485BPOS 1 d477249d485bpos.htm JHUSA - CVUL 03 & CVUL 04 JHUSA - CVUL 03 & CVUL 04
Table of Contents
As filed with the U.S. Securities and Exchange Commission on April 24, 2018
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. 18 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 26 [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 April 30, 2018 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 April 30, 2018
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
Active Bond
American Asset Allocation
American Global Growth
American Growth
American Growth-Income
American International
Blue Chip Growth
Capital Appreciation
Capital Appreciation Value
Core Bond
Emerging Markets Value
Equity Income
Financial Industries
Fundamental All Cap Core
Fundamental Large Cap Value
Global
Global Bond
Health Sciences
High Yield
International Equity Index
International Growth Stock
International Small Company
International Value
Investment Quality Bond
Lifestyle Balanced
Lifestyle Conservative
Lifestyle Growth
Lifestyle Moderate
Managed Volatility Aggressive
Managed Volatility Balanced
Managed Volatility Conservative
Managed Volatility Growth
Managed Volatility Moderate
Mid Cap Index
Mid Cap Stock
Mid Value
Money Market
PIMCO VIT All Asset
Real Estate Securities
Science & Technology
Select Bond
Short Term Government Income
Small Cap Index
Small Cap Opportunities
Small Cap Stock
Small Cap Value
Small Company Value
Strategic Income Opportunities
Total Stock Market Index
Ultra Short Term Bond
Utilities
* * * * * * * * * * * *
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 2018

 

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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 0.46% 1.73%
    
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, and American International 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, and American International 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 have 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 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 John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
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.
Blue Chip Growth T. Rowe Price Associates, Inc. To seek to provide long-term growth of capital. Current income is a secondary objective.
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.
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.
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 Equity Index 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.
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Portfolio Subadviser Investment Objective
Lifestyle Balanced 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 a high level of current income and growth of capital, with a greater emphasis on growth of capital.
Lifestyle Conservative 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 a high level of current income with some consideration given to growth of capital.
Lifestyle Growth 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.
Lifestyle Moderate 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 a balance between a high level of current income and growth of capital, with a greater emphasis on income.
Managed Volatility Aggressive 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.
Managed Volatility Balanced 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.
Managed Volatility Conservative 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.
Managed Volatility Growth 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.
Managed Volatility Moderate 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.
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Portfolio Subadviser Investment Objective
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 (US) LLC 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.
Select Bond John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
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 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 GW&K Investment Management, LLC To seek to provide long-term capital appreciation.
Small Cap Stock Wellington Management Company, LLP 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.
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).
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. Our executive office is located at 197 Clarendon St., Boston, MA 02117.
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 variable 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 variable investment accounts may be added and made available to policy owners from time to time. Existing variable investment accounts 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, U.S. resident alien or other U.S. person, 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. If your policy is issued as a result of an exchange of a policy owned or issued outside the United States, the country or territory in which you reside may still tax you on the surrender of the policy replaced through the exchange. You should consult with a qualified tax adviser before exchanging your policy issued outside of the United States for one issued within the United States.
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 variable 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”).
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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 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
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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 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
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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.
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.
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 policy.
Independent registered public accounting firm
The statutory-basis financial statements of John Hancock Life Insurance Company (U.S.A.) at December 31, 2017 and 2016, and for each of the three years in the period ended December 31, 2017, and the financial statements of John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2017, and for each of the two years in the period ended December 31, 2017, 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.
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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, 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 April 30, 2018
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 accounts 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, 2017 and 2016, and for each of the three years in the period ended December 31, 2017, and the financial statements of John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2017, and for each of the two years in the period ended December 31, 2017, 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.
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 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”).
2

 

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 2017, 2016, and 2015, was $94,706,904, $100,416,732, and $120,545,566, 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.
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.
3

 

4

Table of Contents

AUDITED STATUTORY-BASIS FINANCIAL STATEMENTS

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

For the Years Ended December 31, 2017, 2016 and 2015

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, 2017, 2016 and 2015

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 Stockholder

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, 2017 and 2016, 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, 2017, 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 Department of Insurance and Financial Services. 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 Department of Insurance and Financial Services, which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles are described in Note 2. The effects on the accompanying financial statements of these variances are not reasonably determinable but are presumed to be material.

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, 2017 and 2016, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2017.

 

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, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting practices prescribed or permitted by the Michigan Department of Insurance and Financial Services.

 

/s/ Ernst & Young LLP

Boston, Massachusetts

April 4, 2018

 

F-2

Table of Contents

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

BALANCE SHEETS—STATUTORY BASIS

 

 

     December 31,  
     2017      2016  
  

 

 

  
     (in millions)  

Admitted assets

      

Cash and invested assets:

      

Bonds

        $ 47,970          $ 45,231  

Stocks:

      

Preferred stocks

      11        25  

Common stocks

      1,354        1,063  

Investments in affiliates

      2,560        3,429  

Mortgage loans on real estate

      11,900        11,631  

Real estate:

      

Company occupied

      286        295  

Investment properties

      5,436        5,953  

Cash, cash equivalents and short-term investments

      4,131        3,879  

Policy loans

      2,726        2,722  

Derivatives

      9,637        10,851  

Receivable for securities

      16        18  

Other invested assets

      9,269        6,656  
  

 

 

  

Total cash and invested assets

      95,296        91,753  

Investment income due and accrued

      705        752  

Premiums due and deferred

      65        277  

Amounts recoverable from reinsurers

      163        280  

Net deferred tax asset

      13        177  

Funds held by or deposited with reinsured companies

      3,321        3,488  

Other reinsurance receivable

      181        200  

Amounts due from affiliates

      477        411  

Other assets

      1,435        1,407  

Assets held in separate accounts

        141,167          131,147  
  

 

 

  

Total admitted assets

        $ 242,823          $ 229,892  
  

 

 

  

 

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,  
     2017     2016  
  

 

 

  
     (in millions)  

Liabilities and capital and surplus

     

Liabilities:

     

Policy and contract obligations:

     

Policy reserves

        $ 69,132         $ 67,125  

Policyholders’ and beneficiaries funds

      2,683       2,717  

Consumer notes

      197       201  

Dividends payable to policyholders

      408       422  

Policy benefits in process of payment

      450       526  

Other amount payable on reinsurance

      534       830  

Other policy obligations

      46    

 

60

 

  

 

 

  

Total policy and contract obligations

      73,450       71,881  

Payable to parent and affiliates

      1,645       1,436  

Transfers to (from) separate account, net

      (365 )      (423 ) 

Asset valuation reserve

      2,106       2,106  

Reinsurance in unauthorized companies

      4       3  

Funds withheld from unauthorized reinsurers

      66       7,463  

Interest maintenance reserve

      2,038       1,351  

Current federal income taxes payable

      104       230  

Derivatives

      4,129       5,370  

Payables for collateral on derivatives

      1,973       1,907  

Payables for securities

      177       28  

Funds held under coinsurance

      7,239       138  

Other general account obligations

      981       1,101  

Obligations related to separate accounts

      141,167       131,147  
  

 

 

  

Total liabilities

        234,714         223,738  

Capital and surplus:

     

Preferred stock (par value $1; 50,000,000 shares authorized; 100,000 shares issued and outstanding at December 31, 2017 and 2016)

      -       -  

Common stock (par value $1; 50,000,000 shares authorized; 4,728,940 and 4,728,939 shares issued and outstanding at December 31, 2017 and 2016, respectively)

      5       5  

Paid-in surplus

      3,219       3,196  

Surplus notes

      585       585  

Unassigned surplus

      4,300       2,368  
  

 

 

  

Total capital and surplus

      8,109       6,154  
  

 

 

  

Total liabilities and capital and surplus

        $   242,823         $   229,892  
  

 

 

  

 

 

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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums and other revenues:

       

Life, long-term care and annuity premiums

        $ 18,286         $ 13,227         $ 16,323  

Consideration for supplementary contracts with life contingencies

      176       201       140  

Net investment income

      4,426       4,308       4,387  

Amortization of interest maintenance reserve

      195       191       181  

Commissions and expense allowance on reinsurance ceded

      1,963       629       1,040  

Reserve adjustment on reinsurance ceded

      (12,621 )      (7,297 )      (16,494 ) 

Separate account administrative and contract fees

      1,772       1,697       1,786  

Other revenue

      347       434       415  
  

 

 

  

Total premiums and other revenues

         14,544       13,390       7,778  

Benefits paid or provided:

       

Death, surrender and other contract benefits, net

      12,693       10,220          9,762  

Annuity benefits

      1,788       1,622       1,796  

Disability and long-term care benefits

      738       664       647  

Interest and adjustments on policy or deposit-type funds

      (318 )      94       91  

Payments on supplementary contracts with life contingencies

      199       191       179  

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

      1,979       1,784       (2,506 ) 
  

 

 

  

Total benefits paid or provided

      17,079         14,575       9,969  

Insurance expenses and other deductions:

       

Commissions and expense allowance on reinsurance assumed

      1,091       1,049       1,289  

General expenses

      1,039       943       960  

Insurance taxes, licenses and fees

      138       171       145  

Net transfers to (from) separate accounts

      (8,706 )      (5,581 )      (6,554 ) 

Investment income ceded

      878       1,240       2,465  

Other deductions

      153       21       (160 ) 
  

 

 

  

Total insurance expenses and other deductions

      (5,407 )      (2,157 )      (1,855 ) 

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

      2,872       972       (336 ) 

Dividends to policyholders

      124       131       (36 ) 
  

 

 

  

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

      2,748       841       (300 ) 

Federal income tax expense (benefit)

      446       (121 )      (778 ) 
  

 

 

  

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

      2,302       962       478  

Net realized capital gains (losses)

      (403 )      (933 )      216  
  

 

 

  

Net income (loss)

        $ 1,899         $ 29         $ 694  
  

 

 

  

 

 

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, 2015

        $ 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 ) 

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  

Net income (loss)

              29       29  

Change in net unrealized capital gains (losses)

              569       569  

Change in net deferred income tax

              810       810  

Decrease (increase) in non-admitted assets

              (38 )      (38 ) 

Decrease (increase) in asset valuation reserves

              (262 )      (262 ) 

Change in surplus as a result of reinsurance

              (125 )      (125 ) 

Surplus note redemptions

            (405 )        (405 ) 

Other adjustments, net

            -       132       132  
  

 

 

  

Balances at December 31, 2016

      5        3,196        585       2,368       6,154  

Net income (loss)

              1,899       1,899  

Change in net unrealized capital gains (losses)

              1,394       1,394  

Change in net deferred income tax

              (726 )      (726 ) 

Decrease (increase) in non-admitted assets

              191       191  

Change in liability for reinsurance in unauthorized reinsurance

              (1 )      (1 ) 

Capital contribution from parent

      -        23            23  

Dividend paid to Parent

              (900 )      (900 ) 

Change in surplus as a result of reinsurance

              80       80  

Other adjustments, net

            -       (5 )      (5 ) 
  

 

 

  

Balances at December 31, 2017

        $   5          $   3,219          $   585         $   4,300         $   8,109  
  

 

 

  

 

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,  
  

 

 

  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Operations

       

Premiums and other considerations collected, net of reinsurance

        $ 18,819     $ 13,411     $ 19,961  

Net investment income received

      4,603       4,415       4,600  

Separate account fees

      1,772       1,697       1,786  

Commissions and expenses allowance on reinsurance ceded

      1,963       629       1,040  

Miscellaneous income

      374       595       2,852  

Benefits and losses paid

      (28,091 )      (21,060 )      (29,836 ) 

Net transfers from (to) separate accounts

      8,763       5,699       7,404  

Commissions and expenses (paid) recovered

      (3,040 )      (2,873 )      (5,153 ) 

Dividends paid to policyholders

      (138 )      (137 )      (250 ) 

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

      (846 )      200       847  
  

 

 

  

Net cash provided by (used in) operating activities

      4,179       2,576       3,251  

Investment activities

       

Proceeds from sales, maturities, or repayments of investments:

       

Bonds

      19,287       20,934       19,217  

Stocks

      317       239       190  

Mortgage loans on real estate

      885       1,283       1,834  

Real estate

      986       1,295       8  

Other invested assets

      624       485       955  

Derivatives

      -       -       32  

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

      4       (2 )      (9 ) 
  

 

 

  

Total investment proceeds

      22,103       24,234       22,227  

Cost of investments acquired:

       

Bonds

      21,195       21,880       19,734  

Stocks

      459       652       848  

Mortgage loans on real estate

      1,179       2,440       1,715  

Real estate

      415       446       1,155  

Other invested assets

      1,680       1,429       905  

Derivatives

      46       1,420       -  
  

 

 

  

Total cost of investments acquired

      24,974       28,267       24,357  

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

      217       266       (904 ) 

Net (increase) decrease in policy loans

      (4 )      932       (56 ) 
  

 

 

  

Net cash provided by (used in) investment activities

      (2,658 )      (2,835 )      (3,090 ) 

Financing and miscellaneous activities

       

Surplus notes

      -       (405 )      -  

Borrowed funds

      (164 )      (64 )      (276 ) 

Net deposits (withdrawals) on deposit-type contracts

      (34 )      93       (333 ) 

Dividend paid to Parent

      (900 )      -       (210 ) 

Other cash provided (applied)

      (171 )      (14 )      (2,516 ) 
  

 

 

  

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

      (1,269 )      (390 )      (3,335 ) 

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

      252       (649 )      (3,174 ) 

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

         3,879          4,528          7,702  
  

 

 

  

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

        $ 4,131     $ 3,879     $ 4,528  
  

 

 

  

Non-cash activities during the year:

       

Premium, deposit type contracts and other operating activity for New York Life (“NYL”) 2015 reinsurance transaction and other affiliate transactions, net

        $ 33     $ 650     $ 8,357  

Transfer of invested assets for NYL 2015 reinsurance transaction and other affiliates, net

      16       (650 )      (8,357 ) 

Financing and other activities related to JHVT\JHLH merger and transfer with affiliates, net

      (49 )      -       -  

 

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. Effective December 2, 2016, the Company discontinued new sales of its individual long-term care product. 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”) and a wholly-owned captive insurance subsidiary, Manulife (Michigan) Reassurance Company (“MMRC”).

In 2017, following receipt of regulatory approval, JHLH executed a Plan and Agreement of Merger with John Hancock Insurance Company of Vermont (“JHVT”), also a wholly-owned subsidiary of JHUSA. Effective as of October 1, 2017, JHVT merged with and into JHLH.    Prior to the JHLH/JHVT merger, JHUSA issued one common share to its parent MIC in exchange for 100% ownership of JHVT and became the common parent of both JHLH and JHVT. As a result of the merger, JHVT ceased to exist and the companies’ property and obligations became the property and obligations of 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.

 

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)

 

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 the entity does not have the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in value. 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 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 audited statutory equity. Non-insurance subsidiaries, which have significant ongoing operations other than for the benefit of the Company and its affiliates, are reported based on the underlying audited 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 audited GAAP 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, common and preferred stocks, and other invested assets 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

 

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)

 

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 companies (“LLCs”) which are carried based on the underlying audited 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 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 electronic data processing (“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. Goodwill is reported in other invested assets in the Balance Sheets.

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, 2017, 2016 and 2015, 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 other invested assets, furniture and equipment, prepaid expenses, 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. This includes asset adequacy testing required under NAIC Actuarial Guideline 38 Section 8D (“AG 38 8D”). The Company recorded gross reserves of $1,630 million and $635 million for the calculation required under AG 38 8D, of which $1,103 million and $345 million was ceded to Manulife Reinsurance Limited (“MRL”) under an existing coinsurance transaction at December 31, 2017 and 2016, respectively. At

 

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)

 

 

December 31, 2017 and 2016, the Company held reserves of $1,281 million and $930 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.

 

  •  

Reserves for individual life insurance policies are maintained using the 1941, 1958, 1980, 2001 and 2017 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 A-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.

 

  •  

For life insurance, the calendar year exact method is used to calculate the reserve at December 31, 2017. For the reserve at December 31, 2016, the mean reserve method was used to adjust the calculated terminal reserve to the appropriate reserve. Mean reserves are determined by computing the terminal reserve for the plan and assuming annual premiums have been paid as of the valuation date. An asset is recorded for deferred premiums, net of loading, to adjust the reserve for modal premium payments. Reserves at December 31, 2017 and 2016 are calculated based on the rated age. For certain policies with substandard table ratings, substandard multiple extras are applied via the Lotter method.

 

  •  

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. The reserve is based on the worst 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.

 

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)

 

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 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 realized 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. The provision for federal and foreign income taxes incurred in the Statements of Operations is different from that which would be obtained by applying the statutory federal income tax rate to income before income tax (including realized capital gains). For additional information, see the Federal Income Taxes Note for reconciliation of effective tax rate.

Participating Insurance and Policyholder Dividends: Participating business represented approximately 14% and 15% of the Company’s aggregate reserve for life contracts at December 31, 2017 and 2016, respectively. 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 policyholders’ 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 Reinsurance and Closed Block 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, 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 term certain supplementary contracts, consist of the entire premium received. Premiums received for variable universal life, as well as annuity policies 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

 

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)

 

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 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.

The effects of the foregoing variances from GAAP on the accompanying statutory-basis financial statements have not been determined, but are presumed to be material.

3. Permitted Statutory Accounting Practices

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

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, 2017 and 2016, 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.

John Hancock Subsidiaries, LLC (“JHS”) is a wholly-owned subsidiary of the Company. During 2017, the Company reclassified its investment in JHS of $1.3 billion from Stocks — Investments in affiliates to Other invested assets. This reclassification was the result of a change in accounting principle and had no material impact on the Company’s financial position, results of operations, and financial statement disclosures.

Adoption of New Accounting Standards

In March 2015, the NAIC adopted revisions to Statement of Statutory Accounting Principles (“SSAP”) No. 1, Disclosure of Accounting Policies, Risks and Uncertainties and Other Disclosures (“SSAP 1”) regarding management’s assessment of an entity’s ability to continue as a going concern. The pronouncement requires management to assess the entity’s ability to continue as a going concern, and provide footnote disclosures when conditions give rise to substantial doubt about an entity’s ability to continue as a going concern within one year from the financial statement issuance date. The new guidance was effective December 31, 2016. The guidance had no impact on the Company’s financial position, results of operations, and financial statement disclosures.

 

F-13

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

4. Accounting Changes - (continued)

 

Future Adoption of New Accounting Standards

In August, 2016, the NAIC adopted substantive revisions to SSAP No. 51 – Life Contracts in order to allow principle-based reserving (“PBR”) for life insurance contracts as specified in the Valuation Manual. Current statutory accounting guidance refers to existing model laws for reserving guidance which are primarily based on formulaic methodology. Also, in June 2016, the NAIC adopted updates to Appendix A-820: Minimum Life and Annuity Reserve Standards as part of the PBR project, which incorporate relevant aspects of the 2009 revisions to the Standard Valuation Law (Model #820) into Appendix A-820. The effective date is January 1, 2017 and companies are allowed to defer adoption for three years until January 1, 2020. The Company plans to implement PBR prior to January 1, 2020 and is currently assessing the impact of these revisions on its financial statements. Adoption will be on a prospective basis for policies issued on or after the adoption date, therefore, we expect no impact to surplus upon adoption.

In March 2017, the NAIC made substantive revisions to SSAP No. 69 – Statement of Cash Flow to adopt ASU 2016-15 Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments as issued by the FASB, without modifications. The revisions clarified the classification of eight specific cash flow issues with the objective of reducing diversity in practice. The amendment is to be applied retrospectively, effective for fiscal years beginning after December 15, 2018 and interim periods within those years. Early adoption is permitted. The Company will adopt the amendment in 2019 and is currently assessing the impact of these revisions on its financial statements.

In August 2017, the NAIC adopted non-substantive revisions to SSAP No. 69 – Statement of Cash Flow to adopt ASU 2016-18 Statement of Cash Flows: Restricted Cash as issued by the FASB. The revision clarifies that restricted cash and cash equivalents shall not be reported as operating, investing or financing activities, but shall be reported with cash and cash equivalents when reconciling beginning and ending amounts on the cash flow statement. A consequential change was incorporated in SSAP No. 1 – Accounting Policies, Risks & Uncertainties and Other Disclosures to ensure information on restricted cash, cash equivalents and short-term investments is reported in the restricted asset disclosure. The revision is effective December 31, 2019, to be adopted retrospectively to allow for comparative cash flow statements. Early adoption is permitted. The Company will adopt the amendment in 2019 and is currently assessing the impact of these revisions on its financial statements.

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, 2017, 2016 and 2015.

 

F-14

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, 2017:

           

U.S. government and agencies

        $ 5,382          $ 153          $ (78 )        $ 5,457  

States and political subdivisions

      2,713        548        (3 )      3,258  

Foreign governments

      2,467        87        (17 )      2,537  

Corporate bonds

        31,028          3,455        (77 )        34,406  

Mortgage-backed and asset-backed securities

      6,380        430        (28 )      6,782  
  

 

 

  

Total bonds

        $ 47,970          $ 4,673          $ (203 )        $ 52,440  
  

 

 

  

December 31, 2016:

           

U.S. government and agencies

        $ 4,896          $ 240          $ (96 )        $ 5,040  

States and political subdivisions

      2,625        431        (19 )      3,037  

Foreign governments

      2,683        124        (13 )      2,794  

Corporate bonds

        28,746          2,442        (306 )      30,882  

Mortgage-backed and asset-backed securities

      6,281        382        (61 )      6,602  
  

 

 

  

Total bonds

        $ 45,231          $ 3,619          $    (495 )        $ 48,355  
  

 

 

  

A summary of the carrying value and fair value of the Company’s investments in bonds at December 31, 2017, by contractual maturity, is as follows:

 

     Carrying
Value		     

Fair

Value

  
  

 

 

  
     (in millions)  

Due in one year or less

        $ 752          $ 762  

Due after one year through five years

      7,309        7,406  

Due after five years through ten years

      6,689        6,938  

Due after ten years

        26,840          30,552  

Mortgage-backed and asset-backed securities

      6,380        6,782  
  

 

 

  

Total

        $ 47,970          $ 52,440  
  

 

 

  

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:

 

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Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

     December 31,  
     2017      2016  
  

 

 

  
     (in millions)  

At fair value:

      

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

        $ 135          $ 317  

Bonds pledged in support of exchange-traded futures

      364        533  

Bonds and cash pledged in support of cleared interest rate swaps

      192        278  
  

 

 

  

Total fair value

        $ 691          $ 1,128  
  

 

 

  

At carrying value:

      

Bonds on deposit with government authorities

        $ 16          $ 15  

Mortgage loans pledged in support of real estate

      2        16  

Bonds held in trust

      93        93  

Pledged collateral under reinsurance agreements

        4,187          4,101  
  

 

 

  

Total carrying value

        $ 4,298          $ 4,225  
  

 

 

  

At December 31, 2017 and 2016, the Company held below investment grade corporate bonds of $2,238 million and $2,626 million, with an aggregate fair value of $2,412 million and $2,803 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 book value 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

 

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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 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, 2017

 

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

 

 

  

671451CZ0

        $ 2      $ -      $ 2      $ -      $ -  
     -        -        -        -        -  
  

 

 

  

Total

        $   2      $   -      $   2      $   -      $   -  
  

 

 

  

At December 31, 2016, the Company had no 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).

When a decline in fair value is other-than-temporary, an impairment loss is recognized as a realized loss equal to the entire difference between the bond’s carrying value or amortized cost and its fair value.

 

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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, 2017:

                    

U.S. government and agencies

        $ 2,805      $ (18 )    $ 1,137      $ (60 )    $ 3,942      $ (78 ) 

States and political subdivisions

      45        -       62        (3 )      107        (3 ) 

Foreign governments

      27        -       43        (17 )      70        (17 ) 

Corporate bonds

        2,028        (14 )        2,534        (63 )        4,562        (77 ) 

Mortgage-backed and asset-backed securities

      540        (3 )      772        (25 )      1,312        (28 ) 

Total

        $ 5,445      $    (35 )    $ 4,548      $    (168 )    $ 9,993      $    (203 ) 
                                                   
     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, 2016:

                    

U.S. government and agencies

        $ 2,087      $ (96 )    $ -      $ -     $ 2,087      $ (96 ) 

States and political subdivisions

      286        (10 )      32        (9 )      318        (19 ) 

Foreign governments

      49        (1 )      46        (12 )      95        (13 ) 

Corporate bonds

          6,470        (218 )        1,046        (88 )        7,516        (306 ) 

Mortgage-backed and asset-backed securities

      1,401        (42 )      149        (19 )      1,550        (61 ) 

Total

        $ 10,293      $    (367 )    $ 1,273      $    (128 )    $ 11,566      $    (495 ) 
                                                   

At December 31, 2017 and 2016, there were 483 and 626 bonds that had a gross unrealized loss, of which the single largest unrealized loss was $40 million and $51 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, 2017, 2016 and 2015, realized capital losses include $3 million, $61 million, and $28 million related to bonds that have experienced an other-than-temporary decline in value and were comprised of 4, 8, and 13 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, 2017, 2016 and 2015 was $3 million, $16 million, and $18 million, respectively. There were 1, 2, and 0 restructured corporate bonds for which an impairment was recognized during 2017, 2016 and 2015, respectively. The Company accrues interest income on impaired securities to the

 

F-18

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

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 sales of investments in bonds resulted in the following:

 

     Years Ended December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Proceeds

        $   17,663         $   20,018         $   17,078  

Realized gross gains

      557       524       500  

Realized gross losses

      (33 )      (112 )      (123 ) 

The Company had no nonadmitted accrued investment income from bonds (unaffiliated) at December 31, 2017 and 2016.

Affiliate Transactions

In 2017, the Company sold certain private placements to an affiliate, The Manufacturers Life Insurance Company Bermuda branch (“MLI Bermuda”). These private placements had a book value of $208 million and fair value of $226 million. The Company recognized $18 million in pre-tax realized gains before transfer to the interest maintenance reserve (“IMR”).

In 2017, the Company sold certain bonds to an affiliate, Manulife Reinsurance Bermuda Limited (“MRBL”). These bonds had a book value of $204 million and fair value of $227 million. The Company recognized $23 million in pre-tax realized gains before transfer to the IMR.

In 2017, the Company sold certain bonds to an affiliate, JHLH. These bonds had a book value of $263 million and fair value of $304 million. The Company recognized $41 million in pre-tax realized gains before transfer to the IMR.

In 2017, the Company sold certain bonds to an affiliate, John Hancock Reassurance Company Limited (“JHRECO”). These bonds had a book value of $172 million and fair value of $200 million. The Company recognized $28 million in pre-tax realized gains before transfer to the IMR.

In 2017, the Company sold certain bonds to its indirect parent, MLI. These bonds had a book value of $448 million and fair value of $521 million. The Company recognized $73 million in pre-tax realized gains before transfer to the IMR.

In 2017, the Company sold certain bonds to an affiliate, Manulife Securities Ltd Partner (“MSLP”). These bonds had a book value of $412 million and fair value of $435 million. The Company recognized $23 million in pre-tax realized gains before transfer to the IMR.

In 2017, the Company acquired at fair value, certain bonds from an affiliate, JHLH, for $177 million.

In 2017, the Company acquired at fair value, certain bonds from an affiliate, MRBL, for $100 million.

In 2016, the Company transferred certain bonds to an affiliate, JHRECO, in lieu of a reinsurance cash settlement. These bonds had a book value of $676 million and fair value of $751 million. The Company recognized $75 million in pre-tax realized gains before transfer to the IMR.

In 2016, the Company sold certain bonds to an affiliate, Manulife Financial Singapore (“MLS”). These bonds had a book value of $93 million and fair value of $100 million. The Company recognized $7 million in pre-tax realized gains before transfer to the IMR.

In 2016, the Company sold certain bonds to an affiliate, Manubank (“MB”). These bonds had a book value of $12 million and fair value of $12 million. The Company did not recognize any pre-tax realized gains or losses before transfer to the IMR.

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

In 2016, the Company sold certain bonds to an affiliate Manulife International Ltd (“MIL”). These bonds had a book value of $67 million and fair value of $75 million. The Company recognized $8 million in pre-tax realized gains before transfer to the IMR.

In 2016, the Company sold certain bonds to an affiliate MLRL. These bonds had a book value of $25 million and fair value of $29 million. The Company recognized $4 million in pre-tax realized gains before transfer to the IMR.

In 2016, the Company sold certain bonds to an affiliate Manulife Reinsurance Ltd Partner (“MRLP”). These bonds had a book value of $211 million and fair value of $221 million. The Company recognized $10 million in pre-tax realized gains before transfer to the IMR.

In 2016, the Company received, at fair value, certain bonds from an affiliate, JHNY in lieu of reinsurance cash settlement, for $26 million.

In 2016, the Company acquired, at fair value, certain bonds from an affiliate, JHNY, for $343 million.

In 2016, the Company acquired, at fair value, certain bonds from an affiliate, MIL, for $60 million.

In 2016, the Company acquired, at fair value, certain bonds from an affiliate, MLRL, for $29 million.

In 2016, the Company acquired, at fair value, certain bonds from an affiliate, MLS, for $21 million.

In 2016, the Company acquired, at fair value, certain bonds from an affiliate, JHLH, for $140 million.

In 2015, the Company transferred certain bonds to an affiliate, 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, MLI Bermuda. 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) (“MILHK”). 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, 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.

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Preferred and Common Stocks

Cost and Fair Value of the Company’s investments in Preferred and Common Stocks are summarized as follow:

 

     Cost     

Gross

Unrealized

Gains

     

Gross

Unrealized

Losses

     Fair Value  
  

 

 

  
     (in millions)  

December 31, 2017:

           

Preferred stocks:

           

Nonaffiliated

        $   11      $   3      $ -     $   14  

Affiliates

      -        -        -       -  

Common stocks:

           

Nonaffiliated

      1,131        235        (12 )      1,354  

Affiliates*

      1,589        971        -       2,560  
  

 

 

  

Total stocks

        $   2,731      $   1,209      $    (12 )    $   3,928  
  

 

 

  
     Cost     

Gross

Unrealized

Gains

     

Gross

Unrealized

Losses

     Fair Value  
  

 

 

  
     (in millions)  

December 31, 2016:

           

Preferred stocks:

           

Nonaffiliated

        $   25      $   15      $ -     $   40  

Affiliates

      -        -        -       -  

Common stocks:

           

Nonaffiliated

      949        126        (12 )      1,063  

Affiliates*

      1,387        2,042        -       3,429  
  

 

 

  

Total stocks

        $   2,361      $   2,183      $   (12 )    $   4,532  
  

 

 

  
* Affiliates - fair value represents the carrying value

At December 31, 2017 and 2016, there were 136 and 192 nonaffiliated equity securities that had a gross unrealized loss excluding securities that have been written down to zero. The single largest unrealized loss was $3 million and $3 million at December 31, 2017 and 2016, 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, 2017, 2016 and 2015, realized capital losses include $2 million, $24 million, $4 million and related to preferred and common stocks that have experienced an other-than-temporary decline in value and were comprised of 81, 108, and 115 securities, respectively. These are primarily made up of impairments on public and private common stocks.

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Affiliate Transactions

In 2017, the Company acquired at fair value, certain common stocks from an affiliate, JHLH, for $43 million.

Mortgage Loans on Real Estate

At December 31, 2017 and 2016, 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, 2017:

 

Property Type   

Carrying

Value

       

Geographic

Concentration

   

Carrying

Value

  

 

       

 

  
     (in millions)             (in millions)  

Apartments

        $ 2,560        East North Central        $ 1,574  

Industrial

      907        East South Central      187  

Office buildings

      3,168        Middle Atlantic      1,868  

Retail

      3,652        Mountain      527  

Agricultural

      139        New England      579  

Agribusiness

      303        Pacific      3,604  

Mixed use

      22        South Atlantic          2,449  

Other

          1,163        West North Central      384  
        West South Central      660  
        Canada / Other      82  

Allowance

      (14 )       Allowance      (14 ) 
  

 

 

          

 

 

  

Total mortgage loans on real estate

        $ 11,900        Total mortgage loans on real estate        $ 11,900  
  

 

 

          

 

 

  

 

December 31, 2016:

 

   
Property Type    Carrying
Value		       

Geographic

Concentration

    Carrying
Value		  

 

       

 

  
     (in millions)             (in millions)  

Apartments

        $ 2,501        East North Central        $ 1,554  

Industrial

      872        East South Central      167  

Office buildings

      3,064        Middle Atlantic      1,856  

Retail

      3,538        Mountain      531  

Agricultural

      157        New England      572  

Agribusiness

      424        Pacific      3,581  

Mixed use

      22        South Atlantic          2,381  

Other

          1,060        West North Central      399  
        West South Central      511  
        Canada / Other      86  

Allowance

      (7 )       Allowance      (7 ) 
  

 

 

          

 

 

  

Total mortgage loans on real estate

        $ 11,631        Total mortgage loans on real estate        $ 11,631  
  

 

 

          

 

 

  

The aggregate mortgages outstanding to any one borrower do not exceed $342 million.

During 2017, the respective maximum and minimum lending rates for mortgage loans issued were 4.60% and 4.15% for agricultural loans and 5.75% and 3.49% for commercial loans. The Company issued no purchase money mortgages in 2017 and 2016. 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, 2017, 2016 and 2015, respectively. The average recorded investment in impaired loans was $31 million, $25 million, and $34 million at December 31, 2017, 2016 and 2015, respectively. The

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Company recognized $0 million, $1 million, and $2 million of interest income during the period the loans were impaired for the years ended December 31, 2017, 2016 and 2015, respectively.

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.

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,  
     2017      2016  
  

 

 

  
     (in millions)  

AAA

        $ 250          $ 232  

AA

      2,842        2,678  

A

          5,585            5,555  

BBB

      3,095        3,037  

BB

      98        111  

B and lower and unrated

      30        18  
  

 

 

  

Total

        $ 11,900          $ 11,631  
  

 

 

  

Affiliate Transactions

In 2017, the Company transferred two mortgages to an affiliate, Clarendon Real Estate, LLC (“CRE LLC”). The mortgages had a book value of $7 million and fair value of $7 million at the date of the transaction. The Company did not recognize any pre-tax realized gains or losses before transfer to the IMR.

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 did not recognize any pre-tax realized gains or losses before transfer to the IMR.

 

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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,  
     2017     2016  
  

 

 

  
     (in millions)  

Properties occupied by the company

        $ 396         $ 392  

Properties held for the production of income

        6,086         6,150  

Properties held for sale

      -       395  

Less accumulated depreciation

      (760 )      (689 ) 
  

 

 

  

Total

        $ 5,722         $ 6,248  
  

 

 

  

The Company recorded $0 million, $38 million, and $0 million of impairments on real estate investments during the years ended December 31, 2017, 2016 and 2015, respectively.

In 2017, the Company entered into an arrangement to sell four real estate properties to Hancock U.S Real Estate Fund, LP. These properties had a book value of $325 million and fair value of $471 million, resulting in pre-tax realized gains of $135 million and a deferred gain of $10 million. As part of this arrangement, the Company also committed approximately $44 million for an 11.7% equity interest in the fund.

On May 20, 2016, the Company entered into an arrangement to sell three real estate properties to Manulife U.S. Real Estate Investment Trust (“REIT”) for $777 million. These properties had a book value of $524 million and fair value of $769 million. Approximately 62% of the $245 million gain from operations was ceded to an affiliate reinsurer. The Company recognized an after-tax gain, after reinsurance of $60 million.

Other Invested Assets

The Company had no investments in partnerships or LLCs that exceed 10% of its admitted assets at December 31, 2017 and 2016.

Other invested assets primarily consist of investments in partnerships and LLCs. The Company recorded $0 million, $99 million, and $120 million of impairments on partnerships and LLCs during the years ended December 31, 2017, 2016 and 2015, 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.

 

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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, 2017 or 2016.

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, 2017 and 2016, 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, MRBL whereby cash collateral can be received under a repurchase agreement program. There was no repurchase agreement activity in 2017.

For securities lending transactions, the Company’s policy is to require a minimum of 102% of the fair value of securities loaned to be maintained as collateral. Positions are marked to market and adjusted on a daily basis to ensure the 102% margin requirement is maintained. There were no securities on loan as of December 31, 2017 or 2016.

 

F-25

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:

 

     2017     2016     2015  
  

 

 

  
     (in millions)  

Income:

       

Bonds

        $ 2,146         $ 2,232         $ 2,231  

Preferred stocks

      -       -       -  

Common stocks

      23       225       372  

Mortgage loans on real estate

      610       609       670  

Real estate

      704       762       722  

Policy loans

      176       167       190  

Cash, cash equivalents and short-term investments

      33       18       8  

Other invested assets

      1,014       506       466  

Derivatives

      483       594       520  

Other income

      12       30       27  
  

 

 

  

Total investment income

        5,201         5,143         5,206  

Expenses

       

Investment expenses

      (509 )      (529 )      (533 ) 

Investment taxes, licenses and fees, excluding federal income taxes

      (93 )      (94 )      (84 ) 

Investment interest expense

      (50 )      (82 )      (84 ) 

Depreciation on real estate and other invested assets

      (123 )      (130 )      (118 ) 
  

 

 

  

Total investment expenses

      (775 )      (835 )      (819 ) 
  

 

 

  

Net investment income

        $ 4,426         $ 4,308         $ 4,387  
  

 

 

  

Realized capital gains (losses) and amounts transferred to the IMR are as follows:

 

     2017     2016     2015  
  

 

 

  
     (in millions)  

Realized capital gains (losses)

        $ 722         $ (494 )        $ 965  

Less amount transferred to the IMR (net of related tax benefit (expense) of $(475) in 2017, $31 in 2016, and $(138) in 2015)

      882       (57 )      256  
  

 

 

  

Realized capital gains (losses) before tax

      (160 )      (437 )      709  

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

        243         496         493  
  

 

 

  

Net realized capital gains (losses)

        $ (403 )        $ (933 )        $ 216  
  

 

 

  

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.

 

F-26

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

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, 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 and interest rate treasury locks 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.

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.

 

F-27

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

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”). 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.

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.

 

F-28

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

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, 2017  
          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

        $ 1,870      $ -      $ 2      $ 308      $ 128  
  

Foreign currency swaps

      45        -        9        -        15  

Cash flow hedges

   

Interest rate swaps

      8,116        -        -        896        283  
  

Foreign currency swaps

      1,549        78          45          295          268  
  

Foreign currency forwards

      132        -        -        -        3  
  

Interest rate treasury locks

      880        -        -        58        -  
  

Equity total return swaps

      36        -        -        9        -  
     

 

 

  

Total Derivatives in Effective Hedge Accounting Relationships

        $ 12,628      $ 78      $ 56      $ 1,566      $ 697  
  

 

 

  

Other Hedging Relationships

               
  

Interest rate swaps

        $ 121,799      $ 8,284      $ 4,041      $ 8,284      $ 4,041  
  

Interest rate treasury locks

          10,728            630        13        630        13  
  

Interest rate options

      8,014        247        -        247        -  
  

Interest rate futures

      -        -        -        -        -  
  

Foreign currency swaps

      322        57        13        57        13  
  

Foreign currency forwards

      535        2        5        2        5  
  

Foreign currency futures

      -        -        -        -        -  
  

Equity total return swaps

      100        20        -        20        -  
  

Equity index options

      4,113        319        1        319        1  
  

Equity index futures

      -        -        -        -        -  
  

Credit default swaps

      -        -        -        -        -  
     

 

 

  

Total Derivatives in Other Hedging Relationships

        $ 145,611      $ 9,559      $ 4,073      $ 9,559      $ 4,073  
  

 

 

  

Replication Synthetic Asset Transactions

               
  

Interest rate swaps

        $ 3,135      $ -      $ -      $ 98      $ 102  
  

Credit default swaps

      30        -        -        -        -  
     

 

 

  

Total Derivatives in Replication Synthetic Asset Transactions

        $ 3,165      $ -      $ -      $ 98      $ 102  
  

 

 

  

Total Derivatives

        $ 161,404      $ 9,637      $ 4,129      $ 11,223      $ 4,872  
     

 

 

  

 

F-29

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

          December 31, 2016  
          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

        $ 2,982      $ -      $ -      $ 398      $ 177  
  

Foreign currency swaps

      63        1        8        -        16  

Cash flow hedges

   

Interest rate swaps

        9,443        -        -        1,164        282  
  

Foreign currency swaps

      1,550        143        79        375        316  
  

Foreign currency forwards

      209        -        -        -        17  
  

Equity total return swaps

      33        -        -        11        -  
     

 

 

  

Total Derivatives in Effective Hedge Accounting Relationships

        $ 14,280      $ 144      $ 87      $ 1,948      $ 808  
  

 

 

  

Other Hedging Relationships

               
  

Interest rate swaps

        $   122,946      $ 9,855      $ 4,808      $ 9,855      $ 4,808  
  

Interest rate treasury locks

      10,579            243            467              243            467  
  

Interest rate options

      6,994        280        -        280        -  
  

Interest rate futures

      -        -        -        -        -  
  

Foreign currency swaps

      322        78        5        78        5  
  

Foreign currency forwards

      77        8        -        8        -  
  

Foreign currency futures

      -        -        -        -        -  
  

Equity total return swaps

      140        10        3        10        3  
  

Equity index options

      3,428        232        -        232        -  
  

Equity index futures

      -        -        -        -        -  
  

Credit default swaps

      -        -        -        -        -  
     

 

 

  

Total Derivatives in Other Hedging Relationships

        $ 144,486      $ 10,706      $ 5,283      $ 10,706      $ 5,283  
  

 

 

  

Replication Synthetic Asset Transactions

               
  

Interest rate swaps

        $ 3,135      $ -      $ -      $ 86      $ 115  
  

Credit default swaps

      65        1        -        1        -  
     

 

 

  

Total Derivatives in Replication Synthetic Asset Transactions

        $ 3,200      $ 1      $ -      $ 87      $ 115  
  

 

 

  

Total Derivatives

        $ 161,966      $ 10,851      $ 5,370      $ 12,741      $ 6,206  
     

 

 

  

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, 2017, 2016 and 2015, respectively, the Company recorded unrealized gains (losses) of $ 402 million, $ 436 million, and ($ 33) 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 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.

 

F-30

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

For the year ended December 31, 2017, 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 29 years.

Derivatives Not Designated as Hedging Instruments 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-31

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, 2017, 2016 and 2015 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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Other Hedging Relationships

       

Net unrealized capital gain (loss):

       

Interest rate swaps

        $ (805 )    $ 773     $ 367  

Interest rate treasury locks

      841       (435 )      (728 ) 

Interest rate options

      (73 )      (8 )      16  

Foreign currency swaps

      6       (31 )      -  

Foreign currency forwards

      (11 )      -       5  

Equity total return swaps

      3       (4 )      2  

Equity index options

      102       68       (76 ) 

Credit default swaps

      -       -       -  
  

 

 

  

Total net unrealized capital gain (loss)

        $ 63     $ 363     $ (414 ) 
  

 

 

  

Net realized capital gain (loss):

       

Interest rate swaps

        $ 874     $ (490 )    $ (495 ) 

Interest rate treasury locks

      34       342           446  

Interest rate options

      (3 )      -       -  

Interest rate futures

      273       (23 )      (25 ) 

Foreign currency swaps

      4       3       4  

Foreign currency forwards

      16       24       26  

Foreign currency futures

      (111 )      94       99  

Equity total return swaps

      (9 )      (9 )      11  

Equity index options

      22       (98 )      (18 ) 

Equity index futures

        (1,104 )        (1,007 )      (42 ) 

Credit default swaps

      -       -       -  

Commodity futures

      -       -       -  
  

 

 

  

Total net realized capital gain (loss)

        $ (4 )    $ (1,164 )    $ 6  
  

 

 

  

Total gain (loss) from derivatives in other hedging relationships

        $ 59     $ (801 )    $ (408 ) 
  

 

 

  

The Company also deferred net realized gains (losses) of $ 872 million, ($ 526) million, and ($ 495) million (including $ 874 million, ($ 490) million, and ($ 495) million of gains (losses) for derivatives in other hedging relationships, respectively) related to interest rates for the years ended December 31, 2017, 2016 and 2015, 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. The Company does not employ leverage in its CDS program and therefore, does not write CDS protection in excess of its government bond holdings.

 

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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, 2017 and 2016, respectively

 

     December 31, 2017      December 31, 2016  
  

 

 

  
     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

        $ 10      $ -        1          $ 10      $ -        2  

AA

        10        -        -          10        -        1  

A

      10        -        1        45          1        1  

BBB

      -          -        -        -        -        -  
  

 

 

        

 

 

     

Total CDS protection sold

        $ 30      $ -             $ 65      $ 1     
  

 

 

        

 

 

     
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, 2017 and 2016. 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, 2017 and 2016, the Company accepted collateral consisting of cash of $ 1,973 million and $ 1,907 million, and various securities with a fair value of $ 4,360 million and $ 4,656 million, respectively, which is held in separate custodial accounts and not reflected within these financial statements. 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-33

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 a currency swap agreement with JHFC which was recorded at fair value. JHFC utilizes the currency swap to hedge currency exposure on foreign currency financial instruments. The Company has also entered into currency swap agreements with external counterparties which offset the currency swap agreement with JHFC. As of December 31, 2017 and 2016, the currency swap agreements with JHFC and the external counterparties had offsetting fair values of $ 261 million and $ 315 million, respectively.

The Company has entered into equity total return swap agreements with MLI which are recorded at fair value. JHUSA utilizes the equity total return swaps to hedge equity exposure on restricted share units (“RSU”). As of December 31, 2017 and 2016, the equity total return swap agreements with MLI had a fair value of $30 million and $16 million.

In 2017, the Company repositioned interest rate swaps supporting affiliate reinsurance with John Hancock Reassurance Company Limited. The transaction resulted in a pre-tax gain of $24 million and a post-tax increase to surplus of $16 million, net of amounts transferred to the interest maintenance reserve (IMR) and ceded to the affiliate reinsurer.

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. Fair value of commercial mortgages is derived through an internal valuation methodology using both observable and unobservable inputs. Unobservable inputs include credit assumptions and liquidity spread adjustments. Fair value of fixed-rate residential mortgages is determined using the discounted cash flow method. Inputs used for valuation are primarily comprised of prevailing interest rates and prepayment rates, if applicable. Fair value of variable-rate residential mortgages is assumed to be their carrying value.

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.

 

F-34

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

Policyholders’ and Beneficiaries Funds – Includes term certain contracts and supplementary contracts without life contingencies. The fair values associated with the term certain contracts 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. Effective December 31, 2016, fair value disclosure is no longer required 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 and provides no additional disclosure value.

Consumer Notes – The fair value of consumer notes is determined by projecting cash flows and using a spread assumption associated with the specific risks in the Signature Note contracts. The spread is calculated by taking the difference between the contractual crediting rate and the yield curve as of the issue date of each Signature Note. The calculated spread is added to the yield curve as of each future valuation date to determine the fair value of the Signature Notes.

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 reflecting market transactions. 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. Most bonds are classified within Level 2. Also, included in the Level 2 category are certain separate account assets and derivative assets and liabilities.

 

  •  

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.

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. Judgement 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:

 

F-35

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

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.

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

 

F-36

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

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.

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, 2017  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bond with NAIC 6 rating:

               

Industrial and misc

        $ 22          $ 22          $ -          $ 12          $ 10  

Loan-backed and structured securities

      6        6        -        -        6  
  

 

 

  

Total bonds with NAIC 6 rating

      28        28        -        12        16  

Preferred stocks:

               

Industrial and misc

      -        -        -        -        -  
  

 

 

  

Total preferred stocks

      -        -        -        -        -  

Common stocks:

               

Industrial and misc

      1,354        1,354        1,220        -        134  
  

 

 

  

Total common stocks

      1,354        1,354        1,220        -        134  

Derivatives:

               

Interest rate swaps

      8,284        8,284        -        8,284        -  

Interest rate treasury locks

      630        630        -        61        569  

Interest rate options

      247        247        -        67        180  

Interest rate futures

      -        -        -        -        -  

Foreign currency swaps

      57        57        -        57        -  

Foreign currency forwards

      2        2        -        2        -  

Foreign currency futures

      -        -        -        -        -  

Equity total return swaps

      20        20        -        -        20  

Equity index options

      319        319        -        319        -  

Equity index futures

      -        -        -        -        -  

Credit default swaps

      -        -        -        -        -  
  

 

 

  

Total derivatives

      9,559        9,559        -        8,790        769  

Assets held in separate accounts

      141,167        141,167        136,373        2,950        1,844  
  

 

 

  

Total assets

        $ 152,108          $ 152,108          $ 137,593          $   11,752          $ 2,763  
  

 

 

  

Liabilities:

               

Derivatives:

               

Interest rate swaps

        $ 4,041          $ 4,041          $ -          $ 4,001          $ 40  

Interest rate treasury locks

      13        13        -        12        1  

Interest rate options

      -        -        -        -        -  

Interest rate futures

      -        -        -        -        -  

Foreign currency swaps

      13        13        -        13        -  

Foreign currency forwards

      5        5        -        5        -  

Foreign currency futures

      -        -        -        -        -  

Equity total return swaps

      -        -        -        -        -  

Equity index options

      1        1        -        1        -  

Equity index futures

      -        -        -        -        -  

Credit default swaps

      -        -        -        -        -  
  

 

 

  

Total derivatives

      4,073        4,073        -        4,032        41  

Liabilities held in separate accounts

        141,167          141,167          136,373          2,950          1,844  
  

 

 

  

Total liabilities

        $ 145,240          $ 145,240          $ 136,373          $ 6,982          $ 1,885  
  

 

 

  

 

F-37

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

     December 31, 2016  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bond with NAIC 6 rating:

               

Industrial and misc

        $ 17          $ 17          $ -          $ -          $ 17  

Loan-backed and structured securities

      7        7        -        -        7  
  

 

 

  

Total bonds with NAIC 6 rating

      24        24        -        -        24  

Preferred stocks:

               

Industrial and misc

      -        -        -        -        -  
  

 

 

  

Total preferred stocks

      -        -        -        -        -  

Common stocks:

               

Industrial and misc

      1,063        1,063        894        -        169  
  

 

 

  

Total common stocks

      1,063        1,063        894        -        169  

Derivatives:

               

Interest rate swaps

      9,855        9,855        -        9,855        -  

Interest rate treasury locks

      243        243        -        1        242  

Interest rate options

      280        280        -        108        172  

Interest rate futures

      -        -        -        -        -  

Foreign currency swaps

      78        78        -        78        -  

Foreign currency forwards

      8        8        -        8        -  

Foreign currency futures

      -        -        -        -        -  

Equity total return swaps

      10        10        -        -        10  

Equity index options

      232        232        -        97        135  

Equity index futures

      -        -        -        -        -  

Credit default swaps

      -        -        -        -        -  
  

 

 

  

Total derivatives

      10,706        10,706        -          10,147        559  

Assets held in separate accounts

        131,147          131,147          125,847        3,404          1,896  
  

 

 

  

Total assets

        $ 142,940          $ 142,940          $ 126,741          $ 13,551          $ 2,648  
  

 

 

  

Liabilities:

               

Derivatives:

               

Interest rate swaps

        $ 4,808          $ 4,808          $ -          $ 4,773          $ 35  

Interest rate treasury locks

      467        467        -        32        435  

Interest rate options

      -        -        -        -        -  

Interest rate futures

      -        -        -        -        -  

Foreign currency swaps

      5        5        -        5        -  

Foreign currency forwards

      -        -        -        -        -  

Foreign currency futures

      -        -        -        -        -  

Equity total return swaps

      3        3        -        -        3  

Equity index options

      -        -        -        -        -  

Equity index futures

      -        -        -        -        -  

Credit default swaps

      -        -        -        -        -  
  

 

 

  

Total derivatives

      5,283        5,283        -        4,810        473  

Liabilities held in separate accounts

      131,147        131,147        125,847        3,404        1,896  
  

 

 

  

Total liabilities

        $ 136,430          $ 136,430          $ 125,847          $ 8,214          $ 2,369  
  

 

 

  

 

F-38

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, 2017  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bonds (1)

        $ 47,942          $ 49,997          $ -          $   47,017          $ 2,980  

Preferred stocks

      11        14        -        -        14  

Mortgage loans on real estate

      11,900        12,759        -        -        12,759  

Cash, cash equivalents and short term investments

      4,131        4,131          3,065        1,066        -  

Policy loans

      2,726        2,726        -        2,726        -  

Derivatives in effective hedge accounting and RSAT relationships

      78        1,664        -        1,596        68  
  

 

 

  

Total assets

        $ 66,788          $   71,291          $ 3,065          $ 52,405          $ 15,821  
  

 

 

  

Liabilities:

               

Consumer notes

        $ 197          $ 226          $ -          $ -          $ 226  

Borrowed money

      -        -        -        -        -  

Policy reserves

      1,364        1,354        -        -        1,354  

Policyholders’ and beneficiaries funds

      937        1,136        -        1,136        -  

Derivatives in effective hedge accounting and RSAT relationships

      56        799        -        618        181  
  

 

 

  

Total liabilities

        $ 2,554          $ 3,515          $ -          $ 1,754          $ 1,761  
  

 

 

  
     December 31, 2016  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bonds (1)

        $ 45,207          $ 46,015          $ -          $ 42,245          $ 3,770  

Preferred stocks

      25        40        -        -        40  

Mortgage loans on real estate

        11,631        12,391        -        -        12,391  

Cash, cash equivalents and short term investments

      3,879        3,879        2,509        1,370        -  

Policy loans

      2,722        2,722        -        2,722        -  

Derivatives in effective hedge accounting and RSAT relationships

      145        2,035        -        2,023        12  
  

 

 

  

Total assets

        $ 63,609          $ 67,082          $ 2,509          $ 48,360          $ 16,213  
  

 

 

  

Liabilities:

               

Consumer notes

        $ 201          $ 228          $ -          $ -          $ 228  

Borrowed money

      160        160        -        160        -  

Policy reserves

      1,455        1,439        -        -        1,439  

Policyholders’ and beneficiaries funds

      965        1,151        -        1,151        -  

Derivatives in effective hedge accounting and RSAT relationships

      87        923        -        760        163  
  

 

 

  

Total liabilities

        $ 2,868          $ 3,901          $ -          $ 2,071          $ 1,830  
  

 

 

  
(1) Bonds are carried at amortized cost unless they have NAIC designation rating of 6. Fair value of bonds exclude leveraged leases of $2,415 million and $ 2,316 million at December 31, 2017 and 2016, respectively. The Company calculates the carrying value by accruing income at its expected internal rate of return.

 

F-39

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, 2017 and 2016, 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, 2017 and 2016.

 

F-40

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, 2017, 2016 and 2015, are summarized as follows:

 

    

Balance

at

January

1, 2017

      Net
realized/unrealized
gains (losses) included
in:		    

Amounts

credited

to

separate

account

liabilities

(2)

      Purchases     

Issuances

     

Sales

    

Settlements

     Transfers    

Balance at

December

31, 2017

  
       

Net

income

(1)

     Surplus                 

Into

Level 3

(3)

     

Out of

Level 3 (3)

    
  

 

 

  
     (in millions)  

Bonds with NAIC 6 rating:

                            

Impaired corporate bonds

    $ 17      $ (1 )    $ 1     $ -      $ 3      $ -      $ (7 )    $ -     $ -      $ (3 )    $ 10  

Impaired mortgage-backed and asset-backed securities

      7        1       -       -        -        -        (2 )             -       -             -       6  
  

 

 

  

Total bonds with NAIC 6 rating

      24        -       1       -        3        -        (9 )      -       -        (3 )      16  

Preferred stocks:

                            

Industrial and misc

      -        -       -       -        -        -        -       -       -        -       -  
  

 

 

  

Total preferred stocks

      -        -       -       -        -        -        -       -       -        -       -  

Common stocks:

                            

Industrial and misc

      169        49       (24 )      -        8        -        (68 )      -       -        -       134  
  

 

 

  

Total common stocks

      169        49       (24 )      -        8        -        (68 )      -       -        -       134  

Net derivatives

      86        -         758       -        16        -        -       (59 )      -        (73 )      728  

Separate account assets/liabilities

        1,896        83       -       -        34        -        (164 )      -       6        (11 )      1,844  
  

 

 

  

Total

        $ 2,175          $   132         $ 735         $      -          $     61          $       -          $   (241 )        $ (59 )        $        6          $ (87 )        $   2,722  
  

 

 

  

 

F-41

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

    

Balance

at

January

1, 2016

      Net realized/unrealized
gains  (losses) included
in:		    

Amounts

credited to

separate

account

liabilities

(2)

      Purchases     

Issuances

     

Sales

    

Settlements

      Transfers    

Balance at

December

31, 2016

  
       

Net

income

(1)

     Surplus                  

Into

Level 3

(3)

     

Out of

Level 3 (3)

    
  

 

 

  
     (in millions)  

Bonds with NAIC 6 rating:

                             

Impaired corporate bonds

      $ 29      $ 1     $ (1 )    $ -      $ 1      $ -      $ (17 )    $ -      $ 4      $ -     $ 17  

Impaired mortgage-backed and asset-backed securities

      7        1       -          -        -        -        (1 )      -        -        -       7  
  

 

 

  

Total bonds with NAIC 6 rating

      36        2       (1 )      -        1           -        (18 )      -        4        -       24  

Preferred stocks:

                             

Industrial and misc

      -        -       -       -        -        -        -       -        -        -       -  
  

 

 

  

Total preferred stocks

      -        -       -       -        -        -        -       -        -        -       -  

Common stocks:

                             

Industrial and misc

      110        (1 )      37       -        25        -        (2 )      -        -        -       169  
  

 

 

  

Total common stocks

      110        (1 )           37       -        25        -        (2 )      -        -        -       169  

Net derivatives

      388        -       (407 )      -          152        -               -         -        -        (47 )      86  

Separate account assets/liabilities

        1,965          84       -       -        46        -        (234 )      -          11           24         1,896  
  

 

 

  

Total

    $ 2,499      $ 85     $ (371 )    $ -      $ 224      $ -      $   (254 )    $ -      $ 15      $ (23 )    $ 2,175  
  

 

 

  

 

F-42

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

    

Balance

at

January

1, 2015

      Net realized/unrealized
gains  (losses) included
in:		    

Amounts

credited

to

separate

account

liabilities

(2)

      Purchases     

Issuances

     

Sales

    

Settlements

      Transfers    

Balance at

December

31, 2015

  
       

Net

income

(1)

     Surplus                  

Into

Level 3

(3)

     

Out of

Level 3 (3)

    
  

 

 

  
     (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  
  

 

 

  

 

(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-43

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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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums earned

       

Direct

        $   20,392     $   19,809     $   20,189  

Assumed

      605       872       1,867  

Ceded

      (2,711 )      (7,454 )      (5,733 ) 
  

 

 

  

Net

        $ 18,286     $   13,227     $   16,323  
  

 

 

  

Benefits to policyholders ceded

        $    (16,741 )    $    (15,271 )    $    (16,713 ) 

Reserve amounts ceded to reinsurers not authorized in the State of Michigan are mostly covered by funds withheld assets, 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, 2017, any material recoveries were collateralized or settled 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, 2017, there were no reinsurance agreements in effect such that the amount of losses paid or accrued through the statement date may result in a payment to the reinsurer of amounts which, in aggregate and allowing for offset of mutual credits from other reinsurance agreements with the same reinsurer, exceed the total direct premium collected under the reinsured policies.

As of December 31, 2017, if all reinsurance agreements were cancelled the estimated aggregate reduction in unassigned surplus is $4,375 million.

Non-Affiliated Reinsurance

The JHLICO closed block was established upon the demutualization of JHLICO for those designated participating policies that were in-force on February 1, 2000.

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

 

F-44

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

included the transfer to NYL of $8,916 million of invested assets and $5,282 million in net policy liabilities. In addition, the 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 amortized over a period of approximately 20 years.

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

 

     Year ended December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded

        $ (224 )        $ (264 )        $    (8,180 ) 

Premiums assumed

      91       106       3,272  

Benefits ceded

      (636 )      (615 )      (314 ) 

Benefits assumed

      254       246       126  

Other reinsurance receivable (payable)

      (1 )      (2 )      362  

Funds held by or deposited with reinsured companies

        3,316         3,483         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.

Affiliated Reinsurance

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

 

     Years ended December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded, net

        $    (177 )        $    (183 )        $    (2,231 ) 

Benefits ceded, net

      (424 )      (427 )      (436 ) 

Funds held by or deposited with reinsured companies

      -       -       -  

Other reinsurance receivable

      46       41       60  

Other amounts payable on reinsurance

      4       9       1  

Treaty settlement received (paid)*

        227         246         527  
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

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, variable universal 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.

 

F-45

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded

        $   (256 )        $   (517 )        $   (530 ) 

Premiums ceded, impact of treaty recaptured

      3,718       -       -  

Benefits ceded

      (782 )      (836 )      (756 ) 

Other reinsurance receivable

      2       -       -  

Other amounts payable on reinsurance

      -       24       25  

Funds held by or deposited with reinsured companies

        7,048       -       -  

Funds withheld from unauthorized reinsurers

      -         7,236         7,544  

Treaty settlement received (paid)*

      (8 )      (594 )      (468 ) 
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

The Company also reinsures a portion of the risk related to certain annuity policies. The reinsurance agreement is written on a modified coinsurance basis where the assets supporting the reinsured policies remain invested with the Company. On October 1, 2017, the Company recaptured the payout annuity policies with JHRECO. The recapture resulted in pre-tax income of $708 million and an increase in surplus, net of tax, of $460 million.

The Company reinsures a large portion of the Long Term Care (“LTC”) risk under a single accounting and capital regime, which helps to manage JHUSA’s overall risk profile and reduce strain on statutory surplus. JHUSA’s indirect parent company, MFC, is regulated on a global basis by the Canadian insurance regulator, The Office of the Superintendent of Financial Institution (“OSFI”), and reports its results on a consolidated International Financial Reporting Standards (“IFRS”) basis. As such, the agreement has no impact on the parent company financial results.

JHRECO does not retrocede any risks to a third party or affiliates. The risks assumed by JHRECO are solely the responsibility of JHRECO, but they are also retained within the parent company group. Reserve credits taken were $8,644 million and $8,320 million at December 31, 2017 and 2016, respectively. On December 31, 2017, JHRECO changed its domiciliary jurisdiction from Bermuda to the state of Michigan. As a result of the re-domestication of JHRECO, collateral was no longer required as of December 31, 2017. The total amount of collateral was $8,631 million as of December 31, 2016.

 

F-46

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

A description of the nature of the collateral (funds withheld by the reporting entity, assets placed in trust for the benefit of the captive, Letters of Credit, etc.), if applicable, as well as a tabular presentation of the value of all assets held by or on behalf of the captive reinsurer that back the long term care liabilities (including capital) are summarized below:

 

     Years ended December 31,  
     2017      2016  
  

 

 

  
     (in millions)  

Funds Withheld

        $ 7,048          $ 6,987  

Trust Assets

      -        1,644  

Letter of Credit

      -        -  
  

 

 

  

Total Value of Collateral

        $ 7,048          $ 8,631  
  

 

 

  

If needed for reserves credit, JHRECO is obligated to provide a letter of credit that conforms to Michigan regulatory requirements. The total of the letter of credit and other collateral must equal or exceed the reserve credit taken by JHUSA. As of December 31, 2017 and 2016, a letter of credit was not needed.

The available and required capital in the table below represent JHRECO’s capital position on a NAIC basis at December 31, 2017.

 

     Year ended
December  31,		  
     2017  
  

 

 

  
     (in millions)  

Available Capital

        $ 1,884  

Required Capital

        $ 262  

RBC Ratio

      718 % 

JHUSA’s Authorized Control Level (“ACL”) Risk Based capital impact on recapture of the LTC reinsurance agreement at December 31, 2017 and 2016 is as follows:

 

    

Available

Capital

     

Required

Capital

     

RBC

Ratio

  
  

 

 

  
             (in millions)  

As reported at December 31, 2017

        $ 10,761          $ 1,266          850 % 

Impact of JHRECO LTC Recapture

      854        189        -52 % 
  

 

 

  

Capital Gross of JHRECO LTC Cession

        $   11,615          $ 1,455          798 % 
  

 

 

  
    

Available

Capital

     

Required

Capital

     

RBC

Ratio

  
  

 

 

  
     (in millions)  

As reported at December 31, 2016

        $ 8,678          $ 1,071          810 % 

Impact of JHRECO LTC Recapture

      880        181        -47 % 
  

 

 

  

Capital Gross of JHRECO LTC Cession

        $ 9,558          $   1,252          763 % 
  

 

 

  

 

F-47

Table of Contents

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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded

        $    (3,320 )        $    (3,978 )        $    5,332  

Benefits ceded

         (11,653 )         (10,494 )         (12,125 ) 

Other reinsurance receivable

      25       -       -  

Other amounts payable on reinsurance

      389       605       351  

Funds withheld from unauthorized reinsurers

      -       227       240  

Treaty settlement received (paid)*

      480       (142 )      (712 ) 
* 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.

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, OSFI, and reports on a consolidated 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 $1,873 million and $2,434 million as a coinsurance reserve and JHUSA holds $109 million and $185 million as a modified coinsurance reserve at December 31, 2017 and 2016, respectively. 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 million and $0 million at December 31, 2017 and 2016, respectively, 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 Company entered into a Stop Loss Reinsurance Agreement with (“MRBL”), effective April 1, 2017, simultaneous with entering into a coinsurance with partial funds withheld agreement with MMRC, as described below.

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

 

     Years ended December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded

        $ (255 )        $ (298 )        $ (392 ) 

Benefits ceded

        (545 )        (468 )        (448 ) 

Other reinsurance receivable

      -       5       36  

Other amounts payable on reinsurance

      7       -       -  

Funds withheld from unauthorized reinsurers

      66       -       -  

Treaty settlement received (paid)*

      (28 )      (74 )      14  
* 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.

The table and commentary below consist of the impact of the reinsurance agreement with an affiliate, JHLH:

 

     Years ended December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded

        $ (27 )        $ (28 )        $ (28 ) 

Premiums assumed

      -       241       -  

Benefits ceded

        (19 )        (10 )        (10 ) 

Benefits assumed

      22       8       -  

Other reinsurance receivable

      -       1       -  

Other amounts payable on reinsurance

      7       -       -  

Funds withheld from authorized reinsurers

      -       3       5  

Treaty settlement received (paid)*

      (28 )      7       20  
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

On December 31, 2016, the Company entered into a coinsurance agreement with an affiliate, JHLH, to reinsure 100% of a block of single premium universal life policies. The transaction included the transfer from JHLH of $282 million of invested assets and $241 million in net policy liabilities. The transaction resulted in a pre-tax gain and ceding commission received of $36 million and an increase in surplus of $52 million, net of tax.

 

F-49

Table of Contents

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 agreement with an affiliate, MMRC:

 

     Year ended December 31,  
     2017  
     (in millions)  

Premiums ceded

        $ (373 ) 

Premiums assumed

      -  

Benefits ceded

      (14 ) 

Benefits assumed

      -  

Other reinsurance receivable

      -  

Other amounts payable on reinsurance

      18  

Funds withheld from authorized reinsurers

      50  

Treaty settlement received (paid)*

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

Effective April 1, 2017, the Company entered into a coinsurance with partial FWH agreement with an affiliate, MMRC, to reinsure 100% of the Company’s in-force single-life term life insurance policies and related riders, for certain policy years. The transaction included the transfer to MMRC of $284 million in net policy liabilities. Also, the Company recognized $33 million of FWH liabilities. The transactions resulted in a pre-tax gain of $251 million, including a ceding commission received of $252 million, and an increase in surplus of $163 million, net of tax, which was deferred and will be amortized over a period of approximately 15 years.

The reinsurance agreement with MMRC was entered into to address the surplus strain caused by the excess of XXX NAIC reserves over the VM-20 reserve levels. This transaction was within the scope of Actuarial Guideline 48, the NAIC Term Life and Universal Life with Secondary Guarantees (XXX/AXXX) Credit for Reinsurance Model Regulation (“AG 48”). In accordance with the terms of AG 48, the obligations of MMRC under the reinsurance agreement will be supported by a FWH account and a credit-linked note. The FWH account will be funded with assets meeting the definition of “Primary Security” under AG 48 and in an amount equal to or in excess of the VM-20 reserve. The credit-linked note will be in the amount of the excess of the statutory reserves over the then current “Required Level of Primary Security”.

 

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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, 2017  
    

(1)

Ordinary

    

(2)

Capital

    

(3)

(Col 1 + 2)

Total

  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ 2,432         $ 63         $ 2,495  

(b) Statutory valuation allowance adjustments

      121       -       121  
  

 

 

  

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

      2,311       63       2,374  

(d) Deferred tax assets nonadmitted

      -       -       -  
  

 

 

  

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

        2,311       63         2,374  

(f) Deferred tax liabilities

      2,289       72       2,361  
  

 

 

  

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

        $ 22         $ (9 )        $ 13  
  

 

 

  
     December 31, 2016  
    

(4)

Ordinary

    

(5)

Capital

    

(6)

(Col 4 + 5)

Total

  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ 2,827         $ 128         $ 2,955  

(b) Statutory valuation allowance adjustments

      121       -       121  
  

 

 

  

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

      2,706       128       2,834  

(d) Deferred tax assets nonadmitted

      -       -       -  
  

 

 

  

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

        2,706         128         2,834  

(f) Deferred tax liabilities

      2,580       77       2,657  
  

 

 

  

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

        $ 126         $ 51         $ 177  
  

 

 

  
     Change  
    

(7)

(Col 1 - 4)

Ordinary

    

(8)

(Col 2 - 5)
Capital

    

(9)

(Col 7 + 8)

Total

  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ (395 )        $ (65 )        $ (460 ) 

(b) Statutory valuation allowance adjustments

      -       -       -  
  

 

 

  

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

        (395 )        (65 )        (460 ) 

(d) Deferred tax assets nonadmitted

      -       -       -  
  

 

 

  

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

      (395 )      (65 )      (460 ) 

(f) Deferred tax liabilities

      (291 )      (5 )      (296 ) 
  

 

 

  

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

        $ (104 )        $ (60 )        $ (164 ) 
  

 

 

  

The Company has recorded a valuation allowance against specific general business tax credit carryforwards of $121 million for the year ended December 31, 2017. 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 2027, 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-51

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, 2017  
    

(1)

Ordinary

     

(2)

Capital

     

(3)

(Col 1 + 2)

Total

  
  

 

 

  
     (in millions)  

2. Admission calculation components SSAP No. 101

         

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

        $ -          $ 53          $ 53  

(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)

      742        -        742  

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

      742        -        742  

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

        1,212        -        1,212  

(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.

      1,569        10        1,579  
  

 

 

  

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

        $ 2,311          $ 63          $ 2,374  
  

 

 

  
     December 31, 2016  
    

(4)

Ordinary

     

(5)

Capital

     

(6)

(Col 4 + 5)

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)

      774        120        894  

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

        1,502        120        1,622  

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

      774        120        894  

(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.

      1,932        8        1,940  
  

 

 

  

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

        $ 2,706          $   128          $   2,834  
  

 

 

  

 

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)

 

     Change  
    

(7)

(Col 1 - 4)

Ordinary

    

(8)

(Col 2 - 5)
Capital

    

(9)

(Col 7 + 8)

Total

  
  

 

 

  
     (in millions)  

2. Admission calculation components SSAP No. 101

       

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

        $ -     $ 53     $ 53  

(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)

      (32 )      (120 )      (152 ) 

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

      (760 )      (120 )      (880 ) 

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

        438         (120 )        318  

(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.

      (363 )      2       (361 ) 
  

 

 

  

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

        $    (395 )        $    (65 )        $    (460 ) 
  

 

 

  

 

     2017     2016  
  

 

 

  
     (in millions)  

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

      849 %      794 % 

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

        $   8,082         $   5,959  

Impact of tax planning strategies is as follows:

 

     December 31, 2017  
    

(1)

Ordinary

    

(2)

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)

        $   2,311         $   63  

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)

        $ 2,311         $ 63  

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

      0 %      0 % 

 

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)

 

     December 31, 2016  
    

(3)

Ordinary

    

(4)

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)

      $   2,706       $ 128  

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)

      $   2,706     $ 128  

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

      0 %      0 % 
     Change  
    

(5)

(Col 1 - 3)

Ordinary

    

(6)

(Col 2 - 4)

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)

    $ (395 )    $ (65 ) 

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)

    $ (395 )    $ (65 ) 

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

      0 %      0 % 

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-54

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)  
     2017      2016    

(Col 1 - 2)

Change

  
  

 

 

  
     (in millions)  

1. Current income tax

        

(a) Federal

        $   446          $   (121 )    $ 567  

(b) Foreign

      -        -       -  
  

 

 

  

(c) Subtotal

      446        (121 )      567  

(d) Federal income tax on net capital gains

      243        496       (253 ) 

(e) Utilization of capital loss carryforwards

      -        -       -  

(f) Other

      -        -       -  
  

 

 

  

(g) Federal and foreign income taxes incurred

        $   689          $   375     $ 314  
  

 

 

  

 

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)

 

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)  
     2017      2016     

(Col 1 - 2)

Change

  
  

 

 

  
     (in millions)  

2. Deferred tax assets:

         

(a) Ordinary:

         

(1) Discounting of unpaid losses

        $   -          $   -          $   -  

(2) Unearned premium reserve

      -        -        -  

(3) Policyholder reserves

      1,489        906        583  

(4) Investments

      88        257        (169 ) 

(5) Deferred acquisition costs

      357        550        (193 ) 

(6) Policyholder dividends accrual

      49        84        (35 ) 

(7) Fixed assets

      -        -        -  

(8) Compensation and benefits accrual

      28        44        (16 ) 

(9) Pension accrual

      16        -        16  

(10) Receivables - nonadmitted

      48        71        (23 ) 

(11) Net operating loss carryforward

      -        199        (199 ) 

(12) Tax credit carry-forward

      329        684        (354 ) 

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

      28        32        (5 ) 
  

 

 

  

(99) Subtotal

        $   2,432          $   2,827          $   (395 ) 

(b) Statutory valuation allowance adjustment

      121        121        -  

(c) Nonadmitted

      -        -        -  
  

 

 

  

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

        $   2,311          $ 2,706          $ (395 ) 

(e) Capital:

         

(1) Investments

        $   63          $ 128          $ (65 ) 

(2) Net capital loss carryforward

      -        -        -  

(3) Real estate

      -        -        -  

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

      -        -        -  
  

 

 

  

(99) Subtotal

        $   63          $ 128          $ (65 ) 

(f) Statutory valuation allowance adjustment

      -        -        -  

(g) Nonadmitted

      -        -        -  
  

 

 

  

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

        $   63          $ 128          $ (65 ) 

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

        $   2,374          $   2,834          $ (460 ) 

 

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)

 

3. Deferred tax liabilities:

         

(a) Ordinary:

         

(1) Investments

        $   1,178          $   2,170          $   (992 ) 

(2) Fixed assets

      18        -        18  

(3) Deferred and uncollected premium

      9        89        (80 ) 

(4) Policyholder reserves

      934        -        934  

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

      150        321        (171 ) 
  

 

 

  

(99) Subtotal

        $ 2,289          $ 2,580          $ (291 ) 

(b) Capital:

         

(1) Investments

        $ 72          $ 42          $ 30  

(2) Real estate

      -        -        -  

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

      -        35        (35 ) 
  

 

 

  

(99) Subtotal

        $ 72          $ 77          $ (5 ) 
  

 

 

  

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

        $ 2,361          $ 2,657          $ (296 ) 
  

 

 

  

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

        $ 13          $ 177          $ (164 ) 
  

 

 

  

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

 

     December 31,  
     2017      2016      Change  
  

 

 

  
     (in millions)  

Total deferred tax assets

        $   2,374          $   2,834          $   (460 ) 

Total deferred tax liabilities

      2,361        2,657        (296 ) 
  

 

 

  

Net deferred tax assets (liabilities)

        $   13          $ 177          $ (164 ) 
  

 

 

     

Tax effect of unrealized gains and losses

            628  

Tax effect of unrealized foreign exchange gains (losses)

            (71 ) 

Other

            5  
        

 

 

  

Change in net deferred income taxes

              $ (726 ) 
        

 

 

  

 

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)

 

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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Ordinary provisions computed at statutory rate

        $ 962         $     294         $ (105 ) 

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

      253       (173 )          335  

Change in nonadmitted assets

      -       -       -  

Reinsurance

      22       (47 )      35  

Valuation allowance

      -       71       -  

Tax-exempt income

      (22 )      (16 )      (6 ) 

Nondeductible expenses

      1       (1 )      -  

Foreign tax expense gross up

      8       8       9  

Amortization of IMR

      (68 )      (78 )      (128 ) 

Tax recorded in surplus

      68       (4 )      37  

Dividend received deduction

      (184 )      (183 )      (230 ) 

Investment in subsidiaries

      (25 )      (25 )      (28 ) 

Prior year adjustment

      (151 )      (54 )      (21 ) 

Tax credits

      (24 )      (26 )      (42 ) 

Change in tax reserve

      4       (200 )      18  

Pension

      -       -       -  

Tax rate change

      570       -       -  

Other

      1         $ (1 )        $ (1 ) 
  

 

 

  

Total

        $ 1,415         $ (435 )        $ (127 ) 
  

 

 

  

Federal and foreign income taxes incurred

      446       (121 )      (778 ) 

Capital gains tax

      243       496       493  

Change in net deferred income taxes

      726         $ (810 )        $ 158  
  

 

 

  

Total statutory income tax expense (benefit)

        $   1,415         $ (435 )        $ (127 ) 
  

 

 

  

 

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)

 

As of December 31, 2017, the Company had the following carry forwards:

 

    

Origination

Year

     

Expiration

Year

      Amount  
  

 

 

  
     (in millions)  

Affordable housing tax credits

      2001        2021          $ 1  
     2002        2022        1  
     2003        2023        1  
     2004        2024        1  
     2005        2025        1  
     2006        2026        2  
     2007        2027        23  
     2008        2028        57  
     2009        2029        54  
     2010        2030        47  
     2011        2031        41  
     2012        2032        32  
     2013        2033        21  
     2014        2034        12  
     2015        2035        5  
     2016        2036        3  
        

 

 

  
             $     302  
        

 

 

  

Alternative minimum tax credits

      2002             $ 3  
     2003           7  
     2004           1  
     2008           2  
     2009           7  
        

 

 

  
             $ 20  
        

 

 

  

Other credits

      2000        2020          $ -  
     2001        2021        -  
     2002        2022        -  
     2003        2023        -  
     2004        2024        -  
     2005        2025        -  
     2006        2026        -  
     2007        2027        -  
     2008        2028        -  
     2009        2029        -  
     2010        2030        -  
     2011        2031        -  
     2012        2032        -  
     2013        2033        2  
     2014        2034        2  
     2015        2035        3  
     2016        2036        -  
        

 

 

  
             $ 7  
        

 

 

  

With the enactment of the Tax Cuts and Jobs Act on December 22, 2017, the net operating loss carryback provision is repealed effective January 1, 2018. The federal income taxes incurred on capital gains available for recoupment in the event of future net capital losses were $228 million, $0 million and $0 million for the years 2017, 2016 and 2015 respectively.

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

 

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 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 Natural Resource Corp.
Hancock Natural Resource Group Inc.    John Hancock Realty Advisors Inc.
JH 575 Rengstorff LLC    John Hancock Realty Mgt. Inc.
JH Hostetler LLC    John Hancock Signature Services Inc.
JH Kearny Mesa 5 LLC    Manulife (Michigan) Reassurance Company
JH Kearny Mesa 7 LLC    Manulife Reinsurance (Bermuda) Limited
JH Kearny Mesa 9 LLC    Manulife Reinsurance Limited
JH Networking Insurance Agency Inc.    Manulife Service Corporation
JH Ott LLC    MCC Asset Management Inc.
JHFS One Corp.    PT Timber Inc.
John Hancock Assignment Company    Signator Insurance Agency Inc.
John Hancock Financial Corporation    Signator Investors Inc.
John Hancock Financial Network Inc.    The Manufacturers Investment Corporation
John Hancock Insurance Agency Inc.   

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 ($156) million and ($193) million at December 31, 2017 and 2016, respectively, and are included in other assets or current federal income taxes payable on the Balance Sheets.

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. On March 30, 2016, the Company and the IRS finalized an agreement for tax years 2002-2009. The agreement applies the U.S. Tax Court’s opinion on the Company’s tax treatment of certain leveraged lease investments pertaining to tax years 1997-2001. There was no material impact to the Company’s financial position or results of operations as a result of the agreement.

In August 2017, the Company received and signed an IRS Revenue Agent Report for tax years 2010-2013. Tax years 2014 and forward are open under the statute of limitations.

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

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

 

     2017     2016  
  

 

 

  
     (in millions)  

Balance at beginning of year

    $ 37     $ 1,967  

Additions based on tax positions related to the current year

      14       14  

Payments

      -         (1,535 ) 

Additions for tax positions of prior years

          22       28  

Reductions for tax positions of prior years

         (13 )      (437 ) 
  

 

 

  

Balance at end of year

    $ 60     $ 37  
  

 

 

  

Included in the balances as of December 31, 2017 and 2016, are $75 million and $37 million, respectively, of unrecognized benefits that, if recognized, would affect the Company’s effective tax rate. Included in the balances as of December 31, 2017 and 2016, are ($16) million and $0 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

The Company’s decrease in the liability in 2016 for unrecognized tax benefits is the result of the Company and the IRS finalizing an agreement on the treatment of certain leveraged lease investments.

The Company’s liability for unrecognized tax benefits is not expected to materially change in the next twelve months.

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 ($10) million, $177 million, and $0 million of interest benefit for the years ended December 31, 2017, 2016 and 2015, respectively. The Company had approximately $6 million and $27 million accrued for interest as of December 31, 2017 and 2016, respectively. The Company did not recognize any material penalties for the years ended December 31, 2017, 2016 and 2015.

With the enactment of the Tax Cuts and Jobs Act (the “Act”) on December 22, 2017, the Company has applied existing guidance to the best available information in the recording of its tax provisions reflected in the 2017 financial statements. In 2018, the Company will adjust its provisional amounts as further regulatory and IRS guidance emerges. Deferred Tax Assets and Deferred Tax Liabilities for Actuarial Liabilities both include a provisional amount of $672 million until policy level tax reserve computations are finalized. The revaluation of deferred tax assets and liabilities from 35% to 21% resulted in the following impacts: Change in Net Unrealized Capital Gains (Losses) less Capital Gains Tax, $767 million; Change in Net Unrealized Foreign Exchange Capital Gains (Losses), ($47) million; and Change in Net Deferred Income Tax, ($589) million.

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, 2017, 2016 and 2015, the Company paid ordinary dividends of $807 million, $0 million and $210 million and extraordinary dividends of $93 million, $0 million, and $0 million to its parent company MIC, 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

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

10. Capital and Surplus - (continued)

 

determined based on the various risk factors related to it. As of December 31, 2017 and 2016, 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 $585 million. During 2016, $405 million was repaid. 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, 2017, 2016 and 2015. Total interest paid through December 31, 2017 was $780 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 surplus notes which were to have matured on March 31, 2033 were repaid on November 1, 2016. For the years ended December 31, 2017, 2016, and 2015, the combined interest expense on the notes was $0 million, $31 million and $29 million, respectively.

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 125 basis points and is payable semi-annually. The note which was to have matured on December 15, 2016 was extended to December 14, 2021. Interest expense was $3 million, $3 million, and $2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Total interest paid through December 31, 2017 was $19 million.

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

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 $347 million, $329 million, and $377 million, respectively, for the years ended December 31, 2017, 2016 and 2015.

The Company has Administrative Service Agreements with its subsidiaries and affiliates 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 $767 million, $811 million, and $760 million for the years ended December 31, 2017, 2016 and 2015, 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.

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

11. Related Party Transactions - (continued)

 

Other

During 2017, 2016 and 2015, respectively, the Company received dividends of $31 million, $34 million, and $36 million from John Hancock Investment Management Services LLC, $72 million, $71 million, and $81 million from JHD, $0 million, $0 million, $0 million from JHNY, $0 million, $0 million, and $70 million from JHLH, $231 million, $214 million, and $289 million from John Hancock Subsidiaries, LLC (“JHS LLC”), and $0 million, $19 million, and $0 million from John Hancock Partnership Holdings I & II and $10 million, $0 million, and $0 million from CLA CRE Opportunity Fund I LP. These dividends are included in the Company’s net investment income.

During 2017 and 2016, the Company made a capital contribution of $0 million and $75 million to JHS LLC in exchange for one share of its common stock, respectively.

During 2017, the Company made a capital contribution of $40 million to its wholly-owned subsidiary, MMRC, in exchange for one hundred and one shares of the common stock of MMRC, respectively.

The Company did not own any shares of the stock of its parent, MIC, or its ultimate parent, MFC at December 31, 2017 and 2016, 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, 2017, 2016 and 2015, respectively.

The Company is the owner and beneficiary of corporate owned life insurance (“COLI”) policies issued by JHLH. The asset balances equal to the cash surrender value of the internal COLI policies was $558 million and $543 million at December 31, 2017 and 2016, 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,  
     2017      2016  
  

 

 

  
     (In millions)  

The Manufacturers Investment Corporation

        $ 134      $ 49  

John Hancock Financial Corporation

          114            119  

Manulife Reinsurance Limited

      56        14  

Manulife Reinsurance (Bermuda) Ltd.

      111        153  

Manulife (Michigan) Reassurance Company

      4        -  

John Hancock Life & Health Insurance Company

      180        84  

John Hancock Life Insurance Company Vermont

      -        33  

John Hancock Reassurance Company, Ltd.

      179        88  

John Hancock Life Insurance Company New York

      170        263  

John Hancock Investment Management Services LLC

      23        22  

John Hancock Subsidiaries LLC

      31        64  

John Hancock Insurance Agency, Inc.

      5        8  

Essex Corporation

      -        -  

Hancock Venture Partners, Inc.

      -        -  

JH Signature Services Inc.

      8        6  

JH Partnership Holdings I, II LP

      7        3  

John Hancock Energy Resources Management, Inc.

      -        1  

John Hancock Real Estate Finance

      -        -  

John Hancock Realty Advisors

      2        3  

JH Advisors LLC

      66        56  

Manulife Asset Management (US) LLC

      76        58  

Hancock Capital Investment Management LLC

      11        10  

John Hancock RPS, LLC

      31        5  

The Berkeley Financial Group, LLC

      2        1  

Manulife Holdings (USA), LLC

      -        -  

Signator Insurance Agency, Inc.

      11        4  

JH Networking Insurance Agency, Inc.

      5        2  

John Hancock Administrative Services LLC

      -        -  

John Hancock Financial Network, Inc.

      1        11  

Hancock Natural Resource Group, Inc.

      30        23  

Hancock Forest Management, Inc.

      5        5  

John Hancock Personal Financial Services, LLC

      2        -  
  

 

 

  

Total

        $   1,264      $   1,085  
  

 

 

  

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 $624 million, purchase other invested assets of $2,447 million, purchase real estate of $213 million, and issue agricultural and commercial mortgages of $92 million at December 31, 2017. If funded, loans related to real estate mortgages would be fully collateralized by related properties. Approximately 34% of these commitments expire in 2018.

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)  

2018

        $ 12  

2019

      11  

2020

      11  

2021

      8  

2022

      5  

Thereafter

        350  
  

 

 

  

Total

        $ 397  
  

 

 

  

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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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 investment in certain leveraged leases. On March 30, 2016, the Company and the IRS finalized an agreement determining the impact of the decision on tax years subsequent to the years that were decided by the Court. There was no material impact to the Company’s financial position or results of operations as a result of the agreement.

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.

Two class actions against the Company are pending, one in New York and one in California, in which claims are made that the Company breached, and continues to breach, the contractual terms of certain universal life policies issued between approximately 1990 and 2006 by including impermissible charges in its cost of insurance (“COI”) calculations. The Company believes that its COI calculations have been, and continue to be, in accordance with the terms of the policies. An agreement to settle the case pending in California for $60 million received preliminary court approval at a hearing on February 13, 2018. A hearing for final approval is scheduled for May 9, 2018. That case covers a class of approximately 104,000 current and former owners of Flex V policies. Discovery in the case pending in New York was completed at the end of 2017. Motion practice related to class certification in the New York case is due to be concluded by June 15. It is premature to attempt to predict any outcome or range of outcomes for this matter.

 

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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, 2017  
     General
Account		     

Separate

Account

with
Guarantees

     

Separate

Account
Nonguaranteed

      Total     

Percent

of Total

  
  

 

 

  
     (in millions)  

Subject to discretionary withdrawal:

               

With fair value adjustment

        $ 448          $ 400          $ 1,720          $ 2,568        2 % 

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

      2        -        -        2        0 % 

At fair value

      -        -        124,432        124,432        84 % 
  

 

 

  

Total with adjustment or at fair value

      450        400        126,152        127,002        86 % 

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

      5,412        -        -        5,412        4 % 

Not subject to discretionary withdrawal

      14,987        227        171        15,385        10 % 
  

 

 

  

Total (gross)

        20,849          627          126,323          147,799        100 % 
              

 

 

  

Reinsurance ceded

      4,526        -        -        4,526     
  

 

 

     

Total (net)

        $ 16,323          $ 627          $ 126,323          $ 143,273     
  

 

 

     
     December 31, 2016  
     General
Account		     

Separate

Account

with

Guarantees

      Separate
Account
Nonguaranteed		      Total     

Percent

of Total

  
  

 

 

  
     (in millions)  

Subject to discretionary withdrawal:

               

With fair value adjustment

        $ 675          $ 474          $ 1,733          $ 2,882        2 % 

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

      3        -        -        3        0 % 

At fair value

      -        -        115,422        115,422        83 % 
  

 

 

  

Total with adjustment or at fair value

      678        474        117,155        118,307        85 % 

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

      5,701        -        -        5,701        4 % 

Not subject to discretionary withdrawal

      14,848        640        146        15,634        11 % 
  

 

 

  

Total (gross)

      21,227        1,114        117,301        139,642        100 % 
              

 

 

  

Reinsurance ceded

      4,893        -        -        4,893     
  

 

 

     

Total (net)

        $ 16,334          $ 1,114          $ 117,301          $ 134,749     
  

 

 

     

 

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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 guaranteed 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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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,  
     2017      2016      2017      2016  
  

 

 

  
     (in millions)  

Group Annuity Contracts (401K)

        $ 87,377          $ 78,915          $ -          $ -  

Variable and Fixed Annuities

      35,552        35,077        23        25  

Life Insurance

          14,081            12,516        -        -  

Fixed Products - Institutional and stable value fund

      2,140        2,566        -        -  

Fixed Products - Retail

      26        27          413          452  

Investments - Funds

      1,555        1,569        -        -  
  

 

 

  

Total

        $ 140,731          $ 130,670          $ 436          $ 477  
  

 

 

  

To compensate the general account for the risk taken, the separate account paid risk charges and amounts toward separate account guarantees as follows:

 

    

Risk Charges

Paid to General
Account

      Amounts toward
Separate Account
Guarantees		  
  

 

 

  
     (in millions)  

2017

        $ 220          $ 62  

2016

        $ 231          $ 89  

2015

        $ 241          $ 59  

2014

        $ 252          $ 74  

2013

        $     263          $     109  

The Company had the following variable annuities with guaranteed benefits:

 

     December 31,  
     2017      2016  
  

 

 

  
     (in millions, except for ages)  

Account value

        $   36,044          $   35,588  

Amount of reserve held

      821        901  

Net amount at risk - gross

      4,817        7,031  

Weighted average attained age

      69        68  

The following assumptions and methodology were used to determine the amounts above at December 31, 2017 and 2016:

 

  •  

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 2017 and 2016, 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-69

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts - (continued)

 

  •  

In 2017 and 2016, 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,  
     2017      2016  
  

 

 

  
     (in millions)  

Type of Fund

      

Equity

        $ 28,880          $ 24,145  

Balanced

      10,009        15,300  

Bonds

      6,381        5,052  

Money Market

      519        556  
  

 

 

  

Total

        $   45,789          $   45,053  
  

 

 

  

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

 

    December 31,  
    2017     2016  
 

 

 

  
   

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

       $ -         $ 14,395         $ 14,395         $ -         $ 13,768         $ 13,768  
 

 

 

  

Reserves for accounts with assets at:

            

Fair value

        627       139,896       140,523       1,114       129,333          130,447  

Amortized cost

     -       -       -       -       -       -  
 

 

 

  

Total

       $   627         $    139,896         $    140,523         $    1,114         $    129,333         $    130,447  
 

 

 

  

 

F-70

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts - (continued)

 

    December 31,  
    2017     2016  
 

 

 

  
   

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

       $ 400         $ 1,720         $ 2,120         $ 474         $ 1,733         $ 2,207  

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

     -       1,494       1,494       -       1,531       1,531  

At fair value

     -       134,740       134,740       -       122,924       122,924  

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

     -       1,771       1,771       -       2,903       2,903  
 

 

 

  

Subtotal

     400       139,725       140,125       474       129,091       129,565  

Not subject to discretionary withdrawal

     227       171       398       640       242       882  
 

 

 

  

Total

       $    627         $    139,896         $    140,523         $    1,114         $    129,333         $    130,447  
 

 

 

  

Amounts transferred to and from separate accounts are as follows:

 

     December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Transfers to separate accounts

        $ 17,679     $    17,163     $    17,071  

Transfers from separate accounts

        26,385       22,744       23,625  
  

 

 

  

Net transfers to (from) separate accounts

        $ (8,706 )    $ (5,581 )    $ (6,554 ) 
  

 

 

  

 

F-71

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 $34 million, $30 million, and $35 million in 2017, 2016 and 2015, 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 2017, 2016 and 2015, 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 $328 million and $346 million at December 31, 2017 and 2016, 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 2017, 2016 and 2015, 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, 2017 and 2016 was $112 million and $97 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, 2017 and 2016 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 2017, 2016 and 2015, respectively.

 

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

Lines of Credit: At December 31, 2017, 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, 2017, the Company had no outstanding borrowings under the agreement.

At December 31, 2017, 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, 2017, the Company had no outstanding borrowings under the agreement.

At December 31, 2017, 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 2021. 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, 2017. At December 31, 2017, MFC and its subsidiaries, including the Company, had no outstanding borrowings under the agreement.

At December 31, 2017, the Company had a line of credit agreement established with JHS LLC totaling up to $120 million, which will expire February 15, 2022. Under the agreement, the Company may loan funds, when requested, at prevailing interest rates as determined in accordance with the line of credit agreement. At December 31, 2017, the Company had $55 million outstanding borrowings under the agreement with a fair value of $55 million. This loan replaced a senior note receivable for $30 million issued by JHS LLC during 2016, and an additional advance of $25 million on February 15, 2017. Interest on the loan is calculated at a fluctuating rate equal to the 360 day-year for the actual number of days elapsed and is payable annually. The combined interest income on the loans was $1 million and $0 million for the year ended December 31, 2017 and 2016.

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, 2017 and 2016 was $197 million and $201 million, respectively. Interest ranging from 4.8% to 6.0%. The notes are due in varying amounts to 2032.

Aggregate maturities of consumer notes are as follows: 2018-$43 million; 2019-$16 million; 2020-$0 million; 2021-$0 million; 2022-$13 million; and thereafter $125 million.

Interest expense on consumer notes, included in benefits to policyholders, was $11 million, $12 million, and $18 million in 2017, 2016 and 2015, respectively. Interest paid amounted to $11 million, $11 million, and $18 million in 2017, 2016 and 2015, respectively.

Affiliated Debt: Pursuant to a demand note receivable dated September 30, 2008, the Company had $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, 2016 since the counterparty is the parent entity of the Company; however, this note continued 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 was calculated at a fluctuating rate equal to 3-month LIBOR plus 180 basis points per annum. Interest income was $7 million, $7 million, and $6 million for the years ended December 31, 2017, 2016 and 2015, respectively. The demand note receivable was fully repaid on September 30, 2017.

Pursuant to a promissory note dated June 28, 2012, the Company borrowed $153 million from Manulife Finance Switzerland AG (“MFSA”). Interest on the loan was calculated at a fluctuating rate equal to 3-month LIBOR plus 90 basis points per annum and was 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

 

F-73

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 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 was calculated at a fluctuating rate equal to 3-month LIBOR plus 88 basis points per annum and was payable quarterly effective from June 28, 2015. On May 31, 2016, the maturity date was extended for a period of one year to June 28, 2017. Following the extension, the interest rate was amended and was calculated at a fluctuating rate equal to 3-month LIBOR plus 88 basis points per annum and was payable quarterly effective from June 28, 2016. On May 22, 2017, the maturity date was extended for a period of one year to June 28, 2018. Following the extension, the interest rate was amended and was calculated at a fluctuating rate equal to 3-month LIBOR plus 88 basis points per annum and was payable quarterly effective from June 28, 2017. Interest expense was $3 million, $3 million, and $2 million for the years ended December 31, 2017, 2016 and 2015, respectively. The promissory note was fully repaid as of December 31, 2017.

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 payable monthly. Interest expense was $0 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Pursuant to a senior note receivable dated December 9, 2014, the Company had $40 million outstanding with JHS LLC as of December 31, 2016. During 2017, JHS LLC repaid $15 million of the outstanding loan bringing the outstanding principal balance to $25 million with a fair value of $25 million as of December 31, 2017. 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, $1 million, and $1 million for the years ended December 31, 2017, 2016 and 2015, respectively.

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.

 

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

 

     December 31, 2017  
    

(1)

(Col 2 + 3)

Total

     

(2)

General
Account

     

(3)

Separate
Account

  
  

 

 

  
     (in millions)  

(a) Membership stock - Class A

        $ 19      $ 19      $ -  

(b) Membership stock - Class B

      -        -        -  

(c) Activity stock

      -        -        -  

(d) Excess stock

      -        -        -  

(e) Aggregate total

        $ 19      $ 19      $ -  

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

        $ 421        
     December 31, 2016  
    

(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        

FHLBI membership stock of $0 million and $18 million was classified as not eligible for redemption for the years ended December 31, 2017 and 2016, respectively.

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

 

     December 31, 2017  
     Fair Value      Carrying
Value		     

Aggregate Total

Borrowing

  
  

 

 

  
     (in millions)  

(a) General account

        $ -      $ -      $ -  

(b) Separate account

      -        -        -  
  

 

 

  

(c) Total collateral pledged

        $ -      $ -      $ -  
  

 

 

  
     December 31, 2016  
     Fair Value      Carrying
Value		     

Aggregate Total

Borrowing

  
  

 

 

  
     (in millions)  

(a) General account

        $ -      $ -      $ -  

(b) Separate account

      -        -        -  
  

 

 

  

(c) Total collateral pledged

        $    -      $    -      $    -  
  

 

 

  

 

F-75

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 indicates the maximum collateral pledged to the FHLBI during the year:

 

     December 31, 2017  
     Fair Value      Carrying
Value		     

Amount

Borrowed at Time
of Maximum

Collateral

  
  

 

 

  
     (in millions)  

(a) General account

        $ 803          $ 755          $   400  

(b) Separate account

      -        -        -  
  

 

 

  

(c) Total maximum collateral pledged

        $   803          $   755          $ 400  
  

 

 

  
     December 31, 2016  
     Fair Value      Carrying
Value		     

Amount Borrowed

at Time of

Maximum

Collateral

  
  

 

 

  
     (in millions)  

(a) General account

        $ -          $ -          $ -  

(b) Separate account

      -        -        -  
  

 

 

  

(c) Total maximum collateral pledged

        $ -          $ -          $ -  
  

 

 

  

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

 

     December 31, 2017  
    

(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, 2016  
    

(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 2017 was $400 million. The Company is not subject to any prepayment obligations under current borrowing agreements.

 

F-76

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

17. Closed Block

The Company operates a closed block 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.

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

Assets allocated to the closed block inure solely to the benefit of policyholders included in the closed block and will not revert to the benefit of the shareholders of the Company. In addition, if the assets allocated to the closed block and the revenues from the closed block business prove to be insufficient to pay the benefits guaranteed in the closed block, 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.

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

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

 

F-77

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

17. Closed Block - (continued)

 

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

 

     JHUSA  
     2017      2016  
  

 

 

  
     (in millions)  

Assets:

      

Bonds

        $   2,744          $ 2,979  

Stocks:

      

Preferred stocks

      -        -  

Common stocks

      -        -  

Mortgage loans on real estate

      247        271  

Real estate

      704        817  

Cash, cash equivalents and short-term investments

      4        17  

Policy loans

      1,694        1,686  

Other invested assets

      248        140  
  

 

 

  

Total cash and invested assets

      5,641        5,910  

Investment income due and accrued

      102        108  

Premiums due and deferred

      5        9  

Net deferred tax asset

      73        144  

Other closed block assets

      46        -  
  

 

 

  

Total closed block assets

        $ 5,867          $ 6,171  
  

 

 

  

Obligations:

      

Policy reserves

      5,515        5,623  

Policyholders’ and beneficiaries’ funds

      60        62  

Dividends payable to policyholders

      322        324  

Policy benefits in process of payment

      71        89  

Other policy obligations

      1        2  

Other closed block obligations

      500        719  
  

 

 

  

Total closed block obligations

        $ 6,469          $   6,819  
  

 

 

  

18. Subsequent Events

The Company evaluated the recognition and disclosure of subsequent events for its December 31, 2017 financial statements through April 4, 2018, the date the financial statements were issued.

 

F-78

Table of Contents

 

 

AUDITED FINANCIAL STATEMENTS

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

December 31, 2017

Table of Contents

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

Audited Financial Statements

December  31, 2017

Contents

 

Report of Independent Registered Public Accounting Firm

      3  

Statements of Assets and Liabilities

      6  

Statements of Operations and Changes in Contract Owners’ Equity

      22  

Notes to Financial Statements

      54  

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the 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

Opinion on the Financial Statements

We have audited the accompanying statements of assets and liabilities of John Hancock Life Insurance Company (U.S.A.) Separate Account N (the “Separate Account”) comprised of the following sub-accounts as listed below as of December 31, 2017, and the related statements of operations and changes in contract owners’ equity for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the sub-accounts constituting John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2017, the results of their operations and changes in contract owners’ equity for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.

 

Individual sub-accounts constituting John Hancock Life    Statement of operations and changes in
Insurance Company (U.S.A) Separate Account N    contract owners’ equity

 

500 Index Fund Series NAV    Lifestyle Growth Portfolio Series I   For each of the two years in the period ended December 31, 2017
Active Bond Trust Series I    Lifestyle Growth Portfolio Series NAV    
Active Bond Trust Series NAV    M Capital Appreciation    
Alpha Opportunities Trust Series I    M Large Cap Growth    
Alpha Opportunities Trust Series NAV    Managed Volatility Aggressive Portfolio Series I    
American Asset Allocation Trust Series I    Managed Volatility Aggressive Portfolio Series NAV    
American Global Growth Trust Series I    Managed Volatility Balanced Portfolio Series I    
American Growth Trust Series I    Managed Volatility Balanced Portfolio Series NAV    
American Growth-Income Trust Series I    Managed Volatility Conservative Portfolio Series I    
American International Trust Series I    Managed Volatility Conservative Portfolio Series NAV    
Blue Chip Growth Trust Series I    Managed Volatility Growth Portfolio Series I    
Blue Chip Growth Trust Series NAV    Managed Volatility Growth Portfolio Series NAV    
Bond Trust Series I    Managed Volatility Moderate Portfolio Series I    
Bond Trust Series NAV    Managed Volatility Moderate Portfolio Series NAV    
Capital Appreciation Trust Series I    Mid Cap Index Trust Series I    
Capital Appreciation Trust Series NAV    Mid Cap Index Trust Series NAV    
Capital Appreciation Value Trust Series I    Mid Cap Stock Trust Series I    

 

3

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

Capital Appreciation Value Trust Series NAV

   

Mid Cap Stock Trust Series NAV

     

Core Bond Trust Series I

   

Mid Value Trust Series I

     

Core Bond Trust Series NAV

   

Mid Value Trust Series NAV

     

Emerging Markets Value Trust Series I

   

Money Market Trust Series I

     

Emerging Markets Value Trust Series NAV

   

PIMCO All Asset

     

Equity Income Trust Series I

   

Real Estate Securities Trust Series I

     

Equity Income Trust Series NAV

   

Real Estate Securities Trust Series NAV

     

Financial Industries Trust Series I

   

Science & Technology Trust Series I

     

Financial Industries Trust Series NAV

   

Science & Technology Trust Series NAV

     

Fundamental All Cap Core Trust Series I

   

Short Term Government Income Trust Series I

     

Fundamental All Cap Core Trust Series NAV

   

Short Term Government Income Trust Series NAV

     

Fundamental Large Cap Value Trust Series I

   

Small Cap Growth Trust Series I

     

Fundamental Large Cap Value Trust Series NAV

   

Small Cap Growth Trust Series NAV

     

Global Bond Trust Series I

   

Small Cap Index Trust Series I

     

Global Bond Trust Series NAV

   

Small Cap Index Trust Series NAV

     

Global Trust Series I

   

Small Cap Opportunities Trust Series I

     

Global Trust Series NAV

   

Small Cap Opportunities Trust Series NAV

     

Health Sciences Trust Series I

   

Small Cap Value Trust Series I

     

Health Sciences Trust Series NAV

   

Small Cap Value Trust Series NAV

     

High Yield Trust Series I

   

Small Company Value Trust Series I

     

High Yield Trust Series NAV

   

Small Company Value Trust Series NAV

     

International Equity Index Series I

   

Strategic Income Opportunities Trust Series I

     

International Equity Index Series NAV

   

Strategic Income Opportunities Trust Series NAV

     

International Growth Stock Trust Series I

   

Total Bond Market Series Trust NAV

     

International Growth Stock Trust Series NAV

   

Total Stock Market Index Trust Series I

     

International Small Company Trust Series I

   

Total Stock Market Index Trust Series NAV

     

 

4

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

International Small Company Trust Series NAV

   

Ultra Short Term Bond Trust Series I

     

International Value Trust Series I

   

Ultra Short Term Bond Trust Series NAV

     

International Value Trust Series NAV

   

Utilities Trust Series I

     

Investment Quality Bond Trust Series I

   

Utilities Trust Series NAV

     

Investment Quality Bond Trust Series NAV

          

Money-Market Trust Series NAV

        

For the period from April 29, 2016

(commencement of operations)

through December 31, 2016 and for

the year ended December 31, 2017

Basis for Opinion

These financial statements are the responsibility of the Separate Account’s management. Our responsibility is to express an opinion on each of the sub-accounts’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Separate Account in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Separate Account is not required to have, nor were we engaged to perform, an audit of the Separate Account’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Separate Account’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the fund companies, or their transfer agents, as applicable. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

LOGO

We have served as the auditor of the Separate Account since 1987.

Boston, Massachusetts

April 4, 2018

 

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

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2017

 

     500 Index Fund
Series NAV (a)		      Active Bond Trust
Series I		      Active Bond Trust
Series NAV		      Alpha Opportunities
Trust
Series I		      Alpha Opportunities
Trust
Series NAV		      American Asset
Allocation Trust
Series I		  

Total Assets

                  

Investments at fair value

    $ 89,400,362      $ 763,467      $ 1,067,920      $ 44,333      $ 657,707      $ 11,728,283  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      1,887,547        34,088        13,693        1,635        21,676        630,470  

Unit value

    $ 47.36      $ 22.40      $ 77.99      $ 27.11      $ 30.34      $ 18.60  

Shares

      2,777,271        79,777        111,474        4,381        64,927        820,734  

Cost

    $ 73,683,736      $ 780,150      $ 1,084,297      $ 55,463      $ 684,042      $ 10,434,977  

 

(a)

Renamed on October 27, 2017. Previously known as 500 Index Fund B Series NAV.

 

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, 2017

 

     American Global
Growth Trust
Series I		      American
Growth Trust
Series I		      American Growth-
Income Trust
Series I		      American
International Trust
Series I		      Blue Chip
Growth Trust
Series I		      Blue Chip
Growth Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 659,731      $ 15,257,193      $ 13,401,411      $ 7,988,088      $ 9,563,854      $ 68,329,185  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      32,161        471,529        414,194        306,451        141,623        365,708  

Unit value

    $ 20.51      $ 32.36      $ 32.36      $ 26.07      $ 67.53      $ 186.84  

Shares

      40,977        756,430        757,570        364,254        273,879        1,956,735  

Cost

    $ 632,473      $ 14,956,882      $ 13,005,452      $ 7,280,825      $ 8,352,165      $ 61,607,200  

 

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, 2017

 

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

Total Assets

                  

Investments at fair value

    $ 6,653,487      $ 1,681,650      $ 8,566,232      $ 1,945,535      $ 1,153,927      $ 2,356,274  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      570,745        140,363        244,298        53,085        52,325        102,475  

Unit value

    $ 11.66      $ 11.98      $ 35.06      $ 36.65      $ 22.05      $ 22.99  

Shares

      495,789        125,403        584,726        132,620        96,321        197,178  

Cost

    $ 6,810,948      $ 1,721,141      $ 8,027,119      $ 1,775,471      $ 1,145,780      $ 2,316,752  

 

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, 2017

 

     Core Bond Trust
Series I		      Core Bond
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		  

Total Assets

                  

Investments at fair value

    $ 7,645,685      $ 25,672,554      $ 1,987,004      $ 4,086,315      $ 8,632,436      $ 46,532,756  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      368,867        1,480,100        114,038        284,502        161,955        784,687  

Unit value

    $ 20.73      $ 17.35      $ 17.42      $ 14.36      $ 53.30      $ 59.30  

Shares

      584,533        1,971,778        186,924        385,138        493,282        2,671,226  

Cost

    $ 7,807,181      $ 26,321,536      $ 1,921,704      $ 3,703,770      $ 8,527,239      $ 45,933,283  

 

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, 2017

 

 

     Financial Industries
Trust
Series I		      Financial
Industries Trust
Series NAV		      Fundamental All
Cap Core Trust
Series I		      Fundamental All
Cap Core Trust
Series NAV		      Fundamental Large
Cap Value Trust
Series I		      Fundamental Large
Cap Value Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 820,679      $ 379,482      $ 418,406      $ 2,760,602      $ 3,699,117      $ 8,185,126  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      28,443        9,936        8,401        88,415        108,435        319,859  

Unit value

    $ 28.85      $ 38.19      $ 49.80      $ 31.22      $ 34.11      $ 25.59  

Shares

      54,748        25,383        16,199        106,341        173,180        383,019  

Cost

    $ 740,295      $ 296,459      $ 357,072      $ 2,325,634      $ 3,036,206      $ 6,718,672  

 

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, 2017

 

 

     Global Bond Trust
Series I		      Global Bond Trust
Series NAV		      Global Trust
Series I		      Global Trust
Series NAV		      Health Sciences
Trust
Series I		      Health Sciences
Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 1,015,444      $ 9,043,097      $ 2,608,249      $ 2,578,745      $ 5,158,112      $ 6,555,374  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      33,610        271,299        76,411        122,558        61,871        94,638  

Unit value

    $ 30.21      $ 33.33      $ 34.13      $ 21.04      $ 83.37      $ 69.27  

Shares

      78,534        702,649        119,044        117,859        206,077        258,391  

Cost

    $ 984,158      $ 8,810,204      $ 2,348,272      $ 2,285,813      $ 5,719,230      $ 6,707,754  

 

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, 2017

 

     High Yield Trust
Series I		      High Yield Trust
Series NAV		      International
Equity Index
Series I (b)		      International
Equity Index
Series NAV (c)		      International
Growth Stock
Trust Series I		      International
Growth Stock Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 2,978,937      $ 1,622,162      $ 9,241,272      $ 17,322,973      $ 3,020,605      $ 10,971,753  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      89,337        66,895        650,594        304,244        209,929        749,454  

Unit value

    $ 33.34      $ 24.25      $ 14.20      $ 56.94      $ 14.39      $ 14.64  

Shares

      559,951        309,573        501,154        939,424        162,836        591,151  

Cost

    $ 3,068,435      $ 1,572,674      $ 7,829,174      $ 15,132,047      $ 2,706,051      $ 9,959,457  

 

(b)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series I.

(c)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series NAV.

 

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, 2017

 

     International
Small Company
Trust
Series I		      International
Small Company
Trust
Series NAV		      International
Value Trust
Series I		      International
Value Trust
Series NAV		      Investment Quality
Bond Trust
Series I		      Investment Quality
Bond Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 853,645      $ 1,647,574      $ 6,222,043      $ 7,214,581      $ 4,607,928      $ 822,445  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      43,760        80,027        230,516        384,866        138,776        47,484  

Unit value

    $ 19.51      $ 20.59      $ 26.99      $ 18.75      $ 33.20      $ 17.32  

Shares

      53,655        103,491        434,500        507,712        413,267        74,028  

Cost

    $ 722,017      $ 1,329,602      $ 5,429,790      $ 6,513,830      $ 4,719,038      $ 832,363  

 

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, 2017

 

     Lifestyle
Growth Portfolio
Series I (d)		      Lifestyle Growth
Portfolio
Series NAV (e)		      M Capital
Appreciation		      M Large Cap
Growth		      Managed Volatility
Aggressive Portfolio
Series I (f)		      Managed Volatility
Aggressive Portfolio
Series NAV (g)		  

Total Assets

                  

Investments at fair value

    $ 323,859      $ 2,652,708      $ 293,836      $ 10      $ 1,200,152      $ 4,576,194  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      27,555        197,048        2,566        —          37,230        207,715  

Unit value

    $ 11.75      $ 13.46      $ 114.51      $ 0.00      $ 32.24      $ 22.03  

Shares

      19,735        161,750        9,406        —          100,853        384,554  

Cost

    $ 307,725      $ 2,620,342      $ 288,160      $ 9      $ 999,765      $ 3,971,741  

 

(d)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series I.

(e)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series NAV.

(f)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series I.

(g)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series NAV.

 

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, 2017

 

     Managed Volatility
Balanced Portfolio
Series I (h)		      Managed Volatility
Balanced Portfolio
Series NAV (i)		      Managed Volatility
Conservative
Portfolio
Series I (j)		      Managed Volatility
Conservative Portfolio
Series NAV (k)		      Managed Volatility
Growth Portfolio
Series I (l)		      Managed Volatility
Growth Portfolio
Series NAV (m)		  

Total Assets

                  

Investments at fair value

    $ 3,940,880      $ 16,545,768      $ 1,463,970      $ 4,800,051      $ 3,156,985      $ 23,388,148  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      108,896        803,982        41,931        258,867        90,667        1,107,957  

Unit value

    $ 36.19      $ 20.58      $ 34.91      $ 18.54      $ 34.82      $ 21.11  

Shares

      304,080        1,273,731        127,524        417,033        216,975        1,605,226  

Cost

    $ 3,837,804      $ 16,844,438      $ 1,475,201      $ 4,781,516      $ 2,901,045      $ 22,510,317  

 

(h)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series I.

(i)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series NAV.

(j)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series I.

(k)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series NAV.

(l)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series I.

(m)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series NAV.

 

 

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, 2017

 

     Managed Volatility
Moderate Portfolio
Series I (n)		      Managed Volatility
Moderate Portfolio
Series NAV (o)		      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

    $ 2,047,422      $ 6,949,417      $ 9,764,956      $ 15,217,036      $ 3,662,348      $ 6,055,527  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      54,906        344,088        186,083        406,367        87,269        61,598  

Unit value

    $ 37.29      $ 20.20      $ 52.48      $ 37.45      $ 41.97      $ 98.31  

Shares

      166,052        563,162        424,563        661,610        205,519        335,858  

Cost

    $ 2,085,576      $ 7,199,873      $ 9,090,315      $ 14,332,137      $ 3,028,752      $ 5,593,861  

 

(n)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series I.

(o)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series NAV.

 

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, 2017

 

     Mid Value Trust
Series I		      Mid Value Trust
Series NAV		      Money Market
Trust Series I		      Money-Market
Trust Series
NAV		      PIMCO All
Asset		      Real Estate
Securities Trust
Series I		  

Total Assets

                  

Investments at fair value

    $ 3,587,121      $ 11,222,471      $ 19,208,310      $ 53,181,453      $ 4,545,996      $ 8,669,617  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      106,318        210,469        930,799        5,280,323        235,317        47,363  

Unit value

    $ 33.74      $ 53.32      $ 20.64      $ 10.07      $ 19.32      $ 183.05  

Shares

      309,235        973,328        19,208,310        53,181,453        411,775        439,859  

Cost

    $ 3,489,909      $ 11,031,285      $ 19,208,310      $ 53,181,453      $ 4,388,795      $ 5,783,483  

 

 

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, 2017

 

     Real Estate
Securities Trust
Series NAV		      Science &
Technology Trust
Series I		      Science &
Technology Trust
Series NAV		      Short Term
Government
Income Trust
Series I		      Short Term
Government
Income Trust
Series NAV		      Small Cap
Growth Trust
Series I		  

Total Assets

                  

Investments at fair value

    $ 13,691,576      $ 8,662,179      $ 5,704,807      $ 1,451,325      $ 2,133,338      $ 1,372,442  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      84,360        176,794        129,919        139,708        196,487        44,078  

Unit value

    $ 162.30      $ 49.00      $ 43.91      $ 10.39      $ 10.86      $ 31.14  

Shares

      698,906        289,028        188,526        120,743        177,482        135,483  

Cost

    $ 12,785,887      $ 6,759,287      $ 5,360,456      $ 1,500,249      $ 2,180,569      $ 1,218,803  

 

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, 2017

 

     Small Cap
Growth Trust
Series NAV		      Small Cap
Index Trust
Series I		      Small Cap
Index Trust
Series NAV		      Small Cap
Opportunities
Trust Series I		      Small Cap
Opportunities Trust
Series NAV		      Small Cap
Value Trust
Series I		  

Total Assets

                  

Investments at fair value

    $ 5,243,670      $ 6,186,594      $ 6,813,361      $ 14,715,365      $ 338,798      $ 808,446  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      135,350        154,601        198,652        323,762        13,830        27,201  

Unit value

    $ 38.74      $ 40.02      $ 34.30      $ 45.45      $ 24.50      $ 29.72  

Shares

      511,578        384,499        423,190        459,712        10,637        39,923  

Cost

    $ 4,372,506      $ 5,624,835      $ 6,321,235      $ 13,634,470      $ 319,516      $ 839,030  

 

See accompanying notes.

 

19

Table of Contents

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

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2017

 

     Small Cap
Value Trust
Series NAV		      Small Company
Value Trust
Series I		      Small Company
Value Trust
Series NAV		      Strategic Income
Opportunities Trust
Series I		      Strategic Income
Opportunities Trust
Series NAV		      Total Bond
Market Series
Trust NAV (p)		  

Total Assets

                  

Investments at fair value

    $ 8,356,023      $ 2,739,222      $ 1,128,600      $ 2,561,034      $ 4,988,236      $ 23,146,361  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      96,106        61,798        35,455        92,337        231,440        922,711  

Unit value

    $ 86.95      $ 44.33      $ 31.83      $ 27.74      $ 21.55      $ 25.09  

Shares

      414,075        131,315        54,234        186,664        364,637        2,289,452  

Cost

    $ 8,504,914      $ 2,630,822      $ 1,149,016      $ 2,527,422      $ 4,912,960      $ 23,573,793  

 

(p)

Renamed on October 27, 2017. Previously known as Total Bond Market Trust B Series NAV.

 

See accompanying notes.

 

20

Table of Contents

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

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2017

 

     Total
Stock Market Index
Trust Series I		      Total
Stock Market Index
Trust Series NAV		      Ultra
Short Term
Bond Trust
Series I		      Ultra
Short Term
Bond Trust
Series NAV		      Utilities Trust
Series I		      Utilities Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 8,025,736      $ 5,860,760      $ 3,166      $ 589,854      $ 1,041,966      $ 2,090,789  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      263,987        54,510        324        57,823        27,607        64,181  

Unit value

    $ 30.40      $ 107.52      $ 9.77      $ 10.20      $ 37.74      $ 32.58  

Shares

      358,452        261,875        277        51,696        73,794        148,283  

Cost

    $ 6,660,233      $ 5,457,045      $ 3,305      $ 603,146      $ 1,007,537      $ 2,087,825  

 

See accompanying notes.

 

21

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,

 

     500 Index Fund Series NAV     Active Bond Trust Series I     Active Bond Trust Series NAV  
     2017 (a)     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 1,504,042     $ 1,354,892     $ 26,383     $ 21,476     $ 35,330 $       19,297  

Expenses:

             

Mortality and expense risk and administrative charges

      (119,621 )      (91,697 )      (3,543 )      (3,602 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,384,421       1,263,195       22,840       17,874       35,330       19,297  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      1,079,249       1,150,442       (6 )      (1 )      —         —    

Net realized gain (loss)

      4,520,161       1,593,353       (7,299 )      (7,116 )      (1,318 )      (2,146 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      5,599,410       2,743,795       (7,305 )      (7,117 )      (1,318 )      (2,146 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      9,900,241       4,253,263       8,771       11,483       4,599       1,014  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      16,884,072       8,260,253       24,306       22,240       38,611       18,165  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,609,611       2,181,076       93,630       69,510       118,331       70,052  

Transfers between sub-accounts and the company

      (5,437,492 )      3,047,837       229,777       57,448       427,109       107,902  

Transfers on general account policy loans

      (54,678 )      (203,240 )      (204 )      (364 )      —         —    

Withdrawals

      (4,482,699 )      (473,104 )      (63 )      (29,572 )      (15,439 )      (5,473 ) 

Annual contract fee

      (1,918,288 )      (1,746,570 )      (170,361 )      (155,474 )      (18,597 )      (12,479 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (10,283,546 )      2,805,999       152,779       (58,452 )      511,404       160,002  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      6,600,526       11,066,252       177,085       (36,212 )      550,015       178,167  

Net assets at beginning of period

      82,799,836       71,733,584       586,382       622,594       517,905       339,738  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 89,400,362     $ 82,799,836     $ 763,467     $ 586,382     $ 1,067,920     $ 517,905  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      2,089,276       1,980,760       27,608       30,430       6,966       4,775  

Units issued

      332,880       716,142       15,040       6,324       7,276       3,282  

Units redeemed

      (534,609 )      (607,626 )      (8,560 )      (9,146 )      (549 )      (1,091 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      1,887,547       2,089,276       34,088       27,608       13,693       6,966  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

Renamed on October 27, 2017. Previously known as 500 Index Fund B Series NAV.

 

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,

 

     Alpha Opportunities
Trust Series I		     Alpha Opportunities
Trust Series NAV		     American Asset Allocation
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 193     $ 654     $ 3,151     $ 14,184     $ 136,200     $ 111,807  

Expenses:

             

Mortality and expense risk and administrative charges

      (271 )      (255 )      —         —         (49,378 )      (49,235 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (78 )      399       3,151       14,184       86,822       62,572  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      6,161       4,350       88,793       89,895       723,443       1,127,275  

Net realized gain (loss)

      (1,749 )      (1,984 )      (16,054 )      (6,515 )      396,443       449,692  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      4,412       2,366       72,739       83,380       1,119,886       1,576,967  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      2,232       (839 )      54,856       (35,557 )      306,957       (928,453 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      6,566       1,926       130,746       62,007       1,513,665       711,086  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      —         58       22,898       76,304       794,148       617,164  

Transfers between sub-accounts and the company

      950       —         (317,395 )      358,779       2,219,563       292,814  

Transfers on general account policy loans

      —         —         —         —         3,604       4,349  

Withdrawals

      (1 )      (1,420 )      10       28,560       (898,011 )      (553,972 ) 

Annual contract fee

      (2,705 )      (2,561 )      (16,521 )      (19,067 )      (909,668 )      (861,841 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (1,756 )      (3,923 )      (311,008 )      444,576       1,209,636       (501,486 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      4,810       (1,997 )      (180,262 )      506,583       2,723,301       209,600  

Net assets at beginning of period

      39,523       41,520       837,969       331,386       9,004,982       8,795,382  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 44,333     $ 39,523     $ 657,707     $ 837,969     $ 11,728,283     $ 9,004,982  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      1,705       1,882       32,525       13,602       563,452       597,941  

Units issued

      57       3       12,626       19,634       171,860       79,782  

Units redeemed

      (127 )      (180 )      (23,475 )      (711 )      (104,842 )      (114,271 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      1,635       1,705       21,676       32,525       630,470       563,452  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     American Global Growth
Trust Series I		     American Growth
Trust Series I		     American Growth-Income
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 1,529     $ 4,364     $ 54,866     $ 52,425     $ 135,241     $ 210,855  

Expenses:

             

Mortality and expense risk and administrative charges

      (345 )      (309 )      (10,047 )      (11,138 )      (45,722 )      (46,144 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,184       4,055       44,819       41,287       89,519       164,711  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      52,097       54,346       2,179,527       3,845,187       2,077,455       3,045,364  

Net realized gain (loss)

      (39,068 )      (6,409 )      (291,425 )      (78,313 )      133,740       68,526  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      13,029       47,937       1,888,102       3,766,874       2,211,195       3,113,890  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      87,540       (48,361 )      1,671,259       (2,638,158 )      230,086       (2,021,106 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      101,753       3,631       3,604,180       1,170,003       2,530,800       1,257,495  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      89,535       77,862       410,408       522,270       675,290       672,438  

Transfers between sub-accounts and the company

      446       (11,941 )      209,428       1,532,477       (638,306 )      873,001  

Transfers on general account policy loans

      1,911       5,524       68,951       (132,853 )      (12,552 )      (112,646 ) 

Withdrawals

      31,984       (1,806 )      (2,697,910 )      (576,504 )      (1,892,325 )      (388,108 ) 

Annual contract fee

      (35,094 )      (31,408 )      (297,884 )      (276,756 )      (676,587 )      (705,209 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      88,782       38,231       (2,307,007 )      1,068,634       (2,544,480 )      339,476  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      190,535       41,862       1,297,173       2,238,637       (13,680 )      1,596,971  

Net assets at beginning of period

      469,196       427,334       13,960,020       11,721,383       13,415,091       11,818,120  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 659,731     $ 469,196     $ 15,257,193     $ 13,960,020     $ 13,401,411     $ 13,415,091  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      30,020       27,410       536,522       487,981       486,038       468,780  

Units issued

      346,601       12,587       315,568       217,843       28,459       142,748  

Units redeemed

      (344,460 )      (9,977 )      (380,561 )      (169,302 )      (100,303 )      (125,490 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      32,161       30,020       471,529       536,522       414,194       486,038  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     American International
Trust Series I		     Blue Chip Growth
Trust Series I		     Blue Chip Growth Trust
Series NAV		  
     2017     2016     2017     2016     2017      2016  

Income:

              

Dividend distributions received

    $ 66,736     $ 149,372     $ 6,372     $ 977     $ 68,648      $ 28,080  

Expenses:

              

Mortality and expense risk and administrative charges

      (8,552 )      (10,524 )      (35,454 )      (32,483 )      —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net investment income (loss)

      58,184       138,848       (29,082 )      (31,506 )      68,648        28,080  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Realized gains (losses) on investments:

              

Capital gain distributions received

      802,984       (2 )      592,409       1,364,845       4,065,571        8,754,964  

Net realized gain (loss)

      1,735,045       187,310       (34,611 )      163,844       729,906        876,768  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Realized gains (losses)

      2,538,029       187,308       557,798       1,528,689       4,795,477        9,631,732  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Unrealized appreciation (depreciation) during the period

      1,070,601       208,961       2,077,243       (1,504,545 )      13,836,624        (8,902,517 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net increase (decrease) in net assets from operations

      3,666,814       535,117       2,605,959       (7,362 )      18,700,749        757,295  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Changes from principal transactions:

              

Purchase payments

      360,610       498,368       87,239       74,845       307,176        389,804  

Transfers between sub-accounts and the company

      (8,371,616 )      (1,486,864 )      145,267       (697,772 )      (3,808,107 )       6,746,622  

Transfers on general account policy loans

      45,275       (130,399 )      29,191       162,979       (3,790 )       (113,643 ) 

Withdrawals

      (2,353,956 )      (129,261 )      (668,263 )      (87,638 )      (267,352 )       (77,866 ) 

Annual contract fee

      (296,989 )      (299,965 )      (359,870 )      (361,745 )      (631,923 )       (601,219 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net increase (decrease) in net assets from principal transactions

      (10,616,676 )      (1,548,121 )      (766,436 )      (909,331 )      (4,403,996 )       6,343,698  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Total increase (decrease) in net assets

      (6,949,862 )      (1,013,004 )      1,839,523       (916,693 )      14,296,753        7,100,993  

Net assets at beginning of period

      14,937,950       15,950,954       7,724,331       8,641,024       54,032,432        46,931,439  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net assets at end of period

    $ 7,988,088     $ 14,937,950     $ 9,563,854     $ 7,724,331     $ 68,329,185      $ 54,032,432  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
     2017     2016     2017     2016     2017      2016  

Units, beginning of period

      776,080       848,925       153,004       174,050       394,278        345,379  

Units issued

      212,017       177,276       20,795       47,475       43,478        100,055  

Units redeemed

      (681,646 )      (250,121 )      (32,176 )      (68,521 )      (72,048 )       (51,156 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Units, end of period

      306,451       776,080       141,623       153,004       365,708        394,278  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

 

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,

 

     Bond Trust Series I     Bond Trust Series NAV     Capital Appreciation
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 178,782     $ 205,028     $ 46,906     $ 201,399     $ 4,790     $ —    

Expenses:

             

Mortality and expense risk and administrative charges

      (26,481 )      (25,541 )      —         —         (28,668 )      (27,213 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      152,301       179,487       46,906       201,399       (23,878 )      (27,213 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         —         —         636,200       1,204,602  

Net realized gain (loss)

      (25,659 )      (10,949 )      (231,488 )      629       (163,701 )      (127,335 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (25,659 )      (10,949 )      (231,488 )      629       472,499       1,077,267  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      87,731       (28,256 )      267,171       (275,223 )      1,892,510       (1,241,168 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      214,373       140,282       82,589       (73,195 )      2,341,131       (191,114 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      18,537       7,909       198,751       224,776       29,192       29,020  

Transfers between sub-accounts and the company

      (265,123 )      1,396,073       (6,092,942 )      7,078,949       (325,652 )      (1,059,068 ) 

Transfers on general account policy loans

      (22 )      (8,719 )      7,186       (1,767 )      (79 )      11,053  

Withdrawals

      (346,355 )      (24,111 )      (109,748 )      (167,855 )      (359,353 )      (93,575 ) 

Annual contract fee

      (148,311 )      (140,790 )      (81,160 )      (82,636 )      (177,415 )      (179,594 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (741,274 )      1,230,362       (6,077,913 )      7,051,467       (833,307 )      (1,292,164 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (526,901 )      1,370,644       (5,995,324 )      6,978,272       1,507,824       (1,483,278 ) 

Net assets at beginning of period

      7,180,388       5,809,744       7,676,974       698,702       7,058,408       8,541,686  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 6,653,487     $ 7,180,388     $ 1,681,650     $ 7,676,974     $ 8,566,232     $ 7,058,408  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      636,003       527,987       664,134       62,379       274,009       326,790  

Units issued

      47,516       218,202       18,764       628,588       16,716       12,691  

Units redeemed

      (112,774 )      (110,186 )      (542,535 )      (26,833 )      (46,427 )      (65,472 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      570,745       636,003       140,363       664,134       244,298       274,009  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Capital Appreciation Trust
Series NAV		     Capital Appreciation Value
Trust Series I		     Capital Appreciation Value
Trust Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 1,994     $ 185     $ 15,560     $ 4,322     $ 33,825     $ 25,721  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (3,325 )      (2,121 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,994       185       12,235       2,201       33,825       25,721  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      159,436       321,167       46,325       31,572       106,942       177,554  

Net realized gain (loss)

      (81,609 )      (36,778 )      (4,227 )      (4,642 )      (9,591 )      (4,814 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      77,827       284,389       42,098       26,930       97,351       172,740  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      502,366       (290,072 )      50,615       (6,097 )      174,137       (112,176 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      582,187       (5,498 )      104,948       23,034       305,313       86,285  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      88,456       181,451       2,466       2,615       26,665       24,749  

Transfers between sub-accounts and the company

      (292,295 )      (163,008 )      740,892       (281 )      295,836       1,551,857  

Transfers on general account policy loans

      9,800       (27,722 )      15,718       393       (669 )      —    

Withdrawals

      (48,791 )      (1,892 )      (19,585 )      (67 )      (118,855 )      6,313  

Annual contract fee

      (60,340 )      (73,297 )      (20,111 )      (16,970 )      (52,096 )      (32,313 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (303,170 )      (84,468 )      719,380       (14,310 )      150,881       1,550,606  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      279,017       (89,966 )      824,328       8,724       456,194       1,636,891  

Net assets at beginning of period

      1,666,518       1,756,484       329,599       320,875       1,900,080       263,189  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 1,945,535     $ 1,666,518     $ 1,153,927     $ 329,599     $ 2,356,274     $ 1,900,080  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      62,077       64,777       17,505       18,307       95,143       14,257  

Units issued

      7,453       15,796       38,058       912       16,685       82,358  

Units redeemed

      (16,445 )      (18,496 )      (3,238 )      (1,714 )      (9,353 )      (1,472 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      53,085       62,077       52,325       17,505       102,475       95,143  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Core Bond Trust Series I     Core Bond Trust Series NAV     Emerging Markets Value
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 163,357     $ 204,655     $ 557,434     $ 438,362     $ 18,197     $ 1,593  

Expenses:

             

Mortality and expense risk and administrative charges

      (25,856 )      (32,821 )      —         —         (1,226 )      (487 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      137,501       171,834       557,434       438,362       16,971       1,106  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      99,340       5,646       323,348       11,057       —         —    

Net realized gain (loss)

      (15,944 )      2,214       (28,076 )      17,485       73       (2,563 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      83,396       7,860       295,272       28,542       73       (2,563 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      34,200       107,939       (40,622 )      54,500       78,657       13,315  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      255,097       287,633       812,084       521,404       95,701       11,858  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      107,359       103,438       317,465       417,969       1,984       2,946  

Transfers between sub-accounts and the company

      (695,830 )      (1,263,603 )      3,980,400       (1,761,340 )      1,823,261       (3,462 ) 

Transfers on general account policy loans

      3,289       30,867       (1,448 )      (95,469 )      —         —    

Withdrawals

      (1,497,371 )      (25,819 )      (358,148 )      (393,855 )      —         (1,724 ) 

Annual contract fee

      (270,430 )      (311,331 )      (365,043 )      (420,480 )      (6,088 )      (5,779 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (2,352,983 )      (1,466,448 )      3,573,226       (2,253,175 )      1,819,157       (8,019 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (2,097,886 )      (1,178,815 )      4,385,310       (1,731,771 )      1,914,858       3,839  

Net assets at beginning of period

      9,743,571       10,922,386       21,287,244       23,019,015       72,146       68,307  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 7,645,685     $ 9,743,571     $ 25,672,554     $ 21,287,244     $ 1,987,004     $ 72,146  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      484,218       556,857       1,269,890       1,410,618       5,694       6,322  

Units issued

      26,911       244,343       344,222       1,027,824       108,708       443  

Units redeemed

      (142,262 )      (316,982 )      (134,012 )      (1,168,552 )      (364 )      (1,071 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      368,867       484,218       1,480,100       1,269,890       114,038       5,694  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Emerging Markets Value
Trust Series NAV		     Equity Income Trust Series I     Equity Income Trust
Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 52,002     $ 25,798     $ 184,168     $ 181,743     $ 1,035,076     $ 784,342  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (33,914 )      (35,098 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      52,002       25,798       150,254       146,645       1,035,076       784,342  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         603,704       793,978       3,350,547       3,249,076  

Net realized gain (loss)

      3,585       (19,266 )      (125,791 )      (254,692 )      (1,200,133 )      (1,930,474 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      3,585       (19,266 )      477,913       539,286       2,150,414       1,318,602  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      504,490       163,467       601,378       752,019       3,263,383       3,996,060  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      560,077       169,999       1,229,545       1,437,950       6,448,873       6,099,004  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      223,186       157,345       161,881       118,789       196,030       254,327  

Transfers between sub-accounts and the company

      2,070,330       250,400       (543,783 )      (1,511,719 )      5,627,512       (3,415,650 ) 

Transfers on general account policy loans

      3,911       5,878       (1,863 )      1,440       54,183       (116,886 ) 

Withdrawals

      (45,579 )      (7,520 )      (454,414 )      (89,987 )      (2,622,568 )      (470,094 ) 

Annual contract fee

      (93,967 )      (40,869 )      (521,645 )      (500,870 )      (399,988 )      (375,158 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      2,157,881       365,234       (1,359,824 )      (1,982,347 )      2,855,169       (4,123,461 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      2,717,958       535,233       (130,279 )      (544,397 )      9,304,042       1,975,543  

Net assets at beginning of period

      1,368,357       833,124       8,762,715       9,307,112       37,228,714       35,253,171  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 4,086,315     $ 1,368,357     $ 8,632,436     $ 8,762,715     $ 46,532,756     $ 37,228,714  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      126,400       90,875       190,429       239,984       729,979       823,841  

Units issued

      319,459       44,568       9,954       15,150       174,692       118,264  

Units redeemed

      (161,357 )      (9,043 )      (38,428 )      (64,705 )      (119,984 )      (212,126 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      284,502       126,400       161,955       190,429       784,687       729,979  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Financial Industries
Trust Series I		     Financial Industries
Trust Series NAV		     Fundamental All Cap Core
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 9,337     $ 9,544     $ 4,442     $ 4,170     $ 2,817     $ 1,847  

Expenses:

             

Mortality and expense risk and administrative charges

      (4,970 )      (3,691 )      —         —         (1,354 )      (1,276 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      4,367       5,853       4,442       4,170       1,463       571  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      4       —         —         —         8,945       47,596  

Net realized gain (loss)

      89,620       (69,237 )      5,685       (104,991 )      18,020       847  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      89,624       (69,237 )      5,685       (104,991 )      26,965       48,443  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      23,485       216,829       38,987       144,678       61,046       (34,041 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      117,476       153,445       49,114       43,857       89,474       14,973  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      24,779       13,202       47,809       56,653       516       316  

Transfers between sub-accounts and the company

      (43,329 )      105,565       6,459       (18,570 )      67,957       (112,747 ) 

Transfers on general account policy loans

      153       102       (229 )      (40,308 )      —         —    

Withdrawals

      (87,011 )      (8,442 )      (8,002 )      (100,644 )      (53,827 )      (110 ) 

Annual contract fee

      (79,442 )      (57,434 )      (15,653 )      (19,865 )      (13,141 )      (12,556 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (184,850 )      52,993       30,384       (122,734 )      1,505       (125,097 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (67,374 )      206,438       79,498       (78,877 )      90,979       (110,124 ) 

Net assets at beginning of period

      888,053       681,615       299,984       378,861       327,427       437,551  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 820,679     $ 888,053     $ 379,482     $ 299,984     $ 418,406     $ 327,427  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      35,247       32,096       9,055       13,663       8,365       12,067  

Units issued

      18,241       32,793       1,694       2,987       2,471       39  

Units redeemed

      (25,045 )      (29,642 )      (813 )      (7,595 )      (2,435 )      (3,741 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      28,443       35,247       9,936       9,055       8,401       8,365  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Fundamental All Cap Core
Trust Series NAV		     Fundamental Large Cap Value
Trust Series I		     Fundamental Large Cap Value
Trust Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 19,487     $ 8,707     $ 58,352     $ 96,426     $ 124,902     $ 142,036  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (17,032 )      (18,723 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      19,487       8,707       41,320       77,703       124,902       142,036  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      58,404       175,664       (1 )      (4 )      —         —    

Net realized gain (loss)

      53,591       61,122       259,766       (254,102 )      73,115       30,285  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      111,995       236,786       259,765       (254,106 )      73,115       30,285  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      385,370       (151,883 )      298,161       392,471       982,327       539,444  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      516,852       93,610       599,246       216,068       1,180,344       711,765  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      219,454       221,352       139,573       108,409       328,332       448,183  

Transfers between sub-accounts and the company

      678,855       18,897       (871,268 )      (937,116 )      (56,359 )      2,135,807  

Transfers on general account policy loans

      (27 )      (27 )      15,545       4,824       (5,645 )      (6,191 ) 

Withdrawals

      (48,425 )      (158,200 )      (605,147 )      (200,237 )      (60,122 )      (37,995 ) 

Annual contract fee

      (51,984 )      (39,113 )      (277,075 )      (274,364 )      (112,708 )      (113,730 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      797,873       42,909       (1,598,372 )      (1,298,484 )      93,498       2,426,074  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      1,314,725       136,519       (999,126 )      (1,082,416 )      1,273,842       3,137,839  

Net assets at beginning of period

      1,445,877       1,309,358       4,698,243       5,780,659       6,911,284       3,773,445  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,760,602     $ 1,445,877     $ 3,699,117     $ 4,698,243     $ 8,185,126     $ 6,911,284  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      59,166       58,079       159,972       216,982       317,450       191,036  

Units issued

      35,551       13,314       4,891       81,817       36,767       183,769  

Units redeemed

      (6,302 )      (12,227 )      (56,428 )      (138,827 )      (34,358 )      (57,355 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      88,415       59,166       108,435       159,972       319,859       317,450  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Global Bond Trust Series I     Global Bond Trust Series NAV     Global Trust Series I  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 23,748     $ —       $ 169,097     $ —       $ 43,961     $ 90,712  

Expenses:

             

Mortality and expense risk and administrative charges

      (4,131 )      (4,613 )      —         —         (11,436 )      (10,100 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      19,617       (4,613 )      169,097       —         32,525       80,612  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      (1 )      —         —         —         (2 )      1  

Net realized gain (loss)

      10,284       37,635       2,677       (63,679 )      36,001       (42,143 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      10,283       37,635       2,677       (63,679 )      35,999       (42,142 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      50,214       13,811       377,179       239,719       304,347       134,027  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      80,114       46,833       548,953       176,040       372,871       172,497  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      38,367       36,607       207,979       110,206       31,766       25,514  

Transfers between sub-accounts and the company

      70,021       (103,035 )      2,270,923       576,436       357,981       (134,989 ) 

Transfers on general account policy loans

      103       12,959       6,906       (59,697 )      80       208  

Withdrawals

      (126,846 )      (36,723 )      (415,736 )      (121,781 )      (200,073 )      (30,921 ) 

Annual contract fee

      (61,353 )      (64,198 )      (121,402 )      (112,875 )      (112,533 )      (98,377 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (79,708 )      (154,390 )      1,948,670       392,289       77,221       (238,565 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      406       (107,557 )      2,497,623       568,329       450,092       (66,068 ) 

Net assets at beginning of period

      1,015,038       1,122,595       6,545,474       5,977,145       2,158,157       2,224,225  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 1,015,444     $ 1,015,038     $ 9,043,097     $ 6,545,474     $ 2,608,249     $ 2,158,157  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      36,364       41,347       213,478       201,082       74,558       83,239  

Units issued

      8,239       17,498       125,091       60,846       24,188       31,702  

Units redeemed

      (10,993 )      (22,481 )      (67,270 )      (48,450 )      (22,335 )      (40,383 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      33,610       36,364       271,299       213,478       76,411       74,558  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Global Trust Series NAV     Health Sciences Trust Series I     Health Sciences Trust Series NAV  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 47,285     $ 87,844     $ —       $ 3,401     $ —       $ 5,547  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (18,194 )      (22,214 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      47,285       87,844       (18,194 )      (18,813 )      —         5,547  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         497,113       1,223,324       616,620       1,248,451  

Net realized gain (loss)

      6,699       (77,839 )      (135,232 )      (924,663 )      (831,773 )      (278,724 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      6,699       (77,839 )      361,881       298,661       (215,153 )      969,727  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      346,361       167,104       792,136       (1,138,107 )      1,613,338       (1,508,746 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      400,345       177,109       1,135,823       (858,259 )      1,398,185       (533,472 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      113,847       126,776       13,095       10,703       248,594       268,799  

Transfers between sub-accounts and the company

      162,209       114,657       59,348       (2,684,286 )      98,237       675,883  

Transfers on general account policy loans

      4,201       1,946       80       199       4,250       (19,489 ) 

Withdrawals

      (62,880 )      (309,856 )      (321,211 )      (24,456 )      (80,814 )      (127,855 ) 

Annual contract fee

      (71,396 )      (66,817 )      (103,668 )      (138,394 )      (164,360 )      (133,898 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      145,981       (133,294 )      (352,356 )      (2,836,234 )      105,907       663,440  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      546,326       43,815       783,467       (3,694,493 )      1,504,092       129,968  

Net assets at beginning of period

      2,032,419       1,988,604       4,374,645       8,069,138       5,051,282       4,921,314  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,578,745     $ 2,032,419     $ 5,158,112     $ 4,374,645     $ 6,555,374     $ 5,051,282  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      114,849       123,010       66,543       110,117       93,056       81,107  

Units issued

      15,706       24,782       6,994       23,625       60,143       37,755  

Units redeemed

      (7,997 )      (32,943 )      (11,666 )      (67,199 )      (58,561 )      (25,806 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      122,558       114,849       61,871       66,543       94,638       93,056  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     High Yield Trust Series I     High Yield Trust Series NAV     International Equity Index Series I  
     2017     2016     2017     2016     2017 (b)     2016  

Income:

             

Dividend distributions received

    $ 194,606     $ 205,714     $ 112,212     $ 190,514     $ 183,067     $ 148,846  

Expenses:

             

Mortality and expense risk and administrative charges

      (13,851 )      (11,265 )      —         —         (29,289 )      (24,236 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      180,755       194,449       112,212       190,514       153,778       124,610  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      (2 )      1       —         —         2       —    

Net realized gain (loss)

      (60,400 )      (218,648 )      (18,799 )      (168,868 )      42,586       (103,051 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (60,402 )      (218,647 )      (18,799 )      (168,868 )      42,588       (103,051 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      113,293       454,582       97,293       441,350       1,467,937       395,154  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      233,646       430,384       190,706       462,996       1,664,303       416,713  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      66,385       45,264       116,875       92,774       43,086       43,990  

Transfers between sub-accounts and the company

      178,560       502,478       (1,030,285 )      69,310       2,194,518       745,932  

Transfers on general account policy loans

      31       1,173       2,342       (17,705 )      1,538       1,530  

Withdrawals

      (851,708 )      (7,277 )      (434,663 )      (28,878 )      (83,144 )      (25,982 ) 

Annual contract fee

      (209,412 )      (168,911 )      (24,765 )      (40,095 )      (148,515 )      (137,952 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (816,144 )      372,727       (1,370,496 )      75,406       2,007,483       627,518  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (582,498 )      803,111       (1,179,790 )      538,402       3,671,786       1,044,231  

Net assets at beginning of period

      3,561,435       2,758,324       2,801,952       2,263,550       5,569,486       4,525,255  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,978,937     $ 3,561,435     $ 1,622,162     $ 2,801,952     $ 9,241,272     $ 5,569,486  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      113,511       102,486       124,161       116,916       497,581       419,582  

Units issued

      35,818       48,646       42,537       53,900       191,142       290,485  

Units redeemed

      (59,992 )      (37,621 )      (99,803 )      (46,655 )      (38,129 )      (212,486 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      89,337       113,511       66,895       124,161       650,594       497,581  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(b)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series I.

 

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,

 

     International Equity Index
Series NAV		     International Growth Stock
Trust Series I		     International Growth Stock
Trust Series NAV		  
     2017 (c)     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 340,345     $ 296,616     $ 39,666     $ 22,651     $ 146,915     $ 160,030  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (6,961 )      (4,041 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      340,345       296,616       32,705       18,610       146,915       160,030  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         —         —         —         —    

Net realized gain (loss)

      22,511       (409,919 )      4,369       (48,532 )      134,969       110,154  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      22,511       (409,919 )      4,369       (48,532 )      134,969       110,154  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      3,013,784       467,595       405,643       24,614       1,563,629       (380,330 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      3,376,640       354,292       442,717       (5,308 )      1,845,513       (110,146 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      256,958       552,685       6,696       4,896       77,706       78,367  

Transfers between sub-accounts and the company

      2,816,641       (1,065,099 )      1,122,150       (64,473 )      2,160,156       612,763  

Transfers on general account policy loans

      5,488       (86,888 )      —         —         (736 )      (33,582 ) 

Withdrawals

      (77,135 )      (30,615 )      (35 )      (1,732 )      (1,921,538 )      (30,036 ) 

Annual contract fee

      (300,680 )      (298,145 )      (35,614 )      (27,922 )      (81,653 )      (81,919 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      2,701,272       (928,062 )      1,093,197       (89,231 )      233,935       545,593  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      6,077,912       (573,770 )      1,535,914       (94,539 )      2,079,448       435,447  

Net assets at beginning of period

      11,245,061       11,818,831       1,484,691       1,579,230       8,892,305       8,456,858  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 17,322,973     $ 11,245,061     $ 3,020,605     $ 1,484,691     $ 10,971,753     $ 8,892,305  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      251,701       276,267       125,595       131,425       740,462       695,770  

Units issued

      100,108       77,731       89,473       53,481       359,656       238,105  

Units redeemed

      (47,565 )      (102,297 )      (5,139 )      (59,311 )      (350,664 )      (193,413 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      304,244       251,701       209,929       125,595       749,454       740,462  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(c)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series NAV.

 

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,

 

     International Small Company
Trust Series I		     International Small Company
Trust Series NAV		     International Value
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 7,998     $ 10,579     $ 21,854     $ 17,838     $ 109,973     $ 114,227  

Expenses:

             

Mortality and expense risk and administrative charges

      (3,411 )      (3,324 )      —         —         (21,944 )      (13,704 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      4,587       7,255       21,854       17,838       88,029       100,523  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         1       —         —         2       —    

Net realized gain (loss)

      15,196       2,753       41,739       13,317       35,992       (20,935 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      15,196       2,754       41,739       13,317       35,994       (20,935 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      121,736       13,726       258,155       4,797       790,685       378,738  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      141,519       23,735       321,748       35,952       914,708       458,326  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      12,991       8,135       24,089       23,304       100,353       66,426  

Transfers between sub-accounts and the company

      302,044       (78,536 )      477,222       30,327       92,280       1,751,577  

Transfers on general account policy loans

      (427 )      6,238       1,196       1,210       (519 )      7,012  

Withdrawals

      (69,935 )      (18,764 )      (16,384 )      (155,452 )      (317,263 )      (98,260 ) 

Annual contract fee

      (29,255 )      (31,221 )      (63,933 )      (36,016 )      (232,723 )      (143,085 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      215,418       (114,148 )      422,190       (136,627 )      (357,872 )      1,583,670  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      356,937       (90,413 )      743,938       (100,675 )      556,836       2,041,996  

Net assets at beginning of period

      496,708       587,121       903,636       1,004,311       5,665,207       3,623,211  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 853,645     $ 496,708     $ 1,647,574     $ 903,636     $ 6,222,043     $ 5,665,207  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      32,688       40,372       56,882       66,351       245,286       174,351  

Units issued

      18,340       14,071       30,385       10,350       25,472       124,542  

Units redeemed

      (7,268 )      (21,755 )      (7,240 )      (19,819 )      (40,242 )      (53,607 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      43,760       32,688       80,027       56,882       230,516       245,286  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     International Value Trust
Series NAV		     Investment Quality Bond
Trust Series I		     Investment Quality Bond
Trust Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 130,309     $ 109,057     $ 120,623     $ 104,646     $ 20,927     $ 16,509  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (20,485 )      (22,469 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      130,309       109,057       100,138       82,177       20,927       16,509  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         19,592       28,490       3,162       4,336  

Net realized gain (loss)

      (39,421 )      (18,003 )      5,001       (28,665 )      (7,822 )      (19,225 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (39,421 )      (18,003 )      24,593       (175 )      (4,660 )      (14,889 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      912,121       464,731       62,276       95,482       18,164       21,411  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,003,009       555,785       187,007       177,484       34,431       23,031  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      74,881       77,417       73,820       125,215       128,849       97,222  

Transfers between sub-accounts and the company

      875,007       1,058,172       64,484       (77,776 )      40,336       166,875  

Transfers on general account policy loans

      7,947       (7,386 )      (22,463 )      13,556       7,342       (15,822 ) 

Withdrawals

      (144,166 )      (166,194 )      (163,235 )      (130,144 )      (94,337 )      (209,812 ) 

Annual contract fee

      (119,676 )      (105,580 )      (197,853 )      (216,851 )      (23,004 )      (23,385 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      693,993       856,429       (245,247 )      (286,000 )      59,186       15,078  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      1,697,002       1,412,214       (58,240 )      (108,516 )      93,617       38,109  

Net assets at beginning of period

      5,517,579       4,105,365       4,666,168       4,774,684       728,828       690,719  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 7,214,581     $ 5,517,579     $ 4,607,928     $ 4,666,168     $ 822,445     $ 728,828  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      345,121       288,124       146,714       156,440       44,046       43,523  

Units issued

      100,486       140,918       19,501       16,721       13,288       17,195  

Units redeemed

      (60,741 )      (83,921 )      (27,439 )      (26,447 )      (9,850 )      (16,672 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      384,866       345,121       138,776       146,714       47,484       44,046  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Lifestyle Growth Portfolio
Series I		     Lifestyle Growth Portfolio
Series NAV		     M Capital Appreciation  
     2017 (d)     2016     2017 (e)     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 5,838     $ 176     $ 49,052     $ 2,451     $ —       $ —    

Expenses:

             

Mortality and expense risk and administrative charges

      (1,273 )      (12 )      —         —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      4,565       164       49,052       2,451       —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      2,001       —         1,723       —         31,100       20,199  

Net realized gain (loss)

      2,051       (6 )      1,935       (5 )      45,003       3,985  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      4,052       (6 )      3,658       (5 )      76,103       24,184  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      16,121       12       32,362       3       (25,888 )      78,303  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      24,738       170       85,072       2,449       50,215       102,487  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      4,754       836       29,223       3,368       —         —    

Transfers between sub-accounts and the company

      310,431       9,404       2,430,539       124,120       (287,004 )      80,000  

Transfers on general account policy loans

      —         —         83       —         —         —    

Withdrawals

      (19,130 )      —         (16 )      3       9,872       30,592  

Annual contract fee

      (6,302 )      (1,042 )      (20,437 )      (1,696 )      (8,406 )      (12,551 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      289,753       9,198       2,439,392       125,795       (285,538 )      98,041  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      314,491       9,368       2,524,464       128,244       (235,323 )      200,528  

Net assets at beginning of period

      9,368       —         128,244       —         529,159       328,631  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 323,859     $ 9,368     $ 2,652,708     $ 128,244     $ 293,836     $ 529,159  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      920       —         11,069       —         5,500       4,135  

Units issued

      28,832       1,024       188,696       11,263       4,102       1,961  

Units redeemed

      (2,197 )      (104 )      (2,717 )      (194 )      (7,036 )      (596 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      27,555       920       197,048       11,069       2,566       5,500  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(d)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series I.

(e)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series NAV.

 

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,

 

     M Large
Cap Growth		     Managed Volatility
Aggressive Portfolio
Series I		     Managed Volatility
Aggressive Portfolio
Series NAV		  
     2017      2016     2017 (f)     2016     2017 (g)     2016  

Income:

              

Dividend distributions received

    $ —        $ —       $ 19,637     $ 17,420     $ 76,933     $ 83,430  

Expenses:

              

Mortality and expense risk and administrative charges

      —          —         (6,480 )      (5,972 )      —         —    
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      —          —         13,157       11,448       76,933       83,430  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

              

Capital gain distributions received

      —          —         —         10,507       —         58,069  

Net realized gain (loss)

      —          —         2,408       (31,350 )      36,706       (454,859 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      —          —         2,408       (20,843 )      36,706       (396,790 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      2        (1 )      211,474       28,016       816,070       394,498  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      2        (1 )      227,039       18,621       929,709       81,138  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

              

Purchase payments

      —          —         21,229       27,689       470,320       1,237,350  

Transfers between sub-accounts and the company

      —          —         (20,445 )      8,272       (553,045 )      (2,179,577 ) 

Transfers on general account policy loans

      —          —         —         (2,526 )      (212,945 )      (185,557 ) 

Withdrawals

      —          —         (36,702 )      (1,406 )      (603,414 )      (305,839 ) 

Annual contract fee

      —          —         (46,472 )      (45,166 )      (220,573 )      (315,691 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      —          —         (82,390 )      (13,137 )      (1,119,657 )      (1,749,314 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      2        (1 )      144,649       5,484       (189,948 )      (1,668,176 ) 

Net assets at beginning of period

      8        —         1,055,503       1,050,019       4,766,142       6,434,318  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 10      $ 8     $ 1,200,152     $ 1,055,503     $ 4,576,194     $ 4,766,142  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017      2016     2017     2016     2017     2016  

Units, beginning of period

      —          —         39,879       39,961       265,838       365,714  

Units issued

      —          —         5,720       8,845       51,569       105,117  

Units redeemed

      —          —         (8,369 )      (8,927 )      (109,692 )      (204,993 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      —          —         37,230       39,879       207,715       265,838  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(f)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series I.

(g)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series NAV.

 

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,

 

     Managed Volatility Balanced
Portfolio Series I		     Managed Volatility Balanced
Portfolio Series NAV		     Managed Volatility
Conservative Portfolio
Series I		  
     2017 (h)     2016     2017 (i)     2016     2017 (j)     2016  

Income:

             

Dividend distributions received

    $ 84,015     $ 88,788     $ 359,757     $ 365,233     $ 36,401     $ 44,232  

Expenses:

             

Mortality and expense risk and administrative charges

      (22,736 )      (25,114 )      —         —         (7,285 )      (8,657 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      61,279       63,674       359,757       365,233       29,116       35,575  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      151,730       192,176       593,766       689,845       25,802       44,395  

Net realized gain (loss)

      (61,329 )      (101,904 )      (223,488 )      (78,415 )      (44,640 )      (90,972 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      90,401       90,272       370,278       611,430       (18,838 )      (46,577 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      377,708       24,866       1,472,439       (164,176 )      96,519       74,622  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      529,388       178,812       2,202,474       812,487       106,797       63,620  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      119,614       127,160       769,080       1,924,679       10,528       17,164  

Transfers between sub-accounts and the company

      (372,089 )      (183,396 )      (1,814,601 )      424,372       (363,897 )      (3,184 ) 

Transfers on general account policy loans

      (10,307 )      178,947       (46,770 )      (73,585 )      (197 )      (182 ) 

Withdrawals

      (221,112 )      (186,636 )      (1,086,037 )      (431,480 )      (49,198 )      516  

Annual contract fee

      (349,523 )      (361,285 )      (604,002 )      (647,431 )      (69,214 )      (90,426 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (833,417 )      (425,210 )      (2,782,330 )      1,196,555       (471,978 )      (76,112 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (304,029 )      (246,398 )      (579,856 )      2,009,042       (365,181 )      (12,492 ) 

Net assets at beginning of period

      4,244,909       4,491,307       17,125,624       15,116,582       1,829,151       1,841,643  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 3,940,880     $ 4,244,909     $ 16,545,768     $ 17,125,624     $ 1,463,970     $ 1,829,151  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      132,703       146,545       949,957       879,721       55,799       58,246  

Units issued

      11,837       27,871       59,991       156,248       7,549       21,971  

Units redeemed

      (35,644 )      (41,713 )      (205,966 )      (86,012 )      (21,417 )      (24,418 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      108,896       132,703       803,982       949,957       41,931       55,799  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(h)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series I.

(i)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series NAV.

(j)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series I.

 

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,

 

     Managed Volatility
Conservative Portfolio
Series NAV		     Managed Volatility Growth
Portfolio Series I		     Managed Volatility Growth
Portfolio Series NAV		  
     2017 (k)     2016     2017 (l)     2016     2017 (m)     2016  

Income:

             

Dividend distributions received

    $ 121,318     $ 115,496     $ 60,104     $ 55,030     $ 455,615     $ 483,106  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (16,554 )      (18,714 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      121,318       115,496       43,550       36,316       455,615       483,106  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      82,018       105,481       118,236       99,347       893,206       712,095  

Net realized gain (loss)

      (174,721 )      (238,491 )      64,520       (14,942 )      433,810       373,279  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (92,703 )      (133,010 )      182,756       84,405       1,327,016       1,085,374  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      350,382       194,933       291,743       (32,838 )      2,373,560       (724,382 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      378,997       177,419       518,049       87,883       4,156,191       844,098  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,111,725       1,637,359       84,831       75,662       1,940,969       3,143,697  

Transfers between sub-accounts and the company

      (1,012,830 )      (889,732 )      3,039       (503,375 )      (1,992,114 )      (1,527,843 ) 

Transfers on general account policy loans

      (21,645 )      (11,004 )      (35,498 )      (43,972 )      (268,816 )      (232,336 ) 

Withdrawals

      (272,400 )      (405,307 )      (152,335 )      (43,775 )      (4,189,421 )      (1,572,413 ) 

Annual contract fee

      (222,390 )      (216,447 )      (220,250 )      (225,499 )      (757,754 )      (929,380 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (417,540 )      114,869       (320,213 )      (740,959 )      (5,267,136 )      (1,118,275 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (38,543 )      292,288       197,836       (653,076 )      (1,110,945 )      (274,177 ) 

Net assets at beginning of period

      4,838,594       4,546,306       2,959,149       3,612,225       24,499,093       24,773,270  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 4,800,051     $ 4,838,594     $ 3,156,985     $ 2,959,149     $ 23,388,148     $ 24,499,093  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      281,681       276,655       100,401       126,742       1,377,723       1,440,273  

Units issued

      104,343       109,875       13,266       13,706       113,865       193,192  

Units redeemed

      (127,157 )      (104,849 )      (23,000 )      (40,047 )      (383,631 )      (255,742 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      258,867       281,681       90,667       100,401       1,107,957       1,377,723  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(k)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series NAV.

(l)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series I.

(m)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series NAV.

 

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,

 

     Managed Volatility
Moderate Portfolio Series I		     Managed Volatility Moderate
Portfolio Series NAV		     Mid Cap Index Trust
Series I		  
     2017 (n)     2016     2017 (o)     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 46,251     $ 39,194     $ 160,093     $ 211,219     $ 39,990     $ 78,411  

Expenses:

             

Mortality and expense risk and administrative charges

      (9,281 )      (8,752 )      —         —         (32,279 )      (28,472 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      36,970       30,442       160,093       211,219       7,711       49,939  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      61,552       62,593       215,870       345,044       442,191       606,177  

Net realized gain (loss)

      (43,723 )      (73,484 )      (177,785 )      (108,069 )      18,029       (91,981 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      17,829       (10,891 )      38,085       236,975       460,220       514,196  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      147,960       56,895       786,747       47,499       642,486       638,914  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      202,759       76,446       984,925       495,693       1,110,417       1,203,049  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      47,048       35,892       336,733       539,354       110,993       38,545  

Transfers between sub-accounts and the company

      203,308       32,199       (3,487,568 )      43,261       1,830,494       (327,922 ) 

Transfers on general account policy loans

      (289 )      (301 )      768       (22,267 )      13       (82 ) 

Withdrawals

      (87,475 )      370       (321,830 )      (211,779 )      (144,406 )      (3,422 ) 

Annual contract fee

      (143,045 )      (127,309 )      (187,768 )      (266,336 )      (217,632 )      (155,715 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      19,547       (59,149 )      (3,659,665 )      82,233       1,579,462       (448,596 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      222,306       17,297       (2,674,740 )      577,926       2,689,879       754,453  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at beginning of period

      1,825,116       1,807,819       9,624,157       9,046,231       7,075,077       6,320,624  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,047,422     $ 1,825,116     $ 6,949,417     $ 9,624,157     $ 9,764,956     $ 7,075,077  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      54,394       56,530       533,840       528,138       154,279       165,157  

Units issued

      11,382       10,359       18,704       46,056       49,248       26,344  

Units redeemed

      (10,870 )      (12,495 )      (208,456 )      (40,354 )      (17,444 )      (37,222 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      54,906       54,394       344,088       533,840       186,083       154,279  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(n)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series I.

(o)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series NAV.

 

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,

 

     Mid Cap Index Trust
Series NAV		     Mid Cap Stock Trust
Series I		     Mid Cap Stock Trust
Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 75,941     $ 131,078     $ —       $ —       $ —       $ —    

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (12,555 )      (11,069 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      75,941       131,078       (12,555 )      (11,069 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      801,568       1,192,922       68,969       232,041       116,269       494,580  

Net realized gain (loss)

      405,409       (2,677,740 )      (2,669 )      (359,046 )      393,367       (1,052,511 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      1,206,977       (1,484,818 )      66,300       (127,005 )      509,636       (557,931 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      658,498       3,443,905       840,403       97,793       958,926       683,735  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,941,416       2,090,165       894,148       (40,281 )      1,468,562       125,804  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      331,750       492,799       29,286       27,181       196,406       179,214  

Transfers between sub-accounts and the company

      2,937,674       (14,439,200 )      (424,258 )      59,277       (799,711 )      (334,302 ) 

Transfers on general account policy loans

      (13,461 )      (46,024 )      249       1,337       8,358       (79,701 ) 

Withdrawals

      (445,433 )      (23,145 )      (171,622 )      (29,889 )      (712,125 )      (263,111 ) 

Annual contract fee

      (350,967 )      (418,854 )      (90,775 )      (92,137 )      (97,924 )      (120,258 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      2,459,563       (14,434,424 )      (657,120 )      (34,231 )      (1,404,996 )      (618,158 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      4,400,979       (12,344,259 )      237,028       (74,512 )      63,566       (492,354 ) 

Net assets at beginning of period

      10,816,057       23,160,316       3,425,320       3,499,832       5,991,961       6,484,315  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 15,217,036     $ 10,816,057     $ 3,662,348     $ 3,425,320     $ 6,055,527     $ 5,991,961  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      334,660       861,157       104,260       107,107       78,421       85,358  

Units issued

      209,051       124,113       7,475       53,154       70,307       28,032  

Units redeemed

      (137,344 )      (650,610 )      (24,466 )      (56,001 )      (87,130 )      (34,969 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      406,367       334,660       87,269       104,260       61,598       78,421  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Mid Value Trust Series I     Mid Value Trust Series NAV     Money Market Trust Series I  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 34,091     $ 50,743     $ 115,103     $ 115,551     $ 120,166     $ 19,803  

Expenses:

             

Mortality and expense risk and administrative charges

      (11,972 )      (13,968 )      —         —         (87,154 )      (107,895 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      22,119       36,775       115,103       115,551       33,012       (88,092 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      321,029       536,575       1,053,741       1,146,240       218       (6 ) 

Net realized gain (loss)

      (172,388 )      (523,609 )      (922,102 )      (430,692 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      148,641       12,966       131,639       715,548       218       (6 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      231,068       850,640       983,867       1,180,764       1       —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      401,828       900,381       1,230,609       2,011,863       33,231       (88,098 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      10,887       7,725       189,498       145,428       155,229       667,429  

Transfers between sub-accounts and the company

      (742,686 )      106,155       (67,165 )      1,045,053       1,522,747       1,527,574  

Transfers on general account policy loans

      63       (2,648 )      6,547       (42,269 )      3,073       7,296  

Withdrawals

      (822,650 )      (31,421 )      (1,053,737 )      (327,854 )      (9,047,955 )      (264,191 ) 

Annual contract fee

      (102,752 )      (118,258 )      (148,786 )      (131,150 )      (874,354 )      (965,634 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (1,657,138 )      (38,447 )      (1,073,643 )      689,208       (8,241,260 )      972,474  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (1,255,310 )      861,934       156,966       2,701,071       (8,208,029 )      884,376  

Net assets at beginning of period

      4,842,431       3,980,497       11,065,505       8,364,434       27,416,339       26,531,963  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 3,587,121     $ 4,842,431     $ 11,222,471     $ 11,065,505     $ 19,208,310     $ 27,416,339  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      159,334       162,397       231,302       216,961       1,316,851       1,286,207  

Units issued

      9,806       62,376       66,040       53,117       373,918       1,199,984  

Units redeemed

      (62,822 )      (65,439 )      (86,873 )      (38,776 )      (759,970 )      (1,169,340 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      106,318       159,334       210,469       231,302       930,799       1,316,851  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Money-Market Trust Series NAV     PIMCO All Asset     Real Estate Securities Trust Series I  
     2017     2016 (v)     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 243,058     $ 35,343     $ 180,156     $ 80,627     $ 45,421     $ 339,090  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (4,318 )      (3,997 )      (51,203 )      (57,211 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      243,058       35,343       175,838       76,630       (5,782 )      281,879  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      295       —         —         —         1       1  

Net realized gain (loss)

      —         —         (21,424 )      (111,949 )      458,033       487,441  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      295       —         (21,424 )      (111,949 )      458,034       487,442  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      —         (2 )      339,568       448,287       45,877       (158,998 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      243,353       35,341       493,982       412,968       498,129       610,323  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      6,074,083       4,877,106       149,864       138,967       143,778       142,812  

Transfers between sub-accounts and the company

      15,888,771       34,184,734       678,667       303,566       (941,221 )      (272,894 ) 

Transfers on general account policy loans

      (108,055 )      (115,896 )      (43 )      2,913       14,363       (47,453 ) 

Withdrawals

      (4,218,543 )      (2,017,655 )      (305,595 )      (216,637 )      (615,916 )      (358,449 ) 

Annual contract fee

      (1,015,843 )      (645,943 )      (138,531 )      (132,448 )      (400,818 )      (452,283 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      16,620,413       36,282,346       384,362       96,361       (1,799,814 )      (988,267 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      16,863,766       36,317,687       878,344       509,329       (1,301,685 )      (377,944 ) 

Net assets at beginning of period

      36,317,687       —         3,667,652       3,158,323       9,971,302       10,349,246  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 53,181,453     $ 36,317,687     $ 4,545,996     $ 3,667,652     $ 8,669,617     $ 9,971,302  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      3,628,112       —         215,036       208,113       57,395       63,711  

Units issued

      6,177,745       4,823,314       57,183       58,050       773       7,423  

Units redeemed

      (4,525,534 )      (1,195,202 )      (36,902 )      (51,127 )      (10,805 )      (13,739 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      5,280,323       3,628,112       235,317       215,036       47,363       57,395  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(v)

Reflects the period from commencement of operations on April 29, 2016 through December 31, 2016.

 

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,

 

     Real Estate Securities
Trust Series NAV		     Science & Technology
Trust Series I		     Science & Technology
Trust Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 79,163     $ 477,164     $ 4,029     $ —       $ 4,395     $ —    

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (31,614 )      (30,708 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      79,163       477,164       (27,585 )      (30,708 )      4,395       —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         430,935       1,053,243       278,799       391,399  

Net realized gain (loss)

      761,238       590,864       184,346       (244,987 )      636,610       (58,266 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      761,238       590,864       615,281       808,256       915,409       333,133  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (96,267 )      (202,978 )      2,289,543       (217,736 )      596,538       (79,724 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      744,134       865,050       2,877,239       559,812       1,516,342       253,409  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      390,328       413,857       55,700       40,360       239,955       213,526  

Transfers between sub-accounts and the company

      (127,354 )      (349,187 )      (1,313,079 )      (1,228,069 )      723,003       800,900  

Transfers on general account policy loans

      7,615       7,163       2,050       91,414       245       (3,060 ) 

Withdrawals

      (493,434 )      (80,267 )      (650,687 )      (116,375 )      (129,876 )      (13,315 ) 

Annual contract fee

      (200,042 )      (217,209 )      (256,903 )      (245,672 )      (140,426 )      (95,005 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (422,887 )      (225,643 )      (2,162,919 )      (1,458,342 )      692,901       903,046  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      321,247       639,407       714,320       (898,530 )      2,209,243       1,156,455  

Net assets at beginning of period

      13,370,329       12,730,922       7,947,859       8,846,389       3,495,564       2,339,109  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 13,691,576     $ 13,370,329     $ 8,662,179     $ 7,947,859     $ 5,704,807     $ 3,495,564  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      87,538       89,152       225,197       271,129       112,415       81,554  

Units issued

      32,511       17,710       19,880       47,230       137,973       47,655  

Units redeemed

      (35,689 )      (19,324 )      (68,283 )      (93,162 )      (120,469 )      (16,794 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      84,360       87,538       176,794       225,197       129,919       112,415  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Short Term Government Income
Trust Series I		     Short Term Government Income
Trust Series NAV		     Small Cap Growth
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 19,180     $ 28,052     $ 29,960     $ 34,542     $ —       $ —    

Expenses:

             

Mortality and expense risk and administrative charges

      (7,141 )      (8,203 )      —         —         (7,171 )      (5,720 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      12,039       19,849       29,960       34,542       (7,171 )      (5,720 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         —         —         —         106,755  

Net realized gain (loss)

      (5,024 )      (21,351 )      (23,736 )      (4,626 )      (137,101 )      (43,980 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (5,024 )      (21,351 )      (23,736 )      (4,626 )      (137,101 )      62,775  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (6,086 )      (2,222 )      5,427       (22,389 )      472,028       (28,915 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      929       (3,724 )      11,651       7,527       327,756       28,140  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      21,059       13,029       22,130       33,305       3,544       1,959  

Transfers between sub-accounts and the company

      72,040       (18,694 )      71,738       675,006       (346,240 )      445,219  

Transfers on general account policy loans

      163       86       2,332       (5,224 )      143       83  

Withdrawals

      (475 )      (44,907 )      (1,020 )      (24,306 )      (95,619 )      (598 ) 

Annual contract fee

      (78,268 )      (71,753 )      (30,981 )      (39,276 )      (61,607 )      (48,238 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      14,519       (122,239 )      64,199       639,505       (499,779 )      398,425  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      15,448       (125,963 )      75,850       647,032       (172,023 )      426,565  

Net assets at beginning of period

      1,435,877       1,561,840       2,057,488       1,410,456       1,544,465       1,117,900  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 1,451,325     $ 1,435,877     $ 2,133,338     $ 2,057,488     $ 1,372,442     $ 1,544,465  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      138,264       150,590       190,676       131,528       62,515       46,012  

Units issued

      15,046       56,561       120,962       89,857       8,141       20,914  

Units redeemed

      (13,602 )      (68,887 )      (115,151 )      (30,709 )      (26,578 )      (4,411 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      139,708       138,264       196,487       190,676       44,078       62,515  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Small Cap Growth Trust
Series NAV		     Small Cap Index Trust
Series I		     Small Cap Index Trust
Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ —       $ —       $ 26,087     $ 60,668     $ 33,897     $ 61,677  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (23,028 )      (21,499 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      —         —         3,059       39,169       33,897       61,677  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         692,889       237,959       410,735       270,895       394,453  

Net realized gain (loss)

      (724,743 )      (957,922 )      19,130       (85,123 )      211,488       (250,907 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (724,743 )      (265,033 )      257,089       325,612       482,383       143,546  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      2,135,455       476,224       524,113       650,408       379,532       837,199  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,410,712       211,191       784,261       1,015,189       895,812       1,042,422  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      138,317       112,669       24,331       25,411       162,394       300,090  

Transfers between sub-accounts and the company

      (3,673,471 )      (491,745 )      (434,650 )      (866,877 )      138,193       (542,254 ) 

Transfers on general account policy loans

      11,886       (18,825 )      350       (597 )      (13,591 )      (15,051 ) 

Withdrawals

      (386,909 )      (23,703 )      (5,775 )      (3,592 )      (87,818 )      (54,050 ) 

Annual contract fee

      (106,789 )      (123,769 )      (92,258 )      (86,618 )      (188,096 )      (199,538 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (4,016,966 )      (545,373 )      (508,002 )      (932,273 )      11,082       (510,803 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (2,606,254 )      (334,182 )      276,259       82,916       906,894       531,619  

Net assets at beginning of period

      7,849,924       8,184,106       5,910,335       5,827,419       5,906,467       5,374,848  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 5,243,670     $ 7,849,924     $  6,186,594     $ 5,910,335     $ 6,813,361     $ 5,906,467  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      256,722       273,720       168,328       200,328       197,055       217,000  

Units issued

      98,309       50,655       9,200       26,145       118,344       47,429  

Units redeemed

      (219,681 )      (67,653 )      (22,927 )      (58,145 )      (116,747 )      (67,374 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      135,350       256,722       154,601       168,328       198,652       197,055  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Small Cap Opportunities Trust
Series I		     Small Cap Opportunities Trust
Series NAV		     Small Cap Value Trust
Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 58,421     $ 63,882     $ 1,512     $ 1,839     $ 7,780     $ 5,920  

Expenses:

             

Mortality and expense risk and administrative charges

      (85,892 )      (80,968 )      —         —         (4,096 )      (3,853 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (27,471 )      (17,086 )      1,512       1,839       3,684       2,067  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      912,342       1,290,636       21,320       33,443       67,862       102,513  

Net realized gain (loss)

      82,697       (120,976 )      4,658       (949 )      (32,746 )      (49,580 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      995,039       1,169,660       25,978       32,494       35,116       52,933  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      453,868       1,216,523       13,475       32,542       (16,383 )      109,828  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,421,436       2,369,097       40,965       66,875       22,417       164,828  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      389,940       399,130       39,999       57,499       2,473       3,467  

Transfers between sub-accounts and the company

      (139,559 )      (130,317 )      (127,897 )      21,619       (257,214 )      167,316  

Transfers on general account policy loans

      (5,261 )      (5,192 )      (33 )      (26 )      —         —    

Withdrawals

      (910,803 )      (597,523 )      (3,888 )      (4,467 )      (15,645 )      (4,398 ) 

Annual contract fee

      (858,897 )      (865,598 )      (19,091 )      (18,909 )      (33,220 )      (32,010 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (1,524,580 )      (1,199,500 )      (110,910 )      55,716       (303,606 )      134,375  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (103,144 )      1,169,597       (69,945 )      122,591       (281,189 )      299,203  

Net assets at beginning of period

      14,818,509       13,648,912       408,743       286,152       1,089,635       790,432  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $  14,715,365   $  14,818,509     $ 338,798     $ 408,743     $ 808,446     $ 1,089,635  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      359,768       393,599       18,551       15,521       37,965       33,652  

Units issued

      9,347       17,210       8,159       5,025       11,762       14,257  

Units redeemed

      (45,353 )      (51,041 )      (12,880 )      (1,995 )      (22,526 )      (9,944 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      323,762       359,768       13,830       18,551       27,201       37,965  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Small Cap Value Trust
Series NAV		     Small Company Value Trust
Series I		     Small Company Value Trust
Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 85,252     $ 66,846     $ 6,007     $ 23,413     $ 2,420     $ 4,310  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (8,866 )      (9,867 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      85,252       66,846       (2,859 )      13,546       2,420       4,310  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      674,417       1,225,445       366,011       472,203       143,025       67,615  

Net realized gain (loss)

      (98,500 )      (753,719 )      2,504       (263,358 )      11,504       (28,538 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      575,917       471,726       368,515       208,845       154,529       39,077  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (393,966 )      1,312,466       (92,179 )      609,664       (39,798 )      104,507  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      267,203       1,851,038       273,477       832,055       117,151       147,894  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      275,270       202,215       11,634       10,511       49,190       90,000  

Transfers between sub-accounts and the company

      (138,533 )      (425,968 )      (119,118 )      (307,863 )      353,852       7,868  

Transfers on general account policy loans

      989       (30,201 )      (622 )      29,177       (475 )      (9,274 ) 

Withdrawals

      (945,151 )      (275,520 )      (821,087 )      (64,074 )      (8,354 )      (19,710 ) 

Annual contract fee

      (153,420 )      (153,499 )      (72,461 )      (85,777 )      (30,453 )      (23,209 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (960,845 )      (682,973 )      (1,001,654 )      (418,026 )      363,760       45,675  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (693,642 )      1,168,065       (728,177 )      414,029       480,911       193,569  

Net assets at beginning of period

      9,049,665       7,881,600       3,467,399       3,053,370       647,689       454,120  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 8,356,023     $ 9,049,665     $ 2,739,222     $ 3,467,399     $ 1,128,600     $ 647,689  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      108,027       115,421       86,670       101,321       22,703       21,064  

Units issued

      58,984       52,891       2,521       33,392       30,153       7,957  

Units redeemed

      (70,905 )      (60,285 )      (27,393 )      (48,043 )      (17,401 )      (6,318 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      96,106       108,027       61,798       86,670       35,455       22,703  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Strategic Income Opportunities
Trust Series I		     Strategic Income Opportunities
Trust Series NAV		     Total Bond Market
Series Trust NAV		  
     2017     2016     2017     2016     2017 (p)     2016  

Income:

             

Dividend distributions received

    $ 80,272     $ 67,387     $ 155,343     $ 91,728     $ 723,630     $ 727,448  

Expenses:

             

Mortality and expense risk and administrative charges

      (9,121 )      (9,809 )      —         —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      71,151       57,578       155,343       91,728       723,630       727,448  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         —         —         —         —    

Net realized gain (loss)

      11,070       (126 )      15,852       (8,885 )      (425,824 )      (42,015 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      11,070       (126 )      15,852       (8,885 )      (425,824 )      (42,015 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      55,887       64,010       76,202       97,491       599,713       (529,466 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      138,108       121,462       247,397       180,334       897,519       155,967  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      29,264       22,191       324,297       263,752       604,808       282,672  

Transfers between sub-accounts and the company

      (164,203 )      185,564       810,266       106,914       (2,721,137 )      11,617,072  

Transfers on general account policy loans

      40       1       (780 )      (29,912 )      10,468       3,481  

Withdrawals

      (174,804 )      (16,091 )      (53,178 )      (99,353 )      (3,199,216 )      (107,386 ) 

Annual contract fee

      (100,969 )      (103,772 )      (111,475 )      (112,323 )      (400,979 )      (284,494 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (410,672 )      87,893       969,130       129,078       (5,706,056 )      11,511,345  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (272,564 )      209,355       1,216,527       309,412       (4,808,537 )      11,667,312  

Net assets at beginning of period

      2,833,598       2,624,243       3,771,709       3,462,297       27,954,898       16,287,586  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,561,034     $ 2,833,598     $ 4,988,236     $ 3,771,709     $ 23,146,361     $ 27,954,898  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      107,747       104,935       184,903       178,541       1,151,623       687,371  

Units issued

      9,813       86,756       101,450       27,570       1,336,838       620,208  

Units redeemed

      (25,223 )      (83,944 )      (54,913 )      (21,208 )      (1,565,750 )      (155,956 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      92,337       107,747       231,440       184,903       922,711       1,151,623  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(p)

Renamed on October 27, 2017. Previously known as Total Bond Market Trust B Series NAV.

 

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,

 

     Total Stock Market Index Trust
Series I		     Total Stock Market Index Trust
Series NAV		     Ultra Short Term
Bond Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 124,746     $ 99,539     $ 74,353     $ 33,485     $ 52     $ 133  

Expenses:

             

Mortality and expense risk and administrative charges

      (27,188 )      (23,458 )      —         —         (38 )      (57 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      97,558       76,081       74,353       33,485       14       76  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      189,840       116,532       108,943       35,947       —         —    

Net realized gain (loss)

      581,916       138,448       468,594       28,703       (199 )      (13 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      771,756       254,980       577,537       64,650       (199 )      (13 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      694,016       594,196       166,788       164,906       191       (74 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,563,330       925,257       818,678       263,041       6       (11 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      18,041       946       315,491       345,355       57       114  

Transfers between sub-accounts and the company

      (584,967 )      125,540       2,393,867       273,361       —         —    

Transfers on general account policy loans

      717       —         —         (27 )      —         —    

Withdrawals

      (11,737 )      665       (74,018 )      (23,442 )      (4,876 )      —    

Annual contract fee

      (112,781 )      (75,916 )      (98,002 )      (59,879 )      (543 )      (439 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (690,727 )      51,235       2,537,338       535,368       (5,362 )      (325 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      872,603       976,492       3,356,016       798,409       (5,356 )      (336 ) 

Net assets at beginning of period

      7,153,133       6,176,641       2,504,744       1,706,335       8,522       8,858  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 8,025,736     $ 7,153,133     $ 5,860,760     $ 2,504,744     $ 3,166     $ 8,522  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      282,138       274,469       28,108       21,518       877       910  

Units issued

      73,390       96,839       256,085       10,260       4       9  

Units redeemed

      (91,541 )      (89,170 )      (229,683 )      (3,670 )      (557 )      (42 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      263,987       282,138       54,510       28,108       324       877  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

52

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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,

 

     Ultra Short Term Bond Trust
Series NAV		     Utilities Trust Series I     Utilities Trust Series NAV  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 9,773     $ 10,195     $ 26,231     $ 55,517     $ 50,898     $ 76,702  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (4,957 )      (5,493 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      9,773       10,195       21,274       50,024       50,898       76,702  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         —         20,507       4       28,214  

Net realized gain (loss)

      (1,230 )      (12,501 )      (10,384 )      (222,310 )      (11,666 )      (63,684 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (1,230 )      (12,501 )      (10,384 )      (201,803 )      (11,662 )      (35,470 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (4,486 )      6,438       136,243       264,118       221,144       142,813  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      4,057       4,132       147,133       112,339       260,380       184,045  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      2,726       7,700       5,291       4,266       162,451       177,952  

Transfers between sub-accounts and the company

      83,698       (622,274 )      (23,438 )      (146,730 )      35,400       21,532  

Transfers on general account policy loans

      (893 )      —         —         —         (5,367 )      (37,919 ) 

Withdrawals

      (108,192 )      18,023       (166,476 )      (11,378 )      (28,459 )      (122,822 ) 

Annual contract fee

      (26,945 )      (24,600 )      (37,854 )      (40,997 )      (46,162 )      (54,716 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (49,606 )      (621,151 )      (222,477 )      (194,839 )      117,863       (15,973 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (45,549 )      (617,019 )      (75,344 )      (82,500 )      378,243       168,072  

Net assets at beginning of period

      635,403       1,252,422       1,117,310       1,199,810       1,712,546       1,544,474  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 589,854     $ 635,403     $ 1,041,966     $ 1,117,310     $ 2,090,789     $ 1,712,546  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      62,672       124,349       33,660       40,494       60,361       60,659  

Units issued

      10,345       130,882       5,155       16,013       8,038       9,323  

Units redeemed

      (15,194 )      (192,559 )      (11,208 )      (22,847 )      (4,218 )      (9,621 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      57,823       62,672       27,607       33,660       64,181       60,361  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

53

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

NOTES TO FINANCIAL STATEMENTS

December 31, 2017

 

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 93 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 organized originally under the laws of the State of Maine in 1955 and later in 1992, the Company changed its state of domicile to the State of Michigan. 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.

As a result of a portfolio change, the following sub-accounts of the Account were renamed as follows:

 

Previous Name

  

New Name

   

Effective

Date                 

500 Index Fund B Series NAV   500 Index Fund Series NAV   

10/27/2017

International Equity Index Trust B Series I   International Equity Index Series I   

10/27/2017

International Equity Index Trust B Series NAV   International Equity Index Series NAV   

10/27/2017

Lifestyle Aggressive MVP Series I   Managed Volatility Aggressive Portfolio Series I   

10/27/2017

Lifestyle Aggressive MVP Series NAV   Managed Volatility Aggressive Portfolio Series NAV   

10/27/2017

Lifestyle Balanced MVP Series I   Managed Volatility Balanced Portfolio Series I   

10/27/2017

Lifestyle Balanced MVP Series NAV   Managed Volatility Balanced Portfolio Series NAV   

10/27/2017

Lifestyle Conservative MVP Series I   Managed Volatility Conservative Portfolio Series I   

10/27/2017

Lifestyle Conservative MVP Series NAV   Managed Volatility Conservative Portfolio Series NAV   

10/27/2017

Lifestyle Growth MVP Series I   Managed Volatility Growth Portfolio Series I   

10/27/2017

Lifestyle Growth MVP Series NAV   Managed Volatility Growth Portfolio Series NAV   

10/27/2017

Lifestyle Growth Trust PS Series I   Lifestyle Growth Portfolio Series I   

10/27/2017

Lifestyle Growth Trust PS Series NAV   Lifestyle Growth Portfolio Series NAV   

10/27/2017

Lifestyle Moderate MVP Series I   Managed Volatility Moderate Portfolio Series I   

10/27/2017

Lifestyle Moderate MVP Series NAV   Managed Volatility Moderate Portfolio Series NAV   

10/27/2017

 

54

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

1.

Organization — (continued):

 

Previous Name

   

New Name

   

Effective

Date                 

Total Bond Market Trust B Series NAV

   

Total Bond Market Series Trust NAV

   

10/27/2017

Funds transferred in 2017 are as follows:

 

Transferred from

  

Transferred to

   

Effective

Date                 

All Cap Core Trust Series I   Total Stock Market Index Trust Series I   

04/28/2017

All Cap Core Trust Series NAV   Total Stock Market Index Trust Series NAV   

04/28/2017

American New World Trust Series I   Emerging Markets Value Trust Series I   

10/27/2017

Core Strategy Trust Series I   Lifestyle Growth Portfolio Series I   

10/27/2017

Core Strategy Trust Series NAV   Lifestyle Growth Portfolio Series NAV   

10/27/2017

Value Trust Series I   Mid Cap Index Trust Series I   

10/27/2017

Value Trust Series NAV   Mid Cap Index Trust Series NAV   

10/27/2017

 

55

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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, 2017.    

 

56

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 years 2014 and 2015 are currently under examination by the Internal Revenue Service. The years from 2015 are also open for 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, 2017, 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, 2017

 

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, 2017. 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, 2017:

 

     Level 1      Level 2      Level 3      Total  

Mutual Funds

            

Affiliated

    $ 774,791,781        —          —          774,791,781  

NonAffiliated

    $ 4,839,842        —          —          4,839,842  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 779,631,623        —          —          779,631,623  
  

 

 

     

 

 

     

 

 

     

 

 

  

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, 2017.

 

58

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 2017 were as follows:

 

     Purchases      Sales  

Sub-Account

      

500 Index Fund Series NAV

    $ 19,452,693      $ 27,272,567  

Active Bond Trust Series I

      367,214        191,600  

Active Bond Trust Series NAV

      588,650        41,916  

All Cap Core Trust Series I (g)

      6,254        485,078  

All Cap Core Trust Series NAV (h)

      86,357        1,776,964  

Alpha Opportunities Trust Series I

      7,787        3,461  

Alpha Opportunities Trust Series NAV

      442,934        662,000  

American Asset Allocation Trust Series I

      3,857,774        1,837,875  

American Global Growth Trust Series I

      7,116,637        6,974,575  

American Growth Trust Series I

      11,737,290        11,819,951  

American Growth-Income Trust Series I

      2,995,057        3,372,564  

American International Trust Series I

      5,698,680        15,454,186  

American New World Trust Series I (b)

      903,313        3,546,669  

Blue Chip Growth Trust Series I

      1,745,694        1,948,804  

Blue Chip Growth Trust Series NAV

      11,216,785        11,486,561  

Bond Trust Series I

      727,671        1,316,643  

Bond Trust Series NAV

      267,934        6,298,940  

Capital Appreciation Trust Series I

      1,152,989        1,373,972  

Capital Appreciation Trust Series NAV

      390,883        532,622  

Capital Appreciation Value Trust Series I

      848,884        70,943  

Capital Appreciation Value Trust Series NAV

      496,979        205,331  

Core Bond Trust Series I

      812,287        2,928,429  

Core Bond Trust Series NAV

      6,758,371        2,304,363  

Core Strategy Trust Series I (c)

      8,390        128,205  

Core Strategy Trust Series NAV (d)

      558,341        2,476,633  

Emerging Markets Value Trust Series I

      1,842,924        6,796  

Emerging Markets Value Trust Series NAV

      4,429,724        2,219,841  

Equity Income Trust Series I

      1,280,199        1,886,064  

Equity Income Trust Series NAV

      13,760,869        6,520,075  

Financial Industries Trust Series I

      498,992        679,472  

Financial Industries Trust Series NAV

      63,593        28,766  

Fundamental All Cap Core Trust Series I

      118,784        106,870  

Fundamental All Cap Core Trust Series NAV

      1,051,009        175,244  

Fundamental Large Cap Value Trust Series I

      207,314        1,764,369  

Fundamental Large Cap Value Trust Series NAV

      1,005,145        786,745  

Global Bond Trust Series I

      260,536        320,627  

Global Bond Trust Series NAV

      4,274,332        2,156,564  

Global Trust Series I

      814,785        705,040  

Global Trust Series NAV

      351,478        158,211  

Health Sciences Trust Series I

      1,025,506        898,943  

Health Sciences Trust Series NAV

      4,725,424        4,002,897  

High Yield Trust Series I

      1,321,154        1,956,546  

High Yield Trust Series NAV

      1,105,807        2,364,092  

International Equity Index Series I

      2,673,101        511,840  

International Equity Index Series NAV

      5,560,402        2,518,788  

International Growth Stock Trust Series I

      1,202,734        76,833  

International Growth Stock Trust Series NAV

      5,155,162        4,774,312  

International Small Company Trust Series I

      348,032        128,025  

International Small Company Trust Series NAV

      581,632        137,585  

 

59

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

6.

Purchases and Sales of Investments — (continued):

 

     Purchases      Sales  

Sub-Account

      

International Value Trust Series I

    $ 754,629      $ 1,024,468  

International Value Trust Series NAV

      1,867,755        1,043,455  

Investment Quality Bond Trust Series I

      787,416        912,933  

Investment Quality Bond Trust Series NAV

      250,163        166,887  

Lifestyle Growth Portfolio Series I

      322,530        26,212  

Lifestyle Growth Portfolio Series NAV

      2,523,698        33,532  

M Capital Appreciation (a)

      442,733        697,170  

M Large Cap Value (a)

      3,967        125,213  

Managed Volatility Aggressive Portfolio Series I

      186,078        255,310  

Managed Volatility Aggressive Portfolio Series NAV

      1,120,392        2,163,117  

Managed Volatility Balanced Portfolio Series I

      642,877        1,263,285  

Managed Volatility Balanced Portfolio Series NAV

      2,108,689        3,937,496  

Managed Volatility Conservative Portfolio Series I

      322,667        739,726  

Managed Volatility Conservative Portfolio Series NAV

      2,066,268        2,280,471  

Managed Volatility Growth Portfolio Series I

      602,005        760,430  

Managed Volatility Growth Portfolio Series NAV

      3,572,517        7,490,831  

Managed Volatility Moderate Portfolio Series I

      511,140        393,070  

Managed Volatility Moderate Portfolio Series NAV

      733,238        4,016,941  

Mid Cap Index Trust Series I

      2,906,133        876,771  

Mid Cap Index Trust Series NAV

      8,351,321        5,014,249  

Mid Cap Stock Trust Series I

      349,450        950,158  

Mid Cap Stock Trust Series NAV

      6,500,939        7,789,666  

Mid Value Trust Series I

      663,550        1,977,540  

Mid Value Trust Series NAV

      4,426,238        4,331,037  

Money Market Trust Series I

      7,997,593        16,205,622  

Money-Market Trust Series NAV

      62,251,050        45,387,284  

PIMCO All Asset (a)

      1,256,595        696,395  

Real Estate Securities Trust Series I

      170,068        1,975,665  

Real Estate Securities Trust Series NAV

      5,259,384        5,603,107  

Science & Technology Trust Series I

      1,260,994        3,020,565  

Science & Technology Trust Series NAV

      5,981,418        5,005,324  

Short Term Government Income Trust Series I

      174,756        148,198  

Short Term Government Income Trust Series NAV

      1,345,177        1,251,018  

Small Cap Growth Trust Series I

      232,314        739,264  

Small Cap Growth Trust Series NAV

      3,236,699        7,253,665  

Small Cap Index Trust Series I

      596,422        863,407  

Small Cap Index Trust Series NAV

      4,225,790        3,909,917  

Small Cap Opportunities Trust Series I

      1,370,703        2,010,413  

Small Cap Opportunities Trust Series NAV

      206,491        294,570  

Small Cap Value Trust Series I

      409,491        641,551  

Small Cap Value Trust Series NAV

      5,663,662        5,864,837  

Small Company Value Trust Series I

      475,927        1,114,429  

Small Company Value Trust Series NAV

      1,009,578        500,374  

Strategic Income Opportunities Trust Series I

      350,882        690,401  

Strategic Income Opportunities Trust Series NAV

      2,273,870        1,149,398  

Total Bond Market Series Trust NAV

      33,748,330        38,730,755  

Total Stock Market Index Trust Series I

      2,281,175        2,684,502  

Total Stock Market Index Trust Series NAV

      24,665,410        21,944,777  

Ultra Short Term Bond Trust Series I

      91        5,440  

Ultra Short Term Bond Trust Series NAV

      114,781        154,613  

Utilities Trust Series I

      209,666        410,867  

Utilities Trust Series NAV

      304,525        135,761  

 

60

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

6.

Purchases and Sales of Investments — (continued):

 

     Purchases      Sales  

Sub-Account

      

Value Trust Series I (e)

    $ 1,517,350      $ 2,397,255  

Value Trust Series NAV (f)

      1,482,471        1,851,491  

 

(a)

Sub-account that invests in non-affiliated Trust.

 

(b)

Terminated as an investment option and funds transferred to Emerging Markets Value Trust Series I on October 27, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(c)

Terminated as an investment option and funds transferred to Lifestyle Growth Portfolio Series I on October 27, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(d)

Terminated as an investment option and funds transferred to Lifestyle Growth Portfolio Series NAV on October 27, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(e)

Terminated as an investment option and funds transferred to Mid Cap Index Trust Series I on October 27, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(f)

Terminated as an investment option and funds transferred to Mid Cap Index Trust Series NAV on October 27, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(g)

Terminated as an investment option and funds transferred to Total Stock Market Index Trust Series I on April 28, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(h)

Terminated as an investment option and funds transferred to Total Stock Market Index Trust Series NAV on April 28, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

61

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 Series NAV

       2017  (f)        1,888       $  58.62 to $ 33.53       $ 89,400         0.70% to 0.00 %        1.69 %        21.54% to 20.70 % 
      2016         2,089         48.23 to 27.78         82,800         0.70 to 0.00         1.84         11.64 to 10.86  
      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  

Active Bond Trust Series I

       2017         34         23.29 to 22.00         763         0.65 to 0.20         4.13         4.63 to 4.16  
      2016         28         22.26 to 21.12         586         0.65 to 0.20         3.60         4.14 to 3.66  
      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  

Active Bond Trust Series NAV

       2017         14         77.99 to 77.99         1,068         0.00 to 0.00         4.02         4.89 to 4.89  
      2016         7         74.36 to 74.36         518         0.00 to 0.00         4.10         4.50 to 4.50  
      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  

Alpha Opportunities Trust Series I

       2017         2         27.10 to 27.10         44         0.65 to 0.65         0.46         16.97 to 16.97  
      2016         2         23.17 to 23.17         40         0.65 to 0.65         1.66         5.03 to 5.03  
      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  

Alpha Opportunities Trust Series NAV

       2017         22         30.34 to 30.34         658         0.00 to 0.00         0.40         17.77 to 17.77  
      2016         33         25.76 to 25.76         838         0.00 to 0.00         2.08         5.75 to 5.75  
      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  

American Asset Allocation Trust Series I

       2017         630         19.41 to 18.13         11,728         0.70 to 0.00         1.26         15.79 to 14.99  
      2016         563         16.76 to 15.77         9,005         0.70 to 0.00         1.27         8.99 to 8.23  
      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  

American Global Growth Trust Series I

       2017         32         20.55 to 19.62         660         0.65 to 0.00         0.24         30.92 to 30.06  
      2016         30         15.70 to 15.09         469         0.65 to 0.00         1.02         0.29 to -0.36  
      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  

American Growth Trust Series I

       2017         472         43.07 to 31.43         15,257         0.65 to 0.00         0.38         27.86 to 27.04  
      2016         537         33.90 to 24.58         13,960         0.65 to 0.00         0.41         9.08 to 8.37  
      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  

American Growth-Income Trust Series I

       2017         414         36.92 to 27.38         13,401         0.70 to 0.00         1.06         22.03 to 21.18  
      2016         486         30.47 to 22.44         13,415         0.70 to 0.00         1.72         11.10 to 10.33  
      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  

American International Trust Series I

       2017         306         37.84 to 23.62         7,988         0.65 to 0.00         0.53         31.65 to 30.80  
      2016         776         28.93 to 17.94         14,938         0.65 to 0.00         0.97         3.12 to 2.45  
      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  

Blue Chip Growth Trust Series I

       2017         142         72.16 to 66.28         9,564         0.70 to 0.20         0.07         36.01 to 35.33  
      2016         153         53.06 to 48.98         7,724         0.70 to 0.20         0.01         0.61 to 0.11  
      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  
      2013         165         43.71 to 22.34         6,783         0.70 to 0.20         0.27         41.05 to 40.34  

Blue Chip Growth Trust Series NAV

       2017         366         186.84 to 186.84         68,329         0.00 to 0.00         0.11         36.34 to 36.34  
      2016         394         137.04 to 137.04         54,032         0.00 to 0.00         0.06         0.85 to 0.85  
      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  

Bond Trust Series I

       2017         571         11.79 to 11.47         6,653         0.65 to 0.20         2.69         3.45 to 2.99  
      2016         636         11.39 to 11.14         7,180         0.65 to 0.20         3.14         2.85 to 2.39  
      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  

Bond Trust Series NAV

       2017         140         11.98 to 11.98         1,682         0.00 to 0.00         1.98         3.65 to 3.65  
      2016         664         11.56 to 11.56         7,677         0.00 to 0.00         4.98         3.19 to 3.19  

 

62

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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)

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  

Capital Appreciation Trust Series I

       2017         244         36.06 to 33.18         8,566         0.70 to 0.20         0.06         36.26 to 35.58  
      2016         274         26.47 to 24.48         7,058         0.70 to 0.20         0.00         -1.27 to -1.77  
      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  

Capital Appreciation Trust Series NAV

       2017         53         36.64 to 36.64         1,946         0.00 to 0.00         0.11         36.51 to 36.51  
      2016         62         26.84 to 26.84         1,667         0.00 to 0.00         0.01         -1.00 to -1.00  
      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  

Capital Appreciation Value Trust Series I

       2017         52         22.48 to 21.52         1,154         0.65 to 0.20         1.85         14.91 to 14.40  
      2016         18         19.31 to 18.81         330         0.65 to 0.35         1.32         7.74 to 7.42  
      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  

Capital Appreciation Value Trust Series NAV

       2017         102         22.99 to 22.99         2,356         0.00 to 0.00         1.53         15.13 to 15.13  
      2016         95         19.97 to 19.97         1,900         0.00 to 0.00         2.04         8.19 to 8.19  
      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  

Core Bond Trust Series I

       2017         369         21.03 to 19.88         7,646         0.65 to 0.20         2.00         3.20 to 2.73  
      2016         484         20.38 to 19.35         9,744         0.65 to 0.20         1.95         2.54 to 2.08  
      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  

Core Bond Trust Series NAV

       2017         1,480         17.35 to 17.35         25,673         0.00 to 0.00         2.30         3.47 to 3.47  
      2016         1,270         16.76 to 16.76         21,287         0.00 to 0.00         2.15         2.73 to 2.73  
      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  

Emerging Markets Value Trust Series I

       2017         114         17.50 to 16.68         1,987         0.65 to 0.20         4.52         32.44 to 31.84  
      2016         6         13.02 to 12.65         72         0.65 to 0.35         2.13         17.60 to 17.24  
      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  

Emerging Markets Value Trust Series NAV

       2017         285         14.36 to 14.36         4,086         0.00 to 0.00         2.38         32.67 to 32.67  
      2016         126         10.83 to 10.83         1,368         0.00 to 0.00         2.42         18.09 to 18.09  
      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  

Equity Income Trust Series I

       2017         162         55.52 to 51.00         8,632         0.70 to 0.20         2.21         16.06 to 15.48  
      2016         190         47.84 to 44.16         8,763         0.70 to 0.20         2.14         18.88 to 18.29  
      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  
      2013         301         40.31 to 28.33         11,703         0.70 to 0.20         1.84         29.78 to 29.14  

Equity Income Trust Series NAV

       2017         785         59.30 to 59.30         46,533         0.00 to 0.00         2.47         16.28 to 16.28  
      2016         730         51.00 to 51.00         37,229         0.00 to 0.00         2.26         19.18 to 19.18  
      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  

Financial Industries Trust Series I

       2017         28         30.63 to 28.43         821         0.65 to 0.20         1.03         15.05 to 14.54  
      2016         35         26.63 to 24.82         888         0.65 to 0.20         1.31         19.13 to 18.60  
      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  

Financial Industries Trust Series NAV

       2017         10         38.19 to 38.19         379         0.00 to 0.00         1.32         15.29 to 15.29  
      2016         9         33.13 to 33.13         300         0.00 to 0.00         1.30         19.47 to 19.47  
      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  

Fundamental All Cap Core Trust Series I

       2017         8         50.96 to 47.71         418         0.65 to 0.20         0.74         27.44 to 26.87  
      2016         8         39.99 to 37.61         327         0.65 to 0.20         0.52         8.12 to 7.64  
      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  

Fundamental All Cap Core Trust Series NAV

       2017         88         31.22 to 31.22         2,761         0.00 to 0.00         0.92         27.77 to 27.77  
      2016         59         24.44 to 24.44         1,446         0.00 to 0.00         0.70         8.40 to 8.40  

 

63

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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)

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  

Fundamental Large Cap Value Trust Series I

       2017         108         35.30 to 32.98         3,699         0.70 to 0.20         1.51         17.20 to 16.62  
      2016         160         30.12 to 28.28         4,698         0.70 to 0.20         2.16         9.95 to 9.41  
      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  

Fundamental Large Cap Value Trust Series NAV

       2017         320         25.59 to 25.59         8,185         0.00 to 0.00         1.72         17.54 to 17.54  
      2016         317         21.77 to 21.77         6,911         0.00 to 0.00         2.58         10.21 to 10.21  
      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  

Global Bond Trust Series I

       2017         34         31.33 to 28.78         1,015         0.70 to 0.20         2.36         8.54 to 8.00  
      2016         36         28.86 to 26.65         1,015         0.70 to 0.20         0.00         2.85 to 2.33  
      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  

Global Bond Trust Series NAV

       2017         271         33.33 to 33.33         9,043         0.00 to 0.00         2.29         8.71 to 8.71  
      2016         213         30.66 to 30.66         6,545         0.00 to 0.00         0.00         3.15 to 3.15  
      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  

Global Trust Series I

       2017         76         36.67 to 33.68         2,608         0.70 to 0.20         1.97         18.64 to 18.05  
      2016         75         30.91 to 28.53         2,158         0.70 to 0.20         4.37         9.25 to 8.70  
      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  

Global Trust Series NAV

       2017         123         21.04 to 21.04         2,579         0.00 to 0.00         2.00         18.90 to 18.90  
      2016         115         17.70 to 17.70         2,032         0.00 to 0.00         4.62         9.46 to 9.46  
      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  

Health Sciences Trust Series I

       2017         62         85.82 to 79.62         5,158         0.65 to 0.20         0.00         27.25 to 26.68  
      2016         67         67.44 to 62.85         4,375         0.65 to 0.20         0.06         -10.75 to -11.15  
      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  

Health Sciences Trust Series NAV

       2017         95         69.27 to 69.27         6,555         0.00 to 0.00         0.00         27.61 to 27.61  
      2016         93         54.28 to 54.28         5,051         0.00 to 0.00         0.11         -10.54 to -10.54  
      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  

High Yield Trust Series I

       2017         89         34.61 to 31.81         2,979         0.70 to 0.20         5.79         7.28 to 6.75  
      2016         114         32.27 to 29.80         3,561         0.70 to 0.20         7.03         16.03 to 15.45  
      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  

High Yield Trust Series NAV

       2017         67         24.25 to 24.25         1,622         0.00 to 0.00         4.30         7.46 to 7.46  
      2016         124         22.57 to 22.57         2,802         0.00 to 0.00         6.85         16.56 to 16.56  
      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  

International Equity Index Series I

       2017  (g)        651         14.34 to 14.02         9,241         0.65 to 0.20         2.46         27.05 to 26.49  
      2016         498         11.29 to 11.08         5,569         0.65 to 0.20         2.47         4.24 to 3.77  
      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  

International Equity Index Series NAV

       2017  (h)        304         56.94 to 56.94         17,323         0.00 to 0.00         2.37         27.45 to 27.45  
      2016         252         44.68 to 44.68         11,245         0.00 to 0.00         2.78         4.43 to 4.43  
      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  

International Growth Stock Trust Series I

       2017         210         14.45 to 14.12         3,021         0.65 to 0.20         1.61         21.61 to 21.07  
      2016         126         11.88 to 11.66         1,485         0.65 to 0.20         1.81         -1.51 to -1.95  
      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  

International Growth Stock Trust Series NAV

       2017         749         14.64 to 14.64         10,972         0.00 to 0.00         1.51         21.90 to 21.90  
      2016         740         12.01 to 12.01         8,892         0.00 to 0.00         1.73         -1.19 to -1.19  

 

64

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 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  

International Small Company Trust Series I

       2017         44         20.16 to 19.37         854         0.70 to 0.20         1.44         29.20 to 28.56  
      2016         33         15.61 to 15.06         497         0.70 to 0.20         1.86         4.69 to 4.17  
      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  

International Small Company Trust Series NAV

       2017         80         20.59 to 20.59         1,648         0.00 to 0.00         1.69         29.59 to 29.59  
      2016         57         15.89 to 15.89         904         0.00 to 0.00         1.97         4.95 to 4.95  
      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  

International Value Trust Series I

       2017         231         27.75 to 25.49         6,222         0.70 to 0.20         1.84         16.91 to 16.32  
      2016         245         23.74 to 21.91         5,665         0.70 to 0.20         2.83         12.02 to 11.46  
      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  

International Value Trust Series NAV

       2017         385         18.75 to 18.75         7,215         0.00 to 0.00         2.01         17.25 to 17.25  
      2016         345         15.99 to 15.99         5,518         0.00 to 0.00         2.38         12.20 to 12.20  
      2015         288         14.25 to 14.25         4,105         0.00 to 0.00         1.96         -7.72 to -7.72  
      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  

Investment Quality Bond Trust Series I

       2017         139         34.57 to 31.76         4,608         0.70 to 0.20         2.62         4.39 to 3.88  
      2016         147         33.12 to 30.57         4,666         0.70 to 0.20         2.20         4.09 to 3.56  
      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  

Investment Quality Bond Trust Series NAV

       2017         47         17.32 to 17.32         822         0.00 to 0.00         2.73         4.67 to 4.67  
      2016         44         16.55 to 16.55         729         0.00 to 0.00         2.42         4.26 to 4.26  
      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  

Lifestyle Growth Portfolio Series I

       2017  (q)        28         11.75 to 11.75         324         0.65 to 0.65         2.93         15.37 to 15.37  
      2016  (v)        1         10.19 to 10.19         9         0.65 to 0.65         9.65         1.87 to 1.87  

Lifestyle Growth Portfolio Series NAV

       2017  (r)        197         13.46 to 13.46         2,653         0.00 to 0.00         8.30         16.20 to 16.20  
      2016  (v)        11         11.59 to 11.59         128         0.00 to 0.00         10.08         1.99 to 1.99  

M Capital Appreciation(e)

       2017         3         114.51 to 114.51         294         0.00 to 0.00         0.00         19.02 to 19.02  
      2016         6         96.21 to 96.21         529         0.00 to 0.00         0.00         21.06 to 21.06  
      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  

Managed Volatility Aggressive Portfolio Series I

       2017  (i)        37         34.65 to 32.11         1,200         0.65 to 0.20         1.71         22.57 to 22.03  
      2016         40         28.27 to 26.31         1,056         0.65 to 0.20         1.55         1.75 to 1.29  
      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  

Managed Volatility Aggressive Portfolio Series NAV

       2017  (j)        208         22.03 to 22.03         4,576         0.00 to 0.00         1.73         22.88 to 22.88  
      2016         266         17.93 to 17.93         4,766         0.00 to 0.00         1.35         1.89 to 1.89  
      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  

Managed Volatility Balanced Portfolio Series I

       2017  (k)        109         39.00 to 36.13         3,941         0.65 to 0.20         2.02         13.90 to 13.40  
      2016         133         34.24 to 31.86         4,245         0.65 to 0.20         1.95         4.58 to 4.11  
      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  

Managed Volatility Balanced Portfolio Series NAV

       2017  (l)        804         20.58 to 20.58         16,546         0.00 to 0.00         2.18         14.15 to 14.15  
      2016         950         18.02 to 18.02         17,126         0.00 to 0.00         2.23         4.91 to 4.91  
      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  

Managed Volatility Conservative Portfolio Series I

       2017  (m)        42         37.34 to 34.59         1,464         0.65 to 0.20         2.40         7.60 to 7.12  
      2016         56         34.70 to 32.29         1,829         0.65 to 0.20         2.39         4.37 to 3.91  
      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  

Managed Volatility Conservative Portfolio Series NAV

       2017  (n)        259         18.54 to 18.54         4,800         0.00 to 0.00         2.51         7.94 to 7.94  
      2016         282         17.17 to 17.17         4,839         0.00 to 0.00         2.57         4.53 to 4.53  

 

65

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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)

Managed Volatility Conservative Portfolio 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  

Managed Volatility Growth Portfolio Series I

       2017  (o)        91         37.11 to 34.37         3,157         0.65 to 0.20         1.91         18.35 to 17.82  
      2016         100         31.36 to 29.17         2,959         0.65 to 0.20         1.61         3.12 to 2.67  
      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  

Managed Volatility Growth Portfolio Series NAV

       2017  (p)        1,108         21.11 to 21.11         23,388         0.00 to 0.00         1.88         18.71 to 18.71  
      2016         1,378         17.78 to 17.78         24,499         0.00 to 0.00         1.95         3.38 to 3.38  
      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  

Managed Volatility Moderate Portfolio Series I

       2017  (s)        55         39.56 to 36.64         2,047         0.65 to 0.20         2.43         11.66 to 11.16  
      2016         54         35.43 to 32.96         1,825         0.65 to 0.20         2.25         5.08 to 4.61  
      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  

Managed Volatility Moderate Portfolio Series NAV

       2017  (t)        344         20.19 to 20.19         6,949         0.00 to 0.00         1.92         12.02 to 12.02  
      2016         534         18.03 to 18.03         9,624         0.00 to 0.00         2.22         5.25 to 5.25  
      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  

Mid Cap Index Trust Series I

       2017         186         54.88 to 50.40         9,765         0.70 to 0.20         0.53         15.58 to 15.00  
      2016         154         47.49 to 43.83         7,075         0.70 to 0.20         1.18         19.87 to 19.28  
      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  

Mid Cap Index Trust Series NAV

       2017         406         37.45 to 37.45         15,217         0.00 to 0.00         0.58         15.86 to 15.86  
      2016         335         32.32 to 32.32         10,816         0.00 to 0.00         0.87         20.17 to 20.17  
      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  

Mid Cap Stock Trust Series I

       2017         87         43.13 to 39.61         3,662         0.70 to 0.20         0.00         28.29 to 27.65  
      2016         104         33.62 to 31.03         3,425         0.70 to 0.20         0.00         0.39 to -0.11  
      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  

Mid Cap Stock Trust Series NAV

       2017         62         98.30 to 98.30         6,056         0.00 to 0.00         0.00         28.66 to 28.66  
      2016         78         76.41 to 76.41         5,992         0.00 to 0.00         0.00         0.58 to 0.58  
      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  

Mid Value Trust Series I

       2017         106         34.08 to 32.78         3,587         0.65 to 0.20         0.90         11.21 to 10.71  
      2016         159         30.64 to 29.60         4,842         0.65 to 0.20         1.17         23.77 to 23.22  
      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  

Mid Value Trust Series NAV

       2017         210         53.32 to 53.32         11,222         0.00 to 0.00         0.99         11.46 to 11.46  
      2016         231         47.84 to 47.84         11,066         0.00 to 0.00         1.24         24.09 to 24.09  
      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  

Money Market Trust Series I

       2017         931         21.69 to 19.91         19,208         0.70 to 0.20         0.57         0.38 to -0.11  
      2016         1,317         21.60 to 19.93         27,416         0.70 to 0.20         0.07         -0.15 to -0.62  
      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  

Money -Market Trust Series NAV

       2017         5,280         10.07 to 10.07         53,181         0.00 to 0.00         0.63         0.61 to 0.61  
      2016  (e)        3,628         10.00 to 10.00         36,318         0.00 to 0.00         0.16         0.05 to 0.05  

PIMCO All Asset(e)

       2017         235         23.64 to 18.31         4,546         0.65 to 0.00         4.49         13.19 to 12.46  
      2016         215         21.02 to 16.18         3,668         0.65 to 0.00         2.36         12.59 to 11.85  
      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  

Real Estate Securities Trust Series I

       2017         47         195.60 to 179.66         8,670         0.70 to 0.20         0.50         6.02 to 5.50  
      2016         57         184.49 to 170.30         9,971         0.70 to 0.20         3.37         6.71 to 6.17  
      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  

 

66

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 Estate Securities Trust Series NAV

       2017         84       $  162.30 to $ 162.30       $ 13,692         0.00% to 0.00 %        0.63 %        6.26% to 6.26 % 
      2016         88         152.74 to 152.74         13,370         0.00 to 0.00         3.58         6.96 to 6.96  
      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  

Science & Technology Trust Series I

       2017         177         52.19 to 47.93         8,662         0.70 to 0.20         0.05         40.85 to 40.15  
      2016         225         37.05 to 34.20         7,948         0.70 to 0.20         0.00         8.17 to 7.63  
      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  

Science & Technology Trust Series NAV

       2017         130         43.91 to 43.91         5,705         0.00 to 0.00         0.10         41.21 to 41.21  
      2016         112         31.10 to 31.10         3,496         0.00 to 0.00         0.00         8.41 to 8.41  
      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  

Short Term Government Income Trust Series I

       2017         140         10.63 to 10.25         1,451         0.70 to 0.20         1.38         0.35 to -0.13  
      2016         138         10.59 to 10.26         1,436         0.70 to 0.20         1.80         0.33 to -0.13  
      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  

Short Term Government Income Trust Series NAV

       2017         196         10.86 to 10.86         2,133         0.00 to 0.00         1.52         0.62 to 0.62  
      2016         191         10.79 to 10.79         2,057         0.00 to 0.00         1.75         0.63 to 0.63  
      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  

Small Cap Growth Trust Series I

       2017         44         32.00 to 30.71         1,372         0.65 to 0.20         0.00         26.21 to 25.65  
      2016         63         25.35 to 24.44         1,544         0.65 to 0.20         0.00         2.09 to 1.63  
      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  

Small Cap Growth Trust Series NAV

       2017         135         38.74 to 38.74         5,244         0.00 to 0.00         0.00         26.70 to 26.70  
      2016         257         30.58 to 30.58         7,850         0.00 to 0.00         0.00         2.27 to 2.27  
      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  

Small Cap Index Trust Series I

       2017         155         41.34 to 37.96         6,187         0.70 to 0.20         0.44         14.16 to 13.59  
      2016         168         36.21 to 33.42         5,910         0.70 to 0.20         1.13         20.73 to 20.13  
      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  

Small Cap Index Trust Series NAV

       2017         199         34.30 to 34.30         6,813         0.00 to 0.00         0.52         14.43 to 14.43  
      2016         197         29.98 to 29.98         5,906         0.00 to 0.00         1.17         21.02 to 21.02  
      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  

Small Cap Opportunities Trust Series I

       2017         324         48.22 to 44.81         14,715         0.70 to 0.20         0.41         10.85 to 10.30  
      2016         360         43.50 to 40.62         14,819         0.70 to 0.20         0.47         19.23 to 18.63  
      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  

Small Cap Opportunities Trust Series NAV

       2017         14         24.50 to 24.50         339         0.00 to 0.00         0.39         11.18 to 11.18  
      2016         19         22.03 to 22.03         409         0.00 to 0.00         0.54         19.51 to 19.51  
      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  

Small Cap Value Trust Series I

       2017         27         30.55 to 29.18         808         0.65 to 0.20         0.86         3.52 to 3.06  
      2016         38         29.51 to 28.32         1,090         0.65 to 0.20         0.74         22.43 to 21.88  
      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  

Small Cap Value Trust Series NAV

       2017         96         86.94 to 86.94         8,356         0.00 to 0.00         0.94         3.79 to 3.79  
      2016         108         83.77 to 83.77         9,050         0.00 to 0.00         0.76         22.68 to 22.68  
      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  

Small Company Value Trust Series I

       2017         62         45.35 to 41.65         2,739         0.70 to 0.20         0.22         11.27 to 10.72  
      2016         87         40.75 to 37.62         3,467         0.70 to 0.20         0.77         32.05 to 31.39  
      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  

 

67

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 NAV

       2017         35       $  31.83 to $ 31.83       $ 1,129         0.00% to 0.00 %        0.24 %        11.58% to 11.58 % 
      2016         23         28.53 to 28.53         648         0.00 to 0.00         0.90         32.33 to 32.33  
      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  

Strategic Income Opportunities Trust Series I

       2017         92         28.25 to 26.55         2,561         0.65 to 0.20         3.00         5.38 to 4.90  
      2016         108         26.80 to 25.31         2,834         0.65 to 0.20         2.56         4.92 to 4.45  
      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  

Strategic Income Opportunities Trust Series NAV

       2017         231         21.56 to 21.56         4,988         0.00 to 0.00         3.38         5.66 to 5.66  
      2016         185         20.40 to 20.40         3,772         0.00 to 0.00         2.55         5.19 to 5.19  
      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  

Total Bond Market Series Trust NAV

       2017  (u)        923         25.08 to 25.08         23,146         0.00 to 0.00         2.73         3.34 to 3.34  
      2016         1,152         24.27 to 24.27         27,955         0.00 to 0.00         3.32         2.45 to 2.45  
      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  

Total Stock Market Index Trust Series I

       2017         264         31.03 to 28.50         8,026         0.70 to 0.20         1.47         20.35 to 19.75  
      2016         282         25.79 to 23.80         7,153         0.70 to 0.20         1.42         12.16 to 11.60  
      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  

Total Stock Market Index Trust Series NAV

       2017         55         107.52 to 107.52         5,861         0.00 to 0.00         1.62         20.65 to 20.65  
      2016         28         89.11 to 89.11         2,505         0.00 to 0.00         1.60         12.38 to 12.38  
      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  

Ultra Short Term Bond Trust Series I

       2017         0         9.86 to 9.68         3         0.65 to 0.45         0.90         0.23 to -0.04  
      2016         1         9.84 to 9.68         9         0.65 to 0.45         1.53         0.10 to -0.17  
      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  

Ultra Short Term Bond Trust Series NAV

       2017         58         10.20 to 10.20         590         0.00 to 0.00         1.55         0.62 to 0.62  
      2016         63         10.14 to 10.14         635         0.00 to 0.00         1.36         0.67 to 0.67  
      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  

Utilities Trust Series I

       2017         28         39.31 to 36.46         1,042         0.65 to 0.20         2.38         14.52 to 14.00  
      2016         34         34.33 to 31.98         1,117         0.65 to 0.20         4.59         11.13 to 10.63  
      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  

Utilities Trust Series NAV

       2017         64         32.57 to 32.57         2,091         0.00 to 0.00         2.56         14.82 to 14.82  
      2016         60         28.37 to 28.37         1,713         0.00 to 0.00         4.56         11.43 to 11.43  
      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  
      2013         63         26.50 to 26.50         1,660         0.00 to 0.00         2.30         20.65 to 20.65  

 

68

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

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 separate account, consisting primarily of the items known as “Revenue from underlying fund (12b-1, ST A, Other)” and “Revenue from Sub-account” (formerly referred to as the administrative maintenance charges and sales and service fees (AMC and SSF)). The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to unitholder accounts through the redemption of units and expenses of the underlying fund are excluded.

 

(c)

These ratios 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, represent the total return for the periods indicated, including changes in the value of the underlying Port folio, 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 vari able 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)

Reflects the period from commencement of operations on April 29, 2016 through December 31, 2016.

 

(f)

Renamed on October 27, 2017. Previously known as 500 Index Fund B Series NAV.

 

(g)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series I.

 

(h)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series NAV.

 

(i)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series I.

 

(j)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series NAV.

 

(k)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series I.

 

(l)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series NAV.

 

(m)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series I.

 

(n)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series NAV.

 

(o)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series I.

 

(p)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series NAV.

 

(q)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series I.

 

(r)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series NAV.

 

(s)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series I.

 

(t)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series NAV.

 

(u)

Renamed on October 27, 2017. Previously known as Total Bond Market Trust B Series NAV.

 

(v)

Sub-account available in prior year but no activity.

 

69

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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.

 

70

Table of Contents
Prospectus dated April 30, 2018
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
Active Bond
American Asset Allocation
American Global Growth
American Growth
American Growth-Income
American International
Blue Chip Growth
Capital Appreciation
Capital Appreciation Value
Core Bond
Emerging Markets Value
Equity Income
Financial Industries
Fundamental All Cap Core
Fundamental Large Cap Value
Global
Global Bond
Health Sciences
High Yield
International Equity Index
International Growth Stock
International Small Company
International Value
Investment Quality Bond
Lifestyle Balanced
Lifestyle Conservative
Lifestyle Growth
Lifestyle Moderate
Managed Volatility Aggressive
Managed Volatility Balanced
Managed Volatility Conservative
Managed Volatility Growth
Managed Volatility Moderate
Mid Cap Index
Mid Cap Stock
Mid Value
Money Market
PIMCO VIT All Asset
Real Estate Securities
Science & Technology
Select Bond
Short Term Government Income
Small Cap Index
Small Cap Opportunities
Small Cap Stock
Small Cap Value
Small Company Value
Strategic Income Opportunities
Total Stock Market Index
Ultra Short Term Bond
Utilities
* * * * * * * * * * * *
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 2018

 

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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.
4

 

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 0.46% 1.73%
    
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.
5

 

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, and American International 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, and American International 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 have 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:
6

 

Portfolio Subadviser Investment Objective
500 Index 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 John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
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.
Blue Chip Growth T. Rowe Price Associates, Inc. To seek to provide long-term growth of capital. Current income is a secondary objective.
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.
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.
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 Equity Index 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.
7

 

Portfolio Subadviser Investment Objective
Lifestyle Balanced 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 a high level of current income and growth of capital, with a greater emphasis on growth of capital.
Lifestyle Conservative 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 a high level of current income with some consideration given to growth of capital.
Lifestyle Growth 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.
Lifestyle Moderate 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 a balance between a high level of current income and growth of capital, with a greater emphasis on income.
Managed Volatility Aggressive 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.
Managed Volatility Balanced 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.
Managed Volatility Conservative 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.
Managed Volatility Growth 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.
Managed Volatility Moderate 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.
8

 

Portfolio Subadviser Investment Objective
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 (US) LLC 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.
Select Bond John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
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 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 GW&K Investment Management, LLC To seek to provide long-term capital appreciation.
Small Cap Stock Wellington Management Company, LLP 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.
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).
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.
9

 

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.
10

 

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. Our executive office is located at 197 Clarendon St., Boston, MA 02117.
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 variable 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 variable investment accounts may be added and made available to policy owners from time to time. Existing variable investment accounts 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, U.S. resident alien or other U.S. person, 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. If your policy is issued as a result of an exchange of a policy owned or issued outside the United States, the country or territory in which you reside may still tax you on the surrender of the policy replaced through the exchange. You should consult with a qualified tax adviser before exchanging your policy issued outside of the United States for one issued within the United States.
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 variable 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.
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 policy.
Independent registered public accounting firm
The statutory-basis financial statements of John Hancock Life Insurance Company (U.S.A.) at December 31, 2017 and 2016, and for each of the three years in the period ended December 31, 2017, and the financial statements of John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2017, and for each of the two years in the period ended December 31, 2017, 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, 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 April 30, 2018
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 accounts 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, 2017 and 2016, and for each of the three years in the period ended December 31, 2017, and the financial statements of John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2017, and for each of the two years in the period ended December 31, 2017, 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.
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 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”).
2

 

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 2017, 2016, and 2015, was $94,706,904, $100,416,732, and $120,545,566, 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.
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.
3

 

4

Table of Contents

AUDITED STATUTORY-BASIS FINANCIAL STATEMENTS

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

For the Years Ended December 31, 2017, 2016 and 2015

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, 2017, 2016 and 2015

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 Stockholder

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, 2017 and 2016, 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, 2017, 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 Department of Insurance and Financial Services. 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 Department of Insurance and Financial Services, which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles are described in Note 2. The effects on the accompanying financial statements of these variances are not reasonably determinable but are presumed to be material.

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, 2017 and 2016, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2017.

 

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, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting practices prescribed or permitted by the Michigan Department of Insurance and Financial Services.

 

/s/ Ernst & Young LLP

Boston, Massachusetts

April 4, 2018

 

F-2

Table of Contents

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

BALANCE SHEETS—STATUTORY BASIS

 

 

     December 31,  
     2017      2016  
  

 

 

  
     (in millions)  

Admitted assets

      

Cash and invested assets:

      

Bonds

        $ 47,970          $ 45,231  

Stocks:

      

Preferred stocks

      11        25  

Common stocks

      1,354        1,063  

Investments in affiliates

      2,560        3,429  

Mortgage loans on real estate

      11,900        11,631  

Real estate:

      

Company occupied

      286        295  

Investment properties

      5,436        5,953  

Cash, cash equivalents and short-term investments

      4,131        3,879  

Policy loans

      2,726        2,722  

Derivatives

      9,637        10,851  

Receivable for securities

      16        18  

Other invested assets

      9,269        6,656  
  

 

 

  

Total cash and invested assets

      95,296        91,753  

Investment income due and accrued

      705        752  

Premiums due and deferred

      65        277  

Amounts recoverable from reinsurers

      163        280  

Net deferred tax asset

      13        177  

Funds held by or deposited with reinsured companies

      3,321        3,488  

Other reinsurance receivable

      181        200  

Amounts due from affiliates

      477        411  

Other assets

      1,435        1,407  

Assets held in separate accounts

        141,167          131,147  
  

 

 

  

Total admitted assets

        $ 242,823          $ 229,892  
  

 

 

  

 

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,  
     2017     2016  
  

 

 

  
     (in millions)  

Liabilities and capital and surplus

     

Liabilities:

     

Policy and contract obligations:

     

Policy reserves

        $ 69,132         $ 67,125  

Policyholders’ and beneficiaries funds

      2,683       2,717  

Consumer notes

      197       201  

Dividends payable to policyholders

      408       422  

Policy benefits in process of payment

      450       526  

Other amount payable on reinsurance

      534       830  

Other policy obligations

      46    

 

60

 

  

 

 

  

Total policy and contract obligations

      73,450       71,881  

Payable to parent and affiliates

      1,645       1,436  

Transfers to (from) separate account, net

      (365 )      (423 ) 

Asset valuation reserve

      2,106       2,106  

Reinsurance in unauthorized companies

      4       3  

Funds withheld from unauthorized reinsurers

      66       7,463  

Interest maintenance reserve

      2,038       1,351  

Current federal income taxes payable

      104       230  

Derivatives

      4,129       5,370  

Payables for collateral on derivatives

      1,973       1,907  

Payables for securities

      177       28  

Funds held under coinsurance

      7,239       138  

Other general account obligations

      981       1,101  

Obligations related to separate accounts

      141,167       131,147  
  

 

 

  

Total liabilities

        234,714         223,738  

Capital and surplus:

     

Preferred stock (par value $1; 50,000,000 shares authorized; 100,000 shares issued and outstanding at December 31, 2017 and 2016)

      -       -  

Common stock (par value $1; 50,000,000 shares authorized; 4,728,940 and 4,728,939 shares issued and outstanding at December 31, 2017 and 2016, respectively)

      5       5  

Paid-in surplus

      3,219       3,196  

Surplus notes

      585       585  

Unassigned surplus

      4,300       2,368  
  

 

 

  

Total capital and surplus

      8,109       6,154  
  

 

 

  

Total liabilities and capital and surplus

        $   242,823         $   229,892  
  

 

 

  

 

 

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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums and other revenues:

       

Life, long-term care and annuity premiums

        $ 18,286         $ 13,227         $ 16,323  

Consideration for supplementary contracts with life contingencies

      176       201       140  

Net investment income

      4,426       4,308       4,387  

Amortization of interest maintenance reserve

      195       191       181  

Commissions and expense allowance on reinsurance ceded

      1,963       629       1,040  

Reserve adjustment on reinsurance ceded

      (12,621 )      (7,297 )      (16,494 ) 

Separate account administrative and contract fees

      1,772       1,697       1,786  

Other revenue

      347       434       415  
  

 

 

  

Total premiums and other revenues

         14,544       13,390       7,778  

Benefits paid or provided:

       

Death, surrender and other contract benefits, net

      12,693       10,220          9,762  

Annuity benefits

      1,788       1,622       1,796  

Disability and long-term care benefits

      738       664       647  

Interest and adjustments on policy or deposit-type funds

      (318 )      94       91  

Payments on supplementary contracts with life contingencies

      199       191       179  

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

      1,979       1,784       (2,506 ) 
  

 

 

  

Total benefits paid or provided

      17,079         14,575       9,969  

Insurance expenses and other deductions:

       

Commissions and expense allowance on reinsurance assumed

      1,091       1,049       1,289  

General expenses

      1,039       943       960  

Insurance taxes, licenses and fees

      138       171       145  

Net transfers to (from) separate accounts

      (8,706 )      (5,581 )      (6,554 ) 

Investment income ceded

      878       1,240       2,465  

Other deductions

      153       21       (160 ) 
  

 

 

  

Total insurance expenses and other deductions

      (5,407 )      (2,157 )      (1,855 ) 

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

      2,872       972       (336 ) 

Dividends to policyholders

      124       131       (36 ) 
  

 

 

  

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

      2,748       841       (300 ) 

Federal income tax expense (benefit)

      446       (121 )      (778 ) 
  

 

 

  

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

      2,302       962       478  

Net realized capital gains (losses)

      (403 )      (933 )      216  
  

 

 

  

Net income (loss)

        $ 1,899         $ 29         $ 694  
  

 

 

  

 

 

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, 2015

        $ 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 ) 

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  

Net income (loss)

              29       29  

Change in net unrealized capital gains (losses)

              569       569  

Change in net deferred income tax

              810       810  

Decrease (increase) in non-admitted assets

              (38 )      (38 ) 

Decrease (increase) in asset valuation reserves

              (262 )      (262 ) 

Change in surplus as a result of reinsurance

              (125 )      (125 ) 

Surplus note redemptions

            (405 )        (405 ) 

Other adjustments, net

            -       132       132  
  

 

 

  

Balances at December 31, 2016

      5        3,196        585       2,368       6,154  

Net income (loss)

              1,899       1,899  

Change in net unrealized capital gains (losses)

              1,394       1,394  

Change in net deferred income tax

              (726 )      (726 ) 

Decrease (increase) in non-admitted assets

              191       191  

Change in liability for reinsurance in unauthorized reinsurance

              (1 )      (1 ) 

Capital contribution from parent

      -        23            23  

Dividend paid to Parent

              (900 )      (900 ) 

Change in surplus as a result of reinsurance

              80       80  

Other adjustments, net

            -       (5 )      (5 ) 
  

 

 

  

Balances at December 31, 2017

        $   5          $   3,219          $   585         $   4,300         $   8,109  
  

 

 

  

 

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,  
  

 

 

  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Operations

       

Premiums and other considerations collected, net of reinsurance

        $ 18,819     $ 13,411     $ 19,961  

Net investment income received

      4,603       4,415       4,600  

Separate account fees

      1,772       1,697       1,786  

Commissions and expenses allowance on reinsurance ceded

      1,963       629       1,040  

Miscellaneous income

      374       595       2,852  

Benefits and losses paid

      (28,091 )      (21,060 )      (29,836 ) 

Net transfers from (to) separate accounts

      8,763       5,699       7,404  

Commissions and expenses (paid) recovered

      (3,040 )      (2,873 )      (5,153 ) 

Dividends paid to policyholders

      (138 )      (137 )      (250 ) 

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

      (846 )      200       847  
  

 

 

  

Net cash provided by (used in) operating activities

      4,179       2,576       3,251  

Investment activities

       

Proceeds from sales, maturities, or repayments of investments:

       

Bonds

      19,287       20,934       19,217  

Stocks

      317       239       190  

Mortgage loans on real estate

      885       1,283       1,834  

Real estate

      986       1,295       8  

Other invested assets

      624       485       955  

Derivatives

      -       -       32  

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

      4       (2 )      (9 ) 
  

 

 

  

Total investment proceeds

      22,103       24,234       22,227  

Cost of investments acquired:

       

Bonds

      21,195       21,880       19,734  

Stocks

      459       652       848  

Mortgage loans on real estate

      1,179       2,440       1,715  

Real estate

      415       446       1,155  

Other invested assets

      1,680       1,429       905  

Derivatives

      46       1,420       -  
  

 

 

  

Total cost of investments acquired

      24,974       28,267       24,357  

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

      217       266       (904 ) 

Net (increase) decrease in policy loans

      (4 )      932       (56 ) 
  

 

 

  

Net cash provided by (used in) investment activities

      (2,658 )      (2,835 )      (3,090 ) 

Financing and miscellaneous activities

       

Surplus notes

      -       (405 )      -  

Borrowed funds

      (164 )      (64 )      (276 ) 

Net deposits (withdrawals) on deposit-type contracts

      (34 )      93       (333 ) 

Dividend paid to Parent

      (900 )      -       (210 ) 

Other cash provided (applied)

      (171 )      (14 )      (2,516 ) 
  

 

 

  

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

      (1,269 )      (390 )      (3,335 ) 

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

      252       (649 )      (3,174 ) 

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

         3,879          4,528          7,702  
  

 

 

  

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

        $ 4,131     $ 3,879     $ 4,528  
  

 

 

  

Non-cash activities during the year:

       

Premium, deposit type contracts and other operating activity for New York Life (“NYL”) 2015 reinsurance transaction and other affiliate transactions, net

        $ 33     $ 650     $ 8,357  

Transfer of invested assets for NYL 2015 reinsurance transaction and other affiliates, net

      16       (650 )      (8,357 ) 

Financing and other activities related to JHVT\JHLH merger and transfer with affiliates, net

      (49 )      -       -  

 

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. Effective December 2, 2016, the Company discontinued new sales of its individual long-term care product. 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”) and a wholly-owned captive insurance subsidiary, Manulife (Michigan) Reassurance Company (“MMRC”).

In 2017, following receipt of regulatory approval, JHLH executed a Plan and Agreement of Merger with John Hancock Insurance Company of Vermont (“JHVT”), also a wholly-owned subsidiary of JHUSA. Effective as of October 1, 2017, JHVT merged with and into JHLH.    Prior to the JHLH/JHVT merger, JHUSA issued one common share to its parent MIC in exchange for 100% ownership of JHVT and became the common parent of both JHLH and JHVT. As a result of the merger, JHVT ceased to exist and the companies’ property and obligations became the property and obligations of 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.

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

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 the entity does not have the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in value. 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 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 audited statutory equity. Non-insurance subsidiaries, which have significant ongoing operations other than for the benefit of the Company and its affiliates, are reported based on the underlying audited 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 audited GAAP 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, common and preferred stocks, and other invested assets 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

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

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 companies (“LLCs”) which are carried based on the underlying audited 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 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 electronic data processing (“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. Goodwill is reported in other invested assets in the Balance Sheets.

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, 2017, 2016 and 2015, 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 other invested assets, furniture and equipment, prepaid expenses, 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. This includes asset adequacy testing required under NAIC Actuarial Guideline 38 Section 8D (“AG 38 8D”). The Company recorded gross reserves of $1,630 million and $635 million for the calculation required under AG 38 8D, of which $1,103 million and $345 million was ceded to Manulife Reinsurance Limited (“MRL”) under an existing coinsurance transaction at December 31, 2017 and 2016, respectively. At

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

 

December 31, 2017 and 2016, the Company held reserves of $1,281 million and $930 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.

 

  •  

Reserves for individual life insurance policies are maintained using the 1941, 1958, 1980, 2001 and 2017 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 A-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.

 

  •  

For life insurance, the calendar year exact method is used to calculate the reserve at December 31, 2017. For the reserve at December 31, 2016, the mean reserve method was used to adjust the calculated terminal reserve to the appropriate reserve. Mean reserves are determined by computing the terminal reserve for the plan and assuming annual premiums have been paid as of the valuation date. An asset is recorded for deferred premiums, net of loading, to adjust the reserve for modal premium payments. Reserves at December 31, 2017 and 2016 are calculated based on the rated age. For certain policies with substandard table ratings, substandard multiple extras are applied via the Lotter method.

 

  •  

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. The reserve is based on the worst 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.

 

F-11

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

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 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 realized 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. The provision for federal and foreign income taxes incurred in the Statements of Operations is different from that which would be obtained by applying the statutory federal income tax rate to income before income tax (including realized capital gains). For additional information, see the Federal Income Taxes Note for reconciliation of effective tax rate.

Participating Insurance and Policyholder Dividends: Participating business represented approximately 14% and 15% of the Company’s aggregate reserve for life contracts at December 31, 2017 and 2016, respectively. 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 policyholders’ 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 Reinsurance and Closed Block 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, 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 term certain supplementary contracts, consist of the entire premium received. Premiums received for variable universal life, as well as annuity policies 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

 

F-12

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

2. Significant Accounting Policies - (continued)

 

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 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.

The effects of the foregoing variances from GAAP on the accompanying statutory-basis financial statements have not been determined, but are presumed to be material.

3. Permitted Statutory Accounting Practices

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

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, 2017 and 2016, 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.

John Hancock Subsidiaries, LLC (“JHS”) is a wholly-owned subsidiary of the Company. During 2017, the Company reclassified its investment in JHS of $1.3 billion from Stocks — Investments in affiliates to Other invested assets. This reclassification was the result of a change in accounting principle and had no material impact on the Company’s financial position, results of operations, and financial statement disclosures.

Adoption of New Accounting Standards

In March 2015, the NAIC adopted revisions to Statement of Statutory Accounting Principles (“SSAP”) No. 1, Disclosure of Accounting Policies, Risks and Uncertainties and Other Disclosures (“SSAP 1”) regarding management’s assessment of an entity’s ability to continue as a going concern. The pronouncement requires management to assess the entity’s ability to continue as a going concern, and provide footnote disclosures when conditions give rise to substantial doubt about an entity’s ability to continue as a going concern within one year from the financial statement issuance date. The new guidance was effective December 31, 2016. The guidance had no impact on the Company’s financial position, results of operations, and financial statement disclosures.

 

F-13

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

4. Accounting Changes - (continued)

 

Future Adoption of New Accounting Standards

In August, 2016, the NAIC adopted substantive revisions to SSAP No. 51 – Life Contracts in order to allow principle-based reserving (“PBR”) for life insurance contracts as specified in the Valuation Manual. Current statutory accounting guidance refers to existing model laws for reserving guidance which are primarily based on formulaic methodology. Also, in June 2016, the NAIC adopted updates to Appendix A-820: Minimum Life and Annuity Reserve Standards as part of the PBR project, which incorporate relevant aspects of the 2009 revisions to the Standard Valuation Law (Model #820) into Appendix A-820. The effective date is January 1, 2017 and companies are allowed to defer adoption for three years until January 1, 2020. The Company plans to implement PBR prior to January 1, 2020 and is currently assessing the impact of these revisions on its financial statements. Adoption will be on a prospective basis for policies issued on or after the adoption date, therefore, we expect no impact to surplus upon adoption.

In March 2017, the NAIC made substantive revisions to SSAP No. 69 – Statement of Cash Flow to adopt ASU 2016-15 Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments as issued by the FASB, without modifications. The revisions clarified the classification of eight specific cash flow issues with the objective of reducing diversity in practice. The amendment is to be applied retrospectively, effective for fiscal years beginning after December 15, 2018 and interim periods within those years. Early adoption is permitted. The Company will adopt the amendment in 2019 and is currently assessing the impact of these revisions on its financial statements.

In August 2017, the NAIC adopted non-substantive revisions to SSAP No. 69 – Statement of Cash Flow to adopt ASU 2016-18 Statement of Cash Flows: Restricted Cash as issued by the FASB. The revision clarifies that restricted cash and cash equivalents shall not be reported as operating, investing or financing activities, but shall be reported with cash and cash equivalents when reconciling beginning and ending amounts on the cash flow statement. A consequential change was incorporated in SSAP No. 1 – Accounting Policies, Risks & Uncertainties and Other Disclosures to ensure information on restricted cash, cash equivalents and short-term investments is reported in the restricted asset disclosure. The revision is effective December 31, 2019, to be adopted retrospectively to allow for comparative cash flow statements. Early adoption is permitted. The Company will adopt the amendment in 2019 and is currently assessing the impact of these revisions on its financial statements.

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, 2017, 2016 and 2015.

 

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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, 2017:

           

U.S. government and agencies

        $ 5,382          $ 153          $ (78 )        $ 5,457  

States and political subdivisions

      2,713        548        (3 )      3,258  

Foreign governments

      2,467        87        (17 )      2,537  

Corporate bonds

        31,028          3,455        (77 )        34,406  

Mortgage-backed and asset-backed securities

      6,380        430        (28 )      6,782  
  

 

 

  

Total bonds

        $ 47,970          $ 4,673          $ (203 )        $ 52,440  
  

 

 

  

December 31, 2016:

           

U.S. government and agencies

        $ 4,896          $ 240          $ (96 )        $ 5,040  

States and political subdivisions

      2,625        431        (19 )      3,037  

Foreign governments

      2,683        124        (13 )      2,794  

Corporate bonds

        28,746          2,442        (306 )      30,882  

Mortgage-backed and asset-backed securities

      6,281        382        (61 )      6,602  
  

 

 

  

Total bonds

        $ 45,231          $ 3,619          $    (495 )        $ 48,355  
  

 

 

  

A summary of the carrying value and fair value of the Company’s investments in bonds at December 31, 2017, by contractual maturity, is as follows:

 

     Carrying
Value		     

Fair

Value

  
  

 

 

  
     (in millions)  

Due in one year or less

        $ 752          $ 762  

Due after one year through five years

      7,309        7,406  

Due after five years through ten years

      6,689        6,938  

Due after ten years

        26,840          30,552  

Mortgage-backed and asset-backed securities

      6,380        6,782  
  

 

 

  

Total

        $ 47,970          $ 52,440  
  

 

 

  

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:

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

     December 31,  
     2017      2016  
  

 

 

  
     (in millions)  

At fair value:

      

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

        $ 135          $ 317  

Bonds pledged in support of exchange-traded futures

      364        533  

Bonds and cash pledged in support of cleared interest rate swaps

      192        278  
  

 

 

  

Total fair value

        $ 691          $ 1,128  
  

 

 

  

At carrying value:

      

Bonds on deposit with government authorities

        $ 16          $ 15  

Mortgage loans pledged in support of real estate

      2        16  

Bonds held in trust

      93        93  

Pledged collateral under reinsurance agreements

        4,187          4,101  
  

 

 

  

Total carrying value

        $ 4,298          $ 4,225  
  

 

 

  

At December 31, 2017 and 2016, the Company held below investment grade corporate bonds of $2,238 million and $2,626 million, with an aggregate fair value of $2,412 million and $2,803 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 book value 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

 

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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 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, 2017

 

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

 

 

  

671451CZ0

        $ 2      $ -      $ 2      $ -      $ -  
     -        -        -        -        -  
  

 

 

  

Total

        $   2      $   -      $   2      $   -      $   -  
  

 

 

  

At December 31, 2016, the Company had no 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).

When a decline in fair value is other-than-temporary, an impairment loss is recognized as a realized loss equal to the entire difference between the bond’s carrying value or amortized cost and its fair value.

 

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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, 2017:

                    

U.S. government and agencies

        $ 2,805      $ (18 )    $ 1,137      $ (60 )    $ 3,942      $ (78 ) 

States and political subdivisions

      45        -       62        (3 )      107        (3 ) 

Foreign governments

      27        -       43        (17 )      70        (17 ) 

Corporate bonds

        2,028        (14 )        2,534        (63 )        4,562        (77 ) 

Mortgage-backed and asset-backed securities

      540        (3 )      772        (25 )      1,312        (28 ) 

Total

        $ 5,445      $    (35 )    $ 4,548      $    (168 )    $ 9,993      $    (203 ) 
                                                   
     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, 2016:

                    

U.S. government and agencies

        $ 2,087      $ (96 )    $ -      $ -     $ 2,087      $ (96 ) 

States and political subdivisions

      286        (10 )      32        (9 )      318        (19 ) 

Foreign governments

      49        (1 )      46        (12 )      95        (13 ) 

Corporate bonds

          6,470        (218 )        1,046        (88 )        7,516        (306 ) 

Mortgage-backed and asset-backed securities

      1,401        (42 )      149        (19 )      1,550        (61 ) 

Total

        $ 10,293      $    (367 )    $ 1,273      $    (128 )    $ 11,566      $    (495 ) 
                                                   

At December 31, 2017 and 2016, there were 483 and 626 bonds that had a gross unrealized loss, of which the single largest unrealized loss was $40 million and $51 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, 2017, 2016 and 2015, realized capital losses include $3 million, $61 million, and $28 million related to bonds that have experienced an other-than-temporary decline in value and were comprised of 4, 8, and 13 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, 2017, 2016 and 2015 was $3 million, $16 million, and $18 million, respectively. There were 1, 2, and 0 restructured corporate bonds for which an impairment was recognized during 2017, 2016 and 2015, respectively. The Company accrues interest income on impaired securities to the

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

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 sales of investments in bonds resulted in the following:

 

     Years Ended December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Proceeds

        $   17,663         $   20,018         $   17,078  

Realized gross gains

      557       524       500  

Realized gross losses

      (33 )      (112 )      (123 ) 

The Company had no nonadmitted accrued investment income from bonds (unaffiliated) at December 31, 2017 and 2016.

Affiliate Transactions

In 2017, the Company sold certain private placements to an affiliate, The Manufacturers Life Insurance Company Bermuda branch (“MLI Bermuda”). These private placements had a book value of $208 million and fair value of $226 million. The Company recognized $18 million in pre-tax realized gains before transfer to the interest maintenance reserve (“IMR”).

In 2017, the Company sold certain bonds to an affiliate, Manulife Reinsurance Bermuda Limited (“MRBL”). These bonds had a book value of $204 million and fair value of $227 million. The Company recognized $23 million in pre-tax realized gains before transfer to the IMR.

In 2017, the Company sold certain bonds to an affiliate, JHLH. These bonds had a book value of $263 million and fair value of $304 million. The Company recognized $41 million in pre-tax realized gains before transfer to the IMR.

In 2017, the Company sold certain bonds to an affiliate, John Hancock Reassurance Company Limited (“JHRECO”). These bonds had a book value of $172 million and fair value of $200 million. The Company recognized $28 million in pre-tax realized gains before transfer to the IMR.

In 2017, the Company sold certain bonds to its indirect parent, MLI. These bonds had a book value of $448 million and fair value of $521 million. The Company recognized $73 million in pre-tax realized gains before transfer to the IMR.

In 2017, the Company sold certain bonds to an affiliate, Manulife Securities Ltd Partner (“MSLP”). These bonds had a book value of $412 million and fair value of $435 million. The Company recognized $23 million in pre-tax realized gains before transfer to the IMR.

In 2017, the Company acquired at fair value, certain bonds from an affiliate, JHLH, for $177 million.

In 2017, the Company acquired at fair value, certain bonds from an affiliate, MRBL, for $100 million.

In 2016, the Company transferred certain bonds to an affiliate, JHRECO, in lieu of a reinsurance cash settlement. These bonds had a book value of $676 million and fair value of $751 million. The Company recognized $75 million in pre-tax realized gains before transfer to the IMR.

In 2016, the Company sold certain bonds to an affiliate, Manulife Financial Singapore (“MLS”). These bonds had a book value of $93 million and fair value of $100 million. The Company recognized $7 million in pre-tax realized gains before transfer to the IMR.

In 2016, the Company sold certain bonds to an affiliate, Manubank (“MB”). These bonds had a book value of $12 million and fair value of $12 million. The Company did not recognize any pre-tax realized gains or losses before transfer to the IMR.

 

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NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

In 2016, the Company sold certain bonds to an affiliate Manulife International Ltd (“MIL”). These bonds had a book value of $67 million and fair value of $75 million. The Company recognized $8 million in pre-tax realized gains before transfer to the IMR.

In 2016, the Company sold certain bonds to an affiliate MLRL. These bonds had a book value of $25 million and fair value of $29 million. The Company recognized $4 million in pre-tax realized gains before transfer to the IMR.

In 2016, the Company sold certain bonds to an affiliate Manulife Reinsurance Ltd Partner (“MRLP”). These bonds had a book value of $211 million and fair value of $221 million. The Company recognized $10 million in pre-tax realized gains before transfer to the IMR.

In 2016, the Company received, at fair value, certain bonds from an affiliate, JHNY in lieu of reinsurance cash settlement, for $26 million.

In 2016, the Company acquired, at fair value, certain bonds from an affiliate, JHNY, for $343 million.

In 2016, the Company acquired, at fair value, certain bonds from an affiliate, MIL, for $60 million.

In 2016, the Company acquired, at fair value, certain bonds from an affiliate, MLRL, for $29 million.

In 2016, the Company acquired, at fair value, certain bonds from an affiliate, MLS, for $21 million.

In 2016, the Company acquired, at fair value, certain bonds from an affiliate, JHLH, for $140 million.

In 2015, the Company transferred certain bonds to an affiliate, 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, MLI Bermuda. 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) (“MILHK”). 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, 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.

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Preferred and Common Stocks

Cost and Fair Value of the Company’s investments in Preferred and Common Stocks are summarized as follow:

 

     Cost     

Gross

Unrealized

Gains

     

Gross

Unrealized

Losses

     Fair Value  
  

 

 

  
     (in millions)  

December 31, 2017:

           

Preferred stocks:

           

Nonaffiliated

        $   11      $   3      $ -     $   14  

Affiliates

      -        -        -       -  

Common stocks:

           

Nonaffiliated

      1,131        235        (12 )      1,354  

Affiliates*

      1,589        971        -       2,560  
  

 

 

  

Total stocks

        $   2,731      $   1,209      $    (12 )    $   3,928  
  

 

 

  
     Cost     

Gross

Unrealized

Gains

     

Gross

Unrealized

Losses

     Fair Value  
  

 

 

  
     (in millions)  

December 31, 2016:

           

Preferred stocks:

           

Nonaffiliated

        $   25      $   15      $ -     $   40  

Affiliates

      -        -        -       -  

Common stocks:

           

Nonaffiliated

      949        126        (12 )      1,063  

Affiliates*

      1,387        2,042        -       3,429  
  

 

 

  

Total stocks

        $   2,361      $   2,183      $   (12 )    $   4,532  
  

 

 

  
* Affiliates - fair value represents the carrying value

At December 31, 2017 and 2016, there were 136 and 192 nonaffiliated equity securities that had a gross unrealized loss excluding securities that have been written down to zero. The single largest unrealized loss was $3 million and $3 million at December 31, 2017 and 2016, 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, 2017, 2016 and 2015, realized capital losses include $2 million, $24 million, $4 million and related to preferred and common stocks that have experienced an other-than-temporary decline in value and were comprised of 81, 108, and 115 securities, respectively. These are primarily made up of impairments on public and private common stocks.

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Affiliate Transactions

In 2017, the Company acquired at fair value, certain common stocks from an affiliate, JHLH, for $43 million.

Mortgage Loans on Real Estate

At December 31, 2017 and 2016, 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, 2017:

 

Property Type   

Carrying

Value

       

Geographic

Concentration

   

Carrying

Value

  

 

       

 

  
     (in millions)             (in millions)  

Apartments

        $ 2,560        East North Central        $ 1,574  

Industrial

      907        East South Central      187  

Office buildings

      3,168        Middle Atlantic      1,868  

Retail

      3,652        Mountain      527  

Agricultural

      139        New England      579  

Agribusiness

      303        Pacific      3,604  

Mixed use

      22        South Atlantic          2,449  

Other

          1,163        West North Central      384  
        West South Central      660  
        Canada / Other      82  

Allowance

      (14 )       Allowance      (14 ) 
  

 

 

          

 

 

  

Total mortgage loans on real estate

        $ 11,900        Total mortgage loans on real estate        $ 11,900  
  

 

 

          

 

 

  

 

December 31, 2016:

 

   
Property Type    Carrying
Value		       

Geographic

Concentration

    Carrying
Value		  

 

       

 

  
     (in millions)             (in millions)  

Apartments

        $ 2,501        East North Central        $ 1,554  

Industrial

      872        East South Central      167  

Office buildings

      3,064        Middle Atlantic      1,856  

Retail

      3,538        Mountain      531  

Agricultural

      157        New England      572  

Agribusiness

      424        Pacific      3,581  

Mixed use

      22        South Atlantic          2,381  

Other

          1,060        West North Central      399  
        West South Central      511  
        Canada / Other      86  

Allowance

      (7 )       Allowance      (7 ) 
  

 

 

          

 

 

  

Total mortgage loans on real estate

        $ 11,631        Total mortgage loans on real estate        $ 11,631  
  

 

 

          

 

 

  

The aggregate mortgages outstanding to any one borrower do not exceed $342 million.

During 2017, the respective maximum and minimum lending rates for mortgage loans issued were 4.60% and 4.15% for agricultural loans and 5.75% and 3.49% for commercial loans. The Company issued no purchase money mortgages in 2017 and 2016. 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, 2017, 2016 and 2015, respectively. The average recorded investment in impaired loans was $31 million, $25 million, and $34 million at December 31, 2017, 2016 and 2015, respectively. The

 

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NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

5. Investments - (continued)

 

Company recognized $0 million, $1 million, and $2 million of interest income during the period the loans were impaired for the years ended December 31, 2017, 2016 and 2015, respectively.

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.

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,  
     2017      2016  
  

 

 

  
     (in millions)  

AAA

        $ 250          $ 232  

AA

      2,842        2,678  

A

          5,585            5,555  

BBB

      3,095        3,037  

BB

      98        111  

B and lower and unrated

      30        18  
  

 

 

  

Total

        $ 11,900          $ 11,631  
  

 

 

  

Affiliate Transactions

In 2017, the Company transferred two mortgages to an affiliate, Clarendon Real Estate, LLC (“CRE LLC”). The mortgages had a book value of $7 million and fair value of $7 million at the date of the transaction. The Company did not recognize any pre-tax realized gains or losses before transfer to the IMR.

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 did not recognize any pre-tax realized gains or losses before transfer to the IMR.

 

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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,  
     2017     2016  
  

 

 

  
     (in millions)  

Properties occupied by the company

        $ 396         $ 392  

Properties held for the production of income

        6,086         6,150  

Properties held for sale

      -       395  

Less accumulated depreciation

      (760 )      (689 ) 
  

 

 

  

Total

        $ 5,722         $ 6,248  
  

 

 

  

The Company recorded $0 million, $38 million, and $0 million of impairments on real estate investments during the years ended December 31, 2017, 2016 and 2015, respectively.

In 2017, the Company entered into an arrangement to sell four real estate properties to Hancock U.S Real Estate Fund, LP. These properties had a book value of $325 million and fair value of $471 million, resulting in pre-tax realized gains of $135 million and a deferred gain of $10 million. As part of this arrangement, the Company also committed approximately $44 million for an 11.7% equity interest in the fund.

On May 20, 2016, the Company entered into an arrangement to sell three real estate properties to Manulife U.S. Real Estate Investment Trust (“REIT”) for $777 million. These properties had a book value of $524 million and fair value of $769 million. Approximately 62% of the $245 million gain from operations was ceded to an affiliate reinsurer. The Company recognized an after-tax gain, after reinsurance of $60 million.

Other Invested Assets

The Company had no investments in partnerships or LLCs that exceed 10% of its admitted assets at December 31, 2017 and 2016.

Other invested assets primarily consist of investments in partnerships and LLCs. The Company recorded $0 million, $99 million, and $120 million of impairments on partnerships and LLCs during the years ended December 31, 2017, 2016 and 2015, 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.

 

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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, 2017 or 2016.

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, 2017 and 2016, 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, MRBL whereby cash collateral can be received under a repurchase agreement program. There was no repurchase agreement activity in 2017.

For securities lending transactions, the Company’s policy is to require a minimum of 102% of the fair value of securities loaned to be maintained as collateral. Positions are marked to market and adjusted on a daily basis to ensure the 102% margin requirement is maintained. There were no securities on loan as of December 31, 2017 or 2016.

 

F-25

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:

 

     2017     2016     2015  
  

 

 

  
     (in millions)  

Income:

       

Bonds

        $ 2,146         $ 2,232         $ 2,231  

Preferred stocks

      -       -       -  

Common stocks

      23       225       372  

Mortgage loans on real estate

      610       609       670  

Real estate

      704       762       722  

Policy loans

      176       167       190  

Cash, cash equivalents and short-term investments

      33       18       8  

Other invested assets

      1,014       506       466  

Derivatives

      483       594       520  

Other income

      12       30       27  
  

 

 

  

Total investment income

        5,201         5,143         5,206  

Expenses

       

Investment expenses

      (509 )      (529 )      (533 ) 

Investment taxes, licenses and fees, excluding federal income taxes

      (93 )      (94 )      (84 ) 

Investment interest expense

      (50 )      (82 )      (84 ) 

Depreciation on real estate and other invested assets

      (123 )      (130 )      (118 ) 
  

 

 

  

Total investment expenses

      (775 )      (835 )      (819 ) 
  

 

 

  

Net investment income

        $ 4,426         $ 4,308         $ 4,387  
  

 

 

  

Realized capital gains (losses) and amounts transferred to the IMR are as follows:

 

     2017     2016     2015  
  

 

 

  
     (in millions)  

Realized capital gains (losses)

        $ 722         $ (494 )        $ 965  

Less amount transferred to the IMR (net of related tax benefit (expense) of $(475) in 2017, $31 in 2016, and $(138) in 2015)

      882       (57 )      256  
  

 

 

  

Realized capital gains (losses) before tax

      (160 )      (437 )      709  

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

        243         496         493  
  

 

 

  

Net realized capital gains (losses)

        $ (403 )        $ (933 )        $ 216  
  

 

 

  

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.

 

F-26

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

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, 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 and interest rate treasury locks 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.

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.

 

F-27

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

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”). 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.

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.

 

F-28

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

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, 2017  
          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

        $ 1,870      $ -      $ 2      $ 308      $ 128  
  

Foreign currency swaps

      45        -        9        -        15  

Cash flow hedges

   

Interest rate swaps

      8,116        -        -        896        283  
  

Foreign currency swaps

      1,549        78          45          295          268  
  

Foreign currency forwards

      132        -        -        -        3  
  

Interest rate treasury locks

      880        -        -        58        -  
  

Equity total return swaps

      36        -        -        9        -  
     

 

 

  

Total Derivatives in Effective Hedge Accounting Relationships

        $ 12,628      $ 78      $ 56      $ 1,566      $ 697  
  

 

 

  

Other Hedging Relationships

               
  

Interest rate swaps

        $ 121,799      $ 8,284      $ 4,041      $ 8,284      $ 4,041  
  

Interest rate treasury locks

          10,728            630        13        630        13  
  

Interest rate options

      8,014        247        -        247        -  
  

Interest rate futures

      -        -        -        -        -  
  

Foreign currency swaps

      322        57        13        57        13  
  

Foreign currency forwards

      535        2        5        2        5  
  

Foreign currency futures

      -        -        -        -        -  
  

Equity total return swaps

      100        20        -        20        -  
  

Equity index options

      4,113        319        1        319        1  
  

Equity index futures

      -        -        -        -        -  
  

Credit default swaps

      -        -        -        -        -  
     

 

 

  

Total Derivatives in Other Hedging Relationships

        $ 145,611      $ 9,559      $ 4,073      $ 9,559      $ 4,073  
  

 

 

  

Replication Synthetic Asset Transactions

               
  

Interest rate swaps

        $ 3,135      $ -      $ -      $ 98      $ 102  
  

Credit default swaps

      30        -        -        -        -  
     

 

 

  

Total Derivatives in Replication Synthetic Asset Transactions

        $ 3,165      $ -      $ -      $ 98      $ 102  
  

 

 

  

Total Derivatives

        $ 161,404      $ 9,637      $ 4,129      $ 11,223      $ 4,872  
     

 

 

  

 

F-29

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

          December 31, 2016  
          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

        $ 2,982      $ -      $ -      $ 398      $ 177  
  

Foreign currency swaps

      63        1        8        -        16  

Cash flow hedges

   

Interest rate swaps

        9,443        -        -        1,164        282  
  

Foreign currency swaps

      1,550        143        79        375        316  
  

Foreign currency forwards

      209        -        -        -        17  
  

Equity total return swaps

      33        -        -        11        -  
     

 

 

  

Total Derivatives in Effective Hedge Accounting Relationships

        $ 14,280      $ 144      $ 87      $ 1,948      $ 808  
  

 

 

  

Other Hedging Relationships

               
  

Interest rate swaps

        $   122,946      $ 9,855      $ 4,808      $ 9,855      $ 4,808  
  

Interest rate treasury locks

      10,579            243            467              243            467  
  

Interest rate options

      6,994        280        -        280        -  
  

Interest rate futures

      -        -        -        -        -  
  

Foreign currency swaps

      322        78        5        78        5  
  

Foreign currency forwards

      77        8        -        8        -  
  

Foreign currency futures

      -        -        -        -        -  
  

Equity total return swaps

      140        10        3        10        3  
  

Equity index options

      3,428        232        -        232        -  
  

Equity index futures

      -        -        -        -        -  
  

Credit default swaps

      -        -        -        -        -  
     

 

 

  

Total Derivatives in Other Hedging Relationships

        $ 144,486      $ 10,706      $ 5,283      $ 10,706      $ 5,283  
  

 

 

  

Replication Synthetic Asset Transactions

               
  

Interest rate swaps

        $ 3,135      $ -      $ -      $ 86      $ 115  
  

Credit default swaps

      65        1        -        1        -  
     

 

 

  

Total Derivatives in Replication Synthetic Asset Transactions

        $ 3,200      $ 1      $ -      $ 87      $ 115  
  

 

 

  

Total Derivatives

        $ 161,966      $ 10,851      $ 5,370      $ 12,741      $ 6,206  
     

 

 

  

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, 2017, 2016 and 2015, respectively, the Company recorded unrealized gains (losses) of $ 402 million, $ 436 million, and ($ 33) 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 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.

 

F-30

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

6. Derivatives - (continued)

 

For the year ended December 31, 2017, 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 29 years.

Derivatives Not Designated as Hedging Instruments 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-31

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, 2017, 2016 and 2015 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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Other Hedging Relationships

       

Net unrealized capital gain (loss):

       

Interest rate swaps

        $ (805 )    $ 773     $ 367  

Interest rate treasury locks

      841       (435 )      (728 ) 

Interest rate options

      (73 )      (8 )      16  

Foreign currency swaps

      6       (31 )      -  

Foreign currency forwards

      (11 )      -       5  

Equity total return swaps

      3       (4 )      2  

Equity index options

      102       68       (76 ) 

Credit default swaps

      -       -       -  
  

 

 

  

Total net unrealized capital gain (loss)

        $ 63     $ 363     $ (414 ) 
  

 

 

  

Net realized capital gain (loss):

       

Interest rate swaps

        $ 874     $ (490 )    $ (495 ) 

Interest rate treasury locks

      34       342           446  

Interest rate options

      (3 )      -       -  

Interest rate futures

      273       (23 )      (25 ) 

Foreign currency swaps

      4       3       4  

Foreign currency forwards

      16       24       26  

Foreign currency futures

      (111 )      94       99  

Equity total return swaps

      (9 )      (9 )      11  

Equity index options

      22       (98 )      (18 ) 

Equity index futures

        (1,104 )        (1,007 )      (42 ) 

Credit default swaps

      -       -       -  

Commodity futures

      -       -       -  
  

 

 

  

Total net realized capital gain (loss)

        $ (4 )    $ (1,164 )    $ 6  
  

 

 

  

Total gain (loss) from derivatives in other hedging relationships

        $ 59     $ (801 )    $ (408 ) 
  

 

 

  

The Company also deferred net realized gains (losses) of $ 872 million, ($ 526) million, and ($ 495) million (including $ 874 million, ($ 490) million, and ($ 495) million of gains (losses) for derivatives in other hedging relationships, respectively) related to interest rates for the years ended December 31, 2017, 2016 and 2015, 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. 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-32

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, 2017 and 2016, respectively

 

     December 31, 2017      December 31, 2016  
  

 

 

  
     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

        $ 10      $ -        1          $ 10      $ -        2  

AA

        10        -        -          10        -        1  

A

      10        -        1        45          1        1  

BBB

      -          -        -        -        -        -  
  

 

 

        

 

 

     

Total CDS protection sold

        $ 30      $ -             $ 65      $ 1     
  

 

 

        

 

 

     
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, 2017 and 2016. 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, 2017 and 2016, the Company accepted collateral consisting of cash of $ 1,973 million and $ 1,907 million, and various securities with a fair value of $ 4,360 million and $ 4,656 million, respectively, which is held in separate custodial accounts and not reflected within these financial statements. 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-33

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 a currency swap agreement with JHFC which was recorded at fair value. JHFC utilizes the currency swap to hedge currency exposure on foreign currency financial instruments. The Company has also entered into currency swap agreements with external counterparties which offset the currency swap agreement with JHFC. As of December 31, 2017 and 2016, the currency swap agreements with JHFC and the external counterparties had offsetting fair values of $ 261 million and $ 315 million, respectively.

The Company has entered into equity total return swap agreements with MLI which are recorded at fair value. JHUSA utilizes the equity total return swaps to hedge equity exposure on restricted share units (“RSU”). As of December 31, 2017 and 2016, the equity total return swap agreements with MLI had a fair value of $30 million and $16 million.

In 2017, the Company repositioned interest rate swaps supporting affiliate reinsurance with John Hancock Reassurance Company Limited. The transaction resulted in a pre-tax gain of $24 million and a post-tax increase to surplus of $16 million, net of amounts transferred to the interest maintenance reserve (IMR) and ceded to the affiliate reinsurer.

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. Fair value of commercial mortgages is derived through an internal valuation methodology using both observable and unobservable inputs. Unobservable inputs include credit assumptions and liquidity spread adjustments. Fair value of fixed-rate residential mortgages is determined using the discounted cash flow method. Inputs used for valuation are primarily comprised of prevailing interest rates and prepayment rates, if applicable. Fair value of variable-rate residential mortgages is assumed to be their carrying value.

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.

 

F-34

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

Policyholders’ and Beneficiaries Funds – Includes term certain contracts and supplementary contracts without life contingencies. The fair values associated with the term certain contracts 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. Effective December 31, 2016, fair value disclosure is no longer required 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 and provides no additional disclosure value.

Consumer Notes – The fair value of consumer notes is determined by projecting cash flows and using a spread assumption associated with the specific risks in the Signature Note contracts. The spread is calculated by taking the difference between the contractual crediting rate and the yield curve as of the issue date of each Signature Note. The calculated spread is added to the yield curve as of each future valuation date to determine the fair value of the Signature Notes.

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 reflecting market transactions. 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. Most bonds are classified within Level 2. Also, included in the Level 2 category are certain separate account assets and derivative assets and liabilities.

 

  •  

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.

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. Judgement 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:

 

F-35

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

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.

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

 

F-36

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

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.

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, 2017  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bond with NAIC 6 rating:

               

Industrial and misc

        $ 22          $ 22          $ -          $ 12          $ 10  

Loan-backed and structured securities

      6        6        -        -        6  
  

 

 

  

Total bonds with NAIC 6 rating

      28        28        -        12        16  

Preferred stocks:

               

Industrial and misc

      -        -        -        -        -  
  

 

 

  

Total preferred stocks

      -        -        -        -        -  

Common stocks:

               

Industrial and misc

      1,354        1,354        1,220        -        134  
  

 

 

  

Total common stocks

      1,354        1,354        1,220        -        134  

Derivatives:

               

Interest rate swaps

      8,284        8,284        -        8,284        -  

Interest rate treasury locks

      630        630        -        61        569  

Interest rate options

      247        247        -        67        180  

Interest rate futures

      -        -        -        -        -  

Foreign currency swaps

      57        57        -        57        -  

Foreign currency forwards

      2        2        -        2        -  

Foreign currency futures

      -        -        -        -        -  

Equity total return swaps

      20        20        -        -        20  

Equity index options

      319        319        -        319        -  

Equity index futures

      -        -        -        -        -  

Credit default swaps

      -        -        -        -        -  
  

 

 

  

Total derivatives

      9,559        9,559        -        8,790        769  

Assets held in separate accounts

      141,167        141,167        136,373        2,950        1,844  
  

 

 

  

Total assets

        $ 152,108          $ 152,108          $ 137,593          $   11,752          $ 2,763  
  

 

 

  

Liabilities:

               

Derivatives:

               

Interest rate swaps

        $ 4,041          $ 4,041          $ -          $ 4,001          $ 40  

Interest rate treasury locks

      13        13        -        12        1  

Interest rate options

      -        -        -        -        -  

Interest rate futures

      -        -        -        -        -  

Foreign currency swaps

      13        13        -        13        -  

Foreign currency forwards

      5        5        -        5        -  

Foreign currency futures

      -        -        -        -        -  

Equity total return swaps

      -        -        -        -        -  

Equity index options

      1        1        -        1        -  

Equity index futures

      -        -        -        -        -  

Credit default swaps

      -        -        -        -        -  
  

 

 

  

Total derivatives

      4,073        4,073        -        4,032        41  

Liabilities held in separate accounts

        141,167          141,167          136,373          2,950          1,844  
  

 

 

  

Total liabilities

        $ 145,240          $ 145,240          $ 136,373          $ 6,982          $ 1,885  
  

 

 

  

 

F-37

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

     December 31, 2016  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bond with NAIC 6 rating:

               

Industrial and misc

        $ 17          $ 17          $ -          $ -          $ 17  

Loan-backed and structured securities

      7        7        -        -        7  
  

 

 

  

Total bonds with NAIC 6 rating

      24        24        -        -        24  

Preferred stocks:

               

Industrial and misc

      -        -        -        -        -  
  

 

 

  

Total preferred stocks

      -        -        -        -        -  

Common stocks:

               

Industrial and misc

      1,063        1,063        894        -        169  
  

 

 

  

Total common stocks

      1,063        1,063        894        -        169  

Derivatives:

               

Interest rate swaps

      9,855        9,855        -        9,855        -  

Interest rate treasury locks

      243        243        -        1        242  

Interest rate options

      280        280        -        108        172  

Interest rate futures

      -        -        -        -        -  

Foreign currency swaps

      78        78        -        78        -  

Foreign currency forwards

      8        8        -        8        -  

Foreign currency futures

      -        -        -        -        -  

Equity total return swaps

      10        10        -        -        10  

Equity index options

      232        232        -        97        135  

Equity index futures

      -        -        -        -        -  

Credit default swaps

      -        -        -        -        -  
  

 

 

  

Total derivatives

      10,706        10,706        -          10,147        559  

Assets held in separate accounts

        131,147          131,147          125,847        3,404          1,896  
  

 

 

  

Total assets

        $ 142,940          $ 142,940          $ 126,741          $ 13,551          $ 2,648  
  

 

 

  

Liabilities:

               

Derivatives:

               

Interest rate swaps

        $ 4,808          $ 4,808          $ -          $ 4,773          $ 35  

Interest rate treasury locks

      467        467        -        32        435  

Interest rate options

      -        -        -        -        -  

Interest rate futures

      -        -        -        -        -  

Foreign currency swaps

      5        5        -        5        -  

Foreign currency forwards

      -        -        -        -        -  

Foreign currency futures

      -        -        -        -        -  

Equity total return swaps

      3        3        -        -        3  

Equity index options

      -        -        -        -        -  

Equity index futures

      -        -        -        -        -  

Credit default swaps

      -        -        -        -        -  
  

 

 

  

Total derivatives

      5,283        5,283        -        4,810        473  

Liabilities held in separate accounts

      131,147        131,147        125,847        3,404        1,896  
  

 

 

  

Total liabilities

        $ 136,430          $ 136,430          $ 125,847          $ 8,214          $ 2,369  
  

 

 

  

 

F-38

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, 2017  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bonds (1)

        $ 47,942          $ 49,997          $ -          $   47,017          $ 2,980  

Preferred stocks

      11        14        -        -        14  

Mortgage loans on real estate

      11,900        12,759        -        -        12,759  

Cash, cash equivalents and short term investments

      4,131        4,131          3,065        1,066        -  

Policy loans

      2,726        2,726        -        2,726        -  

Derivatives in effective hedge accounting and RSAT relationships

      78        1,664        -        1,596        68  
  

 

 

  

Total assets

        $ 66,788          $   71,291          $ 3,065          $ 52,405          $ 15,821  
  

 

 

  

Liabilities:

               

Consumer notes

        $ 197          $ 226          $ -          $ -          $ 226  

Borrowed money

      -        -        -        -        -  

Policy reserves

      1,364        1,354        -        -        1,354  

Policyholders’ and beneficiaries funds

      937        1,136        -        1,136        -  

Derivatives in effective hedge accounting and RSAT relationships

      56        799        -        618        181  
  

 

 

  

Total liabilities

        $ 2,554          $ 3,515          $ -          $ 1,754          $ 1,761  
  

 

 

  
     December 31, 2016  
     Carrying
Value		      Total Fair
Value		      Level 1      Level 2      Level 3  
  

 

 

  
     (in millions)  

Assets:

               

Bonds (1)

        $ 45,207          $ 46,015          $ -          $ 42,245          $ 3,770  

Preferred stocks

      25        40        -        -        40  

Mortgage loans on real estate

        11,631        12,391        -        -        12,391  

Cash, cash equivalents and short term investments

      3,879        3,879        2,509        1,370        -  

Policy loans

      2,722        2,722        -        2,722        -  

Derivatives in effective hedge accounting and RSAT relationships

      145        2,035        -        2,023        12  
  

 

 

  

Total assets

        $ 63,609          $ 67,082          $ 2,509          $ 48,360          $ 16,213  
  

 

 

  

Liabilities:

               

Consumer notes

        $ 201          $ 228          $ -          $ -          $ 228  

Borrowed money

      160        160        -        160        -  

Policy reserves

      1,455        1,439        -        -        1,439  

Policyholders’ and beneficiaries funds

      965        1,151        -        1,151        -  

Derivatives in effective hedge accounting and RSAT relationships

      87        923        -        760        163  
  

 

 

  

Total liabilities

        $ 2,868          $ 3,901          $ -          $ 2,071          $ 1,830  
  

 

 

  
(1) Bonds are carried at amortized cost unless they have NAIC designation rating of 6. Fair value of bonds exclude leveraged leases of $2,415 million and $ 2,316 million at December 31, 2017 and 2016, respectively. The Company calculates the carrying value by accruing income at its expected internal rate of return.

 

F-39

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, 2017 and 2016, 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, 2017 and 2016.

 

F-40

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, 2017, 2016 and 2015, are summarized as follows:

 

    

Balance

at

January

1, 2017

      Net
realized/unrealized
gains (losses) included
in:		    

Amounts

credited

to

separate

account

liabilities

(2)

      Purchases     

Issuances

     

Sales

    

Settlements

     Transfers    

Balance at

December

31, 2017

  
       

Net

income

(1)

     Surplus                 

Into

Level 3

(3)

     

Out of

Level 3 (3)

    
  

 

 

  
     (in millions)  

Bonds with NAIC 6 rating:

                            

Impaired corporate bonds

    $ 17      $ (1 )    $ 1     $ -      $ 3      $ -      $ (7 )    $ -     $ -      $ (3 )    $ 10  

Impaired mortgage-backed and asset-backed securities

      7        1       -       -        -        -        (2 )             -       -             -       6  
  

 

 

  

Total bonds with NAIC 6 rating

      24        -       1       -        3        -        (9 )      -       -        (3 )      16  

Preferred stocks:

                            

Industrial and misc

      -        -       -       -        -        -        -       -       -        -       -  
  

 

 

  

Total preferred stocks

      -        -       -       -        -        -        -       -       -        -       -  

Common stocks:

                            

Industrial and misc

      169        49       (24 )      -        8        -        (68 )      -       -        -       134  
  

 

 

  

Total common stocks

      169        49       (24 )      -        8        -        (68 )      -       -        -       134  

Net derivatives

      86        -         758       -        16        -        -       (59 )      -        (73 )      728  

Separate account assets/liabilities

        1,896        83       -       -        34        -        (164 )      -       6        (11 )      1,844  
  

 

 

  

Total

        $ 2,175          $   132         $ 735         $      -          $     61          $       -          $   (241 )        $ (59 )        $        6          $ (87 )        $   2,722  
  

 

 

  

 

F-41

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

    

Balance

at

January

1, 2016

      Net realized/unrealized
gains  (losses) included
in:		    

Amounts

credited to

separate

account

liabilities

(2)

      Purchases     

Issuances

     

Sales

    

Settlements

      Transfers    

Balance at

December

31, 2016

  
       

Net

income

(1)

     Surplus                  

Into

Level 3

(3)

     

Out of

Level 3 (3)

    
  

 

 

  
     (in millions)  

Bonds with NAIC 6 rating:

                             

Impaired corporate bonds

      $ 29      $ 1     $ (1 )    $ -      $ 1      $ -      $ (17 )    $ -      $ 4      $ -     $ 17  

Impaired mortgage-backed and asset-backed securities

      7        1       -          -        -        -        (1 )      -        -        -       7  
  

 

 

  

Total bonds with NAIC 6 rating

      36        2       (1 )      -        1           -        (18 )      -        4        -       24  

Preferred stocks:

                             

Industrial and misc

      -        -       -       -        -        -        -       -        -        -       -  
  

 

 

  

Total preferred stocks

      -        -       -       -        -        -        -       -        -        -       -  

Common stocks:

                             

Industrial and misc

      110        (1 )      37       -        25        -        (2 )      -        -        -       169  
  

 

 

  

Total common stocks

      110        (1 )           37       -        25        -        (2 )      -        -        -       169  

Net derivatives

      388        -       (407 )      -          152        -               -         -        -        (47 )      86  

Separate account assets/liabilities

        1,965          84       -       -        46        -        (234 )      -          11           24         1,896  
  

 

 

  

Total

    $ 2,499      $ 85     $ (371 )    $ -      $ 224      $ -      $   (254 )    $ -      $ 15      $ (23 )    $ 2,175  
  

 

 

  

 

F-42

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

7. Fair Value - (continued)

 

    

Balance

at

January

1, 2015

      Net realized/unrealized
gains  (losses) included
in:		    

Amounts

credited

to

separate

account

liabilities

(2)

      Purchases     

Issuances

     

Sales

    

Settlements

      Transfers    

Balance at

December

31, 2015

  
       

Net

income

(1)

     Surplus                  

Into

Level 3

(3)

     

Out of

Level 3 (3)

    
  

 

 

  
     (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  
  

 

 

  

 

(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-43

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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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums earned

       

Direct

        $   20,392     $   19,809     $   20,189  

Assumed

      605       872       1,867  

Ceded

      (2,711 )      (7,454 )      (5,733 ) 
  

 

 

  

Net

        $ 18,286     $   13,227     $   16,323  
  

 

 

  

Benefits to policyholders ceded

        $    (16,741 )    $    (15,271 )    $    (16,713 ) 

Reserve amounts ceded to reinsurers not authorized in the State of Michigan are mostly covered by funds withheld assets, 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, 2017, any material recoveries were collateralized or settled 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, 2017, there were no reinsurance agreements in effect such that the amount of losses paid or accrued through the statement date may result in a payment to the reinsurer of amounts which, in aggregate and allowing for offset of mutual credits from other reinsurance agreements with the same reinsurer, exceed the total direct premium collected under the reinsured policies.

As of December 31, 2017, if all reinsurance agreements were cancelled the estimated aggregate reduction in unassigned surplus is $4,375 million.

Non-Affiliated Reinsurance

The JHLICO closed block was established upon the demutualization of JHLICO for those designated participating policies that were in-force on February 1, 2000.

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

 

F-44

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

included the transfer to NYL of $8,916 million of invested assets and $5,282 million in net policy liabilities. In addition, the 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 amortized over a period of approximately 20 years.

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

 

     Year ended December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded

        $ (224 )        $ (264 )        $    (8,180 ) 

Premiums assumed

      91       106       3,272  

Benefits ceded

      (636 )      (615 )      (314 ) 

Benefits assumed

      254       246       126  

Other reinsurance receivable (payable)

      (1 )      (2 )      362  

Funds held by or deposited with reinsured companies

        3,316         3,483         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.

Affiliated Reinsurance

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

 

     Years ended December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded, net

        $    (177 )        $    (183 )        $    (2,231 ) 

Benefits ceded, net

      (424 )      (427 )      (436 ) 

Funds held by or deposited with reinsured companies

      -       -       -  

Other reinsurance receivable

      46       41       60  

Other amounts payable on reinsurance

      4       9       1  

Treaty settlement received (paid)*

        227         246         527  
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

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, variable universal 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.

 

F-45

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded

        $   (256 )        $   (517 )        $   (530 ) 

Premiums ceded, impact of treaty recaptured

      3,718       -       -  

Benefits ceded

      (782 )      (836 )      (756 ) 

Other reinsurance receivable

      2       -       -  

Other amounts payable on reinsurance

      -       24       25  

Funds held by or deposited with reinsured companies

        7,048       -       -  

Funds withheld from unauthorized reinsurers

      -         7,236         7,544  

Treaty settlement received (paid)*

      (8 )      (594 )      (468 ) 
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

The Company also reinsures a portion of the risk related to certain annuity policies. The reinsurance agreement is written on a modified coinsurance basis where the assets supporting the reinsured policies remain invested with the Company. On October 1, 2017, the Company recaptured the payout annuity policies with JHRECO. The recapture resulted in pre-tax income of $708 million and an increase in surplus, net of tax, of $460 million.

The Company reinsures a large portion of the Long Term Care (“LTC”) risk under a single accounting and capital regime, which helps to manage JHUSA’s overall risk profile and reduce strain on statutory surplus. JHUSA’s indirect parent company, MFC, is regulated on a global basis by the Canadian insurance regulator, The Office of the Superintendent of Financial Institution (“OSFI”), and reports its results on a consolidated International Financial Reporting Standards (“IFRS”) basis. As such, the agreement has no impact on the parent company financial results.

JHRECO does not retrocede any risks to a third party or affiliates. The risks assumed by JHRECO are solely the responsibility of JHRECO, but they are also retained within the parent company group. Reserve credits taken were $8,644 million and $8,320 million at December 31, 2017 and 2016, respectively. On December 31, 2017, JHRECO changed its domiciliary jurisdiction from Bermuda to the state of Michigan. As a result of the re-domestication of JHRECO, collateral was no longer required as of December 31, 2017. The total amount of collateral was $8,631 million as of December 31, 2016.

 

F-46

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

8. Reinsurance - (continued)

 

A description of the nature of the collateral (funds withheld by the reporting entity, assets placed in trust for the benefit of the captive, Letters of Credit, etc.), if applicable, as well as a tabular presentation of the value of all assets held by or on behalf of the captive reinsurer that back the long term care liabilities (including capital) are summarized below:

 

     Years ended December 31,  
     2017      2016  
  

 

 

  
     (in millions)  

Funds Withheld

        $ 7,048          $ 6,987  

Trust Assets

      -        1,644  

Letter of Credit

      -        -  
  

 

 

  

Total Value of Collateral

        $ 7,048          $ 8,631  
  

 

 

  

If needed for reserves credit, JHRECO is obligated to provide a letter of credit that conforms to Michigan regulatory requirements. The total of the letter of credit and other collateral must equal or exceed the reserve credit taken by JHUSA. As of December 31, 2017 and 2016, a letter of credit was not needed.

The available and required capital in the table below represent JHRECO’s capital position on a NAIC basis at December 31, 2017.

 

     Year ended
December  31,		  
     2017  
  

 

 

  
     (in millions)  

Available Capital

        $ 1,884  

Required Capital

        $ 262  

RBC Ratio

      718 % 

JHUSA’s Authorized Control Level (“ACL”) Risk Based capital impact on recapture of the LTC reinsurance agreement at December 31, 2017 and 2016 is as follows:

 

    

Available

Capital

     

Required

Capital

     

RBC

Ratio

  
  

 

 

  
             (in millions)  

As reported at December 31, 2017

        $ 10,761          $ 1,266          850 % 

Impact of JHRECO LTC Recapture

      854        189        -52 % 
  

 

 

  

Capital Gross of JHRECO LTC Cession

        $   11,615          $ 1,455          798 % 
  

 

 

  
    

Available

Capital

     

Required

Capital

     

RBC

Ratio

  
  

 

 

  
     (in millions)  

As reported at December 31, 2016

        $ 8,678          $ 1,071          810 % 

Impact of JHRECO LTC Recapture

      880        181        -47 % 
  

 

 

  

Capital Gross of JHRECO LTC Cession

        $ 9,558          $   1,252          763 % 
  

 

 

  

 

F-47

Table of Contents

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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded

        $    (3,320 )        $    (3,978 )        $    5,332  

Benefits ceded

         (11,653 )         (10,494 )         (12,125 ) 

Other reinsurance receivable

      25       -       -  

Other amounts payable on reinsurance

      389       605       351  

Funds withheld from unauthorized reinsurers

      -       227       240  

Treaty settlement received (paid)*

      480       (142 )      (712 ) 
* 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.

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, OSFI, and reports on a consolidated 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 $1,873 million and $2,434 million as a coinsurance reserve and JHUSA holds $109 million and $185 million as a modified coinsurance reserve at December 31, 2017 and 2016, respectively. 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 million and $0 million at December 31, 2017 and 2016, respectively, 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 Company entered into a Stop Loss Reinsurance Agreement with (“MRBL”), effective April 1, 2017, simultaneous with entering into a coinsurance with partial funds withheld agreement with MMRC, as described below.

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

 

     Years ended December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded

        $ (255 )        $ (298 )        $ (392 ) 

Benefits ceded

        (545 )        (468 )        (448 ) 

Other reinsurance receivable

      -       5       36  

Other amounts payable on reinsurance

      7       -       -  

Funds withheld from unauthorized reinsurers

      66       -       -  

Treaty settlement received (paid)*

      (28 )      (74 )      14  
* 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.

The table and commentary below consist of the impact of the reinsurance agreement with an affiliate, JHLH:

 

     Years ended December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Premiums ceded

        $ (27 )        $ (28 )        $ (28 ) 

Premiums assumed

      -       241       -  

Benefits ceded

        (19 )        (10 )        (10 ) 

Benefits assumed

      22       8       -  

Other reinsurance receivable

      -       1       -  

Other amounts payable on reinsurance

      7       -       -  

Funds withheld from authorized reinsurers

      -       3       5  

Treaty settlement received (paid)*

      (28 )      7       20  
* Treaty settlement consisted primarily of ceded investment income, ceded benefit payments and ceded statutory reserves.

On December 31, 2016, the Company entered into a coinsurance agreement with an affiliate, JHLH, to reinsure 100% of a block of single premium universal life policies. The transaction included the transfer from JHLH of $282 million of invested assets and $241 million in net policy liabilities. The transaction resulted in a pre-tax gain and ceding commission received of $36 million and an increase in surplus of $52 million, net of tax.

 

F-49

Table of Contents

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 agreement with an affiliate, MMRC:

 

     Year ended December 31,  
     2017  
     (in millions)  

Premiums ceded

        $ (373 ) 

Premiums assumed

      -  

Benefits ceded

      (14 ) 

Benefits assumed

      -  

Other reinsurance receivable

      -  

Other amounts payable on reinsurance

      18  

Funds withheld from authorized reinsurers

      50  

Treaty settlement received (paid)*

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

Effective April 1, 2017, the Company entered into a coinsurance with partial FWH agreement with an affiliate, MMRC, to reinsure 100% of the Company’s in-force single-life term life insurance policies and related riders, for certain policy years. The transaction included the transfer to MMRC of $284 million in net policy liabilities. Also, the Company recognized $33 million of FWH liabilities. The transactions resulted in a pre-tax gain of $251 million, including a ceding commission received of $252 million, and an increase in surplus of $163 million, net of tax, which was deferred and will be amortized over a period of approximately 15 years.

The reinsurance agreement with MMRC was entered into to address the surplus strain caused by the excess of XXX NAIC reserves over the VM-20 reserve levels. This transaction was within the scope of Actuarial Guideline 48, the NAIC Term Life and Universal Life with Secondary Guarantees (XXX/AXXX) Credit for Reinsurance Model Regulation (“AG 48”). In accordance with the terms of AG 48, the obligations of MMRC under the reinsurance agreement will be supported by a FWH account and a credit-linked note. The FWH account will be funded with assets meeting the definition of “Primary Security” under AG 48 and in an amount equal to or in excess of the VM-20 reserve. The credit-linked note will be in the amount of the excess of the statutory reserves over the then current “Required Level of Primary Security”.

 

F-50

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, 2017  
    

(1)

Ordinary

    

(2)

Capital

    

(3)

(Col 1 + 2)

Total

  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ 2,432         $ 63         $ 2,495  

(b) Statutory valuation allowance adjustments

      121       -       121  
  

 

 

  

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

      2,311       63       2,374  

(d) Deferred tax assets nonadmitted

      -       -       -  
  

 

 

  

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

        2,311       63         2,374  

(f) Deferred tax liabilities

      2,289       72       2,361  
  

 

 

  

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

        $ 22         $ (9 )        $ 13  
  

 

 

  
     December 31, 2016  
    

(4)

Ordinary

    

(5)

Capital

    

(6)

(Col 4 + 5)

Total

  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ 2,827         $ 128         $ 2,955  

(b) Statutory valuation allowance adjustments

      121       -       121  
  

 

 

  

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

      2,706       128       2,834  

(d) Deferred tax assets nonadmitted

      -       -       -  
  

 

 

  

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

        2,706         128         2,834  

(f) Deferred tax liabilities

      2,580       77       2,657  
  

 

 

  

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

        $ 126         $ 51         $ 177  
  

 

 

  
     Change  
    

(7)

(Col 1 - 4)

Ordinary

    

(8)

(Col 2 - 5)
Capital

    

(9)

(Col 7 + 8)

Total

  
  

 

 

  
     (in millions)  

(a) Gross deferred tax assets

        $ (395 )        $ (65 )        $ (460 ) 

(b) Statutory valuation allowance adjustments

      -       -       -  
  

 

 

  

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

        (395 )        (65 )        (460 ) 

(d) Deferred tax assets nonadmitted

      -       -       -  
  

 

 

  

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

      (395 )      (65 )      (460 ) 

(f) Deferred tax liabilities

      (291 )      (5 )      (296 ) 
  

 

 

  

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

        $ (104 )        $ (60 )        $ (164 ) 
  

 

 

  

The Company has recorded a valuation allowance against specific general business tax credit carryforwards of $121 million for the year ended December 31, 2017. 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 2027, 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-51

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, 2017  
    

(1)

Ordinary

     

(2)

Capital

     

(3)

(Col 1 + 2)

Total

  
  

 

 

  
     (in millions)  

2. Admission calculation components SSAP No. 101

         

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

        $ -          $ 53          $ 53  

(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)

      742        -        742  

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

      742        -        742  

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

        1,212        -        1,212  

(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.

      1,569        10        1,579  
  

 

 

  

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

        $ 2,311          $ 63          $ 2,374  
  

 

 

  
     December 31, 2016  
    

(4)

Ordinary

     

(5)

Capital

     

(6)

(Col 4 + 5)

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)

      774        120        894  

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

        1,502        120        1,622  

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

      774        120        894  

(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.

      1,932        8        1,940  
  

 

 

  

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

        $ 2,706          $   128          $   2,834  
  

 

 

  

 

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)

 

     Change  
    

(7)

(Col 1 - 4)

Ordinary

    

(8)

(Col 2 - 5)
Capital

    

(9)

(Col 7 + 8)

Total

  
  

 

 

  
     (in millions)  

2. Admission calculation components SSAP No. 101

       

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

        $ -     $ 53     $ 53  

(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)

      (32 )      (120 )      (152 ) 

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

      (760 )      (120 )      (880 ) 

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

        438         (120 )        318  

(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.

      (363 )      2       (361 ) 
  

 

 

  

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

        $    (395 )        $    (65 )        $    (460 ) 
  

 

 

  

 

     2017     2016  
  

 

 

  
     (in millions)  

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

      849 %      794 % 

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

        $   8,082         $   5,959  

Impact of tax planning strategies is as follows:

 

     December 31, 2017  
    

(1)

Ordinary

    

(2)

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)

        $   2,311         $   63  

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)

        $ 2,311         $ 63  

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

      0 %      0 % 

 

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)

 

     December 31, 2016  
    

(3)

Ordinary

    

(4)

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)

      $   2,706       $ 128  

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)

      $   2,706     $ 128  

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

      0 %      0 % 
     Change  
    

(5)

(Col 1 - 3)

Ordinary

    

(6)

(Col 2 - 4)

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)

    $ (395 )    $ (65 ) 

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)

    $ (395 )    $ (65 ) 

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

      0 %      0 % 

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-54

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)  
     2017      2016    

(Col 1 - 2)

Change

  
  

 

 

  
     (in millions)  

1. Current income tax

        

(a) Federal

        $   446          $   (121 )    $ 567  

(b) Foreign

      -        -       -  
  

 

 

  

(c) Subtotal

      446        (121 )      567  

(d) Federal income tax on net capital gains

      243        496       (253 ) 

(e) Utilization of capital loss carryforwards

      -        -       -  

(f) Other

      -        -       -  
  

 

 

  

(g) Federal and foreign income taxes incurred

        $   689          $   375     $ 314  
  

 

 

  

 

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)

 

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)  
     2017      2016     

(Col 1 - 2)

Change

  
  

 

 

  
     (in millions)  

2. Deferred tax assets:

         

(a) Ordinary:

         

(1) Discounting of unpaid losses

        $   -          $   -          $   -  

(2) Unearned premium reserve

      -        -        -  

(3) Policyholder reserves

      1,489        906        583  

(4) Investments

      88        257        (169 ) 

(5) Deferred acquisition costs

      357        550        (193 ) 

(6) Policyholder dividends accrual

      49        84        (35 ) 

(7) Fixed assets

      -        -        -  

(8) Compensation and benefits accrual

      28        44        (16 ) 

(9) Pension accrual

      16        -        16  

(10) Receivables - nonadmitted

      48        71        (23 ) 

(11) Net operating loss carryforward

      -        199        (199 ) 

(12) Tax credit carry-forward

      329        684        (354 ) 

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

      28        32        (5 ) 
  

 

 

  

(99) Subtotal

        $   2,432          $   2,827          $   (395 ) 

(b) Statutory valuation allowance adjustment

      121        121        -  

(c) Nonadmitted

      -        -        -  
  

 

 

  

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

        $   2,311          $ 2,706          $ (395 ) 

(e) Capital:

         

(1) Investments

        $   63          $ 128          $ (65 ) 

(2) Net capital loss carryforward

      -        -        -  

(3) Real estate

      -        -        -  

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

      -        -        -  
  

 

 

  

(99) Subtotal

        $   63          $ 128          $ (65 ) 

(f) Statutory valuation allowance adjustment

      -        -        -  

(g) Nonadmitted

      -        -        -  
  

 

 

  

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

        $   63          $ 128          $ (65 ) 

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

        $   2,374          $   2,834          $ (460 ) 

 

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)

 

3. Deferred tax liabilities:

         

(a) Ordinary:

         

(1) Investments

        $   1,178          $   2,170          $   (992 ) 

(2) Fixed assets

      18        -        18  

(3) Deferred and uncollected premium

      9        89        (80 ) 

(4) Policyholder reserves

      934        -        934  

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

      150        321        (171 ) 
  

 

 

  

(99) Subtotal

        $ 2,289          $ 2,580          $ (291 ) 

(b) Capital:

         

(1) Investments

        $ 72          $ 42          $ 30  

(2) Real estate

      -        -        -  

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

      -        35        (35 ) 
  

 

 

  

(99) Subtotal

        $ 72          $ 77          $ (5 ) 
  

 

 

  

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

        $ 2,361          $ 2,657          $ (296 ) 
  

 

 

  

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

        $ 13          $ 177          $ (164 ) 
  

 

 

  

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

 

     December 31,  
     2017      2016      Change  
  

 

 

  
     (in millions)  

Total deferred tax assets

        $   2,374          $   2,834          $   (460 ) 

Total deferred tax liabilities

      2,361        2,657        (296 ) 
  

 

 

  

Net deferred tax assets (liabilities)

        $   13          $ 177          $ (164 ) 
  

 

 

     

Tax effect of unrealized gains and losses

            628  

Tax effect of unrealized foreign exchange gains (losses)

            (71 ) 

Other

            5  
        

 

 

  

Change in net deferred income taxes

              $ (726 ) 
        

 

 

  

 

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)

 

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,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Ordinary provisions computed at statutory rate

        $ 962         $     294         $ (105 ) 

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

      253       (173 )          335  

Change in nonadmitted assets

      -       -       -  

Reinsurance

      22       (47 )      35  

Valuation allowance

      -       71       -  

Tax-exempt income

      (22 )      (16 )      (6 ) 

Nondeductible expenses

      1       (1 )      -  

Foreign tax expense gross up

      8       8       9  

Amortization of IMR

      (68 )      (78 )      (128 ) 

Tax recorded in surplus

      68       (4 )      37  

Dividend received deduction

      (184 )      (183 )      (230 ) 

Investment in subsidiaries

      (25 )      (25 )      (28 ) 

Prior year adjustment

      (151 )      (54 )      (21 ) 

Tax credits

      (24 )      (26 )      (42 ) 

Change in tax reserve

      4       (200 )      18  

Pension

      -       -       -  

Tax rate change

      570       -       -  

Other

      1         $ (1 )        $ (1 ) 
  

 

 

  

Total

        $ 1,415         $ (435 )        $ (127 ) 
  

 

 

  

Federal and foreign income taxes incurred

      446       (121 )      (778 ) 

Capital gains tax

      243       496       493  

Change in net deferred income taxes

      726         $ (810 )        $ 158  
  

 

 

  

Total statutory income tax expense (benefit)

        $   1,415         $ (435 )        $ (127 ) 
  

 

 

  

 

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)

 

As of December 31, 2017, the Company had the following carry forwards:

 

    

Origination

Year

     

Expiration

Year

      Amount  
  

 

 

  
     (in millions)  

Affordable housing tax credits

      2001        2021          $ 1  
     2002        2022        1  
     2003        2023        1  
     2004        2024        1  
     2005        2025        1  
     2006        2026        2  
     2007        2027        23  
     2008        2028        57  
     2009        2029        54  
     2010        2030        47  
     2011        2031        41  
     2012        2032        32  
     2013        2033        21  
     2014        2034        12  
     2015        2035        5  
     2016        2036        3  
        

 

 

  
             $     302  
        

 

 

  

Alternative minimum tax credits

      2002             $ 3  
     2003           7  
     2004           1  
     2008           2  
     2009           7  
        

 

 

  
             $ 20  
        

 

 

  

Other credits

      2000        2020          $ -  
     2001        2021        -  
     2002        2022        -  
     2003        2023        -  
     2004        2024        -  
     2005        2025        -  
     2006        2026        -  
     2007        2027        -  
     2008        2028        -  
     2009        2029        -  
     2010        2030        -  
     2011        2031        -  
     2012        2032        -  
     2013        2033        2  
     2014        2034        2  
     2015        2035        3  
     2016        2036        -  
        

 

 

  
             $ 7  
        

 

 

  

With the enactment of the Tax Cuts and Jobs Act on December 22, 2017, the net operating loss carryback provision is repealed effective January 1, 2018. The federal income taxes incurred on capital gains available for recoupment in the event of future net capital losses were $228 million, $0 million and $0 million for the years 2017, 2016 and 2015 respectively.

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

 

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 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 Natural Resource Corp.
Hancock Natural Resource Group Inc.    John Hancock Realty Advisors Inc.
JH 575 Rengstorff LLC    John Hancock Realty Mgt. Inc.
JH Hostetler LLC    John Hancock Signature Services Inc.
JH Kearny Mesa 5 LLC    Manulife (Michigan) Reassurance Company
JH Kearny Mesa 7 LLC    Manulife Reinsurance (Bermuda) Limited
JH Kearny Mesa 9 LLC    Manulife Reinsurance Limited
JH Networking Insurance Agency Inc.    Manulife Service Corporation
JH Ott LLC    MCC Asset Management Inc.
JHFS One Corp.    PT Timber Inc.
John Hancock Assignment Company    Signator Insurance Agency Inc.
John Hancock Financial Corporation    Signator Investors Inc.
John Hancock Financial Network Inc.    The Manufacturers Investment Corporation
John Hancock Insurance Agency Inc.   

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 ($156) million and ($193) million at December 31, 2017 and 2016, respectively, and are included in other assets or current federal income taxes payable on the Balance Sheets.

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. On March 30, 2016, the Company and the IRS finalized an agreement for tax years 2002-2009. The agreement applies the U.S. Tax Court’s opinion on the Company’s tax treatment of certain leveraged lease investments pertaining to tax years 1997-2001. There was no material impact to the Company’s financial position or results of operations as a result of the agreement.

In August 2017, the Company received and signed an IRS Revenue Agent Report for tax years 2010-2013. Tax years 2014 and forward are open under the statute of limitations.

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

9. Federal Income Taxes - (continued)

 

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

 

     2017     2016  
  

 

 

  
     (in millions)  

Balance at beginning of year

    $ 37     $ 1,967  

Additions based on tax positions related to the current year

      14       14  

Payments

      -         (1,535 ) 

Additions for tax positions of prior years

          22       28  

Reductions for tax positions of prior years

         (13 )      (437 ) 
  

 

 

  

Balance at end of year

    $ 60     $ 37  
  

 

 

  

Included in the balances as of December 31, 2017 and 2016, are $75 million and $37 million, respectively, of unrecognized benefits that, if recognized, would affect the Company’s effective tax rate. Included in the balances as of December 31, 2017 and 2016, are ($16) million and $0 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

The Company’s decrease in the liability in 2016 for unrecognized tax benefits is the result of the Company and the IRS finalizing an agreement on the treatment of certain leveraged lease investments.

The Company’s liability for unrecognized tax benefits is not expected to materially change in the next twelve months.

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 ($10) million, $177 million, and $0 million of interest benefit for the years ended December 31, 2017, 2016 and 2015, respectively. The Company had approximately $6 million and $27 million accrued for interest as of December 31, 2017 and 2016, respectively. The Company did not recognize any material penalties for the years ended December 31, 2017, 2016 and 2015.

With the enactment of the Tax Cuts and Jobs Act (the “Act”) on December 22, 2017, the Company has applied existing guidance to the best available information in the recording of its tax provisions reflected in the 2017 financial statements. In 2018, the Company will adjust its provisional amounts as further regulatory and IRS guidance emerges. Deferred Tax Assets and Deferred Tax Liabilities for Actuarial Liabilities both include a provisional amount of $672 million until policy level tax reserve computations are finalized. The revaluation of deferred tax assets and liabilities from 35% to 21% resulted in the following impacts: Change in Net Unrealized Capital Gains (Losses) less Capital Gains Tax, $767 million; Change in Net Unrealized Foreign Exchange Capital Gains (Losses), ($47) million; and Change in Net Deferred Income Tax, ($589) million.

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, 2017, 2016 and 2015, the Company paid ordinary dividends of $807 million, $0 million and $210 million and extraordinary dividends of $93 million, $0 million, and $0 million to its parent company MIC, 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

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

10. Capital and Surplus - (continued)

 

determined based on the various risk factors related to it. As of December 31, 2017 and 2016, 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 $585 million. During 2016, $405 million was repaid. 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, 2017, 2016 and 2015. Total interest paid through December 31, 2017 was $780 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 surplus notes which were to have matured on March 31, 2033 were repaid on November 1, 2016. For the years ended December 31, 2017, 2016, and 2015, the combined interest expense on the notes was $0 million, $31 million and $29 million, respectively.

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 125 basis points and is payable semi-annually. The note which was to have matured on December 15, 2016 was extended to December 14, 2021. Interest expense was $3 million, $3 million, and $2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Total interest paid through December 31, 2017 was $19 million.

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

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 $347 million, $329 million, and $377 million, respectively, for the years ended December 31, 2017, 2016 and 2015.

The Company has Administrative Service Agreements with its subsidiaries and affiliates 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 $767 million, $811 million, and $760 million for the years ended December 31, 2017, 2016 and 2015, 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.

 

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

11. Related Party Transactions - (continued)

 

Other

During 2017, 2016 and 2015, respectively, the Company received dividends of $31 million, $34 million, and $36 million from John Hancock Investment Management Services LLC, $72 million, $71 million, and $81 million from JHD, $0 million, $0 million, $0 million from JHNY, $0 million, $0 million, and $70 million from JHLH, $231 million, $214 million, and $289 million from John Hancock Subsidiaries, LLC (“JHS LLC”), and $0 million, $19 million, and $0 million from John Hancock Partnership Holdings I & II and $10 million, $0 million, and $0 million from CLA CRE Opportunity Fund I LP. These dividends are included in the Company’s net investment income.

During 2017 and 2016, the Company made a capital contribution of $0 million and $75 million to JHS LLC in exchange for one share of its common stock, respectively.

During 2017, the Company made a capital contribution of $40 million to its wholly-owned subsidiary, MMRC, in exchange for one hundred and one shares of the common stock of MMRC, respectively.

The Company did not own any shares of the stock of its parent, MIC, or its ultimate parent, MFC at December 31, 2017 and 2016, 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, 2017, 2016 and 2015, respectively.

The Company is the owner and beneficiary of corporate owned life insurance (“COLI”) policies issued by JHLH. The asset balances equal to the cash surrender value of the internal COLI policies was $558 million and $543 million at December 31, 2017 and 2016, 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,  
     2017      2016  
  

 

 

  
     (In millions)  

The Manufacturers Investment Corporation

        $ 134      $ 49  

John Hancock Financial Corporation

          114            119  

Manulife Reinsurance Limited

      56        14  

Manulife Reinsurance (Bermuda) Ltd.

      111        153  

Manulife (Michigan) Reassurance Company

      4        -  

John Hancock Life & Health Insurance Company

      180        84  

John Hancock Life Insurance Company Vermont

      -        33  

John Hancock Reassurance Company, Ltd.

      179        88  

John Hancock Life Insurance Company New York

      170        263  

John Hancock Investment Management Services LLC

      23        22  

John Hancock Subsidiaries LLC

      31        64  

John Hancock Insurance Agency, Inc.

      5        8  

Essex Corporation

      -        -  

Hancock Venture Partners, Inc.

      -        -  

JH Signature Services Inc.

      8        6  

JH Partnership Holdings I, II LP

      7        3  

John Hancock Energy Resources Management, Inc.

      -        1  

John Hancock Real Estate Finance

      -        -  

John Hancock Realty Advisors

      2        3  

JH Advisors LLC

      66        56  

Manulife Asset Management (US) LLC

      76        58  

Hancock Capital Investment Management LLC

      11        10  

John Hancock RPS, LLC

      31        5  

The Berkeley Financial Group, LLC

      2        1  

Manulife Holdings (USA), LLC

      -        -  

Signator Insurance Agency, Inc.

      11        4  

JH Networking Insurance Agency, Inc.

      5        2  

John Hancock Administrative Services LLC

      -        -  

John Hancock Financial Network, Inc.

      1        11  

Hancock Natural Resource Group, Inc.

      30        23  

Hancock Forest Management, Inc.

      5        5  

John Hancock Personal Financial Services, LLC

      2        -  
  

 

 

  

Total

        $   1,264      $   1,085  
  

 

 

  

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 $624 million, purchase other invested assets of $2,447 million, purchase real estate of $213 million, and issue agricultural and commercial mortgages of $92 million at December 31, 2017. If funded, loans related to real estate mortgages would be fully collateralized by related properties. Approximately 34% of these commitments expire in 2018.

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)  

2018

        $ 12  

2019

      11  

2020

      11  

2021

      8  

2022

      5  

Thereafter

        350  
  

 

 

  

Total

        $ 397  
  

 

 

  

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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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 investment in certain leveraged leases. On March 30, 2016, the Company and the IRS finalized an agreement determining the impact of the decision on tax years subsequent to the years that were decided by the Court. There was no material impact to the Company’s financial position or results of operations as a result of the agreement.

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.

Two class actions against the Company are pending, one in New York and one in California, in which claims are made that the Company breached, and continues to breach, the contractual terms of certain universal life policies issued between approximately 1990 and 2006 by including impermissible charges in its cost of insurance (“COI”) calculations. The Company believes that its COI calculations have been, and continue to be, in accordance with the terms of the policies. An agreement to settle the case pending in California for $60 million received preliminary court approval at a hearing on February 13, 2018. A hearing for final approval is scheduled for May 9, 2018. That case covers a class of approximately 104,000 current and former owners of Flex V policies. Discovery in the case pending in New York was completed at the end of 2017. Motion practice related to class certification in the New York case is due to be concluded by June 15. It is premature to attempt to predict any outcome or range of outcomes for this matter.

 

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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, 2017  
     General
Account		     

Separate

Account

with
Guarantees

     

Separate

Account
Nonguaranteed

      Total     

Percent

of Total

  
  

 

 

  
     (in millions)  

Subject to discretionary withdrawal:

               

With fair value adjustment

        $ 448          $ 400          $ 1,720          $ 2,568        2 % 

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

      2        -        -        2        0 % 

At fair value

      -        -        124,432        124,432        84 % 
  

 

 

  

Total with adjustment or at fair value

      450        400        126,152        127,002        86 % 

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

      5,412        -        -        5,412        4 % 

Not subject to discretionary withdrawal

      14,987        227        171        15,385        10 % 
  

 

 

  

Total (gross)

        20,849          627          126,323          147,799        100 % 
              

 

 

  

Reinsurance ceded

      4,526        -        -        4,526     
  

 

 

     

Total (net)

        $ 16,323          $ 627          $ 126,323          $ 143,273     
  

 

 

     
     December 31, 2016  
     General
Account		     

Separate

Account

with

Guarantees

      Separate
Account
Nonguaranteed		      Total     

Percent

of Total

  
  

 

 

  
     (in millions)  

Subject to discretionary withdrawal:

               

With fair value adjustment

        $ 675          $ 474          $ 1,733          $ 2,882        2 % 

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

      3        -        -        3        0 % 

At fair value

      -        -        115,422        115,422        83 % 
  

 

 

  

Total with adjustment or at fair value

      678        474        117,155        118,307        85 % 

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

      5,701        -        -        5,701        4 % 

Not subject to discretionary withdrawal

      14,848        640        146        15,634        11 % 
  

 

 

  

Total (gross)

      21,227        1,114        117,301        139,642        100 % 
              

 

 

  

Reinsurance ceded

      4,893        -        -        4,893     
  

 

 

     

Total (net)

        $ 16,334          $ 1,114          $ 117,301          $ 134,749     
  

 

 

     

 

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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 guaranteed 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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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,  
     2017      2016      2017      2016  
  

 

 

  
     (in millions)  

Group Annuity Contracts (401K)

        $ 87,377          $ 78,915          $ -          $ -  

Variable and Fixed Annuities

      35,552        35,077        23        25  

Life Insurance

          14,081            12,516        -        -  

Fixed Products - Institutional and stable value fund

      2,140        2,566        -        -  

Fixed Products - Retail

      26        27          413          452  

Investments - Funds

      1,555        1,569        -        -  
  

 

 

  

Total

        $ 140,731          $ 130,670          $ 436          $ 477  
  

 

 

  

To compensate the general account for the risk taken, the separate account paid risk charges and amounts toward separate account guarantees as follows:

 

    

Risk Charges

Paid to General
Account

      Amounts toward
Separate Account
Guarantees		  
  

 

 

  
     (in millions)  

2017

        $ 220          $ 62  

2016

        $ 231          $ 89  

2015

        $ 241          $ 59  

2014

        $ 252          $ 74  

2013

        $     263          $     109  

The Company had the following variable annuities with guaranteed benefits:

 

     December 31,  
     2017      2016  
  

 

 

  
     (in millions, except for ages)  

Account value

        $   36,044          $   35,588  

Amount of reserve held

      821        901  

Net amount at risk - gross

      4,817        7,031  

Weighted average attained age

      69        68  

The following assumptions and methodology were used to determine the amounts above at December 31, 2017 and 2016:

 

  •  

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 2017 and 2016, 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 2017 and 2016, 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,  
     2017      2016  
  

 

 

  
     (in millions)  

Type of Fund

      

Equity

        $ 28,880          $ 24,145  

Balanced

      10,009        15,300  

Bonds

      6,381        5,052  

Money Market

      519        556  
  

 

 

  

Total

        $   45,789          $   45,053  
  

 

 

  

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

 

    December 31,  
    2017     2016  
 

 

 

  
   

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

       $ -         $ 14,395         $ 14,395         $ -         $ 13,768         $ 13,768  
 

 

 

  

Reserves for accounts with assets at:

            

Fair value

        627       139,896       140,523       1,114       129,333          130,447  

Amortized cost

     -       -       -       -       -       -  
 

 

 

  

Total

       $   627         $    139,896         $    140,523         $    1,114         $    129,333         $    130,447  
 

 

 

  

 

F-70

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

14. Separate Accounts - (continued)

 

    December 31,  
    2017     2016  
 

 

 

  
   

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

       $ 400         $ 1,720         $ 2,120         $ 474         $ 1,733         $ 2,207  

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

     -       1,494       1,494       -       1,531       1,531  

At fair value

     -       134,740       134,740       -       122,924       122,924  

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

     -       1,771       1,771       -       2,903       2,903  
 

 

 

  

Subtotal

     400       139,725       140,125       474       129,091       129,565  

Not subject to discretionary withdrawal

     227       171       398       640       242       882  
 

 

 

  

Total

       $    627         $    139,896         $    140,523         $    1,114         $    129,333         $    130,447  
 

 

 

  

Amounts transferred to and from separate accounts are as follows:

 

     December 31,  
     2017     2016     2015  
  

 

 

  
     (in millions)  

Transfers to separate accounts

        $ 17,679     $    17,163     $    17,071  

Transfers from separate accounts

        26,385       22,744       23,625  
  

 

 

  

Net transfers to (from) separate accounts

        $ (8,706 )    $ (5,581 )    $ (6,554 ) 
  

 

 

  

 

F-71

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 $34 million, $30 million, and $35 million in 2017, 2016 and 2015, 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 2017, 2016 and 2015, 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 $328 million and $346 million at December 31, 2017 and 2016, 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 2017, 2016 and 2015, 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, 2017 and 2016 was $112 million and $97 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, 2017 and 2016 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 2017, 2016 and 2015, respectively.

 

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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, 2017, 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, 2017, the Company had no outstanding borrowings under the agreement.

At December 31, 2017, 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, 2017, the Company had no outstanding borrowings under the agreement.

At December 31, 2017, 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 2021. 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, 2017. At December 31, 2017, MFC and its subsidiaries, including the Company, had no outstanding borrowings under the agreement.

At December 31, 2017, the Company had a line of credit agreement established with JHS LLC totaling up to $120 million, which will expire February 15, 2022. Under the agreement, the Company may loan funds, when requested, at prevailing interest rates as determined in accordance with the line of credit agreement. At December 31, 2017, the Company had $55 million outstanding borrowings under the agreement with a fair value of $55 million. This loan replaced a senior note receivable for $30 million issued by JHS LLC during 2016, and an additional advance of $25 million on February 15, 2017. Interest on the loan is calculated at a fluctuating rate equal to the 360 day-year for the actual number of days elapsed and is payable annually. The combined interest income on the loans was $1 million and $0 million for the year ended December 31, 2017 and 2016.

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, 2017 and 2016 was $197 million and $201 million, respectively. Interest ranging from 4.8% to 6.0%. The notes are due in varying amounts to 2032.

Aggregate maturities of consumer notes are as follows: 2018-$43 million; 2019-$16 million; 2020-$0 million; 2021-$0 million; 2022-$13 million; and thereafter $125 million.

Interest expense on consumer notes, included in benefits to policyholders, was $11 million, $12 million, and $18 million in 2017, 2016 and 2015, respectively. Interest paid amounted to $11 million, $11 million, and $18 million in 2017, 2016 and 2015, respectively.

Affiliated Debt: Pursuant to a demand note receivable dated September 30, 2008, the Company had $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, 2016 since the counterparty is the parent entity of the Company; however, this note continued 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 was calculated at a fluctuating rate equal to 3-month LIBOR plus 180 basis points per annum. Interest income was $7 million, $7 million, and $6 million for the years ended December 31, 2017, 2016 and 2015, respectively. The demand note receivable was fully repaid on September 30, 2017.

Pursuant to a promissory note dated June 28, 2012, the Company borrowed $153 million from Manulife Finance Switzerland AG (“MFSA”). Interest on the loan was calculated at a fluctuating rate equal to 3-month LIBOR plus 90 basis points per annum and was 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

 

F-73

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 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 was calculated at a fluctuating rate equal to 3-month LIBOR plus 88 basis points per annum and was payable quarterly effective from June 28, 2015. On May 31, 2016, the maturity date was extended for a period of one year to June 28, 2017. Following the extension, the interest rate was amended and was calculated at a fluctuating rate equal to 3-month LIBOR plus 88 basis points per annum and was payable quarterly effective from June 28, 2016. On May 22, 2017, the maturity date was extended for a period of one year to June 28, 2018. Following the extension, the interest rate was amended and was calculated at a fluctuating rate equal to 3-month LIBOR plus 88 basis points per annum and was payable quarterly effective from June 28, 2017. Interest expense was $3 million, $3 million, and $2 million for the years ended December 31, 2017, 2016 and 2015, respectively. The promissory note was fully repaid as of December 31, 2017.

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 payable monthly. Interest expense was $0 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Pursuant to a senior note receivable dated December 9, 2014, the Company had $40 million outstanding with JHS LLC as of December 31, 2016. During 2017, JHS LLC repaid $15 million of the outstanding loan bringing the outstanding principal balance to $25 million with a fair value of $25 million as of December 31, 2017. 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, $1 million, and $1 million for the years ended December 31, 2017, 2016 and 2015, respectively.

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.

 

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

 

     December 31, 2017  
    

(1)

(Col 2 + 3)

Total

     

(2)

General
Account

     

(3)

Separate
Account

  
  

 

 

  
     (in millions)  

(a) Membership stock - Class A

        $ 19      $ 19      $ -  

(b) Membership stock - Class B

      -        -        -  

(c) Activity stock

      -        -        -  

(d) Excess stock

      -        -        -  

(e) Aggregate total

        $ 19      $ 19      $ -  

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

        $ 421        
     December 31, 2016  
    

(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        

FHLBI membership stock of $0 million and $18 million was classified as not eligible for redemption for the years ended December 31, 2017 and 2016, respectively.

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

 

     December 31, 2017  
     Fair Value      Carrying
Value		     

Aggregate Total

Borrowing

  
  

 

 

  
     (in millions)  

(a) General account

        $ -      $ -      $ -  

(b) Separate account

      -        -        -  
  

 

 

  

(c) Total collateral pledged

        $ -      $ -      $ -  
  

 

 

  
     December 31, 2016  
     Fair Value      Carrying
Value		     

Aggregate Total

Borrowing

  
  

 

 

  
     (in millions)  

(a) General account

        $ -      $ -      $ -  

(b) Separate account

      -        -        -  
  

 

 

  

(c) Total collateral pledged

        $    -      $    -      $    -  
  

 

 

  

 

F-75

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 indicates the maximum collateral pledged to the FHLBI during the year:

 

     December 31, 2017  
     Fair Value      Carrying
Value		     

Amount

Borrowed at Time
of Maximum

Collateral

  
  

 

 

  
     (in millions)  

(a) General account

        $ 803          $ 755          $   400  

(b) Separate account

      -        -        -  
  

 

 

  

(c) Total maximum collateral pledged

        $   803          $   755          $ 400  
  

 

 

  
     December 31, 2016  
     Fair Value      Carrying
Value		     

Amount Borrowed

at Time of

Maximum

Collateral

  
  

 

 

  
     (in millions)  

(a) General account

        $ -          $ -          $ -  

(b) Separate account

      -        -        -  
  

 

 

  

(c) Total maximum collateral pledged

        $ -          $ -          $ -  
  

 

 

  

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

 

     December 31, 2017  
    

(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, 2016  
    

(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 2017 was $400 million. The Company is not subject to any prepayment obligations under current borrowing agreements.

 

F-76

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

17. Closed Block

The Company operates a closed block 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.

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

Assets allocated to the closed block inure solely to the benefit of policyholders included in the closed block and will not revert to the benefit of the shareholders of the Company. In addition, if the assets allocated to the closed block and the revenues from the closed block business prove to be insufficient to pay the benefits guaranteed in the closed block, 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.

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

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

 

F-77

Table of Contents

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

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS – (CONTINUED)

 

17. Closed Block - (continued)

 

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

 

     JHUSA  
     2017      2016  
  

 

 

  
     (in millions)  

Assets:

      

Bonds

        $   2,744          $ 2,979  

Stocks:

      

Preferred stocks

      -        -  

Common stocks

      -        -  

Mortgage loans on real estate

      247        271  

Real estate

      704        817  

Cash, cash equivalents and short-term investments

      4        17  

Policy loans

      1,694        1,686  

Other invested assets

      248        140  
  

 

 

  

Total cash and invested assets

      5,641        5,910  

Investment income due and accrued

      102        108  

Premiums due and deferred

      5        9  

Net deferred tax asset

      73        144  

Other closed block assets

      46        -  
  

 

 

  

Total closed block assets

        $ 5,867          $ 6,171  
  

 

 

  

Obligations:

      

Policy reserves

      5,515        5,623  

Policyholders’ and beneficiaries’ funds

      60        62  

Dividends payable to policyholders

      322        324  

Policy benefits in process of payment

      71        89  

Other policy obligations

      1        2  

Other closed block obligations

      500        719  
  

 

 

  

Total closed block obligations

        $ 6,469          $   6,819  
  

 

 

  

18. Subsequent Events

The Company evaluated the recognition and disclosure of subsequent events for its December 31, 2017 financial statements through April 4, 2018, the date the financial statements were issued.

 

F-78

Table of Contents

 

 

AUDITED FINANCIAL STATEMENTS

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

December 31, 2017

Table of Contents

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

Audited Financial Statements

December  31, 2017

Contents

 

Report of Independent Registered Public Accounting Firm

      3  

Statements of Assets and Liabilities

      6  

Statements of Operations and Changes in Contract Owners’ Equity

      22  

Notes to Financial Statements

      54  

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the 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

Opinion on the Financial Statements

We have audited the accompanying statements of assets and liabilities of John Hancock Life Insurance Company (U.S.A.) Separate Account N (the “Separate Account”) comprised of the following sub-accounts as listed below as of December 31, 2017, and the related statements of operations and changes in contract owners’ equity for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the sub-accounts constituting John Hancock Life Insurance Company (U.S.A.) Separate Account N at December 31, 2017, the results of their operations and changes in contract owners’ equity for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.

 

Individual sub-accounts constituting John Hancock Life    Statement of operations and changes in
Insurance Company (U.S.A) Separate Account N    contract owners’ equity

 

500 Index Fund Series NAV    Lifestyle Growth Portfolio Series I   For each of the two years in the period ended December 31, 2017
Active Bond Trust Series I    Lifestyle Growth Portfolio Series NAV    
Active Bond Trust Series NAV    M Capital Appreciation    
Alpha Opportunities Trust Series I    M Large Cap Growth    
Alpha Opportunities Trust Series NAV    Managed Volatility Aggressive Portfolio Series I    
American Asset Allocation Trust Series I    Managed Volatility Aggressive Portfolio Series NAV    
American Global Growth Trust Series I    Managed Volatility Balanced Portfolio Series I    
American Growth Trust Series I    Managed Volatility Balanced Portfolio Series NAV    
American Growth-Income Trust Series I    Managed Volatility Conservative Portfolio Series I    
American International Trust Series I    Managed Volatility Conservative Portfolio Series NAV    
Blue Chip Growth Trust Series I    Managed Volatility Growth Portfolio Series I    
Blue Chip Growth Trust Series NAV    Managed Volatility Growth Portfolio Series NAV    
Bond Trust Series I    Managed Volatility Moderate Portfolio Series I    
Bond Trust Series NAV    Managed Volatility Moderate Portfolio Series NAV    
Capital Appreciation Trust Series I    Mid Cap Index Trust Series I    
Capital Appreciation Trust Series NAV    Mid Cap Index Trust Series NAV    
Capital Appreciation Value Trust Series I    Mid Cap Stock Trust Series I    

 

3

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

Capital Appreciation Value Trust Series NAV

   

Mid Cap Stock Trust Series NAV

     

Core Bond Trust Series I

   

Mid Value Trust Series I

     

Core Bond Trust Series NAV

   

Mid Value Trust Series NAV

     

Emerging Markets Value Trust Series I

   

Money Market Trust Series I

     

Emerging Markets Value Trust Series NAV

   

PIMCO All Asset

     

Equity Income Trust Series I

   

Real Estate Securities Trust Series I

     

Equity Income Trust Series NAV

   

Real Estate Securities Trust Series NAV

     

Financial Industries Trust Series I

   

Science & Technology Trust Series I

     

Financial Industries Trust Series NAV

   

Science & Technology Trust Series NAV

     

Fundamental All Cap Core Trust Series I

   

Short Term Government Income Trust Series I

     

Fundamental All Cap Core Trust Series NAV

   

Short Term Government Income Trust Series NAV

     

Fundamental Large Cap Value Trust Series I

   

Small Cap Growth Trust Series I

     

Fundamental Large Cap Value Trust Series NAV

   

Small Cap Growth Trust Series NAV

     

Global Bond Trust Series I

   

Small Cap Index Trust Series I

     

Global Bond Trust Series NAV

   

Small Cap Index Trust Series NAV

     

Global Trust Series I

   

Small Cap Opportunities Trust Series I

     

Global Trust Series NAV

   

Small Cap Opportunities Trust Series NAV

     

Health Sciences Trust Series I

   

Small Cap Value Trust Series I

     

Health Sciences Trust Series NAV

   

Small Cap Value Trust Series NAV

     

High Yield Trust Series I

   

Small Company Value Trust Series I

     

High Yield Trust Series NAV

   

Small Company Value Trust Series NAV

     

International Equity Index Series I

   

Strategic Income Opportunities Trust Series I

     

International Equity Index Series NAV

   

Strategic Income Opportunities Trust Series NAV

     

International Growth Stock Trust Series I

   

Total Bond Market Series Trust NAV

     

International Growth Stock Trust Series NAV

   

Total Stock Market Index Trust Series I

     

International Small Company Trust Series I

   

Total Stock Market Index Trust Series NAV

     

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

International Small Company Trust Series NAV

   

Ultra Short Term Bond Trust Series I

     

International Value Trust Series I

   

Ultra Short Term Bond Trust Series NAV

     

International Value Trust Series NAV

   

Utilities Trust Series I

     

Investment Quality Bond Trust Series I

   

Utilities Trust Series NAV

     

Investment Quality Bond Trust Series NAV

          

Money-Market Trust Series NAV

        

For the period from April 29, 2016

(commencement of operations)

through December 31, 2016 and for

the year ended December 31, 2017

Basis for Opinion

These financial statements are the responsibility of the Separate Account’s management. Our responsibility is to express an opinion on each of the sub-accounts’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Separate Account in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Separate Account is not required to have, nor were we engaged to perform, an audit of the Separate Account’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Separate Account’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the fund companies, or their transfer agents, as applicable. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

LOGO

We have served as the auditor of the Separate Account since 1987.

Boston, Massachusetts

April 4, 2018

 

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

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2017

 

     500 Index Fund
Series NAV (a)		      Active Bond Trust
Series I		      Active Bond Trust
Series NAV		      Alpha Opportunities
Trust
Series I		      Alpha Opportunities
Trust
Series NAV		      American Asset
Allocation Trust
Series I		  

Total Assets

                  

Investments at fair value

    $ 89,400,362      $ 763,467      $ 1,067,920      $ 44,333      $ 657,707      $ 11,728,283  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      1,887,547        34,088        13,693        1,635        21,676        630,470  

Unit value

    $ 47.36      $ 22.40      $ 77.99      $ 27.11      $ 30.34      $ 18.60  

Shares

      2,777,271        79,777        111,474        4,381        64,927        820,734  

Cost

    $ 73,683,736      $ 780,150      $ 1,084,297      $ 55,463      $ 684,042      $ 10,434,977  

 

(a)

Renamed on October 27, 2017. Previously known as 500 Index Fund B Series NAV.

 

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, 2017

 

     American Global
Growth Trust
Series I		      American
Growth Trust
Series I		      American Growth-
Income Trust
Series I		      American
International Trust
Series I		      Blue Chip
Growth Trust
Series I		      Blue Chip
Growth Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 659,731      $ 15,257,193      $ 13,401,411      $ 7,988,088      $ 9,563,854      $ 68,329,185  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      32,161        471,529        414,194        306,451        141,623        365,708  

Unit value

    $ 20.51      $ 32.36      $ 32.36      $ 26.07      $ 67.53      $ 186.84  

Shares

      40,977        756,430        757,570        364,254        273,879        1,956,735  

Cost

    $ 632,473      $ 14,956,882      $ 13,005,452      $ 7,280,825      $ 8,352,165      $ 61,607,200  

 

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, 2017

 

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

Total Assets

                  

Investments at fair value

    $ 6,653,487      $ 1,681,650      $ 8,566,232      $ 1,945,535      $ 1,153,927      $ 2,356,274  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      570,745        140,363        244,298        53,085        52,325        102,475  

Unit value

    $ 11.66      $ 11.98      $ 35.06      $ 36.65      $ 22.05      $ 22.99  

Shares

      495,789        125,403        584,726        132,620        96,321        197,178  

Cost

    $ 6,810,948      $ 1,721,141      $ 8,027,119      $ 1,775,471      $ 1,145,780      $ 2,316,752  

 

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, 2017

 

     Core Bond Trust
Series I		      Core Bond
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		  

Total Assets

                  

Investments at fair value

    $ 7,645,685      $ 25,672,554      $ 1,987,004      $ 4,086,315      $ 8,632,436      $ 46,532,756  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      368,867        1,480,100        114,038        284,502        161,955        784,687  

Unit value

    $ 20.73      $ 17.35      $ 17.42      $ 14.36      $ 53.30      $ 59.30  

Shares

      584,533        1,971,778        186,924        385,138        493,282        2,671,226  

Cost

    $ 7,807,181      $ 26,321,536      $ 1,921,704      $ 3,703,770      $ 8,527,239      $ 45,933,283  

 

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, 2017

 

 

     Financial Industries
Trust
Series I		      Financial
Industries Trust
Series NAV		      Fundamental All
Cap Core Trust
Series I		      Fundamental All
Cap Core Trust
Series NAV		      Fundamental Large
Cap Value Trust
Series I		      Fundamental Large
Cap Value Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 820,679      $ 379,482      $ 418,406      $ 2,760,602      $ 3,699,117      $ 8,185,126  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      28,443        9,936        8,401        88,415        108,435        319,859  

Unit value

    $ 28.85      $ 38.19      $ 49.80      $ 31.22      $ 34.11      $ 25.59  

Shares

      54,748        25,383        16,199        106,341        173,180        383,019  

Cost

    $ 740,295      $ 296,459      $ 357,072      $ 2,325,634      $ 3,036,206      $ 6,718,672  

 

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, 2017

 

 

     Global Bond Trust
Series I		      Global Bond Trust
Series NAV		      Global Trust
Series I		      Global Trust
Series NAV		      Health Sciences
Trust
Series I		      Health Sciences
Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 1,015,444      $ 9,043,097      $ 2,608,249      $ 2,578,745      $ 5,158,112      $ 6,555,374  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      33,610        271,299        76,411        122,558        61,871        94,638  

Unit value

    $ 30.21      $ 33.33      $ 34.13      $ 21.04      $ 83.37      $ 69.27  

Shares

      78,534        702,649        119,044        117,859        206,077        258,391  

Cost

    $ 984,158      $ 8,810,204      $ 2,348,272      $ 2,285,813      $ 5,719,230      $ 6,707,754  

 

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, 2017

 

     High Yield Trust
Series I		      High Yield Trust
Series NAV		      International
Equity Index
Series I (b)		      International
Equity Index
Series NAV (c)		      International
Growth Stock
Trust Series I		      International
Growth Stock Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 2,978,937      $ 1,622,162      $ 9,241,272      $ 17,322,973      $ 3,020,605      $ 10,971,753  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      89,337        66,895        650,594        304,244        209,929        749,454  

Unit value

    $ 33.34      $ 24.25      $ 14.20      $ 56.94      $ 14.39      $ 14.64  

Shares

      559,951        309,573        501,154        939,424        162,836        591,151  

Cost

    $ 3,068,435      $ 1,572,674      $ 7,829,174      $ 15,132,047      $ 2,706,051      $ 9,959,457  

 

(b)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series I.

(c)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series NAV.

 

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, 2017

 

     International
Small Company
Trust
Series I		      International
Small Company
Trust
Series NAV		      International
Value Trust
Series I		      International
Value Trust
Series NAV		      Investment Quality
Bond Trust
Series I		      Investment Quality
Bond Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 853,645      $ 1,647,574      $ 6,222,043      $ 7,214,581      $ 4,607,928      $ 822,445  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      43,760        80,027        230,516        384,866        138,776        47,484  

Unit value

    $ 19.51      $ 20.59      $ 26.99      $ 18.75      $ 33.20      $ 17.32  

Shares

      53,655        103,491        434,500        507,712        413,267        74,028  

Cost

    $ 722,017      $ 1,329,602      $ 5,429,790      $ 6,513,830      $ 4,719,038      $ 832,363  

 

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, 2017

 

     Lifestyle
Growth Portfolio
Series I (d)		      Lifestyle Growth
Portfolio
Series NAV (e)		      M Capital
Appreciation		      M Large Cap
Growth		      Managed Volatility
Aggressive Portfolio
Series I (f)		      Managed Volatility
Aggressive Portfolio
Series NAV (g)		  

Total Assets

                  

Investments at fair value

    $ 323,859      $ 2,652,708      $ 293,836      $ 10      $ 1,200,152      $ 4,576,194  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      27,555        197,048        2,566        —          37,230        207,715  

Unit value

    $ 11.75      $ 13.46      $ 114.51      $ 0.00      $ 32.24      $ 22.03  

Shares

      19,735        161,750        9,406        —          100,853        384,554  

Cost

    $ 307,725      $ 2,620,342      $ 288,160      $ 9      $ 999,765      $ 3,971,741  

 

(d)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series I.

(e)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series NAV.

(f)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series I.

(g)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series NAV.

 

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, 2017

 

     Managed Volatility
Balanced Portfolio
Series I (h)		      Managed Volatility
Balanced Portfolio
Series NAV (i)		      Managed Volatility
Conservative
Portfolio
Series I (j)		      Managed Volatility
Conservative Portfolio
Series NAV (k)		      Managed Volatility
Growth Portfolio
Series I (l)		      Managed Volatility
Growth Portfolio
Series NAV (m)		  

Total Assets

                  

Investments at fair value

    $ 3,940,880      $ 16,545,768      $ 1,463,970      $ 4,800,051      $ 3,156,985      $ 23,388,148  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      108,896        803,982        41,931        258,867        90,667        1,107,957  

Unit value

    $ 36.19      $ 20.58      $ 34.91      $ 18.54      $ 34.82      $ 21.11  

Shares

      304,080        1,273,731        127,524        417,033        216,975        1,605,226  

Cost

    $ 3,837,804      $ 16,844,438      $ 1,475,201      $ 4,781,516      $ 2,901,045      $ 22,510,317  

 

(h)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series I.

(i)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series NAV.

(j)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series I.

(k)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series NAV.

(l)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series I.

(m)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series NAV.

 

 

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, 2017

 

     Managed Volatility
Moderate Portfolio
Series I (n)		      Managed Volatility
Moderate Portfolio
Series NAV (o)		      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

    $ 2,047,422      $ 6,949,417      $ 9,764,956      $ 15,217,036      $ 3,662,348      $ 6,055,527  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      54,906        344,088        186,083        406,367        87,269        61,598  

Unit value

    $ 37.29      $ 20.20      $ 52.48      $ 37.45      $ 41.97      $ 98.31  

Shares

      166,052        563,162        424,563        661,610        205,519        335,858  

Cost

    $ 2,085,576      $ 7,199,873      $ 9,090,315      $ 14,332,137      $ 3,028,752      $ 5,593,861  

 

(n)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series I.

(o)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series NAV.

 

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, 2017

 

     Mid Value Trust
Series I		      Mid Value Trust
Series NAV		      Money Market
Trust Series I		      Money-Market
Trust Series
NAV		      PIMCO All
Asset		      Real Estate
Securities Trust
Series I		  

Total Assets

                  

Investments at fair value

    $ 3,587,121      $ 11,222,471      $ 19,208,310      $ 53,181,453      $ 4,545,996      $ 8,669,617  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      106,318        210,469        930,799        5,280,323        235,317        47,363  

Unit value

    $ 33.74      $ 53.32      $ 20.64      $ 10.07      $ 19.32      $ 183.05  

Shares

      309,235        973,328        19,208,310        53,181,453        411,775        439,859  

Cost

    $ 3,489,909      $ 11,031,285      $ 19,208,310      $ 53,181,453      $ 4,388,795      $ 5,783,483  

 

 

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, 2017

 

     Real Estate
Securities Trust
Series NAV		      Science &
Technology Trust
Series I		      Science &
Technology Trust
Series NAV		      Short Term
Government
Income Trust
Series I		      Short Term
Government
Income Trust
Series NAV		      Small Cap
Growth Trust
Series I		  

Total Assets

                  

Investments at fair value

    $ 13,691,576      $ 8,662,179      $ 5,704,807      $ 1,451,325      $ 2,133,338      $ 1,372,442  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      84,360        176,794        129,919        139,708        196,487        44,078  

Unit value

    $ 162.30      $ 49.00      $ 43.91      $ 10.39      $ 10.86      $ 31.14  

Shares

      698,906        289,028        188,526        120,743        177,482        135,483  

Cost

    $ 12,785,887      $ 6,759,287      $ 5,360,456      $ 1,500,249      $ 2,180,569      $ 1,218,803  

 

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, 2017

 

     Small Cap
Growth Trust
Series NAV		      Small Cap
Index Trust
Series I		      Small Cap
Index Trust
Series NAV		      Small Cap
Opportunities
Trust Series I		      Small Cap
Opportunities Trust
Series NAV		      Small Cap
Value Trust
Series I		  

Total Assets

                  

Investments at fair value

    $ 5,243,670      $ 6,186,594      $ 6,813,361      $ 14,715,365      $ 338,798      $ 808,446  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      135,350        154,601        198,652        323,762        13,830        27,201  

Unit value

    $ 38.74      $ 40.02      $ 34.30      $ 45.45      $ 24.50      $ 29.72  

Shares

      511,578        384,499        423,190        459,712        10,637        39,923  

Cost

    $ 4,372,506      $ 5,624,835      $ 6,321,235      $ 13,634,470      $ 319,516      $ 839,030  

 

See accompanying notes.

 

19

Table of Contents

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

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2017

 

     Small Cap
Value Trust
Series NAV		      Small Company
Value Trust
Series I		      Small Company
Value Trust
Series NAV		      Strategic Income
Opportunities Trust
Series I		      Strategic Income
Opportunities Trust
Series NAV		      Total Bond
Market Series
Trust NAV (p)		  

Total Assets

                  

Investments at fair value

    $ 8,356,023      $ 2,739,222      $ 1,128,600      $ 2,561,034      $ 4,988,236      $ 23,146,361  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      96,106        61,798        35,455        92,337        231,440        922,711  

Unit value

    $ 86.95      $ 44.33      $ 31.83      $ 27.74      $ 21.55      $ 25.09  

Shares

      414,075        131,315        54,234        186,664        364,637        2,289,452  

Cost

    $ 8,504,914      $ 2,630,822      $ 1,149,016      $ 2,527,422      $ 4,912,960      $ 23,573,793  

 

(p)

Renamed on October 27, 2017. Previously known as Total Bond Market Trust B Series NAV.

 

See accompanying notes.

 

20

Table of Contents

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

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2017

 

     Total
Stock Market Index
Trust Series I		      Total
Stock Market Index
Trust Series NAV		      Ultra
Short Term
Bond Trust
Series I		      Ultra
Short Term
Bond Trust
Series NAV		      Utilities Trust
Series I		      Utilities Trust
Series NAV		  

Total Assets

                  

Investments at fair value

    $ 8,025,736      $ 5,860,760      $ 3,166      $ 589,854      $ 1,041,966      $ 2,090,789  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      263,987        54,510        324        57,823        27,607        64,181  

Unit value

    $ 30.40      $ 107.52      $ 9.77      $ 10.20      $ 37.74      $ 32.58  

Shares

      358,452        261,875        277        51,696        73,794        148,283  

Cost

    $ 6,660,233      $ 5,457,045      $ 3,305      $ 603,146      $ 1,007,537      $ 2,087,825  

 

See accompanying notes.

 

21

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,

 

     500 Index Fund Series NAV     Active Bond Trust Series I     Active Bond Trust Series NAV  
     2017 (a)     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 1,504,042     $ 1,354,892     $ 26,383     $ 21,476     $ 35,330 $       19,297  

Expenses:

             

Mortality and expense risk and administrative charges

      (119,621 )      (91,697 )      (3,543 )      (3,602 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,384,421       1,263,195       22,840       17,874       35,330       19,297  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      1,079,249       1,150,442       (6 )      (1 )      —         —    

Net realized gain (loss)

      4,520,161       1,593,353       (7,299 )      (7,116 )      (1,318 )      (2,146 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      5,599,410       2,743,795       (7,305 )      (7,117 )      (1,318 )      (2,146 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      9,900,241       4,253,263       8,771       11,483       4,599       1,014  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      16,884,072       8,260,253       24,306       22,240       38,611       18,165  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,609,611       2,181,076       93,630       69,510       118,331       70,052  

Transfers between sub-accounts and the company

      (5,437,492 )      3,047,837       229,777       57,448       427,109       107,902  

Transfers on general account policy loans

      (54,678 )      (203,240 )      (204 )      (364 )      —         —    

Withdrawals

      (4,482,699 )      (473,104 )      (63 )      (29,572 )      (15,439 )      (5,473 ) 

Annual contract fee

      (1,918,288 )      (1,746,570 )      (170,361 )      (155,474 )      (18,597 )      (12,479 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (10,283,546 )      2,805,999       152,779       (58,452 )      511,404       160,002  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      6,600,526       11,066,252       177,085       (36,212 )      550,015       178,167  

Net assets at beginning of period

      82,799,836       71,733,584       586,382       622,594       517,905       339,738  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 89,400,362     $ 82,799,836     $ 763,467     $ 586,382     $ 1,067,920     $ 517,905  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      2,089,276       1,980,760       27,608       30,430       6,966       4,775  

Units issued

      332,880       716,142       15,040       6,324       7,276       3,282  

Units redeemed

      (534,609 )      (607,626 )      (8,560 )      (9,146 )      (549 )      (1,091 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      1,887,547       2,089,276       34,088       27,608       13,693       6,966  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

Renamed on October 27, 2017. Previously known as 500 Index Fund B Series NAV.

 

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,

 

     Alpha Opportunities
Trust Series I		     Alpha Opportunities
Trust Series NAV		     American Asset Allocation
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 193     $ 654     $ 3,151     $ 14,184     $ 136,200     $ 111,807  

Expenses:

             

Mortality and expense risk and administrative charges

      (271 )      (255 )      —         —         (49,378 )      (49,235 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (78 )      399       3,151       14,184       86,822       62,572  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      6,161       4,350       88,793       89,895       723,443       1,127,275  

Net realized gain (loss)

      (1,749 )      (1,984 )      (16,054 )      (6,515 )      396,443       449,692  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      4,412       2,366       72,739       83,380       1,119,886       1,576,967  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      2,232       (839 )      54,856       (35,557 )      306,957       (928,453 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      6,566       1,926       130,746       62,007       1,513,665       711,086  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      —         58       22,898       76,304       794,148       617,164  

Transfers between sub-accounts and the company

      950       —         (317,395 )      358,779       2,219,563       292,814  

Transfers on general account policy loans

      —         —         —         —         3,604       4,349  

Withdrawals

      (1 )      (1,420 )      10       28,560       (898,011 )      (553,972 ) 

Annual contract fee

      (2,705 )      (2,561 )      (16,521 )      (19,067 )      (909,668 )      (861,841 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (1,756 )      (3,923 )      (311,008 )      444,576       1,209,636       (501,486 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      4,810       (1,997 )      (180,262 )      506,583       2,723,301       209,600  

Net assets at beginning of period

      39,523       41,520       837,969       331,386       9,004,982       8,795,382  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 44,333     $ 39,523     $ 657,707     $ 837,969     $ 11,728,283     $ 9,004,982  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      1,705       1,882       32,525       13,602       563,452       597,941  

Units issued

      57       3       12,626       19,634       171,860       79,782  

Units redeemed

      (127 )      (180 )      (23,475 )      (711 )      (104,842 )      (114,271 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      1,635       1,705       21,676       32,525       630,470       563,452  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     American Global Growth
Trust Series I		     American Growth
Trust Series I		     American Growth-Income
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 1,529     $ 4,364     $ 54,866     $ 52,425     $ 135,241     $ 210,855  

Expenses:

             

Mortality and expense risk and administrative charges

      (345 )      (309 )      (10,047 )      (11,138 )      (45,722 )      (46,144 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,184       4,055       44,819       41,287       89,519       164,711  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      52,097       54,346       2,179,527       3,845,187       2,077,455       3,045,364  

Net realized gain (loss)

      (39,068 )      (6,409 )      (291,425 )      (78,313 )      133,740       68,526  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      13,029       47,937       1,888,102       3,766,874       2,211,195       3,113,890  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      87,540       (48,361 )      1,671,259       (2,638,158 )      230,086       (2,021,106 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      101,753       3,631       3,604,180       1,170,003       2,530,800       1,257,495  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      89,535       77,862       410,408       522,270       675,290       672,438  

Transfers between sub-accounts and the company

      446       (11,941 )      209,428       1,532,477       (638,306 )      873,001  

Transfers on general account policy loans

      1,911       5,524       68,951       (132,853 )      (12,552 )      (112,646 ) 

Withdrawals

      31,984       (1,806 )      (2,697,910 )      (576,504 )      (1,892,325 )      (388,108 ) 

Annual contract fee

      (35,094 )      (31,408 )      (297,884 )      (276,756 )      (676,587 )      (705,209 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      88,782       38,231       (2,307,007 )      1,068,634       (2,544,480 )      339,476  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      190,535       41,862       1,297,173       2,238,637       (13,680 )      1,596,971  

Net assets at beginning of period

      469,196       427,334       13,960,020       11,721,383       13,415,091       11,818,120  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 659,731     $ 469,196     $ 15,257,193     $ 13,960,020     $ 13,401,411     $ 13,415,091  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      30,020       27,410       536,522       487,981       486,038       468,780  

Units issued

      346,601       12,587       315,568       217,843       28,459       142,748  

Units redeemed

      (344,460 )      (9,977 )      (380,561 )      (169,302 )      (100,303 )      (125,490 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      32,161       30,020       471,529       536,522       414,194       486,038  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     American International
Trust Series I		     Blue Chip Growth
Trust Series I		     Blue Chip Growth Trust
Series NAV		  
     2017     2016     2017     2016     2017      2016  

Income:

              

Dividend distributions received

    $ 66,736     $ 149,372     $ 6,372     $ 977     $ 68,648      $ 28,080  

Expenses:

              

Mortality and expense risk and administrative charges

      (8,552 )      (10,524 )      (35,454 )      (32,483 )      —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net investment income (loss)

      58,184       138,848       (29,082 )      (31,506 )      68,648        28,080  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Realized gains (losses) on investments:

              

Capital gain distributions received

      802,984       (2 )      592,409       1,364,845       4,065,571        8,754,964  

Net realized gain (loss)

      1,735,045       187,310       (34,611 )      163,844       729,906        876,768  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Realized gains (losses)

      2,538,029       187,308       557,798       1,528,689       4,795,477        9,631,732  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Unrealized appreciation (depreciation) during the period

      1,070,601       208,961       2,077,243       (1,504,545 )      13,836,624        (8,902,517 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net increase (decrease) in net assets from operations

      3,666,814       535,117       2,605,959       (7,362 )      18,700,749        757,295  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Changes from principal transactions:

              

Purchase payments

      360,610       498,368       87,239       74,845       307,176        389,804  

Transfers between sub-accounts and the company

      (8,371,616 )      (1,486,864 )      145,267       (697,772 )      (3,808,107 )       6,746,622  

Transfers on general account policy loans

      45,275       (130,399 )      29,191       162,979       (3,790 )       (113,643 ) 

Withdrawals

      (2,353,956 )      (129,261 )      (668,263 )      (87,638 )      (267,352 )       (77,866 ) 

Annual contract fee

      (296,989 )      (299,965 )      (359,870 )      (361,745 )      (631,923 )       (601,219 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net increase (decrease) in net assets from principal transactions

      (10,616,676 )      (1,548,121 )      (766,436 )      (909,331 )      (4,403,996 )       6,343,698  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Total increase (decrease) in net assets

      (6,949,862 )      (1,013,004 )      1,839,523       (916,693 )      14,296,753        7,100,993  

Net assets at beginning of period

      14,937,950       15,950,954       7,724,331       8,641,024       54,032,432        46,931,439  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net assets at end of period

    $ 7,988,088     $ 14,937,950     $ 9,563,854     $ 7,724,331     $ 68,329,185      $ 54,032,432  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
     2017     2016     2017     2016     2017      2016  

Units, beginning of period

      776,080       848,925       153,004       174,050       394,278        345,379  

Units issued

      212,017       177,276       20,795       47,475       43,478        100,055  

Units redeemed

      (681,646 )      (250,121 )      (32,176 )      (68,521 )      (72,048 )       (51,156 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Units, end of period

      306,451       776,080       141,623       153,004       365,708        394,278  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

 

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,

 

     Bond Trust Series I     Bond Trust Series NAV     Capital Appreciation
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 178,782     $ 205,028     $ 46,906     $ 201,399     $ 4,790     $ —    

Expenses:

             

Mortality and expense risk and administrative charges

      (26,481 )      (25,541 )      —         —         (28,668 )      (27,213 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      152,301       179,487       46,906       201,399       (23,878 )      (27,213 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         —         —         636,200       1,204,602  

Net realized gain (loss)

      (25,659 )      (10,949 )      (231,488 )      629       (163,701 )      (127,335 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (25,659 )      (10,949 )      (231,488 )      629       472,499       1,077,267  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      87,731       (28,256 )      267,171       (275,223 )      1,892,510       (1,241,168 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      214,373       140,282       82,589       (73,195 )      2,341,131       (191,114 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      18,537       7,909       198,751       224,776       29,192       29,020  

Transfers between sub-accounts and the company

      (265,123 )      1,396,073       (6,092,942 )      7,078,949       (325,652 )      (1,059,068 ) 

Transfers on general account policy loans

      (22 )      (8,719 )      7,186       (1,767 )      (79 )      11,053  

Withdrawals

      (346,355 )      (24,111 )      (109,748 )      (167,855 )      (359,353 )      (93,575 ) 

Annual contract fee

      (148,311 )      (140,790 )      (81,160 )      (82,636 )      (177,415 )      (179,594 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (741,274 )      1,230,362       (6,077,913 )      7,051,467       (833,307 )      (1,292,164 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (526,901 )      1,370,644       (5,995,324 )      6,978,272       1,507,824       (1,483,278 ) 

Net assets at beginning of period

      7,180,388       5,809,744       7,676,974       698,702       7,058,408       8,541,686  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 6,653,487     $ 7,180,388     $ 1,681,650     $ 7,676,974     $ 8,566,232     $ 7,058,408  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      636,003       527,987       664,134       62,379       274,009       326,790  

Units issued

      47,516       218,202       18,764       628,588       16,716       12,691  

Units redeemed

      (112,774 )      (110,186 )      (542,535 )      (26,833 )      (46,427 )      (65,472 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      570,745       636,003       140,363       664,134       244,298       274,009  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Capital Appreciation Trust
Series NAV		     Capital Appreciation Value
Trust Series I		     Capital Appreciation Value
Trust Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 1,994     $ 185     $ 15,560     $ 4,322     $ 33,825     $ 25,721  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (3,325 )      (2,121 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      1,994       185       12,235       2,201       33,825       25,721  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      159,436       321,167       46,325       31,572       106,942       177,554  

Net realized gain (loss)

      (81,609 )      (36,778 )      (4,227 )      (4,642 )      (9,591 )      (4,814 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      77,827       284,389       42,098       26,930       97,351       172,740  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      502,366       (290,072 )      50,615       (6,097 )      174,137       (112,176 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      582,187       (5,498 )      104,948       23,034       305,313       86,285  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      88,456       181,451       2,466       2,615       26,665       24,749  

Transfers between sub-accounts and the company

      (292,295 )      (163,008 )      740,892       (281 )      295,836       1,551,857  

Transfers on general account policy loans

      9,800       (27,722 )      15,718       393       (669 )      —    

Withdrawals

      (48,791 )      (1,892 )      (19,585 )      (67 )      (118,855 )      6,313  

Annual contract fee

      (60,340 )      (73,297 )      (20,111 )      (16,970 )      (52,096 )      (32,313 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (303,170 )      (84,468 )      719,380       (14,310 )      150,881       1,550,606  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      279,017       (89,966 )      824,328       8,724       456,194       1,636,891  

Net assets at beginning of period

      1,666,518       1,756,484       329,599       320,875       1,900,080       263,189  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 1,945,535     $ 1,666,518     $ 1,153,927     $ 329,599     $ 2,356,274     $ 1,900,080  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      62,077       64,777       17,505       18,307       95,143       14,257  

Units issued

      7,453       15,796       38,058       912       16,685       82,358  

Units redeemed

      (16,445 )      (18,496 )      (3,238 )      (1,714 )      (9,353 )      (1,472 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      53,085       62,077       52,325       17,505       102,475       95,143  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Core Bond Trust Series I     Core Bond Trust Series NAV     Emerging Markets Value
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 163,357     $ 204,655     $ 557,434     $ 438,362     $ 18,197     $ 1,593  

Expenses:

             

Mortality and expense risk and administrative charges

      (25,856 )      (32,821 )      —         —         (1,226 )      (487 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      137,501       171,834       557,434       438,362       16,971       1,106  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      99,340       5,646       323,348       11,057       —         —    

Net realized gain (loss)

      (15,944 )      2,214       (28,076 )      17,485       73       (2,563 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      83,396       7,860       295,272       28,542       73       (2,563 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      34,200       107,939       (40,622 )      54,500       78,657       13,315  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      255,097       287,633       812,084       521,404       95,701       11,858  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      107,359       103,438       317,465       417,969       1,984       2,946  

Transfers between sub-accounts and the company

      (695,830 )      (1,263,603 )      3,980,400       (1,761,340 )      1,823,261       (3,462 ) 

Transfers on general account policy loans

      3,289       30,867       (1,448 )      (95,469 )      —         —    

Withdrawals

      (1,497,371 )      (25,819 )      (358,148 )      (393,855 )      —         (1,724 ) 

Annual contract fee

      (270,430 )      (311,331 )      (365,043 )      (420,480 )      (6,088 )      (5,779 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (2,352,983 )      (1,466,448 )      3,573,226       (2,253,175 )      1,819,157       (8,019 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (2,097,886 )      (1,178,815 )      4,385,310       (1,731,771 )      1,914,858       3,839  

Net assets at beginning of period

      9,743,571       10,922,386       21,287,244       23,019,015       72,146       68,307  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 7,645,685     $ 9,743,571     $ 25,672,554     $ 21,287,244     $ 1,987,004     $ 72,146  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      484,218       556,857       1,269,890       1,410,618       5,694       6,322  

Units issued

      26,911       244,343       344,222       1,027,824       108,708       443  

Units redeemed

      (142,262 )      (316,982 )      (134,012 )      (1,168,552 )      (364 )      (1,071 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      368,867       484,218       1,480,100       1,269,890       114,038       5,694  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Emerging Markets Value
Trust Series NAV		     Equity Income Trust Series I     Equity Income Trust
Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 52,002     $ 25,798     $ 184,168     $ 181,743     $ 1,035,076     $ 784,342  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (33,914 )      (35,098 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      52,002       25,798       150,254       146,645       1,035,076       784,342  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         603,704       793,978       3,350,547       3,249,076  

Net realized gain (loss)

      3,585       (19,266 )      (125,791 )      (254,692 )      (1,200,133 )      (1,930,474 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      3,585       (19,266 )      477,913       539,286       2,150,414       1,318,602  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      504,490       163,467       601,378       752,019       3,263,383       3,996,060  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      560,077       169,999       1,229,545       1,437,950       6,448,873       6,099,004  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      223,186       157,345       161,881       118,789       196,030       254,327  

Transfers between sub-accounts and the company

      2,070,330       250,400       (543,783 )      (1,511,719 )      5,627,512       (3,415,650 ) 

Transfers on general account policy loans

      3,911       5,878       (1,863 )      1,440       54,183       (116,886 ) 

Withdrawals

      (45,579 )      (7,520 )      (454,414 )      (89,987 )      (2,622,568 )      (470,094 ) 

Annual contract fee

      (93,967 )      (40,869 )      (521,645 )      (500,870 )      (399,988 )      (375,158 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      2,157,881       365,234       (1,359,824 )      (1,982,347 )      2,855,169       (4,123,461 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      2,717,958       535,233       (130,279 )      (544,397 )      9,304,042       1,975,543  

Net assets at beginning of period

      1,368,357       833,124       8,762,715       9,307,112       37,228,714       35,253,171  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 4,086,315     $ 1,368,357     $ 8,632,436     $ 8,762,715     $ 46,532,756     $ 37,228,714  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      126,400       90,875       190,429       239,984       729,979       823,841  

Units issued

      319,459       44,568       9,954       15,150       174,692       118,264  

Units redeemed

      (161,357 )      (9,043 )      (38,428 )      (64,705 )      (119,984 )      (212,126 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      284,502       126,400       161,955       190,429       784,687       729,979  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Financial Industries
Trust Series I		     Financial Industries
Trust Series NAV		     Fundamental All Cap Core
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 9,337     $ 9,544     $ 4,442     $ 4,170     $ 2,817     $ 1,847  

Expenses:

             

Mortality and expense risk and administrative charges

      (4,970 )      (3,691 )      —         —         (1,354 )      (1,276 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      4,367       5,853       4,442       4,170       1,463       571  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      4       —         —         —         8,945       47,596  

Net realized gain (loss)

      89,620       (69,237 )      5,685       (104,991 )      18,020       847  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      89,624       (69,237 )      5,685       (104,991 )      26,965       48,443  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      23,485       216,829       38,987       144,678       61,046       (34,041 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      117,476       153,445       49,114       43,857       89,474       14,973  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      24,779       13,202       47,809       56,653       516       316  

Transfers between sub-accounts and the company

      (43,329 )      105,565       6,459       (18,570 )      67,957       (112,747 ) 

Transfers on general account policy loans

      153       102       (229 )      (40,308 )      —         —    

Withdrawals

      (87,011 )      (8,442 )      (8,002 )      (100,644 )      (53,827 )      (110 ) 

Annual contract fee

      (79,442 )      (57,434 )      (15,653 )      (19,865 )      (13,141 )      (12,556 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (184,850 )      52,993       30,384       (122,734 )      1,505       (125,097 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (67,374 )      206,438       79,498       (78,877 )      90,979       (110,124 ) 

Net assets at beginning of period

      888,053       681,615       299,984       378,861       327,427       437,551  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 820,679     $ 888,053     $ 379,482     $ 299,984     $ 418,406     $ 327,427  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      35,247       32,096       9,055       13,663       8,365       12,067  

Units issued

      18,241       32,793       1,694       2,987       2,471       39  

Units redeemed

      (25,045 )      (29,642 )      (813 )      (7,595 )      (2,435 )      (3,741 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      28,443       35,247       9,936       9,055       8,401       8,365  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Fundamental All Cap Core
Trust Series NAV		     Fundamental Large Cap Value
Trust Series I		     Fundamental Large Cap Value
Trust Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 19,487     $ 8,707     $ 58,352     $ 96,426     $ 124,902     $ 142,036  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (17,032 )      (18,723 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      19,487       8,707       41,320       77,703       124,902       142,036  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      58,404       175,664       (1 )      (4 )      —         —    

Net realized gain (loss)

      53,591       61,122       259,766       (254,102 )      73,115       30,285  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      111,995       236,786       259,765       (254,106 )      73,115       30,285  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      385,370       (151,883 )      298,161       392,471       982,327       539,444  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      516,852       93,610       599,246       216,068       1,180,344       711,765  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      219,454       221,352       139,573       108,409       328,332       448,183  

Transfers between sub-accounts and the company

      678,855       18,897       (871,268 )      (937,116 )      (56,359 )      2,135,807  

Transfers on general account policy loans

      (27 )      (27 )      15,545       4,824       (5,645 )      (6,191 ) 

Withdrawals

      (48,425 )      (158,200 )      (605,147 )      (200,237 )      (60,122 )      (37,995 ) 

Annual contract fee

      (51,984 )      (39,113 )      (277,075 )      (274,364 )      (112,708 )      (113,730 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      797,873       42,909       (1,598,372 )      (1,298,484 )      93,498       2,426,074  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      1,314,725       136,519       (999,126 )      (1,082,416 )      1,273,842       3,137,839  

Net assets at beginning of period

      1,445,877       1,309,358       4,698,243       5,780,659       6,911,284       3,773,445  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,760,602     $ 1,445,877     $ 3,699,117     $ 4,698,243     $ 8,185,126     $ 6,911,284  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      59,166       58,079       159,972       216,982       317,450       191,036  

Units issued

      35,551       13,314       4,891       81,817       36,767       183,769  

Units redeemed

      (6,302 )      (12,227 )      (56,428 )      (138,827 )      (34,358 )      (57,355 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      88,415       59,166       108,435       159,972       319,859       317,450  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Global Bond Trust Series I     Global Bond Trust Series NAV     Global Trust Series I  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 23,748     $ —       $ 169,097     $ —       $ 43,961     $ 90,712  

Expenses:

             

Mortality and expense risk and administrative charges

      (4,131 )      (4,613 )      —         —         (11,436 )      (10,100 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      19,617       (4,613 )      169,097       —         32,525       80,612  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      (1 )      —         —         —         (2 )      1  

Net realized gain (loss)

      10,284       37,635       2,677       (63,679 )      36,001       (42,143 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      10,283       37,635       2,677       (63,679 )      35,999       (42,142 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      50,214       13,811       377,179       239,719       304,347       134,027  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      80,114       46,833       548,953       176,040       372,871       172,497  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      38,367       36,607       207,979       110,206       31,766       25,514  

Transfers between sub-accounts and the company

      70,021       (103,035 )      2,270,923       576,436       357,981       (134,989 ) 

Transfers on general account policy loans

      103       12,959       6,906       (59,697 )      80       208  

Withdrawals

      (126,846 )      (36,723 )      (415,736 )      (121,781 )      (200,073 )      (30,921 ) 

Annual contract fee

      (61,353 )      (64,198 )      (121,402 )      (112,875 )      (112,533 )      (98,377 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (79,708 )      (154,390 )      1,948,670       392,289       77,221       (238,565 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      406       (107,557 )      2,497,623       568,329       450,092       (66,068 ) 

Net assets at beginning of period

      1,015,038       1,122,595       6,545,474       5,977,145       2,158,157       2,224,225  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 1,015,444     $ 1,015,038     $ 9,043,097     $ 6,545,474     $ 2,608,249     $ 2,158,157  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      36,364       41,347       213,478       201,082       74,558       83,239  

Units issued

      8,239       17,498       125,091       60,846       24,188       31,702  

Units redeemed

      (10,993 )      (22,481 )      (67,270 )      (48,450 )      (22,335 )      (40,383 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      33,610       36,364       271,299       213,478       76,411       74,558  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Global Trust Series NAV     Health Sciences Trust Series I     Health Sciences Trust Series NAV  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 47,285     $ 87,844     $ —       $ 3,401     $ —       $ 5,547  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (18,194 )      (22,214 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      47,285       87,844       (18,194 )      (18,813 )      —         5,547  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         497,113       1,223,324       616,620       1,248,451  

Net realized gain (loss)

      6,699       (77,839 )      (135,232 )      (924,663 )      (831,773 )      (278,724 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      6,699       (77,839 )      361,881       298,661       (215,153 )      969,727  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      346,361       167,104       792,136       (1,138,107 )      1,613,338       (1,508,746 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      400,345       177,109       1,135,823       (858,259 )      1,398,185       (533,472 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      113,847       126,776       13,095       10,703       248,594       268,799  

Transfers between sub-accounts and the company

      162,209       114,657       59,348       (2,684,286 )      98,237       675,883  

Transfers on general account policy loans

      4,201       1,946       80       199       4,250       (19,489 ) 

Withdrawals

      (62,880 )      (309,856 )      (321,211 )      (24,456 )      (80,814 )      (127,855 ) 

Annual contract fee

      (71,396 )      (66,817 )      (103,668 )      (138,394 )      (164,360 )      (133,898 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      145,981       (133,294 )      (352,356 )      (2,836,234 )      105,907       663,440  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      546,326       43,815       783,467       (3,694,493 )      1,504,092       129,968  

Net assets at beginning of period

      2,032,419       1,988,604       4,374,645       8,069,138       5,051,282       4,921,314  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,578,745     $ 2,032,419     $ 5,158,112     $ 4,374,645     $ 6,555,374     $ 5,051,282  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      114,849       123,010       66,543       110,117       93,056       81,107  

Units issued

      15,706       24,782       6,994       23,625       60,143       37,755  

Units redeemed

      (7,997 )      (32,943 )      (11,666 )      (67,199 )      (58,561 )      (25,806 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      122,558       114,849       61,871       66,543       94,638       93,056  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     High Yield Trust Series I     High Yield Trust Series NAV     International Equity Index Series I  
     2017     2016     2017     2016     2017 (b)     2016  

Income:

             

Dividend distributions received

    $ 194,606     $ 205,714     $ 112,212     $ 190,514     $ 183,067     $ 148,846  

Expenses:

             

Mortality and expense risk and administrative charges

      (13,851 )      (11,265 )      —         —         (29,289 )      (24,236 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      180,755       194,449       112,212       190,514       153,778       124,610  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      (2 )      1       —         —         2       —    

Net realized gain (loss)

      (60,400 )      (218,648 )      (18,799 )      (168,868 )      42,586       (103,051 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (60,402 )      (218,647 )      (18,799 )      (168,868 )      42,588       (103,051 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      113,293       454,582       97,293       441,350       1,467,937       395,154  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      233,646       430,384       190,706       462,996       1,664,303       416,713  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      66,385       45,264       116,875       92,774       43,086       43,990  

Transfers between sub-accounts and the company

      178,560       502,478       (1,030,285 )      69,310       2,194,518       745,932  

Transfers on general account policy loans

      31       1,173       2,342       (17,705 )      1,538       1,530  

Withdrawals

      (851,708 )      (7,277 )      (434,663 )      (28,878 )      (83,144 )      (25,982 ) 

Annual contract fee

      (209,412 )      (168,911 )      (24,765 )      (40,095 )      (148,515 )      (137,952 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (816,144 )      372,727       (1,370,496 )      75,406       2,007,483       627,518  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (582,498 )      803,111       (1,179,790 )      538,402       3,671,786       1,044,231  

Net assets at beginning of period

      3,561,435       2,758,324       2,801,952       2,263,550       5,569,486       4,525,255  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,978,937     $ 3,561,435     $ 1,622,162     $ 2,801,952     $ 9,241,272     $ 5,569,486  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      113,511       102,486       124,161       116,916       497,581       419,582  

Units issued

      35,818       48,646       42,537       53,900       191,142       290,485  

Units redeemed

      (59,992 )      (37,621 )      (99,803 )      (46,655 )      (38,129 )      (212,486 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      89,337       113,511       66,895       124,161       650,594       497,581  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(b)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series I.

 

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,

 

     International Equity Index
Series NAV		     International Growth Stock
Trust Series I		     International Growth Stock
Trust Series NAV		  
     2017 (c)     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 340,345     $ 296,616     $ 39,666     $ 22,651     $ 146,915     $ 160,030  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (6,961 )      (4,041 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      340,345       296,616       32,705       18,610       146,915       160,030  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         —         —         —         —    

Net realized gain (loss)

      22,511       (409,919 )      4,369       (48,532 )      134,969       110,154  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      22,511       (409,919 )      4,369       (48,532 )      134,969       110,154  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      3,013,784       467,595       405,643       24,614       1,563,629       (380,330 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      3,376,640       354,292       442,717       (5,308 )      1,845,513       (110,146 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      256,958       552,685       6,696       4,896       77,706       78,367  

Transfers between sub-accounts and the company

      2,816,641       (1,065,099 )      1,122,150       (64,473 )      2,160,156       612,763  

Transfers on general account policy loans

      5,488       (86,888 )      —         —         (736 )      (33,582 ) 

Withdrawals

      (77,135 )      (30,615 )      (35 )      (1,732 )      (1,921,538 )      (30,036 ) 

Annual contract fee

      (300,680 )      (298,145 )      (35,614 )      (27,922 )      (81,653 )      (81,919 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      2,701,272       (928,062 )      1,093,197       (89,231 )      233,935       545,593  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      6,077,912       (573,770 )      1,535,914       (94,539 )      2,079,448       435,447  

Net assets at beginning of period

      11,245,061       11,818,831       1,484,691       1,579,230       8,892,305       8,456,858  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 17,322,973     $ 11,245,061     $ 3,020,605     $ 1,484,691     $ 10,971,753     $ 8,892,305  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      251,701       276,267       125,595       131,425       740,462       695,770  

Units issued

      100,108       77,731       89,473       53,481       359,656       238,105  

Units redeemed

      (47,565 )      (102,297 )      (5,139 )      (59,311 )      (350,664 )      (193,413 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      304,244       251,701       209,929       125,595       749,454       740,462  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(c)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series NAV.

 

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,

 

     International Small Company
Trust Series I		     International Small Company
Trust Series NAV		     International Value
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 7,998     $ 10,579     $ 21,854     $ 17,838     $ 109,973     $ 114,227  

Expenses:

             

Mortality and expense risk and administrative charges

      (3,411 )      (3,324 )      —         —         (21,944 )      (13,704 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      4,587       7,255       21,854       17,838       88,029       100,523  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         1       —         —         2       —    

Net realized gain (loss)

      15,196       2,753       41,739       13,317       35,992       (20,935 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      15,196       2,754       41,739       13,317       35,994       (20,935 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      121,736       13,726       258,155       4,797       790,685       378,738  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      141,519       23,735       321,748       35,952       914,708       458,326  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      12,991       8,135       24,089       23,304       100,353       66,426  

Transfers between sub-accounts and the company

      302,044       (78,536 )      477,222       30,327       92,280       1,751,577  

Transfers on general account policy loans

      (427 )      6,238       1,196       1,210       (519 )      7,012  

Withdrawals

      (69,935 )      (18,764 )      (16,384 )      (155,452 )      (317,263 )      (98,260 ) 

Annual contract fee

      (29,255 )      (31,221 )      (63,933 )      (36,016 )      (232,723 )      (143,085 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      215,418       (114,148 )      422,190       (136,627 )      (357,872 )      1,583,670  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      356,937       (90,413 )      743,938       (100,675 )      556,836       2,041,996  

Net assets at beginning of period

      496,708       587,121       903,636       1,004,311       5,665,207       3,623,211  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 853,645     $ 496,708     $ 1,647,574     $ 903,636     $ 6,222,043     $ 5,665,207  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      32,688       40,372       56,882       66,351       245,286       174,351  

Units issued

      18,340       14,071       30,385       10,350       25,472       124,542  

Units redeemed

      (7,268 )      (21,755 )      (7,240 )      (19,819 )      (40,242 )      (53,607 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      43,760       32,688       80,027       56,882       230,516       245,286  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     International Value Trust
Series NAV		     Investment Quality Bond
Trust Series I		     Investment Quality Bond
Trust Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 130,309     $ 109,057     $ 120,623     $ 104,646     $ 20,927     $ 16,509  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (20,485 )      (22,469 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      130,309       109,057       100,138       82,177       20,927       16,509  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         19,592       28,490       3,162       4,336  

Net realized gain (loss)

      (39,421 )      (18,003 )      5,001       (28,665 )      (7,822 )      (19,225 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (39,421 )      (18,003 )      24,593       (175 )      (4,660 )      (14,889 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      912,121       464,731       62,276       95,482       18,164       21,411  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,003,009       555,785       187,007       177,484       34,431       23,031  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      74,881       77,417       73,820       125,215       128,849       97,222  

Transfers between sub-accounts and the company

      875,007       1,058,172       64,484       (77,776 )      40,336       166,875  

Transfers on general account policy loans

      7,947       (7,386 )      (22,463 )      13,556       7,342       (15,822 ) 

Withdrawals

      (144,166 )      (166,194 )      (163,235 )      (130,144 )      (94,337 )      (209,812 ) 

Annual contract fee

      (119,676 )      (105,580 )      (197,853 )      (216,851 )      (23,004 )      (23,385 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      693,993       856,429       (245,247 )      (286,000 )      59,186       15,078  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      1,697,002       1,412,214       (58,240 )      (108,516 )      93,617       38,109  

Net assets at beginning of period

      5,517,579       4,105,365       4,666,168       4,774,684       728,828       690,719  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 7,214,581     $ 5,517,579     $ 4,607,928     $ 4,666,168     $ 822,445     $ 728,828  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      345,121       288,124       146,714       156,440       44,046       43,523  

Units issued

      100,486       140,918       19,501       16,721       13,288       17,195  

Units redeemed

      (60,741 )      (83,921 )      (27,439 )      (26,447 )      (9,850 )      (16,672 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      384,866       345,121       138,776       146,714       47,484       44,046  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Lifestyle Growth Portfolio
Series I		     Lifestyle Growth Portfolio
Series NAV		     M Capital Appreciation  
     2017 (d)     2016     2017 (e)     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 5,838     $ 176     $ 49,052     $ 2,451     $ —       $ —    

Expenses:

             

Mortality and expense risk and administrative charges

      (1,273 )      (12 )      —         —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      4,565       164       49,052       2,451       —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      2,001       —         1,723       —         31,100       20,199  

Net realized gain (loss)

      2,051       (6 )      1,935       (5 )      45,003       3,985  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      4,052       (6 )      3,658       (5 )      76,103       24,184  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      16,121       12       32,362       3       (25,888 )      78,303  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      24,738       170       85,072       2,449       50,215       102,487  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      4,754       836       29,223       3,368       —         —    

Transfers between sub-accounts and the company

      310,431       9,404       2,430,539       124,120       (287,004 )      80,000  

Transfers on general account policy loans

      —         —         83       —         —         —    

Withdrawals

      (19,130 )      —         (16 )      3       9,872       30,592  

Annual contract fee

      (6,302 )      (1,042 )      (20,437 )      (1,696 )      (8,406 )      (12,551 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      289,753       9,198       2,439,392       125,795       (285,538 )      98,041  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      314,491       9,368       2,524,464       128,244       (235,323 )      200,528  

Net assets at beginning of period

      9,368       —         128,244       —         529,159       328,631  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 323,859     $ 9,368     $ 2,652,708     $ 128,244     $ 293,836     $ 529,159  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      920       —         11,069       —         5,500       4,135  

Units issued

      28,832       1,024       188,696       11,263       4,102       1,961  

Units redeemed

      (2,197 )      (104 )      (2,717 )      (194 )      (7,036 )      (596 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      27,555       920       197,048       11,069       2,566       5,500  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(d)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series I.

(e)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series NAV.

 

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,

 

     M Large
Cap Growth		     Managed Volatility
Aggressive Portfolio
Series I		     Managed Volatility
Aggressive Portfolio
Series NAV		  
     2017      2016     2017 (f)     2016     2017 (g)     2016  

Income:

              

Dividend distributions received

    $ —        $ —       $ 19,637     $ 17,420     $ 76,933     $ 83,430  

Expenses:

              

Mortality and expense risk and administrative charges

      —          —         (6,480 )      (5,972 )      —         —    
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      —          —         13,157       11,448       76,933       83,430  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

              

Capital gain distributions received

      —          —         —         10,507       —         58,069  

Net realized gain (loss)

      —          —         2,408       (31,350 )      36,706       (454,859 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      —          —         2,408       (20,843 )      36,706       (396,790 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      2        (1 )      211,474       28,016       816,070       394,498  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      2        (1 )      227,039       18,621       929,709       81,138  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

              

Purchase payments

      —          —         21,229       27,689       470,320       1,237,350  

Transfers between sub-accounts and the company

      —          —         (20,445 )      8,272       (553,045 )      (2,179,577 ) 

Transfers on general account policy loans

      —          —         —         (2,526 )      (212,945 )      (185,557 ) 

Withdrawals

      —          —         (36,702 )      (1,406 )      (603,414 )      (305,839 ) 

Annual contract fee

      —          —         (46,472 )      (45,166 )      (220,573 )      (315,691 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      —          —         (82,390 )      (13,137 )      (1,119,657 )      (1,749,314 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      2        (1 )      144,649       5,484       (189,948 )      (1,668,176 ) 

Net assets at beginning of period

      8        —         1,055,503       1,050,019       4,766,142       6,434,318  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 10      $ 8     $ 1,200,152     $ 1,055,503     $ 4,576,194     $ 4,766,142  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017      2016     2017     2016     2017     2016  

Units, beginning of period

      —          —         39,879       39,961       265,838       365,714  

Units issued

      —          —         5,720       8,845       51,569       105,117  

Units redeemed

      —          —         (8,369 )      (8,927 )      (109,692 )      (204,993 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      —          —         37,230       39,879       207,715       265,838  
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(f)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series I.

(g)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series NAV.

 

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,

 

     Managed Volatility Balanced
Portfolio Series I		     Managed Volatility Balanced
Portfolio Series NAV		     Managed Volatility
Conservative Portfolio
Series I		  
     2017 (h)     2016     2017 (i)     2016     2017 (j)     2016  

Income:

             

Dividend distributions received

    $ 84,015     $ 88,788     $ 359,757     $ 365,233     $ 36,401     $ 44,232  

Expenses:

             

Mortality and expense risk and administrative charges

      (22,736 )      (25,114 )      —         —         (7,285 )      (8,657 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      61,279       63,674       359,757       365,233       29,116       35,575  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      151,730       192,176       593,766       689,845       25,802       44,395  

Net realized gain (loss)

      (61,329 )      (101,904 )      (223,488 )      (78,415 )      (44,640 )      (90,972 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      90,401       90,272       370,278       611,430       (18,838 )      (46,577 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      377,708       24,866       1,472,439       (164,176 )      96,519       74,622  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      529,388       178,812       2,202,474       812,487       106,797       63,620  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      119,614       127,160       769,080       1,924,679       10,528       17,164  

Transfers between sub-accounts and the company

      (372,089 )      (183,396 )      (1,814,601 )      424,372       (363,897 )      (3,184 ) 

Transfers on general account policy loans

      (10,307 )      178,947       (46,770 )      (73,585 )      (197 )      (182 ) 

Withdrawals

      (221,112 )      (186,636 )      (1,086,037 )      (431,480 )      (49,198 )      516  

Annual contract fee

      (349,523 )      (361,285 )      (604,002 )      (647,431 )      (69,214 )      (90,426 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (833,417 )      (425,210 )      (2,782,330 )      1,196,555       (471,978 )      (76,112 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (304,029 )      (246,398 )      (579,856 )      2,009,042       (365,181 )      (12,492 ) 

Net assets at beginning of period

      4,244,909       4,491,307       17,125,624       15,116,582       1,829,151       1,841,643  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 3,940,880     $ 4,244,909     $ 16,545,768     $ 17,125,624     $ 1,463,970     $ 1,829,151  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      132,703       146,545       949,957       879,721       55,799       58,246  

Units issued

      11,837       27,871       59,991       156,248       7,549       21,971  

Units redeemed

      (35,644 )      (41,713 )      (205,966 )      (86,012 )      (21,417 )      (24,418 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      108,896       132,703       803,982       949,957       41,931       55,799  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(h)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series I.

(i)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series NAV.

(j)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series I.

 

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,

 

     Managed Volatility
Conservative Portfolio
Series NAV		     Managed Volatility Growth
Portfolio Series I		     Managed Volatility Growth
Portfolio Series NAV		  
     2017 (k)     2016     2017 (l)     2016     2017 (m)     2016  

Income:

             

Dividend distributions received

    $ 121,318     $ 115,496     $ 60,104     $ 55,030     $ 455,615     $ 483,106  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (16,554 )      (18,714 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      121,318       115,496       43,550       36,316       455,615       483,106  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      82,018       105,481       118,236       99,347       893,206       712,095  

Net realized gain (loss)

      (174,721 )      (238,491 )      64,520       (14,942 )      433,810       373,279  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (92,703 )      (133,010 )      182,756       84,405       1,327,016       1,085,374  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      350,382       194,933       291,743       (32,838 )      2,373,560       (724,382 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      378,997       177,419       518,049       87,883       4,156,191       844,098  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      1,111,725       1,637,359       84,831       75,662       1,940,969       3,143,697  

Transfers between sub-accounts and the company

      (1,012,830 )      (889,732 )      3,039       (503,375 )      (1,992,114 )      (1,527,843 ) 

Transfers on general account policy loans

      (21,645 )      (11,004 )      (35,498 )      (43,972 )      (268,816 )      (232,336 ) 

Withdrawals

      (272,400 )      (405,307 )      (152,335 )      (43,775 )      (4,189,421 )      (1,572,413 ) 

Annual contract fee

      (222,390 )      (216,447 )      (220,250 )      (225,499 )      (757,754 )      (929,380 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (417,540 )      114,869       (320,213 )      (740,959 )      (5,267,136 )      (1,118,275 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (38,543 )      292,288       197,836       (653,076 )      (1,110,945 )      (274,177 ) 

Net assets at beginning of period

      4,838,594       4,546,306       2,959,149       3,612,225       24,499,093       24,773,270  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 4,800,051     $ 4,838,594     $ 3,156,985     $ 2,959,149     $ 23,388,148     $ 24,499,093  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      281,681       276,655       100,401       126,742       1,377,723       1,440,273  

Units issued

      104,343       109,875       13,266       13,706       113,865       193,192  

Units redeemed

      (127,157 )      (104,849 )      (23,000 )      (40,047 )      (383,631 )      (255,742 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      258,867       281,681       90,667       100,401       1,107,957       1,377,723  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(k)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series NAV.

(l)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series I.

(m)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series NAV.

 

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,

 

     Managed Volatility
Moderate Portfolio Series I		     Managed Volatility Moderate
Portfolio Series NAV		     Mid Cap Index Trust
Series I		  
     2017 (n)     2016     2017 (o)     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 46,251     $ 39,194     $ 160,093     $ 211,219     $ 39,990     $ 78,411  

Expenses:

             

Mortality and expense risk and administrative charges

      (9,281 )      (8,752 )      —         —         (32,279 )      (28,472 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      36,970       30,442       160,093       211,219       7,711       49,939  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      61,552       62,593       215,870       345,044       442,191       606,177  

Net realized gain (loss)

      (43,723 )      (73,484 )      (177,785 )      (108,069 )      18,029       (91,981 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      17,829       (10,891 )      38,085       236,975       460,220       514,196  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      147,960       56,895       786,747       47,499       642,486       638,914  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      202,759       76,446       984,925       495,693       1,110,417       1,203,049  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      47,048       35,892       336,733       539,354       110,993       38,545  

Transfers between sub-accounts and the company

      203,308       32,199       (3,487,568 )      43,261       1,830,494       (327,922 ) 

Transfers on general account policy loans

      (289 )      (301 )      768       (22,267 )      13       (82 ) 

Withdrawals

      (87,475 )      370       (321,830 )      (211,779 )      (144,406 )      (3,422 ) 

Annual contract fee

      (143,045 )      (127,309 )      (187,768 )      (266,336 )      (217,632 )      (155,715 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      19,547       (59,149 )      (3,659,665 )      82,233       1,579,462       (448,596 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      222,306       17,297       (2,674,740 )      577,926       2,689,879       754,453  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at beginning of period

      1,825,116       1,807,819       9,624,157       9,046,231       7,075,077       6,320,624  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,047,422     $ 1,825,116     $ 6,949,417     $ 9,624,157     $ 9,764,956     $ 7,075,077  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      54,394       56,530       533,840       528,138       154,279       165,157  

Units issued

      11,382       10,359       18,704       46,056       49,248       26,344  

Units redeemed

      (10,870 )      (12,495 )      (208,456 )      (40,354 )      (17,444 )      (37,222 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      54,906       54,394       344,088       533,840       186,083       154,279  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(n)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series I.

(o)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series NAV.

 

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,

 

     Mid Cap Index Trust
Series NAV		     Mid Cap Stock Trust
Series I		     Mid Cap Stock Trust
Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 75,941     $ 131,078     $ —       $ —       $ —       $ —    

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (12,555 )      (11,069 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      75,941       131,078       (12,555 )      (11,069 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      801,568       1,192,922       68,969       232,041       116,269       494,580  

Net realized gain (loss)

      405,409       (2,677,740 )      (2,669 )      (359,046 )      393,367       (1,052,511 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      1,206,977       (1,484,818 )      66,300       (127,005 )      509,636       (557,931 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      658,498       3,443,905       840,403       97,793       958,926       683,735  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,941,416       2,090,165       894,148       (40,281 )      1,468,562       125,804  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      331,750       492,799       29,286       27,181       196,406       179,214  

Transfers between sub-accounts and the company

      2,937,674       (14,439,200 )      (424,258 )      59,277       (799,711 )      (334,302 ) 

Transfers on general account policy loans

      (13,461 )      (46,024 )      249       1,337       8,358       (79,701 ) 

Withdrawals

      (445,433 )      (23,145 )      (171,622 )      (29,889 )      (712,125 )      (263,111 ) 

Annual contract fee

      (350,967 )      (418,854 )      (90,775 )      (92,137 )      (97,924 )      (120,258 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      2,459,563       (14,434,424 )      (657,120 )      (34,231 )      (1,404,996 )      (618,158 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      4,400,979       (12,344,259 )      237,028       (74,512 )      63,566       (492,354 ) 

Net assets at beginning of period

      10,816,057       23,160,316       3,425,320       3,499,832       5,991,961       6,484,315  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 15,217,036     $ 10,816,057     $ 3,662,348     $ 3,425,320     $ 6,055,527     $ 5,991,961  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      334,660       861,157       104,260       107,107       78,421       85,358  

Units issued

      209,051       124,113       7,475       53,154       70,307       28,032  

Units redeemed

      (137,344 )      (650,610 )      (24,466 )      (56,001 )      (87,130 )      (34,969 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      406,367       334,660       87,269       104,260       61,598       78,421  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Mid Value Trust Series I     Mid Value Trust Series NAV     Money Market Trust Series I  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 34,091     $ 50,743     $ 115,103     $ 115,551     $ 120,166     $ 19,803  

Expenses:

             

Mortality and expense risk and administrative charges

      (11,972 )      (13,968 )      —         —         (87,154 )      (107,895 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      22,119       36,775       115,103       115,551       33,012       (88,092 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      321,029       536,575       1,053,741       1,146,240       218       (6 ) 

Net realized gain (loss)

      (172,388 )      (523,609 )      (922,102 )      (430,692 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      148,641       12,966       131,639       715,548       218       (6 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      231,068       850,640       983,867       1,180,764       1       —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      401,828       900,381       1,230,609       2,011,863       33,231       (88,098 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      10,887       7,725       189,498       145,428       155,229       667,429  

Transfers between sub-accounts and the company

      (742,686 )      106,155       (67,165 )      1,045,053       1,522,747       1,527,574  

Transfers on general account policy loans

      63       (2,648 )      6,547       (42,269 )      3,073       7,296  

Withdrawals

      (822,650 )      (31,421 )      (1,053,737 )      (327,854 )      (9,047,955 )      (264,191 ) 

Annual contract fee

      (102,752 )      (118,258 )      (148,786 )      (131,150 )      (874,354 )      (965,634 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (1,657,138 )      (38,447 )      (1,073,643 )      689,208       (8,241,260 )      972,474  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (1,255,310 )      861,934       156,966       2,701,071       (8,208,029 )      884,376  

Net assets at beginning of period

      4,842,431       3,980,497       11,065,505       8,364,434       27,416,339       26,531,963  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 3,587,121     $ 4,842,431     $ 11,222,471     $ 11,065,505     $ 19,208,310     $ 27,416,339  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      159,334       162,397       231,302       216,961       1,316,851       1,286,207  

Units issued

      9,806       62,376       66,040       53,117       373,918       1,199,984  

Units redeemed

      (62,822 )      (65,439 )      (86,873 )      (38,776 )      (759,970 )      (1,169,340 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      106,318       159,334       210,469       231,302       930,799       1,316,851  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Money-Market Trust Series NAV     PIMCO All Asset     Real Estate Securities Trust Series I  
     2017     2016 (v)     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 243,058     $ 35,343     $ 180,156     $ 80,627     $ 45,421     $ 339,090  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (4,318 )      (3,997 )      (51,203 )      (57,211 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      243,058       35,343       175,838       76,630       (5,782 )      281,879  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      295       —         —         —         1       1  

Net realized gain (loss)

      —         —         (21,424 )      (111,949 )      458,033       487,441  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      295       —         (21,424 )      (111,949 )      458,034       487,442  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      —         (2 )      339,568       448,287       45,877       (158,998 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      243,353       35,341       493,982       412,968       498,129       610,323  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      6,074,083       4,877,106       149,864       138,967       143,778       142,812  

Transfers between sub-accounts and the company

      15,888,771       34,184,734       678,667       303,566       (941,221 )      (272,894 ) 

Transfers on general account policy loans

      (108,055 )      (115,896 )      (43 )      2,913       14,363       (47,453 ) 

Withdrawals

      (4,218,543 )      (2,017,655 )      (305,595 )      (216,637 )      (615,916 )      (358,449 ) 

Annual contract fee

      (1,015,843 )      (645,943 )      (138,531 )      (132,448 )      (400,818 )      (452,283 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      16,620,413       36,282,346       384,362       96,361       (1,799,814 )      (988,267 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      16,863,766       36,317,687       878,344       509,329       (1,301,685 )      (377,944 ) 

Net assets at beginning of period

      36,317,687       —         3,667,652       3,158,323       9,971,302       10,349,246  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 53,181,453     $ 36,317,687     $ 4,545,996     $ 3,667,652     $ 8,669,617     $ 9,971,302  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      3,628,112       —         215,036       208,113       57,395       63,711  

Units issued

      6,177,745       4,823,314       57,183       58,050       773       7,423  

Units redeemed

      (4,525,534 )      (1,195,202 )      (36,902 )      (51,127 )      (10,805 )      (13,739 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      5,280,323       3,628,112       235,317       215,036       47,363       57,395  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(v)

Reflects the period from commencement of operations on April 29, 2016 through December 31, 2016.

 

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,

 

     Real Estate Securities
Trust Series NAV		     Science & Technology
Trust Series I		     Science & Technology
Trust Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 79,163     $ 477,164     $ 4,029     $ —       $ 4,395     $ —    

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (31,614 )      (30,708 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      79,163       477,164       (27,585 )      (30,708 )      4,395       —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         430,935       1,053,243       278,799       391,399  

Net realized gain (loss)

      761,238       590,864       184,346       (244,987 )      636,610       (58,266 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      761,238       590,864       615,281       808,256       915,409       333,133  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (96,267 )      (202,978 )      2,289,543       (217,736 )      596,538       (79,724 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      744,134       865,050       2,877,239       559,812       1,516,342       253,409  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      390,328       413,857       55,700       40,360       239,955       213,526  

Transfers between sub-accounts and the company

      (127,354 )      (349,187 )      (1,313,079 )      (1,228,069 )      723,003       800,900  

Transfers on general account policy loans

      7,615       7,163       2,050       91,414       245       (3,060 ) 

Withdrawals

      (493,434 )      (80,267 )      (650,687 )      (116,375 )      (129,876 )      (13,315 ) 

Annual contract fee

      (200,042 )      (217,209 )      (256,903 )      (245,672 )      (140,426 )      (95,005 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (422,887 )      (225,643 )      (2,162,919 )      (1,458,342 )      692,901       903,046  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      321,247       639,407       714,320       (898,530 )      2,209,243       1,156,455  

Net assets at beginning of period

      13,370,329       12,730,922       7,947,859       8,846,389       3,495,564       2,339,109  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 13,691,576     $ 13,370,329     $ 8,662,179     $ 7,947,859     $ 5,704,807     $ 3,495,564  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      87,538       89,152       225,197       271,129       112,415       81,554  

Units issued

      32,511       17,710       19,880       47,230       137,973       47,655  

Units redeemed

      (35,689 )      (19,324 )      (68,283 )      (93,162 )      (120,469 )      (16,794 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      84,360       87,538       176,794       225,197       129,919       112,415  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Short Term Government Income
Trust Series I		     Short Term Government Income
Trust Series NAV		     Small Cap Growth
Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 19,180     $ 28,052     $ 29,960     $ 34,542     $ —       $ —    

Expenses:

             

Mortality and expense risk and administrative charges

      (7,141 )      (8,203 )      —         —         (7,171 )      (5,720 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      12,039       19,849       29,960       34,542       (7,171 )      (5,720 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         —         —         —         106,755  

Net realized gain (loss)

      (5,024 )      (21,351 )      (23,736 )      (4,626 )      (137,101 )      (43,980 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (5,024 )      (21,351 )      (23,736 )      (4,626 )      (137,101 )      62,775  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (6,086 )      (2,222 )      5,427       (22,389 )      472,028       (28,915 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      929       (3,724 )      11,651       7,527       327,756       28,140  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      21,059       13,029       22,130       33,305       3,544       1,959  

Transfers between sub-accounts and the company

      72,040       (18,694 )      71,738       675,006       (346,240 )      445,219  

Transfers on general account policy loans

      163       86       2,332       (5,224 )      143       83  

Withdrawals

      (475 )      (44,907 )      (1,020 )      (24,306 )      (95,619 )      (598 ) 

Annual contract fee

      (78,268 )      (71,753 )      (30,981 )      (39,276 )      (61,607 )      (48,238 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      14,519       (122,239 )      64,199       639,505       (499,779 )      398,425  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      15,448       (125,963 )      75,850       647,032       (172,023 )      426,565  

Net assets at beginning of period

      1,435,877       1,561,840       2,057,488       1,410,456       1,544,465       1,117,900  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 1,451,325     $ 1,435,877     $ 2,133,338     $ 2,057,488     $ 1,372,442     $ 1,544,465  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      138,264       150,590       190,676       131,528       62,515       46,012  

Units issued

      15,046       56,561       120,962       89,857       8,141       20,914  

Units redeemed

      (13,602 )      (68,887 )      (115,151 )      (30,709 )      (26,578 )      (4,411 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      139,708       138,264       196,487       190,676       44,078       62,515  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Small Cap Growth Trust
Series NAV		     Small Cap Index Trust
Series I		     Small Cap Index Trust
Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ —       $ —       $ 26,087     $ 60,668     $ 33,897     $ 61,677  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (23,028 )      (21,499 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      —         —         3,059       39,169       33,897       61,677  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         692,889       237,959       410,735       270,895       394,453  

Net realized gain (loss)

      (724,743 )      (957,922 )      19,130       (85,123 )      211,488       (250,907 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (724,743 )      (265,033 )      257,089       325,612       482,383       143,546  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      2,135,455       476,224       524,113       650,408       379,532       837,199  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,410,712       211,191       784,261       1,015,189       895,812       1,042,422  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      138,317       112,669       24,331       25,411       162,394       300,090  

Transfers between sub-accounts and the company

      (3,673,471 )      (491,745 )      (434,650 )      (866,877 )      138,193       (542,254 ) 

Transfers on general account policy loans

      11,886       (18,825 )      350       (597 )      (13,591 )      (15,051 ) 

Withdrawals

      (386,909 )      (23,703 )      (5,775 )      (3,592 )      (87,818 )      (54,050 ) 

Annual contract fee

      (106,789 )      (123,769 )      (92,258 )      (86,618 )      (188,096 )      (199,538 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (4,016,966 )      (545,373 )      (508,002 )      (932,273 )      11,082       (510,803 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (2,606,254 )      (334,182 )      276,259       82,916       906,894       531,619  

Net assets at beginning of period

      7,849,924       8,184,106       5,910,335       5,827,419       5,906,467       5,374,848  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 5,243,670     $ 7,849,924     $  6,186,594     $ 5,910,335     $ 6,813,361     $ 5,906,467  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      256,722       273,720       168,328       200,328       197,055       217,000  

Units issued

      98,309       50,655       9,200       26,145       118,344       47,429  

Units redeemed

      (219,681 )      (67,653 )      (22,927 )      (58,145 )      (116,747 )      (67,374 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      135,350       256,722       154,601       168,328       198,652       197,055  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Small Cap Opportunities Trust
Series I		     Small Cap Opportunities Trust
Series NAV		     Small Cap Value Trust
Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 58,421     $ 63,882     $ 1,512     $ 1,839     $ 7,780     $ 5,920  

Expenses:

             

Mortality and expense risk and administrative charges

      (85,892 )      (80,968 )      —         —         (4,096 )      (3,853 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (27,471 )      (17,086 )      1,512       1,839       3,684       2,067  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      912,342       1,290,636       21,320       33,443       67,862       102,513  

Net realized gain (loss)

      82,697       (120,976 )      4,658       (949 )      (32,746 )      (49,580 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      995,039       1,169,660       25,978       32,494       35,116       52,933  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      453,868       1,216,523       13,475       32,542       (16,383 )      109,828  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,421,436       2,369,097       40,965       66,875       22,417       164,828  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      389,940       399,130       39,999       57,499       2,473       3,467  

Transfers between sub-accounts and the company

      (139,559 )      (130,317 )      (127,897 )      21,619       (257,214 )      167,316  

Transfers on general account policy loans

      (5,261 )      (5,192 )      (33 )      (26 )      —         —    

Withdrawals

      (910,803 )      (597,523 )      (3,888 )      (4,467 )      (15,645 )      (4,398 ) 

Annual contract fee

      (858,897 )      (865,598 )      (19,091 )      (18,909 )      (33,220 )      (32,010 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (1,524,580 )      (1,199,500 )      (110,910 )      55,716       (303,606 )      134,375  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (103,144 )      1,169,597       (69,945 )      122,591       (281,189 )      299,203  

Net assets at beginning of period

      14,818,509       13,648,912       408,743       286,152       1,089,635       790,432  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $  14,715,365   $  14,818,509     $ 338,798     $ 408,743     $ 808,446     $ 1,089,635  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      359,768       393,599       18,551       15,521       37,965       33,652  

Units issued

      9,347       17,210       8,159       5,025       11,762       14,257  

Units redeemed

      (45,353 )      (51,041 )      (12,880 )      (1,995 )      (22,526 )      (9,944 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      323,762       359,768       13,830       18,551       27,201       37,965  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Small Cap Value Trust
Series NAV		     Small Company Value Trust
Series I		     Small Company Value Trust
Series NAV		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 85,252     $ 66,846     $ 6,007     $ 23,413     $ 2,420     $ 4,310  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (8,866 )      (9,867 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      85,252       66,846       (2,859 )      13,546       2,420       4,310  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      674,417       1,225,445       366,011       472,203       143,025       67,615  

Net realized gain (loss)

      (98,500 )      (753,719 )      2,504       (263,358 )      11,504       (28,538 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      575,917       471,726       368,515       208,845       154,529       39,077  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (393,966 )      1,312,466       (92,179 )      609,664       (39,798 )      104,507  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      267,203       1,851,038       273,477       832,055       117,151       147,894  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      275,270       202,215       11,634       10,511       49,190       90,000  

Transfers between sub-accounts and the company

      (138,533 )      (425,968 )      (119,118 )      (307,863 )      353,852       7,868  

Transfers on general account policy loans

      989       (30,201 )      (622 )      29,177       (475 )      (9,274 ) 

Withdrawals

      (945,151 )      (275,520 )      (821,087 )      (64,074 )      (8,354 )      (19,710 ) 

Annual contract fee

      (153,420 )      (153,499 )      (72,461 )      (85,777 )      (30,453 )      (23,209 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (960,845 )      (682,973 )      (1,001,654 )      (418,026 )      363,760       45,675  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (693,642 )      1,168,065       (728,177 )      414,029       480,911       193,569  

Net assets at beginning of period

      9,049,665       7,881,600       3,467,399       3,053,370       647,689       454,120  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 8,356,023     $ 9,049,665     $ 2,739,222     $ 3,467,399     $ 1,128,600     $ 647,689  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      108,027       115,421       86,670       101,321       22,703       21,064  

Units issued

      58,984       52,891       2,521       33,392       30,153       7,957  

Units redeemed

      (70,905 )      (60,285 )      (27,393 )      (48,043 )      (17,401 )      (6,318 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      96,106       108,027       61,798       86,670       35,455       22,703  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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,

 

     Strategic Income Opportunities
Trust Series I		     Strategic Income Opportunities
Trust Series NAV		     Total Bond Market
Series Trust NAV		  
     2017     2016     2017     2016     2017 (p)     2016  

Income:

             

Dividend distributions received

    $ 80,272     $ 67,387     $ 155,343     $ 91,728     $ 723,630     $ 727,448  

Expenses:

             

Mortality and expense risk and administrative charges

      (9,121 )      (9,809 )      —         —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      71,151       57,578       155,343       91,728       723,630       727,448  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         —         —         —         —    

Net realized gain (loss)

      11,070       (126 )      15,852       (8,885 )      (425,824 )      (42,015 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      11,070       (126 )      15,852       (8,885 )      (425,824 )      (42,015 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      55,887       64,010       76,202       97,491       599,713       (529,466 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      138,108       121,462       247,397       180,334       897,519       155,967  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      29,264       22,191       324,297       263,752       604,808       282,672  

Transfers between sub-accounts and the company

      (164,203 )      185,564       810,266       106,914       (2,721,137 )      11,617,072  

Transfers on general account policy loans

      40       1       (780 )      (29,912 )      10,468       3,481  

Withdrawals

      (174,804 )      (16,091 )      (53,178 )      (99,353 )      (3,199,216 )      (107,386 ) 

Annual contract fee

      (100,969 )      (103,772 )      (111,475 )      (112,323 )      (400,979 )      (284,494 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (410,672 )      87,893       969,130       129,078       (5,706,056 )      11,511,345  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (272,564 )      209,355       1,216,527       309,412       (4,808,537 )      11,667,312  

Net assets at beginning of period

      2,833,598       2,624,243       3,771,709       3,462,297       27,954,898       16,287,586  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,561,034     $ 2,833,598     $ 4,988,236     $ 3,771,709     $ 23,146,361     $ 27,954,898  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      107,747       104,935       184,903       178,541       1,151,623       687,371  

Units issued

      9,813       86,756       101,450       27,570       1,336,838       620,208  

Units redeemed

      (25,223 )      (83,944 )      (54,913 )      (21,208 )      (1,565,750 )      (155,956 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      92,337       107,747       231,440       184,903       922,711       1,151,623  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(p)

Renamed on October 27, 2017. Previously known as Total Bond Market Trust B Series NAV.

 

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,

 

     Total Stock Market Index Trust
Series I		     Total Stock Market Index Trust
Series NAV		     Ultra Short Term
Bond Trust Series I		  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 124,746     $ 99,539     $ 74,353     $ 33,485     $ 52     $ 133  

Expenses:

             

Mortality and expense risk and administrative charges

      (27,188 )      (23,458 )      —         —         (38 )      (57 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      97,558       76,081       74,353       33,485       14       76  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      189,840       116,532       108,943       35,947       —         —    

Net realized gain (loss)

      581,916       138,448       468,594       28,703       (199 )      (13 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      771,756       254,980       577,537       64,650       (199 )      (13 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      694,016       594,196       166,788       164,906       191       (74 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,563,330       925,257       818,678       263,041       6       (11 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      18,041       946       315,491       345,355       57       114  

Transfers between sub-accounts and the company

      (584,967 )      125,540       2,393,867       273,361       —         —    

Transfers on general account policy loans

      717       —         —         (27 )      —         —    

Withdrawals

      (11,737 )      665       (74,018 )      (23,442 )      (4,876 )      —    

Annual contract fee

      (112,781 )      (75,916 )      (98,002 )      (59,879 )      (543 )      (439 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (690,727 )      51,235       2,537,338       535,368       (5,362 )      (325 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      872,603       976,492       3,356,016       798,409       (5,356 )      (336 ) 

Net assets at beginning of period

      7,153,133       6,176,641       2,504,744       1,706,335       8,522       8,858  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 8,025,736     $ 7,153,133     $ 5,860,760     $ 2,504,744     $ 3,166     $ 8,522  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      282,138       274,469       28,108       21,518       877       910  

Units issued

      73,390       96,839       256,085       10,260       4       9  

Units redeemed

      (91,541 )      (89,170 )      (229,683 )      (3,670 )      (557 )      (42 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      263,987       282,138       54,510       28,108       324       877  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

52

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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,

 

     Ultra Short Term Bond Trust
Series NAV		     Utilities Trust Series I     Utilities Trust Series NAV  
     2017     2016     2017     2016     2017     2016  

Income:

             

Dividend distributions received

    $ 9,773     $ 10,195     $ 26,231     $ 55,517     $ 50,898     $ 76,702  

Expenses:

             

Mortality and expense risk and administrative charges

      —         —         (4,957 )      (5,493 )      —         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      9,773       10,195       21,274       50,024       50,898       76,702  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses) on investments:

             

Capital gain distributions received

      —         —         —         20,507       4       28,214  

Net realized gain (loss)

      (1,230 )      (12,501 )      (10,384 )      (222,310 )      (11,666 )      (63,684 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Realized gains (losses)

      (1,230 )      (12,501 )      (10,384 )      (201,803 )      (11,662 )      (35,470 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) during the period

      (4,486 )      6,438       136,243       264,118       221,144       142,813  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      4,057       4,132       147,133       112,339       260,380       184,045  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Changes from principal transactions:

             

Purchase payments

      2,726       7,700       5,291       4,266       162,451       177,952  

Transfers between sub-accounts and the company

      83,698       (622,274 )      (23,438 )      (146,730 )      35,400       21,532  

Transfers on general account policy loans

      (893 )      —         —         —         (5,367 )      (37,919 ) 

Withdrawals

      (108,192 )      18,023       (166,476 )      (11,378 )      (28,459 )      (122,822 ) 

Annual contract fee

      (26,945 )      (24,600 )      (37,854 )      (40,997 )      (46,162 )      (54,716 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from principal transactions

      (49,606 )      (621,151 )      (222,477 )      (194,839 )      117,863       (15,973 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (45,549 )      (617,019 )      (75,344 )      (82,500 )      378,243       168,072  

Net assets at beginning of period

      635,403       1,252,422       1,117,310       1,199,810       1,712,546       1,544,474  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 589,854     $ 635,403     $ 1,041,966     $ 1,117,310     $ 2,090,789     $ 1,712,546  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2017     2016     2017     2016     2017     2016  

Units, beginning of period

      62,672       124,349       33,660       40,494       60,361       60,659  

Units issued

      10,345       130,882       5,155       16,013       8,038       9,323  

Units redeemed

      (15,194 )      (192,559 )      (11,208 )      (22,847 )      (4,218 )      (9,621 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Units, end of period

      57,823       62,672       27,607       33,660       64,181       60,361  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

See accompanying notes.

 

53

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

NOTES TO FINANCIAL STATEMENTS

December 31, 2017

 

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 93 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 organized originally under the laws of the State of Maine in 1955 and later in 1992, the Company changed its state of domicile to the State of Michigan. 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.

As a result of a portfolio change, the following sub-accounts of the Account were renamed as follows:

 

Previous Name

  

New Name

   

Effective

Date                 

500 Index Fund B Series NAV   500 Index Fund Series NAV   

10/27/2017

International Equity Index Trust B Series I   International Equity Index Series I   

10/27/2017

International Equity Index Trust B Series NAV   International Equity Index Series NAV   

10/27/2017

Lifestyle Aggressive MVP Series I   Managed Volatility Aggressive Portfolio Series I   

10/27/2017

Lifestyle Aggressive MVP Series NAV   Managed Volatility Aggressive Portfolio Series NAV   

10/27/2017

Lifestyle Balanced MVP Series I   Managed Volatility Balanced Portfolio Series I   

10/27/2017

Lifestyle Balanced MVP Series NAV   Managed Volatility Balanced Portfolio Series NAV   

10/27/2017

Lifestyle Conservative MVP Series I   Managed Volatility Conservative Portfolio Series I   

10/27/2017

Lifestyle Conservative MVP Series NAV   Managed Volatility Conservative Portfolio Series NAV   

10/27/2017

Lifestyle Growth MVP Series I   Managed Volatility Growth Portfolio Series I   

10/27/2017

Lifestyle Growth MVP Series NAV   Managed Volatility Growth Portfolio Series NAV   

10/27/2017

Lifestyle Growth Trust PS Series I   Lifestyle Growth Portfolio Series I   

10/27/2017

Lifestyle Growth Trust PS Series NAV   Lifestyle Growth Portfolio Series NAV   

10/27/2017

Lifestyle Moderate MVP Series I   Managed Volatility Moderate Portfolio Series I   

10/27/2017

Lifestyle Moderate MVP Series NAV   Managed Volatility Moderate Portfolio Series NAV   

10/27/2017

 

54

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

1.

Organization — (continued):

 

Previous Name

   

New Name

   

Effective

Date                 

Total Bond Market Trust B Series NAV

   

Total Bond Market Series Trust NAV

   

10/27/2017

Funds transferred in 2017 are as follows:

 

Transferred from

  

Transferred to

   

Effective

Date                 

All Cap Core Trust Series I   Total Stock Market Index Trust Series I   

04/28/2017

All Cap Core Trust Series NAV   Total Stock Market Index Trust Series NAV   

04/28/2017

American New World Trust Series I   Emerging Markets Value Trust Series I   

10/27/2017

Core Strategy Trust Series I   Lifestyle Growth Portfolio Series I   

10/27/2017

Core Strategy Trust Series NAV   Lifestyle Growth Portfolio Series NAV   

10/27/2017

Value Trust Series I   Mid Cap Index Trust Series I   

10/27/2017

Value Trust Series NAV   Mid Cap Index Trust Series NAV   

10/27/2017

 

55

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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, 2017.    

 

56

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 years 2014 and 2015 are currently under examination by the Internal Revenue Service. The years from 2015 are also open for 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, 2017, 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, 2017

 

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, 2017. 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, 2017:

 

     Level 1      Level 2      Level 3      Total  

Mutual Funds

            

Affiliated

    $ 774,791,781        —          —          774,791,781  

NonAffiliated

    $ 4,839,842        —          —          4,839,842  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 779,631,623        —          —          779,631,623  
  

 

 

     

 

 

     

 

 

     

 

 

  

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, 2017.

 

58

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 2017 were as follows:

 

     Purchases      Sales  

Sub-Account

      

500 Index Fund Series NAV

    $ 19,452,693      $ 27,272,567  

Active Bond Trust Series I

      367,214        191,600  

Active Bond Trust Series NAV

      588,650        41,916  

All Cap Core Trust Series I (g)

      6,254        485,078  

All Cap Core Trust Series NAV (h)

      86,357        1,776,964  

Alpha Opportunities Trust Series I

      7,787        3,461  

Alpha Opportunities Trust Series NAV

      442,934        662,000  

American Asset Allocation Trust Series I

      3,857,774        1,837,875  

American Global Growth Trust Series I

      7,116,637        6,974,575  

American Growth Trust Series I

      11,737,290        11,819,951  

American Growth-Income Trust Series I

      2,995,057        3,372,564  

American International Trust Series I

      5,698,680        15,454,186  

American New World Trust Series I (b)

      903,313        3,546,669  

Blue Chip Growth Trust Series I

      1,745,694        1,948,804  

Blue Chip Growth Trust Series NAV

      11,216,785        11,486,561  

Bond Trust Series I

      727,671        1,316,643  

Bond Trust Series NAV

      267,934        6,298,940  

Capital Appreciation Trust Series I

      1,152,989        1,373,972  

Capital Appreciation Trust Series NAV

      390,883        532,622  

Capital Appreciation Value Trust Series I

      848,884        70,943  

Capital Appreciation Value Trust Series NAV

      496,979        205,331  

Core Bond Trust Series I

      812,287        2,928,429  

Core Bond Trust Series NAV

      6,758,371        2,304,363  

Core Strategy Trust Series I (c)

      8,390        128,205  

Core Strategy Trust Series NAV (d)

      558,341        2,476,633  

Emerging Markets Value Trust Series I

      1,842,924        6,796  

Emerging Markets Value Trust Series NAV

      4,429,724        2,219,841  

Equity Income Trust Series I

      1,280,199        1,886,064  

Equity Income Trust Series NAV

      13,760,869        6,520,075  

Financial Industries Trust Series I

      498,992        679,472  

Financial Industries Trust Series NAV

      63,593        28,766  

Fundamental All Cap Core Trust Series I

      118,784        106,870  

Fundamental All Cap Core Trust Series NAV

      1,051,009        175,244  

Fundamental Large Cap Value Trust Series I

      207,314        1,764,369  

Fundamental Large Cap Value Trust Series NAV

      1,005,145        786,745  

Global Bond Trust Series I

      260,536        320,627  

Global Bond Trust Series NAV

      4,274,332        2,156,564  

Global Trust Series I

      814,785        705,040  

Global Trust Series NAV

      351,478        158,211  

Health Sciences Trust Series I

      1,025,506        898,943  

Health Sciences Trust Series NAV

      4,725,424        4,002,897  

High Yield Trust Series I

      1,321,154        1,956,546  

High Yield Trust Series NAV

      1,105,807        2,364,092  

International Equity Index Series I

      2,673,101        511,840  

International Equity Index Series NAV

      5,560,402        2,518,788  

International Growth Stock Trust Series I

      1,202,734        76,833  

International Growth Stock Trust Series NAV

      5,155,162        4,774,312  

International Small Company Trust Series I

      348,032        128,025  

International Small Company Trust Series NAV

      581,632        137,585  

 

59

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

6.

Purchases and Sales of Investments — (continued):

 

     Purchases      Sales  

Sub-Account

      

International Value Trust Series I

    $ 754,629      $ 1,024,468  

International Value Trust Series NAV

      1,867,755        1,043,455  

Investment Quality Bond Trust Series I

      787,416        912,933  

Investment Quality Bond Trust Series NAV

      250,163        166,887  

Lifestyle Growth Portfolio Series I

      322,530        26,212  

Lifestyle Growth Portfolio Series NAV

      2,523,698        33,532  

M Capital Appreciation (a)

      442,733        697,170  

M Large Cap Value (a)

      3,967        125,213  

Managed Volatility Aggressive Portfolio Series I

      186,078        255,310  

Managed Volatility Aggressive Portfolio Series NAV

      1,120,392        2,163,117  

Managed Volatility Balanced Portfolio Series I

      642,877        1,263,285  

Managed Volatility Balanced Portfolio Series NAV

      2,108,689        3,937,496  

Managed Volatility Conservative Portfolio Series I

      322,667        739,726  

Managed Volatility Conservative Portfolio Series NAV

      2,066,268        2,280,471  

Managed Volatility Growth Portfolio Series I

      602,005        760,430  

Managed Volatility Growth Portfolio Series NAV

      3,572,517        7,490,831  

Managed Volatility Moderate Portfolio Series I

      511,140        393,070  

Managed Volatility Moderate Portfolio Series NAV

      733,238        4,016,941  

Mid Cap Index Trust Series I

      2,906,133        876,771  

Mid Cap Index Trust Series NAV

      8,351,321        5,014,249  

Mid Cap Stock Trust Series I

      349,450        950,158  

Mid Cap Stock Trust Series NAV

      6,500,939        7,789,666  

Mid Value Trust Series I

      663,550        1,977,540  

Mid Value Trust Series NAV

      4,426,238        4,331,037  

Money Market Trust Series I

      7,997,593        16,205,622  

Money-Market Trust Series NAV

      62,251,050        45,387,284  

PIMCO All Asset (a)

      1,256,595        696,395  

Real Estate Securities Trust Series I

      170,068        1,975,665  

Real Estate Securities Trust Series NAV

      5,259,384        5,603,107  

Science & Technology Trust Series I

      1,260,994        3,020,565  

Science & Technology Trust Series NAV

      5,981,418        5,005,324  

Short Term Government Income Trust Series I

      174,756        148,198  

Short Term Government Income Trust Series NAV

      1,345,177        1,251,018  

Small Cap Growth Trust Series I

      232,314        739,264  

Small Cap Growth Trust Series NAV

      3,236,699        7,253,665  

Small Cap Index Trust Series I

      596,422        863,407  

Small Cap Index Trust Series NAV

      4,225,790        3,909,917  

Small Cap Opportunities Trust Series I

      1,370,703        2,010,413  

Small Cap Opportunities Trust Series NAV

      206,491        294,570  

Small Cap Value Trust Series I

      409,491        641,551  

Small Cap Value Trust Series NAV

      5,663,662        5,864,837  

Small Company Value Trust Series I

      475,927        1,114,429  

Small Company Value Trust Series NAV

      1,009,578        500,374  

Strategic Income Opportunities Trust Series I

      350,882        690,401  

Strategic Income Opportunities Trust Series NAV

      2,273,870        1,149,398  

Total Bond Market Series Trust NAV

      33,748,330        38,730,755  

Total Stock Market Index Trust Series I

      2,281,175        2,684,502  

Total Stock Market Index Trust Series NAV

      24,665,410        21,944,777  

Ultra Short Term Bond Trust Series I

      91        5,440  

Ultra Short Term Bond Trust Series NAV

      114,781        154,613  

Utilities Trust Series I

      209,666        410,867  

Utilities Trust Series NAV

      304,525        135,761  

 

60

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

6.

Purchases and Sales of Investments — (continued):

 

     Purchases      Sales  

Sub-Account

      

Value Trust Series I (e)

    $ 1,517,350      $ 2,397,255  

Value Trust Series NAV (f)

      1,482,471        1,851,491  

 

(a)

Sub-account that invests in non-affiliated Trust.

 

(b)

Terminated as an investment option and funds transferred to Emerging Markets Value Trust Series I on October 27, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(c)

Terminated as an investment option and funds transferred to Lifestyle Growth Portfolio Series I on October 27, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(d)

Terminated as an investment option and funds transferred to Lifestyle Growth Portfolio Series NAV on October 27, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(e)

Terminated as an investment option and funds transferred to Mid Cap Index Trust Series I on October 27, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(f)

Terminated as an investment option and funds transferred to Mid Cap Index Trust Series NAV on October 27, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(g)

Terminated as an investment option and funds transferred to Total Stock Market Index Trust Series I on April 28, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

(h)

Terminated as an investment option and funds transferred to Total Stock Market Index Trust Series NAV on April 28, 2017. The information above represents operations and change in owner’s contract holder equities from beginning of the year through termination date.

 

61

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 Series NAV

       2017  (f)        1,888       $  58.62 to $ 33.53       $ 89,400         0.70% to 0.00 %        1.69 %        21.54% to 20.70 % 
      2016         2,089         48.23 to 27.78         82,800         0.70 to 0.00         1.84         11.64 to 10.86  
      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  

Active Bond Trust Series I

       2017         34         23.29 to 22.00         763         0.65 to 0.20         4.13         4.63 to 4.16  
      2016         28         22.26 to 21.12         586         0.65 to 0.20         3.60         4.14 to 3.66  
      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  

Active Bond Trust Series NAV

       2017         14         77.99 to 77.99         1,068         0.00 to 0.00         4.02         4.89 to 4.89  
      2016         7         74.36 to 74.36         518         0.00 to 0.00         4.10         4.50 to 4.50  
      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  

Alpha Opportunities Trust Series I

       2017         2         27.10 to 27.10         44         0.65 to 0.65         0.46         16.97 to 16.97  
      2016         2         23.17 to 23.17         40         0.65 to 0.65         1.66         5.03 to 5.03  
      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  

Alpha Opportunities Trust Series NAV

       2017         22         30.34 to 30.34         658         0.00 to 0.00         0.40         17.77 to 17.77  
      2016         33         25.76 to 25.76         838         0.00 to 0.00         2.08         5.75 to 5.75  
      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  

American Asset Allocation Trust Series I

       2017         630         19.41 to 18.13         11,728         0.70 to 0.00         1.26         15.79 to 14.99  
      2016         563         16.76 to 15.77         9,005         0.70 to 0.00         1.27         8.99 to 8.23  
      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  

American Global Growth Trust Series I

       2017         32         20.55 to 19.62         660         0.65 to 0.00         0.24         30.92 to 30.06  
      2016         30         15.70 to 15.09         469         0.65 to 0.00         1.02         0.29 to -0.36  
      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  

American Growth Trust Series I

       2017         472         43.07 to 31.43         15,257         0.65 to 0.00         0.38         27.86 to 27.04  
      2016         537         33.90 to 24.58         13,960         0.65 to 0.00         0.41         9.08 to 8.37  
      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  

American Growth-Income Trust Series I

       2017         414         36.92 to 27.38         13,401         0.70 to 0.00         1.06         22.03 to 21.18  
      2016         486         30.47 to 22.44         13,415         0.70 to 0.00         1.72         11.10 to 10.33  
      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  

American International Trust Series I

       2017         306         37.84 to 23.62         7,988         0.65 to 0.00         0.53         31.65 to 30.80  
      2016         776         28.93 to 17.94         14,938         0.65 to 0.00         0.97         3.12 to 2.45  
      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  

Blue Chip Growth Trust Series I

       2017         142         72.16 to 66.28         9,564         0.70 to 0.20         0.07         36.01 to 35.33  
      2016         153         53.06 to 48.98         7,724         0.70 to 0.20         0.01         0.61 to 0.11  
      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  
      2013         165         43.71 to 22.34         6,783         0.70 to 0.20         0.27         41.05 to 40.34  

Blue Chip Growth Trust Series NAV

       2017         366         186.84 to 186.84         68,329         0.00 to 0.00         0.11         36.34 to 36.34  
      2016         394         137.04 to 137.04         54,032         0.00 to 0.00         0.06         0.85 to 0.85  
      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  

Bond Trust Series I

       2017         571         11.79 to 11.47         6,653         0.65 to 0.20         2.69         3.45 to 2.99  
      2016         636         11.39 to 11.14         7,180         0.65 to 0.20         3.14         2.85 to 2.39  
      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  

Bond Trust Series NAV

       2017         140         11.98 to 11.98         1,682         0.00 to 0.00         1.98         3.65 to 3.65  
      2016         664         11.56 to 11.56         7,677         0.00 to 0.00         4.98         3.19 to 3.19  

 

62

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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)

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  

Capital Appreciation Trust Series I

       2017         244         36.06 to 33.18         8,566         0.70 to 0.20         0.06         36.26 to 35.58  
      2016         274         26.47 to 24.48         7,058         0.70 to 0.20         0.00         -1.27 to -1.77  
      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  

Capital Appreciation Trust Series NAV

       2017         53         36.64 to 36.64         1,946         0.00 to 0.00         0.11         36.51 to 36.51  
      2016         62         26.84 to 26.84         1,667         0.00 to 0.00         0.01         -1.00 to -1.00  
      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  

Capital Appreciation Value Trust Series I

       2017         52         22.48 to 21.52         1,154         0.65 to 0.20         1.85         14.91 to 14.40  
      2016         18         19.31 to 18.81         330         0.65 to 0.35         1.32         7.74 to 7.42  
      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  

Capital Appreciation Value Trust Series NAV

       2017         102         22.99 to 22.99         2,356         0.00 to 0.00         1.53         15.13 to 15.13  
      2016         95         19.97 to 19.97         1,900         0.00 to 0.00         2.04         8.19 to 8.19  
      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  

Core Bond Trust Series I

       2017         369         21.03 to 19.88         7,646         0.65 to 0.20         2.00         3.20 to 2.73  
      2016         484         20.38 to 19.35         9,744         0.65 to 0.20         1.95         2.54 to 2.08  
      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  

Core Bond Trust Series NAV

       2017         1,480         17.35 to 17.35         25,673         0.00 to 0.00         2.30         3.47 to 3.47  
      2016         1,270         16.76 to 16.76         21,287         0.00 to 0.00         2.15         2.73 to 2.73  
      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  

Emerging Markets Value Trust Series I

       2017         114         17.50 to 16.68         1,987         0.65 to 0.20         4.52         32.44 to 31.84  
      2016         6         13.02 to 12.65         72         0.65 to 0.35         2.13         17.60 to 17.24  
      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  

Emerging Markets Value Trust Series NAV

       2017         285         14.36 to 14.36         4,086         0.00 to 0.00         2.38         32.67 to 32.67  
      2016         126         10.83 to 10.83         1,368         0.00 to 0.00         2.42         18.09 to 18.09  
      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  

Equity Income Trust Series I

       2017         162         55.52 to 51.00         8,632         0.70 to 0.20         2.21         16.06 to 15.48  
      2016         190         47.84 to 44.16         8,763         0.70 to 0.20         2.14         18.88 to 18.29  
      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  
      2013         301         40.31 to 28.33         11,703         0.70 to 0.20         1.84         29.78 to 29.14  

Equity Income Trust Series NAV

       2017         785         59.30 to 59.30         46,533         0.00 to 0.00         2.47         16.28 to 16.28  
      2016         730         51.00 to 51.00         37,229         0.00 to 0.00         2.26         19.18 to 19.18  
      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  

Financial Industries Trust Series I

       2017         28         30.63 to 28.43         821         0.65 to 0.20         1.03         15.05 to 14.54  
      2016         35         26.63 to 24.82         888         0.65 to 0.20         1.31         19.13 to 18.60  
      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  

Financial Industries Trust Series NAV

       2017         10         38.19 to 38.19         379         0.00 to 0.00         1.32         15.29 to 15.29  
      2016         9         33.13 to 33.13         300         0.00 to 0.00         1.30         19.47 to 19.47  
      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  

Fundamental All Cap Core Trust Series I

       2017         8         50.96 to 47.71         418         0.65 to 0.20         0.74         27.44 to 26.87  
      2016         8         39.99 to 37.61         327         0.65 to 0.20         0.52         8.12 to 7.64  
      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  

Fundamental All Cap Core Trust Series NAV

       2017         88         31.22 to 31.22         2,761         0.00 to 0.00         0.92         27.77 to 27.77  
      2016         59         24.44 to 24.44         1,446         0.00 to 0.00         0.70         8.40 to 8.40  

 

63

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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)

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  

Fundamental Large Cap Value Trust Series I

       2017         108         35.30 to 32.98         3,699         0.70 to 0.20         1.51         17.20 to 16.62  
      2016         160         30.12 to 28.28         4,698         0.70 to 0.20         2.16         9.95 to 9.41  
      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  

Fundamental Large Cap Value Trust Series NAV

       2017         320         25.59 to 25.59         8,185         0.00 to 0.00         1.72         17.54 to 17.54  
      2016         317         21.77 to 21.77         6,911         0.00 to 0.00         2.58         10.21 to 10.21  
      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  

Global Bond Trust Series I

       2017         34         31.33 to 28.78         1,015         0.70 to 0.20         2.36         8.54 to 8.00  
      2016         36         28.86 to 26.65         1,015         0.70 to 0.20         0.00         2.85 to 2.33  
      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  

Global Bond Trust Series NAV

       2017         271         33.33 to 33.33         9,043         0.00 to 0.00         2.29         8.71 to 8.71  
      2016         213         30.66 to 30.66         6,545         0.00 to 0.00         0.00         3.15 to 3.15  
      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  

Global Trust Series I

       2017         76         36.67 to 33.68         2,608         0.70 to 0.20         1.97         18.64 to 18.05  
      2016         75         30.91 to 28.53         2,158         0.70 to 0.20         4.37         9.25 to 8.70  
      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  

Global Trust Series NAV

       2017         123         21.04 to 21.04         2,579         0.00 to 0.00         2.00         18.90 to 18.90  
      2016         115         17.70 to 17.70         2,032         0.00 to 0.00         4.62         9.46 to 9.46  
      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  

Health Sciences Trust Series I

       2017         62         85.82 to 79.62         5,158         0.65 to 0.20         0.00         27.25 to 26.68  
      2016         67         67.44 to 62.85         4,375         0.65 to 0.20         0.06         -10.75 to -11.15  
      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  

Health Sciences Trust Series NAV

       2017         95         69.27 to 69.27         6,555         0.00 to 0.00         0.00         27.61 to 27.61  
      2016         93         54.28 to 54.28         5,051         0.00 to 0.00         0.11         -10.54 to -10.54  
      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  

High Yield Trust Series I

       2017         89         34.61 to 31.81         2,979         0.70 to 0.20         5.79         7.28 to 6.75  
      2016         114         32.27 to 29.80         3,561         0.70 to 0.20         7.03         16.03 to 15.45  
      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  

High Yield Trust Series NAV

       2017         67         24.25 to 24.25         1,622         0.00 to 0.00         4.30         7.46 to 7.46  
      2016         124         22.57 to 22.57         2,802         0.00 to 0.00         6.85         16.56 to 16.56  
      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  

International Equity Index Series I

       2017  (g)        651         14.34 to 14.02         9,241         0.65 to 0.20         2.46         27.05 to 26.49  
      2016         498         11.29 to 11.08         5,569         0.65 to 0.20         2.47         4.24 to 3.77  
      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  

International Equity Index Series NAV

       2017  (h)        304         56.94 to 56.94         17,323         0.00 to 0.00         2.37         27.45 to 27.45  
      2016         252         44.68 to 44.68         11,245         0.00 to 0.00         2.78         4.43 to 4.43  
      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  

International Growth Stock Trust Series I

       2017         210         14.45 to 14.12         3,021         0.65 to 0.20         1.61         21.61 to 21.07  
      2016         126         11.88 to 11.66         1,485         0.65 to 0.20         1.81         -1.51 to -1.95  
      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  

International Growth Stock Trust Series NAV

       2017         749         14.64 to 14.64         10,972         0.00 to 0.00         1.51         21.90 to 21.90  
      2016         740         12.01 to 12.01         8,892         0.00 to 0.00         1.73         -1.19 to -1.19  

 

64

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 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  

International Small Company Trust Series I

       2017         44         20.16 to 19.37         854         0.70 to 0.20         1.44         29.20 to 28.56  
      2016         33         15.61 to 15.06         497         0.70 to 0.20         1.86         4.69 to 4.17  
      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  

International Small Company Trust Series NAV

       2017         80         20.59 to 20.59         1,648         0.00 to 0.00         1.69         29.59 to 29.59  
      2016         57         15.89 to 15.89         904         0.00 to 0.00         1.97         4.95 to 4.95  
      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  

International Value Trust Series I

       2017         231         27.75 to 25.49         6,222         0.70 to 0.20         1.84         16.91 to 16.32  
      2016         245         23.74 to 21.91         5,665         0.70 to 0.20         2.83         12.02 to 11.46  
      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  

International Value Trust Series NAV

       2017         385         18.75 to 18.75         7,215         0.00 to 0.00         2.01         17.25 to 17.25  
      2016         345         15.99 to 15.99         5,518         0.00 to 0.00         2.38         12.20 to 12.20  
      2015         288         14.25 to 14.25         4,105         0.00 to 0.00         1.96         -7.72 to -7.72  
      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  

Investment Quality Bond Trust Series I

       2017         139         34.57 to 31.76         4,608         0.70 to 0.20         2.62         4.39 to 3.88  
      2016         147         33.12 to 30.57         4,666         0.70 to 0.20         2.20         4.09 to 3.56  
      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  

Investment Quality Bond Trust Series NAV

       2017         47         17.32 to 17.32         822         0.00 to 0.00         2.73         4.67 to 4.67  
      2016         44         16.55 to 16.55         729         0.00 to 0.00         2.42         4.26 to 4.26  
      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  

Lifestyle Growth Portfolio Series I

       2017  (q)        28         11.75 to 11.75         324         0.65 to 0.65         2.93         15.37 to 15.37  
      2016  (v)        1         10.19 to 10.19         9         0.65 to 0.65         9.65         1.87 to 1.87  

Lifestyle Growth Portfolio Series NAV

       2017  (r)        197         13.46 to 13.46         2,653         0.00 to 0.00         8.30         16.20 to 16.20  
      2016  (v)        11         11.59 to 11.59         128         0.00 to 0.00         10.08         1.99 to 1.99  

M Capital Appreciation(e)

       2017         3         114.51 to 114.51         294         0.00 to 0.00         0.00         19.02 to 19.02  
      2016         6         96.21 to 96.21         529         0.00 to 0.00         0.00         21.06 to 21.06  
      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  

Managed Volatility Aggressive Portfolio Series I

       2017  (i)        37         34.65 to 32.11         1,200         0.65 to 0.20         1.71         22.57 to 22.03  
      2016         40         28.27 to 26.31         1,056         0.65 to 0.20         1.55         1.75 to 1.29  
      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  

Managed Volatility Aggressive Portfolio Series NAV

       2017  (j)        208         22.03 to 22.03         4,576         0.00 to 0.00         1.73         22.88 to 22.88  
      2016         266         17.93 to 17.93         4,766         0.00 to 0.00         1.35         1.89 to 1.89  
      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  

Managed Volatility Balanced Portfolio Series I

       2017  (k)        109         39.00 to 36.13         3,941         0.65 to 0.20         2.02         13.90 to 13.40  
      2016         133         34.24 to 31.86         4,245         0.65 to 0.20         1.95         4.58 to 4.11  
      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  

Managed Volatility Balanced Portfolio Series NAV

       2017  (l)        804         20.58 to 20.58         16,546         0.00 to 0.00         2.18         14.15 to 14.15  
      2016         950         18.02 to 18.02         17,126         0.00 to 0.00         2.23         4.91 to 4.91  
      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  

Managed Volatility Conservative Portfolio Series I

       2017  (m)        42         37.34 to 34.59         1,464         0.65 to 0.20         2.40         7.60 to 7.12  
      2016         56         34.70 to 32.29         1,829         0.65 to 0.20         2.39         4.37 to 3.91  
      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  

Managed Volatility Conservative Portfolio Series NAV

       2017  (n)        259         18.54 to 18.54         4,800         0.00 to 0.00         2.51         7.94 to 7.94  
      2016         282         17.17 to 17.17         4,839         0.00 to 0.00         2.57         4.53 to 4.53  

 

65

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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)

Managed Volatility Conservative Portfolio 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  

Managed Volatility Growth Portfolio Series I

       2017  (o)        91         37.11 to 34.37         3,157         0.65 to 0.20         1.91         18.35 to 17.82  
      2016         100         31.36 to 29.17         2,959         0.65 to 0.20         1.61         3.12 to 2.67  
      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  

Managed Volatility Growth Portfolio Series NAV

       2017  (p)        1,108         21.11 to 21.11         23,388         0.00 to 0.00         1.88         18.71 to 18.71  
      2016         1,378         17.78 to 17.78         24,499         0.00 to 0.00         1.95         3.38 to 3.38  
      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  

Managed Volatility Moderate Portfolio Series I

       2017  (s)        55         39.56 to 36.64         2,047         0.65 to 0.20         2.43         11.66 to 11.16  
      2016         54         35.43 to 32.96         1,825         0.65 to 0.20         2.25         5.08 to 4.61  
      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  

Managed Volatility Moderate Portfolio Series NAV

       2017  (t)        344         20.19 to 20.19         6,949         0.00 to 0.00         1.92         12.02 to 12.02  
      2016         534         18.03 to 18.03         9,624         0.00 to 0.00         2.22         5.25 to 5.25  
      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  

Mid Cap Index Trust Series I

       2017         186         54.88 to 50.40         9,765         0.70 to 0.20         0.53         15.58 to 15.00  
      2016         154         47.49 to 43.83         7,075         0.70 to 0.20         1.18         19.87 to 19.28  
      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  

Mid Cap Index Trust Series NAV

       2017         406         37.45 to 37.45         15,217         0.00 to 0.00         0.58         15.86 to 15.86  
      2016         335         32.32 to 32.32         10,816         0.00 to 0.00         0.87         20.17 to 20.17  
      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  

Mid Cap Stock Trust Series I

       2017         87         43.13 to 39.61         3,662         0.70 to 0.20         0.00         28.29 to 27.65  
      2016         104         33.62 to 31.03         3,425         0.70 to 0.20         0.00         0.39 to -0.11  
      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  

Mid Cap Stock Trust Series NAV

       2017         62         98.30 to 98.30         6,056         0.00 to 0.00         0.00         28.66 to 28.66  
      2016         78         76.41 to 76.41         5,992         0.00 to 0.00         0.00         0.58 to 0.58  
      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  

Mid Value Trust Series I

       2017         106         34.08 to 32.78         3,587         0.65 to 0.20         0.90         11.21 to 10.71  
      2016         159         30.64 to 29.60         4,842         0.65 to 0.20         1.17         23.77 to 23.22  
      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  

Mid Value Trust Series NAV

       2017         210         53.32 to 53.32         11,222         0.00 to 0.00         0.99         11.46 to 11.46  
      2016         231         47.84 to 47.84         11,066         0.00 to 0.00         1.24         24.09 to 24.09  
      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  

Money Market Trust Series I

       2017         931         21.69 to 19.91         19,208         0.70 to 0.20         0.57         0.38 to -0.11  
      2016         1,317         21.60 to 19.93         27,416         0.70 to 0.20         0.07         -0.15 to -0.62  
      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  

Money -Market Trust Series NAV

       2017         5,280         10.07 to 10.07         53,181         0.00 to 0.00         0.63         0.61 to 0.61  
      2016  (e)        3,628         10.00 to 10.00         36,318         0.00 to 0.00         0.16         0.05 to 0.05  

PIMCO All Asset(e)

       2017         235         23.64 to 18.31         4,546         0.65 to 0.00         4.49         13.19 to 12.46  
      2016         215         21.02 to 16.18         3,668         0.65 to 0.00         2.36         12.59 to 11.85  
      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  

Real Estate Securities Trust Series I

       2017         47         195.60 to 179.66         8,670         0.70 to 0.20         0.50         6.02 to 5.50  
      2016         57         184.49 to 170.30         9,971         0.70 to 0.20         3.37         6.71 to 6.17  
      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  

 

66

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 Estate Securities Trust Series NAV

       2017         84       $  162.30 to $ 162.30       $ 13,692         0.00% to 0.00 %        0.63 %        6.26% to 6.26 % 
      2016         88         152.74 to 152.74         13,370         0.00 to 0.00         3.58         6.96 to 6.96  
      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  

Science & Technology Trust Series I

       2017         177         52.19 to 47.93         8,662         0.70 to 0.20         0.05         40.85 to 40.15  
      2016         225         37.05 to 34.20         7,948         0.70 to 0.20         0.00         8.17 to 7.63  
      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  

Science & Technology Trust Series NAV

       2017         130         43.91 to 43.91         5,705         0.00 to 0.00         0.10         41.21 to 41.21  
      2016         112         31.10 to 31.10         3,496         0.00 to 0.00         0.00         8.41 to 8.41  
      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  

Short Term Government Income Trust Series I

       2017         140         10.63 to 10.25         1,451         0.70 to 0.20         1.38         0.35 to -0.13  
      2016         138         10.59 to 10.26         1,436         0.70 to 0.20         1.80         0.33 to -0.13  
      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  

Short Term Government Income Trust Series NAV

       2017         196         10.86 to 10.86         2,133         0.00 to 0.00         1.52         0.62 to 0.62  
      2016         191         10.79 to 10.79         2,057         0.00 to 0.00         1.75         0.63 to 0.63  
      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  

Small Cap Growth Trust Series I

       2017         44         32.00 to 30.71         1,372         0.65 to 0.20         0.00         26.21 to 25.65  
      2016         63         25.35 to 24.44         1,544         0.65 to 0.20         0.00         2.09 to 1.63  
      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  

Small Cap Growth Trust Series NAV

       2017         135         38.74 to 38.74         5,244         0.00 to 0.00         0.00         26.70 to 26.70  
      2016         257         30.58 to 30.58         7,850         0.00 to 0.00         0.00         2.27 to 2.27  
      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  

Small Cap Index Trust Series I

       2017         155         41.34 to 37.96         6,187         0.70 to 0.20         0.44         14.16 to 13.59  
      2016         168         36.21 to 33.42         5,910         0.70 to 0.20         1.13         20.73 to 20.13  
      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  

Small Cap Index Trust Series NAV

       2017         199         34.30 to 34.30         6,813         0.00 to 0.00         0.52         14.43 to 14.43  
      2016         197         29.98 to 29.98         5,906         0.00 to 0.00         1.17         21.02 to 21.02  
      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  

Small Cap Opportunities Trust Series I

       2017         324         48.22 to 44.81         14,715         0.70 to 0.20         0.41         10.85 to 10.30  
      2016         360         43.50 to 40.62         14,819         0.70 to 0.20         0.47         19.23 to 18.63  
      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  

Small Cap Opportunities Trust Series NAV

       2017         14         24.50 to 24.50         339         0.00 to 0.00         0.39         11.18 to 11.18  
      2016         19         22.03 to 22.03         409         0.00 to 0.00         0.54         19.51 to 19.51  
      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  

Small Cap Value Trust Series I

       2017         27         30.55 to 29.18         808         0.65 to 0.20         0.86         3.52 to 3.06  
      2016         38         29.51 to 28.32         1,090         0.65 to 0.20         0.74         22.43 to 21.88  
      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  

Small Cap Value Trust Series NAV

       2017         96         86.94 to 86.94         8,356         0.00 to 0.00         0.94         3.79 to 3.79  
      2016         108         83.77 to 83.77         9,050         0.00 to 0.00         0.76         22.68 to 22.68  
      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  

Small Company Value Trust Series I

       2017         62         45.35 to 41.65         2,739         0.70 to 0.20         0.22         11.27 to 10.72  
      2016         87         40.75 to 37.62         3,467         0.70 to 0.20         0.77         32.05 to 31.39  
      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  

 

67

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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 NAV

       2017         35       $  31.83 to $ 31.83       $ 1,129         0.00% to 0.00 %        0.24 %        11.58% to 11.58 % 
      2016         23         28.53 to 28.53         648         0.00 to 0.00         0.90         32.33 to 32.33  
      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  

Strategic Income Opportunities Trust Series I

       2017         92         28.25 to 26.55         2,561         0.65 to 0.20         3.00         5.38 to 4.90  
      2016         108         26.80 to 25.31         2,834         0.65 to 0.20         2.56         4.92 to 4.45  
      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  

Strategic Income Opportunities Trust Series NAV

       2017         231         21.56 to 21.56         4,988         0.00 to 0.00         3.38         5.66 to 5.66  
      2016         185         20.40 to 20.40         3,772         0.00 to 0.00         2.55         5.19 to 5.19  
      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  

Total Bond Market Series Trust NAV

       2017  (u)        923         25.08 to 25.08         23,146         0.00 to 0.00         2.73         3.34 to 3.34  
      2016         1,152         24.27 to 24.27         27,955         0.00 to 0.00         3.32         2.45 to 2.45  
      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  

Total Stock Market Index Trust Series I

       2017         264         31.03 to 28.50         8,026         0.70 to 0.20         1.47         20.35 to 19.75  
      2016         282         25.79 to 23.80         7,153         0.70 to 0.20         1.42         12.16 to 11.60  
      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  

Total Stock Market Index Trust Series NAV

       2017         55         107.52 to 107.52         5,861         0.00 to 0.00         1.62         20.65 to 20.65  
      2016         28         89.11 to 89.11         2,505         0.00 to 0.00         1.60         12.38 to 12.38  
      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  

Ultra Short Term Bond Trust Series I

       2017         0         9.86 to 9.68         3         0.65 to 0.45         0.90         0.23 to -0.04  
      2016         1         9.84 to 9.68         9         0.65 to 0.45         1.53         0.10 to -0.17  
      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  

Ultra Short Term Bond Trust Series NAV

       2017         58         10.20 to 10.20         590         0.00 to 0.00         1.55         0.62 to 0.62  
      2016         63         10.14 to 10.14         635         0.00 to 0.00         1.36         0.67 to 0.67  
      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  

Utilities Trust Series I

       2017         28         39.31 to 36.46         1,042         0.65 to 0.20         2.38         14.52 to 14.00  
      2016         34         34.33 to 31.98         1,117         0.65 to 0.20         4.59         11.13 to 10.63  
      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  

Utilities Trust Series NAV

       2017         64         32.57 to 32.57         2,091         0.00 to 0.00         2.56         14.82 to 14.82  
      2016         60         28.37 to 28.37         1,713         0.00 to 0.00         4.56         11.43 to 11.43  
      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  
      2013         63         26.50 to 26.50         1,660         0.00 to 0.00         2.30         20.65 to 20.65  

 

68

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

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 separate account, consisting primarily of the items known as “Revenue from underlying fund (12b-1, ST A, Other)” and “Revenue from Sub-account” (formerly referred to as the administrative maintenance charges and sales and service fees (AMC and SSF)). The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to unitholder accounts through the redemption of units and expenses of the underlying fund are excluded.

 

(c)

These ratios 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, represent the total return for the periods indicated, including changes in the value of the underlying Port folio, 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 vari able 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)

Reflects the period from commencement of operations on April 29, 2016 through December 31, 2016.

 

(f)

Renamed on October 27, 2017. Previously known as 500 Index Fund B Series NAV.

 

(g)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series I.

 

(h)

Renamed on October 27, 2017. Previously known as International Equity Index Trust B Series NAV.

 

(i)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series I.

 

(j)

Renamed on October 27, 2017. Previously known as Lifestyle Aggressive MVP Series NAV.

 

(k)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series I.

 

(l)

Renamed on October 27, 2017. Previously known as Lifestyle Balanced MVP Series NAV.

 

(m)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series I.

 

(n)

Renamed on October 27, 2017. Previously known as Lifestyle Conservative MVP Series NAV.

 

(o)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series I.

 

(p)

Renamed on October 27, 2017. Previously known as Lifestyle Growth MVP Series NAV.

 

(q)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series I.

 

(r)

Renamed on October 27, 2017. Previously known as Lifestyle Growth Trust PS Series NAV.

 

(s)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series I.

 

(t)

Renamed on October 27, 2017. Previously known as Lifestyle Moderate MVP Series NAV.

 

(u)

Renamed on October 27, 2017. Previously known as Total Bond Market Trust B Series NAV.

 

(v)

Sub-account available in prior year but no activity.

 

69

Table of Contents

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

NOTES TO FINANCIAL STATEMENTS — (CONTINUED)

December 31, 2017

 

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.

 

70

Table of Contents
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 11, file number 333-179570, filed with the Commission in April, 2018.
(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. Power of Attorney for Linda A. Davis Watters, incorporated by reference to post-effective amendment number 10, file number 333-179570, filed with the Commission in April, 2017. Power of Attorney for Marianne Harrison, incorporated by reference to pre-effective amendment No. 1, File No. 333-221236, filed with the Commission on December 14, 2017.
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
Marianne Harrison

601 Congress Street

Boston, MA 02210
   Chair, President & Chief Executive Officer
Thomas Borshoff

536 Stone Road

Pittsford, NY 14534
   Director
Paul M. Connolly

75 Indian Spring Road

Milton, MA 02186
   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
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
Brooks Tingle

197 Clarendon Street

Boston, MA 02116
   Director, Senior Vice President
John G. Vrysen

601 Congress Street

Boston, MA 02210
   Director
Linda A. Davis Watters

601 Congress Street

Boston, MA 02210
   Director, Vice President
Executive Vice Presidents
    
Andrew G. Arnott*
    
Christopher Paul Conkey**
    
Gregory Framke*
    
Gretchen Garrigues*
    
Peter Gordon*
    
Naveed Irshad*
   Head of Legacy Business
Halina K. von dem Hagen***
   Treasurer
Senior Vice Presidents
    
Emanuel Alves*
   General Counsel
John C.S. Anderson**
    
Michael Biagiotti†††
    
Nadine Chakar**
    
Kevin J. Cloherty*
    
Steven F. Dorval*
    
Barbara Goose*
   Chief Marketing Officer
Linda Levyne*
    
Patrick McGuinness*
    
William McPadden**
    
Lee Ann Murray**
    
James O’Brien†††
    
Sebastian Pariath*
   Head of Operations and Chief Information Officer
Alan R. Seghezzi**
    
Martin Sheerin*
   Chief Financial Officer
Curt Smith*
    
Anthony Teta**
    

 

Name and Principal Business Address   Position with Depositor
Leo Zerilli*
    
Vice Presidents
    
Lynda Abend*
    
John Addeo**
    
Abigail M. Armstrong**
    
Sudi Arora**
    
Kevin Askew*****
    
William Ball†††
    
Jesse Bean**
    
Dwayne Bertrand**
    
Zahir Bhanji**
   CFO JH Insurance
Stephen J. Blewitt**
    
Alan M. Block*
    
Robert Boyda**
    
Paul Boyne**
    
Ian Bodie*
    
Ted Bruntrager*
   Chief Risk Officer
Grant Buchanan*
    
Daniel C. Budde**
    
Robert Burrow*
    
Jennifer Toone Campanella**
    
Thomas Carlisle**
    
Rick A. Carlson*
    
Patricia Rosch Carrington**
    
Bob Carroll**
    
Todd J. Cassler*
    
Ken K. Cha*
    
Brian Collins*
    
Paul M. Crowley**
    
Marcelle Dahar*
    
Kenneth D’Amato*
    
John J. Danello*
    
Linda A. Davis Watters*
    
Andreas Deutschmann†††
    
Robert Donahue****
    
Jeffrey Duckworth*
    
Melvyn D’Souza***
   Treasury
Carolyn Flanagan*
    
Lauren Marx Fleming*
    
Philip J. Fontana*
    
Carl O. Fowler**
    
Scott Francolini*
    
Paul Gallagher*
    
Thomas C. Goggins**
    
Susan Ghalili**
    
Geoff Gittins***
    
Jeffrey N. Given*
    
Howard C. Greene**
    
Christopher Griswold*
    
Richard Harris***
   Appointed Actuary
Ellie Harrison*
   US Human Resources
John Hatch*
    
Michael Hession*
    
Kevin Hill*
    
James C. Hoodlet**
    
Steven Hutcheon*
    
Daniel S. Janis III**
    

 

Name and Principal Business Address   Position with Depositor
Mitchell Karman*
   CCO & Counsel
Recep C. Kendircioglu**
    
Neal P. Kerins**
    
Frank Knox*
   CCO – Retail Funds/Separate Accounts
Hung Ko***
   Vice President, Treasury
Diane R. Landers**
    
Scott Lively*
    
Jeffrey H. Long*
    
Jennifer Lundmark*
    
Patrick MacDonnell*
    
Nathaniel I. Margolis**
    
Christopher Maryanopolis†††
    
John B. Maynard*
    
Karen McCafferty*
    
Scott A. McFetridge**
    
Jonathan McGee**
    
Ann McNally*
    
Michael McNamara*
    
Steven E. Medina**
    
Maureen Milet**
   CCO – Investments
Scott Morin*
    
Camille Mucci**
    
Patrick M. Murphy*
    
Jeffrey H. Nataupsky**
    
Scott Navin**
    
Sinead O’Connor*
    
Christopher O’Keefe*
    
Jacques Ouimet**
    
Jeffrey Packard**
    
Gary M. Pelletier**
    
David Pemstein**
    
Wendell L. Perkins*
    
Charlie Philbrook*
    
David Plumb*
    
Tracey Polsgrove*
    
Jill Rebman***
    
William Shannon Reid*
    
George Revoir*
    
Charles A. Rizzo*
    
Robert William Rizzo*
    
Kerri Rogers*****
    
Susan Roberts*
    
Keri Rogers*
    
Ian Roke†††
    
Andrew D. Ross****
    
Ronald J. Rovner*
    
Devon Russell*
    
Lisa Anne Ryan†††
    
Frank Saeli**
    
Thomas Samoluk*
    
Emory W. Sanders*
    
Jeffrey R. Santerre**
    
Christopher L. Sechler*
    
Thomas Shea**
    
Gordon Shone*
    
Susan Simi**
    
Darren Smith*
    

 

Name and Principal Business Address   Position with Depositor
Rob Stanley*
    
Paddy Subbaraman*
    
Wilfred Talbot*
    
Nathan Thooft**
    
Tony Todisco*****
    
Brian E. Torrisi**
    
Len van Greuning*
    
Simonetta Vendittelli*****
   Controller
Peter de Vries***
    
Lisa Ann Welch**
    
Adam Wise**
    
R. Blake Witherington**
    
Henry Wong**
    
Laura Wooster**
    
Ross Zilber*
    
*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 200 Berkeley Street, 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
James C. Hoodlet**
   Director
George Revoir*
   Director, President and Chief Executive Officer
Alan Seghezzi**
   Director
Martin Sheerin*
   Director
Christopher Walker***
   Director, Vice President, Investments
Tracy Lannigan*
   Secretary
Brian Collins*
   Vice President, US Taxation
Jeffrey H. Long*
   Chief Financial Officer and Financial Operations Principal
Christopher Walker****
   Vice President, Investments
*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 24th day of April, 2018.
John Hancock Life Insurance Company (U.S.A.) Separate Account N
(Registrant)
By: JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)
By: /s/ Marianne Harrison
Marianne Harrison
Principal Executive Officer
JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)
(Depositor)
By: /s/ Marianne Harrison
Marianne Harrison
Principal Executive Officer

 

Signatures
Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities indicated as of the 24th day of April, 2018.
Signatures Title
/s/ Simonetta Vendittelli
Simonetta Vendittelli 		Vice President and Controller
/s/ Martin Sheerin
Martin Sheerin 		Senior Vice President and Chief Financial Officer
*
Thomas Borshoff 		Director
*
Paul M. Connolly 		Director
*
Ruth Ann Fleming 		Director
*
James D. Gallagher 		Director
*
Scott S. Hartz 		Director
*
Rex E. Schlaybaugh, Jr. 		Director
   
Brooks Tingle 		Director
*
John G. Vrysen 		Director
*
Linda A. Davis Watters 		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 Service Office for more information at 1-800-827-4546 or write to us at Life Post Issue, John Hancock Life Insurance Company, PO Box 55979, Boston, MA 02205. For Majestic and COLI products, you may contact us at 1-800-521-1234 or write to us at the above address.
Certain of the investment options listed below are offered under variable life insurance policies bearing the title Corporate VUL.
500 Index
Active Bond
American Asset Allocation
American Global Growth
American Growth
American Growth-Income
American International
Blue Chip Growth
Capital Appreciation
Capital Appreciation Value
Core Bond
Emerging Markets Value
Equity Income
Financial Industries
Fundamental All Cap Core
Fundamental Large Cap Value
Global
Global Bond
Health Sciences
High Yield
International Equity Index
International Growth Stock
International Small Company
International Value
Investment Quality Bond
Lifestyle Balanced
Lifestyle Conservative
Lifestyle Growth
Lifestyle Moderate
Managed Volatility Aggressive
Managed Volatility Balanced
Managed Volatility Conservative
Managed Volatility Growth
Managed Volatility Moderate
Mid Cap Index
Mid Cap Stock
Mid Value
Money Market
PIMCO VIT All Asset
Real Estate Securities
Science & Technology
Select Bond
Short Term Government Income
Small Cap Index
Small Cap Opportunities
Small Cap Stock
Small Cap Value
Small Company Value
Strategic Income Opportunities
Total Bond Market
Total Stock Market Index
Ultra Short Term Bond
Utilities
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 account 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 0.41% 1.73%
    
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 0.28% and 1.52%, respectively.
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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 0.46% 1.73%
    
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 Variable Investment Accounts 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 variable investment account, 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, and American International portfolios invests in shares of the corresponding investment portfolio of the Trust. The American Asset Allocation, American Global Growth, American Growth, American Growth-Income, and American International 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
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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 accounts we make available under the policy. You bear the investment risk of any portfolio you choose as a variable investment account 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 account.
The variable investment accounts in the Separate Account are not publicly traded mutual funds. The variable investment accounts are only available to you as variable investment accounts 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 variable investment accounts 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 variable investment account 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 variable investment accounts 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 and strategies, 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 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 John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
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.
Blue Chip Growth T. Rowe Price Associates, Inc. To seek to provide long-term growth of capital. Current income is a secondary objective.
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.
Emerging Markets Value Dimensional Fund Advisors LP To seek to provide long-term capital appreciation.
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Portfolio Subadviser Investment Objective
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.
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 Equity Index 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 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 long-term growth of capital.
Lifestyle Balanced 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 a high level of current income and growth of capital, with a greater emphasis on growth of capital.
Lifestyle Conservative 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 a high level of current income with some consideration given to growth of capital.
Lifestyle Growth 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.
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Portfolio Subadviser Investment Objective
Lifestyle Moderate 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 a balance between a high level of current income and growth of capital, with a greater emphasis on income.
Managed Volatility Aggressive 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.
Managed Volatility Balanced 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.
Managed Volatility Conservative 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.
Managed Volatility Growth 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.
Managed Volatility Moderate 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 (US) LLC 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.
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Portfolio Subadviser Investment Objective
Select Bond John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to provide income and capital appreciation.
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 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 GW&K Investment Management, LLC To seek to provide long-term capital appreciation.
Small Cap Stock Wellington Management Company, LLP 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 Bond Market John Hancock Asset Management, a division of Manulife Asset Management (US) LLC To seek to track the performance of the Bloomberg 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.
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).
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 Barclays U.S. Aggregate Bond Index represents the U.S. investment grade bond market.
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.
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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.)
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.
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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. 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
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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
•  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
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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, U.S. resident alien or other U.S. person, 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
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or planning to do so, you should consult with a qualified tax adviser before purchasing or retaining ownership of a policy. If your policy is issued as a result of an exchange of a policy owned or issued outside the United States, the country or territory in which you reside may still tax you on the surrender of the policy replaced through the exchange. You should consult with a qualified tax adviser before exchanging your policy issued outside of the United States for one issued within the United States.
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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.