-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B7sgIdTLpSO3JJJSx1vghNRsJh/ltXGL4D7wDca/SCPaafn/1lBU+mc3Ojaxtkvb tjvWLq8yLUurBEsiUhiMrA== 0000927016-02-004658.txt : 20020923 0000927016-02-004658.hdr.sgml : 20020923 20020923171803 ACCESSION NUMBER: 0000927016-02-004658 CONFORMED SUBMISSION TYPE: S-6/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20020923 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK JOHN VARIABLE LIFE ACCOUNT UV/ CENTRAL INDEX KEY: 0000906470 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-91448 FILM NUMBER: 02770335 BUSINESS ADDRESS: STREET 1: JOHN HANCOCK PLACE PO BOX 111 STREET 2: C/O JOHN HANCOCK MUTUAL LIFE INS CO CITY: BOSTON STATE: MA ZIP: 02117 BUSINESS PHONE: 6175729017 MAIL ADDRESS: STREET 2: 200 CLARENDON STREET PO BOX 111 CITY: BOSTON STATE: MA ZIP: 021170111 FORMER COMPANY: FORMER CONFORMED NAME: HANCOCK JOHN MUTUAL VARIABLE LIFE INSURANCE ACCOUNT UV DATE OF NAME CHANGE: 19930714 FORMER COMPANY: FORMER CONFORMED NAME: HANCOCK JOHN VARIABLE LIFE INSURANCE ACCOUNT UV DATE OF NAME CHANGE: 20011017 S-6/A 1 ds6a.txt VARIABLE LIFE ACCOUNT U MVCOLI PRE-EA #1 As filed with the U.S. Securities and Exchange Commission on September 23, 2002 Registration No. 333-91448 ----------- - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM S-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] PRE-EFFECTIVE AMENDMENT NO. 1 [X] POST-EFFECTIVE AMENDMENT NO. [_] -------------------------- JOHN HANCOCK VARIABLE LIFE ACCOUNT UV (Exact name of trust) JOHN HANCOCK LIFE INSURANCE COMPANY (Name of depositor) JOHN HANCOCK PLACE INSURANCE & SEPARATE ACCOUNTS DIV. - LAW SECTOR BOSTON, MASSACHUSETTS 02117 (Complete address of depositor's principal executive offices) -------------------- RONALD J. BOCAGE, ESQ. JOHN HANCOCK LIFE INSURANCE COMPANY INSURANCE & SEPARATE ACCOUNTS DIV. - LAW SECTOR JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117 (Name and complete address of agent for service) ------------------------- Copy to: THOMAS C. LAUERMAN Foley & Lardner 3000 K Street, N.W. Washington, D.C. 20007 -------------------- Approximate date of proposed public offering: as soon as practicable after the effective date of this Registration Statement. Title and amount of securities being registered: interests under flexible premium variable life contracts. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. PART II UNDERTAKING TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that Section. REPRESENTATION OF REASONABLENESS John Hancock Life Insurance Company represents that the fees and charges deducted under the Policies, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company. UNDERTAKING REGARDING IMDEMNIFICATION Pursuant to Article 8 of John Hancock's Bylaws and Chapter 156B, Section 67 of the Massachusetts Business Corporation Law, John Hancock indemnifies each director, former director, officer, and former officer, and his heirs and legal representatives from liability incurred or imposed in connection with any legal action in which he may be involved by reason of any alleged act or omission as an officer or a director of John Hancock. 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. CONTENTS OF REGISTRATION STATEMENT This Registration Statement comprises the following papers and documents: The facing sheet. The prospectus containing 232 pages. The undertaking to file reports. The representation of reasonableness. The undertaking regarding indemnification. The signatures. The following exhibits: I.A. (1) John Hancock Board Resolution establishing the separate account, is incorporated by reference to Post-Effective Amendment No. 3 to the Form S-6 Registration Statement of File No. 33-63842, filed on March 6, 1996 (2) Not Applicable (3) (a) Form of Distribution and Servicing Agreement by and among Signator Investors, Inc. (previously known as "John Hancock Distributors, Inc."), John Hancock Life Insurance (previously known as "John Hancock Mutual Life Insurance Company"), and John Hancock Variable Life Insurance Company, incorporated by reference from Pre-Effective Amendment No. 2 to Form S-6 Registration Statement of John Hancock Variable Life Account S (File No. 33-15075) filed April 18, 1997. (b) Specimen Variable Contracts Selling Agreement between Signator Investors, Inc. and selling broker-dealers, incorporated by reference from Pre-Effective Amendment No. 2 to Form S-6 Registration Statement of John Hancock Variable Life Account S (File No. 33-15075) filed April 18, 1997. (c) Schedule of sales commissions included in Exhibit I.A.(3)(a) above. (4) Not Applicable (5) Form of flexible premium variable life insurance policy, incorporated by reference to the Initial Registration Statement to this File, filed on June 28, 2002. (6) (a) John Hancock's Restated Articles of Organization are incorporated by reference from Post-Effective Amendment No. 10 the Registration Statement of File No. 333-76662, filed on March 7, 2001. (b) John Hancock's Articles of Amendment, filed herewith (c) John Hancock's Amended And Restated By-Laws are incorporated by reference to the Annual Report filed on Form 10-K, File No. 333-45862, filed March 27, 2002. (7) Not applicable. (8) (a) Participation Agreement Among Variable Insurance Products Fund II, Fidelity Distributors Corporation and John Hancock Life Insurance Company (formerly known as "John Hancock Mutual Life Insurance Company"), filed in Post-Effective Amendment No. 1 to File No. 333-81127, filed May 4, 2000. (b) Participation Agreement Among Variable Insurance Products Fund, Fidelity Distributors Corporation and John Hancock Life Insurance Company (formerly known as "John Hancock Mutual Life Insurance Company"), filed in Post-Effective Amendment No. 1 to File No. 333-81127, filed May 4, 2000. (c) Participation Agreement Among MFS Variable Insurance Trust, John Hancock Life Insurance Company (formerly known as "John Hancock Mutual Life Insurance Company"),and Massachusetts Financial Services Company, filed in Post-Effective Amendment No. 1 to File No. 333-81127, filed May 4, 2000. (d) Participation Agreement By And Among AIM Variable Insurance Funds, Inc., AIM Distributors, Inc., John Hancock Life Insurance Company (formerly known as "John Hancock Mutual Life Insurance Company"), and Certain of its Affiliated Insurance Companies, each on behalf of itself and its Separate Accounts, and John Hancock Funds, Inc., filed in Post-Effective Amendment No. 1 to File No. 333-81127, filed May 4, 2000. (e) Participation Agreement between Janus Aspen Series, Janus Capital Corp., and John Hancock Variable Life Insurance Company, incorporated by reference to File 333-425, filed on Form S-6 on November 1, 2001. (9) Not Applicable. (10) Form of application for Policy, incorporated by reference to the Initial Registration Statement to this File, filed on June 28, 2002. (11) Not Applicable. The Registrant invests only in shares of open-end Funds. 2. Included as Exhibit 1.A(5) above. 3. Opinion and consent of counsel as to securities being registered, filed herewith 4. Not Applicable 5. Not Applicable 6. Opinion and consent of actuary, filed herewith 7. Consent of independent auditors, filed herewith 8. Memorandum describing John Hancock's issuance, transfer and redemption procedures for the flexible policy pursuant to Rule 6e-3(T)(b)(12)(iii), incorporated by reference to Pre-Effective Amendment No. 1 to File 33-64364, filed on October 29, 1993. 9. Powers of attorney for David F. D'Alessandro, Foster L. Aborn, Waye A. Budd, John M. Connors, Jr., John DeCiccio, Richard B. DeWolfe, Robert E. Fast, Thomas P. Glynn, Michael C. Hawley, Edward H. Linde, Judith A. McHale, R. Robert Popeo, Richard F. Syron and Robert J. Tarr, Jr, incorporated by reference to File 333-70734, filed on September 12, 2002. 10. Representations, Description and Undertaking pursuant to Rule 6e-3(T)(b)(13)(iii)(F) under the Investment Company Act of 1940 are incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement to File No. 33-79108 filed October 10, 1994. PROSPECTUS DATED SEPTEMBER 25, 2002 - -------------------------------------------------------------------------------- MAJESTIC VARIABLE COLI - -------------------------------------------------------------------------------- a flexible premium variable life insurance policy issued by JOHN HANCOCK LIFE INSURANCE COMPANY ("JOHN HANCOCK") The policy provides an investment option with fixed rates of return declared by John Hancock and the following variable investment options:
- -------------------------------------------------------------------------------------------------------------------- VARIABLE INVESTMENT OPTION MANAGED BY - -------------------------- ---------- Equity Index .......................... SSgA Funds Management, Inc. Large Cap Value ....................... T. Rowe Price Associates, Inc. Large Cap Value CORE (SM) ............. Goldman Sachs Asset Management Large Cap Growth ...................... Independence Investment LLC Large Cap Aggressive Growth ........... Alliance Capital Management L.P. Growth & Income ....................... Independence Investment LLC and Putnam Investment Management, LLC Fundamental Value ..................... Wellington Management Company, LLP Multi Cap Growth ...................... Janus Capital Management, LLC Fundamental Growth .................... Putnam Investment Management, LLC Small/Mid Cap CORE (SM) ............... Goldman Sachs Asset Management Small/Mid Cap Growth .................. Wellington Management Company, LLP Small Cap Equity ...................... Capital Guardian Trust Company Small Cap Value ....................... T. Rowe Price Associates, Inc. Small Cap Growth ...................... John Hancock Advisers, LLC V.A. Relative Value.................... John Hancock Advisers, LLC AIM V.I. Premier Equity ............... A I M Advisors, Inc. AIM V.I. Capital Development .......... A I M Advisors, Inc. Fidelity VIP Growth ................... Fidelity Management and Research Company Fidelity VIP Contrafund(R) ............ Fidelity Management and Research Company MFS Investors Growth Stock ............ MFS Investment Management(R) MFS Research .......................... MFS Investment Management(R) MFS New Discovery ..................... MFS Investment Management(R) International Equity Index ............ Independence Investment LLC International Opportunities ........... T. Rowe Price International, Inc. Fidelity VIP Overseas ................. Fidelity Management and Research Company Emerging Markets Equity ............... Morgan Stanley Investment Management Inc. Janus Aspen Worldwide Growth .......... Janus Capital Management, LLC Real Estate Equity .................... Independence Investment LLC and Morgan Stanley Investment Management Inc. Health Sciences ....................... Putnam Investment Management, LLC V.A. Financial Industries ............. John Hancock Advisers, LLC Janus Aspen Global Technology ......... Janus Capital Management, LLC Managed ............................... Independence Investment LLC and Capital Guardian Trust Company Global Balanced ....................... Capital Guardian Trust Company Short-Term Bond ....................... Independence Investment LLC Bond Index ............................ Mellon Bond Associates, LLP Active Bond ........................... John Hancock Advisers, LLC V.A. Strategic Income ................. John Hancock Advisers, LLC High Yield Bond ....................... Wellington Management Company, LLP Global Bond ........................... Capital Guardian Trust Company Money Market .......................... Wellington Management Company, LLP Brandes International Equity .......... Brandes Investment Partners, L.P. Turner Core Growth .................... Turner Investment Partners, Inc. Frontier Capital Appreciation ......... Frontier Capital Management Company, LLC Clifton Enhanced U.S. Equity .......... The Clifton Group Business Opportunity Value ............ Iridian Asset Management LLC - --------------------------------------------------------------------------------------------------------------------
The variable investment options shown on page 1 are those available as of the date of this prospectus. We may add, modify or delete variable investment options in the future. When you select one or more of these variable investment options, we invest your money in the corresponding investment option(s) of one or more of the following: the John Hancock Variable Series Trust I, the John Hancock Declaration Trust, the AIM Variable Insurance Funds, Fidelity's Variable Insurance Products Fund (Service Class) and Variable Insurance Products Fund II (Service Class), the MFS Variable Insurance Trust (Initial Class Shares), the Janus Aspen Series (Service Shares Class), and the M Fund, Inc. (together, "the Series Funds"). In this prospectus, the investment options of the Series Funds are referred to as "funds". In the prospectuses for the Series Funds, the investment options may be referred to as "funds", "portfolios" or "series". Each Series Fund is a so-called "series" type mutual fund registered with the Securities and Exchange Commission ("SEC"). The investment results of each variable investment option you select will depend on those of the corresponding fund of one of the Series Funds. Each of the funds is separately managed and has its own investment objective and strategies. Attached at the end of this prospectus are prospectuses for the Series Funds. The Series Fund prospectuses contain detailed information about each available fund. Be sure to read those prospectuses before selecting any of the variable investment options shown on page 1. * * * * * * * * * * * * Please note that the 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. * * * * * * * * * * * * JOHN HANCOCK LIFE SERVICING OFFICE ---------------------------------- Express Delivery U.S. Mail ---------------- --------- 529 Main Street (X-4) P.O. Box 111 Charlestown, MA 02129 Boston, MA 02117 Phone: 1-800-521-1234 Fax: 1-617-572-6956 2 GUIDE TO THIS PROSPECTUS This prospectus contains information that you should know before you buy a policy or exercise any of your rights under the policy. However, please keep in mind that this is a prospectus - - it is not the policy. The prospectus simplifies many policy provisions to better communicate the policy's essential features. Your rights and obligations under the policy will be determined by the language of the policy itself. When you receive your policy, read it carefully. This prospectus is arranged in the following way: . The section which follows is called "Basic Information". It is in a question and answer format. We suggest you read the Basic Information section before reading any other section of the prospectus. . Behind the Basic Information section are illustrations of hypothetical policy benefits that help clarify how the policy works. These start on page 22. . Behind the illustrations is a section called "Additional Information" that gives more details about the policy. It generally does not repeat information that is in the Basic Information section. A table of contents for the Additional Information section appears on page 31. . Behind the Additional Information section are the financial statements for John Hancock and Separate Account UV. These start on page 46. . Finally, there is an Alphabetical Index of Key Words and Phrases at the back of the prospectus on page 232. After the Alphabetical Index of Key Words and Phrases, this prospectus ends and the prospectuses for the Series Funds begin. * * * * * * * * * * * * 3 BASIC INFORMATION This part of the prospectus provides answers to commonly asked questions about the policy. Here are the page numbers where the questions and answers appear:
Question Beginning on page - -------- ----------------- ..What is the policy? ........................................................ 5 ..Who owns the policy? ....................................................... 5 ..How can you invest money in the policy? .................................... 5 ..Is there a minimum amount you must invest? ................................. 6 ..How will the value of your investment in the policy change over time? ...... 8 ..What charges will we deduct from your investment in the policy? ............ 9 ..What charges will the Series Funds deduct from your investment in the policy? ................................................................... 10 ..What other charges could we impose in the future? .......................... 13 ..How can you change your policy's investment allocations? ................... 13 ..How can you access your investment in the policy? .......................... 14 ..How much will we pay when the insured person dies? ......................... 16 ..How can you change your policy's insurance coverage? ....................... 17 ..Can you cancel your policy after it's issued? .............................. 18 ..Can you choose the form in which we pay out policy proceeds? 18 ..To what extent can we vary the terms and conditions of our policies in particular cases? ......................................................... 19 ..How will your policy be treated for income tax purposes? ................... 20 ..How do you communicate with us? ............................................ 20
4 WHAT IS THE POLICY? The policy's primary purpose is to provide lifetime protection against economic loss due to the death of the insured person. The value of the amount you have invested under the policy may increase or decrease daily based upon the investment results of the variable investment options that you choose. The amount we pay to the policy's beneficiary if the insured person dies (we call this the "death benefit") may be similarly affected. 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 investment options . Borrow or withdraw amounts you have in the investment options . 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 surrender value . Choose the form in which we will pay out the death benefit or other proceeds Most of these options are subject to limits that are explained later in this prospectus. 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 investment options 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. HOW CAN YOU INVEST MONEY IN THE POLICY? Premium Payments We call the investments you make in the policy "premiums" or "premium payments". The amount we require as your first premium depends upon the ----- specifics of your policy and the insured person. Except as noted below, you can make any other premium payments you wish at any time. That's why the policy is called a "flexible premium" policy. Minimum premium payment Each premium payment must be at least $100. 5 Maximum premium payments Federal tax law limits the amount of premium payments you can make relative to the amount of your policy's insurance coverage. We will not knowingly accept any amount by which a premium payment exceeds the maximum. If you exceed certain other limits, the law may impose a penalty on amounts you take out of your policy. We'll monitor your premium payments and let you know if you're about to exceed this limit. More discussion of these tax law requirements begins on page 39. Also, we may refuse to accept any amount of an additional premium if: . that amount of premium would increase our insurance risk exposure, and . the insured person doesn't provide us with adequate evidence that he or she continues to meet our requirements for issuing insurance. In no event, however, will we refuse to accept any premium necessary to prevent the policy or the guaranteed minimum death benefit feature from terminating. We reserve the right to limit premium payments above the amount of cumulative Guaranteed Minimum Death Benefit Premiums (whether or not the guaranteed minimum death benefit feature described on page 7 is in effect). Ways to pay premiums If you pay premiums by check or money order, they must be drawn on a U.S. bank in U.S. dollars and made payable to "John Hancock Life." We will not accept credit card checks. We will not accept starter or third party checks if they fail to satisfy our administrative requirements. Premiums after the first must be sent to the John Hancock Life Servicing Office at the appropriate address shown on page 2 of this prospectus. We will also accept premiums: . by wire or by exchange from another insurance company, or . if we agree to it, through a salary deduction plan with your employer. You can obtain information on these other methods of premium payment by contacting your John Hancock representative or by contacting the John Hancock Life Servicing Office. IS THERE A MINIMUM AMOUNT YOU MUST INVEST? Planned Premiums The Policy Specifications page of your policy will show the "Planned Premium" for the policy. You choose this amount in the policy application. The premium reminder notice we send you is based on this amount. You will also choose how often to pay premiums-- annually, semi-annually, quarterly or monthly. The date on which such a payment is "due" is referred to in the policy as a "modal processing date." However, payment of Planned Premiums is not necessarily 6 required. You need only invest enough to keep the policy in force (see "Lapse and reinstatement" and "Guaranteed minimum death benefit feature" below). Lapse and reinstatement Either your entire policy or the Additional Sum Insured portion of your Total Sum Insured can terminate (i.e., "lapse") for failure to pay charges due under the policy. If the guaranteed minimum death benefit feature is in effect, only the Additional Sum Insured, if any, can lapse. If the guaranteed minimum death benefit feature is not in effect, the entire policy can lapse. In either case, if the policy's surrender value is not sufficient to pay the charges on a monthly deduction date, we will notify you of how much you will need to pay to keep any Additional Sum Insured or the policy in force. You will have a 61 day "grace period" to make that payment. If you don't pay at least the required amount by the end of the grace period, the Additional Sum Insured or your policy will lapse. If your policy lapses, all coverage under the policy will cease. Even if the policy or the Additional Sum Insured terminates in this way, you can still reactivate (i.e., "reinstate") it within 1 year from the beginning of the grace period. You will have to provide evidence that the insured person still meets our requirements for issuing coverage. You will also have to pay a minimum amount of premium and be subject to the other terms and conditions applicable to reinstatements, as specified in the policy. If the guaranteed minimum death benefit is not in effect and the insured person dies during the grace period, we will deduct any unpaid monthly charges from the death benefit. During such a grace period, you cannot make a partial withdrawal or policy loan. Guaranteed minimum death benefit feature This feature is available only if the insured person meets certain underwriting requirements and only if you've elected death benefit Option A (see "How much will we pay when the last insured person dies?" on page 15) . The feature guarantees that your Basic Sum Insured will not lapse during the first 10 policy years, regardless of adverse investment performance, if both of the following are true: . any Additional Sum Insured under the policy is not scheduled to exceed the Basic Sum Insured at any time (see "How much will we pay when the insured person dies?" on page 15), and . on each monthly deduction date during that 10 year period the amount of cumulative premiums you have paid accumulated at 4% (less all withdrawals from the policy accumulated at 4%) equals or exceeds the sum of all Guaranteed Minimum Death Benefit Premiums due to date accumulated at 4%. The Guaranteed Minimum Death Benefit Premium (or "GMDB Premium") is defined in the policy and is "due" on each monthly deduction date. The term "monthly deduction date" is defined on page 30. On the application for the policy, you may elect for this feature to extend beyond the tenth policy year. If you so elect, we will impose a special charge for this feature after the tenth policy year. You may revoke the election at any time. 7 No GMDB Premium will ever be greater than the so-called "guideline premium" for the policy as defined in Section 7702 of the Internal Revenue Code. Also, the GMDB Premiums may change in the event of any change in the Additional Sum Insured of the policy or any change in the death benefit option (see "How much will we pay when the insured person dies?" on page 15). If the guaranteed minimum death benefit test is not satisfied on any monthly deduction date, we will notify you immediately and tell you how much you will need to pay to keep the feature in effect. You will have until the second monthly deduction date after default to make that payment. If you don't pay at least the required amount by the end of that period, the feature will lapse. The feature may be reinstated in accordance with the terms of the policy within 5 years after the policy anniversary on which default occurred. If it is reinstated more than 1 year after such policy anniversary, we will require evidence that the insured person still meets our requirements for issuing coverage. We may refuse to reinstate the feature more than once during the life of the policy. The guaranteed minimum death benefit feature applies only to the Basic Sum Insured. It does not apply to any amount of Additional Sum Insured (see "How much will we pay when the insured person dies?" on page 15). The guaranteed minimum death benefit feature will cease to apply on the policy anniversary nearest the insured person's 100th birthday. Also, the feature cannot be reinstated after that policy anniversary. If there are monthly charges that remain unpaid because of this feature, we will deduct such charges when there is sufficient surrender value to pay them. HOW WILL THE VALUE OF YOUR INVESTMENT IN THE POLICY CHANGE OVER TIME? From each premium payment you make, we deduct the charges described under "Deductions from premium payments" below. We invest the rest in the investment options you've elected. Special investment rules apply to premiums processed prior to the 20th day after your policy becomes effective. (See "Commencement of investment performance" beginning on page 35.) Over time, the amount you've invested in any variable investment option will increase or decrease the same as if you had invested the same amount directly in the corresponding fund of a Series Fund and had reinvested all fund dividends and distributions in additional fund shares; except that we will deduct certain additional charges which will reduce your account value. We describe these charges under "What charges will John Hancock deduct from my investment in the policy?" below. The amount you've invested in the fixed investment option will earn interest at a rate we declare from time to time. We guarantee that this rate will be at least 4%. If you want to know what the current declared rate is, just call or write to us. Amounts you invest in the fixed investment option will not be subject to the asset-based risk charge described on page 9. Otherwise, the charges applicable to the fixed investment option are the same as those applicable to the variable investment options. 8 At any time, the "account value" of your policy is equal to: . the amount you invested, . plus or minus the investment experience of the investment options you've chosen, . minus all charges we deduct, and . minus all withdrawals you have made. If you take a loan on the policy, however, your account value will be computed somewhat differently. This is discussed beginning on page 36. WHAT CHARGES WILL WE DEDUCT FROM YOUR INVESTMENT IN THE POLICY? Deductions from premium payments .. Sales charge - A charge to help defray our sales costs. The current charge is 6.5% of premiums received in each of the first 10 policy years up to the Target Premium, and 3.5% of premiums received in each policy year thereafter up to the Target Premium. We reserve the right to increase the percentages for policy years 1 through 10 and thereafter up to 10% and 7%, respectively. Because policies of this type were first offered in 2001, the lower current rates after the tenth policy year are not yet applicable to any policy. No charge is currently deducted from premiums received in excess of the Target Premium, but we reserve the right to impose such a charge of up to 3.5% of such excess premiums received in any policy year. The "Target Premium" is determined at the time the policy is issued and will appear in the "Policy Specifications" section of the policy. .. Optional enhanced cash value rider charge - A charge imposed if you elect this rider. The charge is 1% of premiums received in the first policy year. Deductions from account value .. Asset-based risk charge - A monthly charge for mortality and expense risks we assume. The charge is a percentage of that portion of your account value allocated to variable investment options. The current percentages are .03% for policy years 1 - 20, and .0125% thereafter. These percentages equate to effective annual rates of .36% and .15%, respectively. The reduction after 20 years has not occurred yet under any policy, since no policy has yet been outstanding for 20 years. We guarantee that this charge will never exceed .05% of that portion of your account value allocated to variable investment options. This percentage equates to an effective annual rate of .60%. This charge does not apply to the fixed investment option. .. Issue charge - A monthly charge to help defray our administrative costs. This is a charge per $1,000 of Basic Sum Insured at issue that varies by age and that is deducted only during the first ten policy years. The charge will appear in the "Policy Specifications" section of the policy. As an example, the monthly charge for a 45 year 9 old is 7.65c per $1,000 of Basic Sum Insured. The maximum monthly charge is for an 85 year old and is 48.60c per $1,000 of Basic Sum Insured. .. Administrative charge - A monthly charge to help defray our administrative costs. This charge has two parts: (1) a flat dollar charge of up to $5 (currently $2.50), and (2) a charge of up to 6c per $1,000 of Basic Sum Insured at issue (currently 3c per $1,000 of Basic Sum Insured at issue). The second part of this charge will not apply to amounts of Basic Sum Insured greater than $1,000,000. .. Insurance charge - A monthly charge for the cost of insurance. To determine the charge, we multiply the amount of insurance for which we are at risk by a cost of insurance rate. The rate is derived from an actuarial table. The table in your policy will show the maximum cost of insurance rates. The cost of insurance rates that we currently apply are generally less than the maximum rates. We will review the cost of insurance rates at least every 5 years and may change them from time to time. However, those rates will never be more than the maximum rates shown in the policy. The table of rates we use will depend on the insurance risk characteristics and (usually) gender of the insured person, the Total Sum Insured and the length of time the policy has been in effect. Regardless of the table used, cost of insurance rates generally increase each year that you own your policy, as the insured person's attained age increases. (The insured person's "attained age" on any date is his or her age on the birthday nearest that date.) Higher current insurance rates are generally applicable to policies issued on a "guaranteed issue" basis, where only very limited underwriting information is obtained. This is often the case with policies issued to trustees, employers and similar entities. .. Extra mortality charge - A monthly charge specified in your policy for additional mortality risk if the insured person is subject to certain types of special insurance risk. .. Guaranteed minimum death benefit charge - A monthly charge beginning in the eleventh policy year if the guaranteed minimum death benefit feature is elected to extend beyond the first ten policy years. This charge is currently 1c per $1,000 of Basic Sum Insured and is guaranteed not to exceed 2c per $1,000 of Basic Sum Insured. Because policies of this type were first offered in 2001, this charge is not yet applicable to any policy at the current rate. .. Optional benefits charge - Monthly charges for any optional insurance benefits added to the policy by means of a rider (other than the optional enhanced cash value rider). .. Partial withdrawal charge - A charge for each partial withdrawal of account value to compensate us for the administrative expenses of processing the withdrawal. The charge is equal to the lesser of $20 or 2% of the withdrawal amount. WHAT CHARGES WILL THE SERIES FUNDS DEDUCT FROM YOUR INVESTMENT IN THE POLICY? The funds must pay investment management fees and other operating expenses. These fees and expenses are different for each fund and reduce the investment return of each fund. Therefore, they also indirectly reduce the return you will earn on any variable investment options you select. We may also receive payments from a fund or its affiliates at an annual rate of up to approximately 0.35% of the average net assets that holders of our variable life insurance 10 policies and variable annuity contracts have invested in that fund. Any such payments do not, however, result in any charge to you in addition to what is disclosed below. The following figures for the funds are based on historical fund expenses, as a percentage (rounded to two decimal places) of each fund's average daily net assets for 2001, except as indicated in the Notes appearing at the end of this table. Expenses of the funds are not fixed or specified under the terms of the policy, and those expenses may vary from year to year.
-------------- Total Fund Total Fund Investment Distribution and Other Operating Operating Operating Management Service Expenses With Expenses With Expenses Absent Fund Name Fee (12b-1) Fees Reimbursement Reimbursement Reimbursement - --------- ---------- ---------------- --------------- -------------- --------------- JOHN HANCOCK VARIABLE SERIES TRUST I (NOTE 1): Equity Index....................................... 0.13% N/A 0.07% 0.20% 0.20% Large Cap Value.................................... 0.75% N/A 0.08% 0.83% 0.83% Large Cap Value CORE /SM/.......................... 0.75% N/A 0.10% 0.85% 0.88% Large Cap Growth................................... 0.38% N/A 0.03% 0.41% 0.41% Large Cap Aggressive Growth........................ 0.87% N/A 0.10% 0.97% 1.06% Growth & Income.................................... 0.67% N/A 0.05% 0.72% 0.72% Fundamental Value *................................ 0.89% N/A 0.10% 0.99% 1.20% Multi Cap Growth*.................................. 0.93% N/A 0.10% 1.03% 1.03% Fundamental Growth................................. 0.90% N/A 0.10% 1.00% 1.19% Small/Mid Cap CORE /SM/............................ 0.80% N/A 0.10% 0.90% 1.15% Small/Mid Cap Growth............................... 0.97% N/A 0.10% 1.07% 1.07% Small Cap Equity................................... 0.90% N/A 0.10% 1.00% 1.02% Small Cap Value.................................... 0.95% N/A 0.10% 1.05% 1.08% Small Cap Growth................................... 1.05% N/A 0.10% 1.15% 1.17% International Equity Index......................... 0.17% N/A 0.10% 0.27% 0.40% International Opportunities........................ 1.14% N/A 0.10% 1.24% 1.39% Emerging Markets Equity............................ 1.52% N/A 0.10% 1.62% 4.24% Real Estate Equity................................. 1.00% N/A 0.07% 1.07% 1.07% Health Sciences.................................... 1.00% N/A 0.10% 1.10% 1.19% Managed............................................ 0.67% N/A 0.06% 0.73% 0.73% Global Balanced.................................... 1.05% N/A 0.10% 1.15% 1.36% Short-Term Bond.................................... 0.60% N/A 0.08% 0.68% 0.68% Bond Index......................................... 0.15% N/A 0.09% 0.24% 0.24% Active Bond........................................ 0.62% N/A 0.05% 0.67% 0.67% High Yield Bond.................................... 0.80% N/A 0.10% 0.90% 1.00% Global Bond........................................ 0.85% N/A 0.10% 0.95% 0.95% Money Market....................................... 0.25% N/A 0.07% 0.32% 0.32% JOHN HANCOCK DECLARATION TRUST (NOTE 2): V.A. Relative Value................................ 0.60% N/A 0.14% 0.74% 0.74% V.A. Financial Industries.......................... 0.80% N/A 0.09% 0.89% 0.89% V.A. Strategic Income.............................. 0.60% N/A 0.10% 0.70% 0.70% AIM VARIABLE INSURANCE FUNDS - SERIES I SHARES: AIM V.I. Premier Equity Fund* *.................... 0.60% N/A 0.25% 0.85% 0.85% AIM VARIABLE INSURANCE FUNDS - SERIES II SHARES: AIM V.I. Capital Development Fund.................. 0.75% 0.25% 0.41% 1.41% 1.41%
11
-------------- Total Fund Total Fund Investment Distribution and Other Operating Operating Operating Management Service Expenses With Expenses With Expenses Absent Fund Name Fee (12b-1) Fees Reimbursement Reimbursement Reimbursement - --------- ---------- ---------------- --------------- -------------- --------------- VARIABLE INSURANCE PRODUCTS FUND - SERVICE CLASS (NOTE 3): Fidelity VIP Growth................................ 0.58% 0.10% 0.10% 0.78% 0.78% Fidelity VIP Overseas.............................. 0.73% 0.10% 0.20% 1.03% 1.03% VARIABLE INSURANCE PRODUCTS FUND II - SERVICE CLASS (NOTE 3): Fidelity VIP Contrafund/(R)/....................... 0.58% 0.10% 0.10% 0.78% 0.78% MFS VARIABLE INSURANCE TRUST - INITIAL CLASS SHARES (NOTE 4): MFS Investors Growth Stock......................... 0.75% N/A 0.17% 0.92% 0.92% MFS Research....................................... 0.75% N/A 0.15% 0.90% 0.90% MFS New Discovery.................................. 0.90% N/A 0.16% 1.06% 1.09% JANUS ASPEN SERIES - SERVICE SHARES CLASS (NOTE 5): Janus Aspen Worldwide Growth....................... 0.65% 0.25% 0.04% 0.94% 0.94% Janus Aspen Global Technology...................... 0.65% 0.25% 0.05% 0.95% 0.95% M FUND, INC. (NOTE 6): Brandes International Equity....................... 0.75% N/A 0.25% 1.00% 1.02% Turner Core Growth................................. 0.45% N/A 0.25% 0.70% 0.90% Frontier Capital Appreciation...................... 0.90% N/A 0.25% 1.15% 1.15% Clifton Enhanced U.S. Equity....................... 0.38% N/A 0.25% 0.63% 0.78% Business Opportunity Value 0.65% N/A 0.25% 0.90% 0.90% --------------
NOTES TO FUND EXPENSE TABLE (1) Under its current investment management agreements with the John Hancock Variable Series Trust I, John Hancock Life Insurance Company reimburses a fund when the fund's "other fund expenses" exceed 0.10% of the fund's average daily net assets (0.00% for Equity Index). Percentages shown for the Large Cap Value and Small Cap Value funds are calculated as if the current management fee schedules, which apply to these funds effective May 1, 2001, were in effect for all of 2001. Percentages shown for the Multi Cap Growth, Small/Mid Cap Growth, Small Cap Growth, International Opportunities, Emerging Markets, Short-Term Bond and High Yield Bond funds are calculated as if the current management fee schedules, which apply to these funds effective October 1, 2001, were in effect for all of 2001. Percentages shown for the Health Sciences Fund are annualized. "CORE/SM/" is a service mark of Goldman, Sachs & Co./ / * Fundamental Value was formerly "Large/Mid Cap Value" and Multi Cap Growth was formerly "Mid Cap Growth." (2) Percentages shown for John Hancock Declaration Trust funds reflect the investment management fees currently payable and other fund expenses allocated in 2001. John Hancock Advisers, LLC has agreed to limit temporarily other expenses of each fund to 0.25% of the fund's average daily assets, at least until April 30, 2003. * * AIM V.I. Premier Equity Fund was formerly "AIM V.I. Value Fund." (3) Actual annual class operating expenses were lower for each of the Fidelity VIP funds shown because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expense. In addition, through rearrangements with the fund's custodian, credits realized as a result of uninvested 12 cash balances are used to reduce a portion of the fund's custodian expenses. These offsets may be discontinued at any time. (4) MFS Variable Insurance Trust funds have an expense offset arrangement which reduces each fund's custodian fee based upon the amount of cash maintained by the fund with its custodian and dividend disbursing agent. Each fund may enter into other similar arrangements and directed brokerage arrangements, which would also have the effect of reducing the fund's expenses. "Other Operating Expenses" do not take into account these expense reductions, and are therefore higher than the actual expenses of the funds. Had these fee reductions been taken into account, "Total Fund Operating Expenses with Reimbursement" would equal 0.90% for MFS Investors Growth Stock, 0.89% for MFS Research and 1.05% for MFS New Discovery. MFS Investment Management(R) (also doing business as Massachusetts Financial Services Company) has contractually agreed, subject to reimbursement, to bear expenses for the MFS New Discovery Fund, such that the fund's "Other Expenses" (after taking into account the expense offset arrangement described above) does not exceed 0.15% annually. This contractual fee arrangement will continue until at least May 1, 2003, unless changed with the consent of the board of trustees which oversees the fund. (5) Percentages shown for the Janus Aspen funds are based upon expenses for the year ended December 31, 2001. Expenses are shown without the effect of any expense offset arrangement. (6) Percentages shown for M Fund, Inc. funds reflect the investment management fees currently payable and other fund expenses allocated in 2001. M Financial Advisers, Inc. reimburses a fund when the fund's other operating expenses exceed 0.25% of that fund's average daily net assets. Percentages shown for the Business Opportunity Value Fund are estimates because the fund was not in operation in 2001. WHAT OTHER CHARGES COULD WE IMPOSE IN THE FUTURE? We currently make no charge for our Federal income taxes. However, if we incur, or expect to incur, additional income taxes attributable to any subaccount of the Account or this class of policies in future years, we reserve the right to make a charge for such taxes. Any such charge would reduce what you earn on any affected investment options. However, we expect that no such charge will be necessary. Under current laws, we may incur state and local taxes (in addition to premium taxes) in several states. At present, these taxes are not significant. If there is a material change in applicable state or local tax laws, we may make charges for such taxes. HOW CAN YOU CHANGE YOUR POLICY'S INVESTMENT ALLOCATIONS? Future premium payments At any time, you may change the investment options in which future premium payments will be invested. You make the original allocation in the application for the policy. The percentages you select must be in whole numbers and must total 100%. Transfers of existing account value You may also transfer your existing account value from one investment option to another. To do so, you must tell us how much to transfer, either as a whole number percentage or as a specific dollar amount. A confirmation of each transfer will be sent to you. Without our 13 approval, the maximum amount you may transfer to or from any investment option in any policy year is $1,000,000. Under our current rules, you can make transfers out of any variable investment option anytime you wish. However, we reserve the right to: .. impose limits on the frequency of transfers into and out of variable investment options, .. impose a limit of not less than 12 on the number of such transfers in any policy year, and .. impose a charge of up to $25 on each such transfer in excess of a yearly limit of not less than 12. Transfers out of the fixed investment option are currently subject to the following restrictions: .. You can only make such a transfer once in each policy year. .. Any transfer request received within 6 months of the last transfer out of the fixed investment option will not be processed until such 6 month period has expired. .. The most you can transfer at any one time is the greater of (i) $500, or (ii) 20% of the assets in your fixed investment option or (iii) the amount transferred out of your fixed investment option during the previous policy year. We reserve the right to impose a minimum amount limit on transfers out of the fixed investment option. HOW CAN YOU ACCESS YOUR INVESTMENT IN THE POLICY? Full surrender You may surrender your policy in full at any time. If you do, we will pay you the account value less any policy loans plus, if surrender occurs in the first three policy years, a refund of 50% of sales charges deducted from any Target Premiums paid within 365 days prior to the date of surrender. This is called your "surrender value." You must return your policy when you request a full surrender. Partial withdrawals You may make a partial withdrawal of your surrender value at any time. Each partial withdrawal must be at least $1,000. There is a charge (usually $20) for each partial withdrawal. We will automatically reduce the account value of your policy by the amount of the withdrawal and the related charge. Each investment option will be reduced in the same proportion as the account value is then allocated among them. We will not permit a partial withdrawal if it would cause your account value to fall below 3 months' worth of monthly charges (see "Deductions from account value" on page 9). We also reserve the right to refuse any partial withdrawal that would cause the policy's Total Sum Insured to fall below $100,000. Any partial withdrawal (other than a Terminated ASI Withdrawal Amount, as described below) will reduce your death benefit under any of the death benefit options (see "How much will we pay when the insured 14 person dies?" on page 15) and under the guaranteed death benefit feature (see page 7). Under Option A, such a partial withdrawal will reduce the Total Sum Insured. Under Option B, such a partial withdrawal will reduce your account value. Under the guaranteed death benefit feature, such a partial withdrawal will reduce the Basic Sum Insured. A "Terminated ASI Withdrawal Amount" is any partial withdrawal made while there is an Additional Sum Insured under the policy that later lapses as described on page 7. The total of all Terminated ASI Withdrawal Amounts cannot exceed the Additional Sum Insured in effect immediately before the Additional Sum Insured lapses. Policy loans You may borrow from your policy at any time by completing a form satisfactory to us or, if the telephone transaction authorization form has been completed, by telephone. However, you can't borrow from your policy during a "grace period" (see "Lapse and reinstatement" on page 7). The maximum amount you can borrow is determined as follows: . We first determine the account value of your policy. . We then subtract an amount equal to 12 times the monthly charges then being deducted from account value. . We then multiply the resulting amount by .75% in policy years 1 through 20 and .25% thereafter. . We then subtract the third item above from the second item above. The minimum amount of each loan is $1,000. The interest charged on any loan is an effective annual rate of 4.75% in the first 20 policy years and 4.25% thereafter. Accrued interest will be added to the loan daily and will bear interest at the same rate as the original loan amount. The amount of the loan is deducted from the investment options in the same proportion as the account value is then allocated among them and is placed in a special loan account. This special loan account will earn interest at an effective annual rate of 4.0%. However, if we determine that a loan will be treated as a taxable distribution because of the differential between the loan interest rate and the rate being credited on the special loan account, we reserve the right to decrease the rate credited on the special loan account to a rate that would, in our reasonable judgement, result in the transaction being treated as a loan under Federal tax law. You can repay all or part of a loan at any time. Each repayment will be allocated among the investment options as follows: . The same proportionate part of the loan as was borrowed from the fixed investment option will be repaid to the fixed investment option. . The remainder of the repayment will be allocated among the investment options in the same way a new premium payment would be allocated. 15 If you want a payment to be used as a loan repayment, you must include instructions to that effect. Otherwise, all payments will be assumed to be premium payments. Policy loans may result in adverse tax consequences under certain circumstances (see "Tax Considerations" on page 39). HOW MUCH WILL WE PAY WHEN THE INSURED PERSON DIES? In your application for the policy, you will tell us how much life insurance coverage you want on the life of the insured person. This is called the "Total Sum Insured." Total Sum Insured is composed of the Basic Sum Insured and any Additional Sum Insured you elect. The only limitation on how much Additional Sum Insured you can have is that it generally cannot exceed 400% of the Basic Sum Insured. There are a number of factors you should consider in determining whether to elect coverage in the form of Basic Sum Insured or in the form of Additional Sum Insured. These factors are discussed under "Basic Sum Insured vs. Additional Sum Insured" on page 34. When the insured person dies, we will pay the death benefit minus any outstanding loans. There are two ways of calculating the death benefit. You choose which one you want in the application. The two death benefit options are: . Option A - The death benefit will equal the greater of (1) the Total Sum Insured, or (2) the minimum insurance amount (as described below). . Option B - The death benefit will equal the greater of (1) the Total Sum Insured plus your policy's account value on the date of death, or (2) the minimum insurance amount. For the same premium payments, the death benefit under Option B will tend to be higher than the death benefit under Option A. On the other hand, the monthly insurance charge will be higher under Option B to compensate us for the additional insurance risk. Because of that, the account value will tend to be higher under Option A than under Option B for the same premium payments. The minimum insurance amount In order for a policy to qualify as life insurance under Federal tax law, there has to be a minimum amount of insurance in relation to account value. There are two tests that can be applied under Federal tax law - - the "guideline premium and cash value corridor test" and the "cash value accumulation test." When you elect the death benefit option, you must also elect which test you wish to have applied. Under the guideline premium and cash value corridor test, we compute the minimum insurance amount each business day by multiplying the account value on that date (plus any refund of sales charges that might be due if the policy were surrendered on that date) by the "required additional death benefit factor" applicable on that date. In this case, the death benefit factors are derived by applying the guideline premium and cash value corridor test. The death benefit factor starts out at 2.50 for ages at or below 40 and decreases as attained age increases, reaching a low of 1.0 at age 95. Under the cash value accumulation test, we compute the minimum insurance amount each business day by multiplying the account value on 16 that date (plus any refund of sales charges that might be due if the policy were surrendered on that date) by the death benefit factor applicable on that date. In this case, the death benefit factors are derived by applying the cash value accumulation test. The death benefit factor decreases as attained age increases. Regardless of which test you elect, a table showing the required additional death benefit factor for each policy year will appear in the policy. As noted above, you have to elect which test will be applied when you elect the death benefit option. The cash value accumulation test may be preferable if you want an increasing death benefit in later policy years and/or want to fund the policy at the "7 pay" limit for the full 7 years (see "Tax Considerations" beginning on page 39). The guideline premium and cash value corridor test may be preferable if you want the account value under the policy to increase without increasing the death benefit as quickly as might otherwise be required. When the insured person reaches 100 If the policy is still in effect on the policy anniversary nearest the insured person's 100th birthday, the following things will happen: . We will stop deducting any monthly charges (other than the asset-based risk charge) and will stop accepting any premium payments. . The death benefit will become equal to the account value on the date of death. Death benefit Options A and B (as described above) and the guaranteed minimum death benefit feature will all cease to apply. Enhanced cash value rider In the application for the policy, you may elect to purchase the enhanced cash value rider. This rider provides an enhanced cash value benefit (in addition to the surrender value) if you surrender the policy within the first seven policy years and such surrender is not made pursuant to an exchange under Section 1035 of the Internal Revenue Code (or any successor provision). The amount of the benefit will be shown in the "Policy Specifications" section of the policy. The benefit is also included in the account value when calculating the death benefit. Election of this rider could increase your insurance charge since it affects our amount at risk under the policy. The amount available for partial withdrawals and loans are based on the surrender value and will in no way be increased due to this rider. HOW CAN YOU CHANGE YOUR POLICY'S INSURANCE COVERAGE? Increase in coverage The Basic Sum Insured generally cannot be increased after policy issue. After the first policy year, you may request an increase in the Additional Sum Insured. However, you will have to provide us with evidence that the insured person still meets our requirements for issuing insurance coverage. As to when an approved increase would take effect, see "Effective date of other policy transactions" on page 36. 17 Decrease in coverage The Basic Sum Insured generally cannot be decreased after policy issue. After the first policy year, you may request a reduction in the Additional Sum Insured, but only if: . the remaining Total Sum Insured will be at least $100,000, and . the remaining Total Sum Insured will at least equal the minimum required by the tax laws to maintain the policy's life insurance status. As to when an approved decrease would take effect, see "Effective date of other policy transactions" on page 36. Change of death benefit option At any time, you may request to change your coverage from death benefit Option B to Option A. Our administrative systems do not currently permit any other change of death benefit option. Such changes may be permitted in the future, but that is not guaranteed. Tax consequences Please read "Tax considerations" starting on page 39 to learn about possible tax consequences of changing your insurance coverage under the policy. CAN YOU CANCEL YOUR POLICY AFTER IT'S ISSUED? You have the right to cancel your policy within the latest of the following periods: . 10 days after you receive it (this period may be longer in some states); . 10 days after mailing by John Hancock of the Notice of Withdrawal Right; or . 45 days after the date Part A of the application has been completed. This is often referred to as the "free look" period. To cancel your policy, simply deliver or mail the policy to John Hancock at one of the addresses shown on page 2, or to the John Hancock representative who delivered the policy to you. In most states, you will receive a refund of any premiums you've paid. In some states, the refund will be your account value on the date of cancellation plus all charges deducted by John Hancock or the Series Funds prior to that date. The date of cancellation will be the date of such mailing or delivery. CAN YOU CHOOSE THE FORM IN WHICH WE PAY OUT POLICY PROCEEDS? Choosing a payment option You may choose to receive proceeds from the policy as a single sum. This includes proceeds that become payable because of death or full surrender. Alternatively, you can elect to have 18 proceeds of $1,000 or more applied to any of a number of other payment options, including the following: . Option 1 - Proceeds left with us to accumulate with interest . Option 2A - Equal monthly payments of a specified amount until all proceeds are paid out . Option 2B - Equal monthly payments for a specified period of time . Option 3 - Equal monthly payments for life, but with payments guaranteed for a specific number of years . Option 4 - Equal monthly payments for life with no refund . Option 5 - Equal monthly payments for life with a refund if all of the proceeds haven't been paid out You cannot choose an option if the monthly payments under the option would be less than $50. We will issue a supplementary agreement when the proceeds are applied to any alternative payment option. That agreement will spell out the terms of the option in full. We will credit interest on each of the above options. For Options 1 and 2A, the interest will be at least an effective annual rate of 3 1/2%. If no alternative payment option has been chosen, proceeds will be paid as a single sum. Changing a payment option You can change the payment option at any time before the proceeds are payable. If you haven't made a choice, the payee of the proceeds has a prescribed period in which he or she can make that choice. Tax impact There may be tax consequences to you or your beneficiary depending upon which payment option is chosen. You should consult with a qualified tax adviser before making that choice. TO WHAT EXTENT CAN WE VARY THE TERMS AND CONDITIONS OF OUR POLICIES IN PARTICULAR CASES? Listed below are some variations we can make in the terms of our policies. Any variation will be made only in accordance with uniform rules that we apply fairly to all of our customers. State law insurance requirements Insurance laws and regulations apply to John Hancock in every state in which its policies are sold. As a result, various terms and conditions of your insurance coverage may vary from the terms and conditions described in this prospectus, depending upon where you reside. These variations will be reflected in your policy or in endorsements attached to your policy. 19 Variations in expenses or risks We may vary the charges and other terms of our policies where special circumstances result in sales or administrative expenses, mortality risks or other risks that are different from those normally associated with the policies. These include the type of variations discussed under "Reduced charges for eligible classes" on page 37. No variation in any charge will exceed any maximum stated in this prospectus with respect to that charge. HOW WILL YOUR POLICY BE TREATED FOR INCOME TAX PURPOSES? Generally, death benefits paid under policies such as yours are not subject to income tax. Earnings on your account value are 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 account value upon surrender or partial withdrawal, all or part of that distribution should generally be treated as a return of the premiums you've paid and should not be subject to income tax. Amounts you borrow are generally not taxable to you. However, some of the tax rules change if your policy is found to be a "modified endowment contract." This can happen if you've paid more than a certain amount of premiums that is prescribed by the tax laws. Additional taxes and penalties may be payable for policy distributions of any kind. For further information about the tax consequences of owning a policy, please read "Tax considerations" beginning on page 39. HOW DO YOU COMMUNICATE WITH US? General Rules You should mail or express all checks and money orders for premium payments and loan repayments to the John Hancock Life Servicing Office at the appropriate address shown on page 2. Under our current rules, certain requests must be made in writing and be signed and dated by you. They include the following: . surrenders or partial withdrawals . change of death benefit option . increase or decrease in Total Sum Insured . change of beneficiary . election of payment option for policy proceeds . tax withholding elections 20 . election of telephone transaction privilege The following requests may be made either in writing (signed and dated by you) or by telephone or fax if a special form is completed (see "Telephone Transactions" below): . loans . transfers of account value among investment options . change of allocation among investment options for new premium payments You should mail or express all written requests to the John Hancock Life Servicing Office at the appropriate address shown on page 2. You should also send notice of the insured person's death and related documentation to the John Hancock Life Servicing Office. We don't consider that we've "received" any communication until such time as it has arrived at the proper place and in the proper and complete form. We have special forms that should be used for a number of the requests mentioned above. You can obtain these forms from the John Hancock Life Servicing Office or your John Hancock representative. Each communication to us must include your name, your policy number and the name of the insured person. We cannot process any request that doesn't include this required information. Any communication that arrives after the close of our business day, or on a day that is not a business day, will be considered "received" by us on the next following business day. Our business day currently closes at 4:00 p.m. Eastern Standard Time, but special circumstances (such as suspension of trading on a major exchange) may dictate an earlier closing time. Telephone Transactions If you complete a special authorization form, you can request loans, transfers among investment options and changes of allocation among investment options simply by telephoning us at 1-800-521-1234 or by faxing us at 1-617-572-6956. Any fax request should include your name, daytime telephone number, policy number and, in the case of transfers and changes of allocation, the names of the investment options involved. We will honor telephone instructions from anyone who provides the correct identifying information, so there is a risk of loss to you if this service is used by an unauthorized person. However, you will receive written confirmation of all telephone transactions. There is also a risk that you will be unable to place your request due to equipment malfunction or heavy phone line usage. If this occurs, you should submit your request in writing. The policies are not designed for professional market timing organizations or other persons or entities that use programmed or frequent transfers among investment options. For reasons such as that, we reserve the right to change our telephone transaction policies or procedures at any time. We also reserve the right to suspend or terminate the privilege altogether with respect to all policies like yours or with respect to any class of such policies. 21 ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND ACCUMULATED PREMIUMS The following tables illustrate the changes in death benefit, account value and surrender value of the policy under certain hypothetical circumstances that we assume solely for this purpose. Each table separately illustrates the operation of a policy for a specified issue age, premium payment schedule and Total Sum Insured. The amounts shown are for the end of each policy year and assume that all of the account value is invested in funds that achieve investment returns at constant gross annual rates of 0%, 6% and 12% (i.e., before any fees or expenses deducted from Series Fund assets). After the deduction of average fees and expenses at the Series Fund level (as described below) the corresponding net annual rates of return would be -0.87%, 5.08% and 11.03%. (Investment return reflects investment income and all realized and unrealized capital gains and losses.) The tables assume annual Planned Premiums that are paid at the beginning of each policy year for an insured person who is a 45 year old male standard non-smoker underwriting risk when the policy is issued. Tables are provided for each of the two death benefit options. The tables headed "Current Charges" assume that the current rates for all charges deducted by John Hancock will apply in each year illustrated. The tables headed "Maximum Charges" are the same, except that the maximum permitted rates for all years are used for all charges. The tables do not reflect any charge that we reserve the right to make but are not currently making. The tables assume that (i) the guaranteed minimum death benefit has not been elected beyond the tenth policy year, (ii) no optional rider benefits and no Additional Sum Insured have been elected, (iii) no loans or withdrawals are made, (iv) no increases or decreases in coverage are requested and (v) no change in the death benefit option is requested. With respect to fees and expenses deducted from Series Fund assets, the amounts shown in all tables reflect (1) investment management fees equivalent to an effective annual rate of .75%, and (2) an assumed average asset charge for all other Series Fund operating expenses equivalent to an effective annual rate of .12%. These rates are the arithmetic average for all funds of the Series Funds. In other words, they are based on the hypothetical assumption that policy account values are allocated equally among the variable investment options. The actual rates associated with any policy will vary depending upon the actual allocation of policy values among the investment options. The charge shown above for all other Series Fund operating expenses reflects reimbursements to certain funds as described in the footnotes to the table beginning on page 11. We currently expect those reimbursement arrangements to continue indefinitely, but that is not guaranteed. Without those arrangements, the assumed average asset charge for all other operating expenses shown above would be higher. This would result in lower values than those shown in the following tables. The second column of each table shows the amount you would have at the end of each policy year if an amount equal to the assumed Planned Premiums were invested to earn interest, after taxes, at 5% compounded annually. This is not a policy value. It is included for comparison purposes only. Because your circumstances will no doubt differ from those in the illustrations that follow, values under your policy will differ, in most cases substantially. Upon request, we will furnish you with a comparable illustration reflecting your proposed insured person's issue age, sex and underwriting risk classification, and the Total Sum Insured and annual Planned Premium amount requested. 22 PLAN: FLEXIBLE PREMIUM VARIABLE LIFE $100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONSMOKER UNDERWRITING CLASS OPTION A DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM: $5,649 FOR SEVEN YEARS* USING CURRENT CHARGES
Death Benefit Surrender Value --------------------------------------------- --------------------------------------------- Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of End of accumulated at --------------------------------------------- --------------------------------------------- Policy Year 5% annual interest 0% 6% 12% 0% 6% 12% - ----------- ------------------ -------------- -------------- -------------- ------------- -------------- -------------- 1 5,931 100,000 100,000 100,000 5,174 5,480 5,786 2 12,159 100,000 100,000 100,000 10,087 11,008 11,967 3 18,699 100,000 100,000 100,000 14,886 16,744 18,752 4 25,565 100,000 100,000 100,000 19,411 22,534 26,045 5 32,775 100,000 100,000 100,000 24,030 28,762 34,295 6 40,345 100,000 100,000 100,000 28,585 35,280 43,427 7 48,294 100,000 100,000 100,000 33,081 42,109 53,544 8 50,709 100,000 100,000 100,714 32,287 43,720 58,897 9 53,244 100,000 100,000 106,302 31,480 45,394 64,818 10 55,906 100,000 100,000 112,033 30,654 47,132 71,359 11 58,702 100,000 100,000 118,077 29,937 49,069 78,718 12 61,637 100,000 100,000 126,789 29,200 51,086 86,842 13 64,718 100,000 100,000 136,053 28,441 53,187 95,812 14 67,954 100,000 100,000 145,897 27,663 55,382 105,723 15 71,352 100,000 100,000 156,348 26,870 57,679 116,678 16 74,920 100,000 100,000 167,415 26,039 60,072 128,781 17 78,666 100,000 100,000 181,935 25,165 62,566 142,137 18 82,599 100,000 100,000 197,663 24,240 65,168 156,876 19 86,729 100,000 100,000 214,698 23,262 67,886 173,144 20 91,065 100,000 100,000 233,144 22,222 70,728 191,102 25 116,225 100,000 102,637 367,670 17,142 88,481 316,957 30 148,336 100,000 119,079 563,228 9,962 111,289 526,381 35 189,318 ** 147,326 919,743 ** 140,311 875,946
- --------- * The illustrations assume that Planned Premiums equal to the Target Premium are paid at the start of each of the first seven Policy Years. The Death Benefit and Surrender Value will differ if premiums are paid in different amounts or frequencies. ** Policy lapses unless additional premium payments are made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
Death Benefit Surrender Value --------------------------------------------- --------------------------------------------- Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of End of accumulated at --------------------------------------------- --------------------------------------------- Policy Year 5% annual interest 0% 6% 12% 0% 6% 12% - ----------- ------------------ -------------- -------------- -------------- -------------- -------------- ------------- 1 5,931 100,000 100,000 100,000 4,610 4,889 5,169 2 12,159 100,000 100,000 100,000 8,860 9,688 10,551 3 18,699 100,000 100,000 100,000 13,034 14,691 16,485 4 25,565 100,000 100,000 100,000 16,851 19,627 22,752 5 32,775 100,000 100,000 100,000 20,878 25,073 29,986 6 40,345 100,000 100,000 100,000 24,833 30,760 37,986 7 48,294 100,000 100,000 100,000 28,715 36,703 46,841 8 50,709 100,000 100,000 100,000 27,475 37,563 50,997 9 53,244 100,000 100,000 100,000 26,188 38,421 55,583 10 55,906 100,000 100,000 100,000 24,845 39,271 60,651 11 58,702 100,000 100,000 100,000 23,562 40,236 66,392 12 61,637 100,000 100,000 106,201 22,208 41,194 72,740 13 64,718 100,000 100,000 113,201 20,776 42,145 79,719 14 67,954 100,000 100,000 120,595 19,259 43,084 87,388 15 71,352 100,000 100,000 128,400 17,647 44,009 95,821 16 74,920 100,000 100,000 136,632 15,924 44,914 105,101 17 78,666 100,000 100,000 147,563 14,073 45,791 115,284 18 82,599 100,000 100,000 159,335 12,070 46,631 126,456 19 86,729 100,000 100,000 172,006 9,888 47,420 138,715 20 91,065 100,000 100,000 185,646 7,498 48,148 152,169 25 116,225 ** 100,000 280,170 ** 50,440 241,526 30 148,336 ** 100,000 411,334 ** 48,261 384,424 35 189,318 ** 100,000 646,929 ** 33,499 616,123
- --------- * The illustrations assume that Planned Premiums equal to the Target Premium are paid at the start of each of the first seven Policy Years. The Death Benefit and Surrender Value will differ if premiums are paid in different amounts or frequencies. ** Policy lapses unless additional premium payments are made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
Death Benefit Surrender Value --------------------------------------------- --------------------------------------------- Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of End of accumulated at --------------------------------------------- --------------------------------------------- Policy Year 5% annual interest 0% 6% 12% 0% 6% 12% - ----------- ------------------ -------------- -------------- -------------- ------------- -------------- -------------- 1 5,931 104,988 105,294 105,600 5,172 5,478 5,784 2 12,159 109,895 110,816 111,773 10,078 10,999 11,957 3 18,699 114,675 116,529 118,533 14,859 16,713 18,716 4 25,565 119,349 122,461 125,959 19,349 22,461 25,959 5 32,775 123,913 128,619 134,121 23,913 28,619 34,121 6 40,345 128,396 135,040 143,122 28,396 35,040 43,122 7 48,294 132,802 141,740 153,057 32,802 41,740 53,057 8 50,709 131,913 143,200 158,180 31,913 43,200 58,180 9 53,244 131,005 144,698 163,816 31,005 44,698 63,816 10 55,906 130,070 146,228 170,010 30,070 46,228 70,010 11 58,702 129,240 147,925 176,962 29,240 47,925 76,962 12 61,637 128,384 149,666 184,615 28,384 49,666 84,615 13 64,718 127,498 151,446 193,038 27,498 51,446 93,038 14 67,954 126,589 153,275 202,321 26,589 53,275 102,321 15 71,352 125,663 155,161 212,560 25,663 55,161 112,560 16 74,920 124,690 157,075 223,826 24,690 57,075 123,826 17 78,666 123,663 159,012 236,220 23,663 59,012 136,220 18 82,599 122,576 160,964 249,853 22,576 60,964 149,853 19 86,729 121,425 162,929 264,855 21,425 62,929 164,855 20 91,065 120,205 164,899 281,361 20,205 64,899 181,361 25 116,225 114,333 176,918 397,278 14,333 76,918 297,278 30 148,336 106,357 189,458 588,269 6,357 89,458 488,269 35 189,318 ** 200,236 902,208 ** 100,236 802,208
- --------- * The illustrations assume that Planned Premiums equal to the Target Premium are paid at the start of each of the first seven Policy Years. The Death Benefit and Surrender Value will differ if premiums are paid in different amounts or frequencies. ** Policy lapses unless additional premium payments are made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
Death Benefit Surrender Value --------------------------------------------- --------------------------------------------- Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of End of accumulated at --------------------------------------------- --------------------------------------------- Policy Year 5% annual interest 0% 6% 12% 0% 6% 12% - ----------- ------------------ -------------- -------------- -------------- -------------- -------------- ------------- 1 5,931 104,306 104,584 104,863 4,589 4,867 5,145 2 12,159 108,512 109,334 110,190 8,795 9,617 10,473 3 18,699 112,618 114,255 116,028 12,900 14,538 16,310 4 25,565 116,621 119,352 122,426 16,621 19,352 22,426 5 32,775 120,519 124,627 129,438 20,519 24,627 29,438 6 40,345 124,310 130,086 137,123 24,310 30,086 37,123 7 48,294 127,987 135,727 145,543 27,987 35,727 45,543 8 50,709 126,534 136,241 149,154 26,534 36,241 49,154 9 53,244 125,028 136,700 153,061 25,028 36,700 53,061 10 55,906 123,460 137,093 157,282 23,460 37,093 57,282 11 58,702 121,945 137,534 161,973 21,945 37,534 61,973 12 61,637 120,353 137,893 167,045 20,353 37,893 67,045 13 64,718 118,681 138,162 172,533 18,681 38,162 72,533 14 67,954 116,924 138,329 178,473 16,924 38,329 78,473 15 71,352 115,074 138,382 184,903 15,074 38,382 84,903 16 74,920 113,120 138,301 191,860 13,120 38,301 91,860 17 78,666 111,047 138,065 199,381 11,047 38,065 99,381 18 82,599 108,839 137,647 207,506 8,839 37,647 107,506 19 86,729 106,475 137,016 216,272 6,475 37,016 116,272 20 91,065 103,935 136,140 225,723 3,935 36,140 125,723 25 116,225 ** 126,994 285,259 ** 26,994 185,259 30 148,336 ** 105,499 371,156 ** 5,499 271,156 35 189,318 ** ** 492,101 ** ** 392,101
- --------- * The illustrations assume that Planned Premiums equal to the Target Premium are paid at the start of each of the first seven Policy Years. The Death Benefit and Surrender Value will differ if premiums are paid in different amounts or frequencies. ** Policy lapses unless additional premium payments are made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
Death Benefit Surrender Value --------------------------------------------- --------------------------------------------- Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of End of accumulated at --------------------------------------------- --------------------------------------------- Policy Year 5% annual interest 0% 6% 12% 0% 6% 12% - ----------- ------------------ -------------- -------------- -------------- ------------- -------------- -------------- 1 5,931 100,000 100,000 100,000 5,174 5,480 5,786 2 12,159 100,000 100,000 100,000 10,087 11,008 11,967 3 18,699 100,000 100,000 100,000 14,886 16,744 18,752 4 25,565 100,000 100,000 100,000 19,411 22,534 26,045 5 32,775 100,000 100,000 100,000 24,030 28,762 34,295 6 40,345 100,000 100,000 107,368 28,585 35,280 43,420 7 48,294 100,000 101,095 128,372 33,081 42,109 53,471 8 50,709 100,000 101,937 136,914 32,287 43,718 58,719 9 53,244 100,000 102,823 146,095 31,480 45,388 64,490 10 55,906 100,000 103,750 155,960 30,654 47,119 70,830 11 58,702 100,000 105,009 166,871 29,937 49,042 77,933 12 61,637 100,000 106,320 178,611 29,200 51,039 85,743 13 64,718 100,000 107,681 191,244 28,441 53,110 94,325 14 67,954 100,000 109,102 204,852 27,663 55,264 103,765 15 71,352 100,000 110,588 219,523 26,870 57,508 114,157 16 74,920 100,000 112,123 235,307 26,039 59,831 125,564 17 78,666 100,000 113,694 252,261 25,165 62,233 138,081 18 82,599 100,000 115,313 270,499 24,240 64,717 151,812 19 86,729 100,000 116,990 290,141 23,262 67,286 166,873 20 91,065 100,000 118,732 311,318 22,222 69,941 183,387 25 116,225 100,000 130,923 453,403 17,142 86,184 298,468 30 148,336 100,000 145,999 667,643 9,962 105,942 484,466 35 189,318 ** 165,003 996,043 ** 129,546 782,007
- --------- * The illustrations assume that Planned Premiums equal to the Target Premium are paid at the start of each of the first seven Policy Years. The Death Benefit and Surrender Value will differ if premiums are paid in different amounts or frequencies. ** Policy lapses unless additional premium payments are made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
Death Benefit Surrender Value --------------------------------------------- --------------------------------------------- Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of End of accumulated at --------------------------------------------- --------------------------------------------- Policy Year 5% annual interest 0% 6% 12% 0% 6% 12% - ----------- ------------------ -------------- -------------- -------------- -------------- -------------- ------------- 1 5,931 100,000 100,000 100,000 4,610 4,889 5,169 2 12,159 100,000 100,000 100,000 8,860 9,688 10,551 3 18,699 100,000 100,000 100,000 13,034 14,691 16,485 4 25,565 100,000 100,000 100,000 16,851 19,627 22,752 5 32,775 100,000 100,000 100,000 20,878 25,073 29,986 6 40,345 100,000 100,000 100,000 24,833 30,760 37,986 7 48,294 100,000 100,000 112,316 28,715 36,703 46,783 8 50,709 100,000 100,000 118,495 27,475 37,563 50,819 9 53,244 100,000 100,000 125,056 26,188 38,421 55,203 10 55,906 100,000 100,000 132,024 24,845 39,271 59,959 11 58,702 100,000 100,000 139,706 23,562 40,236 65,247 12 61,637 100,000 100,000 147,856 22,208 41,194 70,979 13 64,718 100,000 100,000 156,511 20,776 42,145 77,194 14 67,954 100,000 100,000 165,695 19,259 43,084 83,930 15 71,352 100,000 100,000 175,435 17,647 44,009 91,230 16 74,920 100,000 100,000 185,776 15,924 44,914 99,134 17 78,666 100,000 100,000 196,728 14,073 45,791 107,684 18 82,599 100,000 100,000 208,334 12,070 46,631 116,924 19 86,729 100,000 100,000 220,633 9,888 47,420 126,895 20 91,065 100,000 100,000 233,667 7,498 48,148 137,646 25 116,225 ** 100,000 311,633 ** 50,440 205,143 30 148,336 ** 100,000 415,615 ** 48,261 301,585 35 189,318 ** 100,000 554,596 ** 33,499 435,421
- --------- * The illustrations assume that Planned Premiums equal to the Target Premium are paid at the start of each of the first seven Policy Years. The Death Benefit and Surrender Value will differ if premiums are paid in different amounts or frequencies. ** Policy lapses unless additional premium payments are made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
Death Benefit Surrender Value --------------------------------------------- --------------------------------------------- Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of End of accumulated at --------------------------------------------- --------------------------------------------- Policy Year 5% annual interest 0% 6% 12% 0% 6% 12% - ----------- ------------------ -------------- -------------- -------------- ------------- -------------- -------------- 1 5,931 104,988 105,294 105,600 5,172 5,478 5,784 2 12,159 109,895 110,816 111,773 10,078 10,999 11,957 3 18,699 114,675 116,529 118,533 14,859 16,713 18,716 4 25,565 119,349 122,461 125,959 19,349 22,461 25,959 5 32,775 123,913 128,619 134,121 23,913 28,619 34,121 6 40,345 128,396 135,040 143,122 28,396 35,040 43,122 7 48,294 132,802 141,740 153,057 32,802 41,740 53,057 8 50,709 131,913 143,200 158,180 31,913 43,200 58,180 9 53,244 131,005 144,698 163,816 31,005 44,698 63,816 10 55,906 130,070 146,228 170,010 30,070 46,228 70,010 11 58,702 129,240 147,925 176,962 29,240 47,925 76,962 12 61,637 128,384 149,666 184,615 28,384 49,666 84,615 13 64,718 127,498 151,446 193,038 27,498 51,446 93,038 14 67,954 126,589 153,275 202,321 26,589 53,275 102,321 15 71,352 125,663 155,161 216,446 25,663 55,161 112,557 16 74,920 124,690 157,075 232,005 24,690 57,075 123,802 17 78,666 123,663 159,012 248,719 23,663 59,012 136,143 18 82,599 122,576 160,964 266,699 22,576 60,964 149,680 19 86,729 121,425 162,929 286,064 21,425 62,929 164,528 20 91,065 120,205 164,899 306,942 20,205 64,899 180,809 25 116,225 114,333 176,918 447,020 14,333 76,918 294,266 30 148,336 106,357 189,458 658,236 6,357 89,458 477,640 35 189,318 ** 200,236 982,001 ** 100,236 770,983
- --------- * The illustrations assume that Planned Premiums equal to the Target Premium are paid at the start of each of the first seven Policy Years. The Death Benefit and Surrender Value will differ if premiums are paid in different amounts or frequencies. ** Policy lapses unless additional premium payments are made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
Death Benefit Surrender Value --------------------------------------------- --------------------------------------------- Planned Premiums Assuming hypothetical gross annual return of Assuming hypothetical gross annual return of End of accumulated at --------------------------------------------- --------------------------------------------- Policy Year 5% annual interest 0% 6% 12% 0% 6% 12% - ----------- ------------------ -------------- -------------- -------------- -------------- -------------- ------------- 1 5,931 104,306 104,584 104,863 4,589 4,867 5,145 2 12,159 108,512 109,334 110,190 8,795 9,617 10,473 3 18,699 112,618 114,255 116,028 12,900 14,538 16,310 4 25,565 116,621 119,352 122,426 16,621 19,352 22,426 5 32,775 120,519 124,627 129,438 20,519 24,627 29,438 6 40,345 124,310 130,086 137,123 24,310 30,086 37,123 7 48,294 127,987 135,727 145,543 27,987 35,727 45,543 8 50,709 126,534 136,241 149,154 26,534 36,241 49,154 9 53,244 125,028 136,700 153,061 25,028 36,700 53,061 10 55,906 123,460 137,093 157,282 23,460 37,093 57,282 11 58,702 121,945 137,534 161,973 21,945 37,534 61,973 12 61,637 120,353 137,893 167,045 20,353 37,893 67,045 13 64,718 118,681 138,162 172,533 18,681 38,162 72,533 14 67,954 116,924 138,329 178,473 16,924 38,329 78,473 15 71,352 115,074 138,382 184,903 15,074 38,382 84,903 16 74,920 113,120 138,301 191,860 13,120 38,301 91,860 17 78,666 111,047 138,065 199,381 11,047 38,065 99,381 18 82,599 108,839 137,647 207,506 8,839 37,647 107,506 19 86,729 106,475 137,016 216,272 6,475 37,016 116,272 20 91,065 103,935 136,140 225,723 3,935 36,140 125,723 25 116,225 ** 126,994 285,259 ** 26,994 185,259 30 148,336 ** 105,499 373,644 ** 5,499 271,130 35 189,318 ** ** 498,202 ** ** 391,146
- --------- * The illustrations assume that Planned Premiums equal to the Target Premium are paid at the start of each of the first seven Policy Years. The Death Benefit and Surrender Value will differ if premiums are paid in different amounts or frequencies. ** Policy lapses unless additional premium payments are made. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE DEATH BENEFIT AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%, OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. IN FACT, FOR ANY GIVEN PERIOD OF TIME, THE INVESTMENT RESULTS COULD BE NEGATIVE. 30 ADDITIONAL INFORMATION This section of the prospectus provides additional detailed information that is not contained in the Basic Information section on pages 4 through 21.
CONTENTS OF THIS SECTION PAGES TO SEE - ------------------------ ------------ Description of John Hancock ......................................... 32 How we support the policy and investment options .................... 32 Procedures for issuance of a policy ................................. 33 Basic Sum Insured vs. Additional Sum Insured ........................ 34 Commencement of investment performance .............................. 35 How we process certain policy transactions .......................... 35 Effects of policy loans ............................................. 36 Additional information about how certain policy charges work ........ 37 How we market the policies .......................................... 38 Tax considerations .................................................. 39 Reports that you will receive ....................................... 41 Voting privileges that you will have ................................ 41 Changes that John Hancock can make as to your policy ................ 42 Adjustments we make to death benefits ............................... 42 When we pay policy proceeds ......................................... 42 Other details about exercising rights and paying benefits ........... 43 Legal matters ....................................................... 43 Registration statement filed with the SEC ........................... 44 Accounting and actuarial experts .................................... 44 Financial statements of John Hancock and the Account ................ 44 List of Directors and Executive Officers of John Hancock ............ 45
31 DESCRIPTION OF JOHN HANCOCK We are John Hancock Life Insurance Company, a Massachusetts stock life insurance company. On February 1, 2000, John Hancock Mutual Life Insurance Company (which was chartered in Massachusetts in 1862) converted to a stock company by "demutualizing" and changed its name to John Hancock Life Insurance Company. As part of the demutualization process, John Hancock Life Insurance Company became a subsidiary of John Hancock Financial Services, Inc., a newly formed publicly-traded corporation. Our Home Office is at John Hancock Place, Boston, Massachusetts 02117. We are authorized to transact a life insurance and annuity business in all states and in the District of Columbia. As of December 31, 2001, our assets were approximately $81 billion. We are regulated and supervised by the Massachusetts Commissioner of Insurance, who periodically examines our affairs. We also are subject to the applicable insurance laws and regulations of all jurisdictions in which we are authorized to do business. We are required to submit annual statements of our operations, including financial statements, to the insurance departments of the various jurisdictions in which we do business for purposes of determining solvency and compliance with local insurance laws and regulations. The regulation to which we are subject, however, does not provide a guarantee as to such matters. HOW WE SUPPORT THE POLICY AND INVESTMENT OPTIONS Separate Account UV The variable investment options shown on page 1 are in fact subaccounts of Separate Account UV (the "Account"), a separate account established by us under Massachusetts law. The 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 SEC of the management of the Account or John Hancock. The Account's assets are the property of John Hancock. Each policy provides that amounts we hold in the Account pursuant to the policies cannot be reached by any other persons who may have claims against us. The assets in each subaccount are invested in the corresponding fund of one of the Series Funds. New subaccounts may be added as new funds are added to the Series Funds and made available to policy owners. Existing subaccounts may be deleted if existing funds are deleted from the Series Funds. We will purchase and redeem Series Fund shares for the Account at their net asset value without any sales or redemption charges. Shares of a Series Fund represent an interest in one of the funds of the Series Fund which corresponds to a subaccount of the Account. Any dividend or capital gains distributions received by the Account will be reinvested in shares of that same fund at their net asset value as of the dates paid. On each business day, shares of each fund are purchased or redeemed by us for each subaccount based on, among other things, the amount of net premiums allocated to the subaccount, distributions reinvested, and transfers to, from and among subaccounts, all to be effected as of that date. Such purchases and redemptions are effected at each fund's net asset value per share determined for that same date. A "business day" is any date on which the New York Stock Exchange is open for trading. We compute policy values for each business day as of the close of that day (usually 4:00 p.m. Eastern Standard Time). Our general account Our obligations under the policy's fixed investment option are backed by our general account assets. Our general account consists of assets owned by us other than those in the Account and in other 32 separate accounts that we may establish. Subject to applicable law, we have sole discretion over the investment of assets of the general account and policy owners do not share in the investment experience of, or have any preferential claim on, those assets. Instead, we guarantee that the account value allocated to the fixed investment option will accrue interest daily at an effective annual rate of at least 4% without regard to the actual investment experience of the general account. Because of exemptive and exclusionary provisions, interests in our fixed investment option have not been registered under the Securities Act of 1933 and our 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 we have been advised that the staff of the SEC has not reviewed the disclosure in this prospectus relating to the fixed investment option. Disclosure regarding the fixed investment option may, however, be subject to certain generally-applicable provisions of the Federal securities laws relating to accuracy and completeness of statements made in prospectuses. PROCEDURES FOR ISSUANCE OF A POLICY Generally, the policy is available with a minimum Total Sum Insured at issue of $100,000 and a minimum Basic Sum Insured at issue of $50,000. At the time of issue, the insured person must have an attained age of at least 20 and no more than 85. All insured persons must meet certain health and other insurance risk criteria called "underwriting standards". Policies issued in Montana or in connection with certain employee plans will not directly reflect the sex of the insured person in either the premium rates or the charges or values under the policy. The illustrations set forth in this prospectus are sex-distinct and, therefore, may not reflect the rates, charges, or values that would apply to such policies. Minimum Initial Premium The Minimum Initial Premium must be received by us at our Life Servicing Office in order for the policy to be in full force and effect. There is no grace period for the payment of the Minimum Initial Premium. The Minimum Initial Premium is determined by us based on the characteristics of the insured person, the Total Sum Insured at issue, and the policy options you have selected. Commencement of insurance coverage After you apply for a policy, it can sometimes take up to several weeks for us to gather and evaluate all the information we need to decide whether to issue a policy to you and, if so, what the insured person's rate class should be. After we approve an application for a policy and assign an appropriate insurance rate class, we will prepare the policy for delivery. We will not pay a death benefit under a policy unless the policy is in effect when the insured person dies (except for the circumstances described under "Temporary insurance coverage prior to policy delivery" on page 34). The policy will take effect only if all of the following conditions are satisfied: .. The policy is delivered to and received by the applicant. .. The Minimum Initial Premium is received by us. .. Each insured person is living and still meets our health criteria for issuing insurance. If all of the above conditions are satisfied, the policy will take effect on the date shown in the policy as the "date of issue." That is the date on which we begin to deduct monthly charges. Policy months, policy years and policy anniversaries are all measured from the date of issue. 33 Backdating In order to preserve a younger age at issue for the insured person, we can designate a date of issue that is up to 60 days earlier than the date that would otherwise apply. This is referred to as "backdating" and is allowed under state insurance laws. Backdating can also be used in certain corporate-owned life insurance cases involving multiple policies to retain a common monthly deduction date. The conditions for coverage described above under "Commencement of insurance coverage" must still be satisfied, but in a backdating situation the policy always takes effect retroactively. Backdating results in a lower insurance charge (if it is used to preserve the insured person's younger age at issue), but monthly charges begin earlier than would otherwise be the case. Those monthly charges will be deducted as soon as we receive premiums sufficient to pay them. Temporary coverage prior to policy delivery If a specified amount of premium is paid with the application for a policy and other conditions are met, we will provide temporary term life insurance coverage on the insured person for a period prior to the time coverage under the policy takes effect. Such temporary term coverage will be subject to the terms and conditions described in the application for the policy, including limits on amount and duration of coverage. Monthly deduction dates Each charge that we deduct monthly is assessed against your account value or the subaccounts at the close of business on the date of issue and at the close of the first business day in each subsequent policy month. BASIC SUM INSURED VS. ADDITIONAL SUM INSURED As noted earlier in this prospectus, you should consider a number of factors in determining whether to elect coverage in the form of Basic Sum Insured or in the form of Additional Sum Insured. For the same amount of premiums paid, the amount of sales charge deducted from premiums and the amount of compensation paid to the selling insurance agent will generally be less if coverage is included as Additional Sum Insured, rather than as Basic Sum Insured. On the other hand, the amount of any Additional Sum Insured is not included in the guaranteed minimum death benefit feature. Therefore, if the policy's surrender value is insufficient to pay the monthly charges as they fall due (including the charges for the Additional Sum Insured), the Additional Sum Insured coverage will lapse, even if the Basic Sum Insured stays in effect pursuant to the guaranteed minimum death benefit feature. Generally, you will incur lower sales charges and have more flexible coverage with respect to the Additional Sum Insured than with respect to the Basic Sum Insured. If this is your priority, you may wish to maximize the proportion of the Additional Sum Insured. However, if your priority is to take advantage of the guaranteed minimum death benefit feature, the proportion of the Policy's Total Sum Insured that is guaranteed can be increased by taking out more coverage as Basic Sum Insured at the time of policy issuance. As stated earlier in this prospectus, the guaranteed minimum death benefit feature does not apply if the Additional Sum Insured is scheduled to exceed the Basic Sum Insured at any time. If such was the case, you would presumably wish to maximize the proportion of the Additional Sum Insured. If you want to purchase Additional Sum Insured, you may select from among several forms of it: a level amount of coverage; an amount of coverage that increases on each policy anniversary up to a prescribed limit; an amount of coverage that increases on each policy anniversary to the amount of premiums paid during prior policy years plus the Planned Premium for the current policy year, subject 34 to certain limits; or a combination of those forms of coverage. Any decision you make to modify the amount of Additional Sum Insured coverage after issue can have significant tax consequences (see "Tax Considerations" beginning on page 39). COMMENCEMENT OF INVESTMENT PERFORMANCE Any premium payment processed prior to the twentieth day after the date of issue will automatically be allocated to the Money Market investment option. On the later of the date such payment is received or the twentieth day following the date of issue, the portion of the Money Market investment option attributable to such payment will be reallocated automatically among the investment options you have chosen. All other premium payments will be allocated among the investment options you have chosen as soon as they are processed. HOW WE PROCESS CERTAIN POLICY TRANSACTIONS Premium payments We will process any premium payment as of the day we receive it, unless one of the following exceptions applies: (1) We will process a payment received prior to a policy's date of issue as if received on the business day immediately preceding the date of issue. (2) If the Minimum Initial Premium is not received prior to the date of issue, we will process each premium payment received thereafter as if received on the business day immediately preceding the date of issue until all of the Minimum Initial Premium is received. (3) We will process the portion of any premium payment for which we require evidence of the insured person's continued insurability only after we have received such evidence and found it satisfactory to us. (4) If we receive any premium payment that we think will cause a policy to become a modified endowment or will cause a policy to lose its status as life insurance under the tax laws, we will not accept the excess portion of that premium payment and will immediately notify the owner. We will refund the excess premium when the premium payment check has had time to clear the banking system (but in no case more than two weeks after receipt), except in the following circumstances: .. The tax problem resolves itself prior to the date the refund is to be made; or .. The tax problem relates to modified endowment status and we receive a signed acknowledgment from the owner prior to the refund date instructing us to process the premium notwithstanding the tax issues involved. In the above cases, we will treat the excess premium as having been received on the date the tax problem resolves itself or the date we receive the signed acknowledgment. We will then process it accordingly. (5) If a premium payment is received or is otherwise scheduled to be processed (as specified above) on a date that is not a business day, the premium payment will be processed on the business day next following that date. Transfers among investment options Any reallocation among investment options must be such that the total in all investment options after reallocation equals 100% of account value. Transfers out of a variable investment option will be effective at the end of the business day in which we receive at our Life Servicing Office notice satisfactory to us. If received on or before the policy anniversary, requests for transfer out of the fixed investment option will be processed on the policy anniversary (or the next business day if the policy anniversary does not occur on a business day). If received after the policy anniversary, such a request will be processed 35 at the end of the business day in which we receive the request at our Life Servicing Office. If you request a transfer out of the fixed investment option 61 days or more prior to the policy anniversary, we will not process that portion of the reallocation, and your confirmation statement will not reflect a transfer out of the fixed investment option as to such request. Currently, there is no minimum amount limit on transfers into the fixed investment option, but we reserve the right to impose such a limit in the future. We have the right to defer transfers of amounts out of the fixed investment option for up to six months. Telephone transfers and policy loans Once you have completed a written authorization, you may request a transfer or policy loan by telephone or by fax. If the fax request option becomes unavailable, another means of telecommunication will be substituted. If you authorize telephone transactions, you will be liable for any loss, expense or cost arising out of any unauthorized or fraudulent telephone instructions which we reasonably believe to be genuine, unless such loss, expense or cost is the result of our mistake or negligence. We employ procedures which provide safeguards against the execution of unauthorized transactions, and which are reasonably designed to confirm that instructions received by telephone are genuine. These procedures include requiring personal identification, tape recording calls, and providing written confirmation to the owner. If we do not employ reasonable procedures to confirm that instructions communicated by telephone are genuine, we may be liable for any loss due to unauthorized or fraudulent instructions. Effective date of other policy transactions The following transactions take effect on the policy anniversary on or next following the date we approve the request: .. Total Sum Insured decreases .. Additional Sum Insured increases .. Change of death benefit option from Option B to Option A .. Any other change of death benefit option, when and if permitted by our administrative rules (see "Change of death benefit option" on page 17) Reinstatements of lapsed policies take effect on the monthly deduction date on or next following the date we approve the request for reinstatement. We process loans, surrenders, partial withdrawals and loan repayments as of the day we receive such request or repayment. EFFECTS OF POLICY LOANS The account value, the surrender value, and any death benefit above the Total Sum Insured are permanently affected by any loan, whether or not it is repaid in whole or in part. This is because the amount of the loan is deducted from the investment options and placed in a special loan account. The investment options and the special loan account will generally have different rates of investment return. The amount of the outstanding loan (which includes accrued and unpaid interest) is subtracted from the amount otherwise payable when the policy proceeds become payable. Whenever the outstanding loan equals or exceeds the account value, the policy will terminate 31 days after we have mailed notice of termination to you (and to any assignee of record at such assignee's last known address) specifying the minimum amount that must be paid to avoid termination, unless a repayment of at least the amount specified is made within that period. Also, taking out a loan on the policy increases the risk that the policy may lapse because of the difference between the interest rate charged on the loan and the interest rate credited to the special loan account. Policy loans may also result in adverse tax consequences under certain circumstances (see "Tax considerations" beginning on page 39). 36 ADDITIONAL INFORMATION ABOUT HOW CERTAIN POLICY CHARGES WORK Sales expenses and related charges The sales charges help to compensate us for the cost of selling our policies. (See "What charges will John Hancock deduct from my investment in the policy?" in the Basic Information section of this prospectus.) The amount of the charges in any policy year does not specifically correspond to sales expenses for that year. We expect to recover our total sales expenses over the life of the policies. To the extent that the sales charges do not cover total sales expenses, the sales expenses may be recovered from other sources, including gains from the asset-based risk charge and other gains with respect to the policies, or from our general assets. (See "How we market the policies" on page 38.) Similarly, administrative expenses not fully covered by the issue charge and the administrative charge may also be recovered from such other sources. Effect of premium payment pattern You may structure the timing and amount of premium payments to minimize the sales charges, although doing so involves certain risks. Paying less than one Target Premium in the first policy year or paying more than one Target Premium in any policy year could reduce your total sales charges over time. For example, if the Target Premium was $10,000 and you paid a premium of $10,000 in each of the first ten policy years, you would pay total sales charges of $6,500. If you paid $20,000 (i.e., two times the Target Premium amount) in every other policy year up to the ninth policy year, you would pay total sales charges of only $3,250. However, delaying the payment of Target Premiums to later policy years could increase the risk that the guaranteed minimum death benefit feature will lapse and the account value will be insufficient to pay monthly policy charges as they come due. As a result, the policy or any Additional Sum Insured may lapse and eventually terminate. Conversely, accelerating the payment of Target Premiums to earlier policy years could cause aggregate premiums paid to exceed the policy's 7-pay premium limit and, as a result, cause the policy to become a modified endowment, with adverse tax consequences to you upon receipt of policy distributions. (See "Tax considerations" beginning on page 39.) Monthly charges We deduct the monthly charges described in the Basic Information section from your policy's investment options in proportion to the amount of account value you have in each. For each month that we cannot deduct any charge because of insufficient account value, the uncollected charges will accumulate and be deducted when and if sufficient account value becomes available. The insurance under the policy continues in full force during any grace period but, if the insured person dies during the policy grace period, the amount of unpaid monthly charges is deducted from the death benefit otherwise payable. Reduced charges for eligible classes The charges otherwise applicable may be reduced with respect to policies issued to a class of associated individuals or to a trustee, employer or similar entity where we anticipate that the sales to the members of the class will result in lower than normal sales or administrative expenses, lower taxes or lower risks to us. We will make these reductions in accordance with our rules in effect at the time of the application for a policy. The factors we consider in determining the eligibility of a particular group for reduced charges, and the level of the reduction, are as follows: the nature of the association and its organizational framework; the method by which sales will be made to the members of the class; the facility with which premiums will be collected from the associated individuals and the association's capabilities with respect to administrative tasks; the anticipated lapse and surrender rates of the policies; the size of the class of associated individuals and the number of years it has been in existence; the 37 aggregate amount of premiums paid; and any other such circumstances which result in a reduction in sales or administrative expenses, lower taxes or lower risks. Any reduction in charges will be reasonable and will apply uniformly to all prospective policy purchasers in the class and will not unfairly discriminate against any owner. HOW WE MARKET THE POLICIES Signator Investors, Inc. ("Signator"), an indirect wholly-owned subsidiary of John Hancock located at 197 Clarendon Street, Boston, MA 02117, is registered as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. and the Securities Investor Protection Corporation. Signator acts as principal underwriter and principal distributor of the policies pursuant to a sales agreement among John Hancock, Signator, John Hancock Variable Life Insurance Company and the Account. Signator also serves as principal underwriter for John Hancock Variable Annuity Accounts U, I and V, John Hancock Mutual Variable Life Insurance Account UV and John Hancock Variable Life Accounts U and V, all of which are registered under the 1940 Act. Signator is also the principal underwriter for John Hancock Variable Series Trust I. Applications for policies are solicited by agents who are licensed by state insurance authorities to sell John Hancock's policies and who are also registered representatives ("representatives") of Signator or other broker-dealer firms, as discussed below. John Hancock performs insurance underwriting and determines whether to accept or reject the application for a policy and each insured person's risk classification. John Hancock will make the appropriate refund if a policy ultimately is not issued or is returned under the "free look" provision. Officers and employees of John Hancock are covered by a blanket bond by a commercial carrier in the amount of $25 million. Signator's representatives are compensated for sales of the policies on a commission and service fee basis by Signator, and John Hancock reimburses Signator for such compensation and for other direct and indirect expenses (including agency expense allowances, general agent, district manager and supervisor's compensation, agent's training allowances, deferred compensation and insurance benefits of agents, general agents, district managers and supervisors, agency office clerical expenses and advertising) actually incurred in connection with the marketing and sale of the policies. The maximum commission payable to a Signator representative for selling a policy is 21% of the Target Premium paid in the first policy year, 12 % of the Target Premium paid in each of the second through fifth policy years, and 3% of the Target Premium paid in each policy year thereafter. The maximum commission on any premium paid in any policy year in excess of the Target Premium is 2%. Representatives with less than four years of service with Signator and those compensated on salary plus bonus or level commission programs may be paid on a different basis. Representatives who meet certain productivity and persistency standards with respect to the sale of policies issued by John Hancock will be eligible for additional compensation. The policies are also sold through other registered broker-dealers that have entered into selling agreements with Signator and whose representatives are authorized by applicable law to sell variable life insurance policies. The commissions which will be paid by such broker-dealers to their representatives will be in accordance with their established rules. The commission rates may be more or less than those set forth above for Signator's representatives. In addition, their qualified registered representatives may be reimbursed by the broker-dealers under expense reimbursement allowance programs in any year for approved voucherable expenses incurred. Signator will compensate the broker-dealers as provided in the selling agreements, 38 and John Hancock will reimburse Signator for such amounts and for certain other direct expenses in connection with marketing the policies through other broker-dealers. Representatives of Signator and the other broker-dealers mentioned above may also earn "credits" toward qualification for attendance at certain business meetings sponsored by John Hancock. The offering of the policies is intended to be continuous, but neither John Hancock nor Signator is obligated to sell any particular amount of policies. TAX CONSIDERATIONS This description of federal income tax consequences is only a brief summary and is not intended as tax advice. Tax consequences will vary based on your own particular circumstances, and for further information you should consult a qualified tax advisor. 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. Policy proceeds We believe the policy will receive the same federal income and estate tax treatment as fixed benefit life insurance policies. Section 7702 of the Internal Revenue Code (the "Code") defines life insurance for federal tax purposes. If certain standards are met at issue and over the life of the policy, the policy will satisfy that definition. We will monitor compliance with these standards. If the policy complies with the definition of life insurance, we believe the death benefit under the policy will be excludable from the beneficiary's gross income under Section 101 of the Code. Other policy distributions Increases in account value as a result of interest or investment experience will not be subject to federal income tax unless and until values are actually received through distributions. In general, the owner will be taxed on the amount of distributions that exceed the premiums paid under the policy. But under certain circumstances within the first 15 policy years, the owner may be taxed on a distribution even if total withdrawals do not exceed total premiums paid. Any taxable distribution will be ordinary income to the owner (rather than capital gains). Distributions for tax purposes can 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. We also believe that, except as noted below, 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, the amount of 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 requirements to keep your policy from lapsing and a significant tax burden if you allow the lapse to occur. It is possible that, despite our monitoring, a policy might fail to qualify as life insurance under Section 7702 of the Code. This could happen, for example, if we inadvertently failed to return to you any premium payments that were in excess of permitted amounts, or if any of the funds failed to meet certain investment diversification or other requirements of the Code. If this were to occur, you would be subject to income tax on the income credited to the policy for the period of the disqualification and for subsequent periods. Tax consequences of ownership or receipt of policy proceeds under federal, state and local estate, 39 inheritance, gift and other tax laws depend on the circumstances of each owner or beneficiary. 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. Diversification rules and ownership of the Account Your policy will not qualify for the tax benefit of a life insurance contract unless the Account follows certain rules requiring diversification of investments underlying the policy. In addition, the rules require that the policy owner not have "investment control" over the underlying assets. The Treasury Department explained in its temporary regulations regarding diversification that such regulations " do not provide guidance concerning the circumstances in which investor control of the investments of a segregated asset account may cause the investor, rather than the insurance company, to be treated as the owner of the assets in the account". As the variable policy owner, you will be treated as the owner of Account assets if you have the ability to exercise investment control over them. If you are found to have such ability, you will be taxed on any income or gains the assets generate. Although the Treasury Department announced several years ago that it would provide further guidance on this issue, it had not yet done so as of the date of this prospectus. The ownership rights under your policy are similar to, but different in certain respects from, those described in Internal Revenue Service 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 Account. We do not know what will be in future Treasury Department regulations or other guidance. 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 it will prevent you from being considered the owner of your policy's proportionate share of the assets of the Account, but we are under no obligation to do so. 7-pay premium limit 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 is the total of net level premiums that would have been payable at any time for a comparable fixed policy to be fully "paid-up" after the payment of 7 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 7 policy years exceed the 7-pay limit, the policy will be treated as a "modified endowment", which can have adverse tax consequences. The owner will be taxed on distributions and loans from a "modified endowment" to the extent of any income (gain) to the owner (on an income-first basis). The distributions and loans affected will be those made on or after, and within the two year period prior to, the time the policy becomes a modified endowment. Additionally, a 10% penalty tax may be imposed on taxable portions of such distributions or loans that are made before the owner attains age 59 1/2. 40 Furthermore, any time there is a "material change" in a policy (generally the result of such things as an increase in Additional Sum Insured, the addition of certain other policy benefits after issue, a change in death benefit option, or reinstatement of a lapsed policy), the policy will have a new 7-pay limit as if it were a newly-issued policy. If a prescribed portion of the policy's then account value, plus all other premiums paid within 7 years after the material change, at any time exceed the new 7-pay limit, the policy will become a modified endowment. Moreover, if benefits under a policy are reduced (such as a reduction in the Total Sum Insured or death benefit or the reduction or cancellation of certain rider benefits) during the 7 years in which a 7-pay test is being applied, the 7-pay limit will generally be recalculated based on the reduced benefits. If the premiums paid to date are greater than the recalculated 7-pay limit, the policy will become a modified endowment. All modified endowments issued by the same insurer (or its affiliates) to the owner during any calendar year generally are required to be treated as one contract for the purpose of applying the modified endowment rules. A policy received in exchange for a modified endowment will itself also be a modified endowment. You should consult your tax advisor if you have questions regarding the possible impact of the 7-pay limit on your policy. Corporate and H.R. 10 plans The policy may be acquired in connection with the funding of retirement plans satisfying the qualification requirements of Section 401 of the Code. If so, the 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 Code. REPORTS THAT YOU WILL RECEIVE At least annually, we will send you a statement setting forth the following information as of the end of the most recent reporting period: the amount of the death benefit, the Basic Sum Insured and the Additional Sum Insured, the account value, the portion of the account value in each investment option, the surrender value, premiums received and charges deducted from premiums since the last report, and any outstanding policy loan (and interest charged for the preceding policy year). Moreover, you also will receive confirmations of premium payments, transfers among investment options, policy loans, partial withdrawals and certain other policy transactions. Semiannually we will send you a report containing the financial statements of each Series Fund, including a list of securities held in each fund. VOTING PRIVILEGES THAT YOU WILL HAVE All of the assets in the subaccounts of the Account are invested in shares of the corresponding funds of the Series Funds. We will vote the shares of each of the funds of the Series Funds which are deemed attributable to variable life insurance policies at regular and special meetings of the Series Funds' shareholders in accordance with instructions received from owners of such policies. Shares of the Series Funds held in the Account which are not attributable to such policies, as well as shares for which instructions from owners are not received, will be represented by us at the meeting. We will vote such shares for and against each matter in the same proportions as the votes based upon the instructions received from the owners of such policies. We determine the number of a fund's shares held in a subaccount attributable to each owner by dividing the amount of a policy's account value held in the subaccount by the net asset value of one share in the fund. Fractional votes will be counted. We determine the number of shares as to which the owner may give instructions as of the record date for the 41 Series Fund's meeting. Owners of policies may give instructions regarding the election of the Board of Trustees or Board of Directors of a Series Fund, ratification of the selection of independent auditors, approval of Series Fund investment advisory agreements and other matters requiring a shareholder vote. We will furnish owners with information and forms to enable owners to give voting instructions. However, we may, in certain limited circumstances permitted by the SEC's rules, disregard voting instructions. If we do disregard voting instructions, you will receive a summary of that action and the reasons for it in the next semi-annual report to owners. CHANGES THAT JOHN HANCOCK CAN MAKE AS TO YOUR POLICY Changes relating to a Series Fund or the Account The voting privileges described in this prospectus reflect our understanding of applicable Federal securities law requirements. To the extent that applicable law, regulations or interpretations change to eliminate or restrict the need for such voting privileges, we reserve the right to proceed in accordance with any such revised requirements. We also reserve the right, subject to compliance with applicable law, including approval of owners if so required, (1) to transfer assets determined by John Hancock to be associated with the class of policies to which your policy belongs from the Account to another separate account or subaccount, (2) to operate the Account as a "management-type investment company" under the 1940 Act, or in any other form permitted by law, the investment adviser of which would be John Hancock or an affiliate, (3) to deregister the Account under the 1940 Act, (4) to substitute for the fund shares held by a subaccount any other investment permitted by law, and (5) to take any action necessary to comply with or obtain any exemptions from the 1940 Act. We would notify owners of any of the foregoing changes and, to the extent legally required, obtain approval of owners and any regulatory body prior thereto. Such notice and approval, however, may not be legally required in all cases. Other permissible changes We reserve the right to make any changes in the policy necessary to ensure the policy is within the definition of life insurance under the Federal tax laws and is in compliance with any changes in Federal or state tax laws. In our policies, we reserve the right to make certain changes if they would serve the best interests of policy owners or would be appropriate in carrying out the purposes of the policies. Such changes include the following: . Changes necessary to comply with or obtain or continue exemptions under the federal securities laws . Combining or removing investment options . Changes in the form of organization of any separate account Any such changes will be made only to the extent permitted by applicable laws and only in the manner permitted by such laws. When required by law, we will obtain your approval of the changes and the approval of any appropriate regulatory authority. ADJUSTMENTS WE MAKE TO DEATH BENEFITS If the insured person commits suicide within certain time periods, the amount of death benefit we pay will be limited as described in the policy. Also, if an application misstated the age or gender of the insured person, we will adjust the amount of any death benefit as described in the policy. WHEN WE PAY POLICY PROCEEDS General We will 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 42 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. Delay to challenge coverage We may challenge the validity of your insurance policy based on any material misstatements made to us in the application for the policy. We cannot make such a challenge, however, beyond certain time limits that are specified in the policy. Delay for check clearance We reserve the right to defer payment of that portion of your account value that is attributable to a premium payment made by check for a reasonable period of time (not to exceed 15 days) to allow the check to clear the banking system. Delay of separate account proceeds We reserve the right to defer payment of any death benefit, loan or other distribution that is derived from a variable investment option if (a) the New York Stock Exchange is closed (other than customary weekend and holiday closings) or trading on the New York Stock Exchange is restricted; (b) an emergency exists, as a result of which disposal of securities is not reasonably practicable or it is not reasonably practicable to fairly determine the account value; or (c) the SEC by order permits the delay for the protection of owners. Transfers and allocations of account value among the investment options may also be postponed under these circumstances. If we need to defer calculation of separate account values for any of the foregoing reasons, all delayed transactions will be processed at the next values that we do compute. OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS Joint ownership If more than one person owns a policy, all owners must join in most requests to exercise rights under the policy. Assigning your policy You may assign your rights in the policy to someone else as collateral for a loan or for some other reason. Assignments do not require the consent of any revocable beneficiary. A copy of the assignment must be forwarded to us. We are not responsible for any payment we make or any action we take before we receive notice of the assignment in good order. Nor are we responsible for the validity of the assignment. An absolute assignment is a change of ownership. All collateral assignees of record must consent to any full surrender, partial withdrawal or loan from the policy. Your beneficiary You name your beneficiary when you apply for the policy. The beneficiary is entitled to the proceeds we pay following the insured person's death. You may change the beneficiary during the insured person's lifetime. Such a change requires the consent of any irrevocable named beneficiary. A new beneficiary designation is effective as of the date you sign it, but will not affect any payments we make before we receive it. If no beneficiary is living when the insured person dies, we will pay the insurance proceeds to the owner or the owner's estate. LEGAL MATTERS The legal validity of the policies described in this prospectus has been passed on by Ronald J. Bocage, Vice President and Counsel for John Hancock. The law firm of Foley & Lardner, Washington, D.C., has advised us on certain Federal securities law matters in connection with the policies. 43 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. ACCOUNTING AND ACTUARIAL EXPERTS Ernst & Young LLP, independent auditors, have audited the consolidated financial statements and schedules of John Hancock at December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001, and the financial statements and schedules of the Account at December 31, 2001 and for each of the periods indicated therein, as set forth in their reports. We've included these financial statements in this prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP's reports, given on their authority as experts in accounting and auditing. Actuarial matters included in this prospectus have been examined by Deborah A. Poppel, F.S.A., an Actuary and Second Vice President of John Hancock. FINANCIAL STATEMENTS OF JOHN HANCOCK AND THE ACCOUNT The financial statements of John Hancock included herein should be distinguished from the financial statements of the Account and should be considered only as bearing upon the ability of John Hancock to meet its obligations under the policies. In addition to those financial statements of John Hancock and the Account included herein that have been audited by Ernst & Young LLP, this prospectus also contains unaudited financial statements of both John Hancock and the Account for a period subsequent to the audited financial statements. 44 LIST OF DIRECTORS AND EXECUTIVE OFFICERS OF JOHN HANCOCK The Directors and Executive Officers of John Hancock and their principal occupations during the past five years are as follows:
Directors Principal Occupations - --------- --------------------- David F. D'Alessandro ........ Chairman of the Board, President and Chief Executive Officer, John Hancock Foster L. Aborn .............. Director, formerly Vice Chairman of the Board and Chief Investment Officer, John Hancock Wayne A. Budd ................ Executive Vice President and General Counsel, John Hancock; formerly Group President, Bell Atlantic - New England (telecommunications) John M. Connors, Jr .......... Chairman and Chief Executive Officer and Director, Hill, Holliday, Connors, Cosmopoulos, Inc. (advertising). John M. DeCiccio ............. Executive Vice President and Chief Investment Officer, John Hancock Richard B. DeWolfe ........... Chairman and Chief Executive Officer of The DeWolfe Companies, Inc. (real estate) Robert E. Fast ............... Senior Partner, Hale and Dorr (law firm) Thomas P. Glynn .............. Chief Operating Officer, Partners HealthCare System, Inc. (health care) Michael C. Hawley ............ Retired Chairman and Chief Executive Officer, The Gillette Company (razors, etc.) Edward H. Linde .............. President and Chief Executive Officer, Boston Properties, Inc. (real estate) Judith A. McHale ............ President and Chief Operating Officer, Discovery Communications, Inc. (multimedia communications) R. Robert Popeo .............. Chairman, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo (law firm) Richard F. Syron ............. Chairman, President and Chief Executive Officer, Thermo Electron Corp. (scientific and industrial instruments) Robert J. Tarr, Jr. .......... Formerly Chairman, President and Chief Executive Officer, HomeRuns.com (online grocer)
Other Executive Officers - ------------------------ Thomas E. Moloney ............ Senior Executive Vice President and Chief Financial Officer Michael Bell ................. Senior Executive Vice President - Retail; Founder and Director of Monitor Company (management consulting) Derek Chilvers ............... Executive Vice President; Chairman and Chief Executive Officer of John Hancock International Holdings, Inc. Maureen R. Ford .............. Executive Vice President; Chairman and Chief Executive Officer of John Hancock Funds, Inc. James E. Collins ............. Vice President and Secretary Robert F. Walters ............ Executive Vice President and Chief Information Officer
The business address of all Directors and officers of John Hancock is John Hancock Place, Boston, Massachusetts 02117. 45 Unaudited Financial Statements John Hancock Life Insurance Company Period ended June 30, 2002 46 JOHN HANCOCK LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 DECEMBER 31, (UNAUDITED) 2001 ----------- ------------- (IN MILLIONS) ASSETS Investments Fixed maturities: Held-to-maturity--at amortized cost (fair value: June 30--$1,889.4; December 31--$1,908.2) ..................... $ 1,856.4 $ 1,923.5 Available-for-sale--at fair value (cost: June 30--$38,403.1; December 31--$35,778.0) ......................... 39,018.1 36,072.1 Equity securities: Available-for-sale--at fair value (cost: June 30--$343.9; December 31--$433.1) ............................... 403.3 562.3 Trading securities--at fair value (cost: June 30--$0.9; December 31--$2.7) ................................... 0.8 1.4 Mortgage loans on real estate ................................................ 9,904.2 9,667.0 Real estate .................................................................. 327.6 380.4 Policy loans ................................................................. 1,937.3 1,927.0 Short-term investments ....................................................... 130.2 78.6 Other invested assets ........................................................ 2,047.7 1,676.9 --------- --------- Total Investments .......................................................... 55,625.6 52,289.2 Cash and cash equivalents .................................................... 610.2 1,025.3 Accrued investment income .................................................... 813.3 745.9 Premiums and accounts receivable ............................................. 107.9 117.2 Deferred policy acquisition costs ............................................ 3,339.6 3,186.3 Reinsurance recoverable ...................................................... 2,767.2 2,464.3 Other assets ................................................................. 2,339.0 2,298.4 Separate account assets ...................................................... 17,555.7 18,998.1 --------- --------- Total Assets ............................................................... $83,158.5 $81,124.7 ========= =========
The accompanying notes are an integral part of these unaudited consolidated financial statements. 47 JOHN HANCOCK LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS (CONTINUED)
JUNE 30, 2002 DECEMBER 31, (UNAUDITED) 2001 ----------- ------------ (IN MILLIONS) LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities Future policy benefits............................................ $31,706.2 $29,715.0 Policyholders' funds.............................................. 21,701.0 20,530.3 Unearned revenue ................................................. 366.5 346.0 Unpaid claims and claim expense reserves ......................... 173.5 203.8 Dividends payable to policyholders ............................... 467.9 472.8 Short-term debt .................................................. 39.1 124.6 Long-term debt ................................................... 606.6 618.7 Income taxes ..................................................... 837.0 803.9 Other liabilities ................................................ 3,898.0 3,675.5 Separate account liabilities ..................................... 17,555.7 18,998.1 --------- --------- Total Liabilities .............................................. 77,351.5 75,488.7 Minority interest ................................................ 28.8 28.8 Commitments and contingencies--Note 4 Shareholder's Equity Common stock, $10,000 par value; 1,000 shares authorized ......... 10.0 10.0 Additional paid in capital ....................................... 4,763.2 4,763.4 Retained earnings ................................................ 730.6 608.2 Accumulated other comprehensive income ........................... 274.4 225.6 --------- --------- Total Shareholder's Equity ..................................... 5,778.2 5,607.2 --------- --------- Total Liabilities and Shareholder's Equity ..................... $83,158.5 $81,124.7 ========= =========
The accompanying notes are an integral part of these unaudited consolidated financial statements. 48 JOHN HANCOCK LIFE INSURANCE COMPANY UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- -------------------- 2002 2001 2002 2001 -------- -------- -------- -------- (IN MILLIONS) REVENUES Premiums ............................................................... $ 500.5 $ 472.2 $ 949.3 $ 926.6 Universal life and investment-type product charges ..................... 150.0 147.3 298.3 295.4 Net investment income .................................................. 888.8 913.9 1,776.5 1,831.9 Net realized investment and other gains (losses), net of related amortization of deferred policy acquisition costs, amounts credited to participating pension contractholders and the policyholder dividend obligation ($(12.6) and $(13.0) for the three months ended June 30, 2002 and 2001 and $(34.9) and $(9.6) for the six months ended June 30, 2002 and 2001, respectively) ......................................................... (125.4) (12.6) (211.5) (37.6) Investment management revenues, commissions and other fees ............. 135.5 150.7 271.4 297.4 Other revenue .......................................................... 48.9 56.5 119.5 58.6 -------- -------- -------- -------- Total revenues ........................................................ 1,598.3 1,728.0 3,203.5 3,372.3 BENEFITS AND EXPENSES Benefits to policyholders, excluding amounts related to net realized investment and other gains (losses) credited to participating pension contractholders and the policyholder dividend obligation ($(3.7) and $(12.2) for the three months ended June 30, 2002 and 2001 and $(10.5) and $(8.3) for the six months ended June 30, 2002 and 2001, respectively) ................ 964.3 952.4 1,868.5 1,905.9 Other operating costs and expenses ..................................... 299.8 326.7 624.5 610.6 Amortization of deferred policy acquisition costs, excluding amounts related to net realized investment and other gains (losses) ($(8.9) and $(0.8) for the three months ended June 30, 2002 and 2001 and $(24.4) and $(1.3) for the six months ended June 30, 2002 and 2001, respectively) ................................. 64.8 53.0 122.5 127.0 Dividends to policyholders ............................................. 143.5 139.5 281.8 270.6 -------- -------- -------- -------- Total benefits and expenses .......................................... 1,472.4 1,471.6 2,897.3 2,914.1 -------- -------- -------- -------- Income before income taxes and cumulative effect of accounting change ..................................................... 125.9 256.4 306.2 458.2 Income taxes ........................................................... 24.3 74.4 72.8 134.9 -------- -------- -------- -------- Income before cumulative effect of accounting change ................... 101.6 182.0 233.4 323.3 Cumulative effect of accounting change, net of tax--Note 1 ............. -- -- -- 7.2 -------- -------- -------- -------- Net income ............................................................. $ 101.6 $ 182.0 $ 233.4 $ 330.5 ======== ======== ======== ========
The accompanying notes are an integral part of these unaudited consolidated financial statements. 49 JOHN HANCOCK LIFE INSURANCE COMPANY UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME
ACCUMULATED ADDITIONAL OTHER TOTAL COMMON PAID IN RETAINED COMPREHENSIVE SHAREHOLDER'S OUTSTANDING STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY SHARES ------ ---------- -------- ------------- ------------- ------------- (IN MILLIONS, EXCEPT FOR OUTSTANDING SHARE AMOUNTS) BALANCE AT APRIL 1, 2001 ..................... $10.0 $4,764.2 $ 182.8 $316.5 $5,273.5 1,000 Demutualization transaction .................. (0.1) (0.1) Comprehensive income: Net income .................................. 182.0 182.0 Other comprehensive income, net of tax: Net unrealized gains (losses) ............... (5.0) (5.0) Net accumulated gains (losses) on cash flow hedges ................................ (17.4) (17.4) Foreign currency translation adjustment ..... (0.1) (0.1) -------- Comprehensive income ......................... 159.5 ----- -------- ------- ------ -------- ----- BALANCE AT JUNE 30, 2001 ..................... $10.0 $4,764.1 $ 364.8 $294.0 $5,432.9 1,000 ===== ======== ======= ====== ======== ===== BALANCE AT APRIL 1, 2002 ..................... $10.0 $4,763.3 $ 729.0 $131.6 $5,633.9 1,000 Demutualization transaction .................. (0.1) (0.1) Comprehensive income: Net income .................................. 101.6 101.6 Other comprehensive income, net of tax: Net unrealized gains (losses) ............... 113.4 113.4 Net accumulated gains (losses) on cash flow hedges ................................ 28.0 28.0 Foreign currency translation adjustment ...... 0.1 0.1 Minimum pension liability .................... 1.3 1.3 -------- Comprehensive income ......................... 244.4 Dividend paid to parent company .............. (100.0) (100.0) ----- -------- ------- ------ -------- ----- BALANCE AT JUNE 30, 2002 ..................... $10.0 $4,763.2 $ 730.6 $274.4 $5,778.2 1,000 ===== ======== ======= ====== ======== =====
The accompanying notes are an integral part of these unaudited consolidated financial statements. 50 JOHN HANCOCK LIFE INSURANCE COMPANY UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME (CONTINUED)
ACCUMULATED ADDITIONAL OTHER TOTAL COMMON PAID IN RETAINED COMPREHENSIVE SHAREHOLDER'S OUTSTANDING STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY SHARES ------ ---------- -------- ------------- ------------- ------------- (IN MILLIONS, EXCEPT FOR OUTSTANDING SHARE AMOUNTS) BALANCE AT JANUARY 1, 2001 ................... $10.0 $4,764.6 $ 284.3 $ 66.7 $5,125.6 1,000 Demutualization transactions ................. (0.5) (0.5) Comprehensive income: Net income .................................. 330.5 330.5 Other comprehensive income, net of tax: Net unrealized gains ........................ 19.0 19.0 Net accumulated gains (losses) on cash flow hedges ................................ (20.0) (20.0) Foreign currency translation adjustment 0.7 0.7 -------- Comprehensive income ......................... 330.2 Dividend paid to parent company .............. (250.0) (250.0) Change in accounting principle-- Note 1 ...................................... 227.6 227.6 ----- -------- ------- ------ -------- ----- BALANCE AT JUNE 30, 2001 ..................... $10.0 $4,764.1 $ 364.8 $294.0 $5,432.9 1,000 ===== ======== ======= ====== ======== ===== BALANCE AT JANUARY 1, 2002 ................... $10.0 $4,763.4 $ 608.2 $225.6 $5,607.2 1,000 Demutualization transactions (0.2) (0.2) Comprehensive income: Net income .................................. 233.4 233.4 Other comprehensive income, net of tax: Net unrealized gains ........................ 30.3 30.3 Net accumulated gains on cash flow hedges ... 15.8 15.8 Foreign currency translation adjustment...... 0.2 0.2 Minimum pension liability .................... 2.5 2.5 -------- Comprehensive income ......................... 282.2 Dividend paid to parent company .............. (111.0) (111.0) ----- -------- ------- ------ -------- ----- BALANCE AT JUNE 30, 2002 ..................... $10.0 $4,763.2 $ 730.6 $274.4 $5,778.2 1,000 ===== ======== ======= ====== ======== =====
The accompanying notes are an integral part of these unaudited consolidated financial statements. 51 JOHN HANCOCK LIFE INSURANCE COMPANY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, ------------------------ 2002 2001 ----------- ----------- (IN MILLIONS) Cash flows from operating activities: Net income ............................................................................. $ 233.4 $ 330.5 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of discount--fixed maturities ........................................... (41.3) (67.9) Net realized investment and other losses ............................................. 211.5 37.6 Change in deferred policy acquisition costs .......................................... (126.4) (79.6) Depreciation and amortization ........................................................ 27.0 36.4 Net cash flows from trading securities ............................................... 0.6 (0.1) Increase in accrued investment income ................................................ (67.4) (151.4) Premiums and accounts receivable ..................................................... 9.3 (194.1) Increase in other assets and other liabilities, net .................................. (98.1) (42.9) Increase in policy liabilities and accruals, net ..................................... 1,120.9 1,192.9 Increase in income taxes ............................................................. 18.3 167.6 ---------- ---------- Net cash provided by operating activities ........................................... 1,287.8 1,229.0 Cash flows from investing activities: Sales of: Fixed maturities available-for-sale ................................................... 1,936.1 10,228.9 Equity securities available-for-sale .................................................. 169.4 267.6 Real estate ........................................................................... 35.9 0.5 Short-term investments and other invested assets ...................................... 61.8 108.4 Maturities, prepayments and scheduled redemptions of: Fixed maturities held-to-maturity ..................................................... 84.5 116.6 Fixed maturities available-for-sale ................................................... 1,583.8 1,584.9 Short-term investments and other invested assets ...................................... 73.6 99.8 Mortgage loans on real estate ......................................................... 605.2 740.8 Purchases of: Fixed maturities held-to-maturity ..................................................... (11.8) (31.9) Fixed maturities available-for-sale ................................................... (6,526.1) (16,270.5) Equity securities available-for-sale .................................................. (81.5) (112.5) Real estate ........................................................................... (3.2) (2.5) Short-term investments and other invested assets ...................................... (341.7) (254.7) Mortgage loans on real estate issued .................................................. (816.7) (610.7) Cash paid related to acquisition of business .......................................... -- (41.0) Cash received on sale of subsidiary ................................................... -- 12.8 Other, net ............................................................................ (273.3) 138.0 ---------- ---------- Net cash used in investing activities ................................................ $ (3,504.0) $ (4,025.5) ========== ==========
The accompanying notes are an integral part of these unaudited consolidated financial statements. 52 JOHN HANCOCK LIFE INSURANCE COMPANY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SIX MONTHS ENDED JUNE 30, ------------------------ 2002 2001 ---------- ---------- (IN MILLIONS) Cash flows from financing activities: Dividends paid to parent .................................................. $ (111.0) $ (250.0) Universal life and investment-type contract deposits ...................... 4,906.3 5,251.6 Universal life and investment-type contract maturities and withdrawals .... (2,898.3) (4,101.2) Issuance of short-term debt ............................................... 9.3 58.6 Repayment of short-term debt .............................................. (91.6) -- Repayment of long-term debt ............................................... (13.6) (14.0) Net increase in commercial paper .......................................... -- (222.2) --------- --------- Net cash provided by financing activities ................................ 1,801.1 722.8 --------- --------- Net decrease in cash and cash equivalents ................................ (415.1) (2,073.7) Cash and cash equivalents at beginning of year ............................. 1,025.3 2,966.3 --------- --------- Cash and cash equivalents at end of period ................................. $ 610.2 $ 892.6 ========= =========
The accompanying notes are an integral part of these unaudited consolidated financial statements. 53 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business John Hancock Life Insurance Company, (the Company) is a diversified financial services organization that provides a broad range of insurance and investment products, and investment management and advisory services. The Company is a wholly owned subsidiary of John Hancock Financial Services, Inc. (JHFS). Basis of Presentation The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these unaudited consolidated financial statements contain all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the financial position and results of operations. Operating results for the three and six month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. These unaudited consolidated financial statements should be read in conjunction with the Company's annual audited financial statements as of December 31, 2001 included in the Company's Form 10-K for the year ended December 31, 2001 filed with the United States Securities and Exchange Commission (hereafter referred to as the Company's 2001 Form 10-K). All of the Company's United States Securities and Exchange Commission filings are available on the internet at www.sec.gov, under the name Hancock John Life. The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. Certain prior year amounts have been reclassified to conform to the current year presentation. During the fourth quarter of 2001, the Company transferred its remaining ownership interest of both John Hancock Canadian Holdings Limited and certain other international subsidiaries held by the Company, with a combined carrying value at December 31, 2001 of $300.1 million, to JHFS in the form of a dividend. The transfer has been accounted for as a transfer of entities under common control. As a result of the transfer, all prior period consolidated financial data has been restated to exclude the results of operations, financial position, and cash flows of these transferred foreign subsidiaries from the Company's financial statements. No gain or loss was recognized on the transaction. On April 2, 2001, a subsidiary of the Company, Signature Fruit Company, LLC (Signature Fruit), purchased certain assets and assumed certain liabilities out of bankruptcy proceedings of Tri Valley Growers, Inc., a cooperative association, for approximately $53.0 million. The acquisition was recorded under the purchase method of accounting and, accordingly, the operating results have been included in the Company's consolidated results of operations from the date of acquisition. The purchase price was allocated to the assets acquired and the liabilities assumed based on estimated fair values. The unaudited pro forma revenues, for the six month period ended June 30, 2001, assuming the transaction had taken place at the beginning of the year of acquisition, were approximately $3,425.6 million, a change of $53.3 million from reported balances. The unaudited pro forma net income for the six month period ended June 30, 2001 was approximately $329.3 million, a change of $(1.2) million from reported balances. The net losses related to the acquired operations included in the Company's results for the three and six month periods ended June 30, 2002 were $2.1 million and $1.2 million, respectively. 54 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Deferred Policy Acquisition Costs Costs that vary with, and are related primarily to, the production of new business have been deferred to the extent that they are deemed recoverable. Such costs include commissions, certain costs of policy issue and underwriting, and certain agency expenses. The Company tests the recoverability of its deferred policy acquisition costs quarterly with a model that uses data such as market performance, lapse rates and expense levels. As of June 30, 2002 the Company's deferred policy acquisition costs are deemed recoverable. For participating traditional life insurance policies, such costs are being amortized over the life of the contracts at a constant rate based on the present value of the estimated gross margin amounts expected to be realized over the lives of the contracts. Estimated gross margin amounts include anticipated premiums and investment results less claims and administrative expenses, changes in the net level premium reserve and expected annual policyholder dividends. For universal life insurance contracts and investment-type products, such costs are being amortized generally in proportion to the present value of expected gross profits arising principally from surrender charges and investment results, and mortality and expense margins. The effects on the amortization of deferred policy acquisition costs of revisions to estimated gross margins and profits are reflected in earnings in the period such estimated gross margins and profits are revised. For non-participating term life and long-term care insurance products, such costs are being amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves. Present values of expected gross profits or expected gross margins are discounted at the latest revised interest rate and is applied to the remaining benefit period. At June 30, 2002, the average discount rate is 8.4% for participating traditional life insurance products and 6.2% for universal life products, and the total amortization period life is 30 years for participating traditional life insurance products and universal life products. Amortization of deferred policy acquisition costs was $64.8 million and $53.0 million for the three month periods ended June 30, 2002 and 2001, respectively, and $122.5 million and $127.0 million for the six month periods ended June 30, 2002 and 2001, respectively. Amortization of deferred policy acquisition costs is allocated to: (1) net realized investment and other gains (losses) for those products in which such gains (losses) have a direct impact on the amortization of deferred policy acquisition costs; (2) unrealized investment gains and losses, net of tax, to provide for the effect on the deferred policy acquisition cost asset that would result from the realization of unrealized gains and losses on assets backing participating traditional life insurance and universal life and investment-type contracts; and (3) a separate component of benefits and expenses to reflect amortization related to the gross margins or profits, excluding realized gains and losses, relating to policies and contracts in force. Net realized investment and other gains (losses) related to certain products have a direct impact on the amortization of deferred policy acquisition costs as such gains and losses affect the amount and timing of profit emergence. Accordingly, to the extent that such amortization results from net realized investment and other gains (losses), management believes that presenting realized investment gains and losses net of related amortization of deferred policy acquisition costs provides information useful in evaluating the operating performance of the Company. This presentation may not be comparable to presentations made by other insurers. 55 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Severance During the three and six month periods ended June 30, 2002, the Company continued its ongoing Competitive Position Project. This project was initiated in the first quarter of 1999 to reduce costs and increase future operating efficiency by consolidating portions of the Company's operations and is expected to continue through 2003. The project consists primarily of reducing staff in the home office and terminating certain operations outside the home office. Since the inception of the project, approximately 1,100 employees have been terminated. As of June 30, 2002 and December 31, 2001, the liability for employee termination costs, included in other liabilities was $14.9 million and $18.0 million, respectively. Employee termination costs net of related curtailment pension and other post employment benefit related gains are included in other operating costs and expenses and were $1.8 million and $7.0 million for the three month period ended June 30, 2002 and 2001 and $6.8 million and $30.6 million for six month periods ended June 30, 2002 and 2001, respectively. Benefits paid since the inception of the project are $82.8 million. Cumulative Effect of Accounting Changes During the first quarter of 2001, the Company changed the method of accounting for the recognition of deferred gains and losses considered in the calculation of the annual expense for its employee pension plan under Statement of Financial Accounting Standards (SFAS) No. 87, "Employers' Accounting for Pensions," and for its postretirement health and welfare plans under SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Company changed the method of recognizing gains and losses from deferral within a 10% corridor and amortization of gains (losses) outside this corridor over the future working careers of the participants to a deferral within a 5% corridor and amortization of gains and losses outside this corridor over the future working careers of the participants. The new method is preferable because in the Company's situation, it produces results that respond more quickly to changes in the market value of the plan assets while providing some measure to mitigate the impact of extreme short term swings in those markets values. As a result, the Company recorded a credit of $18.6 million (net of tax of $9.9 million), related to its employee benefit pension plans, and a credit of $4.7 million (net of tax of $2.6 million), related to its postretirement health and welfare plans. The total credit recorded as a cumulative effect of an accounting change was $23.3 million (net of tax of $12.5 million). On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement 133". The adoption of SFAS No. 133, as amended, resulted in a charge to operations accounted for as a cumulative effect of accounting change of $16.1 million (net of tax benefit of $8.3 million) as of January 1, 2001. In addition, as of January 1, 2001, a $227.6 million (net of tax of $122.6 million) cumulative effect of accounting change was recorded in accumulated other comprehensive income for (1) the transition adjustment in the adoption of SFAS No. 133, as amended, an increase of $40.5 million (net of tax of $21.8 million), and (2) the reclassification of $12.1 billion in securities from the held-to-maturity category to the available-for-sale category, an increase of $187.1 million (net of tax of $100.8 million). 56 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Recent Accounting Pronouncements On January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires that goodwill and other intangible assets deemed to have indefinite lives no longer be amortized to earnings, but instead be reviewed at least annually for impairment. Intangible assets with definite lives will continue to be amortized over their useful lives. The Company has performed the required impairment tests of goodwill as of January 1, 2002 based on the guidance in SFAS No. 142. The Company evaluated the goodwill of each reporting unit for impairment using valuations of reporting units based on earnings and book value multiples and by reference to similar multiples of publicly traded peers. No goodwill impairments resulted from these required impairment tests. In December 2000, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 00-3, "Accounting by Insurance Enterprises for Demutualizations and Formations of Mutual Insurance Holding Companies and Certain Long-Duration Participating Contracts." The SOP details accounting requirements for the demutualization of mutual insurance companies. The SOP required demutualized insurance companies to standardize the presentation of demutualization expenses and presentation of the closed block in their financial statements. The adoption of SOP 00-3 also resulted in the recognition of a policyholder dividend obligation, which represents cumulative actual closed block earnings in excess of expected periodic amounts calculated at the date of the demutualization. Adoption of SOP 00-3 resulted in an increase of net income of $2.4 million and $2.5 million for the three month and six month periods ended June 30, 2001, respectively. Previously reported net income for the three month period ended June 30, 2001 included mortality and lapse experience that was better than expected at the date of demutualization, offset by lower than expected net investment income and lower net realized investment and other gains (losses). Previously reported net income for the six month period ended June 30, 2001 included better than expected net investment income and mortality and lapse experience, offset by lower net realized investment and other gains (losses). NOTE 2. RELATED PARTY TRANSACTIONS Certain directors of the Company are members or directors of other entities that periodically perform services for or have other transactions with Company. Such transactions are either subject to bidding procedures or are otherwise entered into on terms comparable to those that would be available to unrelated third parties and are not material to the Company's results of operations or financial condition. The Company provides JHFS, with personnel, property, and facilities in carrying out certain of its corporate functions. The Company annually determines a fee (the parent company service fee) for these services and facilities based on a number of criteria, which are periodically revised to reflect continuing changes in the Company's operations. The parent company service fee is included in other operating costs and expenses within the Company's income statements. The Company charged JHFS a service fee of $5.0 million and $11.1 million for the three month periods ended June 30, 2002 and 2001, respectively and $11.8 million and $16.7 million for the six month periods ended June 30, 2002 and 2001, respectively. As of June 30, 2002, JHFS was current in its payment to the Company, related to these services. 57 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) During the six month period ended June 30, 2002, the Company purchased $100.0 million of corporate owned life insurance from an affiliate and wholly owned subsidiary of JHFS, John Hancock Insurance Company of Vermont (JHIC of Vermont), to provide insurance coverage on key management employees. The death benefit on this COLI product would cover the cost of replacing these employees, including recruiting, training, and development. There were no such purchases for the three months ended June 30, 2001. The Company has reinsured certain portions of its long term care insurance and group pension businesses with John Hancock Reassurance Company, Ltd. of Bermuda (JHReCo), an affiliate and wholly owned subsidiary of JHFS. The Company entered into these reinsurance contracts in order to facilitate its capital management process. These reinsurance contracts are primarily written on a funds withheld basis where the related financial assets remain invested at the Company. As a result, the Company recorded a liability for coinsurance amounts withheld from JHReCo of $1,465.5 million and $1,158.9 million at June 30, 2002 and December 31, 2001, respectively, which are included with other liabilities in the consolidated balance sheets. Included in other reinsurance recoverables on the consolidated balance sheets are $1,851.5 million and $1,504.6 million at June 30, 2002 and December 31, 2001, respectively, due from JHReCo. Premiums ceded to JHReCo were $264.3 million and $96.8 million for the three month periods ended June 30, 2002 and 2001, respectively and $375.1 million and $554.8 million for the six month periods ended June 30, 2002 and 2001, respectively. In the first quarter of 2002, the Company began reinsuring certain portions of its group pension businesses with JHIC of Vermont. The Company entered into this reinsurance contract in order to facilitate its capital management process. This reinsurance contracts is primarily written on a funds withheld basis where the related financial assets remain invested at the Company. As a result, the Company recorded a liability for coinsurance amounts withheld from JHIC of Vermont of $0.5 million at June 30, 2002, which is included with other liabilities in the consolidated balance sheets. At June 30, 2002, the Company had not recorded any reinsurance recoverable from JHIC of Vermont. the reinsurance recoverable, from JHIC of Vermont, is typically recorded with other reinsurance recoverables on the consolidated balance sheet. Premiums ceded by the Company to JHIC of Vermont were $0.3 million and $0.4 million for the three and six month periods ended June 30, 2002, respectively. NOTE 3. SEGMENT INFORMATION The Company operates in the following five business segments: two segments primarily serve retail customers, two segments serve institutional customers and our fifth segment is the Corporate and Other Segment, which includes our international operations. Our retail segments are the Protection Segment and the Asset Gathering Segment. Our institutional segments are the Guaranteed and Structured Financial Products Segment (G&SFP) and the Investment Management Segment. For additional information about the Company's business segments please refer to the Company's 2001 Form 10-K. The following table summarizes selected financial information by segment for the periods and dates indicated and reconciles segment revenues and segment after-tax operating income to amounts reported in the unaudited consolidated statements of income. Included in the Protection Segment for all periods presented are the assets, liabilities, revenues and expenses of the closed block. For additional information on the closed block, see Note 5--Closed Block in the notes to the unaudited consolidated financial statements and the related footnote in the Company's 2001 Form 10-K. 58 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Amounts reported as segment adjustments in the tables below primarily relate to: (i) certain net realized investment and other gains (losses), net of related amortization adjustment for deferred policy acquisition costs, amounts credited to participating pension contractholder accounts and policyholder dividend obligation (the adjustment for net realized investment and other gains (losses) excludes gains and losses from mortgage securitizations because management views the related gains and losses as an integral part of the core business of those operations); (ii) benefits to policyholders and expenses incurred relating to the settlement of a class action lawsuit against the Company involving a dispute regarding disclosure of costs on various modes of life insurance policy premium payment; (iii) restructuring costs related to reducing staff in the home office and terminating certain operations outside the home office and (iv) cumulative effect of accounting changes.
ASSET INVESTMENT CORPORATE PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED ---------- ---------- ---------- ---------- --------- -------------- (IN MILLIONS) AS OF OR FOR THE THREE MONTHS ENDED JUNE 30, 2002 REVENUES: Revenues from external customers...... $ 473.5 $ 142.1 $ 18.0 $ 22.9 $ 180.2 $ 836.7 Net investment income................. 326.0 140.5 428.7 3.6 (10.0) 888.8 Inter-segment revenues................ -- -- -- 6.8 (6.8) -- --------- --------- --------- -------- -------- --------- Segment revenues...................... 799.5 282.6 446.7 33.3 163.4 1,725.5 Net realized investment and other gains (losses)....................... (28.3) (20.7) (86.7) 0.6 7.9 (127.2) --------- --------- --------- -------- -------- --------- Revenues.............................. $ 771.2 $ 261.9 $ 360.0 $ 33.9 $ 171.3 $ 1,598.3 ========= ========= ========= ======== ======== ========= NET INCOME: Segment after-tax operating income............................... $ 78.7 $ 40.6 $ 72.1 $ 7.4 $ 5.2 $ 204.0 Net realized investment and other gains (losses)....................... (18.4) (13.2) (55.9) 0.5 4.9 (82.1) Class action lawsuit.................. (18.7) -- -- -- (0.8) (19.5) Restructuring charges................. (0.9) (0.5) (0.2) (0.2) 1.0 (0.8) --------- --------- --------- -------- -------- --------- Net income............................ $ 40.7 $ 26.9 $ 16.0 $ 7.7 $ 10.3 $ 101.6 ========= ========= ========= ======== ======== ========= SUPPLEMENTAL INFORMATION: Equity in net income of investees accounted for by the equity method............................... $ 5.3 $ 2.4 $ 11.4 $ 0.2 $ 0.4 $ 19.7 Amortization of deferred policy acquisition costs, excluding amounts related to net realized investment and other gains...................... 35.3 28.8 0.7 -- -- 64.8 Segment assets........................ $29,743.1 $15,294.0 $33,463.7 $2,089.8 $2,567.9 $83,158.5
59 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ASSET INVESTMENT CORPORATE PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED ---------- ---------- ---------- ---------- --------- ------------- (IN MILLIONS) AS OF OR FOR THE THREE MONTHS ENDED JUNE 30, 2001 REVENUES: Revenues from external customers ............................................ $ 429.1 $ 172.1 $ 21.3 $ 20.6 $ 183.5 $ 826.6 Net investment income 309.0 122.8 464.4 3.7 14.0 913.9 Inter-segment revenues................................. -- -- -- 6.6 (6.6) -- --------- --------- --------- -------- -------- --------- Segment revenues ...................................... 738.1 294.9 485.7 30.9 190.9 1,740.5 Net realized investment and other gains (losses)........................................ (24.0) (18.1) (9.1) (0.1) 38.8 (12.5) --------- --------- --------- -------- -------- --------- Revenues .............................................. $ 714.1 $ 276.8 $ 476.6 $ 30.8 $ 229.7 $ 1,728.0 ========= ========= ========= ======== ======== ========= NET INCOME: Segment after-tax operating income................................................ $ 76.8 $ 37.4 $ 58.9 $ 4.6 $ 17.9 $ 195.6 Net realized investment and other gains (losses)........................................ (15.2) (11.2) (6.2) -- 23.3 (9.3) Restructuring charges ................................. (1.6) (1.9) (0.6) (0.1) (0.1) (4.3) --------- --------- --------- -------- -------- --------- Net income ............................................ $ 60.0 $ 24.3 $ 52.1 $ 4.5 $ 41.1 $ 182.0 ========= ========= ========= ======== ======== ========= SUPPLEMENTAL INFORMATION: Equity in net income of investees accounted for by the equity method ................... $ 2.5 $ 2.8 $ 4.7 $ 0.4 $ 15.7 $ 26.1 Amortization of deferred policy acquisition costs,excluding amounts related to net realized investment and other gains ........................... 37.9 13.6 0.9 -- 0.6 53.0 Segment assets ........................................ $27,809.8 $14,306.0 $32,160.1 $2,961.6 $2,860.5 $80,098.0
60 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ASSET INVESTMENT CORPORATE PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED ---------- ---------- ---------- ---------- --------- ------------- (IN MILLIONS) AS OF OR FOR THE SIX MONTHS ENDED JUNE 30, 2002 REVENUES: Revenues from external customers ............................................. $ 935.7 $ 287.4 $ 31.1 $ 39.8 $ 345.5 $ 1,639.5 Net investment income .................................. 646.4 271.0 848.2 7.6 3.3 1,776.5 Inter-segment revenues.................................. -- -- -- 16.5 (16.5) -- --------- --------- --------- -------- -------- --------- Segment revenues ....................................... 1,582.1 558.4 879.3 63.9 332.3 3,416.0 Net realized investment and other gains (losses)......................................... (57.2) (44.4) (108.2) 0.6 (3.3) (212.5) --------- --------- --------- -------- -------- --------- Revenues ............................................... $ 1,524.9 $ 514.0 $ 771.1 $ 64.5 $ 329.0 $ 3,203.5 ========= ========= ========= ======== ======== ========= NET INCOME: Segment after-tax operating income................................................. $ 149.5 80.6 136.2 12.3 14.7 393.3 Net realized investment and other gains (losses)......................................... (36.9) (28.0) (69.4) 0.5 (2.2) (136.0) Class action lawsuit ................................... (18.7) -- -- -- (0.8) (19.5) Restructuring charges .................................. (4.1) (1.9) (0.5) (0.2) 2.3 (4.4) --------- --------- --------- -------- -------- --------- Net income ............................................. $ 89.8 $ 50.7 $ 66.3 $ 12.6 $ 14.0 $ 233.4 ========= ========= ========= ======== ======== ========= SUPPLEMENTAL INFORMATION: Equity in net income of investees accounted for by the equity method................................................. $ 9.5 $ 5.1 $ 18.8 $ 0.1 $ 11.4 $ 44.9 Amortization of deferred policy acquisition costs, excluding amounts related to net realized investment and other gains (losses)............................................... 71.1 50.4 1.1 -- (0.1) 122.5 Segment assets ......................................... $29,743.1 $15,294.0 $33,463.7 $2,089.8 $2,567.9 $83,185.5
61 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ASSET INVESTMENT CORPORATE PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED ---------- ---------- ---------- ---------- --------- ------------ (IN MILLIONS) AS OF OR FOR THE SIX MONTHS ENDED JUNE 30, 2001 REVENUES: Revenues from external customers ............................. $ 846.0 $ 341.2 $ 57.2 $ 42.6 $ 293.5 $ 1,580.5 Net investment income .................. 622.3 242.6 931.2 9.2 26.6 1,831.9 Inter-segment revenues ................. -- -- -- 14.7 (14.7) -- ----------- ----------- ----------- ---------- ---------- ----------- Segment revenues ....................... 1,468.3 583.8 988.4 66.5 305.4 3,412.4 Net realized investment and other gains (losses) ........................ (33.9) (11.2) (23.5) (0.1) 28.6 (40.1) ----------- ----------- ----------- ---------- ---------- ----------- Revenues ............................... $ 1,434.4 $ 572.6 $ 964.9 $ 66.4 $ 334.0 $ 3,372.3 =========== =========== =========== ========== ========== =========== NET INCOME: Segment after-tax operatiing income .... $ 145.1 $ 68.9 $ 117.3 $ 10.0 $ 25.7 $ 367.0 Net realized investment and other gains (losses) ........................ (20.7) (6.6) (14.4) (0.1) 17.4 (24.4) Restructuring charges .................. (2.8) (15.1) (0.7) (0.5) (0.2) (19.3) Cumulative effect of accounting changes, net of tax ................... 11.7 (0.5) (1.2) (0.2) (2.6) 7.2 ----------- ----------- ----------- ---------- ---------- ----------- Net income ............................. $ 133.3 $ 46.7 $ 101.0 $ 9.2 $ 40.3 $ 330.5 =========== =========== =========== ========== ========== =========== SUPPLEMENTAL INFORMATION: Equity in net income of investees accounted for by the equity method .... $ 4.8 $ 3.9 $ 8.1 $ 0.4 $ 28.3 $ 45.5 Amortization ofdeferred policy acquisition costs,excluding amounts related to netrealized investment and other gains ....................... 88.4 37.0 1.5 -- 0.1 127.0 Segment assets ......................... $ 27,809.8 $ 14,306.0 $ 32,160.1 $ 2,961.6 $ 2,860.5 $ 80,098.0
62 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4. CONTINGENCIES AND OTHER MATTERS Class Action During 1997, the Company entered into a court-approved settlement relating to a class action lawsuit involving certain individual life insurance policies sold from 1979 through 1996. In entering into the settlement, the Company specifically denied any wrongdoing. The total reserve held in connection with the settlement to provide for relief to class members and for legal and administrative costs associated with the settlement amounted to $25.4 million and $52.7 million at June 30, 2002 and December 31, 2001, respectively. There were no costs related to the settlement incurred for the three and six months ended June 30, 2002 or 2001. An adjustment of $19.5 million, after-tax, was recorded to the settlement reserve in the fourth quarter of 2001. The estimated reserve is based on a number of factors, including the estimated cost per claim and the estimated costs to administer the claims. During 1996, management determined that it was probable that a settlement would occur and that a minimum loss amount could be reasonably estimated. Accordingly, the Company recorded its best estimate based on the information available at the time. The terms of the settlement agreement were negotiated throughout 1997 and approved by the court on December 31, 1997. In accordance with the terms of the settlement agreement, the Company contacted class members during 1998 to determine the actual type of relief to be sought by class members. The majority of the responses from class members were received by the fourth quarter of 1998. The type of relief sought by class members differed from the Company's initial estimates. In 1999, the Company updated its estimate of the cost of claims subject to alternative dispute resolution (ADR) relief and revised its reserve estimate accordingly. The reserve estimate was further evaluated quarterly, and was adjusted in the fourth quarter of 2001. The adjustment to the reserve in the fourth quarter of 2001 was the result of the Company being able to better estimate the cost of settling the remaining claims, which on average tend to be larger, more complicated claims. The better estimate comes from experience with actual settlements on similar claims. Administration of the ADR component of the settlement continues to date. Although some uncertainty remains as to the cost of claims in the final phase (i.e., arbitration) of the ADR process, it is expected that the final cost of the settlement will not differ materially from the amounts presently provided for by the Company. Harris Trust Since 1983, the Company has been involved in complex litigation known as Harris Trust and Savings Bank, as Trustee of Sperry Master Retirement Trust No. 2 v. John Hancock Mutual Life Insurance Company (S.D.N.Y. Civ. 83-5491). After successive appeals to the Second Circuit and to the U.S. Supreme Court, the case was remanded to the District Court and tried by a Federal District Court judge in 1997. The judge issued an opinion in November 2000. In that opinion the Court found against the Company and awarded the Trust approximately $13.8 million in relation to this claim together with unspecified additional pre-judgment interest on this amount from October 1988. The Court also found against the Company on issues of liability valuation and ERISA law. Damages in the amount of approximately $5.7 million, together with unspecified pre-judgment interest from December 1996, were awarded on these issues. As part of the relief, the judge ordered the removal of Hancock as a fiduciary to the plan. On April 11, 2001, the Court entered a judgment against the Company for approximately $84.9 million, which includes damages to the plaintiff, pre-judgment interest, attorney's fees and other costs. The Company believes that the underlying case was incorrectly decided and there are promising grounds for challenging the District Court's decision. Therefore, on May 14, 2001 the Company filed an appeal and believes that it is probable that the Appeals Court will reverse the lower court's decision. On April 29, 2002, the Appeals Court heard oral arguments from the parties in the case. Notwithstanding what the Company believes to be the merits of its position in this case, if unsuccessful, its ultimate liability, including fees, costs and interest could have a material adverse impact on net income. However, the Company does not believe that any such liability would be material in relation to its financial position or liquidity. 63 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Reinsurance Recoverable On February 28, 1997, the Company sold a major portion of its group insurance business to UNICARE Life & Health Insurance Company (UNICARE), a wholly owned subsidiary of WellPoint Health Networks, Inc. The business sold included the Company's group accident and health business and related group life business and Cost Care, Inc., Hancock Association Services Group and Tri-State, Inc., all of which were indirect wholly owned subsidiaries of the Company. The Company retained its long-term care operations. The insurance business sold was transferred to UNICARE through a 100% coinsurance agreement. The Company remains liable to its policyholders to the extent that UNICARE does not meet its contractual obligations under the coinsurance agreement. Through the Company's group health insurance operations, the Company entered into a number of reinsurance arrangements in respect of personal accident insurance and the occupational accident component of workers compensation insurance, a portion of which was originated through a pool managed by Unicover Managers, Inc. Under these arrangements, the Company both assumed risks as a reinsurer, and also passed 95% of these risks on to other companies. This business had originally been reinsured by a number of different companies, and has become the subject of widespread disputes. The disputes concern the placement of the business with reinsurers and recovery of the reinsurance. The Company is engaged in disputes, including a number of legal proceedings, in respect of this business. The risk to the Company is that other companies that reinsured the business from the Company may seek to avoid their reinsurance obligations. However, the Company believes that it has a reasonable legal position in this matter. During the fourth quarter of 1999 and early 2000, the Company received additional information about its exposure to losses under the various reinsurance programs. As a result of this additional information and in connection with global settlement discussions initiated in late 1999 with other parties involved in the reinsurance programs, during the fourth quarter of 1999 the Company recognized a charge for uncollectible reinsurance of $133.7 million, after tax, as its best estimate of its remaining loss exposure. The Company believes that any exposure to loss from this issue, in addition to amounts already provided for as of June 30, 2002, would not be material. Reinsurance ceded contracts do not relieve the Company from its obligations to policyholders. The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet its obligations for reinsurance ceded to it under the reinsurance agreements. Failure of the reinsurers to honor their obligations could result in losses to the Company; consequently, estimates are established for amounts deemed or estimated to be uncollectible. To minimize its exposure to significant losses from reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from similar characteristics of the reinsurers. Other Matters On July 19, 2002, the Company announced it had entered into a class action lawsuit settlement agreement involving policyholders who paid premiums on a monthly, quarterly or semiannual basis, rather than annually. The class action lawsuit, known as the "Modal Premium" action, was filed in a New Mexico state court and is applicable to all United States policyholders in the class. As a result of the settlement, the Company has established a $30.0 million reserve as of June 30, 2002 to provide for relief to class members and for legal and administrative costs associated with the settlement. In entering into the settlement, the Company specifically denied any wrongdoing. Although some uncertainty remains as to the entire cost of claims, it is expected that the final cost of the settlement will not differ materially from the amounts presently provided for by the Company. In the normal course of its business operations, the Company is involved with litigation from time to time with claimants, beneficiaries and others, and a number of litigation matters were pending as of June 30, 2002. It is the opinion of management, after consultation with counsel, that the ultimate liability with respect to these claims, if any, will not materially affect the financial position or results of operations of the Company. 64 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5. CLOSED BLOCK In connection with the Company's plan of reorganization for its demutualization and initial public offering, the Company created a closed block for the benefit of policies included therein. Additional information regarding the creation of the closed block and relevant accounting issues is contained in the notes to consolidated financial statements of the Company's December 31, 2001 Form 10-K. The following table sets forth certain summarized financial information relating to the closed block as of the dates indicated.
JUNE 30, 2002 DECEMBER 31, (UNAUDITED) 2001 ----------- -------------- (IN MILLIONS) LIABILITIES Future policy benefits .......................... $10,328.7 $10,198.7 Policyholder dividend obligation ................ 229.0 251.2 Policyholders' funds ............................ 1,483.8 1,460.9 Policyholder dividends payable .................. 440.0 433.4 Other closed block liabilities .................. 103.6 53.7 --------- --------- Total closed block liabilities ................ 12,585.1 12,397.9 ========= ========= ASSETS Investments Fixed maturities: Held-to-maturity--at amortized cost (fair value: June 30--$100.1; December 31--$100.7) ................................... 95.2 103.3 Available-for-sale--at fair value (cost: June 30--$5,470.1; December 31--$5,204.0) ........................ 5,622.8 5,320.7 Equity securities: Available-for-sale--at fair value (cost: June 30--$8.5; December 31--$8.8) ...... 11.7 13.4 Mortgage loans on real estate ................... 1,839.0 1,837.0 Policy loans .................................... 1,551.5 1,551.9 Other invested assets ........................... 133.4 83.1 --------- --------- Total investments ............................. 9,253.6 8,909.4 Cash and cash equivalents ....................... 53.5 192.1 Accrued investment income ....................... 163.2 158.9 Other closed block assets ....................... 328.7 297.5 --------- --------- Total closed block assets ..................... 9,799.0 9,557.9 ========= ========= Excess of reported closed block liabilities over asset designated to the closed block ........... 2,786.1 2,840.0 --------- --------- Portion of above representing other comprehensive income: Unrealized appreciation (depreciation), net of tax of $52.9 million and $43.3 million at June 30 and December 31, respectively .............. 98.1 80.1 Allocated to the policyholder dividend obligation, net of tax of $57.5 million and $50.8 million at June 30 and December 31, respectively .................................. (106.9) (94.4) --------- --------- Total ......................................... (8.8) (14.3) --------- --------- Maximum future earnings to be recognized from closed block assets and liabilities ............ $ 2,777.3 $ 2,825.7 ========= =========
65 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2002 DECEMBER 31, (UNAUDITED) 2001 ----------- -------------- (IN MILLIONS) Change in the policyholder dividend obligation: Balance at beginning of period .................. $251.2 $ 77.0 Impact on net income before income taxes ....... (41.4) 42.5 Unrealized investment gains (losses) ........... 19.2 67.1 Cumulative effect of change in accounting principle (1) ................................... -- 64.6 ------ ------ Balance at end of period ........................ $229.0 $251.2 ====== ======
- --------- (1) The cumulative effect of change in accounting principle represents the impact of transferring fixed maturities from held-to-maturity to available-for-sale as part of the adoption of SFAS No. 133 effective January 1, 2001. 66 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table sets forth certain summarized financial information relating to the closed block for the period indicated:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- ------------------ 2002 2001 2002 2001 --------- --------- -------- -------- (IN MILLIONS) REVENUES Premiums ............................ $231.6 $211.7 $468.0 $445.3 Net investment income 166.7 163.4 333.2 332.4 Net realized investment and other gains (losses), net of amounts credited to the policyholder dividend obligation of $3.8 million and $(10.8) million for the three months ended June 30, 2002 and 2001, respectively and $(2.6) million and $(7.8) million for the six months ended June 30, 2002 and 2001, respectively ........ (1.5) (1.5) (2.7) (2.9) Other closed block revenues ......... -- -- -- 0.3 ------ ------ ------ ------ Total closed block revenues ........ 396.8 373.6 798.5 775.1 BENEFITS AND EXPENSES Benefits to policyholders ........... 251.1 215.1 509.5 468.7 Change in the policyholder dividend obligation ................ (17.7) 3.3 (35.7) 5.0 Other closed block operating costs and expenses ....................... (0.7) (1.6) (2.2) (3.9) Dividends to policyholders .......... 127.5 118.3 253.5 228.1 ------ ------ ------ ------ Total benefits and expenses ........ 360.2 335.1 725.1 697.9 ------ ------ ------ ------ Closed block revenues, net of closed block benefits and expenses, before income taxes and cumulative effect of accounting change ............................. 36.6 38.5 73.4 77.2 Income taxes, net of amounts credited to the policyholder dividend obligation of $(0.1) million and $(0.1) million for the three months ended June 30, 2002 and 2001, respectively and $(3.1) million and $(1.2) million for the six months ended June 30, 2002 and 2001, respectively ........ 12.5 13.1 25.0 26.2 ------ ------ ------ ------ Closed block revenues, net of closed block benefits and expenses, income taxes before the cumulative effect of accounting change ............................. 24.1 25.4 48.4 51.0 Cumulative effect of accounting change, net of tax, and net of amounts credited to policyholder dividend obligation of $(1.4) million for the six months ended June 30, 2001 (1) .................. -- -- -- -- ------ ------ ------ ------ Closed block revenues, net of closed block benefits and expenses, income taxes and the cumulative effect of accounting change ............................. $ 24.1 $ 25.4 $ 48.4 $ 51.0 ====== ====== ====== ======
- --------- (1) The cumulative effect of change in accounting principle represents the adoption of SFAS No. 133, effective January 1, 2001. 67 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6. GOODWILL AND VALUE OF BUSINESS ACQUIRED The Company recognizes two purchased intangible assets, goodwill and value of business acquired. The excess of the cost over the fair value of identifiable assets acquired in business combinations is recorded as goodwill. The present value of estimated future profits of insurance policies in force related to businesses acquired is recorded as the value of business acquired (VOBA). The following tables set forth certain summarized financial information relating to goodwill and VOBA as of the dates and periods indicated.
GROSS ACCUMULATED NET CARRYING AMORTIZATION AND CARRYING AMOUNT OTHER CHANGES AMOUNT -------- ---------------- ---------- JUNE 30, 2002 (IN MILLIONS) Unamortizable intangible assets: Goodwill .......................................................... $166.7 $(58.1) $108.6 Amortizable intangible assets: VOBA .............................................................. $ 97.4 $(22.5) $ 74.9 JUNE 30, 2001 Unamortizable intangible assets: Goodwill ........................................................ $174.1 $(52.5) $121.6 Amortizable intangible assets: VOBA .............................................................. $ 97.4 $(19.6) $ 77.8
THREE MONTHS ENDED SIX MONTHS ENDED AMORTIZATION EXPENSE JUNE 30, JUNE 30, ------------------ ------------------ 2002 2001 2002 2001 -------- -------- -------- -------- Goodwill, net of tax of $0.9 million and $1.8 million for the three and six month periods ended June 30, 2001, respectively ...................................................... -- $1.9 -- $3.9 VOBA net of tax of $0.2 million and $0.2 million for the three month periods ended June 30, 2002 and 2001, respectively, and $0.5 million and $0.4 million for the six month periods ended June 30, 2002 and 2001, respectively ........................ $0.5 $0.5 $0.9 $0.7
68 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ESTIMATED FUTURE AMORTIZATION EXPENSE FOR THE YEARS ENDED TAX EFFECT NET EXPENSE DECEMBER 31, ---------- ----------- (IN MILLIONS) 2002 .................................................... $1.1 $2.0 2003 .................................................... $1.4 $2.6 2004 .................................................... $1.5 $2.7 2005 .................................................... $1.6 $2.9 2006 .................................................... $1.6 $3.0 2007 .................................................... $1.6 $2.9
The changes in the carrying value of goodwill, presented for each business segment and in total, for the periods indicated, are as follows:
ASSET INVESTMENT CORPORATE PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED ---------- --------- ----- ---------- --------- ------------ (IN MILLIONS) Goodwill balance at April 1, 2002................ $66.2 $42.1 -- $ 0.4 -- $108.7 Changes to goodwill: Adjustment (1).................................. (0.1) -- -- -- -- (0.1) ----- ----- ---- ----- ---- ------ Goodwill balance at June 30, 2002................ $66.1 $42.1 -- $ 0.4 -- $108.6 ===== ===== ==== ===== ==== ======
- --------- (1) Purchase price negotiations with Fortis, Inc. were concluded during the first quarter of 2002, resulting in an adjustment to the goodwill related to the Company's 1999 acquisition of Fortis' long term care insurance business. Legal fees associated with these negotiations were finalized in the second quarter of 2002, resulting in a further adjustment to goodwill of $(0.1) million.
ASSET INVESTMENT CORPORATE PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED ---------- --------- ----- ---------- --------- ------------ (IN MILLIONS) Goodwill balance at January 1, 2002 ............. $73.5 $42.1 -- $0.4 -- $116.0 Changes to goodwill: Adjustment (1) ................................. (7.4) -- -- -- -- (7.4) ----- ----- ---- ---- ---- ------ Goodwill balance at June 30, 2002 ............... $66.1 $42.1 -- $0.4 -- $108.6 ===== ===== ==== ==== ==== ======
- --------- (1) Purchase price negotiations with Fortis, Inc. were concluded during the first quarter of 2002, resulting in an adjustment of $(7.3) million to the goodwill related to the Company's 1999 acquisition of Fortis' long term care insurance business. Legal fees associated with these negotiations were finalized in the second quarter of 2002, resulting in a further adjustment to goodwill of $(0.1) million 69 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The changes in the carrying value of VOBA, presented for each business segment and in total, for the periods indicated, are as follows:
ASSET INVESTMENT CORPORATE PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED ---------- --------- ----- ---------- --------- ------------ (IN MILLIONS) VOBA balance at April 1, 2002 ................... $76.9 -- -- -- -- $76.9 Amortization and other changes: Amortization ................................... (0.7) -- -- -- -- (0.7) Adjustment to unrealized gains on securities available-for-sale ............................ (1.3) -- -- -- -- (1.3) ----- ---- ---- ---- ---- ----- VOBA balance at June 30, 2002 ................... $74.9 -- -- -- -- $74.9 ===== ==== ==== ==== ==== =====
ASSET INVESTMENT CORPORATE PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED ---------- --------- ----- ---------- --------- ------------ (IN MILLIONS) VOBA balance at January 1, 2002 ................. $76.2 -- -- -- -- $76.2 Amortization and other changes: Amortization ................................... (1.4) -- -- -- -- (1.4) Adjustment to unrealized gains on securities available-for-sale. ........................... 0.1 -- -- -- -- 0.1 ----- ---- ---- ---- ---- ----- VOBA balance at June 30, 2002 ................... $74.9 -- -- -- -- $74.9 ===== ==== ==== ==== ==== =====
The net income of the Company, if the Company had not amortized goodwill prior to the adoption of SFAS No. 142, would have been as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ------------------ 2002 2001 2002 2001 -------- -------- -------- -------- (IN MILLIONS) Net income: As reported ............................... $101.6 $182.0 $233.4 $330.5 Goodwill amortization, net of tax ......... -- 1.9 -- 3.9 ------ ------ ------ ------ Pro forma (unaudited) ..................... $101.6 $183.9 $233.4 $334.4 ====== ====== ====== ======
70 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7. SUBSEQUENT EVENTS On August 11, 2002, US Airways and certain of its subsidiaries filed petitions for reorganization under Chapter 11 of the Bankruptcy Code. John Hancock's fixed maturities securities include notes and collateralized structured financings backed by US Airways or its subsidiaries, and in some cases guaranteed by a guarantor rated AA or better. As of June 30, 2002, these securities were recorded with a carrying value of $287.9 million, net unrealized losses of $14.7 million, and accrued investment income of $6.4 million. A further breakdown is shown below: . $139.9 million, with $3.6 million in accrued interest, are senior tranche Enhanced Equipment Trust Certificate (EETC) bonds guaranteed by MBIA, GE, or SNECMA, all of which are rated AA or better. . $40.1 million, with $1.6 million in accrued interest, are senior tranche EETC bonds without a guarantee. These bonds had an original loan-to-value of 40-50% and have a liquidity facility to pay interest for up to 18 months. . $85.9 million, with $1.2 million in accrued interest, are Equipment Trust Certificate (ETC) bonds that originally had a loan-to-value of 75-80%. . $22.0 million, with no accrued interest, is equity in leveraged leases of aircraft. With the bankruptcy filing, US Airways has the right to affirm or reject the leases on the aircraft that underlie these investments. For tranches other than the guaranteed EETCs, to the extent that (1) US Airways rejects the leases and (2) the aircraft are worth less than our loan balance, we will suffer a loss. We do not yet know if US Airways intends to reject the leases underlying our bonds. 71 REPORT OF INDEPENDENT AUDITORS The Board of Directors John Hancock Life Insurance Company We have audited the accompanying consolidated balance sheets of John Hancock Life Insurance Company as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in shareholder's equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedules. These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of John Hancock Life Insurance Company at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 1 to the consolidated financial statements, in 2001 the Company changed its method of accounting for its employee pension plan and postretirement health and welfare plans, derivatives and certain long-duration participating contracts. /s/ ERNST & YOUNG LLP Boston, Massachusetts March 1, 2002 72 AUDITED FINANCIAL STATEMENTS FOR JOHN HANCOCK LIFE INSURANCE COMPANY 73 JOHN HANCOCK LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS
DECEMBER 31 2001 2000 --------- ----------- (IN MILLIONS) ASSETS Investments - Notes 3 and 4 Fixed maturities: Held-to-maturity-at amortized cost (fair value: 2001-$1,908.2; 2000-$13,965.8)........... $ 1,923.5 $14,145.1 Available-for-sale-at fair value (cost: 2001-$35,778.0; 2000-$15,822.4)................ 36,072.1 15,925.4 Equity securities: Available-for-sale-at fair value (cost: 2001-$433.1; 2000-$587.6)...................... 562.3 846.1 Trading securities-at fair value (cost: 2001-$2.7; 2000-$1.1).......................... 1.4 1.6 Mortgage loans on real estate.......................... 9,667.0 9,659.4 Real estate............................................ 380.4 447.9 Policy loans........................................... 1,927.0 1,894.9 Short-term investments................................. 78.6 174.9 Other invested assets.................................. 1,676.9 1,335.2 --------- ---------- Total Investments.................................... 52,289.2 44,430.5 Cash and cash equivalents.............................. 1,025.3 2,966.3 Accrued investment income.............................. 745.9 699.4 Premiums and accounts receivable....................... 117.2 129.0 Deferred policy acquisition costs...................... 3,186.3 3,027.1 Reinsurance recoverable - Note 9....................... 2,464.3 1,905.9 Other assets........................................... 2,298.4 1,946.8 Separate accounts assets............................... 18,998.1 23,307.0 --------- ---------- Total Assets......................................... $81,124.7 $78,412.0 ========= ==========
The accompanying notes are an integral part of these consolidated financial statements. 74 JOHN HANCOCK LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31 -------------------- 2001 2000 --------- ----------- (IN MILLIONS) LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities Future policy benefits................................ $29,715.0 $26,726.8 Policyholders' funds.................................. 20,530.3 18,543.1 Unearned revenue...................................... 346.0 323.1 Unpaid claims and claim expense reserves.............. 203.8 256.4 Dividends payable to policyholders.................... 472.8 453.7 Short-term debt - Note 7.............................. 124.6 245.3 Long-term debt - Note 7............................... 618.7 534.0 Income taxes - Note 5................................. 803.9 526.3 Other liabilities..................................... 3,675.5 2,370.7 Separate accounts liabilities......................... 18,998.1 23,307.0 --------- --------- Total Liabilities................................... 75,488.7 73,286.4 Minority interest - Note 8............................ 28.8 -- Commitments and contingencies - Note 11 Shareholder's Equity - Note 12 Common stock, $10,000 par value; 1,000 shares authorized and outstanding...................................... 10.0 10.0 Additional paid in capital............................ 4,763.4 4,764.6 Retained earnings..................................... 608.2 284.3 Accumulated other comprehensive income (loss)......... 225.6 66.7 --------- --------- Total Shareholder's Equity.......................... 5,607.2 5,125.6 --------- --------- Total Liabilities and Shareholder's Equity.......... $81,124.7 $78,412.0 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 75 JOHN HANCOCK LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31 2001 2000 1999 --------- -------- ----------- (IN MILLIONS) REVENUES Premiums ................................................ $2,351.9 $2,390.7 $2,021.4 Universal life and investment-type product charges ................................................ 600.8 591.4 560.9 Net investment income - Note 3 .......................... 3,646.2 3,563.9 3,338.9 Net realized investment and other gains (losses), net of relatedamortization of deferred policy acquisition costs, amounts credited to participating pension contractholders and the policyholder dividend obligation ($(4.1), $11.6 and $85.0, respectively) - Notes 1, 3 and 13 ........... (245.8) 78.3 169.6 Investment management revenues, commissions and Other fees ............................................. 585.1 746.5 672.5 Other revenue (expense) ................................. 185.8 3.4 (1.3) -------- -------- -------- Total revenues ......................................... 7,124.0 7,374.2 6,762.0 BENEFITS AND EXPENSES Benefits to policyholders, excluding amounts related to net realized investment and other gains (losses) credited to participating pension contractholders and the policyholder dividend obligation ($25.3, $21.0, and $35.3, respectively) - Notes 1, 3 and 13 .................................... 4,328.1 4,247.4 4,585.4 Other operating costs and expenses ...................... 1,227.8 1,288.8 1,251.0 Amortization of deferred policy acquisition costs, excluding amounts related to net realized investment and other gains (losses)($(29.4) $(9.4) and $49.7, respectively) - Notes 1, 3 and 13 ........... 249.0 187.1 125.0 Dividends to policyholders .............................. 551.7 539.2 487.3 Demutualization expenses ................................ -- 10.6 96.2 -------- -------- -------- Total benefits and expenses ........................... 6,356.6 6,273.1 6,544.9 -------- -------- -------- Income before income taxes and cumulative effect of accounting changes ........................... 767.4 1,101.1 217.1 Income taxes - Note 5 ................................... 200.7 308.9 81.5 -------- -------- -------- Income before cumulative effect of accounting changes ................................................ 566.7 792.2 135.6 Cumulative effect of accounting changes, net of income tax - Note 1 ................................. 7.2 -- (9.7) -------- -------- -------- Net income .............................................. $ 573.9 $ 792.2 $ 125.9 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 76 JOHN HANCOCK LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME
ACCUMULATED ADDITIONAL OTHER TOTAL COMMON PAID IN RETAINED COMPREHENSIVE SHAREHOLDER'S OUTSTANDING STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY SHARES ------- ---------- ---------- ------------- ------------- ------------ (IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) BALANCE AT JANUARY 1, 1999 .................. -- -- $ 4,226.6 $ 281.5 $4,508.1 -- Comprehensive income: Net income ................................. 125.9 125.9 Other comprehensive income, net of tax: Net unrealized investment gains (losses) .................................. (251.4) (251.4) Foreign currency translation Adjustment ................................ (1.8) (1.8) Minimum pension liability .................. (22.9) (22.9) -------- Comprehensive income ........................ (150.2) ----- -------- --------- ------- -------- ----- BALANCE AT DECEMBER 31, 1999 ................ -- -- 4,352.5 5.4 4,357.9 -- ===== ======== ========= ======= ======== ===== Demutualization transaction ................. 10.0 $4,722.1 (4,394.4) 337.7 1,000 Comprehensive income: Net income before demutualization .......... 41.9 41.9 Net income after demutualization ........... 750.3 750.3 --------- -------- Net income ................................ 792.2 792.2 Other comprehensive income, Net of tax: Net unrealized investment gains (losses) .................................. 54.6 54.6 Foreign currency translation Adjustment ................................ (1.5) (1.5) Minimum pension liability .................. 8.2 8.2 -------- Comprehensive income ........................ 853.5 Capital contributions from parent company .................................... 42.5 42.5 Dividend paid to parent company ............. (466.0) (466.0) ----- -------- --------- ------- -------- ----- BALANCE AT DECEMBER 31, 2000 ................ 10.0 4,764.6 284.3 66.7 5,125.6 1,000 ===== ======== ========= ======= ======== =====
The accompanying notes are an integral part of these consolidated financial statements. 77 JOHN HANCOCK LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME (CONTINUED)
ACCUMULATED ADDITIONAL OTHER TOTAL COMMON PAID IN RETAINED COMPREHENSIVE SHAREHOLDER'S OUTSTANDING STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY SHARES -------- --------- -------- ------------- ------------- ------------- (IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) Balance at December 31, 2000 ................ 10.0 4,764.6 284.3 66.7 5,125.6 1,000 Demutualization transactions ................ (1.2) (1.2) Comprehensive income: Net income ................................. 573.9 573.9 Other comprehensive income, Net of tax: Net unrealized investment gains (losses) .................................. (81.1) (81.1) Foreign currency translation Adjustment ................................ 1.0 1.0 Minimum pension liability .................. 15.2 15.2 Cash flow hedges ........................... (3.8) (3.8) -------- Comprehensive income ........................ 505.2 Dividends paid to parent company ............ (250.0) (250.0) Change in accounting principles ............. 227.6 227.6 ----- -------- ------- ------ -------- ----- BALANCE AT DECEMBER 31, 2001 ................ $10.0 $4,763.4 $ 608.2 $225.6 $5,607.2 1,000 ===== ======== ======= ====== ======== =====
The accompanying notes are an integral part of these consolidated financial statements. 78 JOHN HANCOCK LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31 2001 2000 1999 ----------- ---------- ----------- (IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ............................................................. $ 573.9 $ 792.2 $ 125.9 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of discount-fixed maturities ............................ (134.0) (102.9) (67.9) Net realized investment and other gains (losses), net ................ 245.8 (78.3) (169.6) Change in deferred policy acquisition costs .......................... (204.0) (235.4) (251.3) Depreciation and amortization ........................................ 72.1 78.8 70.0 Net cash flows from trading securities ............................... 0.2 (0.1) -- Increase in accrued investment income ................................ (46.5) (89.8) (92.6) Decrease in premiums and accounts receivable ......................... 11.8 8.4 32.0 Increase in other assets and other liabilities, net .................. (263.5) (464.5) (304.4) Increase in policy liabilities and accruals, net ..................... 2,323.7 1,798.1 2,235.1 Loss on sale of subsidiaries ......................................... -- -- 21.3 Increase (decrease) in income taxes .................................. 195.4 336.7 (31.5) ---------- --------- ---------- Net cash provided by operating activities ............................ 2,774.9 2,043.2 1,567.0 CASH FLOWS FROM INVESTING ACTIVITIES: Sales of: Fixed maturities held-to-maturity ..................................... -- -- 24.3 Fixed maturities available-for-sale ................................... 16,058.9 4,360.5 9,567.7 Equity securities available-for-sale .................................. 614.6 669.9 149.7 Real estate ........................................................... 53.8 59.8 1,277.1 Short-term investments and other invested assets ...................... 113.4 81.5 695.9 Maturities, prepayments and scheduled redemptions of: Fixed maturities held-to-maturity ..................................... 241.8 1,807.2 1,769.3 Fixed maturities available-for-sale ................................... 3,051.1 1,476.6 1,800.5 Equity securities available-for-sale .................................. 35.9 13.4 -- Short-term investments and other invested assets ...................... 168.4 418.8 270.9 Mortgage loans on real estate ......................................... 1,342.0 1,447.4 1,304.3 Purchases of: Fixed maturities held-to-maturity ..................................... (66.7) (2,092.4) (2,688.5) Fixed maturities available-for-sale ................................... (26,321.9) (6,961.4) (12,272.9) Equity securities available-for-sale .................................. (285.8) (425.3) (283.6) Real estate ........................................................... (52.8) (58.7) (190.9) Short-term investments and other invested assets ...................... (448.5) (784.8) (649.1) Mortgage loans on real estate issued .................................. (1,204.5) (1,499.9) (2,348.0) Net cash (paid) received related to acquisition/sale of businesses .... (28.2) 141.3 (206.5) Other, net ............................................................ 177.4 (25.7) (57.9) ---------- --------- ---------- Net cash used in investing activities ............................... $ (6,551.1) $(1,371.8) $ (1,837.7)
The accompanying notes are an integral part of these consolidated financial statements. 79 JOHN HANCOCK LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31 2001 2000 1999 ---------- ---------- ---------- (IN MILLIONS) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock ...................................................... -- $ 10.0 -- Contribution from Parent ...................................................... -- 1,552.0 -- Payments to eligible policyholders under Plan of Reorganization ............... -- (1,076.7) -- Dividend paid to parent company ............................................... $ (250.0) (466.0) -- Universal life and investment-type contract deposits .......................... 10,520.3 7,918.2 $ 8,134.9 Universal life and investment-type contract maturities and withdrawals ........ (8,271.8) (7,034.2) (7,977.7) Issuance of long-term debt .................................................... 81.9 20.0 6.0 Repayment of long-term debt ................................................... (22.9) (73.2) (15.5) Net decrease in commercial paper .............................................. (222.3) (158.2) (30.5) --------- --------- --------- Net cash provided by financing activities ................................... 1,835.2 691.9 117.2 --------- --------- --------- Net (decrease) increase in cash and cash equivalents ........................ (1,941.0) 1,363.3 (153.5) Cash and cash equivalents at beginning of year .............................. 2,966.3 1,603.0 1,756.5 --------- --------- --------- Cash and cash equivalents at end of year .................................... $ 1,025.3 $ 2,966.3 $ 1,603.0 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 80 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business John Hancock Life Insurance Company, (the Company), formerly known as John Hancock Mutual Life Insurance Company (the Mutual Company) and Subsidiaries, is a diversified financial services organization that provides a broad range of insurance and investment products and investment management and advisory services. Basis of Presentation The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The accompanying consolidated financial statements include the accounts of the Company and its majority-owned and controlled subsidiaries. All significant intercompany transactions and balances have been eliminated. Partnerships, joint venture interests and other equity investments in which the Company does not have a controlling interest, but has significant influence, are recorded using the equity method of accounting and are included in other invested assets. Certain prior year amounts have been reclassified to conform to the current year presentation. In December 2001, the Company transferred both its remaining portion of John Hancock Canadian Holdings Limited and certain international subsidiaries held by the Company, with a carrying value at December 31, 2001 of $300.1 million, to its parent, JHFS, in the form of a dividend. The transfer has been accounted for as a de-pooling of interests. As a result of the de-pooling of interests, all current and prior period consolidated financial data has been restated to exclude the results of operations, financial position, and cash flows of these transferred foreign subsidiaries from the Company's financial statements. No gain or loss was recognized on the transaction. The following acquisitions were recorded under the purchase method of accounting and, accordingly, the operating results have been included in the Company's consolidated results of operations from the applicable date of acquisition. Each purchase price was allocated to the assets acquired and the liabilities assumed based on estimated fair values, with the excess of the applicable purchase price over the estimated fair values, if any, recorded as goodwill. These entities or books of business were generally acquired by the Company in execution of its plan to acquire businesses that have strategic value, meet its earnings requirements and advance the growth of its current businesses. The unaudited pro forma revenues, assuming the transactions had taken place at the beginning of the year of acquisition and the preceding year, for 2001, 2000 and 1999, were approximately $7,177.3 million, $7,714.1 million and $6,894.9 million, an increase of $53.3 million, $248.7 million and $132.9 million, respectively, from reported balances. The unaudited pro forma net income for the years ended December 31, 2001, 2000 and 1999, was approximately $572.7 million, $783.9 million and $118.6 million, a change of $(1.2) million, $(8.3) million and $(7.3) million, respectively, from reported balances. On April 2, 2001, a subsidiary of the Company, Signature Fruit Company, LLC (Signature Fruit), purchased certain assets and assumed certain liabilities out of the bankruptcy proceedings of Tri Valley Growers, Inc., a cooperative association, for approximately $53.0 million. The net losses related to the acquired operations included in the Company's results from the date of acquisition through December 31, 2001 were $3.4 million. The unaudited pro forma results for the years ended December 31, 2001 and 2000, assuming the transaction had taken place at the beginning of 2001 and 2000, would not be materially different from the reported results. On March 1, 2000, the Company acquired the individual long-term care insurance business of Fortis, Inc. (Fortis) through a coinsurance agreement for approximately $165.0 million. The unaudited pro forma results for the years ended December 31, 2000 and 1999, assuming the acquisition of Fortis had taken place at the beginning of 2000 and 1999, would not be materially different from the reported results. 81 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Reorganization In connection with the Mutual Company's Plan of Reorganization (the Plan), effective February 1, 2000, the Mutual Company converted from a mutual life insurance company to a stock life insurance company (i.e., demutualized) and became a wholly-owned subsidiary of John Hancock Financial Services, Inc. (JHFS or the parent company), which is a holding company. All policyholder membership interests in the Mutual Company were extinguished on that date and eligible policyholders of the Mutual Company received, in the aggregate, 212.8 million shares of common stock of JHFS, $1,438.7 million of cash and $43.7 million of policy credits as compensation. In addition, the Company established a closed block to fund the guaranteed benefits and dividends of certain participating insurance policies. In connection with the Plan, the Mutual Company changed its name to John Hancock Life Insurance Company. In addition, on February 1, 2000, JHFS completed its initial public offering (IPO) in which 102.0 million shares of common stock were issued at a price of $17.00 per share. Net proceeds from the IPO were $1,657.7 million, of which $105.7 million was retained by JHFS and $1,552.0 million was contributed to the Company. Investments The Company classifies its debt and equity investment securities into one of three categories: held-to-maturity, available-for-sale or trading. The Company determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Fixed maturity investments include bonds, mortgage-backed securities, and redeemable preferred stock and are classified as held-to-maturity or available-for-sale. Those bonds and mortgage-backed securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortized cost. Fixed maturity investments not classified as held-to-maturity are classified as available-for-sale and are carried at fair value. Unrealized gains and losses related to available-for-sale securities are reflected in shareholder's equity, net of related amortization of deferred policy acquisition costs, amounts credited to participating pension contractholders, amounts credited to the policyholder dividend obligation, and applicable taxes. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. The amortized cost of fixed maturity investments is adjusted for impairments in value deemed to be other than temporary and such adjustments are reported as a component of net realized investment and other gains (losses). For the mortgage-backed bond portion of the fixed maturity investment portfolio, the Company recognizes income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date plus anticipated future payments, and any resulting adjustment is included in net investment income. Equity securities include common stock and non-redeemable preferred stock. Equity securities that have readily determinable fair values are carried at fair value. For equity securities that the Company has classified as available-for-sale, unrealized gains and losses are reflected in shareholder's equity, as described above for available-for-sale fixed maturity securities. Impairments in value deemed to be other than temporary are reported as a component of net realized investment and other gains (losses). Gains and losses, both realized and unrealized, on equity securities classified as trading are included in net realized investment and other gains (losses). 82 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Mortgage loans on real estate are carried at unpaid principal balances adjusted for amortization of premium or discount, less allowance for probable losses. When it is probable that the Company will be unable to collect all amounts of principal and interest due according to the contractual terms of the mortgage loan agreement, the loan is deemed to be impaired and a valuation allowance for probable losses is established. The valuation allowance is based on the present value of the expected future cash flows, discounted at the loan's original effective interest rate or on the collateral value of the loan if the loan is collateral dependent. Any change to the valuation allowance for mortgage loans on real estate is reported as a component of net realized investment and other gains (losses). Interest received on impaired mortgage loans on real estate is included in interest income in the period received. If foreclosure becomes probable, the measurement method used is collateral value. Foreclosed real estate is then recorded at the collateral's fair value at the date of foreclosure, which establishes a new cost basis. Investment real estate, which the Company has the intent to hold for the production of income, is carried at depreciated cost, using the straight-line method of depreciation, less adjustments for impairments in value. In those cases where it is determined that the carrying amount of investment real estate is not recoverable, an impairment loss is recognized based on the difference between the depreciated cost and fair value of the asset. The Company reports impairment losses as part of net realized investment and other gains (losses). Real estate to be disposed of is carried at the lower of cost or fair value less costs to sell. Any change to the valuation allowance for real estate to be disposed of is reported as a component of net realized investment and other gains (losses). The Company does not depreciate real estate to be disposed of. Policy loans are carried at unpaid principal balances, which approximate fair value. Short-term investments are carried at amortized cost, which approximates fair value. Net realized investment and other gains (losses), other than those related to separate accounts for which the Company does not bear the investment risk, are determined on the basis of specific identification of cost and are reported net of related amortization of deferred policy acquisition costs, amounts credited to participating pension contractholder accounts, and amounts credited to the policyholder dividend obligation. Derivative Financial Instruments The Company uses various derivative instruments to hedge and manage its exposure to changes in interest rate levels, foreign exchange rates, and equity market prices, and to manage the duration of assets and liabilities. All derivatives are carried on the consolidated balance sheets at fair value. In certain cases, the Company uses hedge accounting as allowed by Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," by designating derivative instruments as either fair value hedges or cash flow hedges. For derivative instruments that are designated and qualify as fair value hedges, the change in fair value of the derivative instrument as well as the offsetting change in fair value of the hedged item are recorded in net realized investment and other gains (losses). Basis adjustments are amortized into income through net realized investment and other gains and losses. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the change in fair value of the derivative instrument is recorded in other comprehensive income, and then reclassified into income when the hedged item affects income. Hedge effectiveness is assessed quarterly by a variety of techniques including regression analysis and cumulative dollar offset. In certain cases, there is no hedge ineffectiveness because the derivative instrument was constructed such that all the terms of the derivative exactly match the hedged risk in the hedged item. If a hedge becomes ineffective, the hedge accounting described above ceases. 83 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In cases where the Company receives or pays a premium as consideration for entering into a derivative instrument (i.e., interest rate caps and floors, swaptions, and equity collars), the premium is amortized into investment income over the useful life of the derivative instrument. The fair value of such premiums (i.e., the inherent ineffectiveness of the derivative) is excluded from the assessment of hedge effectiveness and is included in net realized investment and other gains (losses). Changes in fair value of derivatives that are not hedges are included in net realized investment and other gains (losses). Cash and Cash Equivalents Cash and cash equivalents include cash and all highly liquid debt investments with a remaining maturity of three months or less when purchased. Deferred Policy Acquisition Costs Costs that vary with, and are related primarily to, the production of new business have been deferred to the extent that they are deemed recoverable. Such costs include commissions, certain costs of policy issue and underwriting, and certain agency expenses. For participating traditional life insurance policies, such costs are amortized over the life of the contracts at a constant rate based on the present value of the estimated gross margin amounts expected to be realized over the lives of the contracts. Estimated gross margin amounts include anticipated premiums and investment results less claims and administrative expenses, changes in the net level premium reserve and expected annual policyholder dividends. For universal life insurance contracts and investment-type products, such costs are being amortized generally in proportion to the present value of expected gross profits arising principally from surrender charges and investment results, and mortality and expense margins. The effects on the amortization of deferred policy acquisition costs of revisions to estimated gross margins and profits are reflected in earnings in the period such estimated gross margins and profits are revised. For non-participating term life and long-term care insurance products, such costs are being amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves. Amortization of deferred policy acquisition costs was $219.6 million, $177.7 million and $174.7 million in 2001, 2000 and 1999, respectively. Amortization of deferred policy acquisition costs is allocated to: (1) net realized investment and other gains (losses) for those products in which such gains (losses) have a direct impact on the amortization of deferred policy acquisition costs; (2) unrealized investment gains and losses, net of tax, to provide for the effect on the deferred policy acquisition cost asset that would result from the realization of unrealized gains and losses on assets backing participating traditional life insurance and universal life and investment-type contracts; and (3) a separate component of benefits and expenses to reflect amortization related to the gross margins or profits, excluding net realized investment and other gains (losses), relating to policies and contracts in force. Net realized investment and other gains (losses) related to certain products have a direct impact on the amortization of deferred policy acquisition costs as such gains and losses affect the amount and timing of profit emergence. Accordingly, to the extent that such amortization results from net realized investment and other gains (losses), management believes that presenting realized investment and other gains and losses net of related amortization of deferred policy acquisition costs provides information useful in evaluating the operating performance of the Company. This presentation may not be comparable to presentations made by other insurers. 84 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Reinsurance The Company utilizes reinsurance agreements to provide for greater diversification of business, allowing management to control exposure to potential losses arising from large risks and provide additional capacity for growth. Assets and liabilities related to reinsurance ceded contracts are reported on a gross basis. The accompanying statements of income reflect premiums, benefits and settlement expenses net of reinsurance ceded. Reinsurance premiums, commissions, expense reimbursements, benefits and reserves related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. The Company remains liable to its policyholders to the extent that counterparties to reinsurance ceded contracts do not meet their contractual obligations. Goodwill and Value of Business Acquired The excess of cost over the fair value of the net assets of businesses acquired (goodwill) was $116.0 million and $131.2 million at December 31, 2001 and 2000, respectively, and is included in other assets in the consolidated balance sheets. Goodwill relating to acquisitions completed before July 1, 2001 is amortized on systematic bases over periods not exceeding 40 years, which correspond with the benefits estimated to be derived from the acquisitions. Accumulated amortization was $58.1 million and $48.0 million at December 31, 2001 and 2000, respectively. Amortization expense included in other operating costs and expenses was $11.3 million, $11.2 million, and $8.5 million, in 2001, 2000 and 1999, respectively. The Company reevaluates the recoverability of recorded goodwill based on the undiscounted cash flows of the related business whenever significant events or changes indicate an impairment might exist. If the undiscounted cash flows do not support the amount recorded, an impairment is recognized by a charge to current operations to reduce the carrying value of the goodwill based on the expected discounted cash flows of the related business. The Company records an asset representing the present value of estimated future profits of insurance policies inforce related to the businesses acquired. This asset is recorded as the value of business acquired (VOBA) and amounted to $76.2 million and $81.4 million at December 31, 2001 and 2000, respectively, and is included in other assets in the consolidated balance sheets. VOBA is amortized in proportion to the present value of expected gross profits. Amortization expense included in other operating costs and expenses was $2.3 million, $4.2 million and $1.3 million in 2001, 2000 and 1999 respectively. Separate Accounts Separate accounts assets and liabilities reported in the accompanying consolidated balance sheets represent funds that are administered and invested by the Company to meet specific investment objectives of the contractholders. Net investment income and net realized investment and other gains (losses) generally accrue directly to such contractholders who bear the investment risk, subject in some cases to minimum guaranteed rates. The assets of each separate account are legally segregated and are not subject to claims that arise out of any other business of the Company. Separate account assets are reported at fair value. Deposits, net investment income and net realized investment and other gains (losses) of separate accounts are not included in the revenues of the Company. Fees charged to contractholders, principally mortality, policy administration and surrender charges, are included in universal life and investment-type product charges. 85 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Future Policy Benefits and Policyholders' Funds Future policy benefits for participating traditional life insurance policies are based on the net level premium method. This net level premium reserve is calculated using the guaranteed mortality and dividend fund interest rates, which range from 2.5% to 8.0%. The liability for annual dividends represents the accrual of annual dividends earned. Settlement dividends are accrued in proportion to gross margins over the life of the contract. For non-participating traditional life insurance policies, future policy benefits are estimated using a net level premium method on the basis of actuarial assumptions as to mortality, persistency, interest and expenses established at policy issue. Assumptions established at policy issue as to mortality and persistency are based on the Company's experience, which, together with interest and expense assumptions, include a margin for adverse deviation. Benefit liabilities for annuities during the accumulation period are equal to accumulated contractholders' fund balances and after annuitization are equal to the present value of expected future payments. Interest rates used in establishing such liabilities range from 2.5% to 8.0% for life insurance liabilities, from 2.0% to 14.2% for individual annuity liabilities and from 2.0% to 11.3% for group annuity liabilities. Future policy benefits for long-term care insurance policies are based on the net level premium method. Assumptions established at policy issue as to mortality, morbidity, persistency, interest and expenses, which include a margin for adverse deviation, are based on estimates developed by management. Interest rates used in establishing such liabilities range from 6.0% to 8.5%. Liabilities for unpaid claims and claim expenses include estimates of payments to be made on reported individual and group life, long-term care, and group accident and health insurance claims and estimates of incurred but not reported claims based on historical claims development patterns. Estimates of future policy benefit reserves, claim reserves and expenses are reviewed continually and adjusted as necessary; such adjustments are reflected in current earnings. Although considerable variability is inherent in such estimates, management believes that future policy benefit reserves and unpaid claims and claims expense reserves are adequate. Policyholders' funds for universal life and investment-type products, including guaranteed investment contracts and funding agreements, are equal to the policyholder account values before surrender charges. Policy benefits that are charged to expense include benefit claims incurred in the period in excess of related policy account balances and interest credited to policyholders' account balances. Interest crediting rates range from 3.0% to 9.0% for universal life products and from 2.0% to 14.7% for investment-type products. Major components of policyholder funds presented in the consolidated balance sheets are summarized as follows:
DECEMBER 31 2001 2000 --------- ----------- (IN MILLIONS) LIABILITIES FOR POLICYHOLDER FUNDS Guaranteed investment contracts.................................. $ 6,583.5 $ 7,985.5 U.S. funding agreements.......................................... 67.1 80.9 Global funding agreements backing medium-term notes.............. 9,490.4 6,266.3 Other investment-type contracts.................................. 2,247.7 2,341.8 --------- --------- Total liabilities for investment type contracts................. 18,388.7 16,674.5 Liabilities for individual annuities............................. 56.6 62.2 Universal life and other reserves................................ 2,085.0 1,806.4 --------- --------- Total liabilities for policyholder funds........................ $20,530.3 $18,543.1 ========= =========
86 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Company is authorized to issue up to $15.0 billion in global funding agreements under two distribution programs, and through December 31, 2001, we have $9.5 billion outstanding. Global funding agreements are investment products which require the Company to pay a stated rate of interest on the principal amount and to repay the principal at maturity. These agreements may not be terminated prior to maturity by the Company or the contractholder. Claims for principal and interest under these global funding agreements are afforded equal priority to claims of life insurance and annuity policyholders under the insolvency provisions of Massachusetts Insurance Laws. Under the Company's programs, the global funding agreements are issued to special purpose entities. The special purpose entities fund the purchase of the global funding agreement through the issuance of medium-term notes to investors. These notes are non-recourse to the Company. If the medium-term notes issued by the special purpose entity are denominated in a foreign currency, the Company also enters into a currency swap with the special purpose entity. Similarly, the Company may enter into an interest rate swap with the special purpose entity to match the interest rate characteristics of the global funding agreement to those of the medium term note. As a result, the payment terms of any particular series of notes issued by the special purpose entity correspond to the payment terms of the global funding agreement and swap agreement(s), if any, that secure that series. Under the first program, established in May 1998 for $2.5 billion, expanded to $7.5 billion in 1999, an affiliated offshore special purpose entity issued medium-term notes in Europe, Asia and Australia. Through December 31, 2001, there is $3.9 billion outstanding under this program. This special purpose entity is consolidated in the Company's financial statements. The medium-term notes issued by this special purpose entity are reported with global funding agreements in the Company's consolidated balance sheet. Under the second program, established in June 2000, for $5.0 billion, expanded to $7.5 billion in 2001, the unaffiliated special purpose entity issued medium-term notes in Europe, Asia, and to institutional investors in the United States. Through December 31, 2001, there is $5.6 billion outstanding under this program. Although this special purpose entity is not consolidated in the Company's financial statements, the funding agreements backing the related medium-term notes are included in policyholders' funds in the Company's consolidated balance sheets. At December 31, 2001, the annual contractual maturities of global funding agreements on notes issued under both programs were as follows: 2002 - $236.6 million; 2003 - $1,227.8 million; 2004 - $1,227.6 million; 2005 - $1,246.3 million; 2006 - $2,047.9 million; 2007 and thereafter - $3,504.2 million. Participating Insurance Participating business represents approximately 76.6%, 86.3%, and 88.1% of the Company's life insurance in force, 98.1%, 97.9%, and 98.3% of the number of life insurance policies in force, and 92.1%, 99.6% and 97.4%, of life insurance premiums in 2001, 2000 and 1999, respectively. The portion of earnings allocated to participating pension contractholders and closed block policyholders that cannot be expected to inure to the Company is excluded from net income and shareholder's equity. The amount of policyholders' dividends to be paid is approved annually by the Company's Board of Directors. The determination of the amount of policyholder dividends is complex and varies by policy type. In general, the aggregate amount of policyholders' dividends is related to actual interest, mortality, morbidity, persistency and expense experience for the year and is also based on management's judgment as to the appropriate level of statutory surplus to be retained by the Company. For policies included in the closed block, expense experience is not included in determining policyholders' dividends. Revenue Recognition Premiums from participating and non-participating traditional life insurance and annuity policies with life contingencies are recognized as income when due. Premiums from universal life and investment-type contracts are reported as deposits to policyholders' account balances. Revenues from these contracts consist of amounts assessed during the period against policyholders' account balances for mortality charges, policy administration charges and surrender charges. 87 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Premiums for contracts with a single premium or a limited number of premium payments, due over a significantly shorter period than the total period over which benefits are provided, are recorded in income when due. The portion of such premium that is not required to provide for all benefits and expenses is deferred and recognized in income in a constant relationship to insurance in force or, for annuities, the amount of expected future benefit payments. Premiums from long-term care insurance contracts are recognized as income when due. Premiums from group life and health insurance contracts are recognized as income over the period to which the premiums relate in proportion to the amount of insurance protection provided. Investment advisory, transfer agent, distribution and service fees are recognized as revenues when services are performed. Commissions related to security transactions and related expenses are recognized as income on the trade date. Contingent deferred selling charge commissions are recognized as income in the year received. Selling commissions paid to the selling broker/dealer for sales of mutual funds that do not have a front-end sales charge are deferred and amortized on a straight-line basis over periods not exceeding six years. This is the approximate period of time expected to be benefited and during which fees earned pursuant to Rule 12b-1 distribution plans are received from the funds and contingent deferred sales charges are received from shareholders of the funds. Federal Income Taxes The provision for federal income taxes includes amounts currently payable or recoverable and deferred income taxes, computed under the liability method, resulting from temporary differences between the tax basis and book basis of assets and liabilities. A valuation allowance is established for deferred tax assets when it is more likely than not that an amount will not be realized. Foreign subsidiaries and U.S. subsidiaries operating outside of the United States are taxed under applicable foreign statutory rates. Foreign Currency Translation The assets and liabilities of operations in foreign currencies are translated into United States dollars at current exchange rates. Revenues and expenses are translated at average rates during the year. The resulting net translation adjustments for each year are accumulated and included in shareholder's equity. Gains or losses on foreign currency transactions are reflected in earnings. Severance As part of JHFS's ongoing Competitive Position Project, it has initiated a restructuring plan to reduce costs and increase future operating efficiency by consolidating portions of its operations. The plan consists primarily of reducing staff in the home office and terminating certain operations outside the home office. In connection with the restructuring plan, approximately 872 employees have been or will be terminated. These employees are or have been associated with operations in the Boston office and outside the home office. As of December 31, 2001 and 2000, the liability for employee termination costs, included in other liabilities was $18.0 million and $20.6 million, respectively. Employee termination costs, included in other operating costs and expenses, were $40.0 million, $18.8 million and $26.3 million for the years ended December 31, 2001, 2000 and 1999, respectively. Of the total number of employees affected, approximately 855 employees were terminated as of December 31, 2001, having received benefit payments of approximately $67.8 million. On January 7, 2002, as part of its ongoing expense reduction program, the Company eliminated an additional 160 jobs. During the first quarter of 2002, affected employees will receive severance benefits and outplacement services of approximately $5.7 million. 88 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cumulative Effect of Accounting Changes During the first quarter of 2001, the Company changed the method of accounting for the recognition of deferred gains and losses considered in the calculation of the annual expense for its employee pension plan under SFAS No. 87, "Employers' Accounting for Pensions," and for its postretirement health and welfare plans under SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Company changed the method of recognizing gains and losses from deferral within a 10% corridor and amortization of gains outside this corridor over the future working careers of the participants to deferral within a 5% corridor and amortization of gains and losses outside this corridor over the future working careers of the participants. The new method is preferable because in the Company's situation, it produces results that more closely match current economic realities of the Company's retirement and welfare plans through the use of the current fair values of assets while still mitigating the impact of extreme gains and losses. As a result, on January 1, 2001, the Company recorded a credit of $18.6 million (net of tax of $9.9 million), related to its employee benefit pension plans, and a credit of $4.7 million (net of tax of $2.6 million), related to its postretirement health and welfare plans. The total credit recorded as a cumulative effect of an accounting change was $23.3 million (net of tax of $12.5 million) for the year ended December 31, 2001. This change in accounting increased net income for the year ended December 31, 2001 by $4.4 million. The unaudited pro forma results for the years ended December 31, 2000 and 1999, assuming this change in accounting had taken place as of the beginning of 2000 and 1999, would not be materially different from the reported results. On January 1, 2001, the Company adopted SFAS No. 133, as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." The adoption of SFAS No. 133, as amended, resulted in a charge to operations accounted for as a cumulative effect of accounting change of $16.1 million (net of tax benefit of $8.3 million) as of January 1, 2001. In addition, as of January 1, 2001, a $227.6 million (net of tax of $122.6 million) cumulative effect of accounting change was recorded in other comprehensive income for (1) the transition adjustment in the adoption of SFAS No. 133, as amended, an increase of $40.5 million (net of tax of $21.8 million), and (2) the reclassification of $12.1 billion in securities from the held-to-maturity category to the available-for-sale category, an increase of $187.1 million (net of tax of $100.8 million). In April 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-5, "Reporting the Costs of Start-Up Activities." The SOP, which was adopted by the Company on January 1, 1999, required that start-up costs capitalized prior to January 1, 1999 be written-off immediately and any start-up costs incurred on or after January 1, 1999 be expensed as incurred. The adoption of SOP 98-5 resulted in a charge to operations of $9.7 million (net of tax of $5.9 million) and was accounted for as a cumulative effect of an accounting change. Recent Accounting Pronouncements In September 2001, the Financial Accounting Standard Board's (FASB's) Emerging Issues Task Force reached a consensus on Issue 01-10, "Accounting for the Impact of the Terrorist Attacks of September 11, 2001." Issue 01-10 presents guidance relative to accounting for and financial reporting of the events of September 11, 2001 (the Events), including both how and when to measure, record and report losses and any resulting liabilities which are directly attributable to the Events. Based on a comprehensive review of the Company's operations, the Company believes that the Events had no material financial impact on the Company's results of operations or financial position. In June 2001, the FASB issued SFAS No. 141, "Business Combinations." SFAS No. 141 requires that all business combinations be accounted for under a single method, the purchase method. Use of the pooling-of-interests method is no longer permitted. SFAS No. 141 also clarifies the criteria to recognize intangible assets separately from goodwill, and prohibits the amortization of goodwill relating to acquisitions completed after July 1, 2001. SFAS No. 141 is effective for business combinations initiated after June 30, 2001. 89 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires that goodwill and other intangible assets deemed to have indefinite lives no longer be amortized to earnings, but instead be reviewed at least annually for impairment. Intangible assets with definite lives will continue to be amortized over their useful lives. SFAS No. 142 will be effective January 1, 2002. The Company estimates that adoption of SFAS No. 142 on January 1, 2002, and the cessation of amortization of previously amortizable goodwill, will result in an increase in net income of $7.8 million (net of tax of $3.4 million) for the year ending December 31, 2002. During early 2002, the Company will perform initial impairment tests of goodwill as of January 1, 2002 based on the guidance in SFAS No. 142. The Company plans on evaluating the goodwill of each reporting unit for impairment using valuations of reporting units based on earnings and book value multiples and by reference to similar multiples of publicly traded peers. Any goodwill impairments resulting from these initial impairment tests would be recorded as the cumulative effect of a change in accounting principle. The Company has conducted preliminary impairment tests which indicated no impairments of goodwill. The Company does not expect the impact of the impairment tests required under SFAS No. 142 to have a material impact on its results of operations, earnings or financial position. In January 2001, the FASB's Emerging Issues Task Force (EITF) reached a consensus on Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Issue 99-20 requires investors in certain asset-backed securities to record changes in their estimated yield on a prospective basis and specifies evaluation methods with which to evaluate these securities for an other-than-temporary decline in value. The adoption of EITF 99-20 did not have a material financial impact on the Company's results of operations or financial position. In December 2000, the AICPA issued SOP 00-3, "Accounting by Insurance Enterprises for Demutualizations and Formations of Mutual Insurance Holding Companies and Certain Long-Duration Participating Contracts." The SOP, which was adopted with respect to accounting for demutualization expenses by the Company on December 31, 2000, requires that demutualization related expenses be classified as a single line item within income from continuing operations and should not be classified as an extraordinary item. The adoption of SOP 00-3 resulted in the reclassification of demutualization expenses previously recorded as an extraordinary item in 1999 of $93.6 million (net of tax of $2.6 million). On October 1, 2001, the Company adopted the remaining provisions of SOP 00-3 which required the reclassification of $9,710.0 million and $12,035.9 million of closed block assets and liabilities, respectively at December 31, 2000, and $1,467.7 million and $1,343.6 million of closed block revenues, and benefits and expenses, respectively, for the period from February 1, 2000 (date of demutualization) to December 31, 2000, all of which were reclassified to other existing asset, liability, revenue, and benefit and expense accounts. The required implementation of SOP 00-3 also resulted in a reduction of net income of $20.2 million (net of tax of $6.6 million), for the period from February 1, 2000 to December 31, 2000 and $3.4 million (net of tax of $1.8 million), for the nine months ended September 30, 2001. Finally, adoption also resulted in the recognition of a policyholder dividend obligation of $77.0 million at December 31, 2000, which represents cumulative actual closed block earnings in excess of expected periodic amounts calculated at the date of the demutualization. See Note 6 for a summary description of the closed block assets, liabilities, revenues and expenses. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 provides new accounting and reporting standards which are based on consistent application of a financial components approach that focuses on control. Under this approach, after a transfer of financial assets, the Company recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. SFAS No. 140 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The adoption of SFAS No. 140 did not have a material impact on the Company's results of operations or financial position. 90 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," provides guidance on how to account for the issuance of stock and stock options to employees. Certain of the Company's employees are compensated, in part, with non-vested stock and stock options, issued by the parent company, JHFS, and the related expenses are borne by the Company. The Company adopted APB No. 25 upon its demutualization and upon JHFS' IPO effective February 1, 2000. Compensation cost for stock options, if any, is measured as the excess of the quoted market price of JHFS' stock at the date of grant over the amount an employee must pay to acquire the stock. Compensation cost is recognized over the requisite vesting periods based on market value on the date of grant. APB No. 25 was amended by SFAS No. 123, "Accounting for Stock-Based Compensation," to require pro forma disclosures of net income and earnings per share as if a "fair value" based method was used. On March 31, 2000, the FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB No. 25." The Interpretation clarifies guidance for certain issues that arose in the application of APB No. 25. The Company was required to adopt the Interpretation on July 1, 2000. Interpretation No. 44 did not have a material impact on the Company's results of operations or financial position. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." SAB 101 clarifies the SEC staff's views on applying generally accepted accounting principles to revenue recognition in financial statements. In March 2000, the SEC issued an amendment, SAB 101A, which deferred the effective date of SAB 101. In June 2000, the SEC issued a second amendment, SAB 101B, which deferred the effective date of SAB 101 to no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The Company adopted SAB 101 in the fourth quarter of fiscal 2000. The adoption of SAB 101 did not have a material impact on the Company's results of operations or financial position. Codification In March 1998, the National Association of Insurance Commissioners (NAIC) adopted codified statutory accounting principles (Codification) effective January 1, 2001. Codification changes prescribed statutory accounting practices and resulted in changes to the accounting practices that the Company and its domestic life insurance subsidiaries use to prepare their statutory-basis financial statements. The states of domicile of the Company and its domestic life insurance subsidiaries have adopted Codification as the prescribed basis of accounting on which domestic insurers must report their statutory-basis results effective January 1, 2001. The cumulative effect of changes in accounting principles adopted to conform to the requirements of Codification is reported as an adjustment to surplus in the statutory-basis financial statements as of January 1, 2001. Implementation of Codification did not have a material impact on the Company's domestic life insurance subsidiaries' statutory-basis capital and surplus, and these companies remain in compliance with all regulatory and contractual obligations. 91 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2. RELATED PARTY TRANSACTIONS Certain directors of the Company are members or directors of other entities that periodically perform services for or have other transactions with Company. Such transactions are either subject to bidding procedures or are otherwise entered into on terms comparable to those that would be available to unrelated third parties and are not material to the Company's results of operations or financial condition. The Company provides certain administrative and asset management services to its pension plans and employee welfare trust. Fees paid to the Company for these services were $8.4 million, $6.4 million and $6.5 million during the years ended December 31, 2001, 2000 and 1999, respectively. The Company provides JHFS with personnel, property and facilities in carrying out certain of its corporate functions. JHFS determines fees, annually, for these services and facilities based on a number of criteria. The amount of these service fees charged to JHFS were $28.5 million and $19.8 million for the years ended December 31, 2001 and 2000, respectively. These fees are included as a reduction of other operating costs and expenses in the consolidated statements of income. The Company has reinsured certain portions of its long term care and group pension businesses with John Hancock Reassurance Company, Ltd. of Bermuda (JHReCo), a wholly owned subsidiary of JHFS. The Company entered into these reinsurance contracts in order to facilitate its capital management process. These reinsurance contracts are primarily written on a funds withheld basis where the related financial assets remain invested at the Company. As a result, the Company recorded accounts payable to JHReCo for coinsurance amounts withheld of $1,158.9 million and $633.2 million at December 31, 2001 and 2000, respectively, which are included with other liabilities in the consolidated balance sheets, and recorded reinsurance recoverable from JHReCo of $1,504.6 million and $870.4 million at December 31, 2001 and 2000, respectively, which are included with other reinsurance recoverables on the consolidated balance sheets. Premiums ceded to JHReCo were $740.8 million, $396.7 million and $306.2 million during 2001, 2000 and 1999 respectively. 92 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3. INVESTMENTS The following information summarizes the components of net investment income and net realized investment and other gains (losses):
YEARS ENDED DECEMBER 31 2001 2000 1999 --------- --------- --------- (IN MILLIONS) NET INVESTMENT INCOME Fixed maturities ....................................................... $2,721.2 $2,456.2 $2,407.0 Equity securities ...................................................... 29.7 23.3 19.2 Mortgage loans on real estate .......................................... 774.4 796.2 750.7 Real estate ............................................................ 67.7 82.7 147.3 Policy loans ........................................................... 118.4 112.7 105.3 Short-term investments ................................................. 73.9 147.1 83.7 Other .................................................................. 101.4 200.7 161.8 -------- -------- -------- Gross investment income ................................................ 3,886.7 3,818.9 3,675.0 Less investment expenses ............................................. 240.5 255.0 336.1 -------- -------- -------- Net investment income ................................................... $3,646.2 $3,563.9 $3,338.9 ======== ======== ======== NET REALIZED INVESTMENT AND OTHER GAINS (LOSSES), NET OF RELATED AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS, AMOUNTS CREDITED TO THE POLICYHOLDER DIVIDEND OBLIGATION AND AMOUNTS CREDITED TO PARTICIPATING PENSION CONTRACTHOLDERS Fixed maturities ....................................................... $ (351.1) $ (135.3) $ (34.2) Equity securities ...................................................... 201.8 196.1 109.7 Mortgage loans on real estate and real estate to be disposed of ........ (60.4) (15.2) 141.3 Derivatives and other invested assets .................................. (40.2) 44.3 37.8 Amortization adjustment for deferred policy acquisition costs .......... 29.4 9.4 (49.7) Amounts credited to the policyholder dividend obligation ............... 17.0 (14.1) -- Amounts credited to participating pension contractholders ............. (42.3) (6.9) (35.3) -------- -------- -------- Net realized investment and other gains (losses), net of related amortization of deferred policy acquisition costs, amounts credited to the policyholder dividend obligation and amounts credited to participating pension contractholders ................................................ $ (245.8) $ 78.3 $ 169.6 ======== ======== ========
Gross gains of $ 349.9 million in 2001, $294.6 million in 2000 and $186.4 million in 1999, and gross losses of $119.0 million in 2001, $123.6 million in 2000 and $173.7 million in 1999, were realized on the sale of available-for-sale securities. 93 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3. INVESTMENTS (CONTINUED) The Company's investments in held-to-maturity securities and available-for-sale securities are summarized below:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE --------- ---------- ---------- ----------- (IN MILLIONS) DECEMBER 31, 2001 HELD-TO-MATURITY: Corporate securities ...................................... $ 1,073.9 $ 28.3 $ 15.2 $ 1,087.0 Mortgage-backed securities ................................ 844.9 14.5 43.0 816.4 Obligations of states and political subdivisions .......... 4.7 0.1 -- 4.8 --------- -------- -------- --------- Total fixed maturities held-to-maturity ................. $ 1,923.5 $ 42.9 $ 58.2 $ 1,908.2 ========= ======== ======== ========= AVAILABLE-FOR-SALE: Corporate securities ...................................... $29,680.2 $1,103.5 $ 879.1 $29,904.6 Mortgage-backed securities ................................ 5,252.7 125.1 98.7 5,279.1 Obligations of states and political subdivisions .......... 93.3 5.5 0.2 98.6 Debt securities issued by foreign governments ............. 457.1 44.7 4.0 497.8 U.S. Treasury securities and obligations of U.S. government corporations and agencies ............... ..... 294.7 3.8 6.5 292.0 --------- -------- -------- --------- Fixed maturities available-for-sale ....................... 35,778.0 1,282.6 988.5 36,072.1 Equity securities ......................................... 433.1 175.5 46.3 562.3 --------- -------- -------- --------- Total fixed maturities and equity securities available-for-sale ..................................... $36,211.1 $1,458.1 $1,034.8 $36,634.4 ========= ======== ======== =========
94 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3. INVESTMENTS (CONTINUED)
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE --------- ---------- ---------- ---------- (IN MILLIONS) DECEMBER 31, 2000 HELD-TO-MATURITY: Corporate securities ...................................... $12,834.7 $553.7 $698.4 $12,690.0 Mortgage-backed securities ................................ 1,202.5 11.5 53.0 1,161.0 Obligations of states and political subdivisions .......... 102.3 3.1 0.9 104.5 Debt securities issued by foreign governments ............. 5.6 4.7 -- 10.3 --------- ------ ------ --------- Total fixed maturities held-to-maturity ................. $14,145.1 $573.0 $752.3 $13,965.8 ========= ====== ====== ========= AVAILABLE-FOR-SALE: Corporate securities ...................................... $10,948.3 $457.1 $478.2 $10,927.2 Mortgage-backed securities ................................ 4,105.0 94.7 33.0 4,166.7 Obligations of states and political subdivisions .......... 25.3 1.8 -- 27.1 Debt securities issued by foreign governments ............. 546.0 67.3 12.0 601.3 U.S. Treasury securities and obligations of U.S. government corporations and agencies ..................... 197.8 5.4 0.1 203.1 --------- ------ ------ --------- Fixed maturities available-for-sale ....................... 15,822.4 626.3 523.3 15,925.4 Equity securities ......................................... 587.6 348.5 90.0 846.1 --------- ------ ------ --------- Total fixed maturities and equity securities available-for-sale governments ......................... $16,410.0 $974.8 $613.3 $16,771.5 ========= ====== ====== =========
95 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3. INVESTMENTS (CONTINUED) The amortized cost and fair value of fixed maturities at December 31, 2001, by contractual maturity, are shown below:
AMORTIZED FAIR COST VALUE --------- --------- (IN MILLIONS) HELD-TO-MATURITY: Due in one year or less ................................... $ 62.9 $ 68.0 Due after one year through five years ..................... 15.4 22.2 Due after five years through ten years .................... 67.7 65.4 Due after ten years ....................................... 932.6 936.2 --------- --------- 1,078.6 1,091.8 Mortgage-backed securities ................................ 844.9 816.4 --------- --------- Total ..................................................... $ 1,923.5 $ 1,908.2 ========= ========= AVAILABLE-FOR-SALE: Due in one year or less ................................... $ 1,861.7 $ 1,905.8 Due after one year through five years ..................... 9,874.3 10,073.3 Due after five years through ten years .................... 10,902.5 10,927.6 Due after ten years ....................................... 7,886.8 7,886.3 --------- --------- 30,525.3 30,793.0 Mortgage-backed securities ................................ 5,252.7 5,279.1 --------- --------- Total ..................................................... $35,778.0 $36,072.1 ========= =========
Expected maturities may differ from contractual maturities because eligible borrowers may exercise their right to call or prepay obligations with or without call or prepayment penalties. The sale of fixed maturities held-to-maturity relate to certain securities with amortized cost of $24.3 million for the year ended December 31, 1999, which were sold due to a significant decline in the issuers' credit quality or as part of the sale of the property and casualty operations in 1999. The related net realized investment and other gains on the sales were $0.9 million in 1999. The change in net unrealized gains (losses) on trading securities that has been included in earnings during 2001, 2000 and 1999 amounted to $(1.8) million, $0.1 million and $(0.1) million, respectively. The Company participates in a security lending program for the purpose of enhancing income on securities held. At December 31, 2001 and 2000, $775.4 million and $88.6 million, respectively, of the Company's securities, at market value, were on loan to various brokers/dealers, and were fully collateralized by cash and highly liquid securities. The market value of the loaned securities is monitored on a daily basis, and the collateral is maintained at a level of at least 102.0% of the loaned securities' market value. For 2001, 2000 and 1999, investment results passed through to participating pension contractholders as interest credited to policyholders' account balances amounted to $170.5 million, $171.7 million and $180.9 million, respectively. 96 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3. INVESTMENTS (CONTINUED) Mortgage loans on real estate are evaluated periodically as part of the Company's loan review procedures and are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The allowance for losses is maintained at a level believed adequate by management to absorb estimated probable credit losses that exist at the balance sheet date. Management's periodic evaluation of the adequacy of the allowance for losses is based on the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay (including the timing of future payments), the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires estimating the amounts and timing of future cash flows expected to be received on impaired mortgage loans that may be susceptible to significant change. Changes in the allowance for probable losses on mortgage loans on real estate and real estate to be disposed of are summarized below.
BALANCE AT BALANCE AT BEGINNING END OF YEAR ADDITIONS DEDUCTIONS OF YEAR ---------- --------- ---------- ------------ (IN MILLIONS) Year ended December 31, 2001 Mortgage loans on real estate....... $ 81.6 $37.8 $ 6.6 $112.8 Real estate to be disposed of....... 43.5 46.0 5.9 83.6 ------ ----- ------ ------ Total................................ $125.1 $83.8 $ 12.5 $196.4 ====== ===== ====== ====== Year ended December 31, 2000 Mortgage loans on real estate....... $107.9 $ 4.6 $ 30.9 $ 81.6 Real estate to be disposed of....... 58.1 17.1 31.7 43.5 ------ ----- ------ ------ Total................................ $166.0 $21.7 $ 62.6 $125.1 ====== ===== ====== ====== Year ended December 31, 1999 Mortgage loans on real estate....... $ 96.0 $38.4 $ 26.5 $107.9 Real estate to be disposed of....... 112.0 22.5 76.4 58.1 ------ ----- ------ ------ Total................................ $208.0 $60.9 $102.9 $166.0 ====== ===== ====== ======
At December 31, 2001 and 2000, the total recorded investment in mortgage loans that are considered to be impaired under SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," along with the related provision for losses were as follows:
DECEMBER 31 2001 2000 -------- --------- (IN MILLIONS) Impaired mortgage loans on real estate with provision for losses.................................... $ 92.5 $ 32.4 Provision for losses..................................... (42.6) (14.9) ------ ------ Net impaired mortgage loans on real estate............... $ 49.9 $ 17.5 ====== ======
97 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3. INVESTMENTS (CONTINUED) The average recorded investment in impaired loans and the interest income recognized on impaired loans were as follows:
YEARS ENDED DECEMBER 31 2001 2000 1999 ------ ------- --------- (IN MILLIONS) Average recorded investment in impaired loans..... $62.5 $100.3 $135.5 Interest income recognized on impaired loans...... 8.4 2.9 4.9
The payment terms of mortgage loans on real estate may be restructured or modified from time to time. Generally, the terms of the restructured mortgage loans call for the Company to receive some form or combination of an equity participation in the underlying collateral, excess cash flows or an effective yield at the maturity of the loans sufficient to meet the original terms of the loans. Restructured commercial mortgage loans aggregated $56.0 million and $60.4 million as of December 31, 2001 and 2000, respectively. The expected gross interest income that would have been recorded had the loans been current in accordance with the original loan agreements and the actual interest income recorded were as follows:
YEARS ENDED DECEMBER 31 2001 2000 1999 ------- ------- --------- (IN MILLIONS) Expected......................................... $5.0 $5.2 $11.1 Actual........................................... 3.8 4.7 7.2
At December 31, 2001, the mortgage portfolio was diversified by specific collateral property type and geographic region as displayed below:
COLLATERAL CARRYING GEOGRAPHIC CARRYING PROPERTY TYTPE AMOUNT CONCENTRATION AMOUNT - ---------------------- ------------- ----------------------- --------------- (IN MILLIONS) (IN MILLIONS) Apartments........... $1,601.7 East North Central.... $1,072.5 Hotels............... 451.6 East South Central.... 490.6 Industrial........... 809.8 Middle Atlantic....... 1,490.4 Office buildings..... 2,601.5 Mountain.............. 417.4 Retail............... 1,429.7 New England........... 891.1 Multi family......... 1.8 Pacific............... 1,823.1 Mixed Use............ 108.0 South Atlantic........ 2,097.5 Agricultural......... 2,532.3 West North Central.... 385.1 Other................ 243.4 West South Central.... 907.0 Canada/Other.......... 205.1 Allowance for losses. (112.8) Allowance for losses.. (112.8) -------- -------- Total................ $9,667.0 Total................. $9,667.0 ======== ========
98 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3. INVESTMENTS (CONTINUED) Mortgage loans with outstanding principal balances of $2.0 million, bonds with amortized cost of $388.7 million and real estate with a carrying value of $0.5 million were non-income producing for the year ended December 31, 2001. Depreciation expense on investment real estate was $4.6 million, $7.9 million, and $7.1 million in 2001, 2000, and 1999, respectively. Accumulated depreciation was $65.1 million and $60.9 million at December 31, 2001 and 2000, respectively. The Company sold $542.9 million, $359.2 million, and $172.0 million of commercial mortgage loans in securitization transactions in 2001, 2000, and 1999, respectively, for which it received net proceeds of $546.1 million, $362.4 million and $175.5 million, in 2001, 2000 and 1999, respectively. During 2001, 2000 and 1999, the Company recognized pre-tax gains of $3.2 million, $3.2 million and $3.5 million, respectively, related to these transactions. As a result of these securitizations, the Company retained mortgage servicing responsibilities which were recorded as servicing assets. These servicing assets were valued at $1.2 million and $0.8 million at December 31, 2001 and 2000, respectively. Investments in other assets, which include unconsolidated joint ventures, partnerships, and limited liability corporations, accounted for by using the equity method of accounting totaled $1,062.1 million and $826.5 million at December 31, 2001 and 2000, respectively. Total combined assets of such investments were $12,541.6 million and $5,040.1 million (consisting primarily of investments), and total combined liabilities were $1,108.6 million and $823.3 million (including $580.0 million and $354.0 million of notes payable) at December 31, 2001 and 2000, respectively. Total combined revenues and expenses of these investments in 2001 were $942.5 million and $645.2 million, respectively, resulting in $297.3 million of total combined income from operations. Total combined revenues and expenses were $508.0 million and $172.7 million, respectively, resulting in $335.3 million of total combined income from operations in 2000. Net investment income on investments accounted for using the equity method totaled $56.4 million, $143.8 million and $65.1 million in 2001, 2000, and 1999 respectively. NOTE 4. DERIVATIVES AND HEDGING INSTRUMENTS The fair value of derivative instruments classified as assets at December 31, 2001 was $331.2 million, and appears on the consolidated balance sheet in other assets. The fair value of derivative instruments classified as liabilities at December 31, 2001 was $580.0 million, and appears on the consolidated balance sheet in other liabilities. Fair Value Hedges The Company uses interest rate futures contracts and interest rate swap agreements as part of its overall strategies of managing the duration of assets and liabilities or the average life of certain asset portfolios to specified targets. Interest rate swap agreements are contracts with a counterparty to exchange interest rate payments of a differing character (e.g., fixed-rate payments exchanged for variable-rate payments) based on an underlying principal balance (notional principal). The net differential to be paid or received on interest rate swap agreements is accrued and recognized as a component of net investment income. The Company also manages interest rate exposure by using interest rate swap agreements to modify certain liabilities, such as fixed rate debt and Constant Maturity Treasuries (CMT) indexed liabilities, by converting them to a LIBOR-based floating rate. 99 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4. DERIVATIVES AND HEDGING INSTRUMENTS The Company enters into interest rate cap agreements, cancelable interest rates swap agreements, and written swaptions to manage the interest rate exposure of options that are embedded in certain assets and liabilities. A written swaption obligates the Company to enter into an interest rate agreement on the expiration date, contingent on future interest rates. Interest rate cap and floor agreements are contracts with a counterparty which require the payment of a premium for the right to receive payments for the difference between the cap or floor interest rate and a market interest rate on specified future dates based on an underlying principal balance (notional principal). Amounts earned on interest rate cap and floor agreements and swaptions are recorded as an adjustment to net investment income. The Company uses equity collar agreements to reduce its equity market exposure with respect to certain common stock investments that the Company holds. A collar consists of a written call option that limits the Company's potential for gain from appreciation in the stock price as well as a purchased put option that limits the Company's potential for loss from a decline in the stock price. Currency rate swap agreements are used to manage the Company's exposure to foreign exchange rate fluctuations. Currency rate swap agreements are contracts to exchange the currencies of two different countries at the same rate of exchange at specified future dates. The net differential to be paid or received on currency rate swap agreements is accrued and recognized as a component of net investment income. For the year ended December 31, 2001, the Company recognized a net loss of $16.5 million related to the ineffective portion of its fair value hedges, and a net gain of $1.9 million, related to the portion of the hedging instruments that were excluded from the assessment of hedge effectiveness. Both of these amounts are recorded in net realized investment and other gains and losses. For the year ended December 31, 2001, all of the Company's hedged firm commitments qualified as fair value hedges. Cash Flow Hedges The Company uses forward starting interest rate swap agreements to hedge the variable cash flows associated with future fixed income asset acquisitions, which will support the Company's long-term care and life insurance businesses. These agreements will reduce the impact of future interest rate changes on the cost of acquiring adequate assets to support the investment income assumptions used in pricing these products. During the periods in the future when the acquired assets are held by the Company, the accumulated gain or loss will be amortized into investment income as a yield adjustment on the assets. The Company used interest rate futures contracts to hedge the variable cash flows associated with variable benefit payments that it will make on certain annuity contracts. Amounts are reclassified from other comprehensive income when benefit payments are made. The Company used interest rate floor agreements to hedge the interest rate risk associated with minimum interest rate guarantees in certain of its life insurance and annuity businesses. Amounts are reclassified from other comprehensive income if interest rates fall below certain levels. For the year ended December 31, 2001, the Company recognized a loss of $0.2 million related to the ineffective portion of its cash flow hedges, and a net gain of $0.4 million related to the portion of the hedging instruments that was excluded from the assessment of hedge effectiveness. Both of these amounts are recorded in net realized investment and other gains and losses. For the year ended December 31, 2001, all of the Company's hedged forecast transactions qualified as cash flow hedges. For the year ended December 31, 2001, a net loss of $0.2 million was reclassified from other accumulated comprehensive income to earnings. It is anticipated that approximately $0.6 million of net gains will be reclassified from other accumulated comprehensive income to earnings within the next twelve months. The maximum length for which variable cash flows are hedged is 24 years. 100 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4. DERIVATIVES AND HEDGING INSTRUMENTS (CONTINUED) For the year ended December 31, 2001, none of the Company's cash flow hedges have been discontinued because it was probable that the original forecasted transactions would not occur by the end of the originally specified time period documented at inception of the hedging relationship. The transition adjustment for the adoption of SFAS No. 133, as amended, resulted in an increase in other comprehensive income of $23.0 million (net of tax of $12.3 million) representing the accumulation in other comprehensive income of the effective portion of the Company's cash flow hedges as of January 1, 2001. For the year ended December 31, 2001, $3.8 million of loss (net of tax of $2.1 million) representing the effective portion of the change in fair value of derivative instruments designated as cash flow hedges was added to accumulated other comprehensive income, resulting in a balance of $19.1 million (net of tax of $10.3 million). Derivatives Not Designated as Hedging Instruments The Company enters into interest rate swap agreements, cancelable interest rate swap agreements, interest rate futures contracts, and interest rate cap and floor agreements to manage exposure to interest rates as described above under Fair Value Hedges without designating the derivatives as hedging instruments. NOTE 5. INCOME TAXES The Company participates in the filing of a life/non-life consolidated federal income tax return. The life company sub-group includes three domestic life insurance companies (the Company, John Hancock Variable Life Insurance Company and Investors Partner Life Insurance Company) and a Bermuda life insurance company (John Hancock Reassurance Company, Ltd.) that is treated as a U.S. company for federal income tax purposes. The non-life subgroup consists of John Hancock Financial Services, Inc., John Hancock Subsidiaries, LLC and John Hancock International Holdings, Inc. In addition to taxes on operations, mutual life insurance companies are charged an equity base tax. As the Company was a mutual life insurance company for the entire year 1999, it was subject to the re-computation of its 1999 equity base tax liability in its 2000 tax return. The equity base tax is determined by application of an industry-based earnings rate to mutual companies' average equity base, as defined by the Internal Revenue Code. The industry earnings rate is determined by the Internal Revenue Service (IRS) and is not finalized until the subsequent year. The Company estimated its taxes for the current year based on estimated industry earnings rates and revised these estimates up or down when the earnings rates were finalized and published by the IRS in the subsequent year. Income before income taxes and cumulative effect of accounting changes includes the following:
YEARS ENDED DECEMBER 31 2001 2000 1999 ------- -------- -------- (IN MILLIONS) Domestic.................................................... $761.8 $1,093.5 $210.7 Foreign..................................................... 5.6 7.6 6.4 ------ -------- ------ Income before income taxes and cumulative effect of accounting changes...................................... $767.4 $1,101.1 $217.1 ====== ======== ======
101 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5. INCOME TAXES (CONTINUED) The components of income taxes were as follows:
YEARS ENDED DECEMBER 31 2001 2000 1999 ------- ------- -------- (IN MILLIONS) CURRENT TAXES: Federal......................................... $ (9.9) $ 15.7 $(34.1) Foreign......................................... 3.1 1.2 2.3 State........................................... 4.6 12.0 5.8 ------ ------ ------ (2.2) 28.9 (26.0) DEFERRED TAXES: Federal......................................... 210.5 279.4 108.6 Foreign......................................... (0.9) 1.6 -- State........................................... (6.7) (1.0) (1.1) ------ ------ ------ 202.9 280.0 107.5 ------ ------ ------ Total income taxes............................... $200.7 $308.9 $ 81.5 ====== ====== ======
A reconciliation of income taxes computed by applying the federal income tax rate to income before income taxes and the consolidated income tax expense charged to operations follows:
YEARS ENDED DECEMBER 31 2001 2000 1999 ------- ------- -------- (IN MILLIONS) Tax at 35%....................................... $268.6 $385.4 $ 76.0 Add (deduct): Equity base tax................................. (13.4) (46.0) 22.2 Prior year taxes................................ 9.9 (0.3) 1.8 Tax credits..................................... (28.1) (20.6) (12.9) Foreign taxes................................... 1.3 0.4 1.0 Tax exempt investment income.................... (25.7) (11.5) (14.4) Non-taxable gain on sale of subsidiary.......... -- -- (15.4) Disallowed demutualization expenses............. -- -- 31.1 Other........................................... (11.9) 1.5 (7.9) ------ ------ ------ Total income taxes............................ $200.7 $308.9 $ 81.5 ====== ====== ======
102 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5. INCOME TAXES (CONTINUED) The significant components of the Company's deferred tax assets and liabilities were as follows:
DECEMBER 31 2001 2000 -------- --------- (IN MILLIONS) DEFERRED TAX ASSETS: Policy reserve adjustments............................. $ 485.5 $ 492.2 Other postretirement benefits.......................... 136.6 148.9 Book over tax basis of investments..................... 418.1 299.5 Dividends payable to policyholders..................... 125.7 117.6 Interest............................................... 34.5 38.3 Other.................................................. 163.1 51.2 -------- -------- Total deferred tax assets 1,363.5 1,147.7 -------- -------- DEFERRED TAX LIABILITIES: Deferred policy acquisition costs...................... 824.5 649.1 Depreciation........................................... 214.2 211.7 Basis in partnerships.................................. 130.7 109.8 Market discount on bonds............................... 72.9 64.2 Pension plan expense................................... 133.6 104.0 Capitalized charges related to mutual funds............ 31.5 56.9 Lease Income........................................... 523.2 339.4 Unrealized gains....................................... 135.8 56.7 -------- -------- Total deferred tax liabilities....................... 2,066.4 1,591.8 -------- -------- Net deferred tax liabilities......................... $ 702.9 $ 444.1 ======== ========
The Company made an income tax payment of $3.7 million, received an income tax refund of $21.7 million and made an income tax payment of $83.4 million in 2001, 2000 and 1999, respectively. 103 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6. CLOSED BLOCK As of February 1, 2000, the Company established a closed block for the benefit of certain classes of individual or joint traditional participating whole life insurance policies for which the Company had a dividend scale payable in 1999 and individual term life insurance policies that were in force on February 1, 2000. Assets were allocated to the closed block in an amount that, together with anticipated revenues from policies included in the closed block, was reasonably expected to be sufficient to support such business, including provision for payment of benefits, direct asset acquisition and disposition costs, and taxes, and for continuation of dividend scales payable in 1999, assuming experience underlying such dividend scales continues. Assets allocated to the closed block inure solely to the benefit of the holders of the policies included in the closed block and will not revert to the benefit of the shareholders of JHFS. 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 approval of the Massachusetts Division of Insurance. If, over time, the aggregate performance of the closed block assets and policies is better than was assumed in funding the closed block, dividends to policyholders will be increased. If, over time, the aggregate performance of the closed block assets and policies is less favorable than was assumed in the funding, dividends to policyholders could be reduced. The assets and liabilities allocated to the closed block are recorded in the Company's financial statements on the same basis as other similar assets and liabilities. The carrying amount of closed block liabilities in excess of the carrying amount of closed block assets at the date of demutualization (adjusted to eliminate the impact of related amounts in accumulated other comprehensive income) represents the maximum future earnings from the assets and liabilities designated to the closed block that can be recognized in income over the period the policies in the closed block remain in force. The Company has developed an actuarial calculation of the timing of such maximum future shareholder earnings, and this is the basis of the policyholder dividend obligation. If actual cumulative earnings are greater than expected cumulative earnings, only expected earnings will be recognized in income. Actual cumulative earnings in excess of expected cumulative earnings represents undistributed accumulated earnings attributable to policyholders, which are recorded as a policyholder dividend obligation because the excess will be paid to closed block policyholders as an additional policyholder dividend unless otherwise offset by future performance of the closed block that is less favorable than originally expected. If actual cumulative performance is less favorable than expected, only actual earnings will be recognized in income. The principal cash flow items that affect the amount of closed block assets and liabilities are premiums, net investment income, purchases and sales of investments, policyholders' benefits, policyholder dividends, premium taxes, guaranty fund assessments, and income taxes. The principal income and expense items excluded from the closed block are management and maintenance expenses, commissions and net investment income and realized investment gains and losses of investment assets outside the closed block that support the closed block business, all of which enter into the determination of total gross margins of closed block policies for the purpose of the amortization of deferred acquisition costs. The amounts shown in the following tables for assets, liabilities, revenues and expenses of the closed block are those that enter into the determination of amounts that are to be paid to policyholders. 104 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6. CLOSED BLOCK (CONTINUED) The following tables set forth certain summarized financial information relating to the closed block as of the dates indicated:
DECEMBER 31, DECEMBER 31, 2001 2000 ------------ -------------- (IN MILLIONS) LIABILITIES Future policy benefits................................. $10,198.7 $ 9,910.5 Policyholder dividend obligation....................... 251.2 77.0 Policyholders' funds................................... 1,460.9 1,459.5 Policyholder dividends payable......................... 433.4 409.8 Other closed block liabilities......................... 53.7 84.6 --------- --------- Total closed block liabilities........................ 12,397.9 11,941.4 --------- --------- ASSETS Investments Fixed maturities: Held-to-maturity--at amortized cost (fair value: 2001--$100.7; 2000--$2,327.4)........... 103.3 2,269.9 Available-for-sale--at fair value (cost: 2001--$5,204.0; 2000--$2,378.7)............... 5,320.7 2,353.0 Equity securities: Available-for-sale--at fair value (cost: 2001--$8.8; 2000--$5.3)........................ 13.4 6.3 Mortgage loans on real estate.......................... 1,837.0 1,944.0 Policy loans........................................... 1,551.9 1,540.6 Short-term investments................................. -- 62.1 Other invested assets.................................. 83.1 40.7 --------- --------- Total investments..................................... 8,909.4 8,216.6 Cash and cash equivalents.............................. 192.1 305.6 Accrued investment income.............................. 158.9 149.3 Other closed block assets.............................. 297.5 317.1 --------- --------- Total closed block assets............................. 9,557.9 8,988.6 --------- --------- Excess of reported closed block liabilities over assets designated to the closed block................. 2,840.0 2,952.8 --------- --------- Portion of above representing other comprehensive income: Unrealized appreciation (depreciation), net of tax of $43.3 million and $(8.8) million at 2001 and 2000, respectively............................... 80.1 (16.1) Allocated to the policyholder dividend obligation, net of tax $50.8 million and $4.7 million at 2001 and 2000, respectively............................... (94.4) (8.8) --------- --------- Total............................................... (14.3) (24.9) --------- --------- Maximum future earnings to be recognized from closed block assets and liabilities.......................... $ 2,825.7 $ 2,927.9 ========= =========
105 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6. CLOSED BLOCK (CONTINUED)
DECEMBER 31, DECEMBER 31, 2001 2000 ------------ ----------- (IN MILLIONS) Change in the policyholder dividend obligation: Balance at beginning of period................................ $ 77.0 -- Impact on net income before income taxes.................... 42.5 $63.5 Unrealized investment gains (losses)........................ 67.1 13.5 Cumulative effect of change in accounting principle (1)..... 64.6 -- ------ ----- Balance at end of period................................... $251.2 $77.0 ====== =====
(1) The cumulative effect of change in accounting principle represents the impact of transferring fixed maturities from held-to-maturity to available-for-sale as part of the adoption of SFAS No. 133 effective January 1, 2001. See Note 1.
FOR THE PERIOD YEAR FEBRUARY 1 ENDED THROUGH DECEMBER 31, DECEMBER 31, 2001 2000 ------------ -------------- (IN MILLIONS) REVENUES Premiums.......................................................... $ 940.0 $ 865.0 Net investment income............................................. 667.5 591.6 Net realized investment and other gains (losses), net of amounts credited to the policyholder dividend obligation of $(17.0) million and $14.1 million, respectively.................. (3.6) (2.9) Other closed block revenues....................................... 0.6 (0.6) -------- -------- Total closed block revenues...................................... 1,604.5 1,453.1 BENEFITS AND EXPENSES Benefits to policyholders......................................... 924.4 870.0 Change in policyholder dividend obligation........................ 54.9 46.6 Other closed block operating costs and expenses................... (6.3) (10.0) Dividends to policyholders........................................ 474.9 407.1 -------- -------- Total benefits and expenses...................................... 1,447.9 1,313.7 -------- -------- Closed block revenues, net of closed block benefits and expenses, before income taxes and cumulative effect of accounting change... 156.6 139.4 Income taxes, net of amounts credited to the policyholder dividend obligation of $4.6 million and $2.8 million, respectively........ 53.0 52.3 -------- -------- Closed block revenues, net of closed block benefits and expenses and income taxes, before cumulative effect of accounting change.. 103.6 87.1 -------- -------- Cumulative effect of accounting change, net of tax................ (1.4) -- -------- -------- Closed block revenu.es, net of closed block benefits and expenses, income taxes and the cumulative effect of accounting change...... $ 102.2 $ 87.1 ======== ========
106 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6. CLOSED BLOCK (CONTINUED) Maximum future earnings from closed block assets and liabilities:
FOR THE PERIOD YEAR FEBRUARY 1 ENDED THROUGH DECEMBER 31, DECEMBER 31, 2001 2000 ------------ ---------------- (IN MILLIONS) Beginning of period........................... $2,927.9 $3,015.0 End of period................................. 2,825.7 2,927.9 -------- -------- Change during period......................... $ 102.2 $ 87.1 ======== ========
NOTE 7. DEBT AND LINE OF CREDIT Short-term and long-term debt consists of the following:
DECEMBER 31 2001 2000 --------- --------- (IN MILLIONS) SHORT-TERM DEBT: Commercial paper............................................................ -- $222.3 Current maturities of long-term debt........................................ $ 124.6 23.0 ------- ------ Total short-term debt........................................................ 124.6 245.3 ------- ------ LONG-TERM DEBT: Surplus notes, 7.38% maturing in 2024....................................... 447.3 447.2 Notes payable, interest ranging from 5.43% to 14.0%, due in varying amounts through 2007....................................................... 296.0 109.8 ------- ------ Total long-term debt......................................................... 743.3 557.0 Less current maturities...................................................... (124.6) (23.0) ------- ------ Long-term debt............................................................... 618.7 534.0 ------- ------ Total debt................................................................. $ 743.3 $779.3 ======= ======
The Company issues commercial paper primarily to meet working capital needs. The Company had no commercial paper outstanding at December 31, 2001. The weighted-average interest rate for outstanding commercial paper at December 31, 2000 was 6.59%. The weighted-average life for outstanding commercial paper at December 31, 2000 was approximately 11 days. Commercial paper borrowing arrangements are supported by a syndicated line of credit. The issuance of surplus notes was approved by the Massachusetts Commissioner of Insurance, and any payments of interest or principal on the surplus notes requires the prior approval of the Massachusetts Commissioner of Insurance. At December 31, 2001, the Company had a syndicated line of credit with a group of banks totaling $1.0 billion, $500.0 million pursuant to a 364-day commitment which expires on July 26, 2002 and $500.0 million pursuant to a multi-year facility, which expires on August 3, 2005. The banks will commit, when requested, to loan funds at prevailing interest rates as determined in accordance with the line of credit agreement. Under the terms of the agreement, the Company is required to maintain certain minimum levels of net worth and comply with certain other covenants, which were met at December 31, 2001. At December 31, 2001, the Company had no outstanding borrowings under the agreement. 107 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7. DEBT AND LINE OF CREDIT (CONTINUED) Aggregate maturities of long-term debt are as follows: 2002-$124.6 million; 2003-$32.2 million; 2004-$31.5 million; 2005-$25.4 million; 2006-$7.5 million and thereafter-$522.1 million. Interest expense on debt, included in other operating costs and expenses, was $59.0 million, $62.6 million, and $70.1 million in 2001, 2000 and 1999, respectively. Interest paid amounted to $55.8 million in 2001, $63.4 million in 2000, and $70.1 million in 1999. NOTE 8. MINORITY INTEREST Minority interest relates to preferred stock issued by Signature Tomato, a subsidiary of Signature Fruit, a subsidiary of the Company, which acquired certain assets and assumed certain liabilities out of bankruptcy proceedings of Tri-Valley Growers, Inc., a cooperative association, and equity interests in consolidated partnerships. For financial reporting purposes, the assets, the liabilities, and earnings of Signature Fruit and the partnerships are consolidated in the Company's financial statements. In conjunction with the transaction discussed above, Signature Tomato, a subsidiary of Signature Fruit, issued $2.1 million of 14.24% cumulative, voting preferred stock in exchange for debt. In addition, Signature Fruit sold 3.0% of its Class A membership shares to outside third parties with put options exercisable in a period from one to three years from acquisition. All amounts arising from these transactions have been included in minority interest in the accompanying consolidated balance sheets. The minority interest in the equity of consolidated partnerships of approximately $26.1 million reflects the original investment by minority shareholders in various consolidated partnerships, along with their proportional share of the earnings or losses of these partnerships. NOTE 9. REINSURANCE The effect of reinsurance on premiums written and earned was as follows:
2001 2000 1999 PREMIUMS PREMIUMS PREMIUMS WRITTEN EARNED WRITTEN EARNED WRITTEN EARNED ---------- ---------- ---------- ---------- ---------- ------------ (IN MILLIONS) LIFE, HEALTH AND ANNUITY: Direct.................................... $ 3,076.8 $ 3,080.7 $ 3,181.1 $ 3,180.3 $ 2,940.2 $ 2,938.3 Assumed................................... 427.7 427.7 465.3 465.4 311.3 311.3 Ceded..................................... (1,156.5) (1,156.5) (1,255.0) (1,255.0) (1,228.5) (1,228.5) --------- --------- --------- --------- --------- --------- Net life, health and annuity premiums.... 2,348.0 2,351.9 2,391.4 2,390.7 2,023.0 2,021.1 --------- --------- --------- --------- --------- --------- PROPERTY AND CASUALTY: Direct.................................... -- -- -- -- -- -- Assumed................................... -- -- -- -- 0.3 0.3 Ceded..................................... -- -- -- -- -- -- --------- --------- --------- --------- --------- --------- Net property and casualty premiums....... -- -- -- -- 0.3 0.3 --------- --------- --------- --------- --------- --------- Net premiums........................... $ 2,348.0 $ 2,351.9 $ 2,391.4 $ 2,390.7 $ 2,023.3 $ 2,021.4 ========= ========= ========= ========= ========= =========
108 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9. REINSURANCE (CONTINUED) For the years ended December 31, 2001, 2000 and 1999, benefits to policyholders under life, health and annuity ceded reinsurance contracts were $552.7 million, $649.4 million, and $514.5 million, respectively. On February 28, 1997, the Company sold a major portion of its group insurance business to UNICARE Life & Health Insurance Company (UNICARE), a wholly owned subsidiary of WellPoint Health Networks, Inc. The business sold included the Company's group accident and health business and related group life business and Cost Care, Inc., Hancock Association Services Group and Tri-State, Inc., all of which were indirect wholly-owned subsidiaries of the Company. The Company retained its group long-term care operations. The insurance business sold was transferred to UNICARE through a 100% coinsurance agreement. The Company remains liable to its policyholders to the extent that UNICARE does not meet its contractual obligations under the coinsurance agreement. Through the Company's group health insurance operations, the Company entered into a number of reinsurance arrangements in respect of personal accident insurance and the occupational accident component of workers compensation insurance, a portion of which was originated through a pool managed by Unicover Managers, Inc. Under these arrangements, the Company both assumed risks as a reinsurer, and also passed 95% of these risks on to other companies. This business had originally been reinsured by a number of different companies, and has become the subject of widespread disputes. The disputes concern the placement of the business with reinsurers and recovery of the reinsurance. The Company is engaged in disputes, including a number of legal proceedings, in respect of this business. The risk to the Company is that other companies that reinsured the business from the Company may seek to avoid their reinsurance obligations. However, the Company believes that it has a reasonable legal position in this matter. During the fourth quarter of 1999 and early 2000, the Company received additional information about its exposure to losses under the various reinsurance programs. As a result of this additional information and in connection with global settlement discussions initiated in late 1999 with other parties involved in the reinsurance programs, during the fourth quarter of 1999 the Company recognized a charge for uncollectible reinsurance of $133.7 million, after tax, as its best estimate of its remaining loss exposure. The Company believes that any exposure to loss from this issue, in addition to amounts already provided for as of December 31, 2001, would not be material. Reinsurance ceded contracts do not relieve the Company from its obligations to policyholders. The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet its obligations for reinsurance ceded to it under the reinsurance agreements. Failure of the reinsurers to honor their obligations could result in losses to the Company; consequently, estimates are established for amounts deemed or estimated to be uncollectible. To minimize its exposure to significant losses from reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from similar characteristics of the reinsurers. 109 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10. PENSION BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS The Company provides pension benefits to substantially all employees and general agency personnel. These benefits are provided through both qualified defined benefit and defined contribution pension plans. In addition, through nonqualified plans, the Company provides supplemental pension benefits to employees with salaries and/ or pension benefits in excess of the qualified plan limits imposed by federal tax law. Pension benefits under the defined benefit plans had been based on years of service and average compensation generally during the three years prior to retirement. In 2001, the defined benefit pension plans were amended to a cash balance basis under which benefits are based on career average compensation. Under grandfathering rules, employees over a certain age and with at least a certain number of years of service will receive pension benefits based on the greater of the benefit from the cash balance basis or the prior final average salary basis. This amendment became effective on January 1, 2002. Benefits related to the Company's defined benefit pension plans paid to employees and retirees covered by annuity contracts issued by the Company amounted to $115.9 million in 2001, $102.2 million in 2000, and $97.6 million in 1999. Plan assets consist principally of listed equity securities and corporate obligations and U.S. government securities. The Company's funding policy for qualified defined benefit plans is to contribute annually an amount in excess of the minimum annual contribution required under the Employee Retirement Income Security Act (ERISA). This amount is limited by the maximum amount that can be deducted for federal income tax purposes. Because the qualified defined benefit plans are overfunded, no amounts were contributed to these plans in 2001 or 2000. The funding policy for nonqualified defined benefit plans is to contribute the amount of the benefit payments made during the year. The projected benefit obligation and accumulated benefit obligation for the non-qualified defined benefit pension plans, which are underfunded, for which accumulated benefit obligations are in excess of plan assets were $258.7 million, and $236.2 million, respectively, at December 31, 2001, and $256.3 million, and $244.3 million, respectively, at December 31, 2000. Non-qualified plan assets, at fair value, were $4.6 million and $0.8 million at December 31, 2000 and 1999, respectively. Defined contribution plans include The Investment Incentive Plan and the Savings and Investment Plan. The expense for defined contribution plans was $10.6 million, $8.3 million, and $8.3 million, in 2001, 2000 and 1999, respectively. In addition to the Company's defined benefit pension plans, the Company has employee welfare plans for medical, dental, and life insurance covering most of its retired employees and general agency personnel. Substantially all employees may become eligible for these benefits if they reach certain age and service requirements while employed by the Company. The postretirement health care and dental coverages are contributory based on service for post January 1, 1992 non-union retirees. A small portion of pre-January 1, 1992 non-union retirees also contribute. The applicable contributions are based on service. The Company's policy is to fund postretirement benefits in amounts at or below the annual tax qualified limits. As of December 31, 2001 and 2000, plan assets related to non-union employees were comprised of an irrevocable health insurance contract to provide future health benefits to retirees. Plan assets related to union employees were comprised of approximately 60% equity securities and 40% fixed income investments. 110 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10. PENSION BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED) The changes in benefit obligation and plan assets related to the Company's qualified and nonqualified benefit plans are summarized as follows:
YEARS ENDED DECEMBER 31 OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ----------------------- ----------------------- 2001 2000 2001 2000 ---------- ---------- ---------- ---------- (IN MILLIONS) CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year........................... $1,803.6 $1,905.3 $ 486.8 $ 443.2 Service cost...................................................... 30.7 34.0 5.9 7.8 Interest cost .................................................... 129.1 129.2 31.8 30.9 Amendments........................................................ 50.1 (10.3) (48.3) -- Actuarial loss (gain) ............................................ 46.7 (143.7) (1.3) 36.6 Benefits paid .................................................... (127.1) (110.9) (29.6) (31.7) Curtailment ...................................................... -- -- (3.9) -- -------- -------- ------- ------- Benefit obligation at end of year................................. 1,933.1 1,803.6 441.4 486.8 -------- -------- ------- ------- CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year ................... 2,410.9 2,384.4 261.4 232.9 Actual return on plan asset....................................... (105.8) 125.2 (6.7) 0.3 Employer contribution ............................................ 18.9 12.2 -- 35.5 Benefits paid .................................................... (127.1) (110.9) (9.0) (7.3) -------- -------- ------- ------- Fair value of plan assets at end of year ......................... 2,196.9 2,410.9 245.7 261.4 -------- -------- ------- ------- Funded status...................................................... 263.8 607.3 (195.7) (225.4) Unrecognized actuarial loss (gain)................................. 24.3 (400.5) (95.3) (139.7) Unrecognized prior service cost.................................... 67.9 24.1 (47.5) (1.4) Unrecognized net transition asset ................................. 0.1 0.2 -- -- -------- -------- ------- ------- Prepaid (accrued) benefit cost, net ............................... $ 356.1 $ 231.1 $(338.5) $(366.5) ======== ======== ======= ======= AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS CONSIST OF: Prepaid benefit cost.............................................. $ 523.9 $ 380.7 Accrued benefit liability ........................................ (231.6) (243.5) Intangible asset.................................................. 0.5 6.0 Accumulated other comprehensive income ........................... 63.3 87.9 -------- -------- Prepaid benefit cost, net.......................................... $ 356.1 $ 231.1 ======== ========
111 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10. PENSION BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED) The assumptions used in accounting for the Company's qualified and nonqualified benefit plans were as follows:
YEARS ENDED DECEMBER 31 OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ------------------------ --------------------- 2001 2000 2001 2000 ----------- ----------- ---------- --------- Discount rate.................................. 7.25% 7.25% 7.25% 7.25% Expected return on plan assets................. 9.50% 9.00% 9.50% 9.00% Rate of compensation increase.................. 4.20% 4.77% 4.20% 4.77%
For measurement purposes, an 8.75% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2002. The rate was assumed to decrease gradually to 5.25% in 2006 and remain at that level thereafter. For the prior valuation, a 5.50% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001. The rate was assumed to decrease gradually to 5.25% in 2001 and remain at that level thereafter. The net periodic benefit (credit) cost related to the Company's qualified and nonqualified benefit plans includes the following components:
YEARS ENDED DECEMBER 31 OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ---------------------------- --------------------------- 2001 2000 1999 2001 2000 1999 -------- -------- -------- ------- ------- --------- (IN MILLIONS) Service cost................................... $ 30.7 $ 34.0 $ 33.8 $ 5.9 $ 7.8 $ 7.5 Interest cost.................................. 129.1 129.2 119.0 31.8 30.9 28.7 Expected return on plan assets................. (223.8) (209.9) (182.9) (24.4) (24.1) (18.3) Amortization of transition asset............... 0.1 (12.0) (12.1) -- -- -- Amortization of prior service cost............. 6.5 4.6 3.9 (2.2) (0.2) (0.2) Recognized actuarial gain...................... (18.3) (9.3) (6.3) (6.8) (8.7) (8.5) Other.......................................... -- -- -- (3.9) -- -- ------- ------- ------- ------ ------ ------ Net periodic benefit (credit) cost............ $ (75.7) $ (63.4) $ (44.6) $ 0.4 $ 5.7 $ 9.2 ======= ======= ======= ====== ====== ======
Assumed health care cost trend rates have a significant effect on the amounts reported for the healthcare plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
1-PERCENTAGE 1-PERCENTAGE POINT INCREASE POINT DECREASE -------------- ---------------- (IN MILLIONS) Effect on total of service and interest costs in 2001......................... $ 4.0 $ (3.7) Effect on postretirement benefit obligations as of December 31, 2001.......... 42.2 (38.8)
112 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 11. COMMITMENTS AND CONTINGENCIES The Company has extended commitments to purchase fixed maturity investments, preferred and common stock, and other invested assets and to issue mortgage loans on real estate totaling $518.4 million, $0.3 million, $491.2 million and $212.9 million, respectively at December 31, 2001. If funded, loans related to real estate mortgages would be fully collateralized by related properties. The Company monitors the creditworthiness of borrowers under long-term bond commitments and requires collateral as deemed necessary. The estimated fair values of the commitments described above aggregate $1.2 billion at December 31, 2001. The majority of these commitments expire in 2002. In the normal course of its business operations, the Company is involved with litigation from time to time with claimants, beneficiaries and others, and a number of litigation matters were pending as of December 31, 2001. It is the opinion of management, after consultation with counsel, that the ultimate liability with respect to these claims, if any, will not materially affect the financial position or results of operations of the Company. Class Action During 1997, the Company entered into a court-approved settlement relating to a class action lawsuit involving certain individual life insurance policies sold from 1979 through 1996. In entering into the settlement, the Company specifically denied any wrongdoing. The total reserve held in connection with the settlement to provide for relief to class members and for legal and administrative costs associated with the settlement amounted to $52.7 million and $224.0 million at December 31, 2001 and 2000, respectively. Costs incurred related to the settlement were $30.0 million and $140.2 million in 2001 and 1999, respectively. No such costs were incurred in 2000. The estimated reserve is based on a number of factors, including the estimated cost per claim and the estimated costs to administer the claims. During 1996, management determined that it was probable that a settlement would occur and that a minimum loss amount could be reasonably estimated. Accordingly, the Company recorded its best estimate based on the information available at the time. The terms of the settlement agreement were negotiated throughout 1997 and approved by the court on December 31, 1997. In accordance with the terms of the settlement agreement, the Company contacted class members during 1998 to determine the actual type of relief to be sought by class members. The majority of the responses from class members were received by the fourth quarter of 1998. The type of relief sought by class members differed from the Company's previous estimates, primarily due to additional outreach activities by regulatory authorities during 1998 encouraging class members to consider alternative dispute resolution (ADR) relief. In 1999, the Company updated its estimate of the cost of claims subject to alternative dispute resolution relief and revised its reserve estimate accordingly. The reserve estimate was further evaluated quarterly, and was adjusted as noted above, in the fourth quarter of 2001. The adjustment to the reserve in 2001 was the result of the Company being able to better estimate the cost of settling the remaining claims, which on average tend to be larger, more complicated claims. The better estimate comes from experience with actual settlements on similar claims. Administration of the ADR component of the settlement continues to date. Although some uncertainty remains as to the cost of claims in the final phase (i.e., arbitration) of the ADR process, it is expected that the final cost of the settlement will not differ materially from the amounts presently provided for by the Company. 113 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 11. COMMITMENTS AND CONTINGENCIES (CONTINUED) Harris Trust Since 1983, the Company has been involved in complex litigation known as Harris Trust and Savings Bank, as Trustee of Sperry Master Retirement Trust No. 2 v. John Hancock Mutual Life Insurance Company (S.D.N.Y. Civ. 83-5491). After successive appeals to the Second Circuit and to the U.S. Supreme Court, the case was remanded to the District Court and tried to a Federal District Court judge in 1997.The judge issued an opinion in November 2000. In that opinion the Court found against the Company and awarded the Trust approximately $13.8 million in relation to this claim together with unspecified additional pre-judgment interest on this amount from October 1988. The Court also found against the Company on issues of liability valuation and ERISA law. Damages in the amount of approximately $5.7 million, together with unspecified pre-judgment interest from December 1996, were awarded on these issues. As part of the relief, the judge ordered the removal of Hancock as a fiduciary to the plan. On April 11, 2001, the Court entered a judgment against the Company for approximately $84.9 million, which includes damages to the plaintiff, pre-judgment interest, attorney's fees and other costs. The Company believes that the underlying case was incorrectly decided and there are promising grounds for challenging the District Court's decision. Therefore, the Company has filed an appeal and believes that it is probable that the Appeals Court will reverse the lower court's decision. Notwithstanding what the Company believes to be the merits of the Company's position in this case, if unsuccessful, its ultimate liability, including fees, costs and interest could have a material adverse impact on net income. However, the Company does not believe that any such liability would be material in relation to its financial position or liquidity. 114 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12. SHAREHOLDER'S EQUITY (a) Common Stock As result of the Reorganization, as described in Note 1, the Company was converted to a stock life insurance company. The Company has one class of capital stock, common stock ($10,000 par value, 1,000 shares authorized and outstanding). All of the outstanding common stock of the Company is owned by JHFS, the parent. (b) Other Comprehensive Income The components of accumulated other comprehensive income are as follows:
NET ACCUMULATED FOREIGN ACCUMULATED NET GAIN (LOSS) CURRENCY MINIMUM OTHER UNREALIZED ON CASH FLOW TRANSLATION PENSION COMPREHENSIVE GAINS (LOSSES) HEDGES ADJUSTMENT LIABILITY INCOME -------------- ------------- ----------- ---------- ------------- (IN MILLIONS) Balance at December31, 1998....................... $ 320.5 -- $(0.7) $(38.3) $ 281.5 Gross unrealized gains (losses) (net of deferred income tax benefit of $234.7 million)....................... (453.8) -- -- -- (453.8) Reclassification (losses), realized in net income (net of tax expense of $4.5 million).................................... 8.2 -- -- -- 8.2 Adjustment for participating group annuity contracts (net of deferred income tax expense of $40.1 million)........................ 74.6 -- -- -- 74.6 Adjustment for deferred policy acquisition costs and present value of future profits (net of deferred income tax expense of $60.7 million)........................ 119.6 -- -- -- 119.6 ------- ---- ----- ------ ------- Net unrealized gains (losses)..................... (251.4) -- -- -- (251.4) Foreign currency translation adjustment....................................... -- -- (1.8) -- (1.8) Minimum pension liability (net of deferred income tax benefit of $12.3 million)........................ -- -- -- (22.9) (22.9) ------- ---- ----- ------ ------- Balance at December 31, 1999...................... $ 69.1 -- $(2.5) $(61.2) $ 5.4 ======= ==== ===== ====== =======
115 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12. SHAREHOLDER'S EQUITY (CONTINUED)
NET ACCUMULATED FOREIGN ACCUMULATED NET GAIN (LOSS) CURRENCY MINIMUM OTHER UNREALIZED ON CASH FLOW TRANSLATION PENSION COMPREHENSIVE GAINS (LOSSES) HEDGES ADJUSTMENT LIABILITY INCOME -------------- ------------- ----------- ---------- ------------- (IN MILLIONS) Balance at December 31, 1999 ............................ $ 69.1 -- $(2.5) $(61.2) $ 5.4 Gross unrealized gains (losses) (net of deferred income tax benefit of $8.1 million) ............................... (12.7) -- -- -- (12.7) Reclassification adjustments for gains (losses), realized in net income (net of tax expense of $59.8 million) ......................................... 111.2 -- -- -- 111.2 Adjustment for participating group annuity contracts (net of deferred income tax expense of $3.6 million) ............................... (6.8) -- -- -- (6.8) Adjustment for policyholder dividend obligation (net of income tax benefit of $4.7 million................................. (8.8) -- -- -- (8.8) Adjustment for deferred policy acquisition costs and present value of future profits (net of deferred income tax expense of $15.4 million) .............................. (28.3) -- -- -- (28.3) ------ ------ ----- ------ ------ Net unrealized gains (losses) ........................... 54.6 -- -- -- 54.6 Foreign currency translation adjustment ............................................. -- -- (1.5) -- (1.5) Minimum pension liability (net of deferred income tax benefit of $4.4 million) ............................... -- -- -- 8.2 8.2 ------ ------ ----- ------ ------ Balance at December 31, 2000 ............................ $123.7 -- $(4.0) $(53.0) $ 66.7 ====== ====== ===== ====== ======
116 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12. SHAREHOLDER'S EQUITY (CONTINUED)
NET ACCUMULATED FOREIGN ACCUMULATED NET GAIN (LOSS) CURRENCY MINIMUM OTHER UNREALIZED ON CASH FLOW TRANSLATION PENSION COMPREHENSIVE GAINS (LOSSES) HEDGES ADJUSTMENT LIABILITY INCOME -------------- ------------- ----------- ---------- ------------- (IN MILLIONS) Balance at December 31, 2000 .................. $123.7 -- $(4.0) $(53.0) $ 66.7 Gross unrealized gains (losses) (net of deferred income tax benefit of $49.1 million) .................... (88.3) -- -- -- (88.3) Reclassification adjustment for gains (losses), realized in net income (net of tax expense of $80.8 million) ............................... 150.1 -- -- -- 150.1 Adjustment for participating group annuity contracts (net of deferred income tax benefit of $5.1 million) ..................... (9.5) -- -- -- (9.5) Adjustment for deferred policy acquisition costs and present value of future profits (net of deferred income tax benefit of $25.8 million) ............................ (47.8) -- -- -- (47.8) Adjustment for net shadow policyholder dividend obligation (net of tax benefit of $46.1 million) ............................ (85.6) -- -- -- (85.6) ------ ----- ----- ------ ------ Net unrealized gains (losses) (81.1) -- -- -- (81.1) Foreign currency translation adjustment ................................... -- -- 1.0 -- 1.0 Minimum pension liability (net of deferred income tax expense of $8.2 million) ..................... -- -- -- 15.2 15.2 Net accumulated gains (losses) on cash flow hedges (net of tax benefit of $2.1 million) ..................................... -- $(3.8) -- -- (3.8) Change in accounting principle (net of income tax expense of $122.6 million) .............................. 204.7 22.9 -- -- 227.6 ------ ----- ----- ------ ------ Balance at December 31, 2001 .................. $247.3 $19.1 $(3.0) $(37.8) $225.6 ====== ===== ===== ====== ======
117 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12. SHAREHOLDER'S EQUITY (CONTINUED) Net unrealized investment and other gains (losses), included in the consolidated balance sheets as a component of shareholder's equity, are summarized as follows:
YEAR ENDED 2001 2000 1999 -------- -------- -------- (IN MILLIONS) BALANCE, END OF YEAR COMPRISES: Unrealized investment gains (losses) on: Fixed maturities ........................................................ $ 294.1 $ 103.0 $(190.5) Equity investments ...................................................... 129.2 258.5 136.6 Derivatives and other ................................................... 205.0 (155.8) 107.5 ------- ------- ------- Total ..................................................................... 628.3 205.7 53.6 AMOUNTS OF UNREALIZED INVESTMENT (GAINS) LOSSES ATTRIBUTABLE TO: Participating group annuity contracts ................................... (49.0) (34.4) (24.0) Deferred policy acquisition cost and present value of future profits .... (51.0) 22.6 66.3 Policyholder dividend obligation ........................................ (145.2) (13.5) -- Deferred federal income taxes ........................................... (135.8) (56.7) (26.8) ------- ------- ------- Total ..................................................................... (381.0) (82.0) 15.5 ------- ------- ------- Net unrealized investment gains ........................................... $ 247.3 $ 123.7 $ 69.1 ======= ======= =======
(c) Statutory Results The Company adopted the new codified statutory accounting principles (Codification) effective January 1, 2001. Codification changes prescribe statutory accounting practices and results in changes to the accounting practices that the Company and its domestic life insurance subsidiaries use to prepare their statutory-basis financial statements. The Company and its domestic insurance subsidiaries prepare their statutory-basis financial statements in accordance with accounting practices prescribed or permitted by the state of domicile. For the Life Company the Commonwealth of Massachusetts only recognizes statutory accounting practices prescribed or permitted by Massachusetts insurance regulations and laws. The National Association of Insurance Commissioners' "Accounting Practices and Procedures" manual (NAIC SAP) has been adopted as a component of prescribed or permitted practices by Massachusetts. The Commissioner of Insurance has the right to permit other specific practices that deviate from prescribed practices. Prior to 2001, the Commissioner had provided the Company approval to recognize as an admitted asset the pension plan prepaid expense in accordance with the requirements of SFAS No. 87, "Employers' Accounting for Pensions." Beginning in 2001, the Commissioner has provided the Company with approval to phase-in over a three-year period the impact of implementing the material provisions of statutory SSAP No. 8, "Pensions." As a result of this permitted practice, the Company's reported statutory surplus as of December 31, 2001 is increased by $319.5 million over what it would be under NAIC SAP. Statutory net income is not impacted by this permitted practice. In addition, during 2000 and 1999, the Company received permission from the Commonwealth of Massachusetts Division of Insurance to record its Asset Valuation Reserve in excess of the prescribed maximum reserve level by $36.7 million and $48.0 million at December 31, 2000 and 1999, respectively. There are no other material permitted practices. 118 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12. SHAREHOLDER'S EQUITY (CONTINUED) Statutory net income and surplus include the accounts of the Company and its variable life insurance subsidiary, John Hancock Variable Life Insurance Company, including its wholly-owned subsidiary, Investors Partner Life Insurance Company. Investors Guaranty Life Insurance Company, a former subsidiary of the Company, was sold in 2001, and its statutory net income for the period January 1, 2001 to May 22, 2001 and for the years 2000 and 1999, and its statutory surplus at December 31, 2000 and 1999, are included in the table below.
AS OF OR FOR THE YEARS ENDED DECEMBER 31 2001 2000 1999 ---- ---- ---- (IN MILLIONS) Statutory surplus .................... $3,513.6 $3,700.5 $3,456.7 Statutory net income.................. 631.4 617.6 573.2
Massachusetts has enacted laws governing the payment of dividends by insurers. Under Massachusetts insurance law, no insurer may pay any shareholder dividends from any source other than statutory unassigned funds without the prior approval of the Massachusetts Division of Insurance. Massachusetts law also limits the dividends an insurer may pay in any twelve month period, without the prior permission of the Massachusetts Division of Insurance, to the greater of (i) 10% of its statutory policyholders' surplus as of the preceding December 31 or (ii) the individual company's statutory net gain from operations for the preceding calendar year, if such insurer is a life company. NOTE 13. SEGMENT INFORMATION The Company's reportable segments are strategic business units offering different products and services. The reportable segments are managed separately, as they focus on different products, markets or distribution channels. Protection Segment Offers a variety of individual life insurance and individual and group long-term care insurance products, including participating whole life, term life, universal life, variable life, and retail and group long-term care insurance. Products are distributed through multiple distribution channels, including insurance agents and brokers and alternative distribution channels that include banks, financial planners, direct marketing and the Internet. Asset Gathering Segment Offers individual annuities and mutual fund products and services. Individual annuities consist of fixed deferred annuities, fixed immediate annuities, single premium immediate annuities, and variable annuities. Mutual fund products and services primarily consist of open-end mutual funds and closed end funds. This segment distributes its products through distribution channels including insurance agents and brokers affiliated with the Company, securities brokerage firms, financial planners, and banks. Guaranteed and Structured Financial Products (G&SFP) Segment Offers a variety of retirement products to qualified defined benefit plans, defined contribution plans and non-qualified buyers. The Company's products include guaranteed investment contracts, funding agreements, single premium annuities, and general account participating annuities and fund type products. These contracts provide non-guaranteed, partially guaranteed, and fully guaranteed investment options through general and separate account products. The segment distributes its products through a combination of dedicated regional representatives, pension consultants and investment professionals. 119 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13. SEGMENT INFORMATION (CONTINUED) Investment Management Segment Offers a wide range of investment management products and services to investors covering a variety of private and publicly traded asset classes including fixed income, equity, mortgage loans, and real estate. This segment distributes its products through a combination of dedicated sales and marketing professionals, independent marketing specialists, and investment professionals. Corporate and Other Segment Primarily consists of the Company's international group insurance program, certain corporate operations, and businesses that are either disposed or in run-off. The international group insurance program consists of an international network of 46 insurers that coordinate and/or reinsure group life, health, disability and pension coverage for foreign and globally mobile employees of multinational companies in 50 countries and territories. Corporate operations primarily include certain financing activities, income on capital not specifically allocated to the reporting segments and certain non-recurring expenses not allocated to the segments. The disposed businesses primarily consist of group health insurance and related group life insurance, property and casualty insurance and selected broker/dealer operations. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Allocations of net investment income are based on the amount of assets allocated to each segment. Other costs and operating expenses are allocated to each segment based on a review of the nature of such costs, cost allocations utilizing time studies, and other relevant allocation methodologies. Management of the Company evaluates performance based on segment after-tax operating income, which excludes the effect of net realized investment and other gains (losses) and unusual or non-recurring events and transactions. Segment after-tax operating income is determined by adjusting GAAP net income for net realized investment and other gains (losses), including gains and losses on disposals of businesses and certain other items which management believes are not indicative of overall operating trends. While these items may be significant components in understanding and assessing the Company's financial performance, management believes that the presentation of after-tax operating income enhances its understanding of the Company's results of operations by highlighting net income attributable to the normal, recurring operations of the business. Amounts reported as segment adjustments in the tables below primarily relate to: (i) certain net realized investment and other gains (losses), net of related amortization adjustment for deferred policy acquisition costs, amounts credited to participating pension contractholder accounts and policyholder dividend obligation (the adjustment for net realized investment and other gains (losses) excludes gains and losses from mortgage securitizations and investments backing short-term funding agreements because management views the related gains and losses as an integral part of the core business of those operations); (ii) benefits to policyholders and expenses incurred relating to the settlement of a class action lawsuit against the Company involving certain individual life insurance policies sold from 1979 through 1996; (iii) restructuring costs related to our distribution systems, retail operations and mutual fund operations; (iv) the surplus tax on mutual life insurance companies which as a stock company is no longer applicable to the Company; (v) a fourth quarter 1999 charge for uncollectible reinsurance related to certain assumed reinsurance business; (vi) a fourth quarter 1999 charge for a group pension dividend resulting from demutualization related asset transfers and the formation of a corporate account; (vii) a charge for certain one time costs associated with the demutualization process; and (viii) cumulative effect of accounting changes. 120 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13. SEGMENT INFORMATION (CONTINUED) The following table summarizes selected financial information by segment for the year ended or as of December 31 and reconciles segment revenues and segment after-tax operating income to amounts reported in the consolidated statements of income (in millions):
ASSET INVESTMENT CORPORATE 2001 PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED - ---- ---------- ---------- ---------- ---------- --------- ------------- REVENUES: Segment revenues ............................. $ 3,054.7 $ 1,155.0 $ 2,369.5 $ 143.2 $ 650.6 $ 7,373.0 Net realized investment and other gains (losses) .............................. (98.1) (54.8) (121.1) (0.2) 25.2 (249.0) --------- --------- --------- -------- -------- --------- Revenues ..................................... $ 2,956.6 $ 1,100.2 $ 2,248.4 $ 143.0 $ 675.8 $ 7,124.0 ========= ========= ========= ======== ======== ========= Net investment income ........................ $ 1,258.5 $ 498.5 $ 1,834.5 $ 28.7 $ 26.0 $ 3,646.2 NET INCOME: Segment after-tax operating income ...................................... 284.3 148.3 238.0 29.8 55.4 755.8 Realized investment gains (losses), net ............................... (62.2) (34.7) (77.0) (0.2) 16.6 (157.5) Class action lawsuit ......................... -- -- -- -- (19.5) (19.5) Restructuring charges ........................ (4.4) (17.6) (1.2) (0.9) (1.3) (25.4) Surplus tax .................................. 9.6 0.2 2.6 0.1 0.8 13.3 Cumulative effect of accounting changes, net of tax ......................... 11.7 (0.5) (1.2) (0.2) (2.6) 7.2 --------- --------- --------- -------- -------- --------- Net income ................................... $ 239.0 $ 95.7 $ 161.2 $ 28.6 $ 49.4 $ 573.9 ========= ========= ========= ======== ======== ========= SUPPLEMENTAL INFORMATION: Inter-segment revenues ....................... -- -- -- $ 28.0 $ (28.0) -- Equity in net income of investees accounted for by the equity method ...................................... $ 12.9 $ 7.0 $ 24.8 6.9 4.8 $ 56.4 Amortization of deferred policy acquisition costs ........................... 171.3 75.0 2.4 -- 0.3 249.0 Interest expense ............................. 0.9 1.9 -- 12.4 43.8 59.0 Income tax expense ........................... 108.8 35.0 71.0 16.2 (30.3) 200.7 Segment assets ............................... 28,912.5 14,740.5 32,253.9 2,049.8 3,168.0 81,124.7
121 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13. SEGMENT INFORMATION (CONTINUED)
ASSET INVESTMENT CORPORATE 2001 PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED - ---- ---------- --------- -------- ---------- --------- -------------- (IN MILLIONS) NET REALIZED INVESTMENT AND OTHER GAINS (LOSSES) DATA: Net realized investment and other gains (losses) ................................... $(122.9) $(76.4) $ (78.8) $ 3.0 $25.2 $(249.9) Less amortization of deferred policy acquisition costs related to net realized investment and other gains (losses) ............................. 7.8 21.6 -- -- -- 29.4 Less amounts credited to participating pension contractholder accounts .......................... -- -- (42.3) -- -- (42.3) Add amounts credited to the policyholder dividend obligation ................. 17.0 -- -- -- -- 17.0 ------- ------ ------- ----- ----- ------- Net realized investment and other gains (losses), net of related amortization of deferred policy acquisition costs, amounts credited to participating pension contractholders and amounts credited to the policyholder dividend obligation- per the consolidated financial statements ................ (98.1) (54.8) (121.1) 3.0 25.2 (245.8) Less net realized investment and other gains (losses) attributable to mortgage securitizations ......................... -- -- -- (3.2) -- (3.2) ------- ------ ------- ----- ----- ------- Net realized investment and other gains (losses), net-pre-tax adjustment made to calculate segment operating income ......................... (98.1) (54.8) (121.1) (0.2) 25.2 (249.0) Less income tax effect ............................ 35.9 20.1 44.1 -- (8.6) 91.5 ------- ------ ------- ----- ----- ------- Net realized investment and other gains (losses), net-after-tax adjustment made to calculate segment operating income ......................... $ (62.2) $(34.7) $ (77.0) $(0.2) $16.6 $(157.5) ======= ====== ======= ===== ===== =======
122 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13. SEGMENT INFORMATION (CONTINUED)
ASSET INVESTMENT CORPORATE 2000 PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED - ---- ---------- ---------- ---------- ---------- --------- ------------- (IN MILLIONS) REVENUES: Segment revenues ................................ $ 2,887.0 $ 1,195.9 $ 2,427.2 $ 212.0 $ 577.0 $ 7,299.1 Net realized investment and other gains (losses) ........................... (24.4) 15.4 (64.7) 7.1 141.7 75.1 --------- --------- --------- -------- -------- --------- Revenues ........................................ $ 2,862.6 $ 1,211.3 $ 2,362.5 $ 219.1 $ 718.7 $ 7,374.2 ========= ========= ========= ======== ======== ========= Net investment income ........................... $ 1,196.3 $ 445.8 $ 1,741.9 $ 22.7 $ 157.2 $ 3,563.9 NET INCOME: Segment after-tax operating income .............. 238.8 128.8 211.6 46.8 82.4 708.4 Realized investment gains (losses), net .................................. (18.2) 18.6 (40.5) 4.4 87.3 51.6 Restructuring charges ........................... (6.7) (1.4) (2.6) -- (1.3) (12.0) Surplus tax ..................................... 20.8 0.6 6.5 -- 18.1 46.0 Demutualization expenses ........................ 1.6 0.4 0.4 -- 0.1 2.5 Other demutualization related costs ............. (6.8) (1.3) (1.7) -- (0.2) (10.0) Group pension dividend transfer ................. -- -- 5.7 -- -- 5.7 --------- --------- --------- -------- -------- --------- Net income ...................................... $ 229.5 $ 145.7 $ 179.4 $ 51.2 $ 186.4 $ 792.2 ========= ========= ========= ======== ======== ========= SUPPLEMENTAL INFORMATION: Inter-segment revenues .......................... -- -- -- $ 39.1 $ (39.1) -- Equity in net income of investees accounted for by the equity method ............. $ 7.5 $ 3.5 $ 11.2 16.8 104.8 $ 143.8 Amortization of deferred policy acquisition costs .............................. 106.0 78.8 2.6 -- (0.3) 187.1 Interest expense ................................ 2.9 3.5 1.0 12.1 43.1 62.6 Income tax expense .............................. 82.0 57.9 78.3 35.2 55.5 308.9 Segment assets .................................. $27,091.5 $14,067.2 $31,161.1 $3,124.5 $2,967.7 $78,412.0
123 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13. SEGMENT INFORMATION (CONTINUED)
ASSET INVESTMENT CORPORATE 2000 PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED - ---- ---------- --------- -------- ---------- --------- -------------- (IN MILLIONS) NET REALIZED INVESTMENT AND OTHER GAINS (LOSSES) DATA: Net realized investment and other gains (losses) ................................. $ (23.2) $ 18.9 $ (57.8) $ 10.3 $ 141.7 $ 89.9 Less amortization of deferred policy acquisition costs related to net realized investment and other gains (losses) ................................. 12.9 (3.5) -- -- -- 9.4 Less amounts credited to participating pension contractholder accounts ........................ -- -- (6.9) -- -- (6.9) Less amounts credited to policyholder dividend obligation ..................................... (14.1) -- -- -- -- (14.1) ------- ------ ------- ------ ------- ------- Net realized investment and other gains (losses), net of related amortization of deferred policy acquisition costs, amounts credited to participating pension contractholders and amounts credited to the policyholder dividend obligation- per consolidated financial statements ..................................... (24.4) 15.4 (64.7) 10.3 141.7 78.3 Less net realized investment and other gains (losses) attributable to mortgage securitizations .................... -- -- -- (3.2) -- (3.2) ------- ------ ------- ------ ------- ------- Net realized investment and other gains (losses), net-pre-tax adjustment made to calculate segment operating income ....................... (24.4) 15.4 (64.7) 7.1 141.7 75.1 Less income tax effect .......................... 6.2 3.2 24.2 (2.7) (54.4) (23.5) ------- ------ ------- ------ ------- ------- Net realized investment and other gains (losses), net-after-tax adjustment made to calculate segment operating income ....................... $ (18.2) $ 18.6 $ (40.5) $ 4.4 $ 87.3 $ 51.6 ======= ====== ======= ====== ======= =======
124 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13. SEGMENT INFORMATION (CONTINUED)
ASSET INVESTMENT CORPORATE 1999 PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED - ---- ---------- ---------- ---------- ---------- --------- ------------- (IN MILLIONS) REVENUES: Segment revenues ........................... $ 2,756.9 $ 1,057.3 $ 2,028.2 $ 189.9 $ 532.4 $ 6,564.7 Net realized investment and other gains (losses) ............................ 173.6 (11.0) 93.3 3.1 (61.7) 197.3 --------- --------- --------- -------- -------- --------- Revenues ................................... $ 2,930.5 $ 1,046.3 $ 2,121.5 $ 193.0 $ 470.7 $ 6,762.0 ========= ========= ========= ======== ======== ========= Net investment income ...................... $ 1,101.9 $ 388.6 $ 1,681.3 $ 45.9 $ 121.2 $ 3,338.9 NET INCOME: Segment after-tax operating income .................................... 188.7 115.1 201.7 37.3 45.6 588.4 Realized investment gains (losses), net ............................. 108.6 (6.9) 58.4 2.0 (45.6) 116.5 Class action lawsuit ....................... -- -- -- -- (91.1) (91.1) Restructuring charges ...................... (8.6) (7.3) (0.6) -- (0.5) (17.0) Surplus tax ................................ (12.5) (1.0) (6.5) -- (2.3) (22.3) Workers compensation reinsurance reserves .................................. -- -- -- -- (133.7) (133.7) Group pension dividend transfer ............ -- -- (205.8) -- -- (205.8) Demutualization expenses ................... (61.3) (13.0) (16.1) -- (2.2) (92.6) Other demutualization related costs ........ (4.6) (0.9) (1.1) -- (0.2) (6.8) Cumulative effect of accounting change .................................... -- (9.6) -- (0.1) -- (9.7) --------- --------- --------- -------- -------- --------- Net income ................................. $ 210.3 $ 76.4 $ 30.0 $ 39.2 $ (230.0) $ 125.9 ========= ========= ========= ======== ======== ========= SUPPLEMENTAL INFORMATION: Inter-segment revenues ..................... -- -- -- $ 43.6 $ (43.6) -- Equity in net income of investees accounted for by the equity method ................... $ 46.2 $ (0.3) $ 14.3 3.5 1.4 $ 65.1 Amortization of deferred policy acquisition costs .................. 69.2 53.5 3.1 -- (0.8) 125.0 Interest expense ........................... 0.7 6.2 -- 5.3 57.9 70.1 Income tax expense (credit) ................ 138.9 52.6 (7.5) 26.5 (129.0) 81.5 Segment assets ............................. $25,372.1 $14,297.2 $30,370.5 $3,531.4 $2,488.7 $76,059.9
125 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13. SEGMENT INFORMATION (CONTINUED)
ASSET INVESTMENT CORPORATE 1999 PROTECTION GATHERING G&SFP MANAGEMENT AND OTHER CONSOLIDATED - ---- ---------- --------- ------- ---------- --------- ------------ (IN MILLIONS) NET REALIZED INVESTMENT AND OTHER GAINS (LOSSES) DATA: Net realized investment and other gains (losses) ......................... $228.4 $(16.1) $ 97.4 $ 6.6 $(61.7) $254.6 Less amortization of deferred policy acquisition costs related to net realized investment and other gains (losses) ................... (54.8) 5.1 -- -- -- (49.7) Less amounts credited to participating pension contractholder accounts ................ -- -- (35.3) -- -- (35.3) ------ ------ ------ ----- ------ ------ Net realized investment and other gains (losses), net of related amortization of deferred policy acquisition costs and amounts credited to participating pension contractholders - per consolidated financial statements ...... 173.6 (11.0) 62.1 6.6 (61.7) 169.6 Less net realized investment and other gains (losses) attributable to mortgage securitizations and investments backing short-term funding agreements .......... -- -- 31.2 (3.5) -- 27.7 Less gain on sale of business ........... -- -- -- -- (33.0) (33.0) ------ ------ ------ ----- ------ ------ Net realized investment and other gains (losses), net-pre-tax adjustment made to calculate segment operating income ............... 173.6 (11.0) 93.3 3.1 (94.7) 164.3 Less income tax effect .................. (65.0) 4.1 (34.9) (1.1) 49.1 (47.8) ------ ------ ------ ----- ------ ------ Net realized investment and other gains (losses), net-after-tax adjustment made to calculate segment operating income ............... $108.6 $ (6.9) $ 58.4 $ 2.0 $(45.6) $116.5 ====== ====== ====== ===== ====== ======
126 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13. SEGMENT INFORMATION (CONTINUED) The Company operates primarily in the United States and also in Indonesia. In addition, the international group insurance program consists of a network of 46 insurers that coordinate and/or reinsure group life, health, disability and pension coverage for foreign and globally mobile employees of multinational companies in 50 countries and territories. The following table summarizes selected financial information by geographic location for the year ended or at December 31:
INCOME BEFORE INCOME TAXES AND CUMULATIVE LONG-LIVED EFFECT OF LOCATION REVENUES ASSETS ASSETS ACCOUNTING CHANGES - -------- -------- ---------- --------- ------------------ (IN MILLIONS) 2001 United States ............ $6,917.4 $533.8 $81,052.9 $ 761.4 Foreign - other .......... 206.6 0.6 71.8 6.0 -------- ------ --------- -------- $7,124.0 $534.4 $81,124.7 $ 767.4 ======== ====== ========= ======== 2000 United States ............ $7,201.4 $419.6 $78,346.9 $1,093.4 Foreign - other .......... 172.8 0.3 65.1 7.7 -------- ------ --------- -------- $7,374.2 $419.9 $78,412.0 $1,101.1 ======== ====== ========= ======== 1999 United States ............ $6,573.0 $440.0 $75,993.0 $ 211.2 Foreign - other .......... 189.0 0.4 66.9 5.9 -------- ------ --------- -------- $6,762.0 $440.4 $76,059.9 $ 217.1 ======== ====== ========= ========
The Company has no reportable major customers and revenues are attributed to countries based on the location of customers. NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The following discussion outlines the methodologies and assumptions used to determine the fair value of the Company's financial instruments. The aggregate fair value amounts presented herein do not represent the underlying value of the Company and, accordingly, care should be exercised in drawing conclusions about the Company's business or financial condition based on the fair value information presented herein. The following methods and assumptions were used by the Company to determine the fair values of financial instruments: Fair values for publicly traded fixed maturities (including redeemable preferred stocks) are obtained from an independent pricing service. Fair values for private placement securities and fixed maturities not provided by the independent pricing service are estimated by the Company by discounting expected future cash flows using a current market rate applicable to the yield, credit quality and maturity of the investments. The fair value for equity securities is based on quoted market prices. 127 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value for mortgage loans on real estate is estimated using discounted cash flow analyses using interest rates adjusted to reflect the credit characteristics of the loans. Mortgage loans with similar characteristics and credit risks are aggregated into qualitative categories for purposes of the fair value calculations. Fair values for impaired mortgage loans are measured based either on the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the underlying collateral for loans that are collateral dependent. The carrying amount in the balance sheet for policy loans, short-term investments and cash and cash equivalents approximates their respective fair values. The fair value of the Company's long-term debt is estimated using discounted cash flows based on the Company's incremental borrowing rates for similar types of borrowing arrangements. Carrying amounts for commercial paper and short-term borrowings approximate fair value. Fair values for the Company's guaranteed investment contracts and funding agreements are estimated using discounted cash flow calculations based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. The fair value for fixed-rate deferred annuities is the cash surrender value, which represents the account value less applicable surrender charges. Fair values for immediate annuities without life contingencies and supplementary contracts without life contingencies are estimated based on discounted cash flow calculations using current market rates. The Company's derivatives include futures contracts, interest rate swap, cap and floor agreements, swaptions, currency rate swap agreements and equity collar agreements. Fair values for these contracts are based on current settlement values. These values are based on quoted market prices for the financial futures contracts and brokerage quotes that utilize pricing models or formulas using current assumptions for all swaps and other agreements. The fair value for commitments approximates the amount of the initial commitment. 128 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying amounts and fair values of the Company's financial instruments:
DECEMBER 31 ------------------------------------------ 2001 2000 -------------------- -------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE --------- --------- --------- --------- (IN MILLIONS) ASSETS Fixed maturities: Held-to-maturity .................................. $ 1,923.5 $ 1,908.2 $14,145.1 $13,965.8 Available-for-sale ................................ 36,072.1 36,072.1 15,925.4 15,925.4 Equity securities: Available-for-sale ................................ 562.3 562.3 846.1 846.1 Trading securities ................................ 1.4 1.4 1.6 1.6 Mortgage loans on real estate ....................... 9,667.0 10,215.0 9,659.4 10,075.2 Policy loans ........................................ 1,927.0 1,927.0 447.9 447.9 Short-term investments .............................. 78.6 78.6 174.9 174.9 Cash and cash equivalents ........................... 1,025.3 1,025.3 2,966.3 2,966.3 Derivatives: Futures contracts, net .............................. -- -- (14.8) (14.8) Interest rate swap agreements ....................... 24.9 24.9 (178.2) (296.8) Interest rate swap CMT .............................. 7.5 7.5 -- -- Interest rate cap agreements ........................ 3.6 3.6 0.1 0.1 Interest rate floor agreements ...................... 56.5 56.5 -- -- Interest rate swaption agreements ................... -- -- (1.3) (1.3) Currency rate swap agreements ....................... 401.6 401.6 11.4 11.4 Equity collar agreements ............................ 16.7 16.7 11.7 11.7 LIABILITIES: Debt ................................................ 743.3 758.8 779.3 771.5 Guaranteed investment contracts and funding agreements ................................. 16,142.7 15,947.0 14,333.9 13,953.8 Fixed rate deferred and immediate annuities ......... 6,212.2 6,123.3 5,195.2 5,101.3 Supplementary contracts without life contingencies... 54.4 58.4 60.0 63.1 Derivatives: Futures contracts, net .............................. 0.9 0.9 1.4 1.4 Interest rate swap agreements ....................... 420.3 420.3 -- 114.3 Interest rate swap CMT .............................. -- -- -- (5.2) Interest rate cap agreements ........................ -- -- 2.1 2.1 Interest rate floor agreements ...................... -- -- 59.0 59.0 Interest rate swaption agreements ................... 1.3 1.3 -- -- Currency rate swap agreements ....................... 318.2 318.2 -- (473.0) Equity collar agreements ............................ 18.9 18.9 -- -- Commitments ......................................... -- (1,241.3) -- (1,694.2)
129 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 15. STOCK COMPENSATION PLANS On January 5, 2000, the Company, as sole shareholder of John Hancock Financial Services, Inc., approved and adopted the 1999 Long-Term Stock Incentive Plan (the Incentive Plan), which originally had been approved by the Board of Directors (the Board) of the Company on August 31, 1999. Under the Incentive Plan, which became effective on February 1, 2000, the effective date of the Plan of Reorganization of the Company, options of JHFS common stock granted may be either non-qualified options or incentive stock options qualifying under Section 422 of the Internal Revenue Code. The Incentive Plan objectives include attracting and retaining the best personnel, providing for additional performance incentives, and promoting the success of the Company by providing employees the opportunity to acquire JHFS' common stock. In 2001, JHFS' Board adopted and the shareholders approved the amended and restated 1999 Long-Term Stock Incentive Plan (as amended, the Long-Term Stock Incentive Plan) and the Non-Employee Directors Long-Term Stock Incentive Plan (the Directors' Plan, collectively, the Incentive Plans). The maximum number of shares of JHFS common stock available under the Long-Term Stock Incentive Plan is 40,741,403. Of these, no more than 8,148,281 shares shall be available for stock awards, and the maximum number of shares that may be granted as incentive stock options is 32,593,122 shares. The aggregate number of shares that may be covered by awards for any one participant over the period that the Long-Term Stock Incentive Plan is in effect shall not exceed 8,148,281 shares. Subject to these overall limits, there is no annual limit on the number of stock options or stock awards that may be granted in any one year. The maximum number of shares available in the Non-Employee Directors' Long-Term Stock Incentive Plan is 1,000,000 shares of common stock. Pursuant to the Non-Employee Directors' Long-Term Stock Incentive Plan, each director receives 50% of the annual retainer paid to eligible directors in the form of stock awards. If a director elects to have the remaining 50% of their retainer invested in shares of the JHFS' common stock through purchases on the open market, JHFS grants a partial matching stock award, which is forfeitable within three years prior to a change of control if his/her service as a director terminates (other than for death, disability or retirement). In addition, on shareholder approval of the Non-Employee Directors' Long-Term Stock Incentive Plan, each director received a non-qualified stock option award of 15,000 shares and annually thereafter will receive non-qualified stock option awards for 5,000 shares (except that each new director shall receive an option exercisable for 15,000 shares and will not be eligible for an annual grant in the same year.) The Incentive Plans have options exercisable at the dates listed in the table below. JHFS granted 11.0 million options to the Company's employees during the year ended December 31, 2001. Options outstanding under the Long-Term Stock Incentive Plan were granted at a price equal to the fair market value of the stock on the date of grant, vest over a two-year period, and expire five years after the grant date. Options outstanding under the Non-Employee Director's Long Term Stock Incentive Plan were granted at a price equal to the fair market value of the stock on the date of grant, vest immediately, and expire five years after grant date. 130 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 15. STOCK COMPENSATION PLANS The status of JHFS stock options held by the Company's employees under the Long-Term Stock Incentive Plan and by Directors of the Company under the Non-Employee Directors' Long-Term Stock Incentive Plan are summarized below as of December 31:
WEIGHTED- AVERAGE SHARES SUBJECT WEIGHTED- NUMBER OF EXERCISE PRICE TO EXERCISABLE AVERAGE EXERCISE OPTIONS PER OPTION OPTIONS PRICE PER OPTION -------------- -------------- -------------- ---------------- (IN THOUSANDS) (IN THOUSANDS) Outstanding at February 1, 2000 -- -- Granted ................................ 4,165.0 $14.06 Exercised .............................. 0.2 13.94 Canceled ............................... 275.8 13.94 -------- ------ Outstanding at December 31, 2000 3,889.0 $14.07 ======== ====== Granted ............................... 10,992.1 35.96 Exercised ............................. 746.3 14.05 Canceled .............................. 984.8 29.61 -------- ------ ------- ------ Outstanding at December 31, 2001 13,150.0 $31.21 2,270.5 $26.03 ======== ====== ======= ======
The Company accounts for stock-based compensation using the intrinsic value method prescribed by APB Opinion No. 25, under which no compensation cost for stock options is recognized for stock option awards granted at or above fair market value, with the exception of the Signator Stock Option Program. Had compensation expense for the remaining Company's stock-based compensation plans been determined based upon fair values at the grant dates for awards under the plan in accordance with SFAS No. 123, the Company's net earnings would have been reduced to the pro forma amounts indicated below. Additional stock option awards are anticipated in future years. The effects of applying SFAS No. 123 on proforma disclosures of net income indicated below are not likely to be representative of the pro-forma effects on net income in future years for the following reasons: 1) the number of future shares to be issued under these plans is not known, 2) the effect of an additional year of vesting options granted in prior years is not considered in the assumptions and 3) the assumptions used to determine the fair value can vary significantly. The Black-Scholes option valuation model was developed for use in estimating fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require input of highly subjective assumptions including the expected stock price volatility. Because the JHFS stock options granted to the employees of the Company have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the employee stock options. The estimated weighted-average fair value per share using the Black-Scholes option valuation model is $9.24 and $3.66, respectively, for the years ending December 31, 2001 and 2000, using the following assumptions:
2001 2000 ----------- ------------ Expected term ............. 3-5 years 2 -5 years Risk free rate (1)......... 4.6%-6.0% 4.8%-5.6% Dividend yield............. 1.0% 1.8% Expected volatility........ 32.0 % 24.0 %
(1) Dependent on grant date. 131 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 15. STOCK COMPENSATION PLANS (CONTINUED) For the purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:
YEAR ENDED FOR THE PERIOD YEAR ENDED DECEMBER 31, 2000 FEBRUARY 1 THROUGH DECEMBER 31, 2001 PRO FORMA (UNAUDITED) DECEMBER 31, 2000 ----------------- --------------------- -------------------- (IN MILLIONS) Net income: As reported............ $573.9 $792.2 $750.3 Pro forma (unaudited).. 540.6 790.0 748.8
The following table summarizes information about JHFS' stock options held by the Company's employees, outstanding at December 31, 2001:
NUMBER OF WEIGHTED-AVERAGE NUMBER OF RANGE OF OPTIONS REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE EXERCISE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OPTIONS AT EXERCISE PRICE PER PRICE AT 12/31/01 (YEARS) PER OPTION 12/31/01 EXERCISABLE OPTION - ------------- -------------- ---------------- ---------------- -------------- ------------------ (IN THOUSANDS) (IN THOUSANDS) $12.29-$16.39 2,849.3 3.2 $13.94 1,013.9 $13.94 $20.49-$24.58 35.2 3.6 23.59 16.6 23.59 $32.78-$36.88 9,240.0 4.1 35.55 1,045.0 35.53 $36.88-$40.98 1,025.5 4.4 39.31 195.0 38.18 -------- --- ------ ------- ------ 13,150.0 3.9 $30.92 2,270.5 $26.03 ======== === ====== ======= ======
In February 2001, JHFS implemented the Signator Stock Options Grant Program, under the Long-Term Stock Incentive Plan. The program granted 339,307 stock options to non-employee general agents (agents) at the market price of $35.53 per share. The stock options vest over a two-year period, subject to continued participation in the JHFS sales program and attainment of established, individual sales goals. After one year of vesting, an agent is allowed to exercise 50% of the stock options granted. The Company amortizes compensation expense for the grant over a 24-month period commencing on grant date at a fair value of $9.24 per option determined by the Black-Scholes option valuation model. Total expense recognized for the year ended December 31, 2001, is $1.3 million. The total grant date fair value of the stock options granted under the program from January 1, 2001 through December 31, 2001, is $3.1 million. During 2001, 4,737 stock options were forfeited with a total grant date price of $0.01 million. The outstanding option balance in the Signator Grant Program is 334,570 at December 31, 2001. On March 13, 2000, JHFS granted 281,084 shares of non-vested stock to key Company personnel at a weighted- average grant price of $14.34 per share. These grants of non-vested stock are forfeitable and vest at three or five years of service within the Company. The Company recognizes compensation expense immediately, as the grants are based on historical compensation. The total grant-date price of the non-vested stock granted from January 1, 2000 through December 31, 2000 is $4.0 million. During 2001 and 2000, 12,142 and 50,837 shares of this non-vested stock were forfeited with a total grant date price of $0.2 million and $0.7 million, respectively. The outstanding share balance in the 2000 plan is 218,105 as of December 31, 2001. 132 JOHN HANCOCK LIFE INSURANCE COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 15. STOCK COMPENSATION PLANS (CONTINUED) On February 12, March 12 and March 15, 2001, JHFS granted an aggregate 265,391 total shares of non-vested stock to key Company personnel. The program was funded with cash and the shares were purchased on the open market at the weighted-average grant price of $37.22 per share. These grants of non-vested stock are forfeitable and vest at three years of service within the Company. The Company recognizes compensation expense immediately, as the grants are based on historical compensation. The total grant-date price of the non-vested stock granted from January 1, 2001 through December 31, 2001 is $9.9 million. During 2001, 16,414 shares of non-vested stock were forfeited with a total grant-date price of $0.6 million. The outstanding share balance in the 2001 plan is 248,977. During 2001, JHFS granted 72,749 shares of non-vested stock to Company executive officers at a weighted-average grant price of $35.72 per share. These grants of non-vested stock are forfeitable and vest at three or five years of service within the Company. The Company amortizes compensation expense for the grant over the vesting period. Total amortization for the period ending December 31, 2001, is $0.3 million. The total grant-date price of the non-vested stock granted from January 1, 2001 through December 31, 2001, is $2.6 million. During 2001, 14,000 shares of non-vested stock were forfeited with a total grant-date exercise price of $0.5 million. The outstanding share balance in the Executive Restricted Stock Compensation Plan is 58,749 at December 31, 2001. In 2001, JHFS issued 3,129 shares to Non-Employee Directors as payment of 50% of their quarterly retainer. These shares are not forfeitable and vest immediately. The total grant-date price of this stock issued to the Company's non-employee directors from January 1, 2001 through December 31, 2001 is $0.1 million. In addition, in July 2001, the Company implemented a plan that would allow directors, at their discretion, to invest one half of their quarterly retainer in JHFS' common stock in lieu of receiving cash. JHFS will match any investment at a rate of 50%. The restricted stock given as matching shares, is forfeitable and vests over three years, thus amortizes the balance to director compensation expense over the vesting period. At December 31, 2001, 256 shares were matched under the program at a weighted-average grant price per share of $39.07. Total amortization expense recognized for the period ending December 31, 2001 is $0.01 million. There were no forfeitures through December 31, 2001. On January 9, 2002, the Compensation Committee of JHFS' Board of Directors approved stock and stock option grants to the Policy Committee and certain key employees of the Company. The equity grants were made in compliance with the terms of the Long-Term Stock Incentive Plan. A total of 550.0 thousand shares of non-vested stock was granted, with a total grant date price of $22.9 million. A total of 6.2 million options were granted, with a grant date fair value of $12.57 per option as determined by the Black-Scholes option valuation model. On February 5, 2002, the Compensation Committee of JHFS' Board of Directors approved stock grants to executive officers and approved stock and stock option grants to certain key employees and agents of the Company. A total of 87.4 thousand shares of non-vested stock was issued by the Company to executive officers for cash totaling $3.3 million or $38.22 per share. A total of 154.6 thousand shares of non-vested stock was granted to certain key personnel, with a total grant price of $5.9 million. This program was funded with cash and the shares were purchased on the open market at the weighted-average grant price of $38.22 per share. A total of 602.0 thousand options were granted, with a grant date price of $11.34 per option as determined by the Black-Scholes option valuation model. Stock Ownership Loan Program In January 2000, JHFS adopted a loan program whereby JHFS may extend credit to key Company executives to purchase JHFS stock in order for them to meet mandatory stock ownership requirements. These full recourse loans bear interest at variable rates and principal and interest are payable no later than the death of the executive, termination of employment or five years. As of December 31, 2001 and 2000, these amounts loaned by JHFS to Company executives were $2.9 million and $3.6 million, respectively. 133 JOHN HANCOCK LIFE INSURANCE COMPANY SCHEDULE I -- SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES AS OF DECEMBER 31, 2001 (IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D AMOUNT AT WHICH SHOWN IN THE CONSOLIDATED TYPE OF INVESTMENT COST (2) VALUE BALANCE SHEET - ------------------ --------- --------- --------------- FIXED MATURITY SECURITIES, AVAILABLE-FOR-SALE: Bonds: United States government and government agencies and authorities ........................................ $ 332.7 $ 330.1 $ 330.1 States, municipalities and political subdivisions ....... 202.6 206.9 206.9 Foreign governments ..................................... 457.0 497.8 497.8 Public utilities ........................................ 3,178.5 3,198.0 3,198.0 Convertibles and bonds with warrants attached ........... 496.7 503.5 503.5 All other corporate bonds ............................... 30,405.2 30,644.0 30,644.0 Certificates of deposits ................................ -- -- -- Redeemable preferred stock .............................. 705.3 691.8 691.8 --------- --------- --------- Total fixed maturity securities, available-for-sale ..... $35,778.0 $36,072.1 $36,072.1 --------- --------- --------- EQUITY SECURITIES, AVAILABLE-FOR-SALE: Common stocks: Public utilities ........................................ -- -- -- Banks, trust and insurance companies .................... -- -- -- Industrial, miscellaneous and all other ................. $ 307.2 $ 433.7 $ 433.7 Non-redeemable preferred stock .......................... 125.9 128.6 128.6 --------- --------- --------- Total equity securities, available-for-sale ............. $ 433.1 $ 562.3 $ 562.3 --------- --------- --------- FIXED MATURITY SECURITIES, HELD-TO-MATURITY: Bonds United States government and government agencies and authorities ........................................ $ 25.8 $ 27.2 $ 25.8 States, municipalities and political subdivisions ....... 509.8 499.6 509.8 Foreign governments ..................................... -- -- -- Public utilities ........................................ 140.2 140.1 140.2 Convertibles and bonds with warrants attached ........... -- -- -- All other corporate bonds ............................... 1,169.1 1,164.4 1,169.1 Certificates of deposits ................................ 78.6 76.9 78.6 Redeemable preferred stock .............................. -- -- -- --------- --------- --------- Total fixed maturity securities,held-to-maturity ........ $ 1,923.5 $ 1,908.2 $ 1,923.5 --------- --------- ---------
The condensed financial information should be read in conjunction with the audited consolidated financial statements and notes thereto. 134 JOHN HANCOCK LIFE INSURANCE COMPANY SCHEDULE I -- SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES (CONTINUED) AS OF DECEMBER 31, 2001 (IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D AMOUNT AT WHICH SHOWN IN THE CONSOLIDATED TYPE OF INVESTMENT COST (2) VALUE BALANCE SHEET - ------------------ --------- --------- --------------- EQUITY SECURITIES, TRADING: Common stocks: Public utilities .......................... -- -- -- Banks, trust and insurance companies ...... -- -- -- Industrial, miscellaneous and all other ... $ 2.7 $ 1.4 $ 1.4 Non-redeemable preferred stock ............ -- -- -- --------- --------- --------- Total equity securities, trading .......... 2.7 1.4 1.4 --------- --------- --------- Mortgage loans on real estate, net (1) ... 9,779.8 XXXX 9,667.0 REAL ESTATE, NET: Investment properties (1) ................. 290.0 XXXX 253.3 Acquired in satisfaction of debt (1) ..... 174.0 XXXX 127.1 Policy loans .............................. 1,927.0 XXXX 1,927.0 Other long-term investments (2) ........... 1,676.9 XXXX 1,676.9 Short-term investments .................... 78.6 XXXX 78.6 --------- --------- --------- Total investments ......................... $52,060.5 $38,544.0 $52,289.2 ========= ========= =========
(1) Difference between Column B and Column D is primarily due to valuation allowances due to impairments on mortgage loans on real estate and due to accumulated depreciation. See Note 3 to the audited consolidated financial statements. (2) Difference between Column B and Column C is primarily due to operating gains (losses) of investments in limited partnerships. The condensed financial information should be read in conjunction with the audited consolidated financial statements and notes thereto. 135 JOHN HANCOCK LIFE INSURANCE COMPANY SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION AS OF DECEMBER 31, 2001, 2000 AND 1999 AND FOR EACH OF THE YEARS THEN ENDED (IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F FUTURE OTHER POLICY POLICY BENEFITS, CLAIMS DEFERRED LOSSES, AND POLICY CLAIMS BENEFITS ACQUISITION AND LOSS UNEARNED PAYABLE PREMIUM SEGMENT COSTS EXPENSES PREMIUMS (1) (1) REVENUE - ------- ----------- --------- ------------ -------- --------- 2001: Protection .......................... $2,557.1 $18,369.2 $280.4 $102.0 $1,363.8 Asset Gathering ..................... 616.2 6,689.4 -- 0.1 74.8 Guaranteed & Structured Financial Products ................. 8.8 24,375.1 65.7 4.9 483.3 Investment Management ............... -- -- -- -- -- Corporate & Other ................... 4.2 1,284.4 (0.1) 96.8 430.0 -------- --------- ------ ------ -------- Total ............................... $3,186.3 $50,718.1 $346.0 $203.8 $2,351.9 ======== ========= ====== ====== ======== 2000: Protection .......................... $2,455.7 $16,671.2 $262.6 $ 89.9 $1,295.5 Asset Gathering ..................... 558.2 5,619.9 -- (4.5) 63.4 Guaranteed & Structured Financial Products ................. 8.5 21,944.2 60.4 0.7 620.3 Investment Management ............... -- -- -- -- -- Corporate & Other ................... 4.7 1,488.3 0.1 170.3 411.5 -------- --------- ------ ------ -------- Total ............................... $3,027.1 $45,723.6 $323.1 $256.4 $2,390.7 ======== ========= ====== ====== ======== 1999: Protection .......................... $2,291.6 $15,035.0 $217.4 $112.1 $1,291.0 Asset Gathering ..................... 521.5 5,166.8 -- 0.2 17.2 Guaranteed & Structured Financial Products ................. 8.4 20,310.4 56.1 0.5 298.2 Investment Management ............... -- -- -- -- -- Corporate & Other ................... 4.8 1,882.4 0.1 171.5 415.0 -------- --------- ------ ------ -------- Total ............................... $2,826.3 $42,394.6 $273.6 $284.3 $2,021.4 ======== ========= ====== ====== ========
The condensed financial information should be read in conjunction with the audited consolidated financial statements and notes thereto. 136 JOHN HANCOCK LIFE INSURANCE COMPANY SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION -- (CONTINUED) AS OF DECEMBER 31, 2001, 2000 AND 1999 AND FOR EACH OF THE YEARS THEN ENDED (IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E AMORTIZATION OF DEFERRED POLICY ACQUISITION BENEFITS, COSTS EXCLUDING CLAIMS, AMOUNTS RELATED TO NET LOSSES, AND NET REALIZED OTHER INVESTMENT SETTLEMENT INVESTMENT AND OTHER OPERATING SEGMENT INCOME EXPENSES GAINS (LOSSES) EXPENSES - ------- ---------- ----------- -------------------- ---------- 2001: Protection ....................... $1,258.5 $1,603.3 $171.3 $ 346.0 Asset Gathering .................. 498.5 441.6 75.0 452.4 Guaranteed & Structured Financial Products .............. 1,834.5 1,869.2 2.4 107.0 Investment Management ............ 28.7 -- -- 97.9 Corporate & Other ................ 26.0 414.0 0.3 224.5 -------- -------- ------ -------- Total ............................ $3,646.2 $4,328.1 $249.0 $1,227.8 ======== ======== ====== ======== 2000: Protection ....................... $1,196.3 $1,550.1 $106.0 $ 405.2 Asset Gathering .................. 445.8 371.3 78.8 557.2 Guaranteed & Structured Financial Products .............. 1,741.9 1,963.4 2.6 108.8 Investment Management ............ 22.7 -- -- 132.7 Corporate & Other ................ 157.2 362.6 (0.3) 84.9 -------- -------- ------ -------- Total ............................ $3,563.9 $4,247.4 $187.1 $1,288.8 ======== ======== ====== ======== 1999: Protection ....................... $1,101.9 $1,595.0 $ 69.2 $ 401.2 Asset Gathering .................. 388.6 299.3 53.5 542.1 Guaranteed & Structured Financial Products .............. 1,681.3 1,959.9 3.1 94.5 Investment Management ............ 45.9 -- -- 127.2 Corporate & Other ................ 121.2 731.2 (0.8) 86.0 -------- -------- ------ -------- Total ............................ $3,338.9 $4,585.4 $125.0 $1,251.0 ======== ======== ====== ========
(1) Unearned premiums and other policy claims and benefits payable are included in Column C amounts. (2) Allocations of net investment income and certain operating expenses are based on a number of assumptions and estimates, and reported operating results would change by segment if different methods were applied. The condensed financial information should be read in conjunction with the audited consolidated financial statements and notes thereto. 137 JOHN HANCOCK LIFE INSURANCE COMPANY SCHEDULE IV - REINSURANCE AS OF DECEMBER 31, 2001, 2000 AND 1999 AND FOR EACH OF THE YEARS THEN ENDED: (IN MILLIONS)
ASSUMED PERCENTAGE CEDED TO FROM OF AMOUNT GROSS OTHER OTHER NET ASSUMED TO AMOUNT COMPANIES COMPANIES AMOUNT NET ---------- ---------- --------- ---------- ------------ 2001: Life insurance in force ........... $282,557.8 $107,601.2 $27,940.6 $202,897.2 13.8% ========== ========== ========= ========== PREMIUMS: Life insurance .................... 2,551.6 787.6 233.2 1,997.2 11.7% Accident and health Insurance ..... 529.1 368.9 194.5 354.7 54.8% P&C ............................... -- -- -- -- 0.0% ---------- ---------- --------- ---------- Total ........................... $ 3,080.7 $ 1,156.5 $ 427.7 $ 2,351.9 18.2% ========== ========== ========= ========== 2000: Life insurance in force ........... $245,171.2 $ 49,119.2 $27,489.1 $223,541.0 12.3% ========== ========== ========= ========== PREMIUMS: Life insurance .................... 2,369.9 313.7 279.0 2,335.2 11.9% Accident and health Insurance ..... 810.4 941.3 186.4 55.5 335.9% P&C ............................... -- -- -- -- 0.0% ---------- ---------- --------- ---------- Total ........................... $ 3,180.3 $ 1,255.0 $ 465.4 $ 2,390.7 19.5% ========== ========== ========= ========== 1999: Life insurance in force ........... $283,946.1 $ 43,244.4 $29,214.6 $269,916.3 10.8% ========== ========== ========= ========== PREMIUMS: Life insurance .................... 2,074.5 408.1 139.4 1,806.1 7.7% Accident and health Insurance ..... 863.8 820.4 171.6 215.0 79.8% P&C ............................... -- -- 0.3 0.3 100.0% ---------- ---------- --------- ---------- Total ........................... $ 2,938.3 $ 1,228.5 $ 311.3 $ 2,021.4 15.4% ========== ========== ========= ==========
Note: The life insurance caption represents principally premiums from traditional life insurance and life-contingent immediate annuities and excludes deposits on investment products and the universal life insurance products. The condensed financial information should be read in conjunction with the audited consolidated financial statements and notes thereto. 138 UNAUDITED FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE LIFE ACCOUNT UV PERIOD ENDED JUNE 30, 2002 139 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2002
LARGE CAP ACTIVE INTERNATIONAL SMALL CAP GROWTH BOND EQUITY INDEX GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------- ------------ ------------- ------------ ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value........................................................... $35,386,081 $100,025,845 $ 5,309,272 $ 4,416,308 Policy loans and accrued interest receivable ........................ 2,847,141 11,870,083 419,722 -- Receivable from portfolio/JHVLICO.................................... -- -- -- -- ----------- ------------ ----------- ----------- Total assets......................................................... 38,233,222 111,895,928 5,728,994 4,416,308 LIABILITIES Payable to portfolio/JHVLICO......................................... 622 1,487 88 70 Asset charges payable ............................................... -- -- -- -- ----------- ------------ ----------- ----------- Total liabilities ................................................... 622 1,487 88 70 ----------- ------------ ----------- ----------- $38,232,600 $111,894,441 $ 5,728,906 $ 4,416,238 ----------- ------------ ----------- ----------- NET ASSETS: Accumulation units ................................................. $38,232,600 $111,894,441 $ 5,728,906 $ 4,416,238 ----------- ------------ ----------- ----------- Total net assets ................................................... $38,232,600 $111,894,441 $ 5,728,906 $ 4,416,238 ----------- ------------ ----------- ----------- Units outstanding................................................... 671,864 2,009,996 226,095 364,393 ----------- ------------ ----------- ----------- Unit value (accumulation)........................................... $ 56.91 $ 55.67 $ 25.34 $ 12.12 =========== ============ =========== ===========
GLOBAL MULTI CAP LARGE CAP MONEY BALANCED GROWTH VALUE MARKET SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ----------- ----------- ------------- ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value .......................................................... $3,235,518 $16,104,416 $24,400,461 $20,369,856 Policy loans and accrued interest receivable ........................ -- -- -- 2,259,076 Receivable from portfolio/JHVLICO ................................... -- -- -- (1) ---------- ----------- ----------- ----------- Total assets ........................................................ 3,235,518 16,104,416 24,400,461 22,628,931 LIABILITIES Payable to portfolio/JHVLICO ........................................ 53 258 394 1,006 Asset charges payable................................................ -- -- -- -- ---------- ----------- ----------- ----------- Total liabilities.................................................... 53 258 394 1,006 ---------- ----------- ----------- ----------- $3,235,465 $16,104,158 $24,400,067 $22,627,925 ---------- ----------- ----------- ----------- NET ASSETS: Accumulation units. ................................................ $3,235,465 $16,104,158 $24,400,067 $22,627,925 ---------- ----------- ----------- ----------- Total net assets.................................................... $3,235,465 $16,104,158 $24,400,067 $22,627,925 ---------- ----------- ----------- ----------- Units outstanding .................................................. 294,695 1,500,698 1,394,548 741,384 ---------- ----------- ----------- ----------- Unit value (accumulation) .......................................... $ 10.98 $ 10.73 $ 17.50 $ 30.52 ========== =========== =========== ===========
See accompanying notes. 140 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED) JUNE 30, 2002
SMALL/MID CAP REAL ESTATE GROWTH & GROWTH EQUITY INCOME MANAGED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------ ------------ ------------ ------------ ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value .............. $ 7,932,940 $ 7,010,878 $175,994,139 $ 86,325,324 Policy loans and accrued interest receivable ............. -- 407,294 31,811,634 13,831,967 Receivable from portfolio/JHVLICO ...... -- -- -- -- ------------ ------------ ------------ ------------ Total assets ............ 7,932,940 7,418,172 207,805,773 100,157,291 LIABILITIES Payable to portfolio/JHVLICO ...... 127 115 2,584 1,583 Asset charges payable.... -- -- -- -- ------------ ------------ ------------ ------------ Total liabilities ....... 127 115 2,584 1,583 ------------ ------------ ------------ ------------ $ 7,932,813 $ 7,418,057 $207,803,189 $100,155,708 ------------ ------------ ------------ ------------ NET ASSETS: Accumulation units ..... $ 7,932,813 $ 7,418,057 $207,803,189 $100,155,708 ------------ ------------ ------------ ------------ Total net assets ....... $ 7,932,813 $ 7,418,057 $207,803,189 $100,155,708 ------------ ------------ ------------ ------------ Units outstanding ...... 404,155 155,476 1,871,894 1,268,871 ------------ ------------ ------------ ------------ Unit value (accumulation) ....... $ 19.63 $ 47.71 $ 111.01 $ 78.93 ============ ============ ============ ============
SHORT-TERM SMALL CAP INTERNATIONAL EQUITY BOND EQUITY OPPORTUNITIES INDEX SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------ ------------ ------------ ------------ ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value ............. $ 1,095,839 $ 4,572,899 $14,206,679 $47,476,577 Policy loans and accrued interest receivable ... -- -- -- -- Receivable from portfolio/JHVLICO ..... -- -- -- -- ----------- ----------- ----------- ----------- Total assets ........... 1,095,839 4,572,899 14,206,679 47,476,577 LIABILITIES Payable to portfolio/JHVLICO ..... 18 70 225 772 Asset charges payable .. -- -- -- -- ----------- ----------- ----------- ----------- Total liabilities ...... 18 70 225 772 ----------- ----------- ----------- ----------- $ 1,095,821 $ 4,572,829 $14,206,454 $47,475,805 ----------- ----------- ----------- ----------- NET ASSETS: Accumulation units .... $ 1,095,821 $ 4,572,829 $14,206,454 $47,475,805 ----------- ----------- ----------- ----------- Total net assets ...... $ 1,095,821 $ 4,572,829 $14,206,454 $47,475,805 ----------- ----------- ----------- ----------- Units outstanding ..... 71,801 450,507 1,368,983 3,010,684 ----------- ----------- ----------- ----------- Unit value (accumulation) ....... $ 15.26 $ 10.15 $ 10.38 $ 15.77 =========== =========== =========== ===========
See accompanying notes. 141 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED) JUNE 30, 2002
EMERGING GLOBAL MARKETS BOND SMALL/MID BOND EQUITY INDEX CAP CORE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ------------ ------------- -------------- ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value..................................... $1,041,072 $1,151,654 $5,660,569 $716,506 Policy loans and accrued interest receivable... -- -- -- -- Receivable from portfolio/JHVLICO.............. -- -- -- -- ---------- ---------- ---------- -------- Total assets................................... 1,041,072 1,151,654 5,660,569 716,506 LIABILITIES Payable to portfolio/JHVLICO................... 16 18 90 11 Asset charges payable ......................... -- -- -- -- ---------- ---------- ---------- -------- Total liabilities.............................. 16 18 90 11 ---------- ---------- ---------- -------- $1,041,056 $1,151,636 $5,660,479 $716,495 ---------- ---------- ---------- -------- NET ASSETS: Accumulation units............................ $1,041,056 $1,151,636 $5,660,479 $716,495 ---------- ---------- ---------- -------- Total net assets.............................. $1,041,056 $1,151,636 $5,660,479 $716,495 ---------- ---------- ---------- -------- Units outstanding............................. 7,216 152,469 446,358 59,648 ---------- ---------- ---------- -------- Unit value (accumulation)..................... $ 144.27 $ 7.55 $ 12.68 $ 12.01 ========== ========== ========== ========
BRANDES FRONTIER HIGH YIELD TURNER INTERNATIONAL CAPITAL BOND CORE GROWTH EQUITY APPRECIATION SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ----------- ------------- -------------- ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value.......... $970,290 $ -- $ -- $ -- Outside Trust, at value................................. -- 294,255 1,239,122 403,273 Policy loans and accrued interest receivable............. -- -- -- -- Receivable from portfolio/JHVLICO........................ -- -- -- -- -------- --------- ---------- -------- Total assets............................................. 970,290 294,255 1,239,122 403,273 LIABILITIES Payable to portfolio/JHVLICO............................. 15 3 11 4 Asset charges payable.................................... -- -- -- -- -------- --------- ---------- -------- Total liabilities........................................ 15 3 11 4 -------- --------- ---------- -------- $970,275 $ 294,252 $1,239,111 $403,269 -------- --------- ---------- -------- NET ASSETS: Accumulation units...................................... $970,275 $ 294,252 $1,239,111 $403,269 -------- --------- ---------- -------- Total net assets........................................ $970,275 $ 294,252 $1,239,111 $403,269 -------- --------- ---------- -------- Units outstanding....................................... 111,923 20,737 78,174 21,368 -------- --------- ---------- -------- Unit value (accumulation)............................... $ 8.67 $ 14.19 $ 15.85 $ 18.87 ======== ========= ========== ========
See accompanying notes. 142 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED) JUNE 30, 2002
CLIFTON LARGE CAP AIM V.I. ENHANCED AGGRESSIVE FUNDAMENTAL PREMIER U.S. EQUITY GROWTH GROWTH EQUITY SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------ ------------ ------------ ------------ ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value ........................................... $ -- $ 2,018 $28,603 $ -- Outside Trust, at value ............................. 44,083 -- -- 24,065 Policy loans and accrued interest receivable ......... -- -- -- -- Receivable from portfolio/JHVLICO .................... -- -- -- -- ------- ------- ------- ------- Total assets ......................................... 44,083 2,018 28,603 24,065 LIABILITIES Payable to portfolio/JHVLICO ......................... 1 -- -- -- Asset charges payable ................................ -- -- -- -- ------- ------- ------- ------- Total liabilities .................................... 1 -- -- -- ------- ------- ------- ------- $44,082 $ 2,018 $28,603 $24,065 ------- ------- ------- ------- NET ASSETS: Accumulation units .................................. $44,082 $ 2,018 $28,603 $24,065 ------- ------- ------- ------- Total net assets .................................... $44,082 $ 2,018 $28,603 $24,065 ------- ------- ------- ------- Units outstanding ................................... 4,686 339 4,034 3,565 ------- ------- ------- ------- Unit value (accumulation) .......................... $ 9.41 $ 5.95 $ 7.09 $ 6.75 ======= ======= ======= =======
FIDELITY VIP FIDELITY VIP MFS NEW V.A. STRATEGIC GROWTH CONTRAFUND DISCOVERY INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------ ------------ ---------- ---------------- ASSETS Investment in shares of portfolios of: John Hancock Declaration Trust, at value ........................................... $ -- $ -- $ -- $ 739 John Hancock Variable Series Trust I, at value .............................................. Outside Trust, at value ............................. 144,601 33,701 106,374 Policy loans and accrued interest receivable ......... -- -- -- -- Receivable from portfolio/JHVLICO .................... -- -- -- -- -------- -------- -------- -------- Total assets ......................................... 144,601 33,701 106,374 739 LIABILITIES Payable to portfolio/JHVLICO ......................... 2 -- -- -- Asset charges payable ................................ -- -- -- -- -------- -------- -------- -------- Total liabilities .................................... 2 -- -- -- -------- -------- -------- -------- $144,599 $ 33,701 $106,374 $ 739 -------- -------- -------- -------- NET ASSETS: Accumulation units .................................. $144,599 $ 33,701 $106,374 $ 739 -------- -------- -------- -------- Total net assets .................................... $144,599 $ 33,701 $106,374 $ 739 -------- -------- -------- -------- Units outstanding ................................... 17,951 3,178 13,924 60 -------- -------- -------- -------- Unit value (accumulation) .......................... $ 8.06 $ 10.60 $ 7.64 $ 12.32 ======== ======== ======== ========
See accompanying notes. 143 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED) JUNE 30, 2002
HEALTH INTERNATIONAL FUNDAMENTAL SMALL CAP SCIENCES OPPORTUNITIES B VALUE VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- --------------- ---------------- ----------- ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value ......................................... $ 5,288 $ 26,203 $3,982,359 $ 166,356 Policy loans and accrued interest receivable ........................................ -- -- -- -- Receivable from portfolio/JHVLICO .................. -- -- -- -- ---------- ---------- ---------- ---------- Total assets ....................................... 5,288 26,203 3,982,359 166,356 LIABILITIES Payable to portfolio/JHVLICO ....................... 1 -- 56 1 Asset charges payable .............................. -- -- -- -- ---------- ---------- ---------- ---------- Total liabilities .................................. 1 -- 56 1 ---------- ---------- ---------- ---------- $ 5,287 $ 26,203 $3,982,303 $ 166,355 ---------- ---------- ---------- ---------- NET ASSETS: Accumulation units ................................ $ 5,287 $ 26,203 $3,982,303 $ 166,355 ---------- ---------- ---------- ---------- Total net assets .................................. $ 5,287 $ 26,203 $3,982,303 $ 166,355 ---------- ---------- ---------- ---------- Units outstanding ................................. 640 3,426 323,088 13,420 ---------- ---------- ---------- ---------- Unit value (accumulation) ......................... $ 8.26 $ 7.65 $ 12.33 $ 12.40 ========== ========== ========== ==========
V.A. AIM V.I. MFS TEMPLETON FINANCIAL GROWTH RESEARCH INTERNATIONAL INDUSTRIES SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ----------- ------------- ------------ ASSETS Investment in shares of portfolios of: John Hancock Declaration Trust, at value ......................................... $ -- $ -- $ -- $1,876 Outside Trust, at value ........................... 7,316 1,980 2,058 -- Policy loans and accrued interest receivable ........................................ -- -- -- -- Receivable from portfolio/JHVLICO .................. -- -- -- -- ------ ------ ------ ------ Total assets ....................................... 7,316 1,980 2,058 1,876 LIABILITIES Payable to portfolio/JHVLICO ....................... -- -- -- -- Asset charges payable .............................. -- -- -- -- ------ ------ ------ ------ Total liabilities .................................. -- -- -- -- ------ ------ ------ ------ $7,316 $1,980 $2,058 $1,876 ------ ------ ------ ------ NET ASSETS: Accumulation units ................................ $7,316 $1,980 $2,058 $1,876 ------ ------ ------ ------ Total net assets .................................. $7,316 $1,980 $2,058 $1,876 ------ ------ ------ ------ Units outstanding ................................. 563 233 255 135 ------ ------ ------ ------ Unit value (accumulation) ......................... $12.99 $ 8.50 $ 8.07 $13.90 ====== ====== ====== ======
See accompanying notes. 144 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED) JUNE 30, 2002
JANUS ASPEN V.A. RELATIVE LARGE CAP GLOBAL VALUE VALUE CORE TECHNOLOGY SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------- ---------- ------------ ASSETS Investment in shares of portfolios of: John Hancock Declaration Trust, at value ............................ $ 4,431 $ -- $ -- John Hancock Variable Series Trust I, at value ...................... -- 13,813 -- Outside Trust, at value ............................................. -- -- 1,589 Policy loans and accrued interest receivable.......................... -- -- -- Receivable from portfolio/JHVLICO .................................... -- -- -- ------- ------- ------- Total assets ......................................................... 4,431 13,813 1,589 LIABILITIES Payable to portfolio/JHVLICO ......................................... -- -- -- Asset charges payable ................................................ -- -- -- ------- ------- ------- Total liabilities .................................................... -- -- -- ------- ------- ------- $ 4,431 $13,813 $ 1,589 ------- ------- ------- NET ASSETS: Accumulation units .................................................. $ 4,431 $13,813 $ 1,589 ------- ------- ------- Total net assets .................................................... $ 4,431 $13,813 $ 1,589 ------- ------- ------- Units outstanding ................................................... 381 1,447 530 ------- ------- ------- Unit value (accumulation) ........................................... $ 11.63 $ 9.55 $ 3.00 ======= ======= =======
JANUS ASPEN MFS INVESTORS WORLDWIDE GROWTH GROWTH STOCK SUBACCOUNT SUBACCOUNT ------------ ------------- ASSETS Investment in shares of portfolios of: Outside Trust, at value ....................................................... $59,619 $ 6,218 Policy loans and accrued interest receivable ................................... -- -- Receivable from portfolio/JHVLICO .............................................. -- -- ------- ------- Total assets ................................................................... 59,619 6,218 LIABILITIES Payable to portfolio/JHVLICO ................................................... 1 -- Asset charges payable .......................................................... -- -- ------- ------- Total liabilities .............................................................. 1 -- ------- ------- $59,618 $ 6,218 ------- ------- NET ASSETS: Accumulation units ............................................................ $59,618 $ 6,218 ------- ------- Total net assets .............................................................. $59,618 $ 6,218 ------- ------- Units outstanding ............................................................. 10,742 770 ------- ------- Unit value (accumulation) ..................................................... $ 5.55 $ 8.08 ======= =======
See accompanying notes. 145 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
LARGE CAP GROWTH SUBACCOUNT -------------------------------------------- 2002 2001 2000 ------------ ------------ ------------ Investment income: Dividends ......................................................... $ 71,404 $ 75,058 $ 6,351,461 Interest on policy loans .......................................... 107,567 224,030 223,081 ------------ ------------ ------------ Total investment income ............................................ 178,971 299,088 6,574,542 Expenses: Mortality and expense risks ....................................... 121,512 237,021 286,716 ------------ ------------ ------------ Net investment income .............................................. 57,459 62,067 6,287,826 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ............... (515,622) (303,166) 1,809,410 Realized gain distributions ....................................... -- -- -- ------------ ------------ ------------ Realized gains (losses) ........................................... (515,622) (303,166) 1,809,410 Change in unrealized appreciation (depreciation) during the period ................................................. (7,084,402) 9,417,343 (17,039,660) ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ................................................... $ (7,542,565) $ 9,176,244 $ (8,942,424) ============ ============ ============
ACTIVE BOND SUBACCOUNT ----------------------------------------- 2002 2001 2000 ----------- ----------- ----------- Investment income: Dividends ......................................................... $ 2,716,324 $ 5,575,227 $ 5,048,654 Interest on policy loans .......................................... 417,606 840,444 769,530 ----------- ----------- ----------- Total investment income ............................................ 3,133,930 6,415,671 5,818,184 Expenses: Mortality and expense risks ....................................... 260,208 492,587 485,231 ----------- ----------- ----------- Net investment income .............................................. 2,873,722 5,923,084 5,332,953 Realized gains (losses) on investments: Realized losses on sale of portfolio shares ....................... (154,849) (578,863) (1,058,175) Realized gain distributions ....................................... -- -- -- ----------- ----------- ----------- Realized losses .................................................... (154,849) (578,863) (1,058,175) Change in unrealized appreciation (depreciation) during the period ................................................. (755,593) 1,577,966 3,862,398 ----------- ----------- ----------- Net increase in net assets resulting from operations ............... $ 1,963,280 $ 6,922,187 $ 8,137,176 =========== =========== ===========
See accompanying notes. 146 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
INTERNATIONAL EQUITY INDEX SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Investment income: Dividends .............................................................. $ 47,320 $ 92,540 $ 334,135 Interest on policy loans ............................................... 15,365 32,013 29,828 ----------- ----------- ----------- Total investment income ................................................. 62,685 124,553 363,963 Expenses: Mortality and expense risks ............................................ 16,115 35,964 41,808 ----------- ----------- ----------- Net investment income ................................................... 46,570 88,589 322,155 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares .................... (195,650) (244,081) 76,586 Realized gain distributions ............................................ -- 690 -- ----------- ----------- ----------- Realized gains (losses) ................................................ (195,650) (243,391) 76,586 Change in unrealized appreciation (depreciation) during the period ...... 169,621 (1,167,176) (1,706,468) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ......... $ 20,541 $(1,321,978) $(1,307,727) =========== =========== ===========
SMALL CAP GROWTH SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Investment income: Dividends .............................................................. $ -- $ -- $ 621,346 ----------- ----------- ----------- Total investment income ................................................. -- -- 621,346 Expenses: Mortality and expense risks ............................................ 13,503 27,911 39,379 ----------- ----------- ----------- Net investment income (loss) ............................................ (13,503) (27,911) 581,967 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares .................... (353,269) (193,161) 159,388 Realized gain distributions ............................................ -- -- -- ----------- ----------- ----------- Realized gains (losses) ................................................. (353,269) (193,961) 159,388 Change in unrealized depreciation during the period ..................... (543,530) (449,625) (2,654,137) ----------- ----------- ----------- Net decrease in net assets resulting from operations .................... $ (910,302) $ (670,697) $(1,912,782) =========== =========== ===========
See accompanying notes. 147 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
GLOBAL BALANCED SUBACCOUNT ------------------------------------ 2002 2001 2000 ---------- ---------- ---------- Investment income: Dividends ....................................................... $ 24,859 $ 4,344 $ 8,232 --------- --------- --------- Total investment income .......................................... 24,859 4,344 8,232 Expenses: Mortality and expense risks ..................................... 9,570 1,319 1,034 --------- --------- --------- Net investment income ............................................ 15,289 3,025 7,198 Realized gains (losses) on investments: Realized losses on sale of portfolio shares ..................... (10,810) (18,478) (3,641) Realized gain distributions ..................................... -- -- -- --------- --------- --------- Realized losses .................................................. (10,810) (18,478) (3,641) Change in unrealized appreciation (depreciation) during the period ............................................... (114,845) 12,916 (21,945) --------- --------- --------- Net decrease in net assets resulting from operations ............. $(110,366) $ (2,537) $ (18,388) ========= ========= =========
MULTI CAP GROWTH SUBACCOUNT -------------------------------------------- 2002 2001 2000 ------------ ------------ ------------ Investment income: Dividends ....................................................... $ -- $ -- $ 2,284,720 ------------ ------------ ------------ Total investment income .......................................... -- -- 2,284,720 Expenses: Mortality and expense risks ..................................... 48,326 85,083 101,903 ------------ ------------ ------------ Net investment income (loss) ..................................... (48,326) (85,083) 2,182,817 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ............. (1,660,611) (2,329,455) 1,892,763 Realized gain distributions ..................................... -- -- -- ------------ ------------ ------------ Realized gains (losses) .......................................... (1,660,611) (2,329,455) 1,892,763 Change in unrealized depreciation during the period .............. (3,104,474) (4,249,250) (11,690,290) ------------ ------------ ------------ Net decrease in net assets resulting from operations ............. $ (4,813,411) $ (6,663,788) $ (7,614,710) ============ ============ ============
See accompanying notes. 148 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
LARGE CAP VALUE SUBACCOUNT ----------------------------------------- 2002 2001 2000 ------------ ------------ ------------ Investment income: Dividends ........................................................... $ 158,389 $ 278,945 $ 759,319 ----------- ----------- ----------- Total investment income .............................................. 158,389 278,945 759,319 Expenses: Mortality and expense risks ......................................... 71,582 108,117 65,992 ----------- ----------- ----------- Net investment income ................................................ 86,807 170,828 693,327 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ................. 1,603 69,861 (47,306) Realized gain distributions ......................................... -- 274,383 -- ----------- ----------- ----------- Realized gains (losses) .............................................. 1,603 344,244 (47,306) Change in unrealized appreciation (depreciation) during the period .......................................................... (1,211,853) (277,488) 854,807 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ...... $(1,123,443) $ 237,584 $ 1,500,828 =========== =========== ===========
MONEY MARKET SUBACCOUNT ----------------------------------------- 2002 2001 2000 ------------ ------------ ------------ Investment income: Dividends ........................................................... $ 157,083 $ 797,762 $ 1,260,525 Interest on policy loans ............................................ 79,423 169,029 162,299 ----------- ----------- ----------- Total investment income .............................................. 236,506 966,791 1,422,824 Expenses: Mortality and expense risks ......................................... 62,274 132,202 132,261 ----------- ----------- ----------- Net investment income ................................................ 174,232 834,589 1,290,563 Realized gains on investments: Realized gains on sale of portfolio shares .......................... 206 -- -- Realized gain distributions ......................................... -- -- -- ----------- ----------- ----------- Realized gains ....................................................... 206 -- -- Change in unrealized depreciation during the period .................. (1) -- -- ----------- ----------- ----------- Net increase in net assets resulting from operations ................. $ 174,437 $ 834,589 $ 1,290,563 =========== =========== ===========
See accompanying notes. 149 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
SMALL/MID CAP GROWTH SUBACCOUNT ----------------------------------- 2002 2001 2000 --------- --------- --------- Investment income: Dividends ............................................................. $ -- $ -- $ 603,438 --------- --------- --------- Total investment income ................................................ -- -- 603,438 Expenses: Mortality and expense risks ........................................... 24,158 34,942 32,879 --------- --------- --------- Net investment income (loss) .......................................... (24,158) (34,942) 570,559 Realized gains (losses) on investments: Realized losses on sale of portfolio shares ........................... (63,168) (212,465) (136,669) Realized gain distributions ........................................... -- -- -- --------- --------- --------- Realized losses ........................................................ (63,168) (212,465) (136,669) Change in unrealized appreciation (depreciation) during the period ..... (782,437) 391,420 (2,663) --------- --------- --------- Net increase (decrease) in net assets resulting from operations ........ $(869,763) $ 144,013 $ 431,227 ========= ========= =========
REAL ESTATE EQUITY SUBACCOUNT ---------------------------------------- 2002 2001 2000 ----------- ----------- ----------- Investment income: Dividends ............................................................. $ 131,352 $ 233,523 $ 471,363 Interest on policy loans .............................................. 14,408 29,769 21,486 ----------- ----------- ----------- Total investment income ................................................ 145,760 263,292 492,849 Expenses: Mortality and expense risks ........................................... 18,233 33,541 27,585 ----------- ----------- ----------- Net investment income .................................................. 127,527 229,751 465,264 Realized gains (losses) on investments: Realized losses on sale of portfolio shares ........................... (14,875) (234,535) (159,205) Realized gain distributions ........................................... -- 167,156 -- ----------- ----------- ----------- Realized losses ........................................................ (14,875) (67,379) (159,205) Change in unrealized appreciation during the period .................... 564,505 128,322 919,904 ----------- ----------- ----------- Net increase in net assets resulting from operations ................... $ 677,157 $ 290,694 $ 1,225,963 =========== =========== ===========
See accompanying notes. 150 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
GROWTH & INCOME SUBACCOUNT --------------------------------------------- 2002 2001 2000 ------------- ------------- ------------- Investment income: Dividends ................................................... $ 634,217 $ 1,000,312 $ 43,732,520 Interest on policy loans .................................... 1,139,728 2,433,647 2,428,588 ------------ ------------ ------------ Total investment income ...................................... 1,773,945 3,433,959 46,161,108 Expenses: Mortality and expense risks ................................. 491,945 1,065,963 1,733,223 ------------ ------------ ------------ Net investment income ........................................ 1,282,000 2,367,996 44,427,885 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ......... (229,825) 205,711 18,300,286 Realized gain distributions ................................. -- -- -- ------------ ------------ ------------ Realized gains (losses) ...................................... (229,825) 205,711 18,300,286 Change in unrealized depreciation during the period .......... (23,032,815) (37,067,063) (96,829,044) ------------ ------------ ------------ Net decrease in net assets resulting from operations ......... $(21,980,640) $(34,493,356) $(34,100,873) ============ ============ ============
MANAGED SUBACCOUNT --------------------------------------------- 2002 2001 2000 ------------- ------------- ------------- Investment income: Dividends ................................................... $ 759,936 $ 2,011,926 $ 11,757,304 Interest on policy loans .................................... 514,389 1,055,240 -- ------------ ------------ ------------ Total investment income ...................................... 1,274,325 3,067,166 11,757,304 Expenses: Mortality and expense risks ................................. 298,804 624,031 664,664 ------------ ------------ ------------ Net investment income ........................................ 975,521 2,443,135 11,092,640 Realized gains on investments: Realized gains on sale of portfolio shares .................. 55,484 33,494 1,551,519 Realized gain distributions ................................. -- 495,279 -- ------------ ------------ ------------ Realized gains ............................................... 55,484 528,773 1,551,519 Change in unrealized depreciation during the period .......... (8,119,870) (5,276,809) (12,278,637) ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ............................................. $ (7,088,865) $ (2,304,901) $ 365,522 ============ ============ ============
See accompanying notes. 151 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
SHORT-TERM BOND SUBACCOUNT ------------------------------------ 2002 2001 2000 ---------- ---------- ---------- Investment income: Dividends ............................................................... $ 22,369 $ 27,491 $ 17,131 --------- --------- --------- Total investment income .................................................. 22,369 27,491 17,131 Expenses: Mortality and expense risks ............................................. 2,957 3,039 1,637 --------- --------- --------- Net investment income .................................................... 19,412 24,452 15,494 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ..................... 414 8,797 (2,287) Realized gain distributions ............................................. -- -- -- --------- --------- --------- Realized gains (losses) .................................................. 414 8,797 (2,287) Change in unrealized appreciation (depreciation) during the period ....................................................... (652) (2,372) 6,756 --------- --------- --------- Net increase in net assets resulting from operations ..................... $ 19,174 $ 30,877 $ 19,963 ========= ========= =========
SMALL CAP EQUITY SUBACCOUNT ------------------------------------ 2002 2001 2000 ---------- ---------- ---------- Investment income: Dividends ............................................................... $ -- $ 2,669 $ 321,253 --------- --------- --------- Total investment income .................................................. -- 2,669 321,253 Expenses: Mortality and expense risks ............................................. 13,141 21,562 23,745 --------- --------- --------- Net investment income (loss) ............................................. (13,141) (18,893) 297,508 Realized gains (losses) on investments: Realized losses on sale of portfolio shares ............................. (60,672) (553,686) (110,857) Realized gain distributions ............................................. -- -- -- --------- --------- --------- Realized losses .......................................................... (60,672) (553,686) (110,857) Change in unrealized appreciation (depreciation) during the period ....................................................... (462,537) 580,661 (668,463) --------- --------- --------- Net increase (decrease) in net assets resulting from operations ......................................................... $(536,350) $ 8,082 $(481,812) ========= ========= =========
See accompanying notes. 152 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000 INTERNATIONAL OPPORTUNITIES SUBACCOUNT ------------------------------------------- 2002 2001 2000 ----------- ----------- ----------- Investment income: Dividends ....................... $ 55,830 $ 104,368 $ 617,754 ----------- ----------- ----------- Total investment income .......... 55,830 104,368 617,754 Expenses: Mortality and expense risks ..... 37,652 78,353 53,038 ----------- ----------- ----------- Net investment income ............ 18,178 26,015 564,716 Realized gains (losses) on investments: Realized gains (losses)on sale of portfolio shares ................ (294,903) (2,366,905) 348,813 Realized gain distributions .................. -- -- -- ----------- ----------- ----------- Realized gains (losses) .......... (294,903) (2,366,905) 348,813 Change in unrealized depreciation during the period ............... (365,144) (510,586) (2,497,504) ----------- ----------- ----------- Net decrease in net assets resulting from operations ....... $ (641,869) $(2,851,476) $(1,583,975) =========== =========== =========== EQUITY INDEX SUBACCOUNT ----------------------------------------- 2002 2001 2000 ----------- ----------- ----------- Investment income: Dividends ........................ $ 325,857 $ 580,736 $ 2,327,055 ----------- ----------- ----------- Total investment income ........... 325,857 580,736 2,327,055 Expenses: Mortality and expense risks ...... 148,306 288,749 185,175 ----------- ----------- ----------- Net investment income ............. 177,551 291,987 2,141,880 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ................ (404,527) (350,536) 485,643 Realized gain distributions ...... -- 1,572,305 -- ----------- ----------- ----------- Realized gains (losses) .......... (404,527) 1,221,769 485,643 Change in unrealized depreciation during the period ................ (7,088,039) (8,084,684) (8,035,375) ----------- ----------- ----------- Net decrease in net assets resulting from operations ........ $(7,315,015) $(6,570,928) $(5,407,852) =========== =========== =========== See accompanying notes. 153 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000 GLOBAL BOND SUBACCOUNT ----------------------------------- 2002 2001 2000 --------- --------- --------- Investment income: Dividends .............................. $ -- $ 39,052 $ 63,032 --------- --------- --------- Total investment income ................. -- 39,052 63,032 Expenses: Mortality and expense risks ............ 2,408 6,664 5,624 --------- --------- --------- Net investment income (loss) ........... (2,408) 32,388 57,408 Realized gains (losses) on investments: Realized losses on sale of portfolio shares ................................ (485) (4,928) (14,302) Realized gain distributions ............ -- -- -- --------- --------- --------- Realized losses ......................... (485) (4,928) (14,302) Change in unrealized appreciation (depreciation) during the period ....... 83,385 (45,004) 63,359 --------- --------- --------- Net increase (decrease) in net assets resulting from operations .............. $ 80,492 $ (17,544) $ 106,465 ========= ========= ========= EMERGING MARKETS EQUITY SUBACCOUNT ----------------------------------- 2002 2001 2000 --------- --------- --------- Investment income: Dividends .............................. $ 1,769 $ 1,896 $ 63,791 --------- --------- --------- Total investment income ................. 1,769 1,896 63,791 Expenses: Mortality and expense risks ............ 3,013 4,801 5,200 --------- --------- --------- Net investment income (loss) ............ (1,244) (2,905) 58,591 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ...................... (10,278) (512,242) 19,902 Realized gain distributions ............ -- -- -- --------- --------- --------- Realized gains (losses) ................ (10,278) (512,242) 19,902 Change in unrealized appreciation (depreciation) during the period ....... 26,303 454,961 (571,486) --------- --------- --------- Net increase (decrease) in net assets resulting from operations ............. $ 14,781 $ (60,186) $(492,993) ========= ========= ========= See accompanying notes. 154 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000 BOND INDEX SUBACCOUNT ---------------------------------- 2002 2001 2000 --------- --------- --------- Investment income: Dividends ............................... $ 146,775 $ 146,628 $ 7,273 --------- --------- --------- Total investment income .................. 146,775 146,628 7,273 Expenses: Mortality and expense risks ............. 15,884 14,407 561 --------- --------- --------- Net investment income .................... 130,891 132,221 6,712 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ....................... 1,653 9,436 (607) Realized gain distributions ............. -- 8,792 -- --------- --------- --------- Realized gains (losses) .................. 1,653 18,228 (607) Change in unrealized appreciation (depreciation) during the period ........ 34,100 (26,418) 6,100 --------- --------- --------- Net increase in net assets resulting from operations .............................. $ 166,644 $ 124,031 $ 12,205 ========= ========= ========= SMALL/MID CAP CORE SUBACCOUNT -------------------------------- 2002 2001 2000 -------- -------- -------- Investment income: Dividends .................................. $ 919 $ 2,616 $ 22,843 -------- -------- -------- Total investment income ..................... 919 2,616 22,843 Expenses: Mortality and expense risks ................ 1,756 3,013 1,051 -------- -------- -------- Net investment income (loss) ................ (837) (397) 21,792 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares .................................... 2,030 (3,169) 1,505 Realized gain distributions ................ -- -- -- -------- -------- -------- Realized gains (losses) .................... 2,030 (3,169) 1,505 Change in unrealized appreciation (depreciation) during the period ........... (14,447) 25,735 (13,928) -------- -------- -------- Net increase (decrease) in net assets resulting from operations .................. $(13,254) $ 22,169 $ 9,369 ======== ======== ======== 155 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000 HIGH YIELD BOND SUBACCOUNT ----------------------------------- 2002 2001 2000 --------- --------- --------- Investment income: Dividends .............................. $ 52,306 $ 62,648 $ 84,101 --------- --------- --------- Total investment income ................. 52,306 62,648 84,101 Expenses: Mortality and expense risks ............ 2,894 4,178 5,409 --------- --------- --------- Net investment income ................... 49,412 58,470 78,692 Realized gains (losses) on investments: Realized losses on sale of portfolio shares ................................ (29,328) (133,868) (12,114) Realized gain distributions ............ -- -- -- --------- --------- --------- Realized losses ......................... (29,328) (133,868) (12,114) Change in unrealized appreciation (depreciation) during the period ....... (70,306) 132,879 (188,735) --------- --------- --------- Net increase (decrease) in net assets resulting from operations .............. $ (50,222) $ 57,481 $(122,157) ========= ========= ========= TURNER CORE GROWTH SUBACCOUNT ----------------------------------- 2002 2001 2000 --------- --------- --------- Investment income: Dividends .............................. $ -- $ 420 $ 52,832 --------- --------- --------- Total investment income ................. -- 420 52,832 Expenses: Mortality and expense risks ............ 590 1,981 2,215 --------- --------- --------- Net investment income (loss) ........... (590) (1,561) 50,617 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ...................... (25,442) (91,201) 20,969 Realized gain distributions ............ -- -- -- --------- --------- --------- Realized gains (losses) ................. (25,442) (91,201) 20,969 Change in unrealized depreciation during the period ............................. (37,358) (12,342) (120,040) --------- --------- --------- Net decrease in net assets resulting from operations ............................. $ (63,390) $(105,104) $ (48,454) ========= ========= ========= See accompanying notes. 156 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000 BRANDES INTERNATIONAL EQUITY SUBACCOUNT ----------------------------------------- 2002 2001 2000 --------- --------- --------- Investment income: Dividends ........................... $ 685 $ 14,525 $ 92,935 --------- --------- --------- Total investment income .............. 685 14,525 92,935 Expenses: Mortality and expense risks ......... 1,944 5,876 4,973 --------- --------- --------- Net investment income (loss) ......... (1,259) 8,649 87,962 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ................ (23,834) 28,195 13,902 Realized gain distributions ......... -- 43,702 -- --------- --------- --------- Realized gains (losses) .............. (23,834) 71,897 13,902 Change in unrealized appreciation (depreciation) during the period .... 30,006 (246,498) (35,201) --------- --------- --------- Net increase (decrease) in net assets resulting from operations .... $ 4,913 $(165,952) $ 66,663 ========= ========= =========
FRONTIER CAPITA L APPRECIATION SUBACCOUNT ------------------------------------------- 2002 2001 2000 --------- --------- --------- Investment income: Dividends ........................... $ -- $ -- $ 133,836 --------- --------- --------- Total investment income .............. -- -- 133,836 Expenses: Mortality and expense risks ......... 883 2,728 3,700 --------- --------- --------- Net investment income (loss) ........ (883) (2,728) 130,136 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ................ (3,219) (54,796) 68,311 Realized gain distributions ......... -- 4,602 -- --------- --------- --------- Realized gains (losses) .............. (3,219) (50,194) 68,311 Change in unrealized appreciation (depreciation) during the period .... (54,814) 52,457 (175,994) --------- --------- --------- Net increase (decrease) in net assets resulting from operations .... $ (58,916) $ (465) $ 22,453 ========= ========= =========
See accompanying notes. 157 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
CLIFTON ENHANCED U.S. EQUITY SUBACCOUNT ----------------------------------------- 2002 2001 2000 ------- ------- ------- Investment income: Dividends .............................. $ -- $ 1,266 $ 3,328 ------- ------- ------- Total investment income ................. -- 1,266 3,328 Expenses: Mortality and expense risks ............ 95 149 138 ------- ------- ------- Net investment income (loss) ............ (95) 1,117 3,190 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares ...................... (827) (826) 302 Realized gain distributions ............ -- -- -- ------- ------- ------- Realized gains (losses) ................ (827) (826) 302 Change in unrealized depreciation during the period ...................... (4,247) (3,148) (5,562) ------- ------- ------- Net decrease in net assets resulting from operations ........................ $(5,169) $(2,857) $(2,070) ======= ======= =======
LARGE CAP AGGRESSIVE GROWTH SUBACCOUNT ----------------------------------------- 2002 2001 2000* ------- ------- ------- Investment income: Dividends .............................. $ -- $ -- $ 36 ------- ------- ------- Total investment income ................. -- -- 36 Expenses: Mortality and expense risks ............ 4 11 6 ------- ------- ------- Net investment income (loss) ............ (4) (11) 30 Realized gains (losses) on investments: Realized losses on sale of portfolio shares ...................... (47) (68) (8) Realized gain distributions ............ -- -- -- ------- ------- ------- Realized losses ......................... (47) (68) (8) Change in unrealized depreciation during the period ...................... (293) (216) (616) ------- ------- ------- Net decrease in net assets resulting from operations ........................ $ (344) $ (295) $ (594) ======= ======= =======
See accompanying notes. 158 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
FUNDAMENTAL GROWTH SUBACCOUNT ------------------------------- 2002 2001 2000* --------- --------- --------- Investment income: Dividends..................................... $ -- $ -- $ 1,361 ------- ------- ------- Total investment income........................ -- -- 1,361 Expenses: Mortality and expense risks................... 33 62 10 ------- ------- ------- Net investment income (loss)................... (33) (62) 1,351 Realized gains (losses) on investments: Realized losses on sale of portfolio shares... (202) (340) (10) Realized gain distributions................... -- -- -- ------- ------- ------- Realized losses................................ (202) (340) (10) Change in unrealized depreciation during the period........................................ (4,199) (3,866) (1,226) ------- ------- ------- Net increase (decrease) in net assets resulting from operations..................... $(4,434) $(4,268) $ 115 ======= ======= =======
AIM V.I. PREMIER EQUITY SUBACCOUNT ------------------------------------ 2002 2001 2000* ----------- ----------- ---------- Investment income: Dividends................................. $ -- $ 17 $ 241 ------- ------- ------ Total investment income.................... -- 17 241 Expenses: Mortality and expense risks............... 44 61 11 ------- ------- ------ Net investment income (loss)............... (44) (44) 230 Realized gains (losses) on investments: Realized losses on sale of portfolio shares................................... (335) (754) (11) Realized gain distributions............... -- 251 -- ------- ------- ------ Realized losses............................ (335) (503) (11) Change in unrealized depreciation during the period......................... (4,344) (1,395) (1068) ------- ------- ------ Net decrease in net assets resulting from operations........................... $(4,723) $(1,942) $ (849) ======= ======= ======
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 159 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
FIDELITY VIP GROWTH SUBACCOUNT -------------------------------- 2002 2001 2000* --------- ------- ------ Investment income: Dividends....................................... $ 1 $ -- $ -- -------- ------- ----- Total investment income.......................... 1 -- -- Expenses: Mortality and expense risks..................... 143 18 6 -------- ------- ----- Net investment loss.............................. (142) (18) (6) Realized gains (losses) on investments: Realized losses on sale of portfolio shares..... (1,037) (1,717) (7) Realized gain distributions..................... -- 272 -- -------- ------- ----- Realized losses.................................. (1,037) (1,445) (7) Change in unrealized appreciation (depreciation)during the period................. (26,030) 469 (525) -------- ------- ----- Net decrease in net assets resulting from operations...................................... $(27,209) $ (994) $(538) ======== ======= =====
FIDELITY VIP CONTRAFUND SUBACCOUNT ----------------------------------- 2002 2001 2000* ----------- ----------- --------- Investment income: Dividends................................................ $ 84 $ 41 $ -- ----- ------- ----- Total investment income................................... 84 41 -- Expenses: Mortality and expense risks.............................. 47 65 12 ----- ------- ----- Net investment income (loss).............................. 37 (24) (12) Realized gains (losses) on investments: Realized losses on sale of portfolio shares.............. (182) (1,122) (4) Realized gain distributions.............................. -- 164 -- ----- ------- ----- Realized losses........................................... (182) (958) (4) Change in unrealized depreciation during the period....... (801) (616) (366) ----- ------- ----- Net decrease in net assets resulting from operations...... $(946) $(1,598) $(382) ===== ======= =====
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 160 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
MFS NEW DISCOVERY SUBACCOUNT ----------------------------- 2002 2001 2000* --------- -------- ------ Investment income: Dividends.................................... $ -- $ 3,157 $ -- -------- ------- ---- Total investment income....................... -- 3,157 -- Expenses: Mortality and expense risks.................. 317 422 19 -------- ------- ---- Net investment income (loss).................. (317) 2,735 (19) Realized gains (losses) on investments: Realized losses on sale of portfolio shares.. (86) (2,026) (7) Realized gain distributions.................. -- 125 -- -------- ------- ---- Realized losses............................... (86) (1,901) (7) Change in unrealized appreciation (depreciation) during the period............. (24,021) (743) 197 -------- ------- ---- Net increase (decrease) in net assets resulting from operations.................... $(24,424) $ 91 $171 ======== ======= ====
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 161 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001
V.A. STRATEGIC HEALTH INCOME SCIENCES SUBACCOUNT SUBACCOUNT --------------- --------------- 2002 2001* 2002 2001* ------ ------ ------ ----- Investment income: Dividends ............................................................ $ 17 $ 3 $ -- $ -- ----- ----- ----- ----- Total investment income ............................................... 17 3 -- -- Expenses: Mortality and expense risks .......................................... 1 -- 11 3 ----- ----- ----- ----- Net investment income (loss) ......................................... 16 3 (11) (3) Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares .................. (3) 1 (15) (1) Realized gain distributions .......................................... -- -- -- -- ----- ----- ----- ----- Realized gains (losses) ............................................... (3) 1 (15) (1) Change in unrealized appreciation (depreciation) during the period .................................................... (7) 1 (614) (22) ----- ----- ----- ----- Net increase (decrease) in net assets resulting from operations ....... $ 6 $ 5 $(640) $ (26) ===== ===== ===== =====
INTERNATIONAL FUNDAMENTAL OPPORTUNITIES B VALUE SUBACCOUNT SUBACCOUNT ---------------------- ---------------------- 2002 2001* 2002 2001* --------- --------- --------- --------- Investment income: Dividends ....................................................... $ 85 $ -- $ 23,680 $ 3,406 --------- --------- --------- --------- Total investment income .......................................... 85 -- 23,680 3,406 Expenses: Mortality and expense risks ..................................... 3 1 10,871 1,049 --------- --------- --------- --------- Net investment income (loss) .................................... 82 (1) 12,809 2,357 Realized gains (losses) on investments: Realized losses on sale of portfolio shares ..................... (28) -- (53,519) (5,237) Realized gain distributions ..................................... -- -- -- -- --------- --------- --------- --------- Realized losses .................................................. (28) -- (53,519) (5,237) Change in unrealized appreciation (depreciation) during the period ............................................... (1,708) 7 (401,709) (4,848) --------- --------- --------- --------- Net increase (decrease) in net assets resulting from operations... $ (1,654) $ 6 $(442,419) $ (7,728) ========= ========= ========= =========
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 162 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001
AIM V.I. SMALL CAP VALUE GROWTH SUBACCOUNT SUBACCOUNT ----------------- ------------- 2002 2001* 2002 2001* -------- ------- ------ ------ Investment income: Dividends................................ $ 204 $ 91 $ -- $ 4 ------- ------ ----- ---- Total investment income................... 204 91 -- 4 Expenses: Mortality and expense risks.............. 152 33 5 2 ------- ------ ----- ---- Net investment income (loss).............. 52 58 (5) 2 Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares........................ 701 (308) (59) -- Realized gain distributions.............. -- 164 -- -- ------- ------ ----- ---- Realized gains (losses)................... 701 (144) (59) -- Change in unrealized appreciation (depreciation) during the period........................ 2,025 2,861 (485) 68 ------- ------ ----- ---- Net increase (decrease) in net assets resulting from operations................ $ 2,778 $2,775 $(549) $ 70 ======= ====== ===== ====
TEMPLETON MFS RESEARCH INTERNATIONAL SUBACCOUNT SUBACCOUNT -------------- -------------- 2002 2001* 2002 2001* ------- ----- ------ ------ Investment income: Dividends................................. $ 4 $ -- $ 30 $-- ----- ---- ---- --- Total investment income.................... 4 -- 30 -- Expenses: Mortality and expense risks............... 5 2 7 3 ----- ---- ---- --- Net investment income (loss)............... (1) (2) 23 (3) Realized gains (losses) on investments: Realized gains (losses) on sale of portfolio shares......................... (16) 1 (5) 1 Realized gain distributions............... -- -- -- -- ----- ---- ---- --- Realized gains (losses).................... (16) 1 (5) 1 Change in unrealized appreciation (depreciation) during the period......................... (298) 114 (46) 83 ----- ---- ---- --- Net increase (decrease) in net assets resulting from operations................. $(315) $113 $(28) $81 ===== ==== ==== ===
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 163 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF OPERATIONS (CONTINUED) FOR THE PERIOD ENDED JUNE 30, 2002 (UNAUDITED)
V.A. FINANCIAL V.A. RELATIVE LARGE CAP INDUSTRIES VALUE VALUE CORE SUBACCOUNT SUBACCOUNT SUBACCOUNT --------------- -------------- ------------- 2002* 2002* 2002* --------------- -------------- ------------- Investment income: Dividends............................. $ -- $ 1 $ 26 ---- ------ ----- Total investment income................ -- 1 26 Expenses: Mortality and expense risks........... -- -- -- ---- ------ ----- Net investment income.................. -- 1 26 Realized gains (losses) on investments: Realized losses on sale of portfolio shares..................... (6) (21) (133) Realized gain distributions........... -- -- -- ---- ------ ----- Realized losses........................ (6) (21) (133) Change in unrealized appreciation (depreciation) during the period..................... (28) 28 (762) ---- ------ ----- Net increase (decrease) in net assets resulting from operations...... $(34) $ 8 $(869) ==== ====== =====
JANUS ASPEN JANUS ASPEN MFS INVESTORS GLOBAL WORLDWIDE GROWTH TECHNOLOGY GROWTH STOCK SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------ ----------- --------------- 2002* 2002* 2002* ------------ ----------- --------------- Investment income: Dividends........................ $ -- $ 169 $ -- ---- ------- ----- Total investment income........... -- 169 -- Expenses: Mortality and expense risks...... -- 85 -- ---- ------- ----- Net investment income............. -- 84 -- Realized gains (losses) on investments: Realized losses on sale of portfolio shares................ (8) (47) (25) Realized gain distributions...... -- -- -- ---- ------- ----- Realized losses................... (8) (47) (25) Change in unrealized depreciation during the period................ (69) (7,605) (754) ---- ------- ----- Net decrease in net assets resulting from operations........ $(77) $(7,568) $(779) ==== ======= =====
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 164 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
LARGE CAP GROWTH SUBACCOUNT --------------------------------------------- 2002 2001 2000 ------------- ------------- ------------ Increase (decrease) in net assets from operations: Net investment income ......................................... $ 57,459 $ 62,067 $ 6,287,826 Realized gains (losses) ...................................... (516,622) (303,166) 1,809,410 Change in unrealized depreciation during the period ........... (7,084,402) (6,989,603) (17,039,660) ------------ ------------ ------------ Net decrease in net assets resulting from operations ........... (7,542,565) (7,230,702) (8,942,424) ------------ ------------ ------------ Policy transactions: Net premiums from policyholders ............................... 5,550,534 14,342,571 16,225,070 Transfers to policyholders for benefits and termination ....... (3,366,712) (6,740,426) (8,421,666) Net transfers between subaccounts ............................ -- (239,029) -- Net change in policy loans .................................... (3,717) 165,268 407,961 ------------ ------------ ------------ Net increase in net assets resulting from policy transactions ........................................... 2,180,105 7,528,384 8,211,365 ------------ ------------ ------------ Total increase (decrease) in net assets ........................ (5,362,460) 297,682 (731,059) Net assets at beginning of period .............................. 43,595,060 43,297,378 44,028,437 ------------ ------------ ------------ Net assets at end of period .................................... $ 38,232,600 $ 43,595,060 $ 43,297,378 ============ ============ ============
ACTIVE BOND SUBACCOUNT ----------------------------------------------- 2002 2001 2000 ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income ......................................... $ 2,873,722 $ 5,923,084 $ 5,332,953 Realized losses ............................................... (154,849) (578,863) (1,058,175) Change in unrealized appreciation (depreciation) during the period ............................................ (755,593) 1,577,966 3,862,398 ------------- ------------- ------------- Net increase in net assets resulting from operations ........... 1,963,280 6,922,187 8,137,176 ------------- ------------- ------------- Policy transactions: Net premiums from policyholders ............................... 5,159,247 15,445,246 26,218,788 Transfers to policyholders for benefits and termination ...... (4,282,337) (10,820,630) (17,903,281) Net transfers between subaccounts ............................. -- -- -- Net change in policy loans .................................... 236,343 (691,455) 620,295 ------------- ------------- ------------- Net increase in net assets resulting from policy transactions .. 1,113,253 3,933,161 8,935,802 ------------- ------------- ------------- Total increase in net assets ................................... 3,076,533 10,855,348 17,072,978 Net assets at beginning of period .............................. 108,817,908 97,962,560 80,889,582 ------------- ------------- ------------- Net assets at end of period .................................... $ 111,894,441 $ 108,817,908 $ 97,962,560 ============= ============= =============
See accompanying notes. 165 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
INTERNATIONAL EQUITY INDEX SUBACCOUNT ------------------------------------------ 2002 2001 2000 ----------- ----------- ------------ Increase (decrease) in net assets from operations: Net investment income ............................................. $ 46,570 88,589 $ 322,155 Realized gains (losses) .......................................... (195,650) (243,391) 76,586 Change in unrealized appreciation (depreciation) during the period ................................................ 169,621 (1,167,176) (1,706,468) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .... 20,541 1,321,978 (1,307,727) ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ................................... 666,925 1,612,633 2,208,528 Transfers to policyholders for benefits and termination .......... (595,947) (1,532,111) (1,307,479) Net transfers between subaccounts ................................. -- -- -- Net change in policy loans ....................................... (16,250) 10,754 110,023 ----------- ----------- ----------- Net increase in net assets resulting from policy transactions ...... 54,728 91,276 1,011,072 ----------- ----------- ----------- Total increase (decrease) in net assets ............................ 75,269 (1,230,702) (296,655) Net assets at beginning of period .................................. 5,653,637 6,884,339 7,180,994 ----------- ----------- ----------- Net assets at end of period ........................................ $ 5,728,906 $ 5,653,637 $ 6,884,339 =========== =========== ===========
SMALL CAP GROWTH SUBACCOUNT ---------------------------------------- 2002 2001 2000 ----------- ------------ ----------- Increase (decrease) in net assets from operations: Net investment income (loss) ........................................... (13,503) $ (27,911) $ 581,967 Realized gains (losses) ................................................ (353,269) (193,161) 159,388 Change in unrealized depreciation during the period ..................... (543,530) (449,625) (2,654,137) ----------- ----------- ----------- Net decrease in net assets resulting from operations ..................... (910,302) (670,697) (1,912,782) ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ......................................... 1,048,364 2,267,910 4,738,730 Transfers to policyholders for benefits and termination ................. (598,116) (3,102,740) (956,063) Net transfers between subaccounts ....................................... -- -- -- Net change in policy loans .............................................. -- -- -- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions.. 450,248 (834,830) 3,782,667 ----------- ----------- ----------- Total increase (decrease) in net assets .................................. (460,054) (1,505,527) 1,869,885 Net assets at beginning of period ........................................ 4,876,292 6,381,819 4,511,934 ----------- ----------- ----------- Net assets at end of period .............................................. 4,416,238 $ 4,876,292 $ 6,381,819 =========== =========== ===========
See accompanying notes. 166 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
GLOBAL BALANCED SUBACCOUNT ----------------------------------------- 2002 2001 2000 ----------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income ......................................... $ 15,289 $ 3,025 $ 7,198 Realized losses ............................................... (10,810) (18,478) (3,641) Change in unrealized appreciation (depreciation) during the period ............................................ (114,845) 12,916 (21,945) ----------- ----------- ----------- Net decrease in net assets resulting from operations ........... (110,366) (2,537) (18,388) ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ............................... 172,225 3,159,097 75,380 Transfers to policyholders for benefits and termination ....... (74,464) (82,211) (83,639) Net transfers between subaccounts ............................. -- -- -- Net change in policy loans .................................... -- -- -- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions ........................................... 97,761 3,076,886 (8,259) ----------- ----------- ----------- Total increase (decrease) in net assets ........................ (12,605) 3,074,349 (26,647) Net assets at beginning of period .............................. 3,248,070 173,721 200,368 ----------- ----------- ----------- Net assets at end of period .................................... $ 3,235,465 $ 3,248,070 $ 173,721 =========== =========== ===========
MULTI CAP GROWTH SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ----------- ------------ Increase (decrease) in net assets from operations: Net investment income (loss)................................... $ (48,326) $ (85,083) $ 2,182,817 Realized gains (losses)........................................ (1,660,611) (2,329,455) 1,892,763 Change in unrealized depreciation during the period............ (3,104,474) (4,249,250) (11,690,290) ------------ ----------- ------------ Net decrease in net assets resulting from operations............ (4,813,411) (6,663,788) (7,614,710) ------------ ----------- ------------ Policy transactions: Net premiums from policyholders................................ 4,447,567 12,612,039 13,112,643 Transfers to policyholders for benefits and termination........ (1,123,661) (3,031,534) (4,430,561) Net transfers between subaccounts.............................. -- -- -- Net change in policy loans..................................... -- -- -- ------------ ----------- ------------ Net increase in net assets resulting from policy transactions... 3,323,906 9,580,505 8,682,082 ------------- ----------- ------------ Total increase (decrease) in net assets......................... (1,489,505) 2,916,717 1,067,372 Net assets at beginning of period............................... 17,593,663 14,676,946 13,609,574 ------------ ----------- ------------ Net assets at end of period..................................... $ 16,104,158 $17,593,633 $ 14,676,946 ============ =========== ============
See accompanying notes. 167 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
LARGE CAP VALUE SUBACCOUNT -------------------------------------------- 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income ........................................... $ 86,807 $ 170,828 $ 693,327 Realized gains (losses) ......................................... 1,603 344,244 (47,306) Change in unrealized appreciation (depreciation) during the period .............................................. (1,211,853) (277,488) 854,807 ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations... (1,123,443) 237,584 1,500,828 ------------ ------------ ------------ Policy transactions: Net premiums from policyholders ................................. 3,245,122 10,170,978 7,024,748 Transfers to policyholders for benefits and termination ......... (1,119,296) (2,001,066) (1,798,175) Net transfers between subaccounts ............................... -- -- -- Net change in policy loans ...................................... -- -- -- ------------ ------------ ------------ Net increase in net assets resulting from policy transactions .... 2,125,826 8,169,912 5,226,573 ------------ ------------ ------------ Total increase in net assets ..................................... 1,002,383 8,407,496 6,727,401 Net assets at beginning of period ................................ 23,397,684 14,990,188 8,268,787 ------------ ------------ ------------ Net assets at end of period ...................................... $ 24,400,067 $ 23,397,684 $ 14,990,188 ============ ============ ============
MONEY MARKET SUBACCOUNT ------------------------------------------- 2002 2001 2000 ----------- ------------ ------------ Increase (decrease) in net assets from operations: Net investment income ........................................... $ 174,232 $ 834,589 $ 1,290,563 Realized gains .................................................. 206 -- -- Change in unrealized depreciation during the period ............. (1) -- -- ----------- ------------ ------------ Net increase in net assets resulting from operations ............. 174,437 834,589 1,290,563 ----------- ------------ ------------ Policy transactions: Net premiums from policyholders ................................. 5,512,953 22,170,735 26,609,851 Transfers to policyholders for benefits and termination ......... (5,402,127) (26,886,651) (22,265,301) Net transfers between subaccounts ............................... -- -- -- Net change in policy loans ...................................... 13,598 (5,337) 77,509 ----------- ------------ ------------ Net increase (decrease) in net assets resulting from policy transactions ............................................. 124,424 (4,721,253) 4,422,059 ----------- ------------ ------------ Total increase (decrease) in net assets .......................... 298,861 (3,886,664) 5,712,622 Net assets at beginning of period ................................ 22,329,064 26,215,728 20,503,106 ----------- ------------ ------------ Net assets at end of period ...................................... $22,627,925 $ 22,329,064 $ 26,215,728 =========== ============ ============
See accompanying notes. 168 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
SMALL/MID CAP GROWTH SUBACCOUNT -------------------------------------- 2002 2001 2000 ---------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income (loss) ..................................... $ (24,158) $ (34,942) $ 570,559 Realized losses .................................................. (63,168) (212,465) (136,669) Change in unrealized appreciation (depreciation) during the period ............................................... (782,437) 391,420 (2,663) ---------- ----------- ----------- Net increase (decrease) in net assets resulting from operations... (869,763) 144,013 431,227 ---------- ----------- ----------- Policy transactions: Net premiums from policyholders .................................. 948,748 3,794,737 1,474,342 Transfers to policyholders for benefits and termination .......... (613,578) (1,326,766) (1,536,191) Net transfers between subaccounts ................................ -- -- -- Net change in policy loans ....................................... -- -- -- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions .............................................. 335,170 2,467,971 (61,849) ---------- ----------- ----------- Total increase (decrease) in net assets ........................... (534,593) 2,611,984 369,378 Net assets at beginning of period ................................. 8,467,406 5,855,422 5,486,044 ---------- ----------- ----------- Net assets at end of period ....................................... $7,932,813 $ 8,467,406 $ 5,855,422 ========== =========== =========== REAL ESTATE EQUITY SUBACCOUNT -------------------------------------- 2002 2001 2000 ---------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income ............................................ $ 127,527 $ 229,751 $ 465,264 Realized losses .................................................. (14,875) (67,379) (159,205) Change in unrealized appreciation during the period .............. 564,505 128,322 919,904 ---------- ----------- ----------- Net increase in net assets resulting from operations .............. 677,157 290,694 1,225,963 ---------- ----------- ----------- Policy transactions: Net premiums from policyholders .................................. 1,290,446 1,712,308 1,762,038 Transfers to policyholders for benefits and termination .......... (475,202) (2,078,180) (1,130,179) Net transfers between subaccounts ................................ -- -- -- Net change in policy loans ....................................... 24,531 (26,470) 114,851 ---------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions .............................................. 839,775 (392,342) 746,710 ---------- ----------- ----------- Total increase (decrease) in net assets ........................... 1,516,932 (101,648) 1,972,673 Net assets at beginning of period ................................. 5,901,125 6,002,773 4,030,100 ---------- ----------- ----------- Net assets at end of period ....................................... $7,418,057 $ 5,901,125 $ 6,002,773 ========== =========== ===========
See accompanying notes. 169 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
GROWTH & INCOME SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income ...................................... $ 1,282,000 $ 2,367,996 $ 44,427,885 Realized gains (losses) ................................... (229,825) 205,711 18,300,286 Change in unrealized depreciation during the period ........ (23,032,815) (37,067,063) (96,829,044) ------------ ------------ ------------ Net decrease in net assets resulting from operations ........ (21,980,640) (34,493,356) (34,100,873) ------------ ------------ ------------ Policy transactions: Net premiums from policyholders ............................ 12,379,242 25,738,713 31,462,247 Transfers to policyholders for benefits and termination .... (12,129,570) (29,810,655) (71,685,409) Net transfers between subaccounts .......................... -- -- -- Net change in policy loans ................................. (762,860) 1,375,781 1,310,472 ------------ ------------ ------------ Net decrease in net assets resulting from policy transactions ........................................ (513,188) (2,696,161) (38,912,690) Total decrease in net assets ................................ ------------ ------------ ------------ Net assets at beginning of period ........................... (22,493,828) (37,189,517) (73,013,563) Net assets at end of period ................................. 230,297,017 267,486,534 340,500,097 ------------ ------------ ------------ $207,803,189 $230,297,017 $267,486,534 ============ ============ ============ MANAGED SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income ...................................... $ 975,521 $ 2,443,135 $ 11,092,640 Realized gains ............................................. 55,484 528,773 1,551,519 Change in unrealized depreciation during the period ........ (8,119,870) (5,276,809) (12,278,637) ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ............................................ (7,088,865) (2,304,901) 365,522 ------------ ------------ ------------ Policy transactions: Net premiums from policyholders ............................ 5,738,891 12,491,524 12,192,565 Transfers to policyholders for benefits and termination .... (7,073,648) (13,566,962) (19,842,234) Net transfers between subaccounts .......................... -- -- -- Net change in policy loans ................................. (182,323) (334,235) 630,955 ------------ ------------ ------------ Net decrease in net assets resulting from policy transactions ........................................ (1,517,080) (1,409,673) (7,018,714) ------------ ------------ ------------ Total decrease in net assets ................................ (8,605,945) (3,714,574) (6,653,192) Net assets at beginning of period ........................... 108,761,653 112,476,227 119,129,419 ------------ ------------ ------------ Net assets at end of period ................................. $100,155,708 $108,761,653 $112,476,227 ============ ============ ============
See accompanying notes. 170 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
SHORT-TERM BOND SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income ................................................. $ 19,412 $ 24,452 $ 15,494 Realized gains (losses) ............................................... 414 8,797 (2,287) Change in unrealized appreciation (depreciation) during the period ........................................................... (652) (2,372) 6,756 ----------- ----------- ----------- Net increase in net assets resulting from operations ................... 19,174 30,877 19,963 ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ....................................... 243,199 814,841 167,135 Transfers to policyholders for benefits and termination ............... (221,165) (148,073) (69,043) Net transfers between subaccounts ..................................... -- -- -- Net change in policy loans ............................................ -- -- -- ----------- ----------- ----------- Net increase in net assets resulting from policy transactions ................................................... 22,034 666,768 98,092 ----------- ----------- ----------- Total increase in net assets ........................................... 41,208 697,645 118,055 Net assets at beginning of period ...................................... 1,054,613 356,968 238,913 ----------- ----------- ----------- Net assets at end of period ............................................ $ 1,095,821 $ 1,054,613 $ 356,968 =========== =========== ===========
SMALL CAP EQUITY SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income (loss) ......................................... $ (13,141) $ (18,893) $ 297,508 Realized losses ....................................................... (60,672) (553,686) (110,857) Change in unrealized appreciation (depreciation) during the period ........................................................... (462,537) 580,661 (668,463) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ........ (536,350) 8,082 (481,812) ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ....................................... 919,861 2,680,094 1,608,648 Transfers to policyholders for benefits and termination ............... (452,147) (2,188,533) (452,406) Net transfers between subaccounts ..................................... -- -- -- Net change in policy loans ............................................ -- -- -- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions ................................................... 467,714 (491,561) 1,156,242 ----------- ----------- ----------- Total increase (decrease) in net assets ................................ (68,636) 499,643 674,430 Net assets at beginning of period ...................................... 4,641,465 4,141,822 3,467,392 ----------- ----------- ----------- Net assets at end of period ............................................ $ 4,572,829 $ 4,641,465 $ 4,141,822 =========== =========== ===========
171 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
INTERNATIONAL OPPORTUNITIES SUBACCOUNT --------------------------------------------- 2002 2001 2000 ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income ............................................ $ 18,178 $ 26,015 $ 564,716 Realized gains (losses) .......................................... (294,903) (2,366,905) 348,813 Change in unrealized depreciation during the period .............. (365,144) (510,586) (2,497,504) ------------ ------------ ------------ Net decrease in net assets resulting from operations .............. (641,869) (2,851,476) (1,583,975) ------------ ------------ ------------ Policy transactions: Net premiums from policyholders .................................. 3,470,997 9,239,568 9,284,275 Transfers to policyholders for benefits and termination .......... (542,408) (5,328,329) (469,272) Net transfers between subaccounts ................................ -- -- -- Net change in policy loans ....................................... -- -- -- ------------ ------------ ------------ Net increase in net assets resulting from policy transactions ..... 2,928,589 3,911,239 8,815,003 ------------ ------------ ------------ Total increase in net assets ...................................... 2,286,720 1,059,763 7,231,028 Net assets at beginning of period ................................. 11,919,734 10,859,971 3,628,943 ------------ ------------ ------------ Net assets at end of period ....................................... $ 14,206,454 $ 11,919,734 $ 10,859,971 ============ ============ ============
EQUITY INDEX SUBACCOUNT --------------------------------------------- 2002 2001 2000 ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income ............................................ $ 177,551 $ 291,987 $ 2,141,880 Realized gains (losses) .......................................... (404,527) 1,221,769 485,643 Change in unrealized depreciation during the period .............. (7,088,039) (8,084,684) (8,035,375) ------------ ------------ ------------ Net decrease in net assets resulting from operations .............. (7,315,015) (6,570,928) (5,407,852) ------------ ------------ ------------ Policy transactions: Net premiums from policyholders .................................. 4,721,833 13,985,392 43,728,519 Transfers to policyholders for benefits and termination .......... (1,625,835) (5,816,358) (2,630,030) Net transfers between subaccounts ................................ -- -- -- Net change in policy loans ....................................... -- -- -- ------------ ------------ ------------ Net increase in net assets resulting from policy transactions ..... 3,095,998 8,169,034 41,098,489 ------------ ------------ ------------ Total increase (decrease) in net assets ........................... (4,219,017) 1,598,106 35,690,637 Net assets at beginning of period ................................. 51,694,822 50,096,716 14,406,079 ------------ ------------ ------------ Net assets at end of period ....................................... $ 47,475,805 $ 51,694,822 $ 50,096,716 ============ ============ ============
See accompanying notes. 172 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
GLOBAL BOND SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income (loss) ............................................ $ (2,408) $ 32,388 $ 57,408 Realized losses ......................................................... (485) (4,928) (14,302) Change in unrealized appreciation (depreciation) during the period ............................................................. 83,385 (45,004) 63,359 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .......... 80,492 (17,544) 106,465 ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ......................................... 248,639 352,334 396,099 Transfers to policyholders for benefits and termination ................. (85,394) (677,332) (192,421) Net transfers between subaccounts ....................................... -- -- -- Net change in policy loans .............................................. -- -- -- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions ..................................................... 163,245 (324,998) 203,678 ----------- ----------- ----------- Total increase (decrease) in net assets .................................. 243,737 (342,542) 310,143 Net assets at beginning of period ........................................ 797,319 1,139,861 829,718 ----------- ----------- ----------- Net assets at end of period .............................................. $ 1,041,056 $ 797,319 $ 1,139,861 =========== =========== ===========
EMERGING MARKETS EQUITY SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income (loss) ........................................... $ (1,244) $ (2,905) $ 58,591 Realized gains (losses) ................................................. (10,278) (512,242) 19,902 Change in unrealized appreciation (depreciation) during the period ............................................................. 26,303 454,961 (571,486) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .......... 14,781 (60,186) (492,993) ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ......................................... 345,869 801,949 1,133,676 Transfers to policyholders for benefits and termination ................. (102,049) (590,080) (337,143) Net transfers between subaccounts ....................................... -- -- -- Net change in policy loans .............................................. -- -- -- ----------- ----------- ----------- Net increase in net assets resulting from policy transactions ............ 243,820 211,869 796,533 ----------- ----------- ----------- Total increase in net assets ............................................. 258,601 151,683 303,540 Net assets at beginning of period ........................................ 893,035 741,352 437,812 ----------- ----------- ----------- Net assets at end of period .............................................. $ 1,151,636 $ 893,035 $ 741,352 =========== =========== ===========
See accompanying notes. 173 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
BOND INDEX SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ IIncrease (decrease) in net assets from operations: Net investment income ....................................................... $ 130,891 $ 132,221 $ 6,712 Realized gains (losses) .................................................... 1,653 18,228 (607) Change in unrealized appreciation (depreciation) during the period ................................................................. 34,100 (26,418) 6,100 ----------- ----------- ----------- Net increase in net assets resulting from operations ......................... 166,644 124,031 12,205 ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ............................................. 478,279 5,105,113 196,240 Transfers to policyholders for benefits and termination ..................... (349,733) (129,767) (16,742) Net transfers between subaccounts ........................................... -- -- -- Net change in policy loans .................................................. -- -- -- ----------- ----------- ----------- Net increase in net assets resulting from policy transactions ................ 128,546 4,975,346 179,498 ----------- ----------- ----------- Total increase in net assets ................................................. 295,190 5,099,377 191,703 Net assets at beginning of period ............................................ 5,365,289 265,912 74,209 ----------- ----------- ----------- Net assets at end of period .................................................. $ 5,660,479 $ 5,365,289 $ 265,912 =========== =========== ===========
SMALL/MID CAP CORE SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income (loss) ................................................ $ (837) $ (397) $ 21,792 Realized gains (losses) .................................................... 2,030 (3,169) 1,505 Change in unrealized appreciation (depreciation) during the period ................................................................. (14,447) 25,735 (13,928) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .............. (13,254) 22,169 9,369 ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ............................................. 348,639 288,067 479,768 Transfers to policyholders for benefits and termination ..................... (124,258) (364,419) (6,951) Net transfers between subaccounts ........................................... -- -- -- Net change in policy loans .................................................. -- -- -- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions ......................................................... 224,381 (76,352) 472,817 ----------- ----------- ----------- Total increase (decrease) in net assets ...................................... 211,127 (54,183) 482,186 Net assets at beginning of period ............................................ 505,368 559,551 77,365 ----------- ----------- ----------- Net assets at end of period .................................................. $ 716,495 $ 505,368 $ 559,551 =========== =========== ===========
See accompanying notes. 174 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
HIGH YIELD BOND SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income ............................................ $ 49,412 $ 58,470 $ 78,692 Realized losses .................................................. (29,328) (133,868) (12,114) Change in unrealized appreciation (depreciation) during the period ...................................................... (70,306) 132,879 (188,735) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ... (50,222) 57,481 (122,157) ----------- ----------- ----------- Policy transactions: Net premiums from policyholders .................................. 224,846 906,532 1,514,684 Transfers to policyholders for benefits and termination .......... (184,755) (1,363,474) (88,711) Net transfers between subaccounts ................................ -- -- -- Net change in policy loans ....................................... -- -- -- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions .............................................. 40,091 (456,942) 1,425,973 ----------- ----------- ----------- Total increase (decrease) in net assets ........................... (10,131) (399,461) 1,303,816 Net assets at beginning of period ................................. 980,406 1,379,867 76,051 ----------- ----------- ----------- Net assets at end of period ....................................... $ 970,275 $ 980,406 $ 1,379,867 =========== =========== ===========
TURNER CORE GROWTH SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income (loss) ..................................... $ (590) $ (1,561) $ 50,617 Realized gains (losses) ......................................... (25,442) (91,201) 20,969 Change in unrealized depreciation during the period .............. (37,358) (12,342) (120,040) ----------- ----------- ----------- Net decrease in net assets resulting from operations .............. (63,390) (105,104) (48,454) ----------- ----------- ----------- Policy transactions: Net premiums from policyholders .................................. 29,228 316,791 192,556 Transfers to policyholders for benefits and termination .......... (33,978) (219,789) (31,415) Net transfers between subaccounts ................................ -- -- -- Net change in policy loans ....................................... -- -- -- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions .............................................. (4,750) 97,002 161,141 ----------- ----------- ----------- Total increase (decrease) in net assets ........................... (68,140) (8,102) 112,687 Net assets at beginning of period ................................. 362,392 370,494 257,807 ----------- ----------- ----------- Net assets at end of period ....................................... $ 294,252 $ 362,392 $ 370,494 =========== =========== ===========
See accompanying notes. 175 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
BRANDES INTERNATIONAL EQUITY SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income (loss) ..................................... $ (1,259) $ 8,649 $ 87,962 Realized gains (losses) ........................................... (23,834) 71,897 13,902 Change in unrealized appreciation (depreciation) during the period ....................................................... 30,006 (246,498) (35,201) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .... 4,913 (165,952) 66,663 ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ................................... 220,123 1,103,449 616,308 Transfers to policyholders for benefits and termination ........... (113,585) (979,043) (39,267) Net transfers between subaccounts ................................. -- -- -- Net change in policy loans ........................................ -- -- -- ----------- ----------- ----------- Net increase in net assets resulting from policy transactions ...... 106,538 124,406 577,041 ----------- ----------- ----------- Total increase (decrease) in net assets ............................ 111,451 (41,546) 643,704 Net assets at beginning of period .................................. 1,127,660 1,169,206 525,502 ----------- ----------- ----------- Net assets at end of period ........................................ $ 1,239,111 $ 1,127,660 $ 1,169,206 =========== =========== ===========
FRONTIER CAPITAL APPRECIATION SUBACCOUNT ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income (loss) ...................................... $ (883) $ (2,728) $ 130,136 Realized gains (losses) ........................................... (3,219) (50,194) 68,311 Change in unrealized appreciation (depreciation) during the period ....................................................... (54,814) 52,457 (175,994) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .... (58,916) (465) 22,453 ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ................................... 70,202 445,490 219,803 Transfers to policyholders for benefits and termination ........... (67,993) (501,765) (179,523) Net transfers between subaccounts ................................. -- -- -- Net change in policy loans ........................................ -- -- -- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions ............................................... 2,209 (56,275) 40,280 ----------- ----------- ----------- Total increase (decrease) in net assets ............................ (56,707) (56,740) 62,733 Net assets at beginning of period .................................. 459,976 516,716 453,983 ----------- ----------- ----------- Net assets at end of period ........................................ $ 403,269 $ 459,976 $ 516,716 =========== =========== ===========
See accompanying notes. 176 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
CLIFTON ENHANCED U.S. EQUITY SUBACCOUNT --------------------------------------- 2002 2001 2000* ------------ ----------- ------------ Increase (decrease) in net assets from operations: Net investment income (loss) .................................... $ (95) $ 1,117 $ 3,190 Realized gains (losses) .......................................... (827) (826) 302 Change in unrealized depreciation during the period .............. (4,247) (3,148) (5,562) -------- -------- -------- Net decrease in net assets resulting from operations .............. (5,169) (2,857) (2,070) -------- -------- -------- Policy transactions: Net premiums from policyholders .................................. 23,181 10,070 16,541 Transfers to policyholders for benefits and termination .......... (1,989) (2,449) (9,351) Net transfers between subaccounts ................................ -- -- -- Net change in policy loans ....................................... -- -- -- -------- -------- -------- Net increase in net assets resulting from policy transactions ..... 21,192 7,621 7,190 -------- -------- -------- Total increase in net assets ...................................... 16,023 4,764 5,120 Net assets at beginning of period ................................. 28,059 23,295 18,175 -------- -------- -------- Net assets at end of period ....................................... $ 44,082 $ 28,059 $ 23,295 ======== ======== ========
LARGE CAP AGGRESSIVE GROWTH SUBACCOUNT -------------------------------------- 2002 2001 2000* ----------- ----------- ------------ Increase (decrease) in net assets from operations: Net investment income (loss) .................................... $ (4) $ (11) $ 30 Realized losses .................................................. (47) (68) (8) Change in unrealized depreciation during the period .............. (293) (216) (616) -------- -------- -------- Net decrease in net assets resulting from operations .............. (344) (295) (594) -------- -------- -------- Policy transactions: Net premiums from policyholders .................................. 949 5 2,528 Transfers to policyholders for benefits and termination .......... (111) (120) -- Net transfers between subaccounts ................................ -- -- -- Net change in policy loans ....................................... -- -- -- -------- -------- -------- Net increase (decrease) in net assets resulting from policy transactions .............................................. 838 (115) 2,528 -------- -------- -------- Total increase (decrease) in net assets ........................... 494 (410) 1,934 Net assets at beginning of period ................................. 1,524 1,934 -- -------- -------- -------- Net assets at end of period ....................................... $ 2,018 $ 1,524 $ 1,934 ======== ======== ========
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 177 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
FUNDAMENTAL GROWTH SUBACCOUNT ----------------------------------------- 2002 2001 2000* ----------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income (loss) ......................................... $ (33) $ (62) $ 1,351 Realized losses ....................................................... (202) (340) (10) Change in unrealized depreciation during the period ................... (4,199) (3,866) (1,226) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ............................................................ (4,434) (4,268) 115 ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ....................................... 30,737 9,554 9,264,914 Transfers to policyholders for benefits and termination ............... (8,496) (7,743) (9,251,776) Net transfers between subaccounts ..................................... -- -- -- Net change in policy loans ............................................ -- -- -- ----------- ----------- ----------- Net increase in net assets resulting from policy transactions .......... 22,241 1,811 13,138 ----------- ----------- ----------- Total increase (decrease) in net assets ................................ 17,807 (2,457) 13,253 Net assets at beginning of period ...................................... 10,796 13,253 -- ----------- ----------- ----------- Net assets at end of period ............................................ $ 28,603 $ 10,796 $ 13,253 =========== =========== ===========
AIM V.I. PREMIER EQUITY SUBACCOUNT ----------------------------------------- 2002 2001 2000* ----------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income (loss) .......................................... $ (44) $ (44) $ 230 Realized losses ....................................................... (335) (503) (11) Change in unrealized depreciation during the period ................... (4,344) (1,395) (1,068) ----------- ----------- ----------- Net decrease in net assets resulting from operations ................... (4,723) (1,942) (849) ----------- ----------- ----------- Policy transactions: Net premiums from policyholders ....................................... 18,617 12,072 12,213 Transfers to policyholders for benefits and termination ............... (2,245) (3,006) (6,072) Net transfers between subaccounts ..................................... -- -- -- Net change in policy loans ............................................ -- -- -- ----------- ----------- ----------- Net increase in net assets resulting from policy transactions .......... 16,372 9,066 6,141 ----------- ----------- ----------- Total increase in net assets ........................................... 11,649 7,124 5,292 Net assets at beginning of period ...................................... 12,416 5,292 -- ----------- ----------- ----------- Net assets at end of period ............................................ $ 24,065 $ 12,416 $ 5,292 =========== =========== ===========
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 178 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
FIDELITY VIP GROWTH SUBACCOUNT ----------------------------------- 2002 2001 2000* --------- --------- --------- Increase (decrease) in net assets from operations: Net investment loss ....................... $ (142) $ (18) $ (6) Realized losses ........................... (1,037) (1,445) (7) Change in unrealized appreciation (depreciation) during the period ......... (26,030) 469 (525) --------- --------- --------- Net decrease in net assets resulting from operations ................................ (27,209) (994) (538) --------- --------- --------- Policy transactions: Net premiums from policyholders ........... 181,050 1,474 5,160 Transfers to policyholders for benefits and termination .............................. (9,913) (4,037) (394) Net transfers between subaccounts ......... -- -- -- Net change in policy loans ................ -- -- -- --------- --------- --------- Net increase (decrease) in net assets resulting from policy transactions ........ 171,137 (2,563) 4,766 --------- --------- --------- Total increase (decrease) in net assets .... 143,928 (3,557) 4,228 Net assets at beginning of period .......... 671 4,228 -- --------- --------- --------- Net assets at end of period ................ $ 144,599 $ 671 $ 4,228 ========= ========= =========
FIDELITY VIP CONTRAFUND SUBACCOUNT ------------------------------------ 2002 2001 2000* -------- -------- -------- Increase (decrease) in net assets from operations: Net investment income (loss) .............. $ 37 $ (24) $ (12) Realized losses ........................... (182) (958) (4) Change in unrealized depreciation during the period ........................ (801) (616) (366) -------- -------- -------- Net decrease in net assets resulting from operations ........................... (946) (1,598) (382) -------- -------- -------- Policy transactions: Net premiums from policyholders ........... 23,783 10,866 13,880 Transfers to policyholders for benefits and termination ................. (1,259) (3,652) (6,991) Net transfers between subaccounts ......... -- -- -- Net change in policy loans ................ -- -- -- -------- -------- -------- Net increase in net assets resulting from policy transactions .................. 22,524 7,214 6,889 -------- -------- -------- Total increase in net assets ............... 21,578 5,616 6,507 Net assets at beginning of period .......... 12,123 6,507 -- -------- -------- -------- Net assets at end of period ................ $ 33,701 $ 12,123 $ 6,507 ======== ======== ========
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 179 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
MFS NEW DISCOVERY SUBACCOUNT ------------------------------------- 2002 2001 2000* --------- --------- --------- Increase (decrease) in net assets from operations: Net investment income (loss) ........................ $ (317) $ 2,735 $ (19) Realized losses ..................................... (86) (1,901) (7) Change in unrealized appreciation (depreciation) during the period ................... (24,021) (743) 197 --------- --------- --------- Net increase (decrease) in net assets resulting from operations ........................... (24,424) 91 171 --------- --------- --------- Policy transactions: Net premiums from policyholders ..................... 34,311 102,334 37,394 Transfers to policyholders for benefits and termination ........................... (10,070) (14,675) (18,758) Net transfers between subaccounts ................... -- -- -- Net change in policy loans .......................... -- -- -- --------- --------- --------- Net increase in net assets resulting from policy transactions ............................ 24,241 87,659 18,636 --------- --------- --------- Total increase (decrease) in net assets .............. (183) 87,750 18,807 Net assets at beginning of period .................... 106,557 18,807 -- --------- --------- --------- Net assets at end of period .......................... $ 106,374 $ 106,557 $ 18,807 ========= ========= =========
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 180 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
V.A. STRATEGIC HEALTH INCOME SCIENCES SUBACCOUNT SUBACCOUNT ----------------- ----------------------- 2002 2001* 2002 2001* ------- -------- ----------- ---------- Increase (decrease) in net assets from operations: Net investment income (loss) ....................................... $ 16 $ 3 $ (11) $ (3) Realized gains (losses) ............................................ (3) 1 (15) (1) Change in unrealized appreciation (depreciation) during the period ................................................. (7) 1 (614) (22) ------ ------- ---------- --------- Net increase (decrease) in net assets resulting from operations .................................................... 6 5 (640) (26) ------ ------- ---------- --------- Policy transactions: Net premiums from policyholders .................................... 734 2,513 2,849 3,403 Transfers to policyholders for benefits and termination ............ (145) (2,374) (270) (29) Net transfers between subaccounts .................................. -- -- -- -- Net change in policy loans ......................................... -- -- -- -- ------ ------- ---------- --------- Net increase in net assets resulting from policy transactions ................................................ 589 139 2,579 3,374 ------ ------- ---------- --------- Total increase in net assets ........................................ 595 144 1,939 3,348 Net assets at beginning of period ................................... 144 -- 3,348 -- ------ ------- ---------- --------- Net assets at end of period ......................................... $ 739 $ 144 $ 5,287 $ 3,348 ====== ======= ========== =========
INTERNATIONAL FUNDAMENTAL OPPORTUNITIES B VALUE SUBACCOUNT SUBACCOUNT ----------------- ------------------------ 2002 2001* 2002 2001* -------- ------- ----------- ------------ Increase (decrease) in net assets from operations: Net investment income (loss) ....................................... $ 82 $ (1) $ 12,809 $ 2,357 Realized losses .................................................... (28) -- (53,519) (5,237) Change in unrealized appreciation (depreciation) during the period ................................................. (1,708) 7 (401,709) (4,848) ------- ------ ---------- ---------- Net increase (decrease) in net assets resulting from operations .................................................... (1,654) 6 (442,419) (7,728) ------- ------ ---------- ---------- Policy transactions: Net premiums from policyholders .................................... 27,310 517 461,627 2,879,317 Transfers to policyholders for benefits and termination ............ (485) 509 (430,116) 1,521,622 Net transfers between subaccounts .................................. -- -- -- -- Net change in policy loans ......................................... -- -- -- -- ------- ------ ---------- ---------- Net increase in net assets resulting from policy transactions ................................................ 26,825 1,026 31,511 4,400,939 ------- ------ ---------- ---------- Total increase (decrease) in net assets ............................. 25,171 1,032 (410,908) 4,393,211 Net assets at beginning of period ................................... 1,032 -- 4,393,211 -- ------- ------ ---------- ---------- Net assets at end of period ......................................... $26,203 $1,032 $3,982,303 $4,393,211 ======= ====== ========== ==========
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 181 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
SMALL CAP VALUE AIM V.I. GROWTH SUBACCOUNT SUBACCOUNT ------------------- ----------------- 2002 2001* 2002 2001* --------- -------- -------- ------- Increase (decrease) in net assets from operations: Net investment income (loss) ....................................... $ 52 $ 58 $ (5) $ 2 Realized gains (losses) ............................................ 701 (144) (59) -- Change in unrealized appreciation (depreciation) during the period ........................................................ 2,025 2,861 (485) 68 -------- ------- ------- ------ Net increase (decrease) in net assets resulting from operations ..... 2,778 2,775 (549) 70 -------- ------- ------- ------ Policy transactions: Net premiums from policyholders .................................... 140,054 34,295 7,809 1,655 Transfers to policyholders for benefits and termination ............ (7,625) (5,922) (1,656) (13) Net transfers between subaccounts .................................. -- -- -- -- Net change in policy loans ......................................... -- -- -- -- -------- ------- ------- ------ Net increase in net assets resulting from policy transactions ....... 132,429 28,373 6,153 1,642 -------- ------- ------- ------ Total increase in net assets ........................................ 135,207 31,148 5,604 1,712 Net assets at beginning of period ................................... 31,148 -- 1,712 -- -------- ------- ------- ------ Net assets at end of period ......................................... $166,355 $31,148 $ 7,316 $1,712 ======== ======= ======= ======
TEMPLETON MFS RESEARCH INTERNATIONAL SUBACCOUNT SUBACCOUNT ---------------- ---------------- 2002 2001* 2002 2001* ------- ------- ------- --------- Increase (decrease) in net assets from operations: Net investment income (loss) ....................................... $ (1) $ (2) $ 23 $ (3) Realized gains (losses) ............................................ (16) 1 (5) 1 Change in unrealized appreciation(depreciation) during the period ........................................................ (298) 114 (46) 83 ------ ------ ------ ------ Net increase (decrease) in net assets resulting from operations ..... (315) 113 (28) 81 ------ ------ ------ ------ Policy transactions: Net premiums from policyholders .................................... 772 1,655 -- 2,069 Transfers to policyholders for benefits and termination ............ (231) (14) (47) (17) Net transfers between subaccounts .................................. -- -- -- -- Net change in policy loans ......................................... -- -- -- -- ------ ------ ------ ------ Net increase (decrease) in net assets resulting from policy transactions ................................................ 541 1,641 (47) 2,052 ------ ------ ------ ------ Total increase (decrease) in net assets ............................. 226 1,754 (75) 2,133 Net assets at beginning of period ................................... 1,754 -- 2,133 -- ------ ------ ------ ------ Net assets at end of period ......................................... $1,980 $1,754 $2,058 $2,133 ====== ====== ====== ======
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 182 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIOD ENDED JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 AND 2000
V.A. V.A. FINANCIAL RELATIVE LARGE CAP INDUSTRIES VALUE VALUE CORE SUBACCOUNT SUBACCOUNT SUBACCOUNT -------------- ----------- ------------ 2002* 2002* 2002* -------------- ----------- ------------ Increase (decrease) in net assets from operations: Net investment income ............................................... $ -- $ 1 $ 26 Realized losses ..................................................... (6) (21) (133) Change in unrealized appreciation (depreciation) during the period ......................................................... (28) 28 (762) ------ ---------- ------- Net increase (decrease) in net assets resulting from operations ..................................................... (34) 8 (869) ------ ---------- ------- Policy transactions: Net premiums from policyholders ..................................... 2,237 4,786 19,850 Transfers to policyholders for benefits and termination ............. (327) (363) (5,168) Net transfers between subaccounts ................................... -- -- -- Net change in policy loans .......................................... -- -- -- ------ ---------- ------- Net increase in net assets resulting from policy transactions ................................................. 1,910 4,423 14,682 ------ ---------- ------- Total increase in net assets ......................................... 1,876 4,431 13,813 Net assets at beginning of period .................................... -- -- -- ------ ---------- ------- Net assets at end of period .......................................... $1,876 $ 4,431 $13,813 ====== ========== =======
JANUS JANUS ASPEN MFS INVESTORS ASPEN GLOBAL WORLD GROWTH TECHNOLOGY WIDE GROWTH STOCK SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------ ----------- ------------- 2002* 2002* 2002* ------------ ----------- ------------- Increase (decrease) in net assets from operations: Net investment income ............................................... $ -- $ 84 $ -- Realized losses ..................................................... (8) (47) (25) Change in unrealized depreciation during the period ................. (69) (7,605) (754) ------ ------- ------ Net decrease in net assets resulting from operations ................. (77) (7,568) (779) ------ ------- ------ Policy transactions: Net premiums from policyholders ..................................... 1,768 67,602 7,402 Transfers to policyholders for benefits and termination ............. (102) (416) (405) Net transfers between subaccounts ................................... -- -- -- Net change in policy loans .......................................... -- -- -- ------ ------- ------ Net increase in net assets resulting from policy transactions ................................................. 1,666 67,186 6,997 ------ ------- ------ Total increase in net assets ......................................... 1,589 59,618 6,218 Net assets at beginning of period .................................... -- -- -- ------ ------- ------ Net assets at end of period .......................................... $1,589 $59,618 $6,218 ====== ======= ======
- --------- * From commencement of operations (refer to footnote d in notes to financial statements 6). See accompanying notes. 183 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2002 1. ORGANIZATION John Hancock Variable Life Account UV (the Account) is a separate investment account of John Hancock Variable Insurance Company (JHLICO), a wholly-owned subsidiary of John Hancock Insurance Company (John Hancock). The Account was formed to fund variable life insurance policies (Policies) issued by JHLICO. Currently, the Account funds the Annual Premium Variable Life, Flex V1 NY, Flex V2 NY, Medallion Variable Life, Variable Estate Protection NY, Variable Estate Protection PLUS NY, Variable Estate Protection EDGE NY, Majestic Variable Universal Life-98 NY, Majestic Variable Estate Protection 98 NY, Medallion Executive Variable Life III, Medallion Variable Universal Life Insurance PLUS NY, Medallion Variable Universal Life Insurance EDGE NY, Variable Master Plan Plus NY insurance policies. The Account is operated as a unit investment trust registered under the Investment Company Act of 1940, as amended, and currently consists of forty-five subaccounts. The assets of each subaccount are invested exclusively in shares of a corresponding Portfolio of John Hancock Variable Series Trust I (the Trust), John Hancock Declaration Trust (Declaration Trust) or of other Outside Investment Trusts (Outside Trust). New subaccounts may be added as new Portfolios are added to the Trust, Declaration Trust, or to the Outside Trusts, or as other investment options are developed and made available to policyholders. The forty-five Portfolios of the Trust, Declaration Trust, and the Outside Trust which are currently available are the Large Cap Growth, Active Bond, International Equity Index, Small Cap Growth, Global Balanced, Multi Cap Growth, Large Cap Value, Money Market, Small/Mid Cap Growth, Real Estate Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Equity, International Opportunities, Equity Index, Global Bond, Emerging Markets Equity, Bond Index, Small/Mid Cap CORE, High Yield Bond, Turner Core Growth, Brandes International Equity, Frontier Capital Appreciation, Clifton Enhanced U.S. Equity, Large Cap Aggressive Growth, Fundamental Growth, Aim V.I. Premier Equity, Fidelity VIP Growth, Fidelity VIP Contrafund, MFS New Discovery, V.A. Strategic Income, Health Sciences, International Opportunities B, Fundamental Value, Small Cap Value, Aim V.I. Growth, MFS Research, Templeton International, V.A. Financial Industries, V.A. Relative Value, Large Cap Value CORE, Janus Aspen Global Technology, Janus Aspen Worldwide Growth and MFS Investors Growth Stock Portfolios. Each portfolio has a different investment objective. The net assets of the Account may not be less than the amount required under state insurance law to provide for death benefits (without regard to the minimum death benefit guarantee) and other policy benefits. Additional assets are held in JHLICO's general account to cover the contingency that the guaranteed minimum death benefit might exceed the death benefit which would have been payable in the absence of such guarantee. The assets of the Account are the property of JHLICO. The portion of the Account's assets applicable to the policies may not be charged with liabilities arising out of any other business JHLICO may conduct. 2. SIGNIFICANT ACCOUNTING POLICIES ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. VALUATION OF INVESTMENTS Investment in shares of the Trust, Declaration Trust and of the Outside Trust are valued at the reported net asset values of the respective Funds. Investment transactions are recorded on the trade date. Dividend income is recognized on the ex-dividend date. Realized gains and losses on sales of respective Fund shares are determined on the basis of identified cost. 184 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FEDERAL INCOME TAXES The operations of the Account are included in the federal income tax return of JHLICO, which is taxed as a life insurance company under the Internal Revenue Code. JHLICO has the right to charge the Account any federal income taxes, or provision for federal income taxes, attributable to the operations of the Account or to the Contracts funded in the Account. Currently, JHLICO does not make a charge for income or other taxes. Charges for state and local taxes, if any, attributable to the Account may also be made. EXPENSES JHLICO assumes mortality and expense risks of the variable life insurance policies for which asset charges are deducted at various rates ranging from .50% to .625%, depending on the type of policy, of net assets (excluding policy loans) of the Account. Additionally, a monthly charge at varying levels for the cost of extra insurance is deducted from the net assets of the Account. JHLICO makes certain deductions for administrative expenses and state premium taxes from premium payments before amounts are transferred to the Account. AMOUNTS RECEIVABLE/PAYABLE Receivables/Payables to/from portfolios/JHLICO are due to unsettled policy transactions (net of asset-based charges) and/or subsequent/preceding purchases/sales of the respective Portfolios' shares. The amounts are due to/ from either the respective portfolio and/or John Hancock Life Insurance Company for the benefit of policyholders. 3. TRANSACTION WITH AFFILIATES John Hancock acts as the distributor, principal underwriter and investment advisor for the Trust. Certain officers of the Account are officers and directors of JHLICO or the Trust. 4. NEW AUDIT GUIDE Effective January 1, 2001, the Account adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies (the Guide), as revised, effective for fiscal years beginning after December 15, 2001. The adoption of the Guide did not impact the total net assets of the subaccounts for fiscal year 2001. Certain disclosures in the financial statements of the Account have changed as a result of the adoption of the Guide. The financial statement presentation of the account for the years prior to 2001 have not been restated. 185 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 5. DETAILS OF INVESTMENTS The details of the shares owned, cost and value of investments in the Subaccounts of the Trust, Declaration Trust and of the Outside Trust at December 31, 2001 were as follows:
SHARES SUBACCOUNT OWNED COST VALUE - ------------------------------------------------------------------------------------------------ Large Cap Growth ................................ 2,773,101 $58,877,427 $ 35,386,081 Active Bond ..................................... 10,523,229 101,267,932 100,025,845 International Equity Index ...................... 440,904 6,882,197 5,309,272 Small Cap Growth ................................ 456,022 6,646,164 4,416,308 Global Balanced ................................. 392,033 3,359,069 3,235,518 Multi Cap Growth ................................ 2,166,094 30,602,474 16,104,416 Large Cap Value ................................. 1,802,498 25,385,494 24,400,461 Money Market .................................... 20,367,367 20,369,857 20,369,856 Small/Mid Cap Growth ............................ 623,263 8,879,760 7,932,940 Real Estate Equity .............................. 469,428 6,317,909 7,010,878 Growth & Income ................................. 16,690,027 266,792,149 175,994,139 Managed ......................................... 7,205,642 102,213,745 86,325,324 Short Term Bond ................................. 107,913 1,098,943 1,095,839 Small Cap Equity ................................ 578,901 5,387,072 4,572,899 International Opportunities ..................... 1,589,528 16,925,170 14,206,679 Equity Index .................................... 3,705,069 68,663,073 47,476,577 Global Bond ..................................... 98,157 986,709 1,041,072 Emerging Markets Equity ......................... 172,502 1,149,212 1,151,654 Bond Index ...................................... 566,497 5,648,691 5,660,569 Small/Mid Cap CORE .............................. 73,326 712,539 716,506 High Yield Bond ................................. 154,615 1,097,643 970,290 Turner Core Growth .............................. 26,629 410,440 294,255 Brandes International Equity .................... 99,368 1,362,029 1,239,122 Frontier Capital Appreciation ................... 27,230 459,309 403,273 Clifton Enhanced U.S. Equity .................... 3,742 55,755 44,083 Large Cap Aggressive Growth ..................... 310 3,143 2,018 Fundamental Growth .............................. 4,173 37,894 28,603 Aim V.I. Premier Equity ......................... 1,308 30,873 24,065 Fidelity VIP Growth ............................. 5,358 170,687 144,601 Fidelity VIP Contrafund ......................... 1,706 35,485 33,701 MFS New Discovery ............................... 8,599 130,941 106,374 V.A. Strategic Income ........................... 87 745 739 Health Sciences ................................. 633 5,924 5,288 International Opportunities B ................... 3,659 27,904 26,203 Fundamental Value ............................... 413,403 4,388,916 3,982,359 Small Cap Value ................................. 11,264 161,470 166,356 Aim V.I. Growth ................................. 563 7,733 7,316 MFS Research. ................................... 162 2,164 1,980 Templeton International ......................... 179 2,021 2,058 V.A. Financial Industries ....................... 142 1,904 1,876 V.A. Relative Value ............................. 691 4,403 4,431 Large Cap Value CORE. ........................... 1,521 14,575 13,813 Janus Aspen Global Technology ................... 553 1,658 1,589 Janus Aspen Worldwide Growth .................... 2,427 67,224 59,619 MFS Investors Growth Stock. ..................... 777 6,972 6,218
186 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 5. DETAILS OF INVESTMENTS (CONTINUED) Purchases, including reinvestment of dividend distributions, and proceeds from sales of shares in the Subaccounts of the Trust, Declaration Trust and of the Outside Trust during 2001 were as follows: SUBACCOUNT PURCHASES SALES - -------------------------------------------------------------------------------- Large Cap Growth ................................... $4,331,881 $2,105,174 Active Bond ........................................ 7,040,682 3,311,473 International Equity Index ......................... 580,360 469,595 Small Cap Growth ................................... 866,876 429,888 Global Balanced .................................... 162,218 49,115 Multi Cap Growth ................................... 4,028,741 752,891 Large Cap Value .................................... 3,071,638 858,536 Money Market ....................................... 3,939,975 3,661,527 Small/Mid Cap Growth ............................... 804,171 492,868 Real Estate Equity ................................. 1,251,843 318,416 Growth & Income .................................... 8,359,175 6,816,753 Managed ............................................ 3,852,760 4,275,406 Short-Term Bond .................................... 282,552 242,866 Small Cap Equity ................................... 684,554 230,020 International Opportunities ........................ 3,501,287 554,106 Equity Index ....................................... 4,472,489 1,196,969 Global Bond ........................................ 242,110 81,645 Emerging Markets Equity ............................ 325,489 82,378 Bond Index ......................................... 642,593 383,289 Small/Mid Cap CORE ................................. 280,321 56,765 High Yield Bond. ................................... 309,432 219,897 Turner Core Growth ................................. 28,795 34,213 Brandes International Equity ....................... 211,502 106,185 Frontier Capital Appreciation ...................... 38,890 37,966 Clifton Enhanced U.S. Equity ....................... 23,128 2,031 Large Cap Aggressive Growth ........................ 907 73 Fundamental Growth ................................. 22,469 261 Aim V.I. Premier Equity 18,291 1,964 Fidelity VIP Growth ................................ 180,507 9,511 Fidelity VIP Contrafund ............................ 23,781 1,220 MFS New Discovery .................................. 25,675 1,751 V.A. Strategic Income .............................. 741 136 Health Sciences .................................... 2,798 229 International Opportunities B ...................... 27,367 460 Fundamental Value .................................. 380,855 362,992 Small Cap Value .................................... 138,773 6,292 Aim V.I. Growth .................................... 7,587 1,439 MFS Research ....................................... 742 202 Templeton International ............................ 30 55 V.A. Financial Industries .......................... 2,059 149 V.A. Relative Value ................................ 4,742 319 Large Cap Value CORE ............................... 19,336 4,628 Janus Aspen Global Technology ...................... 1,726 60 Janus Aspen Worldwide Growth ....................... 67,663 393 MFS Investors Growth Stock ......................... 7,352 356 187 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. UNIT VALUES A summary of unit values and units outstanding for variable life contracts and the expense and the investment income ratios, excluding expenses of the underlying Portfolios were as follows:
AT JUNE 30, 2002 AND DECEMBER 31, FOR THE YEARS AND PERIODS ENDED 2001 JUNE 30, 2002 AND DECEMBER 31, 2001 --------------------------------------------------------------------------------------------- EXPENSES UNIT FAIR VALUE RATIO* INVESTMENT TOTAL UNITS LOWEST TO ASSETS LOWEST TO INCOME RETURN*** SUBACCOUNT (000S) HIGHEST (000S) HIGHEST RATIO** LOWEST TO HIGHEST - ---------------------------------------------------------------------------------------------------------------------------------- Large Cap Growth June 30, 2002 672 $11.90 to $44.07 $ 38,232 0.05% to 0.625% 0.87% (20.83)% to (19.51)%/g/ December 31, 2001 627 $14.90 to $58.93 $ 43,595 0.05% to 0.625% 0.98% (18.04)% to 49.00%/e/ Active Bond June 30, 2002 2,010 14.09 to 34.16 111,894 0.05 to 0.625 5.76 0.80 to 2.18/g/ December 31, 2001 1,941 13.84 to 66.70 108,818 0.05 to 0.625 7.87 6.80 to 38.40/e/ International Equity Index June 30, 2002 226 10.25 to 19.26 5,729 0.05 to 0.625 2.24 0.01 to 2.85/g/ December 31, 2001 221 10.19 to 19.15 5,654 0.05 to 0.625 2.70 (20.79) to 1.90/e/ Small Cap Growth June 30, 2002 364 11.61 to 13.33 4,416 0.05 to 0.625 --/b/ (20.71) to (18.42)/g/ December 31, 2001 330 14.70 to 16.83 4,876 0.05 to 0.625 --/b/ (13.12) to 68.30 Global Balanced June 30, 2002 295 10.70 to 11.12 3,235 0.05 to 0.625 1.56 (4.51) to 11.(2.95)/g/ December 31, 2001 291 10.88 to 11.56 3,248 0.60 to 0.625 0.57 (7.08) to (6.99) Multi Cap Growth June 30, 2002 1,501 10.27 to 11.63 16,104 0.05 to 0.625 --/b/ (27.29) to (19.18)/g,h/ December 31, 2001 1,234 14.20 to 16.04 17,594 0.05 to 0.625 --/b/ (37.33) to 60.40/e/ Large Cap Value June 30, 2002 1,395 15.04 to 17.90 24,400 0.05 to 0.625 1.31 (9.57) to (3.84)/g,h/ December 31, 2001 1,282 15.89 to 18.90 23,398 0.05 to 0.625 1.83 0.66 to 58.90/e/ Money Market June 30, 2002 741 12.66 to 19.85 22,628 0.05 to 0.625 2.12 0.47 to 0.74/g,h/ December 31, 2001 684 12.56 to 34.50 22,329 0.05 to 0.625 5.38 3.29 to 25.60/e/
188 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. UNIT VALUES (CONTINUED)
FOR THE YEARS AND PERIODS ENDED AT JUNE 30, 2002 AND DECEMBER 31, 2001 JUNE 30, 2002 AND DECEMBER 31, 2001 --------------------------------------------------------------------------------------------- EXPENSES UNIT FAIR VALUE RATIO* INVESTMENT TOTAL UNITS LOWEST TO ASSETS LOWEST TO INCOME RETURN*** SUBACCOUNT (000S) HIGHEST (000S) HIGHEST RATIO** LOWEST TO HIGHEST - -------------------------------------------------------------------------------------------------------------------------- Small/Mid Cap Growth June 30, 2002 404 12.43 to 19.90 7,933 0.05 to 0.625 --/b/ (13.68) to (12.64)/g/ December 31, 2001 388 14.38 to 23.01 8,467 0.05 to 0.625 --/b/ 2.00 to 121.80/e/ Real Estate Equity June 30, 2002 155 14.72 to 35.91 7,418 0.05 to 0.625 4.51 14.72 to 35.91/g/ December 31, 2001 133 13.29 to 32.43 5,901 0.05 to 0.625 5.72 5.07 to 32.90/e/ Growth & Income June 30, 2002 1,872 12.12 to 51.89 207,803 0.05 to 0.625 1.62 (14.07) to (12.40)/g,h/ December 31, 2001 1,818 13.99 to 137.76 230,297 0.05 to 0.625 1.94 (16.00) to 39.90/e/ Managed June 30, 2002 100,156 18.15 to 41.38 100,156 0.60 to 0.625 2.44 (9.53) to (8.59)/g,h/ December 31, 2001 1,273 14.88 to 45.24 108,762 0.60 to 0.625 3.72 (3.47) to (3.41)/e/ Short-Term Bond June 30, 2002 72 13.26 to 15.80 1,096 0.05 to 0.625 4.41 1.59 to 2.55/g,h/ December 31, 2001 70 13.29 to 15.68 1,055 0.05 to 0.625 5.62 (11.57) to 32.90/e/ Small Cap Equity June 30, 2002 451 8.91 to 9.56 4,573 0.05 to 0.625 --/b/ (13.49) to (12.73)/g/ December 31, 2001 436 10.30 to 11.04 4,641 0.05 to 0.625 0.09 (4.40) to 3.00/e/ International Opportunities June 30, 2002 1,369 10.12 to 10.77 14,206 0.05 to 0.625 0.87 (4.04) to (1.95)/g/ December 31, 2001 1,104 10.52 to 11.18 11,920 0.05 to 0.625 1.07 (21.4) to 5.20/e/ Equity Index June 30, 2002 3,011 13.43 to 16.01 47,476 0.05 to 0.625 1.31 (15.87) to (14.45)/g,h/ December 31, 2001 2,838 15.82 to 18.87 51,695 0.05 to 0.625 1.52 2.54 to 58.20/e/ Global Bond June 30, 2002 7 13.87 to 14.95 1,041 0.05 to 0.625 --/b/ 7.71 to 8.31/g/ December 31, 2001 60 12.73 to 13.63 797 0.05 to 0.625 4.57 (2.07) to 27.30/e/ Emerging Markets Equity June 30, 2002 152 7.51 to 7.71 1,152 0.05 to 0.625 0.35 0.66 to 2.12/g/ December 31, 2001 122 7.29 to 7.46 893 0.05 to 0.625 0.31 (26.20) to (4.07)/e/
189 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. UNIT VALUES (CONTINUED)
AT JUNE 30, 2002 AND DECEMBER 31, FOR THE YEARS AND PERIODS ENDED 2001 JUNE 30, 2002 AND DECEMBER 31, 2001 ---------------------------------------------------------------------------------------------- EXPENSES UNIT FAIR VALUE RATIO* INVESTMENT TOTAL UNITS LOWEST TO ASSETS LOWEST TO INCOME RETURN*** SUBACCOUNT (000S) HIGHEST (000S) HIGHEST RATIO** LOWEST TO HIGHEST - ----------------------------------------------------------------------------------------------------------------------------------- Bond Index June 30, 2002 446 12.67 to 13.01 4,465,660 0.60 to 0.625 5.44 2.18 to 3.86/g,h/ December 31, 2001 436 12.30 to 12.58 5,365 0.60 to 0.625 6.46 6.86 to 7.22 Small/Mid Cap CORE June 30, 2002 60 10.83 to 11.11 716 0.60 to 0.625 0.31 (2.54) to (1.14)/g/ December 31, 2001 45 11.19 to 11.44 505 0.60 to 0.625 0.71 (0.36) to 0.09 High Yield Bond June 30, 2002 112 8.64 to 8.87 970 0.05 to 0.625 10.38 (6.24) to (4.98)/g/ December 31, 2001 108 9.08 to 9.29 980 0.05 to 0.625 10.50 (8.00) to 1.68/e/ Turner Core Growth June 30, 2002 21 13.43 to 14.19 294 0.05 to 0.625 --/b/ (20.24) to (20.02) December 31, 2001 21 16.67 to 19.69 362 0 05 to 0.625 0.14 (24.04) to 66.70/e/ Brandes International Equity June 30, 2002 78 15.45 to 16.32 1,239 0.05 to 0.625 0.12 0.31 to 0.59 December 31, 2001 71 15.28 to 16.10 1,128 0.05 to 0.625 1.55 (13.33) to 61.00/e/ Frontier Capital Appreciation June 30, 2002 21 16.69 to 20.23 403 0.05 to 0.625 --/b/ (15.94) to (15.70) December 31, 2001 21 19.76 to 24.69 460 0.05 to 0.625 0.60 to 0.625 (2.09) to 97.60/e/ Clifton Enhanced U.S. Equity June 30, 2002 5 8.69 to 11.66 44 0.60 --/b/ (15.54) to (15.31) December 31, 2001 3 10.25 to 13.83 28 0.60 0.60 to 0.625 (13.50) Large Cap Aggressive Growth June 30, 2002 /a/ 5.39 to 6.53 2 0.625 --/b/ (22.07) to (19.50)/g/ December 31, 2001 /a/ 6.71 to 8.33 2 0.625 --/b/ (15.34) Fundamental Growth June 30, 2002 4 5.34 to 7.90 29 0.625 --/b/ (22.49) to (20.99)/g/ December 31, 2001 2 6.12 to 10.16 11 0.625 --/b/ (32.72) Aim V.I. Premier Equity June 30, 2002 4 5.62 to 22.90 24 0.525 to 0.625 --/b/ (23.19) to (5.21)/g,h/ December 31, 2001 2 7.13 to 29.72 12 0.525 to 0.625 0.19 (13.17) to (12.95)
190 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. UNIT VALUES (CONTINUED)
AT JUNE 30, 2002 AND FOR THE YEARS AND PERIODS ENDED DECEMBER 31, 2001 JUNE 30, 2002 AND DECEMBER 31, 2001 -------------------------------------------------------------------------------------- EXPENSES UNIT FAIR VALUE RATIO* INVESTMENT TOTAL UNITS LOWEST TO ASSETS LOWEST TO INCOME RETURN*** SUBACCOUNT (000S) HIGHEST (000S) HIGHEST RATIO** LOWEST TO HIGHEST - ---------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth June 30, 2002 18 5.75 to 55.71 145 0.625 --/b/ (22.34) to (21.08)/g/ December 31, 2001 --/a/ 7.12 to 71.07 1 0.625 --/b/ (18.22) Fidelity VIP Contrafund June 30, 2002 3 8.23 to 27.25 34 0.575 to 0.625 0.82 (3.31) to 0.47/g,h/ December 31, 2001 1 8.26 to 27.72 12 0.575 to 0.625 0.43 (13.06) to (12.86) MFS New Discovery June 30, 2002 14 7.38 to 12.93 106 0.575 to 0.625 --/b/ (22.01) to (21.32)/g/ December 31, 2001 11 9.12 to 16.49 107 0.575 to 0.625 5.14 (5.69) to (5.59) V.A. Strategic Income June 30, 2002 /a/ 10.50 to 14.06 1 0.625 7.14 0.88 to 1.73/g/ December 31, 2001 /a/ 10.33 to 13.79 /b/ 0.625 3.11 3.30/f/ Health Sciences June 30, 2002 1 8.05 to 8.11 5 0.625 --/b/ (17.08) to (16.40)/g/ December 31, 2001 /a/ 9.77 to 9.81 3 0.625 --/b/ (2.30)/f/ International Opportunities B June 30, 2002 3 7.63 to 7.97 26 0.625 2.05 (5.17) to (2.37)/g/ December 31, 2001 /a/ 8.03 to 8.43 1 0.625 --/b/ (16.00)/f/ Fundamental Value June 30, 2002 323 8.36 to 14.62 3,982 0.05 to 0.625 1.12 (11.41) to (9.75)/g/ December 31, 2001 322 9.40 to 16.44 4,393 0.05 to 0.625 0.30 (6.00) to 64.40/f/ Small Cap Value June 30, 2002 13 10.94 to 17.63 166 0.05 to 0.625 0.38 (1.28) to 6.09/g,h/ December 31, 2001 3 10.44 to 16.79 31 0.05 to 0.625 0.97 4.40 to 4.80/f/ Aim V.I. Growth June 30, 2002 1 6.46 to 15.95 7 0.625 --/b/ (23.45) to (20.68)/g,h/ December 31, 2001 /a/ 8.44 to 20.77 2 0.625 0.34 (15.60)/f/
191 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. UNIT VALUES (CONTINUED)
AT JUNE 30, 2002 AND FOR THE YEARS AND PERIODS ENDED DECEMBER 31, 2001 JUNE 30, 2002 AND DECEMBER 31, 2001 --------------------------------------------------------------------------------------- EXPENSES UNIT FAIR VALUE RATIO* INVESTMENT TOTAL UNITS LOWEST TO ASSETS LOWEST TO INCOME RETURN*** SUBACCOUNT (000s) HIGHEST (000s) HIGHEST RATIO** LOWEST TO HIGHEST - ------------------------------------------------------------------------------------------------------------------------------ MFS Research June 30, 2002 /a/ 7.14 to 15.56 2 0.625 0.45 (16.88) to (14.86)/g/ December 31, 2001 /a/ 8.61 to 18.67 2 0.625 --/b/ (14.10)/f/ Templeton International June 30, 2002 /a/ 8.09 2 0.60 2.89 (1.56) December 31, 2001 /a/ 8.17 to 8.19 2 0.60 --/b/ (18.30)/f/ V.A. Financial Industries June 30, 2002 /a/ 13.92 2 --/c/ --/b/ (9.87)/g/ V.A. Relative Value June 30, 2002 /a/ 11.38 4 --/c/ 0.60 (33.52)/g/ Large Cap Value CORE June 30, 2002 1 9.45 14 --/c/ 2.70 (7.57)/g/ Janus Aspen Global Technology June 30, 2002 1 2.87 2 --/c/ --/b/ (31.46)/g/ Janus Aspen Worldwide Growth June 30, 2002 11 5.47 to 5.54 60 0.03 to 0.21--/d/ 1.53 (14.34) to (12.01)/g/ MFS investors Growth Stock June 30, 2002 1 7.99 6 --/c/ --/b/ (18.50)/g/
* These ratios represent the annualized contract expenses of the variable account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying portfolios are excluded. ** These amounts represent the dividends and other income received by the subaccount 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 result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying portfolio in which the subaccounts invest. The investment income ratio is annualized. *** These amounts represents the total return for the periods indicated, including changes in the value of the underlying portfolio, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the commencement date through the end of the reporting period using a $10.00 initial offering price as the unit value. 192 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. UNIT VALUES (CONTINUED) a. Total accumulation units not greater than 500 units. b. Portfolio distributed no dividends during the period. c. Portfolio incurred no expense charges during the period. d. From commencement of operations as follows.
Large Cap Aggressive Growth April 24, 2000 Fundamental Growth April 24, 2000 AIM V.I. Premier Equity April 24, 2000 Fidelity VIP Growth April 24, 2000 Fidelity VIP Contrafund April 24, 2000 MFS New Discovery April 24, 2000 V.A. Strategic Income May 1, 2001 Health Sciences May 1, 2001 International Opportunities B May 1, 2001 Fundamental Value May 1, 2001 Small Cap Value May 1, 2001 AIM V.I. Growth May 1, 2001 MFS Research May 1, 2001 Templeton International May 1, 2001 V.A. Financial Industries March 27, 2002 V.A. Relative Value March 27, 2002 Large Cap Value CORE March 27, 2002 Janus Aspen Global Technology May 12, 2002 Janus Aspen Worldwide Growth February 1, 2002 MFS Investors Growth Stock March 15, 2002
e. From July 20, 2001 (inception of investment option). $10.00 initial offering price. f. From May 1, 2001 (inception of investment option). $10.00 initial offering price. g. Includes initial offering price on January 14, 2002 of a new product for this subaccount. h. Includes initial offering price on March 4, 2002 of a new product for this subaccount. 193 AUDITED FINANCIAL STATEMENTS FOR JOHN HANCOCK VARIABLE LIFE ACCOUNT UV 194 REPORT OF INDEPENDENT AUDITORS To the Policyholders of John Hancock Variable Life Account UV of John Hancock Life Insurance Company We have audited the accompanying statement of assets and liabilities of John Hancock Variable Life Account UV (the Account) (comprising of, respectively, the Large Cap Growth, Active Bond, International Equity Index, Small Cap Growth, Global Balanced, Mid Cap Growth, Large Cap Value, Money Market, Small/Mid Cap Growth, Real Estate Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Equity, International Opportunities, Equity Index, Global Bond, Emerging Markets (formerly Emerging Markets Equity), Bond Index, Small/Mid Cap CORE, High Yield Bond, Turner Core Growth, Brandes International Equity, Frontier Capital Appreciation, Clifton Enhanced US Equity, Large Cap Aggressive Growth, Fundamental Growth, AIM V.I. Value, Fidelity VIP Growth, Fidelity VIP II Contrafund, MFS New Discovery Series, V.A. Strategic Income, Health Sciences, International Equity, Large/Mid Cap Value, Small Cap Value (formerly Small/Mid Cap Value), AIM V.I. Growth Series, MFS Research Series, and Templeton International Subaccounts) as of December 31, 2001, and the related statements of operations and changes in net assets for each of the periods indicated therein. These financial statements are the responsibility of the Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts constituting John Hancock Variable Life Account UV at December 31, 2001, the results of their operations for the year then ended, and the changes in their net assets for each of the periods indicated, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Boston, Massachusetts February 8, 2002 195 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2001
LARGE CAP INTERNATIONAL GROWTH ACTIVE BOND EQUITY INDEX SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------- ----------- --------------- ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value ... $40,778,508 $ 97,207,604 $5,224,610 Policy loans and accrued interest receivable ....... 2,816,552 11,610,304 429,026 Receivable from portfolio/JHLICO ................... 112,189 70,028 2,647 ----------- ------------ ---------- Total assets ....................................... 43,707,249 108,887,936 5,656,283 LIABILITIES Payable to portfolio/JHLICO ........................ 110,064 65,739 2,377 Asset charges payable .............................. 2,125 4,289 269 ----------- ------------ ---------- Total liabilities .................................. 112,189 70,028 2,646 ----------- ------------ ---------- ................................................... $43,595,060 $108,817,908 $5,653,637 ----------- ------------ ---------- NET ASSETS: Accumulation units ................................ $43,595,060 $108,817,908 $5,653,637 ----------- ------------ ---------- Total net assets ................................. $43,595,060 $108,817,908 $5,653,637 ----------- ------------ ---------- Units outstanding ................................ 627,315 1,941,434 221,470 ----------- ------------ ---------- Unit value (accumulation) ........................ $ 69.49 $ 56.05 $ 25.53 =========== ============ ==========
SMALL CAP GLOBAL MID CAP GROWTH BALANCED GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ---------- ------------- ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value .... $4,876,292 $3,248,070 $17,593,663 Policy loans and accrued interest receivable ....... -- -- -- Receivable from portfolio/JHLICO ................... 34,125 160 64,808 ---------- ---------- ----------- Total assets ....................................... 4,910,417 3,248,230 17,658,471 LIABILITIES Payable to portfolio/JHLICO ........................ 33,891 -- 63,946 Asset charges payable .............................. 234 160 862 ---------- ---------- ----------- Total liabilities .................................. 34,125 160 64,808 ---------- ---------- ----------- ................................................... $4,876,292 $3,248,070 $17,593,663 ---------- ---------- ----------- NET ASSETS: Accumulation units ................................ $4,876,292 $3,248,070 $17,593,663 ---------- ---------- ----------- Total net assets ................................. $4,876,292 $3,248,070 $17,593,663 ---------- ---------- ----------- Units outstanding ................................ 329,623 290,809 1,234,358 ---------- ---------- ----------- Unit value (accumulation) ........................ $ 14.79 $ 11.17 $ 14.25 ========== ========== ===========
See accompanying notes. 196 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2001
LARGE CAP MONEY SMALL/MID CAP VALUE MARKET GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------- ----------- ------------- ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value ............... $23,397,684 $20,091,408 $ 8,467,406 Policy loans and accrued interest receivable .................. -- 2,238,941 -- Receivable from portfolio/JHLICO .............................. 98,670 217,372 3,185 ----------- ----------- ----------- Total assets .................................................. 23,496,354 22,547,721 8,470,591 LIABILITIES Payable to portfolio/JHLICO ................................... 97,521 218,321 2,768 Asset charges payable ......................................... 1,149 336 417 ----------- ----------- ----------- Total liabilities ............................................. 98,670 218,657 3,185 ----------- ----------- ----------- $23,397,684 $22,329,064 $ 8,467,406 ----------- ----------- ----------- NET ASSETS: Accumulation units ........................................... $23,397,684 $22,329,064 $ 8,467,406 ----------- ----------- ----------- Total net assets ............................................ $23,397,684 $22,329,064 $ 8,467,406 ----------- ----------- ----------- Units outstanding ........................................... 1,282,001 683,765 388,270 ----------- ----------- ----------- Unit value (accumulation) ................................... $ 18.25 $ 32.66 $ 21.81 =========== =========== =========== REAL ESTATE GROWTH & EQUITY INCOME MANAGED SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------- ------------ ------------ ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value ............... $ 5,525,379 $197,711,222 $ 94,814,008 Policy loans and accrued interest receivable .................. 375,743 32,585,795 13,948,330 Receivable from portfolio/JHLICO .............................. 41,181 125,660 25,333 ----------- ------------ ------------ Total assets .................................................. 5,942,303 230,422,677 108,787,671 LIABILITIES Payable to portfolio/JHLICO ................................... 40,902 117,099 20,850 Asset charges payable ......................................... 276 8,561 5,168 ----------- ------------ ------------ Total liabilities ............................................. 41,178 125,660 26,018 ----------- ------------ ------------ $ 5,901,125 $230,297,017 $108,761,653 ----------- ------------ ------------ NET ASSETS: Accumulation units ........................................... $ 5,901,125 $230,297,017 $108,761,653 ----------- ------------ ------------ Total net assets ............................................ $ 5,901,125 $230,297,017 $108,761,653 ----------- ------------ ------------ Units outstanding ........................................... 132,974 1,818,448 1,272,533 ----------- ------------ ------------ Unit value (accumulation) .................................. $ 44.38 $ 126.64 $ 85.47 =========== ============ ============
See accompanying notes. 197 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2001
SHORT-TERM SMALL CAP INTERNATIONAL BOND EQUITY OPPORTUNITIES SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ---------- ------------- ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value ........ $1,054,613 $4,641,466 $11,919,734 Policy loans and accrued interest receivable ........... -- -- -- Receivable from portfolio/JHLICO ....................... 2,603 39,222 24,763 ---------- ---------- ----------- Total assets ........................................... 1,057,216 4,680,688 11,944,497 LIABILITIES Payable to portfolio/JHLICO ............................ 2,553 39,008 24,187 Asset charges payable .................................. 50 215 576 ---------- ---------- ----------- Total liabilities ...................................... 2,603 39,223 24,763 ---------- ---------- ----------- $1,054,613 $4,641,465 $11,919,734 ---------- ---------- ----------- NET ASSETS: Accumulation units .................................... $1,054,613 $4,641,465 $11,919,734 ---------- ---------- ----------- Total net assets ..................................... $1,054,613 $4,641,465 $11,919,734 ---------- ---------- ----------- Units outstanding .................................... 70,417 436,086 1,103,525 ---------- ---------- ----------- Unit value (accumulation) ............................ $ 14.98 $ 10.64 $ 10.80 ========== ========== =========== EMERGING EQUITY INDEX GLOBAL BOND MARKETS SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------ ----------- ------------ ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value ........ $ 51,694,821 $ 797,319 $ 893,036 Policy loans and accrued interest receivable ........... -- -- -- Receivable from portfolio/JHLICO ....................... 53,474 230 8,020 ------------ ----------- ---------- Total assets ........................................... 51,748,295 797,549 901,056 LIABILITIES Payable to portfolio/JHLICO ............................ 50,918 194 7,978 Asset charges payable .................................. 2,555 36 43 ------------ ----------- ---------- Total liabilities ...................................... 53,473 230 8,021 ------------ ----------- ---------- $ 51,694,822 $ 797,319 $ 893,035 ------------ ----------- ---------- NET ASSETS: Accumulation units .................................... $ 51,694,822 $ 797,319 $ 893,035 ------------ ----------- ---------- Total net assets ..................................... $ 51,694,822 $ 797,319 $ 893,035 ------------ ----------- ---------- Units outstanding .................................... 2,838,268 60,288 122,482 ------------ ----------- ---------- Unit value (accumulation) ........................... $ 18.21 $ 13.23 $ 7.29 ============ =========== ==========
See accompanying notes. 198 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2001
SMALL/MID CAP HIGH YIELD BOND INDEX CORE BOND SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ------------- ------------ ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value ....... $5,365,289 $ 505,368 $980,405 Receivable from portfolio / JHLICO .................... 2,746 7,956 3,357 ---------- --------- -------- Total assets .......................................... 5,368,035 513,324 983,762 LIABILITIES Payable to portfolio / JHLICO ......................... 2,483 7,931 3,310 Asset charges payable ................................. 263 25 46 ---------- --------- -------- Total liabilities ..................................... 2,746 7,956 3,356 ---------- --------- -------- $5,365,289 $ 505,368 $980,406 ---------- --------- -------- NET ASSETS: Accumulation units ................................... $5,365,289 $ 505,368 $980,406 ---------- --------- -------- Total net assets .................................... $5,365,289 $ 505,368 $980,406 ---------- --------- -------- Units outstanding ................................... 435,798 45,196 107,798 ---------- --------- -------- Unit value (accumulation) ........................... $ 12.31 $ 11.18 $ 9.09 ========== ========= ========
BRANDES FRONTIER TURNER CORE INTERNATIONAL CAPITAL GROWTH EQUITY APPRECIATION SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------- ------------- ------------ ASSETS Investment in shares of portfolios of: $ 362,393 $1,127,660 $459,976 Outside Trust, at value .............................. 10 29 15 Receivable from portfolio / JHLICO .................... ---------- ---------- -------- 362,403 1,127,689 459,991 Total assets .......................................... LIABILITIES ........................................... -- -- -- Payable to portfolio / JHLICO ......................... 11 29 15 Asset charges payable ................................. ---------- ---------- -------- 11 29 15 Total liabilities ..................................... ---------- ---------- -------- $ 362,392 $1,127,660 $459,976 ---------- ---------- -------- NET ASSETS: ........................................... $ 362,392 $1,127,660 $459,976 Accumulation units ................................... ---------- ---------- -------- $ 362,392 $1,127,660 $459,976 Total net assets .................................... ---------- ---------- -------- 21,047 71,396 21,343 Units outstanding ................................... ---------- ---------- -------- $ 17.22 $ 15.79 $ 21.55 Unit value (accumulation) .......................... ========== ========== ========
See accompanying notes. 199 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2001
CLIFTON LARGE CAP ENHANCED AGGRESSIVE FUNDAMENTAL US EQUITY GROWTH GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ---------- ------------ ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust I, at value ................. $ -- $1,524 $10,796 Outside Trust, at value ........................................ 28,059 -- -- Receivable from portfolio / JHLICO ............................... 1 -- 1 ------- ------ ------- Total assets ..................................................... 28,060 1,524 10,797 LIABILITIES Payable to portfolio / JHLICO .................................... -- -- -- Asset charges payable ............................................ 1 -- 1 ------- ------ ------- Total liabilities ................................................ 1 -- 1 ------- ------ ------- $28,059 $1,524 $10,796 ------- ------ ------- NET ASSETS: Accumulation units ............................................. $28,059 $1,524 $10,796 ------- ------ ------- Total net assets ............................................. $28,059 $1,524 $10,796 ------- ------ ------- Units outstanding ............................................ 2,738 221 1,558 ------- ------ ------- Unit value (accumulation) .................................... $ 10.25 $ 6.90 $ 6.93 ======= ====== =======
FIDELITY VIP FIDELITY VIP II AIM V.I. VALUE GROWTH CONTRAFUND SUBACCOUNT SUBACCOUNT SUBACCOUNT -------------- ------------ ----------------- ASSETS Investment in shares of portfolios of: Outside Trust, at value ........................................ $12,416 $ 671 $12,123 Receivable from portfolio / JHLICO ............................... 1 -- 1 ------- ----- ------- Total assets ..................................................... 12,417 671 12,124 LIABILITIES Payable to portfolio / JHLICO .................................... -- -- -- Asset charges payable ............................................ -- -- -- Total liabilities ................................................ 1 -- 1 ------- ----- ------- $12,416 $ 671 $12,123 ------- ----- ------- NET ASSETS: Accumulation units ............................................. $12,416 $ 671 $12,123 ------- ----- ------- Total net assets ............................................. $12,416 $ 671 $12,123 ------- ----- ------- Units outstanding ............................................ 1,695 91 1,443 ------- ----- ------- Unit value (accumulation) .................................... $ 7.33 $7.37 $ 8.40 ======= ===== =======
See accompanying notes. 200 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2001
MFS NEW DISCOVERY V.A. STRATEGIC SERIES INCOME HEALTH SCIENCES SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- -------------- ----------------- ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust, at value ................... $ -- $ -- $3,348 Declaration Trust .............................................. -- 144 -- Outside Trust, at value ........................................ 106,557 -- -- Receivable from portfolio / JHLICO ............................... 5 -- -- -------- ------ ------ Total assets ..................................................... 106,562 144 3,348 LIABILITIES Payable to portfolio / JHLICO .................................... -- -- -- Asset charges payable ............................................ 5 -- -- -------- ------ ------ Total liabilities ................................................ 5 -- -- -------- ------ ------ $106,557 $ 144 $3,348 -------- ------ ------ NET ASSETS: Accumulation units ............................................. $106,557 $ 144 $3,348 -------- ------ ------ Total net assets ............................................. $106,557 $ 144 $3,348 -------- ------ ------ Units outstanding ............................................ 11,273 14 343 -------- ------ ------ Unit value (accumulation) .................................... $ 9.45 $10.29 $ 9.76 ======== ====== ======
INTERNATIONAL LARGE/MID CAP SMALL CAP EQUITY VALUE VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------- ------------- ------------ ASSETS Investment in shares of portfolios of: John Hancock Variable Series Trust, at value ................... $1,032 $4,393,211 $31,149 Receivable from portfolio / JHLICO ............................... -- 1,711 1 ------ ---------- ------- Total assets ..................................................... 1,032 4,394,922 31,150 LIABILITIES Payable to portfolio / JHLICO .................................... -- 1,523 -- Asset charges payable ............................................ -- 188 2 ------ ---------- ------- Total liabilities ................................................ -- 1,711 2 ------ ---------- ------- $1,032 $4,393,211 $31,148 ------ ---------- ------- NET ASSETS: Accumulation units ............................................. $1,032 $4,393,211 $31,148 ------ ---------- ------- Total net assets ............................................. $1,032 $4,393,211 $31,148 ------ ---------- ------- Units outstanding ............................................ 123 322,043 2,980 ------ ---------- ------- Unit value (accumulation) .................................... $ 8.39 $ 13.64 $ 10.45 ====== ========== =======
See accompanying notes. 201 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2001
AIM V.I. MFS RESEARCH TEMPLETON GROWTH SERIES SERIES INTERNATIONAL SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------- ------------ --------------- ASSETS Investment in shares of portfolios of: Outside Trust, at value ........................................ $1,712 $1,754 $2,133 Receivable from portfolio / JHLICO ............................... -- -- -- ------ ------ ------ Total assets ..................................................... 1,712 $1,754 2,133 LIABILITIES Payable to portfolio / JHLICO .................................... -- -- -- Total liabilities ................................................ -- -- -- ------ ------ ------ $1,712 $1,754 $2,133 ------ ------ ------ NET ASSETS: Accumulation units ............................................. $1,712 $1,754 $2,133 ------ ------ ------ Total net assets ............................................. $1,712 $1,754 $2,133 ------ ------ ------ Units outstanding ............................................ 203 204 261 ------ ------ ------ Unit value (accumulation) .................................... $ 8.43 $ 8.60 $ 8.17 ====== ====== ======
See accompanying notes. 202 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001
LARGE CAP INTERNATIONAL GROWTH ACTIVE BOND EQUITY INDEX SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------ ----------- --------------- Investment income: Income: Dividends .................................................................. $ 75,058 $5,575,227 $ 92,540 Interest on policy loans ................................................... 224,030 840,444 32,013 ----------- ---------- ----------- Total investment income ........................................................ 299,088 6,415,671 124,553 Expenses: Mortality and expense risks .................................................. 237,021 492,587 35,964 ----------- ---------- ----------- Net investment income .......................................................... 62,067 5,923,084 88,589 Realized gains (losses) on investments: Realized loss on sale of portfolio shares .................................... (303,166) (578,863) (244,081) Realized gain distributions .................................................. -- -- 690 ----------- ---------- ----------- Realized losses ................................................................ (303,166) (578,863) (243,391) Change in unrealized appreciation (depreciation) during the period ............. (6,989,603) 1,577,966 (1,167,176) ----------- ---------- ----------- Net increase (decrease) in net assets resulting from operations ................ $(7,230,702) $6,922,187 $(1,321,978) =========== ========== ===========
SMALL CAP GLOBAL MID CAP GROWTH BALANCED GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ---------- -------------- Investment income: Income: Dividends .................................................................. $ -- $ 4,344 $ -- --------- -------- ----------- Total investment income ........................................................ -- 4,344 -- Expenses: Mortality and expense risks .................................................. 27,911 1,319 85,083 --------- -------- ----------- Net investment income (loss) ................................................... (27,911) 3,025 (85,083) Realized gains (losses) on investments: Realized loss on sale of portfolio shares .................................... (193,161) (18,478) (2,329,455) Realized gain distributions .................................................. -- -- -- --------- -------- ----------- Realized losses ................................................................ (193,161) (18,478) (2,329,455) Change in unrealized appreciation (depreciation) during the period ............. (449,625) 12,916 (4,249,250) --------- -------- ----------- Net decrease in net assets resulting from operations ........................... $(670,697) $ (2,537) $(6,663,788) ========= ======== ===========
See accompanying notes. 203 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2001
LARGE CAP MONEY SMALL/MID CAP VALUE MARKET GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ---------- ------------- Investment income: Income: Dividends .............................. $ 278,945 $ 797,762 $ -- Interest on policy loans ............... -- 169,029 -- --------- --------- --------- Total investment income .................. 278,945 966,791 -- Expenses: Mortality and expense risks ............. 108,117 132,202 34,942 --------- --------- --------- Net investment income (loss) ............. 170,828 834,589 (34,942) Realized gains (losses) on investments: Realized gain (loss) on sale of portfolio shares ....................... 69,861 -- (212,465) Realized gain distributions ............. 274,383 -- -- --------- --------- --------- Realized gains (losses) .................. 344,244 -- (212,465) Change in unrealized appreciation (depreciation) during the period ........ (277,488) -- 391,420 --------- --------- --------- Net increase in net assets resulting from operations ......................... $ 237,584 $ 834,589 $ 144,013 ========= ========= =========
REAL ESTATE GROWTH & EQUITY INCOME MANAGED SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------- ---------- ------------ Investment income: Income: Dividends ............................. $ 233,523 $ 1,000,312 $ 2,011,926 Interest on policy loans .............. 29,769 2,433,647 1,055,240 ----------- ------------ ------------ Total investment income ................. 263,292 3,433,959 3,067,166 Expenses: Mortality and expense risks ............. 33,541 1,065,963 624,031 ----------- ------------ ------------ Net investment income .................... 229,751 2,367,996 2,443,135 Realized gains (losses) on investments: Realized gain (loss) on sale of portfolio shares ....................... (234,535) 205,711 33,494 Realized gain distributions ............. 167,156 -- 495,279 ----------- ------------ ------------ Realized gains (losses) .................. (67,379) 205,711 528,773 Change in unrealized appreciation (depreciation) during the period ........ 128,322 (37,067,063) (5,276,809) ----------- ------------ ------------ Net increase (decrease) in net assets resulting from operations ........ $ 290,694 $(34,493,356) $ (2,304,901) =========== ============ ============
See accompanying notes. 204 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2001
SHORT-TERM SMALL CAP INTERNATIONAL BOND EQUITY OPPORTUNITIES SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ---------- ------------- Investment income: Income: Dividends .............................. $ 27,491 $ 2,669 $ 104,368 ---------- ---------- ----------- Total investment income .................. 27,491 2,669 104,368 Expenses: Mortality and expense risks ............. 3,039 21,562 78,353 ---------- ---------- ----------- Net investment income (loss) ............ 24,452 (18,893) 26,015 Realized gains (losses) on investments: Realized gain (loss) on sale of portfolio shares ....................... 8,797 (553,686) (2,366,905) Realized gain distributions ............. -- -- -- ---------- ---------- ----------- Realized gains (losses) .................. 8,797 (553,686) (2,366,905) Change in unrealized appreciation (depreciation) during the period ........ (2,372) 580,661 (510,586) ---------- ---------- ----------- Net increase (decrease) in net assets resulting from operations ............... $ 30,877 $ 8,082 $(2,851,476) ========== ========== ===========
EMERGING EQUITY INDEX GLOBAL BOND MARKETS SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------ ----------- ---------- Investment income: Income: Dividends .............................. $ 580,736 $ 39,052 $ 1,896 ----------- ---------- ---------- Total investment income .................. 580,736 39,052 1,896 Expenses: Mortality and expense risks ............. 288,749 6,664 4,801 ----------- ---------- ---------- Net investment income (loss) ............ 291,987 32,388 (2,905) Realized gains (losses) on investments: Realized loss on sale of portfolio shares ................................. (350,536) (4,928) (512,242) Realized gain distributions ............. 1,572,305 -- -- ----------- ---------- ---------- Realized gains (losses) ................. 1,221,769 (4,928) (512,242) Change in unrealized appreciation (depreciation) during the period ........ (8,084,684) (45,004) 454,961 ----------- ---------- ---------- Net decrease in net assets resulting from operations ......................... $(6,570,928) $ (17,544) $ (60,186) =========== ========== ==========
See accompanying notes. 205 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2001
SMALL/MID CAP HIGH YIELD BOND INDEX CORE BOND SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ------------- ---------- Investment income: Income: Dividends ............................... $ 146,628 $ 2,616 $ 62,648 --------- --------- --------- Total investment income ................... 146,628 2,616 62,648 Expenses: Mortality and expense risks .............. 14,407 3,013 4,178 --------- --------- --------- Net investment income (loss) ............. 132,221 (397) 58,470 Realized gains (losses) on investments: Realized gain (loss) on sale of portfolio shares ........................ 9,436 (3,169) (133,868) Realized gain distributions .............. 8,792 -- -- --------- --------- --------- Realized gains (losses) ................... 18,228 (3,169) (133,868) Change in unrealized appreciation (depreciation) during the period ......... (26,418) 25,735 132,879 --------- --------- --------- Net increase in net assets resulting from operations .......................... $ 124,031 $ 22,169 $ 57,481 ========= ========= =========
BRANDES FRONTIER TURNER CORE INTERNATIONAL CAPITAL GROWTH EQUITY APPRECIATION SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------- ------------- ------------ Investment income: Income: Dividends ............................... $ 420 $ 14,525 $ -- --------- --------- --------- Total investment income ................... 420 14,525 -- Expenses: Mortality and expense risks .............. 1,981 5,876 2,728 --------- --------- --------- Net investment income (loss) ............. (1,561) 8,649 (2,728) Realized gains (losses) on investments: Realized gain (loss) on sale of portfolio shares ........................ (91,201) 28,195 (54,796) Realized gain distributions .............. -- 43,702 4,602 --------- --------- --------- Realized gains (losses) .................. (91,201) 71,897 (50,194) Change in unrealized appreciation (depreciation) during the period ......... (12,342) (246,498) 52,457 --------- --------- --------- Net decrease in net assets resulting from operations ................ $(105,104) $(165,952) $ (465) ========= ========= =========
See accompanying notes. 206 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2001
CLIFTON LARGE CAP ENHANCED AGGRESSIVE FUNDAMENTAL US EQUITY GROWTH GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ---------- ------------- Investment income: Income: Dividends ......................................................... $ 1,266 $ -- $ -- ------- ------- ------- Total investment income ............................................. 1,266 -- -- Expenses: Mortality and expense risks ........................................ 149 11 62 ------- ------- ------- Net investment income (loss) ........................................ 1,117 (11) (62) Realized gains (losses) on investments: Realized loss on sale of portfolio shares .......................... (826) (68) (340) Realized gain distributions ........................................ -- -- -- ------- ------- ------- Realized losses ..................................................... (826) (68) (340) Change in unrealized depreciation during the period ................. (3,148) (216) (3,866) .................................................................... ------- ------- ------- Net decrease in net assets resulting from operations ................ $(2,857) $ (295) $(4,268) ======= ======= =======
AIM V.I. FIDELITY VIP FIDELITY VIP II VALUE GROWTH CONTRAFUND SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ------------ ---------------- Investment income: Income: Dividends ......................................................... $ 17 $ -- $ 41 ------- ------- ------- Total investment income ............................................. 17 -- 41 Expenses: Mortality and expense risks ........................................ 61 18 65 ------- ------- ------- Net investment loss ................................................. (44) (18) (24) Realized gains (losses) on investments: Realized loss on sale of portfolio shares .......................... (754) (1,717) (1,122) Realized gain distributions ........................................ 251 272 164 ------- ------- ------- Realized losses ..................................................... (503) (1,445) (958) Change in unrealized appreciation (depreciation) during the period .. (1,395) 469 (616) ------- ------- ------- Net decrease in net assets resulting from operations ................ $(1,942) $ (994) $(1,598) ======= ======= =======
See accompanying notes. 207 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2001
MFS NEW DISCOVERY V.A. STRATEGIC HEALTH SERIES INCOME SCIENCES SUBACCOUNT SUBACCOUNT* SUBACCOUNT* ---------- -------------- ------------- Investment income: Income: Dividends .......................................................... $ 3,157 $ 3 $ -- ------- ------- ------- Total investment income .............................................. 3,157 3 -- Expenses: Mortality and expense risks ......................................... 422 -- 3 ------- ------- ------- Net investment income (loss) ........................................ 2,735 3 (3) Realized gains (losses) on investments: Realized gain (loss) on sale of portfolio shares .................... (2,026) 1 (1) Realized gain distributions ......................................... 125 -- -- ------- ------- ------- Realized gains (losses) .............................................. (1,901) 1 (1) Change in unrealized appreciation (depreciation) during the period ... (743) 1 (22) ------- ------- ------- Net increase (decrease) in net assets resulting from operations ...... $ 91 $ 5 $ (26) ======= ======= =======
INTERNATIONAL LARGE/MID CAP SMALL CAP EQUITY VALUE VALUE SUBACCOUNT* SUBACCOUNT* SUBACCOUNT* ------------- ------------- ------------- Investment income: Income: Dividends ......................................................... $ -- $ 3,406 $ 91 ------- ------- ------- Total investment income ............................................. -- 3,406 91 Expenses: Mortality and expense risks ........................................ 1 1,049 33 ------- ------- ------- Net investment income (loss) ....................................... (1) 2,357 58 Realized gains (losses) on investments: Realized loss on sale of portfolio shares .......................... -- (5,237) (308) Realized gain distributions ........................................ -- -- 164 ------- ------- ------- Realized losses ..................................................... -- (5,237) (144) Change in unrealized appreciation (depreciation) during the period... 7 (4,848) 2,861 ------- ------- ------- Net increase (decrease) in net assets resulting from operations ..... $ 6 $(7,728) $ 2,775 ======= ======= =======
- --------- * From commencement of operations (refer to footnote d in notes to financial statements #6) See accompanying notes. 208 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2001
AIM V.I. MFS RESEARCH TEMPLETON GROWTH SERIES SERIES INTERNATIONAL SUBACCOUNT* SUBACCOUNT* SUBACCOUNT* ------------- ------------ --------------- Investment income: Income: Dividends ............................................... $ 4 $ -- $-- --- ---- --- Total investment income ................................... 4 -- -- Expenses: Mortality and expense risks .............................. 2 2 3 --- ---- --- Net investment income (loss) .............................. 2 (2) (3) Realized gains (losses) on investments: Realized gain on sale of portfolio shares ................ -- 1 1 --- ---- --- Realized gains ........................................... -- 1 1 Change in unrealized appreciation during the period ....... 68 114 83 --- ---- --- Net increase in net assets resulting from operations ...... $70 $113 $81 === ==== ===
- --------- * From commencement of operations (refer to footnote d in notes to financial statements #6) See accompanying notes. 209 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31,
LARGE CAP GROWTH SUBACCOUNT ------------------------------------------ 2001 2000 1999 ------------ ------------- ------------- Increase (decrease) in net assets from operations: Net investment income (loss) .................................................. $ 62,067 $ 6,287,826 $ 6,329,395 Realized gains (losses) ....................................................... (303,166) 1,809,410 1,146,308 Change in unrealized appreciation (depreciation) during the period ............ (6,989,603) (17,039,660) 320,087 ----------- ------------ ----------- Net increase (decrease) in net assets resulting from operations ................ (7,230,702) (8,942,424) 7,795,790 Policy transactions: Net premiums from policyholders ............................................... 14,342,571 16,225,070 10,950,682 Net transfers to policyholders for benefits and terminations .................. (6,740,426) (8,421,666) (5,776,293) Net transfers between subaccounts ............................................. (239,029) -- -- Net change in policy loans .................................................... 165,268 407,961 -- ----------- ------------ ----------- Net increase (decrease) in net assets resulting from policy transactions ....... 7,528,384 8,211,365 5,174,389 ----------- ------------ ----------- Total increase (decrease) in net assets ........................................ 297,682 (731,059) 12,970,179 Net assets at beginning of period .............................................. 43,297,378 44,028,437 31,058,258 ----------- ------------ ------------ Net assets at end of period .................................................... $43,595,060 $ 43,297,378 $44,028,437 =========== ============ ===========
ACTIVE BOND SUBACCOUNT ------------------------------------------- 2001 2000 1999 ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income (loss) .................................................. $ 5,923,084 $ 5,332,953 $ 5,481,982 Realized gains (losses) ....................................................... (578,863) (1,058,175) (388,883) Change in unrealized appreciation (depreciation) during the period ............ 1,577,966 3,862,398 (5,439,148) ------------ ------------ ----------- Net increase (decrease) in net assets resulting from operations ................ 6,922,187 8,137,176 (346,049) Policy transactions: Net premiums from policyholders ............................................... 15,445,246 26,218,788 11,668,600 Net transfers to policyholders for benefits and terminations .................. (10,820,630) (17,903,281) (7,543,864) Net change in policy loans .................................................... (691,455) 620,295 -- ------------ ------------ ----------- Net increase in net assets resulting from policy transactions .................. 3,933,161 8,935,802 4,124,736 ------------ ------------ ----------- Total increase in net assets ................................................... 10,855,348 17,072,978 3,778,687 Net assets at beginning of period .............................................. 97,962,560 80,889,582 77,110,895 ------------ ------------ ----------- Net assets at end of period .................................................... $108,817,908 $ 97,962,560 $80,889,582 ============ ============ ============
See accompanying notes. 210 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
INTERNATIONAL EQUITY INDEX SUBACCOUNT ---------------------------------------- 2001 2000 1999 ------------ ------------ ----------- Increase (decrease) in net assets from operations: Net investment income ........................................................ $ 88,589 $ 322,155 $ 200,569 Realized gains (losses) ...................................................... (243,391) 76,586 62,140 Change in unrealized appreciation (depreciation) during the period ........... (1,167,176) (1,706,468) 1,295,768 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations................ (1,321,978) (1,307,727) 1,558,477 Policy transactions: Net premiums from policyholders .............................................. 1,612,633 2,208,528 1,634,643 Net transfers to policyholders for benefits and terminations.................. (1,532,111) (1,307,479) (1,119,500) Net change in policy loans.................................................... 10,754 110,023 -- ----------- ----------- ----------- Net increase in net assets resulting from policy transactions ................. 91,276 1,011,072 515,143 ----------- ----------- ----------- Total increase (decrease) in net assets........................................ (1,230,702) (296,655) 2,073,620 Net assets at beginning of period.............................................. 6,884,339 7,180,994 5,107,374 ----------- ----------- ------------ Net assets at end of period.................................................... $ 5,653,637 $ 6,884,339 $ 7,180,994 =========== =========== ===========
SMALL CAP GROWTH SUBACCOUNT ---------------------------------------- 2001 2000 1999 ------------ ------------ ----------- Increase (decrease) in net assets from operations: Net investment income (loss) ................................................. $ (27,911) $ 581,967 $ 527,624 Realized gains (losses) ...................................................... (193,161) 159,388 48,210 Change in unrealized appreciation depreciation) during the period............. (449,625) (2,654,137) 1,125,829 ----------- ----------- ---------- Net increase (decrease) in net assets resulting from operations ............... (670,697) (1,912,782) 1,701,663 Policy transactions: Net premiums from policyholders............................................... 2,267,910 4,738,730 1,398,160 Net transfers to policyholders for benefits and terminations ................. (3,102,740) (956,063) (390,180) ----------- ----------- ---------- Net increase (decrease) in net assets resulting from policy transactions ................................................................. (834,830) 3,782,667 1,007,980 ----------- ----------- ---------- Total increase (decrease) in net assets ....................................... (1,505,527) 1,869,885 2,709,643 Net assets at beginning of period ............................................. 6,381,819 4,511,934 1,802,291 ----------- ----------- ---------- Net assets at end of period ................................................... $ 4,876,292 $ 6,381,819 $4,511,934 =========== =========== ==========
See accompanying notes. 211 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GLOBAL BALANCED SUBACCOUNT ------------------------------------------ 2001 2000 1999 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income ...................................................... $ 3,025 $ 7,198 $ 15,944 Realized gains (losses) .................................................... (18,478) (3,641) 1,061 Change in unrealized appreciation (depreciation) during the period ......... 12,916 (21,945) (8,559) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ............. (2,537) (18,388) 8,446 Policy transactions: Net premiums from policyholders ............................................ 3,159,097 75,380 115,573 Net transfers to policyholders for benefits and terminations ............... (82,211) (83,639) (133,983) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions .... 3,076,886 (8,259) (18,410) ----------- ----------- ----------- Total increase (decrease) in net assets ..................................... 3,074,349 (26,647) (9,964) Net assets at beginning of period ........................................... 173,721 200,368 210,332 ----------- ----------- ----------- Net assets at end of period ................................................. $ 3,248,070 $ 173,721 $ 200,368 =========== =========== ===========
MID CAP GROWTH SUBACCOUNT -------------------------------------------- 2001 2000 1999 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income (loss) ............................................... $ (85,083) $ 2,182,817 $ 1,338,175 Realized gains (losses) .................................................... (2,329,455) 1,892,763 420,826 Change in unrealized appreciation (depreciation) during the period ......... (4,249,250) (11,690,290) 4,283,452 ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ............. (6,663,788) (7,614,710) 6,042,453 Policy transactions: Net premiums from policyholders ............................................ 12,612,039 13,112,643 7,041,199 Net transfers to policyholders for benefits and terminations ............... (3,031,534) (4,430,561) (947,660) ------------ ------------ ------------ Net increase in net assets resulting from policy transactions ............... 9,580,505 8,682,082 6,093,539 ------------ ------------ ------------ Total increase in net assets ................................................ 2,916,717 1,067,372 12,135,992 Net assets at beginning of period ........................................... 14,676,946 13,609,574 1,473,582 ------------ ------------ ------------ Net assets at end of period ................................................. $ 17,593,633 $ 14,676,946 $ 13,609,574 ============ ============ ============
See accompanying notes. 212 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
LARGE CAP VALUE SUBACCOUNT --------------------------------------------- 2001 2000 1999 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income .................... $ 170,828 $ 693,327 $ 474,149 Realized gains (losses) .................. 344,244 (47,306) 123,242 Change in unrealized appreciation (depreciation) during the period ........ (277,488) 854,807 (499,454) ------------ ------------ ------------ Net increase in net assets resulting from operations ................ 237,584 1,500,828 97,937 Policy transactions: Net premiums from policyholders .......... 10,170,978 7,024,748 5,449,922 Net transfers to policyholders for benefits and terminations ............... (2,001,066) (1,798,175) (1,059,147) ------------ ------------ ------------ Net increase in net assets resulting from policy transactions ....... 8,169,912 5,226,573 4,390,775 ------------ ------------ ------------ Total increase in net assets .............. 8,407,496 6,727,401 4,488,712 Net assets at beginning of period ......... 14,990,188 8,268,787 3,774,075 ------------ ------------ ------------ Net assets at end of period ............... $ 23,397,684 $ 14,990,188 $ 8,262,787 ============ ============ ============
MONEY MARKET SUBACCOUNT ----------------------------------------------- 2001 2000 1999 ------------ ------------ ------------ Increase (decrease) in net assets from operations: Net investment income .................... $ 834,589 $ 1,290,563 $ 1,143,104 Realized gains (losses) .................. -- -- -- Change in unrealized appreciation (depreciation) during the period ....................... -- -- -- ------------ ------------ ------------ Net increase in net assets resulting from operations ................ 834,589 1,290,563 1,143,104 Policy transactions: Net premiums from policyholders .......... 22,170,735 26,609,851 16,733,655 Net transfers to policyholders for benefits and terminations ........... (26,886,651) (22,265,301) (46,642,184) Net change in policy loans ............... (5,337) 77,509 -- ------------ ------------ ------------ Net increase (decrease) in net assets resulting from policy transactions ............................. (4,721,253) 4,422,059 (29,908,529) ------------ ------------ ------------ Total increase (decrease) in net assets ................................... (3,886,664) 5,712,622 (28,765,425) Net assets at beginning of period ................................... 26,215,728 20,503,106 49,268,531 ------------ ------------ ------------ Net assets at end of period ............... $ 22,329,064 $ 26,215,728 $ 20,503,106 ============ ============ ============
See accompanying notes. 213 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
SMALL/MID CAP GROWTH SUBACCOUNT ----------------------------------------- 2001 2000 1999 ----------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income (loss) ............. $ (34,942) $ 570,559 $ 810,295 Realized gains (losses) .................. (212,465) (136,669) 16,952 Change in unrealized appreciation (depreciation) during the period ........ 391,420 (2,663) (590,295) ----------- ----------- ----------- Net increase in net assets resulting from operations ................ 144,013 431,227 236,952 Policy transactions: Net premiums from policyholders .......... 3,794,737 1,474,342 1,533,102 Net transfers to policyholders for benefits and terminations ............... (1,326,766) (1,536,191) (1,200,248) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions ............................. 2,467,971 (61,849) 332,854 ----------- ----------- ----------- Total increase in net assets .............. 2,611,984 369,378 569,806 Net assets at beginning of period ......... 5,855,422 5,486,044 4,916,238 ----------- ----------- ----------- Net assets at end of period ............... $ 8,467,406 $ 5,855,422 $ 5,486,044 =========== =========== ===========
REAL ESTATE EQUITY SUBACCOUNT ------------------------------------------ 2001 2000 1999 ----------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income ..................... $ 229,751 $ 465,264 $ 255,391 Realized losses ........................... (67,379) (159,205) (168,994) Change in unrealized appreciation (depreciation) during the period ......... 128,322 919,904 (220,380) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .......... 290,694 1,225,963 (133,983) Policy transactions: Net premiums from policyholders ........... 1,712,308 1,762,038 968,627 Net transfers to policyholders for benefits and terminations ................ (2,078,180) (1,130,179) (2,335,552) Net change in policy loans ................ (26,470) 114,851 -- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions .............................. (392,342) 746,710 (1,366,925) ----------- ----------- ----------- Total increase (decrease) in net assets .................................... (101,648) 1,972,673 (1,500,908) Net assets at beginning of period .......... 6,002,773 4,030,100 5,531,008 ----------- ----------- ----------- Net assets at end of period ................ $ 5,901,125 $ 6,002,773 $ 4,030,100 =========== =========== ===========
See accompanying notes. 214 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GROWTH & INCOME SUBACCOUNT ----------------------------------------------- 2001 2000 1999 ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income ..................... $ 2,367,996 $ 44,427,885 $ 35,556,691 Realized gains ............................ 205,711 18,300,286 5,502,422 Change in unrealized appreciation (depreciation) during the period ........................ (37,067,063) (96,829,044) 2,405,417 ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations ................................ (34,493,356) (34,100,873) 43,464,530 Policy transactions: Net premiums from policyholders ........... 25,738,713 31,462,247 34,593,082 Net transfers to policyholders for benefits and terminations ............ (29,810,655) (71,685,409) (34,650,911) Net change in policy loans ................ 1,375,781 1,310,472 -- ------------- ------------- ------------- Net decrease in net assets resulting from policy transactions .............................. (2,696,161) (38,912,690) (57,829) ------------- ------------- ------------- Total increase (decrease) in net assets .................................... (37,189,517) (73,013,563) 43,406,701 Net assets at beginning of period .................................... 267,486,534 340,500,097 297,093,396 ------------- ------------- ------------- Net assets at end of period ................ $ 230,297,017 $ 267,486,534 $ 340,500,097 ============= ============= =============
MANAGED SUBACCOUNT ----------------------------------------------- 2001 2000 1999 ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income ..................... $ 2,443,135 $ 11,092,640 $ 10,302,317 Realized gains ............................ 528,773 1,551,519 996,546 Change in unrealized depreciation during the period ........... (5,276,809) (12,278,637) (2,108,530) ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations ................................ (2,304,901) 365,522 9,190,333 Policy transactions: Net premiums from policyholders ........... 12,491,524 12,192,565 13,430,282 Net transfers to policyholders for benefits and terminations ............ (13,566,962) (19,842,234) (14,305,859) Net change in policy loans ................ (334,235) 630,955 -- ------------- ------------- ------------- Net decrease in net assets resulting from policy transactions .............................. (1,409,673) (7,018,714) (875,577) ------------- ------------- ------------- Total increase (decrease) in net assets .................................... (3,714,574) (6,653,192) 8,314,756 Net assets at beginning of period .................................... 112,476,227 119,129,419 110,814,663 ------------- ------------- ------------- Net assets at end of period ................ $ 108,761,653 $ 112,476,227 $ 119,129,419 ============= ============= =============
See accompanying notes. 215 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
SHORT-TERM BOND SUBACCOUNT ----------------------------------------- 2001 2000 1999 ----------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income ...................... $ 24,452 $ 15,494 $ 14,042 Realized gains (losses) .................... 8,797 (2,287) (8,638) Change in unrealized appreciation (depreciation) during the period .......... (2,372) 6,756 (2,442) ----------- ----------- ----------- Net increase in net assets resulting from operations ................................. 30,877 19,963 2,962 Policy transactions: Net premiums from policyholders ............ 814,841 167,135 109,732 Net transfers to policyholders for benefits and terminations ................. (148,073) (69,043) (370,270) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions ......... 666,768 98,092 (260,538) ----------- ----------- ----------- Total increase (decrease) in net assets ..... 697,645 118,055 (257,576) Net assets at beginning of period ........... 356,968 238,913 496,489 ----------- ----------- ----------- Net assets at end of period ................. $ 1,054,613 $ 356,968 $ 238,913 =========== =========== ===========
SMALL CAP EQUITY SUBACCOUNT ------------------------------------------- 2001 2000 1999 ----------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income (loss) ............. $ (18,893) $ 297,508 $ 61,905 Realized losses .......................... (553,686) (110,857) (33,134) Change in unrealized appreciation (depreciation) during the period ........ 580,661 (668,463) (148,401) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ......... 8,082 (481,812) (119,630) Policy transactions: Net premiums from policyholders .......... 2,680,094 1,608,648 1,483,922 Net transfers to policyholders for benefits and terminations ............... (2,188,533) (452,406) (447,402) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions ............................. (491,561) 1,156,242 1,036,520 ----------- ----------- ----------- Total increase in net assets .............. 499,643 674,430 916,890 Net assets at beginning of period ......... 4,141,822 3,467,392 2,550,502 ----------- ----------- ----------- Net assets at end of period ............... $ 4,641,465 $ 4,141,822 $ 3,467,392 =========== =========== ===========
See accompanying notes. 216 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
INTERNATIONAL OPPORTUNITIES SUBACCOUNT ------------------------------------------ 2001 2000 1999 ------------ ------------ -------------- Increase (decrease) in net assets from operations: Net investment income ..................... $ 26,015 $ 564,716 $ 223,214 Realized gains (losses) ................... (2,366,905) 348,813 155,412 Change in unrealized appreciation (depreciation) during the period ......... (510,586) (2,497,504) 387,412 ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations .......... (2,851,476) (1,583,975) 766,038 Policy transactions: Net premiums from policyholders ........... 9,239,568 9,284,275 2,354,681 Net transfers to policyholders for benefits and terminations ................ (5,328,329) (469,272) (3,673,500) ------------ ------------ ------------ Net increase (decrease) in net assets resulting from policy transactions .............................. 3,911,239 8,815,003 (1,318,819) ------------ ------------ ------------ Total increase (decrease) in net assets .................................... 1,059,763 7,231,028 (552,781) Net assets at beginning of period .......... 10,859,971 3,628,943 4,181,724 ------------ ------------ ------------ Net assets at end of period ................ $ 11,919,734 $ 10,859,971 $ 3,628,943 ============ ============ ============
EQUITY INDEX SUBACCOUNT ------------------------------------------ 2001 2000 1999 ------------ ------------ -------------- Increase (decrease) in net assets from operations: Net investment income ..................... $ 291,987 $ 2,141,880 $ 529,375 Realized gains ............................ 1,221,769 485,643 271,978 Change in unrealized appreciation (depreciation) during the period ......... (8,084,684) (8,035,375) 1,282,937 ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations .......... (6,570,928) (5,407,852) 2,084,290 Policy transactions: Net premiums from policyholders ........... 13,985,392 43,728,519 6,697,385 Net transfers to policyholders for benefits and terminations ................ (5,816,358) (2,630,030) (1,623,429) ------------ ------------ ------------ Net increase in net assets resulting from policy transactions ........ 8,169,034 41,098,489 5,073,956 ------------ ------------ ------------ Total increase in net assets ............... 1,598,106 35,690,637 7,158,246 Net assets at beginning of period .......... 50,096,716 14,406,079 7,247,833 ------------ ------------ ------------ Net assets at end of period ................ $ 51,694,822 $ 50,096,716 $ 14,406,079 ============ ============ ============
See accompanying notes. 217 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GLOBAL BOND SUBACCOUNT ------------------------------------------- 2001 2000 1999 ----------- ----------- ------------ Increase (decrease) in net assets from operations: Net investment income ................ $ 32,388 $ 57,408 $ 33,778 Realized losses ...................... (4,928) (14,302) (151) Change in unrealized appreciation (depreciation) during the period .... (45,004) 63,359 (52,953) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ............ (17,544) 106,465 (19,326) Policy transactions: Net premiums from policyholders ...... 352,334 396,099 696,619 Net transfers to policyholders for benefits and terminations ........... (677,332) (192,421) (317,999) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions ... (324,998) 203,678 378,620 ----------- ----------- ----------- Total increase (decrease) in net assets (342,542) 310,143 359,294 Net assets at beginning of period ..... 1,139,861 829,718 470,424 ----------- ----------- ----------- Net assets at end of period ........... $ 797,319 $ 1,139,861 $ 829,718 =========== =========== ===========
EMERGING MARKETS SUBACCOUNT ------------------------------------------- 2001 2000 1999 ----------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income (loss) ........... $ (2,905) $ 58,591 $ 15,170 Realized gains (losses) ................ (512,242) 19,902 1,838 Change in unrealized appreciation (depreciation) during the period ...... 454,961 (571,486) 92,713 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .............. (60,186) (492,993) 109,721 Policy transactions: Net premiums from policyholders ........ 801,949 1,133,676 336,277 Net transfers to policyholders for benefits and terminations ............. (590,080) (337,143) (8,915) ----------- ----------- ----------- Net increase in net assets resulting from policy transactions .................... 211,869 796,533 327,362 ----------- ----------- ----------- Total increase in net assets ............ 151,683 303,540 437,083 Net assets at beginning of period ....... 741,352 437,812 729 ----------- ----------- ----------- Net assets at end of period ............. $ 893,035 $ 741,352 $ 437,812 =========== =========== ===========
See accompanying notes. 218 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
BOND INDEX SUBACCOUNT ----------------------------------------- 2001 2000 1999 ----------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income .................... $ 132,221 $ 6,712 $ 2,701 Realized gains (losses) .................. 18,228 (607) (1,613) Change in unrealized appreciation (depreciation) during the period ........ (26,418) 6,100 (1,753) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ................ 124,031 12,205 (665) Policy transactions: Net premiums from policyholders .......... 5,105,113 196,240 80,921 Net transfers to policyholders for benefits and terminations ............... (129,767) (16,742) (20,596) ----------- ----------- ----------- Net increase in net assets resulting from policy transactions ...................... 4,975,346 179,498 60,325 ----------- ----------- ----------- Total increase (decrease) in net assets ... 5,099,377 191,703 59,660 Net assets at beginning of period ......... 265,912 74,209 14,549 ----------- ----------- ----------- Net assets at end of period ............... $ 5,365,289 $ 265,912 $ 74,209 =========== =========== ===========
SMALL/MID CAP CORE SUBACCOUNT ------------------------------------ 2001 2000 1999 ---------- --------- ---------- Increase (decrease) in net assets from operations: Net investment income (loss) ............ $ (397) $ 21,792 $ 6,364 Realized gains (losses) ................. (3,169) 1,505 1,093 Change in unrealized appreciation (depreciation) during the period ....... 25,735 (13,928) 4,719 --------- --------- --------- Net increase in net assets resulting from operations .............................. 22,169 9,369 12,176 Policy transactions: Net premiums from policyholders ......... 288,067 479,768 44,493 Net transfers to policyholders for benefits and terminations .............. (364,419) (6,951) (12,003) --------- --------- --------- Net increase (decrease) in net assets resulting from policy transactions ...... (76,352) 472,817 32,490 --------- --------- --------- Total increase (decrease) in net assets .. (54,183) 482,186 44,666 Net assets at beginning of period ........ 559,551 77,365 32,699 --------- --------- --------- Net assets at end of period .............. $ 505,368 $ 559,551 $ 77,365 ========= ========= =========
See accompanying notes. 219 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
HIGH YIELD BOND SUBACCOUNT -------------------------------------- 2001 2000 1999 ----------- ----------- ----------- Increase (decrease) in net assets from operations: Net investment income ...................................................... $ 58,470 $ 78,692 $ 2,791 Realized losses ............................................................ (133,868) (12,114) (396) Change in unrealized appreciation (depreciation) during the period ......... 132,879 (188,735) (1,172) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ............. 57,481 (122,157) 1,223 Policy transactions: Net premiums from policyholders ............................................ 906,532 1,514,684 69,375 Net transfers to policyholders for benefits and terminations ............... (1,363,474) (88,711) -- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions .... (456,942) 1,425,973 69,375 ----------- ----------- ----------- Total increase (decrease) in net assets ..................................... (399,461) 1,303,816 70,598 Net assets at beginning of period ........................................... 1,379,867 76,051 5,453 ----------- ----------- ----------- Net assets at end of period ................................................. $ 980,406 $ 1,379,867 $ 76,051 =========== =========== ===========
TUNER CORE GROWTH SUBACCOUNT ---------------------------------- 2001 2000 1999 ---------- ---------- ---------- Increase (decrease) in net assets from operations: Net investment income (loss) ............................................... $ (1,561) $ 50,617 $ 18,189 Realized gains (losses) .................................................... (91,201) 20,969 26,736 Change in unrealized appreciation (depreciation) during the period ......... (12,342) (120,040) 23,628 ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations ............. (105,104) (48,454) 68,553 Policy transactions: Net premiums from policyholders ............................................ 316,791 192,556 109,802 Net transfers to policyholders for benefits and terminations ............... (219,789) (31,415) (45,555) ---------- ---------- ---------- Net increase in net assets resulting from policy transactions ............... 97,002 161,141 64,247 ---------- ---------- ---------- Total increase (decrease) in net assets ..................................... (8,102) 112,687 132,800 Net assets at beginning of period ........................................... 370,494 257,807 125,007 ---------- ---------- ---------- Net assets at end of period ................................................. $ 362,392 $ 370,494 $ 257,807 ========== ========== ==========
See accompanying notes. 220 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
BRANDES INTERNATIONAL EQUITY SUBACCOUNT ---------------------------------------- 2001 2000 1999 ----------- ------------ ------------ Increase (decrease) in net assets from operations: Net investment income ..................................................... $ 8,649 $ 87,962 $ 14,188 Realized gains ............................................................ 71,897 13,902 11,526 Change in unrealized appreciation (depreciation) during the period ........ (246,498) (35,201) 122,734 ---------- ---------- ----------- Net increase (decrease) in net assets resulting from operations ............ (165,952) 66,663 148,448 Policy transactions: Net premiums from policyholders ........................................... 1,103,449 616,308 152,629 Net transfers to policyholders for benefits and terminations .............. (979,043) (39,267) (31,332) ---------- ---------- ----------- Net increase in net assets resulting from policy transactions .............. 124,406 577,041 121,297 ---------- ---------- ----------- Total increase (decrease) in net assets .................................... (41,546) 643,704 269,745 Net assets at beginning of period .......................................... 1,169,206 525,502 255,757 ---------- ---------- ----------- Net assets at end of period ................................................ $1,127,660 $1,169,206 $ 525,502 ========== ========== ===========
FRONTIER CAPITAL APPRECIATION SUBACCOUNT ---------------------------------------- 2001 2000 1999 ----------- ------------ ------------ Increase (decrease) in net assets from operations: Net investment income (loss) .............................................. $ (2,728) $ 130,136 $ 8,771 Realized gains (losses) ................................................... (50,194) 68,311 (59,550) Change in unrealized appreciation (depreciation) during the period ........ 52,457 (175,994) 89,369 ----------- ---------- ----------- Net increase (decrease) in net assets resulting from operations ............ (465) 22,453 38,590 Policy transactions: Net premiums from policyholders ........................................... 445,490 219,803 103,675 Net transfers to policyholders for benefits and terminations .............. (501,765) (179,523) (2,221,410) ----------- ---------- ----------- Net increase (decrease) in net assets resulting from policy transactions ... (56,275) 40,280 (2,117,735) ----------- ---------- ----------- Total increase (decrease) in net assets .................................... (56,740) 62,733 (2,079,145) Net assets at beginning of period .......................................... 516,716 453,983 2,533,128 ----------- ---------- ----------- Net assets at end of period ................................................ $ 459,976 $ 516,716 $ 453,983 =========== ========== ===========
See accompanying notes. 221 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
CLIFTON ENHANCED US EQUITY SUBACCOUNT -------------------------------------- 2001 2000 1999* ---------- ---------- ---------- Increase (decrease) in net assets from operations: Net investment income ....................................................... $ 1,117 $ 3,190 $ 1,374 Realized gains (losses) ..................................................... (826) 302 11 Change in unrealized appreciation (depreciation) during the period .......... (3,148) (5,562) 1,285 ------- ------- ------- Net increase (decrease) in net assets resulting from operations .............. (2,857) (2,070) 2,670 Policy transactions: Net premiums from policyholders ............................................. 10,070 16,541 15,505 Net transfers to policyholders for benefits and terminations ................ (2,449) (9,351) -- ------- ------- ------- Net increase in net assets resulting from policy transactions ................ 7,621 7,190 15,505 ------- ------- ------- Total increase in net assets ................................................. 4,764 5,120 18,175 Net assets at beginning of period ............................................ 23,295 18,175 -- ------- ------- ------- Net assets at end of period .................................................. $28,059 $23,295 $18,175 ======= ======= =======
LARGE CAP FUNDAMENTAL AGGRESSIVE GROWTH SUBACCOUNT GROWTH SUBACCOUNT ----------------------------- ---------------------- 2001 2000** 2001 2000** ------------- -------------- -------- ------------ Increase (decrease) in net assets from operations: Net investment income (loss) ............................................... $ (11) $ 30 $ (62) $ 1,351 Realized losses ............................................................ (68) (8) (340) (10) Change in unrealized depreciation during the period ........................ (216) (616) (3,866) (1,226) ------ ------ ------- ----------- Net increase (decrease) in net assets resulting from operations ............. (295) (594) (4,268) 115 Policy transactions: Net premiums from policyholders ............................................ 5 2,528 9,554 9,264,914 Net transfers to policyholders for benefits and terminations ............... (120) -- (7,743) (9,251,776) ------ ------ ------- ----------- Net increase (decrease) in net assets resulting from policy transactions .... (115) 2,528 1,811 13,138 ------ ------ ------- ----------- Total increase (decrease) in net assets ..................................... (410) 1,934 (2,457) 13,253 Net assets at beginning of period ........................................... 1,934 -- 13,253 -- ------ ------ ------- ----------- Net assets at end of period ................................................. $1,524 $1,934 $10,796 $ 13,253 ====== ====== ======= ===========
- --------- * From May 1, 1999 (commencement of operations). ** From April 24, 2000 (commencement of operations). See accompanying notes. 222 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
AIM V.I. VALUE FIDELITY VIP GROWTH SUBACCOUNT SUBACCOUNT ------------------ ----------------------- 2001 2000* 2001 2000* -------- -------- ---------- ----------- Increase (decrease) in net assets from operations: Net investment income (loss) ............................................... $ (44) $ 230 $ (18) $ (6) Realized losses ............................................................ (503) (11) (1,445) (7) Change in unrealized appreciation (depreciation) during the period ......... (1,395) (1,068) 469 (525) ------- ------- ------- ------ Net decrease in net assets resulting from operations ........................ (1,942) (849) (994) (538) Policy transactions: Net premiums from policyholders ............................................ 12,072 12,213 1,474 5,160 Net transfers to policyholders for benefits and terminations ............... (3,006) (6,072) (4,037) (394) ------- ------- ------- ------ Net increase (decrease) in net assets resulting from policy transactions .... 9,066 6,141 (2,563) 4,766 ------- ------- ------- ------ Total increase (decrease) in net assets ..................................... 7,124 5,292 (3,557) 4,228 Net assets at beginning of period ........................................... 5,292 -- 4,228 -- ------- ------- ------- ------ Net assets at end of period ................................................. $12,416 $ 5,292 $ 671 $4,228 ======= ======= ======= ======
FIDELITY VIP II CONTRAFUND SUBACCOUNT ----------- --------- 2001 2000* ----------- --------- Increase (decrease) in net assets from operations: Net investment loss ........................................................ $ (24) $ (12) Realized losses ............................................................ (958) (4) Change in unrealized depreciation during the period ........................ (616) (366) ------- ------- Net decrease in net assets resulting from operations ........................ (1,598) (382) Policy transactions: Net premiums from policyholders ............................................ 10,866 13,880 Net transfers to policyholders for benefits and terminations ............... (3,652) (6,991) ------- ------- Net increase in net assets resulting from policy transactions ............... 7,214 6,889 ------- ------- Total increase in net assets ................................................ 5,616 6,507 Net assets at beginning of period ........................................... 6,507 -- ------- ------- Net assets at end of period ................................................. $12,123 $ 6,507 ======= =======
- --------- * From April 24, 2000 (commencement of operations). See accompanying notes. 223 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
MFS NEW V.A. STRATEGIC DISCOVERY SERIES INCOME SUBACCOUNT SUBACCOUNT -------------------- ---------------- 2001 2000* 2001** --------- --------- ---------------- Increase (decrease) in net assets from operations: Net investment income (loss)......... $ 2,735 $ (19) $ 3 Realized gains (losses).............. (1,901) (7) 1 Change in unrealized appreciation (depreciation) during the period.... (743) 197 1 -------- -------- ------- Net increase in net assets resulting from operations...................... 91 171 5 Policy transactions: Net premiums from policyholders...... 102,334 37,394 2,513 Net transfers to policyholders for benefits and terminations........... (14,675) (18,758) (2,374) -------- -------- ------- Net increase in net assets resulting from policy transactions............. 87,659 18,636 139 -------- -------- ------- Total increase in net assets.......... 87,750 18,807 144 Net assets at beginning of period..... 18,807 -- -- -------- -------- ------- Net assets at end of period........... $106,557 $ 18,807 $ 144 ======== ======== =======
HEALTH INTERNATIONAL LARGE/MIDCAP SCIENCES EQUITY VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------- ------------- -------------- 2001** 2001** 2001** ---------- ------------- -------------- Increase (decrease) in net assets from operations: Net investment income (loss)....... $ (3) $ (1) $ 2,357 Realized losses.................... (1) -- (5,237) Change in unrealized appreciation (depreciation) during the period.. (22) 7 (4,848) ------ ------ ---------- Net increase (decrease) in net assets resulting from operations... (26) 6 (7,728) Policy transactions: Net premiums from policyholders.... 3,403 1,026 4,400,939 Net transfers to policyholders for benefits and terminations......... (29) -- -- ------ ------ ---------- Net increase in net assets resulting from policy transactions........... 3,374 1,026 4,400,939 ------ ------ ---------- Total increase in net assets........ 3,348 1,032 4,393,211 Net assets at beginning of period... -- -- -- ------ ------ ---------- Net assets at end of period......... $3,348 $1,032 $4,393,211 ====== ====== ==========
- --------- * From April 24, 2000 (commencement of operations). ** From commencement of operations (refer to footnote d in notes to financial statements #6) See accompanying notes. 224 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS AND PERIODS ENDED DECEMBER 31,
SMALL CAP AIM V.I. MFS TEMPLETON VALUE GROWTH SERIES RESEARCH INTERNATIONAL SUBACCOUNT SUBACCOUNT SERIES SUBACCOUNT ---------- ------------- ---------- --------------- 2001* 2001* 2001* 2001* ---------- ------------- ---------- --------------- Increase (decrease) in net assets from operations: Net investment income (loss)............... $ 58 $ 2 $ (2) $ (3) Realized gains (losses)............. (144) -- 1 1 Change in unrealized appreciation during the period........... 2,861 68 114 83 ------- ------ ------ ------ Net increase in net assets resulting from operations............ 2,775 70 113 81 Policy transactions: Net premiums from policyholders........ 34,295 1,655 1,655 2,069 Net transfers to policyholders for benefits and terminations......... (5,922) (13) (14) (17) ------- ------ ------ ------ Net increase in net assets resulting from policy transactions... 28,373 1,642 1,641 2,052 ------- ------ ------ ------ Total increase in net assets................ 31,148 1,712 1,754 2,133 Net assets at beginning of period............. -- -- -- -- ------- ------ ------ ------ Net assets at end of period................ $31,148 $1,712 $1,754 $2,133 ======= ====== ====== ======
- --------- * From commencement of operations (refer to footnote d in notes to financial statements #6) See accompanying notes. 225 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 1. ORGANIZATION John Hancock Variable Life Account UV (the Account) is a separate investment account of John Hancock Insurance Company (JHLICO), a wholly-owned subsidiary of John Hancock Insurance Company (John Hancock). The Account was formed to fund variable life insurance policies (Policies) issued by JHLICO. Currently, the Account funds the UV VLI Class #1, UV VLI Class #2, UV MVL Class #3, UV Flex Class #4, UV Flex II Class #5, UV VEP Class #7, UV VEP Class #8, UV VEP Class #9, NY MEVL3 Class #13, NY MVUL98 Class #14, NY VCOLI1 Class #15, NY VCOLI2 Class #16, and NY VCOLI3 Class #17 Policies. The Account is operated as a unit investment trust registered under the Investment Company Act of 1940, as amended, and currently consists of thirty-nine subaccounts. The assets of each subaccount are invested exclusively in shares of a corresponding Portfolio of John Hancock Variable Series Trust I (the Trust), John Hancock Declaration Trust (Declaration Trust) or of other Outside Investment Trusts (Outside Trust). New subaccounts may be added as new Portfolios are added to the Trust, Declaration Trust, or to the Outside Trust, or as other investment options are developed and made available to policyholders. The thirty-nine Portfolios of the Trust, Declaration Trust, and the Outside Trust which are currently available are the Large Cap Growth, Active Bond, International Equity Index, Small Cap Growth, Global Balanced, Mid Cap Growth, Large Cap Value, Money Market, Small/Mid Cap Growth, Real Estate Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Equity, International Opportunities, Equity Index, Global Bond, Emerging Markets (formerly Emerging Markets Equity), Bond Index, Small/Mid Cap CORE, High Yield Bond, Turner Core Growth, Brandes International Equity, Frontier Capital Appreciation, Clifton Enhanced US Equity, Large Cap Aggressive Growth, Fundamental Growth, AIM V.I. Value, Fidelity VIP Growth, Fidelity VIP Contrafund, MFS New Discovery Series, V.A. Strategic Income, Health Sciences, International Equity, Large/ Mid Cap Value, Small Cap Value (formerly Small/Mid Cap Value), AIM V.I. Growth Series, MFS Research Series, and Templeton International II Portfolios. Each portfolio has a different investment objective. The net assets of the Account may not be less than the amount required under state insurance law to provide for death benefits (without regard to the minimum death benefit guarantee) and other policy benefits. Additional assets are held in JHLICO's general account to cover the contingency that the guaranteed minimum death benefit might exceed the death benefit which would have been payable in the absence of such guarantee. The assets of the Account are the property of JHLICO. The portion of the Account's assets applicable to the policies may not be charged with liabilities arising out of any other business JHLICO may conduct. 2. SIGNIFICANT ACCOUNTING POLICIES ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. VALUATION OF INVESTMENTS Investment in shares of the Trust, Declaration Trust and of the Outside Trust are valued at the reported net asset values of the respective Funds. Investment transactions are recorded on the trade date. Dividend income is recognized on the ex-dividend date. Realized gains and losses on sales of respective Fund shares are determined on the basis of identified cost. 226 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FEDERAL INCOME TAXES The operations of the Account are included in the federal income tax return of JHLICO, which is taxed as a life insurance company under the Internal Revenue Code. JHLICO has the right to charge the Account any federal income taxes, or provision for federal income taxes, attributable to the operations of the Account or to the Contracts funded in the Account. Currently, JHLICO does not make a charge for income or other taxes. Charges for state and local taxes, if any, attributable to the Account may also be made. EXPENSES JHLICO assumes mortality and expense risks of the variable life insurance policies for which asset charges are deducted at various rates ranging from .50% to .625%, depending on the type of policy, of net assets (excluding policy loans) of the Account. Additionally, a monthly charge at varying levels for the cost of extra insurance is deducted from the net assets of the Account. JHLICO makes certain deductions for administrative expenses and state premium taxes from premium payments before amounts are transferred to the Account. AMOUNTS RECEIVABLE/PAYABLE Receivables/Payables to/from portfolios/JHLICO are due to unsettled policy transactions (net of asset-based charges) and/or subsequent/preceding purchases/sales of the respective Portfolios' shares. The amounts are due to/ from either the respective portfolio and/or John Hancock Life Insurance Company for the benefit of policyholders. 3. TRANSACTION WITH AFFILIATES John Hancock acts as the distributor, principal underwriter and investment advisor for the Trust. Certain officers of the Account are officers and directors of JHLICO or the Trust. 4. NEW AUDIT GUIDE Effective January 1, 2001, the Account adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies (the Guide), as revised, effective for fiscal years beginning after December 15, 2001. The adoption of the Guide did not impact the total net assets of the subaccounts for fiscal year 2001. Certain disclosures in the financial statements of the Account have changed as a result of the adoption of the Guide. The financial statement presentation of the account for the years prior to 2001 have not been restated. 227 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. DETAILS OF INVESTMENTS The details of the shares owned, cost and value of investments in the Subaccounts of the Trust, Declaration Trust and of the Outside Trust at December 31, 2001 were as follows:
SHARES SUBACCOUNT OWNED COST VALUE - ------------------------------------------- ---------- ------------ -------------- Large Cap Growth........................... 2,623,627 $ 57,185,452 $ 40,778,508 Active Bond................................ 10,175,029 97,694,098 97,207,604 International Equity Index................. 432,725 6,967,156 5,224,610 Small Cap Growth........................... 414,200 6,562,618 4,876,292 Global Balanced............................ 379,126 3,256,776 3,248,070 Mid Cap Growth............................. 1,788,114 28,987,247 17,593,663 Large Cap Value............................ 1,653,036 23,170,864 23,397,684 Money Market............................... 20,091,408 20,091,408 20,091,408 Small/Mid Cap Growth....................... 600,897 8,631,789 8,467,406 Real Estate Equity......................... 407,874 5,396,915 5,525,379 Growth & Income............................ 16,569,601 265,476,417 197,711,222 Managed.................................... 7,248,546 102,582,559 94,814,008 Short Term Bond............................ 104,302 1,057,065 1,054,613 Small Cap Equity Portfolio................. 527,967 4,993,102 4,641,466 International Opportunities................ 1,281,466 14,273,081 11,919,734 Equity Index............................... 3,480,909 65,793,278 51,694,821 Global Bond................................ 81,878 826,341 797,319 Emerging Markets........................... 138,705 916,897 893,036 Bond Index................................. 542,637 5,387,511 5,365,289 Small/Mid Cap CORE......................... 51,482 486,954 505,368 High Yield Bond............................ 143,544 1,037,452 980,405 Turner Core Growth......................... 27,044 441,220 362,393 Brandes International Equity............... 91,161 1,280,573 1,127,660 Frontier Capital Appreciation.............. 27,169 461,198 459,976 Clifton Enhanced US Equity................. 2,069 35,484 28,059 Large Cap Aggressive Growth................ 188 2,356 1,524 Fundamental Growth......................... 1,273 15,888 10,796 AIM V.I. Value............................. 5,532 14,880 12,416 Fidelity VIP Growth........................ 20 727 671 Fidelity VIP II Contrafund................. 604 13,106 12,123 MFS New Discovery Series................... 6,978 107,103 106,557 V.A. Strategic Income...................... 16 143 144 Health Sciences Fund....................... 341 3,370 3,348 International Equity....................... 137 1,025 1,032 Large/Mid Cap Value........................ 411,986 4,398,059 4,393,211 Small Cap Value............................ 2,264 28,288 31,149 AIM V.I. Growth Series..................... 105 1,644 1,712 MFS Research Series........................ 122 1,640 1,754 Templeton International.................... 182 2,050 2,133
228 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. DETAILS OF INVESTMENTS (CONTINUED) Purchases, including reinvestment of dividend distributions, and proceeds from sales of shares in the Subaccounts of the Trust, Declaration Trust and of the Outside Trust during 2001 were as follows:
SUBACCOUNT PURCHASES SALES ---------- ----------- ----- Large Cap Growth ................................... $10,804,464 $ 3,042,541 Active Bond ........................................ 16,609,722 7,469,708 International Equity Index ......................... 1,185,789 993,377 Small Cap Growth ................................... 1,648,903 2,511,644 Global Balanced .................................... 3,149,776 69,865 Mid Cap Growth ..................................... 12,345,246 2,849,824 Large Cap Value .................................... 9,841,981 1,226,858 Money Market ....................................... 15,460,482 19,348,199 Small/Mid Cap Growth ............................... 3,467,498 1,034,469 Real Estate Equity ................................. 1,668,166 1,690,773 Growth & Income .................................... 13,637,246 12,552,806 Managed ............................................ 8,042,371 6,853,899 Short Term Bond .................................... 1,003,940 312,720 Small Cap Equity ................................... 2,687,802 2,215,133 International Opportunities ........................ 8,249,954 4,312,700 Equity Index ....................................... 14,738,704 4,705,379 Global Bond ........................................ 350,575 643,185 Emerging Markets ................................... 752,255 543,290 Bond Index ......................................... 5,382,722 266,363 Small/Mid Cap CORE ................................. 540,923 617,672 High Yield Bond .................................... 1,143,455 1,541,928 Turner Core Growth ................................. 316,156 220,714 Brandes International Equity ....................... 1,072,801 896,044 Frontier Capital Appreciation ...................... 482,709 537,110 Clifton Enhanced US Equity ......................... 11,334 2,596 Large Cap Aggressive Growth ........................ -- 126 Fundamental Growth ................................. 2,150 401 AIM V.I. Value ..................................... 10,887 1,614 Fidelity VIP Growth ................................ 1,088 3,397 Fidelity VIP II Contrafund ......................... 11,048 3,694 MFS New Discovery Series ........................... 97,625 7,106 V.A. Strategic Income .............................. 242 100 Health Sciences Fund ............................... 3,402 31 International Equity ............................... 1,034 9 Large/Mid Cap Value ................................ 4,503,258 99,962 Small Cap Value .................................... 34,680 6,084 AIM V.I. Growth Series ............................. 1,659 15 MFS Research Series ................................ 1,655 16 Templeton International ............................ 2,068 19
229 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. UNIT VALUES A summary of unit values and units outstanding for variable life contracts and the expense and the investment income ratios, excluding expenses of the underlying Portfolios were as follows:
AT DECEMBER 31, 2001 FOR THE YEAR OR PERIODS ENDED DECEMBER 31, 2001 ----------------------------------- --------------------------------------------------------- TOTAL UNIT FAIR RETURN*** UNITS VALUE LOWEST ASSETS EXPENSE RATIO INVESTMENT LOWEST TO SUBACCOUNT (000S) TO HIGHEST (000S) LOWEST TO HIGHEST INCOME RATIO** HIGHEST ---------- ------ ------------ ------ ----------------- -------------- ---------- Large Cap Growth 627 $14.90 to $58.93 $ 43,595 0.05% to 0.625% 0.98% (18.04)% to 49.00%/e/ Active Bond 1,941 13.84 to 66.70 108,818 0.05 to 0.625 7.87 6.80 to 38.40/e/ International Equity Index 221 10.19 to 19.15 5,654 0.05 to 0.625 2.70 (20.79) to 1.90/e/ Small Cap Growth 330 14.70 to 16.83 4,876 0.05 to 0.625 --/c/ (13.12) to 68.30 Global Balanced 291 10.88 to 11.56 3,248 0.60 to 0.625 0.57 (7.08) to (6.99) Mid Cap Growth 1,234 14.20 to 16.04 17,594 0.05 to 0.625 --/c/ (37.33) to 60.40/e/ Large Cap Value 1,282 15.89 to 18.90 23,398 0.05 to 0.625 1.83 0.66 to 58.90/e/ Money Market 684 12.56 to 34.50 22,329 0.05 to 0.625 5.38 3.29 to 25.60/e/ Small/Mid Cap Growth 388 14.38 to 23.01 8,467 0.05 to 0.625 --/c/ 2.00 to 121.80/e/ Real Estate Equity 133 13.29 to 32.43 5,901 0.05 to 0.625 5.72 5.07 to 32.90/e/ Growth & Income 1,818 13.99 to 137.76 230,297 0.05 to 0.625 1.94 (16.00) to 39.90/e/ Managed 1,273 14.88 to 45.24 108,762 0.60 to 0.625 3.72 (3.47) to (3.41) Short Term Bond 70 13.29 to 15.68 1,055 0.05 to 0.625 5.62 (11.57) to 32.90/e/ Small Cap Equity 436 10.30 to 11.04 4,641 0.05 to 0.625 0.09 (4.40) to 3.00/e/ International Opportunities 1,104 10.52 to 11.18 11,920 0.05 to 0.625 1.07 (21.41) to 5.20/e/ Equity Index 2,838 15.82 to 18.87 51,695 0.05 to 0.625 1.52 (12.54) to 58.20/e/ Global Bond 60 12.73 to 13.63 797 0.05 to 0.625 4.57 (2.07) to 27.30/e/ Emerging Markets 122 7.29 to 7.46 893 0.05 to 0.625 0.31 (26.20) to (4.07)/e/ Bond Index 436 12.30 to 12.58 5,365 0.60 to 0.625 6.46 6.86 to 7.22 Small/Mid Cap CORE 45 11.19 to 11.44 505 0.60 to 0.625 0.71 (0.36) to 0.09 High Yield Bond 108 9.08 to 9.29 980 0.50 to 0.625 10.50 (8.00) to 1.68/e/ Turner Core Growth 21 16.67 to 19.69 362 0.50 to 0.625 0.14 (24.04) to 66.70/e/ Brandes International Equity 71 15.28 to 16.10 1,128 0.50 to 0.625 1.55 (13.33) to 61.00/e/ Frontier Capital Appreciation 21 19.76 to 24.69 460 0.50 to 0.625 (2.09) to 97.60/e/ Clifton Enhanced US Equity 3 10.25 to 13.83 28 0.60 (13.50) Large Cap Aggressive Growth --/a/ 6.71 to 8.33 2 0.625 --/c/ (15.34) Fundamental Growth 2 6.12 to 10.16 11 0.625 --/c/ (32.72) AIM V.I. Value 2 7.13 to 29.72 12 0.525 to 0.625 0.19 (13.17) to (12.95) Fidelity VIP Growth --/a/ 7.12 to 71.07 1 0.625 --/c/ (18.22) Fidelity VIP II Contrafund 1 8.26 to 27.72 12 0.575 to 0.625 0.43 (13.06) to (12.86) MFS New Discovery Series 11 9.12 to 16.49 107 0.575 to 0.625 5.14 (5.69) to (5.59) V.A. Strategic Income --/a/ 10.33 to 13.79 --/b/ 0.625 3.11/d/ 3.30/f/ Health Sciences Fund --/a/ 9.77 to 9.81 3 0.625 --/c/ (2.30)/f/ International Equity --/a/ 8.03 to 8.43 1 0.625 --/c/ (16.00)/f/ Large/Mid Cap Value 322 9.40 to 16.44 4,393 0.50 to 0.625 0.30/d/ (6.00) to 64.40/f/ Small Cap Value 3 10.44 to 16.79 31 0.50 to 0.625 0.97/d/ 4.40 to 4.80/f/ AIM V.I. Growth Series --/a/ 8.44 to 20.77 2 0.625 0.34/d/ (15.60)/f/ MFS Research Series --/a/ 8.61 to 18.67 2 0.625 --/c/ (14.10)/f/ Templeton International --/a/ 8.17 to 8.19 2 0.60 --/c/ (18.30)/f/
230 JOHN HANCOCK VARIABLE LIFE ACCOUNT UV NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. UNIT VALUES (CONTINUED) * These ratios represent the annualized contract expenses of the variable account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying portfolios are excluded. ** These amounts represent the dividends and other income received by the subaccount 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 result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying portfolio in which the subaccounts invest. *** These amounts represent the total return for the periods indicated, including changes in the value of the underlying portfolio, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the commencement date through the end of the reporting period. a. Total accumulation units not greater than 500 units. b. Total assets not greater than $500. c. Portfolio distributed no dividends during the year. d. From May 1, 2001 (commencement of operations). Investment Income Ratio is annualized. e. From July 20, 2001 (inception of investment option). $10.00 initial offering price. f. From May 1, 2001 (inception of investment option). $10.00 initial offering price. 231 ALPHABETICAL INDEX OF KEY WORDS AND PHRASES This index should help you locate more information about many of the important concepts in this prospectus. Key Word or Phrase Page Account ................................................ 32 account value .......................................... 8 Additional Sum Insured ................................. 16 asset-based risk charge ................................ 9 attained age ........................................... 10 Basic Sum Insured ...................................... 16 beneficiary ............................................ 43 business day ........................................... 33 changing Option A or B ................................. 17 changing the Total Sum Insured ......................... 17 charges ................................................ 9 Code ................................................... 39 cost of insurance rates ................................ 10 date of issue .......................................... 34 death benefit .......................................... 5 deductions ............................................. 9 enhanced cash value rider .............................. 17 expenses of the Series Funds ........................... 10 fixed investment option ................................ 33 full surrender ......................................... 14 fund ................................................... 2 grace period ........................................... 7 guaranteed minimum death benefit ....................... 7 Guaranteed Minimum Death Benefit Premium ............................................... 7 insurance charge ....................................... 10 insured person ......................................... 5 investment options ..................................... 1 John Hancock ........................................... 32 lapse .................................................. 7 loan ................................................... 15 loan interest .......................................... 15 maximum premiums ....................................... 6 Minimum Initial Premium ................................ 33 minimum insurance amount ............................... 16 minimum premiums ....................................... 5 modified endowment contract ............................ 19 monthly deduction date ................................. 34 Option A; Option B ..................................... 16 owner .................................................. 5 partial withdrawal ..................................... 14 partial withdrawal charge .............................. 10 payment options ........................................ 18 Planned Premium ........................................ 6 policy anniversary ..................................... 34 policy year ............................................ 34 premium; premium payment ............................... 5 prospectus ............................................. 3 receive; receipt ....................................... 20 reinstate; reinstatement ............................... 7 sales charge ........................................... 9 SEC .................................................... 2 Separate Account UV .................................... 28 Series Funds ........................................... 2 Servicing Office ....................................... 2 special loan account ................................... 15 subaccount ............................................. 32 surrender .............................................. 5 surrender value ........................................ 14 Target Premium ......................................... 9 tax considerations ..................................... 39 telephone transfers .................................... 21 Total Sum Insured ...................................... 16 transfers of account value ............................. 13 variable investment options ............................ 1 we; us ................................................. 32 withdrawal ............................................. 14 withdrawal charges ..................................... 10 you; your .............................................. 5 232 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the John Hancock Life Insurance Company has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, and attested, all in the City of Boston and Commonwealth of Massachusetts on the 23rd day of September, 2002. On behalf of the Registrant, JOHN HANCOCK LIFE INSURANCE COMPANY (Depositor) By: /s/ DAVID F. D'ALESSANDRO ---------------------------------- David F. D'Alessandro Chairman, President and Chief Executive Officer Attest: /s/ RONALD J. BOCAGE ---------------------------- Ronald J. Bocage Vice President and Counsel Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities with John Hancock Life Insurance Company and on the dates indicated. /s/ THOMAS E. MOLONEY September 23, 2002 - ------------------------------------ Thomas E. Moloney Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer and Acting Principal Accounting Officer) /s/ DAVID F. D'ALESSANDRO September 23, 2002 - --------------------------- David F. D'Alessandro Chairman, President and Chief Executive Officer (Principal Executive Officer) Signing for himself and as Attorney-In-Fact for: Foster L. Aborn Director Wayne A. Budd Director John M. Connors, Jr. Director John M. DeCiccio Director Richard B. DeWolfe Director Robert E. Fast Director Thomas P. Glynn Director Michael C. Hawley Director Edward H. Linde Director Judith A. McHale Director R. Robert Popeo Director Richard F. Syron Director Robert J. Tarr, Jr. Director EX-99.1.A(6)(B) 3 dex991a6b.txt ARTICLES OF AMENDMENT FEDERAL IDENTIFICATION NO. 04-1414660 THE COMMONWEALTH OF MASSACHUSETTS William Francis Galvin Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 ARTICLES OF AMENDMENT (General Laws, Chapter 156B, Section 72) We, David F. D'Alessandro , President and ----------------------------------------------------------- Barry J. Rubenstein , Secretary - --------------------------------------------------------------- of John Hancock Life Insurance Company ----------------------------------------------------------------------------- (Exact name of corporation) located at 200 Clarendon Street, Boston, Massachusetts 02117, ------------------------------------------------- (Street address of corporation in Massachusetts) certify that these Articles of Amendment affecting articles numbered: Articles 3 and 6 - -------------------------------------------------------------------------------- (Number those articles 1, 2, 3, 4, 5 and/or 6 being amended) of the Articles of Organization were duly adopted (***) by vote of: 1,000 shares of common of 1,000 shares outstanding, - ----- ------------------------- ----------- _____ shares of ________________________ of ___________ shares outstanding, and _____ shares of ________________________ of ___________ shares outstanding. /1/ being at least a majority of each type, class or series outstanding and entitled to vote thereon:/ or /2**/ being at least two-thirds of each type, class or series outstanding and entitled to vote thereon and of each type, class or series of stock whose rights are adversely affected thereby: (***) - by unanimous written consent of sole shareholder on March 13, 2000. - --------------------- *Delete the inapplicable words **Delete the inapplicable clause. /1/ For amendments adopted pursuant to Chapter 156B, Section 70. /2/ For amendments adopted pursuant to Chapter 156B, Section 71. Note: If the space provided under any article or item on this form is insufficient, additions shall be set forth on one side only of separate 8 1/2 x 11 sheets of paper with a left margin of at least 1 inch. Additions to more than one article may be made on a single sheet so long as each article requiring each addition is clearly indicated. To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following: The total presently authorized is:
- --------------------------------------------------------------------------------------------- WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - --------------------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - --------------------------------------------------------------------------------------------- Common: XXX Common: 1,000 $ 0.01 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- Preferred: XXX Preferred: XXX XXX - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- Change the total authorized to: - --------------------------------------------------------------------------------------------- WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - --------------------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - --------------------------------------------------------------------------------------------- Common: XXX Common: 1,000 $10,000 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- Preferred: XXX Preferred: XXX XXX - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
SEE ATTACHED The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Law, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date. Later effective date: _________________________________ SIGNED UNDER THE PENALTIES OF PERJURY, this 13th day of March, 2000. __________________________________________, President/*Vice President, __________________________________________, *Clerk/*Assistant Clerk. Article VI Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: (a) No contract or other transaction or this corporation with any other person, corporation, association, or partnership shall be affected or invalidated by the fact that (i) this corporation is a stockholder or partner in, or affiliated of, such other corporation, association, or partnership, or (ii) any one or more of the officers or directors of this corporation is an officer, director or partner of such other corporation, association or partnership, or (iii) any officer or director of this corporation, individually or jointly with others, is a party to or is interested in such contract or transaction. Any director of this corporation may be counted in determining the existence of a quorum at any meeting of the board of directors for the purpose of authorizing or ratifying any such contract or transaction, and may vote thereon, with like force and effect as if he or she where not so interested or were not an officer, director, or partner of such other corporation, association, or partnership. (b) The corporation may be a partner in any business enterprise which it would have power to conduct itself. (c) The corporation may carry on any business, operation or activity through a wholly or partly owned subsidiary (d) The by-laws may provide that the directors may make, amend, or repeal the by-laws in whole or in part, except with respect to any provision thereof which by-law, these articles of organization, or the by-laws requires action by the stockholders. (e) Meetings of the stockholders may be held anywhere in the United States. (f) Except as otherwise provided by law, no stockholder shall have any right to examine any property or any books, accounts or other writings of the corporation if there is reasonable ground for belief that such examination will, for any reason, be adverse to the interests of the corporation, and a vote of the board of directors refusing permission to make such examination and setting forth that in the opinion of the board of directors such examination would be adverse to the interests of the corporation shall be prima-facie evidence that such examination would be adverse to the interests of the corporation. Every such examination shall be subject to such reasonable regulations as the board of directors may establish in regard thereto. (g) The board of directors may specify the manner in which the accounts of the corporation shall be kept and may determine what constitutes net earnings, profits and surplus, what amounts, if any, shall be reserved for any corporate purpose, and what amounts, if any shall be declared as dividends. Unless the board of directors otherwise specifies, the excess of the consideration for any share of its capital stock with par value issued by it over such par value shall be surplus. All surplus shall be available for any corporate purpose, including the payment of dividends. (h) The purchase or other acquisition or retention by the corporation of shares of its own capital stock shall not be deemed a reduction of its capital stock. Upon any reduction of capital or capital stock, no stockholder shall have any right to demand any distribution from the corporation, except as and to the extent that the stockholders shall have provided at the time of authorizing such reduction. (i) The corporation shall have all powers granted to corporations by the law of the Commonwealth of Massachusetts, provided that no such power shall include any activity inconsistent with the Business Corporation Law or the general laws of said Commonwealth. THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF AMENDMENT (General Laws, Chapter 156B, Section 72) I hereby approve the within Articles of Amendment and, the filing fee in the amount of $10,099 having been paid, said articles are deemed to have been filed with me this 13th day of April, 2000. Effective date: __________________________________________ /s/ WILLIAM FRANCIS GALVIN WILLIAM FRANCIS GALVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION Photocopy of document to be sent to: Emanuel Alves, Esq. -------------------------------------------------- John Hancock Life Insurance Company -------------------------------------------------- 200 Clarendon Street, Boston, Massachusetts 02117 -------------------------------------------------- Telephone: (617) -------------------------------------------------- EX-99.3 4 dex993.txt OPINION AND CONSENT OF COUNSEL Exhibit 3 [JOHN HANCOCK LOGO] John Hancock Life Insurance Company Law Sector John Hancock Place Post Office Box 111 Boston, Massachusetts 02117-0111 Ronald J. Bocage Vice President and Counsel September 23, 2002 Board of Directors John Hancock Life Insurance Company Re: John Hancock Life Insurance Company Registration Statement on Form S-6 ----------------------------------------------------------------------- Dear Directors: In my capacity as Counsel of John Hancock Life Insurance Company (the "Company"), I have represented the Company in connection with its development of certain life products of a type which contemplates variable benefits. I have participated in the preparation of the Registration Statement on Form S-6 filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended, for the registration of interests in flexible premium variable life contracts to be issued by the Company (the "Registration Statement"). I have reviewed the Articles and By-laws of the Company and such corporate records and other documents and such laws as I consider necessary and appropriate as a basis for the opinion hereinafter expressed. Based on my review of such documents and laws, I am of the following opinion: the Company is a corporation duly organized and validly existing under the laws of the Commonwealth of Massachusetts and the interests in the flexible premium variable life contracts, when issued as contemplated in the Registration Statement, will be legal and binding obligations of the Company in accordance with the terms of the aforesaid contracts. I hereby consent to the filing of my opinion as an exhibit to the Registration Statement. I do not admit that I am in the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ RONALD J. BOCAGE --------------------------------- Ronald J. Bocage, Esq. Vice President and Counsel EX-99.6 5 dex996.txt OPINION AND CONSENT OF ACTUARY Exhibit 6 M Products and Marketing [JOHN HANCOCK LOGO] John Hancock Life Insurance Company John Hancock Place Post Office Box 111 Boston, Massachusetts 02117 Deborah A. Poppel, F.S.A. Second Vice President and Actuary September 23, 2002 Board of Directors of the John Hancock Life Insurance Company Re: Actuarial Opinion Members of the Board: This opinion is furnished in connection with the filing of the Amendment to the Registration Statement on Form S-6 in which this opinion is being filed as an exhibit, pursuant to the Securities Act of 1933, as amended, with respect to variable life insurance policies under which amounts will be allocated to one or more of the subaccounts of one or more variable life insurance separate accounts. The policies described in the prospectus in said Amendment. The policy form was reviewed under my direction, and I am familiar with the amended Registration Statement and exhibits. In my opinion, the illustrations of policy benefits, values, and accumulated premiums shown in the prospectus (or appendix thereto) included in the Amendment, based on the assumptions stated with the illustrations, are consistent with the provisions of the policies. Such assumptions, including, to the extent applicable, the current cost of insurance rates, current scheduled rates of other charges, current dividend scales, and any other currently scheduled credits, are reasonable. The policies have not been designed so as to make the relationship between premiums and benefits, as shown in the illustrations, appear disproportionately more favorable to a prospective purchaser of a policy for an insured person(s) with the characteristics illustrated than to a prospective purchaser of a policy for an insured person(s) with other characteristics; nor have the particular examples set forth in the illustrations been selected for the purpose of making this relationship appear more favorable. I hereby consent to the filing of this opinion as an exhibit to the amended Registration Statement and to the use of my name under the heading "Experts" or "Accounting and Actuarial Experts" in the prospectus. /s/ DEBORAH A. POPPEL ------------------------------------- Deborah A. Poppel, FSA Second Vice President and Actuary EX-99.7 6 dex997.txt CONSENT OF INDEPENDENT AUDITORS Exhibit 7 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the references to our firm under the captions "Accounting and actuarial experts" and "Financial statements of John Hancock and the Account" in the Prospectus and to the use of our report dated February 8, 2002, with respect to the financial statements of John Hancock Variable Life Insurance Account UV and our report dated March 1, 2002, with respect to the financial statements of John Hancock Life Insurance Company, included in this Pre-Effective Amendment No. 1 to the Registration Statement (Form S-6, No. 333-91448). /s/ ERNST & YOUNG LLP Boston, Massachusetts September 20, 2002 -----END PRIVACY-ENHANCED MESSAGE-----