#### FORM 10-Q

#### UNITED STATES

#### 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, 2004

# 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

| |  | 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 (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 May 7, 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


                                                       INDEX



Part I.  Financial Information:
   Item 1.  Financial Statements (unaudited):
       Report of Independent Accountants..................................................................
       Condensed Statements of Income for the Three Months
           ended March 31, 2004 and 2003..................................................................
       Condensed Balance Sheets as of March 31, 2004
           and December 31, 2003..........................................................................
       Condensed Statements of Cash Flows for the
           Three Months ended March 31, 2004 and 2003.....................................................
       Notes to Condensed Financial Statements............................................................

   Item 2.  Management's Narrative Analysis of the Results of Operations.................................
   Item 4.  Controls and Procedures......................................................................

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

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



# REPORT OF INDEPENDENT
ACCOUNTANTS

To the Directors and
Share OwnersProtective Life and Annuity Insurance Company

We have reviewed the accompanying
condensed balance sheet of Protective Life and Annuity Insurance Company as of March 31,
2004, and the related condensed statements of income for each of the three-month periods
ended March 31, 2004 and 2003, and the condensed statements of cash flows for the
three-month periods ended March 31, 2004 and 2003. These interim 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 generally accepted auditing standards, 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 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, 2003, 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 11, 2004, 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, 2003, is fairly stated in all material respects in relation to the balance
sheet from which it has been derived.

/s/PricewaterhouseCoopers
LLPPricewaterhouseCoopers
LLP

Birmingham, AlabamaMay 14, 2004



`PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
                                          CONDENSED STATEMENTS OF INCOME
                                                    (Unaudited)

                                                                                                             THREE MONTHS ENDED
                                                                                                                   MARCH 31
                                                                                                            2004               2003
---------------------------------------------------------------------------------------------------------------------------------------
REVENUES
  Premiums and policy fees                                                                              $16,549,566         $19,870,307
  Reinsurance ceded                                                                                     (10,350,957)        (13,510,673)
---------------------------------------------------------------------------------------------------------------------------------------
     Premiums and policy fees, net of reinsurance ceded                                                   6,198,609           6,359,634
  Net investment income                                                                                   9,933,930          10,132,301
  Realized investment gains                                                                                 240,458             733,557
  Other income (loss)                                                                                        13,054                (568)
---------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         16,386,051          17,224,924
---------------------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
  Benefits and settlement expenses
  (net of reinsurance ceded:
    2004 - $6,585,056; 2003 - $6,015,224)                                                                 7,356,998           7,837,609
  Amortization of deferred policy acquisition costs                                                       1,703,843           2,078,112
  Other operating expenses (net of reinsurance ceded:
    2004 - $(20,278); 2003 - $(879,203))                                                                  2,286,626           2,123,828
---------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         11,347,467          12,039,549
---------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX                                                                                  5,038,584           5,185,375

Income tax expense                                                                                        1,758,494           1,805,331
---------------------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                                                              $ 3,280,090         $ 3,380,044
---------------------------------------------------------------------------------------------------------------------------------------`

See notes to condensed financial
statements

`PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
                                             CONDENSED BALANCE SHEETS
                                                    (Unaudited)


                                                                                                 MARCH 31             DECEMBER 31
                                                                                                   2004                  2003
----------------------------------------------------------------------------------------------------------------------------------
ASSETS
  Investments:
   Fixed maturities, at market
   (amortized cost: 2004 - $596,390,529; 2003 - $598,941,913)                                  $651,344,211          $636,460,275
   Mortgage loans on real estate                                                                  1,342,120             1,393,720
   Policy loans                                                                                  53,318,432            54,066,125
   Short-term investments                                                                         1,202,496             1,200,413
----------------------------------------------------------------------------------------------------------------------------------
      Total investments                                                                         707,207,259           693,120,533
  Cash                                                                                           15,462,411            13,052,781
  Accrued investment income                                                                      10,028,362            11,116,301
  Accounts and premiums receivable, net of allowance
    for uncollectible amounts                                                                       552,259               530,133
  Reinsurance receivables                                                                        54,913,168            61,159,477
  Deferred policy acquisition costs                                                              89,001,743            95,168,662
  Other assets                                                                                       13,518                14,897
  Assets related to separate accounts
    Variable Annuity                                                                             10,449,362            10,987,259
----------------------------------------------------------------------------------------------------------------------------------
                                                                                               $887,628,082          $885,150,043
----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
  Policy liabilities and accruals:
    Future policy benefits and claims                                                          $490,233,029          $496,884,724
    Unearned premiums                                                                            11,570,610            13,824,017
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                501,803,639           510,708,741
  Annuity account balances                                                                       58,134,910            57,894,232
  Other policyholders' funds                                                                      2,793,169             2,695,070
  Funds held-coinsurance                                                                         39,980,963            46,762,354
  Other liabilities                                                                              16,517,886            15,506,447
 Accrued income taxes                                                                             2,556,443               702,883
 Deferred income taxes                                                                           41,057,586            36,842,882
  Liabilities related to separate accounts
    Variable Annuity                                                                             10,449,362            10,987,259
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                673,293,958           682,099,868
----------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES - NOTE B
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: 500,000
     Shares issued and outstanding: 250,000                                                       2,500,000             2,500,000
  Additional paid-in capital                                                                    171,386,324           171,386,324
  Retained earnings                                                                              15,690,623            12,410,533
  Accumulated other comprehensive income:
     Net unrealized gains on investments (net of income tax:
       2004 - $13,329,711; 2003 - $9,019,940)                                                    24,755,177            16,751,318
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                214,334,124           203,050,175
----------------------------------------------------------------------------------------------------------------------------------
                                                                                               $887,628,082          $885,150,043
----------------------------------------------------------------------------------------------------------------------------------


See notes to condensed financial statements`

`PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
                                        CONDENSED STATEMENTS OF CASH FLOWS
                                                    (Unaudited)

                                                                                                      THREE MONTHS ENDED
                                                                                                           MARCH 31
                                                                                                    2004                2003
-------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                                                  $  3,280,090       $  3,380,044
   Adjustments to reconcile net income to net cash used in
   operating activities:
     Realized investment (gains) losses                                                            (240,458)          (733,557)
     Amortization of deferred policy acquisition costs                                            1,703,843          2,078,112
     Capitalization of deferred policy acquisition costs                                           (739,930)          (601,929)
     Deferred income tax                                                                            (95,066)         1,805,331
     Interest credited to universal life and investment products                                  5,093,586          4,498,577
     Policy fees assessed on universal life and investment products                              (8,423,342)        (8,551,518)
     Change in accrued investment income and other receivables                                    7,312,122          9,865,222
     Change in policy liabilities and other policyholders' funds of traditional
       life and health products                                                                  (9,342,727)       (13,803,879)
     Change in funds held-coinsurance                                                            (6,781,391)       (13,639,045)
     Change in other liabilities                                                                  1,011,439         (1,614,179)
     Other, net                                                                                       1,378             (1,570)
--------------------------------------------------------------------------------------------------------------------------------
   Net cash used in operating activities                                                         (7,220,456)       (17,318,391)
--------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Investments available for sale, net of short-term investments:
     Maturities and principal reductions of investments                                          13,497,992         21,888,068
     Sale of investments                                                                          7,208,363         13,247,370
     Cost of investments acquired                                                               (15,979,637)      (157,388,197)
   Decrease in mortgage loans, net                                                                   51,600             51,411
   Decrease (increase) in policy loans, net                                                         747,693            650,427
   Decrease (increase) in short-term investments, net                                                (2,083)       132,238,981
--------------------------------------------------------------------------------------------------------------------------------
   Net cash provided by investing activities                                                      5,523,928         10,688,060
--------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Investment product deposits and change in universal life deposits                              6,017,531          6,182,501
   Investment product withdrawals                                                                (1,911,373)        (1,221,702)
--------------------------------------------------------------------------------------------------------------------------------
   Net cash provided by financing activities                                                      4,106,158          4,960,799
--------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH                                                                       2,409,630         (1,669,532)
CASH AT BEGINNING OF PERIOD                                                                      13,052,781          1,669,532
--------------------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD                                                                          $ 15,462,411         $        0
--------------------------------------------------------------------------------------------------------------------------------


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 statement have
been included.  Operating  results for the three-month  period ended March 31, 2004 are not necessarily  indicative
of the results that may be expected for the year ending  December 31, 2004.  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,
2003.

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
currently  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 sales  practices,  alleged agent  misconduct,  failure to properly  supervise  representatives'
relationships  with agents or other persons with whom the insurer does business,  and other  matters.  Increasingly
these  lawsuits  have  resulted  in the award of  substantial  judgments  that are  disproportionate  to the actual
damages,  including material amounts of punitive and non-economic  compensatory  damages.  In some states,  juries,
judges,  and arbitrators have substantial  discretion in awarding  punitive and non-economic  compensatory  damages
which  creates the  potential  for  unpredictable  material  adverse  judgments  or awards in any given  lawsuit or
arbitration.  Arbitration  awards are subject to very limited appellate  review. In addition,  in some class action
and other lawsuits,  companies have made material settlement payments.  The Company,  like other financial services
companies,  in the ordinary course of business,  is involved in such  litigation and 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 operation, or liquidity of the Company.

NOTE C - OPERATING SEGMENTS

PLC,  through its  subsidiaries,  operates several business  segments.  An operating  segment is generally
distinguished  by products  and/or  channels of  distribution.  A brief  description  of each  segment in which the
Company operates follows:

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

| | Acquisitions.  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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Annuities.  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
         the Life Marketing  segment's sales force. It also supports  variable  annuity products sold prior to 2003
         when the Company ceased marketing those products.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Asset Protection.  The Asset Protection  segment  primarily  markets credit life and disability  insurance
         products to protect consumers' investments in automobiles and watercraft.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Corporate and Other.  The Company has an  additional  segment  herein  referred to as Corporate and Other.
         The  Corporate  and  Other  segment  primarily   consists  of  net  investment  income  and  expenses  not
         attributable to the segments above (including net investment income on unallocated capital).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company uses the same  accounting  policies and  procedures to measure  operating  segment  income and
assets as it uses to measure  its net  income  and  assets.  The  measure  used by the  Company's  chief  operating
decision maker to assess segment  performance is operating  income.  Operating  segment income is generally  income
before income tax, net of realized  investment gains and losses.  Premiums and policy fees, other income,  benefits
and settlement  expenses,  and amortization of deferred policy  acquisition  costs are attributed  directly to each
operating  segment.  Net investment  income is allocated based on directly  related assets required for transacting
the business of that segment.  Realized  investment  gains (losses) and other  operating  expenses are allocated to
the  segments in a manner which  appropriately  reflects  the  operations  of that  segment.  Unallocated  realized
investment gains (losses) are deemed not to be associated with any specific segment.

Assets are  allocated  based on policy  liabilities  directly  attributable  to each  segment and deferred
policy acquisition costs are shown in the segments to which they are attributable.

There are no significant intersegment transactions.

The following  table sets forth total  operating  segment  income and assets for the period shown.  Income
adjustments  represent the recognition of income tax expense.  Asset adjustments  represent the inclusion of assets
related to discontinued operations.

`Operating Segment Income for the
                                                                                Three Months Ended March 31, 2004
-----------------------------------------------------------------------------------------------------------------------------------
                                                                          Life               Acquisitions             Annuities
                                                                       Marketing
-----------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                              $1,465,708            $  9,741,454           $    76,453
Reinsurance ceded                                                     (1,344,666)             (4,606,640)
-----------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                              121,042               5,134,814                76,453
Net investment income                                                      5,927               7,273,572               941,095
Realized investment gains                                                                                              221,760
Other income                                                                                                             8,071
-----------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                                     126,969              12,408,386             1,247,379
-----------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                                          47,907               5,955,576               875,487
Amortization of deferred policy acquisition costs                         87,929               1,312,294                99,619
Other operating expenses                                                (242,255)              2,353,106                43,889
-----------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                                      (106,419)              9,620,976             1,018,995
-----------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                                 233,388               2,787,410               228,384
Less: realized investment gains                                                                                        221,760
-----------------------------------------------------------------------------------------------------------------------------------
Operating income                                                         233,388               2,787,410                 6,624



-----------------------------------------------------------------------------------------------------------------------------------
                                                                Asset             Corporate                              Total
                                                              Protection          and Other         Adjustments      Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                      $5,265,951                                             $ 16,549,566
Reinsurance ceded                                             (4,399,651)                                             (10,350,957)
-----------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                      866,300                                                6,198,609
Net investment income                                            129,554          $1,583,782                            9,933,930
Realized investment gains                                                             18,698                              240,458
Other income                                                                           4,983                               13,054
-----------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                             995,854           1,607,463                           16,386,051
-----------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                                 478,028                                                7,356,998
Amortization of deferred policy acquisition costs                204,001                                                1,703,843
Other operating expenses                                          88,762              43,124                            2,286,626
-----------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                               770,791              43,124                           11,347,467
-----------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                         225,063           1,564,339                            5,038,584
Less: realized investment gains                                                       18,698
-----------------------------------------------------------------------------------------------------------------------------------
Operating income                                                 225,063           1,545,641
Income tax expense                                                                                  $1,758,494          1,758,494
-----------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                                            $ 3,280,090
-----------------------------------------------------------------------------------------------------------------------------------





                                                                           Operating Segment Income for the
                                                                          Three Months Ended March 31, 2003
-----------------------------------------------------------------------------------------------------------------------------------
                                                                         Life               Acquisitions            Annuities
                                                                      Marketing
-----------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                               $710,912              $10,424,899            $  54,312
Reinsurance ceded                                                      (652,625)              (5,053,413)
-----------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                              58,287                5,371,486               54,312
Net investment income                                                     2,939                7,332,057              943,460
Realized investment gains
Other income (loss)                                                                               (5,045)               4,477
-----------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                                     61,226               12,698,498            1,002,249
-----------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                                         12,862                6,456,153              904,489
Amortization of deferred policy acquisition costs                       169,174                1,660,575               56,853
Other operating expenses                                                  2,406                2,176,225              (43,556)
-----------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                                      184,442               10,292,953              917,786
-----------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                               (123,216)               2,405,545               84,463
Less: realized investment gains
-----------------------------------------------------------------------------------------------------------------------------------
Operating income                                                       (123,216)               2,405,545               84,463



-----------------------------------------------------------------------------------------------------------------------------------
                                                                Asset             Corporate                              Total
                                                              Protection          and Other         Adjustments      Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                      $8,680,184                                              $19,870,307
Reinsurance ceded                                             (7,804,635)                                             (13,510,673)
-----------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                      875,549                                                6,359,634
Net investment income                                             99,378          $1,754,467                           10,132,301
Realized investment gains                                                            733,557                              733,557
Other income (loss)                                                                                                          (568)
-----------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                             974,927           2,488,024                           17,224,924
-----------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                                 464,105                                                7,837,609
Amortization of deferred policy acquisition costs                191,510                                                2,078,112
Other operating expenses                                          27,142             (38,389)                           2,123,828
-----------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                               682,757             (38,389)                          12,039,549
-----------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                         292,170           2,526,413                            5,185,375
Less: realized investment gains                                                      733,557
-----------------------------------------------------------------------------------------------------------------------------------
Operating income                                                 292,170           1,792,856
Income tax expense                                                                                  $1,805,331          1,805,331
-----------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                                            $ 3,380,044
-----------------------------------------------------------------------------------------------------------------------------------





                                                                                Operating Segment Assets
                                                                                     March 31, 2004
-------------------------------------------------------------------------------------------------------------------------------
                                                                   Life
                                                                Marketing                 Acquisitions            Annuities
-------------------------------------------------------------------------------------------------------------------------------
Investments and other assets                                    $3,613,261               $587,336,558           $57,298,601
Deferred policy acquisition costs                                2,617,310                 82,790,885             2,195,842
-------------------------------------------------------------------------------------------------------------------------------
     Total assets                                               $6,230,571               $670,127,443           $59,494,443
-------------------------------------------------------------------------------------------------------------------------------



-------------------------------------------------------------------------------------------------------------------------------
                                                              Asset          Corporate                             Total
                                                            Protection       and Other           Adjustments       Consolidated
------------------------------------------------------------------------------------------------------------------------------
Investments and other assets                               $37,004,057     $113,254,090          $119,772         $798,626,339
Deferred policy acquisition costs                            1,397,706                                              89,001,743
------------------------------------------------------------------------------------------------------------------------------
     Total assets                                          $38,401,763     $113,254,090          $119,772         $887,628,082
------------------------------------------------------------------------------------------------------------------------------



                                                                     Operating Segment Assets
                                                                         December 31, 2003
------------------------------------------------------------------------------------------------------------------------------
                                                                   Life
                                                                Marketing                 Acquisitions            Annuities
------------------------------------------------------------------------------------------------------------------------------
Investments and other assets                                   $3,114,579                $580,346,285           $57,121,591
Deferred policy acquisition costs                               2,114,680                  89,265,855             2,292,570
------------------------------------------------------------------------------------------------------------------------------
     Total assets                                              $5,229,259                $669,612,140           $59,414,161
------------------------------------------------------------------------------------------------------------------------------



------------------------------------------------------------------------------------------------------------------------------
                                                             Asset           Corporate                              Total
                                                           Protection        and Other           Adjustments     Consolidated
------------------------------------------------------------------------------------------------------------------------------
Investments and other assets                               $43,040,563     $106,236,317          $122,046         $789,981,381
Deferred policy acquisition costs                            1,495,557                                              95,168,662
------------------------------------------------------------------------------------------------------------------------------
     Total assets                                          $44,536,120     $106,236,317          $122,046         $885,150,043
------------------------------------------------------------------------------------------------------------------------------`

NOTE D  STATUTORY
REPORTING PRACTICES

Financial
statements prepared in conformity with accounting principles generally accepted in the
United States of America (GAAP) differ in some respects from the statutory
accounting practices prescribed or permitted by insurance regulatory authorities. In
accordance with statutory accounting reporting practices, at March 31, 2004, and for the
three months then ended, the Company had share-owners equity of $113.3 million and
net income of $4.0 million.

NOTE E 
COMPREHENSIVE INCOME

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

`-------------------------------------------------------------------------------------------------------------------------------
                                                                                                     THREE MONTHS ENDED
                                                                                                          MARCH 31
                                                                                                   2004              2003
-------------------------------------------------------------------------------------------------------------------------------
   Net income                                                                                 $  3,280,090        $3,380,044
   Change in net unrealized gains/losses on investments
     (net of income tax: three months: 2004 - $4,393,931; 2003 - $3,258,368)                     8,160,157         6,051,254
   Reclassification adjustment for amounts included in net income
     (net of income tax: 2004 - $(84,160); 2003 - $(256,745)                                      (156,298)         (476,812)
-------------------------------------------------------------------------------------------------------------------------------
   Comprehensive income                                                                       $ ll,283,949        $8,954,486
-------------------------------------------------------------------------------------------------------------------------------`

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

In
July 2003, the American Institute of Certified Public Accountants issued Statement of
Position (SOP) 03-1, Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Separate Accounts. SOP 03-1 is
effective for fiscal years beginning after December 15, 2003. SOP 03-1 provides guidance
related to the establishment of reserves for benefit guarantees provided under certain
long-duration contracts, as well as the accounting for mortality benefits in certain
universal life products. In addition, it addresses the capitalization and amortization of
sales inducements to contract holders. The adoption of SOP 03-1 had no impact on the
Companys financial position or results of operations.

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.

For
a more complete understanding of the Companys business and its current period
results, please read the following Managements Narrative Analysis of the Results of
Operations in conjunction with the Companys latest annual report on Form 10-K and
other filings with the SEC.

PLC,
through its subsidiaries, provides financial services through the production,
distribution, and administration of insurance and investment products. PLC, through its
subsidiaries, operates several business segments each having a strategic focus. An
operating segment is generally distinguished by products and/or channels of distribution.

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, 2004, the Company was involved in the businesses of four of PLCs operating
segments: Life Marketing, Acquisitions, Annuities, and Asset Protection. The Company has
an additional 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 reviews the Companys financial condition and results of operations including
its liquidity and capital resources. Historical information is presented and discussed.
Where appropriate, factors that may affect future financial performance are also
identified and discussed. Certain statements made in this report include
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include any statement that may
predict, forecast, indicate or imply future results, performance or achievements instead
of historical facts and may contain words like believe, expect,
estimate, project, budget, forecast,
anticipate, plan, will, shall,
may, and other words, phrases, or expressions with similar meanings.
Forward-looking statements involve risks and uncertainties which may cause actual results
to differ materially from the results contained in the forward-looking statements, and the
Company cannot give assurances that such statements will prove to be correct. Given these
risks and uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results. Please refer to Exhibit 99(a), incorporated
by reference herein, for more information about factors which could affect future results.

The
Companys results may fluctuate from period to period due to fluctuations in
mortality, persistency, claims, expenses, interest rates, and other factors. Therefore, it
is managements opinion that quarterly operating results for an insurance company are
not necessarily indicative of results to be achieved in future periods, and that a review
of operating results over a longer period is necessary to assess an insurance
companys performance.

Revenues

The
following table sets forth revenues by source for the periods shown:

`----------------------------------------------------------------------------------------------------------------------------
                                                                                                     THREE MONTHS ENDED
                                                                                                          MARCH 31
                                                                                                      2004            2003
----------------------------------------------------------------------------------------------------------------------------

   Premiums and policy fees, net of reinsurance                                                  $  6,198,609   $  6,359,634
   Net investment income                                                                            9,933,930     10,132,301
   Realized investment gains                                                                          240,458        733,557
   Other income (loss)                                                                                 13,054           (568)
 ---------------------------------------------------------------------------------------------------------------------------
                                                                                                  $16,386,051   $ 17,224,924
 ---------------------------------------------------------------------------------------------------------------------------`

Premiums
and policy fees, net of reinsurance (premiums and policy fees) decreased $0.2
million or 2.5% in the first three months of 2004 from the first three months of 2003.
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 2003 or
the first three months of 2004, therefore decreases in older acquired policies resulted in
a decrease of $0.2 million in the first three months of 2004 as compared with the first
three months of 2003. Premiums and policy fees in both the Annuities and Asset Protection
segments remained relatively flat in the first three months of 2004 as compared to 2003,
while premiums and policy fees in the Life Marketing segment increased $0.1 million for
the same period.

Net
investment income in the first three months of 2004 decreased by $0.2 million as compared
to the corresponding period of the preceding year primarily due to a decrease in the
average amount of invested assets. The percentage earned on average cash and investments
was 5.5% in the first three months of both 2004 and 2003.

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

Realized
investment gains were approximately $0.2 million in the first three months of 2004
compared to $0.7 million in the first three months of 2003. During the first three months
of 2004, the Company recorded no other-than-temporary impairments on its investments as
compared to $0.3 million in the first three months of 2003.

Each
quarter the Company reviews investments with material unrealized losses and tests for
other-than-temporary impairments. Management analyzes various factors to determine if any
specific other-than-temporary asset impairments exist. Once a determination has been made
that a specific other-than-temporary impairment exists, a realized loss is recognized and
the cost basis of the impaired asset is adjusted to its fair value. An
other-than-temporary impairment loss is recognized based upon all relevant facts and
circumstances for each investment. With respect to unrealized losses due to
issuer-specific events, the Company considers the creditworthiness and financial
performance of the issuer and other available information. With respect to unrealized
losses that are not due to issuer-specific events, such as losses due to interest rate
fluctuations, general market conditions or industry-related events, the Company considers
its intent and ability to hold the investment to allow for a market recovery or to
maturity together with an assessment of the likelihood of full recovery.

The
Company reported an increase of less than $0.1 million in the amount of other income in
the first three months of 2004 as compared to the first three months of 2003.

Income Before Income Tax
and Operating Income

Consistent
with the Companys segment reporting in the Notes to Condensed Financial Statements,
management evaluates the results of the Companys segments on a before-income-tax
basis as adjusted for certain items which management believes are not indicative of the
segments core operations. Segment operating income (loss) excludes net realized
investment gains and losses because fluctuations in these items are due to changes in
interest rates and other financial market factors instead of mortality and morbidity.
Also, segment operating income (loss) excludes discontinued operations, extraordinary
items, and the cumulative effect of changes in accounting principles. Although the items
excluded from segment operating income (loss) may be significant components in
understanding and assessing the Companys overall financial performance, management
believes that segment operating income (loss) enhances an investors understanding of
the Companys results of operations by highlighting the income (loss) attributable to
the normal, recurring operations of the insurance business (i.e., mortality and
morbidity), consistent with industry practice. However, the Companys segment income
(loss) measures may not be comparable to similarly titled measures reported by other
companies. Segment operating income (loss) should not be construed as a substitute for net
income (loss) determined in accordance with accounting principles generally accepted in
the United States of America (GAAP). Total income before income tax is a GAAP
measure to which the non-GAAP measure total operating income may be compared.
Unlike total operating income, total income before income tax includes net realized
investment gains and losses. In the Life Marketing, Acquisitions, and Asset Protection
segments, operating income equals segment income before income tax for all periods. In the
Annuities and Corporate and Other segment, operating income excludes realized investment
gains and losses.

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
                                                                                                      2004          2003
----------------------------------------------------------------------------------------------------------------------------

Operating income (loss)1
  Life Marketing                                                                                 $   233,388    $  (123,216)
  Acquisitions                                                                                     2,787,410      2,405,545
  Annuities                                                                                            6,624         84,463
  Asset Protection                                                                                   225,063        292,170
  Corporate and Other                                                                              1,545,641      1,792,856
----------------------------------------------------------------------------------------------------------------------------
Realized Investment gains
  Annuities                                                                                          221,760
  Corporate and Other                                                                                 18,698        733,557
----------------------------------------------------------------------------------------------------------------------------
Income (loss) before income tax
  Life Marketing                                                                                     233,388       (123,216)
  Acquisitions                                                                                     2,787,410      2,405,545
  Annuities                                                                                          228,384         84,463
  Asset Protection                                                                                   225,063        292,170
  Corporate and Other                                                                              1,564,339      2,526,413
----------------------------------------------------------------------------------------------------------------------------
       Total income before income tax                                                             $5,038,584     $5,185,375
----------------------------------------------------------------------------------------------------------------------------

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

The
Life Marketing segment had pretax operating income of $0.2 million in the first three
months of 2004 as compared to a pretax operating loss of $0.1 million in the same period
of 2003. The Company began operations in the Life Marketing segment in 2002. The increase
in income is primarily attributable to growth in business-in-force.

Pretax
operating income from the Acquisitions segment was $2.8 million in the first three months
of 2004 as compared to $2.4 million in the same period of 2003. The increase is primarily
due to lower benefit and settlement expenses. Earnings from the Acquisitions segment 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. There were no new
acquisitions made in 2003 or in the first three months of 2004.

The
Annuities segment had pretax operating income of less than $0.1 million in the first three
months of 2004 and in the same period of 2003. The Annuities segments future results
may be negatively affected by a slow economy. Volatile equity markets could negatively
affect the fees the segment assesses on variable annuity contracts. Lower interest rates
could negatively affect sales of fixed annuities. In this segment, equity market
volatility may create uncertainty regarding the future results in the variable annuity
business and the related rate of amortization of deferred policy acquisition costs. Also,
beginning January 2003, the Company is no longer marketing variable annuity products.

The
Asset Protection segments pretax operating income was $0.2 million in the first
three months of 2004, as compared to $0.3 million in the first three months of 2003. The
decrease is primarily due to an increase in various expenses.

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 $1.5
million in the first three months of 2004 as compared to $1.8 million in the first three
months of 2003, primarily due to lower net investment income and higher expenses allocated
to this segment.

Income Taxes

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

`--------------------------------------------------------------------------------------------------------------------------------
                                                                                                     THREE MONTHS ENDED
                                                                                                          MARCH 31
                                                                                                   2004             2003
--------------------------------------------------------------------------------------------------------------------------------
                  Effective Income Tax Rates                                                       34.9%            34.8%
--------------------------------------------------------------------------------------------------------------------------------`

The
effective income tax rate for the full year of 2003 was 34.9%. Managements estimate
of the effective income tax rate for the full year of 2004 is approximately 34.9%.

Net Income

The
following table sets forth net income for the periods shown:

`-------------------------------------------------------------------------------------------------------------------------------
                                                                                                     THREE MONTHS ENDED
                                                                                                          MARCH 31
                                                                                                   2004             2003
-------------------------------------------------------------------------------------------------------------------------------
                  Net Income                                                                    $3,280,090       $3,380,044
-------------------------------------------------------------------------------------------------------------------------------`

Compared
to the same period in 2003, net income in the first three months of 2004 decreased $0.1
million, reflecting increases in operating income in the Life Marketing and Acquisitions
segments, which were offset by decreases in the Annuities, Asset Protection, and Corporate
and Other segments and lower realized investment gains.

Review by Independent
Accountants

With
respect to the unaudited condensed financial information of Protective Life and Annuity
Insurance Company for the three-month periods ended March 31, 2004 and 2003,
PricewaterhouseCoopers LLP (PricewaterhouseCoopers) reported that they have
applied limited procedures in accordance with professional standards for a review of such
information. However, their separate report dated May 14, 2004, appearing herein, stated
that they did not audit and they do not express an opinion on that unaudited condensed
financial information. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review procedures
applied. PricewaterhouseCoopers is not subject to the liability provisions of Section 11
of the Securities Act of 1933 for their report on the unaudited condensed financial
information because that report is not a report or a part of a
registration statement prepared or certified by PricewaterhouseCoopers into which this
Form 10-Q may be incorporated by reference within the meaning of Sections 7 and 11 of the
Act.

Item 4. Controls and
Procedures

Under
the direction our President and Chief Financial Officer, we evaluated our disclosure
controls and procedures and internal control over financial reporting and concluded that
(i) our disclosure controls and procedures were effective as of March 31, 2004, and (ii)
no change in internal control over financial reporting occurred during the quarter ended
March 31, 2004 that has materially affected, or is reasonably likely to materially affect,
such internal control over financial reporting.

# PART II

Item 6. Exhibits and
Reports on Form 8-K

`(a)      Exhibit 31(a) - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
                  Exhibit 31(b) - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
                  Exhibit 32(a) - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.
                  Exhibit 32(b) - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.
                  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



Date:      May 17, 2004                                      /s/Steven G. Walker
                                                              Steven G. Walker
                                                              Vice President, Controller
                                                              and Chief Accounting Officer
                                                              (Duly authorized officer)`