#### FORM 10-Q

#### UNITED STATES

#### SECURITIES AND EXCHANGE COMMISSION

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

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

# For the quarterly period ended September 30, 2003

# OR

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

# For the transition period from ___ to ___

# Commission File Number 333-42425

# Protective Life and Annuity Insurance Company

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

# 2801 HIGHWAY 280 SOUTHBIRMINGHAM, ALABAMA 35223

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

Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).  Yes [ ]  No [X]

Number of shares of Common Stock, $10.00 par value,  outstanding
as of November 7, 2003: 250,000 shares.

`PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY



                                                                 INDEX



Part I.  Financial Information:
   Item 1.  Financial Statements:
       Report of Independent Auditors
       Condensed Statements of Income for the Three and
           Nine Months ended September 30, 2003 and 2002 (unaudited)
       Condensed Balance Sheets as of September 30, 2003
           (unaudited) and December 31, 2002
       Condensed Statements of Cash Flows for the
           Nine Months ended September 30, 2003 and 2002 (unaudited)
       Notes to Condensed Financial Statements (unaudited)

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

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

Signature`

REPORT OF INDEPENDENT
AUDITORS

To the Directors and
Share Owners
Protective Life and Annuity Insurance Company

We have reviewed the accompanying
condensed balance sheet of Protective Life and Annuity Insurance Company as of September
30, 2003, and the related condensed statements of income for each of the three-month and
nine-month periods ended September 30, 2003 and 2002, and the condensed statements of cash
flows for the nine-month periods ended September 30, 2003 and 2002. 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, 2002, 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 3, 2003, 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, 2002, is fairly stated in all material respects in relation to the balance
sheet from which it has been derived.

/s/PricewaterhouseCoopers
LLPPricewaterhouseCoopers LLP

Birmingham, Alabama
November 7, 2003

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

                                                                            Three Months Ended                  Nine Months Ended
                                                                               September 30                       September 30
                                                                           2003              2002            2003               2002
----------------------------------------------------------------------------------------------------------------------------------------

REVENUES
  Premiums and policy fees                                             $17,610,353       $12,998,040    $55,766,165         $36,072,174
  Reinsurance ceded                                                    (11,180,601)       (6,108,778)   (35,866,491)        (14,332,542)
----------------------------------------------------------------------------------------------------------------------------------------
    Premiums and policy fees, net of reinsurance ceded                   6,429,752         6,889,262     19,899,674          21,739,632
  Net investment income                                                  9,840,689         9,348,179     30,698,992          26,952,791
  Realized investment gains (losses)                                     1,106,032          (249,668)     3,384,562            (779,360)
  Other income                                                               6,545             6,378        149,199               8,591
----------------------------------------------------------------------------------------------------------------------------------------
                                                                        17,383,018        15,994,151     54,132,427          47,921,654
----------------------------------------------------------------------------------------------------------------------------------------


BENEFITS AND EXPENSES
  Benefits and settlement expenses
  (net of reinsurance ceded:
    three months: 2003 - $8,319,739; 2002 - $5,381,394
    nine months: 2003 - $22,851,317; 2002 - $11,864,729)                 8,143,085         9,174,577     24,264,248          25,776,996
  Amortization of deferred policy acquisition costs                      1,956,536         1,975,347      6,040,291           6,891,892
  Other operating expenses (net of reinsurance ceded:
    three months: 2003 - $(168,669); 2002 - $531,435
    nine months: 2003 - $(1,566,318); 2002 - $480,373)                   1,752,609         1,786,366      6,093,527           6,292,258
----------------------------------------------------------------------------------------------------------------------------------------
                                                                        11,852,230        12,936,290     36,398,066          38,961,146
----------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX                                                 5,530,788         3,057,861     17,734,361           8,960,508

Income tax expense                                                       1,934,028         1,062,881      6,193,450           3,126,545
----------------------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                              $3,596,760        $1,994,980    $11,540,911          $5,833,963
----------------------------------------------------------------------------------------------------------------------------------------


See notes to condensed financial statements`

`PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
                                                       CONDENSED BALANCE SHEETS


                                                                                               September 30            December 31
                                                                                                  2003                     2002
                                                                                               (Unaudited)
----------------------------------------------------------------------------------------------------------------------------------------

ASSETS
  Investments:
   Fixed maturities, at market
   (amortized cost: 2003 - $610,964,301; 2002 - $466,924,086)                                  $652,715,694          $488,701,807
   Mortgage loans on real estate                                                                  1,643,618             1,793,590
   Policy loans                                                                                  53,846,245            54,807,151
   Short-term investments                                                                         2,633,304           178,805,245
------------------------------------------------------------------------------------------------------------------------------------
      Total investments                                                                         710,838,861           724,107,793
  Cash                                                                                           17,001,876             1,669,532
  Accrued investment income                                                                      10,254,468             8,955,807
  Accounts and premiums receivable, net of allowance
    for uncollectible amounts                                                                       536,465               325,479
  Reinsurance receivables                                                                        65,096,543            92,256,257
  Deferred policy acquisition costs                                                              94,849,696           104,779,582
  Other assets                                                                                       14,184                21,955
  Assets related to separate accounts
    Variable Annuity                                                                             10,165,057             8,382,367
------------------------------------------------------------------------------------------------------------------------------------
                                                                                               $908,757,150          $940,498,772
------------------------------------------------------------------------------------------------------------------------------------

LIABILITIES
  Policy liabilities and accruals:
    Future policy benefits and claims                                                          $501,470,233          $517,624,864
    Unearned premiums                                                                            16,256,820            26,349,028
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                517,727,053           543,973,892
  Annuity deposits                                                                               57,510,054            60,080,082
  Other policyholders' funds                                                                      2,766,021             6,025,066
  Funds held-coinsurance                                                                         55,921,435            89,552,015
  Other liabilities                                                                              14,640,424            14,214,260
 Deferred income taxes                                                                           36,634,068            25,533,038
  Liabilities related to separate accounts
    Variable Annuity                                                                             10,165,057             8,382,367
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                695,364,112           747,760,720
------------------------------------------------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENT LIABILITIES - NOTE B
SHARE-OWNERS' EQUITY
  Preferred Stock, $1.00 par value, shares authorized and issued: 2,000                               2,000                 2,000
  Common Stock, $10.00 par value,
     Shares authorized: 500,000
     Shares issued and outstanding: 250,000                                                       2,500,000             2,500,000
  Additional paid-in capital                                                                    171,386,324           171,386,324
  Retained earnings                                                                              20,884,076             9,343,166
  Accumulated other comprehensive income:
     Net unrealized gains on investments (net of income tax:
       2003 - $10,026,497; 2002 - $5,118,918)                                                    18,620,638             9,506,562
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                213,393,038           192,738,052
------------------------------------------------------------------------------------------------------------------------------------
                                                                                               $908,757,150          $940,498,772
------------------------------------------------------------------------------------------------------------------------------------





See notes to condensed financial statements`

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

                                                                                                      Nine Months Ended
                                                                                                         September 30
                                                                                                   2003                2002
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                                                  $ 11,540,911      $   5,833,963
   Adjustments to reconcile net income to net cash provided by
   operating activities:
     Realized investment (gains) losses                                                          (3,384,562)           779,360
     Amortization of deferred policy acquisition costs                                            6,040,291          6,891,892
     Capitalization of deferred policy acquisition costs                                         (2,093,465)        (1,643,281)
     Deferred income tax                                                                          6,193,450          3,126,545
     Interest credited to universal life and investment products                                 16,227,425         24,579,534
     Policy fees assessed on universal life and investment products                             (25,560,549)       (26,117,836)
     Change in accrued investment income and other receivables                                   25,650,067          7,382,601
     Change in policy liabilities and other policyholders' funds of traditional
       life and health products                                                                 (32,402,227)        (1,085,040)
     Change in funds held-coinsurance                                                           (33,630,580)          (786,199)
     Change in other liabilities                                                                    426,165         (4,537,271)
     Other (net)                                                                                      7,771             (1,318)
------------------------------------------------------------------------------------------------------------------------------------
   Net cash (used in) provided by operating activities                                          (30,985,303)        14,422,950
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Maturities and principal reductions of investments
     Investments available for sale                                                             273,682,191         54,573,275
     Other                                                                                        1,110,878            577,349
   Sale of investments
     Investments available for sale                                                             335,958,623        249,674,713
   Cost of investments acquired
     Investments available for sale                                                            (574,093,484)      (338,302,871)
------------------------------------------------------------------------------------------------------------------------------------
   Net cash provided by (used in) investing activities                                           36,658,208        (33,477,534)
------------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Investment product deposits and change in universal life deposits                             18,948,427         37,432,640
   Investment product withdrawals                                                                (9,288,988)       (20,583,010)
------------------------------------------------------------------------------------------------------------------------------------
   Net cash provided by financing activities                                                      9,659,439         16,849,630
------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH                                                                      15,332,344         (2,204,954)
CASH AT BEGINNING OF PERIOD                                                                       1,669,532          4,284,257
------------------------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD                                                                           $17,001,876         $2,079,303
------------------------------------------------------------------------------------------------------------------------------------



See notes to condensed financial statements`

PROTECTIVE LIFE AND
ANNUITY INSURANCE COMPANY

NOTES TO CONDENSED
FINANCIAL STATEMENTS

(Unaudited)

NOTE A  BASIS OF
PRESENTATION

The
accompanying unaudited condensed financial statements of Protective Life and Annuity
Insurance Company (the Company) have been prepared on the basis of accounting
principles generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the disclosures required by accounting principles
generally accepted in the United States of America for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal recurring accruals)
necessary for a fair statement have been included. Operating results for the nine month
period ended September 30, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003. 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, 2002.

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

NOTE B  COMMITMENTS
AND CONTINGENT LIABILITIES

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

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

NOTE C  OPERATING
SEGMENTS

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

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

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

| | Annuities.
                    The Annuities segment manufactures, sells, and supports fixed annuity products.
                    These products are primarily sold through stockbrokers, but are also sold
                    through financial institutions and the Life Marketing segments sales
                    force. Beginning in 2003, the Company is no longer marketing variable annuity
                    products.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Asset
Protection. The Asset Protection segment primarily markets credit life and disability
insurance products through banks, consumer finance companies and automobile dealers.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

Assets
are allocated based on policy liabilities and deferred policy acquisition costs directly
attributable to each segment.

There
are no significant intersegment transactions.

The
following table sets forth total operating segment income and assets for the period shown.
Adjustments represent the inclusion of unallocated realized investment gains (losses) and
the recognition of income tax expense. Asset adjustments represent the inclusion of assets
related to discontinued operations.

`Operating Segment Income for the
                                                                         Nine Months Ended September 30, 2003
------------------------------------------------------------------------------------------------------------------------------------

                                                                          Life
                                                                        Marketing         Acquisitions              Annuities
------------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                               $ 2,507,808           $30,069,926            $  237,924
Reinsurance ceded                                                       (2,449,295)          (13,106,178)
------------------------------------------------------------------------------------------------------------------------------------
     Net of reinsurance ceded                                               58,513            16,963,748               237,924
Net investment income                                                       29,854            21,948,904             2,789,867
Realized investment gains (losses)                                                                                     262,490
Other income                                                                                      (5,045)               17,613
------------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                                        88,367            38,907,607             3,307,894
------------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                                           (58,639)           19,543,055             3,010,433
Amortization of deferred policy acquisition cost                           259,529             4,984,842               209,070
Other operating expenses                                                  (573,248)            6,394,212               134,135
------------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                                        (372,358)           30,922,109             3,353,638
------------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                                   460,725             7,985,498               (45,744)
Less: realized investment gains (losses)                                                                               262,490
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                                           460,725             7,985,498              (308,234)



------------------------------------------------------------------------------------------------------------------------------------
                                                                                Corporate
                                                              Asset                and                                 Total
                                                           Protection             Other           Adjustments      Consolidated
------------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                     $22,950,507                                            $55,766,165
Reinsurance ceded                                            (20,311,018)                                           (35,866,491)
------------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                    2,639,489                                             19,899,674
Net investment income                                            370,711          $5,559,656                         30,698,992
Realized investment gains (losses)                                                                   $3,122,072       3,384,562
Other income                                                                         136,631                            149,199
------------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                           3,010,200           5,696,287          3,122,072      54,132,427
------------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                               1,769,399                                             24,264,248
Amortization of deferred policy acquisition cost                 586,850                                              6,040,291
Other operating expenses                                         113,788              24,640                          6,093,527
------------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                             2,470,037              24,640                         36,398,066
------------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                         540,163           5,671,647          3,122,072      17,734,361
Less: realized investment gains (losses)
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                                 540,163           5,671,647
Income tax expense                                                                                    6,193,450       6,193,450
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                                          $11,540,911
------------------------------------------------------------------------------------------------------------------------------------




                                                                           Operating Segment Income for the
                                                                       Three Months Ended September 30, 2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                          Life
                                                                       Marketing          Acquisitions               Annuities
Premiums and policy fees                                                 $ 978,362           $ 9,806,651           $    74,045
Reinsurance ceded                                                         (905,587)           (4,404,257)
------------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                                 72,775             5,402,394                74,045
Net investment income                                                        6,730             7,064,121               919,847
Realized investment gains (losses)                                                                                     112,670
Other income                                                                                                             6,545
------------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                                        79,505            12,466,515             1,113,107
------------------------------------------------------------------------------------------------------------------------------------

Benefits and settlement expenses                                            52,342             6,645,332             1,004,094
Amortization of deferred policy acquisition cost                            (3,423)            1,648,941               112,573
Other operating expenses                                                  (347,526)            1,973,992                48,459
------------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                                        (298,607)           10,268,265             1,165,126
------------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                                   378,112             2,198,250               (52,019)
Less: realized investment gains (losses)                                                                               112,670
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                                           378,112             2,198,250              (164,689)


------------------------------------------------------------------------------------------------------------------------------------
                                                                                Corporate
                                                              Asset                and                                 Total
                                                           Protection             Other           Adjustments      Consolidated
------------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                      $6,751,295                                              $17,610,353
Reinsurance ceded                                             (5,870,757)                                             (11,180,601)
------------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                      880,538                                                6,429,752
Net investment income                                            127,556          $1,722,435                            9,840,689
Realized investment gains (losses)                                                                   $  993,362         1,106,032
Other income                                                                                                                6,545
------------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                           1,008,094           1,722,435            993,362        17,383,018
------------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                                 441,317                                                8,143,085
Amortization of deferred policy acquisition cost                 198,445                                                1,956,536
Other operating expenses                                          42,685              34,999                            1,752,609
------------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                               682,447              34,999                           11,852,230
------------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                         325,647           1,687,436            993,362         5,530,788
Less: realized investment gains (losses)
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                                 325,647           1,687,436
Income tax expense                                                                                    1,934,028         1,934,028
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                                             $3,596,760
------------------------------------------------------------------------------------------------------------------------------------




------------------------------------------------------------------------------------------------------------------------------------
                                                                              Operating Segment Income for the
                                                                           Nine Months Ended September 30, 2002

                                                                         Life
                                                                       Marketing          Acquisitions            Annuities
------------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                                 $654,130            $32,702,177           $  121,780
Reinsurance ceded                                                        (537,723)           (13,767,961)
------------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                               116,407             18,934,216              121,780
Net investment income                                                       1,734             23,129,313            2,743,405
Realized investment gains (losses)                                                                                     79,720
Other income                                                                                       5,071                3,520
------------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                                      118,141             42,068,600            2,948,425
------------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                                          147,576             21,554,861            2,642,074
Amortization of deferred policy acquisition cost                           43,124              5,775,028              577,902
Other operating expenses                                                 (104,340)             6,241,822              154,882
------------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                                         86,360             33,571,711            3,374,858
------------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                                   31,781              8,496,889             (426,433)
Less: realized investment gains (losses)                                                                               79,720
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                                           31,781              8,496,889             (506,153)



------------------------------------------------------------------------------------------------------------------------------------
                                                                               Corporate
                                                               Asset               and                                 Total
                                                            Protection            Other           Adjustments      Consolidated
------------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                      $2,594,087                                              $36,072,174
Reinsurance ceded                                                (26,858)                                             (14,332,542)
------------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                    2,567,229                                               21,739,632
Net investment income                                            429,571           $648,768                            26,952,791
Realized investment gains (losses)                                                                 $ (859,080)           (779,360)
Other income                                                                                                                8,591
------------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                           2,996,800            648,768          (859,080)         47,921,654
------------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                               1,432,485                                               25,776,996
Amortization of deferred policy acquisition cost                 495,838                                                6,891,892
Other operating expenses                                          91,344            (91,450)                            6,292,258
------------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                             2,019,667            (91,450)                           38,961,146
------------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                         977,133            740,218          (859,080)          8,960,508
Less: realized investment gains (losses)
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                                 977,133            740,218
Income tax expense                                                                                  3,126,545           3,126,545
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                                             $5,833,963
------------------------------------------------------------------------------------------------------------------------------------





                                                                           Operating Segment Income for the
                                                                       Three Months Ended September 30, 2002
------------------------------------------------------------------------------------------------------------------------------------
                                                                         Life
                                                                       Marketing          Acquisitions            Annuities
------------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                                 $ 289,921           $11,770,967         $     44,904
Reinsurance ceded                                                         (395,020)           (5,713,054)
------------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                               (105,099)            6,057,913               44,904
Net investment income                                                        1,942             7,864,982              984,708
Realized investment gains (losses)                                                                                     13,443
Other income                                                                                       5,071                1,307
------------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                                       (103,157)          13,927,966            1,044,362
------------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                                           115,853             7,582,972            1,021,216
Amortization of deferred policy acquisition cost                            57,829             1,752,875               (1,706)
Other operating expenses                                                  (217,419)            1,955,356               35,751
------------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                                         (43,737)           11,291,203            1,055,261
------------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                                   (59,420)            2,636,763              (10,899)
Less: realized investment gains (losses)                                                                               13,443
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                                           (59,420)            2,636,763              (24,342)



------------------------------------------------------------------------------------------------------------------------------------
                                                                                Corporate
                                                               Asset               and                                 Total
                                                            Protection            Other           Adjustments      Consolidated
------------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees                                      $  892,248                                              $12,998,040
Reinsurance ceded                                                   (704)                                              (6,108,778)
------------------------------------------------------------------------------------------------------------------------------------
   Net of reinsurance ceded                                      891,544                                                6,889,262
Net investment income                                            145,671           $350,876                             9,348,179
Realized investment gains (losses)                                                                $  (263,111)           (249,668)
Other income                                                                                                                6,378
------------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                           1,037,215            350,876          (263,111)         15,994,151
------------------------------------------------------------------------------------------------------------------------------------
Benefits and settlement expenses                                 454,536                                                9,174,577
Amortization of deferred policy acquisition cost                 166,349                                                1,975,347
Other operating expenses                                          33,350            (20,672)                            1,786,366
------------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                               654,235            (20,672)                           12,936,290
------------------------------------------------------------------------------------------------------------------------------------
Income before income tax                                         382,980            371,548          (263,111)          3,057,861
Less: realized investment gains (losses)
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                                 382,980            371,548
Income tax expense                                                                                  1,062,881           1,062,881
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                                             $1,994,980
------------------------------------------------------------------------------------------------------------------------------------





                                                                       Operating Segment Assets
                                                                            September 30, 2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                Life
                                                              Marketing               Acquisitions               Annuities
------------------------------------------------------------------------------------------------------------------------------------
Investments and other assets                                   $2,330,237               $594,040,745             $51,953,650
Deferred policy acquisition costs                               1,687,413                 89,224,230               2,388,533
------------------------------------------------------------------------------------------------------------------------------------
     Total assets                                              $4,017,650               $683,264,975             $54,342,183
------------------------------------------------------------------------------------------------------------------------------------



------------------------------------------------------------------------------------------------------------------------------------
                                                                              Corporate
                                                            Asset                and
                                                         Protection             Other             Adjustments        Total
------------------------------------------------------------------------------------------------------------------------------------
Investments and other assets                             $47,913,291        $117,547,808            $121,723    $813,907,454
Deferred policy acquisition costs                          1,549,520                                              94,849,696
------------------------------------------------------------------------------------------------------------------------------------
     Total assets                                         49,462,811        $117,547,808            $121,723    $908,757,150
------------------------------------------------------------------------------------------------------------------------------------





                                                                     Operating Segment Assets
                                                                         December 31, 2002
------------------------------------------------------------------------------------------------------------------------------------
                                                                  Life
                                                                Marketing            Acquisitions               Annuities
------------------------------------------------------------------------------------------------------------------------------------
Investments and other assets                                 $  523,211              $600,231,727             $54,071,804
Deferred policy acquisition costs                               583,131               100,007,935               2,581,309
------------------------------------------------------------------------------------------------------------------------------------
     Total assets                                            $1,106,342              $700,239,662             $56,653,113
------------------------------------------------------------------------------------------------------------------------------------



------------------------------------------------------------------------------------------------------------------------------------
                                                                              Corporate
                                                              Asset                and
                                                           Protection             Other         Adjustments          Total
------------------------------------------------------------------------------------------------------------------------------------
Investments and other assets                               $78,120,621         $99,048,739     $3,723,088          $835,719,190
Deferred policy acquisition costs                            1,607,207                                              104,779,582
------------------------------------------------------------------------------------------------------------------------------------
     Total assets                                          $79,727,828         $99,048,739     $3,723,088          $940,498,772
------------------------------------------------------------------------------------------------------------------------------------`

NOTE D  STATUTORY
REPORTING PRACTICES

Financial
statements prepared in conformity with accounting principles generally accepted in the
United States of America (GAAP) differ in some respects from the statutory
accounting practices prescribed or permitted by insurance regulatory authorities. In
accordance with statutory accounting reporting practices, at September 30, 2003, and for
the nine months then ended, the Company had share-owners equity of $120.0 million
and net income of $18.9 million.

NOTE E 
COMPREHENSIVE INCOME

`The following table sets forth the Company's comprehensive income for the periods shown:
-------------------------------------------------------------------------------------------------------------------------------
                                                                     Three Months Ended                Nine Months Ended
                                                                           September 30                     September 30
                                                                     2003            2002             2003            2002
-------------------------------------------------------------------------------------------------------------------------------
Net income                                                         $ 3,596,760     $1,994,980      $11,540,911     $ 5,833,963
Change in net unrealized gains/losses
  on investments (net of income tax:
  three months: 2003 - $(3,182,797); 2002 - $3,394,269;
  nine months: 2003 - $6,092,176; 2002 - $4,061,110)                (5,910,909)     6,303,644       11,314,041       7,542,062
Reclassification adjustment for amounts
included in net income (net of income tax:
three months: 2003 -$(387,111); 2002 $87,384;
nine months: 2003 - $(1,184,597); 2002 - $272,776)                    (718,920)       162,284       (2,199,965)        506,584
--------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss)                                        $(3,033,069)    $8,460,908      $20,654,987     $13,882,609
--------------------------------------------------------------------------------------------------------------------------------`

NOTE F 
RECLASSIFICATIONS

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

NOTE G  RECENTLY
ISSUED ACCOUNTING STANDARDS

In
April 2003, the Derivatives Implementation Group of the Financial Accounting Standards
Board (FASB) cleared Issue No. B36, Embedded Derivatives: Modified Coinsurance
Arrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are
Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those
Instruments (DIG B36). DIG B36 requires the bifurcation of embedded derivatives
within modified coinsurance and funds withheld coinsurance arrangements that expose the
creditor to credit risk of a company other than the debtor, even if the debtor owns as
investment assets the third-party securities to which the creditor is exposed. The
effective date of the implementation guidance in DIG B36 is for the first fiscal quarter
beginning after September 15, 2003, and should be applied on a prospective basis. The
Company is currently evaluating the impact of this pronouncement on its financial
statements, but does not anticipate a material impact on its financial condition or
results of operations.

In
April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities. SFAS No. 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under Statement 133. This Statement is effective for
contracts entered into or modified after June 2003, and should be applied prospectively.
The adoption of SFAS No. 149 did not have a material effect on the Companys
financial position or results of operations.

In
May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity. SFAS No. 150 establishes
standards for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. The adoption of SFAS No. 150 did not have
a material effect on the Companys financial position or results of operations.

In
July 2003, the American Institute of Certified Public Accountants issued Statement of
Position (SOP) 03-1, Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Separate Accounts. SOP 03-1 is
effective for fiscal years beginning after December 15, 2003. SOP 03-1 provides guidance
related to the reporting and disclosure of certain insurance contracts and separate
accounts, including the calculation of guaranteed minimum death benefits (GMDB). SOP 03-1
also addresses the capitalization and amortization of sales inducements to contract
holders. The Company is currently evaluating the impact of SOP 03-1, but does not
anticipate a material impact on its financial condition or results of operations.

In
January 2003, the FASB issued FASB Interpretation No. (FIN) 46 Consolidation of
Variable Interest Entities. FIN 46 clarifies the application of Accounting Research
Bulletin No. 51, Consolidated Financial Statements, to certain entities in
which equity investors do not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to finance its activities without
additional subordinated support from the other parties. The FASB has deferred implementation of FIN 46
for variable interest entities (VIEs) created before February 1, 2003, until periods ending after December 15, 2003.
The Company does not expect that FIN 46 will have a material impact on its financial condition or results of operations.

ITEM 2.
MANAGEMENTS NARRATIVE ANALYSIS OF THE

RESULTS OF OPERATIONS

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

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

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

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

The
Company, since it is licensed in the State of New York, is the entity through which PLC
markets, distributes, and services insurance and annuity products in New York. As of
September 30, 2003, the Company was involved in the businesses of four of PLCs
operating segments: Life Marketing, Acquisitions, Annuities, and Asset Protection. The
Company has an additional 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 reviews the Companys financial condition and results of operations including
its liquidity and capital resources. Historical information is presented and discussed.
Where appropriate, factors that may affect future financial performance are also
identified and discussed. Certain statements made in this report include
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include any statement that may
predict, forecast, indicate or imply future results, performance or achievements instead
of historical facts and may contain words like believe, expect,
estimate, project, budget, forecast,
anticipate, plan, will, shall, may, and other
words, phrases, or expressions with similar meanings. Forward-looking statements involve
risks and uncertainties which may cause actual results to differ materially from the
results contained in the forward-looking statements, and the Company cannot give
assurances that such statements will prove to be correct. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking statements as
a prediction of actual results. Please refer to Exhibit 99(a), incorporated by reference
herein, for more information about factors which could affect future results.

The
following discussion and analysis primarily relates to the nine months ended September 30,
2003, as it compares to the same period last year. Unless otherwise noted, the general
factors discussed also apply to the quarter ended September 30, 2003, 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,
2003, and September 30, 2002, has been provided.

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

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

------------------------------------------------------------------------------------------------------------------------------
                                                                  Three Months Ended                  Nine Months Ended
                                                                       September 30                        September 30
                                                                2003               2002              2003             2002
------------------------------------------------------------------------------------------------------------------------------
Premiums and policy fees, net of reinsurance                $ 6,429,752        $ 6,889,262        $19,899,674      $21,739,632
Net investment income                                         9,840,689          9,348,179         30,698,992       26,952,791
Realized investment gains (losses)                            1,106,032           (249,668)         3,384,562         (779,360)
Other income                                                      6,545              6,378            149,199            8,591
------------------------------------------------------------------------------------------------------------------------------
                                                            $17,383,018        $15,994,151        $54,132,427      $47,921,654
------------------------------------------------------------------------------------------------------------------------------`

Premiums
and policy fees, net of reinsurance (premiums and policy fees) decreased $1.8
million or 8.5% in the first nine months of 2003 from the first nine months of 2002.
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 2002 or
the first nine months of 2003, therefore decreases in older acquired policies resulted in
a decrease of $2.0 million in the first nine months of 2003 as compared with the first
nine months of 2002. Premiums and policy fees in both the Annuities and Asset Protection
segments increased $0.1 million in the first nine months of 2003 as compared to 2002,
while premiums and policy fees in the Life Marketing segment decreased $0.1 million for
the same period.

Net
investment income in the first nine months of 2003 increased by $3.7 million as compared
to the corresponding period of the preceding year primarily due to increases in the
average amount of invested assets. The percentage earned on average cash and investments
was 5.6% in the first nine months of 2003 compared to 6.7% in the first nine months of
2002. Investment returns have been negatively affected by higher prepayments on
mortgage-backed securities and mortgage loans, and lower interest rates.

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

Realized
investment gains were approximately $3.4 million in the first nine months of 2003. During
the first nine months of 2003, the Company recorded other than temporary impairments on
its investments of $0.3 million as compared to $3.8 million in the first nine months of
2002. Realized investment losses were approximately $0.8 million in the first nine months
of 2002.

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

The
Company reported an increase in the amount of other income in the first nine months of
2003 of $0.1 million as compared to the first nine months of 2002.

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

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

                                      Operating Income (Loss) and Income (Loss) Before Income Tax
------------------------------------------------------------------------------------------------------------------------------
                                                                    Three Months Ended                Nine Months Ended
                                                                         September 30                     September 30
                                                                   2003             2002             2003           2002
------------------------------------------------------------------------------------------------------------------------------
Operating income (loss)1
  Life Marketing                                                $   378,112      $    (59,420)    $  460,725    $     31,781
  Acquisitions                                                    2,198,250         2,636,763      7,985,498       8,496,889
  Annuities                                                        (164,689)          (24,342)      (308,234)       (506,153)
  Asset Protection                                                  325,647           382,980        540,163         977,133
  Corporate and Other                                             1,687,436           371,548      5,671,647         740,218
------------------------------------------------------------------------------------------------------------------------------
Realized Investment gains (losses)
  Annuities                                                         112,670            13,443        262,490          79,720
  Unallocated realized investment gains (losses)                    993,362          (263,111)     3,122,072        (859,080)
------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income tax
  Life Marketing                                                    378,112           (59,420)       460,725          31,781
  Acquisitions                                                    2,198,250         2,636,763      7,985,498       8,496,889
  Annuities                                                         (52,019)          (10,899)       (45,744)       (426,433)
  Asset Protection                                                  325,647           382,980        540,163         977,133
  Corporate and Other                                             1,687,436           371,548      5,671,647         740,218
  Unallocated realized investment gains (losses)                    993,362          (263,111)     3,122,072        (859,080)
------------------------------------------------------------------------------------------------------------------------------
       Total income before income tax                            $5,530,788        $3,057,861    $17,734,361      $8,960,508
------------------------------------------------------------------------------------------------------------------------------

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

The
Life Marketing segment had pretax operating income of $0.5 million in the first nine
months of 2003 as compared to $0.1 million in the same period of 2002. The Company began
operations in the Life marketing segment in 2002. Because the segment is in the early
stages of business, reinsurance allowances received continue to offset commission expenses
and death benefits.

Pretax
operating income from the Acquisitions segment was $8.0 million in the first nine months
of 2003 as compared to $8.5 million in the same period of 2002. Earnings from the
Acquisitions segment are expected to decline over time (due to the lapsing of policies
resulting from deaths of insureds or terminations of coverage) unless new acquisitions are
made. There were no new acquisitions made in 2002 or in the first nine months of 2003.

The
Annuities segment had pretax operating losses of $0.3 million in the first nine months of
2003 and $0.5 million of pretax operating losses in the same period of 2002, primarily due
to an increase in premiums and policy fees and a decrease in amortization of deferred
policy acquisition costs. The Annuities segments future results may be negatively
affected by a slow economy. Volatile equity markets could negatively affect the fees the
segment assesses on variable annuity contracts. Lower interest rates could negatively
affect sales of fixed annuities. In this segment, equity market volatility may create
uncertainty regarding the future results in the variable annuity business and the related
rate of amortization of deferred policy acquisition costs. Also, beginning January 2003,
the Company is no longer marketing variable annuity products.

In
accordance with statutory accounting practices prescribed or permitted by regulatory
authorities (which require the assumption that equity markets will significantly worsen),
the Company reported GMDB related policy liabilities and accruals of $0.1 million at
September 30, 2003.

The
Asset Protection segments pretax operating income was $0.5 million in the first nine
months of 2003, as compared to $1.0 million in the first nine months of 2002. The decrease
is primarily due to an increase in benefits and settlement expenses as much of the
segments business is in runoff mode

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 $5.7
million in the first nine months of 2003 as compared to $0.7 million in the first nine
months of 2002, primarily due to an increase in net investment income on capital.

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

------------------------------------------------------------------------------------------------------------------------------
                                                              Three Months Ended                    Nine Months Ended
                                                                  September 30                         September 30
                                                             2003              2002                2003             2002
------------------------------------------------------------------------------------------------------------------------------
                  Effective Income Tax Rates                 35.0%             34.8%               34.9%            34.9%
------------------------------------------------------------------------------------------------------------------------------`

`Net Income

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

------------------------------------------------------------------------------------------------------------------------------
                                      Three Months Ended                            Nine Months Ended
                                         September 30                                   September 30
                                   2003             2002                         2003             2002
------------------------------------------------------------------------------------------------------------------------------
                                $3,596,760        $1,994,980                 $11,540,911        $5,833,963
------------------------------------------------------------------------------------------------------------------------------`

Compared
to the same period in 2002, net income in the first nine months of 2003 increased $5.7
million, reflecting increases in the Life Marketing, Annuities and Corporate and Other
segments, and larger unallocated realized gains, which were partially offset by decreases
in the, Acquisitions, and Asset Protection segments.

Review by Independent
Auditors

With
respect to the unaudited condensed financial information of Protective Life and Annuity
Insurance Company for the three-month and nine-month periods ended September 30, 2003 and
2002, PricewaterhouseCoopers LLP (PricewaterhouseCoopers) reported that they
have applied limited procedures in accordance with professional standards for a review of
such information. However, their separate report dated November 7, 2003, appearing herein,
stated that they did not audit and they do not express an opinion on that unaudited
condensed financial information. Accordingly, the degree of reliance on their report on
such information should be restricted in light of the limited nature of the review
procedures applied. PricewaterhouseCoopers is not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their report on the unaudited condensed
financial information because that report is not a report or a
part of a registration statement prepared or certified by
PricewaterhouseCoopers into which this Form 10-Q may be incorporated by reference within
the meaning of Sections 7 and 11 of the Act.

Item 4. Controls and
Procedures

The
Companys President and Chief Financial Officer have evaluated the Companys
disclosure controls and procedures and believe them to be operating effectively to make
known to them on a timely basis any material information required to be included in the
Companys periodic filings with the Securities and Exchange Commission. In the
ordinary course of business, the Company continues to refine its internal control
environment. There have been no changes in the Companys internal control over
financial reporting that occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially affect the Companys
internal control over financial reporting.

PART II

|(a) |  | Exhibit 31(a)  Certification Pursuant to Section 302 of the Sarbanes-Oxley
               Act of 2002. Exhibit 31(b)  Certification Pursuant to Section 302 of the
               Sarbanes-Oxley Act of 2002. Exhibit 32(a)  Certification Pursuant to 18
               U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
               Act of 2002. Exhibit 32(b)  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99  Safe Harbor for
Forward-Looking Statements.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SIGNATURE

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

|      |                   |  | Protective Life and Annuity Insurance Company
|----- | ----------------- |  | ---------------------------------------------
|
|
|
|
|
|
|
|
|
|
|
|Date: | November 14, 2003 |  | /s/ Steven G. Walker                         
|      |                   |  | Steven G. Walker                             
|      |                   |  | Vice President and Controller                
|      |                   |  | and Chief Accounting Officer                 
|      |                   |  | (Duly authrorized officer)