#### FORM 10-Q

#### SECURITIES AND EXCHANGE COMMISSION

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

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

# For the quarterly period ended September 30, 2001

# OR

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

# For the transition period from ___ to ___

# Commission File Number 333-42425

# Protective Life and Annuity Insurance Company

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

# 2801 HIGHWAY 280 SOUTHBIRMINGHAM, ALABAMA 35223

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

Number of shares of Common Stock, $10.00 par value,  outstanding
as of November 9, 2001: 250,000 shares.

`PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY



                                                                 INDEX


                                                                                               Page Number

Part I.  Financial Information:
   Item 1.  Financial Statements:
       Report of Independent Accountants..................................................................2
       Condensed Statements of Income for the Three and
           Nine Months ended September 30, 2001 and 2000 (unaudited)......................................3
       Condensed Balance Sheets as of September 30, 2001
           (unaudited) and December 31, 2000..............................................................4
       Condensed Statements of Cash Flows for the
           Nine Months ended September 30, 2001 and 2000 (unaudited)......................................5
       Notes to Condensed Financial Statements (unaudited)................................................6

   Item 2.  Management's Narrative Analysis of the Results of Operations.................................14

Part II.  Other Information:

   Item 6.  Exhibits and Reports on Form 8-K.............................................................18

Signature................................................................................................18`

We have reviewed the
accompanying condensed balance sheet of Protective Life and Annuity Insurance
Company as of September 30, 2001, and the related condensed statements of income
for each of the three-month and nine-month periods ended September 30, 2001 and
2000, and the condensed statements of cash flows for the nine-month periods
ended September 30, 2001 and 2000. These financial statements are the
responsibility of the Companys management.

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

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

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

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

                                                                Three Months Ended                 Nine Months Ended
                                                                    September 30                      September 30
                                                              ---------------------------     ----------------------------
                                                                   2001            2000             2001           2000
                                                                   ----            ----             ----           ----

REVENUES
    Premiums and policy fees                                   $11,903,872    $12,036,025       $36,469,544    $37,223,110
      Reinsurance ceded                                         (4,401,249)    (4,223,865)      (12,799,926)   (12,508,571)
                                                                -----------    -----------      ------------   ------------
      Premiums and policy fees, net of reinsurance ceded         7,502,623      7,812,160        23,669,618     24,714,539
    Net investment income                                        8,579,285      8,132,593        25,081,914     23,596,785
    Realized investment gains (losses)                          (1,858,929)       (28,070)       (1,247,649)       (28,070)
    Other income (loss)                                               (365)          (987)            2,117          7,412
                                                                -----------    -----------      ------------   ------------
                                                                14,222,614     15,915,696        47,506,000     48,290,666
                                                                -----------    -----------      ------------   ------------

BENEFITS AND EXPENSES
    Benefits and settlement expenses
      (net of reinsurance ceded:
      three months: 2001 - $2,955,704; 2000 - $3,574,770
      nine months: 2001 - $8,644,930; 2000 - $10,491,420)        8,978,108      8,327,691        26,675,119     25,393,819
    Amortization of deferred policy acquisition costs            1,715,286      1,608,404         5,248,443      5,156,776
    Other operating expenses (net of reinsurance ceded:
      three months: 2001 - $65,686; 2000 - $114,066
      nine months: 2001 - $241,231; 2000 - $260,600)             2,314,554      1,598,073         6,663,031      7,553,368
                                                                -----------    -----------      ------------   ------------
                                                                13,007,948     11,534,168        38,586,593     38,103,963
                                                                -----------    -----------      ------------   ------------

INCOME BEFORE INCOME TAX                                         1,214,666      4,381,528         8,919,407     10,186,703

Income tax expense                                                 365,543      1,511,627         3,023,679      3,514,412
                                                                -----------    -----------      ------------   ------------

NET INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE                                                          849,123      2,869,901         5,895,728      6,672,291

Cumulative effective of change in accounting
principle, net of income tax                                                                       (284,968)
                                                                -----------    -----------      ------------   ------------

NET INCOME                                                   $     849,123   $  2,869,901     $   5,610,760   $  6,672,291
                                                                ===========    ===========       ===========   ============


See notes to condensed financial statements`

`PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
                                                       CONDENSED BALANCE SHEETS

                                                                              September 30                December 31
                                                                                  2001                         2000
                                                                              --------------              --------------
                                                                               (Unaudited)
ASSETS
   Investments:
     Fixed maturities, at market
       (amortized cost:  2001 - $455,656,753; 2000 - $428,392,599)              $464,696,721                $418,756,679
     Mortgage loans on real estate                                                 2,844,883                   3,215,344
     Policy loans                                                                 54,037,225                  54,465,893
     Short-term investments                                                                                    4,000,000
                                                                              --------------              --------------
       Total investments                                                         521,578,829                 480,437,916
   Cash                                                                            8,407,446                   1,165,410
   Accrued investment income                                                       8,957,251                   8,914,306
   Accounts and premiums receivable, net of allowance for
     uncollectible amounts                                                         7,007,036                   1,952,449
   Reinsurance receivables                                                        19,587,610                  23,136,896
   Deferred policy acquisition costs                                             118,411,339                 128,228,360
   Other assets                                                                       20,469                      27,333
   Assets related to separate accounts
     Variable Annuity                                                              8,204,456                   9,037,035
                                                                              --------------              --------------
                                                                                $692,174,436                $652,899,705
                                                                              ==============              ==============
LIABILITIES
   Policy liabilities and accruals:
     Future policy benefits and claims                                          $458,318,944                $452,212,971
     Unearned premiums                                                             7,616,340                   8,154,233
                                                                              --------------              --------------
                                                                                 465,935,284                 460,367,204
   Annuity deposits                                                               38,779,014                  28,059,246
   Other policyholders' funds                                                      5,713,358                   5,794,289
   Other liabilities                                                              23,744,227                  21,209,531
   Deferred income taxes                                                          16,443,822                   9,063,941
   Liabilities related to separate accounts
     Variable Annuity                                                              8,204,456                   9,037,035
                                                                              --------------              --------------
                                                                                 558,820,161                 533,531,246
                                                                              --------------              --------------

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                                                    101,386,324                 101,386,324
   Retained earnings                                                              24,359,092                  18,748,333
   Accumulated other comprehensive income (loss):
     Net unrealized gains (losses) on investments (net of income
       tax: 2001 - $2,749,847; 2000 - $(1,759,798))                                5,106,859                  (3,268,198)
                                                                              --------------              --------------
                                                                                 133,354,275                 119,368,459
                                                                              --------------              --------------
                                                                                $692,174,436                $652,899,705
                                                                              ==============              ==============

See notes to condensed financial statements`

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

                                                                                                   Nine Months Ended
                                                                                                      September 30
                                                                                               ----------------------------
                                                                                                   2001             2000
                                                                                                   ----             ----

CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                                                $   5,610,760   $    6,672,291
   Adjustments to reconcile net income to net cash provided by operating activities:
     Realized investment gains                                                                   1,247,649           28,070
     Amortization of deferred policy acquisition costs                                           5,248,443        5,156,776
     Capitalization of deferred policy acquisition costs                                        (1,222,606)      (1,899,680)
     Deferred income tax                                                                         3,023,679        3,514,412
     Interest credited to universal life and investment products                                26,004,415       25,721,267
     Policy fees assessed on universal life and investment products                            (27,210,713)     (28,448,863)
     Change in accrued investment income and other receivables                                  (1,548,246)       5,549,246
     Change in policy liabilities and other policyholders' funds
       of traditional life and health products                                                     442,632        2,173,293
     Change in other liabilities                                                                 2,534,696          401,439
     Other (net)                                                                                     6,864           14,459
                                                                                                ----------       ----------
   Net cash provided by operating activities                                                    14,137,573       18,882,710
                                                                                                ----------       ----------
CASH FLOWS FROM INVESTING ACTIVITIES
   Maturities and principal reductions of investments
     Investments available for sale                                                            130,773,152      281,483,032
     Other                                                                                         812,016          779,055
   Sale of available for sale investments                                                       52,729,791        2,973,510
   Cost of investments acquired
     Investments available for sale                                                           (208,181,079)    (326,078,267)
     Other                                                                                                         (116,493)
                                                                                                ----------       ----------
   Net cash used in investing activities                                                       (23,866,120)     (40,959,163)
                                                                                                ----------       ----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Investment product deposits and change in universal life deposits                            38,498,681       37,722,256
   Investment product withdrawals                                                              (21,528,098)     (17,472,062)
                                                                                                ----------       ----------
   Net cash provided by financing activities                                                    16,970,583       20,250,194
                                                                                                ----------       ----------
INCREASE (DECREASE) IN CASH                                                                      7,242,036       (1,826,259)
CASH AT BEGINNING OF PERIOD                                                                      1,165,410        4,021,839
                                                                                                ----------       ----------
CASH AT END OF PERIOD                                                                       $    8,407,446   $    2,195,580
                                                                                                ==========       ==========


See notes to condensed financial statements`

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

The accompanying  unaudited  condensed  financial  statements of Protective Life and Annuity Insurance Company ("the Company")
have been  prepared on the basis of accounting  principles  generally  accepted in the United  States of America for interim  financial
information  and with the  instructions  to Form 10-Q and Rule 10-01 of  Regulation  S-X.  Accordingly,  they do not include all of the
disclosures  required by accounting  principles  generally accepted in the United States of America for complete financial  statements.
In the opinion of management,  all adjustments  (consisting only of normal recurring  accruals)  necessary for a fair presentation have
been included.  Operating  results for the nine month period ended  September 30, 2001, are not  necessarily  indicative of the results
that may be expected  for the year ending  December  31,  2001.  The  year-end  condensed  balance  sheet data was derived from audited
financial  statements,  but does not include all disclosures required by accounting  principles generally accepted in the United States
of America.  For further  information,  refer to the financial  statements and notes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 2000.

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

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

A number of civil jury  verdicts have been  returned  against  insurers and other  providers of financial  services  involving
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  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 in any given lawsuit.  In addition,  in some class
action and other lawsuits,  companies have made material settlement payments.  The Company, like other financial service companies,  in
the ordinary course of business,  is involved in such litigation or,  alternatively,  in arbitration.  Although the outcome of any such
litigation or arbitration cannot be predicted, the Company believes that at the present time there are no pending or threatened
lawsuits that are reasonably likely to have a material adverse effect on the financial  position,  results of operations,  or liquidity
of the Company.

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

`Operating Segment Income for the
                                                             Three Months Ended September 30, 2001
                                              ------------------------------------------------------------------------------
                                                                                 Dental                         Financial
                                               Acquisitions                     Benefits                       Institutions
                                              ---------------                   --------                       -------------

Premiums and policy fees                         $10,545,795                    $476,137                          $839,344
Reinsurance ceded                                 (4,171,320)                   (228,902)                           (1,027)
                                              ---------------                   --------                       -------------
   Net of reinsurance ceded                        6,374,475                     247,235                           838,317
Net investment income                              7,606,652                         635                           150,456
Other income
                                              ---------------                   --------                       -------------
       Total revenues                             13,981,127                     247,870                           988,773
                                              ---------------                   --------                       -------------
Benefits and settlement expenses                   7,459,729                     127,093                           724,434
Amortization of deferred policy
   acquisition costs                               1,498,790                                                       155,068
Other operating expenses                           2,156,286                      37,868                            20,944
                                              ---------------                   --------                       -------------
       Total benefits and expenses                11,114,805                     164,961                           900,446
                                              ---------------                   --------                       -------------
Income before income tax                           2,866,322                      82,909                            88,327

                                                                          Corporate
                                                 Investment                  and
                                                  Products                  Other            Adjustments          Total
                                              ---------------           -------------       ------------        ------------

Premiums and policy fees                            $ 42,596                                                    $11,903,872
Reinsurance ceded                                                                                                (4,401,249)
                                              ---------------           -------------       ------------        ------------
   Net of reinsurance ceded                           42,596                                                      7,502,623
Net investment income                                662,561                $158,981                              8,579,285
Realized investment gains                                                                      $(1,858,929)      (1,858,929)
Other income                                            (365)                                                          (365)
                                              ---------------           -------------       ------------        ------------
       Total revenues                                704,792                 158,981            (1,858,929)      14,222,614
                                              ---------------           -------------       ------------        ------------
Benefits and settlement expenses                     666,852                                                      8,978,108
Amortization of deferred policy
   acquisition costs                                  61,428                                                      1,715,286
Other operating expenses                              75,775                  23,681                              2,314,554
                                              ---------------           -------------       ------------        ------------
       Total benefits and expenses                   804,055                  23,681                             13,007,948
                                              ---------------           -------------       ------------        ------------
Income (loss) before income tax                      (99,263)                135,300            (1,858,929)       1,214,666
Income tax expense                                                                                 365,543          365,543
                                                                                                                ------------
       Net income                                                                                             $     849,123
                                                                                                                ============




                                                               Operating Segment Income for the
                                                             Three Months Ended September 30, 2000
                                              ------------------------------------------------------------------------------

                                                                                 Dental                         Financial
                                               Acquisitions                     Benefits                       Institutions
                                              ---------------                   --------                       -------------
Premiums and policy fees                         $10,958,563                     $328,131                         $713,408
Reinsurance ceded                                 (4,154,413)                    (164,066)                          94,614
                                              ---------------                   --------                       -------------
   Net of reinsurance ceded                        6,804,150                      164,065                          808,022
Net investment income                              7,311,983                        1,356                          169,683
Other income                                           8,718
                                              ---------------                   --------                       -------------
       Total revenues                             14,124,851                      165,421                          977,705
                                              ---------------                   --------                       -------------
Benefits and settlement expenses                   7,365,395                       88,753                          576,369
Amortization of deferred policy
   acquisition costs                               1,418,865                                                       189,539
Other operating expenses                           2,555,214                          690                           24,310
                                              ---------------                   --------                       -------------
       Total benefits and expenses                11,339,474                       89,443                          790,218
                                              ---------------                   --------                       -------------
Income before income tax                           2,785,377                       75,978                          187,487

                                                                          Corporate
                                                   Investment                and
                                                   Products                 Other            Adjustments           Total
                                              ---------------           -------------       ------------        ------------

Premiums and policy fees                          $    35,923                                                   $12,036,025
Reinsurance ceded                                                                                                (4,223,865)
                                              ---------------           -------------       ------------        ------------
   Net of reinsurance ceded                            35,923                                                     7,812,160
Net investment income                                 413,852              $235,719                               8,132,593
Realized investment gains                                                                      $  (28,070)          (28,070)
Other income                                           (9,705)                                                         (987)
                                              ---------------           -------------       ------------        ------------
       Total revenues                                 440,070               235,719               (28,070)       15,915,696
                                              ---------------           -------------       ------------        ------------
Benefits and settlement expenses                      297,174                                                     8,327,691
Amortization of deferred policy
   acquisition costs                                                                                              1,608,404
Other operating expenses                             (908,032)              (74,109)                              1,598,073
                                              ---------------           -------------       ------------        ------------
       Total benefits and expenses                   (610,858)              (74,109)                             11,534,168
                                              ---------------           -------------       ------------        ------------
Income (loss) before income tax                     1,050,928               309,828               (28,070)        4,381,528
Income tax expense                                                                              1,511,627         1,511,627
                                                                                                                ------------
Net income                                                                                                      $ 2,869,901
                                                                                                                ============





                                                               Operating Segment Income for the
                                                             Nine Months Ended September 30, 2001
                                              ------------------------------------------------------------------------------

                                                                                 Dental                         Financial
                                               Acquisitions                     Benefits                       Institutions
                                              ---------------                   --------                       -------------

Premiums and policy fees                         $32,444,234                   $1,359,619                        $2,556,710
Reinsurance ceded                                (12,230,252)                    (652,988)                           83,314
                                              ---------------                   --------                       -------------
   Net of reinsurance ceded                       20,213,982                      706,631                         2,640,024
Net investment income                             22,277,832                        3,166                           458,319
Other income                                             244
                                              ---------------                   --------                       -------------
       Total revenues                             42,492,058                      709,797                         3,098,343
                                              ---------------                   --------                       -------------
Benefits and settlement expenses                  22,675,061                      511,452                         1,867,239
Amortization of deferred policy
   acquisition costs                               4,585,970                                                        490,941
Other operating expenses                           6,402,462                       81,510                            59,952
                                              ---------------                   --------                       -------------
       Total benefits and expenses                33,663,493                      592,962                         2,418,132
                                              ---------------                   --------                       -------------
Income before income tax                           8,828,565                      116,835                           680,211

                                                                          Corporate
                                                  Investment                  and
                                                   Products                  Other            Adjustments          Total

                                              ---------------           -------------       ------------        ------------
Premiums and policy fees                          $  108,981                                                    $36,469,544
Reinsurance ceded                                                                                               (12,799,926)
                                              ---------------           -------------       ------------        ------------
   Net of reinsurance ceded                          108,981                                                     23,669,618
Net investment income                              1,161,924              $1,180,673                             25,081,914
Realized investment losses                                                                     $(1,247,649)      (1,247,649)
Other income                                           1,873                                                          2,117
                                              ---------------           -------------       ------------        ------------
       Total revenues                              1,272,778               1,180,673            (1,247,649)      47,506,000
                                              ---------------           -------------       ------------        ------------
Benefits and settlement expenses                   1,621,367                                                     26,675,119
Amortization of deferred policy
   acquisition costs                                 171,532                                                      5,248,443
Other operating expenses                             173,604                 (54,497)                             6,663,031
                                              ---------------           -------------       ------------        ------------
       Total benefits and expenses                 1,966,503                 (54,497)                            38,586,593
                                              ---------------           -------------       ------------        ------------
Income (loss) before income tax                     (693,725)              1,235,170            (1,247,649)       8,919,407
Income tax expense                                                                               3,023,679        3,023,679
Cumulative effect of change in
   accounting principle                                                                           (284,968)        (284,968)
                                                                                                                ------------
       Net income                                                                                               $ 5,610,760
                                                                                                                ============





                                                              Operating Segment Income for the
                                                            Nine Months Ended September 30, 2000
                                              ------------------------------------------------------------------------------
                                                                                 Dental                       Financial
                                              Acquisitions                       Benefits                     Institutions
                                              ---------------                   --------                       -------------

Premiums and policy fees                        $34,087,145                      $928,320                       $2,123,610
Reinsurance ceded                               (12,139,026)                     (464,159)                          94,614
                                              ---------------                   --------                       -------------
   Net of reinsurance ceded                      21,948,119                       464,161                        2,218,224
Net investment income                            21,951,958                         4,647                          462,154
Other income                                          8,718
                                              ---------------                   --------                       -------------
       Total revenues                            43,908,795                       468,808                        2,680,378
                                              ---------------                   --------                       -------------
Benefits and settlement expenses                 22,617,803                       248,899                        1,752,828
Amortization of deferred policy
   acquisition costs                              4,614,631                                                        542,145
Other operating expenses                          7,826,612                         3,365                           49,204
                                              ---------------                   --------                       -------------
       Total benefits and expenses               35,059,046                       252,264                        2,344,177
                                              ---------------                   --------                       -------------
Income before income tax                          8,849,749                       216,544                          336,201


                                                                            Corporate
                                                Investment                     and
                                                 Products                     Other         Adjustments           Total
                                              ---------------           -------------       ------------        ------------

Premiums and policy fees                       $     84,035                                                    $37,223,110
Reinsurance ceded                                                                                              (12,508,571)
                                              ---------------           -------------       ------------        ------------
   Net of reinsurance ceded                          84,035                                                     24,714,539
Net investment income                               965,739                  $212,287                           23,596,785
Realized investment losses                                                                    $  (28,070)          (28,070)
Other income                                         (1,306)                                                         7,412
                                              ---------------           -------------       ------------        ------------
       Total revenues                             1,048,468                   212,287            (28,070)       48,290,666
                                              ---------------           -------------       ------------        ------------
Benefits and settlement expenses                    774,289                                                     25,393,819
Amortization of deferred policy
   acquisition costs                                                                                             5,156,776
Other operating expenses                           (385,999)                   60,186                            7,553,368
                                              ---------------           -------------       ------------        ------------
       Total benefits and expenses                  388,290                    60,186                           38,103,963
                                              ---------------           -------------       ------------        ------------
Income (loss) before income tax                     660,178                   152,101            (28,070)       10,186,703
Income tax expense                                                                             3,514,412         3,514,412
                                                                                                                ------------
       Net income                                                                                             $  6,672,291
                                                                                                                ============




                                                           Operating Segment Assets
                                                             September 30, 2001
                                                --------------------------------------------------------------------------

                                                                                 Dental                       Financial
                                                Acquisitions                    Benefits                     Institutions
                                                --------------                ------------                  --------------

Investments and other assets                      $479,111,231                 $3,958,879                      $10,339,157
Deferred policy acquisition costs                  114,607,214                                                   1,574,641
                                                --------------                ------------                  --------------
       Total assets                               $593,718,445                 $3,958,879                      $11,913,798
                                                ==============                ============                  ==============


                                                                                Corporate
                                                 Investment                       and
                                                  Products                       Other                           Total
                                                --------------                --------------                  --------------

Investments and other assets                      $39,206,462                    $41,147,368                   $573,763,097
Deferred policy acquisition costs                   2,229,484                                                   118,411,339
                                                --------------                --------------                  --------------
       Total assets                               $41,435,946                    $41,147,368                   $692,174,436
                                                ==============                ==============                  ==============



                                                                     Operating Segment Assets
                                                                        December 31, 2000
                                               ----------------------------------------------------------------------------
                                                                               Dental                          Financial
                                               Acquisitions                   Benefits                        Institutions
                                               --------------                ------------                  --------------

Investments and other assets                    $453,999,198                   $4,034,632                      $11,462,251
Deferred policy acquisition costs                124,984,368                                                     1,596,654
                                               --------------                 ------------                  ---------------
       Total assets                             $578,983,566                   $4,034,632                      $13,058,905
                                               ==============                 ============                  ===============


                                                                                Corporate
                                               Investment                          and
                                                Products                          Other                          Total
                                               -------------                  -------------                ----------------

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

Financial
statements prepared in conformity with accounting principles generally accepted
in the United States of America (i.e., GAAP) differ in some respects from the
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. At September 30, 2001, and for the nine months then ended, the
Company had share-owners equity and net income prepared in conformity with
statutory reporting practices of $41.1 million and $10.9 million, respectively.

The
National Association of Insurance Commissioners (NAIC) has adopted
the Codification of Statutory Accounting Principles (Codification).
The Codification changed current statutory accounting rules in several areas and
was effective January 1, 2001. The adoption of the Codification did not have a
material effect on the Companys statutory capital.

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

                                                                      Three Months Ended           Nine Months Ended
                                                                         September 30                September 30
                                                                -----------------------------------------------------------

                                                                   2001             2000             2001           2000
                                                                   ----             ----             ----           ----

Net income                                                        $  849,123       $2,869,901      $5,610,760   $ 6,672,291
Increase in net unrealized gains
   on investments (net of income tax:
   three months: 2001 - $2,411,645; 2000 - $1,062,485
   nine months: 2001 - $3,919,524; 2000 - $3,424,114)              4,478,770        1,973,184       7,279,117     6,359,067
Reclassification adjustment for amounts
   included in net income (net of income tax:
   three months: 2001 - $650,625; 2000 - $9,824
   nine months: 2001 - $436,677; 2000 - $9,824)                    1,208,304           18,246         810,972        18,246
Transition adjustment on derivative financial
   instruments (net of income tax:
   nine months: 2001 - $153,444)                                                                      284,968
                                                                  ----------       ----------     -----------   -----------
Comprehensive income                                              $6,536,197       $4,861,331     $13,985,817   $13,049,604
                                                                  ==========       ==========     ===========   ===========`

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.

On
January 1, 2001, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133, as amended by SFAS Nos. 137 and 138,
requires the Company to record all derivative financial instruments at fair
value on the balance sheet. Changes in fair value of a derivative instrument are
reported in net income or other comprehensive income, depending on the
designated use of the derivative instrument. The adoption of SFAS No. 133
resulted in a cumulative after-tax charge to net income of $0.3 million and a
cumulative after-tax increase to other comprehensive income of $0.3 million on
January 1, 2001. The charge to net income and increase to other comprehensive
income primarily resulted from the recognition of derivative instruments
embedded in the Companys corporate bond portfolio. Prospectively, the
adoption of SFAS No. 133 may introduce volatility into the Companys
reported net income and other comprehensive income depending on future market
conditions and the Companys hedging activities.

In
September 2000 the FASB issued SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinquishments of Liabilities, a replacement
of SFAS No. 125". SFAS No. 140 revises the standards for accounting for
securitizations and other transfers of financial assets. This Statement is
effective for transfers and servicing of financial assets and extinquishments of
liabilities occurring after March 31, 2001. The adoption of this accounting
standard did not have a material effect on the Companys financial position
or results of operations.

In
June 2001, the FASB issued SFAS Nos. 141, Business Combinations, and
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires
that business combinations initiated after June 30, 2001, be accounted for using
the purchase method. SFAS No. 142 revises the standards for accounting for
acquired goodwill and other intangible assets. SFAS No. 142 is effective for
fiscal years beginning after December 15, 2001, and effective for any goodwill
or intangible asset acquired after June 30, 2001. The Company does not expect
the adoption of SFAS No. 142 to have a material effect on the Companys
financial position or results of operations.

In
July 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires that companies record the fair value of
a liability for an asset retirement obligation in the period in which the
liability is incurred. The Statement is effective for fiscal years beginning
after June 15, 2002. The Company does not expect the adoption of SFAS No. 143 to
have a material effect on the Companys financial position or results of
operations.

In
October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 revises SFAS No. 121 by
requiring that one accounting model be used for long-lived assets to be disposed
of by sale, whether previously held and used or newly acquired, and by
broadening the presentation of discontinued operations to include more disposal
transactions. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001. The Company does not expect the adoption of SFAS No. 144 to
have a material effect on the Companys financial position or results of
operations.

On
July 10, 2001, PLC announced that it had entered into an agreement to sell
substantially all of its Dental Benefits Division to Fortis, Inc. for
approximately $300 million. PLC anticipates that the transaction will close in
December 2001, and will be accounted for as discontinued
operations. The transaction is subject to regulatory approval and certain
customary closing conditions. PLC will realize a pretax gain on the sale, but
will incur income tax expense and exit costs that currently are estimated to
result in a loss after income tax of approximately $23.9 million. The sale of
the Dental Benefits Division is not expected to have a material adverse effect
on the Companys financial position or results of operations.

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

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

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

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

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

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

The
following discussion and analysis primarily relates to the nine months ended
September 30, 2001, as it compares to the same period last year. Unless
otherwise noted, the general factors discussed also apply to the quarter ended
September 30, 2001, as it compares to the same quarter last year. Where needed
for a more complete understanding of the Companys operating results,
information related to the quarters ended September 30, 2001, and September 30,
2000, has been provided. It is managements opinion that quarterly
operating results for insurance enterprises are not necessarily indicative of
results to be achieved in succeeding quarters, and that a review of operating
results over a longer period yields a better understanding of the Companys
performance.

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

                                                          Three Months Ended                   Nine Months Ended
                                                              September 30                        September 30
                                                    ---------------------------------       -----------------------------
                                                           2001              2000               2001              2000
                                                           ----              ----               ----              ----

         Premiums and policy fees                     $  7,502,623      $  7,812,160         $23,669,618      $24,714,539
         Net investment income                           8,579,285         8,132,593          25,081,914       23,596,785
         Realized investment losses                     (1,858,929)          (28,070)         (1,247,649)         (28,070)
         Other income                                         (365)             (987)              2,117            7,412
                                                       -----------      -------------        -----------     ------------
                                                       $14,222,614       $15,915,696         $47,506,000      $48,290,666
                                                       ===========      =============        ===========     ============`

Premiums
and policy fees, net of reinsurance (premiums and policy fees)
decreased $1.0 million or 4.2% in the first nine months of 2001 over the first
nine months of 2000. Premiums and policy fees in the Acquisitions Division are
expected to decline with time unless new acquisitions are made. No acquisitions
were made in this Division in 2000 or the first nine months of 2001, therefore
decreases in older acquired policies resulted in a decrease of $1.7 million in
the first nine months of 2001 as compared with the first nine months of 2000.
This decrease was partially offset by increases in premiums and policy fees in
both the Dental Benefits and Financial Institutions Divisions. Premiums and
policy fees related to the Investment Products Division remained relatively
unchanged in the first nine months of 2001 as compared to the same period in
2000.

Net
investment income in the first nine months of 2001 increased by $1.5 million as
compared to the corresponding period of the preceding year primarily due to
increases in the average amount of invested assets. The Company could experience
significant realized investment losses were it to make adjustments to its
existing fixed maturity portfolio.

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

Realized
investment losses were approximately $1.2 million in the first nine months of
2001. During the third quarter of 2001, the Company recorded other than
temporary impairments on its investments of $1.9 million. There were no
significant realized investment gains (losses) in the first nine months of 2000.

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

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
                                                            (In Thousands)

                                                           Three Months Ended                       Nine Months Ended
                                                               September 30                            September 30
                                                          --------------------------             -------------------------
                                                            2001               2000                2001            2000
                                                            ----               -----               ----            ----
Operating Income (Loss)1
     Acquisitions                                        $2,866,322         $2,785,377        $ 8,828,565     $  8,849,749
     Dental Benefits                                         82,909             75,978            116,835          216,544
     Financial Institutions                                  88,327            187,487            680,211          336,201
     Investment Products                                    (99,263)         1,050,928           (693,725)         660,178
     Corporate and Other                                    135,300            309,828          1,235,170          152,101
                                                          ----------         ---------         ----------       ----------
           Total operating income                         3,073,595          4,409,598         10,167,056       10,214,773
                                                          ----------         ---------         ----------       ----------

Realized Investment Losses
     Unallocated Realized Investment Losses              (1,858,929)           (28,070)        (1,247,649)         (28,070)
                                                         -----------         ----------        -----------         --------
           Total net                                     (1,858,929)           (28,070)        (1,247,649)         (28,070)
                                                         -----------         ----------        -----------         --------

Income (Loss) Before Income Tax
     Acquisitions                                         2,866,322          2,785,377          8,828,565        8,849,749
     Dental Benefits                                         82,909             75,978            116,835          216,544
     Financial Institutions                                  88,327            187,487            680,211          336,201
     Investment Products                                    (99,263)         1,050,928           (693,725)         660,178
     Corporate and Other                                    135,300            309,828          1,235,170          152,101
     Unallocated Realized Investment Losses              (1,858,929)           (28,070)        (1,247,649)         (28,070)
                                                         ----------         ----------        ------------     -----------
           Total income before income tax                $1,214,666         $4,381,528        $ 8,919,407      $10,186,703
                                                         ==========         ==========        ============     ===========

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

Pretax operating  income from the Acquisitions  Division was $8.8 million in the first nine months of 2001 as compared to $8.8
million in the same period of 2000.  Earnings from the  Acquisitions  Division are expected to decline over time (due to the lapsing of
policies  resulting from deaths of insureds or terminations of coverage)  unless new  acquisitions are made. The increase in investment
income on invested assets  allocated to the Division and the decrease in operating  expenses  partially offset the decrease in premiums
and policy fees.

The Dental  Benefits  Division  had pretax  earnings  of $0.1  million in the first nine  months of 2001 as  compared  to $0.2
million in the first nine months of 2000.  The decrease is primarily due to increased benefit and settlement expenses in 2001.

The Financial  Institutions  Division's  pretax operating income was $0.7 million in the first nine months of 2001 as compared
to $0.3  million in the same  period of 2000.  The  increase  in  operating  income was  primarily  due to an increase in sales for the
period.

The Investment  Products  Division began  marketing  certain  annuity  products in the state of New York in the latter part of
1998.  The Division had pretax  operating  losses of $0.7 million in the first nine months of 2001 and $0.7 million of pretax income in
the same period of 2000.  The amortization of deferred acquisition costs and an increase in settlement costs contributed to the loss.

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 $1.2 million in the first nine months of 2001 as compared to a $0.2 million
in the first nine months of 2000.

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

                                                      Three Months Ended                   Nine Months Ended
                                                          September 30                       September 30
                                                      ----------------------            ------------------------
                                                       2001            2000               2001            2000
                                                       ----            ----              -----            -----

         Estimated Effective Income
            Tax Rates                                  30.1%           34.5%              33.9%           34.5%`

The effective  income tax rate for the full year of 2000 was 34.5%.  Management's  estimate of the  effective  income tax rate
for 2001 is approximately 33.9%.

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

                                                      Three Months Ended                         Nine Months Ended
              Net Income                                  September 30                             September 30
             ------------                             -----------------------                 -------------------------
                                                        2001            2000                    2001              2000
                                                        ----            ----                    ----              ----

                Total                                 $849,123        $2,869,901              $5,610,760       $6,672,291`

Compared
to the same period in 2000, net income in the first nine months of 2001
decreased $1.1 million, reflecting decreases in the Acquisitions, Investment
Products and Dental Benefits Divisions and a charge to earnings related to the
cumulative effect of a change in accounting principle, which were partially
offset by increases in the Financial Institutions Division and the Corporate and
Other segment.

## PART II

Item 6.                Exhibits and Reports on Form 8-K

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

## SIGNATURE

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

|      |                   | Protective Life and Annuity Insurance Company
|----- | ----------------- | ---------------------------------------------
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|Date: | November 14, 2001 | /s/ Jerry W. Defoor                          
|      |                   | Jerry W. DeFoor                              
|      |                   | Vice President and Controller                
|      |                   | and Chief Accounting Officer                 
|      |                   | (Duly authrorized officer)