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, 2004
                          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 March 28, 2005 there were outstanding 33,000 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

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

    ITEM 1.  BUSINESS OF JOHN HANCOCK LIFE INSURANCE COMPANY................   3
    ITEM 2.  PROPERTIES.....................................................  26
    ITEM 3.  LEGAL PROCEEDINGS..............................................  26
    ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............  26

PART II.....................................................................  27

    ITEM 5.  MARKET FOR JOHN HANCOCK LIFE INSURANCE COMPANY COMMON EQUITY,
             RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
             SECURITIES  ...................................................  27
    ITEM 6.  SELECTED FINANCIAL DATA........................................  27
    ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS......................................  28
    ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....  66
    ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................  69
    ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
             AND FINANCIAL DISCLOSURE.......................................  69
    ITEM 9A. CONTROLS AND PROCEDURES........................................  69
    ITEM 9B. OTHER INFORMATION..............................................  69

PART III....................................................................  70

    ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF JOHN HANCOCK LIFE
             INSURANCE COMPANY..............................................  70
    ITEM 11. EXECUTIVE COMPENSATION.........................................  70
    ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT.....................................................  70
    ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................  70
    ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.........................  70

PART IV.....................................................................  71

    ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
             ON FORM 8-K....................................................  71
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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.

      Effective April 28, 2004, Manulife Financial Corporation (Manulife)
acquired all of the outstanding common shares of JHFS that were not already
beneficially owned by Manulife as general fund assets and JHFS became a wholly
owned subsidiary of Manulife. The combined entity has a more diversified product
line and distribution capabilities and expects to have improved operating
efficiencies and a leading position across all its core business lines. Pursuant
to the terms of the acquisition, the holders of JHFS common shares received
1.1853 shares of Manulife stock for each JHFS common share. Approximately 342
million Manulife common shares were issued at an ascribed price of CDN $39.61
per share based on the volume weighted average closing stock price of the common
shares for the period from September 25, 2003 to September 30, 2003. In
addition, all of the JHFS unvested stock options as of the date of announcement
of the acquisition on September 28, 2003, vested immediately prior to the
closing date and were exchanged for options exercisable for approximately 23
million Manulife common shares. This Annual Report on Form 10-K reflects changes
to JHFS' and the Company's business which have occurred as a result of the
merger with Manulife through December 31, 2004 but does not assume changes to
JHFS' and the Company's business due to the merger that may occur in the future.
For additional information, refer to relevant JHFS and other related public
filings with the U.S. SEC relating to the merger. In order to more efficiently
manage its corporate structure, on October 7, 2004 Manulife transferred all of
its shares in JHFS to John Hancock Holdings (Delaware) LLC - a wholly-owned
subsidiary of Manulife.

      The merger was accounted for using the purchase method under Statement of
Financial Accounting Standards (SFAS) No. 141 "Business Combinations" and SFAS
No. 142 "Goodwill and Other Intangible Assets". Under the purchase method of
accounting, the assets acquired and liabilities assumed were recorded at
estimated fair value at the date of merger. The Company is in the process of
completing the valuations of a portion of the assets acquired and liabilities
assumed; thus, the allocation of the purchase price is subject to refinement,
refer to Note 1 - Change of Control and Note 2 - Summary of Significant
Accounting Policy.

      As a result of Manulife's merger with JHFS the Company renamed and
reorganized certain businesses within its operating segments to better align the
Company with its new parent, Manulife. The Company renamed the Asset Gathering
Segment as the Wealth Management Segment. Further aspects of the reorganization
of the Company included moving the Institutional Investment Management Segment
to the Corporate and Other Segment and moving Signator Investors, Inc. our agent
sales organization, from the Wealth Management Segment to the Protection
Segment, and moving group life, retail discontinued operations, discontinued
health insurance operations and creditor from the Corporate and Other Segment to
the Protection Segment. International Group Plans (IGP) remain in international
operations and John Hancock Accident remains in non-core business in our
Corporate and Other Segment while in Manulife's segment results IGP and John
Hancock Accident will be reported in Reinsurance. The financial statements for
all periods have been reclassified to conform to the current period
presentation.

      During most of 2004, the Company operated in four business segments: two
segments primarily served retail customers, one segment served institutional
customers, our fourth segment was the Corporate and Other Segment, which
includes our institutional advisory business, the remaining international
operations, and the corporate account. As of December 31, 2004, our retail
segments are the Protection Segment and the Wealth Management Segment,
previously called Asset Gathering Segment. Our segment serving both retail and
institutional customers is the Guaranteed and Structured Financial Products
Segment (G&SFP). In January 2005, the Company announced the transfer of the
G&SFP Segment to the Wealth Management Segment. This organizational change
reflects G&SFP's increasing focus on retail-oriented products and will enable
the company to better leverage the strong distribution channels of the Wealth
Management Segment with G&SFP's strong product development, risk management, and
immediate annuity servicing capabilities. G&SFP is presented as its own
operating segment for the discussion of 2004 results below.


                                        3
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Prior to the merger, the Company operated in the following five business
segments: two segments served primarily domestic retail customers, two segments
served primarily domestic institutional customers and our fifth segment was the
Corporate and Other Segment, which included our remaining international
operations, the corporate account and run-off from several discontinued business
lines. Our retail segments were the Protection Segment and the Asset Gathering
Segment. Our institutional segments were the Guaranteed and Structured Financial
Products (G&SFP) Segment and the Investment Management Segment. For additional
information about the Company's pre-merger business segments, please refer to
the Company's 2003 Form 10-K.

      Based on LIMRA sales data, which ranks participants within the United
States, as of September 30, 2004, John Hancock is the fifteenth largest writer
of individual life insurance; the tenth largest writer of individual variable
universal life insurance; the tenth largest writer of individual universal life
insurance; the second largest writer of individual long-term care insurance; the
largest provider of long-term care insurance in the employer sponsored group
market based on inforce premium; and the thirty 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, 2004.

      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 G&SFP Segment has begun targeting retail investors with new products such as
structured settlements, immediate fixed annuities and retail notes - sold
through a retail broker network. As previously discussed, in January 2005, the
Company announced the transfer of the G&SFP Segment to the Wealth Management
Segment. As a result of the transfer, going forward, the company will operate in
three segments.

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

      As of December 31, 2004 and 2003, respectively, our total assets under
management were $127.8 billion and $128.8 billion, which includes $31.3 billion
and $29.3 billion, respectively, of assets invested in the Company's retail
mutual funds. Total shareholder's equity was $10.3 billion and $7.6 billion as
of December 31, 2004 and 2003, respectively. In addition, John Hancock generated
$6.9 billion and $7.3 billion in revenues and $702.0 million and $590.5 million
in net income in 2004 and 2003 respectively. In 2004 and 2003, the Company
adopted new accounting pronouncements which resulted in a charge to earnings of
$3.3 million and $279.0 million, respectively; 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

      The Protection segment provides life and long term care insurance products
and services to select markets. The Individual Insurance operation focuses on
high net-worth and emerging affluent markets by providing estate and business
planning solutions with an array of life insurance products. The Long Term Care
business provides insurance to individuals and groups to cover the costs of long
term care services including nursing homes, assisted living care facilities,
adult day care, and at home care. The Segment uses a multi-channel distribution
network, which includes The John Hancock Financial Network, a career agency
system that offers innovative financial solutions to individuals, families and
businesses.

      The Protection Segment has traditionally been our largest business
segment, contributing 50.2%, 49.5% and 54.7% of consolidated revenues and 48.3%,
53.7% and 56.0% of consolidated net income in the years ended December 31, 2004,
2003 and 2002, respectively. The Protection Segment generated revenues of
$3,473.7 million, $3,619.0 million and $3,550.8 million and segment net income
of $339.3 million, $317.3 million and $257.2 million in 2004, 2003, and 2002,
respectively. The Protection Segment has achieved the following financial
results for the periods indicated:

                                                    As of or for the Years
                                                      Ended December 31,
                                            ----------------------------------
                                                2004        2003       2002
                                            ----------------------------------
                                                       (in millions)
Sales (new premiums and deposits)(1):
Individual insurance (2):
  Core ...............................      $   196.6   $   185.3   $   226.2
  Coli/Boli ..........................           40.6        85.4       106.1
Long-term care........................          145.2       299.4       201.9
                                            ----------------------------------
            Total.....................      $   382.4   $   570.1   $   534.2
                                            ==================================
Assets:
                                            ----------------------------------
  TotalProtection Segment.............      $43,559.9   $37,435.1   $32,763.7
                                            ==================================

----------
(1)   Sales represent a measure, fined 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. John Hancock provides an array of insurance solutions to meet
consumer's needs, from pure protection to retirement and estate planning.

Our products are marketed through a variety of distribution channels. The
success of product marketing is contingent upon the successful selling efforts
of career agents, insurance brokers, financial consultants and other
distributors of our products, who 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". With a diversified and competitive portfolio
of both fixed and variable individual insurance and long-term care products, in
addition to comprehensive sales support tools for producers, we have been able
to serve our customers in all market conditions, and generate strong business
and earnings growth.

   Individual Life Insurance

The Individual Insurance business offers traditional products such as term and
whole life, non-traditional products such as universal life and variable
universal life, as well as specialized Corporate Owned Life Insurance products.

Traditional Life Insurance Products: Our traditional life insurance products
include single life and survivorship whole life and term life insurance.
Survivorship 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. 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, but does not build up cash value, or pay a dividend.

Variable Life Insurance Products: Variable life provides life insurance coverage
and an investment return linked to an underlying portfolio of investments chosen


                                        5
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

by the policyholder. Our variable life insurance product portfolio includes
single life, survivorship, and corporate owned life insurance products.
Corporate owned life insurance products are sold to corporations for a variety
of reasons, including, funding deferred compensation plans and benefit programs
for key employees.

Universal Life Insurance Products: 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 increases based on a credited interest rate that is
periodically reset. These policies generally permit policyholders to use the
increase in cash value to vary the amount of insurance coverage as well as the
timing and amount of premium payments. Ideal for an unstable market environment,
universal products offer clients insurance protection and cash accumulation
without exposure to market volatility. Our universal life insurance product
portfolio also includes corporate owned life insurance products that 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.

Overall, the Individual Insurance business has a track record of being able to
rapidly develop and launch innovative products and features. Product development
in 2004 was focused on streamlining the product portfolio to a competitively
positioned, merged company platform. In 2005, all products (Manulife and John
Hancock) will be promoted under the John Hancock name to leverage the brand, and
a common set of underwriting guidelines will be implemented to improve the
selling experience.

   Long-Term Care Insurance

Long term care insurance reimburses the costs of care needed when an insured is
no longer able to perform the ordinary activities of daily living or is
cognitively impaired. The Long Term Care business manufactures and sells
individual and group insurance products. Individual policies are available for
sale to people between the ages of 18 and 84. Group products are designed for
employees of small to large employers or other affinity plan sponsors. Currently
John Hancock is the number two provider in the market overall, having expertise
in all aspects of the business from marketing and sales to claim processing.
Products meet "tax-qualified" regulatory requirements so that premiums may be
deductible when filing an itemized U.S. Tax Return, and the benefits are not
taxable. Our long-term care insurance products are reimbursement products, which
provide benefits only for documented nursing home, assisted living or home or
health care expenses. These products are sold on a guaranteed renewable basis,
meaning that we are required to renew the policies each year as long as the
premium is paid. However, this also gives us the ability to reset the price of
the product prospectively, if needed.

      o     Individual Long-Term Care Insurance: Our individual long-term care
            insurance products are sold mainly to pre-retired and retired
            individuals and couples. The insured typically pays the premium for
            this product.

      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.

      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 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.

      In 2005, Long Term Care will focus on enhancing existing product features
and flexibility in its next generation of individual and group products. In the
small business market (businesses with less than 500 employees), a new Long Term
Care product, will combine the advantages of a diverse individual distribution
network and a large group administration platform.


                                        6
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

John Hancock Financial Network

      John Hancock Financial Network is a nationally recognized career agency
distribution system that offers innovative financial solutions to individuals,
families and businesses. The network provides access to a broad variety of
proprietary and non-proprietary products and services to facilitate the sale of
wealth accumulation and protection oriented products. (For 2005 initiatives,
please refer to Distribution section.)

      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

                                                   As of or for the
                                                Years Ended December 31,
                                        --------------------------------------
                                            2004         2003         2002
                                        --------------------------------------
                                                      (in millions)
Total statutory premiums and deposits:

  Individual Insurance................  $  2,231.9   $  2,328.5   $  3,149.6
  Long-term care.....................        754.0        654.2        466.4
                                        --------------------------------------
      Total...........................  $  2,985.9   $  2,982.7   $  3,616.0
                                        ======================================
Life insurance in force:
  Individual Insurance................  $141,817.4   $142,682.1   $144,288.9
                                        ======================================
GAAP reserves:
  Individual Insurance................  $ 25,895.6   $ 24,264.2   $ 22,181.0
  Long-term care......................     3,340.0      2,198.2      1,702.9
                                        --------------------------------------
      Total...........................  $ 29,235.6   $ 26,462.4   $ 23,883.9
                                        ======================================

Distribution

      Individual insurance and long term care products are sold through a
multi-channel strategy that includes the company owned John Hancock Financial
Network as well as third-party distributors. The third-party channels utilized
are independent agents, brokerage general agents, producer groups,
broker-dealers, banks, and wire houses. The Protection Segment actively develops
and maintains its relationships with these distributors by providing technical
support, delivery of competitive products, and advance marketing and sales
support. Distribution and service initiatives in 2004 were principally focused
on ensuring no disruption to customers as the business integrated operations
subsequent to the merger.

      In 2005, Individual Insurance business distribution efforts will focus on
positioning the combined Manulife and John Hancock businesses as One Company by
promoting the John Hancock brand and by solidifying our strong shelf-space
position with key distribution partners. Service improvements will be
implemented through the continued integration of sales, marketing, and
administrative processes.

      Long Term Care distribution initiatives include expanding and deepening
relations with wire houses, broker-dealers, and under-serviced market niches.
Service enhancements include augmented distributor service capabilities, a
simplified sales process, and upgrades to the claims and care coordination
services.

      Another key initiative for the Protection Segment will be to grow the
newly re-branded John Hancock Financial Network agency system. This includes
increasing the number of agents, expanding into new and under-served markets,
and growing its distribution across the range of Protection and Wealth
Management products. Initiatives to facilitate this growth include the
implementation of enhanced agent training and support programs, and the
development of innovative compensation structures to continually promote sales
activity.


                                        7
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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.

      The Individual Insurance business has developed a reputation for expertise
in underwriting mortality risk, particularly for the older age market. The
underwriting area continually updates standards based on emerging trends and
medical developments in risk assessment, while producing experience consistent
with pricing assumptions. The business is also able to place large individual
insurance policies due to large retention limits of U.S. $20 million for single
lives and U.S. $25 million on survivorship cases.

      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.

      For individual long-term care insurance products, our underwriting is
based on historical morbidity experience, experience of the industry and general
population, and our underwriting criteria are 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.

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

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
before surrender charges, plus additional reserves established the merger
related purchase accounting (PGAAP). Cumulative account balances include
deposits plus credited interest less expense and mortality fees and withdrawals.
Future policy benefits for our traditional life, individual long-term care and
group long-term care insurance policies are calculated based on a set of
actuarial assumptions that we establish and maintain throughout the lives of the
policies. Our assumptions include investment yields, mortality, morbidity and
expenses. The reserves for the traditional life, individual long-term care and
group long-term care insurance policies were also fair valued in the merger
related purchase accounting (PGAAP).

Competition

      Each of the U.S. markets in which the Division operates is highly
competitive. Competitors in the individual insurance and long term care markets
vary across product lines, but are primarily other large insurance companies
that distribute via similar channels. Competitive advantage is based on the
ability to develop flexible product features to meet individual customer needs,
and develop and service a variety of distribution channels.

      Our competitive strengths include product innovation, underwriting
expertise, multiple distribution channels and high quality customer service. The
Company's competitive position is also enhanced due to scale from leading sales
positions in both the individual and long term care insurance markets, and to
the Company's strong financial strength and credit ratings.

Reinsurance

      As part of the Manulife group of companies subsequent to the merger, we
reinsure portions of the risks we assume for our protection insurance products.
The maximum amount of individual ordinary life insurance retained by us on any
life is $20 million under an individual policy and $25 million under a
second-to-die policy. As of January 1, 2001, we established additional


                                        8
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                       JOHN HANCOCK LIFE INSURANCE COMPANY

reinsurance programs, which limit our exposure to fluctuations in life insurance
claims for individuals for whom the net amount at risk is $3 million or more.

      As of January 1, 2001, the Company also entered into agreements with two
reinsurers covering 50% of its closed block business. One of these reinsurers is
Manulife. Effective April 28, 2004 the Company operates as a subsidiary of
Manulife. During the fourth quarter of 2004, the Company entered into an
additional agreement covering closed block policies with a Manulife affiliate in
order to facilitate its statutory capital management process. This transaction
increased the amount of reinsurance of the closed block with Manulife by 20%.
Effective December 31, 2003, the Company entered into an agreement with a third
reinsurer covering another 5% of its closed block business. The reinsurance
agreements 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, effective July
1, 2002, catastrophic reinsurance covering individual life insurance policies
written by all of its U.S. life insurance subsidiaries. Effective July 1, 2004,
the Company are covered by its parent's catastrophic reinsurance under its
global catastrophe reinsurance program which covers the entire Manulife group of
companies for losses in excess of $50 million up to $150 million. This global
catastrophe reinsurance covers all terrorist acts in Canada; in the United
States and elsewhere, nuclear, biological and chemical terrorist acts are not
covered. Should catastrophic reinsurance become unavailable to the Company in
the future, the absence of, or further limitations on, reinsurance coverage
could adversely affect the Company's future net income and financial position.

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


                                        9
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Wealth Management Segment

   Overview

      Through our Wealth Management 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, John
Hancock Signature Services, , and Essex Corporation, one of the nation's largest
intermediaries between banks and product manufacturers for annuities.

      The Wealth Management Segment contributed 15.9%, 14.7% and 14.3% of
consolidated revenues and 26.5%, 26.7% and 21.1% of consolidated net income in
the years ended December 31, 2004, 2003 and 2002, respectively. The Wealth
Management Segment generated revenues of $1,102.4 million, $1,075.9 million and
$930.5 million and segment net income of $186.3 million, $157.9 million and
$97.0 million in 2004, 2003 and 2002, respectively. The Wealth Management
Segment has achieved the following financial results for the periods indicated:

                                       As of or for the Years Ended December 31,
                                       ---------------------------------------
                                           2004         2003         2002
                                       ---------------------------------------
                                                    (in millions)
Sales:(1)

Variable annuities(2)...............     $    206.5  $    405.1  $    746.1
Fixed annuities(2)..................          719.5     2,319.4     2,667.9
John Hancock Funds(3)...............        5,321.3     4,596.7     4,737.6
                                       ---------------------------------------
      Total.........................     $  6,247.3  $  7,321.2  $  8,151.6
                                       =======================================
Assets:
Variable annuities..................     $  6,051.0  $  6,205.5  $  5,702.4
Fixed annuities.....................       12,785.5    12,216.8     9,935.8
John Hancock Funds..................        1,003.0       226.9       245.4
Other...............................           11.6        55.5       154.3
                                       ---------------------------------------
      Total.........................     $ 19,851.1  $ 18,704.7  $ 16,037.9
                                       =======================================
Assets Under Management:
Variable annuities..................     $  5,517.9  $  5,779.3  $  5,327.4
Fixed annuities.....................       11.830.9    11,608.0     9,226.2
John Hancock Funds(4)...............       31,264.7    29,289.9    25,810.3

----------
(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 in 2002. No such exchanges took
      place after 2003. Fixed annuity sales for 2002 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 $2.4 billion, $2.7 billion and $3.4 billion of our general
      account assets and assets managed for certain John Hancock subsidiaries
      and assets managed for variable annuities as of December 31, 2004, 2003
      and 2002, respectively.

Products and Markets

   Annuities

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

      Variable annuities are separate account products, where the contractholder
bears the investment risk and has the right to allocate funds among various
separate investment subaccounts. Our major source of revenues from variable
annuities is mortality and expense fees charged to the contractholder, generally


                                       10
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

determined as a percentage of the market value of the underlying variable assets
under management. During 2004, the Company made a decision to discontinue
selling variable annuity products through this legal entity, and is instead
issuing variable annuity products through the parent company Manulife's U.S.
legal entity.

      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 I (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 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 78.3% fixed annuity and 21.7% variable annuity for the year ended
December 31, 2004 and 85.2% fixed annuity and 14.8% variable annuity for the
year ended December 31, 2003. 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,
                                                           -----------------------------------------
                                                                2004         2003         2002
                                                            ----------------------------------------
                                                                        (in millions)
<S>                                                         <C>          <C>          <C>
Variable Annuities:
Reserves, beginning of year..............................   $  5,722.5   $  5,302.5   $  6,323.1
      Deposits and other policy credits..................        207.7        408.5        747.9
      Interest credited and investment performance.......        448.8        922.7       (778.4)
      Surrenders and benefits............................       (778.8)      (808.7)      (880.7)
      Product fees.......................................        (95.8)      (102.5)      (109.4)
                                                            ----------------------------------------
Reserves, end of year....................................   $  5,504.4   $  5,722.5   $  5,302.5
                                                            ========================================
Fixed Annuities:
Reserves, beginning of year..............................     10,678.9   $  8,761.8   $  6,497.4
      Premiums, deposits and other policy credits........        751.1      2,352.0      2,690.6
      Interest credited..................................        395.7        437.3        394.1
      Surrenders and benefits............................       (970.4)      (857.9)      (810.9)
      Product fees.......................................        (14.2)       (14.3)        (9.4)
                                                            ----------------------------------------
Reserves, end of year....................................   $ 10,841.1   $ 10,678.9   $  8,761.8
                                                            ========================================
Total Annuities:
Reserves, beginning of year..............................   $ 16,401.4   $ 14,064.3     12,820.5
      Premiums, deposits and other policy credits(1).....        958.8      2,760.5      3,438.5
      Interest credited and investment performance.......        844.5      1,360.0       (384.3)
      Surrenders and benefits............................     (1,749.2)    (1,666.6)    (1,691.6)
      Product fees.......................................       (110.0)      (116.8)      (118.8)
                                                            ----------------------------------------
Reserves, end of year....................................   $ 16,345.5   $ 16,401.4   $ 14,064.3
                                                            ========================================
</TABLE>

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


                                       11
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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, 2004, our fixed income and equity research staffs
included over 56 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, 2004,
      58.4% 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 2004, the Company added one new fund,
      the Small Cap Fund, to its domestic offerings. The Small Cap Fund was
      acquired from Independence Investment Associates, LLC in December 2004. In
      addition, one new closed-end fund was offered; John Hancock Tax Advantaged
      Dividend Income Fund.

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,
                                            ----------------------------------
                                               2004         2003        2002
                                            ----------------------------------
                                                      (in millions)
Assets Under Management:
Domestic equity and balanced..............  $ 20,205.6  $ 17,633.9  $ 13,727.7
International equity and balanced.........       100.4       310.1       309.3
Domestic and international fixed income...    10,958.8    11,345.9    11,773.3
                                            ----------------------------------
      Total assets under management(1)....  $ 31,264.8  $ 29,289.9  $ 25,810.3
                                            ==================================


                                       12
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                               Asset Flow Summary

<TABLE>
<CAPTION>
                                                                  For the Years Ended December 31,
                                                               ------------------------------------
                                                                   2004        2003        2002
                                                               ------------------------------------
                                                                           (in millions)
<S>                                                             <C>         <C>         <C>
Retail Mutual Funds:
Assets under management, beginning of year...................   $ 22,786.1  $ 19,233.0  $ 22,876.2
      Deposits and reinvestments.............................      5,056.2     4,244.9     4,056.6
      Redemptions and withdrawals............................     (3,529.5)   (3,364.4)   (3,817.2)
      Net money market funds.................................       (118.1)     (157.4)     (205.4)
      Market appreciation (depreciation).....................      1,188.4     3,096.1    (3,387.1)
      Fees...................................................       (285.3)     (266.1)     (290.1)
                                                               ------------------------------------
Assets under management, end of year(1)......................   $ 25,097.8  $ 22,786.1  $ 19,233.0
                                                               ====================================
Institutional Investment Management:
Assets under management, beginning of year...................   $  6,503.8  $  6,577.3  $  6,409.6
      Deposits and reinvestments.............................        683.2       773.3     1,198.2
      Redemptions and withdrawals............................     (1,408.4)   (1,743.4)     (853.1)
      Market appreciation (depreciation).....................        404.7       913.4      (160.9)
      Fees...................................................        (16.3)      (16.8)      (16.5)
                                                               ------------------------------------
Assets under management, end of year.........................   $  6,167.0  $  6,503.8  $  6,577.3
                                                               ====================================
Total:
Assets under management, beginning of year...................   $ 29,289.9  $ 25,810.3  $ 29,285.8
      Deposits and reinvestments.............................      5,739.4     5,018.2     5,254.8
      Redemptions and withdrawals............................     (4,937.9)   (5,107.8    (4,670.3)
      Net money market funds.................................       (118.1)     (157.4)     (205.4)
      Market appreciation (depreciation).....................      1,593.1     4,009.5    (3,548.0)
      Fees...................................................       (301.6)     (282.9)     (306.6)
                                                               ------------------------------------
Assets under management, end of year(1)......................   $ 31,264.8  $ 29,289.9  $ 25,810.3
                                                               ====================================
</TABLE>

(1)   Retail mutual fund assets under management include $2.6 billion, $2.7
      billion and $2.5 billion in retirement plan assets at December 31, 2004,
      2003 and 2002, respectively.

   Distribution

      Wealth Management products are distributed through John Hancock Financial
Network, Essex, independent broker/dealers, banks, directly to state lottery
commissions and both directly and through consultants to institutions and
retirement plan sponsors.

      John Hancock Financial Network. Formerly known as 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.


                                       13
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

             Wealth Management Segment Sales by Distribution Channel

                                             For the Years Ended December 31,
                                           ------------------------------------
                                                 2004       2003        2002
                                           ------------------------------------
                                                       (in millions)
Broker/Dealers(1):
      Variable annuities(2)..............     $   17.3   $   51.4    $  133.9
      Fixed annuities....................        187.0    1,031.8       555.3
      Mutual funds.......................      4,914.4    3,948.1     3,504.4
Signator:
      Variable annuities(2)..............        157.9      243.5       305.8
      Fixed annuities....................        182.7      232.6       243.1
      Mutual funds.......................        282.1      212.9       270.2
Pension Consultants:
      Mutual funds.......................        135.2      384.5       911.7
Financial Institutions:
      Variable annuities.................         28.6      100.4       277.9
      Fixed annuities....................        347.5      967.2     1,704.1
      Mutual funds.......................         88.9       51.2        51.3
e-Business and Retail Partnerships.......          2.4        7.5        30.1
Other(3).................................          2.6       90.1       163.8
                                           ------------------------------------
      Total..............................     $6,346.6   $7,321.2    $8,151.6
                                           ====================================

---------------
(1)   The prior years have been restated to include Fidelity sales in the
      Broker/Dealer channel and exclude them from the Financial Institutions
      channel.
(2)   Variable annuity deposits exclude internal exchanges as part of the safe
      harbor internal exchange program of $92.0 million, for the year ending
      December 31, 2002. There were no such exchanges after 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 before surrender charges, plus additional
reserves for certain guarantees in some of these products and reserves
established in the merger related purchase accounting. 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. The reserves for the fixed immediate annuity contracts were also
fair valued in the merger related purchase accounting.

   Competition

      We face substantial competition in all aspects of our Wealth Management
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 Wealth Management 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.


                                       14
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

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

      o     develop new products and expand into new markets; and

      o     provide excellent service to investors and distributors.

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


                                       15
<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. The G&SFP Segment has begun targeting retail investors
with products such as structured settlements, immediate fixed annuities and
retail notes sold through a retail broker network. Our institutional 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 20.9%, 20.9% and 22.4% of consolidated
revenues and 24.6%, (13.2)% and 14.9% of consolidated net income in the years
ended December 31, 2004, 2003 and 2002, respectively. The G&SFP Segment
generated revenues of $1,444.2 million, $1,524.9 million and $1,454.6 million
and segment net income of $172.8 million, $(78.1) million and $68.5 million in
2004, 2003 and 2002, respectively. G&SFP Segment financial information is
summarized below:

<TABLE>
<CAPTION>
                                                                As of December 31,
                                                      -------------------------------------
                                                           2004       2003         2002
                                                      -------------------------------------
                                                                  (in millions)
<S>                                                     <C>         <C>          <C>
Assets Under Management:
Spread-based products .............................     $25,001.5   $26,707.9    $24,872.3
Fee-based products.................................       7,641.7     8,207.4      8,402.6
                                                      -------------------------------------
      Total .......................................     $32,643.2   $34,915.3    $33,274.9
                                                      =====================================
Spread-based Premiums and Deposits:
Fund-type products.................................     $ 1,187.5   $ 2,372.9    $ 3,847.9
Single premium annuities...........................           0.2         0.7          1.2
SignatureNotes.....................................         793.2     1,260.1        290.2
                                                      -------------------------------------
      Total Spread-based Premiums and Deposits.....     $ 1,980.9   $ 3,633.7    $ 4,139.3
                                                      =====================================
Fee-based Premiums and Deposits:
General account participating pension fund-type
   products and annuity contracts..................     $   732.6   $   852.5    $   529.3
Structured separate accounts.......................          48.2        54.5        483.9
Other separate account contracts...................          50.7       (71.0)       (26.1)
                                                      -------------------------------------
      Total Fee-based Premiums and Deposits........     $   831.5   $   836.0    $   987.1
                                                      =====================================
</TABLE>

   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. As noted above, recent emphasis has been placed
on retail targeted products such as retail notes and immediate fixed annuities
due to relatively more attractive pricing when compared to our institutional
offerings. In the institutional market, we continue to offer several products
with which we have historically been very successful. The general account
Guaranteed Investment Contract (GIC) has been our predominant product issued in
the tax-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.


                                       16
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

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

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

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

      o     Single premium annuities 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 settlements. 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 based on 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 several investment styles offered 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,


                                       17
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            continue to be reported in and serviced by the Guaranteed and
            Structured Financial Products Segment because of customer
            relationships.

Distribution

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


                                       18
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                       JOHN HANCOCK LIFE INSURANCE COMPANY

    Reserves

      We establish and report liabilities for contractholder funds and future
policy benefits to meet the obligations on our policies and contracts. Since the
Manulife merger on April 28, 2004, our reported liability for contractholder
funds and future policy benefits is the sum of the pre-acquisition business
(contracts issued on and prior to the Manulife merger) and the post-acquisition
business (contracts issued after the Manulife merger). The pre-acquisition
liability for contractholder funds and future policy benefits is calculated
using assumptions established at the time of the Manulife merger. The
post-acquisition 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. The post-acquisition liability for the future
policy benefits of 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 and retail markets. Although a large
number of companies offer these products, the market is concentrated, in large
part because the markets demand issuers of high financial quality. This is
especially true in the institutional market. Through the first three quarters of
2004, for example, the top four issuers of GICs issued approximately 65% of
total GICs and the top five issuers of annuities issued almost 70% of the total
(according to LIMRA). The global funding agreement market is equally
concentrated with the top four issuers issuing 76% of the funding agreements
according to S&P. While in the past we would have been included with these top
issuers, in 2004 we found that historically narrow spreads made it more
difficult to compete. We chose instead to adhere to our very strict pricing
discipline, sacrificing market share in order to maintain profitability.

      With the introduction of SignatureNotes in 2002, 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. The retail note
market has continued to grow since then, reaching more than $31 billion in
issuance in 2004. In 2004, four additional insurers entered the market.

      We believe that, going forward, we will be able to compete successfully in
all of our chosen markets as a result of our strong financial ratings, brand
name, investment management expertise, national distribution, flexible product
design and competitive pricing. Competition in these markets 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. While current spread levels and our adherence to pricing disciplines
make sales in the institutional markets difficult, we will continue to
concentrate on the less price-sensitive retail markets.

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


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                       JOHN HANCOCK LIFE INSURANCE COMPANY

Corporate and Other Segment

Overview

      Our Corporate and Other Segment consists primarily of our corporate
operations, including the holding company, John Hancock Financial Services
(JHFS) and the institutional investment advisory business, 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 13.0%,
15.2% and 9.0% of consolidated revenues and 0.5%, 32.8% and 7.9% of consolidated
net income in the years ended December 31, 2004, 2003 and 2002, respectively.
The Corporate and Other Segment generated revenues of $902.7 million, $1,114.0
million and $582.6 million and net income of $3.6 million, $193.4 million and
$36.2 million in 2004, 2003 and 2002, respectively.

      The Corporate and Other Segment assets are summarized below:

                                               As of Ended December 31,
                                       -------------------------------------
                                             2004        2003        2002
                                       -------------------------------------
                                                    (in millions)
Assets:
International operations.............    $   285.7   $    99.0   $    87.4
Corporate operations.................      1,891.0     9,735.7     9,053.5
Non-core businesses..................        295.9     1,280.7     1,060.6
Intra-segment eliminations...........       (122.3)   (6,591.2)   (6,163.1)
                                       -------------------------------------
      Total..........................    $ 2,350.3   $ 4,524.2   $ 4,038.4
                                       =====================================

    International Operations

      Our international operations offer individual life and group insurance and
pension products through local affiliates doing business in three Asian
countries. Working with an international network of 52 insurers, we also
coordinate and/or reinsure group life, health, disability and pension coverage
for foreign and globally mobile employees of multinational companies in our
international group plan business.

    Corporate Operations

      Corporate operations consist principally of revenues and expense of the
institutional investment advisory business, the holding company, investment and
treasury activities, and assets, investment income, interest expense and other
expenses not specifically allocated to segments or the holding company level.
Corporate operations investment activity is focused on tax-preferenced investing
which may generate lower pre-tax investments income but yields higher returns on
an after-tax basis.

      Changes in corporate operations include the following business activities:
the transfer into corporate operations of the institutional investment advisory
business, the which generated revenues of $126.0 million, $144.1 million and
$125.1 million for the three years ended December 31, 2004, 2003, and 2002,
respectively. We sold our group life insurance business effective May 1, 2003
and transferred its financial results to the Protection Segment subsequent to
the merger with Manulife.

      Also included in corporate operations are 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 $242.6 million, $254.4 million and $235.9
million in revenues, $245.9 million, $257.8 million and $240.7million in
expenses, and $(2.2) million, $(2.2) million, and $(3.1) million in after-tax
losses for the years ended December 31, 2004, 2003 and 2002, respectively.

    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 investment
management businesses. Non-core businesses consist primarily of run-off property
and casualty insurance companies that were sold in 1999, a portion of our group


                                       20
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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 this segment's results, see Management's
Discussion and Analysis of Financial Condition and Results of Operations,
included elsewhere in this Form 10-K.

REGULATION

General

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

State Insurance Regulation

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


                                       21
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

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

Regulation of Dividends and Other Payments from Insurance Subsidiaries

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


                                       22
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      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 Life 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 approximately 251
percent as of December 31, 2004.

Statutory Investment Valuation Reserves

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

IRIS Ratios

      The National Association of Insurance Commissioners has developed a set of
financial tests known as the Insurance Regulatory Information System (IRIS) for
early identification of companies which may require special attention by
insurance regulators. Insurance companies submit data on an annual basis to the
National Association of Insurance Commissioners. This data is used to calculate
ratios covering various categories of financial data, with defined "usual
ranges" for each category. IRIS consists of 13 key financial ratios for life
insurance companies. An insurance company may fall out of the usual range with
respect to one or more ratios because of specific transactions that are in
themselves immaterial or eliminated 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, 2004, 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 2004, 2003 and 2002. The unusual ratios in 2001 were the
result of the implementation of new statutory accounting rules and are not
expected to recur. During the same period, John Hancock Variable Life Insurance
Company and Investors Partner Life Insurance Company, which are wholly owned
direct and indirect subsidiaries of John Hancock Life Insurance Company,
respectively, had several ratios outside of the usual range. John Hancock
Variable Life Insurance Company had eight unusual ratios, all of which resulted
from growth in the business and the effect of reinsurance contracts with John
Hancock Life Insurance Company. Investors Partner Life Insurance Company had ten
unusual ratios due to the fact it writes no new business.

Regulation of Investments

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


                                       23
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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.

      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


                                       24
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

enactment of EGTRRA. Many insurance products are designed and sold to help
policyholders reduce the effect of Federal estate taxation on their estates. The
enactment of EGTRRA has adversely affected sales of certain of our insurance and
investment advisory products, but this effect is mitigated somewhat by the
sunset provision. If the sunset provision of EGTRRA is eliminated in the future,
the adverse affect on the sales of these products could increase. In addition,
sales of split dollar life insurance products have been adversely affected by
proposed changes being considered by the Internal Revenue Service. Recently the
President of the United States of America has also put forth proposals that
would significantly increase tax-favored savings vehicles for individuals. These
proposals, if enacted in its current form, could adversely affect the sale of
our tax-favored annuity products.

Securities Laws

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

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.


                                       25
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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. 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.

Employees

      As of December 31, 2004, we employed approximately 3,914 people. We
believe our relations with our employees are satisfactory.

ITEM 2. Properties

      The Company leases space for its Home Office in historic Boston's Back
Bay, the Company plans on continuing to utilize this space 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.

ITEM 3. Legal Proceedings

      We are regularly involved in 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 and wealth management products,
as well as an investment adviser, employer and taxpayer. In addition, state
regulatory bodies, state attorneys general, the United States Securities and
Exchange Commission, the National Association of Securities Dealers, Inc. and
other government and regulatory bodies regularly make inquiries and, from time
to time, require the production of information or conduct examinations
concerning our compliance with, among other things, insurance laws, securities
laws, and laws governing the activities of broker-dealers. As with many other
companies in the financial services industry, we have been requested or required
by such government and regulatory authorities to provide information with
respect to market timing and late trading of mutual funds and sales compensation
and broker-dealer practices, including with respect to mutual funds underlying
variable life and annuity products. It is believed that these inquiries are
similar to those made to many financial service companies by various agencies
into practices, policies and procedures relating to trading in mutual fund
shares and sales compensation and broker-dealer practices. We intend to continue
to cooperate fully with government and regulatory authorities in connection with
their respective inquiries. We do not believe that the conclusion of any current
legal or regulatory matters, 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.


                                       26
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

PART II

ITEM 5. Market for John Hancock Life Insurance Company Common Equity and Related
        Stockholder Matters And Issuer Purchases of Equity Securities

      In January and December of 2003, the Commissioner of Insurance for the
Commonwealth of Massachusetts (the "Commissioner") approved dividends from the
Life Company to JHFS in the amount of $214.5 million. The Life Company paid
$100.0 million in cash in 2003, transferred property worth $14.5 million in
August 2003 and paid the final $100.0 million in cash in January 2004. See
Regulation of Dividends and Other Payments from Insurance Subsidiaries in the
Business Section for a discussion of limitations of the Company and its
subsidiaries to pay dividends.

      In 2004, following notification to the Insurance Commissioner the Life
Company paid dividends to JHFS in the amount of $200.0 million. In addition,
following notification to the Insurance Commissioner, on March 7, 2005 the
Company paid a $320.0 million dividend to JHFS.

      On March 8, 2005, the Company issued 32,000 shares of Common Stock to its
sole shareholder for consideration of $320.0 million. The transaction was exempt
from registration under Section 4(2) of the Securities Act of 1933.


ITEM 6. Selected Financial Data

    Omitted.


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                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

      Management's discussion and analysis of financial condition and results of
operations is presented in a condensed disclosure format pursuant to General
Instruction I(1)(a) and (b) of Form 10-K. Management's narrative that follows
reviews our consolidated financial condition as of December 31, 2004 and 2003,
the consolidated results of operations for the years ended December 31, 2004,
2003 and 2002 and, where appropriate, factors that may affect future financial
performance. This management narrative for the Company should be read in
conjunction with the consolidated financial statements and related notes,
included elsewhere in this Form 10-K. The Company's news releases and other
information are available on the internet at www.jhancock.com, and its financial
statements are available at www.manulife.com, under the link labeled "Securities
Filings" on the "Investor Relations" Page. In addition, 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 narrative and elsewhere in this Form 10-K, relating to trends in
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 potential 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 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) a decline 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 third party distribution relationships; (8) customers may not be
responsive to new or existing products or distribution channels, (9) interest
rate volatility may adversely affect our profitability; (10) our net income and
revenues will suffer if customers surrender annuities and variable and universal
life insurance policies or redeem shares of our open-end mutual funds; (11) the
independent directors of our variable series trusts and of our mutual funds
could reduce the compensation paid to us or could terminate our contracts to
manage the funds; (12) under our Plan of Reorganization, we were required to
establish the closed block, a special arrangement for the benefit of a group of
our policyholders. We may have to fund deficiencies in our closed block, and any
overfunding of the closed block will benefit only the holders of policies
included in the closed block, not our 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 risks associated with the evaluation and determination by our investment
professionals of the fair value 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) our United States insurance companies
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 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.


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<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

Merger with Manulife Financial Corporation

      Effective April 28, 2004, Manulife Financial Corporation ("Manulife")
acquired all of the outstanding common shares of John Hancock Financial
Services, Inc. (JHFS) that were not already beneficially owned by Manulife as
general fund assets and JHFS became a wholly owned subsidiary of Manulife. The
combined entity has a more diversified product line and distribution
capabilities and expects to have improved operating efficiencies and a leading
position across all its core business lines. In order to more efficiently manage
its corporate structure, on October 7, 2004 Manulife transferred all of its
shares in JHFS to John Hancock Holdings (Delaware) LLC - a wholly-owned
subsidiary of Manulife.

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 2--Summary of Significant Accounting Policies in the notes to
consolidated financial statements in the Company's 2004 Annual Report on Form
10-K. 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.

      Purchase Accounting (PGAAP)

      In accordance with SFAS No. 141, "Business Combinations" the merger
transaction was accounted for as a purchase of John Hancock by Manulife. In
accordance with "push-down accounting," John Hancock, the acquired company,
adjusted the cost and reporting basis of its assets and liabilities to their
fair values on the acquisition date (the purchase adjustments).

      The determination of the purchase adjustments relating to investments
included utilization of independent price quotes where available and
management's own estimates and assumptions where independent price quotes were
unavailable. Other purchase adjustments also required significant management
estimates and assumptions. The purchase adjustments relating to intangible
assets, including goodwill, value of business acquired (VOBA), brand name and
others, and to liabilities, including policyholder reserves, and others,
required management to exercise significant judgment in assessing fair values.

      The Company is in the process of completing the valuations of a portion of
the assets acquired and liabilities assumed; thus the allocation of the purchase
price is subject to refinement.

      The Company's purchase adjustments resulted in a revalued balance sheet
which may result in future earnings trends which differ significantly from
historical trends. The Company does not anticipate any impact on its liquidity,
or ability to pay claims of policyholders, arising out of the purchase
accounting process related to the merger.

      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 all of the entities
described below. The Company is not the primary beneficiary of any of them. For
many 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


                                       29
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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 each candidate is a VIE. The
Company also evaluated quantitative and non-quantitative aspects of control
relationships among the owners and decision makers 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. The Company used
significant levels of judgment while performing these quantitative and
qualitative assessments.

      The Company manages invested assets for its customers under various
fee-based arrangements using a variety of entities to hold these assets under
management, and since 1996, this has included investment vehicles commonly known
as collateralized debt obligations funds (CDOs). Various business units of the
Company sometimes invest in the debt or equity securities issued by these and
other CDOs to support their insurance liabilities.

      Since 1995, 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, but
primarily invests indirectly via limited partnership real estate investment
funds (the Funds). The 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 in some cases is guaranteed or otherwise subsidized by Federal or state
agencies or Fannie Mae. In certain cases, the Company invests in the mortgages
of the Properties.

      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 businesses which have
undergone debt restructurings and reorganizations and various other
relationships.

      Additional liabilities recognized as a result of consolidating any of
these entities would not represent additional claims on the general assets of
the Company; rather, they would represent claims against additional assets
recognized by the Company as a result of 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 made to them. Therefore, the Company believes that the application
of FIN 46R has no potential 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 the CDOs, Properties and other entities in Note 4 - Relationships
with Variable Interest Entities in the notes to the Consolidated Financial
Statements.

      Intangible Assets

      The Company recognizes several intangible assets, all of which resulted
from business combinations. Valuation, and where applicable, amortization of
these assets require significant management estimates and judgment.

      Unamortizable assets include goodwill, brand name and investment
management contracts. Goodwill is the excess of the cost to Manulife over the
fair value of the Company's identifiable net assets acquired by Manulife in the
recent merger. Brand name is the fair value assigned to the Company's trademark
and trade name. Investment management contracts are fair values of the
investment management relationships between the Company and each of the mutual
funds managed by the Company.

      Amortizable assets include value of business acquired (VOBA), distribution
networks and other investment management contracts. VOBA is the present value of
estimated future profits of insurance policies in force related to the Company's
businesses acquired by Manulife in the recent merger. VOBA had weighted average
lives ranging from 6 to 17 years for various insurance businesses at the merger.
Distribution networks are fair values assigned to the Company's networks of


                                       30
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

sales agents and producers responsible for procuring business. Distribution
networks had weighted average lives of 21 years at the merger. Other investment
management contracts had weighted average lives of 9 years at the merger.
Collectively, these amortizable intangible assets had a weighted average life of
14.7 years at the merger.

      The Company will test unamortizable intangible assets for impairment on an
annual basis, and also in response to any events which both suggest that these
assets may be impaired (triggering events). Amortizable intangible assets will
be tested only in response to triggering events. The Company will test goodwill
using the two-step impairment test set forth in SFAS No. 142 "Goodwill and Other
Intangible Assets." VOBA and the Company's other intangible assets will be
evaluated by comparing their fair values to their current carrying values
whenever they are tested. Impairments will be recorded whenever an asset's fair
value is deemed to be less than its carrying value.

      Amortization of Deferred Acquisition Costs (DAC) and Value of Business
Acquired (VOBA) Assets

      Costs that vary with, and are related primarily to, the production of new
business are 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 has also recorded intangible
assets representing the present value of estimated future profits of insurance
policies inforce related to business acquired. The Company tests the
recoverability of its DAC and VOBA assets quarterly with a model that uses data
such as market performance, lapse rates and expense levels. We amortize DAC and
VOBA on term life and long-term care insurance ratably with premiums. We
amortize DAC and VOBA 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 lives of the policies. These policy lives are, generally, up to
thirty years for products supporting DAC and VOBA. 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, VOBA and
unearned revenue on these policies such that the percentage of gross profits
realized compared to the amount of DAC, VOBA 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 and
VOBA 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. As actual results for market
experience or asset growth fluctuate significantly from historical trends and
the long-term assumptions made in calculating expected gross profits, management
changes these assumptions periodically, as necessary.

      Benefits to Policyholders

      The liability for future policy benefits is the largest liability included
in our consolidated balance sheets, equal to $42,962.8 million, or 48.0%, of
total liabilities as of December 31, 2004. Changes in this liability are
generally reflected in the benefits to policyholders in our consolidated
statements of income. This liability is primarily comprised of the present value
of estimated future payments to holders of life insurance and annuity products
based on certain management judgments. 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, or the Company is acquired. 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.


                                       31
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                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Investment in Debt and Equity Securities

      Impairments on our investment portfolio are recorded as a charge to other
comprehensive income, and if judged by management to be other than temporary in
nature, are recorded as a charge to income. See the General Account Investments
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 available-for-sale
are not publicly traded, and quoted market prices are not available from brokers
or investment bankers on these securities. Changes in the fair values of the
available-for-sale securities are recorded in other comprehensive income as
unrealized gains and /or losses. We calculate the fair values of these
securities ourselves through the use of pricing models and discounted cash flows
which therefore calls 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 Security Operations Department. Our pricing analysts take
appropriate action to reduce the valuation of securities where an event occurs
that negatively impacts the securities' value. Certain events that could impact
the valuation of securities include issuer credit ratings, business climate,
management changes at the investee level, litigation, fraud 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 other than temporary impairment as a charge against
income. To assist in identifying these impairments, at the end of each quarter
our Investment Review Committee reviews all securities where market value has
been less than ninety percent of amortized cost for three months or more to
determine whether other than temporary impairments need to be taken. This
committee includes the head of workouts, the head of each industry team, the
head of portfolio management, and the Chief Credit Officer of Manulife. The
analysis focuses on each investee 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 amortized cost. The results of this analysis are reviewed quarterly by the
Credit Committee at Manulife. This committee includes Manulife's Chief Financial
Officer, Chief Investment Officer, Chief Risk Officer, Chief Credit Officer, and
other senior management. 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 reviewed 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 for incorporation in the measurements made as
of April 28, 2004 (the date of the Manulife merger with the Company) and for net
periodic costs for the calendar year. These assumptions are normally
incorporated in measurements made annually as of each December 31 and for the
subsequent calendar year resulting thereon.

      The assumed discount rate is set based on the published December 31st
Moody's Investor Services long-term corporate bond yield for rating category Aa.
The discount rate used in the April 28, 2004 mark to market of 2004's net
periodic pension cost was 6.0%. The discount rate originally in effect for 2004
was 6.25%. A 0.25% increase in the discount rate would decrease the Projected
Benefit Obligation (PBO) and 2004 Net Periodic Pension Cost (NPPC) by
approximately $57.6 million and $1.2 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 $15.9 million and $1.2 million, respectively.

      The assumed long-term rate of return on plan assets is generally set at
the long-term rate expected to be earned (based on the Capital Asset Pricing
Model and similar tools) based on the long-term investment policy of the plans
and the various classes of the invested funds. For 2004, Net Periodic Pension
(and Benefit) Cost, an 8.75% long term rate of return assumption is being used.
A 0.25% increase in the long-term rate of return would decrease 2004 NPPC by
approximately $5.3 million and 2004 NPBC by approximately $0.6 million. The
expected return on plan assets prior to the merger with Manulife was based on
the fair market value of the plan assets as of December 31, 2003. Post merger,
the expected return on plan assets is based on the fair value of plan assets as
of April 28, 2004.

      The compensation rate increase assumption is generally set at a rate
consistent with current and expected long-term compensation and salary policy


                                       32
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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
4.0% compensation rate increase assumption is being used. A 0.25% increase in
the salary scale would increase 2004 pension benefits PBO and NPPC by
approximately $5.8 million and $0.6 million, respectively. Post employment
benefits are independent of compensation.

      The Company uses a 10% corridor for the amortization of actuarial
gains/losses. At the date of the merger, actuarial gains and losses were set to
zero.

      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 Medicare Prescription Drug Improvement and
Modernization Act of 2003 (the Act) provides for special tax-free subsidies to
employers that offer plans with qualifying drug coverages beginning in 2006.
There are two broad groups of retirees receiving employer-subsidized
prescription drug benefits at the Company. The first group, those who retired
prior to January 1, 1992, receives a subsidy of between 90% and 100% of total
cost. Since this subsidy level will clearly meet the criteria for qualifying
drug coverage, the Company anticipates that the benefits it pays after 2005 for
pre-1992 retirees will be lower as a result of the new Medicare provisions. In
accordance with Financial Accounting Standards Board Staff Position FAS 106-2
(FSP FAS 106-2), the Company reflected a reduction in the accumulated plan
benefit obligation for this group of $40.9 million as of the purchase accounting
remeasurement (April 28, 2004) and reduced net periodic postretirement benefit
costs by $1.6 million for the period from April 29 through December 31, 2004.
With respect to the second group, those who retired on or after January 1, 1992,
the employer subsidy on prescription drug benefits is capped and currently
provides as low as 25% of total cost. Since final authoritative accounting
guidance has not yet been issued on determining whether a benefit meets the
actuarial criteria for qualifying drug coverage, the Company has deferred
recognition as permitted by FSP FAS 106-2 for this group. The final accounting
guidance could require changes to previously reported information.

      Income Taxes

      Our reported effective tax rate on net income was 26.7%, 28.4% and 19.1%
for the years ended December 31, 2004, 2003 and 2002, respectively. The increase
in the effective tax rate during the period is due to changes in the recognition
of tax expense as a result of the purchase accounting for leveraged leases as
required by FASB Interpretation No. 21, "Accounting for Leases in a Business
Combination" and FASB Statement of Financial Accounting Standards No. 13,
"Accounting for Leases". Our effective tax rate is based on expected income,
statutory tax rates and tax planning opportunities available to us. Significant
judgment is required in determining our effective tax rate and in evaluating our
tax positions. We establish reserves when, despite our belief that our tax
return positions are fully supportable, we believe that certain positions are
likely to be challenged and that we may not succeed. We adjust these reserves in
light of changing facts and circumstances, such as the progress of a tax audit.
Our effective tax rate includes the impact of reserve provisions, changes to
reserves that we consider appropriate and related interest. This rate is then
applied to our year-to-date operating results.

      Tax regulations require certain items to be included in the tax return at
different times than those items are reflected in the financial statements. As a
result, our effective tax rate reflected in our financial statements is
different than that reported in our tax return. Some of these differences are
permanent, such as affordable housing tax credits, and some are temporary
differences, such as depreciation expense. Temporary differences create deferred
tax assets and liabilities. Deferred tax assets generally represent items that
can be used as a tax deduction or credit in our tax return in future years for
which we have already recorded the tax benefit in our income statement. Our
policy is to establish valuation allowances for deferred tax assets when the
amount of expected future taxable income is not likely to support the use of the
deduction or credit. Deferred tax liabilities generally represent tax expense
recognized in our financial statements for which payment has been deferred or
expense for which we have already taken a deduction on our tax return, but have
not yet recognized as expense in our financial statements.

      A number of years may elapse before a particular matter, for which we have
established an accrued liability, is audited and finally resolved. The Internal
Revenue Service is currently examining our tax returns for 1999 through 2001.

      While it is often difficult to predict the final outcome or the timing of
resolution of any particular tax matter, we believe that our reserves reflect
the probable outcome of known tax contingencies. Our tax reserves are presented
in the balance sheet net in the deferred tax asset or in the deferred tax
liability for the respective period ends.


                                       33
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Reinsurance

      As part of the Manulife group of companies, subsequent to the merger we
reinsure portions of the risks we assume for our protection insurance products.
The maximum amount of individual ordinary life insurance retained by us on any
life is $20 million under an individual policy and $25 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 insurance
claims for individuals for whom the net amount at risk is $3 million or more.

      As of January 1, 2001, the Company also entered into agreements with two
reinsurers covering 50% of its closed block business. One of these reinsurers is
Manulife. Effective April 28, 2004 the Company operates as a subsidiary of
Manulife. During the fourth quarter of 2004, the Company entered into an
additional agreement covering closed block policies with a Manulife affiliate in
order to facilitate its statutory capital management process. This transaction
increased the amount of reinsurance of the closed block with Manulife by 20%.
Effective December 31, 2003, the Company entered into an agreement with a third
reinsurer covering another 5% of its closed block business. The reinsurance
agreements 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, effective July 1, 2002,
catastrophic reinsurance covering individual life insurance policies written by
all of its U.S. life insurance subsidiaries. Effective July 1, 2004, the Company
is covered by its parent's catastrophic reinsurance under its global catastrophe
reinsurance program which covers the entire Manulife group of companies for
losses in excess of $50 million up to $150 million. This global catastrophe
reinsurance covers all terrorist acts in Canada; in the United States and
elsewhere, nuclear, biological and chemical terrorist acts are not covered.
Should catastrophic reinsurance become unavailable to the Company in the future,
the absence of, or further limitations on, reinsurance coverage could adversely
affect the Company's future net income and financial position.

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.


                                       34
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Transactions Affecting Comparability of Results of Operations

The acquisition described under the table below was 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. The purchase price was allocated to the assets acquired and the
liabilities assumed based on estimated fair values. No goodwill was recorded on
this transaction. This acquisition was made 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 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, 2002.

<TABLE>
<CAPTION>
                      Period from   Period from   Period from  Period from
                       April 29,     April 29,     January 1    January 1
                        through       through       through      through
                      December 31,  December 31,   April 28,    April 28,
                          2004          2004         2004         2004         2003        2003         2002         2002
                        Proforma                   Proforma                  Proforma                 Proforma
                     ----------------------------------------------------------------------------------------------------------
                       (unaudited)               (unaudited)               (unaudited)               (unaudited)
                                                                  (in millions)

<S>                   <C>           <C>          <C>           <C>          <C>          <C>          <C>          <C>
Revenue ........      $ 4,409.6     $ 4,409.6    $ 2,513.4     $ 2,513.4    $ 7,261.3    $ 7,306.1    $ 6,406.9    $ 6,492.8

Net Income .....      $   372.7     $   372.7    $   329.3     $   329.3    $   587.7    $   590.5    $   463.3    $   458.9
</TABLE>

Acquisition:

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.

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.


                                       35
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Results of Operations

      The company was merged with Manulife Financial Corporation effective April
28, 2004. The following discussion provides an assessment of the consolidated
results of operations and liquidity and capital resources for the Company and
the Predecessor. Unless otherwise indicated, 2004 historical results represent
the combined operating results of the Predecessor from January 1, 2004 through
April 28, 2004 and the Company from the date of the merger though December 31,
2004.

      As further discussed in Note 1 to the Consolidated Financial Statements
the merger was accounted for as a purchase. Accordingly, the operating results
for the periods subsequent to April 28, 2004 reflect the results of operations
of the Company subsequent to the merger and include the impact of adjustments
required under the purchase method of accounting.

      The tables below present the consolidated results of operations for the
periods presented:

<TABLE>
<CAPTION>
                                                                                 Company             Predecessor Company
                                                                               ------------  --------------------------------------
                                                                                 Period        Period
                                                                                  from          from
                                                                                April 29,    January 1,
                                                                                  2004          2004
                                                                                 through      through
                                                                               December 31,  April 28,
                                                                                  2004          2004         2003         2002
                                                                               ------------  --------------------------------------
                                                                                                    (in millions)
<S>                                                                            <C>           <C>           <C>           <C>
Revenues
     Premiums ..............................................................   $1,352.0      $  628.0      $2,039.4      $1,984.2
     Universal life and investment-type product charges ....................      426.8         230.7         639.2         606.0
     Net investment income .................................................    2,132.1       1,284.7       3,799.4       3,581.0
     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 (($14.0), ($31.3), $55.8
         and $74.1, respectively) ..........................................      (30.0)        101.0          58.2        (450.5)
     Investment management revenues, commissions and other fees ............      356.6         180.7         500.0         530.6
     Other revenue .........................................................      172.1          88.3         269.9         241.5
                                                                               --------      --------      --------      --------
         Total revenues ....................................................    4,409.6       2,513.4       7,306.1       6,492.8
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 (($26.8), ($42.2), $61.9 and $35.2,
         respectively) .....................................................    2,321.7       1,277.1       3,849.2       3,805.2
     Other operating costs and expenses ....................................    1,130.8         483.2       1,395.9       1,247.4
     Amortization of deferred policy acquisition costs, excluding
         amounts related to net realized investment and other gains
         (losses) $12.8, $10.9, ($6.1) and $38.9, respectively) ............      151.7         121.8         308.4         316.5
     Dividends to policyholders ............................................      316.9         157.1         537.8         556.2
                                                                               --------      --------      --------      --------
         Total benefits and expenses .......................................    3,921.1       2,039.2       6,091.3       5,925.3

Income before income taxes and cumulative effect of accounting changes .....      488.5         474.2       1,214.8         567.5

Income taxes ...............................................................      115.8         141.6         345.3         108.6
                                                                               --------      --------      --------      --------

Income before cumulative effect of accounting changes ......................      372.7         332.6         869.5         458.9

Cumulative effect of accounting changes, net of income tax .................         --          (3.3)       (279.0)           --
                                                                               --------      --------      --------      --------

Net income .................................................................   $  372.7      $  329.3      $  590.5      $  458.9
                                                                               ========      ========      ========      ========
</TABLE>


                                       36
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

      As a result of Manulife's merger with JHFS (see Note 1- Change of Control)
the Company renamed and reorganized certain businesses within its operating
segments to better align the Company with its new parent, Manulife. The Company
renamed the Asset Gathering Segment as the Wealth Management Segment. In
addition, the Company transferred the Institutional Investment Management
Segment to the Corporate and Other Segment. Other realignments include moving
Signator Investors, Inc. our agent sales organization, from the Wealth
Management Segment to the Protection Segment, and group life, retail
discontinued operations, discontinued health insurance operations and creditor
from the Corporate and Other Segment to the Protection Segment. International
Group Plans (IGP) remains in international operations in our Corporate and Other
Segment while in Manulife's segment results IGP will be reported in Reinsurance.
The financial results for all periods have been reclassified to conform to the
current period presentation.

      During the majority of 2004, the Company operated in the following four
business segments: two segments primarily served retail customers, one segment
served institutional customers and our fourth segment was the Corporate and
Other Segment, which includes our institutional advisory business, the remaining
international operations, and the corporate account. Our retail segments are the
Protection Segment and the Wealth Management Segment, previously called Asset
Gathering. Our institutional segment is the Guaranteed and Structured Financial
Products Segment (G&SFP). Effective January 27, 2005, the G&SFP Segment will
become a division of the Wealth Management Segment. This organizational change
reflects G&SFP's increasing focus on retail-oriented products and will enable
the company to better leverage the strong distribution channels of the Wealth
Management Segment with G&SFP's strong product development, risk management, and
immediate annuity servicing capabilities. G&SFP is presented as its own
operating segment for the discussion of 2004 results below.

      Consolidated income from continuing operations before income taxes and
cumulative effect of accounting changes decreased 20.8%, or $252.1 million, from
the prior year. The decrease was driven by corporate operations and lower
earnings in the institutional investment management business in the Corporate
and Other Segment and decreased earnings in the long-term care insurance
business in the Protection Segment. Consolidated income from continuing
operations before income taxes and cumulative effect of accounting changes by
operating segment were as follows: a decrease of $300.1 million in the Corporate
and Other Segment, a decrease of $22.4 million in the Protection Segment,
partially offset by growth of $39.7 million in the Wealth Management Segment and
an increase of $30.7 million in the Guaranteed and Structured Financial Products
Segment. After consolidated income from continuing operations before income
taxes and cumulative effect of accounting changes the Company recorded a
decrease to net income of $3.3 million (net of tax of $1.8 million) and $279.0
million (net of tax of $150.2 million) for 2004 and 2003, respectively. There
was no cumulative effect of accounting changes in 2002. The cumulative effect of
accounting changes in 2004 relates to the Company's adoption of SOP 03-1
effective January 1, 2004. The cumulative effect of accounting changes in 2003
relates to the Company's adoption of DIG B36 effective October 1, 2003. For
additional discussion of SOP 03-1 and DIG B36, refer to Note 2 - Summary of
Significant Accounting Policies in the notes to the consolidated financial
statements.

      Premium revenues decreased 2.9%, or $59.4 million, from the prior year.
The decrease in premiums was driven by the traditional life insurance business,
where premiums decreased by $52.8 million. In addition, premiums in the Wealth
Management Segment decreased $25.3 million driven by lower sales of single
premium immediate annuities in the fixed annuity business, and $38.1 million due
to the sale of the group life insurance business in the prior year. Partially
offsetting these decreases in premiums was an increase in premiums of $55.7
million in the long-term care insurance business.

      Universal life and investment-type product fees increased 2.9%, or $18.3
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 an increase of $33.1 million in the universal life
insurance business driven by growth in average account values on growth in the
existing business. Partially offsetting the growth in the Protection Segment was
a decline of $8.8 million in product fees in the Wealth Management Segment as a
result of on lower mortality and expense fees in the variable annuity business.
In addition, product fees decreased $7.1 million in the G&SFP Segment driven by
lowers fees in the single premium annuity business.

      Net investment income decreased 10.1%, or $382.6 million, from the prior
year. Overall, the 2004 yield, net of investment expenses, on the general
account portfolio decreased to 5.11% from 5.96% for the prior year. Yield for
the period subsequent to the merger with Manulife, April 29, 2004 through
December 31, 2004 was 4.79%. In summary, the change in yields was driven by the
following factors:


                                       37
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      o     On April 28, 2004, as a result of Manulife's acquisition of John
            Hancock, assets were marked to market in accordance with purchase
            accounting rules. The impact of the asset adjustment and related
            amortization was a reduction in yield of approximately 73 basis
            points for the year ended 2004 compared to 2003.

      o     As of December 31, 2004, the Company's asset portfolio had
            approximately $12 billion of floating-rate exposure (primarily
            LIBOR). This compares to a $13 billion level of exposure as of
            December 31, 2003. This exposure was created mostly through interest
            rate swaps designed to match our floating-rate liability portfolio.
            As of December 31, 2004, approximately 86% of this exposure,
            excluding cash and short-term investments, was directly offset by
            exposure to floating-rate liabilities. Most of the remaining 14% 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. The impact was approximately a reduction of 46
            basis points for 2004 compared to 54 basis points for 2003.

      o     Certain of our tax-preferenced investments (affordable housing
            limited partnerships and lease residual management) dilute the
            Company's net portfolio yield on a pre-tax basis. For the year ended
            December 31, 2004, this dilutive effect was 9 basis points, compared
            to 9 basis points in the comparable prior year. However, adjusting
            for taxes, these investments increased the Company's net income by
            $2.0 million in 2004 compared to 2003.

      o     Investment expenses were reduced $33.4 million in the year ended
            December 31, 2004 compared to the prior year. Included are
            reductions in state income tax, home office real estate expenses,
            and miscellaneous expenses.

      o     The inflow of new cash for the twelve month period ending December
            31, 2004 was invested at rates that were below the portfolio rate.
            In addition, maturing assets were rolling over into new investments
            at rates below the portfolio rate. In the year ended December 31,
            2004, weighted-average invested assets grew $3,074.7 million, or
            4.82%, from the prior year.

Net realized investment and other gains increased 22.0%, or $12.8 million, from
prior year. See detail of current year net realized investment and other gains
in the table below. For the year ended December 31, 2004 gross losses on
impairments and on disposal of investments, including fixed maturity securities,
equities, real estate, mortgages and other invested assets were $425.9 million,
excluding hedging adjustments, compared to $759.7 in the prior year. For the
year ended December 31, 2004, realized gains on disposal of fixed maturities,
excluding hedging adjustments, were $297.2 million. These gains resulted from
managing the portfolios for tax optimization and ongoing portfolio positioning,
as well as $104.8 million of prepayments. The Company recorded $178.8 million of
other than temporary impairments of fixed maturity securities for the year ended
December 31, 2004. These impairments relate primarily to: securities in the
airline industry ($62.8 million), a manufacturer of parcel delivery vans ($28.0
million), private placement securities related to secured lease obligations of a
regional retail food chain ($22.0 million), a holding in a privately held
pharmaceutical company ($21.3 million), and one of the world's largest dairy
companies ($17.5 million). The Company recorded losses due to other than
temporary impairments of CDO and CBO equity and other invested assets of $78.1
million for year ended December 31, 2004. These impairments primarily relate to
lease investments in the U.S. airline industry ($29.2 million) and an investment
in a royalty stream ($25.5 million). The Company recorded a net loss of $63.7
million on mortgage loans for the year ended December 31, 2004 (of which $17.7
million was losses on hedging adjustments). Included in this loss is $65.7
million in impairments. These impairments primarily relate to mortgages on a
company that operates flour milling facilities ($20.2 million), a refrigeration
warehouse company ($21.5 million), and a commercial office property ($10.0
million). There were also gains of $110.4 million on the sale of equity
securities as part of our overall investment strategy of using equity gains to
offset credit losses in the long-term, gains of $50.3 million from the sale of
other invested assets, and gains of $83.1 million resulting from the sale of
real estate for the year ended December 31, 2004. Net derivative activity
resulted in a gain of $61.9 million for the year ended December 31, 2004
resulting from a slightly larger impact from interest rate changes on the
Company's fair value of hedged items in comparison to the changes in fair value
of its derivatives hedging those items and the change in the fair value of
derivatives that do not qualify for hedge accounting. For additional analysis
regarding net realized investment and other gains (losses), see below and
General Account Investments in this management's narrative. The Company recorded
total impairments for the period from April 29, 2004 though December 31, 2004 of
$210.3 million and $118.5 million for the period from January 1, 2004 through
April 28, 2004, compared to $572.7 million for the prior year.


                                       38
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
For the year ended December 31, 2004                                                                 Net Realized
                                                       Gross Gain   Gross Loss       Hedging          Investment
                                           Impairment  on Disposal  on Disposal    Adjustments   and Other Gain/(Loss)
                                          ----------------------------------------------------------------------------
                                                                         (in millions)
<S>                                          <C>          <C>          <C>           <C>                <C>
Fixed maturity securities...............     $ (178.8)    $ 297.2      $ (64.6)      $ (73.2)           $ (19.4)
Equity securities.......................         (6.2)      110.4         (6.5)           --               97.7
Mortgage loans on real estate...........        (65.7)       30.2        (10.5)        (17.7)             (63.7)
Real estate.............................           --        83.1         (2.5)           --               80.6
Other invested assets...................        (78.1)       50.3        (13.0)           --              (40.8)
Derivatives.............................           --          --           --          61.9               61.9
                                          --------------------------------------------------------------------------
               Subtotal.................     $ (328.8)    $ 571.2      $ (97.1)      $ (29.0)           $ 116.3
                                          ==========================================================================

          Amortization adjustment for deferred policy acquisition costs......................              23.7
          Amounts credited to participating pension contractholders..........................             (43.1)
          Amounts credited to the policyholder dividend obligation...........................             (25.9)
                                                                                                --------------------
               Total.........................................................................           $  71.0
                                                                                                ====================
</TABLE>

      Investment management revenues, commissions, and other fees increased
7.5%, or $37.3 million, from the prior year. The increase in fee revenue was
driven by the mutual funds business where fees increased $18.9 million driven by
a 10.0%, or $2,702.6 million, increase in average assets under management. In
addition, advisory fees increased 3.3%, or $3.8 million, in the institutional
asset management business despite a 5.5%, or $1,542.1 million, decrease in
average assets under management. This increase in advisory fees was driven by
success with the new vertical integration strategy in the Hancock Natural
Resource Group. In addition, advisory fees earned in the Signator Financial
Network increased due to sales of Manulife products since the merger.

      Other revenue decreased 3.5%, or $9.5 million, from the prior year. The
decrease 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
co-operative 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 $242.6 million in 2004, a decrease of $11.9
million from the prior year. Also included in other revenue 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 $1.2 million from the prior year.

      Benefits to policyholders decreased 6.5%, or $250.4 million, from the
prior year. The decrease in benefits to policyholders was driven by a 11.7%, or
$126.5 million, decline in the G&SFP Segment on lower interest credited.
Interest credited in the G&SFP Segment decreased 14.8%, or $138.4 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 $10.4 billion of liabilities with floating
rates and new business added at current market rates. Interest credited in the
G&SFP Segment also decreased due to the repricing of liability products at the
date of the merger with Manulife for purchase accounting which resulted in
resetting the crediting rates to a lower market rate. The average crediting rate
fell to 3.52% from 4.19% in the prior year. Benefits to policyholders declined
23.0%, or $109.3 million, in the fixed annuity business driven by lower sales of
single premium immediate annuities, as noted above, and impact of purchase
accounting in the merger with Manulife whereby reserves established at merger
date are being amortized to benefits to policyholders. In addition, benefits to
policyholders declined 10.3%, or $111.2 million, in the traditional life
insurance business driven by lower premiums. Partially offsetting these
decreases was growth in benefits to policyholders of $60.3 million in the
long-term care insurance business, driven by 10.2%, or $55.7 million, increase
in premiums. In addition, benefits to policyholders increased $61.3 million in
the non-traditional life insurance business driven by growth in average account
balance.

      Other operating costs and expenses increased $218.1 million from the prior
year driven by a charge for unrecoverable reinsurance of $142.1 million, an
increase of $47.9 million in merger transaction expenses and an increase of
$29.5 million in the integration costs. There was a $5.5 million increase in
operating expenses at the Hancock Natural Resource Group, which included $4.4
million of expenses associated with the expansion of its property management
division. Partially offsetting these increases was a decrease in operating
expenses of $11.9 million at Signature Fruit. Signature Fruit other operating
costs and expenses were $245.9 million in 2004 and $257.8 million in the prior
year. Operating expenses at the institutional advisory businesses, Declaration
Management & Research and Independence Investments LLC, decreased $6.9 million
to $40.9 million primarily due to lower compensation expenses.


                                       39
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Amortization of deferred policy acquisition costs and value of business
acquired decreased 11.3%, or $34.9 million, from the prior year. The decrease in
amortization of deferred policy acquisition costs and value of business acquired
was comprised by a $42.4 million decrease in the non-traditional life insurance
business and a decrease of $24.4 million in the traditional life insurance
business. The decrease in amortization of deferred policy acquisition costs and
value of business acquired was driven by the impact of purchase accounting in
the merger with Manulife during the year. Partially offsetting these decreases
was an increase in amortization of deferred policy acquisition costs and value
of business acquired of $36.4 million in the G&SFP Segment driven by the VOBA
asset established in this business due to purchase accounting resulting from the
merger with Manulife.

      Dividends to policyholders decreased 11.9%, or $63.8 million from the
prior year. The decrease in dividends to policyholders was driven by the
traditional life insurance business, which decreased 5.1%, or $23.0 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 2.9% from the prior
period. Dividends to policyholders decreased $26.7 million due to a return of a
claim stabilization reserve to a single customer in the group life business in
the prior year. The result of this transaction in the prior year was a reduction
in benefits to policyholders and an increase in dividends resulting in no income
impact. Group life was sold effective May 1, 2003. In addition, dividends to
policyholders declined $15.6 million in the institutional fee-based business on
lower average reserves from the prior year.

      Income taxes were $257.4 million in 2004, compared to $345.3 million for
2003. Our effective tax rate was 26.7% in 2004, compared to 28.4% in 2003. The
change in effective tax rate was primarily due to changes in the recognition of
tax expense as a result of the purchase accounting for leveraged leases as
required by FASB Interpretation No. 21, "Accounting for Leases in a Business
Combination" and FASB Statement of Financial Accounting Standards No. 13,
"Accounting for Leases".

      Cumulative effect of accounting change, net of tax, was a charge of $3.3
million and $279.0 million for the years ended December 31, 2004 and 2003,
respectively. During the 2004, the Company adopted SOP 03-1 which requires
specialized accounting for insurance companies related to separate accounts,
transfers of assets, liability valuations, 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 contractholders. In 2003, the cumulative effect of accounting change related
to the adoption of DIG B36 as of October 1, 2003; refer to Note 2 - Summary of
Significant Accounting Policies in the notes to the Company's Consolidated
Financial Statements in this Form 10-K.


                                       40
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

      The following discussion has been updated to remain comparable with the
current year management's narrative; it therefore reflects the state of the
Company's operations subsequent to the merger with Manulife. In the following
management's narrative, references to operating segments which have been merged
with other operating segments or renamed since the date of the merger have been
updated to reflect such business decisions.

      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 $289.2 million in the
Corporate and Other Segment, $140.6 million in the Protection Segment, $120.2
million in the Guaranteed and Structured Financial Products, and $97.3 million
in the Wealth 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 $150.9 million on securities in the dairy industry,
$73.5 million on securities in the airline industry, and $69.3 million on
securities in the power and energy industries. 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 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 quarter of 2003. See Note 8 - Sale/Leaseback
Transaction and Other Lease Obligations in the notes to the consolidated
financial statements. In addition, earnings in the institutional investment
advisory business within the Corporate and Other Segment increased due to an


                                       41
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

increase of $9.0 million in net realized investment and other gains and a $7.0
million increase in management advisory fees. The increased earnings in the
G&SFP Segment were 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 $109.9 million increase in net investment income, a $36.9 million increase
in net realized investment and other losses, and a $34.6 million increase in
universal life product fees. The increase in the Wealth Management Segment was
driven by growth in net investment income, partially offset by an increase in
benefits to policyholders and operating expenses.

      Premium revenues increased 2.8%, or $55.2 million, from the prior year.
The increase was primarily due to the Corporate and Other Segment which
increased $129.0 million. The growth in the Corporate and Other Segment was
driven by the International Group Program which generated $396.8 million in
premium, an increase of $128.5 million. Partially offsetting the growth in
Corporate and Other was a decrease in the Protection Segment of $78.3 million.
The decrease in the Protection segment was driven primarily by a decrease in the
group life insurance business of $115.0 million and a decline in traditional
life insurance premiums of 4.0%, or $42.0 million, partially offset by growth in
long-term care insurance premiums, which increased 17.0%, or $79.4 million. The
Company sold the group life insurance 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 Wealth Management 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 9 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 were 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 mutual funds business where fees declined $23.8 million driven by
distribution and advisory fees which declined 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. Partially offsetting the decline


                                       42
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

in the mutual funds business management fees was growth in the institutional
investment advisory business 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 Corporate and Other Segment increased
$114.9 million driven by growth in the International Group Plans business which
increased $111.9 million form the prior year. Benefits to policyholders in the
Wealth Management 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. Partially offsetting these increases
was the G&SFP Segment's decrease in benefits to policyholders of 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 4.19% from 4.85% in the prior year. In addition, the
Protection Segment decreased 1.1%, or $22.0 million, from the prior year. The
decrease in the Protection Segment was due to the sale of the group life
insurance business where benefits to policyholders decreased $127.1 million
partially offset by growth in long-term care insurance benefits to policyholders
of 21.3%, or $88.7 million. Benefits to policyholders increased in the long-term
care insurance business increased 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.

      Other operating costs and expenses increased $148.5 million from the prior
year, driven by an increase of $120.0 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. Wealth
Management Segment other operating costs and expenses decreased $23.0 million
driven by business growth. The Protection Segment other operating costs and
expenses decreased $58.5 million driven by the sale of the group life insurance
business, lower general insurance expenses and amortization of intangibles
related to the Allmerica acquisition.

      Amortization of deferred policy acquisition costs decreased 2.6%, or $8.1
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 Wealth Management 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 2.4%, or $12.4 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. The decrease in
dividends in the traditional life insurance business was partially offset by a


                                       43
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

return of a claim stabilization reserve to a single customer in the group life
insurance business during the year. Due to the return of the claim stabilization
reserve dividends to policyholders increased $29.2 million in the group life
insurance business in 2003.

      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.

      Cumulative effect of accounting change, net of tax, was $279.0 million for
the year ended December 31, 2003, no cumulative effect of accounting change was
recorded in 2002. In 2003 the cumulative effect of accounting change related to
the adoption of DIG B36 as of October 1, 2003; refer to Note 2 - Summary of
Significant Accounting Policies in the notes to the Consolidated Financial
Statements of this Form 10-K.

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.

      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 includes 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 as well as
other results (e.g. mortality, lapse). 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.


                                       44
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      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 hold securities with 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.

Overall Composition of the General Account

      Invested assets, excluding separate accounts, totaled $66.7 billion and
$66.9 billion as of December 31, 2004 and December 31, 2003, respectively. On
April 28, 2004, as a result of Manulife's acquisition of John Hancock, assets
were marked to market, which became the new cost basis of those assets, in
accordance with purchase accounting guidelines. As of December 31, 2004 general
account invested asset included $0.6 billion in investments classified as
separate accounts in the prior year. These assets were reclassified from
separate accounts to the Company's general account pursuant to the Company's
adoption of SOP 03-01, Accounting and Reporting by Insurance Enterprises for
Certain Non Traditional Long Duration Contracts and for Separate Accounts, in
2004. The following table shows the composition of investments in the general
account portfolio.

<TABLE>
<CAPTION>
                                                  As of December 31,            As of December 31,
                                                         2004                          2003
                                            --------------------------------------------------------------
                                                Carrying          % of         Carrying           % of
                                                  Value           Total         Value             Total
                                            --------------------------------------------------------------
                                                                    (in millions)
<S>                                           <C>                 <C>        <C>                 <C>
Fixed maturity securities (1)..........       $ 47,863.2           71.8%     $ 47,970.8           71.7%
Mortgage loans (2).....................         11,792.6           17.7        10,871.1           16.3
Real estate............................            277.2            0.4           123.8            0.2
Policy loans (3).......................          2,012.0            3.0         2,019.2            3.0
Equity securities......................            334.7            0.5           333.7            0.5
Other invested assets..................          3,359.3            5.0         2,912.2            4.4
Short-term investments.................              0.2             --            31.5             --
Cash and cash equivalents (4)..........          1,073.3            1.6         2,626.9            3.9
                                            --------------------------------------------------------------
Total invested assets..................       $ 66,712.5          100.0%     $ 66,889.2          100.0%
                                            ==============================================================
</TABLE>

      1)    In addition to bonds, the fixed maturity security portfolio contains
            redeemable preferred stock with a carrying value of $902.4 million
            and $600.3 million as of December 31, 2004 and December 31, 2003,
            respectively. The total fair value of the fixed maturity security
            portfolio was $47,863.2 million and $47,994.9 million, at December
            31, 2004 and December 31, 2003, respectively.
      2)    The fair value for the mortgage loan portfolio was $11,873.1 million
            and $11,791.4 million as of December 31, 2004 and December 31, 2003,
            respectively.
      3)    Policy loans are secured by the cash value of the underlying life
            insurance policies and do not mature in a conventional sense, but
            expire in conjunction with the related policy liabilities.
      4)    Cash and cash equivalents are included in total invested assets in
            the table above for the purposes of calculating yields on the income
            producing assets for the Company.

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

      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, 2004, fixed maturity
securities represented 71.8% of general account invested assets with a carrying
value of $47.9 billion, comprised of 53.2% public securities and 46.8% private
securities. Each year, the Company directs the majority of net cash inflows into
investment grade fixed maturity securities. As of December 31, 2004, the below
investment grade bonds were 7.1% of invested assets, and 10.1% of total fixed
maturities. Rated fixed maturities exclude redeemable preferred stock.


                                       45
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Allocations are based on an assessment of relative value and the likelihood of
enhancing risk-adjusted portfolio returns. While the Company has profited from
the below-investment-grade asset class in the past, care is taken to manage its
growth strategically by limiting its size relative to the Company's total
assets.

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

      The 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,            As of December 31,
                                                            2004                          2003
                                             --------------------------------------------------------------
SVO                 S&P Equivalent                Carrying          % of         Carrying        % of
Rating (1)          Designation (2)            Value (3)(4)(5)      Total     Value (3)(4)(5)    Total
-----------------------------------------------------------------------------------------------------------

                                                                   (in millions)
<S>          <C>                                 <C>              <C>          <C>              <C>
    1        AAA/AA/A.......................     $ 20,826.0        44.4%       $ 19,612.6        41.4%
    2        BBB............................       21,409.2        45.6          21,645.6        45.7
    3        BB.............................        2,548.5         5.4           2,953.2         6.2
    4        B..............................        1,423.8         3.0           1,919.4         4.1
    5        CCC and lower..................          526.2         1.1             841.3         1.8
    6        In or near default.............          227.1         0.5             398.4         0.8
                                             -------------------------------------------------------------
                    Subtotal................       46,960.8       100.0%         47,370.5       100.0%

             Redeemable preferred stock.....          902.4                         600.3
                                             -------------------------------------------------------------
             Total fixed maturities.........     $ 47,863.2                    $ 47,970.8
                                             =============================================================
</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 61 securities that are awaiting an SVO rating, with a carrying
      value of $876.6 million as of December 31, 2004 and 175 securities that
      are awaiting an SVO rating, with a carrying value of $4,032.7 million at
      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 $185.0 million notional invested in the Company's
      credit-linked note program, $165.0 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, 2003 the Company had
      $130.0 million notional invested in the Company's credit linked note
      program, $110.0 million notional written credit default swaps on fixed
      maturity securities in the AAA/AA/A category and $20.0 million notional
      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 an AAA rated financial guarantor in 1996 which was
      terminated during 2004. In 2003, 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. The guaranty also contained 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, the maximum amount that could be
      recovered under this provision was $112.8 million.

      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 rated
fixed maturity investments are investment grade, with 90.0% and 87.1% of fixed
maturity investments invested in Category 1 and 2 securities as of December 31,
2004 and December 31, 2003, respectively. Below investment grade bonds were
10.1% and 12.9% of the rated fixed maturity investments as of December 31, 2004
and December 31, 2003, respectively, and 7.1% and 9.1% of total invested assets
at December 31, 2004 and December 31, 2003, respectively. This allocation


                                       46
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

reflects the Company strategy of avoiding the unpredictability of interest rate
risk in favor of relying on the Company's bond analysts' ability to better
predict credit or default risk. The bond analysts operate in an industry-based,
team-oriented structure that permits the evaluation of a wide range of below
investment grade offerings in a variety of industries resulting in a
well-diversified high yield portfolio.

      Valuation techniques for the bond portfolio vary by security type and the
availability of market data. Pricing models and their underlying assumptions
impact the amount and timing of unrealized gains and losses recognized, and the
use of different pricing models or assumptions could produce different financial
results. External pricing services are used where available, broker dealer
quotes are used for thinly traded securities, and a spread pricing matrix is
used when price quotes are not available, which typically is the case for our
private placement securities. The spread pricing matrix is based on credit
quality, country of issue, market sector and average investment life and is
created for these dimensions through brokers' estimates of public spreads
derived from their respective publications. When utilizing the spread pricing
matrix, securities are valued through 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 Security Operations Department. The Company's
pricing analysts take appropriate actions to reduce valuations of securities
where such an event occurs that 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.
Every quarter, there is a comprehensive review of all impaired securities and
problem loans by Manulife's Credit Committee a group consisting of Manulife's
Chief Investment Officer, Chief Financial Officer, Chief Risk Officer and Chief
Credit 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 company is likely to continue operations, the estimate of
future cash flows is typically based on the expected operating cash flows of the
company that are available to make payments on the bonds. If the company 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, 2004 and December 31, 2003, 53.9% and 48.3% 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 $227.1 million and $398.4 million as of December 31, 2004 and December 31,
2003, respectively. As of December 31, 2004 and December 31, 2003, $0.5 million
and $4.1 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, 2004 and December 31, 2003 was limited to approximately 24.0% and
22.3%, respectively ,of our total MBS/ABS portfolio and 4.8% and 3.4%,
respectively, of our total fixed maturity securities holdings, at each period
end.

      The following exhibits show a distribution of gross unrealized gains and
losses in the portfolio. As a result of Manulife's acquisition of the Company,
the Company's portfolio was marked to market through purchase accounting on
April 28, 2004. At December 31, 2004, the gross unrealized loss position of the
portfolio is fairly evenly distributed across the portfolio. 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.


                                       47
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

         Fixed Maturity Securities -- By Industry Classification/Sector

<TABLE>
<CAPTION>
                                                             Investment Grade as of December 31, 2004
                                       ---------------------------------------------------------------------------------
                                                                     Carrying                  Carrying
                                                                     Value of                  Value of
                                                                    Securities                Securities
                                                                        with                      with
                                                           Net         Gross        Gross        Gross          Gross
                                        Total Carrying  Unrealized  Unrealized   Unrealized   Unrealized     Unrealized
                                             Value      Gain (Loss)    Gains        Gains        Losses        Losses
                                       ---------------------------------------------------------------------------------
                                                                           (in millions)
<S>                                       <C>         <C>           <C>         <C>          <C>            <C>
Corporate securities:
    Banking and finance ..............    $ 6,051.8   $    84.0     $ 4,465.3   $    96.7    $ 1,586.5      $   (12.7)
    Communications ...................      2,673.8        38.2       2,215.0        43.4        458.8           (5.2)
    Government .......................      2,783.5        45.8       2,097.3        47.7        686.2           (1.9)
    Manufacturing ....................      5,797.9       104.1       4,695.2       116.8      1,102.7          (12.7)
    Oil & gas ........................      3,748.3        90.0       3,306.8        93.5        441.5           (3.5)
    Services/trade ...................      2,569.9        25.0       1,971.3        30.1        598.6           (5.1)
    Transportation ...................      2,039.1        27.0       1,734.0        29.5        305.1           (2.5)
    Utilities ........................      7,296.3       149.3       6,234.4       154.6      1,061.9           (5.3)
                                          ---------------------------------------------------------------------------
  Total corporate securities .........     32,960.6       563.4      26,719.3       612.3      6,241.3          (48.9)

Asset-backed and mortgage-
    backed securities ................      9,242.1        72.9       6,251.4       119.0      2,990.7          (46.1)
U.S. Treasury securities and
    obligations of U.S. government
    agencies .........................        342.2         1.2         231.5         1.6        110.7           (0.4)
Debt securities issued by foreign
    governments ......................        168.4        10.4         158.2        10.5         10.2           (0.1)
Obligations of states and political
    subdivisions .....................        287.4        (0.9)         46.0         0.8        241.4           (1.7)
                                          ---------------------------------------------------------------------------
       Total .........................    $43,000.7   $   647.0     $33,406.4   $   744.2    $ 9,594.3      $   (97.2)
                                          ===========================================================================
</TABLE>

         Fixed Maturity Securities -- By Industry Classification/Sector

<TABLE>
<CAPTION>
                                                      Below Investment Grade as of December 31, 2004
                                     ---------------------------------------------------------------------------------
                                                                   Carrying                  Carrying
                                                                   Value of                  Value of
                                                                  Securities                Securities
                                                                      with                      with
                                                         Net         Gross        Gross        Gross          Gross
                                      Total Carrying  Unrealized  Unrealized   Unrealized   Unrealized     Unrealized
                                           Value      Gain (Loss)    Gains        Gains        Losses        Losses
                                      --------------------------------------------------------------------------------
                                                                         (in millions)
<S>                                    <C>           <C>           <C>          <C>         <C>            <C>
Corporate securities:
    Banking and finance ............   $   77.0      $   (0.6)     $   18.4     $    0.5    $   58.6       $   (1.1)
    Communications .................      148.9           8.7         101.6          9.1        47.3           (0.4)
    Government .....................       16.1           0.1           6.6          0.1         9.5             --
    Manufacturing ..................    1,189.0          53.6         733.8         57.4       455.2           (3.8)
    Oil & gas ......................      476.5          22.1         434.5         22.7        42.0           (0.6)
    Services/trade .................      222.0           5.9         182.4          6.2        39.6           (0.3)
    Transportation .................      474.6          14.4         370.6         17.8       104.0           (3.4)
    Utilities ......................    1,900.9          65.9       1,516.3         71.3       384.6           (5.4)
                                      --------------------------------------------------------------------------------
  Total corporate securities .......    4,505.0         170.1       3,364.2        185.1     1,140.8          (15.0)

Asset-backed and mortgage-
    backed securities ..............      341.9           8.0         286.4         11.0        55.5           (3.0)
Debt securities issued by foreign
    governments ....................       15.6           0.9          15.6          0.9          --             --
                                      --------------------------------------------------------------------------------
       Total .......................   $4,862.5      $  179.0      $3,666.2     $  197.0    $1,196.3       $  (18.0)
                                       ===============================================================================
</TABLE>


                                       48
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

         Fixed Maturity Securities -- By Industry Classification/Sector

<TABLE>
<CAPTION>
                                                                  Investment Grade as of December 31, 2003
                                          ---------------------------------------------------------------------------------------
                                                                    Carrying Value of             Carrying Value of
                                            Total          Net       Securities with     Gross     Securities with        Gross
                                           Carrying    Unrealized   Gross Unrealized   Unrealized  Gross Unrealized    Unrealized
                                            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)
                                          ---------------------------------------------------------------------------------------
  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)
                                          =======================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                            Below Investment Grade as of December 31, 2003
                                     ----------------------------------------------------------------------------------------
                                                               Carrying Value of             Carrying Value of
                                       Total          Net       Securities with     Gross     Securities with        Gross
                                      Carrying    Unrealized   Gross Unrealized   Unrealized  Gross Unrealized    Unrealized
                                       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)
                                     ----------------------------------------------------------------------------------------
  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)
Debt securities issued by foreign
    governments ....................        9.4         0.3              5.7            0.4          3.7              (0.1)
                                     ----------------------------------------------------------------------------------------
       Total .......................   $6,332.0    $  111.5         $4,008.7       $  371.3     $2,323.3          $ (259.8)
                                     ========================================================================================
</TABLE>

      As of December 31, 2004 and December 31, 2003, there were gross unrealized
gains of $941.2 million and $3,068.6 million, and gross unrealized losses of
$115.2 million and $470.1 million on the fixed maturities portfolio. As of
December 31, 2004 gross unrealized losses of $115.2 million included $90.1
million or 78.2% was concentrated in asset-backed/mortgage-backed securities,


                                       49
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

manufacturing, bank & finance and utilities securities. The tables above show
gross unrealized losses before amounts that are allocated to the closed block
policyholders or participating pension contractholders. Of the $115.2 million of
gross unrealized losses in the portfolio at December 31, 2004, $12.3 million was
in the closed block and $6.7 million has been allocated to participating pension
contractholders, leaving $96.2 million of gross unrealized losses after such
allocations. The 2003 gross unrealized losses of $470.1 million included $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
were 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 was allocated to participating pension contractholders, leaving $388.1
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 $259.8 million at December 31, 2003 to $18.0 million primarily due to the
marking to market of the portfolio on April 28, 2004. The gross unrealized loss
on December 31, 2004 was largely due to interest rate changes since April 28,
2004 and is fairly evenly distributed through the fixed maturity portfolio.

      Again, the gross unrealized loss on December 31, 2004 is largely due to
interest rate changes since April 28, 2004 and is fairly evenly distributed
throughout the fixed maturity portfolio. 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) decreased by $103.4
million in the year ending December 31, 2004 to $96.5 million. The gross
unrealized loss on below investment grade bonds (those rated in categories 3, 4,
5, and 6 by the SVO) declined over this period, dropping by $243.1 million to a
total of $16.1 million as of December 31, 2004.

          Unrealized Losses on Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                                              As of December 31, 2004
                                                        -----------------------------------------------------------------
                                                         Carrying Value of
                                                         Securities with
  SVO             S&P Equivalent                         Gross Unrealized       % of      Gross Unrealized      % of
Rating (1)        Designation (2)                           Losses (3)          Total        Losses (3)         Total
------------------------------------------------        -----------------------------------------------------------------
                                                                                   (in millions)
<S>            <C>                                            <C>              <C>            <C>              <C>
    1          AAA/AA/A.......................                $ 5,774.2         55.5%         $ (63.8)          56.7%
    2          BBB............................                  3,547.8         34.1            (32.7)          29.0
    3          BB.............................                    720.7          6.9             (9.5)           8.4
    4          B..............................                    302.6          2.9             (4.1)           3.6
    5          CCC and lower..................                     42.2          0.4             (1.2)           1.1
    6          In or near default.............                     23.1          0.2             (1.3)           1.2
                                                        -----------------------------------------------------------------
                     Subtotal.................                $10,410.6        100.0%         $(112.6)         100.0%

               Redeemable preferred stock.....                    380.0                          (2.6)
                                                        -----------------------------------------------------------------
               Total..........................                $10,790.6                       $(115.2)
                                                        =================================================================
</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 20 securities with gross unrealized losses that are awaiting an
      SVO rating with a carrying value of $213.6 million and unrealized losses
      of $2.9 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 2.0% and 2.5% of the
      total carrying value and total gross unrealized losses of securities in a
      loss position, including redeemable preferred stock, respectively.


                                       50
<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      % of
Rating (1)        Designation (2)                    Losses (3)         Total          Losses (3)         Total
-------------------------------------------------------------------------------------------------------------------
                                                                             (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 Investment Grade Category and Age

<TABLE>
<CAPTION>
                                                                           As of December 31, 2004
                                           -----------------------------------------------------------------------------------------
                                                       Investment Grade                            Below Investment Grade
                                           --------------------------------------------  -------------------------------------------
                                           Carrying Value of                             Carrying Value of
                                            Securities with                              Securities with
                                           Gross Unrealized   Hedging        Market       Gross Unrealized    Hedging      Market
                                                Losses       Adjustments  Depreciation         Losses      Adjustments  Depreciation
                                           --------------------------------------------  -------------------------------------------
                                                                                  (in millions)
<S>                                          <C>            <C>           <C>              <C>           <C>            <C>
Three months or less .....................   $4,136.3       $    3.5      $  (33.2)        $  351.3      $   (0.8)      $   (1.9)
Greater than three months to six months ..      652.3           (1.5)        (16.6)           126.7          (0.5)          (0.9)
Greater than six months to nine months ...    4,533.5            0.7         (49.4)           610.5          (1.7)         (10.3)
Greater than nine months to twelve
    months ...............................         --             --            --               --            --             --
Greater than twelve months ...............         --             --            --               --            --             --
                                           --------------------------------------------  -------------------------------------------
    Subtotal .............................    9,322.1            2.7         (99.2)         1,088.5          (3.0)         (13.1)
                                           --------------------------------------------  -------------------------------------------

Redeemable preferred stock ...............      272.2             --          (0.7)           107.8            --           (1.9)
                                           --------------------------------------------  -------------------------------------------
    Total ................................   $9,594.3       $    2.7      $  (99.9)        $1,196.3      $   (3.0)      $  (15.0)
                                            ===========================================  ===========================================
</TABLE>


                                       51
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

<TABLE>
<CAPTION>
                                                                         As of December 31, 2003
                                         ------------------------------------------------------------------------------------------
                                                  Investment Grade                            Below Investment Grade
                                         --------------------------------------------  --------------------------------------------
                                         Carrying Value of                             Carrying Value of
                                          Securities with                              Securities with
                                         Gross Unrealized   Hedging        Market       Gross Unrealized    Hedging       Market
                                              Losses       Adjustments  Depreciation         Losses       Adjustments  Depreciation
                                         --------------------------------------------  --------------------------------------------
                                                                               (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>

      The tables above shows the Company's investment grade and below investment
grade securities that were in a loss position at December 31, 2004 and December
31, 2003 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, 2004 and December 31, 2003, respectively, the fixed
maturity securities had a total gross unrealized loss of $114.9 million and
$324.2 million, excluding basis adjustments related to hedging relationships. As
of December 31, 2004 the aging of securities reflects the mark to market on
April 28, 2004, thus the entire gross unrealized loss is less than nine months
at December 31, 2004. 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.

      The scheduled maturity dates for securities in an unrealized loss position
at December 31, 2004 and December 31, 2003 is shown below.

         Unrealized Losses on Fixed Maturity Securities -- By Maturity

<TABLE>
<CAPTION>
                                                    December 31, 2004                 December 31, 2003
                                             -------------------------------  --------------------------------
                                             Carrying Value of                 Carrying Value of
                                              Securities with     Gross         Securities with       Gross
                                             Gross Unrealized  Unrealized      Gross Unrealized    Unrealized
                                                   Loss           Loss               Loss             Loss
                                             -------------------------------  --------------------------------
                                                                       (in millions)

<S>                                            <C>             <C>               <C>             <C>
Due in one year or less ..................     $ 1,178.5       $    (4.8)        $   385.1       $   (11.5)
Due after one year through five years ....       3,704.4           (25.0)          1,487.0           (74.5)
Due after five years through ten years ...       1,418.5           (17.0)          1,916.7          (101.8)
Due after ten years ......................       1,443.0           (19.3)          3,404.9          (138.5)
                                             -------------------------------  --------------------------------
                                                 7,744.4           (66.1)          7,193.7          (326.3)

Asset-backed and mortgage-backed
   Securities ............................       3,046.2           (49.1)          2,134.6          (143.8)
                                             -------------------------------  --------------------------------

Total ....................................     $10,790.6       $  (115.2)        $ 9,328.3       $  (470.1)
                                             ===============================  ================================
</TABLE>


                                       52
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Mortgage Loans. As of December 31, 2004 and December 31, 2003, the Company
held mortgage loans with a carrying value of $11.8 billion and $10.9 billion,
including $2.9 billion and $3.0 billion, respectively, of agricultural loans at
each period end and $8.9 billion and $7.9 billion, respectively, of commercial
loans. Impaired loans comprised 1.4% and 1.1% of the mortgage portfolio as of
December 31, 2004 and December 31, 2003, respectively. The Company's average
historical impaired loan percentage during the period from 1999 through 2004 is
1.0%.

      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, 2004                    As of December 31, 2003
                                ----------------------------------------  -----------------------------------------
                                Amortized     Carrying     % of Total       Amortized    Carrying     % of Total
                                   Cost         Value    Carrying Value        Cost        Value    Carrying Value
                                ----------------------------------------  -----------------------------------------
                                                                   (in millions)
<S>                             <C>          <C>            <C>             <C>          <C>              <C>
Agri-business .............     $1,821.9     $1,793.8       61.5%           $1,861.0     $1,860.6         61.5%
Timber ....................      1,110.4      1,110.4       38.1             1,172.4      1,144.2         37.9
Production agriculture ....         13.5         13.5        0.4                18.9         18.9          0.6
                               -----------------------------------------  -----------------------------------------
    Total .................     $2,945.8     $2,917.7      100.0%           $3,052.3     $3,023.7        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, 2004        As of December 31, 2003
                                      ---------------------------------------------------------------
                                          Carrying         % of          Carrying         % of
                                           Value           Total          Value           Total
                                      ---------------------------------------------------------------
                                                              (in millions)
<S>                                       <C>              <C>           <C>               <C>
Apartment..........................       $ 1,645.0         13.9%        $  1,452.9         13.4%
Office Buildings...................         2,396.8         20.3            2,448.4         22.5
Retail.............................         2,677.7         22.8            2,083.6         19.2
Agricultural.......................         2,917.7         24.7            3,023.7         27.8
Industrial.........................         1,004.5          8.5              938.4          8.6
Hotels.............................           437.6          3.7              435.9          4.0
Multi-Family.......................             0.7           --                0.9           --
Mixed Use..........................           433.0          3.7              284.3          2.6
Other..............................           279.6          2.4              203.0          1.9
                                      ---------------------------------------------------------------
     Total.........................       $11,792.6        100.0%        $ 10,871.1        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, 2004              As of December 31, 2003
                           ---------------------------------------------------------------------------
                              Number      Carrying          % of          Carrying         % of
                             Of Loans       Value          Total           Value           Total
                           ---------------------------------------------------------------------------
                                                       (in millions)
<S>                           <C>        <C>                <C>          <C>                <C>
East North Central.......       142      $ 1,229.0           10.4%       $ 1,117.8           10.3%
East South Central.......        40          473.1            4.0            411.9            3.8
Middle Atlantic..........       119        1,690.1           14.4          1,449.5           13.3
Mountain.................        96          746.4            6.3            507.6            4.7
New England..............        94          932.0            7.9            869.1            8.0
Pacific..................       273        2,529.7           21.5          2,371.2           21.8
South Atlantic...........       208        2,535.9           21.5          2,375.6           21.8
West North Central.......        68          408.4            3.5            434.5            4.0
West South Central.......       118          972.2            8.2          1,022.2            9.4
Canada/Other.............        11          275.8            2.3            311.7            2.9
                           ---------------------------------------------------------------------------
     Total...............     1,169      $11,792.6          100.0%       $10,871.1          100.0%
                           ===========================================================================
</TABLE>


                                       53
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

                            Mortgage Loan Comparisons

<TABLE>
<CAPTION>
                                             As of December 31,                            As of December 31,
                                                    2004                                          2003
                                      ------------------------------------  ------------------------------------
                                       Carrying          % of Total           Carrying            % of Total
                                         Value       Mortgage Loans (1)         Value         Mortgage Loans (1)
                                      ------------------------------------  ------------------------------------
                                                                     (in millions)
<S>                                        <C>              <C>                <C>                <C>
Delinquent, not in foreclosure.....        $  0.5            --                 $ 0.2              --
Delinquent, in foreclosure.........           1.4            --                  92.7             0.8%
Restructured.......................         107.3           0.9%                 87.8             0.8
Loans foreclosed during period.....          58.5           0.5                  23.9             0.2
Other loans with valuation
    allowance......................          25.8           0.2                   5.5             0.1
                                      --------------------------------------------------------------------------

   Total...........................        $193.5           1.6%               $210.1             1.9%
                                      --------------------------------------------------------------------------

Valuation allowance................        $ 45.3                              $ 65.9
                                      ==========================================================================
</TABLE>

1)    As of December 31, 2004 and December 31, 2003 the Company held mortgage
      loans with a carrying value of $11.8 billion and $10.9 billion,
      respectively.

      The valuation allowance is maintained at a level that is adequate enough
to absorb estimated probable credit losses. Management's periodic evaluation of
the adequacy of the allowance for losses is based on past experience, known and
inherent risks, adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated value of the
underlying security, the general composition of the portfolio, current economic
conditions and other factors. This evaluation is inherently subjective and is
susceptible to significant changes and no assurance can be given that the
allowances taken will in fact be adequate to cover all losses or that additional
valuation allowances or asset write-downs will not be required in the future.
The valuation allowance for the mortgage loan portfolio was $45.3 million, or
0.4% of the carrying value of the portfolio as of December 31, 2004.

      Investment Results

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


                                       54
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
                                                                                 For the Years Ended
                                                                                    December 31,
                                                      --------------------------------------------------------------------------
                                                                2004                    2003                    2002
                                                        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..................................       5.33%    $ 3,454.8      6.26%   $  3,864.5      6.70%    $  3,685.9
   Ending invested assets (1)-excluding
      policy loans...............................                 64,700.5                64,870.0                 58,548.9
Policy loans
   Gross income..................................       5.79%        116.7      6.10%        123.0      6.10%         120.1
   Ending assets.................................                  2,012.0                 2,019.2                  2,014.2
   Total gross income............................       5.35%      3,571.5      6.26%      3,987.5      6.68%       3,806.0
   Less: investment expenses.....................                   (154.7)                 (188.1)                  (225.0)
                                                                 ---------              ----------               ----------
     Net investment income.......................       5.11%    $ 3,416.8      5.96%   $  3,799.4      6.29%    $  3,581.0
                                                                 =========              ==========               ==========
</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, 2004 Compared to Year Ended December 31, 2003

      Net investment income decreased $382.6 million from the prior year.
Overall, the 2004 yield, net of investment expenses, on the general account
portfolio decreased to 5.11% from 5.96% for prior year. Yield for the period
subsequent to the merger with Manulife, April 29, 2004 through December 31, 2004
was 4.79%. In summary, the change in yields was driven by the following factors:

      o     On April 28, 2004, as a result of Manulife's acquisition of John
            Hancock, assets were marked to market in accordance with purchase
            accounting rules. The impact of the asset adjustment and related
            amortization was a reduction in yield of approximately 73 basis
            points for the year ended 2004 compared to 2003.

      o     As of December 31, 2004, the Company's asset portfolio had
            approximately $12 billion of floating-rate exposure (primarily
            LIBOR). This compares to a $13 billion level of exposure as of
            December 31, 2003. This exposure was created mostly through interest
            rate swaps designed to match our floating-rate liability portfolio.
            As of December 31, 2004, approximately 86% of this exposure,
            excluding cash and short-term investments, was directly offset by
            exposure to floating-rate liabilities. Most of the remaining 14% 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. The impact was approximately a reduction of 46
            basis points for 2004 compared to 54 basis points for 2003.

      o     Certain of our tax-preferenced investments (affordable housing
            limited partnerships and lease residual management) dilute the
            Company's net portfolio yield on a pre-tax basis. For the year ended
            December 31, 2004, this dilutive effect was 9 basis points, compared
            to 9 basis points in the comparable prior year. However, adjusting
            for taxes, these investments increased the Company's net income by
            $2.0 million in 2004 compared to 2003.

      o     Investment expenses were reduced $33.4 million in the year ended
            December 31, 2004 compared to the prior year. Included are
            reductions in state income tax, home office real estate expenses,
            and miscellaneous expenses.

      o     The inflow of new cash for the twelve month period ending December
            31, 2004 was invested at rates that were below the portfolio rate.
            In addition, maturing assets were rolling over into new investments
            at rates below the portfolio rate. In the year ended December 31,
            2004, weighted-average invested assets grew $3,074.7 million, or
            4.82%, from the prior year.

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 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


                                       55
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            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 9 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 were 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.


                                       56
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

       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>
For the year ended December 31, 2004                   Gross Gain    Gross Loss      Hedging    Net Realized Investment
                                           Impairment  on Disposal  on Disposal    Adjustments   and Other Gain/(Loss)
                                          ----------------------------------------------------------------------------
                                                                         (in millions)
<S>                                          <C>          <C>          <C>           <C>                  <C>
Fixed maturity securities...............     $ (178.8)    $ 297.2      $ (64.6)      $ (73.2)             $ (19.4)
Equity securities.......................         (6.2)      110.4         (6.5)           --                 97.7
Mortgage loans on real estate...........        (65.7)       30.2        (10.5)        (17.7)               (63.7)
Real estate.............................           --        83.1         (2.5)           --                 80.6
Other invested assets...................        (78.1)       50.3        (13.0)           --                (40.8)
Derivatives.............................           --          --           --          61.9                 61.9
                                          ----------------------------------------------------------------------------
               Subtotal.................     $ (328.8)    $ 571.2      $ (97.1)      $ (29.0)             $ 116.3
                                          ============================================================================

          Amortization adjustment for deferred policy acquisition costs......................                23.7
          Amounts credited to participating pension contractholders..........................               (43.1)
          Amounts credited to the policyholder dividend obligation...........................               (25.9)
                                                                                                ----------------------
               Total.........................................................................             $  71.0
                                                                                                ======================
</TABLE>

(1)   Fixed maturities gain on disposals includes $42.5 million of gains from
      previously impaired securities.
(2)   Fixed maturities loss on disposals includes $7.0 million of credit related
      losses.

<TABLE>
<CAPTION>
For the year ended December 31, 2003                   Gross Gain    Gross Loss      Hedging    Net Realized Investment
                                           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.

      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.

      For the year ended December 31, 2004 the Company realized a gain for net
realized investment and other gains and losses of $71.0 million compared to a
gain of $58.2 million for the year ended December 31, 2003. For the year ended
December 31, 2004 gross losses on impairments and on disposal of investments -
including bonds, equities, real estate, mortgages and other invested assets was
$425.9 million, excluding hedging adjustments, compared to $759.7 million in
prior year. The Company recorded total impairments for the period from April 29,
2004 though December 31, 2004 of $210.3 million and $118.5 million for the
period from January 1, 2004 through April 28, 2004, compared to $572.7 million
for the prior year.

      For the year ended December 31, 2004, realized gains on disposal of fixed
maturities, excluding hedging adjustments, were $297.2 million. These gains
resulted from managing the portfolios for tax optimization and ongoing portfolio


                                       57
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

positioning, as well as $104.8 million of prepayments. There were $42.5 million
of recoveries on sales of previously impaired securities for the year ended
December 31, 2004.

      For the year ended December 31, 2004, the Company realized losses on the
disposal of fixed maturities, excluding hedging adjustments, of $64.6 million.
The Company generally intends to hold securities in unrealized loss positions
until they mature or recover. However, fixed maturities are sold under certain
circumstances such as when new information causes a change in the 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, and the Chief Credit Officer of Manulife. 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 Credit Committee at
Manulife. This committee includes Manulife's Chief Financial Officer, Chief
Investment Officer, Chief Risk Officer, and Chief Credit Officer. 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) fraudulent information 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.

Realized Gains, Losses and Impairments on Disposals - Year Ended
December 31, 2004

      Of the $64.6 million of realized losses on sales of fixed maturity
securities for the year ended December 31, 2004, there was a total of $7.0
million in credit losses. Most of the sales were related to general portfolio
management, largely due to redeploying high quality, liquid public bonds into
more permanent investments and the losses resulted from increasing interest
rates during the period.

      The Company recorded $178.8 million of other than temporary impairments of
fixed maturity securities for the year ended December 31, 2004. These
impairments relate primarily to: securities in the airline industry ($62.8
million), a manufacturer of parcel delivery vans ($28.0 million), private
placement securities related to secured lease obligations of a regional retail
food chain ($22.0 million), a holding in a privately held pharmaceutical company
($21.3 million), and one of the world's largest dairy companies ($17.5 million).

      The Company recorded losses due to other than temporary impairments of CDO
and CBO equity and other invested assets of $78.1 million for year ended
December 31, 2004. These impairments primarily relate to lease investments in
the U.S. airline industry ($29.2 million) and an investment in a royalty stream
($25.5 million). There were also $12.7 million in impairments on CBO and CDO
equity for the period. Equity in these CBOs and CDOs take the first loss risk in
a pool of high yield debt. We have a total remaining carrying value of $34.9
million and $60.0 million of CBO and CDO equity as of December 31, 2004 and
December 31, 2003, which is currently supported by expected cash flows.


                                       58
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      The Company also recognized losses on other than temporary impairments of
common stock of $6.2 million for the year ended December 31, 2004 as the result
of market values falling below cost for more than six months.

      The Company recorded a net loss of $63.7 million on mortgage loans for the
year ended December 31, 2004 (of which $17.7 million was losses on hedging
adjustments). Included in this loss is $65.7 million in impairments. These
impairments primarily relate to mortgages on a company that operates flour
milling facilities ($20.2 million), a refrigeration warehouse company ($21.5
million), and a commercial office property ($10.0 million).

      There were also gains of $110.4 million on the sale of equity securities
as part of our overall investment strategy of using equity gains to offset
credit losses in the long term, gains of $50.3 million from the sale of other
invested assets, and gains of $83.1 million resulting from the sale of real
estate for the year ended December 31, 2004. Net derivative activity resulted in
a gain of $61.9 million for the year ended December 31, 2004 resulting from a
slightly larger impact from interest rate changes on the Company's fair value of
hedged items in comparison to the changes in fair value of its derivatives
hedging those items and the change in the fair value of derivatives that do not
qualify for hedge accounting.

Realized Gains, Losses and Impairments on Disposals - Year Ended
December 31, 2003

      Of the $95.3 million of realized losses on sales of fixed maturity
securities for the year ended December 31, 2003, there was a total of $28.8
million in credit losses. The significant credit losses for 2003 were $16.7
million of losses related to the sale of public bonds of a major health care
service provider and $4.9 million related to the sale of public bonds of a power
provider. All other sales were related to general portfolio management,
including the sale of a number of below investment grade bonds to maintain the
Company's exposure below 10% of invested assets on a statutory basis.

     The Company recorded $539.2 million of other than temporary impairments of
fixed maturity securities for the year ended December 31, 2003 (including
impairment losses of $515.1 million and $24.1 million of previously recognized
gains where the bond was part of a hedging relationship). These impairments
relate primarily to: securities in the dairy industry ($150.9 million),
securities in the airline industry ($73.5 million), and securities in the power
and energy industry ($69.3 million).

     The Company recorded losses due to other than temporary impairments of CBO
and CDO equity and other invested assets of $29.8 million for year ended
December 31, 2003. These impairments primarily related to an investment in a
royalty stream ($11.5 million), a fund investment ($3.8 million) and a power
holding company ($3.1 million). There were also $4.6 million in impairments on
CBO and CDO equity for the period. Equity in these CBOs and CDOs take the first
loss risk in a pool of high yield debt. These impairments are recognized using
the guidance of EITF 99-20. At December 31, 2003 the Company had a total
remaining carrying value of $60.0 million of CBO and CDO equity, which was
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 ended December 31, 2003 as the result
of market values falling below cost for more than six months.

      The Company recorded a net loss of $28.8 million on mortgage loans for the
year ended December 31, 2003 (of which $63.7 million were losses on hedging
adjustments). Included were losses of $29.7 million 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 offset
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 ended December 31, 2003. Net derivative activity resulted in
a gain of $116.4 million for the year ended December 31, 2003 resulting from a
slightly larger impact from interest rate changes on the Company's fair value of
hedged items in comparison to the changes in fair value of its derivatives
hedging those items and the change in the fair value of derivatives that do not
qualify for hedge accounting.

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 (See Note 9 - Debt
and Line of Credit in the notes to the Company's Consolidated Financial
Statements) 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.


                                       59
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      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.

      In 2003, the Commissioner of Insurance for the Commonwealth of
Massachusetts (the Commissioner) approved dividends to JHFS in the amount of
$214.5 million. The Company paid $100.0 million in cash in 2003, transferred
property worth $14.5 million in 2003, and paid the final $100.0 million in cash
in 2004. During 2004,the Commissioner approved and the Company paid $200.0
million in dividends to JHFS. None of these dividends were classified as
extraordinary by state regulators. Subsequent to year end the Company issued
32,000 shares of common stock to JHFS for consideration of $320.0 million. The
Company then paid a $320.0 million dividend to JHFS. The transaction was
approved by the Commissioner. The transaction was exempt from registration under
Section 4(2) of the Securities Act of 1922.

      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.

      The Company's relative liquidity is reflected in its credit ratings
assigned by the major credit rating agencies. At December 31, 2004, The
Company's financial strength / claims paying abilities were all rated AA+ by
Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc.
(S&P), Aa3 by Moody's Investors Service (Moody's), A++ by A.M. Best Company and
AA by Fitch Ratings (Fitch). The Company's senior unsecured debt rating was AA+
from S&P and A1 from Moody's.

      The liquidity of our insurance operations is also related to the overall
quality of our investments. As of December 31, 2004, $42,235.2 million, or 90.0%
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
$4,725.6 million, or 10.0% of fixed maturity investments were rated
non-investment grade. For additional discussion of our investment portfolio see
the General Account Investments section of this Management's Discussion and
Analysis of Financial Condition and Results of Segment Operations.

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


                                       60
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      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,
                                                                           -------------------------------------------------
                                                                                     2004                    2003
                                                                           -------------------------------------------------
                                                                              Amount          %         Amount        %
                                                                           -------------------------------------------------
                                                                           (in millions)           (in millions)
<S>                                                                          <C>            <C>        <C>          <C>
Not subject to discretionary withdrawal provisions.....................      $ 25,962.5      54.6%     $28,263.1     56.1%
Subject to discretionary withdrawal adjustment:
     With market value adjustment......................................         1,156.0       2.4        1,226.2      2.4
     At contract value.................................................         3,005.1       6.3        2,920.2      5.8
     At fair value/market value........................................        10,215.2      21.4       11,195.0     22.2
Subject to discretionary withdrawal at contract value
     less surrender charge.............................................         7,307.1      15.3        6,809.4     13.5
                                                                           -------------------------------------------------
Total annuity reserves and deposit funds liability.....................      $ 47,645.9     100.0%     $50,413.9    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, 2004, we had approximately $22.9 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; $1.5 billion
of which are in the closed block at December 31, 2004.

      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, 2004, were above the ranges that would require
regulatory action.

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


                                       61
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      Analysis of Consolidated Statement of Cash Flows

      To assist in the comparability of our cash flows, the following discussion
combines the predecessor period (January 1 through April 28, 2004) with the
successor period (April 29 through December 31, 2004) to present combined cash
flows for the year ended December 31, 2004.

      Net cash provided by operating activities was $2,333.0 million, $2,842.4
million and $2,466.6 million for the years ended December 31, 2004, 2003 and
2002, respectively. Cash flows from operating activities are affected by the
timing of premiums received, fees received and investment income. The $509.4
million decrease in 2004 as compared to 2003 is largely attributable to a $538.3
million decrease in income tax paid, a $93.7 million decrease in change to other
assets net of other liabilities, offset by an increase in policy benefits and
dividend payment of $1,118.8 million and an increase in operating expense
payment of $74.0 million. The $375.8 million increase in 2003 as compared to
2002 is largely attributable to a $353.9 million increase in investment income
received, a $339.9 million decrease in policyholder benefits, and a $109.0
million decrease in other assets net of other liabilities, partially offset by a
$179.0 million increase in operating expenses and a $341.1 million increase in
income taxes paid.

      Net cash used in investing activities was $1,363.0 million, $2,968.6
million and $6,212.6 million for the years ended December 31, 2004, 2003, and
2002, 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 $1,605.6 million decrease in cash used in 2004 as compared to
2003 resulted primarily from a $2,194.0 million decrease in net acquisitions of
fixed maturities, partially offsetting by a $887.6 million decrease in the cash
inflow from the sale of Home Office properties. The $3,244.0 million decrease in
cash used in 2003 as compared to 2002 resulted primarily from a $887.6 million
cash inflow from the sale of Home Office properties in the first quarter of 2003
and a $2,335.6 million decrease in net acquisitions of fixed maturities.

      Net cash (used in) or provided by financing activities was $(2,523.6)
million, $1,856.1 million and $3,617.7 million, for the years ended December 31,
2004, 2003 and 2002, 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 $4,379.7 million decrease in net cash provided by financing
activities for 2004 as compared to 2003 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 $3,704.3 million, a decrease in funds from
the issuance of consumer notes of $480.5 million. 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.

      The Company's ability to generate customer deposits in excess of
withdrawals on universal life insurance and investment-type contracts is
critical to our long-term growth. Withdrawals exceeded deposits by $2,993.3
million for the year ended December 31, 2004, and deposits exceeded withdrawals
by $711.0 million and $3,494.0 million for the years ended December 31, 2003 and
2002, respectively.


                                       62
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Lines of Credit, Debt and Guarantees

      At December 31, 2004 the Company had two separate committed lines of
credit: one of $500 million, through a syndication of banks including Fleet
National Bank, JPMorgan Chase, Credit Suisse First Boston, The Bank of New York,
Barclays, The Bank of Nova Scotia, Wachovia, Royal Bank of Canada, State Street
Bank, Bank of America, Bank One, BNP Paribas, Deutsche Bank, PNC Bank, Sovereign
Bank, Westdeutsche Landesbank, Comerica Bank and Northern Trust (the "external
line of credit"); the second of $1.0 billion with the Company's parent, Manulife
(the "Manulife line of credit"). The external line of credit agreement provides
for a multi-year facility for $500 million (renewable in 2005). The external
line of credit is available for general corporate purposes. The external line of
credit agreement has no material adverse change clause, and includes, among
others, the following covenants: minimum requirements for JHFS shareholder's
equity, maximum limit on the capitalization ratio and a negative pledge clause
(with exceptions) as well as limitations on subsidiary debt, none of which were
triggered as of December 31, 2004. The external line of credit also contains
cross-acceleration provisions, none of which were triggered as of December 31,
2004. The fee structure of the external line of credit is determined by the
rating levels of JHFS or the Life Company. To date, the Company has not borrowed
any amounts under the external lines of credit as of December 31, 2004.

      The Manulife line of credit agreement provides for a 364-day credit
facility for $1.0 billion. Manulife 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, 2004. To date, we have not borrowed any amounts
under the external or Manulife lines of credit as of December 31, 2004.

      As of December 31, 2004, we had $715.3 million of principal and interest
amounts of debt outstanding consisting of $516.7 million of surplus notes, $32.5
million of other notes payable, $144.0 million non-recourse debt for Signature
Fruit and an Australian farm management subsidiary, and $22.1 million SFAS No.
133 fair value adjustment to interest rate swaps held for the surplus notes.

      In addition, the Company has outstanding $2,379.1 million of consumer
notes which are redeemable upon the death of the holder, subject to an annual
overall program redemption limitation of 1% of the aggregate securities
outstanding, or an individual redemption limitation of $ 200,000 of aggregate
principal, and mature at a various dates in the future. Covenants in this
program include, among others, limitations on liens.

      The Company guarantees certain mortgage securitizations transactions JHFS
entered into with FNMA and FHLMC. 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 Company has no material guarantees outstanding
outside the scope of insurance accounting at December 31, 2004.


                                       63
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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 relationships 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 14 - Commitments, Guarantees
and Contingencies to the Company's 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, 2004. 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.

                 Contractual Obligations as of December 31, 2004

<TABLE>
<CAPTION>
                                                                       Less than
 Payments due under contractual obligations by period      Total        1 year     2-3 years     4-5 years   After 5 years
---------------------------------------------------------------------------------------------------------------------------
                                                                                 (in millions)
<S>                                                      <C>           <C>           <C>          <C>            <C>
Debt .............................................       $ 1,720.6     $   414.5     $    27.2    $   502.4      $   776.5
Consumer notes ...................................         2,368.7          22.1         224.5        144.6        1,977.5
GIC's ............................................         4,123.5       1,002.1       1,260.9        851.1        1,009.4
Funding agreements ...............................        11,276.1       2,547.0       3,746.1      3,242.2        1,740.8
Institutional structured settlements .............         2,636.7          29.1          56.6         65.7        2,485.3
Annuity certain contracts ........................         1,151.9         134.7         383.3        189.3          444.6
Investment commitments ...........................         1,551.7       1,551.7            --           --             --
Capital lease obligations ........................           201.3          14.1          28.2         28.3          130.7
Operating lease obligations ......................           490.0          63.4         127.6         95.7          203.3
Other long-term obligations ......................           177.6          42.5          79.5         55.6             --
Guarantees .......................................            16.4          16.4            --           --             --
                                                         -----------------------------------------------------------------
      Total payments due under contractual
         obligations--by period ..................       $25,714.5     $ 5,837.6     $ 5,933.9    $ 5,174.9      $ 8,768.1
                                                         =================================================================
</TABLE>


                                       64
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

      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.


                                       65
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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 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.


                                       66
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

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

      As of December 31, 2004 and 2003, 90.0% and 87.1% of the fixed maturity
securities held by the Company and rated by S&P or NAIC were investment grade
securities while 10.0% and 12.9% 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, Wealth Management 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 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, 2004 and 2003, the fair value of
fixed maturity securities and mortgage loans supporting duration managed
liabilities was approximately $ 33,181.0 million and $ 34,936.4 million,
respectively. Based on the information and assumptions we use in our duration
calculations in effect as of December 31, 2004, 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 -/+ $ 16.6
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, 2004 and 2003, the fair value
of fixed maturity securities and mortgage loans supporting liabilities managed
under this modeling was approximately $ 36,011.3 million and $ 35,245.8 million,
respectively. A rate shock (as defined above) as of December 31, 2004 would
decrease the fair value of these assets by $ 1,437.5 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.


                                       67
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

Derivative Instruments

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

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

      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, 2004. The notional amounts in the table
represent the basis on which pay or receive amounts are calculated and are not
reflective of credit risk. These fair value exposures represent only a point in
time and will be subject to change as a result of ongoing portfolio and risk
management activities.

<TABLE>
<CAPTION>
                                                                         As of December 31, 2004
                                                 ---------------------------------------------------------------------------
                                                                                              Fair Value
                                                                  Weighted-    ---------------------------------------------
                                                   Notional     Average Term  -100 Basis Point    As of    +100 Basis Point
                                                    Amount         (Years)        Change (2)    12/31/04       Change (2)
                                                 ---------------------------------------------------------------------------
                                                             (in millions, except for Weighted-Average Term)

<S>                                                <C>               <C>           <C>         <C>          <C>
Interest rate swaps.........................       $ 32,801.9         3.6          $ 543.1     $  12.3      $ (384.1)
CMT swaps...................................            227.6         9.1             (1.0)       (1.7)         (2.4)
Futures contracts (1).......................            172.8        14.2            (10.6)        1.2          13.9
Interest rate caps..........................          1,157.1         3.9              3.8        11.8          26.4
Interest rate floors........................          4,593.0         5.6            154.6        85.3          42.6
Swaptions...................................             30.0        20.4             (7.7)       (3.4)         (0.5)
                                                 --------------                ---------------------------------------------
     Totals.................................       $ 38,982.4         4.0          $ 682.2     $ 105.5      $ (304.1)
                                                 ==============                ==============================================
</TABLE>

(1)   Represents the notional value on open contracts as of December 31, 2004.
(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. As of December 31, 2004, the fair value of our common stock portfolio
was $ 334.7 million. A hypothetical 15% decline in the December 31, 2004 value
of the equity securities would result in an unrealized loss of approximately $
50.2 million. The selection of a 15% immediate change in the value of equity
securities should not be construed as a prediction by us of future market events
but rather as an illustration of the potential impact of such an event. The fair


                                       68
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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, 2004, the fair value of our foreign currency
denominated fixed maturity securities was approximately $ 1,082.6 million. The
fair value of our currency swap agreements at December 31, 2004 supporting
foreign denominated bonds was $(342.8) million.

      We estimate that as of December 31, 2004, 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.

      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.

ITEM 9B. Other Information

None.


                                       69
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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 Company's parent's (JHFS) Board
of Directors to audit the consolidated financial statements of the parent, 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 2004 and 2003 on behalf of JHFS and
its subsidiaries:

                                            2004              2003
                                         ----------       -----------

Audit Fees (1) ...................       $7,739,961       $10,378,348
Audit-Related Fees (2) ...........               --         1,982,891
Tax Fees (3) .....................           73,300           417,800
All Other Fees (4) ...............               --            15,000

----------
(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)   In 2003, the fees in this category were for professional services rendered
      in connection with (i) assistance provided in the review of other
      auditor's work papers in connection with merger due diligence, (ii)
      internal control reviews, (iii) assistance provided in evaluating the
      Company's exposure to certain reinsurance arrangements.

(3)   The fees in this category were for professional services rendered in
      connection with tax strategy assistance and tax compliance services.

(4)   In 2003, the fees in this category were for professional services rendered
      in connection with assistance provided related to an actuarial model and
      process.

Manulife's Audit and Risk Management Committee reviews all requests for proposed
audit or permitted non-audit services to be provided by the Company's
independent auditor under the Audit and Risk Management Committee's Protocol for
Approval of Audit and Permitted Non-Audit Services. Under this Protocol, the
Audit and Risk Management Committee annually reviews and pre-approves recurring
audit and non-audit services that are identifiable for the coming year. The
Protocol also requires that any audit or non-audit services that are proposed
during the year be approved by the Audit and Risk Management Committee, or by a
member of the Audit and Risk Management Committee appointed by the Audit and
Risk Management Committee.


                                       70
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

PART IV

Item 15. Exhibits and Financial Statement Schedules

      (a) Documents filed as part of this report.

      1. Financial Statements (See Item 8. Financial Statements and
           Supplementary Data)
           Report of Ernst & Young LLP, Independent Registered Public
             Accounting Firm
           Consolidated Financial Statements
             Balance Sheets
             Statements of Income
             Statements of Changes in Shareholder's 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.

      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 (7)

3.2      Amended and Restated By-Laws of John Hancock Life Insurance Company
         (As Adopted on July 1, 2004) (4)

3.3      Articles of Amendment dated February 18, 2005 (6)

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)


                                       71
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

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

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)

23.1     Consent of Ernst & Young LLP (6)

31.1     Chief Executive Officer Certification Pursuant to Rules 13a-14
         and 15d-14 of the Securities Exchange Act of 1934. (6)

31.2     Chief Financial Officer Certification  Pursuant to Rules 13a-14
         and 15d-14 of the Securities Exchange Act of 1934. (6)

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. (6)

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. (6)

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.

----------
(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
      quarterly report on Form 10-Q for the quarter ended June 30, 2004, 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)   Filed herewith.
(7)   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.

(b).  The exhibits listed above are included as exhibits to this Form 10-K.


                                       72
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

               INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm....................  F-2

Audited Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2004 (Company)
and 2003 (Predecessor Company).............................................  F-3

Consolidated Statements of Income for the periods April 29, 2004 through
December 31, 2004 (Company) and January 1, 2004 through April 28, 2004
and the years ended December 31, 2003 and 2002 (Predecessor Company).......  F-5

Consolidated Statements of Changes in Shareholder's Equity and
Comprehensive Income for the periods April 29, 2004 through
December 31, 2004 (Company) and January 1, 2004 through April 28, 2004
and the years ended December 31, 2003 and 2002 (Predecessor Company).......  F-6

Consolidated Statements of Cash Flows for the periods April 29, 2004
through December 31, 2004 (Company) and January 1, 2004 through
April 28, 2004 and the years ended December 31, 2003 and 2002
(Predecessor Company)......................................................  F-8

Notes to Consolidated Financial Statements................................. F-10


                                       F-1
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                       John Hancock Life Insurance Company
             Report of Independent Registered Public Accounting Firm


The Board of Directors
John Hancock Life Insurance Company

We have audited the accompanying consolidated balance sheet of John Hancock Life
Insurance Company as of December 31, 2004, and the related consolidated
statements of income, changes in shareholder's equity and other comprehensive
income, and cash flows for the period April 29, 2004 through December 31, 2004.
We have also audited the consolidated balance sheet as of December 31, 2003 and
the related consolidated statements of income, changes in shareholder's equity
and other comprehensive income, and cash flows of the predecessor company for
the period January 1, 2004 through April 28, 2004 and for the years ended
December 31, 2003 and 2002. Our audits also include 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 the standards of the Public Company
Accounting Oversight Board (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. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
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, 2004, and the consolidated results of their
operations and their cash flows for the period April 29, 2004 through December
31, 2004, and the consolidated financial position of the predecessor company at
December 31, 2003 and the consolidated results of its operations and its cash
flows for the period January 1, 2004 through April 28, 2004 and for the years
ended December 31, 2003 and 2002, in conformity with U.S. generally accepted
accounting principles. 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 2 to the financial statements, in 2004 the Company changed
its method of accounting for certain nontraditional long duration contracts and
for separate accounts. In 2003 the Company changed its method of accounting for
stock-based compensation, participating pension contracts and modified
coinsurance contracts.


                                             /s/  ERNST & YOUNG, LLP

Boston, Massachusetts
February 28, 2005



                                      F-2
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                           CONSOLIDATED BALANCE SHEETS

                                                                    Predecessor
                                                      Company         Company
                                                    ------------    ------------
                                                    December 31,    December 31,
                                                        2004            2003
                                                    ------------    ------------
Assets                                                      (in millions)

Investments
Fixed maturities:
     Held-to-maturity--at amortized cost
     (fair value:  2003--$1,512.8) .............             --      $ 1,488.7
     Available-for-sale--at fair value
     (cost: 2004--$47,037.2; 2003--$43,907.7) ..      $47,863.2       46,482.1
Equity securities:
     Available-for-sale--at fair value
     (cost: 2004--$321.5; 2003--$249.9) ........          330.5          333.1
     Trading securities--at fair value
     (cost: 2004--$4.2; 2003--$0.1) ............            4.2            0.6
Mortgage loans on real estate ..................       11,792.6       10,871.1
Real estate ....................................          277.2          123.8
Policy loans ...................................        2,012.0        2,019.2
Short-term investments .........................            0.2           31.5
Other invested assets ..........................        3,359.3        2,912.2
                                                      ---------      ---------
     Total Investments .........................       65,639.2       64,262.3

Cash and cash equivalents ......................        1,073.3        2,626.9
Accrued investment income ......................          683.0          700.5
Premiums and accounts receivable ...............           67.2          104.1
Goodwill .......................................        3,031.7          108.6
Value of business acquired .....................        2,700.3          168.5
Deferred policy acquisition costs ..............          181.4        3,420.7
Intangible assets ..............................        1,348.5            6.3
Reinsurance recoverable ........................        3,345.5        2,677.3
Other assets ...................................        2,937.6        2,886.3
Separate account assets ........................       18,753.0       19,369.6
                                                      ---------      ---------

     Total Assets ..............................      $99,760.7      $96,331.1
                                                      =========      =========

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


                                      F-3
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                   CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

                                                                    Predecessor
                                                      Company         Company
                                                    ------------    ------------
                                                    December 31,    December 31,
                                                        2004            2003
                                                    ------------    ------------
                                                           (in millions)
Liabilities and Shareholder's Equity

Liabilities
Future policy benefits ............................   $42,962.8      $38,451.0
Policyholders' funds ..............................    19,385.8       21,693.5
Consumer notes ....................................     2,379.1        1,550.4
Unearned revenue ..................................        43.3          406.9
Unpaid claims and claim expense reserves ..........       187.8          166.5
Dividends payable to policyholders ................       441.3          440.0
Short-term debt ...................................       137.7          104.0
Long-term debt ....................................       577.6          609.4
Income taxes ......................................         5.9        1,534.1
Other liabilities .................................     4,588.2        4,417.7
Separate account liabilities ......................    18,753.0       19,369.6
                                                      ---------      ---------

     Total Liabilities ............................    89,462.5       88,743.1

Minority interest .................................         5.1            5.1

Commitments, guarantees and contingencies .........

Shareholder's Equity
Common stock, $10,000 par value; 1,000 shares
     authorized and outstanding ...................        10.0           10.0
Additional paid in capital ........................     9,467.0        4,763.2
Retained earnings .................................       172.7        1,332.1
Accumulated other comprehensive income ............       643.4        1,477.6
                                                      ---------      ---------
     Total Shareholder's Equity ...................    10,293.1        7,582.9
                                                      ---------      ---------

     Total Liabilities and Shareholder's Equity ...   $99,760.7      $96,331.1
                                                      =========      =========

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>
                                                                              Company                 Predecessor Company
                                                                           ------------  ------------------------------------------
                                                                            Period from    Period from
                                                                             April 29,     January 1,
                                                                           2004 through   2004 through    Year ended    Year ended
                                                                           December 31,     April 28,    December 31,  December 31,
                                                                               2004           2004           2003          2002
                                                                           ------------  ------------------------------------------
                                                                                                  (in millions)
<S>                                                                          <C>             <C>           <C>          <C>
Revenues
     Premiums .............................................................  $1,352.0        $  628.0      $2,039.4     $1,984.2
     Universal life and investment-type product charges ...................     426.8           230.7         639.2        606.0
     Net investment income ................................................   2,132.1         1,284.7       3,799.4      3,581.0
     Net realized investment and other gains (losses), net of related
         amortization of deferred policy acquisition costs, value
         of the business acquired, amounts credited to participating
         pension contractholders and the policyholder dividend
         obligation (($14.0), ($31.3), $55.8 and $74.1), respectively) ....     (30.0)          101.0          58.2       (450.5)
     Investment management revenues, commissions and other fees ...........     356.6           180.7         500.0        530.6
     Other revenue ........................................................     172.1            88.3         269.9        241.5
                                                                             --------        --------      --------     --------
         Total revenues ...................................................   4,409.6         2,513.4       7,306.1      6,492.8

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 (($26.8), ($42.2), $61.9 and $35.2,
         respectively) ....................................................   2,321.7         1,277.1       3,849.2      3,805.2
     Other operating costs and expenses ...................................   1,130.8           483.2       1,395.9      1,247.4
     Amortization of deferred policy acquisition costs, value of
         business acquired, excluding amounts related to net realized
         investment and other gains (losses) $12.8, $10.9, ($6.1)
         and $38.9, respectively) .........................................     151.7           121.8         308.4        316.5
     Dividends to policyholders ...........................................     316.9           157.1         537.8        556.2
                                                                             --------        --------      --------     --------
         Total benefits and expenses ......................................   3,921.1         2,039.2       6,091.3      5,925.3

Income before income taxes and cumulative effect of accounting changes ....     488.5           474.2       1,214.8        567.5

Income taxes ..............................................................     115.8           141.6         345.3        108.6
                                                                             --------        --------      --------     --------

Income before cumulative effect of accounting changes .....................     372.7           332.6         869.5        458.9

Cumulative effect of accounting changes, net of income tax ................        --            (3.3)       (279.0)          --
                                                                             --------        --------      --------     --------

Net income ................................................................  $  372.7        $  329.3      $  590.5     $  458.9
                                                                             ========        ========      ========     ========
</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 outstanding share data)
<S>                                                <C>      <C>           <C>        <C>              <C>              <C>
Predecessor Company
-------------------
Balance at January 1, 2002 ..................      $ 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 losses......                                             65.7             65.7
       Minimum pension liability.............                                            (24.4)           (24.4)
       Cash flow hedges......................                                            175.3            175.3
                                                                                                      ---------
   Comprehensive income......................                                                             675.5

   Dividend 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 in 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
                                                  ==============================================================================


   Comprehensive income:
     Net income..............................                               329.3                         329.3

     Other comprehensive income, net of tax:
       Net unrealized investment gains ......                                            (28.6)           (28.6)
       Foreign currency translation
         adjustment .........................                                             (0.3)            (0.3)
       Minimum pension liability.............                                              0.6              0.6
       Cash flow hedges......................                                            (37.3)           (37.3)
                                                                                                      ---------
   Comprehensive income......................                                                             263.7

                                                  ------------------------------------------------------------------------------
Balance at April 28, 2004.................         $ 10.0   $ 4,763.2   $ 1,661.4    $ 1,412.0        $ 7,846.6        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 CHANGES IN SHAREHOLDER'S
                  EQUITY AND COMPREHENSIVE INCOME - (CONTINUED)

<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 outstanding share data)
<S>                                                    <C>      <C>           <C>        <C>              <C>             <C>
Predecessor Company
-------------------
Balance at April 28, 2004........................       $ 10.0  $ 4,763.2   $ 1,661.4    $ 1,412.0        $ 7,846.6       1,000

Acquisition by Manulife Financial Corporation:
  Sale of shareholder's equity ..................        (10.0)  (4,763.2)   (1,661.4)    (1,412.0)        (7,846.6)     (1,000)
  Manulife Financial Corporation
    purchase price ..............................         10.0    9,467.0                                   9,477.0       1,000

Company
-------                                               -----------------------------------------------------------------------------
Balance at April 29, 2004                               $ 10.0  $ 9,467.0   $     --     $     --         $  9,477.0       1,000
                                                      =============================================================================
   Comprehensive income:
     Net income..................................                               372.7                         372.7

     Other comprehensive income, net of tax:
       Net unrealized investment gains ..........                                            411.4            411.4
       Foreign currency translation
         adjustment .............................                                              0.6              0.6
       Minimum pension liability.................                                            (11.0)           (11.0)
       Cash flow hedges..........................                                            242.4            242.4
                                                                                                          ---------
   Comprehensive income..........................                                                           1,016.1

   Dividends paid to parent company..............                              (200.0)                       (200.0)

                                                      -----------------------------------------------------------------------------
Balance at December 31, 2004.....................       $ 10.0  $ 9,467.0    $  172.7      $ 643.4        $10,293.1       1,000
                                                      =============================================================================
</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

<TABLE>
<CAPTION>
                                                                    Company                      Predecessor Company
                                                                --------------    ----------------------------------------------
                                                                  Period from       Period from
                                                                April 29, 2004       January 1,
                                                                    through         2004 through    Year Ended      Year Ended
                                                                 December 31,        April 28,     December 31,    December 31,
                                                                     2004              2004            2003            2002
                                                                --------------    ----------------------------------------------
                                                                                            (in millions)
<S>                                                                <C>             <C>            <C>             <C>
Cash flows from operating activities:
     Net income ..............................................     $   372.7       $   329.3      $    590.5      $    458.9
        Adjustments to reconcile net income to net cash
        provided by operating activities:
           Amortization of discount - fixed maturities .......         449.9            17.1            17.8           (78.3)
           Net realized investment and other (gains) losses ..          30.0          (101.0)          (58.2)          450.5
           Change in accounting principles ...................            --             3.3           279.0              --
           Change in deferred policy acquisition costs .......        (231.0)          (15.9)         (227.7)         (194.1)
           Depreciation and amortization .....................         155.8            15.0            42.4            47.4
           Net cash flows from trading securities ............          (3.8)            0.3             0.1             0.7
           Decrease (increase) in accrued investment income ..          74.7           (57.2)           42.7             2.7
           Decrease in premiums and accounts receivable ......          21.0            15.9            10.0             3.1
           Increase in other assets and other
             liabilities, net ................................        (168.3)           62.6          (199.4)         (308.4)
           Increase in policy liabilities and accruals, net ..         538.8           480.5         2,452.3         2,086.8
           Increase (decrease) in income taxes ...............         257.3            86.0          (107.1)           (2.7)
                                                                ----------------------------------------------------------------

                 Net cash provided by operating activities ...       1,497.1           835.9         2,842.4         2,466.6

Cash flows used in investing activities:
     Sales of:
         Fixed maturities available-for-sale .................       2,156.9         2,731.2        11,064.6         4,897.1
         Equity securities available-for-sale ................         214.7           154.9           279.4           316.4
         Real estate .........................................           6.2            97.7           164.4           127.7
         Short-term investments and other invested assets ....         570.9           130.7           500.0           458.7
         Home office properties ..............................            --              --           887.6              --
     Maturities, prepayments and scheduled redemptions of:
         Fixed maturities held-to-maturity ...................            --            40.3           227.5           214.2
         Fixed maturities available-for-sale .................       2,926.4         1,497.6         3,375.7         2,720.1
         Short-term investments and other invested assets ....          56.0            32.4           155.3           149.3
         Mortgage loans on real estate .......................       1,019.9           615.0         1,395.0         1,520.6
     Purchases of:
         Fixed maturities held-to-maturity ...................            --              --           (69.5)          (27.6)
         Fixed maturities available-for-sale .................      (4,020.5)       (5,983.2)      (17,443.6)      (12,984.7)
         Equity securities available-for-sale ................        (252.7)          (39.6)          (90.9)          (90.9)
         Real estate .........................................        (117.4)           (6.9)          (33.4)           (8.1)
         Short-term investments and other invested assets ....        (560.3)         (627.8)       (1,127.7)       (1,369.2)
     Mortgage loans on real estate issued ....................      (1,419.9)         (507.9)       (2,092.6)       (2,036.5)
     Net cash (paid) received related to acquisition/sale
        of businesses ........................................            --              --           (94.7)             --
     Other, net ..............................................          (7.4)          (70.2)          (65.7)          (99.7)
                                                                ----------------------------------------------------------------
              Net cash provided by (used in) investing
                 activities ..................................     $   572.8       $(1,935.8)     $ (2,968.6)     $ (6,212.6)
</TABLE>

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


                                      F-8
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

               CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)

<TABLE>
<CAPTION>
                                                                    Company                      Predecessor Company
                                                                --------------    ---------------------------------------------
                                                                  Period from      Period from
                                                                April 29, 2004      January 1,
                                                                    through        2004 through    Year Ended      Year Ended
                                                                 December 31,       April 28,     December 31,    December 31,
                                                                     2004             2004            2003            2002
                                                                --------------    ---------------------------------------------
                                                                                            (in millions)
<S>                                                                <C>              <C>             <C>             <C>

Cash flows from financing activities:
     Dividend paid to parent company ........................      $ (200.0)        $ (100.0)       $ (100.0)       $ (111.0)
     Universal life and investment-type
       contract deposits ....................................       2,493.8          2,307.3         7,681.5         8,999.4
     Universal life and investment-type contract
       maturities and withdrawals ...........................      (5,414.9)        (2,379.5)       (6,970.5)       (5,505.4)
     Issuance of consumer notes .............................         407.5            372.2         1,260.2           290.2
     Issuance of short-term debt ............................          88.7               --           148.9            92.8
     Issuance of long-term debt .............................         (46.4)           (41.8)             --            20.0
     Repayment of short-term debt ...........................           2.3              0.3          (158.0)         (110.6)
     Repayment of long-term debt ............................         (11.9)            (1.2)           (6.0)          (57.7)
                                                                ---------------------------------------------------------------

     Net cash (used in) provided by financing activities ....      (2,680.9)           157.3         1,856.1         3,617.7
                                                                ---------------------------------------------------------------

     Net (decrease) increase in cash and cash equivalents ...        (611.0)          (942.6)        1,729.9          (128.3)

Cash and cash equivalents at beginning of period ............       1,684.3          2,626.9           897.0         1,025.3
                                                                ---------------------------------------------------------------

Cash and cash equivalents at end of period ..................      $1,073.3         $1,684.3        $2,626.9        $  897.0
                                                                ===============================================================
</TABLE>

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


                                      F-9
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Change of Control

John Hancock Life Insurance Company, (the Company) is a wholly owned subsidiary
of John Hancock Financial Services, Inc. (JHFS). Effective April 28, 2004,
Manulife Financial Corporation ("Manulife") acquired all of the outstanding
common shares of JHFS that were not already beneficially owned by Manulife as
general fund assets and JHFS became a wholly owned subsidiary of Manulife (the
"acquisition" or "merger"). The combined entity has a more diversified product
line and distribution capabilities and expects to have improved operating
efficiencies and a leading position across all its core business lines.

Pursuant to the terms of the acquisition, the holders of JHFS common shares
received 1.1853 shares of Manulife stock for each JHFS common share.
Approximately 342 million Manulife common shares were issued at an ascribed
price of CDN $39.61 per share based on the volume weighted average closing stock
price of the common shares for the period from September 25, 2003 to September
30, 2003. In addition, all of the JHFS unvested stock options as of the date of
announcement of the acquisition on September 28, 2003, vested immediately prior
to the closing date and were exchanged for options exercisable for approximately
23 million Manulife common shares.

The acquisition of JHFS's shares by Manulife was effected through the merger of
JHFS with Jupiter Merger Corporation (Jupiter), a subsidiary of Manulife, which
was organized solely for the purpose of effecting the merger with JHFS. Prior to
the merger, Jupiter had a note payable to MLI Resources Inc., an affiliated
Manulife entity in the amount of $260.7 million in consideration for previously
purchased shares of JHFS, which were cancelled upon merger.

The merger was accounted for using the purchase method under Statement of
Financial Accounting Standards (SFAS) No. 141 "Business Combinations" and SFAS
No. 142 "Goodwill and Other Intangible Assets". Under the purchase method of
accounting, the assets acquired and liabilities assumed were recorded at
estimated fair value at the date of merger and these values were "pushed down"
to the Company's financial statements in accordance with push down accounting
rules. The Company is in the process of completing the valuations of a portion
of the assets acquired and liabilities assumed; thus, the allocation of the
purchase price is subject to refinement.

The following table summarizes the estimated fair values of the assets and
liabilities recorded as of April 28, 2004 (in millions):

      Assets:                                                     Fair Value
                                                                 ------------
      Fixed maturity securities.............................      $48,658.9
      Equity securities.....................................          230.3
      Mortgage loans........................................       11,563.5
      Policy loans..........................................        2,027.6
      Other invested assets.................................        3,423.8
      Goodwill..............................................        3,031.7
      Value of business acquired............................        2,864.6
      Intangible assets.....................................        1,352.0
      Deferred tax asset....................................          436.4
      Cash and cash equivalents.............................        1,684.7
      Reinsurance recoverable, net..........................        3,162.0
      Other assets acquired.................................        3,067.2
      Separate account assets...............................       18,331.9
                                                                 -----------
                     Total assets acquired..................       99,834.6

      Liabilities:
      Policy liabilities....................................       66,277.5
      Other liabilities.....................................        5,748.2
      Separate accounts.....................................       18,331.9
                                                                 -----------
                    Total liabilities assumed...............       90,357.6

      Net assets acquired...................................       $9,477.0
                                                                 -----------


                                      F-10
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 1 -- Change of Control - (Continued)

Goodwill of $3,031.7 million has been allocated to the Company's business and
geographic segments, see Note 18-Goodwill and Other Intangible Assets. Of the
$3,031.7 million in goodwill, no material amount is expected to be deductible
for tax purposes. Value of business acquired is the present value of estimated
future profits of insurance policies in force related to businesses acquired by
Manulife, and has been allocated to the Company's business and geographic
segments, see Note 18 - Goodwill and Other Intangible Assets.

Aside from goodwill and value of business acquired, intangible assets of
$1,352.0 million resulting from the acquisition consists of the "John Hancock"
brand name, distribution network, investment management contracts in the mutual
funds business and other investments management contracts in the institutional
investment advisory business. Refer to Note 18 -- Goodwill and Other Intangible
Assets for a more complete discussion of these intangible assets.

Restructuring Costs

Prior to the merger, the Company continued its Competitive Positioning Project,
which involved reducing costs and increasing future operating efficiencies by
consolidating portions of hte Company's operations. The Project consisted
primarily of reducing staff in the home office and terminating certain
operations outside the home office.

Following the acquisition of the Company by Manulife on April 28, 2004, Manulife
developed a plan to integrate the operations of the Company with its
consolidated subsidiaries. Manulife expects the restructuring to be
substantially completed by the end of 2005. Restructuring costs of $85.1 million
were recognized by the Company as part of the purchase transaction and consist
primarily of exit and consolidation activities involving operations, certain
compensation costs, and facilities. The accruals for the restructuring costs are
included in other liabilities on the Company's Consolidated Balance Sheets and
in other operating costs and expenses on the consolidated income statements.

The following details the amounts and status of restructuring costs (in
millions):

<TABLE>
<CAPTION>
                                    Amount Utilized                Amount Utilized
                       Pre-merger   January 1, 2004                 April 29, 2004
                       accrual at       through                        through        Accrual at
                       January 1,      April 28,      Accrued at     December 31,    December 31,
   Type of Cost           2004           2004           merger           2004            2004
--------------------------------------------------------------------------------------------------
                                                    (in millions)
<S>                      <C>            <C>             <C>             <C>             <C>
Personnel .....          $12.0          $ 3.3           $41.5           $ 9.6           $40.6
Facilities ....             --             --            43.6             7.8            35.8
                      ----------------------------------------------------------------------------
   Total ......          $12.0          $ 3.3           $85.1           $17.4           $76.4
                      ============================================================================
</TABLE>


                                      F-11
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies

Business. John Hancock Life Insurance 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, Inc. (JHFS). Since
April 28, 2004, JHFS operates as a subsidiary of Manulife, as a result of the
merger. The "John Hancock" name is Manulife's primary U.S. brand.

Basis of Presentation. The accompanying financial statements as of December
31, 2004 and for the period from April 29, 2004 to December 31, 2004 reflect the
results of adjustments required under the purchase method of accounting. The
accompanying predecessor financial statements for periods prior to the date of
the merger are presented under the predecessor Company's historical basis of
accounting and do not reflect any adjustments that would be required as a result
of the merger with Manulife. 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. The Company's news releases and other
information are available on the internet at www.jhancock.com. In addition, 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 or 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 to them. Please refer to the Recent
Accounting Pronouncements section below for a discussion of new accounting
guidance relative to VIEs.

Recent Acquisition/Disposal Activity. The acquisition described under the table
below was 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. The purchase price was allocated to
the assets acquired and the liabilities assumed based on estimated fair values.
No goodwill was recorded on this transaction. This acquisition was made 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 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, 2002.

<TABLE>
<CAPTION>
                        Period from    Period from   Period from    Period from
                         April 29,      April 29,     January 1      January 1
                          through        through       through       through
                       December 31,    December 31,   April 28,      April 28,
                           2004           2004          2004           2004          2003        2003         2002       2002
                         Proforma                     Proforma                     Proforma                 Proforma
                        (unaudited)                  (unaudited)                 (unaudited)              (unaudited)
                     -----------------------------------------------------------------------------------------------------------
                                                                     (in millions)

<S>                      <C>            <C>           <C>            <C>           <C>         <C>         <C>         <C>
Revenue ........         $4,409.6       $4,409.6      $2,513.4       $2,513.4      $7,261.3    $7,306.1    $6,406.9    $6,492.8

Net Income .....         $  372.7       $  372.7      $  329.3       $  329.3      $  587.7    $  590.5    $  463.3    $  458.9
</TABLE>


                                      F-12
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

Acquisition:

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.

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. At December 31, 2004, the Company classifies its debt securities
into one category: 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 available-for-sale, or trading.
Fixed maturity investments classified as available-for-sale are carried at fair
value. Unrealized gains and losses related to available-for-sale securities are
reflected in shareholders' 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 recognized on the 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 classifies as
available-for-sale, unrealized gains and losses are reflected in shareholders'
equity, as described above for fixed maturity securities. Impairments in value
deemed to be other than temporary are reported as a component of net realized
investment and other gains (losses).

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 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 real estate to be disposed of was $27.0 million and


                                      F-13
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

$28.5 million at December 31, 2004 and 2003, respectively and is reported in
real estate in the investment section of the Company's Consolidated Balance
Sheets. On March 14, 2003, the Company sold three of its Home Office properties
to Beacon Capital Partners for $910.0 million. See Note 8 - Sale/Leaseback
Transaction and Other Lease 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 also to manage the duration
of assets and liabilities. All derivative instruments are carried on the
Company's 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 changes in fair value of the derivative instruments as
well as the offsetting changes 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 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 affects income. If it is determined that the forecasted
transaction is not probable of occurring, the accumulated 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 sales commissions, certain costs of policy
issuance 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, 2004, the
Company's DAC asset 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


                                      F-14
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

the related policies using assumptions consistent with those used in computing
policy benefit reserves. For participating traditional life insurance policies,
such costs are 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 unearned 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 fifteen year period. The resulting
rates for the next fifteen 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.

When DAC and unearned revenue are amortized in proportion to estimated gross
profits, 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, 2004, the average discount rate
was 5.0% 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 future assumptions with respect to
the expected gross profits in its variable life and variable annuity businesses.
First, the long-term growth rate assumption was lowered from 9%, to 8%, gross of
fees. Second, the average growth rates were lowered for the next five years from
the mid-teens to 13%. Finally, the Company increased certain fee rates on these
policies (the variable series trust (VST) fees were increased). Total
amortization of DAC, including the acceleration of amortization of DAC from the
assumption changes mentioned above, was $151.7 million and $121.8 million for
the periods from April 29, 2004 through December 31, 2004 and from January 1,
2004 through April 28, 2004, respectively, and was $308.4 million and $316.5
million for the years ended December 31, 2003, and 2002, respectively.

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

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

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

Assets and liabilities related to reinsurance ceded contracts are reported on a
gross basis. The accompanying statements of income reflect premiums, benefits
and settlement expenses net of reinsurance ceded. Reinsurance premiums,
commissions, expense reimbursements, benefits and reserves related to reinsured
business are accounted for on bases consistent with those used in accounting for
the original policies issued and the terms of the reinsurance contracts. The
Company remains liable to its policyholders to the extent that counterparties to
reinsurance ceded contracts do not meet their contractual obligations. Refer to
Note 12-Reinsurance for additional disclosures regarding this topic.


                                      F-15
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

Goodwill and Other Intangible Assets. In the merger with Manulife, the Company
de-recognized its intangible assets including goodwill, value of business
acquired (VOBA) and management contracts. Also in the merger, the Company
recognized new non-amortizable intangible assets including goodwill, brand name
and investment management contracts, and recognized new amortizable intangible
assets including VOBA, distribution networks and other investment management
contracts. The Company accounts for all of these intangible assets in accordance
with Statement of Financial Standards No. 142 -- Goodwill and Other Intangible
Assets, including initial valuation, amortization or non-amortization, and
impairment testing for these intangible assets. Refer to Note 18 -- Goodwill and
Other Intangible Assets for a detailed discussion and presentation of each of
these new intangible assets.

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

Future Policy Benefits and Policyholders' Funds. Future policy benefits for
participating traditional life insurance policies are based on the net level
premium method. This net level premium reserve is calculated using the
guaranteed mortality and dividend fund interest rates, which range from 2.5% to
5.5%. 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 4.2% to 6.5% for individual annuity liabilities and from 1.7%
to 11.3% for group annuity liabilities.

Future policy benefits for long-term care insurance policies are based on the
net level premium method. Assumptions established at policy issue as to
mortality, morbidity, persistency, interest and expenses, which include a margin
for adverse deviation, are based on estimates developed by management. Interest
rates used in establishing such liabilities range from 5.0% to 6.6%.

Liabilities for unpaid claims and claim expenses include estimates of payments
to be made on reported individual and group life, long-term care, and group
accident and health insurance claims and estimates of incurred but not reported
claims based on historical claims development patterns.

Estimates of future policy benefit reserves, claim reserves and expenses are
reviewed continually and adjusted as necessary; such adjustments are reflected
in current earnings. Although considerable variability is inherent in such
estimates, management believes that future policy benefit reserves and unpaid
claims and claims expense reserves are adequate.


                                      F-16
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

Policyholders' funds for universal life and investment-type products, including
guaranteed investment contracts and funding agreements, are equal to the total
of the policyholder account values before surrender charges, additional reserves
established to adjust for lower market interest rates as of the merger date, and
additional reserves established on certain guarantees offered in certain
variable annuity products. Policyholder account values include deposits plus
credited interest or change in investment value less expense and mortality fees,
as applicable, and withdrawals. Policy benefits that are charged to expense and
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 insurance
products and from 1.7% to 11.3% for investment type products. Policy benefits
charged to expense also include the change in the additional reserve for fair
value adjustments as of the merger date and certain guarantees offered in
certain investment type products.

Major components of policyholders' funds in the Company's Consolidated Balance
Sheets are summarized in the table below:

<TABLE>
<CAPTION>
                                                                          December 31,
                                                                  --------------------------
                                                                     2004            2003
                                                                  ----------      ----------
                                                                         (in millions)
<S>                                                               <C>             <C>
Liabilities for policyholders' funds
    Guaranteed investment contracts ........................      $  3,691.0      $  4,770.2
    U.S. funding agreements ................................           138.0           144.4
    Global funding agreements and Canadian institutional
       annuities backing medium-term notes .................        10,681.7        11,908.1
    Other investment-type contracts ........................         2,580.6         2,485.2
                                                                  ----------      ----------
        Total liabilities for investment-type contracts ....        17,091.3        19,307.9
Liabilities for individual annuities .......................            80.0            60.5
Universal life and other reserves ..........................         2,214.5         2,325.1
                                                                  ----------      ----------
Total liabilities for policyholders' funds .................      $ 19,385.8      $ 21,693.5
                                                                  ==========      ==========
</TABLE>

Global Funding Agreements and Canadian Institutional Annuities. The Company has
two distribution programs for global funding agreements that back medium-term
notes sold worldwide.

Under these programs, global funding agreements are purchased from the Company
by special purpose entities (SPEs) that fund their purchases with the proceeds
from their issuance of medium-term notes to investors. These SPEs pledge the
global funding agreements and annuities as security for the repayment of their
medium-term notes, but the notes are non-recourse to the Company and its
subsidiaries. Under these distribution programs, as of December 31, 2004 and
2003, the Company had $11.3 billion and $12.9 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. The
global funding agreements may not be terminated or surrendered prior to
maturity. Claims for principal and interest under the global funding agreements
(which are issued by the Life Company) 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 sold world-wide under the
two programs is denominated in a currency different from the currency of the
related global funding agreement, the Company's U.S. insurance subsidiary also
enters into a currency swap with the SPE, and a third party, to match
currencies. Similarly, the Company's U.S. insurance subsidiary may enter into an
interest rate swap with the SPE to match the interest rate characteristics of
the global funding agreement to those of the related medium-term note.

Under the first program, established in May 1998 for $2.5 billion, and expanded
to $7.5 billion in 1999, an SPE issued medium-term notes in Europe, Asia and
Australia. As of December 31, 2004 and 2003, there was $2.8 billion and $3.8
billion, respectively, outstanding under this program. This SPE is not
consolidated in the Company's financial statements. The medium-term notes issued
by this SPE are included in policyholder funds in the Company's Consolidated
Balance Sheets.

Under the second program, established in June 2000, for $5.0 billion, expanded
in stages to $12.5 billion by June 2003, an SPE issued medium-term notes in
Europe, Asia, and to institutional investors in the United States. As of
December 31, 2004


                                      F-17
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

and 2003, there was $8.5 billion and $8.7 billion, respectively, outstanding
under this program. This SPE is not consolidated in the Company's Consolidated
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, 2004, the annual contractual maturities of global funding
agreements backing medium term notes issued under these programs were as
follows: 2005--$2,547.0 million; 2006--$2,884.5 million; 2007--$861.6 million;
2008--$1,488.2 million, 2009 -- $1,753.9 and thereafter--$1,741.0 million.

Participating Insurance. Participating business represents approximately 100.0%,
80.9% and 81.6%, of the Company's traditional life insurance in force, 100.0%,
96.2% and 96.3%, of the number of traditional life insurance policies in force,
and 100.0%, 94.3% and 92.5%, of traditional life insurance premiums in 2004,
2003 and 2002, 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 shareholders' equity.

The amount of policyholders' dividends to be paid is approved annually by the
Life Company's Board of Directors.

The determination of the amount of policyholders' 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 based on management's judgment as to the
appropriate level of statutory surplus to be retained by the Life Company. For
policies included in the closed block, expense experience is not included in
determining policyholders' dividends.

Revenue Recognition. Premiums from participating and non-participating
traditional life insurance and annuity policies with life contingencies are
recognized as income when due.

Premiums from universal life and investment-type contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period against policyholders' account
balances for mortality charges, policy administration charges and surrender
charges.

Premiums for contracts with a single premium or a limited number of premium
payments, due over a significantly shorter period than the total period over
which benefits are provided, are recorded in income when due. The portion of
such premium that is not required to provide for all benefits and expenses is
deferred and recognized in income in a constant relationship to insurance in
force or, for annuities, the amount of expected future benefit payments.

Premiums from long-term care insurance contracts are recognized as income when
due. Premiums from group life and health insurance contracts are recognized as
income over the period to which the premiums relate in proportion to the amount
of insurance protection provided.

Investment advisory, transfer agent, distribution and service fees are
recognized as revenues when services are performed. Commissions related to
security transactions and related expenses are recognized as income on the trade
date. Contingent deferred selling charge commissions are recognized as income in
the year received. Selling commissions paid to the selling broker/dealer for
sales of mutual funds that do not have a front-end sales charge are deferred and
amortized on a straight-line basis over periods not exceeding six years. This is
the approximate period of time expected to be benefited and during which fees
earned pursuant to Rule 12b-1 distribution plans are received from the funds and
contingent deferred sales charges are received from shareholders of the funds.

Stock-Based Compensation. For stock option grants made to employees prior to
January 1, 2003, the Company applied the recognition and measurement provisions
of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," which resulted in no compensation expense recognized for
these stock option grants to employees. 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," the effect of which is to record compensation expense
for grants made subsequent to this date. The following table illustrates the pro
forma effect on net income as if the Company had applied the fair value
recognition provisions of SFAS No. 123 to all stock-based employee compensation.


                                      F-18
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

In the merger all of the JHFS unvested stock options as of the date of
announcement of the merger on September 28, 2003, vested immediately prior to
the closing date and were exchanged for options exercisable for approximately 23
million Manulife common shares. In addition, substantially all outstanding
grants of restricted stock as of the date of the announcement of the merger on
September 28, 2003, vested immediately prior to the closing date. The Company
granted approximately 29,000 shares of Manulife restricted stock subsequent to
the merger. Subsequent to the merger the Company continues to incur compensation
expense related to stock compensation issued by Manulife.

<TABLE>
<CAPTION>
                                                                   Period from      Period from
                                                                  April 29, 2004  January 1, 2004
                                                                     through          through        Year Ended     Year Ended
                                                                  December 31,       April 28,      December 31,   December 31,
                                                                      2004             2004             2003           2002
                                                                  -------------------------------------------------------------
                                                                                          (in millions)

<S>                                                                  <C>              <C>               <C>            <C>
Net income, as reported ....................................         $372.7           $329.3            $590.5         $458.9
Add: Stock-based employee compensation expense included
   in reported net income, net of related tax effects ......            4.6              5.4              14.4            3.5
Deduct: Total stock-based employee compensation expense
   determined under fair value method for all awards, net
   of related tax effects (unaudited) ......................            4.6              8.0              39.5           57.6
                                                                     --------------------------------------------------------
Pro forma net income (unaudited) ...........................         $372.7           $326.7            $565.4         $404.8
                                                                     ========================================================
</TABLE>

Federal Income Taxes. The provision for Federal income taxes includes amounts
currently payable or recoverable and deferred income taxes, computed under the
liability method, resulting from temporary differences between the tax basis and
book basis of assets and liabilities. A valuation allowance is established for
deferred tax assets when it is more likely than not that an amount will not be
realized. Foreign subsidiaries and U.S. subsidiaries operating outside of the
United States are taxed under applicable foreign statutory rates. 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 shareholders' equity. Gains or losses on foreign currency
transactions are reflected in earnings.

Cumulative Effect of Accounting Changes

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

The Company adopted SOP 03-1 on January 1, 2004, which resulted in a decrease in
shareholders' equity of $1.5 million (net of tax of $0.8 million). The Company
recorded a reduction in net income of $3.3 million (net of tax of $1.8 million)
partially offset by an increase in other comprehensive income of $1.8 million
(net of tax of $1.0 million) which were recorded as the cumulative effects of an
accounting change, on January 1, 2004. In addition, in conjunction with the
adoption of SOP 03-1 the Company reclassified $933.8 million in separate account
assets and liabilities to the general account balance sheet accounts. Refer to
Recent Accounting Pronouncements for further discussion.

      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 (DIG B36)

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 the Recent Accounting Pronouncements section
below.


                                      F-19
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

Recent Accounting Pronouncements

      SFAS No. 123 (revised 2004) - Share Based Payment

In December, 2004, the Financial Accounting Standards Board (the FASB) issued
SFAS No. 123 (revised 2004), "Share Based Payment" (SFAS 123R), which is a
revision of SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No.
123(R) supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and amends SFAS No. 95, "Statement of Cash Flows". Generally, the
approach in Statement 123(R) is similar to the approach described in Statement
123. However, Statement 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income
statement based on their fair values. Pro forma disclosure is no longer an
alternative.

The Company adopted the fair-value-based method of accounting for share-based
payments effective January 1, 2003 using the prospective method described in
Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure. The Company uses the
Black-Scholes-Merton option pricing model to estimate the value of stock options
granted to employees and expects to continue to use this model upon our
anticipated adoption of SFAS No. 123(R), on July 1, 2005.

Because SFAS No. 123(R) must be applied not only to new awards but to previously
granted awards that are not fully vested on the effective date, and because the
Company adopted SFAS No. 123 using the prospective transition method (which
applied only to awards granted, modified or settled after the adoption date),
compensation cost for some previously granted awards that were not recognized
under SFAS No 123 will be recognized under Statement No. 123(R). However, had we
adopted SFAS No.123(R) in prior periods, the impact of that standard would have
approximated the impact of SFAS No. 123 as described above in the disclosure of
pro forma net income and earnings per share in Note 2 - Significant Accounting
Policies to our consolidated financial statements.

SFAS No. 123(R) also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather
than as an operating cash flow as required under current literature. This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption. While the Company cannot estimate what those
amounts will be in the future (because they depend upon, among other things,
when employees exercise stock options), the amount of operating cash flows
recognized for such excess tax deductions were $- million, $4.3 million, and
$5.0 million in 2004, 2003 and 2002, respectively.

      FASB Staff Position 106-2 - Accounting and Disclosure Requirements Related
to the Medicare Prescription Drug, Improvement and Modernization Act of 2003

In May, 2004, the FASB issued FASB Staff Position 106-2 - "Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug Improvement
and Modernization Act of 2003" (FSP 106-2). In accordance with FSP 106-2, the
Company recorded a $40.9 million reduction in the accumulated plan benefit
obligation as of the purchase accounting re-measurement date (April 28, 2004)
and a $1.6 million decrease in net periodic postretirement benefit costs for the
period April 29, 2004 through December 31, 2004.

On December 8, 2003, President Bush signed into law the bill referenced above,
which expands Medicare, primarily by adding a prescription drug benefit for
Medicare-eligible retirees starting in 2006. The Medicare Prescription Drug
Improvement and Modernization Act of 2003 (the Act) provides for special
tax-free subsidies to employers that offer plans with qualifying drug coverages
beginning in 2006. There are two broad groups of retirees receiving
employer-subsidized prescription drug benefits at the Company. The first group,
those who retired prior to January 1, 1992, receives a subsidy of between 90%
and 100% of total cost. Since this subsidy level will clearly meet the criteria
for qualifying drug coverage, the Company anticipates that the benefits it pays
after 2005 for pre-1992 retirees will be lower as a result of the new Medicare
provisions and has reflected that reduction in the other postretirement benefit
plan liability. With respect to the second group, those who retired on or after
January 1, 1992, the employer subsidy on prescription drug benefits is capped
and currently provides as low as 25% of total cost. Since final authoritative
accounting guidance has not yet been issued on determining whether a benefit
meets the actuarial criteria for qualifying drug coverage, the Company has
deferred recognition as permitted by FSP 106-2 for this group. The final
accounting guidance could require changes to previously reported information.


                                      F-20
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

      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 measurable 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 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 were applied at December
31, 2003 for entities considered to be special purpose entities (SPEs), and
applied at March 31, 2004 for non-SPE entities.

The Company categorized its FIN 46R consolidation candidates into three
categories- 1) collateralized debt obligation funds it manages (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, Properties or Other Entities, therefore the adoption of FIN 46R had no
impact on the Company's consolidated financial position, results of operations
or cash flows.

Additional liabilities recognized as a result of consolidating any 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 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 significant 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 contractholders. Refer to Note 12- Certain Separate Accounts for additional
disclosures required by SOP 03-1. See Cumulative Effect of Accounting Changes
above for presentation of the impact of adoption of SOP 03-1.

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


                                      F-21
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

      SFAS 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. See Cumulative Effect of
Accounting Changes above for presentation of the impact of adoption of DIG B36.


                                      F-22
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Summary of Significant Accounting Policies - (continued)

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

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" (FIN 45). FIN 45 requires certain types of guarantees to
be recorded by the guarantor as liabilities, 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
12--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.

      SFAS No. 146--Accounting for Costs Associated with Exit or Disposal
Activities

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

      SFAS No. 142--Goodwill and Other Intangible Assets

In January 2002, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 requires that goodwill and other intangible
assets deemed to have indefinite lives no longer be amortized 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 initial impairment tests of goodwill and
management contracts as of September 30, 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.

No impairment test was performed in 2004, because the Company's goodwill was
replaced with new goodwill as a result of the merger with Manulife on April 28,
2004. The Company's post-merger goodwill will be initially tested for impairment
in the second quarter of 2005.


                                      F-23
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments

The following information summarizes the components of net investment income and
net realized investment and other gains (losses):

<TABLE>
<CAPTION>
                                                             Period from      Period from
                                                               April 29        January 1
                                                                through         through       Year Ended     Year Ended
                                                             December 31,      April 28,     December 31,   December 31,
                                                                 2004             2004           2003           2002
                                                             -----------------------------------------------------------
<S>                                                            <C>             <C>             <C>             <C>
Net Investment Income
    Fixed maturities ....................................      $1,794.6        $1,073.0        $3,228.7        $3,017.3
    Equity securities ...................................           5.4             2.0            19.7            10.6
    Mortgage loans on real estate .......................         398.0           257.0           772.0           775.8
    Real estate .........................................          21.6             5.4            57.8            72.1
    Policy loans ........................................          78.2            38.5           123.0           120.1
    Short-term investments ..............................          10.6             1.2            16.5            20.5
    Other ...............................................         (72.4)          (41.6)         (230.2)         (210.4)
                                                               --------------------------------------------------------
    Gross investment income .............................       2,236.0         1,335.5         3,987.5         3,806.0

        Less investment expenses ........................         103.9            50.8           188.1           225.0
                                                               --------------------------------------------------------

Net investment income ...................................      $2,132.1        $1,284.7        $3,799.4        $3,581.0
                                                               --------------------------------------------------------

<CAPTION>
                                                             Period from      Period from
                                                               April 29        January 1
                                                                through         through       Year Ended     Year Ended
                                                             December 31,      April 28,     December 31,   December 31,
                                                                 2004             2004           2003           2002
                                                             -----------------------------------------------------------
<S>                                                            <C>             <C>             <C>             <C>
Net realized investment and other gains (losses),
    net of related amortization of deferred policy
    acquisition costs and value of business acquired,
    amounts credited to the policyholder dividend
    obligation and amounts credited to participating
    pension contractholders
    Fixed maturities ....................................      $    7.0        $  (26.4)       $ (392.8)       $ (660.9)
    Equity securities ...................................          24.7            73.0            69.9           101.2
    Mortgage loans on real estate and real estate to
      be disposed of ....................................         (33.7)           50.6           244.1            (7.9)
    Derivatives and other invested assets ...............         (14.0)           35.1            81.2            43.0
    Amortization adjustment for deferred policy
      acquisition costs and value of business acquired ..          12.8            10.9            (6.1)           38.9
    Amounts credited to the policyholder dividend
      obligation ........................................           8.1           (34.0)           58.5            11.9
    Amounts credited to participating pension
      contractholders ...................................         (34.9)           (8.2)            3.4            23.3
                                                               --------------------------------------------------------
Net realized investment and other gains (losses), net
    of related amortization of deferred policy
    acquisition costs and value of business acquired,
    amounts credited to the policyholder dividend
    obligation and amounts credited to participating
    pension contractholders .............................      $  (30.0)       $  101.0        $   58.2        $ (450.5)
                                                               ========================================================
</TABLE>


                                      F-24
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments - (continued)

Gross gains were realized on the sale of available-for-sale securities of $181.0
million from April 29 through December 31, 2004, $210.9 million from January 1
through April 28, 2004, $606.9 million in 2003 and $320.0 million in 2002, and
gross losses were realized on the sale of available-for-sale securities of $62.5
million from April 29 through December 31, 2004, $13.0 million from January 1
through April 28, 2004, $233.8 million in 2003 and $176.0 million in 2002.

The Company's investments in held-to-maturity and available-for-sale securities
are summarized below for the years indicated:

<TABLE>
<CAPTION>
                                                                             December 31, 2004
                                                           -------------------------------------------------------
                                                                             Gross         Gross
                                                            Amortized     Unrealized     Unrealized       Fair
                                                               Cost          Gains         Losses        Value
                                                           -------------------------------------------------------
                                                                               (in millions)
<S>                                                        <C>            <C>            <C>            <C>
Available-for-Sale:
Corporate securities ................................      $36,732.1      $   797.4      $    63.9      $37,465.6
Asset-backed & mortgage-backed securities ...........        9,503.1          130.0           49.1        9,584.0
Obligations of states and political subdivisions ....          288.3            0.8            1.7          287.4
Debt securities issued by foreign governments .......          172.7           11.4            0.1          184.0
U.S. Treasury securities and obligations of U.S.
   government corporations and agencies .............          341.0            1.6            0.4          342.2
                                                           ------------------------------------------------------
Fixed maturities available-for-sale total ...........       47,037.2          941.2          115.2       47,863.2
Equity securities ...................................          321.5            9.7            0.7          330.5
                                                           ------------------------------------------------------
     Total fixed maturities and equity securities
         available-for-sale .........................      $47,358.7      $   950.9      $   115.9      $48,193.7
                                                           ======================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                             December 31, 2003
                                                           -------------------------------------------------------
                                                                             Gross         Gross
                                                            Amortized     Unrealized     Unrealized       Fair
                                                               Cost          Gains         Losses        Value
                                                           -------------------------------------------------------
                                                                               (in millions)
<S>                                                        <C>            <C>            <C>            <C>
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
                                                           ------------------------------------------------------
     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-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, 2004, by
contractual maturity, are shown below:

                                                    Amortized Cost   Fair Value
                                                    ----------------------------
                                                            (in millions)
Available-for-Sale:
Due in one year or less...........................    $ 2,371.9      $ 2,378.6
Due after one year through five years.............     10,927.8       11,042.6
Due after five years through ten years............     14,135.2       14,454.6
Due after ten years...............................     10,099.2       10,403.4
                                                      ---------      ---------
                                                       37,534.1       38,279.2
Mortgage-backed securities........................      9,503.1        9,584.0
                                                      ---------      ---------
      Total.......................................    $47,037.2      $47,863.2
                                                      =========      =========

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 2004, 2003 and 2002 amounted to $(0.5) million, $0.1
million and $1.7 million, respectively.

The Company participates in a security lending program for the purpose of
enhancing income on securities held. At December 31, 2004 and 2003, $339.3
million and $426.9 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 2004, 2003 and 2002, net investment income passed through to participating
pension contractholders as interest credited to policyholders' account balances
amounted to $170.5 million, $161.7 million and $168.3 million, respectively.

Depreciation expense on investment real estate was $3.9 million, $1.5 million
and $3.0 million, in 2004, 2003, and 2002, respectively. Accumulated
depreciation was $13.9 million and $36.3 million at December 31, 2004 and 2003,
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 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, and the Chief Credit Officer of Manulife. 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
amortized cost. The results of this analysis are reviewed by the Credit
Committee at Manulife. This committee includes Manulife's Chief Financial
Officer, Chief Investment Officer, Chief Risk Officer, Chief Credit Officer and
other senior management. 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.


                                      F-26
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments - (continued)

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) the risk that fraudulent
information 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

<TABLE>
<CAPTION>
                                                                   As of December 31, 2004
                                          Less than 12 months          12 months or more                    Total
                                          -------------------          -----------------                    -----
                                       Carrying                     Carrying                     Carrying
                                       Value of                     Value of                     Value of
                                      Securities                   Securities                   Securities
                                         with                         with                         with
                                         Gross                        Gross                        Gross
                                      Unrealized    Unrealized     Unrealized     Unrealized    Unrealized     Unrealized
  Description of Securities:             Loss         Losses          Loss          Losses         Loss          Losses
                                     -------------------------------------------------------------------------------------
<S>                                    <C>           <C>               <C>           <C>        <C>             <C>
US Treasury obligations and
  direct obligations of U.S.
  government agencies .............    $   352.1     $   (2.1)         --             --        $   352.1       $   (2.1)
Federal agency mortgage backed
  securities ......................      3,046.2        (49.1)         --             --          3,046.2          (49.1)
Debt securities issued by
  foreign governments .............         10.2         (0.1)         --             --             10.2           (0.1)
Corporate bonds ...................      7,382.1        (63.9)         --             --          7,382.1          (63.9)
                                       ---------------------------------------------------------------------------------
Total, debt securities ............     10,790.6       (115.2)         --             --         10,790.6         (115.2)
Common stocks .....................          4.8         (0.7)         --             --              4.8           (0.7)
                                       ---------------------------------------------------------------------------------
Total .............................    $10,795.4     $ (115.9)         --             --        $10,795.4       $ (115.9)
                                       =================================================================================
</TABLE>

The aging of unrealized losses above reflects the mark to market of the
portfolio on April 28, 2004. Gross unrealized losses above include unrealized
losses from hedging adjustments. 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 over time
as the asset and derivative mature, impact the amount of unrealized loss on a
security. The remaining portion of the gross unrealized loss represents the
impact of interest rates on the non-hedged portion of the portfolio and
unrealized losses due to creditworthiness on the total fixed maturity portfolio.

At December 31, 2004 the fixed maturity securities had a total gross unrealized
loss of $115.9 million. 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 securities. 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. The gross unrealized loss on below investment grade fixed
maturity securities declined from $259.8 million at December 31, 2003 to $18.0
million at December 31, 2004 primarily due to the mark to market on the
portfolio as of April 28, 2004. The gross unrealized loss as of December 31,
2004 was largely due to interest rate changes since April 28, 2004.


                                      F-27
<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>
April 29 through December 31, 2004
     Mortgage loans on real estate .....          $ 83.9      $ 45.3       $ 83.9         $ 45.3
     Real estate to be disposed of .....              --          --           --             --
                                                ------------------------------------------------
Total ..................................          $ 83.9      $ 45.3       $ 83.9         $ 45.3
                                                ================================================

January 1 through April 28, 2004
     Mortgage loans on real estate .....          $ 65.9      $ 23.3       $  5.3         $ 83.9
     Real estate to be disposed of .....              --          --           --             --
                                                ------------------------------------------------
Total ..................................          $ 65.9      $ 23.3       $  5.3         $ 83.9
                                                ================================================

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


                                      F-28
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments - (continued)

At December 31, 2004 and 2003, 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,
                                                                            2004          2003
                                                                          ---------------------
                                                                              (in millions)

<S>                                                                        <C>           <C>
Impaired mortgage loans on real estate with provision for losses ...       $163.3        $124.4
Provision for losses ...............................................        (45.3)        (37.2)
                                                                           ------        ------
Net impaired mortgage loans on real estate .........................       $118.0        $ 87.2
                                                                           ======        ======
</TABLE>

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

                                                       Years Ended December 31,
                                                      2004      2003      2002
                                                     --------------------------
(in millions)

Average recorded investment in impaired loans.....   $143.9    $ 90.8    $ 74.9
Interest income recognized on impaired loans......      7.3       3.4       5.0


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 $107.3 million and $87.8 million as of
December 31, 2004 and 2003, 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,
                                                  2004        2003       2002
                                                -------------------------------
                                                         (in millions)
Expected......................................   $10.1       $ 7.6      $ 4.8
Actual........................................     8.7         7.2        4.7


                                      F-29
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Investments - (continued)

At December 31, 2004, 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..............................         $ 1,645.1       East North Central......................        $ 1,241.5
Hotels..................................             437.6       East South Central......................            473.1
Industrial..............................           1,004.5       Middle Atlantic.........................          1,690.1
Office buildings........................           2,409.2       Mountain................................            746.4
Retail..................................           2,682.5       New England.............................            932.0
Multi family............................               0.7       Pacific.................................          2,539.9
Mixed Use...............................             433.0       South Atlantic..........................          2,551.7
Agricultural............................           2,945.7       West North Central......................            408.4
Other...................................             279.6       West South Central......................            979.0
                                                                 Canada/Other............................            275.8

Allowance for losses....................             (45.3)      Allowance for losses....................            (45.3)
                                               --------------                                                  -------------

Total...................................         $11,792.6       Total...................................        $11,792.6
                                               ==============                                                  =============
</TABLE>

Mortgage loans with outstanding principal balances of $127.0 million, and bonds
with amortized cost of $145.7 million were non-income producing for the year
ended December 31, 2004. There was no non-income producing real estate for the
year ended December 31, 2004.

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. In accordance with FIN 46, this prohibition will
continue. During 2004, 2003, and 2002, the Company sold $124.7 million, $529.8
million, and $343.5 million of commercial mortgage loans in securitization
transactions, respectively, for which it received net proceeds of $125.0
million, $541.4 million, and $345.2 million, respectively, from which it
recognized pre-tax gains of $0.3 million, $12.0 million, and $1.9 million,
respectively, and from which it retained servicing assets of (none for 2004),
$0.4 million, and $0.3 million, respectively. The Company's mortgage servicing
assets were valued, in the aggregate, at $1.6 million, $1.4 million December 31,
2004 and 2003, respectively.

During December, 2003, the Company securitized $277.6 million of below
investment grade corporate bonds, all of which were previously owned by the
Company, by transferring them 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 Company's 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 Company's 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 of
the transferred assets were delinquent or in default. No similar securitization
was performed in 2004.

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 17- 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 market rates.


                                      F-30
<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 $2,427.0 million and $1,944.6 million at December
31, 2004 and 2003, respectively. Total combined assets of such investments were
$14,931.4 million and $15,105.4 million (consisting primarily of investments),
and total combined liabilities were $3,082.6 million and $1,583.8 million
(including $1,386.8 million and $1,216.3 million of loans payable) at December
31, 2003 and 2002, respectively. Total combined revenues and expenses of these
investments in 2004 were $1,299.9 million and $660.3 million, respectively,
resulting in $639.6 million of total combined income from operations. 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. 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 using the equity method of accounting totaled
$121.4 million for the period from April 29, 2004 through December 31, 2004 and
$74.2 million for the period from January 1, 2004 through April 28, 2004.
Net investment income on investments accounted for using the equity method of
accounting totaled $138.3 million and $64.8 million in 2003 and 2002,
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 2--Summary of Significant
Accounting Policies. 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 them.

As explained in Note 2--Summary of Significant Accounting Policies, additional
liabilities recognized as a result of consolidating any 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. These
additional liabilities would be 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 Obligation Funds (CDOs). Since 1996, the Company has acted
as investment manager to certain asset backed investment vehicles, commonly
known as collateralized debt obligation funds (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 in excess of the CDO equity are borne by the
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 investment in the CDO.


                                      F-31
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

In accordance with previous consolidation accounting principles (now superceded
by FIN 46R), the Company formerly consolidated a CDO only if 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, but only if 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 relationships among the equity owners of the CDOs. The
Company has determined 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 also does not have controlling financial interests. Therefore, the
Company does 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 all these 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
and does not manage and thus will not be required to consolidate any of them,
and considers that its relationships with them are not collectively significant,
therefore the Company does not disclose data for them. Credit ratings are
provided by nationally recognized credit rating agencies, and relate to the debt
issued by the CDOs in which the Company has invested.

Total size of Company-Managed CDOs (1)                       December 31,
                                                       2004               2003
                                                    ----------------------------
                                                            (in millions)

Total assets .............................           $3,775.9           $4,922.2
                                                     ========           ========

Total debt ...............................            3,707.9           $4,158.2
Total other liabilities ..................                9.0              712.0
                                                     --------           --------
Total liabilities ........................            3,716.9            4,870.2
Total equity .............................               59.0               52.0
                                                     --------           --------
Total liabilities and equity .............           $3,775.9           $4,922.2
                                                     ========           ========

(1)   The reduction in size of the Company-Managed CDOs is primarily due to the
      liquidation, at maturity, of Declaration Funding 1 LTD, in May 2004.

<TABLE>
<CAPTION>
Maximum exposure of the Company to losses from                  December 31,
Company-Managed CDOs                                      2004                2003
                                                   -------------------------------------
                                                      (in millions, except percents)
<S>                                                <C>         <C>      <C>       <C>
Investment in tranches of Company managed CDOs,
by credit rating (Moody's/Standard & Poors):
Aaa/AAA .......................................    $160.2      61.2%    $201.0    35.6 %
Aa1/AA+ .......................................      62.7      24.0       75.7      13.4
Baa2/BBB ......................................        --        --      218.0      38.8
B2 ............................................        --        --        8.0       1.4
B3/B- .........................................       7.5       2.9         --        --
Caa1/CCC+ .....................................      10.6       4.0       13.2       2.3
Not rated (equity) ............................      20.6       7.9       48.1       8.5
                                                   ------    ------     ------    ------
Total Company exposure ........................    $261.6    100.0 %    $564.0    100.0 %
                                                   ======    ======     ======    ======
</TABLE>

Low-Income Housing Properties. Since 1995, the Company has generated income tax
benefits by investing in apartment properties (the Properties) that qualify for
low income housing and/or historic tax credits. The Company initially invested
in the Properties directly, but now primarily 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-32
<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. 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 investment in each of the Properties
for a period of ten years. In some cases, the Company receives distributions
from the Properties which are based on a portion of the Property cash flows.

The Company has determined that it is not the primary beneficiary of any
Property, so the Company does not use consolidation accounting for any of them.
The Company believes that its relationships with the Properties are significant,
and accordingly, the disclosures in the tables below are provided. The tables
below present 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.

Total size of the Properties (1)
                                                               December 31,
                                                            2004         2003
                                                          ----------------------
                                                              (in millions)

Total assets .......................................      $1,103.9      $  982.7
                                                          ========      ========

Total debt .........................................      $  669.9      $  576.3
Total other liabilities ............................         103.3         116.6
                                                          --------      --------
Total liabilities ..................................         773.2         692.9
Total equity .......................................         330.7         289.8
                                                          --------      --------
Total liabilities and equity .......................      $1,103.9      $  982.7
                                                          ========      ========

(1)   Property level data reported above is reported with three month delays due
      to the delayed availability of financial statements of the Funds.

Maximum exposure of the Company to losses from the Properties
                                                                  December 31,
                                                                 2004      2003
                                                                ----------------
                                                                 (in millions)

Equity investment in the Properties (1) ....................    $323.2    $291.0
Outstanding equity capital commitments to the Properties ...      90.9     108.2
Carrying value of mortgages for the Properties .............      67.1      62.8
Outstanding mortgage commitments to the Properties .........       0.9       5.1
                                                                ------    ------
Total Company exposure .....................................    $482.1    $467.1
                                                                ======    ======

(1)   Equity investment in the Properties above is reported with three month
      delays due to the delayed availability of financial statements of the
      Funds.

Other Entities. 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 and various other
relationships. The Company has determined that for each of these Other Entities
which are VIEs, the Company is not the primary beneficiary, and should not use
consolidation accounting for them. The Company believes that its relationships
with the Other Entities are not significant, and is accordingly not providing
summary financial data for them, or data relating to the Company's maximum
exposure to loss as a result of its relationships with them. These potential
losses are generally limited to amounts invested, which are included on the
Company's Consolidated Balance Sheets in the appropriate investment categories.


                                      F-33
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

Since 2001, the Company has been involved with Arclight Energy Partner Fund I,
L.P. (Arclight), which is a private equity fund which invests in the electric
power, utility and energy industry sectors. The Company is a limited partner
investor, owning approximately 55.0% of Arclight's partners' capital at December
31, 2004. The Company's potential losses in relation to Arclight are limited to
its investment in Arclight. As of September 30, 2004, the most recent date for
which data is available, Arclight had total assets of $825.4 million, $0.8
million of liabilities, and $824.6 million of partners' capital. The Company has
determined that it is not the primary beneficiary of this entity and accordingly
does not need to consolidate Arclight.

Note 5 -- Derivatives and Hedging Instruments

The fair values of derivative instruments classified as assets at December 31,
2004 and 2003 were $1,198.9 million and $765.4 million, respectively, and appear
on the consolidated balance sheet in other assets. The fair values of derivative
instruments classified as liabilities at December 31, 2004 and 2003 were
$1,168.9 million and $1,700.1 million, respectively, and appear on the
consolidated balance sheet in other liabilities. The fair values of derivative
instruments, identified as embedded derivatives in participating pension
contracts pursuant to DIG B36, classified as liabilities and appear on the
Company's Consolidated Balance Sheets in policyholders' funds at December 31,
2004 and 2003 were $48.6 million and $225.6 million, respectively.

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

The Company also manages interest rate exposure by using interest rate swap
agreements to modify certain liabilities, such as fixed rate debt and Constant
Maturity Treasuries (CMT) indexed liabilities, by converting them to a
LIBOR-based floating rate.

The Company enters into purchased interest rate cap agreements, cancelable
interest rate swap agreements, and written swaptions to manage the interest rate
exposure of options that are embedded in certain assets and liabilities. A
written swaption obligates the Company to enter into an interest rate agreement
on the expiration date contingent on future interest rates. Purchased interest
rate cap and floor agreements are contracts with a counterparty which require
the payment of a premium for the right to receive payments for the difference
between the cap or floor interest rate 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 period January 1, 2004 through April 28, 2004, the Company
recognized net gains of $4.4 million related to the ineffective portion of its
fair value hedges, and net losses of $3.8 million related to the portion of the
hedging instruments that were excluded from the assessment of hedge
effectiveness. For the period April 29, 2004 through December 31, 2004, the
Company recognized net losses of $38.5 million related to the ineffective
portion of its fair value hedges, and net gains of $1.1 million related to the
portion of the hedging instruments that were excluded from the assessment of
hedge effectiveness. For the year ended December 31, 2003, the Company
recognized net losses of $5.8 million related to the ineffective portion of its
fair value hedges, and net losses of $1.5 million related to the portion of the
hedging instruments that were excluded from the assessment of hedge
effectiveness. 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


                                      F-34
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 5 -- Derivatives and Hedging Instruments - (continued)

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 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 period January 1, 2004 through April 28, 2004, the Company recognized
losses of $4.8 million related to the ineffective portion of its cash flow
hedges. For the period April 29, 2004 through December 31, 2004 the Company
recorded gains of $7.7 million 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 year ended December 31, 2004, all of the Company's
hedged forecast transactions qualified as cash flow hedges.

For the period January 1, 2004 through April 28, 2004, a net gain of $1.2
million was reclassified from other accumulated comprehensive income to
earnings. For the period April 29, 2004 through December 31, 2004, the Company
reclassified no gains or losses from other accumulated comprehensive income to
earnings. It is anticipated that approximately $1.3 million will be reclassified
from other accumulated comprehensive income to earnings within the next twelve
months. The maximum length for which variable cash flows are hedged is 24 years.

For the year ended December 31, 2004, 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.

For the period January 1, 2004 through April 28, 2004, losses of $37.3 million
(net of tax of $20.0 million) representing 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 a balance of
$188.8 million (net of tax of $99.6 million) respectively. For the period April
29, 2004 through December 31, 2004, gains of $242.4 million (net of tax of
$110.4 million) representing 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 a balances of $242.4
million (net of tax of $110.4 million) at December 31, 2004. For the year ended
December 31, 2003 gains of $28.7 million (net of tax of $15.5 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 a balance of $223.3 million (net of tax of
$120.3 million) at December 31, 2003.

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 used 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.


                                      F-35
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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 Manulife Insurance Company, formerly 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.

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

<TABLE>
<CAPTION>
                                                    April 29     January 1
                                                     through      through
                                                  December 31,   April 28,
                                                      2004          2004        2003         2002
                                                  -------------------------------------------------
                                                                     (in millions)

<S>                                                <C>           <C>          <C>          <C>
Domestic ......................................    $  471.7      $  472.2     $1,200.7     $  559.5
Foreign .......................................        16.8           2.0         14.1          8.0
                                                   ------------------------------------------------
Income before income taxes and cumulative
  effect of accounting changes ................    $  488.5      $  474.2     $1,214.8     $  567.5
                                                   ================================================
</TABLE>

The components of income taxes were as follows:

<TABLE>
<CAPTION>
                                                    April 29     January 1
                                                     through      through
                                                  December 31,   April 28,
                                                      2004          2004        2003         2002
                                                  -------------------------------------------------
                                                                     (in millions)
<S>                                                <C>           <C>          <C>          <C>
Current taxes:
   Federal ....................................    $   84.8      $  (33.2)    $  163.9     $   93.4
   Foreign ....................................         7.7           1.1          4.4          2.0
   State ......................................         3.1           1.5          4.6          4.6
                                                   ------------------------------------------------
                                                       95.6         (30.6)       172.9        100.0
                                                   ------------------------------------------------

Deferred taxes:
   Federal ....................................        25.3         175.2        179.0         14.6
   Foreign ....................................        (0.6)         (0.8)         0.1          0.7
   State ......................................        (4.5)         (2.2)        (6.7)        (6.7)
                                                   ------------------------------------------------
                                                       20.2         172.2        172.4          8.6
                                                   ------------------------------------------------

                                                   ------------------------------------------------
   Total income taxes .........................    $  115.8      $  141.6     $  345.3     $  108.6
                                                   ================================================
</TABLE>


                                      F-36
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 -- Income Taxes - (continued)

A reconciliation of income taxes computed by applying the Federal income tax
rate to income before income taxes and the consolidated income tax expense
charged to operations follows:

                                      April 29     January 1
                                       through      through
                                    December 31,   April 28,
                                        2004          2004      2003       2002
                                    --------------------------------------------
                                                     (in millions)

Tax at 35% ........................    $171.0      $166.0      $425.2    $198.6
Add (deduct):
   Prior year taxes ...............      14.2         2.3         4.7      (2.7)
   Tax credits ....................     (37.9)      (18.6)      (50.2)    (36.4)
   Foreign taxes ..................       1.3          --         1.4       2.0
   Tax exempt investment income ...      (7.3)       (4.2)      (21.3)    (25.7)
   Lease income ...................     (24.5)       (2.4)       (9.7)    (25.5)
   Other ..........................      (1.0)       (1.5)       (4.8)     (1.7)
                                     ------------------------------------------

     Total income taxes ...........    $115.8      $141.6      $345.3    $108.6
                                     ==========================================

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

                                                                December 31,
                                                             2004        2003
                                                           ---------------------
                                                                 (in millions)
Deferred tax assets:
   Policy reserve adjustments .........................    $  787.0   $   639.8
   Other employee benefits ............................       176.9       174.9
   Book over tax basis of investments .................       586.9       528.9
   Dividends payable to policyholders .................       253.0        99.6
   Interest ...........................................        56.6        40.2
   Pension plan expense ...............................        57.7          --
   Deferred policy acquisition costs ..................       146.4          --
                                                           --------   ---------
      Total deferred tax assets .......................     2,064.5     1,483.4
                                                           --------   ---------
Deferred tax liabilities:
   Pension plan expense ...............................          --        47.5
   Deferred policy acquisitions costs .................          --       925.6
   Depreciation .......................................        33.8        72.3
   Basis in partnerships ..............................       108.9        72.6
   Market discount on bonds ...........................       146.1        20.0
   Capitalized charges related to mutual funds ........          --         3.0
   Lease income .......................................        71.2     1,041.4
   Value of business acquired .........................     1,215.8          --
   Unrealized gains ...................................       227.1       705.1
   Merger expenses ....................................       208.4          --
   Other ..............................................         3.1        29.9
                                                           --------   ---------
     Total deferred tax liabilities ...................    $2,014.4   $ 2,917.4
                                                           --------   ---------

           Net deferred tax assets (liabilities) ......    $   50.1   $(1,434.0)
                                                           ========   =========

The Company made income tax payments of $59.4 million, $147.4 million and $104.9
million in 2004, 2003 and 2002, respectively.


                                      F-37
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 7 -- Closed Block

As of February 1, 2000, the Company established a closed block for the benefit
of certain classes of individual or joint traditional participating whole life
insurance policies for which the Company had a dividend scale payable in 1999
and individual term life insurance policies that were in force on February 1,
2000. Assets were allocated to the closed block in an amount that, together with
anticipated revenues from policies included in the closed block, was reasonably
expected to be sufficient to support such business, including provision for
payment of benefits, direct asset acquisition and disposition costs, and taxes,
and for continuation of dividend scales payable in 1999, assuming experience
underlying such dividend scales continues. Assets allocated to the closed block
inure solely to the benefit of the holders of the policies included in the
closed block and will not revert to the benefit of the shareholders of the
Company. No reallocation, transfer, borrowing, or lending of assets can be made
between the closed block and other portions of the Company's general account,
any of its separate accounts, or any affiliate of the Company without 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-38
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 7 -- Closed Block - (continued)

The following tables set forth certain summarized financial information relating
to the closed block as of the dates indicated:

<TABLE>
<CAPTION>
                                                                      December 31,
                                                                 -----------------------
                                                                   2004          2003
                                                                 -----------------------
                                                                      (in millions)
<S>                                                              <C>           <C>
Liabilities
Future policy benefits ......................................    $10,759.5     $10,690.6
Policyholder dividend obligation ............................        540.1         400.0
Policyholders' funds ........................................      1,506.7       1,511.9
Policyholder dividends payable ..............................        419.3         413.1
Other closed block liabilities ..............................         64.4          37.4
                                                                 -----------------------
            Total closed block liabilities ..................    $13,290.0     $13,053.0
                                                                 =======================
Assets

Investments
Fixed maturities:
      Held-to-maturity--at amortized cost
        (fair value: 2003--$69.6) ...........................           --     $    66.0
      Available-for-sale--at fair value
        (cost: 2004--$6,474.1; 2003--$5,847.6) ..............    $ 6,585.6       6,271.1
Equity securities:
      Available-for-sale--at fair value
        (cost: 2004--$7.0; 2003--$9.1) ......................          7.0           9.1
Mortgage loans on real estate ...............................      1,662.0       1,577.9
Policy loans ................................................      1,534.3       1,554.0
Short-term investments ......................................           --           1.2
Other invested assets .......................................        324.3         230.6
                                                                 -----------------------
            Total investments ...............................     10,113.2       9,709.9
                                                                 =======================

Cash and cash equivalents ...................................        142.9         248.3
Accrued investment income ...................................        140.2         145.1
Other closed block assets ...................................        317.2         308.6
                                                                 -----------------------
            Total closed block assets .......................    $10,713.5     $10,411.9
                                                                 =======================
Excess of reported closed block liabilities over assets
  designated to the closed block ............................    $ 2,576.5     $ 2,641.1
Portion of above representing other comprehensive income:
      Unrealized appreciation (depreciation), net of
         tax of $(39.7) million and $(148.0) million
         at 2004 and 2003, respectively .....................         74.3         275.3
      Allocated to the policyholder dividend obligation,
         net of tax $40.1 million and $148.1 million at
         2004 and 2003, respectively ........................        (74.4)       (275.1)
                                                                 -----------------------
            Total ...........................................         (0.1)          0.2
            Maximum future earnings to be recognized from
              closed block assets and liabilities ...........    $ 2,576.4     $ 2,641.3
                                                                 =======================
Change in the policyholder dividend obligation:
      Balance at beginning of period ........................    $   400.0     $   288.9
Purchase accounting fair value adjustment ...................        208.4
Impact on net income before income taxes ....................        (68.4)        (57.9)
Unrealized investment gains (losses) ........................          0.1         169.0
                                                                 -----------------------
            Balance at end of period ........................    $   540.1     $   400.0
                                                                 =======================
</TABLE>


                                      F-39
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 7 -- Closed Block - (continued)

<TABLE>
<CAPTION>
                                                                                      Period from    Period from
                                                                                        April 29      January 1
                                                                                        through        through
                                                                                      December 31,    April 28,
                                                                                          2004           2004          2003
                                                                                     ----------------------------------------
                                                                                                    (in millions)
<S>                                                                                    <C>            <C>            <C>
Change in the policyholder dividend obligation:
    Balance at beginning of period .............................................       $  308.8       $  400.0       $  288.9
Purchase accounting fair value adjustment ......................................          208.4           --             --
Impact on net income before income taxes .......................................          (91.8)          23.4          (57.9)
Unrealized investment gains (losses) ...........................................          114.7         (114.6)         169.0
                                                                                     ----------------------------------------
    Balance at end of period ...................................................       $  540.1       $  308.8       $  400.0
                                                                                     ========================================
</TABLE>

<TABLE>
<CAPTION>
                                                                    Period from     Period from
                                                                      April 29       January 1
                                                                      through         through      Year Ended      Year Ended
                                                                    December 31,     April 28,    December 31,    December 31,
                                                                        2004            2004          2003            2002
                                                                    ----------------------------------------------------------
                                                                                           (in millions)
<S>                                                                  <C>            <C>            <C>            <C>
Revenues
Premiums ........................................................    $  573.2       $  278.0       $  915.7       $  969.9
Net investment income ...........................................       348.0          208.4          648.2          663.9
Net realized investment and other gains (losses), net of
   amounts credited to the policyholder dividend obligation
   of $8.1 million for the period April 29 through December 31,
   2004; $(33.7) million for the period January 1 through
   April 28, 2004; and $(58.2) million and $(11.9) million,
   for the years ended December 31, 2003 and 2002,
   respectively .................................................         1.3          (35.7)          (4.5)          (5.2)
Other closed block revenues .....................................          --           (0.2)          (0.1)           0.1
                                                                     --------------------------------------------------------
      Total closed block revenues ...............................       922.5          450.5        1,559.3        1,628.7
Benefits and Expenses
Benefits to policyholders .......................................       636.0          310.9          982.0        1,057.6
Change in the policyholder dividend obligation ..................       (85.2)         (11.2)          (2.4)         (60.2)
Other closed block operating costs and expenses .................        (3.4)           0.9           (3.0)          (5.2)
Dividends to policyholders ......................................       285.1          141.1          449.5          489.7
                                                                     --------------------------------------------------------
Total benefits and expenses .....................................       832.5          441.7        1,426.1        1,481.9

Closed block revenues, net of closed block benefits and
   expenses, before income taxes and cumulative effect of
   accounting change ............................................        90.0            8.8          133.2          146.8
Income taxes, net of amounts credited to the policyholder
   dividend obligation of  $1.7 million for the period April 29
   through December 31, 2004; $0.6 million for the period
   January 1 through April 28, 2004; and $2.1 million and
   $1.3 million, for the years ended December 31, 2003 and
   2002 respectively ............................................        31.6            2.3           45.6           50.0
                                                                     --------------------------------------------------------
Closed block revenues, net of closed block benefits and
   expenses and income taxes, before cumulative effect of
   accounting change ............................................    $   58.4       $    6.5       $   87.6       $   96.8
                                                                     ========================================================
</TABLE>


                                      F-40
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 7 -- Closed Block - (continued)

      Maximum future earnings from closed block assets and liabilities:

                                                       Years Ended December 31,
                                                       ------------------------
                                                          2004           2003
                                                          ----           ----
                                                             (in millions)
Beginning of period................................    $ 2,641.3      $ 2,728.9
End of period......................................      2,576.4        2,641.3
                                                       ------------------------
Change during period...............................    $   (64.9)     $   (87.6)
                                                       ========================

Note 8 -- 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 $233.8 million and a deferred profit of $247.7 million. A
capital lease obligation of $90.0 million was recorded for one of the
properties, which has a 15 year market-based lease term. The other two
properties have operating market-based 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. This sublease was terminated in April 2004, when
the Company sold the parking garage to Beacon Capital Partners. The Company
recognized a gain on the sale of the garage of $74.2 million. The Company has a
cancelable market rate lease for parking spaces at the garage.

The future minimum lease payments by year and in the aggregate, under the
capital lease and under non-cancelable operating leases are presented below:

                                                                       Non-
                                                                    cancelable
                                                       Capital       Operating
                                                        Lease         Leases
                                                     --------------------------
                                                           (in millions)
2005...........................................      $   8.8          $42.0
2006...........................................          8.8           42.0
2007 ..........................................          8.8           37.1
2008...........................................          8.8           34.1
2009 ..........................................          8.8           31.0
Thereafter ....................................         79.9          123.6
                                                     ---------      --------
Total minimum lease payments ..................        123.9         $309.8
                                                                    ========
Amounts representing interest .................        (45.8)
                                                     --------
Present value of net minimum lease payments....         78.1
Current portion of capital lease obligation....         (8.8)
                                                     --------
Total..........................................      $  69.3
                                                     ========


                                      F-41
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 9 -- Debt and Line of Credit

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

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                          2004         2003
                                                                        ---------------------
                                                                              (in millions)
<S>                                                                     <C>          <C>
Short-term debt:
   Current maturities of long-term debt ............................    $  137.7     $  104.0

Long-term debt:
   Surplus notes, 7.38% maturing in 2024 (1) .......................       516.7        447.6
   Notes payable, interest ranging from 6.4% to 12.1%,
     due in varying amounts to 2012 ................................       176.5        171.3
                                                                        --------     --------
Total long-term debt ...............................................       693.2        618.9

Less current maturities ............................................      (137.7)      (104.0)
                                                                        --------     --------
Long-term debt .....................................................       555.5        514.9
                                                                        --------     --------

   Total long and short-term debt before fair value adjustments ....       693.2        618.9

Fair value adjustments related to interest rate swaps (1) ..........        22.1         94.5
                                                                        --------     --------

Total long and short-term debt after fair value adjustments ........    $  715.3     $  713.4
                                                                        ========     ========

Consumer notes:
   Notes payable, interest ranging from 1.75% to 6.25%
     due in varying amounts to 2032 ................................    $2,379.1     $1,550.4
                                                                        ========     ========
</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. The notes payable consists of debt issued by various operating
subsidiaries of the Company of which $124.5 million was outstanding at December
31, 2004 at Signature Fruit, Inc., a subsidiary of the Company, $101.7 million
of which is short-term.

At December 31, 2004 the Company had two separate committed lines of credit: one
of $500 million, through a syndication of banks including Fleet National Bank,
JPMorgan Chase, Credit Suisse First Boston, The Bank of New York, Barclays, The
Bank of Nova Scotia, Wachovia, Royal Bank of Canada, State Street Bank, Bank of
America, Bank One, BNP Paribas, Deutsche Bank, PNC Bank, Sovereign Bank,
Westdeutsche Landesbank, Comerica Bank and Northern Trust (the "external line of
credit"); the second of $1.0 billion with the Company's parent, Manulife (the
"Manulife line of credit"). The external line of credit agreement provides for a
multi-year facility for $500 million (renewable in 2005). The external line of
credit is available for general corporate purposes. The external line of credit
agreement has no material adverse change clause, and includes, among others, the
following covenants: minimum requirements for JHFS shareholder's equity, maximum
limit on the capitalization ratio and a negative pledge clause (with exceptions)
as well as limitations on subsidiary debt, none of which were triggered as of
December 31, 2004. The external line of credit also contains cross-acceleration
provisions, none of which were triggered as of December 31, 2004. The fee
structure of the external line of credit is determined by the rating levels of
JHFS or the Life Company. To date, the Company has not borrowed any amounts
under the external lines of credit as of December 31, 2004.


                                      F-42
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 9 -- Debt and Line of Credit - (continued)

The Manulife line of credit agreement provides for a 364-day credit facility for
$1.0 billion. Manulife 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, 2004. To date, we have not borrowed any amounts under the
external or Manulife lines of credit as of December 31, 2004.

Aggregate maturities of long-term debt are as follows: 2005--$137.7 million;
2006--$16.0 million; 2007--$11.7 million; 2008--$2.0 million, 2009 - $1.2
million; and thereafter--$524.6 million.

Interest expense on debt, included in other operating costs and expenses, was
$27.7 million and $14.2 million for the periods from April 29 through December
31, 2004 and January 1 through April 28, 2004, respectively. Interest expense on
debt, included in other operating costs and expenses, was $49.6 million and
$52.6 million in 2003 and 2002, respectively. Interest paid on debt was $24.8
million and $19.2 million for the period from April 29 through December 31, 2004
and January 1 through April 28, 2004, respectively. Interest paid amounted to
$46.2 million in 2003 and $47.0 million in 2002.

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--$80.5 million; 2007--$144.0 million;
2008--$106.3 million, 2009--$38.2 million; and thereafter--$1,977.5 million. As
of December 31, 2004, there were no maturities of consumer notes in 2004.

Interest expense on consumer notes, included in benefits to policyholders, was
$100.8 million, $39.0 million and $2.5 million in 2004, 2003, and 2002,
respectively. Interest paid amounted to $90.1 million, $29.8 million and $1.4
million in 2004, 2003 and 2002.

Note 10 -- Minority Interest

Minority interest consist of 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 Company's 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 - Related Party Transactions

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 in the Company's
Consolidated Statements of Income. The Company charged JHFS service fees of
$17.3 million, $21.0 million and $23.0 million for the years ending December 31,
2004, 2003 and 2002, respectively. As of December 31, 2004, JHFS was current in
its payments to the Company related to these services.

The Company provides certain administrative and asset management services to its
pension plans and employee welfare trust (the Plans). Fees paid to the Company
for these services were $6.4 million, $5.7 million and $7.2 million during the
years ended December 31, 2004, 2003 and 2002, respectively.


                                      F-43
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Related Party Transactions - (continued)

During the years ended December 31, 2004 and 2003, the Company paid $100.1
million and $24.8 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 $1,529.0
million and $994.5 million at December 31, 2004 and 2003, respectively, which
are included with other liabilities in the Company's Consolidated Balance Sheets
and recorded reinsurance recoverable from JHReCo of $2,169.2 million and
$1,421.1 million at December 31, 2004 and 2003, respectively, which are included
with other reinsurance recoverables on the Company's Consolidated Balance
Sheets. Premiums ceded to JHReCo were $702.8 million, $868.7 million and $596.8
million during the years ended December 31, 2004, 2003 and 2002 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 $286.5 million and $157.2 million at
December 31, 2004 and 2003, which is included with other liabilities in the
Company's Consolidated Balance Sheets. At December 31, 2004 and 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 $1.0 and $0.8 million during the years ended
December 31, 2004 and 2003.

The Company, in the ordinary course of business, invests funds deposited with it
by customers and manages the resulting invested assets for growth and income for
customers. From time to time, successful investment strategies of the Company
may attract deposits from affiliates of the Company. At December 31, 2004, the
Company managed approximately $58.5 million of investments for Manulife
affiliates which to date generated market-based revenue for the Company.

To effect the efficiencies of the merger with Manulife, the Company has an
arrangement with its parent, Manulife, to share the cost of certain corporate
services including, among others, personnel, property facilities, catastrophic
reinsurance coverage, and directors' and officers insurance. In addition,
synergies of sales agents are being found whereby the Company has an arrangement
for the compensation of its sales agents for cross-selling products of Manulife
affiliates. Operational efficiencies identified in the merger are subject to a
service agreement between the Company and its affiliate Manulife U.S.A., a
U.S.-based life insurance subsidiary of Manulife, whereby the Company is
obligated to provide certain services in support of Manulife U.S.A's business.
Further, under the service agreement Manulife U.S.A. is obligated to provide
compensation to the Company for services provided. Through December 31, 2004,
there had not been a material level of business transacted under the service
agreement and no material receivable is owed to the Company at period end.

There are two Service Agreements, both effective as of April 28, 2004, between
the Company and The Manufacturers Life Insurance Company (U.S.A.) which on
January 1, 2005 changed its name to John Hancock Life insurance Company (U.S.A.)
("John Hancock USA"). Under the one agreement the Company provides services to
John Hancock USA, and under the other John Hancock USA provides services to the
Company. In both cases the Provider of the services can also employ a "Provider
Affiliate" to provide services. In the case of the service agreement where the
Company provides services to John Hancock USA, a "Provider Affiliate" means the
Company's parent, JHFS, and its direct and indirect subsidiaries, except for
John Hancock USA. As of December 31, 2004 there are accrued payables of $9.8
million for these service agreements. John Hancock USA paid $15.3 million and
Manulife New York paid $0.9 million to Signator for commissions on Manulife
product sales.


                                      F-44
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 -- Related Party Transactions - (continued)

Prior to its merger with Manulife, the Company reinsured certain portions of its
closed block with Manulife. During the fourth quarter of 2004, the Life Company
entered into an additional agreement covering closed block policies with a
Manulife affiliate. The Company entered into these reinsurance contracts in
order to facilitate its statutory capital management process. Both the original
and the revised reinsurance contracts are primarily written on a modified
coinsurance basis where the related financial assets remain invested at the
Company. The closed block reinsurance agreement is a financial reinsurance
agreement and does not meet the risk transfer definition for U.S. GAAP reporting
purposes. The agreement is accounted for under deposit accounting with only the
reinsurance risk fee being reported on the consolidated statements of income.
The Company's Consolidated Financial Statements do not report reinsurance ceded
premiums or reinsurance recoverable. The Company's Consolidated Financial
Statements report a risk fee that was paid to the Manulife reinsurance companies
for year 2004. This appears in other operating costs and expenses in the
Consolidated Statements of Income and was $1.5 million for the period the
Company operated as a subsidiary of Manulife, April 29, 2004 through December
31, 2004.

Note 12 -- Reinsurance

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

<TABLE>
<CAPTION>
                                         April 29, 2004 to     January 1, 2004 to
                                         December 31, 2004       April 28, 2004               2003                    2002
                                       -------------------------------------------------------------------------------------------
                                             Premiums                Premiums               Premiums                 Premiums
                                        Written     Earned     Written      Earned     Written     Earned      Written      Earned
                                       -------------------------------------------------------------------------------------------
                                                                             (in millions)

<S>                                    <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Direct ............................    $1,675.8    $1,683.4    $  856.8    $  846.7    $2,816.3    $2,813.5    $2,570.1    $2,565.0

Assumed ...........................       484.3       484.3       192.8       192.8       690.5       690.5       469.3       469.3

Ceded .............................      (815.7)     (815.7)     (411.5)     (411.5)   (1,464.6)   (1,464.6)   (1,050.1)   (1,050.1)
                                      ---------------------------------------------------------------------------------------------

  Net life, health and annuity
    premiums ......................    $1,344.4    $1,352.0    $  638.1    $  628.0    $2,042.2    $2,039.4    $1,989.3    $1,984.2
                                      =============================================================================================
</TABLE>

For the period January 1 through April 29, 2004 and April 29 through December
31, 2004 benefits to policyholders under life, health and annuity ceded
reinsurance contracts were $172.4 million and $360.9 million respectively. For
the years ended December 31, 2003 and 2002, benefits to policyholders under
life, health and annuity ceded reinsurance contracts were $474.6 million and
$645.9 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.

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 13 -- 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 also based on years
of service and final average compensation (generally during the three years
prior to retirement). In 2001, the defined benefit pension plans were amended to
a cash balance basis under which benefits are based on career average
compensation. Under grandfathering rules, employees within 5 years of early
retirement eligibility or employees over age 40 and with at least 10 years of
service will receive pension benefits based on the greater of the benefit from
the cash balance basis or the prior final average salary basis. This amendment
became effective on January 1, 2002.

Benefits related to the defined benefit pension plans paid to employees and
retirees were $80.6 million for the period January 1 through April 28, 2004 and
$128.9 million April 29 through December 31, 2004. Benefits related to the
defined benefit pension plans paid to employees and retirees were $167.7 million
and $161.0 million in 2003, and 2002, respectively.

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 $9.0
million, $9.6 million, and $10.4 million in 2004, 2003 and 2002, 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
coverages are contributory based for post January 1, 1992 non-union retirees. A
small portion of pre-January 1, 1992 non-union retirees also contribute. The
applicable contributions are based on the number of years of service. 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 Medicare Prescription Drug Improvement and
Modernization Act of 2003 provides for special tax-free subsidies to employers
that offer plans with qualifying drug coverages beginning in 2006. There are two
broad groups of retirees receiving employer-subsidized prescription drug
benefits from John Hancock. The first group, those who retired prior to January
1, 1992, receive a subsidy of between 90% and 100% of total cost. Since this
subsidy level will clearly meet Medicare's criteria for a qualifying drug
coverage, the


                                      F-46
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 -- Pension Benefit Plans and Other Postretirement Benefit Plans -
(continued)

Company anticipates that the benefits it pays after 2005 for pre 1992 retirees
will be lower as a result of the new Medicare provisions. In accordance with
FASB Staff Position FAS 106-2, the Company reflected a reduction in liability
for this group of $40.9 million as of the purchase accounting remeasurement
(April 28, 2004). With respect to the second group, those who retired on or
after January 1, 1992, the employer subsidy on prescription drug benefits is
capped and currently provides as low as 25% of total cost. Since final
regulations on determining whether a benefit meets the actual criteria for
qualifying drug coverage have not been issued by Medicare as of December 31,
2004, the Company will address the impact of the Act with respect to post- 1991
retirees once these clarifying regulations have been issued.

Obligations and Funded Status:

<TABLE>
<CAPTION>
                                                                     -----------------------------------------------
                                                                                                Other Postretirement
                                                                       Pension Benefits               Benefits
                                                                                 Years Ended December 31,
                                                                     -----------------------------------------------
                                                                       2004          2003         2004         2003
                                                                     -----------------------------------------------
                                                                                      (in millions)
<S>                                                                  <C>          <C>          <C>          <C>
Change in benefit obligation:
Benefit obligation at beginning of year .........................    $2,174.8     $2,029.3     $  615.4     $  584.3
Service cost ....................................................        22.3         25.8          1.4          1.5
Interest cost ...................................................       128.2        130.5         36.3         35.3
Amendments ......................................................          --           --           --        (54.3)
Actuarial loss ..................................................       126.4        156.9         54.0         93.3
Benefits paid ...................................................      (209.5)      (167.7)       (51.1)       (43.9)
Curtailment .....................................................          --           --           --         (0.8)
                                                                     -----------------------------------------------
Benefit obligation at end of year ...............................    $2,242.2     $2,174.8     $  656.0     $  615.4
                                                                     ===============================================

Change in plan assets:
Fair value of plan assets at beginning of year ..................    $2,101.2     $1,861.0     $  237.0     $  204.2
Actual return on plan assets ....................................       259.5        393.4         22.3         44.8
Employer contribution ...........................................        53.9         14.5         51.1         32.0
Employee contribution ...........................................          --           --          5.4          4.2
Benefits paid ...................................................      (209.5)      (167.7)       (56.5)       (48.2)
                                                                     -----------------------------------------------
Fair value of plan assets at end of year ........................    $2,205.1     $2,101.2     $  259.3     $  237.0
                                                                     ===============================================

Funded status ...................................................    $  (37.1)    $  (73.6)    $ (396.7)    $ (378.4)
Unrecognized actuarial (gain) loss ..............................       (71.7)       401.1         23.3        157.1
Unrecognized prior service cost .................................          --         55.3           --        (81.2)
                                                                     -----------------------------------------------
Prepaid (accrued) benefit cost ..................................    $ (108.8)    $  382.8     $ (373.4)    $ (302.5)
                                                                     ===============================================

Amounts recognized in the Company's Consolidated Balance Sheets:
Prepaid benefit cost ............................................    $  154.1     $  569.4
Accrued benefit liability including minimum liability ...........      (279.9)      (317.0)
Intangible asset ................................................          --          0.1
Accumulated other comprehensive income ..........................        17.0        130.3
                                                                     ---------------------
Net amount recognized ...........................................    $ (108.8)    $  382.8
                                                                     =====================
</TABLE>

The accumulated benefit obligations for all defined benefit pension plans was
$2,126.2 million and $2,076.5 million at December 31, 2004 and 2003,
respectively and is included in other liabilities on the Company's Consolidated
Balance Sheets.


                                      F-47
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 -- Pension Benefit Plans and Other Postretirement Benefit Plans -
(continued)

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

                                                        Years Ended December 31,
                                                      --------------------------
                                                        2004           2003
                                                      --------------------------
                                                           (in millions)

Projected benefit obligation......................     $376.5         $337.2

Accumulated benefit obligation....................      355.3          317.9

Fair value of plan assets.........................        4.3            0.9

Components of Net Periodic Benefit cost:

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                         -------------------------------------------------------------------------------
                                                Pension Benefits                         Other Postretirement Benefits
                                         -------------------------------------------------------------------------------
                                          January 1      April 29                   January 1       April 29
                                           through        through                    through         through
                                          April 28,    December 31,                 April 28,     December 31,
                                            2004           2004        2003           2004            2004         2003
                                         -------------------------------------------------------------------------------
                                                                         (in millions)
<S>                                       <C>             <C>         <C>            <C>             <C>         <C>
Service cost .........................    $  7.5          $ 14.8      $ 25.9         $  0.5          $  0.9      $  1.6
Interest cost ........................      43.2            85.0       130.5           11.8            24.5        35.3
Expected return on plan assets .......     (58.8)         (115.1)     (155.8)          (6.9)          (13.9)      (17.4)
Amortization of transition asset .....        --              --         0.1             --              --          --
Amortization of prior service cost ...       2.2              --         7.4           (2.5)             --        (6.6)
Recognized actuarial gain (loss) .....       8.3              --        29.7            4.2              --         6.9
                                          ------------------------------------------------------------------------------
Net periodic benefit (credit) cost ...    $  2.4          $(15.3)     $ 37.8         $  7.1          $ 11.5      $ 19.8
                                          ==============================================================================
</TABLE>

Additional Information:

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                      --------------------------------------------------------------------
                                                                                                     Other Postretirement
                                                                    Pension Benefits                         Benefits
                                                      --------------------------------------------  ----------------------
                                                          January 1         April 29
                                                           through          through
                                                          April 28,       December 31,
                                                             2004             2004         2003        2004        2003
                                                      --------------------------------------------------------------------
                                                                                   (in millions)
<S>                                                      <C>             <C>              <C>          <C>         <C>
Increase in minimum liabilities included in
 other comprehensive income........................      $ (5.6)         $ (107.7)        $25.8        N/A         N/A
</TABLE>


                                      F-48
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 -- Pension Benefit Plans and Other Postretirement Benefit Plans -
(continued)

Assumptions:

Weighted-average assumptions used to determine benefit obligation:

                                                    Years Ended December 31,
                                               ---------------------------------
                                                                   Other
                                                   Pension     Postretirement
                                                   Benefits       Benefits
                                               ---------------------------------
                                                2004     2003   2004      2003
                                               ---------------------------------
Discount rate................................  5.75%     6.25%  5.75%     6.25%
Rate of compensation increase................  4.00%     3.00%   N/A       N/A
Health care trend rate for following year....                  10.50%    11.00%
Ultimate trend rate..........................                   5.00%     5.25%
Year ultimate rate reached...................                   2016      2010


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

<TABLE>
<CAPTION>
                                                          Years Ended December 31,
                                                -------------------------------------------
                                                                      Other Postretirement
                                                   Pension Benefits        Benefits
                                                -------------------------------------------
                                                   2004      2003       2004      2003
                                                -------------------------------------------
<S>                                               <C>       <C>       <C>        <C>
Discount rate.................................    6.25%     6.75%      6.00%      6.75%
Expected long-term return on plan assets......    8.50%     8.75%      8.75%      8.75%
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...........................                         5.00%      5.25%
Year ultimate rate reached....................                         2016       2008
</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
the U.S. Securities and Exchange Commission staff suggestions are also
considered.


                                      F-49
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 -- Pension Benefit Plans and Other Postretirement Benefit Plans -
(continued)

      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 2004......................      $ 1.7              $ (1.5)

Effect on postretirement benefit obligations as of December 31, 2004....       28.2               (24.9)
</TABLE>

Plan Assets

The Company's weighted-average asset allocations for its plans at December 31,
2004 and 2003, by asset category are as follows:
                                                       Pension
                                                     Plan Assets
                                                   at December 31,
                                             ---------------------------
                                                 2004            2003
                                             ---------------------------
Asset Category
--------------
Equity securities........................        65%              69%
Fixed maturity securities................        25               24
Real estate..............................         2                2
Other....................................         8                5
                                             -----------    ------------
         Total...........................       100%             100%
                                             ===========    ============

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

Asset Category
--------------
Equity securities................................         50% - 80%
Fixed maturity  securities.......................         25% - 35%
Real estate......................................          1% -  5%
Other............................................         --% - 15%

The plans do not own any of the Company's common stock at December 31, 2004 and
2003.

Other postretirement benefit plan weighted-average asset allocations at December
31, 2004, and 2003, by asset category are as follows:

                                                          Other
                                                     Postretirement
                                                        Benefits
                                                       Plan Assets
                                                     at December 31,
                                                   --------------------
                                                     2004      2003
                                                   --------------------
Asset Category
--------------
Equity securities..............................       61%       61%
Fixed maturity securities......................       39        38
Real estate....................................       --        --
Other..........................................       --         1
                                                   --------------------
         Total.................................      100%      100%
                                                   ====================


                                      F-50
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 -- Pension Benefit Plans and Other Postretirement Benefit Plans -
(continued)

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 are invested on a combined basis with the assets of the Company's
defined benefit pension plans.

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 2004, $2.3 million was
contributed to these qualified plans and no contributions were made in 2003. The
entire $2.3 million was contributed to only one plan to ensure that the plan's
assets continued to exceed the plan's Accumulated Benefit Obligation. The
funding policy for its non-qualified defined benefit plans is to contribute the
amount of the benefit payments made during the year. In 2004 and 2003, $51.6
million and $14.5 million, respectively, were contributed to three non-qualified
plans. The Company expects to contribute approximately $4.7 million to its
qualified pension plans in 2005 and approximately $64.3 million to its
non-qualified pension plans in 2005.

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

Projections for benefit payments for the next ten years are as follows:

Projected Employer Pension Benefits Payment

                  Year      Total Qualified   Total Nonqualified    Total
             -----------------------------------------------------------------
                                               (in millions)
                  2005          $ 146.8             $ 64.3         $ 211.1
                  2006            134.8               22.0           156.8
                  2007            135.8               23.1           158.9
                  2008            135.7               23.5           159.2
                  2009            136.6               22.4           159.0
                2010-2014         707.9              108.7           816.6

Projected Employer OPEB Benefits Payment (includes Future Service Accruals)

                                          Net of Medicare Part D
              Year        Gross Payments         Subsidy           Net Payments
           ---------------------------------------------------------------------
                                             (in millions)
              2005            $ 53.5                --               $ 53.5
              2006              55.6             $ (4.0)               51.6
              2007              56.5               (4.1)               52.4
              2008              57.2               (4.2)               53.0
              2009              57.5               (4.2)               53.3
            2010-2014          285.1              (20.6)              264.5
           ---------------------------------------------------------------------


                                      F-51
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 -- Pension Benefit Plans and Other Postretirement Benefit Plans -
(continued)

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,
                                             ----------------------------------------------------------------------------
                                                               2004                                 2003
                                             ----------------------------------------------------------------------------
                                                                       (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 .....   $  1,865.7    $  376.5   $  2,242.2   $  1,837.7   $  337.1   $  2,174.8
Fair value of plan assets at end of year...      2,200.8         4.3      2,205.1      2,100.3        0.9      2,101.2
Funded status (assets less obligations) ...        335.1      (372.2)       (37.1)       262.6     (336.2)       (73.6)
Unrecognized net actuarial  loss (gain) ...        (99.0)       27.3        (71.7)       240.9      160.2        401.1
Unrecognized prior service cost ...........           --          --           --         65.9      (10.6)        55.3
Unrecognized transition asset .............           --          --           --           --         --           --
                                             ----------------------------------------------------------------------------
Prepaid (accrued) benefit cost ............   $    236.1    $ (344.9)  $   (108.8)  $    569.4   $ (186.6)  $    382.8
                                             ============================================================================
Amounts recognized in the
Company's Consolidated
Balance Sheets:
Prepaid benefit cost ......................   $    236.1    $  (82.0)  $    154.1   $    569.4   $     --   $    569.4
Accrued benefit liability including
   minimum liability ......................           --      (279.9)      (279.9)          --     (317.0)      (317.0)
Intangible asset ..........................           --          --           --           --        0.1          0.1
Accumulated other comprehensive income ....           --        17.0         17.0           --      130.3        130.3
                                             ----------------------------------------------------------------------------
Net amount recognized .....................   $    236.1    $ (344.9)  $   (108.8)  $    569.4   $ (186.6)  $    382.8
                                             ============================================================================
Components of net periodic
   (credit) benefit cost:
Service cost ..............................   $     19.7    $    2.6   $     22.3   $     24.1   $    1.8   $     25.9
Interest cost .............................        107.2        21.0        128.2        111.0       19.5        130.5
Expected return on plan assets ............       (173.7)       (0.2)      (173.9)      (155.6)      (0.2)      (155.8)
Amortization of transition asset ..........           --          --           --           --        0.1          0.1
Amortization of prior service cost ........          2.2          --          2.2          7.5       (0.1)         7.4
Recognized actuarial gain .................          3.9         4.4          8.3         20.1        9.6         29.7
                                             ----------------------------------------------------------------------------
Net periodic benefit (credit) cost ........   $    (40.7)   $   27.8   $    (12.9)  $      7.1   $   30.7   $     37.8
                                             ============================================================================
</TABLE>


                                      F-52
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 14 -- Commitments, Guarantee, Contingencies and Legal Proceedings

Commitments. The Company has extended commitments to purchase fixed maturity
investments, preferred and common stock and other invested assets and to issue
mortgage loans on real estate totaling $322.4 million, $42.0 million, $443.7
million and $557.4 million, respectively, at December 31, 2004. 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 bond commitments and requires collateral as deemed necessary. The
estimated fair values of the commitments described above aggregate $1.4 billion
at December 31, 2004. The majority of these commitments expire in 2005.

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 Company has no material guarantees outstanding outside the scope
of insurance accounting at December 31, 2004.

Contingencies. 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.
During 2004, the Company received additional information about its exposure and
recognized an additional charge of $92.4 million, after tax, as its current best
estimate of its exposure as of December 31, 2004.

Legal Proceedings. We are regularly involved in 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 and wealth management
products, as well as an investment adviser, employer and taxpayer. In addition,
state regulatory bodies, state attorneys general, the United States Securities
and Exchange Commission, the National Association of Securities Dealers, Inc.
and other government and regulatory bodies regularly make inquiries and, from
time to time, require the production of information or conduct examinations
concerning our compliance with, among other things, insurance laws, securities
laws, and laws governing the activities of broker-dealers. As with many other
companies in the financial services industry, we have been requested or required
by such government and regulatory authorities to provide information with
respect to market timing and late trading of mutual funds and sales compensation
and broker-dealer practices, including with respect to mutual funds underlying
variable life and annuity products. It is believed that these inquiries are
similar to those made to many financial service companies by various agencies
into practices, policies and procedures relating to trading in mutual fund
shares and sales compensation and broker-dealer practices. We intend to continue
to cooperate fully with government and regulatory authorities in connection with
their respective inquiries. We do not believe that the conclusion of any current
legal or regulatory matters, either individually or in the aggregate, will have
a material adverse effect on our financial condition or results of operations.


                                      F-53
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 15 -- Shareholder's Equity

Common Stock

The Company has one class of capital stock, common stock ($10,000 par value,
1,000 shares issued 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, 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 value of business acquired
   (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
Minimum pension liability (net of deferred
   income tax benefit of $13.2 million)............           --            --            --          (24.4)         (24.4)
Net accumulated gains (losses) on cash
   flow hedges (net of income tax expense of
   $94.5 million)..................................           --         175.3            --             --          175.3
                                                       ----------------------------------------------------------------------
Balance at December 31, 2002.......................      $ 313.0       $ 194.4        $ (3.0)       $ (62.2)       $ 442.2
                                                       ======================================================================
</TABLE>


                                      F-54
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 15 -- 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 January 1, 2003.........................      $   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 value of business acquired
   (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)
                                                       ----------------------------------------------------------------------
Net unrealized gains (losses)......................          919.7            --           --             --          919.7
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
Change in accounting principle (net of income
   tax expense of $53.8 million) ..................           99.9            --           --             --           99.9
                                                       ----------------------------------------------------------------------
Balance at December 31, 2003.......................      $ 1,332.6     $   226.1      $  (3.1)       $ (78.0)     $ 1,477.6
                                                       ======================================================================
</TABLE>


                                      F-55
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 15 -- 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 January 1, 2004.........................      $ 1,332.6      $ 226.1        $ (3.1)       $(78.0)     $ 1,477.6
Gross unrealized gains (losses) (net of
   deferred income tax benefit of $139.1 million)..         (257.8)          --            --            --         (257.8)
Adjustment for participating group annuity
   contracts (net of deferred income tax
   benefit of $0.5 million)........................           (1.0)          --            --            --           (1.0)
Adjustment for deferred policy acquisition
   costs and value of business acquired
   (net of deferred income tax of
   $84.0 million)..................................          156.1           --            --            --          156.1
Adjustment for policyholder dividend obligation
   (net of deferred income tax of
   $39.9 million)..................................           74.1           --            --            --           74.1
                                                       ----------------------------------------------------------------------
Net unrealized gains (losses)......................          (28.6)          --            --                        (28.6)
Foreign currency translation adjustment............             --                       (0.3)           --           (0.3)
Minimum pension liability (net of deferred
   income tax benefit of $0.4 million).............             --           --            --           0.6            0.6
Net accumulated gains (losses) on cash
   flow hedges (net of income tax benefit of
   $20.0 million)..................................             --        (37.3)           --            --          (37.3)
                                                       ----------------------------------------------------------------------
Balance at April 28, 2004..........................      $ 1,304.0      $ 188.8        $ (3.4)       $(77.4)     $ 1,412.0
                                                       ======================================================================
</TABLE>


                                      F-56
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 15 -- 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 April 28, 2004...........................     $  1,304.0     $   188.8       $  (3.4)      $ (77.4)      $  1,412.0
                                                       =========================================================================

Acquisition by Manulife Financial Corporation:
   Sale of accumulated other comprehensive income...       (1,304.0)       (188.8)          3.4          77.4         (1,412.0)
                                                       -------------------------------------------------------------------------
Balance at April 29, 2004...........................     $       --     $      --       $    --       $    --       $       --
                                                       =========================================================================

Gross unrealized gains (losses) (net of
   deferred income tax expense of $292.0 million)...     $    544.9            --            --            --       $    544.9
Adjustment for deferred policy acquisition
   costs and value of business acquired
   (net of deferred income tax benefit of
   $31.7 million)...................................          (58.9)           --            --            --            (58.9)
Adjustment for policyholder dividend obligation
   (net of deferred income tax benefit of
   $40.1 million)...................................          (74.6)           --            --            --            (74.6)
                                                       -------------------------------------------------------------------------
Net unrealized gains (losses).......................          411.4            --            --            --            411.4
Foreign currency translation adjustment.............             --            --       $   0.6            --              0.6
Net accumulated gains (losses) on cash
   flow hedges (net of income tax expense of
   $110.4 million)..................................             --     $   242.4            --            --            242.4
Minimum pension liability, (net of deferred
   Income tax expense of $6.0 million)..............             --            --            --       $ (11.0)           (11.0)
                                                       -------------------------------------------------------------------------
Balance at December 31, 2004........................     $    411.4     $   242.4       $   0.6       $ (11.0)      $    643.4
                                                       =========================================================================
</TABLE>

Net unrealized investment and other gains (losses), included in the Company's
Consolidated Balance Sheets as a component of shareholder's equity, are
summarized as follows:

<TABLE>
<CAPTION>
                                                                               For the Years Ended December 31,
                                                                          2004               2003              2002
                                                                     ---------------------------------------------------
                                                                                       (in millions)
<S>                                                                    <C>               <C>                 <C>
Balance, end of year comprises:
   Unrealized investment gains (losses) on:
     Fixed maturities............................................      $   825.1         $ 2,574.4           $  839.8
     Equity investments..........................................            9.0              83.1               42.1
     Derivatives and other.......................................            2.8              81.5               41.7
                                                                     ---------------------------------------------------
Total............................................................          836.9           2,739.0              923.6

Amounts of unrealized investment (gains) losses attributable to:
     Participating group annuity contracts.......................             --                --              (90.8)
     Deferred policy acquisition costs and value of
       business acquired.........................................         (114.7)           (278.4)            (109.5)
     Policyholder dividend obligation............................          (90.6)           (422.9)            (253.9)
     Deferred Federal income taxes...............................         (220.2)           (705.1)            (156.4)
                                                                     ---------------------------------------------------
Total............................................................         (425.5)         (1,406.4)            (610.6)
                                                                     ---------------------------------------------------

Net unrealized investment gains..................................      $   411.4         $ 1,332.6           $  313.0
                                                                     ===================================================
</TABLE>


                                      F-57
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 15 -- Shareholder's Equity - (continued)

Statutory Results

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 (the Division) for a permitted accounting
practice. The Company currently has one permitted practices which relate to an
admitted asset for an after-tax ceding commission in the acquisition of the
fixed universal life insurance business of Allmerica Financial.

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 $37.8 million,
$51.1 million and $60.5 million on the purchase as goodwill at December 31,
2004, 2003 and 2002, respectively. This amount will be amortized over a ten year
period. The impact on statutory net income was an amortization expense of $12.4
million and $9.3 million in 2004 and 2003, respectively. There was no
amortization expense in 2002. As a result of this permitted practice, the
Company's reported capital and surplus for the 2004, 2003 and 2002 reporting
periods was increased by $37.8 million, $51.1 million and $60.5 million,
respectively.

There are no other material permitted practices.

Statutory net income and surplus in the table below include the accounts of the
John Hancock Life Company.
                                                 2004       2003      2002
                                              ------------------------------
                                                       (in millions)
Statutory net income...................        $  481.9  $   441.7  $  210.4
Statutory capital and surplus..........         4,084.5    3,789.9   3,524.1

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 16 -- Segment Information

As a result of Manulife's merger with JHFS, see Note 1- Change of Control, the
Company renamed and reorganized certain businesses within its operating segments
to better align the Company with its new parent, Manulife. The Company renamed
the Asset Gathering Segment as the Wealth Management Segment. Further efforts at
reorganization of JHFS included the movement of the Institutional Investment
Management Segment to the Corporate and Other Segment. Other realignments
include moving Signator Investors, Inc. our agent sales organization, from
Wealth Management to Protection, and group life, retail discontinued operations,
discontinued health insurance operations and creditor from Corporate and Other
to Protection. International Group Plans (IGP) remain in international
operations and John Hancock Accident remains


                                      F-58
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 -- Segment Information - (continued)

in our non-core business in our Corporate and Other Segment while in Manulife's
segment results IGP and John Hancock Accident will be reported in Reinsurance.
The financial results for all periods have been reclassified to conform to the
current period presentation.

During the majority of 2004, the Company operated in the following four business
segments: two segments primarily served retail customers, one segment served
institutional customers and our fourth segment was the Corporate and Other
Segment, which includes our institutional advisory business, the remaining
international operations, and the corporate account. Our retail segments are the
Protection Segment and the Wealth Management Segment, previously called Asset
Gathering. Our institutional segment is the Guaranteed and Structured Financial
Products Segment (G&SFP). In addition, in January 2005, the Company announced
the transfer of the G&SFP Segment to the Wealth Management Segment with an
intended focus on retail customers in the future. G&SFP is presented as its own
operating segment for the discussion of 2004 results below. See below for a more
detail description of the Company's reportable segments.

Prior to the merger, the Company operated in the following five business
segments: two segments served primarily domestic retail customers, two segments
served primarily domestic institutional customers, and our fifth segment was the
Corporate and Other Segment, which included our remaining international
operations, the corporate account and run-off from several discontinued business
lines. Our retail segments were the Protection Segment and the Asset Gathering
Segment. Our institutional segments were the Guaranteed and Structured Financial
Products (G&SFP) Segment and the Investment Management Segment. For additional
information about the Company's pre-acquisition business segments, please refer
to the Company's 2003 Form 10-K.

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 individual 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.

Wealth Management 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
closed-end funds, institutional advisory accounts and privately managed
accounts. This segment distributes its products through distribution channels
including insurance agents and brokers affiliated with the Company, securities
brokerage firms, financial planners, pension plan sponsors, pension plan
consultants and banks.

Guaranteed and Structured Financial Products (G&SFP) Segment. Offers a variety
of retirement products to qualified defined benefit plans, defined contribution
plans and non-qualified buyers. The Company's products include guaranteed
investment contracts, funding agreements, single premium annuities, and general
account participating annuities and fund type products. These contracts provide
non-guaranteed, partially guaranteed, and fully guaranteed investment options
through general and separate account products. The segment distributes its
products through a combination of dedicated regional representatives, pension
consultants and investment professionals. The segment's consumer notes program
distributes primarily through brokers affiliated with the Company and securities
brokerage firms. The segment's new banking products distribute primarily through
the broker-dealer network to the retail investors. In addition, in January 2005,
the Company announced the transfer of the G&SFP Segment to the Wealth Management
Segment.

Corporate and Other Segment. Primarily consists of the Company's remaining
international insurance operations, certain corporate operations, the
institutional investment management business and businesses that are either
disposed or in run-off. Corporate operations primarily include certain financing
activities, income on capital not specifically allocated to the reporting
segments and certain non-recurring expenses not allocated to the segments. The
disposed businesses primarily consist of group health insurance and related
group life insurance, property and casualty insurance and selected broker/dealer
operations.


                                      F-59
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 -- Segment Information - (continued)

Subsequent to the merger, the Company changed its methodology for determining
how much capital is needed to support its operating segments and redeployed
capital according to the new methodology. As part of this process, the Company
moved certain tax preferenced investments from the operating segments to the
Corporate and Other Segment. These steps were taken as part of the alignment of
the Company's investment and capital allocation processes with those of its
parent, and they could have a material impact on each operating segment's
investment income and net income in future periods.

The accounting policies of the segments are the same as those described in Note
2 - 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.

The following table summarizes selected financial information by segment, in
millions, for the periods and dates indicated. Included in the Protection
Segment for all periods presented are the assets, liabilities, revenues and
expenses of the closed block. For additional information on the closed block see
Note 7 - Closed Block in the notes to the consolidated financial statements.

<TABLE>
<CAPTION>

For the period from April 29 through                                Wealth                 Corporate
December 31, 2004                                   Protection    Management      G&SFP    and Other     Consolidated
                                                  -------------------------------------------------------------------
<S>                                                <C>           <C>           <C>           <C>           <C>
Revenues:
   Revenues from external customers ...........    $ 1,386.5     $   350.0     $    32.6    $   538.4     $ 2,307.5
   Net investment income ......................        878.7         417.9         834.5          1.0       2,132.1
   Net realized investment and other
      gains (losses) ..........................        (26.8)        (19.4)         10.4          5.8         (30.0)
   Inter-segment revenues .....................           --           0.9           0.4         (1.3)           --
                                                    ---------------------------------------------------------------
   Revenues ...................................    $ 2,238.4     $   749.4     $   877.9    $   543.9     $ 4,409.6
                                                    ===============================================================

   Net income .................................    $   228.4     $   136.8     $    89.6    $   (82.1)    $   372.7
                                                    ===============================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method .......    $    35.8     $    14.4     $    45.5    $    30.2     $   125.9
   Carrying value of investments accounted
     for under the equity method ..............        768.8         316.2         685.2        660.0       2,430.2
   Amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding amounts
     related to net realized investment and
     other gains (losses) .....................         60.7          53.0          38.1         (0.1)        151.7
   Interest expense ...........................          0.1            --            --         34.6          34.7
   Income tax expense .........................        118.9          61.4          31.4        (95.9)        115.8
   Segment assets .............................    $43,559.9     $19,851.1     $33,999.4    $ 2,350.3     $99,760.7
Net Realized Investment and other Gains
(Losses) Data:
   Net realized investment and other gains
     (losses) .................................    $   (43.2)    $   (23.9)    $    45.3    $     5.8     $   (16.0)
   Less amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding amounts
     related to net realized investment and
     other gains (losses) .....................          8.3           4.5            --           --          12.8
   Less amounts credited to participating
     pension contractholder accounts ..........           --            --         (34.9)          --         (34.9)
   Add amounts credited to the policyholder
     dividend obligation ......................          8.1            --            --           --           8.1
                                                    ---------------------------------------------------------------
   Net realized investment and other gains
     (losses), net of related amortization
     of deferred policy acquisition costs,
     value of the business acquired, amounts
     credited to participating pension
     contractholders and amounts credited to
     the policyholder dividend obligation
     - per the consolidated financial
     statements ...............................    $   (26.8)    $   (19.4)    $    10.4    $     5.8     $   (30.0)
                                                    ===============================================================
</TABLE>


                                      F-60
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 -- Segment Information - (continued)

<TABLE>
<CAPTION>
For the period from January 1 through April                        Wealth              Corporate
28, 2004                                            Protection   Management    G&SFP   and Other  Consolidated
                                                  -------------------------------------------------------------
<S>                                                <C>          <C>          <C>        <C>          <C>
Revenues:
   Revenues from external customers ...........    $  751.6     $  116.6     $   26.9   $  232.6     $1,127.7
   Net investment income ......................       492.7        237.5        530.4       24.1      1,284.7
   Inter-segment revenues .....................          --          0.4          0.2       (0.6)          --
   Net realized investment and other
     gains (losses) ...........................        (9.0)        (1.5)         8.8      102.7        101.0
                                                  -----------------------------------------------------------
   Revenues ...................................    $1,235.3     $  353.0     $  566.3   $  358.8     $2,513.4
                                                  ===========================================================

   Net income .................................    $  110.9     $   49.5     $   83.2   $   85.7     $  329.3
                                                  ===========================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method .......    $   11.4     $    3.1     $   11.5   $   43.7     $   69.7
   Amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding amounts
     related to net realized investment and
     other gains (losses) .....................        71.4         50.0          0.6       (0.2)       121.8
   Interest expense ...........................         0.1           --           --        7.1          7.2
   Income tax expense .........................        56.5         24.9         33.3       26.9        141.6
Net Realized Investment and other Gains
(Losses) Data:
   Net realized investment and other gains
     (losses) .................................    $   18.4     $   (5.8)    $   17.0   $  102.7     $  132.3
   Less amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding amounts
     related to net realized investment and
     other gains (losses) .....................         6.6          4.3           --         --         10.9
   Less amounts credited to participating
     pension contractholder accounts ..........          --           --         (8.2)        --         (8.2)
   Add amounts credited to the policyholder
     dividend obligation ......................       (34.0)          --           --         --        (34.0)
                                                  -----------------------------------------------------------
   Net realized investment and other gains
     (losses), net of related amortization of
     deferred policy acquisition costs, value
     of the business acquired, amounts
     credited to participating pension
     contractholders and amounts credited to
     the policyholder dividend obligation --
     per the consolidated financial
     statements ...............................    $   (9.0)    $   (1.5)    $    8.8   $  102.7     $  101.0
                                                  ===========================================================
</TABLE>


                                      F-61
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 -- Segment Information - (continued)

<TABLE>
<CAPTION>
                                                                  Wealth                  Corporate
2003                                              Protection    Management     G&SFP      and Other     Consolidated
                                                --------------------------------------------------------------------
<S>                                                <C>           <C>           <C>           <C>           <C>
Revenues:
   Revenues from external customers ...........    $ 2,200.9     $   412.3     $    63.1         772.2     $ 3,448.5
   Net investment income ......................      1,449.0         709.4       1,676.7         (35.7)      3,799.4
   Inter-segment revenues .....................           --           1.2           0.4          (1.6)           --
   Net realized investment and other
     gains (losses) ...........................        (30.9)        (47.0)       (215.3)        351.4          58.2
                                                 -------------------------------------------------------------------
   Revenues ...................................    $ 3,619.0     $ 1,075.9     $ 1,524.9       1,086.3     $ 7,306.1
                                                 ===================================================================

   Net income .................................    $   317.3     $   157.9     $   (78.1)    $   193.4     $   590.5
                                                 ===================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method .......    $    31.0     $    16.9     $    57.9     $    32.5     $   138.3
   Carrying value of investments accounted
     for under the  equity method .............        410.2         249.2         586.1         699.1       1,944.6
   Amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding amounts
     related to net realized investment and
     other gains (losses) .....................        195.1         111.4           2.3          (0.4)        308.4
   Interest expense ...........................          0.2            --            --          49.4          49.6
   Income tax expense .........................        178.5          73.2          52.1          41.5         345.3
   Segment assets .............................    $37,435.1     $18,704.7     $35,667.1     $ 4,524.2     $96,331.1
Net Realized Investment and other Gains
(Losses) Data:
   Net realized investment and other gains
     (losses) .................................    $   (96.8)    $   (33.5)    $  (218.7)    $   351.4     $     2.4
   Less amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding amounts
     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,
     value of business acquired, amounts
     credited to participating pension
     contractholders and amounts credited
     to the policyholder dividend obligation
     -- per the consolidated financial
     statements ...............................    $   (30.9)    $   (47.0)    $  (215.3)    $   351.4     $    58.2
                                                 ===================================================================
</TABLE>


                                      F-62
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 -- Segment Information - (continued)

<TABLE>
<CAPTION>
                                                                  Wealth                   Corporate
2002                                              Protection    Management      G&SFP      and Other    Consolidated
                                                --------------------------------------------------------------------
<S>                                               <C>           <C>           <C>           <C>           <C>
Revenues:
   Revenues from external customers ..........    $ 2,279.5     $   397.2     $    64.5     $   621.1     $ 3,362.3
   Net investment income .....................      1,339.1         575.0       1,703.9         (37.0)      3,581.0
   Net realized investment and other
     gains (losses) ..........................        (67.8)        (42.8)       (313.8)        (26.1)       (450.5)
   Intersegment Revenues .....................           --           1.1            --          (1.1)           --
                                                -------------------------------------------------------------------
   Revenues ..................................    $ 3,550.8     $   930.5     $ 1,454.6     $   556.9     $ 6,492.8
                                                ===================================================================

   Net income ................................    $   257.2     $    97.0     $    68.5     $    36.2     $   458.9
                                                ===================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ......    $    17.9     $     8.7     $    34.5     $     3.7     $    64.8
   Carrying value of investments accounted
     for under the  equity method ............        213.0         137.6         387.3         642.4       1,380.3
   Amortization of deferred policy
     acquisition costs and value of
     business acquired,excluding amounts
     relating to net realized investment
     and other gains (losses) ................        174.2         140.5           2.2          (0.4)        316.5
   Interest expense ..........................          0.5           0.5            --          51.6          52.6
   Income tax expense ........................        140.2          41.2          17.6         (90.4)        108.6
   Segment assets ............................    $32,763.7     $16,037.9     $34,967.0     $ 4,038.4     $87,807.0
Net Realized Investment and other Gains
(Losses) Data:
   Net realized investment and other gains
     (losses) ................................    $   (90.5)    $   (70.9)    $  (337.1)    $   (26.1)    $  (524.6)
   Less amortization of deferred policy
     acquisition costs and value of
     business acquired, excluding amounts
     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, value of business
     acquired, amounts credited to
     participating pension contractholders
     and amounts credited to the
     policyholder dividend obligation
     -- per the consolidated financial
     statements ..............................    $   (67.8)    $   (42.8)    $  (313.8)    $   (26.1)    $  (450.5)
                                                ===================================================================
</TABLE>


                                      F-63
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 16 -- 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:

<TABLE>
<CAPTION>
                                                                                            Income Before
                                                                                           Income Taxes and
                                                                                              Cumulative
                                                                                               Effect of
                                                                Long-Lived                    Accounting
Location                                          Revenues        Assets        Assets         Changes
-----------------------------------------------------------------------------------------------------------
                                                                    (in millions)
<S>                                              <C>             <C>          <C>              <C>
April 29 through December 31, 2004
United States...............................     $ 4,107.0       $  250.4     $  99,574.2      $   473.0
Foreign -- other............................         302.6            0.3           186.5           15.5
                                              -------------------------------------------------------------
                                                 $ 4,409.6       $  250.7     $  99,760.7      $   488.5
                                              =============================================================
January 1 through April 28, 2004
United States...............................     $ 2,407.3       $  274.7     $  98,709.9      $   471.9
Foreign -- other............................         106.1            0.2           109.0            2.3
                                              -------------------------------------------------------------
                                                 $ 2,513.4       $  274.9     $  98,818.9      $   474.2
                                              =============================================================
2003
United States...............................     $ 6,898.2       $  273.2     $  96,232.2      $ 1,201.7
Foreign -- other............................         407.9            0.5            98.9           13.1
                                              -------------------------------------------------------------
                                                 $ 7,306.1       $  273.7     $  96,331.1      $ 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
                                              =============================================================
</TABLE>

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


                                      F-64
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 17 -- 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: For fixed maturity securities,
(including redeemable preferred stocks) fair values are obtained from external
pricing services where available, broker dealer quotes are used for thinly
traded securities and a spread pricing matrix is used when price quotes are not
available, which typically is the case for our private placement securities. The
spread pricing matrix is based on credit quality, country of issue, market
sector and average investment life and is created for these dimensions through
brokers' estimates of public spreads derived from their respective publications.
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, the head of portfolio management, and the Chief Credit Officer of
Manulife. 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 amortized cost. The results of this analysis are reviewed by the
Credit Committee at Manulife. This committee includes Manulife's Chief Financial
Officer, Chief Investment Officer, Chief Risk Officer, Chief Credit Officer and
other senior management. This quarterly process includes a fresh assessment of
the credit quality of each investment in the entire fixed maturities portfolio.

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 value 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-65
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 17 -- 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,
                                                     ------------------------------------------------------------------
                                                                  2004                               2003
                                                     ------------------------------------------------------------------
                                                        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
     Available-for-sale............................    $ 47,863.2        $ 47,863.2         46,482.1          46,482.1
   Equity securities:
     Available-for-sale............................         330.5             330.5            333.1             333.1
     Trading securities............................           4.2               4.2              0.6               0.6
   Mortgage loans on real estate...................      11,792.6          11,873.1         10,871.1          11,791.4
   Policy loans....................................       2,012.0           2,012.0          2,019.2           2,019.2
   Short-term investments..........................           0.2               0.2             31.5              31.5
   Cash and cash equivalents.......................       1,073.3           1,073.3          2,626.9           2,626.9
Derivatives:
   Futures contracts, net..........................           1.1               1.1               --                --
   Interest rate swap agreements...................         358.7             358.7            192.7             192.7
   Interest rate swap CMT..........................            --                --              0.7               0.7
   Interest rate cap agreements....................          11.8              11.8             28.2              28.2
   Interest rate floor agreements..................          85.3              85.3             76.0              76.0
   Currency rate swap agreements...................         899.7             899.7            719.8             719.8
   Credit default swaps............................           0.9               0.9              1.9               1.9
   Equity collar agreements........................            --                --              2.0               2.0

Liabilities:
   Consumer notes..................................       2,379.1           2,360.9          1,550.4           1,473.0
   Debt............................................         715.3             673.8            713.4             775.8
   Guaranteed investment contracts and
     funding agreements............................      14,643.0          14,689.9         17,101.4          17,110.5
   Fixed rate deferred and immediate annuities.....      11,047.7          11,076.8         10,336.0          10,602.9
   Supplementary contracts without life
     contingencies.................................          78.0              69.0             56.6              61.6
Derivatives:
   Futures contracts, net..........................            --                --              0.2               0.2
   Interest rate swap agreements...................         436.0             436.0            839.3             839.3
   Interest rate swaption agreements...............           3.4               3.4              2.6               2.6
   Currency rate swap agreements...................         858.9             858.9            677.0             677.0
   Credit default swaps............................           2.5               2.5              0.9               0.9
Commitments........................................            --           1,425.4               --           2,168.0
</TABLE>


                                      F-66
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 18 -- Goodwill and Other Intangible Assets

The Company recognized several intangible assets which resulted from business
combinations including Manulife's acquisition of the Company (see Note 1 -
Change of Control for additional discussion of the Manulife acquisition).

Unamortizable assets include goodwill, brand name and investment management
contracts. Goodwill is the excess of the cost to Manulife over the fair value of
the Company's identifiable net assets acquired by Manulife in the recent merger.
Brand name is the fair value of the Company's trademark and trade name acquired
by Manulife in the recent merger. Investment management contracts are the fair
values of the investment management relationships between the Company and each
of the mutual funds managed by the Company acquired by Manulife in the recent
merger.

Amortizable assets include value of business acquired (VOBA), distribution
networks and other investment management contracts. VOBA is the present value of
estimated future profits of insurance policies in force related to businesses
acquired by Manulife in the recent merger. VOBA had weighted average lives
ranging from 6 to 17 years for various insurance businesses at the merger.
Distribution networks are values assigned to the Company's networks of sales
agents and producers responsible for procuring business acquired by Manulife in
the recent merger. Distribution networks had weighted average lives of 22 years
at the merger. Other investment management contracts are the values assigned to
the Company's institutional investment management contracts managed by its
investment management subsidiaries. Other investment management contracts have
weighted average lives of 10 years at the merger. Collectively, these
amortizable intangible assets have a weighted average life of 15 years at the
merger.

Brand name, distribution networks, and other investment management contracts
were initially recognized at the time of the acquisition of the Company by
Manulife. Goodwill, investment management contracts and VOBA were expanded in
scope and size as a result of the merger.

The Company will test non-amortizing intangible assets for impairment on an
annual basis, and also in response to any events which suggest that these assets
may be impaired (triggering events.) Amortizable intangible assets will be
tested only in response to triggering events. The Company will test goodwill
using the two-step impairment testing program set forth in SFAS No. 142
"Goodwill and Other Intangible Assets." VOBA and the Company's other intangible
assets will be evaluated by comparing their fair values to their current
carrying values whenever they are tested. Impairments will be recorded whenever
an intangible asset's fair value is deemed to be less than its carrying value.


                                      F-67
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 18 -- Goodwill and Other Intangible Assets - (continued)

The following tables contain summarized financial information for each of these
intangible assets as of the dates and periods indicated.

<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                     Gross           Amortization             Net
                                                                Carrying Amount    and Other Changes    Carrying Amount
                                                               ---------------------------------------------------------
                                                                                      (in millions)
<S>                                                                <C>                    <C>                <C>
December 31, 2004
     Unamortizable intangible assets:
              Goodwill.......................................      $3,031.7                    --            $3,031.7
              Brand name.....................................         600.0                    --               600.0
              Investment management contracts................         292.9                    --               292.9
     Amortizable intangible assets:
              Distribution networks..........................         397.2               $  (0.7)              396.5
              Other investment management contracts..........          61.7                  (2.6)               59.1
              VOBA...........................................       2,864.6                (164.3)            2,700.3
December 31, 2003
      Unamortizable intangible assets:
              Goodwill.......................................      $  166.7               $ (58.1)           $  108.6
              Mutual fund investment management contracts....          13.3                  (7.0)                6.3
      Amortizable intangible assets:
              VOBA...........................................         205.9                 (37.4)              168.5
</TABLE>

<TABLE>
<CAPTION>
                                                                              Period from     Period from
                                                                                April 29       January 1
                                                                                through         through
                                                                              December 31,     April 28,
                                                                                  2004            2004        2003      2002
                                                                            --------------------------------------------------
Aggregate amortization expense                                                                (in millions)
<S>                                                                             <C>             <C>          <C>        <C>
Distribution networks, net of tax of $0.2 million, $ - million,
   $ - million and $ - million, respectively.............................       $  0.5              --          --        --
Other Management contract amortization, net of tax of $0.9 million,
     $ -  million, $ - million and,  $ - million, respectively...........          1.7              --          --        --
VOBA, net of tax of $42.2 million,  $1.8 million, $3.5 million and
   $1.1 million, respectively............................................         78.3          $  3.3       $ 6.6      $ 2.0
                                                                            --------------------------------------------------
Aggregate amortization expense, net of tax of $43.3 million,
   $1.8 million, $3.5 million and $1.1 million, respectively.............       $ 80.5          $  3.3       $ 6.6      $ 2.0
                                                                            ==================================================
</TABLE>


                                      F-68
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 18 -- Goodwill and Other Intangible Assets - (continued)

                                                             Tax          Net
                                                            Effect      Expense
                                                          ----------------------
                                                               (in millions)
      Estimated future aggregate amortization expense
      for the years ending December 31,
            2005........................................  $ 66.3        $ 123.2
            2006........................................    60.8          113.0
            2007........................................    53.7           99.7
            2008........................................    47.5           88.2
            2009........................................    42.5           79.0

The following tables present the continuity of each of the Company's
unamortizable and amortizable intangible assets for the periods presented.

Unamortizable intangible assets:

<TABLE>
<CAPTION>
                                                                 Wealth                    Corporate and
                                                 Protection     Management        G&SFP        Other       Consolidated
                                               -------------------------------------------------------------------------
Goodwill:                                                                     (in millions)
---------
<S>                                               <C>            <C>               <C>       <C>          <C>
Balance at January 1, 2004....................   $    66.1      $    42.1          --        $   0.4      $   108.6
Goodwill derecognized (1).....................       (66.1)         (42.1)         --           (0.4)        (108.6)
Goodwill recognized (2) ......................     1,842.3        1,040.0          --          149.4        3,031.7
                                               -------------------------------------------------------------------------
Balance at December 31, 2004..................   $ 1,842.3      $ 1,040.0          --        $ 149.4      $ 3,031.7
                                               =========================================================================
</TABLE>

(1)   Goodwill derecognized in the purchase transaction with Manulife.
(2)   Goodwill recognized in the purchase transaction with Manulife.

<TABLE>
<CAPTION>
                                                                 Wealth                    Corporate and
                                                 Protection     Management        G&SFP        Other       Consolidated
                                               -------------------------------------------------------------------------
Goodwill:                                                                   (in millions)
---------
<S>                                                 <C>            <C>              <C>         <C>         <C>
Balance at January 1, 2003.....................     $66.1          $42.1            --          $0.4        $108.6
                                                -----------------------------------------------------------------------
Balance at December 31, 2003...................     $66.1          $42.1            --          $0.4        $108.6
                                                =======================================================================
</TABLE>


                                      F-69
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 18 -- Goodwill and Other Intangible Assets - (continued)

Unamortizable intangible assets (continued):

<TABLE>
<CAPTION>
                                                                      Wealth                    Corporate and
                                                     Protection      Management        G&SFP        Other       Consolidated
                                                  ----------------------------------------------------------------------------
Brand name:                                                                       (in millions)
-----------
<S>                                                     <C>           <C>                <C>         <C>          <C>
Balance at January 1, 2004.....................              --            --            --             --             --
Brand name recognized (1)......................         $ 364.4       $ 209.0            --          $26.6        $ 600.0
                                                  ----------------------------------------------------------------------------
Balance at December 31, 2004...................         $ 364.4       $ 209.0            --          $26.6        $ 600.0
                                                  ============================================================================
</TABLE>

(1)   Brand name recognized in the purchase transaction with Manulife.

<TABLE>
<CAPTION>
                                                                      Wealth                   Corporate and
                                                     Protection     Management       G&SFP        Other         Consolidated
                                                   ----------------------------------------------------------------------------
Investment management contracts:                                                   (in millions)
--------------------------------
<S>                                                      <C>          <C>              <C>         <C>           <C>
Balance at January 1, 2004......................         --           $   6.3          --          --            $    6.3
Investment management contracts
  derecognized (1)..............................         --              (6.3)         --          --                (6.3)
Investment management contracts
recognized (2)..................................         --             292.9          --          --               292.9
                                                   ----------------------------------------------------------------------------
Balance at December 31, 2004....................         --           $ 292.9          --          --            $  292.9
                                                   ============================================================================
</TABLE>

(1)   Investment management contracts derecognized in the purchase transaction
      with Manulife.
(2)   Investment management contracts recognized in the purchase transaction
      with Manulife.

<TABLE>
<CAPTION>
                                                                     Wealth                    Corporate and
                                                    Protection     Management       G&SFP          Other       Consolidated
                                                  ---------------------------------------------------------------------------
Investment management contracts:                                                   (in millions)
--------------------------------
<S>                                                    <C>          <C>                <C>          <C>          <C>
Balance at January 1, 2003....................         --           $  5.2             --           --           $  5.2
Acquisitions (1)..............................         --              1.1             --           --              1.1
                                                  ---------------------------------------------------------------------------
Balance at December 31, 2003..................         --           $  6.3             --           --           $  6.3
                                                  ===========================================================================
</TABLE>

(1)   This increase results from JH Fund's purchases of mutual fund investment
      management contracts for the US Global Leaders Fund, Classic Value Fund,
      and Large Cap Select Fund in 2003.


                                      F-70
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 18 -- Goodwill and Other Intangible Assets - (continued)

Amortizable intangible assets:

<TABLE>
<CAPTION>
                                                                      Wealth                    Corporate and
                                                      Protection    Management       G&SFP          Other        Consolidated
                                                    ---------------------------------------------------------------------------
Distribution networks:                                                              (in millions)
----------------------
<S>                                                     <C>           <C>              <C>           <C>          <C>
Balance at January 1, 2004.......................           --            --           --            --                 --
Distribution networks recognized (1).............       $308.6        $ 88.6           --            --           $  397.2
Amortization.....................................         (0.7)           --           --            --               (0.7)
                                                    ---------------------------------------------------------------------------
Balance at December 31, 2004.....................       $307.9        $ 88.6           --            --           $  396.5
                                                    ===========================================================================
</TABLE>

(1)   Distribution networks recognized in the purchase transaction with
      Manulife.

<TABLE>
<CAPTION>
                                                                      Wealth                    Corporate and
                                                      Protection    Management       G&SFP          Other       Consolidated
                                                    ---------------------------------------------------------------------------
Other investment management contracts:                                              (in millions)
--------------------------------------
<S>                                                       <C>       <C>                <C>        <C>             <C>
Balance at January 1, 2004.......................         --             --            --             --              --
Other investment management contracts
  recognized (1).................................         --        $  20.3            --         $ 41.4          $ 61.7
Amortization.....................................         --           (0.8)           --           (1.8)           (2.6)
                                                    ---------------------------------------------------------------------------
Balance at December 31, 2004.....................         --        $  19.5            --         $ 39.6          $ 59.1
                                                    ===========================================================================
</TABLE>

(1)   Other investment management contracts recognized in the purchase
      transaction with Manulife.


                                      F-71
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 18 -- Goodwill and Other Intangible Assets - (continued)

Amortizable intangible assets (continued):

<TABLE>
<CAPTION>
                                                                      Wealth                    Corporate and
                                                      Protection    Management       G&SFP          Other       Consolidated
                                                    ---------------------------------------------------------------------------
VOBA:                                                                               (in millions)
-----
<S>                                                    <C>              <C>            <C>            <C>        <C>
Balance at January 1, 2004........................     $  168.5         --             --             --         $  168.5
Amortization......................................         (5.1)        --             --             --             (5.1)
Adjustment to unrealized gains on securities
  available for sale..............................          5.5         --             --             --              5.5
Other adjustments (1).............................         (1.4)        --             --             --             (1.4)
                                                    ---------------------------------------------------------------------------
Balance at April 28, 2004.........................     $  167.5         --             --             --         $  167.5
                                                    ===========================================================================
</TABLE>

(1)   VOBA related to the acquisition of the fixed universal life insurance
      business of Allmerica was adjusted to reflect adjustments to the purchase
      price accounting for the acquisition of that block of business.
<TABLE>
<CAPTION>
                                                                      Wealth                    Corporate and
                                                      Protection    Management       G&SFP          Other       Consolidated
                                                    ---------------------------------------------------------------------------
VOBA:                                                                              (in millions)
-----
<S>                                                   <C>            <C>            <C>              <C>         <C>
Balance at April 29, 2004.........................    $    167.5           --            --          --          $    167.5
VOBA derecognized (1).............................        (167.5)          --            --          --              (167.5)
VOBA recognized (2) ..............................       2,141.8     $  474.9       $ 247.9          --             2,864.6
Amortization......................................         (35.4)       (47.1)        (38.1)         --              (120.6)
Adjustment to unrealized gains on securities
  available for sale..............................         (22.3)       (21.4)           --          --               (43.7)
                                                    ---------------------------------------------------------------------------
Balance at December 31, 2004......................    $  2,084.1     $  406.4       $ 209.8          --          $  2,700.3
                                                    ===========================================================================
</TABLE>

(1)   VOBA derecognized in the purchase transaction with Manulife.
(2)   VOBA recognized in the purchase transaction with Manulife.

<TABLE>
<CAPTION>
                                                                      Wealth                    Corporate and
                                                      Protection    Management       G&SFP          Other        Consolidated
                                                    ---------------------------------------------------------------------------
VOBA:                                                                               (in millions)
-----
<S>                                                   <C>               <C>            <C>           <C>          <C>
Balance at January 1, 2003........................    $  177.2          --             --            --           $  177.2
Amortization......................................       (10.1)         --             --            --              (10.1)
Adjustment to unrealized gains on
  securities available for sale...................        (2.8)         --             --            --               (2.8)
Other adjustments(1)..............................         4.2          --             --            --                4.2
                                                    ---------------------------------------------------------------------------
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 acquisition of the fixed universal life insurance business of
      Allmerica, to reflect refinements in methods and assumptions implemented
      upon finalization of transition.


                                      F-72
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 19 -- Certain Separate Accounts

The Company issues variable annuity contracts through its separate accounts for
which investment income and investment gains and losses accrue directly to, and
investment risk is borne by, the contract holder (traditional variable
annuities). The Company also issues variable life insurance and variable annuity
contracts which contain certain guarantees (variable contracts with guarantees)
which are discussed more fully below.

During 2004 and 2003, there were no gains or losses on transfers of assets from
the general account to the separate account. The assets supporting the variable
portion of both traditional variable annuities and variable contracts with
guarantees are carried at fair value and reported as summary total separate
account assets with an equivalent summary total reported for liabilities.
Amounts assessed against the contractholders for mortality, administrative, and
other services are included in revenue and changes in liabilities for minimum
guarantees are included in policyholder benefits in the Company's Statement of
Operations. Separate account net investment income, net investment gains and
losses, and the related liability changes are offset within the same line items
in the Company's Statement of Operations.

The deposits related to the variable life insurance contracts are invested in
separate accounts and the Company guarantees a specified death benefit if
certain specified premiums are paid by the policyholder, regardless of separate
account performance.

At December 31, 2004 and December 31, 2003, the Company had the following
variable life contracts with guarantees. For guarantees of amounts in the event
of death, the net amount at risk is defined as the excess of the initial sum
insured over the current sum insured for fixed premium variable life contracts,
and, for other variable life contracts, is equal to the sum insured when the
account value is zero and the policy is still in force.

                                               December 31,        December 31,
                                                  2004                2003
                                              ----------------------------------
                                                (in millions, except for age)
Life contracts with guaranteed benefits
  In the event of death
  Account values ............................   $ 6,899.0          $ 6,249.4
  Net amount at risk related to deposits ....       117.5              106.2
  Average attained age of contractholders ...          44                 46

The variable annuity contracts are issued through separate accounts and the
Company contractually guarantees to the contract holder either (a) return of no
less than total deposits made to the contract less any partial withdrawals, (b)
total deposits made to the contract less any partial withdrawals plus a minimum
return, (c) the highest contract value on a specified anniversary date minus any
withdrawals following the contract anniversary or (d) a combination benefit of
(b) and (c) above. Most business issued after May 2003 has a proportional
partial withdrawal benefit instead of a dollar-for-dollar relationship. These
variable annuity contract guarantees include benefits that are payable in the
event of death or annuitization, or at specified dates during the accumulation
period.

At December 31, 2004 and December 31, 2003, the Company had the following
variable contracts with guarantees. (Note that the Company's variable annuity
contracts with guarantees may offer more than one type of guarantee in each
contract; therefore, the amounts listed are not mutually exclusive.) For
guarantees of amounts in the event of death, the net amount at risk is defined
as the current guaranteed minimum death benefit in excess of the current account
balance at the balance sheet date. For guarantees of amounts at annuitization,
the net amount at risk is defined as the present value of the minimum guaranteed
annuity payments available to the contract holder determined in accordance with
the terms of the contract in excess of the current account balance. For
guarantees of accumulation balances, the net amount at risk is defined as the
guaranteed minimum accumulation balance minus the current account balance.


                                      F-73
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 19 -- Certain Separate Accounts - (continued)

                                                      December 31,  December 31,
                                                          2004         2003
                                                     ---------------------------
                                                         (in millions, except
                                                        for ages and percents)

Return of net deposits
In the event of death
  Account value ....................................   $3,273.7     $ 3,406.4
  Net amount at risk ...............................      121.5         153.8
  Average attained age of contractholders ..........         64            61

Return of net deposits plus a minimum return
In the event of death
  Account value ....................................   $  985.2     $ 1,051.7
  Net amount at risk ...............................      212.9         230.7
  Average attained age of contractholders ..........         65            63
  Guaranteed minimum return rate ...................          5%            5%
At annuitization
  Account value ....................................   $  212.0     $   169.4
  Net amount at risk ...............................       21.0            --
  Average attained age of contractholders ..........         59            57
  Range of guaranteed minimum return rates .........        4-5%          4-5%

Highest specified anniversary amount value minus
withdrawals post anniversary
In the event of death
  Account value ....................................   $1,177.0     $ 1,224.7
  Net amount at risk ...............................      139.2         214.0
  Average attained age of contractholders ..........         63            58


Account balances of variable contracts with guarantees were invested in various
separate accounts in variable separate mutual funds which included foreign and
domestic equities and bonds as shown below:

                                                December 31,     December 31,
                                                   2004              2003
                                               --------------------------------
Type of Fund                                             (in millions)
Domestic Equity - Growth Funds...............   $   3,031.6      $    2,813.4
Domestic Bond Funds..........................       2,211.2           2,423.5
Domestic Equity - Growth & Income Funds......       2,348.1           2,341.2
Balanced Investment Funds....................       2,103.5           2,167.4
Domestic Equity - Value Funds................       1,097.8             865.0
International Equity Funds...................         902.9             621.1
International Bond Funds.....................         119.4             107.3
Hedge Funds..................................          31.8              22.7
                                                -----------      ------------
  Total .....................................   $  11,846.3      $   11,361.6
                                                ===========      ============


                                      F-74
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 19 -- Certain Separate Accounts - (continued)

The following table summarizes the liabilities for guarantees on variable
contracts reflected in the general account:

<TABLE>
<CAPTION>
                                                      Guaranteed      Guaranteed
                                                    Minimum Death   Minimum Income
                                                    Benefit (GMDB)  Benefit (GMIB)   Totals
                                                    ----------------------------------------
                                                               (in millions)

<S>                                                   <C>             <C>            <C>
Balance at January 1, 2004........................    $   32.9        $  1.0         $ 33.9
Incurred guarantee benefits ......................         5.1            --            5.1
Fair value adjustment at Manulife acquisition.....         7.9           0.6            8.5
Paid guarantee benefits ..........................        (8.7)           --           (8.7)
                                                    ----------------------------------------
Balance at December 31, 2004 .....................    $   37.2        $  1.6         $ 38.8
                                                    ========================================
</TABLE>

The GMDB liability is determined each period end by estimating the expected
value of death benefits in excess of the projected account balance and
recognizing the excess ratably over the accumulation period based on total
expected assessments. The Company regularly evaluates estimates used and adjusts
the additional liability balance, with a related charge or credit to benefit
expense, if actual experience or other evidence suggests that earlier
assumptions should be revised.

The following assumptions and methodology were used to determine the GMDB
liability at December, 2004.

o     Data used included 1,000 and 200 (for life and annuity contracts,
      respectively) stochastically generated investment performance scenarios.
o     Volatility assumptions depended on mix of investments by contract type and
      were 19% for annuity and 13.8% for life products.
o     Life products used purchase GAAP mortality, lapse, mean investment
      performance, and discount rate assumptions included in the related
      deferred acquisition cost (DAC) and value of business acquired (VOBA)
      models which varied by product
o     Mean investment performance assumptions for annuity contracts were 8.67%.
o     Annuity mortality was assumed to be 100% of the Annuity 2000 table.
o     Annuity lapse rates vary by contract type and duration and range from 1
      percent to 20 percent.
o     Annuity discount rate was 6.5%.

The guaranteed minimum income benefit (GMIB) liability represents the expected
value of the annuitization benefits in excess of the projected account balance
at the date of annuitization, recognizing the excess ratably over the
accumulation period based on total expected assessments. The Company regularly
evaluates estimates used and adjusts the additional liability balance, with a
related charge or credit to benefit expense, if actual experience or other
evidence suggests that earlier assumptions should be revised. The guaranteed
minimum accumulation benefit (GMAB) liability is determined each period end by
calculating the highest investment value occurring ten or more years prior to
each contract's maturity, applying the guaranteed rates of 75% or 100% depending
upon the type of contract and adjusting the results proportionately for any new
deposits or withdrawals within the final ten years to maturity.


                                      F-75
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 20 -- Quarterly Results of Operations (unaudited)

The following is a summary of unaudited quarterly results of operations for 2004
and 2003:

<TABLE>
<CAPTION>
                                    ----------------------------------------------------------------------------------------------
                                                           2004                                             2003
                                    --------------------------------------------------  ------------------------------------------
                                              April 1    April 29
                                              through    through
                                      March   April 28   June 30   September  December    March      June     September  December
                                    --------------------------------------------------  ------------------------------------------
                                                                         (in millions)
<S>                                 <C>        <C>       <C>       <C>        <C>        <C>       <C>       <C>        <C>
Premiums and other
   considerations ...............   $  851.1   $ 276.5   $  551.7  $  829.1   $  926.7   $  818.6  $  815.2  $   821.6  $  993.1
Net investment income ...........      983.5     301.2      518.8     760.2      853.1      933.1     942.3      931.5     992.5
Net realized investment and
   other losses, net of related
   amortization of deferred
   policy acquisition costs,
   value of business acquired,
   amounts credited to
   participating pension
   contractholders, and the
   policyholder dividend
   obligation....................      (97.7)    198.7       48.9    (148.0)      69.1      105.4      78.3      (62.7)    (62.8)
                                    --------------------------------------------------  ------------------------------------------
Total revenues...................    1,736.9     776.4    1,119.4   1,441.3    1,848.9    1,857.1   1,835.8    1,690.4   1,922.8

Benefits and expenses  ..........    1,529.4     509.7      895.5   1,371.0    1,654.6    1,470.3   1,469.5    1,493.1   1,658.4
                                    --------------------------------------------------  ------------------------------------------

Income before income taxes
   and cumulative effect of
   accounting changes............      207.5     266.7      223.9      70.3      194.3      386.8     366.3      197.3     264.4

Cumulative effect of accounting
   changes, net of tax...........       (3.3)       --         --        --         --         --        --         --    (279.0)
                                    --------------------------------------------------  ------------------------------------------

Net income.......................   $  154.3   $ 175.0   $  169.1  $   59.2   $  144.4   $  271.0  $  257.7  $   157.7  $  (95.9)
                                    ==================================================  ==========================================
</TABLE>

Note 21 -- Subsequent Events

On March 8, 2005, the Company issued 32,000 shares of Common Stock to its sole
shareholder, JHFS, for consideration of $320.0 million. The transaction was
exempt from registration under Section 4(2) of the Securities Act of 1933.
Following notification to the Massachusetts Insurance Commissioner, the Company
paid a $320.0 million dividend to JHFS on March 7, 2005.


                                      F-76
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                     SCHEDULE I -- SUMMARY OF INVESTMENTS -
                    OTHER THAN INVESTMENTS IN RELATED PARTIES
                             As of December 31, 2004
                                  (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.....             $   341.0         $   342.2        $   342.2
States, municipalities and political subdivisions....................                 606.1             593.9            593.9
Foreign governments..................................................                 172.7             184.0            184.0
Public utilities.....................................................               4,687.2           4,799.6          4,799.6
Convertibles and bonds with warrants attached........................                  82.8              84.8             84.8
All other corporate bonds............................................              40,266.0          40,956.3         40,956.3
Certificates of deposits.............................................                    --                --               --
Redeemable preferred stock...........................................                 881.4             902.4            902.4
                                                                             ------------------------------------------------------
Total fixed maturity securities, available-for-sale..................              47,037.2          47,863.2         47,863.2
                                                                             ------------------------------------------------------
Equity securities, available-for-sale:
Common stocks:
Public utilities.....................................................                    --                --               --
Banks, trust and insurance companies.................................                    --                --               --
Industrial, miscellaneous and all other..............................                 303.6             312.6            312.6
Non-redeemable preferred stock.......................................                  17.9              17.9             17.9
                                                                             ------------------------------------------------------
Total equity securities, available-for-sale..........................             $   321.5         $   330.5        $   330.5
                                                                             ------------------------------------------------------
Fixed maturity securities, held-to-maturity:
Bonds:
United States government and government agencies and authorities.....                    --                --               --
States, municipalities and political subdivisions....................                    --                --               --
Foreign governments..................................................                    --                --               --
Public utilities.....................................................                    --                --               --
Convertibles and bonds with warrants attached........................                    --                --               --
All other corporate bonds............................................                    --                --               --
Certificates of deposits.............................................                    --                --               --
Redeemable preferred stock...........................................                    --                --               --
                                                                             ------------------------------------------------------
Total fixed maturity securities, held-to-maturity....................                    --                --               --
                                                                             ------------------------------------------------------
</TABLE>

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 I -- SUMMARY OF INVESTMENTS -
             OTHER THAN INVESTMENTS IN RELATED PARTIES - (CONTINUED)
                             As of December 31, 2004
                                  (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...      $      4.2   $     4.2       $     4.2
Non-redeemable preferred stock............              --          --              --
                                            ---------------------------------------------
Total equity securities, trading..........             4.2         4.2             4.2
                                            ---------------------------------------------
Mortgage loans on real estate, net (1)....        11,837.9        XXXX        11,792.6
Real estate, net:
  Investment properties (1)...............           291.1        XXXX           277.2
  Acquired in satisfaction of debt (1)....              --        XXXX              --
Policy loans..............................         2,012.0        XXXX         2,012.0
Other long-term investments (2)...........         3,359.3        XXXX         3,359.3
Short-term investments....................             0.2        XXXX             0.2
                                            ---------------------------------------------
Total investments.........................      $ 64,863.4   $48,197.9       $65,639.2
                                            =============================================
</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-78
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

               SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
   As of December 31, 2004, 2003 and 2002 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>
2004:
Protection........................        $    197.4       $ 26,381.1         $  43.3           $  182.5          $1,546.4
Wealth Management (2).............             (16.7)        11,640.4              --                0.1              10.0
Guaranteed & Structured
   Financial Products.............               0.6         27,106.6              --                4.6              20.0
Corporate & Other.................               0.1             40.9              --                0.6             403.6
                                       --------------------------------------------------------------------------------------
     Total........................        $    181.4       $ 65,169.0         $  43.3           $  187.8          $1,980.0
                                       ======================================================================================

2003:
Protection........................        $  2,775.1       $ 23,079.1         $ 333.3          $   129.1          $1,583.8
Wealth Management (2).............             634.7         10,850.8              --                0.1              35.3
Guaranteed & Structured
   Financial Products.............               7.8         27,420.7            73.6                2.7              16.8
Corporate & Other.................               3.1            784.3              --               34.6             403.5
                                       --------------------------------------------------------------------------------------
     Total........................        $  3,420.7       $ 62,134.9         $ 406.9          $   166.5          $2,039.4
                                       ======================================================================================

2002:
Protection........................        $  2,660.3       $ 20,715.9         $ 300.3          $   108.2          $1,662.1
Wealth Management (2).............             681.2          8,952.8              --                0.1              29.3
Guaranteed & Structured
   Financial Products.............               8.6         26,845.4            68.6                2.9              18.3
Corporate & Other.................               2.5          1,043.9              --               49.5             274.5
                                       --------------------------------------------------------------------------------------
     Total........................        $  3,352.6       $ 57,558.0         $ 368.9          $   160.7          $1,984.2
                                       ======================================================================================
</TABLE>

(1)   Unearned premiums and other policy claims and benefits payable are
      included in these amounts.
(2)   Formerly referred to as the Asset Gathering Segment prior to the merger
      with Manulife April 28, 2004.

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

                     SCHEDULE III -- SUPPLEMENTARY INSURANCE
               INFORMATION -- (CONTINUED) As of December 31, 2004,
               2003 and 2002 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
                                                                                  ACQUISITION COSTS
                                                                                      AND VALUE OF
                                                             BENEFITS,             BUSINESS ACQUIRED,
                                                              CLAIMS,              EXCLUDING AMOUNTS
                                              NET           LOSSES, AND         RELATED TO NET REALIZED            OTHER
                                           INVESTMENT       SETTLEMENT           INVESTMENT AND OTHER            OPERATING
                SEGMENT                    INCOME (3)        EXPENSES               GAINS (LOSSES)              EXPENSES (3)
-----------------------------------------------------------------------------------------------------------------------------

<S>                                        <C>               <C>                     <C>                         <C>
2004:
Protection........................         $ 1,371.4         $ 1,904.7               $     132.1                 $   470.0
Wealth Management (4).............             655.4             398.2                     103.0                     325.8
Guaranteed & Structured
   Financial Products.............           1,364.9             957.5                      38.7                     188.4
Corporate & Other.................              25.1             338.4                      (0.3)                    629.8
                                       --------------------------------------------------------------------------------------
     Total........................         $ 3,416.8         $ 3,598.8               $     273.5                 $ 1,614.0
                                       ======================================================================================

2003:
Protection........................         $ 1,448.9         $ 1,912.4               $     195.1                 $   473.8
Wealth Management (4).............             709.4             500.7                     111.4                     228.2
Guaranteed & Structured
   Financial Products.............           1,676.7           1,084.0                       2.3                     194.2
Corporate & Other.................             (35.6)            352.1                      (0.4)                    499.7
                                       --------------------------------------------------------------------------------------
     Total........................         $ 3,799.4         $ 3,849.2               $     308.4                 $ 1,395.9
                                       ======================================================================================

2002:
Protection........................         $ 1,339.2         $ 1,934.5               $     174.6                 $   532.3
Wealth Management (4).............             575.0             446.7                     140.5                     205.2
Guaranteed & Structured
   Financial Products.............           1,703.9           1,186.8                       2.2                     135.3
Corporate & Other.................             (37.1)            237.2                      (0.8)                    374.6
                                       --------------------------------------------------------------------------------------
     Total........................         $ 3,581.0         $ 3,805.2               $     316.5                 $ 1,247.4
                                       ======================================================================================
</TABLE>

(3)   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.
(4)   Formerly referred to as the Asset Gathering Segment prior to the merger
      with Manulife April 28, 2004.

The condensed financial information should be read in conjunction with the
audited consolidated financial statements and notes thereto.


                                      F-80
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

                           SCHEDULE IV -- REINSURANCE
               As of December 31, 2004, 2003 and 2002 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>
2004:
Life insurance in force...........     $255,940.2   $226,330.7    $145,837.1     $175,446.6      83.1%
                                      ======================================================
Premiums:
Life insurance....................     $  1,626.7   $    728.5     $   478.8     $  1,377.0      34.8%
Accident and health
   Insurance......................          903.4        498.7         198.3          603.0      32.9%
                                      ------------------------------------------------------
     Total........................     $  2,530.1   $  1,227.2     $   677.1     $  1,980.0      34.2%
                                      ======================================================

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%
                                      ======================================================
</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-81
<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/ STEVEN FINCH
                                                   ----------------
                                                   Steven Finch
                                                   Senior Vice President and
                                                   Chief Financial Officer

                                           Date:   March 31, 2005

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.

<TABLE>
<CAPTION>
         SIGNATURE                                          TITLE                                       DATE

<S>                                        <C>                                                    <C>
/s/ JAMES M. BENSON
-------------------
James M. Benson                            President, Chief Executive                             March 31, 2005
                                           Officer and Director
                                           (Principal Executive Officer)

/s/ STEVEN FINCH
----------------
Steven Finch                               Senior Vice President and
                                           Chief Financial Officer
                                           (Principal Financial and Accounting Officer)           March 31, 2005

/s/ JONATHAN CHIEL
------------------
Jonathan Chiel                             Executive Vice President, General
                                           Counsel and Director                                   March 31, 2005

/s/ DOMINIC D'ALESSANDRO
-------------------------
Dominic D'Alessandro                       Chairman of the Board                                  March 31, 2005

/s/ DONALD A. GULOIEN
---------------------
Donald A. Guloien                          Senior Executive Vice President, Chief
                                           Investment Officer and Director                        March 31, 2005

/s/ PETER H. RUBENOVITCH
------------------------
Peter H. Rubenovitch                       Senior Executive Vice President
                                           and Director                                           March 31, 2005

/s/ JOHN D. DESPREZ, III
------------------------
John D. DesPrez, III                       Senior Executive Vice President
                                           and Director                                           March 31, 2005
</TABLE>

<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

<TABLE>
<S>                                        <C>                                                    <C>
/s/ ROBERT R. REITANO
---------------------
Robert R. Reitano                          Executive Vice President
                                           and Director                                           March 31, 2005

/s/ BEVERLY S. MARGOLIAN
------------------------
Beverly S. Margolian                       Executive Vice President
                                           and Director                                           March 31, 2005
</TABLE>