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Hancock John Financial Services Inc – ‘10-Q’ for 3/31/02

On: Wednesday, 5/15/02, at 3:07pm ET · For: 3/31/02 · Accession #: 1171520-2-27 · File #: 1-15607

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/15/02  Hancock John Fin’l Services Inc   10-Q        3/31/02    1:158K                                   Elec Publishing Svcs Inc

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        John Hancock Financial Services, Inc.                 47    264K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Adjustments to GAAP Reported Net Income Benefits and Expenses EXHIBITS and REPORTS on FORM 8-K Financial Statements Fixed maturity securities Forward-Looking Statements Income taxes Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mortgage loans Net income QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK Revenues
1	1st Page - Filing Submission
2	Item 1. Financial Statements
4	Revenues
"	Benefits and Expenses
13	Net income
22	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
23	Income taxes
27	Adjustments to GAAP Reported Net Income
38	Fixed maturity securities
40	Mortgage loans
42	Forward-Looking Statements
44	Item 3. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK
46	Item 1. Legal Proceedings
"	Item 6. EXHIBITS and REPORTS on FORM 8-K

10-Q 1st Page of 47 TOC ↑Top Previous Next ↓Bottom Just 1st
 
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 FORM 10-Q

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

 For the quarterly period ended March 31, 2002

 Commission File Number: 1-15607

 JOHN HANCOCK FINANCIAL SERVICES, INC.
Exact name of registrant as specified in charter

DELAWARE                                  04-3483032
 (State or other jurisdiction of          (I.R.S. Employer Identification No.)
incorporation or organization)                                            

John Hancock Place
 Boston, Massachusetts 02117
(Address of principal executive offices)

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

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

    Number of shares outstanding of our only class of common stock as of May
10, 2002:                                                                       

 294,467,528

10-Q 2nd Page of 47 TOC 1st Previous Next ↓Bottom Just 2nd
PART I  - FINANCIAL INFORMATION                                                 

ITEM 1.   FINANCIAL STATEMENTS                                                  

 JOHN HANCOCK FINANCIAL SERVICES, INC.

 CONSOLIDATED BALANCE SHEETS

                                                        [Enlarge/Download Table]

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

Investments                                                                                                       
Fixed maturities:                                                                                                 
   Held-to-maturity--at amortized cost                                                                            
   (fair value: March 31--$1,899.0; December 31--$1,914.1)......................    $ 1,879.5        $ 1,930.0    
   Available-for-sale--at fair value                                                                              
   (cost: March 31--$39,798.8; December 31--$38,742.0)..........................     40,001.7         39,160.3    
   Trading securities--at fair value                                                                              
   (cost: March 31--$16.4; December 31--$16.4)..................................         16.1             16.5    
Equity securities:                                                                                                
   Available-for-sale--at fair value                                                                              
   (cost: March 31--$765.9; December 31--$752.3)................................        939.8            886.8    
   Trading securities--at fair value                                                                              
   (cost: March 31--$291.3; December 31--$289.5)................................        318.9            304.1    
Mortgage loans on real estate...................................................     11,061.5         10,993.2    
Real estate.....................................................................        420.5            442.4    
Policy loans....................................................................      2,009.6          2,008.2    
Short-term investments..........................................................         86.7            153.5    
Other invested assets...........................................................      1,896.4          1,786.1    
                                                                                 ---------------------------------

   Total Investments............................................................     58,630.7         57,681.1    

Cash and cash equivalents.......................................................      1,252.4          1,313.7    
Accrued investment income.......................................................        767.8            782.1    
Premiums and accounts receivable................................................        228.3            253.8    
Deferred policy acquisition costs...............................................      3,914.6          3,717.4    
Reinsurance recoverable.........................................................      1,867.1          1,909.3    
Other assets....................................................................      3,132.3          2,768.3    
Separate account assets.........................................................     22,827.0         22,718.5    
                                                                                 ---------------------------------

   Total Assets.................................................................    $92,620.2        $91,144.2    
                                                                                 =================================

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

2 

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

                                                        [Enlarge/Download Table]

                                                                                   March 31,                    
                                                                                      2002        December 31,  
                                                                                  (Unaudited)         2001      
                                                                                 -------------------------------
                                                                                         (in millions)          
                                                                                                                
Liabilities and Shareholders' Equity                                                                            

Liabilities                                                                                                     
Future policy benefits..........................................................    $35,771.3       $34,938.7   
Policyholders' funds............................................................     21,494.1        20,762.8   
Unearned revenue................................................................        863.0           809.3   
Unpaid claims and claim expense reserves........................................        227.2           262.7   
Dividends payable to policyholders..............................................        567.2           578.1   
Short-term debt.................................................................         62.6            81.0   
Long-term debt..................................................................      1,356.7         1,359.1   
Income taxes....................................................................        801.1           866.9   
Other liabilities...............................................................      2,732.8         2,779.8   
Separate account liabilities....................................................     22,827.0        22,718.5   
                                                                                 -------------------------------

   Total Liabilities............................................................     86,703.0        85,156.9   

Minority interest...............................................................        122.3           122.3   

Commitments and contingencies - Note 3                                                                          

Shareholders' Equity                                                                                            
Common stock, $.01 par value; 2.0 billion shares authorized; 316.9 million                                      
   and 315.9 million shares issued, respectively................................          3.2             3.2   
Additional paid in capital......................................................      5,109.4         5,099.3   
Retained earnings...............................................................      1,353.2         1,206.7   
Accumulated other comprehensive income..........................................        106.5           228.0   
Treasury stock, at cost (21.2 million and 18.5 million shares, respectively)....       (777.4)         (672.2)  
                                                                                 -------------------------------

   Total Shareholders' Equity...................................................      5,794.9         5,865.0   
                                                                                 -------------------------------

   Total Liabilities and Shareholders' Equity...................................    $92,620.2       $91,144.2   
                                                                                 ===============================

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

3 

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

                                                        [Enlarge/Download Table]

                                                                                          Three Months Ended      
                                                                                              March 31,           
                                                                                          2002           2001     
                                                                                     -----------------------------
                                                                                            (in millions)         
                                                                                                                  
Revenues                                                                                                          
   Premiums.........................................................................    $  742.4       $1,095.7   
   Universal life and investment-type product charges...............................       194.4          179.7   
   Net investment income............................................................       969.9          988.1   
   Net realized investment and other gains (losses), net of related                                               
     amortization of deferred policy acquisition costs, amounts credited                                          
     to participating pension contract holders and the policyholder dividend                                      
     obligation ( $(21.0) and $3.8, respectively)...................................       (85.7)         (24.4)  
   Investment management revenues, commissions and other fees.......................       141.3          151.2   
   Other revenue....................................................................        77.0            4.0   
                                                                                     -----------------------------

   Total revenues...................................................................     2,039.3        2,394.3   

Benefits and expenses                                                                                             
   Benefits to policyholders, excluding amounts related to net realized                                           
     investment and other gains (losses) credited to participating pension                                        
     contract holders and the policyholder dividend obligation                                                    
     ($(6.8) and $3.9, respectively)................................................     1,232.4        1,571.2   
   Other operating costs and expenses...............................................       393.2          353.1   
   Amortization of deferred policy acquisition costs, excluding                                                   
     amounts related to net realized investment and other gains (losses)                                          
     ( $(14.2) and $(0.1), respectively)............................................        70.3          102.9   
   Dividends to policyholders.......................................................       145.1          137.2   
                                                                                     -----------------------------

   Total benefits and expenses......................................................     1,841.0        2,164.4   
                                                                                     -----------------------------

Income before income taxes and cumulative                                                                         
   effect of accounting changes.....................................................       198.3          229.9   
Income taxes........................................................................        51.8           69.1   
                                                                                     -----------------------------

Income before cumulative effect of accounting changes...............................       146.5          160.8   

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

Net income..........................................................................    $  146.5       $  168.0   
                                                                                     =============================

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

4 

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)

                                                        [Enlarge/Download Table]

                                                              Three Months      Three Months   
                                                                  Ended            Ended       
                                                             March 31, 2002    March 31, 2001  
                                                             ----------------------------------

                                                                                               
Basic earnings per common share:                                                               

Income before cumulative effect of accounting changes.......      $ 0.49          $ 0.52       

Cumulative effect of accounting changes, net of tax.........          --            0.02       
                                                             ----------------------------------

Net income..................................................      $ 0.49          $ 0.54       
                                                             ==================================

Diluted earnings per common share:                                                             

Income before cumulative effect of accounting changes.......      $ 0.49          $ 0.52       

Cumulative effect of accounting changes, net of tax.........          --             0.2       
                                                             ----------------------------------

Net income..................................................      $ 0.49          $ 0.54       
                                                             ==================================

Share data:                                                                                    
Weighted-average shares used in basic earnings                                                 
   per common share calculations............................       296.4           311.2       

Dilutive securities:                                                                           
Stock options...............................................         2.8             2.5       
Non-vested stock............................................         0.8             0.1       
                                                             ----------------------------------

Weighted-average shares used in diluted earnings                                               
   per common share calculations............................       300.0           313.8       
                                                             ==================================

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

5 

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME

                                                        [Enlarge/Download Table]

                                                    Additional            Accumulated Other                Total     Outstanding  
                                           Common    Paid In    Retained    Comprehensive    Treasury  Shareholders'   Shares     
                                            Stock    Capital    Earnings    Income (Loss)      Stock      Equity    (in thousands)
                                          ----------------------------------------------------------------------------------------
                                                                            (in millions)                                         

                                                                                                                                  
Balance at January 1, 2001...............    $3.2     $5,086.4     $680.4        $77.3        $ (91.8)    $5,755.5     311,988.9  

Options exercised........................                  3.9                                                 3.9         317.7  
Restricted stock issued..................                  0.1                                                 0.1          56.0  
Treasury stock acquired..................                                                      (125.7)      (125.7)     (3,577.5) 

Comprehensive income:                                                                                                             
   Net income............................                           168.0                                    168.0                

Other comprehensive income, net of tax:                                                                                           
   Net unrealized gains..................                                         11.0                        11.0                
   Net accumulated gains (losses)                                                                                                 
     on cash flow hedges.................                                         (2.7)                       (2.7)               
   Foreign currency translation                                                                                                   
     adjustment..........................                                        (23.6)                      (23.6)               
                                                                                                       --------------             
Comprehensive income.....................                                                                    152.7                

Change in accounting principles -                                                                                                 
    Note 1 ..............................                                        227.6                       227.6                
                                          ----------------------------------------------------------------------------------------

Balance at March 31, 2001................    $3.2     $5,090.4     $848.4       $289.6        $(217.5)    $6,014.1     308,785.1  
                                          ========================================================================================


                                                    Additional            Accumulated Other                Total     Outstanding  
                                           Common    Paid In    Retained    Comprehensive    Treasury  Shareholders'   Shares     
                                            Stock    Capital    Earnings    Income (Loss)      Stock      Equity    (in thousands)
                                          ----------------------------------------------------------------------------------------
                                                                            (in millions)                                         

                                                                                                                                  
Balance at January 1, 2002...............    $3.2     $5,099.3   $1,206.7       $228.0        $(672.2)    $5,865.0     297,430.1  

Options exercised........................                  5.6                                                 5.6         370.3  
Restricted stock issued..................                  4.4                                                 4.4         637.8  
Issuance of shares for board                                                                                                      
   compensation..........................                  0.1                                                 0.1           1.4  
Treasury stock acquired..................                                                      (105.2)      (105.2)     (2,723.9) 

Comprehensive income:                                                                                                             
   Net income............................                           146.5                                    146.5                

Other comprehensive income, net of tax:                                                                                           
   Net unrealized gains (losses).........                                       (110.2)                     (110.2)               
   Net accumulated gains (losses)                                                                                                 
     on cash flow hedges.................                                        (11.9)                      (11.9)               
   Foreign currency translation                                                                                                   
     adjustment..........................                                         (0.6)                       (0.6)               
   Minimum pension liability.............                                          1.2                         1.2                
                                                                                                       --------------             
Comprehensive income.....................                                                                     25.0                
                                          ----------------------------------------------------------------------------------------

Balance at March 31, 2002................    $3.2     $5,109.4   $1,353.2       $106.5        $(777.4)    $5,794.9     295,715.7  
                                          ========================================================================================

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

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                                                                             Three Months Ended         
                                                                                                  March 31,             
                                                                                           2002                2001     
                                                                                      ----------------------------------
                                                                                                (in millions)           
                                                                                                                        
Cash flows from operating activities:                                                                                   
   Net income......................................................................    $    146.5          $    168.0   
   Adjustments to reconcile net income to net cash provided by operating activities:                                    
     Amortization of discount - fixed maturities...................................         (26.9)              (36.0)  
     Net realized investment and other (gains) losses..............................          85.7                24.4   
     Change in deferred policy acquisition costs...................................         (96.7)              (39.0)  
     Depreciation and amortization.................................................          18.4                21.8   
     Net cash flows from trading securities........................................         (14.4)              (36.3)  
     Decrease (increase) in accrued investment income..............................          14.3               (99.8)  
     Decrease (increase) in premiums and accounts receivable.......................          25.5               (47.7)  
     Decrease (increase) in other assets and other liabilities, net................         101.9              (207.9)  
     Increase in policy liabilities and accruals, net..............................         308.8               572.7   
     (Decrease) increase in income taxes...........................................          (3.2)              247.4   
                                                                                      ----------------------------------

       Net cash provided by operating activities...................................         559.9               567.6   

Cash flows from investing activities:                                                                                   
   Sales of:                                                                                                            
     Fixed maturities available-for-sale...........................................       1,023.0             5,004.8   
     Equity securities available-for-sale..........................................          64.4                59.1   
     Real estate...................................................................           7.0                 0.6   
     Short-term investments and other invested assets..............................          32.2                21.7   
   Maturities, prepayments and scheduled redemptions of:                                                                
     Fixed maturities held-to-maturity.............................................          62.6                67.1   
     Fixed maturities available-for-sale...........................................         899.3               763.1   
     Short-term investments and other invested assets..............................         119.2                88.6   
     Mortgage loans on real estate.................................................         281.8               290.9   
   Purchases of:                                                                                                        
     Fixed maturities held-to-maturity.............................................         (10.9)               (6.7)  
     Fixed maturities available-for-sale...........................................      (3,521.3)           (7,335.0)  
     Equity securities available-for-sale..........................................         (47.4)             (113.9)  
     Real estate...................................................................          (1.4)               (1.1)  
     Short-term investments and other invested assets..............................        (180.5)             (138.2)  
   Mortgage loans on real estate issued............................................        (440.5)             (401.7)  
   Other, net......................................................................        (124.1)                6.9   
                                                                                      ----------------------------------

       Net cash used in investing activities.......................................    $ (1,836.6)         $ (1,693.8)  

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

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

                                                        [Enlarge/Download Table]

                                                                                           Three Months Ended         
                                                                                                March 31,             
                                                                                         2002               2001      
                                                                                    ----------------------------------
                                                                                              (in millions)           
                                                                                                                      
Cash flows from financing activities:                                                                                 
   Acquisition of treasury stock...................................................  $   (105.2)          $  (125.7)  
   Universal life and investment-type contract deposits............................     2,895.1             1,780.9   
   Universal life and investment-type contract maturities and withdrawals..........    (1,555.2)           (1,605.4)  
   Repayment of short-term debt....................................................       (16.1)               --     
   Repayment of long-term debt.....................................................        (3.2)               --     
   Net increase in commercial paper................................................        --                  20.3   
                                                                                    ----------------------------------

       Net cash provided by financing activities...................................     1,215.4                70.1   
                                                                                    ----------------------------------

       Net decrease in cash and cash equivalents...................................       (61.3)           (1,056.1)  

Cash and cash equivalents at beginning of period...................................     1,313.7             3,280.0   
                                                                                    ----------------------------------

       Cash and cash equivalents at end of period..................................  $  1,252.4           $ 2,223.9   
                                                                                    ==================================

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

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies                            

Business                                                                        

John Hancock Financial Services, Inc. (the Company) is a diversified financial  
services organization that provides a broad range of insurance and investment   
products and investment management and advisory services.                       

Basis of Presentation                                                           

The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to    
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally    
accepted in the United States for complete financial statements. In the opinion 
of management, these unaudited consolidated financial statements contain all    
adjustments, consisting of only normal and recurring adjustments, necessary for 
a fair presentation of the financial position and results of operations.        
Operating results for the three month period ended March 31, 2002 are not       
necessarily indicative of the results that may be expected for the year ending  
December 31, 2002. These unaudited consolidated financial statements should be  
read in conjunction with the Company's annual audited financial statements as of
December 31, 2001 included in the Company's Form 10-K for the year ended        
December 31, 2001 filed with the United States Securities and Exchange          
Commission (hereafter referred to as the Company's 2001 Form 10-K).             

The balance sheet at December 31, 2001 has been derived from the audited        
financial statements at that date but does not include all of the information   
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.                                       

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

The acquisitions described below were recorded under the purchase method of     
accounting and, accordingly, the operating results of the acquired operations   
have been included in the Company's consolidated results of operations from the 
applicable date of acquisition. Each purchase price was allocated to the assets 
acquired and the liabilities assumed based on estimated fair values, with the   
excess of the applicable purchase price over the estimated fair values, if any, 
recorded as goodwill. These acquisitions were made by the Company in execution  
of its plan to acquire businesses that have strategic value, meet its earnings  
requirements and advance the growth of its current businesses. The following    
table presents actual and proforma data for comparative purposes, of revenue,   
net income and earnings per share for the periods indicated (all amounts in     
millions, except per-share data) to demonstrate the proforma effect of the      
acquisitions as if they occurred on January 1, 2001.                            

                                        Three Months Ended March 31,
                                    2001
                                    Proforma
                                      2002      (unaudited)       2001
                                        ----------------------------------------

    Revenue........................  $ 2,039.3     $ 2,469.7     $ 2,394.3

    Net income.....................  $   146.5     $   168.3     $   168.0

    Earnings per share.............  $    0.49     $    0.54     $    0.54

On October 1, 2001, Maritime Life Assurance Company (Maritime), a majority owned
Canadian subsidiary of the Company, completed its purchase of all of the shares 
of Royal & Sun Alliance Life Insurance Company of Canada (RSAF) for an amount of
approximately $149.9 million. RSAF's business includes life insurance,          
guaranteed interest savings and retirement products. The net income relating to 
the acquired operations included in the Company's results from January 1, 2002  
through March 31, 2002 was $1.2 million.                                        

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

On April 2, 2001, a subsidiary of the Company, Signature Fruit Company, LLC     
(Signature Fruit), purchased certain assets and assumed certain liabilities out 
of bankruptcy proceedings of Tri Valley Growers, Inc., a cooperative            
association, for approximately $53.0 million. The net income related to the     
acquired operations included in the Company's results from January 1, 2002      
through March 31, 2002 was $0.9 million.                                        

Severance                                                                       

During the three months ended March 31, 2002, the Company continued its ongoing 
Competitive Position Project. This project was initiated in the first quarter of
1999 to reduce costs and increase future operating efficiency by consolidating  
portions of the Company's operations and is expected to continue through at     
least 2003. The project consists primarily of reducing staff in the home office 
and terminating certain operations outside the home office.                     

Since the inception of the restructuring project, approximately 1,125 employees 
have been terminated and 25 have been given notice of termination. As of March  
31, 2002 and December 31, 2001, the liability for employee termination costs,   
included in other liabilities was $17.7 million and $18.8 million, respectively.
Employee termination costs net of related curtailment pension and other post    
employment benefit related gains are included in other operating costs and      
expenses and were $5.0 million and $23.6 million for the three months ended     
March 31, 2002 and 2001, respectively. Benefits paid since the inception of the 
project are $79.7 million.                                                      

Cumulative Effect of Accounting Change                                          

During the first quarter of 2001, the Company changed the method of accounting  
for the recognition of deferred gains and losses considered in the calculation  
of the annual expense for its employee pension plan under SFAS No. 87,          
"Employers' Accounting for Pensions," and for its postretirement health and     
welfare plans under SFAS No. 106, "Employers' Accounting for Postretirement     
Benefits Other Than Pensions." The Company changed the method of recognizing    
gains and losses from deferral within a 10% corridor and amortization of gains  
outside this corridor over the future working careers of the participants to a  
deferral within a 5% corridor and amortization of gains and losses outside this 
corridor over the future working careers of the participants. The new method is 
preferable because in the Company's situation, it produces results that more    
closely match current economic realities of the Company's retirement and welfare
plans through the use of the current fair values of assets while still          
mitigating the impact of extreme gains and losses. As a result, the Company     
recorded a credit of $18.6 million (net of tax of $9.9 million), related to its 
employee benefit pension plans, and a credit of $4.7 million (net of tax of $2.6
million), related to its postretirement health and welfare plans. The total     
credit recorded as a cumulative effect of an accounting change was $23.3 million
(net of tax of $12.5 million), or $0.07 diluted earnings per share.             

On January 1, 2001, the Company adopted SFAS No. 133, as amended by SFAS No.    
138, "Accounting for Certain Derivative Instruments and Certain Hedging         
Activities, an amendment of FASB Statement 133". The adoption of SFAS No. 133,  
as amended, resulted in a charge to operations accounted for as a cumulative    
effect of accounting change of $16.1 million (net of tax of $8.3 million) as of 
January 1, 2001, or $(0.05) diluted earnings per share. In addition, as of      
January 1, 2001, a $227.6 million (net of tax of $122.6 million) cumulative     
effect of accounting change was recorded in other comprehensive income for (1)  
the transition adjustment in the adoption of SFAS No. 133, as amended, an       
increase of $40.5 million (net of tax of $21.8 million), and (2) the            
reclassification of $12.1 billion in securities from the held-to-maturity       
category to the available-for-sale category, an increase of $187.1 million (net 
of tax of $100.8 million).                                                      

Recent Accounting Pronouncements                                                

On January 1, 2002, the Company adopted Statement of Financial Standards (SFAS) 
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires that     
goodwill and other intangible assets deemed to have indefinite lives no longer  
be amortized to earnings, but instead be reviewed at least annually for         
impairment. Intangible assets with definite lives will continue to be amortized 
over their useful lives. The Company has performed the required impairment tests
of goodwill as of January 1, 2002 based on the guidance in SFAS No. 142. The    
Company evaluated the goodwill 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 impairments
resulted from these required impairment tests.                                  

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

In December 2000, the AICPA issued Statement of Position (SOP) 00-3, "Accounting
by Insurance Enterprises for Demutualizations and Formations of Mutual Insurance
Holding Companies and Certain Long-Duration Participating Contracts". The SOP   
details accounting requirements for the demutualization of mutual insurance     
companies. The SOP required demutualized insurance companies to standardize the 
presentation of demutualization expenses and presentation of the closed block in
their financial statements. The adoption of SOP 00-3 also resulted in the       
recognition of a policyholder dividend obligation, which represents cumulative  
actual closed block earnings in excess of expected periodic amounts calculated  
at the date of the demutualization. Adoption of SOP 00-3 resulted in an increase
of net income of $0.1 million and had no effect on earnings per common share,   
for the three months ended March 31, 2001.                                      

Note 2 -- Segment Information                                                   

The Company operates in the following five business segments: two segments      
primarily serve retail customers, two segments serve primarily institutional    
customers and our fifth segment is the Corporate and Other Segment, which       
includes our international operations. Our retail segments are the Protection   
Segment and the Asset Gathering Segment. Our institutional segments are the     
Guaranteed and Structured Financial Products Segment (G&SFP) and the Investment 
Management Segment. For additional information about the Company's business     
segments, please refer to the Company's 2001 Form 10-K.                         

The following table summarizes selected financial information by segment for the
periods and dates indicated, and reconciles segment revenues and segment        
after-tax operating income to amounts reported in the unaudited consolidated    
statements of income. 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 4 - Closed Block 
in the notes to the unaudited consolidated financial statements and the related 
footnote in the Company's 2001 Form 10-K.                                       

Amounts reported as segment adjustments in the tables below primarily relate to:
(i) certain net realized investment and other gains (losses), net of related    
amortization adjustment for deferred policy acquisition costs, amounts credited 
to participating pension contractholder accounts and policyholder dividend      
obligation (the adjustment for net realized investment and other gains (losses) 
excludes gains and losses from mortgage securitizations because management views
the related gains and losses as an integral part of the core business of those  
operations ); (ii) restructuring costs related to reducing staff in the home    
office and terminating certain operations outside the home office and (iii)     
cumulative effect of accounting changes.                                        

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Segment Information - (Continued)                                     

                                                        [Enlarge/Download Table]

                                                              Asset                     Investment    Corporate                 
                                            Protection      Gathering       G&SFP       Management    and Other    Consolidated 
                                           -------------------------------------------------------------------------------------
                                                                                                                                
As of or for the three months ended                                                                                             
March 31, 2002                                                                                                                  
Revenues:                                                                                                                       
   Revenues from external                                                                                                       
     customers ...........................    $   537.1     $   145.3     $    50.6     $    16.9     $   404.4     $ 1,154.3   
   Net investment income .................        322.6         130.5         420.7           4.0          92.1         969.9   
   Inter-segment revenues ................           --            --            --           9.7          (9.7)           --   
                                           -------------------------------------------------------------------------------------
   Segment revenues ......................        859.7         275.8         471.3          30.6         486.8       2,124.2   
   Net realized investment and other                                                                                            
     gains (losses), net .................        (29.1)        (23.7)        (21.8)           --         (10.3)        (84.9)  
                                           -------------------------------------------------------------------------------------
   Revenues ..............................    $   830.6     $   252.1     $   449.5     $    30.6     $   476.5     $ 2,039.3   
                                           =====================================================================================
Net Income:                                                                                                                     
   Segment after-tax operating                                                                                                  
     income ..............................    $    72.8     $    40.0     $    66.9     $     4.9     $    18.2     $   202.8   
   Net realized investment and other                                                                                            
     gains (losses) ......................        (18.7)        (14.8)        (13.7)           --          (5.5)        (52.7)  
   Restructuring charges .................         (3.2)         (1.4)         (0.3)           --           1.3          (3.6)  
                                           -------------------------------------------------------------------------------------
   Net income ............................    $    50.9     $    23.8     $    52.9     $     4.9     $    14.0     $   146.5   
                                           =====================================================================================
Supplemental Information:                                                                                                       
   Equity in net income of investees                                                                                            
     accounted for by the equity method ..    $     4.2     $     2.7     $     7.4     $    (0.1)    $    11.0     $    25.2   
   Amortization of deferred policy                                                                                              
     acquisition costs, excluding                                                                                               
     amounts related to net realized                                                                                            
     investment and other gains                                                                                                 
     (losses) ............................         39.1          21.6           0.4            --           9.2          70.3   
   Segment assets ........................    $28,905.2     $15,173.8     $32,308.4     $ 2,258.1     $13,974.7     $92,620.2   

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 2 -- Segment Information - (Continued)                                     

                                                        [Enlarge/Download Table]

                                                              Asset                     Investment    Corporate                 
                                            Protection      Gathering       G&SFP       Management    and Other    Consolidated 
                                           -------------------------------------------------------------------------------------
                                                                                                                                
As of or for the three months ended                                                                                             
March 31, 2001                                                                                                                  
Revenues:                                                                                                                       
   Revenues from external                                                                                                       
     customers ...........................    $   520.4     $   169.1     $   392.2     $    22.0     $   329.6     $ 1,433.3   
   Net investment income .................        314.5         119.8         467.1           5.5          81.2         988.1   
   Inter-segment revenues ................           --            --            --           8.1          (8.1)           --   
                                           -------------------------------------------------------------------------------------
   Segment revenues ......................        834.9         288.9         859.3          35.6         402.7       2,421.4   
   Net realized investment and other                                                                                            
     gains (losses) ......................         (9.7)          6.9         (14.4)         (0.1)         (9.8)        (27.1)  
                                           -------------------------------------------------------------------------------------
   Revenues ..............................    $   825.2     $   295.8     $   844.9     $    35.5     $   392.9     $ 2,394.3   
                                           =====================================================================================

Net Income:                                                                                                                     
   Segment after-tax operating                                                                                                  
     income ..............................    $    72.9     $    31.5     $    59.0     $     5.4     $    21.9     $   190.7   
   Net realized investment and other                                                                                            
     gains (losses) ......................         (5.6)          4.6          (8.2)         (0.1)         (5.6)        (14.9)  
   Restructuring charges .................         (1.2)        (13.2)         (0.1)         (0.4)         (0.1)        (15.0)  
   Cumulative effect of accounting                                                                                              
     changes, net of tax .................         11.7          (0.5)         (1.2)         (0.2)         (2.6)          7.2   
                                           -------------------------------------------------------------------------------------
   Net income ............................    $    77.8     $    22.4     $    49.5     $     4.7     $    13.6     $   168.0   
                                           =====================================================================================
Supplemental Information:                                                                                                       
   Equity in net income of investees                                                                                            
     accounted for by the equity method ..    $     2.3     $     1.1     $     3.4            --     $    12.6     $    19.4   
   Amortization of deferred policy                                                                                              
     acquisition costs, excluding                                                                                               
     amounts related to net realized                                                                                            
     investment and other gains                                                                                                 
     (losses) ............................         52.0          23.4           0.6            --          26.9         102.9   
   Segment assets ........................    $26,694.1     $13,634.4     $30,986.9     $ 2,700.9     $12,149.7     $86,166.0   

Note 3 -- Contingencies                                                         

Class Action                                                                    

During 1997, the Company entered into a court-approved settlement relating to a 
class action lawsuit involving certain individual life insurance policies sold  
from 1979 through 1996. In entering into the settlement, the Company            
specifically denied any wrongdoing. The total reserve held in connection with   
the settlement to provide for relief to class members and for legal and         
administrative costs associated with the settlement amounted to $36.6 million   
and $52.7 million at March 31, 2002 and December 31 2001, respectively. There   
were no costs related to the settlement incurred for the three months ended     
March 31, 2002 or 2001. The estimated reserve is based on a number of factors,  
including the estimated cost per claim and the estimated costs to administer the
claims.                                                                         

During 1996, management determined that it was probable that a settlement would 
occur and that a minimum loss amount could be reasonably estimated. Accordingly,
the Company recorded its best estimate based on the information available at the
time. The terms of the settlement agreement were negotiated throughout 1997 and 
approved by the court on December 31, 1997. In accordance with the terms of the 
settlement agreement, the Company contacted class members during 1998 to        
determine the actual type of relief to be sought by class members. The majority 
of the responses from class members were received by the fourth quarter of 1998.
The type of relief sought by class members differed from the Company's initial  
estimates. In 1999, the Company updated its estimate of the cost of claims      
subject to alternative dispute resolution relief and revised its reserve        
estimate accordingly. The reserve estimate was further evaluated quarterly, and 
was adjusted, in the fourth                                                     

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 -- Contingencies - (Continued)                                           

quarter of 2001. The adjustment to the reserve in the fourth quarter of 2001 was
the result of the Company being able to better estimate the cost of settling the
remaining claims, which on average tend to be larger, more complicated claims.  
The better estimate comes from experience with actual settlements on similar    
claims.                                                                         

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

Harris Trust                                                                    

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

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

The Company believes that the underlying case was incorrectly decided and there 
are promising grounds for challenging the District Court's decision. Therefore, 
on May 14, 2001 the Company filed an appeal and believes that it is probable    
that the Appeals Court will reverse the lower court's decision. On April 29,    
2002, the Appeals Court heard oral arguments from the parties in the case.      
Notwithstanding what the Company believes to be the merits of the Company's     
position in this case, if unsuccessful, its ultimate liability, including fees, 
costs and interest could have a material adverse impact on net income. However, 
the Company does not believe that any such liability would be material in       
relation to its financial position or liquidity.                                

Reinsurance Recoverable                                                         

On February 28, 1997, the Company sold a major portion of its group insurance   
business to UNICARE Life & Health Insurance Company (UNICARE), a wholly owned   
subsidiary of WellPoint Health Networks, Inc. The business sold included the    
Company's group accident and health business and related group life business and
Cost Care, Inc., Hancock Association Services Group and Tri-State, Inc., all of 
which were indirect wholly owned subsidiaries of the Company. The Company       
retained its group long-term care operations. The insurance business sold was   
transferred to UNICARE through a 100% coinsurance agreement. The Company remains
liable to its policyholders to the extent that UNICARE does not meet its        
contractual obligations under the coinsurance agreement.                        

Through the Company's group health insurance operations, the Company entered    
into a number of reinsurance arrangements in respect of personal accident       
insurance and the occupational accident component of workers compensation       
insurance, a portion of which was originated through a pool managed by Unicover 
Managers, Inc. Under these arrangements, the Company both assumed risks as a    
reinsurer, and also passed 95% of these risks on to other companies. This       
business had originally been reinsured by a number of different companies, and  
has become the subject of widespread disputes. The disputes concern the         
placement of the business with reinsurers and recovery of the reinsurance. The  
Company is engaged in disputes, including a number of legal proceedings, in     
respect of this business. The risk to the Company is that other companies that  
reinsured the business from the Company may seek to avoid their reinsurance     
obligations. However, the Company believes that it has a reasonable legal       
position in this matter. During the fourth quarter of 1999 and early 2000, the  
Company received additional information about its exposure to losses under the  
various reinsurance programs. As a result of this additional information and in 
connection with global settlement discussions initiated in late 1999 with other 
parties involved in the reinsurance programs, during the fourth quarter of 1999 
the Company recognized a charge for uncollectible                               

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 3 - Contingencies - (Continued)                                            

reinsurance of $133.7 million, after tax, as its best estimate of its remaining 
loss exposure. The Company believes that any exposure to loss from this issue,  
in addition to amounts already provided for as of March 31, 2002, would not be  
material.                                                                       

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

Other Matters                                                                   

In the normal course of its business operations, the Company is involved with   
litigation from time to time with claimants, beneficiaries and others, and a    
number of litigation matters were pending as of March 31, 2002. It is the       
opinion of management, after consultation with counsel, that the ultimate       
liability with respect to these claims, if any, will not materially affect the  
financial position or results of operations of the Company.                     

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 -- Closed Block                                                          

In connection with the Company's plan of reorganization for its demutualization 
and initial public offering, the Company created a closed block for the benefit 
of policies included therein. Additional information regarding the creation of  
the closed block and relevant accounting issues is contained in the notes to    
consolidated financial statements of the Company's December 31, 2001 Form 10-K. 
The following table sets forth certain summarized financial information relating
to the closed block as of the dates indicated.                                  

                                                        [Enlarge/Download Table]

                                                                                            March 31,                       
                                                                                               2002           December 31,  
                                                                                           (unaudited)           2001       
                                                                                        ------------------------------------
                                                                                                   (in millions)            
                                                                                                                            
Liabilities                                                                                                                 
Future policy benefits.................................................................      $10,273.8         $10,198.7    
Policyholder dividend obligation.......................................................          153.1             251.2    
Policyholders' funds...................................................................        1,474.8           1,460.9    
Policyholder dividends payable.........................................................          436.2             433.4    
Other closed block liabilities.........................................................           71.8              53.7    
                                                                                        ------------------------------------
   Total closed block liabilities......................................................       12,409.7          12,397.9    
                                                                                        ------------------------------------

Assets                                                                                                                      
Investments                                                                                                                 
Fixed maturities:                                                                                                           
   Held-to-maturity--at amortized cost                                                                                      
     (fair value: March 31--$102.0; December 31--$100.7)...............................           98.4             103.3    
   Available-for-sale--at fair value                                                                                        
     (cost: March 31--$5,358.8; December 31--$5,204.0).................................        5,408.8           5,320.7    
Equity securities:                                                                                                          
   Available-for-sale--at fair value                                                                                        
     (cost: March 31--$10.6; December 31--$8.8)........................................           15.6              13.4    
Mortgage loans on real estate..........................................................        1,852.5           1,837.0    
Policy loans...........................................................................        1,551.9           1,551.9    
Other invested assets..................................................................          104.4              83.1    
                                                                                        ------------------------------------
   Total investments...................................................................        9,031.6           8,909.4    

Cash and cash equivalents..............................................................          103.6             192.1    
Accrued investment income..............................................................          156.7             158.9    
Other closed block assets..............................................................          303.2             297.5    
                                                                                        ------------------------------------
   Total closed block assets...........................................................        9,595.1           9,557.9    
                                                                                        ------------------------------------

Excess of reported closed block liabilities over assets                                                                     
   designated to the closed block......................................................        2,814.6           2,840.0    
                                                                                        ------------------------------------

Portion of above representing other comprehensive income:                                                                   
   Unrealized appreciation (depreciation), net of tax of $19.0                                                              
     million and $43.3 million at March 31 and December 31,                                                                 
     respectively......................................................................           35.3              80.1    
   Allocated to the policyholder dividend obligation, net of tax of                                                         
     $26.1 million and $50.8 million at March 31 and December 31,                                                           
     respectively......................................................................          (48.4)            (94.4)   
                                                                                        ------------------------------------
       Total...........................................................................          (13.1)            (14.3)   
                                                                                        ------------------------------------

Maximum future earnings to be recognized from closed block                                                                  
   assets and liabilities..............................................................       $2,801.5        $  2,825.7    
                                                                                        ====================================

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 - Closed Block - (Continued)                                             

                                                        [Enlarge/Download Table]

                                                                                            March 31,                       
                                                                                               2002           December 31,  
                                                                                           (unaudited)           2001       
                                                                                        ------------------------------------
                                                                                                   (in millions)            
                                                                                                                            
Change in the policyholder dividend obligation:                                                                             
   Balance at beginning of period......................................................      $251.2            $  77.0      
     Impact on net income before income taxes..........................................       (27.4)              42.5      
     Unrealized investment gains (losses)..............................................       (70.7)              67.1      
     Cumulative effect of change in accounting principle (1)...........................        --                 64.6      
                                                                                        ------------------------------------

   Balance at end of period............................................................      $153.1             $251.2      
                                                                                        ====================================

(1)  The cumulative effect of change in accounting principle represents the     
impact of transferring fixed maturities from held-to-maturity to      
available-for-sale as part of the adoption of SFAS No. 133 effective  
January 1, 2001.                                                      

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 4 -- Closed Block - (Continued)                                            

The following table sets forth certain summarized financial information relating
to the closed block for the period indicated:                                   

                                                        [Enlarge/Download Table]

                                                                                             Three Months Ended March 31,   
                                                                                                 2002             2001      
                                                                                        ------------------------------------
                                                                                                     (unaudited)            
                                                                                                                            
Revenues                                                                                                                    

   Premiums............................................................................         $236.4            $233.6    
   Net investment income...............................................................          166.5             169.0    
   Net realized investment and other gains (losses), net of amounts                                                         
     credited to the policyholder dividend obligation of $(6.4)                                                             
     million and $3.0 million, respectively............................................           (1.2)             (1.4)   
   Other closed block revenues.........................................................           --                 0.3    
                                                                                        ------------------------------------
     Total closed block revenues.......................................................          401.7             401.5    

Benefits and Expenses                                                                                                       

   Benefits to policyholders...........................................................          258.4             253.6    
   Change in the policyholder dividend                                                                                      
     obligation........................................................................          (18.0)              1.7    
   Other closed block operating                                                                                             
     costs and expenses................................................................           (1.5)             (2.3)   
   Dividends to policyholders..........................................................          126.0             109.8    
                                                                                        ------------------------------------
     Total benefits and expenses.......................................................          364.9             362.8    
                                                                                        ------------------------------------

   Closed block revenues, net of closed block benefits and                                                                  
     expenses, before income taxes and cumulative                                                                           
     effect of accounting change.......................................................           36.8              38.7    
   Income taxes, net of amounts credited to the policyholder                                                                
     dividend obligation of $(3.0) million and $(1.1) million,                                                              
     respectively......................................................................           12.5              13.1    
                                                                                        ------------------------------------
     Closed block revenues, net of closed block benefits and expenses,                                                      
       income taxes before the  cumulative effect of accounting change.................           24.3              25.6    
                                                                                        ------------------------------------
     Cumulative effect of accounting change, net of tax, and net of amounts                                                 
       credited to policy holder dividend obligation of $(1.4) million for 2001........           --                --      
     Closed block revenues, net of closed block benefits and expenses,                                                      
       income taxes and the cumulative effect of accounting change.....................          $24.3             $25.6    
                                                                                        ====================================

Note 5 -- Related Party Transactions                                            

Certain directors of the Company are members or directors of other entities that
periodically perform services for or have other transactions with Company. Such 
transactions are either subject to bidding procedures or are otherwise entered  
into on terms comparable to those that would be available to unrelated third    
parties and are not material to the Company's results of operations or financial
condition.                                                                      

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 - Goodwill and Value of Business Acquired                                

The Company recognizes two purchased intangible assets. The present value of    
estimated future profits of insurance policies in force related to businesses   
acquired is recorded as the value of business acquired (VOBA). The excess of the
cost over the fair value of identifiable assets (including VOBA) acquired in    
business combinations, is recorded as goodwill.                                 

The following tables set forth certain summarized financial information relating
to goodwill and VOBA as of the dates and periods indicated (all amounts are in  
millions except per-share amounts).                                             

                                                        [Enlarge/Download Table]

                                                                      Gross Carrying     Accumulated      Net Carrying
                                                                          Amount         Amortization        Amount   
                                                                      ------------------------------------------------
                                                                                                                      
March 31, 2002                                                                                                        
Amortizable intangible assets:                                                                                        
   VOBA..............................................................      $442.5          $ (50.0)           $392.5  
Unamortizable intangible assets:                                                                                      
   Goodwill..........................................................      $345.7          $ (72.9)           $272.8  

March 31, 2001                                                                                                        
Amortizable intangible assets:                                                                                        
   VOBA..............................................................      $358.7          $ (29.2)           $329.5  
Unamortizable intangible assets:                                                                                      
   Goodwill..........................................................      $282.6          $ (62.1)           $220.5  

                                                        [Enlarge/Download Table]

                                                                        Three Months Ended 
Amortization expense                                                         March 31,     
                                                                         2002        2001  
                                                                      ---------------------

                                                                                           
VOBA, net of tax of $0.4 and  $(0.1), respectively...................   $ 0.6       $ (0.4)

Goodwill, net of tax of $ -- , and  $0.9, respectively...............     --        $  3.1 

                                                        [Enlarge/Download Table]

Estimated future amortization expense for the years ended                                         
  December 31,                                                         Tax Effect     Net Expense 
                                                                      ----------------------------

                                                                                                  
2002.................................................................     $ 1.7          $ 3.2    

2003.................................................................       2.2            4.1    

2004.................................................................       2.3            4.2    

2005.................................................................       2.4            4.4    

2006.................................................................       2.6            4.8    

2007.................................................................       2.8            5.1    

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 - Goodwill and Value of Business Acquired - (Continued)                  

The changes in the carrying value of VOBA, presented for each business segment, 
for the three months ended March 31, 2002 are as follows:                       

                                                        [Enlarge/Download Table]

                                                     Asset                       Investment      Corporate                      
                                     Protection    Gathering        G&SFP        Management      and Other       Consolidated   
                                     -------------------------------------------------------------------------------------------

                                                                                                                                
Balance at January 1, 2002..........     $145.2             --             --             --           $245.6            $390.8 
Amortization........................       (1.2)            --             --             --              0.2              (1.0)
Adjustment to unrealized                                                                                                        
  gains on securities                                                                                                           
  available-for-sale................        1.4             --             --             --              1.9               3.3 
Foreign currency translation                                                                                                    
  adjustment (1)....................         --             --             --             --             (0.6)             (0.6)
                                     -------------------------------------------------------------------------------------------
Balance at March 31, 2002 ..........     $145.4             --             --             --           $247.1            $392.5 
                                     ===========================================================================================

(1)   VOBA related to Maritime is subject to fluctuations in the value of the   
Canadian Dollar relative to the US Dollar.                          

The changes in the carrying value of goodwill, presented for each business      
segment, for the three months ended March 31, 2002 are as follows:              

                                                        [Enlarge/Download Table]

                                                     Asset                       Investment      Corporate                      
                                     Protection    Gathering        G&SFP        Management      and Other       Consolidated   
                                     -------------------------------------------------------------------------------------------

                                                                                                                                
Balance at January 1, 2002..........     $ 73.5         $ 42.1             --          $ 0.4          $ 164.0           $ 280.0 
Goodwill acquired during the                                                                                                    
  period (1)........................         --             --             --             --              0.5               0.5 
Foreign currency translation                                                                                                    
  adjustment (2)....................         --             --             --             --             (0.4)             (0.4)
Other adjustments (3)...............       (7.3)            --             --             --               --              (7.3)
                                     -------------------------------------------------------------------------------------------
Balance at March 31, 2002...........     $ 66.2         $ 42.1             --          $ 0.4          $ 164.1           $ 272.8 
                                     ===========================================================================================

(1)   Purchase price adjustments relating to the RSAF acquisition resulted in an
adjustment to the goodwill relating to RSAF of $0.5 million.        
(2)   Goodwill related to Maritime is subject to fluctuations in the value of   
the Canadian Dollar relative to the US Dollar.                      
(3)   Purchase price negotiations with Fortis, Inc. were concluded during the   
      first quarter of 2002, resulting in an adjustment of $(7.3) million to the
   goodwill related to the Company's 1999 acquisition of Fortis' long term
care business.                                                      

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 - Goodwill and Value of Business Acquired - (Continued)                  

The net income of the Company, if the Company had not amortized goodwill prior  
to the adoption of SFAS No. 142, would have been as follows:                    

                                                          Three Months Ended
                                                             March 31,
                                                          2002        2001
                                                          ----------------------
Net income:                                                                     

As reported.............................................     $146.5      $168.0 
Goodwill amortization...................................         --         3.1 
                                                          ----------------------
Proforma (unaudited)....................................     $146.5      $171.1 
                                                          ======================

Basic earnings per share:                                                       
As reported.............................................     $ 0.49      $ 0.54 
Goodwill amortization...................................         --        0.01 
                                                          ----------------------
Proforma (unaudited)....................................     $ 0.49      $ 0.55 
                                                          ======================

Diluted earnings per share:                                                     
As reported.............................................     $ 0.49      $ 0.54 
Goodwill amortization...................................         --        0.01 
                                                          ----------------------
Proforma (unaudited)....................................     $ 0.49      $ 0.55 
                                                          ======================

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 2. MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and         
RESULTS of OPERATIONS                                           

      Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of John Hancock Financial   
Services, Inc. (John Hancock, JHFS or the Company) as of March 31, 2002,        
compared with December 31, 2001, and its consolidated results of operations for 
the three-month periods ended March 31, 2002 and March 31, 2001, and, where     
appropriate, factors that may affect future financial performance. This         
discussion should be read in conjunction with the Company's MD&A and annual     
audited financial statements as of December 31, 2001 included in the Company's  
Form 10-K for the year ended December 31, 2001 filed with the Securities and    
Exchange Commission (hereafter referred to as the Company's 2001 Form 10-K) and 
unaudited consolidated financial statements and related notes included elsewhere
in this Form 10-Q.                                                              

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

Critical Accounting Policies                                                    

General                                                             

We have identified the accounting policies below as critical to our 
business operations and understanding of our results of operations. For a       
detailed discussion of the application of these and other accounting policies,  
see Note 1 -- Summary of Significant Accounting Policies in the notes to        
consolidated financial statements of the Company's 2001 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 and Management's Discussion and Analysis.                            

Amortization of Deferred Acquisition Costs                          

  We amortize deferred acquisition costs on term life and long-term care
insurance ratably with premiums. We amortize our deferred policy acquisition    
costs on our annuity products and retail life insurance, other than term, based 
on a percentage of the estimated gross profits over the life of the policies,   
which are generally twenty years for annuities and thirty years for life        
policies. Our estimated gross profits are computed based on assumptions related 
to the underlying policies including mortality, lapse, expenses, and asset      
growth rates. We amortize deferred acquisition costs such that the percentage of
gross profits to the amount of deferred acquisition costs 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 changes in the remaining gross profits. When estimated   
gross profits are adjusted, we also adjust the amortization of deferred         
acquisition costs to maintain a constant amortization percentage over the life  
of the policies. Our current estimated gross profits include certain judgments  
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.                           

Benefits to Policyholders                                           

 Reserves for future policy benefits are calculated using management's
judgments of mortality, morbidity, lapse, investment experience 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         
experience. Once these assumptions are made for a given policy or group of      
policies, they will not be changed over the life of the policy unless the       
Company recognizes a loss on the entire line of business. The Company           
periodically reviews its policies for loss recognition and based on management's

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

judgment the Company from time to time may recognize a loss on certain lines of 
business. Short-term variances of actual results from the judgments made by     
management are reflected in current period earnings and can impact quarter to   
quarter earnings.                                                               

Investment in Debt and Equity Securities                            

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

     Certain of our fixed income securities classified as held-to-maturity and
available-for-sale are not publicly traded, and quoted market prices are not    
available from brokers or investment bankers on these securities. The change in 
the fair value of the available-for-sale securities is recorded in other        
comprehensive income as an unrealized gain or loss. We calculate the fair value 
of these securities ourselves through the use of pricing models and discounted  
cash flows calling for a substantial level of management's judgment. See the    
discussion in the General Account Investments section of this document for a    
more detailed discussion of this process and the judgments used therein.        

Benefit Plans                                                       

    The Company annually reviews its pension and other employee benefit plan
assumptions concerning the discount rate and the long-term growth rate on plan  
assets and expected rate of compensation increase. The discount rate is         
generally set as an average of the prior year's discount rate and current year  
December daily average of long-term corporate bond yields, as published by      
Moody's Investor Services less a 5% allowance for expenses and default. The     
long-term rate on plan assets reflects the long-term rate expected to be earned 
based on the investment policy and the various classes of the invested funds.   
The compensation rate increase is the average of the expected rates of          
compensation increase, which are based on current and expected long-term salary 
and compensation policy. Any variation of actual results from management's      
judgments may result in future earnings being materially different than         
anticipated.                                                                    

Income Taxes                                                        

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

Economic Trends                                                                 

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

    Premiums and deposits of our individual annuity products increased 87.0%
to $925.6 million for the three months ended March 31, 2002 from the comparable 
prior year period. Our variable life insurance product deposits for the three   
months ended March 31, 2001 decreased 9.8% to $158.7 million from the comparable
prior year period, primarily from reduced premiums in the corporate and bank    
owned life insurance products partially offset by growth in sales of single life
and term life insurance. Premiums on our long-term care insurance increased     
12.6%, to $176.6 million for the three months ended March 31, 2001 from the     
comparable prior year period, driven by renewal premiums in the individual long 
term care insurance business. Primarily due to the declining equity markets,    
mutual fund deposits and reinvestments decreased $617.8 million, or 41.2%, to   
$882.0 million for the three months ended March 31, 2002. In addition, the sale 
of the full service retirement plan business during 2001 contributed to the     
decrease in deposits in the current period. There were $232.5 million in        
deposits for the three months ended March 31, 2001, in the full service         
retirement plan business. In addition, redemptions decreased $51.8 million, or  
4.3%, to $1,154.2 million for the three months ended March 31, 2002, due to     
conservation initiatives. We have reduced operating expenses to protect profit  
margins as we work to stabilize and grow assets under management in the mutual  
funds business. However, our mutual fund operations are impacted by general     
market trends, and a continued downturn in the mutual fund market may negatively
affect our future operating results.                                            

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

Recent economic and industry trends also have affected the sales and
financial results of our institutional business. Sales of fund-type products    
increased $331.5 million, or 28.1%, to $1,510.2 million. The increase was driven
by increasing demand for funding agreements in the non-qualified institutional  
market, primarily Global Medium Term notes. Premiums from single premium annuity
contracts decreased to $1.6 million for the three months ended March 31, 2002   
from $355.3 million from the comparable prior year period, due to a 99.5%       
decrease in sales of single premium annuity contracts for the three months ended
March 31, 2002. Our investment management services provided to domestic and     
international institutions include services and products such as investment     
advisory client portfolios, individually managed and pooled separate accounts,  
registered investment company funds, bond and mortgage securitizations,         
collateralized bond obligation funds and mutual fund management capabilities.   
Assets under management of our Investment Management Segment decreased to       
$28,856.4 million for the three months ended March 31, 2002 from $29,048.4      
million for the comparable prior year period.                                   

Transaction Affecting Comparability of Results of Operations                    

    The acquisitions described below were recorded under the purchase method
of accounting and, accordingly, the operating results of the acquired operations
have been included in the Company's consolidated results of operations from the 
applicable date of acquisition. Each purchase price was allocated to the assets 
acquired and the liabilities assumed based on estimated fair values, with the   
excess of the applicable purchase price over the estimated fair values, if any, 
recorded as goodwill. These acquisitions were made by the Company in execution  
of its plan to acquire businesses that have strategic value, meet its earnings  
requirements and advance the growth of its current businesses. Assuming the     
transactions occurred on January 1, 2001, the unaudited pro forma revenues, net 
income and earnings per share, were $2,469.7 million, $168.3 million, and $0.54 
per share, respectively, an increase of $75.4 million, $0.3 million, and no     
change in per share amount, respectively, for the three months ended March 31,  
2001.                                                                           

      On October 1, 2001, Maritime Life Assurance Company (Maritime), a majority
owned Canadian subsidiary of the Company, completed its purchase of all of the  
shares of Royal & Sun Alliance Life Insurance Company of Canada (RSAF) for an   
amount of approximately $149.9 million. RSAF's business includes life insurance,
guaranteed interest savings and retirement products. The net income relating to 
the acquired operations included in the Company's results from January 1, 2002  
through March 31, 2002 was $1.2 million.                                        

   On April 2, 2001, a subsidiary of the Company, Signature Fruit Company,
LLC (Signature Fruit), purchased certain assets and assumed certain liabilities 
out of bankruptcy proceedings of Tri Valley Growers, Inc., a cooperative        
association, for approximately $53.0 million. The net income related to the     
acquired operations included in the Company's results from January 1, 2002      
through March 31, 2002 was $0.9 million.                                        

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

Results of Operations                                                           

   The table below presents the consolidated results of operations for the
periods presented.                                                              

                                                Three Months Ended
                                                 March 31,
                                                2002        2001
                                               ---------------------
                                               (in millions)
Revenues .........................................   $ 2,039.3   $ 2,394.3      

Benefits and expenses ............................     1,841.0     2,164.4      
                                               ---------------------

Income before income taxes and                                                  
cumulative effect of accounting                                           
changes........................................       198.3       229.9   

Income taxes......................................        51.8        69.1      
                                               ---------------------
Income before cumulative effect of                                              
accounting changes............................       146.5       160.8  
Cumulative effect of accounting changes,                                        
net of tax (1)................................          --         7.2  
                                               ---------------------

Net income........................................   $   146.5     $ 168.0      
                                               =====================

(1)   Cumulative effect of accounting changes is shown net of taxes of $4.2     
      million for the three months ended March 31, 2001. There was no cumulative
  effect of accounting change for the three months ended March 31, 2002.

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001 

   The following discussion reflects the adoption of Statement of Position
(SOP) 00-3, "Accounting by Insurance Enterprises for Demutualizations and       
Formation of Mutual Insurance Holding Companies and Certain Long-Duration       
Participating Contracts" for all periods presented. In addition, the Company    
reclassified gains and losses on equity securities classified as trading, which 
back the equity indexed universal life insurance policies sold at Maritime, from
net investment income to benefits to policyholders. Consolidated income before  
income taxes and cumulative effect of accounting changes of $198.3 million for  
the three months ended March 31, 2002 decreased by $31.6 million, or 13.7%,     
compared to $229.9 million for the three months ended March 31, 2001. Income    
before income taxes and cumulative effect of accounting changes decreased by    
$24.7 million in the Protection Segment, $9.7 million in the Corporate and Other
Segment, and $0.5 million in both the Asset Gathering Segment and the Investment
Management Segment. Partially offsetting these decreases was an increase of $3.8
million in the Guaranteed and Structured Financial Products Segment (G&SFP).    

  Revenues of $2,039.3 million for the three months ended March 31, 2002
decreased $355.0 million, or 14.8%, compared to the three months ended March 31,
2001, primarily due to a decline of $395.3 million, or 46.8%, in the G&SFP      
Segment, $43.7 million or, 14.8%, in the Asset Gathering Segment and $4.8       
million or, 13.5%, in the Investment Management Segment. Premiums decreased     
$353.3 million to $742.4 million for the three months ended March 31, 2002      
compared to $1,095.7 for the three months ended March 31, 2001. The decrease in 
premiums is primarily due to a decrease in premiums of $353.7 million, to $1.6  
million in the single premium annuity business of the G&SFP segment. This       
decrease is a result of lower sales of single premium annuities in the period.  
These sales fluctuate based on the number of large customers in the market      
during the period. The decrease to premiums is offset by a decrease in benefits 
to policyholders as mentioned below in the discussion of benefits and expenses. 
Net realized investment and other losses of $85.7 million for the three months  
ended March 31, 2002 increased $61.3 million from $24.4 million in the          
comparable prior year period. The $85.7 million in net realized investment and  
other losses in the current period, are net of $0.4 million in net realized     
investment and other losses allocated to participating pension contractholders  
and $6.4 million in net realized investment and other gains allocated to the    
policyholder dividend obligation. The change in net realized investment and     
other losses is primarily the result of impairments of $37.2 million in certain 
collateralized debt obligations (CDO), the impairment of $27.3 million in       
certain fixed income securities of the Argentina government and other           
investments in that country, and losses on derivative instruments totaling $10.9
million. Net investment income decreased $18.2 million to $969.9 million for the
three months ended March 31, 2002 from $988.1 million in the comparable prior   
year period, primarily resulting from the decrease in the G&SFP Segment due to  
the decline in the average investment yield on invested assets from 8.49% for   
the three months                                                                

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

ended March 31, 2001 to 6.58% for the three months ended March 31, 2002. This   
decline in yield is impacted by the fluctuation of the return on approximately  
$9 billion of the G&SFP Segment asset portfolio which floats with market rates. 
The portfolio float is designed to match the interest exposure on our asset     
portfolio to the exposure on our liabilities. Advisory fees decreased $9.9      
million to $141.3 million for the three months ended March 31, 2002, compared to
$151.2 million for the three months ended March 3, 2001. The decrease in fees   
was driven by a $0.6 billion decrease in assets under management in the mutual  
funds business, where a lower effective rate of asset based fees contributed to 
lower advisory fees. Advisory fees as percentage of assets under management,    
decreased due to a decline in retail assets under management and an increase in 
institutional assets under management as a percentage of total assets under     
management, as institutional assets are charged lower fees than retail assets.  
These decreases in revenues were partially offset by an increase in other       
revenue of $73.0 million to $77.0 million for the three months ended March 31,  
2002, from $4.0 million in the comparable prior year period. The increase is    
driven by the April 2001 acquisition of Signature Fruit in the Corporate and    
Other Segment. Revenue of $69.4 million attributed to Signature Fruit was       
included as other revenue in the Company's income statement. In addition,       
universal life and investment-type product charges increased $14.7 million to   
$194.4 million for the three months ended March 31, 2002 from $179.7 million for
the three months ended March 31, 2001, primarily driven by the Corporate and    
Other Segment due to an increase in sales resulting from the acquisition of     
Royal & Sun Life Insurance Company of Canada (RSAF), and an increase in fees on 
segregated funds, both of which contributed to growth at Maritime.              

      Benefits and expenses of $1,841.0 million for the three months ended March
31, 2002 decreased $323.4 million, or 14.9%, compared to the three months ended 
March 31, 2001. The decrease was driven by the decrease in benefits and expenses
of $399.1 million, or 51.8%, in the G&SFP Segment, $43.2 million, or 16.4%, in  
the Asset Gathering Segment and $4.3 million, or 15.8%, in the Investment       
Management Segment. Benefits to policyholders decreased $338.8 million, to      
$1,232.4 million for the three months ended March 31, 2002, from $1,571.2       
million in the comparable prior year period, primarily due to the decrease in   
premiums in the single premium annuity business in the G&SFP Segment. Premiums  
in the G&SFP segment decreased $359.7 million to $1.9 million, due to lower     
sales in the period, as mentioned above. In addition, interest credited         
decreased $54.6 million due to the reset on floating rate liabilities.          
Amortization of deferred policy acquisition costs decreased $32.6 million, to   
$70.3 million for the three months ended March 31, 2002 from $102.9 million for 
the three months ended March 31, 2001, primarily driven by decreased            
amortization at Maritime in the Corporate and Other Segment and decreased       
amortization of $13.8 million for the Protection Segment attributed to lower    
margins on the declining traditional life insurance business. Partially         
offsetting these decreases was a $40.1 million increase in other operating costs
and expenses to $393.2 million for the three months ended March 31, 2002, from  
$353.1 million in the comparable prior year period. The increase is driven by   
the April 2001 acquisition of Signature Fruit in the Corporate and Other        
Segment. Expenses of $63.8 million attributed to Signature Fruit were included  
in other operating costs and expenses as of March 31, 2002. Dividends to        
policyholders increased $7.9 million to $145.1 million for the three months     
ended March 31, 2002, from $137.2 in the comparable prior year period, primarily
due to increased dividends on traditional life insurance products in the        
Protection Segment.                                                             

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

Results of Operations by Segment                                                

  We operate our business in five segments. Two segments primarily serve
retail customers, two segments serve institutional customers and our fifth      
segment is the Corporate and Other Segment, which includes our international    
operations. Our retail segments are the Protection Segment and the Asset        
Gathering Segment. Our institutional segments are the Guaranteed and Structured 
Financial Products Segment and the Investment Management Segment.               

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

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

                                                              Three Months Ended
                                                               March 31,
                                                           2002       2001
                                                             -------------------
Segment Data: (1)                                               (in millions)   
Segment after-tax operating income:                                             
  Protection Segment.....................................   $  72.8    $  72.9
  Asset Gathering Segment................................      40.0       31.5
                                                             -------------------
    Total Retail Segments................................     112.8      104.4

Guaranteed and Structured Financial Products                              
    Segment..............................................      66.9       59.0
  Investment Management Segment..........................       4.9        5.4
                                                             -------------------
    Total Institutional Segments.........................      71.8       64.4

  Corporate and Other Segment............................      18.2       21.9
                                                             -------------------
  Total segment after-tax operating income...............     202.8      190.7

After-tax adjustments: (1)                                                      
   Net realized investment and other gains (losses).......     (52.7)     (14.9)
   Restructuring charges..................................      (3.6)     (15.0)
                                                             -------------------
     Total after-tax adjustments..........................     (56.3)     (29.9)

GAAP Reported:                                                                  
Income before cumulative effect                                           
    of accounting changes................................     146.5      160.8
  Cumulative effect of accounting changes, net of tax....      --          7.2
                                                             -------------------
  Net income.............................................   $ 146.5    $ 168.0
                                                             ===================

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

Adjustments to GAAP Reported Net Income                                         

   Our GAAP reported net income was significantly affected by net realized
investment and other gains and losses and unusual or non-recurring events and   
transactions presented in the reconciliation of GAAP reported net income to     
segment after-tax operating income in Note 2 -- Segment Information in the notes
to the unaudited consolidated financial statements. A description of these      
adjustments follows.                                                            

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

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

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

                                                        [Enlarge/Download Table]

                                                                  Three Months Ended  
                                                                      March 31,       
                                                                     2002      2001   
                                                                 ---------------------
                                                                     (in millions)    

                                                                                      
Net realized investment and other gains (losses) ...............  $(106.7)   $(20.6)  
Add amortization of deferred policy acquisition costs related                         
   to net realized investment and other gains (losses) .........     14.2       0.1   
Add (less) amounts credited  to participating pension                                 
    contract holder accounts ...................................      0.4      (2.3)  
Add amounts credited to the policyholder dividend                                     
    obligation .................................................      6.4      (1.6)  
                                                                 ---------------------
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 per unaudited                             
   consolidated financial statements ...........................    (85.7)    (24.4)  
Add net realized investment and other gains (losses)                                  
   attributable to mortgage securitizations and mezzanine                             
   funds .......................................................      0.8      (2.7)  
                                                                 ---------------------
Net realized investment and other gains (losses) -  pre-tax ....    (84.9)    (27.1)  
   adjustment to calculate segment operating income                                   
Less income tax effect .........................................     32.2      12.1   
                                                                 ---------------------
Netrealized investment and other gains (losses) - after-tax                           
   adjustment to calculate segment operating income ............  $ (52.7)   $(14.9)  
                                                                 =====================

    The Company incurred after-tax restructuring charges to reduce costs and
increase future operating efficiency by consolidating portions of our           
operations. Additional information regarding restructuring costs is included in 
Note 1 -- Summary of Significant Accounting Policies in the notes to the        
unaudited consolidated financial statements. After-tax restructuring costs net  
of related curtailment pension and other post employment benefit related gains, 
were $3.6 million for the three months ended March 31, 2002 and $15.0 million   
for the three months ended March 31, 2001, which included $9.0 million from the 
sale of our full service retirement plan business.                              

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

Protection Segment                                                              

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

                                                          Three Months Ended
                                                           March 31,
                                                        2002      2001
                                                         ---------------------
                                                         (in millions)

Revenues ...............................................    $859.7     $834.9   

Benefits and expenses (2)...............................     749.7      722.6   

Income taxes (2)........................................      37.2       39.4   
                                                         ---------------------

Segment after-tax operating income (1) (2)..............      72.8       72.9   
                                                         ---------------------

After-tax adjustments: (1)                                                      
Net realized investment and other gains                                   
   (losses) (2).......................................     (18.7)      (5.6)
 Restructuring charges................................      (3.2)      (1.2)
                                                         ---------------------
Total after-tax adjustments (2)........................     (21.9)      (6.8) 
                                                         ---------------------

GAAP Reported:                                                                  
Income before cumulative effect                                                 
of accounting changes (2)............................      50.9       66.1
Cumulative effect of accounting                                                 
changes, net of tax..................................      --         11.7
                                                         ---------------------
Net income (2)..........................................    $ 50.9     $ 77.8   
                                                         =====================

Other Data:                                                                     
Segment after-tax operating income: (1)                                         
Traditional life.....................................    $ 29.3     $ 25.8
Non-traditional life (variable and universal life)...      26.9       31.1
Long-term care.......................................      16.8       18.0
 Other................................................      (0.2)      (2.0)
                                                         ---------------------
Segment after-tax operating income (1)...............    $ 72.8     $ 72.9
                                                         =====================

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

(2)   Certain 2001 amounts were adjusted for the adoption of the provisions of  
  SOP 00-3, "Accounting by Insurance Enterprises for Demutualization and
      Formations of Mutual Insurance Holding Companies and Certain Long-Duration
    Participating Contracts" as outlined in Note 1 -- Summary of Significant
    Accounting Policies in the notes to the unaudited consolidated financial
statements.                                                         

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001 

     Segment after-tax operating income was $72.8 million for the three months
ended March 31, 2002, a $0.1 million decrease from $72.9 million for the three  
months ended March 31, 2001. Traditional life insurance business after-tax      
operating income increased $3.5 million, or 13.6%, primarily resulting from     
lower operating and amortization expenses of $16.6 million, partially offset by 
lower net investment income of $5.5 million on lower portfolio yields, which    
were down 31 basis points from March 31, 2001. Non-traditional life insurance   
business after-tax operating income decreased $4.2 million, or 13.5%, primarily 
due to adverse mortality of $9.4 million on a small number of large face amount 
policies, partially offset higher fee income of $6.3 million. Long-term care    
insurance business after-tax operating income decreased $1.2 million, or 6.7%,  
resulting from increased operating expenses of $2.9 million and a slight        
increase in group claim experience, which were partially offset by the growth of
this business as premiums increased $19.8 million.                              

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      Revenues were $859.7 million for the three months ended March 31, 2002, an
increase of $24.8 million, or 3.0%, from $834.9 million for the three months    
ended March 31, 2001. Premiums increased $13.9 million, or 3.4%, primarily due  
to long-term care insurance premiums, which increased $19.8 million, or 12.6%,  
driven by continued growth overall in the business. Long-term care policies have
increased from 493,717 at March 31, 2001 to 555,771 at March 31, 2002. Partially
offsetting this increase was a decline in traditional life insurance premiums of
$5.8 million, or 2.2%, driven by the continued trend away from whole life       
insurance products, which represented only 2.4% of total life sales for the     
quarter, compared to 4.5% a year ago. Universal life and investment-type product
charges were $108.3 million for the three months ended March 31, 2002, an       
increase of $6.3 million, or 6.2%, from $102.0 million for the three months     
ended March 31, 2001. This increase was due primarily to the variable life      
insurance products, which increased by $5.9 million, or 7.1%, from the          
comparable prior year period driven by a 4.1% increase in average account value.
Segment net investment income increased $8.1 million, or 2.6%, primarily due to 
a 9.1% increase in average asset balances, partially offset by a 49 basis point 
decrease in yields.                                                             

      Benefits and expenses were $749.7 million for the three months ended March
31, 2002, an increase of $27.1 million, or 3.8%, from $722.6 million for the    
three months ended March 31, 2001. Benefits to policyholders increased $29.4    
million, or 6.3%, due primarily to growth in long-term insurance care business. 
Long-term care insurance business benefits and expenses increased primarily due 
to additions to reserves for premium growth and higher claim volume on growth of
the business during the period. Long-term care insurance business average       
reserves increased from $1,827.1 million to $2,312.3 million and open claims    
increased from 3,892 to 4,724. The non-traditional life insurance business had  
an increase in benefits of $24.7 million, which was driven primarily by an      
increase in number of claims on policies over $1 million, resulting in an       
increase of $16.3 million for death claims paid less reserves released and      
reinsurance ceded. Partially offsetting this increase was a decrease in benefits
to policyholders on the traditional life insurance line of business due to a    
decrease in the policyholder dividend obligation of $18.0 million, resulting    
from actual closed block earnings below that projected at the date of           
demutualization. Other operating costs and expenses decreased $4.9 million, or  
5.4%, primarily due to a decrease of $5.4 million in operating expenses on      
non-traditional life insurance products mainly attributable to lower commissions
resulting from a change in the product mix of new business. Dividends to        
policyholders increased $15.5 million, or 13.4%, primarily due to increased     
dividends of $16.1 million on traditional life insurance products within the    
closed block, due to both an increase in the dividend scale and normal aging of 
the policies. Amortization of deferred policy acquisition costs decreased $12.9 
million, or 24.8%, primarily due to a decrease in the traditional life insurance
business line, of $13.9 million, due to lower margins on the declining business.
The Segment's effective tax rate on operating income was 33.8% and 35.1% for the
three months ended March 31, 2002 and 2001, respectively. The decrease was      
primarily due to affordable housing investment tax credits, deductions for      
general account dividends received on common stock investments and first quarter
2001 corporate-owned life insurance.                                            

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

Asset Gathering Segment                                                         

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

                                                          Three Months Ended
                                                         March 31,
                                                          2002        2001
                                                           ---------------------
                                                         (in millions)

Revenues ................................................   $ 275.8    $ 288.9  

Benefits and expenses....................................     217.3      242.0  

Income taxes.............................................      18.5       15.4  
                                                           ---------------------
Segment after-tax operating income (1)...................      40.0       31.5  
                                                           ---------------------

After-tax adjustments: (1)                                                      
   Net realized investment and other gains (losses)....     (14.8)       4.6
    Restructuring charges...............................      (1.4)     (13.2)
                                                           ---------------------
Total after-tax adjustments..............................     (16.2)      (8.6) 
                                                           ---------------------

GAAP Reported:                                                                  
Income before cumulative effect of                                              
   accounting changes..................................      23.8       22.9
Cumulative effect of accounting changes, net of tax......      --         (0.5) 
                                                           ---------------------
Net income                                                   $ 23.8     $ 22.4  
                                                           =====================

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

Three Months Ended March 31, 2002 Compared to Three months Ended March 31, 2001 

     Segment after-tax operating income was $40.0 million for the three months
ended March 31, 2002, an increase of $8.5 million, or 27.0%, from $31.5 million 
reported in the comparable prior year period. Annuity business after-tax        
operating income was $24.9 million for the three months ended March 31, 2002, an
increase of $4.7 million, or 23.3%, due to an increase in variable annuity      
after-tax operating income of $3.0 million, or 69.8%, and an increase in fixed  
annuity after-tax operating income of $1.7 million, or 10.7%. Signature Services
after-tax operating income increased $2.6 million, or 152.9% driven by an       
increase in transfer agency fees of $5.4 million, from the same period in 2001. 
Signator, the Company's distribution company, had after-tax operating income of 
$0.4 million, an increase of $2.3 million. The increase was primarily due to an 
increase in commission revenue of $4.3 million or 111.9% from the prior year    
period. Mutual funds after-tax operating income decreased $2.0 million, or      
13.9%, primarily due to lower management advisory fees that decreased $12.7     
million, or 13.2%, partially offset by a decline in operating expenses of $11.1 
million.                                                                        

     Revenues were $275.8 million for the three months ended March 31, 2002, a
decrease of $13.1 million, or 4.5%, from $288.9 million reported for the        
comparable prior year period. The decreased revenue was due to a $16.7 million, 
or 79.1% decline in life-contingent immediate fixed annuity premiums. Net       
investment income was $130.5 million for the three months ended March 31, 2002, 
an increase of $10.7 million, or 8.9%, from $119.8 million reported in the      
comparable prior year period. Net investment income increased primarily due to  
increases in invested assets backing fixed annuity products, partially offset by
lower earned yields in the portfolio. Average invested assets increased 22.0% to
$7,172.2 million while the average investment yield decreased 82 basis points.  
Investment-type product charges decreased $2.6 million, or 7.9%, due to a       
decline in the average variable annuity reserves, which decreased $497.1        
million, or 7.3%, to $6,283.4 million for the three months ended March 31, 2002 
from $6,780.5 million reported in the comparable prior year period. This        
decrease is primarily due to approximately $814.8 million withdrawals and       
surrenders, during the year ended December 31, 2001. Withdrawals and surrenders 
decreased by $9.9 million, or 4.3%, for the three months ended March 31, 2002   
compared to the comparable prior year period. For variable annuities, the       
mortality and expense fees as a percentage of average account balances were     
1.26% and 1.29% for the three months ended March 31, 2002 and 2001,             
respectively. In addition, other revenue increased $0.7 million driven by the   
mutual fund business.                                                           

   Investment management revenues, commissions, and other fees were $110.1
million for the three months ended March 31, 2002, a decrease of $5.2 million,  
or 4.5%, from $115.3 million for the comparable prior year period. Average      
mutual fund assets under management were $29,034.8 million for the three months 
ended March 31, 2002, a decrease of $1,525.5 million                            

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or 5.0%, from $30,560.3 million reported in the comparable prior year period,   
due to market depreciation of approximately $2.6 billion for the year ended     
December 31, 2001. The mutual fund business experienced net redemptions for the 
three months ended March 31, 2002 of $317.6 million compared to net deposits of 
$260.6 million in the comparable prior year period, a change of $578.2 million. 
This change was primarily due to a decrease in deposits of $617.8 million, or   
41.2%, driven by a $247 million institutional advisory account deposit in the   
prior year period. No such deposits were received for the three months ended    
March 31, 2002. In addition, the sale of the full service retirement plan       
business during 2001 contributed to the decrease in deposits in the current     
period. There were $232.5 million in deposits for the three months ended March  
31, 2001, in the full service retirement plan business. Investment advisory fees
were $41.3 million for the three months ended March 31, 2002, a decrease of $4.8
million, or 10.4%, from $46.1 million reported in the comparable prior year     
period and were 0.57% and 0.60% of average mutual fund assets under management  
for the three months ended March 31, 2002 and 2001, respectively. Underwriting  
and distribution fees decreased $1.1 million, or 1.9%, to $57.9 million for the 
three months ended March 31, 2002, primarily due to a decrease in front end load
charge on mutual fund sales. The decrease was partially offset by a $2.1 million
increase in distribution and other fees. Shareholder service and other fees were
$11.0 million for the three months ended March 31, 2002 compared to $10.2       
million reported in the comparable prior year period.                           

      Benefits and expenses decreased $24.7 million, or 10.2%, to $217.3 million
for the three months ended March 31, 2002 from $242.0 million reported in the   
comparable prior year period. Benefits to policyholders decreased $6.0 million, 
or 5.7%, primarily due to lower life-contingent immediate fixed annuity reserve 
provision on new business, which contributed $15.5 million to the decrease,     
partially offset by a $8.2 million increase in interest credited on retail      
annuity account balances due to higher average account balances. Other operating
costs and expenses decreased $16.9 million, or 14.9%, to $96.2 million for the  
three months ended March 31, 2002 from $113.1 million reported in the comparable
prior year period. The decrease was primarily due to cost savings in the mutual 
fund business, and the sale of the full service retirement plan business, which 
had $5.1 million in other operating costs and expense for the three months ended
March 31, 2001. Company wide cost reduction programs also drove the decline in  
total expense. Amortization of deferred policy acquisition costs decreased $1.8 
million, or 7.7%, to $21.6 million for the three months ended March 31, 2002    
from $23.4 million reported in the comparable prior year period. The decrease   
was primarily driven by lower variable annuity amortization of deferred policy  
acquisition costs, of $4.7 million, partially offset by higher amortization of  
$2.9 million in the fixed annuities business. The Segment's effective tax rate  
on operating income was 31.6% and 32.8% for the three months ended March 31,    
2002 and 2001, respectively.                                                    

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

Guaranteed and Structured Financial Products Segment                            

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

                                                        Three Months Ended
                                                         March 31,
                                                        2002      2001
                                                         ---------------------
                                                         (in millions)
Revenues ...............................................   $ 471.3    $ 859.3   

Benefits and expenses...................................     371.1      770.7   

Income taxes............................................      33.3       29.6   
                                                         ---------------------

Segment after-tax operating income (1)..................      66.9       59.0   
                                                         ---------------------

After-tax adjustments: (1)                                                      
Net realized investment and other gains                                   
   (losses)...........................................     (13.7)      (8.2)
 Restructuring charges................................      (0.3)      (0.1)
                                                         ---------------------
Total after-tax adjustments.............................     (14.0)      (8.3)  
                                                         ---------------------

GAAP Reported:                                                                  
Income before cumulative effect of                                              
accounting changes...................................      52.9       50.7
Cumulative effect of accounting                                                 
 changes, net of tax..................................      --         (1.2)
                                                         ---------------------
Net income..............................................   $  52.9    $  49.5   
                                                         =====================

Other Data:                                                                     
Segment after-tax operating income: (1)                                         
Spread-based products:                                                    
  GICs and funding agreements........................   $  45.3    $  40.0
  Single premium annuities...........................      15.8       12.3
Fee-based products...................................       5.8        6.7
                                                         ---------------------
Segment after-tax operating income (1)..................   $  66.9    $  59.0   
                                                         =====================

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

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001 

     Segment after-tax operating income was $66.9 million for the three months
ended March 31, 2002, an increase of $7.9 million, or 13.4%, from $59.0 million 
reported in the comparable prior year period. Spread-based products after-tax   
operating income was $61.1 million, an increase of $8.8 million, or 16.8%, from 
$52.3 million reported in the comparable prior year period, primarily due to a  
$14.6 million increase in investment spreads to $98.8 million for the three     
months ended March 31, 2002 from $84.2 million in the comparable prior year     
period. The increase in investment spread was a result of a higher average      
invested asset base, which increased $3.1 billion to $23.0 billion over the     
comparable period in the prior year, combined with a 4 basis point increase in  
interest rate margin. GICs and funding agreements accounted for 67.7% of segment
after-tax operating income for the three months ended March 31, 2002 compared to
67.8% in the comparable prior year period. On a total company basis, GICs and   
funding agreements accounted for 22.3% of after-tax operating income for the    
three months ended March 31, 2002 compared to 21.0% in the comparable prior year
period. Fee-based products after-tax operating income was $5.8 million, a       
decrease of $0.9 million, or 13.4%, from $6.7 million reported in the comparable
prior year period, primarily due to lower risk-based capital and lower separate 
account risk charges from the comparable prior year period.                     

  Revenues decreased $388.0 million, or 45.2%, to $471.3 million for the
three months ended March 31, 2002 from $859.3 million reported in the comparable
prior year period, largely due to a $338.2 million decrease in premiums.        
Premiums on                                                                     

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single premium annuities declined $353.7 million, or 99.5%, to $1.6 million for 
the three months ended March 31, 2002, from $355.3 million in the comparable    
prior year period. Premiums fell as sales of single premium annuities were down 
$359.7 million, or 99.5%, to $1.9 million, compared with sales of $361.6 million
in the comparable period in the prior year. Investment-type product charges were
$11.4 million for the three months ended March 31, 2002, a decrease of $3.6     
million, or 24.0%, from $15.0 million for the comparable prior year period,     
primarily due to lower expense recoveries from participating contracts.         
Investment-type product charges were 0.51% and 0.52% of average fee-based policy
reserves for the three months ended March 31, 2002 and 2001, respectively.      
Despite growth in the spread-based average invested assets, declining interest  
rates caused net investment income to decrease $46.4 million, or 9.9%, for the  
three months ended March 31, 2002 compared to the prior year period. The average
investment yield on these invested assets decreased to 6.58% for the three      
months ended March 31, 2002 compared to 8.49% reported in the prior year period,
reflecting the lower interest rate environment in the current period. Net       
investment income will vary with market interest rates as the return on         
approximately $9 billion of the asset portfolio floats with market rates.       
Matching the interest rate exposure on our asset portfolio to the exposure on   
our liabilities is a central feature of our asset/liability management process. 

Benefits and expenses decreased $399.6 million, or 51.8%, to $371.1 
million for the three months ended March 31, 2002 from $770.7 million reported  
in the comparable prior year period. The decrease was largely due to lower      
benefits to policyholders. Benefits to policyholders decreased $402.0 million   
primarily due to a decrease in sales of single premium annuity contracts        
combined with lower interest credited on account balances for spread-based      
products. Interest credited was $265.2 million for the three months ended March 
31, 2002, a decrease of $54.6 million, or 17.1%, from $319.8 million reported in
the comparable prior year period. The decrease in interest credited was due to a
decrease in the average interest credited rate on account balances for          
spread-based products, as liabilities with floating rates reset and new business
was added at market rates. The average crediting rate was 5.13% for the three   
months ended March 31, 2002 compared to 7.08% reported in the prior year period.
Partially offsetting the decrease in benefits to policyholders was an increase  
in other operating costs and expenses of $2.6 million, or 21.0%, to $15.0       
million, for the three months ended March 31, 2002, from $12.4 million reported 
in the comparable prior year period. The increase was primarily due to an       
increase in corporate communication costs, up $2.0 million, and state taxes,    
licenses and fees, up $0.6 million. Dividends to contractholders for each of the
three month periods ended March 31, 2002 and 2001 were $8.8 million,            
respectively. The Segment's effective tax rate on operating income was 33.2% and
33.4% for the three months ended March 31, 2002 and 2001, respectively.         

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

Investment Management Segment                                                   

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

                                                            Three Months Ended
                                                             March 31,
                                                         2002     2001
                                                           -------------------
                                                           (in millions)

Revenues .................................................   $ 30.6    $ 35.6   

Benefits and expenses.....................................     22.9      26.5   

Income taxes..............................................      2.8       3.7   
                                                           -------------------

Segment after-tax operating income (1)....................      4.9       5.4   
                                                           -------------------

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

GAAP Reported:                                                                  
Income before cumulative effect of                                              
accounting changes.....................................      4.9       4.9
Cumulative effect of accounting changes, net of tax.......       --      (0.2)  
                                                           -------------------
Net income................................................    $ 4.9     $ 4.7   
                                                           ===================

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

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001 

    Segment after-tax operating income was $4.9 million for the three months
ended March 31, 2002, a decrease of $0.5 million, or 9.3%, from $5.4 million    
reported in the comparable prior year period. The decrease was primarily due to 
after-tax changes of $2.2 million lower net realized investment and other gains 
(losses) on mortgage securitizations and $1.0 million lower net investment      
income, partially offset by $2.8 million lower operating expenses.              

     Revenues decreased $5.0 million, or 14.0%, to $30.6 million for the three
months ended March 31, 2002 from $35.6 million reported in the comparable prior 
year period. Net realized investment and other gains (losses) on mortgage       
securitizations decreased to a loss of $(0.8) from a gain of $2.6 million in the
comparable prior year period, a decline of $3.4 million. The decrease in        
securitization gains was due to lower securitization activity of $148.0 million 
in 2002 compared to $214.0 million in the comparable prior year quarter, and    
lower prices received from the securitizations. The Company's mortgage          
securitization activity was still profitable during the period, considering the 
interest income on warehoused loans, and reduced interest expense on borrowings 
to support those loans, as discussed below. Also, net investment income         
decreased $1.5 million, or 27.3%, to $4.0 million from the prior year period,   
primarily due to $1.7 million lower interest income from a lower level of       
warehoused mortgage loans. Investment management revenues, commissions, and     
other fees decreased $0.1 million, or 0.4%, for the three months ended March 31,
2002. Investment advisory fees decreased $1.2 million to $25.3 million compared 
to $26.5 million in the comparable prior year period. This included a decrease  
of $3.1 million, or 17.8% from the comparable prior year period in advisory fees
at John Hancock's institutional advisor, Independence Investment, LLC, resulting
from a decline in assets under management. This decline at Independence was     
largely offset by increases of $1.2 million, or 34.3% in advisory fees at the   
Company's Bond and Corporate Finance Group and by increases of $1.1 million, or 
100.0%, to $2.2 million in mortgage origination and servicing fees. Investment  
advisory fees were 0.35% and 0.34% of average advisory assets under management  
in 2002 and 2001, respectively.                                                 

     Benefits and expenses were $22.9 million for the three months ended March
31, 2002, a decrease of $3.6 million, or 13.6%, from $26.5 million reported in  
the comparable prior year period. The decrease was primarily due to $2.6 million
savings on interest expenses for warehousing mortgages, of which approximately  
$1.3 million was due to lower average borrowings and approximately $1.3 million 
was due to lower interest rates this period. In addition, compensation expenses 
at Independence Investment, LLC, decreased $0.4 million due to lower average    
assets under management. These reductions                                       

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were partially offset by an increase of $0.7 million in commission expenses due 
to signing new timber investors in the current period. Other operating costs and
expenses were 0.31% and 0.34% of average advisory assets under management for   
the three months ended March 31, 2002 and 2001, respectively. The Segment's     
effective tax rate on operating income fell to 36.4% from 40.7% for the three   
months ended March 31, 2001 and 2000, respectively, primarily due to changes in 
the state tax status of an investment subsidiary. The effective tax rate for the
Investment Management Segment remains higher than for our other business        
segments due to state taxes on certain investment management subsidiaries, and  
fewer tax benefits from portfolio holdings in this segment.                     

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Corporate and Other Segment                                         

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

                                                            Three Months Ended
                                                             March 31,
                                                           2002     2001
                                                            --------------------
                                                             (in millions)

Revenues .................................................   $ 486.8   $ 402.7  

Benefits and expenses.....................................     474.5     379.0  

Income taxes..............................................      (5.9)      1.8  
                                                            --------------------

Segment after-tax operating income (1)....................      18.2      21.9  
                                                            --------------------

After-tax adjustments: (1)                                                      
  Net realized investment and other gains (losses).......      (5.5)     (5.6)
  Restructuring charges..................................       1.3      (0.1)
                                                            --------------------
Total after-tax adjustments...............................      (4.2)     (5.7) 
                                                            --------------------

GAAP Reported:                                                                  
Income before cumulative effect of accounting                             
     changes............................................      14.0      16.2
  Cumulative effect of accounting changes, net of tax....      --        (2.6)
                                                            --------------------
Net income................................................   $  14.0      13.6  
                                                            ====================

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

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001 

      International operations' after-tax operating income was $17.0 million for
the three months ended March 31, 2002, a decrease of $1.1 million from $18.1    
million reported in the comparable prior year period. This decrease in after-tax
operating income was primarily due to Maritime. Maritime experienced less       
favorable pre-tax mortality, morbidity, expense and asset margins of $7.2       
million compared to the first quarter of 2001. Partially offsetting this        
unfavorable variance were favorable pre-tax investment margins of $1.1 million, 
interest income from a tax refund of $1.4 million, the impact of no longer      
amortizing goodwill of $1.2 million and the results of their acquisition of RSAF
of $1.8 million.                                                                

   Corporate operations' after-tax operating loss was $0.6 million for the
three months ended March 31, 2002, a decrease of $2.7 million from $2.1 million 
reported in the comparable prior year period. The decrease was primarily due to 
a decrease in net periodic pension plan credits of $5.1 million and increased   
interest expense on holding company debt of $4.7 million partially offset by    
both an increase in the asset base and improved performance on assets supporting
our corporate owned life insurance program of $8.0 million.                     

     The Segment's effective tax rate on operating income was a negative 48.0%
and a positive 7.6% for the three months ended March 31, 2002 and 2001,         
respectively. This rate decreased primarily due to the increase in non-taxable  
income related to increased low income housing tax credits, lease residual      
management, dividends received deduction and the Company's corporate owned life 
insurance program.                                                              

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

General Account Investments                                                     

Overall Composition of the General Account                                      

   Invested assets, excluding separate accounts, totaled $59.9 billion and
$59.0 billion as of March 31, 2002 and December 31, 2001, respectively. Although
the composition of the portfolio has not significantly changed at March 31, 2002
as compared to December 31, 2001, the majority of the $0.9 billion increase in  
the invested assets is attributable to an increase in the fixed maturity        
security portfolio where the Company directs a majority of its net cash inflows.
The following table shows the composition of investments in the general account 
portfolio.                                                                      

                                                        [Enlarge/Download Table]

                                        As of March 31,          As of December 31,     
                                              2002                      2001            
                                   -----------------------------------------------------
                                     Carrying       % of       Carrying       % of      
                                       Value        Total        Value        Total     
                                   ---------------------------------------------------  
                                   (in millions)             (in millions)              
                                                                                        
Fixed maturity securities (1).....     41,897.3      70.0%      $41,106.8      69.8%    
Mortgage loans (2)................     11,061.5      18.5        10,993.2      18.6     
Real estate.......................        420.5       0.7           442.4       0.7     
Policy loans(3)...................      2,009.6       3.4         2,008.2       3.4     
Equity securities.................      1,258.7       2.1         1,190.9       2.0     
Other invested assets.............      1,896.4       3.1         1,786.1       3.0     
Short-term investments............         86.7       0.1           153.5       0.3     
Cash and cash equivalents (4).....      1,252.4       2.1         1,313.7       2.2     
                                   ---------------------------------------------------  
   Total invested assets..........    $59,883.1     100.0%      $58,994.8     100.0%    
                                   ===================================================  

(1)   In addition to bonds, the fixed maturity security portfolio contains      
  redeemable preferred stock with a carrying value of $706.1 million and
    $695.0 million as of March 31, 2002 and December 31, 2001, respectively.
The total fair value of our fixed maturity security portfolio was   
     $41,916.8 and $41,090.9 million, at March 31, 2002 and December 31, 2001,
respectively.                                                       
(2)   The fair value for the mortgage loan portfolio was $11,525.1 and $11,574.4
million as of March 31, 2002 and December 31, 2001, respectively.   
(3)   Policy loans are secured by the cash value of the underlying life         
    insurance policies and do not mature in a conventional sense, but expire
in conjunction with the related policy liabilities.                 
(4)   Cash and cash equivalents are included in total invested assets for the   
 purposes of calculating yields on the income producing assets for the
Company.                                                            

   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 on the basis of both cash flow and return requirements 
of its products and by the level of investment risk.                            

 Fixed Maturity Securities. The fixed maturity securities portfolio is
predominantly comprised of low risk, investment grade, publicly and privately   
traded corporate bonds and senior tranches of asset-backed securities (ABS) and 
mortgage-backed securities (MBS), with the balance invested in government bonds.
The fixed maturity securities portfolio also includes redeemable preferred      
stock. As of March 31, 2002, fixed maturity securities represented 70.0% of     
general account investment assets with a carrying value of $41.9 billion,       
roughly comprised of 56.6% public securities and 43.4% private securities. Each 
year the Company directs the majority of the net cash inflows into investment   
grade fixed maturity securities. Typically between 5% and 15% of funds are      
invested in below-investment-grade bonds while maintaining a policy to limit the
overall level of these bonds to no more than 10% of invested assets and to      
target two-thirds of that balance in the BB category. Allocations are based on  
an assessment of relative value and the likelihood of enhancing risk-adjusted   
portfolio returns. While the Company has profited from the                      
below-investment-grade asset class in the past, care is taken to manage its     
growth strategically by limiting its size relative to the Company's net worth.  

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

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

Fixed Maturity Securities -- By Issuer

                                                        [Enlarge/Download Table]

                                         As of March 31,          As of December 31,     
                                               2002                      2001            
                                    -----------------------------------------------------
                                      Carrying       % of       Carrying       % of      
                                        Value        Total        Value        Total     
                                    -----------------------------------------------------
                                    (in millions)             (in millions)              
                                                                                         
Corporate securities..............     $32,828.0      78.3%      $32,628.5      79.4%    
MBS/ABS...........................       6,934.1      16.6         6,326.9      15.4     
U.S. Treasury securities and                                                             
   obligations of U.S. government                                                        
   agencies.......................         200.2       0.5           299.9       0.7     
Debt securities issued by foreign                                                        
   governments....................       1,663.0       4.0         1,729.9       4.2     
Obligations of states and political                                                      
   subdivisions...................         272.0       0.6           121.6       0.3     
                                    -----------------------------------------------------
     Total........................     $41,897.3     100.0%      $41,106.8     100.0%    
                                    =====================================================

  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, rather than in residential MBS where the underlying loans have no
call protection. By investing in MBS and ABS securities with relatively         
predictable repayments, we add high quality, liquid assets to our portfolios    
without incurring the risk of excessive cash flow in periods of low interest    
rates or a cash flow deficit in periods of high interest rates. We believe the  
portion of our MBS/ABS portfolio subject to prepayment risk as of March 31, 2002
and December 31, 2001 was limited to 9.2% and 10.1% of our total MBS/ABS        
portfolio and 1.5% and 1.6% of our total fixed maturity securities holdings,    
respectively.                                                                   

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 sets forth the SVO ratings for the bond portfolio
along with an equivalent S&P rating agency designation. The majority of the     
fixed maturity investments are investment grade, with 88.4% and 88.3% of fixed  
maturity investments invested in Category 1 and 2 securities as of March 31,    
2002 and December 31, 2001, respectively. Below investment grade bonds were     
11.6% and 11.7% of fixed maturity investments and 8.0% and 8.0% of total        
invested assets as of March 31, 2002 and December 31, 2001, respectively. This  
allocation reflects the Company strategy of avoiding the unpredictability of    
interest rate risk in favor of relying on the ability of bond analysts to better
predict credit or default risk. The Company's 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. When utilizing the spread pricing     
matrix, securities are valued by utilizing a discounted cash flow method where  
each bond is assigned a spread, that is added to the current U.S. Treasury rates
to discount the cash flows of the security. The spread assigned to each security
is derived from external market data. 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        
Company's pricing analysts take appropriate actions to reduce valuations of     
securities where such an event occurs which negatively impacts the securities'  
value. 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.                                     

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   A majority (56.6%) of the 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    
near default was $381.2 million and $393.1 million as of March 31, 2002 and     
December 31, 2001, respectively. At March 31, 2002 and December 31, 2001, $2.9  
million and $2.5 million, respectively of interest on bonds near default was    
included in accrued investment income. It is the Company's policy to reverse any
accrued investment income and cease accruing interest income on bonds near      
default and to only accrue interest income on bonds near default that the       
Company expects to collect. Management judgment is used and the actual results  
could be materially different.                                                  

 Fixed Maturity Securities -- By Quality

                                                        [Enlarge/Download Table]

                                                  As of March 31,                           As of December 31,          
                                                        2002                                       2001                 
                                     -----------------------------------------------------------------------------------
     SVO          S&P Equivalent             Carrying                % of                Carrying               % of    
  Rating (1)     Designation (2)            Value (3)               Total               Value (3)               Total   
------------------------------------------------------------------------------------------------------------------------
                                          (in millions)                               (in millions)                     
                                                                                                                        
      1       AAA/AA/A.............          $17,356.9               42.1%               $16,876.8               41.8%  
      2       BBB..................           19,070.3               46.3                 18,800.2               46.5   
      3       BB...................            2,695.6                6.5                  2,796.5                6.9   
      4       B....................            1,073.0                2.6                  1,102.4                2.7   
      5       CCC and lower........              614.2                1.5                    442.8                1.1   
      6       In or near default...              381.2                1.0                    393.1                1.0   
                                     -----------------------------------------------------------------------------------
              Total................          $41,191.2              100.0%               $40,411.8              100.0%  
                                     ===================================================================================

(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)   Does not include redeemable preferred stock with a carrying value of      
   $706.1 million and $695.0 million as of March 31, 2002 and December 31,
2001, respectively.                                                 

Mortgage Loans. As of March 31, 2002 and December 31, 2001, we held 
mortgage loans with a carrying value of $11.1 billion and $11.0 billion,        
respectively, including $2.4 billion and $2.5 billion of agricultural loans,    
respectively, and $1.3 billion of loans, respectively at each period end,       
managed by Maritime, of which $0.7 billion and $0.6 billion, respectively, were 
government-insured by the Canada Mortgage and Housing Corporation (CMHC).       

Investment Results                                                              

  Overall, the yield, net of investment expenses, on the general account
portfolio decreased from the first quarter of the prior year. The lower yield   
was driven primarily by the sharp drop in short-term rates during the year. As  
of March 31, 2002, the Company had approximately $11 billion of net exposure to 
the short-term floating rates (primarily LIBOR), mostly created through interest
rate swaps designed to match our portfolio with an increasing volume of floating
rate liabilities. Therefore, approximately 87% of the decline in investment     
income was off set by a decline in floating-rate liability payments. In         
addition, old assets rolling over into new investments with less favorable      
interest rates and narrower acquisition spreads than those present in the 2001  
fixed maturity portfolio contributed to the decline. The inflow of new cash for 
the twelve month period between the first quarter of 2001 and the first quarter 
of 2002 was invested at rates that were less than the overall portfolio earnings
rate during the first quarter of 2001. The following table summarizes the       
Company's investment results for the periods indicated.                         

                                                        [Enlarge/Download Table]

                                                          As of                     As of            
                                                     March 31, 2002           March 31, 2001 (1)     
                                               ------------------------------------------------------
                                                   Yield        Amount        Yield       Amount     
                                               ------------------------------------------------------
                                                            (in millions)              (in millions) 
                                                                                                     
General account assets-excluding policy loans                                                        
   Gross income                                     6.95%     $   997.6        8.01%    $  1,022.4   
   Ending assets-excluding policy                                                                    
     Loans                                                     57,873.5                   51,846.2   
Policy loans                                                                                         
   Gross income                                     5.98%          30.0        6.33%          31.2   
   Ending assets                                                2,009.6                    1,977.3   
     Total gross income                             6.92%       1,027.6        7.95%       1,053.6   
     Less: investment expenses                                    (57.7)                     (65.5)  
                                                              ----------                -----------  
       Net investment income (1)                    6.53%     $   969.9        7.45%    $    988.1   
                                                              ==========                ===========  

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(1)   March 31, 2001 results have been reclassified to conform with current     
      presentation, $37.7 million in investment income related to equity indexed
     universal life insurance policies sold through Maritime, was reclassified
to benefits to policyholders.                                       

Liquidity and Capital Resources                                                 

    Liquidity describes the ability of a company to generate sufficient cash
flows to meet the cash requirements of business operations. John Hancock        
Financial Services, Inc. (the Company) is an insurance holding company. The     
assets of the Company consist primarily of the outstanding capital stock of the 
Life Company, John Hancock Canadian Holding Company and investments in other    
international subsidiaries. The Company's cash flow consists of dividends from  
its subsidiaries and proceeds from debt offerings offset by expenses,           
shareholder dividends and stock repurchases. As a holding company, the Company's
ability to meet its cash requirements, including to pay interest on any debt,   
pay expenses related to its affairs, pay dividends on its common stock and      
continue to repurchase stock, substantially depends upon dividends from its     
subsidiaries.                                                                   

      State insurance laws generally restrict the ability of insurance companies
to pay cash dividends in excess of prescribed limitations without prior         
approval. The Life Company's limit is the greater of 10% of the statutory       
surplus or the prior calendar year's statutory net gain from operations of the  
Life Company. The ability of the Life Company, JHFS' primary operating          
subsidiary, 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  
Life Company can pay shareholder dividends. The Life 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. JHFS currently does not expect such regulatory            
requirements to impair its ability to meet its liquidity and capital needs.     
However, JHFS can give no assurance it will declare or pay dividends on a       
regular basis.                                                                  

The Commissioner of Insurance for the Commonwealth of Massachusetts 
previously approved, and the Life Company paid, dividends to JHFS in 2002 in the
amount of $11.0 million. This cash dividend was not was classified as           
extraordinary by state regulators.                                              

Sources of cash for the Company's insurance subsidiaries are from   
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 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 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 liquidity of our insurance operations is also related to the overall
quality of our investments. As of March 31, 2002, $36,427.2 million, or 88.4% of
the fixed maturity securities held by us and rated by Standard & Poor's Ratings 
Services, a division of the McGraw-Hill Companies, Inc. (S&P) or the National   
Association of Insurance Commissioners were rated investment grade (BBB or      
higher by S&P or 1 or 2 by the National Association of Insurance Commissioners).
The remaining $4,764.0 million, or 11.6% of fixed maturity investments, were    
rated non-investment grade. For additional discussion of our investment         
portfolio see the General Account Investments section on page 35 in this        
Management's Discussion and Analysis of Financial Condition and Results of      
Segment Operations.                                                             

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

   Net cash provided by operating activities was $559.9 million and $567.6
million for the three months ended March 31, 2002 and 2000, respectively. The   
$7.7 million decrease in cash provided by operating activities for the first    
three months in 2002 compared to the same period in 2001 resulted primarily from
decreases in premiums received and increased expense payments, partially offset 
by increased investment income, fees received and lower benefit payments.       

   Net cash used in investing activities was $1,836.6 million and $1,693.8
million for the three months ended March 31, 2002 and 2001, respectively. The   
$142.8 million increase in cash used in 2002 as compared to 2001 resulted from  
larger net                                                                      

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acquisitions of fixed maturities and increased purchases of mortgages           
and other invested assets offset somewhat by decreased purchases of equities    
during the three months ended March 31, 2002 as compared to the same period in  
the prior year.                                                                 

    Net cash provided by financing activities was $1,215.4 million and $70.1
million, for the three months ended March 31, 2002 and 2001, respectively. The  
$1,145.3 million increase in 2002 as compared to 2001 resulted from a $1,164.4  
million increase in deposits net of cash payments made on withdrawals of        
universal life insurance and investment-type contracts. Deposits on such        
universal life insurance and investment-type contracts exceeded withdrawals by  
$1,339.9 million and $175.5 million for the three months ended March 31, 2002   
and March 31, 2001, respectively.                                               

  On October 26, 2000, the Company announced that its Board of Directors
authorized a stock repurchase program, with no termination date, under which the
Company was authorized to purchase up to $500 million of its outstanding common 
stock. On August 6, 2001, the Company's board of directors authorized a $500    
million increase to the stock repurchase program, bringing the total amount     
authorized to be used to repurchase Company stock to $1.0 billion. Under the    
stock repurchase program, purchases have been and will be, made from time to    
time, depending on market conditions, business opportunities and other factors, 
in the open market or through privately negotiated transactions. Through March  
31, 2002, the Company has repurchased 21.2 million shares with a total cost of  
$777.4 million, of which 2.7 million shares were repurchased in the first       
quarter of 2002 at a cost of $105.2 million.                                    

      Cash flow requirements also are supported by a committed line of credit of
$1.0 billion, through a syndication of banks led by FleetBoston Financial       
Corporation, and an effective shelf registration statement which provides for   
the issuance, from time to time, of up to $1.0 billion of the Company's debt and
equity securities. The line of credit agreement provides for two facilities: one
for $500 million pursuant to a 364-day commitment (subject to renewal) and a    
second multi-year facility for $500 million (renewable in 2005). The line of    
credit is available for general corporate purposes. The line of credit agreement
contains various covenants, among these being that shareholders' equity meet    
certain requirements. To date, we have not borrowed any amounts under the line  
of credit. On November 29, 2001, JHFS sold, under the $1.0 billion shelf        
registration statement, $500.0 million in 7-year senior unsecured notes at a    
coupon of 5.625 percent with the proceeds used for general corporate purposes.  
The remaining capacity of the shelf registration is currently $500.0 million.   

As of March 31, 2002, we had $1,419.3 million of debt outstanding   
consisting of $498.7 million of medium-term bonds, $447.3 million of surplus    
notes, $247.5 million of Canadian debt and $225.8 million of other notes        
payable. The commercial paper program established at the Company has replaced   
the commercial paper program at its indirect subsidiary, John Hancock Capital   
Corporation. The Company issued no commercial paper during the first quarter of 
2002, and none was outstanding at March 31, 2002.                               

Forward-Looking Statements                                                      

     The statements, analyses, and other information contained herein relating
to trends in John Hancock Financial Services, Inc.'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)
changes to or elimination of Federal tax benefits for our products and other    
changes in laws and regulations (including those relating to the Federal Estate 
Tax Laws) which the Company expects would adversely affect sales of our         
insurance and investment advisory products; (3) as a holding company, we depend 
on dividends from our subsidiaries, Massachusetts insurance law, and similar    
Canadian laws, may restrict the ability of John Hancock Life Insurance Company  
and Maritime Life Assurance 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                                                                        

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insurance sales are highly dependent on a third party distribution relationship;
(8) customers may not be responsive to new or existing products or distribution 
channels, (9) interest rate volatility may adversely affect our profitability;  
(10) our net income and revenues will suffer if customers surrender annuities   
and variable and universal life insurance policies or redeem shares of our      
open-end mutual funds; (11) the independent directors of our variable series    
trusts and of our mutual funds could reduce the compensation paid to us or could
terminate our contracts to manage the funds; (12) under our Plan of             
Reorganization, we were required to establish the closed block, a special       
arrangement for the benefit of a group of our policyholders. We may have to fund
deficiencies in our closed block, and any overfunding of the closed block will  
benefit only the holders of policies included in the closed block, not our      
shareholders; (13) there are a number of provisions in our Plan of              
Reorganization, our Restated Certificate of Incorporation and by-laws, laws     
applicable to us, agreements that we have entered into with our senior          
management, and our shareholder rights plan, that will prevent or discourage    
takeovers and business combinations that our shareholders might otherwise       
consider to be in their best interests; (14) 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; (15) we face investment and credit     
losses relating to our investment portfolio (16) we may experience volatility in
net income due to changes in standards for accounting for derivatives and other 
changes; (17) our United States insurance companies are subject to risk-based   
capital requirements and possible guaranty fund assessments; (18) the National  
Association of Insurance Commissioners' codification of statutory accounting    
practices affected the statutory surplus of John Hancock Life Insurance Company;
(19) we may be unable to retain personnel who are key to our business; (20) we  
may incur losses from assumed reinsurance business in respect of personal       
accident insurance and the occupational accident component of workers           
compensation insurance; (21) litigation and regulatory proceedings may result in
financial losses, harm our reputation and divert management resources, and (22) 
while the Company is seeking to renew its catastrophic reinsurance coverage, if 
the Company were unable to acquire replacement catastrophic reinsurance coverage
for individual life insurance products, which expired on December 31, 2001,     
and/or for its group life insurance products, which is due to expire on June 30,
2002, the Company's future net income and financial position could be adversely 
impacted.                                                                       

    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.                                                     

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ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK              

Capital Markets Risk Management                                                 

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

To mitigate these risks, and effectively support Company objectives,
investment operations are organized and staffed to focus investment management  
expertise on specific classes of investments, with particular emphasis placed on
private placement markets. In addition, a dedicated unit of asset / liability   
risk management (ALM) professionals centralizes the Life Insurance Company's and
its 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      
senior management and reviewed quarterly with the Company's Committee of        
Finance.                                                                        

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

Credit Risk                                                                     

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

      The Company evaluates its investments in fixed income securities on a case
by case basis for issues of collectibility. The Company's bond analysts operate 
in an industry-based, team-oriented structure that facilitates the evaluation of
the Company's entire fixed income holdings quarterly and formal presentations to
management twice annually. In addition, trading levels of publicly traded       
securities and other market factors and industry trends are followed and their  
impact on individual credits are assessed as they occur. Indenture covenants    
that provide the Company additional protection in the event of credit           
deterioration are also monitored continuously. When as a result of any of these 
analyses, management believes that the collectibility of any amounts owed is    
other than temporarily impaired, the underlying asset is written down to fair   
value.                                                                          

    As of March 31, 2002 and December 31, 2001, the Company's fixed maturity
portfolio was comprised of 88.4% and 88.3% investment grade securities and 11.6%
and 11.7% below-investment-grade securities, respectively. These percentages are
consistent with recent experience and indicative of the Company's long-standing 
investment philosophy of pursuing moderate amounts of credit risk in return for 
higher expected returns. We believe that credit risk can be successfully managed
given our proprietary credit evaluation models and experienced personnel.       

Interest Rate Risk                                                              

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

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 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, medium-term notes, 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 duration mismatch tolerance of less than +/- .05 years (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.             

     As of March 31, 2002, there have been no material changes to the interest
rate exposures as reported in the Company's 2001 Form 10-K.                     

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

      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 that are   
managing interest rate risk as of March 31, 2002. The notional amounts in the   
table represent the basis on which pay or receive amounts are calculated and are
not reflective of credit risk. These exposures represent only a point in time   
and will be subject to change as a result of ongoing portfolio and risk         
management activities.                                                          

                                                        [Enlarge/Download Table]

                                                               As of March 31, 2002                                  
                                   ----------------------------------------------------------------------------------
                                                                                      Fair Value                     
                                                                 ----------------------------------------------------
                                                    Weighted                                                         
                                     Notional     Average Term   -100 Basis Point       As of       +100 Basis Point 
                                      Amount        (Years)         Change (2)         3/31/02         Change (2)    
                                   ----------------------------------------------------------------------------------
                                                   (in millions, except for weighted average term)                   
                                                                                                                     
Interest rate swaps...............   $ 16,691.9        8.3           $ (360.9)        $ (311.2)         $ (217.7)    
CMT swaps.........................        325.0        0.8                7.0              7.0               7.0     
Futures contracts (1).............        233.7        6.6               (4.9)            (1.0)              4.5     
Interest rate caps................        297.0        5.2                1.5              3.4               6.8     
Interest rate floors..............      8,328.0        8.4              117.7             36.0              29.1     
Swaptions.........................         30.0       23.2               (2.4)            (0.9)             (0.3)    
                                   -------------                 ----------------------------------------------------
     Totals.......................   $ 25,905.6        8.2           $ (242.0)        $ (266.7)         $ (170.6)    
                                   =============                 ====================================================

--------------                                                                  
(1)   Represents the notional value on open contracts as of March 31, 2002.     

(2)   The selection of a 100 basis point immediate change in interest rates     
     should not be construed as a prediction by us of future market events but
rather as an illustration of the potential impact of such an event. 

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

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 JOHN HANCOCK FINANCIAL SERVICES, INC.

PART II - OTHER INFORMATION                                                     

ITEM 1.  LEGAL PROCEEDINGS                                                      

Harris Trust Litigation                                                         

   Since 1983, we have been involved in complex litigation known as Harris
Trust and Savings Bank, as Trustee of Sperry Master Retirement Trust No. 2 v.   
John Hancock Mutual Life Insurance Company (S.D.N.Y. Civ. 83-5491). This lawsuit
originally raised only state law causes of action, but in 1984, the plaintiff   
amended the Complaint to allege that John Hancock was a fiduciary and party in  
interest under ERISA in rendering investment advice and exercising control over 
plan assets. Plaintiff alleged that John Hancock breached its fiduciary duty in 
failing to act for the exclusive benefit of plan participants by retaining      
excess funds of the plan, by imposing arbitrary charges for a return of plan    
funds, by failing to pay an appropriate rate of interest on plan funds, and by  
charging the plan excessive compensation. In 1989, the District Court dismissed 
all of plaintiff's ERISA claims and, in 1991, also dismissed all of plaintiff's 
state law claims. The plaintiff appealed to the Second Circuit Court of Appeals,
seeking reversal of several of the District Court's rulings, including two of   
the rulings regarding the applicability of ERISA to the dispute. The District   
Court's state law rulings were upheld, and the ERISA rulings were affirmed in   
part and reversed in part. Specifically, the Second Circuit upheld the District 
Court's conclusion that John Hancock was not a fiduciary under ERISA with       
respect to the insurance policy as a contract. The Second Circuit, however,     
reversed the District Court's determination that none of the assets, held by    
John Hancock in its general account in connection with this contract were plan  
assets, and held that "free funds" associated with this contract constitute plan
assets for ERISA purposes. This decision was appealed to the Supreme Court,     
which affirmed the Second Circuit's ruling in 1993. The Department of Labor     
filed an amicus brief in support of John Hancock's position on the merits before
the Supreme Court. The case was remanded to the District Court. The case was    
tried to a Federal District Court judge in 1997, and the judge issued an opinion
in November 2000.                                                               

      In that opinion the judge determined that John Hancock should have allowed
the Trust to withdraw the free funds by means of an extracontractual payout. The
Court awarded the Trust approximately $13.8 million in relation to this claim   
together with unspecified additional pre-judgment interest on this amount from  
October 1988.                                                                   

      The Court also determined that Hancock violated its fiduciary duty when it
failed to revalue the liabilities for guaranteed benefits, which had been       
established at rates set out in the contract, on a basis which was more         
favorable to the Trust. In addition, the Court concluded that certain of        
Hancock's internal allocations of expenses and investment income violated ERISA.
Damages in the amount of approximately $5.7 million, together with unspecified  
pre-judgment interest from December 1996, were awarded on these issues. As part 
of the relief, the judge ordered the removal of Hancock as a fiduciary to the   
plan. On April 11, 2001, the Court entered a judgment against John Hancock for  
approximately $84.9 million which includes damages to plaintiff, pre-judgment   
interest, attorney's fees and other costs.                                      

     We believe that the underlying case was incorrectly decided and there are
promising grounds for challenging the District Court's decision. On May 14,     
2001we filed an appeal, and on April 29, 2002 the Appeals Court heard oral      
arguments from the parties in the case. Although we believe that we have a      
strong position on the merits of the case, if unsuccessful, our ultimate        
liability, including fees, costs and interest could have a material adverse     
impact on net income. However, we do not believe that any such liability would  
be material in relation to our financial position or liquidity.                 

ITEM 6. EXHIBITS and REPORTS on FORM 8-K                                        

b) Reports on Form 8-K.                                                         

On February 7, 2002, the Company filed a Current Report on Form 8-K, dated      
February 6, 2002 reporting under Item 5 thereof the Company's operating results 
for the year ended December 31, 2001.                                           

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SIGNATURES                                                                      

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this Report to be signed on its behalf by the    
undersigned thereunto duly authorized.                                          

                                       JOHN HANCOCK FINANCIAL SERVICES, INC.

Date: May 10, 2002                       By:  /s/ THOMAS E. MOLONEY             
                                            ----------------------------------
                           Thomas E. Moloney
                                             Senior Executive Vice President and
                                 Chief Financial Officer

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	12/31/02	9		10-K
	6/30/02	43		10-Q, 10-Q/A
Filed on:	5/15/02
	5/10/02	1	47
	4/29/02	14	46
For Period End:	3/31/02	1	45
	2/7/02	46		8-K
	2/6/02	46		8-K
	1/1/02	6	24
	12/31/01	9	46	10-K405
	11/29/01	42		8-K
	10/1/01	9	24
	8/6/01	42
	5/14/01	14	46	DEF 14A
	4/11/01	14	46
	4/2/01	10	24	DEF 14A
	3/31/01	5	42	10-Q
	3/3/01	26
	1/1/01	6	24
	10/26/00	42
	3/31/00	36	41	10-Q, 13F-HR, 4
	12/31/97	13
	2/28/97	14
				List all Filings

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Hancock John Financial Services Inc – ‘10-Q’ for 3/31/02

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