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, 2003
                          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 111
                           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 February 27, 2004 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

   NON-GAAP FINANCIAL MEASURES...............................................  3

PART I.......................................................................  3

   ITEM 1.  BUSINESS OF JOHN HANCOCK LIFE INSURANCE COMPANY..................  3
   ITEM 2.  PROPERTIES....................................................... 32
   ITEM 3.  LEGAL PROCEEDINGS................................................ 32
   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 33

PART II...................................................................... 33

   ITEM 5.  MARKET FOR JOHN HANCOCK LIFE INSURANCE COMPANY COMMON STOCK
            AND RELATED SHAREHOLDER MATTERS.................................. 33
   ITEM 6.  SELECTED FINANCIAL DATA.......................................... 33
   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS........................................ 34
   ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....... 91
   ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 95
   ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE......................................... 95
   ITEM 9A. CONTROLS AND PROCEDURES.......................................... 95

PART III..................................................................... 95

   ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF JOHN HANCOCK LIFE
            INSURANCE COMPANY................................................ 95
   ITEM 11. EXECUTIVE COMPENSATION........................................... 95
   ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT....................................................... 95
   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 95
   ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES........................... 95

PART IV...................................................................... 96

   ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
            ON FORM 8-K...................................................... 96
<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 "total segment
after tax operating income" in our discussion of Results of Operations by
Segment. Refer to "Adjustments to GAAP Reported Net Income" in this report or
Note 15 -Segment Information, for a description of total 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 financial 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. (JHFS), a holding company. Also on February 1, 2000,
JHFS completed an initial public offering of 102,000,000 shares of its common
stock, par value $0.01 per share.

      On September 28, 2003, JHFS, the parent of John Hancock Life Insurance
Company, entered into a definitive merger agreement with Manulife Financial
Corporation (Manulife) which is expected to close early in the second quarter of
2004. In accordance with the agreement, each share of JHFS common stock will, at
the time of the merger, be converted in to the right to receive 1.1853 shares of
Manulife stock. It is estimated that the shares of Manulife common stock to be
issued to JHFS shareholders in the merger will represent approximately 42.6% of
the outstanding Manulife common stock after the merger. The merger has been
approved by JHFS' shareholders, but the closing is subject to conditions,
including the approval by certain U.S. and Canadian regulatory authorities.
Until the merger occurs, the Company will continue to operate independently of
Manulife. Thereafter the Company will operate as a subsidiary of Manulife. The
John Hancock name will be Manulife's primary U.S. brand. This Annual Report on
Form 10-K does not reflect or assume any changes to JHFS', or the Company's,
business which may occur as a result of the proposed merger with Manulife. For
additional information, refer to JHFS and other related public filings with the
U.S. SEC relating to the merger.

      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, individual and group long-term care insurance products, and the
Federal long-term care insurance business. 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.

      Based on LIMRA sales data, which ranks participants within the United
States, as of September 30, 2003, John Hancock is the twelfth largest writer of
individual life insurance, the ninth largest writer of individual variable
universal life insurance and the tenth largest writer of individual universal
life insurance. John Hancock is the second largest writer of


                                        3
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


individual long-term care insurance and the largest provider of long-term care
insurance in the employer sponsored group market based on inforce premium. John
Hancock is the twenty-first largest writer of individual annuity contracts. Our
mutual fund subsidiary ranked 19th among non-proprietary broker-sold U.S. asset
managers in terms of total long-term, open-end assets under management as of
December 31, 2003.

      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
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.
Effective May 1, 2003, we sold our group life insurance business.

      As of December 31, 2003 and 2002, respectively, our total assets under
management were $128.8 billion and $117.6 billion, which includes $29.3 billion
and $25.8 billion, respectively, of assets invested in the Company's retail
mutual funds. Total shareholder's equity, excluding net unrealized capital gains
on securities, was $6.3 billion and $5.9 billion as of December 31, 2003 and
2002, respectively. In addition, John Hancock generated $7.3 billion and $6.5
billion in revenues and $590.5 million and $458.9 million in net income in 2003
and 2002 respectively. In 2003, the Company adopted a new accounting
pronouncement which resulted in a charge to earnings of $279.0 million, refer to
Note 1 - Summary of Significant Accounting Policies for a description of this
cumulative effect of accounting change.


                                        4
<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 47.5%, 46.9% and 41.3% of consolidated operating revenues
and 44.3%, 40.0% and 37.6% of consolidated segment after-tax operating income in
the years ended December 31, 2003, 2002 and 2001, respectively. The Protection
Segment generated revenues of $3,449.3 million, $3,259.9 million and $3,054.7
million and segment after-tax operating income of $371.8 million, $310.6 million
and $284.3 million in 2003, 2002, and 2001, 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,
                                                          2003        2002         2001
                                                        ---------------------------------
                                                                       (in
                                                                            millions)
<S>                                                     <C>         <C>         <C>
 Sales (new premiums and deposits) (1):
 Non-traditional life--excluding COLI and BOLI (2)
     Variable life ..................................   $    53.0   $   116.0   $   124.5
     Universal life .................................        87.9        65.2        30.4
 Traditional life--excluding COLI (2)
     Whole life .....................................         7.9         5.8         6.1
     Term life ......................................        36.4        39.3        33.0
 COLI and BOLI
     Variable life--COLI ............................        38.3        66.6        90.5
     Universal life--COLI ...........................        27.8        23.1        22.1
     Universal life--BOLI ...........................        19.3         6.3        12.2
 Individual long-term care ..........................       197.8       132.5       102.2
 Group long-term care ...............................        18.3        16.6        16.8
 Federal long-term care .............................        83.3        52.8          --
                                                        ---------   ---------   ---------
         Total ......................................   $   570.0   $   524.2   $   437.8
                                                        =========   =========   =========

 Assets:
 Non-traditional life ...............................   $14,244.9   $12,147.0   $11,163.2
 Traditional life ...................................    15,319.9    14,810.4    14,190.4
 Individual long-term care ..........................     5,574.2     3,732.1     2,705.8
 Group long-term care ...............................     1,273.0     1,038.5       801.5
 Federal long-term care .............................       172.1        30.3          --
 Other ..............................................        56.6        44.9        51.6
                                                        ---------   ---------   ---------
         Total ......................................   $36,640.7   $31,803.2   $28,912.5
                                                        =========   =========   =========
</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.

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


                                        5
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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". We were the first to introduce a
web-based illustration and inforce management system, called eHansel that helps
producers make new business proposals and manage their current clients. At
introduction, this system supported only life sales. Today, we also support
long-term care and annuity sales. We are constantly making enhancements to this
system, such as adding an advanced online presentations that instantly creates
customized illustrations and sales presentations, to facilitate the sales
process for producers. To support advanced sales in the life market, we have an
Estate and Business Planning Group that is a multidisciplinary team made up of
professionals with varied backgrounds in law, taxation, insurance, finance and
investments. This group provides differentiated support services to John Hancock
agents and independent brokers, and their clients' attorneys and accountants. In
addition, we provide an income analysis tool that includes estate planning
analysis which 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
2001-2003 due to declines in equity market performance through most of the three
year period and we have seen investors return to stable investment products.
Sales of variable life products have been declining while sales of universal
life insurance, term life insurance and corporate life insurance have increased.
However, we did see the beginning of a slight recovery in variable life product
sales toward the end of 2003. 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 earnings
growth.

      The Company's sales of individual life insurance in 2003 consisted of
33.7% variable life, 49.9% universal life and 16.4% traditional life. The
Company's sales of individual life insurance (excluding COLI and BOLI) in 2003
consisted of 28.6% variable life, 47.5% universal life and 23.9% traditional
life. Term life sales represented 82.2% of traditional life product sales for
the year ended December 31, 2003.

   Individual Life Insurance.

      Variable Life Insurance. We were among the first insurance companies to
offer variable life insurance products, beginning in 1980. Variable universal
life insurance is our primary variable life insurance product, and we believe
the length of our experience in this market is a competitive strength. Variable
life insurance 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 II and Medallion PLUS,
offer an attractive combination of insurance protection features and investment
option selections for clients who can accept a level of market risk, providing
design flexibility for both death benefit and investment objectives. Medallion
Edge II, our newest variable universal life product, continues our tradition of
designing and delivering enhanced variable life products, and provides some of
the most competitive rates for qualified applicants as well as expanded risk
classes and disability rider options.

      In 2001, we introduced an option benefit rider that adds a long-term care
insurance feature to a variable life insurance policies. Called LifeCare
Benefit, this rider, when used with life insurance, helps clients meet not only
income protection and supplemental retirement funding needs, but long-term care
needs as well. Clients can use all, some or none of their life insurance death
benefit to pay for long-term care - giving them cost effective, convenient
long-term care protection. This rider is available on single life VL and UL
products, and is a distinguishing feature of our product line.

      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.


                                        6
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      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 2003, we made major enhancements and
additions to our universal life insurance portfolio. We re-priced our core lapse
protection universal life product, called Protection UL, to make it very price
competitive and provide death benefit guarantee options. We also launched
Protection Survivorship UL, a survivorship product designed to offer both
flexibility and affordability in covering two clients, with competitive rates,
death benefit guarantee flexibility and more risk classes. Finally, we made
enhancements to our client assumption universal life product, called Performance
UL Core. This product performs exceptionally well in terms of pricing and also
offers a choice of disability riders and the LifeCare benefit rider. 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.

      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.

      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. This also gives
us the ability to reset the price of the product prospectively, if needed.

      o     Individual Long-Term Care Insurance. Our individual long-term care
            insurance products are sold to pre-retired and retired individuals
            and couples. 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 Family Care Benefit that
            allows up to four extended family members to be covered by the same
            policy. In 2003, building on the success of Custom Care and
            Essential Care, we developed the second series of the Custom Care
            product line: Custom Care II, Essential Care II, and the Family Care
            II Benefit. Along with many of the same features and options of the
            original series, Custom Care II features two new built-in benefits
            designed for younger audiences: the Double Accident Benefit and the
            Return of Premium Benefit. The Double Accident Benefit doubles
            coverage for people under 65 who need long-term care due to an
            accident. The built-in Return of Premium Benefit returns premiums
            (less claims) to those policyholders who die before the age of 65.
            The Custom Care II product offers new inflation options and a new
            Extended Return of Premium optional rider.

      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.

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

                                        7
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                       JOHN HANCOCK LIFE INSURANCE COMPANY


            expected to increase awareness of the product among consumers and
            employers. John Hancock and MetLife joined together to form
            Long-Term Care Partners, LLC to administer the plan and support a
            successful enrollment program. As of December 31, 2003, the program
            generated approximately 217,000 policies after underwriting,
            representing approximately $268 million in annualized premium. The
            plan first became effective October 1, 2002.

      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 care insurance 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,
                                              2003        2002         2001
                                            ------------------------------------
                                                      (in millions)
<S>                                         <C>          <C>          <C>
Total statutory premiums and deposits:
Variable life ...........................   $    789.0   $    926.8   $    948.5
Universal life (1) (2) ..................        530.4      1,030.9        456.1
Traditional life ........................        968.7      1,035.9        997.3
Individual long-term care ...............        468.5        393.5        331.0
Group long-term care ....................         63.0         57.7          6.3
Federal long-term care ..................        122.9         15.1           --
                                            ----------   ----------   ----------
   Total ................................   $  2,942.5   $  3,459.9   $  2,739.2
                                            ==========   ==========   ==========
Life insurance in force:
Variable life ...........................   $ 53,535.2   $ 57,331.8   $ 58,104.4
Universal life (2) ......................     16,542.5     13,621.4     10,604.5
Traditional life ........................     72,604.4     73,335.7     71,166.0
                                            ----------   ----------   ----------
   Total ................................   $142,682.1   $144,288.9   $139,874.9
                                            ==========   ==========   ==========
GAAP Reserves:
Variable life ...........................   $  7,005.5   $  5,809.2   $  6,479.9
Universal life (2) ......................      4,420.6      3,845.0      2,758.1
Traditional life ........................     12,790.9     12,421.7     10,632.2
Individual long-term care ...............      1,751.9      1,413.8      1,138.8
Group long-term care ....................        331.9        279.7        237.4
Federal long-term care ..................        114.3          9.5           --
                                            ----------   ----------   ----------
   Total ................................   $ 26,415.1   $ 23,778.9   $ 21,246.4
                                            ==========   ==========   ==========
</TABLE>

(1)   Includes bank owned life insurance premiums of $200.0 million for the year
      ended December 31, 2001. There were no such premiums for the year ended
      December 31, 2003 and 2002.

(2)   Includes $639.7 million in deposits, $5,651.3 million in life insurance in
      force (gross of reinsurance of $4,973.0 million) 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.

Distribution

      Protection products are distributed through multiple distribution channels
including Signator, M Financial Group, Essex, 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. The Signator channel 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


                                        8
<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. 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.

      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
through insurance aggregators that reach customers over the Internet and via the
telephone.

      Essex/Banks. We offer 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.

      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.


                                        9
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


                Protection Segment Sales by Distribution Channel

                                                For the Years Ended December 31,
                                                    2003     2002    2001
                                                --------------------------------
                                                         (in millions)
Signator: (1)
    Individual life--excluding COLI and BOLI ..   $128.9     $151.4     $137.7
    Individual life--COLI .....................     24.6       57.7       74.2
    Individual long-term care .................    197.2      130.9      101.1
M Financial Group:
    Individual life--excluding COLI ...........     48.8       60.9       45.9
    Individual life--COLI .....................     41.5       32.0       38.4
    Individual long-term care .................      0.5        0.6        0.2
e-Business & Retail Partnerships:
    Individual life ...........................      7.5       14.0       10.4
    Individual long-term care .................      0.1        1.0        0.9
Dedicated Sales Force:
    Group long-term care ......................     18.3       16.6       16.8

BOLI ..........................................     19.3        6.3       12.2

Other:
    Federal long-term care ....................     83.3       52.8         --

Total: (2)
    Individual life--excluding COLI and BOLI ..    185.2      226.3      194.0
    Individual life--COLI and BOLI ............     85.4       96.0      124.8
    Individual long-term care .................    197.8      132.5      102.2
    Group long-term care ......................     18.3       16.6       16.8
    Federal long-term care ....................     83.3       52.8         --

(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)   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. In our underwriting of long-term care insurance we use a 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. In addition,
we use the STAR (System to Assess Risk) underwriting system in an automated
environment 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


                                       10
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 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 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 catastrophic
reinsurance covering individual life insurance policies written by all of its
U.S. life insurance subsidiaries. Effective July 1, 2003 the deductible for
individual coverage was reduced from $25.0 million to $17.5 million per
occurrence and the limit of coverage is $40 million per occurrence. Should
catastrophic reinsurance become unavailable to the Company in the future, the
absence of,


                                       11
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 their inforce business prior to 1997 to JHReC0 in 2001 (up from 40%
in 2002 and 30% in 1999) and 50% of all new business effective 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 is 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% of 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.


                                       12
<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 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 17.3%, 16.5% and 15.9% of
consolidated operating revenues and 23.2%, 16.9% and 19.6% of consolidated
segment after-tax operating income in the years ended December 31, 2003, 2002
and 2001, respectively. The Asset Gathering Segment generated operating revenues
of $1,254.4 million, $1,147.8 million and $1,176.5 million and segment after-tax
operating income of $194.3 million, $130.7 million and $148.3 million in 2003,
2002 and 2001, respectively. The Asset Gathering Segment has achieved the
following financial results for the periods indicated:

                                                 As of or for the Years Ended
                                                         December 31,
                                                 ----------------------------
                                                2003         2002        2001
                                                ----         ----        ----
                                                         (in millions)
Sales:(1)
Variable annuities(2) ...................    $   405.1    $   746.1    $   639.6
Fixed annuities(2) ......................      2,319.4      2,667.9      1,463.6
John Hancock Funds(3) ...................      4,596.7      4,737.6      5,001.4
                                             ---------    ---------    ---------
     Total ..............................    $ 7,321.2    $ 8,151.6    $ 7,104.6
                                             =========    =========    =========
Assets:
Variable annuities ......................    $ 6,205.5    $ 5,702.4    $ 6,750.0
Fixed annuities .........................     12,216.8      9,935.8      7,428.2
John Hancock Funds ......................        226.9        245.4        338.4
Other ...................................         72.3        169.2        223.9
                                             ---------    ---------    ---------
     Total ..............................    $18,721.5    $16,052.8    $14,740.5
                                             =========    =========    =========
Assets Under Management:
Variable annuities ......................    $ 5,779.3    $ 5,327.4    $ 6,357.1
Fixed annuities .........................     11,608.0      9,226.2      6,876.6
John Hancock Funds(4) ...................     29,289.9    $25,810.3     29,285.8

----------
(1)   Sales represent 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. Variable annuity sales exclude safe
      harbor internal exchanges of $92.0 million and $1,910.5 million,
      respectively, in 2002 and 2001. No such exchanges took place in 2003.
      Fixed annuity sales for 2002 and 2001 have been restated to exclude
      supplemental contracts.

(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 $2.7 billion, $3.4 billion and $3.6 billion of our general
      account assets and assets managed for certain John Hancock subsidiaries
      and assets managed for variable annuities as of December 31, 2003, 2002
      and 2001, respectively.

Products and Markets


                                       13
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


   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. We introduced
Revolution II in May, 2003 and made many enhancements to the product line,
including offering options on length of surrender charges with in the product
and associated fees. 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%, 94% and 88% of total variable
annuity sales for the years ended December 31, 2003, 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.
Despite a difficult interest rate environment, John Hancock continued to issue
products with guaranteed floor rates to attract the retail customer.

      Investment management skills are critical to the growth and profitability
of our annuity business. The available investment options under our variable
annuity products include options that are funded through the John Hancock
Variable Series Trust (VST). The VST contains subadvised funds managed by some
of the world's premier money managers, which John Hancock, as investment
adviser, is responsible for overseeing. As the VST's investment adviser, John
Hancock oversees the subadvisers and monitors to ensure their investment styles
for consistency. 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 85.2% fixed annuity and 14.8% variable annuity for the year ended
December 31, 2003, 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,
                                                               -----------------------------------------
                                                                   2003          2002           2001
                                                                   ----          ----           ----
                                                                             (in millions)
<S>                                                            <C>             <C>             <C>
Variable Annuities:
Reserves, beginning of year ...............................    $ 5,302.5       $ 6,323.1       $ 7,182.8
     Deposits and other policy credits ....................        408.5           747.9           641.3
     Interest credited and investment performance .........        922.7          (778.4)         (570.9)
     Surrenders and benefits ..............................       (808.7)         (880.7)         (814.8)
     Product fees .........................................       (102.5)         (109.4)         (115.3)
                                                               ---------       ---------       ---------
Reserves, end of year .....................................    $ 5,722.5       $ 5,302.5       $ 6,323.1
                                                               =========       =========       =========
Fixed Annuities:
Reserves, beginning of year ...............................    $ 8,761.8       $ 6,497.4       $ 5,365.8
     Premiums, deposits and other policy credits ..........      2,352.0         2,690.6         1,478.0
     Interest credited ....................................        437.3           394.1           344.7
     Surrenders and benefits ..............................       (857.9)         (810.9)         (680.7)
     Product fees .........................................        (14.3)           (9.4)          (10.4)
                                                               ---------       ---------       ---------
Reserves, end of year .....................................    $10,678.9       $ 8,761.8       $ 6,497.4
                                                               =========       =========       =========
Total Annuities:
Reserves, beginning of year ...............................    $14,064.3       $12,820.5       $12,548.6
     Premiums, deposits and other policy credits(1) .......      2,760.5         3,438.5         2,119.3
     Interest credited and investment performance .........      1,360.0          (384.3)         (226.2)
     Surrenders and benefits ..............................     (1,666.6)       (1,691.6)       (1,495.5)
     Product fees .........................................       (116.8)         (118.8)         (125.7)
                                                               ---------       ---------       ---------
Reserves, end of year .....................................    $16,401.4       $14,064.3       $12,820.5
                                                               =========       =========       =========
</TABLE>


                                       14
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


----------
(1)   Variable annuity deposits exclude internal exchanges as part of the safe
      harbor internal exchange program of $92.0 million and $1,910.5 million for
      the years ending December 31, 2002 and 2001, respectively. There were no
      such exchanges in 2003.

   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, 2003, our fixed income and equity research staffs
included over 55 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 and variable annuity
products.

      o     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, 2003, 59.1% of our mutual
            fund assets under management were invested in open-end mutual funds.
            Our product offerings cover both domestic and international equity
            and fixed-income markets. In 2003, the Company added four new funds
            to its domestic offerings. Three new open-end funds were offered;
            Large Cap Select Fund, Mid Cap Equity Fund and Cash Investment
            Trust. The Large Cap Select Fund was acquired from Shay Assets
            Management, Inc. in August 2003. In addition, one new closed-end
            fund was offered; John Hancock Preferred Income Fund III.

      o     Retirement Services. We offer traditional IRA programs and a
            complete line of retirement products, including: 401(k) plans and
            sole proprietor 401(k) plans of a third party, 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.

      o     Institutional Services. John Hancock Funds manages diversified
            equity and fixed income strategies in multiple investment vehicles
            on behalf of public pension plans, corporate pension plans,
            endowments & foundations, insurance companies, and Taft-Hartley
            pension plans.

      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,
                                                       ------------------
                                                2003         2002        2001
                                                ----         ----        ----
                                                         (in millions)
Assets Under Management:
Domestic equity and balanced ...............   $17,633.9   $13,727.7   $17,898.4
International equity and balanced ..........       310.1       309.3       391.3
Domestic and international fixed income ....    11,345.9    11,773.3    10,996.1
                                               ---------   ---------   ---------
     Total assets under management(1) ......   $29,289.9   $25,810.3   $29,285.8
                                               =========   =========   =========


                                       15
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


                               Asset Flow Summary

<TABLE>
<CAPTION>
                                                   For the Years Ended December 31,
                                                   --------------------------------
                                                   2003          2002         2001
                                                   ----          ----         ----
                                                             (in millions)
<S>                                             <C>           <C>           <C>
Retail Mutual Funds:
Assets under management, beginning of year ..   $ 19,233.0    $ 22,876.2    $ 26,541.4
     Deposits and reinvestments .............      4,244.9       4,056.6       3,958.7
     Redemptions and withdrawals ............     (3,364.4)     (3,817.2)     (4,300.8)
     Net money market funds .................       (157.4)       (205.4)       (205.5)
     Market appreciation (depreciation) .....      3,096.1      (3,387.1)     (2,770.2)
     Fees ...................................       (266.1)       (290.1)       (347.5)
                                                ----------    ----------    ----------
Assets under management, end of year(1) .....   $ 22,786.1    $ 19,233.0    $ 22,876.1
                                                ==========    ==========    ==========
Institutional Investment Management:
Assets under management, beginning of year ..   $  6,577.3    $  6,409.6    $  5,184.4
     Deposits and reinvestments .............        773.3       1,198.2       1,924.4
     Redemptions and withdrawals ............     (1,743.4)       (853.1)       (822.3)
     Market appreciation (depreciation) .....        913.4        (160.9)        137.2
     Fees ...................................        (16.8)        (16.5)        (14.0)
                                                ----------    ----------    ----------
Assets under management, end of year ........   $  6,503.8    $  6,577.3    $  6,409.7
                                                ==========    ==========    ==========
Total:
Assets under management, beginning of year ..   $ 25,810.3    $ 29,285.8    $ 31,725.8
     Deposits and reinvestments .............      5,018.2       5,254.8       5,883.1
     Redemptions and withdrawals ............     (5,107.8)     (4,670.3)     (5,123.1)
     Net money market funds .................       (157.4)       (205.4)       (205.5)
     Market appreciation (depreciation) .....      4,009.5      (3,548.0)     (2,633.0)
     Fees ...................................       (282.9)       (306.6)       (361.5)
                                                ----------    ----------    ----------
Assets under management, end of year(1) .....   $ 29,289.9    $ 25,810.3    $ 29,285.8
                                                ==========    ==========    ==========
</TABLE>

(1)   Retail mutual fund assets under management includes $2.7 billion, $2.5
      billion and $3.7 billion in retirement plan assets at December 31, 2003,
      2002 and 2001, respectively.

Distribution

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

      Signator. Signator, a subsidiary 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 banks. Essex has historically 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.

      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 a network of wholesalers, referred to as
"Business Development Consultants", for our mutual fund sales. These wholesalers
meet directly with broker/dealers and financial planners and are supported by an
extensive home office sales and marketing 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.


                                       16
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


     The table below shows Asset Gathering Segment sales by distribution channel
for the periods indicated. Sales is a non-GAAP measure. Sales refer to premiums
and deposits received by the Company and are not reflective of revenue on the
Company's income statement. GAAP refers to the application of accounting
principles generally accepted in the United States. A non-GAAP measure refers to
a financial metric relevant to Company performance but not appearing in the
Company's GAAP financial statements.

              Asset Gathering Segment Sales by Distribution Channel

                                                For the Years Ended December 31,
                                                --------------------------------
                                                   2003       2002        2001
                                                   ----       ----        ----
                                                         (in millions)
Broker/Dealers (1):
     Variable annuities(2) ...................  $   51.4   $  133.9   $  145.2
     Fixed annuities .........................   1,031.8      555.3      260.5
     Mutual funds ............................   3,948.1    3,504.4    2,816.6
Signator:
     Variable annuities(2) ...................     243.5      305.8      414.0
     Fixed annuities .........................     232.6      243.1      131.9
     Mutual funds ............................     212.9      270.2      367.5
Pension Consultants:
     Mutual funds ............................     384.5      911.7    1,700.6
Financial Institutions(1):
     Variable annuities ......................     100.4      277.9       60.0
     Fixed annuities .........................     967.2    1,704.1    1,049.0
     Mutual funds ............................      51.2       51.3      116.7
e-Business and Retail Partnerships ...........       7.5       30.1       19.2
Other(3) .....................................      90.1      163.8       23.4
                                                --------   --------   --------
     Total ...................................  $7,321.2   $8,151.6   $7,104.6
                                                ========   ========   ========

----------
(1)   The prior years have been restated to include Fidelity sales in the
      Broker/Dealer channel and exclude them from the Financial Institution
      channel.
(2)   Variable annuity deposits exclude internal exchanges as part of the safe
      harbor internal exchange program of $92.0 million and $1,910.5 million,
      respectively, for the years ending December 31, 2002 and 2001. There were
      no such exchanges in 2003.
(3)   Other includes single premium immediate annuities, including
      lottery-related payout contracts.

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:


                                       17
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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

      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.

      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.


                                       18
<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 24.0%, 25.5% and 32.0% of consolidated
operating revenues and 34.3%, 34.7% and 31.5% of consolidated segment after-tax
operating income in the years ended December 31, 2003, 2002 and 2001,
respectively. The G&SFP Segment generated revenues of $1,740.2 million, $1,768.4
million and $2,369.5 million and segment after-tax operating income of $287.4
million, $268.7 million and $238.0 million in 2003, 2002 and 2001, respectively.
G&SFP Segment financial information is summarized below:

<TABLE>
<CAPTION>
                                                                              As of December 31,
                                                                      2003           2002           2001
                                                                   -----------------------------------------
                                                                                (in millions)
<S>                                                                <C>             <C>             <C>
Assets Under Management:
Spread-based products ........................................     $26,707.9       $24,872.3       $22,444.5
Fee-based products ...........................................       8,207.4         8,402.6         8,448.4
                                                                   ---------       ---------       ---------
Total ........................................................     $34,915.3       $33,274.9       $30,892.9
                                                                   =========       =========       =========

Spread-based Premiums and Deposits:

Fund-type products ...........................................     $ 2,372.9       $ 3,847.9       $ 4,718.8
Single premium annuities .....................................           0.7             1.2           465.5
SignatureNotes ...............................................       1,260.1           290.2              --
                                                                   ---------       ---------       ---------
Total Spread-based Premiums and Deposits .....................     $ 3,633.7       $ 4,139.3       $ 5,184.3
                                                                   =========       =========       =========

Fee-based Premiums and Deposits:
General account participating pension fund-type
  products and annuity contracts .............................     $   852.5       $   529.3       $   468.9
Structured separate accounts .................................          54.5           483.9            77.4
Other separate account contracts .............................         (71.0)          (26.1)          130.6
                                                                   ---------       ---------       ---------
    Total Fee-based Premiums and Deposits ....................     $   836.0       $   987.1       $   676.9
                                                                   =========       =========       =========
</TABLE>

      Premiums and deposits above are non-GAAP measures. Premiums and deposits
above differ from GAAP premiums because GAAP requires that deposits on fund-type
products be accounted for using deposit accounting. Deposit accounting excludes
the contributions and deposits received 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.

      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


                                       19
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 and structured settlements. 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. These
      contracts, like the general account GICs, are primarily marketed to
      sponsors of tax-qualified retirement plans such as 401(k) plans.

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 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


                                       20
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      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.

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.


                                       21
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 2003, five insurers, including the Life Company, issued
approximately 58% of total GICs and funding agreements issued by U.S. insurance
companies reporting to LIMRA; and nine insurers, including the Life Company,
issued more than 99% of total single premium annuities. Our competitors include
a variety of well-recognized insurance companies, domestic and foreign banks and
other institutional investment advisors.

      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.

      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. There are a large number of
competitors but none with a substantial share of the market.

      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.


                                       22
<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 21.6%, 23.7% and 25.1% of
our total assets under management as of December 31, 2003, 2002 and 2001, which
were $128.8 billion, $117.6 billion and $114.8 billion, respectively. The
Investment Management Segment contributed $145.0 million, $124.6 million and
$143.2 million of consolidated operating revenues and $29.8 million, $21.2
million and $29.8 million of consolidated segment after-tax operating income in
the years ended December 31, 2003, 2002 and 2001, 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. During
2003, we sold our international fund operations, the effect of which was
immaterial.

      The capabilities of the Investment Management Segment include:

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

      Through Declaration Management & Research LLC 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 mortgage-backed 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
mezzanine funds 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.


                                       23
<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,
                                                              2003            2002            2001
                                                            ---------       ---------       ---------
                                                                          (in millions)
<S>                                                         <C>             <C>             <C>
Assets Under Management:
Domestic equity and balanced ............................   $10,818.5       $11,159.9       $14,952.7
International equity and balanced (1) ...................       160.2         1,417.0         1,512.6
Domestic and international fixed income .................    13,596.8        11,758.0         9,385.7
Timber, farmland and independent power ..................     3,187.9         3,156.5         2,919.6
                                                            ---------       ---------       ---------
    Total assets under management (3) (4) ...............   $27,763.4       $27,491.4       $28,770.6
                                                            =========       =========       =========
</TABLE>

                               Asset Flow Summary

<TABLE>
<CAPTION>
                                                                        As of December 31,
                                                              2003            2002            2001
                                                            ---------       ---------       ---------
                                                                          (in millions)
<S>                                                         <C>             <C>             <C>
Assets Under Management:
Assets under management, beginning of year (2) (5)  ......  $27,491.4       $28,770.6       $32,544.7
Sales and reinvestments ..................................    3,994.9         4,638.6         3,506.7
Redemptions and withdrawals ..............................   (6,715.9)       (2,804.6)       (5,304.8)
Market (depreciation) appreciation .......................    2,993.0        (3,113.2)       (1,976.0)
                                                            ---------       ---------       ---------
Assets under management, end of year (3) (4) .............  $27,763.4       $27,491.4       $28,770.6
                                                            =========       =========       =========
</TABLE>

(1)   During 2003, our international fund operation was sold.

(2)   Includes $1,612.0 million, $1,234.6 million and $1,120.1 million of assets
      managed by subsidiaries for our general account as of January 1, 2003,
      2002 and 2001, respectively.

(3)   Does not include $79.5 million, $383.1 million and $151.3 million of
      general account cash and invested assets as of December 31, 2003, 2002 and
      2001, respectively.

(4)   Includes $2,603.0 million, $1,612.0 million and $1,234.6 million of assets
      managed by subsidiaries for our general account for the year ended
      December 31, 2003, 2002 and 2001, respectively.

(5)   Does not include $383.1 million, $151.3 million and $106.9 million of
      general account cash and invested assets as of January 1, 2003, 2002 and
      2001, 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 whom 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.


                                       24
<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 9.2%, 9.3% and 8.8% of consolidated segment
operating revenues and (5.3)%, 5.6% and 7.3% of consolidated after-tax operating
income in the years ended December 31, 2003, 2002 and 2001, respectively. The
Corporate and Other Segment generated operating revenues of $670.5 million,
$643.5 million and $650.6 million and segment after-tax operating income of
$(44.6) million, $43.4 million and $55.4 million in 2003, 2002 and 2001,
respectively.

          The Corporate and Other Segment assets are summarized below:

                                          For the Years Ended December 31,
                                        2003            2002           2001
                                      ---------      ---------      ---------
                                                   (in millions)
Assets:
International operations ..........   $    99.0      $    87.4      $    71.9
Corporate operations ..............     7,842.7        7,628.3        6,634.7
Non-core businesses ...............     1,280.7        1,060.8        1,004.0
Intra-segment eliminations ........    (6,591.2)      (6,163.3)      (4,542.6)
                                      ---------      ---------      ---------
    Total .........................   $ 2,631.2      $ 2,613.2      $ 3,168.0
                                      =========      =========      =========

International Operations

      Our international operations consist primarily of the International Group
Program. The International Group Program consists of an international network of
52 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,
which was sold during the year. We sold our group life insurance business
effective May 1, 2003 and it generated $39.2 million, $154.1 million and $225.8
million in premiums in the years ended December 31, 2003, 2002, and 2001,
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 $254.4 million, $235.9 million and
$177.8 million in revenues, $257.8 million, $240.7 million and $183.1 million in
expenses, and $(2.2) million, ($3.1) million, and $(2.4) million in after-tax
operating (losses) or gains for the years ended December 31, 2003, 2002 and
2001, respectively. Long-Term Care Partners, a new initiative done in
conjunction with the Federal Government's long-term care insurance program in
2002, is now shown in the Protection Segment. The prior year numbers shown here
have been restated to reflect this change.

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.


                                       25
<PAGE>

                       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, 2003, JHFS has been assigned an A+ (Strong) debt rating by Fitch,
an A (Strong) debt rating by Standard and Poor's, and an A3 (Good) debt rating
by Moody's. As of December 31, 2003, John Hancock Life Insurance Company and
John Hancock Variable Life Insurance Company are 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.

      On September 28, 2003, JHFS, the parent of John Hancock Life Insurance
Company, entered into a definitive merger agreement with Manulife. Until the
closing of the transaction, the Company will continue to operate independently
and does not expect the proposed merger to have a negative impact on financial
condition, liquidity or sales. Following the announcement of the proposed
merger, Standard and Poor's, Moody's, A.M. Best and Fitch affirmed all ratings.
In addition, Standard & Poor's noted that "the `A' long-term counterparty credit
and senior debt ratings on John Hancock Financial Services Inc., a holding
company for its U.S. and Canadian operating insurance companies, have been
placed on CreditWatch with positive implications." Dominion Bond Rating Service
placed John Hancock Financial Services' corporate rating of A (high).

      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, including our common stock.

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


                                       26
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                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 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.

      In February 2004 the Massachusetts Division of Insurance completed its
routine regulatory statutory financial examination of John Hancock Life
Insurance Company and John Hancock Variable Life Insurance Company and issued
its reports for the years 1998 through 2002. The findings of these examinations
did not have a material impact on our financial condition or results of
operations.

      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. These insurance departments and others
periodically conduct examinations of insurers that transact business in their
jurisdictions. 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. The Massachusetts Division of Insurance has
completed its Market Conduct Examination and issued its report in February
without any material findings.

      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


                                       27
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE 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 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 212 percent as of December 31,
2003.

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


                                       28
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 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, 2003, 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 2003 2002 and 2001. 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 are 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.


                                       29
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      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.

      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


                                       30
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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.

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
(SBJPA), 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 the Harris Trust case has been settled the broader
underlying issues of disintermediation risk created by compliance with the
regulations remain unresolved (described under "Item 3. Legal Proceedings" in
this Form 10-K). 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


                                       31
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


accompanying extra-contractual (e.g., punitive) damages in lawsuits involving,
for example, group long-term care insurance claims. To date, all such amendments
to ERISA have been defeated.

Employees

      As of December 31, 2003, we employed approximately 4,383 people. We
believe our relations with our employees are satisfactory.

ITEM 2. Properties

      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 5-15 year
market-based leases of the space it now occupies in those buildings, the Company
plans on continuing to use them as its corporate headquarters. 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. Refer to Note 9 - Sale/Leaseback
Transactions and Other Lease Obligations to our audited consolidated financial
statements for additional information.

ITEM 3. Legal Proceedings

Sales Practice Class Action Settlement

      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 $3.2 million and
$11.9 million at December 31, 2003 and 2002, respectively. The Company incurred
no costs related to the settlement in 2003 or 2002. 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.

      Administration of the alternative dispute resolution (ADR) component of
the settlement is substantially complete. Although some uncertainty remains as
to the cost of the remaining 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

Harris Trust

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

      In that opinion the Court found against the Company and awarded the Trust
approximately $13.8 million in relation to this claim together with unspecified
additional pre-judgment interest on this amount from October 1988. The Court
also found against the Company on issues of liability valuation and ERISA law.
Damages in the amount of approximately $5.7 million, together with unspecified
pre-judgment interest from December 1996, were awarded on these issues. As part
of the relief, the judge ordered the removal of Hancock as a fiduciary to the
plan. On April 11, 2001, the Court entered a judgment against the Company for
approximately $84.9 million, which includes damages to the plaintiff,
pre-judgment interest, attorney's fees and other costs.

      On May 14, 2001 the Company filed an appeal in this case. On August 20,
2002, the Second Circuit Court of Appeals issued a ruling, affirming in part,
reversing in part, and vacating in part the District Court's judgment in this
case. The Second Circuit Court of Appeals' opinion overturned substantial
portions of the District Court's opinion, representing the


                                       32
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 action has been dismissed and the settlement consummated as of
December 11, 2003. The settlement costs were paid in 2003.

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 $214.5 million and $111.0
million in dividends to JHFS in 2003 and 2002, respectively. The $214.5 million
dividend in 2003 consisted of a $100.0 million in a cash transfer, the second
$100.0 million was not paid in cash in 2003 but was an accounts payable at year
end, and the remaining $14.5 million represents a property transfer of the First
Signature Bank to the Holding Company. 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.

      As of March 1, 2004, 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.


                                       33
<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, 2003 and 2002, the consolidated results
of operations for the years ended December 31, 2003, 2002, and 2001 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. All of the
Company's United States Securities and Exchange Commission filings are available
on the internet at www.sec.gov, under the name Hancock John Life.
                   -----------

Forward-Looking Statements

      The statements, analyses, and other information contained in this
Management's Discussion and analysis (MD&A) and elsewhere in this Form 10-K, in
connection with the proposed merger with John Hancock and Manulife Financial
Corporation, 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 trustees 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) we may be
unable to retain personnel who are key to our business; (18) we may incur losses
from assumed reinsurance business in respect of personal accident insurance and
the occupational accident component of workers compensation insurance; (19)
litigation and regulatory proceedings may result in financial losses, harm our
reputation and divert management resources; (20) we face unforeseen liabilities
arising from our acquisitions and dispositions of businesses; (21) 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, and (22) in connection with the proposed merger between JHFS
and Manulife Financial Corporation: we may not achieve the revenue synergies,
cost savings and other synergies contemplated by the proposed merger; we may
experience litigation related to the merger; John Hancock's and Manulife's
distributors, customers and policyholders may react negatively to the
transaction; we may encounter difficulties in promptly and effectively
integrating the businesses of John Hancock and Manulife; we may not


                                       34
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                       JOHN HANCOCK LIFE INSURANCE COMPANY


be able to retain the professional and management talent necessary to operate
the business; the transaction may result in diversion of management time on
merger-related issues; and after the merger, we may experience increased
exposure to exchange rate fluctuations and other unknown risks associated with
the merger.

      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.

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 MD&A and elsewhere in this report we use a non-GAAP financial
measure called "total segment after tax operating income." Please see
"Adjustments to GAAP Reported Net Income" in this report or Note 13 - Segment
Information in the notes to the consolidated financial statements, for a
description of total 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 insurance 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.

Executive 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 in five segments: (1) the retail business,
which offers insurance protection and asset gathering products and services
primarily to retail consumers; (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 financial reporting and this MD&A of Financial Condition and Results
of Operations (MD&A) is organized in the same manner as our business. We present
a discussion of our consolidated statement of operations in "Results of
Operations" and then proceed to present the business broken down into its
operating segments discussed above, focusing the discussion therein on the
segments' operating income (see Key Performance Indicators for definition of
operating income). In addition to these discussions of segment operating income,
we identify and discuss accounting policies critical to understanding our
business operations and understanding of our results of operation in Critical
Accounting Policies section of this MD&A. We also identify macro economic issues
impacting the industry and the Company in the Economic Trends section of this
MD&A, while we identify significant transactions affecting the comparability of
operating results across reporting period in the section labeled Transactions
Affecting the Comparability of the Results of Operation.

      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;

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

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

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


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                       JOHN HANCOCK LIFE INSURANCE COMPANY


      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, which includes: changes in policyholder reserves; interest
credited on policyholders' general account balances; dividends to policyholders;
and 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 policy or contractholders' general account
balances.

Key Performance Measures

      Certain financial measures recur throughout our MD&A because they are
metrics used by management to run our various businesses. The primary key
performance measure is after-tax operating income; refer to the Results of
Operations by Segment. Secondary key performance measures include return on
equity, where income for the period is divided by average equity excluding
unrealized gains (losses); return on assets, where after-tax operating income
for the period is divided by average assets, which are both measures of the
efficiency with which we invest Company resources; and book value per share,
excluding unrealized gains (losses), which is a measure of growth for the
Company. A key performance measure used by agencies who rate the Company's
liquidity and its ability to repay its debts and execute on customer contracts
is the credit quality rating of our fixed maturity portfolio; refer to the
Investments section of this MD&A for presentation of the credit quality of the
Company's fixed maturity portfolio. Rating agency analysis is especially
important to an insurance company because its ratings drive its ability to price
and subsequently sell certain products. Performance measures based on National
Association of Insurance Commissioners (NAIC) statutory-based accounting
measures which are viewed as critical to the Company are: statutory premiums and
deposits, a measure of actual inflows from customers indicating growth in any
particular product line, and statutory reserve and capital, measures used by
rating agencies and regulators of our ability to pay claims of our customers.
Please refer to the tabular presentation of Protection, Asset Gathering, and
G&SFP Segments results for a summary of key product statutory premiums and
deposits. Return on equity and return on assets are shown below:

                                                For the years ended December 31,
                                                --------------------------------
                                                  2003      2002       2001
                                                  ----      ----       ----
                                                        (in millions)

Return on equity ...........................       8.6%       7.8%     10.7%
Return on assets ...........................       0.6%       0.5%      0.7%

Announced Merger with Manulife Financial Corporation

      On September 28, 2003, JHFS, the parent of John Hancock Life Insurance
Company, entered into a definitive merger agreement with Manulife Financial
Corporation (Manulife) which is expected to close early in the second quarter of
2004. In accordance with the agreement, each share of JHFS common stock will, at
the time of the merger, be converted in to the right to receive 1.1853 shares of
Manulife stock. It is estimated that the shares of Manulife common stock to be
issued to JHFS shareholders in the merger will represent approximately 42.6% of
the outstanding Manulife common stock after the merger. The merger has been
approved by JHFS' shareholders but the closing is subject to conditions,
including the approval by certain U.S. and Canadian regulatory authorities.
Until the merger occurs, JHFS and the Company will continue to operate
independently of Manulife. Thereafter the Company will operate as a subsidiary
of Manulife. The John Hancock name will be Manulife's primary U.S. brand. This
Annual Report on Form 10-K does not reflect or assume any changes to JHFS', or
the Company's, business which may occur as a result of the proposed merger with
Manulife.


                                       36
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


Critical Accounting Policies and Estimates

      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 December 2003, the Financial Accounting Standards Board re-issued
Interpretation 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51," (FIN 46R) which clarifies the consolidation
accounting guidance of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," (ARB No. 51) to certain entities for which controlling
interests are not measurable by reference to ownership in the equity of the
entity. Such entities are known as variable interest entities (VIEs).

      The Company has finalized its FIN 46R analysis for some of the entities
described below. For each of these, the application of FIN 46R required
estimation by the Company of the future periodic cash flows and changes in fair
values for each candidate, starting as of the Company's original commitment to
invest in and/or manage each candidate, and extending out to the end of the full
expected life of each. These cash flows and fair values were then analyzed for
variability, and this expected variability was quantified and compared to total
historical amounts invested in each candidate's equity to help determine if the
candidate is a VIE. The Company also evaluated quantitative and non-quantitative
aspects of control relationships among the owners and managers of each candidate
to help determine if they are VIEs.

      For each candidate determined to be a VIE, the expected variable losses
and returns were then theoretically allocated out to the various investors and
other participants in each candidate, in order to determine if any party had
exposure to the majority of the expected variable losses or returns, in which
case that party is the primary beneficiary of the VIE. If the Company were
determined to be primary beneficiary of any VIE the Company would use
consolidation accounting or its relationship with it.

      The Company used significant levels of judgment while performing these
quantitative and qualitative assessments. The discussion below describes the
status and results of the Company's analysis of those entities which the Company
has identified as reasonably possible candidates for consolidation under FIN
46R.

      The Investment Management Segment of the Company manages invested assets
for customers under various fee-based arrangements using a variety of special
purpose entities (SPEs) to hold assets under management for customers under
these arrangements including investment vehicles commonly known as
collateralized debt obligations (CDOs). Various business units of the Company
sometimes invest in the debt or equity securities issued by the CDOs to support
their insurance liabilities. The Company has determined that it is not the
primary beneficiary of any of the CDOs and therefore does not consolidate them.

      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 limited
partnership real estate investment funds 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 previously determined that each Property is a VIE,
but that the Company was not the primary beneficiary of any Property, under FIN
46, which was replaced by FIN 46R in December of 2003, as discussed above. The
Company


                                       37
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


is therefore currently re-evaluating whether each of the Properties are VIEs,
and if so, if the Company is the primary beneficiary of each, in accordance with
FIN 46R.

      The Company has a number of relationships with a disparate group of
entities (Other Entities), which result from the Company's direct investment in
their equity and/or debt. This group includes energy investment partnerships,
investment funds organized as limited partnerships, and manufacturing companies
in whose debt the Company invests, and which subsequently underwent corporate
reorganizations. 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 is currently evaluating whether each of these are VIEs, and if
so, if the Company is the primary beneficiary of each.

      Additional liabilities recognized as a result of consolidating any of
these Other Entities (or similarly, the CDOs and Properties) 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 these consolidations. Conversely, additional assets recognized as a result of
these consolidations 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 these
consolidations.

      The Company's maximum exposure to loss in relation to these entities is
limited to its investments in them, future debt and equity commitments made to
them, and where the Company is the mortgagor to the Properties, the outstanding
balance of the mortgages originated for them, and outstanding mortgage
commitments they made to them. Therefore, the Company believes that the
application of FIN 46R will have no impact on the Company's liquidity and
capital resources beyond what is already presented in the consolidated financial
statements and notes thereto.

      The Company discloses summary financial data and its maximum exposure to
losses for all these candidates in Note 3 - Relationships with Variable Interest
Entities in the Notes to Consolidated Financial Statements.

      Amortization of Deferred Policy 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 life insurance policies, 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 third quarter of 2002
(Q3 2002 Unlocking), as further described below.

      Q3 2002 Unlocking: 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 its 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 here and elsewhere in this document as the Q3 2002 Unlocking.
The performance of the major market indices for the past five quarters has
demonstrated the propriety of our changes in assumptions. The result of


                                       38
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 Unlocking 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.

      Sensitivity of Deferred Acquisition Costs Amortization

      The level of DAC amortization in 2004 will vary if separate account growth
rates vary from our current assumptions. The table below shows the estimated
increased (decreased) quarterly DAC amortization that will result if actual
separate account growth rates are different than the rates assumed in our DAC
models.

                                                               Asset
                                                Protection   Gathering    Total
                                                ----------   ---------    -----
                                                           (in millions)
18% ........................................      $(1.2)      $(1.5)      $(2.7)
13% ........................................         --          --          --
 8% ........................................        1.3         1.8         3.1

      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.

      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 consistently applied pricing
models and discounted cash flows calling for a substantial level of professional
investment management judgment. Our approach is based on currently available
information, including information obtained by reviewing similarly traded
securities in the market, and we believe it to be appropriate and fundamentally
sound. However, different pricing models or assumptions or changes in relevant
current information could produce different valuation results. The Company's
pricing model takes into account a number of factors based on current market
conditions and trading levels of similar securities. These include current
market based factors related to credit quality, country of issue, market sector
and average investment life. The resulting prices are then reviewed by the
pricing analysts and members of the Controller's Department. Our pricing
analysts take appropriate action to reduce valuation of securities where an
event occurs which negatively impacts their value. Certain events that could
impact the valuation of securities include changes in issuer credit ratings,
changes in the business climate, actions of issuer management, 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, corporate chief risk
officer who reports to the chief financial officer, 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 Life
Company's Committee of Finance, a subcommittee of the Life Company's Board of
Directors, quarterly. To supplement this


                                       39
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


process, a quarterly review is made of the entire fixed maturity portfolio to
assess credit quality, including a review of all impairments with the Life
Company's Committee of Finance. See "Management's Discussion and Analysis of
Financial Condition and Analysis of Financial Condition and Results of
Operations--General Account Investments" section of this document for a more
detailed discussion of this process and the judgments used therein.

      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 and
approved by the Chief Financial Officer and reviewed with the Audit Committee of
the Board of Directors.

      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 2003 the Company
set the rate at 6.25%. A 0.25% increase in the discount rate would decrease
pension benefits Projected Benefit Obligation (PBO) and 2004 Net Periodic
Pension Cost (NPPC) by approximately $56.1 million and $3.7 million
respectively. A 0.25% increase in the discount rate would decrease other
post-employment benefits Accumulated Postretirement Benefit Obligation (APBO)
and 2004 Net Periodic Benefit Cost (NPBC) by approximately $14.3 million and
$1.0 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 2004 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 2004 NPPC by approximately $5.0 million and 2003 NPBC by approximately
$0.6 million. The expected return on plan assets is based on the fair market
value of the plan assets as of December 31, 2003.

      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 $5.6 million and $1.1 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.

      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 admissibility 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 $6.0 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


                                       40
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 decreased from a
strong prior year by 20% to $2,724.5 million for the year ended December 31,
2003, driven by a 45.7% decrease in the variable annuity business, and a 13.1%
decrease in the fixed annuity business. Premiums and deposits on our long-term
care insurance increased 17.0%, to $547.2 million for year ended December 31,
2003 due to strong growth in the business and increasing renewal premiums, while
our variable life insurance product deposits in 2003 decreased 14.9%, to $789.0
million, from the prior year. The average policyholder account value in the
universal life insurance product line increased 25.6%, or $842.9 million, for
year ended December 31, 2003 from 2002, due to underlying growth and the
December 31, 2002 acquisition of Allmerica's fixed universal life insurance
business. The rebound in the equity markets in 2003 led to an increase in mutual
fund assets under management to $29,289.9 million at December 31, 2003. The
increase was due to $4,009.4 million of market appreciation in 2003. Our mutual
fund operations were impacted by general market trends, and any upturn or
downturn in the market may affect our future operating results. Changes in laws
or regulations related to the mutual fund industry may negatively impact our
future operating results.

      In our institutional business, sales of fund-type products decreased
$997.9 million, or 25.9%, to $2,854.6 million in 2003. The decrease was driven
by decreasing demand for GICs and increased market competition. Partially
offsetting this decrease was an increase in sales of our group annuity products
and SignatureNotes. Sales of the annuity product increased 61.4%, or $179.5
million. In addition, sales of SignatureNotes, which were launched in August
2002, continued to be strong, as they grew 324.1%, or $983.2 million to $1,286.6
million. SignatureNotes are 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 in our Investment Management
Segment increased to $27,763.4 million as of December 31, 2003 from $27,491.4
million as of December 31, 2002. This $0.3 billion increase in assets under
management was driven by $3.8 billion in deposits, $3.0 billion in market
appreciation and $0.2 billion in reinvested dividends partially offset by $6.7
billion of outflows.

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, 2001.

      The disposal described under the table below was conducted in order to
execute the Company's strategy to focus resources on businesses in which it can
have a leadership position. The table below presents actual and proforma data
for comparative purposes for the periods indicated to demonstrate the proforma
effect of the acquisitions and disposal as if they occurred on January 1, 2001.

                                     Year Ended December 31,
                   2003                 2002                  2001
                 Proforma     2003    Proforma     2002     Proforma     2001
                ---------------------------------------------------------------
                (unaudited)          (unaudited)           (unaudited)

Revenue .....   $7,261.3   $7,306.1   $6,406.9   $6,492.8   $7,043.5   $7,145.5

Net income ..   $  587.7   $  590.5   $  463.3   $  458.9   $  582.0   $  573.9


                                       41
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


Acquisitions:

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.

Disposal:

On June 19, 2003, the Company agreed to sell its group life insurance business
through a reinsurance agreement with Metropolitan Life Insurance Company, Inc.
(MetLife). The Company is ceding all activity after May 1, 2003 to MetLife. The
transaction was recorded as of May 1, 2003 and closed November 4, 2003.


                                       42
<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,
                                                                             2003        2002       2001
                                                                           ---------------------------------
                                                                                     (in millions)
<S>                                                                        <C>         <C>         <C>
Revenues
     Premiums ..........................................................   $2,039.4    $1,984.2    $2,351.9
     Universal life and investment - type product fees .................      639.2       606.0       600.8
     Net investment income .............................................    3,799.4     3,581.0     3,646.2
     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) ..........................       58.2      (450.5)     (245.8)
     Investment management revenues, commissions, and other fees .......      500.0       530.6       606.6
     Other revenue (expense) ...........................................      269.9       241.5       185.8
                                                                           --------    --------    --------

         Total revenues ................................................    7,306.1     6,492.8     7,145.5

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) .......................................    3,849.2     3,805.2     4,328.1
     Other operating costs and expenses ................................    1,406.0     1,250.5     1,249.3
     Amortization of deferred policy acquisition costs, excluding
         amounts related to net realized investment and other
         gains (losses) (3) ............................................      298.3       313.4       249.0
     Dividends to policyholders ........................................      537.8       556.2       551.7
                                                                           --------    --------    --------

     Total benefits and expenses .......................................    6,091.3     5,925.3     6,378.1

Income before income taxes and cumulative effect of accounting
     changes ...........................................................    1,214.8       567.5       767.4

Income taxes ...........................................................      345.3       108.6       200.7
                                                                           --------    --------    --------

Income before cumulative effect of accounting changes ..................      869.5       458.9       566.7
Cumulative effect of accounting changes, net of taxes (4) ..............     (279.0)         --         7.2
                                                                           --------    --------    --------

Net income .............................................................   $  590.5    $  458.9    $  573.9
                                                                           ========    ========    ========
</TABLE>

(1)   Net of related amortization of deferred policy acquisition costs, amounts
      credited to participating pension contractholders and the policyholder
      dividend obligation of $(55.8) million, $(74.1) million and $(4.1) million
      for the years ended December 31, 2003, 2002, and 2001, respectively.
(2)   Excluding amounts related to net realized investment and other gains
      (losses) credited to participating pension contractholders and the
      policyholder dividend obligation of $(61.9) million, $(35.2) million and
      $25.3 million, for the years ended December 31, 2003, 2002, and 2001,
      respectively.
(3)   Excluding amounts related to net realized investment and other gains
      (losses) of $6.1 million, $(38.9) million and $(29.4) million for the
      years ended December 31, 2003, 2002, and 2001, respectively.
(4)   Cumulative effect of accounting changes is shown net of taxes of $150.2
      million for 2003 and $(4.2) million for 2001. There was no cumulative
      effect of accounting changes in 2002. The cumulative effect of accounting
      change in 2003 relates to the Company's adoption of DIG B36 effective
      October 1, 2003. For additional discussion of DIG B36, refer to Note 1 --
      Summary of Significant Accounting Policies in the notes to the
      consolidated financial statements.


                                       43
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      Consolidated income before income taxes and cumulative effect of
accounting changes increased 114.1%, or $647.3 million, from the prior year. The
increase was driven by growth in income before taxes of $268.5 million in the
Corporate and Other Segment, $147.5 million in the Protection Segment, $120.2
million in the Guaranteed and Structured Financial Products, $97.0 million in
the Asset Gathering Segment, and $14.1 million in the Investment Management
Segment.

      Net realized investment and other gains increased 112.9%, or $508.7
million, from prior year. See detail of current year net realized investment and
other gains in the table below. The change in net realized investment gains is
the result of gross gains on disposal of fixed maturity securities of $464.5
million, real estate of $289.7 million driven by the sale of the Home Office
properties, equity securities of $101.1 million and mortgage loans on real
estate of $75.8 million. These gains are partially offset by impairments on
fixed maturity securities of $515.1 million and associated hedging adjustments
during the period. The improvement of $508.7 million in net realized investment
and other losses in 2003 is net of $3.4 million in net realized investment and
other losses allocated to the participating pension contractholders and $58.5
million in net realized investment and other losses allocated to the
policyholder dividend obligation.

      The impairments in the current period were driven by losses recognized on
other than temporary declines in value of fixed maturity securities of $539.2
million, including impairment losses of $515.1 million and $24.1 million of
previously recognized gains where the bond was part of a hedging relationship.
The largest impairments were write-downs on $113.2 million on public & private
fixed maturity securities (including an impairment loss of $112.7 million and
$0.5 million in previously recognized gains where the bonds were part of a
hedging relationship) on an international dairy company headquartered in Italy,
$37.7 million (including an impairment loss of $37.3 million and $0.4 million in
previously recognized gains where the bonds were part of a hedging relationship)
on public fixed maturity securities relating to a large, national farmer-owned
dairy cooperative, $36.8 million on private fixed maturity securities (including
an impairment loss of $31.7 million and $5.1 million in previously recognized
gains where the bond was part of a hedging relationship) on a toll road in
Texas, $36.1 million on private and public fixed maturity securities (including
an impairment loss of $34.6 million and $1.5 million in previously recognized
gains where the bond was part of a hedging relationship) secured by aircraft
leased by a large U.S. airline, and $29.8 million on private fixed maturity
securities relating to an Australian mining company. Additional losses were
recorded for other than temporary declines in the equity in collateralized bond
obligations of $29.8 million and other equity securities of $27.8 million during
2003. For a more complete discussion of impairments see General Accounts
Investments in this MD&A.

<TABLE>
<CAPTION>
                                                                                                   Net Realized
                                                       Gross Gain    Gross Loss      Hedging        Investment
For the Year Ended December 31, 2003       Impairment  on Disposal  on Disposal    Adjustments  and Other Gain/(Loss)
                                          ---------------------------------------------------------------------------
                                                                         (in millions)
<S>                                        <C>           <C>         <C>           <C>             <C>
Fixed maturity securities ......           $(515.1)      $464.5      $ (95.3)      $(246.9)        $(392.8)
Equity securities ..............             (27.8)       101.1         (3.4)           --            69.9
Mortgage loans on real estate ..                --         75.8        (40.9)        (63.7)          (28.8)
Real estate ....................                --        289.7        (16.8)           --           272.9
Other invested assets ..........             (29.8)        25.2        (30.6)           --           (35.2)
Derivatives ....................                --           --           --         116.4           116.4
                                            -------------------------------------------------------------------------
               Subtotal ........           $(572.7)      $956.3      $(187.0)      $(194.2)        $   2.4
                                            =========================================================================

          Amortization adjustment for deferred policy acquisition costs......................      $  (6.1)
          Amounts credited to participating pension contractholders..........................          3.4
          Amounts credited to the policyholder dividend obligation...........................         58.5
                                                                                                ---------------------
               Total.........................................................................      $  58.2
                                                                                                =====================
</TABLE>

(1)   Fixed maturities gain on disposals includes $90.3 million of gains from
      previously impaired securities.
(2)   Fixed maturities loss on disposals includes $28.8 million of credit
      related losses.

      In addition to impairment losses, the Company incurred losses on disposal
of fixed maturity securities of $95.3 million, losses on the disposal of
mortgage loans on real estate investments of $40.9 million, losses on the
disposal of other invested assets of $30.6 million, losses on the disposal of
real estate of $16.8 million and losses on disposal of equity securities of $3.4
million

      The increase in income before income taxes and the cumulative effect of an
accounting change in the Corporate and Other Segment was driven by growth in net
realized investment and other gains of $371.5 million due to a gain of $271.4
million (excluding a deferred profit of $209.4 million) on the sale of the
Company's Home Office properties during the first


                                       44
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


quarter of 2003. See Note 9 - Sale/Leaseback Transaction and Other Lease
Obligations in the notes to the consolidated financial statements. The increased
earnings in the G&SFP Segment was primarily due to a $98.5 million improvement
in net realized investment and other losses. The increase in the Protection
Segment was driven by a $111.0 million increase in net investment income, a
$34.0 million increase in net realized investment and other losses, and a $34.6
million increase in universal life product fees. The increase in the Asset
Gathering Segment was driven by growth in net investment income, partially
offset by a decrease of $34.4 million in management advisory fees due to lower
assets under management, partially offset by a decrease in operating expenses.
The Investment Management Segment's income before income taxes and cumulative
effect of accounting changes increased due to an increase of $9.0 million in net
realized investment and other gains and a $7.0 million increase in management
advisory fees.

      Premium revenues increased 2.8%, or $55.2 million, from the prior year.
The increase was primarily due to the Protection Segment which increased $37.5
million driven primarily by long-term care insurance premiums, which increased
17.0%, or $79.4 million, partially offset by a decline in traditional life
insurance premiums of 4.0%, or $42.0 million. Also contributing to the increase
in premiums was the Corporate and Other Segment which increased $13.3 million.
The growth in Corporate and Other was driven by the International Group Program
partially offset by the sale of the group life business effective May 1, 2003.

      Universal life and investment-type product fees increased 5.5%, or $33.2
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 an increase of $34.6 million in the Protection
Segment driven by growth in average account values in universal life insurance
products driven by the acquisition of the Allmerica block of fixed universal
life insurance business as of December 31, 2002 and growth in the existing
business. Partially offsetting the growth in the Protection Segment was a
decline of $1.8 million in product fees in the Asset Gathering Segment where the
decline in variable annuity fund balances drove the fees down.

      Net investment income increased 6.1%, or $218.4 million, from the prior
year. The increase was primarily the result of asset growth and lower investment
expenses. Overall, the 2003 yield, net of investment expenses, on the general
account portfolio decreased to 5.96% from 6.29% in the prior year. The lower
portfolio yield was driven primarily by the drop in short-term interest rates
during the year, which impacts floating rate investments, and lower yields on
investment acquisitions. In summary, the change in yields was driven by the
following factors:

      o     As of December 31, 2003, the Company's asset portfolio had
            approximately $13 billion of floating-rate exposure (primarily
            LIBOR). This compares to approximately $12 billion of exposure as of
            December 31, 2002. This exposure was created mostly through interest
            rate swaps designed to match our floating-rate liability portfolio.
            As of December 31, 2003, approximately 88% of this exposure,
            excluding cash and short-term investments, was directly offset by
            exposure to floating-rate liabilities. Most of the remaining 12% 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 11 basis points in 2003
            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 2003, this
            dilutive effect was 11 basis points, compared to 10 basis points in
            2002. However, adjusting for taxes, these investments increased the
            Company's net income by $7.6 million in 2003 relative to 2002.

      o     The inflow of new cash for the twelve-month period ending December
            31, 2003 was invested at rates that were below the portfolio rate.
            In addition, maturing assets rolled over into new investments at
            rates less favorable than those available in 2002. These two factors
            account for the majority of the remaining decline in portfolio
            rates.

      Partially offsetting the effects of these decreases to yields on
investments was an increase in invested assets and a reduction in investment
expenses. In 2003, weighted-average invested assets grew $6,787.3 million, or
11.9%, from the prior year. In addition, investment expenses were reduced $36.9
million in 2003 compared to the prior year. Included are reductions in corporate
complex expenses and in depreciation expenses associated with the sale of the
Company's home office real estate of $44.9 million.

      Investment management revenues, commissions, and other fees decreased
5.8%, or $30.6 million, from the prior year. The decrease in fee revenue was
driven by the Asset Gathering Segment where fees decline $34.4 million driven by
the mutual funds business where distribution and advisory fees declined due to a
shift in the product mix. Average mutual fund


                                       45
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


assets under management were $27,159.7 million, an increase of $356.4 million,
or 1.3% from the prior year. Partially offsetting the decline in the Asset
Gathering Segment management fees was growth in the Investment Management
Segment of $7.0 million driven by successes with the new vertical integration
strategy in the Hancock Natural Resource Group.

      Other revenue increased 11.8%, or $28.4 million, from the prior year. The
increase in other revenue is due to Signature Fruit, a subsidiary of the Company
since April 2, 2001, which acquired certain assets and assumed certain
liabilities out of bankruptcy proceedings of Tri Valley Growers, Inc., a
cooperative association on that date. 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, in the Corporate and Other Segment.
Signature Fruit generated revenue of $254.5 million in 2003, an increase of
$18.6 million from the prior year. Also included in other revenues is the fee
revenue generated in the Federal long-term care insurance business, its primary
operating revenue. The Federal long-term care insurance business is a fee
business where the Company administers and supports employee long-term care
insurance benefits offered by the Federal Government to its employees. Federal
long-term care insurance fee revenue increased $7.2 million from the prior year,
its start-up year.

      Benefits to policyholders increased 1.2%, or $44.0 million, from the prior
year. Benefits to policyholders in the Protection Segment increased 5.9%, or
$106.1 million, from the prior year, due to growth in long-term care insurance
benefits to policyholders of 21.3%, or $88.7 million, primarily due to additions
to reserves for premium growth and higher claim volume on growth of the business
during the period. In addition, in the Protection Segment the non-traditional
life insurance business experienced increased benefits to policyholders of 8.4%,
or $24.1 million, primarily due to an increase in interest credited on higher
current year account balances, partially offset by a $19.2 million decrease in
reserves for lower reserves on term conversions and a decrease in death claims,
net of reserves released. Benefits to policyholders in the Asset Gathering
Segment increased 12.1%, or $54.0 million, driven by a $40.3 million increase in
interest credit on growing fixed annuity account balances and $9.5 million
increase in reserve provisions related to sales of life-contingent immediate
fixed annuities. Benefits to policyholders in the G&SFP Segment decreased 8.7%,
or $102.8 million, driven by a decrease of $60.5 million in interest credited on
spread-based products due to a decline in the average interest crediting rate.
The decrease in interest credited was due to a decline in the average interest
credited rate on account balances for spread-based products. The average
crediting rate fell to 4.22% from 4.85% in the prior year.

      Other operating costs and expenses increased $155.5 million from the prior
year, driven by an increase of $113.6 million in the Corporate and Other Segment
driven by increases in net periodic pension costs of $32.0 million, deficiency
interest of $22.4 million, $12.3 million in compensation costs, $3.3 million in
pension curtailment losses, and administrative service contracts of $4.6
million. In addition, Signature Fruit operating expenses increased $16.5
million. Signature Fruit other operating costs and expenses were $257.8 million
in 2003 and $241.3 million in the prior year. G&SFP Segment other operating
costs and expenses increased $58.9 million on increased investment income
transferred on reinsurance ceded and higher compensation costs. Asset Gathering
Segment other operating costs and expenses decreased $19.7 million driven by
lower commission expense in the mutual fund business. The Protection Segment
other operating costs and expenses decreased $2.3 million driven by general
insurance expenses and amortization of intangibles related to the Allmerica
acquisition.

      Amortization of deferred policy acquisition costs decreased 4.8%, or $15.1
million, from the prior year. The decrease 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 in 2002. The Q3 2002 Unlocking of the DAC asset
occurred based on changes in the future investment return assumptions and our
lowering of 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. The Q3 2002
Unlocking 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 for further
discussion). The decrease in amortization of DAC due to Q3 2002 Unlocking of the
DAC asset was partially offset by a $13.6 million increase in amortization in
the Protection Segment for growth in the long-term care insurance business and
adjusting gross profit margins for term conversions in the non-traditional life
insurance business.

      Dividends to policyholders decreased 3.3%, or $18.4 million from the prior
year. The decrease in dividends to policyholders was driven by the Protection
Segment, which decreased 8.1%, or $41.5 million. This decrease was due to the
full year impact of lowering of the dividend scale on traditional life insurance
products in the prior year. Partially offsetting the decrease in the dividend
scale was growth in the traditional life insurance products average reserves,
which increased approximately 3.3% from the prior period. Offsetting the decline
in dividends in the Protection Segment was a $29.1 million increase in the
Corporate and Other Segment. The increase in dividends in the Corporate and
Other Segment was due to the accounting for the sale of the group life business
effective May 1, 2003.


                                       46
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      Income taxes were $345.3 million in 2003, compared to $108.6 million for
2002. Our effective tax rate was 28.4% in 2003, as compared to 19.1% in 2002.
The higher effective tax rate was primarily due to increased pre-tax income
driven by improved net realized investment and other gains/losses, partially
offset by increased affordable housing tax credits.

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

      The following discussion reflects the adoption of Statement of Position
s(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,
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.


                                       47
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      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.

      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 changes 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 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 investments 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 properties.

      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


                                       48
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


and other equity securities of $26.9 million. In addition, the Company incurred
losses on disposal of real estate of $36.5 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
12.5%, or $76.0 million, from the prior year. The decrease in fee revenue was
the result of lower average assets under management in the mutual fund business
and a shift in the product mix. Assets under management decreased 13.5%, or
$3,479.6 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


                                       49
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


traditional life insurance products. Traditional life insurance products average
reserves increased approximately 4.2% from the prior period.

      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.


                                       50
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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. Total 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,
                                                                    2003           2002            2001
                                                                   ------------------------------------
                                                                               (in millions)
<S>                                                                <C>           <C>           <C>
Segment Data: (1)
Segment after-tax operating income (loss):
     Protection Segment ........................................   $  371.8      $  310.6      $  284.3
     Asset Gathering Segment ...................................      194.3         130.7         148.3
                                                                   --------      --------      --------
         Total Retail Segments .................................      566.1         441.3         432.6

     Guaranteed and Structured Financial Products Segment ......      287.4         268.7         238.0
     Investment Management Segment .............................       29.8          21.2          29.8
                                                                   --------      --------      --------
         Total Institutional Segments ..........................      317.2         289.9         267.8

     Corporate and Other Segment ...............................      (44.6)         43.4          55.4
                                                                   --------      --------      --------
         Total segment after-tax operating income ..............      838.7         774.6         755.8

After-tax adjustments: (1)
     Net realized investment and other gains (losses), net .....       30.8        (285.8)       (157.5)
     Class action lawsuit ......................................         --         (19.5)        (19.5)
     Restructuring charges .....................................         --         (10.4)        (25.4)
     Surplus tax ...............................................         --            --          13.3
                                                                   --------      --------      --------
         Total after-tax adjustments ...........................       30.8        (315.7)       (189.1)
                                                                   --------      --------      --------

GAAP Reported:
     Income before cumulative effect
         of accounting changes .................................      869.5         458.9         566.7
     Cumulative effect of accounting changes, net of tax .......     (279.0)           --           7.2
                                                                   --------      --------      --------
     Net income ................................................   $  590.5      $  458.9      $  573.9
                                                                   ========      ========      ========
</TABLE>

(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.


                                       51
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      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 presented.

<TABLE>
<CAPTION>
                                                                                      For the Years Ended December 31,
                                                                                     2003           2002          2001
                                                                                    ------------------------------------
                                                                                               (in millions)
<S>                                                                                 <C>           <C>           <C>
Net realized investment and other gains (losses) ................................   $   2.4       $(524.6)      $(249.9)
Add amortization of deferred policy acquisition costs related to net
     realized investment and other gains (losses) ...............................      (6.1)         38.9          29.4
Add amounts credited to participating pension contractholder accounts ...........       3.4          23.3         (42.3)
Add amounts credited to the closed block policyholder
     dividend obligation ........................................................      58.5          11.9          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 closed block
     policyholder dividend obligation per consolidated financial
     statements .................................................................      58.2        (450.5)       (245.8)
Less net realized investment and other (gains) losses attributable to
     mortgage securitizations ...................................................     (11.5)         (0.9)         (3.2)
                                                                                    -------       -------       -------
Net realized investment and other gains (losses), net--pre-tax
     adjustment to calculate segment operating income ...........................      46.7        (451.4)       (249.0)
Income tax effect ...............................................................     (15.9)        165.6          91.5
                                                                                    -------       -------       -------

Net realized investment and other gains (losses), net--after-tax
     adjustment to calculate segment operating income ...........................   $  30.8       $(285.8)      $(157.5)
                                                                                    =======       =======       =======
</TABLE>

      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 $3.2 million and
$11.9 million at December 31, 2003 and 2002, respectively. The Company incurred
no costs related to the settlement in 2003 or 2002. Costs incurred related to
the settlement were $19.5 million after-tax 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.

      Administration of the alternative dispute resolution (ADR) component of
the settlement is essentially complete. 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.

      During 2002 and 2001, 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.

      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. Since then, as a
stock company, we are no longer subject to the surplus tax and have excluded it
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 at December 31, 2003 and 2002. 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 was $58.1 million
at both December 31, 2003 and 2002. Amortization expense included in other
operating costs and


                                       52
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


expenses was $11.3 million in 2001. No amortization of goodwill occurred in 2003
and 2002 pursuant to current accounting guidance. The Company evaluates goodwill
for impairment using valuations of reporting units and also whenever significant
events or changes indicate an impairment may exist. If the fair value analysis
did 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.

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

<TABLE>
<CAPTION>
                                                                For the Years Ended December 31
                                                                  2003       2002         2001
                                                               ---------------------------------
                                                                         (in millions)
<S>                                                                   <C>         <C>      <C>
Amortization of Goodwill:
     Protection Segment ....................................          --          --       $ 4.0
     Asset Gathering Segment ...............................          --          --         6.8
                                                               ---------   ---------   ---------
         Total Retail Segments .............................                                10.8

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

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


                                       53
<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,
                                                                    2003        2002        2001
                                                                  --------------------------------
                                                                           (in millions)
<S>                                                               <C>         <C>         <C>
Operating Results:
Revenues
     Premiums .................................................   $1,543.5    $1,506.0    $1,363.9
     Universal life and investment-type product fees ..........      476.4       441.8       423.9
     Net investment income ....................................    1,421.7     1,310.7     1,258.5
     Other revenue ............................................        7.7         1.4         8.4
                                                                  --------    --------    --------
         Total revenues .......................................    3,449.3     3,259.9     3,054.7

Benefits and expenses
     Benefits to policyholders ................................    1,893.7     1,773.4     1,603.3
     Other operating costs and expenses .......................      343.6       322.5       339.2
     Amortization of deferred policy acquisition costs,
         excluding amounts related to net realized and other
         investment gains (losses) ............................      184.7       171.1       171.3
     Dividends to policyholders ...............................      470.0       511.5       499.9
                                                                  --------    --------    --------
         Total benefits and expenses ..........................    2,892.0     2,778.5     2,613.7

Segment pre-tax operating income (1) ..........................      557.3       481.4       441.0

Income taxes ..................................................      185.5       170.8       156.7
                                                                  --------    --------    --------

Segment after-tax operating income (1) ........................      371.8       310.6       284.3

After-tax adjustments: (1)
     Net realized investment and other (losses) gains, net ....      (20.9)      (42.0)      (62.2)
     Class action lawsuit .....................................         --       (18.7)         --
     Restructuring charges ....................................         --        (5.7)       (4.4)
     Surplus tax ..............................................         --          --         9.6
                                                                  --------    --------    --------
         Total after-tax adjustments ..........................      (20.9)      (66.4)      (57.0)
                                                                  --------    --------    --------

GAAP Reported:
Income before cumulative effect of accounting changes .........      350.9       244.2       227.3
Cumulative effect of accounting changes, net of tax ...........      (42.2)         --        11.7
                                                                  --------    --------    --------
Net income ....................................................   $  308.7    $  244.2    $  239.0
                                                                  ========    ========    ========
Amortization of goodwill, net of tax ..........................         --          --         2.6
                                                                  --------    --------    --------
Net income before amortization of goodwill ....................   $  308.7    $  244.2    $  241.6
                                                                  ========    ========    ========
</TABLE>


                                       54
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


<TABLE>
<CAPTION>
                                                                  For the Years Ended December 31,
                                                                    2003       2002        2001
                                                                  -------------------------------
                                                                           (in millions)
<S>                                                               <C>        <C>         <C>
Other Data:
Segment after-tax operating income (loss)
     Non-traditional life (variable life and universal life) ..   $  151.8   $  119.8    $  121.0
     Traditional life .........................................      104.6      110.6       107.8
     Long-term care ...........................................      105.4       83.6        58.6
     Federal long-term care (2) ...............................        6.0        0.9          --
     Other ....................................................        4.0       (4.3)       (3.1)
Statutory premiums (3)
     Variable life ............................................      788.9      926.8       948.5
     Universal life ...........................................      530.5    1,030.9       456.1
     Traditional life .........................................      968.8    1,035.9       997.3
     Long-term care ...........................................      654.2      466.4       337.3
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" included in this
      Management's Discussion and Analysis.
(2)   In 2002, during its start-up phase, the Federal long-term care insurance
      business was reported in the Corporate and Other Segment. Effective
      January 1, 2003, the business and its prior year results were reclassified
      from the Corporate and Other Segment to the Protection Segment.
(3)   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,
      Investors Partner Life Insurance Company, and John Hancock Reassurance
      Company Ltd. as filed with insurance regulatory authorities and prepared
      in accordance with statutory accounting practices. Universal life
      statutory premiums include a $639.7 million deposit related to the
      acquisition of Allmerica's fixed universal life insurance business in
      2002. Long-term care premiums include $15.1 million in Federal long-term
      care premiums previously reported in the Company's Corporate and Other
      segment in 2002.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      Segment after-tax operating income increased 19.7%, or $61.2 million, from
the prior year. Non-traditional life insurance segment after-tax operating
income increased 26.7%, or $32.0 million, primarily due to increased universal
life and product-type fee income and increased net investment income partially
offset by increased benefits to policyholders. Long-term care insurance segment
after-tax operating income increased 26.1%, or $21.8 million, resulting from
increased premiums and higher net investment income, partially offset by higher
benefits and expenses and higher amortization of deferred policy acquisition
costs. Traditional life insurance business after-tax operating income decreased
5.4%, or $6.0 million, primarily due to run-off of the closed block. Federal
long-term care insurance business after-tax operating income increased $5.1
million from its start up phase in the prior year.

      Revenues increased 5.8%, or $189.4 million. Premiums increased 2.5%, or
$37.5 million, primarily due to long-term care insurance premiums, which
increased 17.0%, or $79.4 million, driven by business growth from higher sales
and continued lower lapses. This increase was partially offset by a 4.0%, or
$42.0 million, decrease in premiums in the traditional life insurance business
due to the run off of the closed block. Universal life and investment-type
product fees increased 7.8%, or $34.6 million, primarily due to a $37.6 million
increase in the cost of insurance fees resulting from growth in the existing
business and from the addition of Allmerica block of business assumed as of
December 31, 2002. Segment net investment income increased 8.5%, or $111.0
million, primarily due to a 15.5% increase in average asset balances, partially
offset by a 45 basis point decrease in yields.

      Benefits and expenses increased 4.1%, or $113.5 million. Benefits to
policyholders increased 6.8%, or $120.3 million, primarily due to growth in both
the long-term care insurance business and non-traditional life insurance
business in force. Long-term care insurance benefits to policyholders increased
20.9%, or $108.7 million, primarily due to additions to reserves for premium
growth and higher claim volume on growth of the business during the period. The
long-term care insurance business claims are being incurred at an aggregate rate
lower than assumed in calculating the reserves of the business. Long-term care
insurance business policies have increased to 706.2 thousand from 604.2 thousand
in the prior year. The non-traditional life insurance business had an increase
in benefits to policyholders of 8.4%, or $24.1 million, primarily due to a $51.0
million increase in interest credited on higher current year account balances.
This increase was partially offset by a $19.2 million decrease to lower reserves
on term conversions and a $7.8 million decrease in death claims, net of reserves


                                       55
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


released. Other operating costs and expenses increased 6.5%, or $21.1 million,
primarily due to increases in general insurance expenses, primarily pension and
bonus plan-related, and higher amortization of intangibles related to the
acquisition of the Allmerica as of December 31, 2002. Amortization of deferred
policy acquisition costs increased 8.0%, or $13.6 million, primarily due to a
$12.9 million increase from growth in the long-term care insurance business, and
a $7.4 million in the non-traditional life business. The non-traditional
increase of $7.4 million is $19.2 million higher due to adjusting gross profit
margins for term conversions and $16.1 million higher due to normal amortization
and true-ups for lower lapse and higher separate account performance in the
current year, and is offset by $27.9 million lower DAC amortization because of
the Q3 2002 Unlocking (See Critical Accounting Policies in this MD&A). These
increases were partially offset by a $6.7 million decrease in the traditional
life insurance business amortization of deferred policy acquisition costs due to
lower contributions from the closed block. Dividends to policyholders decreased
8.1%, or $41.5 million, primarily due to a dividend scale cut on traditional
life insurance products. The Segment's effective tax rate on operating income
was 33.3% compared to 35.5% for the prior year. The decrease was primarily due
to an increase in affordable housing tax credits and a decrease in the
deficiency charge.

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

      Segment after-tax operating income increased 9.3%, or $26.3 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 $205.2 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 $164.8 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 4.9%, or $16.7 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 2002 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


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,
                                                                        2003        2002        2001
                                                                      --------------------------------
                                                                                (in millions)
<S>                                                                   <C>         <C>         <C>
Operating Results:
Revenues
     Premiums .....................................................   $   35.3    $   29.2    $   74.8
     Investment-type product fees .................................      116.8       118.6       125.6
     Net investment income ........................................      710.1       575.7       498.5
     Investment management revenues, commissions, and other fees ..      388.8       423.2       477.9
     Other revenue (expense) ......................................        3.4         1.1        (0.3)
                                                                      --------    --------    --------
         Total revenues ...........................................    1,254.4     1,147.8     1,176.5

Benefits and expenses
     Benefits to policyholders ....................................      500.7       446.7       441.6
     Other operating costs and expenses ...........................      356.8       366.5       445.9
     Amortization of deferred policy acquisition costs,
         excluding amounts related to net realized investment
         and other gains (losses) .................................      111.4       140.5        75.0
     Dividends to policyholders ...................................        0.1         0.1         0.1
                                                                      --------    --------    --------
         Total benefits and expenses ..............................      969.0       953.8       962.6

Segment pre-tax operating income (1) ..............................      285.4       194.0       213.9

Income taxes ......................................................       91.1        63.3        65.6
                                                                      --------    --------    --------

Segment after-tax operating income (1) ............................      194.3       130.7       148.3

After-tax adjustments (1):
     Net realized investment and other (losses) gains, net ........      (30.2)      (25.7)      (34.7)
     Restructuring charges ........................................         --        (6.1)      (17.6)
     Surplus tax ..................................................         --          --         0.2
                                                                      --------    --------    --------
         Total after-tax adjustments ..............................      (30.2)      (31.8)      (52.1)
                                                                      --------    --------    --------

GAAP Reported:
Income before cumulative effect of accounting changes .............      164.1        98.9        96.2
Cumulative effect of accounting changes, net of tax ...............       (4.5)         --        (0.5)
                                                                      --------    --------    --------
Net income ........................................................   $  159.6    $   98.9    $   95.7
                                                                      ========    ========    ========
Amortization of goodwill, net of tax ..............................         --          --         4.5
                                                                      --------    --------    --------
Net income before amortization of goodwill ........................   $  159.6    $   98.9    $  100.2
                                                                      ========    ========    ========
</TABLE>


                                       57
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


<TABLE>
<CAPTION>
                                                       For the Years Ended December 31,
                                                       2003         2002         2001
                                                      ---------------------------------
                                                                (in millions)
<S>                                                   <C>         <C>         <C>
Other Data:
Segment after-tax operating income
     Annuity ......................................   $   140.3   $    73.4   $    90.3
     Mutual funds .................................        50.3        52.1        55.5
     Other ........................................         3.7         5.2         2.5
Annuity premiums and deposits (2)
     Fixed ........................................     2,319.4     2,668.0     1,463.5
     Variable (3) .................................       405.1       746.1       639.6
Mutual fund assets under management, end of year ..    29,289.9    25,810.3    29,285.8
</TABLE>

(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 and $1,910.5 million,
      respectively, for the years ending December 31, 2002 and 2001. No such
      exchanges took place in 2003.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      Segment after-tax operating income increased 48.7%, or $63.6 million, from
the prior year. The increase in segment after-tax operating income was driven by
a $34.6 million increase in the variable annuity business. The growth in the
variable annuity business was driven by improved separate account performance in
the current period. Separate accounts experienced a 19.9% return in 2003
compared to a negative return of 14.6% in 2002. The poor separate account
performance in 2002 resulted in a one time unlocking of the deferred policy
acquisition cost asset of $36.1 million in the prior year. Partially offsetting
the decrease in the amortization of the deferred policy acquisition costs was a
$10.5 million increase in operating expenses and a decrease of $6.9 million in
universal life and investment product fees. The increase in segment after-tax
operating income was also driven by a $32.3 million increase in the fixed
annuity business, as net investment income increased 22.9%, or $129.0 million,
on higher assets under management, and was partially offset by an increase in
benefits to policyholders of $57.9 million driven by interest credited on higher
average account values. Mutual fund business after-tax operating income was
$50.3 million, declining 3.5%, or $1.8 million, primarily due to a 7.8%, or
$23.8 million, decrease in management advisory fees, offset by a 28.0%, or $24.6
million, decrease in commissions. After-tax operating income for Essex, a
distribution subsidiary primarily serving the financial institution channel,
decreased $0.3 million. Signature Services after-tax operating income decreased
$0.3 million and Signator Investors after-tax operating income decreased $0.2
million.

      Revenues increased 9.3%, or $106.6 million, from the prior year. The
increase in revenue was due to a $134.4 million increase in net investment
income, driven by the annuity business, offset by a $34.4 million decrease in
investment management revenues and other fees. 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 31.6% to $10,157.5
million while the average investment yield decreased 61 basis points.
Investment-type product fees decreased 1.6%, or $1.9 million, including a $6.9
million decrease in the variable annuity business, mostly due to a decline in
the average fund values of 5.2%, or $300.3 million, to $5,512.5 million from the
prior year. Fixed annuity investment-type product fees increased $5.0 million
generally due to higher average account values. For variable annuities the
mortality and expense fees as a percentage of average account balances was 1.29%
for the current and prior year periods.

      Investment management revenues, commissions, and other fees decreased
8.1%, or $34.4 million from the prior year due to a shift in the product mix.
Average mutual fund assets under management were $27,159.7 million, an increase
of $356.4 million, or 1.3% from the prior year. The increase in average mutual
fund assets under management is primarily due to market appreciation of $4,009.4
million since December 31, 2002. The mutual fund business experienced net
redemptions of $246.9 million during 2003, compared to net deposits of $379.1
million in the prior year, a decline of $626.0 million. This change was due to a
decrease in deposits and reinvestments of $236.6 million and an increase in
redemptions and withdrawals of $437.4 million. The decrease in deposits and
reinvestments was driven by a decline in institutional advisory account sales of
$527.2 million, partially offset by increases in retail open-end funds of $95.8
million, closed-end funds of $197.6 million and private managed account sales of
$102.2 million. The increase in redemptions and withdrawals was


                                       58
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


caused by an increase in institutional advisory account redemptions of $916.7
million, partially offset by a decrease in open-end retail mutual fund
redemptions of $490.5 million. Investment advisory fees decreased 1.9%, or $2.8
million, to $149.4 million, from the prior period and were 0.55% and 0.57% of
average mutual fund assets under management for the years ended December 31,
2003 and 2002. Underwriting and distribution fees decreased 11.3%, or $23.3
million, to $181.4 million compared to the prior period, primarily due to a
decrease in contingent deferred sales charges on a decline in open-end mutual
fund class B share redemptions. Rule 12b-1 fee revenue also declined due to
lower eligible assets under management. The decrease also included a $7.9
million decrease in distribution and other fees. Shareholder service and other
fees were $58.0 million compared to $66.3 million in the prior year.

      Benefits and expenses increased 1.6%, or $15.2 million from the prior
year. Driving the increase in benefits and expenses was an increase of 12.1%, or
$54.0 million, in benefits to policyholders. Benefits to policyholders increased
$57.9 million in the fixed annuity business primarily due to a $40.3 million
increase in interest credited on fixed annuity account balances due to higher
average account balances and $9.5 million in higher reserve provisions for
life-contingent immediate fixed annuity fund values on higher sales of these
contract types. Offsetting the increase in benefits and expenses was a decline
of $29.1 million in amortization of deferred policy costs primarily due to the
variable annuity business. Amortization of deferred policy costs decreased $54.3
million from the prior year in the variable annuity business due in part to the
prior year DAC unlocking of $36.1 million. In 2002, the variable annuity
business experienced significant declines in the equity markets, leading to an
increase in the amortization of deferred policy costs, resulting in the Q3 2002
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). Amortization of deferred policy costs also decreased $26.9 million
due in part to higher variable annuity future profit margins associated with
improved separate account performance in the current year, and increased $25.3
million due to higher fixed annuity deferred policy cost asset balances. Other
operating costs and expenses decreased 2.6%, or $9.7 million, from the prior
year, primarily due to the decrease in commission expense in the mutual funds
business. The Segment's effective tax rate on operating income was 31.9%
compared to 32.6% for the prior year. The decrease in the rate is due to an
increase in affordable housing tax credits and lower dividends received
deductions in the current period.

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 2.4%, or $28.7 million, from the prior year. The
decrease in revenue was due to a $54.7 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
11.4%, or $54.7 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


                                       59
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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.

      Benefits and expenses decreased 0.9%, or $8.8 million from the prior year.
Driving the decrease was a decline in other operating costs and expenses of
17.8%, or $79.4 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.


                                       60
<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,
                                                                        2003         2002        2001
                                                                       --------------------------------
                                                                                 (in millions)
<S>                                                                    <C>         <C>         <C>
Operating Results:
Revenues
     Premiums ......................................................   $   16.8    $   18.3    $  483.2
     Investment-type product fees ..................................       45.8        45.4        51.4
     Net investment income .........................................    1,676.7     1,703.9     1,834.5
     Net realized investment and other gains (losses), net (1) .....         --          --          --
     Other revenue .................................................        0.9         0.8         0.4
                                                                       --------    --------    --------
         Total revenues ............................................    1,740.2     1,768.4     2,369.5

Benefits and expenses
     Benefits to policyholders, excluding amounts related to net
         realized investment and other gains (losses) credited to
         participating pension contractholders .....................    1,084.0     1,186.8     1,869.3
     Other operating costs and expenses ............................      194.2       134.4       105.3
     Amortization of deferred policy acquisition costs .............        2.3         2.2         2.4
     Dividends to policyholders ....................................       38.2        44.2        36.1
                                                                       --------    --------    --------
         Total benefits and expenses ...............................    1,318.7     1,367.6     2,013.1

Segment pre-tax operating income (1) ...............................      421.5       400.8       356.4

Income taxes .......................................................      134.1       132.1       118.4
                                                                       --------    --------    --------

Segment after-tax operating income (1) .............................      287.4       268.7       238.0

After-tax adjustments: (1)
     Net realized investment and other (losses) gains, net .........     (133.2)     (199.6)      (77.0)
     Restructuring charges .........................................         --        (0.6)       (1.2)
     Surplus tax ...................................................         --          --         2.6
                                                                       --------    --------    --------
         Total after-tax adjustments, net of tax ...................     (133.2)     (200.2)      (75.6)
                                                                       --------    --------    --------

GAAP Reported:
Income before cumulative effect of accounting changes ..............      154.2        68.5       162.4
Cumulative effect of accounting changes, net of tax ................     (232.3)         --        (1.2)
                                                                       --------    --------    --------
Net income .........................................................   $  (78.1)   $   68.5    $  161.2
                                                                       ========    ========    ========

Other Data:
Segment after-tax operating income
     Spread-based products .........................................   $  271.6    $  246.4    $  214.5
     Fee-based products ............................................       15.8        22.3        23.5
Premiums and deposits
     Spread-based products
         Fund-type products ........................................    2,372.9     3,847.9     4,718.8
         Single premium annuities ..................................        0.7         1.2       465.5
         SignatureNotes ............................................    1,260.1       290.2          --
     Fee-based products
         Participating contracts and conversion annuity contracts ..      852.5       529.3       468.9
         Structured Separate Accounts ..............................       54.5       483.9        77.4
         Other separate account contracts ..........................      (71.0)      (26.1)      130.6
</TABLE>

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


                                       61
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      Segment after-tax operating income increased 7.0%, or $18.7 million from
the prior year. Spread-based products after-tax operating income increased
10.2%, or $25.2 million from the prior year, driven by a 9.2%, or $92.2 million
decrease in benefits to policyholders, partially offset by an increase in
operating costs and expenses mainly from higher reinsurance expenses and a
decrease in net investment income. Lower benefits to policyholders reflect an
increased level of reinsurance arrangements, driving a lower increase in policy
reserves. Fee-based products after-tax operating income decreased 29.1%, or $6.5
million from the prior year, primarily due to lower separate account risk
charges and lower earnings on risk-based capital.

      Revenues decreased 1.6%, or $28.2 million from the prior year, primarily
as a result of lower net investment income. Premiums decreased 8.2%, or $1.5
million, from the prior year. Net investment income decreased 1.6%, or $27.2
million, despite growth of 8.9%, or $2.1 billion, in the average invested asset
base. Net investment income declined as the average investment yield fell to
5.85% from 6.43% in 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 $11 billion or 42.2% 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 3.6%, or $48.9 million, from the prior
year, driven by lower benefits to policyholders and partially offset by higher
operating costs and expenses. Benefits to policyholders declined 8.7%, or $102.8
million, in the current year primarily due to lower interest credited on account
balances for spread-based products. Spread-based interest credited decreased
5.9%, or $60.5 million, from the prior year. This decrease resulted from the
decline in the average interest credited rate on account balances for
spread-based products as liabilities with floating rates reset and new business
is added at current market rates. The average interest credited rate fell to
4.22% from 4.85% in the prior year. Partially offsetting the decrease in
benefits to policyholders was an increase in other operating costs and expenses
of 44.5%, or $59.8 million, from the prior year. This increase was primarily due
to increased investment income transferred on reinsurance ceded combined with
higher pension and compensation costs. Dividends to policyholders decreased
13.6%, or $6.0 million, from the prior year. The Segment's effective tax rate
was 31.8% compared to 33.0% in the prior year.

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.


                                       62
<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,
                                                                          2003         2002        2001
                                                                       -----------------------------------
                                                                                   (in millions)
<S>                                                                    <C>          <C>          <C>
Operating Results:
Revenues
Net investment income .............................................    $    17.1    $    15.1    $    28.7
Net realized investment and other gains (losses), net (1) .........         11.5          1.2          3.2
Investment management revenues, commissions, and other fees .......        115.2        108.2        111.3
Other revenue .....................................................          1.2          0.1           --
                                                                       ---------    ---------    ---------
Total revenues ....................................................        145.0        124.6        143.2

Benefits and expenses
Other operating costs and expenses ................................         97.0         90.9         96.4
                                                                       ---------    ---------    ---------
Total benefits and expenses .......................................         97.0         90.9         96.4

Segment pre-tax operating income (1) ..............................         48.0         33.7         46.8

Income taxes ......................................................         18.2         12.5         17.0
                                                                       ---------    ---------    ---------

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

After-tax adjustments: (1)
Net realized investment and other gains (losses) ..................         (0.5)         0.4         (0.2)
Restructuring charges .............................................           --         (0.8)        (0.9)
Surplus tax .......................................................           --           --          0.1
                                                                       ---------    ---------    ---------
Total after-tax adjustments .......................................         (0.5)        (0.4)        (1.0)
                                                                       ---------    ---------    ---------

GAAP Reported:
Income before cumulative effect of accounting changes .............         29.3         20.8         28.8
        Cumulative effect of accounting changes, net of tax .......           --           --         (0.2)
                                                                       ---------    ---------    ---------
Net income ........................................................    $    29.3    $    20.8    $    28.6
                                                                       =========    =========    =========
        Amortization of goodwill, net of tax ......................           --           --          0.5
                                                                       ---------    ---------    ---------
Net income before amortization of goodwill ........................    $    29.3    $    20.8    $    29.1
                                                                       =========    =========    =========

Other Data:
Assets under management, end of year (2) ..........................    $27,856.8    $27,874.7    $28,921.8
</TABLE>

----------
(1)   See "Results of operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this Management's Discussion and Analysis.
(2)   Includes general account cash and invested assets of $79.5 million, $383.1
      million and $151.3 million, as of December 31, 2003, 2002 and 2001,
      respectively.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      Segment after-tax operating income increased $8.6 million, or 40.6%, from
the prior year. The increase was primarily due to an increase of $10.3 million
in net realized investment and other gains and an increase of $7.0 million in
investment management revenues, commission and other fees and partially offset
by an increase of $6.1 million in benefits and expenses. The increase in net
realized investment and other gains resulted primarily from mortgage
securitizations which are part of the operating revenues of our real estate
finance business. The increase in investment management revenues, commission and
other fees was primarily from timber property management fees and from private
equity funds. Benefits and expenses increased primarily on higher operating
expenses from timber property management activity.


                                       63
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      Total revenues increased $20.4 million, or 16.4%, from the prior year. Net
investment income increased $2.0 million, or 13.2%, to $17.1 million, primarily
from increases in equity method income of $3.8 on limited partnership energy
investments at John Hancock Energy Resources Management due to the required
adoption of fair value accounting at the limited partnerships offset by a
decrease of $1.3 million at John Hancock Real Estate Finance due to a lower
average level of warehoused commercial mortgages. Investment management
revenues, commissions, and other fees increased $7.0 million, or 6.5%, from the
prior year. Advisory fees at the Hancock Natural Resource Group increased $8.2
million, or 35.0%, primarily from property management revenue at the new
northwest property management division, which was established in December of
2002. One of the Hancock Natural Resource Group's strategies is to vertically
integrate its operations in the timber business and the establishment of the
northwest property management division is one of the steps taken to implement
that strategy. Mortgage origination and servicing fees at John Hancock Real
Estate Finance increased $1.4 million, or 21.2 %, from 2002 mostly from a higher
volume of loans generated for the Company's General Account and from higher
securitized assets under management. Advisory fees at the Company's Bond and
Corporate Finance Group increased by $1.1 million, or 7.7%, from increases of
$2.6 million from its general partnership investment in private equity funds and
a $1.0 million increase in fees on third party pension assets offset by $2.5
million in lower fees from CDO funds. Offsetting these increases, advisory fees
at the Company's institutional investment advisor, the Independence group of
companies (Independence), were down $3.3 million, or 6.0%. This decrease
reflects lower fees on lower average assets under management of $0.6 billion and
a shift from equity to fixed income assets which have lower fee rates and from
the closure of the managed accounts business. John Hancock Realty Advisors' fees
decreased $0.5 million, or 5.4%, reflecting lower acquisition fees based on
lower acquisition activity offset by higher management fees on higher assets
under management. Investment management revenues, commissions and other fees
were 0.41% and 0.39% of average advisory assets under management in 2003 and
2002, respectively, for the segment. Net realized investment and other gains
increased $10.3 million mainly from an improvement in net realized gains of $9.6
million at John Hancock Real Estate Finance, primarily due to higher
profitability on a higher volume of commercial mortgage securitizations.

      Other operating costs and expenses increased $6.1 million, or 6.7%, from
the prior year. Operating expenses were up $8.2 million at Hancock Natural
Resource Group, reflecting $4.3 million in increased expenses for the northwest
property management division and from an increase of $3.8 million in incentive
compensation expenses. Operating expenses at Independence increased $0.1
million, mostly from $1.6 million of higher personnel severance expenses and
$0.9 million in higher fixed income commission expenses offset by expense
savings primarily from ongoing expense management in 2003. John Hancock Real
Estate Finance had $0.4 million, or 4.3%, of lower operating expenses in 2003 on
lower interest expenses from lower average levels of borrowings on a lower
average level of warehoused commercial mortgages and from lower prevailing
interest rates. Operating expenses at John Hancock Realty Advisors declined $0.4
million, or 10.3%, reflecting lower acquisition activity. The segment's
effective tax rate on operating income was 37.9% compared to 37.1% in the prior
year. The effective tax rate for the Investment Management Segment remains
higher than for our other U.S. based business operating segments due to state
taxes on certain investment management subsidiaries, and reduced tax benefits
from portfolio holdings in this segment.

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 sale of investments at
John Hancock Energy Resource 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 Resource
Group, offset by increased operating expenses at Independence Investments LLC
due to higher compensation this year.

      Total 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 Resource 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


                                       64
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 of 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
Resource 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 effective tax rate for the Investment
Management Segment remains higher than for our other U.S.-based business
operating segments due to state taxes on certain investment management
subsidiaries, and reduced tax benefits from portfolio holdings in this segment.


                                       65
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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,
                                                                    2003         2002         2001
                                                                  ----------------------------------
                                                                            (in millions)
<S>                                                               <C>           <C>           <C>
Operating Results:
Segment after-tax operating income (loss) (1)
     International operations ..................................  $  8.6        $  7.4        $  3.5
     Corporate operations ......................................   (56.6)         32.3          42.7
     Non-core businesses .......................................     3.4           3.7           9.2
                                                                  ------        ------        ------
         Total .................................................   (44.6)         43.4          55.4

After-tax adjustments (1):
     Net realized investment and other gains (losses), net .....   215.6         (18.9)         16.6
     Class action lawsuit ......................................      --          (0.8)        (19.5)
     Restructuring charges .....................................      --           2.8          (1.3)
     Surplus tax ...............................................      --            --           0.8
                                                                  ------        ------        ------
         Total after-tax adjustments ...........................   215.6         (16.9)         (3.4)
                                                                  ------        ------        ------

GAAP Reported:
Income (loss) before cumulative effect of accounting changes ...   171.0          26.5          52.0
Cumulative effect of accounting changes, net of tax ............      --            --          (2.6)
                                                                  ------        ------        ------
Net income (loss) ..............................................  $171.0        $ 26.5        $ 49.4
                                                                  ======        ======        ======
</TABLE>

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

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      After-tax operating income from international operations increased $1.2
million or 16.2% from the prior year. The increase was due to a $2.2 million, or
28.9%, improvement in the earnings of our International Group Program due to
growth, higher earned retention income and currency gains. Partially offsetting
this increase was a decrease in results from our Indonesia subsidiary of $1.0
million.

      After-tax operating loss from corporate operations was $56.6 million, a
decrease of $88.9 million from the prior year. Investment income on corporate
surplus was $46.1 million lower due to increased surplus requirements from
growth in several of our capital intensive businesses. Group Life after-tax
operating income was $7.8 million lower, reflecting a sale of the Group Life
business to MetLife effective May 1, 2003. Other expense increases in our
corporate account were driven by a $32.0 million increase for net periodic
pension costs, $4.8 million increase for incentive compensation expense, $3.3
million in first year costs for information technology outsourcing, $1.8 million
for other post employment benefits and merger related expenses of $2.5 million.
This was partially offset by our corporate owned life insurance program which
increased $15.8 million as a result of an increase in the asset base and to
improved performance of the separate account assets involved in the program.

      After-tax operating income from non-core businesses decreased $0.3
million, or 8.1% from the prior year. We continue with the orderly run-off of
business in this segment.

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 Program.

      After-tax operating income from corporate operations decreased $10.4
million or 24.4% 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.


                                       66
<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.


                                       67
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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.

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

      John Hancock is able to hold to this investment strategy over the long
term, both because of its strong capital position, the fixed nature of its
liabilities and the matching of those liabilities with assets, and because of
the experience gained through many decades of a consistent investment
philosophy. We generally intend to hold all of our fixed maturity investments to
maturity to meet liability payments, and to ride out any unrealized gains and
losses over the long term. However, we do sell bonds under certain
circumstances, such as when new information causes us to change our assessment
of whether a bond will recover or perform according to its contractual terms, in
response to external events (such as a merger or a downgrade) that result in
investment guideline violations (such as single issuer or overall portfolio
credit quality limits), in response to extreme catastrophic events (such as
September 11, 2001) that result in industry or market wide disruption, or to
take advantage of tender offers.


                                       68
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


Overall Composition of the General Account

      Invested assets, excluding separate accounts, totaled $66.9 billion and
$60.6 billion as of December 31, 2003 and December 31, 2002, respectively.
Although the portfolio composition has not significantly changed at December 31,
2003 as compared to December 31, 2002, invested assets have grown 10.4% over the
year. The following table shows the composition of investments in the general
account portfolio.

<TABLE>
<CAPTION>
                                                   As of December 31,              As of December 31,
                                                          2003                            2002
                                             -----------------------------------------------------------
                                                Carrying          % of           Carrying         % of
                                                 Value           Total            Value           Total
                                             -----------------------------------------------------------
                                             (in millions)                   (in millions)
<S>                                           <C>                <C>             <C>              <C>
Fixed maturity securities (1)............     $47,970.8           71.7%          $43,773.3         72.3%
Mortgage loans (2).......................      10,871.1           16.3            10,296.5         17.0
Real estate..............................         123.8            0.2               255.3          0.4
Policy loans (3).........................       2,019.2            3.0             2,014.2          3.3
Equity securities........................         333.7            0.5               350.3          0.6
Other invested assets (4)................       2,912.2            4.4             2,839.1          4.7
Short-term investments...................          31.5            0.0               137.3          0.2
Cash and cash equivalents (5)............       2,626.9            3.9               897.0          1.5
                                             -----------------------------------------------------------
Total invested assets....................     $66,889.2          100.0%          $60,563.0        100.0%
                                             ===========================================================
</TABLE>

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $600.3 million and
      $590.2 million as of December 31, 2003 and December 31, 2002,
      respectively. The total fair value of the fixed maturity security
      portfolio was $47,994.9 million and $43,823.5 million at December 31, 2003
      and December 31, 2002, respectively.
(2)   The fair value for the mortgage loan portfolio was $11,791.4 million and
      $11,220.7 million as of December 31, 2003 and December 31, 2002,
      respectively.
(3)   Policy loans are secured by the cash value of the underlying life
      insurance policies and do not mature in a conventional sense, but expire
      in conjunction with the related policy liabilities.
(4)   Other invested assets as of December 31, 2002 contains a receivable of
      $471.1 million from Allmerica Financial Corporation pursuant to the
      Company's agreement to reinsure Allmerica's fixed universal life insurance
      business. 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 liabilities associated with the
Company's products, assets are heavily oriented toward fixed maturity
securities. The Company determines the allocation of assets primarily on the
basis of cash flow and return requirements of its products and by the level of
investment risk.

      Fixed Maturity Securities. The fixed maturity securities portfolio is
predominantly comprised of low risk, investment grade, publicly and privately
traded corporate bonds and senior tranches of asset-backed securities (ABS) and
mortgage-backed securities (MBS). The fixed maturity securities portfolio also
includes redeemable preferred stock. As of December 31, 2003, fixed maturity
securities represented 71.7% of general account invested assets with a carrying
value of $48.0 billion, comprised of 49.0% public securities and 51.0% private
securities. Each year, the Company directs the majority of net cash inflows into
investment grade fixed maturity securities. Typically, between 5% and 15% of
funds allocated to fixed maturity securities are invested in
below-investment-grade bonds while maintaining a policy to limit the overall
level of these bonds to no more than 10% of invested assets and the majority of
that balance in the BB category. The Company has established a two year target
of limiting investments in below investment grade bonds to 8% of invested assets
by 2005 for its U.S. life insurance companies on a statutory accounting basis.
Allocations are based on an assessment of relative value and the likelihood of
enhancing risk-adjusted portfolio returns. While the Company has profited from
the below-investment-grade asset class in the past, care is taken to manage its
growth strategically by limiting its size relative to the Company's total
assets.

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


                                       69
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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 following table shows the composition by credit quality of the fixed
maturity securities portfolio.

                 Fixed Maturity Securities -- By Credit Quality

<TABLE>
<CAPTION>
                                                    ---------------------------------------------------------
                                                                           As of December 31,
                                                                    2003                         2002
                                                    ---------------------------------------------------------
SVO                      S&P Equivalent                  Carrying        % of         Carrying         % of
Rating (1)               Designation (2)             Value (3)(4)(5)     Total     Value (3)(4)(5)     Total
-------------------------------------------------------------------------------------------------------------
                                                    (in millions)                 (in millions)
<S>          <C>                                        <C>              <C>          <C>             <C>
    1        AAA/AA/A............................       $19,612.6         41.4%       $17,565.5        40.7%
    2        BBB.................................        21,645.6         45.7         20,406.6        47.3
    3        BB..................................         2,953.2          6.2          2,574.9         6.0
    4        B...................................         1,919.4          4.1          1,240.3         2.8
    5        CCC and lower.......................           841.3          1.8            775.8         1.8
    6        In or near default..................           398.4          0.8            620.0         1.4
                                                    ---------------------------------------------------------
                    Subtotal.....................        47,370.5        100.0%        43,183.1       100.0%

                Redeemable preferred Stock.......           600.3                         590.2
                                                    ---------------------------------------------------------
             Total fixed maturities..............       $47,970.8                     $43,773.3
                                                    =========================================================
</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 175 securities that are awaiting an SVO rating, with a carrying
      value of $4,032.7 million as of December 31, 2003. Due to lags between the
      funding of an investment, the processing of final legal documents, the
      filing with the SVO, and the rating by the SVO, there will always be a
      number of unrated securities at each statement date.
(4)   Includes the effect of $130.0 million notional invested in the Company's
      credit-linked note program, $110.0 million notional of written credit
      default swaps on fixed maturity securities in the AAA/AA/A category and
      $20.0 million notional of written credit default swaps on fixed maturity
      securities in the BBB category. As of December 31, 2002 the Company had
      $55.0 million notional invested in the Company's credit linked program,
      $10.0 million notional of written credit default swaps on fixed maturity
      securities in the AAA/AA/A category and $45.0 million notional of written
      credit default swaps on fixed maturity securities in the BBB category.
(5)   The Company entered into a credit enhancement agreement in the form of a
      guaranty from a AAA rated financial guarantor in 1996. To reflect the
      impact of this guaranty on the overall portfolio, the Company has
      presented securities covered in aggregate by the guaranty at rating levels
      provided by the SVO and Moody's that reflect the guaranty. As a result,
      $421.0 million of SVO Rating 3, $185.2 million of SVO Rating 4, and $7.6
      million of SVO Rating 5 underlying securities are included as $397.6
      million of SVO Rating 1, $162.1 million of SVO Rating 2, and $54.1 million
      of SVO Rating 3 as of December 31, 2003 and $94.0 million of SVO Rating 2,
      $718.0 million of SVO Rating 3, and $141.3 million of SVO Rating 4
      underlying securities are included as $753.2 million of SVO Rating 1,
      $150.1 million of SVO Rating 2 and $50.0 million of SVO Rating 3 as of
      December 31, 2002. The guaranty also contains a provision that the
      guarantor can recover from the Company certain amounts paid over the
      history of the program in the event a payment is required under the
      guaranty. As of December 31, 2003 and December 31, 2002, the maximum
      amount that can be recovered under this provision was $112.8 million and
      $82.3 million, respectively.

      The table above sets forth the SVO ratings for the bond portfolio along
with an equivalent S&P rating agency designation. The majority of the fixed
maturity investments are investment grade, with 87.1% and 88.0% of fixed
maturity investments invested in Category 1 and 2 securities as of December 31,
2003 and 2002, respectively. Below investment grade bonds were 12.9% and 12.0%
of fixed maturity investments and 9.1% and 8.6% of total invested assets as of
December 31, 2003 and 2002, respectively. This allocation reflects the Company
strategy of avoiding the unpredictability of interest rate risk in favor of
relying on the Company's bond analysts' ability to better predict credit or
default risk. The bond analysts operate in an industry-based, team-oriented
structure that permits the evaluation of a wide range of below investment grade
offerings in a variety of industries resulting in a well-diversified high yield
portfolio.


                                       70
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      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. 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
Chief Investment Officer, the Chief Risk Officer, and the Bond Investment
Committee, including the Corporate Risk Officer who reports to the Chief
Financial Officer. The valuation of impaired bonds for which there is no quoted
price is typically based on the present value of the future cash flows expected
to be received. If the issuer is likely to continue operations, the estimate of
future cash flows is typically based on the expected operating cash flows of the
issuer that are available to make payments on the bonds. If the issuer is likely
to liquidate, the estimate of future cash flows is based on an estimate of the
liquidation value of its net assets.

      As of December 31, 2003 and 2002, respectively, 48.3% and 49.4% 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 $398.4 million and $620.0 million as of December 31, 2003 and 2002,
respectively. As of December 31, 2003 and 2002, $4.1 million and $10.7 million,
respectively, of interest on bonds near default were 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.

      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 its MBS/ABS portfolio subject to prepayment risk as of
December 31, 2003 and 2002 was limited to approximately 22.3% and 13.1%,
respectively of our total MBS/ABS portfolio and 3.4% and 2.3%, respectively, of
our total fixed maturity securities holdings, at each period end.

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.


                                       71
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


         Fixed Maturity Securities -- By Industry Classification/Sector

<TABLE>
<CAPTION>
                                                         Investment Grade as of December 31, 2003
                                    -----------------------------------------------------------------------------------
                                                                Carrying Value              Carrying Value
                                                                 of Securities               of Securities
                                                        Net       with Gross      Gross       with Gross       Gross
                                        Total        Unrealized   Unrealized    Unrealized    Unrealized    Unrealized
                                    Carrying Value  Gain (Loss)      Gains        Gains         Losses        Losses
                                    -----------------------------------------------------------------------------------
                                                                       (in millions)
<S>                                <C>             <C>             <C>           <C>           <C>           <C>
Corporate securities:
     Banking and finance .......   $ 6,198.6       $   359.1       $ 5,408.5     $   370.3     $   790.1     $   (11.2)
     Communications ............     2,795.5           230.8         2,390.1         239.8         405.4          (9.0)
     Government ................     3,151.1           132.7         2,112.2         140.0       1,038.9          (7.3)
     Manufacturing .............     6,199.1           381.3         5,194.4         411.9       1,004.7         (30.6)
     Oil & gas .................     3,827.5           342.3         3,660.0         347.9         167.5          (5.6)
     Services / trade ..........     2,351.1           170.4         2,222.8         174.3         128.3          (3.9)
     Transportation ............     2,252.9           104.8         1,713.1         138.9         539.8         (34.1)
     Utilities .................     6,943.5           503.7         6,182.4         528.2         761.1         (24.5)
     Other .....................          --              --              --            --            --            --
                                   ------------------------------------------------------------------------------------
   Total Corporate Securities ..    33,719.3         2,225.1        28,883.5       2,351.3       4,835.8        (126.2)

Asset-backed and mortgage-
    backed securities ..........     6,956.3           223.0         5,155.1         303.3       1,801.2         (80.3)
U.S. Treasury securities and
    obligations of U.S.
    government agencies ........       289.3             2.7           111.1           4.1         178.2          (1.4)
Debt securities issued by
    foreign Governments ........       244.9            20.2           147.0          21.4          97.9          (1.2)
Obligations of states and
    political Subdivisions .....       429.0            16.0           337.1          17.2          91.9          (1.2)
                                   ------------------------------------------------------------------------------------
     Total .....................   $41,638.8       $ 2,487.0       $34,633.8     $ 2,697.3     $ 7,005.0     $  (210.3)
                                   ====================================================================================

<CAPTION>
                                                      Below Investment Grade as of December 31, 2003
                                    ----------------------------------------------------------------------------------
                                                                Carrying Value              Carrying Value
                                                                 of Securities               of Securities
                                                        Net       with Gross      Gross       with Gross       Gross
                                        Total        Unrealized   Unrealized    Unrealized    Unrealized    Unrealized
                                    Carrying Value  Gain (Loss)      Gains        Gains         Losses        Losses
                                    ----------------------------------------------------------------------------------
                                                                       (in millions)
<S>                                <C>             <C>            <C>           <C>           <C>           <C>
Corporate securities:
     Banking and finance .......   $   113.4       $    (3.7)     $    84.3     $     2.6     $    29.1     $    (6.3)
     Communications ............       203.3             8.2          104.9          17.4          98.4          (9.2)
     Government ................        11.0            (0.4)           1.5           0.2           9.5          (0.6)
     Manufacturing .............     1,414.6            61.8          992.5          93.0         422.1         (31.2)
     Oil & gas .................       673.0           (31.7)         413.9          21.4         259.1         (53.1)
     Services / trade ..........       431.4            45.7          324.8          51.1         106.6          (5.4)
     Transportation ............       507.3           (14.4)         182.0          29.9         325.3         (44.3)
     Utilities .................     2,588.2           107.0        1,852.1         153.1         736.1         (46.1)
     Other .....................          --              --             --            --            --            --
                                   ----------------------------------------------------------------------------------
   Total Corporate Securities ..     5,942.2           172.5        3,956.0         368.7       1,986.2        (196.2)

Asset-backed and mortgage-
    backed securities ..........       380.4           (61.3)          47.0           2.2         333.4         (63.5)
U.S. Treasury securities and
    obligations of U.S.
    government agencies ........          --              --             --            --            --            --
Debt securities issued by
    foreign Governments ........         9.4             0.3            5.7           0.4           3.7          (0.1)
Obligations of states and
    political Subdivisions .....          --              --             --            --            --            --
                                   ----------------------------------------------------------------------------------
     Total .....................   $ 6,332.0       $   111.5      $ 4,008.7     $   371.3     $ 2,323.3     $  (259.8)
                                   ==================================================================================
</TABLE>


                                       72
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


         Fixed Maturity Securities -- By Industry Classification/Sector

<TABLE>
<CAPTION>
                                                         Investment Grade as of December 31, 2002
                                    ----------------------------------------------------------------------------------
                                                                Carrying Value              Carrying Value
                                                                 of Securities               of Securities
                                                        Net       with Gross      Gross       with Gross       Gross
                                        Total        Unrealized   Unrealized    Unrealized    Unrealized    Unrealized
                                    Carrying Value  Gain (Loss)      Gains        Gains         Losses        Losses
                                    ----------------------------------------------------------------------------------
                                                                       (in millions)
<S>                                 <C>             <C>           <C>           <C>           <C>           <C>
Corporate securities:
     Banking and finance .......    $ 5,425.7       $   232.3     $ 4,349.7     $   263.4     $ 1,076.0     $   (31.1)
     Communications ............      2,016.0           127.4       1,782.0         137.5         234.0         (10.1)
     Government ................      2,559.0           121.5       1,802.7         139.5         756.3         (18.0)
     Manufacturing .............      6,083.3           312.4       5,031.9         350.1       1,051.4         (37.7)
     Oil & gas .................      3,701.4           195.2       3,038.4         263.9         663.0         (68.7)
     Services/trade ............      2,093.9           105.2       1,839.2         118.0         254.7         (12.8)
     Transportation ............      2,262.1           111.3       1,854.9         140.0         407.2         (28.7)
     Utilities .................      6,352.2           153.5       4,748.9         315.6       1,603.3        (162.1)
     Other .....................           --              --            --            --            --            --
                                    ---------------------------------------------------------------------------------
   Total Corporate Securities ..     30,493.6         1,358.8      24,447.7       1,728.0       6,045.9        (369.2)

Asset-backed and mortgage-
    backed securities ..........      7,271.4           243.9       5,811.2         411.1       1,460.2        (167.2)
U.S. Treasury securities and
    obligations of U.S.
    government agencies ........        184.4             8.7         183.3           8.7           1.1            --
Debt securities issued by
    foreign Governments ........        313.5            35.8         313.5          35.8            --            --
Obligations of states and
    political Subdivisions .....        299.4            21.9         296.1          21.9           3.3            --
                                   ----------------------------------------------------------------------------------
     Total .....................    $38,562.3       $ 1,669.1     $31,051.8     $ 2,205.5     $ 7,510.5     $  (536.4)
                                   ==================================================================================

<CAPTION>
                                                      Below Investment Grade as of December 31, 2002
                                   ----------------------------------------------------------------------------------
                                                                Carrying Value              Carrying Value
                                                                 of Securities               of Securities
                                                       Net        with Gross      Gross       with Gross       Gross
                                       Total        Unrealized    Unrealized    Unrealized    Unrealized    Unrealized
                                   Carrying Value  Gain (Loss)       Gains        Gains         Losses        Losses
                                   ----------------------------------------------------------------------------------
                                                                       (in millions)
<S>                                <C>            <C>             <C>          <C>            <C>            <C>
Corporate securities:
     Banking and finance .......   $   43.3       $  (19.1)       $   12.0     $    0.6       $   31.3       $  (19.7)
     Communications ............      188.5          (41.0)           33.8          0.1          154.7          (41.1)
     Government ................       11.5           (0.8)            2.4          0.2            9.1           (1.0)
     Manufacturing .............    1,128.0         (110.0)          470.9         34.5          657.1         (144.5)
     Oil & gas .................      616.7         (110.2)          267.3         10.5          349.4         (120.7)
     Services/trade ............      328.6           13.7           249.4         17.4           79.2           (3.7)
     Transportation ............      478.4          (82.4)          189.5         18.2          288.9         (100.6)
     Utilities .................    2,130.1         (321.8)          677.8         38.4        1,452.3         (360.2)
     Other .....................        0.1             --              --           --            0.1             --
                                   ----------------------------------------------------------------------------------
   Total Corporate Securities ..    4,925.2         (671.6)        1,903.1        119.9        3,022.1         (791.5)

Asset-backed and mortgage-
    backed securities ..........      251.7         (105.9)           47.7          2.9          204.0         (108.8)
U.S. Treasury securities and
    obligations of U.S.
    government agencies ........         --             --              --           --             --             --
Debt securities issued by
    foreign Governments ........       11.5           (2.3)            3.4          0.2            8.1           (2.5)
Obligations of states and
    political Subdivisions .....       22.6            0.7            22.6          0.7             --             --
                                   ----------------------------------------------------------------------------------
     Total .....................   $5,211.0       $ (779.1)       $1,976.8     $  123.7       $3,234.2       $ (902.8)
                                   ==================================================================================
</TABLE>


                                       73
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      As of December 31, 2003, there were gross unrealized gains of $3,068.6
million and gross unrealized losses of $470.1 million on the fixed maturities
portfolio. As of December 31, 2003 gross unrealized losses of $470.1 million
include $413.3 million, or 87.9%, of gross unrealized losses concentrated in the
utilities, manufacturing, oil and gas, transportation, and asset-backed and
mortgage-backed securities. The tables above show gross unrealized losses before
amounts that are allocated to the closed block policyholders or participating
pension contractholders. Of the $470.1 million of gross unrealized losses in the
portfolio at December 31, 2003, $61.8 million was in the closed block and $20.2
million has been allocated to participating pension contractholders, leaving
$388.1 million of gross unrealized losses after such allocations.

      As of December 31, 2002, there were gross unrealized gains of $2,329.2
million, and gross unrealized losses of $1,439.2 million on the fixed maturities
portfolio. The 2002 gross unrealized losses of $1,439.2 million included
$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 were 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 million was in the closed block and $62.6 million was allocated to
participating pension contractholders, leaving $1,185.6 million of gross
unrealized losses after such allocations.

      Unrealized losses can be created by rising interest rates or by rising
credit concerns and hence widening credit spreads. Credit concerns are apt to
play a larger role in the unrealized loss on below investment grade bonds and
hence the gross unrealized loss on the portfolio has been split between
investment grade and below investment grade bonds in the above tables. The gross
unrealized loss on below investment grade fixed maturity securities declined
from $902.8 million at December 31, 2002 to $259.8 million at December 31, 2003
primarily due to the easing of credit concerns and the resulting spread
tightening.

      All sectors within the below investment grade portfolio saw a dramatic
drop in gross unrealized losses. Most notable was the drop in the gross
unrealized loss on the utility portfolio, from $360.2 million as of December 31,
2002 to $46.1 million as of December 31, 2003. While the excess capacity in this
sector will continue to pressure certain power regions and certain companies for
several years, the industry is in much better shape after a year of sharply
curtailed capital expenditures and general balance sheet strengthening.

      We remain most concerned about the airline sector. 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 $58.6 million and $180.1 million of
the $143.8 million and $276.0 million of gross unrealized loss in the
asset-backed and mortgage-backed securities category as of December 31, 2003 and
2002, respectively. While the airline industry is making positive strides in
reducing its cost structure, a significant recovery in this sector requires a
growing economy and a pick up in business travel. In the most recent quarter
ending December 31, 2003, most of the major carriers have reported improved
financial results. This trend is encouraging and we expect it to continue
barring any new terrorist events or a reversal of the course of the U.S.
economy. We continue to expect that the senior secured nature of our loans to
this industry will protect our holdings through this difficult time.

      The following table shows the composition by credit quality of the
securities with gross unrealized losses in our fixed maturity securities
portfolio. The gross unrealized loss on investment grade bonds (those rated in
categories 1 and 2 by the SVO) declined by $325.0 million in the twelve months
ending December 31, 2003 to $199.9 million. The gross unrealized loss on below
investment grade bonds (those rated in categories 3, 4, 5, and 6 by the SVO)
declined even more over this period, dropping by $643.6 million to a total of
$259.2 million as of December 31, 2003.


                                       74
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


          Unrealized Losses on Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                                   As of December 31, 2003
                                                ------------------------------------------------------------
                                                 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.........................        $4,631.6          50.8%      $ (93.4)          20.3%
    2        BBB..............................         2,168.2          23.8        (106.5)          23.2
    3        BB...............................           664.4           7.3         (74.4)          16.2
    4        B................................         1,068.3          11.7         (90.5)          19.7
    5        CCC and lower....................           441.5           4.8         (83.5)          18.2
    6        In or near default...............           146.7           1.6         (10.8)           2.4
                                                ------------------------------------------------------------
                   Subtotal...................         9,120.7         100.0%       (459.1)         100.0%

             Redeemable preferred stock.......           207.6                       (11.0)
                                                ------------------------------------------------------------
             Total............................        $9,328.3                     $(470.1)
                                                ============================================================
</TABLE>

(1)   With respect to securities that are awaiting rating, the Company has
      assigned a rating based on an analysis that it believes is equivalent to
      that used by the SVO.
(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.
(3)   Includes 58 securities with gross unrealized losses that are awaiting an
      SVO rating with a carrying value of $1,763.4 million and unrealized losses
      of $27.1 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 18.9% and 5.8% of the
      total carrying value and total gross unrealized losses of securities in a
      loss position, including redeemable preferred stock, respectively.

          Unrealized Losses on Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                                      As of December 31, 2002
                                                  ------------------------------------------------------------
                                                   Carrying Value of
                                                    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 Stock........             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.


                                       75
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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

<TABLE>
<CAPTION>
                                                               As of December 31, 2003
                                  ---------------------------------------------------------------------------------
                                                 Investment Grade                       Below Investment Grade
                                  ---------------------------------------  ----------------------------------------
                                   Carrying                                   Carrying
                                   Value of                                   Value 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 ..........   $1,793.1     $  (12.2)    $  (15.6)        $  247.8      $   (3.8)       $   (7.5)
Greater than three months to
     six months ...............    1,385.2         (5.6)       (27.0)           122.9          (1.8)           (1.1)
Greater than six months to
     nine months ..............      925.2         (1.0)       (32.6)           122.1          (2.5)          (10.8)
Greater than nine months to
     twelve months ............      207.4        (14.0)        (7.7)           191.6          (1.2)           (2.8)
Greater than twelve months ....    2,488.9        (43.7)       (40.5)         1,636.5         (60.1)         (167.6)
                                  ---------------------------------------  ----------------------------------------
     Total ....................    6,799.8        (76.5)      (123.4)         2,320.9         (69.4)         (189.8)
                                  ---------------------------------------  ----------------------------------------

Redeemable Preferred Stock ....      205.2           --        (10.4)             2.4            --            (0.6)
                                  ---------------------------------------  ----------------------------------------
     Total ....................   $7,005.0     $  (76.5)    $ (133.8)        $2,323.3      $  (69.4)       $ (190.4)
                                  =======================================  ========================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                    As of December 31, 2002
                                  ---------------------------------------------------------------------------------
                                                 Investment Grade                       Below Investment Grade
                                  ---------------------------------------  ----------------------------------------
                                   Carrying                                   Carrying
                                   Value of                                   Value 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 tables above show the Company's investment grade and below investment
grade securities that were in a loss position at December 31, 2003 and 2002 by
the amount of time the security has been in a loss position. Gross unrealized
losses from hedging adjustments represent the amount of the unrealized loss that
results from the security being designated as a hedged item in a fair value
hedge. When a security is so designated, its cost basis is adjusted in response
to movements in interest rates. These adjustments, which are non-cash and
reverse with the passage of time as the asset and derivative mature, impact the
amount of unrealized loss on a security. The remaining portion of the gross
unrealized loss represents the impact of interest rates on the non-hedged
portion of the portfolio and unrealized losses due to creditworthiness on the
total fixed maturity portfolio.

      As of December 31, 2003 and 2002, respectively, the fixed maturity
securities had a total gross unrealized loss of $324.2 million and $1,185.0
million, excluding basis adjustments related to hedging relationships. Of these
totals, $218.6 million and


                                       76
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


$870.1 million, respectively, are due to securities that have had various
amounts of unrealized loss for more than nine months. Of this, $48.2 million and
$271.7 million, respectively comes from securities rated investment grade.
Unrealized losses on investment grade securities principally relate to changes
in interest rates or changes in credit spreads since the securities were
acquired. Credit rating agencies statistics indicate that investment grade
securities have been found to be less likely to develop credit concerns.

      As of December 31, 2003 and 2002, $170.4 million and $598.4 million,
respectively, of the $324.2 million and $1,185.0 million resided in below
investment grade securities with various amounts of unrealized loss for over
nine months. At December 31, 2003, all of these securities were current as to
the payments of principal and interest with the exception of 2 securities with a
carrying value of $16.8 million and an unrealized loss of $18.3 million. Of the
total $170.4 million, $88.2 million traded above 80% of amortized cost at
December 31, 2003 and an additional $11.3 million traded above 80% of amortized
cost within the last nine months, for a total of $99.5 million. Of the total
$99.5 million, $58.1 million comes from airline related bonds, an industry that
continues to experience stress and hence has lagged the general recovery. While,
as described earlier, we expect the secured nature of our positions to protect
our value, the continued stress in this industry is of concern.

Unrealized Losses as of December 31, 2003

      As of December 31, 2003, the remaining portion of the unrealized loss,
$70.9 million, arises from below investment grade securities that have traded
below 80 percent of amortized cost for over nine months. All of these bonds,
with the exception of the 2 securities mentioned above, 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 expect full recovery of principal and interested on
the 2 securities on which interest is overdue. This interest was actually paid
to the trustee, but the investors chose to use these payments for expenses
related to protecting the collateral underlying the bonds rather than distribute
them. 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     $28.2 million from a structured investment based on oil and gas
            payments to an Argentine province. This transaction benefits from
            (1) rights to 80% of the royalty payments received by the province,
            (2) a six month debt service reserve located in the U.S., and (3) a
            political risk insurance policy from a major reinsurer that will
            take over payments in the event the government imposes transfer or
            currency conversion limitations. Currently, the major risk is that
            the local oil and gas companies are making payments to the province
            based on a fixed exchange rate rather than the market exchange rate.
            While the province is working to correct this, if it does not
            change, the coverages on the bond will suffer and should oil and gas
            prices drop, we may need to restructure our rights to royalty
            payments to extend beyond the maturity of our bond, so a
            restructuring would likely extend the term of our bond with
            interest.

      o     $26.6 million on five secured airline bonds: $17.6 million on senior
            tranche EETC's and $9.0 million on ETC's. The EETC's are backed by
            planes of an airline currently in bankruptcy. These EETC's however,
            are all current due to the 18 month liquidity facility with which to
            make interest payments and in all these positions, the total loan
            balance of the senior tranche is still less than the current
            appraised value of the underlying aircraft. Accordingly, we expect
            the market prices of these bonds to recover. The ETC's and the
            subordinated EETC are backed by planes of major US airline that we
            do not expect to file for bankruptcy and accordingly we expect these
            bonds to recover.

      o     $9.4 million on a fertilizer plant that sources its natural gas from
            PDVSA, the Venezuelan oil company. While the cost of the natural gas
            is very inexpensive, there are concerns about the reliability of the
            supply. Also, the plant experienced some start up operational
            difficulties that now appear to have been fixed. Additionally, its
            equity sponsors have supported the project with additional
            contributions of equity and based on our review of this credit we
            expect their continued support. Hence, we expect the price to
            continue to recover.

      o     $5.2 million on the bond of a major telecommunications company. A
            major portion of the value of this company is derived from its local
            exchange business. The company has taken steps to de-leverage and is
            expected to be in a positive cash flow position this year. As the
            company continues to reduce leverage through cost cutting and asset
            dispositions, we expect these securities to continue to recover in
            value.

      o     $1.2 million markdown of an asset backed security resulting from a
            bond being downgraded. The bankruptcy filing of the issuer/servicer
            of the bond has caused significant performance deterioration on the
            underlying collateral during December 2002 to June 2003. However,
            performance has improved gradually since the service reorganization
            which took place in June 2003.


                                       77
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      The Company's investment grade and below investment grade bonds trading at
less than 80% of amortized cost for more than one year amounted to $75.9 million
as of December 31, 2003.

      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, 2003 and 2002 are
shown below.

          Unrealized Losses on Fixed Maturity Securities -- By Maturity

<TABLE>
<CAPTION>
                                                  December 31, 2003              December 31, 2002
                                            ----------------------------    ----------------------------
                                             Carrying Value                 Carrying Value
                                             of Securities      Gross        of Securities       Gross
                                               with Gross     Unrealized      with Gross      Unrealized
                                            Unrealized Loss      Loss       Unrealized Loss      Loss
                                            ----------------------------    ----------------------------
                                                    (in millions)                  (in millions)

<S>                                         <C>                <C>          <C>                <C>
Due in one year or less .................   $   385.1          $   (11.5)   $   554.9          $   (35.5)
Due after one year through five years ...     1,487.0              (74.5)     2,473.7             (268.4)
Due after five years through ten years ..     1,916.7             (101.8)     2,478.4             (418.6)
Due after ten years .....................     3,404.8             (138.5)     3,573.5             (440.7)
                                            ----------------------------    ----------------------------
                                               7,193.6             (326.3)     9,080.5           (1,163.2)

Asset-backed and mortgage-backed
  Securities ............................     2,134.7             (143.8)     1,664.2             (276.0)
                                            ----------------------------    ----------------------------

Total ...................................   $ 9,328.3          $  (470.1)   $10,744.7          $(1,439.2)
                                            ============================    ============================
</TABLE>

      As of December 31, 2003 we had 59 securities representing 9 credit
exposures that had unrealized losses of $10 million or more. They include:

<TABLE>
<CAPTION>
Description of Issuer                                        Amortized Cost     Unrealized Loss
-----------------------------------------------------------------------------------------------
                                                                       (In Millions)

<S>                                                              <C>                <C>
Argentinean trust holding rights to oil and gas royalty ....     $   43.4           $  (28.2)
Notes secured by leases on a pool of aircraft ..............         35.1              (18.3)
Securitized investment of aircraft .........................        224.8              (17.8)
Secured financings to large US airline .....................        110.8              (15.6)
Venezuelan oil company with US dollar based flows ..........        152.4              (15.2)
Major US airline ...........................................        151.1              (10.6)
Major US airline ...........................................         73.9              (10.5)
Finance subsidiary of US paper/wood products manufacturer ..        215.5              (10.3)
Joint venture with a Venezuelan oil company ................         41.3               (9.8)

                                                                 --------           --------
       Total ...............................................     $1,048.3           $ (136.3)
</TABLE>

      Unrealized losses improved during the year ending December 31, 2003. As of
December 31, 2002, there were 76 securities, representing 35 credit exposures,
with an unrealized loss of $10 million or more with an amortized cost of
$2,287.6 million and unrealized loss of $694.9 million. The area of concern
continues to be the airline sector and it represents 5 names on this list. All
of the above securities have undergone thorough analysis by our investment
professionals, and at this time we believe that the borrowers have the financial
capacity to make all required contractual payments on the notes when due, and we
intend to hold these securities until they either mature or recover in value.

      Mortgage Loans. As of December 31, 2003 and 2002, the Company held
mortgage loans with carrying values of $10.9 billion and $10.3 billion,
including $3.0 billion and $2.6 billion respectively, of agricultural loans at
each period end and $7.9 billion and $7.7 billion, respectively, of commercial
loans. Impaired loans comprised 1.1% of the mortgage portfolio at December 31,
2003. The Company's average historical impaired loan percentage during the
period from 1998 through 2003 is


                                       78
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


1.2%. This historical percentage is higher than the current 1.1% because the
historical percentage includes some remaining problem assets of the 1990's real
estate downturn, some of which are still held.

      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,
                                  ----------------------------------------------------------------------------------
                                                   2003                                       2002
                                  -----------------------------------------  ---------------------------------------
                                  Amortized     Carrying      % of Total      Amortized    Carrying     % of Total
                                     Cost         Value     Carrying Value       Cost        Value    Carrying Value
                                  -----------------------------------------  ---------------------------------------
                                       (in millions)                               (in millions)
<S>                                <C>          <C>            <C>            <C>          <C>            <C>
Agri-business...................   $1,861.0     $1,860.6        61.5%         $1,526.8     $1,520.8        57.7%
Timber..........................    1,172.4      1,144.2        37.9           1,090.4      1,086.7        41.3
Production agriculture..........       18.9         18.9         0.6              25.3         25.1         1.0
                                  -----------------------------------------  ---------------------------------------
    Total ......................   $3,052.3     $3,023.7       100.0%         $2,642.5     $2,632.6       100.0%
                                  =========================================  =======================================
</TABLE>

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

                        Mortgage Loans - By Property Type

<TABLE>
<CAPTION>
                                                              As of December 31,
                                      ---------------------------------------------------------------
                                                   2003                               2002
                                      ---------------------------------------------------------------
                                        Carrying            % of           Carrying            % of
                                          Value            Total             Value            Total
                                      ---------------------------------------------------------------
                                      (in millions)                      (in millions)
<S>                                      <C>               <C>              <C>               <C>
Apartment..........................      $ 1,452.9          13.4%           $ 1,408.4          13.7%
Office Buildings...................        2,448.4          22.5              2,779.9          27.0
Retail.............................        2,083.6          19.2              1,779.3          17.3
Agricultural.......................        3,023.7          27.8              2,632.6          25.6
Industrial.........................          938.4           8.6                916.5           8.9
Hotels.............................          435.9           4.0                447.3           4.3
Multi-Family.......................            0.9           0.0                  1.4           0.0
Mixed Use..........................          284.3           2.6                155.2           1.5
Other..............................          203.0           1.9                175.9           1.7
                                      ---------------------------------------------------------------
     Total.........................      $10,871.1         100.0%           $10,296.5         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,
                           ----------------------------------------------------------------------
                                            2003                                  2002
                           ----------------------------------------------------------------------
                            Number       Carrying         % of          Carrying           % of
                           Of Loans        Value          Total           Value           Total
                           ----------------------------------------------------------------------
                                       (in millions)                  (in millions)
<S>                        <C>          <C>               <C>           <C>                <C>
East North Central.......    142        $ 1,117.8          10.3%        $ 1,102.0           10.7%
East South Central.......     39            411.9          3.8              430.5           4.2
Middle Atlantic..........    120          1,449.5         13.3            1,447.4          14.1
Mountain.................     91            507.6          4.7              488.5           4.7
New England..............    103            869.1          8.0              794.7           7.7
Pacific..................    274          2,371.2         21.8            2,134.5          20.7
South Atlantic...........    202          2,375.6         21.8            2,229.5          21.7
West North Central.......     69            434.5          4.0              450.5           4.4
West South Central.......    120          1,022.2          9.4              952.2           9.2
Canada...................     12            311.7          2.9              266.7           2.6
                           ----------------------------------------------------------------------
     Total...............  1,172        $10,871.1         100.0%        $10,296.5          100.0%
                           ======================================================================
</TABLE>


                                       79
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


                            Mortgage Loan Comparisons

<TABLE>
<CAPTION>
                                                                           As of December 31,
                                                  -----------------------------------------------------------------------
                                                               2003                                 2002
                                                  ----------------------------------  -----------------------------------
                                                     Carrying        % of Total           Carrying        % of Total
                                                      Value       Mortgage Loans (1)       Value       Mortgage Loans (1)
                                                  ----------------------------------  -----------------------------------
                                                  (in millions)                        (in millions)
<S>                                                      <C>              <C>                <C>               <C>
Delinquent, not in foreclosure..................         $ 0.2            0.0%               $  6.1            0.1%
Delinquent, in foreclosure (2)..................          92.7            0.8                  44.4            0.4
Restructured....................................          87.8            0.8                  54.8            0.5
Loans foreclosed during period..................          23.9            0.2                  25.8            0.3
Other loans with valuation allowance............           5.5            0.1                   5.5            0.1
                                                  -----------------------------------------------------------------------

   Total........................................         210.1            1.9                 136.6            1.4
                                                  =======================================================================

Valuation allowance.............................         $65.9            0.6%               $ 61.7            0.6%
                                                  =======================================================================
</TABLE>

(1)   As of December 31, 2003 and 2002 the Company held mortgage loans with
      carrying values of $10.9 billion and $10.3 billion, respectively.
(2)   Increase as of December 31, 2003 is from a U.S. based forest products
      company that filed for bankruptcy in June 2003.

      Valuation allowance is maintained at a level that is adequate to absorb
estimated probable credit losses. Management's periodic evaluation of the
adequacy of the allowance for losses is based on past experience, known and
inherent risks, adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated value of the
underlying security, the general composition of the portfolio, current economic
conditions and other factors. This evaluation is inherently subjective and is
susceptible to significant changes and no assurance can be given that the
allowances taken will in fact be adequate to cover all losses or that additional
valuation allowances or asset write-downs will not be required in the future.
The valuation allowance for the mortgage loan portfolio was $65.9 million, or
0.6% of the carrying value of the portfolio as of December 31, 2003.

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,
                                          --------------------------------------------------------------------------
                                                    2003                    2002                    2001
                                            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..........................     6.26%    $ 3,864.5      6.70%    $ 3,685.9       7.79%    $ 3,768.3
   Ending invested assets (1)-excluding
   policy loans..........................               64,870.0                58,548.9                 51,387.5
Policy loans
   Gross income..........................     6.10%        123.0      6.10%        120.1       6.20%        118.4
   Ending assets.........................                2,019.2                 2,014.2                  1,927.0
   Total gross income....................     6.26%      3,987.5      6.68%      3,806.0       7.73%      3,886.7
   Less: investment expenses.............                 (188.1)                 (225.0)                  (240.5)
                                                       ---------               ---------                ---------
     Net investment income...............     5.96%    $ 3,799.4      6.29%    $ 3,581.0       7.25%    $ 3,646.2
                                                       =========               =========                =========
</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.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      Net investment income increased $218.4 million from the prior year. The
increase was primarily the result of asset growth and lower investment expenses.
Overall, the 2003 yield, net of investment expenses, on the general account
portfolio decreased to 5.96% from 6.29% in the prior year. The lower portfolio
yield was driven primarily by the drop in short-term


                                       80
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


interest rates during the year, which impacts floating rate investments, and
lower yields on investment acquisitions. In summary, the change in yields was
driven by the following factors:

      o     As of December 31, 2003, the Company's asset portfolio had
            approximately $13 billion of floating-rate exposure (primarily
            LIBOR). This compares to $12 billion of exposure as of December 31,
            2002. This exposure was created mostly through interest rate swaps
            designed to match our floating-rate liability portfolio. As of
            December 31, 2003, approximately 88% of this exposure, excluding
            cash and short-term investments, was directly offset by exposure to
            floating-rate liabilities. Most of the remaining 12% 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 11 basis points in 2003 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 2003, this
            dilutive effect was 11 basis points, compared to 10 basis points in
            2002. However, adjusting for taxes, these investments increased the
            Company's net income by $7.6 million in 2003 relative to 2002.

      o     The inflow of new cash for the twelve-month period ending December
            31, 2003 was invested at rates that were below the portfolio rate.
            In addition, maturing assets rolling over into new investments at
            rates less favorable than those available in 2002. These two factors
            account for the majority of the remaining decline in portfolio
            rates.

      Partially offsetting the effects of these decreases to yields on
investments was an increase in invested assets and a reduction in investment
expenses. In 2003, weighted-average invested assets grew $6,787.3 million, or
11.9%, from the prior year. In addition, investment expenses were reduced $36.9
million in 2003 compared to the prior year. Included are reductions in corporate
complex expenses and in depreciation expenses associated with the sale of the
Company's Home Office real estate of $44.9 million.

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

      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 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 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.


                                       81
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      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>
                                                     Gross Gain    Gross Loss      Hedging      Net Realized Investment
For the Year Ended December 31, 2003     Impairment  on Disposal  on Disposal    Adjustments      and Other Gain/(Loss)
                                         ------------------------------------------------------------------------------
                                                                         (in millions)
<S>                                      <C>          <C>           <C>            <C>                   <C>
Fixed maturity securities ......         $ (515.1)    $  464.5      $  (95.3)      $ (246.9)             $ (392.8)
Equity securities ..............            (27.8)       101.1          (3.4)            --                  69.9
Mortgage loans on real estate ..               --         75.8         (40.9)         (63.7)                (28.8)
Real estate ....................               --        289.7         (16.8)            --                 272.9
Other invested assets ..........            (29.8)        25.2         (30.6)            --                 (35.2)
Derivatives ....................               --           --            --          116.4                 116.4
                                         ------------------------------------------------------------------------------
               Subtotal ........         $ (572.7)    $  956.3      $ (187.0)      $ (194.2)             $    2.4
                                         ==============================================================================

          Amortization adjustment for deferred policy acquisition costs......................                (6.1)
          Amounts credited to participating pension contractholders..........................                 3.4
          Amounts credited to the policyholder dividend obligation...........................                58.5
                                                                                                      --------------
               Total.........................................................................            $   58.2
                                                                                                      ==============
</TABLE>

(1)   Fixed maturities gain on disposals includes $90.3 million of gains from
      previously impaired securities.
(2)   Fixed maturities loss on disposals includes $28.8 million of credit
      related losses.

<TABLE>
<CAPTION>
                                                  Gross Gain    Gross Loss      Hedging    Net Realized 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)
                                                                                                    ============
</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 hedge. When an asset or liability is so
designated, its cost basis is adjusted in response to movement in interest rate.
These adjustments are non-cash and reverse with the passage of time as the asset
or liability and derivative mature. The hedging adjustments on the derivatives
represent non-cash adjustments on derivative instruments and on assets and
liabilities designated as hedged items reflecting the change in fair value of
those items.

      In 2003, net realized investment and other gains was a gain of $58.2
million and gross losses on impairments and on disposal of investments -
including bonds, equities, real estate, mortgages and other invested assets was
$759.7 million, excluding hedging adjustments.

      In 2003, we realized $464.5 million of gains on disposal of fixed
maturities excluding hedging adjustments. These gains resulted from managing our
portfolios for tax optimization and ongoing portfolio repositioning, and
included $59.8 million of prepayments and approximately $90.3 million from
recoveries on sales of previously impaired securities.


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      In 2003, we realized $95.3 million of losses upon disposal of bonds
excluding hedging adjustments. We generally intend to hold securities in
unrealized loss positions until they mature or recover. However, we do sell
bonds under certain circumstances such as when new information causes us to
change our assessment of whether a bond will recover or perform according to its
contractual terms, in response to external events (such as a merger or a
downgrade) that result in investment guideline violations (such as single issuer
or overall portfolio credit quality limits), in response to extreme catastrophic
events (such as September 11, 2001) that result in industry or market wide
disruption, or to take advantage of tender offers. Sales generate both gains and
losses.

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

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

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

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

      As disclosed in our discussion of the Results of Operations in this MD&A,
the Company recorded losses due to other than temporary impairments of fixed
maturity securities for the year 2003 of $539.2 million (including impairment
losses of $515.1 million, and $24.1 million of previously recognized gains where
the bond was part of a hedging relationship). The following list shows the
largest losses recognized year to date, the related circumstances giving rise to
the loss and a discussion of how those circumstances impacted other material
investments held. Unless noted otherwise, all of the items shown are impairments
of securities held at December 31, 2003, including hedging adjustments.

      o     $113.2 million on public and private fixed maturity securities
            (including an impairment loss of $112.7 million and $0.5 million in
            previously recognized gains where the bonds were part of a hedging
            relationship) on an international dairy company headquartered in
            Italy. The company filed for bankruptcy in December after 4 billion
            euros of liquid investments were declared non-existent by a major
            U.S. financial institution. The current carrying value of the
            securities is $20.3 million with most of our holdings were written
            down to a year-end quoted value of 15 cents on the dollar.

      o     $37.7 million (including an impairment loss of $37.3 million and
            $0.4 million in previously recognized gains where the bonds were
            part of a hedging relationship) on public fixed maturity securities
            relating to a large, national farmer-owned dairy co-operative.
            Margins have been squeezed due to a supply/demand imbalance, high
            input costs and high leverage, due in part to a recent acquisition.
            Despite a large favorable outcome on a lawsuit, depressed commodity
            prices in this environment have continued to put pressure on the
            company to rationalize their operations as was evident in their
            recently released annual financial statements. Given our
            subordinated position in the capital structure, and unlikely
            improvement near term, we have impaired the security to the market
            level. We have no other loans to dairy companies that are impacted
            by this same combination of factors. We have recovered $10.7 million
            on subsequent sales of this security.


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                       JOHN HANCOCK LIFE INSURANCE COMPANY


      o     $36.8 million on private fixed maturity securities (including an
            impairment loss of $31.7 million and $5.1 million in previously
            recognized gains where the bond was part of a hedging relationship)
            on a toll road where a new competing road has decreased the traffic
            on the toll road and hence the project has been unable to service
            its debt. We have no other holdings affected by this situation.

      o     $36.1 million on private and public fixed maturity securities
            (including an impairment loss of $34.6 million and $1.5 million in
            previously recognized gains where the bond was part of a hedging
            relationship) secured by aircraft leased by a large U.S. airline.
            This airline is seeking to reduce its lease rates as a small part of
            its larger efforts to reduce costs and emerge from bankruptcy. These
            impairments are based on public quoted prices for the public
            securities and the appraised values of the aircraft in conjunction
            with the expected restructured lease rates on the private
            securities. While we hold other investments in the aircraft
            industry, these circumstances are unique to this issuer.

      o     $29.8 million on private fixed maturity securities relating to an
            Australian mining company. The company filed the equivalent of
            Chapter 11 due to weaker commodity prices, operational difficulties,
            and losses on currency transactions. Attempts to sell assets at
            prices sufficient to pay our debt have not been successful. As a
            result, the investment has been written off entirely. While lower
            commodity prices affect a broad range of credits, the unique
            circumstances of this company are not present in our other
            investments.

      o     $27.3 million on public fixed maturity securities relating to a
            large North American transportation provider to a variety of
            industries that has struggled to emerge from bankruptcy due to
            litigation with a subsidiary, tax claims by the IRS, and most
            recently, a claim by a regulatory agency. We had further impaired
            the security and the reorganization out of bankruptcy has occurred.
            These circumstances are unique to this issuer. We have recovered
            $26.4 million on subsequent sales of this security.

      o     $26.3 million (including an impairment loss of $23.2 million and
            $3.1 million in previously recognized gains where the bonds were
            part of a hedging relationship) on public fixed maturity securities
            relating to a special purpose company created to sublease aircraft
            to two major US airlines. This investment is the subordinated
            tranche in a multi-tier structure of an Enhanced Equipment Trust
            Certificate (EETC). One of the airlines has recently indicated that
            it will not honor the original lease rates on the aircraft in this
            investment. Hence, with the loan exceeding the current value of the
            securities, we have impaired the security to the market level. While
            we do have an investment in the senior tranche of this EETC, the
            senior tranche exposure is still less than the current market value
            of the underlying planes and the senior tranche enjoys an 18 month
            liquidity facility. Accordingly, we do not anticipate a loss on the
            senior tranche.

      o     $25.2 million on private fixed maturities of a holding company
            structure created to develop three natural gas fired power projects
            in the southwestern United States that were initiated to respond to
            the California power crisis. The subsequent drop in power demand and
            prices made this company's business plan uneconomic. Negotiations
            with the company to restructure the debt and create a stronger
            entity have lead to further impairments in our security. We have one
            other $50 million loan to a power company that similarly began
            construction on a new plant to sell power into California. It has
            successfully redeployed its turbines elsewhere and we do not expect
            a loss on that position.

      o     $21.6 million (including an impairment loss of $19.2 million and
            $2.4 million in previously recognized gains where the bond was part
            of a hedging relationship) on public fixed maturity securities
            relating to an asset backed pool of franchise loans primarily
            focused in the gas/convenience store sector. The sector has
            continued to be hit hard by higher delinquencies and lower
            recoveries on the underlying loans. Modeling under EITF 99-20 with
            higher delinquencies and lower recovery values has led to further
            impairments on these securities. We have $134.8 million of other
            exposure to franchise loan ABS, all of which are senior tranches.

      o     $14.2 million on public fixed maturity securities relating to a
            subordinated holding company structure comprised of ownership
            interests in three power generation facilities in the western US.
            Due to the severe overcapacity in the power markets and the lack of
            an off take provider for the potential power generated from the
            plants, this subordinated interest in the facilities was not
            refinanced and we wrote off the investment completely. The
            overcapacity in the power markets has put stress on all power
            producers as we discuss in our sector commentary.

      o     $11.1 million on private fixed maturity securities on a Chilean
            based conglomerate. Attempts to renegotiate the agreement have not
            materialized and the likelihood of receiving any recovery is remote.
            We have completely


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            written off the investment. The circumstances surrounding this
            investment are unique as the borrower has demonstrated a lack of
            willingness to repay the debt on this investment.

      o     $11.0 million on public fixed maturity securities (including an
            impairment loss of $9.2 million and $1.8 million in previously
            recognized gains where the bond was part of a hedging relationship)
            of a utility brought into the bankruptcy of its parent that suffered
            from a significant amount of merchant energy exposure. Our bonds are
            secured by a pump storage facility. We have $55.2 million carrying
            value of bonds at the parent that were already impaired in a prior
            quarter.

      o     $11.0 million on private fixed maturity securities secured by
            aircraft leased by a large U.S. airline. This airline is seeking to
            reduce its lease rates as a small part of its larger efforts to
            reduce costs to avoid bankruptcy. This impairment is based on the
            expected reduction in the lease rates. We have $72.5 million of
            other ETC's backed by leases to this airline. The airline has not
            requested a change in the lease rates on the aircraft backing these
            investments. While we hold other investments in the airline industry
            and the industry has been under extreme pressure as discussed above,
            these issues are unique to this borrower.

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

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

      o     $9.4 million on public fixed maturity securities relating to a
            special purpose financing company which owns an interest in a gas
            fired power plant in the UK with long-term fixed price contracts
            that are significantly above market in today's depressed pricing
            environment. In early 2003, the banks decided to pursue a fire sale
            of the power plant. We have impaired this loan to the discounted
            value of our likely recovery from such a sale. We have two other
            loans with a total carrying value of $103.8 million to companies
            participating in the UK power market. $63.9 million is backed by a
            UK pump storage facility investment where debt service coverage has
            been reduced by the weak environment for power in the U.K., but we
            continue to anticipate positive debt service coverage for this
            investment. $39.9 million is a loan to the owner of a UK regional
            electric company. Regional electric companies have monopolies to
            distribute and supply power to their regions and as a result, are
            less affected by the over supply of power.

      Of the $95.3 million of realized losses on sales of fixed maturity
securities for the year 2003, $28.8 million was credit related and $50.3 million
arose from the sale of 16 securities with $1.0 million or more of realized loss.
The only significant realized losses for 2003, were $16.7 million on the sale of
the bonds of a major healthcare service provider (late in the first quarter, the
SEC announced that they had discovered massive accounting fraud at that company
and thus its bond and stock prices plummeted; due to this significant event and
the uncertainty over the future of the company due to the ongoing SEC
investigation, we sold our position), and $4.9 million on the sale of bonds of a
power provider with a large exposure to the merchant energy markets. As we
became more concerned that the banks would not renew their bank lines to this
company, we sold most of our position and impaired the remaining position that
was subsequently sold in early July. These were the only sales of significance
that we consider credit losses (i.e. sold at less than 80% of amortized cost).
All other sales were related to general portfolio management, including the sale
of a number of below investment grade bonds to maintain our exposure below 10%
of invested assets on a statutory basis. The following are the losses on sales
over $1.0 million:

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

      o     $5.5 million on the sale of public bonds of a utility holding
            company where our position exceeded our single credit limits due to
            a downgrade of the company. This sale brought our holdings of this
            company in compliance within our limits.

      o     $4.9 million credit loss on the sale of public bonds of a power
            provider referred to in the above paragraph.


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                       JOHN HANCOCK LIFE INSURANCE COMPANY


      o     $3.1 million on the sale of public bonds of an oil and gas company's
            bonds. This position was sold to reduce below investment grade
            exposure.

      o     $2.9 million credit loss on the sale of public bonds of a merchant
            energy producer. When this company announced it had broken off talks
            with its banks on a line coming due in the next month, we sold these
            bonds.

      o     $2.3 million on the sale of the senior tranche of a commercial
            mortgage backed security. The loss is due to a rise in interest
            rates since the time of purchase.

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

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

      o     $2.1 million on the sale of public bonds of a large U.S. based bank.
            The loss was entirely due to a rise in Treasury rates since the time
            of purchase.

      o     $1.8 million on the sale of public bonds of an oil and gas
            exploration and production company. The loss is due to a rise in
            interest rates since the time of purchase.

      o     $1.4 million credit loss on the sale of MBS/CMO of an aircraft lease
            trust. This loss was due to a downgrade by the rating agencies,
            which led to a supply/demand imbalance.

      o     $1.2 million on the sale of bonds of a public power provider with
            merchant exposure due to our concern over whether the banks would
            renew their lines.

      o     $1.1 million on the sale of public bonds of a gas pipeline company.
            The loss is due to a rise in interest rates since the time of
            purchase.

      o     $1.0 million on the sale of public bonds of another power provider
            with a significant exposure to the merchant energy markets and our
            concern over their ability to renew their bank lines.

      o     $1.0 million on the sale of public bonds of a large, European
            telecom company. The loss is due to a rise in interest rates since
            the time of purchase.

      o     $1.0 million on the sale of public bonds of a large, domestic
            telecom company. The loss is due to a rise in interest rates since
            the time of purchase.

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

      The Company recorded losses due to other than temporary impairments of CDO
equity and other invested assets of $29.8 million for the year 2003. Equity in
these CDO's take the first loss risk in a pool of high yield debt and hence
under perform in a high yield default environment. These impairments were
recognized using the guidance in EITF 99-20. We have a total remaining carrying
value of $60.0 million and $48.7 million of CDO equity as of December 31, 2003
and December 31, 2002, respectively, which is currently supported by expected
cash flows.

      The Company also recognized losses on other than temporary impairments of
common stock of $27.8 million for the year 2003, as the result of market values
falling below cost by greater than 15% for more than six months.

      The Company recorded a net loss of $28.8 million on mortgage loans for the
year 2003 (of which $63.7 million were losses on hedging adjustments). Included
are losses of $29.7 million for the year 2003, associated with agricultural
mortgages.

       There were also gains of $101.1 million on the sale of equity securities
as part of our overall investment strategy of using equity gains to minimize
credit losses in the long term, gains of $25.2 million from the sale of other
invested assets, and gains of $289.7 million resulting from the sale of real
estate for the year 2003. Net derivative activity resulted in a gain


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                       JOHN HANCOCK LIFE INSURANCE COMPANY


of $116.4 million for the year 2003, resulting from a slightly larger impact
from interest rate changes on the Company's fair value of hedged and non-hedged
items in comparison to the changes in fair value of its derivatives.

      For the year 2002, net realized investment and other losses were $450.5
million. Gross losses on impairments and on disposal of investments - including
bonds, equities, mortgages, real estate, and other invested assets were $842.8
million, excluding hedging adjustments.

      The Company recorded losses due to other than temporary impairments of
fixed maturities of $565.9 million for the year 2002, excluding hedging
adjustments. The primary other than temporary impairments on fixed maturities
for the year ended December 31, 2002 were $113.2 million 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 , $56.1 million on a large energy company that filed for bankruptcy in
late 2001, $48.0 million on secured financings backed by an airline, or its
subsidiaries, that filed for Chapter 11 bankruptcy protection during the third
quarter of 2002, $45.5 million on securities issued by the holding company of a
large domestic power producer that was downgraded to below investment grade
status in July 2002 due to liquidity concerns, $35.3 million on issuers
affiliated with the Argentina government and other investments in that country,
$33.8 million on securities issued by a large telecommunications company that
filed for bankruptcy in July, 2002, $33.5 million on fixed maturity securities
for a unregulated power and pipeline energy company, $31.6 million of fixed
maturity investments of U.K. based projects providing power and other essential
services to an industrial complex, $28.3 million on fixed maturity securities
relating to an oil field service company, $24.8 million on a redeemable
preferred stock of a large domestic farm cooperative due to the cyclical nature
of the business and a heavy debt load, $19.2 million on redeemable preferred
stock of a technology based manufacturer of engineering products with a tight
liquidity position, $19.0 million on securities of an Australian power project
that failed to produce benefits expected from the deregulation of that country's
power industry, $16.9 million on securities issued by a Mexican producer of
corrugated boxes and newsprint, $13.6 million on securities of a diversified
producer of single-use, specialty medical products, and $9.9 million on
subordinated private placement securities funding a toll road between the U.S.
and Mexico. Writedowns of CBO/CDO fixed maturity investments and other invested
assets were $61.3 million for the year ended December 31, 2002.

Liquidity and Capital Resources

      Liquidity describes the ability of a company to generate sufficient cash
flows to meet the immediate capital needs to facilitate business operations. The
assets of the Company consist of a diversified investment portfolio and
investments in operating subsidiaries. The Company's cash flow consists
primarily of premiums, deposits, investment income, results of its operating
subsidiaries and proceeds from the Company's debt offerings offset by benefits
paid to contractholders, operating expenses, policyholder dividends to its
participating policyholders and shareholder dividends to it parent company. All
of the outstanding common stock of John Hancock Life Insurance Company is owned
by its Parent, an insurance holding company, John Hancock Financial Services,
Inc.

     State insurance laws generally restrict the ability of insurance companies
to pay cash dividends in excess of prescribed limitations without prior
approval. The Company's limit is the greater of 10% of the statutory surplus at
prior year-end or the prior calendar year's statutory net gain from operations
of the Company. 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. The Company currently does not expect such
regulatory requirements to impair its ability to meet its liquidity and capital
needs. During 2003, the Company paid $214.5 million in dividends to its parent,
JHFS.

      Sources of cash for the Company include premiums, deposits and charges on
policies and contracts, investment income, maturing investments, and proceeds
from sales of investment assets. In addition to the need for cash flow to meet
operating expenses, our liquidity requirements relate principally to the
liabilities associated with various life insurance, annuity, and structured
investment products, and to the funding of investments in new products,
processes, and technologies. 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.

      In June, August and December 2003, the Commissioner of Insurance for the
Commonwealth of Massachusetts approved, and the Company paid, dividends to JHFS
in the amount of $100.0 million, $14.5 million and $100.0 million, respectively.
$100.0 million of the dividend payments were cash transfers, the second $100.0
million was not paid in cash in 2003 but was an accounts payable at year end,
and the remaining $14.5 million represents a property transfer of the First
Signature Bank to


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                       JOHN HANCOCK LIFE INSURANCE COMPANY


the Holding Company. None of these dividends were classified as extraordinary by
state regulators.

      As noted above, on September 28, 2003, JHFS entered into a definitive
merger agreement with Manulife. Until the closing of the transaction, the
Company will continue to operate independently and does not expect the proposed
merger to have a negative impact on financial condition, liquidity or sales.
Following the announcement of the proposed merger, Standard and Poor's, Moody's,
A.M. Best and Fitch affirmed all ratings. In addition, Standard & Poor's noted
that "the `A' long-term counterparty credit and senior debt ratings on John
Hancock Financial Services, Inc., a holding company for its U.S. and Canadian
operating insurance companies, have been placed on CreditWatch with positive
implications." Dominion Bond Rating Service placed John Hancock Financial
Services' corporate rating of A (high).

      The liquidity of our insurance operations is also related to the overall
quality of our investments. As of December 31, 2003, $41,258.2 million, or 87.1%
of the fixed maturity securities held by us and rated by Standard & Poor's
Ratings Services, (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
$6,112.3 million, or 12.9% 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.

      Analysis of Consolidated Statement of Cash Flows

      Net cash provided by operating activities was $2,842.4 million, $2,466.6
million and $2,774.9 million for the years ended December 31, 2003, 2002 and
2001, respectively. Cash flows from operating activities are affected by the
timing of premiums received, fees received and investment income. The $375.8
million increase in 2003 as compared to 2002 is largely attributable to an
increase in investment income received of $353.9, a decrease in policyholder
benefits of $339.9 million, and a smaller decrease in other assets net of other
liabilities of $109.0 million, partially offset by an increase in operating
expenses of $179.0 million and an increase in income taxes paid of $341.1
million. 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 $80.4 million and an increase in income taxes paid of
$101.8 million, partially offset by a decrease in policyholder benefits of
$281.5 million.

      Net cash used in investing activities was $2,968.6 million, $6,212.6
million and $6,551.1 million for the years ended December 31, 2003, 2002, and
2001, 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 $3,244.0 million decrease in cash used in 2003 as compared to
2002 resulted primarily from an $887.6 million cash inflow from the sale of Home
Office properties in the first quarter of 2003 and a $2,335.6 million reduction
in net acquisitions of fixed maturities during the year ended December 31, 2003
as compared to prior year. 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.


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                       JOHN HANCOCK LIFE INSURANCE COMPANY


     Net cash provided by financing activities was $1,856.1 million, $3,617.7
million and $1,835.2 million, for the years ended December 31, 2003, 2002 and
2001, 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
$1,761.6 million decrease in net cash provided by financing activities for 2003
as compared to 2002 was driven by a decrease in deposits and an increase in cash
payments made on withdrawals of universal life insurance and investment-type
contracts totaling $2,783.0 million, somewhat offset by a $970.0 million
increase in funds from the issuance of consumer notes, a program initiated in
the second half of 2002. Deposits on such universal life insurance and
investment-type contracts exceeded withdrawals by $711.0 million and $3,494.0
million for 2003 and 2002, respectively. The Company's ability to generate
customer deposits in excess of withdrawals is critical to our long-term growth.
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.

      Lines of Credit, Debt and Guarantees

      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 25, 2003) 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, 2003, we had $713.4 million of principal and interest
amounts of debt outstanding consisting of $447.6 million of surplus notes, and
$265.8 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 JHFS 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, 2003.

      Insurance Company Customer Accounts

      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,
                                                                 ------------------------------------------------
                                                                           2003                    2002
                                                                 ------------------------------------------------
                                                                    Amount         %         Amount        %
                                                                 ------------------------------------------------
                                                                 (in millions)            (in millions)
<S>                                                                 <C>           <C>        <C>          <C>
Not subject to discretionary withdrawal provisions...........       $28,263.1      56.1%     $28,854.2     59.3%
Subject to discretionary withdrawal adjustment:
     With market value adjustment............................         1,226.2       2.4%         837.8      1.7%
     At contract value.......................................         2,920.2       5.8%       2,535.8      5.2%
     At fair value / market value............................        11,195.0      22.2%      10,972.4     22.6%
Subject to discretionary withdrawal at contract value
     less surrender charge...................................         6,809.4      13.5%       5,455.6     11.2%
                                                                 ------------------------------------------------
Total annuity reserves and deposit funds liability...........       $50,413.9     100.0%     $48,655.8    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 any
withdrawals, whether at book value or at market value, 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. The Company does not sell
contracts with put provisions.

      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, 2003, we had approximately $20.8 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, 2003.

      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, 2003, were above the ranges


                                       89
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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.

      Off Balance Sheet Arrangements

      The Company has relationships with a number of entities which are not
consolidated into the Company's consolidated financial statements. These
entities include qualified special purpose entities (QSPEs) and other special
purpose entities. In the course of some of its business the Company transfers
assets to, and in some cases, retains interests in QSPEs. The Company may also
purchase interests in QSPEs on the open market.

      The Company's primary use of QSPEs arises in its commercial mortgage
banking subsidiary. The Company's commercial mortgage banking subsidiary
originates commercial mortgages and sells them to QSPEs which then issues
mortgage backed securities (MBS). The Company engages in this activity to earn
fees during the origination process, and to generate realized gains during the
securitization process. The Company may purchase MBS from the QSPEs created in
its commercial mortgage banking subsidiary to generate net investment income.
The majority of the Company's MBS portfolio was purchased from unrelated QSPEs.

      These QSPEs and other special purpose entities also include CDO funds we
manage and may also invest in, which are considered variable interest entities
and are discussed in detail in Note 4 - Relationships with Variable Interest
Entities to our consolidated financial statements. The Company generates fee
income from the CDO funds we manage, and generates net investment income from
CDOs we invest in, whether we manage them or not.

      The Company receives Federal income tax benefits from certain investments
made through variable interest entities.

      These arrangements also include credit and collateral support agreements
with FNMA and FHMLC, through which the Company securitized some of its mortgage
investments, which provided a potential source of liquidity to the Company.
These agreements are described in detail in Note 13 - Commitments, Guarantees
and Contingencies to our consolidated financial statements.

      The Company's risk of loss from these entities is limited to its
investment in them. Consolidation of unconsolidated accounts from these entities
would inflate the Company's balance sheet but would not be reflective of
additional risk in these entities. In each, there are no potential liabilities
which might arise in the future as a result of these relationships that would
not be completely satisfied by the assets of that entity.

      Contractual Obligations

      The following table summarizes the Company's information about contractual
obligations by due date as of December 31, 2003. 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,
2003.


                                       90
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


                 Contractual Obligations as of December 31, 2003

<TABLE>
<CAPTION>
                                                                     Less than
  Payments due under contractual obligations by period      Total      1 year   1-3 years   4-5 years  After 5 years
--------------------------------------------------------------------------------------------------------------------
                                                                             (in millions)
<S>                                                      <C>        <C>         <C>         <C>          <C>
Debt ........................................            $   618.9  $   104.0   $    45.2   $    14.7    $   455.0
Consumer notes ..............................              2,833.0       82.7       457.9       242.2      2,050.2
GIC's .......................................              5,636.6    1,763.6     2,200.3       684.4        988.3
Funding agreements ..........................             14,055.8    2,266.5     6,634.5     3,192.7      1,962.1
Institutional structured settlements ........              2,248.8       19.7        48.7        53.2      2,127.2
Annuity certain contracts ...................              1,298.7      145.8       417.0       210.0        525.9
Investment commitments ......................              2,111.9    2,111.9          --          --           --
Operating lease obligations .................                838.5       98.5       192.0       151.6        396.4
Other long-term obligations .................                376.2       33.4       205.0        81.1         56.7
                                                         -----------------------------------------------------------
      Total payments due under contractual
         obligations--by period .............            $30,018.4  $ 6,626.1   $10,200.6   $ 4,629.9    $ 8,561.8
                                                         ===========================================================
</TABLE>

      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.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

Capital Markets Risk Management

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


                                       91
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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.

      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, 2003 and 2002, 87.1% and 88.0% of the fixed maturity
securities held by the Company and rated by S&P or NAIC were investment grade
securities while 12.9% and 12.0% were 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, F.A., 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


                                       92
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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, 2003 and 2002, the fair value of
fixed maturity securities and mortgage loans supporting duration managed
liabilities was approximately $33,637.5 million and $31,645.9 million,
respectively. Based on the information and assumptions we use in our duration
calculations in effect as of December 31, 2003, we estimate that a 100 basis
point immediate, parallel increase in interest rates ("rate shock") would have
no effect on the net fair value, or surplus, of our duration managed assets and
liabilities based on our targeted mismatch of zero, but could be -/+ $ 16.8
million based on our operational tolerance of +/- 18 days.

      The risk management method for non-guaranteed rate products, such as whole
life insurance or single premium deferred annuities, is less formulaic, but more
complex, due to the less predictable nature of the liability cash flows. For
these products, we manage interest rate risk based on scenario-based portfolio
modeling that seeks to identify the most appropriate investment strategy given
probable policyholder behavior and liability crediting needs under a wide range
of interest rate environments. As of December 31, 2003 and 2002, the fair value
of fixed maturity securities and mortgage loans supporting liabilities managed
under this modeling was approximately $ 31,048.6 million and $28,003.8 million,
respectively. A rate shock (as defined above) as of December 31, 2003 would
decrease the fair value of these assets by $ 1,170.0 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.

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.

      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, 2003. The notional amounts in the table
represent the basis on which pay or receive amounts are calculated and are not
reflective of credit risk. These 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.


                                       93
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


<TABLE>
<CAPTION>
                                                              As of December 31, 2003
                                        --------------------------------------------------------------------
                                                                                   Fair Value
                                                                    ----------------------------------------
                                                       Weighted-     -100 Basis                  +100 Basis
                                        Notional     Average Term       Point        As of         Point
                                         Amount         (Years)      Change (2)     12/31/03     Change (2)
                                        --------------------------------------------------------------------
                                                  (in millions, except for Weighted-Average Term)
<S>                                      <C>              <C>             <C>       <C>            <C>
Interest rate swaps................      $28,952.6        12.4             (8.1)    $(447.9)       (754.6)
CMT swaps..........................           33.4         0.9              0.8         0.8           0.8
Futures contracts (1)..............          173.8         7.9              9.3        (0.1)        (10.3)
Interest rate caps.................          835.4         5.3             12.5        27.1          47.4
Interest rate floors...............        4,107.6         6.4            125.2        63.4          29.6
Swaptions..........................           30.0        21.4             (5.6)       (2.6)         (0.9)
                                        ------------                ----------------------------------------
     Totals........................      $34,132.8        11.4            134.1     $(359.3)       (688.0)
                                        ============                ========================================
</TABLE>

(1)   Represents the notional value on open contracts as of December 31, 2003.
(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) 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, 2003,
the fair value of our common stock portfolio was $ 78.5 million. The fair value
of our equity collar agreements as of December 31, 2003 was $ 1.9 million. A
hypothetical 15% decline in the December 31, 2003 value of the equity securities
would result in an unrealized loss of approximately $ 9.4 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 group programs 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, 2003, the fair value of our foreign currency
denominated fixed maturity securities was approximately $ 945.1 million. The
fair value of our currency swap agreements at December 31, 2003 supporting
foreign denominated bonds was $(225.8) million.

      We estimate that as of December 31, 2003, a modeled 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.


                                       94
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      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.

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.

ITEM 9A. Controls and Procedures

An evaluation was carried out under the supervision and with the participation
of the Company's management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934,
as amended). Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures were
effective as of the end of the period covered by this report.

No change in the Company's internal control over financial reporting (as defined
in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended) occurred
during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.

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. Principal Accountant Fees and Services

      Ernst & Young LLP has been selected by the JHFS Board to audit the
consolidated financial statements of JHFS and its subsidiaries, including the
Company, for fiscal year 2004.

      The following table sets forth the approximate aggregate fees billed by
Ernst & Young for professional services in 2003 and 2002 on behalf of JHFS and
its subsidiaries, a significant but unallocated portion of which are
attributable to services related to the Company:

                                                      2003               2002
                                                  -----------         ----------
Audit Fees (1)                                    $10,378,348         $7,144,461
Audit-Related Fees (2)                              1,982,891          1,182,077
Tax Fees (3)                                          417,800          1,754,400
All Other Fees (4)                                     15,000                 --


                                       95
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


----------
(1)   The fees in this category were for professional services rendered in
      connection with (i) the audit of the Company's annual financial statements
      set forth in the Company's Annual Report on Form 10-K, (ii) the review of
      the Company's quarterly financial statements set forth in the Company's
      Quarterly Reports on Form 10-Q, (iii) audits of the Company's subsidiaries
      and separate accounts that are required by statute or regulation, and (iv)
      services that generally only the Company's independent auditors reasonably
      can provide, such as comfort letters, consents and agreed upon procedures
      reports.
(2)   The fees in this category were for professional services rendered in
      connection with (i) consultations concerning financial accounting and
      reporting standards, (ii) internal control reviews, (iii) assistance
      provided in evaluating the Company's exposure to certain reinsurance
      arrangements, and (iv) assistance provided in the review of other
      auditors' work papers in connection with merger due diligence.
(3)   The fees in this category were for professional services rendered in
      connection with tax strategy assistance and tax compliance services.
(4)   The fees in this category were for professional services rendered in
      connection with assistance provided related to an actuarial model and
      process.

The Audit Committee's Policy regarding Pre-Approval of Audit and Non-Audit
Services requires that all services provided by the Company's Independent
Auditor be pre-approved by the Committee. Pursuant to that Policy, the Chair of
the Audit Committee is authorized to act on behalf of the Committee with respect
to requests for pre-approval of services to be provided by the Independent
Auditor other than the annual audit engagement services. The Chair is to report
on any such approvals at the next regularly-scheduled Committee meeting.

PART IV

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

      (a) Documents filed as part of this report.

      1. Financial Statements

            Report of Ernst & Young LLP, Independent Auditors
            Consolidated Financial Statements
                  Balance Sheets
                  Statements of Income
                  Statements of Changes in Shareholders' Equity and
                     Comprehensive Income
                  Statements of Cash Flows
                  Notes to Consolidated Financial Statements

      2. Financial Statement Schedules

            Schedule I--Summary of Investments--Other Than Investments in
                        Related Parties
            Schedule III--Supplementary Insurance Information
            Schedule IV--Reinsurance

      Note: All other financial statement schedules are omitted because they are
inapplicable.


                                       96
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


      3. Exhibits.

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

2.1         Plan of Reorganization (1)

2.1.1       Agreement and Plan of Merger, dated as of September 28, 2003, by and
            among Manulife Financial Corporation, John Hancock Financial
            Services, Inc. and Jupiter Merger Corporation, a Delaware
            corporation and a direct wholly-owned subsidiary of Manulife
            ("Merger Co.") (2)

2.2         Purchase and Sale Agreement between John Hancock Life Insurance
            Company, as seller, and Beacon Capital Strategic Partners, as
            purchaser, for the sale of certain John Hancock home office
            properties. (3)

3.1         Restated Articles of Organization and Articles of Amendment of John
            Hancock Life Insurance Company (16)

3.2         Amended and Restated By-Laws of John Hancock Life Insurance Company
            (As Adopted on February 11, 2002) (4)

10.1        Third Amendment dated as of July 25, 2003 to the $1,000,000,000
            Credit Agreement dated as of August 3, 2000, as amended, among John
            Hancock Financial Services, Inc., John Hancock Life Insurance
            Company, The Banks listed therein, Fleet National Bank, as
            Co-Administrative Agent, JPMorgan Chase Bank, as Co-Administrative
            Agent, Citicorp USA, Inc., as Syndication Agent, The Bank of New
            York, as Documentation Agent (364-Day Revolver) and Wachovia Bank,
            National Association as Documentation Agent (364-Day Revolver),
            Fleet Securities, Inc., and J.P. Morgan Securities, Inc., as Joint
            Bookrunners and Joint Lead Arrangers (5)

10.1.1      Employment Continuation Agreement between John Hancock Life
            Insurance Company, John Hancock Financial Services, Inc. and James
            M. Benson dated April 1, 2003 (11) +

10.1.2      Amendment No. 1, dated September 28, 2003, to the Employment
            Continuation Agreement dated April 1, 2003 by and among John Hancock
            Life Insurance Company, John Hancock Financial Services, Inc., James
            M. Benson and Manulife Financial Corporation. (12) +

10.2        Amendment No. 1, dated September 28, 2003, to the Employment
            Continuation Agreement dated October 15, 2001 by and among John
            Hancock Life Insurance Company, John Hancock Financial Services,
            Inc., Michael A. Bell and Manulife Financial Corporation. (6) +

10.2.1      Employment Continuation Agreement between John Hancock Life
            Insurance Company, John Hancock Financial Services, Inc. and Michael
            A. Bell. (7) +

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. (7) +

10.2.2.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and Thomas E.
            Moloney. (3) +

10.2.2.2    Amendment No. 1, dated September 28, 2003, to the Second Amended and
            Restated Employment Continuation Agreement dated October 15, 2001 by
            and among John Hancock Life Insurance Company, John Hancock
            Financial Services, Inc., Thomas E. Moloney and Manulife Financial
            Corporation. (15) +

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. (7) +

10.2.3.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and David F.
            D'Alessandro. (8) +

10.2.3.2    Amendment No. 1, dated September 28, 2003, to the Second Amended and
            Restated Employment Continuation Agreement dated October 15, 2001 by
            and among John Hancock Life Insurance Company, John Hancock
            Financial Services, Inc., David F. D'Alessandro and Manulife
            Financial Corporation. (14) +


                                       97
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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

10.2.4      Second Amended and Restated Employment Continuation Agreement
            between John Hancock Life Insurance Company, John Hancock Financial
            Services, Inc. and Derek Chilvers. (7) +

10.2.4.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and Derek Chilvers.
            (8) +

10.2.5      Second Amended and Restated Employment Continuation Agreement
            between John Hancock Life Insurance Company, John Hancock Financial
            Services, Inc. and Maureen Ford. (7) +

10.2.5.1    Amended and Restated Employment Continuation Agreement between John
            Hancock Life Insurance Company, John Hancock Financial Services,
            Inc. and Maureen Ford dated April 1, 2003. (3) +

10.2.5.2    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and Maureen Ford
            dated April 1, 2003. (3) +

10.2.6      Second Amended and Restated Employment Continuation Agreement
            between John Hancock Life Insurance Company, John Hancock Financial
            Services, Inc. and Robert Walters. (7) +

10.2.6.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and Robert Walters
            (3) +

10.2.7      Amended and Restated Employment Continuation Agreement between John
            Hancock Life Insurance Company, John Hancock Financial Services,
            Inc. and John M. DeCiccio. (7) +

10.2.7.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and John M. DeCiccio.
            (8) +

10.2.8      Amended and Restated Employment Continuation Agreement between John
            Hancock Life Insurance Company, John Hancock Financial Services,
            Inc. and Wayne A. Budd, dated January 1, 2003. (8) +

10.2.8.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and Wayne A. Budd (3)
            +

10.2.8.2    Amendment No. 1, dated September 28, 2003, to the Amended and
            Restated Employment Continuation Agreement dated January 1, 2003 by
            and among John Hancock Life Insurance Company, John Hancock
            Financial Services, Inc., Wayne A. Budd and Manulife Financial
            Corporation. (13) +

10.2.9      Amended and Restated Employment Continuation Agreement between John
            Hancock Life Insurance Company, John Hancock Financial Services,
            Inc. and Deborah H. McAneny. (8) +

10.2.9.1    Executive Employment Agreement between John Hancock Life Insurance
            Company, John Hancock Financial Services, Inc. and Deborah H.
            McAneny (3) +

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 (1)

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 (1)

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 (1)

10.6        Coinsurance Agreement, dated as of March 1, 1997 by and between John
            Hancock Mutual Life Insurance Company and UNICARE Life & Health
            Insurance Company (1)

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.
            (1)

10.8        Long-Term Incentive Plan for Senior Executives (as Amended and
            Restated Effective February 6, 2003). (8) +

10.9        Incentive Compensation Plan for Certain Senior Executives (as
            Amended and Restated Effective February 6, 2003) (8) +


                                       98
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


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

10.10       Form of Shareholder Rights Agreement. (1)

10.11       1999 Long-Term Stock Incentive Plan (As Amended and Restated as of
            May 14, 2001) (9) +

10.13       Deferred Compensation Plan for Non-Employee Directors. (8) +

10.14       Non-Employee Directors' Long-Term Stock Incentive Plan. (8) +

10.15       Deferred Compensation Plan for Executives. (8) +

10.16       Deferred Equity Rights Program for Non-Employee Directors. (8) +

23.1        Consent of Ernst & Young LLP (10)

31.1        Chief Executive Officer Certification Pursuant to Rules 13a-14 and
            15d-14 of the Securities Exchange Act of 1934. (10)

31.2        Chief Financial Officer Certification Pursuant to Rules 13a-14 and
            15d-14 of the Securities Exchange Act of 1934. (10)

32.1        Chief Executive Officer certification pursuant to 18 U.S.C. Section
            1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
            (10)

32.2        Chief Financial Officer certification pursuant to 18 U.S.C. Section
            1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
            (10)

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 (except no payment will be required for the
financial statements and schedules included in Exhibit 13 if not included). Such
requests should be directed to John Hancock Financial Services, Inc., Investor
Relations, John Hancock Place, Post Office Box 111, Boston, Massachusetts 02117.

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

(1)   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.
(2)   Previously filed as an exhibit to John Hancock Financial Services, Inc.'s
      current report on Form 8-K filed with the Securities and Exchange
      Commission on October 1, 2003, and incorporated by reference herein.
(3)   Previously filed as an exhibit to John Hancock Financial Services, Inc.'s
      quarterly report on Form 10-Q for the quarter ended March 31, 2003, and
      incorporated by reference herein
(4)   Previously filed as an exhibit to John Hancock Life Insurance Company's
      annual report on Form 10-K for the year ended December 31, 2001, and
      incorporated by reference herein.
(5)   Previously filed as an exhibit to John Hancock Financial Services, Inc.'s
      quarterly report on Form 10-Q for the quarter ended June 30, 2003, and
      incorporated by reference herein.
(6)   Previously filed as an exhibit to John Hancock Financial Services, Inc.'s
      quarterly report on Form 10-Q for the quarter ended September 30, 2003,
      and incorporated by reference herein.
(7)   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.
(8)   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.
(9)   Previously filed with John Hancock Financial Services, Inc. definitive
      proxy statement for the 2001 annual meeting of shareholders, and
      incorporated by reference herein.
(10)  Filed herewith.
(11)  Previously filed as exhibit 10.2 to John Hancock Financial Services,
      Inc.'s quarterly report on Form 10-Q for the quarter ended June 30, 2003,
      and incorporated by reference herein.
(12)  Previously filed as exhibit 10.3 to John Hancock Financial Services,
      Inc.'s quarterly report on Form 10-Q for the quarter ended September 30,
      2003, and incorporated by reference herein.


                                       99
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


(13)  Previously filed as exhibit 10.4 to John Hancock Financial Services,
      Inc.'s quarterly report on Form 10-Q for the quarter ended September 30,
      2003, and incorporated by reference herein.
(14)  Previously filed as exhibit 10.5 to John Hancock Financial Services,
      Inc.'s quarterly report on Form 10-Q for the quarter ended September 30,
      2003, and incorporated by reference herein.
(15)  Previously filed as exhibit 10.6 to John Hancock Financial Services,
      Inc.'s quarterly report on Form 10-Q for the quarter ended September 30,
      2003, and incorporated by reference herein.
(16)  Previously filed as an exhibit to John Hancock Life Insurance Company's
      annual report on Form 10-K for the year ended December 31, 2000, and
      incorporated by reference herein.

+     Management contract or compensatory plan or arrangement.


                                      100
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


(b) Reports on Form 8-K.

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

On October 1, 2003, the Company filed a Current Report on Form 8-K dated
September 28, 2003, reporting under Item 5 thereof John Hancock Financial
Services Inc. (JHFS) entered into an Agreement and Plan of Merger, dated as of
September 28, 2003, by and among Manulife Financial Corporation, John Hancock
and Jupiter Merger Corporation, a subsidiary of Manulife. JHFS is the Company's
parent and sole shareholder.

On October 31, 2003, the Company filed a Current Report on Form 8-K, dated
October 30, 2003, reporting under Item 5 thereof John Hancock Financial
Services, Inc. (JHFS) operating and financial results for the third quarter of
2003. JHFS is the Company's parent and sole shareholder.


                                      101
<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, 2003 and 2002.................F-3

Consolidated Statements of Income for the Years Ended
      December 31, 2003, 2002 and 2001.......................................F-5

Consolidated Statements of Changes in Shareholder's Equity
      and Comprehensive Income for the Years Ended December 31,
      2003, 2002 and 2001....................................................F-6

Consolidated Statements of Cash Flows for the Years Ended
      December 31, 2003, 2002 and 2001.......................................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 as of December 31, 2003 and 2002, 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, 2003. 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, 2003 and 2002, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2003, 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 financial statements, in 2003 the Company changed
its method of accounting for stock-based compensation, participating pension
contracts and modified coinsurance contracts. 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 for derivatives.


                                                           /s/ ERNST & YOUNG LLP

Boston, Massachusetts
February 25, 2004


                                       F-2
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                           CONSOLIDATED BALANCE SHEETS

                                                                December 31,
                                                             2003        2002
                                                           ---------------------
                                                               (in millions)

Assets

Investments - Notes 3 and 5
Fixed maturities:
     Held-to-maturity--at amortized cost
     (fair value: 2003--$1,512.8; 2002--$1,777.2) ......   $ 1,488.7   $ 1,727.0
     Available-for-sale--at fair value
     (cost: 2003--$43,907.7; 2002--$41,206.5) ..........    46,482.1    42,046.3
Equity securities:
     Available-for-sale--at fair value
     (cost: 2003--$249.9; 2002--$307.5) ................       333.1       349.6
     Trading securities--at fair value
     (cost: 2003--$0.1; 2002--$0.3) ....................         0.6         0.7
Mortgage loans on real estate ..........................    10,871.1    10,296.5
Real estate ............................................       123.8       255.3
Policy loans ...........................................     2,019.2     2,014.2
Short-term investments .................................        31.5       137.3
Other invested assets ..................................     2,912.2     2,839.1
                                                           ---------   ---------

     Total Investments .................................    64,262.3    59,666.0

Cash and cash equivalents ..............................     2,626.9       897.0
Accrued investment income ..............................       700.5       743.2
Premiums and accounts receivable .......................       104.1       114.1
Deferred policy acquisition costs ......................     3,420.7     3,352.6
Reinsurance recoverable - Note 11 ......................     2,677.3     2,958.9
Other assets ...........................................     2,786.9     2,660.3
Separate account assets ................................    19,369.6    17,414.9
                                                           ---------   ---------

     Total Assets ......................................   $95,948.3   $87,807.0
                                                           =========   =========

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,
                                                             2003        2002
                                                           ---------------------
                                                              (in millions)

Liabilities and Shareholder's Equity

Liabilities
Future policy benefits .................................   $38,451.0   $34,233.8
Policyholders' funds ...................................    21,693.5    22,571.0
Consumer notes - Note 8 ................................     1,550.4       290.2
Unearned revenue .......................................       406.9       368.9
Unpaid claims and claim expense reserves ...............       166.5       160.7
Dividends payable to policyholders .....................       440.0       463.0
Short-term debt - Note 8 ...............................       104.0        99.5
Long-term debt - Note 8 ................................       609.4       703.9
Income taxes - Note 6 ..................................     1,534.1       925.0
Other liabilities ......................................     4,034.9     4,397.3
Separate account liabilities ...........................    19,369.6    17,414.9
                                                           ---------   ---------

         Total Liabilities .............................    88,360.3    81,628.2

Minority interest - Note 10 ............................         5.1         7.3

Commitments and contingencies - Note 13

Shareholder's Equity - Note 14
Common stock, $10,000 par value; 1,000 shares
     authorized and outstanding ........................        10.0        10.0
Additional paid in capital .............................     4,763.2     4,763.2
Retained earnings ......................................     1,332.1       956.1
Accumulated other comprehensive income .................     1,477.6       442.2
                                                           ---------   ---------
         Total Shareholder's Equity ....................     7,582.9     6,171.5
                                                           ---------   ---------

         Total Liabilities and Shareholder's Equity ....   $95,948.3   $87,807.0
                                                           =========   =========

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,
                                                                       2003       2002        2001
                                                                    --------------------------------
                                                                              (in millions)
<S>                                                                 <C>         <C>         <C>
Revenues
     Premiums ...................................................   $2,039.4    $1,984.2    $2,351.9
     Universal life and investment-type product charges .........      639.2       606.0       600.8
     Net investment income - Note 3 .............................    3,799.4     3,581.0     3,646.2
     Net realized investment and other gains (losses),
         net of related amortization of deferred policy
         acquisition costs, amounts Credited to
         participating pension contractholders and the
         policyholder dividend obligation ($(55.8),
         $(74.1) and $(4.1), respectively) - Notes 1, 3 and 12 ..       58.2      (450.5)     (245.8)
     Investment management revenues, commissions and
         other fees .............................................      500.0       530.6       606.6
     Other revenue ..............................................      269.9       241.5       185.8
                                                                    --------    --------    --------
         Total revenues .........................................    7,306.1     6,492.8     7,145.5

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 ($(61.9), $(35.2) and $25.3,
         respectively) - Notes 1, 3 and 12 ......................    3,849.2     3,805.2     4,328.1
     Other operating costs and expenses .........................    1,406.0     1,250.5     1,249.3
     Amortization of deferred policy acquisition costs,
         excluding amounts related to net realized
         investment and other gains (losses)($6.1, $(38.9)
         and $(29.4), respectively) - Notes 1, 3 and 12 .........      298.3       313.4       249.0
     Dividends to policyholders .................................      537.8       556.2       551.7
                                                                    --------    --------    --------
         Total benefits and expenses ............................    6,091.3     5,925.3     6,378.1

Income before income taxes and cumulative effect of
     accounting changes .........................................    1,214.8       567.5       767.4

Income taxes - Note 6 ...........................................      345.3       108.6       200.7
                                                                    --------    --------    --------

Income before cumulative effect of accounting changes ...........      869.5       458.9       566.7

Cumulative effect of accounting changes, net of
         income tax - Note 1 ....................................     (279.0)         --         7.2
                                                                    --------    --------    --------

Net income ......................................................   $  590.5    $  458.9    $  573.9
                                                                    ========    ========    ========
</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, 2001 ......................   $  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
                                                    =============================================================================

   Comprehensive income:
     Net income .................................                            590.5                        590.5

     Other comprehensive income, net of tax:
       Net unrealized investment gains ..........                                         919.7           919.7
       Foreign currency translation adjustment ..                                          (0.1)           (0.1)
       Minimum pension liability ................                                         (15.8)          (15.8)
       Cash flow hedges .........................                                          31.7            31.7
                                                                                                       ---------
   Comprehensive income .........................                                                       1,526.0

   Dividends paid to parent company .............                           (214.5)                      (214.5)
   Change is accounting principle ...............                                          99.9            99.9

                                                    -----------------------------------------------------------------------------
Balance at December 31, 2003 ....................   $  10.0    $4,763.2   $1,332.1     $1,477.6        $7,582.9           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,
                                                                            2003          2002          2001
                                                                         --------------------------------------
                                                                                     (in millions)
<S>                                                                      <C>           <C>           <C>
Cash flows from operating activities:
     Net income ......................................................   $    590.5    $    458.9    $    573.9
         Adjustments to reconcile net income to net cash
         provided by operating activities:
              Amortization of discount - fixed maturities ............         17.8         (78.3)       (134.0)
              Net realized investment and other (gains) losses .......        (58.2)        450.5         245.8
              Change in accounting principles ........................        279.0            --          (7.2)
              Change in deferred policy acquisition costs ............       (227.7)       (194.1)       (204.0)
              Depreciation and amortization ..........................         42.4          47.4          72.1
              Net cash flows from trading securities .................          0.1           0.7           0.2
              Decrease (increase) in accrued investment income .......         42.7           2.7         (46.5)
              Decrease in premiums and accounts
                  receivable .........................................         10.0           3.1          11.8
              Increase in other assets and other liabilities, net ....       (199.4)       (308.4)       (252.1)
              Increase in policy liabilities and accruals, net .......      2,452.3       2,086.8       2,323.7
              Increase (decrease) in income taxes ....................       (107.1)         (2.7)        191.2
                                                                         ----------    ----------    ----------

                  Net cash provided by operating activities ..........      2,842.4       2,466.6       2,774.9

Cash flows used in investing activities:
     Sales of:
         Fixed maturities available-for-sale .........................     11,064.6       4,897.1      16,058.9
         Equity securities available-for-sale ........................        279.4         316.4         614.6
         Real estate .................................................        164.4         127.7          53.8
         Short-term investments and other invested assets ............        500.0         458.7         113.4
         Home office properties ......................................        887.6            --            --
     Maturities, prepayments and scheduled redemptions of:
         Fixed maturities held-to-maturity ...........................        227.5         214.2         241.8
         Fixed maturities available-for-sale .........................      3,375.7       2,720.1       3,087.0
         Short-term investments and other invested assets ............        155.3         149.3         168.4
         Mortgage loans on real estate ...............................      1,395.0       1,520.6       1,342.0
     Purchases of:
         Fixed maturities held-to-maturity ...........................        (69.5)        (27.6)        (66.7)
         Fixed maturities available-for-sale .........................    (17,443.6)    (12,984.7)    (26,321.9)
         Equity securities available-for-sale ........................        (90.9)        (90.9)       (285.8)
         Real estate .................................................        (33.4)         (8.1)        (52.8)
         Short-term investments and other invested assets ............     (1,127.7)     (1,369.2)       (448.5)
     Mortgage loans on real estate issued ............................     (2,092.6)     (2,036.5)     (1,204.5)
     Net cash (paid) received related to acquisition of businesses ...         93.7            --         (28.2)
     Net cash paid related to sale of businesses .....................       (188.4)           --            --
     Other, net ......................................................        (65.7)        (99.7)        177.4
                                                                         ----------    ----------    ----------

              Net cash used in investing activities ..................   $ (2,968.6)   $ (6,212.6)   $ (6,551.1)
</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,
                                                                        2003         2002        2001
                                                                     -----------------------------------
                                                                                (in millions)
<S>                                                                  <C>          <C>          <C>
Cash flows from financing activities:
     Dividend paid to parent company .............................   $  (100.0)   $  (111.0)   $  (250.0)
     Universal life and investment-type contract deposits ........     7,681.5      8,999.4     10,520.3
     Universal life and investment-type contract maturities and
         withdrawals .............................................    (6,970.5)    (5,505.4)    (8,271.8)
     Issuance of consumer notes ..................................     1,260.2        290.2           --
     Issuance of short-term debt .................................       148.9         92.8        105.4
     Issuance of long-term debt ..................................          --         20.0          6.5
     Repayment of short-tem debt .................................      (158.0)      (110.6)       (23.0)
     Repayment of long-term debt .................................        (6.0)       (57.7)       (29.9)
     Net decrease in commercial paper ............................          --           --       (222.3)
                                                                     ---------    ---------    ---------

     Net cash provided by financing activities ...................     1,856.1      3,617.7      1,835.2
                                                                     ---------    ---------    ---------

     Net increase (decrease) in cash and cash equivalents ........     1,729.9       (128.3)    (1,941.0)

Cash and cash equivalents at beginning of year ...................       897.0      1,025.3      2,966.3
                                                                     ---------    ---------    ---------

Cash and cash equivalents at end of year .........................   $ 2,626.9    $   897.0    $ 1,025.3
                                                                     =========    =========    =========
</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), is a diversified financial
services organization that provides a broad range of insurance and investment
products and investment management and advisory services. The Company is a
wholly owned subsidiary of John Hancock Financial Services (JHFS).

On September 28, 2003, JHFS entered into a definitive merger agreement with
Manulife Financial Corporation (Manulife) which is expected to close early in
the second quarter of 2004. In accordance with the agreement, each share of JHFS
common stock will, at the time of the merger, be converted into the right to
receive 1.1853 shares of Manulife stock. It is estimated that the shares of
Manulife common stock to be issued to JHFS shareholders in the merger will
represent approximately 42.6% of the outstanding Manulife common stock after the
merger. The merger has been approved by JHFS' shareholders but the closing of
the merger remains subject to certain conditions, including the approval by
certain U.S. and Canadian regulatory authorities. Until the merger occurs, the
Company will continue to operate independently of Manulife. Thereafter, the
Company will operate as a subsidiary of Manulife. The John Hancock name will be
Manulife's primary U.S. brand. This Form 10-K does not reflect or assume any
changes to JHFS', or the Company's, business which may occur as a result of the
proposed merger with Manulife. For additional information, refer to JHFS and
other related public filings with the U.S. SEC relating to the merger.

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. All of the Company's United States Securities and Exchange Commission
filings are available on the internet at www.sec.gov, under the name Hancock
John Life.                               -----------

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. 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. Other entities in which the Company has a less than
controlling financial interest, whether variable interest entities (VIEs) or
not, are accounted for under guidance appropriate to each relationship, whether
the Company invests in their debt or equity securities, issues funding
agreements to them, manages them as investment advisor, or performs other
transactions with them or provides services for them. Please refer to the Recent
Accounting Pronouncements section below for a discussion of new accounting
guidance relative to 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 Acquisition / Disposal Activity

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 each 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.


                                       F-9
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



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

The disposal described under the table below was conducted in order to execute
the Company's strategy to focus resources on businesses in which it can have a
leadership position. The table below presents actual and proforma data for
comparative purposes for the periods indicated to demonstrate the proforma
effect of the acquisitions and disposal as if they occurred on January 1, 2001.

<TABLE>
<CAPTION>
                                                              Years Ended December 31,
                                   2003                          2002                          2001
                                 Proforma         2003         Proforma         2002         Proforma        2001
                               ------------------------------------------------------------------------------------
                                                     (in millions, except per share data)
                               (unaudited)                   (unaudited)                   (unaudited)

<S>                             <C>            <C>            <C>            <C>            <C>           <C>
Revenue ..................      $7,261.3       $7,306.1       $6,406.9       $6,492.8       $7,043.5      $7,145.5

Net income ...............        $587.7         $590.5         $463.3         $458.9         $582.0        $573.9
</TABLE>

Acquisitions:

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.

Disposal:

On June 19, 2003, the Company agreed to sell its group life insurance business
through a reinsurance agreement with Metropolitan Life Insurance Company, Inc.
(MetLife). The Company is ceding all activity after May 1, 2003 to MetLife. The
transaction was recorded as of May 1, 2003 and closed November 4, 2003.

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 mandatorily
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).

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-mandatorily 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


                                      F-10
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

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 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. The
carrying value of the Company's other real estate to be disposed of was $28.5
million and $143.8 million at December 31, 2003 and 2002, respectively and is
reported in real estate in the Investment section of the consolidated balance
sheets. On March 14, 2003 the Company sold three of it Home Office complex
properties and entered into a long-term lease on its parking garage to Beacon
Capital Partners for $910.0 million. See Note 9 - Sale/Leaseback Transaction
and Other Obligations.

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.

In certain cases, the Company uses hedge accounting as allowed by the Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
as amended, 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 is recorded in net
realized investment and other gains (losses), as well as the offsetting changes
in fair value for the hedged item. At maturity, expiration or sale of the hedged
item, a final fair value change for the hedged item is 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 continues to be
reported in other comprehensive income and then is reclassified into income when
the hedged item


                                      F-11
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

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 is 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 policy acquisition costs (DAC) are costs that vary with, and are
related primarily to, the production of new insurance business and have been
deferred to the extent that they are deemed recoverable. Such costs include sale
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, 2003, the Company's DAC was 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 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 policies at a constant rate
based on the present value of the estimated gross margin amounts expected to be
realized over the lives of the policies.

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 policies and investment-type products, such costs and revenues are
being amortized generally in proportion to the change in present value of
expected gross profits arising principally from surrender charges, investment
results and mortality and expense margins.

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 investment returns. The
Company also assumes that historical variances from the long-term rate of
investment return 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, 2003, the average discount rate was
8.4% for participating traditional life insurance products and 6.0% 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%, we increased certain fee rates on these
policies (the variable services trust (VST) fee increase). Total amortization of
DAC, including the acceleration of amortization of DAC from the assumption
changes mentioned above, was $298.3 million, $313.4 million and $249.0 million
for the years ended December 31, 2003, 2002 and 2001, respectively.


                                      F-12
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

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. Refer to
Note 11 - Reinsurance for additional disclosures regarding this topic.

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 was no longer amortized, rather it is reviewed for
impairment annually using valuation models based on earnings and book value
multiples referencing similar multiples of publicly traded peers. Goodwill is
also reviewed whenever significant events or changing circumstances indicate
that an impairment may exist. Prior to 2002, goodwill relating to 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 are included in other assets in the
consolidated balance sheets. These management contract intangible assets are not
amortized, instead they are reviewed for impairment using a testing regimen
similar to that used for goodwill. Refer to Note 18 - 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.


                                      F-13
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

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 6.3%. 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 policies.

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 14.0% for individual annuity liabilities and from 1.1%
to 13.8% 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.

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 3.0% to 8.0% for universal life
products and from 1.1% 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,
                                                              2003            2002
                                                              ---------------------
                                                                  (in millions)
<S>                                                           <C>         <C>
Liabilities for policyholders' funds
     Guaranteed investment contracts ......................   $ 4,770.2   $ 5,952.4
     U.S. funding agreements ..............................       144.4       143.4
     Global funding agreements backing medium-term notes ..    11,908.1    12,264.7
     Other investment-type contracts ......................     2,485.2     2,274.3
                                                              ---------------------

         Total liabilities for investment-type contracts ..    19,307.9    20,634.8

Liabilities for individual annuities ......................        60.5        54.8
Universal life and other reserves .........................     2,325.1     1,881.4
                                                              ---------------------

         Total liabilities for policyholders' funds .......   $21,693.5   $22,571.0
                                                              =====================
</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-


                                      F-14
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

recourse to the Company and its subsidiaries. Under the two distribution
programs, as of December 31, 2003 and 2002, the Company had $12.5 billion and
$12.0 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 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 and a third party to match currencies. Similarly, the Company may
enter into an interest rate swap with the SPE and a third party 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, 2003 and 2002, there was $3.8 billion and $3.8
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, and
expanded again to $12.5 billion in June 2003, an SPE issued medium-term notes in
Europe, Asia, and to institutional investors in the United States. As of
December 31, 2003 and 2002, there was $8.7 billion and $8.2 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.

At December 31, 2003, the annual contractual maturities of global funding
agreements on notes issued under both programs were as follows: 2004 - $2,104.5
million; 2005 - $2,547.0 million; 2006 - $2,884.6 million; 2007 - $661.6
million; 2008 - $1,448.2; 2009 and thereafter - $2,860.6 million.

Participating Insurance

Participating business represents approximately 80.9%, 81.6% and 76.6% of the
Company's life insurance in force, 96.2%. 96.3% and 98.1%, of the number of life
insurance policies in force, and 94.3%, 92.5% and 92.1%, of life insurance
premiums in 2003, 2002 and 2001, 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.


                                      F-15
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

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

The Company applied the recognition and measurement provisions of Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for stock-based
compensation grants made prior to January 1, 2003. Prior to January 1, 2003 the
Company recognized compensation expense at the time of the grant or over the
vesting period for grants of non-vested stock to employees and non-employee
board members and grants of stock options to non-employee general agents and has
continued this practice. All options granted under those plans had an exercise
price equal to the market value of the Company's common stock on the date of
grant. Effective January 1, 2003, The Company adopted the fair value provisions
of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," and is utilizing the transition provisions described
in SFAS No. 148, on a prospective basis to awards granted after December 31,
2002. The following table illustrates the pro forma effect on net income and
earnings per share if the Company had applied the fair value recognition
provisions of SFAS No. 123, to all stock-based employee compensation.

                                                        Years Ended December 31,
                                                        2003     2002      2001
                                                       -------------------------
                                                             (in millions)
Net income, as reported ............................   $590.5   $458.9   $573.9
Add: Stock-based employee
       compensation expense
       included in reported net
       income, net of related tax
       effects .....................................     14.4      3.5      1.0
Deduct: Total stock-based
       employee compensation
       expense determined under
       fair value method for all
       awards, net of related tax
       effects (unaudited) .........................     39.5     57.6     34.3
                                                       -------------------------
Pro forma net income
       (unaudited) .................................   $565.4   $404.8   $540.6
                                                       =========================

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. Refer to Note 6 -
Income Taxes for additional disclosures on this topic.

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.


                                      F-16
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

Severance

During 2003, the Company continued its ongoing Competitive Position Project (the
project). This project was initiated in the first quarter of 1999 to reduce
costs and increase future operating efficiency by consolidating portions of the
Company's operations and continued through early 2004. The project consists
primarily of reducing staff in the Home Office and terminating certain
operations outside the home office.

Since the inception of the project as well as from similar initiatives such as
our information technology outsourcing and the sale of the Home Office real
estate, approximately 1,530 employees have been terminated or identified for
termination. Benefits paid since the inception of the project were $107.3
million through December 31, 2003. As of December 31, 2003 and 2002, the
liability for employee termination costs, included in other liabilities was
$12.0 million and $12.4 million, respectively. Employee termination costs, net
of related pension curtailment and other post employment benefit related gains,
are included in other operating costs and expenses and were $13.0 million, $18.6
million and $40.0 million for the years ended December 31, 2003, 2002, and 2001,
respectively. The total employee termination costs for year ended December 31,
2003 included an estimated $5.0 million for planned terminations related to our
information technology outsourcing.

Cumulative Effect of Accounting Changes

FASB Derivatives Implementation Group Issue No. B36--Embedded Derivatives:
Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit
Risk Exposures That Are Unrelated or Only Partially Related to the
Creditworthiness of the Obligor under Those Instruments

The Company adopted DIG B36 on October 1, 2003, which resulted in a decrease in
shareholders' equity of $179.0 million (net of tax of $96.4 million). The
Company recorded a reduction in net income of $279.0 million (net of tax of
$150.2 million) partially offset by an increase in other comprehensive income of
$99.9 million (net of tax of $53.8 million) which were recorded as the
cumulative effects of an accounting change, on October 1, 2003. For additional
discussion of DIG B-36, refer to its discussion in the Recent Accounting
Pronouncements section below.

Statement of Financial Accounting Standards No. 87- Employers' accounting for
pensions

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 respond
more quickly to changes in the market value of the plan assets while providing
some measure to mitigate the impact of extreme short term swings in those market
values. 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 year ended December 31, 2001, assuming this
change in accounting had taken place as of the beginning of 2001, would not be
materially different from the reported results.

Statement of Financial Accounting Standards No. 133 - Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities", an amendment of
FASB Statement No. 133

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 No. 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 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).


                                      F-17
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

Recent Accounting Pronouncements

FASB Interpretation No. 46 (revised December 2003)--Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51

In December, 2003, the FASB re-issued Interpretation 46 "Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51," (FIN 46R) which
clarifies the consolidation accounting guidance of Accounting Research Bulletin
No. 51, "Consolidated Financial Statements," (ARB No. 51) to certain entities
for which controlling financial interests are not identifiable by reference to
ownership of the equity of the entity. Such entities are known as variable
interest entities (VIEs). Controlling financial interests of a VIE are typified
by the defined as exposure of a party to the VIE to a majority of either the
expected variable losses or expected variable returns of the VIE, or both. Such
party is the primary beneficiary of the VIE and FIN 46R requires that the
primary beneficiary of a VIE consolidate the VIE. FIN 46R also requires certain
disclosures for significant relationships with VIEs, whether or not
consolidation accounting is either used or anticipated. The consolidation
requirements of FIN 46R apply as of December 31, 2003 for entities considered to
be special purpose entities (SPEs), and otherwise will be applicable at March
31, 2004,

The Company has categorized its FIN 46R consolidation candidates into three
categories- 1) Collateral Debt Obligation funds we manage (CDO funds or CDOs),
which are SPEs, 2) low-income housing properties (the Properties) which are not
SPEs, and 3) assorted other entities (Other Entities) which are not SPEs. The
Company has determined that it should not consolidate any of the CDO funds,
therefore the adoption of FIN46R for the CDO funds had no impact on the
Company's consolidated financial position, results of operations or cash flows.
The Company is re-evaluating whether it should consolidate any of the Properties
based on FIN 46R, and is still evaluating the Other Entities, and is also
evaluating the future potential impact of consolidating any of them.

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.

Statement of Position 03-1 - Accounting and Reporting by Insurance Enterprises
for Certain Nontraditional Long Duration Contracts and for Separate Accounts

On July 7, 2003, the Accounting Standards Executive Committee (AcSEC) of the
American Institute of Certified Public Accountants (AICPA) issued Statement of
Position 03-1, "Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long Duration Contracts and for Separate Accounts" (SOP 03-1).
SOP 03-1 provides guidance on a number of topics unique to insurance
enterprises, including separate account presentation, interest in separate
accounts, gains and losses on the transfer of assets from the general account to
a separate account, liability valuation, returns based on a contractually
referenced pool of assets or index, accounting for contracts that contain death
or other insurance benefit features, accounting for reinsurance and other
similar contracts, accounting for annuitization benefits, and sales inducements
to contract holders.

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

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

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" (SFAS No. 150).
SFAS No. 150 changes the accounting for certain financial instruments that,
under previous guidance, issuers could account for as equity. It requires that
certain financial instruments be classified as liabilities on issuer balance
sheets, including those instruments that are issued in shares and are
mandatorily redeemable, those instruments that are not issued in shares but give
the issuer an obligation to repurchase previously issued equity shares, and
certain financial instruments that give the issuer the option of settling an
obligation by issuing more equity shares. The adoption of SFAS No. 150 had no
impact on the


                                      F-18
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

Company's consolidated financial position, results of operations or cash flows.

Statement of Financial Accounting Standards No. 149 - Amendment of Statement No.
133 on Derivative Instruments and Hedging Activities

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

FASB Derivatives Implementation Group Issue No. B36--Embedded Derivatives:
Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit
Risk Exposures That Are Unrelated or Only Partially Related to the
Creditworthiness of the Obligor under Those Instruments

In April 2003, the FASB's Derivatives Implementation Group (DIG) released SFAS
No. 133 Implementation Issue No. B36, "Embedded Derivatives: Modified
Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk
Exposures That Are Unrelated or Only Partially Related to the Creditworthiness
of the Obligor under Those Instruments" (DIG B36). DIG B36 addresses whether
SFAS No. 133 requires bifurcation of a debt instrument into a debt host contract
and an embedded derivative if the debt instrument incorporates both interest
rate risk and credit risk exposures that are unrelated or only partially 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 and/or other
investment results are determined by reference to a specific pool of assets or a
total return debt index are examples of arrangements containing embedded
derivatives requiring bifurcation under SFAS No. 133. Under SFAS No. 133,
bifurcation requires that the embedded derivative be held at fair value and that
changes in fair value be charged or credited to income. The effective date of
DIG B36 was October 1, 2003.

On October 1, 2003, the Company adopted DIG B36 and determined that certain of
its reinsurance contracts and participating pension contracts contain embedded
derivatives. In accordance with DIG B36, the Company bifurcated each of the
contracts into its debt host and embedded derivative (total return swap) and
recorded the embedded derivative at fair value on the balance sheet with changes
in fair value recorded in income. In the case of the Company, DIG B36 results in
the establishment of derivative liabilities based on the fair value of all the
underlying assets of the respective contracts, including both the assets
recorded at amortized cost and the assets recorded at fair value on the balance
sheet. With respect to the underlying assets held at amortized cost, current
guidance does not permit adjustments to record the fair value of all of these
assets. However, the Company's implementation of DIG B36 required embedded
derivatives based on the fair value of those assets to be recorded in income.
The Company recorded derivative liabilities aggregating $429.2 million based on
the fair value of the assets underlying these contracts. Of this total
liability, $123.1 million related to assets held at amortized cost without any
adjustment recorded to recognize the change in the fair value of the asset.
Prior to the adoption of DIG B36, the Company had established, through other
comprehensive income, a reserve for its participating pension contracts to
recognize the impact on contractholder liabilities of the realization of
unrealized gains on assets backing those contracts. With the adoption of DIG
B36, this reserve is no longer required and is replaced by the recognition of
the fair value of the embedded derivative in income. The adoption of DIG B36
resulted in a decrease in shareholders' equity of $179.0 million (net of tax of
$96.4 million). The Company recorded a reduction in net income of $279.0 million
(net of tax of $150.2 million) partially offset by an increase in other
comprehensive income of $99.9 million (net of tax of $53.8 million) which were
recorded as the cumulative effects of an accounting change.


                                      F-19
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

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

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation which is an optional alternative method of accounting presented in
SFAS No. 123, "Accounting for Stock Based Compensation." In addition, SFAS No.
148 amends the disclosure requirements of SFAS No. 123 to require more prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148's amendment of the transition and annual
disclosure provisions of SFAS No. 123 is effective for fiscal years ending after
December 2002. The Company adopted the fair value provisions of SFAS No. 123 on
January 1, 2003 and utilized the transition provisions described in SFAS No.
148, on a prospective basis to awards granted after December 31, 2002 for its
participation in JHFS' stock compensation plans. In 2003 JHFS granted 630,000
stock options to senior management of the Company and the Company recorded $1.2
million, net of tax of $0.6 million, of related compensation expense. The
Company has adopted the disclosure provisions of SFAS No. 148, see Note
1--Summary of Significant Accounting Policies, Stock-Based Compensation above.

For the periods prior to January 1, 2003, Accounting Principles Board Opinion
(APB) No. 25, "Accounting for Stock Issued to Employees" was applied. APB No. 25
provides guidance on how to account for the issuance of stock and stock options
to employees. Under APB No. 25, 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 under APB No.
25. Compensation cost is recognized over the requisite vesting periods based on
market value on the date of grant. APB No. 25 was amended by SFAS No. 123 to
require pro forma disclosures of net income and earnings per share as if a "fair
value" based method was used.

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

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" (FIN 45). FIN 45 requires certain types of guarantees to
be recorded by the guarantor as liabilities, at fair value. This differs from
previous practice, which generally required recognition of a liability only when
a potential loss was deemed to be probable and was 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.

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

Statement of Financial Accounting Standards No. 146--Accounting for Costs
Associated with Exit or Disposal Activities

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

Statement of Financial Accounting Standards 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 against 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 has performed the required impairment tests of goodwill and management
contracts as of September 30,


                                      F-20
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

2003, based on the guidance in SFAS No. 142. The Company evaluated the goodwill
and indefinite lived management contracts of each reporting unit 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.

EITF Issue 01-10--Accounting for the Impact of the Terrorist Attacks of
September 11, 2001

In September 2001, the 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 consolidated financial
position, results of operations or cash flows.

Statement of Financial Accounting Standards 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. Adoption of SFAS No.
141 had no impact on the Company's consolidated financial position, results of
operations or cash flows.

EITF 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 consolidated financial position, results of operations
or cash flows.

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-21
<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 consolidated financial
position, results of operations or cash flows.

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 $21.0
million, $23.0 million and $28.5 million for the years ending December 31, 2003,
2002 and 2001, respectively. As of December 31, 2003, 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 $5.7 million, $6.9 million and $8.4 million during the
years ended December 31, 2003, 2002 and 2001, respectively.

During the years ended December 31, 2003 and 2002, the Company paid $24.8
million and $180.0 million, respectively, in premiums to an affiliate, John
Hancock Insurance Company of Vermont (JHIC of Vermont) for certain insurance
services. All of these 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. During
the fourth quarter of 2003, the reinsurance agreement covering pension contracts
was converted to a modified coinsurance agreement. As a result, the Company
recorded a liability for coinsurance amounts withheld from JHReCo of $994.5
million and $1,631.5 million at December 31, 2003 and 2002, respectively, which
are included with other liabilities in the consolidated balance sheets and
recorded reinsurance recoverable from JHReCo of $1,421.1 million and $2,043.7
million at December 31, 2003 and 2002, respectively, which are included with
other reinsurance recoverables on the consolidated balance sheets. Premiums
ceded to JHReCo were $868.7 million, $596.8 million and $740.8 million during
the years ended December 31, 2003, 2002 and 2001 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 modified
coinsurance basis where the related financial assets remain invested at the
Company. As a result, the Company recorded a liability for reinsurance
recoverable from JHIC of Vermont of $157.2 million and $98.6 million at December
31, 2003 and 2002, which is included with other liabilities in the consolidated
balance sheets. At December 31, 2003, the Company had not recorded any
outstanding reinsurance receivables 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 years ended December 31, 2003 and 2002.


                                      F-22
<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,
                                                                             2003           2002          2001
                                                                            ------------------------------------
                                                                                        (in millions)
<S>                                                                         <C>           <C>           <C>
Net Investment Income
     Fixed maturities ..................................................    $3,228.7      $3,017.3      $2,721.2
     Equity securities .................................................        19.7          10.6          29.7
     Mortgage loans on real estate .....................................       772.0         775.8         774.4
     Real estate .......................................................        57.8          72.1          67.7
     Policy loans ......................................................       123.0         120.1         118.4
     Short-term investments ............................................        16.5          20.5          73.9
     Other .............................................................      (230.2)       (210.4)        101.4
                                                                            --------      --------      --------
     Gross investment income ...........................................     3,987.5       3,806.0       3,886.7

         Less investment expenses ......................................       188.1         225.0         240.5
                                                                            --------      --------      --------

Net investment income ..................................................    $3,799.4      $3,581.0      $3,646.2
                                                                            --------      --------      --------

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 ..................................................    $ (392.8)     $ (660.9)     $ (392.6)
     Equity securities .................................................        69.9         101.2         165.7
     Mortgage loans on real estate and real estate to be disposed of ...       244.1          (7.9)        (71.2)
     Derivatives and other invested assets .............................        81.2          43.0          48.2
     Amortization adjustment for deferred policy acquisition costs .....        (6.1)         38.9          29.4
     Amounts credited to the policyholder dividend obligation ..........        58.5          11.9          17.0
     Amounts credited to participating pension contractholders .........         3.4          23.3         (42.3)
                                                                            --------      --------      --------

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 .................    $   58.2      $ (450.5)     $ (245.8)
                                                                            ========      ========      ========
</TABLE>


                                      F-23
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Investments - (continued)

Gross gains of $606.9 million in 2003, $320.0 million in 2002 and $433.1 million
in 2001 and gross losses of $233.8 million in 2003, $176.0 million in 2002 and
$150.6 million in 2001, 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 for the years indicated:

<TABLE>
<CAPTION>
                                                                                  Gross        Gross
                                                                 Amortized      Unrealized   Unrealized      Fair
                                                                    Cost          Gains        Losses       Value
                                                                ---------------------------------------------------
<S>                                                             <C>           <C>           <C>           <C>
December 31, 2003                                                                  (in millions)

Held-to-Maturity:

Corporate securities .......................................    $ 1,144.5     $    21.3     $    18.3     $ 1,147.5

Mortgage-backed securities .................................        344.2          21.5           0.4         365.3

Obligations of states and political subdivisions ...........           --            --            --            --
                                                                ---------------------------------------------------

     Total fixed maturities held-to-maturity ...............    $ 1,488.7     $    42.8     $    18.7     $ 1,512.8
                                                                ===================================================

Available-for-Sale:

Corporate securities .......................................    $36,122.2     $ 2,698.7     $   304.1     $38,516.8

Mortgage-backed securities .................................      6,852.0         284.0         143.4       6,992.6

Obligations of states and political subdivisions ...........        413.1          17.2           1.2         429.1

Debt securities issued by foreign governments ..............        233.7          21.8           1.3         254.2

U.S. Treasury securities and obligations of
     U.S. government corporations and agencies .............        286.7           4.1           1.4         289.4
                                                                ---------------------------------------------------

Fixed maturities available-for-sale ........................     43,907.7       3,025.8         451.4      46,482.1

Equity securities ..........................................        249.9          83.6           0.4         333.1
                                                                ---------------------------------------------------

     Total fixed maturities and equity securities
         available-for-sale ................................    $44,157.6     $ 3,109.4     $   451.8     $46,815.2
                                                                ===================================================
</TABLE>


                                      F-24
<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
                                                                    ---------------------------------------------------
<S>                                                                 <C>           <C>           <C>           <C>
December 31, 2002                                                                      (in millions)

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)

The amortized cost and fair value of fixed maturities at December 31, 2003, by
contractual maturity, are shown below:

                                                          Amortized      Fair
                                                            Cost         Value
                                                          ----------------------
                                                              (in millions)
Held-to-Maturity:
Due in one year or less ..............................    $     3.5    $     3.8
Due after one year through five years ................         29.8         37.6
Due after five years through ten years ...............        251.0        257.9
Due after ten years ..................................        860.2        848.2
                                                          ---------    ---------

Mortgage-backed securities ...........................        344.2        365.3
                                                          ---------    ---------

Total ................................................    $ 1,488.7    $ 1,512.8
                                                          =========    =========

Available-for-Sale:
Due in one year or less ..............................    $ 2,023.6    $ 2,086.7
Due after one year through five years ................     10,607.4     11,174.9
Due after five years through ten years ...............     14,090.3     15,172.6
Due after ten years ..................................     10,334.4     11,055.3
                                                          ---------    ---------

Mortgage-backed securities ...........................      6,852.0      6,992.6
                                                          ---------    ---------

Total ................................................    $43,907.7    $46,482.1
                                                          =========    =========

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 2003, 2002 and 2001 amounted to $0.1 million, $1.7
million and $(1.8) million, respectively.

The Company participates in a security lending program for the purpose of
enhancing income on securities held. At December 31, 2003 and 2002, $426.9
million and $625.5 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 2003, 2002 and 2001, net investment income passed through to participating
pension contractholders as interest credited to policyholders' account balances
amounted to $161.7 million, $168.3 million and $170.5 million, respectively.

Depreciation expense on investment real estate was $1.5 million, $3.0 million
and $4.6 million, in 2003, 2002, and 2001, respectively. Accumulated
depreciation was $36.3 million and $49.4 million at December 31, 2003 and 2002,
respectively.

Analysis of unrealized losses on fixed maturity securities

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


                                      F-26
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Investments - (continued)

percent of amortized cost for three months or more to determine whether
impairments need to be taken. This committee includes the head of workouts, the
head of each industry team, the head of portfolio management, the Chief
Investment Officer and the Corporate Risk Officer who reports to the Chief
Financial Officer. The analysis focuses on each company's or project's ability
to service its debts in a timely fashion and the length of time the security has
been trading below cost. The results of this analysis are reviewed by the Life
Company's Committee of Finance, a subcommittee of the Life Company's Board of
Directors, quarterly. This quarterly process includes a fresh assessment of the
credit quality of each investment in the entire fixed maturities portfolio.

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

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

       Unrealized Losses on Fixed Maturity Securities -- By Investment Age

<TABLE>
<CAPTION>
                                                                               As of December 31, 2003
                                                   Less than 12 months             12 months or more                  Total
                                                   -------------------             -----------------                  -----
                                                 Carrying                      Carrying                     Carrying
                                                 Value of                      Value of                     Value of
                                                Securities                    Securities                   Securities
                                                with Gross                    with Gross                   with Gross
                                                Unrealized     Unrealized     Unrealized    Unrealized     Unrealized    Unrealized
Description of Securities:                         Loss          Losses          Loss         Losses          Loss         Losses
-------------------------------------------------------------------------  ----------------------------  --------------------------
<S>                                             <C>            <C>            <C>                           <C>            <C>
US Treasury obligations and direct
   obligations of U.S. government agencies ..   $  268.6       $   (2.6)      $    1.5             --       $  270.1       $   (2.6)
Federal agency mortgage backed
   securities ...............................    1,161.0          (39.4)         973.6       $ (104.4)       2,134.6         (143.8)
Debt securities issued by foreign
   governments ..............................      101.6           (1.3)            --             --          101.6           (1.3)
Corporate bonds .............................    3,483.5         (106.0)       3,338.5         (216.4)       6,822.0         (322.4)
                                                -------------------------  ----------------------------  --------------------------
Total, debt securities ......................    5,014.7         (149.3)       4,313.6         (320.8)       9,328.3         (470.1)
Common stocks ...............................       32.8           (0.1)           7.7           (0.3)          40.5           (0.4)
                                                -------------------------  ----------------------------  --------------------------
Total .......................................   $5,047.5       $ (149.4)      $4,321.3       $ (321.1)      $9,368.8       $ (470.5)
                                                =========================  ============================  ==========================
</TABLE>

Gross unrealized losses from hedging adjustments represent the amount of the
unrealized loss that results from the security being designated as a hedged item
in a fair value hedge. When a security is so designated, its cost basis is
adjusted in response to movements in interest rates. These adjustments, which
are non-cash and reverse with the passage of time as the asset and derivative
mature, impact the amount of unrealized loss on a security. The remaining
portion of the gross unrealized loss represents the impact of interest rates on
the non-hedged portion of the portfolio and unrealized losses due to
creditworthiness on the total fixed maturity portfolio.

As of December 31, 2003, the fixed maturity securities had a total gross
unrealized loss of $324.2 million excluding basis


                                      F-27
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Investments - (continued)

adjustments related to hedging relationships. Of this total, $218.6 million is
due to securities that have had various amounts of unrealized loss for more than
nine months. Of this, $48.2 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, 2003, $170.4 million, of the $324.2 million resided in below
investment grade securities with various amounts of unrealized loss for over
nine months. At December 31, 2003, all of these securities were current as to
the payments of principal and interest with the exception of 2 securities with a
carrying value of $16.8 million and an unrealized loss of $18.3 million. Of the
total $170.4 million, $88.2 million traded above 80% of amortized cost at
December 31, 2003 and an additional $11.3 million traded above 80% of amortized
cost within the last nine months, for a total of $99.5 million. Of the total,
$58.1 million of this $99.5 million total comes from airline related bonds, an
industry that continues to experience stress and hence has lagged the general
recovery. While, as described earlier, we expect the secured nature of our
positions to protect our value, the continued stress in this industry continues
to be a concern.

The remaining portion of the unrealized loss, $70.9 million, arises from below
investment grade securities that have traded below 80 percent of amortized cost
for over nine months. All of these bonds, with the exception of the 2 securities
mentioned above, 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 expect full
recovery of principal and interest on the 2 securities on which interest is
overdue. This interest was actually paid to the trustee, but the investors chose
to use these payments for expenses related to protecting the collateral
underlying the bonds rather than distribute them. We carefully track these
investments to ensure our continued belief that their prices will recover.

Unrealized losses can be created by rising interest rates or by rising credit
concerns and hence widening credit spreads. Credit concerns are apt to play a
larger role in the unrealized loss on below investment grade bonds and hence the
gross unrealized loss on the portfolio has been split between investment grade
and below investment grade bonds in the above tables. The gross unrealized loss
on below investment grade fixed maturity securities declined to $259.8 million
at December 31, 2003 primarily due to the easing of credit concerns and the
resulting spread tightening.

All sectors within the below investment grade portfolio saw a dramatic drop in
gross unrealized losses. Most notable was the drop in the gross unrealized loss
on the utility portfolio to $46.1 million as of December 31, 2003. While the
overbuild in this sector will continue to pressure certain power regions and
certain companies for several years, the industry is in much better shape after
a year of sharply curtailed capital expenditures and general balance sheet
strengthening.

We remain most concerned about the airline sector. 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 $58.6 million of the $143.8 million
and of gross unrealized loss in the asset-backed and mortgage-backed securities
category as of December 31, 2003. While the airline industry is making positive
strides in reducing its cost structure, a significant recovery in this sector
requires a growing economy and a pick up in business travel. In the most recent
quarter ending December 31, 2003, most of the major carriers have reported
improved financial results. This trend is encouraging and we expect it to
continue barring any new terrorist events or a reversal of the course of the
U.S. economy. We continue to expect that the senior secured nature of our loans
to this industry will protect our holdings through this difficult time.


                                      F-28
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Investments - (continued)

Mortgage loans on real estate

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. Any change to the valuation allowance for
mortgage loans on real estate 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 recorded at the fair value of
the collateral at the date of foreclosure, which establishes a new cost basis.

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, 2003
     Mortgage loans on real estate .............       $ 61.7        $ 56.6        $ 52.4        $ 65.9
     Real estate to be disposed of .............           --            --            --            --
                                                       ------------------------------------------------
Total ..........................................       $ 61.7        $ 56.6        $ 52.4        $ 65.9
                                                       ================================================

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
                                                       ================================================
</TABLE>


                                      F-29
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Investments - (continued)

At December 31, 2003 and 2001, 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,
                                                                           2003          2002
                                                                          --------------------
                                                                             (in millions)

<S>                                                                       <C>           <C>
Impaired mortgage loans on real estate with provision for losses ...      $124.4        $ 57.2
Provision for losses ...............................................       (37.2)        (17.1)
                                                                          ------        ------
Net impaired mortgage loans on real estate .........................      $ 87.2        $ 40.1
                                                                          ======        ======
</TABLE>

The average recorded investment in impaired loans and the interest income
recognized on impaired loans were as follows:

                                                      Years Ended December 31,
                                                   2003         2002        2001
                                                  ------------------------------
                                                          (in millions)

Average recorded investment in impaired loans..    $ 90.8     $ 74.9      $ 62.5
Interest income recognized on impaired loans...       3.4        5.0         8.4

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 $87.8 million and $54.8 million as of
December 31, 2003 and 2002, 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,
                                      2003          2002           2001
                                     ----------------------------------
                                               (in millions)
Expected......................       $ 7.6         $ 4.8          $24.3
Actual........................         7.2           4.7           23.0


                                      F-30
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Investments - (continued)

At December 31, 2003, 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..............................         $ 1,461.8       East North Central......................        $ 1,124.6
Hotels..................................             438.6       East South Central......................            414.4
Industrial..............................             944.1       Middle Atlantic.........................          1,458.3
Office buildings........................           2,463.2       Mountain................................            510.6
Retail..................................           2,096.2       New England.............................            874.3
Multi family............................               0.9       Pacific.................................          2,385.6
Mixed Use...............................             286.0       South Atlantic..........................          2,390.0
Agricultural............................           3,042.0       West North Central......................            437.2
Other...................................             204.2       West South Central......................          1,028.4
                                                                 Canada/Other............................            313.6

Allowance for losses....................             (65.9)      Allowance for losses....................            (65.9)
                                                 ---------                                                       ---------

Total...................................         $10,871.1       Total...................................        $10,871.1
                                                 =========                                                       =========
</TABLE>

Mortgage loans with outstanding principal balances of $58.9 million, bonds with
amortized cost of $254.0 million and real estate with a carrying value of $0.5
million were non-income producing for the year ended December 31, 2003.

Securitization activity

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. During 2003, 2002 and 2001, the Company sold $529.8
million, $343.5 million and $542.9 million of commercial mortgage loans in
securitization transactions, respectively, for which it received net proceeds of
$541.4 million, $345.2 million and $546.5 million, respectively, from which it
recognized pre-tax gains of $12.0 million, $1.9 million and $4.1 million,
respectively, and from which it retained servicing assets of $0.4 million, $0.3
million and $0.5 million, respectively. The Company's mortgage servicing assets
were valued, in the aggregate, at $1.4 million, and $1.3 million at December 31,
2003 and 2002, respectively.

During December, 2003, the Company securitized $277.6 million of below
investment grade corporate bonds, most of which were below investment grade
issues. All of the assets, which were previously owned by the Company, were
transferred to a trust, Signature QSPE, Limited (the Trust), which the Company
sponsored. The Trust is a QSPE in accordance with SFAS No. 140, and as
transferor of assets to the Trust, the Company is prohibited from consolidating
the Trust. The Company retained $140.0 million of notes issued by the Trust
which were rated A1, and which are recorded as fixed maturities: available for
sale on the consolidated balance sheets, and the Company retained $12.7 million
of equity issued by the QSPE, which is unrated, and which is recorded in other
invested assets on the consolidated balance sheets. The Company received net
proceeds of $124.9 million, representing the proceeds from sales of notes issued
by the Trust to unrelated parties, and the Company recorded a realized gain of
$10.8 million on these proceeds. The Company recognized no servicing assets as a
result of this securitization. All of the assets transferred from the Company to
the Trust were performing assets; none were delinquent or in default.

The Company values retained security interests in securitizations, at time of
issue and subsequently, using the same pricing methods as it uses for its
existing investment portfolio. Fair value prices are obtained from an
independent pricing service when available, and if not available 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.
Refer to Note 16 - Fair Value of Financial Instruments below for further
discussion of the Company's fair value methodologies. The Company values
servicing rights by estimating future cash flows from the servicing assets using
discount rates that approximate current market rates.


                                      F-31
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Investments - (continued)

Equity method investments

Investments in other assets, which include unconsolidated joint ventures,
partnerships, and limited liability corporations, accounted for using the equity
method of accounting totaled $1,944.6 million and $1,380.7 million at December
31, 2003 and 2002, respectively. Total combined assets of such investments were
$15,105.4 million and $14,302.6 million (consisting primarily of investments),
and total combined liabilities were $1,583.8 million and $1,815.1 million
(including $1,216.3 million and $1,171.5 million of loans payable) at December
31, 2003 and 2002, respectively. Total combined revenues and expenses of these
investments in 2003 were $1,184.0 million and $940.3 million, respectively,
resulting in $243.7 million of total combined income from operations. Total
combined revenues and expenses of these investments in 2002 were $893.6 million
and $1,108.1 million, respectively, resulting in $214.5 million of total
combined loss from operations. Total combined revenues and expenses of these
investments in 2001 were $598.7 million and $633.0 million, respectively,
resulting in $34.3 million of total combined loss from operations. Depending on
the timing of receipt of audited financial statements of these other assets, the
above financial data could be up to one year in arrears. Net investment income
on investments accounted for on the equity method totaled $138.3 million, $64.8
million and $56.4 million in 2003, 2002, and 2001, respectively.

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),
in accordance with FIN 46R, as discussed in Note 1--Summary of Significant
Accounting Policies above. Presented below are discussions of the Company's
significant relationships with them, the Company's conclusions about whether the
Company should consolidate them, 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). Since 1996, the Company has acted as
investment manager to certain asset backed investment vehicles, commonly known
as collateralized debt obligations (CDOs). The Company also invests in the debt
and/or equity of these CDOs, and in the debt and/or equity of CDOs managed by
others. CDOs raise capital by issuing debt and equity securities, and use their
capital to invest in portfolios of interest bearing securities. The returns from
a CDO's portfolio of investments are used by the CDO to finance its operations
including paying interest on its debt and paying advisory fees and other
expenses. Any net income or net loss is shared by the CDO's equity owners and,
in certain circumstances where the Company manages 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. Owners
of securities issued by CDOs that are managed by the Company have no recourse to
the Company's assets in the event of default by the CDO. The Company's risk of
loss from any CDO it manages, or in which it invests, is limited to its
investments in the CDO.

In accordance with previous consolidation accounting principles (now superceded
by FIN 46R), the Company formerly consolidated a CDO only when the Company owned
a majority of the CDO's equity. The Company is now required to consolidate a CDO
when, in accordance with FIN 46R, the CDO is deemed to be a VIE, and the Company
is deemed to be the primary beneficiary of the CDO. For those CDOs which are not
deemed to be VIEs, the Company determines its consolidation status by
considering the control aspects of the equity classes of the CDOs. The Company
has determined


                                      F-32
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 4 -- Relationships with Variable Interest Entities - (continued)

whether each CDO should be considered a VIE, and while most are VIEs, some are
not. The Company has determined that it is not the primary beneficiary of any
CDO which is a VIE, and for those that are not VIEs, the Company does not have
controlling financial interests. Therefore, the Company will not use
consolidation accounting for any of the CDOs which it manages.

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

                                                                December 31,
                                                             2003         2002
                                                           ---------------------
                                                               ( in millions)
Total size of Company-Managed CDOs
Total assets .........................................     $4,922.2     $6,220.9
                                                           ========     ========
      Total debt .....................................      4,158.2      3,564.4
      Total other liabilities ........................        712.0      2,429.7
                                                           --------     --------
Total liabilities ....................................      4,870.2      5,994.1
Total equity .........................................         52.0        226.8
                                                           --------     --------
Total liabilities and equity .........................     $4,922.2     $6,220.9
                                                           ========     ========

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                   2003                2002
                                                                           -----------------------------------------
                                                                                (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 ..............................................................     $201.0       35.6%      $380.2       53.8%
Aa1/AA+ ..............................................................       75.7       13.4           --         --
A3/A- ................................................................         --         --         14.5        2.1
Baa2/BBB .............................................................      218.0       38.8        218.0       31.0
Ba2/BB ...............................................................         --         --          7.0        1.0
B2 ...................................................................        8.0        1.4           --         --
B3/B- ................................................................         --         --          6.0        0.8
Caa1/CCC+ ............................................................       13.2        2.3           --         --
Not rated (equity) ...................................................       48.1        8.5         79.8       11.3
                                                                           -----------------------------------------
Total Company exposure ...............................................     $564.0      100.0%      $705.5      100.0%
                                                                           =========================================
</TABLE>

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), 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.


                                      F-33
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 4 -- Relationships with Variable Interest Entities - (continued)

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 receives Federal income tax credits in recognition
of its investments in each of the Properties for a period of ten years and in
some cases, the Company receives distributions from the Properties which are
based on a portion of the actual cash flows.

The Company had previously determined that the Properties are VIEs in accordance
with FIN 46, as it was previously issued by the FASB, and that the Company is
not the primary beneficiary of any of them, so the Company did not consolidate
any of the Properties in the third fiscal quarter of 2003. However, the Company
is currently re-evaluating whether the Properties are VIEs, and whether the
Company is the primary beneficiary of any of them, in accordance with FIN 46R.
The Company believes that it is reasonably possible that it may be required to
consolidate one or more of the Properties. Accordingly the disclosures in the
tables below are provided. 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 them.

                                                                  December 31,
                                                               2003        2002
                                                               -----------------
                                                                  (in millions)
Total size of the Properties(1)
Total assets .............................................     $982.7     $682.2
                                                               ======     ======
     Total debt ..........................................      576.3      396.4
     Total other liabilities .............................      116.6      101.8
                                                               ------     ------
Total liabilities ........................................      692.9      498.2
Total equity .............................................      289.8      184.0
                                                               ------     ------
Total liabilities and equity .............................     $982.7     $682.2
                                                               ======     ======

----------
(1)   Property level data is sourced primarily from the Funds' financial
      statements, and is presented on three and twelve month delays, as of
      December 31, 2003 and 2002, respectively, due to the delayed availability
      of financial statements of the Funds.

                                                                   December 31,
                                                                 2003      2002
                                                                 ---------------
                                                                 (in millions)
Maximum exposure of the Company to losses from the Properties
Equity investment in the Properties(1) .......................   $291.0   $177.0
Outstanding Equity capital commitments to the Properties .....    108.2    139.4
Carrying value of mortgages for the Properties ...............     62.8     65.2
Outstanding mortgage commitments to the Properties ...........      5.1      5.1
                                                                 ------   ------

Total Company exposure .......................................   $467.1   $386.7
                                                                 ======   ======
----------
(1)   Company exposure data is sourced primarily from the Funds' financial
      statements, and is presented with three and twelve month delays, as of
      December 31, 2003 and 2002, respectively, due to the delayed availability
      of financial statements of the Funds

Other. The Company has investment relationships with a disparate group of
entities (Other Entities), which result from the Company's direct investment in
their debt and/or equity. This category includes energy investment partnerships,
investment funds organized as limited partnerships, and businesses which have
undergone debt restructurings and reorganizations. The Company is evaluating
whether each is a VIE, and considers it reasonably possible that it may
consolidate one or more of the entities them or be required to disclose
information about them, as a result of adopting FIN 46R. The Company


                                      F-34
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 4 -- Relationships with Variable Interest Entities - (continued)

has made no guarantees to any other parties involved with them, and has no
further equity or debt commitments to them. The Company's maximum exposure to
loss as a result of its relationships with the Other Entities is limited to its
investment in them.

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

                                                                 December 31,
                                                             ------------------
                                                             2003          2002
                                                             ------------------
                                                               (in millions)
Total size of the Other Entities (1)
Total assets ...........................................     $284.8      $281.8
                                                             ======      ======
     Total debt ........................................      301.7       309.3
     Total other liabilities ...........................       65.3        62.1
                                                             ------      ------
Total liabilities ......................................      367.0       371.4
Total equity(2) ........................................      (82.2)      (89.6)
                                                             ------      ------
Total liabilities and equity ...........................     $284.8      $281.8
                                                             ======      ======
----------
(1)   Certain data is reported with up to a one-year delay, due to the delayed
      availability of financial statements of the Other Entities.
(2)   The negative equity results from the inclusion in the table of one of the
      businesses mentioned above in the table. The business has an accumulated
      deficit from operations predating the Company's equity investment in it,
      but it 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.

<TABLE>
<CAPTION>
                                                                      December 31,
                                                                    ---------------
                                                                    2003       2002
                                                                    ---------------
                                                                     (in millions)
<S>                                                                 <C>      <C>
Maximum exposure of the Company to losses from Other Entities (1)
Equity investment in Other Entities .............................   $ 53.1   $ 52.3
Outstanding equity capital commitments to the Other Entities ....      9.0     16.5
Debt investment in Other Entities ...............................    129.1    110.8
                                                                    ------   ------
Total Company exposure ..........................................   $191.2   $179.6
                                                                    ======   ======
</TABLE>

----------
(1)   The Company's maximum exposure to loss is limited to its investments of
      equity and debt securities of these entities, which are carried on the
      Company's financial statements using the equity method of accounting, or
      at amortized cost, and commitments to provide future equity and debt
      capital.

Note 5 -- Derivatives and Hedging Instruments

The fair values of derivative instruments classified as assets at December 31,
2003 and 2002 were $765.4 million and $346.9 million, respectively, and appears
on the consolidated balance sheet in other assets. The fair values of derivative
instruments classified as liabilities at December 31, 2003 and 2002 were
$1,700.1 million and $1,399.8 million, respectively, and appear on the
consolidated balance sheet in other liabilities. In addition, as a result of the
Company's adoption of SFAS No. 133 issue B36, "Embedded Derivatives: Modified
Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk
Exposures That Are Unrelated or Only Partially Related to the Creditworthiness
of the Obligor under Those Instruments" (DIG B36), the Company has recorded as
derivatives amounts aggregating $225.6 million as of December 31, 2003 related
to participating pension contracts which appear on the consolidated balance
sheet in policyholders' funds.

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


                                      F-35
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 5 -- Derivatives and Hedging Instruments (continued)

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 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, 2003 and 2002, the Company recognized net
losses of $5.8 million and $19.5 million, respectively, related to the
ineffective portion of its fair value hedges, and net losses of $1.5 million and
$6.4 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.

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 also uses forward starting interest rate swap agreements to hedge
the variable cash flows associated with payments that it will make on certain
funding agreements issued by the company. Amounts are reclassified from other
comprehensive income as a yield adjustment when the payments are made.

For the years ended December 31, 2003 and 2002, the Company recognized gains of
$1.8 million and $7.2 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, 2003 and 2002, all
of the Company's hedged forecast transactions qualified as cash flow hedges.

For the years ended December 31, 2003 and 2002, a net gain of $2.7 million and a
net gain of $0.5 million, respectively, were reclassified from other accumulated
comprehensive income to earnings. It is anticipated that approximately $5.2
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.


                                      F-36
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 5 -- Derivatives and Hedging Instruments (continued)

For the years ended December 31, 2003 and 2002, none of the Company's cash flow
hedges were 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, 2003 and 2002, gains of $28.7 million (net of
tax of $15.5 million) and $175.4 million (net of tax of $94.5 million)
represented the effective portion of the change in fair value of derivative
instruments designated as cash flow hedges were added to accumulated other
comprehensive income, resulting in balances of $223.3 million (net of tax of
$120.3 million) and $194.5 million (net of tax of $104.8 million), respectively.

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, credit
default swaps, 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. As such the financial statements for
the year ended December 31, 2001 include the impact of the final tax return
adjustments related to the 1999 equity base tax.

Income before income taxes and cumulative effect of accounting changes includes
the following:

<TABLE>
<CAPTION>
                                                            Years Ended December 31,
                                                          2003        2002        2001
                                                         -------------------------------
                                                                 (in millions)

<S>                                                      <C>        <C>        <C>
Domestic .............................................   $1,200.7   $  559.5   $  761.8
Foreign ..............................................       14.1        8.0        5.6
                                                         --------   --------   --------
Income before income taxes and cumulative effect of
    accounting changes ...............................   $1,214.8   $  567.5   $  767.4
                                                         ========   ========   ========
</TABLE>


                                      F-37
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 6 -- Income Taxes - (continued)

The components of income taxes were as follows:

                                                      Years Ended December 31,
                                                    2003       2002        2001
                                                   ----------------------------
                                                          (in millions)
Current taxes:
   Federal ....................................    $163.9     $ 93.4     $ (9.9)
   Foreign ....................................       4.4        2.0        3.1
   State ......................................       4.6        4.6        4.6
                                                   ------     ------     ------
                                                    172.9      100.0       (2.2)
                                                   ------     ------     ------

Deferred taxes:
   Federal ....................................     179.0       14.6      210.5
   Foreign ....................................       0.1        0.7       (0.9)
   State ......................................      (6.7)      (6.7)      (6.7)
                                                   ------     ------     ------
                                                    172.4        8.6      202.9
                                                   ------     ------     ------

   Total income taxes ............................ $345.3     $108.6     $200.7
                                                   ======     ======     ======

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,
                                                      2003      2002       2001
                                                     --------------------------
                                                           (in millions)

Tax at 35% .......................................   $425.2    $198.6    $268.6
Add (deduct):
   Equity base tax ...............................       --        --     (13.4)
   Prior year taxes ..............................      4.7      (2.7)      9.9
   Tax credits ...................................    (50.2)    (36.4)    (28.1)
   Foreign taxes .................................      1.4       2.0       1.3
   Tax exempt investment income ..................    (21.3)    (25.7)    (25.7)
   Lease income ..................................     (9.7)    (25.5)       --
   Other .........................................     (4.8)     (1.7)    (11.9)
                                                     ------    ------    ------

     Total income taxes ..........................   $345.3    $108.6    $200.7
                                                     ======    ======    ======


                                      F-38
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 6 -- Income Taxes - (continued)

The significant components of the Company's deferred tax assets and liabilities
were as follows:

                                                              December 31,
                                                        2003               2002
                                                       -------------------------
                                                             (in millions)
Deferred tax assets:
   Policy reserve adjustments ......................   $  639.8         $  550.2
   Other employee benefits .........................      174.9            154.5
   Book over tax basis of investments ..............      528.9            329.6
   Dividends payable to policyholders ..............       99.6            135.2
   Interest ........................................       40.2             32.5
                                                       --------         --------
     Total deferred tax assets .....................    1,483.4          1,202.0
                                                       --------         --------

Deferred tax liabilities:
   Deferred policy acquisition costs ...............      925.6            879.4
   Depreciation ....................................       72.3             13.3
   Basis in partnerships ...........................       72.6             65.1
   Market discount on bonds ........................       20.0             18.9
   Pension plan expense ............................       47.5             73.9
   Capitalized charges related to mutual funds .....        3.0             12.7
   Lease income ....................................    1,041.4            772.7
   Unrealized gains ................................      705.1            156.4
   Other ...........................................       29.9             29.9
                                                       --------         --------
     Total deferred tax liabilities ................    2,917.4          2,022.3
                                                       --------         --------

     Net deferred tax liabilities ..................   $1,434.0         $  820.3
                                                       ========         ========

The Company made income tax payments of $147.4 million, $104.9 million and $3.7
million in 2003, 2002 and 2001, respectively.


                                      F-39
<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 prior
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-40
<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,
                                                                                  2003           2002
                                                                                -----------------------
                                                                                     (in millions)
<S>                                                                             <C>           <C>
Liabilities
Future policy benefits .....................................................    $10,690.6     $10,509.0
Policyholder dividend obligation ...........................................        400.0         288.9
Policyholders' funds .......................................................      1,511.9       1,504.0
Policyholder dividends payable .............................................        413.1         432.3
Other closed block liabilities .............................................         37.4         111.7
                                                                                ---------     ---------
   Total closed block liabilities ..........................................    $13,053.0     $12,845.9
                                                                                ---------     ---------

Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
     (fair value: 2003--$69.6; 2002--$97.1) ................................    $    66.0     $    86.0
   Available-for-sale--at fair value
     (cost: 2003--$5,847.6; 2002--$5,580.2) ................................      6,271.1       5,823.2
Equity securities:
   Available-for-sale--at fair value
     (cost: 2003--$9.1; 2002--$10.5) .......................................          9.1          12.4
Mortgage loans on real estate ..............................................      1,577.9       1,665.8
Policy loans ...............................................................      1,554.0       1,555.1
Short-term investments .....................................................          1.2          25.2
Other invested assets ......................................................        230.6         212.4
                                                                                ---------     ---------
   Total investments .......................................................      9,709.9       9,380.1

Cash and cash equivalents ..................................................        248.3         244.0
Accrued investment income ..................................................        145.1         156.3
Other closed block assets ..................................................        308.6         327.6
                                                                                ---------     ---------
   Total closed block assets ...............................................    $10,411.9     $10,108.0
                                                                                ---------     ---------

Excess of reported closed block liabilities over assets
   designated to the closed block ..........................................    $ 2,641.1     $ 2,737.9
                                                                                ---------     ---------

Portion of above representing other comprehensive income:
   Unrealized appreciation (depreciation), net of tax of $(148.0)
     million and $(84.0) million at 2003 and 2002,
     respectively ..........................................................        275.3         155.9
   Allocated to the policyholder dividend obligation, net of tax of
     $148.1 million and $88.8 million at 2003 and 2002,
     respectively ..........................................................       (275.1)       (164.9)
                                                                                ---------     ---------
       Total ...............................................................          0.2          (9.0)
                                                                                ---------     ---------

Maximum future earnings to be recognized from closed block
   assets and liabilities ..................................................    $ 2,641.3     $ 2,728.9
                                                                                =========     =========
</TABLE>


                                      F-41
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 7 -- Closed Block - (continued)

                                                                 December 31,
                                                              2003         2002
                                                              -----------------
                                                                (in millions)
Change in the policyholder dividend obligation:
   Balance at beginning of period ....................        $288.9     $251.2
     Impact on net income before income taxes ........         (57.9)     (70.8)
     Unrealized investment gains (losses) ............         169.0      108.5
                                                              ------     ------

   Balance at end of period ..........................        $400.0     $288.9
                                                              ======     ======

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                                       2003             2002           2001
                                                                      --------------------------------------
                                                                                   (in millions)
<S>                                                                   <C>            <C>            <C>
Revenues
   Premiums .....................................................     $  915.7       $  969.9       $  940.0
   Net investment income ........................................        648.2          663.9          667.5
   Net realized investment and other gains (losses),
     net of amounts credited to the policyholder dividend
     obligation of $(58.2) million, $(11.9)million and
     $(17.0) million, respectively ..............................         (4.5)          (5.2)          (3.6)
   Other closed block revenues ..................................         (0.1)           0.1            0.6
                                                                      --------------------------------------
     Total closed block revenues ................................      1,559.3        1,628.7        1,604.5

Benefits and Expenses
   Benefits to policyholders ....................................        982.0        1,057.6          924.4
   Change in the policyholder dividend obligation ...............         (2.4)         (60.2)          54.9
   Other closed block operating costs and expenses ..............         (3.0)          (5.2)          (6.3)
   Dividends to policyholders ...................................        449.5          489.7          474.9
                                                                      --------------------------------------
     Total benefits and expenses ................................      1,426.1        1,481.9        1,447.9
                                                                      --------------------------------------

   Closed block revenues, net of closed block benefits and
     expenses, before income taxes and cumulative
     effect of accounting change ................................        133.2          146.8          156.6
   Income taxes, net of amounts credited to the
     policyholder dividend obligation of $2.1 million,
     $1.3 million and $4.6 million, respectively ................         45.6           50.0           53.0
                                                                      --------------------------------------
     Closed block revenues, net of closed block benefits and
     expenses and income taxes, before cumulative effect
     of accounting change .......................................         87.6           96.8          103.6
                                                                      --------------------------------------
     Cumulative effect of accounting change, net of tax .........           --             --           (1.4)
                                                                      --------------------------------------
     Closed block revenues, net of closed block benefits and
     expenses, income taxes and cumulative effect of
     accounting change ..........................................     $   87.6       $   96.8       $  102.2
                                                                      ======================================
</TABLE>


                                      F-42
<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:

                                                      Years Ended December 31,
                                                      2003              2002
                                                    ---------------------------
                                                           (in millions)
Beginning of period ......................          $2,728.9           $2,825.7
End of period ............................           2,641.3            2,728.9
                                                    --------           --------
   Change during period ..................          $  (87.6)          $  (96.8)
                                                    ========           ========

Note 8--Debt and Line of Credit

Short-term and long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                         December 31,
                                                                      2003          2002
                                                                     --------------------
                                                                         (in millions)
<S>                                                                  <C>         <C>
Short-term debt:
   Current maturities of long-term debt ..........................   $  104.0    $   99.5

Long-term debt:
   Surplus notes, 7.38% maturing in 2024 (1) .....................      447.6       447.4
   Notes payable, interest ranging from 7.31% to 12.0%,
     due in varying amounts to 2009 ..............................      171.3       242.3
                                                                     --------    --------
Total long-term debt .............................................      618.9       689.7

Less current maturities ..........................................     (104.0)      (99.5)
                                                                     --------    --------
Long-term debt ...................................................      514.9       590.2
                                                                     --------    --------

   Total long and short-term debt before fair value adjustments ..      618.9       689.7

Fair value adjustments related to interest rate swaps (1) ........       94.5       113.7
                                                                     --------    --------

Total long and short-term debt after fair value adjustments ......   $  713.4    $  803.4
                                                                     ========    ========

Consumer notes:
   Notes payable, interest ranging from 1.75% to 6.25%
     due in varying amounts to 2032 ..............................   $1,550.4    $  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 SFAS No. 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.

At December 31, 2003, 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 25, 2003) 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, 2003. At December 31, 2003, the
Company had no outstanding borrowings under the agreement.

Aggregate maturities of long-term debt are as follows: 2004--$104.0 million;
2005--$28.5 million; 2006--$16.8 million; 2007--$12.7 million; 2008--$1.9
million; and thereafter--$455.0 million.


                                      F-43
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 8 -- Debt and Line of Credit - (continued)

Interest expense on debt, included in other operating costs and expenses, was
$49.6 million, $52.6 million and $59.0 million in 2003, 2002 and 2001,
respectively. Interest paid amounted to $46.2 million in 2003, $47.0 million in
2002 and $55.8 million in 2001.

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, gross of unamortized dealer fees, are as
follows: 2005--$22.1 million; 2006--$63.5 million; 2007--$99.0 million;
2008--$68.4 million; and thereafter--$1,327.7 million. As of December 31, 2003,
there are no maturities of consumer notes in 2004.

Interest expense on consumer notes, included in benefits to policyholders, was
$39.0 million and $2.5 million in 2003 and 2002, respectively. No interest
expense was incurred in 2001. Interest paid amounted to $29.8 million and $1.4
million in 2003 and 2002. No interest was paid in 2001.

Note 9 -- Sale/Leaseback Transaction and Other Lease Obligations

On March 14, 2003, the Company sold three of its Home Office complex properties
to Beacon Capital Partners for $910.0 million. As part of the transaction, the
Company entered into a long-term lease of the space it now occupies in those
buildings and plans on continuing to use them as its corporate headquarters. As
a result of the sale-leaseback transaction, the Company recognized a current
realized gain of $271.4 million and a deferred profit of $209.4 million. A
capital lease obligation of $90.0 million was recorded for one of the
properties, which has a 15 year lease term. The other two properties have
operating leases which range from 5 to 12 years. The Company also provided
Beacon Capital Partners with a long-term sublease on the Company's parking
garage.

The future minimum lease payments by year and in the aggregate, under the
capital lease and under noncancelable operating leases and future sublease
rental income on the garage are presented below:

<TABLE>
<CAPTION>
                                                                       Noncancelable
                                                           Capital       operating      Sub-lease
                                                            Lease         leases      rental income
                                                           ----------------------------------------
                                                                      (in millions)
<S>                                                         <C>           <C>             <C>
2004 ...................................................    $  8.8        $ 36.2          $  1.3
2005 ...................................................       8.8          36.1             1.3
2006 ...................................................       8.8          36.1             1.3
2007 ...................................................       8.8          31.2             1.3
2008 ...................................................       8.8          29.7             1.3
Thereafter .............................................      88.6         130.6            77.2
                                                            ------        ------          ------
Total minimum lease payments ...........................     132.6        $299.9          $ 83.7
                                                                          ======          ======
Amounts representing interest ..........................     (46.3)
                                                            ------
Present value of net minimum lease payments ............      86.3

Current portion of capital lease obligation ............      (8.8)
                                                            ------
    Total ..............................................    $ 77.5
                                                            ======
</TABLE>


                                      F-44
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Minority Interest

Minority interest relates equity interests in a consolidated partnership. For
financial reporting purposes, the assets, the liabilities, and earnings of the
partnership are consolidated in the Company's financial statements. The minority
interest of $5.1 million on the consolidated balance sheets in the equity of the
consolidated partnership reflects the original investment by minority
shareholders in the consolidated partnership, along with their proportional
share of the earnings or losses of this partnership.

Note 11 -- Reinsurance

The effect of reinsurance on life, health, and annuity premiums written and
earned was as follows:

<TABLE>
<CAPTION>
                                              2003                         2002                          2001
                                            Premiums                     Premiums                      Premiums
                                     Written        Earned        Written        Earned         Written        Earned
                                     -----------------------------------------------------------------------------------
                                                                       (in millions)

<S>                                  <C>           <C>           <C>           <C>             <C>           <C>
   Direct........................    $ 2,816.3     $ 2,813.5     $  2,570.1    $  2,565.0      $  3,076.8    $  3,080.7
   Assumed.......................        690.5         690.5          469.3         469.3           427.7         427.7
   Ceded.........................     (1,464.6)     (1,464.6)      (1,050.1)     (1,050.1)       (1,156.5)     (1,156.5)
                                     ------------------------  ----------------------------  ---------------------------
     Net life, health and
     annuity premiums............    $ 2,042.2     $ 2,039.4     $  1,989.3    $  1,984.2      $  2,348.0    $  2,351.9
                                     ========================  ============================  ===========================
</TABLE>

For the years ended December 31, 2003, 2002 and 2001, benefits to policyholders
under life, health and annuity ceded reinsurance contracts were $474.6 million,
$645.9 million and $552.7 million, respectively.

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 to 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 to 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, 2003, would not be material.

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


                                      F-45
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 12 -- 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 funded qualified and
unfunded 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 under applicable law. Prior to
2002, pension benefits under the defined benefit plans were 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 defined benefit pension plans paid to employees and
retirees were $167.7 million in 2003, $161.0 million in 2002 and $127.1 million
in 2001.

The Company uses a December 31 measurement date.

Defined contribution plans include the Investment Incentive Plan and the Savings
and Investment Plan. The expense for defined contribution plans was $9.6
million, $10.4 million, and $10.6 million in 2003, 2002 and 2001, respectively.

In addition to the Company defined benefit pension plans, the Company has
employee welfare plans for medical 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
coverage is 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. Dental
insurance is provided to eligible pre-January 1, 1992 retired employees.

On December 8, 2003, President Bush signed into law a bill that expands
Medicare, primarily by adding a prescription drug benefit for Medicare-eligible
retirees starting in 2006. The company anticipates that the benefits it pays
after 2006 will be lower as a result of the new Medicare provisions; however,
the retiree medical obligations and costs reported do not reflect the impact of
this legislation. Deferring the recognition of the new Medicare provisions'
impact is permitted by Financial Accounting Standards Board Staff Position 106-1
due to open questions about some of the new Medicare provisions and a lack of
authoritative accounting guidance about certain matters. The final accounting
guidance could require changes to previously reported information.


                                      F-46
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 12 -- Pension Benefit Plans and Other Postretirement Benefit Plans -
(continued)

Obligations and Funded Status:

<TABLE>
<CAPTION>
                                                                           Years Ended December 31,
                                                    ------------------------------------------------------------------------
                                                           2003             2002               2003             2002
                                                    ------------------------------------------------------------------------
                                                                                 (in millions)
                                                                                               Other Postretirement
                                                             Pension Benefits                        Benefits
<S>                                                       <C>               <C>               <C>               <C>
Change in benefit obligation:
   Benefit obligation at beginning of year.........       $2,029.3          $1,933.1          $ 584.3           $ 441.4
   Service cost....................................           25.8              27.8              1.5               4.0
   Interest cost...................................          130.5             133.9             35.3              33.5
   Amendments......................................             --               9.9            (54.3)               --
   Actuarial loss..................................          156.9              91.9             93.3             143.9
   Benefits paid...................................         (167.7)           (161.0)           (43.9)            (37.4)
   Curtailment.....................................           --                (6.3)            (0.8)             (1.1)
                                                    ------------------------------------  ----------------------------------
   Benefit obligation at end of year...............        2,174.8           2,029.3            615.4             584.3
                                                    ------------------------------------  ----------------------------------

Change in plan assets:
   Fair value of plan assets at beginning
     of year.......................................        1,861.0           2,196.9            204.2             245.7
   Actual return on plan assets....................          393.4            (201.5)            44.8             (25.5)
   Employer contribution...........................           14.5              26.6             32.0              21.4
   Employee contribution...........................             --                --              4.2               3.9
   Benefits paid...................................         (167.7)           (161.0)           (48.2)            (41.3)
                                                    ------------------------------------  ----------------------------------
   Fair value of plan assets at end of year........        2,101.2           1,861.0            237.0             204.2
                                                    ------------------------------------  ----------------------------------

Funded status......................................          (73.6)           (168.3)          (378.4)           (380.1)
Unrecognized actuarial loss........................          401.1             511.5            157.1              98.8
Unrecognized prior service cost....................           55.3              67.9            (81.2)            (42.3)
Unrecognized net transition asset..................             --               0.1               --                --
                                                    ------------------------------------  ----------------------------------
Prepaid (accrued) benefit cost, net................       $  382.8          $  411.2          $(302.5)          $(323.6)
                                                    ====================================  ==================================

Amounts recognized in the consolidated
  balance sheets:
     Prepaid benefit cost..........................         $569.4          $  581.7
     Accrued benefit liability including minimum
       liability...................................         (317.0)           (275.1)
     Intangible asset..............................            0.1               0.1
     Accumulated other comprehensive
       income......................................          130.3             104.5
                                                    ------------------------------------
Net amount recognized..............................       $  382.8          $  411.2
                                                    ====================================
</TABLE>

The accumulated benefit obligations for all defined benefit pension plans was
$2,076.5 million and $1,897.2 million at December 31, 2003 and 2002,
respectively.


                                      F-47
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 12 -- Pension Benefits Plans and Other Postretirement Benefit Plans -
(continued)

Information for pension plans with accumulated benefit obligations in excess of
plan assets:

                                                      Years Ended December 31,
                                                     --------------------------
                                                      2003                2002
                                                      ----                ----
                                                           (in millions)
Projected benefit obligation.....................     $337.2           $301.9
Accumulated benefit obligation...................      317.9            280.2
Fair value of plan assets........................        0.9              5.1

Components of Net Periodic Benefit cost:

<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                            -------------------------------------------------
                                                             2003          2002          2003          2002
                                                             ----          ----          ----          ----
                                                                            (in millions)
                                                            -------------------------------------------------
                                                                                       Other Postretirement
                                                              Pension Benefits               Benefits
                                                            ------------------------------------------------
<S>                                                         <C>           <C>           <C>           <C>
Service cost ........................................       $  25.9       $  27.8       $  1.6        $  4.0
Interest cost .......................................         130.5         133.9         35.3          33.5
Expected return on plan assets ......................        (155.8)       (201.5)       (17.4)        (22.8)
Amortization of transition asset ....................           0.1           0.1           --            --
Amortization of prior service cost ..................           7.4           7.0         (6.6)         (3.2)
Recognized actuarial gain (loss) ....................          29.7           7.6          6.9          (1.9)
                                                            ---------------------       --------------------
Net periodic benefit (credit) cost ..................       $  37.8       $ (25.1)      $ 19.8        $  9.6
                                                            =====================       ====================
</TABLE>

Additional Information:

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                          2003      2002                2003     2002
                                                          ----      ----                ----     ----
                                                                          (in millions)
                                                        ---------------------------------------------------
                                                                                     Other Postretirement
                                                           Pension Benefits                Benefits
                                                        ---------------------------------------------------
<S>                                                         <C>      <C>
Increase in minimum liabilities included in
 other comprehensive income..........................       $25.8    $41.2               N/A      N/A
</TABLE>


                                      F-48
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 12 -- Pension Benefits Plans and Other Postretirement Benefit Plans -
(continued)

Assumptions:

Weighted-average assumptions used to determine benefit obligation:

<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                                         2003         2002        2003      2002
                                                                      (in millions)
                                                       ---------------------------------------------
                                                                               Other Postretirement
                                                          Pension Benefits          Benefits
                                                       ---------------------------------------------
<S>                                                      <C>          <C>       <C>        <C>
Discount rate .......................................    6.25%        6.75%      6.25%      6.75%
Rate of compensation increase .......................    3.00%        3.50%       N/A        N/A
Health care trend rate for following year ...........                           11.00%     10.00%
Ultimate trend rate .................................                            5.25%      5.25%
Year ultimate rate reached ..........................                            2010       2008
</TABLE>

Weighted-average assumptions used to determine net periodic benefit cost:

<TABLE>
<CAPTION>
                                                               Years Ended December 31,
                                                        2003         2002        2003      2002
                                                        ----         ----        ----      ----
                                                                      (in millions)
                                                       ---------------------------------------------
                                                                              Other Postretirement
                                                         Pension Benefits           Benefits
                                                       ---------------------------------------------
<S>                                                     <C>          <C>       <C>         <C>
Discount rate .......................................   6.75%        7.25%      6.75%      7.25%
Expected long-term return on plan assets ............   8.75%        9.50%      8.75%      9.50%
Rate of compensation increase .......................   3.50%        4.25%       N/A        N/A
Health care trend rate for following year ...........                          10.00%      8.00%
Ultimate trend rate .................................                           5.25%      5.25%
Year ultimate rate reached ..........................                           2008       2006
</TABLE>

The Company generally determines the assumed long-term rate of return on plan
assets based on the rate expected to be earned for plan assets. The asset mix
based on the long-term investment policy and range of target allocation
percentages of the plans and the Capital Asset Pricing Model are used as part of
that determination. Current conditions and published commentary/guidance from
SEC staff suggestions are also considered.

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 service and interest costs in 2003.........................         $ 3.2             $ (2.9)
Effect on postretirement benefit obligations as of December 31, 2003.......          46.2              (43.1)
</TABLE>


                                      F-49
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 12 -- Pension Benefits Plans and Other Postretirement Benefit Plans -
(continued)

Plan Assets

The Company's weighted-average asset allocations for its plans at December 31,
2003 and 2002, by asset category are as follows:

                                                             Pension
                                                           Plan Assets
                                                         at December 31,
                                                  ------------------------------
                                                      2003            2002
                                                  ------------------------------
Asset Category
Equity securities..............................         69%              64%
Fixed maturity securities......................         24%              27%
Real estate....................................          2%               4%
Other..........................................          5%               5%
                                                  -------------   --------------
         Total.................................        100%             100%
                                                  =============   ==============

The target allocation for assets of the Company's pension plans is summarized
below for major assets categories.

Asset Category
Equity securities..............................            50%-80%
Fixed maturity securities......................            25%-35%
Real estate....................................             1%-5%
Other..........................................            --%-18%

The plans do not own any of the Company's common stock at December 31, 2003 and
2002.

Other postretirement benefit plan weighted-average asset allocations at December
31, 2003 and 2002, by asset category are as follows:

                                                Other Postretirement Benefits
                                                         Plan Assets
                                                       at December 31,
                                                ------------------------------
                                                    2003            2002
                                                ------------------------------
Asset Category
Equity securities ........................            61%              58%
Fixed maturity securities ................            38%              41%
Real estate ..............................            --%              --%
Other ....................................             1%               1%
                                                -------------   --------------
         Total ...........................           100%             100%
                                                =============   ==============

Plan assets for other post retirement benefits for non-union employees are
comprised of an irrevocable health insurance contract and a 401(h) account under
the pension plan. The plan assets for other postretirement benefits for other
employees are held in a 401(h) account under the pension plan. The plan assets
underlying the insurance contract have target allocations of approximately 60%
equity securities and 40% fixed maturity securities. The plan assets in the
401(h) account of the pension have target allocations identified to the target
allocations shown above for assets in the pension benefits account.

Cash Flows

Contributions. The Company's funding policy for its 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 2003, there were no
contributions made to these qualified plans. In 2002, $3.0 million was
contributed to these qualified plans. Of the $3.0 million contributed in 2002,
$3.0 million was contributed to only one plan to ensure that the


                                      F-50
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 12 -- Pension Benefit Plans and Other Postretirement Benefit Plans -
(continued)

plan's assets continued to exceed the plan's Accumulated Benefit Obligation.
This contribution is not deductible for 2002 but was deductible in 2003. The
funding policy for its non-qualified defined benefit plans is to contribute the
amount of the benefit payments made during the year. In 2003 and 2002, $14.5
million and $23.5 million, respectively, were contributed to the non-qualified
plans. The Company expects to contribute approximately $2 million to its
qualified pension plans in 2004 and approximately $25 million to its
non-qualified pension plans in 2004.

The Company's policy is to fund its other post retirement benefits in amounts at
or below the annual tax qualified limits.

The Company expects to contribute approximately $50 million to its other post
retirement benefit plans in 2004.

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.

Obligations and Funded Status:

<TABLE>
<CAPTION>
                                                                                      Years Ended December 31,
                                                               --------------------------------------------------------------------
                                                                             2003                               2002
                                                               ---------------------------------  ---------------------------------
                                                                                          (in millions)
                                                               Qualified  Nonqualified             Qualified  Nonqualified
                                                                 Plans       Plans       Total       Plans        Plans      Total
                                                               ---------------------------------  ---------------------------------
<S>                                                            <C>         <C>         <C>         <C>         <C>         <C>
Benefit obligation at the end of year ......................   $1,837.7    $  337.1    $2,174.8    $1,727.4    $  301.9    $2,029.3
Fair value of plan assets at end of year ...................    2,100.3         0.9     2,101.2     1,855.8         5.2     1,861.0
                                                               ---------------------------------  ---------------------------------
Funded status (assets less obligations) ....................      262.6      (336.2)      (73.6)      128.4      (296.7)     (168.3)
Unrecognized net actuarial loss ............................      240.9       160.2       401.1       374.7       136.8       511.5
Unrecognized prior service cost ............................       65.9       (10.6)       55.3        78.6       (10.7)       67.9
Unrecognized transition liability ..........................         --          --          --          --         0.1         0.1
                                                               ---------------------------------  ---------------------------------
Prepaid (accrued) benefit cost .............................   $  569.4    $ (186.6)   $  382.8    $  581.7    $ (170.5)   $  411.2
                                                               =================================  =================================

Amounts recognized in the consolidated balance sheets:
Prepaid benefit cost .......................................   $  569.4          --    $  569.4    $  581.7          --    $  581.7
Accrued benefit liability including
   minimum liability .......................................         --    $ (317.0)     (317.0)         --    $ (275.1)     (275.1)
Intangible asset ...........................................         --         0.1         0.1          --         0.1         0.1
Accumulated other comprehensive income .....................         --       130.3       130.3          --       104.5       104.5
                                                               ---------------------------------  ---------------------------------
Net amount recognized ......................................   $  569.4    $ (186.6)   $  382.8    $  581.7    $ (170.5)   $  411.2
                                                               =================================  =================================

Components of net periodic benefit cost:

Service cost ...............................................   $   24.1    $    1.8    $   25.9    $   26.1    $    1.7    $   27.8
Interest cost ..............................................      111.0        19.5       130.5       115.9        18.0       133.9
Expected return on plan assets .............................     (155.6)       (0.2)     (155.8)     (201.3)       (0.2)     (201.5)
Amortization of transition asset ...........................         --         0.1         0.1          --         0.1         0.1
Amortization of prior service cost .........................        7.5        (0.1)        7.4         6.5         0.5         7.0
Recognized actuarial gain ..................................       20.1         9.6        29.7         1.5         6.1         7.6
                                                               ---------------------------------  ---------------------------------
Net periodic benefit (credit) cost .........................   $    7.1    $   30.7    $   37.8    $  (51.3)   $   26.2    $  (25.1)
                                                               =================================  =================================
</TABLE>

Note 13 -- Commitments, Guarantees and Contingencies

Commitments. The Company has extended commitments to purchase fixed maturity
investments, preferred and common stock, other invested assets and to issue
mortgage loans on real estate totaling $482.6 million, $182.0 million, $800.8
million and $646.5 million, respectively, at December 31, 2003. If funded, loans
related to real estate mortgages would be fully collateralized by the mortgaged
properties. The Company monitors the creditworthiness of borrowers under
long-term


                                      F-51
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 13 -- Commitments, Guarantees and Contingencies - (continued)

bond commitments and requires collateral as deemed necessary. The estimated fair
values of the commitments described above aggregate $2.2 billion at December 31,
2003. The majority of these commitments expire in 2004.

Guarantees. In the course of business the Company enters into guarantees which
vary in nature and purpose and which are accounted for and disclosed under
accounting principles generally accepted in the U.S, specific to the insurance
industry. The following guarantee falls outside the scope of insurance
accounting and is disclosed pursuant to FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others".

      o     The Company guarantees certain mortgage securitizations transactions
            the Company entered into with FNMA and FHLMC. These guarantees will
            persist until the pool of mortgages are paid off in full by the
            mortgagees. The Company must perform under these guarantees where
            the mortgagees fail to repay their mortgages. The maximum amount of
            future payments the Company may be required to make pursuant to the
            guarantees is up to 12.25% of the total principal and interest for
            FNMA securitization, or $13.2 million, and up to 10.50% of total
            principal and interest for the FHLMC securitization, or $14.6
            million at December 31, 2003.

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 $3.2 million and
$11.9 million at December 31, 2003 and 2002, respectively. The Company incurred
no costs related to the settlement in 2003 or 2002. 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.

Administration of the ADR component of the settlement is substantially complete.
Although some uncertainty remains as to the cost of the remaining 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. Beginning in 1983, the Company became involved in complex
litigation known as Harris Trust and Savings Bank, as Trustee of Sperry Master
Retirement Trust No. 2 v. John Hancock Mutual Life Insurance Company (S.D.N.Y.
Civ. 83-5491). After successive appeals to the Second Circuit and to the U.S.
Supreme Court, the case was remanded to the District Court and tried by a
Federal District Court judge in 1997. The judge issued an opinion in November
2000.

In that opinion the Court found against the Company and awarded the Trust
approximately $13.8 million in relation to this claim together with unspecified
additional pre-judgment interest on this amount from October 1988. The Court
also found against the Company on issues of liability valuation and ERISA law.
Damages in the amount of approximately $5.7 million, together with unspecified
pre-judgment interest from December 1996, were awarded on these issues. As part
of the relief, the judge ordered the removal of Hancock as a fiduciary to the
plan. On April 11, 2001, the Court entered a judgment against the Company for
approximately $84.9 million, which includes damages to the plaintiff,
pre-judgment interest, attorney's fees and other costs.

On May 14, 2001 the Company filed an appeal in this case. On August 20, 2002,
the Second Circuit Court of Appeals issued a ruling, affirming in part,
reversing in part, and vacating in part the District Court's judgment in this
case. The Second Circuit Court of Appeals' opinion overturned substantial
portions of the District Court's opinion, representing the vast majority of the
lower court's award of damages and fees, and sent the matter back to the
District Court for further proceedings.

The action has been dismissed and the settlement consummated as of December 11,
2003. The settlement costs were paid in 2003.


                                      F-52
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 13 -- Commitments, Guarantees and Contingencies - (continued)

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

Note 14 -- Shareholder's Equity

Common Stock

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.

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, 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 deferred income tax benefit 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
                                                     ----------------------------------------------------------------------
</TABLE>


                                      F-53
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 14 -- 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, 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 expense 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 benefit 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
                                                         =================================================================

Gross unrealized gains (losses) (net of
   deferred income tax expense of $504.6 million) ....   $  937.7            --           --            --        $  937.7
Reclassification adjustment for gains
   (losses), realized in net income (net of
   income tax expense of $130.6 million) .............      242.5            --           --            --           242.5
Adjustment for participating group annuity
   contracts (net of deferred income tax
   benefit of $22.0 million) .........................      (40.9)           --           --            --           (40.9)
Adjustment for deferred policy acquisition
   Costs and present value of future profits
   (net of deferred income tax benefit of
   $59.1 million) ....................................     (109.8)           --           --            --          (109.8)
Adjustment for policyholder dividend obligation
   (net of deferred income tax benefit of
   $59.2 million) ....................................     (109.8)           --           --            --          (109.8)
Change in accounting principle (net of income
   tax expense of $53.8 million) .....................       99.9            --           --            --            99.9
                                                         -----------------------------------------------------------------
Net unrealized gains (losses) ........................    1,019.6            --           --            --         1,019.6
Foreign currency translation adjustment ..............         --            --         (0.1)           --            (0.1)
Minimum pension liability (net of deferred
   income tax benefit of $8.5 million) ...............         --            --           --         (15.8)          (15.8)
Net accumulated gains (losses) on cash
   flow hedges (net of income tax expense of
   $17.1 million) ....................................         --          31.7           --            --            31.7
                                                         -----------------------------------------------------------------
Balance at December 31, 2003 .........................   $1,332.6      $  226.1     $   (3.1)     $  (78.0)       $1,477.6
                                                         =================================================================
</TABLE>


                                      F-54
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 14 -- 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,
                                                                               2003            2002           2001
                                                                              -------------------------------------
                                                                                          (in millions)
<S>                                                                           <C>           <C>           <C>
Balance, end of year comprises:
   Unrealized investment gains (losses) on:
     Fixed maturities ....................................................    $ 2,574.4     $   839.8     $   294.1
     Equity investments ..................................................         83.1          42.1         129.2
     Derivatives and other ...............................................         81.5          41.7         205.0
                                                                              -------------------------------------
Total ....................................................................      2,739.0         923.6         628.3

Amounts of unrealized investment (gains) losses attributable to:
     Participating group annuity contracts ...............................           --         (90.8)        (49.0)
     Deferred policy acquisition costs and
       present value of future profits ...................................       (278.4)       (109.5)        (51.0)
     Policyholder dividend obligation ....................................       (422.9)       (253.9)       (145.2)
     Deferred Federal income taxes .......................................       (705.1)       (156.4)       (135.8)
                                                                              -------------------------------------
Total ....................................................................     (1,406.4)       (610.6)       (381.0)
                                                                              -------------------------------------

Net unrealized investment gains ..........................................    $ 1,332.6     $   313.0     $   247.3
                                                                              =====================================
</TABLE>

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 four permitted practices which relate to 1) an admitted
asset for the pension plan prepaid expense, 2) an admitted asset for the
start-up and launch costs due from the experience fund of the Federal Long-Term
Care Program, 3) an admitted asset for an after-tax ceding commission in the
acquisition of the fixed universal life insurance business of Allmerica
Financial and 4) the Company is allowed to carry the administrative rating
symbol of Z for a selected group of securities.

Prior to 2001, the Division had provided the Company approval to recognize as an
admitted asset the prepaid pension expense in respect to the Company's pension
plan. Beginning in 2001, the Division has provided the Company with approval to
phase-in over a three-year period the impact of implementing the material
provisions of SSAP No. 8, Pensions. As a result of this permitted practice, the
Company's reported capital and surplus for the 2003 and 2002 reporting period
was increased by $0 and $159.7 million, respectively.

During 2002, the Company received permission from the Division 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. As a result
of this permitted practice, the Company's reported capital and surplus for the
2002 reporting period was increased by $19.3 million. There was no permitted
practice for this item in 2003 thus no admitted asset for start-up and launch
costs in 2003.


                                      F-55
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 14 -- Shareholder's Equity - (continued)

On December 31, 2002, the Company entered into indemnity coinsurance agreements,
under which it assumed 100% of the liabilities for the fixed universal life
insurance blocks of Allmerica Financial Life Insurance and Annuity Company and
First Allmerica Financial Life Insurance Company. The Division provided the
Company approval to record the after-tax ceding commission of $51.1 million and
$60.5 million on the purchase as goodwill at December 31, 2003 and 2002,
respectively. This amount will be amortized over a ten year period. The impact
on net income was an amortization expense of $9.3 million in 2003. There was no
amortization expense in 2002. As a result of this permitted practice, the
Company's reported capital and surplus for the 2003 and 2002 reporting periods
was increased by $51.1 million and $60.5 million, respectively.

      The Company received permission from the Division to continue carrying the
administrative rating symbol of Z for a selected group of securities at December
31, 2003. As of March 4, 2004, 89% of the outstanding principle balance of these
securities have been rated by the Securities Valuation Office (SVO), and the
remaining securities have a high probability of being rated in the first quarter
of 2004. As a result of this permitted practice, the Company's reported capital
and surplus increased by less than 2%.

There are no other material permitted practices.

Statutory net income and surplus in the table below include the accounts of the
John Hancock Life Insurance Company.

                                       As of or for the Years Ended December 31
                                          2003          2002         2001
                                         ----------------------------------
                                                    (in millions)
Statutory net income ...............     $  441.7     $  210.4     $  631.4

Statutory surplus ..................     $3,789.9     $3,524.1     $3,513.6

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 15 -- 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


                                      F-56
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 15 -- Segment Information - (continued)

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 Program, certain corporate operations, and non-core businesses, those that
are either disposed or in run-off. The International Group Program consists of
an international network of insurers that coordinate and/or reinsure group life,
health, disability and pension coverage for foreign and globally mobile
employees of multinational companies. 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 non-core 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 Note
1 - 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) during 2002 and 2001restructuring costs related to reducing staff in the
      home office and terminating certain operations outside the home office;

(iv)  the 2001 surplus tax applicable to mutual life insurance companies which
      are no longer applicable to the Company;

(v)   cumulative effect of accounting changes.


                                      F-57
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 15 -- 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
2003                                                    Protection    Gathering      G&SFP     Management   and Other  Consolidated
                                                        --------------------------------------------------------------------------
<S>                                                     <C>          <C>          <C>          <C>          <C>          <C>
Revenues:
   Revenues from external customers .................   $ 2,027.6    $   543.1    $    63.1    $   102.8    $   723.4    $ 3,460.0
   Net investment income ............................     1,421.7        710.1      1,676.7         17.1        (26.2)     3,799.4
   Inter-segment revenues ...........................          --          1.2          0.4         25.1        (26.7)          --
                                                        --------------------------------------------------------------------------
   Segment revenues .................................     3,449.3      1,254.4      1,740.2        145.0        670.5      7,259.4
   Net realized investment and other
     gains (losses) .................................       (32.0)       (47.0)      (215.3)        (0.9)       341.9         46.7
                                                        --------------------------------------------------------------------------
   Revenues .........................................   $ 3,417.3    $ 1,207.4    $ 1,524.9    $   144.1    $ 1,012.4    $ 7,306.1
                                                        ==========================================================================
Net Income:
   Segment after-tax operating income ...............   $   371.8    $   194.3    $   287.4    $    29.8    $   (44.6)   $   838.7
   Net realized investment gains (losses) ...........       (20.9)       (30.2)      (133.2)        (0.5)       215.6         30.8
   Cumulative effect of accounting
     change, net of tax .............................       (42.2)        (4.5)      (232.3)          --           --       (279.0)
                                                        --------------------------------------------------------------------------
   Net income .......................................   $   308.7    $   159.6    $   (78.1)   $    29.3    $   171.0    $   590.5
                                                        ==========================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method .............   $    31.0    $    16.9    $    57.9    $     4.4    $    28.1    $   138.3
   Carrying value of investments accounted
     for under the  equity method ...................       410.2        249.2        586.1         13.1        686.0      1,944.6
   Amortization of deferred policy
     acquisition costs ..............................       184.7        111.4          2.3           --         (0.1)       298.3
   Interest expense .................................         0.2           --           --          6.1         43.3         49.6
   Income tax expense ...............................       174.3         74.4         52.1         17.8         26.7        345.3
   Segment assets ...................................    36,640.7     18,721.5     35,667.1      2,287.8      2,631.2     95,948.3
Net Realized Investment and other Gains
(Losses) Data:
   Net realized investment and other gains
     (losses) .......................................   $   (97.9)   $   (33.5)   $  (218.7)   $    10.6    $   341.9    $     2.4
   Less amortization of deferred policy
     acquisition costs related to net
     realized investment and other gains
     (losses) .......................................         7.4        (13.5)          --           --           --         (6.1)
   Less amounts credited to participating
     pension contractholder accounts ................          --           --          3.4           --           --          3.4
   Add amounts credited to the policyholder
     dividend obligation ............................        58.5           --           --           --           --         58.5
                                                        --------------------------------------------------------------------------
   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 ......       (32.0)       (47.0)      (215.3)        10.6        341.9         58.2
   Less net realized investment and other
     (gains) losses attributable to
     mortgage securitizations .......................          --           --           --        (11.5)          --        (11.5)
                                                        --------------------------------------------------------------------------
   Net realized investment and other gains
     (losses), net-pre-tax adjustment made
     to calculate segment operating income ..........       (32.0)       (47.0)      (215.3)        (0.9)       341.9         46.7
   Less income tax effect ...........................        11.1         16.8         82.1          0.4       (126.3)       (15.9)
                                                        --------------------------------------------------------------------------
   Net realized investment and other gains
     (losses), net-after-tax adjustment made
     to calculate segment operating income ..........   $   (20.9)   $   (30.2)   $  (133.2)   $    (0.5)   $   215.6    $    30.8
                                                        ==========================================================================
</TABLE>


                                      F-58
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 15 -- Segment Information - (continued)

<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 ...........   $ 1,949.2    $   571.0    $    64.5    $    76.0    $   702.5    $ 3,363.2
   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 ...........................     3,259.9      1,147.8      1,768.4        124.6        643.5      6,944.2
   Net realized investment and other
      gains (losses) ..........................       (66.0)       (42.5)      (313.8)         0.4        (29.5)      (451.4)
                                                  --------------------------------------------------------------------------
   Revenues ...................................   $ 3,193.9    $ 1,105.3    $ 1,454.6    $   125.0    $   614.0    $ 6,492.8
                                                  ==========================================================================
Net Income:
   Segment after-tax operating income .........   $   310.6    $   130.7    $   268.7    $    21.2    $    43.4    $   774.6
   Net realized investment gains (losses) .....       (42.0)       (25.7)      (199.6)         0.4        (18.9)      (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 .................................   $   244.2    $    98.9    $    68.5    $    20.8    $    26.5    $   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
   Carrying value of investments accounted
      for under the  equity method ............       213.0        137.6        387.3         11.4        631.4      1,380.7
   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 .........................       133.6         42.5         17.6         12.2        (97.3)       108.6
   Segment assets .............................    31,803.2     16,052.8     34,967.0      2,370.8      2,613.2     87,807.0
Net Realized Investment and other Gains
(Losses) Data:
   Net realized investment and other gains
      (losses) ................................   $   (88.7)   $   (70.9)   $  (337.1)   $     1.6    $   (29.5)   $  (524.6)
   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 .........          --           --         23.3           --           --         23.3
   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 .......       (66.0)       (42.8)      (313.8)         1.6        (29.5)      (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 ...       (66.0)       (42.5)      (313.8)         0.4        (29.5)      (451.4)
   Less income tax effect .....................        24.0         16.8        114.2           --         10.6        165.6
                                                  --------------------------------------------------------------------------
   Net realized  investment and other gains
      (losses), net-after-tax adjustment
      made to calculate segment operating
      income ..................................   $   (42.0)   $   (25.7)   $  (199.6)   $     0.4    $   (18.9)   $  (285.8)
                                                  ==========================================================================
</TABLE>


                                      F-59
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 15 -- 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    $   678.0    $   535.0    $    86.5    $   652.6    $ 3,748.3
   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      1,176.5      2,369.5        143.2        650.6      7,394.5
   Net realized investment and other
      gains (losses) ...........................       (98.1)       (54.8)      (121.1)        (0.2)        25.2       (249.0)
                                                   --------------------------------------------------------------------------
   Revenues ....................................   $ 2,956.6    $ 1,121.7    $ 2,248.4    $   143.0    $   675.8    $ 7,145.5
                                                   ==========================================================================
Net Income:
   Segment after-tax operating income ..........   $   284.3    $   148.3    $   238.0    $    29.8    $    55.4    $   755.8
   Net 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
   Carrying value of investments accounted
      for under the equity method ..............       121.5         87.7        212.0         11.2        629.7      1,062.1
   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-60
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 15 -- Segment Information (continued)

The Company operates primarily in the United States and also in Indonesia. In
addition, the International Group Program consists of a network of 52 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. The following table summarizes selected financial
information by geographic location for the year ended or at December 31:

                                                                  Income Before
                                                                Income Taxes and
                                                                   Cumulative
                                                                    Effect of
                                            Long-Lived             Accounting
Location                         Revenues     Assets     Assets      Changes
-----------------------------------------------------------------------------
                                               (in millions)
2003
United States ...............   $ 6,898.2   $   273.2   $95,849.4   $ 1,201.7
Foreign -- other ............       407.9         0.5        98.9        13.1
                                ---------------------------------------------
                                $ 7,306.1   $   273.7   $95,948.3   $ 1,214.8
                                =============================================
2002
United States ...............   $ 6,214.6   $   525.1   $87,719.6   $   556.8
Foreign -- other ............       278.2         0.6        87.4        10.7
                                ---------------------------------------------
                                $ 6,492.8   $   525.7   $87,807.0   $   567.5
                                =============================================
2001
United States ...............   $ 6,938.9   $   533.8   $81,052.9   $   761.4
Foreign -- other ............       206.6         0.6        71.8         6.0
                                ---------------------------------------------
                                $ 7,145.5   $   534.4   $81,124.7   $   767.4
                                =============================================

The Company has no reportable major customers and revenues are attributed to
countries based on the location of customers.


                                      F-61
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 16 -- 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 below 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 below.

The following methods and assumptions were used by the Company to determine the
fair values of its financial instruments:

      Fair values for publicly traded fixed maturities (including redeemable
      preferred stocks). Quarterly a review is made of the entire fixed maturity
      portfolio to assess credit quality, including a review of all impairments
      with the Life Company's Committee of Finance, 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 other-than-temporary impairments need to be recorded.
      The results of this quarterly analysis are reviewed by the Life 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 values 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 values for
      commercial paper and short-term borrowings approximate fair value.

      Fair values for the Company's guaranteed investment contracts, consumer
      notes, 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 account value adjusted for current market interest rates. 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 outstanding
      commitment.


                                      F-62
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 16 -- Fair Value of Financial Instruments (continued)

The following table presents the carrying values and fair values of the
Company's financial instruments:

<TABLE>
<CAPTION>
                                                                              December 31,
                                                         -------------------------------------------------------
                                                                    2003                         2002
                                                         -------------------------------------------------------
                                                          Carrying         Fair         Carrying         Fair
                                                           Value           Value         Value           Value
                                                         -------------------------------------------------------
                                                                              (in millions)
<S>                                                      <C>            <C>            <C>            <C>
Assets:
   Fixed maturities:
     Held-to-maturity ...............................    $ 1,488.7      $ 1,512.8      $ 1,727.0      $ 1,777.2
     Available-for-sale .............................     46,482.1       46,482.1       42,046.3       42,046.3
   Equity securities:
     Available-for-sale .............................        333.1          333.1          349.6          349.6
     Trading securities .............................          0.6            0.6            0.7            0.7
   Mortgage loans on real estate ....................     10,871.1       11,791.4       10,296.5       11,220.7
   Policy loans .....................................      2,019.2        2,019.2        2,014.2        2,014.2
   Short-term investments ...........................         31.5           31.5          137.3          137.3
   Cash and cash equivalents ........................      2,626.9        2,626.9          897.0          897.0
Derivatives:
     Futures contracts, net .........................           --             --            0.3            0.3
     Interest rate swap agreements ..................        192.7          192.7          165.4          165.4
     Interest rate swap CMT .........................          0.7            0.7            1.7            1.7
     Interest rate cap agreements ...................         28.2           28.2           15.9           15.9
     Interest rate floor agreements .................         76.0           76.0           93.2           93.2
     Currency rate swap agreements ..................        719.8          719.8          281.7          281.7
     Credit default swaps ...........................          1.9            1.9             --             --
     Equity collar agreements .......................          2.0            2.0           12.8           12.8

Liabilities:
   Consumer notes ...................................      1,550.4        1,473.0          290.2          272.9
   Debt .............................................        713.3          775.8          803.4          643.3
   Guaranteed investment contracts and
     funding agreements .............................     17,101.4       17,110.5       17,961.3       18,022.2
   Fixed rate deferred and immediate annuities ......     10,336.0       10,602.9        8,466.9        8,775.9
   Supplementary contracts
     without life contingencies .....................         56.6           61.6           52.8           59.1
Derivatives:
   Futures contracts, net ...........................          0.2            0.2            0.2            0.2
   Interest rate swap agreements ....................        839.3          839.3        1,229.1        1,229.1
   Interest rate swaption agreements ................          2.6            2.6            3.2            3.2
   Currency rate swap agreements ....................        677.0          677.0          156.8          156.8
   Equity collar agreements .........................           --             --             --             --
   Credit default swaps .............................          0.9            0.9             --             --
   Equity swaps .....................................           --             --             --             --
Commitments .........................................           --        2,168.0             --        1,537.9
</TABLE>


                                      F-63
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 17 -- Stock Compensation Plans

On January 5, 2000, the Life 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 Life Company, options granted may be either
non-qualified stock 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 the Company's common stock. In 2001, the
Board adopted and the 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 common stock available under the Long-Term
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 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 the Company's 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
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. Through December 31, 2002, 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 Company's annual meeting, each will
receive non-qualified stock option awards for 5,000 shares. As of January 1,
2003, in lieu of stock option grants made in prior year, the Board of Directors
receives an annual retainer paid in common stock transferred from the Non
Employee Director Long Term Stock Incentive Plan. The stock compensation granted
under the Incentive Plans contain various vesting provisions described in more
detail below. All outstanding stock compensation grants made prior to September
28, 2003 vest upon the change of control with Manulife, should that transaction
be approved by the shareholders and regulatory authorities. Pursuant to the
definitive merger agreement with Manulife, no stock compensation grants made
under the Incentive Plans subsequent to September 28, 2003 (except for
restricted stock and restricted deferred stock units issued to non-employee
directors on or before December 31, 2003) vest on the potential change in
control with Manulife.

<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                         21,566.6                         $ 34.59                           14,258.9

Equity compensation plans
not approved by JHFS
stockholders                               --                              --                                 --
                            ---------------------------     ----------------------------     --------------------------------

Total                                21,566.6                         $ 34.59                           14,258.9
                            ===========================     ============================     ================================
</TABLE>

The Incentive Plans have options exercisable at the dates listed in the table
below. JHFS granted 1.0 million options to the Company's employees during the
year ended December 31, 2003. Options outstanding under the Long-Term Incentive
Plan


                                      F-64
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 17 -- Stock Compensation Plans (continued)

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.
There were no options granted under the Non Employee Director Long Term Stock
Incentive Plan in 2003.

The status of stock options under the Incentive Plans are summarized below as of
December 31:

<TABLE>
<CAPTION>
                                                                               JHFS Shares
                                      Number of JHFS        Weighted-             subject        Weighted-average
                                          Shares             average          to exercisable         exercise
                                      (in thousands)     exercise price          options          price per share
                                      ----------------------------------------------------------------------------
<S>                                      <C>            <C>                     <C>               <C>
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
     Granted                              1,012.1            27.78
     Exercised                              881.6            20.52
     Canceled                               876.7            36.00

                                      ----------------------------------------------------------------------------
Outstanding at December 31, 2003         21,566.6       $    34.59             16,312.3           $    34.29
</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 option using the Black-Scholes
option valuation model was $5.79, $7.70 and $9.35, respectively, for the years
ending December 31, 2003, 2002 and 2001, using the following assumptions:

                                 2003            2002               2001
                          ------------------------------------------------------
Expected term                   3 years        3 years            3-5 years
Risk free rate (1)               2.51%          2.51%            4.6% - 6.0%
Dividend yield                   1.05%          1.05%               1.0%
Expected volatility              28.8%          28.8%               32.0%

(1)   Dependent on grant date.


                                      F-65
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 17 -- 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:

                                                Years Ended December 31,
                                         2003              2002            2001
                                                      (in millions)
Net income, as reported .............    $590.5           $458.9          $573.9
Add: Stock-based employee
       compensation expense
       included in reported net
       income, net of related tax
       effects ......................      14.4              3.5             1.0
Deduct: Total stock-based
       employee compensation
       expense determined under
       fair value method for all
       awards, net of related tax
       effects (unaudited) ..........      39.5             57.6            34.3
                                         ---------------------------------------
Pro forma net income
       (unaudited) ..................    $565.4           $404.8          $540.6
                                         =======================================

The following table summarizes information about stock options outstanding at
December 31, 2003:

<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      12/31/03          (years)        exercise price      12/31/03      exercisable options
-------------------------------------------------------------------------------------------------------------
                   (in thousands)                                       (in thousands)
<S>                     <C>                <C>              <C>             <C>                    <C>
$12.49 - $16.65          1,415.0           1.2              $13.94           1,415.0               $13.94
$20.81 - $24.97             31.8           1.6               23.58              31.8                23.58
$24.97 - $29.13          3,168.9           4.0               28.60           1,076.4                28.94
$29.13 - $33.30          1,133.2           3.8               30.44           1,008.2                30.52
$33.30 - $37.46          8,631.1           2.2               35.51           8,522.3                35.53
$37.46 - $41.62          7,186.6           2.9               40.99           4,258.6                40.78
-------------------------------------------------------------------------------------------------------------
                        21,566.6           2.7              $34.59          16,312.3               $34.29
                   ==========================================================================================
</TABLE>

Under the Signator Stock Option Program, pursuant to the Long-Term Stock
Incentive Plan, which was implemented in 2001, the Company granted 382,983 stock
options during February 2003 at a grant price of $26.89 per share. The Company
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, the Company 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 Signator Stock
Option Program grants over a 24-month period commencing on grant date at a fair
value of $5.60, $7.83, $8.44 and $9.24 per option determined by the
Black-Scholes Option valuation model for the February 2003, 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, 2003, 2002 and 2001 was $2.0 million,
$1.4 million and $1.3 million, respectively. The total grant date fair value of
the stock options granted under the program from January 1, 2002 through
December 31, 2002, is $2.1 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 2003, 2002 and 2001, 94,555, 67,457 and 4,737 stock options
were forfeited with a total grant date price of $3.3 million, $0.5 million and
$0.01 million, respectively. The outstanding option balance for the 2003, 2002
and 2001 grants under the Signator Stock Options Grant Program are 367,764,
238,002,


                                      F-66
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 17 -- Stock Compensation Plans (continued)

and 177,224, respectively, at December 31, 2003.

In 2003, the Company anticipates a $7.2 million tax deduction on its tax return
for employee stock option compensation. The Company plans to file its 2003 tax
return by September 15, 2004. In 2002 and 2001, the Company deducted $12.3
million and $12.4 million, respectively, on its tax return for employee stock
option compensation.

Stock Grants to Non-Executives

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 2003, 2002, and 2001, 1,939, 3,520, and 16,414 shares of
non-vested stock were forfeited with a total grant-date exercise price of $0.1
million, $0.1 million and $0.6 million, respectively. During 2003, $163,642
shares were vested. The outstanding share balance in the 2001 plan is 79,876 at
December 31, 2003.

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
2003 and 2002 1,487 and, 66 shares of non-vested stock were forfeited with a
total grant-date price of $0.1 million and $0.01 million, respectively. During
2003, 51,307 shares were vested. The outstanding share balance in the 2002 plan
is 101,040 at December 31, 2003.

During February 2003, the Company granted 23,076 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 $27.53 per
share. The grants of non-vested stock are forfeitable and, at the time of the
grant, vested at three years of service with the Company. The total grant-date
exercise price of the non-vested stock granted from January 1, 2003 through
December 31, 2003 is $0.6 million. During 2003, 1,412 shares of non-vested stock
were forfeited with a total-grant date price of $0.03 million. The outstanding
share balance in the 2003 plan is 21,664 at December 31, 2003.

On February 24, 2003, the Company received 149,100 shares at a weighted average
price of $27.88 per share as consideration for the payment of payroll taxes on
the vesting of the non-vested stock grant to key personnel. On this date, the
vesting characteristics of the non-executive stock grants changed from three
year cliff vesting to ratable vesting over three years, one-third per year.

Stock Grants to Executives

During 2001, the Company 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, 2003, 2002
and 2001, was $0.4, $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 2003 or 2002. The total outstanding share balance of these grants
is 58,749 at December 31, 2003.

During January 2002, the Company 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 periods ending
December 31, 2003 and December 31, 2002 was $4.6 million and $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 2003 or 2002. The outstanding share balance of this grant is
550,000 at December 31, 2003.


                                      F-67
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 17 -- Stock Compensation Plans (continued)

During February 2002, the Company 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 2003 or 2002. The outstanding share
balance of this grant is 87,401 at December 31, 2003.

During January 2003, the Company granted 1,150,000 shares of non-vested stock to
the Company's policy committee at a weighted average grant price per share of
$28.65. 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, 2003 is $12.2 million. The total grant-date exercise price of the non-vested
stock granted from January 1, 2003 through December 31, 2003 is $32.9 million.
During 2003, 245,646 shares of the January 2003 grant were vested and exchanged
to payoff loans under the Stock Ownership and Loan Program and related income
tax. The outstanding share balance of this grant is 904,354 at December 31,
2003.

During February 2003, the Company granted 27,305 total shares of non-vested
stock to the Company's policy committee. The program was funded with cash and
the shares were purchased from the Company at the weighted-average grant price
of $27.53 per share. The 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, 2003 through December 31, 2003 is
$0.8 million. There were no forfeitures of this grant during 2003. The
outstanding share balance in the 2003 plan is 27,305 at December 31, 2003.

During February 2003, the Company's executives purchased 68,382 shares from the
Company at a weighted average price of $27.53. This purchase was not made
pursuant to the Long Term Stock Incentive Plan and was not charged to the
remaining equity available under the plan. The transaction was executed at
market price to facilitate executives reaching required ownership levels.

Stock Grants to Board Members

During 2003 and 2002, the Company issued 11,158 and 7,504 shares to Non-Employee
Directors as payment of 25% and 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,
2003 through December 31, 2003 is $0.3 million, 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. As of July 1, 2003 the Company will match any investment at a rate of 25%.
Prior to July 1, 2003 the Company matched investments 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, 2003 and 2002, 506
and 484 shares were matched under the program at a weighted-average grant price
per share of $29.53 and $36.22, respectively. Of 484 shares matched in 2002, 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, 2003 and 2002 was $0.03 million and $0.04 million,
respectively.

During May 2003, the Company issued 21,696 shares to the Board of Directors as
payment of their annual retainer. 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, 2003 was $0.1 million. There
were no forfeitures through December 31, 2003.

Stock Compensation Activity Subsequent to Year End

During February 2004, 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 312,500 shares of
non-vested stock was granted, with a total grant date price of $12.9 million. A
total of 3.2 million options were granted, with a grant date fair value of $8.59
per


                                      F-68
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 17 -- Stock Compensation Plans - (continued)

option as determined by the Black-Scholes option valuation model. Pursuant to
the definitive merger agreement with Manulife, no stock compensation grants made
under the Incentive Plans subsequent to September 28, 2003 (except for
restricted stock and restricted deferred stock units issued to non-employee
directors on or before December 31, 2003, vest on the potential change in
control with Manulife. Accordingly, these stock compensation grants will not
vest as part of any change in control with Manulife.

Note 18--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 (JH Funds) 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 intangible assets in
accordance with SFAS No. 142. These management contracts are recorded at cost.

The following tables set forth certain summarized financial information relating
to the Company's purchased intangible assets as of the dates and periods
indicated.


                                      F-69
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 18 -- Goodwill and Other Intangible Assets - (continued)

<TABLE>
<CAPTION>
                                                                                           Accumulated
                                                                        Gross Carrying     Amortization     Net Carrying
                                                                            Amount      and Other Changes      Amount
                                                                        ------------------------------------------------
                                                                                          (in millions)
<S>                                                                         <C>             <C>                 <C>
December 31, 2003 Unamortizable intangible assets:
    Goodwill ......................................................         $166.7          $(58.1)             $108.6
    Management contracts ..........................................           13.3            (7.0)                6.3
Amortizable intangible assets:
    VOBA ..........................................................          205.9           (37.4)              168.5

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
</TABLE>

<TABLE>
<CAPTION>
                                                                                 For the Years Ended December 31,
                                                                        ------------------------------------------------
                                                                             2003              2002              2001
<S>                                                                           <C>             <C>                 <C>
Aggregate amortization expense                                                             (in millions)
Goodwill amortization, net of tax of $ - million, $ - million
   and $3.6 million, respectively .................................             --              --                $7.7
Management contract amortization, net of tax of $ - million, $ -
   million and $0.3 million, respectively .........................             --              --                 0.7
VOBA amortization, net of tax of $3.5 million, $1.1 million
   and $0.8 million, respectively .................................           $6.6            $2.0                 1.5
                                                                        ------------------------------------------------
Aggregate amortization expense, net of tax of $3.5 million, $1.1
   million, $4.7 million, respectively ............................           $6.6            $2.0                $9.9
                                                                        ================================================
</TABLE>


                                      F-70
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 18 -- Goodwill and Other Intangible Assets - (continued)

Estimated future aggregate amortization
expense for the years ended December 31,           Tax Effect       Net Expense
                                                   ----------------------------
                                                          (in millions)
2004..........................................       $ 4.1              7.6

2005..........................................         4.0              7.3

2006..........................................         3.8              7.0

2007..........................................         3.5              6.6

2008..........................................         3.3              6.1

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, 2003 .......     $ 66.1        $ 42.1         --        $  0.4         --           $108.6
Changes to goodwill during 2003:
    Amortization ..........................         --            --         --            --         --               --
    Goodwill acquired .....................         --            --         --            --         --               --
    Other adjustments .....................         --            --         --            --         --               --
                                                -------------------------------------------------------------------------
Goodwill balance at December 31, 2003 .....     $ 66.1        $ 42.1         --        $  0.4         --           $108.6
                                                =========================================================================
</TABLE>

<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-71
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 18 -- 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, 2003 .............    $177.2         --        --        --        --          $177.2
Amortization and other changes during 2003:
    Amortization ............................     (10.1)        --        --        --        --           (10.1)
    VOBA acquired ...........................        --         --        --        --        --              --
    Adjustment to unrealized
       gains on securities
       available-for-sale ...................      (2.8)        --        --        --        --            (2.8)
   Other adjustments (1) ....................       4.2         --        --        --        --             4.2
                                              ---------------------------------------------------------------------
VOBA balance at December 31, 2003 ...........    $168.5         --        --        --        --          $168.5
                                              =====================================================================
</TABLE>

(1)   An adjustment of $4.2 million was made to previously recorded VOBA
      relating to Allmerica Financial Corporation, to reflect refinements in
      methods and assumptions implemented upon finalization of transition.

<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, 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)   VOBA related to the Company's acquisition of Allmerica Financial
      Corporation.


                                      F-72
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 18 -- Goodwill and Other Intangible Assets - (continued)

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, 2003 ..........................      --         $5.2        --        --           --         $5.2
Amortization and other changes during 2003:
   Amortization ..............................      --           --        --        --           --           --
   Management contracts acquired (1) .........      --          1.1        --        --           --          1.1
                                                ---------------------------------------------------------------------
Management contracts balance at
    December 31, 2003 ........................      --         $6.3        --        --           --         $6.3
                                                =====================================================================
</TABLE>

(1)   This increase results from JH Fund's purchases of the management contracts
      for the US Global Leaders Fund, Classic Value Fund, and the Large Cap
      Select Fund in 2003.

<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 (1) ...........        --        3.2           --         --         --        3.2
                                                ---------------------------------------------------------------------
Management contracts balance at
    December 31, 2002 .......................        --       $5.2           --         --         --       $5.2
                                                =====================================================================
</TABLE>

(1)   This increase results from JH Fund's purchases of the management contracts
      for the U.S. Global Leaders Growth Funds and the Classic 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,
                                                       2003           2002          2001
                                                      ------------------------------------
                                                                  (in millions)
<S>                                                   <C>            <C>            <C>
Net income:
As reported ..................................        $590.5         $458.9         $573.9
Goodwill amortization, net of tax ............            --             --            7.7
Management contract amortization, net of tax .            --             --            0.7
                                                      ------------------------------------
Proforma (unaudited) .........................        $590.5         $458.9         $582.3
                                                      ====================================
</TABLE>


                                      F-73
<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 2003
and 2002:

<TABLE>
<CAPTION>
                                                              2003                                        2002
                                          ----------------------------------------------------------------------------------------
                                             March    June    September    December     March       June     September    December
                                         -------------------------------------------  --------------------------------------------
                                                                               (in millions)
<S>                                       <C>       <C>        <C>        <C>         <C>         <C>         <C>         <C>
Premiums and other
   considerations (1) .................   $  818.6  $  815.2   $  821.6   $  993.1    $  810.1    $  838.3    $  822.4    $  891.5
Net investment income .................      933.1     942.3      931.5      992.5       887.7       888.8       878.4       926.1
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 ...      105.4      78.3      (62.7)     (62.8)      (86.1)     (125.4)      (37.8)     (201.2)
                                          ------------------------------------------  --------------------------------------------
Total revenues ........................    1,857.1   1,835.8    1,690.4    1,922.8     1,611.7     1,601.7     1,663.0     1,616.4

Benefits and expenses (1) .............    1,470.3   1,469.5    1,493.1    1,658.4     1,431.4     1,475.8     1,494.6     1,523.5
                                          ------------------------------------------  --------------------------------------------

Income before income taxes and
   cumulative effect of accounting
   change .............................      386.8     366.3      197.3      264.4       180.3       125.9       168.4        92.9
                                          ------------------------------------------  --------------------------------------------

Cumulative effect of accounting
   change, net of tax .................         --        --         --     (279.0)         --          --          --          --

Net income ............................   $  271.0  $  257.7   $  157.7   $  (95.9)   $  131.8    $  101.6    $  133.3    $   92.2
                                          ==========================================  ============================================
</TABLE>

(1)   Prior year balances have been restated to reflect the reclassification of
      JHSS expense reimbursement from other operating costs and expenses to
      investment management revenues, commissions, and other fees.
      Reclassification was $6.5 million for the three months ended March 31,
      2002, $3.4 million for the three months ended June 30, 2002, $4.5 million
      for the three months ended September 30, 2002, and $8.6 million for the
      three months ended December 31, 2002.


                                      F-74
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                     SCHEDULE I -- SUMMARY OF INVESTMENTS -
                    OTHER THAN INVESTMENTS IN RELATED PARTIES
                             As of December 31, 2003
                                  (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 .............................   $   286.7       $   289.3       $   289.3
States, municipalities and political subdivisions ....       478.3           491.8           491.8
Foreign governments ..................................       233.7           254.3           254.3
Public utilities .....................................     4,362.1         4,697.8         4,697.8
Convertibles and bonds with warrants attached ........       366.2           413.4           413.4
All other corporate bonds ............................    37,617.5        39,735.2        39,735.2
Certificates of deposits .............................          --              --              --
Redeemable preferred stock ...........................       563.2           600.3           600.3
                                                         -----------------------------------------
Total fixed maturity securities, available-for-sale ..    43,907.7        46,482.1        46,482.1
                                                         -----------------------------------------
Equity securities, available-for-sale:
Common stocks:
Public utilities .....................................          --              --              --
Banks, trust and insurance companies .................          --              --              --
Industrial, miscellaneous and all other ..............       172.0           231.0           231.0
Non-redeemable preferred stock .......................        77.9           102.1           102.1
                                                         -----------------------------------------
Total equity securities, available-for-sale ..........       249.9           333.1           333.1
                                                         -----------------------------------------
Fixed maturity securities, held-to-maturity:
Bonds
United States government and government
agencies and authorities .............................          --              --              --
States, municipalities and political subdivisions ....       257.8           272.4           257.8
Foreign governments ..................................          --              --              --
Public utilities .....................................          --              --              --
Convertibles and bonds with warrants attached ........       142.0           142.0           142.0
All other corporate bonds ............................     1,088.9         1,098.4         1,088.9
Certificates of deposits .............................          --              --              --
Redeemable preferred stock ...........................          --              --              --
                                                         -----------------------------------------
Total fixed maturity securities, held-to-maturity ....     1,488.7         1,512.8         1,488.7
                                                         -----------------------------------------
</TABLE>

The condensed financial information should be read in conjunction with the
audited consolidated financial statements and notes thereto.


                                      F-75
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                     SCHEDULE I -- SUMMARY OF INVESTMENTS -
             OTHER THAN INVESTMENTS IN RELATED PARTIES - (CONTINUED)
                             As of December 31, 2003
                                  (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>
Equity securities, trading:
Common stocks:
Public utilities.....................................................             --                --               --
Banks, trust and insurance companies.................................             --                --               --
Industrial, miscellaneous and all other..............................            0.1               0.6              0.6
Non-redeemable preferred stock.......................................             --                --               --
                                                                       -----------------------------------------------------
Total equity securities, trading.....................................            0.1               0.6              0.6
                                                                       -----------------------------------------------------
Mortgage loans on real estate, net (1)...............................       10,937.0              XXXX         10,871.1
Real estate, net:
Investment properties (1)............................................          158.3              XXXX            121.9
Acquired in satisfaction of debt (1).................................            1.9              XXXX              1.9
Policy loans.........................................................        2,019.2              XXXX          2,019.2
Other long-term investments (2)......................................        2,912.2              XXXX          2,912.2
Short-term investments...............................................           31.5              XXXX             31.5
                                                                       -----------------------------------------------------
Total investments....................................................      $61,706.5         $48,328.6        $64,262.3
                                                                       =====================================================
</TABLE>

(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-76
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                     SCHEDULE III -- SUPPLEMENTARY INSURANCE
               INFORMATION As of December 31, 2003, 2002 and 2001
                      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>
2003:
Protection ...............     $ 2,772.9         $23,079.1         $   333.3         $   129.1         $ 1,543.5
Asset Gathering ..........         634.8          10,850.8                --               0.1              35.3
Guaranteed & Structured
   Financial Products ....           7.8          27,420.7              73.6               2.7              16.8
Investment Management ....            --                --                --                --                --
Corporate & Other ........           5.2             784.3                --              34.6             443.8
                               ---------------------------------------------------------------------------------
     Total ...............     $ 3,420.7         $62,134.9         $   406.9         $   166.5         $ 2,039.4
                               =================================================================================

2002:
Protection ...............     $ 2,657.8         $20,715.9         $   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             818.9                --              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 ..........         616.1           6,689.4                --               0.1              74.8
Guaranteed & Structured
   Financial Products ....           8.8          24,375.1              65.6               4.9             483.3
Investment Management ....            --                --                --                --                --
Corporate & Other ........           4.3           1,284.4                --              96.8             430.0
                               ---------------------------------------------------------------------------------
     Total ...............     $ 3,186.3         $50,718.1         $   346.0         $   203.8         $ 2,351.9
                               =================================================================================
</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-77
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                     SCHEDULE III -- SUPPLEMENTARY INSURANCE
               INFORMATION -- (CONTINUED) As of December 31, 2003,
               2002 and 2001 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

<S>                            <C>               <C>              <C>                  <C>
2003:
Protection ...............     $1,421.7          $1,893.6         $  184.7             $  343.6
Asset Gathering ..........        710.1             500.7            111.4                356.8
Guaranteed & Structured
   Financial Products ....      1,676.7           1,084.0              2.3                194.2
Investment Management ....         17.1                --               --                 97.0
Corporate & Other ........        (26.2)            370.9             (0.1)               414.4
                               ----------------------------------------------------------------
     Total ...............     $3,799.4          $3,849.2         $  298.3             $1,406.0
                               ================================================================

2002:
Protection ...............     $1,310.7          $1,787.6         $  171.1             $  345.9
Asset Gathering ..........        575.7             446.7            140.5                376.5
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)               300.7
                               ----------------------------------------------------------------
     Total ...............     $3,581.0          $3,805.2         $  313.4             $1,250.5
                               ================================================================

2001:
Protection ...............     $1,258.5          $1,603.3         $  171.3             $  345.9
Asset Gathering ..........        498.5             441.6             75.0                474.2
Guaranteed & Structured
   Financial Products ....      1,834.5           1,869.2              2.4                107.2
Investment Management ....         28.7                --               --                 97.9
Corporate & Other ........         26.0             414.0              0.3                224.1
                               ----------------------------------------------------------------
     Total ...............     $3,646.2          $4,328.1         $  249.0             $1,249.3
                               ================================================================
</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-78
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                           SCHEDULE IV -- REINSURANCE
  As of December 31, 2003, 2002 and 2001 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>
2003:
Life insurance in force...........       $291,130.3       $222,077.8        $75,965.3        $145,017.8          52.4%
                                    =======================================================================
Premiums:
Life insurance....................          2,037.1          1,036.6            491.7           1,492.2          33.0%
Accident and health
   Insurance......................            776.4            428.0            198.8             547.2          36.3%
                                    -----------------------------------------------------------------------
     Total........................       $  2,813.5       $  1,464.6        $   690.5        $  2,039.4          33.9%
                                    =======================================================================

2002:
Life insurance in force...........       $308,858.4       $179,098.5        $34,544.8        $164,304.7          21.0%
                                    =======================================================================
Premiums:
Life insurance....................          1,945.3            734.3            305.4           1,516.4          20.1%
Accident and health
   Insurance......................            619.7            315.8            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%
                                    =======================================================================
</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-79
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY


SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                    JOHN HANCOCK LIFE INSURANCE COMPANY


                                    By:     /s/ Thomas E. Moloney
                                            -----------------------------------
                                            Thomas E. Moloney
                                            Senior Executive Vice President and
                                            Chief Financial Officer
                                    Date:   March 5, 2004

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          March 5, 2004
                               Executive Officer and
                               Director Principal
                               Executive Officer)

/s/ Thomas E. Moloney
---------------------
Thomas E. Moloney              Senior Executive Vice               March 5, 2004
                               President and Chief
                               Financial Officer
                               (Principal Financial
                               and Accounting Officer)

/s/ Wayne A. Budd
-----------------
Wayne A. Budd                  Executive Vice President,           March 5, 2004
                               General Counsel and Director

/s/ John M. Connors, Jr.
------------------------
John M. Connors, Jr.           Director                            March 5, 2004

/s/ Robert E. Fast
------------------
Robert E. Fast                 Director                            March 5, 2004

/s/ Richard B. DeWolfe
----------------------
Richard B. DeWolfe             Director                            March 5, 2004

/s/ Thomas P. Glynn
-------------------
Thomas P. Glynn                Director                            March 5, 2004

/s/ Michael C. Hawley
---------------------
Michael C. Hawley              Director                            March 5, 2004
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

/s/ Edward H. Linde
-------------------
Edward H. Linde                            Director                March 5, 2004

/s/ Judith A. McHale
--------------------
Judith A. McHale                           Director                March 5, 2004

/s/ R. Robert Popeo
-------------------
R. Robert Popeo                            Director                March 5, 2004

/s/ Richard F. Syron
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Richard F. Syron                           Director                March 5, 2004

/s/ Robert J. Tarr, Jr.
-----------------------
Robert J. Tarr, Jr.                        Director                March 5, 2004

/s/ Foster L. Aborn
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Foster L. Aborn                            Director                March 5, 2004

/s/ John M. DeCiccio
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John M. DeCiccio                           Director                March 5, 2004

/s/ Robert J. Davis
-------------------
Robert J. Davis                            Director                March 5, 2004