|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  **FORM                  10-Q**____________________                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| UNITED                STATESSECURITIES                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 **June                30, 2005**                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|  OR                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|  [                ] TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d)OF                THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                                                                                                                                                |
|  For                the transition period from __ to __                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|  Commission                File Number **333-42425**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|  **Protective                Life and Annuity Insurance Company**                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (Exact                name of registrant as specified in its charter)                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|  **Alabama**(State                or other jurisdiction ofincorporation                or organization)                                                                                                                                                                                                                                                                                                                                                                                                                                       |  **63-0761690**(IRS                Employer Identification Number) |
|  **2801                Highway 280 South****Birmingham,                Alabama 35223**(Address                of principal executive offices and zip code)                                                                                                                                                                                                                                                                                                                                                                                    |
|  **(205)                268-1000**(Registrant's                telephone number, including area code)                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|  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 (or for                such                shorter period that the registrant was required to file such reports),                and                (2) has been subject to such filing requirements for the past                90                days. Yes [X] No [ ] |
|  Indicate                by check mark whether the registrant is an accelerated filer (as                defined                in Rule 12b-2 of the Exchange Act). Yes [ ]                No [X]                                                                                                                                                                                                                                                                                                                              |
|  Number                of shares of Common Stock, $10.00 par value, outstanding as                of                August 15, 2004: 250,000 shares.                                                                                                                                                                                                                                                                                                                                                                                |
|  **The                registrant meets the conditions set forth in General                Instruction H(1)(a) and (b) of Form 10-Q and is therefore                filing                this form with the reduced disclosure format pursuant to General                Instruction H(2).**                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

| **PROTECTIVE                LIFE AND ANNUITY INSURANCE COMPANY**Quarterly                Report on Form 10-QFor                Quarter Ended June 30, 2005 INDEX |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                            |  *Page* |
| **Part                I. Financial Information:**                                                                                                                          |   |
| Item                1. Financial                Statements (unaudited):                                                                                                    |   |
| Report                of Independent Registered Public Accounting Firm                                                                                                          | 2 |
|  Condensed                Statements of Income for the Three                                                                                                               |   |
| and                Six Months ended June 30, 2005 and 2004                                                                                                                      | 3 |
|  Condensed                Balance Sheets as of June 30, 2005                                                                                                               |   |
| and                December 31, 2004                                                                                                                                            | 4 |
|  Condensed                Statements of Cash Flows for the                                                                                                                 |   |
| Six                Months ended June 30, 2005 and 2004                                                                                                                          | 5 |
|  Notes                to Condensed Financial Statements                                                                                                                    |  6 |
|                                                                                                                                                                            |   |
| Item                2. Management’s                Narrative Analysis of the Results of Operations                                                                   | 11 |
| Item                4. Controls                and Procedures                                                                                                              | 14 |
|                                                                                                                                                                            |   |
| **Part                II. Other Information:**                                                                                                                                  |   |
| Item                6. Exhibits                                                                                                                                            | 15 |
|                                                                                                                                                                            |   |
| Signature                                                                                                                                                                  | 16 |
|                                                                                                                                                                            |   |
|                                                                                                                                                                            |   |
|                                                                                                                                                                            |   |

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

----

**PROTECTIVE      LIFE AND ANNUITY INSURANCE COMPANY**

**CONDENSED      STATEMENTS OF INCOME**

| **Three                Months Ended** |   | **Six                Months Ended** |     |
|---------------------------------------|--------|-------------------------------------|----------|
| **June                30**            |   | **June                30**          |     |
| **2005**                              |   |                                | **2004** |   |   | **2005** |   |   | **2004** |   |

| **REVENUES**                                                                                                                                                                                                                                                         |   |   |       |   |   |       |   |   |        |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|--------|-------------|
| Premiums                and policy fees                                                                                                                                                                                                                              |   | $      | 13,777,782 |   | $      | 15,375,419 |   | $      | 28,409,584  |   | $ | 31,924,986 |   |
| Reinsurance                ceded                                                                                                                                                                                                                                     |   |   | (7,115,827 | )      |   | (8,451,326 | )      |   | (15,869,947 | ) |   | (18,802,284 | ) |
| Net                of reinsurance ceded                                                                                                                                                                                                                              |   |   | 6,661,955  |   |   | 6,924,093  |   |   | 12,539,637  |   |   | 13,122,702 |   |
| Net                investment income                                                                                                                                                                                                                                 |   |   | 10,004,674 |   |   | 10,415,975 |   |   | 19,879,313  |   |   | 20,349,905 |   |
| Realized                investment gains (losses)                                                                                                                                                                                                                    |   |   | 16,055     |   |   | (189,999   | )      |   | (335,348    | ) |   | 50,459 |   |
| Other                income                                                                                                                                                                                                                                          |   |   | 17,114     |   |   | 7,569      |   |   | 16,216      |   |   | 20,623 |   |
| Total                revenues                                                                                                                                                                                                                                        |   |   | 16,699,798 |   |   | 17,157,638 |   |   | 32,099,818  |   |   | 33,543,689 |   |
| **BENEFITS                AND EXPENSES**Benefits                and settlement expenses, net ofreinsurance                ceded:(three                months: 2005 - $5,917,691; 2004 - $6,162,188six                months: 2005 - $12,097,919; 2004 - $12,747,244) |   |   | 8,993,011  |   |   | 8,685,305  |   |   | 15,637,584  |   |   | 16,042,303 |   |
| Amortization                of deferred policy acquisition costs                                                                                                                                                                                                     |   |   | 2,265,910  |   |   | 1,669,371  |   |   | 4,341,976   |   |   | 3,373,214 |   |
| Other                operating expenses, net of reinsurance ceded:(three                months: 2005 - $345,599; 2004 - $(121,227)six                months: 2005 - $720,244; 2004 - $(141,505))                                                                     |   |   | 1,676,037  |   |   | 1,905,617  |   |   | 3,370,172   |   |   | 4,192,243 |   |
| Total                benefits and expenses                                                                                                                                                                                                                           |   |   | 12,934,958 |   |   | 12,260,293 |   |   | 23,349,732  |   |   | 23,607,760 |   |
| **INCOME                BEFORE INCOME TAX**                                                                                                                                                                                                                          |   |   | 3,764,840  |   |   | 4,897,345  |   |   | 8,750,086   |   |   | 9,935,929 |   |
| Income                tax expense                                                                                                                                                                                                                                    |   |   | 1,350,148  |   |   | 1,709,096  |   |   | 3,129,257   |   |   | 3,467,590 |   |
| **NET                INCOME**                                                                                                                                                                                                                                        |   | $      | 2,414,692  |   | $      | 3,188,249  |   | $      | 5,620,829   |   | $ | 6,468,339 |   |

*See      notes to condensed financial statements*

----

**PROTECTIVE      LIFE AND ANNUITY INSURANCE COMPANY**

**CONDENSED      BALANCE SHEETS**

| **                                                                                                                                                                                                              June 30**                                                                                                                                                                                                                |   | **December                31** |     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|----------|
| **                                                                                                                                                                                                                                                 2005** |   |                           | **2004** |   |

|  **ASSETS**Investments:                   Fixed maturities, at market                  (amortized cost: 2005 - $581,655,630; 2004 - $578,812,588)                              |   | $      | 643,770,663 |   | $      | 625,095,231 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|-------------|--------|
| Equity                securities, at market (cost: 2005 - $4,312,500)                                                                                                                                        |   |   | 4,365,000   |   |   | 0           |   |
| Mortgage                loans on real estate                                                                                                                                                                 |   |   | 1,060,847   |   |   | 1,177,521   |   |
| Policy                loans                                                                                                                                                                                  |   |   | 51,205,997  |   |   | 52,994,451  |   |
| Short-term                investments                                                                                                                                                                        |   |   | 22          |   |   | 10          |   |
| Total                investments                                                                                                                                                                             |   |   | 700,402,529 |   |   | 679,267,213 |   |
| Cash                                                                                                                                                                                                         |   |   | 4,326,054   |   |   | 10,337,198  |   |
| Accrued                investment income                                                                                                                                                                     |   |   | 10,881,174  |   |   | 10,825,632  |   |
| Accounts                and premiums receivable, net                                                                                                                                                         |   |   | 331,826     |   |   | 396,654     |   |
| Reinsurance                receivables                                                                                                                                                                       |   |   | 35,250,565  |   |   | 43,363,998  |   |
| Deferred                policy acquisition costs                                                                                                                                                             |   |   | 87,499,656  |   |   | 93,107,390  |   |
| Other                assets                                                                                                                                                                                  |   |   | 12,173      |   |   | 13,027      |   |
| Assets                related to separate accountsVariable                Annuity                                                                                                                            |   |   | 10,085,650  |   |   | 10,629,080  |   |
| Total                assets                                                                                                                                                                                  |   | $      | 848,789,627 |   | $      | 847,940,192 |   |
| **LIABILITIES**Policy                liabilities and accruals:Future                policy benefits and claims                                                                                               |   | $      | 482,444,441 |   | $      | 486,995,573 |   |
| Unearned                premiums                                                                                                                                                                             |   |   | 5,834,780   |   |   | 7,513,955   |   |
| Total                policy liabilities and accruals                                                                                                                                                         |   |   | 488,279,221 |   |   | 494,509,528 |   |
| Annuity                account balances                                                                                                                                                                      |   |   | 58,597,221  |   |   | 59,989,579  |   |
| Other                policyholders' funds                                                                                                                                                                    |   |   | 2,698,917   |   |   | 2,765,727   |   |
| Funds                held-coinsurance                                                                                                                                                                        |   |   | 18,229,008  |   |   | 25,713,359  |   |
| Other                liabilities                                                                                                                                                                             |   |   | 6,087,966   |   |   | 8,736,280   |   |
| Accrued                income taxes                                                                                                                                                                          |   |   | 867,540     |   |   | (529,937    | )      |
| Deferred                income taxes                                                                                                                                                                         |   |   | 45,671,403  |   |   | 41,614,693  |   |
| Liabilities                related to separate accountsVariable                Annuity                                                                                                                       |   |   | 10,085,650  |   |   | 10,629,080  |   |
| Total                liabilities                                                                                                                                                                             |   |   | 630,516,926 |   |   | 643,428,309 |   |
| **COMMITMENTS                AND CONTINGENT LIABILITIES - NOTE 2****SHARE-OWNERS'                EQUITY**Preferred                Stock, $1.00 par value, shares authorized and issued:                2,000 |   |   | 2,000       |   |   | 2,000       |   |
| Common                Stock, $10.00 par value,shares                authorized: 500,000shares                issued and outstanding: 250,000                                                                 |   |   | 2,500,000   |   |   | 2,500,000   |   |
| Additional                paid-in capital                                                                                                                                                                    |   |   | 171,386,324 |   |   | 171,386,324 |   |
| Retained                earnings                                                                                                                                                                             |   |   | 13,283,211  |   |   | 7,662,382   |   |
| Accumulated                other comprehensive income:Net                unrealized gains on investments, net of income tax:(2005                - $16,746,782; 2004 - $12,363,711)                          |   |   | 31,101,166  |   |   | 22,961,177  |   |
|                                                                                                                                                                                                         |   |   | 218,272,701 |   |   | 204,511,883 |   |
|                                                                                                                                                                                                         |   | $      | 848,789,627 |   | $      | 847,940,192 |   |

*See      notes to condensed financial statements*

----

**PROTECTIVE      LIFE AND ANNUITY INSURANCE COMPANY**

**CONDENSED      STATEMENTS OF CASH FLOWS **

| **                                                                                                                                                                                                                                                        Six Months Ended**                                                 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **                                                                                                                                                                                                                                                        June 30**                                                          |   |
| **                                                                                                                                                                                                                                                                  2005** |   |   | **2004** |   |

| **CASH                FLOWS FROM OPERATING ACTIVITIES**Net                income                                                                                                                      |   | $      | 5,620,829   |   | $      | 6,468,339   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|-------------|--------|
| Adjustments                to reconcile net income to net cash used in operating                activities:Realized                investment (gains) losses                                          |   |   | 335,348     |   |   | (50,459     | )      |
| Amortization                of deferred policy acquisition costs                                                                                                                                      |   |   | 4,341,976   |   |   | 3,373,214   |   |
| Capitalization                of deferred policy acquisition costs                                                                                                                                    |   |   | (2,207,067  | )      |   | (1,778,133  | )      |
| Deferred                income tax                                                                                                                                                                    |   |   | (262,905    | )      |   | (191,513    | )      |
| Accrued                income tax                                                                                                                                                                     |   |   | 1,397,477   |   |   | 1,159,103   |   |
| Interest                credited to universal life and investment products                                                                                                                            |   |   | 10,639,647  |   |   | 10,374,674  |   |
| Policy                fees assessed on universal life and investment products                                                                                                                         |   |   | (16,338,679 | )      |   | (16,771,184 | )      |
| Change                in accrued investment income and other receivables                                                                                                                              |   |   | 8,122,719   |   |   | 15,134,446  |   |
| Change                in policy liabilities and other policyholders' funds of                traditionallife                and health products                                                       |   |   | (5,989,442  | )      |   | (12,813,185 | )      |
| Change                in funds held-coinsurance                                                                                                                                                       |   |   | (7,484,351  | )      |   | (12,985,855 | )      |
| Change                in other liabilities                                                                                                                                                            |   |   | (2,648,314  | )      |   | (7,710,091  | )      |
| Other,                net                                                                                                                                                                             |   |   | 46,347      |   |   | 2,748       |   |
| Net                cash used in operating activities                                                                                                                                                  |   |   | (4,426,415  | )      |   | (15,787,896 | )      |
| **CASH                FLOWS FROM INVESTING ACTIVITIES**Investments                available for sale, net of short-term investments:Maturities                and principal reductions of investments |   |   | 15,972,815  |   |   | 21,559,858  |   |
| Sale                of investments                                                                                                                                                                    |   |   | 10,768,023  |   |   | 8,208,363   |   |
| Cost                of investments acquired                                                                                                                                                           |   |   | (34,229,682 | )      |   | (24,652,394 | )      |
| Change                in mortgage loans, net                                                                                                                                                          |   |   | 116,674     |   |   | 104,453     |   |
| Change                in policy loans, net                                                                                                                                                            |   |   | 1,788,454   |   |   | 806,918     |   |
| Change                in short-term investments, net                                                                                                                                                  |   |   | (12         | )      |   | (4,163      | )      |
| Net                cash (used in) provided by investing activities                                                                                                                                    |   |   | (5,583,728  | )      |   | 6,023,035   |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES**Investment                product deposits and change in universal life deposits                                                               |   |   | 12,232,844  |   |   | 12,378,260  |   |
| Investment                product withdrawals                                                                                                                                                         |   |   | (8,233,845  | )      |   | (5,697,213  | )      |
| Net                cash provided by financing activities                                                                                                                                              |   |   | 3,998,999   |   |   | 6,681,047   |   |
| **CHANGE                IN CASH**                                                                                                                                                                     |   |   | (6,011,144  | )      |   | (3,083,814  | )      |
| **CASH                AT BEGINNING OF PERIOD**                                                                                                                                                        |   |   | 10,337,198  |   |   | 13,052,781  |   |
| **CASH                AT END OF PERIOD**                                                                                                                                                              |   | $      | 4,326,054   |   | $      | 9,968,967   |   |

*See      notes to condensed financial statements*

----

**PROTECTIVE      LIFE AND ANNUITY INSURANCE COMPANY**

**NOTES      TO CONDENSED FINANCIAL STATEMENTS **

| ·   | The                Life Marketing segment markets level premium term and term-like insurance,                universal life, variable universal life and “bank owned life                insurance” (“BOLI”) products on a national basis primarily through                networks of independent insurance agents and brokers, stockbrokers,                and in                the BOLI market. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Acquisitions segment focuses on acquiring, converting, and servicing                policies acquired from other companies. The segment's primary focus                is on                life insurance policies sold to                individuals. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Annuities segment manufactures, sells, and supports fixed annuity                products. These products are primarily sold through stockbrokers,                but are                also sold through financial institutions and independent insurance                agents                and brokers. The Annuities segment also supports variable annuity                products                sold in prior periods. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Asset Protection segment markets extended service contracts and credit                life and disability insurance to protect consumers’ investments in                automobiles and watercraft. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                               |   | **Three                Months Ended****June                30** |       | **Six                Months Ended****June                30** |   |
|------------------------------------|--------|-----------------------------------------------------------------|------------|---------------------------------------------------------------|--------|
|                               |   | **2005**                                                        |       | **2004**                                                      |   | **2005** |   | **2004** |   |
| **Revenues**                       |   |                                                            |       |                                                          |   |   |   |   |   |
| Life                Marketing      |   | $                                                               | 210,071    |                                                          | $      | 66,034 |   | $ | 542,078 |   | $ | 193,003 |   |
| Acquisitions                       |   |                                                            | 12,810,555 |                                                          |   | 13,156,789 |   |   | 24,733,384 |   |   | 25,565,175 |   |
| Annuities                          |   |                                                            | 1,071,582  |                                                          |   | 1,071,240 |   |   | 2,144,493 |   |   | 2,318,619 |   |
| Asset                Protection    |   |                                                            | 846,309    |                                                          |   | 940,896 |   |   | 1,726,712 |   |   | 1,936,750 |   |
| Corporate                and Other |   |                                                            | 1,761,281  |                                                          |   | 1,922,679 |   |   | 2,953,151 |   |   | 3,530,142 |   |
| Total                revenues      |   | $                                                               | 16,699,798 |                                                          | $      | 17,157,638 |   | $ | 32,099,818 |   | $ | 33,543,689 |   |

|                                                        |   | **Three                Months Ended****June                30** |      | **Six                Months Ended****June                30** |   |
|-------------------------------------------------------------|--------|-----------------------------------------------------------------|-----------|---------------------------------------------------------------|--------|
|                                                        |   | **2005**                                                        |      | **2004**                                                      |   | **2005** |   | **2004** |   |
| **Segment                Operating Income**                 |   |                                                            |      |                                                          |   |   |   |   |   |
| Life                Marketing                               |   | $                                                               | 309,081   |                                                          | $      | 158,076 |   | $ | 594,498 |   | $ | 391,464 |   |
| Acquisitions                                                |   |                                                            | 1,857,454 |                                                          |   | 2,797,656 |   |   | 4,844,039 |   |   | 5,585,066 |   |
| Annuities                                                   |   |                                                            | (429,105  | )                                                             |   | (59,466 | ) |   | (368,194 | ) |   | (52,842 | ) |
| Asset                Protection                             |   |                                                            | 267,929   |                                                          |   | 108,609 |   |   | 732,961 |   |   | 333,672 |   |
| Corporate                and Other                          |   |                                                            | 1,743,426 |                                                          |   | 2,082,469 |   |   | 3,282,130 |   |   | 3,628,110 |   |
| Total                segment operating income               |   |                                                            | 3,748,785 |                                                          |   | 5,087,344 |   |   | 9,085,434 |   |   | 9,885,470 |   |
|                                                        |   |                                                            |      |                                                          |   |   |   |   |   |   |   |   |   |
| Add                back: realized investment gains (losses) |   |                                                            | 16,055    |                                                          |   | (189,999 | ) |   | (335,348 | ) |   | 50,459 |   |
| Income                before income tax                     |   |                                                            | 3,764,840 |                                                          |   | 4,897,345 |   |   | 8,750,086 |   |   | 9,935,929 |   |
| Income                tax expense                           |   |                                                            | 1,350,148 |                                                          |   | 1,709,096 |   |   | 3,129,257 |   |   | 3,467,590 |   |
| Net                income                                   |   | $                                                               | 2,414,692 |                                                          | $      | 3,188,249 |   | $ | 5,620,829 |   | $ | 6,468,339 |   |

----

|                                                                                                                                                 **Operating              Segment Assets****                                                                      June 30, 2005** |   |                  |       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | **Life****Marketing** |       | **Acquisitions** |   | **Annuities** |   |
| Investments                and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                     | 8,614,384  |   | $ | 566,988,151 |   | $ | 58,127,187 |   |
| Deferred                policy acquisition costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                  | 4,906,587  |   |   | 79,840,571 |   |   | 1,610,038 |   |
| Total                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                     | 13,520,971 |   | $ | 646,828,722 |   | $ | 59,737,225 |   |

|                                             |   | **Asset****Protection** |       | **Corporate****and                Other** |   | **Adjustments** |   | **Total****Consolidated** |    |
|--------------------------------------------------|--------|-------------------------|------------|-------------------------------------------|--------|-----------------|--------|---------------------------|---------|
|                                             |   |                    |       |                                      |   |            |   |                      |    |
| Investments                and other assets      |   | $                       | 17,232,699 |                                      | $      | 110,202,873     |   | $                         | 124,677 |   | $ | 761,289,971 |   |
| Deferred                policy acquisition costs |   |                    | 1,142,460  |                                      |   | 0               |   |                      | 0       |   |   | 87,499,656 |   |
| Total                assets                      |   | $                       | 18,375,159 |                                      | $      | 110,202,873     |   | $                         | 124,677 |   | $ | 848,789,627 |   |

|                                                                                                                                               **Operating              Segment Assets****                                                                                                     December 31, 2004** |   |                  |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | **Life****Marketing** |       | **Acquisitions** |   | **Annuities** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                  |       |   |   |   |   |
| Investments                and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $                     | 8,440,192  |   | $ | 558,422,751 |   | $ | 59,057,983 |   |
| Deferred                policy acquisition costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                  | 4,094,472  |   |   | 85,663,856 |   |   | 2,090,306 |   |
| Total                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $                     | 12,534,664 |   | $ | 644,086,607 |   | $ | 61,148,289 |   |

|                                             |   | **Asset****Protection** |       | **Corporate****and                Other** |   | **Adjustments** |   | **Total****Consolidated** |    |
|--------------------------------------------------|--------|-------------------------|------------|-------------------------------------------|--------|-----------------|--------|---------------------------|---------|
|                                             |   |                    |       |                                      |   |            |   |                      |    |
| Investments                and other assets      |   | $                       | 23,408,930 |                                      | $      | 105,382,771     |   | $                         | 120,175 |   | $ | 754,832,802 |   |
| Deferred                policy acquisition costs |   |                    | 1,258,756  |                                      |   | 0               |   |                      | 0       |   |   | 93,107,390 |   |
| Total                assets                      |   | $                       | 24,667,686 |                                      | $      | 105,382,771     |   | $                         | 120,175 |   | $ | 847,940,192 |   |

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|                                                                                                                                                                                                                                        |   | **Three                Months Ended****June                30** |       | **Six                Months Ended****June                30** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|------------|---------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                        |   | **2005**                                                        |       | **2004**                                                      |   | **2005** |   | **2004** |   |
|                                                                                                                                                                                                                                        |   |                                                            |       |                                                          |   |   |   |   |   |
| Net                Income                                                                                                                                                                                                                   |   | $                                                               | 2,414,692  |                                                          | $      | 3,188,249 |   | $ | 5,620,829 |   | $ | 6,468,339 |   |
| Change                in net unrealized gains/losseson                investments, net of income tax:(three                months: 2005 - $6,034,645; 2004 - $(8,799,392)six                months: 2005 - $4,265,699; 2004 - $(4,405,462)) |   |                                                            | 11,207,197 |                                                          |   | (16,341,728 | ) |   | 7,922,013 |   |   | (8,181,572 | ) |
| Reclassification                adjustment for amountsincluded                in net income, net of income tax:(three                months: 2005 - $(5,619); 2004 - $66,500six                months: 2005 - $117,372; 2004 - $(17,661))   |   |                                                            | (10,436    | )                                                             |   | 123,499 |   |   | 217,976 |   |   | (32,798 | ) |
| Comprehensive                income (loss)                                                                                                                                                                                                  |   | $                                                               | 13,611,453 |                                                          | $      | (13,029,980 | ) | $ | 13,760,818 |   | $ | (1,746,031 | ) |

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

**INTRODUCTION**

----

**FORWARD-LOOKING      STATEMENTS - CAUTIONARY LANGUAGE**

**Revenues**

|                                                              |   | **Three                Months Ended****June                30** |       | **Six                Months Ended****June                30** |   |
|-------------------------------------------------------------------|--------|-----------------------------------------------------------------|------------|---------------------------------------------------------------|--------|
|                                                              |   | **2005**                                                        |       | **2004**                                                      |   | **2005** |   | **2004** |   |
|                                                              |   |                                                            |       |                                                          |   |   |   |   |   |
| Premiums                and policy fees, net of reinsurance ceded |   | $                                                               | 6,661,955  |                                                          | $      | 6,924,093 |   | $ | 12,539,637 |   | $ | 13,122,702 |   |
| Net                investment income                              |   |                                                            | 10,004,674 |                                                          |   | 10,415,975 |   |   | 19,879,313 |   |   | 20,349,905 |   |
| Realized                investment gains (losses)                 |   |                                                            | 16,055     |                                                          |   | (189,999 | ) |   | (335,348 | ) |   | 50,459 |   |
| Other                income                                       |   |                                                            | 17,114     |                                                          |   | 7,569 |   |   | 16,216 |   |   | 20,623 |   |
|                                                              |   | $                                                               | 16,699,798 |                                                          | $      | 17,157,638 |   | $ | 32,099,818 |   | $ | 33,543,689 |   |

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**Income      Before Income Tax and Segment Operating Income**

|                                              |   | **Three                Months Ended****June                30** |      |     |   | **Six                Months Ended****June                30** |   |     |   |
|---------------------------------------------------|--------|-----------------------------------------------------------------|-----------|----------|--------|---------------------------------------------------------------|--------|----------|--------|
|                                              |   | **2005**                                                        |      | **2004** |   | **Change**                                                    |   | **2005** |   | **2004** |   | **Change** |   |
| **Segment                Operating Income**       |   |                                                            |      |     |   |                                                          |   |     |   |   |   |   |   |
| Life                Marketing                     |   | $                                                               | 309,081   |     | $      | 158,076                                                       |   |     | 95.5   | % | $ | 594,498 |   | $ | 391,464 |   |   | 51.9 | % |
| Acquisitions                                      |   |                                                            | 1,857,454 |     |   | 2,797,656                                                     |   |     | (33.6  | ) |   | 4,844,039 |   |   | 5,585,066 |   |   | (13.3 | ) |
| Annuities                                         |   |                                                            | (429,105  | )        |   | (59,466                                                       | )      |     | (621.6 | ) |   | (368,194 | ) |   | (52,842 | ) |   | (596.8 | ) |
| Asset                Protection                   |   |                                                            | 267,929   |     |   | 108,609                                                       |   |     | 146.7  |   |   | 732,961 |   |   | 333,672 |   |   | 119.7 |   |
| Corporate                and Other                |   |                                                            | 1,743,426 |     |   | 2,082,469                                                     |   |     | (16.3  | ) |   | 3,282,130 |   |   | 3,628,110 |   |   | (9.5 | ) |
|                                              |   |                                                            | 3,748,785 |     |   | 5,087,344                                                     |   |     | (26.3  | ) |   | 9,085,434 |   |   | 9,885,470 |   |   | (8.1 | ) |
|                                              |   |                                                            |      |     |   |                                                          |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Realized                investment gains (losses) |   |                                                            | 16,055    |     |   | (189,999                                                      | )      |     |   |   |   | (335,348 | ) |   | 50,459 |   |   |   |   |
| Income                tax expense                 |   |                                                            | 1,350,148 |     |   | 1,709,096                                                     |   |     |   |   |   | 3,129,257 |   |   | 3,467,590 |   |   |   |   |
| Net                income                         |   | $                                                               | 2,414,692 |     | $      | 3,188,249                                                     |   |     | (24.3  | ) | $ | 5,620,829 |   | $ | 6,468,339 |   |   | (13.1 | ) |

**Income      Taxes**

|                                      |   | **Three                Months Ended****June                30** |   | **Six                Months Ended****June                30** |   |
|-------------------------------------------|--------|-----------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                      |   | **2005**                                                        |   | **2004**                                                      |   | **2005** |   | **2004** |   |
|                                      |   |                                                            |   |                                                          |   |   |   |   |   |
| Effective                Income Tax Rates |   |                                                            | 35.9   | %                                                             |   | 34.9 | % |   | 35.8 | % |   | 34.9 | % |

|   | (a) | Disclosure                controls and procedures |
|--------|-----|---------------------------------------------------|

| (b)   | Changes                in internal control over financial                reporting |
|-----------------|------------------------------------------------------------------------------------|

**PART      II**

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**SIGNATURE**