As filed with the Securities and Exchange Commission on December 21, 2001
Registration No. 333-70734
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________________________________________________________________________________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-6
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
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JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
(Exact name of trust)
JOHN HANCOCK LIFE INSURANCE COMPANY
(Name of depositor)
JOHN HANCOCK PLACE
INSURANCE & SEPARATE ACCOUNTS DEPT.-LAW SECTOR
BOSTON, MASSACHUSETTS 02117
(Complete address of depositor's principal executive offices)
--------------------
RONALD J. BOCAGE, ESQ.
INSURANCE & SEPARATE ACCOUNTS DEPT.-LAW SECTOR
JOHN HANCOCK LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
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Copy to:
THOMAS C. LAUERMAN, ESQ.
Foley & Lardner
3000 K Street, N.W.
Washington, D.C. 20007
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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 Registration 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.
Prospectus Dated January __, 2002
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MEDALLION VARIABLE UNIVERSAL LIFE PLUS
--------------------------------------
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.
Growth & Income. . . . . . . . . . . . . . . . . . . . . . Independence Investment LLC and Putnam Investment
Management, LLC
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.
Large/Mid Cap Value. . . . . . . . . . . . . . . . . . . . Wellington Management Company, LLP
Fundamental Growth . . . . . . . . . . . . . . . . . . . . Putnam Investment Management, LLC
Mid Cap Growth . . . . . . . . . . . . . . . . . . . . . . Janus Capital Corporation
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, Inc.
V.A. Relative Value. . . . . . . . . . . . . . . . . . . . John Hancock Advisers, Inc.
AIM V.I. Value . . . . . . . . . . . . . . . . . . . . . . A I M Advisors, Inc.
AIM V.I. Growth. . . . . . . . . . . . . . . . . . . . . . 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.
International Equity . . . . . . . . . . . . . . . . . . . Goldman Sachs Asset Management
Emerging Markets Equity. . . . . . . . . . . . . . . . . . Morgan Stanley Investment Management Inc.
Janus Aspen Worldwide Growth . . . . . . . . . . . . . . . Janus Capital Corporation
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, Inc.
Janus Aspen Global Technology. . . . . . . . . . . . . . . Janus Capital Corporation
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, Inc.
V.A. Strategic Income. . . . . . . . . . . . . . . . . . . John Hancock Advisers, Inc.
High Yield Bond. . . . . . . . . . . . . . . . . . . . . . Wellington Management Company, LLP
Global Bond. . . . . . . . . . . . . . . . . . . . . . . . Capital Guardian Trust Company
Money Market . . . . . . . . . . . . . . . . . . . . . . . Wellington Management Company, LLP
- -----------------------------------------------------------------------------------------------------------------------------
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), and
the Janus Aspen Series (Service Shares Class) (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
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Express Delivery U.S. Mail
---------------- ---------
529 Main Street (X-4) P.O. Box 111
Charlestown, MA 02129 Boston, MA 02117
Phone: 1-800-732-5543
Fax: 1-617-886-3048
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:
o The section which follows is called "Basic Information". It contains
basic information about the policy in a question and answer format.
You should read the Basic Information before reading any other section
of the prospectus.
o Behind the Basic Information section are illustrations of hypothetical
policy benefits that help clarify how the policy works. These start on
page 25.
o Behind the illustrations is a section called "Additional Information."
This section gives more details about the policy. It generally does
not repeat information contained in the Basic Information section. A
---
table of contents for the Additional Information section appears on
page 32.
o Behind the Additional Information section are the financial statements
for us and for the Separate Account that we use for this policy. These
start on page 46.
o Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 187.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the prospectuses for the Series Funds begin.
3
BASIC INFORMATION
This "Basic Information" section provides answers to commonly asked
questions about the policy. Here are the page numbers where the questions and
answers appear:
Question Beginning on page
- -------- -----------------
o What is the policy?....................................... 5
o Who owns the policy?...................................... 5
o How can you invest money in the policy?................... 5
o Is there a minimum amount you must invest?................ 6
o How will the value of your investment in the policy
change over time?......................................... 8
o What charges will we deduct from your investment in the
policy?................................................... 9
o What charges will the Series Fund deduct from your
investment in the policy?................................. 11
o What other charges can we impose in the future?........... 14
o How can you change your policy's investment allocations?.. 14
o How can you access your investment in the policy?......... 16
o How much will we pay when the insured person dies?........ 17
o Can you add additional benefit riders?.................... 19
o How can you change your policy's insurance coverage?...... 19
o Can you cancel your policy after it's issued?............. 20
o Can you choose the form in which we pay out policy
proceeds?................................................. 21
o To what extent can we vary the terms and conditions of
the policies in particular cases?......................... 22
o How will your policy be treated for income tax purposes?.. 22
o How do you communicate with us?........................... 23
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. If the life insurance
protection is provided under a master group policy, the term "policy" as used in
this prospectus refers to the certificate you will be issued and not to the
master group policy. 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:
o Determine when and how much you invest in the various investment
options
o Borrow or withdraw amounts you have in the investment options
o Change the beneficiary who will receive the death benefit
o Change the amount of insurance
o Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
o 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.
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. More discussion of these tax law requirements begins on page 40. Also,
we may refuse to accept any amount of an additional premium if:
o that amount of premium would increase our insurance risk exposure, and
o 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 death benefit feature from terminating.
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:
o by wire or by exchange from another insurance company,
o via an electronic funds transfer program (any owner interested in
making monthly premium payments must use this method), or
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o 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. You
will also choose how often to pay premiums-- annually, semi-annually, quarterly
or monthly. The premium reminder notice we send you is based on the amount and
period you choose. However, payment of Planned Premiums is not necessarily
required. You need only invest enough to keep the policy in force (see
"Guaranteed death benefit feature" on page 7 and "Lapse and reinstatement" on
page 8).
6
Guaranteed death benefit feature
This feature guarantees that your Basic Sum Insured will not terminate
(i.e., "lapse"), regardless of adverse investment performance, if on each "grace
period testing date" the amount of cumulative premiums you have paid (less all
withdrawals from the policy and all outstanding loans) equals or exceeds the sum
of all Guaranteed Death Benefit Premium ("GDB Premium") due to date. If the
Guaranteed Death Benefit test is not satisfied on any grace period testing date,
the guaranteed death benefit feature will not be "in effect" on that date. We
currently test on a quarterly basis, but reserve the right to test on each
monthly deduction date. (The term "monthly deduction date" is defined on page 35
under "Procedures for issuance of a policy".)
Your policy will show two types of GDB Premium (or such other types as
permitted by your state):
o Age 65/10 Year GDB Premium - is used on each testing date until the
policy anniversary nearest the insured person's 65th birthday (or, if
longer, until the 10th policy anniversary). The GDB premium that is
"due" during this period is equal to the Age 65/10 Year GDB Premium
times the number of elapsed policy months on a testing date.
o Age 100 GDB Premium - is used on each testing date that occurs on and
after the policy anniversary nearest the insured person's 65th
birthday (or on and after the 10th policy anniversary) until the
policy anniversary nearest the insured person's 100th birthday. The
GDB premium that is "due" during this period is equal to the number of
elapsed policy months on the testing date, measured from the Date of
Issue, times the Age 100 GDB Premium.
The Age 100 GDB Premium is higher than the Age 65/10 Year GDB Premium, but
neither will ever be greater than the so-called "guideline premium" for the
policy as defined in Section 7702 of the Internal Revenue Code.
The guaranteed death benefit feature applies only to the Basic Sum Insured
in effect when we issue the policy. It does not apply to any amount of
Additional Sum Insured and it will not be in effect if you increase the Basic
Sum Insured (see "How much will we pay when the insured person dies?" on page
17). The amount of the Basic Sum Insured that is guaranteed will be reduced to
the extent that we pay it to you under a living care or life-time care
additional benefit rider while the insured is living (see "Can you add
additional benefit riders?" on page 19). 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.
If an insufficient amount of GDB premium has been paid on a grace period
testing date, and your policy would lapse for failure to pay charges then due,
we will provide you with a notification as descibed in the next section, "Lapse
and reinstatement".
7
Lapse and reinstatement
Either your entire policy or the Additional Sum Insured portion of your
Total Sum Insured can lapse for failure to pay charges due under the policy. If
the guaranteed death benefit feature is in effect, the Additional Sum Insured
and any additional benefit riders (unless otherwise stated therein) will lapse
if the policy's surrender value is not sufficient to pay the charges on a grace
period testing date. If the guaranteed death benefit feature is not in effect,
the entire policy will lapse if the policy's surrender value is not sufficient
to pay the charges on a grace period testing date. In either case, we will
notify you of how much you will need to pay to keep the Additional Sum Insured
or the policy in force. You will have a 61 day "grace period" to make these
payments. If you pay these amounts during the grace period, you may also
continue the Guaranteed Death Benefit feature by paying the GDB Premium
described in your policy.
If you don't pay at least the required amount by the end of the grace
period, the Additional Sum Insured and any additional benefit riders (unless
otherwise stated therein) 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 3 years 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 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 a grace period, you cannot make a partial
withdrawal or policy loan.
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 we deduct from your investment
in the policy?" on page 9.
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. The current declared rate will also appear in the annual
statement we will send you. Amounts you invest in the fixed investment option
will not be subject to the asset-based risk charge described on page 10.
Otherwise, the charges
8
applicable to the fixed investment option are the same as those applicable to
the variable investment options.
At any time, the "account value" of your policy is equal to:
o the amount you invested,
o plus or minus the investment experience of the investment options
you've chosen,
o minus all charges we deduct, and
o 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 37.
What charges will we deduct from your investment in the policy?
Deductions from premium payments
o Premium tax charge - A charge to cover state premium taxes we currently
------------------
expect to pay, on average. This charge is currently 2.35% of each premium.
o DAC tax charge - A charge to cover the increased Federal income tax burden
--------------
that we currently expect will result from receipt of premiums. This charge
is currently 1.25% of each premium.
o Premium sales charge - A charge to help defray our sales costs. The charge
--------------------
is 4% of a certain portion of the premium you pay. The portion of each
year's premium that is subject to the charge is called the "Target
Premium". It's determined at the time the policy is issued and will appear
in the "Policy Specifications" section of the policy. We currently waive
one half of this charge for policies with a Total Sum Insured (excluding
any Premium Cost Recovery Benefit) of $250,000 or higher, but continuation
of that waiver is not guaranteed. Also, we currently intend to stop making
this charge on premiums received after the 10th policy year, but this is
not guaranteed either. Because policies of this type were first offered for
sale on May 1, 2000, no termination of this charge has yet occurred.
Deductions from account value
o Issue charge - A monthly charge to help defray our administrative costs.
------------
This is a flat dollar charge of $20 and is deducted only during the first
policy year.
o Maintenance charge - A monthly charge to help defray our administrative
------------------
costs. This is a flat dollar charge of up to $8 (currently $6).
o 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 and
the ratio of Basic Sum
9
Insured to Additional Sum Insured on the date we issue your policy. 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.) We currently apply three "bands" of insurance rates,
based on a policy's Total Sum Insured (excluding any Premium Cost Recovery
Benefit) on the date of issue, but continuation of that practice is not
guaranteed. The lowest band of rates is for policies of $1 million or more,
next lower for policies between $250,000 to $999,999, and the highest band
is for policies between $100,000 to $249,999. The insurance charge for
death benefit Option B will tend to be higher than the insurance charge for
death benefit Option A (see "How much will we pay when the insured person
dies?" on page 17).
o 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.
o 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 .050%
for policy years 1 - 10, .035% for policy year 11, decreasing by .001% each
year thereafter through policy year 28, and .017% for policy year 29 and
each policy year thereafter. These percentages equate to effective annual
rates of .60% for policy years 1 - 10, .40% for policy year 11, grading
down to .20% for policy years 29 and thereafter. The reductions after
policy year 10 have not occurred yet under any policy, since no policy has
been outstanding for 10 years. We guarantee that this charge will never
exceed .075% of that portion of your account value allocated to variable
investment options. This percentage equates to an effective annual rate of
.90%. This charge does not apply to the fixed investment option.
o Optional benefits charge - Monthly charges for certain optional insurance
------------------------
benefits added to the policy by means of a rider. Some of the riders we
currently offer are described under "Can you add additional benefit
riders?" on page 19.
o ASI reduction charge - A charge we deduct if you decrease the Additional
--------------------
Sum Insured during the first 9 policy years. A table in your policy will
state the maximum rate for the charge per $1,000 of Additional Sum Insured
surrendered, based on the insured person's issue age, insurance risk
characteristics and (usually) gender. The rates are shown in the policy and
generally range from less than $1 per $1,000 for issue age 40 or less, and
increase for issue ages thereafter, to over $10 per $1,000 for issue ages
after 70. We do not deduct this charge if the Additional Sum Insured is
reduced because of a withdrawal of surrender value or surrender of the
policy.
10
o Contingent deferred sales charge ("CDSC") - A charge we deduct if the
-----------------------------------------
policy lapses or is surrendered within the first 10 policy years. We deduct
this charge to compensate us for sales expenses that we would otherwise not
recover in the event of early lapse or surrender. The charge is a
percentage of the premiums we received in the first policy year that do not
exceed the first year Target Premium, as shown in the following table:
Policy Year(s) Percentage of First Year Target Premium
-------------- ---------------------------------------
1-5 100%
6 80%
7 70%
8 60%
9 40%
10 20%
11 and later 0%
The above table applies only if the insured person is less than attained
age 45 at issue. For older issue ages, the maximum is reached earlier and
the percentage may decrease to zero in fewer than 10 policy years.
Regardless of issue age, there is a further limitation on the CDSC that can
be charged if surrender or lapse occurs in the second policy year. A
pro-rata portion of the CDSC may also be charged in the case of withdrawals
that reduce Basic Sum Insured (see "Partial withdrawals" on page 16) and
requested reductions in Basic Sum Insured (see "Decrease in coverage" on
page 20). The pro-rata charge is calculated by dividing the reduction in
Basic Sum Insured by the Basic Sum Insured immediately prior to the
reduction and then multiplying the applicable CDSC by that ratio.
o 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 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 2000, except as
11
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 0.06% 0.19% 0.19%
Growth & Income. . . . . . . . . . . . 0.68% N/A 0.08% 0.76% 0.76%
Large Cap Value. . . . . . . . . . . . 0.75% N/A 0.05% 0.80% 0.80%
Large Cap Value CORE /SM/ . . . . . . 0.75% N/A 0.10% 0.85% 1.09%
Large Cap Growth . . . . . . . . . . . 0.36% N/A 0.10% 0.46% 0.46%
Large Cap Aggressive Growth. . . . . . 0.90% N/A 0.10% 1.00% 1.05%
Large/Mid Cap Value. . . . . . . . . . 0.95% N/A 0.10% 1.05% 1.36%
Fundamental Growth*. . . . . . . . . . 0.90% N/A 0.10% 1.00% 1.04%
Mid Cap Growth . . . . . . . . . . . . 0.92% N/A 0.04% 0.96% 0.96%
Small/Mid Cap CORE /SM/ . . . . . . . 0.80% N/A 0.10% 0.90% 1.23%
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% 1.03%
Small Cap Value* . . . . . . . . . . . 0.95% N/A 0.10% 1.05% 1.29%
Small Cap Growth . . . . . . . . . . . 1.05% N/A 0.07% 1.12% 1.12%
International Equity Index . . . . . . 0.18% N/A 0.10% 0.28% 0.37%
International Opportunities. . . . . . 1.13% N/A 0.10% 1.23% 1.39%
International Equity . . . . . . . . . 1.20% N/A 0.10% 1.30% 1.96%
Emerging Markets Equity. . . . . . . . 1.50% N/A 0.10% 1.60% 2.77%
Real Estate Equity . . . . . . . . . . 1.01% N/A 0.09% 1.10% 1.10%
Health Sciences. . . . . . . . . . . . 1.00% N/A 0.10% 1.10% 1.10%
Managed. . . . . . . . . . . . . . . . 0.66% N/A 0.09% 0.75% 0.75%
Global Balanced. . . . . . . . . . . . 1.05% N/A 0.10% 1.15% 1.44%
Short-Term Bond. . . . . . . . . . . . 0.60% N/A 0.06% 0.66% 0.66%
Bond Index . . . . . . . . . . . . . . 0.15% N/A 0.10% 0.25% 0.27%
Active Bond. . . . . . . . . . . . . . 0.62% N/A 0.10% 0.72% 0.74%
High Yield Bond. . . . . . . . . . . . 0.80% N/A 0.10% 0.90% 1.02%
Global Bond. . . . . . . . . . . . . . 0.85% N/A 0.10% 0.95% 1.05%
Money Market . . . . . . . . . . . . . 0.25% N/A 0.04% 0.29% 0.29%
John Hancock Declaration Trust
(Note 2):
V.A. Relative Value. . . . . . . . . . 0.60% N/A 0.19% 0.79% 0.79%
V.A. Financial Industries. . . . . . . 0.80% N/A 0.10% 0.90% 0.90%
V.A. Strategic Income. . . . . . . . . 0.60% N/A 0.16% 0.76% 0.76%
AIM Variable Insurance Funds:
AIM V.I. Value . . . . . . . . . . . . 0.61% N/A 0.23% 0.84% 0.84%
AIM V.I. Growth. . . . . . . . . . . . 0.61% N/A 0.22% 0.83% 0.83%
Variable Insurance Products Fund -
Service Class (Note 3):
Fidelity VIP Growth. . . . . . . . . . 0.57% 0.10% 0.09% 0.76% 0.76%
Variable Insurance Products Fund II -
Service Class (Note 3):
Fidelity VIP Contrafund(R) . . . . . . 0.57% 0.10% 0.09% 0.76% 0.76%
--------------
12
--------------
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
- --------- ---------- ---------------- --------------- -------------- ------------------
MFS Variable Insurance Trust - Initial
Class Shares (Note 4):
MFS Investors Growth Stock*. . . . . . 0.75% 0.00% 0.16% 0.91% 0.92%
MFS Research . . . . . . . . . . . . . 0.75% 0.00% 0.10% 0.85% 0.85%
MFS New Discovery. . . . . . . . . . . 0.90% 0.00% 0.16% 1.06% 1.09%
Janus Aspen Series - Service Shares
Class (Note 5):
Janus Aspen Worldwide Growth . . . . . 0.65% 0.25% 0.05% 0.95% 0.95%
Janus Aspen Global Technology. . . . . 0.65% 0.25% 0.04% 0.94% 0.94%
--------------
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. Percentages shown for the
Health Sciences Fund are estimates because the fund was not in
operation in 2000. Percentages shown for the Growth & Income,
Fundamental Growth, Small Cap Equity, Real Estate Equity, Managed,
Global Balanced, Active Bond and Global Bond funds are calculated as
if the current management fee schedules (which became effective as to
these funds on November 1, 2000) were in effect for all of 2000.
Percentages shown for the Small Cap Value and Large Cap Value funds
are calculated as if the current management fee schedules (which
became effective as to these funds on May 1, 2001) were in effect for
all of 2000. Percentages shown for the Mid Cap Growth, Small/Mid Cap
Growth, Small Cap Growth, International Opportunities, International
Equity, Emerging Markets Equity, Short-Term Bond and High Yield Bond
funds are calculated as if the current management fee schedules (which
became effective as to these funds on October 1, 2001) were in effect
for all of 2000. "CORE/SM/" is a service mark of Goldman, Sachs & Co.
* Fundamental Growth was formerly "Fundamental Mid Cap Growth," Small
Cap Equity was formerly "Small Cap Value," and Small Cap Value was
formerly "Small/Mid Cap Value."
(2) Percentages shown for John Hancock Declaration Trust funds reflect the
investment management fees currently payable and other fund expenses
allocated in 2000. John Hancock Advisers, Inc. 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, 2002.
(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 expenses,
and/or because through arrangements with the fund's custodian, credits
realized as a result of uninvested cash balances were used to reduce a
portion of the fund's expenses. See the accomanying prospectus of the
fund for details.
(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 such 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
13
Expenses with Reimbursement would equal 0.90% for MFS Investors Growth
Stock, 0.84% 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 Investors Growth Stock and
New Discovery funds, such that the funds' "Other Expenses" (after
taking into account the expense offset arrangement describe above) do
not exceed 0.15% for Investors Growth Stock and 0.15% for New
Discovery of the average daily net assets during the current fiscal
year.
* MFS Investors Growth Stock was formerly "MFS Growth."
(5) Percentages shown forJanus Aspen funds are based upon expenses for the
fiscal year ended December 31, 2000, restated to reflect a reduction
in the management fee for the Worldwide Growth fund. Expenses are
shown without the effect of any expense offset arrangement.
What other charges could we impose in the future?
Except for the premium and DAC tax charges, we currently make no charge for
our Federal income taxes. However, if we incur, or expect to incur, 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.
We also reserve the right to increase the premium tax charge and the DAC
tax charge in order to correspond, respectively, with changes in the state
premium tax levels or in the Federal income tax treatment of the deferred
acquisition costs for this type of policy.
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 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 number and frequency
14
of transfers into or out of variable investment options and to impose a charge
of up to $25 for any transfer beyond an annual limit (which will not be less
than 12). Transfers under the dollar cost averaging program or the asset
rebalancing program would not be counted toward any such limit.
Transfers out of the fixed investment option are currently subject to the
following restrictions:
o You can only make such a transfer once in each policy year.
o The most you can transfer at any one time is the greater of $500 or
20% of the assets in your fixed investment option.
We reserve the right to impose limits on:
o the minimum amount of each transfer out of the fixed investment
option; and
o the maximum amount of any transfer into the fixed investment option
after the second policy year.
Dollar cost averaging
This is a program of automatic monthly transfers out of the Money Market
investment option into one or more of the other variable investment options. You
choose the investment options and the dollar amount and timing of the transfers.
The program is designed to reduce the risks that result from market
fluctuations. It does this by spreading out the allocation of your money to
investment options over a longer period of time. This allows you to reduce the
risk of investing most of your money at a time when market prices are high.
Obviously, the success of this strategy depends on market trends and is not
guaranteed.
Asset Rebalancing
This is a program that automatically re-sets the percentage of your account
value allocated to the variable investment options. Over time, the variations in
the investment results for each variable investment option you've elected will
shift the percentage allocations among them. The rebalancing program will
periodically transfer your account value among the variable investment options
to reestablish the preset percentages you have chosen. Rebalancing would usually
result in transferring amounts from a variable investment option with relatively
higher investment performance since the last rebalancing to one with relatively
lower investment performance. However, rebalancing can also result in
transferring amounts from a variable investment option with relatively lower
current investment performance to one with relatively higher current investment
performance. Rebalancing and dollar cost averaging cannot be in effect at the
same time.
15
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 and less any CDSC charge that then
applies. 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 after
the first policy year. 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. Unless we agree otherwise, 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 surrender 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, or the policy's Basic Sum
Insured to fall below $100,000. Under the Option A death benefit, the reduction
of your account value occasioned by a partial withdrawal could cause the minimum
insurance amount to become less than your Total Sum Insured (see "How much will
we pay when the insured person dies?" on page 17). If that happens, we will
automatically reduce your Total Sum Insured. The calculation of that reduction
is explained in the policy, and will be implemented by first reducing any
Additional Sum Insured in effect. If the reduction in Total Sum Insured would
cause your policy to fail the Internal Revenue Code's definition of life
insurance, we will not permit the partial withdrawal. If the withdrawal results
in a reduction in Basic Sum Insured, a pro-rata portion of the applicable CDSC
will be deducted from the account value (see "Contingent deferred sales charge
('CDSC')" on page 11).
Policy loans
You may borrow from your policy at any time after it has been in effect for
1 year by completing a form satisfactory to us or, if the telephone transaction
authorization form has been completed, by telephone. The maximum amount you can
borrow is the greater of (i) 75% of the surrender value of your policy or (ii)
the amount determined as follows:
o We first determine the surrender value of your policy.
o We then subtract an amount equal to 12 times the monthly charges then
being deducted from account value.
o We then multiply the resulting amount by.75% in policy years 1 through
10, .50% in policy years 11 through 20, and 0% thereafter (although we
reserve the right to increase the percentage after policy year 20 to
as much as .25%).
o We then subtract the third item above from the second item above.
16
The minimum amount of each loan is $300. The interest charged on any loan
is currently an effective annual rate of 4.75% in the first 10 policy years,
4.50% in policy years 11 through 20, and 4.0% thereafter. However, we reserve
the right to increase the percentage after policy year 20 to as much as 4.25%.
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. Unless we agree otherwise,
each repayment will be allocated among the investment options as follows:
o The same proportionate part of the loan as was borrowed from the fixed
investment option will be repaid to the fixed investment option.
o The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
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.
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" of insurance. Total Sum Insured is composed of the Basic
Sum Insured and any Additional Sum Insured you elect. The maximum amount of
Additional Sum Insured you can have when we issue the policy is generally
limited to 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 35.
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:
o Option A - The death benefit will equal the greater of (1) the Total
Sum Insured or (2) the minimum insurance amount under the "guideline
premium and cash value corridor test" or under the "cash value
accumulation test" (as described below).
17
o Option B - The death benefit will equal the greater of (1) the Total
Sum Insured amount plus your policy's account value on the date of
death, or (2) the minimum insurance amount under the "guideline
premium and cash value corridor test".
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 Option A death benefit, you must elect which test you wish to
have applied. If you elect the Option B death benefit, the guideline premium and
cash value corridor test will automatically be 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 by the so-called
"corridor factor" applicable on that date. The corridor factors are derived by
applying the "guideline premium and cash value corridor test." The corridor
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. A table showing the factor for each
age will appear in the policy. Under the cash value accumulation test, we
compute the minimum insurance amount each business day by multiplying the
account value on that date by the so-called "death benefit factor" applicable on
that date. The death benefit factors are derived by applying the "cash value
accumulation test." The death benefit factor decreases as attained age
increases. A table showing the factor for each age will appear in the policy.
As noted above, you have to elect which test will be applied if you elect
the Option A death benefit. 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 40). 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
On the policy anniversary nearest the insured person's 100th birthday, the
death benefit will become equal to the account value on the date of death. Death
benefit Options A and B (as described above) will cease to apply. Also, we will
stop deducting any monthly charges (other than the asset-based risk charge) and
will stop accepting any premium payments.
18
Can you add additional benefit riders?
When you apply for a policy, you can request any of the additional benefit
riders that we then make available. Availability and rider benefits may vary by
state. Charges for the selected rider will generally increase the monthly
deductions from your policy's account value. We may change the rates of these
charges, but not above the maximum amounts that will be stated in the Policy
Specifications page of your policy. Our rules and procedures will govern
eligibility for the riders, or any changes to these benefits. Each rider
contains specific details that you should review if you desire to choose the
additional benefit. We may add to, delete from, or modify the following list of
additional benefit riders:
o Disability Waiver of Charges Rider - Provides for the waiver of
monthly deductions if the insured person becomes totally and
permanently disabled, as defined in the rider, prior to age 60. If the
insured person becomes totally and permanently disabled after age 60,
monthly deductions are only waived until age 65. Benefits under this
rider do not reduce the Guaranteed Death Benefit Premium payment
requirements described on page 7 that are necessary for the guaranteed
death benefit feature to remain in effect.
o Living Care Benefit Rider - Provides for an advance payment to you of
a portion of the death benefit if the insured person becomes
terminally ill, as defined in the rider, with death expected within 24
months. Advances under the rider are discounted for interest at the
rates specified in the rider, and we may use a portion of any advance
to repay loans under your policy. The maximum advance is $1,000,000.
o Children's Insurance Benefit Rider - Provides term insurance up
through age 21 on each covered child of the insured person. A child
must be more than 14 days old and less than 15 years old to begin
coverage.
o Accidental Death Benefit Rider - Provides for an additional insurance
benefit if the insured person's death is due to accidental causes
between the policy anniversaries nearest the insured person's 5th and
70th birthdays.
How can you change your policy's insurance coverage?
Increase in coverage
You may request an increase in the Additional Sum Insured. As to when such
an increase would take effect, see "Effective date of other policy transactions"
on page 37). Generally, each such increase must be at least $50,000. However,
you will have to provide us with evidence that the insured person still meets
our requirements for issuing insurance coverage. Unless we consent otherwise,
you may not increase the Additional Sum Insured if the increase would cause the
entire Additional Sum Insured to equal or exceed 800% of the Basic Sum Insured.
19
Decrease in coverage
After the first policy year, you may request a reduction in the Total Sum
Insured at any time, but only if:
o the remaining Basic Sum Insured will be at least $100,000, and
o the remaining Additional Sum Insured will not exceed 800% of the Basic
Sum Insured, and
o 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 any reduction in Total Sum Insured would take effect, see
"Effective date of other policy transactions" on page 37. Any reduction in Total
Sum Insured will be implemented by first reducing any Additional Sum Insured. If
there is any reduction in Basic Sum Insured, a pro-rata portion of the
applicable CDSC will be deducted from the account value (see "Contingent
deferred sales charge ('CDSC')" on page 11).
Change of death benefit option
If the "guideline premium and cash value corridor test" applies to your
policy, you may change your coverage from death benefit Option A to Option B or
vice-versa on any policy anniversary, but only if there is no change in the
Federal tax law test used to determine the minimum insurance amount. If you
change from Option A to Option B, we will require evidence that the insured
person still meets our requirements for issuing coverage. This is because such a
change increases our insurance risk exposure.
If the "cash value accumulation test" applies to your policy, you can never
change to either Option A under the "guideline premium and cash value corridor
test" or to Option B.
Please read "the minimum insurance amount" on page 18 for more information
about the "guideline premium and cash value corridor test" and the "cash value
accumulation test."
Tax consequences
Please read "Tax considerations" starting on page 40 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 10 days (or longer in some
states) after you receive it. This is often referred to as the "free look"
period. To cancel your policy, simply deliver or mail the policy to:
20
o John Hancock at one of the addresses shown on page 2, or
o 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 proceeds of $1,000 or more applied to any
of a number of other payment options, including the following:
o Option 1 - Proceeds left with us to accumulate with interest
o Option 2A - Equal monthly payments of a specified amount until all
proceeds are paid out
o Option 2B - Equal monthly payments for a specified period of time
o Option 3 - Equal monthly payments for life, but with payments
guaranteed for a specific number of years
o Option 4 - Equal monthly payments for life with no refund
o 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.
21
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 us 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.
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 38. 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 or
adding the Long-Term Care Acceleration Rider, please read "Tax considerations"
beginning of page 40.
22
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:
o surrenders or partial withdrawals
o change of death benefit option
o increase or decrease in Total Sum Insured
o change of beneficiary
o election of payment option for policy proceeds
o tax withholding elections
o 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):
o loans
o transfers of account value among investment options
o change of allocation among investment options for new premium payments
You should mail or express all written requests to our 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 our 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 our 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
23
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 1-800-732-5543 or by faxing us at
1-617-886-3048. 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.
24
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 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 -0.82%, 5.13% and 11.08%.
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 35 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, including the intended
waiver of the premium sales charge after the tenth policy year and the intended
reduction in the asset-based risk charge after the tenth policy year. 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) no optional rider benefits and no Additional Sum Insured have
been elected, (ii) no loans or withdrawals are made, (iii) no increases or
decreases in coverage are requested, and (iv) no change in the death benefit
option is requested.
With respect to fees and expenses deducted from assets of the Series Funds,
the amounts shown in all tables reflect (1) investment management fees
equivalent to an effective annual rate of 0.72%, and (2) an assumed average
asset charge for all other operating expenses of the Series Funds equivalent to
an effective annual rate of 0.10%. These rates are the arithmetic average for
all funds that are available as investment options. 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 operating expenses
of the Series Funds reflects reimbursements to certain funds as described in the
footnotes to the table beginning on page 12. 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 Basic Sum Insured, Additional Sum Insured and annual
Planned Premium amount requested.
25
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
Death Benefit Account Value Surrender Value
----------------------------- ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- -------- -------- --------- -------- -------- --------- -------- -------- -----------
1 798 100,000 100,000 100,000 217 243 270 0 0 0
2 1,636 100,000 100,000 100,000 661 735 813 0 0 53
3 2,516 100,000 100,000 100,000 1,089 1,239 1,402 329 479 642
4 3,439 100,000 100,000 100,000 1,500 1,754 2,041 740 994 1,281
5 4,409 100,000 100,000 100,000 1,891 2,279 2,733 1,131 1,519 1,973
6 5,428 100,000 100,000 100,000 2,264 2,814 3,483 1,656 2,206 2,875
7 6,497 100,000 100,000 100,000 2,615 3,356 4,295 2,083 2,824 3,763
8 7,620 100,000 100,000 100,000 2,944 3,907 5,176 2,488 3,451 4,720
9 8,799 100,000 100,000 100,000 3,250 4,463 6,130 2,946 4,159 5,826
10 10,037 100,000 100,000 100,000 3,531 5,025 7,165 3,379 4,873 7,013
11 11,337 100,000 100,000 100,000 3,823 5,632 8,335 3,823 5,632 8,335
12 12,702 100,000 100,000 100,000 4,092 6,249 9,613 4,092 6,249 9,613
13 14,135 100,000 100,000 100,000 4,335 6,873 11,010 4,335 6,873 11,010
14 15,640 100,000 100,000 100,000 4,550 7,505 12,536 4,550 7,505 12,536
15 17,220 100,000 100,000 100,000 4,736 8,141 14,205 4,736 8,141 14,205
16 18,879 100,000 100,000 100,000 4,949 8,839 16,089 4,949 8,839 16,089
17 20,621 100,000 100,000 100,000 5,121 9,534 18,145 5,121 9,534 18,145
18 22,450 100,000 100,000 100,000 5,240 10,216 20,386 5,240 10,216 20,386
19 24,370 100,000 100,000 100,000 5,303 10,880 22,832 5,303 10,880 22,832
20 26,387 100,000 100,000 100,000 5,311 11,527 25,511 5,311 11,527 25,511
25 38,086 100,000 100,000 100,000 5,398 15,425 44,405 5,398 15,425 44,405
30 53,018 100,000 100,000 100,000 4,321 19,393 76,391 4,321 19,393 76,391
35 72,076 100,000 100,000 150,165 1,114 22,654 130,578 1,114 22,654 130,578
40 96,398 ** 100,000 231,205 ** 23,576 220,195 ** 23,576 220,195
45 127,441 ** 100,000 387,828 ** 19,749 369,360 ** 19,749 369,360
- ---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit
and Surrender Value will differ if premiums are paid in different amounts
or frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
THE HYPOTHETICAL INVESTMENT RESULTS 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,
ACCOUNT VALUE 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 FLUCTUATED ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
IN FACT, FOR ANY GIVEN PERIOD OF TIME, THE INVESTMENT RESULTS COULD BE NEGATIVE.
26
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
Death Benefit Account Value Surrender Value
----------------------------- ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- -------- -------- --------- -------- -------- --------- -------- -------- -----------
1 798 100,000 100,000 100,000 190 216 241 0 0 0
2 1,636 100,000 100,000 100,000 608 678 752 0 0 0
3 2,516 100,000 100,000 100,000 1,008 1,150 1,304 248 390 544
4 3,439 100,000 100,000 100,000 1,390 1,629 1,900 630 869 1,140
5 4,409 100,000 100,000 100,000 1,752 2,116 2,542 992 1,356 1,782
6 5,428 100,000 100,000 100,000 2,095 2,609 3,235 1,487 2,001 2,627
7 6,497 100,000 100,000 100,000 2,415 3,106 3,982 1,883 2,574 3,450
8 7,620 100,000 100,000 100,000 2,712 3,607 4,787 2,256 3,151 4,331
9 8,799 100,000 100,000 100,000 2,985 4,109 5,654 2,681 3,805 5,350
10 10,037 100,000 100,000 100,000 3,234 4,614 6,591 3,082 4,462 6,439
11 11,337 100,000 100,000 100,000 3,456 5,117 7,601 3,456 5,117 7,601
12 12,702 100,000 100,000 100,000 3,648 5,615 8,689 3,648 5,615 8,689
13 14,135 100,000 100,000 100,000 3,810 6,109 9,863 3,810 6,109 9,863
14 15,640 100,000 100,000 100,000 3,941 6,595 11,130 3,941 6,595 11,130
15 17,220 100,000 100,000 100,000 4,036 7,071 12,498 4,036 7,071 12,498
16 18,879 100,000 100,000 100,000 4,095 7,533 13,977 4,095 7,533 13,977
17 20,621 100,000 100,000 100,000 4,112 7,975 15,572 4,112 7,975 15,572
18 22,450 100,000 100,000 100,000 4,079 8,390 17,292 4,079 8,390 17,292
19 24,370 100,000 100,000 100,000 3,993 8,771 19,147 3,993 8,771 19,147
20 26,387 100,000 100,000 100,000 3,844 9,109 21,144 3,844 9,109 21,144
25 38,086 100,000 100,000 100,000 1,942 9,840 33,807 1,942 9,840 33,807
30 53,018 ** 100,000 100,000 ** 7,653 52,986 ** 7,653 52,986
35 72,076 ** ** 100,000 ** ** 84,154 ** ** 84,154
40 96,398 ** ** 143,465 ** ** 136,633 ** ** 136,633
45 127,441 ** ** 231,403 ** ** 220,383 ** ** 220,383
- ---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit
and Surrender Value will differ if premiums are paid in different amounts
or frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
THE HYPOTHETICAL INVESTMENT RESULTS 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,
ACCOUNT VALUE 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 FLUCTUATED ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
IN FACT, FOR ANY GIVEN PERIOD OF TIME, THE INVESTMENT RESULTS COULD BE NEGATIVE.
27
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
Death Benefit Account Value Surrender Value
----------------------------- ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- -------- -------- --------- -------- -------- --------- -------- -------- -----------
1 798 100,216 100,242 100,269 216 242 269 0 0 0
2 1,636 100,659 100,733 100,810 659 733 810 0 0 50
3 2,516 101,085 101,234 101,396 1,085 1,234 1,396 325 474 636
4 3,439 101,492 101,745 102,030 1,492 1,745 2,030 732 985 1,270
5 4,409 101,880 102,265 102,715 1,880 2,265 2,715 1,120 1,505 1,955
6 5,428 102,247 102,792 103,455 2,247 2,792 3,455 1,639 2,184 2,847
7 6,497 102,591 103,325 104,254 2,591 3,325 4,254 2,059 2,793 3,722
8 7,620 102,913 103,863 105,116 2,913 3,863 5,116 2,457 3,407 4,660
9 8,799 103,209 104,405 106,046 3,209 4,405 6,046 2,905 4,101 5,742
10 10,037 103,480 104,948 107,049 3,480 4,948 7,049 3,328 4,796 6,897
11 11,337 103,759 105,532 108,179 3,759 5,532 8,179 3,759 5,532 8,179
12 12,702 104,014 106,122 109,407 4,014 6,122 9,407 4,014 6,122 9,407
13 14,135 104,240 106,714 110,739 4,240 6,714 10,739 4,240 6,714 10,739
14 15,640 104,438 107,306 112,185 4,438 7,306 12,185 4,438 7,306 12,185
15 17,220 104,603 107,897 113,754 4,603 7,897 13,754 4,603 7,897 13,754
16 18,879 104,797 108,547 115,523 4,797 8,547 15,523 4,797 8,547 15,523
17 20,621 104,947 109,184 117,437 4,947 9,184 17,437 4,947 9,184 17,437
18 22,450 105,040 109,797 119,499 5,040 9,797 19,499 5,040 9,797 19,499
19 24,370 105,074 110,378 121,720 5,074 10,378 21,720 5,074 10,378 21,720
20 26,387 105,050 110,928 124,119 5,050 10,928 24,119 5,050 10,928 24,119
25 38,086 104,979 114,192 140,737 4,979 14,192 40,737 4,979 14,192 40,737
30 53,018 103,701 116,966 166,985 3,701 16,966 66,985 3,701 16,966 66,985
35 72,076 100,328 117,998 207,996 328 17,998 107,996 328 17,998 107,996
40 96,398 ** 114,880 271,417 ** 14,880 171,417 ** 14,880 171,417
45 127,441 ** 104,674 370,152 ** 4,674 270,152 ** 4,674 270,152
- ---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit
and Surrender Value will differ if premiums are paid in different amounts
or frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
THE HYPOTHETICAL INVESTMENT RESULTS 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,
ACCOUNT VALUE 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 FLUCTUATED ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
IN FACT, FOR ANY GIVEN PERIOD OF TIME, THE INVESTMENT RESULTS COULD BE NEGATIVE.
28
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
Death Benefit Account Value Surrender Value
----------------------------- ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- -------- -------- --------- -------- -------- --------- -------- -------- -----------
1 798 100,190 100,215 100,241 190 215 241 0 0 0
2 1,636 100,606 100,676 100,750 606 676 750 0 0 0
3 2,516 101,004 101,145 101,298 1,004 1,145 1,298 244 385 538
4 3,439 101,383 101,621 101,890 1,383 1,621 1,890 623 861 1,130
5 4,409 101,741 102,102 102,525 1,741 2,102 2,525 981 1,342 1,765
6 5,428 102,079 102,588 103,209 2,079 2,588 3,209 1,471 1,980 2,601
7 6,497 102,393 103,077 103,943 2,393 3,077 3,943 1,861 2,545 3,411
8 7,620 102,683 103,567 104,731 2,683 3,567 4,731 2,227 3,111 4,275
9 8,799 102,947 104,055 105,576 2,947 4,055 5,576 2,643 3,751 5,272
10 10,037 103,187 104,542 106,484 3,187 4,542 6,484 3,035 4,390 6,332
11 11,337 103,397 105,025 107,457 3,397 5,025 7,457 3,397 5,025 7,457
12 12,702 103,576 105,498 108,498 3,576 5,498 8,498 3,576 5,498 8,498
13 14,135 103,724 105,963 109,614 3,724 5,963 9,614 3,724 5,963 9,614
14 15,640 103,838 106,414 110,809 3,838 6,414 10,809 3,838 6,414 10,809
15 17,220 103,916 106,849 112,087 3,916 6,849 12,087 3,916 6,849 12,087
16 18,879 103,956 107,264 113,455 3,956 7,264 13,455 3,956 7,264 13,455
17 20,621 103,951 107,650 114,913 3,951 7,650 14,913 3,951 7,650 14,913
18 22,450 103,896 108,000 116,463 3,896 8,000 16,463 3,896 8,000 16,463
19 24,370 103,785 108,308 118,109 3,785 8,308 18,109 3,785 8,308 18,109
20 26,387 103,610 108,559 119,850 3,610 8,559 19,850 3,610 8,559 19,850
25 38,086 101,576 108,640 130,063 1,576 8,640 30,063 1,576 8,640 30,063
30 53,018 ** 105,376 142,688 ** 5,376 42,688 ** 5,376 42,688
35 72,076 ** ** 156,347 ** ** 56,347 ** ** 56,347
40 96,398 ** ** 167,188 ** ** 67,188 ** ** 67,188
45 127,441 ** ** 165,549 ** ** 65,549 ** ** 65,549
- ---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit
and Surrender Value will differ if premiums are paid in different amounts
or frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
THE HYPOTHETICAL INVESTMENT RESULTS 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,
ACCOUNT VALUE 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 FLUCTUATED ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
IN FACT, FOR ANY GIVEN PERIOD OF TIME, THE INVESTMENT RESULTS COULD BE NEGATIVE.
29
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
Death Benefit Account Value Surrender Value
----------------------------- ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- -------- -------- --------- -------- -------- --------- -------- -------- -----------
1 798 100,000 100,000 100,000 217 243 270 0 0 0
2 1,636 100,000 100,000 100,000 661 735 813 0 0 53
3 2,516 100,000 100,000 100,000 1,089 1,239 1,402 329 479 642
4 3,439 100,000 100,000 100,000 1,500 1,754 2,041 740 994 1,281
5 4,409 100,000 100,000 100,000 1,891 2,279 2,733 1,131 1,519 1,973
6 5,428 100,000 100,000 100,000 2,264 2,814 3,483 1,656 2,206 2,875
7 6,497 100,000 100,000 100,000 2,615 3,356 4,295 2,083 2,824 3,763
8 7,620 100,000 100,000 100,000 2,944 3,907 5,176 2,488 3,451 4,720
9 8,799 100,000 100,000 100,000 3,250 4,463 6,130 2,946 4,159 5,826
10 10,037 100,000 100,000 100,000 3,531 5,025 7,165 3,379 4,873 7,013
11 11,337 100,000 100,000 100,000 3,823 5,632 8,335 3,823 5,632 8,335
12 12,702 100,000 100,000 100,000 4,092 6,249 9,613 4,092 6,249 9,613
13 14,135 100,000 100,000 100,000 4,335 6,873 11,010 4,335 6,873 11,010
14 15,640 100,000 100,000 100,000 4,550 7,505 12,536 4,550 7,505 12,536
15 17,220 100,000 100,000 100,000 4,736 8,141 14,205 4,736 8,141 14,205
16 18,879 100,000 100,000 100,000 4,949 8,839 16,089 4,949 8,839 16,089
17 20,621 100,000 100,000 100,000 5,121 9,534 18,145 5,121 9,534 18,145
18 22,450 100,000 100,000 100,000 5,240 10,216 20,386 5,240 10,216 20,386
19 24,370 100,000 100,000 100,000 5,303 10,880 22,832 5,303 10,880 22,832
20 26,387 100,000 100,000 100,000 5,311 11,527 25,511 5,311 11,527 25,511
25 38,086 100,000 100,000 100,000 5,398 15,425 44,405 5,398 15,425 44,405
30 53,018 100,000 100,000 129,061 4,321 19,393 75,829 4,321 19,393 75,829
35 72,076 100,000 100,000 190,822 1,114 22,654 126,071 1,114 22,654 126,071
40 96,398 ** 100,000 281,034 ** 23,576 205,314 ** 23,576 205,314
45 127,441 ** 100,000 416,780 ** 19,749 330,097 ** 19,749 330,097
- ---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit
and Surrender Value will differ if premiums are paid in different amounts
or frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
THE HYPOTHETICAL INVESTMENT RESULTS 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,
ACCOUNT VALUE 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 FLUCTUATED ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
IN FACT, FOR ANY GIVEN PERIOD OF TIME, THE INVESTMENT RESULTS COULD BE NEGATIVE.
30
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
Death Benefit Account Value Surrender Value
----------------------------- ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------ -------------- -------- -------- --------- -------- -------- --------- -------- -------- -----------
1 798 100,000 100,000 100,000 190 216 241 0 0 0
2 1,636 100,000 100,000 100,000 608 678 752 0 0 0
3 2,516 100,000 100,000 100,000 1,008 1,150 1,304 248 390 544
4 3,439 100,000 100,000 100,000 1,390 1,629 1,900 630 869 1,140
5 4,409 100,000 100,000 100,000 1,752 2,116 2,542 992 1,356 1,782
6 5,428 100,000 100,000 100,000 2,095 2,609 3,235 1,487 2,001 2,627
7 6,497 100,000 100,000 100,000 2,415 3,106 3,982 1,883 2,574 3,450
8 7,620 100,000 100,000 100,000 2,712 3,607 4,787 2,256 3,151 4,331
9 8,799 100,000 100,000 100,000 2,985 4,109 5,654 2,681 3,805 5,350
10 10,037 100,000 100,000 100,000 3,234 4,614 6,591 3,082 4,462 6,439
11 11,337 100,000 100,000 100,000 3,456 5,117 7,601 3,456 5,117 7,601
12 12,702 100,000 100,000 100,000 3,648 5,615 8,689 3,648 5,615 8,689
13 14,135 100,000 100,000 100,000 3,810 6,109 9,863 3,810 6,109 9,863
14 15,640 100,000 100,000 100,000 3,941 6,595 11,130 3,941 6,595 11,130
15 17,220 100,000 100,000 100,000 4,036 7,071 12,498 4,036 7,071 12,498
16 18,879 100,000 100,000 100,000 4,095 7,533 13,977 4,095 7,533 13,977
17 20,621 100,000 100,000 100,000 4,112 7,975 15,572 4,112 7,975 15,572
18 22,450 100,000 100,000 100,000 4,079 8,390 17,292 4,079 8,390 17,292
19 24,370 100,000 100,000 100,000 3,993 8,771 19,147 3,993 8,771 19,147
20 26,387 100,000 100,000 100,000 3,844 9,109 21,144 3,844 9,109 21,144
25 38,086 100,000 100,000 100,000 1,942 9,840 33,807 1,942 9,840 33,807
30 53,018 ** 100,000 100,000 ** 7,653 52,986 ** 7,653 52,986
35 72,076 ** ** 124,904 ** ** 82,521 ** ** 82,521
40 96,398 ** ** 170,378 ** ** 124,473 ** ** 124,473
45 127,441 ** ** 229,881 ** ** 182,070 ** ** 182,070
- ---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit
and Surrender Value will differ if premiums are paid in different amounts
or frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
THE HYPOTHETICAL INVESTMENT RESULTS 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,
ACCOUNT VALUE 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 FLUCTUATED ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
IN FACT, FOR ANY GIVEN PERIOD OF TIME, THE INVESTMENT RESULTS COULD BE NEGATIVE.
31
ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information
that is not contained in the Basic Information section on pages 4 through 24.
Contents of this section Beginning on page
- ------------------------ -----------------
Description of us ........................................... 33
How we support the policy and investment options............. 33
Procedures for issuance of a policy.......................... 34
Basic Sum Insured vs. Additional Sum Insured................. 35
Commencement of investment performance....................... 35
How we process certain policy transactions................... 35
Effects of policy loans...................................... 37
Additional information about how certain policy charges
work......................................................... 38
How we market the policies................................... 39
Tax considerations........................................... 40
Reports that you will receive................................ 42
Voting privileges that you will have......................... 42
Changes that we can make as to your policy................... 42
Adjustments we make to death benefits........................ 43
When we pay policy proceeds.................................. 43
Other details about exercising rights and paying benefits.... 44
Legal matters................................................ 44
Registration statement filed with the SEC.................... 44
Accounting and actuarial experts............................. 44
Financial statements of John Hancock and the Account......... 44
List of our Directors and Executive Officers of John
Hancock...................................................... 45
32
Description of John Hancock
We are John Hancock Life Insurance Company, a Massachusetts stock life
insuarnce 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, 2000, our assets were
approximately $88 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 of us.
The Account's assets are our property. 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 theSeries 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 separate accounts that we may
establish. Subject to
33
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 Basic Sum Insured at
issue of $100,000. At the time of issue, the insured person must have an
attained age of no more than 80. 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 Basic Sum Insured and the Additional 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 35).
The policy will take effect only if all of the following conditions are
satisfied:
o The policy is delivered to and received by the applicant.
o The Minimum Initial Premium is received by us.
o 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.
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.
34
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 (because of 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.
The amount of sales charge deducted from premiums and the amount of
compensation paid to the selling insurance agent will 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 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 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 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.
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 40).
Commencement of investment performance
Any premium payment processed prior to the twentieth day after the policy's
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:
35
(1) We will process a payment received prior to a policy's date of issue as
if received on 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:
o The tax problem resolves itself prior to the date the refund is to be
made; or
o 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 any 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.
We have the right to defer transfers of amounts out of the fixed investment
option for up to six months.
Dollar cost averaging
Scheduled transfers under this option may be made from the Money Market
investment option to not more than nine other variable investment options.
However, the amount transferred to any one investment option must be at least
$100.
Once we receive the election in form satisfactory to us at our Life
Servicing Office, transfers will begin on the second monthly deduction date
following its receipt. If you have any questions with respect to this provision,
call 1-800-732-5543.
Once elected, the scheduled monthly transfer option will remain in effect
for so long as you have at least $2,500 of your account value in the Money
Market investment option, or until we receive written notice from you of
cancellation of the option or notice of the death of the insured person. The
dollar cost averaging and rebalancing options cannot be in effect at the same
time. We reserve the right to modify, terminate or suspend the dollar cost
averaging program at any time.
Asset Rebalancing
This option can be elected in the application or by sending the appropriate
form to our Life Servicing Office. You must specify the frequency for
rebalancing (quarterly, semi-annually or annually), the preset percentage for
each variable investment option and a future beginning date. The first
rebalancing will occur on the monthly deduction date
36
that occurs on or next follows the beginning date you select.
Once elected, rebalancing will continue until we receive notice of
cancellation of the option or notice of the death of the last surviving insured
person. If you cancel rebalancing, you will have to wait 30 days before you can
start it again.
The fixed investment option does not participate in and is not affected by
rebalancing.The rebalancing and dollar cost averaging options cannot be in
effect at the same time. We reserve the right to modify, terminate or suspend
the rebalancing program at any time.
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 your request:
o Additional Sum Insured increases.
o Change of death benefit Option from A to B.
A change from Option B to Option A is effective on the policy anniversary
on or next following the date we receive the request.
The following transactions take effect on the monthly deduction date on or
next following the date we approve your request:
o Total Sum Insured decreases
o Reinstatements of lapsed policies
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 surrender 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
37
circumstances (see "Tax considerations" beginning on page 40).
Additional information about how certain policy charges work
Sales expenses and related charges
The sales charges (i.e., the premium sales charge and the CDSC) help to
compensate us for the cost of selling our policies. (See "What charges will we
deduct from your 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 charge for mortality and
expense risks and other gains with respect to the policies, or from our general
assets. (See "How we market the policies" on page 39.)
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 any 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 $1,000 and you paid a premium of $1,000 for ten years, you
would pay total premium sales charges of $400 and be subject to a maximum CDSC
of $1,000. If you paid $2,000 every other policy year for ten policy years, you
would pay total premium sales charges of only $200 and be subject to a maximum
CDSC of $1,000. However, delaying the payment of Target Premiums to later policy
years could increase the risk that the guaranteed death benefit feature will
lapse and the account value will be insufficient to pay policy charges. 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 40.)
Monthly charges
Unless we agree otherwise, we will 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
38
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
John Hancock Funds, Inc. ("JHFI") and Signator Investors, Inc.("Signator")
act as principal distributors of the policies sold through this prospectus. JHFI
and Signator are each registered as a broker-dealer under the Securities
Exchange Act of 1934, and each is a member of the National Association of
Securities Dealers, Inc. JHFI's address is 101 Huntington Avenue, Boston,
Massachusetts 02199. Signator's address is 200 Clarendon Street, John Hancock
Place, Boston, Massachusetts 02117. JHFI and Signator are subsidiaries of John
Hancock.
You can purchase a policy through representatives of broker-dealers and
certain financial institutions who have entered into selling agreements with
JHFI and us, or with Signator and us. We pay compensation to these
broker-dealers for promoting, marketing and selling our products through their
representatives who are authorized by applicable law to sell variable life
insurance polices. In turn, the broker-dealers pay a portion of the compensation
to these representatives, under their own arrangements. The most common schedule
of gross commissions (inclusive of overrides and expense allowance payments paid
to such broker-dealers and financial institutions) for minimum face amounts of
less than $250,000 is as follows:
o 97.5% of first year premiums paid up to the Target Premium plus 5.85%
of any excess premium payments,
o 6% of premiums paid in each of policy years 2 through 4 up to the
target Premium plus 3% of any excess premium payments, and
o 3% of all premiums paid in policy years 5 through 10.
In situations where the broker-dealer or financial institutions provides
some or all of the additional marketing services required, we may pay an
additional gross first year commission of up to 20% of premiums paid up to the
Target Premium. In such instances, we may also pay an additional gross renewal
commission. The additional gross renewal commission would not be expected to
exceed 0.10% of account value less policy loans in policy years 2 and
thereafter. For limited periods of time, we may pay additional compensation to
broker-dealers or financial institutions as part of special sales promotions.
Signator also pays its branch office principals, who are also independent
general agents of ours, for sales of the policies to Signator customers. In
turn, the branch office principals pay a portion of their compensation to their
assigned marketing representatives, under their own arrangments. The most common
schedule of gross commission (inclusive of overrides and expense allowance
payments paid to such branch office principals) is as follows:
o 89% of the Target Premium paid in the first policy year, 11% of the
Target Premium paid in each of policy years 2 through 4, and 3% of the
Target Premium paid in each policy year thereafter,
o 5.89% of any premium paid in the first policy year in excess of the
Target Premium, and
o 3% to 3.25% of any premium paid in any other policy year in excess of
the Target Premium.
Representatives who meet certain productivity and persistency standards may
be eligible for additional compensation. From time to time, JHFI and Signator,
at their expense, may provide significant additional amounts to financial
services firms which sell or arrange for the sale of the policies. Such amounts
may include, for example, financial assistance to financial services firms in
connection with their conferences or seminars, sales or training programs for
invited registered representatives and
39
other employees, payment for travel expenses, including lodging, incurred by
registered representatives and other employees for such seminars or training
programs, seminars for the public, advertising and sales campaigns regarding the
policies, and/or other events or activities sponsored by the financial services
firms.
We offer these contracts on a continuous basis, but neither JHFI nor
Signator is obligated to sell any particular amount of policies. JHFI and
Signator also serve as principal underwriters for John Hancock Variable Annuity
Accounts U, I and V, and John Hancock Variable Life Accounts S, U and V, all of
which are registered under the 1940 Act. Signator is also the principal
underwriter for the John Hancock Variable Series Trust I, and JHFI is the
principal underwriter for the John Hancock Declaration Trust.
We reimburse JHFI and Signator for certain direct and indirect expenses
actually incurred in connection with the marketing of these contracts. John
Hancock performs insurance underwriting and determines whether to accept or
reject the application for a policy and each insured person's risk
classification. Officers and employees of John Hancock are covered by a blanket
bond by a commercial carrier in the amount of $25 million.
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 proceeds under the policy will be excludable from the
beneficiary's gross income under 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.
40
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 and gains under
the policy for the period of the disqualification and for subsequent periods.
In the past, the United States Treasury Department has stated that it
anticipated issuing guidelines prescribing circumstances in which the ability of
a policy owner to direct his or her investment to particular funds may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the shares of those funds. In that case, any income and gains attributable to
those shares would be included in your current gross income for federal income
tax purposes. Under current law, however, we believe that we, and not the owner
of a policy, would be considered the owner of the fund's shares for tax
purposes.
Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, 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.
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 591/2.
Furthermore, any time there is a "material change" in an increase in the
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 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 will be treated as one contract for
the purpose of applying the modified endowment
41
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 the Series Funds, 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 a Series Fund which are deemed attributable to variable life
insurance policies at regular and special meetings of the Series Fund's
shareholders in accordance with instructions received from owners of such
policies. Shares of the Series Fund 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 a 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 we 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
42
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:
o Changes necessary to comply with or obtain or continue exemptions
under the federal securities laws
o Combining or removing investment options
o 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 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 (1) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (2) 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 (3) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of
43
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.
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
Certain of the financial statements of John Hancock and the Account
included in this prospectus have been audited by Ernst & Young LLP, independent
auditors, for the periods indicated in their reports thereon which appear
elsewhere herein and have been included in reliance on their reports given on
their authority as experts in accounting and auditing. Actuarial matters
included in this prospectus have been examined by Paul J. Strong, F.S.A., an
Actuary and 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
I. MacAllister Booth... Retired Chairman of the Board and Chief Executive
Officer, Polaroid Corporation (photographic products)
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
Robert E. Fast......... Senior Partner, Hale and Dorr (law firm)
Kathleen F. Feldstein.. President, Economic Studies, Inc. (economic
consulting).
Nelson S. Gifford...... Principal, Fleetwing Capital (financial services)
Thomas P. Glynn........ Chief Operating Officer, Partners HealthCare System
(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 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.
Barry J. Rubenstein.... Vice President, Counsel 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
FOR
JOHN HANCOCK LIFE INSURANCE COMPANY
THIRD QUARTER 2001
46
JOHN HANCOCK LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
September 30
2001 December 31
(Unaudited) 2000
------------ -------------
(in millions)
Assets
Investments
Fixed maturities:
Held-to-maturity--at amortized cost
(fair value: September 30--$1,843.6; December
31--$11,651.2) . . . . . . . . . . . . . . . . . $ 1,855.8 $11,888.6
Available-for-sale--at fair value
(cost: September 30--$31,548.9; December
31--$15,790.3) . . . . . . . . . . . . . . . . . 32,465.8 16,023.5
Trading securities--at fair value
(cost: September 30--$16.5). . . . . . . . . . . 17.0 --
Equity securities:
Available-for-sale--at fair value
(cost: September 30--$830.9; December 31--$830.6) 859.8 1,094.9
Trading securities--at fair value
(cost: September 30--$267.4; December 31--$193.4) 249.0 231.6
Mortgage loans on real estate . . . . . . . . . . 8,846.4 8,968.9
Real estate . . . . . . . . . . . . . . . . . . . 481.7 519.0
Policy loans. . . . . . . . . . . . . . . . . . . 446.3 428.6
Short-term investments. . . . . . . . . . . . . . 147.5 151.9
Other invested assets . . . . . . . . . . . . . . 1,251.3 1,353.0
--------- ---------
Total Investments . . . . . . . . . . . . . . . 46,620.6 40,660.0
Cash and cash equivalents . . . . . . . . . . . . 1,097.3 2,841.2
Accrued investment income . . . . . . . . . . . . 677.0 585.9
Premiums and accounts receivable. . . . . . . . . 202.9 210.8
Deferred policy acquisition costs . . . . . . . . 2,490.5 2,388.5
Reinsurance recoverable . . . . . . . . . . . . . 3,297.6 2,829.0
Other assets. . . . . . . . . . . . . . . . . . . 2,613.6 2,100.6
Closed block assets--Note 6 . . . . . . . . . . . 10,103.3 9,710.0
Separate accounts assets. . . . . . . . . . . . . 21,890.5 26,454.8
--------- ---------
Total Assets. . . . . . . . . . . . . . . . . . $88,993.3 $87,780.8
========= =========
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
47
JOHN HANCOCK LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
September 30
2001 December 31
(Unaudited) 2000
------------ -------------
(in millions)
Liabilities and Shareholder's Equity
Liabilities
Future policy benefits. . . . . . . . . . . . . . $24,468.3 $22,996.4
Policyholders' funds. . . . . . . . . . . . . . . 17,594.9 15,722.9
Unearned revenue. . . . . . . . . . . . . . . . . 726.4 671.3
Unpaid claims and claim expense reserves. . . . . 234.5 253.7
Dividends payable to policyholders. . . . . . . . 137.9 130.8
Short-term debt . . . . . . . . . . . . . . . . . 250.3 245.3
Long-term debt. . . . . . . . . . . . . . . . . . 715.8 534.0
Income taxes. . . . . . . . . . . . . . . . . . . 793.4 428.8
Other liabilities . . . . . . . . . . . . . . . . 3,627.1 2,600.7
Closed block liabilities -- Note 6. . . . . . . . 12,273.2 12,035.9
Separate accounts liabilities . . . . . . . . . . 21,890.5 26,454.8
--------- ---------
Total Liabilities . . . . . . . . . . . . . . . 82,712.3 82,074.6
Minority interest . . . . . . . . . . . . . . . . 293.6 290.3
Commitments and contingencies -- Note 5
Shareholder's Equity Common stock,
$10,000 par value; 1,000 shares
authorized and outstanding . . . . . . . . . . . 10.0 10.0
Additional paid in capital. . . . . . . . . . . . 4,998.1 4,998.9
Retained earnings . . . . . . . . . . . . . . . . 588.8 330.1
Accumulated other comprehensive income. . . . . . 390.5 76.9
--------- ---------
Total Shareholder's Equity. . . . . . . . . . . 5,987.4 5,415.9
--------- ---------
Total Liabilities and Shareholder's Equity. . . $88,993.3 $87,780.8
========= =========
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
48
JOHN HANCOCK LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
Septmeber 30 September 30
------------------- ----------------------
2001 2000 2001 2000
--------- --------- --------- -----------
(in millions) (in millions)
Revenues
Premiums . . . . . . . . . . . . . $ 394.2 $ 418.9 $1,266.1 $1,435.8
Universal life and
investment-type product charges 198.8 193.6 555.8 578.9
Net investment income. . . . . . . 821.9 792.0 2,460.2 2,408.6
Net realized investment and other
gains (losses), net of related
amortization of deferred policy
acquisition costs and amounts
credited to participating pension
contractholders ($18.0 and $(4.6)
for the three months ended
September 30, 2001 and 2000 and
$13.3 and $(7.9) for the nine
months ended September 30, 2001
and 2000, respectively) . . . . . (60.9) (2.7) (95.6) 78.7
Investment management revenues,
commissions and other fees. . . . 143.7 180.7 450.2 596.3
Other revenue. . . . . . . . . . . 52.2 4.7 113.9 12.6
Contribution from the closed
block -- Note 6 . . . . . . . . . 34.2 39.4 70.9 90.7
-------- -------- -------- --------
Total revenues. . . . . . . . . . 1,584.1 1,626.6 4,821.5 5,201.6
Benefits and Expenses
Benefits to policyholders,
excluding amounts related to net
realized investment and other
gains (losses) credited to
participating pension
contractholders ($14.1 and
$(4.0) for the three months ended
September 30, 2001 and 2000 and
$15.0 and $(8.7) for the nine
months ended September 30, 2001
and 2000, respectively) . . . . . 925.4 896.4 2,746.3 2,854.0
Other operating costs and
expenses. . . . . . . . . . . . . 344.6 360.1 1,086.0 1,154.0
Amortization of deferred policy
acquisition costs, excluding
amounts related to net realized
investment and other gains (losses)
($3.9 and $(0.6) for the three
months ended September 30, 2001
and 2000 and $(1.7) and $0.8 for
the nine months ended September
30, 2001 and 2000, respectively). 64.0 50.4 193.4 143.8
Dividends to policyholders . . . . 18.1 26.8 72.0 120.5
-------- -------- -------- --------
Total benefits and expenses. . . 1,352.1 1,333.7 4,097.7 4,272.3
-------- -------- -------- --------
Income before income taxes,
minority interest and cumulative
effect of accounting changes. . . 232.0 292.9 723.8 929.3
Income taxes . . . . . . . . . . . 59.5 90.5 204.8 298.7
-------- -------- -------- --------
Income before minority interest
and cumulative effect of
accounting changes. . . . . . . . 172.5 202.4 519.0 630.6
Minority interest. . . . . . . . . (4.3) (1.3) (17.5) (4.0)
-------- -------- -------- --------
Income before cumulative effect
of accounting changes . . . . . . 168.2 201.1 501.5 626.6
Cumulative effect of accounting
changes, net of taxes -- Note 1 . -- -- 7.2 --
-------- -------- -------- --------
Net income . . . . . . . . . . . . $ 168.2 $ 201.1 $ 508.7 $ 626.6
======== ======== ======== ========
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 Shares
Common Paid in Retained Comprehensive Shareholder's Outstanding
Stock Capital Earnings Income Equity (in thousands)
------ ---------- -------- ------------- ------------- ---------------
(in millions)
Balance at July 1,
2000. . . . . . . . $10.0 $4,950.6 $ 381.5 $(92.8) $5,249.3 1.0
Demutualization
transaction . . . . 10.6 10.6
Comprehensive income:
Net income. . . . . 201.1 201.1
Other comprehensive
income, net of tax:
Net unrealized gains
(losses) . . . . . 51.1 51.1
Foreign currency
translation
adjustment . . . . (11.6) (11.6)
Minimum pension
liability. . . . . (5.5) (5.5)
--------
Comprehensive income 235.1
Dividend paid to
parent company. . . (466.0) (466.0)
----- -------- ------- ------ -------- ---
Balance at September
30, 2000. . . . . . $10.0 $4,961.2 $ 116.6 $(58.8) $5,029.0 1.0
===== ======== ======= ====== ======== ===
Balance at July 1,
2001. . . . . . . . $10.0 $4,998.4 $420.6 $310.1 $5,739.1 1.0
Demutualization
transaction . . . . (0.3) (0.3)
Comprehensive income:
Net income. . . . . 168.2 168.2
Other comprehensive
income, net of tax:
Net unrealized gains
(losses) . . . . . 70.4 70.4
Net accumulated gains
(losses) on cash
flow hedges. . . . 34.2 34.2
Foreign currency
translation
adjustment. . . . . (18.2) (18.2)
--------
Comprehensive income 254.6
Minority interest. . (6.0) (6.0)
----- -------- ------- ------ -------- ---
Balance at September
30, 2001. . . . . . $10.0 $4,998.1 $ 588.8 $390.5 $5,987.4 1.0
===== ======== ======= ====== ======== ===
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 Shares
Common Paid in Retained Comprehensive Shareholder's Outstanding
Stock Capital Earnings Income Equity (in thousands)
-------- ---------- ---------- ------------- --------------- --------------
(in millions)
Balance at January 1, 2000 . . . -- -- $ 4,782.9 $(29.7) $ 4,753.2 --
Demutualization transaction. . . $ 10.0 $4,961.2 (4,826.9) 144.3 1.0
Comprehensive income:
Net income before
demutualization. . . . . . . . 44.0 44.0
Net income after demutualization 582.6 582.6
--------- ---------
Net income for the period . . . 626.6 626.6
Other comprehensive income, net
of tax:
Net unrealized gains (losses) . 6.3 6.3
Foreign currency translation
adjustment . . . . . . . . . . (18.9) (18.9)
Minimum pension liability . . . (16.5) (16.5)
---------
Comprehensive income . . . . . . 597.5
Dividend paid to parent company. (466.0) (466.0)
-------- -------- --------- ------ --------- ---
Balance at September 30, 2000 . $ 10.0 $4,961.2 $ 116.6 $(58.8) $ 5,029.0 1.0
======== ======== ========= ====== ========= ===
Balance at January 1, 2001 . . . $ 10.0 $4,998.9 $ 330.1 $ 76.9 $ 5,415.9 1.0
Demutualization
transaction. . . . . (0.8) (0.8)
Comprehensive income:
Net income. . . . . 508.7 508.7
Other comprehensive
income, net of tax:
Net unrealized gains
(losses). . . . . . 76.1 76.1
Net accumulated gains
(losses) on cash
flow hedges. . . . 14.2 14.2
Foreign currency
translation
adjustment. . . . . (21.5) (21.5)
---------
Comprehensive income. 577.5
Dividend paid to
parent company. . . (250.0) (250.0)
Change in accounting
principle . . . . . 227.6 227.6
Minority interest. . 17.2 17.2
-------- -------- --------- ------ --------- ---
Balance at September
30, 2001. . . . . . $ 10.0 $4,998.1 $ 588.8 $390.5 $ 5,987.4 1.0
======== ======== ========= ====== ========= ===
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
Nine Months Ended
September 30
----------------------
2001 2000
----------- ----------
(in millions)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . $ 508.7 $ 626.6
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of discount--fixed maturities . . . (119.7) (85.9)
Realized investment and other (gains) losses, net 95.6 (78.7)
Change in deferred policy acquisition costs. . . (212.4) (131.7)
Depreciation and amortization. . . . . . . . . . 95.4 80.3
Net cash flows from trading securities . . . . . (34.4) (142.4)
Increase in accrued investment income. . . . . . (91.1) (100.6)
Decrease (increase) in premiums and accounts
receivable. . . . . . . . . . . . . . . . . . . 7.9 (25.1)
Increase in other assets and other liabilities,
net . . . . . . . . . . . . . . . . . . . . . . (154.4) (559.9)
Increase in policy liabilities and accruals, net 1,257.0 1,291.3
Increase in income taxes . . . . . . . . . . . . 267.1 300.4
Initial cash transferred to the closed block . . -- (158.6)
Contribution from the closed block . . . . . . . (70.9) (90.7)
---------- ---------
Net cash provided by operating activities . . . 1,548.8 925.0
Cash flows from investing activities:
Sales of:
Fixed maturities available-for-sale . . . . . . . 14,207.0 4,242.7
Equity securities available-for-sale. . . . . . . 329.5 257.3
Real estate . . . . . . . . . . . . . . . . . . . 4.3 49.5
Short-term investments and other invested assets. 118.6 24.5
Maturities, prepayments and scheduled redemptions of:
Fixed maturities held-to-maturity . . . . . . . . 161.1 1,216.9
Fixed maturities available-for-sale . . . . . . . 1,988.0 1,149.9
Short-term investments and other invested assets. 112.6 406.6
Mortgage loans on real estate . . . . . . . . . . 917.6 953.4
Purchases of:
Fixed maturities held-to-maturity . . . . . . . . (31.6) (1,292.9)
Fixed maturities available-for-sale . . . . . . . (21,448.3) (6,232.5)
Equity securities available-for-sale. . . . . . . (241.4) (194.4)
Real estate . . . . . . . . . . . . . . . . . . . (5.5) (48.0)
Short-term investments and other invested assets. (400.3) (568.8)
Mortgage loans on real estate issued. . . . . . . (1,001.3) (1,290.8)
Cash (paid) received related to acquisition of
business . . . . . . . . . . . . . . . . . . . . (41.0) 141.3
Cash received on sale of subsidiary . . . . . . . 12.8 --
Other, net. . . . . . . . . . . . . . . . . . . . 35.4 25.6
---------- ---------
Net cash used in investing activities. . . . . . $ (5,282.5) $(1,159.7)
========== =========
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)
Nine Months Ended
September 30
----------------------
2001 2000
---------- ----------
(in millions)
Cash flows from financing activities:
Issuance of common stock. . . . . . . . . . . . . . $ -- $ 10.0
Contribution from parent. . . . . . . . . . . . . . -- 1,589.0
Payments to eligible policyholders under Plan of
Reorganization . . . . . . . . . . . . . . . . . . -- (1,067.0)
Dividends paid to parent. . . . . . . . . . . . . . (250.0) (200.0)
Universal life and investment-type contract deposits 8,256.9 5,250.3
Universal life and investment-type contract
maturities and withdrawals . . . . . . . . . . . . (6,142.6) (5,435.8)
Issuance of short-term debt . . . . . . . . . . . . 160.4 --
Issuance of long-term debt. . . . . . . . . . . . . 145.2 20.0
Repayment of long-term debt . . . . . . . . . . . . (14.0) (73.2)
Net (decrease) increase in commercial paper . . . . (166.1) 64.6
--------- ---------
Net cash provided by financing activities. . . . . 1,989.8 157.9
--------- ---------
Net decrease in cash and cash equivalents. . . . . (1,743.9) (76.8)
Cash and cash equivalents at beginning of year . . . 2,841.2 1,797.7
--------- ---------
Cash and cash equivalents at end of period . . . . . $ 1,097.3 $ 1,720.9
========= =========
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
Basis of Presentation
The accompanying unaudited consolidated financial statements of John
Hancock Life Insurance Company, Inc. (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 nine month periods ended September 30, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. These unaudited consolidated financial statements
should be read in conjunction with the Company's annual audited financial
statements as of December 31, 2000 included in the Company's Form 10-K for the
year ended December 31, 2000 filed with the United States Securities and
Exchange Commission (hereafter referred to as the Company's 2000 Form 10-K).
The balance sheet at December 31, 2000 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.
Reorganization and Initial Public Offering
In connection with John Hancock Mutual Life Insurance Company's (the Mutual
Company) 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), 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, $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, the parent company, 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.
54
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (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 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 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 nine months ended September 30, 2001. This
change in accounting increased net income for the three and nine month periods
ended September 30, 2001 by $1.1 million and $3.3 million, respectively. The pro
forma results, assuming this change in accounting had taken place as of the
beginning of 2000, would not be materially different from the reported results.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June
1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities--Deferral of the Effective Date of FASB Statement 133." This
Statement amends SFAS No. 133 to defer its effective date for one year, to
fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities." This Statement makes certain changes in the hedging provisions of
SFAS No. 133, and is effective concurrent with SFAS No. 133. As amended, SFAS
No. 133 requires all derivatives to be recognized on the balance sheet at fair
value, and establishes special accounting for the following three types of
hedges: fair value hedges, cash flow hedges, and hedges of foreign currency
exposures of net investments in foreign operations. Special accounting for
qualifying hedges provides for matching the timing of gain or loss recognition
on the hedging instrument with the recognition of the corresponding change in
value of the hedged item. If the derivative is accounted for as a hedge,
depending on the nature of the hedge, the change in the fair value of
derivatives is either offset against the change in the fair value of the hedged
asset, liability or firm commitment through earnings or recognized in other
comprehensive income until the change in value of the hedged item is recognized
in earnings. The ineffective portion of a derivative's change in fair value is
recognized immediately in earnings and is included in net realized and other
investment gains. As a result, such amounts are not included in the
determination of the Company's segment after-tax operating income. In addition,
SFAS No. 133, as amended, precludes the designation of held-to-maturity fixed
maturity investment securities as hedged items in hedging relationships where
the hedged risk is interest rate risk.
On January 1, 2001, the Company adopted SFAS No. 133, as amended. The
Company's risk management philosophy has not changed as a result of adoption of
the Statement. The adoption of SFAS No. 133, as amended, resulted in a charge to
operations accounted for as a cumulative effect of accounting change of $16.1
million (net of tax of $8.3 million) as of January 1, 2001. 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 133, as amended, an increase
of $40.5 million (net of tax of $21.8 million), and (2) the reclassification of
certain 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).
55
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
New Accounting Pronouncements
In July 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. SFAS No. 141 is effective for business
combinations initiated after June 30, 2001.
In July 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
will result in an increase in net income of approximately $10-15 million for the
year ended December 31, 2002. During 2002, the Company will perform the first of
the required impairment tests of goodwill as of January 1, 2002 based on the
guidance in SFAS No. 142. The Company does not expect the impact of these
impairment tests on its earnings or financial position to be material.
In September 2001, the 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 earnings or financial position of
the Company.
In December 2000, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 00-3, "Accounting by Insurance Enterprises
for Demutualizations and Formations of Mutual Insurance Holding Companies and
Certain Long-Duration Participating Contracts", (SOP 00-3). SOP 00-3, which was
adopted with respect to accounting for demutualization expenses by the Company
effective December 15, 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 the nine month period ended September 30, 2000 of
$10.3 million (net of tax of $0.4 million). There were no demutualization
expenses for the three or nine months ended September 30, 2001. The remaining
provisions of this SOP, which will require (1) the inclusion of all closed block
activity together with all other assets, liabilities, revenues and expenses and
(2) recognition of a policyholder dividend obligation that represents cumulative
actual closed block earnings in excess of expected periodic amounts calculated
at the date of the demutualization, are effective no later than December 31,
2001. See Note 6 for a summary description of the closed block assets,
liabilities, revenues and expenses, which do not include the policyholder
dividend obligation that will be required in 2001. The Company currently is
evaluating the effect that establishing the policyholder dividend obligation
will have on its results of operations and financial position. That impact is
not known at this time.
Reclassifications
During the third quarter of 2001, the Company began classifying investment
returns related to equity indexed universal life insurance policies sold through
The Maritime Life Assurance Company (Maritime), a majority-owned subsidiary of
the Company, with benefits to policyholders and reclassified prior period
balances from net investment income to benefits to policyholders. See Note 7 to
the unaudited consolidated financial statements, Derivative and Hedging
Instruments in the section entitled Derivatives Not Designated as Hedging
Instruments.
56
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Codification
In March 1998, the National Association of Insurance Commissioners (NAIC)
adopted 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 states of domicile of these subsidiaries 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. Although the
implementation of Codification reduced the Company's domestic life insurance
subsidiaries' statutory-basis capital and surplus, these subsidiaries remain in
compliance with all regulatory and contractual obligations.
Recent Acquisitions
On October 1, 2001, The Maritime Life Assurance Company (Maritime), a
majority-owned Canadian subsidiary of the Company, completed its purchase of the
shares of Royal & Sun Alliance Life Insurance Company of Canada ("RSAF") for an
amount of approximately $149.9 million, financed primarily by a public debt
offering in Canada. RSAF's business includes life insurance, guaranteed interest
savings and retirement products and segregated funds. The Company believes that
this purchase will strengthen its competitive position in the Canadian market.
The proforma results for the periods ending September 30, 2001 and 2000,
assuming the acquisitions of RSAF had taken place as of the beginning of 2001
and 2000, respectively, would not be materially different from the reported
results.
On April 2, 2001, a subsidiary of the Company, Signature Fruit Company, LLC
(Signature Fruit), acquired certain assets and assumed certain liabilities out
of bankruptcy proceedings of Tri Valley Growers, Inc., a cooperative
association. The transaction was accounted for as a purchase and the results of
operations are included in the accompanying financial statements since the date
of acquisition. The fair values of assets acquired and liabilities assumed were
$252.1 million and $199.1 million, respectively. The net losses related to the
acquired operations included in the Company's results for the three and nine
month periods ended September 30, 2001 were $2.7 million and $4.0 million,
respectively. The pro forma results for the three and nine month periods ended
September 30, 2001 and 2000, respectively, assuming the acquisition had taken
place at the beginning of the periods presented, 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). The pro forma results for the three
and nine month periods ended September 30, 2000, assuming the acquisition of
Fortis had taken place as of the beginning of 2000, would not be materially
different from the reported results.
Note 2. Transactions with Parent
The Company provides JHFS with personnel, property and facilities in
carrying out certain of its corporate functions. The Company annually determines
a fee for these services and facilities based on a number of criteria. The
amount of service fee charged to JHFS was $5.9 million and $22.6 million for the
three and nine month periods ended September 30, 2001, respectively. No such
service fee was charged to JHFS during the comparable prior year periods. During
the nine month periods ended September 30, 2001 and 2000, the Company declared
dividends to JHFS of $250.0 million and $466.0 million, respectively, of which
$266.0 million was unpaid at September 30, 2000.
On November 5, 2001, the Board of Directors of the Company approved a plan
whereby the Company will dividend its ownership of Direct Foreign Operations
(DFO) and its remaining 55% ownership of Maritime to JHFS. In addition, the
board approved the payment by the Company to JHFS of a cash dividend of
approximately $11.0 million. The Company expects to complete these transactions
in the fourth quarter of 2001.
57
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
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, refer
to the Company's 2000 Form 10-K, as amended.
The following tables summarize selected financial information by segment
for the three and nine month periods ended or as of September 30, 2001 and 2000,
respectively, and reconciles segment revenues and segment after-tax operating
income to amounts reported in the unaudited consolidated statements of income
(in millions). Included in the Protection Segment for 2001 are the closed block
assets and liabilities, as well as the contribution from the closed block, which
is reflected in "Revenues" in the table below (see Note 6).
Retail Institutional
Retail Asset Institutional Investment Corporate
Protection Gathering G&SFP Management and Other Consolidated
---------- ---------- ------------- ------------- ---------- --------------
As of or for the three months ended
September 30, 2001
Revenues:
Segment revenues . . . . . . . . . $ 395.2 $ 296.2 $ 474.2 $ 33.2 $ 441.2 $ 1,640.0
Net realized investment and other
gains (losses), net . . . . . . . (0.9) 9.7 (57.8) -- (6.9) (55.9)
--------- --------- --------- -------- --------- ---------
Revenues . . . . . . . . . . . . . $ 394.3 $ 305.9 $ 416.4 $ 33.2 $ 434.3 $ 1,584.1
========= ========= ========= ======== ========= =========
Net investment income. . . . . . . $ 150.3 $ 130.9 $ 455.3 $ 8.9 $ 76.5 $ 821.9
Net Income:
Segment after-tax operating income 67.4 41.0 62.9 7.0 23.8 202.1
Net realized investment and other
gains (losses), net . . . . . . . (0.4) 6.6 (36.9) -- (4.0) (34.7)
Restructuring charges. . . . . . . (1.0) (0.3) -- (0.2) (1.5) (3.0)
Surplus tax. . . . . . . . . . . . 1.5 -- 2.1 -- 0.2 3.8
--------- --------- --------- -------- --------- ---------
Net income . . . . . . . . . . . . $ 67.5 $ 47.3 $ 28.1 $ 6.8 18.5 $ 168.2
========= ========= ========= ======== ========= =========
Supplemental Information:
Inter-segment revenues . . . . . . -- -- -- $ 6.5 $ (6.5) --
Equity in net income of investees
accounted for by the equity method $ 5.1 $ 2.2 $ 7.9 3.4 (7.3) $ 11.3
Amortization of deferred policy
acquisition costs, excluding
amounts related to net realized
investment gains (losses) . . . . 31.4 22.5 0.4 -- 9.7 64.0
Segment assets . . . . . . . . . . $27,676.6 $13,835.4 $32,373.3 $2,792.9 $12,315.1 $88,993.3
58
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Retail Institutional
Retail Asset Institutional Investment Corporate
Protection Gathering G&SFP Management and Other Consolidated
---------- ---------- ------------- ------------- ---------- --------------
As of or for the three months
ended September 30, 2000
Revenues:
Segment revenues . . . . . . . $ 379.9 $ 297.2 $ 483.5 $ 45.4 $ 421.8 $ 1,627.8
(Net realized investment and
other gains losses), net. . . (2.9) 4.2 (18.0) 1.1 14.4 (1.2)
--------- --------- --------- -------- --------- ---------
Revenues . . . . . . . . . . . $ 377.0 $ 301.4 $ 465.5 $ 46.5 $ 436.2 $ 1,626.6
========= ========= ========= ======== ========= =========
Net investment income . . . . . $ 141.2 $ 111.5 $ 438.2 $ 7.0 $ 94.1 $ 792.0
Net Income:
Segment after-tax operating
income. . . . . . . . . . . . 71.6 38.4 52.3 7.8 28.8 198.9
Net realized investment and
other gains (losses), net . . (1.9) 2.6 (11.3) 0.7 7.2 (2.7)
Restructuring charges. . . . . (1.8) (0.4) (0.1) -- (0.1) (2.4)
Surplus tax. . . . . . . . . . 5.5 0.4 4.0 -- (2.6) 7.3
--------- --------- --------- -------- --------- ---------
Net Income . . . . . . . . . . $ 73.4 $ 41.0 $ 44.9 $ 8.5 $ 33.3 $ 201.1
========= ========= ========= ======== ========= =========
Supplemental Information:
Inter-segment revenues . . . . -- -- -- $ 9.7 $ (9.7) --
Equity in net income of
investees accounted for by the
equity method . . . . . . . . $ (2.8) $ (1.5) $ (0.4) (2.5) 13.1 $ 5.9
Amortization of deferred policy
acquisition costs, excluding
amounts related to net
realized investment gains
(losses). . . . . . . . . . . 21.2 17.5 0.8 -- 10.9 50.4
Segment assets . . . . . . . . $27,175.7 $14,439.1 $31,061.8 $2,149.6 $12,124.3 $86,950.5
59
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Retail Institutional
Retail Asset Institutional Investment Corporate
Protection Gathering G&SFP Management and Other Consolidated
---------- ---------- ------------- ------------- ---------- --------------
As of or for the nine months
ended September 30, 2001
Revenues:
Segment revenues . . . . . . . $ 1,131.3 $ 880.0 $ 1,462.6 $ 99.7 $ 1,350.2 $ 4,923.8
Net realized investment and
other gains (losses), net . . (38.8) (1.5) (81.3) (0.1) 19.4 (102.3)
--------- --------- --------- -------- --------- ----------
Revenues . . . . . . . . . . . $ 1,092.5 $ 878.5 $ 1,381.3 $ 99.6 $ 1,369.6 $ 4,821.5
========= ========= ========= ======== ========= ==========
Net investment income. . . . . $ 440.2 $ 373.5 $ 1,386.5 $ 18.1 $ 241.9 $ 2,460.2
Net Income:
Segment after-tax operating
income. . . . . . . . . . . . 212.9 109.9 180.2 17.0 63.7 583.7
Net realized investment and
other gains (losses), net . . (24.0) -- (51.3) (0.1) 11.7 (63.7)
Restructuring charges. . . . . (3.8) (15.4) (0.7) (0.7) (1.7) (22.3)
Cumulative effect of accounting
changes . . . . . . . . . . . 11.7 (0.5) (1.2) (0.2) (2.6) 7.2
Surplus tax. . . . . . . . . . 1.5 -- 2.1 -- 0.2 3.8
--------- --------- --------- -------- --------- ----------
Net income . . . . . . . . . . $ 198.3 $ 94.0 $ 129.1 $ 16.0 $ 71.3 $ 508.7
========= ========= ========= ======== ========= ==========
Supplemental Information:
Inter-segment revenues . . . . -- -- -- $ 21.2 $ (21.2) --
Equity in net income of
investees accounted for by the
equity method . . . . . . . . $ 9.9 $ 6.1 $ 16.0 3.8 21.0 56.8
Amortization of deferred policy
acquisition costs, excluding
amounts related to net
realized investment gains
(losses). . . . . . . . . . . 83.3 59.5 1.9 -- 48.7 193.4
Segment assets . . . . . . . . $27,676.6 $13,835.4 $32,373.3 $2,792.9 $12,315.1 $88,993.3
60
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Retail Institutional
Retail Asset Institutional Investment Corporate
Protection Gathering G&SFP Management and Other Consolidated
---------- ---------- ------------- ------------- ---------- --------------
As of or for the nine months
ended September 30, 2000
Revenues:
Segment revenues . . . . . . . $ 1,169.1 $ 894.1 $ 1,583.0 $ 173.3 $ 1,304.0 $ 5,123.5
Net realized investment and
other gains (losses), net . . 11.6 10.1 (38.9) 1.7 93.6 78.1
--------- --------- --------- -------- --------- ---------
Revenues . . . . . . . . . . . $ 1,180.7 $ 904.2 $ 1,544.1 $ 175.0 $ 1,397.6 $ 5,201.6
========= ========= ========= ======== ========= =========
Net investment income. . . . . $ 456.9 $ 327.4 $ 1,287.0 $ 17.3 $ 320.0 $ 2,408.6
Net Income:
Segment after-tax operating
income. . . . . . . . . . . . 195.4 104.0 161.6 40.2 78.8 580.0
Net realized investment and
other gains (losses), net . . 7.1 6.3 (24.4) 1.0 57.4 47.4
Restructuring charges. . . . . (5.4) (1.4) (2.3) -- (1.0) (10.1)
Group pension dividend
transfer. . . . . . . . . . . -- -- 5.7 -- -- 5.7
Demutualization expenses . . . (0.2) (0.1) (0.2) -- (0.2) (0.7)
Other demutualization related
costs . . . . . . . . . . . . (6.7) (1.4) (1.7) -- (0.4) (10.2)
Surplus tax. . . . . . . . . . 8.4 0.5 5.5 -- 0.1 14.5
--------- --------- --------- -------- --------- ---------
Net income . . . . . . . . . . $ 198.6 $ 107.9 $ 144.2 $ 41.2 $ 134.7 $ 626.6
========= ========= ========= ======== ========= =========
Supplemental Information:
Inter-segment revenues . . . . -- -- -- $ 31.2 $ (31.2) --
Equity in net income of
investees accounted for by the
equity method . . . . . . . . $ 2.9 $ 1.7 $ 5.9 5.5 71.6 $ 87.6
Amortization of deferred policy
acquisition costs, excluding
amounts related to net
realized investment gains
(losses). . . . . . . . . . . 46.9 53.6 2.2 -- 41.1 143.8
Segment assets . . . . . . . . $27,175.7 $14,439.1 $31,061.8 $2,149.6 $12,124.3 $86,950.5
Note 4. Severance
As part of JHFS's on-going Competitive Position Project, the Company
participated in 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 798 employees have
been or will be terminated. As of September 30, 2001 and December 31, 2000, the
liability for employee termination costs, included in other liabilities was
$19.3 million and $20.6 million, respectively. Employee termination costs,
included in other operating costs and expenses, were $4.4 million and $3.6
million for the three months ended September 30, 2001 and 2000 and $35.0 million
and $16.6 million for the nine months ended September 30, 2001 and 2000,
respectively. Of the total number of employees affected, approximately 794
employees were terminated as of September 30, 2001, having received benefit
payments of approximately $62.1 million.
61
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 5. Contingencies
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 September 30, 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.
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 $43.1 million
and $224.0 million at September 30, 2001 and December 31, 2000, respectively.
There were no additional reserves recorded related to the settlement for the
three and nine month periods ended September 30, 2001 and 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 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.
Given the uncertainties associated with estimating the reserve, it is
reasonably possible that the final cost of the settlement could differ
materially from the amounts presently provided for by the Company. The Company
will continue to update its estimate of the final cost of the settlement as the
claims are processed and more specific information is developed, particularly as
the actual cost of the claims subject to alternative dispute resolution becomes
available. However, based on information available at the time, and the
uncertainties associated with the final claim processing and alternative dispute
resolution, the range of any additional cost related to the settlement cannot be
estimated with precision.
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 insurance operations. The insurance
business sold was transferred to UNICARE through a 100% coinsurance agreement.
The Company secured a $397.0 million letter of credit facility with a group of
banks. The banks have agreed to issue a letter of credit to the Company pursuant
to which the Company may draw up to $397.0 million for any claims not satisfied
by UNICARE under the coinsurance agreement after the Company has incurred the
first $113.0 million of losses from such claims. The amount available pursuant
to the letter of credit agreement and any letter of credit issued thereunder
automatically will be reduced on a scheduled basis consistent with the
anticipated run-off of liabilities related to the business reinsured under the
coinsurance agreement. The letter of credit facility was reduced to $127.0
million on March 1, 2001. The letter of credit facility and any letter of credit
issued thereunder are scheduled to expire on March 1, 2002. The Company remains
liable to its policyholders to the extent that UNICARE does not meet its
contractual obligations under the coinsurance agreement.
62
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 uncollectable 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 September 30, 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
uncollectable. 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.
63
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6. Closed Block
Under the Plan, the Company created a closed block for the benefit of
policies included therein. The following table sets forth certain summarized
financial information relating to the closed block as of the dates indicated:
September 30 December 31
2001 2000
------------ -------------
(in millions)
Assets
Investments
Fixed maturities:
Held-to-maturity--at amortized cost
(fair value: September 30--$106.1; December
31--$2,327.4) . . . . . . . . . . . . . . . . . $ 108.1 $ 2,269.9
Available-for-sale-at fair value
(cost: September 30--$5,101.6; December
31--$2,378.7) . . . . . . . . . . . . . . . . . 5,298.5 2,353.0
Equity securities:
Available-for-sale--at fair value
(cost: September 30--$10.3; December 31--$5.3) . 11.5 6.3
Mortgage loans on real estate . . . . . . . . . . 1,831.4 1,930.6
Policy loans. . . . . . . . . . . . . . . . . . . 1,548.6 1,540.6
Short-term investments. . . . . . . . . . . . . . 11.7 62.1
Other invested assets . . . . . . . . . . . . . . 64.5 40.7
--------- ---------
Total Investments . . . . . . . . . . . . . . . 8,874.3 8,203.2
Cash and cash equivalents . . . . . . . . . . . . 174.8 305.6
Accrued investment income . . . . . . . . . . . . 164.9 149.3
Premiums and accounts receivable. . . . . . . . . 22.6 27.1
Deferred policy acquisition costs . . . . . . . . 778.7 947.3
Other assets. . . . . . . . . . . . . . . . . . . 88.0 77.5
--------- ---------
Total Closed Block Assets . . . . . . . . . . . $10,103.3 $ 9,710.0
========= =========
Liabilities
Future policy benefits. . . . . . . . . . . . . . $10,105.1 $ 9,910.5
Policyholders' funds. . . . . . . . . . . . . . . 1,492.1 1,459.5
Other liabilities . . . . . . . . . . . . . . . . 676.0 665.9
--------- ---------
Total Closed Block Liabilities. . . . . . . . . $12,273.2 $12,035.9
========= =========
64
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 periods indicated:
For the Period
Three Months Three Months Nine Months February 1
Ended Ended Ended Through
September 30 September 30 September 30 September 30
2001 2000 2001 2000
------------ ------------ ------------ --------------
(in millions)
Revenues
Premiums . . . . . . $226.8 $217.2 $ 672.0 $ 619.0
Net investment income 167.5 155.8 500.0 423.1
Net realized
investment and other
gains (losses), net 5.9 1.4 (3.2) 1.3
Other closed block
revenue (expense) . -- (0.2) 0.4 (0.4)
------ ------ -------- --------
Total closed block
revenues . . . . . 400.2 374.2 1,169.2 1,043.0
Benefits and Expenses
Benefits to
policyholders . . . 248.5 203.1 717.3 613.4
Other operating costs
and expenses. . . . (2.7) (3.4) (6.6) (9.1)
Amortization of
deferred policy
acquisition costs . 12.1 27.1 51.4 55.5
Dividends to
policyholders . . . 108.1 108.0 336.2 292.5
------ ------ -------- --------
Total closed block
benefits and
expenses. . . . . . 366.0 334.8 1,098.3 952.3
------ ------ -------- --------
Contribution from
the closed block . $ 34.2 $ 39.4 $ 70.9 $ 90.7
====== ====== ======== ========
Note 7. Derivatives and Hedging 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.
The fair value of derivative instruments classified as assets at September
30, 2001 was $180.1 million, and appears on the consolidated balance sheet in
other assets. The fair value of derivative instruments classified as liabilities
at September 30, 2001 was $717.6 million, and appears on the consolidated
balance sheet in other liabilities.
In certain of these cases, the Company uses hedge accounting as allowed by
SFAS No. 133, as amended, by designating derivative instruments as either fair
value 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 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.
65
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (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 and losses.
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 and currency rate swap agreements is accrued and
recognized as a component of net investment income.
The Company also manages interest rate exposure by using interest rate swap
agreements to modify certain liabilities, such as fixed rate debt and Constant
Maturity Treasuries (CMT) indexed liabilities, by converting them to a
LIBOR-based floating rate.
The Company enters into 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.
For the three and nine month periods ended September 30, 2001, the Company
recognized a net loss of $40.7 million and $39.8 million, respectively, related
to the ineffective portion of its fair value hedges, and a net loss of $6.1
million and $7.2 million, respectively, related to the portion of the hedging
instruments that were excluded from the assessment of hedge effectiveness. For
the three and nine month periods ended September 30, 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 asset acquisitions, which will
support the Company's long-term care 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.
66
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
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.
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.
For the three and nine month periods ended September 30, 2001, the Company
recognized a net gain of $1.2 million and $0.7 million, respectively, related to
the ineffective portion of its cash flow hedges, and a net gain of $46.9 million
and $24.3 million, respectively, related to the portion of the hedging
instruments that was excluded from the assessment of hedge effectiveness. For
the three and nine month periods ended September 30, 2001, all of the Company's
hedged forecast transactions qualified as cash flow hedges.
For both the three and nine month periods ended September 30, 2001, a net
loss of $0.5 million was reclassified from other accumulated comprehensive
income to earnings. It is anticipated that approximately $0.4 million will be
reclassified from other accumulated comprehensive income to earnings within the
next twelve months. The maximum length for which variable cash flows are hedged
is 24 years.
For the three and nine month periods ended September 30, 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 three and nine month periods ended September 30, 2001, $34.2
million and $14.2 million of gains (net of tax of $18.4 million and $7.6
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 $37.0 million (net of tax
of $19.9 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.
The Company enters into equity indexed futures contracts and equity indexed
option contracts and equity swaps to generate investment return related to
equity indexed universal life insurance policies. For the three month periods
ended September 30, 2001 and 2000, $(11.4) million and $0.1 million,
respectively, and for the nine month periods ended September 30, 2001 and 2000,
$19.1 million and $(35.3) million, respectively, of gains and losses on these
derivatives are included in benefits to policyholders and are offset by
crediting similar amounts to policyholders' accounts.
Note 8. 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 the
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.
67
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, 2000 and 1999, and the related
consolidated statements of income, changes in shareholder's equity, and cash
flows for each of the three years in the period ended December 31, 2000. Our
audits also included the financial statement schedules listed in the Index at
Item 14(a). These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with 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, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, 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.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
March 16, 2001
68
JOHN HANCOCK LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
--------------------
2000 1999
--------- -----------
(in millions)
Assets
Investments--Notes 3 and 4
Fixed maturities:
Held-to-maturity--at amortized cost
(fair value: 2000--$11,651.2; 1999--$13,438.7). . . $11,888.6 $13,790.2
Available-for-sale--at fair value (cost:
2000--$15,790.3; 1999--$17,150.9) . . . . . . . . . 16,023.5 16,959.2
Equity securities:
Available-for-sale--at fair value (cost:
2000--$830.6; 1999--$1,086.2) . . . . . . . . . . . 1,094.9 1,230.2
Trading securities--at fair value (cost:
2000--$193.4; 1999--$53.8). . . . . . . . . . . . . 231.6 84.1
Mortgage loans on real estate . . . . . . . . . . . . 8,968.9 10,733.0
Real estate . . . . . . . . . . . . . . . . . . . . . 519.0 548.5
Policy loans . . . . . . . . . . . . . . . . . . . . . 428.6 1,938.8
Short-term investments . . . . . . . . . . . . . . . . 151.9 166.9
Other invested assets . . . . . . . . . . . . . . . . 1,353.0 1,311.1
--------- ---------
Total Investments . . . . . . . . . . . . . . . . . 40,660.0 46,762.0
Cash and cash equivalents . . . . . . . . . . . . . . 2,841.2 1,797.7
Accrued investment income . . . . . . . . . . . . . . 585.9 652.0
Premiums and accounts receivable . . . . . . . . . . . 210.8 215.6
Deferred policy acquisition costs . . . . . . . . . . 2,388.5 3,142.7
Reinsurance recoverable--Note 9 . . . . . . . . . . . 2,829.0 2,246.0
Other assets . . . . . . . . . . . . . . . . . . . . . 2,100.6 1,724.8
Closed block assets--Note 6 . . . . . . . . . . . . . 9,710.0 --
Separate accounts assets . . . . . . . . . . . . . . . 26,454.8 28,047.6
--------- ---------
Total Assets . . . . . . . . . . . . . . . . . . . . $87,780.8 $84,588.4
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
69
JOHN HANCOCK LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS--(CONTINUED)
December 31,
2000 1999
--------- ------------
(in millions)
Liabilities and Shareholder's Equity
Liabilities
Future policy benefits . . . . . . . . . . . . . . . $22,996.4 $31,106.2
Policyholders' funds . . . . . . . . . . . . . . . . 15,722.9 15,562.3
Unearned revenue . . . . . . . . . . . . . . . . . . 671.3 490.2
Unpaid claims and claim expense reserves . . . . . . 253.7 358.9
Dividends payable to policyholders . . . . . . . . . 130.8 472.8
Short-term debt--Note 7 . . . . . . . . . . . . . . . 245.3 453.8
Long-term debt--Note 7 . . . . . . . . . . . . . . . 534.0 536.9
Income taxes--Note 5 . . . . . . . . . . . . . . . . 428.8 161.8
Other liabilities . . . . . . . . . . . . . . . . . . 2,600.7 2,551.2
Closed block liabilities--Note 6 . . . . . . . . . 12,035.9 --
Separate accounts liabilities . . . . . . . . . . . 26,454.8 28,047.6
--------- ---------
Total Liabilities . . . . . . . . . . . . . . . . . 82,074.6 79,741.7
Minority interest--Note 8 . . . . . . . . . . . . . . 290.3 93.5
Commitments and contingencies--Note 11
Shareholder's Equity--Note 12 . . . . . . . . . . . .
Common stock, $10,000 par value; 1,000 shares
authorized and outstanding . . . . . . . . . . . . . 10.0 --
Additional paid in capital . . . . . . . . . . . . . 4,998.9 --
Retained earnings . . . . . . . . . . . . . . . . . . 330.1 4,782.9
Accumulated other comprehensive income (loss) . . . . 76.9 (29.7)
--------- ---------
Total Shareholder's Equity . . . . . . . . . . . . 5,415.9 4,753.2
--------- ---------
Total Liabilities and Shareholder's Equity . . . . $87,780.8 $84,588.4
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
70
JOHN HANCOCK LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
------------------------------
2000 1999 1998
--------- --------- ---------
(in millions)
Revenues
Premiums . . . . . . . . . . . . . . . . . $2,190.4 $2,411.3 $2,109.0
Universal life and investment-type product
charges. . . . . . . . . . . . . . . . . . 746.7 703.3 597.0
Net investment income--Note 3 . . . . . . . 3,251.0 3,568.5 3,328.0
Net realized investment gains, net of
related amortization of deferred policy
acquisition costs and amounts credited
to participating pension contractholders
($6.0, $85.8 and $120.3, respectively)--
Notes 1, 3, and 13 . . . . . . . . . . . . 83.9 175.2 106.1
Investment management revenues, commissions
and other fees . . . . . . . . . . . . . . 764.8 680.9 659.7
Other revenue (expense) . . . . . . . . . . (13.9) 0.1 10.3
Contribution from the closed block--Note 6 124.1 -- --
-------- -------- --------
Total revenues . . . . . . . . . . . . . 7,147.0 7,539.3 6,810.1
Benefits and expenses
Benefits to policyholders, excluding amounts
related to net realized investment gains
credited to participating pension
contractholders ($6.9, $35.3, $79.1,
respectively)--Notes 1, 3, and 13. . . . . 4,092.5 5,133.0 4,082.6
Other operating costs and expenses . . . . 1,507.7 1,384.4 1,357.8
Amortization of deferred policy acquisition
costs, excluding amounts related to net
realized investment gains (losses) (($0.9),
$50.5 and $41.2, respectively)--Notes 1,
3 and 13 . . . . . . . . . . . . . . . . . 183.8 164.2 261.2
Dividends to policyholders . . . . . . . . 157.3 501.6 473.2
Demutualization expenses. . . . . . . . . . 10.6 96.2 18.0
-------- -------- --------
Total benefits and expenses . . . . . . . 5,951.9 7,279.4 6,192.8
-------- -------- --------
Income before income taxes, minority
interest and cumulative effect of
accounting change . . . . . . . . . . . . 1,195.1 259.9 617.3
Income taxes--Note 5 . . . . . . . . . . . 344.4 97.9 174.1
-------- -------- --------
Income before minority interest and
cumulative effect of accounting change . . 850.7 162.0 443.2
Minority interest--Note 8 . . . . . . . . . (10.6) (1.6) (1.1)
-------- -------- --------
Income before cumulative effect of
accounting change . . . . . . . . . . . . 840.1 160.4 442.1
Cumulative effect of accounting change, net
of tax--Note 1 . . . . . . . . . . . . . . -- (9.7) --
-------- -------- --------
Net income . . . . . . . . . . . . . . . . $ 840.1 $ 150.7 $ 442.1
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
71
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
Stock Capital Earnings Income (Loss) Equity
------ ---------- --------- -------------- ----------------
(in millions)
Balance at January 1,
1998 . . . . . . . . $4,190.1 $ 446.7 $4,636.8
Comprehensive income:
Net income . . . . . 442.1 442.1
Other comprehensive
income, net of tax:
Net unrealized gains
(losses) . . . . . (148.6) (148.6)
Foreign currency
translation
adjustment. . . . . (6.0) (6.0)
Minimum pension
liability . . . . . (8.8) (8.8)
--------
Comprehensive income 278.7
-------- ------- --------
Balance at December
31, 1998 . . . . . . 4,632.2 283.3 4,915.5
Comprehensive income:
Net income . . . . . 150.7 150.7
Other comprehensive
income, net of tax:
Net unrealized gains
(losses) . . . . . (307.0) (307.0)
Foreign currency
translation
adjustment . . . . 16.9 16.9
Minimum pension
liability . . . . . (22.9) (22.9)
--------
Comprehensive income (162.3)
-------- ------- --------
Balance at December
31, 1999 . . . . . . $4,782.9 $ (29.7) $4,753.2
======== ======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
72
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
Stock Capital Earnings Income (Loss) Equity
------ ---------- --------- -------------- ----------------
(in millions)
Balance at December
31, 1999 . . . . . . -- -- $ 4,782.9 $(29.7) $4,753.2
Demutualization
transaction. . . . . $10.0 $4,956.4 (4,826.9) 139.5
Comprehensive income:
Net income before
demutualization . . 44.0 44.0
Net income after
demutualization . . 796.1 796.1
--------- --------
Net income for the
year. . . . . . . . 840.1 840.1
Other comprehensive
income, net of tax:
Net unrealized gains
(losses). . . . . . 122.0 122.0
Foreign currency
translation
adjustment. . . . . (19.1) (19.1)
Minimum pension
liability . . . . . 8.2 8.2
------ --------
Comprehensive income 951.2
Capital contributions
from
parent company . . . 42.5 42.5
Dividend paid to
parent
company . . . . . . (466.0) (466.0)
Minority interest . . (4.5) (4.5)
----- -------- --------- ------ --------
Balance at December
31, 2000 . . . . . . $10.0 $4,998.9 $ 330.1 $ 76.9 $5,415.9
===== ======== ========= ====== ========
The accompanying notes are an integral part of these consolidated financial
statements.
73
JOHN HANCOCK LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------
2000 1999 1998
---------- ----------- -----------
(in millions)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . $ 840.1 $ 150.7 $ 442.1
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization of discount--fixed
maturities. . . . . . . . . . . . . (121.8) (77.9) (55.6)
Realized investment gains, net . . . (83.9) (175.2) (106.1)
Change in deferred policy acquisition
costs . . . . . . . . . . . . . . . (334.0) (281.3) (173.8)
Depreciation and amortization . . . 98.6 74.3 90.2
Net cash flows from trading
securities. . . . . . . . . . . . . (147.5) (16.2) 4.2
(Increase) decrease in accrued
investment income . . . . . . . . . (70.0) (116.3) 21.9
Decrease in premiums and accounts
receivable. . . . . . . . . . . . . 0.8 11.8 131.3
Increase in other assets and other
liabilities, net . . . . . . . . . (546.4) (218.7) (427.4)
Increase in policy liabilities and
accruals, net . . . . . . . . . . . 1,776.9 2,253.6 1,347.4
Loss on sale of subsidiaries . . . . -- 21.3 --
Increase (decrease) in income taxes. 434.6 (4.2) 16.6
Initial cash transferred to the
closed block . . . . . . . . . . . (158.6) -- --
Contribution from the closed block . (124.1) -- --
--------- ---------- ----------
Net cash provided by operating
activities. . . . . . . . . . . . . . 1,564.7 1,621.9 1,290.8
Cash flows from investing activities:
Sales of:
Fixed maturities held-to-maturity . -- 28.7 8.5
Fixed maturities available-for-sale 4,896.8 9,824.0 21,079.2
Equity securities available-for-sale 742.9 182.7 249.2
Real estate . . . . . . . . . . . . 66.4 1,286.3 640.3
Short-term investments and other
invested assets . . . . . . . . . . 101.9 764.4 926.3
Maturities, prepayments and scheduled
redemptions of:
Fixed maturities held-to-maturity . 1,553.9 1,777.1 2,166.9
Fixed maturities available-for-sale 1,394.2 1,880.3 2,162.3
Short-term investments and other
invested assets . . . . . . . . . . 459.9 311.8 79.4
Mortgage loans on real estate . . . 1,429.9 1,509.0 1,849.8
Purchases of:
Fixed maturities held-to-maturity . (1,860.8) (2,715.1) (2,428.5)
Fixed maturities available-for-sale (7,553.0) (12,660.6) (24,118.7)
Equity securities available-for-sale (511.6) (384.1) (384.5)
Real estate . . . . . . . . . . . . (46.0) (197.2) (152.0)
Short-term investments and other
invested assets . . . . . . . . . . (818.5) (715.4) (1,103.0)
Mortgage loans on real estate issued (1,605.8) (2,410.7) (2,265.3)
Cash received related to acquisition
of business . . . . . . . . . . . . 141.3 -- --
Net cash received (paid) related to
sale of subsidiaries . . . . . . . 267.2 (206.5) --
Net cash paid for acquisition of
subsidiary. . . . . . . . . . . . . -- (200.4) --
Other, net . . . . . . . . . . . . . 22.8 (7.9) (13.0)
--------- ---------- ----------
Net cash used in investing activities (1,318.5) (1,933.6) (1,303.1)
========= ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
74
JOHN HANCOCK LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
Year Ended December 31,
---------------------------------
2000 1999 1998
---------- ---------- ----------
(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 . . . . (466.0) -- --
Proceeds from issuance of preferred
stock. . . . . . . . . . . . . . . . . -- $ 68.2 --
Universal life and investment--type
contract deposits . . . . . . . . . . 8,148.3 8,365.9 $ 8,214.8
Universal life and investment-type
contract maturities and withdrawals. . (7,158.8) (8,144.0) (7,204.1)
Issuance of long-term debt . . . . . . 20.0 6.0 77.0
Repayment of long-term debt . . . . . . (73.2) (15.5) (298.1)
Net (decrease) increase in commercial
paper. . . . . . . . . . . . . . . . . (158.3) (30.5) 60.4
--------- --------- ---------
Net cash provided by financing
activities. . . . . . . . . . . . . . 797.3 250.1 850.0
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . 1,043.5 (61.6) 837.7
Cash and cash equivalents at beginning of
year. . . . . . . . . . . . . . . . . . 1,797.7 1,859.3 1,021.6
--------- --------- ---------
Cash and cash equivalents at end of year $ 2,841.2 $ 1,797.7 $ 1,859.3
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statement.
75
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--Summary of Significant Accounting Policies
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.
Reorganization and Initial Public Offering
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, $1,438.7 million of cash and $43.7 million 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.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its majority-owned and controlled subsidiaries. Less than
majority-owned entities in which the Company has at least a 20% interest are
accounted for using the equity method. All significant intercompany transactions
and balances have been eliminated.
As of October 1, 2000, the Company sold 100% of the common stock of John
Hancock Reassurance Company Ltd. (JHReCO), a Bermuda based subsidiary, to JHFS
for cash of $44.9 million. The sale has been accounted for as a de-pooling of
interests, and accordingly all prior period consolidated financial statements
have been restated to exclude the results of operations, financial position, and
cash flows of JHReCO from the Company's financial statements. No gain or loss
was recognized on the transaction.
The preparation of financial statements 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.
Investments
In accordance with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", the Company is required to classify its investments 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.
Bonds and mortgage-backed securities which the Company has the positive intent
and ability to hold to maturity are classified as held-to-maturity and 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 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.
76
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1--Summary of Significant Accounting Policies (continued)
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, and
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 which the Company has classified as
available-for-sale, unrealized gains and losses are reflected in shareholder's
equity as described above. Impairments in value deemed to be other than
temporary are reported as a component of realized investment gains (losses).
Gains and losses, both realized and unrealized, on equity securities classified
as trading are included in net investment income.
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 realized investment 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 realized investment 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 realized investment gains (losses).
The Company does not depreciate real estate to be disposed of. During 1998, the
Company made a strategic decision to sell the majority of its commercial real
estate portfolio. Properties with a carrying value of $43.7 million, $979.7
million and $512.0 million were sold in 2000, 1999 and 1998, respectively. As of
December 31, 2000, the plan to divest the Company of the majority of its
commercial real estate portfolio is substantially complete.
Policy loans are carried at unpaid principal balances which approximate
fair value.
Short-term investments are carried at amortized cost.
Partnership and joint venture interests in which the Company does not have
control or a majority ownership interest are recorded using the equity method of
accounting and included in other invested assets.
Realized investment gains and losses, other than those related to separate
accounts for which the Company does not bear the investment risk, are determined
on the basis of specific identification and are reported net of related
amortization of deferred policy acquisition costs and amounts credited to
participating pension contractholder accounts.
77
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1--Summary of Significant Accounting Policies (continued)
Derivative Financial Instruments
The Company uses futures contracts, interest rate swap, cap and floor
agreements, swaptions and currency rate swap agreements for other than trading
purposes to hedge and manage its exposure to changes in interest rate levels,
and foreign exchange rate fluctuations, and to manage duration mismatch of
assets and liabilities. The Company also uses equity collar agreements to reduce
its exposure to market fluctuations in certain equity securities.
The Company uses futures contracts principally to hedge risks associated
with interest rate fluctuations on sales of guaranteed investment contracts and
funding agreements. Futures contracts represent commitments to either purchase
or sell securities at a specified future date and at a specified price or yield.
The Company uses interest rate swap, cap and floor agreements and swaptions
for the purpose of converting the interest rate characteristics (fixed or
variable) of certain investments to more closely match its liabilities. 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) to hedge against interest rate changes. 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) to hedge against rising
and falling interest rates. Swaptions entitle the Company to receive settlement
payments from other parties on specified expiration dates, contingent on future
interest rates. The amount of such settlement payments, if any, is determined by
the present value of the difference between the fixed rate on a market rate swap
and the strike rate multiplied by the notional amount.
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 Company invests in common stock that is subject to fluctuations from
market value changes in stock prices. The Company sometimes seeks to reduce its
market exposure to such holdings by entering into equity collar agreements. A
collar consists of a call option that limits the Company's potential for gain
from appreciation in the stock price as well as a put option that limits the
Company's potential for loss from a decline in the stock price.
Futures contracts are carried at fair value and require daily cash
settlement. Changes in the fair value of futures contracts that qualify as
hedges are deferred and recognized as an adjustment to the hedged asset or
liability.
The net differential to be paid or received on interest rate swap
agreements and currency rate swap agreements is accrued and recognized as a
component of net investment income. The related amounts due to or from
counterparties are included in accrued investment income receivable or payable.
Premiums paid for interest rate cap and floor agreements and swaptions are
deferred and amortized to net investment income on a straight-line basis over
the term of the agreements. The unamortized premium is included in other assets.
Amounts earned on interest rate cap and floor agreements and swaptions are
recorded as an adjustment to net investment income. Settlements received on
swaptions are deferred and amortized over the life of the hedged assets as an
adjustment to yield.
78
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1--Summary of Significant Accounting Policies (continued)
Interest rate swap, cap and floor agreements, swaptions and currency rate
swap agreements which hedge instruments designated as available-for-sale are
adjusted to fair value with the resulting unrealized gains and losses, net of
related taxes, included in shareholder's equity. The net unrealized gain
(losses) on derivatives hedging available-for-sale instruments included in
shareholder's equity was ($181.2) million, $86.1 million, and ($128.1) million,
at December 31, 2000, 1999 and 1998, respectively. The change in net unrealized
gain (losses) for derivatives recorded as part of other comprehensive income for
the years ended December 31, 2000, 1999 and 1998 was ($267.3) million, $214.2
million, and ($68.4) million, respectively. The fair value of those derivatives
used to hedge items other than available-for-sale instruments is not recognized
in the financial statements.
Equity collar agreements are carried at fair value and are included in
other invested assets, with the resulting unrealized gains and losses included
in realized investment gains (losses).
Hedge accounting is applied after the Company determines that the items to
be hedged expose it to interest or price risk, designates these financial
instruments as hedges and assesses whether the instruments reduce the hedged
risks through the measurement of changes in the value of the instruments and the
items being hedged at both inception and throughout the hedge period.
From time to time, futures contracts, interest rate swaps, cap and floor
agreements, swaptions and currency rate swap agreements are terminated. If the
terminated position was accounted for as a hedge, realized gains or losses are
deferred and amortized over the remaining lives of the hedged assets or
liabilities. Realized and unrealized changes in fair value of derivatives
designated with items that no longer exist or are no longer probable of
occurring are recorded as a component of the gain or loss arising from the
disposition of the designated item or included in income when it is determined
that the item is no longer probable of occurring. Changes in the fair value of
derivatives no longer effective as hedges are recognized in income from the date
the derivative becomes ineffective until their expiration.
Revenue Recognition
Premiums from participating and non-participating traditional life
insurance and annuity policies with life contingencies are recognized as income
when due.
Premiums from universal life and investment-type contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period against policyholders' account
balances for mortality charges, policy administration charges and surrender
charges.
Premiums for contracts with a single premium or a limited number of premium
payments, due over a significantly shorter period than the total period over
which benefits are provided, are recorded in income when due. The portion of
such premium that is not required to provide for all benefits and expenses is
deferred and recognized in income in a constant relationship to insurance in
force or, for annuities, the amount of expected future benefit payments.
Premiums from long-term care insurance contracts are recognized as income
when due. Premiums from group life and health insurance contracts are recognized
as income over the period to which the premiums relate in proportion to the
amount of insurance protection provided.
Property and casualty insurance premiums are recognized as earned over the
terms of the contracts.
79
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1--Summary of Significant Accounting Policies (continued)
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.
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 12.6% for group annuity liabilities.
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. As of December 31,
2000, the Company had approximately $6.3 billion of funding agreements, none of
which contains early termination provisions. 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 4.6% to 16.0% for investment-type products.
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.
80
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1--Summary of Significant Accounting Policies (continued)
Property and casualty reserves include loss reserve estimates based on
claims reported and unreported and estimates of future expenses to be incurred
in settlement of the claims provided for in the loss reserves estimates. These
liabilities include estimates of future trends in claim severity and frequency
and other factors that could vary as the losses are ultimately settled. During
1999, the Company sold the rest of its property and casualty business.
Participating Insurance
Participating business represents approximately 86.3%, 88.1%, and 87.7% of
the Company's life insurance in force, 97.9%, 98.3%, and 98.4% of the number of
life insurance policies in force, and 99.6%, 97.4%, and 97.3% of life insurance
premiums in 2000, 1999 and 1998, respectively.
The portion of earnings allocated to participating pension contractholders
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
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.
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 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. Amortization expense was $182.9
million, $214.7 million, and $302.4 million in 2000, 1999 and 1998,
respectively.
Amortization of deferred policy acquisition costs is allocated to: (1)
realized investment gains and losses for those products that realized gains and
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.
81
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1--Summary of Significant Accounting Policies (continued)
Realized investment gains and 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 realized gains and 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.
Cash and Cash Equivalents
Cash and cash equivalents include cash and all highly liquid debt
investments with a maturity of three months or less when purchased.
Goodwill and Value of Business Acquired
The excess of cost over the fair value of the net assets of businesses
acquired was $228.6 million and $155.3 million at December 31, 2000 and 1999,
respectively, and is included in other assets in the consolidated balance
sheets. Goodwill 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 $63.6 million and $43.3 million at
December 31, 2000 and 1999, respectively. Amortization expense included in other
operating costs and expenses was $20.3 million, $9.7 million, and $9.1 million,
in 2000, 1999 and 1998, 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 may
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 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
$340.0 million and $112.4 million at December 31, 2000 and 1999, respectively,
and is included in other assets in the consolidated financial statements. VOBA
is amortized in proportion to the present value of expected gross profits.
Amortization expense included in other operating costs and expenses was $4.9
million, $1.3 million and $1.7 million in 2000, 1999 and 1998 respectively.
On October 1, 1999, The Maritime Life Assurance Company (Maritime), an
indirect majority owned subsidiary of the Company, completed its purchase of
Aetna Canada Holdings Limited (Aetna Canada) for approximately $296 million. 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 million. The 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 recorded as goodwill.
The goodwill calculation related to the Fortis acquisition is preliminary and
further refinements might be necessary and are expected to be finalized in 2001.
The unaudited pro forma revenues and net income, assuming that the acquisition
of Aetna Canada had occurred at the beginning of 1999, were $7,899.2 million and
$158.4 million, respectively, for the year ended December 31, 1999. The pro
forma results, assuming the acquisition of Fortis had taken place as of the
beginning of 2000 and 1999, respectively, would not be materially different from
the reported results.
82
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1--Summary of Significant Accounting Policies (continued)
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.
Investment income and investment gains and losses generally accrue directly to
such contractholders who bear the investment risk, subject in some cases to
minimum guaranteed rates. The assets of each 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 realized investment gains and 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.
Reinsurance
The Company utilizes reinsurance agreements to provide for greater
diversification of business, allow 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.
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
In 1999, the Company 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 391 employees have
been or will be terminated. These employees are or have been associated with
operations in our Boston office and outside the home office. As of December 31,
2000, the liability for employee termination costs included in other liabilities
was $20.6 million. Employee termination costs, included in other operating costs
and expenses, were $18.8 million and $26.3 million for the years ended December
31, 2000 and 1999, respectively. Of the total number of employees affected,
approximately 364 have been terminated, having received benefit payments of
approximately $24.5 million.
83
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1--Summary of Significant Accounting Policies (continued)
Accounting Changes
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, which was
adopted with respect to accounting for demutualization expenses by the Company
on December 15, 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 and 1998 of $93.6 million and $11.7 million,
respectively (net of tax of $2.6 million and $6.3 million, respectively). The
remaining provisions of this SOP, which will require (1) the inclusion of all
closed block activity together with all other assets, liabilities, revenues and
expenses and (2) recognition of a policyholder dividend obligation that
represents cumulative actual closed block earnings in excess of expected
periodic amounts calculated at the date of the demutualization, are effective no
later than December 31, 2001. See Note 6 for a summary description of the closed
block assets, liabilities, revenues and expenses, which do not include the
policyholder dividend obligation that will be required in 2001. The Company
currently is evaluating the effect that establishing the policyholder dividend
obligation will have on its results of operations and financial position. That
impact is not known at this time.
In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-Up
Activities." The SOP, which was adopted by the Company on January 1, 1999,
requires that start-up costs capitalized prior to January 1, 1999 be written-off
and any future start-up costs 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.
In March 1998, the Accounting Standards Executive Committee of the AICPA
issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." SOP 98-1 provides guidance for determining whether
computer software is for internal use and when costs incurred for internal use
software are to be capitalized. SOP 98-1 was adopted by the Company on January
1, 1999. The adoption of SOP 98-1 did not have a material impact on the
Company's consolidated financial statements.
SOP 98-7, "Deposit Accounting: Accounting for Insurance and Reinsurance
Contracts That Do Not Transfer Insurance Risk," provides guidance on how to
account for insurance and reinsurance contracts that do not transfer insurance
risk under a method referred to as deposit accounting. SOP 98-7 is effective for
fiscal years beginning after June 15, 1999. SOP 98-7 did not have a material
impact on the Company's consolidated financial statements.
84
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1--Summary of Significant Accounting Policies (continued)
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement 133." This Statement amends SFAS No. 133 to
defer its effective date for one year, to fiscal years beginning after June 15,
2000. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities--an amendment of SFAS No.
133." This Statement makes certain changes in the hedging provisions of SFAS No.
133, and is effective concurrent with SFAS No. 133. As amended, SFAS No. 133
requires all derivatives to be recognized on the balance sheet at fair value,
and establishes special accounting for the following three types of hedges: fair
value hedges, cash flow hedges, and hedges of foreign currency exposures of net
investments in foreign operations. Special accounting for qualifying hedges
provides for matching the timing of gain or loss recognition on the hedging
instrument with the recognition of the corresponding changes in value of the
hedged item. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in the fair value of the hedged assets, liabilities or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be recognized immediately in earnings and will be included in
net realized and other investment gains. As a result, such amounts will not be
included in the determination of the Company's segment after tax operating
income.
The adoption of SFAS No. 133, as amended, will result in an increase in
other comprehensive income of $58.8 million (net of tax of $31.7 million) as of
January 1, 2001 that will be accounted for as the cumulative effect of an
accounting change. In addition, the adoption of SFAS No. 133, as amended, will
result in a charge to operations of $26.2 million (net of tax of $14.1 million)
as of January 1, 2001, that will be accounted for as the cumulative effect of an
accounting change. The Company believes that its current risk management
philosophy will remain largely unchanged after adoption of the Statement.
SFAS No. 133, as amended, precludes the designation of held-to-maturity
fixed maturity investment securities as hedged items in hedging relationships
where the hedged risk is interest rate risk. As a result, in connection with the
adoption of the Statement and consistent with the provisions of the Statement,
on January 1, 2001, the Company will reclassify approximately $12.1 billion of
its held-to-maturity fixed maturity investment portfolio to the
available-for-sale category. This will result in an additional increase in other
comprehensive income of $178.6 million (net of tax of $96.2 million) as of
January 1, 2001.
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." The Statement provides accounting
and reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. Those standards are based on consistent
application of a financial components approach that focuses on control. Under
that 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. The Statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. The Statement is effective for transfers
and servicing of financial assets and extinguishments of liabilities occurring
after March 31, 2001.
85
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1--Summary of Significant Accounting Policies (continued)
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin 101 (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 operation 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 results in changes to the accounting practices that the Company and its
domestic life insurance subsidiaries will 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 will be
reported as an adjustment to surplus as of January 1, 2001. Management believes
that, although the implementation of Codification will have a negative impact on
the Company and its domestic life insurance subsidiaries' statutory-basis
capital and surplus, the Company and its domestic subsidiaries will remain in
compliance with all regulatory and contractual obligations.
Note 2--Transactions with Parent
The Company provides JHFS with personnel, property and facilities in
carrying out certain of its corporate functions. The Company annually determines
a fee for these services and facilities based on a number of criteria. The
amount of the service fee charged to JHFS was $19.8 million in 2000.
86
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 -- Investments
The following information summarizes the components of net investment
income and realized investment gains, net:
Year Ended December 31,
------------------------------
2000 1999 1998
--------- --------- ---------
(in millions)
Net Investment Income
Fixed maturities . . . . . . . . . . . . . $2,281.6 $2,495.5 $2,207.5
Equity securities . . . . . . . . . . . . 50.3 62.6 18.7
Mortgage loans on real estate . . . . . . 742.1 831.7 781.2
Real estate . . . . . . . . . . . . . . . 97.1 158.4 415.7
Policy loans . . . . . . . . . . . . . . . 24.5 109.8 111.9
Short-term investments . . . . . . . . . . 146.1 92.3 45.3
Other . . . . . . . . . . . . . . . . . . 183.0 165.3 181.3
-------- -------- --------
Gross investment income . . . . . . . . . 3,524.7 3,915.6 3,761.6
Less investment expenses . . . . . . . . 273.7 347.1 433.6
-------- -------- --------
Net investment income . . . . . . . . . . $3,251.0 $3,568.5 $3,328.0
======== ======== ========
Net Realized Investment Gains (Losses), Net
of Related Amortization of Deferred Policy
Acquisition Costs and Amounts Credited to
Participating Pension Contractholders
Fixed maturities . . . . . . . . . . . . . $ (128.6) $ (34.5) $ 110.3
Equity securities . . . . . . . . . . . . 204.7 113.5 115.2
Mortgage loans on real estate and real
estate. . . . . . . . . . . . . . . . . . (13.1) 143.5 (15.6)
Derivatives and other invested assets . . 26.9 38.5 16.5
Amortization adjustment for deferred policy
acquisition costs . . . . . . . . . . . . 0.9 (50.5) (41.2)
Amounts credited to participating pension
contractholders . . . . . . . . . . . . . (6.9) (35.3) (79.1)
-------- -------- --------
Net realized investment gains, net of
related amortization of deferred policy
acquisition costs and amounts credited
to participating pension contractholders . $ 83.9 $ 175.2 $ 106.1
======== ======== ========
87
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 -- Investments (continued)
Gross gains of $308.7 million in 2000, $192.3 million in 1999, and $267.8
million in 1998, and gross losses of $123.6 million in 2000, $176.8 million in
1999, and $92.9 million in 1998, were realized on the sale of available-for-sale
securities.
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, 2000
Held-to-Maturity:
Corporate securities . . . . . $10,691.1 $ 459.2 $665.7 $10,484.6
Mortgage-backed securities . . 1,104.2 10.3 48.2 1,066.3
Obligations of states and
political subdivisions . . . 87.7 3.0 0.7 90.0
Debt securities issued by
foreign governments . . . . . 5.6 4.7 -- 10.3
--------- -------- ------ ---------
Total . . . . . . . . . . . . $11,888.6 $ 477.2 $714.6 $11,651.2
========= ======== ====== =========
Available-for-Sale:
Corporate securities . . . . . $10,793.5 $ 485.5 $415.6 $10,863.4
Mortgage-backed securities . . 3,430.4 82.2 25.2 3,487.4
Obligations of states and
political subdivisions . . . 24.8 1.7 -- 26.5
Debt securities issued by
foreign governments . . . . . 1,354.1 112.3 12.7 1,453.7
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies . . 187.5 5.3 0.3 192.5
--------- -------- ------ ---------
Total fixed maturities . . . 15,790.3 687.0 453.8 16,023.5
Equity securities . . . . . . 830.6 360.0 95.7 1,094.9
--------- -------- ------ ---------
Total . . . . . . . . . . . $16,620.9 $1,047.0 $549.5 $17,118.4
========= ======== ====== =========
88
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 -- Investments (continued)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----------
(in millions)
December 31, 1999
Held-to-Maturity:
Corporate securities . . . . . $12,523.0 $390.3 $680.3 $12,233.0
Mortgage-backed securities . . 1,188.4 5.0 68.5 1,124.9
Obligations of states and
political subdivisions . . . 59.7 1.8 4.4 57.1
Debt securities issued by
foreign governments . . . . . 5.0 5.0 -- 10.0
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies . . 14.1 -- 0.4 13.7
--------- ------ ------ ---------
Total . . . . . . . . . . . . $13,790.2 $402.1 $753.6 $13,438.7
========= ====== ====== =========
Available-for-Sale:
Corporate securities . . . . . $11,103.0 $304.0 $431.1 $10,975.9
Mortgage-backed securities . . 4,168.5 18.6 109.9 4,077.2
Obligations of states and
political subdivisions . . . 68.9 5.0 -- 73.9
Debt securities issued by
foreign governments . . . . . 1,519.2 79.0 49.1 1,549.1
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies . . 291.3 1.6 9.8 283.1
--------- ------ ------ ---------
Total fixed maturities . . . 17,150.9 408.2 599.9 16,959.2
Equity securities . . . . . . 1,086.2 305.9 161.9 1,230.2
--------- ------ ------ ---------
Total . . . . . . . . . . . . $18,237.1 $714.1 $761.8 $18,189.4
======== ====== ====== ========
89
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 -- Investments (continued)
The amortized cost and fair value of fixed maturities at December 31, 2000, by
contractual maturity, are shown below:
Amortized Fair
Cost Value
--------- ---------
(in millions)
Held-to-Maturity:
Due in one year or less . . . . . . . . . . . . . . . $ 901.6 $ 919.4
Due after one year through five years . . . . . . . . 3,332.4 3,396.6
Due after five years through ten years . . . . . . . . 3,080.9 3,144.0
Due after ten years . . . . . . . . . . . . . . . . . 3,469.5 3,124.9
--------- ---------
10,784.4 10,584.9
Mortgage-backed securities . . . . . . . . . . . . . . 1,104.2 1,066.3
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . $11,888.6 $11,651.2
========= =========
Available-for-Sale:
Due in one year or less . . . . . . . . . . . . . . . $ 567.0 $ 575.6
Due after one year through five years . . . . . . . . 3,363.0 3,356.3
Due after five years through ten years . . . . . . . . 3,798.5 3,758.2
Due after ten years . . . . . . . . . . . . . . . . . 4,631.4 4,846.0
--------- ---------
12,359.9 12,536.1
Mortgage-backed securities . . . . . . . . . . . . . . 3,430.4 3,487.4
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . $15,790.3 $16,023.5
========= =========
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 and $8.5 million for the years ended
December 31, 1999 and 1998, respectively, which were sold due to a significant
decline in the issuers' credit quality or as part of the sale of our property
and casualty operations in 1999. The related net realized gains on the sales
were $0.9 million in 1999. There were no such gains in 1998.
The change in net unrealized gains (losses) on trading securities that has
been included in earnings during 2000, 1999 and 1998 amounted to $7.9 million,
$15.4 million, and ($6.6) million, respectively.
The Company participates in a securities lending program for the purpose of
enhancing income on securities held. At December 31, 2000 and 1999, $87.1
million and $278.1 million, respectively, of the Company's bonds and stocks, at
market value, were on loan to various brokers/dealers, but were fully
collateralized by cash and U.S. government securities in an account held in
trust for the Company. The market value of the loaned securities is monitored on
a daily basis, and the Company obtains additional collateral when deemed
appropriate.
90
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 -- Investments (continued)
For 2000, 1999 and 1998, investment results passed through to participating
pension contractholders as interest credited to policyholders' account balances
amounted to $162.3 million, $170.8 million, and $178.1 million, respectively.
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 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. Included in
deductions in 2000 are $13.5 million of allowances for probable losses on
mortgage loans transferred to the closed block.
Balance at Balance at
Beginning End of
of Year Additions Deductions Year
---------- --------- ---------- ------------
(in millions)
Year ended December 31, 2000
Mortgage loans on real estate $110.4 $ 5.4 $ 45.8 $ 70.0
Real estate to be disposed of 58.1 17.1 31.7 43.5
------ ------ ------ ------
Total . . . . . . . . . . . $168.5 $ 22.5 $ 77.5 $113.5
====== ====== ====== ======
Year ended December 31, 1999
Mortgage loans on real estate $111.0 $ 39.3 $ 39.9 $110.4
Real estate to be disposed of 112.0 22.5 76.4 58.1
------ ------ ------ ------
Total . . . . . . . . . . . $223.0 $ 61.8 $116.3 $168.5
====== ====== ====== ======
Year ended December 31, 1998
Mortgage loans on real estate $127.3 $ 15.9 $ 32.2 $111.0
Real estate to be disposed of 25.5 97.0 10.5 112.0
------ ------ ------ ------
Total . . . . . . . . . . . $152.8 $112.9 $ 42.7 $223.0
====== ====== ====== ======
91
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 -- Investments (continued)
At December 31, 2000 and 1999, 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,
----------------
2000 1999
------- -------
(in millions)
Impaired mortgage loans on real estate with provision for
losses. . . . . . . . . . . . . . . . . . . . . . . . . . $ 57.6 $147.1
Provision for losses . . . . . . . . . . . . . . . . . . . (16.8) (43.2)
------ ------
Net impaired mortgage loans on real estate . . . . . . . . $ 40.8 $103.9
====== ======
The average recorded investment in impaired loans and the interest income
recognized on impaired loans were as follows:
Year Ended
December 31,
-----------------------
2000 1999 1998
------ ------ -------
(in millions)
Average recorded investment in impaired loans . . . $102.4 $137.9 $210.8
Interest income recognized on impaired loans . . . . 2.9 4.9 2.7
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 $68.3 million and $133.1
million as of December 31, 2000 and 1999, 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:
Year Ended
December 31,
-------------------
2000 1999 1998
---- ----- ------
(in millions)
Expected . . . . . . . . . . . . . . . . . . . . . . . . $5.8 $12.0 $23.7
Actual . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 7.9 12.6
92
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 -- Investments (continued)
At December 31, 2000, the mortgage portfolio was diversified by geographic
region and specific collateral property type as displayed below:
Carrying Geographic Carrying
Property Type Amount Concentration Amount
- ------------- ------------- ------------- ---------------
(in millions) (in millions)
Apartments . . . . . $2,082.4 East North Central . . $ 907.8
Hotels . . . . . . . 351.6 East South Central . . 475.0
Industrial . . . . . 784.3 Middle Atlantic. . . . 1,115.8
Office buildings . . 1,990.2 Mountain . . . . . . . 312.6
Retail . . . . . . . 1,284.3 New England. . . . . . 682.5
1-4 Family . . . . . 71.8 Pacific. . . . . . . . 1,573.9
Mixed Use . . . . . . 234.9 South Atlantic . . . . 1,678.9
Agricultural . . . . 2,104.2 West North Central . . 296.1
Other . . . . . . . . 135.2 West South Central . . 659.9
Canada/Other . . . . . 1,336.4
Allowance for losses (70.0) Allowance for losses . (70.0)
-------- --------
Total . . . . . . . $8,968.9 Total . . . . . . . . $8,968.9
======== ========
Mortgage loans with outstanding principal balances of $27.8 million, bonds
with amortized cost of $117.1 million and real estate with a carrying value of
$1.1 million were non-income producing for the year ended December 31, 2000.
Depreciation expense on investment real estate was $9.5 million, $8.1
million, and $41.7 million in 2000, 1999, and 1998, respectively. Accumulated
depreciation was $66.2 million and $60.5 million at December 31, 2000 and 1999,
respectively.
Investments in unconsolidated joint ventures and partnerships accounted for
by using the equity method of accounting totaled $183.6 million and $201.7
million at December 31, 2000 and 1999, respectively. Total combined assets of
these joint ventures and partnerships were $1,235.0 million and $1,134.2 million
(consisting primarily of investments), and total combined liabilities were
$313.0 million and $267.1 million (including $124.8 million and $133.2 million
of non-recourse notes payable to banks) at December 31, 2000 and 1999,
respectively. Total combined revenues and expenses of such joint ventures and
partnerships were $1,908.4 million and $1,720.0 million, respectively, resulting
in $188.4 million of total combined income from operations before income taxes
in 2000. Total combined revenues of such joint ventures and partnerships were
$346.7 million and $1,435.6 million, and total combined expenses were $145.2
million and $1,128.0 million, respectively, resulting in $201.5 million and
$307.6 million of total combined income from operations before income taxes in
1999 and 1998, respectively. Net investment income on investments accounted for
on the equity method totaled $143.8 million, $65.1 million and $70.0 million in
2000, 1999, and 1998, respectively.
93
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 4 -- Derivatives
The notional amounts, carrying values and estimated fair values of the
Company's derivative instruments are as follows:
Assets (Liabilities)
Number of Contracts/ -----------------------------------------
Notional Amount 2000 1999
---------------------- --------------------- -----------------
Carrying Fair Carrying Fair
2000 1999 Value Value Value Value
---------- ---------- ---------- ---------- -------- --------
(in millions)
Asset Hedges:
Futures contracts to
sell securities . . 5,874 19,288 $ (17.6) $ (17.6) $32.2 $ 32.2
Interest rate swap
agreements
Notional . . . . . $6,896.1 $5,824.0 (178.2) (290.4) 82.9 94.7
Average fixed
rate-paid. . . . . 6.90% 6.91% -- -- -- --
Average float
rate-received. . . 6.67% 6.06% -- -- -- --
Interest rate cap
agreements. . . . . $ 42.2 $ 80.0 0.1 0.1 0.2 0.2
Interest rate
swaption agreements 30 30.0 (1.3) (1.3) (3.6) (3.6)
Currency rate swap
agreements. . . . . 515.0 541.0 11.4 11.4 9.1 9.1
Equity collar
agreements. . . . . -- -- 11.7 11.7 53.0 53.0
Liability Hedges:
Futures contracts to
acquire
securities . . . . 647 4,075 1.4 1.4 (0.9) (0.9)
Interest rate swap
agreements. . . . .
Notional . . . . . $3,008.2 $3,780.0 -- 114.3 -- (113.0)
Average fixed
rate-received. . . 6.79% 6.97% -- -- -- --
Average float
rate-paid. . . . . 6.68% 6.06% -- -- -- --
Interest rate swaps
(receive CMT rate) $ 491.3 $ 648.7 -- (5.2) -- 1.9
Interest rate cap
agreements. . . . . 279.4 279.4 2.1 2.1 5.6 5.6
Interest rate floor
agreements. . . . . 8,328.0 125.0 59.0 59.0 0.1 0.1
Currency rate swap
agreements. . . . . 3,423.4 5,470.2 -- (473.0) -- (57.4)
Financial futures contracts are used principally to hedge risks associated
with interest rate fluctuations on sales of guaranteed investment contracts and
funding agreements. The Company is subject to the risks associated with changes
in the value of the underlying securities; however, such changes in value
generally are offset by opposite changes in the value of the hedged items. The
contract or notional amounts of the contracts represent the extent of the
Company's involvement but not the future cash requirements, as the Company
intends to close the open positions prior to settlement. The futures contracts
expire in March 2001.
The interest rate swap agreements expire in 2001 to 2029. The interest rate
cap agreements expire in 2001 to 2007 and interest rate floor agreements expire
in 2010. Interest rate swaption agreements expire in 2025. The currency rate
swap agreements expire in 2001 to 2021. The equity collar agreements expire in
2003.
94
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 4 -- Derivatives (continued)
Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap and floor agreements, swaptions, and currency
swap agreements and equity collar agreements are based on current settlement
values. The current settlement values are based on quoted market prices, which
utilize pricing models or formulas using current assumptions.
The Company's exposure to credit risk is the risk of loss from a
counterparty failing to perform to the terms of the contract. The Company
continually monitors its position and the credit ratings of the counterparties
to these derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap agreements, the Company enters
into master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.
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 four domestic
life insurance companies (the Company, John Hancock Variable Life Insurance
Company, Investors Partner Life Insurance Company and Investors Guaranty 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, Inc. 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 is 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 estimates its taxes for the current year based
on estimated industry earnings rates and revises these estimates up or down when
the earnings rates are finalized and published by the IRS in the subsequent
year.
Income before income taxes, minority interest and cumulative effect of
accounting change includes the following:
Year Ended December 31,
-------------------------
2000 1999 1998
-------- ------ -------
(in millions)
Domestic . . . . . . . . . . . . . . . . . . . . . $1,125.5 $211.7 $585.1
Foreign . . . . . . . . . . . . . . . . . . . . . 69.6 48.2 32.2
-------- ------ ------
Income before income taxes, minority interest and
cumulative effect of accounting change . . . . . $1,195.1 $259.9 $617.3
======== ====== ======
95
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 5--Income Taxes (continued)
The components of income taxes were as follows:
Year Ended December 31,
-------------------------
2000 1999 1998
------- ------- -------
(in millions)
Current taxes:
Federal . . . . . . . . . . . . . . . . . . . . $ 18.1 $(62.5) $223.6
Foreign . . . . . . . . . . . . . . . . . . . . 7.5 2.6 1.9
State . . . . . . . . . . . . . . . . . . . . . 12.0 5.8 6.3
------ ------ ------
37.6 (54.1) 231.8
Deferred taxes:
Federal . . . . . . . . . . . . . . . . . . . . 284.7 137.7 (64.5)
Foreign . . . . . . . . . . . . . . . . . . . . 23.1 15.4 7.7
State . . . . . . . . . . . . . . . . . . . . . (1.0) (1.1) (0.9)
------ ------ ------
306.8 152.0 (57.7)
------ ------ ------
Total income taxes . . . . . . . . . . . . . . . $344.4 $ 97.9 $174.1
====== ====== ======
A reconciliation of income taxes computed by applying the federal income
tax rate to income before income taxes, minority interest and cumulative effect
of accounting change and the consolidated income tax expense charged to
operations follows:
Year Ended December 31,
-------------------------
2000 1999 1998
------- ------- -------
(in millions)
Tax at 35% $418.2 $ 91.0 $216.1
Add (deduct):
Equity base tax. . . . . . . . . . . . . . . . . (46.0) 22.2 (19.9)
Prior year taxes . . . . . . . . . . . . . . . . (0.3) 2.1 5.8
Tax credits . . . . . . . . . . . . . . . . . . (20.6) (12.9) (13.0)
Foreign taxes . . . . . . . . . . . . . . . . . 0.4 1.0 2.5
Tax exempt investment income . . . . . . . . . . (16.4) (19.4) (24.4)
Non-taxable gain on sale of subsidiary . . . . . -- (15.4) --
Disallowed demutualization expenses . . . . . . -- 31.1 --
Other . . . . . . . . . . . . . . . . . . . . . 9.1 (1.8) 7.0
------ ------ ------
Total income taxes . . . . . . . . . . . . . . $344.4 $ 97.9 $174.1
====== ====== ======
96
JOHN HANCOCK LIFE INSURANCE COMPANY
NoteS TO 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,
-------------------
2000 1999
-------- ---------
(in millions)
Deferred tax assets:
Policy reserve adjustments . . . . . . . . . . . . . . $ 458.8 $ 803.1
Other postretirement benefits . . . . . . . . . . . . . 149.4 151.1
Book over tax basis of investments . . . . . . . . . . 168.7 119.7
Dividends payable to policyholders . . . . . . . . . . 117.6 129.0
Unearned premium . . . . . . . . . . . . . . . . . . . 93.3 58.3
Interest . . . . . . . . . . . . . . . . . . . . . . . 38.3 38.3
Other . . . . . . . . . . . . . . . . . . . . . . . . . -- 67.0
-------- --------
Total deferred tax assets . . . . . . . . . . . . . . 1,026.1 1,366.5
-------- --------
Deferred tax liabilities:
Deferred policy acquisition costs . . . . . . . . . . . 777.6 805.1
Depreciation . . . . . . . . . . . . . . . . . . . . . 212.2 232.1
Basis in partnerships . . . . . . . . . . . . . . . . . 109.8 159.2
Market discount on bonds . . . . . . . . . . . . . . . 64.2 59.2
Pension plan expense . . . . . . . . . . . . . . . . . 114.6 82.5
Capitalized charges related to mutual funds . . . . . . 56.9 71.8
Unrealized gains . . . . . . . . . . . . . . . . . . . 112.6 34.5
Other . . . . . . . . . . . . . . . . . . . . . . . . . 74.2 --
-------- --------
Total deferred tax liabilities . . . . . . . . . . . . 1,522.1 1,444.4
-------- --------
Net deferred tax liabilities . . . . . . . . . . . . . $ 496.0 $ 77.9
======== ========
The Company received an income tax refund of $24.3 million, and made income
tax payments of $86.2 million, and $158.8 million in 2000, 1999 and 1998,
respectively.
97
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6--Closed Block
Under the Plan, on February 1, 2000, the Company created a closed block for
the benefit of policies included therein. The following tables set forth certain
summarized financial information relating to the closed block as of the dates
indicated:
December 31, February 1,
2000 2000
------------ -------------
Assets (in millions)
Investments
Fixed maturities:
Held-to-maturity--at amortized cost
(fair value: December 31--$2,327.4; February
1--$2,259.6). . . . . . . . . . . . . . . . . . $ 2,269.9 $ 2,270.7
Available-for-sale--at fair value
(cost: December 31--$2,378.7; February
1--$2,275.1). . . . . . . . . . . . . . . . . . 2,353.0 2,199.2
Equity securities:
Available-for-sale--at fair value (cost: December
31--$5.3; February 1--$6.4) . . . . . . . . . . 6.3 3.4
Mortgage loans on real estate . . . . . . . . . . 1,930.6 1,875.9
Policy loans . . . . . . . . . . . . . . . . . . 1,540.6 1,561.2
Short-term investments . . . . . . . . . . . . . 62.1 --
Other invested assets . . . . . . . . . . . . . . 40.7 5.3
--------- ---------
Total Investments . . . . . . . . . . . . . . . 8,203.2 7,915.7
Cash and cash equivalents . . . . . . . . . . . . 305.6 158.6
Accrued investment income . . . . . . . . . . . . 149.3 136.2
Premiums and accounts receivable . . . . . . . . 27.1 4.0
Deferred policy acquisition costs . . . . . . . . 947.3 1,062.5
Other assets . . . . . . . . . . . . . . . . . . 77.5 66.0
--------- ---------
Total closed block assets . . . . . . . . . . . $ 9,710.0 $ 9,343.0
========= =========
Liabilities
Future policy benefits . . . . . . . . . . . . . $ 9,910.5 $ 9,732.8
Policyholders' funds . . . . . . . . . . . . . . 1,459.5 1,885.4
Other liabilities . . . . . . . . . . . . . . . . 665.9 500.1
--------- ---------
Total closed block liabilities . . . . . . . . . $12,035.9 $12,118.3
========= =========
For the Period
February 1, Through
December 31, 2000
----------------------
Revenues (in millions)
Premiums . . . . . . . . . . . . . . . . . . . . . . $ 865.0
Net investment income . . . . . . . . . . . . . . . 591.6
Realized investment gains, net . . . . . . . . . . . 11.7
Other expense . . . . . . . . . . . . . . . . . . . (0.6)
--------
Total revenues . . . . . . . . . . . . . . . . . . 1,467.7
Benefits and Expenses
Benefits to policyholders . . . . . . . . . . . . . 870.0
Other operating costs and expenses . . . . . . . . . (10.0)
Amortization of deferred policy acquisition costs . 76.5
Dividends to policyholders . . . . . . . . . . . . . 407.1
--------
Total benefits and expenses . . . . . . . . . . . . 1,343.6
--------
Contribution from the closed block . . . . . . . . $ 124.1
========
98
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6--Closed Book (continued)
Gross losses of $7.2 million in 2000 were realized on sales of
available-for-sale securities allocated to the closed block. There were no gross
gains realized in 2000.
Investments in held-to-maturity securities and available-for-sale
securities allocated to the closed block are summarized below:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- ----- ----- --------
December 31, 2000 (in millions)
Held-to-Maturity:
Corporate securities . . . . . $2,157.0 $94.6 $33.4 $2,218.2
Mortgage-backed securities . . 98.3 1.2 4.8 94.7
Obligations of states and
political subdivisions . . . . 14.6 0.1 0.2 14.5
-------- ----- ----- --------
Total. . . . . . . . . . . . $2,269.9 $95.9 $38.4 $2,327.4
======== ===== ===== ========
Available-for-Sale:
Corporate securities . . . . . $1,485.4 $42.8 $80.4 $1,447.8
Mortgage-backed securities . . 784.9 14.5 8.5 790.9
Obligations of states and
political subdivisions . . . . 11.3 0.4 -- 11.7
Debt securities issued by
foreign governments . . . . . 84.0 6.7 1.4 89.3
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies . . 13.1 0.2 -- 13.3
-------- ----- ----- --------
Total fixed maturities . . . . 2,378.7 64.6 90.3 2,353.0
Equity securities . . . . . . . 5.3 1.6 0.6 6.3
-------- ----- ----- --------
Total . . . . . . . . . . . . $2,384.0 $66.2 $90.9 $2,359.3
======== ===== ===== ========
The amortized cost and fair value of fixed maturities at December 31, 2000,
by contractual maturity, are shown below:
Amortized Fair
Cost Value
--------- ---------
(in millions)
Held-to-Maturity:
Due in one year or less . . . . . . . . . . . . . . . . $ 202.2 $ 206.0
Due after one year through five years . . . . . . . . . 803.6 821.2
Due after five years through ten years . . . . . . . . 587.1 614.1
Due after ten years . . . . . . . . . . . . . . . . . . 578.7 591.4
-------- --------
2,171.6 2,232.7
Mortgage-backed securities . . . . . . . . . . . . . . 98.3 94.7
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . $2,269.9 $2,327.4
======== ========
Available-for-Sale:
Due in one year or less . . . . . . . . . . . . . . . . $ 64.5 $ 66.0
Due after one year through five years . . . . . . . . . 431.7 431.4
Due after five years through ten years . . . . . . . . 473.8 466.8
Due after ten years . . . . . . . . . . . . . . . . . . 623.8 597.9
-------- --------
1,593.8 1,562.1
Mortgage-backed securities . . . . . . . . . . . . . . 784.9 790.9
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . $2,378.7 $2,353.0
======== ========
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.
99
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6--Closed Block (continued)
At December 31, 2000, the mortgage portfolio was diversified by geographic
region and specific collateral property type as displayed below:
Carrying Geographic Carrying
Property Type Amount Concentration Amount
- ------------- -------- ------------- --------
(in millions) (in millions)
Apartments . . . . . $ 324.3 East North Central . . $ 201.1
Hotels . . . . . . . 66.1 East South Central . . 58.5
Industrial . . . . . 127.2 Middle Atlantic. . . . 378.0
Office buildings . . 494.6 Mountain . . . . . . . 92.1
Retail . . . . . . . 350.4 New England. . . . . . 162.0
1-4 Family . . . . . -- Pacific. . . . . . . . 420.7
Mixed Use . . . . . . 41.8 South Atlantic . . . . 384.5
Agricultural . . . . 433.1 West North Central . . 74.9
Other . . . . . . . . 106.6 West South Central . . 162.7
Canada/Other . . . . . 9.6
Allowance for losses (13.5) Allowance for losses . (13.5)
-------- --------
Total . . . . . . . $1,930.6 Total . . . . . . . . $1,930.6
======== ========
Note 7--Debt and Line of Credit
Short-term and long-term debt consists of the following:
December 31,
----------------
2000 1999
------- -------
(in millions)
Short-term debt:
Commercial paper . . . . . . . . . . . . . . . . . . . . $222.3 $380.6
Current maturities of long-term debt 23.0 73.2
------ ------
Total short-term debt . . . . . . . . . . . . . . . . . . 245.3 453.8
------ ------
Long-term debt:
Surplus notes, 7.38% maturing in 2024 . . . . . . . . . . 447.2 447.1
Notes payable, interest ranging from 5.43% to 9.60%, due
in varying amounts to 2005 . . . . . . . . . . . . . . . 109.8 163.0
------ ------
Total long-term debt . . . . . . . . . . . . . . . . . . . 557.0 610.1
Less current maturities . . . . . . . . . . . . . . . . . (23.0) (73.2)
------ ------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . 534.0 536.9
------ ------
Total debt . . . . . . . . . . . . . . . . . . . . . . . $779.3 $990.7
====== ======
100
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 7--Debt and Line of Credit (continued)
The Company issues commercial paper primarily to take advantage of current
investment opportunities, balance operating cash flows and existing commitments
and meet working capital needs. The weighted average interest rate for
outstanding commercial paper at December 31, 2000 and 1999 was 6.59% and 6.28%,
respectively. The weighted average life for outstanding commercial paper at
December 31, 2000 and 1999 was approximately 26 days and 11 days, respectively.
Commercial paper borrowing arrangements are supported by a syndicated line of
credit.
The issuance of surplus notes was approved by the Commonwealth of
Massachusetts Division of Insurance, and any payments of interest or principal
on the surplus notes require the prior approval of the Commissioner of the
Commonwealth of Massachusetts Division of Insurance.
At December 31, 2000, the Company had a syndicated line of credit with a
group of banks totaling $1.0 billion, $500.0 million of which expires on August
2, 2001 and $500.0 million of 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,
2000. At December 31, 2000, the Company had no outstanding borrowings under the
agreement.
Aggregate maturities of long-term debt are as follows: 2001--$23.0 million;
2002--$38.0 million; 2003--$22.9 million; 2004--$6.0 million; 2005--$19.9
million and thereafter--$447.2 million.
Interest expense on debt, included in other operating costs and expenses,
was $63.4 million, $70.1 million, and $76.7 million in 2000, 1999 and 1998,
respectively. Interest paid amounted to $63.4 million in 2000, $70.1 million in
1999, and $76.7 million in 1998.
Note 8--Minority Interest
Minority interest relates to the portion of John Hancock Canadian Holdings
Limited (JHCH) owned by JHFS and the preferred stock issued by Maritime, an
indirect majority owned subsidiary of the Company.
As of October 1, 2000, the Company sold 45% of the common stock of JHCH,
the parent company of Maritime, to JHFS for cash of $222.3 million. No gain or
loss was recognized on the transaction. For financial reporting purposes, the
assets, liabilities, and earnings of JHCH are consolidated in the Company's
financial statements. JHFS's interest in JHCH of $196.8 million as of December
31, 2000 and the related income attributable to the interest of $5.2 million in
2000 is reflected in Minority Interest in the consolidated balance sheets and
statements of income. The Board of Directors of JHFS also has authorized the
purchase of the remaining JHCH shares from the Company over time as well as the
shares of certain other foreign subsidiaries.
On November 19, 1999, Maritime issued $68.2 million of Non-Cumulative
Redeemable Second Preferred Shares, Series 1 (Series 1 Preferred Shares) at a
price of 25 Canadian dollars per share. Dividends on the Series 1 Preferred
Shares are payable quarterly, through December 31, 2004, at a rate of 0.38125
Canadian dollars per share. Commencing on January 1, 2005, the Series 1
Preferred Shares dividends will be calculated by applying 25 Canadian dollars to
the greater of one quarter of 90% of prime rate and 5.85%. The Series 1
Preferred Shares are nonvoting and redeemable at Maritime's sole option any time
after December 31, 2004 at a price of 25.50 Canadian dollars plus all declared
and unpaid dividends. In addition, shareholders as of December 31, 2004 have the
option to convert their Series 1 Preferred Shares to Non-Cumulative Redeemable
Second Preferred Shares, Series 2 (Series 2 Preferred Shares). The Series 2
Preferred Shares will have a dividend rate of not less than 95% of the yield of
certain bonds of the Government of Canada.
101
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 8--Minority Interest (continued)
In 1986, Maritime issued $25.3 million of Series A Cumulative Redeemable
Preferred Stock (Preferred Stock). Dividends on the Preferred Stock are payable
quarterly at 18% of the average of two prime rates of two specified Canadian
banks. The Preferred Stock is nonvoting and redeemable at Maritime's sole option
at a price of 25 Canadian dollars per share.
Note 9--Reinsurance
The effect of reinsurance on premiums written and earned was as follows:
2000 1999 1998
--------------------- --------------------- ---------------------
Premiums Premiums Premiums
--------------------- --------------------- ---------------------
Written Earned Written Earned Written Earned
---------- --------- ---------- --------- ---------- ---------
(in millions)
Life, Health and
Annuity:
Direct . . . . . . . $ 3,158.1 $ 3,157.4 $ 3,437.1 $ 3,435.2 $ 2,830.4 $ 2,828.4
Assumed . . . . . . 465.1 465.1 312.5 312.5 351.9 351.9
Ceded . . . . . . . (1,432.1) (1,432.1) (1,336.7) (1,336.7) (1,071.4) (1,071.3)
--------- --------- --------- --------- --------- ---------
Net life, health and
annuity premiums . 2,191.1 2,190.4 2,412.9 2,411.0 2,110.9 2,109.0
--------- --------- --------- --------- --------- ---------
Property and Casualty:
Direct . . . . . . . -- -- -- -- 0.4 7.1
Assumed . . . . . . -- -- 0.3 0.3 -- 1.9
Ceded . . . . . . . -- -- -- -- (0.4) (9.0)
--------- --------- --------- --------- --------- ---------
Net property and
casualty premiums -- -- 0.3 0.3 -- --
--------- --------- --------- --------- --------- ---------
Net premiums . . . $ 2,191.1 $ 2,190.4 $ 2,413.2 $ 2,411.3 $ 2,110.9 $ 2,109.0
========= ========= ========= ========= ========= =========
For the years ended December 31, 2000, 1999 and 1998, benefits to
policyholders under life, health and annuity ceded reinsurance contracts were
$734.5 million, $576.3 million, and $814.6 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.
102
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 9--Reinsurance (continued)
In connection with the coinsurance arrangement, the Company initially
secured a $397.0 million letter of credit facility with a group of banks. Under
the terms of the letter of credit facility agreement, the banks agreed to issue
a letter of credit to the Company pursuant to which the Company may draw up to
the amount of the letter of credit for any claims not satisfied by UNICARE under
the coinsurance agreement after the Company has incurred the first $113.0
million of losses from such claims. The amount available pursuant to the letter
of credit agreement and any letter of credit issued thereunder automatically
will be reduced on a scheduled basis consistent with the anticipated runoff of
liabilities related to the business reinsured under the coinsurance agreement.
The letter of credit facility was reduced to $272.0 million effective March 1,
2000 and is scheduled to be reduced again to $127.0 million on March 1, 2001.
The letter of credit and any letter of credit issued thereunder are scheduled to
expire on March 1, 2002. 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, 2000, 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.
103
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO 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 are based on years of service and average compensation generally during
the five years prior to retirement. 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 $102.2 million in 2000, $97.6
million in 1999, and $92.6 million in 1998. Plan assets consist principally of
listed equity securities, 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 2000 or 1999. 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 $256.3 million, and $244.3 million, respectively, at December 31,
2000, and $257.4 million and $239.3 million, respectively, at December 31, 1999.
Non-qualified plan assets, at fair value, were $0.8 million and $1.0 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
$10.2 million, $9.4 million, and $8.1 million, in 2000, 1999 and 1998,
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 retirement age 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, 2000 and 1999, 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.
104
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO 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:
Year Ended December 31,
-------------------------------------------
Other Postretirement
Pension Benefits Benefits
------------------- --------------------
2000 1999 2000 1999
-------- -------- ------- -------
(in millions)
Change in benefit
obligation:
Benefit obligation
at beginning of year . . . . . $1,967.6 $1,839.8 $ 443.2 $ 441.1
Service cost . . . . . . . . . 36.8 35.7 7.8 7.5
Interest cost . . . . . . . . . 134.1 121.2 31.4 28.7
Amendments . . . . . . . . . . (10.3) 19.9 -- --
Actuarial (gain) loss . . . . . (136.8) 32.6 36.4 (4.7)
Translation (gain) loss . . . . (1.5) 2.1 -- --
Benefits paid . . . . . . . . . (113.6) (115.1) (32.0) (29.4)
Acquisition of subsidiary . . . -- 44.6 6.5 --
Curtailment . . . . . . . . . . -- (13.2) -- --
-------- -------- ------- -------
Benefit obligation
at end of year . . . . . . . . 1,876.3 1,967.6 493.3 443.2
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets
at beginning of year . . . . . 2,476.5 2,251.1 232.9 215.2
Actual return on plan assets. . 132.6 281.5 0.3 17.7
Employer contribution . . . . . 12.6 11.5 35.5 --
Benefits paid . . . . . . . . . (113.6) (108.4) (7.3) --
Translation (loss) gain . . . . (2.3) 3.5 -- --
Acquisition of subsidiary . . . -- 50.2 -- --
Curtailment . . . . . . . . . . -- (12.9) -- --
-------- -------- ------- -------
Fair value of plan assets
at end of year . . . . . . . . 2,505.8 2,476.5 261.4 232.9
-------- -------- ------- -------
Funded status . . . . . . . . . . 629.5 508.9 (231.9) (210.3)
Unrecognized actuarial gain . . . (400.6) (366.0) (139.7) (182.8)
Unrecognized prior service cost . 24.2 39.1 (1.4) (1.6)
Unrecognized net transition
asset. . . . . . . . . . . . . . (6.3) (11.8) -- --
-------- -------- ------- -------
Prepaid (accrued) benefit
cost, net. . . . . . . . . . . . $ 246.8 $ 170.2 $(373.0) $(394.7)
======== ======== ======= =======
Amounts recognized in balance
sheet consist of:
Prepaid benefit cost . . . . . $ 396.4 $ 299.4
Accrued benefit liability. . . (243.5) (238.9)
Intangible asset . . . . . . . 6.0 7.9
Accumulated other
comprehensive income. . . . . 87.9 101.8
-------- --------
Prepaid benefit cost, net . . . . $ 246.8 $ 170.2
======== ========
105
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO 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:
Year Ended December 31,
-----------------------------
Other
Pension Postretirement
Benefits Benefits
----------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Discount rate . . . . . . . . . . . . 7.25% 7.00% 7.25% 7.00%
Expected return on plan assets. . . . 9.00% 8.50% 9.00% 8.50%
Rate of compensation increase . . . . 4.77% 4.77% 4.77% 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 2001. The rate was
assumed to decrease gradually to 5.25% in 2006 and remain at that level
thereafter.
For the prior valuation, an 5.50% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 2000. 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:
Year Ended December 31,
------------------------------------------------------
Other Postretirement
Pension Benefits Benefits
--------------------------- ------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- ------- ------- -------
(in millions)
Service cost . . . . $ 36.8 $ 35.7 $ 34.6 $ 7.8 $ 7.5 $ 7.1
Interest cost . . . . 134.1 121.2 117.5 31.4 28.7 29.1
Expected return on
plan assets . . . . (217.4) (186.6) (168.5) (24.1) (18.3) (14.7)
Amortization of
transition asset . . (12.7) (12.1) (11.7) -- -- --
Amortization of prior
service cost . . . . 4.6 3.9 6.5 (0.2) (0.2) (0.3)
Recognized actuarial
gain . . . . . . . . (10.9) (8.1) (2.6) (8.8) (8.5) (7.8)
Other . . . . . . . . -- (3.8) (1.2) -- -- --
------- ------- ------- ------ ------ ------
Net periodic benefit
(credit) cost . . $ (65.5) $ (49.8) $ (25.4) $ 6.1 $ 9.2 $ 13.4
======= ======= ======= ====== ====== ======
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 2000 . . . . . . . . . . . . . . . . . . $ 4.6 $ (2.2)
Effect on postretirement benefit obligations
as of December 31, 2000 . . . . . . . . . . 34.5 (29.9)
106
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 11--Commitments and Contingencies
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, 2000. 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.
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 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 $172.8 million
and $496.6 million at December 31, 2000 and 1999, respectively. Costs incurred
related to the settlement were $140.2 million and $230.8 million, in 1999 and
1998, 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 is 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 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.
Given the uncertainties associated with estimating the reserve, it is
reasonably possible that the final cost of the settlement could differ
materially from the amounts presently provided for by the Company. The Company
will continue to update its estimate of the final cost of the settlement as the
claims are processed and more specific information is developed, particularly as
the actual cost of the claims subject to alternative dispute resolution becomes
available. However, based on information available at this time, and the
uncertainties associated with the final claim processing and alternative dispute
resolution, the range of any additional costs related to the settlement cannot
be estimated with precision.
Note 12--Shareholder's Equity
(a) Common Stock
As result of the demutualization, as described in Note 1, the Company was
converted to a stock life insurance company and has one class of capital stock,
common stock ($10,000 par value, 1,000 shares authorized). All of the
outstanding common stock of the Company is owned by JHFS.
107
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 12--Shareholder's Equity (continued)
(b) Other Comprehensive Income
The components of accumulated other comprehensive income are as follows:
Foreign Accumulated
Net Currency Minimum Other
Unrealized Translation Pension Comprehensive
Gains (Losses) Adjustment Liability Income
-------------- ----------- --------- ---------------
(in millions)
Balance at January 1,
1998 . . . . . . . . $ 520.3 $(44.1) $(29.5) $ 446.7
Gross unrealized gains
(losses) (net of
deferred income tax
benefit of $56.7
million) . . . . . . (121.3) -- -- (121.3)
Less reclassification
adjustment for
(gains) losses,
realized in net
income (net of tax
expense of $61.4
million) . . . . . . (113.9) -- -- (113.9)
Participating group
annuity contracts
(net of deferred
income tax expense of
$31.1 million) . . . 57.7 -- -- 57.7
Adjustment to deferred
policy acquisition
costs and present
value of future
profits (net of
deferred income tax
expense of $15.5
million) . . . . . . 28.9 -- -- 28.9
------- ------ ------ -------
Net unrealized gains
(losses) . . . . . . (148.6) -- -- (148.6)
Foreign currency
translation
adjustment -- (6.0) -- (6.0)
Minimum pension
liability (net of
deferred income tax
benefit of $6.2
million) . . . . . . -- -- (8.8) (8.8)
------- ------ ------ -------
Balance at December
31, 1998 . . . . . . $ 371.7 $(50.1) $(38.3) $ 283.3
======= ====== ====== =======
108
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 12--Shareholder's Equity (continued)
Foreign Accumulated
Net Currency Minimum Other
Unrealized Translation Pension Comprehensive
Gains (Losses) Adjustment Liability Income
-------------- ----------- --------- ---------------
(in millions)
Balance at December
31, 1998 . . . . . . $ 371.7 $(50.1) $(38.3) $ 283.3
Gross unrealized gains
(losses) (net of
deferred income tax
benefit of $275.6
million) . . . . . . (503.9) -- -- (503.9)
Less reclassification
adjustment for
(gains) losses,
realized in net
income (net of tax
expense of $5.4
million) . . . . . . (10.0) -- -- (10.0)
Participating group
annuity contracts
(net of deferred
income tax expense of
$40.1 million) . . . 74.6 -- -- 74.6
Adjustment to deferred
policy acquisition
costs and present
value of future
profits (net of
deferred income tax
expense of $71.3
million) . . . . . . 132.3 -- -- 132.3
------- ------ ------ -------
Net unrealized gains
(losses) . . . . . . (307.0) -- -- (307.0)
Foreign currency
translation
adjustment . . . . . -- 16.9 -- 16.9
Minimum pension
liability (net of
deferred income tax
benefit of $12.3
million) . . . . . . -- -- (22.9) (22.9)
------- ------ ------ -------
Balance at December
31, 1999 . . . . . . $ 64.7 $(33.2) $(61.2) $ (29.7)
------- ------ ------ -------
Gross unrealized gains
(losses) (net of
deferred income tax
expense of $37.1
million) . . . . . . 46.2 46.2
Less reclassification
adjustment for
(gains) losses,
realized in net
income (net of tax
benefit of $62.0
million) . . . . . . 115.2 115.2
Participating group
annuity contracts
(net of deferred
income tax benefit
of $3.6 million) . . (6.8) (6.8)
Adjustment to deferred
policy acquisition
costs and present
value of future profits
(net of deferred income
tax benefit of $17.5
million) . . . . . . (32.6) (32.6)
------- -------
Net unrealized gains
(losses) . . . . . . 122.0 122.0
Foreign currency
translation
adjustment . . . . . (19.1) (19.1)
Minimum pension
liability (net of
deferred income tax
expense of $4.4
million) . . . . . . 8.2 8.2
Minority interest . . (3.9) (0.6) (4.5)
------- ------ ------ -------
Balance at December
31, 2000 . . . . . . $ 182.8 $(52.9) $(53.0) $ 76.9
======= ====== ====== =======
109
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 12--Shareholder's Equity (continued)
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of shareholder's equity, are summarized as
follows:
Year Ended
----------------------------
2000 1999 1998
-------- -------- --------
(in millions)
Balance, end of year comprises:
Unrealized investment gains (losses) on:
Fixed maturities . . . . . . . . . . . . . $ 207.5 $(191.7) $ 730.6
Equity investments . . . . . . . . . . . . 265.3 144.0 239.0
Derivatives and other . . . . . . . . . . . (149.1) 110.8 (111.5)
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . 323.7 63.1 858.1
Amounts of unrealized investment (gains) losses
attributable to:
Participating group annuity contracts . . . (34.4) (24.0) (138.7)
Deferred policy acquisition cost and present
value of future profits . . . . . . . . . . 10.0 60.1 (143.5)
Deferred federal income taxes . . . . . . . (112.6) (34.5) (204.2)
Minority interest . . . . . . . . . . . . . (3.9) -- --
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . (140.9) 1.6 (486.4)
------- ------- --------
Net unrealized investment gains . . . . . . . $ 182.8 $ 64.7 $ 371.7
======= ======= ========
Statutory Results
The Company and its domestic insurance subsidiaries prepare their
statutory-basis financial statements in accordance with accounting practices
prescribed or permitted by the state of domicile. Prescribed statutory
accounting practices include state laws, regulations and administrative rules,
as well as guidance published by the NAIC. Permitted accounting practices
encompass all accounting practices that are not prescribed by the sources noted
above. Since 1988, the Commonwealth of Massachusetts Division of Insurance has
provided the Company with approval to recognize the pension plan prepaid expense
in accordance with the requirements of SFAS No. 87, "Employers' Accounting for
Pensions." The Company furnishes the Commonwealth of Massachusetts Division of
Insurance with an actuarial certification of the prepaid expense computation on
an annual basis.
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.
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, and Investors Guaranty Life Insurance Company.
2000 1999 1998
-------- -------- --------
(in millions)
Statutory net income . . . . . . . . . . . . . $ 617.6 $ 573.2 $ 627.3
Statutory surplus . . . . . . . . . . . . . . 3,700.5 3,456.7 3,388.7
110
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 12--Shareholder's Equity (continued)
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.
Retail-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.
Retail-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, closed-end funds, and 401(k) services. This segment distributes
its products through distribution channels including insurance agents and
brokers affiliated with the Company, securities brokerage firms, financial
planners, and banks.
Institutional-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.
Institutional-Investment Management Segment. Offers a wide range of
investment management products and services to institutional 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 insurance operations, certain corporate operations, and businesses
that are either disposed or in run-off. Corporate operations primarily include
certain financing activities, income on capital not specifically allocated to
the reporting segments and certain non-recurring expenses not allocated to the
segments. The disposed businesses primarily consist of group health insurance
and related group life insurance, property and casualty insurance and selected
broker/dealer operations.
111
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13--Segment Information (continued)
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 gains or
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 gains and 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 realized investment gains (losses), net of related
amortization adjustment for deferred policy acquisition costs and amounts
credited to participating pension contractholder accounts (the adjustment for
realized investment 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 change.
112
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO 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):
Retail Institutional Corporate
Retail Asset Institutional Investment and
2000 Protection Gathering G&SFP Management Other Consolidated
- ---- ---------- ---------- ------------- ------------- ---------- --------------
Revenues:
Segment revenues. . . . . . . . . . . . . . . . $ 1,529.7 $ 1,195.9 $ 2,409.4 $ 212.0 $ 1,707.6 $ 7,054.6
Realized investment gains (losses), net . . . . (18.2) 15.4 (64.7) 7.1 152.8 92.4
--------- --------- --------- -------- --------- ---------
Revenues . . . . . . . . . . . . . . . . . . . $ 1,511.5 $ 1,211.3 $ 2,344.7 $ 219.1 $ 1,860.4 $ 7,147.0
========= ========= ========= ======== ========= =========
Net investment income . . . . . . . . . . . . . $ 604.7 $ 445.8 $ 1,741.9 $ 22.7 $ 435.9 $ 3,251.0
Net Income:
Segment after-tax operating income . . . . . . 252.2 128.8 211.6 46.8 104.0 743.4
Realized investment gains (losses), net . . . . (11.5) 18.6 (40.5) 4.4 93.5 64.5
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 . . . . . . . . . . . . . . . . . . $ 249.6 $ 145.7 $ 179.4 $ 51.2 $ 214.2 $ 840.1
========= ========= ========= ======== ========= =========
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. . . . . . . . . . . . . . . . . . . . . 55.6 78.8 2.6 -- 46.8 183.8
Interest expense . . . . . . . . . . . . . . . 1.1 3.5 -- 12.1 46.7 63.4
Income tax expense . . . . . . . . . . . . . . 88.6 57.9 78.3 35.2 84.4 344.4
Segment assets . . . . . . . . . . . . . . . . 27,049.9 14,067.2 31,161.1 3,124.5 12,378.1 87,780.8
Net Realized Investment Gains Data:
Net realized investment (losses) gains. . . . . (34.3) 18.8 (57.8) 10.3 152.9 89.9
Add capitalization/less amortization of deferred
policy acquisition costs related to net
realized investment gains (losses) . . . . . . 4.4 (3.5) -- -- -- 0.9
Less amounts credited to participating pension
contractholder accounts . . . . . . . . . . . -- -- (6.9) -- -- (6.9)
--------- --------- --------- -------- --------- ---------
Net realized investment (losses) gains, net of
related amortization of deferred policy
acquisition costs and amounts credited to
participating pension contractholders--per
consolidated financial statements . . . . . . (29.9) 15.3 (64.7) 10.3 152.9 83.9
Less realized investment (losses) gains
attributable to mortgage securitizations . . . -- -- -- 3.2 -- 3.2
Net realized investment gains in the closed
block. . . . . . . . . . . . . . . . . . . . . 11.7 -- -- -- -- 11.7
--------- --------- --------- -------- --------- ---------
Realized investment (losses) gains, net-pre-tax
adjustment made to calculate segment operating
income . . . . . . . . . . . . . . . . . . . . (18.2) 15.3 (64.7) 7.1 152.9 92.4
Less income tax effect . . . . . . . . . . . . 6.7 3.3 24.2 (2.7) (59.4) (27.9)
--------- --------- --------- -------- --------- ---------
Realized investment (losses) gains,
net-after-tax adjustment made to calculate
segment operating income . . . . . . . . . . . $ (11.5) $ 18.6 $ (40.5) $ 4.4 $ 93.5 $ 64.5
========= ========= ========= ======== ========= =========
113
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13--Segment Information (continued)
Retail Institutional
Retail Asset Institutional Investment Corporate
1999 Protection Gathering G&SFP Management and Other Consolidated
- ---- ---------- ---------- ------------- ------------- ---------- --------------
Revenues:
Segment revenues. . . . . . . . . . . . . . . . $ 2,756.9 $ 1,057.3 $ 2,021.8 $ 189.9 $ 1,310.5 $ 7,336.4
Realized investment gains (losses), net . . . . 173.6 (11.0) 93.3 3.1 (56.1) 202.9
--------- --------- --------- -------- --------- ---------
Revenues . . . . . . . . . . . . . . . . . . . $ 2,930.5 $ 1,046.3 $ 2,115.1 $ 193.0 $ 1,254.4 $ 7,539.3
========= ========= ========= ======== ========= =========
Net investment income . . . . . . . . . . . . . $ 1,101.9 $ 388.6 $ 1,681.3 $ 45.9 $ 350.8 $ 3,568.5
Net Income:
Segment after-tax operating income . . . . . . 188.7 115.1 201.7 37.3 67.8 610.6
Realized investment gains (losses), net . . . . 108.6 (6.9) 58.4 2.0 (42.1) 120.0
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) -- (2.2) (22.2)
Workers' compensation reinsurance reserves . . -- -- -- -- (133.7) (133.7)
Group pension dividend transfer . . . . . . . . -- -- (205.8) -- -- (205.8)
Demutualization expenses. . . . . . . . . . . . (61.3) (13.0) (16.1) -- (3.2) (93.6)
Other demutualization related costs . . . . . . (4.6) (0.9) (1.1) -- (0.2) (6.8)
CumuIative effect of accounting change . . . . -- (9.6) -- (0.1) -- (9.7)
--------- --------- --------- -------- --------- ---------
Net income . . . . . . . . . . . . . . . . . . $ 210.3 $ 76.4 $ 30.0 $ 39.2 $ (205.2) $ 150.7
========= ========= ========= ======== ========= =========
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 -- 38.4 164.2
Interest expense . . . . . . . . . . . . . . . 0.7 6.2 -- 5.3 57.9 70.1
Income tax expense (credit) . . . . . . . . . . 138.9 51.9 (7.5) 26.5 (111.9) 97.9
Segment assets . . . . . . . . . . . . . . . . 25,372.1 14,297.2 30,370.5 3,531.4 11,017.2 84,588.4
Net Realized Investment Gains Data:
Net realized investment gains (losses) . . . . 228.4 (16.1) 97.4 6.6 (55.3) 261.0
Less amortization of deferred policy acquisition
costs related to net realized investment
(losses) gains . . . . . . . . . . . . . . . . (54.8) 5.1 -- -- (0.8) (50.5)
Less amounts credited to participating pension
contractholder accounts . . . . . . . . . . . -- -- (35.3) -- -- (35.3)
--------- --------- --------- -------- --------- ---------
Net realized investment 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 (56.1) 175.2
Less realized investment (losses) gains
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)
--------- --------- --------- -------- --------- ---------
Realized investment gains (losses), net-pre-tax
adjustment made to calculate segment operating
income . . . . . . . . . . . . . . . . . . . . 173.6 (11.0) 93.3 3.1 (89.1) 169.9
Less income tax effect . . . . . . . . . . . . (65.0) 4.1 (34.9) (1.1) 47.0 (49.9)
--------- --------- --------- -------- --------- ---------
Realized investment gains (losses),
net-after-tax adjustment made to calculate
segment operating income . . . . . . . . . . . $ 108.6 $ (6.9) $ 58.4 $ 2.0 $ (42.1) $ 120.0
========= ========= ========= ======== ========= =========
114
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13--Segment Information (continued)
Retail Institutional
Retail Asset Institutional Investment Corporate
1998 Protection Gathering G&SFP Management and Other Consolidated
- ---- ---------- ---------- ------------- ------------- --------- --------------
Revenues:
Segment revenues . . . . . . . . . . . . . . . . $ 2,667.6 $ 1,015.3 $ 1,731.2 $ 143.9 $1,103.9 $ 6,661.9
Realized investment gains, net . . . . . . . . . 75.3 18.3 30.7 0.2 23.7 148.2
--------- --------- --------- -------- -------- ---------
Revenues . . . . . . . . . . . . . . . . . . . . $ 2,742.9 $ 1,033.6 $ 1,761.9 $ 144.1 $1,127.6 $ 6,810.1
========= ========= ========= ======== ======== =========
Net investment income . . . . . . . . . . . . . $ 1,061.2 $ 378.0 $ 1,576.3 $ 24.1 $ 288.4 $ 3,328.0
Net Income:
Segment after-tax operating income . . . . . . . $ 166.1 $ 111.1 $ 145.7 $ 15.4 $ 56.3 $ 494.6
Realized investment gains, net . . . . . . . . . 49.0 12.0 17.2 0.1 15.4 93.7
Class action lawsuit . . . . . . . . . . . . . . -- -- -- -- (150.0) (150.0)
Surplus tax . . . . . . . . . . . . . . . . . . 11.7 0.3 2.0 -- 1.5 15.5
Demutualization expenses . . . . . . . . . . . . (7.9) (1.8) (1.5) -- (0.5) (11.7)
--------- --------- --------- -------- -------- ---------
Net income . . . . . . . . . . . . . . . . . . . $ 218.9 $ 121.6 $ 163.4 $ 15.5 $ (77.3) $ 442.1
========= ========= ========= ======== ======== =========
Supplemental Information:
Inter-segment revenues . . . . . . . . . . . . . -- -- -- $ 34.3 $ (34.3) --
Equity in net income of investees accounted for
by the equity method . . . . . . . . . . . . . $ 54.9 -- $ 12.7 0.9 1.5 $ 70.0
Amortization of deferred policy acquisition costs 153.9 $ 46.8 3.7 -- 45.3 249.7
Interest expense . . . . . . . . . . . . . . . . 0.3 8.5 -- 7.0 60.9 76.7
Income tax expense (credit) . . . . . . . . . . 82.1 61.5 67.9 10.7 (48.1) 174.1
Segment assets . . . . . . . . . . . . . . . . . 25,684.2 12,715.7 29,315.2 3,439.6 5,792.5 76,947.2
Net Realized Investment Gains Data:
Net realized investment gains (losses) . . . . . 112.9 21.9 72.1 (4.2) 23.7 226.4
Less amortization of deferred policy acquisition
costs related to net realized investment
(losses) gains . . . . . . . . . . . . . . . . (37.6) (3.6) -- -- -- (41.2)
Less amounts credited to participating pension
contractholder accounts . . . . . . . . . . . . -- -- (79.1) -- -- (79.1)
--------- --------- --------- -------- -------- ---------
Net realized investment gains (losses), net of
related amortization of deferred policy
acquisition costs and amounts credited to
participating pension contractholders--per
consolidated financialstatements . . . . . . . 75.3 18.3 (7.0) (4.2) 23.7 106.1
Less realized investment (losses) gains
attributable to mortgage securitizations and
investments backing short-term funding
agreements. . . . . . . . . . . . . . . . . . . -- -- (37.7) (4.4) -- (42.1)
Realized investment gains, net-pre-tax adjustment
made to calculate segment operating income . . 75.3 18.3 30.7 0.2 23.7 148.2
Less income tax effect . . . . . . . . . . . . . (26.3) (6.3) (13.5) (0.1) (8.3) (54.5)
--------- --------- --------- -------- -------- ---------
Realized investment gains, net-after-tax
adjustment
made to calculate segment operating income . . $ 49.0 $ 12.0 $ 17.2 $ 0.1 $ 15.4 $ 93.7
========= ========= ========= ======== ======== =========
115
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13--Segment Information (continued)
The Company operates primarily in the United States, Canada and the Pacific
Rim (China, Indonesia, Malaysia, the Philippines, Singapore, and Thailand). The
following table summarizes selected financial information by geographic location
for the year ended or at December 31:
Income Before
Income Taxes, Minority
Interest and Cumulative
Long-Lived Effect of
Location Revenues AssetS AssetS Accounting Change
- -------- -------- ---------- --------- -----------------------
(in millions)
2000
United States . . . . $5,823.7 $424.8 $77,978.9 $1,130.7
Canada . . . . . . . 1,078.6 30.4 9,357.8 58.5
Foreign--other . . . 244.7 3.4 444.1 5.9
-------- ------ --------- --------
Total. . . . . . . . $7,147.0 $458.6 $87,780.8 $1,195.1
======== ====== ========= ========
1999
United States . . . . $6,560.7 $440.0 $75,777.6 $ 211.7
Canada . . . . . . . 741.9 28.8 8,461.7 41.8
Foreign--other . . . 236.7 2.2 349.1 6.4
-------- ------ --------- --------
Total. . . . . . . . $7,539.3 $471.0 $84,588.4 $ 259.9
======== ====== ========= ========
1998
United States . . . . $6,069.5 $442.5 $71,725.1 $ 585.1
Canada . . . . . . . 512.0 24.9 4,941.6 30.2
Foreign--other . . . 228.6 2.1 280.5 2.0
-------- ------ --------- --------
Total. . . . . . . . $6,810.1 $469.5 $76,947.2 $ 617.3
======== ====== ========= ========
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.
116
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 14--Fair Value of Financial Instruments (continued)
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.
117
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 14--Fair Value of Financial Instruments (continued)
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
December 31,
----------------------------------------------
2000 1999
---------------------- ----------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ---------- ----------
(in millions)
Assets:
Fixed maturities:
Held-to-maturity . . . . $11,888.6 $11,651.2 $13,790.2 $13,438.7
Available-for-sale . . . 16,023.5 16,023.5 16,959.2 16,959.2
Equity securities:
Available-for-sale . . . 1,094.9 1,094.9 1,230.2 1,230.2
Trading securities . . . 231.6 231.6 84.1 84.1
Mortgage loans on real
estate . . . . . . . . . . 8,968.9 9,350.6 10,733.0 10,681.8
Policy loans . . . . . . . 428.6 428.6 1,938.8 1,938.8
Short-term investments . . 151.9 151.9 166.9 166.9
Cash and cash equivalents 2,841.2 2,841.2 1,797.7 1,797.7
Liabilities:
Debt . . . . . . . . . . . 779.3 771.5 990.7 962.8
Guaranteed investment
contracts and
funding agreements . . . . 14,333.9 13,953.8 13,109.3 12,709.1
Fixed rate deferred and
immediate annuities . . . 5,195.2 5,101.3 4,801.1 4,656.9
Supplementary contracts
Without life contingencies 60.0 63.1 56.6 55.7
Derivatives assets/(liabilities)
relating to:
Futures contracts, net . . (16.2) (16.2) 31.3 31.3
Interest rate swap
agreements . . . . . . . . (178.2) (176.1) 82.9 (18.3)
Interest rate swap CMT . . -- (5.2) -- --
Interest rate cap
agreements . . . . . . . . 2.2 2.2 5.8 5.8
Interest rate floor
agreements . . . . . . . . 59.0 59.0 0.1 0.1
Interest rate swaption
agreements . . . . . . . . (1.3) (1.3) (3.6) (3.6)
Currency rate swap
agreements . . . . . . . . 11.4 (461.6) 9.1 (48.3)
Equity collar agreements . 11.7 11.7 53.0 53.0
Commitments . . . . . . . . -- (1,843.9) -- (1,273.5)
118
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 15--Stock Compensation Plans
On January 5, 2000, the Company, as sole shareholder of JHFS, approved and
adopted the 1999 Long-Term Stock Incentive Plan (the Incentive Plan), which
originally had been approved by the Board of Directors 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's common stock.
The maximum number of shares of JHFS common stock available under the
Incentive Plan is 5% of the total number of shares of common stock that were
outstanding following the IPO. In addition, no more than 4% of these shares
shall be available for awards of incentive stock options under the Incentive
Plan, and no more than 1% of these shares shall be available for stock awards,
which includes non-vested stock. The aggregate number of shares that may be
covered by awards for any one participant over the period that the Incentive
Plan is in effect shall not exceed 1% of these 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 Incentive Plan has options exercisable at March 13, 2001 and 2002, June
12, 2001 and 2002, and August 14, 2001 and 2002. JHFS has granted 4.6 million
options to employees of the Company as of December 31, 2000. Options outstanding
under the Incentive Plan were granted at a price equal to the market value of
the stock on the date of grant, vest over a two-year period, and expire five
years after the grant date.
The status of JHFS stock options granted to employees of the Company under
the Long-Term Stock Incentive Plan is summarized below as of December 31:
Number of shares Weighted-average
(in thousands) exercise price
---------------- ------------------
Outstanding at February 1, 2000. . . . . -- $ --
Granted . . . . . . . . . . . . . . . . 4,618.4 14.06
Exercised . . . . . . . . . . . . . . . 0.2 13.94
Canceled. . . . . . . . . . . . . . . . 311.6 13.94
------- ------
Outstanding at December 31, 2000 . . . . 4,306.6 14.07
Options exercisable at:
March 13, 2001 . . . . . . . . . . . . 2,125.3 13.94
June 12, 2001 . . . . . . . . . . . . . 6.3 23.37
August 14, 2001 . . . . . . . . . . . . 21.7 23.75
March 13, 2002. . . . . . . . . . . . . 2,125.3 13.94
June 12, 2002 . . . . . . . . . . . . . 6.3 23.37
August 14, 2002 . . . . . . . . . . . . 21.7 23.75
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. Had compensation expense for the Company's stock-based
compensation plan 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.
119
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 15--Stock Compensation Plans (continued)
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 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 stock
options.
The estimated weighted-average grant date fair value per share of stock
options granted during 2000 using the Black-Scholes option valuation model was
$3.66. The fair value of options granted in 2000 is estimated on the date of
grant using the following assumptions: dividend yield of 1.8%, expected
volatility of 24%, risk-free interest rate range of 4.8% to 5.6% depending on
grant date, and an expected life ranging from 2 to 5 years.
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:
For the Period
February Year Ended
through December 31, 2000
December 31, 2000 Pro Forma (unaudited)
----------------- -----------------------
(in millions)
Net income:
As reported . . . . . . . . . . . $796.1 $840.1
Pro forma (unaudited) . . . . . . 792.4 835.8
At December 31, 2000, JHFS had 4.3 million stock options outstanding to
employees of the Company with a weighted-average remaining contractual life of
4.2 years and a weighted-average exercise price of $14.07. As of December 31,
2000, there were 21,707 options exercisable, which represent grants to employees
of the Company who subsequently retired. Employees of the Company who retire
with outstanding options immediately vest and have a maximum of one year to
exercise.
On March 13, 2000, JHFS granted 291,028 shares of non-vested stock to key
personnel of the Company at a weighted-average grant price per share of $14.34.
These grants of non-vested stock are forfeitable and vest at three or five years
of service with the Company. The total grant-date exercise price of the
non-vested stock granted from February 1, 2000 through December 31, 2000 is $4.2
million. During the third and fourth quarters of 2000, 50,837 shares of
non-vested stock were forfeited with a total grant date exercise price of $0.7
million.
120
JOHN HANCOCK LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 16--Subsequent Events
On February 8, 2001, the Company signed letters of intent to reinsure 50%
of the business in the Closed Block, effective January 1, 2001. The effect of
the reinsurance will be to lower the Company's statutory risk based capital
requirements and to raise its statutory risk based capital ratio. This will
provide greater statutory capital flexibility for the Company. There will be no
effect on policyholder dividends, nor will the immediate effect on earnings be
material, as the reinsurance treaties will not meet the requirements of SFAS No.
113, "Accounting and Reporting for Reinsurance of Short-Duration and Long
Duration Contracts." Final treaties with two reinsurers are expected to be
signed by the end of the first quarter of 2001. The reinsurance agreements
result in making several hundred million dollars in statutory capital available
for further business development or other purposes.
In March 2001, the Company announced the sale of the retirement plan
record-keeping business operated out of the mutual fund subsidiary of the
Company, John Hancock Funds. It is estimated that an after-tax charge of
approximately $9 million will be recorded in the first quarter of 2001 and that
the Company will initially sever 31 employees with additional severances
planned. The Company will continue to manage the assets of the business, the
purchaser will assume the record-keeping and support responsibilities.
121
JOHN HANCOCK LIFE INSURANCE COMPANY
SCHEDULE I--SUMMARY OF INVESTMENTS--
OTHER THAN INVESTMENTS IN RELATED PARTIES
excluding Closed Block
As of December 31, 2000
(in millions)
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. . . . . . . 243.2 247.9 247.9
States, municipalities and political
subdivisions. . . . . . . . . . . . . 126.6 126.7 126.7
Foreign governments. . . . . . . . . . 1,386.4 1,453.8 1,453.8
Public utilities . . . . . . . . . . . 1,051.4 1,085.0 1,085.0
Convertibles and bonds with warrants
attached. . . . . . . . . . . . . . . 250.9 258.4 258.4
All other corporate bonds. . . . . . . 12,123.4 12,263.9 12,264.0
Certificates of deposits . . . . . . . 0.0 0.0 0.0
Redeemable preferred stock . . . . . . 608.4 587.8 587.8
-------- -------- --------
Total fixed maturity securities,
available-for-sale. . . . . . . . . . 15,790.3 16,023.5 16,023.6
-------- -------- --------
Equity securities, available-for-sale:
Common stocks:
Public utilities . . . . . . . . . . . 4.7 5.5 5.5
Banks, trust and insurance companies . 1.9 2.8 2.8
Industrial, miscellaneous and all other 703.1 968.9 968.9
Non-redeemable preferred stock . . . . 120.9 117.7 117.7
-------- -------- --------
Total equity securities,
available-for-sale. . . . . . . . . . 830.6 1,094.9 1,094.9
-------- -------- --------
Fixed maturity securities, held-to-maturity:
Bonds:
United States government and government
agencies and authorities. . . . . . . 32.5 33.2 32.5
States, municipalities and political
subdivisions. . . . . . . . . . . . . 717.4 701.3 717.4
Foreign governments. . . . . . . . . . 5.6 10.2 5.6
Public utilities . . . . . . . . . . . 973.2 901.3 973.2
Convertibles and bonds with warrants
attached. . . . . . . . . . . . . . . 174.2 149.0 174.2
All other corporate bonds. . . . . . . 9,985.7 9,856.2 9,985.7
Certificates of deposits . . . . . . . 0.0 0.0 0.0
Redeemable preferred stock . . . . . . 0.0 0.0 0.0
-------- -------- --------
Total fixed maturity securities,
held-to-maturity . . . . . . . . . . 11,888.6 11,651.2 11,888.6
-------- -------- --------
122
JOHN HANCOCK LIFE INSURANCE COMPANY
SCHEDULE I--SUMMARY OF INVESTMENTS--
OTHER THAN INVESTMENTS IN RELATED PARTIES--(CONTINUED)
excluding Closed Block
As of December 31, 2000
(in millions)
Amount at Which
Shown in the
Consolidated
Type of Investment Cost (2) Value Balance Sheet
------------------ -------- ----- ---------------
Equity securities, trading:
Common stocks:
Public utilities . . . . . . . . . . . 7.1 8.6 8.6
Banks, trust and insurance companies . 14.9 24.6 24.6
Industrial, miscellaneous and all other 171.4 198.4 198.4
Non-redeemable preferred stock . . . . 0.0 0.0 0.0
Total equity securities, trading . . . 193.4 231.6 231.6
-------- -------- --------
Mortgage loans on real estate, net (1) 9,038.9 XXXX 8,968.9
Real estate, net:
Investment properties (1). . . . . . . 386.8 XXXX 373.6
Acquired in satisfaction of debt (1) . 175.7 XXXX 145.4
Policy loans . . . . . . . . . . . . . 428.6 XXXX 428.6
Other long-term investments (2). . . . 1,353.0 XXXX 1,353.0
Short-term investments . . . . . . . . 151.9 XXXX 151.9
-------- -------- --------
Total investments . . . . . . . . . . 40,237.8 29,001.3 40,660.0
======== ======== ========
(1) Difference from Column B is primarily due to valuation allowances due to
impairments on mortgage loans on real estate and due to accumulated
depreciation and valuation allowances due to impairments on real estate.
See note 3 to the consolidated financial statements.
(2) Difference from Column B is primarily due to operating gains (losses) of
investments in limited partnerships.
123
JOHN HANCOCK LIFE INSURANCE COMPANY
SCHEDULE III--SUPPLEMENTARY INSURANCE INFORMATION
As of December 31, 2000, 1999 and 1998 and for each of the years then ended
(in millions)
Future Policy Other
Deferred Benefits, Policy
Policy Losses, Claims Claims and
Acquisition and Loss Unearned Benefits Premium
Segment Costs Expenses Premiums(1) Payable (1) Revenue
------- ------------ --------------- ------------ ----------- -------
2000:
Protection. . . . . . $1,466.8 $ 4,814.4 $262.6 $ 33.5 $430.6
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 . . 355.0 6,471.6 348.3 224.0 1,076.1
-------- --------- ------ ------ --------
Total. . . . . . . . $2,388.5 $38,850.1 $671.3 $253.7 $2,190.4
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 . . 321.2 6,629.1 216.7 246.1 804.9
-------- --------- ------ ------ --------
Total. . . . . . . . $3,142.7 $47,141.3 $490.2 $358.9 $2,411.3
1998:
Protection. . . . . . $2,017.6 $14,093.6 $219.5 $ 85.5 $1,262.5
Asset Gathering . . . 425.2 4,850.0 -- 0.2 19.8
Guaranteed &
Structured . . . . .
Financial Products. . 8.7 19,366.4 48.4 0.3 121.4
Investment Management -- -- -- -- --
Corporate & Other . . 251.0 3,865.0 105.9 800.3 705.3
-------- --------- ------ ------ --------
Total. . . . . . . . $2,702.5 $42,175.0 $373.8 $886.3 $2,109.0
124
JOHN HANCOCK LIFE INSURANCE COMPANY
SCHEDULE III--SUPPLEMENTARY INSURANCE INFORMATION--(CONTINUED)
As of December 31, 2000, 1999 and 1998 and for each of the years then ended
(in millions)
Amortization of
Benefits, Deferred Policy
Claims, Losses, Acquisition Costs,
Net and Excluding Amounts Other
Investment Settlement Related to Realized Operating
Segment Income Expenses Investment Gains Expenses
------- ---------- --------------- ------------------- ---------
2000:
Protection. . . . . . $ 604.8 $ 633.5 $ 55.5 $ 395.8
Asset Gathering . . . 445.8 371.3 78.8 557.4
Guaranteed &
Structured . . . . .
Financial Products. . 1,741.9 1,963.5 2.6 77.5
Investment Management 22.7 -- -- 132.7
Corporate & Other . . 435.8 1,124.2 46.9 344.3
-------- -------- ------ --------
Total. . . . . . . . $3,251.0 $4,092.5 $183.8 $1,507.7
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 88.1
Investment Management 45.9 -- -- 127.2
Corporate & Other . . 350.8 1,278.8 38.4 225.8
-------- -------- ------ --------
Total. . . . . . . . $3,568.5 $5,133.0 $164.2 $1,384.4
1998:
Protection. . . . . . $1,061.2 $1,424.4 $165.4 $ 418.3
Asset Gathering . . . 378.0 296.3 46.8 504.9
Guaranteed &
Structured . . . . .
Financial Products. . 1,576.3 1,411.5 3.7 92.6
Investment Management 24.1 -- -- 117.8
Corporate & Other . . 288.4 950.4 45.3 224.2
-------- -------- ------ --------
Total. . . . . . . . $3,328.0 $4,082.6 $261.2 $1,357.8
(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 reporting operating
results would change by segment if different methods were applied.
125
JOHN HANCOCK LIFE INSURANCE COMPANY
SCHEDULE IV--REINSURANCE
As of December 31, 2000, 1999 and 1998 and for each of the years then ended:
(in millions)
Percentage
Ceded to Assumed of Amount
Gross Other from Other Assumed
Amount Companies Companies Net Amount to Net
------ --------- ---------- ---------- ----------
2000
Life insurance in
force. . . . . . . . $346,720.6 $91,827.1 $27,489.1 $282,382.6 9.7%
---------- --------- --------- ---------- =====
Premiums:
Life insurance. . . . $ 1,818.8 $ 370.6 $ 23.9 $ 1,472.1 1.6%
Accident and health
insurance. . . . . . 1,338.6 1,061.5 441.2 718.3 61.4%
P&C . . . . . . . . . -- -- -- -- 0.0%
---------- --------- --------- ---------- -----
Total . . . . . . . $ 3,157.4 $ 1,432.1 $ 465.1 $ 2,190.4 21.2%
========== ========= ========= ========== =====
1999
Life insurance in
force. . . . . . . . $380,019.3 $83,232.3 $29,214.6 $326,001.6 9.0%
---------- --------- --------- ---------- =====
Premiums:
Life insurance. . . . $ 2,292.8 $ 468.5 $ 139.4 $ 1,963.7 7.1%
Accident and health
insurance. . . . . . 1,142.4 868.2 173.1 447.3 38.7%
P&C . . . . . . . . . -- -- -- 0.3 100.0%
---------- --------- --------- ---------- -----
Total . . . . . . . $ 3,435.2 $ 1,336.7 $ 312.8 $ 2,411.13 13.0%
========== ========= ========= ========== =====
1998
Life insurance in
force. . . . . . . . $324,597.7 $88,662.6 $29,210.1 $265,145.2 11.0%
---------- --------- --------- ---------- =====
Premiums:
Life insurance. . . . $ 1,871.9 $ 327.6 $ 221.0 $ 1,765.3 12.5%
Accident and health
insurance. . . . . . 956.5 743.7 130.9 343.7 38.1%
P&C . . . . . . . . . 7.1 9.0 1.9 0.0%
---------- --------- --------- ---------- -----
Total . . . . . . . $ 2,835.5 $ 1,080.3 $ 353.8 $ 2,109.0 16.8%
========== ========= ========= ========== =====
Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and excludes
deposits on investment products and universal life insurance products.
126
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
THIRD QUARTER 2001
127
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2001
(unaudited)
International
Large Cap Active Equity Small Cap
Growth Bond Index Growth
Subaccount Subaccount Subaccount Subaccount
----------- ------------ ------------- -------------
Assets
Cash. . . . . . . . . . . . . . . . . . -- -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . $32,238,723 $ 93,295,695 $ 4,996,880 $ 3,817,361
Investments in shares of portfolios of
Outside Trust, at value. . . . . . . . -- -- -- --
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . 2,800,465 11,735,995 429,004 --
Receivable from:
John Hancock Variabl Series Trust I . 14,167 434,641 7,746 --
Outside Trust. . . . . . . . . . . . . -- -- -- --
----------- ------------ ----------- -----------
Total assets. . . . . . . . . . . . . . 35,053,355 105,466,331 5,403,360 3,817,361
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company . . . . . . . . . . . . . . . -- -- -- --
Outside Trust. . . . . . . . . . . . . -- -- -- --
Asset charges payable . . . . . . . . . 544 1,386 85 59
----------- ------------ ----------- -----------
Total liabilities . . . . . . . . . . . 544 1,386 85 59
----------- ------------ ----------- -----------
Net assets. . . . . . . . . . . . . . . $35,052,801 $105,464,945 $ 5,403,275 $ 3,817,302
=========== ============ =========== ===========
Global Mid Cap Large Cap Money
Balanced Growth Value Market
Subaccount Subaccount Subaccount Subaccount
---------- ----------- ----------- --------------
Assets
Cash . . . . . . . . . . . . . . . . . -- -- -- $ (1,285)
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value. . . . . . . . . . . . . . . $185,974 $12,249,074 $18,873,555 20,787,418
Investments in shares of portfolios of
Outside Trust, at value . . . . . . . -- -- -- --
Policy loans and accrued interest
receivable. . . . . . . . . . . . . . -- -- -- 2,281,020
Receivable from:
John Hancock Variable Series Trust I. 248 -- 18,354 4,922
Outside Trust . . . . . . . . . . . . -- -- -- --
-------- ----------- ----------- -----------
Total assets . . . . . . . . . . . . . 186,222 12,249,074 18,891,909 23,072,075
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company. . . . . . . . . . . . . . . -- -- -- 3
Outside Trust . . . . . . . . . . . . -- -- -- --
Asset charges payable. . . . . . . . . 3 193 303 1,075
-------- ----------- ----------- -----------
Total liabilities. . . . . . . . . . . 3 193 303 1,078
-------- ----------- ----------- -----------
Net assets . . . . . . . . . . . . . . $186,219 $12,248,881 $18,891,606 $23,070,997
======== =========== =========== ===========
See accompanying notes.
128
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (continued)
September 30, 2001
(unaudited)
Large/Mid Cap Small/Mid Cap Real Estate Growth &
Value II Growth Equity Income
Subaccount Subaccount Subaccount Subaccount
-------------- ------------- ----------- --------------
Assets
Cash. . . . . . . . . . . . . . . . . . -- -- $ 3 --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . $ 653,339 $5,113,090 5,339,377 $176,034,919
Investments in shares of portfolios of
Outside Trust, at value. . . . . . . . -- -- -- --
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- 390,488 32,633,613
Receivable from:
John Hancock Variable Series Trust I . 473 -- 44,391 91,628
Outside Trust. . . . . . . . . . . . . -- -- -- --
-------------- ---------- ---------- ------------
Total assets. . . . . . . . . . . . . . 653,812 5,113,090 5,774,259 208,760,160
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company . . . . . . . . . . . . . . . -- -- 82 --
Outside Trust. . . . . . . . . . . . . -- -- -- --
Asset charges payable . . . . . . . . . 4 81 8 2,550
-------------- ---------- ---------- ------------
Total liabilities . . . . . . . . . . . 4 81 90 2,550
-------------- ---------- ---------- ------------
Net assets. . . . . . . . . . . . . . . $ 653,808 $5,133,009 $5,774,169 $208,757,610
============== ========== ========== ============
Short-Term Small Cap International
Managed Bond Equity Opportunities
Subaccount Subaccount Subaccount Subaccount
------------- ---------- ---------- ---------------
Assets
Cash . . . . . . . . . . . . . . . . . . $ (685) -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value. . . . . . . . . . . . . . . . 87,488,855 $576,275 $3,546,636 $13,696,983
Investments in shares of portfolios of
Outside Trust, at value . . . . . . . . -- -- -- --
Policy loans and accrued interest
receivable. . . . . . . . . . . . . . . 14,012,579 -- -- --
Receivable from:
John Hancock Variable Series Trust I. . 155,971 2,162 -- 1,166
Outside Trust . . . . . . . . . . . . . -- -- -- --
------------ -------- ---------- -----------
Total assets . . . . . . . . . . . . . . 101,656,720 578,437 3,546,636 13,698,149
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company. . . . . . . . . . . . . . . . -- -- -- --
Outside Trust . . . . . . . . . . . . . -- -- -- --
Asset charges payable. . . . . . . . . . 1,590 9 54 219
------------ -------- ---------- -----------
Total liabilities. . . . . . . . . . . . 1,590 9 54 219
------------ -------- ---------- -----------
Net assets . . . . . . . . . . . . . . . $101,655,130 $578,428 $3,546,582 $13,697,930
============ ======== ========== ===========
See accompanying notes.
129
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (continued)
September 30, 2001
(unaudited)
Brandes
Equity Global Turner Core International
Index Bond Growth Equity
Subaccount Subaccount Subaccount Subaccount
----------- ---------- ------------ ---------------
Assets
Cash . . . . . . . . . . . . . . . . . . -- -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value. . . . . . . . . . . . . . . . $44,109,516 $1,237,355 -- --
Investments in shares of portfolios of
Outside Trust, at value . . . . . . . . -- -- $ 319,823 $1,007,801
Policy loans and accrued interest
receivable. . . . . . . . . . . . . . . -- -- -- --
Receivable from:
John Hancock Variable Series Trust I. . 41,267 3,401 -- --
Outside Trust . . . . . . . . . . . . . -- -- -- --
----------- ---------- ------------ ----------
Total assets . . . . . . . . . . . . . . 44,150,783 1,240,736 319,823 1,007,801
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company. . . . . . . . . . . . . . . . -- -- -- --
Outside Trust . . . . . . . . . . . . . -- -- -- --
Asset charges payable. . . . . . . . . . 706 20 4 10
----------- ---------- ------------ ----------
Total liabilities. . . . . . . . . . . . 706 20 4 10
----------- ---------- ------------ ----------
Net assets . . . . . . . . . . . . . . . $44,150,077 $1,240,736 $ 319,819 $1,007,791
=========== ========== ============ ==========
Frontier
Capital Emerging Small/Mid
Appreciation Markets Equity Bond Index Cap Core
Subaccount Subaccount Subaccount Subaccount
------------ --------------- ----------- ------------
Assets
Cash. . . . . . . . . . . . . . . . . . -- -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . -- $624,216 $5,116,176 $499,543
Investments in shares of portfolios of
Outside Trust, at value. . . . . . . . $386,290 -- -- --
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- -- --
Receivable from:
John Hancock Variable Series Trust I . -- 497 22,339 335
Outside Trust. . . . . . . . . . . . . -- -- -- --
-------- -------- ---------- --------
Total assets. . . . . . . . . . . . . . 386,290 624,713 5,138,431 499,878
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company . . . . . . . . . . . . . . . -- -- -- --
Outside Trust. . . . . . . . . . . . . -- -- -- --
Asset charges payable . . . . . . . . . 4 10 84 8
-------- -------- ---------- --------
Total liabilities . . . . . . . . . . . 4 10 84 8
-------- -------- ---------- --------
Net assets. . . . . . . . . . . . . . . $386,286 $624,703 $5,138,431 $499,870
======== ======== ========== ========
See accompanying notes.
130
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (continued)
September 30, 2001
(unaudited)
High Clifton Large Cap
Yield Enhanced Aggressive Fundamental
Bond US Equity Growth Growth
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ------------ -------------
Assets
Cash. . . . . . . . . . . -- -- -- --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value. . . . $681,119 $22,033 $ 1,366 $7,034
Investments in shares of
portfolios of Outside
Trust, at value. . . . . -- -- -- --
Policy loans and accrued
interest receivable. . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I. . . . . 4,875 -- -- --
Outside Trust. . . . . . -- -- -- --
-------- ------- ------- ------
Total assets. . . . . . . 685,994 22,033 1,366 7,034
Liabilities
Payable to:
John Hancock Variable
Life Insurance Company. -- -- -- --
Outside Trust. . . . . . -- -- -- --
Asset charges payable . . 11 -- --
-------- ------- ------- ------
Total liabilities . . . . 11 -- -- --
-------- ------- ------- ------
Net assets. . . . . . . . $685,983 $22,033 $ 1,366 $7,034
======== ======= ======= ======
Fidelity Fidelity Janus Aspen
AIM V.I. VIP VIP II Global
Value Growth Contrafund Technology
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- -------------
Assets
Cash. . . . . . . . . . . . -- -- -- --
Investments in shares of
portfolios of John Hancock
Variable Series Trust I, at
value. . . . . . . . . . . -- -- -- --
Investments in shares of
portfolios of Outside
Trust, at value. . . . . . $12,376 $2,529 $14,123 $1,735
Policy loans and accrued
interest receivable. . . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I. . . . . . -- -- -- --
Outside Trust. . . . . . . -- -- -- --
------- ------ ------- ------
Total assets. . . . . . . . 12,376 2,529 14,123 1,735
Liabilities
Payable to:
John Hancock Variable Life
Insurance Company . . . . -- -- -- --
Outside Trust. . . . . . . -- -- -- --
Asset charges payable . . . -- -- -- --
------- ------ ------- ------
Total liabilities . . . . . -- -- -- --
------- ------ ------- ------
Net assets. . . . . . . . . $12,376 $2,529 $14,123 $1,735
======= ====== ======= ======
See accompanying notes.
131
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (continued)
September 30, 2001
(unaudited)
Janus Aspen MFS New
Worldwide Discovery Active Large/Mid Small Cap
Growth Series Bond II Cap Value Value
Subaccount Subaccount Subaccount Subaccount Subaccount
----------- ---------- ---------- ---------- ------------
Assets
Cash. . . . . . . . . . . . . . . . . . -- -- -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . -- -- $2,751 $3,326,891 $8,597
Investments in shares of portfolios of
Outside Trust, at value. . . . . . . . $3,096 $80,466 -- -- --
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- -- -- --
Receivable from:
John Hancock Variable Series Trust I . -- -- 11 2,602 11
Outside Trust. . . . . . . . . . . . . -- -- -- -- --
------ ------- ------ ---------- ------
Total assets. . . . . . . . . . . . . . 3,096 80,466 2,762 3,329,439 8,608
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company . . . . . . . . . . . . . . . -- -- -- -- --
Outside Trust. . . . . . . . . . . . . -- -- -- -- --
Asset charges payable . . . . . . . . . -- 1 -- 54 --
------ ------- ------ ---------- ------
Total liabilities . . . . . . . . . . . -- 1 -- 54 --
------ ------- ------ ---------- ------
Net assets. . . . . . . . . . . . . . . $3,096 $80,465 $2,762 $3,329,439 $8,608
====== ======= ====== ========== ======
See accompanying notes.
132
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF OPERATIONS
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Large Cap Growth Subaccount Active Bond Subaccount
---------------------------------------- ----------------------------------------
2001 2000 1999 2001 2000 1999
------------- ------------- ---------- ------------ ------------ ------------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . . . $ 35,051 $ 6,351,461 $6,381,711 $ 4,178,042 $ 5,048,654 $ 5,184,234
Outside Trust . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . . 167,379 223,081 161,454 616,986 769,530 750,673
------------ ------------ ---------- ----------- ----------- -----------
Total investment income. . . . . . . . . . . 202,430 6,574,542 6,543,165 4,795,028 5,818,184 5,934,907
Expenses:
Mortality and expense risks . . . . . . . . 177,357 286,716 213,770 364,128 485,231 452,925
------------ ------------ ---------- ----------- ----------- -----------
Net investment income. . . . . . . . . . . . 25,073 6,287,826 6,329,395 4,430,900 5,332,953 5,481,982
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses) . . . . . . . . (175,998) 1,809,410 1,146,308 (515,287) (1,058,175) (388,883)
Net unrealized appreciation (depreciation)
during the period. . . . . . . . . . . . . (12,425,145) (17,039,660) 320,087 2,482,298 3,862,398 (5,439,148)
------------ ------------ ---------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . (12,601,143) (15,230,250) 1,466,395 1,967,011 2,804,223 (5,828,031)
------------ ------------ ---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . . $(12,576,070) $ (8,942,424) $7,795,790 $ 6,397,911 $ 8,137,176 $ (346,049)
============ ============ ========== =========== =========== ===========
International Equity Index Subaccount Small Cap Growth Subaccount
-------------------------------------- ---------------------------------------
2001 2000 1999 2001 2000 1999
------------ ------------ ---------- ------------ ------------ -----------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $ 89,103 $ 334,135 $ 212,869 $ -- $ 621,346 $ 543,433
Outside Trust. . . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans. . . . . . . . 23,801 29,828 20,538 -- -- --
----------- ----------- ---------- ----------- ----------- ----------
Total investment income . . . . . . . . . . . . 112,904 363,963 233,407 -- 621,346 543,433
Expenses:
Mortality and expense risks. . . . . . . . . . 27,519 41,808 32,838 21,297 39,379 15,809
----------- ----------- ---------- ----------- ----------- ----------
Net investment income (loss). . . . . . . . . . 85,385 322,155 200,569 (21,297) 581,967 527,624
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses). . . . . . . . . . (122,640) 76,586 62,140 3,918 159,388 48,210
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . (1,653,325) (1,706,468) 1,295,768 (1,739,132) (2,654,137) 1,125,829
----------- ----------- ---------- ----------- ----------- ----------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . . . (1,775,965) (1,629,882) 1,357,908 (1,735,214) (2,494,749) 1,174,039
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . $(1,690,580) $(1,307,727) $1,558,477 $(1,756,011) $(1,912,782) $1,701,663
=========== =========== ========== =========== =========== ==========
See accompanying notes.
133
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Global Balanced Subaccount Mid Cap Growth Subaccount
------------------------------------------- ---------------------------------------
2001 2000 1999 2001 2000 1999
--------------- ------------- ----------- ------------ ------------- ----------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . . $ 2,054 $ 8,232 $ 17,211 $ -- $ 2,284,720 $1,373,009
Outside Trust . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . -- -- -- -- -- --
-------------- ------------ ---------- ----------- ------------ ----------
Total investment income. . . . . . . . . . 2,054 8,232 17,211 -- 2,284,720 1,373,009
Expenses:
Mortality and expense risks . . . . . . . 841 1,034 1,267 64,238 101,903 34,834
-------------- ------------ ---------- ----------- ------------ ----------
Net investment income (loss) . . . . . . . 1,213 7,198 15,944 (64,238) 2,182,817 1,338,175
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses) . . . . . . . (8,554) (3,641) 1,061 (1,706,682) 1,892,763 420,826
Net unrealized appreciation (depreciation)
during the period. . . . . . . . . . . . (19,857) (21,945) (8,559) (6,633,116) (11,690,290) 4,283,452
-------------- ------------ ---------- ----------- ------------ ----------
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . (28,411) (25,586) (7,498) (8,339,798) (9,797,527) 4,704,278
-------------- ------------ ---------- ----------- ------------ ----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . $ (27,198) $ (18,388) $ 8,446 $(8,404,036) $ (7,614,710) $6,042,453
============== ============ ========== =========== ============ ==========
Large Cap Value Subaccount Money Market Subaccount
------------------------------------- ---------------------------------
2001 2000 1999 2001 2000 1999
------------ ----------- ---------- -------- ---------- -----------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . . $ 207,337 $ 759,319 $ 511,132 $699,973 $1,260,525 $1,134,371
Outside Trust. . . . -- -- -- -- -- --
Interest income on policy loans. . . . . -- -- -- 125,658 162,299 155,491
----------- ---------- --------- -------- ---------- ----------
Total investment income. . . . . . . . . . 207,337 759,319 511,132 825,631 1,422,824 1,289,862
Expenses:
Mortality and expense risks . . . . . . . 77,250 65,992 36,983 100,165 132,261 146,758
----------- ---------- --------- -------- ---------- ----------
Net investment income. . . . . . . . . . . 130,087 693,327 474,149 725,466 1,290,563 1,143,104
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses) . . . . . . . 67,962 (47,306) 123,242 -- -- --
Net unrealized appreciation
(depreciation) during the period . . . . (1,393,400) 854,807 (499,454) -- -- --
----------- ---------- --------- -------- ---------- ----------
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . (1,325,438) 807,501 (376,212) -- -- --
----------- ---------- --------- -------- ---------- ----------
Net increase (decrease) in net
assets resulting from operations. . . . . $(1,195,351) $1,500,828 $ 97,937 $725,466 $1,290,563 $1,143,104
=========== ========== ========= ======== ========== ==========
See accompanying notes.
134
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended June 30, 2001 (unaudited) and
December 31, 2000 and 1999
Large/Mid Cap Value II Subaccount Small/Mid Cap Growth Subaccount
---------------------------------------- -------------------------------------------
2001 2000 1999 2001 2000 1999
--------------- ----------- ---------- ------------- ------------- -------------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . $ 1,251 $ 861,684 $ 30,563 $ -- $ 603,438 $ 840,786
Outside Trust. . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans. . . . . -- -- -- -- -- --
-------------- ---------- --------- ------------ ------------ ------------
Total investment income . . . . . . . . . 1,251 861,684 30,563 -- 603,438 840,786
Expenses:
Mortality and expense risks. . . . . . . 213 36,705 28,106 25,816 32,879 30,491
-------------- ---------- --------- ------------ ------------ ------------
Net investment income (loss). . . . . . . 1,038 824,979 2,457 (25,816) 570,559 810,295
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses). . . . . . . (2,862) (47,013) (547,518) (102,355) (136,669) 16,952
Net unrealized appreciation
(depreciation) during the period. . . . (75,104) 853,987 657,486 (889,404) (2,663) (590,295)
-------------- ---------- --------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . (77,966) 806,974 109,968 (991,759) (139,332) (573,343)
-------------- ---------- --------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . $ (76,928) $1,631,953 $ 112,425 $ (1,017,575) $ 431,227 $ 236,952
============== ========== ========= ============ ============ ============
Real Estate Equity Subaccount Growth & Income Subaccount
-------------------------------------- -----------------------------------------
2001 2000 1999 2001 2000 1999
------------- ----------- ---------- ------------- ------------- -----------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . $ 161,784 $ 471,363 $ 262,930 $ 354,937 $ 43,732,520 $35,057,066
Outside Trust. . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans. . . . . 21,908 21,486 17,361 1,214,903 2,428,588 2,279,107
------------ ---------- --------- ------------ ------------ -----------
Total investment income . . . . . . . . . 183,692 492,849 280,291 1,569,840 46,161,108 37,336,173
Expenses:
Mortality and expense risks. . . . . . . 807,696 27,585 24,900 550,147 1,733,223 1,779,482
------------ ---------- --------- ------------ ------------ -----------
Net investment income . . . . . . . . . . 1,695,152 465,264 255,391 1,019,693 44,427,885 35,556,691
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses). . . . . . . 291,493 (159,205) (168,994) 373,787 18,300,286 5,502,422
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . (58,152,177) 919,904 (220,380) (21,835,984) (96,829,044) 2,405,417
------------ ---------- --------- ------------ ------------ -----------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . (57,860,684) 760,699 (389,374) (21,462,197) (78,528,758) 7,907,839
------------ ---------- --------- ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . $(56,165,532) $1,225,963 $(133,983) $(20,442,504) $(34,100,873) $43,464,530
============ ========== ========= ============ ============ ===========
See accompanying notes.
135
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Managed Subaccount Short-Term Bond Subaccount
------------------------------------------ ---------------------------------------
2001 2000 1999 2001 2000 1999
------------- ------------- ------------ ------------- ------------- ---------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . $ 1,562,932 $ 11,757,304 $ 9,998,433 $ 17,421 $ 17,131 $ 15,539
Outside Trust. . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . 779,359 -- 953,686 -- -- --
------------ ------------ ----------- ------------ ------------ --------
Total investment income . . . . . . . . . . 2,342,291 11,757,304 10,952,119 17,421 17,131 15,539
Expenses:
Mortality and expense risks. . . . . . . . 465,854 664,664 649,802 1,837 1,637 1,497
------------ ------------ ----------- ------------ ------------ --------
Net investment income . . . . . . . . . . . 1,876,437 11,092,640 10,302,317 15,584 15,494 14,042
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses). . . . . . . . 44,474 1,551,519 996,546 (315) (2,287) (8,638)
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . (11,191,146) (12,278,637) (2,108,530) 13,799 6,756 (2,442)
------------ ------------ ----------- ------------ ------------ --------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . (11,146,672) (10,727,118) (1,111,984) 13,484 4,469 (11,080)
------------ ------------ ----------- ------------ ------------ --------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . $ (9,270,235) $ 365,522 $ 9,190,333 $ 29,068 $ 19,963 $ 2,962
============ ============ =========== ============ ============ ========
Small Cap Equity Subaccount International Opportunities Subaccount
------------------------------------- ---------------------------------------
2001 2000 1999 2001 2000 1999
---------- ------------ ----------- ------------- ------------- ---------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I $ -- $ 321,253 $ 79,585 $ 104,368 $ 617,754 $241,151
Outside Trust. . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans. . . . . . -- -- -- -- -- --
--------- ----------- ---------- ----------- ----------- --------
Total investment income . . . . . . . . . . -- 321,253 79,585 104,368 617,754 241,151
Expenses:
Mortality and expense risks. . . . . . . . 15,612 23,745 17,680 56,211 53,038 17,937
--------- ----------- ---------- ----------- ----------- --------
Net investment income (loss). . . . . . . . (15,612) 297,508 61,905 48,157 564,716 223,214
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses). . . . . . . . (497,942) (110,857) (33,134) (254,673) 348,813 155,412
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . (443,318) (668,463) (148,401) (4,019,589) (2,497,504) 387,412
--------- ----------- ---------- ----------- ----------- --------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . (941,260) (779,320) (181,535) (4,274,262) (2,148,691) 542,824
--------- ----------- ---------- ----------- ----------- --------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . $(956,872) $ (481,812) $ (119,630) $(4,266,105) $(1,583,975) $766,038
========= =========== ========== =========== =========== ========
See accompanying notes.
136
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Equity Index Subaccount Global Bond Subaccount
--------------------------------------- ------------------------------
2001 2000 1999 2001 2000 1999
------------ ----------- ---------- ------- -------- --------
Investment income:
Distributions received from:
John Hancock Variable
Series Trust I. . . . . . $ 432,341 $ 2,327,055 $ 593,325 $ 5,614 $ 63,032 $ 37,862
Outside Trust. . . . . . . -- -- -- -- -- --
Interest income on policy
loans . . . . . . . . . . -- -- -- -- -- --
------------ ----------- ---------- ------- -------- --------
Total investment income . . 432,341 2,327,055 593,325 5,614 63,032 37,862
Expenses:
Mortality and expense risks 216,019 185,175 63,950 5,096 5,624 4,084
------------ ----------- ---------- ------- -------- --------
Net investment income . . . 216,322 2,141,880 529,375 518 57,408 33,778
Net realized and unrealized
gain (loss) on investments:
Net realized gains (losses) (85,115) 485,643 271,978 (6,331) (14,302) (151)
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . (11,294,511) (8,035,375) 1,282,937 24,984 63,359 (52,953)
------------ ----------- ---------- ------- -------- --------
Net realized and unrealized
gain (loss) on investments (11,379,626) (7,549,732) 1,554,915 18,653 49,057 (53,104)
------------ ----------- ---------- ------- -------- --------
Net increase (decrease) in
net assets resulting from
operations . . . . . . . . $(11,163,304) $(5,407,852) $2,084,290 $19,171 $106,465 $(19,326)
============ =========== ========== ======= ======== ========
Brandes International Equity
Turner Core Growth Subaccount Subaccount
------------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
--------- --------- ------- --------- -------- --------
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . . . . . . -- -- -- -- -- --
Outside Trust. . . . . . . . . $ 80 $ 52,832 $19,328 $ 3,215 $ 92,935 $ 16,354
Interest income on
policy loans. . . . . . . . . -- -- -- -- -- --
--------- --------- ------- --------- -------- --------
Total investment
income . . . . . . . . . . . . 80 52,832 19,328 3,215 92,935 16,354
Expenses:
Mortality and expense
risks . . . . . . . . . . . . 1,667 2,215 1,139 5,022 4,973 2,166
--------- --------- ------- --------- -------- --------
Net investment income
(loss) . . . . . . . . . . . . (1,587) 50,617 18,189 (1,807) 87,962 14,188
Net realized and
unrealized gain
(loss) on
investments:
Net realized gains
(losses). . . . . . . . . . . (87,369) 20,969 26,736 30,200 13,902 11,526
Net unrealized
appreciation
(depreciation)
during the period . . . . . . (56,525) (120,040) 23,628 (276,840) (35,201) 122,734
--------- --------- ------- --------- -------- --------
Net realized and
unrealized gain
(loss) on investments. . . . . (143,894) (99,071) 50,364 (246,640) (21,299) 134,260
--------- --------- ------- --------- -------- --------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $(145,481) $ (48,454) $68,553 $(248,447) $ 66,663 $148,448
========= ========= ======= ========= ======== ========
See accompanying notes.
137
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Frontier Capital Appreciation Emerging Markets Equity
Subaccount Subaccount
--------------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- --------- ---------- ---------- --------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . -- -- -- $ 1,897 $ 63,791 $ 15,636
Outside Trust . . . . . . . . . . . . . $ 4,602 $ 133,836 $ 13,028 -- -- --
Interest income on policy loans . . . . -- -- -- -- -- --
--------- --------- -------- --------- --------- --------
Total investment income. . . . . . . . . 4,602 133,836 13,028 1,897 63,791 15,636
Expenses:
Mortality and expense risks . . . . . . 2,351 3,700 4,257 3,704 5,200 466
--------- --------- -------- --------- --------- --------
Net investment income (loss) . . . . . . 2,251 130,136 8,771 (1,807) 58,591 15,170
Net realized and unrealized gain (loss)
on investments:
Net realized gains (losses) . . . . . . (52,619) 68,311 (59,550) (424,870) 19,902 1,838
Net unrealized appreciation
(depreciation) during the period . . . (47,847) (175,994) 89,369 193,158 (571,486) 92,713
--------- --------- -------- --------- --------- --------
Net realized and unrealized gain
(loss) on investments . . . . . . . . . (100,466) (107,683) 29,819 (231,712) (551,584) 94,551
--------- --------- -------- --------- --------- --------
Net increase (decrease) in net
assets resulting from operations. . . . $ (98,215) $ 22,453 $ 38,590 $(233,519) $(492,993) $109,721
========= ========= ======== ========= ========= ========
Bond Index Subaccount Small/Mid Cap Core Subaccount
---------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
-------- -------- -------- ---------- ---------- --------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 72,347 $ 7,273 $ 2,971 $ 1,997 $ 22,843 $ 6,699
Outside Trust . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . -- -- -- -- -- --
-------- ------- ------- -------- -------- -------
Total investment income. . . . . . . . . 72,347 7,273 2,971 1,997 22,843 6,699
Expenses:
Mortality and expense risks . . . . . . 6,237 561 270 2,162 1,051 335
-------- ------- ------- -------- -------- -------
Net investment income (loss) . . . . . . 66,110 6,712 2,701 (165) 21,792 6,364
Net realized and unrealized gain
(loss) on investments:
Net realized gains (losses) . . . . . . 6,268 (607) (1,613) (1,290) 1,505 1,093
Net unrealized appreciation
(depreciation) during the period . . . 66,645 6,100 (1,753) (78,559) (13,928) 4,719
-------- ------- ------- -------- -------- -------
Net realized and unrealized gain
(loss) on investments . . . . . . . . . 72,913 5,493 (3,366) (79,849) (12,423) 5,812
-------- ------- ------- -------- -------- -------
Net increase (decrease) in net
assets resulting from operations. . . . $139,023 $12,205 $ (665) $ 80,014 $ 9,369 $12,176
======== ======= ======= ======== ======== =======
See accompanying notes.
138
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
High Yield Bond Clifton Enhanced US
Subaccount Equity Subaccount
-------------------------------- ---------------------------
2001 2000 1999 2001 2000 1999*
---------- ---------- -------- -------- -------- -------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 42,754 $ 84,101 $ 3,011 $ -- $ 3,328 $ 1,435
Outside Trust . . . . . . . . . . . . . -- -- -- 42 -- --
Interest income on policy loans . . . . -- -- -- -- -- --
--------- --------- ------- ------- ------- -------
Total investment income. . . . . . . . . 42,754 84,101 3,011 42 3,328 1,435
Expenses:
Mortality and expense risks. . . . . . 2,983 5,409 220 111 138 61
--------- --------- ------- ------- ------- -------
Net investment income (loss) . . . . . . 39,771 78,692 2,791 (69) 3,190 1,374
Net realized and unrealized gain
(loss) on investments:
Net realized gains (loss) . . . . . . . (107,391) (12,114) (396) (525) 302 11
Net unrealized appreciation
(depreciation) during the period . . . 93,431 (188,735) (1,172) (4,557) (5,562) 1,285
--------- --------- ------- ------- ------- -------
Net realized and unrealized gain
(loss) on investments . . . . . . . . . (13,960) (200,849) (1,568) (5,082) (5,260) 1,296
-------- --------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from operations. . . . $ 25,811 $(122,157) $ 1,223 $(5,151) $(2,070) $ 2,670
======== ========= ======= ======= ======= =======
Large Cap Aggressive Fundamental Growth AIM V.I. Value
Growth Subaccount Subaccount Subaccount
---------------------- -------------------- -----------------
2001 2000** 2001 2000* 2001 2000*
---------- ---------- --------- --------- -------- -------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ -- $ 36 $ -- $ 1,361 $ -- $ --
Outside Trust . . . . . . . . . . . . . -- -- -- -- -- 241
Interest income on policy loans . . . . -- -- -- -- -- --
----- ----- ------- ------- ------- -------
Total investment income. . . . . . . . . -- 36 -- 1,361 -- 241
Expenses:
Mortality and expense risks . . . . . . 8 6 48 10 42 11
----- ----- ------- ------- ------- -------
Net investment income (loss) . . . . . . (8) 30 (48) 1,351 (42) 230
Net realized and unrealized (loss) on
investments:
Net realized (loss) . . . . . . . . . . (40) (8) (242) (10) (173) (11)
Net unrealized (depreciation)
during the period. . . . . . . . . . . (444) (616) (5,780) (1,226) (2,905) (1,068)
----- ----- ------- ------- ------- -------
Net realized and unrealized (loss) on
investments . . . . . . . . . . . . . . (484) (624) (6,022) (1,236) (3,078) (1,079)
----- ----- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from operations. . . . $(492) $(594) $(6,070) $ 115 $(3,120) $ (849)
===== ===== ======= ======= ======= =======
- ---------
* From May 1, 1999 (commencement of operations).
** From April 24, 2000 (commencement of operations).
See accompanying notes.
139
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Fidelity VIP II
Fidelity VIP Growth Contrafund Janus Aspen Global
Subaccount Subaccount Technology Subaccount
---------------------- ---------------- ----------------------
2001 2000** 2001 2000** 2001 2000***
----------- --------- -------- ------ ---------- ----------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . . . . -- -- -- -- -- --
Outside Trust . . . . . . . . . . . . . . . . $ 272 $ -- $ 205 $ -- $ 17 $ 24
Interest income on policy loans. . . . . . . -- -- -- -- -- --
------- ----- ------- ----- ------- -------
Total investment income. . . . . . . . . . . . 272 -- 205 -- 17 24
Expenses:
Mortality and expense risks . . . . . . . . . 16 12 47 6 13 8
------- ----- ------- ----- ------- -------
Net investment income (loss) . . . . . . . . . 256 (12) 158 (6) 4 16
Net realized and unrealized (loss) on
investments:
Net realized losses . . . . . . . . . . . . . (472) (4) (160) (7) (87) (99)
Net unrealized (depreciation) during the
period . . . . . . . . . . . . . . . . . . . (983) (366) (2,418) (525) (1,856) (1,649)
------- ----- ------- ----- ------- -------
Net realized and unrealized (loss) on
investments . . . . . . . . . . . . . . . . . (1,455) (370) (2,578) (532) (1,943) (1,748)
------- ----- ------- ----- ------- -------
Net (decrease) in net assets resulting from
operations. . . . . . . . . . . . . . . . . . $(1,199) $(382) $(2,420) $(538) $(1,939) $(1,732)
======= ===== ======= ===== ======= =======
Janus Aspen NFS New
Worldwide Discovery
Growth Series Active Bond II Large/Mid Small Cap
Subaccount Subaccount Subaccount Cap Value Value
----------------- ----------------- -------------- ------------ -----------
2001 2000*** 2001 2000** 2001**** 2001**** 2001****
-------- ------- --------- ------ -------------- ------------ -----------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . -- -- -- -- $71 $ 32,410 $ 13
Outside Trust. . . . . . . . . . . . . . . . . $ 7 $ 1 $ 3,282 $ -- -- -- --
Interest income on policy loans. . . . . . . . -- -- -- -- -- -- --
------- ----- -------- ---- --- ----------- -----
Total investment income . . . . . . . . . . . . 7 1 3,282 -- 71 32,410 13
Expenses:
Mortality and expense risks. . . . . . . . . . 18 8 282 19 8 19,605 5
------- ----- -------- ---- --- ----------- -----
Net investment income (loss). . . . . . . . . . (11) (7) 3,000 (19) 63 12,805 8
Net realized and unrealized gain (loss) on
investments:
Net realized income (loss) . . . . . . . . . . (46) (71) (491) (7) 1 478,407 (350)
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . (1,396) (717) (23,621) 197 24 (1,138,810) 443
------- ----- -------- ---- --- ----------- -----
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . . . (1,442) (788) (24,112) 190 25 (660,403) 93
------- ----- -------- ---- --- ----------- -----
Net increase (decrease) in net assets resulting
from operations. . . $(1,453) $(795) $(21,112) $171 $88 $ (647,598) $ 101
======= ===== ======== ==== === =========== =====
- ---------
** From April 24, 2000 (commencement of operations).
*** From June 29, 2000 (commencement of operations).
**** Activity from January 1, 2001. From December 15, 2000 (commencement of
operations) to December 31, 2000 there was no activity.
See accompanying notes.
140
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Large Cap Growth Subaccount Active Bond Subaccount
------------------------------------------ -----------------------------------------
2001 2000 1999 2001 2000 1999
------------- ------------- ------------ ------------- ------------- -----------
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 25,073 $ 6,287,826 $ 6,329,395 $ 4,430,900 $ 5,332,953 $ 5,481,982
Net realized gains (losses) . . . . . . (175,998) 1,809,410 1,146,308 (515,287) (1,058,175) (388,883)
Net unrealized appreciation
(depreciation) during the period . . . (12,425,145) (17,039,660) 320,087 2,482,298 3,862,398 (5,439,148)
------------ ------------ ----------- ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . (12,576,070) (8,942,424) 7,795,790 6,397,911 8,137,176 (346,049)
From policyholder transactions:
Net premiums from policyholders . . . . 9,798,367 16,225,070 10,950,682 9,484,532 26,218,788 11,668,600
Net benefits to policyholders . . . . . (5,259,528) (8,421,666) (5,776,293) (9,173,407) (17,903,281) (7,543,864)
Net increase (decrease) in policy loans (207,346) 407,961 -- 793,349 620,295 --
------------ ------------ ----------- ------------ ------------ -----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . 4,331,493 8,211,365 5,174,389 1,104,474 8,935,802 4,124,736
------------ ------------ ----------- ------------ ------------ -----------
Net increase (decrease) in net assets. . (8,244,577) (731,059) 12,970,179 7,502,385 17,072,978 3,778,687
Net assets at beginning of period. . . . 43,297,378 44,028,437 31,058,258 97,962,560 80,889,582 77,110,895
------------ ------------ ----------- ------------ ------------ -----------
Net assets at end of period. . . . . . . $ 35,052,801 $ 43,297,378 $44,028,437 $105,464,945 $ 97,962,560 $80,889,582
============ ============ =========== ============ ============ ===========
International Equity Index Subaccount Small Cap Growth Subaccount
---------------------------------------- --------------------------------------
2001 2000 1999 2001 2000 1999
------------ ------------ ------------ ------------ ------------ -----------
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . . . $ 85,385 $ 322,155 $ 200,569 $ (21,297) $ 581,967 $ 527,624
Net realized gains (losses). . . . . . . . . (122,640) 76,586 62,140 3,918 159,388 48,210
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . (1,653,325) (1,706,468) 1,295,768 (1,739,132) (2,654,137) 1,125,829
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . . (1,690,580) (1,307,727) 1,558,477 (1,756,511) (1,912,782) 1,701,663
From policyholder transactions:
Net premiums from policyholders. . . . . . . 1,306,416 2,208,529 1,634,643 1,836,588 4,738,730 1,398,160
Net benefits to policyholders. . . . . . . . (1,081,138) (1,307,479) (1,119,500) (2,644,594) (956,063) (390,180)
Net increase (decrease) in policy loans. . . (15,762) 110,023 -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from policyholder transactions . . 209,516 1,011,073 515,143 (808,006) 3,782,667 1,007,980
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets . . . . (1,481,064) (296,654) 2,073,620 (2,564,517) 1,869,885 2,709,643
Net assets at beginning of period . . . . . . 6,884,339 7,180,994 5,107,374 6,381,819 4,511,934 1,802,291
----------- ----------- ----------- ----------- ----------- ----------
Net assets at end of period . . . . . . . . . $ 5,403,275 $ 6,884,340 $ 7,180,994 $ 3,817,302 $ 6,381,819 $4,511,934
=========== =========== =========== =========== =========== ==========
See accompanying notes.
141
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Global Balanced Subaccount Mid Cap Growth Subaccount
--------------------------------------- -----------------------------------------
2001 2000 1999 2001 2000 1999
----------- ------------ ------------ ------------ ------------- ------------
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . . $ 1,213 $ 7,198 $ 15,944 $ (64,238) $ 2,182,817 $ 1,338,175
Net realized gains (losses). . . . . . . . (8,554) (3,641) 1,061 (1,706,682) 1,892,763 420,826
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . (19,857) (21,945) (8,559) (6,633,116) (11,690,290) 4,283,452
---------- ----------- ----------- ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . (27,198) (18,388) 8,446 (8,404,036) (7,614,710) 6,042,453
From policyholder transactions:
Net premiums from policyholders. . . . . . 84,769 75,380 115,573 8,459,392 13,112,643 7,041,199
Net benefits to policyholders. . . . . . . (45,073) (83,639) (133,983) (2,483,421) (4,430,561) (947,660)
Net increase in policy loans . . . . . . . -- -- -- -- -- --
---------- ----------- ----------- ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions . 39,696 (8,259) (18,410) 5,975,971 8,682,082 6,093,539
---------- ----------- ----------- ----------- ------------ ------------
Net increase (decrease) in net assets . . . 12,498 (26,647) (9,964) (2,428,065) 1,067,372 12,135,992
Net assets at beginning of period . . . . . 173,721 200,368 210,332 14,676,946 13,609,574 1,473,582
---------- ----------- ----------- ----------- ------------ ------------
Net assets at end of period . . . . . . . . $ 186,219 $ 173,721 $ 200,368 $12,248,881 $ 14,676,946 $ 13,609,574
========== =========== =========== =========== ============ ============
Large Cap Value Subaccount Money Market Subaccount
---------------------------------------- -------------------------------------------
2001 2000 1999 2001 2000 1999
------------ ------------ ------------ ------------- ------------- -------------
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . $ 130,087 $ 693,327 $ 474,149 $ 725,466 $ 1,290,563 $ 1,143,104
Net realized gains (losses). . . . . . . 67,962 (47,306) 123,242 -- -- --
Net unrealized appreciation
(depreciation) during the period. . . . (1,393,400) 854,807 (499,454) -- -- --
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . (1,195,351) 1,500,828 97,937 725,466 1,290,563 1,143,104
From policyholder transactions:
Net premiums from policyholders. . . . . 6,639,919 7,024,748 5,449,922 18,020,488 26,609,851 16,733,655
Net benefits to policyholders. . . . . . (1,543,150) (1,798,175) (1,059,147) (21,929,201) (22,265,301) (46,642,184)
Net increase in policy loans . . . . . . -- -- -- 38,516 77,509 --
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions 5,096,769 5,226,573 4,390,775 (3,870,197) 4,422,059 (29,908,529)
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets . . 3,901,418 6,727,401 4,488,712 (3,144,731) 5,712,622 (28,765,425)
Net assets at beginning of period . . . . 14,990,188 8,262,787 3,774,075 26,215,728 20,503,106 49,268,531
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period . . . . . . . $18,891,606 $14,990,188 $ 8,262,787 $ 23,070,997 $ 26,215,728 $ 20,503,106
=========== =========== =========== ============ ============ ============
See accompanying notes.
142
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Large/Mid Cap Value II Subaccount Small/Mid Cap Growth Subaccount
-------------------------------------- --------------------------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ------------ ------------- -------------- -------------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . . $ 1,038 $ 824,979 $ 2,457 $ (25,816) $ 570,559 $ 810,295
Net realized gains (losses) . . . . . . . (2,862) (47,013) (547,518) (102,355) (136,669) 16,952
Net unrealized appreciation (depreciation)
during the period. . . . . . . . . . . . (75,104) 853,987 657,486 (889,404) (2,663) (590,295)
---------- ---------- ----------- ------------ ------------- ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . (76,928) 1,631,953 112,425 (1,017,575) 431,227 236,952
From policyholder transactions:
Net premiums from policyholders . . . . . 765,924 2,895,543 2,086,192 1,208,797 1,474,342 1,533,102
Net benefits to policyholders . . . . . . (35,188) (830,119) (3,546,814) (913,635) (1,536,191) (1,200,248)
Net increase in policy loans. . . . . . . -- -- -- -- -- --
---------- ---------- ----------- ------------ ------------- ------------
Net increase (decrease) in net assets
resulting from policyholder transactions. (730,736) 2,065,424 (1,460,622) 295,162 (61,849) 332,854
---------- ---------- ----------- ------------ ------------- ------------
Net increase (decrease) in net assets. . . 653,808 3,697,377 (1,348,197) (722,413) 369,378 569,806
Net assets at beginning of period. . . . . 8,399,009 4,701,632 6,049,829 5,855,422 5,486,044 4,916,238
---------- ---------- ----------- ------------ ------------- ------------
Net assets at end of period. . . . . . . . $ 653,808 $8,399,009 $ 4,701,632 $ 5,133,009 $ 5,855,422 $ 5,486,044
========== ========== =========== ============ ============= ============
Real Estate Equity Subaccount Growth & Income Subaccount
---------------------------------------- ------------------------------------------
2001 2000 1999 2001 2000 1999
------------ ------------ ------------ ------------- ------------- ------------
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . $ 158,563 $ 465,264 $ 255,391 $ 1,695,152 $ 44,427,885 $ 35,556,691
Net realized gains (losses). . . . . . . (171,749) (159,205) (168,994) 291,493 18,300,286 5,502,422
Net unrealized appreciation
(depreciation) during the period. . . . 63,266 919,904 (220,380) (58,152,177) (96,829,044) 2,405,417
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . 50,080 1,225,963 (133,983) (56,165,532) (34,100,873) 43,464,530
From policyholder transactions:
Net premiums from policyholders. . . . . 1,189,510 1,762,038 968,627 20,191,545 31,462,247 34,593,082
Net benefits to policyholders. . . . . . (1,501,999) (1,130,179) (2,335,552) (21,398,447) (71,685,409) (34,650,911)
Net increase (decrease) in policy loans. 33,805 114,851 -- (1,356,490) 1,310,472 --
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions (278,684) 746,710 (1,366,925) (2,563,392) (38,912,690) (57,829)
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets . . (228,604) 1,972,673 (1,500,908) (58,728,924) (73,013,563) 43,406,701
Net assets at beginning of period . . . . 6,002,773 4,030,100 5,531,008 267,486,534 340,500,097 297,093,396
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period . . . . . . . $ 5,774,169 $ 6,002,773 $ 4,030,100 $208,757,610 $267,486,534 $340,500,097
=========== =========== =========== ============ ============ ============
See accompanying notes.
143
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Managed Subaccount Short-Term Bond Subaccount
------------------------------------------- ---------------------------------------
2001 2000 1999 2001 2000 1999
------------- ------------- ------------- ------------ ------------ -----------
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . $ 1,876,437 $ 11,092,640 $ 10,302,317 $ 15,584 $ 15,494 $ 14,042
Net realized gains (losses) . . . . . . . 44,474 1,551,519 996,546 (315) (2,287) (8,638)
Net unrealized appreciation (depreciation)
during the period. . . . . . . . . . . . (11,191,146) (12,278,637) (2,108,530) 13,799 6,756 (2,442)
------------ ------------ ------------ ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . (9,270,235) 365,522 9,190,333 29,068 19,963 2,962
From policyholder transactions:
Net premiums from policyholders . . . . . 9,044,080 12,192,565 13,430,282 282,609 167,135 109,732
Net benefits to policyholders . . . . . . (10,942,264) (19,842,234) (14,305,859) (90,217) (69,043) (370,270)
Net increase in policy loans. . . . . . . 347,322 630,955 -- -- -- --
------------ ------------ ------------ ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from policyholder transactions. (1,550,862) (7,018,714) (875,577) 192,392 98,092 (260,538)
------------ ------------ ------------ ----------- ----------- ----------
Net increase (decrease) in net assets. . . (10,821,097) (6,653,192) 8,314,756 221,460 118,055 (257,576)
Net assets at beginning of period. . . . . 112,476,227 119,129,419 110,814,663 356,968 238,913 496,489
------------ ------------ ------------ ----------- ----------- ----------
Net assets at end of period. . . . . . . . $101,655,130 $112,476,227 $119,129,419 $ 578,428 $ 356,968 $ 238,913
============ ============ ============ =========== =========== ==========
Small Cap Equity Subaccount International Opportunities Subaccount
-------------------------------------- ----------------------------------------
2001 2000 1999 2001 2000 1999
------------ ----------- ----------- ------------ ------------ ------------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . . . . $ (15,612) $ 297,508 $ 61,905 $ 48,157 $ 564,716 $ 223,214
Net realized gains (losses) . . . . . . . . . (497,942) (110,857) (33,134) (254,673) 348,813 155,412
Net unrealized appreciation (depreciation)
during the period. . . . . . . . . . . . . . (773,318) (668,463) (148,401) (4,019,589) (2,497,504) 387,412
----------- ---------- ---------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . (956,872) (481,812) (119,630) (4,226,105) (1,583,975) 766,038
From policyholder transactions:
Net premiums from policyholders . . . . . . . 2,352,805 1,608,648 1,483,922 7,905,633 9,284,275 2,354,681
Net benefits to policyholders . . . . . . . . (1,991,173) (452,404) (447,402) (841,569) (469,272) (3,673,500)
Net increase in policy loans. . . . . . . . . -- -- -- -- -- --
----------- ---------- ---------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from policyholder transactions. . . . . . . . 361,632 1,156,242 1,036,520 7,064,064 8,815,003 (1,318,819)
----------- ---------- ---------- ----------- ----------- -----------
Net increase (decrease) in net assets. . . . . (595,240) 674,430 916,890 2,837,959 7,231,028 (552,781)
Net assets at beginning of period. . . . . . . 4,141,822 3,467,392 2,550,502 10,859,971 3,628,943 4,181,724
----------- ---------- ---------- ----------- ----------- -----------
Net assets at end of period. . . . . . . . . . $ 3,546,582 $4,141,822 $3,467,392 $13,694,930 $10,859,971 $ 3,628,943
=========== ========== ========== =========== =========== ===========
See accompanying notes.
144
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Equity Index Subaccount Global Bond Subaccount
----------------------------------------- ------------------------------------
2001 2000 1999 2001 2000 1999
------------- ------------ ------------ ----------- ----------- ----------
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . . . . $ 216,322 $ 2,141,880 $ 529,375 $ 518 $ 57,408 $ 33,778
Net realized gains (losses). . . . . . . . . . (85,115) 485,643 271,978 (6,331) (14,302) (151)
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . (11,294,511) (8,035,375) 1,282,937 24,984 63,359 (52,953)
------------ ----------- ----------- ---------- ---------- ---------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . (11,163,304) (5,407,852) 2,084,290 19,171 106,465 (19,326)
From policyholder transactions:
Net premiums from policyholders. . . . . . . . 9,622,997 43,728,519 6,697,385 283,498 396,099 696,619
Net benefits to policyholders. . . . . . . . . (4,406,332) (2,630,030) (1,623,429) (201,794) (192,421) (317,999)
Net increase in policy loans . . . . . . . . . -- -- -- -- -- --
------------ ----------- ----------- ---------- ---------- ---------
Net increase in net assets resulting from
policyholder transactions. . . . . . . . . . . 5,216,665 41,098,489 5,073,956 81,704 203,678 378,620
------------ ----------- ----------- ---------- ---------- ---------
Net increase (decrease) in net assets . . . . . (5,946,639) 35,690,637 7,158,246 100,875 310,143 359,294
Net assets at beginning of period . . . . . . . 50,096,716 14,406,079 7,247,833 1,139,861 829,718 470,424
------------ ----------- ----------- ---------- ---------- ---------
Net assets at end of period . . . . . . . . . . $ 50,069,716 $50,096,716 $14,406,079 $1,240,736 $1,139,861 $ 829,718
============ =========== =========== ========== ========== =========
Turner Core Growth Subaccount Brandes International Equity Subaccount
--------------------------------- -----------------------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- --------- ------------- ------------- -----------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . . $ (1,587) $ 50,617 $ 18,189 $ (1,807) $ 87,962 $ 14,188
Net realized gains (losses) . . . . . . . (87,369) 20,969 26,736 30,200 13,902 11,526
Net unrealized appreciation
(depreciation) during the period . . . . (56,525) (120,040) 23,628 (276,840) (35,201) 122,734
--------- --------- -------- ---------- ---------- --------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . (145,481) (48,454) 68,553 (248,447) 66,663 148,448
From policyholder transactions:
Net premiums from policyholders . . . . . 309,721 192,556 109,802 1,045,529 616,308 152,629
Net benefits to policyholders . . . . . . (214,915) (31,415) (45,555) (958,497) (39,267) (31,332)
Net increase in policy loans. . . . . . . -- -- -- -- -- --
--------- --------- -------- ---------- ---------- --------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . 94,806 161,141 64,247 87,032 577,041 121,297
--------- --------- -------- ---------- ---------- --------
Net increase (decrease) in net assets. . . (50,675) 112,687 132,800 (161,415) 643,704 269,745
Net assets at beginning of period. . . . . 370,494 257,807 125,007 1,169,206 525,502 255,757
--------- --------- -------- ---------- ---------- --------
Net assets at end of period. . . . . . . . $ 319,819 $ 370,494 $257,807 $1,007,791 $1,169,206 $525,502
========= ========= ======== ========== ========== ========
See accompanying notes.
145
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Frontier Capital Appreciation Subaccount Emerging Markets Equity Subaccount
------------------------------------------- ------------------------------------
2001 2000 1999 2001 2000 1999
------------- ------------ -------------- ----------- ------------ ---------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . . . $ 2,251 $ 130,136 $ 8,771 $ (1,807) $ 58,591 $ 15,170
Net realized gains (losses) . . . . . . . . (52,619) 68,311 (59,550) (424,870) 19,902 1,838
Net unrealized appreciation (depreciation)
during the period. . . . . . . . . . . . . (47,847) (175,994) 89,369 193,158 (571,486) 92,713
---------- --------- ----------- --------- ---------- --------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . . (98,215) 22,453 38,590 (233,519) (492,993) 109,721
From policyholder transactions:
Net premiums from policyholders . . . . . . 429,905 219,803 103,675 588,861 1,133,676 336,277
Net benefits to policyholders . . . . . . . (462,120) (179,523) (2,221,410) (471,991) (337,143) (8,915)
Net increase in policy loans. . . . . . . . -- -- -- -- -- --
---------- --------- ----------- --------- ---------- --------
Net increase (decrease) in net assets
resulting from policyholder transactions. . (32,215) 40,280 (2,117,735) 116,870 796,533 327,362
---------- --------- ----------- --------- ---------- --------
Net increase (decrease) in net assets. . . . (130,430) 62,733 (2,079,145) (116,649) 303,540 437,083
Net assets at beginning of period. . . . . . 516,716 453,983 2,533,128 741,352 437,812 729
---------- --------- ----------- --------- ---------- --------
Net assets at end of period. . . . . . . . . $ 386,286 $ 516,716 $ 453,983 $ 624,703 $ 741,352 $437,812
========== ========= =========== ========= ========== ========
Bond Index Subaccount Small/Mid Cap Core Subaccount
---------------------------------- ---------------------------------
2001 2000 1999 2001 2000 1999
----------- --------- ---------- --------- ----------- ---------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . . . . . $ 66,110 $ 6,712 $ 2,701 $ (165) $ 21,792 $ 6,364
Net realized gains (losses) . . . . . . . . . . 6,268 (607) (1,613) (1,290) 1,505 1,093
Net unrealized appreciation (depreciation)
during the period. . . . . . . . . . . . . . . 66,645 6,100 (1,753) (78,559) (13,928) 4,719
---------- -------- --------- -------- ---------- --------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . . 139,023 12,205 (665) (80,014) 9,369 12,176
From policyholder transactions:
Net premiums from policyholders . . . . . . . . 4,791,282 196,240 80,921 112,553 479,768 44,493
Net benefits to policyholders . . . . . . . . . (57,786) (16,742) (20,596) (92,220) (6,951) (12,003)
Net increase in policy loans. . . . . . . . . . -- -- -- -- -- --
---------- -------- --------- -------- ---------- --------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . . . 4,733,496 179,498 60,325 20,333 472,817 32,490
---------- -------- --------- -------- ---------- --------
Net increase (decrease) in net assets. . . . . . 4,872,519 191,703 59,660 (59,681) 482,186 44,666
Net assets at beginning of period. . . . . . . . 265,912 74,209 14,549 559,551 77,365 32,699
---------- -------- --------- -------- ---------- --------
Net assets at end of period. . . . . . . . . . . $5,138,431 $265,912 $ 74,209 $499,870 $ 559,551 $ 77,365
========== ======== ========= ======== ========== ========
See accompanying notes.
146
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Clifton Enhanced
High Yield Bond Subaccount US Equity Subaccount
----------------------------------- ----------------------------
2001 2000 1999 2001 2000 1999*
------------ ----------- -------- -------- -------- --------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . $ 39,771 $ 78,692 $ 2,791 $ (69) $ 3,190 $ 1,374
Net realized gains (losses) . . . . . . (107,391) (12,114) (396) (525) 302 11
Net unrealized appreciation
(depreciation) during the period . . . 93,431 (188,735) (1,172) (4,557) (5,562) 1,285
----------- ---------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from operations. . . . 25,811 (122,157) 1,223 (5,151) (2,070) 2,670
From policyholder transactions:
Net premiums from policyholders . . . . 578,612 1,514,684 69,375 5,606 16,541 15,505
Net benefits to policyholders . . . . . (1,298,307) (88,711) -- (1,717) (9,351) --
Net increase in policy loans. . . . . . -- -- -- -- -- --
----------- ---------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from policyholder
transactions. . . . . . . . . . . . . . (719,695) 1,425,973 69,375 3,889 7,190 15,505
----------- ---------- ------- ------- ------- -------
Net increase (decrease) in net assets. . (693,884) 1,303,816 70,598 (1,262) 5,120 18,175
Net assets at beginning of period. . . . 1,379,867 76,051 5,453 23,295 18,175 --
----------- ---------- ------- ------- ------- -------
Net assets at end of period. . . . . . . $ 685,983 $1,379,867 $76,051 $22,033 $23,295 $18,175
=========== ========== ======= ======= ======= =======
Large Cap Aggressive Fundamental Growth
Growth Subaccount Subaccount
---------------------- ----------------------
2001 2000** 2001 2000**
---------- ---------- -------- ------------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . $ (8) $ 30 $ (48) $ 1,351
Net realized (losses) . . . . . . . . (40) (8) (242) (10)
Net unrealized (depreciation) during
the period . . . . . . . . . . . . . (444) (616) (5,780) (1,226)
------ ------ ------- -----------
Net increase (decrease) in net assets
resulting from operations . . . . . . (492) (594) (6,070) 115
From policyholder transactions:
Net premiums from policyholders . . . 4 2,528 7,509 9,264,914
Net benefits to policyholders . . . . (80) -- (7,658) (9,251,776)
Net increase in policy loans. . . . . -- -- -- --
------ ------ ------- -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . . (76) 2,528 (149) 13,138
------ ------ ------- -----------
Net increase (decrease) in net assets . (568) 1,934 (6,219) 13,253
Net assets at beginning of period . . . 1,934 -- 13,253 --
------ ------ ------- -----------
Net assets at end of period . . . . . . $1,366 $1,934 $ 7,034 $ 13,253
====== ====== ======= ===========
- ---------
* From May 1, 1999 (commencement of operations).
** From April 24, 2000 (commencement of operations).
See accompanying notes.
147
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Fidelity VIP II
AIM V.I. Value Fidelity VIP Growth Contrafund
Subaccount Subaccount Subaccount
------------------ --------------------- ---------------------
2001 2000** 2001 2000** 2001 2000**
-------- -------- ---------- --------- ---------- ---------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . . $ (42) $ 230 $ 256 $ (6) $ 158 $ (12)
Net realized (losses) . . . . . . . . . . (173) (11) (472) (7) (160) (4)
Net unrealized (depreciation)
during the period. . . . . . . . . . . . (2,905) (1,068) (983) (525) (2,418) (366)
------- ------- ------- ------ --------- --------
Net (decrease) in net assets resulting from
operations. . . . . . . . . . . . . . . . (3,120) (849) (1,199) (538) (2,420) (382)
From policyholder transactions:
Net premiums from policyholders . . . . . 10,605 12,213 734 5,160 10,626 13,880
Net benefits to policyholders. . . . . . (401) (6,072) (1,234) (394) (590) (6,991)
Net increase in policy loans . . . . . . -- -- -- -- -- --
------- ------- ------- ------ --------- --------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . 10,204 6,141 500 4,766 10,036 6,889
------- ------- ------- ------ --------- --------
Net increase (decrease) in net assets. . . 7,084 5,292 (1,699) 4,228 7,616 6,507
Net assets at beginning of period. . . . . 5,292 -- 4,228 -- 6,507 --
------- ------- ------- ------ --------- --------
Net assets at end of period. . . . . . . . $12,376 $ 5,292 $ 2,529 $4,228 $ 14,123 $ 6,507
======= ======= ======= ====== ========= ========
Janus Aspen Janus Aspen MFS New
Global Technical Worldwide Growth Discovery Series
Subaccount Subaccount Subaccount
------------------ ----------------- --------------------
2001 2000*** 2001 2000*** 2001 2000**
-------- -------- -------- ------- --------- ---------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . . $ 4 $ 16 $ (11) $ (7) $ 3,000 $ (19)
Net realized (losses) . . . . . . . . . . (87) (99) (46) (71) (491) (7)
Net unrealized appreciation
(depreciation) during the period . . . . (1,856) (1,649) (1,396) (717) (23,621) 197
------- ------- ------- ------ -------- --------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . (1,939) (1,732) (1,453) (795) (21,112) 171
From policyholder transactions:
Net premiums from policyholders . . . . . 215 5,487 406 5,929 93,317 37,394
Net benefits to policyholders . . . . . . (296) -- (521) (470) (10,547) (18,758)
Net increase in policy loans. . . . . . . -- -- -- -- -- --
------- ------- ------- ------ -------- --------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . . . (81) 5,487 (115) 5,459 82,770 18,636
------- ------- ------- ------ -------- --------
Net increase (decrease) in net assets. . . (2,020) 3,755 (1,568) 4,664 61,658 18,807
Net assets at beginning of period. . . . . 3,755 -- 4,664 -- 18,807 --
------- ------- ------- ------ -------- --------
Net assets at end of period. . . . . . . . $ 1,735 $ 3,755 $ 3,096 $4,664 $ 80,465 $ 18,807
======= ======= ======= ====== ======== ========
- ---------
** From April 24, 2000 (commencement of operations).
*** From June 29, 2000 (commencement of operations).
See accompanying notes.
148
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended September 30, 2001 (unaudited) and
December 31, 2000 and 1999
Active Bond II LARGE/Mid Cap Value Small Cap Value
Subaccount Subaccount Subaccount
-------------- ------------------- ----------------
2001**** 2001**** 2001****
-------------- ------------------- ----------------
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . $ 63 $ 12,805 $ 8
Net realized gains (losses). . . . . . 1 478,407 (350)
Net unrealized appreciation
(depreciation) during the period. . . 24 (1,138,810) 443
------ ----------- -------
Net increase (decrease) in net assets
resulting from operations. . . . . . . 88 (647,598) 101
From policyholder transactions:
Net premiums from policyholders. . . . 2,824 1,270,788 14,148
Net benefits to policyholders . . . . (150) (5,692,760) (5,641)
Net increase in policy loans . . . . . -- -- --
------ ----------- -------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . . 2,674 (4,421,972) 8,507
------ ----------- -------
Net increase (decrease) in net assets . 2,762 (5,069,570) 8,608
Net assets at beginning of period . . . -- 8,399,009 --
------ ----------- -------
Net assets at end of period . . . . . . $2,762 $ 3,329,439 $ 8,608
====== =========== =======
- ---------
**** Activity from January 1, 2001. From December 15, 2000 (commencement of
operations) to December 31, 2000 there was no activity.
See accompanying notes.
149
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (Unaudited)
September 30, 2001
1. Organization
John Hancock Variable Life Account UV (the Account) is a separate
investment account of John Hancock Life Insurance Company (JHLICO or John
Hancock). John Hancock Variable Life Account UV was formed to fund variable life
insurance policies (Policies) issued by JHLICO. The Account is operated as a
unit investment trust registered under the Investment Company Act of 1940, as
amended, and currently consists of thirty-seven subaccounts. The assets of each
subaccount are invested exclusively in shares of a corresponding Fund of John
Hancock Variable Series Trust I (the Trust) or of other Outside Investment Trust
(Outside Trust). New subaccounts may be added as new Funds are added to the
Trust or to Outside Trust, or as other investment options are developed, and
made available to policyholders. The thirty-four subaccounts of the Trust and
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, Large/Mid Cap Value II (formerly, Mid Cap
Value), Small/ Mid Cap Growth, Real Estate Equity, Growth & Income, Managed,
Short-Term Bond, Small Cap Equity, International Opportunities, Equity Index,
Global Bond, Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Emerging Markets Equity, Bond Index, Small/Mid Cap Core, High
Yield Bond, Clifton Enhanced US Equity, Large Cap Aggressive Growth, Fundamental
Growth, AIM V.I. Value, Fidelity VIP Growth, Fidelity VIP II Contrafund, Janus
Aspen Global Technology, Janus Aspen Worldwide Growth, MFS New Discovery Series,
Active Bond II, Large Mid/Cap Value, and Small Cap Value subaccounts. Each
subaccount 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 Fund and of Outside Trust are valued at the
reported net asset values of the respective Portfolios. 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 Portfolio shares are
determined on the basis of identified cost.
150
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
September 30, 2001
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 Policies 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.
Policy Loans
Policy loans represent outstanding loans plus accrued interest. Interest is
accrued (net of a charge for policy loan administration determined at an annual
rate of .75% of the aggregate amount of policyholder indebtedness) and
compounded daily.
3. Transactions with Affiliates
JHLICO acts as the distributor, principal underwriter and investment
advisor for the Fund.
Certain officers of the Account are officers and directors of JHLICO or the
Fund.
151
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
September 30, 2001
4. Details of Investments
The details of the shares owned and cost and value of investments in the
Subaccounts of the Trust and of Outside Trusts at September 30 were as follows:
Subaccount Shares Owned Cost Value
---------- ------------ ------------ --------------
Large Cap Growth . . . . . . 2,416,440 $ 54,081,209 $ 32,238,723
Active Bond. . . . . . . . . 9,666,633 92,877,857 93,295,695
International Equity Index . 441,466 7,195,575 4,966,880
Small Cap Growth . . . . . . 417,508 6,793,194 3,817,361
Global Balanced. . . . . . . 23,312 227,453 185,974
Mid Cap Growth . . . . . . . 1,423,346 26,026,524 12,249,074
Large Cap Value. . . . . . . 1,412,663 19,762,647 18,873,555
Money Market . . . . . . . . 20,787,418 20,787,418 20,787,418
Large/Mid Cap Value II . . . 65,480 728,443 653,339
Small/Mid Cap Growth . . . . 443,575 6,578,297 5,133,090
Real Estate Equity . . . . . 394,707 5,275,969 5,339,377
Growth & Income. . . . . . . 16,512,434 264,885,288 176,034,919
Managed. . . . . . . . . . . 7,137,794 101,171,743 87,488,855
Short-Term Bond. . . . . . . 56,558 562,556 576,275
Small Cap Equity . . . . . . 511,666 4,922,251 3,546,636
International Opportunities. 1,626,910 19,559,333 13,696,983
Equity Index . . . . . . . . 3,170,074 61,417,800 44,109,516
Global Bond. . . . . . . . . 118,118 1,196,389 1,237,355
Turner Core Growth . . . . . 26,876 442,833 319,823
Brandes International Equity 83,844 1,191,056 1,007,801
Frontier Capital Appreciation 28,509 487,816 386,290
Emerging Markets Equity. . . 124,447 909,880 624,216
Bond Index . . . . . . . . . 508,964 5,045,335 5,116,176
Small/Mid Cap Core . . . . . 60,736 585,423 499,543
High Yield Bond. . . . . . . 102,060 777,614 681,119
Clifton Enhanced U.S. Equity 1,721 30,867 22,033
Large Cap Aggressive Growth. 193 2,426 1,366
Fundamental Growth . . . . . 1,038 14,040 7,034
AIM V.I. Value . . . . . . . 571 16,350 12,376
Fidelity VIP Growth. . . . . 88 4,037 2,529
Fidelity VIP II Contrafund . 752 16,908 14,123
Janus Aspen Global
Technology. . . . . . . . . 558 5,240 1,735
Janus Aspen Worldwide Growth 123 5,208 3,096
MFS New Discovery Series . . 6,645 103,890 80,466
Active Bond II . . . . . . . 259 2,727 2,751
Large/Mid Cap Value. . . . . 263,889 3,739,008 3,326,891
Small Cap Value. . . . . . . 716 8,154 8,597
152
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
September 30, 2001
4. Details of Investments (Continued)
Purchases, including reinvestment of dividend distributions and proceeds
from the sales of shares in the Subaccounts of the Trust and of Outside Trusts
during 2001, were as follows:
Subaccount Purchases Sales
---------- ----------- ------------
Large Cap Growth. . . . . . . . . $ 7,001,493 $ 2,470,981
Active Bond . . . . . . . . . . . 10,622,178 6,361,981
International Equity Index. . . . 976,329 676,939
Small Cap Growth. . . . . . . . . 1,366,104 2,195,348
Global Balanced . . . . . . . . . 77,855 37,191
Mid Cap Growth. . . . . . . . . . 8,434,287 2,522,361
Large Cap Value . . . . . . . . . 6,313,877 1,105,072
Money Market. . . . . . . . . . . 12,002,156 15,193,863
Large/Mid Cap Value II. . . . . . 790,505 59,200
Small/Mid Cap Growth. . . . . . . 873,038 603,611
Real Estate Equity. . . . . . . . 1,068,485 1,274,824
Growth & Income . . . . . . . . . 10,881,837 10,474,368
Managed . . . . . . . . . . . . . 5,407,115 5,640,439
Short-Term Bond . . . . . . . . . 275,047 69,224
Small Cap Equity. . . . . . . . . 2,407,054 2,060,980
International Opportunities . . . 7,837,966 726,692
Equity Index. . . . . . . . . . . 8,930,085 3,537,659
Global Bond . . . . . . . . . . . 257,023 178,182
Turner Core Growth. . . . . . . . 309,161 215,938
Brandes International Equity. . . 971,398 886,163
Frontier Capital Appreciation . . 434,275 464,235
Emerging Markets Equity . . . . . 550,148 435,572
Bond Index. . . . . . . . . . . . 4,908,359 131,008
Small/Mid Cap Core. . . . . . . . 371,400 351,559
High Yield Bond . . . . . . . . . 625,321 1,310,109
Clifton Enhanced U.S. Equity. . . 5,646 1,826
Large Cap Aggressive Growth . . . -- 84
Fundamental Growth. . . . . . . . 120 317
AIM V.I. Value. . . . . . . . . . 10,618 456
Fidelity VIP Growth . . . . . . . 860 1,104
Fidelity VIP II Contrafund. . . . 10,825 631
Janus Aspen Global Technology . . 17 94
Janus Aspen Worldwide Growth. . . 7 133
MFS New Discovery Series. . . . . 88,640 2,869
Active Bond II. . . . . . . . . . 2,893 167
Large/Mid Cap Value . . . . . . . 1,056,005 5,467,721
Small Cap Value . . . . . . . . . 14,296 5,792
153
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
September 30, 2001
5. Net Assets
Accumulation shares attributable to net assets of policyholders and
accumulation share values for each subaccount at September 30, 2001 were as
follows:
UV MVL Class #3 UV Flex Class #4 UV Flex II Class #5
-------------------------- -------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Subaccount Shares Share Values Shares Share Values Shares Share Values
- ---------- ------------ ------------ ------------ ------------ ------------ ------------
Large Cap Growth 76,665 $45.78 397,319 $45.78 36,999 $45.78
Active Bond 35,774 27.71 1,749,724 27.71 15,438 27.71
International Equity Index 34,021 16.70 130,662 11.45 15,668 16.70
Small Cap Growth 123,545 11.45 156,574 15.55 46,500 11.49
Global Balanced 8,927 10.40 2,590 10.40 4,960 10.40
Mid Cap Growth 215,644 12.47 623,532 12.46 79,799 12.46
Large Cap Value 157,978 17.00 836,878 17.00 67,332 17.00
Money Market 233,821 19.68 316,766 19.68 26,442 19.68
Large/Mid Cap Value II 81,597 15.49 67,053 15.45 35,901 15.45
Small/Mid Cap Growth 36,326 17.91 220,174 17.92 10,89? 17.92
Real Estate Equity 15,072 29.30 97,410 29.30 10,503 29.30
Growth & Income 174,094 44.19 1,380,190 44.19 96,188 44.19
Managed 70,676 35.38 1,110,650 35.38 38,247 35.38
Short-Term Bond 7,638 14.94 23,405 14.94 3,339 14.94
Small Cap Equity 67,638 8.42 265,813 8.42 33,190 8.42
International Opportunities 44,737 9.80 1,286,515 9.80 20,196 9.80
Equity Index 273,782 16.51 2,177,283 16.51 92,032 16.51
Global Bond 29,182 13.72 40,108 13.72 10,905 13.72
Turner Core Growth 5,727 15.69 5,145 15.69 30 15.70
Brandes International Equity 17,563 14.34 11,740 14.34 1,057 14.34
154
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
September 30, 2001
5. Net Assets (continued)
UV MVL Class #3 UV Flex Class #4 UV Flex II Class #5
-------------------------- -------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Subaccount Shares Share Values Shares Share Values Shares Share Values
- ---------- ------------ ------------ ------------ ------------ ------------ ------------
Frontier Capital
Appreciation 3,796 $17.82 3,384 $17.82 532 $17.82
Emerging Markets Equity 45,506 5.69 43,948 5.70 10,568 5.70
Bond Index 54,866 12.34 359,122 12.34 1,562 12.34
Small/Mid Cap Core 7,071 9.38 25,751 9.38 1,652 9.38
High Yield Bond 50,701 8.68 18,040 8.69 3,479 8.69
Clifton Enhanced U.S.
Equity 2,377 9.27 -- -- -- --
Large Cap Aggressive
Growth -- -- -- -- -- --
Fundamental Growth -- -- -- -- -- --
AIM V.I. Value -- -- -- -- -- --
Fidelity VIP Growth -- -- -- -- -- --
Fidelity VIP II Contrafund -- -- -- -- -- --
Janus Aspen Global
Technology -- -- -- -- -- --
Janus Aspen Worldwide
Growth -- -- -- -- -- --
MFS New Discovery Series -- -- -- -- -- --
Active Bond II -- -- -- -- -- --
Large/Mid Cap Value -- -- -- -- -- --
Small Cap Value -- -- -- -- -- --
155
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
September 30, 2001
5. Net Assets (continued)
UV Vep Class #7 UV Vep Class #8 UV Vep Class #9
-------------------------- -------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Subaccount Shares Share Values Shares Share Values Shares Share Values
- ---------- ------------ ------------ ------------ ------------ ------------ ------------
Large Cap Growth 25,178 $19.64 16,344 $19.71 3,163 $19.79
Active Bond 19,153 16.13 6,072 16.19 -- --
International Equity Index 21,942 10.62 2,583 10.66 -- --
Small Cap Growth 15,101 11.43 4,263 11.46 -- --
Global Balanced 200 10.38 -- -- -- --
Mid Cap Growth 26,109 12.44 16,825 12.48 -- --
Large Cap Value 20,288 16.97 20,596 17.01 -- --
Money Market 46,210 14.22 41,955 14.27 -- --
Large/Mid Cap Value II 29,639 15.47 726 15.52 -- --
Small/Mid Cap Growth 5,751 17.88 5,791 17.95 -- --
Real Estate Equity 1,349 19.05 2,554 19.12 -- --
Growth & Income 88,973 20.04 35,739 20.11 4,126 20.19
Managed 23,835 18.62 11,961 18.70 -- --
Short-Term Bond 3,246 14.91 -- -- -- --
Small Cap Equity 21,043 8.41 3,703 8.43 -- --
International Opportunities 13,401 9.78 9,641 9.81 6,024 9.83
Equity Index 57,726 16.49 48,206 16.53 -- --
Global Bond 5,531 16.70 -- -- -- --
Turner Core Growth -- -- -- -- -- --
Brandes International Equity 746 14.14 12,290 14.18 -- --
156
JOHN HANCOCK VARIABLE LIFE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
September 30, 2001
5. Net Assets (continued)
UV Vep Class #7 UV Vep Class #8 UV Vep Class #9
-------------------------- -------------------------- ---------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Subaccount Shares Share Values Shares Share Values Shares Share Values
- ---------- ------------ ------------ ------------ ------------ ------------ ------------
Frontier Capital
Appreciation 285 $19.20 2,515 $19.25 -- --
Emerging Markets Equity 6,711 5.69 841 5.70 -- --
Bond Index 562 12.33 235 12.35 -- --
Small/Mid Cap Core 17,345 9.37 1,500 9.39 -- --
High Yield Bond 1,927 8.68 277 8.69 -- --
Clifton Enhanced U.S.
Equity -- -- -- -- -- --
Large Cap Aggressive
Growth 227 6.02 -- -- -- --
Fundamental Growth 1,268 5.55 -- -- -- --
AIM V.I. Value 606 6.66 1,252 6.67 -- --
Fidelity VIP Growth 407 6.31 -- -- -- --
Fidelity VIP II Contrafund 637 7.81 1,157 7.88 -- --
Janus Aspen Global
Technology 540 3.21 -- -- -- --
Janus Aspen Worldwide
Growth 544 5.69 -- -- -- --
MFS New Discovery Series 1,630 7.50 9,088 7.51 -- --
Active Bond II 243 11.37 -- -- -- --
Large/Mid Cap Value 572 8.78 -- -- -- --
Small Cap Value 951 9.06 -- -- -- --
157
REPORT OF INDEPENDENT AUDITORS
To the Policyholders of,
John Hancock Variable Life Insurance Account UV
of John Hancock Mutual Life Insurance Company
We have audited the accompanying statement of assets and liabilities of
John Hancock Variable Life Insurance Account UV (the Account) (comprising,
respectively, the Large Cap Growth, Active Bond (formerly, Sovereign Bond),
International Equity Index, Small Cap Growth, Global Balanced, Mid Cap Growth,
Large Cap Value, Money Market, Mid Cap Value, Small/Mid Cap Growth, Real Estate
Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Equity (formerly,
Small Cap Value), International Opportunities, Equity Index, Global Bond
(formerly, Strategic Bond), Turner Core Growth, Brandes International Equity,
Frontier Capital Appreciation, Emerging Markets Equity, Bond Index, Small/Mid
Cap Core, High Yield Bond, Clifton Enhanced US Equity, Large Cap Aggressive
Growth, Fundamental Growth (formerly, Fundamental Mid Cap Growth), Aim V.I.
Value, Fidelity VIP Growth, Fidelity VIP II Contrafund, Janus Aspen Global
Technology, Janus Aspen Worldwide Growth, and MFS New Discovery Series
Subaccounts) as of December 31, 2000, 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 Mutual Life Insurance Account UV at
December 31, 2000, the results of their operations and 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 13, 2001
158
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2000
International
Large Cap Active Equity Small Cap
Growth Bond Index Growth
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ------------- ----------
Assets
Cash. . . . . . . . . . . . . . . . . . -- -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . $40,309,354 $87,068,487 $6,443,455 $6,381,819
Investments in shares of portfolios of
Outside Trust, at value. . . . . . . . -- -- -- --
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . 2,988,024 10,894,073 440,884 8,939
Receivable from:
John Hancock Variable Series Trust I . 78,996 43,980 3,951 --
Portfolio of Outside Trusts. . . . . . -- -- -- --
----------- ----------- ---------- ----------
Total assets. . . . . . . . . . . . . . 43,376,374 98,006,540 6,888,290 6,390,758
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company . . . . . . . . . . . . . . . 76,877 40,173 3,625 8,618
Portfolio of Outside Trusts. . . . . . -- -- -- --
Asset charges payable . . . . . . . . . 2,119 3,807 326 321
----------- ----------- ---------- ----------
Total liabilities . . . . . . . . . . . 78,996 43,980 3,951 8,939
----------- ----------- ---------- ----------
Net assets. . . . . . . . . . . . . . . $43,297,378 $97,962,560 $6,884,339 $6,381,819
=========== =========== ========== ==========
Global Mid Cap Large Cap Money
Balanced Growth Value Market
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
Assets
Cash . . . . . . . . . . . . . . . . . . -- -- -- $ (1,285)
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value. . . . . . . . . . . . . . . . $173,721 $14,676,946 $14,990,188 23,979,125
Investments in shares of portfolios of
Outside Trusts, at value. . . . . . . . -- -- -- --
Policy loans and accrued interest
receivable. . . . . . . . . . . . . . . -- -- -- 2,237,889
Receivable from:
John Hancock Variable Series Trust I. . 171 29,614 13,493 413,212
Portfolio of Outside Trust. . . . . . . -- -- -- --
-------- ----------- ----------- -----------
Total assets . . . . . . . . . . . . . . 173,892 14,706,560 15,003,681 26,628,941
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company. . . . . . . . . . . . . . . . 162 28,877 12,748 411,972
Portfolio of Outside Trusts . . . . . . -- -- -- --
Asset charges payable. . . . . . . . . . 9 737 745 1,241
-------- ----------- ----------- -----------
Total liabilities. . . . . . . . . . . . 171 29,614 13,493 413,213
-------- ----------- ----------- -----------
Net assets . . . . . . . . . . . . . . . $173,721 $14,676,946 $14,990,188 $26,215,728
======== =========== =========== ===========
See accompanying notes.
159
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (continued)
December 31, 2000
Mid Cap Small/Mid Cap Real Estate Growth &
Value Growth Equity Income
Subaccount Subaccount Subaccount Subaccount
---------- ------------- ----------- -----------
Assets
Cash . . . . . . . . . . . . . . . . . -- -- $ 3 --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value. . . . . . . . . . . . . . . $8,399,009 $5,855,422 5,654,199 $233,488,134
Investments in shares of portfolios of
Outside Trust, at value . . . . . . . -- -- -- --
Policy loans and accrued interest
receivable. . . . . . . . . . . . . . -- -- 348,571 33,998,401
Receivable from:
John Hancock Variable Series Trust I. 8,739 26,900 49,159
Portfolio of Outside Trusts . . . . . 52,486 -- -- --
---------- ---------- ---------- ------------
Total assets . . . . . . . . . . . . . 8,451,495 5,864,161 6,029,673 267,535,694
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company. . . . . . . . . . . . . . . 52,072 8,446 26,610 39,397
Portfolio of Outside Trusts . . . . . -- -- -- --
Asset charges payable. . . . . . . . . 414 293 290 9,763
---------- ---------- ---------- ------------
Total liabilities. . . . . . . . . . . 52,486 8,739 26,900 49,160
---------- ---------- ---------- ------------
Net assets . . . . . . . . . . . . . . $8,399,009 $5,855,422 $6,002,773 $267,486,534
========== ========== ========== ============
Short-Term Small Cap International
Managed Bond Equity Opportunities
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- -------------
Assets
Cash . . . . . . . . . . . . . . . . . . $ (685) -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value. . . . . . . . . . . . . . . . 98,868,851 $356,968 $4,141,822 $10,859,971
Investments in shares of portfolios
of Outside Trust, at value. . . . . . . -- -- -- --
Policy loans and accrued interest
receivable. . . . . . . . . . . . . . . 13,608,061 -- -- --
Receivable from:
John Hancock Variable Series Trust I. . 17,989 192 1,324 13,244
Outside Trust . . . . . . . . . . . . . -- -- -- --
------------ -------- ---------- -----------
Total assets . . . . . . . . . . . . . . 112,494,216 357,160 4,143,146 10,873,215
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company. . . . . . . . . . . . . . . . 12,682 174 1,117 12,716
Outside Trust . . . . . . . . . . . . . -- -- -- --
Asset charges payable. . . . . . . . . . 5,307 18 207 528
------------ -------- ---------- -----------
Total liabilities. . . . . . . . . . . . 17,989 192 1,324 13,244
------------ -------- ---------- -----------
Net assets . . . . . . . . . . . . . . . $112,476,227 $356,968 $4,141,822 $10,859,971
============ ======== ========== ===========
See accompanying notes.
160
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (continued)
December 31, 2000
Brandes
Equity Global Turner Core International
Index Bond Growth Equity
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ----------- -------------
Assets
Cash. . . . . . . . . . . . . . . . . . -- -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . $50,096,716 $1,139,861 -- --
Investments in shares of portfolios of
Outside Trust, at value. . . . . . . . -- -- $370,494 $1,169,206
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- -- --
Receivable from:
John Hancock Variable Series Trust I . 10,356 243 -- --
Portfolio of Outside Trusts. . . . . . -- -- 18 57
----------- ---------- -------- ----------
Total assets. . . . . . . . . . . . . . 50,107,072 1,140,104 370,512 1,169,263
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company . . . . . . . . . . . . . . . 7,866 187 -- --
Portfolio of Outside Trusts. . . . . . -- -- -- --
Asset charges payable . . . . . . . . . 2,490 56 18 57
----------- ---------- -------- ----------
Total liabilities . . . . . . . . . . . 10,356 243 18 57
----------- ---------- -------- ----------
Net assets. . . . . . . . . . . . . . . $50,096,716 $1,139,861 $370,494 $1,169,206
=========== ========== ======== ==========
Frontier
Capital Emerging Small/Mid
Appreciation Markets Equity Bond Index Cap Core
Subaccount Subaccount Subaccount Subaccount
------------ -------------- ---------- ----------
Assets
Cash . . . . . . . . . . . . . . . . . -- -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value. . . . . . . . . . . . . . . -- $741,352 $265,912 $559,551
Investments in shares of portfolios of
Outside Trust, at value . . . . . . . $516,716 -- -- --
Policy loans and accrued interest
receivable. . . . . . . . . . . . . . -- -- -- --
Receivable from:
John Hancock Variable Series Trust I. -- 7,964 13 28
Portfolio of Outside Trusts . . . . . 26 -- -- --
-------- -------- -------- --------
Total assets . . . . . . . . . . . . . 516,742 749,316 265,925 559,579
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company. . . . . . . . . . . . . . . -- 7,928 -- --
Portfolio of Outside Trusts . . . . . -- -- -- --
Asset charges payable. . . . . . . . . 26 36 13 28
-------- -------- -------- --------
Total liabilities. . . . . . . . . . . 26 7,964 13 28
-------- -------- -------- --------
Net assets . . . . . . . . . . . . . . $516,716 $741,352 $265,912 $559,551
======== ======== ======== ========
See accompanying notes.
161
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (continued)
December 31, 2000
High Large Cap
Yield Clifton Enhanced Aggressive Fundamental
Bond US Equity Growth Growth
Subaccount Subaccount Subaccount Subaccount
---------- ---------------- ---------- -----------
Assets
Cash. . . . . . . . . . . . . . . . . . -- -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . $1,379,867 $23,295 $1,934 $13,253
Investments in shares of portfolios of
Outside Trust, at value. . . . . . . . -- -- -- --
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- -- --
Receivable from:
John Hancock Variable Series Trust I . 68 1 -- 1
Portfolio of Outside Trusts. . . . . . -- -- -- --
---------- ------- ------ -------
Total assets. . . . . . . . . . . . . . 1,379,935 23,296 1,934 13,254
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company . . . . . . . . . . . . . . . -- -- -- 1
Portfolio of Outside Trusts. . . . . . -- -- -- --
Asset charges payable . . . . . . . . . 68 1 -- --
---------- ------- ------ -------
Total liabilities . . . . . . . . . . . 68 1 -- 1
---------- ------- ------ -------
Net assets. . . . . . . . . . . . . . . $1,379,867 $23,295 $1,934 $13,253
========== ======= ====== =======
Janus Aspen
Fidelity VIP Fidelity VIP II Global
AIM V.I. Value Growth Contrafund Technology
Subaccount Subaccount Subaccount Subaccount
-------------- ------------ --------------- -----------
Assets
Cash. . . . . . . . . . . . . . . . . . -- -- -- --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . -- -- -- --
Investments in shares of portfolios of
Outside Trust, at value. . . . . . . $5,292 $4,228 $6,507 $3,755
Policy loans and accrued interest
receivable . . . . . . . . . . . . . -- -- -- --
Receivable from:
John Hancock Variable Series Trust I. -- -- -- --
Portfolio of Outside Trusts . . . . . -- -- -- --
------ ------ ------ ------
Total assets . . . . . . . . . . . . . 5,292 4,228 6,507 3,755
Liabilities
Payable to:
John Hancock Variable Life Insurance
Company. . . . . . . . . . . . . . . -- -- -- --
Portfolio of Outside Trusts . . . . . -- -- -- --
Asset charges payable. . . . . . . . . -- -- -- --
------ ------ ------ ------
Total liabilities. . . . . . . . . . . -- -- -- --
------ ------ ------ ------
Net assets . . . . . . . . . . . . . . $5,292 $4,228 $6,507 $3,755
====== ====== ====== ======
See accompanying notes.
162
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENT OF ASSETS AND LIABILITIES (continued)
December 31, 2000
Janus Aspen MFS New
Worldwide Discovery
Growth Series
Subaccount Subaccount
----------- ----------
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . -- --
Investments in shares of portfolios of John Hancock
Variable
Series Trust I, at value . . . . . . . . . . . . . -- --
Investments in shares of portfolios of Outside
Trust, at value. . . . . . . . . . . . . . . . . . $4,664 $18,807
Policy loans and accrued interest receivable. . . . -- --
Receivable from:
John Hancock Variable Series Trust I . . . . . . . -- --
Portfolio of Outside Trusts. . . . . . . . . . . . -- 1
------ -------
Total assets. . . . . . . . . . . . . . . . . . . . 4,664 18,808
Liabilities
Payable to:
John Hancock Variable Life Insurance Company . . . -- --
Portfolio of Outside Trusts. . . . . . . . . . . . -- --
Asset charges payable . . . . . . . . . . . . . . . -- 1
------ -------
Total liabilities . . . . . . . . . . . . . . . . . -- 1
------ -------
Net assets. . . . . . . . . . . . . . . . . . . . . $4,664 $18,807
====== =======
See accompanying notes.
163
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS
Years and periods ended December 31,
Large Cap Growth Subaccount Active Bond Subaccount
------------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
------------- ---------- ---------- ------------ ------------ -----------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I $ 6,351,461 $6,381,711 $2,836,032 $ 5,048,654 $ 5,184,234 $5,266,576
Outside Trusts. . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans. . . 223,081 161,454 128,186 769,530 750,673 727,807
------------ ---------- ---------- ----------- ----------- ----------
Total investment income . . . . . . . 6,574,542 6,543,165 2,964,218 5,818,184 5,934,907 5,994,383
Expenses:
Mortality and expense risks . . . . 286,716 213,770 143,859 485,231 452,925 415,570
------------ ---------- ---------- ----------- ----------- ----------
Net investment income . . . . . . . . 6,287,826 6,329,395 2,820,359 5,332,953 5,481,982 5,578,813
Net realized and unrealized gain
(loss) on investments:
Net realized gains (losses) . . . . 1,809,410 1,146,308 433,509 (1,058,175) (388,883) (142,628)
Net unrealized appreciation
(depreciation) during the period . (17,039,660) 320,087 4,558,660 3,862,398 (5,439,148) (102,600)
------------ ---------- ---------- ----------- ----------- ----------
Net realized and unrealized gain
(loss) on investments . . . . . . . (15,230,250) 1,466,395 4,992,169 2,804,223 (5,828,031) (245,228)
------------ ---------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . $ (8,942,424) $7,795,790 $7,812,528 $ 8,137,176 $ (346,049) $5,333,585
============ ========== ========== =========== =========== ==========
International Equity Index Subaccount Small Cap Growth Subaccount
---------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
-------------- ------------ ---------- ------------ ---------- -----------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I $ 334,135 $ 212,869 $743,339 $ 621,346 $ 43,433 $ --
Outside Trusts. . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans. . . 29,828 20,538 17,802 -- -- --
----------- ---------- -------- ----------- ---------- --------
Total investment income . . . . . . . 363,963 233,407 761,141 621,346 543,433 --
Expenses:
Mortality and expense risks . . . . 41,808 32,838 26,542 39,379 15,809 8,233
----------- ---------- -------- ----------- ---------- --------
Net investment income (loss). . . . . 322,155 200,569 734,599 581,967 527,624 (8,233)
Net realized and unrealized gain
(loss) on investments:
Net realized gains . . . . . . . . . 76,586 62,140 52,891 159,388 48,210 21,741
Net unrealized appreciation
(depreciation) during the period . (1,706,468) 1,295,768 13,239 (2,654,137) 1,125,829 204,674
----------- ---------- -------- ----------- ---------- --------
Net realized and unrealized gain
(loss) on investments . . . . . . . (1,629,882) 1,357,908 66,130 (2,494,749) 1,174,039 226,415
----------- ---------- -------- ----------- ---------- --------
Net increase (decrease) in net assets
resulting from operations . . . . . $(1,307,727) $1,558,477 $800,729 $(1,912,782) $1,701,663 $218,182
=========== ========== ======== =========== ========== ========
See accompanying notes.
164
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended December 31,
Global Balanced Subaccount Mid Cap Growth Subaccount
---------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
--------- -------- ------- ------------- ---------- --------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 8,232 $17,211 $12,240 $ 2,284,720 $1,373,009 $130,303
Outside Trusts. . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans. . . . -- -- -- -- -- --
-------- ------- ------- ------------ ---------- --------
Total investment income. . . . . . . . . 8,232 17,211 12,240 2,284,720 1,373,009 130,303
Expenses:
Mortality and expense risks . . . . . . 1,034 1,267 826 101,903 34,834 5,242
-------- ------- ------- ------------ ---------- --------
Net investment income. . . . . . . . . . 7,198 15,944 11,414 2,182,817 1,338,175 125,061
Net realized and unrealized gain
(loss) on investments:
Net realized gains (losses) . . . . . . (3,641) 1,061 1,050 1,892,763 420,826 26,192
Net unrealized appreciation
(depreciation) during the period . . . (21,945) (8,559) 12,294 (11,690,290) 4,283,452 193,946
-------- ------- ------- ------------ ---------- --------
Net realized and unrealized gain
(loss) on investments . . . . . . . . . (25,586) (7,498) 13,344 (9,797,527) 4,704,278 220,138
-------- ------- ------- ------------ ---------- --------
Net increase (decrease) in net assets
resulting from operations . . . . . . . $(18,388) $ 8,446 $24,758 $ (7,614,710) $6,042,453 $345,199
======== ======= ======= ============ ========== ========
Large Cap Value Subaccount Money Market Subaccount
--------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
----------- ---------- -------- ---------- ---------- -----------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 759,319 $ 511,132 $185,232 $1,260,525 $1,134,371 $2,249,510
Outside Trusts. . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . -- -- -- 162,299 155,491 154,162
---------- --------- -------- ---------- ---------- ----------
Total investment income. . . . . . . . . 759,319 511,132 185,232 1,422,824 1,289,862 2,403,672
Expenses:
Mortality and expense risks . . . . . . 65,992 36,983 15,356 132,261 146,758 263,735
---------- --------- -------- ---------- ---------- ----------
Net investment income. . . . . . . . . . 693,327 474,149 169,876 1,290,563 1,143,104 2,139,937
Net realized and unrealized gain
(loss) on investments:
Net realized gains (losses) . . . . . . (47,306) 123,242 68,953 -- -- --
Net unrealized appreciation
(depreciation) during the period . . . 854,807 (499,454) 64,132 -- -- --
---------- --------- -------- ---------- ---------- ----------
Net realized and unrealized gain
(loss) on investments . . . . . . . . . 807,501 (376,212) 133,085 -- -- --
---------- --------- -------- ---------- ---------- ----------
Net increase in net assets
resulting from operations . . . . . . . $1,500,828 $ 97,937 $302,961 $1,290,563 $1,143,104 $2,139,937
========== ========= ======== ========== ========== ==========
See accompanying notes.
165
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended December 31,
Mid Cap Value Subaccount Small/Mid Cap Growth Subaccount
----------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
----------- ---------- ---------- ---------- ---------- ---------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . $ 861,684 $ 30,563 $ 53,920 $ 603,438 $ 840,786 $ 93,281
Outside Trusts. . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . -- -- -- -- -- --
---------- --------- --------- --------- --------- --------
Total investment income. . . . . . . . . . 861,684 30,563 53,920 603,438 840,786 93,281
Expenses:
Mortality and expense risks . . . . . . . 36,705 28,106 34,857 32,879 30,491 26,942
---------- --------- --------- --------- --------- --------
Net investment income. . . . . . . . . . . 824,979 2,457 19,063 570,559 810,295 66,339
Net realized and unrealized gain (loss) on
investments:
Net realized gains (losses) . . . . . . . (47,013) (547,518) 74,634 (136,669) 16,952 33,249
Net unrealized appreciation (depreciation)
during the period. . . . . . . . . . . . 853,987 657,486 (944,401) (2,663) (590,295) 126,465
---------- --------- --------- --------- --------- --------
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . 806,974 109,968 (869,767) (139,332) (573,343) 159,714
---------- --------- --------- --------- --------- --------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . $1,631,953 $ 112,425 $(850,704) $ 431,227 $ 236,952 $226,053
========== ========= ========= ========= ========= ========
Real Estate Equity Subaccount Growth & Income Subaccount
------------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
----------- ---------- ------------ ------------- ----------- -----------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I $ 471,363 $ 262,930 $ 343,976 $ 43,732,520 $35,057,066 $26,306,209
Outside Trusts. . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . 21,486 17,361 17,260 2,428,588 2,279,107 1,996,131
---------- --------- ----------- ------------ ----------- -----------
Total investment income . . . . . . . 492,849 280,291 361,236 46,161,108 37,336,173 28,302,340
Expenses:
Mortality and expense risks . . . . 27,585 24,900 33,890 1,733,223 1,779,482 1,466,469
---------- --------- ----------- ------------ ----------- -----------
Net investment income . . . . . . . . 465,264 255,391 327,346 44,427,885 35,556,691 26,835,871
Net realized and unrealized gain
(loss) on investments:
Net realized gains (losses) . . . . (159,205) (168,994) 158,205 18,300,286 5,502,422 3,223,935
Net unrealized appreciation
(depreciation) during the period . 919,904 (220,380) (1,546,717) (96,829,044) 2,405,417 32,918,552
---------- --------- ----------- ------------ ----------- -----------
Net realized and unrealized gain
(loss) on investments . . . . . . . 760,699 (389,374) (1,388,512) (78,528,758) 7,907,839 36,142,487
---------- --------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations . . . . . $1,225,963 $(133,983) $(1,061,166) $(34,100,873) $43,464,530 $62,978,358
========== ========= =========== ============ =========== ===========
See accompanying notes.
166
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended December 31,
Managed Subaccount Short-Term Bond Subaccount
---------------------------------------- -----------------------------
2000 1999 1998 2000 1999 1998
------------- ------------ ----------- -------- --------- --------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 11,757,304 $ 9,998,433 $ 9,347,788 $17,131 $ 15,539 $27,350
Outside Trusts. . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . -- 953,686 854,487 -- -- --
------------ ----------- ----------- ------- -------- -------
Total investment income. . . . . . . . . 11,757,304 10,952,119 10,202,275 17,131 15,539 27,350
Expenses:
Mortality and expense risks . . . . . . 664,664 649,802 577,276 1,637 1,497 2,680
------------ ----------- ----------- ------- -------- -------
Net investment income. . . . . . . . . . 11,092,640 10,302,317 9,624,999 15,494 14,042 24,670
Net realized and unrealized gain
(loss) on investments:
Net realized gains (losses) . . . . . . 1,551,519 996,546 791,245 (2,287) (8,638) 265
Net unrealized appreciation
(depreciation) during the period . . . (12,278,637) (2,108,530) 6,629,458 6,756 (2,442) (4,247)
------------ ----------- ----------- ------- -------- -------
Net realized and unrealized gain
(loss) on investments . . . . . . . . . (10,727,118) (1,111,984) 7,420,703 4,469 (11,080) (3,982)
------------ ----------- ----------- ------- -------- -------
Net increase in net assets
resulting from operations . . . . . . . $ 365,522 $ 9,190,333 $17,045,702 $19,963 $ 2,962 $20,688
============ =========== =========== ======= ======== =======
Small Cap Equity Subaccount International Opportunities Subaccount
---------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- -------------- ---------- ------------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 321,253 $ 79,585 $ 12,675 $ 617,754 $241,151 $ 33,443
Outside Trusts. . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . -- -- -- -- -- --
--------- --------- --------- ----------- -------- --------
Total investment income. . . . . . . . . 321,253 79,585 12,675 617,754 241,151 33,443
Expenses:
Mortality and expense risks . . . . . . 23,745 17,680 11,853 53,038 17,937 21,581
--------- --------- --------- ----------- -------- --------
Net investment income. . . . . . . . . . 297,508 61,905 822 564,716 223,214 11,862
Net realized and unrealized gain
(loss) on investments:
Net realized gains (losses) . . . . . . (110,857) (33,134) 29,257 348,813 155,412 33,474
Net unrealized appreciation
(depreciation) during the period . . . (668,463) (148,401) (105,331) (2,497,504) 387,412 272,314
--------- --------- --------- ----------- -------- --------
Net realized and unrealized gain
(loss) on investments . . . . . . . . . (779,320) (181,535) (76,074) (2,148,691) 542,824 305,788
--------- --------- --------- ----------- -------- --------
Net increase (decrease) in net assets
resulting from operations . . . . . . . $(481,812) $(119,630) $ (75,252) $(1,583,975) $766,038 $317,650
========= ========= ========= =========== ======== ========
See accompanying notes.
167
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended December 31,
Equity Index Subaccount Global Bond Subaccount
------------------------------------ ------------------------------
2000 1999 1998 2000 1999 1998
------------ ---------- ---------- --------- --------- --------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 2,327,055 $ 593,325 $ 185,267 $ 63,032 $ 37,862 $19,628
Outside Trusts. . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . -- -- -- -- -- --
----------- ---------- ---------- -------- -------- -------
Total investment income . . . . . . . 2,327,055 593,325 185,267 63,032 37,862 19,628
Expenses:
Mortality and expense risks . . . . . . 185,175 63,950 27,141 5,624 4,084 1,979
----------- ---------- ---------- -------- -------- -------
Net investment income 2,141,880 529,375 158,126 57,408 33,778 17,649
Net realized and unrealized gain (loss)
on investments:
Net realized gains (losses) . . . . . . 485,643 271,978 443,879 (14,302) (151) 3,991
Net unrealized appreciation
(depreciation) during the period . . . (8,035,375) 1,282,937 585,673 63,359 (52,953) 4,,308
----------- ---------- ---------- -------- -------- -------
Net realized and unrealized gain
(loss) on investments (7,549,732) 1,554,915 1,029,552 49,057 (53,104) 8,299
----------- ---------- ---------- -------- -------- -------
Net increase (decrease) in net assets
resulting from operations . . . . . . . $(5,407,852) $2,084,290 $1,187,678 $106,465 $(19,326) $25,948
=========== ========== ========== ======== ======== =======
Turner Core Growth Subaccount Brandes International Equity Subaccount
------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
----------- -------- -------- ------------ ----------- -------------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . -- -- -- -- -- --
Outside Trusts. . . . . . . . . . . . . $ 52,832 $19,328 $ 2,231 $ 92,935 $ 16,354 $14,444
Interest income on policy loans . . . . -- -- -- -- -- --
--------- ------- ------- -------- -------- -------
Total investment income. . . . . . . . . 52,832 19,328 2,231 92,935 16,354 14,444
Expenses:
Mortality and expense risks . . . . . . 2,215 1,139 565 4,973 2,166 1,158
--------- ------- ------- -------- -------- -------
Net investment income 50,617 18,189 1,666 87,962 14,188 13,286
Net realized and unrealized gain (loss)
on investments:
Net realized gains. . . . . . . . . . . 20,969 26,736 2,780 13,902 11,526 600
Net unrealized appreciation
(depreciation) during the period . . . (120,040) 23,628 22,686 (35,201) 122,734 8,581
--------- ------- ------- -------- -------- -------
Net realized and unrealized gain
(loss) on investments (99,071) 50,364 25,466 (21,299) 134,260 9,181
--------- ------- ------- -------- -------- -------
Net increase (decrease) in net assets
resulting from operations . . . . . . . $ (48,454) $68,553 $27,132 $ 66,663 $148,448 $22,467
========= ======= ======= ======== ======== =======
See accompanying notes.
168
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended December 31,
Frontier Capital Appreciation Subaccount Emerging Markets Equity Subaccount
------------------------------------------- ------------------------------------
2000 1999 1998 2000 1999 1998*
-------------- ------------- ------------ ------------- ----------- --------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I -- -- -- $ 63,791 $ 15,636 $ 1
Outside Trusts. . . . . . . . . . . $ 133,836 $ 13,028 $12,832 -- -- --
Interest income on policy loans. . . -- -- -- -- -- --
--------- -------- ------- --------- -------- ----
Total investment income . . . . . . . 133,836 13,028 12,832 63,791 15,636 1
Expenses:
Mortality and expense risks . . . . 3,700 4,257 13,446 5,200 466 --
--------- -------- ------- --------- -------- ----
Net investment income (loss). . . . . 130,136 8,771 (614) 58,591 15,170 1
Net realized and unrealized gain
(loss) on investments:
Net realized gains (losses) . . . . 68,311 (59,550) 23,061 19,902 1,838 (1)
Net unrealized appreciation
(depreciation) during the period . (175,994) 89,369 (840) (571,486) 92,713 (48)
--------- -------- ------- --------- -------- ----
Net realized and unrealized gain
(loss) on investments . . . . . . . (107,683) 29,819 22,221 (551,584) 94,551 (49)
--------- -------- ------- --------- -------- ----
Net increase (decrease) in net assets
resulting from operations . . . . . $ 22,453 $ 38,590 $21,607 $(492,993) $109,721 $(48)
========= ======== ======= ========= ======== ====
Bond Index Subaccount Small/Mid Cap Core Subaccount
-------------------------------- ------------------------------
2000 1999 1998* 2000 1999 1998*
-------- -------- ------------ ---------- -------- --------
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . $ 7,273 $ 2,971 $ 296 $ 22,843 $ 6,699 $ --
Outside Trusts. . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . -- -- -- -- -- --
------- ------- ----- -------- ------- -------
Total investment income. . . . . . . 7,273 2,971 296 22,843 6,699 --
Expenses:
Mortality and expense risks . . . . 561 270 11 1,051 335 48
------- ------- ----- -------- ------- -------
Net investment income (loss) . . . . 6,712 2,701 285 21,792 6,364 (48)
Net realized and unrealized gain
(loss) on investments:
Net realized gains (losses) . . . . (607) (1,613) (26) 1,505 1,093 (1,957)
Net unrealized appreciation
(depreciation) during the period . 6,100 (1,753) (147) (13,928) 4,719 1,888
------- ------- ----- -------- ------- -------
Net realized and unrealized gain
(loss) on investments . . . . . . . 5,493 (3,366) (173) (12,423) 5,812 (69)
------- ------- ----- -------- ------- -------
Net increase (decrease) in net
assets resulting from operations. . $12,205 $ (665) $ 112 $ 9,369 $12,176 $ (117)
======= ======= ===== ======== ======= =======
- ---------
* From May 1, 1998 (commencement of operations).
See accompanying notes.
169
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended December 31,
Large Cap
Aggressive
Clifton Enhanced US Growth
High Yield Bond Subaccount Equity Subaccount Subaccount
---------------------------- ---------------------- -------------
2000 1999 1998* 2000 1999** 2000***
---------- -------- ------ ----------- --------- -------------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 84,101 $ 3,011 $ 50 -- -- $ 36
Outside Trusts. . . . . . . . . . . . . -- -- -- $ 3,328 $1,435 --
Interest income on policy loans . . . . -- -- -- -- -- --
--------- ------- ----- ------- ------ -----
Total investment income. . . . . . . . . 84,101 3,011 50 3,328 1,435 36
Expenses:
Mortality and expense risks . . . . . . 5,409 220 2 138 61 6
--------- ------- ----- ------- ------ -----
Net investment income 78,692 2,791 48 3,190 1,374 30
Net realized and unrealized gain (loss)
on investments:
Net realized gains (losses) . . . . . . (12,114) (396) (108) 302 11 (8)
Net unrealized appreciation
(depreciation) during the period . . . (188,735) (1,172) (19) (5,562) 1,285 (616)
--------- ------- ----- ------- ------ -----
Net realized and unrealized gain
(loss) on investments (200,849) (1,568) (127) (5,260) 1,296 (624)
--------- ------- ----- ------- ------ -----
Net increase (decrease) in net assets
resulting from operations . . . . . . . $(122,157) $ 1,223 $ (79) $(2,070) $2,670 $(594)
========= ======= ===== ======= ====== =====
Fundamental AIM V.I. Fidelity VIP Fidelity VIP II
Growth Value Growth Contrafund
Subaccount Subaccount Subaccount Subaccount
----------- ----------- ------------ ----------------
2000*** 2000*** 2000*** 2000***
----------- ----------- ------------ ----------------
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 1,361 $ 241 -- --
Outside Trusts. . . . . . . . . . . . . -- -- -- --
Interest income on policy loans . . . . -- -- -- --
------- ------- ----- -----
Total investment income. . . . . . . . . 1,361 241 -- --
Expenses:
Mortality and expense risks . . . . . . 10 11 $ 6 $ 12
------- ------- ----- -----
Net investment income (loss) . . . . . . 1,351 230 (6) (12)
Net realized and unrealized (loss) on
investments:
Net realized (losses) (10) (11) (7) (4)
Net unrealized (depreciation) during
the period . . . . . . . . . . . . . . (1,226) (1,068) (525) (366)
------- ------- ----- -----
Net realized and unrealized (loss) on
investments . . . . . . . . . . . . . . (1,236) (1,079) (532) (370)
------- ------- ----- -----
Net increase (decrease) in net assets
resulting from operations . . . . . . . $ 115 $ (849) $(538) $(382)
======= ======= ===== =====
- ---------
* From May 1, 1998 (commencement of operations).
** From May 1, 1999 (commencement of operations).
*** From April 24, 2000 (commencement of operations).
See accompanying notes.
170
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF OPERATIONS (continued)
Years and periods ended December 31,
Janus Aspen Janus Aspen
Global Worldwide MFS New
Technology Growth Discovery Series
Subaccount Subaccount Subaccount
----------- ----------- ------------------
2000**** 2000**** 2000***
----------- ----------- ------------------
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . -- -- --
Outside Trust. . . . . . . . . $ 24 $ 1 --
Interest income on policy loans -- -- --
------- ----- ----
Total investment income . . . . 24 1 --
Expenses:
Mortality and expense risks . . 8 8 $ 19
------- ----- ----
Net investment income (loss) . . 16 (7) (19)
Net realized and unrealized gain
(loss) on investments:
Net realized (losses) . . . . . (99) (71) (7)
Net unrealized appreciation
(depreciation) during the
period . . . . . . . . . . . . (1,649) (717) 197
------- ----- ----
Net realized and unrealized gain
(loss) on investments . . . . . (1,748) (788) 190
------- ----- ----
Net increase (decrease) in net
assets resulting from operations $(1,732) $(795) $171
======= ===== ====
- ---------
*** From April 24, 2000 (commencement of operations).
**** From June 29, 2000 (commencement of operations).
See accompanying notes.
171
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS
Years and periods ended December 31,
Large Cap Growth Subaccount Active Bond Subaccount
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------- ------------ ------------ -------------- ------------ -----------
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . $ 6,287,826 $ 6,329,395 $ 2,820,359 $ 5,332,953 $ 5,481,982 $ 5,578,813
Net realized gains (losses). . . . . . . 1,809,410 1,146,308 433,509 (1,058,175) (388,883) (142,628)
Net unrealized appreciation
(depreciation) during the period. . . . (17,039,660) 320,087 4,558,660 3,862,398 (5,439,148) (102,600)
------------ ----------- ----------- ------------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . (8,942,424) 7,795,790 7,812,528 8,137,176 (346,049) 5,333,585
From policyholder transactions:
Net premiums from policyholders. . . . . 16,225,070 10,950,682 6,922,934 26,218,788 11,668,600 10,038,753
Net benefits to policyholders. . . . . . (8,421,666) (5,776,293) (3,869,320) (17,903,281) (7,543,864) (7,974,328)
Net increase in policy loans . . . . . . 407,961 -- -- 620,295 -- --
------------ ----------- ----------- ------------- ----------- -----------
Net increase in net assets resulting from
policyholder transactions. . . . . . . . 8,211,365 5,174,389 3,053,614 8,935,802 4,124,736 2,064,425
------------ ----------- ----------- ------------- ----------- -----------
Net increase (decrease) in net assets . . (731,059) 12,970,179 10,866,142 17,072,978 3,778,687 7,398,010
Net assets at beginning of period . . . . 44,028,437 31,058,258 20,192,116 80,889,582 77,110,895 69,712,885
------------ ----------- ----------- ------------- ----------- -----------
Net assets at end of period . . . . . . . $ 43,297,378 $44,028,437 $31,058,258 $ 97,962,560 $80,889,582 $77,110,895
============ =========== =========== ============= =========== ===========
International Equity Index Subaccount Small Cap Growth Subaccount
---------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ----------- -----------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . . . . $ 322,155 $ 200,569 $ 734,599 $ 581,967 $ 527,624 $ (8,233)
Net realized gains. . . . . . . . . . . . . . 76,586 62,140 52,891 159,388 48,210 21,741
Net unrealized appreciation (depreciation)
during the
period . . . . . . . . . . . . . . . . . . . (1,706,468) 1,295,768 13,239 (2,654,137) 1,125,829 204,674
----------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . (1,307,727) 1,558,477 800,729 (1,912,782) 1,701,663 218,182
From policyholder transactions:
Net premiums from policyholders . . . . . . . 2,208,528 1,634,643 1,489,281 4,738,730 1,398,160 891,480
Net benefits to policyholders . . . . . . . . (1,307,479) (1,119,500) (1,357,312) (956,063) (390,180) (269,586)
Net increase in policy loans. . . . . . . . . 110,023 -- -- -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . . 1,011,072 515,143 141,969 3,782,667 1,007,980 621,894
----------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net assets. . . . . (296,655) 2073,620 942,698 1,869,885 2,709,643 840,076
Net assets at beginning of period. . . . . . . 7,180,994 5,107,374 4,164,676 4,511,934 1,802,291 962,215
----------- ----------- ----------- ----------- ---------- ----------
Net assets at end of period. . . . . . . . . . $ 6,884,339 $ 7,180,994 $ 5,107,374 $ 6,381,819 $4,511,934 $1,802,291
=========== =========== =========== =========== ========== ==========
See accompanying notes.
172
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
Global Balanced Subaccount Mid Cap Growth Subaccount
-------------------------------- ----------------------------------------------------
2000 1999 1998 2000 1999 1998
--------- ---------- --------- ------------------ ----------------- -------------
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . $ 7,198 $ 15,944 $ 11,414 $ 2,182,817 $ 1,338,175 $ 125,061
Net realized gains (losses). . . . . (3,641) 1,061 1,050 1,892,763 420,826 26,192
Net unrealized appreciation
(depreciation) during the period. . (21,945) (8,559) 12,294 (11,690,290) 4,283,452 193,946
-------- --------- -------- ----------------- ---------------- -------------
Net increase (decrease) in net assets
resulting from operations. . . . . . (18,388) 8,446 24,758 (7,614,710) 6,042,453 345,199
From policyholder transactions:
Net premiums from policyholders. . . 75,380 115,573 150,466 13,112,643 7,041,199 772,359
Net benefits to policyholders. . . . (83,639) (133,983) (50,204) (4,430,561) (947,660) (211,806)
Net increase (decrease) in policy
loans. . . . . . . . . . . . . . . . -- -- -- -- -- --
-------- --------- -------- ----------------- ---------------- -------------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . (8,259) (18,410) 100,262 8,682,082 6,093,539 560,553
-------- --------- -------- ----------------- ---------------- -------------
Net increase (decrease) in net assets (26,647) (9,964) 125,020 1,067,372 12,135,992 905,752
Net assets at beginning of period . . 200,368 210,332 85,312 13,609,574 1,473,582 567,830
-------- --------- -------- ----------------- ---------------- -------------
Net assets at end of period . . . . . $173,721 $ 200,368 $210,332 $ 14,676,946 $ 13,609,574 $1,473,582
======== ========= ======== ================= ================ =============
Large Cap Value Subaccount Money Market Subaccount
--------------------------------------- -------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ----------- ------------- ------------- -------------
Increase (decrease) in net assets
from operations:
Net investment income. . . . . . . . $ 693,327 $ 474,149 $ 169,876 $ 1,290,563 $ 1,143,104 $ 2,139,937
Net realized gains (losses). . . . . (47,306) 123,242 68,953 -- -- --
Net unrealized appreciation
(depreciation) during the period. . 854,807 (499,454) 64,132 -- -- --
----------- ----------- ---------- ------------ ------------ ------------
Net increase in net assets
resulting from operations. . . . . . 1,500,828 97,937 302,961 1,290,563 1,143,104 2,139,937
From policyholder transactions:
Net premiums from policyholders. . . 7,024,748 5,449,922 2,321,440 26,609,851 16,733,655 55,692,824
Net benefits to policyholders. . . . (1,798,175) (1,059,147) (528,449) (22,265,301) (46,642,184) (22,850,788)
Net increase (decrease) in policy
loans . . . . . . . . . . . . . . . -- -- -- 77,509 -- (198,682)
----------- ----------- ---------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . 5,226,573 4,390,775 1,792,991 4,422,059 (29,908,529) 32,643,354
----------- ----------- ---------- ------------ ------------ ------------
Net increase (decrease) in net assets 6,727,401 4,488,712 2,095,932 5,712,622 (28,765,425) 34,783,291
Net assets at beginning of period . . 8,268,787 3,774,075 1,678,123 20,503,106 49,268,531 14,485,240
----------- ----------- ---------- ------------ ------------ ------------
Net assets at end of period . . . . . $14,990,188 $ 8,262,787 $3,774,075 $ 26,215,728 $ 20,503,106 $ 49,268,531
=========== =========== ========== ============ ============ ============
See accompanying notes.
173
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
Mid Cap Value Subaccount Small/Mid Cap Growth Subaccount
-------------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ----------- ------------ ------------ ------------
Increase (decrease) in net assets
from operations:
Net investment income . . . . . . . . . $ 824,979 $ 2,457 $ 19,063 $ 570,559 $ 810,295 $ 66,339
Net realized gains (losses) . . . . . . (47,013) (547,518) 74,634 (136,669) 16,952 33,249
Net unrealized appreciation
(depreciation) during the period . . . 853,987 657,486 (944,401) (2,663) (590,295) 126,465
---------- ----------- ---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . 1,631,953 112,425 (850,704) 431,227 236,952 226,053
From policyholder transactions:
Net premiums from policyholders . . . . 2,895,543 2,086,192 5,639,732 1,474,342 1,533,102 1,812,713
Net benefits to policyholders . . . . . (830,119) (3,546,814) (775,357) (1,536,191) (1,200,248) (1,214,489)
Net increase (decrease) in policy loans -- -- -- -- -- --
---------- ----------- ---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder transactions 2,065,424 (1,460,622) 4,864,375 (61,849) 332,854 598,224
---------- ----------- ---------- ----------- ----------- -----------
Net increase (decrease) in net assets. . 3,697,377 (1,348,197) 4,013,671 369,378 569,806 824,277
Net assets at beginning of period. . . . 4,701,632 6,049,829 2,036,158 5,486,044 4,916,238 4,091,961
---------- ----------- ---------- ----------- ----------- -----------
Net assets at end of period. . . . . . . $8,399,009 $ 4,701,632 $6,049,829 $ 5,855,422 $ 5,486,044 $ 4,916,238
========== =========== ========== =========== =========== ===========
Real Estate Equity Subaccount Growth & Income Subaccount
---------------------------------------- -------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------- ------------- -------------
Increase (decrease) in net assets
from operations:
Net investment income . . . . . . . . . $ 465,264 $ 255,391 $ 327,346 $ 44,427,885 $ 35,556,691 $ 26,835,871
Net realized gains (losses) . . . . . . (159,205) (168,994) 158,205 18,300,286 5,502,422 3,223,935
Net unrealized appreciation
(depreciation) during the period . . . 919,904 (220,380) (1,546,717) (96,829,044) 2,405,417 32,918,552
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . 1,225,963 (133,983) (1,061,166) (34,100,873) 43,464,530 62,978,358
From policyholder transactions:
Net premiums from policyholders . . . . 1,762,038 968,627 3,382,263 31,462,247 34,593,082 35,108,834
Net benefits to policyholders . . . . . (1,130,179) (2,335,552) (1,663,696) (71,685,409) (34,650,911) (29,649,984)
Net increase (decrease) in policy loans 114,851 -- (1,103) 1,310,472 -- 3,672,137
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions 746,710 (1,366,925) 1,717,464 (38,912,690) (57,829) 9,130,987
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets. . 1,972,673 (1,500,908) 656,298 (73,013,563) 43,406,701 72,109,345
Net assets at beginning of period. . . . 4,030,100 5,531,008 4,874,710 340,500,097 297,093,396 224,984,051
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period. . . . . . . $ 6,002,773 $ 4,030,100 $ 5,531,008 $267,486,534 $340,500,097 $297,093,396
=========== =========== =========== ============ ============ ============
See accompanying notes.
174
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
Managed Subaccount Short-Term Bond Subaccount
------------------------------------------- --------------------------------
2000 1999 1998 2000 1999 1998
------------- ------------- ------------- --------- ---------- ---------
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . . $ 11,092,640 $ 10,302,317 $ 9,624,999 $ 15,494 $ 14,042 $ 24,670
Net realized gains (losses). . . . . . . . 1,551,519 996,546 791,245 (2,287) (8,638) 265
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . (12,278,637) (2,108,530) 6,629,458 6,756 (2,442) (4,247)
------------ ------------ ------------ -------- --------- --------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . 365,522 9,190,333 17,045,702 19,963 2,962 20,688
From policyholder transactions:
Net premiums from policyholders. . . . . . 12,192,565 13,430,282 13,116,210 167,135 109,732 420,697
Net benefits to policyholders. . . . . . . (19,842,234) (14,305,859) (14,539,301) (69,043) (370,270) (71,999)
Net increase in policy loans . . . . . . . 630,955 -- 1,134,137 -- -- --
------------ ------------ ------------ -------- --------- --------
Net increase (decrease) in net assets
resulting from policyholder transactions . (7,018,714) (875,577) (288,954) 98,092 (260,538) 348,698
------------ ------------ ------------ -------- --------- --------
Net increase (decrease) in net assets . . . (6,653,192) 8,314,756 16,756,748 118,055 (257,576) 369,386
Net assets at beginning of period . . . . . 119,129,419 110,814,663 94,057,915 238,913 496,489 127,103
------------ ------------ ------------ -------- --------- --------
Net assets at end of period . . . . . . . . $112,476,227 $119,129,419 $110,814,663 $356,968 $ 238,913 $496,489
============ ============ ============ ======== ========= ========
Small Cap Equity Subaccount International Opportunities Subaccount
------------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ------------ ------------ -----------
Increase (decrease) in net assets
from operations:
Net investment income. . . . . . . . . . . $ 297,508 $ 61,905 $ 822 $ 564,716 $ 223,214 $ 11,862
Net realized gains (losses). . . . . . . . (110,857) (33,134) 29,257 348,813 155,412 33,474
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . (668,463) (148,401) (105,331) (2,497,504) 387,412 272,314
---------- ---------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . (481,812) (119,630) (75,252) (1,583,975) 766,038 317,650
From policyholder transactions:
Net premiums from policyholders. . . . . . 1,608,648 1,483,922 1,644,666 9,284,275 2,354,681 3,814,201
Net benefits to policyholders. . . . . . . (452,404) (447,402) (270,585) (469,272) (3,673,500) (339,134)
Net increase (decrease) in policy loans. . -- -- -- -- -- --
---------- ---------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from policyholder transactions . 1,156,242 1,036,520 1,374,081 8,815,003 (1,318,819) 3,475,067
---------- ---------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets . . . 674,430 916,890 1,298,829 7,231,028 (552,781) 3,792,717
Net assets at beginning of period . . . . . 3,467,392 2,550,502 1,251,673 3,628,943 4,181,724 389,007
---------- ---------- ---------- ----------- ----------- ----------
Net assets at end of period . . . . . . . . $4,141,822 $3,467,392 $2,550,502 $10,859,971 $ 3,628,943 $4,181,724
========== ========== ========== =========== =========== ==========
See accompanying notes.
175
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
Equity Index Subaccount Global Bond Subaccount
--------------------------------------- ----------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ----------- ----------- ---------- ---------
Increase (decrease) in net assets from
operations:
Net investment income $ 2,141,880 $ 529,375 $ 158,126 $ 57,408 $ 33,778 $ 17,649
Net realized gains (losses) . . . . . . 485,643 271,978 443,879 (14,302) (151) 3,991
Net unrealized appreciation
(depreciation) during the period . . . (8,035,375) 1,282,937 585,673 63,359 (52,953) 4,308
----------- ----------- ---------- ---------- --------- --------
Net increase (decrease) in net
assets resulting from operations. . . . (5,407,852) 2,084,290 1,187,678 106,465 (19,326) 25,948
From policyholder transactions:
Net premiums from policyholders . . . . 43,728,519 6,697,385 4,822,053 396,099 696,619 381,024
Net benefits to policyholders . . . . . (2,630,030) (1,623,429) (885,493) (192,421) (317,999) (83,865)
Net increase (decrease) in policy
loans. . . . . . . . . . . . . . . . . -- -- -- -- -- --
----------- ----------- ---------- ---------- --------- --------
Net increase in net assets resulting
from policyholder transactions. . . . . 41,098,489 5,073,956 3,936,560 203,678 378,620 297,159
----------- ----------- ---------- ---------- --------- --------
Net increase in net assets . . . . . . . 35,690,637 7,158,246 5,124,238 310,143 359,294 323,107
Net assets at beginning of period. . . . 14,406,079 7,247,833 2,123,595 829,718 470,424 147,317
----------- ----------- ---------- ---------- --------- --------
Net assets at end of period. . . . . . . $50,096,716 $14,406,079 $7,247,833 $1,139,861 $ 829,718 $470,424
=========== =========== ========== ========== ========= ========
Brandes International Equity
Turner Core Growth Subaccount Subaccount
-------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
---------- --------- --------- ----------- --------- ---------
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 50,617 $ 18,189 $ 1,666 $ 87,962 $ 14,188 $ 13,286
Net realized gains. . . . . . . . . . . 20,969 26,736 2,780 13,902 11,526 600
Net unrealized appreciation
(depreciation) during the period . . . (120,040) 23,628 22,686 (35,201) 122,734 8,581
--------- -------- -------- ---------- -------- --------
Net increase (decrease) in net assets
resulting from operations . . . . . . . (48,454) 68,553 27,132 66,663 148,448 22,467
From policyholder transactions:
Net premiums from policyholders . . . . 192,556 109,802 39,070 616,308 152,629 141,892
Net benefits to policyholders . . . . . (31,415) (45,555) (9,835) (39,267) (31,332) (34,941)
Net increase (decrease) in policy
loans. . . . . . . . . . . . . . . . . -- -- -- -- -- --
--------- -------- -------- ---------- -------- --------
Net increase in net assets resulting
from policyholder transactions . . . . 161,141 64,247 29,235 577,041 121,297 106,951
--------- -------- -------- ---------- -------- --------
Net increase in net assets . . . . . . . 112,687 132,800 56,367 643,704 269,745 129,418
Net assets at beginning of period. . . . 257,807 125,007 68,640 525,502 255,757 126,339
--------- -------- -------- ---------- -------- --------
Net assets at end of period. . . . . . . $ 370,494 $257,807 $125,007 $1,169,206 $525,502 $255,757
========= ======== ======== ========== ======== ========
See accompanying notes.
176
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
Frontier Capital Appreciation Subaccount Emerging Markets Equity Subaccount
------------------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998*
------------ -------------- ------------- ------------- ----------- -------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . . . . $ 130,136 $ 8,771 $ (614) $ 58,591 $ 15,170 $ 1
Net realized gains (losses) . . . . . . . . . 68,311 (59,550) 23,061 19,902 1,838 (1)
Net unrealized appreciation (depreciation)
during the period. . . . . . . . . . . . . . (175,994) 89,369 (840) (571,486) 92,713 (48)
--------- ----------- ---------- ---------- -------- ----
Net increase (decrease) in net assets resulting
from
operations. . . . . . . . . . . . . . . . . . 22,453 38,590 21,607 (492,993) 109,721 (48)
From policyholder transactions:
Net premiums from policyholders . . . . . . . 219,803 103,675 2,465,299 1,133,676 336,277 784
Net benefits to policyholders . . . . . . . . (179,523) (2,221,410) (227,386) (337,143) (8,915) (7)
Net increase in policy loans. . . . . . . . . -- -- -- -- -- --
--------- ----------- ---------- ---------- -------- ----
Net increase (decrease) in net assets resulting
from policyholder transactions. . . . . . . . 40,280 (2,117,735) 2,237,913 796,533 327,362 777
--------- ----------- ---------- ---------- -------- ----
Net increase (decrease) in net assets. . . . . 62,733 (2,079,145) 2,259,520 303,540 437,083 729
Net assets at beginning of period. . . . . . . 453,983 2,533,128 273,608 437,812 729 --
--------- ----------- ---------- ---------- -------- ----
Net assets at end of period. . . . . . . . . . $ 516,716 $ 453,983 $2,533,128 $ 741,352 $437,812 $729
========= =========== ========== ========== ======== ====
Bond Index Subaccount Small/Mid Cap Core Subaccount
------------------------------ ---------------------------------
2000 1999 1998* 2000 1999 1998*
--------- --------- -------- ---------- ---------- ---------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . . . $ 6,712 $ 2,701 $ 285 $ 21,792 $ 6,364 $ (48)
Net realized gains (losses) . . . . . . . . (607) (1,613) (26) 1,505 1,093 (1,957)
Net unrealized appreciation
(depreciation) during the period . . . . . 6,100 (1,753) (147) (13,928) 4,719 1,888
-------- -------- ------- -------- -------- --------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . . 12,205 (665) 112 9,369 12,176 (117)
From policyholder transactions:
Net premiums from policyholders . . . . . . 196,240 80,921 16,730 479,768 44,493 52,673
Net benefits to policyholders . . . . . . . (16,742) (20,596) (2,293) (6,951) (12,003) (19,857)
Net increase in policy loans. . . . . . . . -- -- -- -- -- --
-------- -------- ------- -------- -------- --------
Net increase in net assets resulting from
policyholder transactions . . . . . . . . . 179,498 60,325 14,437 472,817 32,490 32,816
-------- -------- ------- -------- -------- --------
Net increase in net assets . . . . . . . . . 191,703 59,660 14,549 482,186 44,666 32,699
Net assets at beginning of period. . . . . . 74,209 14,549 -- 77,365 32,699 --
-------- -------- ------- -------- -------- --------
Net assets at end of period. . . . . . . . . $265,912 $ 74,209 $14,549 $559,551 $ 77,365 $ 32,699
======== ======== ======= ======== ======== ========
- ---------
* From May 1, 1998 (commencement of operations).
See accompanying notes.
177
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
High Yield Bond Subaccount Clifton Enhanced US Equity Subaccount
--------------------------------- --------------------------------------
2000 1999 1998* 2000 1999**
----------- -------- ---------- ------------------ ------------------
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 78,692 $ 2,791 $ 48 $ 3,190 $ 1,374
Net realized gains (losses) . . . . . . (12,114) (396) (108) 302 11
Net unrealized appreciation
(depreciation) during the period . . . (188,735) (1,172) (19) (5,562) 1,285
---------- ------- --------- ------- -------
Net increase (decrease) in net assets
resulting from operations . . . . . . . (122,157) 1,223 (79) (2,070) 2,670
From policyholder transactions:
Net premiums from policyholders . . . . 1,514,684 69,375 108,274 16,541 15,505
Net benefits to policyholders . . . . . (88,711) -- (102,742) (9,351) --
Net increase in policy loans. . . . . . -- -- -- -- --
---------- ------- --------- ------- -------
Net increase in net assets resulting
from policyholder transactions. . . . . 1,425,973 69,375 5,532 7,190 15,505
---------- ------- --------- ------- -------
Net increase in net assets . . . . . . . 1,303,816 70,598 5,453 5,120 18,175
Net assets at beginning of period. . . . 76,051 5,453 -- 18,175 --
---------- ------- --------- ------- -------
Net assets at end of period. . . . . . . $1,379,867 $76,051 $ 5,453 $23,295 $18,175
========== ======= ========= ======= =======
Large Cap
Aggressive Fundamental AIM V.I. Fidelity VIP
Growth Growth Value Growth Fidelity VIP II
Subaccount Subaccount Subaccount Subaccount Contrafund Subaccount
---------- ------------ ---------- ------------ ----------------------
2000*** 2000*** 2000*** 2000*** 2000***
---------- ------------ ---------- ------------ ----------------------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . $ 30 $ 1,351 $ 230 $ (6) $ (12)
Net realized (losses) . . . . . . . . . (8) (10) (11) (7) (4)
Net unrealized (depreciation) during
the period . . . . . . . . . . . . . . (616) (1,226) (1,068) (525) (366)
------ ----------- ------- ------ -------
Net increase (decrease) in net assets
resulting from operations . . . . . . . (594) 115 (849) (538) (382)
From policyholder transactions:
Net premiums from policyholders . . . . 2,528 9,264,914 12,213 5,160 13,880
Net benefits to policyholders . . . . . -- (9,251,776) (6,072) (394) (6,991)
Net increase in policy loans. . . . . . -- -- -- -- --
------ ----------- ------- ------ -------
Net increase in net assets resulting
from policyholder transactions. . . . . 2,528 13,138 6,141 4,766 6,889
------ ----------- ------- ------ -------
Net increase in net assets . . . . . . . 1,934 13,253 5,292 4,228 6,507
Net assets at beginning of period. . . . -- -- -- -- --
------ ----------- ------- ------ -------
Net assets at end of period. . . . . . . $1,934 $ 13,253 $ 5,292 $4,228 $ 6,507
====== =========== ======= ====== =======
- ---------
* From May 1, 1998 (commencement of operations).
** From May 1, 1999 (commencement of operations).
*** From April 24, 2000 (commencement of operations).
See accompanying notes.
178
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Years and periods ended December 31,
Janus Aspen Janus Aspen MFS New
Global Technical Worldwide Growth Discovery
Subaccount Subaccount Series Subaccount
----------------- ---------------- -------------------
2000**** 2000**** 2000***
----------------- ---------------- -------------------
Increase (decrease) in net assets from
operations:
Net investment income (loss). . . . . . $ 16 $ (7) $ (19)
Net realized (losses) . . . . . . . . . (99) (71) (7)
Net unrealized appreciation
(depreciation) during the period . . . (1,649) (717) 197
------- ------ --------
Net increase (decrease) in net assets
resulting from operations . . . . . . . (1,732) (795) 171
From policyholder transactions:
Net premiums from policyholders . . . . 5,487 5,929 37,394
Net benefits to policyholders . . . . . -- (470) (18,758)
Net increase in policy loans. . . . . . -- -- --
------- ------ --------
Net increase in net assets resulting
from policyholder transactions. . . . . 5,487 5,459 18,636
------- ------ --------
Net increase in net assets . . . . . . . 3,755 4,664 18,807
Net assets at beginning of period. . . . -- -- --
------- ------ --------
Net assets at end of period. . . . . . . $ 3,755 $4,664 $ 18,807
======= ====== ========
- ---------
*** From April 24, 2000 (commencement of operations).
**** From June 29, 2000 (commencement of operations).
See accompanying notes.
179
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
1. Organization
John Hancock Mutual Variable Life Insurance Account UV (the Account) is a
separate investment account of John Hancock Mutual Life Insurance Company
(JHMVLICO or John Hancock). John Hancock Mutual Variable Life Insurance Account
UV was formed to fund variable life insurance policies (Policies) issued by
JHMVLICO. The Account is operated as a unit investment trust registered under
the Investment Company Act of 1940, as amended, and currently consists of
thirty-four subaccounts. The assets of each subaccount are invested exclusively
in shares of a corresponding Fund of John Hancock Variable Series Trust I (the
Trust) or Outside Trust. New subaccounts may be added as new Funds are added to
the Trust or to Outside Trust, or as other investment options are developed, and
made available to policyholders. The thirty-four Funds of the Trust and Outside
Trust which are currently available are the Large Cap Growth, Active Bond
(formerly, Sovereign Bond), International Equity Index, Small Cap Growth, Global
Balanced (formerly, International Balanced), Mid Cap Growth, Large Cap Value,
Money Market, Mid Cap Value, Small/Mid Cap Growth, Real Estate Equity, Growth &
Income, Managed, Short-Term Bond, Small Cap Equity (formerly, Small Cap Value),
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Emerging Markets Equity, Bond Index, Small/Mid Cap Core, High
Yield Bond, Clifton Enhanced US Equity, Large Cap Aggressive Growth, Fundamental
Growth (formerly, Fundamental Mid Cap Growth), AIM V.I. Value, Fidelity VIP
Growth, Fidelity VIP II Contrafund, Janus Aspen Global Technology, Janus Aspen
Worldwide Growth, and MFS New Discovery Series subaccounts. Each Fund 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 JHVLICO'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 JHVLICO. The portion of the
Account's assets applicable to the policies may not be charged with liabilities
arising out of any other business JHVLICO 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 and of 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.
180
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (continued)
Federal Income Taxes
The operations of the Account are included in the federal income tax return of
JHVLICO, which is taxed as a life insurance company under the Internal Revenue
Code. JHVLICO 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 Policies funded in the Account. Currently, JHVLICO 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
JHVLICO 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.
JHVLICO makes certain deductions for administrative expenses and state premium
taxes from premium payments before amounts are transferred to the Account.
Policy Loans
Policy loans represent outstanding loans plus accrued interest. Interest is
accrued (net of a charge for policy loan administration determined at an annual
rate of .75% of the aggregate amount of policyholder indebtedness) and
compounded daily.
3. Transactions with Affiliates
JHVLICO acts as the distributor, principal underwriter and investment advisor
for the Fund.
Certain officers of the Account are officers and directors of JHVLICO or the
Fund.
181
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (continued)
4. Details of Investments
The details of the shares owned and cost and value of investments in the
Subaccounts of the Trust and of Outside Trusts at December 31, 2000 were as
follows:
Subaccount Shares Owned Cost Value
- -----------------------------------------------------------------------
Large Cap Growth 2,134,279 $ 49,726,695 $ 40,309,354
Active Bond 9,220,332 89,132,947 87,068,487
International Equity Index 418,581 7,018,825 6,443,455
Small Cap Growth 469,884 7,618,520 6,381,819
Global Balanced 18,730 195,343 173,721
Mid Cap Growth 940,768 21,821,280 14,676,946
Large Cap Value 1,042,527 14,485,880 14,990,188
Money Market 2,396,674 23,979,125 23,979,125
Mid Cap Value 573,188 7,672,317 8,399,009
Small/Mid Cap Growth 427,288 6,411,225 5,855,422
Real Estate Equity 410,488 5,654,057 5,654,199
Growth & Income 16,464,612 264,186,266 233,488,134
Managed 7,151,246 101,360,593 98,868,851
Short-Term Bond 36,191 357,048 356,968
Small Cap Equity 453,079 5,074,119 4,141,822
International Opportunities 916,359 12,702,732 10,859,971
Equity Index 2,839,312 56,110,489 50,096,716
Global Bond 109,624 1,123,879 1,139,861
Turner Core Growth 21,099 436,949 370,494
Brandes International Equity 78,208 1,075,621 1,169,206
Frontier Capital
Appreciation 29,955 570,395 516,716
Emerging Markets 110,662,958 1,220,174 741,352
Bond Index 27,296 261,716 265,912
Small/Mid Cap Core 57,007 566,872 559,551
High Yield Bond 182,888 1,569,793 1,379,867
Clifton Enhanced U.S.
Equity 1,427 27,572 23,295
Large Cap Aggressive
Growth 203 2,550 1,934
Fundamental Growth 1,059 14,479 13,253
AIM V.I. Value 194 6,361 5,292
Fidelity VIP Growth 97 4,753 4,228
Fidelity VIP II Contrafund 275 6,874 6,507
Janus Aspen Global
Technology 573 5,404 3,755
Janus Aspen Worldwide
Growth 127 5,380 4,664
MFS New Discovery Series 1,132 18,610 18,807
182
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (continued)
4. Details of Investments (continued)
Purchases, including reinvestment of dividend distributions and proceeds from
the sales of shares in the Subaccounts of the Trust and of Outside Trusts during
2000 were as follows:
Subaccount Purchases Sales
- ------------------------------------------------------------------
Large Cap Growth $18,258,586 $ 4,179,799
Active Bond 21,683,388 8,059,756
International Equity Inde 1,819,131 600,051
Small Cap Growth 4,728,339 363,705
Global Balanced 73,877 74,938
Mid Cap Growth 15,044,085 4,179,188
Large Cap Value 8,324,134 2,404,233
Money Market 25,074,870 19,446,917
Mid Cap Value 3,589,187 698,784
Small/Mid Cap Growth 1,603,684 1,094,974
Real Estate Equity 1,807,284 703,801
Growth & Income 57,305,890 53,160,381
Managed 15,768,185 12,350,769
Short-Term Bond 168,738 55,151
Small Cap Equity 1,883,002 429,250
International Opportunities 11,983,910 2,604,191
Equity Index 46,207,986 2,967,617
Global Bond 456,473 195,388
Turner Core Growth 260,382 48,624
Brandes International Equity 707,500 42,497
Frontier Capital Appreciation 364,918 194,503
Emerging Markets 1,122,971 267,846
Bond Index 332,405 146,196
Small/Mid Cap Core 504,485 9,875
High Yield Bond 1,777,756 273,092
Clifton Enhanced U.S. Equity 19,876 9,496
Large Cap Aggressive Growth 2,611 52
Fundamental Growth 14,558 69
AIM V.I. Value 6,455 83
Fidelity VIP Growth 4,825 65
Fidelity VIP II Contrafund 6,967 89
Janus Aspen Global Technology. 5,776 273
Janus Aspen Worldwide Growth 5,930 479
MFS New Discovery Series 18,733 116
183
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (continued)
5. Net Assets
Accumulation shares attributable to net assets of policyholders and accumulation
share values for each Subaccount at December 31, 2000 were as follows:
UV VLI Class #1 UV VLI Class #2 UV MVL Class #3
-------------------------------------------------------------------------------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Subaccount Shares Share Values Shares Share Values Shares Share Values
- ---------------------------------------------------------------------------------------------------------------------------------
Large Cap Growth 301,994 $ 71 -- -- 47,403 $65.04
Active Bond 301,994 62 301,994 $ 62.65 19,396 26.01
International Equity Index 301,994 23 -- -- 21,835 22.61
Small Cap Growth -- -- -- -- 84,323 16.94
Global Balanced -- -- -- -- 6,978 12.01
Mid Cap Growth -- -- -- -- 150,842 22.69
Large Cap Value -- -- -- -- 69,602 18.15
Money Market 301,994 33 301,994 33.36 149,377 19.12
Mid Cap Value -- -- -- -- 81,913 17.95
Small/Mid Cap Growth -- -- -- -- 27,289 21.50
Real Estate Equity 301,994 29 -- -- 20,927 29.12
Growth & Income 301,994 162 301,994 162.20 134,966 58.85
Managed 301,994 46 -- -- 52,738 39.43
Short-Term Bond -- -- -- -- 5,572 16.94
Small Cap Equity -- -- -- -- 38,204 11.15
International Opportunities -- -- -- -- 34,841 13.75
Equity Index -- -- -- -- 266,104 20.84
Global Bond -- -- -- -- 23,292 13.54
Turner Core Growth -- -- -- -- 4,834 23.25
Brandes International Equity -- -- -- -- 19,563 17.87
Frontier Capital Appreciation -- -- -- -- 2,760 22.59
Emerging Markets Equity -- -- -- -- 17,441 7.62
Bond Index -- -- -- -- 5,016 11.49
Small/Mid Cap Core -- -- -- -- 3,381 11.19
High Yield Bond -- -- -- -- 31,917 8.95
Clifton Enhanced US Equity -- -- -- -- 1,965 11.85
Large Cap Aggressive Growth -- -- -- -- -- --
Fundamental Growth -- -- -- -- -- --
AIM V.I. Value -- -- -- -- -- --
Fidelity VIP Growth -- -- -- -- -- --
Fidelity VIP II Contrafund -- -- -- -- -- --
Janus Aspen Global
Technology -- -- -- -- -- --
Janus Aspen Worldwide
Growth -- -- -- -- -- --
MFS New Discovery Series -- -- -- -- -- --
184
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (continued)
5. Net Assets (continued)
UV Flex Class #4 UV Flex II Class #5 UV Flex Class #9
-------------------------------------------------------------------------------------------------
Accumulation Accumulation Accumulation Accumulation Accumulation Accumulation
Subaccount Shares Share Values Shares Share Values Shares Share Values
- ---------------------------------------------------------------------------------------------------------------------------------
Large Cap Growth 355,536 $ 65.04 27,727 $65.04 2,052 $28.09
Active Bond 1,688,399 26.01 12,973 26.01 -- 15.25
International Equity Index 151,89 22.61 11,943 22.61 -- --
Small Cap Growth 240,785 16.94 35,289 16.94 -- 17.00
Global Balanced 3,671 12.01 3,495 12.01 -- 12.05
Mid Cap Growth 417,189 22.69 45,217 22.69 -- 22.77
Large Cap Value 681,933 18.15 44,769 18.15 -- 18.22
Money Market 639,493 19.12 9,562 19.12 -- 13.91
Mid Cap Value 325,982 17.95 30,538 17.95 -- 18.01
Small/Mid Cap Growth 225,097 21.50 9,052 21.50 -- 21.61
Real Estate Equity 109,667 29.11 8,662 29.11 -- 19.07
Growth & Income 1,397,476 58.85 72,875 58.85 3,195 26.87
Managed 1,120,465 39.43 34,455 39.42 -- 20.90
Short-Term Bond 14,895 13.94 3,097 13.94 -- 14.01
Small Cap Equity 290,429 11.15 26,171 11.15 -- 11.19
International Opportunities 711,861 13.75 13,887 13.75 4,650 13.79
Equity Index 1,994,107 20.84 71,508 20.84 -- 20.91
Global Bond 47,066 13.54 9,112 13.54 -- 13.58
Turner Core Growth 11,094 23.25 -- 23.25 -- 25.11
Brandes International Equity 34,475 17.87 525 17.87 -- 17.72
Frontier Capital Appreciation 14,908 22.59 275 22.59 4,318 24.40
Emerging Markets Equity 62,103 7.62 7,993 7.62 -- 7.62
Bond Index 17,515 11.49 279 11.49 131 11.50
Small/Mid Cap Core 30,190 11.19 1,187 11.19 619 11.20
High Yield Bond 119,207 8.95 2,037 8.95 150 8.96
Clifton Enhanced US Equity -- 11.85 -- 11.85 -- 15.66
Large Cap Aggressive Growth -- -- -- -- -- 8.15
Fundamental Growth -- -- -- -- -- 10.29
AIM V.I. Value -- -- -- -- -- 8.43
Fidelity VIP Growth -- -- -- -- -- 9.00
Fidelity VIP II Contrafund -- -- -- -- -- 9.64
Janus Aspen Global
Technology -- -- -- -- -- 6.75
Janus Aspen Worldwide
Growth -- -- -- -- -- 8.33
MFS New Discovery Series -- -- -- -- -- 10.01
185
JOHN HANCOCK VARIABLE LIFE INSURANCE ACCOUNT UV
NOTES TO FINANCIAL STATEMENTS (continued)
5. New Assets (continued)
UV Flex Class #7 UV Flex Class #8
---------------------------------------------------------------------
Accumulation Accumulation Accumulation Accumulation
Subaccount Shares Share Values Shares Share Values
- ---------------------------------------------------------------------------------------------
Large Cap Growth 19,225 $27.90 15,279 $28.00
Active Bond 16,904 15.14 5,716 15.20
International Equity
Index 16,614 14.38 6,359 14.43
Small Cap Growth 13,382 16.92 2,435 16.96
Global Balanced 306 12.00 -- 12.02
Mid Cap Growth 18,928 22.66 13,296 22.72
Large Cap Value 16,837 18.13 11,888 18.17
Money Market 39,349 13.82 41,887 13.86
Mid Cap Value 25,905 17.93 739 17.97
Small/Mid Cap Growth 5,259 21.47 5,994 21.54
Real Estate Equity 994 18.94 -- 18.90
Growth & Income 76,640 26.69 31,028 26.78
Managed 18,772 20.76 11,996 20.83
Short-Term Bond 1,913 13.92 -- 13.96
Small Cap Equity 14,147 11.14 2,300 11.17
International
Opportunities 15,888 13.73 8,391 13.76
Equity Index 43,161 20.82 28,088 20.87
Global Bond 4,702 13.52 -- 13.55
Turner Core Growth -- 24.98 -- 25.05
Brandes International
Equity 723 17.63 10.258 17.67
Frontier Capital
Appreciation -- 24.46 225 24.34
Emerging Markets
Equity -- 7.63 8,858 7.61
Bond Index -- 11.51 194 11.49
Small/Mid Cap Core -- 11.22 14,619 11.19
High Yield Bond -- 8.97 829 8.95
Clifton Enhanced US
Equity -- 15.69 -- 15.64
Large Cap Aggressive
Growth -- 8.15 238 8.14
Fundamental Growth -- 10.30 1,288 10.29
AIM V.I. Value -- 8.43 628 8.42
Fidelity VIP Growth -- 9.00 470 9.00
Fidelity VIP II
Contrafund -- 9.65 675 9.64
Janus Aspen Global
Technology -- 6.75 556 6.75
Janus Aspen Worldwide
Growth -- 8.33 560 8.33
MFS New Discovery
Series -- 10.02 1,879 10.01
186
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 Key Word or Phrase Page
Account . . . . . . . . . . 33 minimum premiums. . . . . . . 6
account value . . . . . . . 9 modified endowment. . . . . . 41
Additional Sum Insured. . . 17 monthly deduction date. . . . 35
asset-based risk charge . . 10 Option A; Option B. . . . . . 17
asset rebalancing . . . . . 15 optional benefits charge. . . 10
attained age. . . . . . . . 10 owner . . . . . . . . . . . . 5
Basic Sum Insured . . . . . 17 partial withdrawal. . . . . . 16
beneficiary . . . . . . . . 44 partial withdrawal charge . . 11
business day. . . . . . . . 33 payment options . . . . . . . 21
changing Option A or B. . . 20 Planned Premium . . . . . . . 6
changing the Total Sum policy anniversary. . . . . . 34
Insured . . . . . . . . . 19 policy year . . . . . . . . . 34
charges . . . . . . . . . . 9 premium; premium payment. . . 5
Code. . . . . . . . . . . . 40 premium sales charge. . . . . 9
contingent deferred sales prospectus. . . . . . . . . . 2
charge . . . . . . . . . . 11 receive; receipt. . . . . . . 23
cost of insurance rates . . 9 reinstate; reinstatement. . . 8
date of issue . . . . . . . 34 SEC . . . . . . . . . . . . . 2
death benefit . . . . . . . 5 Separate Account UV . . . . . 33
deductions. . . . . . . . . 9 Series Funds. . . . . . . . . 2
dollar cost averaging . . . 15 Servicing Office. . . . . . . 2
expenses of the Series special loan account. . . . . 17
Funds. . . . . . . . . . . 11 subaccount. . . . . . . . . . 33
fixed investment option . . 33 surrender . . . . . . . . . . 5
full surrender. . . . . . . 16 surrender value . . . . . . . 16
fund. . . . . . . . . . . . 2 Target Premium. . . . . . . . 9
grace period. . . . . . . . 8 tax considerations. . . . . . 40
guaranteed death benefit telephone transactions. . . . 24
feature. . . . . . . . . . 7 Total Sum Insured . . . . . . 17
Guaranteed Death Benefit transfers of account value. . 14
Premium. . . . . . . . . . 7 variable investment options . 1
insurance charge. . . . . . 9 we; us. . . . . . . . . . . . 33
insured person. . . . . . . 5 withdrawal. . . . . . . . . . 16
investment options. . . . . 1 withdrawal charges. . . . . . 11
John Hancock . . . . . . . 33 you; your . . . . . . . . . . 5
lapse . . . . . . . . . . . 7
loan. . . . . . . . . . . . 16
loan interest . . . . . . . 17
maximum premiums. . . . . . 6
Minimum Initial Premium . . 34
minimum insurance amount. . 18
187
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 INDEMNIFICATION
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 187 pages.
The undertaking to file reports.
The undertaking regarding indemnification.
The signatures.
The following exhibits:
I.A. (1) John Hancock Board Resolution establishing the separate account,
incorporated by reference to Post-Effective Amendment No. 3 to
(File No. 33-63842) Form S-6 Registration Statement, filed March
5, 1996.
(2) Not Applicable
(3) (a) Form of Distribution Agreement by and among Signator Investors
Inc., (formerly known as "John Hancock Distributors, Inc.",)
John Hancock Life Insurance Company (formerly 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. 333-15075)
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. 333-15075) filed April 18, 1997.
(c) Schedule of sales commissions included in Exhibit 1.A.(3)(a)
above.
(d) Form of marketing and Distribution Agreement between John
Hancock Life Insurance Company, and John Hancock Funds, Inc.,
incorporated by reference to John Hancock Variable Annuity
Account H Initial Registration Statement (File No. 811-0711),
filed on July 18, 1996.
(e) Form of Soliciting Dealer Agreement between John Hancock Funds,
Inc., and soliciting broker-dealers or financial institutions
participating in distribution of Contracts, incorporated by
reference to Form S-1 Registration Statement for John Hancock
Variable Life Insurance Company (File No. 33-64945), filed
electronically on April 23, 1997.
(f) Schedule of sales commissions included in Exhibit 1.A.(3) (d)
above
(4) Not Applicable
(5) Form of flexible premium variable life insurance policy is
incorporated by reference to the initial registration statement to
File No. 333-70734, filed on October 2, 2001.
(6) Restated Articles of Organization and Restated and Amendment of By-
Laws are incorporated by reference from Form S-6 to Post-Effective
Amendment No. 10 (File 333-76662), filed on March 7, 2001.
(7) Not Applicable.
(8) (a) Participation Agreement Among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and 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 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 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 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 is incorporated by reference to the
initial registration statement to File No. 333-70734, filed on
October 2, 2001.
(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 policy pursuant to Rule 6e-2(b)(l2)(ii)included in Post-
Effective Amendment No. 3 to this Form S-6 Registration Statement,
incorporated by reference to this file, filed March 5, 1996.
9. Power of attorney for David F. D'Alessandro, Foster L. Aborn, I. MacAllister
Booth, Wayne A. Budd, John M. Connors, Jr., John De Ciccio, Robert E. Fast,
Kathleen Foley Feldstein, Nelson F. Gifford, Michael C. Hawley, Edward H.
Linde, Judith A. McHale, R. Robert Popeo, Richard F. Syron and Robert J.
Tarr are incorporated by reference to File No. 333-67744, the initial
registration statement filed on August 16, 2001. Power of attorney for
Thomas P. Glynn, incorporated by reference to the initial registration of
File No. 333-70734, filed on October 2, 2001.
Pursuant to the requirements of the Securities Act of 1933, John Hancock
Life Insurance Company has duly caused this Pre-effective Amendment to the
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 21st day of December, 2001.
On behalf of the Registrant
By 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 Pre-
effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities with John Hancock Life Insurance Company and
on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ THOMAS E. MOLONEY Senior Executive Vice
---------------------- President and Chief Financial
Thomas E. Moloney Officer (Principal Financial
Officer and Principal December 21, 2001
Accounting Officer)
Chairman, President and Chief
Executive Officer
/s/ DAVID F. D'ALESSANDRO (Principal Executive Officer)
------------------------
David F. D'Alessandro December 21, 2001
for himself and as Attorney-in-Fact FOR:
Foster L. Aborn Director
I. MacAllister Booth Director
Wayne A. Budd Director
John M. Connors, Jr. Director
John M. DeCiccio Director
Robert E. Fast Director
Kathleen Foley Feldstein Director
Nelson F. Gifford 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