#### FORM 10-Q

#### SECURITIES AND EXCHANGE COMMISSION

##### WASHINGTON, D. C.  20549

# [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

# For the quarterly period ended March 31, 2001

# OR

# [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d)OF THE SECURITIES AND EXCHANGE ACT OF 1934

# For the transition period from ___ to ___

# Commission File Number 333-42425

# Protective Life and Annuity Insurance Company

| |  | ALABAMA | 63-0761690
| |  | ------- | ----------
|
|

# 2801 HIGHWAY 280 SOUTHBIRMINGHAM, ALABAMA 35223

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

Number of shares of Common Stock, $10.00 par value,  outstanding
as of May 4, 2001: 250,000 shares.

## Protective Life and Annuity Insurance Company

### INDEX

`Part I. Financial Information:
   Item 1.   Financial Statements:
        Report of Independent Accountants.......................................
        Condensed Statements of Income for the Three Months
          ended March 31, 2001 and 2000 (unaudited).............................
        Condensed Balance Sheets as of March 31, 2001
          (unaudited) and December 31, 2000.....................................
        Condensed Statements of Cash Flows for the
          Three Months ended March 31, 2001 and 2000 (unaudited)................
        Notes to Condensed Financial Statements (unaudited).....................

   Item 2.Management's Narrative Analysis of the Results of Operations..........

   Item 3.Quantitative and Qualitative Disclosures About Market Risk............

Part II.  Other Information:
   Item 6.Exhibits and Reports on Form 8-K......................................

Signature.......................................................................`

## REPORT OF INDEPENDENT ACCOUNTANTS

To the Directors and Share Owners
Protective Life and Annuity Insurance Company
Birmingham, Alabama

We have reviewed the
accompanying condensed balance sheet of Protective Life and Annuity Insurance
Company as of March 31, 2001, and the related condensed statements of income for
the three-month periods ended March 31, 2001 and 2000, and condensed statements
of cash flows for the three-month periods ended March 31, 2001 and 2000. These
financial statements are the responsibility of the Companys management.

We conducted our review in
accordance with standards established by the American Institute of Certified
Public Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with auditing
standards generally accepted in the United States of America, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are
not aware of any material modifications that should be made to the accompanying
condensed interim financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States of
America.

We previously audited in
accordance with auditing standards generally accepted in the United States of
America, the balance sheet as of December 31, 2000, and the related statements
of income, share-owners equity, and cash flows for the year then ended
(not presented herein), and in our report dated March 1, 2001 we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet as of December
31, 2000, is fairly stated in all material respects in relation to the balance
sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Birmingham, Alabama
May 7, 2001

## PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
                                                         CONDENSED STATEMENTS OF INCOME

### (Unaudited)

`THREE MONTHS ENDED
                                                                             MARCH 31
                                                                   ----------------------------
                                                                        2001           2000
                                                                        ----           ----
REVENUES
     Premiums and policy fees ..................................   $ 12,388,866    $ 12,776,306
        Reinsurance ceded ......................................     (4,866,460)     (4,678,778)
                                                                   ------------    ------------
        Premiums and policy fees, net of reinsurance ceded .....      7,522,406       8,097,528
     Net investment income .....................................      8,054,071       7,366,363
     Realized investment gains .................................        664,444
     Other income ..............................................          1,981           3,708
                                                                   ------------    ------------
                                                                     16,242,902      15,467,599
                                                                   ------------    ------------
BENEFITS AND EXPENSES
     Benefits and settlement expenses (net of reinsurance ceded:
        2001 - $3,282,874; 2000 - $3,523,755) ..................      8,258,497       8,017,391
     Amortization of deferred policy acquisition costs .........      1,769,322       1,574,851
     Other operating expenses (net of reinsurance ceded:
        2001 - $79,783; 2000 - $78,596) ........................      2,047,913       3,355,127
                                                                   ------------    ------------
                                                                     12,075,732      12,947,369
                                                                   ------------    ------------
INCOME BEFORE INCOME TAX .......................................      4,167,170       2,520,230

Income tax expense .............................................      1,437,674         869,479
                                                                   ------------    ------------

NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
     ACCOUNTING PRINCIPLE ......................................      2,729,496       1,650,751

Cumulative effect of change in accounting principle,
     net of income tax .........................................       (284,968)
                                                                   ------------   -------------
NET INCOME .....................................................   $  2,444,528    $  1,650,751
                                                                   ============   =============

See notes to condensed financial statements`

## PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
                                                       CONDENSED BALANCE SHEETS

`MARCH 31       DECEMBER 31
                                                                          2001            2000
                                                                     -------------   --------------
                                                                      (UNAUDITED)
ASSETS
  Investments
    Fixed maturities, at market
     (amortized cost: 2001 - $438,193,895; 2000 - $428,392,599) ..   $ 437,805,253   $ 418,756,679
    Mortgage loans on real estate ................................       3,093,005       3,215,344
    Policy loans .................................................      53,832,835      54,465,893
    Short-term investments .......................................      12,497,198       4,000,000
                                                                     -------------   -------------
     Total investments ...........................................     507,228,291     480,437,916
  Cash ...........................................................         537,208       1,165,410
  Accrued investment income ......................................       8,346,937       8,914,306
  Accounts and premiums receivable, net of allowance for
     uncollectible amounts .......................................       2,079,463       1,952,449
  Reinsurance receivables ........................................      21,796,277      23,136,896
  Deferred policy acquisition costs ..............................     123,157,361     128,228,360
  Other assets ...................................................          21,510          27,333
  Assets related to separate accounts
    Variable annuity .............................................       8,337,700       9,037,035
                                                                     -------------   -------------
                                                                     $ 671,504,747   $ 652,899,705
                                                                     =============   =============
LIABILITIES
  Policy liabilities and accruals:
     Future policy benefits and claims ...........................   $ 455,825,285   $ 452,212,971
     Unearned premiums ...........................................       7,989,319       8,154,233
                                                                     -------------   -------------
                                                                       463,814,604     460,367,204
  Annuity deposits ...............................................      28,891,204      28,059,246
  Other policyholders' funds .....................................       5,714,405       5,794,289
  Other liabilities ..............................................      26,959,236      21,209,531
  Deferred income taxes ..........................................      12,317,425       9,063,941
  Liabilities related to separate accounts
    Variable annuity .............................................       8,337,700       9,037,035
                                                                     -------------   -------------
           Total liabilities .....................................     546,034,574     533,531,246
                                                                     -------------   -------------
COMMITMENTS AND CONTINGENT LIABILITIES - NOTE B

SHARE-OWNERS' EQUITY
  Preferred Stock, $1.00 par value, shares authorized, issued, and
    outstanding: 2,001 ...........................................           2,000           2,000
  Common Stock, $10 par value
    Shares authorized: 500,000
    Shares issued and outstanding: 250,000 .......................       2,500,000       2,500,000
  Additional paid-in capital .....................................     101,386,324     101,386,324
  Retained earnings ..............................................      21,192,861      18,748,333
  Accumulated other comprehensive income (loss):
    Net unrealized gains (losses) on investments (net of
     income tax:  2001 - $209,455; 2000 - $(1,759,798)) ..........         388,988      (3,268,198)
                                                                     -------------   -------------
           Total share-owners' equity ............................     125,470,173     119,368,459
                                                                     -------------   -------------
                                                                     $ 671,504,747   $ 652,899,705
                                                                     =============   =============

See notes to condensed financial statements`

## PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
                                                  CONDENSED STATEMENTS OF CASH FLOWS

### (Unaudited)

`THREE MONTHS ENDED
                                                                                                 MARCH 31
                                                                                    --------------------------------
                                                                                         2001             2000
                                                                                         ----             ----
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income ..................................................................   $   2,444,528    $   1,650,751
    Adjustments to reconcile net income to net cash used in operating activities:
       Realized investment gains ................................................        (664,444)
       Amortization of deferred policy acquisition costs ........................       1,769,322        1,574,851
       Capitalization of deferred policy acquisition costs ......................        (319,161)        (148,987)
       Deferred income tax ......................................................       1,437,674          869,479
       Interest credited to universal life and investment products ..............       7,209,883        4,382,558
       Policy fees assessed on universal life and investment products ...........      (9,249,491)      (9,778,675)
       Change in accrued investment income and other receivables ................       1,780,974           62,310
       Change in policy liabilities and other policyholder
          funds of traditional life and health products .........................       3,567,779        5,406,468
       Change in other liabilities ..............................................       5,749,705        1,024,483
       Other (net) ..............................................................           5,823           13,013
                                                                                     ------------     ------------
    Net cash provided by (used in) operating activities .........................      13,732,592        5,056,251
                                                                                     ============     ============
CASH FLOWS FROM INVESTING ACTIVITIES
    Maturities and principal reductions of investments
       Investments available for sale ...........................................     107,948,855      101,329,695
       Other ....................................................................         759,862          111,127
    Sale of investments
       Investments available for sale ...........................................      30,995,909
    Cost of investments acquired
       Investments available for sale ...........................................    (156,736,723)    (114,069,882)
                                                                                     ------------      -----------
    Net cash used in investing activities .......................................     (17,032,097)     (12,629,060)
                                                                                     ------------      -----------
CASH FLOWS FROM FINANCING ACTIVITIES
    Investment product deposits and change in universal life deposits ...........       9,762,981       19,756,393
    Investment product withdrawals ..............................................      (7,091,678)     (12,698,715)
                                                                                     ------------      -----------
    Net cash provided by financing activities ...................................       2,671,303        7,057,678
                                                                                     ------------      -----------
DECREASE IN CASH ................................................................        (628,202)        (515,131)
CASH AT BEGINNING OF PERIOD .....................................................       1,165,410        4,021,839
                                                                                     ------------      -----------
CASH AT END OF PERIOD ...........................................................   $     537,208    $   3,506,708
                                                                                     ============      ===========


See notes to condensed financial statements`

## PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
                                                NOTES TO CONDENSED FINANCIAL STATEMENTS

### (Unaudited)

### NOTE A - BASIS OF PRESENTATION

The
accompanying unaudited condensed financial statements of Protective Life and
Annuity Insurance Company (the Company) have been prepared on the
basis of accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
disclosures required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 2001, are not necessarily indicative of the
results that may be expected for the year ending December 31, 2001. The year-end
condensed balance sheet data was derived from audited financial statements, but
does not include all disclosures required by accounting principles generally
accepted in the United States of America. For further information, refer to the
financial statements and notes thereto included in the Companys annual
report on Form 10-K for the year ended December 31, 2000.

All
outstanding shares of the Companys common stock are owned by Protective
Life Insurance Company (Protective), which is a wholly-owned
subsidiary of Protective Life Corporation (PLC). All outstanding
shares of the Companys preferred stock are owned by PLC.

### NOTE B - COMMITMENTS AND CONTINGENT LIABILITIES

Under
insurance guaranty fund laws, in most states, insurance companies doing business
therein can be assessed up to prescribed limits for policyholder losses incurred
by insolvent companies. The Company does not believe such assessments will be
materially different from amounts already provided for in the financial
statements. Most of these laws do provide, however, that an assessment may be
excused or deferred if it would threaten an insurers own financial
strength.

A
number of civil jury verdicts have been returned against insurers and other
providers of financial services involving the insurers sales practices,
alleged agent misconduct, failure to properly supervise agents, and other
matters. Increasingly, these lawsuits have resulted in the award of substantial
judgments against the insurer which are disproportionate to the actual damages,
including material amounts of punitive damages. In some states, including
Alabama (where the Company maintains its headquarters), juries have substantial
discretion in awarding punitive damages and non-economic compensatory damages
which creates the potential for unpredictable material adverse judgments in any
given lawsuit. In addition, in some class action and other lawsuits, companies
have made material settlement payments. The Company, like other financial
service companies, in the ordinary course of business, is involved in such
litigation, or alternatively, in arbitration. Although the outcome of any such
litigation or arbitration cannot be predicted, the Company believes that at the
present time there are no pending or threatened lawsuits that are reasonably
likely to have a material adverse effect on the financial position, results of
operations, or liquidity of the Company.

### NOTE C - OPERATING SEGMENTS

PLC,
through its subsidiaries, operates divisions each having a strategic focus which
can be grouped into three general categories: life insurance, specialty
insurance products, and retirement savings and investment products. The Company
is involved in the businesses of four of PLCs seven divisions. The
following table sets forth operating segment income and assets for the periods
shown. Adjustments represent the inclusion of unallocated realized investment
gains (losses) and the recognition of income tax expense. There are no asset
adjustments.

`OPERATING SEGMENT INCOME FOR THE
                                         THREE MONTHS ENDED MARCH 31, 2001
                                   ----------------------------------------------
                                                        DENTAL        FINANCIAL
                                    ACQUISITIONS       BENEFITS      INSTITUTIONS
                                    ------------       --------      ------------

Premiums and policy fees .......    $11,174,197       $ 449,505       $ 733,854
Reinsurance ceded ..............     (4,618,522)       (216,548)        (31,390)
                                    -----------       ---------        --------
  Net of reinsurance ceded .....      6,555,675         232,957         702,464
Net investment income ..........      7,264,965           1,457         158,683
Realized investment gains
Other income ...................            244
                                    -----------       ---------        --------
     Total revenues ............     13,820,884         234,414         861,147
                                    -----------       ---------        --------
Benefits and settlement expenses      7,105,267         225,940         451,827
Amortization of deferred policy
  acquisition costs ............      1,557,736                         157,825
Other operating expenses .......      2,000,478          32,720           9,534
                                    -----------       ---------        --------
     Total benefits and expenses     10,663,481         258,660         619,186
                                    -----------       ---------        --------
Income (loss) before income tax       3,157,403         (24,246)        241,961


                                                    CORPORATE
                                     INVESTMENT        AND
                                      PRODUCTS        OTHER         ADJUSTMENTS     TOTAL
                                     ----------     ----------      -----------  ------------
Premiums and policy fees .......       $ 31,310                                  $ 12,388,866
Reinsurance ceded ..............                                                   (4,866,460)
                                       --------                                  ------------
  Net of reinsurance ceded .....         31,310                                     7,522,406
Net investment income ..........        314,198        $314,768                     8,054,071
Realized investment gains ......                                    $ 664,444         664,444
Other income ...................          1,737                                         1,981
                                       --------        --------     ---------    ------------
     Total revenues ............        347,245         314,768       664,444      16,242,902
                                       --------        --------     ---------    ------------
Benefits and settlement expenses        475,463                                     8,258,497
Amortization of deferred policy
  acquisition costs ............         53,761                                     1,769,322
Other operating expenses .......         83,359         (78,178)                    2,047,913
                                       --------         -------     ---------    ------------
     Total benefits and expenses        612,583         (78,178)                   12,075,732
                                       --------         -------     ---------    ------------
Income (loss) before income tax        (265,338)        392,946       664,444       4,167,170
Income tax expense .............                                    1,437,674       1,437,674
Cumulative effect of change
  in accounting principle ......                                     (284,968)       (284,968)
                                                                                 ------------
     Net income ................                                                 $  2,444,528
                                                                                 ============`

`OPERATING SEGMENT INCOME FOR THE
                                           THREE MONTHS ENDED MARCH 31, 2000
                                     ---------------------------------------------
                                                          DENTAL        FINANCIAL
                                     ACQUISITIONS        BENEFITS      INSTITUTIONS
                                     ------------        --------      ------------
Premiums and policy fees .........    $11,785,305       $ 292,478        $677,657
Reinsurance ceded ................     (4,532,540)       (146,238)
                                      -----------       ---------        --------
  Net of reinsurance ceded .......      7,252,765         146,240         677,657
Net investment income ............      7,005,884           1,616         141,512
Realized investment gains (losses)
Other income                          -----------       ---------        --------
     Total revenues ..............     14,258,649         147,856         819,169
                                      -----------       ---------        --------
Benefits and settlement expenses .      7,010,523          79,306         720,279
Amortization of deferred policy
  acquisition costs ..............      1,411,832                         163,019
Other operating expenses .........      2,826,773          (1,980)         19,950
                                      -----------       ---------        --------
     Total benefits and expenses .     11,249,128          77,326         903,248
                                      -----------       ---------        --------
Income before income tax .........      3,009,521          70,530         (84,079)


                                                        CORPORATE
                                       INVESTMENT          AND
                                        PRODUCTS          OTHER        ADJUSTMENTS       TOTAL
                                       ----------       ----------     -----------    -----------
Premiums and policy fees .........     $   20,866                                     $12,776,306
Reinsurance ceded ................                                                     (4,678,778)
                                       ----------                                     -----------
  Net of reinsurance ceded .......         20,866                                       8,097,528
Net investment income ............        243,888       $ (26,537)                      7,366,363
Realized investment gains (losses)
Other income .....................          3,708                                           3,708
                                       ----------       ----------                    -----------
     Total revenues ..............        268,462         (26,537)                     15,467,599
                                       ----------       ----------                    -----------
Benefits and settlement expenses .        207,283                                       8,017,391
Amortization of deferred policy
  acquisition costs ..............                                                      1,574,851
Other operating expenses .........        376,289         134,095                       3,355,127
                                       ----------       ---------                     -----------
     Total benefits and expenses .        583,572         134,095                      12,947,369
                                       ----------       ---------                     -----------
Income (loss) before income tax ..       (315,110)       (160,632)                      2,520,230
Income tax expense ...............                                       $869,479         869,479
                                                                                      -----------
     Net income ..................                                                    $ 1,650,751
                                                                                      ===========`

`OPERATING SEGMENT ASSETS
                                                MARCH 31, 2001
                                    -------------------------------------------
                                                     DENTAL      FINANCIAL
                                    ACQUISITIONS    BENEFITS    INSTITUTIONS
                                    ------------   ----------   ------------
Investments and other assets ....   $469,576,677   $4,028,993   $11,433,993
Deferred policy acquisition costs    119,805,794                  1,566,591
                                    ------------   ----------   -----------
     Total assets ...............   $589,382,471   $4,028,993   $13,000,584
                                    ============   ==========   ===========

                                                   CORPORATE
                                     INVESTMENT       AND
                                      PRODUCTS       OTHER        TOTAL
                                    ------------  -----------  ------------
Investments and other assets ....   $ 29,215,197  $34,092,526  $548,347,386
Deferred policy acquisition costs      1,784,976                123,157,361
                                    ------------  -----------  ------------
     Total assets ...............   $ 31,000,173  $34,092,526  $671,504,747
                                    ============  ===========  ============

                                            OPERATING SEGMENT ASSETS
                                               DECEMBER 31, 2000
                                    ----------------------------------------
                                                     DENTAL     FINANCIAL
                                    ACQUISITIONS    BENEFITS   INSTITUTIONS
                                    ------------   ----------  ------------
Investments and other assets ....   $453,999,198   $4,034,632   $11,462,251
Deferred policy acquisition costs    124,984,368                  1,596,654
                                    ------------   ----------   -----------
     Total assets ...............   $578,983,566   $4,034,632   $13,058,905
                                    ============   ==========   ===========

                                                   CORPORATE
                                     INVESTMENT       AND
                                      PRODUCTS       OTHER        TOTAL
                                    ------------  ----------- ------------
Investments and other assets ....   $ 25,799,102  $29,376,162 $524,671,345
Deferred policy acquisition costs      1,647,338               128,228,360
                                    ------------  ----------- ------------
     Total assets ...............   $ 27,446,440  $29,376,162 $652,899,705
                                    ============  =========== ============`

### NOTE D - STATUTORY REPORTING PRACTICES

Financial
statements prepared in conformity with accounting principles generally accepted
in the United States of America (i.e., GAAP) differ in some respects from the
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. At March 31, 2001, and for the three months then ended, the Company
had share-owners equity and net income prepared in conformity with
statutory reporting practices of $36.6 million and $3.3 million, respectively.

The
National Association of Insurance Commissioners (NAIC) has adopted
the Codification of Statutory Accounting Principles (Codification).
Codification changes current statutory accounting rules in several areas and was
effective January 1, 2001. The adoption of Codification resulted in an increase
in the Companys statutory capital of approximately $3 million on January
1, 2001.

### NOTE E - COMPREHENSIVE INCOME

The
following table sets forth the Companys comprehensive income for the
periods shown:

`THREE MONTHS ENDED
                                                               MARCH 31
                                                      --------------------------
                                                          2001            2000
                                                          ----            ----
Net income ........................................   $ 2,444,528    $ 1,650,751
Other comprehensive income:
  Increase in net unrealized gains on
    investments (net of income tax:
    2001 - $2,048,365; 2000 - $2,541,452) .........     3,804,107      4,719,840
  Reclassification adjustment for amounts
    included in net income (net of income tax:
    2001 - $(232,556)) ............................      (431,889)
  Transition adjustment on derivative
    financial instruments (net of income tax:
    2001 - $153,444) ..............................       284,968
                                                      -----------    -----------
Comprehensive income ..............................   $ 6,101,714    $ 6,370,591
                                                      ===========    ===========`

### NOTE F - RECLASSIFICATIONS

Certain
reclassifications have been made in the previously reported financial statements
and accompanying notes to make the prior year amounts comparable to those of the
current year. Such reclassifications had no effect on previously reported net
income, total assets, or share-owners equity.

### NOTE G - RECENTLY ISSUED ACCOUNTING STANDARDS

On
January 1, 2001, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133 (as amended by SFAS Nos. 137 and 138)
requires the Company to record derivative financial instruments, including
certain derivative instruments embedded in other contracts, on its balance sheet
and to carry such derivatives at fair value. Derivatives that are not designated
to be part of a qualifying hedging relationship must be adjusted to fair value
each period through net income. If the derivative is a hedge, its change in fair
value is either offset against the change in fair value of the hedged item
through net income or recorded in share-owners equity until the hedged
item is recognized in net income. The fair value of derivatives increases or
decreases as interest rates and general economic conditions change.

The
Company occasionally may purchase a financial instrument that contains a derivative
instrument that is embedded in the financial instrument. If the
economic characteristics of the embedded financial instrument are not clearly
and closely related to the host contract, it would meet the definition of a
derivative instrument. Any embedded derivative is then separated from the host
contract and is carried at fair value on the Companys balance sheet.

The
adoption of SFAS No. 133 on January 1, 2001, resulted in a cumulative charge to
net income of approximately $0.3 million (net of an income tax benefit of $0.2
million) and is reflected in the accompanying statements of income as the
cumulative effect of a change in accounting principle. The adoption of SFAS No.
133 also resulted in a cumulative increase to other comprehensive income of
approximately $0.3 million (net of $0.2 million of income tax) in the three
months ended March 31, 2001. Prospectively, the adoption may introduce
volatility into the Companys reported net income and other comprehensive
income depending on future market conditions and the Companys hedging
activities.

In
September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, a replacement
of SFAS No. 125". SFAS No. 140 revises the standards for accounting for
securitizations and other transfers of financial assets. This statement is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after March 31, 2001.

## ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF THE
                   RESULTS OF OPERATIONS

Protective
Life and Annuity Insurance Company (the Company), a stock life
insurance company, was founded in 1978. Since 1983, all outstanding shares of
the Companys common stock have been owned by Protective Life Insurance
Company (Protective), which is a wholly-owned subsidiary of
Protective Life Corporation (PLC), an insurance holding company
whose common stock is traded on the New York Stock Exchange under the symbol
PL. All outstanding shares of the Companys preferred stock are
owned by PLC. The Company is authorized to transact insurance business as an
insurance company or a reinsurance company in 49 states, including New York.

In
accordance with General Instruction H(2)(a), the Company includes the following
analysis with the reduced disclosure format.

PLC,
through its subsidiaries, provides financial services through the production,
distribution, and administration of insurance and investment products. PLC,
through its subsidiaries, operates seven divisions each having a strategic focus
which can be grouped into three general categories: life insurance, specialty
insurance products, and retirement savings and investment products. The life
insurance category includes the Individual Life, West Coast, and Acquisitions
Divisions. The specialty insurance products category includes the Dental
Benefits and Financial Institutions Divisions. The retirement savings and
investment products category includes the Stable Value Products and Investment
Products Divisions.

The
Company, since it is licensed in the State of New York, is the entity through
which PLC markets, distributes, and services insurance and annuity products in
New York. As of March 31, 2001, the Company was involved in the businesses of
four of PLCs seven divisions: the Acquisition Division, the Dental
Benefits Division, the Financial Institutions Division and the Investment
Products Division. The Company has an additional business segment which is
described herein as Corporate and Other.

Protective
has entered into an intercompany guaranty agreement, enforceable by the Company
or its successors, whereby Protective has guaranteed the Companys payment
of claims made by the holders of Company policies according to the terms of such
policies. The guarantee will remain in force until the earlier of (a) when the
Company achieves a claims-paying rating equal to or better than Protective
without the benefit of any intercompany guaranty agreement or (b) 90 days after
the guaranty agreement is revoked by written instrument; provided, however, even
after any revocation or termination by such notice, the guarantee shall remain
effective as to policies issued during the existence of the guaranty agreement.

This
report includes forward-looking statements which express
expectations of future events and/or results. The words believe,
expect, anticipate and similar expressions identify
forward-looking statements which are based on future expectations rather than on
historical facts and are subject to a number of risks and uncertainties, and the
Company cannot give assurance that such statements will prove to be correct.
Please refer to Exhibit 99 herein for more information about factors which could
affect future results.

### Revenues

The
following table sets forth revenues by source for the period shown, and the
percentage change from the prior period:

`Three Months                Percentage
                                       Ended                     Increase
                                      March 31                  (Decrease)
                            --------------------------          ----------
                                 2001         2000
                                 ----         ----
Premiums and policy fees    $ 7,522,406   $ 8,097,528              (7.1) %
Net investment income ...     8,054,071     7,366,363               9.3
Realized investment gains       664,444                              -
Other ...................         1,981         3,708                -
                            -----------   -----------
                            $16,242,902   $15,467,599
                            ===========   ===========`

Premiums
and policy fees, net of reinsurance (premiums and policy fees)
decreased $0.6 million or 7.1% in the first three months of 2001 over the first
three months of 2000. Premiums and policy fees in the Acquisitions Division are
expected to decline with time unless new acquisitions are made. No acquisitions
were made in this Division in 2000 or the first three months of 2001, therefore
decreases in older acquired policies resulted in a decrease of $0.7 million in
the first three months of 2001 as compared with the first three months of 2000.
Premiums and policy fees related to the Dental Benefits, Financial Institutions
and Investment Products Divisions remained relatively unchanged in the first
three months of 2001 as compared to the same period in 2000.

Net
investment income in the first three months of 2001 increased $0.7 million or
9.3% as compared to the corresponding period of the preceding year primarily due
to increases in the average amount of invested assets. The Company could
experience significant realized investment losses were it to make adjustments to
its existing fixed maturity portfolio.

The
Company generally purchases its investments with the intent to hold to maturity
by purchasing investments that match future cash-flow needs. However, the
Company may sell any of its investments to maintain approximate matching of
assets and liabilities. Accordingly, the Company has classified its fixed
maturities and certain other securities as available for sale. The
sales of investments that have occurred generally result from portfolio
management decisions to maintain proper matching of assets and liabilities.

Realized
investment gains were approximately $0.7 million in the first three months of
2001. There were no realized investment gains (losses) in the first three months
of 2000.

The
Company reported an insignificant amount of other income in the first three
months of 2001 and 2000.

### Income Before Income Tax

The
following table sets forth operating income or loss and income or loss before
income tax by business segment for the periods shown:

## Operating Income (Loss) and Income (Loss) Before Income Tax
                                             Three Months Ended March 31

`2001            2000
                                                   ----            ----
Operating Income (Loss)(1)
      Acquisitions ........................    $3,157,403     $3,009,521
      Dental Benefits .....................       (24,246)        70,530
      Financial Institutions ..............       241,961        (84,079)
      Investment Products .................      (265,338)      (315,110)
      Corporate and Other .................       392,946       (160,632)
                                               ----------     ----------
              Total operating income ......     3,502,726      2,520,230
                                               ----------     ----------
Realized Investment Gains
      Unallocated Investment Gains ........       664,444
                                               ----------
              Total net ...................       664,444
                                               ----------
Income (Loss) Before Income Tax
      Acquisitions ........................     3,157,403      3,009,521
      Dental Benefits .....................       (24,246)        70,530
      Financial Institutions ..............       241,961        (84,079)
      Investment Products .................      (265,338)      (315,110)
      Corporate and Other .................       392,946       (160,632)
      Unallocated Realized Investment Gains       664,444
                                               ----------     ----------
              Total income before tax .....    $4,167,170     $2,520,230
                                               ==========     ==========

(1)  Income (loss) before tax excluding realized investment gains and losses.`

Pretax
operating income from the Acquisitions Division was $3.2 million in the first
three months of 2001 and $3.0 million in the first three months of 2000.
Earnings from the Acquisitions Division are expected to decline over time (due
to the lapsing of policies resulting from deaths of insureds or terminations of
coverage) unless new acquisitions are made. The increase in investment income on
invested assets allocated to the Division and the decrease in operating expenses
offset the decrease in premiums and policy fees.

The
Dental Benefits Division had an insignificant pretax loss in the first three
months of 2001 and pretax earnings of $0.1 million in the first three months of
2000.

The
Financial Institutions Divisions pretax operating income was $0.2 million
for the first three months of 2001 as compared to a $0.1 million loss in the
first three months of 2000. The increase in operating income was primarily due
to lower operating expenses.

The
Investment Products Division began marketing certain annuity products in the
state of New York in the latter part of 1998. The Division had pretax operating
losses of $0.3 million in both the first three months of 2001 and 2000.

The
Corporate and Other segment consists of net investment income and expenses not
identified with the preceding business segments. Pretax operating income from
this segment was $0.4 million in the first three months of 2001 as compared to a
$0.2 million loss in the first three months of 2000 primarily due to increased
investment income.

### Income Taxes

The following table sets forth the effective tax rates for the periods shown:

`THREE MONTHS
                 ENDED                           ESTIMATED EFFECTIVE
                MARCH 31                          INCOME TAX RATES
              ------------                       -------------------
                 2000                                    34.5
                 2001                                    34.5`

The effective  income tax rate for the full year of 2000 was 34.5%.  Managements  estimate of the  effective  income tax rate
for 2001 is 34.5%.

### Net Income

The following table sets forth net income for the periods shown, and the percentage change from the prior period:

`NET INCOME
                                 ---------------------------------
       THREE MONTHS                                     PERCENTAGE
          ENDED                                          INCREASE
         MARCH 31                   TOTAL               (DECREASE)
       ------------              ----------             ----------
          2000                   $1,650,751               (24.4)
          2001                    2,444,528                48.1`

Compared
to the same period in 2000, net income in the first three months of 2001
increased $0.8 million, reflecting increases in the Acquisitions, Financial
Institutions, Investment Products Divisions and the Corporate and Other segment,
which was partially offset by a decrease in the Dental Benefits Division and a
charge to earnings related to the cumulative effect of a change in accounting
principles.

## ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                           MARKET RISK

There have been no material changes from the disclosure in the Company's 2000 Annual Report  on Form 10-K for the year ended
December 31, 2000.

## PART II

Item 6.                Exhibits and Reports on Form 8-K

(a)          Exhibit 99 - Safe Harbor for Forward-Looking Statements

## SIGNATURE

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

|      |              | Protective Life and Annuity Insurance Company
|----- | ------------ | ---------------------------------------------
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|Date: | May 15, 2001 | /s/ Jerry W. Defoor                          
|      |              | Jerry W. DeFoor                              
|      |              | Vice President and Controller                
|      |              | and Chief Accounting Officer                 
|      |              | (Duly authrorized officer)