0001193125-16-559473.txt : 20160427 0001193125-16-559473.hdr.sgml : 20160427 20160427160854 ACCESSION NUMBER: 0001193125-16-559473 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20160427 DATE AS OF CHANGE: 20160427 EFFECTIVENESS DATE: 20160502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOHN HANCOCK LIFE INSURANCE CO (USA) SEPARATE ACCOUNT N CENTRAL INDEX KEY: 0000813572 IRS NUMBER: 232030787 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-100567 FILM NUMBER: 161595428 BUSINESS ADDRESS: STREET 1: 200 BLOOR STREET EAST ST 10 STREET 2: TORONTO M4W 1EF CITY: ONTARIO CANADA STATE: A6 ZIP: 48304 BUSINESS PHONE: 4169266302 MAIL ADDRESS: STREET 1: P O BOX 600 CITY: BUFFALO STATE: NY ZIP: 14201-0600 FORMER COMPANY: FORMER CONFORMED NAME: MANUFACTURERS LIFE INS CO USA SEPARATE ACCOUNT N DATE OF NAME CHANGE: 20020411 FORMER COMPANY: FORMER CONFORMED NAME: SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INS CO OF AM DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOHN HANCOCK LIFE INSURANCE CO (USA) SEPARATE ACCOUNT N CENTRAL INDEX KEY: 0000813572 IRS NUMBER: 232030787 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05130 FILM NUMBER: 161595429 BUSINESS ADDRESS: STREET 1: 200 BLOOR STREET EAST ST 10 STREET 2: TORONTO M4W 1EF CITY: ONTARIO CANADA STATE: A6 ZIP: 48304 BUSINESS PHONE: 4169266302 MAIL ADDRESS: STREET 1: P O BOX 600 CITY: BUFFALO STATE: NY ZIP: 14201-0600 FORMER COMPANY: FORMER CONFORMED NAME: MANUFACTURERS LIFE INS CO USA SEPARATE ACCOUNT N DATE OF NAME CHANGE: 20020411 FORMER COMPANY: FORMER CONFORMED NAME: SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INS CO OF AM DATE OF NAME CHANGE: 19920703 0000813572 S000009940 JOHN HANCOCK LIFE INSURANCE CO (USA) SEPARATE ACCOUNT N C000027518 CVUL 03 C000027519 CVUL 04 485BPOS 1 d152417d485bpos.htm JHUSA N - CVUL 03, CVUL 04 JHUSA N - CVUL 03, CVUL 04
Table of Contents
As filed with the U.S. Securities and Exchange Commission on April 26, 2016
Registration No. 333-100567
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-6
SEC File No 811-5130
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST EFFECTIVE AMENDMENT NO. 16 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 24 [X]
John Hancock Life Insurance Company (U.S.A.) Separate Account N
(Exact Name of Registrant)
John Hancock Life Insurance Company (U.S.A.)
(Name of Depositor)
197 Clarendon Street
Boston, MA 02116
(Complete address of depositor’s principal executive offices)
Depositor's Telephone Number: 617-572-6000
JAMES C. HOODLET
John Hancock Life Insurance Company (U.S.A.)
U.S. INSURANCE LAW
JOHN HANCOCK PLACE
BOSTON, MA 02117
(Name and complete address of agent for service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on on May 2, 2016 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) (1) of Rule 485
[ ] on (date) pursuant to paragraph (a) (1) of Rule 485
If appropriate check the following box
[ ] this post-effective amendment designates a new effective date for a previously filed amendment
Pursuant to the provisions of Rule 24f-2, Registrant has registered an indefinite amount of the securities under the Securities Act of 1933.

Table of Contents
Prospectus dated May 2, 2016
for interests in
John Hancock Life Insurance Company (U.S.A.) Separate Account N
Interests are made available under
Corporate VUL
JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)
(“John Hancock USA”)
500 Index B
Active Bond
All Cap Core
Alpha Opportunities
American Asset Allocation
American Global Growth
American Growth
American Growth-Income
American International
American New World
Blue Chip Growth
Bond
Capital Appreciation
Capital Appreciation Value
Core Bond
Core Strategy
Emerging Markets Value
Equity Income
Financial Industries
Franklin Templeton Founding Allocation
Fundamental All Cap Core
Fundamental Large Cap Value
Global
Global Bond
Health Sciences
High Yield
International Core
International Equity Index B
International Growth Stock
International Small Company
International Value
Investment Quality Bond
Lifestyle Aggressive MVP
Lifestyle Balanced MVP
Lifestyle Conservative MVP
Lifestyle Growth MVP
Lifestyle Moderate MVP
Mid Cap Index
Mid Cap Stock
Mid Value
Money Market
PIMCO VIT All Asset
Real Estate Securities
Science & Technology
Short Term Government Income
Small Cap Growth
Small Cap Index
Small Cap Opportunities
Small Cap Value
Small Company Value
Strategic Income Opportunities
Total Stock Market Index
Ultra Short Term Bond
U.S. Equity
Utilities
Value
* * * * * * * * * * * *
Please note that the Securities and Exchange Commission (“SEC”) has not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
CVUL 03 5/2016

 

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This prospectus does not constitute an offering in any jurisdiction in which such offering may not lawfully be made. No person is authorized to make any representations in connection with this offering other than those contained in this prospectus, the portfolios prospectuses, or the corresponding Statements of Additional Information.
The purpose of this variable life insurance policy is to provide insurance protection for the beneficiary named therein. No claim is made that this variable life insurance policy is in any way similar or comparable to a systematic investment plan of a mutual fund.
Examine this prospectus carefully. The Policy Summary will briefly describe the policy. More detailed information will be found further in the prospectus. You should rely on the information contained in this prospectus, the portfolio prospectuses, and the corresponding Statements of Additional Information, which contains the audited financial statements for John Hancock NY and Separate Account B. The portfolio prospectuses describe the investment objectives, policies and restrictions of, and the risks relating to, investment in the investment options. In the case of any of the portfolios that are operated as “feeder funds,” the prospectus for the corresponding “master fund” is also provided. We have not authorized anyone to provide you with information that is different from the information contained in the aforementioned documents.
RISKS/BENEFITS SUMMARY
Benefits
Some of the benefits of purchasing the policy are described below. Death Benefit Protection. This prospectus describes a flexible premium variable life insurance policy, which provides for a death benefit payable to the beneficiary of the policy upon the death of the insured. Variable life insurance is a flexible tool for financial and investment planning for persons needing death benefit protection. You should consider other forms of investments if death benefit protection is not one of your financial planning objectives, as there are additional costs and expenses in providing the insurance.
Access To Your Policy Values. Variable life insurance offers access to Policy Value. You may borrow against your policy, or surrender all, or a portion of your policy through a partial withdrawal. There are limitations on partial withdrawals. See “Policy Surrender and Partial Withdrawals” for further information.
Tax Deferred Accumulation. Variable life insurance has several tax advantages under current tax laws. For example, Policy Value accumulates on a tax-deferred basis and a transfer of values from one sub-account to another within the policy generates no taxable gain or loss. Any investment income and realized capital gains within a sub-account or interest from the Fixed Account are automatically reinvested without current income taxation to the policy owner.
Investment Options. In addition to the Fixed Account, the policy provides for access to a number of variable investment options, which permit you to reallocate your Policy Value to meet your changing personal objectives, goals, and investment conditions. Information regarding each investment option may be found in the portfolio prospectuses.
Flexibility. The policy is a flexible premium variable life insurance policy in which varying premium payments are permitted. You may select death benefit options and an additional policy rider. You may increase or decrease the amount of death benefit. You are able to select, monitor, and change investment choices within your policy.
Risks
Some of the risks of purchasing the policy are described below.
Fluctuating Investment Performance. Policy Value invested in a sub-account is not guaranteed and will increase and decrease according to investment performance. You assume the investment risk of Policy Value allocated to the sub-accounts. A comprehensive discussion of each sub-account’s objective and risk is found in the portfolio prospectuses. You should review these prospectuses carefully before allocating Policy Value to any sub-accounts.
Unsuitable for Short-Term Investment. The Policy is intended for long-term financial planning, and is unsuitable for short-term goals. Your policy is not designed to serve as a vehicle for frequent trading.
Policy Lapse. Sufficient premiums must be paid to keep a policy in force. There is a risk of lapse if the Policy Value is too low in relation to the insurance amount, if investment results are less favorable than anticipated or if extensive policy loans are taken. A policy lapse could have adverse tax consequences since the amount received (including any loans) less the
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investment in the policy may be treated as ordinary income subject to tax. Since withdrawals reduce your Policy Value, withdrawals increase the risk of lapse.
Decreasing Death Benefit. Any outstanding policy loans and any amount that you have surrendered or withdrawn will reduce your policy’s death benefit.
Adverse Consequences of Early Surrender. There are surrender charges assessed if you surrender your policy in the first 10 years from the purchase of the policy or the effective date of a Face Amount increase. Depending on the amount of premium paid and the Policy Value at the time of surrender, there may be little or no Net Cash Surrender Value paid to you when the policy is surrendered. In addition, there are adverse consequences associated with partial withdrawals including potential policy lapse and adverse tax consequences. There may also be adverse consequences associated with full surrender of the policy.
Adverse Tax Consequences. You should always consult a tax adviser about the application of federal and state tax law to your individual situation. The federal income tax treatment of life insurance is complex and current tax treatment of life insurance may change.
FEE TABLES
The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the policy. Except where necessary to show a rate greater than zero, all rates shown in the tables have been rounded to two decimal places as required by the prospectus disclosure rules. Consequently, the actual rates charged may be slightly higher or lower than those shown. The first table describes the fees and expenses that you will pay at the time that you buy the policy, surrender the policy, or transfer cash value between investment options.
Transaction Fees
Charge When Charge is Deducted Amount Deducted
Maximum Premium Load Charge Imposed on Premium (Load) Upon receipt of premium 2% of each premium paid
Maximum Sales Load Charge Imposed on Premium1 Upon receipt of premium 8% (Coverage Year 1)2
Maximum Surrender Charge (Load)1 Upon termination or reduction of any Coverage Amount that is subject to a surrender charge including surrender of the policy for its Net Cash Surrender Value, partial withdrawal in excess of the Free Withdrawal Amount, decrease in the Face Amount, or policy lapse. 5% (Coverage Year 1)3
Transfer Fees Upon transfer $25 (only applies to transfers in excess of 12 in a Policy Year)
Dollar Cost Averaging Upon transfer Guaranteed $5.00
    Current $0.00
Asset Allocation Rebalancer Upon transfer Guaranteed $15.00
    Current $5.00
    
1 A policy is subject to either a Sales Charge or a Surrender Charge but not both. The policy indicates which charge is applicable.
2 The Sales Load Charge declines in subsequent Coverage Years as noted below:
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Coverage
Year 		  Percentage
1
   8.00%
2
   6.00%
3
   3.00%
4
   2.00%
5
   1.00%
6+
   0.00%
    
3 The Surrender Charge declines in subsequent Policy Years as noted below:
Coverage
Year 		  Percentage
1
   5.00%
2
   4.00%
3
   3.00%
4
   2.50%
5
   2.00%
6
   1.50%
7
   1.00%
8
   1.00%
9
   0.50%
10+
   0.00%
The surrender charge are a percentage of the sum of all premium payments attributed to a Coverage Amount in the first five Coverage Years.
The next table describes the fees and expenses that you will pay periodically during the time that you own the policy, not including fees and expenses of the portfolios, the underlying variable investment options for your policy.
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Charges Other Than Those of the Portfolios
Charge When Charge isDeducted Amount Deducted
Cost of Insurance1 Monthly Minimum and Maximum Charge The possible range of the cost of insurance is from $0.00 to $83.33 per month per $1,000 of the net amount at risk.
    Charge for a Representative policy owner (a 45 year old non-smoking male) (rating classification is for short form underwriting) Policy Subject to Sales Charge: The Cost of Insurance rate is $0.16 per month per $1,000 of the net amount at risk.
      Policy Subject to Surrender Charge: The Cost of Insurance rate is $0.35 per month per $1,000 of the net amount at risk.
Cost of Insurance - Optional FTIO Rider (Flexible Term Insurance Option)1 Monthly Minimum and Maximum Charges The possible range of the cost of insurance is from $0.00 to $83.33 per month per $1,000 of the net amount at risk
    Charge for a Representative policy owner (a 45 year old non-smoking male) rating classification is for short form underwriting) The Cost of Insurance rate is $0.10 per month per $1,000 of the net amount at risk
Mortality and Expense Risk Fees Monthly 0.04% (0.50% annually)2  
Administration Fees Monthly $12 per Policy Month  
Loan Interest Rate (Net) Annually 0.75% 3  
    
1 The cost of insurance varies based on individual characteristics and the charges shown in the table may not be representative of the charge a particular policy owner will pay. A policy owner may obtain additional information regarding cost of insurance charge by contacting the Company. The election (or failure to elect) the optional FTIO rider will impact the total cost of insurance charges.
2 Currently the Company is charging the following rates:
Policy Year   Annual Rate
1-10
   0.50%
11+
   0.20%
    
3 The Loan Interest Rate (Net) is equal to the rate of interest charged on the policy loan less the interest credited to the Loan Account. Currently this rate is 0.75% for Policy Years 1-10 and 0.25% for Policy Years 11 and higher. The maximum loan rate is 4%.
The next table describes the minimum and maximum portfolio level fees and expenses charged by any of the portfolios underlying a variable investment option offered through this prospectus, expressed as a percentage of average net assets (rounded to two decimal places). These expenses are deducted from portfolio assets.
Total Annual Portfolio Operating Expenses Minimum Maximum
Range of expenses, including management fees, distribution and/or service (12b-1) fees, and other expenses 0.44% 1.71%
    
1  Certain of the portfolios’ advisers or subadvisers have contractually agreed to reimburse or waive certain portfolio level expenses. The minimum and maximum expenses shown do not reflect these contractual expense reimbursements or waivers. If such reimbursements or waivers were reflected, the minimum and maximum expenses would be 0.33% and 1.52%, respectively.
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Table of Investment Options and Investment Subadvisers
When you select a Separate Account investment option, we invest your money in shares of a corresponding portfolio of the John Hancock Variable Insurance Trust (the “Trust” or “JHVIT”) (or the PIMCO Variable Insurance Trust (the “PIMCO Trust”) with respect to the PIMCO VIT All Asset portfolio) and hold the shares in a subaccount of the Separate Account. Fees and expenses of the portfolios are not fixed or specified under the terms of the policies and may vary from year to year. These fees and expenses differ for each portfolio and reduce the investment return of each portfolio. Therefore, they also indirectly reduce the return you will earn on any Separate Account investment options you select. For more information, please refer to the prospectus for the underlying portfolios.
The JHVIT and the PIMCO Trust are so-called “series” type mutual funds and each is registered under the Investment Company Act of 1940 (“1940 Act”) as an open-end management investment company. John Hancock Investment Management Services, LLC (“JHIMS”) provides investment advisory services to the Trust and receives investment management fees for doing so. JHIMS pays a portion of its investment management fees to other firms that manage the Trust’s portfolios. We are affiliated with JHIMS and may indirectly benefit from any investment management fees JHIMS retains. The PIMCO VIT All Asset portfolio of the PIMCO Trust receives investment advisory services from Pacific Investment Management Company LLC (“PIMCO”) and pays investment management fees to PIMCO.
Each of the American Asset Allocation, American Global Growth, American Growth, American Growth-Income, American International and American New World portfolios invests in Series 1 shares of the corresponding investment portfolio of the Trust. The American Asset Allocation, American Global Growth, American Growth, American Growth-Income, American International, and American New World portfolios operate as “feeder funds,” which means that the portfolios do not buy investment securities directly. Instead, they invest in a “master fund” which in turn purchases investment securities. Each of the American feeder fund portfolios has the same investment objective and limitations as its master fund. The prospectus for the American Fund master fund is included with the prospectuses for the underlying funds. We pay American Funds Distributors, Inc., the principal underwriter for the American Funds Insurance Series, a percentage of some or all of the amounts allocated to the “American” portfolios of the Trust for the marketing support services it provides.
The portfolios pay us or certain of our affiliates compensation for some of the distribution, administrative, shareholder support, marketing and other services we or our affiliates provide to the portfolios. The amount of this compensation is based on a percentage of the assets of the portfolios attributable to the variable insurance products that we and our affiliates issue. These percentages may differ from portfolio to portfolio and among classes of shares within a portfolio. In some cases, the compensation is derived from the Rule 12b-1 fees that are deducted from a portfolio’s assets for the services we or our affiliates provide to that portfolio. These compensation payments do not, however, result in any charge to you in addition to what is shown in the Fee Tables.
The following table provides a general description of the portfolios that underlie the variable investment options we make available under the policy. You bear the investment risk of any portfolio you choose as an investment option for your policy. You can find a full description of each portfolio, including the investment objectives, policies, restrictions, and risks, in the prospectus for that portfolio. You should read the portfolio’s prospectus carefully before investing in the corresponding variable investment option.
The investment options in the Separate Account are not publicly traded mutual funds. The investment options are only available to you as investment options in the policies, or in some cases through other variable annuity contracts or variable life insurance policies issued by us or by other life insurance companies. In some cases, the investment options also may be available through participation in certain qualified pension or retirement plans. The portfolios' investment advisers and managers (i.e. subadvisers) may manage publicly traded mutual funds with similar names and investment objectives. However, the portfolios are not directly related to any publicly traded mutual fund. You should not compare the performance of any investment option described in this prospectus with the performance of a publicly traded mutual fund. The performance of any publicly traded mutual fund could differ substantially from that of any of the investment options of our Separate Account.
The portfolios available under the policies are as described in the following table:
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Portfolio Subadviser Investment Objective
500 Index B John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To approximate the aggregate total return of a broad-based U.S. domestic equity market index.
Active Bond Declaration Management & Research LLC; and John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
All Cap Core QS Investors, LLC To seek to provide long-term growth of capital.
Alpha Opportunities Wellington Management Company, LLP To seek to provide long-term total return.
American Asset Allocation Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide high total return (including income and capital gains) consistent with preservation of capital over the long-term.
American Global Growth Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide long-term growth of capital.
American Growth Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide growth of capital.
American Growth–Income Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide growth of capital and income.
American International Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide long-term growth of capital.
American New World Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide long-term capital appreciation.
Blue Chip Growth T. Rowe Price Associates, Inc. To seek to provide long-term growth of capital. Current income is a secondary objective.
Bond John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
Capital Appreciation Jennison Associates LLC To seek to provide long-term growth of capital.
Capital Appreciation Value T. Rowe Price Associates, Inc. To seek to provide long-term capital appreciation.
Core Bond Wells Capital Management, Incorporated To seek to provide total return consisting of income and capital appreciation.
Core Strategy John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide long-term growth of capital. Current income is also a consideration.
Emerging Markets Value Dimensional Fund Advisors LP To seek to provide long-term capital appreciation.
Equity-Income T. Rowe Price Associates, Inc. To seek to provide substantial dividend income and also long-term growth of capital.
Financial Industries John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide growth of capital.
Franklin Templeton Founding Allocation John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide long-term growth of capital.
Fundamental All Cap Core John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide long-term growth of capital.
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Portfolio Subadviser Investment Objective
Fundamental Large Cap Value John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide long-term capital appreciation.
Global Templeton Global Advisors Limited To seek to provide long-term capital appreciation.
Global Bond Pacific Investment Management Company LLC To seek to provide maximum total return, consistent with preservation of capital and prudent investment management.
Health Sciences T. Rowe Price Associates, Inc. To seek to provide long-term capital appreciation.
High Yield Western Asset Management Company To seek to provide an above-average total return over a market cycle of 3 to 5 years, consistent with reasonable risk.
International Core Grantham, Mayo, Van Otterloo & Co. LLC To seek to provide high total return.
International Equity Index B SSgA Funds Management, Inc. To seek to track the performance of a broad-based equity index of foreign companies primarily in developed countries and, to a lesser extent, in emerging markets.
International Growth Stock Invesco Advisers, Inc. To seek to provide long-term growth of capital.
International Small Company Dimensional Fund Advisors LP To seek to provide long-term capital appreciation.
International Value Templeton Investment Counsel, LLC To seek to provide long-term growth of capital.
Investment Quality Bond Wellington Management Company, LLP To seek to provide a high level of current income consistent with the maintenance of principal and liquidity.
Lifestyle Aggressive MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide long-term growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Balanced MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide growth of capital and current income while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Conservative MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide current income and growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Growth MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide long-term growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Moderate MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide current income and growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Mid Cap Index John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to approximate the aggregate total return of a medium-capitalization U.S. domestic equity market index.
Mid Cap Stock Wellington Management Company, LLP To seek to provide long-term growth of capital.
Mid Value T. Rowe Price Associates, Inc. To seek to provide long-term capital appreciation.
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Portfolio Subadviser Investment Objective
Money Market John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to obtain maximum current income consistent with preservation of principal and liquidity. Certain market conditions may cause the return of the portfolio to become low or possibly negative.
PIMCO VIT All Asset (a series of PIMCO Variable Insurance Trust) (only Class M is available) Pacific Investment Management Company LLC To seek to provide maximum real return, consistent with preservation of real capital and prudent investment management.
Real Estate Securities Deutsche Investment Management Americas Inc. To seek to provide a combination of long-term capital appreciation and current income.
Science & Technology T. Rowe Price Associates, Inc.; and Allianz Global Investors U.S. LLC To seek to provide long-term growth of capital. Current income is incidental to the portfolio’s objective.
Short Term Government Income John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide a high level of current income consistent with preservation of capital. Maintaining a stable share price is a secondary goal.
Small Cap Growth Wellington Management Company, LLP To seek to provide long-term capital appreciation.
Small Cap Index John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to approximate the aggregate total return of a small-capitalization U.S. domestic equity market index.
Small Cap Opportunities Dimensional Fund Advisors LP; and Invesco Advisers, Inc. To seek to provide long-term capital appreciation.
Small Cap Value Wellington Management Company, LLP To seek to provide long-term capital appreciation.
Small Company Value T. Rowe Price Associates, Inc. To seek to provide long-term growth of capital.
Strategic Income Opportunities John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide a high level of current income.
Total Stock Market Index John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to approximate the aggregate total return of a broad U.S. domestic equity market index.
Ultra Short Term Bond John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide a high level of current income consistent with the maintenance of liquidity and the preservation of capital.
U.S. Equity Grantham, Mayo, Van Otterloo & Co. LLC To seek to provide long-term capital appreciation.
Utilities Massachusetts Financial Services Company To seek to provide capital growth and current income (income above that available from the portfolio invested entirely in equity securities).
Value Invesco Advisers, Inc. To seek to provide an above-average total return over a market cycle of 3 to 5 years, consistent with reasonable risk.
POLICY SUMMARY
General
The policy is a flexible premium variable universal life insurance policy. This summary provides a general description of the important features of the policy. It is not comprehensive and is qualified in its entirety by the more detailed information contained in this prospectus. Unless otherwise stated or implied by the context, the discussions in this prospectus assume that the policy has not gone into default, there is no outstanding Policy Debt and the death benefit is not determined by the Minimum Death Benefit percentage. The policy’s provisions may vary in some states. The terms of the policy and any endorsements or riders will supersede the disclosure in this prospectus.
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Death Benefits
The policy provides a death benefit in the event of the death of the Life Insured while the policy is in force. The basic death benefit amount is the Face Amount, which is provided for the lifetime of the Life Insured with no maturity or expiration date. There may be other amounts added to the death benefit as described below.
Flexible Term Insurance Option. You may add a flexible term insurance option rider (the “FTIO Rider”) to the policy to provide additional term life insurance coverage on the Life Insured. Cost of insurance rates are less than or equal to those of the policy and no Sales Loads or surrender charge will apply. However, unlike the Face Amount of the policy, the FTIO Rider will terminate at the Life Insured’s Attained Age 100. The FTIO Rider also offers the flexibility to schedule varying death benefit amounts on future dates (the “Scheduled Death Benefits”).
Death Benefit Options. There are two death benefit Options. Option 1 provides a death benefit equal to the Face Amount of the policy and the Scheduled Death Benefits of the FTIO Rider or, if greater, the Minimum Death Benefit. Option 2 provides a death benefit equal to the Face Amount and the Scheduled Death Benefits, plus the Policy Value or, if greater, the Minimum Death Benefit. You may change the death benefit Option and increase or decrease the Face Amount and Scheduled Death Benefits.
Age 100 Advantage. If the Life Insured is alive on the Policy Anniversary when the Life Insured reaches Attained Age 100, the policy will continue in force subject to the following unless the policy owner chooses to surrender the policy for its Net Cash Surrender Value:
•  the policy will be continued until the earlier of the death of the Life Insured or the date the policy owner surrenders the policy;
•  no additional premium payments will be accepted although loan repayments will be accepted;
•  no additional charges or deductions (described under “Charges and Deductions”) will be assessed;
•  interest on any Policy Debt will continue to accrue;
•  the policy owner may continue to transfer portions of the Policy Value among the Investment Accounts and the Fixed Accounts as described in this prospectus.
Premiums
Premium payments may be made at any time prior to Attained Age 100 and in any amount, subject to certain limitations (see “Premium Payments—Premium Limitations”). Net Premiums will be allocated to one or more of the Fixed Account and the sub-accounts of the Separate Account. You may change allocations and make transfers among the accounts subject to limitations described below.
Policy Value
The Policy Value is the accumulation of premiums paid, less charges and deductions we take for expenses and cost of insurance, plus or minus the investment returns of the accounts to which the Policy Value has been allocated. You may obtain a portion of the Policy Value by taking a policy loan or a partial withdrawal or by full surrender of the policy.
Policy Loans
You may borrow against the Net Cash Surrender Value of the policy. Loan interest will accrue daily and be payable in arrears on each Policy Anniversary. The Policy Debt will be deducted from amounts payable at the Life Insured’s death or upon surrender.
Surrender and Partial Withdrawals
You may make a partial withdrawal of Policy Value. It may result in a decrease in the Face Amount and Scheduled Death Benefits and assessment of a portion of the surrender charge. You may surrender the policy for its Net Cash Surrender Value at any time.
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Lapse and Reinstatement
A policy will lapse and terminate without value when the Net Cash Surrender Value is insufficient to pay the next monthly deduction and a grace period of 61 days expires without an adequate premium payment from you. You may reinstate a lapsed policy within five years following lapse if the policy was not surrendered for its Net Cash Surrender Value. Evidence of insurability is required, along with a premium payment described under “Reinstatement.”
The policy differs in two important ways from a conventional life insurance policy. First, failure to make planned premium payments will not itself cause the policy to lapse. Second, the policy can lapse even if planned premiums have been paid.
Charges and Deductions
We assess charges and deductions in connection with the policy, in the form of monthly deductions for the cost of insurance and administrative expenses, charges assessed daily against amounts in the Investment Accounts and loads deducted from premiums paid.
For more information, please refer to the prospectus for the underlying portfolio.
Sales Load or Surrender Charge. You may choose Coverage Amounts with one of two alternative charge structures representing different ways to cover a portion of our marketing and distribution costs. Generally, policy benefits will be approximately equal in present value under either alternative. However, there is no guarantee each alternative will perform the same in all circumstances. Therefore, you should obtain individualized illustrations for both charge structures.
Sales Load coverage features a load deducted immediately from premiums paid and no surrender charge. Surrender Charge coverage features no added sales load with surrender charges assessed upon early surrender, lapse, partial withdrawal or coverage decrease. Current cost of insurance charges in early years are higher for Surrender Charge coverage.
Reduction in Charges and Enhancement of Surrender Values. The policy is designed for employers and other sponsoring organizations that may purchases multiple policies as a Case. The size or nature of the Case may result in expected savings of sales, underwriting, administrative or other costs. If so, we may offer reductions of policy charges and enhancements of surrender value. We may change the nature and amount of reductions and enhancements available from time to time. They will be determined in a way that is not unfairly discriminatory to policyholders.
Investment Options and Investment Subadvisers
You may allocate Net Premiums to the Fixed Account or to one or more of the sub-accounts of the Separate Account. Each of the sub-accounts invests in the shares of one of the portfolios described in the Table of Investment Options and Investment Subadvisers.
The portfolios also employ subadvisers. The Table of Investment Options and Investment Subadvisers shows the subadvisers that provide investment subadvisory services to the indicated portfolios.
Allocating Net Premiums only to one or a small number of the investment options (other than the Lifestyle Trusts) should not be considered a balanced investment strategy. In particular, allocating Net Premiums to a small number of investment options that concentrate their investments in a particular business or market sector will increase the risk that the value of your policy will be more volatile since these investment options may react similarly to business or market specific events. Examples of business or market sectors where this risk historically has been and may continue to be particularly high include: (a) technology related businesses, including internet related businesses, (b) small cap securities and © foreign securities. The Company does not provide advice regarding appropriate investment allocations. Please discuss this matter with your financial adviser.
Description of John Hancock (USA)
We are a stock life insurance company incorporated in Maine on August 20, 1955 by a special act of the Maine legislature and redomesticated under the laws of Michigan. We are a licensed life insurance company in the District of Columbia and all states of the United States except New York. Our ultimate parent is Manulife Financial Corporation (“MFC”), a publicly traded company based in Toronto, Canada. MFC is the holding company of John Hancock USA and its
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subsidiaries. However, neither John Hancock USA nor any of its affiliated companies guarantees the investment performance of the Separate Account.
We are ranked and rated by independent financial rating services, which may include Moody's, Standard & Poor's, Fitch and A.M. Best. The purpose of these ratings is to reflect the financial strength or claims-paying ability of the company, but they do not specifically relate to its products, the performance (return) of these products, the value of any investment in these products upon withdrawal or to individual securities held in any portfolio. These ratings do not apply to the safety and performance of the Separate Account.
Description of Separate Account N
The investment accounts shown on page 1 are in fact subaccounts of the John Hancock Life Insurance Company (U.S.A.) Separate Account N, a separate account operated by us under Michigan law. The Separate Account meets the definition of “separate account” under the Federal securities laws and is registered as a unit investment trust under the 1940 Act. Such registration does not involve supervision by the SEC of the management of the Separate Account or of us.
The Separate Account’s assets are our property. Each policy provides that amounts we hold in the Separate Account pursuant to the policies cannot be reached by any other persons who may have claims against us and can’t be used to pay any indebtedness of John Hancock USA other than those arising out of policies that use the Separate Account. Income, gains and losses credited to, or charged against, the Separate Account reflect the Separate Account's own investment experience and not the investment experience of John Hancock USA's other assets. John Hancock USA is obligated to pay all amounts promised to policy owners under the policies.
New subaccounts may be added and made available to policy owners from time to time. Existing subaccounts may be modified or deleted at any time.
ISSUING A POLICY
Use of the Policy
The policy is designed to provide employers or other organizations with life insurance coverage on employees or other individuals in whose lives they have an insurable interest. The policy may be owned by an individual or a corporation, trust, association, or similar entity. The policy may be used for such purposes as funding non-qualified executive deferred compensation or salary continuation liabilities or death benefit liabilities of executive retirement plans, or as a source for funding cash flow obligations under such plans.
Requirements
To purchase a policy, an applicant must submit a completed application. A policy will not be issued until the underwriting process is completed to our satisfaction and we approve issuance of the policy.
Policies may be issued on a basis that does not distinguish between the Life Insured’s sex and/or smoking status, with prior approval from us. A policy will only be issued on the lives of insureds from Issue Ages 20 through 80. Each policy has a Policy Date, an Effective Date and an Issue Date. The Policy Date is the date from which the first monthly deductions are calculated and from which Policy Years, Policy Months and Policy Anniversaries are measured. The Policy Date is also the effective date of the initial Coverage Amount. The Policy Date is the same date as the Effective Date unless the policy is backdated (see “Backdating a Policy”). The Effective Date is the date we become obligated under the policy and when the first monthly deductions are taken. It is the later of the date we approve issuance of the policy and the date we receive at least the Minimum Initial Premium. The Issue Date is the date from which the Suicide and Incontestability provisions of the policy are measured.
If we approve issuance of a policy before we receive the Minimum Initial Premium then the Effective Date will be later than the Issue Date. The Minimum Initial Premium must be received by us within 60 days after the Issue Date and the Life Insured must be in good health on the Effective Date. If the Minimum Initial Premium is not paid or if the application is rejected, the policy will be canceled and any premiums paid will be returned to the applicant.
Net Premiums received prior to the Effective Date will be credited with interest at the rate of return earned on amounts allocated to the Money Market portfolio. On the Effective Date, Net Premiums received plus any interest credited will be
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allocated to Investment Accounts and the Fixed Account according to your instructions, unless first allocated to the Money Market Trust for the duration of the right to examine period (see “Right to Examine the Policy”).
Minimum Face Amount and Scheduled Death Benefit. The minimum Face Amount is $50,000 unless the FTIO Rider is added to the policy. With an FTIO Rider, the minimum Face Amount is $25,000 and the minimum Scheduled Death Benefit is $50,000 at all times.
Backdating a Policy. You may request that we backdate the policy by assigning a Policy Date earlier than the date the application is signed. We will not backdate the policy to a date earlier than that allowed by state law, which is generally three months to one year prior to the date of application for the policy. Monthly deductions will be made for the period the Policy Date is backdated.
Temporary Insurance Agreement
Temporary insurance coverage may be provided under the terms of a Temporary Insurance Agreement, subject to our underwriting practices. Generally, temporary life insurance may not exceed $1,000,000 and may not be in effect for more than 90 days. It is issued on a conditional receipt basis, which means that benefits would only be paid if the Life Insured met our usual and customary underwriting standards for the coverage applied for.
Underwriting
The policies are offered on three underwriting classes that require different types and amounts of information from the applicant and prospective Life Insured. Current cost of insurance charges in early Policy Years will vary by the type of underwriting and charges will generally be lower where underwriting information is more extensive. Under any of the underwriting bases, the acceptance of an application is subject to our underwriting rules and we may request additional information or reject an application for any reason.
Short Form Underwriting. The proposed Life Insured must answer qualifying questions in the application but is not required to provide detailed medical history, submit records or undergo examinations or tests unless requested to do so by us. Availability of Short Form underwriting depends on characteristics of the Case, such as the number of lives to be insured, the amounts of insurance and other factors, and it is generally available only up to Issue Age 65.
Simplified Underwriting. The proposed Life Insured must satisfactorily answer certain health questions in the application and may be required to submit existing medical records, but requirements to undergo examinations and tests are minimized. Availability of Simplified underwriting and the nature of the requirements will depend on characteristics of the Case and the proposed lives to be insured.
Regular (Medical) Underwriting. Where Short Form or Simplified underwriting is unavailable we require satisfactory evidence of insurability under our regular underwriting guidelines for individual applicants. This may include medical exams and other information. A proposed Life Insured who fails to qualify for a standard risk classification may be eligible to be insured with an additional substandard rating.
Right to Examine the Policy
A policy may be returned for a refund within 10 days after you receive it. Some states provide a longer period of time for this right, which will be stated in the policy if applicable. The policy can be mailed or delivered to the John Hancock USA agent who sold it or to the Service Office. Immediately upon such delivery or mailing, the policy shall be deemed void from the beginning. Within seven days after receipt of the returned policy at the Service Office we will refund an amount equal to the value of amounts in the Investment Accounts and the Fixed Account on the date we receive the returned policy, plus all charges deducted prior to that date, not including fees and expenses of the portfolios, minus any partial withdrawals and policy loans.
Some state laws require the refund of premiums paid without adjustment for investment gains and losses of the Separate Account. In these states, all Net Premiums will be allocated to the Money Market Trust during the right to examine period and the refund amount will be equal to all premiums received less any partial withdrawals and policy loans.
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If you request a Face Amount increase that results in new surrender charge or sales loads, you will have the same rights described above to cancel the increase. If canceled, the premiums paid during this right to examine period will be refunded, and the Policy Value and surrender charge or sales loads will be recalculated to be as they would have been had the premiums not been paid.
We reserve the right to delay the refund of any premium paid by check until the check has cleared.
(Applicable to Residents of California Only)
Residents in California age 60 and greater may return the policy for a refund at any time within 30 days after receiving it. The policy can be mailed or delivered to the Company’s agent who sold it or to the Service Office. If you cancel the policy during this 30 day period and your premiums were allocated to a Fixed Account or the Money-Market investment option, we will refund you the amount of all premiums paid. If your premiums were allocated to one or more of the Investment Accounts (other than the Money Market portfolio), we will refund you the value of amounts in the Investment Accounts and the Fixed Account on the date we receive the returned policy plus all charges deducted prior to that date, not including fees and expenses of the portfolios; minus any partial withdrawals and policy loans.
Your premiums will be placed in either (a) the Fixed Account, (b) the Money Market investment option or © in one or more of the Investment Accounts, based upon your instructions. If no instructions are given, your premiums will be placed in the Money Market investment option.
Life Insurance Qualification
A policy must satisfy either of two tests to qualify as a life insurance contract as defined in Section 7702 of the Internal Revenue Code of 1986, as amended (the “Code”). At the time of application, you must choose either the Cash Value Accumulation Test (“CVA Test”) or the Guideline Premium Test (“GP Test”) and the test cannot be changed once the policy is issued.
Cash Value Accumulation Test. The CVA Test requires the death benefit at any time to be at least a certain ratio of the Policy Value, based on prescribed calculations. The Minimum Death Benefit provision described below will ensure that the CVA Test is met. There is no restriction on the amount of premiums you may pay, but we will require you to provide satisfactory evidence of insurability before we accept an amount of premium that would increase the death benefit by more than the increase in Policy Value.
Guideline Premium Test. The GP Test limits the amount of premiums you may pay into the policy, given its death benefit, based on prescribed calculations. In addition, the GP Test requires the death benefit at any time to be at least a prescribed ratio of the Policy Value. These prescribed multiples are generally lower than those calculated under the CVA Test. The Minimum Death Benefit provision described below will ensure that this second requirement is met.
Changes to the policy or FTIO Rider, such as changes in Face Amount, Scheduled Death Benefit, death benefit Option or partial withdrawals, may affect the premium limits under the GP Test. Some changes will reduce future premium limits and may cause premiums already paid to exceed the new limits and force you to make a partial withdrawal.
DEATH BENEFITS
If the policy is in force at the time of the Life Insured’s death we will pay an insurance benefit to the beneficiary. The policy may remain in force for the Life Insured’s entire lifetime and there is no specified maturity or expiration date.
Insurance benefits are only payable when we receive due proof of death at the Service Office, in the form of either a certified copy of the death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other proof satisfactory to us.
The amount of the insurance benefit payable will be the death benefit on the date of death, as described below, less any Policy Debt and outstanding monthly deductions on the date of death. The insurance benefit will be paid in one lump sum unless another form of settlement is agreed to by the beneficiary and us. If the insurance benefit is paid in one sum, we will pay interest from the date of death to the date of payment. If the Life Insured should die after our receipt of a request for surrender, no insurance benefit will be payable, and we will pay only the Net Cash Surrender Value.
Minimum Death Benefit. Both the CVA Test and the GP Test require the death benefit to be at least a prescribed ratio of the Policy Value at all times. The Policy’s Minimum Death Benefit ensures that these requirements are met by providing that
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the death benefit shall be at least equal to the Policy Value multiplied by the applicable Minimum Death Benefit Percentage for the Attained Age of the Life Insured. Tables of Minimum Death Benefit Percentages appear below.
Table of Minimum Death Benefit Percentages.
 Age    GP Test
Percent 		  Male   CVA Test
Female 		  Unisex
20   250%   653%   779%   67.4%
21   250%   634%   754%   654%
22   250%   615%   730%   635%
23   250%   597%   706%   616%
24   250%   580%   684%   598%
25   250%   562%   662%   579%
26   250%   545%   640%   561%
27   250%   528%   619%   544%
28   250%   511%   599%   526%
29   250%   494%   580%   509%
30   250%   479%   561%   493%
31   250%   463%   542%   477%
32   250%   448%   525%   461%
33   250%   433%   507%   446%
34   250%   419%   491%   432%
35   250%   406%   475%   418%
36   250%   392%   459%   404%
37   250%   380%   444%   391%
38   250%   367%   430%   378%
39   250%   356%   416%   366%
40   250%   344%   403%   355%
41   243%   333%   390%   343%
42   236%   323%   378%   333%
43   229%   313%   366%   322%
44   222%   303%   355%   312%
45   215%   294%   344%   303%
46   209%   285%   333%   294%
47   203%   277%   323%   285%
48   197%   268%   313%   276%
49   191%   260%   304%   268%
50   185%   253%   295%   260%
51   178%   245%   286%   253%
52   171%   238%   278%   245%
53   164%   232%   270%   238%
54   157%   225%   262%   232%
55   150%   219%   254%   225%
56   146%   213%   247%   219%
57   142%   207%   240%   213%
58   138%   202%   233%   208%
59   134%   197%   227%   202%
 Age    GP Test
Percent 		  Male   CVA Test
Female 		  Unisex
60   130%   192%   221%   197%
61   128%   187%   214%   192%
62   126%   182%   208%   187%
63   124%   178%   203%   183%
64   122%   174%   197%   178%
65   120%   170%   192%   174%
66   119%   166%   187%   170%
67   118%   162%   182%   166%
68   117%   159%   177%   162%
69   116%   155%   173%   159%
70   115%   152%   169%   156%
71   113%   149%   164%   152%
72   111%   146%   160%   149%
73   109%   144%   156%   146%
74   107%   141%   153%   144%
75   105%   139%   149%   141%
76   105%   136%   146%   139%
77   105%   134%   143%   136%
78   105%   132%   140%   134%
79   105%   130%   138%   132%
80   105%   129%   135%   130%
81   105%   127%   133%   128%
82   105%   125%   130%   127%
83   105%   124%   128%   125%
84   105%   122%   126%   123%
85   105%   121%   124%   122%
86   105%   120%   123%   121%
87   105%   119%   121%   119%
88   105%   118%   119%   118%
89   105%   116%   118%   117%
90   105%   116%   117%   116%
91   104%   115%   115%   115%
92   103%   114%   114%   114%
93   102%   112%   113%   113%
94   101%   111%   112%   111%
95   100%   110%   110%   110%
96   100%   109%   109%   109%
97   100%   107%   107%   107%
98   100%   106%   106%   106%
99   100%   105%   105%   105%
100+   100%   100%   100%   100%
 
 
Flexible Term Insurance Option Rider
You may add the FTIO Rider to the policy to provide additional death benefit coverage on the Life Insured. The FTIO Rider provides flexible term life insurance to Attained Age 100 with cost of insurance charges less than or equal to those of the policy. The Rider will terminate at the earlier of Attained Age 100, the date the policy lapses or is surrendered, and your request to cancel the FTIO Rider.
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You may schedule the death benefit amounts that will apply at specified times (the “Scheduled Death Benefits”). Scheduled Death Benefits may be constant or varying from time to time. The Death Benefit Schedule will be shown in the policy.
The Term Insurance Benefit of the FTIO Rider is equal to (a) minus (b) but not less than zero where:
(a) the Scheduled Death Benefit for the Policy Month, and
(b) the Face Amount of the policy or, if greater, the policy’s Minimum Death Benefit
Even if the Term Insurance Benefit may be zero in a Policy Month, the Rider will not terminate.
Example. A policy is purchased for an executive as part of an employee benefit plan. The death benefit provided by the policy is to be equal to the executive’s salary of $100,000 increasing at 5% per year through age 64. Assuming the executive is currently 55, the policy will be issued with a death benefit Schedule as follows:
Policy Year   Scheduled
Death
Benefit
1
   100,000
2
   105,000
3
   110,250
4
   115,763
5
   121,551
6
   127,628
7
   134,010
8
   140,710
9
   147,746
10+
   155,133
The FTIO Rider amount will change each year as necessary to provide the benefits shown in the schedule, as follows:
Policy Year   Total
Death
Benefit 		  Face
Amount 		  Flexible
Term
Insurance
Amount
1
   100,000   100000   0
2
   105,000   100000   5,000
3
   110,250   100000   10,250
4
   115,763   100000   15,763
5
   121,551   100000   21,551
6
   127,628   100000   27,628
7
   134,010   100000   34,010
8
   140,710   100000   40,710
9
   147,746   100000   47,746
10
   155,133   100000   55,133
Death Benefit Options
You may choose either of two death benefit Options:
Death Benefit Option 1. The death benefit on any date is the Face Amount of the policy or, if greater, the Minimum Death Benefit, plus the Term Insurance Benefit of the FTIO Rider.
Death Benefit Option 2. The death benefit on any date is the Face Amount plus the Policy Value or, if greater, the Minimum Death Benefit, plus the Term Insurance Benefit of the FTIO Rider.
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Changing the Death Benefit Option
You may change the death benefit Option at any time. The change will take effect at the beginning of the next Policy Month that is at least 30 days after your written request is received at the Service Office. We reserve the right to limit changes that could cause the policy to fail to qualify as life insurance for tax purposes.
A change in the death benefit Option will result in a change in the Face Amount and Scheduled Death Benefits to avoid any change in the amount of death benefit, as follows:
•  Change from Option 1 to Option 2. The new Face Amount will be the Face Amount prior to the change less the Policy Value on the date of the change.
•  The Scheduled Death benefit amounts for dates on or after the date of the change will be the amounts scheduled prior to the change less the Policy Value on the date of the change.
•  Coverage Amounts will be reduced or eliminated in the order that they are listed in the policy until the total decrease in Coverage Amounts equals the decrease in Face Amount.
•  surrender charge will not be assessed for reductions that are solely due to a change in the death benefit Option.
Example. A policy is issued with a Face amount of $100,000, death benefit Option 1, and the following schedule:
Policy Year   Scheduled
Death Benefit
1
   100,000
2
   125,000
3
   150,000
4
   175,000
5+
   200,000
The death benefit Option is changed to Option 2 at the beginning of Policy Year 3. If the Policy Value at the time of the change is $10,000, then the Face Amount after the change will be $90,000 (the Face Amount prior to the change less the Policy Value) and the Death Benefit Schedule after the change will become:
Policy Year   Scheduled
Death Benefit
3
   140,000
4
   165,000
5+
   190,000
Change from Option 2 to Option 1. The new Face Amount will be the Face Amount prior to the change plus the Policy Value on the date of the change (but the new Face Amount will be no greater than the Scheduled Death Benefit on the date of the change.)
The resulting Face Amount increase will be added to the first Coverage Amount listed in the policy.
The Annual Premium Target for this Coverage Amount will not be increased and new surrender charge or Sales Loads will not apply, however, for an increase solely due to a change in the death benefit Option.
Example. A policy is issued with a Face amount of $100,000, death benefit Option 2, and the following schedule:
Policy Year   Scheduled
Death Benefit
1
   100,000
2
   125,000
3
   150,000
4
   175,000
5+
   200,000
The death benefit Option is changed to Option 1 at the beginning of Policy Year 3. If the Policy Value at the time of the change is $10,000, then the Face Amount after the change will be $110,000 (the Face Amount prior to the change plus the Policy Value), and the Death Benefit Schedule after the change will become:
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Policy Year   Scheduled
Death Benefit
3
   160,000
4
   185,000
5+
   210,000
Changing the Face Amount and Scheduled Death Benefits
•  At any time, you may request an increase or decrease to the Face Amount or any Scheduled Death Benefits effective on or after the date of change. We reserve the right to limit changes that could cause the policy to fail to qualify as life insurance for tax purposes.
•  Increases in Face Amount and Scheduled Death Benefits. Increases in Face Amount and Scheduled Death Benefits are subject to the following conditions:
•  Increases in Face Amount and Scheduled Death Benefits will require satisfactory evidence of the Life Insured’s insurability.
•  Increases will take effect at the beginning of the next Policy Month after we approve the request.
•  We may refuse a requested increase that would not meet our requirements for new policy issues at the time due to the Life Insured’s Attained Age or other factors.
•  If the Face Amount is increased (other than as required by a death benefit Option change) then all Scheduled Death Benefits effective on or after the date of the change will be increased by the amount of the Face Amount increase.
New Surrender Charges or Sales Loads for a Face Amount Increase. Coverage Amounts equal to the amount of the increase will be added to the policy as follows:
•  First, Coverage Amounts that were reduced or eliminated by a prior Face Amount decrease will be restored.
•  Second, if needed, a new Coverage Amount will be added to the policy with an Annual Premium Target and new surrender charge or Sales Loads. Any new Coverage Amount will be based on the Life Insured’s Attained Age and other relevant factors on the effective date of the increase.
Premiums paid on or after the increase may be attributed to the new Coverage Amount and result in surrender charge or Sales Loads (see “Charges and Deductions—Attribution of Premiums”).
Decreases in Face Amount and Scheduled Death Benefits. Decreases in Face Amount and Scheduled Death Benefits are subject to the following conditions:
•  Decreases in Face Amount and Scheduled Death Benefits will take effect at the beginning of the next policy Month which is at least 30 days after your written request is received at the Service Office.
•  If the Face Amount is decreased then all Scheduled Death Benefits effective on or after the date of the change will be decreased by the same amount.
•  If at any time the Scheduled Death Benefit decreases to less than the Face Amount, the Face Amount will be decreased to be equal to the Scheduled Death Benefit at that time.
•  Coverage Amounts equal to the amount of the Face Amount decrease will be reduced or eliminated in the reverse order that they are listed in the policy. surrender charge may be assessed (see “Charges and Deductions—Sales Load or Surrender Charge”).
Decreases in Face Amount under Death Benefit Option 1 due to a Partial Withdrawal. If death benefit Option 1 is in effect when a partial withdrawal is made, the Face Amount will be decreased by an amount equal to (a) minus (b) but not less than zero, where:
(a)  is the partial withdrawal amount plus any applicable Surrender Charge and
(b)  is the excess, if any, of the policy’s Minimum Death Benefit over its Face Amount, immediately prior to the partial withdrawal.
Decreases in Face Amount under death benefit Option 1 due to a Partial Withdrawal are subject to the following conditions:
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•  Coverage Amounts equal to the amount of the Face Amount decrease will be reduced or eliminated in the reverse order that they are listed in the policy.
•  All Scheduled Death Benefits effective on or after the date of the partial withdrawal will be decreased by the amount of the Face Amount decrease, unless you request otherwise and we approve.
•  A Face Amount decrease due to a partial withdrawal will not incur any Surrender Charge in addition to that applicable to the partial withdrawal (see “Charges and Deductions—Sales Load or Surrender Charge”).
Example for Face Increases and Decreases. A policy is issued with a Face Amount of $100,000, death benefit Option 1, and a Death Benefit Schedule as follows:
Policy Year   Scheduled
Death Benefit
1
   100,000
2
   125,000
3
   150,000
4
   175,000
5+
   200,000
Assume the following policy activity:
Activity Effect on Policy Change in Benefit Schedule
In Policy Year 2, the Face Amount is reduced to $80,000. The initial Coverage amount is reduced to $80,000. Policy Year Scheduled Death Benefit
2 105,000
3 130,000
4 155,000
5+ 180,000
In Policy Year 3, the Face Amount is increased to $120,000 The initial Coverage Amount (which earlier was reduced to $80,000) is restored to its original level of $100,000. A new Coverage Amount for $20,000 is added to the policy. This new coverage amount will have its own Annual Premium Target, and if applicable, its own Sales Load or surrender charge. A portion of the future premiums paid will be attributed to this Coverage Amount to determine the amount of the Sales Load or Surrender Charge. Policy Year Scheduled Death Benefit
3 170,000
4 195,000
5+ 220,000
In Policy Year 4, a Partial Withdrawal of $30,000 is made. The Face Amount is reduced to $90,000. The most recent Coverage Amount of $20,000 is reduced to $0, and the initial Coverage Amount is reduced to $90,000. Policy Year Scheduled Death Benefit
4 165,000
5 190,000
Factors that Affect the Death Benefit. In the case of death benefit Option 2 where the death benefit is the Face Amount plus the Policy Value, changes in the Policy Value will affect the amount of death benefit. Factors that affect the Policy Value are the investment performance of the variable investment options chosen and the charges deducted. For a discussion of how
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these factors affect Policy Value see the “Risks/Benefits Summary.” These factors do not affect the Face Amount of the policy. Therefore, the amount of death benefit under Option 1 will not be less than the Face Amount as long as the policy does not lapse.
PREMIUM PAYMENTS
Initial Premiums
No premiums will be accepted prior to receipt of a completed application by us. All premiums received prior to the Effective Date of the policy will be held in the general account and credited with interest from the date of receipt at the rate of return earned on amounts allocated to the Money Market Trust.
On the Effective Date, the Net Premiums paid plus interest credited will be allocated among the Investment Accounts or the Fixed Account in accordance with your instructions, unless first allocated to the Money Market Trust for the duration of the right to examine period (see “Right to Examine the Policy”).
Subsequent Premiums
After the payment of the initial premium, premiums may be paid at any time during the lifetime of the Life Insured prior to Attained Age 100 and in any amount subject to the premium limitations described below. A policy will be issued with a planned premium, which is based on the amount of premium you wish to pay. We will send you notices of your planned premium at the payment interval you select. However, you are under no obligation to make the planned premium payment.
Payment of premiums will not guarantee that the policy will stay in force and failure to pay premiums will not necessarily cause the policy to lapse. The policy will remain in force so long as the Net Cash Surrender Value is sufficient to cover policy charges.
Premium Limitations
If the policy is issued under the GP Test, the total of all premiums paid may not exceed the then-current maximum premium limitations established by federal income tax law for the policy to qualify as life insurance. The GP Test premium limits are stated in the policy. If a premium is received which would result in total premiums exceeding the applicable GP Test limit, we will only accept that portion of the premium that will not exceed the limit. Any premium in excess of that amount will be returned.
If the policy is issued under the CVA Test, there is no restriction on the amount of premiums that may be paid into a policy, but you must provide satisfactory evidence of insurability before we accept any premium that would increase the death benefit by an amount greater than the increase in Policy Value.
Premium Allocation
You may allocate premiums to the Fixed Account and Investment Accounts. Allocations may be made as percentages that are between zero and 100% that sum to exactly 100%. Alternatively, you may allocate a premium in dollar amounts that sum to exactly the Net Premium amount. You may change premium allocations at any time and the change will take effect on the date a request for change satisfactory to us is received at the Service Office.
CHARGES AND DEDUCTIONS
Premium Load
We will deduct a Premium Load as a percentage of each premium payment that is guaranteed never to exceed 2.0%. Currently, we waive this load in Policy Years 11 and later and charge 0%.
The charge is intended to cover a portion of the aggregate amount of various taxes and fees we pay to federal, state and local governments. It is not based on the actual premium tax rate of your state of residence or any other specific tax.
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Sales Load or Surrender Charge
Each Coverage Amount listed in the policy is designated as having either a Sales Load or Surrender Charge. One or the other of these charges will apply to a Coverage Amount, but not both. This designation cannot be changed after a Coverage Amount is effective and, currently, the same alternative must apply to all Coverage Amounts.
Generally, policy benefits will be approximately equal in present value under either alternative. However, there is no guarantee each alternative will perform the same in all circumstances. Therefore, you should obtain individualized illustrations for both charge structures. Current cost of insurance rates in early Policy Years will be higher for the Surrender Charge alternative.
The Sales Load or Surrender Charge is intended to cover a portion of our costs of marketing and distributing the policies.
Attribution of Premiums. An Annual Premium Target is associated with each Coverage Amount. Annual Premium Targets are based on the Coverage Amount and the Life Insured’s Attained Age, sex and smoking status on the effective date of the Coverage Amount. The Annual Premium Targets are listed with the Coverage Amounts in the policy.
Premium payments will be attributed to Coverage Amounts that have been in effect for less than 5 years. Attribution will begin with the first applicable Coverage Amount that is listed in the policy. The sum of all premium amounts attributed to a Coverage Amount in a Coverage Year is limited to the Annual Premium Target shown in the policy. Premium amounts that exceed the Annual Premium Target will be attributed to the next listed Coverage Amount, up to its own Annual Premium Target. Attribution will continue in this manner until either the entire premium is attributed to Coverage Amounts or the Annual Premium Target is exceeded for all applicable Coverage Amounts.
Sales Load. We deduct a Sales Load from all premium amounts attributed to a Coverage Amount designated as having a Sales Load. The Sales Load is a percentage of premiums guaranteed never to exceed the percentages below.
Currently we are charging these percentages.
Coverage Year   Percentage   Coverage Year   Percentage
1
   8%   4   2%
2
   6%   5   1%
3
   3%   6+   0%
Surrender Charge. We will deduct a Surrender Charge from the Net Policy Value upon elimination or reduction of a Coverage Amount designated as having a Surrender Charge during the first 9 Coverage Years. Coverage Amounts may be eliminated or reduced and a Surrender Charge assessed due to:
•  surrender of the policy for its Net Cash Surrender Value,
•  a partial withdrawal which exceeds the Free Partial Withdrawal Amount,
•  a Face Amount decrease that is not solely due to a death benefit Option change, or
•  lapse of the policy.
The Surrender Charge for an applicable Coverage Amount is a percentage of the sum of all premiums attributed to it since its effective date. Surrender Charge percentages are guaranteed never to exceed those below. Currently, we are charging these percentages:
Coverage Year   Percentage   Coverage Year   Percentage
1
   5.0%   6   1.5%
2
   4.0%   7   1.0%
3
   3.0%   8   1.0%
4
   2.5%   9   0.5%
5
   2.0%   10+   0.0%
Although the Surrender Charge percentages remain level or decrease as the Coverage Year increases, the total dollar amount of surrender charge may increase, as the total premium paid increases. Premiums paid in any Coverage Year in excess of the Annual Premium Target and premiums paid after the fifth Coverage Year may not add to the Surrender Charge, so the timing of premium payments may affect the amount of the Surrender Charge.
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Depending upon circumstances such as premiums paid and performance of the underlying investment options, there may be a Policy Value but no Cash Surrender Value available due to the existence of the Surrender Charge.
Unless otherwise allowed by us and specified by you, surrender charge will be allocated among the Investment Accounts and the Fixed Account in the same proportion as the Policy Value in each Account bears to the Net Policy Value.
Surrender Charges on a Partial Withdrawal. We will assess a portion of the Surrender Charge if you take a partial withdrawal that exceeds the Free Withdrawal Amount. The Free Withdrawal Amount is 10% of the Net Cash Surrender Value at the time of the withdrawal less the amount of any partial withdrawals already taken in the same Policy Year.
The portion of the policy’s total Surrender Charge that will be assessed is the ratio of (a) to (b), where (a) is the amount being withdrawn in excess of the Free Withdrawal Amount and (b) is the Net Cash Surrender Value immediately prior to the withdrawal. The remaining surrender charge for all Coverage Amounts will be reduced in the same proportion that the Surrender Charge assessed bears to the policy’s total Surrender Charge immediately prior to the partial withdrawal.
Surrender Charges on a Face Amount Decrease. We will assess a portion of the Surrender Charge upon a Face Amount decrease that is not required due to a death benefit Option change or partial withdrawal. For each Coverage Amount that is reduced or eliminated as a result of the decrease, we will assess a portion of any applicable Surrender Charge. The proportion of the Surrender Charge that is assessed will be the ratio of amount by which the Coverage Amount is reduced to the Coverage Amount prior to reduction. The remaining surrender charge for affected Coverage Amounts will be reduced by the same ratio.
Monthly Deductions
On the Policy Date and at the beginning of each Policy Month prior to Attained Age 100, a deduction is due from the Net Policy Value to cover certain charges described below. Monthly deductions due prior to the policy’s Effective Date will be taken on the Effective Date. Unless otherwise allowed by us and specified by you, the monthly deduction will be allocated among the Investment Accounts and the Fixed Account in the same proportion as the Policy Value in each of the Investment Accounts and the Fixed Account bears to the Net Policy Value.
Administration Charge. Currently we deduct a charge of $12 per Policy Month, which is guaranteed never to be exceeded. This charge is intended to cover certain administrative expenses associated with the policy, including maintaining policy records, collecting premiums and processing death claims, surrender and withdrawal requests and various changes permitted under a policy.
Cost of Insurance Charge. A monthly charge for the cost of insurance is paid to the Company and is determined by multiplying a cost of insurance rate by the net amount at risk at the beginning of each Policy Month.
Death Benefit Option 1. The net amount at risk is equal to the greater of zero, or (a) minus (b), where
(a) is the applicable death benefit amount on the first day of the Policy Month, divided by 1.0024663; and
(b) is the Policy Value attributed to that death benefit amount on the first day of the Policy Month.
Death Benefit Option 2. The net amount at risk is equal to the Face Amount of insurance.
Cost of insurance rates and net amounts at risk are determined separately for each Coverage Amount and for the excess of the death benefit over the Face Amount (the Face Amount is the sum of the Coverage Amounts).
Attribution of Policy Value to Net Amounts at Risk. To determine the net amounts at risk, the Policy Value will be attributed to Coverage Amounts in the order listed in the policy. The amount of Policy Value attributed to a Coverage Amount will be limited to the amount that results in zero net amount at risk, and any excess Policy Value will then be attributed to the next listed Coverage Amount. Attribution will continue in this manner until either the entire Policy Value is attributed or the end of the list of Coverage Amounts is reached. Any remaining Policy Value will then be attributed to the excess of the death benefit over the Face Amount.
Current Cost of Insurance Rates. Cost of insurance rates are determined separately for each Coverage Amount and the excess of the death benefit over the Face Amount. There are different current cost of insurance rate bases for:
•  Coverage Amounts having Sales Loads,
•  Coverage Amounts having surrender charge, and
•  The excess of the death benefit over the Face Amount, including any Term Insurance Benefit under the FTIO Rider.
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The cost of insurance rate in a specific Policy Month for an applicable death benefit amount will depend on:
•  the cost of insurance rate basis for the applicable death benefit amount,
•  the Life Insured’s Attained Age, sex (unless unisex rates are required by law) and smoking status on the effective date of the applicable death benefit amount,
•  the underwriting class of the applicable death benefit amount,
•  the Coverage Year, or Policy Year for the excess of the death benefit over the Face Amount,
•  any extra charges for substandard ratings, as stated in the policy.
Since the net amount at risk for death benefit Option 1 is based on a formula that includes as factors the Policy Value, the net amount at risk is affected by the investment performance of the underlying investment options chosen, payment of premiums and charges assessed.
Cost of insurance rates will generally increase with the Life Insured’s age and the Coverage Year.
Cost of insurance rates reflect our expectation as to future mortality experience. They are also intended to cover our general costs of providing the policy, to the extent that these costs are not covered by other charges. Current cost of insurance rates may be changed by us on a basis that does not unfairly discriminate within the class of lives insured.
Guaranteed Maximum Cost of Insurance Rates. In no event will the cost of insurance rates we charge exceed the guaranteed maximum rates set forth in the policy, except to the extent that an extra charge is imposed for a substandard rating. The guaranteed rates are the based on 1980 Commissioners Standard Ordinary Sex Distinct (unless unisex rates are required by law) ANB Aggregate Ultimate Mortality Tables. Current cost of insurance rates may be less than the guaranteed rates.
Asset Based Risk Charge Deducted from Investment Accounts
We assess a daily charge against amounts in the Investment Accounts. This charge is intended to compensate us for insurance risks we assume under the policy, such as benefit payments and expenses that are higher than we expected. We will realize a gain from this charge to the extent it is not needed to provide benefits and pay expenses under the policy.
The charge is a percentage of amounts in the Investment Accounts, which will reduce Unit Values of the sub-accounts. The charge is guaranteed never to exceed an annual rate of 0.50%. Currently, we charge the following rates:
PolicyYear   Annual Rate
1-10
   0.50%
11+
   0.25%
Reduction in Charges and Enhanced Surrender Values
The policy is designed for employers and other sponsoring organizations that may purchase multiple policies as a Case. The size or nature of the Case may result in expected savings of sales, underwriting, administrative or other costs. If so, we expect to offer reductions of policy charges and enhancements of surrender value. Eligibility for reductions and enhancements and the amounts available will be determined by a number of factors, including the number of lives to be insured, the total premiums expected to be paid, total assets under management for the policy owner, the nature of the relationship among the lives insured, the purpose for which the policies are being purchased, expected persistency of the individual policies, and any other circumstances which we believe to be relevant to the expected reduction of our expenses. Some of reductions and enhancements may be guaranteed and others may be subject to restrictions or to withdrawal or modification, on a uniform case basis. We may change the nature and amount of reductions and enhancements available from time to time. Reductions and enhancements will be determined in a way that is not unfairly discriminatory to policy owners.
COMPANY TAX CONSIDERATIONS
Currently, we make no specific charge for any federal, state, or local taxes that we incur that may be attributable to such Account or to the policy. We reserve the right in the future to make a charge for any such tax or other economic burden resulting from the application of tax laws that we determines to be attributable to the Separate Account or to the policy.
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POLICY VALUE
Determination of the Policy Value
A policy has a Policy Value, a portion of which is available to you by making a policy loan or partial withdrawal, or upon surrender of the policy. The Policy Value may also affect the amount of the death benefit. The Policy Value at any time is equal to the sum of the values in the Investment Accounts, the Fixed Account, and the Loan Account.
The Policy Value is affected by the investment performance of the Investment Account chosen and the rate of interest credited if amounts are allocated to the Fixed Account. The Policy Value is also affected by the charges deducted. For a discussion of how these factors affect Policy Value see the “Risks/Benefits Summary.”
Investment Accounts. An Investment Account is established under each policy for each sub-account of the Separate Account to which Net Premiums or transfer amounts have been allocated. Each Investment Account under a policy measures the interest of the policy in the corresponding sub-account. The value of the Investment Account established for a particular sub-account is equal to the number of units of that sub-account credited to the policy times the value of such units.
Fixed Account. Amounts in the Fixed Account do not vary with the investment performance of any sub-account. Instead, these amounts are credited with interest at a rate determined by John Hancock USA. See “The General Account—Fixed Account”.
Loan Account. Amounts borrowed from the policy are transferred to the Loan Account. Amounts in the Loan Account do not vary with the investment performance of any sub-account. Instead, these amounts are credited with interest at a rate determined by John Hancock USA that is lower than the loan interest rate charged on Policy Debt. See “Policy Loans— Loan Account”.
Units and Unit Values
Crediting and Canceling Units. Units of a particular sub-account are credited to a policy when Net Premiums are allocated to that sub-account or amounts are transferred to that sub-account. Units of a sub-account are cancelled whenever amounts are deducted, transferred or withdrawn from the sub-account. The number of units credited or cancelled for a specific transaction is based on the dollar amount of the transaction divided by the value of the unit on the Business Day on which the transaction occurs. The number of units credited with respect to a premium payment will be based on the applicable unit values for the Business Day on which the premium is received at the Service Office, except for any premiums received before the Effective Date. For premiums received before the Effective Date, the values will be determined on the Effective Date.
Units are valued at the end of each Business Day. When an order involving the crediting or canceling of units is received after the end of a Business Day, or on a day that is not a Business Day, the order will be processed on the basis of unit values determined on the next Business Day. Similarly, any determination of Policy Value, Investment Account value or death benefit to be made on a day that is not a Business Day will be made on the next Business Day.
Unit Values. For each Business Day the unit value for a sub-account is determined by multiplying the unit value for the immediately preceding Business Day by the net investment factor for that sub-account on such subsequent Business Day.
The net investment factor for a sub-account on any Business Day is equal to (a) divided by (b) minus (c), where:
(a)  is the net asset value of the underlying portfolio shares held by that sub-account as of the end of such Business Day before any policy transactions are made on that day;
(b)  is the net asset value of the underlying portfolio shares held by that sub-account as of the end of the immediately preceding Business Day after all policy transactions were made for that day; and
(c)  is a charge not exceeding the daily mortality and expense risk charge shown in the “Charges and Deductions— Asset Based Risk Charge Deducted from Investment Accounts” section.
The value of a unit may increase, decrease, or remain the same, depending on the investment performance of a sub-account from one Business Day to the next.
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Transfers of Policy Value
Market timing and disruptive trading risks
The policy is not designed for professional market timers or highly active traders, including persons or entities that engage in programmed, large or frequent transfers among the investment accounts or between the investment accounts and any available fixed account. The policy is also not designed to accommodate trading that results in transfers that are large in relation to the total assets of the underlying portfolio.
Variable investment options in variable life insurance products can be a prime target for abusive transfer activity because these products value their investment options on a daily basis and allow transfers among investment options without immediate tax consequences. As a result, some investors may seek to frequently transfer into and out of variable investment options or to make large transfers in reaction to market news or to exploit a perceived pricing inefficiency. Whatever the reason, long-term investors in a variable investment option can be harmed by large or frequent transfer activity. For example, such activity may expose the investment account's underlying portfolio to increased portfolio transaction costs and/or disrupt the portfolio manager’s ability to effectively manage the portfolio's investments in accordance with the portfolio’s investment objectives and policies. This could include causing the portfolio to maintain higher levels of cash than would otherwise be the case, or liquidating investments prematurely. Accordingly, frequent or large transfers may result in dilution with respect to interests held for long-term investment and adversely affect policy owners, beneficiaries and the underlying portfolios.
To discourage market timing and disruptive trading activity, we impose restrictions on transfers and reserve the right to change, suspend or terminate telephone and facsimile transaction privileges. In addition, we reserve the right to take other actions at any time to restrict trading, including, but not limited to: (i) restricting the number of transfers made during a defined period, (ii) restricting the dollar amount of transfers, (iii) restricting transfers into and out of certain investment options, (iv) restricting the method used to submit transfers, and (v) deferring a transfer at any time we are unable to purchase or redeem shares of the underlying portfolio.
We may also impose additional administrative conditions upon, or prohibit a transfer request made by a third party giving instructions on behalf of multiple policies, whether owned by the same owner or different owners. If you engage a third party for asset allocation services, then you may be subject to these transfer restrictions because of the actions of that party in providing those services. We will notify the third party you have engaged if we exercise this right.
While we seek to identify and prevent disruptive trading activity, it may not always be possible to do so. Therefore, no assurance can be given that the restrictions we impose will be successful in preventing all disruptive trading and avoiding harm to long-term investors.
Our current practice is to restrict transfers into or out of variable investment options to two per calendar month (except with respect to those policies described in the following paragraph). In applying this restriction any transfer request involving the transfer of account value into or out of multiple variable investment options will still count as only one request. No more than one transfer request may be made on any day. You may, however, transfer to the Money Market portfolio even if the two transfer per month limit has been reached, but only if 100% of the Policy Value in all variable investment options is transferred to the Money Market portfolio. If such a transfer to the Money Market investment portfolio is made, then, for the 30 calendar day period after such transfer, no transfers from the Money Market portfolio to any other variable investment options or to the Fixed Account may be made. If a policy offers a dollar cost averaging or automatic asset allocation rebalancing program, any transfers pursuant to such program are not considered transfers subject to these restrictions on frequent trading. The restrictions described in this paragraph will be applied uniformly to all policy owners subject to the restrictions.
Policies may be purchased by a corporation or other entity as a means to informally finance the liabilities created by an employee benefit plan, and to this end the entity may aggregately manage the policies purchased to match its liabilities under the plan. Policies sold under these circumstances are subject to special transfer restrictions. In lieu of the two transfers per month restriction, we will allow the policy owner under these circumstances to rebalance the investment options in its policies within the following limits: (i) during the 10 calendar day period after any account values are transferred from one portfolio into a second portfolio, the values can only be transferred out of the second investment option if they are transferred into the Money Market portfolio; and (ii) any account values that would otherwise not be transferable by application of the 10 day limit described above and that are transferred into the Money Market portfolio may not be transferred out of the Money Market portfolio into any other investment options (variable or fixed) for 30 calendar days. The restrictions described in this paragraph will be applied uniformly to all policy owners subject to the restrictions.
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Subject to our approval, we may offer policies purchased by a corporation or other entity that has purchased policies to match its liabilities under an employee benefit plan, as described above, the ability to electronically rebalance the investment options in its policies. Under these circumstances, in lieu of imposing any specific limit upon the number or timing of transfers, we will monitor aggregate trades among the sub-accounts for frequency, pattern and size for potentially harmful investment practices. If we detect trading activity that we believe may be harmful to the overall operation of any investment account or underlying portfolio, we may impose conditions on policies employing electronic rebalancing to submit trades, including setting limits upon the number and timing of transfers, and revoking privileges to make trades by any means other than written communication submitted via U.S. mail. The restrictions described in these paragraphs will be applied uniformly to all policy owners subject to the restrictions.
We reserve the right to modify or terminate the transfer privilege at any time in accordance with applicable law. Transfer privileges are also subject to any restrictions that may be imposed by the portfolios. In addition, we reserve the right to defer the transfer privilege at any time that we are unable to purchase or redeem shares of a portfolio.
Rule 22c-2 under the 1940 Act requires us to provide tax identification numbers and other policy owner transaction information to John Hancock Trust or to other investment companies in which the Separate Account invests, at their request. An investment company will use this information to identify any pattern or frequency of investment account transfers that may violate their frequent trading policy. An investment company may require us to impose trading restrictions in addition to those described above if violations of their frequent trading policy are discovered.
Transfers Involving Fixed Account.
While the policy is in force, you may transfer the Policy Value from any of the Investment Accounts to the Fixed Account without incurring transfer charges:
•  within eighteen months after the Issue Date; or
•  within 60 days of the effective date of a material change in the investment objectives of any of the sub-accounts; or
•  within 60 days of the date of notification of such change, whichever is later.
Such transfers will not count against the twelve transfers that may be made free of charge in any Policy Year.
The maximum amount that you may transfer from the Fixed Account in any one Policy Year is the greater of $2,000, 15% of the Fixed Account value at the previous Policy Anniversary, or the amount transferred out of the Fixed Account during the previous policy year. Any transfer which involves a transfer out of the Fixed Account may not involve a transfer to the Investment Account for the Money Market portfolio.
Telephone Transfers. Transfer requests must be in writing in a form satisfactory to us, or by telephone if a currently valid telephone transfer authorization form is on file. Although failure to follow reasonable procedures may result in our being liable for any losses resulting from unauthorized or fraudulent telephone transfers, we will not be liable for following instructions communicated by telephone that we reasonably believe to be genuine. We will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures shall consist of confirming that a valid telephone authorization form is on file, tape recording of all telephone transactions and providing written confirmation thereof.
POLICY LOANS
At any time while the policy is in force, you may borrow against the Policy Value. The policy is the only security for the loan. policy loans may have tax consequences. See “Tax Treatment of Policy Benefits—Policy Loan Interest.”
A policy loan will affect future Policy Values, since the portion of the Policy Value in the Loan Account will receive the loan interest credited rate rather than varying with the performance of the underlying portfolios or increasing at the Fixed Account interest credited rate. A policy loan may cause a policy to be more susceptible to lapse since it reduces the Net Cash Surrender Value from which monthly deductions are taken. A policy loan causes the amount payable upon death of the Life Insured to be reduced by the amount of outstanding Policy Debt.
Maximum Loan. The amount of any loan cannot exceed the amount that would cause the Policy Debt to equal the Policy’s Cash Surrender Value less the monthly deductions due from the date of the loan to the next Policy Anniversary.
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Interest Charged on Policy Loans
Interest on the Policy Debt will accrue daily and be payable annually on the Policy Anniversary. The rate of interest charged will be an effective annual rate of 4%.
Loan Account
When a loan is made, an amount equal to the loan will be deducted from the Investment Accounts or the Fixed Account and transferred to the Loan Account. You may designate how this amount is allocated among the Accounts. If you give no instructions, the amount transferred will be allocated among the Investment Accounts and the Fixed Account in the same proportion as the Policy Value in each Investment Account and the Fixed Account bears to the Net Policy Value. A transfer from an Investment Account will result in the cancellation of units of the underlying sub-account equal in value to the amount transferred from the Investment Account. However, since the Loan Account is part of the Policy Value, transfers made in connection with a loan will not change the Policy Value.
Interest Credited to the Loan Account. Policy Value in the Loan Account will earn interest at an effective annual rate guaranteed to be at least 3.25%. We may declare a current interest rate that is greater than this, subject to change at any time. The excess of the loan interest charged rate (4%) over the loan interest credited rates will result in a net charge against the Policy Value with respect to any Policy Debt.
Currently we credit loan interest rates which vary by Policy Year as follows:
Policy
Years 		  Current Loan
Interest
Credited Rates 		  Excess of Loan
Interest
Charged Rate
1-10
   3.25%   0.75%
11+
   3.75%   0.25%
Loan Account Adjustments. On the first day of each Policy Month the difference between the Loan Account and the Policy Debt is transferred to the Loan Account from the Investment Accounts or the Fixed Account. The amount transferred will be allocated to the Investment Accounts and the Fixed Account in the same proportion as the Policy Value in each Investment Account or the Fixed Account bears to the Net Policy Value.
Loan Repayments. Policy Debt may be repaid, in whole or in part, at any time prior to the death of the Life Insured while the policy is in force. A loan repayment amount will be credited to the Loan Account and transferred to the Fixed Account or the Investment Accounts in the same proportion as the Policy Value in each Account bears to the Net Policy Value.
Amounts paid to us not specifically designated in writing as loan repayments will be treated as premiums.
POLICY SURRENDER AND PARTIAL WITHDRAWALS
Policy Surrender
A policy may be surrendered for its Net Cash Surrender Value at any time while the Life Insured is living. The Net Cash Surrender Value is equal to the Policy Value less any surrender charge, monthly deductions due and Policy Debt. The Net Cash Surrender Value will be determined at the end of the Business Day on which we receive the policy and a written request for surrender at the Service Office. When a policy is surrendered, the insurance coverage and all other benefits under the policy will terminate.
Partial Withdrawals
You may make a partial withdrawal of the Net Cash Surrender Value at any time. You may designate how the withdrawal amount is allocated among the Investment Account and the Fixed Account. If you give no instructions, the withdrawal amount will be allocated among the Accounts in the same proportion as the Policy Value in each Account bears to the Net Policy Value.
Surrender Charges may be assessed on a Partial Withdrawal. See “Charges and Deductions—Surrender Charges.” The death benefit may be reduced as a result of a Partial Withdrawal. See “Death Benefits—Decreases in Face Amount under death benefit Option 1 due to a Partial Withdrawal”.
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LAPSE AND REINSTATEMENT
Lapse
A policy will go into default at the beginning of a Policy Month if the Net Cash Surrender Value would go below zero after deducting the monthly deduction then due. A lapse could have adverse tax consequences as described under “Tax Considerations—Tax Treatment of Policy Benefits—Surrender or Lapse.” We will notify you of the default and will allow you a 61-day grace period in which to make a premium payment sufficient to bring the policy out of default. The required payment will be equal to the amount necessary to bring the Net Cash Surrender Value to zero, if it was less than zero on the date of default, plus the monthly deductions due at the date of default and payable at the beginning of each of the two Policy Months thereafter, plus any applicable premium load charge. If the required payment is not received by the end of the grace period, the policy will terminate with no value.
Death During Grace Period. If the Life Insured should die during the grace period, the Policy Value used in the calculation of the death benefit will be the Policy Value on the date of default and the insurance benefit will be reduced by any outstanding monthly deductions due at the time of death.
Reinstatement
You may reinstate a policy that has terminated after going into default at any time within the five-year period following the date of termination subject to the following conditions:
•  The policy must not have been surrendered for its Net Cash Surrender Value;
•  Evidence of the Life Insured’s insurability satisfactory to us must be provided; and
•  A premium equal to the payment required during the grace period following default to keep the policy in force is paid.
THE GENERAL ACCOUNT
The general account of John Hancock USA consists of all assets owned by us other than those in the Separate Account and other Separate Accounts of the Company. Subject to applicable law, we have sole discretion over investment of the assets of the general account.
By virtue of exclusionary provisions, interests in the general account of John Hancock USA have not been registered under the Securities Act of 1933 and the general account has not been registered as an investment company under the Investment Company Act of 1940. Accordingly, neither the general account nor any interests therein are subject to the provisions of these acts, and as a result the staff of the SEC has not reviewed the disclosures in this prospectus relating to the general account. Disclosures regarding the general account may, however, be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in a prospectus.
Fixed Account
You may allocate Net Premiums to the Fixed Account or transfer all or a portion of the Policy Value to the Fixed Account from the Investment Accounts. John Hancock USA will hold the reserves required for any portion of the policy Value allocated to the Fixed Account in our general account. Transfers from the Fixed Account to the Investment Accounts are subject to restrictions.
Policy Value in the Fixed Account. The Policy Value in the Fixed Account is equal to:
•  the portion of the Net Premiums allocated to it; plus
•  any amounts transferred to it; plus
•  interest credited to it; less
•  any charges deducted from it; less
•  any partial withdrawals from it; less
•  any amounts transferred from it.
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Interest on the Fixed Account. An allocation of Policy Value to the Fixed Account does not entitle you to share in the investment experience of the general account. Instead, we guarantee that the Policy Value in the Fixed Account will accrue interest daily at an effective annual rate of at least 3%, without regard to the actual investment experience of the general account. We may declare a current interest rate in excess of the guaranteed rate, subject to change at any time.
OTHER PROVISIONS OF THE POLICY
Policy Owner Rights
Unless otherwise restricted by a separate agreement, you may:
•  Vary the premiums paid under the policy.
•  Change the death benefit Option.
•  Change the premium allocation for future premiums.
•  Transfer amounts between sub-accounts.
•  Take loans and/or partial withdrawals.
•  Surrender the contract.
•  Transfer ownership to a new owner.
•  Name a contingent owner that will automatically become owner if you die before the Life Insured.
•  Change or revoke a contingent owner.
•  Change or revoke a beneficiary.
Assignment of Rights. We will not be bound by an assignment until we receive a copy of the assignment at the Service Office. We assume no responsibility for the validity or effects of any assignment.
Beneficiary
You may appoint one or more beneficiaries of the policy by naming them in the application. Beneficiaries may be appointed in three classes—primary, secondary, and final. Beneficiaries may also be revocable or irrevocable. Unless an irrevocable designation has been elected, you may change the beneficiary during the Life Insured’s lifetime by giving written notice in a form satisfactory to us. If the Life Insured dies and there is no surviving beneficiary, you, or your estate if you are the Life Insured, will be the beneficiary. If a beneficiary dies before the seventh day after the death of the Life Insured, we will pay the insurance benefit as if the beneficiary had died before the Life Insured.
Incontestability
We will not contest the validity of a policy after it has been in force during the Life Insured’s lifetime for two years from the Issue Date stated in the policy, nor will we contest the validity of an increase in Face Amount after it has been in force during the Life Insured’s lifetime for two years. If a policy has been reinstated, we can contest any misrepresentation of a fact material to the reinstatement for a period of two years after the reinstatement date.
Misstatement of Age or Sex
If the Life Insured’s stated age or sex or both in the policy are incorrect, we will change the Face Amount so that the death benefit will be that which the most recent monthly charge for the cost of insurance would have purchased for the correct age and sex.
Suicide Exclusion
If the Life Insured, whether sane or insane, dies by suicide within two years from the Issue Date stated in the policy (or within the maximum period permitted by the state in which the policy was delivered, if less than two years), we will pay only the premiums paid less any partial withdrawals and any Policy Debt. If the Life Insured should die by suicide within two
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years after a Face Amount increase, the death benefit for the increase will be limited to the monthly deductions for the increase. At our discretion, this provision may be waived.
Supplementary Benefits
Subject to certain requirements, one or more supplementary benefits may be added to a policy, including the FTIO Rider (see “Death Benefits—Flexible term Insurance Option Rider”) and, in the case of a policy owned by a corporation or other similar entity, a benefit permitting a change in the Life Insured (a taxable event). More detailed information concerning these supplementary benefits may be obtained from us. There is no cost for any supplementary benefit currently offered by us, with the exception of FTIO Rider (see “Charges and Deductions—Monthly Deductions”).
Tax considerations
This description of Federal income tax consequences is only a brief summary and is neither exhaustive nor authoritative. It was written to support the promotion of our products. It does not constitute legal or tax advice, and it is not intended to be used and cannot be used to avoid any penalties that may be imposed on you. Tax consequences will vary based on your own particular circumstances, and for further information you should consult a qualified tax adviser. Federal, state and local tax laws, regulations and interpretations can change from time to time. As a result, the tax consequences to you and the beneficiary may be altered, in some cases retroactively. The policy may be used in various arrangements, including non-qualified deferred compensation or salary continuation plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans and others. The tax consequences of such plans may vary depending on the particular facts and circumstances of each individual arrangement. Therefore, if the value of using the policy in any such arrangement depends in part on the tax consequences, a qualified tax adviser should be consulted for advice.
General
We are taxed as a life insurance company. Under current tax law rules, we include the investment income (exclusive of capital gains) of the Separate Account in our taxable income and take deductions for investment income credited to our policy holder reserves. We are also required to capitalize and amortize certain costs instead of deducting those costs when they are incurred. We do not currently charge the Separate Account for any resulting income tax costs, other than a charge we may impose against the Separate Account to compensate us for the cost of a delay in the deductibility of deferred acquisition costs (the “DAC tax” adjustment) pursuant to section 848 of the Internal Revenue Code. We also claim certain tax credits or deductions relating to foreign taxes paid and dividends received by the series funds. These benefits can be material. We do not pass these benefits through to the Separate Account, principally because: (i) the deductions and credits are allowed to us and not the policy owners under applicable tax law; and (ii) the deductions and credits do not represent investment return on the Separate Account assets that is passed through to policy owners.
The policies permit us to deduct a charge for any taxes we incur that are attributable to the operation or existence of the policies or the Separate Account. Currently, we do not anticipate making any specific charge for such taxes other than any DAC tax charge and premium taxes where applicable. If the level of the current taxes increases, however, or is expected to increase in the future, we reserve the right to make a charge in the future.
Death benefit proceeds and other policy distributions
Generally, death benefits paid under policies such as yours are not subject to income tax unless policy ownership has been transferred in exchange for payment. Earnings on your policy value are ordinarily not subject to income tax as long as we don’t pay them out to you. If we do pay out any amount of your policy value upon surrender or partial withdrawal, all or part of that distribution would generally be treated as a return of the premiums you’ve paid and not subjected to income tax. Any portion not treated as a return of your premiums would be includible in your income.
Please note that certain distributions associated with a reduction in death benefit or other policy benefits within the first fifteen years after issuance of the policy are ordinarily taxable in whole or in part. Amounts you borrow are generally not taxable to you.
However, some of the tax rules change if your policy becomes a modified endowment contract. This can happen if you’ve paid premiums in excess of limits prescribed by the tax laws. In that case, additional taxes and penalties may be payable for policy distributions of any kind, including loans. (See “7-pay premium limit and modified endowment contract status” below.)
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We expect the policy to receive the same Federal income and estate tax treatment as fixed benefit life insurance policies. Section 7702 of the Internal Revenue Code defines a life insurance contract for Federal tax purposes. For a policy to be treated as a life insurance contract, it must satisfy either the cash value accumulation test or the guideline premium test. These tests limit the amount of premium that you may pay into the policy. We will monitor compliance with these standards. If we determine that a policy does not satisfy section 7702, we may take whatever steps are appropriate and reasonable to bring it into compliance with section 7702.
If the policy complies with section 7702, the death benefit proceeds under the policy ordinarily should be excludable from the beneficiary’s gross income under section 101 of the Internal Revenue Code. (As noted above, a transfer of the policy for valuable consideration may limit the exclusion of death benefits from the beneficiary's income.)
Increases in policy value as a result of interest or investment experience will not be subject to Federal income tax unless and until values are received through actual or deemed distributions. In general, unless the policy is a modified endowment contract, the owner will be taxed only on the amount of distributions that exceed the premiums paid under the policy. An exception to this general rule occurs in the case of a decrease in the policy's death benefit or any other change that reduces benefits under the policy in the first fifteen years after the policy is issued and that results in a cash distribution to the policy owner. Changes that reduce benefits include partial withdrawals, death benefit option changes, and distributions required to keep the policy in compliance with section 7702. For purposes of this rule any distribution within the two years immediately before a reduction in benefits will also be treated as if it were a result of the reduction. A cash distribution that reduces policy benefits will be taxed in whole or in part (to the extent of any gain in the policy) under rules prescribed in section 7702. The taxable amount is subject to limits prescribed in section 7702(f)(7). Any taxable distribution will be ordinary income to the owner (rather than capital gain).
Distributions for tax purposes include amounts received upon surrender or partial withdrawals. You may also be deemed to have received a distribution for tax purposes if you assign all or part of your policy rights or change your policy’s ownership.
It is possible that, despite our monitoring, a policy might fail to qualify as a life insurance contract under the Internal Revenue Code. This could happen, for example, if we inadvertently failed to return to you any premium payments that were in excess of amounts permitted under section 7702, or if any of the funds failed to meet certain investment diversification or other requirements of the Internal Revenue Code. If this were to occur, you would be subject to income tax on the income credited to the policy from the date of issue to the date of the disqualification and for subsequent periods.
Tax consequences of ownership or receipt of policy proceeds under Federal, state and local estate, inheritance, gift and other tax laws will depend on the circumstances of each owner or beneficiary. If the person insured by the policy is also its owner, either directly or indirectly through an entity such as a revocable trust, the death benefit will be includible in his or her estate for purposes of the Federal estate tax. If the owner is not the person insured, the value of the policy will be includible in the owner's estate upon his or her death. Even if ownership has been transferred, the death proceeds or the policy value may be includible in the former owner's estate if the transfer occurred less than three years before the former owner's death or if the former owner retained certain kinds of control over the policy. You should consult your tax adviser regarding these possible tax consequences.
Because there may be unfavorable tax consequences (including recognition of taxable income and the loss of income tax-free treatment for any death benefit payable to the beneficiary), you should consult a qualified tax adviser prior to changing the policy’s ownership or making any assignment of ownership interests.
Policy loans
We expect that, except as noted below (see “7-pay premium limit and modified endowment contract status”), loans received under the policy will be treated as indebtedness of an owner and that no part of any loan will constitute income to the owner. However, if the policy terminates for any reason other than the payment of the death benefit, an amount equal to any outstanding loan that was not previously considered income will be treated as if it had been distributed to the owner upon such termination. This could result in a considerable tax bill. Under certain circumstances involving large amounts of outstanding loans, you might find yourself having to choose between high premiums required to keep your policy from lapsing and a significant tax burden if you allow the lapse to occur.
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Diversification rules and ownership of the Separate Account
Your policy will not qualify for the tax benefits of a life insurance contract unless the Separate Account follows certain rules requiring diversification of investments underlying the policy. In addition, the rules require that the policy owner not have “investor control” over the underlying assets.
In certain circumstances, the owner of a variable life insurance policy may be considered the owner, for Federal income tax purposes, of the assets of the Separate Account used to support the policy. In those circumstances, income and gains from the Separate Account assets would be includible in the policy owner's gross income. The Internal Revenue Service (“IRS”) has stated in published rulings that a variable policy owner will be considered the owner of Separate Account assets if the policy owner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. A Treasury Decision issued in 1986 (T.D. 8101) stated that guidance would be issued in the form of regulations or rulings on “the extent to which policyholders may direct their investments to particular sub-accounts of a Separate Account without being treated as owners of the underlying assets.” As of the date of this prospectus, no comprehensive guidance on this point has been issued. In Rev. Rul. 2003-91, however, the IRS ruled that a contract holder would not be treated as the owner of assets underlying a variable life insurance or annuity contract despite the owner’s ability to allocate funds among as many as twenty subaccounts.
The ownership rights under your policy are similar to, but different in certain respects from, those described in IRS rulings in which it was determined that policyholders were not owners of Separate Account assets. Since you have greater flexibility in allocating premiums and policy values than was the case in those rulings, it is possible that you would be treated as the owner of your policy’s proportionate share of the assets of the Separate Account.
We do not know what future Treasury Department regulations or other guidance may require. We cannot guarantee that the funds will be able to operate as currently described in the series funds' prospectuses, or that a series fund will not have to change any fund's investment objectives or policies. We have reserved the right to modify your policy if we believe doing so will prevent you from being considered the owner of your policy's proportionate share of the assets of the Separate Account, but we are under no obligation to do so.
7-pay premium limit and modified endowment contract status
At the time of policy issuance, we will determine whether the Planned Premium schedule will exceed the 7-pay limit discussed below. If so, our standard procedures prohibit issuance of the policy unless you sign a form acknowledging that fact.
The 7-pay limit at any time during the first seven contract years is the total of net level premiums that would have been payable at or before that time under a comparable fixed policy that would be fully “paid-up” after the payment of seven equal annual premiums. “Paid-up” means that no further premiums would be required to continue the coverage in force until maturity, based on certain prescribed assumptions. If the total premiums paid at any time during the first seven policy years exceed the 7-pay limit, the policy will be treated as a modified endowment contract, which can have adverse tax consequences.
Policies classified as modified endowment contracts are subject to the following tax rules:
•  First, all withdrawals from such a policy are treated as ordinary income subject to tax up to the amount equal to the excess (if any) of the policy value immediately before the withdrawal over the investment in the policy at such time. If you own any other modified endowment contracts issued to you in the same calendar year by the same insurance company or its affiliates, their values will be combined with the value of the policy from which you take the withdrawal for purposes of determining how much of the withdrawal is taxable as ordinary income.
•  Second, loans taken from or secured by such a policy and assignments or pledges of any part of its value are treated as partial withdrawals from the policy and taxed accordingly. Past-due loan interest that is added to the loan amount is treated as an additional loan.
•  Third, a 10% additional penalty tax is imposed on the portion of any distribution (including distributions on surrender) from, or loan taken from or secured by, such a policy that is included in income except where the distribution or loan:
•  is made on or after the date on which the policy owner attains age 59½;
•  is attributable to the policy owner becoming disabled; or
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•  is part of a series of substantially equal periodic payments for the life (or life expectancy) of the policy owner or the joint lives (or joint life expectancies) of the policy owner and the policy owner’s beneficiary.
These exceptions to the 10% additional tax do not apply in situations where the policy is not owned by an individual.
Furthermore, any time there is a “material change” in a policy, the policy will begin a new 7-pay testing period as if it were a newly-issued policy. The material change rules for determining whether a policy is a modified endowment contract are complex. In general, however, the determination of whether a policy will be a modified endowment contract after a material change depends upon the relationship among the death benefit of the policy at the time of such change, the policy value at the time of the change, and the additional premiums paid into the policy during the seven years starting with the date on which the material change occurs.
Moreover, under a policy insuring a single life, if there is a reduction in benefits (such as a reduction in the death benefit or the reduction or cancellation of certain rider benefits) during a 7-pay testing period, the 7-pay limit will generally be recalculated based on the reduced benefits and the policy will be re-tested from the beginning of the 7-pay testing period using the lower limit. If the premiums paid to date at any point during the 7-pay testing period are greater than the recalculated 7-pay limit, the policy will become a modified endowment contract. If your policy is a survivorship policy, a reduction in benefits under the policy at any time will require re-testing. For such a policy the 7-pay limit will generally be recalculated based on the reduced benefits and the policy will be re-tested, using the lower limit, from the date it was issued. You should consult your tax adviser if you have questions regarding the possible impact of the 7-pay limit on your policy.
If your policy is issued as a result of an exchange subject to section 1035 of the Internal Revenue Code, it may be considered to be a modified endowment contract if the death benefit under the new policy is smaller than the death benefit under the exchanged policy, or if you reduce coverage in your new policy after it is issued. Therefore, if you desire to reduce the face amount as part of a 1035 exchange, a qualified tax adviser should be consulted for advice. A new policy issued in exchange for a modified endowment contract will also be a modified endowment contract regardless of any change in the death benefit.
All modified endowment contracts issued by the same insurer (or its affiliates) to the same owner during any calendar year generally are required to be treated as one contract for the purpose of applying the rules on taxation of withdrawals from modified endowment contracts. You should consult your tax adviser if you have questions regarding the possible impact of the 7-pay limit on your policy.
Corporate and H.R. 10 retirement plans
The policy may be acquired in connection with the funding of retirement plans satisfying the qualification requirements of section 401 of the Internal Revenue Code. If so, the Internal Revenue Code provisions relating to such plans and life insurance benefits thereunder should be carefully scrutinized. We are not responsible for compliance with the terms of any such plan or with the requirements of applicable provisions of the Internal Revenue Code.
Withholding
To the extent that policy distributions to you are taxable, they are generally subject to withholding for your Federal income tax liability. However if you reside in the United States, you can generally choose not to have tax withheld from distributions. Electing to have no withholding will not reduce your tax liability and may expose you to penalties under the rules governing payment of estimated taxes.
Life insurance purchases by residents of Puerto Rico
In Rev. Rul. 2004-75, 2004-31 I.R.B. 109, the Internal Revenue Service ruled that income received by residents of Puerto Rico under a life insurance policy issued by a United States company is U.S.-source income that is subject to United States Federal income tax.
Life insurance purchases by non-resident aliens
If you are not a U.S. citizen or resident, you will generally be subject to U.S. Federal withholding tax on taxable distributions from life insurance policies at a 30% rate, unless a lower treaty rate applies. In addition, you may be subject to state and/or municipal taxes and taxes imposed by your country of citizenship or residence. You should consult with a qualified tax adviser before purchasing a policy.
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Life insurance owned by citizens or residents living abroad
If you are a U.S. citizen or permanent resident living outside the United States, you are still subject to income taxation by the United States. Since many countries tax on the basis of domicile, you may also be subject to tax in the country or territory in which you are living. The tax-deferred accumulation of gain that a life insurance policy provides under United States tax law may not be available under the tax laws of the country in which you are living. If you are living outside the United States or planning to do so, you should consult with a qualified tax adviser before purchasing or retaining ownership of a policy.
OTHER INFORMATION
Payment of Proceeds
As long as the policy is in force, we will ordinarily pay any policy loans, surrenders, partial withdrawals or insurance benefit within seven days after receipt at the Service Office of all the documents required for such a payment. We will ordinarily pay any death benefit, withdrawal, surrender value or loan within 7 days after we receive the last required form or request (and, with respect to the death benefit, any other documentation that may be required). If we don’t have information about the desired manner of payment within 7 days after the date we receive documentation of the insured person’s death, we will pay the proceeds as a single sum.
We may delay the payment of any policy loans, surrenders, partial withdrawals, or insurance benefit that depends on Fixed Account values for up to six months or in the case of any Investment Account for any period during which (i) the New York Stock Exchange is closed for trading (except for normal weekend and holiday closings), (ii) trading on the New York Stock Exchange is restricted (iii) an emergency exists, as determined by the SEC, as a result of which disposal of securities held in the Separate Account is not reasonably practicable or it is not reasonably practicable to determine the value of the Separate Account’s net assets or (iv) the SEC, by order, so permits for the protection of security holders; provided that applicable rules and regulations of the SEC shall govern as to whether the conditions described in (ii) and (iii) exist.
Reports to Policyholders
Within 30 days after each Policy Anniversary, we will send you a statement showing, among other things:
•  the amount of death benefit;
•  the Policy Value and its allocation among the Investment Accounts, the Fixed Account and the Loan Account;
•  the value of the units in each Investment Account to which the Policy Value is allocated;
•  the Policy Debt and any loan interest charged since the last report;
•  the premiums paid and other policy transactions made during the period since the last report; and
•  any other information required by law.
You will also be sent an annual and a semi-annual report for the portfolios, which will include a list of the securities, held in each portfolio as required by the 1940 Act.
Distribution of policies
John Hancock Distributors LLC (“JH Distributors”), a Delaware limited liability company affiliated with us, is the principal distributor and underwriter of the securities offered through this prospectus and of other annuity and life insurance products we and our affiliates offer. JH Distributors also acts as the principal underwriter of the Trust, whose securities are used to fund certain investment accounts under the policies and under other annuity and life insurance products we offer.
JH Distributors' principal address is 601 Congress Street, Boston, MA 02210 and it also maintains offices with us at 197 Clarendon Street, Boston, Massachusetts 02116. JH Distributors is a broker-dealer registered under the Securities Exchange Act of 1934 (the “1934 Act”) and a member of the Financial Industry Regulatory Authority (“FINRA”).
We offer the policies for sale through individuals who are licensed as insurance agents and who are registered representatives of broker-dealers that have entered into selling agreements with JH Distributors. Our affiliate, Signator Investors, Inc., is one such broker-dealer. In addition, we, either directly or through JH Distributors, have entered into agreements with other financial intermediaries that provide marketing, sales support and certain administrative services to
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help promote the policies (“financial intermediaries”). In a limited number of cases, we have entered into loans, leases or other financial agreements with these broker-dealers or financial intermediaries or their affiliates.
Compensation
The broker-dealers and other financial intermediaries that distribute or support the marketing of our policies may be compensated by means of various compensation and revenue sharing arrangements. A general description of these arrangements is set out below under “Standard compensation” and “Additional compensation and revenue sharing.” These arrangements may differ between firms, and not all broker-dealers or financial intermediaries will receive the same compensation and revenue sharing benefits for distributing our policies. Also, a broker-dealer may receive more or less compensation or other benefits for the promotion and sale of our policy than it would expect to receive from another issuer.
Under their own arrangements, broker-dealers determine how much of any amounts received from us is to be paid to their registered representatives. Our affiliated broker-dealer, Signator Investors, Inc., may pay its registered representatives additional compensation and benefits, such as bonus payments, expense payments, health and retirement benefits or the waiver of overhead costs or expenses in connection with the sale of the policies that they would not receive in connection with the sale of policies issued by unaffiliated companies.
Policy owners do not pay any compensation or revenue sharing benefits directly. These payments are made from JH Distributors’ and our own revenues, profits or retained earnings, which may be derived from a number of sources, such as fees received from an underlying fund’s distribution plan (“12b-1 fees”), the fees and charges imposed under the policy and other sources.
You should contact your registered representative for more information on compensation arrangements in connection with your purchase of a policy. We provide additional information on special compensation or reimbursement arrangements involving broker-dealers and other financial intermediaries in the SAI, which is available upon request.
Standard compensation. JH Distributors pays compensation to broker-dealers for the promotion and sale of the policies, and for providing ongoing service in relation to policies that have already been purchased. We may also pay a limited number of broker-dealers commissions or overrides to “wholesale” the policies; that is, to provide marketing support and training services to the broker-dealer firms that do the actual selling.
The compensation JH Distributors pays to broker-dealers may vary depending on the selling agreement. The compensation paid is not expected to exceed 15% of the target premium paid in the first policy year, 9.0% of the target premium in years 2-5, and 2.5% of the target premium paid in years 6 and after. Compensation on any premium paid in excess of target premium in any year will not exceed 2.5%. This compensation schedule is exclusive of additional compensation and revenue sharing and inclusive of overrides and expense allowances paid to broker-dealers for sale of the policies (not including riders).
Additional compensation and revenue sharing. To the extent permitted by SEC and FINRA rules and other applicable laws and regulations, we may enter into special compensation or reimbursement arrangements (“revenue sharing”), either directly or through JH Distributors, with selected broker-dealers and other financial intermediaries. In consideration of these arrangements, a firm may feature our policy in its sales system, give us preferential access to sales staff, or allow JH Distributors or its affiliates to participate in conferences, seminars or other programs attended by the firm’s sales force. We hope to benefit from these revenue sharing and other arrangements through increased sales of our policies.
Selling broker-dealers and other financial intermediaries may receive, directly or indirectly, additional payments in the form of cash, other compensation or reimbursement. These additional compensation or reimbursement arrangements may include, for example, payments in connection with the firm's “due diligence” examination of the policies, payments for providing conferences or seminars, sales or training programs for invited registered representatives and other employees, payment for travel expenses, including lodging, incurred by registered representatives and other employees for such seminars or training programs, seminars for the public or client seminars, advertising and sales campaigns regarding the policies, payments to assist a firm in connection with its systems, operations and marketing expenses and/or other events or activities sponsored by the firms. We may contribute to, as well as sponsor, various educational programs, sales promotions, and/or other contests in which participating firms and their sales persons may receive gifts and prizes such as merchandise, cash or other rewards as may be permitted under FINRA rules and other applicable laws and regulations.
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Responsibilities of John Hancock USA
John Hancock USA entered into an agreement with JH Distributors pursuant to which John Hancock USA, on behalf of JH Distributors will pay the sales commissions in respect of the policies and certain other policies issued by John Hancock USA, prepare and maintain all books and records required to be prepared and maintained by JH Distributors with respect to the policies and such other policies, and send all confirmations required to be sent by JH Distributors with respect to the policies and such other policies. JH Distributors will promptly reimburse John Hancock USA for all sales commissions paid by John Hancock USA and will pay John Hancock USA for its other services under the agreement in such amounts and at such times as agreed to by the parties.
Finally, John Hancock USA may, from time to time in its sole discretion, enter into one or more reinsurance agreements with other life insurance companies under which policies issued by it may be reinsured, such that its total amount at risk under a policy would be limited for the life of the insured.
Voting Rights
As stated previously, all of the assets held in each sub-account of the Separate Account will be invested in shares of a particular portfolio. John Hancock USA is the legal owner of those shares and as such has the right to vote upon certain matters that are required by the 1940 Act to be approved or ratified by the shareholders of a mutual fund and to vote upon any other matters that may be voted upon at a shareholders’ meeting. However, John Hancock USA will vote shares held in the sub-accounts in accordance with instructions received from policyholders having an interest in such sub-accounts. Shares held in each sub-account for which no timely instructions from policyholders are received, including shares not attributable to the policies, will be voted by John Hancock USA in the same proportion as those shares in that sub-account for which instructions are received. Should the applicable federal securities laws or regulations change so as to permit John Hancock USA to vote shares held in the Separate Account in its own right, it may elect to do so.
The number of shares in each sub-account for which instructions may be given by a policyholder is determined by dividing the portion of the Policy Value derived from participation in that sub-account, if any, by the value of one share of the corresponding portfolio. The number will be determined as of a date chosen by John Hancock USA, but not more than 90 days before the shareholders’ meeting. Fractional votes are counted. Voting instructions will be solicited in writing at least 14 days prior to the meeting.
John Hancock USA may, if required by state officials, disregard voting instructions if such instructions would require shares to be voted so as to cause a change in the sub-classification or investment policies of one or more of the portfolios, or to approve or disapprove an investment management contract. In addition, we may disregard voting instructions that would require changes in the investment policies or investment adviser, provided that we reasonably disapprove such changes in accordance with applicable federal regulations. If John Hancock USA does disregard voting instructions, it will advise policyholders of that action and its reasons for such action in the next communication to policyholders.
Substitution of Portfolio Shares
It is possible that in the judgment of the Company, one or more of the portfolios may become unsuitable for investment by the Separate Account because of a change in investment policy or a change in the applicable laws or regulations, because the shares are no longer available for investment, or for some other reason. In that event, John Hancock USA may seek to substitute the shares of another portfolio or of an entirely different mutual fund. Before this can be done, the approval of the SEC and one or more state insurance departments may be required.
John Hancock USA also reserves the right (i) to combine other Separate Accounts with the Separate Account, (ii) to create new Separate Accounts, (iii) to establish additional sub-accounts within the Separate Account to invest in additional portfolios of the Trust or another management investment company, (iv) to eliminate existing sub-accounts and to stop accepting new allocations and transfers into the corresponding portfolio, (v) to combine sub-accounts or to transfer assets in one sub-account to another sub-account or (vi) to transfer assets from the Separate Account to another Separate Account and from another Separate Account to the Separate Account. We also reserve the right to operate the Separate Account as a management investment company or other form permitted by law, and to de-register the Separate Account under the 1940 Act. Any such change would be made only if permissible under applicable federal and state law.
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Records and Accounts
Our Service Office is responsible for performing all administrative functions, such as decreases, increases, surrender and partial withdrawals, and fund transfers although certain of these functions may be delegated to a third party administrator.
All records and accounts relating to the Separate Account and the portfolios will be maintained by us. All financial transactions will be handled by us. All reports required to be made and information required to be given will be provided the Company or by McCamish Systems on behalf of us.
State Regulation
John Hancock USA is subject to the regulation and supervision by the Michigan Department of Insurance, which periodically examines its financial condition and operations. It is also subject to the insurance laws and regulations of all jurisdictions in which it is authorized to do business. The policies have been filed with insurance officials in each jurisdiction where they are sold.
John Hancock USA is required to submit annual statements of its operations, including financial statements, to the insurance departments of the various jurisdictions in which it does business for the purposes of determining solvency and compliance with local insurance laws and regulations.
Financial statements reference
The financial statements of John Hancock USA and the Separate Account can be found in the SAI. The financial statements of John Hancock USA should be distinguished from the financial statements of the Separate Account and should be considered only as bearing upon the ability of John Hancock USA to meet its obligations under the policies. Our general account is comprised of securities and other investments, the value of which may decline during periods of adverse market conditions.
Registration statement filed with the SEC
This prospectus omits certain information contained in the Registration Statement which has been filed with the SEC. More details may be obtained from the SEC upon payment of the prescribed fee.
Independent registered public accounting firm
The statutory-basis financial statements of John Hancock Life Insurance Company (U.S.A.) at December 31, 2015 and 2014, and for each of the three years in the period ended December 31, 2015, and the financial statements of John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2015, and for each of the two years in the period ended December 31, 2015, appearing in this Prospectus and Registration Statement have been audited by Ernst &Young LLP, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
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APPENDIX A: DEFINITIONS
Annual Premium Target: is an amount set forth in the policy that limits the amount of premium attributable to a Coverage Amount in Surrender Charge or Sales Load calculations.
Attained Age: is the Issue Age of the Life Insured plus the number of completed Policy Years.
Business Day: is any day that the New York Stock Exchange is open for business. A Business Day ends at the close of regularly scheduled trading of the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on that day.
Case: is a group of Policies insuring individual lives with common employment or other relationship, independent of the Policies.
Cash Surrender Value: is the Policy Value less the Surrender Charge and any outstanding monthly deductions due.
Coverage Amount: is an amount of insurance coverage under the policy with a distinct effective date. The Face Amount of the policy at any time is the sum of the Coverage Amounts in effect.
Coverage Year: is a one-year period beginning on a Coverage Amount’s effective date and on each anniversary of this date. For Coverage Amounts in effect on the policy’s Effective Date, the Coverage Year is the same as the Policy Year.
Fixed Account: is the part of the Policy Value that reflects the value you have in our general account.
Investment Account: is the part of the Policy Value that reflects the value you have in one of the sub-accounts of the Separate Account.
Issue Age: is the Life Insured’s age on the birthday closest to the Policy Date.
Loan Account: is the part of the Policy Value that reflects policy loans and interest credited to the Policy Value in connection with such loans.
Minimum Initial Premium: is the sum of the monthly deductions due for the first 3 Policy Months plus the Premium Charges deductible from this amount.
Net Cash Surrender Value: is the Cash Surrender Value less the Policy Debt. Net Policy Value: is the Policy Value less the value in the Loan Account. Net Premium: is the premium paid less the Premium Load and Sales Load.
Policy Date, Policy Anniversary, Policy Month and Policy Year: Policy Date is the date from which the first monthly deductions are calculated and from which Policy Years, Policy Months, and Policy Anniversaries are measured.
Policy Debt: on any date is the aggregate amount of policy loans, including borrowed and accrued interest, less any loan repayments.
Policy Value: is the sum of the values in the Loan Account, the Fixed Account, and the Investment Accounts.
Service Office: is PO Box 192, Boston, MA 02117 or such other address as we specify to you by written notice.
39

 

In addition to this prospectus, John Hancock USA has filed with the SEC an SAI that contains additional information about John Hancock USA and the Separate Account, including information on our history, services provided to the Separate Account, legal and regulatory matters and the audited financial statements for John Hancock USA and the Separate Account. The SAI and personalized illustrations of death benefits, policy values and surrender values are available, without charge, upon request. You may obtain the personalized illustrations from your John Hancock USA representative. The SAI may be obtained by contacting the John Hancock USA Service Office. You should also contact the John Hancock USA Service Office to request any other information about your policy or to make any inquiries about its operation.
JOHN HANCOCK USA SERVICE OFFICE
Overnight Express Delivery Mail Delivery
Life Post Issue - Specialty Products
John Hancock Insurance Company
30 Dan Road, Suite #55979
Canton, MA 02021 		Life Post Issue - Specialty Products
John Hancock Insurance Company
PO Box 55979
Boston, MA 02205
Phone: Fax:
1-800-521-1234 1-617-572-1571
Information about the Separate Account (including the SAI) can be reviewed and copied at the SEC’s Public Reference Branch, 100 F Street, NE, Room 1580, Washington, DC, 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 202-551-8090. Reports and other information about the Account are available on the SEC’s Internet website at http://www.sec.gov. Copies of such information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549-0102.
1940 Act File No. 811-5130—1933 Act File No. 333-100567

Table of Contents
Statement of Additional Information
dated May 2, 2016
for interests in
John Hancock Life Insurance Company (U.S.A.) Separate Account N
(Name of Registrant)
JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)
(“John Hancock USA”)
(Name of Depositor)
This is a Statement of Additional Information (“SAI”). It is not the prospectus. The prospectus, dated the same date as this SAI, may be obtained from a John Hancock USA representative or by contacting our Service Office - Specialty Products by mail at Life Post Issue, John Hancock Insurance Company, PO Box 55979, Boston, MA 02205, or telephone at 1-800-827-4546.
TABLE OF CONTENTS

 

Description of the Depositor
Under the Federal securities laws, the entity responsible for organization of the registered separate account underlying the variable life insurance policy is known as the “Depositor.” John Hancock USA (“Depositor”) is a stock life insurance company organized under the laws of Maine on August 20, 1955 by a special act of the Maine legislature and redomesticated under the laws of Michigan. The Depositor is a licensed life insurance company in the District of Columbia and all states of the United States except New York. Until 2004, the Depositor was known as The Manufacturers Life Insurance Company (U.S.A.).
The Depositor's ultimate parent is Manulife Financial Corporation (“MFC”), a publicly traded company based in Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial.
Description of the Registrant
Under the Federal securities laws, the registered separate account underlying the variable life insurance policy is known as the “Registrant.” John Hancock Life Insurance Company (U.S.A.) Separate Account N (the “Registrant” or “Separate Account”), is a separate account established by the Depositor under Michigan law. The variable investment options shown on page 1 of the prospectus are subaccounts of the Separate Account. The Separate Account meets the definition of “separate account” under the Federal securities laws and is registered as a unit investment trust under the Investment Company Act of 1940 (“1940 Act”). Such registration does not involve supervision by the Securities and Exchange Commission (“SEC”) of the management of the Separate Account or of the Depositor.
New subaccounts may be added and made available to policy owners from time to time. Existing subaccounts may be modified or deleted at any time.
Services
Administration of policies issued by the Depositor and of registered separate accounts organized by the Depositor may be provided by other affiliates. Neither the Depositor nor the separate accounts are assessed any charges for such services.
Custodianship and depository services for the Registrant are provided by State Street Investment Services (“State Street”). State Street’s address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts, 02111.
Independent registered public accounting firm
The statutory-basis financial statements of John Hancock Life Insurance Company (U.S.A.) at December 31, 2015 and 2014, and for each of the three years in the period ended December 31, 2015, and the financial statements of John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2015, and for each of the two years in the period ended December 31, 2015, appearing in this Prospectus and Registration Statement have been audited by Ernst &Young LLP, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
Legal and Regulatory Matters
There are no legal proceedings to which the Depositor, the Separate Account or the principal underwriter is a party or to which the assets of the Separate Account are subject that are likely to have a material adverse effect on the Separate Account or the ability of the principal underwriter to perform its contract with the Separate Account or of the Depositor to meet its obligations under the policies.
Principal Underwriter/Distributor
John Hancock Distributors LLC (“JH Distributors”), a Delaware limited liability company affiliated with the Depositor, is the principal distributor and underwriter of the securities offered through the prospectus. JH Distributors acts as the principal distributor of a number of other life insurance and annuity products we and our affiliates offer or maintain. JH
2

 

Distributors also acts as the principal underwriter of John Hancock Variable Insurance Trust (the “Trust”), whose securities are used to fund certain variable investment options under the policies and under other life insurance and annuity products we offer or maintain.
JH Distributors' principal address is 601 Congress Street, Boston, MA 02210, and it also maintains offices with us at 197 Clarendon Street, Boston, MA 02116. JH Distributors is a broker-dealer registered under the Securities Act of 1934 (the “1934 Act”) and is a member of the Financial Industry Regulatory Authority (“FINRA”).
We offer the policies for sale through individuals who are licensed as insurance agents and who are registered representatives of broker-dealers that have entered into selling agreements with JH Distributors. Our affiliate Signator Investors, Inc. is one such broker-dealer.
The aggregate dollar amount of underwriting commissions paid to JH Distributors by the Depositor and its affiliates in connection with the sale of variable life products in 2015, 2014, and 2013 was $120,545,566, 132,392,739, and $119,574,297, respectively. JH Distributors did not retain any of these amounts during such periods.
The registered representative through whom your policy is sold will be compensated pursuant to the registered representative’s own arrangement with his or her broker-dealer. Compensation to broker-dealers for the promotion and sale of the policies is not paid directly by policy owners but will be recouped through the fees and charges imposed under the policy.
Additional compensation and revenue sharing arrangements may be offered to certain broker-dealer firms and other financial intermediaries. The terms of such arrangements may differ among firms we select based on various factors. In general, the arrangements involve three types of payments or any combination thereof:
•  Fixed dollar payments: The amount of these payments varies widely. JH Distributors may, for example, make one or more payments in connection with a firm’s conferences, seminars or training programs, seminars for the public, advertising and sales campaigns regarding the policies, to assist a firm in connection with its systems, operations and marketing expenses, or for other activities of a selling firm or wholesaler. JH Distributors may make these payments upon the initiation of a relationship with a firm, and at any time thereafter.
•  Payments based upon sales: These payments are based upon a percentage of the total amount of money received, or anticipated to be received, for sales through a firm of some or all of the insurance products that we and/or our affiliates offer. JH Distributors makes these payments on a periodic basis.
•  Payments based upon “assets under management”: These payments are based upon a percentage of the policy value of some or all of our (and/or our affiliates’) insurance products that were sold through the firm. JH Distributors makes these payments on a periodic basis.
Our affiliated broker-dealer, Signator Investors, Inc., may pay its respective registered representatives additional cash incentives, such as bonus payments, expense payments, health and retirement benefits or the waiver of overhead costs or expenses in connection with the sale of the policies that they would not receive in connection with the sale of policies issued by unaffiliated companies.
Additional Information About Charges
A policy will not be issued until the underwriting process has been completed to our satisfaction. The underwriting process generally includes the obtaining of information concerning your age, medical history, occupation and other personal information. This information is then used to determine the cost of insurance charge.
3

 

Special purchase programs for eligible classes
The policy is available for purchase by corporations and other groups or sponsoring organizations. Group or sponsored arrangements may include reduction or elimination of withdrawal charges and deductions for employees, officers, directors, agents and immediate family members of the foregoing. We reserve the right to reduce any of the policy's charges on certain cases where it is expected that the amount or nature of such cases will result in savings of sales, underwriting, administrative, commissions or other costs. Eligibility for these reductions and the amount of reductions will be determined by a number of factors, including the number of lives to be insured, the total premiums expected to be paid, total assets under management for the policyowner, the nature of the relationship among the insured individuals, the purpose for which the policies are being purchased, expected persistency of the individual policies, and any other circumstances which we believe to be relevant to the expected reduction of its expenses. Some of these reductions may be guaranteed and others may be subject to withdrawal or modifications, on a uniform case basis. Reductions in charges will not be unfairly discriminatory to any policyowners. We may modify from time to time, on a uniform basis, both the amounts of reductions and the criteria for qualification.
333-100567
333-126668
333-152409
4

Table of Contents

AUDITED STATUTORY-BASIS FINANCIAL STATEMENTS

John Hancock Life Insurance Company (U.S.A.)

For the Years Ended December 31, 2015, 2014 and 2013

With Report of Independent Auditors

Table of Contents

AUDITED STATUTORY-BASIS FINANCIAL STATEMENTS

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

Years Ended December 31, 2015, 2014 and 2013

Contents

 

Report of Independent Auditors

     F-1   

Statutory-Basis Financial Statements

   

Balance Sheets-

Statutory-Basis

      F-3   

Statements of Operations-

Statutory-Basis

      F-5   

Statements of Changes in Capital and Surplus-

Statutory-Basis

      F-6   

Statements of Cash Flow-

Statutory-Basis

      F-7   

Notes to Statutory-Basis Financial Statements

     F-8   

Table of Contents

Report of Independent Auditors

The Board of Directors and Shareholder

John Hancock Life Insurance Company (U.S.A.)

We have audited the accompanying statutory-basis financial statements of John Hancock Life Insurance Company (U.S.A.) (the Company), which comprise the balance sheets as of December 31, 2015 and 2014, and the related statements of operations, changes in capital and surplus and cash flow for each of the three years in the period ended December 31, 2015, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with accounting practices prescribed or permitted by the Michigan Office of Financial and Insurance Regulation. Management also is responsible for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note 2, to meet the requirements of Michigan the financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Michigan Office of Financial and Insurance Regulation, which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles and the effects on the accompanying financial statements are described in Note 2.

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the effects of the matter described in the preceding paragraph, the statutory-basis financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the financial position of the Company at December 31, 2015 and 2014, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2015.

 

F-1

Table of Contents

Opinion on Statutory-Basis of Accounting

However, in our opinion, the statutory-basis financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting practices prescribed or permitted by the Michigan Office of Financial and Insurance Regulation.

/s/ Ernst & Young LLP

Boston, Massachusetts

April 5, 2016

 

F-2

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

BALANCE SHEETS – STATUTORY BASIS

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions)  

Admitted assets

      

Cash and invested assets:

      

Bonds

        $ 44,463           $ 49,226   

Stocks:

      

Preferred stocks

      23         26   

Common stocks

      658         477   

Investments in affiliates

      3,205         2,911   

Mortgage loans on real estate

      10,475         11,519   

Real estate:

      

Company occupied

      299         300   

Investment properties

      6,487         5,203   

Cash, cash equivalents and short-term investments

      4,528         7,702   

Policy loans

      3,718         5,039   

Derivatives

      11,001         10,458   

Receivable for collateral on derivatives

      26         400   

Receivable for securities

      5         10   

Other invested assets

      5,618         5,978   
  

 

 

     

 

 

  

Total cash and invested assets

      90,506         99,249   

Investment income due and accrued

      758         887   

Premiums due and deferred

      303         388   

Amounts recoverable from reinsurers

      162         196   

Funds held by or deposited with reinsured companies

      3,660         1,958   

Other reinsurance receivable

      670         439   

Amounts due from affiliates

      304         247   

Other assets

      1,755         2,364   

Assets held in separate accounts

      129,725         140,164   
  

 

 

     

 

 

  

Total admitted assets

        $   227,843           $   245,892   
  

 

 

     

 

 

  

 

The accompanying notes are an integral part of these statutory-basis financial statements.

 

F-3

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

BALANCE SHEETS – STATUTORY BASIS – (CONTINUED)

 

     December 31,  
     2015     2014  
  

 

 

  
     (in millions)  

Liabilities and capital and surplus

     

Liabilities:

     

Policy and contract obligations:

     

Policy reserves

        $ 66,516          $ 69,184   

Policyholders’ and beneficiaries funds

      2,624        3,834   

Consumer notes

      265        411   

Dividends payable to policyholders

      428        574   

Policy benefits in process of payment

      499        556   

Other amount payable on reinsurance

      480        1,039   

Other policy obligations

      68        78   
  

 

 

    

 

 

  

Total policy and contract obligations

      70,880        75,676   

Payable to parent and affiliates

      1,816        3,073   

Transfers to (from) separate account, net

      (540 )      (1,390 ) 

Asset valuation reserve

      1,844        1,927   

Reinsurance in unauthorized companies

      3        3   

Funds withheld from unauthorized reinsurers

      7,784        8,873   

Interest maintenance reserve

      1,630        1,745   

Net deferred tax liability

      387        456   

Derivatives

      6,094        5,229   

Payables for collateral on derivatives

      1,640        2,939   

Payables for securities

      42        26   

Other general account obligations

      1,094        1,843   

Obligations related to separate accounts

      129,725        140,164   
  

 

 

    

 

 

  

Total liabilities

      222,399        240,564   

Capital and surplus:

     

Preferred stock (par value $1; 50,000,000 shares authorized; 100,000 shares issued and outstanding at December 31, 2015 and 2014)

      -        -   

Common stock (par value $1; 50,000,000 shares authorized; 4,728,939 shares issued and outstanding at December 31, 2015 and 2014)

      5        5   

Paid-in surplus

      3,196        3,196   

Surplus notes

      990        990   

Unassigned surplus

      1,253        1,137   
  

 

 

    

 

 

  

Total capital and surplus

      5,444        5,328   
  

 

 

    

 

 

  

Total liabilities and capital and surplus

        $   227,843          $   245,892   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of these statutory-basis financial statements.

 

F-4

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

STATEMENTS OF OPERATIONS – STATUTORY-BASIS

 

     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums and other revenues:

       

Life, long-term care and annuity premiums

        $    16,323          $    12,738          $    12,882   

Consideration for supplementary contracts with life contingencies

      140        183        266   

Net investment income

      4,387        4,297        4,551   

Amortization of interest maintenance reserve

      181        176        183   

Commissions and expense allowance on reinsurance ceded

      1,040        817        1,224   

Reserve adjustment on reinsurance ceded

      (16,494 )      (10,652 )      (9,775 ) 

Separate account administrative and contract fees

      1,786        1,841        1,848   

Other revenue

      415        467        188   
  

 

 

    

 

 

    

 

 

  

Total premiums and other revenues

      7,778        9,867        11,367   

Benefits paid or provided:

       

Death, surrender and other contract benefits, net

      9,762        9,064        7,710   

Annuity benefits

      1,796        1,733        1,784   

Disability and long-term care benefits

      647        584        542   

Interest and adjustments on policy or deposit-type funds

      91        125        132   

Payments on supplementary contracts with life contingencies

      179        170        159   

Increase (decrease) in life and long-term care reserves

      (2,506 )      2,161        1,017   
  

 

 

    

 

 

    

 

 

  

Total benefits paid or provided

      9,969        13,837        11,344   

Insurance expenses and other deductions:

       

Commissions and expense allowance on reinsurance assumed

      1,289        1,203        1,360   

General expenses

      960        972        1,092   

Insurance taxes, licenses and fees

      145        138        150   

Net transfers to (from) separate accounts

      (6,554 )      (8,229 )      (6,388 ) 

Investment income ceded

      2,465        4,954        (1,356 ) 

Other deductions

      (160 )      21        14   
  

 

 

    

 

 

    

 

 

  

Total insurance expenses and other deductions

      (1,855 )      (941 )      (5,128 ) 

Income (loss) from operations before dividends to policyholders, federal income taxes and net realized capital gains (losses)

      (336 )      (3,029 )      5,151   

Dividends to policyholders

      (36 )      77        81   
  

 

 

    

 

 

    

 

 

  

Income (loss) from operations before federal income taxes and net realized capital gains (losses)

      (300 )      (3,106 )      5,070   

Federal income tax expense (benefit)

      (778 )      (716 )      262   
  

 

 

    

 

 

    

 

 

  

Income (loss) from operations before net realized capital gains (losses)

      478        (2,390 )      4,808   

Net realized capital gains (losses)

      216        (74 )      (1,793 ) 
  

 

 

    

 

 

    

 

 

  

Net income (loss)

        $ 694          $ (2,464 )        $ 3,015   
  

 

 

    

 

 

    

 

 

  

 

The accompanying notes are an integral part of these statutory-basis financial statements.

 

F-5

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS – STATUTORY-BASIS

 

     Preferred
and
Common
Stock		      Paid-in
Surplus		      Surplus
Notes		      Unassigned
Surplus
(Deficit)		     Total
Capital
and
Surplus		  
  

 

 

  
     (in millions)  

Balances at January 1, 2013

        $ 5       $ 3,196       $ 990       $ 1,603      $ 5,794   

Net income (loss)

               3,015        3,015   

Change in net unrealized capital gains (losses)

               (1,455 )      (1,455 ) 

Change in net deferred income tax

               (347 )      (347 ) 

Decrease (increase) in non-admitted assets

               (12 )      (12 ) 

Change in liability for reinsurance in unauthorized reinsurance

               -        -   

Decrease (increase) in asset valuation reserves

               (180 )      (180 ) 

Dividend paid to Parent

               (300 )      (300 ) 

Change in surplus as a result of reinsurance

               (573 )      (573 ) 

Other adjustments, net

            -         (133 )      (133 ) 
  

 

 

  

Balances at December 31, 2013

      5         3,196         990         1,618        5,809   

Net income (loss)

               (2,464 )      (2,464 ) 

Change in net unrealized capital gains (losses)

               2,389        2,389   

Change in net deferred income tax

               973        973   

Decrease (increase) in non-admitted assets

               56        56   

Change in liability for reinsurance in unauthorized reinsurance

               3        3   

Decrease (increase) in asset valuation reserves

               (553 )      (553 ) 

Dividend paid to Parent

               (500 )      (500 ) 

Change in surplus as a result of reinsurance

               (252 )      (252 ) 

Other adjustments, net

            -         (133 )      (133 ) 
  

 

 

  

Balances at December 31, 2014

      5         3,196         990         1,137        5,328   

Net income (loss)

               694        694   

Change in net unrealized capital gains (losses)

               (394 )      (394 ) 

Change in net deferred income tax

               (158 )      (158 ) 

Decrease (increase) in non-admitted assets

               (43 )      (43 ) 

Change in liability for reinsurance in unauthorized reinsurance

               -        -   

Decrease (increase) in asset valuation reserves

               83        83   

Dividend paid to Parent

               (210 )      (210 ) 

Change in surplus as a result of reinsurance

               107        107   

Other adjustments, net

            -         37        37   
  

 

 

  

Balances at December 31, 2015

        $   5       $   3,196       $   990       $    1,253      $    5,444   
  

 

 

  

 

The accompanying notes are an integral part of these statutory-basis financial statements.

 

F-6

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

STATEMENTS OF CASH FLOW – STATUTORY-BASIS

 

     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Operations

       

Premiums and other considerations collected, net of reinsurance

        $ 19,961      $ 12,924      $ 13,205   

Net investment income received

      4,600        4,399        4,635   

Separate account fees

      1,786        1,841        1,848   

Commissions and expenses allowance on reinsurance ceded

      1,040        817        1,224   

Miscellaneous income

      2,852        450        (172 ) 

Benefits and losses paid

      (29,836 )      (21,960 )      (20,462 ) 

Net transfers from (to) separate accounts

      7,404        8,206        6,493   

Commissions and expenses (paid) recovered

      (5,153 )      (7,147 )      (1,572 ) 

Dividends paid to policyholders

      (250 )      (89 )      (91 ) 

Federal and foreign income and capital gain taxes (paid) recovered

      847        (382 )      (1,195 ) 
  

 

 

  

Net cash provided by (used in) operating activities

      3,251        (941 )      3,913   

Investment activities

       

Proceeds from sales, maturities, or repayments of investments:

       

Bonds

      19,217        20,471        19,130   

Stocks

      190        130        149   

Mortgage loans on real estate

      1,834        1,789        1,660   

Real estate

      8        1,053        22   

Other invested assets

      955        941        498   

Derivatives

      32        -        -   

Net gains (losses) on cash, cash equivalents and short term investments

      (9 )      3        (2 ) 
  

 

 

  

Total investment proceeds

         22,227           24,387           21,457   

Cost of investments acquired:

       

Bonds

      19,734        21,430        17,853   

Stocks

      848        234        78   

Mortgage loans on real estate

      1,715        1,088        1,813   

Real estate

      1,155        539        743   

Other invested assets

      905        1,281        882   

Derivatives

      -        739        1,916   
  

 

 

  

Total cost of investments acquired

      24,357        25,311        23,285   

Net increase (decrease) in receivable/payable for securities and collateral on derivatives

      904        (1,729 )      1,197   

Net increase (decrease) in policy loans

      56        (150 )      140   
  

 

 

  

Net cash provided by (used in) investment activities

      (3,090 )      955        (3,165 ) 

Financing and miscellaneous activities

       

Borrowed funds

      (276 )      (232 )      (48 ) 

Net deposits (withdrawals) on deposit-type contracts

      (333 )      (85 )      (134 ) 

Dividend paid to Parent

      (210 )      (500 )      (300 ) 

Repurchase agreements

      -        -        (437 ) 

Other cash provided (applied)

      (2,516 )      3,756        14   
  

 

 

  

Net cash provided by (used in) financing and miscellaneous activities

      (3,335 )      2,939        (905 ) 

Net increase (decrease) in cash, cash equivalents and short-term investments

      (3,174 )      2,953        (157 ) 

Cash, cash equivalents and short-term investments at beginning of year

      7,702        4,749        4,906   
  

 

 

  

Cash, cash equivalents and short-term investments at end of year

        $ 4,528      $ 7,702      $ 4,749   
  

 

 

  

Non-cash investing activities during the year:

       

Premium, deposit type contracts and other operating activity for New York Life (NYL) reinsurance transaction and other transactions, net

        $ 8,357      $ -      $ -   

Transfer of invested assets for NYL reinsurance transaction and other affiliates, net

      (8,357 )      -        -   

 

The accompanying notes are an integral part of these statutory-basis financial statements.

 

F-7

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS

 

1. Organization and Nature of Operations

John Hancock Life Insurance Company (U.S.A.) (“JHUSA” or the “Company”) is a wholly-owned subsidiary of The Manufacturers Investment Corporation (“MIC”). MIC is a wholly-owned subsidiary of John Hancock Financial Corporation (“JHFC”), which is an indirect, wholly-owned subsidiary of The Manufacturers Life Insurance Company (“MLI”). MLI, in turn, is a wholly-owned subsidiary of Manulife Financial Corporation (“MFC”), a Canadian-based, publicly traded financial services holding company.

The Company provides a wide range of financial protection and wealth management products and services to both individual and institutional customers located primarily in the United States. Through its insurance operations, the Company offers a variety of individual life insurance and individual and group long-term care insurance products that are distributed through multiple distribution channels, including insurance agents, brokers, banks, financial planners, and direct marketing. The Company also offers mutual fund products and services which include a variety of retirement products to retirement plans. The Company distributes these products through multiple distribution channels, including insurance agents and affiliated brokers, securities brokerage firms, financial planners, pension plan sponsors, pension plan consultants, and banks. In 2013, the Company discontinued sales of its structured settlements and single premium immediate annuity products. The Company is licensed to sell insurance in 49 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands.

Pursuant to a distribution agreement with the Company, John Hancock Distributors LLC (“JHD”), a registered broker-dealer and a wholly-owned subsidiary of the Company, acts as the principal underwriter of variable life contracts and other products issued by the Company.

The Company has two wholly-owned life insurance subsidiaries, John Hancock Life Insurance Company of New York (“JHNY”) and John Hancock Life & Health Insurance Company (“JHLH”).

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known and may impact the amounts reported and disclosed herein.

Basis of Presentation

These financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Michigan Department of Insurance and Financial Services (the “Insurance Department”). The National Association of Insurance Commissioners’ (“NAIC”) Accounting Practices and Procedures Manual (“NAIC SAP”) has been adopted as a component of practices prescribed or permitted by the State of Michigan. The Michigan Director of the Department of Insurance and Financial Services (the “Director”) has the authority to prescribe or permit other specific practices that deviate from prescribed practices. NAIC SAP practices differ from accounting principles generally accepted in the United States (“GAAP”) as described below.

Investments: Investments in bonds not backed by other loans are principally stated at amortized cost using the constant yield (interest) method. Bonds can also be stated at the lesser of amortized cost or fair value based on their NAIC designated rating. Non-redeemable preferred stocks, which have characteristics of equity securities, are reported at cost or lower of cost or market value as determined by the Securities Valuation Office of the NAIC (“SVO”) rating, and the related net unrealized capital gains (losses) are reported in unassigned surplus along with any adjustment for federal income taxes. Redeemable preferred stocks, which have characteristics of debt securities and are rated as medium quality or better, are reported at cost or amortized cost. All other redeemable preferred stocks are reported at the lower of cost, amortized cost, or fair value.

For bonds other than loan-backed and structured securities, the Company has a process in place to identify securities that could potentially have an impairment that is other-than-temporary. The Company recognizes other-than-temporary impairment losses on bonds with unrealized losses when either of the following two conditions exist: the entity either (1) has the intent to sell the debt security or (2) is more likely than not to be required to sell the debt security before its anticipated recovery. Declines in value due to credit difficulties are also considered to be other-than-temporarily impaired when the Company does not have the intent and ability to hold the security for a period of time sufficient to allow for any anticipated

 

F-8

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

recovery in value. The entire difference between amortized cost and fair value on such bonds with credit difficulties is recognized as an impairment loss in income.

Loan-backed and structured securities (i.e., collateralized mortgage obligations) are adjusted for the effects of changes in prepayment assumptions on the related accretion of discounts or amortization of premiums of such securities using either the retrospective or prospective methods. The retrospective adjustment method is used to value all such securities, except principal-only and interest-only securities and such securities with NAIC designations of 3-6, which are valued using the prospective method. If it is determined that a decline in fair value is other-than-temporary, the cost basis of the security is written down to the present value of estimated future cash flows using the original effective interest rate inherent in the security.

Common stocks are primarily reported at fair value based on quoted market prices and the related net unrealized capital gains (losses) are reported in unassigned surplus, net of any adjustment for federal income taxes. There are no restrictions on common and preferred stocks.

Insurance subsidiaries are reported at their underlying statutory equity. Non-insurance subsidiaries, which have significant ongoing operations other than for the benefit of the Company and its affiliates, are reported at GAAP equity. Non-insurance subsidiaries, which have no significant ongoing operations other than for the benefit of the Company and its affiliates, are reported based on the underlying equity, plus the admitted portion of goodwill. Dividends from subsidiaries are included in net investment income. The remaining net change in the subsidiaries’ equity is included in the change in net unrealized capital gains (losses).

Realized capital gains (losses) on sales of securities are recognized using the first in, first out (“FIFO”) method. The cost basis of bonds and common and preferred stocks is adjusted for impairments in value deemed to be other-than-temporary and such adjustments are reported as a component of net realized capital gains (losses).

Mortgage loans on real estate are reported at unpaid principal balances, less an allowance for impairments. Valuation allowances, if necessary, are established for mortgage loans on real estate based on the difference between the net value of the collateral, determined as the fair value of the collateral less estimated costs to obtain and sell, and the recorded investment in the mortgage loan. The initial valuation allowance and subsequent changes in the allowance for mortgage loans are charged or credited directly to unassigned surplus. A mortgage loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage agreement. When management determines foreclosure is probable and the impairment is other-than-temporary, the mortgage loan is written down and a realized loss is recognized.

Real estate occupied by the Company and real estate held for the production of income are reported at depreciated cost, net of related obligations. Real estate that the Company has the intent to sell is reported at the lower of depreciated cost or fair value, net of related obligations. Depreciation is calculated on a straight-line basis over the estimated useful lives of the properties. Investment income and operating expenses include rent for the Company’s occupancy of Company-owned properties.

Cash equivalents are short-term highly liquid investments with original maturities of three months or less and are principally stated at amortized cost. Short-term investments include investments with maturities of one year or less and greater than three months at the date of acquisition and are principally stated at amortized cost.

Policy loans are reported at unpaid principal balances.

Derivative instruments that meet the criteria to qualify for hedge accounting are accounted for in a manner consistent with the item hedged (i.e., amortized cost or fair value with the related net unrealized capital gains (losses) reported in unassigned surplus along with any adjustment for federal income taxes). Derivative instruments that are entered into for other than hedging purposes or that do not meet the criteria to qualify for hedge accounting are accounted for at fair value, and the related changes in fair value are recognized as net unrealized capital gains (losses) reported in unassigned surplus, net of any adjustments for federal income taxes. Embedded derivatives are not accounted for separately from the host contract.

Other invested assets consist of ownership interests in partnerships and limited liability corporations (“LLCs”) which are carried based on the underlying GAAP equity, with the exception of affordable housing tax credit properties, which are carried at amortized cost. The related net unrealized capital gains (losses) are reported in unassigned surplus, net of any

 

F-9

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

adjustments for federal income taxes. The Company records its share of income using the most recent financial information available, which is generally on a three month lag. Depending on the timing of receipt of the audited financial statements of these other invested assets, the investee level financial data may be up to one year in arrears.

Interest Maintenance and Asset Valuation Reserves: Under a formula prescribed by the NAIC, the Company defers the portion of realized capital gains (losses) on sales of fixed income investments, principally bonds and mortgage loans, and interest-related hedging activities that are attributable to changes in the general level of interest rates and amortizes those deferrals over the remaining period to maturity based on groupings of individual securities sold in five-year bands. That net deferral is reported as the interest maintenance reserve (“IMR”) in the accompanying Balance Sheets. Realized capital gains (losses) are reported in income, net of federal income tax and transferred to the IMR. The asset valuation reserve (“AVR”) provides a valuation allowance for invested assets. The AVR is determined by an NAIC prescribed formula with changes reflected directly in unassigned surplus.

Subsidiaries: The accounts and operations of the Company’s subsidiaries are not consolidated with the accounts and operations of the Company.

Goodwill: Goodwill is admitted subject to an aggregate limitation of 10% of the capital and surplus in the most recently filed quarterly statement, excluding EDP equipment, operating system software, net deferred tax assets, and net positive goodwill. Goodwill is amortized over the period the Company benefits economically, not to exceed 10 years. Goodwill held by non-insurance subsidiaries is assessed in accordance with GAAP, subject to certain limitations for holding companies and foreign insurance subsidiaries.

Separate Accounts: Separate account assets and liabilities reported in the accompanying Balance Sheets represent funds that are separately administered, principally for annuity contracts and variable life insurance policies, and for which the contract holder, rather than the Company, bears the investment risk. Separate account obligations are intended to be satisfied from separate account assets and not from assets of the general account. Separate accounts are generally reported at fair value. The operations of the separate accounts are not included in the Statements of Operations; however, income earned on amounts initially invested by the Company in the formation of new separate accounts is included in other revenue. Fees charged to contract holders, principally mortality, policy administration, and surrender charges are included in separate account administrative and contract fees. The assets in the separate accounts are not pledged to others as collateral or otherwise restricted. For the years ended December 31, 2015, 2014 and 2013, there were no gains (losses) on transfers of assets from the general account to the separate account.

Nonadmitted Assets: Certain assets designated as nonadmitted, principally furniture and equipment, past due agents’ balances, and other assets not specifically identified as an admitted asset within the NAIC SAP are excluded from the accompanying Balance Sheets and are charged directly to unassigned surplus.

Policy Acquisition Costs: The costs of acquiring and renewing business are expensed when incurred.

Policy Reserves: Reserves for life, long-term care, annuity, and deposit-type contracts are developed by actuarial methods and are determined based on interest rates, mortality tables and valuation methods prescribed by the NAIC that will provide, in the aggregate, reserves that are greater than or equal to the maximum of guaranteed policy cash values or the amounts required by the Insurance Department.

 

  •  

The Company waives deduction of deferred fractional premiums on the death of lives insured and annuity contract holders and returns any premium beyond the date of death. Surrender values on policies do not exceed the corresponding benefit reserves. Additional reserves are established when the results of asset adequacy testing indicate the need for such reserves or the net premiums exceed the gross premiums on any insurance in-force. This includes asset adequacy testing required under NAIC Actuarial Guideline 38 Section 8D (“AG 38 8D”). The Company recorded gross reserves of $791 million and $641 million for the calculation required under AG 38 8D, of which $465 million and $446 million was ceded to Manulife Reinsurance Limited (“MRL”) under an existing coinsurance transaction at December 31, 2015 and 2014, respectively. At December 31, 2015 and 2014, the Company held reserves of $920 million and $1,030 million, respectively, on insurance in-force for which gross premiums were less than net premiums according to the standard of valuation set by the State of Michigan.

 

F-10

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

  •  

Reserves for individual life insurance policies are maintained using the 1941, 1958, 1980, and 2001 Commissioner’s Standard Ordinary and American Experience Mortality Tables. Methods used include the net level premium method principally for policies issued prior to 1978, a modified preliminary term method, and the Commissioner’s Reserve Valuation Method.

 

  •  

Annuity and supplementary contracts with life contingency reserves are based principally on modifications of the 1937 Standard Annuity Table, the Group Annuity Mortality Tables for 1951, 1971, 1983, and 1994, the 1971 and 1983 Individual Annuity Mortality Tables, the 2000 Individual Annuity Mortality Table, and the 2012 Individual Annuity Mortality Table.

 

  •  

Liabilities related to policyholder funds left on deposit with the Company are generally equal to fund balances.

 

  •  

Long-term care reserves are generally calculated using the one-year preliminary term method based on various mortality, morbidity, and lapse tables.

 

  •  

The mean reserve method is used to adjust the calculated terminal reserve to the appropriate reserve at December 31, 2015 or 2014. Mean reserves are determined by computing the terminal reserve for the plan at the rated age and assuming annual premiums have been paid as of the valuation date. For certain policies with substandard table ratings, mean reserves are based on rated mortality from 125% to 500% of standard rating; for certain policies with flat extra ratings, mean reserves are based on standard mortality rates increased by 1 to 25 deaths per thousand. An asset is recorded for deferred premiums, net of loading, to adjust the reserve for modal premium payments.

 

  •  

For long-term care, the interpolated reserve method is used to adjust the calculated terminal reserve, and in addition an unearned premium reserve is held.

 

  •  

Tabular interest, tabular less actual reserve released, and tabular costs have been determined by formula. Tabular interest on funds not involving life contingencies is calculated as one percent of the product of such valuation rate of interest times the mean of the amount of funds subject to such valuation rate of interest held at the beginning and end of the valuation year.

 

  •  

From time to time, the Company finds it appropriate to modify certain required policy reserves because of changes in actuarial assumptions. Reserve modifications resulting from such determinations are recorded directly to unassigned surplus.

 

  •  

Reserves for variable deferred annuity contracts are calculated in accordance with NAIC Actuarial Guideline 43, and primarily use the 1994 Minimum Guaranteed Death Benefit or Annuity 2000 tables. The reserve is based on the present value of accumulated losses from the perspective of the Company. The liability is evaluated under both a standard scenario and stochastic scenario, and the Company holds the higher of the standard or stochastic values.

Reinsurance: 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 insurer.

Premiums, commissions, expense reimbursements, benefits, and reserves related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums ceded to other companies have been reported as a reduction of premium income. Amounts applicable to reinsurance ceded for future policy benefits, unearned premium reserves, and claim liabilities have been reported as reductions of these items.

The Company records a liability for unsecured policy reserves ceded to reinsurers not authorized in the State of Michigan to assume such business. Changes to those amounts are credited or charged directly to unassigned surplus. Policy and contract liabilities ceded to reinsurers have been reported as reductions of the related reserves. Commissions allowed by reinsurers on business ceded are reported as income when received. Investment income ceded includes separate account fee income, net

 

F-11

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

investment income and realized investment and other gains (losses), which was ceded to the affiliated reinsurers. NAIC SAP prescribes that no gain be recognized upon inception of a reinsurance treaty. The initial consideration is recorded directly to unassigned surplus and released into income over the life of the treaty.

Federal Income Taxes: Total federal income taxes are based upon the Company’s best estimate of its current and deferred tax assets or liabilities. Current tax expense is reported in the Statements of Operations as federal income tax expense if resulting from operations and within net unrealized capital gains (losses) if resulting from capital transactions. Changes in the balances of deferred taxes, which provide for book versus tax temporary differences, are subject to limitations and are reported within various lines within surplus. Accordingly, the reporting of statutory to tax temporary differences, such as reserves and policy acquisition costs, and of statutory to tax permanent differences, such as tax-exempt interest and tax credits, results in effective tax rates in the Statements of Operations that differ from the federal statutory tax rate.

Participating Insurance and Policyholder Dividends: Participating business represented approximately 15% and 26% of the Company’s aggregate reserve for life contracts at December 31, 2015 and 2014. The amount of policyholders’ dividends to be paid is approved annually by the Company’s Board of Directors. Policyholder dividends are recognized when declared rather than over the term of the related policies. The determination of the amount of policyholder dividends is complex and varies by policy type. In general, the aggregate amount of policyholders’ dividends is calculated based upon actual interest, mortality, morbidity, persistency, and expense experience for the year, as well as management’s judgment as to the appropriate level of statutory surplus to be retained by the Company. John Hancock Life Insurance Company (“JHLICO”) was a predecessor company that was merged into JHUSA on December 31, 2009. For additional information on the closed blocks, see the Closed Blocks Note.

Surplus Notes: Surplus notes are reported in capital and surplus, and the interest expense is not accrued unless approved for payment by the Insurance Department.

Statements of Cash Flow: Cash, cash equivalents and short-term investments in the Statements of Cash Flow represent movements of cash and highly liquid debt investments with initial maturities of one year or less.

Premiums and Benefits: Premiums for whole, term, and universal life, long-term care, annuity policies, guaranteed interest, and group annuity contracts with any mortality and morbidity risk are recognized as revenue when due. Revenues for universal life and annuity policies with mortality or morbidity risk, except for guaranteed interest, term certain supplementary contracts, and funding agreements, consist of the entire premium received. Premiums received for annuity policies, guaranteed interest, funding agreements, variable universal life, and group annuity contracts without mortality or morbidity risk are recorded using deposit accounting and are credited directly to an appropriate policy reserve account, without recognizing premium revenue. Benefits incurred represent the total of death benefits paid, annuity benefits paid and the change in policy reserves.

Policy and Contract Claims: Policy and contract claims are determined on an individual-case basis for reported losses. Estimates of incurred but not reported losses are developed on the basis of past experience.

Guaranty Fund Assessments: Guaranty fund assessments are accrued when the Company receives knowledge of an insurance insolvency.

Variances Between NAIC SAP and GAAP: The more significant variances from GAAP are: (a) bonds would generally be reported at fair value; (b) changes in the fair value of derivative financial instruments would generally be reported as revenue unless deemed an effective hedge; (c) embedded derivatives would be bifurcated from the underlying contract or security and accounted for separately at fair value; (d) income recognition on partnerships and LLCs, which are accounted for under the equity method, would not be limited to the amount of cash distribution; (e) majority-owned noninsurance subsidiaries, variable interest entities where the Company is the primary beneficiary, and certain other controlled entities would be consolidated; (f) changes in the balances of deferred income taxes would generally be included in net income; (g) market value adjusted (“MVA”) annuity products would be reported in the general account of the Company; (h) all assets, subject to valuation allowances, would be recognized; (i) reserves would generally be based upon the net level premium method or the estimated gross margin method with estimates of future mortality, morbidity, persistency and interest; (j) reinsurance ceded, unearned ceded premium and unpaid ceded claims would be reported as an asset; (k) AVR and IMR would not be recorded; (l) changes to the mortgage loan valuation allowance would be reported in income; (m) surplus notes would be reported as liabilities; (n) premiums received in excess of policy charges for universal life and annuity policies would not be recognized as premium revenue and benefits would represent the excess of benefits paid over the policy account value and interest

 

F-12

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

credited to the account values; (o) certain acquisition costs, such as commissions and other variable costs, directly related to acquiring new business are charged to current operations as incurred, would generally be capitalized and amortized based on profit emergence over the expected life of the policies or over the premium payment period; and (p) changes in unrealized capital gains (losses) and foreign currency translations would be presented as other comprehensive income.

3. Permitted Statutory Accounting Practices

The financial statements of the Company are presented in conformity with accounting practices prescribed or permitted by the Insurance Division.

For determining the Company’s solvency under the State of Michigan’s insurance laws and regulations, the Insurance Department recognizes only statutory accounting practices prescribed or permitted by the State of Michigan for determining and reporting the financial condition and results of operations of the Company. NAIC SAP has been adopted as a component of practices prescribed or permitted by the State of Michigan. The Director has the authority to prescribe or permit other specific practices that deviate from prescribed practices.

As of December 31, 2015 and 2014, the Director had not prescribed or permitted the Company to use any accounting practices that would result in the Company’s income or financial position to deviate from NAIC SAP.

4. Accounting Changes

Accounting changes adopted to conform to the provisions of NAIC SAP are reported as changes in accounting principles. The cumulative effect of changes in accounting principles is reported as an adjustment to unassigned surplus in the period of the change in accounting principle. The cumulative effect is the difference between the amount of unassigned surplus at the beginning of the year and the amount of unassigned surplus that would have been reported at that date if the new accounting principle had been applied retrospectively.

Adoption of New Accounting Standards

In December 2014, the NAIC adopted revisions to Statement of Statutory Accounting Principles (“SSAP”) No. 40R, Real Estate Investments (“SSAP 40R”) which became effective January 1, 2015 allowing real estate property investments that are wholly-owned by a LLC that are directly and wholly-owned by the reporting entity to be reported as real estate. For these investments previously reported within SSAP No. 48, Joint Ventures, Partnerships and Limited Liability Companies (“SSAP 48”), and owned as of the effective date, the Company recorded a $248 million reduction in other invested assets, and a corresponding increase in real estate investment property holdings.

Future Adoption of New Accounting Standards

As of December 31, 2015, there were no pending new accounting standards that would have a material impact on the Company’s Balance Sheet or Statement of Operations.

Reconciliation Between Audited Financial Statements and NAIC Annual Statements

There were no differences in net income (loss) or capital and surplus between the audited financial statements and the NAIC statements as filed as of and for the years ended December 31, 2015, 2014 and 2013.

 

F-13

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments

Bonds

The carrying value and fair value of the Company’s investments in bonds are summarized as follows:

 

     Carrying
Value		      Gross
Unrealized
Gains		      Gross
Unrealized
Losses		     Fair Value  
  

 

 

  
     (in millions)  

December 31, 2015:

           

U.S. government and agencies

        $ 5,378           $ 348           $ (46 )        $ 5,680   

States and political subdivisions

      2,666         435         (11 )      3,090   

Foreign governments

      2,737         201         (16 )      2,922   

Corporate bonds

      27,480         1,935         (655 )      28,760   

Mortgage-backed and asset-backed securities

      6,202         389         (93 )      6,498   
  

 

 

  

Total bonds

        $ 44,463           $ 3,308           $ (821 )        $ 46,950   
  

 

 

  

December 31, 2014:

           

U.S. government and agencies

        $ 5,420           $ 863           $ (1 )        $ 6,282   

States and political subdivisions

      2,842         606         —          3,448   

Foreign governments

      2,849         205         (10 )      3,044   

Corporate bonds

      31,347         3,633         (140 )      34,840   

Mortgage-backed and asset-backed securities

      6,768         618         (49 )      7,337   
  

 

 

  

Total bonds

        $   49,226           $   5,925           $   (200 )        $   54,951   
  

 

 

  

A summary of the carrying value and fair value of the Company’s investments in bonds at December 31, 2015, by contractual maturity, is as follows:

 

     Carrying
Value		      Fair Value  
  

 

 

  
     (in millions)  

Due in one year or less

        $ 747       $ 760   

Due after one year through five years

      5,659         5,764   

Due after five years through ten years

      6,962         7,010   

Due after ten years

      24,893         26,918   

Mortgage-backed and asset-backed securities

      6,202         6,498   
  

 

 

  

Total

        $   44,463       $   46,950   
  

 

 

  

The expected maturities in the foregoing table may differ from the contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

The Company maintains assets which are pledged as collateral in connection with various agreements and transactions. Additionally, the Company holds assets on deposit with government authorities as required by state law. The following table summarizes the carrying value or fair value, as applicable, of the pledged or deposited assets:

 

F-14

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions)  

At fair value:

      

Bonds pledged in support of over-the-counter derivative instruments

        $ 244       $ 125   

Bonds pledged in support of exchange-traded futures

      609         498   

Bonds and cash pledged in support of cleared interest rate swaps

      120         551   
  

 

 

  

Total fair value

        $ 973       $ 1,174   
  

 

 

  

At carrying value:

      

Bonds on deposit with government authorities

        $ 16       $ 16   

Mortgage loans pledged in support of real estate

      17         45   

Bonds held in trust

      92         132   

Pledged collateral under reinsurance agreements

      3,407         2,800   
  

 

 

  

Total carrying value

        $   3,532       $   2,993   
  

 

 

  

At December 31, 2015 and 2014, the Company held below investment grade corporate bonds of $2,047 million and $2,096 million, with an aggregate fair value of $1,990 million and $2,197 million, respectively. The Company performs periodic evaluations of the relative credit standing of the issuers of these bonds.

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

At the end of each quarter, the MFC Loan Review Committee reviews all securities where there is evidence of impairment or a significant unrealized loss at the Balance Sheet date. Generally, securities with market value less than 60 percent of amortized cost for six months or more indicate an impairment is present. Accordingly, securities in this category are normally deemed impaired unless there is clear evidence they should not be impaired. The analysis focuses on each company’s or project’s ability to service its debts in a timely fashion and the length of time the security has been trading below amortized cost. The results of this analysis are reviewed by the Transaction and Portfolio Review Committee at MFC. This committee includes MFC’s Chief Financial Officer, Chief Investment Officer, Chief Risk Officer, Chief Credit Officer, and other senior management. This quarterly process includes a fresh assessment of the credit quality of each investment in the entire fixed maturity security portfolio.

The Company considers relevant facts and circumstances in evaluating whether the impairment of a security is other-than-temporary. Relevant facts and circumstances considered include (1) the length of time the fair value has been below cost; (2) the financial position of the issuer, including the current and future impact of any specific events; and (3) the Company’s ability and intent to hold the security to maturity or until it recovers in value. To the extent the Company determines that a security, other than loan-backed and structured securities, is deemed to be other-than-temporarily impaired, the difference between amortized cost and fair value would be charged to income. For loan-backed and structured securities in an unrealized loss position, where the Company does not intend to sell or is not likely to be required to sell the security, the Company calculates an other-than-temporary impairment loss by subtracting the net present value of the projected future cash flows of the security from the amortized cost of the security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the debt security prior to impairment. The projection of future cash flows is subject to the same analysis the Company applies to its overall impairment evaluation process, as noted above, which incorporates security specific information such as late payments, downgrades by rating agencies, key financial ratios, financial statements, and fundamentals of the industry and geographic area in which the issuer operates, as well as overall macroeconomic conditions. The cash flow estimates, including prepayment assumptions, are based on data from third-party data sources or internal estimates, and are driven by assumptions regarding the underlying collateral, including default rates, recoveries, and changes in value.

There are a number of significant risks and uncertainties inherent in the process of monitoring impairments and determining if impairment is other-than-temporary. These risks and uncertainties include (1) the risk that the Company’s assessment of an

 

F-15

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

issuer’s ability to meet all of its contractual obligations will change based on changes in the credit characteristics of that issuer; (2) the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated; (3) the risk that fraudulent information could be provided to the Company’s investment professionals who determine the fair value estimates and other-than-temporary impairments; and (4) the risk that new information obtained by the Company or changes in other facts and circumstances lead the Company to change its intent to hold the security to maturity or until it recovers in value. Any of these situations could result in a charge to income in a future period.

The impact of Other-Than-Temporary Impairments (OTTI) on Carrying Values (CV), including the Present Value (PV) of Cash Flows (CF) less than Book Value (BV), is as follows:

 

                                    
  

 

 

  
     December 31, 2015  
         CV Before OTTI      Interest OTTI      Credit OTTI      CV After OTTI      Fair Value      
  

 

 

  
     (in millions)  

Aggregate PV of CFs less than BV

        $ 8             $ -             $   2             $ 6             $ 6     

Aggregate intent to sell

      -           -           -           -           -     

Aggregate lack of intent or inability to sell

      -           -           -           -           -     
  

 

 

  

Total

        $ 8             $   -             $   2             $ 6             $ 6     
  

 

 

  
              
  

 

 

  
     December 31, 2014  
         CV Before OTTI      Interest OTTI      Credit OTTI      CV After OTTI      Fair Value      
  

 

 

  
     (in millions)  

Aggregate PV of CF’s less than BV

        $ 33             $ -             $   5             $ 28             $ 28     

Aggregate intent to sell

      -           -           -           -           -     

Aggregate lack of intent or inability to sell

      -           -           -           -           -     
  

 

 

  

Total

        $     33             $   -             $   5             $   28             $   28     
  

 

 

  

 

F-16

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

The following tables disclose the impact of Other-Than-Temporary Impairments (OTTI) on Carrying Values (CV), including the Net Present Value (NPV) of Projected Cash Flows (CF) less than Book Value (BV) by CUSIP:

Year Ended December 31, 2015

 

                CUSIP#                     CV Before
OTTI		      NPV of
Projected
CFs		      Credit OTTI
Recognized in
Loss		      CV After
OTTI		      Fair        
Value        		  

 

  

      36242DFH1

        $ 3       $ 1       $ 2       $ 1       $ 1     

      75970NBK2

      -         -         -         -         -     

      94981QAZ1

      -         -         -         -         -     

      805564PN5

      2         2         -         2         2     

      36242DFH1

      1         1         -         1         1     

      55265KS34

      1         1         -         1         1     

      75970NBK2

      -         -         -         -         -     

      126671TU0

      -         -         -         -         -     

      294751CT7

      1         1         -         1         1     
  

 

 

  

          Total

        $         8       $         6       $         2       $         6       $         6     
  

 

 

  

 

F-17

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Year Ended December 31, 2014

 

CUSIP#    CV Before
OTTI		      NPV of
Projected
CFs		      Credit OTTI
Recognized in
Loss		      CV After
OTTI		      Fair        
Value        		  

 

  

      00075XAE7

        $ 1       $ 1       $ -       $ 1       $ 1     

      12669FUY7

      -         -         -         -         -     

      361849RK0

      15         14         1         14         14     

      126670AJ7

      -         -         -         -         -     

      126673WJ7

      -         -         -         -         -     

      126673WK4

      -         -         -         -         -     

      12669ERQ1

      4         3         1         3         3     

      12669FD67

      -         -         -         -         -     

      50180LAP5

      4         3         1         3         3     

      55265KS42

      -         -         -         -         -     

      75970NAR8

      1         1         -         1         1     

      75970NBK2

      1         1         -         1         1     

      126673WJ7

      -         -         -         -         -     

      12669FD59

      2         1         1         1         1     

      55265KS34

      1         1         -         1         1     

      59020UAZ8

         -         -         -         -     

      75970NAR8

      1         1         -         1         1     

      75970NBK2

      -         -         -         -         -     

      94981QAZ1

      -         -         -         -         -     

      50180LAP5

      3         2         1         2         2     

      75970NBK2

      -         -         -         -         -     
  

 

 

  

          Total

        $         33       $         28       $         5       $         28       $         28     
  

 

 

  

All impaired securities which have fair value less than cost or amortized cost, for which an other-than-temporary impairment has not been recognized in income as a realized loss, including securities with a recognized other-than-temporary impairment for non-interest related declines when a non-recognized interest related impairment remains:

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions)  

Continuous Unrealized Losses

      

Less than 12 months

        $   -           $   -   

12 months or longer

      -         -   

Fair Value of Securities with Continuous Unrealized Losses

      

Less than 12 months

      -         3   

12 months or longer

      -         4   

 

F-18

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

The following table shows gross unrealized losses and fair values of bonds, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

 

    Less than 12 months     12 months or more     Total  
   
    Fair Value     Gross
Unrealized
Losses		     Fair Value     Gross
Unrealized
Losses		     Fair Value     Gross
Unrealized
Losses		  
   
                (in millions)              

December 31, 2015:

                

U.S. government and agencies

       $ 3,260      $ (46 )    $ -      $ -      $ 3,260      $ (46 ) 

States and political subdivisions

     213        (10 )      11        (1 )      224        (11 ) 

Foreign governments

     16        (3 )      46        (12 )      62        (15 ) 

Corporate bonds

     8,424        (482 )      1,167        (174 )      9,591        (656 ) 

Mortgage-backed and asset-backed securities

     1,744        (57 )      242        (36 )      1,986        (93 ) 

Total

       $   13,657      $   (598 )    $   1,466      $   (223 )    $   15,123      $   (821 ) 
                                               

    

            
    Less than 12 months     12 months or more     Total  
   
    Fair Value     Gross
Unrealized
Losses		     Fair Value     Gross
Unrealized
Losses		     Fair Value     Gross
Unrealized
Losses		  
   
                (in millions)              

December 31, 2014:

                

U.S. government and agencies

       $ 94      $ -      $ 58      $ (1 )    $ 152      $ (1 ) 

States and political subdivisions

     8        -        8        -        16        -   

Foreign governments

     80        -        52        (10 )      132        (10 ) 

Corporate bonds

     2,033        (45 )      2,651        (95 )      4,684        (140 ) 

Mortgage-backed and asset-backed securities

     412        (8 )      459        (41 )      871        (49 ) 

Total

       $ 2,627      $ (53 )    $ 3,228      $ (147 )    $ 5,855      $ (200 ) 
                                               

At December 31, 2015 and 2014, there were 889 and 574 bonds that had a gross unrealized loss, of which the single largest unrealized loss was $25 million and $12 million, respectively. The Company anticipates that these bonds will perform in accordance with their contractual terms and the Company currently has the ability and intent to hold these bonds until they recover or mature. Unrealized losses can be created by rising interest rates or by rising credit concerns and hence widening credit spreads. Credit concerns are apt to play a larger role in the unrealized loss on below investment grade securities. Unrealized losses on investment grade securities principally relate to changes in interest rates or changes in credit spreads since the securities were acquired. Credit rating agencies’ statistics indicate that investment grade securities have been found to be less likely to develop credit concerns.

For the years ended December 31, 2015, 2014 and 2013, realized capital losses include $28 million, $24 million, and $88 million related to bonds that have experienced an other-than-temporary decline in value and were comprised of 13, 21, and 43 securities, respectively. These are primarily made up of impairments on public and private bonds and sub-prime mortgage-backed securities.

The total recorded investment in restructured corporate bonds at December 31, 2015, 2014 and 2013 was $18 million, $17 million, and $0 respectively. There were 0, 2, and 0 restructured corporate bonds for which an impairment was recognized during 2015, 2014 and 2013, respectively. The Company accrues interest income on impaired securities to the extent deemed

 

F-19

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

collectible and the loan continues to perform under its original or restructured contractual terms. Interest income on non-performing loans generally is recognized on a cash basis.

The sales of investments in bonds resulted in the following:

 

     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Proceeds

        $   17,078          $   18,292          $   14,555   

Realized gross gains

      500        579        244   

Realized gross losses

      (123 )      (111 )      (483 ) 

The Company had no nonadmitted accrued investment income from bonds (unaffiliated) at December 31, 2015 and 2014.

Affiliate Transactions

In 2015, the Company transferred certain bonds to an affiliate, John Hancock Reassurance Company Limited (“JHRECO”) in lieu of a reinsurance cash settlement. These bonds had a book value of $537 million and fair value of $609 million. The Company recognized $72 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company sold certain bonds to an affiliate, Bermuda Branch of The Manufacturers Life Insurance Company (“BBMLI”). These bonds had a book value of $270 million and fair value of $284 million at the date of the transaction. The Company recognized $15 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company sold certain bonds to an affiliate, Manufacturers International Limited (Hong Kong) (“MIL”). These bonds had a book value of $298 million and fair value of $332 million at the date of the transaction. The Company recognized $33 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company sold certain bonds to an affiliate, Manulife Financial Singapore (“MLS”). These bonds had a book value of $135 million and fair value of $147 million at the date of the transaction. The Company recognized $12 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company sold certain bonds with an affiliate, Manulife Japan (“MLJ”). These bonds had a net book value of $224 million and fair value of $248 million at the date of the transaction. The Company recognized $24 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company acquired, at fair value, certain bonds from an affiliate, JHNY, for $152 million.

In 2015, the Company acquired, at fair value, certain bonds from an affiliate, JHLH, for $282 million.

In 2014, JHUSA sold certain bonds to an affiliate, MLI. These bonds had a book value of $178 million and a fair value of $206 million at the date of the transaction. The Company recognized $28 million in pre-tax realized gains which was deferred in the IMR.

In 2014, JHUSA sold certain bonds to an affiliate, MIL. These bonds had a book value of $371 million and a fair value of $433 million in exchange for certain bonds from MIL with a book value of $389 million and fair value of $435 million at the date of the transaction. The Company recognized $62 million in pre-tax realized gains which was deferred in the IMR.

In 2014, JHUSA sold certain bonds to an affiliate, JHRECO. These bonds had a book value of $244 million and fair value of $284 million in exchange for certain bonds from JHRECO with a book value of $282 million and fair value of $291 million at the date of the transaction. The Company recognized $41 million in pre-tax realized gains which was deferred in the IMR.

 

F-20

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

In 2014, JHUSA acquired certain and sold certain bonds from an affiliate, JHNY. These bonds had a net book value of $165 million and a fair value of $188 million at the date of the transactions. The Company recognized $1 million in pre-tax realized gains before transfer to the IMR.

In 2014, JHUSA acquired, at fair value, certain bonds from an affiliate, JHLH, for $72 million.

In 2013, JHUSA sold certain bonds to an affiliate, MIL. These bonds had a book value of $397 million and a fair value of $454 million at the date of the transaction. The Company recognized $57 million in pre-tax realized gains before transfer to the IMR.

In 2013, JHUSA sold certain bonds to an affiliate, JHRECO. These bonds had a book value of $184 million and a fair value of $181 million at the date of the transaction. The Company recognized $3 million in pre-tax realized losses before transfer to the IMR.

In 2013, JHUSA sold certain and acquired certain bonds from an affiliate, BBMLI. The bonds had a net book value of $338 million and a fair value of $372 million at the date of the transaction. The Company recognized $27 million in pre-tax realized gains before transfer to the IMR.

 

F-21

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Preferred and Common Stocks

Unrealized gains and losses on investments in preferred and common stocks are reported directly in unassigned surplus and do not affect operations. The gross unrealized gains and losses on, and the cost and fair values of, those investments are summarized as follows:

 

     Cost      Gross
Unrealized
Gains		      Gross
Unrealized
Losses		      Fair
Value		  
  

 

 

  
     (in millions)  

December 31, 2015:

            

Preferred stocks:

            

Nonaffiliated

        $ 23       $ 11       $ -        $ 34   

Affiliates

      3         -         (3)         -   

Common stocks:

            

Nonaffiliated

      634         64         (40)         658   

Affiliates*

      971         2,241         (7)         3,205   
  

 

 

  

Total stocks

        $ 1,631       $   2,316       $ (50)       $ 3,897   
  

 

 

  
     Cost      Gross
Unrealized
Gains		      Gross
Unrealized
Losses		      Fair
Value		  
  

 

 

  
     (in millions)  

December 31, 2014:

            

Preferred stocks:

            

Nonaffiliated

        $ 29       $ 18       $ (1)       $ 46   

Affiliates

      3         -         (3)         -   

Common stocks:

            

Nonaffiliated

      420         71         (14)         477   

Affiliates*

      971         1,947         (7)         2,911   
  

 

 

  

Total stocks

        $   1,423       $   2,036       $   (25)       $   3,434   
  

 

 

  
* Affiliates — fair value represents the carrying value

At December 31, 2015 and 2014, there were 276 and 134 nonaffiliated equity securities that had a gross unrealized loss excluding securities that have been written down to zero. The single largest unrealized loss was $19 million and $3 million at December 31, 2015 and 2014, respectively. The Company anticipates that these equity securities will recover in value in the near term.

The Company has a process in place to identify equity securities that could potentially have an impairment that is other-than-temporary. The Company considers relevant facts and circumstances in evaluating whether the impairment of a security is other-than-temporary. Relevant facts and circumstances include (1) the length of time the fair value has been below cost; (2) the financial position of the issuer; and (3) the Company’s ability and intent to hold the security until it recovers. To the extent the Company determines that a security is deemed to be other-than-temporarily impaired, the difference between book value and fair value would be charged to income.

For the years ended December 31, 2015, 2014 and 2013, realized capital losses include $4 million, $2 million, $5 million and related to preferred and common stocks that have experienced an other-than-temporary decline in value and were comprised of 115, 33, and 69 securities, respectively. These are primarily made up of impairments on public and private common stocks.

 

F-22

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Mortgage Loans on Real Estate

At December 31, 2015 and 2014, the mortgage loan portfolio was diversified by geographic region and specific collateral property type as displayed below. The Company controls credit risk through credit approvals, limits, and monitoring procedures.

 

December 31, 2015:                     
Property Type    Carrying
Value		       

Geographic

Concentration

    Carrying
Value		  

 

       

 

  
     (in millions)             (in millions)  

Apartments

        $ 2,206         East North Central        $ 1,445   

Industrial

      739         East South Central      157   

Office buildings

      2,562         Middle Atlantic      1,599   

Retail

      3,278         Mountain      516   

Agricultural

      171         New England      586   

Agribusiness

      471         Pacific      3,210   

Mixed use

      22         South Atlantic      1,986   

Other

      1,034         West North Central      449   

Allowance

      (8 )       West South Central      453   
        Canada / Other      82   
        Allowance      (8 ) 
  

 

 

          

 

 

  

Total mortgage loans on real estate

        $ 10,475         Total mortgage loans on real estate        $ 10,475   
  

 

 

          

 

 

  
                         
December 31, 2014:                     
Property Type    Carrying
Value		       

Geographic

Concentration

    Carrying
Value		  

 

       

 

  
     (in millions)             (in millions)  

Apartments

        $ 2,136         East North Central        $ 1,394   

Industrial

      920         East South Central      83   

Office buildings

      3,347         Middle Atlantic      1,997   

Retail

      3,209         Mountain      511   

Agricultural

      405         New England      682   

Agribusiness

      516         Pacific      3,310   

Mixed use

      22         South Atlantic      2,459   

Other

      974         West North Central      468   

Allowance

      (10 )       West South Central      533   
        Canada / Other      92   
        Allowance      (10 ) 
  

 

 

          

 

 

  

Total mortgage loans on real estate

        $   11,519         Total mortgage loans on real estate        $   11,519   
  

 

 

          

 

 

  

The aggregate mortgages outstanding to any one borrower do not exceed $263 million.

During 2015, the respective maximum and minimum lending rates for mortgage loans issued were 7.49% and 3.72% for agricultural loans and 5.19% and 3.00% for commercial loans. The Company issued no purchase money mortgages in 2015 and 2014. At the issuance of a loan, the percentage of any one loan to value of security, exclusive of insured, guaranteed, or purchase money mortgages does not exceed 75%. Impaired mortgage loans without an allowance for credit losses were $0 million, $0 million, and $0 million at December 31, 2015, 2014 and 2013, respectively. The average recorded investment in impaired loans was $34 million, $41 million, and $60 million at December 31, 2015, 2014 and 2013, respectively. The Company recognized $2 million, $3 million, and $0 million of interest income during the period the loans were impaired for the years ended December 31, 2015, 2014 and 2013, respectively.

 

F-23

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Generally, the terms of the restructured mortgage loans call for the Company to receive some form or combination of an equity participation in the underlying collateral, excess cash flows or an effective yield at the maturity of the loans sufficient to meet the original terms of the loans. There are no contractual commitments made to extend credit to debtors owning receivables whose terms have been modified in troubled debt restructurings. The Company accrues interest income on impaired loans to the extent deemed collectible and the loan continues to perform under its original or restructured contractual terms. Interest income on non-performing loans generally is recognized on a cash basis.

The following table provides a reconciliation of the beginning and ending balances for allowance for losses for the periods indicated.

 

     2015     2014     2013  
  

 

 

  
     (in millions)  

Balance at beginning of year

        $   10      $ 10      $ 19   

Additions, net

      3           10           13   

Recoveries of amounts previously charged off

      (5 )      (10 )      (22 ) 
  

 

 

  

Balance at end of year

        $ 8      $ 10      $ 10   
  

 

 

  

For mortgage loans, the Company evaluates credit quality through regular monitoring of credit related exposures, considering both qualitative and quantitative factors in assigning an internal risk rating (“IRR”). These ratings are updated at least annually.

The carrying value of mortgage loans by IRR was as follows:

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions)  

AAA

        $ 345       $ 436   

AA

      1,974         1,594   

A

      4,685         4,141   

BBB

      3,251         4,979   

BB

      177         267   

B and lower and unrated

      43         102   
  

 

 

  

Total

        $   10,475       $   11,519   
  

 

 

  

Affiliate Transactions

In 2015, the Company sold certain mortgages to an affiliate, JHNY. These mortgages had a book value of $67 million and fair value of $73 million at the date of the transaction. The Company recognized $5 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company sold certain mortgages to an affiliate, JHLH. These mortgages had a book value of $2 million and fair value of $2 million at the date of the transaction. The Company recognized $0 million in pre-tax realized gains before transfer to the IMR.

 

F-24

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Real Estate

The composition of the Company’s investment in real estate is summarized as follows:

 

     December 31,  
     2015     2014  
  

 

 

  
     (in millions)  

Properties occupied by the company

        $ 381      $ 374   

Properties held for the production of income

      7,178        5,764   

Properties held for sale

      -        -   

Less accumulated depreciation

      (773 )      (635 ) 
  

 

 

  

Total

        $   6,786      $   5,503   
  

 

 

  

The Company recorded $0 million, $0 million, and $0 million of impairments on real estate investments during the years ended December 31, 2015, 2014 and 2013, respectively.

On December 12, 2014, the Company entered into an arrangement with Allianz to co-invest up to $1 billion in the U.S. real estate market. As part of this arrangement, the Company sold 100% of certain real estate holding to an unaffiliated joint venture limited partnership (“LP”) in return for cash and a 20% equity interest in the LP. These properties had a book value of $343 million and fair value of $545 million, which resulted in a gain to operations of $161 million (after 20% deferral of realized gain). The Company provides the LP with property management services and through a wholly-owned subsidiary provides the LP with asset management services.

Affiliate Transactions

In 2014, JHUSA acquired, at fair value, real estate from an affiliate, JHNY, for approximately $33 million.

Other Invested Assets

The Company had no investments in partnerships or LLCs that exceed 10% of its admitted assets at December 31, 2015 and 2014.

Other invested assets primarily consist of investments in partnerships and LLCs. The Company recorded $120 million, $3 million, and $0 million of impairments on partnerships and LLCs during the years ended December 31, 2015, 2014 and 2013, respectively. These impairments are based on significant judgement by the Company in determining whether the objective evidence of other-than-temporary impairment exists. The Company considers relevant facts and circumstances in evaluating whether the impairment of an other invested asset is other-than-temporary. Relevant facts and circumstances include (1) the length of time the fair value has been below cost; (2) the financial position of the investee; (3) the Company’s ability and intent to hold the other invested asset until it recovers. To the extent the Company determines that an other invested asset is deemed to be other-than-temporarily impaired, the difference between book and fair value would be charged to income.

Other

The subprime lending sector, also referred to as B-paper, near-prime, or second chance lending, is the sector of the mortgage lending industry which lends to borrowers who do not qualify for prime market interest rates because of poor or insufficient credit history.

For purposes of this disclosure, subprime exposure is defined as the potential for financial loss through direct investment, indirect investment, or underwriting risk associated with risk from the subprime lending sector. For purposes of this note, subprime exposure is not limited solely to the risk associated with holding direct mortgage loans, but also includes any indirect risk through investments in asset-backed or structured securities, hedge funds, common stock, subsidiaries and affiliates, and insurance product issuance.

 

F-25

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Although it can be difficult to determine the indirect risk exposures, it should be noted that not only does it include expected losses, it also includes the potential for losses that could occur due to significantly depressed fair value of the related assets in an illiquid market.

The Company had no direct exposure through investments in subprime mortgage loans as of December 31, 2015 or 2014.

Management considers several factors when classifying a structured finance or residential mortgage-backed security holding as “subprime” or placing a security in the highest risk category. These factors include the transaction’s weighted average FICO or credit score, loan-to-value ratio (LTV), geographic composition, lien position, loan purpose, and loan documentation.

The Company has entered into certain repurchase agreements with an aggregate carrying value of $0 million and $0 million as of December 31, 2015 and 2014, respectively. For such agreements, the Company agrees to a specified term, price, and interest rate through the date of the repurchase.

The Company established a facility with an affiliate, Manulife Reinsurance (Bermuda) Limited (“MRBL”) whereby cash collateral can be received under a repurchase agreement program. There was no repurchase agreement activity in 2015.

The Company’s practice is to require a minimum of 102% of the fair value of securities loaned under securities lending agreements to be maintained as non-cash collateral. Positions are marked to market and adjusted on a daily basis to ensure the 102% margin requirement is maintained. Any cash collateral received is not re-invested nor is a rebate paid to the lending counterparty. There were no securities on loan as of December 31, 2015 and 2014.

 

F-26

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Net Investment Income and Net Realized and Other Gains (Losses)

Major categories of the Company’s net investment income are summarized as follows:

 

     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Income:

       

Bonds

        $   2,231      $   2,378      $   2,577   

Preferred stocks

      -        2        -   

Common stocks

      372        76        4   

Mortgage loans on real estate

      670        738        730   

Real estate

      722        669        605   

Policy loans

      190        287        283   

Cash, cash equivalents and short-term investments

      8        7        5   

Other invested assets

      466        464        620   

Derivatives

      520        452        464   

Other income

      27        23        25   
  

 

 

  

Total investment income

      5,206        5,096        5,313   

Expenses

       

Investment expenses

      (533 )      (516 )      (493 ) 

Investment taxes, licenses and fees, excluding federal income taxes

      (84 )      (85 )      (83 ) 

Investment interest expense

      (84 )      (91 )      (97 ) 

Depreciation on real estate and other invested assets

      (118 )      (107 )      (89 ) 
  

 

 

  

Total investment expenses

      (819 )      (799 )      (762 ) 
  

 

 

  

Net investment income

        $ 4,387      $ 4,297      $ 4,551   
  

 

 

  
Realized capital gains (losses) and amounts transferred to the IMR are as follows:              
     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Realized capital gains (losses)

        $ 965      $ 431      $ (1,701 ) 

Less amount transferred to the IMR (net of related tax benefit (expense) of $(138) in 2015, $(66) in 2014, and $(8) in 2013)

      256        123        (16 ) 
  

 

 

  

Realized capital gains (losses) before tax

      709        308        (1,685 ) 

Less federal income taxes on realized capital gains (losses) before effect of transfer to the IMR

      493        382        108   
  

 

 

  

Net realized capital gains (losses)

        $ 216      $ (74 )    $   (1,793 ) 
  

 

 

  

 

F-27

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives

Derivatives are financial contracts, the value of which is derived from underlying interest rates, foreign exchange rates, credit, equity price movements, indices or other market risks arising from on-balance sheet financial instruments and selected anticipated transactions. The Company uses derivatives including swaps, forward and futures agreements, floors, and options to manage current and anticipated exposures to changes in interest rates, foreign exchange rates, credit and equity market prices.

Over-the-counter (“OTC”) swaps are contractual agreements between the Company and a counterparty to exchange a series of cash flows based upon rates applied to a notional amount. For interest rate swaps, counterparties generally exchange fixed or floating interest rate payments based on a notional value in a single currency. Cross currency swaps involve the exchange of principal amounts between parties as well as the exchange of interest payments in one currency for the receipt of interest payments in another currency. Total return swaps are contracts that involve the exchange of payments based on changes in the values of a reference asset, including any returns such as interest earned on these assets, in return for amounts based on reference rates specified in the contract.

Cleared interest rate swaps are contractual agreements between the Company and a counterparty whereby the transaction must be cleared through a central clearing house, and subject to mandatory margin and reporting requirements.

Forward and futures agreements are contractual obligations to buy or sell a financial instrument or foreign currency on a predetermined future date at a specified price. Forward contracts are OTC contracts negotiated between counterparties, whereas futures agreements are contracts with standard amounts and settlement dates that are traded on regulated exchanges.

Interest rate floors are contracts with counterparties which require payment of a premium for the right to receive payments when the market interest rate on specified future dates falls below the agreed upon strike price. Interest rate treasury lock contracts are customized agreements securing current interest rates on Treasury securities for payment on a future date.

Options are contractual agreements whereby the holder has the right, but not the obligation, to buy (call option) or sell (put option) a security, exchange rate, interest rate, or other financial instrument at a predetermined price/rate within a specified time.

Swaptions are contractual agreements whereby the holder has the right, but not obligation, to enter into a given swap agreement on a specified future date.

Types of Derivatives and Derivative Strategies

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

The Company uses interest rate swap agreements in effective cash flow and fair value hedge accounting relationships. These derivatives hedge the variable cash flows associated with certain floating-rate bonds, as well as, future fixed income asset acquisitions, which will support the Company’s long-term care and life insurance businesses. These derivatives reduce the impact of future interest rate changes on the cost of acquiring adequate assets to support the investment income assumptions used in pricing these products. For its fair value hedging relationships, the Company uses interest rate swap agreements to hedge the risk of changes in fair value of existing fixed rate assets and liabilities arising from changes in benchmark interest rates.

The Company also enters into basis swaps to better match the cash flows from assets and related liabilities. Basis swaps are included in interest rate swaps for disclosure purposes. The Company utilizes basis swaps in other hedging relationships.

 

F-28

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

Inflation swaps are used to reduce inflation risk generated from inflation-indexed liabilities. Inflation swaps are classified within interest rate swaps for disclosure purposes. The Company utilizes inflation swaps in effective hedge accounting relationships and other hedging relationships.

The Company uses exchange-traded interest rate futures primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, and to hedge against changes in interest rates on anticipated liability issuances by replicating U.S. Treasury or swap curve performance. The Company utilizes exchange-traded interest rate futures in other hedging relationships.

The Company also uses interest rate floors and swaptions primarily to protect against interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). The Company utilizes interest rate floors in other hedging relationships.

Foreign Currency Contracts. Foreign currency derivatives, including foreign currency swaps, foreign currency forwards, and foreign currency futures are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.

Cross currency rate swap agreements are used to manage the Company’s exposure to foreign exchange rate fluctuations, interest rate fluctuations, or both, on foreign currency financial instruments. Cross currency rate swap agreements are contracts to exchange the currencies of two different countries at the same rate of exchange at specified future dates. The net differential to be paid or received on cross currency rate swap agreements is accrued and recognized as a component of net investment income.

Under foreign currency forwards, the Company agrees with other parties to deliver a specified amount of an identified currency at a specified future date. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The maturities of these forwards correspond with the future periods in which the foreign currency transactions are expected to occur. The Company utilizes currency forwards in effective hedge accounting relationships and other hedging relationships.

Foreign currency futures are contractual obligations to buy or sell a foreign currency on a predetermined future date at a specified price. These contracts are standardized contracts traded on an exchange. The Company utilizes foreign exchange futures in other hedging relationships.

Equity Market Contracts. Total return swaps are contracts that involve the exchange of payments based on changes in the value of a reference asset, including any returns such as interest earned on these assets, in exchange for amounts based on reference rates specified in the contract. The Company utilizes total return swaps in effective hedge accounting relationships and other hedging relationships.

Equity index options are contractual agreements whereby the holder has the right, but not the obligation, to buy (call option) or sell (put option) an underlying equity market index on or before a specified future date at a specified price. The Company utilizes equity index options that are exchange-traded in other hedging relationships.

Equity index futures contracts are contractual obligations to buy or sell a specified amount of an underlying equity index at an agreed contract price on a specified date. Equity index futures are contracts with standard amounts and settlement dates that are traded on regulated exchanges. The Company utilizes equity index futures in other hedging relationships.

Credit Contracts. The Company manages credit risk through the issuance of credit default swaps (“CDS”) or the purchase of credit default swap index (“CDX”). A CDS is a derivative instrument representing an agreement between two parties to exchange the credit risk of a single specified entity or an index based on the credit risk of a group of entities (all commonly referred to as the “reference entity” or a portfolio of “reference entities”), in return for a periodic premium. CDS contracts typically have a five-year term.

A CDX is similar to a CDS in that it is a credit derivative used to hedge credit risk; however, it uses a basket of credit entities or indexes rather than a single reference entity or index. CDX is a standardized credit security and it is cleared through a clearing house.

 

F-29

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

Replication Synthetic Assets. Replication synthetic asset transactions (“RSATs”) are derivative transactions made in combination with a cash instrument in order to reproduce the investment characteristic of an otherwise permissible investment. The Company uses interest rate swaps and credit default swaps in these transactions when direct investments are either too expensive to acquire or otherwise unavailable in the market. Such derivatives can only be RSATs and not hedging vehicles.

The table below provides a summary of the gross notional amount and fair value of derivatives contracts for all derivatives in effective hedge accounting relationships, other hedging relationships, and RSATs:

 

          December 31, 2015  
          Notional
Amount		      Carrying
Value
Assets		      Carrying
Value
Liabilities		      Fair
Value
Assets		      Fair
Value
Liabilities		  
     

 

 

  
          (in millions)  

Effective Hedge Accounting Relationships

  

            

Fair value hedges

   

Interest rate swaps

        $ 3,553           $ -           $ -           $ 457           $ 256   
  

Foreign currency swaps

      142         10         7         1         24   

Cash flow hedges

   

Interest rate swaps

      10,358         -         -         1,516         267   
  

Foreign currency swaps

      1,571         168         93         420         339   
  

Foreign currency forwards

      288         -         -         -         31   
  

Equity total return swaps

      26         -         -         -         1   
     

 

 

  

Total Derivatives in Effective Hedge Accounting Relationships

        $ 15,938           $ 178           $ 100           $ 2,394           $ 918   
     

 

 

  

Other Hedging Relationships

               
  

Interest rate swaps

        $ 149,942           $ 10,043           $ 5,770           $ 10,043           $ 5,770   
  

Interest rate treasury locks

      8,429         364         153         364         153   
  

Interest rate options

      4,253         144         -         144         -   
  

Interest rate futures

      4,656         -         -         -         -   
  

Foreign currency swaps

      972         123         62         123         62   
  

Foreign currency forwards

      73         8         -         8         -   
  

Foreign currency futures

      1,842         -         -         -         -   
  

Equity total return swaps

      131         2         1         2         1   
  

Equity options

      2,878         138         8         138         8   
  

Equity index futures

      9,169         -         -         -         -   
  

Credit default swaps

      -         -         -         -         -   
     

 

 

  

Total Derivatives in Other Hedging Relationships

        $ 182,345           $ 10,822           $ 5,994           $ 10,822           $ 5,994   
     

 

 

  

Replication Synthetic Asset Transactions

               
  

Interest rate swaps

        $ 2,385           $ -           $ -           $ 90           $ 13   
  

Credit default swaps

      295         1         -         3         -   
     

 

 

  

Total Derivatives in Replication Synthetic Asset Transactions

        $ 2,680           $ 1           $ -           $ 93           $ 13   
     

 

 

  

Total Derivatives

        $   200,963           $   11,001           $   6,094           $   13,309           $   6,925   
     

 

 

  

 

F-30

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

          December 31, 2014  
          Notional
Amount		      Carrying
Value
Assets		      Carrying
Value
Liabilities		      Fair
Value
Assets		      Fair
Value
Liabilities		  
     

 

 

  
          (in millions)  

Effective Hedge Accounting Relationships

  

            

Fair value hedges

   

Interest rate swaps

        $ 5,461           $ -           $ 1           $ 496           $ 641   
  

Foreign currency swaps

      169         1         29         -         62   

Cash flow hedges

   

Interest rate swaps

      12,053         -         -         1,543         263   
  

Foreign currency swaps

      1,640         29         15         266         261   
  

Foreign currency forwards

      102         -         -         -         4   
  

Equity total return swaps

      27         -         -         6         -   
     

 

 

  

Total Derivatives in Effective Hedge Accounting Relationships

        $ 19,452           $ 30           $ 45           $ 2,311           $ 1,231   
     

 

 

  

Other Hedging Relationships

               
  

Interest rate swaps

        $ 128,704           $ 9,059           $ 5,154           $ 9,059           $ 5,154   
  

Interest rate treasury locks

      6,323         938         -         938         -   
  

Interest rate options

      3,362         93         -         93         -   
  

Interest rate futures

      3,697         -         -         -         -   
  

Foreign currency swaps

      978         43         30         43         30   
  

Foreign currency forwards

      43         4         -         4         -   
  

Foreign currency futures

      1,775         -         -         -         -   
  

Equity total return swaps

      31         11         -         11         -   
  

Equity options

      3,940         277         -         277         -   
  

Equity index futures

      8,323         -         -         -         -   
  

Credit default swaps

      -         -         -         -         -   
     

 

 

  

Total Derivatives in Other Hedging Relationships

        $ 157,176           $ 10,425           $ 5,184           $ 10,425           $ 5,184   
     

 

 

  

Replication Synthetic Asset Transactions

               
  

Interest rate swaps

        $ 1,040           $ -           $ -           $ 61           $ -   
  

Credit default swaps

      315         3         -         6         -   
     

 

 

  

Total Derivatives in Replication Synthetic Asset Transactions

        $ 1,355           $ 3           $ -           $ 67           $ -   
     

 

 

  

Total Derivatives

        $   177,983           $   10,458           $   5,229           $   12,803           $   6,415   
     

 

 

  

Hedging Relationships

The Company generally does not enter into derivative contracts for speculative purposes. In certain circumstances, these hedges also meet the requirements for hedge accounting and are reported in a manner consistent with the hedged asset or liability. For the years ended December 31, 2015, 2014 and 2013, respectively, the Company recorded unrealized gains (losses) of ($33) million, $1,215 million, and $168 million, respectively, related to derivatives that no longer qualify for hedge accounting.

Fair Value Hedges. The Company uses interest rate swaps to manage its exposure to changes in fair value of fixed-rate financial instruments caused by changes in interest rates. The Company also uses cross currency swaps and currency forwards to manage its exposure to foreign exchange rate fluctuations and interest rate fluctuations.

Cash Flow Hedges. The Company uses interest rate swaps and interest rate treasury locks to hedge the variability in cash flows from variable rate financial instruments and forecasted transactions. The Company also uses cross currency swaps and forward agreements to hedge currency exposure on foreign currency financial instruments and foreign currency denominated

 

F-31

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

expenses, respectively. Total return swaps are used to hedge the variability in cash flows associated with certain stock-based compensation awards. Inflation swaps are used to reduce inflation risk generated from inflation-indexed liabilities.

In 2014, the Company concluded that a portion of the hedged transactions for its long-term care business and life insurance business were probable not to occur resulting in the de-designation of $2.7 billion (notional principal) of forward-starting interest rate swaps. The de-designation of these interest rate swaps resulted in an increase to unrealized capital gains (losses) of $445 million, net of tax. In addition as part of our affiliate reinsurance agreement with JHRECO, we were required as part of the net investment income component of the treaty settlement calculation to cede $440 million, net of tax, and therefore the overall impact of this transaction was not material to capital and surplus.

For the year ended December 31, 2015, all of the Company’s hedged forecast transactions qualified as cash flow hedges and no cash flow hedges were discontinued because it was probable that the original forecasted transactions would occur by the end of the originally specified time period documented at inception of the hedging relationship.

The maximum time frame for which variable cash flows are hedged is 31 years.

Derivatives Not Designated as Hedging Instruments in Effective Hedge Accounting or RSAT Relationships. The Company enters into interest rate swap agreements, cancelable interest rate swap agreements, and interest rate futures contracts to manage interest rate risk, total return swap agreements to manage equity risk, and CDS to manage credit risk. The Company also uses interest rate treasury locks and interest rate floor agreements to manage exposure to interest rates without designating the derivatives as hedging instruments. Interest rate floor agreements hedge the interest rate risk associated with minimum interest rate guarantees in certain life insurance and annuity businesses.

The Company offers certain variable annuity products with a guaranteed minimum withdrawal benefit (“GMWB”) and guaranteed minimum death benefit (“GMDB”). These guarantees are effectively an embedded option on the basket of mutual funds offered to contract holders. The Company manages a hedging program to reduce its exposure to certain contracts with the GMWB and GMDB guarantees. This dynamic hedging program uses interest rate swap agreements, equity index futures (including but not limited to the Dow Jones Industrial, Standard & Poor’s 500, Russell 2000, and Dow Jones Euro Stoxx 50 indices), equity index options, and U.S. Treasury futures to match the sensitivities of the GMWB and GMDB liabilities to the market risk factors.

The Company also has a macro equity risk hedging program using equity and currency futures, as well as equity index options. This program is designed to reduce the Company’s overall exposure to public equity markets arising from several sources including, but not limited to, variable annuity guarantees not dynamically hedged, separate account fees not associated with guarantees, and Company equity holdings.

The Company uses foreign currency swaps and foreign currency forwards to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.

 

F-32

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

For the years ended December 31, 2015, 2014 and 2013 net gains and losses related to derivatives in other hedging relationships were recognized by the Company, and the components were recorded in net unrealized and net realized gains (losses) as follows:

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Other Hedging Relationships

       

Net unrealized capital gain (loss):

       

Interest rate swaps

        $    367      $   2,043      $   (2,530 ) 

Interest rate treasury locks

      (728 )      1,323        (385 ) 

Interest rate options

      16        67        (46 ) 

Foreign currency swaps

      -        (5 )      (9 ) 

Foreign currency forwards

      5        4        (1 ) 

Equity total return swaps

      2        -        -   

Equity options

      (76 )      (23 )      (39 ) 

Credit default swaps

      -        -        -   
  

 

 

  

Total net unrealized capital gain (loss)

        $ (414 )    $ 3,409      $ (3,010 ) 
  

 

 

  

Net realized capital gain (loss):

       

Interest rate swaps

        $ (495 )    $ (178 )    $ 164   

Interest rate treasury locks

      446        157        -   

Interest rate options

      -        -        -   

Interest rate futures

      (25 )      (141 )      78   

Foreign currency swaps

      4        18        (10 ) 

Foreign currency forwards

      26        1        5   

Foreign currency futures

      99        165        74   

Equity total return swaps

      11        24        5   

Equity options

      (18 )      5        3   

Equity index futures

      (42 )      (692 )      (1,892 ) 

Credit default swaps

      -        -        -   

Commodity futures

      -        -        -   
  

 

 

  

Total net realized capital gain (loss)

        $ 6      $ (641 )    $ (1,573 ) 
  

 

 

  

Total gain (loss) from derivatives in other hedging relationships

        $ (408 )    $ 2,768      $ (4,583 ) 
  

 

 

  

The Company also deferred net realized gains (losses) of ($495) million, ($192) million, and $146 million (including ($495) million and ($174) million of losses, and $148 million of gains for derivatives in other hedging relationships, respectively) related to interest rates for the years ended December 31, 2015, 2014 and 2013, respectively. Deferred net realized gains and losses are reported in IMR and amortized over the remaining period to expiration date.

Credit Default Swaps

The Company replicates exposure to specific issuers by selling credit protection via CDS in order to complement its cash bond investing. In addition, the Company replicates the exposure of a basket of entities using CDX with complementary cash bond investing. The Company does not employ leverage in its CDS program and therefore, does not write CDS protection in excess of its government bond holdings.

 

F-33

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

The following table provides details of the CDS protection sold by type of contract and external agency rating for the underlying reference security, as of December 31, 2015 and 2014, respectively.

 

     December 31, 2015      December 31, 2014  
  

 

 

     

 

 

  
     Notional
Amount2		      Fair
Value		      Weighted
average
maturity
(in  years)3		      Notional
Amount2		      Fair
Value		      Weighted
average
maturity
(in  years)3		  
  

 

 

     

 

 

  
     (in millions)  

Single name CDS1

                  

Corporate debt

                  

AAA

        $ 35       $ -         1           $ 35       $ 1         2   

AA

      95         1         1         95         2         2   

A

      165         2         1         185         3         2   

BBB

      -         -         -         -         -         -   
  

 

 

        

 

 

     

Total CDS protection sold

        $   295       $   3              $   315       $   6      
  

 

 

        

 

 

     
1 

The rating agency designations are based on S&P where available followed by Moody’s, Dominion Bond Rating Services (DBRS), and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.

2 

Notional amount represents the maximum future payments the Company would have to pay its counterparties assuming a default of the underlying credit and zero recovery on the underlying issuer obligation.

3 

The weighted average maturity of the CDS is weighted based on notional amounts.

The Company holds no purchased credit protection at December 31, 2015 and 2014. The average credit rating of the counterparties guaranteeing the underlying credits is A and the weighted average maturity is 1 year.

Credit Risk

The Company’s exposure to loss on derivatives is limited to the amount of any net gains that may have accrued with a particular counterparty. Gross derivative counterparty exposure is measured as the total fair value (including accrued interest) of all outstanding contracts in a gain position excluding any offsetting contracts in negative positions and the impact of collateral on hand. The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to the derivative financial instruments. The current credit exposure of the Company’s derivative contracts is limited to the fair value in excess of the collateral held at the reporting date.

The Company manages its credit risk by entering into transactions with creditworthy counterparties, obtaining collateral where appropriate, and entering into master netting agreements that provide for a netting of payments and receipts with a single counterparty. The Company enters into credit support annexes with its OTC derivative dealers in order to manage its credit exposure to those counterparties. As part of the terms and conditions of those agreements, the pledging and accepting of collateral in connection with the Company’s derivative usage is required. As of December 31, 2015 and 2014, the Company accepted collateral consisting of cash of $1,640 million and $2,939 million, and various securities with a fair value of $5,014 million and $3,895 million, respectively, which is held in separate custodial accounts. In addition, the Company has pledged collateral to support both the OTC derivative instruments, exchange traded futures and cleared interest rate swap transactions. For further details regarding pledged collateral see the Investments Note.

Under U.S. regulations, certain interest rate swap agreements and credit default swap agreements are required to be cleared through central clearing houses. These transactions are contractual agreements that require initial and variation margin collateral postings and are settled on a daily basis through a clearing house. As such, they reduce the credit risk exposure in the event of default by a counterparty.

 

F-34

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

Transactions with Affiliates

The Company has entered into two currency swap agreements with JHFC which are recorded at fair value. JHFC utilizes the currency swaps to hedge currency exposure on foreign currency financial instruments. The Company has also entered into two currency agreements with external counterparties which offset the currency swap agreements with JHFC. As of December 31, 2015 and 2014, the currency swap agreements with JHFC and the external counterparties had offsetting fair values of $397 million and $238 million, respectively.

7. Fair Value

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy:

 

  •  

Financial Instruments Measured at Fair Value and Reported in the Balance Sheet after Initial Recognition — This category includes assets and liabilities measured at fair value. Financial instruments in this category include bonds and preferred stocks carried at the lower of cost or fair value due to their SVO quality rating, common stocks, derivatives, and separate account assets.

 

  •  

Other Financial Instruments Not Reported at Fair Value After Initial Recognition – This category includes assets and liabilities as follows:

Bonds — For bonds, including corporate debt, U.S. Treasury, commercial and residential mortgage-backed securities, asset-backed securities, collateralized debt obligations, issuances by foreign governments, and obligations of state and political subdivisions, fair values are based on quoted market prices when available. When market prices are not available, fair value is generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality (matrix pricing). The significant inputs into these models include, but are not limited to, yield curves, credit risks and spreads, measures of volatility, and prepayment speeds.

Mortgage Loans on Real Estate — The fair value of unimpaired mortgage loans is estimated using discounted cash flows and takes into account the contractual maturities and discount rates, which were based on current market rates for similar maturity ranges and adjusted for risk due to the property type. The fair value of impaired mortgage loans is based on the net of the collateral less estimated cost to obtain and sell.

Cash, Cash Equivalents and Short-Term Investments — The carrying values for cash, cash equivalents, and short-term investments approximate their fair value due to the short-term maturities of these instruments.

Policy Loans — These loans are carried at unpaid principal balances, which approximate their fair values.

Policy Reserves — Policy reserves consists of guaranteed investment contracts. The fair values associated with these financial instruments are determined by projecting cash flows and discounting the cash flows at current corporate rates, defined as U.S. Treasury rates plus MFC’s corporate spread. The fair value attributable to credit risk represents the present value of the spread.

Policyholders’ and Beneficiaries Funds — Includes term certain contracts, funding agreements, supplementary contracts without life contingencies and those balances that can be withdrawn by the policyholder at any time without prior notice or penalty. The fair values associated with the term certain contracts, funding agreements and supplementary contracts without life contingencies are determined by projecting cash flows and discounting the cash flows at current corporate rates, defined as U.S. Treasury rates plus MFC’s corporate spread. The fair value attributable to credit risk represents the present value of the spread. For those balances that can be withdrawn by the policyholder at any time without prior notice or penalty, the fair value is the amount estimated to be payable to the policyholder as of the reporting date, which is generally the carrying value.

Consumer Notes — The fair value of consumer notes is determined by projecting cash flows and discounting the cash flows at current corporate rates, defined as U.S. Treasury rates plus MFC’s corporate spread. The fair value attributable to credit risk represents the present value of the spread.

 

F-35

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

Financial Instruments Measured at Fair Value and Reported in the Balance Sheet after Initial Recognition

Valuation Hierarchy

The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company’s valuation techniques. A level is assigned to each fair value measurement based on the lowest level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:

 

  •  

Level 1 — Fair value measurements that reflect unadjusted, quoted prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. Active markets are defined as having the following characteristics for the measured asset/liability: (i) many transactions, (ii) current prices, (iii) price quotes not varying substantially among market makers, (iv) narrow bid/ask spreads, and (v) most information is publicly available. Valuations are based on quoted prices reflecting market transactions involving assets or liabilities identical to those being measured. Level 1 assets primarily include exchange traded equity securities and certain separate account assets.

 

  •  

Level 2 — Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in inactive markets, inputs that are observable that are not prices (such as interest rates, credit risks, etc.), and inputs that are derived from or corroborated by observable market data. Certain of the Company’s separate account assets and derivative assets and liabilities are included within Level 2. A description of valuation techniques used to measure the fair value of derivatives is described below.

 

  •  

Level 3 — Fair value measurements using significant nonmarket observable inputs. These include valuations for assets and liabilities that are derived using data, some or all of which is not market observable data, including assumptions about risk. Level 3 securities include impaired bonds and less liquid securities, such as structured asset-backed securities, commercial mortgage-backed securities, and other securities that have little or no price transparency. The valuation techniques used to measure the fair value of derivative assets and separate account investments in timber and agriculture are included in Level 3 as described below.

Determination of Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (not a forced liquidation or distress sale) between market participants at the measurement date, that is, an exit value.

When available, quoted market prices are used to determine fair value. If quoted market prices are not available, fair value is typically based upon alternative valuation techniques such as discounted cash flows, matrix pricing, consensus pricing services and other techniques. Broker quotes are generally used when external public vendor prices are not available.

The Company has a process in place that includes a review of price movements relative to the market, a comparison of prices between vendors, and a comparison to internal matrix pricing which uses predominately external observable data. Judgment is applied in adjusting external observable data for items including liquidity and credit factors.

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy:

Bonds

Refer to the previous page for the determination of fair value of bonds. Generally, impaired bonds with a NAIC designation rating of 6 whose cost is greater than its fair value are reported at fair value and are classified within Level 3.

Preferred Stocks

Preferred stocks with active markets are classified within Level 1, as fair values are based on quoted market prices. Preferred stocks not traded in active markets are classified within Level 3.

 

F-36

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

Common Stocks

Common stocks with active markets are classified within Level 1, as fair values are based on quoted market prices. Common stocks not traded in active markets are classified within Level 3.

Derivatives

The fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for OTC derivatives. The pricing models used are based on market standard valuation methodologies, and the inputs to these models are consistent with what a market participant would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), and volatility. The Company’s derivatives are generally classified within Level 2 given the significant inputs to the pricing models for most OTC derivatives are observable or can be corroborated by observable market data. Inputs that are observable generally include interest rates, foreign currency exchange rates, and interest rate curves. However, certain OTC derivatives may rely on inputs that are significant to the fair value, that are unobservable in the market or cannot be derived principally from or corroborated by observable market data and would be classified within Level 3. Inputs that are unobservable generally include broker quotes, volatilities, and inputs that are outside of the observable portion of the interest rate curve or other relevant market measures. These unobservable inputs may involve significant management judgment or estimation.

Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what market participants would use when pricing such instruments. The credit risk of both the counterparty and the Company are considered in determining the fair value for all OTC derivatives after taking into account the effects of netting agreements and collateral arrangements.

Separate Account Assets and Liabilities

For separate accounts structured as a non-unitized fund, the fair value of separate account assets is based on the fair value of the underlying assets owned by the separate account. For separate accounts structured as a unitized fund, the fair value of the separate account assets is based on the fair value of the underlying funds owned by the separate account. Assets owned by the Company’s separate accounts primarily include: investments in mutual funds, bonds, common stock, short-term investments, real estate, and cash and cash equivalents. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders whose interest in the separate account assets is recorded by the Company as separate account liabilities. Separate account liabilities are set equal to the fair value of separate account assets.

The fair value of fund investments is based upon quoted market prices or reported net asset value (“NAV”). Fund investments that are traded in an active market and have a NAV that the Company can access at the measurement date are classified within Level 1. Level 2 assets consist primarily of bonds which are valued using matrix pricing with independent pricing data.

Separate account assets classified as Level 3 consist primarily of fixed maturity and equity investments in private companies, which own timber and agriculture and carry them at fair value. The values of the timber and agriculture investments are estimated using generally accepted valuation techniques. A comprehensive appraisal is performed shortly after initial purchase and at two or three-year intervals thereafter. Appraisal updates are conducted according to client contracts, generally at one-year or six-month intervals. In the quarters in which an investment is not independently appraised or its valuation updated, the market value is reviewed by management. The valuation of an investment is adjusted only if there has been a significant change in economic circumstances related to the investment since acquisition or the most recent independent valuation and upon the independent appraiser’s review and concurrence with management. Further, these valuations are prepared giving consideration to the income, cost, and sales comparison approaches of estimating asset value. The significant unobservable inputs used in the fair value measurement of the Company’s timberland investments are harvest volumes, timber prices, operating costs and discount rates. Significant changes to any one of these inputs in isolation could result in a significant change to fair value measurement. Holding other factors constant, an increase to either harvest volumes or timber prices would tend to increase the fair value of a timberland investment, while an increase in operating costs or discount rate would have the opposite effect. These investments are classified as Level 3 by the companies owning them, and therefore the equity investments in these companies are considered to be Level 3 by the Company.

 

F-37

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

The following table presents the Company’s assets and liabilities that are measured and reported at fair value in the Balance Sheets after initial recognition by fair value hierarchy level:

 

     December 31, 2015  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bond with NAIC 6 rating:

               

Industrial and misc

        $ 29       $ 29       $ -       $ -       $ 29   

Loan-backed and structured securities

      7         7         -         -         7   
  

 

 

  

Total bonds with NAIC 6 rating

      36         36         -         -         36   

Preferred stocks:

               

Industrial and misc

      -         -         -         -         -   
  

 

 

  

Total preferred stocks

      -         -         -         -         -   

Common stocks:

               

Industrial and misc

      658         658         548         -         110   
  

 

 

  

Total common stocks

      658         658         548         -         110   

Derivatives:

               

Interest rate swaps

      10,043         10,043         -         10,043         -   

Interest rate treasury locks

      364         364         -         -         364   

Interest rate options

      144         144         -         -         144   

Interest rate futures

      -         -         -         -         -   

Foreign currency swaps

      123         123         -         123         -   

Foreign currency forwards

      8         8         -         8         -   

Foreign currency futures

      -         -         -         -         -   

Equity total return swaps

      2         2         -         -         2   

Equity options

      138         138         -         36         102   

Equity index futures

      -         -         -         -         -   

Credit default swaps

      -         -         -         -         -   
  

 

 

  

Total derivatives

      10,822         10,822         -         10,210         612   

Assets held in separate accounts

      129,725         129,725         124,290         3,470         1,965   
  

 

 

  

Total assets

        $ 141,241       $ 141,241       $ 124,838       $   13,680       $   2,723   
  

 

 

  

Liabilities:

               

Derivatives:

               

Interest rate swaps

        $ 5,770       $ 5,770       $ -       $ 5,700       $ 70   

Interest rate treasury locks

      153         153         -         -         153   

Interest rate options

      -         -         -         -         -   

Interest rate futures

      -         -         -         -         -   

Foreign currency swaps

      62         62         -         62         -   

Foreign currency forwards

      -         -         -         -         -   

Foreign currency futures

      -         -         -         -         -   

Equity total return swaps

      1         1         -         -         1   

Equity options

      8         8         -         8         -   

Equity index futures

      -         -         -         -         -   

Credit default swaps

      -         -         -         -         -   
  

 

 

  

Total derivatives

      5,994         5,994         -         5,770         224   

Liabilities held in separate accounts

      129,725         129,725         124,290         3,470         1,965   
  

 

 

  

Total liabilities

        $   135,719       $   135,719       $   124,290       $ 9,240       $ 2,189   
  

 

 

  

 

F-38

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

     December 31, 2014  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bond with NAIC 6 rating:

               

Industrial and misc

        $ -       $ -       $ -       $ -       $ -   

Loan-backed and structured securities

      39         39         -         18         21   
  

 

 

  

Total bonds with NAIC 6 rating

      39         39         -         18         21   

Preferred stocks:

               

Industrial and misc

      -         -         -         -         -   
  

 

 

  

Total preferred stocks

      -         -         -         -         -   

Common stocks:

               

Industrial and misc

      477         477         379         -         98   
  

 

 

  

Total common stocks

      477         477         379         -         98   

Derivatives:

               

Interest rate swaps

      9,059         9,059         -         9,058         1   

Interest rate treasury locks

      938         938         -         168         770   

Interest rate options

      93         93         -         -         93   

Interest rate futures

      -         -         -         -         -   

Foreign currency swaps

      43         43         -         43         -   

Foreign currency forwards

      4         4         -         4         -   

Foreign currency futures

      -         -         -         -         -   

Equity total return swaps

      11         11         -         -         11   

Equity options

      277         277         -         61         216   

Equity index futures

      -         -         -         -         -   

Credit default swaps

      -         -         -         -         -   
  

 

 

  

Total derivatives

      10,425         10,425         -         9,334         1,091   

Assets held in separate accounts

      140,164         140,164         134,070         3,756         2,338   
  

 

 

  

Total assets

        $   151,105       $   151,105       $   134,449       $   13,108       $   3,548   
  

 

 

  

Liabilities:

               

Derivatives:

               

Interest rate swaps

        $ 5,154       $ 5,154       $ -       $ 5,113       $ 41   

Interest rate treasury locks

      -         -         -         -         -   

Interest rate options

      -         -         -         -         -   

Interest rate futures

      -         -         -         -         -   

Foreign currency swaps

      30         30         -         30         -   

Foreign currency forwards

      -         -         -         -         -   

Foreign currency futures

      -         -         -         -         -   

Equity total return swaps

      -         -         -         -         -   

Equity options

      -         -         -         -         -   

Equity index futures

      -         -         -         -         -   

Credit default swaps

      -         -         -         -         -   
  

 

 

  

Total derivatives

      5,184         5,184         -         5,143         41   

Liabilities held in separate accounts

      140,164         140,164         134,070         3,756         2,338   
  

 

 

  

Total liabilities

        $   145,348       $   145,348       $   134,070       $ 8,899       $ 2,379   
  

 

 

  

 

F-39

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

The table below presents the carrying amounts and fair value by fair value hierarchy level for certain assets and liabilities that are not reported at fair value in the Balance Sheets:

 

     December 31, 2015  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bonds (1)

        $ 44,427       $ 44,595       $ -       $ 40,866       $ 3,729   

Preferred stocks

      23         34         -         -         34   

Mortgage loans on real estate

      10,475         11,213         -         -         11,213   

Cash, cash equivalents and short term investments

      4,528         4,528         2,059         2,469         -   

Policy loans

      3,718         3,718         -         3,718         -   

Derivatives in effective hedge accounting and RSAT relationships

      179         2,487         -         2,484         3   
  

 

 

  

Total assets

        $   63,350       $   66,575       $   2,059       $   49,537       $   14,979   
  

 

 

  

Liabilities:

               

Consumer notes

        $ 265       $ 289       $ -       $ -       $ 289   

Borrowed money

      160         160         -         160         -   

Policy reserves

      1,553         1,533         -         -         1,533   

Policyholders’ and beneficiaries funds

      2,685         2,850         -         1,151         1,699   

Derivatives in effective hedge accounting and RSAT relationships

      100         931         -         664         267   
  

 

 

  

Total liabilities

        $ 4,763       $ 5,763       $ -       $ 1,975       $ 3,788   
  

 

 

  
     December 31, 2014  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bonds (1)

        $ 49,187       $ 52,644       $ -       $ 48,392       $ 4,252   

Preferred stocks

      26         46         -         -         46   

Mortgage loans on real estate

      11,519         12,785         -         -         12,785   

Cash, cash equivalents and short term investments

      7,702         7,702         4,407         3,295         -   

Policy loans

      5,039         5,039         -         5,039         -   

Derivatives in effective hedge accounting and RSAT relationships

      33         2,378         -         2,372         6   
  

 

 

  

Total assets

        $ 73,506       $ 80,594       $ 4,407       $ 59,098       $ 17,089   
  

 

 

  

Liabilities:

               

Consumer notes

        $ 411       $ 454       $ -       $ -       $ 454   

Borrowed money

      290         290         -         290         -   

Policy reserves

      1,661         1,648         -         -         1,648   

Policyholders’ and beneficiaries funds

      3,901         4,352         -         1,457         2,895   

Derivatives in effective hedge accounting and RSAT relationships

      45         1,231         -         964         267   
  

 

 

  

Total liabilities

        $ 6,308       $ 7,975       $ -       $ 2,711       $ 5,264   
  

 

 

  
(1) Bonds are carried at amortized cost unless they have NAIC designation rating of 6. Fair value of bonds exclude leveraged leases of $ 2,319 million and $2,268 million at December 31, 2015 and 2014, respectively. The Company calculates the carrying value by accruing income at its expected internal rate of return.

 

F-40

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

Transfers of Level 1 and Level 2 Assets and Liabilities

The Company’s policy is to record transfers of assets and liabilities between Level 1 and Level 2 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. Assets are transferred out of Level 1 when they are no longer transacted with sufficient frequency and volume in an active market. During the years ended December 31, 2015 and 2014, the Company did not have any transfers from Level 1 to Level 2. Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are indicative of an active market. The Company did not transfer assets from Level 2 to Level 1 during the years ended December 31, 2015 and 2014.

 

F-41

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

Level 3 Financial Instruments

The changes in Level 3 financial instruments measured and reported at fair value for the years ended December 31, 2015, 2014 and 2013, are summarized as follows:

 

          Net
realized/unrealized
gains (losses) included in:		                                   Transfers        
    Balance at
January 1,
2015		     Net
income (1)		     Surplus     Amounts
credited to
separate
account
liabilities (2)		     Purchases     Issuances     Sales     Settlements     Into
Level 3 (3)		     Out of
Level 3 (3)		     Balance at
December 31,
2015		  
 

 

 

  
    (in millions)  

Bonds with NAIC 6 rating:

                      

Impaired corporate bonds

       $ -      $ (4 )    $ (1 )    $ -      $ 2      $ -      $ (2 )    $ -      $ 41      $ (7 )    $ 29   

Impaired mortgage-backed and asset-backed securities

     21        (3 )      3        -        -        -        (24 )      -        15        (5 )      7   
 

 

 

  

Total bonds with NAIC 6 rating

     21        (7 )      2        -        2        -        (26 )      -        56        (12 )      36   

Preferred stocks:

                      

Industrial and misc

     -        -        -        -        -        -        -        -        -        -        -   
 

 

 

  

Total preferred stocks

     -        -        -        -        -        -        -        -        -        -        -   

Common stocks:

                      

Industrial and misc

     98        (2 )      8        -        7        -        (3 )      -        2        -        110   
 

 

 

  

Total common stocks

     98        (2 )      8        -        7        -        (3 )      -        2        -        110   

Net derivatives

     1,050        -        (614 )      -        27        -        -        -        -        (75 )      388   

Separate account assets/liabilities

     2,338        189        -        -        27        -        (593 )      -        4        -        1,965   
 

 

 

  

Total

       $   3,507      $   180      $   (604 )    $   -      $   63      $   -      $   (622 )    $   -      $   62      $   (87 )    $   2,499   
 

 

 

  

 

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Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

          Net
realized/unrealized
gains (losses) included in:		                                   Transfers        
    Balance at
January 1,
2014		     Net
income (1)		     Surplus     Amounts
credited to
separate
account
liabilities (2)		     Purchases     Issuances     Sales     Settlements     Into
Level 3 (3)		     Out of
Level 3 (3)		     Balance at
December 31,
2014		  
 

 

 

  
    (in millions)  

Bonds with NAIC 6 rating:

                      

Impaired corporate bonds

       $ 26      $ -      $ (3 )    $ -      $ -      $ -      $ -      $ -      $ -      $ (23 )    $ -   

Impaired mortgage-backed and asset-backed securities

     34        -        1        -        -        -        -        -        11        (25 )      21   
 

 

 

  

Total bonds with NAIC 6 rating

     60        -        (2 )      -        -        -        -        -        11        (48 )      21   

Preferred stocks:

                      

Industrial and misc

     -        -        -        -        -        -        -        -        -        -        -   
 

 

 

  

Total preferred stocks

     -        -        -        -        -        -        -        -        -        -        -   

Common stocks:

                      

Industrial and misc

     86        -        (1 )      -        14        -        (1 )      -        -        -        98   
 

 

 

  

Total common stocks

     86        -        (1 )      -        14        -        (1 )      -        -        -        98   

Net derivatives

     (114 )      26        1,088        -        72        -        (25 )      -        41        (38 )      1,050   

Separate account assets/liabilities

     2,221        162        -        -        68        -        (270 )      -        163        (6 )      2,338   
 

 

 

  

Total

       $   2,253      $   188      $   1,085      $   -      $   154      $   -      $   (296 )    $   -      $   215      $   (92 )    $   3,507   
 

 

 

  

 

F-43

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

          Net
realized/unrealized
gains (losses) included in:		                                   Transfers        
    Balance at
January 1,
2013		     Net
income (1)		     Surplus     Amounts
credited to
separate
account
liabilities (2)		     Purchases     Issuances     Sales     Settlements     Into
Level 3 (3)		     Out of
Level 3 (3)		     Balance at
December 31,
2013		  
 

 

 

  
    (in millions)  

Bonds with NAIC 6 rating:

                      

Impaired corporate bonds

       $ 12      $ (2 )    $ -      $ -      $ -      $ -      $ -      $ -      $ 23      $ (7 )    $ 26   

Impaired mortgage-backed and asset-backed securities

     53        (37 )      39        -        -        -        (23 )      (5 )      16        (9 )      34   
 

 

 

  

Total bonds with NAIC 6 rating

     65        (39 )      39        -        -        -        (23 )      (5 )      39        (16 )      60   

Preferred stocks:

                      

Industrial and misc

     4        -        -        -        -        -        -        -        -        (4 )      -   
 

 

 

  

Total preferred stocks

     4        -        -        -        -        -        -        -        -        (4 )      -   

Common stocks:

                      

Industrial and misc

     44        -        (2 )      -        58        -        (18 )      -        4        -        86   
 

 

 

  

Total common stocks

     44        -        (2 )      -        58        -        (18 )      -        4        -        86   

Net derivatives

     58        6        (459 )      -        287        -        (7 )      -        -        1        (114 ) 

Separate account assets/liabilities

     2,223        160        -        -        31        -        (195 )      -        3        (1 )      2,221   
 

 

 

  

Total

       $   2,394      $   127      $   (422 )    $   -      $   376      $   -      $   (243 )    $   (5 )    $   46      $   (20 )    $   2,253   
 

 

 

  
(1) This amount is included in net realized capital gains (losses) on the Statements of Operations.
(2) Changes in the fair value of separate account assets are credited directly to separate account liabilities in accordance with NAIC SAP and are not reflected in income.
(3) For financial instruments that are transferred into and/or out of Level 3, the Company uses the fair value of the instruments at the beginning of the reporting period.

 

F-44

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

The transfers into Level 3 primarily result from securities that were impaired during the year or securities where a lack of observable market data (versus the previous year) resulted in reclassifying instruments into Level 3. The transfers out of Level 3 primarily result from observable market data becoming available for that instrument, thus eliminating the need to extrapolate market data beyond observable points. Additionally, securities carried at fair value at the beginning of the period but carried at amortized cost at the end of the period due to rating change or change in fair value relative to amortized cost, are included in transfers out of Level 3. Conversely, any securities carried at amortized cost at the beginning of the period and carried at fair value at the end of the year due to SVO rating change or change in fair value relative to amortized cost, are included into transfers into Level 3.

8. Reinsurance

Certain premiums and benefits are assumed from or ceded to affiliate and other insurance companies under various reinsurance agreements. The Company entered into these reinsurance agreements to shift underlying risk on certain of its products, and to improve cash flow and statutory capital. The ceded reinsurance agreements provide the Company with increased capacity to write larger risks and maintain its exposure to loss within its capital resources.

Total reinsurance amounts included in the Company’s accompanying statutory-basis financial statements were as follows:

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums earned

       

Direct

        $ 20,189      $   19,525      $    20,311   

Assumed

      1,867        792        1,062   

Ceded

      (5,733 )      (7,579 )      (8,491 ) 
  

 

 

  

Net

        $   16,323      $ 12,738      $ 12,882   
  

 

 

  

Benefits to policyholders ceded

        $ (16,713 )    $ (18,500 )    $ (17,988 ) 

Reserve amounts ceded to reinsurers not authorized in the State of Michigan are mostly covered by letters of credit or trust agreements. Amounts payable or recoverable for reinsurance on policy and contract liabilities are not subject to periodic or maximum limits. At December 31, 2015, any material recoveries were secured by letters of credit or assets placed in trust by the assuming company.

Neither the Company nor any of its related parties control, directly or indirectly, any external reinsurers with whom the Company conducts business. No policies issued by the Company have been reinsured with a foreign company, which is controlled, either directly or indirectly, by a party not primarily engaged in the business of insurance. The Company does not have any reinsurance agreements in effect under which the reinsurer may unilaterally cancel the agreement. At December 31, 2015, there was no reinsurance agreements in effect such that the amount of losses paid or accrued exceed the total direct premium collected.

As of December 31, 2015, if all reinsurance agreements were cancelled the estimated aggregate reduction in unassigned surplus is $1,328 million.

The Company has not entered into any reinsurance transactions within the scope of Actuarial Guideline 48, the NAIC Term Life and Universal Life with Secondary Guarantees (XXX/AXXX) Credit for Reinsurance Model Regulation.

Non-Affiliated Reinsurance

Effective July 1, 2015, the Company entered into coinsurance reinsurance agreements with New York Life (“NYL”) to cede 100% quota share (“QS”) of the Company’s JHLICO Closed Block policies (“NYL 100% Coinsurance”). In addition, NYL agreed to retrocede 40% QS of the same policy risks back to the Company under a coinsurance funds withheld (“FWH”) agreement (“NYL 40% FWH Retrocession”). Collectively, these agreements are known as the NYL Agreements. The NYL 100% Coinsurance keeps the assets supporting the JHLICO Closed Block together in NYL, and the NYL 40% FWH Retrocession adjusts the net reinsurance to NYL to 60% of the JHLICO Closed Block policies at risk. The transactions included the transfer to NYL of $8,916 million of invested assets and $5,282 million in net policy liabilities. In addition, the

 

F-45

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

Company recognized approximately $3,698 million of FWH assets. The transactions resulted in a pre-tax loss of $70 million, including a ceding commission paid of $263 million, and an increase in surplus of $281 million, net of tax, which was deferred and will be amortized over a period of approximately 20 years.

The table below consists of the impact of the NYL Agreements:

 

     Year ended December 31,  
     2015  
     (in millions)  

Premiums ceded

        $   (8,180 ) 

Premiums assumed

      3,272   

Benefits ceded

      (314 ) 

Benefits assumed

      126   

Other reinsurance receivable

      362   

Funds held by or deposited with reinsured companies

      3,655   

In conjunction with the NYL Agreements, the existing 100% coinsurance FWH agreement which retrocedes the JHLICO Closed Block New York business back to the Company from JHNY was recaptured. The recapture resulted in a decrease in FWH assets of $1,919 million, a net decrease in policy assets and liabilities of $1,918 million, and an increase in surplus of $96 million. In addition, the 90% modified coinsurance FWH treaty with MRBL was also recaptured. The recapture resulted in a decrease in assets of $1,000 million, an increase in net policy liabilities of $1,266 million and a decrease in surplus of $173 million, net of tax. The recaptures were necessary to complete the NYL Agreements, because the policies under these agreements are the same policies at risk under the NYL Agreements.

On July 1, 2011, JHUSA entered into a sale of its Life Retrocession business by way of a coinsurance treaty with Pacific Life Insurance Company that resulted in the recognition of approximately $432 million deferred gain (net of deferred taxes) recorded to surplus. During 2013, JHUSA novated 95% of the underlying reinsurance agreements to Pacific Life Insurance Company. Based on this novation, the Company recorded a gain of $352 million to the Statements of Operations (pre-tax). In 2014, the Company completed the novation of the remaining 5% of the agreements and recorded $20 million to the Statements of Operations (pre-tax).

Affiliated Reinsurance

The table and commentary below consist of the impact of the reinsurance agreements with an affiliate, JHNY:

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums ceded, net

        $   (2,231 )    $   (192 )    $   (216 ) 

Benefits ceded, net

      (436 )      (394 )      (483 ) 

Funds held by or deposited with reinsured companies

      -        1,952        1,978   

Other reinsurance receivable

      60        86        124   

Other amounts payable on reinsurance

      1        10        15   

Treaty settlement received (paid)

      527        449        532   
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

 

F-46

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

On January 1, 2010, the assets supporting the policyholders who reside in the state of New York (“NY business”) were transferred to JHNY from the Company. The transfer included participating traditional life insurance, universal life insurance, fixed deferred and immediate annuities, participating pension contracts, and variable annuities. The NY business was transferred using assumption reinsurance, modified coinsurance and coinsurance with cut-through provisions.

The NY business related to participating traditional life insurance policies was transferred from JHUSA to JHNY under a coinsurance agreement and was immediately retroceded back to JHUSA using a coinsurance FWH agreement. JHNY retained the invested assets supporting this block of business. As previously noted, the coinsurance FWH agreement was recaptured effective July 1, 2015. The NY business related to variable universal life was reinsured through coinsurance and modified coinsurance. The NY business related to universal life was transferred from the Company to JHNY under coinsurance agreements.

The NY business related to a majority of the fixed deferred annuity business was transferred from the Company to JHNY under an assumption reinsurance agreement. The NY business related to variable annuities and some participating pension contracts where assets were held in separate accounts were reinsured through modified coinsurance. The NY business related to fixed deferred and immediate annuities and participating pension contracts was transferred from the Company to JHNY under a coinsurance agreement.

The table and commentary below consist of the impact of the reinsurance agreements with an affiliate, JHRECO:

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums ceded

        $ (530 )    $ (546 )    $ (570 ) 

Benefits ceded

      (756 )      (759 )      (730 ) 

Other amounts payable on reinsurance

      25        58        45   

Funds withheld from unauthorized reinsurers

        7,544          7,409          5,425   

Treaty settlement received (paid)

      (468 )      (489 )      (55 ) 
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

The Company reinsures certain portions of its long-term care insurance business with JHRECO through coinsurance FWH transactions. Under reinsurance treaties covering life insurance business, the Company cedes to JHRECO on a coinsurance FWH basis to the death benefits from the no-lapse guarantee on a small block of policies. The Company also reinsures a portion of the risk related to certain annuity policies and during 2013 a small number of these policies were recaptured for administration purposes. This recapture did not have a material impact on the Company’s results of operations. The reinsurance agreement is written on a modified coinsurance basis where the assets supporting the reinsured policies remain invested with the Company.

 

F-47

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

The table and commentary below consist of the impact of the reinsurance agreements with an affiliate, MRBL:

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums ceded

        $ 5,332      $ (4,599 )    $ (5,128 ) 

Benefits ceded

        (12,125 )        (14,303 )        (13,966 ) 

Other reinsurance receivable

      -        40        398   

Other amounts payable on reinsurance

      351        837        55   

Funds withheld from unauthorized reinsurers

      240        1,251        1,256   

Treaty settlement received (paid)

      (712 )      (2,080 )      1,095   
* Treaty settlement consisted primarily of ceded investment income related to non-qualifying hedging strategies and changes in the modified coinsurance and coinsurance reserves.

The Company reinsures 87% of certain group annuity contracts in-force with MRBL. The reinsurance agreement covers all contracts, excluding the guaranteed benefit rider. As the underlying contracts being reinsured are considered investment contracts, the agreement does not meet the criteria for reinsurance accounting and was classified as a financial instrument.

The Company reinsures 90% of a significant block of variable annuity contracts in-force with MRBL. All substantial risks, including all guaranteed benefits (GMDB, Guaranteed Minimum Income Benefit (“GMIB”), and GMWB), related to certain specified policies not already reinsured to third parties, are reinsured under the agreement. The base contracts are reinsured on a modified coinsurance basis, while the guaranteed benefit reinsurance coverage is apportioned in accordance with the reinsurance agreement provisions between modified coinsurance and coinsurance FWH. The assets supporting the reinsured policies remain invested with the Company. Since the inception of the treaty in 2008, several amendments have been enacted to refine certain aspects of the treaty. The net MRBL reinsurance recoverable includes the impact of ongoing reinsurance cash flows and is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies with changes to ceded reserves and cost of reinsurance recognized as a component of benefits to policyholders on the Statements of Operations.

The Company’s indirect parent company, MFC, is regulated on a global basis by the Canadian insurance regulator, The Office of the Superintendent of Financial Institutions (“OSFI”), and reports on a consolidated international financial reporting standards (“IFRS”) basis. The Company utilizes a dynamic hedging program to manage risks on an economic basis. The IFRS accounting for these derivatives aligns with MFC’s market-based reserving regime. The US statutory accounting and reserving framework does not provide appropriate alignment of economic risk management strategies (hedging) and associated reserve methodologies. The treaty with MRBL provides a mechanism to allow management of the majority of the variable annuity risk under a single consolidated reserve and capital regime, rather than managing the block simultaneously under two very diverse frameworks.

As a coinsurance / modified coinsurance treaty, MRBL holds $2,992 million as a coinsurance reserve and JHUSA holds $325 million as a modified coinsurance reserve. The IFRS reserves that MRBL holds for variable annuities are similar in concept to AG43. The calculations are a real-world stochastic calculation at CTE(70), based on the guaranteed benefits and fees in isolation rather than the whole contract, including the cash flows generated from the dynamic hedging program and including margins for adverse deviation. The real-world stochastic scenarios are subject to Canadian Institute of Actuaries equity and bond fund return calibration criteria. Reserve credits taken were $0 at December 31, 2015 and there is no supporting collateral.

MRBL does not retrocede any risks to a third party. The risks assumed by MRBL are solely the responsibility of MRBL, but they are also retained within MFC. This transaction has no impact on MFC’s financial statements as it reports its risks on a consolidated basis.

Prior to the previously noted transactions with NYL, the Company reinsured 90% of the non-reinsured risk of the JHLICO closed block. The reinsurance agreement was written on a modified coinsurance basis where the related financial assets

 

F-48

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

remain invested with the Company. As the reinsurance agreement did not subject the reinsurer to the reasonable possibility of significant loss, it was classified as structured reinsurance and given deposit-type accounting treatment with only the reinsurance risk fee being reported in other operating costs and expenses in the Statements of Operations. This reinsurance agreement was recaptured effective July 1, 2015.

The table and commentary below consist of the impact of the reinsurance agreements with an affiliate, Manulife Reinsurance Limited (“MRL”):

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums ceded

        $   (392 )    $   (338 )    $   (536 ) 

Benefits ceded

      (448 )      (298 )      (338 ) 

Other reinsurance receivable

      36        82        18   

Funds withheld from unauthorized reinsurers

      -        213        -   

Treaty settlement received (paid)

      14        (97 )      146   
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

The Company entered into a coinsurance/modified coinsurance agreement with an affiliate, MRL, to reinsure 90% of all risks not already reinsured to third parties on various universal life contracts effective December 15, 2000. Subsequent amendments added further UL and some term contracts. The Company amended the agreement during 2014 to simplify treaty administration and to modify the structure of the treaty to a modified coinsurance FWH structure.

Other

On July 31, 2013, MFC signed an agreement to sell its life insurance business in Taiwan to CTBC Life Insurance Company (CTBC Life). Under the agreement, CTBC Life will assume all of the life insurance business related obligations. In connection with this transaction, on December 31, 2013, the Company paid $111 million in fees to an affiliate, Manufacturers Life Reinsurance Limited for the recapture of certain traditional life business reserves and net liabilities of $42 million, which resulted in a pre-tax loss of $69 million.

 

F-49

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes

The components of the net deferred tax asset/(liability) are as follows:

 

     December 31, 2015  
     (1)     (2)     (3)  
                 (Col 1 + 2)  
     Ordinary     Capital     Total  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ 4,114      $ 383      $ 4,497   

(b) Statutory valuation allowance adjustments

      50        -        50   
  

 

 

  

(c) Adjusted gross deferred tax assets (a — b)

      4,064        383        4,447   

(d) Deferred tax assets nonadmitted

      -        -        -   
  

 

 

  

(e) Subtotal net admitted deferred tax asset (c — d)

        4,064           383          4,447   

(f) Deferred tax liabilities

      4,639        195        4,834   
  

 

 

  

(g) Net admitted deferred tax asset / (net deferred tax liability) (e — f)

        $ (575 )    $ 188      $ (387 ) 
  

 

 

  
     December 31, 2014  
     (4)     (5)     (6)  
                 (Col 4 + 5)  
     Ordinary     Capital     Total  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ 4,300      $ 479      $ 4,779   

(b) Statutory valuation allowance adjustments

      50        -        50   
  

 

 

  

(c) Adjusted gross deferred tax assets (a — b)

      4,250        479        4,729   

(d) Deferred tax assets nonadmitted

      -        -        -   
  

 

 

  

(e) Subtotal net admitted deferred tax asset (c — d)

      4,250        479        4,729   

(f) Deferred tax liabilities

      4,871        314        5,185   
  

 

 

  

(g) Net admitted deferred tax asset / (net deferred tax liability) (e — f)

        $ (621 )    $ 165      $ (456 ) 
  

 

 

  
     Change  
     (7)     (8)     (9)  
     (Col 1 - 4)     (Col 2 - 5)     (Col 7 + 8)  
     Ordinary     Capital     Total  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ (186 )    $ (96 )    $ (282 ) 

(b) Statutory valuation allowance adjustments

      -        -        -   
  

 

 

  

(c) Adjusted gross deferred tax assets (a — b)

      (186 )      (96 )      (282 ) 

(d) Deferred tax assets nonadmitted

      -        -        -   
  

 

 

  

(e) Subtotal net admitted deferred tax asset (c — d)

      (186 )      (96 )      (282 ) 

(f) Deferred tax liabilities

      (232 )      (119 )      (351 ) 
  

 

 

  

(g) Net admitted deferred tax asset / (net deferred tax liability) (e — f)

        $ 46      $ 23      $ 69   
  

 

 

  

The Company has recorded a valuation allowance against specific general business tax credit carryforwards of $50 million for the year ended December 31, 2015. These tax credits were generated by the legacy JHFC group and are subject to the separate return limitation rules. These credits will not expire until 2019, however due to restrictions on the utilization, management believes that it is more likely than not that the Company will not realize the benefit. In assessing the need for a valuation allowance, management considered the future reversal of taxable temporary differences, future taxable income exclusive of reversing temporary differences, taxable income in the carry back period, as well as tax planning strategies. Tax

 

F-50

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

planning strategies were considered to the extent they were both prudent and feasible and if implemented, would result in the realization of deferred tax assets.

The amount of adjusted gross deferred tax assets admitted under each component and the resulting increase in deferred tax assets by character are as follows:

 

     December 31, 2015  
     (1)      (2)      (3)  
                   (Col 1 + 2)  
     Ordinary      Capital      Total  
  

 

 

  
     (in millions)  

2. Admission calculation components SSAP No. 101

         

(a) Federal income taxes paid in prior years recoverable through loss carrybacks.

        $ -       $ -       $ -   

(b) Adjusted gross deferred tax assets expected to be realized (excluding the amount of deferred tax assets from 2(a) above) after application of the threshold limitation.

(The lesser of 2(b)1 and 2(b)2 below)

      546         268         814   

1. Adjusted gross deferred tax assets expected to be realized following the Balance Sheet date.

      1,162           268           1,430   

2. Adjusted gross deferred tax assets allowed per limitation threshold.

      546         268         814   

(c) Adjusted gross deferred tax assets (excluding the amount of deferred tax assets from 2(a) and 2(b) above) offset by gross deferred tax liabilities.

      3,518         115         3,633   
  

 

 

  

(d) Deferred tax assets admitted as the result of application of SSAP No. 101. Total (2(a) + 2(b) + 2(c))

        $   4,064       $ 383       $ 4,447   
  

 

 

  
     December 31, 2014  
     (4)      (5)      (6)  
                   (Col 4 + 5)  
     Ordinary      Capital      Total  
  

 

 

  
     (in millions)  

2. Admission calculation components SSAP No. 101

         

(a) Federal income taxes paid in prior years recoverable through loss carrybacks.

        $ -       $ -       $ -   

(b) Adjusted gross deferred tax assets expected to be realized (excluding the amount of deferred tax assets from 2(a) above) after application of the threshold limitation.

(The lesser of 2(b)1 and 2(b)2 below)

      521         276         797   

1. Adjusted gross deferred tax assets expected to be realized following the Balance Sheet date.

      1,197         276         1,473   

2. Adjusted gross deferred tax assets allowed per limitation threshold.

      521         276         797   

(c) Adjusted gross deferred tax assets (excluding the amount of deferred tax assets from 2(a) and 2(b) above) offset by gross deferred tax liabilities.

      3,729         203         3,932   
  

 

 

  

(d) Deferred tax assets admitted as the result of application of SSAP No. 101. Total (2(a) + 2(b) + 2(c))

        $ 4,250       $ 479       $ 4,729   
  

 

 

  

 

F-51

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

     Change  
     (7)     (8)     (9)  
     (Col 1 - 4)     (Col 2 - 5)     (Col 7 + 8)  
     Ordinary     Capital     Total  
  

 

 

  
     (in millions)  

2. Admission calculation components SSAP No. 101

       

(a) Federal income taxes paid in prior years recoverable through loss carrybacks.

        $ -      $ -      $ -   

(b) Adjusted gross deferred tax assets expected to be realized (excluding the amount of deferred tax assets from 2(a) above) after application of the threshold limitation.

(The lesser of 2(b)1 and 2(b)2 below)

      25        (8 )      17   

1. Adjusted gross deferred tax assets expected to be realized following the Balance Sheet date.

      (35 )      (8 )      (43 ) 

2. Adjusted gross deferred tax assets allowed per limitation threshold.

      25        (8 )      17   

(c) Adjusted gross deferred tax assets (excluding the amount of deferred tax assets from 2(a) and 2(b) above) offset by gross deferred tax liabilities.

      (211 )      (88 )      (299 ) 
  

 

 

  

(d) Deferred tax assets admitted as the result of application of SSAP No. 101. Total (2(a) + 2(b) + 2(c))

        $   (186 )    $   (96 )    $   (282 ) 
  

 

 

  

 

     2015     2014  
  

 

 

  
     (in millions)  

(a) Ratio percentage used to determine recovery period and threshold limitation amount

      793 %      917 % 

(b) Amount of adjusted capital and surplus used to determine recovery period and threshold limitation in 2(b)2 above

        $   5,426          $   5,315   

Impact of tax planning strategies is as follows:

 

     December 31, 2015  
     (1)     (2)  
     Ordinary     Capital  
  

 

 

  
     (in millions)  

(a) Determination of Adjusted Gross Deferred Tax Assets and Net Admitted Deferred Tax Assets by tax character as a percentage.

     

1. Adjusted Gross DTAs Amount From Note 9A1(c)

        $   4,064          $   383   

2. Percentage of Adjusted Gross DTAs By Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      0 % 

3. Net Admitted Adjusted Gross DTAs Amount from Note 9A1(e)

        $ 4,064          $ 383   

4. Percentage of Net Admitted Adjusted Gross DTAs by Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      0 % 

 

F-52

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

     December 31, 2014  
     (3)     (4)  
     Ordinary     Capital  
  

 

 

  
     (in millions)  

(a) Determination of Adjusted Gross Deferred Tax Assets and Net Admitted Deferred Tax Assets by tax character as a percentage.

     

1. Adjusted Gross DTAs Amount From Note 9A1(c)

        $   4,250          $   479   

2. Percentage of Adjusted Gross DTAs By Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      32 % 

3. Net Admitted Adjusted Gross DTAs Amount from Note 9A1(e)

        $ 4,250          $ 479   

4. Percentage of Net Admitted Adjusted Gross DTAs by Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      32 % 
     Change  
     (5)     (6)  
     (Col 1 - 3)     (Col 2 - 4)  
     Ordinary     Capital  
  

 

 

  
     (in millions)  

(a) Determination of Adjusted Gross Deferred Tax Assets and Net Admitted Deferred Tax Assets by tax character as a percentage.

     

1. Adjusted Gross DTAs Amount From Note 9A1(c)

        $ (186 )        $ (96 ) 

2. Percentage of Adjusted Gross DTAs By Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      (32 %) 

3. Net Admitted Adjusted Gross DTAs Amount from Note 9A1(e)

        $ (186 )        $ (96 ) 

4. Percentage of Net Admitted Adjusted Gross DTAs by Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      (32 %) 

The Company’s tax planning strategies do not include the use of reinsurance.

There are no unrecognized deferred tax liabilities for amounts described in ASC 740-10-25-3.

 

F-53

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

Current income taxes incurred consist of the following major components:

 

     Years Ended December 31,  
     (1)     (2)     (3)  
                 (Col 1 - 2)  
     2015     2014     Change  
  

 

 

  
     (in millions)  

1. Current income tax

       

(a) Federal

        $ (778 )    $ (716 )    $ (62 ) 

(b) Foreign

      -        -        -   
  

 

 

  

(c) Subtotal

      (778 )      (716 )      (62 ) 

(d) Federal income tax on net capital gains

         493           382          111   

(e) Utilization of capital loss carryforwards

      -        -        -   

(f) Other

      -        -        -   
  

 

 

  

(g) Federal and foreign income taxes incurred

        $ (285 )    $ (334 )    $ 49   
  

 

 

  

 

F-54

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:

 

     December 31,  
     (1)      (2)      (3)  
                   (Col 1 - 2)  
     2015      2014      Change  
  

 

 

  
     (in millions)  

2. Deferred tax assets:

         

(a) Ordinary:

         

(1) Discounting of unpaid losses

        $ -       $ -       $ -   

(2) Unearned premium reserve

      -         -         -   

(3) Policyholder reserves

        1,011         1,034         (23 ) 

(4) Investments

      157         147         10   

(5) Deferred acquisition costs

      506         755         (249 ) 

(6) Policyholder dividends accrual

      68         111         (43 ) 

(7) Fixed assets

      -         -         -   

(8) Compensation and benefits accrual

      37         54         (17 ) 

(9) Pension accrual

      -         -         -   

(10) Receivables — nonadmitted

      67         49         18   

(11) Net operating loss carryforward

      1,276           1,218         58   

(12) Tax credit carry-forward

      898         860         38   

(13) Other (including items <5% of total ordinary tax assets)

      94         72         22   
  

 

 

  

(99) Subtotal

        $ 4,114       $ 4,300       $   (186 ) 

(b) Statutory valuation allowance adjustment

      50         50         -   

(c) Nonadmitted

      -         -         -   
  

 

 

  

(d) Admitted ordinary deferred tax assets (2(a)(99) — 2(b) — 2(c))

        $ 4,064       $ 4,250       $ (186 ) 

(e) Capital:

         

(1) Investments

        $ 383       $ 479       $ (96 ) 

(2) Net capital loss carryforward

      -         -         -   

(3) Real estate

      -         -         -   

(4) Other (including items <5% of total capital tax assets)

      -         -         -   
  

 

 

  

(99) Subtotal

        $ 383       $ 479       $ (96 ) 

(f) Statutory valuation allowance adjustment

      -         -         -   

(g) Nonadmitted

      -         -         -   
  

 

 

  

(h) Admitted capital deferred tax assets (2(e)(99) — 2(f) — 2(g))

        $ 383       $ 479       $ (96 ) 

(i) Admitted deferred tax assets (2(d)+2(h))

        $ 4,447       $ 4,729       $ (282 ) 

 

F-55

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

3. Deferred tax liabilities:

       

(a) Ordinary:

       

(1) Investments

        $   4,146      $ 4,202      $ (56 ) 

(2) Fixed assets

      -        -        -   

(3) Deferred and uncollected premium

      119        148        (29 ) 

(4) Policyholder reserves

      -        -        -   

(5) Other (including items <5% of total ordinary tax liabilities)

      374        521        (147 ) 
  

 

 

  

(99) Subtotal

        $ 4,639      $   4,871      $ (232 ) 

(b) Capital:

       

(1) Investments

        $ 155      $ 276      $   (121 ) 

(2) Real estate

      -        -        -   

(3) Other (including items <5% of total capital tax liabilities)

      40        38        2   
  

 

 

  

(99) Subtotal

        $ 195      $ 314      $ (119 ) 
  

 

 

  

(c) Deferred tax liabilities (3(a)(99) + 3(b)(99))

        $ 4,834      $ 5,185      $ (351 ) 
  

 

 

  

4. Net deferred tax assets/liabilities (2(i) — 3(c))

        $ (387 )    $ (456 )    $ 69   
  

 

 

  

The change in net deferred income taxes is comprised of the following:

 

     December 31,  
     2015     2014     Change  
  

 

 

  
     (in millions)  

Total deferred tax assets

        $   4,447      $   4,729          $ (282 ) 

Total deferred tax liabilities

      4,834        5,185        (351 ) 
  

 

 

  

Net deferred tax assets (liabilities)

        $ (387 )    $ (456 )        $ 69   
  

 

 

    

Tax effect of unrealized gains and losses

          183   

Tax effect of unrealized foreign exchange gains (losses)

          44   
      

 

 

  

Change in net deferred income taxes

            $   (158 ) 
      

 

 

  

 

F-56

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

The provision for federal and foreign income taxes incurred is different from that which would be obtained by applying the statutory federal income tax rate of 35% to income before income tax (including realized capital gains). The significant items causing this difference are as follows:

 

     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Ordinary provisions computed at statutory rate

        $ (105 )    $ (1,087 )    $   1,775   

Net realized capital gains (losses) before IMR at statutory rate

      335        151        (595 ) 

Change in nonadmitted assets

      -        -        -   

Reinsurance

      35        (91 )      (206 ) 

Valuation allowance

      -        -        50   

Tax-exempt income

      (6 )      (16 )      (2 ) 

Nondeductible expenses

      -        1        7   

Foreign tax expense gross up

      9        9        8   

Amortization of IMR

      (128 )      (62 )      (64 ) 

Tax recorded in surplus

      37        15        (18 ) 

Dividend received deduction

      (230 )      (129 )      (102 ) 

Investment in subsidiaries

      (28 )      (32 )      (35 ) 

Prior year adjustment

      (21 )      (23 )      16   

Tax credits

      (42 )      (52 )      (61 ) 

Change in tax reserve

      18        11        (55 ) 

Pension

      -        -        -   

Other

      (1 )      (2 )      (1 ) 
  

 

 

  

Total

        $ (127 )    $ (1,307 )    $ 717   
  

 

 

  

Federal and foreign income taxes incurred

        $ (778 )    $ (716 )    $ 262   

Capital gains tax

         493        382        108   

Change in net deferred income taxes

      158        (973 )      347   
  

 

 

  

Total statutory income tax expense (benefit)

        $ (127 )    $   (1,307 )    $ 717   
  

 

 

  

 

F-57

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

As of December 31, 2015, the Company had the following carry forwards:

 

     Origination
Year		    Expiration
Year		    Amount  
  

 

  
     (in millons)  

Net operating losses

    2008    2023        $ 1,594   
   2009    2024      259   
   2010    2025      200   
   2013    2028      902   
   2014    2029      628   
   2015    2030      62   
        

 

 

  
             $   3,645   
        

 

 

  

Affordable housing tax credits

    2001    2021        $ -   
   2002    2022      26   
   2003    2023      49   
   2004    2024      56   
   2005    2025      58   
   2006    2026      55   
   2007    2027      64   
   2008    2028      60   
   2009    2029      47   
   2010    2030      52   
   2011    2031      53   
   2012    2032      46   
   2013    2033      37   
   2014    2034      28   
   2015    2035      16   
        

 

 

  
             $ 647   
        

 

 

  

Foreign tax credits

    2005    2015        $ 23   
   2006    2016      9   
   2007    2017      27   
   2008    2018      18   
   2009    2019      7   
   2010    2020      9   
   2011    2021      27   
   2012    2022      27   
   2013    2023      27   
   2014    2024      30   
   2015    2025      27   
        

 

 

  
             $ 231   
        

 

 

  

Alternative minimum tax credits

    2002           $ 2   
   2003         2   
        

 

 

  
             $ 4   
        

 

 

  

 

F-58

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

Rehabilitation credits

    2003    2023        $ 4   
   2006    2026      1   
        

 

 

  
             $ 5   
        

 

 

  

Other credits

    2007    2027        $ 1   
   2008    2028      1   
   2009    2029      1   
   2010    2030      2   
   2011    2031      2   
   2013    2033      2   
   2014    2034      2   
        

 

 

  
             $        11   
        

 

 

  

There are no federal income taxes incurred available for recoupment in the event of future net losses for 2015, 2014 and 2013 respectively.

The Company has no deposits under Section 6603 of the Internal Revenue Code.

The Company is included in the consolidated federal income tax return of JHFC with the following entities:

 

Essex Corporation    John Hancock Insurance Company of Vermont
Farmland Management Services, Inc.    John Hancock Leasing Corp.
Guide Financial, Inc.    John Hancock Life Insurance Company of New York
Hancock Farmland Services, Inc.    John Hancock Life & Health Insurance Company
Hancock Forest Management Inc.    John Hancock Real Estate Finance Inc.
Hancock Natural Resource Group Inc.    John Hancock Realty Advisors Inc.
Hancock Venture Partners Inc.    John Hancock Realty Mgt. Inc.
Hancock Venture Partners Inc. Russia    John Hancock Signature Services Inc.
HVP-Special Purpose Sub I Inc.    John Hancock Natural Resource Corp.
HVP-Special Purpose Sub II Inc.    Manulife Reinsurance (Bermuda) Limited
JH California Real Estate Holdings, Inc.    Manulife Reinsurance Limited
JH Illinois Real Estate Holdings, Inc.    Manulife Service Corporation
JH Networking Insurance Agency Inc.    MCC Asset Management Inc.
JHFS One Corp.    PT Timber Inc.
John Hancock Assignment Company    Signator Insurance Agency Inc.
John Hancock Capital Growth Management Inc.    Signator Investors Inc.
John Hancock Energy Resources Mgt. Inc.    Signator Financial Services Inc.
John Hancock Financial Network Inc.    The Manufacturers Investment Corporation
John Hancock Financial Corporation    Transamerica Fund Distributors Inc.
John Hancock Insurance Agency Inc.    Transamerica Fund Management Company

In accordance with the income tax sharing agreements in effect for the applicable tax years, the Company’s income tax expense (benefit) is computed as if the Company filed separate federal income tax returns with tax benefits provided for operating losses and tax credits when utilized by the consolidated group. Intercompany settlements of income taxes are made through an increase or reduction to amounts due to or from affiliates. Such settlements occur on a periodic basis in accordance with the tax sharing agreements.

Taxes receivable from (payable to) affiliates are $130 million and $728 million at December 31, 2015 and 2014, respectively, and are included in other assets on the Balance Sheets.

 

F-59

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The Company is under continuous examination by the Internal Revenue Service (“IRS”). Effective for 2010, the Company’s common parent, JHFC, merged into Manulife Holdings (Delaware) LLC (“MHDLLC”) resulting in a new combined group. With respect to the legacy MHDLLC consolidated return group, the IRS audit for tax years through 2009 have been closed. With respect to the legacy JHFC group, the IRS has completed its examinations of tax years 1997 through 2009. The IRS has issued statutory notices of deficiency relating to issues in years 1997 through 2004. JHFC filed a petition in U.S. Tax Court pertaining to leveraged leases to contest years 1997 to 2001 and the trial was completed in 2011 with final judgment entered on July 22, 2014. The IRS issued Revenue Agent Reports for tax years 2005 through 2009. Protests were filed with respect to disagreed issues. The IRS commenced its audit of tax years 2010 through 2013 in September 2014.

On August, 5, 2013, the U.S. Tax Court issued an opinion in the litigation between the Company and the IRS involving the tax treatment of certain leveraged lease investments. The Court’s opinion effectively ruled against the Company with respect to deductions claimed for tax years 1997 through 2001. The Company and the IRS are in the process of determining the impact of the decision on years subsequent to the years that were decided by the Court. The Company has made advance payments of tax and interest and is awaiting final IRS assessments. Although the Company is fully reserved for the taxes and interest that could be due, this decision may result in a decrease in the admissible book value of other deferred tax assets include in surplus in subsequent periods, absent consideration of further management actions.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

     2015     2014  
  

 

 

  
     (in millions)  

Balance at beginning of year

        $ 2,002      $ 2,715   

Additions based on tax positions related to the current year

      40        49   

Payments

      -        (550 ) 

Additions for tax positions of prior years

      41        23   

Reductions for tax positions of prior years

      (116 )      (235 ) 
  

 

 

  

Balance at end of year

        $   1,967      $   2,002   
  

 

 

  

Included in the balances as of December 31, 2015 and 2014, respectively, are $172 million and $154 million of unrecognized benefits that, if recognized, would affect the Company’s effective tax rate. Included in the balances as of December 31, 2015 and 2014, are $1,796 million and $1,848 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Approximately $1,734 million and $1,734 million of such amounts at December 31, 2015 and 2014, respectively, represent deferred tax liability balances related to leveraged lease deductions taken in prior year tax returns that were considered in determining the amount of deferred tax assets that can be admitted by offsetting such amounts against deferred tax liabilities. Excluding the effect of interest and penalties, this will have no impact on the annual effective rate, but would accelerate the payment of taxes to an earlier period.

The Company’s liability for unrecognized tax benefits may decrease in the next twelve months pending the outcome of remaining issues associated with the 2002 through 2009 IRS audit. A reasonable estimate of the decrease cannot be determined at this time however, the Company believes that the ultimate resolution will not result in a material change to its financial statements.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense in the Statements of Operations. The Company recognized approximately $0 million of interest expense, and $9 million, and $11 million of interest benefit for the years ended December 31, 2015, 2014 and 2013, respectively. The Company had approximately $202 million and $209 million accrued for interest as of December 31, 2015 and 2014, respectively. The Company did not recognize any material amounts of penalties for the years ended December 31, 2015, 2014 and 2013.

 

F-60

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

10. Capital and Surplus

There are no restrictions placed on the Company’s unassigned surplus other than restrictions on dividend payments described below.

Under Michigan State insurance laws, no insurer may pay any shareholder dividends from any source other than statutory earned surplus without the prior approval of the Director. Dividends to the shareholder that may be paid without prior approval of the Director are limited by the laws of the State of Michigan. Such dividends are permissible if, together with other dividends or distributions made within the preceding 12 months, they do not exceed the greater of 10% of the JHUSA surplus as of December 31 of the preceding year, or the net gain from operations excluding realized capital gains and (losses) for the 12 month period ending December 31 of the immediately preceding year. For the years ended December 31, 2015, 2014 and 2013, the Company paid a dividend to its parent company MIC of $210 million, $500 million and $300 million, respectively.

Life/health insurance companies are subject to certain Risk-Based Capital (“RBC”) requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life/health insurance company is to be determined based on the various risk factors related to it. As of December 31, 2015 and 2014, based on calculations pursuant to those requirements, the Company’s total adjusted capital exceeds the company action level.

The Company has surplus notes described below in the amount of $991 million. The issuance of the surplus notes was approved by the insurance regulators with the following repayment conditions and restrictions: payment of principal and accrued interest otherwise required or permissible cannot be made unless approved by the Board of Directors, approved in writing by the Director, and the Company has sufficient earned surplus or such other funds as may be approved by the Director available for such payment.

Surplus notes in the amount of $450 million were issued on February 25, 1994, for cash pursuant to Rule 144A under the Securities Act of 1933. 100% of the issued and outstanding surplus notes are represented by a global note registered in the name of a nominee of the Depository Trust Company. The interest rate is fixed at 7.375%, and interest is payable semi-annually. The notes mature on February 15, 2024. Interest expense was $33 million for years ended December 31, 2015, 2014 and 2013. Total interest paid through December 31, 2015 was $714 million.

Pursuant to two subordinated surplus notes dated September 30, 2008, the Company borrowed the respective amount of $295 million and $110 million from an affiliate, John Hancock Insurance Agency, Inc. (“JHIA”). The interest rate is fixed at 7% per annum and is payable semi-annually. The notes mature on March 31, 2033. The combined interest expense on the notes was $29 million for years ended December 31, 2015, 2014 and 2013. Total interest paid through December 31, 2015 was $202 million.

Pursuant to an amended and restated subordinated surplus note dated September 30, 2008, the Company borrowed $136 million from JHFC. Interest is calculated and reset quarterly at a fluctuating rate equal to 3-month LIBOR plus 130 basis points and is payable semi-annually. The note matures on December 15, 2016. Interest expense was $2 million, $2 million, and $2 million for the years ended December 31, 2015, 2014 and 2013, respectively. Total interest paid through December 31, 2015 was $13 million.

Under Michigan State liquidation statutes, the claims of the Depository Trust Company, JHIA, and JHFC (“the surplus noteholders”) come before those of the Company’s shareholders. There is no preferential treatment in claims between the surplus noteholders.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

11. Related Party Transactions

Service Agreements

The Company has formal service agreements with MFC and MLI, which can be terminated by either party upon two months’ notice. Under the various agreements, the Company will pay a fee for services received under the agreement which includes legal, actuarial, investment, data processing, accounting, and certain other administrative services. Management fees relating to the agreement were $377 million, $398 million, and $443 million, respectively, for the years ended December 31, 2015, 2014 and 2013.

The Company has Administrative Service Agreements with its subsidiaries whereby the Company will be reimbursed for operating expenses incurred by the Company. Services provided under the agreement include legal, personnel, marketing, investment accounting, and certain other administrative services and are billed based on intercompany cost allocations or total average daily net assets. The amounts earned under the agreements were $760 million, $618 million, and $328 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Management believes the allocation methods used are reasonable and appropriate in the circumstances; however, the Company’s Balance Sheets and Statements of Operations may not necessarily be indicative of the financial condition that would have existed if the Company operated as an unaffiliated entity.

Other

During 2015, 2014 and 2013, respectively, the Company received dividends of $36 million, $43 million, and $297 million from John Hancock Investment Management Services LLC, $81 million, $90 million, and $98 million from JHD, $0 million, $0 million, $0 million from JHNY, $70 million, $0 million, and $0 million from JHLH, and $289 million, $72 million, and $0 million from John Hancock Subsidiaries, LLC (JHS). These dividends are included in the Company’s net investment income.

During 2015, the Company made a capital contribution of $348 million to JHS in exchange for one share of its common stock.

The Company did not own any shares of the stock of its parent, MIC, or its ultimate parent, MFC at December 31, 2015 and 2014, respectively.

The Company did not recognize any impairment write-down for its investment in subsidiaries, controlled or affiliated companies for the years ended December 31, 2015, 2014 and 2013, respectively.

The Company operates a liquidity pool in which affiliates can invest excess cash. Terms of operation and participation in the liquidity pool are set out in the Second Restated and Amended Liquidity Pool and Loan Facility Agreement effective January 1, 2010. The maximum aggregate amounts that JHUSA can accept into the Liquidity Pool are $5 billion in U.S. dollar deposits and $200 million in Canadian dollar deposits. Under the terms of the agreement, certain participants may receive advances from the Liquidity Pool up to certain predetermined limits. By acting as the banker the Company can earn a spread over the amount it pays its affiliates and this aggregation and resulting economies of scale allows the affiliates to improve the investment return on their excess cash. Interest payable on U.S. dollar funds will be reset daily to the one-month U.S. Dollar London Inter-Bank Bid Rate (“LIBID”) and interest payable on Canadian dollar funds is based off the one-month Canadian Dollar Offering Rate (“CDOR”) plus a spread.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

11. Related Party Transactions - (continued)

 

The following table details the affiliates and their participation in the Company’s Liquidity Pool:

 

     December 31,  
     2015      2014  
  

 

 

  
     (In millions)  

The Manufacturers Investment Corporation

        $ 49       $ 105   

John Hancock Financial Corporation

      138         274   

Manulife Reinsurance Limited

      44         186   

Manulife Reinsurance (Bermuda) Ltd.

      167         696   

John Hancock Life & Health Insurance Company

      30         142   

John Hancock Life Insurance Company Vermont

      33         39   

John Hancock Reassurance Company, Ltd.

      126         278   

John Hancock Life Insurance Company New York

      473         611   

John Hancock Investment Management Services LLC

      28         31   

John Hancock Subsidiaries LLC

      45         45   

John Hancock Insurance Agency, Inc.

      12         16   

Essex Corporation

      -         1   

Hancock Venture Partners, Inc.

      -         -   

JH Signature Services Inc.

      7         9   

JH Partnership Holdings I, II LP

      4         2   

John Hancock Energy Resources Management, Inc.

      -         4   

John Hancock Real Estate Finance

      -         1   

John Hancock Realty Advisors

      4         8   

JH Advisors LLC

      84         158   

Manulife Asset Management (US) LLC

      55         75   

Declaration Management and Research LLC

      11         4   

Hancock Capital Investment Management LLC

      10         15   

John Hancock RPS, LLC

      36         14   

The Berkeley Financial Group, LLC

      4         4   

Manulife Holdings (USA), LLC

      -         -   

Signator Insurance Agency, Inc.

      14         18   

JH Networking Insurance Agency, Inc.

      6         4   

John Hancock Administrative Services LLC

      -         -   

John Hancock Financial Network, Inc.

      -         -   

Hancock Natural Resource Group, Inc.

      50         -   

Hancock Forest Management, Inc.

      6         -   

John Hancock Personal Financial Services, LLC

      1         -   
  

 

 

  

Total

        $   1,437       $   2,740   
  

 

 

  

Effective March 31, 1996, MLI provides a claims paying guarantee to certain U.S. policyholders. The claims guarantee agreement was terminated effective August 13, 2008, but still remains in effect with respect to policies issued by the Company prior to that date.

MFC fully and unconditionally guarantees payments from the guarantee periods of the accumulation phase for certain of the Company’s market value adjusted annuity contracts.

MFC fully and unconditionally guarantees JHLICO’s SignatureNotes. In December 2009, the entity that formerly issued these notes, JHLICO, ceased to exist and its property and obligations became the property and obligations of the Company.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

11. Related Party Transactions - (continued)

 

MFC’s guarantees of the market value adjusted deferred annuity contracts and SignatureNotes are unsecured obligations of MFC and are subordinated in right of payment to the prior payment in full of all other obligations of MFC, except for other guarantees or obligations of MFC, which by their terms are designated as ranking equally in right of payment with or subordinate to MFC’s guarantees of the market value adjusted deferred annuity contracts and SignatureNotes.

The Company also enters into debt and reinsurance transactions with its affiliates. Please refer to the debt and reinsurance notes for further details.

12. Commitments, Guarantees, Contingencies, and Legal Proceedings

Commitments: The Company has extended commitments to purchase long-term bonds of $183 million, purchase other invested assets of $1,716 million, purchase real estate of $98 million, and issue agricultural and commercial mortgages of $125 million at December 31, 2015. If funded, loans related to real estate mortgages would be fully collateralized by related properties. Approximately 39% of these commitments expire in 2016.

There were no leasing arrangements that the Company entered into as lessee which could have a material financial effect.

During 2001, the Company entered into an office ground lease agreement, which expires on September 20, 2096. During 2012, the Company entered into a parking lease agreement, which expires on December 31, 2050. The terms of the lease agreements provide for adjustments in future periods. The future minimum lease payments, by year and in the aggregate, under these leases and other non-cancelable operating leases along with the associated sub-lease income are as follows:

 

     Non-cancelable
Operating
Leases		  
     (in millions)  

2016

        $ 12   

2017

      10   

2018

      7   

2019

      5   

2020

      5   

Thereafter

      349   
  

 

 

  

Total

        $   388   
  

 

 

  

The Company does not have any sublease income related to its office space.

The Company’s investment in leveraged leases relates to equipment used primarily in the transportation industries; however, this type of leasing transaction is not a significant part of the Company’s business activities in terms of revenue, net income, or assets.

Guarantees: In the course of business, the Company enters into guarantees which vary in nature and purpose and which are accounted for and disclosed under statutory accounting principles.

The Company has issued guarantee agreements pursuant to which the Company guarantees the obligations of JHNY and JHLH under the OTC International Swaps and Derivatives Association, Inc. (“ISDA”) cleared and exchange-traded derivative agreements and transactions entered into by JHNY and JHLH with external counterparties. The ISDA guarantees are subject to an overall limit of $1 billion of Potential Future Exposure, using a three-week and 95% confidence parameters, in calculating the counterparty risk exposure.

The Company is party to a financial support agreement with JHLH pursuant to which it has agreed to maintain JHLH’s capital level such that its risk-based capital ratio shall be at or above 225% of the company action level annually. In addition, under the terms of the financial support agreement, the Company undertakes to provide sufficient liquidity to enable JHLH to make timely payment of its contractual obligations.

 

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Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

12. Commitments, Guarantees, Contingencies, and Legal Proceedings - (continued)

 

Contingencies: The Company is an investor in a number of leasing transactions. On August 5, 2013, the U.S. Tax Court issued an opinion effectively ruling in the government’s favor in the litigation between John Hancock and the IRS involving the tax treatment of John Hancock’s investments in certain leveraged leases. The Company and the IRS are in the process of determining the impact of the decision on years subsequent to the years that were decided by the Court. The Company has made advance payments of tax and interest and is awaiting final IRS assessments. Although the Company is fully reserved for the taxes and interest that could be due, this decision may result in a decrease in the admissible book value of other deferred tax assets included in surplus in subsequent periods, absent consideration of further management actions.

The Company acts as an intermediary/broker in OTC derivative instruments. In these cases, the Company enters into derivative transactions on behalf of affiliated companies and then enters into offsetting derivative transactions with the affiliate. In the event of default of either party, the Company is still obligated to fulfill its obligations with the other party.

The Company is subject to insurance guaranty fund laws in the states in which it does business. Pursuant to these laws, insurance companies are assessed, and required to make periodic payments, to be used to pay benefits to policyholders and claimants of insolvent or rehabilitated insurance companies. Many states allow these assessments to be credited against future premium taxes. The Company believes such assessments in excess of amounts accrued will not materially affect its financial position.

Legal Proceedings: The Company is regularly involved in litigation, both as a defendant and as a plaintiff. The litigation naming the Company as a defendant ordinarily involves its activities as a provider of insurance protection and wealth management products, an employer, and a taxpayer. In addition, the Michigan Department of Insurance and Financial Services, the Michigan Attorney General, the SEC, the Financial Regulatory Authority, and other government and regulatory bodies regularly make inquiries and, from time to time, require the production of information or conduct examinations concerning the Company’s compliance with, among other things, insurance laws, securities laws, and laws governing the activities of broker-dealers. An estimation of the range of potential outcomes in any given matter is often unavailable until such matters have developed and sufficient information emerges to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals and estimates of reasonably possible losses or ranges of loss based on such reviews.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

13. Annuity Actuarial Reserves

The Company’s annuity reserves and deposit fund liabilities and related separate account liabilities that are subject to discretionary withdrawal (with adjustment), subject to discretionary withdrawal (without adjustment), and not subject to discretionary withdrawal provisions are summarized as follows:

 

    December 31, 2015  
    General
Account		     Separate
Account
with
Guarantees		     Separate
Account
Nonguaranteed		     Total     Percent
of Total		  
 

 

 

  
    (in millions)  

Subject to discretionary withdrawal:

          

With fair value adjustment

       $ 769      $ 503      $ 1,793      $ 3,065        2 % 

At book value less current surrender charge of 5% or more

     5        -        -        5        0 % 

At fair value

     -        -        114,302        114,302        82 % 
 

 

 

  

Total with adjustment or at fair value

     774        503        116,095        117,372        84 % 

At book value without adjustment (minimal or no charge or adjustment)

     7,165        -        -        7,165        5 % 

Not subject to discretionary withdrawal

     15,068        686        134        15,888        11 % 
 

 

 

  

Total (gross)

     23,007        1,189        116,229        140,425        100 % 
         

 

 

  

Reinsurance ceded

     4,904        -        -        4,904     
 

 

 

    

Total (net)

       $   18,103      $   1,189      $   116,229      $   135,521     
 

 

 

    
    December 31, 2014  
    General
Account		     Separate
Account
with
Guarantees		     Separate
Account
Nonguaranteed		     Total     Percent
of Total		  
 

 

 

  
    (in millions)  

Subject to discretionary withdrawal:

          

With fair value adjustment

       $ 968      $ 559      $ 1,879      $ 3,406        2 % 

At book value less current surrender charge of 5% or more

     29        -        -        29        0 % 

At fair value

     -        -        123,450        123,450        81 % 
 

 

 

  

Total with adjustment or at fair value

     997        559        125,329        126,885        83 % 

At book value without adjustment (minimal or no charge or adjustment)

     8,594        -        -        8,594        6 % 

Not subject to discretionary withdrawal

     15,577        713        130        16,420        11 % 
 

 

 

  

Total (gross)

     25,168        1,272        125,459        151,899        100 % 
         

 

 

  

Reinsurance ceded

     5,483        -        -        5,483     
 

 

 

    

Total (net)

       $ 19,685      $ 1,272      $ 125,459      $ 146,416     
 

 

 

    

 

F-66

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts

Separate accounts held by the Company include individual and group variable annuity and variable life products that offer guarantee and non-guaranteed returns. The net investment experience of the separate account is credited directly to the policyholder and can be positive or negative.

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

The deposits related to variable annuities generally provide a GMDB. For annuity products, this can take the form of either (a) return of no less than total deposits made to the contract less any partial withdrawals; (b) total deposits made to the contract less any partial withdrawals plus a minimum return; (c) the highest contract value on a specified anniversary date minus any withdrawals following the contract anniversary; or (d) a combination benefit of (b) and (c) above. The assets and liabilities of these accounts are carried at fair value. The GMDB reserve is held in the Company’s general account policy reserves.

The Company sold contracts with GMIB riders from 1998 to 2004. The GMIB rider provides a guaranteed lifetime annuity which may be elected by the contract holder after a stipulated waiting period (7 to 15 years), and which may be larger than what the contract account balance could purchase at then-current annuity purchase rates.

The Company sold contracts with a GMWB rider and has since offered multiple variations of this optional benefit. The GMWB rider provides contract holders a guaranteed annual withdrawal amount over a specified time period or in some cases for as long as they live. In general, guaranteed annual withdrawal amounts are based on deposits and may be reduced if withdrawals exceed allowed amounts. Guaranteed amounts may also be increased as a result of “step-up” provisions which increase the benefit base to higher account values at specified intervals. Guaranteed amounts may also be increased if withdrawals are deferred over a specified period. In addition, certain versions of the GMWB rider extend lifetime guarantees to spouses.

Reinsurance has been utilized to mitigate risk related to some of the GMDB and GMIB riders.

For GMDB, the net amount at risk is defined as the current guaranteed minimum death benefit in excess of the current account balance. For GMIB, the net amount at risk is defined as the excess of the current annuitization income base over the current account value. For GMWB, the net amount at risk is defined as the current guaranteed withdrawal amount minus the current account value. For all the guarantees, the net amount at risk is floored at zero at the single contract level.

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

 

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Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts - (continued)

 

The assets legally insulated from the general account are attributed to the following products/transactions:

 

Product/Transaction    Separate Account Legally
Insulated Assets		     

Separate Account

Not Legally Insulated

Assets

  
  

 

 

  
     December 31,  
     2015      2014        2015      2014  
  

 

 

  
     (in millions)  

Group Annuities (Deposit Administration)

        $ 75,437       $ 78,905       $ -       $ -   

Variable Annuities

      37,422         43,503         27         29   

Life and COLI

      12,067         12,359         -         -   

Fixed Products — Institutional and stable value fund

      2,611         2,713         -         -   

Fixed Products — Retail

      22         24         472         570   

Investments — Funds

      1,667         2,061         -         -   
  

 

 

  

Total

        $   129,226       $   139,565       $   499       $   599   
  

 

 

  

As of December 31, 2015 and 2014, the general account of the Company had a maximum guarantee for separate account liabilities $10,914 million and $7,816 million, respectively. To compensate the general account for the risk taken, the separate account paid risk charges and amounts toward separate account guarantees are as follows:

 

     Risk Charges
Paid to General
Account		      Amounts toward
Separate Account
Guarantees		  
  

 

 

  
     (in millions)  

2015

      $    241         $      59   

2014

      $    252         $      74   

2013

      $    263         $    109   

2012

      $    269         $    165   

2011

      $    261         $    145   

The Company had the following variable annuities with guaranteed benefits:

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions, except for ages)  

Account value

    $ 37,947       $ 44,116   

Amount of reserve held

      1,179         865   

Net amount at risk — gross

      7,169         4,699   

Weighted average attained age

      68         67   

The following assumptions and methodology were used to determine the amounts above at December 31, 2015 and 2014:

 

  •  

Actuarial Guideline 43 (“AG 43”) is used in both years to determine the aggregate reserve for products falling under the scope. Assumptions used in the standard scenario are prescribed by the guideline. Assumptions used in the stochastic scenarios are detailed below.

 

  •  

The stochastically generated projection scenarios have met the scenario calibration criteria prescribed in AG 43.

 

  •  

In 2015 and 2014, annuity mortality is based on the Ruark Variable Annuity Table, which is based on an industry study of variable annuity deaths. The table is further adjusted by factors varied by rider types (living benefit/GMDB only) and qualified and non-qualified business.

 

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Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts - (continued)

 

  •  

In 2015 and 2014, annuity base lapse rates vary by product, policy year, and rider type, where the lapse rates range from 0.5% to 40% for GMDB, GMIB and GMWB. These rates are dynamically reduced for guarantees that are in-the-money. Beginning in 2012, rates are also dynamically increased for GMWBs that are out-of-the-money.

 

  •  

For variable annuities, the swap curve at December 31 is used for discounting in both years.

 

  •  

For variable annuities, mean return, volatility and correlation assumptions are determined by indices, which have met the calibration criteria prescribed in AG 43.

Account balances of variable contracts with guarantees were invested in various separate accounts with the following characteristics:

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions)  

Type of Fund

      

Equity

        $ 24,131       $ 27,353   

Balanced

      16,993         19,449   

Bonds

      5,216         5,807   

Money Market

      668         683   
  

 

 

     

 

 

  

Total

        $   47,008       $   53,292   
  

 

 

     

 

 

  

Information regarding the separate accounts of the Company is as follows:

 

     December 31,  
     2015      2014  
  

 

 

  
    

Nonindexed
Guarantee
Less than or

Equal to
4%

      Nonguaranteed
Separate
Account		      Total     

Nonindexed
Guarantee
Less than or

Equal to
4%

      Nonguaranteed
Separate
Account		      Total  
  

 

 

  
     (in millions)  

Premiums, deposits and other considerations

    $ 1       $ 13,935       $ 13,936       $ -       $ 13,258       $ 13,258   
  

 

 

  

Reserves for accounts with assets at:

                  

Fair value

      1,189         127,792         128,981         1,272         137,306         138,578   

Amortized cost

      -         -         -         -         -         -   
  

 

 

  

Total

    $ 1,189       $ 127,792       $ 128,981       $ 1,272       $ 137,306       $ 138,578   
  

 

 

  

 

F-69

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts - (continued)

 

    December 31,  
    2015     2014  
 

 

 

  
   

Nonindexed
Guarantee

Less than or

Equal to
4%

     Nonguaranteed
Separate
Account		     Total    

Nonindexed
Guarantee

Less than or

Equal to
4%

     Nonguaranteed
Separate
Account		     Total  
 

 

 

  
    (in millions)  

Reserves for separate accounts by withdrawal characteristics:

            

Subject to discretionary withdrawal:

            

With fair value adjustment

       $ 503      $ 1,793      $ 2,296      $ 531      $ 1,879      $ 2,410   

At book value without fair value adjustments and with current surrender charge of 5% or more

     -        1,901        1,901        -        2,483        2,483   

At fair value

     -        120,337        120,337        28        129,620        129,648   

At book value without fair value adjustments and with current surrender charge of less than 5%

     -        3,533        3,533        -        3,058        3,058   
 

 

 

  

Subtotal

     503        127,564        128,067        559        137,040        137,599   

Not subject to discretionary withdrawal

     686        228        914        713        266        979   
 

 

 

  

Total

       $   1,189      $   127,792      $   128,981      $   1,272      $   137,306      $   138,578   
 

 

 

  

Amounts transferred to and from separate accounts are as follows:

 

     December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Transfers to separate accounts

        $   17,071      $   16,100      $   14,916   

Transfers from separate accounts

      23,625        24,329        21,304   
  

 

 

    

 

 

    

 

 

  

Net transfers to (from) separate accounts

        $ (6,554 )    $ (8,229 )    $ (6,388 ) 
  

 

 

    

 

 

    

 

 

  

 

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Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

15. Employee Benefit Plans

Retirement Plans: The Company participates in the John Hancock Pension Plan, a qualified defined benefit plan that covers substantially all of its employees. The Company also participates in the John Hancock Non-Qualified Pension Plan, a nonqualified defined benefit plan for employees whose qualified cash balance benefit is restricted by the Internal Revenue Code. Both plans are sponsored by MIC. The non-qualified defined benefit plan was frozen except for grandfathered participants as of January 1, 2008, and the benefits accrued under this plan continue to be subject to the plan’s provisions.

The Company is jointly and severally liable for the funding requirements of the plans and will recognize its allocation, from MIC, of the required contributions to the plans as pension expense in its Statements of Operations. The allocation is derived by utilizing participant data, provided by the plan actuary, to calculate payments into the trust for the qualified plan and payments to participants for the non-qualified plan. The expense for these plans was $35 million, $37 million, and $41 million in 2015, 2014 and 2013, respectively.

The Company participates in the John Hancock Supplemental Retirement Plan, a non-qualified defined contribution plan maintained by MFC, which was established as of January 1, 2008 with participant directed investment options. The expense for this plan was not material for the years ended 2015, 2014 and 2013, respectively. The prior non-qualified defined contribution plan was frozen except for grandfathered participants as of January 1, 2008, and the benefits accrued under the prior plan continue to be subject to the prior plan provisions.

The Company also maintains a separate rabbi trust for the purpose of holding assets to be used to satisfy its obligations with respect to certain other non-qualified retirement plans of $329 million and $332 million at December 31, 2015 and 2014, respectively. In the event of insolvency of the Company, the rabbi trust assets can be used to satisfy claims of general creditors.

401 (k) Plans: The Company participates in qualified defined contribution plans for its employees who meet certain eligibility requirements. These plans include the Investment-Incentive Plan for John Hancock Employees and the John Hancock Savings and Investment Plan. Both plans are sponsored by JHUSA. Expense is primarily comprised of the amounts the Company contributes to the plans, which fully matches eligible participants’ basic pre-tax or Roth contributions, subject to a 4% per participant maximum. The expense for the defined contribution plans was not material for the years ended 2015, 2014 and 2013, respectively.

Deferred Compensation Plan: The Company maintains the Deferred Compensation Plan for Certain Employees of John Hancock, and the Deferred Compensation Plan of the John Hancock Financial Network, both of which are deferred compensation plans sponsored by MFC. These plans are for a select group of management or highly compensated employees and certain qualified agents. The plans are fully funded and accounts are maintained by a third-party administrator. Under these plans, participants have the flexibility and opportunity to invest their plan balances in mutual funds. The liability for these plans at December 31, 2015 and 2014 was $89 million and $91 million, respectively.

Prior to January 1, 2006, the Company offered the Legacy Deferred Compensation Plan for Certain Employees of John Hancock Life Insurance Company (USA), the legacy plan, which is closed to new participation and is unfunded. These are notional accounts and all liabilities have remained with the Company and are paid out of general account assets when a distribution is taken. The liability for this plan was not material as of December 31, 2015 and 2014 respectively.

Postretirement Benefit Plan: The Company participates in the John Hancock Employee Welfare Plan which is sponsored by MIC. Consistent with the pension plan, the Company is jointly and severally liable for the funding requirements of the plan and will recognize its allocation, from MIC, of the benefits earned by plan participants as postretirement benefits expense in its Statements of Operations. The allocation is derived by utilizing participant data, provided by the plan actuary, to calculate the benefits earned; i.e., service cost, relating to participants employed by the Company. In addition, any difference between actual cash paid for benefits to plan participants and benefits earned is recorded directly to unassigned surplus. The expense and charge to surplus for the John Hancock Employee Welfare Plan were not material for the years ended 2015, 2014 and 2013, respectively.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

16. Lines of Credit, Consumer Notes and Affiliated Debt

Lines of Credit: At December 31, 2015, the Company, MFC, and other MFC subsidiaries had a committed line of credit through a group of banks totaling $500 million pursuant to a multi-year facility, which will expire in 2020. The banks will commit, when requested, to loan funds at prevailing interest rates as determined in accordance with the line of credit agreement. Under the terms of the agreement, MFC is required to maintain a certain minimum level of net worth, and MFC and the Company are required to comply with certain other covenants, which were met at December 31, 2015. At December 31, 2015, MFC and its subsidiaries, including the Company, had no outstanding borrowings under the agreement.

At December 31, 2015, the Company had a committed line of credit agreement established by MLI totaling $1 billion, which will expire in 2018. MLI will commit, when requested, to loan funds at prevailing interest rates as determined in accordance with the line of credit agreement. Under the terms of the agreement, the Company is required to maintain a certain minimum level of net worth and comply with certain other covenants as long as any amount is owed to the lender under the agreement. At December 31, 2015, the Company had no outstanding borrowings under the agreement.

At December 31, 2015, JHUSA and MIC share in a committed line of credit established by MFC totaling $1 billion, which will expire in 2018. MFC will commit, when requested, to loan funds at prevailing interest rates as determined in accordance with the line of credit agreement. Under the terms of the agreement, the Company is required to maintain a certain minimum level of net worth and comply with certain other covenants, as long as any amount is owed to the lender under the agreement. At December 31, 2015, the Company had no outstanding borrowings under the agreement.

Consumer Notes: The Company issued consumer notes through its SignatureNotes Program. SignatureNotes may be redeemed upon the death of the holder, subject to an annual overall program redemption limitation of 1% of the aggregate securities outstanding, or $1 million, or an individual redemption limitation of $200,000 of aggregate principal. SignatureNotes have a variety of issue dates, maturities, interest rates and call provisions. The notes payable balance as of December 31, 2015 and 2014 was $265 million and $411 million, respectively. Interest ranging from 3.1% to 6.0%. The notes are due in varying amounts to 2032.

Aggregate maturities of consumer notes are as follows: 2016-$64 million; 2017-$4 million; 2018-$43 million; 2019-$16 million; 2020-$0 million; and thereafter $138 million.

Interest expense on consumer notes, included in benefits to policyholders, was $18 million, $24 million, and $ 30 million in 2015, 2014 and 2013, respectively. Interest paid amounted to $18 million, $24 million, and $ 30 million in 2015, 2014 and 2013, respectively.

Affiliated Debt: Pursuant to a demand note receivable dated September 30, 2008, the Company has $295 million outstanding with MIC. The note, which was to have matured on March 31, 2013, was extended to March 31, 2018. This note was reported as a nonadmitted asset at December 31, 2015 and 2014 since the counterparty is the parent entity of the Company; however, this note will continue to accrue interest throughout the duration of the contract as per the terms of the note. Prior to March 31, 2013, the interest rate was calculated at a fluctuating rate equal to 3-month LIBOR plus 83 basis points per annum. Following the extension, the interest rate is calculated at a fluctuating rate equal to 3-month LIBOR plus 180 basis points per annum. Interest income was $6 million, $6 million, and $6 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Pursuant to a promissory note dated June 28, 2012, the Company borrowed $153 million from Manulife Finance Switzerland AG (“MFSA”). Interest on the loan is calculated at a fluctuating rate equal to 3-month LIBOR plus 90 basis points per annum and is payable quarterly. In addition, the Company renewed two previously outstanding promissory notes to MFSA with an outstanding balance of $7 million and combined these notes with the new note issued on June 28, 2012, thus bringing the total principal balance due to $160 million. On June 3, 2015, the maturity date was extended for a period of one year to June 28, 2016. Following the extension, the interest rate was amended and is calculated at a fluctuating rate equal to 3-month LIBOR plus 88 basis points per annum and is payable quarterly effective from June 28, 2015. Interest expense was $2 million, $2 million, and $2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Pursuant to a demand note dated December 20, 2012, the Company borrowed $130 million from MIC. The note was paid on December 21, 2015. Interest on the loan was calculated at a fluctuating rate equal to the one-month LIBOR rate and was

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

16. Lines of Credit, Consumer Notes and Affiliated Debt - (continued)

 

payable monthly. Interest expense was $0 million, $0 million, and $0 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Pursuant to a senior note receivable dated December 9, 2014, the Company has $40 million outstanding with JHS with a fair value of $ 40 million as of December 31, 2015. The note matures on December 9, 2019. Interest on the loan is calculated at a fluctuating rate equal to the 3-month LIBOR rate plus 180 basis points per annum and is payable quarterly. Interest income was $1 million for the year ended December 31, 2015.

FHLB (Federal Home Loan Bank) Agreements: The Company is a member of the Federal Home Loan Bank of Indianapolis (FHLBI). The Company uses advances from the FHLBI as a part of its liquidity management program, and any funds obtained for this purpose would be accounted for as borrowed money.

The following table indicates the aggregate amount of the FHLBI capital stock held related to the agreement:

 

    December 31, 2015  
   

(1)

(Col 2 +3)

Total

    

(2)

General
Account

    

(3)

Separate
Account

  
 

 

 

  
    (in millions)  

(a) Membership stock — Class A

   $ -      $ -      $ -   

(b) Membership stock — Class B

     18        18        -   

(c) Activity stock

     -        -        -   

(d) Excess stock

     -        -        -   

(e) Aggregate total

   $ 18      $ 18      $ -   

(f) Actual or estimated borrowing capacity as determined by the insurer

   $ 400       
    December 31, 2014  
   

(1)

(Col 2 +3)

Total

    

(2)

General
Account

    

(3)

Separate
Account

  
 

 

 

  
    (in millions)  

(a) Membership stock — Class A

   $ -      $ -      $ -   

(b) Membership stock — Class B

     20        20        -   

(c) Activity stock

     -        -        -   

(d) Excess stock

     -        -        -   

(e) Aggregate total

   $ 20      $ 20      $ -   

(f) Actual or estimated borrowing capacity as determined by the insurer

   $ 446       

FHLBI membership stock of $18 million and $20 million was classified as not eligible for redemption for the years ended December 31, 2015 and 2014, respectively.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

16. Lines of Credit, Consumer Notes and Affiliated Debt - (continued)

 

The following table indicates the collateral pledged to the FHLBI at the end of the year:

 

    December 31, 2015  
    Fair Value     Carrying
Value		     Aggregate Total
Borrowing		  
 

 

 

  
    (in millions)  

(a) General account

   $ -      $ -      $ -   

(b) Separate account

     -        -        -   
 

 

 

    

 

 

    

 

 

  

(c) Total collateral pledged

   $ -      $ -      $ -   
 

 

 

    

 

 

    

 

 

  
    December 31, 2014  
    Fair Value     Carrying
Value		     Aggregate Total
Borrowing		  
 

 

 

  
    (in millions)  

(a) General account

   $ -      $ -      $ -   

(b) Separate account

     -        -        -   
 

 

 

    

 

 

    

 

 

  

(c) Total collateral pledged

   $ -      $ -      $ -   
 

 

 

    

 

 

    

 

 

  

The following table indicates the maximum collateral pledged to the FHLBI during the year:

 

     December 31, 2015  
     Fair Value      Carrying
Value		      Amount
Borrowed at Time
of Maximum
Collateral		  
  

 

 

  
     (in millions)  

(a) General account

    $ 794       $ 738       $ 400   

(b) Separate account

      -         -         -   
  

 

 

     

 

 

     

 

 

  

(c) Total maximum collateral pledged

    $ 794       $ 738       $ 400   
  

 

 

     

 

 

     

 

 

  
     December 31, 2014  
     Fair Value      Carrying
Value		     

Amount

Borrowed at Time
of Maximum
Collateral

  
  

 

 

  
     (in millions)  

(a) General account

    $ 13       $ 12       $ 10   

(b) Separate account

      -         -         -   
  

 

 

     

 

 

     

 

 

  

(c) Total maximum collateral pledged

    $ 13       $ 12       $ 10   
  

 

 

     

 

 

     

 

 

  

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

16. Lines of Credit, Consumer Notes and Affiliated Debt - (continued)

 

The following table represents the aggregate amount of borrowing from FHLBI:

 

     December 31, 2015  
    

(1)

(Col 2 +3)

Total

     

(2)

General
Account

     

(3)

Separate
Account

     

(4)

Funding
Agreements
Reserves
Established

  
  

 

 

  
     (in millions)  

(a) Debt

    $ -       $ -       $ -         -   

(b) Funding agreements

      -         -         -      

(c) Other

      -         -         -         -   

(d) Aggregate total

    $ -       $ -       $ -       $ -   
     December 31, 2014  
    

(1)

(Col 2 +3)

Total

     

(2)

General
Account

     

(3)

Separate
Account

     

(4)

Funding
Agreements
Reserves
Established

  
  

 

 

  
     (in millions)  

(a) Debt

    $ -       $ -       $ -         -   

(b) Funding agreements

      -         -         -      

(c) Other

      -         -         -         -   

(d) Aggregate total

    $ -       $ -       $ -       $ -   

The maximum amount of aggregate borrowings from FHLBI during 2015 was $400 million. The Company is not subject to any prepayment obligations under current borrowing agreements.

17. Closed Blocks

The Company operates two separate closed blocks for the benefit of certain classes of individual or joint traditional participating whole life insurance policies. The JHUSA closed block was established upon the demutualization of MLI for those designated participating policies that were in-force on September 23, 1999. The JHLICO closed block was established upon the demutualization of JHLICO for those designated participating policies that were in-force on February 1, 2000. As a result of the merger in 2009, the property and obligations of the JHLICO closed block became the property and obligations of JHUSA, but the Company operates these two closed blocks separately.

Assets were allocated to the closed blocks in an amount that, together with anticipated revenues from policies included in the closed blocks, was reasonably expected to be sufficient to support such business, including provision for payment of benefits, direct asset acquisition and disposition costs, taxes, and for continuation of dividend scales, assuming experience underlying such dividend scales continues.

Assets allocated to the closed blocks inure solely to the benefit of policyholders included in the closed blocks and will not revert to the benefit of the shareholders of the Company. In addition, if the assets allocated to the closed blocks and the revenues from the closed blocks’ business prove to be insufficient to pay the benefits guaranteed in the closed blocks, the Company will be required to make payments from its general funds in an amount equal to the shortfall.

If, over time, the aggregate performance of the assets and policies of a closed block is better than was assumed in funding that closed block, dividends to policyholders for that closed block will be increased. If, over time, the aggregate performance of the assets and policies of a closed block is less favorable than was assumed in funding that closed block, dividends to policyholders for that closed block will be reduced.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

17. Closed Blocks - (continued)

 

No reallocation, transfer, borrowing, or lending of assets can be made between the closed blocks and other portions of the Company’s general account, any of its separate accounts, or any affiliate of the Company without prior notification to or approval of the Insurance Department.

The excess of the closed blocks’ liabilities over the closed blocks’ assets represents the expected future post-tax contribution from that closed block which may be recognized in income over the period the policies and contracts in that closed block remain in force.

As previously discussed in the Reinsurance Note, effective July 1, 2015, the Company entered into a coinsurance reinsurance agreement with NYL to cede 100% QS of the Company’s in-force participating life insurance JHLICO closed block policies.

The following table sets forth certain summarized financial information relating to the JHUSA and JHLICO closed block.

 

     JHUSA      JHLICO  
     2015      2014      2014  
  

 

 

     

 

 

  
     (in millions)  

Assets:

         

Bonds

        $ 2,802       $ 3,153           $ 6,248   

Stocks:

         

Preferred stocks

      -         -         4   

Common stocks

      -         1         11   

Mortgage loans on real estate

      350         402         1,633   

Real estate

      1,012         842         12   

Cash, cash equivalents and short-term investments

      6         3         4   

Policy loans

      1,563         1,551         1,354   

Other invested assets

      18         113         127   
  

 

 

     

 

 

  

Total cash and invested assets

      5,751         6,065         9,393   

Investment income due and accrued

      101         105         126   

Premiums due and deferred

      10         12         68   

Net deferred tax asset

      112         112         157   

Other closed block assets

      77         63         91   
  

 

 

     

 

 

  

Total closed block assets

        $ 6,051       $ 6,357           $ 9,835   
  

 

 

     

 

 

  

Obligations:

         

Policy reserves

      5,756         5,871         9,710   

Policyholders’ and beneficiaries’ funds

      64         67         1,360   

Dividends payable to policyholders

      329         314         208   

Policy benefits in process of payment

      115         52         155   

Other policy obligations

      2         2         6   

Other closed block obligations

      474         720         198   
  

 

 

     

 

 

  

Total closed block obligations

        $   6,740       $   7,026           $   11,637   
  

 

 

     

 

 

  

18. Subsequent Events

The Company evaluated the recognition and disclosure of subsequent events for its December 31, 2015 financial statements through April 5, 2016, the date the financial statements were issued.

 

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AUDITED FINANCIAL STATEMENTS

John Hancock Life Insurance Company (U.S.A.) Separate Account N

December 31, 2015

Table of Contents

John Hancock Life Insurance Company (U.S.A.) Separate Account N

Audited Financial Statements

December  31, 2015

Contents

 

Report of Independent Registered Public Accounting Firm

      3   

Statements of Assets and Liabilities

      5   

Statements of Operations and Changes in Contract Owners’ Equity

      23   

Notes to Financial Statements

      62   

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors of John Hancock Life Insurance Company (U.S.A.) and Contract Owners of

John Hancock Life Insurance Company (U.S.A.) Separate Account N

We have audited the accompanying statements of assets and liabilities of John Hancock Life Insurance Company (U.S.A.) Separate Account N (the Account) comprised of the following sub-accounts,

 

500 Index Fund B Series NAV

   

International Core Trust Series NAV

Active Bond Trust Series I

   

International Equity Index Trust B Series I

Active Bond Trust Series NAV

   

International Equity Index Trust B Series NAV

All Cap Core Trust Series I

   

International Growth Stock Trust Series I

All Cap Core Trust Series NAV

   

International Growth Stock Trust Series NAV

Alpha Opportunities Trust Series I

   

International Small Company Trust Series I

Alpha Opportunities Trust Series NAV

   

International Small Company Trust Series NAV

American Asset Allocation Trust Series I

   

International Value Trust Series I

American Global Growth Trust Series I

   

International Value Trust Series NAV

American Growth Trust Series I

   

Investment Quality Bond Trust Series I

American Growth-Income Trust Series I

   

Investment Quality Bond Trust Series NAV

American International Trust Series I

   

Lifestyle Aggressive MVP Series I

American New World Trust Series I

   

Lifestyle Aggressive MVP Series NAV

Blue Chip Growth Trust Series I

   

Lifestyle Balanced MVP Series I

Blue Chip Growth Trust Series NAV

   

Lifestyle Balanced MVP Series NAV

Bond Trust Series I

   

Lifestyle Conservative MVP Series I

Bond Trust Series NAV

   

Lifestyle Conservative MVP Series NAV

Capital Appreciation Trust Series I

   

Lifestyle Growth MVP Series I

Capital Appreciation Trust Series NAV

   

Lifestyle Growth MVP Series NAV

Capital Appreciation Value Trust Series I

   

Lifestyle Moderate MVP Series I

Capital Appreciation Value Trust Series NAV

   

Lifestyle Moderate MVP Series NAV

Core Bond Trust Series I

   

M Capital Appreciation

Core Bond Trust Series NAV

   

M Large Cap Growth

Core Strategy Trust Series I

   

Mid Cap Index Trust Series I

Core Strategy Trust Series NAV

   

Mid Cap Index Trust Series NAV

Emerging Markets Value Trust Series I

   

Mid Cap Stock Trust Series I

Emerging Markets Value Trust Series NAV

   

Mid Cap Stock Trust Series NAV

Equity-Income Trust Series I

   

Mid Value Trust Series I

Equity-Income Trust Series NAV

   

Mid Value Trust Series NAV

Financial Industries Trust Series I

   

Money Market Trust B Series NAV

Financial Industries Trust Series NAV

   

Money Market Trust Series I

Franklin Templeton Founding Allocation Trust Series I

   

PIMCO All Asset Real Estate Securities Trust Series I

Franklin Templeton Founding Allocation Trust Series NAV

   

Real Estate Securities Trust Series NAV Real Return Bond Trust Series I

Fundamental All Cap Core Trust Series I

   

Real Return Bond Trust Series NAV

Fundamental All Cap Core Trust Series NAV

   

Science & Technology Trust Series I

Fundamental Large Cap Value Trust Series I

   

Science & Technology Trust Series NAV

Fundamental Large Cap Value Trust Series NAV

   

Short Term Government Income Trust Series I

Global Bond Trust Series I

   

Short Term Government Income Trust Series NAV

Global Bond Trust Series NAV

   

Small Cap Growth Trust Series I

Global Trust Series I

   

Small Cap Growth Trust Series NAV

Global Trust Series NAV

   

Small Cap Index Trust Series I

Health Sciences Trust Series I

   

Small Cap Index Trust Series NAV

Health Sciences Trust Series NAV

   

Small Cap Opportunities Trust Series I

High Yield Trust Series I

   

Small Cap Opportunities Trust Series NAV

High Yield Trust Series NAV

   

Small Cap Value Trust Series I

International Core Trust Series I

   

Small Cap Value Trust Series NAV

 

3

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

Small Company Value Trust Series I

  

U.S. Equity Trust Series NAV

Small Company Value Trust Series NAV

  

Ultra Short Term Bond Trust Series I

Strategic Income Opportunities Trust Series I

  

Ultra Short Term Bond Trust Series NAV

Strategic Income Opportunities Trust Series NAV

  

Utilities Trust Series I

Total Bond Market Trust B Series NAV

  

Utilities Trust Series NAV

Total Stock Market Index Trust Series I

  

Value Trust Series I

Total Stock Market Index Trust Series NAV

  

Value Trust Series NAV

U.S. Equity Trust Series I

  

as of December 31, 2015, and the related statements of operations and changes in contract owners’ equity for the above mentioned sub-accounts and for the Fundamental Value Trust Series I, Fundamental Value Trust Series NAV, Natural Resources Trust Series I. Natural Resources Trust Series NAV, Total Return Trust Series I, and Total Return Trust Series NAV (the “closed sub-accounts”) for each of the periods indicated therein. These financial statements are the responsibility of the Account’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Account’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Account’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the fund companies, or their transfer agents, as applicable. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the above mentioned sub-accounts constituting John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2015, the results of their and the closed sub-accounts’ operations, and changes in contract owners’ equity for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Boston, Massachusetts

April 05, 2016

 

4

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    500 Index Fund B
Series NAV		     Active Bond Trust
Series I		     Active Bond Trust
Series NAV		     All Cap Core Trust
Series I		     All Cap Core Trust
Series NAV		     Alpha
Opportunities
Trust Series I		  

Total Assets

            

Investments at fair value

   $ 71,733,584      $ 622,594      $ 339,738      $ 449,524      $ 1,593,831      $ 41,520   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     1,980,760        30,430        4,775        15,284        76,770        1,882   

Unit value

   $ 36.22      $ 20.46      $ 71.15      $ 29.41      $ 20.76      $ 22.06   

Shares

     2,839,809        66,234        36,142        16,193        57,394        3,795   

Cost

   $ 70,170,461      $ 659,530      $ 361,728      $ 290,983      $ 1,230,207      $ 54,044   

 

See accompanying notes.

 

5

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Alpha
Opportunities
Trust Series NAV		     American Asset
Allocation Trust
Series I		     American Global
Growth Trust
Series I		     American Growth
Trust Series I		     American Growth-
Income Trust
Series I		     American
International
Trust Series I		  

Total Assets

            

Investments at fair value

   $ 331,386      $ 8,795,382      $ 427,334      $ 11,721,383      $ 11,818,120      $ 15,950,954   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     13,602        597,941        27,410        487,981        468,780        848,925   

Unit value

   $ 24.36      $ 14.71      $ 15.59      $ 24.02      $ 25.21      $ 18.79   

Shares

     30,264        618,957        27,785        485,357        558,512        919,363   

Cost

   $ 377,022      $ 6,880,581      $ 439,254      $ 10,454,177      $ 9,631,141      $ 16,523,252   

 

See accompanying notes.

 

6

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    American New
World Trust
Series I		     Blue Chip
Growth Trust
Series I		     Blue Chip
Growth Trust
Series NAV		     Bond Trust
Series I		     Bond Trust
Series
NAV		     Capital
Appreciation
Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 1,994,863      $ 8,641,024      $ 46,931,439      $ 5,809,744      $ 698,702      $ 8,541,686   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     130,392        174,050        345,379        527,987        62,379        326,790   

Unit value

   $ 15.30      $ 49.65      $ 135.88      $ 11.00      $ 11.20      $ 26.14   

Shares

     180,531        266,287        1,446,269        436,823        52,574        604,935   

Cost

   $ 2,379,581      $ 8,002,035      $ 45,143,560      $ 6,026,677      $ 730,141      $ 8,653,914   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Capital
Appreciation
Trust Series
NAV		     Capital
Appreciation
Value Trust
Series I		     Capital
Appreciation
Value Trust
Series NAV		     Core Bond Trust
Series I		     Core Bond Trust
Series NAV		     Core Strategy Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 1,756,484      $ 320,875      $ 263,189      $ 10,922,386      $ 23,019,015      $ 103,653   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     64,777        18,307        14,257        556,857        1,410,618        7,429   

Unit value

   $ 27.12      $ 17.53      $ 18.46      $ 19.61      $ 16.32      $ 13.95   

Shares

     124,309        27,975        22,986        839,538        1,776,158        7,356   

Cost

   $ 1,798,713      $ 357,246      $ 285,628      $ 11,226,023      $ 23,681,874      $ 105,461   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Core Strategy
Trust
Series NAV		     Emerging Markets
Value Trust
Series I		     Emerging Markets
Value Trust
Series NAV		     Equity-Income
Trust
Series I		     Equity-Income
Trust
Series NAV		     Financial Industries
Trust Series I		  

Total Assets

            

Investments at fair value

   $ 2,739,770      $ 68,307      $ 833,124      $ 9,307,112      $ 35,253,171      $ 681,615   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     186,052        6,322        90,875        239,984        823,841        32,096   

Unit value

   $ 14.73      $ 10.80      $ 9.17      $ 38.78      $ 42.79      $ 21.24   

Shares

     194,310        9,703        118,510        589,431        2,239,719        60,967   

Cost

   $ 2,870,101      $ 94,979      $ 1,118,536      $ 10,555,310      $ 41,913,138      $ 841,547   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Financial
Industries
Trust
Series NAV		     Franklin
Templeton
Founding
Allocation Trust
Series I		     Franklin
Templeton
Founding
Allocation Trust
Series NAV		     Fundamental All
Cap Core Trust
Series I		     Fundamental All
Cap Core Trust
Series NAV		     Fundamental Large
Cap Value Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 378,861      $ 9,443      $ 138,132      $ 437,551      $ 1,309,358      $ 5,780,659   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     13,663        726        10,074        12,067        58,079        216,982   

Unit value

   $ 27.73      $ 13.01      $ 13.71      $ 36.26      $ 22.54      $ 26.64   

Shares

     33,979        793        11,608        19,621        58,453        337,065   

Cost

   $ 479,503      $ 10,464      $ 149,224      $ 403,220      $ 1,107,876      $ 5,808,379   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Fundamental Large
Cap Value Trust
Series NAV		     Global Bond Trust
Series I		     Global Bond Trust
Series NAV		     Global Trust
Series I		     Global Trust
Series NAV		     Health Sciences
Trust Series I		  

Total Assets

            

Investments at fair value

   $ 3,773,445      $ 1,122,595      $ 5,977,145      $ 2,224,225      $ 1,988,604      $ 8,069,138   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     191,036        41,347        201,082        83,239        123,010        110,117   

Unit value

   $ 19.75      $ 27.15      $ 29.72      $ 26.72      $ 16.17      $ 73.28   

Shares

     220,026        95,135        508,693        123,912        110,848        252,793   

Cost

   $ 3,828,764      $ 1,155,334      $ 6,361,149      $ 2,402,621      $ 2,209,136      $ 8,284,287   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Health Sciences
Trust
Series NAV		     High Yield Trust
Series I		     High Yield Trust
Series NAV		     International
Core Trust
Series I		     International
Core Trust
Series NAV		     International Equity
Index Trust B
Series I		  

Total Assets

            

Investments at fair value

   $ 4,921,314      $ 2,758,324      $ 2,263,550      $ 2,389,485      $ 436,958      $ 4,525,255   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     81,107        102,486        116,916        129,399        28,729        419,582   

Unit value

   $ 60.68      $ 26.91      $ 19.36      $ 18.47      $ 15.21      $ 10.79   

Shares

     152,836        572,266        476,537        247,872        45,469        311,228   

Cost

   $ 5,178,286      $ 3,415,699      $ 2,752,705      $ 2,662,879      $ 512,667      $ 4,976,251   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

 

    International
Equity
Index Trust B
Series NAV		     International
Growth Stock
Trust
Series I		     International
Growth Stock
Trust
Series NAV		     International
Small Company
Trust
Series I		     International
Small Company
Trust
Series NAV		     International
Value Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 11,818,831      $ 1,579,230      $ 8,456,858      $ 587,121      $ 1,004,311      $ 3,623,211   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     276,267        131,425        695,770        40,372        66,351        174,351   

Unit value

   $ 42.78      $ 12.02      $ 12.15      $ 14.54      $ 15.14      $ 20.78   

Shares

     812,849        99,260        531,544        48,482        82,932        319,789   

Cost

   $ 13,109,287      $ 1,694,934      $ 8,627,861      $ 590,955      $ 949,288      $ 4,000,379   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    International
Value Trust
Series NAV		     Investment
Quality
Bond Trust
Series I		     Investment
Quality
Bond Trust
Series NAV		     Lifestyle
Aggressive
MVP
Series I		     Lifestyle
Aggressive
MVP
Series NAV		     Lifestyle
Balanced
MVP
Series I		  

Total Assets

            

Investments at fair value

   $ 4,105,365      $ 4,774,684      $ 690,719      $ 1,050,019      $ 6,434,318      $ 4,491,307   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     288,124        156,440        43,523        39,961        365,714        146,545   

Unit value

   $ 14.25      $ 30.52      $ 15.87      $ 26.28      $ 17.59      $ 30.65   

Shares

     364,921        440,469        63,896        105,955        648,621        366,937   

Cost

   $ 4,781,469      $ 5,043,553      $ 740,211      $ 1,089,120      $ 7,040,435      $ 4,790,804   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Lifestyle
Balanced MVP
Series NAV		     Lifestyle
Conservative MVP
Series I		     Lifestyle
Conservative MVP
Series NAV		     Lifestyle
Growth MVP
Series I		     Lifestyle
Growth MVP
Series NAV		     Lifestyle
Moderate MVP
Series I		  

Total Assets

            

Investments at fair value

   $ 15,116,582      $ 1,841,643      $ 4,546,306      $ 3,612,225      $ 24,773,270      $ 1,807,819   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     879,721        58,246        276,655        126,742        1,440,273        56,530   

Unit value

   $ 17.18      $ 31.62      $ 16.43      $ 28.50      $ 17.20      $ 31.98   

Shares

     1,233,000        165,318        407,010        274,069        1,878,186        154,251   

Cost

   $ 16,723,514      $ 2,024,014      $ 5,073,085      $ 3,615,190      $ 25,544,617      $ 2,050,826   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Lifestyle
Moderate MVP
Series NAV		     M Capital
Appreciation (a)		     Mid Cap Index
Trust Series I		     Mid Cap Index
Trust Series NAV		     Mid Cap Stock
Trust Series I		     Mid Cap Stock
Trust Series NAV		  

Total Assets

            

Investments at fair value

   $ 9,046,231      $ 328,631      $ 6,320,624      $ 23,160,316      $ 3,499,832      $ 6,484,315   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     528,138        4,135        165,157        861,157        107,107        85,358   

Unit value

   $ 17.13      $ 79.48      $ 38.27      $ 26.89      $ 32.68      $ 75.97   

Shares

     771,205        13,067        321,660        1,178,642        230,707        423,258   

Cost

   $ 10,130,934      $ 375,370      $ 6,927,386      $ 26,377,819      $ 3,804,434      $ 7,665,309   

 

(a)

Sub-account that invests in non-affiliated Trust.

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Mid Value
Trust
Series I		     Mid Value
Trust Series
NAV		     Money Market
Trust B
Series NAV		     Money Market
Trust
Series I		     PIMCO
All Asset (a)		     Real Estate
Securities Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 3,980,497      $ 8,364,434      $ 53,619,767      $ 26,531,963      $ 3,158,323      $ 10,349,246   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     162,397        216,961        3,086,046        1,286,207        208,113        63,711   

Unit value

   $ 24.51      $ 38.55      $ 17.37      $ 20.63      $ 15.18      $ 162.44   

Shares

     371,315        783,921        53,619,767        26,531,963        341,440        572,731   

Cost

   $ 4,964,992      $ 10,337,876      $ 53,619,767      $ 26,531,963      $ 3,788,978      $ 7,349,993   

 

(a)

Sub-account that invests in non-affiliated Trust.

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Real Estate
Securities Trust
Series NAV		     Real Return
Bond Trust
Series I		     Real Return
Bond Trust
Series NAV		     Science &
Technology Trust
Series I		     Science &
Technology Trust
Series NAV		     Short Term
Government Income
Trust Series I		  

Total Assets

            

Investments at fair value

   $ 12,730,922      $ 1,455,643      $ 9,714,885      $ 8,846,389      $ 2,339,109      $ 1,561,840   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     89,152        73,273        670,049        271,129        81,554        150,590   

Unit value

   $ 142.80      $ 19.87      $ 14.50      $ 32.63      $ 28.68      $ 10.37   

Shares

     708,454        133,423        903,710        372,010        97,626        127,497   

Cost

   $ 11,525,987      $ 1,628,652      $ 10,742,360      $ 9,015,306      $ 2,511,572      $ 1,602,455   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Short Term
Government
Income Trust
Series NAV		     Small Cap
Growth Trust
Series I		     Small Cap
Growth Trust
Series NAV		     Small Cap
Index Trust
Series I		     Small Cap
Index Trust
Series NAV		     Small Cap
Opportunities Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 1,410,456      $ 1,117,900      $ 8,184,106      $ 5,827,419      $ 5,374,848      $ 13,648,912   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     131,528        46,012        273,720        200,328        217,000        393,599   

Unit value

   $ 10.72      $ 24.30      $ 29.90      $ 29.09      $ 24.77      $ 34.68   

Shares

     115,139        129,837        941,784        438,812        404,428        474,580   

Cost

   $ 1,440,725      $ 1,407,377      $ 9,924,622      $ 6,440,182      $ 6,099,453      $ 14,238,410   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Small Cap
Opportunities
Trust
Series NAV		     Small Cap
Value Trust
Series I		     Small Cap
Value Trust
Series NAV		     Small Company
Value Trust
Series I		     Small Company
Value Trust
Series NAV		     Strategic Income
Opportunities Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 286,152      $ 790,432      $ 7,881,600      $ 3,053,370      $ 454,120      $ 2,624,243   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     15,521        33,652        115,421        101,321        21,064        104,935   

Unit value

   $ 18.44      $ 23.49      $ 68.29      $ 30.14      $ 21.56      $ 25.01   

Shares

     9,995        38,938        389,215        155,151        23,122        200,784   

Cost

   $ 312,888      $ 914,462      $ 8,948,990      $ 3,462,454      $ 539,245      $ 2,710,527   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Strategic Income
Opportunities
Trust
Series NAV		     Total Bond
Market
Trust B
Series NAV		     Total Stock Market
Index Trust
Series I		     Total Stock Market
Index Trust
Series NAV		     U.S. Equity Trust
Series I		     U.S. Equity Trust
Series NAV		  

Total Assets

            

Investments at fair value

   $ 3,462,297      $ 16,287,586      $ 6,176,641      $ 1,706,335      $ 1,555,543      $ 2,181,051   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     178,541        687,371        274,469        21,518        107,396        148,019   

Unit value

   $ 19.39      $ 23.70      $ 22.50      $ 79.30      $ 14.48      $ 14.73   

Shares

     265,717        1,612,632        350,746        96,896        81,399        114,131   

Cost

   $ 3,560,716      $ 16,785,263      $ 6,099,349      $ 1,634,313      $ 1,344,923      $ 1,936,323   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Ultra Short Term
Bond Trust Series I		     Ultra Short Term
Bond Trust Series
NAV		     Utilities Trust
Series I		     Utilities Trust
Series NAV		     Value Trust
Series I		     Value
Trust Series
NAV		  

Total Assets

            

Investments at fair value

   $ 8,858      $ 1,252,422      $ 1,199,810      $ 1,544,474      $ 2,209,157      $ 1,416,747   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     910        124,349        40,494        60,659        46,950        57,233   

Unit value

   $ 9.73      $ 10.07      $ 29.63      $ 25.46      $ 47.05      $ 24.75   

Shares

     761        107,596        99,569        128,385        109,581        70,380   

Cost

   $ 9,115      $ 1,267,665      $ 1,565,741      $ 1,905,468      $ 2,346,642      $ 1,625,858   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     500 Index Fund B Series NAV     Active Bond Trust Series I     Active Bond Trust Series NAV  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 1,282,150      $ 1,085,153      $ 33,359      $ 24,116      $ 17,516      $ 9,373   

Expenses:

             

Mortality and expense risk and administrative charges

      (96,913 )      (97,809 )      (4,009 )      (3,911 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,185,237        987,344        29,350        20,205        17,516        9,373   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      721,119        948,791        (2 )      —          —          —     

Net realized gain (loss)

      9,900,551        5,420,301        (2,560 )      900        (2,322 )      (2,607 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      10,621,670        6,369,092        (2,562 )      900        (2,322 )      (2,607 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (10,584,673 )      568,294        (30,290 )      16,625        (16,178 )      6,192   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      1,222,234        7,924,730        (3,502 )      37,730        (984 )      12,958   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      2,659,989        2,359,292        51,531        42,940        76,662        34,311   

Transfers between sub-accounts and the company

      6,729,049        7,737,412        78,514        131,353        22,369        100,672   

Transfers on general account policy loans

      (2,479,116 )      (424,345 )      (588 )      (316 )      —          —     

Withdrawals

      (4,939,493 )      (1,536,440 )      (23,547 )      (2,508 )      (7,962 )      (62,472 ) 

Annual contract fee

      (1,624,817 )      (1,294,472 )      (132,224 )      (113,061 )      (8,690 )      (6,711 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      345,612        6,841,447        (26,314 )      58,408        82,379        65,800   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      1,567,846        14,766,177        (29,816 )      96,138        81,395        78,758   

Contract owners’ equity at beginning of period

      70,165,738        55,399,561        652,410        556,272        258,343        179,585   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 71,733,584      $ 70,165,738      $ 622,594      $ 652,410      $ 339,738      $ 258,343   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      1,978,310        1,786,837        31,753        28,744        3,635        2,703   

Units issued

      1,166,603        739,484        22,394        8,679        2,854        2,388   

Units redeemed

      (1,164,153 )      (548,011 )      (23,717 )      (5,670 )      (1,714 )      (1,456 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      1,980,760        1,978,310        30,430        31,753        4,775        3,635   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

23

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     All Cap Core Trust Series I     All Cap Core Trust Series NAV     Alpha Opportunities Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 4,517      $ 4,640      $ 16,172      $ 12,790      $ 278      $ 234   

Expenses:

             

Mortality and expense risk and administrative charges

      (3,134 )      (2,974 )      —          —          (279 )      (275 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,383        1,666        16,172        12,790        (1 )      (41 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          (1 )      —          —          7,745        9,450   

Net realized gain (loss)

      22,624        14,306        44,116        45,318        (626 )      103   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      22,624        14,305        44,116        45,318        7,119        9,553   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (13,699 )      19,538        (19,980 )      61,679        (7,350 )      (6,499 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      10,308        35,509        40,308        119,787        (232 )      3,013   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      14,837        14,043        59,457        302,703        —          54   

Transfers between sub-accounts and the company

      6,101        52,786        38,457        49,175        —          (56 ) 

Transfers on general account policy loans

      2,367        (96 )      21,251        —          —          —     

Withdrawals

      (28,711 )      (42,584 )      (18,102 )      (21,280 )      (2 )      (15 ) 

Annual contract fee

      (40,418 )      (34,374 )      (32,635 )      (29,289 )      (2,306 )      (1,980 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (45,824 )      (10,225 )      68,428        301,309        (2,308 )      (1,997 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (35,516 )      25,284        108,736        421,096        (2,540 )      1,016   

Contract owners’ equity at beginning of period

      485,040        459,756        1,485,095        1,063,999        44,060        43,044   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 449,524      $ 485,040      $ 1,593,831      $ 1,485,095      $ 41,520      $ 44,060   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      16,812        17,368        73,424        57,702        1,984        2,080   

Units issued

      760        3,764        7,759        20,566        —          48   

Units redeemed

      (2,288 )      (4,320 )      (4,413 )      (4,844 )      (102 )      (144 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      15,284        16,812        76,770        73,424        1,882        1,984   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

24

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Alpha Opportunities Trust
Series NAV		     American Asset Allocation
Trust Series I		     American Global Growth
Trust Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 3,612      $ 2,596      $ 186,426      $ 140,129      $ 6,641      $ 2,383   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (53,590 )      (59,397 )      (511 )      (671 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      3,612        2,596        132,836        80,732        6,130        1,712   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      147,073        95,285        752,089        —          32,308        —     

Net realized gain (loss)

      (218,744 )      2,429        565,487        700,722        (60,656 )      4,641   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (71,671 )      97,714        1,317,576        700,722        (28,348 )      4,641   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      31,450        (81,445 )      (1,406,902 )      (344,107 )      (48,810 )      (1,449 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (36,609 )      18,865        43,510        437,347        (71,028 )      4,904   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      409,947        16,627        583,458        591,105        68,308        35,102   

Transfers between sub-accounts and the company

      (454,925 )      399,783        336,167        (33,209 )      184,961        66,715   

Transfers on general account policy loans

      —          —          (8,903 )      30,278        (53,827 )      (292 ) 

Withdrawals

      (28 )      (9,409 )      (633,132 )      (559,024 )      26,659        (6,052 ) 

Annual contract fee

      (38,104 )      (19,322 )      (856,016 )      (905,124 )      (22,224 )      (9,555 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (83,110 )      387,679        (578,426 )      (875,974 )      203,877        85,918   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (119,719 )      406,544        (534,916 )      (438,627 )      132,849        90,822   

Contract owners’ equity at beginning of period

      451,105        44,561        9,330,298        9,768,925        294,485        203,663   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 331,386      $ 451,105      $ 8,795,382      $ 9,330,298      $ 427,334      $ 294,485   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      18,510        1,977        638,145        698,325        20,260        14,273   

Units issued

      16,668        17,776        58,245        99,913        376,969        7,623   

Units redeemed

      (21,576 )      (1,243 )      (98,449 )      (160,093 )      (369,819 )      (1,636 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      13,602        18,510        597,941        638,145        27,410        20,260   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

25

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     American Growth Trust
Series I		     American Growth-Income
Trust Series I		     American International
Trust Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 30,984      $ 116,011      $ 163,519      $ 110,410      $ 206,997      $ 204,669   

Expenses:

             

Mortality and expense risk and administrative charges

      (16,109 )      (17,013 )      (52,195 )      (52,611 )      (15,122 )      (17,672 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      14,875        98,998        111,324        57,799        191,875        186,997   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      648,887        —          1,349,660        —          —          2   

Net realized gain (loss)

      1,992,587        818,731        701,135        812,104        625,249        1,210,896   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      2,641,474        818,731        2,050,795        812,104        625,249        1,210,898   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (1,643,801 )      183,599        (2,067,970 )      222,100        (1,637,123 )      (1,989,053 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      1,012,548        1,101,328        94,149        1,092,003        (819,999 )      (591,158 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      384,994        343,412        406,997        543,305        275,912        493,412   

Transfers between sub-accounts and the company

      (2,397,986 )      (44,995 )      51,916        529,116        (4,002 )      394,733   

Transfers on general account policy loans

      (122,743 )      (9,597 )      (131,823 )      52,478        (35,710 )      (5,611 ) 

Withdrawals

      (764,823 )      (508,743 )      (511,681 )      (536,252 )      (1,029,385 )      (345,478 ) 

Annual contract fee

      (305,731 )      (286,731 )      (712,875 )      (689,851 )      (355,838 )      (356,866 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (3,206,289 )      (506,654 )      (897,466 )      (101,204 )      (1,149,023 )      180,190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (2,193,741 )      594,674        (803,317 )      990,799        (1,969,022 )      (410,968 ) 

Contract owners’ equity at beginning of period

      13,915,124        13,320,450        12,621,437        11,630,638        17,919,976        18,330,944   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 11,721,383      $ 13,915,124      $ 11,818,120      $ 12,621,437      $ 15,950,954      $ 17,919,976   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      605,899        626,036        501,916        507,491        885,723        878,450   

Units issued

      369,610        124,403        31,131        83,731        243,151        290,138   

Units redeemed

      (487,528 )      (144,540 )      (64,267 )      (89,306 )      (279,949 )      (282,865 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      487,981        605,899        468,780        501,916        848,925        885,723   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

26

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     American New World
Trust Series I		     Blue Chip Growth
Trust Series I		     Blue Chip Growth Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 32,807      $ 17,702      $ —        $ —        $ —        $ —     

Expenses:

             

Mortality and expense risk and administrative charges

      (3,558 )      (3,454 )      (36,229 )      (31,145 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      29,249        14,248        (36,229 )      (31,145 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      222,931        44,793        1,568,001        264,854        7,776,668        1,293,503   

Net realized gain (loss)

      (114,342 )      5,038        551,474        867,421        3,371,714        1,472,842   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      108,589        49,831        2,119,475        1,132,275        11,148,382        2,766,345   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (237,419 )      (197,146 )      (1,308,652 )      (573,146 )      (6,541,551 )      75,245   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (99,581 )      (133,067 )      774,594        527,984        4,606,831        2,841,590   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      53,398        124,672        78,332        70,879        2,062,191        2,437,806   

Transfers between sub-accounts and the company

      69,200        1,505,817        1,328,065        (67,179 )      3,631,363        4,718,348   

Transfers on general account policy loans

      (49 )      (3,735 )      139,591        118,866        (32,498 )      (173,654 ) 

Withdrawals

      (22,895 )      (17,497 )      (223,931 )      (206,449 )      (695,313 )      (303,633 ) 

Annual contract fee

      (29,827 )      (21,568 )      (355,760 )      (326,511 )      (599,469 )      (470,887 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      69,827        1,587,689        966,297        (410,394 )      4,366,274        6,207,980   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (29,754 )      1,454,622        1,740,891        117,590        8,973,105        9,049,570   

Contract owners’ equity at beginning of period

      2,024,617        569,995        6,900,133        6,782,543        37,958,334        28,908,764   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,994,863      $ 2,024,617      $ 8,641,024      $ 6,900,133      $ 46,931,439      $ 37,958,334   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      127,899        32,698        154,074        165,084        310,431        257,961   

Units issued

      109,771        98,038        46,341        36,543        99,708        84,573   

Units redeemed

      (107,278 )      (2,837 )      (26,365 )      (47,553 )      (64,760 )      (32,103 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      130,392        127,899        174,050        154,074        345,379        310,431   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

27

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Bond Trust Series I     Bond Trust Series NAV     Capital Appreciation Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 169,912      $ 19,691      $ 21,449      $ 16,541      $ —        $ 3,536   

Expenses:

             

Mortality and expense risk and administrative charges

      (17,645 )      (2,021 )      —          —          (29,859 )      (30,176 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      152,267        17,670        21,449        16,541        (29,859 )      (26,640 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          —          —          1,360,847        813,711   

Net realized gain (loss)

      (8,837 )      (156 )      (1,496 )      (635 )      131,917        843,332   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (8,837 )      (156 )      (1,496 )      (635 )      1,492,764        1,657,043   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (209,961 )      12,879        (18,215 )      17,067        (649,368 )      (984,607 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (66,531 )      30,393        1,738        32,973        813,537        645,796   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      2,557        558        31,189        95,223        28,572        29,684   

Transfers between sub-accounts and the company

      5,184,578        243,535        52,400        10,274        136,185        (854,757 ) 

Transfers on general account policy loans

      —          —          (25,989 )      (5,592 )      2,092        11,731   

Withdrawals

      (2,271 )      5        64        34        (52,161 )      (81,461 ) 

Annual contract fee

      (72,245 )      (7,180 )      (21,648 )      (19,555 )      (190,772 )      (194,503 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      5,112,619        236,918        36,016        80,384        (76,084 )      (1,089,306 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      5,046,088        267,311        37,754        113,357        737,453        (443,510 ) 

Contract owners’ equity at beginning of period

      763,656        496,345        660,948        547,591        7,804,233        8,247,743   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 5,809,744      $ 763,656      $ 698,702      $ 660,948      $ 8,541,686      $ 7,804,233   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      69,117        47,293        59,182        51,772        331,659        384,105   

Units issued

      534,477        23,124        11,408        24,375        37,121        104,510   

Units redeemed

      (75,607 )      (1,300 )      (8,211 )      (16,965 )      (41,990 )      (156,956 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      527,987        69,117        62,379        59,182        326,790        331,659   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

28

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Capital Appreciation Trust
Series NAV		     Capital Appreciation Value
Trust Series I		     Capital Appreciation Value
Trust Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 419      $ 1,007      $ 8,938      $ 37,056      $ 2,957      $ 2,106   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (9,379 )      (7,693 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      419        1,007        (441 )      29,363        2,957        2,106   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      293,666        130,651        425,748        184,493        27,718        14,205   

Net realized gain (loss)

      76,342        81,335        (343,251 )      4,432        927        2,701   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      370,008        211,986        82,497        188,925        28,645        16,906   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (218,299 )      (105,957 )      (51,210 )      (745 )      (20,565 )      (3,847 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      152,128        107,036        30,846        217,543        11,037        15,165   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      180,636        100,258        2,474        1,475        25,532        20,407   

Transfers between sub-accounts and the company

      272,911        164,837        (2,720,242 )      2,367,189        74,330        52,314   

Transfers on general account policy loans

      (75,507 )      (14,267 )      (15,390 )      330        (2,182 )      (3 ) 

Withdrawals

      (28,817 )      (86,188 )      (901 )      1,156        (7,124 )      (17,943 ) 

Annual contract fee

      (60,932 )      (42,683 )      (43,468 )      (31,081 )      (8,545 )      (5,442 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      288,291        121,957        (2,777,527 )      2,339,069        82,011        49,333   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      440,419        228,993        (2,746,681 )      2,556,612        93,048        64,498   

Contract owners’ equity at beginning of period

      1,316,065        1,087,072        3,067,556        510,944        170,141        105,643   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,756,484      $ 1,316,065      $ 320,875      $ 3,067,556      $ 263,189      $ 170,141   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      54,104        49,018        180,139        33,513        9,702        6,770   

Units issued

      20,808        15,705        11,211        159,328        5,520        4,851   

Units redeemed

      (10,135 )      (10,619 )      (173,043 )      (12,702 )      (965 )      (1,919 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      64,777        54,104        18,307        180,139        14,257        9,702   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

29

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Core Bond Trust Series I     Core Bond Trust Series NAV     Core Strategy Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 190,497      $ 408      $ 372,214      $ 17,436      $ 2,391      $ 2,496   

Expenses:

             

Mortality and expense risk and administrative charges

      (24,503 )      (92 )      —          —          (774 )      (697 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      165,994        316        372,214        17,436        1,617        1,799   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      27,214        —          50,559        —          3,458        327   

Net realized gain (loss)

      (75,953 )      (128 )      (175,242 )      (9,656 )      (3,181 )      837   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (48,739 )      (128 )      (124,683 )      (9,656 )      277        1,164   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (302,975 )      529        (645,755 )      22,676        (6,065 )      2,422   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (185,720 )      717        (398,224 )      30,456        (4,171 )      5,385   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      92,440        1,558        348,019        15,644        3,149        3,045   

Transfers between sub-accounts and the company

      11,235,324        (240 )      24,467,104        615,743        (4 )      (53,074 ) 

Transfers on general account policy loans

      21,763        —          (426,842 )      (60,333 )      —          —     

Withdrawals

      (49,461 )      4        (1,662,598 )      —          3,382        (629 ) 

Annual contract fee

      (205,595 )      (2,200 )      (337,560 )      (18,375 )      (2,094 )      (2,556 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      11,094,471        (878 )      22,388,123        552,679        4,433        (53,214 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      10,908,751        (161 )      21,989,899        583,135        262        (47,829 ) 

Contract owners’ equity at beginning of period

      13,635        13,796        1,029,116        445,981        103,391        151,220   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 10,922,386      $ 13,635      $ 23,019,015      $ 1,029,116      $ 103,653      $ 103,391   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      716        763        63,291        29,076        7,355        11,340   

Units issued

      806,434        94        2,066,816        40,188        67,761        191   

Units redeemed

      (250,293 )      (141 )      (719,489 )      (5,973 )      (67,687 )      (4,176 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      556,857        716        1,410,618        63,291        7,429        7,355   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

30

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Core Strategy Trust Series NAV     Emerging Markets Value
Trust Series I		     Emerging Markets Value
Trust Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 64,517      $ 67,496      $ 2,542      $ 3,606      $ 22,200      $ 22,281   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (827 )      (2,164 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      64,517        67,496        1,715        1,442        22,200        22,281   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      97,049        7,776        —          6,779        —          41,505   

Net realized gain (loss)

      1,788        8,293        (17,807 )      (20,435 )      (102,845 )      (16,528 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      98,837        16,069        (17,807 )      (13,656 )      (102,845 )      24,977   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (167,511 )      31,650        (11,741 )      (5,512 )      (135,798 )      (47,416 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (4,157 )      115,215        (27,833 )      (17,726 )      (216,443 )      (158 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      140,594        401,461        1,472        2,863        147,176        202,371   

Transfers between sub-accounts and the company

      37,319        2,142,904        (48,376 )      (760,392 )      (109,124 )      (198,275 ) 

Transfers on general account policy loans

      (108,482 )      (132 )      —          —          (612 )      (4,798 ) 

Withdrawals

      (1,818 )      (92,850 )      (25,629 )      (7,992 )      (22,486 )      (496,782 ) 

Annual contract fee

      (78,599 )      (52,188 )      (5,450 )      (8,113 )      (34,854 )      (39,887 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (10,986 )      2,399,195        (77,983 )      (773,634 )      (19,900 )      (537,371 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (15,143 )      2,514,410        (105,816 )      (791,360 )      (236,343 )      (537,529 ) 

Contract owners’ equity at beginning of period

      2,754,913        240,503        174,123        965,483        1,069,467        1,606,996   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 2,739,770      $ 2,754,913      $ 68,307      $ 174,123      $ 833,124      $ 1,069,467   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      186,973        17,326        12,966        67,004        94,432        134,286   

Units issued

      13,383        180,865        349        814        33,026        713,944   

Units redeemed

      (14,304 )      (11,218 )      (6,993 )      (54,852 )      (36,583 )      (753,798 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      186,052        186,973        6,322        12,966        90,875        94,432   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

31

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Equity-Income Trust Series I     Equity-Income Trust Series NAV     Financial Industries Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 198,283      $ 245,660      $ 768,816      $ 790,767      $ 6,837      $ 8,992   

Expenses:

             

Mortality and expense risk and administrative charges

      (47,683 )      (53,387 )      —          —          (5,212 )      (4,951 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      150,600        192,273        768,816        790,767        1,625        4,041   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      1,001,855        1,065,012        3,391,324        3,473,532        210,455        (2 ) 

Net realized gain (loss)

      210,387        1,752,773        1,618,154        4,446,816        131,448        87,594   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      1,212,242        2,817,785        5,009,478        7,920,348        341,903        87,592   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (2,259,100 )      (2,158,614 )      (8,305,580 )      (5,798,771 )      (335,732 )      (7,985 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (896,258 )      851,444        (2,527,286 )      2,912,344        7,796        83,648   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      103,836        93,826        1,953,579        2,479,533        9,378        5,586   

Transfers between sub-accounts and the company

      (3,063,633 )      1,704,089        (2,989,989 )      828,567        (731,876 )      332,004   

Transfers on general account policy loans

      (18,147 )      696        (369,007 )      (104,264 )      63        82   

Withdrawals

      (117,998 )      (42,361 )      (1,947,391 )      (742,584 )      (17,768 )      (21,002 ) 

Annual contract fee

      (516,618 )      (495,220 )      (499,724 )      (524,416 )      (54,309 )      (37,009 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (3,612,560 )      1,261,030        (3,852,532 )      1,936,836        (794,512 )      279,661   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (4,508,818 )      2,112,474        (6,379,818 )      4,849,180        (786,716 )      363,309   

Contract owners’ equity at beginning of period

      13,815,930        11,703,456        41,632,989        36,783,809        1,468,331        1,105,022   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 9,307,112      $ 13,815,930      $ 35,253,171      $ 41,632,989      $ 681,615      $ 1,468,331   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      330,215        301,290        908,115        862,903        66,065        53,864   

Units issued

      44,271        166,802        270,407        392,484        22,298        38,849   

Units redeemed

      (134,502 )      (137,877 )      (354,681 )      (347,272 )      (56,267 )      (26,648 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      239,984        330,215        823,841        908,115        32,096        66,065   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

32

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Financial Industries
Trust Series NAV		     Franklin Templeton Founding
Allocation Trust Series I		     Franklin Templeton Founding
Allocation Trust Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 4,736      $ 3,099      $ 277      $ 341      $ 4,069      $ 7,219   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (67 )      (74 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      4,736        3,099        210        267        4,069        7,219   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      157,230        —          —          —          —          —     

Net realized gain (loss)

      (16,149 )      85,675        453        1,656        18,417        7,542   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      141,081        85,675        453        1,656        18,417        7,542   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (153,413 )      (47,631 )      (1,318 )      (1,737 )      (34,334 )      (9,978 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (7,596 )      41,143        (655 )      186        (11,848 )      4,783   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      69,300        52,593        5,016        5,065        25,821        22,039   

Transfers between sub-accounts and the company

      234,520        (45,926 )      —          —          392        33,474   

Transfers on general account policy loans

      (95,985 )      (40,410 )      —          —          (50,935 )      (20,124 ) 

Withdrawals

      (216,509 )      (15,766 )      7        (2,080 )      (36,442 )      5   

Annual contract fee

      (26,148 )      (19,593 )      (5,632 )      (5,495 )      (12,844 )      (8,289 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (34,822 )      (69,102 )      (609 )      (2,510 )      (74,008 )      27,105   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (42,418 )      (27,959 )      (1,264 )      (2,324 )      (85,856 )      31,888   

Contract owners’ equity at beginning of period

      421,279        449,238        10,707        13,031        223,988        192,100   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 378,861      $ 421,279      $ 9,443      $ 10,707      $ 138,132      $ 223,988   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      14,800        17,147        771        960        15,395        13,607   

Units issued

      22,337        10,208        364        358        2,587        3,682   

Units redeemed

      (23,474 )      (12,555 )      (409 )      (547 )      (7,908 )      (1,894 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      13,663        14,800        726        771        10,074        15,395   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

33

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Fundamental All Cap Core
Trust Series I		     Fundamental All Cap Core
Trust Series NAV		     Fundamental Large Cap Value
Trust Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ —        $ 1,279      $ —        $ 4,266      $ 63,828      $ 40,986   

Expenses:

             

Mortality and expense risk and administrative charges

      (1,545 )      (1,429 )      —          —          (29,920 )      (14,734 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (1,545 )      (150 )      —          4,266        33,908        26,252   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      20,784        —          57,279        —          (2 )      (5 ) 

Net realized gain (loss)

      2,312        123,394        39,419        28,072        206,995        46,328   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      23,096        123,394        96,698        28,072        206,993        46,323   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (4,162 )      (93,080 )      (55,309 )      56,502        (315,142 )      214,616   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      17,389        30,164        41,389        88,840        (74,241 )      287,191   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      151        415        193,498        205,539        98,507        11,626   

Transfers between sub-accounts and the company

      129,276        (58,885 )      123,930        (3,897 )      (1,003,840 )      4,395,659   

Transfers on general account policy loans

      —          —          (73 )      (159 )      (47,938 )      27   

Withdrawals

      (565 )      1,033        (27,504 )      (38,673 )      (173,673 )      (3,776 ) 

Annual contract fee

      (14,317 )      (11,626 )      (30,847 )      (21,152 )      (299,038 )      (82,084 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      114,545        (69,063 )      259,004        141,658        (1,425,982 )      4,321,452   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      131,934        (38,899 )      300,393        230,498        (1,500,223 )      4,608,643   

Contract owners’ equity at beginning of period

      305,617        344,516        1,008,965        778,467        7,280,882        2,672,239   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 437,551      $ 305,617      $ 1,309,358      $ 1,008,965      $ 5,780,659      $ 7,280,882   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      8,736        10,880        46,584        39,468        269,824        108,548   

Units issued

      4,059        7,797        16,156        10,943        41,329        195,130   

Units redeemed

      (728 )      (9,941 )      (4,661 )      (3,827 )      (94,171 )      (33,854 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      12,067        8,736        58,079        46,584        216,982        269,824   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

34

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Fundamental’ Large Cap Value
Trust Series NAV		     Fundamental Value
Trust Series I		      Fundamental Value
Trust Series NAV		  
     2015     2014     2015      2014 (b)      2015      2014 (b)  

Income:

                

Dividend distributions received

    $ 36,129      $ 21,278      $ —         $ 72,835       $ —         $ 9,879   

Expenses:

                

Mortality and expense risk and administrative charges

      —          —          —           (19,283 )       —           —     
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Net investment income (loss)

      36,129        21,278        —           53,552         —           9,879   
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Realized gains (losses) on investments:

                

Capital gain distributions received

      —          1        —           1,020,729         —           135,032   

Net realized gain (loss)

      341,353        32,525        —           849,896         —           665,169   
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Realized gains (losses)

      341,353        32,526        —           1,870,625         —           800,201   
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Unrealized appreciation (depreciation) during the period

      (403,059 )      199,757        —           (1,652,966 )       —           (671,876 ) 
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (25,577 )      253,561        —           271,211         —           138,204   
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Changes from principal transactions:

                

Purchase payments

      231,235        460,766        —           69,893         —           51,362   

Transfers between sub-accounts and the company

      569,323        697,513        —           (4,669,764 )       —           (3,054,290 ) 

Transfers on general account policy loans

      (71,915 )      (24,390 )      —           27,917         —           —     

Withdrawals

      (219,309 )      (63,678 )      —           (209,064 )       —           (19,821 ) 

Annual contract fee

      (73,639 )      (51,422 )      —           (225,747 )       —           (27,983 ) 
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  
               

Net increase (decrease) in contract owners’ equity from principal transactions

      435,695        1,018,789        —           (5,006,765 )       —           (3,050,732 ) 
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Total increase (decrease) in contract owners’ equity

      410,118        1,272,350        —           (4,735,554 )       —           (2,912,528 ) 

Contract owners’ equity at beginning of period

      3,363,327        2,090,977        —           4,735,554         —           2,912,528   
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Contract owners’ equity at end of period

    $ 3,773,445      $ 3,363,327      $ —         $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  
     2015     2014     2015      2014      2015      2014  

Units, beginning of period

      168,466        115,904        —           207,120         —           166,902   

Units issued

      173,767        60,436        —           27,140         —           20,871   

Units redeemed

      (151,197 )      (7,874 )      —           (234,260 )       —           (187,773 ) 
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Units, end of period

      191,036        168,466        —           —           —           —     
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

 

(b)

Terminated as an investment option and funds transferred to Fundamental Large Cap Value Trust on November 10, 2014.

 

See accompanying notes.

 

35

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Global Bond Trust Series I     Global Bond Trust Series NAV     Global Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 34,025      $ 23,529      $ 161,511      $ 73,583      $ 50,822      $ 66,510   

Expenses:

             

Mortality and expense risk and administrative charges

      (8,754 )      (12,117 )      —          —          (14,709 )      (10,877 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      25,271        11,412        161,511        73,583        36,113        55,633   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      2        (2 )      —          —          —          (2 ) 

Net realized gain (loss)

      (146,520 )      (21,041 )      (190,499 )      (113,607 )      38,265        216,643   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (146,518 )      (21,043 )      (190,499 )      (113,607 )      38,265        216,641   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      29,532        57,750        (199,549 )      199,758        (259,706 )      (338,835 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (91,715 )      48,119        (228,537 )      159,734        (185,328 )      (66,561 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      33,092        16,857        149,795        258,505        27,470        16,279   

Transfers between sub-accounts and the company

      (1,222,561 )      (63,449 )      (531,154 )      137,590        (706,011 )      1,646,209   

Transfers on general account policy loans

      185        (30 )      (4,096 )      2,099        151        273   

Withdrawals

      (16,111 )      (4,376 )      (227,171 )      (109,592 )      (30,378 )      (39,914 ) 

Annual contract fee

      (66,802 )      (74,308 )      (117,824 )      (129,900 )      (115,784 )      (77,004 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (1,272,197 )      (125,306 )      (730,450 )      158,702        (824,552 )      1,545,843   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (1,363,912 )      (77,187 )      (958,987 )      318,436        (1,009,880 )      1,479,282   

Contract owners’ equity at beginning of period

      2,486,507        2,563,694        6,936,132        6,617,696        3,234,105        1,754,823   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,122,595      $ 2,486,507      $ 5,977,145      $ 6,936,132      $ 2,224,225      $ 3,234,105   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      88,633        93,283        225,164        220,019        113,243        60,023   

Units issued

      70,832        11,852        66,468        79,106        23,584        84,659   

Units redeemed

      (118,118 )      (16,502 )      (90,550 )      (73,961 )      (53,588 )      (31,439 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      41,347        88,633        201,082        225,164        83,239        113,243   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

36

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Global Trust Series NAV     Health Sciences Trust Series I     Health Sciences Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 43,264      $ 42,969      $ —        $ —        $ —        $ —     

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (33,863 )      (26,805 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      43,264        42,969        (33,863 )      (26,805 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          1,297,991        729,281        841,577        508,708   

Net realized gain (loss)

      38,734        70,694        845,996        908,983        882,857        568,470   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      38,734        70,694        2,143,987        1,638,264        1,724,434        1,077,178   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (221,522 )      (142,227 )      (1,417,776 )      (111,030 )      (1,110,578 )      28,966   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (139,524 )      (28,564 )      692,348        1,500,429        613,856        1,106,144   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      163,726        64,328        20,548        23,664        222,073        147,658   

Transfers between sub-accounts and the company

      16,774        1,544,668        1,149,332        477,906        1,448,797        24,070   

Transfers on general account policy loans

      (28,632 )      (1,749 )      145        281        (223,347 )      3,388   

Withdrawals

      (160,697 )      (34,210 )      (97,376 )      (163,919 )      (1,480,248 )      (205,217 ) 

Annual contract fee

      (72,385 )      (24,953 )      (201,222 )      (181,642 )      (113,340 )      (85,005 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (81,214 )      1,548,084        871,427        156,290        (146,065 )      (115,106 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (220,738 )      1,519,520        1,563,775        1,656,719        467,791        991,038   

Contract owners’ equity at beginning of period

      2,209,342        689,822        6,505,363        4,848,644        4,453,523        3,462,485   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,988,604      $ 2,209,342      $ 8,069,138      $ 6,505,363      $ 4,921,314      $ 4,453,523   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      128,007        38,965        100,406        98,652        82,761        84,840   

Units issued

      17,494        105,899        49,124        39,550        47,977        24,737   

Units redeemed

      (22,491 )      (16,857 )      (39,413 )      (37,796 )      (49,631 )      (26,816 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      123,010        128,007        110,117        100,406        81,107        82,761   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

37

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     High Yield Trust Series I     High Yield Trust Series NAV     International Core Trust
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 236,834      $ 284,027      $ 211,295      $ 275,166      $ 77,140      $ 103,795   

Expenses:

             

Mortality and expense risk and administrative charges

      (13,912 )      (20,167 )      —          —          (12,612 )      (15,327 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      222,922        263,860        211,295        275,166        64,528        88,468   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      (2 )      —          —          —          —          —     

Net realized gain (loss)

      (197,529 )      126,580        (298,836 )      11,691        18,646        341,902   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (197,531 )      126,580        (298,836 )      11,691        18,646        341,902   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (302,971 )      (399,524 )      (146,436 )      (319,495 )      (195,218 )      (636,759 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (277,580 )      (9,084 )      (233,977 )      (32,638 )      (112,044 )      (206,389 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      35,201        24,358        108,377        180,635        35,694        42,230   

Transfers between sub-accounts and the company

      (714,667 )      (613,194 )      (963,062 )      1,527,095        84,288        (66,615 ) 

Transfers on general account policy loans

      (133 )      26        (86,931 )      (30,909 )      186        76,456   

Withdrawals

      (55,707 )      (33,313 )      (417,631 )      (135,806 )      (115,518 )      (109,266 ) 

Annual contract fee

      (169,472 )      (195,704 )      (62,852 )      (60,038 )      (115,895 )      (135,119 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (904,778 )      (817,827 )      (1,422,099 )      1,480,977        (111,245 )      (192,314 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (1,182,358 )      (826,911 )      (1,656,076 )      1,448,339        (223,289 )      (398,703 ) 

Contract owners’ equity at beginning of period

      3,940,682        4,767,593        3,919,626        2,471,287        2,612,774        3,011,477   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 2,758,324      $ 3,940,682      $ 2,263,550      $ 3,919,626      $ 2,389,485      $ 2,612,774   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      134,138        162,490        185,483        116,952        133,817        144,210   

Units issued

      22,790        67,652        65,401        103,125        56,694        68,849   

Units redeemed

      (54,442 )      (96,004 )      (133,968 )      (34,594 )      (61,112 )      (79,242 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      102,486        134,138        116,916        185,483        129,399        133,817   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

38

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     International Core
Trust Series NAV		     International Equity Index
Trust B Series I		     International Equity Index
Trust B Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 15,664      $ 15,636      $ 117,760      $ 139,780      $ 309,108      $ 416,066   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (15,964 )      (16,336 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      15,664        15,636        101,796        123,444        309,108        416,066   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          1        —          —          —     

Net realized gain (loss)

      3,154        20,645        (10,188 )      141,478        387,327        1,143,466   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      3,154        20,645        (10,187 )      141,478        387,327        1,143,466   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (68,447 )      (70,695 )      (423,279 )      (485,740 )      (1,405,598 )      (2,153,028 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (49,629 )      (34,414 )      (331,670 )      (220,818 )      (709,163 )      (593,496 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      72,013        54,808        44,829        45,919        550,510        556,375   

Transfers between sub-accounts and the company

      91,100        6,067        606,567        616,422        1,548,487        (565,506 ) 

Transfers on general account policy loans

      (35,570 )      (20,142 )      (5,526 )      14,796        (729,472 )      (228,754 ) 

Withdrawals

      (11,181 )      (8,157 )      (56,439 )      (60,807 )      (947,152 )      (1,316,994 ) 

Annual contract fee

      (19,798 )      (16,437 )      (124,503 )      (125,810 )      (339,665 )      (342,904 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      96,564        16,139        464,928        490,520        82,708        (1,897,783 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      46,935        (18,275 )      133,258        269,702        (626,455 )      (2,491,279 ) 

Contract owners’ equity at beginning of period

      390,023        408,298        4,391,997        4,122,295        12,445,286        14,936,565   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 436,958      $ 390,023      $ 4,525,255      $ 4,391,997      $ 11,818,831      $ 12,445,286   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      24,279        23,700        382,220        340,922        274,026        313,848   

Units issued

      33,877        8,616        145,376        152,239        79,165        79,886   

Units redeemed

      (29,427 )      (8,037 )      (108,014 )      (110,941 )      (76,924 )      (119,708 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      28,729        24,279        419,582        382,220        276,267        274,026   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

39

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     International Growth Stock
Trust Series I		     International Growth Stock
Trust Series NAV		     International Small
Company Trust Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 28,635      $ 10,387      $ 169,647      $ 172,045      $ 10,325      $ 13,914   

Expenses:

             

Mortality and expense risk and administrative charges

      (2,973 )      (1,927 )      —          —          (4,060 )      (5,704 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      25,662        8,460        169,647        172,045        6,265        8,210   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          —          —          2        —     

Net realized gain (loss)

      (3,305 )      86,458        193,467        495,808        115,265        85,694   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (3,305 )      86,458        193,467        495,808        115,267        85,694   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (101,978 )      (87,804 )      (579,844 )      (650,451 )      (59,094 )      (169,505 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (79,621 )      7,114        (216,730 )      17,402        62,438        (75,601 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      2,941        3,723        79,864        69,733        11,685        10,648   

Transfers between sub-accounts and the company

      1,286,743        (184,571 )      549,463        476,464        (396,521 )      35,652   

Transfers on general account policy loans

      —          —          7,654        (1,226 )      6,752        (574 ) 

Withdrawals

      (10 )      (7,072 )      (126,510 )      (214,586 )      (26,036 )      (12,930 ) 

Annual contract fee

      (20,544 )      (19,877 )      (95,973 )      (91,616 )      (35,370 )      (43,935 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      1,269,130        (207,797 )      414,498        238,769        (439,490 )      (11,139 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      1,189,509        (200,683 )      197,768        256,171        (377,052 )      (86,740 ) 

Contract owners’ equity at beginning of period

      389,721        590,404        8,259,090        8,002,919        964,173        1,050,913   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,579,230      $ 389,721      $ 8,456,858      $ 8,259,090      $ 587,121      $ 964,173   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      31,635        47,849        664,305        644,899        70,056        70,728   

Units issued

      105,690        38,740        175,588        256,775        24,373        20,783   

Units redeemed

      (5,900 )      (54,954 )      (144,123 )      (237,369 )      (54,057 )      (21,455 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      131,425        31,635        695,770        664,305        40,372        70,056   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

40

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     International Small Company
Trust Series NAV		     International Value Trust
Series I		     International Value Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 18,318      $ 15,607      $ 75,807      $ 116,552      $ 87,735      $ 155,331   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (14,875 )      (16,073 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      18,318        15,607        60,932        100,479        87,735        155,331   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          —          —          —          —     

Net realized gain (loss)

      47,750        35,227        (36,527 )      303,180        141,751        412,651   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      47,750        35,227        (36,527 )      303,180        141,751        412,651   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      8,596        (123,035 )      (361,048 )      (955,812 )      (571,041 )      (1,243,133 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      74,664        (72,201 )      (336,643 )      (552,153 )      (341,555 )      (675,151 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      40,474        44,667        58,231        27,089        104,261        196,644   

Transfers between sub-accounts and the company

      (172,809 )      161,099        509,920        208,846        (98,702 )      (279,412 ) 

Transfers on general account policy loans

      669        1,022        478        (746 )      (9,807 )      (11,258 ) 

Withdrawals

      (2,988 )      (36,921 )      (45,331 )      (99,168 )      (34,836 )      (193,159 ) 

Annual contract fee

      (38,637 )      (42,381 )      (128,004 )      (144,177 )      (102,622 )      (101,940 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (173,291 )      127,486        395,294        (8,156 )      (141,706 )      (389,125 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (98,627 )      55,285        58,651        (560,309 )      (483,261 )      (1,064,276 ) 

Contract owners’ equity at beginning of period

      1,102,938        1,047,653        3,564,560        4,124,869        4,588,626        5,652,902   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,004,311      $ 1,102,938      $ 3,623,211      $ 3,564,560      $ 4,105,365      $ 4,588,626   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      77,732        68,776        158,546        160,541        297,190        320,427   

Units issued

      5,204        18,587        83,492        50,509        51,210        76,874   

Units redeemed

      (16,585 )      (9,631 )      (67,687 )      (52,504 )      (60,276 )      (100,111 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      66,351        77,732        174,351        158,546        288,124        297,190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

41

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Investment Quality Bond
Trust Series I		     Investment Quality Bond
Trust Series NAV		     Lifestyle Aggressive MVP
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 93,562      $ 152,061      $ 13,199      $ 20,684      $ 22,141      $ 52,841   

Expenses:

             

Mortality and expense risk and administrative charges

      (25,224 )      (24,637 )      —          —          (8,948 )      (14,179 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      68,338        127,424        13,199        20,684        13,193        38,662   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      226,295        10,984        28,968        1,668        —          —     

Net realized gain (loss)

      (34,982 )      3,152        (9,625 )      (9,663 )      177,607        348,589   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      191,313        14,136        19,343        (7,995 )      177,607        348,589   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (326,039 )      57,773        (37,099 )      16,516        (270,777 )      (339,883 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (66,388 )      199,333        (4,557 )      29,205        (79,977 )      47,368   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      155,619        143,735        139,650        205,994        32,907        34,317   

Transfers between sub-accounts and the company

      (164,518 )      1,494,490        (125,644 )      231,266        (235,554 )      (1,066,182 ) 

Transfers on general account policy loans

      5,717        14,560        1,483        (533 )      753        (5,966 ) 

Withdrawals

      (142,654 )      (108,421 )      (778 )      (184,780 )      (460,192 )      (131,500 ) 

Annual contract fee

      (223,461 )      (212,870 )      (16,310 )      (17,693 )      (54,705 )      (74,381 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (369,297 )      1,331,494        (1,599 )      234,254        (716,791 )      (1,243,712 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (435,685 )      1,530,827        (6,156 )      263,459        (796,768 )      (1,196,344 ) 

Contract owners’ equity at beginning of period

      5,210,369        3,679,542        696,875        433,416        1,846,787        3,043,131   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 4,774,684      $ 5,210,369      $ 690,719      $ 696,875      $ 1,050,019      $ 1,846,787   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      169,445        126,309        43,612        28,628        65,914        109,097   

Units issued

      70,115        53,007        22,394        31,541        7,124        32,094   

Units redeemed

      (83,120 )      (9,871 )      (22,483 )      (16,557 )      (33,077 )      (75,277 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      156,440        169,445        43,523        43,612        39,961        65,914   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

42

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Lifestyle Aggressive MVP
Series NAV		     Lifestyle Balanced MVP
Series I		     Lifestyle Balanced MVP Series
NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 138,912      $ 207,587      $ 113,910      $ 127,600      $ 390,140      $ 479,068   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (22,081 )      (38,244 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      138,912        207,587        91,829        89,356        390,140        479,068   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          271,000        —          1,089,270        —     

Net realized gain (loss)

      362,317        895,333        144,901        635,935        544,954        1,329,299   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      362,317        895,333        415,901        635,935        1,634,224        1,329,299   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (867,164 )      (1,005,258 )      (599,137 )      (349,476 )      (2,324,044 )      (1,025,326 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (365,935 )      97,662        (91,407 )      375,815        (299,680 )      783,041   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,233,922        1,245,707        87,196        192,944        2,398,422        3,587,675   

Transfers between sub-accounts and the company

      66,952        771,603        422,744        (3,818,379 )      (480,515 )      (5,556,947 ) 

Transfers on general account policy loans

      (1,061,147 )      (692,182 )      60,463        (6,608 )      (1,889,975 )      (486,834 ) 

Withdrawals

      (267,287 )      (640,320 )      (150,746 )      (81,166 )      (518,359 )      (640,247 ) 

Annual contract fee

      (347,930 )      (305,518 )      (309,795 )      (378,945 )      (643,848 )      (704,589 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (375,490 )      379,290        109,862        (4,092,154 )      (1,134,275 )      (3,800,942 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (741,425 )      476,952        18,455        (3,716,339 )      (1,433,955 )      (3,017,901 ) 

Contract owners’ equity at beginning of period

      7,175,743        6,698,791        4,472,852        8,189,191        16,550,537        19,568,438   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 6,434,318      $ 7,175,743      $ 4,491,307      $ 4,472,852      $ 15,116,582      $ 16,550,537   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      384,239        364,230        141,756        265,930        941,999        1,161,213   

Units issued

      113,351        195,096        64,181        102,225        214,368        304,953   

Units redeemed

      (131,876 )      (175,087 )      (59,392 )      (226,399 )      (276,646 )      (524,167 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      365,714        384,239        146,545        141,756        879,721        941,999   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

43

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Lifestyle Conservative MVP
Series I		     Lifestyle Conservative MVP
Series NAV		     Lifestyle Growth MVP
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 48,876      $ 63,784      $ 122,708      $ 157,206      $ 83,420      $ 94,480   

Expenses:

             

Mortality and expense risk and administrative charges

      (8,918 )      (17,891 )      —          —          (17,202 )      (25,522 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      39,958        45,893        122,708        157,206        66,218        68,958   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      105,361        208,341        246,155        312,407        1        —     

Net realized gain (loss)

      (100,312 )      (214,403 )      (187,460 )      (98,831 )      123,642        761,884   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      5,049        (6,062 )      58,695        213,576        123,643        761,884   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (42,205 )      128,163        (157,615 )      (85,699 )      (352,853 )      (702,527 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      2,802        167,994        23,788        285,083        (162,992 )      128,315   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      19,051        16,533        809,098        (129,754 )      70,395        74,369   

Transfers between sub-accounts and the company

      (338,459 )      (3,878,917 )      (880,318 )      (1,387,758 )      723,696        (1,886,048 ) 

Transfers on general account policy loans

      (169 )      (156 )      (696,019 )      (219,637 )      (2,587 )      (6,441 ) 

Withdrawals

      (11,200 )      (9,568 )      (44,603 )      (335,253 )      (167,457 )      (352,297 ) 

Annual contract fee

      (97,484 )      (143,658 )      (215,032 )      (213,278 )      (185,157 )      (208,883 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (428,261 )      (4,015,766 )      (1,026,874 )      (2,285,680 )      438,890        (2,379,300 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (425,459 )      (3,847,772 )      (1,003,086 )      (2,000,597 )      275,898        (2,250,985 ) 

Contract owners’ equity at beginning of period

      2,267,102        6,114,874        5,549,392        7,549,989        3,336,327        5,587,312   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,841,643      $ 2,267,102      $ 4,546,306      $ 5,549,392      $ 3,612,225      $ 3,336,327   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      71,768        199,931        338,321        483,207        110,388        186,695   

Units issued

      44,535        65,457        102,512        75,870        49,479        44,525   

Units redeemed

      (58,057 )      (193,620 )      (164,178 )      (220,756 )      (33,125 )      (120,832 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      58,246        71,768        276,655        338,321        126,742        110,388   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

44

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Lifestyle Growth MVP Series
NAV		     Lifestyle Moderate MVP
Series I		     Lifestyle Moderate MVP Series
NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 585,523      $ 718,047      $ 46,871      $ 53,858      $ 239,999      $ 293,016   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (9,305 )      (10,788 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      585,523        718,047        37,566        43,070        239,999        293,016   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          153,696        103,351        812,580        485,754   

Net realized gain (loss)

      779,384        1,623,305        (5,136 )      83,569        (25,540 )      147,676   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      779,384        1,623,305        148,560        186,920        787,040        633,430   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (2,538,332 )      (1,824,061 )      (212,433 )      (151,083 )      (1,090,056 )      (445,910 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (1,173,425 )      517,291        (26,307 )      78,907        (63,017 )      480,536   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      3,743,943        3,684,115        24,526        20,096        650,670        1,578,370   

Transfers between sub-accounts and the company

      312,214        (1,022,104 )      57,968        (83,860 )      (219,159 )      48,489   

Transfers on general account policy loans

      (1,296,638 )      (713,782 )      22        (233 )      (976,857 )      (413,242 ) 

Withdrawals

      (764,071 )      (1,512,184 )      (7,193 )      (44,665 )      (40,266 )      (494,416 ) 

Annual contract fee

      (954,488 )      (980,954 )      (110,180 )      (102,154 )      (320,136 )      (321,530 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      1,040,960        (544,909 )      (34,857 )      (210,816 )      (905,748 )      397,671   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (132,465 )      (27,618 )      (61,164 )      (131,909 )      (968,765 )      878,207   

Contract owners’ equity at beginning of period

      24,905,735        24,933,353        1,868,983        2,000,892        10,014,996        9,136,789   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 24,773,270      $ 24,905,735      $ 1,807,819      $ 1,868,983      $ 9,046,231      $ 10,014,996   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      1,382,122        1,415,209        57,869        64,888        579,654        555,212   

Units issued

      304,264        424,426        16,352        25,139        50,304        148,844   

Units redeemed

      (246,113 )      (457,513 )      (17,691 )      (32,158 )      (101,820 )      (124,402 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      1,440,273        1,382,122        56,530        57,869        528,138        579,654   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

45

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     M Capital Appreciation (a)     M Large Cap Growth (a)     Mid Cap Index Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ —        $ —        $ —        $ 263      $ 69,906      $ 54,262   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          —          —          (28,930 )      (28,657 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      —          —          —          263        40,976        25,605   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      37,784        27,084        1        76,197        544,533        325,588   

Net realized gain (loss)

      2,236        5,263        87,029        17,304        263,340        425,210   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      40,020        32,347        87,030        93,501        807,873        750,798   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (67,613 )      (5,706 )      (46,512 )      (43,917 )      (1,075,497 )      (298,724 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (27,593 )      26,641        40,518        49,847        (226,648 )      477,679   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      —          —          —          —          45,738        30,948   

Transfers between sub-accounts and the company

      80,949        44,473        (696,655 )      134,288        1,059,700        264,756   

Transfers on general account policy loans

      —          —          —          —          (933 )      174   

Withdrawals

      19        —          (416 )      —          (63,053 )      (129,497 ) 

Annual contract fee

      (9,443 )      (6,048 )      (4,626 )      (13,111 )      (148,231 )      (141,867 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      71,525        38,425        (701,697 )      121,177        893,221        24,514   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      43,932        65,066        (661,179 )      171,024        666,573        502,193   

Contract owners’ equity at beginning of period

      284,699        219,633        661,179        490,155        5,654,051        5,151,858   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 328,631      $ 284,699      $ —        $ 661,179      $ 6,320,624      $ 5,654,051   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      3,347        2,902        13,169        10,760        144,638        144,073   

Units issued

      899        681        —          3,643        81,766        54,308   

Units redeemed

      (111 )      (236 )      (13,169 )      (1,234 )      (61,247 )      (53,743 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      4,135        3,347        —          13,169        165,157        144,638   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

Sub-account that invests in non-affiliated Trust.

 

See accompanying notes.

 

46

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Mid Cap Index Trust Series
NAV		     Mid Cap Stock Trust
Series I		     Mid Cap Stock Trust Series
NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 270,727      $ 94,885      $ —        $ 3,333      $ —        $ 26,444   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (12,705 )      (12,775 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      270,727        94,885        (12,705 )      (9,442 )      —          26,444   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      2,249,833        552,641        704,107        595,753        1,197,646        3,405,537   

Net realized gain (loss)

      (634,274 )      492,361        63,249        376,982        251,723        (1,858,477 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      1,615,559        1,045,002        767,356        972,735        1,449,369        1,547,060   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (3,953,548 )      (332,346 )      (686,594 )      (729,433 )      (1,263,628 )      (875,129 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (2,067,262 )      807,541        68,057        233,860        185,741        698,375   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      510,729        715,680        24,086        23,482        152,135        145,913   

Transfers between sub-accounts and the company

      17,180,743        311,290        397,335        (249,526 )      (73,248 )      (1,688,517 ) 

Transfers on general account policy loans

      (1,215,670 )      (290,765 )      765        (1,589 )      (241,174 )      (101,362 ) 

Withdrawals

      (350,592 )      (1,343,194 )      (79,037 )      (97,026 )      (105,996 )      (551,043 ) 

Annual contract fee

      (439,649 )      (290,932 )      (90,145 )      (100,708 )      (133,900 )      (204,579 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      15,685,561        (897,921 )      253,004        (425,367 )      (402,183 )      (2,399,588 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      13,618,299        (90,380 )      321,061        (191,507 )      (216,442 )      (1,701,213 ) 

Contract owners’ equity at beginning of period

      9,542,017        9,632,397        3,178,771        3,370,278        6,700,757        8,401,970   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 23,160,316      $ 9,542,017      $ 3,499,832      $ 3,178,771      $ 6,484,315      $ 6,700,757   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      345,780        381,850        100,130        114,327        90,888        123,212   

Units issued

      877,478        96,265        19,166        40,992        94,975        218,928   

Units redeemed

      (362,101 )      (132,335 )      (12,189 )      (55,189 )      (100,505 )      (251,252 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      861,157        345,780        107,107        100,130        85,358        90,888   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

47

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

     Mid Value Trust Series I     Mid Value Trust Series NAV     Money Market Trust B Series NAV  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 47,213      $ 42,846      $ 108,960      $ 108,292      $ 784      $ —     

Expenses:

             

Mortality and expense risk and administrative charges

      (17,562 )      (23,900 )      —          —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      29,651        18,946        108,960        108,292        784        —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      759,936        565,701        1,661,417        944,094        165        775   

Net realized gain (loss)

      411,388        571,054        1,620,489        427,561        —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      1,171,324        1,136,755        3,281,906        1,371,655        165        775   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (1,346,800 )      (585,267 )      (2,987,715 )      (340,281 )      (3 )      (2 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (145,825 )      570,434        403,151        1,139,666        946        773   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      8,078        9,029        569,020        271,477        11,545,887        16,710,956   

Transfers between sub-accounts and the company

      (1,567,565 )      (219,782 )      (11,799,890 )      9,939,095        (5,327,791 )      (27,443,169 ) 

Transfers on general account policy loans

      (5,533 )      (84 )      (146,930 )      (52,855 )      (4,012,465 )      (3,051,770 ) 

Withdrawals

      (6,440 )      (46,024 )      (874,467 )      (357,600 )      (1,104,328 )      (1,489,402 ) 

Annual contract fee

      (118,788 )      (134,231 )      (192,761 )      (145,179 )      (1,259,276 )      (1,497,834 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (1,690,248 )      (391,092 )      (12,445,028 )      9,654,938        (157,973 )      (16,771,219 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (1,836,073 )      179,342        (12,041,877 )      10,794,604        (157,027 )      (16,770,446 ) 

Contract owners’ equity at beginning of period

      5,816,570        5,637,228        20,406,311        9,611,707        53,776,794        70,547,240   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 3,980,497      $ 5,816,570      $ 8,364,434      $ 20,406,311      $ 53,619,767      $ 53,776,794   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      228,646        244,764        511,313        266,593        3,095,151        4,060,754   

Units issued

      77,664        92,026        183,734        301,725        2,921,149        2,706,170   

Units redeemed

      (143,913 )      (108,144 )      (478,086 )      (57,005 )      (2,930,254 )      (3,671,773 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      162,397        228,646        216,961        511,313        3,086,046        3,095,151   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

48

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Money Market Trust
Series I		     Natural Resources Trust
Series I		     Natural Resources Trust
Series NAV		  
     2015     2014     2015      2014 (c)     2015      2014 (c)  

Income:

               

Dividend distributions received

    $ —        $ —        $ —         $ 32,032      $ —         $ 26,430   

Expenses:

               

Mortality and expense risk and administrative charges

      (123,357 )      (108,771 )      —           (13,470 )      —           —     
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Net investment income (loss)

      (123,357 )      (108,771 )      —           18,562        —           26,430   
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Realized gains (losses) on investments:

               

Capital gain distributions received

      30        584        —           —          —           —     

Net realized gain (loss)

      —          —          —           (418,862 )      —           (308,559 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Realized gains (losses)

      30        584        —           (418,862 )      —           (308,559 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Unrealized appreciation (depreciation) during the period

      —          (1 )      —           154,150        —           87,404   
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (123,327 )      (108,188 )      —           (246,150 )      —           (194,725 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Changes from principal transactions:

               

Purchase payments

      980,762        725,705        —           14,333        —           114,816   

Transfers between sub-accounts and the company

      1,219,618        966,357        —           (3,374,559 )      —           (2,553,575 ) 

Transfers on general account policy loans

      6,579        (1,976 )      —           —          —           6,417   

Withdrawals

      (64,158 )      (84,411 )      —           (41,164 )      —           (120,167 ) 

Annual contract fee

      (835,449 )      (708,311 )      —           (93,389 )      —           (60,272 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      1,307,352        897,364        —           (3,494,779 )      —           (2,612,781 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Total increase (decrease) in contract owners’ equity

      1,184,025        789,176        —           (3,740,929 )      —           (2,807,506 ) 

Contract owners’ equity at beginning of period

      25,347,938        24,558,762        —           3,740,929        —           2,807,506   
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Contract owners’ equity at end of period

    $ 26,531,963      $ 25,347,938      $ —         $ —        $ —         $ —     
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
     2015     2014     2015      2014     2015      2014  

Units, beginning of period

      1,220,595        1,177,155        —           94,863        —           160,544   

Units issued

      1,157,088        998,613        —           30,441        —           16,817   

Units redeemed

      (1,091,476 )      (955,173 )      —           (125,304 )      —           (177,361 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Units, end of period

      1,286,207        1,220,595        —           —          —           —     
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

 

(c)

Terminated as an investment option and funds transferred to Global Trust on November 10, 2014.

 

See accompanying notes.

 

49

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

    PIMCO All Asset (a)     Real Estate Securities Trust
Series I		     Real Estate Securities Trust
Series NAV		  
    2015     2014     2015     2014     2015     2014  

Income:

            

Dividend distributions received

   $ 106,375      $ 177,232      $ 198,953      $ 170,909      $ 251,645      $ 209,665   

Expenses:

            

Mortality and expense risk and administrative charges

     (4,812 )      (3,903 )      (62,472 )      (60,435 )      —          —     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

     101,563        173,329        136,481        110,474        251,645        209,665   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

            

Capital gain distributions received

     —          —          2        —          —          —     

Net realized gain (loss)

     (65,840 )      6,644        574,267        328,159        1,160,311        435,111   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

     (65,840 )      6,644        574,269        328,159        1,160,311        435,111   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

     (384,498 )      (183,799 )      (518,763 )      2,312,293        (1,065,167 )      2,593,960   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

     (348,775 )      (3,826 )      191,987        2,750,926        346,789        3,238,736   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

            

Purchase payments

     156,800        195,268        160,112        171,941        361,172        503,141   

Transfers between sub-accounts and the company

     (69,671 )      249,188        (555,644 )      703,346        (1,006,516 )      1,079,190   

Transfers on general account policy loans

     (10,969 )      (60,302 )      (10,462 )      114,743        (41,122 )      (660 ) 

Withdrawals

     (141,782 )      (6,526 )      (667,281 )      (531,994 )      (465,664 )      (980,833 ) 

Annual contract fee

     (132,117 )      (125,699 )      (476,673 )      (485,226 )      (207,084 )      (183,336 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

     (197,739 )      251,929        (1,549,948 )      (27,190 )      (1,359,214 )      417,502   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

     (546,514 )      248,103        (1,357,961 )      2,723,736        (1,012,425 )      3,656,238   

Contract owners’ equity at beginning of period

     3,704,837        3,456,734        11,707,207        8,983,471        13,743,347        10,087,109   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

   $ 3,158,323      $ 3,704,837      $ 10,349,246      $ 11,707,207      $ 12,730,922      $ 13,743,347   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    2015     2014     2015     2014     2015     2014  

Units, beginning of period

     222,794        208,924        73,812        74,618        98,937        95,675   

Units issued

     31,911        46,484        11,401        12,743        37,128        29,532   

Units redeemed

     (46,592 )      (32,614 )      (21,502 )      (13,549 )      (46,913 )      (26,270 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

     208,113        222,794        63,711        73,812        89,152        98,937   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

Sub-account that invests in non-affiliated Trust.

 

See accompanying notes.

 

50

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Real Return Bond Trust
Series I		     Real Return Bond Trust
Series NAV		     Science & Technology Trust
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 109,888      $ 79,826      $ 728,690      $ 382,623      $ —        $ —     

Expenses:

             

Mortality and expense risk and administrative charges

      (9,031 )      (12,222 )      —          —          (34,143 )      (34,218 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      100,857        67,604        728,690        382,623        (34,143 )      (34,218 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          —          —          1,389,946        219,286   

Net realized gain (loss)

      (68,710 )      (111,254 )      (874,633 )      (273,645 )      920,112        1,091,058   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (68,710 )      (111,254 )      (874,633 )      (273,645 )      2,310,058        1,310,344   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (85,099 )      166,596        (178,958 )      464,827        (1,798,397 )      (439,775 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (52,952 )      122,946        (324,901 )      573,805        477,518        836,351   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      15,712        11,716        596,471        729,997        47,224        39,674   

Transfers between sub-accounts and the company

      (758,406 )      (799,741 )      (1,006,872 )      16,417        315,863        78,250   

Transfers on general account policy loans

      (86 )      —          (91,662 )      (28,660 )      87,258        70,590   

Withdrawals

      (113,615 )      (11,388 )      (1,163,039 )      (188,555 )      (97,413 )      (49,357 ) 

Annual contract fee

      (68,400 )      (88,210 )      (171,839 )      (181,699 )      (249,004 )      (233,759 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (924,795 )      (887,623 )      (1,836,941 )      347,500        103,928        (94,602 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (977,747 )      (764,677 )      (2,161,842 )      921,305        581,446        741,749   

Contract owners’ equity at beginning of period

      2,433,390        3,198,067        11,876,727        10,955,422        8,264,943        7,523,194   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,455,643      $ 2,433,390      $ 9,714,885      $ 11,876,727      $ 8,846,389      $ 8,264,943   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      118,175        162,304        795,107        769,254        273,549        286,461   

Units issued

      144,322        83,232        304,505        250,654        84,925        106,826   

Units redeemed

      (189,224 )      (127,361 )      (429,563 )      (224,801 )      (87,345 )      (119,738 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      73,273        118,175        670,049        795,107        271,129        273,549   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

51

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Science & Technology Trust
Series NAV		     Short Term Government Income Trust
Series I		     Short Term Government Income Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ —        $ —        $ 29,910      $ 45,609      $ 31,467      $ 33,349   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (9,634 )      (9,748 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      —          —          20,276        35,861        31,467        33,349   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      365,991        58,180        —          —          —          —     

Net realized gain (loss)

      232,460        455,027        (16,210 )      (43,172 )      (28,958 )      (19,224 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      598,451        513,207        (16,210 )      (43,172 )      (28,958 )      (19,224 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (457,036 )      (283,512 )      (3,184 )      18,738        4,123        6,125   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      141,415        229,695        882        11,427        6,632        20,250   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      199,293        184,330        14,708        16,263        25,162        75,403   

Transfers between sub-accounts and the company

      403,655        363,810        (30,196 )      281,468        422,324        (241,017 ) 

Transfers on general account policy loans

      (35,373 )      3,841        69        1,230        (2,771 )      (67 ) 

Withdrawals

      (562,709 )      (782,313 )      (33,272 )      (12,839 )      (437,712 )      (67,000 ) 

Annual contract fee

      (75,106 )      (54,601 )      (74,441 )      (75,951 )      (33,364 )      (37,393 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (70,240 )      (284,933 )      (123,132 )      210,171        (26,361 )      (270,074 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      71,175        (55,238 )      (122,250 )      221,598        (19,729 )      (249,824 ) 

Contract owners’ equity at beginning of period

      2,267,934        2,323,172        1,684,090        1,462,492        1,430,185        1,680,009   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 2,339,109      $ 2,267,934      $ 1,561,840      $ 1,684,090      $ 1,410,456      $ 1,430,185   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      84,429        97,688        162,685        142,145        134,293        159,638   

Units issued

      38,968        39,945        117,785        146,619        83,190        42,447   

Units redeemed

      (41,843 )      (53,204 )      (129,880 )      (126,079 )      (85,955 )      (67,792 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      81,554        84,429        150,590        162,685        131,528        134,293   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

52

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Small Cap Growth Trust
Series I		     Small Cap Growth Trust
Series NAV		     Small Cap Index Trust
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ —        $ —        $ —        $ —        $ 62,504      $ 51,024   

Expenses:

             

Mortality and expense risk and administrative charges

      (5,750 )      (6,699 )      —          —          (24,919 )      (24,589 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (5,750 )      (6,699 )      —          —          37,585        26,435   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      198,491        171,489        1,601,803        1,402,775        494,855        340,753   

Net realized gain (loss)

      15,674        125,138        (316,816 )      653,224        257,130        279,437   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      214,165        296,627        1,284,987        2,055,999        751,985        620,190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (310,082 )      (215,325 )      (1,969,622 )      (1,400,629 )      (1,063,494 )      (413,117 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (101,667 )      74,603        (684,635 )      655,370        (273,924 )      233,508   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      2,957        5,313        98,654        229,907        24,316        21,554   

Transfers between sub-accounts and the company

      181,956        (457,583 )      (119,370 )      186,108        533,303        225,239   

Transfers on general account policy loans

      (16,972 )      (308 )      (26,440 )      (1,632 )      (291 )      —     

Withdrawals

      (1,508 )      (13,415 )      (557,673 )      (589,501 )      (17,409 )      (5,477 ) 

Annual contract fee

      (47,227 )      (45,580 )      (137,720 )      (132,773 )      (87,697 )      (84,745 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      119,206        (511,573 )      (742,549 )      (307,891 )      452,222        156,571   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      17,539        (436,970 )      (1,427,184 )      347,479        178,298        390,079   

Contract owners’ equity at beginning of period

      1,100,361        1,537,331        9,611,290        9,263,811        5,649,121        5,259,042   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,117,900      $ 1,100,361      $ 8,184,106      $ 9,611,290      $ 5,827,419      $ 5,649,121   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      41,085        61,397        293,216        304,103        185,766        180,560   

Units issued

      10,895        17,732        138,704        96,238        86,667        47,647   

Units redeemed

      (5,968 )      (38,044 )      (158,200 )      (107,125 )      (72,105 )      (42,441 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      46,012        41,085        273,720        293,216        200,328        185,766   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

53

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Small Cap Index Trust
Series NAV		     Small Cap Opportunities Trust
Series I		     Small Cap Opportunities Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 64,888      $ 55,466      $ 11,114      $ 7,685      $ 503      $ 253   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (90,896 )      (97,542 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      64,888        55,466        (79,782 )      (89,857 )      503        253   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      496,231        361,488        535,798        (3 )      15,674        —     

Net realized gain (loss)

      291,936        300,782        63,788        128,311        (1,747 )      33,925   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      788,167        662,270        599,586        128,308        13,927        33,925   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (1,159,836 )      (495,651 )      (1,351,240 )      223,102        (40,003 )      (24,638 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (306,781 )      222,085        (831,436 )      261,553        (25,573 )      9,540   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      297,626        421,346        443,431        468,327        148,869        35,590   

Transfers between sub-accounts and the company

      555,174        (69,765 )      (208,609 )      (186,395 )      (126,813 )      103,542   

Transfers on general account policy loans

      (657,432 )      (193,551 )      55,633        99,104        (3,890 )      (2 ) 

Withdrawals

      (266,840 )      (770,857 )      (709,896 )      (868,482 )      (4,835 )      (81,506 ) 

Annual contract fee

      (208,650 )      (174,367 )      (911,505 )      (948,948 )      (22,635 )      (18,443 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (280,122 )      (787,194 )      (1,330,946 )      (1,436,394 )      (9,304 )      39,181   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (586,903 )      (565,109 )      (2,162,382 )      (1,174,841 )      (34,877 )      48,721   

Contract owners’ equity at beginning of period

      5,961,751        6,526,860        15,811,294        16,986,135        321,029        272,308   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 5,374,848      $ 5,961,751      $ 13,648,912      $ 15,811,294      $ 286,152      $ 321,029   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      229,643        263,242        429,728        470,162        16,522        14,354   

Units issued

      88,386        62,540        5,066        30,337        8,212        8,833   

Units redeemed

      (101,029 )      (96,139 )      (41,195 )      (70,771 )      (9,213 )      (6,665 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      217,000        229,643        393,599        429,728        15,521        16,522   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

54

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Small Cap Value Trust
Series I		     Small Cap Value Trust
Series NAV		     Small Company Value Trust
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 3,870      $ 5,877      $ 44,996      $ 63,147      $ 42,553      $ 1,618   

Expenses:

             

Mortality and expense risk and administrative charges

      (4,734 )      (5,642 )      —          —          (13,852 )      (20,939 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (864 )      235        44,996        63,147        28,701        (19,321 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      125,900        119,656        1,366,926        1,152,298        428,293        118,913   

Net realized gain (loss)

      1,001        124,383        160,871        716,703        522,577        776,820   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      126,901        244,039        1,527,797        1,869,001        950,870        895,733   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (163,225 )      (174,310 )      (1,762,807 )      (1,321,882 )      (1,202,696 )      (893,976 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (37,188 )      69,964        (190,014 )      610,266        (223,125 )      (17,564 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,300        678        175,120        165,487        11,940        15,916   

Transfers between sub-accounts and the company

      (26,344 )      (206,865 )      (530,775 )      (2,246,718 )      (1,944,496 )      (347,979 ) 

Transfers on general account policy loans

      —          —          (211,023 )      (71,607 )      (232 )      (430 ) 

Withdrawals

      (1,697 )      (312 )      (66,410 )      (519,508 )      (20,582 )      (109,980 ) 

Annual contract fee

      (33,689 )      (40,707 )      (163,515 )      (165,406 )      (102,543 )      (134,981 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (60,430 )      (247,206 )      (796,603 )      (2,837,752 )      (2,055,913 )      (577,454 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (97,618 )      (177,242 )      (986,617 )      (2,227,486 )      (2,279,038 )      (595,018 ) 

Contract owners’ equity at beginning of period

      888,050        1,065,292        8,868,217        11,095,703        5,332,408        5,927,426   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 790,432      $ 888,050      $ 7,881,600      $ 8,868,217      $ 3,053,370      $ 5,332,408   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      37,291        47,600        128,165        171,983        166,559        185,558   

Units issued

      44,555        22,169        32,683        17,069        26,417        60,676   

Units redeemed

      (48,194 )      (32,478 )      (45,427 )      (60,887 )      (91,655 )      (79,675 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      33,652        37,291        115,421        128,165        101,321        166,559   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

55

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Small Company Value Trust
Series NAV		     Strategic Income Opportunities Trust
Series I		     Strategic Income Opportunities Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 7,239      $ 774      $ 64,994      $ 83,589      $ 90,963      $ 138,369   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (9,237 )      (9,912 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      7,239        774        55,757        73,677        90,963        138,369   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      73,700        28,514        —          3        —          —     

Net realized gain (loss)

      107,240        110,739        1,090        9,224        (11,047 )      24,792   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      180,940        139,253        1,090        9,227        (11,047 )      24,792   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (229,289 )      (141,248 )      (49,829 )      9,734        (29,457 )      16,781   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (41,110 )      (1,221 )      7,018        92,638        50,459        179,942   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      173,760        98,031        16,669        16,405        312,179        297,078   

Transfers between sub-accounts and the company

      (706,913 )      127,186        890,702        (120,724 )      (248,069 )      612,135   

Transfers on general account policy loans

      (27,027 )      (3,722 )      41        (96 )      (214,973 )      (103,776 ) 

Withdrawals

      (302,596 )      (34,992 )      (35,303 )      (16,523 )      (143,188 )      (676,202 ) 

Annual contract fee

      (33,549 )      (34,814 )      (100,401 )      (103,049 )      (121,661 )      (90,894 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (896,325 )      151,689        771,708        (223,987 )      (415,712 )      38,341   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (937,435 )      150,468        778,726        (131,349 )      (365,253 )      218,283   

Contract owners’ equity at beginning of period

      1,391,555        1,241,087        1,845,517        1,976,866        3,827,550        3,609,267   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 454,120      $ 1,391,555      $ 2,624,243      $ 1,845,517      $ 3,462,297      $ 3,827,550   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      60,990        54,470        75,032        84,454        199,884        198,151   

Units issued

      14,172        24,233        68,115        40,171        40,198        68,809   

Units redeemed

      (54,098 )      (17,713 )      (38,212 )      (49,593 )      (61,541 )      (67,076 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      21,064        60,990        104,935        75,032        178,541        199,884   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

56

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Total Bond Market Trust B
Series NAV		     Total Return Trust
Series I		     Total Return Trust
Series NAV		  
     2015     2014     2015 (d)     2014     2015 (d)     2014  

Income:

             

Dividend distributions received

    $ 499,249      $ 541,519      $ 1,147,747      $ 393,042      $ 3,170,383      $ 902,977   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (13,050 )      (44,326 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      499,249        541,519        1,134,697        348,716        3,170,383        902,977   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          522,437        —          1,443,110        —     

Net realized gain (loss)

      30,337        (368,132 )      (1,666,503 )      (79,576 )      (5,144,838 )      (446,104 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      30,337        (368,132 )      (1,144,066 )      (79,576 )      (3,701,728 )      (446,104 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (500,412 )      705,637        256,396        200,889        1,014,815        718,322   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      29,174        879,024        247,027        470,029        483,470        1,175,195   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,023,825        1,145,713        9,630        106,974        1,275,500        2,297,010   

Transfers between sub-accounts and the company

      (432,600 )      2,104,360        (13,529,247 )      3,790,574        (28,942,073 )      1,631,996   

Transfers on general account policy loans

      9,831        6,635        (17,599 )      7,568        (385,416 )      (236,787 ) 

Withdrawals

      (469,960 )      (483,811 )      (10,157 )      714        (292,437 )      (477,350 ) 

Annual contract fee

      (248,907 )      (232,717 )      (99,703 )      (325,407 )      (168,112 )      (490,475 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (117,811 )      2,540,180        (13,647,076 )      3,580,423        (28,512,538 )      2,724,394   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (88,637 )      3,419,204        (13,400,049 )      4,050,452        (28,029,068 )      3,899,589   

Contract owners’ equity at beginning of period

      16,376,223        12,957,019        13,400,049        9,349,597        28,029,068        24,129,479   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 16,287,586      $ 16,376,223      $ —        $ 13,400,049      $ —        $ 28,029,068   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      693,208        581,698        475,980        347,788        1,554,096        1,401,145   

Units issued

      582,637        592,035        56,183        306,116        116,351        632,285   

Units redeemed

      (588,474 )      (480,525 )      (532,163 )      (177,924 )      (1,670,447 )      (479,334 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      687,371        693,208        —          475,980        —          1,554,096   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(d)

Terminated as an investment option and funds transferred to Core Bond Trust on April 27, 2015.

 

See accompanying notes.

 

57

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Total Stock Market Index Trust
Series I		     Total Stock Market Index Trust
Series NAV		     U.S. Equity Trust
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 71,820      $ 34,436      $ 23,608      $ 18,319      $ 29,857      $ 19,817   

Expenses:

             

Mortality and expense risk and administrative charges

      (14,757 )      (12,038 )      —          —          (6,275 )      (6,879 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      57,063        22,398        23,608        18,319        23,582        12,938   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      90,697        45,207        48,570        22,911        (1 )      —     

Net realized gain (loss)

      476,589        34,764        24,658        91,059        21,416        98,353   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      567,286        79,971        73,228        113,970        21,415        98,353   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (509,074 )      198,205        (110,302 )      34,333        (41,195 )      47,143   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      115,275        300,574        (13,466 )      166,622        3,802        158,434   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,785        1,206        268,049        215,398        25,426        28,978   

Transfers between sub-accounts and the company

      3,116,036        951,261        93,998        625,306        195,974        (111,025 ) 

Transfers on general account policy loans

      —          —          (21,296 )      (158,615 )      62,141        64,541   

Withdrawals

      (384 )      (11,337 )      (55,974 )      (57,916 )      (503 )      (90,744 ) 

Annual contract fee

      (36,231 )      (19,326 )      (117,942 )      (99,069 )      (74,337 )      (85,571 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      3,081,206        921,804        166,835        525,104        208,701        (193,821 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      3,196,481        1,222,378        153,369        691,726        212,503        (35,387 ) 

Contract owners’ equity at beginning of period

      2,980,160        1,757,782        1,552,966        861,240        1,343,040        1,378,427   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 6,176,641      $ 2,980,160      $ 1,706,335      $ 1,552,966      $ 1,555,543      $ 1,343,040   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      133,517        87,511        19,481        12,042        92,865        105,444   

Units issued

      237,571        50,734        4,660        12,439        20,213        42,779   

Units redeemed

      (96,619 )      (4,728 )      (2,623 )      (5,000 )      (5,682 )      (55,358 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      274,469        133,517        21,518        19,481        107,396        92,865   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     U.S. Equity Trust
Series NAV		     Ultra Short Term Bond Trust
Series I		     Ultra Short Term Bond Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 44,755      $ 37,448      $ 118      $ 354      $ 12,968      $ 9,665   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (59 )      (143 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      44,755        37,448        59        211        12,968        9,665   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          —          —          —          —     

Net realized gain (loss)

      279,410        101,914        (6 )      (489 )      (8,107 )      (2,664 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      279,410        101,914        (6 )      (489 )      (8,107 )      (2,664 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (312,252 )      100,780        (116 )      138        (4,930 )      (7,799 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      11,913        240,142        (63 )      (140 )      (69 )      (798 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      74,358        87,594        114        322        508,925        61,401   

Transfers between sub-accounts and the company

      (672,321 )      207,209        —          15,554        18,927        477,420   

Transfers on general account policy loans

      (108,723 )      (51,108 )      —          —          —          —     

Withdrawals

      (85,125 )      (63,704 )      —          (22,810 )      2        (5,369 ) 

Annual contract fee

      (59,609 )      (45,713 )      (318 )      (1,463 )      (11,434 )      (13,814 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (851,420 )      134,278        (204 )      (8,397 )      516,420        519,638   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (839,507 )      374,420        (267 )      (8,537 )      516,351        518,840   

Contract owners’ equity at beginning of period

      3,020,558        2,646,138        9,125        17,662        736,071        217,231   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 2,181,051      $ 3,020,558      $ 8,858      $ 9,125      $ 1,252,422      $ 736,071   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      206,068        200,517        931        1,793        73,092        21,577   

Units issued

      20,628        47,457        9        1,636        117,321        70,117   

Units redeemed

      (78,677 )      (41,906 )      (30 )      (2,498 )      (66,064 )      (18,602 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      148,019        206,068        910        931        124,349        73,092   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Utilities Trust Series I     Utilities Trust Series NAV     Value Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 44,428      $ 64,745      $ 137,037      $ 130,407      $ 13,360      $ 11,955   

Expenses:

             

Mortality and expense risk and administrative charges

      (8,192 )      (11,542 )      —          —          (15,458 )      (14,897 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      36,236        53,203        137,037        130,407        (2,098 )      (2,942 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      138,180        81,072        417,272        146,192        323,267        240,417   

Net realized gain (loss)

      222,125        164,895        (666,233 )      135,613        69,401        259,724   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      360,305        245,967        (248,961 )      281,805        392,668        500,141   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (617,627 )      (85,285 )      (646,545 )      12,128        (610,023 )      (288,038 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (221,086 )      213,885        (758,469 )      424,340        (219,453 )      209,161   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      5,770        4,331        355,939        893,322        49,820        34,487   

Transfers between sub-accounts and the company

      (680,554 )      186,947        (2,040,602 )      1,867,214        129,998        (139,197 ) 

Transfers on general account policy loans

      —          294        (230,014 )      (80,728 )      (288 )      125   

Withdrawals

      (48,713 )      (3,135 )      (63,590 )      (131,913 )      (38,918 )      (42,561 ) 

Annual contract fee

      (56,795 )      (70,591 )      (203,141 )      (147,495 )      (239,119 )      (205,425 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (780,292 )      117,846        (2,181,408 )      2,400,400        (98,507 )      (352,571 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (1,001,378 )      331,731        (2,939,877 )      2,824,740        (317,960 )      (143,410 ) 

Contract owners’ equity at beginning of period

      2,201,188        1,869,457        4,484,351        1,659,611        2,527,117        2,670,527   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,199,810      $ 2,201,188      $ 1,544,474      $ 4,484,351      $ 2,209,157      $ 2,527,117   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      63,595        60,473        150,086        62,610        48,637        55,655   

Units issued

      12,677        22,683        16,749        102,042        24,006        10,238   

Units redeemed

      (35,778 )      (19,561 )      (106,176 )      (14,566 )      (25,693 )      (17,256 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      40,494        63,595        60,659        150,086        46,950        48,637   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Value Trust Series NAV  
     2015     2014  

Income:

     

Dividend distributions received

    $ 9,318      $ 7,125   

Expenses:

     

Mortality and expense risk and administrative charges

      —          —     
  

 

 

    

 

 

  

Net investment income (loss)

      9,318        7,125   
  

 

 

    

 

 

  

Realized gains (losses) on investments:

     

Capital gain distributions received

      194,530        119,811   

Net realized gain (loss)

      61,657        85,466   
  

 

 

    

 

 

  

Realized gains (losses)

      256,187        205,277   
  

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (403,757 )      (95,614 ) 
  

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (138,252 )      116,788   
  

 

 

    

 

 

  

Changes from principal transactions:

     

Purchase payments

      184,164        150,399   

Transfers between sub-accounts and the company

      113,782        23,672   

Transfers on general account policy loans

      (18,702 )      (6,923 ) 

Withdrawals

      (52,048 )      (5,115 ) 

Annual contract fee

      (45,477 )      (41,660 ) 
  

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      181,719        120,373   
  

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      43,467        237,161   

Contract owners’ equity at beginning of period

      1,373,280        1,136,119   
  

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,416,747      $ 1,373,280   
  

 

 

    

 

 

  
     2015     2014  

Units, beginning of period

      50,565        45,967   

Units issued

      14,103        12,307   

Units redeemed

      (7,435 )      (7,709 ) 
  

 

 

    

 

 

  

Units, end of period

      57,233        50,565   
  

 

 

    

 

 

  

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS

December 31, 2015

 

1.

Organization

John Hancock Life Insurance Company (U.S.A.) Separate Account N (the “Account”) is a separate account established by John Hancock Life Insurance Company (U.S.A.) (the “Company”). The Account operates as a Unit Investment Trust under the Investment Company Act of 1940, as amended (the “Act”) and is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 Financial Services – Investment Companies. The Account consists of 106 active sub-accounts which are exclusively invested in a corresponding portfolio of the John Hancock Variable Insurance Trust (the “Trust”), and 2 active sub-accounts that are invested in portfolios of other Non-affiliated Trusts (the “Non-affiliated Trusts”). The Trust and Non-Affiliated Trusts are registered under the Act as an open-ended management investment company, commonly known as a mutual fund, which does not transact with the general public. The Account is a funding vehicle for the allocation of net premiums under single premium variable life and variable universal life insurance contracts (the “Contracts”) issued by the Company.

The Company is a stock life insurance company incorporated under the laws of Michigan in 1979. The Company is an indirect, wholly owned subsidiary of Manulife Financial Corporation (“MFC”), a Canadian based publicly traded life insurance company. MFC and its subsidiaries are known collectively as Manulife Financial.

The Company is required to maintain assets in the Account with a total fair value of at least equal to the reserves and other liabilities relating to the variable benefits under all Contracts participating in the Account. These assets may not be charged with liabilities which arise from any other business the Company conducts. However, all obligations under the Contracts are general corporate obligations of the Company.

In addition to the Account, certain contract owners may also allocate funds to the fixed account, which is part of the Company’s general account. Because of exemptive and exclusionary provisions, interests in the fixed account have not been registered under the Securities Act of 1933, and the Company’s general account has not been registered as an investment company under the Investment Company Act of 1940. Net interfund transfers include transfers between separate and general accounts.

Each sub-account holds shares of a particular series (“Portfolio”) of a registered investment company. Sub-accounts that invest in Portfolios of the Trust may offer 2 classes of units to fund Contracts issued by the Company. These classes, Series I and Series NAV, represent an interest in the same Trust Portfolio, but in different classes of that Portfolio. Series I and Series NAV shares of the Trust Portfolio differ in the level of 12b-1 fees and other expenses assessed against the Portfolio’s assets.

Sub-accounts closed in 2015 are as follows:

 

Sub-accounts Closed

    Effective Date  

Total Return Trust Series I

      04/27/2015   

Total Return Trust Series NAV

      04/27/2015   

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

2.

Significant Accounting Policies

Estimates

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

Valuation of Investments

Investments made in the Portfolios of the Trust, and of the Non-affiliated Trusts, are valued at fair value based on the reported net asset values of such Portfolios. Investment transactions are recorded on the trade date. Income from dividends, and gains from realized gain distributions are recorded on the ex-dividend date. Realized gains and losses on the sales of investments are computed on a first-in, first-out basis.

Amounts Receivable/Payable

Receivables/Payables from/to Portfolios/the Company are due to unsettled contract transactions (net of asset -based charges) and/or subsequent/preceding purchases/sales of the respective Portfolios’ shares. The amounts are due from/to either the respective Portfolio and/or the Company for the benefit of contract owners. There are no unsettled policy transactions at December 31, 2015.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

3.

Federal Income Taxes

The Account does not file separate tax returns. The taxable income of the Account is consolidated with that of the Company within the consolidated federal tax return. Any tax contingencies arising from the taxable income generated by the Account is the responsibility of the Company and the Company holds any and all tax contingencies on its financial statements. The Company’s consolidated federal tax return for the FY 2002 and onward remains open subject to examination by the internal revenue service. The Account is not a party to the consolidated tax sharing agreement thus no amount of income taxes or tax contingencies are passed through to the Account. The legal form of the Account is not taxable in any state or foreign jurisdictions.

The income taxes topic of the FASB ASC establishes a minimum threshold for financial statement recognition of the benefit of positions taken, or expected to be taken, in filing tax returns (including whether the Account is taxable in certain jurisdictions). The topic requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet the more-likely-than-not threshold would be recorded as tax expense or benefit.

The Account complies with the provisions of FASB ASC Topic 740, Income Taxes. As of December 31, 2015, the Account did not have a liability for any uncertain tax positions. The Account recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statements of Operations and Changes in Contract Owners’ Equity.

 

4.

Transactions with Affiliates

The Company has an administrative services agreement with Manulife Financial, whereby Manulife Financial or its designee, with the consent of the Company, performs certain services on behalf of the Company necessary for the operation of the Account. John Hancock Investment Management Services, LLC (“JHIMS”), a Delaware limited liability company controlled by MFC, serves as investment adviser for the Trust.

John Hancock Distributors LLC, a registered broker-dealer and wholly owned subsidiary of JHUSA, acts as the principle underwriter of the Contracts pursuant to a distribution agreement with the Company. Contracts are sold by registered representatives of either John Hancock Distributors LLC or other broker-dealers having distribution agreements with John Hancock Distributors LLC.

Certain officers of the Account are officers and directors of JHUSA or the Trust.

Contract charges, as described in Note 9, are paid to the Company.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

5.

Fair Value Measurements

ASC 820 “Fair Value Measurements and Disclosures” provides a single definition of fair value for accounting purposes, establishes a consistent framework for measuring fair value, and expands disclosure requirements about fair value measurements. ASC 820 defines fair value as the value that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; that is, an exit value. An exit value is not a forced liquidation or distressed sale.

Following ASC 820 guidance, the Account has categorized its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Account’s valuation techniques. A level is assigned to each fair value measurement based on the lowest level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:

 

•  

Level 1 – Fair value measurements that reflect unadjusted, quoted prices in active markets for identical assets and liabilities that the Account has the ability to access at the measurement date.

 

•  

Level 2 – Fair value measurements using inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.

 

•  

Level 3 – Fair value measurements using significant non market observable inputs.

All of the Account’s sub-accounts’ investments in a Portfolio of the Trust were valued at the reported net asset value of the Portfolio and categorized as Level 1 as of December 31, 2015. The following table presents the Account’s assets that are measured at fair value on a recurring basis by fair value hierarchy level under ASC 820, as of December 31, 2015:

 

     Level 1      Level 2      Level 3      Total  

Mutual Funds

    $ 711,676,816         —           —           711,676,816   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 711,676,816         —           —           711,676,816   
  

 

 

     

 

 

     

 

 

     

 

 

  

Assets owned by the Account are primarily open-ended mutual fund investments issued by the Trust. These are classified within Level 1, as fair values of the underlying funds are based upon reported net asset values (“NAV”), which represent the values at which each sub-account can redeem its investments.

Changes in valuation techniques may result in transfer in or out of an assigned level within the disclosure hierarchy. Transfers between investment levels may occur as the availability of a price source or data used in an investment’s valuation changes. Transfers between investment levels are recognized at the beginning of the reporting period. There have been no transfers between any level of fair value measurements during the period ended December 31, 2015.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

6.

Purchases and Sales of Investments

The cost of purchases including reinvestment of dividend distributions and proceeds from the sales of investments in the Portfolios of the Trust and Non-affiliated Trusts during 2015 were as follows:

 

     Purchases      Sales  

Sub-Account

      

500 Index Fund B Series NAV

    $ 41,170,190       $ 38,918,221   

Active Bond Trust Series I

      508,670         505,635   

Active Bond Trust Series NAV

      222,961         123,065   

All Cap Core Trust Series I

      26,943         71,383   

All Cap Core Trust Series NAV

      176,816         92,215   

Alpha Opportunities Trust Series I

      8,022         2,587   

Alpha Opportunities Trust Series NAV

      578,923         511,347   

American Asset Allocation Trust Series I

      1,800,345         1,493,846   

American Global Growth Trust Series I

      5,723,275         5,480,961   

American Growth Trust Series I

      8,918,812         11,461,339   

American Growth-Income Trust Series I

      2,262,230         1,698,713   

American International Trust Series I

      5,705,190         6,662,340   

American New World Trust Series I

      2,051,022         1,729,014   

Blue Chip Growth Trust Series I

      3,786,956         1,288,886   

Blue Chip Growth Trust Series NAV

      20,616,590         8,473,647   

Bond Trust Series I

      6,119,868         854,982   

Bond Trust Series NAV

      149,778         92,313   

Capital Appreciation Trust Series I

      2,329,874         1,074,969   

Capital Appreciation Trust Series NAV

      848,839         266,463   

Capital Appreciation Value Trust Series I

      629,572         2,981,792   

Capital Appreciation Value Trust Series NAV

      130,028         17,343   

Core Bond Trust Series I

      16,223,604         4,935,926   

Core Bond Trust Series NAV

      34,584,062         11,773,167   

Core Strategy Trust Series I

      960,963         951,456   

Core Strategy Trust Series NAV

      362,090         211,510   

Emerging Markets Value Trust Series I

      7,064         83,332   

Emerging Markets Value Trust Series NAV

      375,832         373,531   

Equity-Income Trust Series I

      3,033,648         5,493,750   

Equity-Income Trust Series NAV

      16,217,044         15,909,437   

Financial Industries Trust Series I

      724,620         1,307,051   

Financial Industries Trust Series NAV

      813,301         686,158   

Franklin Templeton Founding Allocation Trust Series I

      5,300         5,699   

Franklin Templeton Founding Allocation Trust Series NAV

      41,890         111,829   

Fundamental All Cap Core Trust Series I

      161,352         27,568   

Fundamental All Cap Core Trust Series NAV

      421,476         105,192   

Fundamental Large Cap Value Trust Series I

      1,210,654         2,602,731   

Fundamental Large Cap Value Trust Series NAV

      3,581,459         3,109,634   

Global Bond Trust Series I

      2,023,182         3,270,107   

Global Bond Trust Series NAV

      2,149,287         2,718,226   

Global Trust Series I

      746,062         1,534,502   

Global Trust Series NAV

      344,262         382,211   

Health Sciences Trust Series I

      5,092,188         2,956,633   

Health Sciences Trust Series NAV

      3,752,415         3,056,902   

High Yield Trust Series I

      913,629         1,595,488   

High Yield Trust Series NAV

      1,610,144         2,820,949   

International Core Trust Series I

      1,250,610         1,297,327   

International Core Trust Series NAV

      589,924         477,695   

International Equity Index Trust B Series I

      1,863,905         1,297,183   

International Equity Index Trust B Series NAV

      3,957,569         3,565,754   

 

66

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

6. Purchases and Sales of Investments — (continued):

 

     Purchases      Sales  

Sub-Account

      

International Growth Stock Trust Series I

    $ 1,370,152       $ 75,361   

International Growth Stock Trust Series NAV

      2,366,002         1,781,857   

International Small Company Trust Series I

      374,218         807,442   

International Small Company Trust Series NAV

      96,330         251,303   

International Value Trust Series I

      1,961,365         1,505,141   

International Value Trust Series NAV

      893,230         947,201   

Investment Quality Bond Trust Series I

      2,538,394         2,613,053   

Investment Quality Bond Trust Series NAV

      400,137         359,568   

Lifestyle Aggressive MVP Series I

      213,955         917,554   

Lifestyle Aggressive MVP Series NAV

      2,237,385         2,473,962   

Lifestyle Balanced MVP Series I

      2,434,709         1,962,018   

Lifestyle Balanced MVP Series NAV

      5,287,132         4,941,998   

Lifestyle Conservative MVP Series I

      1,612,244         1,895,188   

Lifestyle Conservative MVP Series NAV

      2,073,755         2,731,764   

Lifestyle Growth MVP Series I

      1,535,464         1,030,356   

Lifestyle Growth MVP Series NAV

      6,040,976         4,414,492   

Lifestyle Moderate MVP Series I

      751,439         595,033   

Lifestyle Moderate MVP Series NAV

      1,933,734         1,786,904   

M Capital Appreciation (a)

      118,752         9,443   

M Large Cap Growth (a)

      1         701,697   

Mid Cap Index Trust Series I

      3,956,607         2,477,876   

Mid Cap Index Trust Series NAV

      27,998,852         9,792,731   

Mid Cap Stock Trust Series I

      1,353,415         409,011   

Mid Cap Stock Trust Series NAV

      8,711,289         7,915,826   

Mid Value Trust Series I

      2,838,194         3,738,854   

Mid Value Trust Series NAV

      9,225,664         19,900,313   

Money Market Trust B Series NAV

      50,738,631         50,895,658   

Money Market Trust Series I

      24,020,499         22,836,474   

PIMCO All Asset (a)

      687,239         783,415   

Real Estate Securities Trust Series I

      2,029,121         3,442,586   

Real Estate Securities Trust Series NAV

      5,295,540         6,403,111   

Real Return Bond Trust Series I

      3,120,818         3,944,756   

Real Return Bond Trust Series NAV

      5,285,288         6,393,539   

Science & Technology Trust Series I

      4,200,796         2,741,066   

Science & Technology Trust Series NAV

      1,456,658         1,160,907   

Short Term Government Income Trust Series I

      1,266,769         1,369,627   

Short Term Government Income Trust Series NAV

      927,184         922,079   

Small Cap Growth Trust Series I

      479,768         167,822   

Small Cap Growth Trust Series NAV

      6,042,554         5,183,299   

Small Cap Index Trust Series I

      3,236,994         2,252,333   

Small Cap Index Trust Series NAV

      2,875,791         2,594,796   

Small Cap Opportunities Trust Series I

      728,452         1,603,382   

Small Cap Opportunities Trust Series NAV

      181,047         174,173   

Small Cap Value Trust Series I

      1,244,174         1,179,567   

Small Cap Value Trust Series NAV

      3,708,529         3,093,208   

Small Company Value Trust Series I

      1,327,413         2,926,332   

Small Company Value Trust Series NAV

      402,283         1,217,669   

Strategic Income Opportunities Trust Series I

      1,801,288         973,823   

Strategic Income Opportunities Trust Series NAV

      875,204         1,199,950   

Total Bond Market Trust B Series NAV

      14,342,973         13,961,536   

Total Return Trust Series I (b)

      3,321,193         15,311,134   

Total Return Trust Series NAV (b)

      6,741,313         30,640,357   

 

67

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

6.

Purchases and Sales of Investments — (continued):

 

 

     Purchases      Sales  

Sub-Account

      

Total Stock Market Index Trust Series I

    $ 5,458,548       $ 2,229,583   

Total Stock Market Index Trust Series NAV

      448,755         209,743   

U.S. Equity Trust Series I

      319,142         86,859   

U.S. Equity Trust Series NAV

      347,171         1,153,836   

Ultra Short Term Bond Trust Series I

      205         351   

Ultra Short Term Bond Trust Series NAV

      1,195,782         666,394   

Utilities Trust Series I

      639,926         1,245,801   

Utilities Trust Series NAV

      1,053,597         2,680,697   

Value Trust Series I

      1,528,469         1,305,808   

Value Trust Series NAV

      587,703         202,135   

 

(a)

Sub-account that invests in non-affiliated Trust.

 

(b)

Terminated as an investment option and funds transferred to Core Bond Trust on April 27, 2015.

 

68

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values

A summary of unit values and units outstanding for variable life contracts and the expense and income ratios, excluding expenses of the underlying Portfolios, were as follows:

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

500 Index Fund B Series NAV

       2015          1,981        $ 43.20 to $25.06        $ 71,734          0.70% to 0.00 %        1.79 %        1.15% to 0.44 % 
      2014          1,978          26.70 to 24.48          70,166          0.90 to 0.00          1.74          13.43 to 12.41   
      2013          1,787          37.65 to 22.15          55,400          0.70 to 0.00          1.83          32.03 to 31.11   
      2012          1,599          28.52 to 16.90          38,999          0.70 to 0.00          1.07          15.80 to 14.99   
      2011          1,391          24.63 to 14.50          29,724          0.70 to 0.00          1.93          1.87 to 0.95   

Active Bond Trust Series I

       2015          30          21.37 to 20.38          623          0.65 to 0.20          4.95          (0.03) to (0.49 ) 
      2014          32          21.80 to 19.99          652          0.90 to 0.00          3.76          6.82 to 5.85   
      2013          29          20.06 to 19.30          556          0.65 to 0.20          6.73          0.05 to (0.40 ) 
      2012          28          20.05 to 19.38          544          0.65 to 0.20          4.45          9.49 to 8.99   
      2011          52          18.56 to 17.48          927          0.65 to 0.00          4.54          5.81 to 4.87   

Active Bond Trust Series NAV

       2015          5          71.15 to 71.15          340          0.00 to 0.00          5.26          0.12 to 0.12   
      2014          4          71.07 to 71.07          258          0.00 to 0.00          4.64          6.97 to 6.97   
      2013          3          66.44 to 66.44          180          0.00 to 0.00          5.68          0.19 to 0.19   
      2012          4          66.31 to 66.31          239          0.00 to 0.00          4.25          9.76 to 9.76   
      2011          4          60.42 to 60.42          234          0.00 to 0.00          4.23          5.97 to 5.97   

All Cap Core Trust Series I

       2015          15          31.44 to 29.18          450          0.70 to 0.20          0.93          2.39 to 1.88   
      2014          17          31.58 to 27.85          485          0.90 to 0.00          1.01          9.64 to 8.66   
      2013          17          28.06 to 14.71          460          0.70 to 0.20          1.24          34.06 to 33.39   
      2012          21          20.68 to 19.72          408          0.70 to 0.30          0.97          16.21 to 15.75   
      2011          24          18.40 to 9.50          414          0.65 to 0.00          0.94          0.41 to (0.49 ) 

All Cap Core Trust Series NAV

       2015          77          20.76 to 20.76          1,594          0.00 to 0.00          1.02          2.64 to 2.64   
      2014          73          20.23 to 20.23          1,485          0.00 to 0.00          1.01          9.68 to 9.68   
      2013          58          18.44 to 18.44          1,064          0.00 to 0.00          1.33          34.44 to 34.44   
      2012          59          13.72 to 13.72          813          0.00 to 0.00          1.24          16.62 to 16.62   
      2011          21          11.76 to 11.76          244          0.00 to 0.00          1.09          0.40 to 0.40   

Alpha Opportunities Trust Series I

       2015          2          22.06 to 22.06          42          0.65 to 0.65          0.64          (0.65) to (0.65)   
      2014          2          23.02 to 21.90          44          0.90 to 0.00          0.55          8.00 to 7.03   
      2013          2          20.69 to 20.69          43          0.65 to 0.65          0.35          34.68 to 34.68   
      2012          3          15.36 to 15.36          40          0.65 to 0.65          0.67          20.55 to 20.55   
      2011          1          12.96 to 12.66          13          0.65 to 0.00          0.62          (8.14) to (8.96 ) 

Alpha Opportunities Trust Series NAV

       2015          14          24.36 to 24.36          331          0.00 to 0.00          0.68          (0.03) to (0.03)   
      2014          19          24.37 to 24.37          451          0.00 to 0.00          0.94          8.12 to 8.12   
      2013          2          22.54 to 22.54          45          0.00 to 0.00          1.01          35.58 to 35.58   
      2012          1          16.63 to 16.63          19          0.00 to 0.00          0.76          21.38 to 21.38   
      2011          1          13.70 to 13.70          11          0.00 to 0.00          0.35          (8.02) to (8.02 ) 

American Asset Allocation Trust Series I

       2015          598          15.38 to 14.57          8,795          0.70 to 0.00          2.04          1.06 to 0.35   
      2014          638          15.22 to 14.33          9,330          0.90 to 0.00          1.40          5.05 to 4.10   
      2013          698          14.49 to 13.92          9,769          0.70 to 0.00          1.05          23.30 to 22.44   
      2012          756          11.75 to 11.37          8,631          0.70 to 0.00          1.43          15.77 to 14.95   
      2011          978          10.15 to 9.82          9,709          0.65 to 0.00          1.40          0.91 to 0.01   

American Global Growth Trust Series I

       2015          27          15.66 to 15.14          427          0.65 to 0.00          1.58          6.64 to 5.94   
      2014          20          14.68 to 14.14          294          0.90 to 0.00          1.03          1.97 to 1.05   
      2013          14          14.40 to 14.11          204          0.65 to 0.00          0.83          28.63 to 27.80   
      2012          34          11.19 to 11.04          380          0.65 to 0.00          0.50          22.12 to 21.33   
      2011          38          9.17 to 9.07          344          0.65 to 0.00          1.06          10.05 to (9.24 ) 

American Growth Trust Series I

       2015          488          31.29 to 22.54          11,721          0.65 to 0.00          0.23          6.44 to 5.75   
      2014          606          28.74 to 21.17          13,915          0.90 to 0.00          0.83          8.13 to 7.17   
      2013          626          28.87 to 27.54          13,320          0.65 to 0.00          0.49          29.61 to 28.76   
      2012          732          21.39 to 15.11          13,000          0.65 to 0.00          0.38          17.49 to 16.73   
      2011          942          19.36 to 17.93          15,092          0.65 to 0.00          0.21          (4.63) to (5.48 ) 

American Growth-Income Trust Series I

       2015          469          27.62 to 20.19          11,818          0.70 to 0.00          1.32          1.11 to 0.41   
      2014          502          26.88 to 19.97          12,621          0.90 to 0.00          0.93          10.25 to 9.27   
      2013          507          26.48 to 25.12          11,631          0.70 to 0.00          0.97          33.02 to 32.09   
      2012          545          19.02 to 13.62          9,568          0.70 to 0.00          1.22          17.16 to 16.33   
      2011          647          17.35 to 16.08          10,081          0.65 to 0.00          1.15          (2.09) to (2.97 ) 

American International Trust Series I

       2015          849          28.24 to 17.40          15,951          0.65 to 0.00          1.13          (4.82) to (5.44)   
      2014          886          29.02 to 18.28          17,920          0.90 to 0.00          1.07          (3.05) to (3.92 ) 
      2013          878          32.50 to 31.01          18,331          0.65 to 0.00          0.99          21.20 to 20.41   
      2012          887          25.75 to 15.55          16,146          0.65 to 0.00          0.99          17.50 to 16.73   
      2011          1,290          23.31 to 21.60          22,460          0.65 to 0.00          1.28         
 		 15.11 to
(14.30		   
) 

American New World Trust Series I

       2015          130          15.47 to 14.81          1,995          0.65 to 0.00          1.67          (3.66) to (4.29)   
      2014          128          16.05 to 15.26          2,025          0.90 to 0.00          1.21          (8.21) to (9.03 ) 
      2013          33          17.49 to 16.97          570          0.65 to 0.00          1.14          10.89 to 10.17   
      2012          46          15.77 to 15.40          715          0.65 to 0.00          0.72          17.37 to 16.60   
      2011          37          13.44 to 13.12          493          0.65 to 0.00          1.48          15.10 to (14.30 ) 

Blue Chip Growth Trust Series I

       2015          174          52.74 to 48.92          8,641          0.70 to 0.20          0.00          10.84 to 10.29   
      2014          154          48.93 to 43.14          6,900          0.90 to 0.00          0.00          9.07 to 8.09   

 

69

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Blue Chip Growth Trust Series I

       2013          165        $ 43.71 to $22.34        $ 6,783          0.70% to 0.20 %        0.27 %        41.05% to 40.34 % 
      2012          189          30.99 to 29.18          5,515          0.70 to 0.20          0.09          18.08 to 17.49   
      2011          416          26.83 to 13.51          10,454          0.65 to 0.00          0.01          1.44 to 0.53   

Blue Chip Growth Trust Series NAV

       2015          345          135.88 to 135.88          46,931          0.00 to 0.00          0.00          11.13 to 11.13   
      2014          310          122.28 to 122.28          37,958          0.00 to 0.00          0.00          9.11 to 9.11   
      2013          258          112.07 to 112.07          28,909          0.00 to 0.00          0.35          41.43 to 41.43   
      2012          209          79.24 to 79.24          16,560          0.00 to 0.00          0.14          18.39 to 18.39   
      2011          215          66.93 to 66.93          14,394          0.00 to 0.00          0.01          1.45 to 1.45   

Bond Trust Series I

       2015          528          11.08 to 10.88          5,810          0.65 to 0.20          3.49          0.01 to (0.41 ) 
      2014          69          11.16 to 10.84          764          0.90 to 0.00          3.08          5.53 to 4.57   
      2013          47          10.52 to 10.42          496          0.65 to 0.20          3.09          (1.56) to (2.01 ) 
      2012          41          10.69 to 10.63          434          0.65 to 0.20          2.83          6.10 to 5.64   
      2011          122          10.08 to 10.06          1,232          0.65 to 0.00          14.34          0.78 to 0.62   

Bond Trust Series NAV

       2015          62          11.20 to 11.20          699          0.00 to 0.00          3.02          0.30 to 0.30   
      2014          59          11.17 to 11.17          661          0.00 to 0.00          2.64          5.59 to 5.59   
      2013          52          10.58 to 10.58          548          0.00 to 0.00          2.66          (1.32) to (1.32 ) 
      2012          84          10.72 to 10.72          896          0.00 to 0.00          3.96          6.31 to 6.31   
      2011          45          10.08 to 10.08          454          0.00 to 0.00          14.78          0.82 to 0.82   

Capital Appreciation Trust Series I

       2015          327          26.81 to 24.92          8,542          0.70 to 0.20          0.00          11.23 to 10.68   
      2014          332          24.78 to 21.90          7,804          0.90 to 0.00          0.05          9.65 to 8.67   
      2013          384          22.02 to 20.67          8,248          0.70 to 0.20          0.21          37.14 to 36.45   
      2012          167          16.06 to 15.15          2,598          0.70 to 0.20          0.15          15.75 to 15.16   
      2011          311          14.18 to 12.88          4,191          0.65 to 0.00          0.07          0.07 to (0.82 ) 

Capital Appreciation Trust Series NAV

       2015          65          27.11 to 27.11          1,756          0.00 to 0.00          0.03          11.47 to 11.47   
      2014          54          24.32 to 24.32          1,316          0.00 to 0.00          0.09          9.68 to 9.68   
      2013          49          22.17 to 22.17          1,087          0.00 to 0.00          0.24          37.50 to 37.50   
      2012          54          16.13 to 16.13          873          0.00 to 0.00          0.22          16.03 to 16.03   
      2011          41          13.90 to 13.90          571          0.00 to 0.00          0.12          0.11 to 0.11   

Capital Appreciation Value Trust Series I

       2015          18          17.92 to 17.52          321          0.65 to 0.35          0.39          4.92 to 4.60   
      2014          180          17.48 to 16.46          3,068          0.90 to 0.00          1.95          12.22 to 11.22   
      2013          34          15.27 to 15.02          511          0.65 to 0.35          1.45          21.88 to 21.53   
      2012          27          12.53 to 12.36          339          0.65 to 0.35          1.41          14.19 to 13.86   
      2011          39          11.12 to 10.75          430          0.65 to 0.00          1.25          3.13 to 2.21   

Capital Appreciation Value Trust Series NAV

       2015          14          18.46 to 18.46          263          0.00 to 0.00          1.40          5.27 to 5.27   
      2014          10          17.54 to 17.54          170          0.00 to 0.00          1.68          12.38 to 12.38   
      2013          7          15.60 to 15.60          106          0.00 to 0.00          1.91          22.29 to 22.29   
      2012          3          12.76 to 12.76          45          0.00 to 0.00          1.63          14.77 to 14.77   
      2011          0          11.12 to 11.12          3          0.00 to 0.00          0.12          3.09 to 3.09   

Core Bond Trust Series I

       2015          557          19.87 to 18.96          10,922          0.65 to 0.20          2.59          0.12 to (0.33)   
      2014          1          20.25 to 18.56          14          0.90 to 0.00          2.89          5.93 to 4.98   
      2013          1          18.78 to 18.07          14          0.65 to 0.20          1.60          (2.35) to (2.79 ) 
      2012          1          19.23 to 18.59          26          0.65 to 0.20          0.87          6.25 to 5.78   
      2011          25          18.35 to 17.28          447          0.65 to 0.00          10.22          8.32 to 7.35   

Core Bond Trust Series NAV

       2015          1,411          16.32 to 16.32          23,019          0.00 to 0.00          2.19          0.36 to 0.36   
      2014          63          16.26 to 16.26          1,029          0.00 to 0.00          3.47          6.01 to 6.01   
      2013          29          15.34 to 15.34          446          0.00 to 0.00          1.73          (2.12) to (2.12 ) 
      2012          50          15.67 to 15.67          791          0.00 to 0.00          2.84          6.54 to 6.54   
      2011          41          14.71 to 14.71          599          0.00 to 0.00          3.28          8.32 to 8.32   

Core Strategy Trust Series I

       2015          7          14.45 to 13.95          104          0.65 to 0.20          2.00          (0.30) to (0.76 ) 
      2014          7          14.68 to 13.82          103          0.90 to 0.00          2.34          6.10 to 5.16   
      2013          11          13.33 to 13.33          151          0.65 to 0.65          7.87          18.39 to 18.39   
      2012          0          11.26 to 11.26          1          0.65 to 0.65          3.89          11.79 to 11.79   
      2011          0          10.32 to 9.98          1          0.65 to 0.00          2.25          0.20 to (0.69 ) 

Core Strategy Trust Series NAV

       2015          186          14.73 to 14.73          2,740          0.00 to 0.00          2.24          (0.06) to (0.06 ) 
      2014          187          14.73 to 14.73          2,755          0.00 to 0.00          3.64          6.14 to 6.14   
      2013          17          13.88 to 13.88          241          0.00 to 0.00          3.06          19.29 to 19.29   
      2012          3          11.64 to 11.64          30          0.00 to 0.00          3.18          12.58 to 12.58   
      2011          2          10.34 to 10.34          18          0.00 to 0.00          1.65          0.19 to 0.19   

Emerging Markets Value Trust Series I

       2015          6          11.07 to 10.79          68          0.65 to 0.35          1.99          (19.36) to (19.60 ) 
      2014          13          14.10 to 13.16          174          0.90 to 0.00          0.96          (5.50) to (6.35 ) 
      2013          67          14.58 to 14.29          965          0.65 to 0.35          1.10          (3.55) to (3.84 ) 
      2012          90          15.12 to 14.86          1,345          0.65 to 0.35          1.11          18.12 to 17.76   
      2011          58          13.01 to 12.47          742          0.65 to 0.00          1.41          27.71 to (27.00 ) 

Emerging Markets Value Trust Series NAV

       2015          91          9.17 to 9.17          833          0.00 to 0.00          2.21          (19.05) to (19.05 ) 
      2014          94          11.32 to 11.32          1,069          0.00 to 0.00          1.65          (5.37) to (5.37 ) 
      2013          134          11.97 to 11.97          1,607          0.00 to 0.00          1.49          (3.18) to (3.18 ) 
      2012          95          12.36 to 12.36          1,174          0.00 to 0.00          0.97          18.49 to 18.49   
      2011          97          10.43 to 10.43          1,016          0.00 to 0.00          2.03          27.02 to (27.00 ) 

Equity -Income Trust Series I

       2015          240          40.24 to 37.33          9,307          0.70 to 0.20          1.68          (6.93) to (7.40 ) 
      2014          330          44.46 to 39.20          13,816          0.90 to 0.00          1.98          7.47 to 6.51   

 

70

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Equity-Income Trust Series I

       2013          301        $ 40.31 to $28.33        $ 11,703          0.70% to 0.20 %        1.84 %        29.78% to 29.14 % 
      2012          367          31.06 to 29.25          11,018          0.70 to 0.20          2.05          17.13 to 16.54   
      2011          474          27.11 to 18.77          12,187          0.70 to 0.00          1.73          (0.81) to (1.70 ) 

Equity -Income Trust Series NAV

       2015          824          42.79 to 42.79          35,253          0.00 to 0.00          1.98          (6.66) to (6.66 ) 
      2014          908          45.85 to 45.85          41,633          0.00 to 0.00          2.00          7.55 to 7.55   
      2013          863          42.63 to 42.63          36,784          0.00 to 0.00          2.17          30.05 to 30.05   
      2012          745          32.78 to 32.78          24,422          0.00 to 0.00          2.06          17.47 to 17.47   
      2011          749          27.90 to 27.90          20,893          0.00 to 0.00          1.90          (0.76) to (0.76 ) 

Financial Industries Trust Series I

       2015          32          22.35 to 20.93          682          0.65 to 0.20          0.60          (2.84) to (3.27 ) 
      2014          66          23.65 to 20.91          1,468          0.90 to 0.00          0.85          8.65 to 7.67   
      2013          54          21.21 to 20.04          1,105          0.65 to 0.20          0.00          30.49 to 29.90   
      2012          38          16.26 to 15.43          591          0.65 to 0.20          0.81          17.80 to 17.28   
      2011          23          14.10 to 12.81          304          0.65 to 0.00          1.01          10.32 to (9.51 ) 

Financial Industries Trust Series NAV

       2015          14          27.73 to 27.73          379          0.00 to 0.00          1.02          (2.58) to (2.58 ) 
      2014          15          28.46 to 28.46          421          0.00 to 0.00          0.68          8.64 to 8.64   
      2013          17          26.20 to 26.20          449          0.00 to 0.00          0.72          30.86 to 30.86   
      2012          16          20.02 to 20.02          322          0.00 to 0.00          0.64          18.03 to 18.03   
      2011          22          16.96 to 16.96          370          0.00 to 0.00          2.01          (9.39) to (9.39 ) 

Franklin Templeton Founding Allocation Trust Series I

       2015          1          13.00 to 13.00          9          0.65 to 0.65          2.67          (6.41) to (6.41 ) 
      2014          1          14.51 to 13.67          11          0.90 to 0.00          3.02          3.01 to 2.09   
      2013          1          13.57 to 13.57          13          0.65 to 0.65          2.46          23.63 to 23.63   
      2012          1          10.98 to 10.98          10          0.65 to 0.65          3.60          15.51 to 15.51   
      2011          1          9.74 to 9.42          7          0.65 to 0.00          20.73          (1.41) to (2.28 ) 

Franklin Templeton Founding Allocation Trust Series NAV

       2015          10          13.71 to 13.71          138          0.00 to 0.00          1.96          (5.75) to (5.75 ) 
      2014          15          14.55 to 14.55          224          0.00 to 0.00          3.49          3.06 to 3.06   
      2013          14          14.12 to 14.12          192          0.00 to 0.00          2.63          24.51 to 24.51   
      2012          12          11.34 to 11.34          137          0.00 to 0.00          2.48          16.33 to 16.33   
      2011          29          9.75 to 9.75          285          0.00 to 0.00          1.72          (1.45) to (1.45 ) 

Fundamental All Cap Core Trust Series I

       2015          12          36.99 to 34.94          438          0.65 to 0.20          0.00          3.81 to 3.34   
      2014          9          36.47 to 32.84          306          0.90 to 0.00          0.38          9.75 to 8.76   
      2013          11          32.53 to 31.01          345          0.65 to 0.20          0.93          35.61 to 35.00   
      2012          13          23.99 to 22.97          312          0.65 to 0.20          0.80          23.27 to 22.72   
      2011          15          19.80 to 18.32          282          0.65 to 0.00          0.86          (2.08) to (2.95 ) 

Fundamental All Cap Core Trust Series NAV

       2015          58          22.55 to 22.55          1,309          0.00 to 0.00          0.00          4.09 to 4.09   
      2014          47          21.66 to 21.66          1,009          0.00 to 0.00          0.48          9.81 to 9.81   
      2013          39          19.73 to 19.73          778          0.00 to 0.00          1.10          35.87 to 35.87   
      2012          38          14.52 to 14.52          545          0.00 to 0.00          0.90          23.67 to 23.67   
      2011          30          11.74 to 11.74          347          0.00 to 0.00          1.22          (2.02) to (2.02 ) 

Fundamental Large Cap Value Trust Series I

       2015          217          27.40 to 25.85          5,781          0.70 to 0.20          0.97          (1.31) to (1.80 ) 
      2014          270          28.36 to 25.76          7,281          0.90 to 0.00          1.21          10.61 to 9.62   
      2013          109          25.15 to 24.08          2,672          0.65 to 0.20          0.12          32.15 to 31.56   
      2012          0          19.03 to 18.30          3          0.65 to 0.20          5.59          24.17 to 23.61   
      2011          0          15.56 to 14.52          0          0.65 to 0.00          1.01          1.75 to 0.83   

Fundamental Large Cap Value Trust Series NAV

       2015          191          19.75 to 19.75          3,773          0.00 to 0.00          1.03          (1.06) to (1.06 ) 
      2014          168          19.96 to 19.96          3,363          0.00 to 0.00          0.84          10.66 to 10.66   
      2013          116          18.04 to 18.04          2,091          0.00 to 0.00          1.11          32.46 to 32.46   
      2012          23          13.62 to 13.62          307          0.00 to 0.00          4.85          24.48 to 24.48   
      2011          18          10.94 to 10.94          198          0.00 to 0.00          1.15          1.90 to 1.90   

Fundamental Value Trust Series I

       2014          0          26.08 to 23.09          0          0.90 to 0.00          1.87          6.99 to 6.18   
      2013          207          23.76 to 22.31          4,736          0.70 to 0.20          1.17          33.25 to 32.59   
      2012          330          17.83 to 16.82          5,709          0.70 to 0.20          0.88          13.15 to 12.59   
      2011          544          16.10 to 14.62          8,360          0.70 to 0.00          0.75          (3.78) to (4.64 ) 

Fundamental Value Trust Series NAV

       2014          0          18.67 to 18.67          0          0.00 to 0.00          0.64          7.01 to 7.01   
      2013          167          17.45 to 17.45          2,913          0.00 to 0.00          1.22          33.62 to 33.62   
      2012          302          13.06 to 13.06          3,948          0.00 to 0.00          0.73          13.40 to 13.40   
      2011          256          11.52 to 11.52          2,950          0.00 to 0.00          0.88          (3.74) to (3.74 ) 

Global Bond Trust Series I

       2015          41          28.07 to 26.04          1,123          0.70 to 0.20          1.76          (3.70) to (4.17 ) 
      2014          89          29.98 to 26.43          2,487          0.90 to 0.00          0.93          2.28 to 1.36   
      2013          93          28.55 to 25.78          2,564          0.70 to 0.20          0.44          (5.61) to (6.07 ) 
      2012          104          30.25 to 28.49          3,033          0.70 to 0.20          7.12          6.81 to 6.28   
      2011          134          28.95 to 25.75          3,694          0.70 to 0.00          6.14          9.08 to 8.11   

Global Bond Trust Series NAV

       2015          201          29.73 to 29.73          5,977          0.00 to 0.00          2.49          (3.51) to (3.51 ) 
      2014          225          30.81 to 30.81          6,936          0.00 to 0.00          1.08          2.42 to 2.42   
      2013          220          30.08 to 30.08          6,618          0.00 to 0.00          0.46          (5.54) to (5.54 ) 
      2012          415          31.84 to 31.84          13,208          0.00 to 0.00          7.03          7.15 to 7.15   
      2011          463          29.72 to 29.72          13,749          0.00 to 0.00          6.84          9.08 to 9.08   

Global Trust Series I

       2015          83          28.30 to 26.25          2,224          0.70 to 0.20          1.81          (6.61) to (7.08 ) 
      2014          113          31.16 to 27.47          3,234          0.90 to 0.00          3.40          (2.60) to (3.47 ) 
      2013          60          31.17 to 22.63          1,755          0.70 to 0.20          1.65          30.82 to 30.17   
      2012          70          23.83 to 22.44          1,571          0.70 to 0.20          2.25          21.50 to 20.89   

 

71

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Global Trust Series I

       2011          55        $ 20.05 to $14.34        $ 1,036          0.65% to 0.00 %        1.36 %        (6.00)% to (6.84 )% 

Global Trust Series NAV

       2015          123          16.17 to 16.17          1,989          0.00 to 0.00          1.96          (6.33) to (6.33 ) 
      2014          128          17.26 to 17.26          2,209          0.00 to 0.00          4.54          (2.51) to (2.51 ) 
      2013          39          17.70 to 17.70          690          0.00 to 0.00          0.02          31.04 to 0.01   
      2012          30          13.51 to 13.51          412          0.00 to 0.00          2.63          21.82 to 21.82   
      2011          16          11.09 to 11.09          179          0.00 to 0.00          2.15          (5.96) to (5.96 ) 

Health Sciences Trust Series I

       2015          110          75.57 to 70.74          8,069          0.65 to 0.20          0.00          12.47 to 11.97   
      2014          100          69.05 to 61.05          6,505          0.90 to 0.00          0.00          31.83 to 30.65   
      2013          99          51.07 to 48.24          4,849          0.65 to 0.20          0.00          50.77 to 50.10   
      2012          104          33.87 to 32.14          3,410          0.65 to 0.20          0.00          31.69 to 31.09   
      2011          111          26.28 to 23.87          2,758          0.65 to 0.00          0.00          10.57 to 9.58   

Health Sciences Trust Series NAV

       2015          81          60.67 to 60.67          4,921          0.00 to 0.00          0.00          12.76 to 12.76   
      2014          83          53.81 to 53.81          4,454          0.00 to 0.00          0.00          31.85 to 31.85   
      2013          85          40.81 to 40.81          3,462          0.00 to 0.00          0.00          51.24 to 51.24   
      2012          72          26.99 to 26.99          1,947          0.00 to 0.00          0.00          31.93 to 31.93   
      2011          55          20.45 to 20.45          1,135          0.00 to 0.00          0.00          10.66 to 10.66   

High Yield Trust Series I

       2015          102          27.81 to 25.81          2,758          0.70 to 0.20          7.30          (8.51) to (8.96 ) 
      2014          134          31.25 to 27.57          3,941          0.90 to 0.00          6.42          0.12 to (0.78 ) 
      2013          162          30.42 to 24.48          4,768          0.70 to 0.20          6.93          8.30 to 7.78   
      2012          148          28.09 to 26.46          4,002          0.70 to 0.20          7.52          18.77 to 18.15   
      2011          205          24.17 to 19.17          4,701          0.65 to 0.00          7.86          0.90 to (0.01 ) 

High Yield Trust Series NAV

       2015          117          19.36 to 19.36          2,264          0.00 to 0.00          6.07          (8.38) to (8.38 ) 
      2014          185          21.14 to 21.14          3,920          0.00 to 0.00          7.74          0.00 to 0.00   
      2013          117          21.14 to 21.14          2,471          0.00 to 0.00          6.37          8.68 to 8.68   
      2012          122          19.45 to 19.45          2,370          0.00 to 0.00          8.40          19.07 to 19.07   
      2011          95          16.33 to 16.33          1,550          0.00 to 0.00          8.02          1.14 to 1.14   

International Core Trust Series I

       2015          129          19.21 to 17.83          2,389          0.70 to 0.20          2.81          (5.64) to (6.11 ) 
      2014          134          20.94 to 18.46          2,613          0.90 to 0.00          3.43          (6.70) to (7.53 ) 
      2013          144          21.86 to 17.02          3,011          0.70 to 0.20          3.00          24.74 to 24.12   
      2012          142          17.53 to 16.51          2,379          0.70 to 0.20          2.68          14.82 to 14.24   
      2011          199          15.61 to 11.97          2,920          0.65 to 0.00          2.37          10.38 to (9.57 ) 

International Core Trust Series NAV

       2015          29          15.21 to 15.21          437          0.00 to 0.00          3.21          (5.32) to (5.32 ) 
      2014          24          16.07 to 16.07          390          0.00 to 0.00          3.38          (6.76) to (6.76 ) 
      2013          24          17.23 to 17.23          408          0.65 to 0.00          3.04          25.13 to 25.13   
      2012          16          13.77 to 13.77          215          0.00 to 0.00          3.23          15.16 to 15.16   
      2011          14          11.96 to 11.96          167          0.00 to 0.00          2.07          (9.55) to (9.55 ) 

International Equity Index Trust B Series I

       2015          420          10.83 to 10.68          4,525          0.65 to 0.20          2.54          (6.11) to (6.53 ) 
      2014          382          11.58 to 11.36          4,392          0.90 to 0.00          3.21          (4.61) to (5.47 ) 
      2013          341          12.12 to 12.05          4,122          0.65 to 0.20          2.68          14.32 to 13.81   
      2012          327          10.60 to 10.59          3,460          0.65 to 0.20          6.74          5.98 to 5.91   

International Equity Index Trust B Series NAV

       2015          276          42.78 to 42.78          11,819          0.00 to 0.00          2.45          (5.80) to (5.80 ) 
      2014          274          45.42 to 45.42          12,445          0.00 to 0.00          3.02          (4.57) to (4.57 ) 
      2013          314          47.59 to 47.59          14,937          0.00 to 0.00          2.55          14.54 to 14.54   
      2012          349          41.55 to 41.55          14,502          0.00 to 0.00          1.26          17.76 to 17.76   
      2011          248          35.28 to 35.28          8,758          0.00 to 0.00          3.62          13.99 to (13.90 ) 

International Growth Stock Trust Series I

       2015          131          12.06 to 11.89          1,579          0.65 to 0.20          3.18          (2.46) to (2.90 ) 
      2014          32          12.42 to 12.18          390          0.90 to 0.00          2.16          0.20 to (0.70 ) 
      2013          48          12.37 to 12.30          590          0.65 to 0.20          1.19          18.86 to 18.33   
      2012          43          10.40 to 10.40          445          0.65 to 0.20          4.22          4.04 to 3.96   

International Growth Stock Trust Series NAV

       2015          696          12.16 to 12.16          8,457          0.00 to 0.00          1.83          (2.23) to (2.23 ) 
      2014          664          12.43 to 12.43          8,259          0.00 to 0.00          1.93          0.19 to 0.19   
      2013          645          12.41 to 12.41          8,003          0.00 to 0.00          1.27          19.18 to 19.18   
      2012          504          10.41 to 10.41          5,245          0.00 to 0.00          4.39          4.12 to 4.12   

International Small Company Trust Series I

       2015          40          14.91 to 14.46          587          0.70 to 0.20          1.51          6.32 to 5.80   
      2014          70          14.17 to 13.53          964          0.90 to 0.00          1.38          (6.89) to (7.73 ) 
      2013          71          15.09 to 14.78          1,051          0.70 to 0.20          1.77          26.10 to 25.46   
      2012          87          11.97 to 11.78          1,025          0.70 to 0.20          1.18          18.95 to 18.36   
      2011          203          10.10 to 9.91          2,031          0.65 to 0.00          1.69          (16.23) to (16.97 ) 

International Small Company Trust Series NAV

       2015          66          15.14 to 15.14          1,004          0.00 to 0.00          1.77          6.68 to 6.68   
      2014          78          14.19 to 14.19          1,103          0.00 to 0.00          1.44          (6.85) to (6.85 ) 
      2013          69          15.23 to 15.23          1,048          0.00 to 0.00          1.92          26.30 to 26.30   
      2012          69          12.06 to 12.06          837          0.00 to 0.00          1.27          19.23 to 19.23   
      2011          61          10.12 to 10.12          614          0.00 to 0.00          1.93          (16.18) to (16.18 ) 

International Value Trust Series I

       2015          174          21.19 to 19.66          3,623          0.70 to 0.20          1.92          (7.99) to (8.45 ) 
      2014          159          23.69 to 20.88          3,565          0.90 to 0.00          2.80          (12.51) to (13.29 ) 
      2013          161          26.38 to 24.72          4,125          0.70 to 0.20          1.58          25.90 to 25.27   
      2012          231          20.95 to 19.73          4,726          0.70 to 0.20          2.67          19.14 to 18.54   
      2011          336          17.98 to 16.28          5,800          0.65 to 0.00          2.18          (12.85) to (13.63 ) 

International Value Trust Series NAV

       2015          288          14.25 to 14.25          4,105          0.00 to 0.00          1.96          (7.72) to (7.72 ) 

 

72

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

International Value Trust Series NAV

       2014          297        $ 15.44 to $15.44        $ 4,589          0.00% to 0.00 %        2.99 %        (12.47)% to (12.47 )% 
      2013          320          17.64 to 17.64          5,653          0.00 to 0.00          1.94          26.21 to 26.21   
      2012          330          13.98 to 13.98          4,617          0.00 to 0.00          2.78          19.36 to 19.36   
      2011          320          11.71 to 11.71          3,750          0.00 to 0.00          2.37          (12.80) to (12.80 ) 

Investment Quality Bond Trust Series I

       2015          156          31.82 to 29.52          4,775          0.70 to 0.20          1.85          (1.02) to (1.51 ) 
      2014          169          33.07 to 29.15          5,210          0.90 to 0.00          3.35          5.48 to 4.53   
      2013          126          30.54 to 25.37          3,680          0.70 to 0.20          3.74          (2.11) to (2.60 ) 
      2012          142          31.20 to 29.38          4,236          0.70 to 0.20          1.98          7.36 to 6.83   
      2011          223          29.71 to 24.31          6,242          0.07 to 0.00          4.35          8.07 to 7.10   

Investment Quality Bond Trust Series NAV

       2015          44          15.87 to 15.87          691          0.00 to 0.00          1.94          (0.68) to (0.68 ) 
      2014          44          15.98 to 15.98          697          0.00 to 0.00          3.30          5.54 to 5.54   
      2013          29          15.14 to 15.14          433          0.00 to 0.00          4.03          (1.88) to (1.88)   
      2012          42          15.43 to 15.43          644          0.00 to 0.00          2.33          7.66 to 7.66   
      2011          35          14.33 to 14.33          507          0.00 to 0.00          3.65          8.06 to 8.06   

Lifestyle Aggressive MVP Series I

       2015          40          27.78 to 25.98          1,050          0.65 to 0.20          1.41          (6.04) to (6.46 ) 
      2014          66          30.41 to 26.82          1,847          0.90 to 0.00          1.98          1.40 to 0.49   
      2013          109          29.22 to 22.23          3,043          0.65 to 0.20          2.43          26.47 to 25.90   
      2012          99          23.11 to 21.90          2,179          0.65 to 0.20          1.68          16.38 to 15.85   
      2011          228          20.30 to 15.21          4,345          0.65 to 0.00          1.70          (6.50) to (7.34 ) 

Lifestyle Aggressive MVP Series NAV

       2015          366          17.59 to 17.59          6,434          0.00 to 0.00          2.05          (5.79) to (5.79 ) 
      2014          384          18.67 to 18.67          7,176          0.00 to 0.00          3.07          1.54 to 1.54   
      2013          364          18.39 to 18.39          6,699          0.00 to 0.00          2.64          26.77 to 26.77   
      2012          400          14.51 to 14.51          5,797          0.00 to 0.00          1.53          16.67 to 16.67   
      2011          593          12.43 to 12.43          7,378          0.00 to 0.00          1.94          (6.46) to (6.46 ) 

Lifestyle Balanced MVP Series I

       2015          147          32.74 to 30.60          4,491          0.65 to 0.20          2.84          (2.45) to (2.88 ) 
      2014          142          34.52 to 30.43          4,473          0.90 to 0.00          1.67          4.29 to 3.35   
      2013          266          32.24 to 24.30          8,189          0.65 to 0.20          2.44          12.56 to 12.05   
      2012          316          28.64 to 27.14          8,676          0.65 to 0.20          2.13          11.64 to 11.14   
      2011          524          26.23 to 19.47          12,908          0.65 to 0.00          3.34          0.62 to (0.28 ) 

Lifestyle Balanced MVP Series NAV

       2015          880          17.18 to 17.18          15,117          0.00 to 0.00          2.49          (2.20) to (2.20 ) 
      2014          942          17.57 to 17.57          16,551          0.00 to 0.00          2.70          4.25 to 4.25   
      2013          1,161          16.85 to 16.85          19,568          0.00 to 0.00          2.92          12.89 to 12.89   
      2012          1,146          14.93 to 14.93          17,102          0.00 to 0.00          2.41          11.90 to 11.90   
      2011          1,347          13.34 to 13.34          17,965          0.00 to 0.00          3.98          0.67 to 0.67   

Lifestyle Conservative MVP Series I

       2015          58          33.25 to 31.08          1,842          0.65 to 0.20          2.54          (0.15) to (0.61 ) 
      2014          72          34.24 to 30.19          2,267          0.90 to 0.00          1.72          5.02 to 4.08   
      2013          200          31.77 to 24.68          6,115          0.65 to 0.20          3.51          3.67 to 3.21   
      2012          220          30.65 to 29.03          6,465          0.65 to 0.20          3.82          8.29 to 7.81   
      2011          117          28.92 to 22.14          3,191          0.65 to 0.00          4.60          4.23 to 3.30   

Lifestyle Conservative MVP Series NAV

       2015          277          16.43 to 16.43          4,546          0.00 to 0.00          2.71          0.18 to 0.18   
      2014          338          16.40 to 16.40          5,549          0.00 to 0.00          2.76          4.98 to 4.98   
      2013          483          15.62 to 15.62          7,550          0.00 to 0.00          3.45          3.99 to 3.99   
      2012          520          15.02 to 15.02          7,808          0.00 to 0.00          3.53          8.55 to 8.55   
      2011          361          13.84 to 13.84          4,994          0.00 to 0.00          5.32          4.27 to 4.27   

Lifestyle Growth MVP Series I

       2015          127          30.41 to 28.41          3,612          0.65 to 0.20          2.66          (4.72) to (5.15 ) 
      2014          110          32.82 to 28.93          3,336          0.90 to 0.00          1.94          2.16 to 1.25   
      2013          187          31.30 to 23.02          5,587          0.65 to 0.20          2.42          19.10 to 18.57   
      2012          194          26.28 to 24.89          4,884          0.65 to 0.20          1.75          13.64 to 13.13   
      2011          394          23.64 to 17.13          8,774          0.65 to 0.00          2.88          (1.60) to (2.48 ) 

Lifestyle Growth MVP Series NAV

       2015          1,440          17.20 to 17.20          24,773          0.00 to 0.00          2.29          (4.55) to (4.55 ) 
      2014          1,382          18.02 to 18.02          24,906          0.00 to 0.00          2.72          2.28 to 2.28   
      2013          1,415          17.62 to 17.62          24,933          0.00 to 0.00          2.67          19.38 to 19.38   
      2012          1,397          14.76 to 14.76          20,618          0.00 to 0.00          2.02          13.91 to 13.91   
      2011          1,482          12.96 to 12.96          19,198          0.00 to 0.00          3.15          (1.55) to (1.55 ) 

Lifestyle Moderate MVP Series I

       2015          57          33.71 to 31.51          1,808          0.65 to 0.20          2.58          (1.11) to (1.56 ) 
      2014          58          35.06 to 30.90          1,869          0.90 to 0.00          2.75          4.94 to 4.00   
      2013          65          32.55 to 24.57          2,001          0.65 to 0.20          2.95          10.00 to 9.51   
      2012          81          29.59 to 28.04          2,278          0.65 to 0.20          2.68          10.44 to 9.94   
      2011          102          27.39 to 20.37          2,616          0.65 to 0.00          2.88          2.33 to 1.42   

Lifestyle Moderate MVP Series NAV

       2015          528          17.13 to 17.13          9,046          0.00 to 0.00          2.49          (0.86) to (0.86 ) 
      2014          580          17.27 to 17.27          10,015          0.00 to 0.00          2.97          4.99 to 4.99   
      2013          555          16.45 to 16.45          9,137          0.00 to 0.00          2.84          10.26 to 10.26   
      2012          585          14.92 to 14.92          8,729          0.00 to 0.00          2.90          10.70 to 10.70   
      2011          496          13.48 to 13.48          6,680          0.00 to 0.00          4.71          2.38 to 2.38   

M Capital Appreciation(e)

       2015          4          79.47 to 79.47          329          0.00 to 0.00          0.00          (6.58) to (6.58 ) 
      2014          3          85.07 to 85.07          285          0.00 to 0.00          0.00          12.42 to 12.42   
      2013          3          75.67 to 75.67          220          0.00 to 0.00          0.00          39.20 to 39.20   
      2012          2          54.36 to 54.36          117          0.00 to 0.00          0.61          17.43 to 17.43   

M International Equity (e)

       2015          0          31.74 to 31.74          0          0.00 to 0.00          0.00          (3.94) to (3.94 ) 
      2014          0          33.05 to 33.05          0          0.00 to 0.00          0.00          (7.06) to (7.06 ) 

 

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Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

M International Equity (e)

       2013          0        $ 35.56 to $35.56        $ 0          0.00% to 0.00 %        0.00          16.32% to 16.32 % 
      2012          0          30.57 to 30.57          0          0.00 to 0.00          0.00          20.68 to 20.68   

M Large Cap Growth(e)

       2015          0          54.08 to 54.08          0          0.00 to 0.00          0.00          7.70 to 7.70   
      2014          13          50.21 to 50.21          661          0.00 to 0.00          0.05          10.21 to 10.21   
      2013          11          45.56 to 45.56          490          0.00 to 0.00          0.61          36.15 to 36.15   
      2012          9          33.46 to 33.46          309          0.00 to 0.00          0.06          19.31 to 19.31   

Mid Cap Index Trust Series I

       2015          165          39.61 to 36.74          6,321          0.70 to 0.20          1.13          (2.79) to (3.27 ) 
      2014          145          41.90 to 36.95          5,654          0.90 to 0.00          0.98          9.34 to 8.36   
      2013          144          37.34 to 34.99          5,152          0.70 to 0.20          1.02          32.76 to 32.10   
      2012          195          28.13 to 26.48          5,322          0.70 to 0.20          1.25          17.25 to 16.66   
      2011          382          24.52 to 22.21          8,990          0.65 to 0.00          56.00          (2.25) to (3.13 ) 

Mid Cap Index Trust Series NAV

       2015          861          26.89 to 26.89          23,160          0.00 to 0.00          1.35          (2.54) to (2.54 ) 
      2014          346          27.60 to 27.60          9,542          0.00 to 0.00          1.01          9.40 to 9.40   
      2013          382          25.23 to 25.23          9,632          0.00 to 0.00          1.18          33.09 to 33.09   
      2012          360          18.95 to 18.95          6,824          0.00 to 0.00          1.54          17.54 to 17.54   
      2011          313          16.13 to 16.13          5,051          0.00 to 0.00          0.81          (2.14) to (2.14 ) 

Mid Cap Stock Trust Series I

       2015          107          33.49 to 31.06          3,500          0.70 to 0.20          0.00          2.79 to 2.28   
      2014          100          33.50 to 29.53          3,179          0.90 to 0.00          0.10          8.02 to 7.05   
      2013          114          30.49 to 28.32          3,370          0.70 to 0.20          0.04          36.55 to 35.86   
      2012          116          22.13 to 20.84          2,515          0.70 to 0.20          0.00          21.97 to 21.35   
      2011          251          18.55 to 16.80          4,452          0.70 to 0.20          0.00          (9.20) to (10.01 ) 

Mid Cap Stock Trust Series NAV

       2015          85          75.96 to 75.96          6,484          0.00 to 0.00          0.00          3.04 to 3.04   
      2014          91          73.72 to 73.72          6,701          0.00 to 0.00          0.20          8.11 to 8.11   
      2013          123          68.19 to 68.19          8,402          0.00 to 0.00          0.07          36.84 to 36.84   
      2012          121          49.83 to 49.83          6,027          0.00 to 0.00          0.00          22.34 to 22.34   
      2011          120          40.73 to 40.73          4,908          0.00 to 0.00          0.00          (9.16) to (9.16 ) 

Mid Value Trust Series I

       2015          162          24.76 to 24.03          3,980          0.65 to 0.20          0.96          (3.62) to (4.06 ) 
      2014          229          25.98 to 24.69          5,817          0.90 to 0.00          0.74          10.60 to 9.62   
      2013          245          23.27 to 22.79          5,637          0.65 to 0.20          1.13          31.13 to 30.55   
      2012          220          17.75 to 17.46          3,867          0.65 to 0.20          0.85          19.29 to 18.75   
      2011          266          14.96 to 14.60          3,937          0.65 to 0.00          0.69          (4.93) to (5.77 ) 

Mid Value Trust Series NAV

       2015          217          38.55 to 38.55          8,364          0.00 to 0.00          0.78          (3.41) to (3.41)   
      2014          511          39.91 to 39.91          20,406          0.00 to 0.00          0.99          10.70 to 10.70   
      2013          267          36.05 to 36.05          9,612          0.00 to 0.00          1.13          31.47 to 31.47   
      2012          270          27.42 to 27.42          7,391          0.00 to 0.00          0.92          19.54 to 19.54   
      2011          265          22.94 to 22.94          6,074          0.00 to 0.00          0.75          (4.80) to (4.80 ) 

Money Market Trust B Series NAV

       2015          3,086          17.37 to 17.37          53,620          0.00 to 0.00          0.00          0.00 to 0.00   
      2014          3,095          17.37 to 17.37          53,777          0.00 to 0.00          0.00          0.00 to 0.00   
      2013          4,061          17.37 to 17.37          70,547          0.00 to 0.00          0.01          0.01 to 0.01   
      2012          3,405          17.37 to 17.37          59,154          0.00 to 0.00          0.04          0.03 to 0.03   
      2011          2,900          17.36 to 17.36          50,355          0.00 to 0.00          0.00          0.08 to 0.08   

Money Market Trust Series I

       2015          1,286          21.64 to 20.05          26,532          0.70 to 0.20          0.00          (0.19) to (0.72)   
      2014          1,221          22.29 to 19.65          25,348          0.90 to 0.00          0.00          0.00 to (0.92)   
      2013          1,177          21.72 to 14.99          24,559          0.70 to 0.20          0.00          (0.18) to (0.71 ) 
      2012          3,865          21.76 to 20.49          82,145          0.70 to 0.20          0.00          (0.18) to (0.70 ) 
      2011          1,293          22.28 to 15.15          27,375          0.70 to 0.00          0.00          0.07 to (0.82 ) 

Natural Resources Trust Series I

       2014          0          38.15 to 34.40          0          0.90 to 0.00          1.06          (7.78) to (8.48)   
      2013          95          40.50 to 38.60          3,741          0.65 to 0.20          0.63          2.76 to 2.30   
      2012          84          39.41 to 37.73          3,204          0.65 to 0.20          0.73          0.32 to (0.13 ) 
      2011          125          39.97 to 36.98          4,794          0.65 to 0.00          0.45          (20.29) to (21.00 ) 

Natural Resources Trust Series NAV

       2014          0          16.13 to 16.13          0          0.00 to 0.00          1.25          (7.74) to (7.74 ) 
      2013          161          17.49 to 17.49          2,808          0.00 to 0.00          0.69          3.07 to 3.07   
      2012          150          16.97 to 16.97          2,546          0.00 to 0.00          0.89          0.58 to 0.58   
      2011          130          16.87 to 16.87          2,194          0.00 to 0.00          0.61          (20.27) to (20.27 ) 

PIMCO All Asset(e)

       2015          208          18.79 to 14.37          3,158          0.65 to 0.00          2.98          (9.31) to (9.90 ) 
      2014          223          20.32 to 15.84          3,705          0.90 to 0.00          5.08          0.23 to (0.66 ) 
      2013          209          21.88 to 20.95          3,457          0.65 to 0.00          4.57          (0.10) to (0.75 ) 
      2012          157          21.11 to 15.82          2,642          0.65 to 0.00          4.87          14.65 to 13.90   
      2011          120          19.48 to 18.18          1,776          0.65 to 0.00          6.34          1.66 to 0.75   

Real Estate Securities Trust Series I

       2015          64          172.90 to 160.39          10,349          0.70 to 0.20          1.83          2.47 to 1.96   
      2014          74          173.52 to 152.98          11,707          0.90 to 0.00          1.68          31.73 to 30.55   
      2013          75          128.34 to 48.06          8,983          0.70 to 0.20          1.73          (0.30) to (0.80 ) 
      2012          93          128.73 to 121.22          11,298          0.70 to 0.20          1.66          17.02 to 16.44   
      2011          120          112.45 to 41.48          12,391          0.65 to 0.00          1.38          9.46 to 8.49   

Real Estate Securities Trust Series NAV

       2015          89          142.80 to 142.80          12,731          0.00 to 0.00          1.90          2.80 to 2.80   
      2014          99          138.91 to 138.91          13,743          0.00 to 0.00          1.75          31.75 to 31.75   
      2013          96          105.43 to 105.43          10,087          0.00 to 0.00          2.00          (0.05) to (0.05 ) 
      2012          93          105.48 to 105.48          9,784          0.00 to 0.00          1.82          17.33 to 17.33   
      2011          86          89.90 to 89.90          7,765          0.00 to 0.00          1.53          9.58 to 9.58   

 

74

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Real Return Bond Trust Series I

       2015          73        $ 20.50 to $19.36        $ 1,456          0.65% to 0.20 %        5.42 %        (3.14)% to (3.58 )% 
      2014          118          21.67 to 19.51          2,433          0.90 to 0.00          3.02          4.76 to 3.82   
      2013          162          20.25 to 19.29          3,198          0.65 to 0.20          2.17          (9.46) to (9.87 ) 
      2012          234          22.36 to 21.41          5,091          0.65 to 0.20          1.74          8.64 to 8.15   
      2011          267          20.95 to 19.38          5,369          0.65 to 0.00          4.40          12.02 to 11.03   

Real Return Bond Trust Series NAV

       2015          670          14.50 to 14.50          9,715          0.00 to 0.00          6.19          (2.94) to (2.94 ) 
      2014          795          14.94 to 14.94          11,877          0.00 to 0.00          3.11          4.88 to 4.88   
      2013          769          14.24 to 14.24          10,955          0.00 to 0.00          2.63          (9.25) to (9.25 ) 
      2012          727          15.69 to 15.69          11,415          0.00 to 0.00          1.83          8.86 to 8.86   
      2011          621          14.41 to 14.41          8,946          0.00 to 0.00          4.19          12.14 to 12.14   

Science & Technology Trust Series I

       2015          271          34.25 to 31.78          8,846          0.70 to 0.20          0.00          6.47 to 5.94   
      2014          274          33.10 to 29.18          8,265          0.90 to 0.00          0.00          12.90 to 11.88   
      2013          286          28.56 to 10.37          7,523          0.70 to 0.20          0.00          43.24 to 42.53   
      2012          292          19.94 to 18.77          5,407          0.70 to 0.20          0.00          10.23 to 9.67   
      2011          373          18.49 to 6.61          6,303          0.70 to 0.20          0.00          (7.75) to (8.57 ) 

Science & Technology Trust Series NAV

       2015          82          28.68 to 28.68          2,339          0.00 to 0.00          0.00          6.78 to 6.78   
      2014          84          26.86 to 26.86          2,268          0.00 to 0.00          0.00          12.95 to 12.95   
      2013          98          23.78 to 23.78          2,323          0.00 to 0.00          0.00          43.55 to 43.55   
      2012          79          16.57 to 16.57          1,302          0.00 to 0.00          0.00          10.54 to 10.54   
      2011          73          14.99 to 14.99          1,089          0.00 to 0.00          0.00          (7.72) to (7.72 ) 

Short Term Government Income Trust Series I

       2015          151          10.55 to 10.27          1,562          0.70 to 0.20          1.66          0.41 to (0.06 ) 
      2014          163          10.62 to 10.17          1,684          0.90 to 0.00          2.62          1.15 to 0.19   
      2013          142          10.42 to 10.24          1,462          0.70 to 0.20          1.08          (1.09) to (1.56 ) 
      2012          205          10.53 to 10.40          2,145          0.70 to 0.20          1.61          0.96 to 0.50   
      2011          241          10.47 to 10.31          2,503          0.65 to 0.00          2.31          2.77 to 1.83   

Short Term Government Income Trust Series NAV

       2015          132          10.72 to 10.72          1,410          0.00 to 0.00          2.13          0.69 to 0.69   
      2014          134          10.65 to 10.65          1,430          0.00 to 0.00          2.08          1.19 to 1.19   
      2013          160          10.52 to 10.52          1,680          0.00 to 0.00          1.77          (0.74) to (0.74 ) 
      2012          227          10.60 to 10.60          2,409          0.00 to 0.00          1.96          1.18 to 1.18   
      2011          71          10.48 to 10.48          748          0.00 to 0.00          1.39          2.83 to 2.83   

Small Cap Growth Trust Series I

       2015          46          24.83 to 24.05          1,118          0.65 to 0.20          0.00          (9.03) to (9.44 ) 
      2014          41          27.64 to 26.15          1,100          0.90 to 0.00          0.00          7.57 to 6.61   
      2013          61          25.43 to 24.85          1,537          0.65 to 0.20          0.00          43.80 to 43.15   
      2012          64          17.68 to 17.36          1,121          0.65 to 0.20          0.00          16.24 to 15.71   
      2011          70          15.31 to 14.88          1,057          0.65 to 0.00          0.00          (6.81) to (7.65 ) 

Small Cap Growth Trust Series NAV

       2015          274          29.90 to 29.90          8,184          0.00 to 0.00          0.00          (8.78) to (8.78 ) 
      2014          293          32.78 to 32.78          9,611          0.00 to 0.00          0.00          7.60 to 7.60   
      2013          304          30.46 to 30.46          9,264          0.00 to 0.00          0.00          44.22 to 44.22   
      2012          244          21.12 to 21.12          5,161          0.00 to 0.00          0.00          16.53 to 16.53   
      2011          239          18.13 to 18.13          4,325          0.00 to 0.00          0.00          (6.80) to (6.80 ) 

Small Cap Index Trust Series I

       2015          200          29.99 to 27.82          5,827          0.70 to 0.20          1.06          (4.77) to (5.24 ) 
      2014          186          32.38 to 28.55          5,649          0.90 to 0.00          0.95          4.59 to 3.65   
      2013          181          30.17 to 28.26          5,259          0.70 to 0.20          1.52          38.35 to 37.65   
      2012          265          21.81 to 20.53          5,572          0.70 to 0.20          1.96          15.87 to 15.29   
      2011          122          19.23 to 17.43          2,235          0.70 to 0.00          1.13          (4.50) to (5.36 ) 

Small Cap Index Trust Series NAV

       2015          217          24.77 to 24.77          5,375          0.00 to 0.00          1.09          (4.59) to (4.59 ) 
      2014          230          25.96 to 25.96          5,962          0.00 to 0.00          0.93          4.71 to 4.71   
      2013          263          24.79 to 24.79          6,527          0.00 to 0.00          1.53          38.75 to 38.75   
      2012          283          17.87 to 17.87          5,056          0.00 to 0.00          2.17          16.06 to 16.06   
      2011          201          15.40 to 15.40          3,097          0.00 to 0.00          1.32          (4.37) to (4.37 ) 

Small Cap Opportunities Trust Series I

       2015          394          36.49 to 34.24          13,649          0.70 to 0.20          0.07          (5.35) to (5.83 )
      2014          430          39.46 to 35.53          15,811          0.90 to 0.00          0.05          2.39 to 1.47   
      2013          470          37.73 to 35.77          16,986          0.70 to 0.20          0.27          39.88 to 39.18   
      2012          17          26.97 to 25.70          437          0.70 to 0.20          0.00          16.61 to 16.02   
      2011          33          23.54 to 21.77          735          0.70 to 0.00          0.09          (3.16) to (4.03 ) 

Small Cap Opportunities Trust Series NAV

       2015          16          18.44 to 18.44          286          0.00 to 0.00          0.14          (5.12) to (5.12 ) 
      2014          17          19.43 to 19.43          321          0.00 to 0.00          0.08          2.42 to 2.42   
      2013          14          18.97 to 18.97          272          0.00 to 0.00          0.74          40.28 to 40.28   
      2012          10          13.52 to 13.52          131          0.00 to 0.00          0.00          16.88 to 16.88   
      2011          11          11.57 to 11.57          130          0.00 to 0.00          0.12          (3.13) to (3.13 ) 

Small Cap Value Trust Series I

       2015          34          24.11 to 23.24          790          0.65 to 0.20          0.38          (1.56) to (2.00 ) 
      2014          37          24.84 to 23.29          888          0.90 to 0.00          0.57          7.18 to 6.22   
      2013          48          22.89 to 22.04          1,065          0.65 to 0.20          0.51          33.06 to 32.45   
      2012          53          17.21 to 16.81          891          0.65 to 0.20          0.87          15.47 to 14.94   
      2011          32          15.03 to 14.47          462          0.65 to 0.00          0.80          1.04 to 0.14   

Small Cap Value Trust Series NAV

       2015          115          68.28 to 68.28          7,882          0.00 to 0.00          0.50          (1.31) to (1.31 ) 
      2014          128          69.19 to 69.19          8,868          0.00 to 0.00          0.63          7.25 to 7.25   
      2013          172          64.51 to 64.51          11,096          0.00 to 0.00          0.62          33.33 to 33.33   
      2012          162          48.39 to 48.39          7,815          0.00 to 0.00          0.91          15.78 to 15.78   
      2011          167          41.79 to 41.79          6,963          0.00 to 0.00          0.90          1.15 to 1.15   

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Small Company Value Trust Series I

       2015          101        $ 30.86 to $28.63        $ 3,053          0.70% to 0.20 %        1.09 %        (5.79)% to (6.26 )% 
      2014          167          33.69 to 29.70          5,332          0.90 to 0.00          0.03          0.11 to (0.79)   
      2013          186          46.36 to 30.72          5,927          0.70 to 0.20          1.76          31.35 to 30.70   
      2012          191          24.96 to 23.51          4,661          0.70 to 0.20          0.25          16.06 to 15.48   
      2011          292          30.62 to 19.92          6,156          0.65 to 0.20          0.54          (0.93) to (1.82 ) 

Small Company Value Trust Series NAV

       2015          21          21.56 to 21.56          454          0.00 to 0.00          0.75          (5.51) to (5.51 ) 
      2014          61          22.81 to 22.81          1,392          0.00 to 0.00          0.06          0.14 to 0.14   
      2013          54          22.78 to 22.78          1,241          0.00 to 0.00          1.77          31.68 to 31.68   
      2012          75          17.30 to 17.30          1,303          0.00 to 0.00          0.25          16.41 to 16.41   
      2011          69          14.86 to 14.86          1,029          0.00 to 0.00          0.64          (0.94) to (0.94 ) 

Strategic Income Opportunities Trust Series I

       2015          105          25.55 to 24.23          2,624          0.65 to 0.20          2.91          1.02 to 0.56   
      2014          75          25.83 to 23.47          1,846          0.90 to 0.00          4.00          5.06 to 4.12   
      2013          84          24.12 to 23.08          1,977          0.65 to 0.20          6.34          3.63 to 3.15   
      2012          61          23.27 to 22.38          1,367          0.65 to 0.20          6.72          12.64 to 12.12   
      2011          108          20.98 to 19.59          2,168          0.65 to 0.00          9.78          2.03 to 1.11   

Strategic Income Opportunities Trust Series NAV

       2015          179          19.39 to 19.39          3,462          0.00 to 0.00          2.41          1.27 to 1.27   
      2014          200          19.15 to 19.15          3,828          0.00 to 0.00          4.09          5.13 to 5.13   
      2013          198          18.22 to 18.22          3,609          0.00 to 0.00          5.72          3.81 to 3.81   
      2012          182          17.55 to 17.55          3,195          0.00 to 0.00          7.25          12.94 to 12.94   
      2011          136          15.54 to 15.54          2,106          0.00 to 0.00          12.08          2.08 to 2.08   

Total Bond Market Trust B Series NAV

       2015          687          23.69 to 23.69          16,288          0.00 to 0.00          2.85          0.30 to 0.30   
      2014          693          23.62 to 23.62          16,376          0.00 to 0.00          3.54          6.06 to 6.06   
      2013          582          22.27 to 22.27          12,957          0.00 to 0.00          3.60          (2.44) to (2.44 ) 
      2012          567          22.83 to 22.83          12,955          0.00 to 0.00          1.88          4.08 to 4.08   
      2011          353          21.94 to 21.94          7,750          0.00 to 0.00          4.38          7.60 to 7.60   

Total Return Trust Series I

       2015 (f)        0          29.44 to 27.61          0          0.65 to 0.20          34.75          1.98 to 1.84   
      2014          476          29.70 to 26.19          13,400          0.90 to 0.00          3.49          4.74 to 3.80   
      2013          348          27.63 to 26.06          9,350          0.65 to 0.20          2.34          (2.23) to (2.67 ) 
      2012          962          28.26 to 26.77          26,630          0.65 to 0.20          1.72          8.27 to 7.78   
      2011          1,865          26.68 to 24.17          47,874          0.65 to 0.00          4.47          3.91 to 2.98   

Total Return Trust Series NAV

       2015 (f)        0          18.34 to 18.34          0          0.00 to 0.00          36.65          1.71 to 1.71   
      2014          1,554          18.03 to 18.03          28,029          0.00 to 0.00          3.51          4.72 to 4.72   
      2013          1,401          17.22 to 17.22          24,129          0.00 to 0.00          3.33          (1.98) to (1.98 ) 
      2012          1,786          17.57 to 17.57          31,388          0.00 to 0.00          2.00          8.57 to 8.57   
      2011          1,764          16.18 to 16.18          28,551          0.00 to 0.00          4.80          3.97 to 3.97   

Total Stock Market Index Trust Series I

       2015          274          22.99 to 21.33          6,177          0.70 to 0.20          1.75          (0.83) to (1.33 ) 
      2014          134          23.84 to 21.02          2,980          0.90 to 0.00          1.35          11.48 to 10.46   
      2013          88          20.84 to 19.53          1,758          0.70 to 0.20          1.17          33.12 to 32.46   
      2012          130          15.65 to 14.74          1,982          0.70 to 0.20          1.54          15.26 to 14.69   
      2011          145          13.88 to 12.57          1,911          0.65 to 0.00          1.16          0.28 to (0.62 ) 

Total Stock Market Index Trust Series NAV

       2015          22          79.30 to 79.30          1,706          0.00 to 0.00          1.43          (0.53) to (0.53 ) 
      2014          19          79.72 to 79.72          1,553          0.00 to 0.00          1.30          11.46 to 11.46   
      2013          12          71.52 to 71.52          861          0.00 to 0.00          1.70          33.45 to 33.45   
      2012          9          53.59 to 53.59          458          0.00 to 0.00          1.34          15.56 to 15.56   
      2011          13          46.38 to 46.38          621          0.00 to 0.00          0.59          0.33 to 0.33   

U.S. Equity Trust Series I

       2015          107          14.60 to 14.33          1,556          0.70 to 0.20          2.01          0.32 to (0.18 ) 
      2014          93          14.63 to 14.28          1,343          0.90 to 0.00          1.30          11.03 to 10.04   
      2013          105          13.13 to 13.02          1,378          0.70 to 0.20          1.46          27.98 to 27.33   
      2012          105          10.26 to 10.23          1,072          0.70 to 0.20          1.97          2.63 to 2.28   

U.S. Equity Trust Series NAV

       2015          148          14.73 to 14.73          2,181          0.00 to 0.00          1.69          0.52 to 0.52   
      2014          206          14.66 to 14.66          3,021          0.00 to 0.00          1.51          11.07 to 11.07   
      2013          201          13.20 to 13.20          2,646          0.00 to 0.00          1.84          28.36 to 28.36   
      2012          52          10.28 to 10.28          538          0.00 to 0.00          2.14          2.81 to 2.81   

Ultra Short Term Bond Trust Series I

       2015          1          9.83 to 9.70          9          0.65 to 0.45          1.31          (0.47) to (0.71 ) 
      2014          1          10.05 to 9.72          9          0.90 to 0.00          1.61          (0.02) to (0.84 ) 
      2013          2          9.92 to 9.84          18          0.65 to 0.45          0.02          (0.49) to (0.74 ) 
      2012          3          9.91 to 9.91          33          0.65 to 0.65          1.16          (0.15) to (0.15 ) 
      2011          3          9.91 to 9.91          27          0.65 to 0.00          2.05          0.12 to (0.69 ) 

Ultra Short Term Bond Trust Series NAV

       2015          124          10.07 to 10.07          1,252          0.00 to 0.00          2.02          0.01 to 0.01   
      2014          73          10.07 to 10.07          736          0.00 to 0.00          3.39          0.03 to 0.03   
      2013          22          10.07 to 10.07          217          0.00 to 0.00          0.67          (0.02) to (0.02 ) 
      2012          34          10.07 to 10.07          340          0.00 to 0.00          1.10          0.66 to 0.66   
      2011          12          10.00 to 10.00          116          0.00 to 0.00          1.32          0.09 to 0.09   

Utilities Trust Series I

       2015          40          30.89 to 28.91          1,200          0.65 to 0.20          2.74          (14.93) to (15.31 ) 
      2014          64          37.33 to 33.00          2,201          0.90 to 0.00          3.07          12.59 to 11.58   
      2013          60          32.32 to 30.52          1,869          0.65 to 0.20          2.06          20.32 to 19.78   
      2012          64          26.86 to 25.48          1,644          0.65 to 0.20          3.65          13.43 to 12.92   
      2011          80          24.19 to 21.98          1,830          0.65 to 0.00          3.56          6.65 to 5.70   

Utilities Trust Series NAV

       2015          61          25.46 to 25.46          1,544          0.00 to 0.00          3.30          (14.79) to (14.79 ) 
      2014          150          29.88 to 29.88          4,484          0.00 to 0.00          3.46          12.72 to 12.72   

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Utilities Trust Series NAV

       2013          63        $ 26.50 to $26.50        $ 1,660          0.00% to 0.00 %        2.30 %        20.65% to 20.65 % 
      2012          53          21.97 to 21.97          1,174          0.00 to 0.00          3.78          13.63 to 13.63   
      2011          51          19.33 to 19.33          993          0.00 to 0.00          3.82          6.80 to 6.80   

Value Trust Series I

       2015          47          50.26 to 46.63          2,209          0.70 to 0.20          0.53          (9.07) to (9.53 ) 
      2014          49          56.85 to 50.12          2,527          0.90 to 0.00          0.49          9.82 to 8.84   
      2013          56          50.43 to 43.00          2,671          0.70 to 0.20          0.72          35.13 to 34.45   
      2012          76          37.32 to 35.15          2,735          0.70 to 0.20          0.84          17.19 to 16.60   
      2011          113          32.56 to 27.35          3,499          0.70 to 0.00          1.04          0.98 to 0.07   

Value Trust Series NAV

       2015          57          24.75 to 24.75          1,417          0.00 to 0.00          0.62          (8.86) to (8.86 ) 
      2014          51          27.16 to 27.16          1,373          0.00 to 0.00          0.57          9.88 to 9.88   
      2013          46          24.72 to 24.72          1,136          0.00 to 0.00          0.93          35.44 to 35.44   
      2012          41          18.25 to 18.25          754          0.00 to 0.00          0.95          17.50 to 17.50   
      2011          34          15.53 to 15.53          523          0.00 to 0.00          1.10          1.03 to 1.03   

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

(a)

As the unit fair value is presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual contract unit values are not within the ranges presented.

 

(b)

These ratios represent the annualized contract expenses of the variable account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to policyholder accounts through the redemption of units and expenses of the underlying Portfolio are excluded.

 

(c)

These ratios, which are not annualized, represent the distributions from net investment income received by the sub-account from the underlying Portfolio, net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against policyholder accounts either through the reductions in the unit values or the redemptions of units. The recognition of investment income by the sub-account is affected by the timing of the declaration of dividends by the underlying Portfolio in which the sub-accounts invest.

 

(d)

These ratios, which are not annualized, represent the total return for the periods indicated, including changes in the value of the underlying Portfolio, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. Investment options indicated in footnote 1 with a date notation, if any, denote the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. For closed sub-accounts, the total return is calculated from the beginning of the reporting period to the date the sub-account closed. As the total return is presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual contract total returns are not within the ranges presented.

 

(e)

Sub-account that invests in non-affiliated Trust.

 

(f)

Terminated as an investment option and funds transferred to Core Bond Trust on April 27, 2015.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

8. Diversification Requirements

The Internal Revenue Service has issued regulations under Section 817(h) of the Internal Revenue Code (“the Code”). Under the provisions of Section 817(h) of the Code, a Contract will not be treated as a variable life contract for federal tax purposes for any period for which the investments of the Account on which the contract is based are not adequately diversified. The Code provides that the “adequately diversified” requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirement set forth in regulations issued by the Secretary of the Treasury. The Company believes that the Account satisfies the current requirements of the regulations, and the Account will continue to meet such requirements.

9. Contract Charges

The Company deducts certain charges from gross premiums before placing the remaining net premiums in the sub-account. In the event of a surrender by the contract holder, surrender charges may be levied by the Company against the contract value at the time of termination to cover sales and administrative expenses associated with underwriting and issuing the Contract. Additionally, each month a deduction consisting of an administrative charge, a charge for cost of insurance, and charges for supplementary benefits is deducted from the contract value. Contract charges are paid through the redemption of sub-accounts and are reflected as terminations.

The Company deducts from the assets of the Account a daily charge equivalent to annual rates between 0.00% and 0.70% of the average net value of the Account’s assets for the assumption of mortality and expense risks.

 

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Table of Contents
Prospectus dated May 2, 2016
for interests in
John Hancock Life Insurance Company (U.S.A.) Separate Account N
Interests are made available under
Corporate VUL
JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)
(“John Hancock USA”)
500 Index B
Active Bond
All Cap Core
Alpha Opportunities
American Asset Allocation
American Global Growth
American Growth
American Growth-Income
American International
American New World
Blue Chip Growth
Bond
Capital Appreciation
Capital Appreciation Value
Core Bond
Core Strategy
Emerging Markets Value
Equity Income
Financial Industries
Franklin Templeton Founding Allocation
Fundamental All Cap Core
Fundamental Large Cap Value
Global
Global Bond
Health Sciences
High Yield
International Core
International Equity Index B
International Growth Stock
International Small Company
International Value
Investment Quality Bond
Lifestyle Aggressive MVP
Lifestyle Balanced MVP
Lifestyle Conservative MVP
Lifestyle Growth MVP
Lifestyle Moderate MVP
Mid Cap Index
Mid Cap Stock
Mid Value
Money Market
PIMCO VIT All Asset
Real Estate Securities
Science & Technology
Short Term Government Income
Small Cap Growth
Small Cap Index
Small Cap Opportunities
Small Cap Value
Small Company Value
Strategic Income Opportunities
Total Stock Market Index
Ultra Short Term Bond
U.S. Equity
Utilities
Value
* * * * * * * * * * * *
Please note that the Securities and Exchange Commission (“SEC”) has not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
CVUL 04 5/2016

 

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2

 

The purpose of this variable life insurance policy is to provide insurance protection for the beneficiary named therein. No claim is made that this variable life insurance policy is in any way similar or comparable to a systematic investment plan of a mutual fund.
Examine this prospectus carefully. The Policy Summary will briefly describe the policy. More detailed information will be found further in the prospectus. You should rely on the information contained in this prospectus, the portfolio prospectuses, and the corresponding Statements of Additional Information, which contains the audited financial statements for JHUSA and Separate Account N. The portfolio prospectuses describe the investment objectives, policies and restrictions of, and the risks relating to, investment in the investment options. In the case of any of the portfolios that are operated as “feeder funds,” the prospectus for the corresponding “master fund” is also provided. We have not authorized anyone to provide you with information that is different from the information contained in the aforementioned documents.
SUMMARY OF BENEFITS AND RISKS
Benefits
Some of the benefits of purchasing the policy are described below.
Death Benefit Protection: This prospectus describes a flexible premium variable life insurance policy, which provides for a death benefit payable to the beneficiary of the policy upon the death of the insured person. Variable life insurance is a flexible tool for financial and investment planning for persons needing death benefit protection. You should consider other forms of investments if death benefit protection is not one of your financial planning objectives, as there are additional costs and expenses in providing the insurance.
Access to Your Policy Values: Your variable life insurance policy offers access to your Policy Value through policy loans, policy surrender and partial withdrawal. There are limitations on partial withdrawals. See “Policy Surrender and Partial Withdrawals” for further information. Policy loans permanently affect the Policy Value, and may also result in adverse tax consequences.
Tax Deferred Accumulation: Variable life insurance has several tax advantages under current tax laws. For example, Policy Value accumulates on a tax-deferred basis and a transfer of values from one sub-account to another within the policy does not generate a taxable gain or loss. Any investment income and realized capital gains within a sub-account or interest from the Fixed Account are automatically reinvested without current income taxation to the policy owner.
Investment Options: In addition to the Fixed Account, the policy provides for access to a number of variable investment options, which permit you to reallocate your Policy Value to meet your changing personal objectives, goals, and investment conditions. Information regarding each investment option may be found in the portfolio prospectuses.
Flexibility: The policy is a flexible premium variable life insurance policy in which varying premium payments are permitted. You may select death benefit options and policy riders. You may increase or decrease the amount of death benefit. You are able to select, monitor, and change investment choices within your policy.
Risks
Some of the risks of purchasing the policy are described below.
Fluctuating Investment Performance: Policy Values invested in a sub-account are not guaranteed. Policy Values will increase and decrease according to investment performance. You assume the investment risk of Policy Value allocated to the sub-accounts. A comprehensive discussion of each sub-account’s objective and risk is found in the portfolio prospectuses. You should review the prospectuses carefully before allocating Policy Values to any sub-accounts.
Unsuitable for Short-Term Investment: The policy is intended for long-term financial planning, and is unsuitable for short-term goals. The policy is not designed to serve as a vehicle for frequent trading.
Policy Lapse: Sufficient premiums must be paid to keep the policy in force. There is a risk of lapse if the Policy Value is too low in relation to the insurance amount, if investment results are less favorable than anticipated or if extensive policy loans are taken. A policy lapse could have adverse tax consequences since the amount received (including any loans) less the investment in the policy may be treated as ordinary income subject to tax. Withdrawals reduce your Policy Value and increase the risk of lapse.
3

 

Decreasing Death Benefit: Any outstanding policy loans and any amount that you have surrendered or withdrawn will reduce your policy’s death benefit.
Adverse Consequences of Early Surrender: Depending on the Policy Value at the time of surrender, there may be little or no Net Cash Surrender Value paid to you when the policy is surrendered. In addition, there are adverse consequences associated with partial withdrawals including potential policy lapse and adverse tax consequences. There may also be adverse consequences associated with full surrender of the policy.
Adverse Tax Consequences: You should always consult a tax adviser about the application of federal and state tax law to your individual situation. The federal income tax treatment of life insurance is complex and current tax treatment of life insurance may change.
FEE TABLES
The following tables describe the fees and expenses (on a guaranteed basis) that you will pay when buying, owning, and surrendering the policy. Except where necessary to show a rate greater than zero, all rates shown in the tables have been rounded to two decimal places as required by the prospectus disclosure rules. Consequently, the actual rates charged may be slightly higher or lower than those shown. The first table describes the fees and expenses that you will pay at the time that you buy the policy, surrender the policy, or transfer cash value between investment options.
Transaction Fees
Charge When Charge is Deducted Amount Deducted
Premium Charge Upon receipt of premium 2.5% of each premium paid
Sales Charge Upon receipt of premium 13% (Coverage Year 1)1
Transfer Fees Upon transfer $25 (only applies to transfers in excess of 12 in a Policy Year)
Dollar Cost Averaging Upon transfer Guaranteed $5.00
    Current $0.00
Asset Allocation Balancer Upon transfer Guaranteed $15.00
    Current $0.00
    
1 The sales charge declines in subsequent Coverage Years as noted below:
Coverage Year   Percentage
1
   13.00%
2
   6.25%
3
   3.50%
4
   2.50%
5
   0.50%
6
   0.50%
7+
   0.00%
The next table describes the fees and expenses (on a guaranteed basis) that you will pay periodically during the time that you own the policy. These fees and expenses do not include fees and expenses of the portfolios, which are the underlying variable investment options for your policy.
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Charges Other Than Those of the Portfolios
Charge When Charge is
Deducted 		Amount Deducted
Cost of Insurance1 Monthly Minimum and Maximum Charge The possible range of the cost of insurance is from $0.00 to $83.33 per month per $1,000 of the net amount at risk.
    Charge for a Representative Policy Owner (a 45 year old non-smoking male) (rating classification is for short form underwriting) The cost of insurance rate is $0.08 per month per $1,000 of the net amount at risk.
Cost of Insurance – Optional FTIO Rider (Flexible Term Insurance Option)1 Monthly Minimum and Maximum Charges The possible range of the cost of insurance is from $0.00 to $83.33 per month per $1,000 of the net amount at risk.
    Charge for a Representative Policy Owner (a 45 year old non-smoking male) rating classification is for short form underwriting) The cost of insurance rate is $0.38 per month per $1,000 of the net amount at risk.
Mortality and Expense Risk Charge Monthly 0.50% annually2  
Administration Charge Monthly $12 per Policy Month  
Loan Interest Rate (Net) Annually 0.75% 3  
    
1 The cost of insurance varies based on individual characteristics and the charges shown in the table may not be representative of the charge a particular policy owner will pay. A policy owner may obtain additional information regarding cost of insurance charge by contacting the Company. The election (or failure to elect) the optional FTIO rider will impact the total cost of insurance charges.
2 Currently the Company is charging the following rates:
Policy Years   Annual Rate
1-10
   0.45%
11+
   0.25%
    
3 The Loan Interest Rate (Net) is equal to the rate of interest charged on the policy loan less the interest credited to the Loan Account. Currently this rate is 0.75% for Policy Years 1-10 and 0.25% for Policy Years 11 and higher. The maximum loan rate is 4%.
The next table describes the minimum and maximum portfolio level fees and expenses charged by any of the portfolios underlying a variable investment option offered through this prospectus, expressed as a percentage of average net assets (rounded to two decimal places). These expenses are deducted from portfolio assets.
Total Annual Portfolio Operating Expenses Minimum Maximum
Range of expenses, including management fees, distribution and/or service (12b-1) fees, and other expenses 0.44% 1.71%
    
1  Certain of the portfolios’ advisers or subadvisers have contractually agreed to reimburse or waive certain portfolio level expenses. The minimum and maximum expenses shown do not reflect these contractual expense reimbursements or waivers. If such reimbursements or waivers were reflected, the minimum and maximum expenses would be 0.33% and 1.52%, respectively.
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Table of Investment Options and Investment Subadvisers
When you select a Separate Account investment option, we invest your money in shares of a corresponding portfolio of the John Hancock Variable Insurance Trust (the “Trust” or “JHVIT”) (or the PIMCO Variable Insurance Trust (the “PIMCO Trust”) with respect to the PIMCO VIT All Asset portfolio) and hold the shares in a subaccount of the Separate Account. Fees and expenses of the portfolios are not fixed or specified under the terms of the policies and may vary from year to year. These fees and expenses differ for each portfolio and reduce the investment return of each portfolio. Therefore, they also indirectly reduce the return you will earn on any Separate Account investment options you select. For more information, please refer to the prospectus for the underlying portfolios.
The JHVIT and the PIMCO Trust are so-called “series” type mutual funds and each is registered under the Investment Company Act of 1940 (“1940 Act”) as an open-end management investment company. John Hancock Investment Management Services, LLC (“JHIMS”) provides investment advisory services to the Trust and receives investment management fees for doing so. JHIMS pays a portion of its investment management fees to other firms that manage the Trust’s portfolios. We are affiliated with JHIMS and may indirectly benefit from any investment management fees JHIMS retains. The PIMCO VIT All Asset portfolio of the PIMCO Trust receives investment advisory services from Pacific Investment Management Company LLC (“PIMCO”) and pays investment management fees to PIMCO.
Each of the American Asset Allocation, American Global Growth, American Growth, American Growth-Income, American International and American New World portfolios invests in Series 1 shares of the corresponding investment portfolio of the Trust. The American Asset Allocation, American Global Growth, American Growth, American Growth-Income, American International, and American New World portfolios operate as “feeder funds,” which means that the portfolios do not buy investment securities directly. Instead, they invest in a “master fund” which in turn purchases investment securities. Each of the American feeder fund portfolios has the same investment objective and limitations as its master fund. The prospectus for the American Fund master fund is included with the prospectuses for the underlying funds. We pay American Funds Distributors, Inc., the principal underwriter for the American Funds Insurance Series, a percentage of some or all of the amounts allocated to the “American” portfolios of the Trust for the marketing support services it provides.
The portfolios pay us or certain of our affiliates compensation for some of the distribution, administrative, shareholder support, marketing and other services we or our affiliates provide to the portfolios. The amount of this compensation is based on a percentage of the assets of the portfolios attributable to the variable insurance products that we and our affiliates issue. These percentages may differ from portfolio to portfolio and among classes of shares within a portfolio. In some cases, the compensation is derived from the Rule 12b-1 fees that are deducted from a portfolio’s assets for the services we or our affiliates provide to that portfolio. These compensation payments do not, however, result in any charge to you in addition to what is shown in the Fee Tables.
The following table provides a general description of the portfolios that underlie the variable investment options we make available under the policy. You bear the investment risk of any portfolio you choose as an investment option for your policy. You can find a full description of each portfolio, including the investment objectives, policies, restrictions, and risks, in the prospectus for that portfolio. You should read the portfolio’s prospectus carefully before investing in the corresponding variable investment option.
The investment options in the Separate Account are not publicly traded mutual funds. The investment options are only available to you as investment options in the policies, or in some cases through other variable annuity contracts or variable life insurance policies issued by us or by other life insurance companies. In some cases, the investment options also may be available through participation in certain qualified pension or retirement plans. The portfolios' investment advisers and managers (i.e. subadvisers) may manage publicly traded mutual funds with similar names and investment objectives. However, the portfolios are not directly related to any publicly traded mutual fund. You should not compare the performance of any investment option described in this prospectus with the performance of a publicly traded mutual fund. The performance of any publicly traded mutual fund could differ substantially from that of any of the investment options of our Separate Account.
The portfolios available under the policies are as described in the following table:
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Portfolio Subadviser Investment Objective
500 Index B John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To approximate the aggregate total return of a broad-based U.S. domestic equity market index.
Active Bond Declaration Management & Research LLC; and John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
All Cap Core QS Investors, LLC To seek to provide long-term growth of capital.
Alpha Opportunities Wellington Management Company, LLP To seek to provide long-term total return.
American Asset Allocation Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide high total return (including income and capital gains) consistent with preservation of capital over the long-term.
American Global Growth Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide long-term growth of capital.
American Growth Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide growth of capital.
American Growth–Income Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide growth of capital and income.
American International Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide long-term growth of capital.
American New World Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide long-term capital appreciation.
Blue Chip Growth T. Rowe Price Associates, Inc. To seek to provide long-term growth of capital. Current income is a secondary objective.
Bond John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
Capital Appreciation Jennison Associates LLC To seek to provide long-term growth of capital.
Capital Appreciation Value T. Rowe Price Associates, Inc. To seek to provide long-term capital appreciation.
Core Bond Wells Capital Management, Incorporated To seek to provide total return consisting of income and capital appreciation.
Core Strategy John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide long-term growth of capital. Current income is also a consideration.
Emerging Markets Value Dimensional Fund Advisors LP To seek to provide long-term capital appreciation.
Equity-Income T. Rowe Price Associates, Inc. To seek to provide substantial dividend income and also long-term growth of capital.
Financial Industries John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide growth of capital.
Franklin Templeton Founding Allocation John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide long-term growth of capital.
Fundamental All Cap Core John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide long-term growth of capital.
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Portfolio Subadviser Investment Objective
Fundamental Large Cap Value John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide long-term capital appreciation.
Global Templeton Global Advisors Limited To seek to provide long-term capital appreciation.
Global Bond Pacific Investment Management Company LLC To seek to provide maximum total return, consistent with preservation of capital and prudent investment management.
Health Sciences T. Rowe Price Associates, Inc. To seek to provide long-term capital appreciation.
High Yield Western Asset Management Company To seek to provide an above-average total return over a market cycle of 3 to 5 years, consistent with reasonable risk.
International Core Grantham, Mayo, Van Otterloo & Co. LLC To seek to provide high total return.
International Equity Index B SSgA Funds Management, Inc. To seek to track the performance of a broad-based equity index of foreign companies primarily in developed countries and, to a lesser extent, in emerging markets.
International Growth Stock Invesco Advisers, Inc. To seek to provide long-term growth of capital.
International Small Company Dimensional Fund Advisors LP To seek to provide long-term capital appreciation.
International Value Templeton Investment Counsel, LLC To seek to provide long-term growth of capital.
Investment Quality Bond Wellington Management Company, LLP To seek to provide a high level of current income consistent with the maintenance of principal and liquidity.
Lifestyle Aggressive MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide long-term growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Balanced MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide growth of capital and current income while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Conservative MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide current income and growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Growth MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide long-term growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Moderate MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide current income and growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Mid Cap Index John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to approximate the aggregate total return of a medium-capitalization U.S. domestic equity market index.
Mid Cap Stock Wellington Management Company, LLP To seek to provide long-term growth of capital.
Mid Value T. Rowe Price Associates, Inc. To seek to provide long-term capital appreciation.
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Portfolio Subadviser Investment Objective
Money Market John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to obtain maximum current income consistent with preservation of principal and liquidity. Certain market conditions may cause the return of the portfolio to become low or possibly negative.
PIMCO VIT All Asset (a series of PIMCO Variable Insurance Trust) (only Class M is available) Pacific Investment Management Company LLC To seek to provide maximum real return, consistent with preservation of real capital and prudent investment management.
Real Estate Securities Deutsche Investment Management Americas Inc. To seek to provide a combination of long-term capital appreciation and current income.
Science & Technology T. Rowe Price Associates, Inc.; and Allianz Global Investors U.S. LLC To seek to provide long-term growth of capital. Current income is incidental to the portfolio’s objective.
Short Term Government Income John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide a high level of current income consistent with preservation of capital. Maintaining a stable share price is a secondary goal.
Small Cap Growth Wellington Management Company, LLP To seek to provide long-term capital appreciation.
Small Cap Index John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to approximate the aggregate total return of a small-capitalization U.S. domestic equity market index.
Small Cap Opportunities Dimensional Fund Advisors LP; and Invesco Advisers, Inc. To seek to provide long-term capital appreciation.
Small Cap Value Wellington Management Company, LLP To seek to provide long-term capital appreciation.
Small Company Value T. Rowe Price Associates, Inc. To seek to provide long-term growth of capital.
Strategic Income Opportunities John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide a high level of current income.
Total Stock Market Index John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to approximate the aggregate total return of a broad U.S. domestic equity market index.
Ultra Short Term Bond John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide a high level of current income consistent with the maintenance of liquidity and the preservation of capital.
U.S. Equity Grantham, Mayo, Van Otterloo & Co. LLC To seek to provide long-term capital appreciation.
Utilities Massachusetts Financial Services Company To seek to provide capital growth and current income (income above that available from the portfolio invested entirely in equity securities).
Value Invesco Advisers, Inc. To seek to provide an above-average total return over a market cycle of 3 to 5 years, consistent with reasonable risk.
POLICY SUMMARY
General
The policy is a flexible premium variable universal life insurance policy. This summary provides a general description of the important features of the policy. It is not comprehensive and is qualified in its entirety by the more detailed information contained in this prospectus. Unless otherwise stated or implied by the context, the discussions in this prospectus assume that the policy is not in default, that there is no outstanding Policy Debt and the death benefit is not determined by the Minimum Death Benefit Percentage. Your policy’s provisions may vary in some states and the terms of the policy, and any endorsements or riders, supersede the disclosure in this prospectus.
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Death Benefits
The policy provides a death benefit in the event of the death of the Life Insured while the policy is in force. The basic death benefit amount is the Face Amount, which is provided for the lifetime of the Life Insured with no maturity or expiration date. There may be other amounts added to the death benefit as described below.
Flexible Term Insurance Option. You may add a Flexible Term Insurance Option rider (the “FTIO Rider”) to the policy to provide additional term life insurance coverage on the Life Insured. Cost of insurance rates are less than or equal to those of the policy and no sales charge will apply. However, unlike the Face Amount of the policy, the FTIO Rider will terminate at the Life Insured’s Attained Age 100. The FTIO Rider also offers the flexibility to schedule varying death benefit amounts on future dates (the “Scheduled Death Benefits”).
Death Benefit Options. There are two death benefit options. Option 1 provides a death benefit equal to the Face Amount of the policy or, if greater, the Minimum Death Benefit, plus the term insurance benefit of the FTIO option. Option 2 provides a death benefit equal to the Face Amount plus the Policy Value or, if greater, the Minimum Death Benefit, plus the term insurance benefit of the FTIO option. You may change the death benefit option and increase or decrease the Face Amount and Scheduled Death Benefits.
Age 100 Advantage. If the Life Insured is alive on the Policy Anniversary when the Life Insured reaches Attained Age 100, the policy will continue in force subject to the following unless the policy owner chooses to surrender the policy for its Net Cash Surrender Value:
•  the policy will be continued until the earlier of the death of the Life Insured or the date the policy owner surrenders the policy;
•  no additional premium payments will be accepted although loan repayments will be accepted;
•  no additional charges or deductions (described under “Charges and Deductions”) will be assessed;
•  interest on any Policy Debt will continue to accrue;
•  the policy owner may continue to transfer portions of the Policy Value among the Investment Accounts and the Fixed Accounts as described in this prospectus.
Premiums
Premium payments may be made at any time prior to Attained Age 100 and in any amount, subject to certain limitations (see “Premium Payments—Premium Limitations”). Net Premiums will be allocated to one or more of the Fixed Account and the sub-accounts of the Separate Account. You may change allocations and make transfers among the accounts subject to limitations described below.
Policy Value
The Policy Value is the accumulation of premiums paid, less charges and deductions we take for expenses and cost of insurance, plus or minus the investment returns of the accounts to which the Policy Value has been allocated. You may obtain a portion of the Policy Value by taking a policy loan or a partial withdrawal or by full surrender of the policy.
Policy Loans
You may borrow against the Net Cash Surrender Value of the policy. Loan interest will accrue daily and be payable in arrears on each Policy Anniversary. The Policy Debt will be deducted from amounts payable at the Life Insured’s death or upon surrender of the policy.
Surrender and Partial Withdrawals
You may make a partial withdrawal of the Policy Value. It may result in a decrease in the Face Amount and Scheduled Death Benefits. You may surrender the policy for its Net Cash Surrender Value at any time.
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Lapse and Reinstatement
Your policy will lapse and terminate without value when the Net Cash Surrender Value is insufficient to pay the next monthly deduction and a grace period of 61 days expires without an adequate premium payment from you. You may reinstate a lapsed policy within five years following lapse if the policy was not surrendered for its Net Cash Surrender Value. Evidence of insurability is required, along with a premium payment described under “Lapse and Reinstatement—Reinstatement.”
The policy differs in two important ways from conventional life insurance policies. First, failure to make planned premium payments will not in itself cause the policy to lapse. Second, a policy can lapse even if planned premiums have been paid.
Charges and Deductions
We assess certain charges and deductions in connection with the policy. These include: (i) charges in the form of monthly deductions for the cost of insurance and administrative expenses, (ii) charges assessed daily against amounts in the Investment Account and (iii) charges deducted from premiums paid. These charges are summarized in the Fee Tables.
In addition, there are charges deducted from each portfolio. For more information, please refer to the prospectus for the underlying portfolio.
Reduction in Charges and Enhancement of Surrender Values: The policy is designed for employers and other sponsoring organizations that may purchase multiple policies as a case. The size or nature of the case may result in expected savings of sales, underwriting, administrative or other costs. If so, we expect to offer reductions of policy charges and enhancements of surrender value. We may change the nature and amount of reductions and enhancements available from time to time. They will be determined in a way that is not unfairly discriminatory to policy owners.
Investment Options and Investment Subadvisers
You may allocate Net Premiums to the Fixed Account or to one or more of the sub-accounts of the Separate Account. Each of the sub-accounts invests in the shares of one of the portfolios described in the Table of Investment Options and Investment Subadvisers.
The Table of Investment Options and Investment Subadvisers describes the portfolios and shows the subadvisers that provide investment subadvisory services.
Allocating Net Premiums only to one or a small number of the investment options (other than the Lifestyle Trusts) should not be considered a balanced investment strategy. In particular, allocating Net Premiums to a small number of investment options that concentrate their investments in a particular business or market sector will increase the risk that the value of your policy will be more volatile since these investment options may react similarly to business or market specific events. Examples of business or market sectors where this risk historically has been and may continue to be particularly high include: (a) technology related businesses, including internet related businesses, (b) small cap securities, and (c) foreign securities. The Company does not provide advice regarding appropriate investment allocations. Please discuss this matter with your financial adviser.
Description of John Hancock (USA)
We are a stock life insurance company incorporated in Maine on August 20, 1955 by a special act of the Maine legislature and redomesticated under the laws of Michigan. We are a licensed life insurance company in the District of Columbia and all states of the United States except New York. Our ultimate parent is Manulife Financial Corporation (“MFC”), a publicly traded company based in Toronto, Canada. MFC is the holding company of John Hancock USA and its subsidiaries. However, neither John Hancock USA nor any of its affiliated companies guarantees the investment performance of the Separate Account.
We are ranked and rated by independent financial rating services, which may include Moody's, Standard & Poor's, Fitch and A.M. Best. The purpose of these ratings is to reflect the financial strength or claims-paying ability of the company, but they do not specifically relate to its products, the performance (return) of these products, the value of any investment in these products upon withdrawal or to individual securities held in any portfolio. These ratings do not apply to the safety and performance of the Separate Account.
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Description of Separate Account N
The investment accounts shown on page 1 are in fact subaccounts of the John Hancock Life Insurance Company (U.S.A.) Separate Account N, a separate account operated by us under Michigan law. The Separate Account meets the definition of “separate account” under the Federal securities laws and is registered as a unit investment trust under the 1940 Act. Such registration does not involve supervision by the SEC of the management of the Separate Account or of us.
The Separate Account’s assets are our property. Each policy provides that amounts we hold in the Separate Account pursuant to the policies cannot be reached by any other persons who may have claims against us and can’t be used to pay any indebtedness of John Hancock USA other than those arising out of policies that use the Separate Account. Income, gains and losses credited to, or charged against, the Separate Account reflect the Separate Account's own investment experience and not the investment experience of John Hancock USA's other assets. John Hancock USA is obligated to pay all amounts promised to policy owners under the policies.
New subaccounts may be added and made available to policy owners from time to time. Existing subaccounts may be modified or deleted at any time.
ISSUING A POLICY
Use of the Policy
The policy is designed to provide employers or other organizations with life insurance coverage on employees or other individuals in whose lives they have an insurable interest. The policy may be owned by an individual or a corporation, trust, association, or similar entity. The policy may be used for such purposes as funding non-qualified executive deferred compensation or salary continuation liabilities or death benefit liabilities of executive retirement plans, or as a source for funding cash flow obligations under such plans.
Requirements
To purchase a policy, you must submit a completed application. Your policy will not be issued until the underwriting process is completed to our satisfaction.
With our prior approval, the policy may be issued on a basis that does not distinguish between the Life Insured’s sex and/or smoking status. A policy will only be issued on the lives of insureds from Issue Ages 20 through 80.
Each policy has a Policy Date, an Effective Date and an Issue Date (see “Definitions” in Appendix A). The Policy Date is the date from which the first monthly deductions are calculated and from which Policy Years, Policy Months and Policy Anniversaries are determined. The Policy Date is also the effective date of the initial Coverage Amount. The Policy Date is the same date as the Effective Date unless the policy is backdated (see “Backdating a Policy”). The Effective Date is the date we become obligated under the policy and when the first monthly deductions are taken. It is the later of the date we approve issuance of the policy and the date we receive at least the Minimum Initial Premium. The Issue Date is the date from which the Suicide and Incontestability provisions of the policy are determined.
If we approve issuance of a policy before we receive the Minimum Initial Premium then the Effective Date will be later than the Issue Date. The Minimum Initial Premium must be received by us within 60 days after the Issue Date and the Life Insured must be in good health on the Effective Date. If the Minimum Initial Premium is not paid or if the application is rejected, the policy will be canceled and any premiums paid will be returned to the applicant.
Net Premiums received prior to the Effective Date will be credited with interest at the rate of return earned on amounts allocated to the Money Market portfolio. On the Effective Date, Net Premiums received plus any interest credited will be allocated to Investment Accounts and the Fixed Account according to your instructions, unless first allocated to the Money Market portfolio for the duration of the right to examine period (see “Right to Examine the Policy”).
Minimum Face Amount and Scheduled Death Benefit. The minimum Face Amount is $50,000 unless the FTIO Rider is added to the policy. With an FTIO Rider, the minimum Face Amount is $25,000 and the minimum Scheduled Death Benefit is $50,000.
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Backdating a Policy. You may request that we backdate the policy by assigning a Policy Date earlier than the date the application is signed. We will not backdate the policy to a date earlier than that allowed by state law, which is generally three months to one year prior to the date of application for the policy. Monthly deductions will be made for the period the Policy Date is backdated.
Temporary Insurance Agreement
Temporary insurance coverage may be provided under the terms of a Temporary Insurance Agreement, subject to our underwriting practices. Generally, temporary life insurance may not exceed $1,000,000 and may not be in effect for more than 90 days. It is issued on a conditional receipt basis, which means that benefits would only be paid if the Life Insured met our usual and customary underwriting standards for the coverage applied for.
Underwriting
The policies are offered on three underwriting classes that require different types and amounts of information from the applicant and prospective Life Insured. Current cost of insurance charges in early Policy Years will vary by the type of underwriting, and charges will generally be lower where underwriting information is more extensive. Under any of the underwriting bases, the acceptance of an application is subject to our underwriting rules and we may request additional information or reject an application for any reason.
Short Form Underwriting. The proposed Life Insured must answer qualifying questions in the application but is not required to provide detailed medical history, submit records or undergo examinations or tests unless requested to do so by us. Availability of short form underwriting depends on characteristics of the case, such as the number of lives to be insured, the amounts of insurance and other factors, and it is generally available only up to Issue Age 65.
Simplified Underwriting. The proposed Life Insured must satisfactorily answer certain health questions in the application and may be required to submit existing medical records, but requirements to undergo examinations and tests are minimized. Availability of simplified underwriting and the nature of the requirements will depend on characteristics of the case and the proposed lives to be insured.
Regular (Medical) Underwriting. Where short form or simplified underwriting is unavailable we require satisfactory evidence of insurability under our regular underwriting guidelines for individual applicants. This may include medical exams and other information. A proposed Life Insured who fails to qualify for a standard risk classification may be eligible to be insured with an additional substandard rating.
Right to Examine the Policy
You may return your policy for a refund within 10 days after you receive it. Some states provide a longer period of time for this right, which will be stated in the policy if applicable. The policy can be mailed or delivered to the Company agent who sold it to you or to our Service Office. Immediately upon such delivery or mailing, the policy shall be deemed void from the beginning. Within seven days after receipt of the returned policy at our Service Office we will refund an amount equal to the value of amounts in the Investment Accounts and the Fixed Account on the date we receive the returned policy, plus all charges deducted prior to that date, not including the fees and expenses of the portfolios, minus any partial withdrawals and policy loans.
Some state laws require the refund of premiums paid without adjustment for investment gains and losses of the Separate Account. In these states, all Net Premiums will be allocated to the Money Market portfolio during the Right to Examine period and the refund amount will be equal to all premiums received less any partial withdrawals and policy loans.
If you request a Face Amount increase that results in new sales charge, you will have the same rights described above to cancel the increase. If canceled the Policy Value and sales charge will be recalculated to be as they would have been had the premiums not been paid.
We reserve the right to delay the refund of any premium paid by check until the check has cleared.
(Applicable to Residents of California Only)
Residents of California, age 60 and greater, may return the policy for a refund at any time within 30 days after receiving it. The policy can be mailed or delivered to the Company’s agent who sold it, or to our Service Office. If you cancel the policy
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during this 30 day period and your premiums were allocated to a Fixed Account or the Money Market portfolio, we will refund you the amount of all premiums paid. If your premiums were allocated to one or more of the Investment Accounts (other than the Money Market portfolio), we will refund you the value of amounts in the Investment Accounts and the Fixed Account on the date we receive the returned policy plus all charges deducted prior to that date, not including the fees and expenses of the portfolios, minus any partial withdrawals and policy loans. Your premiums will be placed in either (a) the Fixed Account, (b) the Money Market portfolio or (c) in one or more of the Investment Accounts, based upon your instructions. If no instructions are given, your premiums will be placed in the Money Market portfolio.
Life Insurance Qualification
A policy must satisfy either of two tests to qualify as a life insurance contract as defined in Section 7702 of the Internal Revenue Code of 1986, as amended (the “Code”). At the time of application, you must choose either the Cash Value Accumulation Test (“CVA Test”) or the Guideline Premium Test (“GP Test”) and the test cannot be changed once the policy is issued.
Cash Value Accumulation Test. The CVA Test requires the death benefit at any time to be at least a certain ratio of the Policy Value, based on prescribed calculations. The Minimum Death Benefit provision described below will ensure that the CVA Test is met. There is no restriction on the amount of premiums you may pay, but we will require you to provide satisfactory evidence of insurability before we accept an amount of premium that would increase the death benefit by more than the increase in Policy Value.
Guideline Premium Test. The GP Test limits the amount of premiums you may pay into the policy, given its death benefit, based on prescribed calculations. In addition, the GP Test requires the death benefit at any time to be at least a prescribed ratio of the Policy Value. These prescribed multiples are generally lower than those calculated under the CVA Test. The Minimum Death Benefit provision described below will ensure that this second requirement is met.
Changes to the policy or FTIO Rider, such as changes in Face Amount, Scheduled Death Benefit, death benefit option or partial withdrawals, may affect the premium limits under the GP Test. Some changes will reduce future premium limits and may cause premiums already paid to exceed the new limits and force you to make a partial withdrawal.
DEATH BENEFITS
If the policy is in force at the time of the Life Insured’s death we will pay an insurance benefit to the beneficiary. The policy may remain in force for the Life Insured’s entire lifetime and there is no specified maturity or expiration date.
Insurance benefits are only payable when we receive due proof of death at our Service Office, in the form of either a certified copy of the death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other proof satisfactory to us.
The amount of the insurance benefit payable will be the death benefit on the date of death, as described below, less any Policy Debt, accrued interest, and outstanding monthly deductions on the date of death. The insurance benefit will be paid in one lump sum unless another form of settlement is agreed to by the beneficiary and us. If the insurance benefit is paid in one sum, we will pay interest from the date of death to the date of payment. If the Life Insured should die after our receipt of a request for surrender, no insurance benefit will be payable, and we will pay only the Net Cash Surrender Value.
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Minimum Death Benefit. Both the CVA Test and the GP Test require the death benefit to be at least a prescribed ratio of the Policy Value at all times. The policy’s Minimum Death Benefit ensures that these requirements are met by providing that the death benefit shall be at least equal to the Policy Value multiplied by the applicable Minimum Death Benefit Percentage for the Attained Age of the Life Insured. Tables of Minimum Death Benefit Percentages appear below.
Table of Minimum Death Benefit Percentages.
 Age    GP Test
Percent 		  CVA Test
Male 		  Female   Unisex
20   250%   644%   768%   665%
21   250%   625%   743%   645%
22   250%   607%   720%   626%
23   250%   589%   697%   608%
24   250%   572%   674%   589%
25   250%   554%   652%   571%
26   250%   537%   631%   554%
27   250%   520%   611%   536%
28   250%   504%   591%   519%
29   250%   488%   572%   502%
30   250%   472%   553%   486%
31   250%   457%   535%   470%
32   250%   442%   517%   455%
33   250%   428%   500%   440%
34   250%   414%   484%   426%
35   250%   400%   468%   412%
36   250%   387%   453%   399%
37   250%   375%   438%   386%
38   250%   362%   424%   373%
39   250%   351%   410%   361%
40   250%   340%   397%   350%
41   243%   329%   384%   339%
42   236%   319%   372%   328%
43   229%   309%   361%   318%
44   222%   299%   350%   308%
45   215%   290%   339%   299%
46   209%   281%   329%   290%
47   203%   273%   319%   281%
48   197%   265%   309%   272%
49   191%   257%   300%   264%
50   185%   249%   291%   257%
51   178%   242%   282%   249%
52   171%   235%   274%   242%
53   164%   228%   266%   235%
54   157%   222%   258%   229%
55   150%   216%   251%   222%
56   146%   210%   244%   216%
57   142%   205%   237%   210%
58   138%   199%   230%   205%
59   134%   194%   224%   199%
 Age    GP Test
Percent 		  CVA Test
Male 		  Female   Unisex
60   130%   189%   218%   194%
61   128%   184%   211%   189%
62   126%   180%   206%   185%
63   124%   175%   200%   180%
64   122%   171%   194%   176%
65   120%   167%   189%   172%
66   119%   164%   184%   168%
67   118%   160%   180%   164%
68   117%   157%   175%   160%
69   116%   153%   171%   157%
70   115%   150%   166%   154%
71   113%   147%   162%   151%
72   111%   145%   158%   147%
73   109%   142%   154%   145%
74   107%   139%   151%   142%
75   105%   137%   147%   139%
76   105%   135%   144%   137%
77   105%   133%   141%   135%
78   105%   131%   139%   133%
79   105%   129%   136%   131%
80   105%   127%   133%   129%
81   105%   125%   131%   127%
82   105%   124%   129%   125%
83   105%   122%   127%   124%
84   105%   121%   125%   122%
85   105%   120%   123%   121%
86   105%   118%   121%   119%
87   105%   117%   120%   118%
88   105%   116%   118%   117%
89   105%   115%   117%   116%
90   105%   114%   115%   115%
91   104%   113%   114%   114%
92   103%   112%   113%   112%
93   102%   111%   112%   111%
94   101%   110%   110%   110%
95   100%   109%   109%   109%
96   100%   107%   107%   107%
97   100%   106%   106%   106%
98   100%   104%   104%   104%
99   100%   103%   103%   103%
100+   100%   100%   100%   100%
 
 
Flexible Term Insurance Option Rider
You may add an FTIO Rider to the policy to provide additional death benefit coverage on the Life Insured. The FTIO Rider provides flexible term life insurance to Attained Age 100 with cost of insurance charges less than or equal to those of
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the policy. The election of (or failure to elect) the FTIO Rider will impact the total cost of insurance charges. The FTIO Rider will terminate at the earlier of Attained Age 100, the date the policy lapses or is surrendered, and your request to cancel the FTIO Rider.
You may schedule the death benefit amounts that will apply at specified times (the “Scheduled Death Benefits”). Scheduled Death Benefits may be constant or varying from time to time. The Scheduled Death Benefits will be shown in the policy.
The term insurance benefit of the FTIO Rider is equal to (a) minus (b) but not less than zero where:
(a) is the Scheduled Death Benefit for the Policy Month, and
(b) is the Face Amount of the policy or, if greater, the policy’s Minimum Death Benefit.
Even if the term insurance benefit may be zero in a Policy Month, the FTIO Rider will not terminate.
Example. A policy is purchased for an executive as part of an employee benefit plan. The death benefit provided by the policy is to be equal to the executive’s salary of $100,000 increasing at 5% per year through age 64. Assuming the executive is currently 55, the policy will be issued with a Scheduled Death Benefit as follows:
Policy Year   Scheduled
Death Benefit
1
   100,000
2
   105,000
3
   110,250
4
   115,763
5
   121,551
6
   127,628
7
   134,010
8
   140,710
9
   147,746
10+
   155,133
The FTIO Rider amount will change each year as necessary to provide the benefits shown in the schedule, as follows:
Policy
Year 		  Total
Death Benefit 		  Face
Amount 		  Flexible Term
Insurance Amount
1
   100,000   100,000   0
2
   105,000   100,000   5,000
3
   110,250   100,000   10,250
4
   115,763   100,000   15,763
5
   121,551   100,000   21,551
6
   127,628   100,000   27,628
7
   134,010   100,000   34,010
8
   140,710   100,000   40,710
9
   147,746   100,000   47,746
10
   155,133   100,000   55,133
Death Benefit Options
You may choose either of two death benefit options:
Death Benefit Option 1. The death benefit on any date is the Face Amount of the policy or, if greater, the Minimum Death Benefit, plus the term insurance benefit of the FTIO Rider.
Death Benefit Option 2. The death benefit on any date is the Face Amount plus the Policy Value or, if greater, the Minimum Death Benefit, plus the term insurance benefit of the FTIO Rider.
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Changing the Death Benefit Option
You may change the death benefit option at any time. The change will take effect at the beginning of the next Policy Month at least 30 days after your written request is received at our Service Office. We reserve the right to limit changes that could cause the policy to fail to qualify as life insurance for tax purposes.
A change in the death benefit option will result in a change in the Face Amount and Scheduled Death Benefits to avoid any change in the amount of death benefit, as follows:
Change from Option 1 to Option 2. The new Face Amount will be equal to the Face Amount prior to the change less the Policy Value on the date of the change.
The Scheduled Death Benefit amounts for dates on or after the date of the change will be the amounts scheduled prior to the change less the Policy Value on the date of the change.
Coverage Amounts will be reduced or eliminated in the order that they are listed in the policy until the total decrease in coverage amounts equals the decrease in Face Amount.
Example. A policy is issued with a Face Amount of $100,000, death benefit Option 1, and the following schedule:
Policy Year   Scheduled
Death Benefit
1
   100,000
2
   125,000
3
   150,000
4
   175,000
5+
   200,000
The death benefit option is changed to Option 2 at the beginning of Policy Year 3. If the Policy Value at the time of the change is $10,000, then the Face Amount after the change will be $90,000 (the Face Amount prior to the change less the Policy Value), and the Scheduled Death Benefit after the change will become:
Policy Year   Scheduled
Death Benefit
3
   140,000
4
   165,000
5+
   190,000
Change from Option 2 to Option 1. The new Face Amount will be the Face Amount prior to the change plus the Policy Value on the date of the change (but the new Face Amount will be no greater than the Scheduled Death Benefit on the date of the change).
The resulting Face Amount increase amount will be added to the first Coverage Amount listed in the policy.
The Annual Premium Target for this Coverage Amount will not be increased and new sales charges will not apply, however, for an increase solely due to a change in the death benefit option.
Example. A policy is issued with a Face amount of $100,000, death benefit Option 2, and the following schedule:
Policy Year   Scheduled
Death Benefit
1
   100,000
2
   125,000
3
   150,000
4
   175,000
5+
   200,000
The death benefit option is changed to Option 1 at the beginning of Policy Year 3. If the Policy Value at the time of the change is $10,000, then the Face Amount after the change will be $110,000 (the Face Amount prior to the change plus the Policy Value), and the Scheduled Death Benefit after the change will become:
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Policy Year   Scheduled
Death Benefit
3
   160,000
4
   185,000
5+
   210,000
Changing the Face Amount and Scheduled Death Benefits
At any time, you may request an increase or decrease to the Face Amount or any Scheduled Death Benefits effective on or after the date of change. We reserve the right to limit changes that could cause the policy to fail to qualify as life insurance for tax purposes.
Increases in Face Amount and Scheduled Death Benefits. Increases in Face Amount and Scheduled Death Benefits are subject to the following conditions:
•  Increases in Face Amount and Scheduled Death Benefits will require satisfactory evidence of the Life Insured’s insurability.
•  Increases will take effect at the beginning of the next Policy Month after we approve the request.
•  We may refuse a requested increase that would not meet our requirements for new policy issues at the time due to the Life Insured’s Attained Age or other factors.
•  If the Face Amount is increased (other than as required by a death benefit option change) then all Scheduled Death Benefits effective on or after the date of the change will be increased by the amount of the Face Amount increase.
New Sales Loads for a Face Amount Increase. Coverage Amounts equal to the amount of the increase will be added to the policy as follows:
•  First, Coverage Amounts that were reduced or eliminated by a prior Face Amount decrease will be restored.
•  Second, if needed, a new Coverage Amount will be added to the policy with an Annual Premium Target and new sales charges. Any new Coverage Amount will be based on the Life Insured’s Attained Age and other relevant factors on the effective date of the increase.
Premiums paid on or after the increase may be attributed to the new Coverage Amount and result in sales charges (see “Charges and Deductions—Attribution of Premiums”).
Decreases in Face Amount and Scheduled Death Benefits. Decreases in Face Amount and Scheduled Death Benefits are subject to the following conditions:
•  Decreases in Face Amount and Scheduled Death Benefits will take effect at the beginning of the next Policy Month which is 30 days after your written request is received at our Service Office.
•  If the Face Amount is decreased then all Scheduled Death Benefits effective on or after the date of the change will be decreased by the same amount.
•  If at any time the Scheduled Death Benefit decreases to less than the Face Amount, the Face Amount will be decreased to be equal to the Scheduled Death Benefit at that time.
•  Coverage Amounts equal to the amount of the Face Amount decrease will be reduced or eliminated in the reverse order that they are listed in the policy.
Decreases in Face Amount Under Death Benefit Option 1 Due to a Partial Withdrawal. If death benefit Option 1 is in effect when a partial withdrawal is made, the Face Amount will be decreased by an amount equal to (a) minus (b) but not less than zero, where:
(a) is the partial withdrawal amount and
(b) is the excess, if any, of the policy’s Minimum Death Benefit over its Face Amount, immediately prior to the partial withdrawal.
Decreases in Face Amount under death benefit Option 1 due to a partial withdrawal are subject to the following conditions:
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•  Coverage Amounts equal to the amount of the Face Amount decrease will be reduced or eliminated in the reverse order that they are listed in the policy.
•  All Scheduled Death Benefits effective on or after the date of the partial withdrawal will be decreased by the amount of the Face Amount decrease, unless you request otherwise and we approve.
Example for Face Increases and Decreases. A policy is issued with a Face Amount of $100,000, death benefit Option 1, and a Scheduled Death Benefit as follows:
Policy Year   Scheduled
Death Benefit
1
   100,000
2
   125,000
3
   150,000
4
   175,000
5+
   200,000
Assume the following policy activity:
Activity Effect on Policy Change in Benefit Schedule
In Policy Year 2, the Face Amount is reduced to $80,000. The initial Coverage Amount is reduced to $80,000. Policy Year Scheduled Death Benefit
2 105,000
3 130,000
4 155,000
5+ 180,000
In Policy Year 3, the Face Amount is increased to $120,000 The initial Coverage Amount (which earlier was reduced to $80,000) is restored to its original level of $100,000. A new Coverage Amount for $20,000 is added to the policy. This new Coverage Amount will have its own Annual Premium Target, and its own sales charges. A portion of the future premiums paid will be attributed to this Coverage Amount to determine the amount of the sales charges. Policy Year Scheduled Death Benefit
3 170,000
4 195,000
5+ 220,000
In Policy Year 4, a partial withdrawal of $30,000 is made. The Face Amount is reduced to $90,000. The most recent Coverage Amount of $20,000 is reduced to $0, and the initial Coverage Amount is reduced to $90,000. Policy Year Scheduled Death Benefit
4 165,000
5 190,000
Factors that Affect the Death Benefit. In the case of death benefit Option 2 where the death benefit is the Face Amount plus the Policy Value, changes in the Policy Value will affect the amount of death benefit. Factors that affect the Policy Value are the investment performance of the variable investment options chosen and the charges deducted. For a discussion of how these factors affect Policy Value see the “Summary of Benefits and Risks”. These factors do not affect the Face Amount of the policy. Therefore, the amount of death benefit under Option 1 will not be less than the Face Amount as long as the policy does not lapse.
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PREMIUM PAYMENTS
Initial Premiums
No premiums will be accepted prior to receipt of a completed application by us. All premiums received prior to the Effective Date of the policy will be held in our general account and credited with interest from the date of receipt at the rate of return earned on amounts allocated to the Money Market portfolio.
On the Effective Date, the Net Premiums paid plus interest credited will be allocated among the Investment Accounts or the Fixed Account in accordance with your instructions, unless first allocated to the Money Market portfolio for the duration of the Right to Examine period (see “Right to Examine the Policy”).
Subsequent Premiums
After the payment of the initial premium, premiums may be paid at any time during the lifetime of the Life Insured prior to Attained Age 100 and in any amount subject to the premium limitations described below.
A policy will be issued with a planned premium, which is based on the amount of premium you wish to pay. We will send you notices of your planned premium at the payment interval you select. However, you are under no obligation to make the planned premium payment.
Payment of premiums will not guarantee that the policy will stay in force and failure to pay premiums will not necessarily cause the policy to lapse. The policy will remain in force so long as the Net Cash Surrender Value is sufficient to cover policy charges.
Premium Limitations
If the policy is issued under the GP Test, the total of all premiums paid may not exceed the then-current maximum premium limitations established by federal income tax law for the policy to qualify as life insurance. The GP Test premium limits are stated in the policy. If a premium is received which would result in total premiums exceeding the applicable GP Test limit, we will only accept that portion of the premium that will not exceed the limit. Any premium in excess of that amount will be returned to you.
If the policy is issued under the CVA Test, there is no restriction on the amount of premiums that may be paid into a policy, but you must provide satisfactory evidence of insurability before we accept any premium that would increase the death benefit by an amount greater than the increase in Policy Value.
Premium Allocation
You may allocate premiums to the Fixed Account and Investment Accounts. Allocations may be made as percentages that are between zero and 100% that sum to exactly 100%. Alternatively, you may allocate a premium in dollar amounts that sum to exactly the Net Premium amount. You may change premium allocations at any time and the change will take effect on the date a request for change satisfactory to us is received at our Service Office.
CHARGES AND DEDUCTIONS
Premium Charge
We will deduct a premium charge as a percentage of each premium payment that is guaranteed never to exceed 2.5%. Currently, we waive this charge in Policy Years 4 and later and charge 0%.
The charge is intended to cover a portion of the aggregate amount of various taxes and fees we pay to federal, state and local governments. It is not based on the actual premium tax rate of your state of residence or any other specific tax.
Sales Charge
The sales charge is intended to cover a portion of our costs of marketing and distributing the policies.
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Attribution of Premiums. An Annual Premium Target is associated with each Coverage Amount. Annual Premium Targets are based on the Coverage Amount and the Life Insured’s Attained Age, sex and smoking status on the effective date of the Coverage Amount. The Annual Premium Targets are listed with the Coverage Amounts in the policy.
Premium payments will be attributed to Coverage Amounts that have been in effect for less than 5 years. Attribution will begin with the first applicable Coverage Amount that is listed in the policy. The sum of all premium amounts attributed to a Coverage Amount in a Coverage Year is limited to the Annual Premium Target shown in the policy. Premium amounts that exceed the Annual Premium Target will be attributed to the next listed Coverage Amount, up to its own Annual Premium Target. Attribution will continue in this manner until either the entire premium is attributed to Coverage Amounts or the Annual Premium Target is exceeded for all applicable Coverage Amounts.
Sales Charge. We deduct a sales charge from all premium amounts attributed to a Coverage Amount designated as having a sales charge. The sales charge is a percentage of premiums guaranteed never to exceed the percentages below. Currently we are charging these percentages.
Coverage Year   Percentage
1
   13.00%
2
   6.25%
3
   3.50%
4
   2.50%
5
   0.50%
6
   0.50%
7+
   0.00%
Monthly Deductions
On the Policy Date and at the beginning of each Policy Month prior to Attained Age 100, a deduction is due from the Net Policy Value to cover certain charges described below. Monthly deductions due prior to the policy’s Effective Date will be taken on the Effective Date. Unless otherwise allowed by us and specified by you, the monthly deduction will be allocated among the Investment Accounts and the Fixed Account in the same proportion as the Policy Value in each of the Investment Accounts and the Fixed Account bears to the Net Policy Value.
Administration Charge. Currently we deduct a charge of $12 per Policy Month, which is guaranteed never to be exceeded. This charge is intended to cover certain administrative expenses associated with the policy, including maintaining policy records, collecting premiums and processing death claims, surrender and withdrawal requests and various changes permitted under a policy.
Cost of Insurance Charge. A monthly charge for the cost of insurance is paid to us and is determined by multiplying a cost of insurance rate by the net amount at risk at the beginning of each Policy Month.
Death Benefit Option 1. The net amount at risk is equal to the greater of zero, or (a) minus (b), where
(a) is the applicable death benefit amount on the first day of the month, divided by 1.0024663; and
(b) is the Policy Value attributed to that death benefit amount on the first day of the month.
Death Benefit Option 2. The net amount at risk is equal to the Face Amount of insurance.
Cost of insurance rates and net amounts at risk are determined separately for each Coverage Amount and for the excess of the death benefit over the Face Amount (the Face Amount is the sum of the Coverage Amounts).
Attribution of Policy Value for Net Amounts at Risk. To determine the net amounts at risk, the Policy Value will be attributed to Coverage Amounts in the order listed in the policy. The amount of Policy Value attributed to a Coverage Amount will be limited to the amount that results in zero net amount at risk, and any excess Policy Value will then be attributed to the next listed Coverage Amount. Attribution will continue in this manner until either the entire Policy Value is attributed or the end of the list of Coverage Amounts is reached. Any remaining Policy Value will then be attributed to the excess of the death benefit over the Face Amount.
Current Cost of Insurance Rates. Cost of insurance rates are determined separately for each Coverage Amount and the excess of the death benefit over the Face Amount. There are different current cost of insurance rate bases for:
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•  Coverage Amounts having sales charges, and
•  The excess of the death benefit over the Face Amount, including any term insurance benefit under the FTIO Rider.
The cost of insurance rate in a specific Policy Month for an applicable death benefit amount will depend on:
•  the cost of insurance rate basis for the applicable death benefit amount,
•  the Life Insured’s Attained Age, sex (unless unisex rates are required by law) and smoking status on the effective date of the applicable death benefit amount,
•  the underwriting class of the applicable death benefit amount,
•  the Coverage Year, or Policy Year for the excess of the death benefit over the Face Amount,
•  any extra charges for substandard ratings, as stated in the policy.
Since the net amount of risk for death benefit Option 1 is based on a formula that includes as factors the Policy Value, the net amount at risk is affected by the investment performance of the underlying investment options chosen, payment of premiums and charges assessed.
Cost of insurance rates will generally increase with the Life Insured’s age and the Coverage Year.
Cost of insurance rates reflect our expectation as to future mortality experience. They are also intended to cover our general costs of providing the policy, to the extent that these costs are not covered by other charges. Current cost of insurance rates may be changed by us on a basis that does not unfairly discriminate within the class of lives insured.
Guaranteed Maximum Cost of Insurance Rates. In no event will the cost of insurance rates we charge exceed the guaranteed maximum rates set forth in the policy, except to the extent that an extra charge is imposed for a substandard rating. The guaranteed rates are based on the 1980 Commissioners Standard Ordinary Sex Distinct (unless unisex rates are required by law) ANB Aggregate Ultimate Mortality Tables. Current cost of insurance rates may be less than the guaranteed rates.
Asset Based Risk Charge Deducted from Investment Accounts
We assess a daily charge against amounts in the Investment Accounts. This charge is intended to compensate us for insurance risks we assume under the policy, such as benefit payments and expenses that are higher than we expected. We will realize a gain from this charge to the extent it is not needed to provide benefits and pay expenses under the policy. The charge is a percentage of amounts in the Investment Accounts, which will reduce unit values of the sub-accounts. The charge is guaranteed never to exceed an annual rate of 0.50%. Currently, we charge the following rates:
Policy Year   Annual Rate
1-10
   0.45%
11+
   0.25%
Reduction in Charges and Enhanced Surrender Values
The policy is designed for employers and other sponsoring organizations that may purchase multiple policies as a case. The size or nature of the case may result in expected savings of sales, underwriting, administrative or other costs. If so, we expect to offer reductions of policy charges and enhancements of surrender value. Eligibility for reductions and enhancements and the amounts available will be determined by a number of factors, including the number of lives to be insured, the total premiums expected to be paid, total assets under management for the policy owner, the nature of the relationship among the lives insured, the purpose for which the policies are being purchased, expected persistency of the individual policies, and any other circumstances which we believe to be relevant to the expected reduction of our expenses. Some of reductions and enhancements may be guaranteed and others may be subject to restrictions or to withdrawal or modification, on a uniform case basis. We may change the nature and amount of reductions and enhancements available from time to time. Reductions and enhancements will be determined in a way that is not unfairly discriminatory to policy owners.
COMPANY TAX CONSIDERATIONS
Currently, we make no specific charge for any federal, state, or local taxes that we incur that may be attributable to the Separate Account or to the policy. We reserve the right in the future, however, to make a charge for any such tax or other
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economic burden resulting from the application of tax laws that we determine to be properly attributable to the Separate Account or to the policy.
POLICY VALUE
Determination of the Policy Value
A policy has a Policy Value, a portion of which is available to you by making a policy loan or partial withdrawal, or upon surrender of the policy. The Policy Value may also affect the amount of the death benefit. The Policy Value at any time is equal to the sum of the values in the Investment Accounts, the Fixed Account, and the Loan Account.
The Policy Value is affected by the investment performance of the Investment Account chosen and the rate of interest credited if amounts are allocated to the Fixed Account. The Policy Value is also affected by the charges deducted. For a discussion of how these factors affect Policy Value see the “Summary of Benefits and Risks”.
Investment Accounts. An Investment Account is established under each policy for each sub-account of the Separate Account to which Net Premiums or transfer amounts have been allocated. Each Investment Account under a policy measures the interest of the policy in the corresponding sub-account. The value of the Investment Account established for a particular sub-account is equal to the number of units of that sub-account credited to the policy multiplied by the value of such units.
Fixed Account. Amounts in the Fixed Account do not vary with the investment performance of any sub-account. Instead, these amounts are credited with interest at a rate determined by us. See “The General Account—Fixed Account”.
Loan Account. Amounts borrowed from the policy are transferred to the Loan Account. Amounts in the Loan Account do not vary with the investment performance of any sub-account. Instead, these amounts are credited with interest at a rate determined by us that is lower than the loan interest rate charged on Policy Debt. See “Policy Loans—Loan Account”.
Units and Unit Values
Crediting and Canceling Units. Units of a particular sub-account are credited to a policy when Net Premiums are allocated to that sub-account or amounts are transferred to that sub-account. Units of a sub-account are cancelled whenever amounts are deducted, transferred or withdrawn from the sub-account. The number of units credited or cancelled for a specific transaction is based on the dollar amount of the transaction divided by the value of the unit on the Business Day on which the transaction occurs. The number of units credited with respect to a premium payment will be based on the applicable unit values for the Business Day on which the premium is received at our Service Office, except for any premiums received before the Effective Date. For premiums received before the Effective Date, the values will be determined on the Effective Date.
Units are valued at the end of each Business Day. When an order involving the crediting or canceling of units is received after the end of a Business Day, or on a day that is not a Business Day, the order will be processed on the basis of unit values determined on the next Business Day. Similarly, any determination of Policy Value, Investment Account value or death benefit to be made on a day that is not a Business Day will be made on the next Business Day.
Unit Values. For each Business Day the unit value for each sub-account is determined by multiplying the net investment factor for the that sub-account by the unit value for the immediately preceding Business Day.
The net investment factor for a sub-account on any Business Day is equal to (a) divided by (b) minus (c), where:
(a)  is the net asset value of the underlying portfolio shares held by that sub-account as of the end of such Business Day before any policy transactions are made on that day;
(b)  is the net asset value of the underlying portfolio shares held by that sub-account as of the end of the immediately preceding Business Day after all policy transactions were made for that day; and
(c)  is a charge not exceeding the daily mortality and expense risk charge shown in the “Charges and Deductions— Asset Based Risk Charge Deducted from Investment Accounts” section.
The value of a unit may increase, decrease, or remain the same, depending on the investment performance of a sub-account from one Business Day to the next.
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Transfers of Policy Value
Market timing and disruptive trading risks
The policy is not designed for professional market timers or highly active traders, including persons or entities that engage in programmed, large or frequent transfers among the investment accounts or between the investment accounts and any available fixed account. The policy is also not designed to accommodate trading that results in transfers that are large in relation to the total assets of the underlying portfolio.
Variable investment options in variable life insurance products can be a prime target for abusive transfer activity because these products value their investment options on a daily basis and allow transfers among investment options without immediate tax consequences. As a result, some investors may seek to frequently transfer into and out of variable investment options or to make large transfers in reaction to market news or to exploit a perceived pricing inefficiency. Whatever the reason, long-term investors in a variable investment option can be harmed by large or frequent transfer activity. For example, such activity may expose the investment account's underlying portfolio to increased portfolio transaction costs and/or disrupt the portfolio manager’s ability to effectively manage the portfolio's investments in accordance with the portfolio’s investment objectives and policies. This could include causing the portfolio to maintain higher levels of cash than would otherwise be the case, or liquidating investments prematurely. Accordingly, frequent or large transfers may result in dilution with respect to interests held for long-term investment and adversely affect policy owners, beneficiaries and the underlying portfolios.
To discourage market timing and disruptive trading activity, we impose restrictions on transfers and reserve the right to change, suspend or terminate telephone and facsimile transaction privileges. In addition, we reserve the right to take other actions at any time to restrict trading, including, but not limited to: (i) restricting the number of transfers made during a defined period, (ii) restricting the dollar amount of transfers, (iii) restricting transfers into and out of certain investment options, (iv) restricting the method used to submit transfers, and (v) deferring a transfer at any time we are unable to purchase or redeem shares of the underlying portfolio.
We may also impose additional administrative conditions upon, or prohibit a transfer request made by a third party giving instructions on behalf of multiple policies, whether owned by the same owner or different owners. If you engage a third party for asset allocation services, then you may be subject to these transfer restrictions because of the actions of that party in providing those services. We will notify the third party you have engaged if we exercise this right.
While we seek to identify and prevent disruptive trading activity, it may not always be possible to do so. Therefore, no assurance can be given that the restrictions we impose will be successful in preventing all disruptive trading and avoiding harm to long-term investors.
Our current practice is to restrict transfers into or out of variable investment options to two per calendar month (except with respect to those policies described in the following paragraph). In applying this restriction any transfer request involving the transfer of account value into or out of multiple variable investment options will still count as only one request. No more than one transfer request may be made on any day. You may, however, transfer to the Money Market portfolio even if the two transfer per month limit has been reached, but only if 100% of the Policy Value in all variable investment options is transferred to the Money Market portfolio. If such a transfer to the Money Market investment portfolio is made, then, for the 30 calendar day period after such transfer, no transfers from the Money Market portfolio to any other variable investment options or to the Fixed Account may be made. If a policy offers a dollar cost averaging or automatic asset allocation rebalancing program, any transfers pursuant to such program are not considered transfers subject to these restrictions on frequent trading. The restrictions described in this paragraph will be applied uniformly to all policy owners subject to the restrictions.
Policies may be purchased by a corporation or other entity as a means to informally finance the liabilities created by an employee benefit plan, and to this end the entity may aggregately manage the policies purchased to match its liabilities under the plan. Policies sold under these circumstances are subject to special transfer restrictions. In lieu of the two transfers per month restriction, we will allow the policy owner under these circumstances to rebalance the investment options in its policies within the following limits: (i) during the 10 calendar day period after any account values are transferred from one portfolio into a second portfolio, the values can only be transferred out of the second investment option if they are transferred into the Money Market portfolio; and (ii) any account values that would otherwise not be transferable by application of the 10 day limit described above and that are transferred into the Money Market portfolio may not be transferred out of the Money Market portfolio into any other investment options (variable or fixed) for 30 calendar days. The restrictions described in this paragraph will be applied uniformly to all policy owners subject to the restrictions.
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Subject to our approval, we may offer policies purchased by a corporation or other entity that has purchased policies to match its liabilities under an employee benefit plan, as described above, the ability to electronically rebalance the investment options in its policies. Under these circumstances, in lieu of imposing any specific limit upon the number or timing of transfers, we will monitor aggregate trades among the sub-accounts for frequency, pattern and size for potentially harmful investment practices. If we detect trading activity that we believe may be harmful to the overall operation of any investment account or underlying portfolio, we may impose conditions on policies employing electronic rebalancing to submit trades, including setting limits upon the number and timing of transfers, and revoking privileges to make trades by any means other than written communication submitted via U.S. mail. The restrictions described in these paragraphs will be applied uniformly to all policy owners subject to the restrictions.
We reserve the right to modify or terminate the transfer privilege at any time in accordance with applicable law. Transfer privileges are also subject to any restrictions that may be imposed by the portfolios. In addition, we reserve the right to defer the transfer privilege at any time that we are unable to purchase or redeem shares of a portfolio.
Rule 22c-2 under the 1940 Act requires us to provide tax identification numbers and other policy owner transaction information to John Hancock Trust or to other investment companies in which the Separate Account invests, at their request. An investment company will use this information to identify any pattern or frequency of investment account transfers that may violate their frequent trading policy. An investment company may require us to impose trading restrictions in addition to those described above if violations of their frequent trading policy are discovered.
Transfers Involving Fixed Account.
While the policy is in force, you may transfer the Policy Value from any of the Investment Accounts to the Fixed Account without incurring transfer charges:
•  within eighteen months after the Issue Date; or
•  within 60 days of the effective date of a material change in the investment objectives of any of the sub-accounts; or
•  within 60 days of the date of notification of such change, whichever is later.
Such transfers will not count against the twelve transfers that may be made free of charge in any Policy Year.
The maximum amount that you may transfer from the Fixed Account in any one Policy Year is the greater of $2,000, 15% of the Fixed Account value at the previous Policy Anniversary, or the amount transferred out of the Fixed Account during the previous policy year. Any transfer which involves a transfer out of the Fixed Account may not involve a transfer to the Investment Account for the Money Market portfolio.
Telephone Transfers. Transfer requests must be in writing in a form satisfactory to us, or by telephone if a currently valid telephone transfer authorization form is on file. Although failure to follow reasonable procedures may result in our being liable for any losses resulting from unauthorized or fraudulent telephone transfers, we will not be liable for following instructions communicated by telephone that we reasonably believe to be genuine. We will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures shall consist of confirming that a valid telephone authorization form is on file, tape recording of all telephone transactions and providing written confirmation thereof.
POLICY LOANS
At any time while this policy is in force, you may borrow against the Policy Value. This policy is the only security for the loan. Policy loans may have tax consequences, see “Tax Treatment of Policy Benefits—Policy Loans”.
A policy loan will affect future Policy Values, since the portion of the Policy Value in the Loan Account will receive the loan interest credited rate rather than varying with the performance of the underlying portfolios or increasing at the Fixed Account interest credited rate. A policy loan may cause a policy to be more susceptible to lapse since it reduces the Net Cash Surrender Value from which monthly deductions are taken. A policy loan causes the amount payable upon death of the Life Insured to be reduced by the amount of outstanding Policy Debt.
Maximum Loan. The amount of any loan cannot exceed the amount that would cause the Policy Debt to equal the policy’s Cash Surrender Value less the monthly deductions due from the date of the loan to the next Policy Anniversary.
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Interest Charged on Policy Loans
Interest on the Policy Debt will accrue daily and be payable annually on the Policy Anniversary. The rate of interest charged will be an effective annual rate of 4%.
Loan Account
When a loan is made, an amount equal to the loan will be deducted from the Investment Accounts or the Fixed Account and transferred to the Loan Account. You may designate how this amount is allocated among the accounts. If you give no instructions, the amount transferred will be allocated among the Investment Accounts and the Fixed Account in the same proportion as the Policy Value in each Investment Account and the Fixed Account bears to the Net Policy Value. A transfer from an Investment Account will result in the cancellation of units of the underlying sub-account equal in value to the amount transferred from the Investment Account. However, since the Loan Account is part of the Policy Value, transfers made in connection with a loan will not change the Policy Value.
Interest Credited to the Loan Account. Policy Value in the Loan Account will earn interest at an effective annual rate guaranteed to be at least 3.25%. We may declare a current interest rate that is greater than this, subject to change at any time. The excess of the loan interest charged rate (4%) over the loan interest credited rates will result in a net charge against the Policy Value with respect to any Policy Debt.
Currently we credit loan interest rates which vary by Policy Year as follows:
Policy Years   Current Loan Interest
Credited Rates 		  Excess Loan Interest
Charged Rate
1-10
   3.25%   0.75%
11+
   3.75%   0.25%
Loan Account Adjustments. On the first day of each Policy Month the difference between the Loan Account and the Policy Debt is transferred to the Loan Account from the Investment Accounts or the Fixed Account. The amount transferred will be allocated to the Investment Accounts and the Fixed Account in the same proportion as the Policy Value in each Investment Account or the Fixed Account bears to the Net Policy Value.
Loan Repayments. Policy Debt may be repaid, in whole or in part, at any time prior to the death of the Life Insured while the policy is in force. A loan repayment amount will be credited to the Loan Account and transferred to the Fixed Account or the Investment Accounts in the same proportion as the Policy Value in each account bears to the Net Policy Value.
Amounts paid to us not specifically designated in writing as loan repayments will be treated as premiums.
POLICY SURRENDER AND PARTIAL WITHDRAWALS
Policy Surrender
A policy may be surrendered for its Net Cash Surrender Value at any time while the Life Insured is living. The Net Cash Surrender Value is equal to the Policy Value less any outstanding monthly deductions due minus the Policy Debt. The Net Cash Surrender Value will be determined at the end of the Business Day on which we receive the policy and a written request for surrender at our our Service Office. After a policy is surrendered, the insurance coverage and all other benefits under the policy will terminate.
Partial Withdrawals
You may make a partial withdrawal of the Net Cash Surrender Value at any time. You may designate how the withdrawal amount is allocated among the Investment Account and the Fixed Account. If you give no instructions, the withdrawal amount will be allocated among the accounts in the same proportion as the Policy Value in each account bears to the Net Policy Value.
The death benefit may be reduced as a result of a Partial Withdrawal. (See “Death Benefits—Decreases in Face Amount under Death Benefit Option 1 due to a Partial Withdrawal”).
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LAPSE AND REINSTATEMENT
Lapse
A policy will go into default at the beginning of a Policy Month if the Net Cash Surrender Value would be zero and below after deducting the monthly deduction then due. A lapse could have adverse tax consequences as described under “Tax Considerations—Other Policy Distributions”. We will notify you of the default and will allow you a 61 day grace period in which you may make a premium payment sufficient to bring the policy out of default. The required payment will be equal to the amount necessary to bring the Net Cash Surrender Value to zero, if it was less than zero on the date of default, plus the monthly deductions due at the date of default and payable at the beginning of each of the two Policy Months thereafter, plus any applicable premium charge. If the required payment is not received by the end of the grace period, the policy will terminate with no value.
Death During Grace Period. If the Life Insured should die during the grace period, the Policy Value used in the calculation of the death benefit will be the Policy Value on the date of default and the insurance benefit will be reduced by any outstanding monthly deductions due at the time of death.
Reinstatement
You may reinstate a policy that has terminated after going into default at any time within the five-year period following the date of termination subject to the following conditions:
•  The policy must not have been surrendered for its Net Cash Surrender Value;
•  Evidence of the Life Insured’s insurability satisfactory to us must be provided; and
•  A premium equal to the payment required during the grace period following default to keep the policy in force is paid.
Generally, the suicide exclusion and incontestability provision will apply from the effective date of the reinstatement. Your policy will indicate if this is not the case.
THE GENERAL ACCOUNT
The general account of John Hancock USA consists of all assets owned by us other than those in Separate Account N and other separate accounts of the Company. Subject to applicable law, we have sole discretion over investment of the assets of the general account.
By virtue of exclusionary provisions, interests in the general account of John Hancock USA have not been registered under the Securities Act of 1933 (“1933 Act”) and the general account has not been registered as an investment company under the 1940 Act. Accordingly, neither the general account nor any interests therein are subject to the provisions of these acts, and as a result the staff of the SEC has not reviewed the disclosures in this prospectus relating to the general account. Disclosures regarding the general account may, however, be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in a prospectus.
Fixed Account
You may elect to allocate Net Premiums to the Fixed Account or transfer all or a portion of the Policy Value to the Fixed Account from the Investment Accounts. We will hold the reserves required for any portion of the Policy Value allocated to the Fixed Account in our general account. Transfers from the Fixed Account to the Investment Accounts are subject to restrictions.
Policy Value in the Fixed Account. The Policy Value in the Fixed Account is equal to:
•  the portion of the Net Premiums allocated to it; plus
•  any amounts transferred to it; plus
•  interest credited to it; less
•  any charges deducted from it; less
•  any partial withdrawals from it; less
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•  any amounts transferred from it.
Interest on the Fixed Account. An allocation of Policy Value to the Fixed Account does not entitle you to share in the investment experience of the general account. Instead, we guarantee that the Policy Value in the Fixed Account will accrue interest daily at an effective annual rate of at least 3%, without regard to the actual investment experience of the general account. We may declare a current interest rate in excess of the guaranteed rate, subject to change at any time.
OTHER PROVISIONS OF THE POLICY
Policy Owner Rights
Who owns the policy? That’s up to the person who applies for the policy. The owner of the policy is the person who can exercise most of the rights under the policy, such as the right to choose the accounts in which to invest or the right to surrender the policy. In many cases, the person buying the policy is also the person who will be the owner. However, the application for a policy can name another person or entity (such as a trust) as owner. Whenever we’ve used the term “you” in this prospectus, we’ve assumed that the reader is the person who has whatever right or privilege is being discussed. There may be tax consequences if the owner and the insured person are different, so you should discuss this issue with your tax adviser.
While the insured person is alive, you will have a number of options under the policy. Here are some major ones:
•  Determine when and how much you invest in the various accounts
•  Borrow or withdraw amounts you have in the accounts
•  Change the beneficiary who will receive the death benefit
•  Change the amount of insurance
•  Turn in (i.e., “surrender”) the policy for the full amount of its Net Cash surrender value
•  Choose the form in which we will pay out the death benefit or other proceeds
It is possible to name so-called “joint owners” of the policy. If more than one person owns a policy, all owners must join in most requests to exercise rights under the policy.
Policy Cancellation
Unless otherwise restricted by a separate agreement, you may:
•  Vary the premiums paid under the policy.
•  Change the death benefit option.
•  Change the premium allocation for future premiums.
•  Take loans and/or partial withdrawals.
•  Surrender the policy.
•  Transfer ownership to a new owner.
•  Name a contingent owner that will automatically become owner if you die before the Life Insured.
•  Change or revoke a contingent owner.
•  Change or revoke a beneficiary.
Assignment of Rights. We will not be bound by an assignment until we receive a copy of the assignment at our Service Office. We assume no responsibility for the validity or effects of any assignment.
Beneficiary
You may appoint one or more beneficiaries of the policy by naming them in the application. Beneficiaries may be appointed in three classes—primary, secondary, and final. Beneficiaries may also be revocable or irrevocable. Unless an irrevocable designation has been elected, you may change the beneficiary during the Life Insured’s lifetime by giving written notice in a form satisfactory to us. If the Life Insured dies and there is no surviving beneficiary, you, or your estate if you are
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the Life Insured, will be the beneficiary. If a beneficiary dies before the seventh day after the death of the Life Insured, we will pay the insurance benefit as if the beneficiary had died before the Life Insured.
Incontestability
We will not contest the validity of a policy after it has been in force during the Life Insured’s lifetime for two years from the Issue Date stated in the policy, nor will we contest the validity of an increase in Face Amount after it has been in force during the Life Insured’s lifetime for two years. If a policy has been reinstated, we can contest any misrepresentation of a fact material to the reinstatement for a period of two years after the reinstatement date.
Misstatement of Age or Sex
If the Life Insured’s stated age or sex or both in the policy are incorrect, we will change the Face Amount so that the death benefit will be that which the most recent monthly charge for the cost of insurance would have purchased for the correct age and sex.
Suicide Exclusion
If the Life Insured, whether sane or insane, dies by suicide within two years from the Issue Date stated in the policy (or within the maximum period permitted by the state in which the policy was delivered, if less than two years), we will pay only the premiums paid less any partial withdrawals and any Policy Debt. If the Life Insured should die by suicide within two years after a Face Amount increase, the death benefit for the increase will be limited to the monthly deductions for the increase. At our discretion, this provision may be waived; for example, with policies purchased in conjunction with certain existing benefit plans.
Supplementary Benefits
Subject to certain requirements, one or more supplementary benefits may be added to a policy, including the FTIO Rider (see “Death Benefits—Flexible Term Insurance Option Rider”) and, in the case of a policy owned by a corporation or other similar entity, a benefit permitting a change in the Life Insured (a taxable event). More detailed information concerning this supplementary benefit may be obtained from us. There is no cost for any supplementary benefit currently offered by us, with the exception of the FTIO Rider (see “Charges and Deductions—Monthly Deductions”).
Tax considerations
This description of Federal income tax consequences is only a brief summary and is neither exhaustive nor authoritative. It was written to support the promotion of our products. It does not constitute legal or tax advice, and it is not intended to be used and cannot be used to avoid any penalties that may be imposed on you. Tax consequences will vary based on your own particular circumstances, and for further information you should consult a qualified tax adviser. Federal, state and local tax laws, regulations and interpretations can change from time to time. As a result, the tax consequences to you and the beneficiary may be altered, in some cases retroactively. The policy may be used in various arrangements, including non-qualified deferred compensation or salary continuation plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans and others. The tax consequences of such plans may vary depending on the particular facts and circumstances of each individual arrangement. Therefore, if the value of using the policy in any such arrangement depends in part on the tax consequences, a qualified tax adviser should be consulted for advice.
General
We are taxed as a life insurance company. Under current tax law rules, we include the investment income (exclusive of capital gains) of the Separate Account in our taxable income and take deductions for investment income credited to our policy holder reserves. We are also required to capitalize and amortize certain costs instead of deducting those costs when they are incurred. We do not currently charge the Separate Account for any resulting income tax costs, other than a charge we may impose against the Separate Account to compensate us for the cost of a delay in the deductibility of deferred acquisition costs (the “DAC tax” adjustment) pursuant to section 848 of the Internal Revenue Code. We also claim certain tax credits or deductions relating to foreign taxes paid and dividends received by the series funds. These benefits can be material. We do not pass these benefits through to the Separate Account, principally because: (i) the deductions and credits are allowed to us and
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not the policy owners under applicable tax law; and (ii) the deductions and credits do not represent investment return on the Separate Account assets that is passed through to policy owners.
The policies permit us to deduct a charge for any taxes we incur that are attributable to the operation or existence of the policies or the Separate Account. Currently, we do not anticipate making any specific charge for such taxes other than any DAC tax charge and premium taxes where applicable. If the level of the current taxes increases, however, or is expected to increase in the future, we reserve the right to make a charge in the future.
Death benefit proceeds and other policy distributions
Generally, death benefits paid under policies such as yours are not subject to income tax unless policy ownership has been transferred in exchange for payment. Earnings on your policy value are ordinarily not subject to income tax as long as we don’t pay them out to you. If we do pay out any amount of your policy value upon surrender or partial withdrawal, all or part of that distribution would generally be treated as a return of the premiums you’ve paid and not subjected to income tax. Any portion not treated as a return of your premiums would be includible in your income.
Please note that certain distributions associated with a reduction in death benefit or other policy benefits within the first fifteen years after issuance of the policy are ordinarily taxable in whole or in part. Amounts you borrow are generally not taxable to you.
However, some of the tax rules change if your policy becomes a modified endowment contract. This can happen if you’ve paid premiums in excess of limits prescribed by the tax laws. In that case, additional taxes and penalties may be payable for policy distributions of any kind, including loans. (See “7-pay premium limit and modified endowment contract status” below.)
We expect the policy to receive the same Federal income and estate tax treatment as fixed benefit life insurance policies. Section 7702 of the Internal Revenue Code defines a life insurance contract for Federal tax purposes. For a policy to be treated as a life insurance contract, it must satisfy either the cash value accumulation test or the guideline premium test. These tests limit the amount of premium that you may pay into the policy. We will monitor compliance with these standards. If we determine that a policy does not satisfy section 7702, we may take whatever steps are appropriate and reasonable to bring it into compliance with section 7702.
If the policy complies with section 7702, the death benefit proceeds under the policy ordinarily should be excludable from the beneficiary’s gross income under section 101 of the Internal Revenue Code. (As noted above, a transfer of the policy for valuable consideration may limit the exclusion of death benefits from the beneficiary's income.)
Increases in policy value as a result of interest or investment experience will not be subject to Federal income tax unless and until values are received through actual or deemed distributions. In general, unless the policy is a modified endowment contract, the owner will be taxed only on the amount of distributions that exceed the premiums paid under the policy. An exception to this general rule occurs in the case of a decrease in the policy's death benefit or any other change that reduces benefits under the policy in the first fifteen years after the policy is issued and that results in a cash distribution to the policy owner. Changes that reduce benefits include partial withdrawals, death benefit option changes, and distributions required to keep the policy in compliance with section 7702. For purposes of this rule any distribution within the two years immediately before a reduction in benefits will also be treated as if it were a result of the reduction. A cash distribution that reduces policy benefits will be taxed in whole or in part (to the extent of any gain in the policy) under rules prescribed in section 7702. The taxable amount is subject to limits prescribed in section 7702(f)(7). Any taxable distribution will be ordinary income to the owner (rather than capital gain).
Distributions for tax purposes include amounts received upon surrender or partial withdrawals. You may also be deemed to have received a distribution for tax purposes if you assign all or part of your policy rights or change your policy’s ownership.
It is possible that, despite our monitoring, a policy might fail to qualify as a life insurance contract under the Internal Revenue Code. This could happen, for example, if we inadvertently failed to return to you any premium payments that were in excess of amounts permitted under section 7702, or if any of the funds failed to meet certain investment diversification or other requirements of the Internal Revenue Code. If this were to occur, you would be subject to income tax on the income credited to the policy from the date of issue to the date of the disqualification and for subsequent periods.
Tax consequences of ownership or receipt of policy proceeds under Federal, state and local estate, inheritance, gift and other tax laws will depend on the circumstances of each owner or beneficiary. If the person insured by the policy is also its
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owner, either directly or indirectly through an entity such as a revocable trust, the death benefit will be includible in his or her estate for purposes of the Federal estate tax. If the owner is not the person insured, the value of the policy will be includible in the owner's estate upon his or her death. Even if ownership has been transferred, the death proceeds or the policy value may be includible in the former owner's estate if the transfer occurred less than three years before the former owner's death or if the former owner retained certain kinds of control over the policy. You should consult your tax adviser regarding these possible tax consequences.
Because there may be unfavorable tax consequences (including recognition of taxable income and the loss of income tax-free treatment for any death benefit payable to the beneficiary), you should consult a qualified tax adviser prior to changing the policy’s ownership or making any assignment of ownership interests.
Policy loans
We expect that, except as noted below (see “7-pay premium limit and modified endowment contract status”), loans received under the policy will be treated as indebtedness of an owner and that no part of any loan will constitute income to the owner. However, if the policy terminates for any reason other than the payment of the death benefit, an amount equal to any outstanding loan that was not previously considered income will be treated as if it had been distributed to the owner upon such termination. This could result in a considerable tax bill. Under certain circumstances involving large amounts of outstanding loans, you might find yourself having to choose between high premiums required to keep your policy from lapsing and a significant tax burden if you allow the lapse to occur.
Diversification rules and ownership of the Separate Account
Your policy will not qualify for the tax benefits of a life insurance contract unless the Separate Account follows certain rules requiring diversification of investments underlying the policy. In addition, the rules require that the policy owner not have “investor control” over the underlying assets.
In certain circumstances, the owner of a variable life insurance policy may be considered the owner, for Federal income tax purposes, of the assets of the Separate Account used to support the policy. In those circumstances, income and gains from the Separate Account assets would be includible in the policy owner's gross income. The Internal Revenue Service (“IRS”) has stated in published rulings that a variable policy owner will be considered the owner of Separate Account assets if the policy owner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. A Treasury Decision issued in 1986 (T.D. 8101) stated that guidance would be issued in the form of regulations or rulings on “the extent to which policyholders may direct their investments to particular sub-accounts of a Separate Account without being treated as owners of the underlying assets.” As of the date of this prospectus, no comprehensive guidance on this point has been issued. In Rev. Rul. 2003-91, however, the IRS ruled that a contract holder would not be treated as the owner of assets underlying a variable life insurance or annuity contract despite the owner’s ability to allocate funds among as many as twenty subaccounts.
The ownership rights under your policy are similar to, but different in certain respects from, those described in IRS rulings in which it was determined that policyholders were not owners of Separate Account assets. Since you have greater flexibility in allocating premiums and policy values than was the case in those rulings, it is possible that you would be treated as the owner of your policy’s proportionate share of the assets of the Separate Account.
We do not know what future Treasury Department regulations or other guidance may require. We cannot guarantee that the funds will be able to operate as currently described in the series funds' prospectuses, or that a series fund will not have to change any fund's investment objectives or policies. We have reserved the right to modify your policy if we believe doing so will prevent you from being considered the owner of your policy's proportionate share of the assets of the Separate Account, but we are under no obligation to do so.
7-pay premium limit and modified endowment contract status
At the time of policy issuance, we will determine whether the Planned Premium schedule will exceed the 7-pay limit discussed below. If so, our standard procedures prohibit issuance of the policy unless you sign a form acknowledging that fact.
The 7-pay limit at any time during the first seven contract years is the total of net level premiums that would have been payable at or before that time under a comparable fixed policy that would be fully “paid-up” after the payment of seven equal annual premiums. “Paid-up” means that no further premiums would be required to continue the coverage in force until
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maturity, based on certain prescribed assumptions. If the total premiums paid at any time during the first seven policy years exceed the 7-pay limit, the policy will be treated as a modified endowment contract, which can have adverse tax consequences.
Policies classified as modified endowment contracts are subject to the following tax rules:
•  First, all withdrawals from such a policy are treated as ordinary income subject to tax up to the amount equal to the excess (if any) of the policy value immediately before the withdrawal over the investment in the policy at such time. If you own any other modified endowment contracts issued to you in the same calendar year by the same insurance company or its affiliates, their values will be combined with the value of the policy from which you take the withdrawal for purposes of determining how much of the withdrawal is taxable as ordinary income.
•  Second, loans taken from or secured by such a policy and assignments or pledges of any part of its value are treated as partial withdrawals from the policy and taxed accordingly. Past-due loan interest that is added to the loan amount is treated as an additional loan.
•  Third, a 10% additional penalty tax is imposed on the portion of any distribution (including distributions on surrender) from, or loan taken from or secured by, such a policy that is included in income except where the distribution or loan:
•  is made on or after the date on which the policy owner attains age 59½;
•  is attributable to the policy owner becoming disabled; or
•  is part of a series of substantially equal periodic payments for the life (or life expectancy) of the policy owner or the joint lives (or joint life expectancies) of the policy owner and the policy owner’s beneficiary.
These exceptions to the 10% additional tax do not apply in situations where the policy is not owned by an individual.
Furthermore, any time there is a “material change” in a policy, the policy will begin a new 7-pay testing period as if it were a newly-issued policy. The material change rules for determining whether a policy is a modified endowment contract are complex. In general, however, the determination of whether a policy will be a modified endowment contract after a material change depends upon the relationship among the death benefit of the policy at the time of such change, the policy value at the time of the change, and the additional premiums paid into the policy during the seven years starting with the date on which the material change occurs.
Moreover, under a policy insuring a single life, if there is a reduction in benefits (such as a reduction in the death benefit or the reduction or cancellation of certain rider benefits) during a 7-pay testing period, the 7-pay limit will generally be recalculated based on the reduced benefits and the policy will be re-tested from the beginning of the 7-pay testing period using the lower limit. If the premiums paid to date at any point during the 7-pay testing period are greater than the recalculated 7-pay limit, the policy will become a modified endowment contract. If your policy is a survivorship policy, a reduction in benefits under the policy at any time will require re-testing. For such a policy the 7-pay limit will generally be recalculated based on the reduced benefits and the policy will be re-tested, using the lower limit, from the date it was issued. You should consult your tax adviser if you have questions regarding the possible impact of the 7-pay limit on your policy.
If your policy is issued as a result of an exchange subject to section 1035 of the Internal Revenue Code, it may be considered to be a modified endowment contract if the death benefit under the new policy is smaller than the death benefit under the exchanged policy, or if you reduce coverage in your new policy after it is issued. Therefore, if you desire to reduce the face amount as part of a 1035 exchange, a qualified tax adviser should be consulted for advice. A new policy issued in exchange for a modified endowment contract will also be a modified endowment contract regardless of any change in the death benefit.
All modified endowment contracts issued by the same insurer (or its affiliates) to the same owner during any calendar year generally are required to be treated as one contract for the purpose of applying the rules on taxation of withdrawals from modified endowment contracts. You should consult your tax adviser if you have questions regarding the possible impact of the 7-pay limit on your policy.
Corporate and H.R. 10 retirement plans
The policy may be acquired in connection with the funding of retirement plans satisfying the qualification requirements of section 401 of the Internal Revenue Code. If so, the Internal Revenue Code provisions relating to such plans and life insurance benefits thereunder should be carefully scrutinized. We are not responsible for compliance with the terms of any such plan or with the requirements of applicable provisions of the Internal Revenue Code.
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Withholding
To the extent that policy distributions to you are taxable, they are generally subject to withholding for your Federal income tax liability. However if you reside in the United States, you can generally choose not to have tax withheld from distributions. Electing to have no withholding will not reduce your tax liability and may expose you to penalties under the rules governing payment of estimated taxes.
Life insurance purchases by residents of Puerto Rico
In Rev. Rul. 2004-75, 2004-31 I.R.B. 109, the Internal Revenue Service ruled that income received by residents of Puerto Rico under a life insurance policy issued by a United States company is U.S.-source income that is subject to United States Federal income tax.
Life insurance purchases by non-resident aliens
If you are not a U.S. citizen or resident, you will generally be subject to U.S. Federal withholding tax on taxable distributions from life insurance policies at a 30% rate, unless a lower treaty rate applies. In addition, you may be subject to state and/or municipal taxes and taxes imposed by your country of citizenship or residence. You should consult with a qualified tax adviser before purchasing a policy.
Life insurance owned by citizens or residents living abroad
If you are a U.S. citizen or permanent resident living outside the United States, you are still subject to income taxation by the United States. Since many countries tax on the basis of domicile, you may also be subject to tax in the country or territory in which you are living. The tax-deferred accumulation of gain that a life insurance policy provides under United States tax law may not be available under the tax laws of the country in which you are living. If you are living outside the United States or planning to do so, you should consult with a qualified tax adviser before purchasing or retaining ownership of a policy.
OTHER INFORMATION
Payment of Proceeds
As long as the policy is in force, we will ordinarily pay any policy loans, surrenders, partial withdrawals or insurance benefit within seven days after receipt at our Service Office of all the documents required for such a payment. We will ordinarily pay any death benefit, withdrawal, surrender value or loan within 7 days after we receive the last required form or request (and, with respect to the death benefit, any other documentation that may be required). If we don’t have information about the desired manner of payment within 7 days after the date we receive documentation of the insured person’s death, we will pay the proceeds as a single sum.
We will ordinarily pay any death benefit, withdrawal, surrender value or loan within 7 days after we receive the last required form or request (and, with respect to the death benefit, any other documentation that may be required). If we don’t have information about the desired manner of payment within 7 days after the date we receive documentation of the insured person’s death, we will pay the proceeds as a single sum. We may delay the payment of any policy loans, surrenders, partial withdrawals, or insurance benefit that depends on Fixed Account values for up to six months or in the case of any Investment Account for any period during which:
(i)   the New York Stock Exchange is closed for trading (except for normal weekend and holiday closings),
(ii)   trading on the New York Stock Exchange is restricted
(iii)   an emergency exists, as determined by the SEC, as a result of which disposal of securities held in the Separate Account is not reasonably practicable or it is not reasonably practicable to determine the value of the Separate Account’s net assets or
(iv)   the SEC, by order, so permits for the protection of security holders; provided that applicable rules and regulations of the SEC shall govern as to whether the conditions described in (ii) and (iii) exist.
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Reports to Policy Owners
Within 30 days after each Policy Anniversary, we will send you a statement showing, among other things:
•  the amount of death benefit;
•  the Policy Value and its allocation among the Investment Accounts, the Fixed Account and the Loan Account;
•  the value of the units in each Investment Account to which the Policy Value is allocated;
•  the Policy Debt and any loan interest charged since the last report;
•  the premiums paid and other policy transactions made during the period since the last report; and
•  any other information required by law.
You will also be sent an annual and a semi-annual report for each portfolio, which will include a list of the securities, held in each portfolio as required by the 1940 Act.
Distribution of policies
John Hancock Distributors LLC (“JH Distributors”), a Delaware limited liability company affiliated with us, is the principal distributor and underwriter of the securities offered through this prospectus and of other annuity and life insurance products we and our affiliates offer. JH Distributors also acts as the principal underwriter of the Trust, whose securities are used to fund certain investment accounts under the policies and under other annuity and life insurance products we offer.
JH Distributors' principal address is 601 Congress Street, Boston, MA 02210 and it also maintains offices with us at 197 Clarendon Street, Boston, Massachusetts 02116. JH Distributors is a broker-dealer registered under the Securities Exchange Act of 1934 (the “1934 Act”) and a member of the Financial Industry Regulatory Authority (“FINRA”).
We offer the policies for sale through individuals who are licensed as insurance agents and who are registered representatives of broker-dealers that have entered into selling agreements with JH Distributors. Our affiliate, Signator Investors, Inc., is one such broker-dealer. In addition, we, either directly or through JH Distributors, have entered into agreements with other financial intermediaries that provide marketing, sales support and certain administrative services to help promote the policies (“financial intermediaries”). In a limited number of cases, we have entered into loans, leases or other financial agreements with these broker-dealers or financial intermediaries or their affiliates.
Compensation
The broker-dealers and other financial intermediaries that distribute or support the marketing of our policies may be compensated by means of various compensation and revenue sharing arrangements. A general description of these arrangements is set out below under “Standard compensation” and “Additional compensation and revenue sharing.” These arrangements may differ between firms, and not all broker-dealers or financial intermediaries will receive the same compensation and revenue sharing benefits for distributing our policies. Also, a broker-dealer may receive more or less compensation or other benefits for the promotion and sale of our policy than it would expect to receive from another issuer.
Under their own arrangements, broker-dealers determine how much of any amounts received from us is to be paid to their registered representatives. Our affiliated broker-dealer, Signator Investors, Inc., may pay its registered representatives additional compensation and benefits, such as bonus payments, expense payments, health and retirement benefits or the waiver of overhead costs or expenses in connection with the sale of the policies that they would not receive in connection with the sale of policies issued by unaffiliated companies.
Policy owners do not pay any compensation or revenue sharing benefits directly. These payments are made from JH Distributors’ and our own revenues, profits or retained earnings, which may be derived from a number of sources, such as fees received from an underlying fund’s distribution plan (“12b-1 fees”), the fees and charges imposed under the policy and other sources.
You should contact your registered representative for more information on compensation arrangements in connection with your purchase of a policy. We provide additional information on special compensation or reimbursement arrangements involving broker-dealers and other financial intermediaries in the SAI, which is available upon request.
Standard compensation. JH Distributors pays compensation to broker-dealers for the promotion and sale of the policies, and for providing ongoing service in relation to policies that have already been purchased. We may also pay a limited number
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of broker-dealers commissions or overrides to “wholesale” the policies; that is, to provide marketing support and training services to the broker-dealer firms that do the actual selling.
The compensation JH Distributors pays to broker-dealers may vary depending on the selling agreement. The compensation paid is not expected to exceed 30% of the target premium paid in policy year 1, 5% of target premium paid in years 2-5, and 2.5% of the target premium paid in years 6 and after. Compensation on any premium paid in excess of target premium in any year will not exceed 2.5%. Broker-dealers may also receive a service fee of up to $100 per policy per year, and an asset trail of up to .10%. This compensation schedule is exclusive of additional compensation and revenue sharing and inclusive of overrides and expense allowances paid to broker-dealers for sale of the policies (not including riders).
Additional compensation and revenue sharing. To the extent permitted by SEC and FINRA rules and other applicable laws and regulations, we may enter into special compensation or reimbursement arrangements (“revenue sharing”), either directly or through JH Distributors, with selected broker-dealers and other financial intermediaries. In consideration of these arrangements, a firm may feature our policy in its sales system, give us preferential access to sales staff, or allow JH Distributors or its affiliates to participate in conferences, seminars or other programs attended by the firm’s sales force. We hope to benefit from these revenue sharing and other arrangements through increased sales of our policies.
Selling broker-dealers and other financial intermediaries may receive, directly or indirectly, additional payments in the form of cash, other compensation or reimbursement. These additional compensation or reimbursement arrangements may include, for example, payments in connection with the firm's “due diligence” examination of the policies, payments for providing conferences or seminars, sales or training programs for invited registered representatives and other employees, payment for travel expenses, including lodging, incurred by registered representatives and other employees for such seminars or training programs, seminars for the public or client seminars, advertising and sales campaigns regarding the policies, payments to assist a firm in connection with its systems, operations and marketing expenses and/or other events or activities sponsored by the firms. We may contribute to, as well as sponsor, various educational programs, sales promotions, and/or other contests in which participating firms and their sales persons may receive gifts and prizes such as merchandise, cash or other rewards as may be permitted under FINRA rules and other applicable laws and regulations.
Responsibilities of John Hancock USA
John Hancock USA entered into an agreement with JH Distributors pursuant to which John Hancock USA, on behalf of JH Distributors will pay the sales commissions in respect of the policies and certain other policies issued by John Hancock USA, prepare and maintain all books and records required to be prepared and maintained by JH Distributors with respect to the policies and such other policies, and send all confirmations required to be sent by JH Distributors with respect to the policies and such other policies. JH Distributors will promptly reimburse John Hancock USA for all sales commissions paid by John Hancock USA and will pay John Hancock USA for its other services under the agreement in such amounts and at such times as agreed to by the parties.
Finally, John Hancock USA may, from time to time in its sole discretion, enter into one or more reinsurance agreements with other life insurance companies under which policies issued by it may be reinsured, such that its total amount at risk under a policy would be limited for the life of the insured.
Voting Rights
As stated previously, all of the assets held in each sub-account of the Separate Account will be invested in shares of a particular portfolio. John Hancock USA is the legal owner of those shares and as such has the right to vote upon certain matters that are required by the 1940 Act to be approved or ratified by the shareholders of a mutual fund and to vote upon any other matters that may be voted upon at a shareholders’ meeting. However, John Hancock USA will vote shares held in the sub-accounts in accordance with instructions received from policyholders having an interest in such sub-accounts. Shares held in each sub-account for which no timely instructions from policyholders are received, including shares not attributable to the policies, will be voted by John Hancock USA in the same proportion as those shares in that sub-account for which instructions are received. Should the applicable federal securities laws or regulations change so as to permit John Hancock USA to vote shares held in the Separate Account in its own right, it may elect to do so.
The number of shares in each sub-account for which instructions may be given by a policyholder is determined by dividing the portion of the Policy Value derived from participation in that sub-account, if any, by the value of one share of the corresponding portfolio. The number will be determined as of a date chosen by John Hancock USA, but not more than 90
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days before the shareholders’ meeting. Fractional votes are counted. Voting instructions will be solicited in writing at least 14 days prior to the meeting.
John Hancock USA may, if required by state officials, disregard voting instructions if such instructions would require shares to be voted so as to cause a change in the sub-classification or investment policies of one or more of the portfolios, or to approve or disapprove an investment management contract. In addition, we may disregard voting instructions that would require changes in the investment policies or investment adviser, provided that we reasonably disapprove such changes in accordance with applicable federal regulations. If John Hancock USA does disregard voting instructions, it will advise policyholders of that action and its reasons for such action in the next communication to policyholders.
Substitution of Portfolio Shares
It is possible that in the judgment of the Company, one or more of the portfolios may become unsuitable for investment by the Separate Account because of a change in investment policy or a change in the applicable laws or regulations, because the shares are no longer available for investment, or for some other reason. In that event, John Hancock USA may seek to substitute the shares of another portfolio or of an entirely different mutual fund. Before this can be done, the approval of the SEC and one or more state insurance departments may be required.
John Hancock USA also reserves the right (i) to combine other Separate Accounts with the Separate Account, (ii) to create new Separate Accounts, (iii) to establish additional sub-accounts within the Separate Account to invest in additional portfolios of the Trust or another management investment company, (iv) to eliminate existing sub-accounts and to stop accepting new allocations and transfers into the corresponding portfolio, (v) to combine sub-accounts or to transfer assets in one sub-account to another sub-account or (vi) to transfer assets from the Separate Account to another Separate Account and from another Separate Account to the Separate Account. We also reserve the right to operate the Separate Account as a management investment company or other form permitted by law, and to de-register the Separate Account under the 1940 Act. Any such change would be made only if permissible under applicable federal and state law.
Records and Accounts
Our Service Office is responsible for performing all administrative functions, such as decreases, increases, surrender and partial withdrawals, and fund transfers although certain of these functions may be delegated to a third party administrator.
All records and accounts relating to the Separate Account and the portfolios will be maintained by us. All financial transactions will be handled by us. All reports required to be made and information required to be given will be provided the Company or by McCamish Systems on behalf of us.
State Regulation
John Hancock USA is subject to the regulation and supervision by the Michigan Department of Insurance, which periodically examines its financial condition and operations. It is also subject to the insurance laws and regulations of all jurisdictions in which it is authorized to do business. The policies have been filed with insurance officials in each jurisdiction where they are sold.
John Hancock USA is required to submit annual statements of its operations, including financial statements, to the insurance departments of the various jurisdictions in which it does business for the purposes of determining solvency and compliance with local insurance laws and regulations.
Financial statements reference
The financial statements of John Hancock USA and the Separate Account can be found in the SAI. The financial statements of John Hancock USA should be distinguished from the financial statements of the Separate Account and should be considered only as bearing upon the ability of John Hancock USA to meet its obligations under the policies. Our general account is comprised of securities and other investments, the value of which may decline during periods of adverse market conditions.
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Registration statement filed with the SEC
This prospectus omits certain information contained in the Registration Statement which has been filed with the SEC. More details may be obtained from the SEC upon payment of the prescribed fee.
Independent registered public accounting firm
The statutory-basis financial statements of John Hancock Life Insurance Company (U.S.A.) at December 31, 2015 and 2014, and for each of the three years in the period ended December 31, 2015, and the financial statements of John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2015, and for each of the two years in the period ended December 31, 2015, appearing in this Prospectus and Registration Statement have been audited by Ernst &Young LLP, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
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APPENDIX A: DEFINITIONS
Annual Premium Target: is an amount set forth in the policy that limits the amount of premium attributable to a Coverage Amount in Sales Load calculations.
Attained Age: is the Issue Age of the Life Insured plus the number of completed Policy Years.
Business Day: is any day that the New York Stock Exchange is open for business. A Business Day ends at the close of regularly scheduled trading of the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on that day.
Case: is a group of policies insuring individual lives with common employment or other relationship, independent of the policies.
Cash Surrender Value: is the Policy Value less any outstanding monthly deductions due.
Coverage Amount: is an amount of insurance coverage under the policy with a distinct effective date. The Face Amount of the policy at any time is the sum of the Coverage Amounts in effect.
Coverage Year: is a one-year period beginning on a Coverage Amount’s effective date and on each anniversary of this date. For Coverage Amounts in effect on the policy’s Effective Date, the Coverage Year is the same as the Policy Year.
Fixed Account: is the part of the Policy Value that reflects the value you have in our general account.
Investment Account: is the part of the Policy Value that reflects the value you have in one of the sub-accounts of the Separate Account.
Issue Age: is the Life Insured’s age on the birthday closest to the Policy Date.
Loan Account: is the part of the Policy Value that reflects policy loans and interest credited to the Policy Value in connection with such loans.
Minimum Initial Premium: is the sum of the monthly deductions due for the first 3 Policy Months plus the Premium Charges deductible from this amount.
Net Cash Surrender Value: is the Cash Surrender Value less the Policy Debt.
Net Policy Value: is the Policy Value less the value in the Loan Account.
Net Premium: is the premium paid less the Premium Load and Sales Load.
Policy Date, Policy Anniversary, Policy Month and Policy Year: Policy Date is the date from which the first monthly deductions are calculated and from which Policy Years, Policy Months, and Policy Anniversaries are measured.
Policy Debt: on any date is the aggregate amount of policy loans, including borrowed and accrued interest, less any loan repayments.
Policy Value: is the sum of the values in the Loan Account, the Fixed Account, and the Investment Accounts.
Service Office: is PO Box 192, Boston, MA 02117-0192, or such other address as we specify to you by written notice.
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In addition to this prospectus, John Hancock USA has filed with the SEC an SAI that contains additional information about John Hancock USA and the Separate Account, including information on our history, services provided to the Separate Account, legal and regulatory matters and the audited financial statements for John Hancock USA and the Separate Account. The SAI and personalized illustrations of death benefits, policy values and surrender values are available, without charge, upon request. You may obtain the personalized illustrations from your John Hancock USA representative. The SAI may be obtained by contacting the John Hancock USA Service Office. You should also contact the John Hancock USA Service Office to request any other information about your policy or to make any inquiries about its operation.
JOHN HANCOCK USA SERVICE OFFICE
Overnight Express Delivery Mail Delivery
Life Post Issue - Specialty Products
John Hancock Insurance Company
30 Dan Road, Suite #55979
Canton, MA 02021 		Life Post Issue - Specialty Products
John Hancock Insurance Company
PO Box 55979
Boston, MA 02205
Phone: Fax:
1-800-521-1234 1-617-572-1571
Information about the Separate Account (including the SAI) can be reviewed and copied at the SEC’s Public Reference Branch, 100 F Street, NE, Room 1580, Washington, DC, 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 202-551-8090. Reports and other information about the Account are available on the SEC’s Internet website at http://www.sec.gov. Copies of such information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549-0102.
1940 Act File No. 811-5130—1933 Act File No. 333-100567

Table of Contents
Statement of Additional Information
dated May 2, 2016
for interests in
John Hancock Life Insurance Company (U.S.A.) Separate Account N
(Name of Registrant)
JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)
(“John Hancock USA”)
(Name of Depositor)
This is a Statement of Additional Information (“SAI”). It is not the prospectus. The prospectus, dated the same date as this SAI, may be obtained from a John Hancock USA representative or by contacting our Service Office - Specialty Products by mail at Life Post Issue, John Hancock Insurance Company, PO Box 55979, Boston, MA 02205, or telephone at 1-800-827-4546.
TABLE OF CONTENTS

 

Description of the Depositor
Under the Federal securities laws, the entity responsible for organization of the registered separate account underlying the variable life insurance policy is known as the “Depositor.” John Hancock USA (“Depositor”) is a stock life insurance company organized under the laws of Maine on August 20, 1955 by a special act of the Maine legislature and redomesticated under the laws of Michigan. The Depositor is a licensed life insurance company in the District of Columbia and all states of the United States except New York. Until 2004, the Depositor was known as The Manufacturers Life Insurance Company (U.S.A.).
The Depositor's ultimate parent is Manulife Financial Corporation (“MFC”), a publicly traded company based in Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial.
Description of the Registrant
Under the Federal securities laws, the registered separate account underlying the variable life insurance policy is known as the “Registrant.” John Hancock Life Insurance Company (U.S.A.) Separate Account N (the “Registrant” or “Separate Account”), is a separate account established by the Depositor under Michigan law. The variable investment options shown on page 1 of the prospectus are subaccounts of the Separate Account. The Separate Account meets the definition of “separate account” under the Federal securities laws and is registered as a unit investment trust under the Investment Company Act of 1940 (“1940 Act”). Such registration does not involve supervision by the Securities and Exchange Commission (“SEC”) of the management of the Separate Account or of the Depositor.
New subaccounts may be added and made available to policy owners from time to time. Existing subaccounts may be modified or deleted at any time.
Services
Administration of policies issued by the Depositor and of registered separate accounts organized by the Depositor may be provided by other affiliates. Neither the Depositor nor the separate accounts are assessed any charges for such services.
Custodianship and depository services for the Registrant are provided by State Street Investment Services (“State Street”). State Street’s address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts, 02111.
Independent registered public accounting firm
The statutory-basis financial statements of John Hancock Life Insurance Company (U.S.A.) at December 31, 2015 and 2014, and for each of the three years in the period ended December 31, 2015, and the financial statements of John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2015, and for each of the two years in the period ended December 31, 2015, appearing in this Prospectus and Registration Statement have been audited by Ernst &Young LLP, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
Legal and Regulatory Matters
There are no legal proceedings to which the Depositor, the Separate Account or the principal underwriter is a party or to which the assets of the Separate Account are subject that are likely to have a material adverse effect on the Separate Account or the ability of the principal underwriter to perform its contract with the Separate Account or of the Depositor to meet its obligations under the policies.
Principal Underwriter/Distributor
John Hancock Distributors LLC (“JH Distributors”), a Delaware limited liability company affiliated with the Depositor, is the principal distributor and underwriter of the securities offered through the prospectus. JH Distributors acts as the principal distributor of a number of other life insurance and annuity products we and our affiliates offer or maintain. JH
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Distributors also acts as the principal underwriter of John Hancock Variable Insurance Trust (the “Trust”), whose securities are used to fund certain variable investment options under the policies and under other life insurance and annuity products we offer or maintain.
JH Distributors' principal address is 601 Congress Street, Boston, MA 02210, and it also maintains offices with us at 197 Clarendon Street, Boston, MA 02116. JH Distributors is a broker-dealer registered under the Securities Act of 1934 (the “1934 Act”) and is a member of the Financial Industry Regulatory Authority (“FINRA”).
We offer the policies for sale through individuals who are licensed as insurance agents and who are registered representatives of broker-dealers that have entered into selling agreements with JH Distributors. Our affiliate Signator Investors, Inc. is one such broker-dealer.
The aggregate dollar amount of underwriting commissions paid to JH Distributors by the Depositor and its affiliates in connection with the sale of variable life products in 2015, 2014, and 2013 was $120,545,566, 132,392,739, and $119,574,297, respectively. JH Distributors did not retain any of these amounts during such periods.
The registered representative through whom your policy is sold will be compensated pursuant to the registered representative’s own arrangement with his or her broker-dealer. Compensation to broker-dealers for the promotion and sale of the policies is not paid directly by policy owners but will be recouped through the fees and charges imposed under the policy.
Additional compensation and revenue sharing arrangements may be offered to certain broker-dealer firms and other financial intermediaries. The terms of such arrangements may differ among firms we select based on various factors. In general, the arrangements involve three types of payments or any combination thereof:
•  Fixed dollar payments: The amount of these payments varies widely. JH Distributors may, for example, make one or more payments in connection with a firm’s conferences, seminars or training programs, seminars for the public, advertising and sales campaigns regarding the policies, to assist a firm in connection with its systems, operations and marketing expenses, or for other activities of a selling firm or wholesaler. JH Distributors may make these payments upon the initiation of a relationship with a firm, and at any time thereafter.
•  Payments based upon sales: These payments are based upon a percentage of the total amount of money received, or anticipated to be received, for sales through a firm of some or all of the insurance products that we and/or our affiliates offer. JH Distributors makes these payments on a periodic basis.
•  Payments based upon “assets under management”: These payments are based upon a percentage of the policy value of some or all of our (and/or our affiliates’) insurance products that were sold through the firm. JH Distributors makes these payments on a periodic basis.
Our affiliated broker-dealer, Signator Investors, Inc., may pay its respective registered representatives additional cash incentives, such as bonus payments, expense payments, health and retirement benefits or the waiver of overhead costs or expenses in connection with the sale of the policies that they would not receive in connection with the sale of policies issued by unaffiliated companies.
Additional Information About Charges
A policy will not be issued until the underwriting process has been completed to our satisfaction. The underwriting process generally includes the obtaining of information concerning your age, medical history, occupation and other personal information. This information is then used to determine the cost of insurance charge.
3

 

Special purchase programs for eligible classes
The policy is available for purchase by corporations and other groups or sponsoring organizations. Group or sponsored arrangements may include reduction or elimination of withdrawal charges and deductions for employees, officers, directors, agents and immediate family members of the foregoing. We reserve the right to reduce any of the policy's charges on certain cases where it is expected that the amount or nature of such cases will result in savings of sales, underwriting, administrative, commissions or other costs. Eligibility for these reductions and the amount of reductions will be determined by a number of factors, including the number of lives to be insured, the total premiums expected to be paid, total assets under management for the policyowner, the nature of the relationship among the insured individuals, the purpose for which the policies are being purchased, expected persistency of the individual policies, and any other circumstances which we believe to be relevant to the expected reduction of its expenses. Some of these reductions may be guaranteed and others may be subject to withdrawal or modifications, on a uniform case basis. Reductions in charges will not be unfairly discriminatory to any policyowners. We may modify from time to time, on a uniform basis, both the amounts of reductions and the criteria for qualification.
333-100567
333-126668
333-152409
4

Table of Contents

AUDITED STATUTORY-BASIS FINANCIAL STATEMENTS

John Hancock Life Insurance Company (U.S.A.)

For the Years Ended December 31, 2015, 2014 and 2013

With Report of Independent Auditors

Table of Contents

AUDITED STATUTORY-BASIS FINANCIAL STATEMENTS

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

Years Ended December 31, 2015, 2014 and 2013

Contents

 

Report of Independent Auditors

     F-1   

Statutory-Basis Financial Statements

   

Balance Sheets-

Statutory-Basis

      F-3   

Statements of Operations-

Statutory-Basis

      F-5   

Statements of Changes in Capital and Surplus-

Statutory-Basis

      F-6   

Statements of Cash Flow-

Statutory-Basis

      F-7   

Notes to Statutory-Basis Financial Statements

     F-8   

Table of Contents

Report of Independent Auditors

The Board of Directors and Shareholder

John Hancock Life Insurance Company (U.S.A.)

We have audited the accompanying statutory-basis financial statements of John Hancock Life Insurance Company (U.S.A.) (the Company), which comprise the balance sheets as of December 31, 2015 and 2014, and the related statements of operations, changes in capital and surplus and cash flow for each of the three years in the period ended December 31, 2015, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with accounting practices prescribed or permitted by the Michigan Office of Financial and Insurance Regulation. Management also is responsible for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note 2, to meet the requirements of Michigan the financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Michigan Office of Financial and Insurance Regulation, which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles and the effects on the accompanying financial statements are described in Note 2.

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the effects of the matter described in the preceding paragraph, the statutory-basis financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the financial position of the Company at December 31, 2015 and 2014, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2015.

 

F-1

Table of Contents

Opinion on Statutory-Basis of Accounting

However, in our opinion, the statutory-basis financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting practices prescribed or permitted by the Michigan Office of Financial and Insurance Regulation.

/s/ Ernst & Young LLP

Boston, Massachusetts

April 5, 2016

 

F-2

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

BALANCE SHEETS – STATUTORY BASIS

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions)  

Admitted assets

      

Cash and invested assets:

      

Bonds

        $ 44,463           $ 49,226   

Stocks:

      

Preferred stocks

      23         26   

Common stocks

      658         477   

Investments in affiliates

      3,205         2,911   

Mortgage loans on real estate

      10,475         11,519   

Real estate:

      

Company occupied

      299         300   

Investment properties

      6,487         5,203   

Cash, cash equivalents and short-term investments

      4,528         7,702   

Policy loans

      3,718         5,039   

Derivatives

      11,001         10,458   

Receivable for collateral on derivatives

      26         400   

Receivable for securities

      5         10   

Other invested assets

      5,618         5,978   
  

 

 

     

 

 

  

Total cash and invested assets

      90,506         99,249   

Investment income due and accrued

      758         887   

Premiums due and deferred

      303         388   

Amounts recoverable from reinsurers

      162         196   

Funds held by or deposited with reinsured companies

      3,660         1,958   

Other reinsurance receivable

      670         439   

Amounts due from affiliates

      304         247   

Other assets

      1,755         2,364   

Assets held in separate accounts

      129,725         140,164   
  

 

 

     

 

 

  

Total admitted assets

        $   227,843           $   245,892   
  

 

 

     

 

 

  

 

The accompanying notes are an integral part of these statutory-basis financial statements.

 

F-3

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

BALANCE SHEETS – STATUTORY BASIS – (CONTINUED)

 

     December 31,  
     2015     2014  
  

 

 

  
     (in millions)  

Liabilities and capital and surplus

     

Liabilities:

     

Policy and contract obligations:

     

Policy reserves

        $ 66,516          $ 69,184   

Policyholders’ and beneficiaries funds

      2,624        3,834   

Consumer notes

      265        411   

Dividends payable to policyholders

      428        574   

Policy benefits in process of payment

      499        556   

Other amount payable on reinsurance

      480        1,039   

Other policy obligations

      68        78   
  

 

 

    

 

 

  

Total policy and contract obligations

      70,880        75,676   

Payable to parent and affiliates

      1,816        3,073   

Transfers to (from) separate account, net

      (540 )      (1,390 ) 

Asset valuation reserve

      1,844        1,927   

Reinsurance in unauthorized companies

      3        3   

Funds withheld from unauthorized reinsurers

      7,784        8,873   

Interest maintenance reserve

      1,630        1,745   

Net deferred tax liability

      387        456   

Derivatives

      6,094        5,229   

Payables for collateral on derivatives

      1,640        2,939   

Payables for securities

      42        26   

Other general account obligations

      1,094        1,843   

Obligations related to separate accounts

      129,725        140,164   
  

 

 

    

 

 

  

Total liabilities

      222,399        240,564   

Capital and surplus:

     

Preferred stock (par value $1; 50,000,000 shares authorized; 100,000 shares issued and outstanding at December 31, 2015 and 2014)

      -        -   

Common stock (par value $1; 50,000,000 shares authorized; 4,728,939 shares issued and outstanding at December 31, 2015 and 2014)

      5        5   

Paid-in surplus

      3,196        3,196   

Surplus notes

      990        990   

Unassigned surplus

      1,253        1,137   
  

 

 

    

 

 

  

Total capital and surplus

      5,444        5,328   
  

 

 

    

 

 

  

Total liabilities and capital and surplus

        $   227,843          $   245,892   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of these statutory-basis financial statements.

 

F-4

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

STATEMENTS OF OPERATIONS – STATUTORY-BASIS

 

     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums and other revenues:

       

Life, long-term care and annuity premiums

        $    16,323          $    12,738          $    12,882   

Consideration for supplementary contracts with life contingencies

      140        183        266   

Net investment income

      4,387        4,297        4,551   

Amortization of interest maintenance reserve

      181        176        183   

Commissions and expense allowance on reinsurance ceded

      1,040        817        1,224   

Reserve adjustment on reinsurance ceded

      (16,494 )      (10,652 )      (9,775 ) 

Separate account administrative and contract fees

      1,786        1,841        1,848   

Other revenue

      415        467        188   
  

 

 

    

 

 

    

 

 

  

Total premiums and other revenues

      7,778        9,867        11,367   

Benefits paid or provided:

       

Death, surrender and other contract benefits, net

      9,762        9,064        7,710   

Annuity benefits

      1,796        1,733        1,784   

Disability and long-term care benefits

      647        584        542   

Interest and adjustments on policy or deposit-type funds

      91        125        132   

Payments on supplementary contracts with life contingencies

      179        170        159   

Increase (decrease) in life and long-term care reserves

      (2,506 )      2,161        1,017   
  

 

 

    

 

 

    

 

 

  

Total benefits paid or provided

      9,969        13,837        11,344   

Insurance expenses and other deductions:

       

Commissions and expense allowance on reinsurance assumed

      1,289        1,203        1,360   

General expenses

      960        972        1,092   

Insurance taxes, licenses and fees

      145        138        150   

Net transfers to (from) separate accounts

      (6,554 )      (8,229 )      (6,388 ) 

Investment income ceded

      2,465        4,954        (1,356 ) 

Other deductions

      (160 )      21        14   
  

 

 

    

 

 

    

 

 

  

Total insurance expenses and other deductions

      (1,855 )      (941 )      (5,128 ) 

Income (loss) from operations before dividends to policyholders, federal income taxes and net realized capital gains (losses)

      (336 )      (3,029 )      5,151   

Dividends to policyholders

      (36 )      77        81   
  

 

 

    

 

 

    

 

 

  

Income (loss) from operations before federal income taxes and net realized capital gains (losses)

      (300 )      (3,106 )      5,070   

Federal income tax expense (benefit)

      (778 )      (716 )      262   
  

 

 

    

 

 

    

 

 

  

Income (loss) from operations before net realized capital gains (losses)

      478        (2,390 )      4,808   

Net realized capital gains (losses)

      216        (74 )      (1,793 ) 
  

 

 

    

 

 

    

 

 

  

Net income (loss)

        $ 694          $ (2,464 )        $ 3,015   
  

 

 

    

 

 

    

 

 

  

 

The accompanying notes are an integral part of these statutory-basis financial statements.

 

F-5

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS – STATUTORY-BASIS

 

     Preferred
and
Common
Stock		      Paid-in
Surplus		      Surplus
Notes		      Unassigned
Surplus
(Deficit)		     Total
Capital
and
Surplus		  
  

 

 

  
     (in millions)  

Balances at January 1, 2013

        $ 5       $ 3,196       $ 990       $ 1,603      $ 5,794   

Net income (loss)

               3,015        3,015   

Change in net unrealized capital gains (losses)

               (1,455 )      (1,455 ) 

Change in net deferred income tax

               (347 )      (347 ) 

Decrease (increase) in non-admitted assets

               (12 )      (12 ) 

Change in liability for reinsurance in unauthorized reinsurance

               -        -   

Decrease (increase) in asset valuation reserves

               (180 )      (180 ) 

Dividend paid to Parent

               (300 )      (300 ) 

Change in surplus as a result of reinsurance

               (573 )      (573 ) 

Other adjustments, net

            -         (133 )      (133 ) 
  

 

 

  

Balances at December 31, 2013

      5         3,196         990         1,618        5,809   

Net income (loss)

               (2,464 )      (2,464 ) 

Change in net unrealized capital gains (losses)

               2,389        2,389   

Change in net deferred income tax

               973        973   

Decrease (increase) in non-admitted assets

               56        56   

Change in liability for reinsurance in unauthorized reinsurance

               3        3   

Decrease (increase) in asset valuation reserves

               (553 )      (553 ) 

Dividend paid to Parent

               (500 )      (500 ) 

Change in surplus as a result of reinsurance

               (252 )      (252 ) 

Other adjustments, net

            -         (133 )      (133 ) 
  

 

 

  

Balances at December 31, 2014

      5         3,196         990         1,137        5,328   

Net income (loss)

               694        694   

Change in net unrealized capital gains (losses)

               (394 )      (394 ) 

Change in net deferred income tax

               (158 )      (158 ) 

Decrease (increase) in non-admitted assets

               (43 )      (43 ) 

Change in liability for reinsurance in unauthorized reinsurance

               -        -   

Decrease (increase) in asset valuation reserves

               83        83   

Dividend paid to Parent

               (210 )      (210 ) 

Change in surplus as a result of reinsurance

               107        107   

Other adjustments, net

            -         37        37   
  

 

 

  

Balances at December 31, 2015

        $   5       $   3,196       $   990       $    1,253      $    5,444   
  

 

 

  

 

The accompanying notes are an integral part of these statutory-basis financial statements.

 

F-6

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

STATEMENTS OF CASH FLOW – STATUTORY-BASIS

 

     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Operations

       

Premiums and other considerations collected, net of reinsurance

        $ 19,961      $ 12,924      $ 13,205   

Net investment income received

      4,600        4,399        4,635   

Separate account fees

      1,786        1,841        1,848   

Commissions and expenses allowance on reinsurance ceded

      1,040        817        1,224   

Miscellaneous income

      2,852        450        (172 ) 

Benefits and losses paid

      (29,836 )      (21,960 )      (20,462 ) 

Net transfers from (to) separate accounts

      7,404        8,206        6,493   

Commissions and expenses (paid) recovered

      (5,153 )      (7,147 )      (1,572 ) 

Dividends paid to policyholders

      (250 )      (89 )      (91 ) 

Federal and foreign income and capital gain taxes (paid) recovered

      847        (382 )      (1,195 ) 
  

 

 

  

Net cash provided by (used in) operating activities

      3,251        (941 )      3,913   

Investment activities

       

Proceeds from sales, maturities, or repayments of investments:

       

Bonds

      19,217        20,471        19,130   

Stocks

      190        130        149   

Mortgage loans on real estate

      1,834        1,789        1,660   

Real estate

      8        1,053        22   

Other invested assets

      955        941        498   

Derivatives

      32        -        -   

Net gains (losses) on cash, cash equivalents and short term investments

      (9 )      3        (2 ) 
  

 

 

  

Total investment proceeds

         22,227           24,387           21,457   

Cost of investments acquired:

       

Bonds

      19,734        21,430        17,853   

Stocks

      848        234        78   

Mortgage loans on real estate

      1,715        1,088        1,813   

Real estate

      1,155        539        743   

Other invested assets

      905        1,281        882   

Derivatives

      -        739        1,916   
  

 

 

  

Total cost of investments acquired

      24,357        25,311        23,285   

Net increase (decrease) in receivable/payable for securities and collateral on derivatives

      904        (1,729 )      1,197   

Net increase (decrease) in policy loans

      56        (150 )      140   
  

 

 

  

Net cash provided by (used in) investment activities

      (3,090 )      955        (3,165 ) 

Financing and miscellaneous activities

       

Borrowed funds

      (276 )      (232 )      (48 ) 

Net deposits (withdrawals) on deposit-type contracts

      (333 )      (85 )      (134 ) 

Dividend paid to Parent

      (210 )      (500 )      (300 ) 

Repurchase agreements

      -        -        (437 ) 

Other cash provided (applied)

      (2,516 )      3,756        14   
  

 

 

  

Net cash provided by (used in) financing and miscellaneous activities

      (3,335 )      2,939        (905 ) 

Net increase (decrease) in cash, cash equivalents and short-term investments

      (3,174 )      2,953        (157 ) 

Cash, cash equivalents and short-term investments at beginning of year

      7,702        4,749        4,906   
  

 

 

  

Cash, cash equivalents and short-term investments at end of year

        $ 4,528      $ 7,702      $ 4,749   
  

 

 

  

Non-cash investing activities during the year:

       

Premium, deposit type contracts and other operating activity for New York Life (NYL) reinsurance transaction and other transactions, net

        $ 8,357      $ -      $ -   

Transfer of invested assets for NYL reinsurance transaction and other affiliates, net

      (8,357 )      -        -   

 

The accompanying notes are an integral part of these statutory-basis financial statements.

 

F-7

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS

 

1. Organization and Nature of Operations

John Hancock Life Insurance Company (U.S.A.) (“JHUSA” or the “Company”) is a wholly-owned subsidiary of The Manufacturers Investment Corporation (“MIC”). MIC is a wholly-owned subsidiary of John Hancock Financial Corporation (“JHFC”), which is an indirect, wholly-owned subsidiary of The Manufacturers Life Insurance Company (“MLI”). MLI, in turn, is a wholly-owned subsidiary of Manulife Financial Corporation (“MFC”), a Canadian-based, publicly traded financial services holding company.

The Company provides a wide range of financial protection and wealth management products and services to both individual and institutional customers located primarily in the United States. Through its insurance operations, the Company offers a variety of individual life insurance and individual and group long-term care insurance products that are distributed through multiple distribution channels, including insurance agents, brokers, banks, financial planners, and direct marketing. The Company also offers mutual fund products and services which include a variety of retirement products to retirement plans. The Company distributes these products through multiple distribution channels, including insurance agents and affiliated brokers, securities brokerage firms, financial planners, pension plan sponsors, pension plan consultants, and banks. In 2013, the Company discontinued sales of its structured settlements and single premium immediate annuity products. The Company is licensed to sell insurance in 49 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands.

Pursuant to a distribution agreement with the Company, John Hancock Distributors LLC (“JHD”), a registered broker-dealer and a wholly-owned subsidiary of the Company, acts as the principal underwriter of variable life contracts and other products issued by the Company.

The Company has two wholly-owned life insurance subsidiaries, John Hancock Life Insurance Company of New York (“JHNY”) and John Hancock Life & Health Insurance Company (“JHLH”).

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known and may impact the amounts reported and disclosed herein.

Basis of Presentation

These financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Michigan Department of Insurance and Financial Services (the “Insurance Department”). The National Association of Insurance Commissioners’ (“NAIC”) Accounting Practices and Procedures Manual (“NAIC SAP”) has been adopted as a component of practices prescribed or permitted by the State of Michigan. The Michigan Director of the Department of Insurance and Financial Services (the “Director”) has the authority to prescribe or permit other specific practices that deviate from prescribed practices. NAIC SAP practices differ from accounting principles generally accepted in the United States (“GAAP”) as described below.

Investments: Investments in bonds not backed by other loans are principally stated at amortized cost using the constant yield (interest) method. Bonds can also be stated at the lesser of amortized cost or fair value based on their NAIC designated rating. Non-redeemable preferred stocks, which have characteristics of equity securities, are reported at cost or lower of cost or market value as determined by the Securities Valuation Office of the NAIC (“SVO”) rating, and the related net unrealized capital gains (losses) are reported in unassigned surplus along with any adjustment for federal income taxes. Redeemable preferred stocks, which have characteristics of debt securities and are rated as medium quality or better, are reported at cost or amortized cost. All other redeemable preferred stocks are reported at the lower of cost, amortized cost, or fair value.

For bonds other than loan-backed and structured securities, the Company has a process in place to identify securities that could potentially have an impairment that is other-than-temporary. The Company recognizes other-than-temporary impairment losses on bonds with unrealized losses when either of the following two conditions exist: the entity either (1) has the intent to sell the debt security or (2) is more likely than not to be required to sell the debt security before its anticipated recovery. Declines in value due to credit difficulties are also considered to be other-than-temporarily impaired when the Company does not have the intent and ability to hold the security for a period of time sufficient to allow for any anticipated

 

F-8

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

recovery in value. The entire difference between amortized cost and fair value on such bonds with credit difficulties is recognized as an impairment loss in income.

Loan-backed and structured securities (i.e., collateralized mortgage obligations) are adjusted for the effects of changes in prepayment assumptions on the related accretion of discounts or amortization of premiums of such securities using either the retrospective or prospective methods. The retrospective adjustment method is used to value all such securities, except principal-only and interest-only securities and such securities with NAIC designations of 3-6, which are valued using the prospective method. If it is determined that a decline in fair value is other-than-temporary, the cost basis of the security is written down to the present value of estimated future cash flows using the original effective interest rate inherent in the security.

Common stocks are primarily reported at fair value based on quoted market prices and the related net unrealized capital gains (losses) are reported in unassigned surplus, net of any adjustment for federal income taxes. There are no restrictions on common and preferred stocks.

Insurance subsidiaries are reported at their underlying statutory equity. Non-insurance subsidiaries, which have significant ongoing operations other than for the benefit of the Company and its affiliates, are reported at GAAP equity. Non-insurance subsidiaries, which have no significant ongoing operations other than for the benefit of the Company and its affiliates, are reported based on the underlying equity, plus the admitted portion of goodwill. Dividends from subsidiaries are included in net investment income. The remaining net change in the subsidiaries’ equity is included in the change in net unrealized capital gains (losses).

Realized capital gains (losses) on sales of securities are recognized using the first in, first out (“FIFO”) method. The cost basis of bonds and common and preferred stocks is adjusted for impairments in value deemed to be other-than-temporary and such adjustments are reported as a component of net realized capital gains (losses).

Mortgage loans on real estate are reported at unpaid principal balances, less an allowance for impairments. Valuation allowances, if necessary, are established for mortgage loans on real estate based on the difference between the net value of the collateral, determined as the fair value of the collateral less estimated costs to obtain and sell, and the recorded investment in the mortgage loan. The initial valuation allowance and subsequent changes in the allowance for mortgage loans are charged or credited directly to unassigned surplus. A mortgage loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage agreement. When management determines foreclosure is probable and the impairment is other-than-temporary, the mortgage loan is written down and a realized loss is recognized.

Real estate occupied by the Company and real estate held for the production of income are reported at depreciated cost, net of related obligations. Real estate that the Company has the intent to sell is reported at the lower of depreciated cost or fair value, net of related obligations. Depreciation is calculated on a straight-line basis over the estimated useful lives of the properties. Investment income and operating expenses include rent for the Company’s occupancy of Company-owned properties.

Cash equivalents are short-term highly liquid investments with original maturities of three months or less and are principally stated at amortized cost. Short-term investments include investments with maturities of one year or less and greater than three months at the date of acquisition and are principally stated at amortized cost.

Policy loans are reported at unpaid principal balances.

Derivative instruments that meet the criteria to qualify for hedge accounting are accounted for in a manner consistent with the item hedged (i.e., amortized cost or fair value with the related net unrealized capital gains (losses) reported in unassigned surplus along with any adjustment for federal income taxes). Derivative instruments that are entered into for other than hedging purposes or that do not meet the criteria to qualify for hedge accounting are accounted for at fair value, and the related changes in fair value are recognized as net unrealized capital gains (losses) reported in unassigned surplus, net of any adjustments for federal income taxes. Embedded derivatives are not accounted for separately from the host contract.

Other invested assets consist of ownership interests in partnerships and limited liability corporations (“LLCs”) which are carried based on the underlying GAAP equity, with the exception of affordable housing tax credit properties, which are carried at amortized cost. The related net unrealized capital gains (losses) are reported in unassigned surplus, net of any

 

F-9

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

adjustments for federal income taxes. The Company records its share of income using the most recent financial information available, which is generally on a three month lag. Depending on the timing of receipt of the audited financial statements of these other invested assets, the investee level financial data may be up to one year in arrears.

Interest Maintenance and Asset Valuation Reserves: Under a formula prescribed by the NAIC, the Company defers the portion of realized capital gains (losses) on sales of fixed income investments, principally bonds and mortgage loans, and interest-related hedging activities that are attributable to changes in the general level of interest rates and amortizes those deferrals over the remaining period to maturity based on groupings of individual securities sold in five-year bands. That net deferral is reported as the interest maintenance reserve (“IMR”) in the accompanying Balance Sheets. Realized capital gains (losses) are reported in income, net of federal income tax and transferred to the IMR. The asset valuation reserve (“AVR”) provides a valuation allowance for invested assets. The AVR is determined by an NAIC prescribed formula with changes reflected directly in unassigned surplus.

Subsidiaries: The accounts and operations of the Company’s subsidiaries are not consolidated with the accounts and operations of the Company.

Goodwill: Goodwill is admitted subject to an aggregate limitation of 10% of the capital and surplus in the most recently filed quarterly statement, excluding EDP equipment, operating system software, net deferred tax assets, and net positive goodwill. Goodwill is amortized over the period the Company benefits economically, not to exceed 10 years. Goodwill held by non-insurance subsidiaries is assessed in accordance with GAAP, subject to certain limitations for holding companies and foreign insurance subsidiaries.

Separate Accounts: Separate account assets and liabilities reported in the accompanying Balance Sheets represent funds that are separately administered, principally for annuity contracts and variable life insurance policies, and for which the contract holder, rather than the Company, bears the investment risk. Separate account obligations are intended to be satisfied from separate account assets and not from assets of the general account. Separate accounts are generally reported at fair value. The operations of the separate accounts are not included in the Statements of Operations; however, income earned on amounts initially invested by the Company in the formation of new separate accounts is included in other revenue. Fees charged to contract holders, principally mortality, policy administration, and surrender charges are included in separate account administrative and contract fees. The assets in the separate accounts are not pledged to others as collateral or otherwise restricted. For the years ended December 31, 2015, 2014 and 2013, there were no gains (losses) on transfers of assets from the general account to the separate account.

Nonadmitted Assets: Certain assets designated as nonadmitted, principally furniture and equipment, past due agents’ balances, and other assets not specifically identified as an admitted asset within the NAIC SAP are excluded from the accompanying Balance Sheets and are charged directly to unassigned surplus.

Policy Acquisition Costs: The costs of acquiring and renewing business are expensed when incurred.

Policy Reserves: Reserves for life, long-term care, annuity, and deposit-type contracts are developed by actuarial methods and are determined based on interest rates, mortality tables and valuation methods prescribed by the NAIC that will provide, in the aggregate, reserves that are greater than or equal to the maximum of guaranteed policy cash values or the amounts required by the Insurance Department.

 

  •  

The Company waives deduction of deferred fractional premiums on the death of lives insured and annuity contract holders and returns any premium beyond the date of death. Surrender values on policies do not exceed the corresponding benefit reserves. Additional reserves are established when the results of asset adequacy testing indicate the need for such reserves or the net premiums exceed the gross premiums on any insurance in-force. This includes asset adequacy testing required under NAIC Actuarial Guideline 38 Section 8D (“AG 38 8D”). The Company recorded gross reserves of $791 million and $641 million for the calculation required under AG 38 8D, of which $465 million and $446 million was ceded to Manulife Reinsurance Limited (“MRL”) under an existing coinsurance transaction at December 31, 2015 and 2014, respectively. At December 31, 2015 and 2014, the Company held reserves of $920 million and $1,030 million, respectively, on insurance in-force for which gross premiums were less than net premiums according to the standard of valuation set by the State of Michigan.

 

F-10

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

  •  

Reserves for individual life insurance policies are maintained using the 1941, 1958, 1980, and 2001 Commissioner’s Standard Ordinary and American Experience Mortality Tables. Methods used include the net level premium method principally for policies issued prior to 1978, a modified preliminary term method, and the Commissioner’s Reserve Valuation Method.

 

  •  

Annuity and supplementary contracts with life contingency reserves are based principally on modifications of the 1937 Standard Annuity Table, the Group Annuity Mortality Tables for 1951, 1971, 1983, and 1994, the 1971 and 1983 Individual Annuity Mortality Tables, the 2000 Individual Annuity Mortality Table, and the 2012 Individual Annuity Mortality Table.

 

  •  

Liabilities related to policyholder funds left on deposit with the Company are generally equal to fund balances.

 

  •  

Long-term care reserves are generally calculated using the one-year preliminary term method based on various mortality, morbidity, and lapse tables.

 

  •  

The mean reserve method is used to adjust the calculated terminal reserve to the appropriate reserve at December 31, 2015 or 2014. Mean reserves are determined by computing the terminal reserve for the plan at the rated age and assuming annual premiums have been paid as of the valuation date. For certain policies with substandard table ratings, mean reserves are based on rated mortality from 125% to 500% of standard rating; for certain policies with flat extra ratings, mean reserves are based on standard mortality rates increased by 1 to 25 deaths per thousand. An asset is recorded for deferred premiums, net of loading, to adjust the reserve for modal premium payments.

 

  •  

For long-term care, the interpolated reserve method is used to adjust the calculated terminal reserve, and in addition an unearned premium reserve is held.

 

  •  

Tabular interest, tabular less actual reserve released, and tabular costs have been determined by formula. Tabular interest on funds not involving life contingencies is calculated as one percent of the product of such valuation rate of interest times the mean of the amount of funds subject to such valuation rate of interest held at the beginning and end of the valuation year.

 

  •  

From time to time, the Company finds it appropriate to modify certain required policy reserves because of changes in actuarial assumptions. Reserve modifications resulting from such determinations are recorded directly to unassigned surplus.

 

  •  

Reserves for variable deferred annuity contracts are calculated in accordance with NAIC Actuarial Guideline 43, and primarily use the 1994 Minimum Guaranteed Death Benefit or Annuity 2000 tables. The reserve is based on the present value of accumulated losses from the perspective of the Company. The liability is evaluated under both a standard scenario and stochastic scenario, and the Company holds the higher of the standard or stochastic values.

Reinsurance: 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 insurer.

Premiums, commissions, expense reimbursements, benefits, and reserves related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums ceded to other companies have been reported as a reduction of premium income. Amounts applicable to reinsurance ceded for future policy benefits, unearned premium reserves, and claim liabilities have been reported as reductions of these items.

The Company records a liability for unsecured policy reserves ceded to reinsurers not authorized in the State of Michigan to assume such business. Changes to those amounts are credited or charged directly to unassigned surplus. Policy and contract liabilities ceded to reinsurers have been reported as reductions of the related reserves. Commissions allowed by reinsurers on business ceded are reported as income when received. Investment income ceded includes separate account fee income, net

 

F-11

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

investment income and realized investment and other gains (losses), which was ceded to the affiliated reinsurers. NAIC SAP prescribes that no gain be recognized upon inception of a reinsurance treaty. The initial consideration is recorded directly to unassigned surplus and released into income over the life of the treaty.

Federal Income Taxes: Total federal income taxes are based upon the Company’s best estimate of its current and deferred tax assets or liabilities. Current tax expense is reported in the Statements of Operations as federal income tax expense if resulting from operations and within net unrealized capital gains (losses) if resulting from capital transactions. Changes in the balances of deferred taxes, which provide for book versus tax temporary differences, are subject to limitations and are reported within various lines within surplus. Accordingly, the reporting of statutory to tax temporary differences, such as reserves and policy acquisition costs, and of statutory to tax permanent differences, such as tax-exempt interest and tax credits, results in effective tax rates in the Statements of Operations that differ from the federal statutory tax rate.

Participating Insurance and Policyholder Dividends: Participating business represented approximately 15% and 26% of the Company’s aggregate reserve for life contracts at December 31, 2015 and 2014. The amount of policyholders’ dividends to be paid is approved annually by the Company’s Board of Directors. Policyholder dividends are recognized when declared rather than over the term of the related policies. The determination of the amount of policyholder dividends is complex and varies by policy type. In general, the aggregate amount of policyholders’ dividends is calculated based upon actual interest, mortality, morbidity, persistency, and expense experience for the year, as well as management’s judgment as to the appropriate level of statutory surplus to be retained by the Company. John Hancock Life Insurance Company (“JHLICO”) was a predecessor company that was merged into JHUSA on December 31, 2009. For additional information on the closed blocks, see the Closed Blocks Note.

Surplus Notes: Surplus notes are reported in capital and surplus, and the interest expense is not accrued unless approved for payment by the Insurance Department.

Statements of Cash Flow: Cash, cash equivalents and short-term investments in the Statements of Cash Flow represent movements of cash and highly liquid debt investments with initial maturities of one year or less.

Premiums and Benefits: Premiums for whole, term, and universal life, long-term care, annuity policies, guaranteed interest, and group annuity contracts with any mortality and morbidity risk are recognized as revenue when due. Revenues for universal life and annuity policies with mortality or morbidity risk, except for guaranteed interest, term certain supplementary contracts, and funding agreements, consist of the entire premium received. Premiums received for annuity policies, guaranteed interest, funding agreements, variable universal life, and group annuity contracts without mortality or morbidity risk are recorded using deposit accounting and are credited directly to an appropriate policy reserve account, without recognizing premium revenue. Benefits incurred represent the total of death benefits paid, annuity benefits paid and the change in policy reserves.

Policy and Contract Claims: Policy and contract claims are determined on an individual-case basis for reported losses. Estimates of incurred but not reported losses are developed on the basis of past experience.

Guaranty Fund Assessments: Guaranty fund assessments are accrued when the Company receives knowledge of an insurance insolvency.

Variances Between NAIC SAP and GAAP: The more significant variances from GAAP are: (a) bonds would generally be reported at fair value; (b) changes in the fair value of derivative financial instruments would generally be reported as revenue unless deemed an effective hedge; (c) embedded derivatives would be bifurcated from the underlying contract or security and accounted for separately at fair value; (d) income recognition on partnerships and LLCs, which are accounted for under the equity method, would not be limited to the amount of cash distribution; (e) majority-owned noninsurance subsidiaries, variable interest entities where the Company is the primary beneficiary, and certain other controlled entities would be consolidated; (f) changes in the balances of deferred income taxes would generally be included in net income; (g) market value adjusted (“MVA”) annuity products would be reported in the general account of the Company; (h) all assets, subject to valuation allowances, would be recognized; (i) reserves would generally be based upon the net level premium method or the estimated gross margin method with estimates of future mortality, morbidity, persistency and interest; (j) reinsurance ceded, unearned ceded premium and unpaid ceded claims would be reported as an asset; (k) AVR and IMR would not be recorded; (l) changes to the mortgage loan valuation allowance would be reported in income; (m) surplus notes would be reported as liabilities; (n) premiums received in excess of policy charges for universal life and annuity policies would not be recognized as premium revenue and benefits would represent the excess of benefits paid over the policy account value and interest

 

F-12

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

credited to the account values; (o) certain acquisition costs, such as commissions and other variable costs, directly related to acquiring new business are charged to current operations as incurred, would generally be capitalized and amortized based on profit emergence over the expected life of the policies or over the premium payment period; and (p) changes in unrealized capital gains (losses) and foreign currency translations would be presented as other comprehensive income.

3. Permitted Statutory Accounting Practices

The financial statements of the Company are presented in conformity with accounting practices prescribed or permitted by the Insurance Division.

For determining the Company’s solvency under the State of Michigan’s insurance laws and regulations, the Insurance Department recognizes only statutory accounting practices prescribed or permitted by the State of Michigan for determining and reporting the financial condition and results of operations of the Company. NAIC SAP has been adopted as a component of practices prescribed or permitted by the State of Michigan. The Director has the authority to prescribe or permit other specific practices that deviate from prescribed practices.

As of December 31, 2015 and 2014, the Director had not prescribed or permitted the Company to use any accounting practices that would result in the Company’s income or financial position to deviate from NAIC SAP.

4. Accounting Changes

Accounting changes adopted to conform to the provisions of NAIC SAP are reported as changes in accounting principles. The cumulative effect of changes in accounting principles is reported as an adjustment to unassigned surplus in the period of the change in accounting principle. The cumulative effect is the difference between the amount of unassigned surplus at the beginning of the year and the amount of unassigned surplus that would have been reported at that date if the new accounting principle had been applied retrospectively.

Adoption of New Accounting Standards

In December 2014, the NAIC adopted revisions to Statement of Statutory Accounting Principles (“SSAP”) No. 40R, Real Estate Investments (“SSAP 40R”) which became effective January 1, 2015 allowing real estate property investments that are wholly-owned by a LLC that are directly and wholly-owned by the reporting entity to be reported as real estate. For these investments previously reported within SSAP No. 48, Joint Ventures, Partnerships and Limited Liability Companies (“SSAP 48”), and owned as of the effective date, the Company recorded a $248 million reduction in other invested assets, and a corresponding increase in real estate investment property holdings.

Future Adoption of New Accounting Standards

As of December 31, 2015, there were no pending new accounting standards that would have a material impact on the Company’s Balance Sheet or Statement of Operations.

Reconciliation Between Audited Financial Statements and NAIC Annual Statements

There were no differences in net income (loss) or capital and surplus between the audited financial statements and the NAIC statements as filed as of and for the years ended December 31, 2015, 2014 and 2013.

 

F-13

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments

Bonds

The carrying value and fair value of the Company’s investments in bonds are summarized as follows:

 

     Carrying
Value		      Gross
Unrealized
Gains		      Gross
Unrealized
Losses		     Fair Value  
  

 

 

  
     (in millions)  

December 31, 2015:

           

U.S. government and agencies

        $ 5,378           $ 348           $ (46 )        $ 5,680   

States and political subdivisions

      2,666         435         (11 )      3,090   

Foreign governments

      2,737         201         (16 )      2,922   

Corporate bonds

      27,480         1,935         (655 )      28,760   

Mortgage-backed and asset-backed securities

      6,202         389         (93 )      6,498   
  

 

 

  

Total bonds

        $ 44,463           $ 3,308           $ (821 )        $ 46,950   
  

 

 

  

December 31, 2014:

           

U.S. government and agencies

        $ 5,420           $ 863           $ (1 )        $ 6,282   

States and political subdivisions

      2,842         606         —          3,448   

Foreign governments

      2,849         205         (10 )      3,044   

Corporate bonds

      31,347         3,633         (140 )      34,840   

Mortgage-backed and asset-backed securities

      6,768         618         (49 )      7,337   
  

 

 

  

Total bonds

        $   49,226           $   5,925           $   (200 )        $   54,951   
  

 

 

  

A summary of the carrying value and fair value of the Company’s investments in bonds at December 31, 2015, by contractual maturity, is as follows:

 

     Carrying
Value		      Fair Value  
  

 

 

  
     (in millions)  

Due in one year or less

        $ 747       $ 760   

Due after one year through five years

      5,659         5,764   

Due after five years through ten years

      6,962         7,010   

Due after ten years

      24,893         26,918   

Mortgage-backed and asset-backed securities

      6,202         6,498   
  

 

 

  

Total

        $   44,463       $   46,950   
  

 

 

  

The expected maturities in the foregoing table may differ from the contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

The Company maintains assets which are pledged as collateral in connection with various agreements and transactions. Additionally, the Company holds assets on deposit with government authorities as required by state law. The following table summarizes the carrying value or fair value, as applicable, of the pledged or deposited assets:

 

F-14

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions)  

At fair value:

      

Bonds pledged in support of over-the-counter derivative instruments

        $ 244       $ 125   

Bonds pledged in support of exchange-traded futures

      609         498   

Bonds and cash pledged in support of cleared interest rate swaps

      120         551   
  

 

 

  

Total fair value

        $ 973       $ 1,174   
  

 

 

  

At carrying value:

      

Bonds on deposit with government authorities

        $ 16       $ 16   

Mortgage loans pledged in support of real estate

      17         45   

Bonds held in trust

      92         132   

Pledged collateral under reinsurance agreements

      3,407         2,800   
  

 

 

  

Total carrying value

        $   3,532       $   2,993   
  

 

 

  

At December 31, 2015 and 2014, the Company held below investment grade corporate bonds of $2,047 million and $2,096 million, with an aggregate fair value of $1,990 million and $2,197 million, respectively. The Company performs periodic evaluations of the relative credit standing of the issuers of these bonds.

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

At the end of each quarter, the MFC Loan Review Committee reviews all securities where there is evidence of impairment or a significant unrealized loss at the Balance Sheet date. Generally, securities with market value less than 60 percent of amortized cost for six months or more indicate an impairment is present. Accordingly, securities in this category are normally deemed impaired unless there is clear evidence they should not be impaired. The analysis focuses on each company’s or project’s ability to service its debts in a timely fashion and the length of time the security has been trading below amortized cost. The results of this analysis are reviewed by the Transaction and Portfolio Review Committee at MFC. This committee includes MFC’s Chief Financial Officer, Chief Investment Officer, Chief Risk Officer, Chief Credit Officer, and other senior management. This quarterly process includes a fresh assessment of the credit quality of each investment in the entire fixed maturity security portfolio.

The Company considers relevant facts and circumstances in evaluating whether the impairment of a security is other-than-temporary. Relevant facts and circumstances considered include (1) the length of time the fair value has been below cost; (2) the financial position of the issuer, including the current and future impact of any specific events; and (3) the Company’s ability and intent to hold the security to maturity or until it recovers in value. To the extent the Company determines that a security, other than loan-backed and structured securities, is deemed to be other-than-temporarily impaired, the difference between amortized cost and fair value would be charged to income. For loan-backed and structured securities in an unrealized loss position, where the Company does not intend to sell or is not likely to be required to sell the security, the Company calculates an other-than-temporary impairment loss by subtracting the net present value of the projected future cash flows of the security from the amortized cost of the security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the debt security prior to impairment. The projection of future cash flows is subject to the same analysis the Company applies to its overall impairment evaluation process, as noted above, which incorporates security specific information such as late payments, downgrades by rating agencies, key financial ratios, financial statements, and fundamentals of the industry and geographic area in which the issuer operates, as well as overall macroeconomic conditions. The cash flow estimates, including prepayment assumptions, are based on data from third-party data sources or internal estimates, and are driven by assumptions regarding the underlying collateral, including default rates, recoveries, and changes in value.

There are a number of significant risks and uncertainties inherent in the process of monitoring impairments and determining if impairment is other-than-temporary. These risks and uncertainties include (1) the risk that the Company’s assessment of an

 

F-15

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

issuer’s ability to meet all of its contractual obligations will change based on changes in the credit characteristics of that issuer; (2) the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated; (3) the risk that fraudulent information could be provided to the Company’s investment professionals who determine the fair value estimates and other-than-temporary impairments; and (4) the risk that new information obtained by the Company or changes in other facts and circumstances lead the Company to change its intent to hold the security to maturity or until it recovers in value. Any of these situations could result in a charge to income in a future period.

The impact of Other-Than-Temporary Impairments (OTTI) on Carrying Values (CV), including the Present Value (PV) of Cash Flows (CF) less than Book Value (BV), is as follows:

 

                                    
  

 

 

  
     December 31, 2015  
         CV Before OTTI      Interest OTTI      Credit OTTI      CV After OTTI      Fair Value      
  

 

 

  
     (in millions)  

Aggregate PV of CFs less than BV

        $ 8             $ -             $   2             $ 6             $ 6     

Aggregate intent to sell

      -           -           -           -           -     

Aggregate lack of intent or inability to sell

      -           -           -           -           -     
  

 

 

  

Total

        $ 8             $   -             $   2             $ 6             $ 6     
  

 

 

  
              
  

 

 

  
     December 31, 2014  
         CV Before OTTI      Interest OTTI      Credit OTTI      CV After OTTI      Fair Value      
  

 

 

  
     (in millions)  

Aggregate PV of CF’s less than BV

        $ 33             $ -             $   5             $ 28             $ 28     

Aggregate intent to sell

      -           -           -           -           -     

Aggregate lack of intent or inability to sell

      -           -           -           -           -     
  

 

 

  

Total

        $     33             $   -             $   5             $   28             $   28     
  

 

 

  

 

F-16

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

The following tables disclose the impact of Other-Than-Temporary Impairments (OTTI) on Carrying Values (CV), including the Net Present Value (NPV) of Projected Cash Flows (CF) less than Book Value (BV) by CUSIP:

Year Ended December 31, 2015

 

                CUSIP#                     CV Before
OTTI		      NPV of
Projected
CFs		      Credit OTTI
Recognized in
Loss		      CV After
OTTI		      Fair        
Value        		  

 

  

      36242DFH1

        $ 3       $ 1       $ 2       $ 1       $ 1     

      75970NBK2

      -         -         -         -         -     

      94981QAZ1

      -         -         -         -         -     

      805564PN5

      2         2         -         2         2     

      36242DFH1

      1         1         -         1         1     

      55265KS34

      1         1         -         1         1     

      75970NBK2

      -         -         -         -         -     

      126671TU0

      -         -         -         -         -     

      294751CT7

      1         1         -         1         1     
  

 

 

  

          Total

        $         8       $         6       $         2       $         6       $         6     
  

 

 

  

 

F-17

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Year Ended December 31, 2014

 

CUSIP#    CV Before
OTTI		      NPV of
Projected
CFs		      Credit OTTI
Recognized in
Loss		      CV After
OTTI		      Fair        
Value        		  

 

  

      00075XAE7

        $ 1       $ 1       $ -       $ 1       $ 1     

      12669FUY7

      -         -         -         -         -     

      361849RK0

      15         14         1         14         14     

      126670AJ7

      -         -         -         -         -     

      126673WJ7

      -         -         -         -         -     

      126673WK4

      -         -         -         -         -     

      12669ERQ1

      4         3         1         3         3     

      12669FD67

      -         -         -         -         -     

      50180LAP5

      4         3         1         3         3     

      55265KS42

      -         -         -         -         -     

      75970NAR8

      1         1         -         1         1     

      75970NBK2

      1         1         -         1         1     

      126673WJ7

      -         -         -         -         -     

      12669FD59

      2         1         1         1         1     

      55265KS34

      1         1         -         1         1     

      59020UAZ8

         -         -         -         -     

      75970NAR8

      1         1         -         1         1     

      75970NBK2

      -         -         -         -         -     

      94981QAZ1

      -         -         -         -         -     

      50180LAP5

      3         2         1         2         2     

      75970NBK2

      -         -         -         -         -     
  

 

 

  

          Total

        $         33       $         28       $         5       $         28       $         28     
  

 

 

  

All impaired securities which have fair value less than cost or amortized cost, for which an other-than-temporary impairment has not been recognized in income as a realized loss, including securities with a recognized other-than-temporary impairment for non-interest related declines when a non-recognized interest related impairment remains:

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions)  

Continuous Unrealized Losses

      

Less than 12 months

        $   -           $   -   

12 months or longer

      -         -   

Fair Value of Securities with Continuous Unrealized Losses

      

Less than 12 months

      -         3   

12 months or longer

      -         4   

 

F-18

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

The following table shows gross unrealized losses and fair values of bonds, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

 

    Less than 12 months     12 months or more     Total  
   
    Fair Value     Gross
Unrealized
Losses		     Fair Value     Gross
Unrealized
Losses		     Fair Value     Gross
Unrealized
Losses		  
   
                (in millions)              

December 31, 2015:

                

U.S. government and agencies

       $ 3,260      $ (46 )    $ -      $ -      $ 3,260      $ (46 ) 

States and political subdivisions

     213        (10 )      11        (1 )      224        (11 ) 

Foreign governments

     16        (3 )      46        (12 )      62        (15 ) 

Corporate bonds

     8,424        (482 )      1,167        (174 )      9,591        (656 ) 

Mortgage-backed and asset-backed securities

     1,744        (57 )      242        (36 )      1,986        (93 ) 

Total

       $   13,657      $   (598 )    $   1,466      $   (223 )    $   15,123      $   (821 ) 
                                               

    

            
    Less than 12 months     12 months or more     Total  
   
    Fair Value     Gross
Unrealized
Losses		     Fair Value     Gross
Unrealized
Losses		     Fair Value     Gross
Unrealized
Losses		  
   
                (in millions)              

December 31, 2014:

                

U.S. government and agencies

       $ 94      $ -      $ 58      $ (1 )    $ 152      $ (1 ) 

States and political subdivisions

     8        -        8        -        16        -   

Foreign governments

     80        -        52        (10 )      132        (10 ) 

Corporate bonds

     2,033        (45 )      2,651        (95 )      4,684        (140 ) 

Mortgage-backed and asset-backed securities

     412        (8 )      459        (41 )      871        (49 ) 

Total

       $ 2,627      $ (53 )    $ 3,228      $ (147 )    $ 5,855      $ (200 ) 
                                               

At December 31, 2015 and 2014, there were 889 and 574 bonds that had a gross unrealized loss, of which the single largest unrealized loss was $25 million and $12 million, respectively. The Company anticipates that these bonds will perform in accordance with their contractual terms and the Company currently has the ability and intent to hold these bonds until they recover or mature. Unrealized losses can be created by rising interest rates or by rising credit concerns and hence widening credit spreads. Credit concerns are apt to play a larger role in the unrealized loss on below investment grade securities. Unrealized losses on investment grade securities principally relate to changes in interest rates or changes in credit spreads since the securities were acquired. Credit rating agencies’ statistics indicate that investment grade securities have been found to be less likely to develop credit concerns.

For the years ended December 31, 2015, 2014 and 2013, realized capital losses include $28 million, $24 million, and $88 million related to bonds that have experienced an other-than-temporary decline in value and were comprised of 13, 21, and 43 securities, respectively. These are primarily made up of impairments on public and private bonds and sub-prime mortgage-backed securities.

The total recorded investment in restructured corporate bonds at December 31, 2015, 2014 and 2013 was $18 million, $17 million, and $0 respectively. There were 0, 2, and 0 restructured corporate bonds for which an impairment was recognized during 2015, 2014 and 2013, respectively. The Company accrues interest income on impaired securities to the extent deemed

 

F-19

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

collectible and the loan continues to perform under its original or restructured contractual terms. Interest income on non-performing loans generally is recognized on a cash basis.

The sales of investments in bonds resulted in the following:

 

     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Proceeds

        $   17,078          $   18,292          $   14,555   

Realized gross gains

      500        579        244   

Realized gross losses

      (123 )      (111 )      (483 ) 

The Company had no nonadmitted accrued investment income from bonds (unaffiliated) at December 31, 2015 and 2014.

Affiliate Transactions

In 2015, the Company transferred certain bonds to an affiliate, John Hancock Reassurance Company Limited (“JHRECO”) in lieu of a reinsurance cash settlement. These bonds had a book value of $537 million and fair value of $609 million. The Company recognized $72 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company sold certain bonds to an affiliate, Bermuda Branch of The Manufacturers Life Insurance Company (“BBMLI”). These bonds had a book value of $270 million and fair value of $284 million at the date of the transaction. The Company recognized $15 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company sold certain bonds to an affiliate, Manufacturers International Limited (Hong Kong) (“MIL”). These bonds had a book value of $298 million and fair value of $332 million at the date of the transaction. The Company recognized $33 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company sold certain bonds to an affiliate, Manulife Financial Singapore (“MLS”). These bonds had a book value of $135 million and fair value of $147 million at the date of the transaction. The Company recognized $12 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company sold certain bonds with an affiliate, Manulife Japan (“MLJ”). These bonds had a net book value of $224 million and fair value of $248 million at the date of the transaction. The Company recognized $24 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company acquired, at fair value, certain bonds from an affiliate, JHNY, for $152 million.

In 2015, the Company acquired, at fair value, certain bonds from an affiliate, JHLH, for $282 million.

In 2014, JHUSA sold certain bonds to an affiliate, MLI. These bonds had a book value of $178 million and a fair value of $206 million at the date of the transaction. The Company recognized $28 million in pre-tax realized gains which was deferred in the IMR.

In 2014, JHUSA sold certain bonds to an affiliate, MIL. These bonds had a book value of $371 million and a fair value of $433 million in exchange for certain bonds from MIL with a book value of $389 million and fair value of $435 million at the date of the transaction. The Company recognized $62 million in pre-tax realized gains which was deferred in the IMR.

In 2014, JHUSA sold certain bonds to an affiliate, JHRECO. These bonds had a book value of $244 million and fair value of $284 million in exchange for certain bonds from JHRECO with a book value of $282 million and fair value of $291 million at the date of the transaction. The Company recognized $41 million in pre-tax realized gains which was deferred in the IMR.

 

F-20

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

In 2014, JHUSA acquired certain and sold certain bonds from an affiliate, JHNY. These bonds had a net book value of $165 million and a fair value of $188 million at the date of the transactions. The Company recognized $1 million in pre-tax realized gains before transfer to the IMR.

In 2014, JHUSA acquired, at fair value, certain bonds from an affiliate, JHLH, for $72 million.

In 2013, JHUSA sold certain bonds to an affiliate, MIL. These bonds had a book value of $397 million and a fair value of $454 million at the date of the transaction. The Company recognized $57 million in pre-tax realized gains before transfer to the IMR.

In 2013, JHUSA sold certain bonds to an affiliate, JHRECO. These bonds had a book value of $184 million and a fair value of $181 million at the date of the transaction. The Company recognized $3 million in pre-tax realized losses before transfer to the IMR.

In 2013, JHUSA sold certain and acquired certain bonds from an affiliate, BBMLI. The bonds had a net book value of $338 million and a fair value of $372 million at the date of the transaction. The Company recognized $27 million in pre-tax realized gains before transfer to the IMR.

 

F-21

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Preferred and Common Stocks

Unrealized gains and losses on investments in preferred and common stocks are reported directly in unassigned surplus and do not affect operations. The gross unrealized gains and losses on, and the cost and fair values of, those investments are summarized as follows:

 

     Cost      Gross
Unrealized
Gains		      Gross
Unrealized
Losses		      Fair
Value		  
  

 

 

  
     (in millions)  

December 31, 2015:

            

Preferred stocks:

            

Nonaffiliated

        $ 23       $ 11       $ -        $ 34   

Affiliates

      3         -         (3)         -   

Common stocks:

            

Nonaffiliated

      634         64         (40)         658   

Affiliates*

      971         2,241         (7)         3,205   
  

 

 

  

Total stocks

        $ 1,631       $   2,316       $ (50)       $ 3,897   
  

 

 

  
     Cost      Gross
Unrealized
Gains		      Gross
Unrealized
Losses		      Fair
Value		  
  

 

 

  
     (in millions)  

December 31, 2014:

            

Preferred stocks:

            

Nonaffiliated

        $ 29       $ 18       $ (1)       $ 46   

Affiliates

      3         -         (3)         -   

Common stocks:

            

Nonaffiliated

      420         71         (14)         477   

Affiliates*

      971         1,947         (7)         2,911   
  

 

 

  

Total stocks

        $   1,423       $   2,036       $   (25)       $   3,434   
  

 

 

  
* Affiliates — fair value represents the carrying value

At December 31, 2015 and 2014, there were 276 and 134 nonaffiliated equity securities that had a gross unrealized loss excluding securities that have been written down to zero. The single largest unrealized loss was $19 million and $3 million at December 31, 2015 and 2014, respectively. The Company anticipates that these equity securities will recover in value in the near term.

The Company has a process in place to identify equity securities that could potentially have an impairment that is other-than-temporary. The Company considers relevant facts and circumstances in evaluating whether the impairment of a security is other-than-temporary. Relevant facts and circumstances include (1) the length of time the fair value has been below cost; (2) the financial position of the issuer; and (3) the Company’s ability and intent to hold the security until it recovers. To the extent the Company determines that a security is deemed to be other-than-temporarily impaired, the difference between book value and fair value would be charged to income.

For the years ended December 31, 2015, 2014 and 2013, realized capital losses include $4 million, $2 million, $5 million and related to preferred and common stocks that have experienced an other-than-temporary decline in value and were comprised of 115, 33, and 69 securities, respectively. These are primarily made up of impairments on public and private common stocks.

 

F-22

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Mortgage Loans on Real Estate

At December 31, 2015 and 2014, the mortgage loan portfolio was diversified by geographic region and specific collateral property type as displayed below. The Company controls credit risk through credit approvals, limits, and monitoring procedures.

 

December 31, 2015:                     
Property Type    Carrying
Value		       

Geographic

Concentration

    Carrying
Value		  

 

       

 

  
     (in millions)             (in millions)  

Apartments

        $ 2,206         East North Central        $ 1,445   

Industrial

      739         East South Central      157   

Office buildings

      2,562         Middle Atlantic      1,599   

Retail

      3,278         Mountain      516   

Agricultural

      171         New England      586   

Agribusiness

      471         Pacific      3,210   

Mixed use

      22         South Atlantic      1,986   

Other

      1,034         West North Central      449   

Allowance

      (8 )       West South Central      453   
        Canada / Other      82   
        Allowance      (8 ) 
  

 

 

          

 

 

  

Total mortgage loans on real estate

        $ 10,475         Total mortgage loans on real estate        $ 10,475   
  

 

 

          

 

 

  
                         
December 31, 2014:                     
Property Type    Carrying
Value		       

Geographic

Concentration

    Carrying
Value		  

 

       

 

  
     (in millions)             (in millions)  

Apartments

        $ 2,136         East North Central        $ 1,394   

Industrial

      920         East South Central      83   

Office buildings

      3,347         Middle Atlantic      1,997   

Retail

      3,209         Mountain      511   

Agricultural

      405         New England      682   

Agribusiness

      516         Pacific      3,310   

Mixed use

      22         South Atlantic      2,459   

Other

      974         West North Central      468   

Allowance

      (10 )       West South Central      533   
        Canada / Other      92   
        Allowance      (10 ) 
  

 

 

          

 

 

  

Total mortgage loans on real estate

        $   11,519         Total mortgage loans on real estate        $   11,519   
  

 

 

          

 

 

  

The aggregate mortgages outstanding to any one borrower do not exceed $263 million.

During 2015, the respective maximum and minimum lending rates for mortgage loans issued were 7.49% and 3.72% for agricultural loans and 5.19% and 3.00% for commercial loans. The Company issued no purchase money mortgages in 2015 and 2014. At the issuance of a loan, the percentage of any one loan to value of security, exclusive of insured, guaranteed, or purchase money mortgages does not exceed 75%. Impaired mortgage loans without an allowance for credit losses were $0 million, $0 million, and $0 million at December 31, 2015, 2014 and 2013, respectively. The average recorded investment in impaired loans was $34 million, $41 million, and $60 million at December 31, 2015, 2014 and 2013, respectively. The Company recognized $2 million, $3 million, and $0 million of interest income during the period the loans were impaired for the years ended December 31, 2015, 2014 and 2013, respectively.

 

F-23

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Generally, the terms of the restructured mortgage loans call for the Company to receive some form or combination of an equity participation in the underlying collateral, excess cash flows or an effective yield at the maturity of the loans sufficient to meet the original terms of the loans. There are no contractual commitments made to extend credit to debtors owning receivables whose terms have been modified in troubled debt restructurings. The Company accrues interest income on impaired loans to the extent deemed collectible and the loan continues to perform under its original or restructured contractual terms. Interest income on non-performing loans generally is recognized on a cash basis.

The following table provides a reconciliation of the beginning and ending balances for allowance for losses for the periods indicated.

 

     2015     2014     2013  
  

 

 

  
     (in millions)  

Balance at beginning of year

        $   10      $ 10      $ 19   

Additions, net

      3           10           13   

Recoveries of amounts previously charged off

      (5 )      (10 )      (22 ) 
  

 

 

  

Balance at end of year

        $ 8      $ 10      $ 10   
  

 

 

  

For mortgage loans, the Company evaluates credit quality through regular monitoring of credit related exposures, considering both qualitative and quantitative factors in assigning an internal risk rating (“IRR”). These ratings are updated at least annually.

The carrying value of mortgage loans by IRR was as follows:

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions)  

AAA

        $ 345       $ 436   

AA

      1,974         1,594   

A

      4,685         4,141   

BBB

      3,251         4,979   

BB

      177         267   

B and lower and unrated

      43         102   
  

 

 

  

Total

        $   10,475       $   11,519   
  

 

 

  

Affiliate Transactions

In 2015, the Company sold certain mortgages to an affiliate, JHNY. These mortgages had a book value of $67 million and fair value of $73 million at the date of the transaction. The Company recognized $5 million in pre-tax realized gains before transfer to the IMR.

In 2015, the Company sold certain mortgages to an affiliate, JHLH. These mortgages had a book value of $2 million and fair value of $2 million at the date of the transaction. The Company recognized $0 million in pre-tax realized gains before transfer to the IMR.

 

F-24

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Real Estate

The composition of the Company’s investment in real estate is summarized as follows:

 

     December 31,  
     2015     2014  
  

 

 

  
     (in millions)  

Properties occupied by the company

        $ 381      $ 374   

Properties held for the production of income

      7,178        5,764   

Properties held for sale

      -        -   

Less accumulated depreciation

      (773 )      (635 ) 
  

 

 

  

Total

        $   6,786      $   5,503   
  

 

 

  

The Company recorded $0 million, $0 million, and $0 million of impairments on real estate investments during the years ended December 31, 2015, 2014 and 2013, respectively.

On December 12, 2014, the Company entered into an arrangement with Allianz to co-invest up to $1 billion in the U.S. real estate market. As part of this arrangement, the Company sold 100% of certain real estate holding to an unaffiliated joint venture limited partnership (“LP”) in return for cash and a 20% equity interest in the LP. These properties had a book value of $343 million and fair value of $545 million, which resulted in a gain to operations of $161 million (after 20% deferral of realized gain). The Company provides the LP with property management services and through a wholly-owned subsidiary provides the LP with asset management services.

Affiliate Transactions

In 2014, JHUSA acquired, at fair value, real estate from an affiliate, JHNY, for approximately $33 million.

Other Invested Assets

The Company had no investments in partnerships or LLCs that exceed 10% of its admitted assets at December 31, 2015 and 2014.

Other invested assets primarily consist of investments in partnerships and LLCs. The Company recorded $120 million, $3 million, and $0 million of impairments on partnerships and LLCs during the years ended December 31, 2015, 2014 and 2013, respectively. These impairments are based on significant judgement by the Company in determining whether the objective evidence of other-than-temporary impairment exists. The Company considers relevant facts and circumstances in evaluating whether the impairment of an other invested asset is other-than-temporary. Relevant facts and circumstances include (1) the length of time the fair value has been below cost; (2) the financial position of the investee; (3) the Company’s ability and intent to hold the other invested asset until it recovers. To the extent the Company determines that an other invested asset is deemed to be other-than-temporarily impaired, the difference between book and fair value would be charged to income.

Other

The subprime lending sector, also referred to as B-paper, near-prime, or second chance lending, is the sector of the mortgage lending industry which lends to borrowers who do not qualify for prime market interest rates because of poor or insufficient credit history.

For purposes of this disclosure, subprime exposure is defined as the potential for financial loss through direct investment, indirect investment, or underwriting risk associated with risk from the subprime lending sector. For purposes of this note, subprime exposure is not limited solely to the risk associated with holding direct mortgage loans, but also includes any indirect risk through investments in asset-backed or structured securities, hedge funds, common stock, subsidiaries and affiliates, and insurance product issuance.

 

F-25

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Although it can be difficult to determine the indirect risk exposures, it should be noted that not only does it include expected losses, it also includes the potential for losses that could occur due to significantly depressed fair value of the related assets in an illiquid market.

The Company had no direct exposure through investments in subprime mortgage loans as of December 31, 2015 or 2014.

Management considers several factors when classifying a structured finance or residential mortgage-backed security holding as “subprime” or placing a security in the highest risk category. These factors include the transaction’s weighted average FICO or credit score, loan-to-value ratio (LTV), geographic composition, lien position, loan purpose, and loan documentation.

The Company has entered into certain repurchase agreements with an aggregate carrying value of $0 million and $0 million as of December 31, 2015 and 2014, respectively. For such agreements, the Company agrees to a specified term, price, and interest rate through the date of the repurchase.

The Company established a facility with an affiliate, Manulife Reinsurance (Bermuda) Limited (“MRBL”) whereby cash collateral can be received under a repurchase agreement program. There was no repurchase agreement activity in 2015.

The Company’s practice is to require a minimum of 102% of the fair value of securities loaned under securities lending agreements to be maintained as non-cash collateral. Positions are marked to market and adjusted on a daily basis to ensure the 102% margin requirement is maintained. Any cash collateral received is not re-invested nor is a rebate paid to the lending counterparty. There were no securities on loan as of December 31, 2015 and 2014.

 

F-26

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Net Investment Income and Net Realized and Other Gains (Losses)

Major categories of the Company’s net investment income are summarized as follows:

 

     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Income:

       

Bonds

        $   2,231      $   2,378      $   2,577   

Preferred stocks

      -        2        -   

Common stocks

      372        76        4   

Mortgage loans on real estate

      670        738        730   

Real estate

      722        669        605   

Policy loans

      190        287        283   

Cash, cash equivalents and short-term investments

      8        7        5   

Other invested assets

      466        464        620   

Derivatives

      520        452        464   

Other income

      27        23        25   
  

 

 

  

Total investment income

      5,206        5,096        5,313   

Expenses

       

Investment expenses

      (533 )      (516 )      (493 ) 

Investment taxes, licenses and fees, excluding federal income taxes

      (84 )      (85 )      (83 ) 

Investment interest expense

      (84 )      (91 )      (97 ) 

Depreciation on real estate and other invested assets

      (118 )      (107 )      (89 ) 
  

 

 

  

Total investment expenses

      (819 )      (799 )      (762 ) 
  

 

 

  

Net investment income

        $ 4,387      $ 4,297      $ 4,551   
  

 

 

  
Realized capital gains (losses) and amounts transferred to the IMR are as follows:              
     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Realized capital gains (losses)

        $ 965      $ 431      $ (1,701 ) 

Less amount transferred to the IMR (net of related tax benefit (expense) of $(138) in 2015, $(66) in 2014, and $(8) in 2013)

      256        123        (16 ) 
  

 

 

  

Realized capital gains (losses) before tax

      709        308        (1,685 ) 

Less federal income taxes on realized capital gains (losses) before effect of transfer to the IMR

      493        382        108   
  

 

 

  

Net realized capital gains (losses)

        $ 216      $ (74 )    $   (1,793 ) 
  

 

 

  

 

F-27

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives

Derivatives are financial contracts, the value of which is derived from underlying interest rates, foreign exchange rates, credit, equity price movements, indices or other market risks arising from on-balance sheet financial instruments and selected anticipated transactions. The Company uses derivatives including swaps, forward and futures agreements, floors, and options to manage current and anticipated exposures to changes in interest rates, foreign exchange rates, credit and equity market prices.

Over-the-counter (“OTC”) swaps are contractual agreements between the Company and a counterparty to exchange a series of cash flows based upon rates applied to a notional amount. For interest rate swaps, counterparties generally exchange fixed or floating interest rate payments based on a notional value in a single currency. Cross currency swaps involve the exchange of principal amounts between parties as well as the exchange of interest payments in one currency for the receipt of interest payments in another currency. Total return swaps are contracts that involve the exchange of payments based on changes in the values of a reference asset, including any returns such as interest earned on these assets, in return for amounts based on reference rates specified in the contract.

Cleared interest rate swaps are contractual agreements between the Company and a counterparty whereby the transaction must be cleared through a central clearing house, and subject to mandatory margin and reporting requirements.

Forward and futures agreements are contractual obligations to buy or sell a financial instrument or foreign currency on a predetermined future date at a specified price. Forward contracts are OTC contracts negotiated between counterparties, whereas futures agreements are contracts with standard amounts and settlement dates that are traded on regulated exchanges.

Interest rate floors are contracts with counterparties which require payment of a premium for the right to receive payments when the market interest rate on specified future dates falls below the agreed upon strike price. Interest rate treasury lock contracts are customized agreements securing current interest rates on Treasury securities for payment on a future date.

Options are contractual agreements whereby the holder has the right, but not the obligation, to buy (call option) or sell (put option) a security, exchange rate, interest rate, or other financial instrument at a predetermined price/rate within a specified time.

Swaptions are contractual agreements whereby the holder has the right, but not obligation, to enter into a given swap agreement on a specified future date.

Types of Derivatives and Derivative Strategies

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

The Company uses interest rate swap agreements in effective cash flow and fair value hedge accounting relationships. These derivatives hedge the variable cash flows associated with certain floating-rate bonds, as well as, future fixed income asset acquisitions, which will support the Company’s long-term care and life insurance businesses. These derivatives reduce the impact of future interest rate changes on the cost of acquiring adequate assets to support the investment income assumptions used in pricing these products. For its fair value hedging relationships, the Company uses interest rate swap agreements to hedge the risk of changes in fair value of existing fixed rate assets and liabilities arising from changes in benchmark interest rates.

The Company also enters into basis swaps to better match the cash flows from assets and related liabilities. Basis swaps are included in interest rate swaps for disclosure purposes. The Company utilizes basis swaps in other hedging relationships.

 

F-28

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

Inflation swaps are used to reduce inflation risk generated from inflation-indexed liabilities. Inflation swaps are classified within interest rate swaps for disclosure purposes. The Company utilizes inflation swaps in effective hedge accounting relationships and other hedging relationships.

The Company uses exchange-traded interest rate futures primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, and to hedge against changes in interest rates on anticipated liability issuances by replicating U.S. Treasury or swap curve performance. The Company utilizes exchange-traded interest rate futures in other hedging relationships.

The Company also uses interest rate floors and swaptions primarily to protect against interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). The Company utilizes interest rate floors in other hedging relationships.

Foreign Currency Contracts. Foreign currency derivatives, including foreign currency swaps, foreign currency forwards, and foreign currency futures are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.

Cross currency rate swap agreements are used to manage the Company’s exposure to foreign exchange rate fluctuations, interest rate fluctuations, or both, on foreign currency financial instruments. Cross currency rate swap agreements are contracts to exchange the currencies of two different countries at the same rate of exchange at specified future dates. The net differential to be paid or received on cross currency rate swap agreements is accrued and recognized as a component of net investment income.

Under foreign currency forwards, the Company agrees with other parties to deliver a specified amount of an identified currency at a specified future date. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The maturities of these forwards correspond with the future periods in which the foreign currency transactions are expected to occur. The Company utilizes currency forwards in effective hedge accounting relationships and other hedging relationships.

Foreign currency futures are contractual obligations to buy or sell a foreign currency on a predetermined future date at a specified price. These contracts are standardized contracts traded on an exchange. The Company utilizes foreign exchange futures in other hedging relationships.

Equity Market Contracts. Total return swaps are contracts that involve the exchange of payments based on changes in the value of a reference asset, including any returns such as interest earned on these assets, in exchange for amounts based on reference rates specified in the contract. The Company utilizes total return swaps in effective hedge accounting relationships and other hedging relationships.

Equity index options are contractual agreements whereby the holder has the right, but not the obligation, to buy (call option) or sell (put option) an underlying equity market index on or before a specified future date at a specified price. The Company utilizes equity index options that are exchange-traded in other hedging relationships.

Equity index futures contracts are contractual obligations to buy or sell a specified amount of an underlying equity index at an agreed contract price on a specified date. Equity index futures are contracts with standard amounts and settlement dates that are traded on regulated exchanges. The Company utilizes equity index futures in other hedging relationships.

Credit Contracts. The Company manages credit risk through the issuance of credit default swaps (“CDS”) or the purchase of credit default swap index (“CDX”). A CDS is a derivative instrument representing an agreement between two parties to exchange the credit risk of a single specified entity or an index based on the credit risk of a group of entities (all commonly referred to as the “reference entity” or a portfolio of “reference entities”), in return for a periodic premium. CDS contracts typically have a five-year term.

A CDX is similar to a CDS in that it is a credit derivative used to hedge credit risk; however, it uses a basket of credit entities or indexes rather than a single reference entity or index. CDX is a standardized credit security and it is cleared through a clearing house.

 

F-29

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

Replication Synthetic Assets. Replication synthetic asset transactions (“RSATs”) are derivative transactions made in combination with a cash instrument in order to reproduce the investment characteristic of an otherwise permissible investment. The Company uses interest rate swaps and credit default swaps in these transactions when direct investments are either too expensive to acquire or otherwise unavailable in the market. Such derivatives can only be RSATs and not hedging vehicles.

The table below provides a summary of the gross notional amount and fair value of derivatives contracts for all derivatives in effective hedge accounting relationships, other hedging relationships, and RSATs:

 

          December 31, 2015  
          Notional
Amount		      Carrying
Value
Assets		      Carrying
Value
Liabilities		      Fair
Value
Assets		      Fair
Value
Liabilities		  
     

 

 

  
          (in millions)  

Effective Hedge Accounting Relationships

  

            

Fair value hedges

   

Interest rate swaps

        $ 3,553           $ -           $ -           $ 457           $ 256   
  

Foreign currency swaps

      142         10         7         1         24   

Cash flow hedges

   

Interest rate swaps

      10,358         -         -         1,516         267   
  

Foreign currency swaps

      1,571         168         93         420         339   
  

Foreign currency forwards

      288         -         -         -         31   
  

Equity total return swaps

      26         -         -         -         1   
     

 

 

  

Total Derivatives in Effective Hedge Accounting Relationships

        $ 15,938           $ 178           $ 100           $ 2,394           $ 918   
     

 

 

  

Other Hedging Relationships

               
  

Interest rate swaps

        $ 149,942           $ 10,043           $ 5,770           $ 10,043           $ 5,770   
  

Interest rate treasury locks

      8,429         364         153         364         153   
  

Interest rate options

      4,253         144         -         144         -   
  

Interest rate futures

      4,656         -         -         -         -   
  

Foreign currency swaps

      972         123         62         123         62   
  

Foreign currency forwards

      73         8         -         8         -   
  

Foreign currency futures

      1,842         -         -         -         -   
  

Equity total return swaps

      131         2         1         2         1   
  

Equity options

      2,878         138         8         138         8   
  

Equity index futures

      9,169         -         -         -         -   
  

Credit default swaps

      -         -         -         -         -   
     

 

 

  

Total Derivatives in Other Hedging Relationships

        $ 182,345           $ 10,822           $ 5,994           $ 10,822           $ 5,994   
     

 

 

  

Replication Synthetic Asset Transactions

               
  

Interest rate swaps

        $ 2,385           $ -           $ -           $ 90           $ 13   
  

Credit default swaps

      295         1         -         3         -   
     

 

 

  

Total Derivatives in Replication Synthetic Asset Transactions

        $ 2,680           $ 1           $ -           $ 93           $ 13   
     

 

 

  

Total Derivatives

        $   200,963           $   11,001           $   6,094           $   13,309           $   6,925   
     

 

 

  

 

F-30

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

          December 31, 2014  
          Notional
Amount		      Carrying
Value
Assets		      Carrying
Value
Liabilities		      Fair
Value
Assets		      Fair
Value
Liabilities		  
     

 

 

  
          (in millions)  

Effective Hedge Accounting Relationships

  

            

Fair value hedges

   

Interest rate swaps

        $ 5,461           $ -           $ 1           $ 496           $ 641   
  

Foreign currency swaps

      169         1         29         -         62   

Cash flow hedges

   

Interest rate swaps

      12,053         -         -         1,543         263   
  

Foreign currency swaps

      1,640         29         15         266         261   
  

Foreign currency forwards

      102         -         -         -         4   
  

Equity total return swaps

      27         -         -         6         -   
     

 

 

  

Total Derivatives in Effective Hedge Accounting Relationships

        $ 19,452           $ 30           $ 45           $ 2,311           $ 1,231   
     

 

 

  

Other Hedging Relationships

               
  

Interest rate swaps

        $ 128,704           $ 9,059           $ 5,154           $ 9,059           $ 5,154   
  

Interest rate treasury locks

      6,323         938         -         938         -   
  

Interest rate options

      3,362         93         -         93         -   
  

Interest rate futures

      3,697         -         -         -         -   
  

Foreign currency swaps

      978         43         30         43         30   
  

Foreign currency forwards

      43         4         -         4         -   
  

Foreign currency futures

      1,775         -         -         -         -   
  

Equity total return swaps

      31         11         -         11         -   
  

Equity options

      3,940         277         -         277         -   
  

Equity index futures

      8,323         -         -         -         -   
  

Credit default swaps

      -         -         -         -         -   
     

 

 

  

Total Derivatives in Other Hedging Relationships

        $ 157,176           $ 10,425           $ 5,184           $ 10,425           $ 5,184   
     

 

 

  

Replication Synthetic Asset Transactions

               
  

Interest rate swaps

        $ 1,040           $ -           $ -           $ 61           $ -   
  

Credit default swaps

      315         3         -         6         -   
     

 

 

  

Total Derivatives in Replication Synthetic Asset Transactions

        $ 1,355           $ 3           $ -           $ 67           $ -   
     

 

 

  

Total Derivatives

        $   177,983           $   10,458           $   5,229           $   12,803           $   6,415   
     

 

 

  

Hedging Relationships

The Company generally does not enter into derivative contracts for speculative purposes. In certain circumstances, these hedges also meet the requirements for hedge accounting and are reported in a manner consistent with the hedged asset or liability. For the years ended December 31, 2015, 2014 and 2013, respectively, the Company recorded unrealized gains (losses) of ($33) million, $1,215 million, and $168 million, respectively, related to derivatives that no longer qualify for hedge accounting.

Fair Value Hedges. The Company uses interest rate swaps to manage its exposure to changes in fair value of fixed-rate financial instruments caused by changes in interest rates. The Company also uses cross currency swaps and currency forwards to manage its exposure to foreign exchange rate fluctuations and interest rate fluctuations.

Cash Flow Hedges. The Company uses interest rate swaps and interest rate treasury locks to hedge the variability in cash flows from variable rate financial instruments and forecasted transactions. The Company also uses cross currency swaps and forward agreements to hedge currency exposure on foreign currency financial instruments and foreign currency denominated

 

F-31

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

expenses, respectively. Total return swaps are used to hedge the variability in cash flows associated with certain stock-based compensation awards. Inflation swaps are used to reduce inflation risk generated from inflation-indexed liabilities.

In 2014, the Company concluded that a portion of the hedged transactions for its long-term care business and life insurance business were probable not to occur resulting in the de-designation of $2.7 billion (notional principal) of forward-starting interest rate swaps. The de-designation of these interest rate swaps resulted in an increase to unrealized capital gains (losses) of $445 million, net of tax. In addition as part of our affiliate reinsurance agreement with JHRECO, we were required as part of the net investment income component of the treaty settlement calculation to cede $440 million, net of tax, and therefore the overall impact of this transaction was not material to capital and surplus.

For the year ended December 31, 2015, all of the Company’s hedged forecast transactions qualified as cash flow hedges and no cash flow hedges were discontinued because it was probable that the original forecasted transactions would occur by the end of the originally specified time period documented at inception of the hedging relationship.

The maximum time frame for which variable cash flows are hedged is 31 years.

Derivatives Not Designated as Hedging Instruments in Effective Hedge Accounting or RSAT Relationships. The Company enters into interest rate swap agreements, cancelable interest rate swap agreements, and interest rate futures contracts to manage interest rate risk, total return swap agreements to manage equity risk, and CDS to manage credit risk. The Company also uses interest rate treasury locks and interest rate floor agreements to manage exposure to interest rates without designating the derivatives as hedging instruments. Interest rate floor agreements hedge the interest rate risk associated with minimum interest rate guarantees in certain life insurance and annuity businesses.

The Company offers certain variable annuity products with a guaranteed minimum withdrawal benefit (“GMWB”) and guaranteed minimum death benefit (“GMDB”). These guarantees are effectively an embedded option on the basket of mutual funds offered to contract holders. The Company manages a hedging program to reduce its exposure to certain contracts with the GMWB and GMDB guarantees. This dynamic hedging program uses interest rate swap agreements, equity index futures (including but not limited to the Dow Jones Industrial, Standard & Poor’s 500, Russell 2000, and Dow Jones Euro Stoxx 50 indices), equity index options, and U.S. Treasury futures to match the sensitivities of the GMWB and GMDB liabilities to the market risk factors.

The Company also has a macro equity risk hedging program using equity and currency futures, as well as equity index options. This program is designed to reduce the Company’s overall exposure to public equity markets arising from several sources including, but not limited to, variable annuity guarantees not dynamically hedged, separate account fees not associated with guarantees, and Company equity holdings.

The Company uses foreign currency swaps and foreign currency forwards to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.

 

F-32

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

For the years ended December 31, 2015, 2014 and 2013 net gains and losses related to derivatives in other hedging relationships were recognized by the Company, and the components were recorded in net unrealized and net realized gains (losses) as follows:

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Other Hedging Relationships

       

Net unrealized capital gain (loss):

       

Interest rate swaps

        $    367      $   2,043      $   (2,530 ) 

Interest rate treasury locks

      (728 )      1,323        (385 ) 

Interest rate options

      16        67        (46 ) 

Foreign currency swaps

      -        (5 )      (9 ) 

Foreign currency forwards

      5        4        (1 ) 

Equity total return swaps

      2        -        -   

Equity options

      (76 )      (23 )      (39 ) 

Credit default swaps

      -        -        -   
  

 

 

  

Total net unrealized capital gain (loss)

        $ (414 )    $ 3,409      $ (3,010 ) 
  

 

 

  

Net realized capital gain (loss):

       

Interest rate swaps

        $ (495 )    $ (178 )    $ 164   

Interest rate treasury locks

      446        157        -   

Interest rate options

      -        -        -   

Interest rate futures

      (25 )      (141 )      78   

Foreign currency swaps

      4        18        (10 ) 

Foreign currency forwards

      26        1        5   

Foreign currency futures

      99        165        74   

Equity total return swaps

      11        24        5   

Equity options

      (18 )      5        3   

Equity index futures

      (42 )      (692 )      (1,892 ) 

Credit default swaps

      -        -        -   

Commodity futures

      -        -        -   
  

 

 

  

Total net realized capital gain (loss)

        $ 6      $ (641 )    $ (1,573 ) 
  

 

 

  

Total gain (loss) from derivatives in other hedging relationships

        $ (408 )    $ 2,768      $ (4,583 ) 
  

 

 

  

The Company also deferred net realized gains (losses) of ($495) million, ($192) million, and $146 million (including ($495) million and ($174) million of losses, and $148 million of gains for derivatives in other hedging relationships, respectively) related to interest rates for the years ended December 31, 2015, 2014 and 2013, respectively. Deferred net realized gains and losses are reported in IMR and amortized over the remaining period to expiration date.

Credit Default Swaps

The Company replicates exposure to specific issuers by selling credit protection via CDS in order to complement its cash bond investing. In addition, the Company replicates the exposure of a basket of entities using CDX with complementary cash bond investing. The Company does not employ leverage in its CDS program and therefore, does not write CDS protection in excess of its government bond holdings.

 

F-33

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

The following table provides details of the CDS protection sold by type of contract and external agency rating for the underlying reference security, as of December 31, 2015 and 2014, respectively.

 

     December 31, 2015      December 31, 2014  
  

 

 

     

 

 

  
     Notional
Amount2		      Fair
Value		      Weighted
average
maturity
(in  years)3		      Notional
Amount2		      Fair
Value		      Weighted
average
maturity
(in  years)3		  
  

 

 

     

 

 

  
     (in millions)  

Single name CDS1

                  

Corporate debt

                  

AAA

        $ 35       $ -         1           $ 35       $ 1         2   

AA

      95         1         1         95         2         2   

A

      165         2         1         185         3         2   

BBB

      -         -         -         -         -         -   
  

 

 

        

 

 

     

Total CDS protection sold

        $   295       $   3              $   315       $   6      
  

 

 

        

 

 

     
1 

The rating agency designations are based on S&P where available followed by Moody’s, Dominion Bond Rating Services (DBRS), and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.

2 

Notional amount represents the maximum future payments the Company would have to pay its counterparties assuming a default of the underlying credit and zero recovery on the underlying issuer obligation.

3 

The weighted average maturity of the CDS is weighted based on notional amounts.

The Company holds no purchased credit protection at December 31, 2015 and 2014. The average credit rating of the counterparties guaranteeing the underlying credits is A and the weighted average maturity is 1 year.

Credit Risk

The Company’s exposure to loss on derivatives is limited to the amount of any net gains that may have accrued with a particular counterparty. Gross derivative counterparty exposure is measured as the total fair value (including accrued interest) of all outstanding contracts in a gain position excluding any offsetting contracts in negative positions and the impact of collateral on hand. The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to the derivative financial instruments. The current credit exposure of the Company’s derivative contracts is limited to the fair value in excess of the collateral held at the reporting date.

The Company manages its credit risk by entering into transactions with creditworthy counterparties, obtaining collateral where appropriate, and entering into master netting agreements that provide for a netting of payments and receipts with a single counterparty. The Company enters into credit support annexes with its OTC derivative dealers in order to manage its credit exposure to those counterparties. As part of the terms and conditions of those agreements, the pledging and accepting of collateral in connection with the Company’s derivative usage is required. As of December 31, 2015 and 2014, the Company accepted collateral consisting of cash of $1,640 million and $2,939 million, and various securities with a fair value of $5,014 million and $3,895 million, respectively, which is held in separate custodial accounts. In addition, the Company has pledged collateral to support both the OTC derivative instruments, exchange traded futures and cleared interest rate swap transactions. For further details regarding pledged collateral see the Investments Note.

Under U.S. regulations, certain interest rate swap agreements and credit default swap agreements are required to be cleared through central clearing houses. These transactions are contractual agreements that require initial and variation margin collateral postings and are settled on a daily basis through a clearing house. As such, they reduce the credit risk exposure in the event of default by a counterparty.

 

F-34

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

Transactions with Affiliates

The Company has entered into two currency swap agreements with JHFC which are recorded at fair value. JHFC utilizes the currency swaps to hedge currency exposure on foreign currency financial instruments. The Company has also entered into two currency agreements with external counterparties which offset the currency swap agreements with JHFC. As of December 31, 2015 and 2014, the currency swap agreements with JHFC and the external counterparties had offsetting fair values of $397 million and $238 million, respectively.

7. Fair Value

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy:

 

  •  

Financial Instruments Measured at Fair Value and Reported in the Balance Sheet after Initial Recognition — This category includes assets and liabilities measured at fair value. Financial instruments in this category include bonds and preferred stocks carried at the lower of cost or fair value due to their SVO quality rating, common stocks, derivatives, and separate account assets.

 

  •  

Other Financial Instruments Not Reported at Fair Value After Initial Recognition – This category includes assets and liabilities as follows:

Bonds — For bonds, including corporate debt, U.S. Treasury, commercial and residential mortgage-backed securities, asset-backed securities, collateralized debt obligations, issuances by foreign governments, and obligations of state and political subdivisions, fair values are based on quoted market prices when available. When market prices are not available, fair value is generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality (matrix pricing). The significant inputs into these models include, but are not limited to, yield curves, credit risks and spreads, measures of volatility, and prepayment speeds.

Mortgage Loans on Real Estate — The fair value of unimpaired mortgage loans is estimated using discounted cash flows and takes into account the contractual maturities and discount rates, which were based on current market rates for similar maturity ranges and adjusted for risk due to the property type. The fair value of impaired mortgage loans is based on the net of the collateral less estimated cost to obtain and sell.

Cash, Cash Equivalents and Short-Term Investments — The carrying values for cash, cash equivalents, and short-term investments approximate their fair value due to the short-term maturities of these instruments.

Policy Loans — These loans are carried at unpaid principal balances, which approximate their fair values.

Policy Reserves — Policy reserves consists of guaranteed investment contracts. The fair values associated with these financial instruments are determined by projecting cash flows and discounting the cash flows at current corporate rates, defined as U.S. Treasury rates plus MFC’s corporate spread. The fair value attributable to credit risk represents the present value of the spread.

Policyholders’ and Beneficiaries Funds — Includes term certain contracts, funding agreements, supplementary contracts without life contingencies and those balances that can be withdrawn by the policyholder at any time without prior notice or penalty. The fair values associated with the term certain contracts, funding agreements and supplementary contracts without life contingencies are determined by projecting cash flows and discounting the cash flows at current corporate rates, defined as U.S. Treasury rates plus MFC’s corporate spread. The fair value attributable to credit risk represents the present value of the spread. For those balances that can be withdrawn by the policyholder at any time without prior notice or penalty, the fair value is the amount estimated to be payable to the policyholder as of the reporting date, which is generally the carrying value.

Consumer Notes — The fair value of consumer notes is determined by projecting cash flows and discounting the cash flows at current corporate rates, defined as U.S. Treasury rates plus MFC’s corporate spread. The fair value attributable to credit risk represents the present value of the spread.

 

F-35

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

Financial Instruments Measured at Fair Value and Reported in the Balance Sheet after Initial Recognition

Valuation Hierarchy

The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company’s valuation techniques. A level is assigned to each fair value measurement based on the lowest level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:

 

  •  

Level 1 — Fair value measurements that reflect unadjusted, quoted prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. Active markets are defined as having the following characteristics for the measured asset/liability: (i) many transactions, (ii) current prices, (iii) price quotes not varying substantially among market makers, (iv) narrow bid/ask spreads, and (v) most information is publicly available. Valuations are based on quoted prices reflecting market transactions involving assets or liabilities identical to those being measured. Level 1 assets primarily include exchange traded equity securities and certain separate account assets.

 

  •  

Level 2 — Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in inactive markets, inputs that are observable that are not prices (such as interest rates, credit risks, etc.), and inputs that are derived from or corroborated by observable market data. Certain of the Company’s separate account assets and derivative assets and liabilities are included within Level 2. A description of valuation techniques used to measure the fair value of derivatives is described below.

 

  •  

Level 3 — Fair value measurements using significant nonmarket observable inputs. These include valuations for assets and liabilities that are derived using data, some or all of which is not market observable data, including assumptions about risk. Level 3 securities include impaired bonds and less liquid securities, such as structured asset-backed securities, commercial mortgage-backed securities, and other securities that have little or no price transparency. The valuation techniques used to measure the fair value of derivative assets and separate account investments in timber and agriculture are included in Level 3 as described below.

Determination of Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (not a forced liquidation or distress sale) between market participants at the measurement date, that is, an exit value.

When available, quoted market prices are used to determine fair value. If quoted market prices are not available, fair value is typically based upon alternative valuation techniques such as discounted cash flows, matrix pricing, consensus pricing services and other techniques. Broker quotes are generally used when external public vendor prices are not available.

The Company has a process in place that includes a review of price movements relative to the market, a comparison of prices between vendors, and a comparison to internal matrix pricing which uses predominately external observable data. Judgment is applied in adjusting external observable data for items including liquidity and credit factors.

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy:

Bonds

Refer to the previous page for the determination of fair value of bonds. Generally, impaired bonds with a NAIC designation rating of 6 whose cost is greater than its fair value are reported at fair value and are classified within Level 3.

Preferred Stocks

Preferred stocks with active markets are classified within Level 1, as fair values are based on quoted market prices. Preferred stocks not traded in active markets are classified within Level 3.

 

F-36

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

Common Stocks

Common stocks with active markets are classified within Level 1, as fair values are based on quoted market prices. Common stocks not traded in active markets are classified within Level 3.

Derivatives

The fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for OTC derivatives. The pricing models used are based on market standard valuation methodologies, and the inputs to these models are consistent with what a market participant would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), and volatility. The Company’s derivatives are generally classified within Level 2 given the significant inputs to the pricing models for most OTC derivatives are observable or can be corroborated by observable market data. Inputs that are observable generally include interest rates, foreign currency exchange rates, and interest rate curves. However, certain OTC derivatives may rely on inputs that are significant to the fair value, that are unobservable in the market or cannot be derived principally from or corroborated by observable market data and would be classified within Level 3. Inputs that are unobservable generally include broker quotes, volatilities, and inputs that are outside of the observable portion of the interest rate curve or other relevant market measures. These unobservable inputs may involve significant management judgment or estimation.

Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what market participants would use when pricing such instruments. The credit risk of both the counterparty and the Company are considered in determining the fair value for all OTC derivatives after taking into account the effects of netting agreements and collateral arrangements.

Separate Account Assets and Liabilities

For separate accounts structured as a non-unitized fund, the fair value of separate account assets is based on the fair value of the underlying assets owned by the separate account. For separate accounts structured as a unitized fund, the fair value of the separate account assets is based on the fair value of the underlying funds owned by the separate account. Assets owned by the Company’s separate accounts primarily include: investments in mutual funds, bonds, common stock, short-term investments, real estate, and cash and cash equivalents. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders whose interest in the separate account assets is recorded by the Company as separate account liabilities. Separate account liabilities are set equal to the fair value of separate account assets.

The fair value of fund investments is based upon quoted market prices or reported net asset value (“NAV”). Fund investments that are traded in an active market and have a NAV that the Company can access at the measurement date are classified within Level 1. Level 2 assets consist primarily of bonds which are valued using matrix pricing with independent pricing data.

Separate account assets classified as Level 3 consist primarily of fixed maturity and equity investments in private companies, which own timber and agriculture and carry them at fair value. The values of the timber and agriculture investments are estimated using generally accepted valuation techniques. A comprehensive appraisal is performed shortly after initial purchase and at two or three-year intervals thereafter. Appraisal updates are conducted according to client contracts, generally at one-year or six-month intervals. In the quarters in which an investment is not independently appraised or its valuation updated, the market value is reviewed by management. The valuation of an investment is adjusted only if there has been a significant change in economic circumstances related to the investment since acquisition or the most recent independent valuation and upon the independent appraiser’s review and concurrence with management. Further, these valuations are prepared giving consideration to the income, cost, and sales comparison approaches of estimating asset value. The significant unobservable inputs used in the fair value measurement of the Company’s timberland investments are harvest volumes, timber prices, operating costs and discount rates. Significant changes to any one of these inputs in isolation could result in a significant change to fair value measurement. Holding other factors constant, an increase to either harvest volumes or timber prices would tend to increase the fair value of a timberland investment, while an increase in operating costs or discount rate would have the opposite effect. These investments are classified as Level 3 by the companies owning them, and therefore the equity investments in these companies are considered to be Level 3 by the Company.

 

F-37

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

The following table presents the Company’s assets and liabilities that are measured and reported at fair value in the Balance Sheets after initial recognition by fair value hierarchy level:

 

     December 31, 2015  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bond with NAIC 6 rating:

               

Industrial and misc

        $ 29       $ 29       $ -       $ -       $ 29   

Loan-backed and structured securities

      7         7         -         -         7   
  

 

 

  

Total bonds with NAIC 6 rating

      36         36         -         -         36   

Preferred stocks:

               

Industrial and misc

      -         -         -         -         -   
  

 

 

  

Total preferred stocks

      -         -         -         -         -   

Common stocks:

               

Industrial and misc

      658         658         548         -         110   
  

 

 

  

Total common stocks

      658         658         548         -         110   

Derivatives:

               

Interest rate swaps

      10,043         10,043         -         10,043         -   

Interest rate treasury locks

      364         364         -         -         364   

Interest rate options

      144         144         -         -         144   

Interest rate futures

      -         -         -         -         -   

Foreign currency swaps

      123         123         -         123         -   

Foreign currency forwards

      8         8         -         8         -   

Foreign currency futures

      -         -         -         -         -   

Equity total return swaps

      2         2         -         -         2   

Equity options

      138         138         -         36         102   

Equity index futures

      -         -         -         -         -   

Credit default swaps

      -         -         -         -         -   
  

 

 

  

Total derivatives

      10,822         10,822         -         10,210         612   

Assets held in separate accounts

      129,725         129,725         124,290         3,470         1,965   
  

 

 

  

Total assets

        $ 141,241       $ 141,241       $ 124,838       $   13,680       $   2,723   
  

 

 

  

Liabilities:

               

Derivatives:

               

Interest rate swaps

        $ 5,770       $ 5,770       $ -       $ 5,700       $ 70   

Interest rate treasury locks

      153         153         -         -         153   

Interest rate options

      -         -         -         -         -   

Interest rate futures

      -         -         -         -         -   

Foreign currency swaps

      62         62         -         62         -   

Foreign currency forwards

      -         -         -         -         -   

Foreign currency futures

      -         -         -         -         -   

Equity total return swaps

      1         1         -         -         1   

Equity options

      8         8         -         8         -   

Equity index futures

      -         -         -         -         -   

Credit default swaps

      -         -         -         -         -   
  

 

 

  

Total derivatives

      5,994         5,994         -         5,770         224   

Liabilities held in separate accounts

      129,725         129,725         124,290         3,470         1,965   
  

 

 

  

Total liabilities

        $   135,719       $   135,719       $   124,290       $ 9,240       $ 2,189   
  

 

 

  

 

F-38

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

     December 31, 2014  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bond with NAIC 6 rating:

               

Industrial and misc

        $ -       $ -       $ -       $ -       $ -   

Loan-backed and structured securities

      39         39         -         18         21   
  

 

 

  

Total bonds with NAIC 6 rating

      39         39         -         18         21   

Preferred stocks:

               

Industrial and misc

      -         -         -         -         -   
  

 

 

  

Total preferred stocks

      -         -         -         -         -   

Common stocks:

               

Industrial and misc

      477         477         379         -         98   
  

 

 

  

Total common stocks

      477         477         379         -         98   

Derivatives:

               

Interest rate swaps

      9,059         9,059         -         9,058         1   

Interest rate treasury locks

      938         938         -         168         770   

Interest rate options

      93         93         -         -         93   

Interest rate futures

      -         -         -         -         -   

Foreign currency swaps

      43         43         -         43         -   

Foreign currency forwards

      4         4         -         4         -   

Foreign currency futures

      -         -         -         -         -   

Equity total return swaps

      11         11         -         -         11   

Equity options

      277         277         -         61         216   

Equity index futures

      -         -         -         -         -   

Credit default swaps

      -         -         -         -         -   
  

 

 

  

Total derivatives

      10,425         10,425         -         9,334         1,091   

Assets held in separate accounts

      140,164         140,164         134,070         3,756         2,338   
  

 

 

  

Total assets

        $   151,105       $   151,105       $   134,449       $   13,108       $   3,548   
  

 

 

  

Liabilities:

               

Derivatives:

               

Interest rate swaps

        $ 5,154       $ 5,154       $ -       $ 5,113       $ 41   

Interest rate treasury locks

      -         -         -         -         -   

Interest rate options

      -         -         -         -         -   

Interest rate futures

      -         -         -         -         -   

Foreign currency swaps

      30         30         -         30         -   

Foreign currency forwards

      -         -         -         -         -   

Foreign currency futures

      -         -         -         -         -   

Equity total return swaps

      -         -         -         -         -   

Equity options

      -         -         -         -         -   

Equity index futures

      -         -         -         -         -   

Credit default swaps

      -         -         -         -         -   
  

 

 

  

Total derivatives

      5,184         5,184         -         5,143         41   

Liabilities held in separate accounts

      140,164         140,164         134,070         3,756         2,338   
  

 

 

  

Total liabilities

        $   145,348       $   145,348       $   134,070       $ 8,899       $ 2,379   
  

 

 

  

 

F-39

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

The table below presents the carrying amounts and fair value by fair value hierarchy level for certain assets and liabilities that are not reported at fair value in the Balance Sheets:

 

     December 31, 2015  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bonds (1)

        $ 44,427       $ 44,595       $ -       $ 40,866       $ 3,729   

Preferred stocks

      23         34         -         -         34   

Mortgage loans on real estate

      10,475         11,213         -         -         11,213   

Cash, cash equivalents and short term investments

      4,528         4,528         2,059         2,469         -   

Policy loans

      3,718         3,718         -         3,718         -   

Derivatives in effective hedge accounting and RSAT relationships

      179         2,487         -         2,484         3   
  

 

 

  

Total assets

        $   63,350       $   66,575       $   2,059       $   49,537       $   14,979   
  

 

 

  

Liabilities:

               

Consumer notes

        $ 265       $ 289       $ -       $ -       $ 289   

Borrowed money

      160         160         -         160         -   

Policy reserves

      1,553         1,533         -         -         1,533   

Policyholders’ and beneficiaries funds

      2,685         2,850         -         1,151         1,699   

Derivatives in effective hedge accounting and RSAT relationships

      100         931         -         664         267   
  

 

 

  

Total liabilities

        $ 4,763       $ 5,763       $ -       $ 1,975       $ 3,788   
  

 

 

  
     December 31, 2014  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bonds (1)

        $ 49,187       $ 52,644       $ -       $ 48,392       $ 4,252   

Preferred stocks

      26         46         -         -         46   

Mortgage loans on real estate

      11,519         12,785         -         -         12,785   

Cash, cash equivalents and short term investments

      7,702         7,702         4,407         3,295         -   

Policy loans

      5,039         5,039         -         5,039         -   

Derivatives in effective hedge accounting and RSAT relationships

      33         2,378         -         2,372         6   
  

 

 

  

Total assets

        $ 73,506       $ 80,594       $ 4,407       $ 59,098       $ 17,089   
  

 

 

  

Liabilities:

               

Consumer notes

        $ 411       $ 454       $ -       $ -       $ 454   

Borrowed money

      290         290         -         290         -   

Policy reserves

      1,661         1,648         -         -         1,648   

Policyholders’ and beneficiaries funds

      3,901         4,352         -         1,457         2,895   

Derivatives in effective hedge accounting and RSAT relationships

      45         1,231         -         964         267   
  

 

 

  

Total liabilities

        $ 6,308       $ 7,975       $ -       $ 2,711       $ 5,264   
  

 

 

  
(1) Bonds are carried at amortized cost unless they have NAIC designation rating of 6. Fair value of bonds exclude leveraged leases of $ 2,319 million and $2,268 million at December 31, 2015 and 2014, respectively. The Company calculates the carrying value by accruing income at its expected internal rate of return.

 

F-40

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

Transfers of Level 1 and Level 2 Assets and Liabilities

The Company’s policy is to record transfers of assets and liabilities between Level 1 and Level 2 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. Assets are transferred out of Level 1 when they are no longer transacted with sufficient frequency and volume in an active market. During the years ended December 31, 2015 and 2014, the Company did not have any transfers from Level 1 to Level 2. Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are indicative of an active market. The Company did not transfer assets from Level 2 to Level 1 during the years ended December 31, 2015 and 2014.

 

F-41

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

Level 3 Financial Instruments

The changes in Level 3 financial instruments measured and reported at fair value for the years ended December 31, 2015, 2014 and 2013, are summarized as follows:

 

          Net
realized/unrealized
gains (losses) included in:		                                   Transfers        
    Balance at
January 1,
2015		     Net
income (1)		     Surplus     Amounts
credited to
separate
account
liabilities (2)		     Purchases     Issuances     Sales     Settlements     Into
Level 3 (3)		     Out of
Level 3 (3)		     Balance at
December 31,
2015		  
 

 

 

  
    (in millions)  

Bonds with NAIC 6 rating:

                      

Impaired corporate bonds

       $ -      $ (4 )    $ (1 )    $ -      $ 2      $ -      $ (2 )    $ -      $ 41      $ (7 )    $ 29   

Impaired mortgage-backed and asset-backed securities

     21        (3 )      3        -        -        -        (24 )      -        15        (5 )      7   
 

 

 

  

Total bonds with NAIC 6 rating

     21        (7 )      2        -        2        -        (26 )      -        56        (12 )      36   

Preferred stocks:

                      

Industrial and misc

     -        -        -        -        -        -        -        -        -        -        -   
 

 

 

  

Total preferred stocks

     -        -        -        -        -        -        -        -        -        -        -   

Common stocks:

                      

Industrial and misc

     98        (2 )      8        -        7        -        (3 )      -        2        -        110   
 

 

 

  

Total common stocks

     98        (2 )      8        -        7        -        (3 )      -        2        -        110   

Net derivatives

     1,050        -        (614 )      -        27        -        -        -        -        (75 )      388   

Separate account assets/liabilities

     2,338        189        -        -        27        -        (593 )      -        4        -        1,965   
 

 

 

  

Total

       $   3,507      $   180      $   (604 )    $   -      $   63      $   -      $   (622 )    $   -      $   62      $   (87 )    $   2,499   
 

 

 

  

 

F-42

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

          Net
realized/unrealized
gains (losses) included in:		                                   Transfers        
    Balance at
January 1,
2014		     Net
income (1)		     Surplus     Amounts
credited to
separate
account
liabilities (2)		     Purchases     Issuances     Sales     Settlements     Into
Level 3 (3)		     Out of
Level 3 (3)		     Balance at
December 31,
2014		  
 

 

 

  
    (in millions)  

Bonds with NAIC 6 rating:

                      

Impaired corporate bonds

       $ 26      $ -      $ (3 )    $ -      $ -      $ -      $ -      $ -      $ -      $ (23 )    $ -   

Impaired mortgage-backed and asset-backed securities

     34        -        1        -        -        -        -        -        11        (25 )      21   
 

 

 

  

Total bonds with NAIC 6 rating

     60        -        (2 )      -        -        -        -        -        11        (48 )      21   

Preferred stocks:

                      

Industrial and misc

     -        -        -        -        -        -        -        -        -        -        -   
 

 

 

  

Total preferred stocks

     -        -        -        -        -        -        -        -        -        -        -   

Common stocks:

                      

Industrial and misc

     86        -        (1 )      -        14        -        (1 )      -        -        -        98   
 

 

 

  

Total common stocks

     86        -        (1 )      -        14        -        (1 )      -        -        -        98   

Net derivatives

     (114 )      26        1,088        -        72        -        (25 )      -        41        (38 )      1,050   

Separate account assets/liabilities

     2,221        162        -        -        68        -        (270 )      -        163        (6 )      2,338   
 

 

 

  

Total

       $   2,253      $   188      $   1,085      $   -      $   154      $   -      $   (296 )    $   -      $   215      $   (92 )    $   3,507   
 

 

 

  

 

F-43

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

          Net
realized/unrealized
gains (losses) included in:		                                   Transfers        
    Balance at
January 1,
2013		     Net
income (1)		     Surplus     Amounts
credited to
separate
account
liabilities (2)		     Purchases     Issuances     Sales     Settlements     Into
Level 3 (3)		     Out of
Level 3 (3)		     Balance at
December 31,
2013		  
 

 

 

  
    (in millions)  

Bonds with NAIC 6 rating:

                      

Impaired corporate bonds

       $ 12      $ (2 )    $ -      $ -      $ -      $ -      $ -      $ -      $ 23      $ (7 )    $ 26   

Impaired mortgage-backed and asset-backed securities

     53        (37 )      39        -        -        -        (23 )      (5 )      16        (9 )      34   
 

 

 

  

Total bonds with NAIC 6 rating

     65        (39 )      39        -        -        -        (23 )      (5 )      39        (16 )      60   

Preferred stocks:

                      

Industrial and misc

     4        -        -        -        -        -        -        -        -        (4 )      -   
 

 

 

  

Total preferred stocks

     4        -        -        -        -        -        -        -        -        (4 )      -   

Common stocks:

                      

Industrial and misc

     44        -        (2 )      -        58        -        (18 )      -        4        -        86   
 

 

 

  

Total common stocks

     44        -        (2 )      -        58        -        (18 )      -        4        -        86   

Net derivatives

     58        6        (459 )      -        287        -        (7 )      -        -        1        (114 ) 

Separate account assets/liabilities

     2,223        160        -        -        31        -        (195 )      -        3        (1 )      2,221   
 

 

 

  

Total

       $   2,394      $   127      $   (422 )    $   -      $   376      $   -      $   (243 )    $   (5 )    $   46      $   (20 )    $   2,253   
 

 

 

  
(1) This amount is included in net realized capital gains (losses) on the Statements of Operations.
(2) Changes in the fair value of separate account assets are credited directly to separate account liabilities in accordance with NAIC SAP and are not reflected in income.
(3) For financial instruments that are transferred into and/or out of Level 3, the Company uses the fair value of the instruments at the beginning of the reporting period.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

The transfers into Level 3 primarily result from securities that were impaired during the year or securities where a lack of observable market data (versus the previous year) resulted in reclassifying instruments into Level 3. The transfers out of Level 3 primarily result from observable market data becoming available for that instrument, thus eliminating the need to extrapolate market data beyond observable points. Additionally, securities carried at fair value at the beginning of the period but carried at amortized cost at the end of the period due to rating change or change in fair value relative to amortized cost, are included in transfers out of Level 3. Conversely, any securities carried at amortized cost at the beginning of the period and carried at fair value at the end of the year due to SVO rating change or change in fair value relative to amortized cost, are included into transfers into Level 3.

8. Reinsurance

Certain premiums and benefits are assumed from or ceded to affiliate and other insurance companies under various reinsurance agreements. The Company entered into these reinsurance agreements to shift underlying risk on certain of its products, and to improve cash flow and statutory capital. The ceded reinsurance agreements provide the Company with increased capacity to write larger risks and maintain its exposure to loss within its capital resources.

Total reinsurance amounts included in the Company’s accompanying statutory-basis financial statements were as follows:

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums earned

       

Direct

        $ 20,189      $   19,525      $    20,311   

Assumed

      1,867        792        1,062   

Ceded

      (5,733 )      (7,579 )      (8,491 ) 
  

 

 

  

Net

        $   16,323      $ 12,738      $ 12,882   
  

 

 

  

Benefits to policyholders ceded

        $ (16,713 )    $ (18,500 )    $ (17,988 ) 

Reserve amounts ceded to reinsurers not authorized in the State of Michigan are mostly covered by letters of credit or trust agreements. Amounts payable or recoverable for reinsurance on policy and contract liabilities are not subject to periodic or maximum limits. At December 31, 2015, any material recoveries were secured by letters of credit or assets placed in trust by the assuming company.

Neither the Company nor any of its related parties control, directly or indirectly, any external reinsurers with whom the Company conducts business. No policies issued by the Company have been reinsured with a foreign company, which is controlled, either directly or indirectly, by a party not primarily engaged in the business of insurance. The Company does not have any reinsurance agreements in effect under which the reinsurer may unilaterally cancel the agreement. At December 31, 2015, there was no reinsurance agreements in effect such that the amount of losses paid or accrued exceed the total direct premium collected.

As of December 31, 2015, if all reinsurance agreements were cancelled the estimated aggregate reduction in unassigned surplus is $1,328 million.

The Company has not entered into any reinsurance transactions within the scope of Actuarial Guideline 48, the NAIC Term Life and Universal Life with Secondary Guarantees (XXX/AXXX) Credit for Reinsurance Model Regulation.

Non-Affiliated Reinsurance

Effective July 1, 2015, the Company entered into coinsurance reinsurance agreements with New York Life (“NYL”) to cede 100% quota share (“QS”) of the Company’s JHLICO Closed Block policies (“NYL 100% Coinsurance”). In addition, NYL agreed to retrocede 40% QS of the same policy risks back to the Company under a coinsurance funds withheld (“FWH”) agreement (“NYL 40% FWH Retrocession”). Collectively, these agreements are known as the NYL Agreements. The NYL 100% Coinsurance keeps the assets supporting the JHLICO Closed Block together in NYL, and the NYL 40% FWH Retrocession adjusts the net reinsurance to NYL to 60% of the JHLICO Closed Block policies at risk. The transactions included the transfer to NYL of $8,916 million of invested assets and $5,282 million in net policy liabilities. In addition, the

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

Company recognized approximately $3,698 million of FWH assets. The transactions resulted in a pre-tax loss of $70 million, including a ceding commission paid of $263 million, and an increase in surplus of $281 million, net of tax, which was deferred and will be amortized over a period of approximately 20 years.

The table below consists of the impact of the NYL Agreements:

 

     Year ended December 31,  
     2015  
     (in millions)  

Premiums ceded

        $   (8,180 ) 

Premiums assumed

      3,272   

Benefits ceded

      (314 ) 

Benefits assumed

      126   

Other reinsurance receivable

      362   

Funds held by or deposited with reinsured companies

      3,655   

In conjunction with the NYL Agreements, the existing 100% coinsurance FWH agreement which retrocedes the JHLICO Closed Block New York business back to the Company from JHNY was recaptured. The recapture resulted in a decrease in FWH assets of $1,919 million, a net decrease in policy assets and liabilities of $1,918 million, and an increase in surplus of $96 million. In addition, the 90% modified coinsurance FWH treaty with MRBL was also recaptured. The recapture resulted in a decrease in assets of $1,000 million, an increase in net policy liabilities of $1,266 million and a decrease in surplus of $173 million, net of tax. The recaptures were necessary to complete the NYL Agreements, because the policies under these agreements are the same policies at risk under the NYL Agreements.

On July 1, 2011, JHUSA entered into a sale of its Life Retrocession business by way of a coinsurance treaty with Pacific Life Insurance Company that resulted in the recognition of approximately $432 million deferred gain (net of deferred taxes) recorded to surplus. During 2013, JHUSA novated 95% of the underlying reinsurance agreements to Pacific Life Insurance Company. Based on this novation, the Company recorded a gain of $352 million to the Statements of Operations (pre-tax). In 2014, the Company completed the novation of the remaining 5% of the agreements and recorded $20 million to the Statements of Operations (pre-tax).

Affiliated Reinsurance

The table and commentary below consist of the impact of the reinsurance agreements with an affiliate, JHNY:

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums ceded, net

        $   (2,231 )    $   (192 )    $   (216 ) 

Benefits ceded, net

      (436 )      (394 )      (483 ) 

Funds held by or deposited with reinsured companies

      -        1,952        1,978   

Other reinsurance receivable

      60        86        124   

Other amounts payable on reinsurance

      1        10        15   

Treaty settlement received (paid)

      527        449        532   
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

 

F-46

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

On January 1, 2010, the assets supporting the policyholders who reside in the state of New York (“NY business”) were transferred to JHNY from the Company. The transfer included participating traditional life insurance, universal life insurance, fixed deferred and immediate annuities, participating pension contracts, and variable annuities. The NY business was transferred using assumption reinsurance, modified coinsurance and coinsurance with cut-through provisions.

The NY business related to participating traditional life insurance policies was transferred from JHUSA to JHNY under a coinsurance agreement and was immediately retroceded back to JHUSA using a coinsurance FWH agreement. JHNY retained the invested assets supporting this block of business. As previously noted, the coinsurance FWH agreement was recaptured effective July 1, 2015. The NY business related to variable universal life was reinsured through coinsurance and modified coinsurance. The NY business related to universal life was transferred from the Company to JHNY under coinsurance agreements.

The NY business related to a majority of the fixed deferred annuity business was transferred from the Company to JHNY under an assumption reinsurance agreement. The NY business related to variable annuities and some participating pension contracts where assets were held in separate accounts were reinsured through modified coinsurance. The NY business related to fixed deferred and immediate annuities and participating pension contracts was transferred from the Company to JHNY under a coinsurance agreement.

The table and commentary below consist of the impact of the reinsurance agreements with an affiliate, JHRECO:

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums ceded

        $ (530 )    $ (546 )    $ (570 ) 

Benefits ceded

      (756 )      (759 )      (730 ) 

Other amounts payable on reinsurance

      25        58        45   

Funds withheld from unauthorized reinsurers

        7,544          7,409          5,425   

Treaty settlement received (paid)

      (468 )      (489 )      (55 ) 
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

The Company reinsures certain portions of its long-term care insurance business with JHRECO through coinsurance FWH transactions. Under reinsurance treaties covering life insurance business, the Company cedes to JHRECO on a coinsurance FWH basis to the death benefits from the no-lapse guarantee on a small block of policies. The Company also reinsures a portion of the risk related to certain annuity policies and during 2013 a small number of these policies were recaptured for administration purposes. This recapture did not have a material impact on the Company’s results of operations. The reinsurance agreement is written on a modified coinsurance basis where the assets supporting the reinsured policies remain invested with the Company.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

The table and commentary below consist of the impact of the reinsurance agreements with an affiliate, MRBL:

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums ceded

        $ 5,332      $ (4,599 )    $ (5,128 ) 

Benefits ceded

        (12,125 )        (14,303 )        (13,966 ) 

Other reinsurance receivable

      -        40        398   

Other amounts payable on reinsurance

      351        837        55   

Funds withheld from unauthorized reinsurers

      240        1,251        1,256   

Treaty settlement received (paid)

      (712 )      (2,080 )      1,095   
* Treaty settlement consisted primarily of ceded investment income related to non-qualifying hedging strategies and changes in the modified coinsurance and coinsurance reserves.

The Company reinsures 87% of certain group annuity contracts in-force with MRBL. The reinsurance agreement covers all contracts, excluding the guaranteed benefit rider. As the underlying contracts being reinsured are considered investment contracts, the agreement does not meet the criteria for reinsurance accounting and was classified as a financial instrument.

The Company reinsures 90% of a significant block of variable annuity contracts in-force with MRBL. All substantial risks, including all guaranteed benefits (GMDB, Guaranteed Minimum Income Benefit (“GMIB”), and GMWB), related to certain specified policies not already reinsured to third parties, are reinsured under the agreement. The base contracts are reinsured on a modified coinsurance basis, while the guaranteed benefit reinsurance coverage is apportioned in accordance with the reinsurance agreement provisions between modified coinsurance and coinsurance FWH. The assets supporting the reinsured policies remain invested with the Company. Since the inception of the treaty in 2008, several amendments have been enacted to refine certain aspects of the treaty. The net MRBL reinsurance recoverable includes the impact of ongoing reinsurance cash flows and is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies with changes to ceded reserves and cost of reinsurance recognized as a component of benefits to policyholders on the Statements of Operations.

The Company’s indirect parent company, MFC, is regulated on a global basis by the Canadian insurance regulator, The Office of the Superintendent of Financial Institutions (“OSFI”), and reports on a consolidated international financial reporting standards (“IFRS”) basis. The Company utilizes a dynamic hedging program to manage risks on an economic basis. The IFRS accounting for these derivatives aligns with MFC’s market-based reserving regime. The US statutory accounting and reserving framework does not provide appropriate alignment of economic risk management strategies (hedging) and associated reserve methodologies. The treaty with MRBL provides a mechanism to allow management of the majority of the variable annuity risk under a single consolidated reserve and capital regime, rather than managing the block simultaneously under two very diverse frameworks.

As a coinsurance / modified coinsurance treaty, MRBL holds $2,992 million as a coinsurance reserve and JHUSA holds $325 million as a modified coinsurance reserve. The IFRS reserves that MRBL holds for variable annuities are similar in concept to AG43. The calculations are a real-world stochastic calculation at CTE(70), based on the guaranteed benefits and fees in isolation rather than the whole contract, including the cash flows generated from the dynamic hedging program and including margins for adverse deviation. The real-world stochastic scenarios are subject to Canadian Institute of Actuaries equity and bond fund return calibration criteria. Reserve credits taken were $0 at December 31, 2015 and there is no supporting collateral.

MRBL does not retrocede any risks to a third party. The risks assumed by MRBL are solely the responsibility of MRBL, but they are also retained within MFC. This transaction has no impact on MFC’s financial statements as it reports its risks on a consolidated basis.

Prior to the previously noted transactions with NYL, the Company reinsured 90% of the non-reinsured risk of the JHLICO closed block. The reinsurance agreement was written on a modified coinsurance basis where the related financial assets

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

remain invested with the Company. As the reinsurance agreement did not subject the reinsurer to the reasonable possibility of significant loss, it was classified as structured reinsurance and given deposit-type accounting treatment with only the reinsurance risk fee being reported in other operating costs and expenses in the Statements of Operations. This reinsurance agreement was recaptured effective July 1, 2015.

The table and commentary below consist of the impact of the reinsurance agreements with an affiliate, Manulife Reinsurance Limited (“MRL”):

 

     Years ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Premiums ceded

        $   (392 )    $   (338 )    $   (536 ) 

Benefits ceded

      (448 )      (298 )      (338 ) 

Other reinsurance receivable

      36        82        18   

Funds withheld from unauthorized reinsurers

      -        213        -   

Treaty settlement received (paid)

      14        (97 )      146   
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

The Company entered into a coinsurance/modified coinsurance agreement with an affiliate, MRL, to reinsure 90% of all risks not already reinsured to third parties on various universal life contracts effective December 15, 2000. Subsequent amendments added further UL and some term contracts. The Company amended the agreement during 2014 to simplify treaty administration and to modify the structure of the treaty to a modified coinsurance FWH structure.

Other

On July 31, 2013, MFC signed an agreement to sell its life insurance business in Taiwan to CTBC Life Insurance Company (CTBC Life). Under the agreement, CTBC Life will assume all of the life insurance business related obligations. In connection with this transaction, on December 31, 2013, the Company paid $111 million in fees to an affiliate, Manufacturers Life Reinsurance Limited for the recapture of certain traditional life business reserves and net liabilities of $42 million, which resulted in a pre-tax loss of $69 million.

 

F-49

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes

The components of the net deferred tax asset/(liability) are as follows:

 

     December 31, 2015  
     (1)     (2)     (3)  
                 (Col 1 + 2)  
     Ordinary     Capital     Total  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ 4,114      $ 383      $ 4,497   

(b) Statutory valuation allowance adjustments

      50        -        50   
  

 

 

  

(c) Adjusted gross deferred tax assets (a — b)

      4,064        383        4,447   

(d) Deferred tax assets nonadmitted

      -        -        -   
  

 

 

  

(e) Subtotal net admitted deferred tax asset (c — d)

        4,064           383          4,447   

(f) Deferred tax liabilities

      4,639        195        4,834   
  

 

 

  

(g) Net admitted deferred tax asset / (net deferred tax liability) (e — f)

        $ (575 )    $ 188      $ (387 ) 
  

 

 

  
     December 31, 2014  
     (4)     (5)     (6)  
                 (Col 4 + 5)  
     Ordinary     Capital     Total  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ 4,300      $ 479      $ 4,779   

(b) Statutory valuation allowance adjustments

      50        -        50   
  

 

 

  

(c) Adjusted gross deferred tax assets (a — b)

      4,250        479        4,729   

(d) Deferred tax assets nonadmitted

      -        -        -   
  

 

 

  

(e) Subtotal net admitted deferred tax asset (c — d)

      4,250        479        4,729   

(f) Deferred tax liabilities

      4,871        314        5,185   
  

 

 

  

(g) Net admitted deferred tax asset / (net deferred tax liability) (e — f)

        $ (621 )    $ 165      $ (456 ) 
  

 

 

  
     Change  
     (7)     (8)     (9)  
     (Col 1 - 4)     (Col 2 - 5)     (Col 7 + 8)  
     Ordinary     Capital     Total  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ (186 )    $ (96 )    $ (282 ) 

(b) Statutory valuation allowance adjustments

      -        -        -   
  

 

 

  

(c) Adjusted gross deferred tax assets (a — b)

      (186 )      (96 )      (282 ) 

(d) Deferred tax assets nonadmitted

      -        -        -   
  

 

 

  

(e) Subtotal net admitted deferred tax asset (c — d)

      (186 )      (96 )      (282 ) 

(f) Deferred tax liabilities

      (232 )      (119 )      (351 ) 
  

 

 

  

(g) Net admitted deferred tax asset / (net deferred tax liability) (e — f)

        $ 46      $ 23      $ 69   
  

 

 

  

The Company has recorded a valuation allowance against specific general business tax credit carryforwards of $50 million for the year ended December 31, 2015. These tax credits were generated by the legacy JHFC group and are subject to the separate return limitation rules. These credits will not expire until 2019, however due to restrictions on the utilization, management believes that it is more likely than not that the Company will not realize the benefit. In assessing the need for a valuation allowance, management considered the future reversal of taxable temporary differences, future taxable income exclusive of reversing temporary differences, taxable income in the carry back period, as well as tax planning strategies. Tax

 

F-50

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

planning strategies were considered to the extent they were both prudent and feasible and if implemented, would result in the realization of deferred tax assets.

The amount of adjusted gross deferred tax assets admitted under each component and the resulting increase in deferred tax assets by character are as follows:

 

     December 31, 2015  
     (1)      (2)      (3)  
                   (Col 1 + 2)  
     Ordinary      Capital      Total  
  

 

 

  
     (in millions)  

2. Admission calculation components SSAP No. 101

         

(a) Federal income taxes paid in prior years recoverable through loss carrybacks.

        $ -       $ -       $ -   

(b) Adjusted gross deferred tax assets expected to be realized (excluding the amount of deferred tax assets from 2(a) above) after application of the threshold limitation.

(The lesser of 2(b)1 and 2(b)2 below)

      546         268         814   

1. Adjusted gross deferred tax assets expected to be realized following the Balance Sheet date.

      1,162           268           1,430   

2. Adjusted gross deferred tax assets allowed per limitation threshold.

      546         268         814   

(c) Adjusted gross deferred tax assets (excluding the amount of deferred tax assets from 2(a) and 2(b) above) offset by gross deferred tax liabilities.

      3,518         115         3,633   
  

 

 

  

(d) Deferred tax assets admitted as the result of application of SSAP No. 101. Total (2(a) + 2(b) + 2(c))

        $   4,064       $ 383       $ 4,447   
  

 

 

  
     December 31, 2014  
     (4)      (5)      (6)  
                   (Col 4 + 5)  
     Ordinary      Capital      Total  
  

 

 

  
     (in millions)  

2. Admission calculation components SSAP No. 101

         

(a) Federal income taxes paid in prior years recoverable through loss carrybacks.

        $ -       $ -       $ -   

(b) Adjusted gross deferred tax assets expected to be realized (excluding the amount of deferred tax assets from 2(a) above) after application of the threshold limitation.

(The lesser of 2(b)1 and 2(b)2 below)

      521         276         797   

1. Adjusted gross deferred tax assets expected to be realized following the Balance Sheet date.

      1,197         276         1,473   

2. Adjusted gross deferred tax assets allowed per limitation threshold.

      521         276         797   

(c) Adjusted gross deferred tax assets (excluding the amount of deferred tax assets from 2(a) and 2(b) above) offset by gross deferred tax liabilities.

      3,729         203         3,932   
  

 

 

  

(d) Deferred tax assets admitted as the result of application of SSAP No. 101. Total (2(a) + 2(b) + 2(c))

        $ 4,250       $ 479       $ 4,729   
  

 

 

  

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

     Change  
     (7)     (8)     (9)  
     (Col 1 - 4)     (Col 2 - 5)     (Col 7 + 8)  
     Ordinary     Capital     Total  
  

 

 

  
     (in millions)  

2. Admission calculation components SSAP No. 101

       

(a) Federal income taxes paid in prior years recoverable through loss carrybacks.

        $ -      $ -      $ -   

(b) Adjusted gross deferred tax assets expected to be realized (excluding the amount of deferred tax assets from 2(a) above) after application of the threshold limitation.

(The lesser of 2(b)1 and 2(b)2 below)

      25        (8 )      17   

1. Adjusted gross deferred tax assets expected to be realized following the Balance Sheet date.

      (35 )      (8 )      (43 ) 

2. Adjusted gross deferred tax assets allowed per limitation threshold.

      25        (8 )      17   

(c) Adjusted gross deferred tax assets (excluding the amount of deferred tax assets from 2(a) and 2(b) above) offset by gross deferred tax liabilities.

      (211 )      (88 )      (299 ) 
  

 

 

  

(d) Deferred tax assets admitted as the result of application of SSAP No. 101. Total (2(a) + 2(b) + 2(c))

        $   (186 )    $   (96 )    $   (282 ) 
  

 

 

  

 

     2015     2014  
  

 

 

  
     (in millions)  

(a) Ratio percentage used to determine recovery period and threshold limitation amount

      793 %      917 % 

(b) Amount of adjusted capital and surplus used to determine recovery period and threshold limitation in 2(b)2 above

        $   5,426          $   5,315   

Impact of tax planning strategies is as follows:

 

     December 31, 2015  
     (1)     (2)  
     Ordinary     Capital  
  

 

 

  
     (in millions)  

(a) Determination of Adjusted Gross Deferred Tax Assets and Net Admitted Deferred Tax Assets by tax character as a percentage.

     

1. Adjusted Gross DTAs Amount From Note 9A1(c)

        $   4,064          $   383   

2. Percentage of Adjusted Gross DTAs By Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      0 % 

3. Net Admitted Adjusted Gross DTAs Amount from Note 9A1(e)

        $ 4,064          $ 383   

4. Percentage of Net Admitted Adjusted Gross DTAs by Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      0 % 

 

F-52

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

     December 31, 2014  
     (3)     (4)  
     Ordinary     Capital  
  

 

 

  
     (in millions)  

(a) Determination of Adjusted Gross Deferred Tax Assets and Net Admitted Deferred Tax Assets by tax character as a percentage.

     

1. Adjusted Gross DTAs Amount From Note 9A1(c)

        $   4,250          $   479   

2. Percentage of Adjusted Gross DTAs By Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      32 % 

3. Net Admitted Adjusted Gross DTAs Amount from Note 9A1(e)

        $ 4,250          $ 479   

4. Percentage of Net Admitted Adjusted Gross DTAs by Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      32 % 
     Change  
     (5)     (6)  
     (Col 1 - 3)     (Col 2 - 4)  
     Ordinary     Capital  
  

 

 

  
     (in millions)  

(a) Determination of Adjusted Gross Deferred Tax Assets and Net Admitted Deferred Tax Assets by tax character as a percentage.

     

1. Adjusted Gross DTAs Amount From Note 9A1(c)

        $ (186 )        $ (96 ) 

2. Percentage of Adjusted Gross DTAs By Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      (32 %) 

3. Net Admitted Adjusted Gross DTAs Amount from Note 9A1(e)

        $ (186 )        $ (96 ) 

4. Percentage of Net Admitted Adjusted Gross DTAs by Tax Character Attributable To The Impact of Tax Planning Strategies

      0 %      (32 %) 

The Company’s tax planning strategies do not include the use of reinsurance.

There are no unrecognized deferred tax liabilities for amounts described in ASC 740-10-25-3.

 

F-53

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

Current income taxes incurred consist of the following major components:

 

     Years Ended December 31,  
     (1)     (2)     (3)  
                 (Col 1 - 2)  
     2015     2014     Change  
  

 

 

  
     (in millions)  

1. Current income tax

       

(a) Federal

        $ (778 )    $ (716 )    $ (62 ) 

(b) Foreign

      -        -        -   
  

 

 

  

(c) Subtotal

      (778 )      (716 )      (62 ) 

(d) Federal income tax on net capital gains

         493           382          111   

(e) Utilization of capital loss carryforwards

      -        -        -   

(f) Other

      -        -        -   
  

 

 

  

(g) Federal and foreign income taxes incurred

        $ (285 )    $ (334 )    $ 49   
  

 

 

  

 

F-54

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:

 

     December 31,  
     (1)      (2)      (3)  
                   (Col 1 - 2)  
     2015      2014      Change  
  

 

 

  
     (in millions)  

2. Deferred tax assets:

         

(a) Ordinary:

         

(1) Discounting of unpaid losses

        $ -       $ -       $ -   

(2) Unearned premium reserve

      -         -         -   

(3) Policyholder reserves

        1,011         1,034         (23 ) 

(4) Investments

      157         147         10   

(5) Deferred acquisition costs

      506         755         (249 ) 

(6) Policyholder dividends accrual

      68         111         (43 ) 

(7) Fixed assets

      -         -         -   

(8) Compensation and benefits accrual

      37         54         (17 ) 

(9) Pension accrual

      -         -         -   

(10) Receivables — nonadmitted

      67         49         18   

(11) Net operating loss carryforward

      1,276           1,218         58   

(12) Tax credit carry-forward

      898         860         38   

(13) Other (including items <5% of total ordinary tax assets)

      94         72         22   
  

 

 

  

(99) Subtotal

        $ 4,114       $ 4,300       $   (186 ) 

(b) Statutory valuation allowance adjustment

      50         50         -   

(c) Nonadmitted

      -         -         -   
  

 

 

  

(d) Admitted ordinary deferred tax assets (2(a)(99) — 2(b) — 2(c))

        $ 4,064       $ 4,250       $ (186 ) 

(e) Capital:

         

(1) Investments

        $ 383       $ 479       $ (96 ) 

(2) Net capital loss carryforward

      -         -         -   

(3) Real estate

      -         -         -   

(4) Other (including items <5% of total capital tax assets)

      -         -         -   
  

 

 

  

(99) Subtotal

        $ 383       $ 479       $ (96 ) 

(f) Statutory valuation allowance adjustment

      -         -         -   

(g) Nonadmitted

      -         -         -   
  

 

 

  

(h) Admitted capital deferred tax assets (2(e)(99) — 2(f) — 2(g))

        $ 383       $ 479       $ (96 ) 

(i) Admitted deferred tax assets (2(d)+2(h))

        $ 4,447       $ 4,729       $ (282 ) 

 

F-55

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

3. Deferred tax liabilities:

       

(a) Ordinary:

       

(1) Investments

        $   4,146      $ 4,202      $ (56 ) 

(2) Fixed assets

      -        -        -   

(3) Deferred and uncollected premium

      119        148        (29 ) 

(4) Policyholder reserves

      -        -        -   

(5) Other (including items <5% of total ordinary tax liabilities)

      374        521        (147 ) 
  

 

 

  

(99) Subtotal

        $ 4,639      $   4,871      $ (232 ) 

(b) Capital:

       

(1) Investments

        $ 155      $ 276      $   (121 ) 

(2) Real estate

      -        -        -   

(3) Other (including items <5% of total capital tax liabilities)

      40        38        2   
  

 

 

  

(99) Subtotal

        $ 195      $ 314      $ (119 ) 
  

 

 

  

(c) Deferred tax liabilities (3(a)(99) + 3(b)(99))

        $ 4,834      $ 5,185      $ (351 ) 
  

 

 

  

4. Net deferred tax assets/liabilities (2(i) — 3(c))

        $ (387 )    $ (456 )    $ 69   
  

 

 

  

The change in net deferred income taxes is comprised of the following:

 

     December 31,  
     2015     2014     Change  
  

 

 

  
     (in millions)  

Total deferred tax assets

        $   4,447      $   4,729          $ (282 ) 

Total deferred tax liabilities

      4,834        5,185        (351 ) 
  

 

 

  

Net deferred tax assets (liabilities)

        $ (387 )    $ (456 )        $ 69   
  

 

 

    

Tax effect of unrealized gains and losses

          183   

Tax effect of unrealized foreign exchange gains (losses)

          44   
      

 

 

  

Change in net deferred income taxes

            $   (158 ) 
      

 

 

  

 

F-56

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

The provision for federal and foreign income taxes incurred is different from that which would be obtained by applying the statutory federal income tax rate of 35% to income before income tax (including realized capital gains). The significant items causing this difference are as follows:

 

     Years Ended December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Ordinary provisions computed at statutory rate

        $ (105 )    $ (1,087 )    $   1,775   

Net realized capital gains (losses) before IMR at statutory rate

      335        151        (595 ) 

Change in nonadmitted assets

      -        -        -   

Reinsurance

      35        (91 )      (206 ) 

Valuation allowance

      -        -        50   

Tax-exempt income

      (6 )      (16 )      (2 ) 

Nondeductible expenses

      -        1        7   

Foreign tax expense gross up

      9        9        8   

Amortization of IMR

      (128 )      (62 )      (64 ) 

Tax recorded in surplus

      37        15        (18 ) 

Dividend received deduction

      (230 )      (129 )      (102 ) 

Investment in subsidiaries

      (28 )      (32 )      (35 ) 

Prior year adjustment

      (21 )      (23 )      16   

Tax credits

      (42 )      (52 )      (61 ) 

Change in tax reserve

      18        11        (55 ) 

Pension

      -        -        -   

Other

      (1 )      (2 )      (1 ) 
  

 

 

  

Total

        $ (127 )    $ (1,307 )    $ 717   
  

 

 

  

Federal and foreign income taxes incurred

        $ (778 )    $ (716 )    $ 262   

Capital gains tax

         493        382        108   

Change in net deferred income taxes

      158        (973 )      347   
  

 

 

  

Total statutory income tax expense (benefit)

        $ (127 )    $   (1,307 )    $ 717   
  

 

 

  

 

F-57

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

As of December 31, 2015, the Company had the following carry forwards:

 

     Origination
Year		    Expiration
Year		    Amount  
  

 

  
     (in millons)  

Net operating losses

    2008    2023        $ 1,594   
   2009    2024      259   
   2010    2025      200   
   2013    2028      902   
   2014    2029      628   
   2015    2030      62   
        

 

 

  
             $   3,645   
        

 

 

  

Affordable housing tax credits

    2001    2021        $ -   
   2002    2022      26   
   2003    2023      49   
   2004    2024      56   
   2005    2025      58   
   2006    2026      55   
   2007    2027      64   
   2008    2028      60   
   2009    2029      47   
   2010    2030      52   
   2011    2031      53   
   2012    2032      46   
   2013    2033      37   
   2014    2034      28   
   2015    2035      16   
        

 

 

  
             $ 647   
        

 

 

  

Foreign tax credits

    2005    2015        $ 23   
   2006    2016      9   
   2007    2017      27   
   2008    2018      18   
   2009    2019      7   
   2010    2020      9   
   2011    2021      27   
   2012    2022      27   
   2013    2023      27   
   2014    2024      30   
   2015    2025      27   
        

 

 

  
             $ 231   
        

 

 

  

Alternative minimum tax credits

    2002           $ 2   
   2003         2   
        

 

 

  
             $ 4   
        

 

 

  

 

F-58

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

Rehabilitation credits

    2003    2023        $ 4   
   2006    2026      1   
        

 

 

  
             $ 5   
        

 

 

  

Other credits

    2007    2027        $ 1   
   2008    2028      1   
   2009    2029      1   
   2010    2030      2   
   2011    2031      2   
   2013    2033      2   
   2014    2034      2   
        

 

 

  
             $        11   
        

 

 

  

There are no federal income taxes incurred available for recoupment in the event of future net losses for 2015, 2014 and 2013 respectively.

The Company has no deposits under Section 6603 of the Internal Revenue Code.

The Company is included in the consolidated federal income tax return of JHFC with the following entities:

 

Essex Corporation    John Hancock Insurance Company of Vermont
Farmland Management Services, Inc.    John Hancock Leasing Corp.
Guide Financial, Inc.    John Hancock Life Insurance Company of New York
Hancock Farmland Services, Inc.    John Hancock Life & Health Insurance Company
Hancock Forest Management Inc.    John Hancock Real Estate Finance Inc.
Hancock Natural Resource Group Inc.    John Hancock Realty Advisors Inc.
Hancock Venture Partners Inc.    John Hancock Realty Mgt. Inc.
Hancock Venture Partners Inc. Russia    John Hancock Signature Services Inc.
HVP-Special Purpose Sub I Inc.    John Hancock Natural Resource Corp.
HVP-Special Purpose Sub II Inc.    Manulife Reinsurance (Bermuda) Limited
JH California Real Estate Holdings, Inc.    Manulife Reinsurance Limited
JH Illinois Real Estate Holdings, Inc.    Manulife Service Corporation
JH Networking Insurance Agency Inc.    MCC Asset Management Inc.
JHFS One Corp.    PT Timber Inc.
John Hancock Assignment Company    Signator Insurance Agency Inc.
John Hancock Capital Growth Management Inc.    Signator Investors Inc.
John Hancock Energy Resources Mgt. Inc.    Signator Financial Services Inc.
John Hancock Financial Network Inc.    The Manufacturers Investment Corporation
John Hancock Financial Corporation    Transamerica Fund Distributors Inc.
John Hancock Insurance Agency Inc.    Transamerica Fund Management Company

In accordance with the income tax sharing agreements in effect for the applicable tax years, the Company’s income tax expense (benefit) is computed as if the Company filed separate federal income tax returns with tax benefits provided for operating losses and tax credits when utilized by the consolidated group. Intercompany settlements of income taxes are made through an increase or reduction to amounts due to or from affiliates. Such settlements occur on a periodic basis in accordance with the tax sharing agreements.

Taxes receivable from (payable to) affiliates are $130 million and $728 million at December 31, 2015 and 2014, respectively, and are included in other assets on the Balance Sheets.

 

F-59

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The Company is under continuous examination by the Internal Revenue Service (“IRS”). Effective for 2010, the Company’s common parent, JHFC, merged into Manulife Holdings (Delaware) LLC (“MHDLLC”) resulting in a new combined group. With respect to the legacy MHDLLC consolidated return group, the IRS audit for tax years through 2009 have been closed. With respect to the legacy JHFC group, the IRS has completed its examinations of tax years 1997 through 2009. The IRS has issued statutory notices of deficiency relating to issues in years 1997 through 2004. JHFC filed a petition in U.S. Tax Court pertaining to leveraged leases to contest years 1997 to 2001 and the trial was completed in 2011 with final judgment entered on July 22, 2014. The IRS issued Revenue Agent Reports for tax years 2005 through 2009. Protests were filed with respect to disagreed issues. The IRS commenced its audit of tax years 2010 through 2013 in September 2014.

On August, 5, 2013, the U.S. Tax Court issued an opinion in the litigation between the Company and the IRS involving the tax treatment of certain leveraged lease investments. The Court’s opinion effectively ruled against the Company with respect to deductions claimed for tax years 1997 through 2001. The Company and the IRS are in the process of determining the impact of the decision on years subsequent to the years that were decided by the Court. The Company has made advance payments of tax and interest and is awaiting final IRS assessments. Although the Company is fully reserved for the taxes and interest that could be due, this decision may result in a decrease in the admissible book value of other deferred tax assets include in surplus in subsequent periods, absent consideration of further management actions.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

     2015     2014  
  

 

 

  
     (in millions)  

Balance at beginning of year

        $ 2,002      $ 2,715   

Additions based on tax positions related to the current year

      40        49   

Payments

      -        (550 ) 

Additions for tax positions of prior years

      41        23   

Reductions for tax positions of prior years

      (116 )      (235 ) 
  

 

 

  

Balance at end of year

        $   1,967      $   2,002   
  

 

 

  

Included in the balances as of December 31, 2015 and 2014, respectively, are $172 million and $154 million of unrecognized benefits that, if recognized, would affect the Company’s effective tax rate. Included in the balances as of December 31, 2015 and 2014, are $1,796 million and $1,848 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Approximately $1,734 million and $1,734 million of such amounts at December 31, 2015 and 2014, respectively, represent deferred tax liability balances related to leveraged lease deductions taken in prior year tax returns that were considered in determining the amount of deferred tax assets that can be admitted by offsetting such amounts against deferred tax liabilities. Excluding the effect of interest and penalties, this will have no impact on the annual effective rate, but would accelerate the payment of taxes to an earlier period.

The Company’s liability for unrecognized tax benefits may decrease in the next twelve months pending the outcome of remaining issues associated with the 2002 through 2009 IRS audit. A reasonable estimate of the decrease cannot be determined at this time however, the Company believes that the ultimate resolution will not result in a material change to its financial statements.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense in the Statements of Operations. The Company recognized approximately $0 million of interest expense, and $9 million, and $11 million of interest benefit for the years ended December 31, 2015, 2014 and 2013, respectively. The Company had approximately $202 million and $209 million accrued for interest as of December 31, 2015 and 2014, respectively. The Company did not recognize any material amounts of penalties for the years ended December 31, 2015, 2014 and 2013.

 

F-60

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

10. Capital and Surplus

There are no restrictions placed on the Company’s unassigned surplus other than restrictions on dividend payments described below.

Under Michigan State insurance laws, no insurer may pay any shareholder dividends from any source other than statutory earned surplus without the prior approval of the Director. Dividends to the shareholder that may be paid without prior approval of the Director are limited by the laws of the State of Michigan. Such dividends are permissible if, together with other dividends or distributions made within the preceding 12 months, they do not exceed the greater of 10% of the JHUSA surplus as of December 31 of the preceding year, or the net gain from operations excluding realized capital gains and (losses) for the 12 month period ending December 31 of the immediately preceding year. For the years ended December 31, 2015, 2014 and 2013, the Company paid a dividend to its parent company MIC of $210 million, $500 million and $300 million, respectively.

Life/health insurance companies are subject to certain Risk-Based Capital (“RBC”) requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life/health insurance company is to be determined based on the various risk factors related to it. As of December 31, 2015 and 2014, based on calculations pursuant to those requirements, the Company’s total adjusted capital exceeds the company action level.

The Company has surplus notes described below in the amount of $991 million. The issuance of the surplus notes was approved by the insurance regulators with the following repayment conditions and restrictions: payment of principal and accrued interest otherwise required or permissible cannot be made unless approved by the Board of Directors, approved in writing by the Director, and the Company has sufficient earned surplus or such other funds as may be approved by the Director available for such payment.

Surplus notes in the amount of $450 million were issued on February 25, 1994, for cash pursuant to Rule 144A under the Securities Act of 1933. 100% of the issued and outstanding surplus notes are represented by a global note registered in the name of a nominee of the Depository Trust Company. The interest rate is fixed at 7.375%, and interest is payable semi-annually. The notes mature on February 15, 2024. Interest expense was $33 million for years ended December 31, 2015, 2014 and 2013. Total interest paid through December 31, 2015 was $714 million.

Pursuant to two subordinated surplus notes dated September 30, 2008, the Company borrowed the respective amount of $295 million and $110 million from an affiliate, John Hancock Insurance Agency, Inc. (“JHIA”). The interest rate is fixed at 7% per annum and is payable semi-annually. The notes mature on March 31, 2033. The combined interest expense on the notes was $29 million for years ended December 31, 2015, 2014 and 2013. Total interest paid through December 31, 2015 was $202 million.

Pursuant to an amended and restated subordinated surplus note dated September 30, 2008, the Company borrowed $136 million from JHFC. Interest is calculated and reset quarterly at a fluctuating rate equal to 3-month LIBOR plus 130 basis points and is payable semi-annually. The note matures on December 15, 2016. Interest expense was $2 million, $2 million, and $2 million for the years ended December 31, 2015, 2014 and 2013, respectively. Total interest paid through December 31, 2015 was $13 million.

Under Michigan State liquidation statutes, the claims of the Depository Trust Company, JHIA, and JHFC (“the surplus noteholders”) come before those of the Company’s shareholders. There is no preferential treatment in claims between the surplus noteholders.

 

F-61

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

11. Related Party Transactions

Service Agreements

The Company has formal service agreements with MFC and MLI, which can be terminated by either party upon two months’ notice. Under the various agreements, the Company will pay a fee for services received under the agreement which includes legal, actuarial, investment, data processing, accounting, and certain other administrative services. Management fees relating to the agreement were $377 million, $398 million, and $443 million, respectively, for the years ended December 31, 2015, 2014 and 2013.

The Company has Administrative Service Agreements with its subsidiaries whereby the Company will be reimbursed for operating expenses incurred by the Company. Services provided under the agreement include legal, personnel, marketing, investment accounting, and certain other administrative services and are billed based on intercompany cost allocations or total average daily net assets. The amounts earned under the agreements were $760 million, $618 million, and $328 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Management believes the allocation methods used are reasonable and appropriate in the circumstances; however, the Company’s Balance Sheets and Statements of Operations may not necessarily be indicative of the financial condition that would have existed if the Company operated as an unaffiliated entity.

Other

During 2015, 2014 and 2013, respectively, the Company received dividends of $36 million, $43 million, and $297 million from John Hancock Investment Management Services LLC, $81 million, $90 million, and $98 million from JHD, $0 million, $0 million, $0 million from JHNY, $70 million, $0 million, and $0 million from JHLH, and $289 million, $72 million, and $0 million from John Hancock Subsidiaries, LLC (JHS). These dividends are included in the Company’s net investment income.

During 2015, the Company made a capital contribution of $348 million to JHS in exchange for one share of its common stock.

The Company did not own any shares of the stock of its parent, MIC, or its ultimate parent, MFC at December 31, 2015 and 2014, respectively.

The Company did not recognize any impairment write-down for its investment in subsidiaries, controlled or affiliated companies for the years ended December 31, 2015, 2014 and 2013, respectively.

The Company operates a liquidity pool in which affiliates can invest excess cash. Terms of operation and participation in the liquidity pool are set out in the Second Restated and Amended Liquidity Pool and Loan Facility Agreement effective January 1, 2010. The maximum aggregate amounts that JHUSA can accept into the Liquidity Pool are $5 billion in U.S. dollar deposits and $200 million in Canadian dollar deposits. Under the terms of the agreement, certain participants may receive advances from the Liquidity Pool up to certain predetermined limits. By acting as the banker the Company can earn a spread over the amount it pays its affiliates and this aggregation and resulting economies of scale allows the affiliates to improve the investment return on their excess cash. Interest payable on U.S. dollar funds will be reset daily to the one-month U.S. Dollar London Inter-Bank Bid Rate (“LIBID”) and interest payable on Canadian dollar funds is based off the one-month Canadian Dollar Offering Rate (“CDOR”) plus a spread.

 

F-62

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

11. Related Party Transactions - (continued)

 

The following table details the affiliates and their participation in the Company’s Liquidity Pool:

 

     December 31,  
     2015      2014  
  

 

 

  
     (In millions)  

The Manufacturers Investment Corporation

        $ 49       $ 105   

John Hancock Financial Corporation

      138         274   

Manulife Reinsurance Limited

      44         186   

Manulife Reinsurance (Bermuda) Ltd.

      167         696   

John Hancock Life & Health Insurance Company

      30         142   

John Hancock Life Insurance Company Vermont

      33         39   

John Hancock Reassurance Company, Ltd.

      126         278   

John Hancock Life Insurance Company New York

      473         611   

John Hancock Investment Management Services LLC

      28         31   

John Hancock Subsidiaries LLC

      45         45   

John Hancock Insurance Agency, Inc.

      12         16   

Essex Corporation

      -         1   

Hancock Venture Partners, Inc.

      -         -   

JH Signature Services Inc.

      7         9   

JH Partnership Holdings I, II LP

      4         2   

John Hancock Energy Resources Management, Inc.

      -         4   

John Hancock Real Estate Finance

      -         1   

John Hancock Realty Advisors

      4         8   

JH Advisors LLC

      84         158   

Manulife Asset Management (US) LLC

      55         75   

Declaration Management and Research LLC

      11         4   

Hancock Capital Investment Management LLC

      10         15   

John Hancock RPS, LLC

      36         14   

The Berkeley Financial Group, LLC

      4         4   

Manulife Holdings (USA), LLC

      -         -   

Signator Insurance Agency, Inc.

      14         18   

JH Networking Insurance Agency, Inc.

      6         4   

John Hancock Administrative Services LLC

      -         -   

John Hancock Financial Network, Inc.

      -         -   

Hancock Natural Resource Group, Inc.

      50         -   

Hancock Forest Management, Inc.

      6         -   

John Hancock Personal Financial Services, LLC

      1         -   
  

 

 

  

Total

        $   1,437       $   2,740   
  

 

 

  

Effective March 31, 1996, MLI provides a claims paying guarantee to certain U.S. policyholders. The claims guarantee agreement was terminated effective August 13, 2008, but still remains in effect with respect to policies issued by the Company prior to that date.

MFC fully and unconditionally guarantees payments from the guarantee periods of the accumulation phase for certain of the Company’s market value adjusted annuity contracts.

MFC fully and unconditionally guarantees JHLICO’s SignatureNotes. In December 2009, the entity that formerly issued these notes, JHLICO, ceased to exist and its property and obligations became the property and obligations of the Company.

 

F-63

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

11. Related Party Transactions - (continued)

 

MFC’s guarantees of the market value adjusted deferred annuity contracts and SignatureNotes are unsecured obligations of MFC and are subordinated in right of payment to the prior payment in full of all other obligations of MFC, except for other guarantees or obligations of MFC, which by their terms are designated as ranking equally in right of payment with or subordinate to MFC’s guarantees of the market value adjusted deferred annuity contracts and SignatureNotes.

The Company also enters into debt and reinsurance transactions with its affiliates. Please refer to the debt and reinsurance notes for further details.

12. Commitments, Guarantees, Contingencies, and Legal Proceedings

Commitments: The Company has extended commitments to purchase long-term bonds of $183 million, purchase other invested assets of $1,716 million, purchase real estate of $98 million, and issue agricultural and commercial mortgages of $125 million at December 31, 2015. If funded, loans related to real estate mortgages would be fully collateralized by related properties. Approximately 39% of these commitments expire in 2016.

There were no leasing arrangements that the Company entered into as lessee which could have a material financial effect.

During 2001, the Company entered into an office ground lease agreement, which expires on September 20, 2096. During 2012, the Company entered into a parking lease agreement, which expires on December 31, 2050. The terms of the lease agreements provide for adjustments in future periods. The future minimum lease payments, by year and in the aggregate, under these leases and other non-cancelable operating leases along with the associated sub-lease income are as follows:

 

     Non-cancelable
Operating
Leases		  
     (in millions)  

2016

        $ 12   

2017

      10   

2018

      7   

2019

      5   

2020

      5   

Thereafter

      349   
  

 

 

  

Total

        $   388   
  

 

 

  

The Company does not have any sublease income related to its office space.

The Company’s investment in leveraged leases relates to equipment used primarily in the transportation industries; however, this type of leasing transaction is not a significant part of the Company’s business activities in terms of revenue, net income, or assets.

Guarantees: In the course of business, the Company enters into guarantees which vary in nature and purpose and which are accounted for and disclosed under statutory accounting principles.

The Company has issued guarantee agreements pursuant to which the Company guarantees the obligations of JHNY and JHLH under the OTC International Swaps and Derivatives Association, Inc. (“ISDA”) cleared and exchange-traded derivative agreements and transactions entered into by JHNY and JHLH with external counterparties. The ISDA guarantees are subject to an overall limit of $1 billion of Potential Future Exposure, using a three-week and 95% confidence parameters, in calculating the counterparty risk exposure.

The Company is party to a financial support agreement with JHLH pursuant to which it has agreed to maintain JHLH’s capital level such that its risk-based capital ratio shall be at or above 225% of the company action level annually. In addition, under the terms of the financial support agreement, the Company undertakes to provide sufficient liquidity to enable JHLH to make timely payment of its contractual obligations.

 

F-64

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

12. Commitments, Guarantees, Contingencies, and Legal Proceedings - (continued)

 

Contingencies: The Company is an investor in a number of leasing transactions. On August 5, 2013, the U.S. Tax Court issued an opinion effectively ruling in the government’s favor in the litigation between John Hancock and the IRS involving the tax treatment of John Hancock’s investments in certain leveraged leases. The Company and the IRS are in the process of determining the impact of the decision on years subsequent to the years that were decided by the Court. The Company has made advance payments of tax and interest and is awaiting final IRS assessments. Although the Company is fully reserved for the taxes and interest that could be due, this decision may result in a decrease in the admissible book value of other deferred tax assets included in surplus in subsequent periods, absent consideration of further management actions.

The Company acts as an intermediary/broker in OTC derivative instruments. In these cases, the Company enters into derivative transactions on behalf of affiliated companies and then enters into offsetting derivative transactions with the affiliate. In the event of default of either party, the Company is still obligated to fulfill its obligations with the other party.

The Company is subject to insurance guaranty fund laws in the states in which it does business. Pursuant to these laws, insurance companies are assessed, and required to make periodic payments, to be used to pay benefits to policyholders and claimants of insolvent or rehabilitated insurance companies. Many states allow these assessments to be credited against future premium taxes. The Company believes such assessments in excess of amounts accrued will not materially affect its financial position.

Legal Proceedings: The Company is regularly involved in litigation, both as a defendant and as a plaintiff. The litigation naming the Company as a defendant ordinarily involves its activities as a provider of insurance protection and wealth management products, an employer, and a taxpayer. In addition, the Michigan Department of Insurance and Financial Services, the Michigan Attorney General, the SEC, the Financial Regulatory Authority, and other government and regulatory bodies regularly make inquiries and, from time to time, require the production of information or conduct examinations concerning the Company’s compliance with, among other things, insurance laws, securities laws, and laws governing the activities of broker-dealers. An estimation of the range of potential outcomes in any given matter is often unavailable until such matters have developed and sufficient information emerges to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals and estimates of reasonably possible losses or ranges of loss based on such reviews.

 

F-65

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

13. Annuity Actuarial Reserves

The Company’s annuity reserves and deposit fund liabilities and related separate account liabilities that are subject to discretionary withdrawal (with adjustment), subject to discretionary withdrawal (without adjustment), and not subject to discretionary withdrawal provisions are summarized as follows:

 

    December 31, 2015  
    General
Account		     Separate
Account
with
Guarantees		     Separate
Account
Nonguaranteed		     Total     Percent
of Total		  
 

 

 

  
    (in millions)  

Subject to discretionary withdrawal:

          

With fair value adjustment

       $ 769      $ 503      $ 1,793      $ 3,065        2 % 

At book value less current surrender charge of 5% or more

     5        -        -        5        0 % 

At fair value

     -        -        114,302        114,302        82 % 
 

 

 

  

Total with adjustment or at fair value

     774        503        116,095        117,372        84 % 

At book value without adjustment (minimal or no charge or adjustment)

     7,165        -        -        7,165        5 % 

Not subject to discretionary withdrawal

     15,068        686        134        15,888        11 % 
 

 

 

  

Total (gross)

     23,007        1,189        116,229        140,425        100 % 
         

 

 

  

Reinsurance ceded

     4,904        -        -        4,904     
 

 

 

    

Total (net)

       $   18,103      $   1,189      $   116,229      $   135,521     
 

 

 

    
    December 31, 2014  
    General
Account		     Separate
Account
with
Guarantees		     Separate
Account
Nonguaranteed		     Total     Percent
of Total		  
 

 

 

  
    (in millions)  

Subject to discretionary withdrawal:

          

With fair value adjustment

       $ 968      $ 559      $ 1,879      $ 3,406        2 % 

At book value less current surrender charge of 5% or more

     29        -        -        29        0 % 

At fair value

     -        -        123,450        123,450        81 % 
 

 

 

  

Total with adjustment or at fair value

     997        559        125,329        126,885        83 % 

At book value without adjustment (minimal or no charge or adjustment)

     8,594        -        -        8,594        6 % 

Not subject to discretionary withdrawal

     15,577        713        130        16,420        11 % 
 

 

 

  

Total (gross)

     25,168        1,272        125,459        151,899        100 % 
         

 

 

  

Reinsurance ceded

     5,483        -        -        5,483     
 

 

 

    

Total (net)

       $ 19,685      $ 1,272      $ 125,459      $ 146,416     
 

 

 

    

 

F-66

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts

Separate accounts held by the Company include individual and group variable annuity and variable life products that offer guarantee and non-guaranteed returns. The net investment experience of the separate account is credited directly to the policyholder and can be positive or negative.

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

The deposits related to variable annuities generally provide a GMDB. For annuity products, this can take the form of either (a) return of no less than total deposits made to the contract less any partial withdrawals; (b) total deposits made to the contract less any partial withdrawals plus a minimum return; (c) the highest contract value on a specified anniversary date minus any withdrawals following the contract anniversary; or (d) a combination benefit of (b) and (c) above. The assets and liabilities of these accounts are carried at fair value. The GMDB reserve is held in the Company’s general account policy reserves.

The Company sold contracts with GMIB riders from 1998 to 2004. The GMIB rider provides a guaranteed lifetime annuity which may be elected by the contract holder after a stipulated waiting period (7 to 15 years), and which may be larger than what the contract account balance could purchase at then-current annuity purchase rates.

The Company sold contracts with a GMWB rider and has since offered multiple variations of this optional benefit. The GMWB rider provides contract holders a guaranteed annual withdrawal amount over a specified time period or in some cases for as long as they live. In general, guaranteed annual withdrawal amounts are based on deposits and may be reduced if withdrawals exceed allowed amounts. Guaranteed amounts may also be increased as a result of “step-up” provisions which increase the benefit base to higher account values at specified intervals. Guaranteed amounts may also be increased if withdrawals are deferred over a specified period. In addition, certain versions of the GMWB rider extend lifetime guarantees to spouses.

Reinsurance has been utilized to mitigate risk related to some of the GMDB and GMIB riders.

For GMDB, the net amount at risk is defined as the current guaranteed minimum death benefit in excess of the current account balance. For GMIB, the net amount at risk is defined as the excess of the current annuitization income base over the current account value. For GMWB, the net amount at risk is defined as the current guaranteed withdrawal amount minus the current account value. For all the guarantees, the net amount at risk is floored at zero at the single contract level.

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

 

F-67

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts - (continued)

 

The assets legally insulated from the general account are attributed to the following products/transactions:

 

Product/Transaction    Separate Account Legally
Insulated Assets		     

Separate Account

Not Legally Insulated

Assets

  
  

 

 

  
     December 31,  
     2015      2014        2015      2014  
  

 

 

  
     (in millions)  

Group Annuities (Deposit Administration)

        $ 75,437       $ 78,905       $ -       $ -   

Variable Annuities

      37,422         43,503         27         29   

Life and COLI

      12,067         12,359         -         -   

Fixed Products — Institutional and stable value fund

      2,611         2,713         -         -   

Fixed Products — Retail

      22         24         472         570   

Investments — Funds

      1,667         2,061         -         -   
  

 

 

  

Total

        $   129,226       $   139,565       $   499       $   599   
  

 

 

  

As of December 31, 2015 and 2014, the general account of the Company had a maximum guarantee for separate account liabilities $10,914 million and $7,816 million, respectively. To compensate the general account for the risk taken, the separate account paid risk charges and amounts toward separate account guarantees are as follows:

 

     Risk Charges
Paid to General
Account		      Amounts toward
Separate Account
Guarantees		  
  

 

 

  
     (in millions)  

2015

      $    241         $      59   

2014

      $    252         $      74   

2013

      $    263         $    109   

2012

      $    269         $    165   

2011

      $    261         $    145   

The Company had the following variable annuities with guaranteed benefits:

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions, except for ages)  

Account value

    $ 37,947       $ 44,116   

Amount of reserve held

      1,179         865   

Net amount at risk — gross

      7,169         4,699   

Weighted average attained age

      68         67   

The following assumptions and methodology were used to determine the amounts above at December 31, 2015 and 2014:

 

  •  

Actuarial Guideline 43 (“AG 43”) is used in both years to determine the aggregate reserve for products falling under the scope. Assumptions used in the standard scenario are prescribed by the guideline. Assumptions used in the stochastic scenarios are detailed below.

 

  •  

The stochastically generated projection scenarios have met the scenario calibration criteria prescribed in AG 43.

 

  •  

In 2015 and 2014, annuity mortality is based on the Ruark Variable Annuity Table, which is based on an industry study of variable annuity deaths. The table is further adjusted by factors varied by rider types (living benefit/GMDB only) and qualified and non-qualified business.

 

F-68

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts - (continued)

 

  •  

In 2015 and 2014, annuity base lapse rates vary by product, policy year, and rider type, where the lapse rates range from 0.5% to 40% for GMDB, GMIB and GMWB. These rates are dynamically reduced for guarantees that are in-the-money. Beginning in 2012, rates are also dynamically increased for GMWBs that are out-of-the-money.

 

  •  

For variable annuities, the swap curve at December 31 is used for discounting in both years.

 

  •  

For variable annuities, mean return, volatility and correlation assumptions are determined by indices, which have met the calibration criteria prescribed in AG 43.

Account balances of variable contracts with guarantees were invested in various separate accounts with the following characteristics:

 

     December 31,  
     2015      2014  
  

 

 

  
     (in millions)  

Type of Fund

      

Equity

        $ 24,131       $ 27,353   

Balanced

      16,993         19,449   

Bonds

      5,216         5,807   

Money Market

      668         683   
  

 

 

     

 

 

  

Total

        $   47,008       $   53,292   
  

 

 

     

 

 

  

Information regarding the separate accounts of the Company is as follows:

 

     December 31,  
     2015      2014  
  

 

 

  
    

Nonindexed
Guarantee
Less than or

Equal to
4%

      Nonguaranteed
Separate
Account		      Total     

Nonindexed
Guarantee
Less than or

Equal to
4%

      Nonguaranteed
Separate
Account		      Total  
  

 

 

  
     (in millions)  

Premiums, deposits and other considerations

    $ 1       $ 13,935       $ 13,936       $ -       $ 13,258       $ 13,258   
  

 

 

  

Reserves for accounts with assets at:

                  

Fair value

      1,189         127,792         128,981         1,272         137,306         138,578   

Amortized cost

      -         -         -         -         -         -   
  

 

 

  

Total

    $ 1,189       $ 127,792       $ 128,981       $ 1,272       $ 137,306       $ 138,578   
  

 

 

  

 

F-69

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts - (continued)

 

    December 31,  
    2015     2014  
 

 

 

  
   

Nonindexed
Guarantee

Less than or

Equal to
4%

     Nonguaranteed
Separate
Account		     Total    

Nonindexed
Guarantee

Less than or

Equal to
4%

     Nonguaranteed
Separate
Account		     Total  
 

 

 

  
    (in millions)  

Reserves for separate accounts by withdrawal characteristics:

            

Subject to discretionary withdrawal:

            

With fair value adjustment

       $ 503      $ 1,793      $ 2,296      $ 531      $ 1,879      $ 2,410   

At book value without fair value adjustments and with current surrender charge of 5% or more

     -        1,901        1,901        -        2,483        2,483   

At fair value

     -        120,337        120,337        28        129,620        129,648   

At book value without fair value adjustments and with current surrender charge of less than 5%

     -        3,533        3,533        -        3,058        3,058   
 

 

 

  

Subtotal

     503        127,564        128,067        559        137,040        137,599   

Not subject to discretionary withdrawal

     686        228        914        713        266        979   
 

 

 

  

Total

       $   1,189      $   127,792      $   128,981      $   1,272      $   137,306      $   138,578   
 

 

 

  

Amounts transferred to and from separate accounts are as follows:

 

     December 31,  
     2015     2014     2013  
  

 

 

  
     (in millions)  

Transfers to separate accounts

        $   17,071      $   16,100      $   14,916   

Transfers from separate accounts

      23,625        24,329        21,304   
  

 

 

    

 

 

    

 

 

  

Net transfers to (from) separate accounts

        $ (6,554 )    $ (8,229 )    $ (6,388 ) 
  

 

 

    

 

 

    

 

 

  

 

F-70

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

15. Employee Benefit Plans

Retirement Plans: The Company participates in the John Hancock Pension Plan, a qualified defined benefit plan that covers substantially all of its employees. The Company also participates in the John Hancock Non-Qualified Pension Plan, a nonqualified defined benefit plan for employees whose qualified cash balance benefit is restricted by the Internal Revenue Code. Both plans are sponsored by MIC. The non-qualified defined benefit plan was frozen except for grandfathered participants as of January 1, 2008, and the benefits accrued under this plan continue to be subject to the plan’s provisions.

The Company is jointly and severally liable for the funding requirements of the plans and will recognize its allocation, from MIC, of the required contributions to the plans as pension expense in its Statements of Operations. The allocation is derived by utilizing participant data, provided by the plan actuary, to calculate payments into the trust for the qualified plan and payments to participants for the non-qualified plan. The expense for these plans was $35 million, $37 million, and $41 million in 2015, 2014 and 2013, respectively.

The Company participates in the John Hancock Supplemental Retirement Plan, a non-qualified defined contribution plan maintained by MFC, which was established as of January 1, 2008 with participant directed investment options. The expense for this plan was not material for the years ended 2015, 2014 and 2013, respectively. The prior non-qualified defined contribution plan was frozen except for grandfathered participants as of January 1, 2008, and the benefits accrued under the prior plan continue to be subject to the prior plan provisions.

The Company also maintains a separate rabbi trust for the purpose of holding assets to be used to satisfy its obligations with respect to certain other non-qualified retirement plans of $329 million and $332 million at December 31, 2015 and 2014, respectively. In the event of insolvency of the Company, the rabbi trust assets can be used to satisfy claims of general creditors.

401 (k) Plans: The Company participates in qualified defined contribution plans for its employees who meet certain eligibility requirements. These plans include the Investment-Incentive Plan for John Hancock Employees and the John Hancock Savings and Investment Plan. Both plans are sponsored by JHUSA. Expense is primarily comprised of the amounts the Company contributes to the plans, which fully matches eligible participants’ basic pre-tax or Roth contributions, subject to a 4% per participant maximum. The expense for the defined contribution plans was not material for the years ended 2015, 2014 and 2013, respectively.

Deferred Compensation Plan: The Company maintains the Deferred Compensation Plan for Certain Employees of John Hancock, and the Deferred Compensation Plan of the John Hancock Financial Network, both of which are deferred compensation plans sponsored by MFC. These plans are for a select group of management or highly compensated employees and certain qualified agents. The plans are fully funded and accounts are maintained by a third-party administrator. Under these plans, participants have the flexibility and opportunity to invest their plan balances in mutual funds. The liability for these plans at December 31, 2015 and 2014 was $89 million and $91 million, respectively.

Prior to January 1, 2006, the Company offered the Legacy Deferred Compensation Plan for Certain Employees of John Hancock Life Insurance Company (USA), the legacy plan, which is closed to new participation and is unfunded. These are notional accounts and all liabilities have remained with the Company and are paid out of general account assets when a distribution is taken. The liability for this plan was not material as of December 31, 2015 and 2014 respectively.

Postretirement Benefit Plan: The Company participates in the John Hancock Employee Welfare Plan which is sponsored by MIC. Consistent with the pension plan, the Company is jointly and severally liable for the funding requirements of the plan and will recognize its allocation, from MIC, of the benefits earned by plan participants as postretirement benefits expense in its Statements of Operations. The allocation is derived by utilizing participant data, provided by the plan actuary, to calculate the benefits earned; i.e., service cost, relating to participants employed by the Company. In addition, any difference between actual cash paid for benefits to plan participants and benefits earned is recorded directly to unassigned surplus. The expense and charge to surplus for the John Hancock Employee Welfare Plan were not material for the years ended 2015, 2014 and 2013, respectively.

 

F-71

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

16. Lines of Credit, Consumer Notes and Affiliated Debt

Lines of Credit: At December 31, 2015, the Company, MFC, and other MFC subsidiaries had a committed line of credit through a group of banks totaling $500 million pursuant to a multi-year facility, which will expire in 2020. The banks will commit, when requested, to loan funds at prevailing interest rates as determined in accordance with the line of credit agreement. Under the terms of the agreement, MFC is required to maintain a certain minimum level of net worth, and MFC and the Company are required to comply with certain other covenants, which were met at December 31, 2015. At December 31, 2015, MFC and its subsidiaries, including the Company, had no outstanding borrowings under the agreement.

At December 31, 2015, the Company had a committed line of credit agreement established by MLI totaling $1 billion, which will expire in 2018. MLI will commit, when requested, to loan funds at prevailing interest rates as determined in accordance with the line of credit agreement. Under the terms of the agreement, the Company is required to maintain a certain minimum level of net worth and comply with certain other covenants as long as any amount is owed to the lender under the agreement. At December 31, 2015, the Company had no outstanding borrowings under the agreement.

At December 31, 2015, JHUSA and MIC share in a committed line of credit established by MFC totaling $1 billion, which will expire in 2018. MFC will commit, when requested, to loan funds at prevailing interest rates as determined in accordance with the line of credit agreement. Under the terms of the agreement, the Company is required to maintain a certain minimum level of net worth and comply with certain other covenants, as long as any amount is owed to the lender under the agreement. At December 31, 2015, the Company had no outstanding borrowings under the agreement.

Consumer Notes: The Company issued consumer notes through its SignatureNotes Program. SignatureNotes may be redeemed upon the death of the holder, subject to an annual overall program redemption limitation of 1% of the aggregate securities outstanding, or $1 million, or an individual redemption limitation of $200,000 of aggregate principal. SignatureNotes have a variety of issue dates, maturities, interest rates and call provisions. The notes payable balance as of December 31, 2015 and 2014 was $265 million and $411 million, respectively. Interest ranging from 3.1% to 6.0%. The notes are due in varying amounts to 2032.

Aggregate maturities of consumer notes are as follows: 2016-$64 million; 2017-$4 million; 2018-$43 million; 2019-$16 million; 2020-$0 million; and thereafter $138 million.

Interest expense on consumer notes, included in benefits to policyholders, was $18 million, $24 million, and $ 30 million in 2015, 2014 and 2013, respectively. Interest paid amounted to $18 million, $24 million, and $ 30 million in 2015, 2014 and 2013, respectively.

Affiliated Debt: Pursuant to a demand note receivable dated September 30, 2008, the Company has $295 million outstanding with MIC. The note, which was to have matured on March 31, 2013, was extended to March 31, 2018. This note was reported as a nonadmitted asset at December 31, 2015 and 2014 since the counterparty is the parent entity of the Company; however, this note will continue to accrue interest throughout the duration of the contract as per the terms of the note. Prior to March 31, 2013, the interest rate was calculated at a fluctuating rate equal to 3-month LIBOR plus 83 basis points per annum. Following the extension, the interest rate is calculated at a fluctuating rate equal to 3-month LIBOR plus 180 basis points per annum. Interest income was $6 million, $6 million, and $6 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Pursuant to a promissory note dated June 28, 2012, the Company borrowed $153 million from Manulife Finance Switzerland AG (“MFSA”). Interest on the loan is calculated at a fluctuating rate equal to 3-month LIBOR plus 90 basis points per annum and is payable quarterly. In addition, the Company renewed two previously outstanding promissory notes to MFSA with an outstanding balance of $7 million and combined these notes with the new note issued on June 28, 2012, thus bringing the total principal balance due to $160 million. On June 3, 2015, the maturity date was extended for a period of one year to June 28, 2016. Following the extension, the interest rate was amended and is calculated at a fluctuating rate equal to 3-month LIBOR plus 88 basis points per annum and is payable quarterly effective from June 28, 2015. Interest expense was $2 million, $2 million, and $2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Pursuant to a demand note dated December 20, 2012, the Company borrowed $130 million from MIC. The note was paid on December 21, 2015. Interest on the loan was calculated at a fluctuating rate equal to the one-month LIBOR rate and was

 

F-72

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

16. Lines of Credit, Consumer Notes and Affiliated Debt - (continued)

 

payable monthly. Interest expense was $0 million, $0 million, and $0 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Pursuant to a senior note receivable dated December 9, 2014, the Company has $40 million outstanding with JHS with a fair value of $ 40 million as of December 31, 2015. The note matures on December 9, 2019. Interest on the loan is calculated at a fluctuating rate equal to the 3-month LIBOR rate plus 180 basis points per annum and is payable quarterly. Interest income was $1 million for the year ended December 31, 2015.

FHLB (Federal Home Loan Bank) Agreements: The Company is a member of the Federal Home Loan Bank of Indianapolis (FHLBI). The Company uses advances from the FHLBI as a part of its liquidity management program, and any funds obtained for this purpose would be accounted for as borrowed money.

The following table indicates the aggregate amount of the FHLBI capital stock held related to the agreement:

 

    December 31, 2015  
   

(1)

(Col 2 +3)

Total

    

(2)

General
Account

    

(3)

Separate
Account

  
 

 

 

  
    (in millions)  

(a) Membership stock — Class A

   $ -      $ -      $ -   

(b) Membership stock — Class B

     18        18        -   

(c) Activity stock

     -        -        -   

(d) Excess stock

     -        -        -   

(e) Aggregate total

   $ 18      $ 18      $ -   

(f) Actual or estimated borrowing capacity as determined by the insurer

   $ 400       
    December 31, 2014  
   

(1)

(Col 2 +3)

Total

    

(2)

General
Account

    

(3)

Separate
Account

  
 

 

 

  
    (in millions)  

(a) Membership stock — Class A

   $ -      $ -      $ -   

(b) Membership stock — Class B

     20        20        -   

(c) Activity stock

     -        -        -   

(d) Excess stock

     -        -        -   

(e) Aggregate total

   $ 20      $ 20      $ -   

(f) Actual or estimated borrowing capacity as determined by the insurer

   $ 446       

FHLBI membership stock of $18 million and $20 million was classified as not eligible for redemption for the years ended December 31, 2015 and 2014, respectively.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

16. Lines of Credit, Consumer Notes and Affiliated Debt - (continued)

 

The following table indicates the collateral pledged to the FHLBI at the end of the year:

 

    December 31, 2015  
    Fair Value     Carrying
Value		     Aggregate Total
Borrowing		  
 

 

 

  
    (in millions)  

(a) General account

   $ -      $ -      $ -   

(b) Separate account

     -        -        -   
 

 

 

    

 

 

    

 

 

  

(c) Total collateral pledged

   $ -      $ -      $ -   
 

 

 

    

 

 

    

 

 

  
    December 31, 2014  
    Fair Value     Carrying
Value		     Aggregate Total
Borrowing		  
 

 

 

  
    (in millions)  

(a) General account

   $ -      $ -      $ -   

(b) Separate account

     -        -        -   
 

 

 

    

 

 

    

 

 

  

(c) Total collateral pledged

   $ -      $ -      $ -   
 

 

 

    

 

 

    

 

 

  

The following table indicates the maximum collateral pledged to the FHLBI during the year:

 

     December 31, 2015  
     Fair Value      Carrying
Value		      Amount
Borrowed at Time
of Maximum
Collateral		  
  

 

 

  
     (in millions)  

(a) General account

    $ 794       $ 738       $ 400   

(b) Separate account

      -         -         -   
  

 

 

     

 

 

     

 

 

  

(c) Total maximum collateral pledged

    $ 794       $ 738       $ 400   
  

 

 

     

 

 

     

 

 

  
     December 31, 2014  
     Fair Value      Carrying
Value		     

Amount

Borrowed at Time
of Maximum
Collateral

  
  

 

 

  
     (in millions)  

(a) General account

    $ 13       $ 12       $ 10   

(b) Separate account

      -         -         -   
  

 

 

     

 

 

     

 

 

  

(c) Total maximum collateral pledged

    $ 13       $ 12       $ 10   
  

 

 

     

 

 

     

 

 

  

 

F-74

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

16. Lines of Credit, Consumer Notes and Affiliated Debt - (continued)

 

The following table represents the aggregate amount of borrowing from FHLBI:

 

     December 31, 2015  
    

(1)

(Col 2 +3)

Total

     

(2)

General
Account

     

(3)

Separate
Account

     

(4)

Funding
Agreements
Reserves
Established

  
  

 

 

  
     (in millions)  

(a) Debt

    $ -       $ -       $ -         -   

(b) Funding agreements

      -         -         -      

(c) Other

      -         -         -         -   

(d) Aggregate total

    $ -       $ -       $ -       $ -   
     December 31, 2014  
    

(1)

(Col 2 +3)

Total

     

(2)

General
Account

     

(3)

Separate
Account

     

(4)

Funding
Agreements
Reserves
Established

  
  

 

 

  
     (in millions)  

(a) Debt

    $ -       $ -       $ -         -   

(b) Funding agreements

      -         -         -      

(c) Other

      -         -         -         -   

(d) Aggregate total

    $ -       $ -       $ -       $ -   

The maximum amount of aggregate borrowings from FHLBI during 2015 was $400 million. The Company is not subject to any prepayment obligations under current borrowing agreements.

17. Closed Blocks

The Company operates two separate closed blocks for the benefit of certain classes of individual or joint traditional participating whole life insurance policies. The JHUSA closed block was established upon the demutualization of MLI for those designated participating policies that were in-force on September 23, 1999. The JHLICO closed block was established upon the demutualization of JHLICO for those designated participating policies that were in-force on February 1, 2000. As a result of the merger in 2009, the property and obligations of the JHLICO closed block became the property and obligations of JHUSA, but the Company operates these two closed blocks separately.

Assets were allocated to the closed blocks in an amount that, together with anticipated revenues from policies included in the closed blocks, was reasonably expected to be sufficient to support such business, including provision for payment of benefits, direct asset acquisition and disposition costs, taxes, and for continuation of dividend scales, assuming experience underlying such dividend scales continues.

Assets allocated to the closed blocks inure solely to the benefit of policyholders included in the closed blocks and will not revert to the benefit of the shareholders of the Company. In addition, if the assets allocated to the closed blocks and the revenues from the closed blocks’ business prove to be insufficient to pay the benefits guaranteed in the closed blocks, the Company will be required to make payments from its general funds in an amount equal to the shortfall.

If, over time, the aggregate performance of the assets and policies of a closed block is better than was assumed in funding that closed block, dividends to policyholders for that closed block will be increased. If, over time, the aggregate performance of the assets and policies of a closed block is less favorable than was assumed in funding that closed block, dividends to policyholders for that closed block will be reduced.

 

F-75

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

17. Closed Blocks - (continued)

 

No reallocation, transfer, borrowing, or lending of assets can be made between the closed blocks and other portions of the Company’s general account, any of its separate accounts, or any affiliate of the Company without prior notification to or approval of the Insurance Department.

The excess of the closed blocks’ liabilities over the closed blocks’ assets represents the expected future post-tax contribution from that closed block which may be recognized in income over the period the policies and contracts in that closed block remain in force.

As previously discussed in the Reinsurance Note, effective July 1, 2015, the Company entered into a coinsurance reinsurance agreement with NYL to cede 100% QS of the Company’s in-force participating life insurance JHLICO closed block policies.

The following table sets forth certain summarized financial information relating to the JHUSA and JHLICO closed block.

 

     JHUSA      JHLICO  
     2015      2014      2014  
  

 

 

     

 

 

  
     (in millions)  

Assets:

         

Bonds

        $ 2,802       $ 3,153           $ 6,248   

Stocks:

         

Preferred stocks

      -         -         4   

Common stocks

      -         1         11   

Mortgage loans on real estate

      350         402         1,633   

Real estate

      1,012         842         12   

Cash, cash equivalents and short-term investments

      6         3         4   

Policy loans

      1,563         1,551         1,354   

Other invested assets

      18         113         127   
  

 

 

     

 

 

  

Total cash and invested assets

      5,751         6,065         9,393   

Investment income due and accrued

      101         105         126   

Premiums due and deferred

      10         12         68   

Net deferred tax asset

      112         112         157   

Other closed block assets

      77         63         91   
  

 

 

     

 

 

  

Total closed block assets

        $ 6,051       $ 6,357           $ 9,835   
  

 

 

     

 

 

  

Obligations:

         

Policy reserves

      5,756         5,871         9,710   

Policyholders’ and beneficiaries’ funds

      64         67         1,360   

Dividends payable to policyholders

      329         314         208   

Policy benefits in process of payment

      115         52         155   

Other policy obligations

      2         2         6   

Other closed block obligations

      474         720         198   
  

 

 

     

 

 

  

Total closed block obligations

        $   6,740       $   7,026           $   11,637   
  

 

 

     

 

 

  

18. Subsequent Events

The Company evaluated the recognition and disclosure of subsequent events for its December 31, 2015 financial statements through April 5, 2016, the date the financial statements were issued.

 

F-76

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AUDITED FINANCIAL STATEMENTS

John Hancock Life Insurance Company (U.S.A.) Separate Account N

December 31, 2015

Table of Contents

John Hancock Life Insurance Company (U.S.A.) Separate Account N

Audited Financial Statements

December  31, 2015

Contents

 

Report of Independent Registered Public Accounting Firm

      3   

Statements of Assets and Liabilities

      5   

Statements of Operations and Changes in Contract Owners’ Equity

      23   

Notes to Financial Statements

      62   

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors of John Hancock Life Insurance Company (U.S.A.) and Contract Owners of

John Hancock Life Insurance Company (U.S.A.) Separate Account N

We have audited the accompanying statements of assets and liabilities of John Hancock Life Insurance Company (U.S.A.) Separate Account N (the Account) comprised of the following sub-accounts,

 

500 Index Fund B Series NAV

   

International Core Trust Series NAV

Active Bond Trust Series I

   

International Equity Index Trust B Series I

Active Bond Trust Series NAV

   

International Equity Index Trust B Series NAV

All Cap Core Trust Series I

   

International Growth Stock Trust Series I

All Cap Core Trust Series NAV

   

International Growth Stock Trust Series NAV

Alpha Opportunities Trust Series I

   

International Small Company Trust Series I

Alpha Opportunities Trust Series NAV

   

International Small Company Trust Series NAV

American Asset Allocation Trust Series I

   

International Value Trust Series I

American Global Growth Trust Series I

   

International Value Trust Series NAV

American Growth Trust Series I

   

Investment Quality Bond Trust Series I

American Growth-Income Trust Series I

   

Investment Quality Bond Trust Series NAV

American International Trust Series I

   

Lifestyle Aggressive MVP Series I

American New World Trust Series I

   

Lifestyle Aggressive MVP Series NAV

Blue Chip Growth Trust Series I

   

Lifestyle Balanced MVP Series I

Blue Chip Growth Trust Series NAV

   

Lifestyle Balanced MVP Series NAV

Bond Trust Series I

   

Lifestyle Conservative MVP Series I

Bond Trust Series NAV

   

Lifestyle Conservative MVP Series NAV

Capital Appreciation Trust Series I

   

Lifestyle Growth MVP Series I

Capital Appreciation Trust Series NAV

   

Lifestyle Growth MVP Series NAV

Capital Appreciation Value Trust Series I

   

Lifestyle Moderate MVP Series I

Capital Appreciation Value Trust Series NAV

   

Lifestyle Moderate MVP Series NAV

Core Bond Trust Series I

   

M Capital Appreciation

Core Bond Trust Series NAV

   

M Large Cap Growth

Core Strategy Trust Series I

   

Mid Cap Index Trust Series I

Core Strategy Trust Series NAV

   

Mid Cap Index Trust Series NAV

Emerging Markets Value Trust Series I

   

Mid Cap Stock Trust Series I

Emerging Markets Value Trust Series NAV

   

Mid Cap Stock Trust Series NAV

Equity-Income Trust Series I

   

Mid Value Trust Series I

Equity-Income Trust Series NAV

   

Mid Value Trust Series NAV

Financial Industries Trust Series I

   

Money Market Trust B Series NAV

Financial Industries Trust Series NAV

   

Money Market Trust Series I

Franklin Templeton Founding Allocation Trust Series I

   

PIMCO All Asset Real Estate Securities Trust Series I

Franklin Templeton Founding Allocation Trust Series NAV

   

Real Estate Securities Trust Series NAV Real Return Bond Trust Series I

Fundamental All Cap Core Trust Series I

   

Real Return Bond Trust Series NAV

Fundamental All Cap Core Trust Series NAV

   

Science & Technology Trust Series I

Fundamental Large Cap Value Trust Series I

   

Science & Technology Trust Series NAV

Fundamental Large Cap Value Trust Series NAV

   

Short Term Government Income Trust Series I

Global Bond Trust Series I

   

Short Term Government Income Trust Series NAV

Global Bond Trust Series NAV

   

Small Cap Growth Trust Series I

Global Trust Series I

   

Small Cap Growth Trust Series NAV

Global Trust Series NAV

   

Small Cap Index Trust Series I

Health Sciences Trust Series I

   

Small Cap Index Trust Series NAV

Health Sciences Trust Series NAV

   

Small Cap Opportunities Trust Series I

High Yield Trust Series I

   

Small Cap Opportunities Trust Series NAV

High Yield Trust Series NAV

   

Small Cap Value Trust Series I

International Core Trust Series I

   

Small Cap Value Trust Series NAV

 

3

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

Small Company Value Trust Series I

  

U.S. Equity Trust Series NAV

Small Company Value Trust Series NAV

  

Ultra Short Term Bond Trust Series I

Strategic Income Opportunities Trust Series I

  

Ultra Short Term Bond Trust Series NAV

Strategic Income Opportunities Trust Series NAV

  

Utilities Trust Series I

Total Bond Market Trust B Series NAV

  

Utilities Trust Series NAV

Total Stock Market Index Trust Series I

  

Value Trust Series I

Total Stock Market Index Trust Series NAV

  

Value Trust Series NAV

U.S. Equity Trust Series I

  

as of December 31, 2015, and the related statements of operations and changes in contract owners’ equity for the above mentioned sub-accounts and for the Fundamental Value Trust Series I, Fundamental Value Trust Series NAV, Natural Resources Trust Series I. Natural Resources Trust Series NAV, Total Return Trust Series I, and Total Return Trust Series NAV (the “closed sub-accounts”) for each of the periods indicated therein. These financial statements are the responsibility of the Account’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Account’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Account’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the fund companies, or their transfer agents, as applicable. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the above mentioned sub-accounts constituting John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2015, the results of their and the closed sub-accounts’ operations, and changes in contract owners’ equity for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Boston, Massachusetts

April 05, 2016

 

4

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    500 Index Fund B
Series NAV		     Active Bond Trust
Series I		     Active Bond Trust
Series NAV		     All Cap Core Trust
Series I		     All Cap Core Trust
Series NAV		     Alpha
Opportunities
Trust Series I		  

Total Assets

            

Investments at fair value

   $ 71,733,584      $ 622,594      $ 339,738      $ 449,524      $ 1,593,831      $ 41,520   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     1,980,760        30,430        4,775        15,284        76,770        1,882   

Unit value

   $ 36.22      $ 20.46      $ 71.15      $ 29.41      $ 20.76      $ 22.06   

Shares

     2,839,809        66,234        36,142        16,193        57,394        3,795   

Cost

   $ 70,170,461      $ 659,530      $ 361,728      $ 290,983      $ 1,230,207      $ 54,044   

 

See accompanying notes.

 

5

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Alpha
Opportunities
Trust Series NAV		     American Asset
Allocation Trust
Series I		     American Global
Growth Trust
Series I		     American Growth
Trust Series I		     American Growth-
Income Trust
Series I		     American
International
Trust Series I		  

Total Assets

            

Investments at fair value

   $ 331,386      $ 8,795,382      $ 427,334      $ 11,721,383      $ 11,818,120      $ 15,950,954   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     13,602        597,941        27,410        487,981        468,780        848,925   

Unit value

   $ 24.36      $ 14.71      $ 15.59      $ 24.02      $ 25.21      $ 18.79   

Shares

     30,264        618,957        27,785        485,357        558,512        919,363   

Cost

   $ 377,022      $ 6,880,581      $ 439,254      $ 10,454,177      $ 9,631,141      $ 16,523,252   

 

See accompanying notes.

 

6

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    American New
World Trust
Series I		     Blue Chip
Growth Trust
Series I		     Blue Chip
Growth Trust
Series NAV		     Bond Trust
Series I		     Bond Trust
Series
NAV		     Capital
Appreciation
Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 1,994,863      $ 8,641,024      $ 46,931,439      $ 5,809,744      $ 698,702      $ 8,541,686   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     130,392        174,050        345,379        527,987        62,379        326,790   

Unit value

   $ 15.30      $ 49.65      $ 135.88      $ 11.00      $ 11.20      $ 26.14   

Shares

     180,531        266,287        1,446,269        436,823        52,574        604,935   

Cost

   $ 2,379,581      $ 8,002,035      $ 45,143,560      $ 6,026,677      $ 730,141      $ 8,653,914   

 

See accompanying notes.

 

7

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Capital
Appreciation
Trust Series
NAV		     Capital
Appreciation
Value Trust
Series I		     Capital
Appreciation
Value Trust
Series NAV		     Core Bond Trust
Series I		     Core Bond Trust
Series NAV		     Core Strategy Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 1,756,484      $ 320,875      $ 263,189      $ 10,922,386      $ 23,019,015      $ 103,653   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     64,777        18,307        14,257        556,857        1,410,618        7,429   

Unit value

   $ 27.12      $ 17.53      $ 18.46      $ 19.61      $ 16.32      $ 13.95   

Shares

     124,309        27,975        22,986        839,538        1,776,158        7,356   

Cost

   $ 1,798,713      $ 357,246      $ 285,628      $ 11,226,023      $ 23,681,874      $ 105,461   

 

See accompanying notes.

 

8

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Core Strategy
Trust
Series NAV		     Emerging Markets
Value Trust
Series I		     Emerging Markets
Value Trust
Series NAV		     Equity-Income
Trust
Series I		     Equity-Income
Trust
Series NAV		     Financial Industries
Trust Series I		  

Total Assets

            

Investments at fair value

   $ 2,739,770      $ 68,307      $ 833,124      $ 9,307,112      $ 35,253,171      $ 681,615   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     186,052        6,322        90,875        239,984        823,841        32,096   

Unit value

   $ 14.73      $ 10.80      $ 9.17      $ 38.78      $ 42.79      $ 21.24   

Shares

     194,310        9,703        118,510        589,431        2,239,719        60,967   

Cost

   $ 2,870,101      $ 94,979      $ 1,118,536      $ 10,555,310      $ 41,913,138      $ 841,547   

 

See accompanying notes.

 

9

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Financial
Industries
Trust
Series NAV		     Franklin
Templeton
Founding
Allocation Trust
Series I		     Franklin
Templeton
Founding
Allocation Trust
Series NAV		     Fundamental All
Cap Core Trust
Series I		     Fundamental All
Cap Core Trust
Series NAV		     Fundamental Large
Cap Value Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 378,861      $ 9,443      $ 138,132      $ 437,551      $ 1,309,358      $ 5,780,659   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     13,663        726        10,074        12,067        58,079        216,982   

Unit value

   $ 27.73      $ 13.01      $ 13.71      $ 36.26      $ 22.54      $ 26.64   

Shares

     33,979        793        11,608        19,621        58,453        337,065   

Cost

   $ 479,503      $ 10,464      $ 149,224      $ 403,220      $ 1,107,876      $ 5,808,379   

 

See accompanying notes.

 

10

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Fundamental Large
Cap Value Trust
Series NAV		     Global Bond Trust
Series I		     Global Bond Trust
Series NAV		     Global Trust
Series I		     Global Trust
Series NAV		     Health Sciences
Trust Series I		  

Total Assets

            

Investments at fair value

   $ 3,773,445      $ 1,122,595      $ 5,977,145      $ 2,224,225      $ 1,988,604      $ 8,069,138   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     191,036        41,347        201,082        83,239        123,010        110,117   

Unit value

   $ 19.75      $ 27.15      $ 29.72      $ 26.72      $ 16.17      $ 73.28   

Shares

     220,026        95,135        508,693        123,912        110,848        252,793   

Cost

   $ 3,828,764      $ 1,155,334      $ 6,361,149      $ 2,402,621      $ 2,209,136      $ 8,284,287   

 

See accompanying notes.

 

11

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Health Sciences
Trust
Series NAV		     High Yield Trust
Series I		     High Yield Trust
Series NAV		     International
Core Trust
Series I		     International
Core Trust
Series NAV		     International Equity
Index Trust B
Series I		  

Total Assets

            

Investments at fair value

   $ 4,921,314      $ 2,758,324      $ 2,263,550      $ 2,389,485      $ 436,958      $ 4,525,255   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     81,107        102,486        116,916        129,399        28,729        419,582   

Unit value

   $ 60.68      $ 26.91      $ 19.36      $ 18.47      $ 15.21      $ 10.79   

Shares

     152,836        572,266        476,537        247,872        45,469        311,228   

Cost

   $ 5,178,286      $ 3,415,699      $ 2,752,705      $ 2,662,879      $ 512,667      $ 4,976,251   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

 

    International
Equity
Index Trust B
Series NAV		     International
Growth Stock
Trust
Series I		     International
Growth Stock
Trust
Series NAV		     International
Small Company
Trust
Series I		     International
Small Company
Trust
Series NAV		     International
Value Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 11,818,831      $ 1,579,230      $ 8,456,858      $ 587,121      $ 1,004,311      $ 3,623,211   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     276,267        131,425        695,770        40,372        66,351        174,351   

Unit value

   $ 42.78      $ 12.02      $ 12.15      $ 14.54      $ 15.14      $ 20.78   

Shares

     812,849        99,260        531,544        48,482        82,932        319,789   

Cost

   $ 13,109,287      $ 1,694,934      $ 8,627,861      $ 590,955      $ 949,288      $ 4,000,379   

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    International
Value Trust
Series NAV		     Investment
Quality
Bond Trust
Series I		     Investment
Quality
Bond Trust
Series NAV		     Lifestyle
Aggressive
MVP
Series I		     Lifestyle
Aggressive
MVP
Series NAV		     Lifestyle
Balanced
MVP
Series I		  

Total Assets

            

Investments at fair value

   $ 4,105,365      $ 4,774,684      $ 690,719      $ 1,050,019      $ 6,434,318      $ 4,491,307   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     288,124        156,440        43,523        39,961        365,714        146,545   

Unit value

   $ 14.25      $ 30.52      $ 15.87      $ 26.28      $ 17.59      $ 30.65   

Shares

     364,921        440,469        63,896        105,955        648,621        366,937   

Cost

   $ 4,781,469      $ 5,043,553      $ 740,211      $ 1,089,120      $ 7,040,435      $ 4,790,804   

 

See accompanying notes.

 

14

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Lifestyle
Balanced MVP
Series NAV		     Lifestyle
Conservative MVP
Series I		     Lifestyle
Conservative MVP
Series NAV		     Lifestyle
Growth MVP
Series I		     Lifestyle
Growth MVP
Series NAV		     Lifestyle
Moderate MVP
Series I		  

Total Assets

            

Investments at fair value

   $ 15,116,582      $ 1,841,643      $ 4,546,306      $ 3,612,225      $ 24,773,270      $ 1,807,819   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     879,721        58,246        276,655        126,742        1,440,273        56,530   

Unit value

   $ 17.18      $ 31.62      $ 16.43      $ 28.50      $ 17.20      $ 31.98   

Shares

     1,233,000        165,318        407,010        274,069        1,878,186        154,251   

Cost

   $ 16,723,514      $ 2,024,014      $ 5,073,085      $ 3,615,190      $ 25,544,617      $ 2,050,826   

 

See accompanying notes.

 

15

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Lifestyle
Moderate MVP
Series NAV		     M Capital
Appreciation (a)		     Mid Cap Index
Trust Series I		     Mid Cap Index
Trust Series NAV		     Mid Cap Stock
Trust Series I		     Mid Cap Stock
Trust Series NAV		  

Total Assets

            

Investments at fair value

   $ 9,046,231      $ 328,631      $ 6,320,624      $ 23,160,316      $ 3,499,832      $ 6,484,315   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     528,138        4,135        165,157        861,157        107,107        85,358   

Unit value

   $ 17.13      $ 79.48      $ 38.27      $ 26.89      $ 32.68      $ 75.97   

Shares

     771,205        13,067        321,660        1,178,642        230,707        423,258   

Cost

   $ 10,130,934      $ 375,370      $ 6,927,386      $ 26,377,819      $ 3,804,434      $ 7,665,309   

 

(a)

Sub-account that invests in non-affiliated Trust.

 

See accompanying notes.

 

16

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Mid Value
Trust
Series I		     Mid Value
Trust Series
NAV		     Money Market
Trust B
Series NAV		     Money Market
Trust
Series I		     PIMCO
All Asset (a)		     Real Estate
Securities Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 3,980,497      $ 8,364,434      $ 53,619,767      $ 26,531,963      $ 3,158,323      $ 10,349,246   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     162,397        216,961        3,086,046        1,286,207        208,113        63,711   

Unit value

   $ 24.51      $ 38.55      $ 17.37      $ 20.63      $ 15.18      $ 162.44   

Shares

     371,315        783,921        53,619,767        26,531,963        341,440        572,731   

Cost

   $ 4,964,992      $ 10,337,876      $ 53,619,767      $ 26,531,963      $ 3,788,978      $ 7,349,993   

 

(a)

Sub-account that invests in non-affiliated Trust.

 

See accompanying notes.

 

17

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Real Estate
Securities Trust
Series NAV		     Real Return
Bond Trust
Series I		     Real Return
Bond Trust
Series NAV		     Science &
Technology Trust
Series I		     Science &
Technology Trust
Series NAV		     Short Term
Government Income
Trust Series I		  

Total Assets

            

Investments at fair value

   $ 12,730,922      $ 1,455,643      $ 9,714,885      $ 8,846,389      $ 2,339,109      $ 1,561,840   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     89,152        73,273        670,049        271,129        81,554        150,590   

Unit value

   $ 142.80      $ 19.87      $ 14.50      $ 32.63      $ 28.68      $ 10.37   

Shares

     708,454        133,423        903,710        372,010        97,626        127,497   

Cost

   $ 11,525,987      $ 1,628,652      $ 10,742,360      $ 9,015,306      $ 2,511,572      $ 1,602,455   

 

See accompanying notes.

 

18

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Short Term
Government
Income Trust
Series NAV		     Small Cap
Growth Trust
Series I		     Small Cap
Growth Trust
Series NAV		     Small Cap
Index Trust
Series I		     Small Cap
Index Trust
Series NAV		     Small Cap
Opportunities Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 1,410,456      $ 1,117,900      $ 8,184,106      $ 5,827,419      $ 5,374,848      $ 13,648,912   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     131,528        46,012        273,720        200,328        217,000        393,599   

Unit value

   $ 10.72      $ 24.30      $ 29.90      $ 29.09      $ 24.77      $ 34.68   

Shares

     115,139        129,837        941,784        438,812        404,428        474,580   

Cost

   $ 1,440,725      $ 1,407,377      $ 9,924,622      $ 6,440,182      $ 6,099,453      $ 14,238,410   

 

See accompanying notes.

 

19

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Small Cap
Opportunities
Trust
Series NAV		     Small Cap
Value Trust
Series I		     Small Cap
Value Trust
Series NAV		     Small Company
Value Trust
Series I		     Small Company
Value Trust
Series NAV		     Strategic Income
Opportunities Trust
Series I		  

Total Assets

            

Investments at fair value

   $ 286,152      $ 790,432      $ 7,881,600      $ 3,053,370      $ 454,120      $ 2,624,243   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     15,521        33,652        115,421        101,321        21,064        104,935   

Unit value

   $ 18.44      $ 23.49      $ 68.29      $ 30.14      $ 21.56      $ 25.01   

Shares

     9,995        38,938        389,215        155,151        23,122        200,784   

Cost

   $ 312,888      $ 914,462      $ 8,948,990      $ 3,462,454      $ 539,245      $ 2,710,527   

 

See accompanying notes.

 

20

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Strategic Income
Opportunities
Trust
Series NAV		     Total Bond
Market
Trust B
Series NAV		     Total Stock Market
Index Trust
Series I		     Total Stock Market
Index Trust
Series NAV		     U.S. Equity Trust
Series I		     U.S. Equity Trust
Series NAV		  

Total Assets

            

Investments at fair value

   $ 3,462,297      $ 16,287,586      $ 6,176,641      $ 1,706,335      $ 1,555,543      $ 2,181,051   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     178,541        687,371        274,469        21,518        107,396        148,019   

Unit value

   $ 19.39      $ 23.70      $ 22.50      $ 79.30      $ 14.48      $ 14.73   

Shares

     265,717        1,612,632        350,746        96,896        81,399        114,131   

Cost

   $ 3,560,716      $ 16,785,263      $ 6,099,349      $ 1,634,313      $ 1,344,923      $ 1,936,323   

 

See accompanying notes.

 

21

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2015

 

    Ultra Short Term
Bond Trust Series I		     Ultra Short Term
Bond Trust Series
NAV		     Utilities Trust
Series I		     Utilities Trust
Series NAV		     Value Trust
Series I		     Value
Trust Series
NAV		  

Total Assets

            

Investments at fair value

   $ 8,858      $ 1,252,422      $ 1,199,810      $ 1,544,474      $ 2,209,157      $ 1,416,747   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     910        124,349        40,494        60,659        46,950        57,233   

Unit value

   $ 9.73      $ 10.07      $ 29.63      $ 25.46      $ 47.05      $ 24.75   

Shares

     761        107,596        99,569        128,385        109,581        70,380   

Cost

   $ 9,115      $ 1,267,665      $ 1,565,741      $ 1,905,468      $ 2,346,642      $ 1,625,858   

 

See accompanying notes.

 

22

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     500 Index Fund B Series NAV     Active Bond Trust Series I     Active Bond Trust Series NAV  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 1,282,150      $ 1,085,153      $ 33,359      $ 24,116      $ 17,516      $ 9,373   

Expenses:

             

Mortality and expense risk and administrative charges

      (96,913 )      (97,809 )      (4,009 )      (3,911 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,185,237        987,344        29,350        20,205        17,516        9,373   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      721,119        948,791        (2 )      —          —          —     

Net realized gain (loss)

      9,900,551        5,420,301        (2,560 )      900        (2,322 )      (2,607 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      10,621,670        6,369,092        (2,562 )      900        (2,322 )      (2,607 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (10,584,673 )      568,294        (30,290 )      16,625        (16,178 )      6,192   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      1,222,234        7,924,730        (3,502 )      37,730        (984 )      12,958   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      2,659,989        2,359,292        51,531        42,940        76,662        34,311   

Transfers between sub-accounts and the company

      6,729,049        7,737,412        78,514        131,353        22,369        100,672   

Transfers on general account policy loans

      (2,479,116 )      (424,345 )      (588 )      (316 )      —          —     

Withdrawals

      (4,939,493 )      (1,536,440 )      (23,547 )      (2,508 )      (7,962 )      (62,472 ) 

Annual contract fee

      (1,624,817 )      (1,294,472 )      (132,224 )      (113,061 )      (8,690 )      (6,711 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      345,612        6,841,447        (26,314 )      58,408        82,379        65,800   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      1,567,846        14,766,177        (29,816 )      96,138        81,395        78,758   

Contract owners’ equity at beginning of period

      70,165,738        55,399,561        652,410        556,272        258,343        179,585   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 71,733,584      $ 70,165,738      $ 622,594      $ 652,410      $ 339,738      $ 258,343   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      1,978,310        1,786,837        31,753        28,744        3,635        2,703   

Units issued

      1,166,603        739,484        22,394        8,679        2,854        2,388   

Units redeemed

      (1,164,153 )      (548,011 )      (23,717 )      (5,670 )      (1,714 )      (1,456 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      1,980,760        1,978,310        30,430        31,753        4,775        3,635   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

23

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     All Cap Core Trust Series I     All Cap Core Trust Series NAV     Alpha Opportunities Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 4,517      $ 4,640      $ 16,172      $ 12,790      $ 278      $ 234   

Expenses:

             

Mortality and expense risk and administrative charges

      (3,134 )      (2,974 )      —          —          (279 )      (275 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,383        1,666        16,172        12,790        (1 )      (41 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          (1 )      —          —          7,745        9,450   

Net realized gain (loss)

      22,624        14,306        44,116        45,318        (626 )      103   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      22,624        14,305        44,116        45,318        7,119        9,553   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (13,699 )      19,538        (19,980 )      61,679        (7,350 )      (6,499 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      10,308        35,509        40,308        119,787        (232 )      3,013   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      14,837        14,043        59,457        302,703        —          54   

Transfers between sub-accounts and the company

      6,101        52,786        38,457        49,175        —          (56 ) 

Transfers on general account policy loans

      2,367        (96 )      21,251        —          —          —     

Withdrawals

      (28,711 )      (42,584 )      (18,102 )      (21,280 )      (2 )      (15 ) 

Annual contract fee

      (40,418 )      (34,374 )      (32,635 )      (29,289 )      (2,306 )      (1,980 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (45,824 )      (10,225 )      68,428        301,309        (2,308 )      (1,997 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (35,516 )      25,284        108,736        421,096        (2,540 )      1,016   

Contract owners’ equity at beginning of period

      485,040        459,756        1,485,095        1,063,999        44,060        43,044   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 449,524      $ 485,040      $ 1,593,831      $ 1,485,095      $ 41,520      $ 44,060   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      16,812        17,368        73,424        57,702        1,984        2,080   

Units issued

      760        3,764        7,759        20,566        —          48   

Units redeemed

      (2,288 )      (4,320 )      (4,413 )      (4,844 )      (102 )      (144 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      15,284        16,812        76,770        73,424        1,882        1,984   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

24

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Alpha Opportunities Trust
Series NAV		     American Asset Allocation
Trust Series I		     American Global Growth
Trust Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 3,612      $ 2,596      $ 186,426      $ 140,129      $ 6,641      $ 2,383   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (53,590 )      (59,397 )      (511 )      (671 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      3,612        2,596        132,836        80,732        6,130        1,712   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      147,073        95,285        752,089        —          32,308        —     

Net realized gain (loss)

      (218,744 )      2,429        565,487        700,722        (60,656 )      4,641   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (71,671 )      97,714        1,317,576        700,722        (28,348 )      4,641   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      31,450        (81,445 )      (1,406,902 )      (344,107 )      (48,810 )      (1,449 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (36,609 )      18,865        43,510        437,347        (71,028 )      4,904   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      409,947        16,627        583,458        591,105        68,308        35,102   

Transfers between sub-accounts and the company

      (454,925 )      399,783        336,167        (33,209 )      184,961        66,715   

Transfers on general account policy loans

      —          —          (8,903 )      30,278        (53,827 )      (292 ) 

Withdrawals

      (28 )      (9,409 )      (633,132 )      (559,024 )      26,659        (6,052 ) 

Annual contract fee

      (38,104 )      (19,322 )      (856,016 )      (905,124 )      (22,224 )      (9,555 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (83,110 )      387,679        (578,426 )      (875,974 )      203,877        85,918   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (119,719 )      406,544        (534,916 )      (438,627 )      132,849        90,822   

Contract owners’ equity at beginning of period

      451,105        44,561        9,330,298        9,768,925        294,485        203,663   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 331,386      $ 451,105      $ 8,795,382      $ 9,330,298      $ 427,334      $ 294,485   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      18,510        1,977        638,145        698,325        20,260        14,273   

Units issued

      16,668        17,776        58,245        99,913        376,969        7,623   

Units redeemed

      (21,576 )      (1,243 )      (98,449 )      (160,093 )      (369,819 )      (1,636 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      13,602        18,510        597,941        638,145        27,410        20,260   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

25

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     American Growth Trust
Series I		     American Growth-Income
Trust Series I		     American International
Trust Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 30,984      $ 116,011      $ 163,519      $ 110,410      $ 206,997      $ 204,669   

Expenses:

             

Mortality and expense risk and administrative charges

      (16,109 )      (17,013 )      (52,195 )      (52,611 )      (15,122 )      (17,672 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      14,875        98,998        111,324        57,799        191,875        186,997   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      648,887        —          1,349,660        —          —          2   

Net realized gain (loss)

      1,992,587        818,731        701,135        812,104        625,249        1,210,896   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      2,641,474        818,731        2,050,795        812,104        625,249        1,210,898   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (1,643,801 )      183,599        (2,067,970 )      222,100        (1,637,123 )      (1,989,053 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      1,012,548        1,101,328        94,149        1,092,003        (819,999 )      (591,158 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      384,994        343,412        406,997        543,305        275,912        493,412   

Transfers between sub-accounts and the company

      (2,397,986 )      (44,995 )      51,916        529,116        (4,002 )      394,733   

Transfers on general account policy loans

      (122,743 )      (9,597 )      (131,823 )      52,478        (35,710 )      (5,611 ) 

Withdrawals

      (764,823 )      (508,743 )      (511,681 )      (536,252 )      (1,029,385 )      (345,478 ) 

Annual contract fee

      (305,731 )      (286,731 )      (712,875 )      (689,851 )      (355,838 )      (356,866 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (3,206,289 )      (506,654 )      (897,466 )      (101,204 )      (1,149,023 )      180,190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (2,193,741 )      594,674        (803,317 )      990,799        (1,969,022 )      (410,968 ) 

Contract owners’ equity at beginning of period

      13,915,124        13,320,450        12,621,437        11,630,638        17,919,976        18,330,944   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 11,721,383      $ 13,915,124      $ 11,818,120      $ 12,621,437      $ 15,950,954      $ 17,919,976   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      605,899        626,036        501,916        507,491        885,723        878,450   

Units issued

      369,610        124,403        31,131        83,731        243,151        290,138   

Units redeemed

      (487,528 )      (144,540 )      (64,267 )      (89,306 )      (279,949 )      (282,865 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      487,981        605,899        468,780        501,916        848,925        885,723   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

26

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     American New World
Trust Series I		     Blue Chip Growth
Trust Series I		     Blue Chip Growth Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 32,807      $ 17,702      $ —        $ —        $ —        $ —     

Expenses:

             

Mortality and expense risk and administrative charges

      (3,558 )      (3,454 )      (36,229 )      (31,145 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      29,249        14,248        (36,229 )      (31,145 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      222,931        44,793        1,568,001        264,854        7,776,668        1,293,503   

Net realized gain (loss)

      (114,342 )      5,038        551,474        867,421        3,371,714        1,472,842   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      108,589        49,831        2,119,475        1,132,275        11,148,382        2,766,345   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (237,419 )      (197,146 )      (1,308,652 )      (573,146 )      (6,541,551 )      75,245   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (99,581 )      (133,067 )      774,594        527,984        4,606,831        2,841,590   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      53,398        124,672        78,332        70,879        2,062,191        2,437,806   

Transfers between sub-accounts and the company

      69,200        1,505,817        1,328,065        (67,179 )      3,631,363        4,718,348   

Transfers on general account policy loans

      (49 )      (3,735 )      139,591        118,866        (32,498 )      (173,654 ) 

Withdrawals

      (22,895 )      (17,497 )      (223,931 )      (206,449 )      (695,313 )      (303,633 ) 

Annual contract fee

      (29,827 )      (21,568 )      (355,760 )      (326,511 )      (599,469 )      (470,887 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      69,827        1,587,689        966,297        (410,394 )      4,366,274        6,207,980   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (29,754 )      1,454,622        1,740,891        117,590        8,973,105        9,049,570   

Contract owners’ equity at beginning of period

      2,024,617        569,995        6,900,133        6,782,543        37,958,334        28,908,764   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,994,863      $ 2,024,617      $ 8,641,024      $ 6,900,133      $ 46,931,439      $ 37,958,334   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      127,899        32,698        154,074        165,084        310,431        257,961   

Units issued

      109,771        98,038        46,341        36,543        99,708        84,573   

Units redeemed

      (107,278 )      (2,837 )      (26,365 )      (47,553 )      (64,760 )      (32,103 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      130,392        127,899        174,050        154,074        345,379        310,431   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

27

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Bond Trust Series I     Bond Trust Series NAV     Capital Appreciation Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 169,912      $ 19,691      $ 21,449      $ 16,541      $ —        $ 3,536   

Expenses:

             

Mortality and expense risk and administrative charges

      (17,645 )      (2,021 )      —          —          (29,859 )      (30,176 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      152,267        17,670        21,449        16,541        (29,859 )      (26,640 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          —          —          1,360,847        813,711   

Net realized gain (loss)

      (8,837 )      (156 )      (1,496 )      (635 )      131,917        843,332   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (8,837 )      (156 )      (1,496 )      (635 )      1,492,764        1,657,043   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (209,961 )      12,879        (18,215 )      17,067        (649,368 )      (984,607 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (66,531 )      30,393        1,738        32,973        813,537        645,796   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      2,557        558        31,189        95,223        28,572        29,684   

Transfers between sub-accounts and the company

      5,184,578        243,535        52,400        10,274        136,185        (854,757 ) 

Transfers on general account policy loans

      —          —          (25,989 )      (5,592 )      2,092        11,731   

Withdrawals

      (2,271 )      5        64        34        (52,161 )      (81,461 ) 

Annual contract fee

      (72,245 )      (7,180 )      (21,648 )      (19,555 )      (190,772 )      (194,503 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      5,112,619        236,918        36,016        80,384        (76,084 )      (1,089,306 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      5,046,088        267,311        37,754        113,357        737,453        (443,510 ) 

Contract owners’ equity at beginning of period

      763,656        496,345        660,948        547,591        7,804,233        8,247,743   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 5,809,744      $ 763,656      $ 698,702      $ 660,948      $ 8,541,686      $ 7,804,233   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      69,117        47,293        59,182        51,772        331,659        384,105   

Units issued

      534,477        23,124        11,408        24,375        37,121        104,510   

Units redeemed

      (75,607 )      (1,300 )      (8,211 )      (16,965 )      (41,990 )      (156,956 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      527,987        69,117        62,379        59,182        326,790        331,659   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

28

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Capital Appreciation Trust
Series NAV		     Capital Appreciation Value
Trust Series I		     Capital Appreciation Value
Trust Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 419      $ 1,007      $ 8,938      $ 37,056      $ 2,957      $ 2,106   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (9,379 )      (7,693 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      419        1,007        (441 )      29,363        2,957        2,106   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      293,666        130,651        425,748        184,493        27,718        14,205   

Net realized gain (loss)

      76,342        81,335        (343,251 )      4,432        927        2,701   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      370,008        211,986        82,497        188,925        28,645        16,906   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (218,299 )      (105,957 )      (51,210 )      (745 )      (20,565 )      (3,847 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      152,128        107,036        30,846        217,543        11,037        15,165   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      180,636        100,258        2,474        1,475        25,532        20,407   

Transfers between sub-accounts and the company

      272,911        164,837        (2,720,242 )      2,367,189        74,330        52,314   

Transfers on general account policy loans

      (75,507 )      (14,267 )      (15,390 )      330        (2,182 )      (3 ) 

Withdrawals

      (28,817 )      (86,188 )      (901 )      1,156        (7,124 )      (17,943 ) 

Annual contract fee

      (60,932 )      (42,683 )      (43,468 )      (31,081 )      (8,545 )      (5,442 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      288,291        121,957        (2,777,527 )      2,339,069        82,011        49,333   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      440,419        228,993        (2,746,681 )      2,556,612        93,048        64,498   

Contract owners’ equity at beginning of period

      1,316,065        1,087,072        3,067,556        510,944        170,141        105,643   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,756,484      $ 1,316,065      $ 320,875      $ 3,067,556      $ 263,189      $ 170,141   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      54,104        49,018        180,139        33,513        9,702        6,770   

Units issued

      20,808        15,705        11,211        159,328        5,520        4,851   

Units redeemed

      (10,135 )      (10,619 )      (173,043 )      (12,702 )      (965 )      (1,919 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      64,777        54,104        18,307        180,139        14,257        9,702   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

29

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Core Bond Trust Series I     Core Bond Trust Series NAV     Core Strategy Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 190,497      $ 408      $ 372,214      $ 17,436      $ 2,391      $ 2,496   

Expenses:

             

Mortality and expense risk and administrative charges

      (24,503 )      (92 )      —          —          (774 )      (697 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      165,994        316        372,214        17,436        1,617        1,799   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      27,214        —          50,559        —          3,458        327   

Net realized gain (loss)

      (75,953 )      (128 )      (175,242 )      (9,656 )      (3,181 )      837   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (48,739 )      (128 )      (124,683 )      (9,656 )      277        1,164   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (302,975 )      529        (645,755 )      22,676        (6,065 )      2,422   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (185,720 )      717        (398,224 )      30,456        (4,171 )      5,385   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      92,440        1,558        348,019        15,644        3,149        3,045   

Transfers between sub-accounts and the company

      11,235,324        (240 )      24,467,104        615,743        (4 )      (53,074 ) 

Transfers on general account policy loans

      21,763        —          (426,842 )      (60,333 )      —          —     

Withdrawals

      (49,461 )      4        (1,662,598 )      —          3,382        (629 ) 

Annual contract fee

      (205,595 )      (2,200 )      (337,560 )      (18,375 )      (2,094 )      (2,556 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      11,094,471        (878 )      22,388,123        552,679        4,433        (53,214 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      10,908,751        (161 )      21,989,899        583,135        262        (47,829 ) 

Contract owners’ equity at beginning of period

      13,635        13,796        1,029,116        445,981        103,391        151,220   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 10,922,386      $ 13,635      $ 23,019,015      $ 1,029,116      $ 103,653      $ 103,391   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      716        763        63,291        29,076        7,355        11,340   

Units issued

      806,434        94        2,066,816        40,188        67,761        191   

Units redeemed

      (250,293 )      (141 )      (719,489 )      (5,973 )      (67,687 )      (4,176 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      556,857        716        1,410,618        63,291        7,429        7,355   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

30

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Core Strategy Trust Series NAV     Emerging Markets Value
Trust Series I		     Emerging Markets Value
Trust Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 64,517      $ 67,496      $ 2,542      $ 3,606      $ 22,200      $ 22,281   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (827 )      (2,164 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      64,517        67,496        1,715        1,442        22,200        22,281   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      97,049        7,776        —          6,779        —          41,505   

Net realized gain (loss)

      1,788        8,293        (17,807 )      (20,435 )      (102,845 )      (16,528 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      98,837        16,069        (17,807 )      (13,656 )      (102,845 )      24,977   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (167,511 )      31,650        (11,741 )      (5,512 )      (135,798 )      (47,416 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (4,157 )      115,215        (27,833 )      (17,726 )      (216,443 )      (158 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      140,594        401,461        1,472        2,863        147,176        202,371   

Transfers between sub-accounts and the company

      37,319        2,142,904        (48,376 )      (760,392 )      (109,124 )      (198,275 ) 

Transfers on general account policy loans

      (108,482 )      (132 )      —          —          (612 )      (4,798 ) 

Withdrawals

      (1,818 )      (92,850 )      (25,629 )      (7,992 )      (22,486 )      (496,782 ) 

Annual contract fee

      (78,599 )      (52,188 )      (5,450 )      (8,113 )      (34,854 )      (39,887 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (10,986 )      2,399,195        (77,983 )      (773,634 )      (19,900 )      (537,371 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (15,143 )      2,514,410        (105,816 )      (791,360 )      (236,343 )      (537,529 ) 

Contract owners’ equity at beginning of period

      2,754,913        240,503        174,123        965,483        1,069,467        1,606,996   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 2,739,770      $ 2,754,913      $ 68,307      $ 174,123      $ 833,124      $ 1,069,467   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      186,973        17,326        12,966        67,004        94,432        134,286   

Units issued

      13,383        180,865        349        814        33,026        713,944   

Units redeemed

      (14,304 )      (11,218 )      (6,993 )      (54,852 )      (36,583 )      (753,798 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      186,052        186,973        6,322        12,966        90,875        94,432   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

31

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Equity-Income Trust Series I     Equity-Income Trust Series NAV     Financial Industries Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 198,283      $ 245,660      $ 768,816      $ 790,767      $ 6,837      $ 8,992   

Expenses:

             

Mortality and expense risk and administrative charges

      (47,683 )      (53,387 )      —          —          (5,212 )      (4,951 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      150,600        192,273        768,816        790,767        1,625        4,041   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      1,001,855        1,065,012        3,391,324        3,473,532        210,455        (2 ) 

Net realized gain (loss)

      210,387        1,752,773        1,618,154        4,446,816        131,448        87,594   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      1,212,242        2,817,785        5,009,478        7,920,348        341,903        87,592   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (2,259,100 )      (2,158,614 )      (8,305,580 )      (5,798,771 )      (335,732 )      (7,985 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (896,258 )      851,444        (2,527,286 )      2,912,344        7,796        83,648   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      103,836        93,826        1,953,579        2,479,533        9,378        5,586   

Transfers between sub-accounts and the company

      (3,063,633 )      1,704,089        (2,989,989 )      828,567        (731,876 )      332,004   

Transfers on general account policy loans

      (18,147 )      696        (369,007 )      (104,264 )      63        82   

Withdrawals

      (117,998 )      (42,361 )      (1,947,391 )      (742,584 )      (17,768 )      (21,002 ) 

Annual contract fee

      (516,618 )      (495,220 )      (499,724 )      (524,416 )      (54,309 )      (37,009 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (3,612,560 )      1,261,030        (3,852,532 )      1,936,836        (794,512 )      279,661   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (4,508,818 )      2,112,474        (6,379,818 )      4,849,180        (786,716 )      363,309   

Contract owners’ equity at beginning of period

      13,815,930        11,703,456        41,632,989        36,783,809        1,468,331        1,105,022   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 9,307,112      $ 13,815,930      $ 35,253,171      $ 41,632,989      $ 681,615      $ 1,468,331   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      330,215        301,290        908,115        862,903        66,065        53,864   

Units issued

      44,271        166,802        270,407        392,484        22,298        38,849   

Units redeemed

      (134,502 )      (137,877 )      (354,681 )      (347,272 )      (56,267 )      (26,648 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      239,984        330,215        823,841        908,115        32,096        66,065   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

32

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Financial Industries
Trust Series NAV		     Franklin Templeton Founding
Allocation Trust Series I		     Franklin Templeton Founding
Allocation Trust Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 4,736      $ 3,099      $ 277      $ 341      $ 4,069      $ 7,219   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (67 )      (74 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      4,736        3,099        210        267        4,069        7,219   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      157,230        —          —          —          —          —     

Net realized gain (loss)

      (16,149 )      85,675        453        1,656        18,417        7,542   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      141,081        85,675        453        1,656        18,417        7,542   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (153,413 )      (47,631 )      (1,318 )      (1,737 )      (34,334 )      (9,978 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (7,596 )      41,143        (655 )      186        (11,848 )      4,783   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      69,300        52,593        5,016        5,065        25,821        22,039   

Transfers between sub-accounts and the company

      234,520        (45,926 )      —          —          392        33,474   

Transfers on general account policy loans

      (95,985 )      (40,410 )      —          —          (50,935 )      (20,124 ) 

Withdrawals

      (216,509 )      (15,766 )      7        (2,080 )      (36,442 )      5   

Annual contract fee

      (26,148 )      (19,593 )      (5,632 )      (5,495 )      (12,844 )      (8,289 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (34,822 )      (69,102 )      (609 )      (2,510 )      (74,008 )      27,105   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (42,418 )      (27,959 )      (1,264 )      (2,324 )      (85,856 )      31,888   

Contract owners’ equity at beginning of period

      421,279        449,238        10,707        13,031        223,988        192,100   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 378,861      $ 421,279      $ 9,443      $ 10,707      $ 138,132      $ 223,988   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      14,800        17,147        771        960        15,395        13,607   

Units issued

      22,337        10,208        364        358        2,587        3,682   

Units redeemed

      (23,474 )      (12,555 )      (409 )      (547 )      (7,908 )      (1,894 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      13,663        14,800        726        771        10,074        15,395   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

33

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Fundamental All Cap Core
Trust Series I		     Fundamental All Cap Core
Trust Series NAV		     Fundamental Large Cap Value
Trust Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ —        $ 1,279      $ —        $ 4,266      $ 63,828      $ 40,986   

Expenses:

             

Mortality and expense risk and administrative charges

      (1,545 )      (1,429 )      —          —          (29,920 )      (14,734 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (1,545 )      (150 )      —          4,266        33,908        26,252   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      20,784        —          57,279        —          (2 )      (5 ) 

Net realized gain (loss)

      2,312        123,394        39,419        28,072        206,995        46,328   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      23,096        123,394        96,698        28,072        206,993        46,323   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (4,162 )      (93,080 )      (55,309 )      56,502        (315,142 )      214,616   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      17,389        30,164        41,389        88,840        (74,241 )      287,191   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      151        415        193,498        205,539        98,507        11,626   

Transfers between sub-accounts and the company

      129,276        (58,885 )      123,930        (3,897 )      (1,003,840 )      4,395,659   

Transfers on general account policy loans

      —          —          (73 )      (159 )      (47,938 )      27   

Withdrawals

      (565 )      1,033        (27,504 )      (38,673 )      (173,673 )      (3,776 ) 

Annual contract fee

      (14,317 )      (11,626 )      (30,847 )      (21,152 )      (299,038 )      (82,084 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      114,545        (69,063 )      259,004        141,658        (1,425,982 )      4,321,452   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      131,934        (38,899 )      300,393        230,498        (1,500,223 )      4,608,643   

Contract owners’ equity at beginning of period

      305,617        344,516        1,008,965        778,467        7,280,882        2,672,239   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 437,551      $ 305,617      $ 1,309,358      $ 1,008,965      $ 5,780,659      $ 7,280,882   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      8,736        10,880        46,584        39,468        269,824        108,548   

Units issued

      4,059        7,797        16,156        10,943        41,329        195,130   

Units redeemed

      (728 )      (9,941 )      (4,661 )      (3,827 )      (94,171 )      (33,854 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      12,067        8,736        58,079        46,584        216,982        269,824   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

34

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Fundamental’ Large Cap Value
Trust Series NAV		     Fundamental Value
Trust Series I		      Fundamental Value
Trust Series NAV		  
     2015     2014     2015      2014 (b)      2015      2014 (b)  

Income:

                

Dividend distributions received

    $ 36,129      $ 21,278      $ —         $ 72,835       $ —         $ 9,879   

Expenses:

                

Mortality and expense risk and administrative charges

      —          —          —           (19,283 )       —           —     
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Net investment income (loss)

      36,129        21,278        —           53,552         —           9,879   
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Realized gains (losses) on investments:

                

Capital gain distributions received

      —          1        —           1,020,729         —           135,032   

Net realized gain (loss)

      341,353        32,525        —           849,896         —           665,169   
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Realized gains (losses)

      341,353        32,526        —           1,870,625         —           800,201   
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Unrealized appreciation (depreciation) during the period

      (403,059 )      199,757        —           (1,652,966 )       —           (671,876 ) 
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (25,577 )      253,561        —           271,211         —           138,204   
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Changes from principal transactions:

                

Purchase payments

      231,235        460,766        —           69,893         —           51,362   

Transfers between sub-accounts and the company

      569,323        697,513        —           (4,669,764 )       —           (3,054,290 ) 

Transfers on general account policy loans

      (71,915 )      (24,390 )      —           27,917         —           —     

Withdrawals

      (219,309 )      (63,678 )      —           (209,064 )       —           (19,821 ) 

Annual contract fee

      (73,639 )      (51,422 )      —           (225,747 )       —           (27,983 ) 
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  
               

Net increase (decrease) in contract owners’ equity from principal transactions

      435,695        1,018,789        —           (5,006,765 )       —           (3,050,732 ) 
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Total increase (decrease) in contract owners’ equity

      410,118        1,272,350        —           (4,735,554 )       —           (2,912,528 ) 

Contract owners’ equity at beginning of period

      3,363,327        2,090,977        —           4,735,554         —           2,912,528   
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Contract owners’ equity at end of period

    $ 3,773,445      $ 3,363,327      $ —         $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  
     2015     2014     2015      2014      2015      2014  

Units, beginning of period

      168,466        115,904        —           207,120         —           166,902   

Units issued

      173,767        60,436        —           27,140         —           20,871   

Units redeemed

      (151,197 )      (7,874 )      —           (234,260 )       —           (187,773 ) 
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Units, end of period

      191,036        168,466        —           —           —           —     
  

 

 

    

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

 

(b)

Terminated as an investment option and funds transferred to Fundamental Large Cap Value Trust on November 10, 2014.

 

See accompanying notes.

 

35

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Global Bond Trust Series I     Global Bond Trust Series NAV     Global Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 34,025      $ 23,529      $ 161,511      $ 73,583      $ 50,822      $ 66,510   

Expenses:

             

Mortality and expense risk and administrative charges

      (8,754 )      (12,117 )      —          —          (14,709 )      (10,877 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      25,271        11,412        161,511        73,583        36,113        55,633   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      2        (2 )      —          —          —          (2 ) 

Net realized gain (loss)

      (146,520 )      (21,041 )      (190,499 )      (113,607 )      38,265        216,643   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (146,518 )      (21,043 )      (190,499 )      (113,607 )      38,265        216,641   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      29,532        57,750        (199,549 )      199,758        (259,706 )      (338,835 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (91,715 )      48,119        (228,537 )      159,734        (185,328 )      (66,561 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      33,092        16,857        149,795        258,505        27,470        16,279   

Transfers between sub-accounts and the company

      (1,222,561 )      (63,449 )      (531,154 )      137,590        (706,011 )      1,646,209   

Transfers on general account policy loans

      185        (30 )      (4,096 )      2,099        151        273   

Withdrawals

      (16,111 )      (4,376 )      (227,171 )      (109,592 )      (30,378 )      (39,914 ) 

Annual contract fee

      (66,802 )      (74,308 )      (117,824 )      (129,900 )      (115,784 )      (77,004 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (1,272,197 )      (125,306 )      (730,450 )      158,702        (824,552 )      1,545,843   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (1,363,912 )      (77,187 )      (958,987 )      318,436        (1,009,880 )      1,479,282   

Contract owners’ equity at beginning of period

      2,486,507        2,563,694        6,936,132        6,617,696        3,234,105        1,754,823   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,122,595      $ 2,486,507      $ 5,977,145      $ 6,936,132      $ 2,224,225      $ 3,234,105   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      88,633        93,283        225,164        220,019        113,243        60,023   

Units issued

      70,832        11,852        66,468        79,106        23,584        84,659   

Units redeemed

      (118,118 )      (16,502 )      (90,550 )      (73,961 )      (53,588 )      (31,439 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      41,347        88,633        201,082        225,164        83,239        113,243   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

36

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Global Trust Series NAV     Health Sciences Trust Series I     Health Sciences Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 43,264      $ 42,969      $ —        $ —        $ —        $ —     

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (33,863 )      (26,805 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      43,264        42,969        (33,863 )      (26,805 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          1,297,991        729,281        841,577        508,708   

Net realized gain (loss)

      38,734        70,694        845,996        908,983        882,857        568,470   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      38,734        70,694        2,143,987        1,638,264        1,724,434        1,077,178   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (221,522 )      (142,227 )      (1,417,776 )      (111,030 )      (1,110,578 )      28,966   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (139,524 )      (28,564 )      692,348        1,500,429        613,856        1,106,144   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      163,726        64,328        20,548        23,664        222,073        147,658   

Transfers between sub-accounts and the company

      16,774        1,544,668        1,149,332        477,906        1,448,797        24,070   

Transfers on general account policy loans

      (28,632 )      (1,749 )      145        281        (223,347 )      3,388   

Withdrawals

      (160,697 )      (34,210 )      (97,376 )      (163,919 )      (1,480,248 )      (205,217 ) 

Annual contract fee

      (72,385 )      (24,953 )      (201,222 )      (181,642 )      (113,340 )      (85,005 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (81,214 )      1,548,084        871,427        156,290        (146,065 )      (115,106 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (220,738 )      1,519,520        1,563,775        1,656,719        467,791        991,038   

Contract owners’ equity at beginning of period

      2,209,342        689,822        6,505,363        4,848,644        4,453,523        3,462,485   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,988,604      $ 2,209,342      $ 8,069,138      $ 6,505,363      $ 4,921,314      $ 4,453,523   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      128,007        38,965        100,406        98,652        82,761        84,840   

Units issued

      17,494        105,899        49,124        39,550        47,977        24,737   

Units redeemed

      (22,491 )      (16,857 )      (39,413 )      (37,796 )      (49,631 )      (26,816 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      123,010        128,007        110,117        100,406        81,107        82,761   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

37

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     High Yield Trust Series I     High Yield Trust Series NAV     International Core Trust
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 236,834      $ 284,027      $ 211,295      $ 275,166      $ 77,140      $ 103,795   

Expenses:

             

Mortality and expense risk and administrative charges

      (13,912 )      (20,167 )      —          —          (12,612 )      (15,327 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      222,922        263,860        211,295        275,166        64,528        88,468   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      (2 )      —          —          —          —          —     

Net realized gain (loss)

      (197,529 )      126,580        (298,836 )      11,691        18,646        341,902   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (197,531 )      126,580        (298,836 )      11,691        18,646        341,902   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (302,971 )      (399,524 )      (146,436 )      (319,495 )      (195,218 )      (636,759 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (277,580 )      (9,084 )      (233,977 )      (32,638 )      (112,044 )      (206,389 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      35,201        24,358        108,377        180,635        35,694        42,230   

Transfers between sub-accounts and the company

      (714,667 )      (613,194 )      (963,062 )      1,527,095        84,288        (66,615 ) 

Transfers on general account policy loans

      (133 )      26        (86,931 )      (30,909 )      186        76,456   

Withdrawals

      (55,707 )      (33,313 )      (417,631 )      (135,806 )      (115,518 )      (109,266 ) 

Annual contract fee

      (169,472 )      (195,704 )      (62,852 )      (60,038 )      (115,895 )      (135,119 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (904,778 )      (817,827 )      (1,422,099 )      1,480,977        (111,245 )      (192,314 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (1,182,358 )      (826,911 )      (1,656,076 )      1,448,339        (223,289 )      (398,703 ) 

Contract owners’ equity at beginning of period

      3,940,682        4,767,593        3,919,626        2,471,287        2,612,774        3,011,477   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 2,758,324      $ 3,940,682      $ 2,263,550      $ 3,919,626      $ 2,389,485      $ 2,612,774   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      134,138        162,490        185,483        116,952        133,817        144,210   

Units issued

      22,790        67,652        65,401        103,125        56,694        68,849   

Units redeemed

      (54,442 )      (96,004 )      (133,968 )      (34,594 )      (61,112 )      (79,242 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      102,486        134,138        116,916        185,483        129,399        133,817   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

38

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     International Core
Trust Series NAV		     International Equity Index
Trust B Series I		     International Equity Index
Trust B Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 15,664      $ 15,636      $ 117,760      $ 139,780      $ 309,108      $ 416,066   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (15,964 )      (16,336 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      15,664        15,636        101,796        123,444        309,108        416,066   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          1        —          —          —     

Net realized gain (loss)

      3,154        20,645        (10,188 )      141,478        387,327        1,143,466   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      3,154        20,645        (10,187 )      141,478        387,327        1,143,466   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (68,447 )      (70,695 )      (423,279 )      (485,740 )      (1,405,598 )      (2,153,028 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (49,629 )      (34,414 )      (331,670 )      (220,818 )      (709,163 )      (593,496 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      72,013        54,808        44,829        45,919        550,510        556,375   

Transfers between sub-accounts and the company

      91,100        6,067        606,567        616,422        1,548,487        (565,506 ) 

Transfers on general account policy loans

      (35,570 )      (20,142 )      (5,526 )      14,796        (729,472 )      (228,754 ) 

Withdrawals

      (11,181 )      (8,157 )      (56,439 )      (60,807 )      (947,152 )      (1,316,994 ) 

Annual contract fee

      (19,798 )      (16,437 )      (124,503 )      (125,810 )      (339,665 )      (342,904 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      96,564        16,139        464,928        490,520        82,708        (1,897,783 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      46,935        (18,275 )      133,258        269,702        (626,455 )      (2,491,279 ) 

Contract owners’ equity at beginning of period

      390,023        408,298        4,391,997        4,122,295        12,445,286        14,936,565   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 436,958      $ 390,023      $ 4,525,255      $ 4,391,997      $ 11,818,831      $ 12,445,286   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      24,279        23,700        382,220        340,922        274,026        313,848   

Units issued

      33,877        8,616        145,376        152,239        79,165        79,886   

Units redeemed

      (29,427 )      (8,037 )      (108,014 )      (110,941 )      (76,924 )      (119,708 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      28,729        24,279        419,582        382,220        276,267        274,026   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

39

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     International Growth Stock
Trust Series I		     International Growth Stock
Trust Series NAV		     International Small
Company Trust Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 28,635      $ 10,387      $ 169,647      $ 172,045      $ 10,325      $ 13,914   

Expenses:

             

Mortality and expense risk and administrative charges

      (2,973 )      (1,927 )      —          —          (4,060 )      (5,704 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      25,662        8,460        169,647        172,045        6,265        8,210   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          —          —          2        —     

Net realized gain (loss)

      (3,305 )      86,458        193,467        495,808        115,265        85,694   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (3,305 )      86,458        193,467        495,808        115,267        85,694   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (101,978 )      (87,804 )      (579,844 )      (650,451 )      (59,094 )      (169,505 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (79,621 )      7,114        (216,730 )      17,402        62,438        (75,601 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      2,941        3,723        79,864        69,733        11,685        10,648   

Transfers between sub-accounts and the company

      1,286,743        (184,571 )      549,463        476,464        (396,521 )      35,652   

Transfers on general account policy loans

      —          —          7,654        (1,226 )      6,752        (574 ) 

Withdrawals

      (10 )      (7,072 )      (126,510 )      (214,586 )      (26,036 )      (12,930 ) 

Annual contract fee

      (20,544 )      (19,877 )      (95,973 )      (91,616 )      (35,370 )      (43,935 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      1,269,130        (207,797 )      414,498        238,769        (439,490 )      (11,139 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      1,189,509        (200,683 )      197,768        256,171        (377,052 )      (86,740 ) 

Contract owners’ equity at beginning of period

      389,721        590,404        8,259,090        8,002,919        964,173        1,050,913   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,579,230      $ 389,721      $ 8,456,858      $ 8,259,090      $ 587,121      $ 964,173   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      31,635        47,849        664,305        644,899        70,056        70,728   

Units issued

      105,690        38,740        175,588        256,775        24,373        20,783   

Units redeemed

      (5,900 )      (54,954 )      (144,123 )      (237,369 )      (54,057 )      (21,455 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      131,425        31,635        695,770        664,305        40,372        70,056   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

40

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     International Small Company
Trust Series NAV		     International Value Trust
Series I		     International Value Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 18,318      $ 15,607      $ 75,807      $ 116,552      $ 87,735      $ 155,331   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (14,875 )      (16,073 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      18,318        15,607        60,932        100,479        87,735        155,331   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          —          —          —          —     

Net realized gain (loss)

      47,750        35,227        (36,527 )      303,180        141,751        412,651   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      47,750        35,227        (36,527 )      303,180        141,751        412,651   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      8,596        (123,035 )      (361,048 )      (955,812 )      (571,041 )      (1,243,133 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      74,664        (72,201 )      (336,643 )      (552,153 )      (341,555 )      (675,151 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      40,474        44,667        58,231        27,089        104,261        196,644   

Transfers between sub-accounts and the company

      (172,809 )      161,099        509,920        208,846        (98,702 )      (279,412 ) 

Transfers on general account policy loans

      669        1,022        478        (746 )      (9,807 )      (11,258 ) 

Withdrawals

      (2,988 )      (36,921 )      (45,331 )      (99,168 )      (34,836 )      (193,159 ) 

Annual contract fee

      (38,637 )      (42,381 )      (128,004 )      (144,177 )      (102,622 )      (101,940 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (173,291 )      127,486        395,294        (8,156 )      (141,706 )      (389,125 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (98,627 )      55,285        58,651        (560,309 )      (483,261 )      (1,064,276 ) 

Contract owners’ equity at beginning of period

      1,102,938        1,047,653        3,564,560        4,124,869        4,588,626        5,652,902   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,004,311      $ 1,102,938      $ 3,623,211      $ 3,564,560      $ 4,105,365      $ 4,588,626   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      77,732        68,776        158,546        160,541        297,190        320,427   

Units issued

      5,204        18,587        83,492        50,509        51,210        76,874   

Units redeemed

      (16,585 )      (9,631 )      (67,687 )      (52,504 )      (60,276 )      (100,111 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      66,351        77,732        174,351        158,546        288,124        297,190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

41

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Investment Quality Bond
Trust Series I		     Investment Quality Bond
Trust Series NAV		     Lifestyle Aggressive MVP
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 93,562      $ 152,061      $ 13,199      $ 20,684      $ 22,141      $ 52,841   

Expenses:

             

Mortality and expense risk and administrative charges

      (25,224 )      (24,637 )      —          —          (8,948 )      (14,179 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      68,338        127,424        13,199        20,684        13,193        38,662   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      226,295        10,984        28,968        1,668        —          —     

Net realized gain (loss)

      (34,982 )      3,152        (9,625 )      (9,663 )      177,607        348,589   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      191,313        14,136        19,343        (7,995 )      177,607        348,589   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (326,039 )      57,773        (37,099 )      16,516        (270,777 )      (339,883 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (66,388 )      199,333        (4,557 )      29,205        (79,977 )      47,368   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      155,619        143,735        139,650        205,994        32,907        34,317   

Transfers between sub-accounts and the company

      (164,518 )      1,494,490        (125,644 )      231,266        (235,554 )      (1,066,182 ) 

Transfers on general account policy loans

      5,717        14,560        1,483        (533 )      753        (5,966 ) 

Withdrawals

      (142,654 )      (108,421 )      (778 )      (184,780 )      (460,192 )      (131,500 ) 

Annual contract fee

      (223,461 )      (212,870 )      (16,310 )      (17,693 )      (54,705 )      (74,381 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (369,297 )      1,331,494        (1,599 )      234,254        (716,791 )      (1,243,712 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (435,685 )      1,530,827        (6,156 )      263,459        (796,768 )      (1,196,344 ) 

Contract owners’ equity at beginning of period

      5,210,369        3,679,542        696,875        433,416        1,846,787        3,043,131   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 4,774,684      $ 5,210,369      $ 690,719      $ 696,875      $ 1,050,019      $ 1,846,787   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      169,445        126,309        43,612        28,628        65,914        109,097   

Units issued

      70,115        53,007        22,394        31,541        7,124        32,094   

Units redeemed

      (83,120 )      (9,871 )      (22,483 )      (16,557 )      (33,077 )      (75,277 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      156,440        169,445        43,523        43,612        39,961        65,914   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

42

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Lifestyle Aggressive MVP
Series NAV		     Lifestyle Balanced MVP
Series I		     Lifestyle Balanced MVP Series
NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 138,912      $ 207,587      $ 113,910      $ 127,600      $ 390,140      $ 479,068   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (22,081 )      (38,244 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      138,912        207,587        91,829        89,356        390,140        479,068   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          271,000        —          1,089,270        —     

Net realized gain (loss)

      362,317        895,333        144,901        635,935        544,954        1,329,299   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      362,317        895,333        415,901        635,935        1,634,224        1,329,299   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (867,164 )      (1,005,258 )      (599,137 )      (349,476 )      (2,324,044 )      (1,025,326 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (365,935 )      97,662        (91,407 )      375,815        (299,680 )      783,041   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,233,922        1,245,707        87,196        192,944        2,398,422        3,587,675   

Transfers between sub-accounts and the company

      66,952        771,603        422,744        (3,818,379 )      (480,515 )      (5,556,947 ) 

Transfers on general account policy loans

      (1,061,147 )      (692,182 )      60,463        (6,608 )      (1,889,975 )      (486,834 ) 

Withdrawals

      (267,287 )      (640,320 )      (150,746 )      (81,166 )      (518,359 )      (640,247 ) 

Annual contract fee

      (347,930 )      (305,518 )      (309,795 )      (378,945 )      (643,848 )      (704,589 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (375,490 )      379,290        109,862        (4,092,154 )      (1,134,275 )      (3,800,942 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (741,425 )      476,952        18,455        (3,716,339 )      (1,433,955 )      (3,017,901 ) 

Contract owners’ equity at beginning of period

      7,175,743        6,698,791        4,472,852        8,189,191        16,550,537        19,568,438   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 6,434,318      $ 7,175,743      $ 4,491,307      $ 4,472,852      $ 15,116,582      $ 16,550,537   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      384,239        364,230        141,756        265,930        941,999        1,161,213   

Units issued

      113,351        195,096        64,181        102,225        214,368        304,953   

Units redeemed

      (131,876 )      (175,087 )      (59,392 )      (226,399 )      (276,646 )      (524,167 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      365,714        384,239        146,545        141,756        879,721        941,999   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

43

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Lifestyle Conservative MVP
Series I		     Lifestyle Conservative MVP
Series NAV		     Lifestyle Growth MVP
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 48,876      $ 63,784      $ 122,708      $ 157,206      $ 83,420      $ 94,480   

Expenses:

             

Mortality and expense risk and administrative charges

      (8,918 )      (17,891 )      —          —          (17,202 )      (25,522 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      39,958        45,893        122,708        157,206        66,218        68,958   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      105,361        208,341        246,155        312,407        1        —     

Net realized gain (loss)

      (100,312 )      (214,403 )      (187,460 )      (98,831 )      123,642        761,884   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      5,049        (6,062 )      58,695        213,576        123,643        761,884   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (42,205 )      128,163        (157,615 )      (85,699 )      (352,853 )      (702,527 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      2,802        167,994        23,788        285,083        (162,992 )      128,315   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      19,051        16,533        809,098        (129,754 )      70,395        74,369   

Transfers between sub-accounts and the company

      (338,459 )      (3,878,917 )      (880,318 )      (1,387,758 )      723,696        (1,886,048 ) 

Transfers on general account policy loans

      (169 )      (156 )      (696,019 )      (219,637 )      (2,587 )      (6,441 ) 

Withdrawals

      (11,200 )      (9,568 )      (44,603 )      (335,253 )      (167,457 )      (352,297 ) 

Annual contract fee

      (97,484 )      (143,658 )      (215,032 )      (213,278 )      (185,157 )      (208,883 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (428,261 )      (4,015,766 )      (1,026,874 )      (2,285,680 )      438,890        (2,379,300 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (425,459 )      (3,847,772 )      (1,003,086 )      (2,000,597 )      275,898        (2,250,985 ) 

Contract owners’ equity at beginning of period

      2,267,102        6,114,874        5,549,392        7,549,989        3,336,327        5,587,312   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,841,643      $ 2,267,102      $ 4,546,306      $ 5,549,392      $ 3,612,225      $ 3,336,327   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      71,768        199,931        338,321        483,207        110,388        186,695   

Units issued

      44,535        65,457        102,512        75,870        49,479        44,525   

Units redeemed

      (58,057 )      (193,620 )      (164,178 )      (220,756 )      (33,125 )      (120,832 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      58,246        71,768        276,655        338,321        126,742        110,388   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

44

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Lifestyle Growth MVP Series
NAV		     Lifestyle Moderate MVP
Series I		     Lifestyle Moderate MVP Series
NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 585,523      $ 718,047      $ 46,871      $ 53,858      $ 239,999      $ 293,016   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (9,305 )      (10,788 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      585,523        718,047        37,566        43,070        239,999        293,016   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          153,696        103,351        812,580        485,754   

Net realized gain (loss)

      779,384        1,623,305        (5,136 )      83,569        (25,540 )      147,676   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      779,384        1,623,305        148,560        186,920        787,040        633,430   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (2,538,332 )      (1,824,061 )      (212,433 )      (151,083 )      (1,090,056 )      (445,910 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (1,173,425 )      517,291        (26,307 )      78,907        (63,017 )      480,536   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      3,743,943        3,684,115        24,526        20,096        650,670        1,578,370   

Transfers between sub-accounts and the company

      312,214        (1,022,104 )      57,968        (83,860 )      (219,159 )      48,489   

Transfers on general account policy loans

      (1,296,638 )      (713,782 )      22        (233 )      (976,857 )      (413,242 ) 

Withdrawals

      (764,071 )      (1,512,184 )      (7,193 )      (44,665 )      (40,266 )      (494,416 ) 

Annual contract fee

      (954,488 )      (980,954 )      (110,180 )      (102,154 )      (320,136 )      (321,530 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      1,040,960        (544,909 )      (34,857 )      (210,816 )      (905,748 )      397,671   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (132,465 )      (27,618 )      (61,164 )      (131,909 )      (968,765 )      878,207   

Contract owners’ equity at beginning of period

      24,905,735        24,933,353        1,868,983        2,000,892        10,014,996        9,136,789   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 24,773,270      $ 24,905,735      $ 1,807,819      $ 1,868,983      $ 9,046,231      $ 10,014,996   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      1,382,122        1,415,209        57,869        64,888        579,654        555,212   

Units issued

      304,264        424,426        16,352        25,139        50,304        148,844   

Units redeemed

      (246,113 )      (457,513 )      (17,691 )      (32,158 )      (101,820 )      (124,402 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      1,440,273        1,382,122        56,530        57,869        528,138        579,654   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

45

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     M Capital Appreciation (a)     M Large Cap Growth (a)     Mid Cap Index Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ —        $ —        $ —        $ 263      $ 69,906      $ 54,262   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          —          —          (28,930 )      (28,657 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      —          —          —          263        40,976        25,605   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      37,784        27,084        1        76,197        544,533        325,588   

Net realized gain (loss)

      2,236        5,263        87,029        17,304        263,340        425,210   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      40,020        32,347        87,030        93,501        807,873        750,798   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (67,613 )      (5,706 )      (46,512 )      (43,917 )      (1,075,497 )      (298,724 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (27,593 )      26,641        40,518        49,847        (226,648 )      477,679   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      —          —          —          —          45,738        30,948   

Transfers between sub-accounts and the company

      80,949        44,473        (696,655 )      134,288        1,059,700        264,756   

Transfers on general account policy loans

      —          —          —          —          (933 )      174   

Withdrawals

      19        —          (416 )      —          (63,053 )      (129,497 ) 

Annual contract fee

      (9,443 )      (6,048 )      (4,626 )      (13,111 )      (148,231 )      (141,867 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      71,525        38,425        (701,697 )      121,177        893,221        24,514   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      43,932        65,066        (661,179 )      171,024        666,573        502,193   

Contract owners’ equity at beginning of period

      284,699        219,633        661,179        490,155        5,654,051        5,151,858   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 328,631      $ 284,699      $ —        $ 661,179      $ 6,320,624      $ 5,654,051   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      3,347        2,902        13,169        10,760        144,638        144,073   

Units issued

      899        681        —          3,643        81,766        54,308   

Units redeemed

      (111 )      (236 )      (13,169 )      (1,234 )      (61,247 )      (53,743 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      4,135        3,347        —          13,169        165,157        144,638   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

Sub-account that invests in non-affiliated Trust.

 

See accompanying notes.

 

46

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Mid Cap Index Trust Series
NAV		     Mid Cap Stock Trust
Series I		     Mid Cap Stock Trust Series
NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 270,727      $ 94,885      $ —        $ 3,333      $ —        $ 26,444   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (12,705 )      (12,775 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      270,727        94,885        (12,705 )      (9,442 )      —          26,444   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      2,249,833        552,641        704,107        595,753        1,197,646        3,405,537   

Net realized gain (loss)

      (634,274 )      492,361        63,249        376,982        251,723        (1,858,477 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      1,615,559        1,045,002        767,356        972,735        1,449,369        1,547,060   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (3,953,548 )      (332,346 )      (686,594 )      (729,433 )      (1,263,628 )      (875,129 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (2,067,262 )      807,541        68,057        233,860        185,741        698,375   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      510,729        715,680        24,086        23,482        152,135        145,913   

Transfers between sub-accounts and the company

      17,180,743        311,290        397,335        (249,526 )      (73,248 )      (1,688,517 ) 

Transfers on general account policy loans

      (1,215,670 )      (290,765 )      765        (1,589 )      (241,174 )      (101,362 ) 

Withdrawals

      (350,592 )      (1,343,194 )      (79,037 )      (97,026 )      (105,996 )      (551,043 ) 

Annual contract fee

      (439,649 )      (290,932 )      (90,145 )      (100,708 )      (133,900 )      (204,579 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      15,685,561        (897,921 )      253,004        (425,367 )      (402,183 )      (2,399,588 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      13,618,299        (90,380 )      321,061        (191,507 )      (216,442 )      (1,701,213 ) 

Contract owners’ equity at beginning of period

      9,542,017        9,632,397        3,178,771        3,370,278        6,700,757        8,401,970   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 23,160,316      $ 9,542,017      $ 3,499,832      $ 3,178,771      $ 6,484,315      $ 6,700,757   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      345,780        381,850        100,130        114,327        90,888        123,212   

Units issued

      877,478        96,265        19,166        40,992        94,975        218,928   

Units redeemed

      (362,101 )      (132,335 )      (12,189 )      (55,189 )      (100,505 )      (251,252 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      861,157        345,780        107,107        100,130        85,358        90,888   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

47

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

     Mid Value Trust Series I     Mid Value Trust Series NAV     Money Market Trust B Series NAV  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 47,213      $ 42,846      $ 108,960      $ 108,292      $ 784      $ —     

Expenses:

             

Mortality and expense risk and administrative charges

      (17,562 )      (23,900 )      —          —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      29,651        18,946        108,960        108,292        784        —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      759,936        565,701        1,661,417        944,094        165        775   

Net realized gain (loss)

      411,388        571,054        1,620,489        427,561        —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      1,171,324        1,136,755        3,281,906        1,371,655        165        775   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (1,346,800 )      (585,267 )      (2,987,715 )      (340,281 )      (3 )      (2 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (145,825 )      570,434        403,151        1,139,666        946        773   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      8,078        9,029        569,020        271,477        11,545,887        16,710,956   

Transfers between sub-accounts and the company

      (1,567,565 )      (219,782 )      (11,799,890 )      9,939,095        (5,327,791 )      (27,443,169 ) 

Transfers on general account policy loans

      (5,533 )      (84 )      (146,930 )      (52,855 )      (4,012,465 )      (3,051,770 ) 

Withdrawals

      (6,440 )      (46,024 )      (874,467 )      (357,600 )      (1,104,328 )      (1,489,402 ) 

Annual contract fee

      (118,788 )      (134,231 )      (192,761 )      (145,179 )      (1,259,276 )      (1,497,834 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (1,690,248 )      (391,092 )      (12,445,028 )      9,654,938        (157,973 )      (16,771,219 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (1,836,073 )      179,342        (12,041,877 )      10,794,604        (157,027 )      (16,770,446 ) 

Contract owners’ equity at beginning of period

      5,816,570        5,637,228        20,406,311        9,611,707        53,776,794        70,547,240   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 3,980,497      $ 5,816,570      $ 8,364,434      $ 20,406,311      $ 53,619,767      $ 53,776,794   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      228,646        244,764        511,313        266,593        3,095,151        4,060,754   

Units issued

      77,664        92,026        183,734        301,725        2,921,149        2,706,170   

Units redeemed

      (143,913 )      (108,144 )      (478,086 )      (57,005 )      (2,930,254 )      (3,671,773 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      162,397        228,646        216,961        511,313        3,086,046        3,095,151   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

48

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Money Market Trust
Series I		     Natural Resources Trust
Series I		     Natural Resources Trust
Series NAV		  
     2015     2014     2015      2014 (c)     2015      2014 (c)  

Income:

               

Dividend distributions received

    $ —        $ —        $ —         $ 32,032      $ —         $ 26,430   

Expenses:

               

Mortality and expense risk and administrative charges

      (123,357 )      (108,771 )      —           (13,470 )      —           —     
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Net investment income (loss)

      (123,357 )      (108,771 )      —           18,562        —           26,430   
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Realized gains (losses) on investments:

               

Capital gain distributions received

      30        584        —           —          —           —     

Net realized gain (loss)

      —          —          —           (418,862 )      —           (308,559 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Realized gains (losses)

      30        584        —           (418,862 )      —           (308,559 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Unrealized appreciation (depreciation) during the period

      —          (1 )      —           154,150        —           87,404   
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (123,327 )      (108,188 )      —           (246,150 )      —           (194,725 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Changes from principal transactions:

               

Purchase payments

      980,762        725,705        —           14,333        —           114,816   

Transfers between sub-accounts and the company

      1,219,618        966,357        —           (3,374,559 )      —           (2,553,575 ) 

Transfers on general account policy loans

      6,579        (1,976 )      —           —          —           6,417   

Withdrawals

      (64,158 )      (84,411 )      —           (41,164 )      —           (120,167 ) 

Annual contract fee

      (835,449 )      (708,311 )      —           (93,389 )      —           (60,272 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      1,307,352        897,364        —           (3,494,779 )      —           (2,612,781 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Total increase (decrease) in contract owners’ equity

      1,184,025        789,176        —           (3,740,929 )      —           (2,807,506 ) 

Contract owners’ equity at beginning of period

      25,347,938        24,558,762        —           3,740,929        —           2,807,506   
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Contract owners’ equity at end of period

    $ 26,531,963      $ 25,347,938      $ —         $ —        $ —         $ —     
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
     2015     2014     2015      2014     2015      2014  

Units, beginning of period

      1,220,595        1,177,155        —           94,863        —           160,544   

Units issued

      1,157,088        998,613        —           30,441        —           16,817   

Units redeemed

      (1,091,476 )      (955,173 )      —           (125,304 )      —           (177,361 ) 
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Units, end of period

      1,286,207        1,220,595        —           —          —           —     
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

 

(c)

Terminated as an investment option and funds transferred to Global Trust on November 10, 2014.

 

See accompanying notes.

 

49

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

    PIMCO All Asset (a)     Real Estate Securities Trust
Series I		     Real Estate Securities Trust
Series NAV		  
    2015     2014     2015     2014     2015     2014  

Income:

            

Dividend distributions received

   $ 106,375      $ 177,232      $ 198,953      $ 170,909      $ 251,645      $ 209,665   

Expenses:

            

Mortality and expense risk and administrative charges

     (4,812 )      (3,903 )      (62,472 )      (60,435 )      —          —     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

     101,563        173,329        136,481        110,474        251,645        209,665   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

            

Capital gain distributions received

     —          —          2        —          —          —     

Net realized gain (loss)

     (65,840 )      6,644        574,267        328,159        1,160,311        435,111   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

     (65,840 )      6,644        574,269        328,159        1,160,311        435,111   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

     (384,498 )      (183,799 )      (518,763 )      2,312,293        (1,065,167 )      2,593,960   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

     (348,775 )      (3,826 )      191,987        2,750,926        346,789        3,238,736   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

            

Purchase payments

     156,800        195,268        160,112        171,941        361,172        503,141   

Transfers between sub-accounts and the company

     (69,671 )      249,188        (555,644 )      703,346        (1,006,516 )      1,079,190   

Transfers on general account policy loans

     (10,969 )      (60,302 )      (10,462 )      114,743        (41,122 )      (660 ) 

Withdrawals

     (141,782 )      (6,526 )      (667,281 )      (531,994 )      (465,664 )      (980,833 ) 

Annual contract fee

     (132,117 )      (125,699 )      (476,673 )      (485,226 )      (207,084 )      (183,336 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

     (197,739 )      251,929        (1,549,948 )      (27,190 )      (1,359,214 )      417,502   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

     (546,514 )      248,103        (1,357,961 )      2,723,736        (1,012,425 )      3,656,238   

Contract owners’ equity at beginning of period

     3,704,837        3,456,734        11,707,207        8,983,471        13,743,347        10,087,109   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

   $ 3,158,323      $ 3,704,837      $ 10,349,246      $ 11,707,207      $ 12,730,922      $ 13,743,347   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    2015     2014     2015     2014     2015     2014  

Units, beginning of period

     222,794        208,924        73,812        74,618        98,937        95,675   

Units issued

     31,911        46,484        11,401        12,743        37,128        29,532   

Units redeemed

     (46,592 )      (32,614 )      (21,502 )      (13,549 )      (46,913 )      (26,270 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

     208,113        222,794        63,711        73,812        89,152        98,937   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

Sub-account that invests in non-affiliated Trust.

 

See accompanying notes.

 

50

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Real Return Bond Trust
Series I		     Real Return Bond Trust
Series NAV		     Science & Technology Trust
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 109,888      $ 79,826      $ 728,690      $ 382,623      $ —        $ —     

Expenses:

             

Mortality and expense risk and administrative charges

      (9,031 )      (12,222 )      —          —          (34,143 )      (34,218 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      100,857        67,604        728,690        382,623        (34,143 )      (34,218 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          —          —          1,389,946        219,286   

Net realized gain (loss)

      (68,710 )      (111,254 )      (874,633 )      (273,645 )      920,112        1,091,058   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (68,710 )      (111,254 )      (874,633 )      (273,645 )      2,310,058        1,310,344   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (85,099 )      166,596        (178,958 )      464,827        (1,798,397 )      (439,775 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (52,952 )      122,946        (324,901 )      573,805        477,518        836,351   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      15,712        11,716        596,471        729,997        47,224        39,674   

Transfers between sub-accounts and the company

      (758,406 )      (799,741 )      (1,006,872 )      16,417        315,863        78,250   

Transfers on general account policy loans

      (86 )      —          (91,662 )      (28,660 )      87,258        70,590   

Withdrawals

      (113,615 )      (11,388 )      (1,163,039 )      (188,555 )      (97,413 )      (49,357 ) 

Annual contract fee

      (68,400 )      (88,210 )      (171,839 )      (181,699 )      (249,004 )      (233,759 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (924,795 )      (887,623 )      (1,836,941 )      347,500        103,928        (94,602 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (977,747 )      (764,677 )      (2,161,842 )      921,305        581,446        741,749   

Contract owners’ equity at beginning of period

      2,433,390        3,198,067        11,876,727        10,955,422        8,264,943        7,523,194   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,455,643      $ 2,433,390      $ 9,714,885      $ 11,876,727      $ 8,846,389      $ 8,264,943   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      118,175        162,304        795,107        769,254        273,549        286,461   

Units issued

      144,322        83,232        304,505        250,654        84,925        106,826   

Units redeemed

      (189,224 )      (127,361 )      (429,563 )      (224,801 )      (87,345 )      (119,738 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      73,273        118,175        670,049        795,107        271,129        273,549   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

51

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Science & Technology Trust
Series NAV		     Short Term Government Income Trust
Series I		     Short Term Government Income Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ —        $ —        $ 29,910      $ 45,609      $ 31,467      $ 33,349   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (9,634 )      (9,748 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      —          —          20,276        35,861        31,467        33,349   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      365,991        58,180        —          —          —          —     

Net realized gain (loss)

      232,460        455,027        (16,210 )      (43,172 )      (28,958 )      (19,224 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      598,451        513,207        (16,210 )      (43,172 )      (28,958 )      (19,224 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (457,036 )      (283,512 )      (3,184 )      18,738        4,123        6,125   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      141,415        229,695        882        11,427        6,632        20,250   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      199,293        184,330        14,708        16,263        25,162        75,403   

Transfers between sub-accounts and the company

      403,655        363,810        (30,196 )      281,468        422,324        (241,017 ) 

Transfers on general account policy loans

      (35,373 )      3,841        69        1,230        (2,771 )      (67 ) 

Withdrawals

      (562,709 )      (782,313 )      (33,272 )      (12,839 )      (437,712 )      (67,000 ) 

Annual contract fee

      (75,106 )      (54,601 )      (74,441 )      (75,951 )      (33,364 )      (37,393 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (70,240 )      (284,933 )      (123,132 )      210,171        (26,361 )      (270,074 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      71,175        (55,238 )      (122,250 )      221,598        (19,729 )      (249,824 ) 

Contract owners’ equity at beginning of period

      2,267,934        2,323,172        1,684,090        1,462,492        1,430,185        1,680,009   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 2,339,109      $ 2,267,934      $ 1,561,840      $ 1,684,090      $ 1,410,456      $ 1,430,185   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      84,429        97,688        162,685        142,145        134,293        159,638   

Units issued

      38,968        39,945        117,785        146,619        83,190        42,447   

Units redeemed

      (41,843 )      (53,204 )      (129,880 )      (126,079 )      (85,955 )      (67,792 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      81,554        84,429        150,590        162,685        131,528        134,293   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

52

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Small Cap Growth Trust
Series I		     Small Cap Growth Trust
Series NAV		     Small Cap Index Trust
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ —        $ —        $ —        $ —        $ 62,504      $ 51,024   

Expenses:

             

Mortality and expense risk and administrative charges

      (5,750 )      (6,699 )      —          —          (24,919 )      (24,589 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (5,750 )      (6,699 )      —          —          37,585        26,435   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      198,491        171,489        1,601,803        1,402,775        494,855        340,753   

Net realized gain (loss)

      15,674        125,138        (316,816 )      653,224        257,130        279,437   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      214,165        296,627        1,284,987        2,055,999        751,985        620,190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (310,082 )      (215,325 )      (1,969,622 )      (1,400,629 )      (1,063,494 )      (413,117 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (101,667 )      74,603        (684,635 )      655,370        (273,924 )      233,508   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      2,957        5,313        98,654        229,907        24,316        21,554   

Transfers between sub-accounts and the company

      181,956        (457,583 )      (119,370 )      186,108        533,303        225,239   

Transfers on general account policy loans

      (16,972 )      (308 )      (26,440 )      (1,632 )      (291 )      —     

Withdrawals

      (1,508 )      (13,415 )      (557,673 )      (589,501 )      (17,409 )      (5,477 ) 

Annual contract fee

      (47,227 )      (45,580 )      (137,720 )      (132,773 )      (87,697 )      (84,745 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      119,206        (511,573 )      (742,549 )      (307,891 )      452,222        156,571   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      17,539        (436,970 )      (1,427,184 )      347,479        178,298        390,079   

Contract owners’ equity at beginning of period

      1,100,361        1,537,331        9,611,290        9,263,811        5,649,121        5,259,042   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,117,900      $ 1,100,361      $ 8,184,106      $ 9,611,290      $ 5,827,419      $ 5,649,121   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      41,085        61,397        293,216        304,103        185,766        180,560   

Units issued

      10,895        17,732        138,704        96,238        86,667        47,647   

Units redeemed

      (5,968 )      (38,044 )      (158,200 )      (107,125 )      (72,105 )      (42,441 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      46,012        41,085        273,720        293,216        200,328        185,766   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

53

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Small Cap Index Trust
Series NAV		     Small Cap Opportunities Trust
Series I		     Small Cap Opportunities Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 64,888      $ 55,466      $ 11,114      $ 7,685      $ 503      $ 253   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (90,896 )      (97,542 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      64,888        55,466        (79,782 )      (89,857 )      503        253   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      496,231        361,488        535,798        (3 )      15,674        —     

Net realized gain (loss)

      291,936        300,782        63,788        128,311        (1,747 )      33,925   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      788,167        662,270        599,586        128,308        13,927        33,925   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (1,159,836 )      (495,651 )      (1,351,240 )      223,102        (40,003 )      (24,638 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (306,781 )      222,085        (831,436 )      261,553        (25,573 )      9,540   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      297,626        421,346        443,431        468,327        148,869        35,590   

Transfers between sub-accounts and the company

      555,174        (69,765 )      (208,609 )      (186,395 )      (126,813 )      103,542   

Transfers on general account policy loans

      (657,432 )      (193,551 )      55,633        99,104        (3,890 )      (2 ) 

Withdrawals

      (266,840 )      (770,857 )      (709,896 )      (868,482 )      (4,835 )      (81,506 ) 

Annual contract fee

      (208,650 )      (174,367 )      (911,505 )      (948,948 )      (22,635 )      (18,443 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (280,122 )      (787,194 )      (1,330,946 )      (1,436,394 )      (9,304 )      39,181   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (586,903 )      (565,109 )      (2,162,382 )      (1,174,841 )      (34,877 )      48,721   

Contract owners’ equity at beginning of period

      5,961,751        6,526,860        15,811,294        16,986,135        321,029        272,308   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 5,374,848      $ 5,961,751      $ 13,648,912      $ 15,811,294      $ 286,152      $ 321,029   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      229,643        263,242        429,728        470,162        16,522        14,354   

Units issued

      88,386        62,540        5,066        30,337        8,212        8,833   

Units redeemed

      (101,029 )      (96,139 )      (41,195 )      (70,771 )      (9,213 )      (6,665 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      217,000        229,643        393,599        429,728        15,521        16,522   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

54

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Small Cap Value Trust
Series I		     Small Cap Value Trust
Series NAV		     Small Company Value Trust
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 3,870      $ 5,877      $ 44,996      $ 63,147      $ 42,553      $ 1,618   

Expenses:

             

Mortality and expense risk and administrative charges

      (4,734 )      (5,642 )      —          —          (13,852 )      (20,939 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (864 )      235        44,996        63,147        28,701        (19,321 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      125,900        119,656        1,366,926        1,152,298        428,293        118,913   

Net realized gain (loss)

      1,001        124,383        160,871        716,703        522,577        776,820   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      126,901        244,039        1,527,797        1,869,001        950,870        895,733   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (163,225 )      (174,310 )      (1,762,807 )      (1,321,882 )      (1,202,696 )      (893,976 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (37,188 )      69,964        (190,014 )      610,266        (223,125 )      (17,564 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,300        678        175,120        165,487        11,940        15,916   

Transfers between sub-accounts and the company

      (26,344 )      (206,865 )      (530,775 )      (2,246,718 )      (1,944,496 )      (347,979 ) 

Transfers on general account policy loans

      —          —          (211,023 )      (71,607 )      (232 )      (430 ) 

Withdrawals

      (1,697 )      (312 )      (66,410 )      (519,508 )      (20,582 )      (109,980 ) 

Annual contract fee

      (33,689 )      (40,707 )      (163,515 )      (165,406 )      (102,543 )      (134,981 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (60,430 )      (247,206 )      (796,603 )      (2,837,752 )      (2,055,913 )      (577,454 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (97,618 )      (177,242 )      (986,617 )      (2,227,486 )      (2,279,038 )      (595,018 ) 

Contract owners’ equity at beginning of period

      888,050        1,065,292        8,868,217        11,095,703        5,332,408        5,927,426   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 790,432      $ 888,050      $ 7,881,600      $ 8,868,217      $ 3,053,370      $ 5,332,408   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      37,291        47,600        128,165        171,983        166,559        185,558   

Units issued

      44,555        22,169        32,683        17,069        26,417        60,676   

Units redeemed

      (48,194 )      (32,478 )      (45,427 )      (60,887 )      (91,655 )      (79,675 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      33,652        37,291        115,421        128,165        101,321        166,559   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

55

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Small Company Value Trust
Series NAV		     Strategic Income Opportunities Trust
Series I		     Strategic Income Opportunities Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 7,239      $ 774      $ 64,994      $ 83,589      $ 90,963      $ 138,369   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (9,237 )      (9,912 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      7,239        774        55,757        73,677        90,963        138,369   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      73,700        28,514        —          3        —          —     

Net realized gain (loss)

      107,240        110,739        1,090        9,224        (11,047 )      24,792   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      180,940        139,253        1,090        9,227        (11,047 )      24,792   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (229,289 )      (141,248 )      (49,829 )      9,734        (29,457 )      16,781   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (41,110 )      (1,221 )      7,018        92,638        50,459        179,942   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      173,760        98,031        16,669        16,405        312,179        297,078   

Transfers between sub-accounts and the company

      (706,913 )      127,186        890,702        (120,724 )      (248,069 )      612,135   

Transfers on general account policy loans

      (27,027 )      (3,722 )      41        (96 )      (214,973 )      (103,776 ) 

Withdrawals

      (302,596 )      (34,992 )      (35,303 )      (16,523 )      (143,188 )      (676,202 ) 

Annual contract fee

      (33,549 )      (34,814 )      (100,401 )      (103,049 )      (121,661 )      (90,894 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (896,325 )      151,689        771,708        (223,987 )      (415,712 )      38,341   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (937,435 )      150,468        778,726        (131,349 )      (365,253 )      218,283   

Contract owners’ equity at beginning of period

      1,391,555        1,241,087        1,845,517        1,976,866        3,827,550        3,609,267   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 454,120      $ 1,391,555      $ 2,624,243      $ 1,845,517      $ 3,462,297      $ 3,827,550   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      60,990        54,470        75,032        84,454        199,884        198,151   

Units issued

      14,172        24,233        68,115        40,171        40,198        68,809   

Units redeemed

      (54,098 )      (17,713 )      (38,212 )      (49,593 )      (61,541 )      (67,076 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      21,064        60,990        104,935        75,032        178,541        199,884   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

56

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Total Bond Market Trust B
Series NAV		     Total Return Trust
Series I		     Total Return Trust
Series NAV		  
     2015     2014     2015 (d)     2014     2015 (d)     2014  

Income:

             

Dividend distributions received

    $ 499,249      $ 541,519      $ 1,147,747      $ 393,042      $ 3,170,383      $ 902,977   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (13,050 )      (44,326 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      499,249        541,519        1,134,697        348,716        3,170,383        902,977   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          522,437        —          1,443,110        —     

Net realized gain (loss)

      30,337        (368,132 )      (1,666,503 )      (79,576 )      (5,144,838 )      (446,104 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      30,337        (368,132 )      (1,144,066 )      (79,576 )      (3,701,728 )      (446,104 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (500,412 )      705,637        256,396        200,889        1,014,815        718,322   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      29,174        879,024        247,027        470,029        483,470        1,175,195   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,023,825        1,145,713        9,630        106,974        1,275,500        2,297,010   

Transfers between sub-accounts and the company

      (432,600 )      2,104,360        (13,529,247 )      3,790,574        (28,942,073 )      1,631,996   

Transfers on general account policy loans

      9,831        6,635        (17,599 )      7,568        (385,416 )      (236,787 ) 

Withdrawals

      (469,960 )      (483,811 )      (10,157 )      714        (292,437 )      (477,350 ) 

Annual contract fee

      (248,907 )      (232,717 )      (99,703 )      (325,407 )      (168,112 )      (490,475 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (117,811 )      2,540,180        (13,647,076 )      3,580,423        (28,512,538 )      2,724,394   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (88,637 )      3,419,204        (13,400,049 )      4,050,452        (28,029,068 )      3,899,589   

Contract owners’ equity at beginning of period

      16,376,223        12,957,019        13,400,049        9,349,597        28,029,068        24,129,479   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 16,287,586      $ 16,376,223      $ —        $ 13,400,049      $ —        $ 28,029,068   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      693,208        581,698        475,980        347,788        1,554,096        1,401,145   

Units issued

      582,637        592,035        56,183        306,116        116,351        632,285   

Units redeemed

      (588,474 )      (480,525 )      (532,163 )      (177,924 )      (1,670,447 )      (479,334 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      687,371        693,208        —          475,980        —          1,554,096   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(d)

Terminated as an investment option and funds transferred to Core Bond Trust on April 27, 2015.

 

See accompanying notes.

 

57

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Total Stock Market Index Trust
Series I		     Total Stock Market Index Trust
Series NAV		     U.S. Equity Trust
Series I		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 71,820      $ 34,436      $ 23,608      $ 18,319      $ 29,857      $ 19,817   

Expenses:

             

Mortality and expense risk and administrative charges

      (14,757 )      (12,038 )      —          —          (6,275 )      (6,879 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      57,063        22,398        23,608        18,319        23,582        12,938   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      90,697        45,207        48,570        22,911        (1 )      —     

Net realized gain (loss)

      476,589        34,764        24,658        91,059        21,416        98,353   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      567,286        79,971        73,228        113,970        21,415        98,353   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (509,074 )      198,205        (110,302 )      34,333        (41,195 )      47,143   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      115,275        300,574        (13,466 )      166,622        3,802        158,434   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,785        1,206        268,049        215,398        25,426        28,978   

Transfers between sub-accounts and the company

      3,116,036        951,261        93,998        625,306        195,974        (111,025 ) 

Transfers on general account policy loans

      —          —          (21,296 )      (158,615 )      62,141        64,541   

Withdrawals

      (384 )      (11,337 )      (55,974 )      (57,916 )      (503 )      (90,744 ) 

Annual contract fee

      (36,231 )      (19,326 )      (117,942 )      (99,069 )      (74,337 )      (85,571 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      3,081,206        921,804        166,835        525,104        208,701        (193,821 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      3,196,481        1,222,378        153,369        691,726        212,503        (35,387 ) 

Contract owners’ equity at beginning of period

      2,980,160        1,757,782        1,552,966        861,240        1,343,040        1,378,427   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 6,176,641      $ 2,980,160      $ 1,706,335      $ 1,552,966      $ 1,555,543      $ 1,343,040   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      133,517        87,511        19,481        12,042        92,865        105,444   

Units issued

      237,571        50,734        4,660        12,439        20,213        42,779   

Units redeemed

      (96,619 )      (4,728 )      (2,623 )      (5,000 )      (5,682 )      (55,358 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      274,469        133,517        21,518        19,481        107,396        92,865   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

58

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     U.S. Equity Trust
Series NAV		     Ultra Short Term Bond Trust
Series I		     Ultra Short Term Bond Trust
Series NAV		  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 44,755      $ 37,448      $ 118      $ 354      $ 12,968      $ 9,665   

Expenses:

             

Mortality and expense risk and administrative charges

      —          —          (59 )      (143 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      44,755        37,448        59        211        12,968        9,665   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —          —          —          —          —          —     

Net realized gain (loss)

      279,410        101,914        (6 )      (489 )      (8,107 )      (2,664 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      279,410        101,914        (6 )      (489 )      (8,107 )      (2,664 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (312,252 )      100,780        (116 )      138        (4,930 )      (7,799 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      11,913        240,142        (63 )      (140 )      (69 )      (798 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      74,358        87,594        114        322        508,925        61,401   

Transfers between sub-accounts and the company

      (672,321 )      207,209        —          15,554        18,927        477,420   

Transfers on general account policy loans

      (108,723 )      (51,108 )      —          —          —          —     

Withdrawals

      (85,125 )      (63,704 )      —          (22,810 )      2        (5,369 ) 

Annual contract fee

      (59,609 )      (45,713 )      (318 )      (1,463 )      (11,434 )      (13,814 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (851,420 )      134,278        (204 )      (8,397 )      516,420        519,638   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (839,507 )      374,420        (267 )      (8,537 )      516,351        518,840   

Contract owners’ equity at beginning of period

      3,020,558        2,646,138        9,125        17,662        736,071        217,231   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 2,181,051      $ 3,020,558      $ 8,858      $ 9,125      $ 1,252,422      $ 736,071   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      206,068        200,517        931        1,793        73,092        21,577   

Units issued

      20,628        47,457        9        1,636        117,321        70,117   

Units redeemed

      (78,677 )      (41,906 )      (30 )      (2,498 )      (66,064 )      (18,602 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      148,019        206,068        910        931        124,349        73,092   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

59

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Utilities Trust Series I     Utilities Trust Series NAV     Value Trust Series I  
     2015     2014     2015     2014     2015     2014  

Income:

             

Dividend distributions received

    $ 44,428      $ 64,745      $ 137,037      $ 130,407      $ 13,360      $ 11,955   

Expenses:

             

Mortality and expense risk and administrative charges

      (8,192 )      (11,542 )      —          —          (15,458 )      (14,897 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      36,236        53,203        137,037        130,407        (2,098 )      (2,942 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      138,180        81,072        417,272        146,192        323,267        240,417   

Net realized gain (loss)

      222,125        164,895        (666,233 )      135,613        69,401        259,724   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      360,305        245,967        (248,961 )      281,805        392,668        500,141   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (617,627 )      (85,285 )      (646,545 )      12,128        (610,023 )      (288,038 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (221,086 )      213,885        (758,469 )      424,340        (219,453 )      209,161   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      5,770        4,331        355,939        893,322        49,820        34,487   

Transfers between sub-accounts and the company

      (680,554 )      186,947        (2,040,602 )      1,867,214        129,998        (139,197 ) 

Transfers on general account policy loans

      —          294        (230,014 )      (80,728 )      (288 )      125   

Withdrawals

      (48,713 )      (3,135 )      (63,590 )      (131,913 )      (38,918 )      (42,561 ) 

Annual contract fee

      (56,795 )      (70,591 )      (203,141 )      (147,495 )      (239,119 )      (205,425 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      (780,292 )      117,846        (2,181,408 )      2,400,400        (98,507 )      (352,571 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      (1,001,378 )      331,731        (2,939,877 )      2,824,740        (317,960 )      (143,410 ) 

Contract owners’ equity at beginning of period

      2,201,188        1,869,457        4,484,351        1,659,611        2,527,117        2,670,527   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,199,810      $ 2,201,188      $ 1,544,474      $ 4,484,351      $ 2,209,157      $ 2,527,117   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2015     2014     2015     2014     2015     2014  

Units, beginning of period

      63,595        60,473        150,086        62,610        48,637        55,655   

Units issued

      12,677        22,683        16,749        102,042        24,006        10,238   

Units redeemed

      (35,778 )      (19,561 )      (106,176 )      (14,566 )      (25,693 )      (17,256 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      40,494        63,595        60,659        150,086        46,950        48,637   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS’ EQUITY

For the years ended December 31,

 

 

     Value Trust Series NAV  
     2015     2014  

Income:

     

Dividend distributions received

    $ 9,318      $ 7,125   

Expenses:

     

Mortality and expense risk and administrative charges

      —          —     
  

 

 

    

 

 

  

Net investment income (loss)

      9,318        7,125   
  

 

 

    

 

 

  

Realized gains (losses) on investments:

     

Capital gain distributions received

      194,530        119,811   

Net realized gain (loss)

      61,657        85,466   
  

 

 

    

 

 

  

Realized gains (losses)

      256,187        205,277   
  

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (403,757 )      (95,614 ) 
  

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from operations

      (138,252 )      116,788   
  

 

 

    

 

 

  

Changes from principal transactions:

     

Purchase payments

      184,164        150,399   

Transfers between sub-accounts and the company

      113,782        23,672   

Transfers on general account policy loans

      (18,702 )      (6,923 ) 

Withdrawals

      (52,048 )      (5,115 ) 

Annual contract fee

      (45,477 )      (41,660 ) 
  

 

 

    

 

 

  

Net increase (decrease) in contract owners’ equity from principal transactions

      181,719        120,373   
  

 

 

    

 

 

  

Total increase (decrease) in contract owners’ equity

      43,467        237,161   

Contract owners’ equity at beginning of period

      1,373,280        1,136,119   
  

 

 

    

 

 

  

Contract owners’ equity at end of period

    $ 1,416,747      $ 1,373,280   
  

 

 

    

 

 

  
     2015     2014  

Units, beginning of period

      50,565        45,967   

Units issued

      14,103        12,307   

Units redeemed

      (7,435 )      (7,709 ) 
  

 

 

    

 

 

  

Units, end of period

      57,233        50,565   
  

 

 

    

 

 

  

 

See accompanying notes.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS

December 31, 2015

 

1.

Organization

John Hancock Life Insurance Company (U.S.A.) Separate Account N (the “Account”) is a separate account established by John Hancock Life Insurance Company (U.S.A.) (the “Company”). The Account operates as a Unit Investment Trust under the Investment Company Act of 1940, as amended (the “Act”) and is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 Financial Services – Investment Companies. The Account consists of 106 active sub-accounts which are exclusively invested in a corresponding portfolio of the John Hancock Variable Insurance Trust (the “Trust”), and 2 active sub-accounts that are invested in portfolios of other Non-affiliated Trusts (the “Non-affiliated Trusts”). The Trust and Non-Affiliated Trusts are registered under the Act as an open-ended management investment company, commonly known as a mutual fund, which does not transact with the general public. The Account is a funding vehicle for the allocation of net premiums under single premium variable life and variable universal life insurance contracts (the “Contracts”) issued by the Company.

The Company is a stock life insurance company incorporated under the laws of Michigan in 1979. The Company is an indirect, wholly owned subsidiary of Manulife Financial Corporation (“MFC”), a Canadian based publicly traded life insurance company. MFC and its subsidiaries are known collectively as Manulife Financial.

The Company is required to maintain assets in the Account with a total fair value of at least equal to the reserves and other liabilities relating to the variable benefits under all Contracts participating in the Account. These assets may not be charged with liabilities which arise from any other business the Company conducts. However, all obligations under the Contracts are general corporate obligations of the Company.

In addition to the Account, certain contract owners may also allocate funds to the fixed account, which is part of the Company’s general account. Because of exemptive and exclusionary provisions, interests in the fixed account have not been registered under the Securities Act of 1933, and the Company’s general account has not been registered as an investment company under the Investment Company Act of 1940. Net interfund transfers include transfers between separate and general accounts.

Each sub-account holds shares of a particular series (“Portfolio”) of a registered investment company. Sub-accounts that invest in Portfolios of the Trust may offer 2 classes of units to fund Contracts issued by the Company. These classes, Series I and Series NAV, represent an interest in the same Trust Portfolio, but in different classes of that Portfolio. Series I and Series NAV shares of the Trust Portfolio differ in the level of 12b-1 fees and other expenses assessed against the Portfolio’s assets.

Sub-accounts closed in 2015 are as follows:

 

Sub-accounts Closed

    Effective Date  

Total Return Trust Series I

      04/27/2015   

Total Return Trust Series NAV

      04/27/2015   

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

2.

Significant Accounting Policies

Estimates

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

Valuation of Investments

Investments made in the Portfolios of the Trust, and of the Non-affiliated Trusts, are valued at fair value based on the reported net asset values of such Portfolios. Investment transactions are recorded on the trade date. Income from dividends, and gains from realized gain distributions are recorded on the ex-dividend date. Realized gains and losses on the sales of investments are computed on a first-in, first-out basis.

Amounts Receivable/Payable

Receivables/Payables from/to Portfolios/the Company are due to unsettled contract transactions (net of asset -based charges) and/or subsequent/preceding purchases/sales of the respective Portfolios’ shares. The amounts are due from/to either the respective Portfolio and/or the Company for the benefit of contract owners. There are no unsettled policy transactions at December 31, 2015.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

3.

Federal Income Taxes

The Account does not file separate tax returns. The taxable income of the Account is consolidated with that of the Company within the consolidated federal tax return. Any tax contingencies arising from the taxable income generated by the Account is the responsibility of the Company and the Company holds any and all tax contingencies on its financial statements. The Company’s consolidated federal tax return for the FY 2002 and onward remains open subject to examination by the internal revenue service. The Account is not a party to the consolidated tax sharing agreement thus no amount of income taxes or tax contingencies are passed through to the Account. The legal form of the Account is not taxable in any state or foreign jurisdictions.

The income taxes topic of the FASB ASC establishes a minimum threshold for financial statement recognition of the benefit of positions taken, or expected to be taken, in filing tax returns (including whether the Account is taxable in certain jurisdictions). The topic requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet the more-likely-than-not threshold would be recorded as tax expense or benefit.

The Account complies with the provisions of FASB ASC Topic 740, Income Taxes. As of December 31, 2015, the Account did not have a liability for any uncertain tax positions. The Account recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statements of Operations and Changes in Contract Owners’ Equity.

 

4.

Transactions with Affiliates

The Company has an administrative services agreement with Manulife Financial, whereby Manulife Financial or its designee, with the consent of the Company, performs certain services on behalf of the Company necessary for the operation of the Account. John Hancock Investment Management Services, LLC (“JHIMS”), a Delaware limited liability company controlled by MFC, serves as investment adviser for the Trust.

John Hancock Distributors LLC, a registered broker-dealer and wholly owned subsidiary of JHUSA, acts as the principle underwriter of the Contracts pursuant to a distribution agreement with the Company. Contracts are sold by registered representatives of either John Hancock Distributors LLC or other broker-dealers having distribution agreements with John Hancock Distributors LLC.

Certain officers of the Account are officers and directors of JHUSA or the Trust.

Contract charges, as described in Note 9, are paid to the Company.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

5.

Fair Value Measurements

ASC 820 “Fair Value Measurements and Disclosures” provides a single definition of fair value for accounting purposes, establishes a consistent framework for measuring fair value, and expands disclosure requirements about fair value measurements. ASC 820 defines fair value as the value that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; that is, an exit value. An exit value is not a forced liquidation or distressed sale.

Following ASC 820 guidance, the Account has categorized its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Account’s valuation techniques. A level is assigned to each fair value measurement based on the lowest level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:

 

•  

Level 1 – Fair value measurements that reflect unadjusted, quoted prices in active markets for identical assets and liabilities that the Account has the ability to access at the measurement date.

 

•  

Level 2 – Fair value measurements using inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.

 

•  

Level 3 – Fair value measurements using significant non market observable inputs.

All of the Account’s sub-accounts’ investments in a Portfolio of the Trust were valued at the reported net asset value of the Portfolio and categorized as Level 1 as of December 31, 2015. The following table presents the Account’s assets that are measured at fair value on a recurring basis by fair value hierarchy level under ASC 820, as of December 31, 2015:

 

     Level 1      Level 2      Level 3      Total  

Mutual Funds

    $ 711,676,816         —           —           711,676,816   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 711,676,816         —           —           711,676,816   
  

 

 

     

 

 

     

 

 

     

 

 

  

Assets owned by the Account are primarily open-ended mutual fund investments issued by the Trust. These are classified within Level 1, as fair values of the underlying funds are based upon reported net asset values (“NAV”), which represent the values at which each sub-account can redeem its investments.

Changes in valuation techniques may result in transfer in or out of an assigned level within the disclosure hierarchy. Transfers between investment levels may occur as the availability of a price source or data used in an investment’s valuation changes. Transfers between investment levels are recognized at the beginning of the reporting period. There have been no transfers between any level of fair value measurements during the period ended December 31, 2015.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

6.

Purchases and Sales of Investments

The cost of purchases including reinvestment of dividend distributions and proceeds from the sales of investments in the Portfolios of the Trust and Non-affiliated Trusts during 2015 were as follows:

 

     Purchases      Sales  

Sub-Account

      

500 Index Fund B Series NAV

    $ 41,170,190       $ 38,918,221   

Active Bond Trust Series I

      508,670         505,635   

Active Bond Trust Series NAV

      222,961         123,065   

All Cap Core Trust Series I

      26,943         71,383   

All Cap Core Trust Series NAV

      176,816         92,215   

Alpha Opportunities Trust Series I

      8,022         2,587   

Alpha Opportunities Trust Series NAV

      578,923         511,347   

American Asset Allocation Trust Series I

      1,800,345         1,493,846   

American Global Growth Trust Series I

      5,723,275         5,480,961   

American Growth Trust Series I

      8,918,812         11,461,339   

American Growth-Income Trust Series I

      2,262,230         1,698,713   

American International Trust Series I

      5,705,190         6,662,340   

American New World Trust Series I

      2,051,022         1,729,014   

Blue Chip Growth Trust Series I

      3,786,956         1,288,886   

Blue Chip Growth Trust Series NAV

      20,616,590         8,473,647   

Bond Trust Series I

      6,119,868         854,982   

Bond Trust Series NAV

      149,778         92,313   

Capital Appreciation Trust Series I

      2,329,874         1,074,969   

Capital Appreciation Trust Series NAV

      848,839         266,463   

Capital Appreciation Value Trust Series I

      629,572         2,981,792   

Capital Appreciation Value Trust Series NAV

      130,028         17,343   

Core Bond Trust Series I

      16,223,604         4,935,926   

Core Bond Trust Series NAV

      34,584,062         11,773,167   

Core Strategy Trust Series I

      960,963         951,456   

Core Strategy Trust Series NAV

      362,090         211,510   

Emerging Markets Value Trust Series I

      7,064         83,332   

Emerging Markets Value Trust Series NAV

      375,832         373,531   

Equity-Income Trust Series I

      3,033,648         5,493,750   

Equity-Income Trust Series NAV

      16,217,044         15,909,437   

Financial Industries Trust Series I

      724,620         1,307,051   

Financial Industries Trust Series NAV

      813,301         686,158   

Franklin Templeton Founding Allocation Trust Series I

      5,300         5,699   

Franklin Templeton Founding Allocation Trust Series NAV

      41,890         111,829   

Fundamental All Cap Core Trust Series I

      161,352         27,568   

Fundamental All Cap Core Trust Series NAV

      421,476         105,192   

Fundamental Large Cap Value Trust Series I

      1,210,654         2,602,731   

Fundamental Large Cap Value Trust Series NAV

      3,581,459         3,109,634   

Global Bond Trust Series I

      2,023,182         3,270,107   

Global Bond Trust Series NAV

      2,149,287         2,718,226   

Global Trust Series I

      746,062         1,534,502   

Global Trust Series NAV

      344,262         382,211   

Health Sciences Trust Series I

      5,092,188         2,956,633   

Health Sciences Trust Series NAV

      3,752,415         3,056,902   

High Yield Trust Series I

      913,629         1,595,488   

High Yield Trust Series NAV

      1,610,144         2,820,949   

International Core Trust Series I

      1,250,610         1,297,327   

International Core Trust Series NAV

      589,924         477,695   

International Equity Index Trust B Series I

      1,863,905         1,297,183   

International Equity Index Trust B Series NAV

      3,957,569         3,565,754   

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

6. Purchases and Sales of Investments — (continued):

 

     Purchases      Sales  

Sub-Account

      

International Growth Stock Trust Series I

    $ 1,370,152       $ 75,361   

International Growth Stock Trust Series NAV

      2,366,002         1,781,857   

International Small Company Trust Series I

      374,218         807,442   

International Small Company Trust Series NAV

      96,330         251,303   

International Value Trust Series I

      1,961,365         1,505,141   

International Value Trust Series NAV

      893,230         947,201   

Investment Quality Bond Trust Series I

      2,538,394         2,613,053   

Investment Quality Bond Trust Series NAV

      400,137         359,568   

Lifestyle Aggressive MVP Series I

      213,955         917,554   

Lifestyle Aggressive MVP Series NAV

      2,237,385         2,473,962   

Lifestyle Balanced MVP Series I

      2,434,709         1,962,018   

Lifestyle Balanced MVP Series NAV

      5,287,132         4,941,998   

Lifestyle Conservative MVP Series I

      1,612,244         1,895,188   

Lifestyle Conservative MVP Series NAV

      2,073,755         2,731,764   

Lifestyle Growth MVP Series I

      1,535,464         1,030,356   

Lifestyle Growth MVP Series NAV

      6,040,976         4,414,492   

Lifestyle Moderate MVP Series I

      751,439         595,033   

Lifestyle Moderate MVP Series NAV

      1,933,734         1,786,904   

M Capital Appreciation (a)

      118,752         9,443   

M Large Cap Growth (a)

      1         701,697   

Mid Cap Index Trust Series I

      3,956,607         2,477,876   

Mid Cap Index Trust Series NAV

      27,998,852         9,792,731   

Mid Cap Stock Trust Series I

      1,353,415         409,011   

Mid Cap Stock Trust Series NAV

      8,711,289         7,915,826   

Mid Value Trust Series I

      2,838,194         3,738,854   

Mid Value Trust Series NAV

      9,225,664         19,900,313   

Money Market Trust B Series NAV

      50,738,631         50,895,658   

Money Market Trust Series I

      24,020,499         22,836,474   

PIMCO All Asset (a)

      687,239         783,415   

Real Estate Securities Trust Series I

      2,029,121         3,442,586   

Real Estate Securities Trust Series NAV

      5,295,540         6,403,111   

Real Return Bond Trust Series I

      3,120,818         3,944,756   

Real Return Bond Trust Series NAV

      5,285,288         6,393,539   

Science & Technology Trust Series I

      4,200,796         2,741,066   

Science & Technology Trust Series NAV

      1,456,658         1,160,907   

Short Term Government Income Trust Series I

      1,266,769         1,369,627   

Short Term Government Income Trust Series NAV

      927,184         922,079   

Small Cap Growth Trust Series I

      479,768         167,822   

Small Cap Growth Trust Series NAV

      6,042,554         5,183,299   

Small Cap Index Trust Series I

      3,236,994         2,252,333   

Small Cap Index Trust Series NAV

      2,875,791         2,594,796   

Small Cap Opportunities Trust Series I

      728,452         1,603,382   

Small Cap Opportunities Trust Series NAV

      181,047         174,173   

Small Cap Value Trust Series I

      1,244,174         1,179,567   

Small Cap Value Trust Series NAV

      3,708,529         3,093,208   

Small Company Value Trust Series I

      1,327,413         2,926,332   

Small Company Value Trust Series NAV

      402,283         1,217,669   

Strategic Income Opportunities Trust Series I

      1,801,288         973,823   

Strategic Income Opportunities Trust Series NAV

      875,204         1,199,950   

Total Bond Market Trust B Series NAV

      14,342,973         13,961,536   

Total Return Trust Series I (b)

      3,321,193         15,311,134   

Total Return Trust Series NAV (b)

      6,741,313         30,640,357   

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

6.

Purchases and Sales of Investments — (continued):

 

 

     Purchases      Sales  

Sub-Account

      

Total Stock Market Index Trust Series I

    $ 5,458,548       $ 2,229,583   

Total Stock Market Index Trust Series NAV

      448,755         209,743   

U.S. Equity Trust Series I

      319,142         86,859   

U.S. Equity Trust Series NAV

      347,171         1,153,836   

Ultra Short Term Bond Trust Series I

      205         351   

Ultra Short Term Bond Trust Series NAV

      1,195,782         666,394   

Utilities Trust Series I

      639,926         1,245,801   

Utilities Trust Series NAV

      1,053,597         2,680,697   

Value Trust Series I

      1,528,469         1,305,808   

Value Trust Series NAV

      587,703         202,135   

 

(a)

Sub-account that invests in non-affiliated Trust.

 

(b)

Terminated as an investment option and funds transferred to Core Bond Trust on April 27, 2015.

 

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Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values

A summary of unit values and units outstanding for variable life contracts and the expense and income ratios, excluding expenses of the underlying Portfolios, were as follows:

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

500 Index Fund B Series NAV

       2015          1,981        $ 43.20 to $25.06        $ 71,734          0.70% to 0.00 %        1.79 %        1.15% to 0.44 % 
      2014          1,978          26.70 to 24.48          70,166          0.90 to 0.00          1.74          13.43 to 12.41   
      2013          1,787          37.65 to 22.15          55,400          0.70 to 0.00          1.83          32.03 to 31.11   
      2012          1,599          28.52 to 16.90          38,999          0.70 to 0.00          1.07          15.80 to 14.99   
      2011          1,391          24.63 to 14.50          29,724          0.70 to 0.00          1.93          1.87 to 0.95   

Active Bond Trust Series I

       2015          30          21.37 to 20.38          623          0.65 to 0.20          4.95          (0.03) to (0.49 ) 
      2014          32          21.80 to 19.99          652          0.90 to 0.00          3.76          6.82 to 5.85   
      2013          29          20.06 to 19.30          556          0.65 to 0.20          6.73          0.05 to (0.40 ) 
      2012          28          20.05 to 19.38          544          0.65 to 0.20          4.45          9.49 to 8.99   
      2011          52          18.56 to 17.48          927          0.65 to 0.00          4.54          5.81 to 4.87   

Active Bond Trust Series NAV

       2015          5          71.15 to 71.15          340          0.00 to 0.00          5.26          0.12 to 0.12   
      2014          4          71.07 to 71.07          258          0.00 to 0.00          4.64          6.97 to 6.97   
      2013          3          66.44 to 66.44          180          0.00 to 0.00          5.68          0.19 to 0.19   
      2012          4          66.31 to 66.31          239          0.00 to 0.00          4.25          9.76 to 9.76   
      2011          4          60.42 to 60.42          234          0.00 to 0.00          4.23          5.97 to 5.97   

All Cap Core Trust Series I

       2015          15          31.44 to 29.18          450          0.70 to 0.20          0.93          2.39 to 1.88   
      2014          17          31.58 to 27.85          485          0.90 to 0.00          1.01          9.64 to 8.66   
      2013          17          28.06 to 14.71          460          0.70 to 0.20          1.24          34.06 to 33.39   
      2012          21          20.68 to 19.72          408          0.70 to 0.30          0.97          16.21 to 15.75   
      2011          24          18.40 to 9.50          414          0.65 to 0.00          0.94          0.41 to (0.49 ) 

All Cap Core Trust Series NAV

       2015          77          20.76 to 20.76          1,594          0.00 to 0.00          1.02          2.64 to 2.64   
      2014          73          20.23 to 20.23          1,485          0.00 to 0.00          1.01          9.68 to 9.68   
      2013          58          18.44 to 18.44          1,064          0.00 to 0.00          1.33          34.44 to 34.44   
      2012          59          13.72 to 13.72          813          0.00 to 0.00          1.24          16.62 to 16.62   
      2011          21          11.76 to 11.76          244          0.00 to 0.00          1.09          0.40 to 0.40   

Alpha Opportunities Trust Series I

       2015          2          22.06 to 22.06          42          0.65 to 0.65          0.64          (0.65) to (0.65)   
      2014          2          23.02 to 21.90          44          0.90 to 0.00          0.55          8.00 to 7.03   
      2013          2          20.69 to 20.69          43          0.65 to 0.65          0.35          34.68 to 34.68   
      2012          3          15.36 to 15.36          40          0.65 to 0.65          0.67          20.55 to 20.55   
      2011          1          12.96 to 12.66          13          0.65 to 0.00          0.62          (8.14) to (8.96 ) 

Alpha Opportunities Trust Series NAV

       2015          14          24.36 to 24.36          331          0.00 to 0.00          0.68          (0.03) to (0.03)   
      2014          19          24.37 to 24.37          451          0.00 to 0.00          0.94          8.12 to 8.12   
      2013          2          22.54 to 22.54          45          0.00 to 0.00          1.01          35.58 to 35.58   
      2012          1          16.63 to 16.63          19          0.00 to 0.00          0.76          21.38 to 21.38   
      2011          1          13.70 to 13.70          11          0.00 to 0.00          0.35          (8.02) to (8.02 ) 

American Asset Allocation Trust Series I

       2015          598          15.38 to 14.57          8,795          0.70 to 0.00          2.04          1.06 to 0.35   
      2014          638          15.22 to 14.33          9,330          0.90 to 0.00          1.40          5.05 to 4.10   
      2013          698          14.49 to 13.92          9,769          0.70 to 0.00          1.05          23.30 to 22.44   
      2012          756          11.75 to 11.37          8,631          0.70 to 0.00          1.43          15.77 to 14.95   
      2011          978          10.15 to 9.82          9,709          0.65 to 0.00          1.40          0.91 to 0.01   

American Global Growth Trust Series I

       2015          27          15.66 to 15.14          427          0.65 to 0.00          1.58          6.64 to 5.94   
      2014          20          14.68 to 14.14          294          0.90 to 0.00          1.03          1.97 to 1.05   
      2013          14          14.40 to 14.11          204          0.65 to 0.00          0.83          28.63 to 27.80   
      2012          34          11.19 to 11.04          380          0.65 to 0.00          0.50          22.12 to 21.33   
      2011          38          9.17 to 9.07          344          0.65 to 0.00          1.06          10.05 to (9.24 ) 

American Growth Trust Series I

       2015          488          31.29 to 22.54          11,721          0.65 to 0.00          0.23          6.44 to 5.75   
      2014          606          28.74 to 21.17          13,915          0.90 to 0.00          0.83          8.13 to 7.17   
      2013          626          28.87 to 27.54          13,320          0.65 to 0.00          0.49          29.61 to 28.76   
      2012          732          21.39 to 15.11          13,000          0.65 to 0.00          0.38          17.49 to 16.73   
      2011          942          19.36 to 17.93          15,092          0.65 to 0.00          0.21          (4.63) to (5.48 ) 

American Growth-Income Trust Series I

       2015          469          27.62 to 20.19          11,818          0.70 to 0.00          1.32          1.11 to 0.41   
      2014          502          26.88 to 19.97          12,621          0.90 to 0.00          0.93          10.25 to 9.27   
      2013          507          26.48 to 25.12          11,631          0.70 to 0.00          0.97          33.02 to 32.09   
      2012          545          19.02 to 13.62          9,568          0.70 to 0.00          1.22          17.16 to 16.33   
      2011          647          17.35 to 16.08          10,081          0.65 to 0.00          1.15          (2.09) to (2.97 ) 

American International Trust Series I

       2015          849          28.24 to 17.40          15,951          0.65 to 0.00          1.13          (4.82) to (5.44)   
      2014          886          29.02 to 18.28          17,920          0.90 to 0.00          1.07          (3.05) to (3.92 ) 
      2013          878          32.50 to 31.01          18,331          0.65 to 0.00          0.99          21.20 to 20.41   
      2012          887          25.75 to 15.55          16,146          0.65 to 0.00          0.99          17.50 to 16.73   
      2011          1,290          23.31 to 21.60          22,460          0.65 to 0.00          1.28         
 		 15.11 to
(14.30		   
) 

American New World Trust Series I

       2015          130          15.47 to 14.81          1,995          0.65 to 0.00          1.67          (3.66) to (4.29)   
      2014          128          16.05 to 15.26          2,025          0.90 to 0.00          1.21          (8.21) to (9.03 ) 
      2013          33          17.49 to 16.97          570          0.65 to 0.00          1.14          10.89 to 10.17   
      2012          46          15.77 to 15.40          715          0.65 to 0.00          0.72          17.37 to 16.60   
      2011          37          13.44 to 13.12          493          0.65 to 0.00          1.48          15.10 to (14.30 ) 

Blue Chip Growth Trust Series I

       2015          174          52.74 to 48.92          8,641          0.70 to 0.20          0.00          10.84 to 10.29   
      2014          154          48.93 to 43.14          6,900          0.90 to 0.00          0.00          9.07 to 8.09   

 

69

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Blue Chip Growth Trust Series I

       2013          165        $ 43.71 to $22.34        $ 6,783          0.70% to 0.20 %        0.27 %        41.05% to 40.34 % 
      2012          189          30.99 to 29.18          5,515          0.70 to 0.20          0.09          18.08 to 17.49   
      2011          416          26.83 to 13.51          10,454          0.65 to 0.00          0.01          1.44 to 0.53   

Blue Chip Growth Trust Series NAV

       2015          345          135.88 to 135.88          46,931          0.00 to 0.00          0.00          11.13 to 11.13   
      2014          310          122.28 to 122.28          37,958          0.00 to 0.00          0.00          9.11 to 9.11   
      2013          258          112.07 to 112.07          28,909          0.00 to 0.00          0.35          41.43 to 41.43   
      2012          209          79.24 to 79.24          16,560          0.00 to 0.00          0.14          18.39 to 18.39   
      2011          215          66.93 to 66.93          14,394          0.00 to 0.00          0.01          1.45 to 1.45   

Bond Trust Series I

       2015          528          11.08 to 10.88          5,810          0.65 to 0.20          3.49          0.01 to (0.41 ) 
      2014          69          11.16 to 10.84          764          0.90 to 0.00          3.08          5.53 to 4.57   
      2013          47          10.52 to 10.42          496          0.65 to 0.20          3.09          (1.56) to (2.01 ) 
      2012          41          10.69 to 10.63          434          0.65 to 0.20          2.83          6.10 to 5.64   
      2011          122          10.08 to 10.06          1,232          0.65 to 0.00          14.34          0.78 to 0.62   

Bond Trust Series NAV

       2015          62          11.20 to 11.20          699          0.00 to 0.00          3.02          0.30 to 0.30   
      2014          59          11.17 to 11.17          661          0.00 to 0.00          2.64          5.59 to 5.59   
      2013          52          10.58 to 10.58          548          0.00 to 0.00          2.66          (1.32) to (1.32 ) 
      2012          84          10.72 to 10.72          896          0.00 to 0.00          3.96          6.31 to 6.31   
      2011          45          10.08 to 10.08          454          0.00 to 0.00          14.78          0.82 to 0.82   

Capital Appreciation Trust Series I

       2015          327          26.81 to 24.92          8,542          0.70 to 0.20          0.00          11.23 to 10.68   
      2014          332          24.78 to 21.90          7,804          0.90 to 0.00          0.05          9.65 to 8.67   
      2013          384          22.02 to 20.67          8,248          0.70 to 0.20          0.21          37.14 to 36.45   
      2012          167          16.06 to 15.15          2,598          0.70 to 0.20          0.15          15.75 to 15.16   
      2011          311          14.18 to 12.88          4,191          0.65 to 0.00          0.07          0.07 to (0.82 ) 

Capital Appreciation Trust Series NAV

       2015          65          27.11 to 27.11          1,756          0.00 to 0.00          0.03          11.47 to 11.47   
      2014          54          24.32 to 24.32          1,316          0.00 to 0.00          0.09          9.68 to 9.68   
      2013          49          22.17 to 22.17          1,087          0.00 to 0.00          0.24          37.50 to 37.50   
      2012          54          16.13 to 16.13          873          0.00 to 0.00          0.22          16.03 to 16.03   
      2011          41          13.90 to 13.90          571          0.00 to 0.00          0.12          0.11 to 0.11   

Capital Appreciation Value Trust Series I

       2015          18          17.92 to 17.52          321          0.65 to 0.35          0.39          4.92 to 4.60   
      2014          180          17.48 to 16.46          3,068          0.90 to 0.00          1.95          12.22 to 11.22   
      2013          34          15.27 to 15.02          511          0.65 to 0.35          1.45          21.88 to 21.53   
      2012          27          12.53 to 12.36          339          0.65 to 0.35          1.41          14.19 to 13.86   
      2011          39          11.12 to 10.75          430          0.65 to 0.00          1.25          3.13 to 2.21   

Capital Appreciation Value Trust Series NAV

       2015          14          18.46 to 18.46          263          0.00 to 0.00          1.40          5.27 to 5.27   
      2014          10          17.54 to 17.54          170          0.00 to 0.00          1.68          12.38 to 12.38   
      2013          7          15.60 to 15.60          106          0.00 to 0.00          1.91          22.29 to 22.29   
      2012          3          12.76 to 12.76          45          0.00 to 0.00          1.63          14.77 to 14.77   
      2011          0          11.12 to 11.12          3          0.00 to 0.00          0.12          3.09 to 3.09   

Core Bond Trust Series I

       2015          557          19.87 to 18.96          10,922          0.65 to 0.20          2.59          0.12 to (0.33)   
      2014          1          20.25 to 18.56          14          0.90 to 0.00          2.89          5.93 to 4.98   
      2013          1          18.78 to 18.07          14          0.65 to 0.20          1.60          (2.35) to (2.79 ) 
      2012          1          19.23 to 18.59          26          0.65 to 0.20          0.87          6.25 to 5.78   
      2011          25          18.35 to 17.28          447          0.65 to 0.00          10.22          8.32 to 7.35   

Core Bond Trust Series NAV

       2015          1,411          16.32 to 16.32          23,019          0.00 to 0.00          2.19          0.36 to 0.36   
      2014          63          16.26 to 16.26          1,029          0.00 to 0.00          3.47          6.01 to 6.01   
      2013          29          15.34 to 15.34          446          0.00 to 0.00          1.73          (2.12) to (2.12 ) 
      2012          50          15.67 to 15.67          791          0.00 to 0.00          2.84          6.54 to 6.54   
      2011          41          14.71 to 14.71          599          0.00 to 0.00          3.28          8.32 to 8.32   

Core Strategy Trust Series I

       2015          7          14.45 to 13.95          104          0.65 to 0.20          2.00          (0.30) to (0.76 ) 
      2014          7          14.68 to 13.82          103          0.90 to 0.00          2.34          6.10 to 5.16   
      2013          11          13.33 to 13.33          151          0.65 to 0.65          7.87          18.39 to 18.39   
      2012          0          11.26 to 11.26          1          0.65 to 0.65          3.89          11.79 to 11.79   
      2011          0          10.32 to 9.98          1          0.65 to 0.00          2.25          0.20 to (0.69 ) 

Core Strategy Trust Series NAV

       2015          186          14.73 to 14.73          2,740          0.00 to 0.00          2.24          (0.06) to (0.06 ) 
      2014          187          14.73 to 14.73          2,755          0.00 to 0.00          3.64          6.14 to 6.14   
      2013          17          13.88 to 13.88          241          0.00 to 0.00          3.06          19.29 to 19.29   
      2012          3          11.64 to 11.64          30          0.00 to 0.00          3.18          12.58 to 12.58   
      2011          2          10.34 to 10.34          18          0.00 to 0.00          1.65          0.19 to 0.19   

Emerging Markets Value Trust Series I

       2015          6          11.07 to 10.79          68          0.65 to 0.35          1.99          (19.36) to (19.60 ) 
      2014          13          14.10 to 13.16          174          0.90 to 0.00          0.96          (5.50) to (6.35 ) 
      2013          67          14.58 to 14.29          965          0.65 to 0.35          1.10          (3.55) to (3.84 ) 
      2012          90          15.12 to 14.86          1,345          0.65 to 0.35          1.11          18.12 to 17.76   
      2011          58          13.01 to 12.47          742          0.65 to 0.00          1.41          27.71 to (27.00 ) 

Emerging Markets Value Trust Series NAV

       2015          91          9.17 to 9.17          833          0.00 to 0.00          2.21          (19.05) to (19.05 ) 
      2014          94          11.32 to 11.32          1,069          0.00 to 0.00          1.65          (5.37) to (5.37 ) 
      2013          134          11.97 to 11.97          1,607          0.00 to 0.00          1.49          (3.18) to (3.18 ) 
      2012          95          12.36 to 12.36          1,174          0.00 to 0.00          0.97          18.49 to 18.49   
      2011          97          10.43 to 10.43          1,016          0.00 to 0.00          2.03          27.02 to (27.00 ) 

Equity -Income Trust Series I

       2015          240          40.24 to 37.33          9,307          0.70 to 0.20          1.68          (6.93) to (7.40 ) 
      2014          330          44.46 to 39.20          13,816          0.90 to 0.00          1.98          7.47 to 6.51   

 

70

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Equity-Income Trust Series I

       2013          301        $ 40.31 to $28.33        $ 11,703          0.70% to 0.20 %        1.84 %        29.78% to 29.14 % 
      2012          367          31.06 to 29.25          11,018          0.70 to 0.20          2.05          17.13 to 16.54   
      2011          474          27.11 to 18.77          12,187          0.70 to 0.00          1.73          (0.81) to (1.70 ) 

Equity -Income Trust Series NAV

       2015          824          42.79 to 42.79          35,253          0.00 to 0.00          1.98          (6.66) to (6.66 ) 
      2014          908          45.85 to 45.85          41,633          0.00 to 0.00          2.00          7.55 to 7.55   
      2013          863          42.63 to 42.63          36,784          0.00 to 0.00          2.17          30.05 to 30.05   
      2012          745          32.78 to 32.78          24,422          0.00 to 0.00          2.06          17.47 to 17.47   
      2011          749          27.90 to 27.90          20,893          0.00 to 0.00          1.90          (0.76) to (0.76 ) 

Financial Industries Trust Series I

       2015          32          22.35 to 20.93          682          0.65 to 0.20          0.60          (2.84) to (3.27 ) 
      2014          66          23.65 to 20.91          1,468          0.90 to 0.00          0.85          8.65 to 7.67   
      2013          54          21.21 to 20.04          1,105          0.65 to 0.20          0.00          30.49 to 29.90   
      2012          38          16.26 to 15.43          591          0.65 to 0.20          0.81          17.80 to 17.28   
      2011          23          14.10 to 12.81          304          0.65 to 0.00          1.01          10.32 to (9.51 ) 

Financial Industries Trust Series NAV

       2015          14          27.73 to 27.73          379          0.00 to 0.00          1.02          (2.58) to (2.58 ) 
      2014          15          28.46 to 28.46          421          0.00 to 0.00          0.68          8.64 to 8.64   
      2013          17          26.20 to 26.20          449          0.00 to 0.00          0.72          30.86 to 30.86   
      2012          16          20.02 to 20.02          322          0.00 to 0.00          0.64          18.03 to 18.03   
      2011          22          16.96 to 16.96          370          0.00 to 0.00          2.01          (9.39) to (9.39 ) 

Franklin Templeton Founding Allocation Trust Series I

       2015          1          13.00 to 13.00          9          0.65 to 0.65          2.67          (6.41) to (6.41 ) 
      2014          1          14.51 to 13.67          11          0.90 to 0.00          3.02          3.01 to 2.09   
      2013          1          13.57 to 13.57          13          0.65 to 0.65          2.46          23.63 to 23.63   
      2012          1          10.98 to 10.98          10          0.65 to 0.65          3.60          15.51 to 15.51   
      2011          1          9.74 to 9.42          7          0.65 to 0.00          20.73          (1.41) to (2.28 ) 

Franklin Templeton Founding Allocation Trust Series NAV

       2015          10          13.71 to 13.71          138          0.00 to 0.00          1.96          (5.75) to (5.75 ) 
      2014          15          14.55 to 14.55          224          0.00 to 0.00          3.49          3.06 to 3.06   
      2013          14          14.12 to 14.12          192          0.00 to 0.00          2.63          24.51 to 24.51   
      2012          12          11.34 to 11.34          137          0.00 to 0.00          2.48          16.33 to 16.33   
      2011          29          9.75 to 9.75          285          0.00 to 0.00          1.72          (1.45) to (1.45 ) 

Fundamental All Cap Core Trust Series I

       2015          12          36.99 to 34.94          438          0.65 to 0.20          0.00          3.81 to 3.34   
      2014          9          36.47 to 32.84          306          0.90 to 0.00          0.38          9.75 to 8.76   
      2013          11          32.53 to 31.01          345          0.65 to 0.20          0.93          35.61 to 35.00   
      2012          13          23.99 to 22.97          312          0.65 to 0.20          0.80          23.27 to 22.72   
      2011          15          19.80 to 18.32          282          0.65 to 0.00          0.86          (2.08) to (2.95 ) 

Fundamental All Cap Core Trust Series NAV

       2015          58          22.55 to 22.55          1,309          0.00 to 0.00          0.00          4.09 to 4.09   
      2014          47          21.66 to 21.66          1,009          0.00 to 0.00          0.48          9.81 to 9.81   
      2013          39          19.73 to 19.73          778          0.00 to 0.00          1.10          35.87 to 35.87   
      2012          38          14.52 to 14.52          545          0.00 to 0.00          0.90          23.67 to 23.67   
      2011          30          11.74 to 11.74          347          0.00 to 0.00          1.22          (2.02) to (2.02 ) 

Fundamental Large Cap Value Trust Series I

       2015          217          27.40 to 25.85          5,781          0.70 to 0.20          0.97          (1.31) to (1.80 ) 
      2014          270          28.36 to 25.76          7,281          0.90 to 0.00          1.21          10.61 to 9.62   
      2013          109          25.15 to 24.08          2,672          0.65 to 0.20          0.12          32.15 to 31.56   
      2012          0          19.03 to 18.30          3          0.65 to 0.20          5.59          24.17 to 23.61   
      2011          0          15.56 to 14.52          0          0.65 to 0.00          1.01          1.75 to 0.83   

Fundamental Large Cap Value Trust Series NAV

       2015          191          19.75 to 19.75          3,773          0.00 to 0.00          1.03          (1.06) to (1.06 ) 
      2014          168          19.96 to 19.96          3,363          0.00 to 0.00          0.84          10.66 to 10.66   
      2013          116          18.04 to 18.04          2,091          0.00 to 0.00          1.11          32.46 to 32.46   
      2012          23          13.62 to 13.62          307          0.00 to 0.00          4.85          24.48 to 24.48   
      2011          18          10.94 to 10.94          198          0.00 to 0.00          1.15          1.90 to 1.90   

Fundamental Value Trust Series I

       2014          0          26.08 to 23.09          0          0.90 to 0.00          1.87          6.99 to 6.18   
      2013          207          23.76 to 22.31          4,736          0.70 to 0.20          1.17          33.25 to 32.59   
      2012          330          17.83 to 16.82          5,709          0.70 to 0.20          0.88          13.15 to 12.59   
      2011          544          16.10 to 14.62          8,360          0.70 to 0.00          0.75          (3.78) to (4.64 ) 

Fundamental Value Trust Series NAV

       2014          0          18.67 to 18.67          0          0.00 to 0.00          0.64          7.01 to 7.01   
      2013          167          17.45 to 17.45          2,913          0.00 to 0.00          1.22          33.62 to 33.62   
      2012          302          13.06 to 13.06          3,948          0.00 to 0.00          0.73          13.40 to 13.40   
      2011          256          11.52 to 11.52          2,950          0.00 to 0.00          0.88          (3.74) to (3.74 ) 

Global Bond Trust Series I

       2015          41          28.07 to 26.04          1,123          0.70 to 0.20          1.76          (3.70) to (4.17 ) 
      2014          89          29.98 to 26.43          2,487          0.90 to 0.00          0.93          2.28 to 1.36   
      2013          93          28.55 to 25.78          2,564          0.70 to 0.20          0.44          (5.61) to (6.07 ) 
      2012          104          30.25 to 28.49          3,033          0.70 to 0.20          7.12          6.81 to 6.28   
      2011          134          28.95 to 25.75          3,694          0.70 to 0.00          6.14          9.08 to 8.11   

Global Bond Trust Series NAV

       2015          201          29.73 to 29.73          5,977          0.00 to 0.00          2.49          (3.51) to (3.51 ) 
      2014          225          30.81 to 30.81          6,936          0.00 to 0.00          1.08          2.42 to 2.42   
      2013          220          30.08 to 30.08          6,618          0.00 to 0.00          0.46          (5.54) to (5.54 ) 
      2012          415          31.84 to 31.84          13,208          0.00 to 0.00          7.03          7.15 to 7.15   
      2011          463          29.72 to 29.72          13,749          0.00 to 0.00          6.84          9.08 to 9.08   

Global Trust Series I

       2015          83          28.30 to 26.25          2,224          0.70 to 0.20          1.81          (6.61) to (7.08 ) 
      2014          113          31.16 to 27.47          3,234          0.90 to 0.00          3.40          (2.60) to (3.47 ) 
      2013          60          31.17 to 22.63          1,755          0.70 to 0.20          1.65          30.82 to 30.17   
      2012          70          23.83 to 22.44          1,571          0.70 to 0.20          2.25          21.50 to 20.89   

 

71

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Global Trust Series I

       2011          55        $ 20.05 to $14.34        $ 1,036          0.65% to 0.00 %        1.36 %        (6.00)% to (6.84 )% 

Global Trust Series NAV

       2015          123          16.17 to 16.17          1,989          0.00 to 0.00          1.96          (6.33) to (6.33 ) 
      2014          128          17.26 to 17.26          2,209          0.00 to 0.00          4.54          (2.51) to (2.51 ) 
      2013          39          17.70 to 17.70          690          0.00 to 0.00          0.02          31.04 to 0.01   
      2012          30          13.51 to 13.51          412          0.00 to 0.00          2.63          21.82 to 21.82   
      2011          16          11.09 to 11.09          179          0.00 to 0.00          2.15          (5.96) to (5.96 ) 

Health Sciences Trust Series I

       2015          110          75.57 to 70.74          8,069          0.65 to 0.20          0.00          12.47 to 11.97   
      2014          100          69.05 to 61.05          6,505          0.90 to 0.00          0.00          31.83 to 30.65   
      2013          99          51.07 to 48.24          4,849          0.65 to 0.20          0.00          50.77 to 50.10   
      2012          104          33.87 to 32.14          3,410          0.65 to 0.20          0.00          31.69 to 31.09   
      2011          111          26.28 to 23.87          2,758          0.65 to 0.00          0.00          10.57 to 9.58   

Health Sciences Trust Series NAV

       2015          81          60.67 to 60.67          4,921          0.00 to 0.00          0.00          12.76 to 12.76   
      2014          83          53.81 to 53.81          4,454          0.00 to 0.00          0.00          31.85 to 31.85   
      2013          85          40.81 to 40.81          3,462          0.00 to 0.00          0.00          51.24 to 51.24   
      2012          72          26.99 to 26.99          1,947          0.00 to 0.00          0.00          31.93 to 31.93   
      2011          55          20.45 to 20.45          1,135          0.00 to 0.00          0.00          10.66 to 10.66   

High Yield Trust Series I

       2015          102          27.81 to 25.81          2,758          0.70 to 0.20          7.30          (8.51) to (8.96 ) 
      2014          134          31.25 to 27.57          3,941          0.90 to 0.00          6.42          0.12 to (0.78 ) 
      2013          162          30.42 to 24.48          4,768          0.70 to 0.20          6.93          8.30 to 7.78   
      2012          148          28.09 to 26.46          4,002          0.70 to 0.20          7.52          18.77 to 18.15   
      2011          205          24.17 to 19.17          4,701          0.65 to 0.00          7.86          0.90 to (0.01 ) 

High Yield Trust Series NAV

       2015          117          19.36 to 19.36          2,264          0.00 to 0.00          6.07          (8.38) to (8.38 ) 
      2014          185          21.14 to 21.14          3,920          0.00 to 0.00          7.74          0.00 to 0.00   
      2013          117          21.14 to 21.14          2,471          0.00 to 0.00          6.37          8.68 to 8.68   
      2012          122          19.45 to 19.45          2,370          0.00 to 0.00          8.40          19.07 to 19.07   
      2011          95          16.33 to 16.33          1,550          0.00 to 0.00          8.02          1.14 to 1.14   

International Core Trust Series I

       2015          129          19.21 to 17.83          2,389          0.70 to 0.20          2.81          (5.64) to (6.11 ) 
      2014          134          20.94 to 18.46          2,613          0.90 to 0.00          3.43          (6.70) to (7.53 ) 
      2013          144          21.86 to 17.02          3,011          0.70 to 0.20          3.00          24.74 to 24.12   
      2012          142          17.53 to 16.51          2,379          0.70 to 0.20          2.68          14.82 to 14.24   
      2011          199          15.61 to 11.97          2,920          0.65 to 0.00          2.37          10.38 to (9.57 ) 

International Core Trust Series NAV

       2015          29          15.21 to 15.21          437          0.00 to 0.00          3.21          (5.32) to (5.32 ) 
      2014          24          16.07 to 16.07          390          0.00 to 0.00          3.38          (6.76) to (6.76 ) 
      2013          24          17.23 to 17.23          408          0.65 to 0.00          3.04          25.13 to 25.13   
      2012          16          13.77 to 13.77          215          0.00 to 0.00          3.23          15.16 to 15.16   
      2011          14          11.96 to 11.96          167          0.00 to 0.00          2.07          (9.55) to (9.55 ) 

International Equity Index Trust B Series I

       2015          420          10.83 to 10.68          4,525          0.65 to 0.20          2.54          (6.11) to (6.53 ) 
      2014          382          11.58 to 11.36          4,392          0.90 to 0.00          3.21          (4.61) to (5.47 ) 
      2013          341          12.12 to 12.05          4,122          0.65 to 0.20          2.68          14.32 to 13.81   
      2012          327          10.60 to 10.59          3,460          0.65 to 0.20          6.74          5.98 to 5.91   

International Equity Index Trust B Series NAV

       2015          276          42.78 to 42.78          11,819          0.00 to 0.00          2.45          (5.80) to (5.80 ) 
      2014          274          45.42 to 45.42          12,445          0.00 to 0.00          3.02          (4.57) to (4.57 ) 
      2013          314          47.59 to 47.59          14,937          0.00 to 0.00          2.55          14.54 to 14.54   
      2012          349          41.55 to 41.55          14,502          0.00 to 0.00          1.26          17.76 to 17.76   
      2011          248          35.28 to 35.28          8,758          0.00 to 0.00          3.62          13.99 to (13.90 ) 

International Growth Stock Trust Series I

       2015          131          12.06 to 11.89          1,579          0.65 to 0.20          3.18          (2.46) to (2.90 ) 
      2014          32          12.42 to 12.18          390          0.90 to 0.00          2.16          0.20 to (0.70 ) 
      2013          48          12.37 to 12.30          590          0.65 to 0.20          1.19          18.86 to 18.33   
      2012          43          10.40 to 10.40          445          0.65 to 0.20          4.22          4.04 to 3.96   

International Growth Stock Trust Series NAV

       2015          696          12.16 to 12.16          8,457          0.00 to 0.00          1.83          (2.23) to (2.23 ) 
      2014          664          12.43 to 12.43          8,259          0.00 to 0.00          1.93          0.19 to 0.19   
      2013          645          12.41 to 12.41          8,003          0.00 to 0.00          1.27          19.18 to 19.18   
      2012          504          10.41 to 10.41          5,245          0.00 to 0.00          4.39          4.12 to 4.12   

International Small Company Trust Series I

       2015          40          14.91 to 14.46          587          0.70 to 0.20          1.51          6.32 to 5.80   
      2014          70          14.17 to 13.53          964          0.90 to 0.00          1.38          (6.89) to (7.73 ) 
      2013          71          15.09 to 14.78          1,051          0.70 to 0.20          1.77          26.10 to 25.46   
      2012          87          11.97 to 11.78          1,025          0.70 to 0.20          1.18          18.95 to 18.36   
      2011          203          10.10 to 9.91          2,031          0.65 to 0.00          1.69          (16.23) to (16.97 ) 

International Small Company Trust Series NAV

       2015          66          15.14 to 15.14          1,004          0.00 to 0.00          1.77          6.68 to 6.68   
      2014          78          14.19 to 14.19          1,103          0.00 to 0.00          1.44          (6.85) to (6.85 ) 
      2013          69          15.23 to 15.23          1,048          0.00 to 0.00          1.92          26.30 to 26.30   
      2012          69          12.06 to 12.06          837          0.00 to 0.00          1.27          19.23 to 19.23   
      2011          61          10.12 to 10.12          614          0.00 to 0.00          1.93          (16.18) to (16.18 ) 

International Value Trust Series I

       2015          174          21.19 to 19.66          3,623          0.70 to 0.20          1.92          (7.99) to (8.45 ) 
      2014          159          23.69 to 20.88          3,565          0.90 to 0.00          2.80          (12.51) to (13.29 ) 
      2013          161          26.38 to 24.72          4,125          0.70 to 0.20          1.58          25.90 to 25.27   
      2012          231          20.95 to 19.73          4,726          0.70 to 0.20          2.67          19.14 to 18.54   
      2011          336          17.98 to 16.28          5,800          0.65 to 0.00          2.18          (12.85) to (13.63 ) 

International Value Trust Series NAV

       2015          288          14.25 to 14.25          4,105          0.00 to 0.00          1.96          (7.72) to (7.72 ) 

 

72

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

International Value Trust Series NAV

       2014          297        $ 15.44 to $15.44        $ 4,589          0.00% to 0.00 %        2.99 %        (12.47)% to (12.47 )% 
      2013          320          17.64 to 17.64          5,653          0.00 to 0.00          1.94          26.21 to 26.21   
      2012          330          13.98 to 13.98          4,617          0.00 to 0.00          2.78          19.36 to 19.36   
      2011          320          11.71 to 11.71          3,750          0.00 to 0.00          2.37          (12.80) to (12.80 ) 

Investment Quality Bond Trust Series I

       2015          156          31.82 to 29.52          4,775          0.70 to 0.20          1.85          (1.02) to (1.51 ) 
      2014          169          33.07 to 29.15          5,210          0.90 to 0.00          3.35          5.48 to 4.53   
      2013          126          30.54 to 25.37          3,680          0.70 to 0.20          3.74          (2.11) to (2.60 ) 
      2012          142          31.20 to 29.38          4,236          0.70 to 0.20          1.98          7.36 to 6.83   
      2011          223          29.71 to 24.31          6,242          0.07 to 0.00          4.35          8.07 to 7.10   

Investment Quality Bond Trust Series NAV

       2015          44          15.87 to 15.87          691          0.00 to 0.00          1.94          (0.68) to (0.68 ) 
      2014          44          15.98 to 15.98          697          0.00 to 0.00          3.30          5.54 to 5.54   
      2013          29          15.14 to 15.14          433          0.00 to 0.00          4.03          (1.88) to (1.88)   
      2012          42          15.43 to 15.43          644          0.00 to 0.00          2.33          7.66 to 7.66   
      2011          35          14.33 to 14.33          507          0.00 to 0.00          3.65          8.06 to 8.06   

Lifestyle Aggressive MVP Series I

       2015          40          27.78 to 25.98          1,050          0.65 to 0.20          1.41          (6.04) to (6.46 ) 
      2014          66          30.41 to 26.82          1,847          0.90 to 0.00          1.98          1.40 to 0.49   
      2013          109          29.22 to 22.23          3,043          0.65 to 0.20          2.43          26.47 to 25.90   
      2012          99          23.11 to 21.90          2,179          0.65 to 0.20          1.68          16.38 to 15.85   
      2011          228          20.30 to 15.21          4,345          0.65 to 0.00          1.70          (6.50) to (7.34 ) 

Lifestyle Aggressive MVP Series NAV

       2015          366          17.59 to 17.59          6,434          0.00 to 0.00          2.05          (5.79) to (5.79 ) 
      2014          384          18.67 to 18.67          7,176          0.00 to 0.00          3.07          1.54 to 1.54   
      2013          364          18.39 to 18.39          6,699          0.00 to 0.00          2.64          26.77 to 26.77   
      2012          400          14.51 to 14.51          5,797          0.00 to 0.00          1.53          16.67 to 16.67   
      2011          593          12.43 to 12.43          7,378          0.00 to 0.00          1.94          (6.46) to (6.46 ) 

Lifestyle Balanced MVP Series I

       2015          147          32.74 to 30.60          4,491          0.65 to 0.20          2.84          (2.45) to (2.88 ) 
      2014          142          34.52 to 30.43          4,473          0.90 to 0.00          1.67          4.29 to 3.35   
      2013          266          32.24 to 24.30          8,189          0.65 to 0.20          2.44          12.56 to 12.05   
      2012          316          28.64 to 27.14          8,676          0.65 to 0.20          2.13          11.64 to 11.14   
      2011          524          26.23 to 19.47          12,908          0.65 to 0.00          3.34          0.62 to (0.28 ) 

Lifestyle Balanced MVP Series NAV

       2015          880          17.18 to 17.18          15,117          0.00 to 0.00          2.49          (2.20) to (2.20 ) 
      2014          942          17.57 to 17.57          16,551          0.00 to 0.00          2.70          4.25 to 4.25   
      2013          1,161          16.85 to 16.85          19,568          0.00 to 0.00          2.92          12.89 to 12.89   
      2012          1,146          14.93 to 14.93          17,102          0.00 to 0.00          2.41          11.90 to 11.90   
      2011          1,347          13.34 to 13.34          17,965          0.00 to 0.00          3.98          0.67 to 0.67   

Lifestyle Conservative MVP Series I

       2015          58          33.25 to 31.08          1,842          0.65 to 0.20          2.54          (0.15) to (0.61 ) 
      2014          72          34.24 to 30.19          2,267          0.90 to 0.00          1.72          5.02 to 4.08   
      2013          200          31.77 to 24.68          6,115          0.65 to 0.20          3.51          3.67 to 3.21   
      2012          220          30.65 to 29.03          6,465          0.65 to 0.20          3.82          8.29 to 7.81   
      2011          117          28.92 to 22.14          3,191          0.65 to 0.00          4.60          4.23 to 3.30   

Lifestyle Conservative MVP Series NAV

       2015          277          16.43 to 16.43          4,546          0.00 to 0.00          2.71          0.18 to 0.18   
      2014          338          16.40 to 16.40          5,549          0.00 to 0.00          2.76          4.98 to 4.98   
      2013          483          15.62 to 15.62          7,550          0.00 to 0.00          3.45          3.99 to 3.99   
      2012          520          15.02 to 15.02          7,808          0.00 to 0.00          3.53          8.55 to 8.55   
      2011          361          13.84 to 13.84          4,994          0.00 to 0.00          5.32          4.27 to 4.27   

Lifestyle Growth MVP Series I

       2015          127          30.41 to 28.41          3,612          0.65 to 0.20          2.66          (4.72) to (5.15 ) 
      2014          110          32.82 to 28.93          3,336          0.90 to 0.00          1.94          2.16 to 1.25   
      2013          187          31.30 to 23.02          5,587          0.65 to 0.20          2.42          19.10 to 18.57   
      2012          194          26.28 to 24.89          4,884          0.65 to 0.20          1.75          13.64 to 13.13   
      2011          394          23.64 to 17.13          8,774          0.65 to 0.00          2.88          (1.60) to (2.48 ) 

Lifestyle Growth MVP Series NAV

       2015          1,440          17.20 to 17.20          24,773          0.00 to 0.00          2.29          (4.55) to (4.55 ) 
      2014          1,382          18.02 to 18.02          24,906          0.00 to 0.00          2.72          2.28 to 2.28   
      2013          1,415          17.62 to 17.62          24,933          0.00 to 0.00          2.67          19.38 to 19.38   
      2012          1,397          14.76 to 14.76          20,618          0.00 to 0.00          2.02          13.91 to 13.91   
      2011          1,482          12.96 to 12.96          19,198          0.00 to 0.00          3.15          (1.55) to (1.55 ) 

Lifestyle Moderate MVP Series I

       2015          57          33.71 to 31.51          1,808          0.65 to 0.20          2.58          (1.11) to (1.56 ) 
      2014          58          35.06 to 30.90          1,869          0.90 to 0.00          2.75          4.94 to 4.00   
      2013          65          32.55 to 24.57          2,001          0.65 to 0.20          2.95          10.00 to 9.51   
      2012          81          29.59 to 28.04          2,278          0.65 to 0.20          2.68          10.44 to 9.94   
      2011          102          27.39 to 20.37          2,616          0.65 to 0.00          2.88          2.33 to 1.42   

Lifestyle Moderate MVP Series NAV

       2015          528          17.13 to 17.13          9,046          0.00 to 0.00          2.49          (0.86) to (0.86 ) 
      2014          580          17.27 to 17.27          10,015          0.00 to 0.00          2.97          4.99 to 4.99   
      2013          555          16.45 to 16.45          9,137          0.00 to 0.00          2.84          10.26 to 10.26   
      2012          585          14.92 to 14.92          8,729          0.00 to 0.00          2.90          10.70 to 10.70   
      2011          496          13.48 to 13.48          6,680          0.00 to 0.00          4.71          2.38 to 2.38   

M Capital Appreciation(e)

       2015          4          79.47 to 79.47          329          0.00 to 0.00          0.00          (6.58) to (6.58 ) 
      2014          3          85.07 to 85.07          285          0.00 to 0.00          0.00          12.42 to 12.42   
      2013          3          75.67 to 75.67          220          0.00 to 0.00          0.00          39.20 to 39.20   
      2012          2          54.36 to 54.36          117          0.00 to 0.00          0.61          17.43 to 17.43   

M International Equity (e)

       2015          0          31.74 to 31.74          0          0.00 to 0.00          0.00          (3.94) to (3.94 ) 
      2014          0          33.05 to 33.05          0          0.00 to 0.00          0.00          (7.06) to (7.06 ) 

 

73

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

M International Equity (e)

       2013          0        $ 35.56 to $35.56        $ 0          0.00% to 0.00 %        0.00          16.32% to 16.32 % 
      2012          0          30.57 to 30.57          0          0.00 to 0.00          0.00          20.68 to 20.68   

M Large Cap Growth(e)

       2015          0          54.08 to 54.08          0          0.00 to 0.00          0.00          7.70 to 7.70   
      2014          13          50.21 to 50.21          661          0.00 to 0.00          0.05          10.21 to 10.21   
      2013          11          45.56 to 45.56          490          0.00 to 0.00          0.61          36.15 to 36.15   
      2012          9          33.46 to 33.46          309          0.00 to 0.00          0.06          19.31 to 19.31   

Mid Cap Index Trust Series I

       2015          165          39.61 to 36.74          6,321          0.70 to 0.20          1.13          (2.79) to (3.27 ) 
      2014          145          41.90 to 36.95          5,654          0.90 to 0.00          0.98          9.34 to 8.36   
      2013          144          37.34 to 34.99          5,152          0.70 to 0.20          1.02          32.76 to 32.10   
      2012          195          28.13 to 26.48          5,322          0.70 to 0.20          1.25          17.25 to 16.66   
      2011          382          24.52 to 22.21          8,990          0.65 to 0.00          56.00          (2.25) to (3.13 ) 

Mid Cap Index Trust Series NAV

       2015          861          26.89 to 26.89          23,160          0.00 to 0.00          1.35          (2.54) to (2.54 ) 
      2014          346          27.60 to 27.60          9,542          0.00 to 0.00          1.01          9.40 to 9.40   
      2013          382          25.23 to 25.23          9,632          0.00 to 0.00          1.18          33.09 to 33.09   
      2012          360          18.95 to 18.95          6,824          0.00 to 0.00          1.54          17.54 to 17.54   
      2011          313          16.13 to 16.13          5,051          0.00 to 0.00          0.81          (2.14) to (2.14 ) 

Mid Cap Stock Trust Series I

       2015          107          33.49 to 31.06          3,500          0.70 to 0.20          0.00          2.79 to 2.28   
      2014          100          33.50 to 29.53          3,179          0.90 to 0.00          0.10          8.02 to 7.05   
      2013          114          30.49 to 28.32          3,370          0.70 to 0.20          0.04          36.55 to 35.86   
      2012          116          22.13 to 20.84          2,515          0.70 to 0.20          0.00          21.97 to 21.35   
      2011          251          18.55 to 16.80          4,452          0.70 to 0.20          0.00          (9.20) to (10.01 ) 

Mid Cap Stock Trust Series NAV

       2015          85          75.96 to 75.96          6,484          0.00 to 0.00          0.00          3.04 to 3.04   
      2014          91          73.72 to 73.72          6,701          0.00 to 0.00          0.20          8.11 to 8.11   
      2013          123          68.19 to 68.19          8,402          0.00 to 0.00          0.07          36.84 to 36.84   
      2012          121          49.83 to 49.83          6,027          0.00 to 0.00          0.00          22.34 to 22.34   
      2011          120          40.73 to 40.73          4,908          0.00 to 0.00          0.00          (9.16) to (9.16 ) 

Mid Value Trust Series I

       2015          162          24.76 to 24.03          3,980          0.65 to 0.20          0.96          (3.62) to (4.06 ) 
      2014          229          25.98 to 24.69          5,817          0.90 to 0.00          0.74          10.60 to 9.62   
      2013          245          23.27 to 22.79          5,637          0.65 to 0.20          1.13          31.13 to 30.55   
      2012          220          17.75 to 17.46          3,867          0.65 to 0.20          0.85          19.29 to 18.75   
      2011          266          14.96 to 14.60          3,937          0.65 to 0.00          0.69          (4.93) to (5.77 ) 

Mid Value Trust Series NAV

       2015          217          38.55 to 38.55          8,364          0.00 to 0.00          0.78          (3.41) to (3.41)   
      2014          511          39.91 to 39.91          20,406          0.00 to 0.00          0.99          10.70 to 10.70   
      2013          267          36.05 to 36.05          9,612          0.00 to 0.00          1.13          31.47 to 31.47   
      2012          270          27.42 to 27.42          7,391          0.00 to 0.00          0.92          19.54 to 19.54   
      2011          265          22.94 to 22.94          6,074          0.00 to 0.00          0.75          (4.80) to (4.80 ) 

Money Market Trust B Series NAV

       2015          3,086          17.37 to 17.37          53,620          0.00 to 0.00          0.00          0.00 to 0.00   
      2014          3,095          17.37 to 17.37          53,777          0.00 to 0.00          0.00          0.00 to 0.00   
      2013          4,061          17.37 to 17.37          70,547          0.00 to 0.00          0.01          0.01 to 0.01   
      2012          3,405          17.37 to 17.37          59,154          0.00 to 0.00          0.04          0.03 to 0.03   
      2011          2,900          17.36 to 17.36          50,355          0.00 to 0.00          0.00          0.08 to 0.08   

Money Market Trust Series I

       2015          1,286          21.64 to 20.05          26,532          0.70 to 0.20          0.00          (0.19) to (0.72)   
      2014          1,221          22.29 to 19.65          25,348          0.90 to 0.00          0.00          0.00 to (0.92)   
      2013          1,177          21.72 to 14.99          24,559          0.70 to 0.20          0.00          (0.18) to (0.71 ) 
      2012          3,865          21.76 to 20.49          82,145          0.70 to 0.20          0.00          (0.18) to (0.70 ) 
      2011          1,293          22.28 to 15.15          27,375          0.70 to 0.00          0.00          0.07 to (0.82 ) 

Natural Resources Trust Series I

       2014          0          38.15 to 34.40          0          0.90 to 0.00          1.06          (7.78) to (8.48)   
      2013          95          40.50 to 38.60          3,741          0.65 to 0.20          0.63          2.76 to 2.30   
      2012          84          39.41 to 37.73          3,204          0.65 to 0.20          0.73          0.32 to (0.13 ) 
      2011          125          39.97 to 36.98          4,794          0.65 to 0.00          0.45          (20.29) to (21.00 ) 

Natural Resources Trust Series NAV

       2014          0          16.13 to 16.13          0          0.00 to 0.00          1.25          (7.74) to (7.74 ) 
      2013          161          17.49 to 17.49          2,808          0.00 to 0.00          0.69          3.07 to 3.07   
      2012          150          16.97 to 16.97          2,546          0.00 to 0.00          0.89          0.58 to 0.58   
      2011          130          16.87 to 16.87          2,194          0.00 to 0.00          0.61          (20.27) to (20.27 ) 

PIMCO All Asset(e)

       2015          208          18.79 to 14.37          3,158          0.65 to 0.00          2.98          (9.31) to (9.90 ) 
      2014          223          20.32 to 15.84          3,705          0.90 to 0.00          5.08          0.23 to (0.66 ) 
      2013          209          21.88 to 20.95          3,457          0.65 to 0.00          4.57          (0.10) to (0.75 ) 
      2012          157          21.11 to 15.82          2,642          0.65 to 0.00          4.87          14.65 to 13.90   
      2011          120          19.48 to 18.18          1,776          0.65 to 0.00          6.34          1.66 to 0.75   

Real Estate Securities Trust Series I

       2015          64          172.90 to 160.39          10,349          0.70 to 0.20          1.83          2.47 to 1.96   
      2014          74          173.52 to 152.98          11,707          0.90 to 0.00          1.68          31.73 to 30.55   
      2013          75          128.34 to 48.06          8,983          0.70 to 0.20          1.73          (0.30) to (0.80 ) 
      2012          93          128.73 to 121.22          11,298          0.70 to 0.20          1.66          17.02 to 16.44   
      2011          120          112.45 to 41.48          12,391          0.65 to 0.00          1.38          9.46 to 8.49   

Real Estate Securities Trust Series NAV

       2015          89          142.80 to 142.80          12,731          0.00 to 0.00          1.90          2.80 to 2.80   
      2014          99          138.91 to 138.91          13,743          0.00 to 0.00          1.75          31.75 to 31.75   
      2013          96          105.43 to 105.43          10,087          0.00 to 0.00          2.00          (0.05) to (0.05 ) 
      2012          93          105.48 to 105.48          9,784          0.00 to 0.00          1.82          17.33 to 17.33   
      2011          86          89.90 to 89.90          7,765          0.00 to 0.00          1.53          9.58 to 9.58   

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Real Return Bond Trust Series I

       2015          73        $ 20.50 to $19.36        $ 1,456          0.65% to 0.20 %        5.42 %        (3.14)% to (3.58 )% 
      2014          118          21.67 to 19.51          2,433          0.90 to 0.00          3.02          4.76 to 3.82   
      2013          162          20.25 to 19.29          3,198          0.65 to 0.20          2.17          (9.46) to (9.87 ) 
      2012          234          22.36 to 21.41          5,091          0.65 to 0.20          1.74          8.64 to 8.15   
      2011          267          20.95 to 19.38          5,369          0.65 to 0.00          4.40          12.02 to 11.03   

Real Return Bond Trust Series NAV

       2015          670          14.50 to 14.50          9,715          0.00 to 0.00          6.19          (2.94) to (2.94 ) 
      2014          795          14.94 to 14.94          11,877          0.00 to 0.00          3.11          4.88 to 4.88   
      2013          769          14.24 to 14.24          10,955          0.00 to 0.00          2.63          (9.25) to (9.25 ) 
      2012          727          15.69 to 15.69          11,415          0.00 to 0.00          1.83          8.86 to 8.86   
      2011          621          14.41 to 14.41          8,946          0.00 to 0.00          4.19          12.14 to 12.14   

Science & Technology Trust Series I

       2015          271          34.25 to 31.78          8,846          0.70 to 0.20          0.00          6.47 to 5.94   
      2014          274          33.10 to 29.18          8,265          0.90 to 0.00          0.00          12.90 to 11.88   
      2013          286          28.56 to 10.37          7,523          0.70 to 0.20          0.00          43.24 to 42.53   
      2012          292          19.94 to 18.77          5,407          0.70 to 0.20          0.00          10.23 to 9.67   
      2011          373          18.49 to 6.61          6,303          0.70 to 0.20          0.00          (7.75) to (8.57 ) 

Science & Technology Trust Series NAV

       2015          82          28.68 to 28.68          2,339          0.00 to 0.00          0.00          6.78 to 6.78   
      2014          84          26.86 to 26.86          2,268          0.00 to 0.00          0.00          12.95 to 12.95   
      2013          98          23.78 to 23.78          2,323          0.00 to 0.00          0.00          43.55 to 43.55   
      2012          79          16.57 to 16.57          1,302          0.00 to 0.00          0.00          10.54 to 10.54   
      2011          73          14.99 to 14.99          1,089          0.00 to 0.00          0.00          (7.72) to (7.72 ) 

Short Term Government Income Trust Series I

       2015          151          10.55 to 10.27          1,562          0.70 to 0.20          1.66          0.41 to (0.06 ) 
      2014          163          10.62 to 10.17          1,684          0.90 to 0.00          2.62          1.15 to 0.19   
      2013          142          10.42 to 10.24          1,462          0.70 to 0.20          1.08          (1.09) to (1.56 ) 
      2012          205          10.53 to 10.40          2,145          0.70 to 0.20          1.61          0.96 to 0.50   
      2011          241          10.47 to 10.31          2,503          0.65 to 0.00          2.31          2.77 to 1.83   

Short Term Government Income Trust Series NAV

       2015          132          10.72 to 10.72          1,410          0.00 to 0.00          2.13          0.69 to 0.69   
      2014          134          10.65 to 10.65          1,430          0.00 to 0.00          2.08          1.19 to 1.19   
      2013          160          10.52 to 10.52          1,680          0.00 to 0.00          1.77          (0.74) to (0.74 ) 
      2012          227          10.60 to 10.60          2,409          0.00 to 0.00          1.96          1.18 to 1.18   
      2011          71          10.48 to 10.48          748          0.00 to 0.00          1.39          2.83 to 2.83   

Small Cap Growth Trust Series I

       2015          46          24.83 to 24.05          1,118          0.65 to 0.20          0.00          (9.03) to (9.44 ) 
      2014          41          27.64 to 26.15          1,100          0.90 to 0.00          0.00          7.57 to 6.61   
      2013          61          25.43 to 24.85          1,537          0.65 to 0.20          0.00          43.80 to 43.15   
      2012          64          17.68 to 17.36          1,121          0.65 to 0.20          0.00          16.24 to 15.71   
      2011          70          15.31 to 14.88          1,057          0.65 to 0.00          0.00          (6.81) to (7.65 ) 

Small Cap Growth Trust Series NAV

       2015          274          29.90 to 29.90          8,184          0.00 to 0.00          0.00          (8.78) to (8.78 ) 
      2014          293          32.78 to 32.78          9,611          0.00 to 0.00          0.00          7.60 to 7.60   
      2013          304          30.46 to 30.46          9,264          0.00 to 0.00          0.00          44.22 to 44.22   
      2012          244          21.12 to 21.12          5,161          0.00 to 0.00          0.00          16.53 to 16.53   
      2011          239          18.13 to 18.13          4,325          0.00 to 0.00          0.00          (6.80) to (6.80 ) 

Small Cap Index Trust Series I

       2015          200          29.99 to 27.82          5,827          0.70 to 0.20          1.06          (4.77) to (5.24 ) 
      2014          186          32.38 to 28.55          5,649          0.90 to 0.00          0.95          4.59 to 3.65   
      2013          181          30.17 to 28.26          5,259          0.70 to 0.20          1.52          38.35 to 37.65   
      2012          265          21.81 to 20.53          5,572          0.70 to 0.20          1.96          15.87 to 15.29   
      2011          122          19.23 to 17.43          2,235          0.70 to 0.00          1.13          (4.50) to (5.36 ) 

Small Cap Index Trust Series NAV

       2015          217          24.77 to 24.77          5,375          0.00 to 0.00          1.09          (4.59) to (4.59 ) 
      2014          230          25.96 to 25.96          5,962          0.00 to 0.00          0.93          4.71 to 4.71   
      2013          263          24.79 to 24.79          6,527          0.00 to 0.00          1.53          38.75 to 38.75   
      2012          283          17.87 to 17.87          5,056          0.00 to 0.00          2.17          16.06 to 16.06   
      2011          201          15.40 to 15.40          3,097          0.00 to 0.00          1.32          (4.37) to (4.37 ) 

Small Cap Opportunities Trust Series I

       2015          394          36.49 to 34.24          13,649          0.70 to 0.20          0.07          (5.35) to (5.83 )
      2014          430          39.46 to 35.53          15,811          0.90 to 0.00          0.05          2.39 to 1.47   
      2013          470          37.73 to 35.77          16,986          0.70 to 0.20          0.27          39.88 to 39.18   
      2012          17          26.97 to 25.70          437          0.70 to 0.20          0.00          16.61 to 16.02   
      2011          33          23.54 to 21.77          735          0.70 to 0.00          0.09          (3.16) to (4.03 ) 

Small Cap Opportunities Trust Series NAV

       2015          16          18.44 to 18.44          286          0.00 to 0.00          0.14          (5.12) to (5.12 ) 
      2014          17          19.43 to 19.43          321          0.00 to 0.00          0.08          2.42 to 2.42   
      2013          14          18.97 to 18.97          272          0.00 to 0.00          0.74          40.28 to 40.28   
      2012          10          13.52 to 13.52          131          0.00 to 0.00          0.00          16.88 to 16.88   
      2011          11          11.57 to 11.57          130          0.00 to 0.00          0.12          (3.13) to (3.13 ) 

Small Cap Value Trust Series I

       2015          34          24.11 to 23.24          790          0.65 to 0.20          0.38          (1.56) to (2.00 ) 
      2014          37          24.84 to 23.29          888          0.90 to 0.00          0.57          7.18 to 6.22   
      2013          48          22.89 to 22.04          1,065          0.65 to 0.20          0.51          33.06 to 32.45   
      2012          53          17.21 to 16.81          891          0.65 to 0.20          0.87          15.47 to 14.94   
      2011          32          15.03 to 14.47          462          0.65 to 0.00          0.80          1.04 to 0.14   

Small Cap Value Trust Series NAV

       2015          115          68.28 to 68.28          7,882          0.00 to 0.00          0.50          (1.31) to (1.31 ) 
      2014          128          69.19 to 69.19          8,868          0.00 to 0.00          0.63          7.25 to 7.25   
      2013          172          64.51 to 64.51          11,096          0.00 to 0.00          0.62          33.33 to 33.33   
      2012          162          48.39 to 48.39          7,815          0.00 to 0.00          0.91          15.78 to 15.78   
      2011          167          41.79 to 41.79          6,963          0.00 to 0.00          0.90          1.15 to 1.15   

 

75

Table of Contents

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Small Company Value Trust Series I

       2015          101        $ 30.86 to $28.63        $ 3,053          0.70% to 0.20 %        1.09 %        (5.79)% to (6.26 )% 
      2014          167          33.69 to 29.70          5,332          0.90 to 0.00          0.03          0.11 to (0.79)   
      2013          186          46.36 to 30.72          5,927          0.70 to 0.20          1.76          31.35 to 30.70   
      2012          191          24.96 to 23.51          4,661          0.70 to 0.20          0.25          16.06 to 15.48   
      2011          292          30.62 to 19.92          6,156          0.65 to 0.20          0.54          (0.93) to (1.82 ) 

Small Company Value Trust Series NAV

       2015          21          21.56 to 21.56          454          0.00 to 0.00          0.75          (5.51) to (5.51 ) 
      2014          61          22.81 to 22.81          1,392          0.00 to 0.00          0.06          0.14 to 0.14   
      2013          54          22.78 to 22.78          1,241          0.00 to 0.00          1.77          31.68 to 31.68   
      2012          75          17.30 to 17.30          1,303          0.00 to 0.00          0.25          16.41 to 16.41   
      2011          69          14.86 to 14.86          1,029          0.00 to 0.00          0.64          (0.94) to (0.94 ) 

Strategic Income Opportunities Trust Series I

       2015          105          25.55 to 24.23          2,624          0.65 to 0.20          2.91          1.02 to 0.56   
      2014          75          25.83 to 23.47          1,846          0.90 to 0.00          4.00          5.06 to 4.12   
      2013          84          24.12 to 23.08          1,977          0.65 to 0.20          6.34          3.63 to 3.15   
      2012          61          23.27 to 22.38          1,367          0.65 to 0.20          6.72          12.64 to 12.12   
      2011          108          20.98 to 19.59          2,168          0.65 to 0.00          9.78          2.03 to 1.11   

Strategic Income Opportunities Trust Series NAV

       2015          179          19.39 to 19.39          3,462          0.00 to 0.00          2.41          1.27 to 1.27   
      2014          200          19.15 to 19.15          3,828          0.00 to 0.00          4.09          5.13 to 5.13   
      2013          198          18.22 to 18.22          3,609          0.00 to 0.00          5.72          3.81 to 3.81   
      2012          182          17.55 to 17.55          3,195          0.00 to 0.00          7.25          12.94 to 12.94   
      2011          136          15.54 to 15.54          2,106          0.00 to 0.00          12.08          2.08 to 2.08   

Total Bond Market Trust B Series NAV

       2015          687          23.69 to 23.69          16,288          0.00 to 0.00          2.85          0.30 to 0.30   
      2014          693          23.62 to 23.62          16,376          0.00 to 0.00          3.54          6.06 to 6.06   
      2013          582          22.27 to 22.27          12,957          0.00 to 0.00          3.60          (2.44) to (2.44 ) 
      2012          567          22.83 to 22.83          12,955          0.00 to 0.00          1.88          4.08 to 4.08   
      2011          353          21.94 to 21.94          7,750          0.00 to 0.00          4.38          7.60 to 7.60   

Total Return Trust Series I

       2015 (f)        0          29.44 to 27.61          0          0.65 to 0.20          34.75          1.98 to 1.84   
      2014          476          29.70 to 26.19          13,400          0.90 to 0.00          3.49          4.74 to 3.80   
      2013          348          27.63 to 26.06          9,350          0.65 to 0.20          2.34          (2.23) to (2.67 ) 
      2012          962          28.26 to 26.77          26,630          0.65 to 0.20          1.72          8.27 to 7.78   
      2011          1,865          26.68 to 24.17          47,874          0.65 to 0.00          4.47          3.91 to 2.98   

Total Return Trust Series NAV

       2015 (f)        0          18.34 to 18.34          0          0.00 to 0.00          36.65          1.71 to 1.71   
      2014          1,554          18.03 to 18.03          28,029          0.00 to 0.00          3.51          4.72 to 4.72   
      2013          1,401          17.22 to 17.22          24,129          0.00 to 0.00          3.33          (1.98) to (1.98 ) 
      2012          1,786          17.57 to 17.57          31,388          0.00 to 0.00          2.00          8.57 to 8.57   
      2011          1,764          16.18 to 16.18          28,551          0.00 to 0.00          4.80          3.97 to 3.97   

Total Stock Market Index Trust Series I

       2015          274          22.99 to 21.33          6,177          0.70 to 0.20          1.75          (0.83) to (1.33 ) 
      2014          134          23.84 to 21.02          2,980          0.90 to 0.00          1.35          11.48 to 10.46   
      2013          88          20.84 to 19.53          1,758          0.70 to 0.20          1.17          33.12 to 32.46   
      2012          130          15.65 to 14.74          1,982          0.70 to 0.20          1.54          15.26 to 14.69   
      2011          145          13.88 to 12.57          1,911          0.65 to 0.00          1.16          0.28 to (0.62 ) 

Total Stock Market Index Trust Series NAV

       2015          22          79.30 to 79.30          1,706          0.00 to 0.00          1.43          (0.53) to (0.53 ) 
      2014          19          79.72 to 79.72          1,553          0.00 to 0.00          1.30          11.46 to 11.46   
      2013          12          71.52 to 71.52          861          0.00 to 0.00          1.70          33.45 to 33.45   
      2012          9          53.59 to 53.59          458          0.00 to 0.00          1.34          15.56 to 15.56   
      2011          13          46.38 to 46.38          621          0.00 to 0.00          0.59          0.33 to 0.33   

U.S. Equity Trust Series I

       2015          107          14.60 to 14.33          1,556          0.70 to 0.20          2.01          0.32 to (0.18 ) 
      2014          93          14.63 to 14.28          1,343          0.90 to 0.00          1.30          11.03 to 10.04   
      2013          105          13.13 to 13.02          1,378          0.70 to 0.20          1.46          27.98 to 27.33   
      2012          105          10.26 to 10.23          1,072          0.70 to 0.20          1.97          2.63 to 2.28   

U.S. Equity Trust Series NAV

       2015          148          14.73 to 14.73          2,181          0.00 to 0.00          1.69          0.52 to 0.52   
      2014          206          14.66 to 14.66          3,021          0.00 to 0.00          1.51          11.07 to 11.07   
      2013          201          13.20 to 13.20          2,646          0.00 to 0.00          1.84          28.36 to 28.36   
      2012          52          10.28 to 10.28          538          0.00 to 0.00          2.14          2.81 to 2.81   

Ultra Short Term Bond Trust Series I

       2015          1          9.83 to 9.70          9          0.65 to 0.45          1.31          (0.47) to (0.71 ) 
      2014          1          10.05 to 9.72          9          0.90 to 0.00          1.61          (0.02) to (0.84 ) 
      2013          2          9.92 to 9.84          18          0.65 to 0.45          0.02          (0.49) to (0.74 ) 
      2012          3          9.91 to 9.91          33          0.65 to 0.65          1.16          (0.15) to (0.15 ) 
      2011          3          9.91 to 9.91          27          0.65 to 0.00          2.05          0.12 to (0.69 ) 

Ultra Short Term Bond Trust Series NAV

       2015          124          10.07 to 10.07          1,252          0.00 to 0.00          2.02          0.01 to 0.01   
      2014          73          10.07 to 10.07          736          0.00 to 0.00          3.39          0.03 to 0.03   
      2013          22          10.07 to 10.07          217          0.00 to 0.00          0.67          (0.02) to (0.02 ) 
      2012          34          10.07 to 10.07          340          0.00 to 0.00          1.10          0.66 to 0.66   
      2011          12          10.00 to 10.00          116          0.00 to 0.00          1.32          0.09 to 0.09   

Utilities Trust Series I

       2015          40          30.89 to 28.91          1,200          0.65 to 0.20          2.74          (14.93) to (15.31 ) 
      2014          64          37.33 to 33.00          2,201          0.90 to 0.00          3.07          12.59 to 11.58   
      2013          60          32.32 to 30.52          1,869          0.65 to 0.20          2.06          20.32 to 19.78   
      2012          64          26.86 to 25.48          1,644          0.65 to 0.20          3.65          13.43 to 12.92   
      2011          80          24.19 to 21.98          1,830          0.65 to 0.00          3.56          6.65 to 5.70   

Utilities Trust Series NAV

       2015          61          25.46 to 25.46          1,544          0.00 to 0.00          3.30          (14.79) to (14.79 ) 
      2014          150          29.88 to 29.88          4,484          0.00 to 0.00          3.46          12.72 to 12.72   

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

        At December 31,   For the years and periods ended December 31,

Sub-account

   Year   Units
(000s)		   Unit Fair Value
Highest to Lowest (a)		   Assets
(000s)		   Expense Ratio
Highest to Lowest (b)		   Investment
Income Ratio (c)		   Total Return
Highest to Lowest (d)

Utilities Trust Series NAV

       2013          63        $ 26.50 to $26.50        $ 1,660          0.00% to 0.00 %        2.30 %        20.65% to 20.65 % 
      2012          53          21.97 to 21.97          1,174          0.00 to 0.00          3.78          13.63 to 13.63   
      2011          51          19.33 to 19.33          993          0.00 to 0.00          3.82          6.80 to 6.80   

Value Trust Series I

       2015          47          50.26 to 46.63          2,209          0.70 to 0.20          0.53          (9.07) to (9.53 ) 
      2014          49          56.85 to 50.12          2,527          0.90 to 0.00          0.49          9.82 to 8.84   
      2013          56          50.43 to 43.00          2,671          0.70 to 0.20          0.72          35.13 to 34.45   
      2012          76          37.32 to 35.15          2,735          0.70 to 0.20          0.84          17.19 to 16.60   
      2011          113          32.56 to 27.35          3,499          0.70 to 0.00          1.04          0.98 to 0.07   

Value Trust Series NAV

       2015          57          24.75 to 24.75          1,417          0.00 to 0.00          0.62          (8.86) to (8.86 ) 
      2014          51          27.16 to 27.16          1,373          0.00 to 0.00          0.57          9.88 to 9.88   
      2013          46          24.72 to 24.72          1,136          0.00 to 0.00          0.93          35.44 to 35.44   
      2012          41          18.25 to 18.25          754          0.00 to 0.00          0.95          17.50 to 17.50   
      2011          34          15.53 to 15.53          523          0.00 to 0.00          1.10          1.03 to 1.03   

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

7.

Unit Values — (continued):

 

(a)

As the unit fair value is presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual contract unit values are not within the ranges presented.

 

(b)

These ratios represent the annualized contract expenses of the variable account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to policyholder accounts through the redemption of units and expenses of the underlying Portfolio are excluded.

 

(c)

These ratios, which are not annualized, represent the distributions from net investment income received by the sub-account from the underlying Portfolio, net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against policyholder accounts either through the reductions in the unit values or the redemptions of units. The recognition of investment income by the sub-account is affected by the timing of the declaration of dividends by the underlying Portfolio in which the sub-accounts invest.

 

(d)

These ratios, which are not annualized, represent the total return for the periods indicated, including changes in the value of the underlying Portfolio, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. Investment options indicated in footnote 1 with a date notation, if any, denote the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. For closed sub-accounts, the total return is calculated from the beginning of the reporting period to the date the sub-account closed. As the total return is presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual contract total returns are not within the ranges presented.

 

(e)

Sub-account that invests in non-affiliated Trust.

 

(f)

Terminated as an investment option and funds transferred to Core Bond Trust on April 27, 2015.

 

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JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2015

 

8. Diversification Requirements

The Internal Revenue Service has issued regulations under Section 817(h) of the Internal Revenue Code (“the Code”). Under the provisions of Section 817(h) of the Code, a Contract will not be treated as a variable life contract for federal tax purposes for any period for which the investments of the Account on which the contract is based are not adequately diversified. The Code provides that the “adequately diversified” requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirement set forth in regulations issued by the Secretary of the Treasury. The Company believes that the Account satisfies the current requirements of the regulations, and the Account will continue to meet such requirements.

9. Contract Charges

The Company deducts certain charges from gross premiums before placing the remaining net premiums in the sub-account. In the event of a surrender by the contract holder, surrender charges may be levied by the Company against the contract value at the time of termination to cover sales and administrative expenses associated with underwriting and issuing the Contract. Additionally, each month a deduction consisting of an administrative charge, a charge for cost of insurance, and charges for supplementary benefits is deducted from the contract value. Contract charges are paid through the redemption of sub-accounts and are reflected as terminations.

The Company deducts from the assets of the Account a daily charge equivalent to annual rates between 0.00% and 0.70% of the average net value of the Account’s assets for the assumption of mortality and expense risks.

 

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PART C
OTHER INFORMATION
Item 26. Exhibits
The following exhibits are filed as part of this Registration Statement:
(a) Resolution of Board of Directors establishing Separate Account N is incorporated by reference to post-effective amendment number 1, file number 333-152409, filed with the Commission in April 2010.
(b) Not applicable.
(c) (1) Distribution Agreement and Servicing Agreement between John Hancock Distributors and John Hancock Life Insurance Company (U.S.A.) dated February 17, 2009, incorporated by reference to pre-effective amendment number 1, file number 333-157212, filed with the Commission on April 7, 2009.
(2)(a) Specimen General Agent and Broker-Dealer Selling Agreement by and among John Hancock Life Insurance Company (U.S.A.) and John Hancock Distributors LLC effective August, 2009, incorporated by reference to pre-effective amendment number 2, file number 333-157212, filed with the Commission on April 26, 2011.
(b) List of third party broker-dealer firms included as Attachment A, incorporated by reference to post-effective amendment number 8, file number 333-179570, filed with the Commission in April, 2016.
(d) Form of Specimen Flexible Premium Variable Life Insurance Policy, incorporated by reference to post-effective amendment number 6, file number 333-100567 filed with the Commission on April 30, 2007.
(2) Form of Specimen Flexible Term Insurance Option Term Life Rider, incorporated by reference to post-effective amendment number 6, file number 333-100567, filed with the Commission on April 30, 2007.
(e)(1) Specimen Application for Flexible Premium Variable Life Insurance Policy, incorporated by reference to post-effective amendment number 7, file number 33-52310, filed with the Commission on April 26, 1996.
(2) Specimen Application Supplement for Flexible Premium Variable Life Insurance Policy, incorporated by reference to post-effective amendment number 9, file number 33-52310, filed with the Commission on April 26, 1996.
(f) (1) Restated Articles of Redomestication of the John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) dated December 30, 1992, incorporated by reference to post-effective amendment number 9, file number 333-85284, filed with the Commission in April, 2007.
(a) Amendment to the Articles of Redomestication of John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) dated July 16, 2004, incorporated by reference to pre-effective amendment number 1, file number 333-126668, filed with the Commission on October 12, 2005.
(b) Amendment to the Articles of Redomestication effective January 1, 2005, incorporated by reference to post-effective amendment number 9, file number 333-85284, filed with the Commission in April, 2007.
(c) Amended and Restated Articles of Redomestication and Articles of Incorporation of John Hancock Life Insurance Company (U.S.A.) dated July 26, 2010, and further amended as of November 20, 2012, incorporated by reference to post-effective amendment number 2, file number 333-179570, filed with the Commission in April 2013.
(2) By-laws of John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) dated December 2, 1992, incorporated by reference to pre-effective amendment number 1, file number 333-126668, filed with the Commission on October 12, 2005.
(a) Amendment to the By-laws of John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) dated June 7, 2000, incorporated by reference to pre-effective amendment number 1, file number 333-126668, filed with the Commission on October 12, 2005.
(b) Amendment to the By-laws of John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) dated March 12, 1999, incorporated by reference to pre-effective amendment number 1, file number 333-126668, filed with the Commission on October 12, 2005.
(c) Amendment to the By-laws of John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) dated July 16, 2004, incorporated by reference to post-effective amendment number 9, file number 333-85284, filed with the Commission in April, 2007.
(d) Amended and Restated By-laws of John Hancock Life Insurance Company (U.S.A.) dated June 15, 2010, incorporated by reference to post-effective amendment number 2, file number 333-179570, filed with the Commission in April 2013.

 

(g) The Depositor maintains reinsurance arrangements in the normal course of business, none of which are material.
(h)(1) Participation Agreement among the Manufacturers Insurance Company (U.S.A.), the Manufacturers Insurance Company of New York, PIMCO Variable Insurance Trust and PIMCO Advisors Distributors LLC dated April 30, 2004, incorporated by reference to pre-effective amendment number 1, file number 333-126668, filed with the Commission on October 12, 2005.
(2) Participation Agreement among John Hancock Life Insurance Company (U.S.A.), John Hancock Life Insurance Company of New York, and John Hancock Trust dated April 20, 2005, incorporated by reference to pre-effective amendment number 1, file number 333-126668, filed with the Commission on October 12, 2005.
(3) Participation Agreement among John Hancock Life Insurance Company (U.S.A.), John Hancock Life Insurance Company of New York, and M Financial Investment Advisers, Inc. dated November 13, 2009, incorporated by reference to file number 333-164150, filed with the Commission on January 4, 2010.
(4) Shareholder Information Agreement between John Hancock Life Insurance Company (U.S.A.), John Hancock Life Insurance Company of New York, John Hancock Life Insurance Company, John Hancock Variable Life Insurance, and John Hancock Trust portfolios (except American Funds Insurance Series) dated April 16, 2007, incorporated by reference to post-effective amendment number 9, file number 333-85284, filed with the Commission in April, 2007.
(5) Shareholder Information Agreement between John Hancock Life Insurance Company (U.S.A.), John Hancock Life Insurance Company of New York, John Hancock Life Insurance Company, John Hancock Variable Life Insurance, and John Hancock Trust on behalf of series of the Trust that are feeder funds of the American Funds Insurance Series dated April 16, 2007, incorporated by reference to post-effective amendment number 9, file number 333-85284, filed with the Commission in April, 2007.
(i) (1) Service agreement between Manulife Financial Corporation and the Manufacturers Life Insurance Company (U.S.A.), dated January 1, 2001, incorporated by reference to post-effective amendment number 6, file number 333-179570, filed with the Commission April 28, 2014.
(j) Not applicable.
(k) Opinion and consent of counsel for John Hancock Life Insurance Company (U.S.A.), incorporated by reference to pre-effective amendment number 1, file number 333-100597, filed with the Commission on December 16, 2002.
(l) Not Applicable.
(m) Not Applicable.
(n) Consent of Independent Registered Public Accounting Firm, filed herewith.
(n)(1) Opinion of Counsel as to the eligibility of this post-effective amendment to be filed pursuant to Rule 485(b), filed herewith.
(o) Not Applicable.
(p) Not Applicable.
(q) Memorandum Regarding Issuance, Face Amount Increase, Redemption and Transfer Procedures for the policies, incorporated by reference to pre-effective amendment number 1, file number 333-100597, filed with the Commission on December 16, 2002.
Powers of Attorney
(i) Powers of Attorney for Craig Bromley, Thomas Borshoff, Paul M. Connolly, Michael Doughty, Ruth Ann Fleming, James D. Gallagher, Scott S. Hartz, Rex Schlaybaugh, Jr., and John Vrysen, incorporated by reference to post-effective amendment number 1, file number 333-179570, filed with the Commission on April 24, 2013.
Item 27. Directors and Officers of the Depositor
OFFICERS AND DIRECTORS OF JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)
Name and Principal Business Address   Position with Depositor
Craig Bromley

601 Congress Street

Boston, MA 02210
   Director, Chairman and President

 

Name and Principal Business Address   Position with Depositor
Thomas Borshoff

536 Stone Road

Pittsford, NY 14534
   Director
Paul M. Connolly

75 Indian Spring Road

Milton, MA 02186
   Director
Michael Doughty

197 Clarendon Street

Boston, MA 02116
   Director
Ruth Ann Fleming

205 Highland Avenue

Short Hills, NJ 07078
   Director
James D. Gallagher

601 Congress Street

Boston, MA 02210
   Director, Executive Vice President, General Counsel and Chief Administrative Officer
Scott S. Hartz

197 Clarendon Street

Boston, MA 02116
   Director, Executive Vice President and Chief Investment Officer – US Investments
Rex Schlaybaugh, Jr.

400 Renaissance Center

Detroit, MI 48243
   Director
John G. Vrysen

601 Congress Street

Boston, MA 02210
   Director
Executive Vice Presidents
    
Andrew G. Arnott*
    
Michael Doughty**
    
Steven Finch*
   and Chief Financial Officer
Peter Gordon*
    
Timothy W. Ramza*
    
Halina K. von dem Hagen***
   and Treasurer
Senior Vice Presidents
    
John C.S. Anderson**
    
Kevin J. Cloherty*
    
Barry Evans††††
    
Brian Heapps**
    
Gregory Mack*
    
Janis K. McDonough*****
    
William McPadden**
    
James O’Brien†††
    
Sebastian Pariath*
   and Head of Operations and Chief Information Officer
Alan R. Seghezzi**
    
Anthony Teta**
    
Brooks Tingle**
    
Leo Zerilli*
    
Vice Presidents
    
Emanuel Alves*
   Counsel and Corporate Secretary
Roy V. Anderson*
    
Abigail M. Armstrong**
    
Kevin Askew*****
    
William Ball**
    
William D. Bertrand**
    
Ann Birle*****
    
Stephen J. Blewitt**
    
Alan Block*
    
Robert Boyda**
    

 

Name and Principal Business Address   Position with Depositor
Grant Buchanan***
    
Rick A. Carlson*
    
Bob Carroll**
    
Brian Collins*
    
Paul M. Crowley**
    
John J. Danello*
    
Brent Dennis**
    
Robert Donahue*****
    
Melvyn D’Souza
   Vice President, Treasury
Paul Gallagher*
    
Ann Gencarella**
    
Gerald C. Hanrahan, Jr.**
    
Richard Harris***
   and Appointed Actuary
John Hatch*
    
Kevin Hill**
    
Eugene Xavier Hodge, Jr.*
    
James C. Hoodlet**
    
Mitchell Karman*
   and Chief Compliance Officer & Counsel
Frank Knox*
   and Chief Compliance Officer – Retail Funds/Separate Accounts
Hung Ko***
   Vice President, Treasury
David Kroach***
    
Scott Lively*
    
Cheryl Mallett****
    
Nathaniel I. Margolis**
    
John B. Maynard*
    
Karen McCafferty*
    
Scott A. McFetridge**
    
Maureen Milet**
   and Chief Compliance Officer – Investments
Scott Morin*
    
Jeffrey H. Nataupsky*
    
Scott Navin**
    
Betty Ng***
    
Nina Nicolosi*
    
Jacques Ouimet**
    
Jeffrey Packard**
    
Gary M. Pelletier**
    
E. David Pemstein
    
David Plumb*
    
Tracey Polsgrove*
    
Jill Rebman***
    
George Revoir*
    
Andrew Ross****
    
Lisa Anne Ryan†††
    
Thomas Samoluk*
    
Martin Sheerin*
    
Gordon Shone*
    
Susan Simi**
   
Rob Stanley*
    
Tony Todisco*****
    
Simonetta Vendittelli*
   and Controller
Peter de Vries***
    
Linda A. Watters*
    
Brent Wilkinson†††
    
R. Blake Witherington
    
Henry Wong**
    
Assistant Vice Presidents
    

 

Name and Principal Business Address   Position with Depositor
Joanne Adkins
    
Stacey Agretelis
    
Patricia L. Allison
    
Michael Barnes
    
Jack Barry
    
Naomi S. Bazak
    
P. J. Beltramini
    
Jon Bourgault
    
Daniel C. Budde
    
Jennifer Toone Campanella
    
Suzanne Cartledge
    
Anjali Chitre
    
Eileen Cloherty
   and Chief Accountant
Catherine Collins
    
Thomas D. Crohan
    
Diane Cronin
    
Jaime Hertel Dasque
    
Lorn C. Davis
    
Todd D. Emmel
    
Allan M. Fen
    
Paul A. Fishbin
    
Michael A. Foreman
    
Arthur Francis
    
Donna Frankel
    
Philip W. Freiberger
    
Scott B. Garfield
    
John M. Garrison
    
Keith Gendron
    
William A. Gottlieb
    
Teresa S. Hayes
    
Charles Whitney Hill
    
Tina Joseph
    
Recep C. Kendircioglu
    
Bruce Kinna
    
Patty Kisielis
    
Sally Kwan
    
Thomas Loftus
    
Timothy J. Malik
    
Robert Maulden
    
Kathleen E. McDonough
    
Reid W. McLay
    
John P. Monahan
    
Geoffrey Norris
    
John O’Connor
    
Charlie Philbrook
   and Chief Risk Officer
David Pickett
    
Michael A. Pirrello
    
Malcolm Pittman
    
Jason M. Pratt
    
David P. Previte
    
Peta-Gaye Prinn
   
Malcolm Quinn
    
Hilary Quosai
    
Kathryn Riley
    
Josephine M. Rolka
    
Timothy A. Roseen
    
Louise Santosuosso
    

 

Name and Principal Business Address   Position with Depositor
William T. Shields
    
Debbie Stickland
    
Joan Marie Uzdavinis
    
John Wallace
    
Sean A. Williams
    
Jennifer Wilson
    
Shauna Yen
    
Sameh Youssef
    
Paolo Zadra
    
Aleksander Zivanovic
    
*Principal Business Office is 601 Congress Street, Boston, MA 02210
**Principal Business Office is 197 Clarendon Street, Boston, MA 02116
***Principal Business Office is 200 Bloor Street, Toronto, Canada M4W1E5
****Principal Business Office is 250 Bloor Street, Toronto, Canada M4W1E5
*****Principal Business Office is 380 Stuart Street, Boston, MA 02116
†Principal Business is 6400 Sheridan Drive, Williamsville, NY 14221
††Principal Business is 2001 Butterfield Road, Downers Grove, Illinois 60515
†††Principal Business is 200 Berkeley Street, Boston, MA 02116
††††Principal Business is 101 Huntington Avenue, Boston, MA 02116
Item 28. Persons Controlled by or Under Common Control with the Depositor or the Registrant
The Registrant is a separate account of the Depositor operating as a unit investment trust. The Registrant supports benefits payable under the Depositor's variable life insurance policies by investing assets allocated to various investment options in shares of John Hancock Variable Insurance Trust (formerly, John Hancock Trust) and other mutual funds registered under the Investment Company Act of 1940 as open-end management investment companies of the “series” type.
As of the effective date of the registration statement, the Company and its affiliates are controlled by Manulife Financial Corporation.

 

 

Item 29. Indemnification
The Form of Selling Agreement or Service Agreement between John Hancock Distributors LLC (“JH Distributors”) and various broker-dealers may provide that the selling broker-dealer indemnify and hold harmless JH Distributors and the Company, including their affiliates, officers, directors, employees and agents against losses, claims, liabilities or expenses (including reasonable attorney’s fees), arising out of or based upon a breach of the Selling or Service Agreement, or any applicable law or regulation or any applicable rule of any self-regulatory organization or similar provision consistent with industry practice.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 30. Principal Underwriter
(a) Set forth below is information concerning other investment companies for which JH Distributors, the principal underwriter of the contracts, acts as investment adviser or principal underwriter.
Name of Investment Company   Capacity in Which Acting
John Hancock Variable Life Account S
   Principal Underwriter
John Hancock Variable Life Account U
   Principal Underwriter
John Hancock Variable Life Account V
   Principal Underwriter
John Hancock Variable Life Account UV
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account R
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account T
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account W
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account X
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account Q
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account A
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account N
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account H
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account I
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account J
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account K
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account L
   Principal Underwriter
John Hancock Life Insurance Company (U.S.A.) Separate Account M
   Principal Underwriter
John Hancock Life Insurance Company of New York Separate Account B
   Principal Underwriter
John Hancock Life Insurance Company of New York Separate Account A
   Principal Underwriter

 

(b) John Hancock Life Insurance Company (U.S.A.) is the sole member of JH Distributors and the following comprise the Board of Managers and Officers of JH Distributors.
Name   Title
Michael Doughty**
   Chairman, Director
Steven Finch*
   Director
James C. Hoodlet**
   Director
George Revoir*
   Director, President and Chief Executive Officer
Alan Seghezzi**
   Director
Christopher Walker***
   Director, Vice President, Investments
Emanuel Alves*
   Secretary
Brian Collins*
   Vice President, US Taxation
John Bryson*
   Assistant Vice President
Jeffrey H. Long*
   Assistant Vice President, Chief Financial Officer and Financial Operations Principal
Michael Mahoney*
   Assistant Vice President, Chief Compliance Officer
David Pickett*
   Assistant Vice President, General Counsel
Halina K. von dem Hagen***
   Executive Vice President and Treasurer
Melvyn D’Souza***
   Vice President, Treasury
*Principal Business Office is 601 Congress Street, Boston, MA 02210
**Principal Business Office is 197 Clarendon Street, Boston, MA 02116
***Principal Business Office is 200 Bloor Street, Toronto, Canada M4W1E5
****Principal Business Office is 250 Bloor Street, Toronto, Canada M4W1E5
(c) John Hancock Distributors LLC
Compensation received, directly or indirectly, from the Registrant by John Hancock Distributors LLC, the sole principal underwriter of the contracts funded by the Separate Account during the last fiscal year:
(1)   (2)   (3)   (4)   (5)
Name of
Principal
Underwriter 		  Net
Underwriting
Discounts and
Commissions 		  Compensation
on Events
Occasioning
the Deduction
of a Deferred
Sales Load 		  Brokerage
Commissions 		  Other
Compensation
John Hancock Distributors LLC   $0   $0   $0   $0
Item 31. Location of Accounts and Records
The following entities prepare, maintain, and preserve the records required by Section 31(a) of the Act for the Registrant through written agreements between the parties to the effect that such services will be provided to the Registrant for such periods prescribed by the Rules and Regulations of the Commission under the Act and such records will be surrendered promptly on request: John Hancock Distributors LLC, John Hancock Place, Boston, Massachusetts 02117, serves as Registrant’s distributor and principal underwriter, and, in such capacities, keeps records regarding shareholders account records, cancelled stock certificates. John Hancock Life Insurance Company (U.S.A.) (at the same address), in its capacity as Registrant’s depositor keeps all other records required by Section 31 (a) of the Act.
Item 32. Management Services
All management services contracts are discussed in Part A or Part B.
Item 33. Fee Representation
Representation of Insurer Pursuant to Section 26 of the Investment Company Act of 1940
John Hancock Life Insurance Company (U.S.A.) hereby represents that the fees and charges deducted under the contracts issued pursuant to this registration statement, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company.

 

Signatures
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has caused this amendment to the Registration Statement to be signed on its behalf in the City of Boston, Commonwealth of Massachusetts, as of the 26th day of April, 2016.
John Hancock Life Insurance Company (U.S.A.) Separate Account N
(Registrant)
By: JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)
By: /s/ Craig Bromley
Craig Bromley
Principal Executive Officer
JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)
(Depositor)
By: /s/ Craig Bromley
Craig Bromley
Principal Executive Officer

 

Signatures
Pursuant to the requirements of the Securities Act of 1933, this post-effective amendment to the Registration Statement has been signed by the following persons in the capacities indicated as of the 26th day of April, 2016.
Signatures Title
/s/ Simonetta Vendittelli
Simonetta Vendittelli 		Vice President and Controller
/s/ Steven Finch
Steven Finch 		Executive Vice President and Chief Financial Officer
*
Craig Bromley 		Director
*
Thomas Borshoff 		Director
*
Paul M. Connolly 		Director
*
Ruth Ann Fleming 		Director
*
Michael Doughty 		Director
*
James D. Gallagher 		Director
*
Scott S. Hartz 		Director
*
Rex E. Schlaybaugh, Jr. 		Director
*
John G. Vrysen 		Director
/s/James C. Hoodlet
James C. Hoodlet 		 
*Pursuant to Power of Attorney

Table of Contents
This disclosure is distributed to policy owners of variable life insurance policies issued by John Hancock Life Insurance Company (U.S.A.) (“John Hancock USA”) and offering interests in John Hancock Life Insurance Company (U.S.A.) Separate Account N (the “Account” or “Separate Account”). Certain of the investment options described in this disclosure may not be available to you under your policy. You may contact the John Hancock USA Service Office for more information at 1-800-521-1234 or write to us at 197 Clarendon Street, Boston, MA 02117.
Certain of the investment options listed below are offered under variable life insurance policies bearing the title Corporate VUL.
500 Index B
Active Bond
All Cap Core
Alpha Opportunities
American Asset Allocation
American Global Growth
American Growth
American Growth-Income
American International
American New World
Blue Chip Growth
Bond
Capital Appreciation
Capital Appreciation Value
Core Bond
Core Strategy
Emerging Markets Value
Equity Income
Financial Industries
Franklin Templeton Founding Allocation
Fundamental All Cap Core
Fundamental Large Cap Value
Global
Global Bond
Health Sciences
High Yield
International Core
International Equity Index B
International Growth Stock
International Small Company
International Value
Investment Quality Bond
Lifestyle Aggressive MVP
Lifestyle Balanced MVP
Lifestyle Conservative MVP
Lifestyle Growth MVP
Lifestyle Moderate MVP
Mid Cap Index
Mid Cap Stock
Mid Value
Money Market
PIMCO VIT All Asset
Real Estate Securities
Science & Technology
Short Term Government Income
Small Cap Growth
Small Cap Index
Small Cap Opportunities
Small Cap Value
Small Company Value
Strategic Income Opportunities
Total Bond Market B
Total Stock Market Index
Ultra Short Term Bond
U.S. Equity
Utilities
Value
M Capital Appreciation
M International Equity
M Large Cap Growth
M Large Cap Value
1

 

Market timing and disruptive trading risks
The policy is not designed for professional market timers or highly active traders, including persons or entities that engage in programmed, large or frequent transfers among the investment accounts or between the investment accounts and any available fixed account. The policy is also not designed to accommodate trading that results in transfers that are large in relation to the total assets of the underlying portfolio.
Variable investment accounts in variable life insurance products can be a prime target for abusive transfer activity because these products value their investment accounts on a daily basis and allow transfers among investment accounts without immediate tax consequences. As a result, some investors may seek to frequently transfer into and out of investment accounts or to make large transfers in reaction to market news or to exploit a perceived pricing inefficiency. Whatever the reason, long-term investors in an investment account can be harmed by large or frequent transfer activity. For example, such activity may expose the investment account's underlying portfolio to increased portfolio transaction costs and/or disrupt the portfolio manager's ability to effectively manage the portfolio's investments in accordance with the portfolio’s investment objectives and policies. This could include causing the portfolio to maintain higher levels of cash than would otherwise be the case, or liquidating investments prematurely. Accordingly, frequent or large transfers may result in dilution with respect to interests held for long-term investment and adversely affect policy owners, beneficiaries and the underlying portfolios.
To discourage market timing and disruptive trading activity, we impose restrictions on transfers and reserve the right to change, suspend or terminate telephone, facsimile and internet transaction privileges. In addition, we reserve the right to take other actions at any time to restrict trading, including, but not limited to:
(i) restricting the number of transfers made during a defined period,
(ii) restricting the dollar amount of transfers,
(iii) restricting transfers into and out of certain investment accounts,
(iv) restricting the method used to submit transfers, and
(v) deferring a transfer at any time we are unable to purchase or redeem shares of the underlying portfolio.
We may also impose additional administrative conditions upon, or prohibit a transfer request made by a third party giving instructions on behalf of multiple policies, whether owned by the same owner or different owners. If you engage a third party for asset allocation services, then you may be subject to these transfer restrictions because of the actions of that party in providing those services. We will notify the third party you have engaged if we exercise this right.
While we seek to identify and prevent disruptive trading activity, it may not always be possible to do so. Therefore, no assurance can be given that the restrictions we impose will be successful in preventing all disruptive trading and avoiding harm to long-term investors.
Total annual portfolio operating expenses
The following table describes the minimum and maximum portfolio level fees and expenses charged by any of the portfolios underlying a variable investment option offered through CVUL policies purchased on or after October 12, 2005, expressed as a percentage of average net assets (rounded to two decimal places). These expenses are deducted from portfolio assets. For more information, please refer to the prospectus for the underlying portfolio.
Total Annual Portfolio Operating Expenses Minimum Maximum
Range of expenses, including management fees, distribution and/or service (12b-1) fees, and other expenses1 0.39% 1.71%
    
1  Certain of the portfolios’ advisers or subadvisers have contractually agreed to reimburse or waive certain portfolio level expenses. The minimum and maximum expenses shown do not reflect these contractual expense reimbursements or waivers. If such reimbursements or waivers were reflected, the minimum and maximum expenses would be 0.25% and 1.52%, respectively.
2

 

The next table describes the minimum and maximum portfolio level fees and expenses charged by any of the portfolios underlying a variable investment option offered through a Corporate VUL policy purchased prior to October 12, 2005, expressed as a percentage of average net assets (rounded to two decimal places). These expenses are deducted from portfolio assets.
Total Annual Portfolio Operating Expenses Minimum Maximum
Range of expenses, including management fees, distribution and/or service (12b-1) fees, and other expenses 0.44% 1.71%
    
1  Certain of the portfolios’ advisers or subadvisers have contractually agreed to reimburse or waive certain portfolio level expenses. The minimum and maximum expenses shown do not reflect these contractual expense reimbursements or waivers. If such reimbursements or waivers were reflected, the minimum and maximum expenses would be 0.33% and 1.52%, respectively.
Table of Investment Options and Investment Subadvisers
Please note that certain of the investment options described in this table may not be available to you under your policy.
When you select a Separate Account investment option, we invest your money in shares of a corresponding portfolio of the John Hancock Variable Insurance Trust (the “Trust” or “JHVIT”) (or the PIMCO Variable Insurance Trust (the “PIMCO Trust”) or M Fund, Inc. (the “M Fund”)), and hold the shares in a subaccount of the Separate Account. Fees and expenses of the portfolios are not fixed or specified under the terms of the policies and may vary from year to year. These fees and expenses differ for each portfolio and reduce the investment return of each portfolio. Therefore, they also indirectly reduce the return you will earn on any Separate Account investment options you select. For more information, please refer to the prospectus for the underlying portfolio.
The JHVIT, the PIMCO Trust, and the M Fund are so-called “series” type mutual funds and each is registered under the Investment Company Act of 1940 (“1940 Act”) as an open-end management investment company. John Hancock Investment Management Services, LLC (“JHIMS”) provides investment advisory services to the Trust and receives investment management fees for doing so. JHIMS pays a portion of its investment management fees to other firms that manage the Trust’s portfolios. We are affiliated with JHIMS and may indirectly benefit from any investment management fees JHIMS retains. The PIMCO VIT All Asset portfolio of the PIMCO Trust receives investment advisory services from Pacific Investment Management Company LLC (“PIMCO”) and pays investment management fees to PIMCO.
Each of the American Asset Allocation, American Global Growth, American Growth, American Growth-Income, American International and American New World portfolios invests in shares of the corresponding investment portfolio of the Trust. The American Asset Allocation, American Global Growth, American Growth, American Growth-Income, American International and American New World portfolios (“American Portfolios”) operate as “feeder funds,” which means that the portfolios do not buy investment securities directly. Instead, they invest in a “master fund” which in turn purchases investment securities. Each of the American feeder fund portfolios has the same investment objective and limitations as its master fund. The prospectus for the American Fund master fund is included with the prospectuses for the underlying funds. We pay American Funds Distributors, Inc., the principal underwriter for the American Funds Insurance Series, a percentage of some or all of the amounts allocated to the American Portfolios of the Trust for the marketing support services it provides.
The M Capital Appreciation, M International Equity, M Large Cap Growth and M Large Cap Value portfolios are series of the M Fund, an open-end management investment company registered under the 1940 Act. The assets of these subaccounts are invested in the corresponding portfolios of the M Fund. M Financial Investment Advisers, Inc. (“M Financial”) is the investment adviser for all portfolios of the M Fund. The entities shown in the table below as “Portfolio Managers” of the M Fund portfolios are sub-investment advisers selected by M Financial and are the entities that manage the portfolio’s assets.
The portfolios pay us or certain of our affiliates compensation for some of the distribution, administrative, shareholder support, marketing and other services we or our affiliates provide to the portfolios. Compensation payments may be made by a portfolio’s investment adviser or its affiliates. The compensation payments are based on a percentage of the assets of the portfolios attributable to the variable insurance products that we and our affiliates issue. These percentages may differ from portfolio to portfolio and among classes of shares within a portfolio. In some cases, the compensation is derived from the
3

 

Rule 12b-1 fees that are deducted from a portfolio’s assets for the services we or our affiliates provide to that portfolio. These compensation payments do not, however, result in any charge to you in addition to what is shown in the prospectus for the underlying portfolio.
The following table provides a general description of the portfolios that underlie the variable investment options we make available under the policy. You bear the investment risk of any portfolio you choose as an investment option for your policy. You can find a full description of each portfolio, including the investment objectives, policies, restrictions, and risks, in the prospectus for that portfolio. You should read the portfolio’s prospectus carefully before investing in the corresponding variable investment option.
The investment options in the Separate Account are not publicly traded mutual funds. The investment options are only available to you as investment options in the policies, or in some cases through other variable annuity contracts or variable life insurance policies issued by us or by other life insurance companies. In some cases, the investment options also may be available through participation in certain qualified pension or retirement plans. The portfolios' investment advisers and managers (i.e. subadvisers) may manage publicly traded mutual funds with similar names and investment objectives. However, the portfolios are not directly related to any publicly traded mutual fund. You should not compare the performance of any investment option described in this prospectus with the performance of a publicly traded mutual fund. The performance of any publicly traded mutual fund could differ substantially from that of any of the investment options of our Separate Account.
The portfolios available under the policies, the investment subadvisers (engaged by JHIMS, M Financial or PIMCO) and the investment objective for each portfolio are described in the table below. For additional information regarding these portfolios’ investment objectives, policies and restrictions of and the risks relating to investment in the portfolios, please refer to the prospectus for the underlying portfolio.
Portfolio Subadviser Investment Objective
500 Index B John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To approximate the aggregate total return of a broad-based U.S. domestic equity market index.
Active Bond Declaration Management & Research LLC; and John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
All Cap Core QS Investors, LLC To seek to provide long-term growth of capital.
Alpha Opportunities Wellington Management Company, LLP To seek to provide long-term total return.
American Asset Allocation Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide high total return (including income and capital gains) consistent with preservation of capital over the long-term.
American Global Growth Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide long-term growth of capital.
American Growth Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide growth of capital.
American Growth–Income Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide growth of capital and income.
American International Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide long-term growth of capital.
American New World Capital Research and Management Company (Adviser to the American Funds Insurance Series) To seek to provide long-term capital appreciation.
4

 

Portfolio Subadviser Investment Objective
Blue Chip Growth T. Rowe Price Associates, Inc. To seek to provide long-term growth of capital. Current income is a secondary objective.
Bond John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
Capital Appreciation Jennison Associates LLC To seek to provide long-term growth of capital.
Capital Appreciation Value T. Rowe Price Associates, Inc. To seek to provide long-term capital appreciation.
Core Bond Wells Capital Management, Incorporated To seek to provide total return consisting of income and capital appreciation.
Core Strategy John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide long-term growth of capital. Current income is also a consideration.
Emerging Markets Value Dimensional Fund Advisors LP To seek to provide long-term capital appreciation.
Equity Income T. Rowe Price Associates, Inc. To seek to provide substantial dividend income and also long-term growth of capital.
Financial Industries John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide growth of capital.
Franklin Templeton Founding Allocation John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide long-term growth of capital.
Fundamental All Cap Core John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide long-term growth of capital.
Fundamental Large Cap Value John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide long-term capital appreciation.
Global Templeton Global Advisors Limited To seek to provide long-term capital appreciation.
Global Bond Pacific Investment Management Company LLC To seek to provide maximum total return, consistent with preservation of capital and prudent investment management.
Health Sciences T. Rowe Price Associates, Inc. To seek to provide long-term capital appreciation.
High Yield Western Asset Management Company To seek to provide an above-average total return over a market cycle of 3 to 5 years, consistent with reasonable risk.
International Core Grantham, Mayo, Van Otterloo & Co. LLC To seek to provide high total return.
International Equity Index B SSgA Funds Management, Inc. To seek to track the performance of a broad-based equity index of foreign companies primarily in developed countries and, to a lesser extent, in emerging markets.
International Growth Stock Invesco Advisers, Inc. To seek to provide long-term growth of capital.
International Small Company Dimensional Fund Advisors LP To seek to provide long-term capital appreciation.
International Value Templeton Investment Counsel, LLC To seek to provide long-term growth of capital.
Investment Quality Bond Wellington Management Company, LLP To seek to provide a high level of current income consistent with the maintenance of principal and liquidity.
Lifestyle Aggressive MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide long-term growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
5

 

Portfolio Subadviser Investment Objective
Lifestyle Balanced MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide growth of capital and current income while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Conservative MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide current income and growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Growth MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide long-term growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Lifestyle Moderate MVP John Hancock Asset Management, a division of Manulife Asset Management (US) LLC; and John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to provide current income and growth of capital while seeking to both manage the volatility of return and limit the magnitude of portfolio losses.
Mid Cap Index John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to approximate the aggregate total return of a medium-capitalization U.S. domestic equity market index.
Mid Cap Stock Wellington Management Company, LLP To seek to provide long-term growth of capital.
Mid Value T. Rowe Price Associates, Inc. To seek to provide long-term capital appreciation.
Money Market John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to obtain maximum current income consistent with preservation of principal and liquidity. Certain market conditions may cause the return of the portfolio to become low or possibly negative.
PIMCO VIT All Asset (a series of PIMCO Variable Insurance Trust) (only Class M is available) Pacific Investment Management Company LLC To seek to provide maximum real return, consistent with preservation of real capital and prudent investment management.
Real Estate Securities Deutsche Investment Management Americas Inc. To seek to provide a combination of long-term capital appreciation and current income.
Science & Technology T. Rowe Price Associates, Inc.; and Allianz Global Investors U.S. LLC To seek to provide long-term growth of capital. Current income is incidental to the portfolio’s objective.
Short Term Government Income John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide a high level of current income consistent with preservation of capital. Maintaining a stable share price is a secondary goal.
Small Cap Growth Wellington Management Company, LLP To seek to provide long-term capital appreciation.
Small Cap Index John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to approximate the aggregate total return of a small-capitalization U.S. domestic equity market index.
Small Cap Opportunities Dimensional Fund Advisors LP; and Invesco Advisers, Inc. To seek to provide long-term capital appreciation.
Small Cap Value Wellington Management Company, LLP To seek to provide long-term capital appreciation.
6

 

Portfolio Subadviser Investment Objective
Small Company Value T. Rowe Price Associates, Inc. To seek to provide long-term growth of capital.
Strategic Income Opportunities John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide a high level of current income.
Total Bond Market B Declaration Management & Research LLC To seek to track the performance of the Barclays U.S. Aggregate Bond Index.*
Total Stock Market Index John Hancock Asset Management, a division of Manulife Asset Management (North America) Limited To seek to approximate the aggregate total return of a broad U.S. domestic equity market index.
Ultra Short Term Bond John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide a high level of current income consistent with the maintenance of liquidity and the preservation of capital.
U.S. Equity Grantham, Mayo, Van Otterloo & Co. LLC To seek to provide long-term capital appreciation.
Utilities Massachusetts Financial Services Company To seek to provide capital growth and current income (income above that available from the portfolio invested entirely in equity securities).
Value Invesco Advisers, Inc. To seek to provide an above-average total return over a market cycle of 3 to 5 years, consistent with reasonable risk.
M Capital Appreciation (a series of M Fund, Inc.) Frontier Capital Management Company, LLC To seek to provide maximum capital appreciation.
M International Equity (a series of M Fund, Inc.) Northern Cross, LLC To seek to provide long-term capital appreciation.
M Large Cap Growth (a series of M Fund, Inc.) DSM Capital Partners LLC To seek to provide long-term capital appreciation.
M Large Cap Value (a series of M Fund, Inc.) AJO, LP To seek to provide long-term capital appreciation.
    
*   The U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass throughs), ABS, and CMBS.
Tax considerations
This description of Federal income tax consequences is only a brief summary and is neither exhaustive nor authoritative. It was written to support the promotion of our products. It does not constitute legal or tax advice, and it is not intended to be used and cannot be used to avoid any penalties that may be imposed on you. Tax consequences will vary based on your own particular circumstances, and for further information you should consult a qualified tax adviser. Federal, state and local tax laws, regulations and interpretations can change from time to time. As a result, the tax consequences to you and the beneficiary may be altered, in some cases retroactively. The policy may be used in various arrangements, including non-qualified deferred compensation or salary continuation plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans and others. The tax consequences of such plans may vary depending on the particular facts and circumstances of each individual arrangement. Therefore, if the value of using the policy in any such arrangement depends in part on the tax consequences, a qualified tax adviser should be consulted for advice.
General
We are taxed as a life insurance company. Under current tax law rules, we include the investment income (exclusive of capital gains) of the Separate Account in our taxable income and take deductions for investment income credited to our policy holder reserves. We are also required to capitalize and amortize certain costs instead of deducting those costs when they are incurred. We do not currently charge the Separate Account for any resulting income tax costs, other than a charge we may impose against the Separate Account to compensate us for the cost of a delay in the deductibility of deferred acquisition costs (the “DAC tax” adjustment) pursuant to section 848 of the Internal Revenue Code. We also claim certain tax credits or deductions relating to foreign taxes paid and dividends received by the series funds. These benefits can be material. We do not pass these benefits through to the Separate Account, principally because: (i) the deductions and credits are allowed to us and
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not the policy owners under applicable tax law; and (ii) the deductions and credits do not represent investment return on the Separate Account assets that is passed through to policy owners.
The policies permit us to deduct a charge for any taxes we incur that are attributable to the operation or existence of the policies or the Separate Account. Currently, we do not anticipate making any specific charge for such taxes other than any DAC tax charge and premium taxes where applicable. If the level of the current taxes increases, however, or is expected to increase in the future, we reserve the right to make a charge in the future.
Death benefit proceeds and other policy distributions
Generally, death benefits paid under policies such as yours are not subject to income tax unless policy ownership has been transferred in exchange for payment. Earnings on your policy value are ordinarily not subject to income tax as long as we don’t pay them out to you. If we do pay out any amount of your policy value upon surrender or partial withdrawal, all or part of that distribution would generally be treated as a return of the premiums you’ve paid and not subjected to income tax. Any portion not treated as a return of your premiums would be includible in your income.
Please note that certain distributions associated with a reduction in death benefit or other policy benefits within the first fifteen years after issuance of the policy are ordinarily taxable in whole or in part. Amounts you borrow are generally not taxable to you.
However, some of the tax rules change if your policy becomes a modified endowment contract. This can happen if you’ve paid premiums in excess of limits prescribed by the tax laws. In that case, additional taxes and penalties may be payable for policy distributions of any kind, including loans. (See “7-pay premium limit and modified endowment contract status” below.)
We expect the policy to receive the same Federal income and estate tax treatment as fixed benefit life insurance policies. Section 7702 of the Internal Revenue Code defines a life insurance contract for Federal tax purposes. For a policy to be treated as a life insurance contract, it must satisfy either the cash value accumulation test or the guideline premium test. These tests limit the amount of premium that you may pay into the policy. We will monitor compliance with these standards. If we determine that a policy does not satisfy section 7702, we may take whatever steps are appropriate and reasonable to bring it into compliance with section 7702.
If the policy complies with section 7702, the death benefit proceeds under the policy ordinarily should be excludable from the beneficiary’s gross income under section 101 of the Internal Revenue Code. (As noted above, a transfer of the policy for valuable consideration may limit the exclusion of death benefits from the beneficiary's income.) In addition, if your policy offers a Long-Term Care Rider, and you have elected it, the rider's benefits generally will be excludable from gross income under the Internal Revenue Code. The tax-free nature of these accelerated benefits is contingent on the rider meeting specific requirements under section 101 and/or section 7702B of the Internal Revenue Code. The riders are intended to meet these standards.
If you have elected a Long-Term Care Rider, we caution you that there is a significant risk that ownership by anyone other than the person insured by the policy will cause adverse tax consequences. If the owner of the policy is not the insured person, benefit payments may be included in the owner's income, and the death benefit may be part of the insured person's estate for purposes of the Federal estate tax. A policy with a Long-Term Care Rider should not be purchased by or transferred to a person other than the insured person unless you have carefully reviewed the tax implications with your tax adviser.
Increases in policy value as a result of interest or investment experience will not be subject to Federal income tax unless and until values are received through actual or deemed distributions. In general, unless the policy is a modified endowment contract, the owner will be taxed only on the amount of distributions that exceed the premiums paid under the policy. An exception to this general rule occurs in the case of a decrease in the policy's death benefit or any other change that reduces benefits under the policy in the first fifteen years after the policy is issued and that results in a cash distribution to the policy owner. Changes that reduce benefits include partial withdrawals, death benefit option changes, and distributions required to keep the policy in compliance with section 7702. For purposes of this rule any distribution within the two years immediately before a reduction in benefits will also be treated as if it were a result of the reduction. A cash distribution that reduces policy benefits will be taxed in whole or in part (to the extent of any gain in the policy) under rules prescribed in section 7702. The taxable amount is subject to limits prescribed in section 7702(f)(7). Any taxable distribution will be ordinary income to the owner (rather than capital gain).
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Distributions for tax purposes include amounts received upon surrender or partial withdrawals. You may also be deemed to have received a distribution for tax purposes if you assign all or part of your policy rights or change your policy’s ownership. If your policy offers a Long-Term Care Rider, and if you have elected it, deductions from policy value to pay the rider charges will reduce your investment in the contract, but will not be included in income even if you have recovered all of your investment in the contract.
It is possible that, despite our monitoring, a policy might fail to qualify as a life insurance contract under the Internal Revenue Code. This could happen, for example, if we inadvertently failed to return to you any premium payments that were in excess of amounts permitted under section 7702, or if any of the funds failed to meet certain investment diversification or other requirements of the Internal Revenue Code. If this were to occur, you would be subject to income tax on the income credited to the policy from the date of issue to the date of the disqualification and for subsequent periods.
Tax consequences of ownership or receipt of policy proceeds under Federal, state and local estate, inheritance, gift and other tax laws will depend on the circumstances of each owner or beneficiary. If the person insured by the policy is also its owner, either directly or indirectly through an entity such as a revocable trust, the death benefit will be includible in his or her estate for purposes of the Federal estate tax. If the owner is not the person insured, the value of the policy will be includible in the owner's estate upon his or her death. Even if ownership has been transferred, the death proceeds or the policy value may be includible in the former owner's estate if the transfer occurred less than three years before the former owner's death or if the former owner retained certain kinds of control over the policy. You should consult your tax adviser regarding these possible tax consequences.
Because there may be unfavorable tax consequences (including recognition of taxable income and the loss of income tax-free treatment for any death benefit payable to the beneficiary), you should consult a qualified tax adviser prior to changing the policy’s ownership or making any assignment of ownership interests.
Policy loans
We expect that, except as noted below (see “7-pay premium limit and modified endowment contract status”), loans received under the policy will be treated as indebtedness of an owner and that no part of any loan will constitute income to the owner. However, if the policy terminates for any reason other than the payment of the death benefit, an amount equal to any outstanding loan that was not previously considered income will be treated as if it had been distributed to the owner upon such termination. This could result in a considerable tax bill. Under certain circumstances involving large amounts of outstanding loans, you might find yourself having to choose between high premiums required to keep your policy from lapsing and a significant tax burden if you allow the lapse to occur.
Diversification rules and ownership of the Separate Account
Your policy will not qualify for the tax benefits of a life insurance contract unless the Separate Account follows certain rules requiring diversification of investments underlying the policy. In addition, the rules require that the policy owner not have “investor control” over the underlying assets.
In certain circumstances, the owner of a variable life insurance policy may be considered the owner, for Federal income tax purposes, of the assets of the Separate Account used to support the policy. In those circumstances, income and gains from the Separate Account assets would be includible in the policy owner's gross income. The Internal Revenue Service (“IRS”) has stated in published rulings that a variable policy owner will be considered the owner of Separate Account assets if the policy owner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. A Treasury Decision issued in 1986 (T.D. 8101) stated that guidance would be issued in the form of regulations or rulings on “the extent to which policyholders may direct their investments to particular sub-accounts of a Separate Account without being treated as owners of the underlying assets.” As of the date of this prospectus, no comprehensive guidance on this point has been issued. In Rev. Rul. 2003-91, however, the IRS ruled that a contract holder would not be treated as the owner of assets underlying a variable life insurance or annuity contract despite the owner’s ability to allocate funds among as many as twenty subaccounts.
The ownership rights under your policy are similar to, but different in certain respects from, those described in IRS rulings in which it was determined that policyholders were not owners of Separate Account assets. Since you have greater flexibility in allocating premiums and policy values than was the case in those rulings, it is possible that you would be treated as the owner of your policy’s proportionate share of the assets of the Separate Account.
9

 

We do not know what future Treasury Department regulations or other guidance may require. We cannot guarantee that the funds will be able to operate as currently described in the series funds' prospectuses, or that a series fund will not have to change any fund's investment objectives or policies. We have reserved the right to modify your policy if we believe doing so will prevent you from being considered the owner of your policy's proportionate share of the assets of the Separate Account, but we are under no obligation to do so.
7-pay premium limit and modified endowment contract status
At the time of policy issuance, we will determine whether the Planned Premium schedule will exceed the 7-pay limit discussed below. If so, our standard procedures prohibit issuance of the policy unless you sign a form acknowledging that fact.
The 7-pay limit at any time during the first seven contract years is the total of net level premiums that would have been payable at or before that time under a comparable fixed policy that would be fully “paid-up” after the payment of seven equal annual premiums. “Paid-up” means that no further premiums would be required to continue the coverage in force until maturity, based on certain prescribed assumptions. If the total premiums paid at any time during the first seven policy years exceed the 7-pay limit, the policy will be treated as a modified endowment contract, which can have adverse tax consequences.
Policies classified as modified endowment contracts are subject to the following tax rules:
•  First, all withdrawals from such a policy are treated as ordinary income subject to tax up to the amount equal to the excess (if any) of the policy value immediately before the withdrawal over the investment in the policy at such time. If you own any other modified endowment contracts issued to you in the same calendar year by the same insurance company or its affiliates, their values will be combined with the value of the policy from which you take the withdrawal for purposes of determining how much of the withdrawal is taxable as ordinary income.
•  Second, loans taken from or secured by such a policy and assignments or pledges of any part of its value are treated as partial withdrawals from the policy and taxed accordingly. Past-due loan interest that is added to the loan amount is treated as an additional loan.
•  Third, a 10% additional penalty tax is imposed on the portion of any distribution (including distributions on surrender) from, or loan taken from or secured by, such a policy that is included in income except where the distribution or loan:
•  is made on or after the date on which the policy owner attains age 59½;
•  is attributable to the policy owner becoming disabled; or
•  is part of a series of substantially equal periodic payments for the life (or life expectancy) of the policy owner or the joint lives (or joint life expectancies) of the policy owner and the policy owner’s beneficiary.
These exceptions to the 10% additional tax do not apply in situations where the policy is not owned by an individual.
Furthermore, any time there is a “material change” in a policy, the policy will begin a new 7-pay testing period as if it were a newly-issued policy. The material change rules for determining whether a policy is a modified endowment contract are complex. In general, however, the determination of whether a policy will be a modified endowment contract after a material change depends upon the relationship among the death benefit of the policy at the time of such change, the policy value at the time of the change, and the additional premiums paid into the policy during the seven years starting with the date on which the material change occurs.
Moreover, under a policy insuring a single life, if there is a reduction in benefits (such as a reduction in the death benefit or the reduction or cancellation of certain rider benefits) during a 7-pay testing period, the 7-pay limit will generally be recalculated based on the reduced benefits and the policy will be re-tested from the beginning of the 7-pay testing period using the lower limit. If the premiums paid to date at any point during the 7-pay testing period are greater than the recalculated 7-pay limit, the policy will become a modified endowment contract. If your policy is a survivorship policy, a reduction in benefits under the policy at any time will require re-testing. For such a policy the 7-pay limit will generally be recalculated based on the reduced benefits and the policy will be re-tested, using the lower limit, from the date it was issued. You should consult your tax adviser if you have questions regarding the possible impact of the 7-pay limit on your policy.
If your policy is issued as a result of an exchange subject to section 1035 of the Internal Revenue Code, it may be considered to be a modified endowment contract if the death benefit under the new policy is smaller than the death benefit
10

 

under the exchanged policy, or if you reduce coverage in your new policy after it is issued. Therefore, if you desire to reduce the face amount as part of a 1035 exchange, a qualified tax adviser should be consulted for advice. A new policy issued in exchange for a modified endowment contract will also be a modified endowment contract regardless of any change in the death benefit.
All modified endowment contracts issued by the same insurer (or its affiliates) to the same owner during any calendar year generally are required to be treated as one contract for the purpose of applying the rules on taxation of withdrawals from modified endowment contracts. You should consult your tax adviser if you have questions regarding the possible impact of the 7-pay limit on your policy.
Corporate and H.R. 10 retirement plans
The policy may be acquired in connection with the funding of retirement plans satisfying the qualification requirements of section 401 of the Internal Revenue Code. If so, the Internal Revenue Code provisions relating to such plans and life insurance benefits thereunder should be carefully scrutinized. We are not responsible for compliance with the terms of any such plan or with the requirements of applicable provisions of the Internal Revenue Code.
Withholding
To the extent that policy distributions to you are taxable, they are generally subject to withholding for your Federal income tax liability. However if you reside in the United States, you can generally choose not to have tax withheld from distributions. Electing to have no withholding will not reduce your tax liability and may expose you to penalties under the rules governing payment of estimated taxes.
Life insurance purchases by residents of Puerto Rico
In Rev. Rul. 2004-75, 2004-31 I.R.B. 109, the Internal Revenue Service ruled that income received by residents of Puerto Rico under a life insurance policy issued by a United States company is U.S.-source income that is subject to United States Federal income tax.
Life insurance purchases by non-resident aliens
If you are not a U.S. citizen or resident, you will generally be subject to U.S. Federal withholding tax on taxable distributions from life insurance policies at a 30% rate, unless a lower treaty rate applies. In addition, you may be subject to state and/or municipal taxes and taxes imposed by your country of citizenship or residence. You should consult with a qualified tax adviser before purchasing a policy.
Life insurance owned by citizens or residents living abroad
If you are a U.S. citizen or permanent resident living outside the United States, you are still subject to income taxation by the United States. Since many countries tax on the basis of domicile, you may also be subject to tax in the country or territory in which you are living. The tax-deferred accumulation of gain that a life insurance policy provides under United States tax law may not be available under the tax laws of the country in which you are living. If you are living outside the United States or planning to do so, you should consult with a qualified tax adviser before purchasing or retaining ownership of a policy.
11

 

In addition to the disclosure contained herein, John Hancock USA has filed with the SEC a prospectus and a Statement of Additional Information (the “SAI”) which contains additional information about John Hancock USA and the Separate Account, including information on our history, services provided to the Separate Account, legal and regulatory matters and the audited financial statements of John Hancock USA and the Separate Account. The SAI and personalized illustrations of death benefits, account values and surrender values are available, without charge, upon request. You may obtain the personalized illustrations from your John Hancock USA representative. The SAI may be obtained by contacting the John Hancock USA Servicing Office. You should also contact the John Hancock USA Servicing Office to request any other information about your policy or to make any inquiries about its operation.
Information about the Separate Account (including the SAI) can be reviewed and copied at the SEC’s Public Reference Branch, 100 F Street, NE, Room 1580, Washington, DC, 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 202-551-8090. Reports and other information about the Account are available on the SEC’s Internet website at http://www.sec.gov. Copies of such information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549-0102.
 EX-99.(26)(N) 2 d152417dex9926n.htm CONSENT OF INDEPENTENT AUDITORS Consent of Indepentent Auditors

Exhibit 99.26N

Consent of Independent Registered

Public Accounting Firm

We consent to the reference to our firm under the caption “Independent registered public accounting firm” and to the use of our reports dated April 5, 2016, with respect to the statutory-basis financial statements of John Hancock Life Insurance Company (U.S.A.) and the GAAP-basis financial statements of John Hancock Life Insurance Company (U.S.A.) Separate Account N, included in the Statement of Additional Information in Post-Effective Amendment No. 16 to the Registration Statement (Form N-6 No. 333-100567) and related Prospectus of John Hancock Life Insurance Company (U.S.A.) Separate Account N.

/s/ Ernst & Young LLP

Boston, Massachusetts

April 26, 2016

EX-99.(26)(N)(1) 3 d152417dex9926n1.htm OPINION OF COUNSEL Opinion of Counsel
John Hancock Financial Services, Inc.
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117-0117
(617) 572-9197
Fax: (617) 572-9161
E-mail: jchoodlet@jhancock.com
James C. Hoodlet
Vice President & Counsel
April 26, 2016
U.S. Securities and Exchange Commission
450 F St., N.E.
Washington, D.C. 20549
Re: John Hancock Life Insurance Company (U.S.A.) Separate Account N File Nos. 811-5130 and 333-100567
Commissioners:
This opinion is being furnished with respect to the filing of Post-Effective No. 16 under the Securities Act of 1933 (Post-Effective Amendment No. 24 under the Investment Company Act of 1940) on the Form N-6 Registration Statement of John Hancock Life Insurance Company (U.S.A.) Separate Account N as required by Rule 485 under the 1933 Act.
I have acted as counsel to Registrant for the purpose of preparing this Post-Effective Amendment which is being filed pursuant to paragraph (b) of Rule 485 and hereby represent to the Commission that in our opinion this Post-Effective Amendment does not contain disclosures which would render it ineligible to become effective pursuant to paragraph (b).
I hereby consent to the filing of this opinion with and as a part of this Post-Effective Amendment to Registrant’s Registration Statement with the Commission.
Very truly yours,
/s/ James C. Hoodlet
James C. Hoodlet
Vice President and Chief Counsel
CVUL 03, CVUL 04
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