3
Investment Management ....          --            --            --             --             --
Corporate & Other ........         4.2       1,284.4          (0.1)          96.8          430.0
                             -------------------------------------------------------------------
     Total ...............   $ 3,186.3     $50,718.1     $   346.0      $   203.8      $ 2,351.9
                             ===================================================================

2000:
Protection ...............   $ 2,455.7     $16,671.2     $   262.6      $    89.9      $ 1,295.5
Asset Gathering ..........       558.2       5,619.9            --           (4.5)          63.4
Guaranteed & Structured
   Financial Products ....         8.5      21,944.2          60.4            0.7          620.3
Investment Management ....          --            --            --             --             --
Corporate & Other ........         4.7       1,488.3           0.1          170.3          411.5
                             -------------------------------------------------------------------
     Total ...............   $ 3,027.1     $45,723.6     $   323.1      $   256.4      $ 2,390.7
                             ===================================================================
</TABLE>

(1)   Unearned premiums and other policy claims and benefits payable are
      included in these amounts.

The condensed financial information should be read in conjunction with the
audited consolidated financial statements and notes thereto.


                                      F-73
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                     SCHEDULE III -- SUPPLEMENTARY INSURANCE
               INFORMATION -- (CONTINUED) As of December 31, 2002,
               2001 and 2000 and for each of the years then ended
                                  (in millions)

<TABLE>
<CAPTION>
          Column A              Column B       Column C           Column D          Column E

                                                             AMORTIZATION OF
                                                             DEFERRED POLICY
                                               BENEFITS,     ACQUISITION COSTS,
                                                CLAIMS,      EXCLUDING AMOUNTS
                                   NET        LOSSES, AND  RELATED TO NET REALIZED    OTHER
                               INVESTMENT     SETTLEMENT   INVESTMENT AND OTHER     OPERATING
          SEGMENT                INCOME        EXPENSES       GAINS (LOSSES)        EXPENSES

2002:
<S>                             <C>           <C>              <C>                 <C>
Protection ................     $1,310.7      $1,787.6         $  171.1            $  346.7
Asset Gathering ...........        575.7         446.7            140.5               353.5
Guaranteed & Structured
   Financial Products .....      1,703.9       1,186.8              2.2               135.3
Investment Management .....         15.1            --               --                92.1
Corporate & Other .........        (24.4)        384.1             (0.4)              299.9
                             ------------------------------------------------------------------
     Total ................     $3,581.0      $3,805.2         $  313.4            $1,227.5
                             ==================================================================

2001:
Protection ................     $1,258.5      $1,603.3         $  171.3            $  346.0
Asset Gathering ...........        498.5         441.6             75.0               452.4
Guaranteed & Structured
   Financial Products .....      1,834.5       1,869.2              2.4               107.0
Investment Management .....         28.7            --               --                97.9
Corporate & Other .........         26.0         414.0              0.3               224.5
                             ------------------------------------------------------------------
     Total ................     $3,646.2      $4,328.1         $  249.0            $1,227.8
                             ==================================================================

2000:
Protection ................     $1,196.3      $1,550.1         $  106.0            $  405.2
Asset Gathering ...........        445.8         371.3             78.8               557.2
Guaranteed & Structured
   Financial Products .....      1,741.9       1,963.4              2.6               108.8
Investment Management .....         22.7            --               --               132.7
Corporate & Other .........        157.2         362.6             (0.3)               84.9
                             ------------------------------------------------------------------
     Total ................     $3,563.9      $4,247.4         $  187.1            $1,288.8
                             ==================================================================
</TABLE>

(2)   Allocations of net investment income and certain operating expenses are
      based on a number of assumptions and estimates, and reported operating
      results would change by segment if different methods were applied.

The condensed financial information should be read in conjunction with the
audited consolidated financial statements and notes thereto.


                                      F-74
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                           SCHEDULE IV -- REINSURANCE

  As of December 31, 2002, 2001 and 2000 and for each of the years then ended:
                                  (in millions)

<TABLE>
<CAPTION>
                                                                      ASSUMED      PERCENTAGE
                                                         CEDED TO      FROM        OF AMOUNT
                                 GROSS       OTHER        OTHER         NET        ASSUMED TO
                                 AMOUNT    COMPANIES    COMPANIES     AMOUNT          NET
<S>                           <C>          <C>          <C>          <C>              <C>
2002:
Life insurance in force ...   $308,858.4   $179,098.5   $ 34,544.8   $164,304.7       21.0%
                             ===================================================
Premiums:
Life insurance ............      1,946.0        735.0        305.4      1,516.4       20.1%
Accident and health
   Insurance ..............        619.0        315.1        163.9        467.8       35.0%
                             ---------------------------------------------------
     Total ................   $  2,565.0   $  1,050.1   $    469.3   $  1,984.2       23.7%
                             ===================================================

2001:
Life insurance in force ...   $282,557.8   $107,601.2   $ 27,940.6   $202,897.2       13.8%
                             ===================================================
Premiums:
Life insurance ............      2,551.6        787.6        233.2      1,997.2       11.7%
Accident and health
   Insurance ..............        529.1        368.9        194.5        354.7       54.8%
                             ---------------------------------------------------
     Total ................   $  3,080.7   $  1,156.5   $    427.7   $  2,351.9       18.2%
                             ===================================================

2000:
Life insurance in force ...   $245,171.2   $ 49,119.2   $ 27,489.1   $223,541.0       12.3%
                             ===================================================
Premiums:
Life insurance ............      2,369.9        313.7        279.0      2,335.2       11.9%
Accident and health
   Insurance ..............        810.4        941.3        186.4         55.5      335.9%
                             ---------------------------------------------------
     Total ................   $  3,180.3   $  1,255.0   $    465.4   $  2,390.7       19.5%
                             ===================================================
</TABLE>

Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and excludes
deposits on investment products and the universal life insurance products.

The condensed financial information should be read in conjunction with the
audited consolidated financial statements and notes thereto.


                                      F-75
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                      JOHN HANCOCK LIFE INSURANCE COMPANY

                      By: /s/ Thomas E. Moloney
                              -------------------------------------------
                              Thomas E. Moloney
                              Senior Executive Vice President and
                              Chief Financial Officer
                      Date:   March 24, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.

         SIGNATURE                          TITLE                   DATE

/s/ David F. D'Alessandro
-------------------------
David F. D'Alessandro      Chairman, President, Chief
                           Executive Officer and Director     March 24, 2003
                           (Principal Executive Officer)

/s/ Thomas E. Moloney
---------------------
Thomas E. Moloney          Senior Executive Vice
                           President and Chief                March 24, 2003
                           Financial Officer
                           (Principal Financial and
                           Accounting Officer)

/s/ Wayne A. Budd
-----------------
Wayne A. Budd              Executive Vice President,
                           General Counsel and Director       March 24, 2003

/s/ John M. Connors, Jr.
------------------------
John M. Connors, Jr.       Director                           March 24, 2003


/s/ Robert E. Fast
------------------
Robert E. Fast             Director                           March 24, 2003


/s/ Richard B. DeWolfe
----------------------
Richard B. DeWolfe         Director                           March 24, 2003


/s/ Thomas P. Glynn
-------------------
Thomas P. Glynn            Director                           March 24, 2003


/s/ Michael C. Hawley
---------------------
Michael C. Hawley          Director                           March 24, 2003


/s/ Edward H. Linde
-------------------
Edward H. Linde            Director                           March 24, 2003


/s/ Judith A. McHale
--------------------
Judith A. McHale           Director                           March 24, 2003


                                       S-1
<PAGE>

/s/ R. Robert Popeo
-------------------
R. Robert Popeo            Director                           March 24, 2003


/s/ Richard F. Syron
--------------------
Richard F. Syron           Director                           March 24, 2003


/s/ Robert J. Tarr, JR.
-----------------------
Robert J. Tarr, Jr.        Director                           March 24, 2003


/s/ Foster L. Aborn
-------------------
Foster L. Aborn            Director                           March 24, 2003


/s/ John M. DeCiccio
--------------------
John M. DeCiccio           Director                           March 24, 2003


/s/ Robert J. Davis
--------------------
Robert J. Davis            Director                           March 24, 2003


                                       S-2
<PAGE>

                                 CERTIFICATIONS
                                 --------------

I, David F. D'Alessandro, certify that:

1.    I have reviewed this annual report on Form 10-K of John Hancock Life
      Insurance Company;
2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;
3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this annual
      report;
4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      have:
      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;
      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and
      c)    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;
5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):
      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and
      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and
6.    The registrant's other certifying officers and I have indicated in this
      annual report whether there were significant changes in internal controls
      or in other factors that could significantly affect internal controls
      subsequent to the date of our most recent evaluation, including any
      corrective actions with regard to significant deficiencies and material
      weaknesses.

Date: March 20, 2003

By: /s/ DAVID F. D'ALESSANDRO
-----------------------------------------
David F. D'Alessandro
Chairman, President and
Chief Executive Officer and Director


                                       S-3
<PAGE>

                                 CERTIFICATIONS
                                 --------------

I, Thomas E. Moloney, certify that:

1.    I have reviewed this annual report on Form 10-K of John Hancock Life
      Insurance Company;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this annual
      report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      have:

      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c)    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      annual report whether there were significant changes in internal controls
      or in other factors that could significantly affect internal controls
      subsequent to the date of our most recent evaluation, including any
      corrective actions with regard to significant deficiencies and material
      weaknesses.

Date: March 20, 2003

By: /s/ THOMAS E. MOLONEY
-----------------------------------------
Thomas E. Moloney
Senior Executive Vice President and
Chief Financial Officer


                                       S-4