Exhibit 99toForm 10-Q of Protective Life and Annuity Insurance Company for the six months ended June 30, 2003 

Safe Harbor forForward-Looking Statements 

        ThePrivate Securities Litigation Reform Act of 1995 (the Act) encourages companies to make“forward-looking statements” by creating a safe harbor to protect the companiesfrom securities law liability in connection with forward-looking statements. Allstatements based on future expectations rather than on historical facts areforward-looking statements. Forward-looking statements can be identified by use of wordssuch as “expect,” “estimate,” “project,” “budget,”“forecast,” “anticipated,” “plan,” and similar expressions.Protective Life and Annuity Insurance Company (the Company) intends to qualify both itswritten and oral forward-looking statements for protection under the Act. 

        Toqualify oral forward-looking statements for protection under the Act, a readily availablewritten document must identify important factors that could cause actual results to differmaterially from those in the forward-looking statements. The Company provides thefollowing information to qualify forward-looking statements for the safe harbor protectionof the Act. 

        TheCompany is a stock life insurance company founded in 1978. All outstanding shares of theCompany’s common stock are owned by Protective Life Insurance Company (Protective),which is the principal operating subsidiary of Protective Life Corporation (PLC), aninsurance holding company whose common stock is traded on the New York Stock Exchangeunder the symbol “PL”. All outstanding shares of the Company’s preferredstock are owned by PLC. The Company is authorized to transact insurance business, as aninsurance company or reinsurance company, in 49 states, including New York. 

        ProtectiveLife Corporation (PLC), through its subsidiaries, operates several business segments. TheCompany, since it is licensed in the State of New York, is the entity through which PLCmarkets, distributes, and services insurance and annuity products in New York. As of June30, 2003, the Company was involved in the operations of four of PLC’s segments: theLife Marketing segment, the Annuities segment, the Acquisitions segment, and the AssetProtection segment. The Company has an additional business segment which is describedherein as Corporate and Other. 

        Theoperating results of companies in the insurance industry have historically been subject tosignificant fluctuations. The factors which could affect the Company’s future resultsinclude, but are not limited to, general economic conditions, and the known trends anduncertainties which are discussed more fully below. 

        Whilethe Company has obtained insurance, implemented risk management and contingency plans, andtaken preventive measures and other precautions, no predictions of specific scenarios canbe made nor can assurance be given that there are not scenarios that could have an adverseeffect on the Company. A natural disaster or an outbreak of an easily communicable diseasecould adversely affect the mortality or morbidity experience of the Company or itsreinsurers. 

        Lifeand health insurance is a mature industry. In recent years, the industry has experiencedlittle growth in life insurance sales, though the aging population has increased thedemand for retirement savings products. Life and health insurance is a highly competitiveindustry. The Company encounters significant competition in all lines of business fromother insurance companies, many of which have greater financial resources than theCompany, as well as competition from other providers of financial services. Competitioncould result in, among other things, lower sales or higher lapses of existing products. 

        Theinsurance industry is consolidating, with larger, potentially more efficient organizationsemerging from consolidation. Participants in certain of the Company’s independentdistribution channels are also consolidating into larger organizations. Some mutualinsurance companies are converting to stock ownership, which will give them greater accessto capital markets. Additionally, commercial banks, insurance companies, and investmentbanks may now combine, provided certain requirements are satisfied. The ability of banksto increase their securities-related business or to affiliate with insurance companies maymaterially and adversely affect sales of all of the Company’s products bysubstantially increasing the number and financial strength of potential competitors. 

        TheCompany’s ability to compete is dependent upon, among other things, its ability toattract and retain distribution channels to market its insurance and investment products,its ability to develop competitive and profitable products, its ability to maintain lowunit costs, and its maintenance of strong ratings from rating agencies. 

        Ratingorganizations periodically review the financial performance and condition of insurers,including the Company and its insurance affiliates. A downgrade in the ratings of theCompany or its insurance affiliates could adversely affect the Company’s ability tosell its products, retain existing business, and compete for attractive acquisitionopportunities. 

        Ratingorganizations assign ratings based upon several factors. While most of the factors relateto the rated company, some of the factors relate to the views of the rating organization,general economic conditions, and circumstances outside the rated company’s control.The Company cannot predict what actions the rating organizations may take, or what actionsthe Company may be required to take in response to the actions of the ratingorganizations, which could adversely affect the Company. 

        TheCompany’s results may fluctuate from period to period due to fluctuations in policyclaims received by the Company. Certain of the Company’s businesses may experiencehigher claims if the economy is growing slowly or in recession, or equity markets decline. 

        Mortality,morbidity, and casualty expectations incorporate assumptions about many factors, includingfor example, how a product is distributed, persistency and lapses, and future progress inthe fields of health and medicine. Actual mortality, morbidity, and casualty claims coulddiffer from expectations if actual results differ from those assumptions. 

        Inthe conduct of its business, the Company makes certain assumptions regarding themortality, persistency, expenses and interest rates, or other factors appropriate to thetype of business it expects to experience in future periods. These assumptions are alsoused to estimate the amounts of deferred policy acquisition costs, policy liabilities andaccruals, and various other components of the Company’s balance sheet. TheCompany’s actual experience, as well as changes in estimates, are used to prepare theCompany’s statements of income. 

        Thecalculations the Company uses to estimate various components of its balance sheet andstatements of income are necessarily complex and involve analyzing and interpreting largequantities of data. The Company currently employs various techniques for such calculationsand it from time to time will develop and implement more sophisticated administrativesystems and procedures capable of facilitating the calculation of more precise estimates. 

        Assumptionsand estimates involve judgment, and by their nature are imprecise and subject to changesand revision over time. Accordingly, the Company’s results may be affected,positively or negatively, from time to time, by actual results differing from assumptions,by changes in estimates, and by changes resulting from implementing more sophisticatedadministrative systems and procedures that facilitate the calculation of more preciseestimates. 

        Thetiming of premium payments to, and receipt of expense allowances from, reinsurers maydiffer from the Company’s receipt of customer premium payments and payment ofexpenses. These timing differences introduce variability into certain components of theCompany’s statements of income, and may also introduce variability into theCompany’s quarterly results. 

        Manyof the products offered by the Company and its insurance affiliates allow policyholdersand contract holders to withdraw their funds under defined circumstances. The Company andits insurance affiliates manage their liabilities and configure investment portfolios soas to provide and maintain sufficient liquidity to support anticipated withdrawal demandsand contract benefits and maturities. While the Company and its insurance affiliates own asignificant amount of liquid assets, a certain portion of their assets are relativelyilliquid. If the Company and its insurance affiliates experience unanticipated withdrawalor surrender activity, the Company and its insurance affiliates could exhaust their liquidassets and be forced to liquidate other assets, perhaps on unfavorable terms. If theCompany and its insurance affiliates are forced to dispose of assets on unfavorable terms,it could have an adverse effect on the Company’s financial condition. 

        Significantchanges in interest rates expose insurance companies to the risk of not earninganticipated spreads between the interest rate earned on investments and the creditedinterest rates paid on outstanding policies and contracts. Both rising and declininginterest rates can negatively affect the Company’s spread income. While the Companydevelops and maintains asset/liability management programs and procedures designed topreserve spread income in rising or falling interest rate environments, no assurance canbe given that changes in interest rates will not affect such spreads. 

        Fromtime to time, the Company has participated in securities repurchase transactions that havecontributed to the Company’s investment income. Such transactions involve some degreeof risk that the counterparty may fail to perform its obligation to pay amounts owed andthe collateral has insufficient value to satisfy the obligation. No assurance can be giventhat such transactions will continue to be entered into and contribute to theCompany’s investment income in the future. 

        Changesin interest rates may also impact our business in other ways. Lower interest rates mayresult in lower sales of certain of the Company’s insurance and investment products.In addition, certain of the Company’s insurance and investment products guarantee aminimum credited interest rate, and the Company could become unable to earn its spreadincome should interest rates decrease significantly. 

        Higherinterest rates may create a less favorable environment for the origination of mortgageloans and decrease the investment income the Company receives in the form of prepaymentfees, make-whole payments, and mortgage participation income. Higher interest rates mayalso increase the cost of debt and other obligations having floating rate or rate resetprovisions and may result in lower sales of variable products. 

        Additionally,the Company’s asset/liability management programs and procedures incorporateassumptions about the relationship between short-term and long-term interest rates (i.e.,the slope of the yield curve) and relationships between risk-adjusted and risk-freeinterest rates, market liquidity, and other factors. The effectiveness of theCompany’s asset/liability management programs and procedures may be negativelyaffected whenever actual results differ from these assumptions. 

        Ingeneral terms, the Company’s results are improved when the yield curve is positivelysloped (i.e., when long-term interest rates are higher than short-term interest rates),and will be adversely affected by a flat or negatively sloped curve. 

        The amountof policy fees received from variable products is affected by the performance of theequity markets, increasing or decreasing as markets rise or fall. Equity market volatilitycan also affect the profitability of variable products in other ways. 

        Theamortization of deferred policy acquisition costs relating to variable products and theestimated cost of providing guaranteed minimum death benefits incorporate variousassumptions about the overall performance of equity markets over certain time periods. Therate of amortization of deferred policy acquisition costs and the estimated cost ofproviding guaranteed minimum death benefits could increase if equity market performance isworse than assumed. 

        Thebusiness of insurance necessarily involves the collection and dissemination of largeamounts of data using systems operated by the Company. Examples of data collected andanalyzed include policy information, policy rates, expenses, mortality and morbidityexperience. To the extent that data input errors, systems errors, or systems failures arenot identified and corrected by the Company’s internal controls, the informationgenerated by the systems and used by the Company and/or supplied to business partners,policyholders, and others may be incorrect and may result in an overpayment orunderpayment of amounts owed to or by the Company and/or the Company using incorrectassumptions in its business decisions or financial reporting. 

        TheCompany and its insurance affiliates are subject to government regulation in each of thestates in which they conduct business. Such regulation is vested in state agencies havingbroad administrative power dealing with many aspects of the insurance business, which mayinclude premium rates, marketing practices, advertising, policy forms, and capitaladequacy, and is concerned primarily with the protection of policyholders rather thanshare owners. At any given time, a number of financial and/or market conduct examinationsof the Company or its insurance affiliates is ongoing. From time to time, regulators raiseissues during examinations or audits of the Company and its insurance affiliates that could, if determined adversely, have amaterial impact on the Company.The Company cannot predict whether or when regulatoryactions may be taken that could adversely affect the Company or its operations. 

        TheCompany and its insurance affiliates may be subject to regulation by the United StatesDepartment of Labor when providing a variety of products and services to employee benefitplans governed by the Employment Retirement Income Security Act (ERISA). Severe penaltiesare imposed for breach of duties under ERISA. 

        Certainpolicies, contracts, and annuities offered by the Company and its insurance affiliates aresubject to regulation under the federal securities laws administered by the Securities andExchange Commission. The federal securities laws contain regulatory restrictions andcriminal, administrative, and private remedial provisions. 

        Othertypes of regulation that could affect the Company and its insurance affiliates includeinsurance company investment laws and regulations, state statutory accounting practices,state anti-trust laws, and minimum solvency requirements. The Company cannot predict whatform any future changes in these or other areas of regulation affecting the insuranceindustry might take or what effect, if any, such proposals might have on the Company ifenacted into law. 

        Underthe Internal Revenue Code of 1986, as amended (the “Code”), income tax payableby policy holders on investment earnings is deferred during the accumulation period ofcertain life insurance and annuity products. This favorable tax treatment may give certainof the Company’s products a competitive advantage over other non-insurance products.To the extent that the Code is revised to reduce the tax-deferred status of life insuranceand annuity products, or to increase the tax-deferred status of competing products, alllife insurance companies, including the Company and its affiliates, would be adverselyaffected with respect to their ability to sell such products, and, depending upongrandfathering provisions, would be affected by the surrenders of existing annuitycontracts and life insurance policies. For example, changes in laws or regulations couldrestrict the ability of some companies to purchase certain corporate or bank-owned lifeinsurance products. Recent changes in tax law, which have reduced the federal income taxrates on corporate dividends in certain circumstances, could make the tax advantages ofinvesting in certain life insurance or annuity products less attractive. Additionally,changes in tax law based on recent proposals to establish new tax advantaged retirementand life savings plans, if enacted, could reduce the tax advantage of investing in certainlife insurance or annuity products. In addition, life insurance products are often used tofund estate tax obligations. Legislation has recently been enacted that would, over time,reduce and eventually eliminate the estate tax. If the estate tax is significantly reducedor eliminated, the demand for certain life insurance products could be adversely affected.Additionally, the Company is subject to the federal corporation income tax. The Companycannot predict what changes to tax law or interpretations of existing tax law couldadversely affect the Company. 

        Anumber of civil jury verdicts have been returned against insurers, broker-dealers, andother providers of financial services involving sales practices, alleged agent misconduct,failure to properly supervise representatives, relationships with agents or other personswith whom the insurer does business and other matters. Increasingly these lawsuits haveresulted in the award of substantial judgments that are disproportionate to the actualdamages, including material amounts of punitive non-economic compensatory damages. In somestates, juries, judges, and arbitrators have substantial discretion in awarding punitiveand non-economic compensatory damages, which creates the potential for unpredictablematerial adverse judgments or awards in any given lawsuit or arbitration. Arbitrationawards are subject to very limited appellate review. In addition, in some class action andother lawsuits, companies have made material settlement payments. The Company, like otherfinancial services companies, in the ordinary course of business is involved in suchlitigation and arbitration. The Company cannot predict the outcome of any such litigationor arbitration. 

        TheCompany’s ability to maintain low unit costs is dependent upon the level of new salesand persistency (continuation or renewal) of existing business. A decrease in sales orpersistency without a corresponding reduction in expenses may result in higher unit costs. 

        Additionally,a decrease in persistency may result in higher or more rapid amortization of deferredpolicy acquisition costs and thus higher unit costs, and lower reported earnings. Althoughmany of the Company’s products contain surrender charges, the charges decrease overtime and may not be sufficient to cover the unamortized deferred policy acquisition costswith respect to the insurance policy or annuity contract being surrendered. Some of theCompany’s products do not contain surrender charge features and such products can besurrendered or exchanged without penalty. A decrease in persistency may also result inhigher claims. 

        TheCompany’s invested assets and derivative financial instruments are subject tocustomary risks of credit defaults and changes in market values. The value of theCompany’s commercial mortgage loan portfolio depends in part on the financialcondition of the tenants occupying the properties which the Company has financed. Factorsthat may affect the overall default rate on, and market value of, the Company’sinvested assets, derivative financial instruments, and mortgage loans include interestrate levels, financial market performance, and general economic conditions as well asparticular circumstances affecting the businesses of individual borrowers and tenants. 

        TheCompany’s acquisitions have increased its earnings in part by allowing the Company toenter new markets and to position itself to realize certain operating efficiencies. Therecan be no assurance, however, that suitable acquisitions, presenting opportunities forcontinued growth and operating efficiencies, or capital to fund acquisitions will continueto be available to the Company, or that the Company will realize the anticipated financialresults from its acquisitions. 

        Additionally,in connection with its acquisitions, the Company assumes or otherwise becomes responsiblefor the obligations of policies and other liabilities of other insurers. Any regulatory,legal, financial, or other adverse development affecting the other insurer could also havean adverse effect on the Company. 

        The Company’sresults may be affected by the performance of others because the Company has entered intovarious arrangements involving other parties. For example, most of the Company’sproducts are sold through independent distribution channels and variable annuity depositsare invested in funds managed by third parties. Additionally, the Company’soperations are dependent on various technologies some of which are provided and/ormaintained by other parties. 

        Certainof these other parties may act on behalf of the Company or represent the Company invarious capacities. Consequently, the Company may be held responsible for obligations thatarise from the acts or omissions of these other parties. 

        Aswith all financial services companies, its ability to conduct business is dependent uponconsumer confidence in the industry and its products. Actions of competitors, andfinancial difficulties of other companies in the industry, could undermine consumerconfidence and adversely affect retention of existing business and future sales of theCompany’s insurance and investment products. 

        TheCompany and its insurance affiliates cede material amounts of insurance and transferrelated assets to other insurance companies through reinsurance. The Company may enterinto third party reinsurance arrangements under which the Company will rely on the thirdparty to collect premiums, pay claims, and/or perform customer service functions. However,notwithstanding the transfer of related assets or other issues, the Company remains liablewith respect to ceded insurance should any reinsurer fail to meet the obligations assumedby it. 

        TheCompany’s ability to compete is dependent on the availability of reinsurance. Premiumrates charged by the Company are based, in part, on the assumption that reinsurance willbe available at a certain cost. Under certain reinsurance agreements, the reinsurer mayincrease the rate it charges the Company for the reinsurance, though the Company does notanticipate increases to occur with respect to existing reinsurance contracts. Therefore,if the cost of reinsurance were to increase or if reinsurance were to become unavailable,or if a reinsurer should fail to meet its obligations, the Company could be adverselyaffected. 

        Recently,certain commentators on the insurance industry have speculated that reinsurance mightbecome more costly or less available in the future, which could have a negative effect onthe Company’s ability to compete. In recent years, the number of life reinsurers hasdecreased as the reinsurance industry has consolidated. The decreased number ofparticipants in the life reinsurance market results in increased concentration risk forinsurers, including the Company. In addition, some reinsures have indicated anunwillingness to continue to reinsure new sales of long-term guarantee products. If thereinsurance markets for these products contracts, the Company’s ability to continueto offer such products would be adversely impacted. 

        A computervirus could affect the data processing systems of the Company or its business partners,destroying valuable data or making it difficult to conduct their business. 

        **Forward-lookingstatements express expectations of future events and/or results. All forward-lookingstatements are inherently uncertain as they are based on various expectations andassumptions concerning future events and they are subject to numerous known and unknownrisks and uncertainties which could cause actual events or results to differ materiallyfrom those projected. Due to these inherent uncertainties, investors are urged not toplace undue reliance on forward-looking statements. In addition, the Company undertakes noobligation to update or revise forward-looking statements to reflect changed assumptions,the occurrence of unanticipated events, or changes to projections over time.**