PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
485BPOS, 1995-06-13
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<PAGE>
   
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1995
    
                                                               FILE NO. 811-8108
                                                               FILE NO. 33-70984
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM N-4

   
     REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933       / /
         PRE-EFFECTIVE AMENDMENT NO.                           / /
       POST-EFFECTIVE AMENDMENT NO.  3                           /X/
                                  AND/OR
        REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
               1940                                      / /
             AMENDMENT NO. 4                               /X/

    

                          PROTECTIVE VARIABLE ANNUITY
                                SEPARATE ACCOUNT
                           (Exact Name of Registrant)

                       PROTECTIVE LIFE INSURANCE COMPANY
                              (Name of Depositor)

                             2801 HIGHWAY 280 SOUTH
                           BIRMINGHAM, ALABAMA 35223
              (Address of Depositor's Principal Executive Offices)

       Depositor's Telephone Number, including Area Code: (205) 879-9230
                            ------------------------

                          LIZABETH R. NICHOLS, Esquire
                       Protective Life Insurance Company
                             2801 Highway 280 South
                           Birmingham, Alabama, 35223
                    (Name and Address of Agent for Services)

                                    COPY TO:
                            STEPHEN E. ROTH, Esquire
                          Sutherland, Asbill & Brennan
                         1275 Pennsylvania Avenue, N.W.
                             Washington, D.C. 20004
                                 (202) 383-0158

    It is proposed that this filing become effective (check appropriate box):

    /X/ immediately upon filing pursuant to paragraph (b) of Rule 485;
   
    / / on (date) pursuant to paragraph (b) of Rule 485;
    
    / / 60 days after filing pursuant to paragraph (a) of Rule 485;
    / / on (date) pursuant to paragraph (a)(i) of Rule 485
    / / 75 days after filing pursuant to paragraph (a)(ii) of Rule 485;
    / / on date pursuant to paragraph (a)(ii) of Rule 485.

    Pursuant  to  Rule  24f-2 under  the  Investment  Company Act  of  1940, the
registrant has previously  registered an indefinite  amount of securities  under
the  Securities Act of  1933. The registrant  filed a Rule  24f-2 Notice for the
fiscal year ended December 31, 1994, on or about February 28, 1995.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                             CROSS REFERENCE SHEET
                      PURSUANT TO RULES 481(A) AND 495(A)

    Showing  Location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Registration Statement of Information Required by Form N-4.

ITEM OF FORM N-4                                     PROSPECTUS CAPTION
- -------------------------------------------  -----------------------------------
                                     PART A

 1. Cover Page.............................. Cover Page
 2. Definitions............................. Definitions
 3. Synopsis................................ Expense Tables; Summary
 4. Condensed Financial Information......... Condensed Financial Information;
                                             Yields and Total Returns
 5. General Description of Registrant,
    Depositor and Portfolio Companies......  The Company, Variable Account and
                                             Funds
   a.   Depositor..........................  The Company, Variable Account and
                                             Funds -- Protective Life Insurance
                                              Company
   b.   Registrant.........................  The Company, Variable Account and
                                             Funds -- The Protective Variable
                                              Annuity Separate Account
   c.   Portfolio Company..................  The Company, Variable Account and
                                             Funds -- The Funds
   d.   Fund Prospectus....................  The Company, Variable Account and
                                             Funds -- The Funds
   e.   Voting Rights......................  The Company, Variable Account and
                                             Funds -- Voting Rights
   f.   Administrators.....................  The Company, Variable Account and
                                             Funds --
 6. Deductions and Expenses................. Charges and Deductions
   a.   General............................  Charges and Deductions
   b.   Sales Load %.......................  Charges and Deductions -- Surrender
                                             Charge
   c.   Special Purchase Plan..............  Surrenders; Transfers
   d.   Commissions........................  Distribution of Contracts
   e.   Expenses -- Registrant.............  Charges and Deductions
   f.   Fund Expenses......................  Charges and Deductions -- Other
                                             Charges Including Investment
                                              Management Fees of the Funds
   g.   Organizational Expenses............  N/A
 7. General Description of Variable Annuity
    Contracts..............................  Description of Variable Annuity
                                             Contracts
   a.   (i) Allocation of Purchase           Purchase Payments, Allocation of
         Payments..........................  Purchase Payments
        (ii) Transfers.....................  Description of Variable Annuity
                                             Contract -- Transfers; Payments
   b.   Changes............................  Description of Variable Annuity
                                             Contract -- Modification
   c.   Inquiries..........................  Description of Variable Annuity
                                             Contract -- Inquiries
 8. Annuity Options......................... Annuity Options
 9. Death Benefit........................... Description of Variable Annuity
                                             Contract -- Death Benefit Before
                                              Annuity Commencement Date; Payment

<PAGE>

ITEM OF FORM N-4                                     PROSPECTUS CAPTION
- -------------------------------------------  -----------------------------------
10. Purchases and Contract Value............ Description of Variable Annuity
                                             Contract
   a.   Purchases..........................  Description of Variable Annuity
                                             Contract -- Purchase Payments
   b.   Valuation..........................  Description of Variable Annuity
                                             Contract -- Variable Account Value
   c.   Daily Calculation..................  Description of Variable Annuity
                                             Contract -- Variable Account Value
   d.   Underwriter........................  Distribution of Contracts
11. Redemptions............................. Description of Variable Annuity
                                             Contract
   a.   -- By Owners.......................  Description of Variable Annuity
                                             Contract -- Surrenders and Partial
                                              Surrenders; Payments
        -- By Annuitant....................  Description of Variable Annuity
                                             Contract -- proceeds on Annuity
                                              Commencement Date; Annuity Options
   b.   Delay in Payment...................  Description of Variable Annuity
                                             Contract -- Suspension or Delay in
                                              Payments
   c.   Lapse..............................  Description of Variable Annuity
                                             Contract -- Annuity Options
   d.   Free Look Period...................  Description of Variable Annuity
                                             Contract -- Free Look Period
12. Taxes................................... Federal Tax Matters
13. Legal Proceedings....................... Legal Proceedings

APPENDIX

14. Table of Contents in the Statement of
    Additional Information.................  Statements of Additional
                                             Information Table of Contents

                                     PART B

15. Cover Page.............................. Cover Page
16. Table of Contents....................... Statement of Additional Information
                                             Table of Contents
17. General Information and History......... See Prospectus -- The Company,
                                             Variable Account and Funds
18. Services
   a.   Fees and Expenses of Registrant....  N/A
   b.   Management Contract................  See Prospectus -- The Company,
                                             Variable Account and Funds
   c.   Custodian and Independent Public     Safekeeping of Account Assets;
         Accountant........................   Experts
   d.   Assets of Registrants..............  Safekeeping of Accounts Assets
   e.   Affiliated Persons.................  N/A
   f.   Principal Underwriter..............  See Prospectus -- Distribution of
                                             Contracts
19. Purchase of Securities Being Offered.... See Prospectus -- Distribution of
                                             Contracts
20. Underwriter............................. See Prospectus -- Distribution of
                                             Contracts
21. Calculation of Performance Data......... Calculation of Yields and Total
                                             Returns
22. Annuity Options......................... See Prospectus -- Annuity Options
23. Financial Statements.................... Financial Statements

<PAGE>
                                     PART A
                  INFORMATION REQUIRED TO BE IN THE PROSPECTUS
<PAGE>
                      INDIVIDUAL FLEXIBLE PREMIUM DEFERRED
                      VARIABLE AND FIXED ANNUITY CONTRACT
                                   ISSUED BY

                       Protective Life Insurance Company
                             2801 Highway 280 South
                           Birmingham, Alabama 35223
                           Telephone: 1-800-866-3555

    This  Prospectus describes the individual flexible premium deferred variable
and fixed annuity contract (the "Contract") offered by Protective Life Insurance
Company ("Protective Life"). The  Contract may be sold  for use with  retirement
plans  receiving special federal income tax treatment under the Internal Revenue
Code such as pension and profit sharing plans, annuity purchase plans of  public
school  systems  and universities  and  certain other  tax-exempt organizations,
individual retirement accounts, and individual retirement annuities.

    Purchase Payments will be allocated, as  designated by the Owner(s), to  one
or  more of the Sub-Accounts of the Protective Variable Annuity Separate Account
(the "Variable Account"),  or the  Fixed Account  (which is  part of  Protective
Life's General Account) or both. The assets of each Sub-Account will be invested
solely  in a corresponding  investment portfolio (each,  a "Fund") of Protective
Investment Company. These Funds are:

   
    Protective Money Market Fund        Protective International Equity Fund
    Protective Select Equity Fund       Protective Growth and Income Fund
    Protective Capital Growth Fund      Protective Global Income Fund
    Protective Small Cap Equity Fund

    The Contract  Value  prior to  the  Annuity Commencement  Date,  except  for
amounts  in the Fixed Account, will vary according to the investment performance
of the Funds in which the selected Sub-Accounts are invested. The Owner(s)  bear
the investment risk of amounts allocated to the Variable Account.
    

    This  Prospectus sets  forth basic  information about  the Contract  and the
Variable Account  that  a prospective  investor  should know  before  investing.
Additional  information about the Contract and the Variable Account is contained
in the  Statement of  Additional  Information, which  has  been filed  with  the
Securities  and Exchange Commission. The  Statement of Additional Information is
dated the same date as this Prospectus and is incorporated herein by  reference.
The  Table of Contents for the Statement of Additional Information is on Page 32
of this  Prospectus.  You may  obtain  a copy  of  the Statement  of  Additional
Information  free of charge by writing or calling Protective Life at the address
or telephone number shown above.

    PLEASE READ  THIS PROSPECTUS  CAREFULLY. INVESTORS  SHOULD KEEP  A COPY  FOR
FUTURE  REFERENCE. THIS PROSPECTUS  MUST BE ACCOMPANIED  BY A CURRENT PROSPECTUS
FOR THE FUNDS.

AN INVESTMENT IN THE CONTRACT IS NOT  A DEPOSIT OR OBLIGATION OF, OR  GUARANTEED
OR  ENDORSED BY, ANY BANK, NOR IS  THE CONTRACT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY  OTHER GOVERNMENT AGENCY. AN INVESTMENT  IN
THE  CONTRACT INVOLVES  CERTAIN RISKS, INCLUDING  THE LOSS  OF PURCHASE PAYMENTS
(PRINCIPAL).

THESE SECURITIES HAVE  NOT BEEN APPROVED  OR DISAPPROVED BY  THE SECURITIES  AND
EXCHANGE  COMMISSION OR ANY  STATE SECURITIES COMMISSION  NOR HAS THE SECURITIES
AND EXCHANGE  COMMISSION OR  ANY  STATE SECURITIES  COMMISSION PASSED  UPON  THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

   
                 THE DATE OF THIS PROSPECTUS IS JUNE 13, 1995.
    
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                            -----------
<S>                                                                                                         <C>
Definitions...............................................................................................           1
Expense Tables............................................................................................           3
Summary...................................................................................................           5
Condensed Financial Information...........................................................................           6
The Company, Variable Account and Funds...................................................................           7
  Protective Life Insurance Company.......................................................................           7
  Protective Variable Annuity Separate Account............................................................           7
  Administration..........................................................................................           7
  The Funds...............................................................................................           7
  Other Investors in the Funds............................................................................           8
  Addition, Deletion or Substitution of Investments.......................................................           9
Description of the Contracts..............................................................................           9
  Issuance of a Contract..................................................................................           9
  Purchase Payments.......................................................................................          10
  Free Look Period........................................................................................          10
  Allocation of Purchase Payments.........................................................................          10
  Variable Account Value..................................................................................          10
  Transfers...............................................................................................          11
  Surrenders and Partial Surrenders.......................................................................          12
  Loan Privilege..........................................................................................          14
The Fixed Account.........................................................................................          15
Death Benefit.............................................................................................          15
Suspension or Delay in Payments...........................................................................          16
Charges and Deductions....................................................................................          16
  Surrender Charge (Contingent Deferred Sales Charge).....................................................          16
  Administrative Charges..................................................................................          18
  Transfer Fee............................................................................................          18
  Mortality and Expense Risk Charge.......................................................................          18
  Contract Maintenance Fee................................................................................          18
  Fund Expenses...........................................................................................          19
  Premium Taxes...........................................................................................          19
  Other Taxes.............................................................................................          19
Annuity Options...........................................................................................          19
  Annuity Payment.........................................................................................          20
  Death of Annuitant or Owner After Annuity Commencement Date.............................................          20
Yields and Total Returns..................................................................................          20
Exchange Offer............................................................................................          22
Federal Tax Matters.......................................................................................          23
  Introduction............................................................................................          23
  The Company's Tax Status................................................................................          23
Taxation of Annuities in General..........................................................................          24
  Tax Deferral During Accumulation Period.................................................................          24
  Taxation of Partial and Full Surrenders.................................................................          25
  Taxation of Annuity Payments............................................................................          25
  Taxation of Death Benefit Proceeds......................................................................          26
  Assignments, Pledges, and Gratuitous Transfers..........................................................          26
  Penalty Tax on Premature Distributions..................................................................          26
  Aggregation of Contracts................................................................................          26
Qualified Retirement Plans................................................................................          27
  In General..............................................................................................          27
  Direct Rollovers........................................................................................          29
Federal Income Tax Withholding............................................................................          29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                            -----------
<S>                                                                                                         <C>
General Matters...........................................................................................          29
  Modification............................................................................................          29
  Reports.................................................................................................          29
  Inquiries...............................................................................................          29
Distribution of the Contracts.............................................................................          29
Legal Proceedings.........................................................................................          30
Voting Rights.............................................................................................          30
Financial Statements......................................................................................          30
Statement of Additional Information Table of Contents.....................................................          32
</TABLE>
<PAGE>
                                  DEFINITIONS

    "We", "Us", "Our", "Protective Life", and "Company" refer to Protective Life
Insurance Company. "You" and "Your" refer to the person(s) who has been issued a
Contract.

    ACCUMULATION  UNIT:  A unit of measurement used to calculate the Sub-Account
Value.

    AGE:  The age on the birthday immediately prior to any date for which age is
to be determined.

    ANNUITANT:  The  person on whose  life annuity payments  are based.  Annuity
payments will be made to the Annuitant unless otherwise requested by the Owner.

    ANNUITY  OPTION:   The benefit  payout option  selected by  the Owner(s) for
annuity payments made by the Company.

    BENEFICIARY:  The  person entitled  to receive  the Death  Benefit upon  the
death of any Owner prior to the Annuity Commencement Date.

        Primary:   Where  a Primary  Beneficiary is  living, such  person is the
    Beneficiary. The  Primary Beneficiary  is the  surviving Owner,  if any.  If
    there  is no surviving Owner, the Primary Beneficiary is the person named as
    the "Primary Beneficiary" in the Contract application.

        Contingent:  Where  no Primary  Beneficiary is  living, the  "Contingent
    Beneficiary", as named in the Contract application, is the Beneficiary.

        Irrevocable:    An  Irrevocable  Beneficiary  is  one  whose  consent is
    necessary to change the Beneficiary or exercise certain other rights.

    CODE:  The Internal Revenue Code of 1986, as amended.

    CONTRACT ANNIVERSARY:  The same month and day as the Effective Date in  each
subsequent year of the Contract.

    CONTRACT  VALUE:  The  sum of: (1)  the Variable Account  Value; and (2) the
Fixed Account Value at any time.

    CONTRACT YEAR:  Any period of  12 months commencing with the Effective  Date
and each Contract Anniversary thereafter.

    DEATH  BENEFIT:  The amount payable to the Beneficiary upon the death of any
Owner prior to the Annuity Commencement Date. Only one Death Benefit is  payable
under  this  Contract,  even though  the  Contract may,  in  some circumstances,
continue beyond the time of any Owner's death.

    EFFECTIVE DATE:  The date shown  on the Contract Specifications page and  on
which this Contract takes effect. Contract Years are measured from the Effective
Date.

    FIXED  ACCOUNT:  The Fixed Account is part of our General Account and is not
part of nor dependent upon the investment performance of the Variable Account.

    FIXED ACCOUNT VALUE:   Prior  to the  Annuity Commencement  Date, the  total
amount  equal to  that part  of any Purchase  Payment(s) allocated  to the Fixed
Account, increased  by any  amount  transferred to  the  Fixed Account  and  any
credited  interest and decreased by  partial surrenders (including any surrender
charges and any applicable premium tax)  and any amounts transferred out of  the
Fixed Account.

    FUND:    A  separate investment  portfolio  in  which a  Sub-Account  of the
Variable Account invests.

    HOME OFFICE:  2801 Highway 280 South, Birmingham, Alabama 35223.

    NET ASSET VALUE PER SHARE:  The value  per share of any Fund as computed  on
any Valuation Day as described in the Fund Prospectus.

    NON-QUALIFIED CONTRACTS:  Contracts which are not qualified contracts.

                                       1
<PAGE>
    OWNER:  The owner(s) of the Contract. Herein referred to as "you" or "your".

    PIC:  Protective Investment Company.

    PURCHASE PAYMENT(S):  The amount(s) deposited under this Contract.

    QUALIFIED  CONTRACTS:  Contracts issued  in connection with retirement plans
that receive favorable tax  treatment under Sections 401,403,408  or 457 of  the
Code.

    QUALIFIED  PLANS:   Retirement  plans that  receive favorable  tax treatment
under Sections 401, 403, 408, or 457 of the Code.

    SUB-ACCOUNT:  A separate division of the Variable Account. Each  Sub-Account
invests in a corresponding Fund.

    SUB-ACCOUNT VALUE:  Prior to the Annuity Commencement Date, the total amount
equal  to that part of any Purchase Payment(s) allocated to the Sub-Account, and
any amount  transferred  to a  Sub-Account,  adjusted by  any  interest  income,
dividends, net capital gains or losses, realized or unrealized, and decreased by
partial  surrenders (including any surrender  charges and any applicable premium
tax) and any amounts transferred out of the Sub-Account.

    SURRENDER VALUE:  The amount available for a partial or full surrender which
shall equal the  Fixed Account Value  plus the Variable  Account Value less  any
applicable surrender charge, contract maintenance fee and any applicable premium
tax.

    VALUATION  DAY:  Each day  on which the New York  Stock Exchange is open for
business.

    VALUATION PERIOD:  The period commencing at the close of regular trading  on
the  New York  Stock Exchange on  any Valuation Day  and ending at  the close of
regular trading on the next succeeding Valuation Day.

    VARIABLE ACCOUNT:  Protective Variable Annuity Separate Account; a  separate
investment  account  of  the  Company  into  which  Purchase  Payment(s)  may be
allocated.

    VARIABLE ACCOUNT VALUE:  The sum of all Sub-Account Values.

                                       2
<PAGE>
                                 EXPENSE TABLES

    The  following expense information assumes that the entire Contract Value is
Variable Account Value.
   
<TABLE>
<S>                                                                       <C>
OWNER TRANSACTION EXPENSES
  Sales Charge Imposed on Premiums......................................       None
  Maximum Surrender Charge (contingent deferred sales charge)...........         7%
  Transfer Processing Fee...............................................       None*
ANNUAL CONTRACT MAINTENANCE FEE.........................................        $35
ANNUAL ACCOUNT EXPENSES
 (as a percentage of net assets)
  Mortality and Expense Risk Charge.....................................      1.25%
  Administration Charge.................................................     00.15%
                                                                            ------
  Total Account Expenses................................................      1.40%
ANNUAL FUND EXPENSES
 (as percentage of average net assets)

<CAPTION>
                                                                             MONEY
                                                                            MARKET
                                                                             FUND
                                                                          -----------
<S>                                                                       <C>
 Management (Advisory) Fees.............................................      0.60%
  Other Expenses After Reimbursement....................................      0.00%
                                                                              -----
  Total Annual Fund Expenses............................................
    (after reimbursements)                                                    0.60%
<CAPTION>
                                                                            SELECT
                                                                            EQUITY
                                                                             FUND
                                                                          -----------
<S>                                                                       <C>
 Management (Advisory) Fees.............................................      0.80%
  Other Expenses After Reimbursement....................................      0.00%
                                                                              -----
  Total Annual Fund Expenses............................................
    (after reimbursements)                                                    0.80%
<CAPTION>
                                                                            CAPITAL
                                                                            GROWTH
                                                                             FUND
                                                                          -----------
<S>                                                                       <C>
 Management (Advisory) Fees.............................................      0.80%
  Other Expenses After Reimbursement....................................      0.00%
                                                                              -----
  Total Annual Fund Expenses............................................
    (after reimbursements)                                                    0.80%
<CAPTION>
                                                                           SMALL CAP
                                                                          EQUITY FUND
                                                                          -----------
<S>                                                                       <C>
 Management (Advisory) Fees.............................................      0.80%
  Other Expenses After Reimbursement....................................      0.00%
                                                                              -----
  Total Annual Fund Expenses............................................
    (after reimbursements)                                                    0.80%
<CAPTION>
                                                                          INTERNATIONAL
                                                                          EQUITY FUND
                                                                          -----------
<S>                                                                       <C>
 Management (Advisory) Fees.............................................      1.10%
  Other Expenses After Reimbursement....................................      0.00%
                                                                              -----
  Total Annual Fund Expenses............................................
    (after reimbursements)                                                    1.10%
<CAPTION>
                                                                          GROWTH AND
                                                                          INCOME FUND
                                                                          -----------
<S>                                                                       <C>
 Management (Advisory) Fees.............................................      0.80%
  Other Expenses After Reimbursement....................................      0.00%
                                                                              -----
  Total Annual Fund Expenses............................................
    (after reimbursements)                                                    0.80%
</TABLE>
    

                                       3
<PAGE>
<TABLE>
<CAPTION>
                                                                            GLOBAL
                                                                            INCOME
                                                                             FUND
                                                                          -----------
 Management (Advisory) Fees.............................................      1.10%
<S>                                                                       <C>
  Other Expenses After Reimbursement....................................      0.00%
                                                                              -----
  Total Annual Fund Expenses............................................
    (after reimbursements)                                                    1.10%
<FN>
- ------------------------

    *The Company reserves the right to charge a Transfer Fee in the future. (See
     "Charges and Deductions".)
</TABLE>

   
    The above tables are intended to assist the owner in understanding the costs
and expenses that he or she will bear directly or indirectly. The tables reflect
the expenses for  the Account  and reflect  the investment  management fees  and
other  expenses and total expenses for each  Fund other than Capital Growth Fund
for the  period  March 14,  1994  to December  31,  1994. For  a  more  complete
description  of the various costs and  expenses see "Charges and Deductions" and
the prospectus for the Funds which  accompanies this prospectus. IN ADDITION  TO
THE  EXPENSES  LISTED  ABOVE,  PREMIUM  TAXES VARYING  FROM  0  TO  3.5%  MAY BE
APPLICABLE IN CERTAIN STATES.
    

    The annual expenses listed for  all of the Funds of  the Company are net  of
certain  reimbursements by PIC's  investment manager. (See  "The Funds".) Absent
the reimbursements, the Funds' total expenses  for the period March 14, 1994  to
December 31, 1994 were: Money Market Fund 2.24%, Select Equity Fund 1.81%, Small
Cap  Equity Fund 1.62%, International Equity  Fund 2.24%, Growth and Income Fund
1.31%, and Global Income  Fund 2.12%. PIC's  investment manager has  voluntarily
agreed  to reimburse certain of each Fund's expenses in excess of its management
fees. Although this reimbursement may  be ended on 120  days notice to PIC,  the
investment manager has no present intention of doing so.

   
    Because  Capital Growth Fund  has no operating  history, figures for Capital
Growth Fund are estimates.
    

EXAMPLES

    An Owner would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets:

                                       4
<PAGE>
1. If the Contract is surrendered at the end of the applicable time period:

   
<TABLE>
<CAPTION>
SUB-ACCOUNT                                                                                1 YEAR     3 YEARS
- ---------------------------------------------------------------------------------------  ----------  ----------
<S>                                                                                      <C>         <C>
Money Market...........................................................................        $98        $125
Select Equity..........................................................................        100         132
Capital Growth.........................................................................        100         132
Small Cap Equity.......................................................................        100         132
International Equity...................................................................        103         142
Growth and Income......................................................................        100         132
Global Income..........................................................................        103         142
</TABLE>
    

2. If  the Contract  is not  surrendered or  is annuitized*  at the  end of  the
applicable time period:

   
<TABLE>
<CAPTION>
SUB-ACCOUNT                                                                                1 YEAR     3 YEARS
- ---------------------------------------------------------------------------------------  ----------  ----------
<S>                                                                                      <C>         <C>
Money Market...........................................................................        $24         $75
Select Equity..........................................................................         26          82
Capital Growth.........................................................................         26          82
Small Cap Equity.......................................................................         26          82
International Equity...................................................................         29          92
Growth and Income......................................................................         26          82
Global Income..........................................................................         29          92
<FN>
- ------------------------
* A surrender charge will be applied to the Contract Value upon annuitization if
the  annuity option selected  is for a  certain period of  less than five years.
(See "Charges and Deductions".)
</TABLE>
    

    The examples  assume  that  no  transfer fee  or  premium  taxes  have  been
assessed.  The examples assume that the contract maintenance fee is $35 and that
the Contract  Value  per  contract  is $2,000,  which  translates  the  contract
maintenance  fee into  an asset charge  at an  assumed annual rate  of 1.75% for
purposes of the examples based on a $1,000 investment.

    THE ABOVE EXAMPLES  SHOULD NOT  BE CONSIDERED  A REPRESENTATION  OF PAST  OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE 5%
ANNUAL   RETURN  ASSUMED  IS  HYPOTHETICAL  AND   SHOULD  NOT  BE  CONSIDERED  A
REPRESENTATION OF PAST OR  FUTURE ANNUAL RETURNS, WHICH  MAY BE GREATER OR  LESS
THAN THE ASSUMED AMOUNT.

                                    SUMMARY

THE CONTRACT

    HOW  IS A  CONTRACT ISSUED?   The  Contract, an  individual flexible premium
deferred variable  and fixed  annuity will  be issued  by Protective  Life  upon
receipt  of completed application information and an initial Purchase Payment of
at least $2,000. (See "Issuance of Contract".)

    WHAT ARE THE PURCHASE  PAYMENTS?  The minimum  amount which Protective  Life
will  accept  as  an initial  Purchase  Payment is  $2,000.  Subsequent Purchase
Payments may be made  at any time  except for contracts issued  in the State  of
Oregon.  The minimum subsequent  Purchase Payment(s) that we  will accept is (1)
$100 for  Non-Qualified Contracts;  and  (2) $50  for Qualified  Contracts.  The
maximum  aggregate Purchase Payments we will accept without Home Office approval
is $1,000,000. (See "Purchase Payments".)

    CAN I CANCEL THE CONTRACT?  You have the right to return the Contract within
a certain number of days (which varies by state and is never less than ten days)
after you receive it. The returned Contract will be treated as if it were  never
issued.  Protective  Life  will  refund  the  Contract  Value  in  states  where
permitted. This amount  may be more  or less than  the Purchase Payments.  Where
required, we will refund Purchase Payments. (See "Free Look Period".)

                                       5
<PAGE>
    CAN  I TRANSFER AMOUNTS IN THE CONTRACT?   Prior to the Annuity Commencement
Date, you may request transfers from  one Sub-Account to another Sub-Account  or
the  Fixed Account. At least $100 must  be transferred. The maximum amount which
may be transferred from the Fixed Account  is the greater of (a) $2,500; or  (b)
25% of the Fixed Account Value per Contract Year. The Company reserves the right
to charge a Transfer Fee of $25 for each transfer after the 12th transfer during
such Contract Year. (See "Transfers".)

    CAN I SURRENDER THE CONTRACT?  Upon written notice at the Home Office before
the  Annuity Commencement Date,  you may surrender the  Contract and receive its
Surrender Value. (See "Surrenders and Partial Surrenders".)

    IS THERE A GUARANTEED DEATH BENEFIT PAYABLE?  If any Owner dies prior to the
Annuity Commencement  Date, a  guaranteed  Death Benefit  will be  payable.  The
guaranteed  Death Benefit  will be  determined as  of the  end of  the Valuation
Period next  following the  date  due proof  of death  is  provided to  us.  The
guaranteed  Death Benefit is equal  to the sum of:  (1) the Fixed Account Value;
plus (2)  the greater  of: (a)  the Variable  Account Value;  or (b)  the  total
Purchase  Payment(s) allocated to  the Variable Account  less previous transfers
from the  Variable Account,  partial surrenders,  and any  applicable  Surrender
Charge(s) and Contract Maintenance Fees, increased by amounts transferred to the
Variable  Account and interest at a compounded annual effective interest rate of
5% credited as  of each Contract  Anniversary up to  any Owner's 80th  birthday.
(See "Death Benefit".)

    ARE  THERE CHARGES AND  DEDUCTIONS FROM MY CONTRACT?   The following charges
and deductions are made in connection with the Contract:

    SURRENDER CHARGES.  The amount of  any full or partial surrender is  subject
to  a surrender charge. The surrender charge  is equal to a specified percentage
(maximum 7%) of each Purchase  Payment surrendered. No surrender charge  applies
to  Contract Value in excess of total Purchase Payments. The surrender charge is
calculated using  the assumption  that the  Contract Value  in excess  of  total
Purchase  Payments is surrendered before any Purchase Payments and that Purchase
Payments  are  surrendered  on  a  first-in-first-out  basis.  (See   "Surrender
Charge".)

    MORTALITY  AND EXPENSE RISK CHARGE.  We  will deduct a mortality and expense
risk charge to compensate us for  assuming certain mortality and expense  risks.
The  charge is equal, on an annual basis,  to 1.25% of the daily net asset value
of each Sub-Account (approximately .50% for mortality risk and .75% for  expense
risk.)

    ADMINISTRATION CHARGE.  We will deduct an administration charge equal, on an
annual basis, to .15% of the daily net asset value of each Sub-Account.

    CONTRACT  MAINTENANCE FEE.   A contract  maintenance fee of  $35 is deducted
from the Variable  Account Value on  each Contract Anniversary,  and on any  day
that  the Contract is surrendered, if the surrender occurs on any day other than
the Contract Anniversary. (See "Contract Maintenance Fee".)

    PREMIUM TAXES.   If  applicable, premium  taxes will  be deducted  from  the
Purchase  Payment(s) when  received, on  full or  partial surrender  or from the
amount applied under  an Annuity  Option. Premium  taxes imposed  by the  states
currently range up to 3.5%. (See "Premium Taxes".)

    INVESTMENT  MANAGEMENT FEES AND OTHER EXPENSES OF THE FUNDS.  The net assets
of each  Sub-Account  of  the  Variable  Account  will  reflect  the  investment
management  fee incurred  by the corresponding  Fund as well  as other operating
expenses of that Fund. For each Fund, the investment manager is paid a daily fee
for its investment  management services. The  management fees are  based on  the
average  daily net  assets of  the Fund.  (See "Funds  Expenses" and  the Funds'
Prospectuses.)

    WHAT ANNUITY OPTIONS ARE AVAILABLE?   On the Annuity Commencement Date,  the
Contract  Value (less applicable  premium tax) will be  applied under an Annuity
Option, unless you choose to receive the Surrender Value in a lump sum.

                                       6
<PAGE>
    The Annuity Options include:  Payment for a Fixed  Period; Life Income  with
Payment  for a Guaranteed Period;  and Payments for a  Fixed Amount. The amounts
payable under these Annuity Options do  NOT vary with the investment  experience
of the Variable Account. (See "Annuity Options".)

    IS  THE CONTRACT AVAILABLE FOR QUALIFIED RETIREMENT PLANS?  The Contract may
be issued for  use with retirement  plans receiving special  federal income  tax
treatment  under the  Internal Revenue Code  such as pension  and profit sharing
plans, annuity  purchase plans  of public  school systems  and universities  and
certain  other  tax-exempt  organizations, individual  retirement  accounts, and
individual retirement annuities. (See "Federal Tax Matters".)

FEDERAL TAX STATUS

    Generally, a  distribution  from the  Contract,  which includes  a  full  or
partial surrender or payment of a death benefit,will result in taxable income if
there  has been an increase  in the Contract Value.  In certain circumstances, a
10% penalty tax may also apply. (See "Federal Tax Matters".)

                        CONDENSED FINANCIAL INFORMATION

    At December 31, 1994, net assets of the Variable Account were represented by
the following accumulation unit values and accumulation units. The  accumulation
unit values shown for the beginning of the period are as of March 14, 1994 (date
of  inception). This information should be read in conjunction with the Variable
Account's financial statements and  related notes included  in the Statement  of
Additional Information.

<TABLE>
<CAPTION>
                                                                        ACCUMULATION    ACCUMULATION    ACCUMULATION
                                                                         UNIT VALUE*     UNIT VALUE*      UNITS**
                                                                        -------------  ---------------  ------------
<S>                                                                     <C>            <C>              <C>
                                                                        BEGINNING OF       END OF          END OF
                                                                           PERIOD          PERIOD          PERIOD
Money Market Sub-Account..............................................         1.00            1.02       3,034,056
Growth and Income Sub-Account.........................................        10.00            9.71       4,260,743
International Equity Sub-Account......................................        10.00            9.48       2,588,605
Global Income Sub-Account.............................................        10.00            9.82       1,457,712
Small Cap Equity Sub-Account..........................................        10.00            8.91       2,347,968
Select Equity Sub-Account.............................................        10.00            9.94       1,682,927
<FN>
- ------------------------
 *   Accumulation unit values are rounded to the nearest tenth of a cent.
**   Accumulation units are rounded to the nearest unit.
</TABLE>

                    THE COMPANY, VARIABLE ACCOUNT AND FUNDS

PROTECTIVE LIFE INSURANCE COMPANY

    The  Contracts are  issued by Protective  Life. Founded  in 1907, Protective
Life provides individual life  and health insurance,  annuities, group life  and
health  insurance,  and  guaranteed  investment  contracts.  Protective  Life is
currently licensed to  transact life  insurance business  in 49  states and  the
District  of Columbia. As of December 31, 1994, Protective Life had total assets
of approximately  $6.1  billion.  Protective Life  is  the  principal  operating
subsidiary  of Protective Life Corporation ("PLC"), an insurance holding company
whose stock  is  traded  on  the  New  York  Stock  Exchange.  PLC,  a  Delaware
corporation,  had total  assets of  approximately $6.1  billion at  December 31,
1994.

PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

    The Protective Variable  Annuity Separate Account  is a separate  investment
account of Protective Life. The Variable Account was established under Tennessee
law  by  the Board  of Directors  of Protective  Life on  October 11,  1993. The
Variable Account is registered with the Securities and Exchange Commission  (the
"SEC")  as a unit investment trust under the Investment Company Act of 1940 (the
"1940 Act")  and  meets the  definition  of  a separate  account  under  federal
securities  laws. This registration  does not involve supervision  by the SEC of
the management or investment policies or practices of the Variable Account.

                                       7
<PAGE>
    Protective Life owns the  assets of the Variable  Account. These assets  are
held  separate from other assets  and are not part  of Protective Life's General
Account. Assets of the Variable Account equal to the reserves or other  contract
liabilities  of the Variable  Account will not be  charged with liabilities that
arise from  any other  business Protective  Life conducts.  Protective Life  may
transfer  to its General Account any assets of the Variable Account which exceed
the reserves and the  Contract liabilities of the  Variable Account (which  will
always  be at  least equal  to the  aggregate Variable  Account Value  under the
Contracts). Protective Life may  accumulate in the  Variable Account the  charge
for  mortality and  expense risks,  and investment  results applicable  to those
assets that are in excess of the net assets supporting the Contracts.

    The income, gains  or losses, whether  or not realized,  from the assets  of
each Sub-Account of the Variable Account are credited to or charged against that
Sub-Account  without regard to  any other income, gains  or losses of Protective
Life. The Variable  Account currently  has six Sub-Accounts:  Growth and  Income
Sub-Account; International Equity Sub-Account; Global Income Sub-Account; Select
Equity   Sub-Account;  Small  Capital  Equity   Sub-Account;  and  Money  Market
Sub-Account. The assets of each  Sub-Account are invested exclusively in  shares
of a corresponding Fund.

ADMINISTRATION

    Protective  Life Insurance  Company performs the  Contract administration at
its Home Office at 2801 Highway  280 South, Birmingham, Alabama 35223.  Contract
administration includes processing applications for the Contracts and processing
Purchase  Payments, transfers,  surrenders and Death  Benefit claims  as well as
performing record maintenance and paying annuity benefits.

THE FUNDS

    Each Sub-Account invests  in shares of  PIC, a "series"  type of  investment
company  registered with the  SEC as an  open-end management investment company.
PlC currently issues six classes or "series" of stock, each of which  represents
an  interest in a separate investment portfolio or Fund. New Funds, which may or
may not be available as investments  under the Contracts, may be established  in
the  future. Each Fund  has its own  investment objective(s) and  the income and
losses of each are determined  separately. The investment objective(s) of  Funds
are briefly summarized below.

    MONEY MARKET FUND.  This Fund seeks to maximize current income to the extent
consistent  with the preservation of capital  and maintenance of liquidity. This
Fund will pursue its  objective by investing exclusively  in high quality  money
market  instruments. An investment  in the Money Market  Fund is neither insured
nor guaranteed by the U.S. Government and the Fund cannot assure that it will be
able to maintain a stable net asset value of $1 per share.

   
    SELECT EQUITY FUND.   This Fund seeks a  total return consisting of  capital
appreciation  plus  dividend  income. This  Fund  will pursue  its  objective by
investing, under  normal circumstances,  at least  90% of  its total  assets  in
equity  securities selected  using both  fundamental research  and a  variety of
quantitative techniques that seek to maximize the Fund's reward to risk ratio.
    

   
    PROTECTIVE CAPITAL GROWTH FUND seeks long-term capital growth. The Fund will
pursue its objective by investing, under  normal circumstances, at least 65%  of
its  total  assets in  equity securities  having long-term  capital appreciation
potential.
    

    SMALL CAP EQUITY FUND.  This Fund seeks long-term capital growth. This  Fund
will  pursue its objective by investing under normal circumstances, at least 65%
of its total assets in equity  securities of companies with public stock  market
capitalizations of $1 billion or less at the time of investment.

   
    INTERNATIONAL  EQUITY FUND.  This Fund seeks long-term capital appreciation.
This Fund  will pursue  its  objective by  investing,  primarily in  equity  and
equity-related  securities of  companies that  are organized  outside the United
States or whose securities are primarily traded outside the United States.
    

                                       8
<PAGE>
    GROWTH AND INCOME  FUND.  This  Fund seeks long-term  growth of capital  and
growth  of  income. This  Fund will  pursue its  objectives by  investing, under
normal circumstances, at  least 65%  of its  total assets  in equity  securities
having favorable prospects of capital appreciation and/or dividend growth.

    GLOBAL  INCOME FUND.  This Fund seeks high total return, emphasizing current
income  and,  to   a  lesser   extent,  providing   opportunities  for   capital
appreciation.  This Fund will pursue its objectives by investing in high quality
fixed-income securities of U.S. and foreign issuers and through foreign currency
transactions.

    THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF  THE
FUNDS WILL BE ACHIEVED.

    MORE DETAILED INFORMATION CONCERNING THE INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS  OF THE FUNDS,  THE EXPENSES OF  THE FUNDS, THE  RISKS ATTENDANT TO
INVESTING IN THE FUNDS AND OTHER ASPECTS OF THEIR OPERATIONS CAN BE FOUND IN THE
CURRENT PROSPECTUS  FOR THE  FUNDS  WHICH ACCOMPANIES  THIS PROSPECTUS  AND  THE
CURRENT STATEMENT OF ADDITIONAL INFORMATION FOR THE FUNDS. THE FUNDS' PROSPECTUS
SHOULD  BE READ CAREFULLY BEFORE ANY  DECISION IS MADE CONCERNING THE ALLOCATION
OF PURCHASE PAYMENTS OR TRANSFERS AMONG THE SUB-ACCOUNTS.

OTHER INVESTORS IN THE FUNDS

    PIC currently sells shares only to  the Variable Account or directly to  the
Company.  PIC may in  the future sell  shares to other  separate accounts of the
Company or  its  life insurance  company  affiliates supporting  other  variable
annuity  contracts  or  variable  life insurance  contracts.  In  addition, upon
obtaining regulatory approval, PIC may  sell shares to certain retirement  plans
qualifying under Section 401 of the Code. The Company currently does not foresee
any disadvantages to Owners that would arise from the possible sale of shares to
support its variable life insurance contracts or those of its affiliates or from
the  possible sale  of shares  to such retirement  plans. However,  the board of
directors of  PIC  will  monitor  events  in  order  to  identify  any  material
irreconcilable  conflicts that  might possibly  arise if  such shares  were also
offered to  support  variable annuity  contracts  other than  the  Contracts  or
variable  life insurance contracts  or to retirement  plans. In event  of such a
conflict, the board of directors would determine what action, if any, should  be
taken in response to the conflict. In addition, if the Company believes that the
PIC's  response to  any such conflicts  insufficiently protects  Owners, it will
take  appropriate  action  on  its  own,  including  withdrawing  the  Account's
investment in the Fund. (See the Fund Prospectus for more detail.)

   
    Investment  Distributors  Advisory Services,  Inc.  ("IDASI") serves  as the
investment manager of  the Funds.  IDASI, in  turn, has  retained Goldman  Sachs
Asset  Management as  the investment  adviser of  Protective Money  Market Fund,
Protective Select Equity Fund, Protective Capital Growth Fund, Protective  Small
Cap  Equity  Fund and  Protective  Growth and  Income  Fund. IDASI  has retained
Goldman Sachs  Asset  Management  International as  the  investment  adviser  of
Protective  International Equity Fund and Protective Global Income Fund. Goldman
Sachs Asset Management is a separate operating division of Goldman, Sachs &  Co.
and  Goldman Sachs  Asset Management International  is an  affiliate of Goldman,
Sachs & Co.
    

ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS

    Protective Life  reserves the  right,  subject to  applicable law,  to  make
additions  to, deletions from, or substitutions for  the shares that are held in
the Variable Account or that the Variable Account may purchase. If the shares of
a Fund  are  no longer  available  for investment  or  if in  Protective  Life's
judgment  further investment in any Fund  should become inappropriate in view of
the purposes of the Variable Account, Protective Life may redeem the shares,  if
any,  of  that  Fund  and  substitute  shares  of  another  registered  open-end
management company or unit investment trust. Protective Life will not substitute
any shares attributable to a Contract's interest in the Variable Account without
notice and prior  approval of the  SEC and state  insurance authorities, to  the
extent required by the 1940 Act or other applicable law.

    Protective Life also reserves the right to establish additional Sub-Accounts
of the Variable Account, each of which would invest in shares corresponding to a
new Fund or in shares of another

                                       9
<PAGE>
investment company having a specific investment objective. Subject to applicable
law  and any required SEC approval, Protective Life may, in its sole discretion,
establish new Sub-Accounts or  eliminate one or  more Sub-Accounts if  marketing
needs, tax considerations or investment conditions warrant. Any new Sub-Accounts
may  be  made available  to existing  Owner(s) on  a basis  to be  determined by
Protective Life.

    If any of these  substitutions or changes are  made, Protective Life may  by
appropriate endorsement change the Contract to reflect the substitution or other
change.  If Protective Life deems it to be  in the best interest of Owner(s) and
Annuitants, and subject to any approvals  that may be required under  applicable
law, the Variable Account may be operated as a management company under the 1940
Act,  it  may be  de-registered  under that  Act  if registration  is  no longer
required, or it may  be combined with other  Protective Life separate  accounts.
Protective  Life reserves the right to make  any changes to the Variable Account
required by the 1940 Act or other applicable law or regulation.

                          DESCRIPTION OF THE CONTRACTS

ISSUANCE OF A CONTRACT

    To purchase  a  Contract, certain  application  information and  an  initial
Purchase  Payment  must  be  submitted to  Protective  Life  through  a licensed
representative of Protective Life, who is also a registered representative of  a
broker-dealer having a distribution agreement with Investment Distributors, Inc.
The  minimum initial  Purchase Payment is  $2,000. Protective  Life reserves the
right to accept or decline a request to issue a Contract. Contracts may be  sold
to  or in connection with retirement plans  which do not qualify for special tax
treatment as well  as retirement plans  that qualify for  special tax  treatment
under    the   Code.   The   maximum   age   for   Owners   on   the   Effective
Date is 85.

    If the necessary application  information for a  Contract is accompanied  by
the  initial Purchase Payment, the initial Purchase Payment (less any applicable
premium tax)  will be  allocated to  the Sub-Accounts  or the  Fixed Account  as
provided  for in  the application  within two business  days of  receipt of such
Purchase Payment at the Home Office. If the necessary application information is
not received,  the Company  will retain  the  Purchase Payment  for up  to  five
business  days while it  attempts to complete the  information. If the necessary
application information is not complete after five days, the Company will inform
the applicant of the reason for the delay and the initial Purchase Payment  will
be  returned  immediately  unless  the applicant  specifically  consents  to the
Company retaining it until the information is complete. Once the information  is
complete,  the initial  Purchase Payment  will be  allocated to  the appropriate
Sub-Accounts and/or the Fixed Account within two business days.

    Information necessary to complete an  application may be transmitted to  the
Company by telephone, facsimile, or electronic media.

PURCHASE PAYMENTS

    Subsequent  Purchase Payment(s)  will be accepted  by the  Company except on
contracts issued in the  State of Oregon, where  a single Purchase Payment  only
will  be  accepted.  Protective Life  retains  the  right to  limit  the maximum
Purchase Payment that can be made  without Home Office approval. This amount  is
currently  $1,000,000.  The minimum  subsequent  Purchase Payment  that  will be
accepted is (1)  $100 for  Non-Qualified Contracts;  and (2)  $50 for  Qualified
Contracts.

    Under  an Automatic Purchase  Payment plan, the Owner  can select a monthly,
quarterly, semi-annual or  annual payment  schedule pursuant  to which  Purchase
Payments will be automatically deducted from a bank account. The minimum size of
such  a monthly, quarterly, semi-annual, or annual payment must be equivalent to
a minimum of $100 per month.

FREE LOOK PERIOD

    You have the right to  return the Contract within  a certain number of  days
after  you  receive  it  by  returning  it  to  the  Home  Office  or  the sales
representative who sold it along with a written cancellation request. The number
of days is determined by state  law (and is at least  ten days) in the state  in

                                       10
<PAGE>
which the Owner resides and is shown on your Contract. Return of the Contract by
mail  is effective on being received by  Us. We will treat the returned Contract
as if  it  had never  been  issued. However,  Protective  Life will  refund  the
Contract  Value in states where permitted. This  amount may be more or less than
the aggregate amount of your Purchase Payments up to that time. Where  required,
we will refund the Purchase Payment.

ALLOCATION OF PURCHASE PAYMENTS

    Owners  must indicate  in the  application how  Purchase Payments  are to be
allocated to  the  Sub-Accounts  and/or  the  Fixed  Account.  These  allocation
instructions  apply to both initial and subsequent Purchase Payments. Owners may
change the allocation instructions in effect  at any time by written request  to
the   Company.  If  such  instructions   are  indicated  by  percentages,  whole
percentages must be used.  The minimum percentage that  can be allocated to  any
Sub-Account or the Fixed Account is 10% of a Purchase Payment.

    For Contracts issued in states where, upon cancellation during the free look
period,  we return  at least  your Purchase  Payments, we  reserve the  right to
allocate your initial Purchase Payment (and any subsequent Purchase Payment made
during the  free  look  period)  to  the  Money  Market  Sub-Account  until  the
expiration  of the number of days in the free look period starting from the date
the Contract is mailed from the  Home Office. Thereafter, all Purchase  Payments
will be allocated according to your allocation instructions then in effect.

VARIABLE ACCOUNT VALUE

    The  Variable  Account  Value  reflects  the  investment  experience  of the
Sub-Accounts to which it  is allocated, any Purchase  Payments allocated to  the
Sub-Accounts, transfers in or out of the Sub-Accounts, or any partial surrenders
of  Variable  Account Value.  There is  no  guaranteed minimum  Variable Account
Value. The Contract's Variable Account Value therefore depends upon a number  of
factors. The Variable Account Value for a Contract at any time is the sum of the
Sub-Account  Values  for  the  Contract  on  the  Valuation  Day  most  recently
completed.

    DETERMINATION OF ACCUMULATION  UNITS.   For each  Sub-Account, the  Purchase
Payment(s)  or transferred  amounts are  converted into  Accumulation Units. The
number of  Accumulation Units  credited  is determined  by dividing  the  dollar
amount  directed to each Sub-Account  by the value of  the Accumulation Unit for
that Sub-Account  for the  Valuation Day  on which  the Purchase  Payment(s)  or
transferred  amount is invested in the Sub-Account. Therefore, Purchase Payments
allocated to or amounts transferred to  a Sub-Account under a Contract  increase
the number of Accumulation Units of that Sub-Account credited to the Contract.

    Certain events will reduce the number of Accumulation Units of a Sub-Account
credited  to a Contract. Partial surrenders or transfers from a Sub-Account will
result in the cancellation  of the appropriate number  of Accumulation Units  of
that  Sub-Account as will: notice of surrender;  death of any Owner; the Annuity
Commencement Date; and  the deduction  of the annual  Contract Maintenance  Fee.
Accumulation  Units will be cancelled  as of the end  of the Valuation Period in
which the Company received notice of or instructions regarding the event.

    DETERMINATION OF ACCUMULATION UNIT VALUE.   The Accumulation Unit value  for
each Sub-Account was arbitrarily set initially at $10 when the Sub-Account began
operations.  Thereafter,  the  Accumulation  Unit  value  at  the  end  of every
Valuation Day  is  the  Accumulation Unit  value  at  the end  of  the  previous
Valuation  Day  times  the  net  investment  factor,  as  described  below.  The
Sub-Account Value for  a Contract is  determined on any  day by multiplying  the
number of Accumulation Units attributable to the Contract in that Sub-Account by
the Accumulation Unit value for that Sub-Account on that day.

    NET  INVESTMENT FACTOR.  The net investment factor is an index that measures
the investment performance  of a Sub-Account  from one Valuation  Period to  the
next.  Each Sub-Account  has a net  investment factor for  each Valuation Period
which may be greater or less than one. Therefore, the

                                       11
<PAGE>
value of  an Accumulation  Unit may  increase or  decrease. The  Net  Investment
Factor  for any Sub-Account  for any Valuation Period  is determined by dividing
(1) by (2) and subtracting (3) from the result, where:

(1) is the result of:

        a.  the net asset value per  share of the Fund held in the  Sub-Account,
           determined at the end of the current Valuation Period; plus

        b.   the per share amount of  any dividend or capital gain distributions
           made by the Fund to the Sub-Account, if the "ex-dividend" date occurs
           during the current Valuation Period; plus or minus

        c.  a per share  charge or credit for any  taxes reserved for, which  is
           determined  by  the  Company  to have  resulted  from  the investment
           operations of the Sub-Account.

(2) is  the net  asset value  per share  of the  Fund held  in the  Sub-Account,
    determined at the end of the last prior Valuation Period.

(3) is a daily factor representing the Mortality and Expense Risk Charge and the
    Administration Charge deducted from the Sub-Account.

TRANSFERS
    Upon  our receipt of  your written notice  at any time  prior to the Annuity
Commencement Date,  you  may  transfer  amounts  in  a  Sub-Account  to  another
Sub-Account  and/or  the  Fixed  Account or,  subject  to  certain restrictions,
amounts from the Fixed Account to a Sub-Account. The minimum amount that may  be
transferred is the lesser of $100 or the entire amount in any Sub-Account or the
Fixed  Account from which the transfer is to be made. After the transfer, if the
amount remaining  in the  Sub-Account(s)  and/or Fixed  Account from  which  the
transfer  is made  would be  less than  $100, then  we will  transfer the entire
amount instead of  the requested amount.  Transfers from the  Fixed Account  are
subject  to a maximum amount which may  be transferred. The maximum amount which
may be transferred from the Fixed Account  is the greater of (a) $2,500; or  (b)
25%  of the Fixed Account Value per  Contract Year calculated as of the previous
Contract Anniversary. We reserve the right to limit transfers to no more than 12
per year. For  each additional transfer  over 12 during  each Contract Year,  we
reserve  the right to charge  a Transfer Fee. The Transfer  Fee, if any, will be
deducted from  the amount  being transferred.  (See "Charges  and Deductions  --
Transfer Fee".)

                                       12
<PAGE>
    TELEPHONE TRANSFERS.  Transfers may be made based upon instructions given by
telephone, provided the appropriate election has been made on the application or
written authorization is provided.

    We  will  send  you  a  confirmation  of  all  instructions  communicated by
telephone to determine  if they  are genuine.  For telephone  transfers we  will
require  a  form  of personal  identification  prior to  acting  on instructions
received by telephone. We  will also make a  tape-recording of the  instructions
given  by telephone. If we follow these procedures we will not be liable for any
losses due to unauthorized or fraudulent  instructions. We reserve the right  to
suspend telephone transfer privileges at any time for any class of contracts.

    RESERVATION OF RIGHTS.  We reserve the right without prior notice to modify,
restrict,  suspend  or eliminate  the  transfer privileges  (including telephone
transfers) at  any  time,  for  any  class of  Contracts,  for  any  reason.  In
particular,  we reserve the  right to not  honor transfers requested  by a third
party holding a power of attorney from an Owner where that third party  requests
simultaneous transfers on behalf of the Owners of two or more Contracts.

    DOLLAR  COST AVERAGING.  If  you elect at the time  of application or at any
time thereafter by  written notice to  the Company, you  may systematically  and
automatically  transfer,  on  a  monthly or  quarterly  basis,  specified dollar
amounts from the Fixed Account and to or from any Sub-Account(s). This is  known
as  the  dollar  cost  averaging  method of  investment.  By  transferring  on a
regularly scheduled  basis as  opposed to  allocating the  total amount  at  one
particular  time,  an Owner  may be  less  susceptible to  the impact  of market
fluctuations in Sub-Account Accumulation Units. Protective Life, however,  makes
no  guarantee that the dollar  cost averaging method will  result in a profit or
protection against loss.

    You may elect dollar  cost averaging for  periods of at  least 12 months  or
greater.  At least $100 must be transferred each month or $300 each quarter. The
amount required to be  allocated to the Fixed  Account and/or Sub-Accounts  from
which  the  transfers will  be  made can  be made  by  an initial  or subsequent
investment or by  transferring amounts  into such accounts.  Such transfers  are
subject  to the transfer restrictions described above (except the maximum amount
restriction) which otherwise apply to transfers from the Fixed Account.

   
    If elected, transfers will commence on  the 15th of the month following  the
end of the Free Look Period.
    

    We  will process  dollar cost averaging  transfers until the  earlier of the
following (i) the number  of designated transfers have  been completed; or  (ii)
until  the Contract  Value from  the Fixed  Account and/  or Sub-Account(s) from
which the transfers are being  made is less than  the amount selected; or  (iii)
the  Owner  instructs  Protective  Life  in  writing  to  cancel  the  automatic
transfers.

    Automatic transfers made to  facilitate the dollar  cost averaging will  not
count  toward the twelve  transfers permitted each Contract  Year if the Company
elects to limit  transfers. We  reserve the  right to  discontinue offering  the
automatic transfers upon 30 days' written notice to the Owner.

SURRENDERS AND PARTIAL SURRENDERS

    PARTIAL  SURRENDERS.  At  any time before the  Annuity Commencement Date, an
Owner may  make a  partial surrender  of the  Contract Value.  The Company  will
withdraw  the amount requested from the Contract Value as of the business day on
or next following  the day written  notice requesting the  partial surrender  is
received.  Any  applicable surrender  charge will  be  deducted from  the amount
requested. (See "Surrender Charge".)

    In the case of certain Qualified Plans, federal tax law imposes restrictions
on the form  and manner  in which  benefits may  be paid.  For example,  spousal
consent may be needed in certain instances before a distribution may be made.

    The  Owner may specify the  amount of the partial  surrender to be made from
any Sub-Account or the Fixed  Account. If the Owner does  not so specify, or  if
the amount in the designated Sub-Accounts

                                       12
<PAGE>
or  the Fixed  Account is  inadequate to  comply with  the request,  the partial
surrender will be made from each Sub-Account and the Fixed Account based on  the
proportion  that such Sub-Account Value bears to the total Contract Value on the
Valuation Day immediately prior to the partial surrender.

    A  partial  surrender  will  have  federal  income  tax  consequences.  (See
"Taxation of Partial and Full Surrenders".)

    SURRENDER.   At any time before the Annuity Commencement Date, the Owner may
request a surrender of the Contract for its Surrender Value. The Surrender Value
will be determined as of the Valuation Day on or next following the date written
notice requesting surrender and  the Contract are received  at the Home  Office.
The Surrender Value will be paid in a lump sum unless the Owner requests payment
under  a payment option. A surrender  will have federal income tax consequences.
(See "Taxation of Partial and Full Surrenders".)

    SURRENDER AND PARTIAL  SURRENDER RESTRICTIONS.   The Owner's  right to  make
surrenders  and partial  surrenders is  subject to  any restrictions  imposed by
applicable law or employee benefit plan.

    RESTRICTIONS ON DISTRIBUTIONS FROM  CERTAIN TYPES OF  CONTRACTS.  There  are
certain  restrictions on surrenders and partial  surrenders of Contracts used as
funding vehicles for Code Section  403(b) retirement plans. Section 403(b)  (11)
of  the Code restricts  the distribution under  Section 403(b) annuity contracts
of: (i) contributions  made pursuant to  a salary reduction  agreement in  years
beginning  after December  31, 1988; (ii)  earnings on  those contributions; and
(iii) earnings in  such years  on amounts  held as  of the  last year  beginning
before  January 1, 1989. Distributions of those  amounts may only occur upon the
death of  the employee,  attainment  of age  59  1/2, separation  from  service,
disability,  or hardship. In  addition, income attributable  to salary reduction
contributions may not be distributed in the case of hardship.

    SYSTEMATIC WITHDRAWALS.  You may  elect at the time  of application or at  a
later  date  by properly  completing  an election  form,  to participate  in the
systematic withdrawal  plan.  This plan  allows  you to  pre-authorize  periodic
partial  surrenders  prior  to  the  Annuity  Commencement  Date.  In  order  to
participate in the plan you must have:  (1) made an initial Purchase Payment  of
at  least  $12,000;  or  (2)  a  Contract  Value  as  of  the  previous Contract
Anniversary equal to $12,000 or greater after deduction of surrender charges and
premium  taxes.  There  are  federal  income  tax  consequences  to   systematic
withdrawals  from the Contract and the Owner should, therefore, consult with his
or her tax advisor before participating in any systematic withdrawal plan.

    When you elect systematic withdrawals, you will instruct Protective Life  to
withdraw  a level  dollar amount  from the  Contract on  a monthly  or quarterly
basis. The minimum  distribution requested must  be at least  $100 monthly.  The
maximum amount which can be withdrawn under the plan each year is the greater of
(1)  10% of all  Purchase Payments made, as  of the date of  the request, or (2)
cumulative earnings  calculated  as of  each  Contract Anniversary.  Unless  you
instruct  Us to reduce the  monthly withdrawal amount so  that the annual amount
would not exceed  the above  limits, Protective  Life will  continue to  process
withdrawals   for  the  designated  monthly  amount.  Once  the  amount  of  the
withdrawals exceeds the above limits, we reserve the right to deduct a Surrender
Charge, if otherwise applicable,  from the remaining  payments made during  that
Contract Year (See "Surrender Charge".)

    We will pay you the amount requested each month or quarter as applicable and
cancel Accumulation Units equal to that amount in accordance with the allocation
schedule  in effect.  If the  amount to  be withdrawn  exceeds the Sub-Account's
Value, we will cease processing the systematic withdrawals.

    Normally, systematic  withdrawals are  not subject  to a  Surrender  Charge.
However,  if you request a partial surrender  that is not part of the systematic
withdrawal plan in a year when the systematic withdrawal plan has been utilized,
that partial surrender will be subject to any applicable Surrender Charge.  (See
"Surrender  Charge".) Systematic withdrawals will terminate  in the event that a
non-systematic withdrawal  plan  partial  surrender  is  made  from  a  Contract
participating  in the  plan and the  Contract Value after  the partial surrender
does not equal or exceed $12,000.

                                       13
<PAGE>
    Systematic withdrawals may  be discontinued by  the Owner at  any time  upon
written  request.  We  reserve  the  right  to  discontinue  offering systematic
withdrawals upon written notice to you.

LOAN PRIVILEGE

    The Company offers a  loan privilege to Owners  of section 403(b)  Contracts
that  are not subject to  Title 1 of ERISA. Owners  of such Contracts may obtain
loans using the Contract as the only security for the loan. Loans are subject to
provisions of the Code and to applicable retirement program rules. Tax  advisors
and  retirement  plan  advisors should  be  consulted prior  to  exercising loan
privileges.

    The amount available for a loan at any  given time is the lesser of (1)  80%
of  the Contract Value  less any outstanding debt  under the Contract (including
any accrued  interest thereon),  or (2)  the amount  permitted as  a loan  under
federal tax law. The minimum loan amount is $1,000. The maximum amount permitted
as a loan under federal tax law generally equals the amount which, when added to
existing  debt under  the Contract,  does not exceed  the lesser  of (1) $50,000
(reduced by  any excess  of the  highest outstanding  debt during  the one  year
period ending on the day before the date on which the current loan is made, over
the  outstanding debt on the date the current  loan is made), or (2) $10,000 or,
if greater, one-half  of the  Contract Value.  For purposes  of determining  the
amount  permitted as a  loan under the  federal tax law,  certain employer plans
must  be  aggregated.  A  tax  advisor  should  be  consulted  for  purposes  of
determining  the maximum amount which may be taken and treated as a loan, rather
than as a taxable distribution, for federal income tax purposes.

    Loans will be made only upon written request of the Owner. The Company  will
make loans within seven days of receiving a properly completed loan application,
subject  to postponement under the same circumstances that payment of surrenders
may be  postponed.  (See "Suspension  or  Delay  in Payments".)  When  an  Owner
requests  a loan, the Company  will reduce the Owner's  Contract Value (on a pro
rata basis among investments in the  Sub-Accounts and the Fixed Account,  unless
the Owner requests otherwise) by the amount of the loan and transfer that amount
to  the loan account, which is part of the Company's general account. Amounts in
the loan  account will  not  participate in  the  investment experience  of  any
Sub-Account.  Loans must be repaid within five years, repayments must be made at
least quarterly, and  repayments must  be made in  substantially equal  amounts.
However,  the repayment period  of a loan may  be longer than  five years if the
purpose of the loan is to acquire a principal residence for the Owner. The Owner
may prepay the loan, in whole or in  part, at any time while the Contract is  in
force. Failure to make timely loan repayments may give rise to taxable income.

    When  the loan is  repaid, the amount  of the repayment  will be transferred
from the loan account back into the  Variable and Fixed Accounts. The Owner  may
designate  the  manner  in which  a  repayment  is to  be  allocated. Otherwise,
repayments will  be  allocated  in  accordance  with  the  Owner's  most  recent
instructions  for allocations.  On each  Contract Anniversary,  the Company will
transfer from the Contract  Value (from the Sub-Accounts  and Fixed Account,  in
the  same manner as described above) to the loan account the amount by which the
debt on the Contract exceeds the balance in the loan account.

    The Company charges interest of 6% per year on Contract loans. Loan interest
is payable on  amounts in arrears  and, unless  paid in cash,  the accrued  loan
interest  is added to the amount  of the debt and bears  interest at 6% as well.
The Company credits interest with respect to amounts held in the loan account at
a rate of 4% per year. Consequently, the net cost of loans under the Contract is
2%. If  on any  date  debt under  a Contract  exceeds  the Contract  Value,  the
Contract  will  be in  default. In  such case,  an Owner  will receive  a notice
indicating the payment needed to bring the Contract out of default and will have
a thirty-one (31) day grace  period within which to  pay the default amount.  If
the  required payment is not  made within the grace  period, the Contract may be
terminated without value.

    The amount of any debt will be deducted from the death benefit. In addition,
debt, whether or not repaid, will have a permanent effect on the Contract  Value
because  the investment  results of the  Fixed and Variable  Accounts will apply
only to  the  unborrowed portion  of  the Contract  Value.  The longer  debt  is
outstanding, the greater the effect is likely to be.

                                       14
<PAGE>
                               THE FIXED ACCOUNT

    An  Owner may allocate some or all of Purchase Payments and transfer some or
all of the Contract Value to the  Fixed Account, which is part of the  Company's
general  account.  The  assets  of the  Company's  general  account  support its
insurance and  annuity obligations  and  are subject  to the  Company's  general
liabilities  from business  operations. Since the  Fixed Account is  part of the
general account, the Company assumes the risk of investment gain or loss on this
amount. Under the Contracts  the Fixed Account Value  is credited with rates  of
interest, as described below.

    The  Fixed Account has not been, and  is not required to be, registered with
the SEC under the Securities Act of 1933, and neither the Fixed Account nor  the
Company's general account has been registered as an investment company under the
1940  Act. Therefore, neither the Company's  general account, the Fixed Account,
nor any interests therein are generally subject to regulation under the 1933 Act
or the 1940 Act. The disclosures relating  to the general account and the  Fixed
Account included in this prospectus are for the Owner's information and have not
been  reviewed by the SEC.  However, such disclosures may  be subject to certain
generally applicable  provisions  of  federal securities  law  relating  to  the
accuracy and completeness of statements made in prospectuses.

    The  Company guarantees that the interest credited during the first Contract
Year to the initial Purchase Payment allocated to the Fixed Account will not  be
less  than  the  rate shown  in  the  Contract. The  interest  rate  credited to
subsequent Purchase Payment(s) allocated to or amounts transferred to the  Fixed
Account  will be the  annual effective interest  rate in effect  on the date the
Purchase Payment(s) is  received by us  or the  date the transfer  is made.  The
interest  rate is guaranteed to apply to  such amounts for a twelve month period
which begins on the date  the Purchase Payment(s) is  allocated or the date  the
transfer is made.

    After  an interest rate guarantee expires as to a Purchase Payment or amount
transferred, (I.E.,  12 months  after  the Purchase  Payment(s) or  transfer  is
placed  in the Fixed Account) we will credit interest on the Fixed Account Value
at the current interest rate in effect. New current interest rates are effective
for the Fixed Account Value for 12 months from the time they are first  applied.
We, in our sole discretion, may declare a new current interest rate from time to
time  but in  no event more  frequently than  once per year.  The initial annual
effective interest rate and the current  interest rates the Company will  credit
are  annual effective  interest rates  of not less  than 3.00%.  For purposes of
crediting interest, amounts  deducted, transferred or  withdrawn from the  Fixed
Account will be accounted for on a "first-in, first-out" (FIFO) basis.

    FIXED  ACCOUNT VALUE.  The  value of the Fixed Account  at any time is equal
to: (a) the Purchase Payment(s) allocated to the Fixed Account; plus (b) amounts
transferred to  the Fixed  Account;  plus (c)  interest  credited to  the  Fixed
Account;  less (d) any  partial surrenders, or transfers  from the Fixed Account
and any Surrender Charges or premium  taxes deducted in connection with  partial
surrenders  from  the  Fixed  Account.  Because  Protective  Life,  at  its sole
discretion, anticipates changing the  current interest rate  from time to  time,
different  allocations  and transfers  to  and from  the  Fixed Account  will be
credited with different current interest rates.

                                 DEATH BENEFIT

    If any Owner dies before the  Annuity Commencement Date, a guaranteed  Death
Benefit  will  be paid  to the  Beneficiary.  In the  case of  certain Qualified
Contracts, regulations promulgated by the Treasury Department prescribe  certain
limitations on the designation of a Beneficiary.

    The  guaranteed  Death Benefit  will  be determined  as  of the  end  of the
Valuation Period next following the date due  proof of death is received by  us.
The  guaranteed Death Benefit  at any age will  be equal to the  sum of: (1) the
Fixed Account Value; plus (2) the greater of: (a) the Variable Account Value; or
(b) the  total  Purchase  Payment(s)  allocated to  the  Variable  Account  less
previous  transfers  from  the  Variable Account,  partial  surrenders,  and any
applicable Surrender  Charge(s)  and  Contract Maintenance  Fees,  increased  by
amounts   transferred  to  the   Variable  Account  (this   subtotal  is  called

                                       15
<PAGE>
"Death Benefit Account  Value") and  interest at a  compounded annual  effective
interest  rate of  5% credited  to the  Death Benefit  Account Value  as of each
Contract Anniversary, on or before any Owner's 80th birthday.

    The Death Benefit may be taken in one sum immediately as a full surrender of
the Contract. If  the Death  Benefit is  not taken  in one  sum immediately  the
Contract  will  be continued  with the  Death Benefit  becoming the  new current
Contract Value. Any  increase in  the Contract Value  will be  allocated to  and
among  the  Fixed  Account  and  Sub-Accounts  in  proportion  to  their  values
immediately prior to the Owner's death. If the Death Benefit is not taken in one
sum immediately, the entire interest in the Contract must be distributed  within
five years of the Owner's death unless:

    (a)  the entire interest in the Contract is distributed over the life of the
       Beneficiary with distributions beginning within  one year of the  Owner's
       death; or

    (b)  the entire interest  in the Contract  is distributed over  a period not
       extending  beyond   the  life   expectancy   of  the   Beneficiary   with
       distributions beginning within one year of the Owner's death; or

    (c)  the Beneficiary is  the deceased Owner's spouse  and elects to continue
       the Contract and become the new Owner.

    If the deceased Owner's spouse is the Beneficiary and elects to continue the
Contract and become the new Owner, upon such spouse's death, the entire interest
in the Contract is payable to the new Beneficiary (determined at the time of the
spouse's death) and must be distributed within five years of the spouse's death.

    If any Owner is  not a natural  person, the death of  the Annuitant will  be
treated as the death of an Owner.

                        SUSPENSION OR DELAY IN PAYMENTS

    Payments  of a partial  or full surrender  of the Variable  Account Value or
Death Benefit are  usually made  within seven  (7) calendar  days. However,  the
Company  may delay such payment  of a partial or  full surrender of the Variable
Account Value or Death Benefit for any period in the following circumstances:

    1)  when the New York Stock Exchange is closed; or

    2)  when trading on the New York Stock Exchange is restricted; or

    3)  when an emergency exists (as determined by the SEC as a result of  which
       (a)  the disposal of securities in the Variable Account is not reasonably
       practicable; or (b) it is not reasonably practicable to determine  fairly
       the value of the net assets of the Variable Account); or

    4)    when the  SEC, by  order, so  permits for  the protection  of security
       holders.

    Protective Life further reserves the right to delay payment of a partial  or
full  surrender of the Fixed Account Value for  up to six months in those states
where applicable law requires the Company to reserve such right.

                             CHARGES AND DEDUCTIONS

SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)

    GENERAL.  No charge for sales expenses is deducted from Purchase Payments at
the time  Purchase  Payments  are  paid. However,  within  certain  time  limits
described  below,  a  surrender  charge (contingent  deferred  sales  charge) is
deducted   from   the    Contract   Value    if   a    partial   surrender    or

                                       16
<PAGE>
surrender is made before the Annuity Commencement Date. Also, a surrender charge
may,  in  certain circumstances,  be deducted  from  amounts applied  to Annuity
Options 3 and 4. (See "Annuity Options".)

    In the event surrender charges are  not sufficient to cover sales  expenses,
the loss will be borne by the Company; conversely, if the amount of such charges
provides more than enough to cover such expenses, the excess will be retained by
Protective  Life. Protective Life does not  currently believe that the surrender
charges imposed will cover the expected costs of distributing the Contracts. Any
shortfall will  be made  up  from Protective  Life's  general assets  which  may
include amounts derived from the mortality and expense risk charge.

    CHARGE  FOR PARTIAL WITHDRAWAL OR SURRENDER.   The surrender charge is equal
to the percentage of each Purchase Payment surrendered as specified in the table
below. The  surrender  charge  is  separately calculated  and  applied  to  each
Purchase  Payment at any time that the  Purchase Payment is surrendered. No such
surrender charge applies to the Contract  Value in excess of aggregate  Purchase
Payments.  The  surrender charge  is calculated  using  the assumption  that all
Contract Value in excess  of aggregate Purchase  Payments is surrendered  before
any   Purchase  Payments  and  that  Purchase  Payments  are  surrendered  on  a
first-in-first-out basis.

    The surrender charge is as follows:

<TABLE>
<CAPTION>
   NUMBER OF FULL YEARS
          ELAPSED                 SURRENDER CHARGE AS A
BETWEEN THE DATE OF RECEIPT            PERCENTAGE
 OF PURCHASE PAYMENT(S) &     OF PURCHASE PAYMENT WITHDRAWN
     DATE OF SURRENDER               IN A FULL YEAR
- ---------------------------  -------------------------------
<S>                          <C>
        Less than 1                        7%
             1                             6%
             2                             5%
             3                             4%
             4                             3%
             5                             2%
             6+                            0%
</TABLE>

    In addition, this  surrender charge  is never applied  to the  payment of  a
Death  Benefit at the death of any Owner or to most systematic withdrawals. (See
"Death Benefits" and "Systematic Withdrawals.")

    Surrenders will result in the  cancellation of Accumulation Units from  each
applicable Sub-Account(s) and/or in a reduction of the Fixed Account Value.

    REDUCTION  OR ELIMINATION  OF SURRENDER  CHARGE.   Surrender Charges  may be
decreased or waived on Contracts issued to a trustee, employer or similar entity
pursuant to a retirement plan  or when sales are  made in a similar  arrangement
where  offering the  Contracts to  a group of  individuals under  such a program
results in saving  of sales  expenses. The entitlement  to such  a reduction  in
Surrender Charge will be determined by the Company.

    In  addition, Surrender Charges are waived  for: a full or partial surrender
of  a  Contract  Value   on  Contracts  issued   to  employees  and   registered
representatives  of any member of the selling  group and their spouses and minor
children, or to officers, directors,  trustees or bona-fide full time  employees
of  Protective Life or Goldman, Sachs & Co. or their affiliated companies (based
upon the Owner's status at the time the Contract is purchased).

    WAIVER OF SURRENDER CHARGES.   The Company will  waive Surrender Charges  in
the event you, at any time after the first Contract Year, (1) enter for a period
of  at least  ninety (90)  days a facility  which is  licensed by  the State and
qualifies as a skilled nursing home facility under Medicare or Medicaid; or  (2)
you  are first diagnosed as having a terminal illness by a physician that is not
related to you or the Annuitant. The  term "terminal illness" is defined in  the
Contract. Written proof of a terminal illness

                                       17
<PAGE>
satisfactory to the Company must be submitted. The Company reserves the right to
require  an examination by  a physician of  its choice. The  Waiver of Surrender
Charges provision is  not available in  all states due  to applicable  insurance
laws in effect in various states.

ADMINISTRATIVE CHARGES

    We  will deduct an Administration Charge equal,  on an annual basis, to .15%
of the daily net asset value of  each Sub-Account in the Variable Account.  This
deduction  is  made  to  reimburse  the Company  for  expenses  incurred  in the
administration of  the Contract  and the  Variable Account.  The  Administration
Charge  is deducted only from  the Variable Account Value.  The Company does not
expect to make a profit on this charge.

TRANSFER FEE

    Currently, there is no charge for transfers. The Company reserves the right,
however, to charge $25  for each transfer  after the first  12 transfers in  any
Contract  Year. For  the purpose  of assessing  the fee,  each request  would be
considered to be one transfer, regardless  of the number of Sub-Accounts or  the
Fixed  Account affected by  the transfer in  one day. The  fee would be deducted
from the amount  being transferred. The  Company does not  expect a profit  from
this charge in the event that it is taken.

MORTALITY AND EXPENSE RISK CHARGE

    To  compensate the  Company for  assuming mortality  and expense  risks, the
Company deducts a  daily mortality and  expense risk charge  equal on an  annual
basis,  to 1.25%  (daily rate  of 0.0034035%)  of the  average annual  daily net
assets of  the Variable  Account, (approximately  0.50% for  mortality risk  and
0.75% for expense risk).

    The  mortality risk the Company assumes is  that Annuitant(s) may live for a
longer period of time  than estimated when the  guarantees in the Contract  were
established.  Because of these guarantees, each  payee is assured that longevity
will not have an adverse effect on the annuity payments received. The  mortality
risk  that the Company assumes also includes  a guarantee to pay a death benefit
if the Owner dies  before the Annuity Commencement  Date. The expense risk  that
the  Company  assumes  is  the risk  that  the  administration  charge, contract
maintenance fee and  transfer fees may  be insufficient to  cover actual  future
expenses.

    If the mortality and expense risk charge is insufficient to cover the actual
cost  of the mortality and expense risks  undertaken by the Company, the Company
will bear the shortfall. Conversely, if the charge proves more than  sufficient,
the  excess will be profit  to the Company and will  be available for any proper
corporate  purpose  including,  among  other  things,  payment  of  distribution
expenses.

CONTRACT MAINTENANCE FEE

   
    The  contract  maintenance fee  is  $35 and  is  deducted from  the Variable
Account Value on each Contract Anniversary, and on any day that the Contract  is
surrendered,  if  such  surrender occurs  on  any  day other  than  the Contract
Anniversary. The contract  maintenance fee  deduction will be  allocated to  the
Sub-Accounts  in the same  proportion as the Sub-Account  Values in the Variable
Account. For contracts issued after June 13, 1995, the contract maintenance  fee
will  be  waived  by  the Company  in  the  event the  Premiums  paid  minus any
withdrawals or partial surrenders equals or  exceeds $50,000 on the date(s)  the
contract  maintenance fee is to be deducted. The Company does not expect to make
a profit from this charge.
    

    In addition,  the contract  maintenance fee  may be  reduced or  waived  for
Contracts  issued to employees  and registered representatives  of any member of
the selling  group  and  their  spouses and  minor  children,  or  to  officers,
directors,  trustees, or  bona-fide full  time employees  of Protective  Life or
Goldman, Sachs  & Co.  or their  affiliated companies  (based upon  the  Owner's
status  at the time  the Contract is  purchased). Such waiver  or reduction will
only be made to the extent that  the Company estimates that it will incur  lower
administrative expenses or perform fewer administrative services.

                                       18
<PAGE>
    The  Company reserves  the right to  waive the Contract  Maintenance Fee for
Contracts issued to a trustee of a 401 plan or to employers purchasing Contracts
in connection with plans qualifying under Section 403(b) of the Code.

FUND EXPENSES

    The net assets of each Sub-Account of the Variable account will reflect  the
investment  management fees and other operating  expenses incurred by the Funds.
For each Fund, an investment manager is paid a daily fee for its services.  (See
the prospectus for PIC which accompanies this Prospectus.)

PREMIUM TAXES

    Premium  taxes (including  any related  retaliatory taxes,  if any)  will be
deducted, if applicable. On any Contract subject to premium taxes, the tax  will
be  deducted,  as  provided  under  applicable  law,  either  from  the Purchase
Payment(s) when received, upon  full or partial surrenders,  or from the  amount
applied  to  effect an  annuity at  the time  annuity payments  commence. (Where
applicable, the rate of these taxes currently ranges up to 3.50%.)

OTHER TAXES

    Currently, no charge will be made against the Variable Account for  federal,
state  or local  taxes other than  premium taxes. Protective  Life may, however,
make such a charge in the future if income or gains within the Variable  Account
will  result in any federal income tax liability to Protective Life. Charges for
other taxes attributable to the Variable Account, if any, may also be made.

                                ANNUITY OPTIONS

    Upon application for a Contract you select an Annuity Commencement Date. The
Annuity Commencement Date may  not be later than  the Annuitant's 85th  birthday
unless approved by the Company. You may change the Annuity Commencement Date and
the  Annuity Option selected from time to time, but any such change must be made
in writing and received at the Home Office within 30 days prior to the scheduled
Annuity Commencement Date. On the Annuity Commencement Date, the Contract  Value
will  be applied under any one of  the following Annuity Options. In the absence
of such  an  election,  the  Contract  Value will  be  applied  on  the  Annuity
Commencement  Date under  Option 2 --  Life Income  with Payments for  a 10 Year
Guaranteed Period.

    The Annuity Options are  fixed, which means that  each Annuity Option has  a
fixed  and guaranteed amount to be paid during the annuity period that is not in
any way dependent upon the investment experience of the Variable Account.

    The following  Annuity  Options may  be  elected. For  Qualified  Contracts,
certain restrictions apply.

    OPTION 1 -- PAYMENT FOR A FIXED PERIOD.  Equal monthly payments will be made
for  any period of not  less than 5 nor  more than 30 years.  The amount of each
payment depends on the total amount applied, the period selected and the monthly
payment rates we are using when the first payment is due.

    OPTION 2  -- LIFE  INCOME WITH  PAYMENTS  FOR A  GUARANTEED PERIOD.    Equal
monthly  payments are based  on the life  of the named  Annuitant. Payments will
continue for the lifetime of the Annuitant with payments guaranteed for 10 or 20
years. Payments stop at the  end of the selected  guaranteed period or when  the
named person dies, whichever is later.

    OPTION  3 -- PAYMENTS  FOR A FIXED  AMOUNT.  Equal  monthly payments will be
made of an agreed fixed amount. The amount of each payment may not be less  than
$10  for each $1,000 applied. Interest will be credited each month on the unpaid
balance and added to it. This interest will be at a rate set by us, but not less
than an effective rate  of 3% per  year. Payments continue  until the amount  we
hold runs out. The last payment will be for the balance only.

                                       19
<PAGE>
    OPTION  4 -- The total amount applied may  be used to purchase an annuity of
any kind issued by us on the date this option is elected.

    A surrender  charge will  not be  applied  to the  Contract Value  when  the
Contract  Value is applied to an Annuity Option on the Annuity Commencement Date
provided that annuity payments are made for the lifetime of the Annuitant or for
a period  certain of  at least  5 years.  In certain  circumstances,  therefore,
application  of Contract Value  to Annuity Options  3 and 4  could result in the
imposition of a surrender charge.

    After the death of the Annuitant, any remaining payments shall be payable to
the Beneficiary unless you specified otherwise before the Annuitant's death.

    MINIMUM AMOUNTS.   We reserve  the right  to pay  the total  amount of  this
Contract in one lump sum, if less than $5,000. If monthly payments are less than
$100, we may make payments quarterly, semi-annually, or annually at our option.

    If  we have available at  the time an Annuity  Option is elected, options or
rates on a more favorable basis than those guaranteed, the higher benefits shall
apply.

ANNUITY PAYMENT

    The first payment under any Annuity Option will be made one month  following
the  Annuity Commencement Date.  Subsequent payments will  be made in accordance
with the manner of payment selected.

    The Annuity Option elected must  result in a payment  of an amount at  least
equal to the minimum payment amount according to Protective Life's rules then in
effect.  If at any  time payments are  less than the  minimum payment amount, we
have the right to change the frequency to an interval resulting in a payment  at
least equal to the minimum. If any amount due is less than the minimum per year,
we may make other arrangements that are equitable to the Annuitant.

    Once  annuity payments have  commenced, no surrender  of the annuity benefit
can be made.

DEATH OF ANNUITANT OR OWNER AFTER ANNUITY COMMENCEMENT DATE

    In the event of the death of any Owner on or after the Annuity  Commencement
Date,  the Beneficiary will become the new Owner. If any Owner or Annuitant dies
on or after the Annuity Commencement Date and before all the benefits under  the
Annuity  Option selected have been paid,  any remaining portion of such benefits
will be paid out at  least as fast as under  the Annuity Option being used  when
the Owner or Annuitant died.

                            YIELDS AND TOTAL RETURNS

    From  time  to  time, Protective  Life  may  advertise or  include  in sales
literature yields, effective  yields, and  total returns  for the  Sub-Accounts.
THESE  FIGURES ARE  BASED ON  HISTORIC RESULTS  AND DO  NOT INDICATE  OR PROJECT
FUTURE PERFORMANCE. The Company may, from time to time, advertise or include  in
sales   literature  Sub-Account  performance  relative  to  certain  performance
rankings and  indices  compiled  by  independent  organizations.  More  detailed
information  as  to  the  calculation of  performance  information,  as  well as
comparisons  with  unmanaged  market  indices,  appears  in  the  Statement   of
Additional Information.

    Yields,  effective yields, and total returns  for the Sub-Accounts are based
on the investment performance of the corresponding Funds. The Funds' performance
also reflects the Funds' expenses. Certain of  the expenses of each Fund may  be
reimbursed by the investment manager. (See the Prospectuses for the Funds.)

    The  yield of the  Money Market Sub-Account refers  to the annualized income
generated by an investment in the Sub-Account over a specified seven-day period.
The yield is calculated by assuming that the income generated for that seven-day
period is generated each seven day period over a 52 week period and is shown  as
a  percentage of the investment. The effective yield is calculated similarly but

                                       20
<PAGE>
when annualized the income earned by an investment in-the Sub-Account is assumed
to be reinvested.  The effective yield  will be slightly  higher than the  yield
because of the compounding effect of this assumed reinvestment.

    The  yield of a Sub-Account (except  the Money Market Sub-Account) refers to
the annualized  income generated  by an  investment in  the Sub-Account  over  a
specified  30 day or one-month period. The  yield is calculated by assuming that
the income generated by the investment during that 30 day or one month period is
generated each period over a 12 month period and is shown as a percentage of the
investment.

    The total return of  a Sub-Account refers to  return quotations assuming  an
investment under a Contract has been held in the Sub-Account for various periods
of  time including,  but not  limited to,  a period  measured from  the date the
Sub-Account commenced operations. Average annual  return refers to total  return
quotations  that are annualized based on  an average return over various periods
of time.

    The average  annual total  return quotations  represent the  average  annual
compounded  rates of  return that would  equate an initial  investment of $1,000
under a Contract to the redemption value  of that investment as of the last  day
of  each of the  periods for which  the quotations are  provided. Average annual
total return information shows the average percentage change in the value of  an
investment in the Sub-Account from the beginning date of the measuring period to
the end of that period. This standardized version of average annual total return
reflects  all  historical investment  results, less  all charges  and deductions
applied against the Sub-Account (including any Surrender Charge that would apply
if an Owner terminated  the Contract at  the end of  each period indicated,  but
excluding  any deductions for premium taxes).  When a Sub-Account other than the
Money Market Sub-Account  has been  in operation for  one, five  and ten  years,
respectively, the standard version average annual total return for these periods
will be provided.

    In addition to the standard version of average annual total return described
above,   total  return   performance  information  computed   on  two  different
non-standard bases may be  used in advertisements  or sales literature.  Average
annual  total return information may be presented, computed on the same basis as
the standard version except deductions will not include the surrender charge. In
addition, Protective Life may  from time to time  disclose average annual  total
return  in other non-standard formats and  cumulative total return for Contracts
funded by the Sub-Accounts.

    Protective Life  may,  from time  to  time, also  disclose  yield,  standard
average annual total returns, and non-standard total returns for the Funds.

    Non-standard  performance  data  will  only  be  disclosed  if  the standard
performance data  for the  required periods  is also  disclosed. For  additional
information regarding the calculation of other performance data, please refer to
the Statement of Additional Information.

    In advertising and sales literature, the performance of each Sub-Account may
be  compared to the performance of other  variable annuity issuers in general or
to the performance of particular types of variable annuities investing in mutual
funds, or  investment  portfolios of  mutual  funds with  investment  objectives
similar to each of the Sub-Accounts. Lipper Analytical Services, Inc. ("Lipper")
and  the  Variable  Annuity  Research  Data  Service  ("VARDS")  are independent
services which monitor and rank the  performance of variable annuity issuers  in
each of the major categories of investment objectives on an industry-wide basis.

    Lipper  rankings include variable life insurance issuers as well as variable
annuity issuers.  VARDS  rankings compare  only  variable annuity  issuers.  The
performance  analyses prepared by Lipper and VARDS each rank such issuers on the
basis of total return, assuming reinvestment  of distributions, but do not  take
sales  charges, redemption fees,  or certain expense  deductions at the separate
account level  into consideration.  In addition,  VARDS prepares  risk  adjusted
rankings, which consider the effects of market risk on total return performance.
This  type of ranking provides data as  to which funds provide the highest total
return within various categories of funds defined by the degree of risk inherent
in their investment objectives.

                                       21
<PAGE>
    Advertising and sales literature  may also compare  the performance of  each
Sub-Account  to the Standard & Poor's Index  of 500 Common Stocks, a widely used
measure of stock performance. This  unmanaged index assumes the reinvestment  of
dividends  but does not reflect any "deduction"  for the expense of operating or
managing an investment portfolio. Other independent ranking services and indices
may also be used as a source of performance comparison.

    Protective Life may also  report other information  including the effect  of
tax-deferred  compounding on a  Sub-Account's investment returns,  or returns in
general, which may be illustrated by tables, graphs, or charts.

    All income  and  capital  gains derived  from  Sub-Account  investments  are
reinvested  and  can  lead  to  substantial  long-term  accumulation  of assets,
provided that the underlying Fund's investment experience is positive.

                                 EXCHANGE OFFER

    The Company is  offering to  owners of certain  modified guaranteed  annuity
contracts  issued  by it  the  opportunity to  exchange  such a  contract  for a
Contract. Owners of  ProSaver Modified Guaranteed  Annuity Contracts  ("ProSaver
MGA  Contracts") may, any time prior to the annuity commencement date under such
contracts, exchange their  ProSaver MGA  Contract for this  Contract. Owners  of
ProSaver  MGA Contracts  may also  make a partial  or full  surrender from their
contract and use the proceeds to  purchase this Contract. Contracts are  offered
to  owners of ProSaver MGA Contracts on  the same basis as Contracts are offered
to any other purchaser. In particular,  all charges and deductions described  in
this  prospectus are equally applicable to  Contracts received in an exchange or
purchased by  ProSaver  MGA Contract  owners  and  to Contracts  sold  to  other
purchasers.   In  addition,  applicable  surrender   charges  and  market  value
adjustments will be assessed under a ProSaver MGA Contract in connection with an
exchange, surrender, or partial surrender of a ProSaver MGA Contract.

    The Contracts differ  from the  ProSaver MGA Contracts  in many  significant
respects.  Most  importantly, Contract  Value under  the Contracts  may consist,
entirely or in part, of Variable  Account Value which fluctuates in response  to
the  net investment return  of the Variable Account.  In contrast, account value
under the ProSaver MGA  Contracts reflects interest credited  by the Company  at
rates  guaranteed for  certain guaranteed  periods of  time. Even  when credited
interest is  not guaranteed,  such as  when a  surrender, partial  surrender  or
transfer  between sub-accounts  occurs prior to  the expiration  of a guaranteed
period, account value under the ProSaver MGA Contracts reflects changing current
interest rates and does not vary  with the investment performance of a  separate
account.  Furthermore, Fixed Account  Value under the  Contracts is computed and
credited on  a basis  substantially  different from  that  of the  ProSaver  MGA
Contracts.  In particular, unlike a ProSaver  MGA Contract, a surrender, partial
surrender or transfer of Fixed Account  Value under a Contract is never  subject
to  a market value adjustment.  In contrast, account value  under a ProSaver MGA
Contract is  reduced  or  increased  by, among  other  things,  a  market  value
adjustment  when surrenders,  partial surrenders  or transfers  are made  from a
sub-account prior  to  the  expiration  of a  guaranteed  period.  In  addition,
interest  rates  applicable  to fixed  account  values under  the  Contracts are
guaranteed for one  year periods whereas  rates applicable to  the ProSaver  MGA
Contracts may be guaranteed for periods of one to fifteen years.

    Other  significant differences  between the  Contracts and  the ProSaver MGA
Contracts include: (1) additional charges applicable under the Contracts such as
the mortality  and expense  risk charge,  the administration  charge and  annual
contract maintenance fee that are not found in the ProSaver MGA Contracts, (2) a
contract  loan  provision  under the  Contracts,  when used  in  connection with
certain Qualified Plans, that is not available under the ProSaver MGA Contracts,
(3) different surrender  charges, (4)  different death  benefits, (5)  different
annuity option purchase rates, and (6) differences in federal and state laws and
regulations    applicable    to    each    of    the    types    of   contracts.

                                       22
<PAGE>
Owners of ProSaver  MGA Contracts should  refer to their  contract forms and  to
their  prospectus for such contracts for  a complete description of the ProSaver
MGA Contract. Copies  of the most  recent ProSaver MGA  Contract prospectus  are
available free of charge from the Company at its home office.

    Owners  of ProSaver MGA Contracts should  carefully consider whether it will
be advantageous  to replace  such a  contract with  a Contract.  IT MAY  NOT  BE
ADVANTAGEOUS TO EXCHANGE A PROSAVER MGA CONTRACT FOR A CONTRACT (OR TO SURRENDER
IN  FULL OR  IN PART A  PROSAVER MGA CONTRACT  AND USE THE  SURRENDER OR PARTIAL
SURRENDER PROCEEDS  TO PURCHASE  A CONTRACT)  EXCEPT AT  THE EXPIRATION  OF  ALL
GUARANTEED  PERIODS IN ORDER  TO AVOID APPLICATION OF  A MARKET VALUE ADJUSTMENT
AND A SURRENDER CHARGE.

    Sales representatives offering the Contracts to ProSaver MGA Contract owners
will receive a sales  commission. In most cases,  this sales commission will  be
somewhat  less than that paid in connection with sales of the Contracts to other
purchasers. The maximum  sales commission  that may be  paid is  7% of  Purchase
Payments. (See "Distribution of the Contracts".)

    TAX   CONSIDERATIONS.    The   Company  believes  that   an  exchange  of  a
non-qualified ProSaver MGA Contract for  a Contract generally should be  treated
as a nontaxable exchange of annuity contracts within the meaning of Section 1035
of  the Code.  A Contract received  in exchange  will generally be  treated as a
newly issued contract as of the effective date of the Contract. This could  have
various  tax consequences, E.G., aggregation with other annuity contracts issued
during the same calendar year as the exchange. (See "Federal Tax Matters".)

    IF YOU SURRENDER  YOUR NON-QUALIFIED PROSAVER  MGA CONTRACT IN  WHOLE OR  IN
PART AND AFTER RECEIPT OF THE PROCEEDS YOU USE THE SURRENDER PROCEEDS OR PARTIAL
SURRENDER  PROCEEDS TO PURCHASE A CONTRACT IT  WILL NOT BE TREATED AS A TAX-FREE
EXCHANGE. THE SURRENDER PROCEEDS WILL GENERALLY BE INCLUDIBLE IN INCOME (TO  THE
EXTENT  OF ANY INCOME  IN THE PROSAVER MGA  CONTRACT) AND A  10% PENALTY TAX MAY
APPLY IF THE SURRENDER IS MADE BEFORE THE TAXPAYER REACHES AGE 59 1/2.

    Special tax considerations apply  to exchanges of,  or transfers of  amounts
from,  a ProSaver MGA Contract  issued in connection with  a Qualified Plan to a
Contract.

    Owners of ProSaver MGA  Contracts should consult  their tax advisors  before
exchanging  a ProSaver MGA Contract for this Contract, or before surrendering in
whole or in part their ProSaver MGA Contract and using the proceeds to  purchase
this Contract.

                              FEDERAL TAX MATTERS

INTRODUCTION

    The following discussion of the federal income tax treatment of the Contract
is not exhaustive, does not purport to cover all situations, and is not intended
as  tax advice. The federal  income tax treatment of  the Contract is unclear in
certain circumstances, and a  qualified tax adviser  should always be  consulted
with  regard  to  the  application  of  law  to  individual  circumstances. This
discussion is  based  on the  Code,  Treasury regulations,  and  interpretations
existing on the date of this Prospectus. These authorities, however, are subject
to change by Congress, the Treasury Department, and judicial decisions.

    This  discussion does not address state or local tax consequences associated
with the purchase of the Contract.  In addition, THE COMPANY MAKES NO  GUARANTEE
REGARDING  ANY TAX TREATMENT -- FEDERAL, STATE OR LOCAL -- OF ANY CONTRACT OR OF
ANY TRANSACTION INVOLVING A CONTRACT.

THE COMPANY'S TAX STATUS

    The Company is taxed as a life  insurance company under Subchapter L of  the
Code.  Since the operations of the Variable Account are a part of, and are taxed
with, the operations  of the  Company, the  Variable Account  is not  separately
taxed  as a "regulated investment company" under Subchapter M of the Code. Under
existing federal income  tax laws, investment  income and capital  gains of  the

                                       23
<PAGE>
Variable  Account  are not  taxed to  the  extent they  are applied  to increase
reserves under a  Contract. Since,  under the Contracts,  investment income  and
realized  capital  gains  of  the  Variable  Account  attributable  to  contract
obligations are automatically applied to increase reserves, the Company does not
anticipate that it will incur any  federal income tax liability in the  Variable
Account attributable to contract obligations, and therefore the Company does not
intend  to  make  provision for  any  such taxes.  If  the Company  is  taxed on
investment income or capital gains of the Variable Account, then the Company may
impose a charge against the Variable Account in order to make provision for such
taxes.

                        TAXATION OF ANNUITIES IN GENERAL

TAX DEFERRAL DURING ACCUMULATION PERIOD

    Under existing  provisions  of the  Code,  except as  described  below,  any
increase  in an Owner's Contract Value is  generally not taxable to the Owner or
Annuitant until received, either in the form of annuity payments as contemplated
by the Contracts,  or in  some other form  of distribution.  However, this  rule
applies  only if  (1) the  investments of  the Variable  Account are "adequately
diversified"  in  accordance  with  Treasury  Department  regulations,  (2)  the
Company,  rather than the  Owner, is considered  the owner of  the assets of the
Variable Account  for federal  income tax  purposes,  and (3)  the Owner  is  an
individual.

    DIVERSIFICATION  REQUIREMENTS.  The Code and Treasury Department regulations
prescribe the manner  in which the  investments of a  segregated asset  account,
such  as  the  Variable Account,  are  to  be "adequately  diversified."  If the
Variable Account  fails  to comply  with  these diversification  standards,  the
Contract  will not  be treated  as an  annuity contract  for federal  income tax
purposes and the Owner would generally be taxable currently on the income on the
Contract  (as  defined  in   the  tax  law)  for   the  period  or  periods   of
non-diversification.  The Company expects that the Variable Account, through the
Funds, will comply with the diversification requirements prescribed by the  Code
and Treasury Department regulations.

    OWNERSHIP  TREATMENT.   In certain circumstances,  variable annuity contract
owners may be  considered the owners,  for federal income  tax purposes, of  the
assets  of a  segregated asset  account, such as  the Variable  Account, used to
support their  contracts. In  those  circumstances, income  and gains  from  the
segregated  asset  account would  be includible  in  the contract  owners' gross
income. The Internal Revenue Service (the "IRS") has stated in published rulings
that a variable contract owner will be  considered the owner of the assets of  a
segregated  asset account if the owner possesses incidents of ownership in those
assets, such as the ability to  exercise investment control over the assets.  In
addition,  the Treasury Department announced, in connection with the issuance of
regulations concerning investment  diversification, that  those regulations  "do
not  provide guidance concerning the circumstances  in which investor control of
the investments of  a segregated asset  account may cause  the investor,  rather
than  the insurance  company, to be  treated as the  owner of the  assets in the
account." This announcement also stated that guidance would be issued by way  of
regulations  or rulings on  the "extent to which  policyholders may direct their
investments to particular sub-accounts [of  a segregated asset account]  without
being  treated  as owners  of the  underlying assets."  As of  the date  of this
Prospectus, no such guidance has been issued.

    The ownership rights  under the Contract  are similar to,  but different  in
certain  respects from, those  described by the  IRS in rulings  in which it was
determined that contract owners  were not owners of  the assets of a  segregated
asset  account. For example, the  owner of this Contract  has the choice of more
investment options to which to  allocate purchase payments and Variable  Account
values,  and may  be able to  transfer among investment  options more frequently
than in such rulings. These differences could result in the Owner being  treated
as  the owner of  the assets of  the Variable Account.  In addition, the Company
does not know what  standards will be  set forth in  the regulations or  rulings
which  the  Treasury Department  has  stated it  expects  to issue.  The Company
therefore

                                       24
<PAGE>
reserves the right  to modify the  Contract as necessary  to attempt to  prevent
Contract  Owners from being considered the owners  of the assets of the Variable
Account. However, there is no assurance such efforts would be successful.

    NON-NATURAL OWNER.    As a  general  rule, Contracts  held  by  "non-natural
persons"  such as a corporation, trust or  other similar entity, as opposed to a
natural person, are not treated as  annuity contracts for federal tax  purposes.
The  income on such Contracts  (as defined in the tax  law) is taxed as ordinary
income that is  received or  accrued by  the Owner  of the  Contract during  the
taxable  year. There are several exceptions  to this general rule for nonnatural
Owners. First, Contracts will generally be  treated as held by a natural  person
if  the nominal owner is a trust or  other entity which holds the Contract as an
agent for a natural  person. However, this special  exception will not apply  in
the  case  of any  employer  who is  the  nominal owner  of  a Contract  under a
non-qualified deferred compensation arrangement for its employees.

    In addition,  exceptions to  the general  rule for  non-natural Owners  will
apply  with respect  to (1)  Contracts acquired  by an  estate of  a decedent by
reason of  the death  of  the decedent,  (2)  certain Qualified  Contracts,  (3)
Contracts  purchased  by employers  upon  the termination  of  certain Qualified
Plans, (4)  certain  Contracts used  in  connection with  structured  settlement
agreements,  and (5) Contracts purchased with a single purchase payment when the
annuity starting date is no later than a year from purchase of the Contract  and
substantially  equal  periodic  payments  are  made,  not  less  frequently than
annually, during the annuity period.

    The remainder of this discussion assumes  that the Contract will be  treated
as an annuity contract for federal income tax purposes.

TAXATION OF PARTIAL AND FULL SURRENDERS

    In  the  case  of  a  partial  surrender,  amounts  received  generally  are
includible in  income  to the  extent  the  Owner's Contract  Value  before  the
surrender exceeds his or her "investment in the contract." In the case of a full
surrender,  amounts received are includible in  income to the extent they exceed
the "investment in  the contract."  For these  purposes, the  investment in  the
contract  at any time equals  the total of the  Purchase Payments made under the
Contract to that time (to the extent such payments were neither deductible  when
made  nor  excludable  from income  as,  for  example, in  the  case  of certain
contributions to Qualified Contracts) less any amounts previously received  from
the  Contract which were not included in income. Partial and full surrenders may
be subject to federal income  tax withholding requirements. (See Federal  Income
Tax  Withholding.) In addition, in the case  of partial and full surrenders from
certain Qualified Plans, mandatory withholding requirements may apply, unless  a
"direct rollover" of the amount surrendered is made. (See "Direct Rollovers".)

    Under  the Waiver  of Surrender Charges  provision of  the Contract, amounts
distributed may not be subject to Surrender Charges if the Owner has a  terminal
illness  or if  the Owner  enters, for  a period  of at  least 90  days, certain
nursing home facilities. Such  distributions will be  treated as surrenders  for
federal tax purposes.

    The  Contract provides  a Death  Benefit that  in certain  circumstances may
exceed the greater of the Purchase Payments and the Contract Value. As described
elsewhere in this Prospectus, the  Company imposes certain charges with  respect
to the Death Benefit. It is possible that some portion of those charges could be
treated for federal tax purposes as a partial surrender of the Contract.

TAXATION OF ANNUITY PAYMENTS

    Normally,  the portion of each annuity payment taxable as ordinary income is
equal to the  excess of  the payment over  the exclusion  amount. The  exclusion
amount  is the amount determined by multiplying (1) the payment by (2) the ratio
of the investment  in the contract,  adjusted for any  period certain or  refund
feature,  to the total expected  amount of annuity payments  for the term of the
Contract (determined under  Treasury Department  regulations). Annuity  payments
may be subject to

                                       25
<PAGE>
federal   income  tax   withholding  requirements.   (See  Federal   Income  Tax
Withholding.) In  addition,  in  the  case  of  annuity  payments  from  certain
Qualified  Plans, mandatory withholding requirements may apply, unless a "direct
rollover" of such annuity payments is made. (See Direct Rollovers.)

    Once the total amount  of the investment in  the contract is excluded  using
this  ratio, annuity payments  will be fully taxable.  If annuity payments cease
because of  the death  of  the Annuitant  and before  the  total amount  of  the
investment  in the contract is recovered,  the unrecovered amount generally will
be allowed as a deduction to the Annuitant in his or her last taxable year.

    There may be special income tax issues present in situations where the Owner
and the Annuitant are not the same person or are not married. For example, where
the Owner and the  Annuitant are not  the same person and  are not married,  the
Owner  may be taxed on  the Annuity Commencement Date  on the difference between
the Contract Value and the investment in  the contract. A tax advisor should  be
consulted in those situations.

TAXATION OF DEATH BENEFIT PROCEEDS

    Prior  to the Annuity  Commencement Date, amounts may  be distributed from a
Contract because of  the death  of an Owner  or, in  certain circumstances,  the
death  of the Annuitant. Such Death Benefit proceeds are includible in income as
follows: (1) if distributed in a lump sum, they are taxed in the same manner  as
a  full surrender, as  described above, or  (2) if distributed  under an Annuity
Option, they are  taxed in  the same manner  as annuity  payments, as  described
above.  After the  Annuity Commencement Date,  where a  guaranteed period exists
under an Annuity Option, and the Annuitant  dies before the end of that  period,
payments made to the Beneficiary for the remainder of that period are includible
in income as follows: (1) if received in a lump sum, they are included in income
to  the extent that  they exceed the  unrecovered investment in  the contract at
that time, or (2) if distributed in accordance with the existing Annuity  Option
selected,  they are fully excluded from income until the remaining investment in
the contract is deemed to be recovered, and all annuity payments thereafter  are
fully includible in income.

    Proceeds  payable on death may be  subject to federal income tax withholding
requirements. (See "Federal Income Tax  Withholding".) In addition, in the  case
of   such  proceeds   from  certain   Qualified  Plans,   mandatory  withholding
requirements may apply,  unless a "direct  rollover" of such  proceeds is  made.
(See "Direct Rollovers".)

ASSIGNMENTS, PLEDGES, AND GRATUITOUS TRANSFERS

    Other  than  in the  case  of Contracts  issued  in connection  with certain
Qualified Plans (which generally cannot be assigned or pledged), any  assignment
or  pledge (or agreement to assign or  pledge) any portion of the Contract Value
is treated for  federal income tax  purposes as  a surrender of  such amount  or
portion. The investment in the contract is increased by the amount includible as
income  with respect to such assignment or  pledge, though it is not affected by
any other aspect  of the  assignment or pledge  (including its  release). If  an
Owner transfers a Contract without adequate consideration to a person other than
the  Owner's spouse (or to a former  spouse incident to divorce), the Owner will
be taxed on the difference between his or her Contract Value and the  investment
in  the  contract  at the  time  of  transfer. In  such  case,  the transferee's
investment in the  contract will  be increased to  reflect the  increase in  the
transferor's income.

PENALTY TAX ON PREMATURE DISTRIBUTIONS

    Where  a Contract has not  been issued in connection  with a Qualified Plan,
there generally is  a 10%  penalty tax  on the amount  of any  payment from  the
Contract  that is includable in income unless the payment is: (a) received on or
after the Owner  reaches age 59  1/2; (b) attributable  to the Owner's  becoming
disabled  (as defined in  the tax law);  (c) made on  or after the  death of the
Owner or, if  the Owner  is not  an individual,  on or  after the  death of  the
primary  annuitant  (as  defined  in the  tax  law);  (d) made  as  a  series of
substantially equal periodic  payments (not less  frequently than annually)  for
the life (or life expectancy) of the Annuitant or the joint lives (or joint life
expectancies) of the Annuitant and a designated beneficiary, or (e) made under a
Contract purchased with a single

                                       26
<PAGE>
Purchase  Payment when the  annuity starting date  is no later  than a year from
purchase of the Contract and substantially equal periodic payments are made, not
less frequently than annually, during  the annuity period. (Similar rules  apply
in the case of certain Contracts issued in connection with Qualified Plans.)

AGGREGATION OF CONTRACTS

    In  certain circumstances,  the IRS may  determine the amount  of an annuity
payment or a surrender from a Contract that is includible in income by combining
some or  all of  the annuity  contracts owned  by an  individual not  issued  in
connection  with Qualified Plans. For example,  if a person purchases a Contract
offered by this Prospectus and also purchases at approximately the same time  an
immediate  annuity, the  IRS may  treat the  two contracts  as one  contract. In
addition, if a person purchases two or more deferred annuity contracts from  the
same  insurance company (or  its affiliates) during any  calendar year, all such
contracts will be treated  as one contract for  purposes of determining  whether
any  payment  not received  as  an annuity  (including  surrenders prior  to the
Annuity Commencement  Date)  is  includible  in  income.  The  effects  of  such
aggregation  are not  clear; however,  it could affect  the time  when income is
taxable and the amount which might be  subject to the 10% penalty tax  described
above.

                           QUALIFIED RETIREMENT PLANS

IN GENERAL

    The  Contracts are also designed for use in connection with certain types of
qualified retirement plans  which receive  favorable treatment  under the  Code.
Numerous  special tax rules apply to the Owners under Qualified Plans and to the
Contracts used  in  connection  with  Qualified  Plans.  These  tax  rules  vary
according  to the type of plan and the  terms and conditions of the plan itself.
For example, for both  surrenders and annuity  payments under certain  Contracts
issued  in connection with Qualified  Plans, there may be  no "investment in the
contract" and the  total amount  received may  be taxable.  Also, special  rules
apply to the time at which distributions must commence and the form in which the
distributions  must be paid. Therefore, no attempt  is made to provide more than
general information  about  the use  of  Contracts  with the  various  types  of
Qualified Plans.

    When  issued in connection with a Qualified Plan, a Contract will be amended
as generally necessary  to conform  to the  requirements of  the plan.  However,
Owners,  Annuitants,  and Beneficiaries  are cautioned  that  the rights  of any
person to any benefits  under Qualified Plans  may be subject  to the terms  and
conditions  of the plans  themselves, regardless of the  terms and conditions of
the Contract.  In  addition,  the  Company  shall not  be  bound  by  terms  and
conditions of Qualified Plans to the extent such terms and conditions contradict
the Contract, unless the Company consents.

    Following  are brief  descriptions of  various types  of Qualified  Plans in
connection with which the Company may issue a Contract.

    INDIVIDUAL RETIREMENT  ACCOUNTS AND  ANNUITIES.   Section  408 of  the  Code
permits  eligible individuals to contribute  to an individual retirement program
known as  an  "Individual  Retirement  Account"  or  an  "Individual  Retirement
Annuity"  ("IRAs").  IRAs are  subject  to limits  on  the amounts  that  may be
contributed, the persons who may be eligible and on the time when  distributions
may  commence. Also,  subject to the  direct rollover  and mandatory withholding
requirements (discussed below), distributions  from certain Qualified Plans  may
be "rolled over" on a tax-deferred basis into an IRA.

    IRAs  generally may not  invest in life insurance  contracts, but an annuity
that is purchased by, or used as, an IRA may provide a death benefit that equals
the greater of  the premiums paid  and the contract's  cash value. The  Contract
provides a Death Benefit that in certain circumstances may exceed the greater of
the  Purchase Payments  and the  Contract Value. It  is possible  that the Death
Benefit could  be viewed  as violating  the prohibition  on investment  in  life
insurance  contracts with the  result that the  Contract would not  be viewed as
satisfying the requirements of an IRA.

                                       27
<PAGE>
    SIMPLIFIED EMPLOYEE PENSIONS (SEP-IRAS).  Section 408(k) of the Code  allows
employers  to establish simplified  employee pension plans  for their employees,
using the employees' IRAs for such purposes, if certain criteria are met.  Under
these   plans  the  employer  may,  within  specified  limits,  make  deductible
contributions on behalf of the employees to IRAs. Employers intending to use the
Contract in connection with such plans should seek competent advice.

    In particular, employers should consider that IRAs generally may not  invest
in life insurance contracts, but an annuity that is purchased by, or used as, an
IRA may provide a death benefit that equals the greater of the premiums paid and
the contract's cash value. The Contract provides a Death Benefit that in certain
circumstances  may exceed the greater of  the Purchase Payments and the Contract
Value. It is possible that  the Death Benefit could  be viewed as violating  the
prohibition  on investment in life insurance  contracts with the result that the
Contract would not be viewed as satisfying the requirements of an IRA.

    CORPORATE  AND   SELF-EMPLOYED  ("H.R.   10"   AND  "KEOGH")   PENSION   AND
PROFIT-SHARING  PLANS.  Sections 401(a) and  403(a) of the Code permit corporate
employers to  establish  various  types  of  tax-favored  retirement  plans  for
employees.  The  Self-Employed  Individuals'  Tax  Retirement  Act  of  1962, as
amended, commonly referred  to as  "H.R. 10" or  "Keogh," permits  self-employed
individuals  also to establish such  tax-favored retirement plans for themselves
and their  employees. Such  retirement  plans may  permit  the purchase  of  the
Contract  in order to provide benefits under  the plans. The Contract provides a
Death Benefit  that in  certain  circumstances may  exceed  the greater  of  the
Purchase Payments and the Contract Value. It is possible that such Death Benefit
could  be characterized as an incidental death benefit. There are limitations on
the amount of incidental benefits that may be provided under pension and  profit
sharing  plans.  In  addition, the  provision  of  such benefits  may  result in
currently taxable  income  to  participants.  Employers  intending  to  use  the
Contract in connection with such plans should seek competent advice.

    SECTION  403(B) POLICIES.  Section 403(b)  of the Code permits public school
employees  and  employees  of  certain  types  of  charitable,  educational  and
scientific  organizations specified  in Section  501(c)(3) of  the Code  to have
their employers  purchase annuity  contracts for  them and,  subject to  certain
limitations,  to exclude the  amount of purchase payments  from gross income for
tax purposes. Purchasers of the Contracts  for use as a "Section 403(b)  Policy"
should  seek  competent advice  as  to eligibility,  limitations  on permissible
amounts of purchase  payments and  other tax consequences  associated with  such
Contracts. In particular, purchasers and their advisers should consider that the
Contract  provides a Death Benefit that  in certain circumstances may exceed the
greater of the  Purchase Payments and  the Contract Value.  It is possible  that
such Death Benefit could be characterized as an incidental death benefit. If the
Death  Benefit were  so characterized,  this could  result in  currently taxable
income to  purchasers. In  addition,  there are  limitations  on the  amount  of
incidental  death benefits that  may be provided under  a Section 403(b) Policy.
Even if the Death Benefit under the Contract were characterized as an incidental
death benefit, it is unlikely to violate those limits unless the purchaser  also
purchases a life insurance contract as part of his or her Section 403(b) Policy.

    Section   403(b)  Policies  contain  restrictions   on  withdrawals  of  (i)
contributions made pursuant to a  salary reduction agreement in years  beginning
after  December  31,  1988,  (ii) earnings  on  those  contributions,  and (iii)
earnings in such  years on amounts  held as  of the last  year beginning  before
January  1, 1989. These amounts can be paid only if the employee has reached age
59 1/2,  separated  from service,  died,  become disabled,  or  in the  case  of
hardship.  Amounts  permitted to  be distributed  in the  event of  hardship are
limited to  actual contributions;  earnings thereon  can not  be distributed  on
account  of  hardship. (These  limitations on  withdrawals do  not apply  to the
extent the Company is directed to transfer some or all of the Contract Value  to
the  issuer  of  another  Section  403(b) Policy  or  into  a  Section 403(b)(7)
custodial account.)

    DEFERRED COMPENSATION PLANS  OF STATE AND  LOCAL GOVERNMENTS AND  TAX-EXEMPT
ORGANIZATIONS.  Section 457  of the  Code permits  employees of  state and local
governments  and  tax-exempt   organizations  to  defer   a  portion  of   their
compensation   without   paying   current   taxes.   The   employees   must   be

                                       28
<PAGE>
participants in  an  eligible deferred  compensation  plan. To  the  extent  the
Contract  is used in connection with  an eligible plan, employees are considered
general creditors of the employer and the employer as Owner of the Contract  has
the  sole right to the proceeds of the Contract. Generally, a Contract purchased
by a state or local government or a tax-exempt organization will not be  treated
as  an annuity contract for federal income tax purposes. Those who intend to use
the Contracts in connection with such plans should seek competent advice.

DIRECT ROLLOVERS

    If your Contract is  used in connection with  a pension, profit-sharing,  or
annuity  plan qualified  under sections 401(a)  or 403(a)  of the Code,  or is a
Section 403(b) Policy,  any "eligible rollover  distribution" from the  Contract
will   be  subject  to  the  new   direct  rollover  and  mandatory  withholding
requirements enacted  by Congress  in 1992.  An eligible  rollover  distribution
generally  is  any  taxable distribution  from  a qualified  pension  plan under
section 401(a) of the Code, qualified  annuity plan under section 403(a) of  the
Code,  or section 403(b) annuity or custodial account, excluding certain amounts
(such as minimum distributions required under section 401(a)(9) of the Code  and
distributions  which  are  part of  a  "series of  substantially  equal periodic
payments" made for life or a specified period of 10 years or more).

    Under these  new  requirements, federal  income  tax  equal to  20%  of  the
eligible  rollover  distribution  will  be  withheld  from  the  amount  of  the
distribution. Unlike withholding on certain  other amounts distributed from  the
Contract,  discussed below, you cannot elect  out of withholding with respect to
an eligible rollover distribution. However, this 20% withholding will not  apply
if,  instead of receiving the eligible  rollover distribution, you elect to have
it directly  transferred  to certain  Qualified  Plans. Prior  to  receiving  an
eligible  rollover  distribution,  you  will receive  a  notice  (from  the plan
administrator or  the  Company) explaining  generally  the direct  rollover  and
mandatory  withholding  requirements and  how to  avoid  the 20%  withholding by
electing a direct transfer.

                         FEDERAL INCOME TAX WITHHOLDING

    The Company will withhold and remit to the federal government a part of  the
taxable   portion  of  each  distribution  made  under  a  Contract  unless  the
distributee notifies the Company at or before the time of the distribution  that
he or she elects not to have any amounts withheld. In certain circumstances, the
Company  may be  required to withhold  tax, as explained  above. The withholding
rates applicable to the taxable portion of periodic annuity payments (other than
eligible rollover distributions) are the same as the withholding rates generally
applicable to payments of wages. In addition, the withholding rate applicable to
the taxable portion of non-periodic payments (including surrenders prior to  the
Annuity  Commencement Date) is 10%. Even if you elect not to have federal income
tax withheld, you  are still liable  for payment  of federal income  tax on  the
taxable  portion  of  the  payment. As  discussed  above,  the  withholding rate
applicable to eligible rollover distributions is 20%.

                                GENERAL MATTERS

MODIFICATION

    No change or waiver of  the terms of this Contract  is valid unless made  by
us,  in writing, and approved by our  President, Vice President or Secretary. We
reserve the right to change  the provisions of this  Contract to conform to  any
applicable  laws, or  applicable regulations or  rulings issued  by a government
agency.

REPORTS

    Once per calendar quarter, Protective Life  will send to each Owner, at  the
Owner's  last known  address, a report  showing the  Contract Value, Sub-Account
Values, and  Fixed  Account  Value  along  with  information  regarding  current
investment allocations as well as any other information required by law.

                                       29
<PAGE>
INQUIRIES

    Inquiries  regarding a Contract may be made by writing to Protective Life at
its Home Office.

                         DISTRIBUTION OF THE CONTRACTS

    The Contracts will be offered on a continuous basis and the Company does not
anticipate discontinuing  the  offering  of  the  Contracts.  Nevertheless,  the
Company  reserves the right to discontinue  the offering at any time. Investment
Distributors, Inc. serves as principal underwriter (as defined in the 1940  Act)
for  the Contracts.  Investment Distributors,  Inc. has  agreed to  use its best
efforts to sell the Contracts.  Investment Distributors, Inc. is a  wholly-owned
subsidiary  of PLC  and has  the same address  as the  Company. Applications for
Contracts are solicited by agents who are licensed by applicable state insurance
authorities to  sell Protective  Life's Contracts  and who  are also  registered
representatives   of  broker/dealers   having  a   distribution  agreement  with
Investment Distributors, Inc. or broker/dealers having a distribution  agreement
with  such  broker/dealer.  Investment  Distributors, Inc.  is  an  affiliate of
Protective Life  Insurance Company  and is  registered with  the SEC  under  the
Securities  Exchange Act  of 1934  as a  broker/dealer. Investment Distributors,
Inc. is a  member of the  National Association of  Securities Dealers, Inc.  The
maximum  commission Protective will pay is 7.0% of the Purchase Payments for the
sale of a Contract.

                               LEGAL PROCEEDINGS

    There are at present no legal proceedings to which the Variable Account is a
party or the  assets of  the Variable Account  are subject.  Protective Life  is
involved  in pending  and threatened  proceedings in  which claims  for monetary
damages or penalties may be asserted. Management, after consultation with  legal
counsel,  does  not believe  that  such proceedings  are  material, nor  does it
anticipate the  ultimate liability  arising from  any such  proceeding would  be
material,  to Protective Life in relation  to its total assets. Such proceedings
are not related to the Variable Account.

                                 VOTING RIGHTS

    In accordance with its view of applicable law, Protective Life will vote the
Fund shares held in the Variable Account at special shareholder meetings of  PIC
or the Funds in accordance with instructions received from persons having voting
interests  in the corresponding  Sub-Accounts. If, however, the  1940 Act or any
regulation thereunder  should  be  amended, or  if  the  present  interpretation
thereof  should change, or Protective Life determines that it is allowed to vote
such shares in its own right, it may elect to do so.

    The number  of votes  which are  available to  an Owner  will be  calculated
separately  for  each  Sub-Account  of the  Variable  Account,  and  may include
fractional votes. The  number of  votes attributable  to a  Sub-Account will  be
determined  by applying an Owner's percentage  interest, if any, in a particular
Sub-Account to the total  number of votes attributable  to that Sub-Account.  An
Owner  holds a voting interest in each Sub-Account to which the Variable Account
Value is allocated.  The Owner  only has voting  interest prior  to the  Annuity
Commencement Date.

    The  number of votes which are available  to the Owner will be determined as
of the  date  coincident  with  the date  established  by  PIC  for  determining
shareholders  eligible  to vote  at the  relevant meeting  of each  Fund. Voting
instructions will be solicited by written communication prior to such meeting in
accordance with procedures established by PIC.

    Shares as to which  no timely instructions are  received and shares held  by
Protective  Life in a Sub-Account as to which no Owner has a beneficial interest
will be voted in proportion to  the voting instructions which are received  with
respect  to all Contracts participating in that Sub-Account. Voting instructions
to abstain on  any item to  be voted upon  will be applied  to reduce the  votes
eligible to be cast on that item.

                                       30
<PAGE>
    Each  person having  a voting interest  in a Sub-Account  will receive proxy
materials, reports, and other material relating to the appropriate Fund.

                              FINANCIAL STATEMENTS

    The audited statement of assets  and liabilities of The Protective  Variable
Annuity Separate Account (comprised of six sub-accounts) as of December 31, 1994
and  the related  statements of  operations and  changes in  net assets  for the
period from March 14, 1994 (date of inception) through December 31, 1994 as well
as the  Report of  Independent Accountants  are contained  in the  Statement  of
Additional Information.

    The  audited consolidated balance sheets for  Protective Life as of December
31,  1994  and  1993  and   the  related  consolidated  statements  of   income,
stockholders'  equity, and cash  flows for the  three years in  the period ended
December 31, 1994 and the related financial  schedules as well as the Report  of
Independent   Accountants  are   contained  in   the  Statement   of  Additional
Information.

                                       31
<PAGE>
                      STATEMENT OF ADDITIONAL INFORMATION
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                            -----------
<S>                                                                                                         <C>
ADDITIONAL CONTRACT PROVISIONS............................................................................           3
  The Contract............................................................................................           3
  Error in Age or Sex.....................................................................................           3
  Incontestability........................................................................................           3
  Non-Participation.......................................................................................           3
  Assignment..............................................................................................           3
CALCULATION OF YIELDS AND TOTAL RETURNS...................................................................           3
  Money Market Sub-Account Yield..........................................................................           3
  Other Sub-Account Yields................................................................................           4
  Average Annual Total Returns............................................................................           5
  Other Total Returns.....................................................................................           6
  Effect of the Contract Maintenance Fee on Performance Data..............................................           6
SAFEKEEPING OF ACCOUNT ASSETS.............................................................................           6
STATE REGULATION..........................................................................................           7
RECORDS AND REPORTS.......................................................................................           7
LEGAL MATTERS.............................................................................................           7
EXPERTS...................................................................................................           7
OTHER INFORMATION.........................................................................................           7
FINANCIAL STATEMENTS......................................................................................           8
</TABLE>

                                       32
<PAGE>
                                    APPENDIX
                           SURRENDER CHARGE EXAMPLES

    EXAMPLES:   (1)  An Owner  makes a  $5,000 initial  Purchase Payment  and 10
months later has a Contract Value of $5,250.  If at that time the Owner makes  a
partial  surrender of  any amount  or a  full surrender,  he or  she will  pay a
surrender charge equal to  7% of the  amount surrendered; (2)  An Owner makes  a
$5,000  initial  Purchase Payment  and no  subsequent  Purchase Payments  and 30
months later (i.e., in the third Contract Year) has a Contract Value of  $5,750.
If  at that time the Owner  makes a full surrender, he  or she would not pay any
surrender charge on the $750 of earnings under the Contract (which is considered
to be surrendered  before Purchase Payments)  but would pay  a surrender  charge
equal to 5% of $5,000, or $250. Likewise, if the Owner makes a partial surrender
of  $2,500 at that time, he or she would  pay no surrender charge on the $750 of
earnings but would pay a surrender charge equal to 5% of $1,750, or $87.50;  (3)
The  same Owner  does not  make a  surrender after  30 months  but instead makes
another Purchase Payment of $2,000  at that time and  after 52 months (i.e.,  in
the  fifth  Contract Year)  the  Contract Value  is  $9,000 ($7,000  of Purchase
Payments and $2,000  of earnings). If  at that  time the Owner  makes a  partial
surrender  of  any amount  or  a full  surrender,  he or  she  would only  pay a
surrender charge on the amount surrendered in  excess of $2,000 and would pay  a
surrender charge equal to 2% of the next $5,000 surrendered and 5% of any amount
surrendered in excess of $7,000.

                                      A-1
<PAGE>
                                     PART B
                       INFORMATION REQUIRED TO BE IN THE
                      STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
                             2801 Highway 280 South
                           Birmingham, Alabama 35223
                           Telephone: (205) 879-9230

                      STATEMENT OF ADDITIONAL INFORMATION
                  PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
                          INDIVIDUAL FLEXIBLE PREMIUM
                  DEFERRED VARIABLE AND FIXED ANNUITY CONTRACT

    This Statement of Additional Information contains information in addition to
the  information described in the Prospectus for the individual flexible premium
deferred variable  and  fixed  annuity  contract  (the  "Contract")  offered  by
Protective  Life Insurance Company. This  Statement of Additional Information is
not a Prospectus. It  should be read only  in conjunction with the  Prospectuses
for  the Contract and Protective Investment Company. The Prospectus is dated the
same as this Statement of Additional Information.  You may obtain a copy of  the
Prospectus by writing or calling us at our address or phone number shown above.

   
     THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS JUNE 13, 1995
    

                                       1
<PAGE>
                      STATEMENT OF ADDITIONAL INFORMATION
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                            -----------
<S>                                                                                                         <C>
ADDITIONAL CONTRACT PROVISIONS............................................................................           3
  The Contract............................................................................................           3
  Error in Age or Sex.....................................................................................           3
  Incontestability........................................................................................           3
  Non-Participation.......................................................................................           3
  Assignment..............................................................................................           3
CALCULATION OF YIELDS AND TOTAL RETURNS...................................................................           3
  Money Market Sub-Account Yield..........................................................................           3
  Other Sub-Account Yields................................................................................           4
  Average Annual Total Returns............................................................................           5
  Other Total Returns.....................................................................................           6
  Effect of the Contract Maintenance Fee on Performance Data..............................................           6
SAFEKEEPING OF ACCOUNT ASSETS.............................................................................           7
STATE REGULATION..........................................................................................           7
RECORDS AND REPORTS.......................................................................................           7
LEGAL MATTERS.............................................................................................           7
EXPERTS...................................................................................................           7
OTHER INFORMATION.........................................................................................           7
FINANCIAL STATEMENTS......................................................................................           8
</TABLE>

                                       2
<PAGE>
                         ADDITIONAL CONTRACT PROVISIONS

THE CONTRACT

    This  Contract,  any  riders and/or  endorsements  attached as  well  as the
Application, constitute the entire contract.  All statements in the  application
shall be deemed representations and not warranties.

ERROR IN AGE OR SEX

    Questions  in the Application concern the  Annuitant's and Owner(s)' date of
birth and sex. If the dates of birth or sex given are not correct, the  benefits
under this Contract will be adjusted to the amount which would have been payable
at  the correct  age and  sex. If we  made any  underpayments on  account of any
misstatement, the amount of  any underpayment shall be  immediately paid in  one
sum.  Any overpayments  made shall  be deducted  from the  current or succeeding
payments due under this Contract.

INCONTESTABILITY

    The Contract shall not be contestable by us.

NON-PARTICIPATION

    The Contract  is not  eligible for  dividends and  will not  participate  in
Protective Life's surplus or profits.

ASSIGNMENT

    By  written notice  to us,  an Owner may  assign his  or her  rights under a
Contract. The  assignment must  be filed  with  the Home  Office. We  assume  no
responsibility  for  the validity  of  any assignment  and  any claim  under any
assignment is subject to proof of interest and the extent of the assignment.

                    CALCULATION OF YIELDS AND TOTAL RETURNS

    From time to time, Protective Life  may disclose yields, total returns,  and
other  performance  data pertaining  to the  Contracts  for a  Sub-Account. Such
performance data will be computed  or accompanied by performance data  computed,
in  accordance  with  the  standards  defined  by  the  Securities  and Exchange
Commission ("SEC").

    Because of the charges and deductions  imposed under a Contract, yields  for
the  Sub-Accounts will be lower than the  yields for their respective Funds. The
calculations of yields, total returns, and other performance data do not reflect
the effect  of premium  tax that  may be  applicable to  a particular  Contract.
Premium  taxes currently range from 0% to 3.50% of premium based on the state in
which the Contract is sold.

MONEY MARKET SUB-ACCOUNT YIELD

    From time to time, advertisements and sales literature may quote the current
annualized yield of  the Money Market  Sub-Account for a  seven-day period in  a
manner  which does not take into  consideration any realized or unrealized gain,
or losses on shares of the Money Market Fund or on its portfolio securities.

    This current  annualized yield  is computed  by determining  the net  change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation  and depreciation) at the end of the seven day period in value of a
hypothetical account under a Contract having a balance of 1 Accumulation Unit of
the Money Market Sub-Account at the  beginning of the period, dividing such  net
change  in  account  value by  the  value  of the  hypothetical  account  at the
beginning of the  period to determine  the base period  return, and  annualizing
this  quotient on a 365-day basis. The  net change in account value reflects: 1)
net income from the Money Market Fund attributable to the hypothetical  account;
and  2) charges  and deductions imposed  under the Contract  attributable to the
hypothetical account. The charges  and deductions include  the per unit  charges
for  the hypothetical  account for: 1)  the Annual Contract  Maintenance Fee; 2)
Administration Charge; and 3) the Mortality and

                                       3
<PAGE>
Expense Risk Charge. For purposes of calculating current yields for a  Contract,
an  average per unit Contract Maintenance Fee  is used based on the $35 Contract
Maintenance Fee deducted at the end of each Contract Year. Current Yield will be
calculated according to the following formula:

    Current Yield = ((NCS-ES)/UV) X (365/7)

<TABLE>
<S>         <C>
    Where:

    NCS     the net change in the value of the Fund (exclusive of unrealized gains or losses
            on the sale of securities and unrealized appreciation and depreciation) for  the
            seven-day  period attributable to  a hypothetical Account having  a balance of 1
            Sub-Account Accumulation Unit.

    ES      per unit expenses  attributable to  the hypothetical account  for the  seven-day
            period.

    UV      The Accumulation Unit value on the first day of the seven-day period.
</TABLE>

    The  effective  yield  of  the  Money  Market  Sub-Account  determined  on a
compounded basis for the same seven-day period may also be quoted.

    The effective  yield  is calculated  by  compounding the  unannualized  base
period return according to the following formula:

    Effective Yield = (1 + ((NCS-ES)/UV))365/7 - 1

<TABLE>
<S>         <C>
    Where:

    NCS     the  net change in the  value of the portfolio  (exclusive of realized gains and
            losses on the sale of  securities and unrealized appreciation and  depreciation)
            for the seven-day period attributable to a hypothetical account having a balance
            of 1 Sub-Account Accumulation Unit.

    ES      per  Accumulation Unit expenses attributable to the hypothetical account for the
            seven-day period.

    UV      the Accumulation Unit value for the first day of the seven-day period.
</TABLE>

    Because of  the  charges and  deductions  imposed under  the  Contract,  the
current and effective yields for the Money Market Sub-Account will be lower than
such yields for the Money Market Fund.

    The  current  and  effective yields  on  amounts  held in  the  Money Market
Sub-Account normally will fluctuate on  a daily basis. THEREFORE, THE  DISCLOSED
YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE
YIELDS  OR  RATES OF  RETURN.  The Money  Market  Sub-Account's actual  yield is
affected by  changes  in interest  rates  on money  market  securities,  average
portfolio  maturity of the Money Market Fund,  the types of quality of portfolio
securities held by the Money Market  Fund and the Money Market Fund's  operating
expenses.  Yields on amounts  held in the  Money Market Sub-Account  may also be
presented for periods other than a seven day period.

OTHER SUB-ACCOUNT YIELDS

    From time to time, sales literature or advertisements may quote the  current
annualized  yield of one  or more of  the Sub-Accounts (except  the Money Market
Sub-Account) for  a Contract  for 30-day  or one-month  periods. The  annualized
yield  of a  Sub-Account refers  to income generated  by the  Sub-Account over a
specific 30 day or one month period. Because the yield is annualized, the  yield
generated  by a Sub-Account during a 30-day or one-month period is assumed to be
generated each period over a 12-month period.

    The yield is computed by: 1) dividing the net investment income of the  Fund
attributable to the Sub-Account Accumulation Units less Sub-Account expenses for
the  period; by 2) the maximum offering  price per Accumulation Unit on the last
day of the period times  the daily average number  of units outstanding for  the
period;   by  3)  compounding  that  yield   for  a  six-month  period;  and  by

                                       4
<PAGE>
4) multiplying  that  result by  2.  Expenses attributable  to  the  Sub-Account
include  the Annual Contract Maintenance Fee,  the Administration Charge and the
Mortality and Expense  Risk Charge.  The yield calculation  assumes an  Contract
Maintenance  Fee  of $35  per  year per  Contract deducted  at  the end  of each
Contract Year. For purposes of calculating  the 3(1-day or one-month yield),  an
average  administration fee per dollar of Contract value in the Variable Account
is used to determine  the amount of the  charge attributable to the  Sub-Account
for  the 30-day or one-month period. The 30 day or one month yield is calculated
according to the following formula:

    Yield = 2 X [(((N1-ES)/(U X UV)) + 1)(6) - 1]

<TABLE>
<S>         <C>
    Where:

    N1      net income of the Fund  for the 30 day or  one month period attributable to  the
            Sub-Account Accumulation Units.

    ES      expenses of the Sub-Account for the 30 day or one month period.

    U       the average number of Accumulation Units outstanding.

    UV      the Accumulation Unit value at the close (highest) of the last day in the 30 day
            or one month period.
</TABLE>

    Because of the charges and deductions imposed under the Contracts, the yield
for the Sub-Account will be lower than the yield for the corresponding Fund.

    The  yield on the  amounts held in the  Sub-Accounts normally will fluctuate
over time. Therefore, the disclosed  yield for any given  past period is not  an
indication   or  representation  of  future  yields  or  rates  of  return.  The
Sub-Account's actual yield  is affected by  the types and  quality of  portfolio
securities held by the corresponding Fund and its operating expenses.

    Yield  calculations do not take into  Account the Surrender Charge under the
Contract equal to 2% to  7% of premiums paid during  the six years prior to  the
surrender  (including  the  year in  which  the  surrender is  made)  on amounts
surrendered under the Contract.

AVERAGE ANNUAL TOTAL RETURNS

    From time to time, sales literature or advertisements may also quote average
annual total returns for one or more of the Sub-Accounts for various periods  of
time.

    Until a Sub-Account has been in operation for 10 years, Protective Life will
always  include quotes  of standard average  annual total return  for the period
measured from the date the Sub-Accounts began operations. When a Sub-Account has
been in operation  for 1,  5, and 10  years, respectively,  the standard  annual
total  return for these  periods will be provided.  Average annual total returns
for other periods of time may, from time to time, also be disclosed.

    Average annual total returns represent  the average annual compounded  rates
of  return that would equate an initial investment of $1,000 under a Contract to
the redemption  value of  that investment  as of  the last  day of  each of  the
periods.  The ending date of  each period for which  total return quotations are
provided will be for the most recent month-end practicable considering the  type
and media of the communication and will be stated in the communication.

    Average  annual  total returns  will  be calculated  using  Sub-Account unit
values  computed  on  each  Valuation  Day  based  on  the  performance  of  the
Sub-Account's underlying Fund, the deductions for the Mortality and Expense Risk
Charge   and  the  Administration  Charge.   The  average  annual  total  return
calculation also assumes that the Contract  Maintenance Fee is $35 per year  per
contract  deducted at the end of each Contract Year. For purposes of calculating
standard average annual total return, an average per dollar Contract Maintenance
fee attributable to the hypothetical account for

                                       5
<PAGE>
the period  for  the  quotation  standard  average  annual  total  returns  will
therefore  reflect a deduction of the Surrender  Charge for any period less than
eight years. The total return will then be calculated according to the following
formula:

    TR = (ERV/P)1/N - 1

<TABLE>
<S>         <C>        <C>
    Where:

    TR the average annual total return net of Sub-Account recurring charges.

    ERV     =          the ending redeemable value (net of any applicable surrender charge) of the
                       hypothetical account at the end of the period.

    P       =          a hypothetical single purchase payment of $1,000.

    N       =          the number of years in the period.
</TABLE>

OTHER TOTAL RETURNS

    From time to time, sales literature or advertisements may also quote average
annual total  returns  that do  not  reflect  the Surrender  Charge.  These  are
calculated  in exactly  the same  way as  standard average  annual total returns
described above, except  that the  ending redeemable value  of the  hypothetical
account for the period is replaced with an ending value for the period that does
not take into account any charges on amounts surrendered.

    Protective  Life may disclose  cumulative total returns  in conjunction with
the standard  formats described  above.  The cumulative  total returns  will  be
calculated using the following formula:

    CTR = (ERV/P) - 1

<TABLE>
<S>         <C>        <C>
    Where:

    CTR     =          The  cumulative total return  net of Sub-Account  recurring charges for the
                       period.

    ERV     =          The ending redeemable value  of the hypothetical investment  at the end  of
                       the period.

    P       =          A hypothetical single Purchase Payment of $1,000.
</TABLE>

EFFECT OF THE CONTRACT MAINTENANCE FEE ON PERFORMANCE DATA

    The  Contract  provides for  a  $35 Annual  Contract  Maintenance Fee  to be
deducted annually at the  end of each Contract  Year, from the Sub-Accounts  and
the  Fixed Account based on  the proportion that the  value of each such account
bears to  the total  Contract  Account Value.  For  purposes of  reflecting  the
Contract Maintenance Fee in yield and total return quotations, the annual charge
is  converted into  a per dollar  per day  charge based on  the average Variable
Contract Value  of  all Contracts  on  the last  day  of the  period  for  which
quotations  are provided. The per-dollar per-day average charge is then adjusted
to reflect the basis upon which the particular quotation is calculated.

                         SAFEKEEPING OF ACCOUNT ASSETS

    Title to the assets of the Variable Account are held by Protective Life. The
assets are  kept physically  segregated and  held separate  and apart  from  the
Company's  General  Account assets  and from  the assets  in any  other separate
account.

    Records are maintained of all purchases and redemptions of Fund shares  held
by each of the Sub-Accounts.

    The  officers and employees  of Protective Life are  covered by an insurance
company blanket  bond issued  in the  amount of  $15 million  dollars. The  bond
insures against dishonest and fraudulent acts of officers and employees.

                                       6
<PAGE>
                                STATE REGULATION

    Protective  Life is subject to regulation  and supervision by the Department
of Insurance of the State of Tennessee which periodically examines its  affairs.
It  is also subject to  the insurance laws and  regulations of all jurisdictions
where it is  authorized to do  business. A copy  of the Contract  form has  been
filed  with,  and  where  required  approved  by,  insurance  officials  in each
jurisdiction where the Contracts are sold. Protective Life is required to submit
annual statements  of its  operations, including  financial statements,  to  the
insurance departments of the various jurisdictions in which it does business for
the  purposes of determining  solvency and compliance  with local insurance laws
and regulations.

                              RECORDS AND REPORTS

    Protective Life  will maintain  all  records and  accounts relating  to  the
Variable  Account.  As  presently  required  by  the  1940  Act  and regulations
promulgated thereunder, reports containing such  information as may be  required
under  the Act  or by  any other applicable  law or  regulation will  be sent to
Owner(s) periodically at the last known address.

                                 LEGAL MATTERS

    Sutherland, Asbill  & Brennan  of Washington,  D.C. has  provided advice  on
certain matters relating to the federal securities laws.

                                    EXPERTS

    The  statement of assets and liabilities  of The Protective Variable Annuity
Separate Account (comprised of six sub-accounts) as of December 31, 1994 and the
related statements of operations and changes  in net assets for the period  from
March  14, 1994 (date of  inception) through December 31,  1994 included in this
Statement of Additional Information and in the registration statement have  been
included  herein  in  reliance on  the  report  of Coopers  and  Lybrand L.L.P.,
independent accountants,  given on  the authority  of that  firm as  experts  in
accounting and auditing.

    The  consolidated balance sheets of Protective  Life as of December 31, 1994
and 1993 and the related consolidated statements of income, stockholder's equity
and cash flows for each of the three years in the period ended December 31, 1994
and the  related financial  statement schedules  included in  this Statement  of
Additional  Information  and in  the registration  statement have  been included
herein in reliance on the report,  which includes an explanatory paragraph  with
respect   to  changes  in  the  Company's  methods  of  accounting  for  certain
investments in debt and  equity securities in  1993 and postretirement  benefits
other   than  pensions  in  1992,  of  Coopers  &  Lybrand  L.L.P.,  independent
accountants, given on the  authority of that firm  as experts in accounting  and
auditing.

                               OTHER INFORMATION

    A  registration statement has  been filed with the  SEC under the Securities
Act of  1933  as  amended, with  respect  to  the Contracts  discussed  in  this
Statement  of Additional Information.  Not all the information  set forth in the
registration statement, amendments  and exhibits  thereto has  been included  in
this Statement of Additional Information. Statements contained in this Statement
of  Additional Information  concerning the  content of  the Contracts  and other
legal instruments are intended to be summaries. For a complete statement of  the
terms of these documents, reference should be made to the instruments filed with
the SEC at 450 Fifth Street, N.W., Washington, DC 20549.

                                       7
<PAGE>
                              FINANCIAL STATEMENTS

    The  audited statement of assets and  liabilities of The Protective Variable
Annuity Separate Account (comprised of six sub-accounts) as of December 31, 1994
and the  related statements  of operations  and changes  in net  assets for  the
period from March 14, 1994 (date of inception) through December 31, 1994 as well
as the Report of Independent Accountants are contained herein.

    The  audited consolidated balance sheets for  Protective Life as of December
31,  1994  and  1993  and   the  related  consolidated  statements  of   income,
stockholder's equity, and cash flows for the years ended December 31, 1994, 1993
and 1992 as well as the Report of Independent Accountants are contained herein.

                                       8
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                    <C>
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
Report of Independent Accountants....................................................        F-2
Statement of Assets and Liabilities as of December 31, 1994..........................        F-3
Statement of Operations for the period from March 14, 1994 (date of inception)
 through December 31, 1994...........................................................        F-4
Statement of Changes in Net Assets for the period from March 14, 1994 (date of
 inception) through December 31, 1994................................................        F-5
Notes to Financial Statements........................................................        F-6

PROTECTIVE LIFE INSURANCE COMPANY
Report of Independent Accountants....................................................        F-9
Consolidated Statements of Income for the years ended
 December 31, 1994, 1993 and 1992....................................................       F-10
Consolidated Balance Sheets as of December 31, 1994 and 1993.........................       F-11
Consolidated Statements of Stockholder's Equity for the years ended
 December 31, 1994, 1993 and 1992....................................................       F-12
Consolidated Statements of Cash Flows for the years ended
 December 31, 1994, 1993 and 1992....................................................       F-13
Notes to Consolidated Financial Statements...........................................       F-14
</TABLE>

                                      F-1
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Contractowners and Board of Directors
of Protective Life Insurance Company

    We  have audited the financial statements of The Protective Variable Annuity
Separate Account (comprised of six  sub-accounts) included on pages F-3  through
F-8  of this registration statement on  Form N-4. These financial statements are
the responsibility of the management of The Protective Variable Annuity Separate
Account. Our  responsibility  is  to  express  an  opinion  on  these  financial
statements based on our audit.

    We  conducted  our  audit  in accordance  with  generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of shares owned as of  December 31, 1994, with the transfer  agent,
State  Street Bank  and Trust. An  audit also includes  assessing the accounting
principles used  and  significant  estimates  made by  management,  as  well  as
evaluating  the overall  financial statement  presentation. We  believe that our
audit provides a reasonable basis for our opinion.

    In our opinion, the financial  statements referred to above present  fairly,
in  all material  respects, the  financial position  of The  Protective Variable
Annuity Separate Account as of December 31, 1994, the results of its operations,
and the changes in its  net assets for the period  from March 14, 1994 (date  of
inception)  through  December 31,  1994, in  conformity with  generally accepted
accounting principles.

                                          /s/ COOPERS & LYBRAND L.L.P.

Birmingham, Alabama
March 20, 1995

                                      F-2
<PAGE>
                THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
                      OF PROTECTIVE LIFE INSURANCE COMPANY
                       STATEMENT OF ASSETS & LIABILITIES
                               DECEMBER 31, 1994

<TABLE>
<CAPTION>
                                                   GROWTH AND   INTERNATIONAL                      SMALL CAP
                                  MONEY MARKET       INCOME         EQUITY       GLOBAL INCOME       EQUITY     SELECT EQUITY
                                   SUB-ACOUNT     SUB-ACCOUNT    SUB-ACCOUNT      SUB-ACCOUNT     SUB-ACCOUNT    SUB-ACCOUNT
                                  -------------   ------------  --------------   --------------   ------------  --------------
<S>                               <C>             <C>           <C>              <C>              <C>           <C>
ASSETS
Investment in Protective
 Investment Company at market
 value..........................   $ 3,618,491    $42,305,118    $ 27,385,061     $ 17,281,472    $21,812,746    $ 17,717,449
Receivable from Protective Life
 Insurance Company..............                       37,849          30,375            7,945         27,495          19,269
                                  -------------   ------------  --------------   --------------   ------------  --------------
    Total Assets................     3,618,491     42,342,967      27,415,436       17,289,417     21,840,241      17,736,718
                                  -------------   ------------  --------------   --------------   ------------  --------------
LIABILITIES
Payable to Protective Life
 Insurance Company..............         5,978
                                  -------------   ------------  --------------   --------------   ------------  --------------
NET ASSETS......................   $ 3,612,513    $42,342,967    $ 27,415,436     $ 17,289,417    $21,840,241    $ 17,736,718
                                  -------------   ------------  --------------   --------------   ------------  --------------
                                  -------------   ------------  --------------   --------------   ------------  --------------
Held for the benefit of
 contractowners.................   $ 3,096,831    $41,361,603    $ 24,540,983     $ 14,311,514    $20,938,899    $ 16,731,419
Attributable to Protective Life
 Insurance Company..............       515,682        981,364       2,874,453        2,977,903        901,342       1,005,299
                                  -------------   ------------  --------------   --------------   ------------  --------------
                                   $ 3,612,513    $42,342,967    $ 27,415,436     $ 17,289,417    $21,840,241    $ 17,736,718
                                  -------------   ------------  --------------   --------------   ------------  --------------
                                  -------------   ------------  --------------   --------------   ------------  --------------
</TABLE>

                See accompanying notes to financial statements.

                                      F-3
<PAGE>
                THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
                      OF PROTECTIVE LIFE INSURANCE COMPANY
                            STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 14, 1994 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1994

<TABLE>
<CAPTION>
                                                    GROWTH AND    INTERNATIONAL                      SMALL CAP
                                    MONEY MARKET      INCOME          EQUITY       GLOBAL INCOME       EQUITY      SELECT EQUITY
                                     SUB-ACOUNT    SUB-ACCOUNT     SUB-ACCOUNT      SUB-ACCOUNT     SUB-ACCOUNT     SUB-ACCOUNT
                                    ------------   ------------   --------------   --------------   ------------   --------------
<S>                                 <C>            <C>            <C>              <C>              <C>            <C>
INVESTMENT INCOME
  Dividends.......................   $ 115,674      $  331,204                       $  451,353     $    92,044      $  163,171
EXPENSE
  Mortality and expense risk and
   administrative charges.........      34,654         198,917      $  121,605           79,910         110,199          82,649
                                    ------------   ------------   --------------   --------------   ------------   --------------
  Net investment income (loss)....      81,020         132,287        (121,605)         371,443         (18,155)         80,522
                                    ------------   ------------   --------------   --------------   ------------   --------------
NET REALIZED AND UNREALIZED GAINS
 (LOSSES) ON INVESTMENTS
Net realized gain (loss) from
 redemption of investment shares..                         (76)          1,016               11             125             488
Capital gain distribution.........         245         169,877                                           57,869         215,029
                                    ------------   ------------   --------------   --------------   ------------   --------------
Net realized gain on
 investments......................         245         169,801           1,016               11          57,994         215,517
                                    ------------   ------------   --------------   --------------   ------------   --------------
Net unrealized appreciation
 (depreciation) on investments
 during the period................                    (849,702)       (379,600)        (378,711)     (1,657,883)       (339,157)
                                    ------------   ------------   --------------   --------------   ------------   --------------
Net realized and unrealized gain
 (loss) on investments............         245        (679,901)       (378,584)        (378,700)     (1,599,889)       (123,640)
                                    ------------   ------------   --------------   --------------   ------------   --------------
NET INCREASE (DECREASE) IN NET
 ASSETS RESULTING FROM
 OPERATIONS.......................   $  81,265      $ (547,614)     $ (500,189)      $   (7,257)    $(1,618,044)     $  (43,118)
</TABLE>

                See accompanying notes to financial statements.

                                      F-4
<PAGE>
                THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
                      OF PROTECTIVE LIFE INSURANCE COMPANY
                       STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM MARCH 14, 1994 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1994

<TABLE>
<CAPTION>
                                                    GROWTH AND     INTERNATIONAL                       SMALL CAP
                                  MONEY MARKET        INCOME           EQUITY       GLOBAL INCOME       EQUITY       SELECT EQUITY
                                   SUB-ACOUNT       SUB-ACCOUNT     SUB-ACCOUNT      SUB-ACCOUNT      SUB-ACCOUNT     SUB-ACCOUNT
                                ----------------   -------------   --------------   --------------   -------------   --------------
<S>                             <C>                <C>             <C>              <C>              <C>             <C>
FROM OPERATIONS
Net investment income
 (loss).......................  $      81,020      $    132,287     $   (121,605)    $    371,443    $    (18,155)    $     80,522
Net realized gain on
 investments..................            245           169,801            1,016               11          57,994          215,517
Net unrealized depreciation of
 investments during the
 period.......................                         (849,702)        (379,600)        (378,711)     (1,657,883)        (339,157)
                                ----------------   -------------   --------------   --------------   -------------   --------------
Net increase (decrease) in net
 assets resulting from
 operations...................         81,265          (547,614)        (500,189)          (7,257)     (1,618,044)         (43,118)
                                ----------------   -------------   --------------   --------------   -------------   --------------
FROM VARIABLE ANNUITY CONTRACT
 TRANSACTIONS
Contractowners' net payments..     28,046,929        27,903,691       16,918,013       10,479,690      15,055,748       12,022,234
Surrenders....................         (3,351)         (146,706)         (76,797)        (107,387)        (89,199)         (75,829)
Death benefits................                          (71,630)         (16,626)         (14,803)        (16,728)         (22,661)
Transfer (to) from other
 portfolios...................    (25,006,354)       14,167,377        8,061,390        3,931,230       7,481,651        4,836,824
                                ----------------   -------------   --------------   --------------   -------------   --------------
Net increase in net assets
 resulting from variable
 annuity contract
 transactions.................      3,037,224        41,852,732       24,885,980       14,288,730      22,431,472       16,760,568
                                ----------------   -------------   --------------   --------------   -------------   --------------
Capital contribution from
 Protective Life Insurance
 Company......................        494,024         1,037,849        3,029,645        3,007,944       1,026,813        1,019,268
                                ----------------   -------------   --------------   --------------   -------------   --------------
Total increase in net
 assets.......................      3,612,513        42,342,967       27,415,436       17,289,417      21,840,241       17,736,718
NET ASSETS
Beginning of Year.............
                                ----------------   -------------   --------------   --------------   -------------   --------------
                                $   3,612,513      $ 42,342,967     $ 27,415,436     $ 17,289,417    $ 21,840,241     $ 17,736,718
                                ----------------   -------------   --------------   --------------   -------------   --------------
                                ----------------   -------------   --------------   --------------   -------------   --------------
</TABLE>

                See accompanying notes to financial statements.

                                      F-5
<PAGE>
                THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
                      OF PROTECTIVE LIFE INSURANCE COMPANY
                       NOTES TO THE FINANCIAL STATEMENTS

1.  ORGANIZATION
    The  Protective  Variable Annuity  Separate  Account (Separate  Account) was
established by Protective  Life Insurance  Company (Protective  Life) under  the
provisions  of Tennessee  law and  commenced operations  on March  14, 1994. The
Separate Account is an investment account to which net proceeds from  individual
flexible  premium  deferred  variable  annuity  contracts  (the  Contracts)  are
allocated until maturity or termination of the Contracts.

    Protective Life has  structured the  Separate Account  into unit  investment
trust  form registered  with the  Securities and  Exchange Commission  under the
Investment Company Act of 1940, as amended. The Separate Account is comprised of
six sub-accounts: Money Market, Growth and Income, International Equity,  Global
Income, Small Cap Equity, and Select Equity. Funds are transferred to Protective
Investment  Company  (the  Fund) in  exchange  for shares  of  the corresponding
portfolio of the Fund.

    Net premiums  from  the  Contracts  are allocated  to  the  sub-accounts  in
accordance  with contractowner instructions and are recorded as variable annuity
contract transactions in the  statement of changes in  net assets. Such  amounts
are  used to provide money to pay  contract values under the Contracts (Note 4).
The Separate Account's assets are the property of Protective Life.

    Contractowners may allocate some or all of net premiums or transfer some  or
all  of the  contract value to  the fixed  account, which is  part of Protective
Life's general account. The assets of Protective Life's general account  support
its  insurance  and annuity  obligations and  are  subject to  Protective Life's
general liabilities from business operations.

    Transfers, included in the statement of changes in net assets, are transfers
between the individual sub-accounts and the sub-accounts and the fixed account.

2.  SIGNIFICANT ACCOUNTING POLICIES

    INVESTMENT VALUATION:  Investments are made in shares and are valued at  the
net  asset values of the respective portfolios. Transactions are recorded on the
trade date. Dividend income is recorded on the ex-dividend date.

    REALIZED GAINS AND LOSSES:  Realized gains and losses on investments include
gains and  losses  on  redemptions  of the  Fund's  shares  (determined  on  the
last-in-first-out (LIFO) basis) and capital gain distributions from the fund.

    FEDERAL  INCOME TAXES:  The operation of the Separate Account is included in
the Federal income tax  return of Protective Life.  Under the provisions of  the
Contracts,  Protective Life  has the  right to  charge the  Separate Account for
Federal income tax attributable to the Separate Account. No charge is  currently
being made against the Separate Account for such tax.

3.  INVESTMENTS
    At December 31, 1994, the investments by the respective sub-accounts were as
follows:

<TABLE>
<CAPTION>
                                                             SHARES          COST        MARKET VALUE
                                                           -----------  --------------  --------------
<S>                                                        <C>          <C>             <C>
Money Market.............................................    3,618,488  $    3,618,491  $    3,618,491
Growth and Income........................................    4,378,864  $   43,154,820  $   42,305,118
International Equity.....................................    2,858,191  $   27,764,661  $   27,385,061
Global Income............................................    1,808,152  $   17,660,183  $   17,281,472
Small Cap Equity.........................................    2,436,839  $   23,470,629  $   21,812,746
Select Equity............................................    1,800,828  $   18,056,606  $   17,717,449
</TABLE>

                                      F-6
<PAGE>
                THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
                      OF PROTECTIVE LIFE INSURANCE COMPANY
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3.  INVESTMENTS (CONTINUED)
    During  the period from March 14,  1994 (date of inception) through December
31, 1994, transactions in shares were as follows:

<TABLE>
<CAPTION>
                                                    GROWTH AND   INTERNATIONAL   GLOBAL      SMALL CAP     SELECT
                                      MONEY MARKET    INCOME        EQUITY       INCOME       EQUITY       EQUITY
                                      ------------  -----------  ------------  -----------  -----------  -----------
<S>                                   <C>           <C>          <C>           <C>          <C>          <C>
Seed money shares...................       500,000      100,000      300,000       300,000      100,000      100,000
Shares purchased....................    18,924,377    4,260,890    2,608,596     1,659,913    2,349,252    1,700,986
Shares received from reinvestment of
 dividends..........................       115,976       51,337                     46,869       16,747       38,440
                                      ------------  -----------  ------------  -----------  -----------  -----------
Total shares acquired...............    19,540,353    4,412,227    2,908,596     2,006,782    2,465,999    1,839,426
Shares redeemed.....................   (15,921,865)     (33,363)     (50,405)     (198,630)     (29,160)     (38,598)
                                      ------------  -----------  ------------  -----------  -----------  -----------
Net increase in shares owned........     3,618,488    4,378,864    2,858,191     1,808,152    2,436,839    1,800,828
Shares owned, beginning of the
 period.............................
                                      ------------  -----------  ------------  -----------  -----------  -----------
Shares owned, end of period.........     3,618,488    4,378,864    2,858,191     1,808,152    2,436,839    1,800,828
Cost of shares acquired.............  $ 19,540,356  $43,489,003   $28,249,119  $19,580,664  $23,751,674  $18,447,968
Cost of shares redeemed.............  $ 15,921,865  $   334,183   $  484,458   $ 1,920,481  $   281,045  $   391,362
</TABLE>

4.  RELATED PARTY TRANSACTIONS
    Certain deductions are made from the sub-accounts by Protective Life.  These
deductions may include surrender charges, administrative charges, transfer fees,
mortality  and expense risk  charges, contract maintenance  fees, fund expenses,
premium taxes, and other taxes.

    There are no sales expenses deducted from premiums at the time the  premiums
are  paid. If a Contract has not been  in force for six years, upon surrender or
for certain  withdrawals, a  surrender  charge is  deducted from  the  proceeds.
Surrender  charges  may  be decreased  or  waived on  Contracts  meeting certain
restrictions as determined by Protective Life. Surrender charges of $8,958  were
assessed on surrenders of $499,269 during 1994.

    An administrative charge is assessed on an annual basis equal to .15% of the
daily net asset value of each sub-account in the Separate Account.

    There  is currently no charge for  transfers of amounts in the sub-accounts.
However, Protective Life has reserved the right to charge $25 for each  transfer
after  the first twelve  transfers in any  contract year. No  transfer fees were
assessed in 1994.

    The Separate Account is charged a daily mortality and expense risk charge at
an annual rate  of 1.25%.  The mortality risk  Protective Life  assumes is  that
annuitants  may  live  for a  longer  period  of time  than  estimated  when the
guarantees in the Contract were established. The mortality risk that  Protective
Life  assumes  also  includes  a  guarantee  to  pay  a  death  benefit  if  the
contractowner dies before  the annuity commencement  date. The guaranteed  death
benefit  is equal  to the  sum of:  (1) the  fixed account  value; plus  (2) the
greater of:  (a) the  Separate Account  value,  or (b)  the total  net  premiums
allocated  to the  Separate Account  less previous  transfers from  the Separate
Account, partial surrenders, and any  applicable surrender charges and  contract
maintenance  fees, increased by amounts transferred  to the Separate Account and
interest at a  compounded annual effective  interest rate of  5% credited as  of
each  contract anniversary up to any  contractowners' 80th birthday. The expense
risk that  Protective Life  assumes  is the  risk that  administrative  charges,
contract maintenance fees, and transfer fees may be insufficient to cover actual
future expenses.

                                      F-7
<PAGE>
                THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
                      OF PROTECTIVE LIFE INSURANCE COMPANY
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4.  RELATED PARTY TRANSACTIONS (CONTINUED)
    A  contract maintenance fee of $35  is deducted on each contract anniversary
date, and on any day that the contract is surrendered, if such surrender  occurs
on  any day other  than the contract  anniversary date. The  contract fee may be
waived under  certain circumstances.  There were  no contract  maintenance  fees
assessed during 1994.

    The  net  assets of  each sub-account  of the  Separate Account  reflect the
investment management fees and other operating expenses incurred by the Funds.

    Premium  taxes,  when  applicable,  will  be  deducted,  as  provided  under
applicable  law,  either  from  premiums when  received,  upon  full  or partial
surrenders of the contract or  from the amount applied  to effect an annuity  at
the  time annuity payments commence. There were no premium taxes assessed during
1994.

    Protective Life offers a loan privilege to contractowners of section  403(b)
policies  that are  not subject  to Title  1 of  ERISA. Such  contractowners may
obtain loans using the  Contract as the  only security for  the loan. Loans  are
subject  to provisions of The Internal Revenue  Code of 1986, as amended, and to
applicable retirement  program rules.  There  were no  loans outstanding  as  of
December 31, 1994.

                                      F-8
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Directors and Stockholder
Protective Life Insurance Company
Birmingham, Alabama

    We  have  audited the  consolidated financial  statements and  the financial
statement schedules  of  Protective  Life Insurance  Company  and  subsidiaries,
included  on pages F-10 through F-32 and  S-1 through S-3, respectively, of this
registration statement on  Form N-4.  These financial  statements and  financial
statement  schedules  are the  responsibility of  the Company's  management. Our
responsibility is  to  express an  opinion  on these  financial  statements  and
financial statement schedules based on our audits.

    We  conducted  our audits  in  accordance with  generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In  our opinion, the financial statements  referred to above present fairly,
in all material respects, the consolidated financial position of Protective Life
Insurance Company and  subsidiaries as of  December 31, 1994  and 1993, and  the
consolidated  results of their operations  and their cash flows  for each of the
three years in the period ended December 31, 1994, in conformity with  generally
accepted  accounting  principles. In  addition,  in our  opinion,  the financial
statement schedules referred to above, when considered in relation to the  basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.

    As discussed in Note A to the Consolidated Financial Statements, the Company
changed  its method  of accounting  for certain  investments in  debt and equity
securities in 1993. Also, as discussed in Note L, the Company changed its method
of accounting for postretirement benefits other than pensions in 1992.

                                          /s/ COOPERS & LYBRAND L.L.P.

Birmingham, Alabama
February 13, 1995

                                      F-9
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY

                       CONSOLIDATED STATEMENTS OF INCOME
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31
                                                                             -------------------------------------
                                                                                1994         1993         1992
                                                                             -----------  -----------  -----------
<S>                                                                          <C>          <C>          <C>
REVENUES
  Premiums and policy fees (net of reinsurance ceded: 1994 - $172,575; 1993
   - $126,912; 1992 - $109,355)............................................  $   402,772  $   351,423  $   323,136
  Net investment income....................................................      408,933      354,165      274,991
  Realized investment gains (losses).......................................        6,298        5,054         (154)
  Other income.............................................................       11,977        4,756       10,675
                                                                             -----------  -----------  -----------
                                                                                 829,980      715,398      608,648
                                                                             -----------  -----------  -----------
BENEFITS AND EXPENSES
  Benefits and settlement expenses (net of reinsurance ceded: 1994 -
   $112,922; 1993 - $84,949; 1992 - $67,436)...............................      517,110      461,636      409,557
  Amortization of deferred policy acquisition costs........................       88,089       73,335       48,403
  Other operating expenses (net of reinsurance ceded: 1994 - $14,326; 1993
   - $10,759; 1992 - $7,468)...............................................      119,203       94,315       91,925
                                                                             -----------  -----------  -----------
                                                                                 724,402      629,286      549,885
                                                                             -----------  -----------  -----------
INCOME BEFORE INCOME TAX...................................................      105,578       86,112       58,763
INCOME TAX EXPENSE
  Current..................................................................       37,586       33,039       19,475
  Deferred.................................................................       (4,731)      (3,082)      (2,082)
                                                                             -----------  -----------  -----------
                                                                                  32,855       29,957       17,393
                                                                             -----------  -----------  -----------
INCOME BEFORE MINORITY INTEREST............................................       72,723       56,155       41,370
MINORITY INTEREST IN NET INCOME OF CONSOLIDATED SUBSIDIARIES...............                                     90
                                                                             -----------  -----------  -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE..........       72,723       56,155       41,280
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (NET OF INCOME TAX:
 $542).....................................................................                                  1,053
                                                                             -----------  -----------  -----------
NET INCOME.................................................................  $    72,723  $    56,155  $    40,227
                                                                             -----------  -----------  -----------
                                                                             -----------  -----------  -----------
</TABLE>

                See notes to consolidated financial statements.

                                      F-10
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY

                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          DECEMBER 31
                                                                                    ------------------------
                                                                                       1994          1993
                                                                                    ----------    ----------
<S>                                                                                 <C>           <C>
ASSETS
Investments:
  Fixed maturities, at market (amortized cost: 1994-$3,698,370;
   1993-$2,985,670).............................................................    $3,493,646    $3,051,292
  Equity securities, at market (cost: 1994-$45,958; 1993-$33,331)...............        45,005        40,596
  Mortgage loans on real estate.................................................     1,488,495     1,408,444
  Investment real estate, net of accumulated depreciation (1994-$695;
   1993-$3,126).................................................................        20,170        21,928
  Policy loans..................................................................       147,608       141,136
  Other long-term investments...................................................        50,751        22,760
  Short-term investments........................................................        54,683        79,772
                                                                                    ----------    ----------
    Total investments...........................................................     5,300,358     4,765,928
Cash............................................................................                      23,951
Accrued investment income.......................................................        55,630        51,330
Accounts and premiums receivable, net of allowance for uncollectible
 amounts (1994-$2,464; 1993-$5,024).............................................        28,928        20,473
Reinsurance receivables.........................................................       122,175       102,559
Deferred policy acquisition costs...............................................       434,200       299,307
Property and equipment, net.....................................................        33,185        33,046
Receivables from related parties................................................           281           382
Other assets....................................................................        11,802         7,473
Assets related to separate accounts.............................................       124,145         3,400
                                                                                    ----------    ----------
                                                                                    $6,110,704    $5,307,849
                                                                                    ----------    ----------
                                                                                    ----------    ----------
LIABILITIES
Policy liabilities and accruals:
  Future policy benefits and claims.............................................    $1,694,295    $1,380,845
  Unearned premiums.............................................................       103,479        88,785
                                                                                    ----------    ----------
                                                                                     1,797,774     1,469,630
Guaranteed investment contract deposits.........................................     2,281,673     2,015,075
Annuity deposits................................................................     1,251,318     1,005,742
Other policyholders' funds......................................................       144,461       141,975
Other liabilities...............................................................        94,181        74,375
Accrued income taxes............................................................        (4,699)        7,483
Deferred income taxes...........................................................       (14,667)       69,118
Short-term debt.................................................................        --                20
Long-term debt..................................................................        --                98
Indebtedness to related parties.................................................        39,443        48,943
Liabilities related to separate accounts........................................       124,145         3,400
                                                                                    ----------    ----------
      Total liabilities.........................................................     5,713,629     4,835,859
                                                                                    ----------    ----------
COMMITMENTS AND CONTINGENT LIABILITIES -- NOTE G
REDEEMABLE PREFERRED STOCK, $1.00 par value, at redemption value
 Shares authorized and issued: 2,000............................................         2,000         2,000
                                                                                    ----------    ----------

STOCKHOLDER'S EQUITY
Common Stock, $1.00 par value...................................................         5,000         5,000
  Shares authorized and issued: 5,000,000
Additional paid-in capital......................................................       126,494       126,494
Net unrealized gains on investments (Net of income tax: 1994-$(57,902);
 1993-$19,774)..................................................................      (107,532)       39,284
Retained earnings...............................................................       377,049       305,176
Note receivable from PLC Employee Stock Ownership Plan..........................        (5,936)       (5,964)
                                                                                    ----------    ----------
      Total stockholder's equity................................................       395,075       469,990
                                                                                    ----------    ----------
                                                                                    $6,110,704    $5,307,849
                                                                                    ----------    ----------
                                                                                    ----------    ----------
</TABLE>

                See notes to consolidated financial statements.

                                      F-11
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY

                CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                            NET                        NOTE
                                                         ADDITIONAL     UNREALIZED                  RECEIVABLE        TOTAL
                                                COMMON    PAID-IN     GAINS (LOSSES)     RETAINED    FROM PLC     STOCKHOLDER'S
                                                STOCK     CAPITAL     ON INVESTMENTS     EARNINGS      ESOP          EQUITY
                                                ------   ----------   ---------------    --------   ----------    -------------
<S>                                             <C>      <C>          <C>                <C>        <C>           <C>
Balance, December 31, 1991...................   $5,000   $   84,737   $        3,981     $211,013   $  (6,263)    $    298,468
  Net income for 1992........................                                              40,227                       40,227
  Common dividends ($.38 per share)..........                                              (1,904)                      (1,904)
  Preferred dividends ($675 per share).......                                              (1,350)                      (1,350)
  Decrease in net unrealized gains on
   investments...............................                                   (825)                                     (825)
  Sale of PLC Stock to PLC
   ESOP (728 shares).........................                    16                                                         16
  Sale of PLC Stock to PLC (39,688 shares)...                   643                                                        643
  Transfer of assets from PLC................                    98                                                         98
  Decrease in note receivable from PLC
   ESOP......................................                                                             143              143
                                                ------   ----------   ---------------    --------   ----------    -------------
Balance, December 31, 1992...................   5,000        85,494            3,156      247,986      (6,120)         335,516
  Net income for 1993........................                                              56,155                       56,155
  Preferred dividends ($750 per share).......                                              (1,500)                      (1,500)
  Transfer of Southeast Health Plan, Inc.
   common stock to PLC.......................                                               2,535                        2,535
  Increase in net unrealized gains on
   investments...............................                                 36,128                                    36,128
  Capital contribution from PLC..............                41,000                                                     41,000
  Decrease in note receivable from PLC
   ESOP......................................                                                             156              156
                                                ------   ----------   ---------------    --------   ----------    -------------
Balance, December 31, 1993...................   5,000       126,494           39,284      305,176      (5,964)         469,990
  Net income for 1994........................                                              72,723                       72,723
  Preferred dividends ($425 per share).......                                                (850)                        (850)
  Decrease in net unrealized gains on
   investments...............................                               (146,816)                                 (146,816)
  Decrease in note receivable from PLC
   ESOP......................................                                                              28               28
                                                ------   ----------   ---------------    --------   ----------    -------------
                                                $5,000   $  126,494   $     (107,532)    $377,049   $  (5,936)    $    395,075
                                                ------   ----------   ---------------    --------   ----------    -------------
                                                ------   ----------   ---------------    --------   ----------    -------------
</TABLE>

                See notes to consolidated financial statements.

                                      F-12
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                          --------------------------------------
                                                             1994          1993          1992
                                                          ----------    ----------    ----------
<S>                                                       <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income...........................................   $   72,723    $   56,155    $   40,227
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Amortization of deferred policy acquisition
     costs.............................................       88,089        73,335        48,403
    Capitalization of deferred policy acquisition
     costs.............................................     (127,566)      (92,935)      (81,160)
    Depreciation expense...............................        4,280         2,660         2,974
    Deferred income taxes..............................       (4,731)       16,987        (3,280)
    Accrued income taxes...............................      (12,182)        5,040         2,368
    Interest credited to universal life and investment
     products..........................................      260,081       220,772       173,658
    Policy fees assessed on universal life and
     investment products...............................      (85,532)      (67,314)      (46,383)
    Change in accrued investment income and other
     receivables.......................................      (32,242)      (91,864)       (2,135)
    Change in policy liabilities and other policyholder
     funds of traditional life and health products.....       61,322        47,212         4,307
    Change in other liabilities........................       18,564        11,970         6,230
    Other (net)........................................       (1,475)       10,517        (3,377)
                                                          ----------    ----------    ----------
Net cash provided by operating activities..............      241,331       192,535       141,832
                                                          ----------    ----------    ----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Maturities and principal reductions of investments:
    Investments available for sale.....................      386,498
    Other..............................................      153,945     1,319,590       881,795
  Sale of investments:
    Investment available for sale......................      630,095
    Other..............................................       59,550       244,683       338,850
  Cost of investments acquired:
    Investments available for sale.....................   (1,807,658)
    Other..............................................     (220,839)   (2,320,628)   (1,997,470)
  Acquisitions and bulk reinsurance assumptions........      106,435        14,170        23,274
  Principal payments on subordinated debenture of
   PLC.................................................                                    3,678
  Purchase of property and equipment...................       (4,889)       (3,451)       (2,679)
  Sale of property and equipment.......................          470         1,817           181
                                                          ----------    ----------    ----------
Net cash used in investing activities..................     (696,393)     (743,819)     (752,371)
                                                          ----------    ----------    ----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from borrowing under line of credit
   arrangements and long-term debt.....................      572,586       574,423       297,300
  Proceeds from borrowing from PLC.....................                                    4,700
  Proceeds from surplus note to PLC....................                     35,000        15,000
  Capital contribution from PLC........................                     41,000
  Principal payments on line of credit arrangements and
   long-term debt......................................     (572,704)     (577,767)     (297,331)
  Principal payment on surplus note to PLC.............       (9,500)      (22,500)       (4,500)
  Dividends to stockholder.............................         (850)       (1,500)       (3,254)
  Investment product deposits and change in universal
   life deposits.......................................    1,417,980     1,198,263       871,251
  Investment product withdrawals.......................     (976,401)     (683,251)     (263,530)
                                                          ----------    ----------    ----------
Net cash provided by financing activities..............      431,111       563,668       619,636
                                                          ----------    ----------    ----------
INCREASE(DECREASE) IN CASH.............................      (23,951)       12,384         9,097
CASH AT BEGINNING OF YEAR..............................       23,951        11,567         2,470
                                                          ----------    ----------    ----------
CASH AT END OF YEAR....................................   $        0    $   23,951    $   11,567
                                                          ----------    ----------    ----------
                                                          ----------    ----------    ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the year:
    Interest on notes and mortgages payable............   $    5,029    $    3,803    $      326
    Income taxes.......................................   $   49,765    $   27,432    $   17,278
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
 FINANCING ACTIVITIES
  Minority interest in consolidated subsidiary.........                 $   (1,311)   $       90
  Sale of PLC stock to PLC.............................                               $      643
  Sale of PLC stock to ESOP............................                               $       16
  Reduction of principal on note from ESOP.............   $       28    $      156    $      143
  Acquisitions and bulk reinsurance assumptions
    Assets acquired....................................   $  117,349    $  423,140    $  103,557
    Liabilities assumed................................     (166,595)     (429,580)     (130,008)
                                                          ----------    ----------    ----------
    Net................................................   $  (49,246)   $   (6,440)   $  (26,451)
                                                          ----------    ----------    ----------
                                                          ----------    ----------    ----------
</TABLE>

                See notes to consolidated financial statements.

                                      F-13
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES

    BASIS OF PRESENTATION

    The  accompanying  consolidated  financial  statements  of  Protective  Life
Insurance Company and subsidiaries ("Protective")  are prepared on the basis  of
generally accepted accounting principles. Such accounting principles differ from
statutory  reporting practices used by insurance companies in reporting to state
regulatory authorities. (See also Note B.)

    ENTITIES INCLUDED

    The  consolidated   financial  statements   include  the   accounts,   after
intercompany   eliminations,  of  Protective  Life  Insurance  Company  and  its
wholly-owned subsidiaries including  Wisconsin National  Life Insurance  Company
("Wisconsin National") and American Foundation Life Insurance Company ("American
Foundation").  Protective  is  a  wholly-owned  subsidiary  of  Protective  Life
Corporation ("PLC"), an insurance holding company.

    Additionally,   the   financial   statements   include   the   accounts   of
majority-owned subsidiaries. The ownership interest of the other stockholders of
these  subsidiaries is called a minority interest and is reported as a liability
of Protective and as an adjustment to income.

    PLC has  from time  to time  merged other  life insurance  companies it  has
acquired  (or formed) into  Protective. Acquisitions have  been accounted for as
purchases by  PLC.  The  results of  such  mergers  have been  included  in  the
accompanying financial statements as if the mergers into Protective had occurred
on the dates the merged companies were acquired (or formed) by PLC. Such mergers
into  Protective  have  been  accounted  for in  a  manner  similar  to  that in
pooling-of-interests accounting.

    RECENTLY ISSUED ACCOUNTING STANDARDS

    In 1992,  Protective adopted  Statement  of Financial  Accounting  Standards
("SFAS")  No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." SFAS No. 106  was accounted for as  a change in accounting  principle
with the cumulative effect reported as a reduction to income.

    Protective adopted SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," at December 31, 1993, which requires Protective to carry
its  investment in fixed maturities and certain other securities at market value
instead of amortized cost. As prescribed by SFAS No. 115, these investments  are
recorded  at their market values with the resulting unrealized gains and losses,
net of income tax, reported as a component of stockholder's equity reduced by  a
related  adjustment to deferred  policy acquisition costs.  The market values of
fixed maturities increase or decrease as interest rates fall or rise. Therefore,
although the adoption of SFAS No.  115 does not affect Protective's  operations,
its reported stockholder's equity will fluctuate significantly as interest rates
change.

    In  1994,  Protective  adopted  SFAS No.  119  "Disclosure  about Derivative
Financial Instruments and Fair Values of Financial Instruments," which  requires
additional  disclosures related  to derivative  financial instruments.  Also, in
1994, Protective adopted  new disclosure requirements  required by Statement  of
Position  94-4 of the Accounting Standards Division of the American Institute of
Certified Public  Accountants  concerning disclosures  related  to  Protective's
liability  for unpaid claims. The adoption  of these accounting standards had no
effect on Protective's financial statements.

    INVESTMENTS

    For purposes of adopting SFAS No.  115 Protective has classified all of  its
investments  in fixed maturities, equity  securities, and short-term investments
as "available for sale."

                                      F-14
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Investments  are  reported  on  the  following  bases  less  allowances  for
uncollectible amounts on investments, if applicable:

    - Fixed   maturities  (bonds,  bank   loan  participations,  and  redeemable
      preferred stocks) -- at current market value.

    - Equity securities  (common  and  nonredeemable  preferred  stocks)  --  at
      current market value.

    - Mortgage  loans on  real estate --  at unpaid balances,  adjusted for loan
      origination costs, net of fees, and amortization of premium or discount.

    - Investment real  estate  --  at cost,  less  allowances  for  depreciation
      computed on the straight-line method. With respect to real estate acquired
      through  foreclosure,  cost  is  the  lesser  of  the  loan  balance  plus
      foreclosure costs or appraised value.

    - Policy loans -- at unpaid balances.

    - Other long-term investments --  at a variety of  methods similar to  those
      listed above, as deemed appropriate for the specific investment.

    - Short-term  investments  --  at cost,  which  approximates  current market
      value.

    Substantially all short-term investments have maturities of three months  or
less  at the time of acquisition and  include approximately $9.7 million in bank
deposits voluntarily restricted as to withdrawal.

    Protective's balance  sheets  at  December  31, prepared  on  the  basis  of
reporting  investments at  amortized cost rather  than at market  values, are as
follows:

<TABLE>
<CAPTION>
                                                                      1994           1993
                                                                  -------------  -------------
<S>                                                               <C>            <C>
Total investments...............................................  $   5,499,511  $   4,693,041
Deferred policy acquisition costs...............................        400,480        311,757
All other assets................................................        376,146        242,614
                                                                  -------------  -------------
                                                                  $   6,276,137  $   5,247,412
                                                                  -------------  -------------
                                                                  -------------  -------------
Deferred income taxes...........................................  $      43,235  $      47,965
All other liabilities...........................................      5,728,296      4,766,741
                                                                  -------------  -------------
                                                                      5,771,531      4,814,706
Redeemable preferred stock......................................          2,000          2,000
Stockholder's equity............................................        502,606        430,706
                                                                  -------------  -------------
                                                                  $   6,276,137  $   5,247,412
                                                                  -------------  -------------
                                                                  -------------  -------------
</TABLE>

    Realized gains and  losses on  sales of  investments are  recognized in  net
income using the specific identification basis.

    DERIVATIVE FINANCIAL INSTRUMENTS

    Protective  does  not  use  derivative  financial  instruments  for  trading
purposes.

    Combinations  of  futures  contracts  and  options  on  treasury  notes  are
currently  being  used  as  hedges  for  asset/liability  management  of certain
investments, primarily mortgage  loans on real  estate, and liabilities  arising
from  interest-sensitive products  such as  guaranteed investment  contracts and

                                      F-15
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
individual annuities. Realized investment gains and losses on such contracts are
deferred and amortized over the life of the hedged asset. Net realized gains  of
$7.9 million were deferred in 1994. At December 31, 1994, open futures contracts
with  a notional amount of $137.5 million  were in a $0.4 million net unrealized
loss position.

    Protective uses interest rate swap contracts to convert certain  investments
from  a variable to a fixed rate of interest. At December 31, 1994, related open
interest rate swap contracts with a notional amount of $230.0 million were in an
$8.9 million net unrealized  loss position. At December  31, 1993, related  open
interest  rate swap contracts with a notional amount of $245.0 million were in a
$9.0 million net unrealized gain position.

    CASH

    Cash includes  all demand  deposits  reduced by  the amount  of  outstanding
checks and drafts.

    PROPERTY AND EQUIPMENT

    Property   and  equipment  are  reported   at  cost.  Protective  uses  both
accelerated and straight-line methods of  depreciation based upon the  estimated
useful  lives of the  assets. Major repairs or  improvements are capitalized and
depreciated over the  estimated useful lives  of the assets.  Other repairs  are
expensed  as incurred. The cost and related accumulated depreciation of property
and equipment sold or retired are removed from the accounts, and resulting gains
or losses are included in income.

    Property and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                                           1994       1993
                                                                         ---------  ---------
<S>                                                                      <C>        <C>
Home office building...................................................  $  35,321  $  35,284
Other, principally furniture and equipment.............................     25,687     21,576
                                                                         ---------  ---------
                                                                            61,008     56,860
Accumulated depreciation...............................................     27,823     23,814
                                                                         ---------  ---------
                                                                         $  33,185  $  33,046
                                                                         ---------  ---------
                                                                         ---------  ---------
</TABLE>

    SEPARATE ACCOUNTS

    Protective operates separate  accounts, some in  which Protective bears  the
investment  risk  and  others  in  which the  investments  risk  rests  with the
contractholder. The assets and liabilities related to separate accounts in which
Protective does not bear the investment  risk are valued at market and  reported
separately  as  assets  and  liabilities related  to  separate  accounts  in the
accompanying consolidated financial statements.

    REVENUES, BENEFITS, CLAIMS, AND EXPENSES

    - Traditional  Life  and  Health  Insurance  Products  --  Traditional  life
      insurance  products consist principally  of those products  with fixed and
      guaranteed  premiums  and  benefits  and  include  whole  life   insurance
      policies,  term  life insurance  policies, limited-payment  life insurance
      policies, and certain  annuities with life  contingencies. Life  insurance
      and  immediate annuity premiums are recognized as revenue when due. Health
      insurance premiums  are  recognized  as  revenue over  the  terms  of  the
      policies.  Benefits and  expenses are  associated with  earned premiums so
      that profits  are recognized  over  the life  of  the contracts.  This  is
      accomplished  by means of the provision  for liabilities for future policy
      benefits and the amortization of deferred policy acquisition costs.

                                      F-16
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
      Liabilities for  future  policy  benefits on  traditional  life  insurance
      products have been computed using a net level method including assumptions
      as  to investment  yields, mortality,  persistency, and  other assumptions
      based  on  Protective's  experience  modified  as  necessary  to   reflect
      anticipated   trends  and  to  include  provisions  for  possible  adverse
      deviation. Reserve investment yield assumptions are graded and range  from
      2.5%  to  7.0%. The  liability for  future policy  benefits and  claims on
      traditional life and health  insurance products includes estimated  unpaid
      claims  that have been reported to  Protective and claims incurred but not
      yet reported. Policy claims are charged to expense in the period that  the
      claims are incurred.

    Activity in the liability for unpaid claims is summarized as follows:

<TABLE>
<CAPTION>
                                                            1994         1993         1992
                                                         -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>
Balance beginning of year..............................  $    77,191  $    68,203  $    49,851
  Less reinsurance.....................................        3,973        3,809        3,685
                                                         -----------  -----------  -----------
Net balance beginning of year..........................       73,218       64,394       46,166
                                                         -----------  -----------  -----------
Incurred related to:
Current year...........................................      203,453      194,394      178,604
Prior year.............................................       (6,683)      (5,123)       5,753
                                                         -----------  -----------  -----------
    Total incurred.....................................      196,770      189,271      184,357
                                                         -----------  -----------  -----------
Paid related to:
Current year...........................................      148,548      141,361      127,859
Prior year.............................................       47,002       39,086       38,270
                                                         -----------  -----------  -----------
    Total paid.........................................      195,550      180,447      166,129
                                                         -----------  -----------  -----------
Net balance end of year................................       74,438       73,218       64,394
  Plus reinsurance.....................................        5,024        3,973        3,809
                                                         -----------  -----------  -----------
Balance end of year....................................  $    79,462  $    77,191  $    68,203
                                                         -----------  -----------  -----------
                                                         -----------  -----------  -----------
</TABLE>

    - Universal  Life and Investment  Products -- Universal  life and investment
      products  include   universal   life  insurance,   guaranteed   investment
      contracts,  deferred annuities, and  annuities without life contingencies.
      Revenues for universal life and investment products consist of policy fees
      that have been assessed against policy  account balances for the costs  of
      insurance,  policy administration, and surrenders. That is, universal life
      and investment product deposits are not considered revenues in  accordance
      with  generally  accepted  accounting  principles.  Benefit  reserves  for
      universal life and investment  products represent policy account  balances
      before   applicable  surrender   charges  plus   certain  deferred  policy
      initiation fees  that  are recognized  in  income  over the  term  of  the
      policies.  Policy benefits and claims that  are charged to expense include
      benefit claims incurred in the period in excess of related policy  account
      balances and interest credited to policy account balances. Interest credit
      rates  for universal life and investment products ranged from 3.0% to 9.4%
      in 1994.

      At  December  31,  1994,  Protective  estimates  the  fair  value  of  its
      guaranteed investment contracts to be $2,200 million using discounted cash
      flows.  The surrender  value of Protective's  annuities which approximates
      fair value was $1,221 million.

    - Policy Acquisition  Costs  -- Commissions  and  other costs  of  acquiring
      traditional  life  and  health insurance,  universal  life  insurance, and
      investment products  that  vary with  and  are primarily  related  to  the
      production of new business have been deferred. Traditional life and health

                                      F-17
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
     insurance  acquisition costs are amortized  over the premium-payment period
      of the  related policies  in proportion  to the  ratio of  annual  premium
      income   to  total  anticipated  premium  income.  Acquisition  costs  for
      universal life and investment products are being amortized over the  lives
      of  the  policies in  relation  to the  present  value of  estimated gross
      profits from  surrender charges  and  investment, mortality,  and  expense
      margins.  Additionally, relating  to SFAS No.  115, these  costs have been
      adjusted by  an amount  equal to  the amortization  that would  have  been
      recorded  if  unrealized gains  or losses  on investments  associated with
      Protective's universal life and investment products had been realized.

      At the time it adopted SFAS No. 97, "Accounting and Reporting by Insurance
      Enterprises for Certain Long-Duration Contracts and for Realized Gains and
      Losses from the Sale of Investments," Protective made certain  assumptions
      regarding  the  mortality, persistency,  expenses,  and interest  rates it
      expected to  experience  in  future  periods. Under  SFAS  No.  97,  these
      assumptions  are to be  best estimates and are  to be periodically updated
      whenever actual experience and/or expectations for the future change  from
      initial  assumptions. Accordingly,  Protective has  substituted its actual
      experience to date for that previously assumed.

      The cost to acquire blocks of insurance representing the present value  of
      future  profits from such blocks of insurance is also included in deferred
      policy acquisition costs, discounted at interest rates averaging 15%.  For
      acquisitions  occurring after 1988, Protective amortizes the present value
      of future  profits  over  the premium  payment  period  including  accrued
      interest  at 8%. The unamortized present  value of future profits for such
      acquisitions was approximately $84.4 million and $39.4 million at December
      31, 1994  and 1993,  respectively. During  1994 $56.0  million of  present
      value  of  future  profits  on  acquisitions  made  during  the  year  was
      capitalized, and  $11.0 million  was  amortized. The  unamortized  present
      value  of  future  profits  for all  acquisitions  was  $110.3  million at
      December 31, 1994 and $69.9 million at December 31, 1993.

    PARTICIPATING POLICIES

    Participating business  comprises approximately  4% of  the individual  life
insurance  in  force and  4% of  the individual  life insurance  premium income.
Policyholder dividends totaled $2.6 million in 1994, 1993, and 1992.

    INCOME TAXES

    Protective uses  the asset  and liability  method of  accounting for  income
taxes.  Income  tax  provisions  are  generally  based  on  income  reported for
financial statement  purposes.  Deferred federal  income  taxes arise  from  the
recognition  of temporary  differences between  income determined  for financial
reporting purposes  and  income tax  purposes.  Such temporary  differences  are
principally  related  to  the  deferral  of  policy  acquisition  costs  and the
provision for future policy benefits and expenses.

    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
net income, total assets, or stockholder's equity.

NOTE B -- RECONCILIATION WITH STATUTORY REPORTING PRACTICES
    Financial  statements  prepared  in   conformity  with  generally   accepted
accounting  principals  ("GAAP")  differ  in some  respects  from  the statutory
accounting practices prescribed or permitted by

                                      F-18
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE B -- RECONCILIATION WITH STATUTORY REPORTING PRACTICES (CONTINUED)
insurance regulatory  authorities. The  most  significant differences  are:  (a)
acquisition  costs of obtaining new business are deferred and amortized over the
approximate life of the policies rather than charged to operations as  incurred,
(b)  benefit liabilities are computed using a  net level method and are based on
realistic estimates of expected mortality, interest, and withdrawals as adjusted
to provide  for  possible  unfavorable  deviation  from  such  assumptions,  (c)
deferred  income taxes are provided  for temporary differences between financial
and taxable earnings, (d) the  Asset Valuation Reserve and Interest  Maintenance
Reserve  are  restored to  stockholder's  equity, (e)  furniture  and equipment,
agents' debit balances, and prepaid expenses are reported as assets rather  than
being  charged  directly  to surplus  (referred  to as  nonadmitted  items), (f)
certain items  of interest  income,  principally accrual  of mortgage  and  bond
discounts  are amortized differently, and (g) bonds are stated at market instead
of amortized cost.

                                      F-19
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE B -- RECONCILIATION WITH STATUTORY REPORTING PRACTICES (CONTINUED)
    The reconciliations  of  net income  and  stockholder's equity  prepared  in
conformity   with  statutory  reporting  practices   to  that  reported  in  the
accompanying consolidated financial statements are as follows:

<TABLE>
<CAPTION>
                                                       NET INCOME                    STOCKHOLDER'S EQUITY
                                             -------------------------------  -----------------------------------
                                               1994       1993       1992        1994         1993        1992
                                             ---------  ---------  ---------  -----------  ----------  ----------
<S>                                          <C>        <C>        <C>        <C>          <C>         <C>
In conformity with statutory reporting
 practices:
  Protective Life Insurance Company........  $  54,812  $  41,471  $  25,138  $   304,858  $  263,075  $  206,476
  Wisconsin National Life Insurance
   Company.................................     10,132      9,591                  57,268      50,885
  American Foundation Life Insurance
   Company.................................      3,072      1,415      2,155       20,327      18,290      18,394
  Capital Investors Life Insurance
   Company.................................        170        207                   1,125         824
  Empire General Life Assurance
   Corporation.............................        690        408       (201)      21,270      10,588       5,178
  National Deposit Life Insurance
   Company1................................                            5,386
  Protective Life Insurance Acquisition
   Corporation2............................                               22
  Protective Life Insurance Corporation of
   Alabama.................................         69         16                   2,133       2,064
  Consolidation elimination................                    30        (74)    (100,123)    (80,651)    (21,572)
                                             ---------  ---------  ---------  -----------  ----------  ----------
                                                68,945     53,138     32,426      306,858     265,075     208,476
Additions (deductions) by adjustment:
  Deferred policy acquisition costs, net of
   amortization............................     41,718     25,686     33,476      434,200     299,307     274,923
  Policy liabilities and accruals..........    (34,632)   (15,586)   (26,486)    (140,298)    (69,844)    (45,583)
  Deferred income tax......................      4,731      3,081      2,082       14,667     (69,118)    (51,842)
  Asset Valuation Reserve..................                                        24,925      43,398      25,341
  Interest Maintenance Reserve.............     (1,716)    (1,432)       (93)       3,583      10,489       1,634
  Nonadmitted items........................                                        21,445       7,742     (10,178)
  Timing differences on mortgage loans on
   real estate and fixed maturity
   investments.............................       (961)     1,645      1,296        6,877       7,350     (11,608)
  Net unrealized gains and losses on
   investments, net of income tax..........                                      (107,532)     39,284       3,156
  Realized investment losses...............     (6,664)    (7,860)    (2,565)
  Noninsurance affiliates..................                   (12)       934                       31      (2,535)
  Consolidation elimination................     (4,415)    (2,107)    (5,310)    (162,835)    (65,620)    (53,450)
  Minority interest in consolidated
   subsidiaries............................                              (90)                              (1,311)
  Other adjustments, net...................      5,717       (398)     4,557       (4,815)      1,896      (1,507)
                                             ---------  ---------  ---------  -----------  ----------  ----------
  In conformity with generally accepted
   accounting principles...................  $  72,723  $  56,155  $  40,227  $   397,075  $  469,990  $  335,516
                                             ---------  ---------  ---------  -----------  ----------  ----------
                                             ---------  ---------  ---------  -----------  ----------  ----------
<FN>
- --------------------------
(1)  Merged into Protective in September 1992.

(2)  Formed to facilitate  Protective's acquisition of  Employers National  Life
     Insurance Company. See Note F.
</TABLE>

                                      F-20
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE C -- INVESTMENT OPERATIONS
    Major  categories of net  investment income for the  years ended December 31
are summarized as follows:

<TABLE>
<CAPTION>
                                                            1994         1993         1992
                                                         -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>
Fixed maturities.......................................  $   237,264  $   211,566  $   174,051
Equity securities......................................        2,435        1,519          939
Mortgage loans on real estate..........................      141,751      130,262      108,128
Investment real estate.................................        1,950        2,119        1,848
Policy loans...........................................        8,397        7,558        6,781
Other, principally short-term investments..............       35,062       18,779        3,799
                                                         -----------  -----------  -----------
                                                             426,859      371,803      295,546
Investment expenses....................................       17,926       17,638       20,555
                                                         -----------  -----------  -----------
                                                         $   408,933  $   354,165  $   274,991
                                                         -----------  -----------  -----------
                                                         -----------  -----------  -----------
</TABLE>

    Realized investment  gains (losses)  for  the years  ended December  31  are
summarized as follows:

<TABLE>
<CAPTION>
                                                              1994        1993       1992
                                                            ---------  ----------  ---------
<S>                                                         <C>        <C>         <C>
Fixed maturities..........................................  $  (8,646) $   10,508  $   8,163
Equity securities.........................................      7,735       2,230      3,688
Mortgage loans and other investments......................      7,209      (7,684)   (12,005)
                                                            ---------  ----------  ---------
                                                            $   6,298  $    5,054  $    (154)
                                                            ---------  ----------  ---------
                                                            ---------  ----------  ---------
</TABLE>

    Protective  has  established  an  allowance  for  uncollectible  amounts  on
investments. The allowance totaled $35.2 million at December 31, 1994 and  1993.
Additions  to the allowance are included  in realized investment losses. Without
such additions, Protective had realized investment gains of $6.3 million,  $13.8
million, and $9.5 million in 1994, 1993, and 1992, respectively.

    In  1994, gross gains on  the sale of investments  available for sale (fixed
maturities, equity securities and short-term investments) were $15.2 million and
gross losses were  $16.4 million.  In 1993, gross  gains were  $8.3 million  and
gross  losses were less than  $0.4 million. In 1992, gross  gains on the sale of
fixed maturities were $12.8 million and gross losses were $1.7 million.

                                      F-21
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE C -- INVESTMENT OPERATIONS (CONTINUED)
    The amortized cost and estimated  market values of Protective's  investments
classified as available for sale at December 31 are as follows:

<TABLE>
<CAPTION>
                                                          GROSS        GROSS
                                          AMORTIZED     UNREALIZED   UNREALIZED    ESTIMATED
1994                                        COST          GAINS        LOSSES    MARKET VALUES
- --------------------------------------  -------------   ----------   ----------  -------------
<S>                                     <C>             <C>          <C>         <C>
Fixed maturities:
  Bonds:
    Mortgage-backed securities........  $   2,002,842   $   7,538    $  112,059  $   1,898,321
    United States Government and
     authorities......................         90,468         290         8,877         81,881
    States, municipalities, and
     political subdivisions...........         10,902           5         1,230          9,677
    Public utilities..................        414,011       1,091        36,982        378,120
    Convertibles and bonds with
     warrants.........................            687           0           302            385
    All other corporate bonds.........        927,779       3,437        56,788        874,428
  Bank loan participations............        244,881           0             0        244,881
  Redeemable preferred stocks.........          6,800          37           884          5,953
                                        -------------   ----------   ----------  -------------
                                            3,698,370      12,398       217,122      3,493,646
Equity securities.....................         45,958       3,994         4,947         45,005
Short-term investments................         54,683           0             0         54,683
                                        -------------   ----------   ----------  -------------
                                        $   3,799,011   $  16,392    $  222,069  $   3,593,334
                                        -------------   ----------   ----------  -------------
                                        -------------   ----------   ----------  -------------
</TABLE>

<TABLE>
<CAPTION>
                                                           GROSS        GROSS
                                           AMORTIZED    UNREALIZED   UNREALIZED     ESTIMATED
1993                                         COST          GAINS       LOSSES     MARKET VALUES
- ---------------------------------------  -------------  -----------  -----------  -------------
<S>                                      <C>            <C>          <C>          <C>
Fixed maturities:
  Bonds:
    Mortgage-backed securities.........  $   1,531,012   $  31,532    $     957   $   1,561,587
    United States Government and
     authorities.......................         89,372       2,818            0          92,190
    States, municipalities, and
     political subdivisions............         15,024         133            2          15,155
    Public utilities...................        339,613       4,262          252         343,623
    Convertibles and bonds with
     warrants..........................          1,421           0          167           1,254
    All other corporate bonds..........        822,505      28,799          688         850,616
  Bank loan participations.............        151,278           0            0         151,278
  Redeemable preferred stocks..........         35,445         226           82          35,589
                                         -------------  -----------  -----------  -------------
                                             2,985,670      67,770        2,148       3,051,292
Equity securities......................         33,331       8,560        1,295          40,596
Short-term investments.................         79,772           0            0          79,772
                                         -------------  -----------  -----------  -------------
                                         $   3,098,773   $  76,330    $   3,443   $   3,171,660
                                         -------------  -----------  -----------  -------------
                                         -------------  -----------  -----------  -------------
</TABLE>

                                      F-22
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE C -- INVESTMENT OPERATIONS (CONTINUED)
    The  amortized  cost  and estimated  market  values of  fixed  maturities at
December 31,  by expected  maturity, are  shown below.  Expected maturities  are
derived  from  rates  of  prepayment  that  may  differ  from  actual  rates  of
prepayment.

<TABLE>
<CAPTION>
                                                                         AMORTIZED      ESTIMATED
                                                                           COST       MARKET VALUES
                                                                       -------------  -------------

<S>                                                                    <C>            <C>
1994
- ---------------------------------------------------------------------
  Due in one year or less............................................  $     577,146  $     540,223
  Due after one year through five years..............................      1,351,435      1,299,248
  Due after five years through ten years.............................        994,994        929,764
  Due after ten years................................................        774,795        724,411
                                                                       -------------  -------------
                                                                       $   3,698,370  $   3,493,646
                                                                       -------------  -------------
                                                                       -------------  -------------
1993
- ---------------------------------------------------------------------
  Due in one year or less............................................  $     517,179  $     524,100
  Due after one year through five years..............................      1,118,089      1,142,613
  Due after five years through ten years.............................        777,058        797,093
  Due after ten years................................................        573,344        587,486
                                                                       -------------  -------------
                                                                       $   2,985,670  $   3,051,292
                                                                       -------------  -------------
                                                                       -------------  -------------
</TABLE>

    The approximate  percentage  distribution  of  Protective's  fixed  maturity
investments by quality rating at December 31 is as follows:

<TABLE>
<CAPTION>
RATING                                                            1994       1993
- ------------------------------------------------------------     ------     ------
<S>                                                              <C>        <C>
AAA.........................................................       57.6%      52.5%
AA..........................................................        5.5        7.8
A...........................................................       12.5       15.1
BBB
  Bonds.....................................................       14.9       16.2
  Bank loan participations..................................        1.4        1.0
BB or Less
  Bonds.....................................................        2.3        2.2
  Bank loan participations..................................        5.6        4.0
Redeemable preferred stocks.................................        0.2        1.2
                                                                 ------     ------
                                                                  100.0%     100.0%
                                                                 ------     ------
                                                                 ------     ------
</TABLE>

    At  December 31, 1994 and  1993, Protective had bonds  which were rated less
than investment grade of $82.5  million and $67.3 million, respectively,  having
an   amortized  cost   of  $89.4   million  and   $66.7  million,  respectively.
Additionally, Protective had bank loan participations which were rated less than
investment grade of $195.1 million  and $121.7 million, respectively, having  an
amortized cost of $195.1 million and $121.7 million, respectively.

                                      F-23
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE C -- INVESTMENT OPERATIONS (CONTINUED)
    The  change  in  unrealized gains  (losses),  net  of income  tax,  on fixed
maturity and equity securities for the years ended December 31 is summarized  as
follows:

<TABLE>
<CAPTION>
                                                                   1994        1993       1992
                                                               ------------  ---------  ---------
<S>                                                            <C>           <C>        <C>
Fixed maturities.............................................  $   (175,723) $   1,198  $      76
Equity securities............................................  $     (5,342) $   1,565  $    (825)
</TABLE>

    At  December 31,  1994, all of  Protective's mortgage  loans were commercial
loans of  which  79%  were  retail,  8% were  warehouses,  and  7%  were  office
buildings.   Protective  specializes   in  making   mortgage  loans   on  either
credit-oriented or  credit-anchored commercial  properties,  most of  which  are
strip  shopping centers in  smaller towns and cities.  No single tenant's leased
space represents  more than  5%  of mortgage  loans.  Approximately 84%  of  the
mortgage  loans  are on  properties located  in the  following states  listed in
decreasing order  of significance:  Alabama, South  Carolina, Tennessee,  Texas,
Georgia,  North Carolina, Florida,  Mississippi, Virginia, California, Colorado,
Louisiana, Illinois, Ohio, Kentucky, and Indiana.

    Many of the mortgage loans have  call provisions after five to seven  years.
Assuming  the loans  are called at  their next call  dates, approximately $107.9
million would become due  in 1995, $478.0  million in 1996  to 1999, and  $233.9
million in 2000 to 2004.

    At  December 31, 1994, the  average mortgage loan was  $1.5 million, and the
weighted average interest rate  was 9.6%. The largest  single mortgage loan  was
$11.9  million.  While Protective's  mortgage loans  do  not have  quoted market
values, at December 31, 1994 and 1993, Protective estimates the market value  of
its  mortgage loans to  be $1,535.3 million  and $1,524.2 million, respectively,
using discounted cash flows from the next call date.

    At December  31, 1994  and  1993, Protective's  problem mortgage  loans  and
foreclosed  properties totaled  $24.0 million  and $27.1  million, respectively.
Protective expects no significant loss of principal.

    Certain investments, principally real estate, with a carrying value of  $6.7
million were nonincome producing for the twelve months ended December 31, 1994.

    Mortgage  loans to Fletcher Bright and Edens & Avant, totaling $99.4 million
and $65.6 million, respectively, exceeded ten percent of stockholder's equity at
December 31, 1994.

    Mortgage-backed securities  consist  primarily  of  sequential  and  planned
amortization  class  (PAC)  securities.  Mortgage-backed  securities  issued  by
Independent National Mortgage  Corporation totaling $54.9  million exceeded  ten
percent of stockholder's equity at December 31, 1994.

    Protective believes it is not practicable to determine the fair value of its
policy  loans since  there is  no stated  maturity, and  policy loans  are often
repaid by reductions to  policy benefits. Policy  loan interest rates  generally
range  from  4.5%  to 8.0%.  The  fair  values of  Protective's  other long-term
investments approximate cost.

                                      F-24
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE D -- FEDERAL INCOME TAXES
    Protective's effective  income  tax rate  varied  from the  maximum  federal
income tax rate as follows:

<TABLE>
<CAPTION>
                                                                  1994       1993       1992
                                                                 ------     ------     ------
<S>                                                              <C>        <C>        <C>
Statutory federal income tax rate applied to pretax
 income.....................................................       35.0%      35.0%      34.0%
Amortization of nondeductible goodwill......................                              0.4
Dividends received deduction and tax-exempt interest........       (0.4)      (0.5)      (1.0)
Low-income housing credit...................................       (0.7)
Tax benefits arising from prior acquisitions and other
 adjustments................................................       (2.8)      (1.1)      (3.8)
                                                                 ------     ------     ------
Effective income tax rate...................................       31.1%      33.4%      29.6%
                                                                 ------     ------     ------
                                                                 ------     ------     ------
</TABLE>

    In  August 1993, the corporate income tax rate was increased from 34% to 35%
which resulted in a one-time increase to income tax expense of $1.2 million  due
to  a recalculation of Protective's deferred income tax liability. The effective
income tax rate for 1993 of 33.4% excludes the one-time increase.

    The provision for federal income tax differs from amounts currently  payable
due  to certain items reported for financial statement purposes in periods which
differ from those in which they are reported for income tax purposes.

    Details of the deferred income tax provision for the years ended December 31
are as follows:

<TABLE>
<CAPTION>
                                                               1994        1993       1992
                                                            ----------  ----------  ---------
<S>                                                         <C>         <C>         <C>
Deferred policy acquisition costs.........................  $   34,561  $    8,861  $   7,351
Benefit and other policy liability changes................     (52,288)    (10,416)    (9,005)
Temporary differences of investment income................      15,524                    336
Other items...............................................      (2,528)     (1,527)      (764)
                                                            ----------  ----------  ---------
                                                            $   (4,731) $   (3,082) $  (2,082)
                                                            ----------  ----------  ---------
                                                            ----------  ----------  ---------
</TABLE>

    The components  of Protective's  net  deferred income  tax liability  as  of
December 31 were as follows:

<TABLE>
<CAPTION>
                                                                          1994        1993
                                                                       -----------  ---------
<S>                                                                    <C>          <C>
Deferred income tax assets:
  Policy and policyholder liability reserves.........................  $   116,326  $  25,123
  Unrealized loss on investments.....................................       23,485
  Other..............................................................                   4,484
                                                                       -----------  ---------
                                                                           139,811     29,607
                                                                       -----------  ---------
Deferred income tax liabilities:
  Deferred policy acquisition costs..................................      113,760     79,199
  Unrealized gain on investments.....................................                  19,526
  Other..............................................................       11,384
                                                                       -----------  ---------
                                                                           125,144     98,725
                                                                       -----------  ---------
  Net deferred income tax liability..................................  $   (14,667) $  69,118
                                                                       -----------  ---------
                                                                       -----------  ---------
</TABLE>

                                      F-25
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE D -- FEDERAL INCOME TAXES (CONTINUED)
    Under  pre-1984  life  insurance  company  income  tax  laws,  a  portion of
Protective's gain  from  operations which  was  not subject  to  current  income
taxation  was  accumulated  for  income tax  purposes  in  a  memorandum account
designated as Policyholders' Surplus. The aggregate accumulation in this account
at December 31, 1994 was approximately $50.7 million. Should the accumulation in
the Policyholders' Surplus  account exceed  certain stated  maximums, or  should
distributions including cash dividends be made to PLC in excess of approximately
$248 million, such excess would be subject to federal income taxes at rates then
effective. Deferred income taxes have not been provided on amounts designated as
Policyholders'  Surplus.  Protective  does not  anticipate  involuntarily paying
income tax on amounts in the Policyholders' Surplus accounts.

    At December  31, 1994  Protective has  no material  unused income  tax  loss
carryforwards.

    Protective's  income tax returns are included in the consolidated income tax
returns of PLC.  The allocation of  income tax liabilities  among affiliates  is
based upon separate income tax return calculations.

NOTE E -- DEBT
    Short-term and long-term debt at December 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                            1994       1993
                                                                                          ---------  ---------
<S>                                                                                       <C>        <C>
Short-term debt:
  Current portion of mortgage and other notes payable...................................       None  $      20
                                                                                          ---------        ---
                                                                                          ---------        ---
Long-term debt:
  Mortgage and other notes payable less current portion.................................       None  $      98
                                                                                          ---------        ---
                                                                                          ---------        ---
</TABLE>

    At  December 31,  1994, PLC  had borrowed under  a term  note that contains,
among other provisions, requirements  for maintaining certain financial  ratios,
and  restrictions  on  indebtedness  incurred  by  PLC's  subsidiaries including
Protective. Additionally, PLC,  on a  consolidated basis, cannot  incur debt  in
excess of 50% of its total capital.

    Included  in indebtedness  to related  parties are  three surplus debentures
issued by Protective  to PLC. At  December 31,  1994, the balance  of the  three
surplus debentures combined was $39.4 million.

    Interest  expense totaled $5.0  million, $5.0 million,  and $3.3 million, in
1994, 1993, and 1992, respectively.

NOTE F -- ACQUISITIONS
    In July 1993, Protective acquired Wisconsin National Life Insurance  Company
("Wisconsin  National"). Also in 1993, Protective acquired through reinsurance a
block of universal life policies.

    In April 1994, Protective  acquired through reinsurance  a block of  payroll
deduction  policies. In October 1994,  Protective acquired through reinsurance a
block of individual life insurance policies.

    These transactions have been accounted for as purchases, and the results  of
the  transactions have  been included  in the  accompanying financial statements
since the effective dates of the agreements.

    Summarized below are  the consolidated  results of operations  for 1993  and
1992,  on an unaudited pro forma basis, as if the Wisconsin National acquisition
had occurred  as of  January 1,  1992. The  pro forma  information is  based  on
Protective's  consolidated results of  operations for 1993 and  1992 and on data
provided by  Wisconsin  National,  after  giving effect  to  certain  pro  forma
adjustments. The pro

                                      F-26
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE F -- ACQUISITIONS (CONTINUED)
forma  financial information  does not  purport to  be indicative  of results of
operations that would have  occurred had the transaction  occurred on the  basis
assumed above nor are they indicative of results of the future operations of the
combined enterprises.

<TABLE>
<CAPTION>
                                                                                   1993         1992
                                                                                -----------  -----------
                                                                                      (UNAUDITED)
<S>                                                                             <C>          <C>
Total revenues................................................................  $   747,157  $   676,572
Net income....................................................................  $    58,033  $    44,109
</TABLE>

NOTE G -- 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.  Protective  does  not  believe such
assessments will be materially  different from amounts  already provided for  in
the  financial  statements. Most  of  these laws  do  provide, however,  that an
assessment may be  excused or  deferred if it  would threaten  an insurer's  own
financial strength.

    A  number of civil jury verdicts have  been returned against life and health
insurers in the jurisdictions  in which Protective  does business involving  the
insurers'  sales  practices,  alleged  agent  misconduct,  failure  to  properly
supervise agents, and other matters. Some  of the lawsuits have resulted in  the
award  of substantial judgments against  the insurer, including material amounts
of punitive  damages. In  some  states, juries  have substantial  discretion  in
awarding   punitive  damages   in  these   circumstances.  Protective   and  its
subsidiaries, like  other  life and  health  insurers,  from time  to  time  are
involved  in such litigation. To date, no such lawsuit has resulted in the award
of any significant amount  of damages against  Protective. Among the  litigation
currently pending is a class action filed in the state of Alabama concerning the
sale  of credit  insurance for  which a  proposed settlement  agreement has been
filed with  the supervising  court for  approval. Although  the outcome  of  any
litigation  cannot be  predicted with  certainty, Protective  believes that such
litigation will not have a material adverse effect on the financial position  of
Protective.

NOTE H -- STOCKHOLDER'S EQUITY AND RESTRICTIONS
    At   December  31,   1994,  approximately   $321  million   of  consolidated
stockholder's equity excluding net unrealized  gains and losses represented  net
assets of Protective that cannot be transferred in the form of dividends, loans,
or  advances  to PLC.  Generally,  the net  assets  of Protective  available for
transfer to PLC  are limited  to the amounts  that Protective's  net assets,  as
determined  in accordance  with statutory  accounting practices,  exceed certain
minimum amounts. However, payments of such  amounts as dividends may be  subject
to approval by regulatory authorities.

NOTE I -- REDEEMABLE PREFERRED STOCK
    PLC  owns all of  the 2,000 shares  of redeemable preferred  stock issued by
Protective's subsidiary, American Foundation. The  entire issue was reissued  in
1991  and will be redeemed  September 30, 1996 for $1  thousand per share, or $2
million. The  stock  pays,  when  and if  declared,  annual  minimum  cumulative
dividends  of $50  per share, and  noncumulative participating  dividends to the
extent American Foundation's  statutory earnings for  the immediately  preceding
fiscal year exceed $1 million. Dividends of $0.9 million, $1.5 million, and $1.4
million were paid to PLC in 1994, 1993, and 1992, respectively.

NOTE J -- RELATED PARTY MATTERS
    Receivables  from related  parties consisted of  receivables from affiliates
under control of PLC in the amounts of $0.3 million and $0.4 million at December
31, 1994 and 1993, respectively. Protective

                                      F-27
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE J -- RELATED PARTY MATTERS (CONTINUED)
routinely receives  from  or  pays  to  affiliates  under  the  control  of  PLC
reimbursements  for expenses incurred  on one another's  behalf. Receivables and
payables among affiliates are generally settled monthly.

    On August 6, 1990,  PLC announced that its  Board of Directors approved  the
formation  of an  Employee Stock Ownership  Plan ("ESOP"). On  December 1, 1990,
Protective transferred to the ESOP 520,000 shares of PLC's common stock held  by
it  in exchange for a note. The outstanding balance of the note, $5.9 million at
December 31, 1994, is accounted for as a reduction to stockholder's equity.  The
stock  will be  used to  match employee  contributions to  PLC's existing 401(k)
Plan. The ESOP shares are dividend paying.  Dividends on the shares are used  to
pay the ESOP's note to Protective.

    Protective  leases furnished office space and computers to affiliates. Lease
revenues were $2.8 million in  1994, $2.8 million in  1993, and $2.6 million  in
1992.  Protective purchases  data processing,  legal, investment  and management
services from affiliates. The costs of  such services were $29.8 million,  $20.4
million,  and $27.5 million  in 1994, 1993,  and 1992, respectively. Commissions
paid to affiliated marketing organizations  of $10.1 million, $5.8 million,  and
$4.8  million in 1994,  1993, and 1992, respectively,  were included in deferred
policy acquisition costs.

    Certain  corporations  with  which  PLC's  directors  were  affiliated  paid
Protective  premiums and policy fees for  various types of group insurance. Such
premiums and policy  fees amounted to  $21.1 million, $10.3  million, and  $10.9
million in 1994, 1993, and 1992, respectively.

    For a discussion of indebtedness to related parties, see Note E.

NOTE K -- BUSINESS SEGMENTS
    Protective  operates  predominantly  in  the life  and  accident  and health
insurance industry. The following table sets forth total revenues, income before
income tax,  and  identifiable assets  of  Protective's business  segments.  The
primary  components of  revenues are  premiums and  policy fees,  net investment
income, and realized investment gains and  losses. Premiums and policy fees  are
attributed directly to each business segment. Net investment income is allocated
based  on  directly  related assets  required  for transacting  that  segment of
business.

    Realized investment  gains  (losses)  and  expenses  are  allocated  to  the
segments  in a manner  which most 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.

                                      F-28
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE K -- BUSINESS SEGMENTS (CONTINUED)
    There are no significant intersegment transactions.

<TABLE>
<CAPTION>
                                                                 1994           1993           1992
                                                             -------------  -------------  -------------
<S>                                                          <C>            <C>            <C>
TOTAL REVENUES
Acquisitions...............................................  $     170,659  $     123,855  $      93,634
Financial Institutions.....................................        107,194         96,443         63,041
Group......................................................        148,313        143,423        129,778
Guaranteed Investment Contracts............................        183,591        167,233        138,617
Individual Life............................................        122,248        111,497         90,516
Investment Products........................................         79,773         69,550         47,678
Corporate and Other........................................         12,936          1,521         46,973
Unallocated Realized Investment Gains (Losses).............          5,266          1,876         (1,589)
                                                             -------------  -------------  -------------
                                                             $     829,980  $     715,398  $     608,648
                                                             -------------  -------------  -------------
                                                             -------------  -------------  -------------
Acquisitions...............................................           20.6%          17.3%          15.4%
Financial Institutions.....................................           12.9           13.5           10.4
Group......................................................           17.9           20.0           21.3
Guaranteed Investment Contracts............................           22.1           23.4           22.8
Individual Life............................................           14.7           15.6           14.9
Investment Products........................................            9.6            9.7            7.8
Corporate and Other........................................            1.6            0.2            7.7
Unallocated Realized Investment Gains (Losses).............            0.6            0.3           (0.3)
                                                             -------------  -------------  -------------
                                                                     100.0%         100.0%         100.0%
                                                             -------------  -------------  -------------
                                                             -------------  -------------  -------------
INCOME BEFORE INCOME TAX
Acquisitions...............................................  $      39,176  $      29,845  $      20,031
Financial Institutions.....................................          8,176          7,220          4,669
Group......................................................         11,169         10,435          7,762
Guaranteed Investment Contracts............................         33,197         27,218         18,266
Individual Life............................................         17,223         20,324         12,976
Investment Products........................................            107          3,402          4,191
Corporate and Other*.......................................         (8,736)       (14,208)        (7,543)
Unallocated Realized Investment Gains (Losses).............          5,266          1,876         (1,589)
                                                             -------------  -------------  -------------
                                                             $     105,578  $      86,112  $      58,763
                                                             -------------  -------------  -------------
                                                             -------------  -------------  -------------
Acquisitions...............................................           37.1%          34.6%          34.1%
Financial Institutions.....................................            7.7            8.4            7.9
Group......................................................           10.6           12.1           13.2
Guaranteed Investment Contracts............................           31.5           31.6           31.1
Individual Life............................................           16.3           23.6           22.1
Investment Products........................................            0.1            4.0            7.1
Corporate and Other........................................           (8.3)         (16.5)         (12.8)
Unallocated Realized Investment Gains (Losses).............            5.0            2.2           (2.7)
                                                             -------------  -------------  -------------
                                                                     100.0%         100.0%         100.0%
                                                             -------------  -------------  -------------
                                                             -------------  -------------  -------------
</TABLE>

                                      F-29
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE K -- BUSINESS SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
                                                                 1994           1993           1992
                                                             -------------  -------------  -------------
<S>                                                          <C>            <C>            <C>
IDENTIFIABLE ASSETS
Acquisitions...............................................  $   1,282,478  $   1,145,357  $     599,022
Financial Institutions.....................................        211,652        189,943        145,014
Group......................................................        215,904        208,790        161,445
Guaranteed Investment Contracts............................      2,211,079      2,041,463      1,696,786
Individual Life............................................        752,168        641,992        507,449
Investment Products........................................      1,160,041        876,691        683,450
Corporate and Other........................................        277,382        203,613        206,991
                                                             -------------  -------------  -------------
                                                             $   6,110,704  $   5,307,849  $   4,000,157
                                                             -------------  -------------  -------------
                                                             -------------  -------------  -------------
Acquisitions...............................................           21.0%          21.6%          15.0%
Financial Institutions.....................................            3.5            3.6            3.6
Group......................................................            3.5            3.9            4.0
Guaranteed Investment Contracts............................           36.2           38.5           42.4
Individual Life............................................           12.3           12.1           12.7
Investment Products........................................           19.0           16.5           17.1
Corporate and Other........................................            4.5            3.8            5.2
                                                             -------------  -------------  -------------
                                                                     100.0%         100.0%         100.0%
                                                             -------------  -------------  -------------
                                                             -------------  -------------  -------------
<FN>
- ------------------------
*   Income before  income tax for the Corporate  and Other segment has not  been
    reduced by pretax minority interest of $90 in 1992.
</TABLE>

NOTE L -- EMPLOYEE BENEFIT PLANS
    PLC  has a  defined benefit pension  plan covering substantially  all of its
employees. The plan is  not separable by affiliates  participating in the  plan.
However,  approximately 80%  of the  participants in  the plan  are employees of
Protective. The  benefits are  based  on years  of  service and  the  employee's
highest  thirty-six consecutive months of  compensation. PLC's funding policy is
to contribute  amounts  to the  plan  sufficient  to meet  the  minimum  funding
requirements  of ERISA plus such  additional amounts as PLC  may determine to be
appropriate from time to  time. Contributions are intended  to provide not  only
for  benefits attributed to  service to date  but also for  those expected to be
earned in the future.

    The actuarial present value of benefit obligations and the funded status  of
the plan taken as a whole at December 31 is as follows:

<TABLE>
<CAPTION>
                                                                                     1994       1993
                                                                                   ---------  ---------
<S>                                                                                <C>        <C>
Accumulated benefit obligation, including vested benefits of $11,992 in 1994 and
 $12,406 in 1993.................................................................  $  12,348  $  12,692
                                                                                   ---------  ---------
Projected benefit obligation for service rendered to date........................  $  20,302  $  20,480
Plan assets at fair value (group annuity contract with Protective)...............     15,679     15,217
                                                                                   ---------  ---------
Plan assets less than the projected benefit obligation...........................     (4,623)    (5,263)
Unrecognized net loss from past experience different from that assumed...........      2,400      2,244
Unrecognized prior service cost..................................................        905      2,069
Unrecognized net transition asset................................................       (101)      (118)
                                                                                   ---------  ---------
Net pension liability recognized in balance sheet................................  $  (1,419) $  (1,068)
                                                                                   ---------  ---------
                                                                                   ---------  ---------
</TABLE>

                                      F-30
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE L -- EMPLOYEE BENEFIT PLANS (CONTINUED)
    Net  pension  cost includes  the following  components  for the  years ended
December 31:

<TABLE>
<CAPTION>
                                                                 1994       1993       1992
                                                               ---------  ---------  ---------
<S>                                                            <C>        <C>        <C>
Service cost -- benefits earned during the year..............  $   1,433  $   1,191  $     970
Interest cost on projected benefit obligation................      1,520      1,396      1,257
Actual return on plan assets.................................     (1,333)    (1,270)    (1,172)
Net amortization and deferral................................        210        704        130
                                                               ---------  ---------  ---------
Net pension cost.............................................  $   1,830  $   2,021  $   1,185
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
</TABLE>

    Protective's share of the net pension  cost was $1.2 million, $1.5  million,
and $0.8 million, in 1994, 1993, and 1992, respectively.

    Assumptions used to determine the benefit obligations as of December 31 were
as follows:

<TABLE>
<CAPTION>
                                                                          1994         1993         1992
                                                                       -----------  -----------  -----------
<S>                                                                    <C>          <C>          <C>
Weighted average discount rate.......................................        8.0%         7.5%         8.0%
Rates of increase in compensation level..............................        6.0%         5.5%         6.0%
Expected long-term rate of return on assets..........................        8.5%         8.5%         8.5%
</TABLE>

    Assets of the pension plan are included in the general assets of Protective.
Upon retirement, the amount of pension plan assets vested in the retiree is used
to  purchase a  single premium  annuity from  Protective in  the retiree's name.
Therefore, amounts presented  above as  plan assets exclude  assets relating  to
retirees.

    PLC  also sponsors an unfunded Excess Benefits Plan, which is a nonqualified
plan that  provides defined  pension benefits  in excess  of limits  imposed  by
federal  income tax law. At December  31, 1994, the projected benefit obligation
of this plan totaled $4.7 million.

    In addition to pension benefits,  PLC provides limited health care  benefits
to eligible retired employees until age 65. At January 1, 1992, PLC recognized a
$1.6  million  accumulated  postretirement  benefit  obligation,  of  which $0.9
million  relates  to  current  retirees  and  $0.7  million  relates  to  active
employees. The $1.6 million (representing Protective's entire liability for such
benefits),  net of $0.5 million tax, was accounted for as a cumulative effect of
a change  in  accounting principle  and  shown as  a  reduction to  income.  The
postretirement  benefit is provided  by an unfunded plan.  At December 31, 1994,
the liability for such  benefits totaled $1.6 million.  The expense recorded  by
Protective  was $0.2  million in  1994, 1993 and  1992. PLC's  obligation is not
materially affected by  a 1% change  in the health  care cost trend  assumptions
used in the calculation of the obligation.

    Life  insurance benefits for  retirees are provided  through the purchase of
life  insurance  policies  upon  retirement  equal  to  the  employees'   annual
compensation.  This plan is partially funded at a maximum of $50,000 face amount
of insurance.

    In 1990, PLC established an Employee Stock Ownership Plan to match  employee
contributions  to PLC's existing  401(k) Plan. Previously,  PLC matched employee
contributions in cash. In 1994, a stock  bonus was added to the 401(k) Plan  for
employees  who are not otherwise under a bonus plan. Expense related to the ESOP
consists of the cost of the shares allocated to participating employees plus the
interest expense on  the ESOP's  note payable  to Protective  less dividends  on
shares  held by the ESOP. At December  31, 1994, PLC had committed 33,250 shares
to be released to fund employee benefits.  The expense recorded by PLC for  this
employee  benefit was $0.6 million, $0.2 million and $0.4 million in 1994, 1993,
and 1992, respectively.

                                      F-31
<PAGE>
                       PROTECTIVE LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)

NOTE M -- REINSURANCE
    Protective assumes risks from and reinsures certain parts of its risks  with
other   insurers  under   yearly  renewable  term,   coinsurance,  and  modified
coinsurance agreements.  Yearly renewable  term and  coinsurance agreements  are
accounted  for by passing a portion of the risk to the reinsurer. Generally, the
reinsurer receives a proportionate part of the premiums less commissions and  is
liable for a corresponding part of all benefit payments. Modified coinsurance is
accounted  for similarly  to coinsurance  except that  the liability  for future
policy benefits is held by the original  company, and settlements are made on  a
net basis between the companies. While the amount retained on an individual life
will  vary based upon age  and mortality prospects of  the risk, Protective will
not carry more than $500,000 individual life insurance on a single risk.

    Protective has reinsured approximately $8.6 billion, $7.5 billion, and  $7.0
billion  in face amount of life insurance risks with other insurers representing
$46.0 million, $37.9  million, and  $34.8 million  of premium  income for  1994,
1993,  and 1992, respectively. Protective has also reinsured accident and health
risks representing $126.5 million, $88.9  million, and $74.6 million of  premium
income  for 1994,  1993, and  1992, respectively. In  1994 and  1993, policy and
claim reserves relating to insurance ceded  of $120.0 million and $97.8  million
respectively  are  included  in  reinsurance  receivables.  Should  any  of  the
reinsurers be unable to meet its obligation at the time of the claim, obligation
to pay such claim would remain with  Protective. At December 31, 1994 and  1993,
Protective  had  paid  $5.4 million  and  $4.8 million,  respectively,  of ceded
benefits which are recoverable from reinsurers.

NOTE N -- ESTIMATED MARKET VALUES OF FINANCIAL INSTRUMENTS
    The carrying amount  and estimated market  values of Protective's  financial
instruments at December 31 are as follows:

<TABLE>
<CAPTION>
                                                                   1994                          1993
                                                       ----------------------------  ----------------------------
                                                                        ESTIMATED                     ESTIMATED
                                                         CARRYING        MARKET        CARRYING        MARKET
                                                          AMOUNT         VALUES         AMOUNT         VALUES
                                                       -------------  -------------  -------------  -------------
<S>                                                    <C>            <C>            <C>            <C>
Assets (see Notes A and C):
Investments:
  Fixed maturities...................................  $   3,493,646  $   3,493,646  $   3,051,292  $   3,051,292
  Equity securities..................................         45,005         45,005         40,596         40,596
  Mortgage loans on real estate......................      1,488,495      1,535,300      1,408,444      1,524,200
  Short-term investments.............................         54,683         54,683         79,772         79,772
Cash.................................................                                       23,951         23,951
Other (see Note A):
Futures contracts....................................                          (416)
Interest rate swaps..................................                        (8,952)                        9,038
</TABLE>

                                      F-32
<PAGE>
                      SCHEDULE I -- SUMMARY OF INVESTMENTS
                   OTHER THAN INVESTMENTS IN RELATED PARTIES
               PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
                               DECEMBER 31, 1994
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
                              COL. A                                   COL. B         COL. C          COL. D
- -----------------------------------------------------------------------------------------------------------------
                                                                                                     AMOUNT AT
                                                                                                    WHICH SHOWN
                                                                                                    IN BALANCE
                        TYPE OF INVESTMENT                              COST           VALUE           SHEET
- ------------------------------------------------------------------  -------------  -------------  ---------------
<S>                                                                 <C>            <C>            <C>
Fixed maturities:
  Bonds:
    Mortgage-backed securities....................................  $   2,002,842  $   1,898,321   $   1,898,321
    United States Government and government agencies and
     authorities..................................................         90,468         81,881          81,881
    States, municipalities, and political subdivisions............         10,902          9,677           9,677
    Public utilities..............................................        414,011        378,120         378,120
    Convertibles and bonds with warrants attached.................            687            385             385
    All other corporate bonds.....................................        927,779        874,428         874,428
  Bank loan participations........................................        244,881        244,881         244,881
  Redeemable preferred stocks.....................................          6,800          5,953           5,953
                                                                    -------------  -------------  ---------------
      TOTAL FIXED MATURITIES......................................      3,698,370      3,493,646       3,493,646
                                                                    -------------  -------------  ---------------
Equity securities:
  Common stocks -- Industrial, miscellaneous, and all other.......         22,768         24,797          24,797
  Nonredeemable preferred stocks..................................         23,190         20,208          20,208
                                                                    -------------  -------------  ---------------
      TOTAL EQUITY SECURITIES.....................................         45,958         45,005          45,005
                                                                    -------------  -------------  ---------------
Mortgage loans on real estate.....................................      1,488,495                      1,488,495
Investment real estate............................................         20,170                         20,170
Policy loans......................................................        147,608                        147,608
Other long-term investments.......................................         50,751                         50,751
Short-term investments............................................         54,683                         54,683
                                                                    -------------                 ---------------
      TOTAL INVESTMENTS...........................................  $   5,506,035                  $   5,300,358
                                                                    -------------                 ---------------
                                                                    -------------                 ---------------
</TABLE>

                                      S-1
<PAGE>
              SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
               PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------- -----------------------------------------------

       COL. A          COL. B       COL. C    COL. D        COL. E       COL. F    COL. G                 COL. H       COL. I
- --------------------------------------------------------------------------------
                                                           GIC AND               -----------------------------------------------
                                    FUTURE                 ANNUITY                                                  AMORTIZATION
                      DEFERRED      POLICY                 DEPOSITS     PREMIUMS             REALIZED    BENEFITS   OF DEFERRED
                       POLICY      BENEFITS               AND OTHER       AND       NET      INVESTMENT    AND         POLICY
                     ACQUISITION     AND     UNEARNED   POLICYHOLDERS'   POLICY  INVESTMENT    GAINS    SETTLEMENT  ACQUISITION
      SEGMENT           COSTS       CLAIMS   PREMIUMS       FUNDS         FEES   INCOME (1)  (LOSSES)    EXPENSES      COSTS
- -------------------- -----------  ---------- ---------  --------------  -------- ----------  ---------  ----------  ------------
<S>                  <C>          <C>        <C>        <C>             <C>      <C>         <C>        <C>         <C>
Year Ended
 December 31, 1994:
  Acquisitions......  $110,203    $  856,889 $    381     $  266,828    $86,376   $ 83,750    $  532     $ 97,649     $14,460
  Financial
   Institutions.....    68,060        43,198   99,798          2,758     98,027      9,164                 46,360      36,592
  Group.............    22,685       116,324    2,905         84,689    131,096     14,381                 98,930       2,724
  Guaranteed
   Investment
   Contracts........       996             0        0      2,281,674          0    180,591     3,000      147,383         892
  Individual Life...   162,186       571,070      320         13,713     84,925     37,319                 67,451      18,771
  Investment
   Products.........    70,053       102,705        0      1,027,527      1,635     80,759    (2,500)      58,424      14,647
  Corporate and
   Other............        17         4,109       75            263        713      2,969                    913           3
  Unallocated
   Realized
   Investment Gains
   (Losses).........         0             0        0              0          0          0     5,266            0           0
                     -----------  ---------- ---------  --------------  -------- ----------  ---------  ----------  ------------
    TOTAL...........  $434,200    $1,694,295 $103,479     $3,677,452    $402,772  $408,933    $6,298     $517,110     $88,089
                     -----------  ---------- ---------  --------------  -------- ----------  ---------  ----------  ------------
                     -----------  ---------- ---------  --------------  -------- ----------  ---------  ----------  ------------
Year Ended
 December 31, 1993:
  Acquisitions......  $ 69,942    $  705,487 $    501     $  259,513    $58,562   $ 65,290               $ 73,463     $ 7,831
  Financial
   Institutions.....    59,163        39,508   85,042          2,913     87,355      8,921                 42,840      31,202
  Group.............    20,520        99,412    2,786         83,522    126,027     14,522                101,266       2,272
  Guaranteed
   Investment
   Contracts........     1,464             0        0      2,015,075          0    166,058    $1,175      137,380       1,170
  Individual Life...   129,265       483,604      368         11,762     77,338     34,153                 55,972      18,069
  Investment
   Products.........    18,934        52,516        0        789,668        856     66,691     2,003       49,569      12,788
  Corporate and
   Other............        19           318       88            339      1,285     (1,470)                 1,146           3
  Unallocated
   Realized
   Investment Gains
   (Losses).........         0             0        0              0          0          0     1,876            0           0
                     -----------  ---------- ---------  --------------  -------- ----------  ---------  ----------  ------------
    TOTAL...........  $299,307    $1,380,845 $ 88,785     $3,162,792    $351,423  $354,165    $5,054     $461,636     $73,335
                     -----------  ---------- ---------  --------------  -------- ----------  ---------  ----------  ------------
                     -----------  ---------- ---------  --------------  -------- ----------  ---------  ----------  ------------
Year Ended
 December 31, 1992:
  Acquisitions......  $ 65,868    $  428,991 $    655     $   80,458    $48,068   $ 45,543               $ 56,901     $ 7,404
  Financial
   Institutions.....    49,684        20,207   71,878          3,246     56,990      6,051                 25,342      21,605
  Group.............    14,801        66,551    2,422         77,671    112,985     12,620                 93,380       1,664
  Guaranteed
   Investment
   Contracts........     2,256             0        0      1,694,530          0    137,654    $  962      117,321       1,267
  Individual Life...   110,408       382,025        2          8,847     62,776     27,723                 49,755      11,493
  Investment
   Products.........    30,228        27,051        0        626,171        586     46,618       473       37,021       4,485
  Corporate and
   Other............     1,678         4,767      220            439     41,731     (1,218)                29,837         485
  Unallocated
   Realized
   Investment Gains
   (Losses).........         0             0        0              0          0          0    (1,589)           0           0
                     -----------  ---------- ---------  --------------  -------- ----------  ---------  ----------  ------------
    TOTAL...........  $274,923    $  929,592 $ 75,177     $2,491,362    $323,136  $274,991    $ (154)    $409,557     $48,403
                     -----------  ---------- ---------  --------------  -------- ----------  ---------  ----------  ------------
                     -----------  ---------- ---------  --------------  -------- ----------  ---------  ----------  ------------

<CAPTION>
- --------------------

       COL. A            COL. J
- --------------------

                          OTHER
                        OPERATING
      SEGMENT         EXPENSES (1)
- --------------------  -------------
<S>                  <C>
Year Ended
 December 31, 1994:
  Acquisitions......    $ 19,374
  Financial
   Institutions.....      16,065
  Group.............      35,490
  Guaranteed
   Investment
   Contracts........       2,119
  Individual Life...      18,803
  Investment
   Products.........       6,595
  Corporate and
   Other............      20,757
  Unallocated
   Realized
   Investment Gains
   (Losses).........           0
                      -------------
    TOTAL...........    $119,203
                      -------------
                      -------------
Year Ended
 December 31, 1993:
  Acquisitions......    $ 12,715
  Financial
   Institutions.....      15,181
  Group.............      29,450
  Guaranteed
   Investment
   Contracts........       1,466
  Individual Life...      17,133
  Investment
   Products.........       3,790
  Corporate and
   Other............      14,580
  Unallocated
   Realized
   Investment Gains
   (Losses).........           0
                      -------------
    TOTAL...........    $ 94,315
                      -------------
                      -------------
Year Ended
 December 31, 1992:
  Acquisitions......    $  9,299
  Financial
   Institutions.....      11,426
  Group.............      26,972
  Guaranteed
   Investment
   Contracts........       1,763
  Individual Life...      16,292
  Investment
   Products.........       1,980
  Corporate and
   Other............      24,193
  Unallocated
   Realized
   Investment Gains
   (Losses).........           0
                      -------------
    TOTAL...........    $ 91,925
                      -------------
                      -------------
<FN>
- ------------------------------
(1)  Allocations of Net Investment Income and Other Operating Expenses are based
     on  a  number of  assumptions  and estimates  and  results would  change if
     different methods were applied.
</TABLE>

                                      S-2
<PAGE>
                           SCHEDULE IV -- REINSURANCE
               PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
                COL. A                      COL. B         COL. C         COL. D          COL. E         COL. F
- ------------------------------------------------------------------------------------------------------------------
                                                                                                       PERCENTAGE
                                                          CEDED TO        ASSUMED                       OF AMOUNT
                                            GROSS           OTHER       FROM OTHER         NET           ASSUMED
                                            AMOUNT        COMPANIES      COMPANIES        AMOUNT         TO NET
                                        --------------  -------------  -------------  --------------  -------------
<S>                                     <C>             <C>            <C>            <C>             <C>
Year Ended December 31, 1994:
  Life insurance in force.............  $   40,909,454  $   8,639,272  $   8,968,166  $   41,238,348        21.7%
                                        --------------  -------------  -------------  --------------         ---
                                        --------------  -------------  -------------  --------------         ---
  Premiums and policy fees:
    Life insurance....................  $      256,840  $      46,029  $      31,032  $      241,843        12.8%
    Accident/health insurance.........         283,883        126,545          3,591         160,929         2.2%
                                        --------------  -------------  -------------  --------------
      TOTAL...........................  $      540,723  $     172,574  $      34,623  $      402,772
                                        --------------  -------------  -------------  --------------
                                        --------------  -------------  -------------  --------------
Year Ended December 31, 1993:
  Life insurance in force.............  $   40,149,017  $   7,484,566  $   2,301,577  $   34,966,028         6.6%
                                        --------------  -------------  -------------  --------------         ---
                                        --------------  -------------  -------------  --------------         ---
  Premiums and policy fees:
    Life insurance....................  $      230,706  $      37,995  $       8,329  $      201,040         4.1%
    Accident/health insurance.........         254,672         88,917          3,963         169,718         2.3%
                                        --------------  -------------  -------------  --------------
      TOTAL...........................  $      485,378  $     126,912  $      12,292  $      370,758
                                        --------------  -------------  -------------  --------------
                                        --------------  -------------  -------------  --------------
Year Ended December 31, 1992:
  Life insurance in force.............  $   33,811,280  $   6,982,127  $     665,733  $   27,494,886         2.4%
                                        --------------  -------------  -------------  --------------         ---
                                        --------------  -------------  -------------  --------------         ---
  Premiums and policy fees:
    Life insurance....................  $      180,018  $      34,824  $      16,092  $      161,286        10.0%
    Accident/health insurance.........         228,192         74,531          8,189         161,850         5.1%
                                        --------------  -------------  -------------  --------------
      TOTAL...........................  $      408,210  $     109,355  $      24,281  $      323,136
                                        --------------  -------------  -------------  --------------
                                        --------------  -------------  -------------  --------------
</TABLE>

                                      S-3
<PAGE>
                                     PART C
                               OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements:

    All  required financial statements are included in Part A and Part B of this
Registration Statement.

(b) Exhibits:

<TABLE>
<C>  <S>  <C>
 1.  Resolution of the Board of Directors of Protective Life Insurance
     Company authorizing establishment of the Protective Life Variable
     Annuity Separate Account**
 2.  Not applicable
 3.  (a)  Form of Underwriting Agreement among Protective Life
          Insurance Company, Investment Distributors, Inc. and the
          Protective Life Variable Annuity Separate Account**
     (b)  Form of Distribution Agreement between Investment
          Distributors, Inc. and broker/ dealers**
 4.  (a)  Form of Individual Flexible Premium Deferred Variable and
          Fixed Annuity Contract*
     (b)  Endorsement**
     (c)  Qualified Retirement Plan Endorsement**
     (d)  Individual Retirement Annuity Endorsement**
     (e)  Tax Sheltered Annuity Endorsement**
     (f)  ERISA Tax-Sheltered Annuity Endorsement**
     (g)  Section 457 Deferred Compensation Plan Endorsement**
 5.  Form of Contract Applications**
 6.  (a)  Charter of Protective Life Insurance Company.*
     (b)  By-Laws of Protective Life Insurance Company.*
 7.  Not applicable
 8.  (a)  Participation/Distribution Agreement**
 9.  (a)  Opinion and Consent of Lizabeth R. Nichols, Esq.**
10.  (a)  Consent of Sutherland, Asbill & Brennan
     (b)  Consent of Coopers & Lybrand L.L.P.
11.  No financial statements will be omitted from Item 23
12.  Not applicable
13.  Not applicable
14.  Powers of Attorneys*
</TABLE>

- ------------------------
 *  Incorporated  herein by  reference to  the initial  filing of  the Form  N-4
    Registration  Statement, (File  No. 33-70984)  filed with  the Commission on
    October 28, 1993.
**  Incorporated  herein by reference  to Pre-Effective Amendment  No. 1 to  the
    Form  N-4  Registration  Statement,  (File  No.  33-70984)  filed  with  the
    Commission on February 23, 1994.

                                      C-1
<PAGE>
Item 25. DIRECTORS AND OFFICERS OF DEPOSITOR.

   
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS                                 POSITION AND OFFICES WITH DEPOSITOR
- --------------------------------------------------------  --------------------------------------------------------
<S>                                                       <C>
Drayton Nabers, Jr.                                       President
John D. Johns                                             Executive Vice President and Chief Financial Officer
R. Stephen Briggs                                         Executive Vice President
Ormond L. Bentley                                         Senior Vice President, Group
Carolyn King                                              Senior Vice President, Investment Products
Deborah J. Long                                           Senior Vice President and General Counsel
Jim E. Massengale                                         Senior Vice President
Steven A. Schultz                                         Senior Vice President, Financial Institutions
Wayne E. Stuenkel                                         Senior Vice President and Chief Actuary
A.S. Williams, III                                        Senior Vice President, Investments and Treasurer
Judy Wilson                                               Senior Vice President, Guaranteed Investment Contracts
J. Russell Bailey, Jr.                                    Vice President, Group Actuary
Michael B. Ballard                                        Vice President, Individual Life Marketing
Harvey S. Benjamin                                        Vice President, Operations, Investment Products
Danny L. Bentley                                          Vice President, Group Marketing
Richard J. Bielen                                         Vice President, Investments
Linda C. Cleveland                                        Vice President, Acquisition Administration
Chris Calos                                               Vice President, Group Sales
Jerry W. DeFoor                                           Vice President and Controller and Chief Accounting
                                                          Officer
James D. Dondero                                          Vice President, Investments
Kenneth A. Eaise                                          Vice President and Chief Underwriter
Brent E. Fritz                                            Vice President, Individual Life, Product Development
James T. Helton III                                       Vice President and Product Actuary
Lawrence G. Merrill                                       Vice President, Investment Products Marketing
Eric A. Miller                                            Vice President, Information Services, Investment
                                                          Products
Charles M. Prior                                          Vice President, Investments
T. Michael Presley                                        Vice President and Actuary
Charles H. Wagner                                         Vice President, Financial Institutions
Alan E. Watson                                            Vice President, Individual Life
Thomas W. Willingham                                      Vice President, Individual Life Operations
John K. Wright                                            Vice President, Senior Associate Counsel and Secretary
<FN>
- ------------------------
*    Unless otherwise indicated, principal business address is 2801 Highway  280
     South, Birmingham, Alabama 35223.
</TABLE>
    

                                      C-2
<PAGE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR AND
REGISTRANT

    The registrant is a segregated asset account of the Company and is therefore
owned  and controlled  by the Company.  All of the  Company's outstanding voting
common  stock  is  owned  by   Protective  Life  Corporation.  Protective   Life
Corporation  is  described  more  fully  in  the  prospectus  included  in  this
registration statement.  Various  companies  and other  entities  controlled  by
Protective  Life  Corporation may  therefore be  considered  to be  under common
control with the registrant or the  Company. Such other companies and  entities,
together  with  the  identity  of  the  owners  of  their  common  stock  (where
applicable), are set forth in the following

                    See organization chart on following page

                                      C-3
<PAGE>
  PROTECTIVE LIFE CORPORATION
  ORGANIZATIONAL CHART*
  PROTECTIVE LIFE CORPORATION
  (Ultimate Controlling Person)
  Delaware Corporation
  TIN 95-2492236
INVESTMENT DISTRIBUTORS, INC.
(TENNESSEE) Parent Company Owns 100% of Stock
TIN 63-1100710
INVESTMENT DISTRIBUTORS ADVISORY
SERVICES, INC. (TENNESSEE) Parent Company Owns 100% of Stock
TIN 63-1100711
PES OF MARYLAND, INC. (MARYLAND) Parent Company Owns 100% of Stock
TIN 52-1841605
PES OF OHIO, INC. (OHIO) Parent Company Owns 100% of Stock
TIN 34-1749375
FIRST PROTECTIVE INSURANCE GROUP, INC. (ALABAMA)
Parent Company Owns 100% of Stock
TIN 63-0846761
HOTEL DEVELOPMENT COMPANY, INC. (ALABAMA) Parent Company
Owns 100% of Stock
TIN 63-0938078
PROTECTIVE EQUITY SERVICES, INC. (ALABAMA)
Parent Company Owns 100% of Stock
TIN 63-0879387
PROTECTIVE BENEFITS
COMMUNICATIONS INC. (MISSOURI)
Parent Company Owns 100% of Stock
TIN 43-1199343
PROTECTIVE LIFE INSURANCE COMPANY
(TENNESSEE)
Parent Company Owns 100% of Stock
TIN 63-0169720
NAIC CO 68136
  WISCONSIN NATIONAL LIFE INSURANCE COMPANY (WISCONSIN)
  PLIC owns 100% of Stock
  TIN 39-0714280
  NAIC CO 70580
  PROTECTIVE LIFE INSURANCE CORPORATION OF ALABAMA (ALABAMA)
  PLIC owns 100% of Stock
  TIN 63-1088714
  NAIC CO 62868
  EMPIRE GENERAL LIFE ASSURANCE CORPORATION (formerly, National Old
  Line Insurance
  Company (TENNESSEE)
  PLIC owns 100% of Stock
  TIN 63-1073929
  NAIC CO 94285
  AMERICAN FOUNDATION LIFE INSURANCE COMPANY (ALABAMA)
  PLIC owns 100% Voting Stock
  PLC Owns 100% of Non-Voting Preferred Stock
  TIN 63-0761690
  NAIC CO 88536
  PROTECTIVE ASSIGNED BENEFITS COMPANY (formerly) PFC AGENCY OF TEXAS, INC.
  (TEXAS)
  PLIC owns 100% of Stock
  TIN 75-2366969
  CAPITAL INVESTORS LIFE INSURANCE COMPANY (ARIZONA)
  PLIC owns 100% of Stock
  TIN 56-1407737
  NAIC CO 62456
  PROTECTIVE INVESTMENT COMPANY (MARYLAND)
  PLIC Separate Account will own 100% of Stock
  TIN 52-1854793
FINANCIAL PROTECTION MARKETING, INC formerly, R. L. HERNDON & ASSOCIATES, INC.
(INDIANA)
Parent Company Owns 100% of Stock
TIN 34-1349213
VOLUNTARY BENEFITS INTERNATIONAL, INC. (ALABAMA)
Parent Company Owns 100% of Stock
TIN 63-0984208
CENTRAL FINANCIAL CENTER, INC. (LOUISIANA)
Parent Company Owns 100% of Stock
TIN 72-1183399
IPD MARKETING SERVICES, INC. (ALABAMA)
Parent Company Owns 100% of Stock
TIN 63-1062369
PRODUCT RESOURCE GROUP, INC. (ALABAMA)
Parent Company Owns 100% of Stock
TIN 63-1087298
SPECIALTY ASSET MANAGEMENT CORPORATION (DELAWARE)
Parent Company Owns 100% of Stock
TIN 52-1836315
    PROTECTIVE ASSET MANAGEMENT COMPANY (Delaware General Partnership)
    SAMCO has 60% interest
PROTECTIVE LLC HOLDING, INC.
Parent Company Owns 100% of Stock
TIN 63-1114345
    PLC CAPITAL L.L.C (Delaware Limited Liability Company) Class A Interest
    Owned by PLC
    Class B Interest Owned by Protective LLC Holding, Inc.
    TIN 63-1114346
LIPPO PROTECTIVE LIFE INSURANCE COMPANY LIMITED
Parent Company Owns 50% of Stock

                                      C-4
<PAGE>
Item 27. NUMBER OF CONTRACTOWNERS.

    As of the date of this filing, there were 5,105 individual flexible  premium
deferred variable and fixed annuity contracts that have been issued.

Item 28. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

    Article  XI of the  By-laws of Protective Life  provides, in substance, that
any of Protective Life's directors and officers, who is a party or is threatened
to be made a party to any action, suit or proceeding, other than an action by or
in the right of  Protective Life, by  reason of the  fact that he  is or was  an
officer  or director, shall  be indemnified by  Protective Life against expenses
(including attorneys' fees),  judgments, fines  and amounts  paid in  settlement
actually  and reasonably incurred by such  person in connection with such claim,
action, suit  or proceeding  if  he acted  in  good faith  and  in a  manner  he
reasonably  believed to be in or not opposed to the best interests of Protective
Life and, with respect to any  criminal action or proceeding, had no  reasonable
cause  to believe his conduct  was unlawful. If the claim,  action or suit is or
was by or in the  right of Protective Life to  procure a judgment in its  favor,
such  person shall be indemnified by Protective Life against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with  the
defense  or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in  or not opposed to the best interests  of
Protective  Life, except that no indemnification shall be made in respect of any
claim, issue or matter as  to which such person shall  have been adjudged to  be
liable for negligence or misconduct in the performance of his duty to Protective
Life  unless and only to the extent that  the court in which such action or suit
was brought shall determine upon  application that, despite the adjudication  of
liability  but in view of  all circumstances of the  case, such person is fairly
and reasonably entitled to  indemnity for such expenses  which such court  shall
deem proper. To the extent that a director or officer has been successful on the
merits  or otherwise in  defense of any  such action, suit  or proceeding, or in
defense of  any claim,  issue or  matter  therein, he  shall be  indemnified  by
Protective  Life  against  expenses  (including  attorneys'  fees)  actually and
reasonably incurred by him in connection therewith, not withstanding that he has
not been successful on any other claim issue or matter in any such action,  suit
or  proceeding.  Unless ordered  by a  court, indemnification  shall be  made by
Protective Life only  as authorized in  the specific case  upon a  determination
that  indemnification of the officer or  director is proper in the circumstances
because he has met the applicable standard of conduct. Such determination  shall
be  made (a) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to, or who have been successful on the  merits
or  otherwise with respect to, such claim  action, suit or proceeding, or (b) if
such  a  quorum  is  not  obtainable,  or,  even  if  obtainable  a  quorum   of
disinterested  directors so directs,  by independent legal  counsel in a written
opinion or (c) by the shareholders.

    In addition,  the executive  officers  and directors  are insured  by  PLC's
Directors'   and   Officers'  Liability   Insurance  Policy   including  Company
Reimbursement  and  are  indemnified  by  a  written  contract  with  PLC  which
supplements such coverage.

    Insofar as indemnification for liability arising under the Securities Act of
1933  may be  permitted to  directors, officers  and controlling  persons of the
Registrant pursuant to  the foregoing provisions,  or otherwise, the  Registrant
has  been advised that in the opinion  of the Securities and Exchange Commission
such indemnification is against  public policy as expressed  in the Act and  is,
therefore,  unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses  incurred
or  paid by a director,  officer or controlling person  of the Registrant in the
successful defense  of any  action,  suit or  proceeding)  is asserted  by  such
director,  officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled  by controlling  precedent, submit  to a  court of  appropriate
jurisdiction  the question whether such indemnification  by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

                                      C-5
<PAGE>
Item 29. PRINCIPAL UNDERWRITER.

    (a)Investment Distributors, Inc. ("IDI") is the principal underwriter of the
       Contracts as defined in the Investment  Company Act of 1940. IDI is  also
       principal  underwriter for the Fund and  for the Protective Life Variable
       Separate Account.

    (b)The following information is furnished  with respect to the officers  and
       directors of Investment Distributors, Inc.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL                                                  POSITION AND OFFICES
BUSINESS ADDRESS*                  POSITION AND OFFICES                WITH REGISTRANT
- --------------------------------  -----------------------  ---------------------------------------
<S>                               <C>                      <C>
Briggs, Robert Stephen            Director                 Executive Vice President, Director
Wright, John King                 Director, Secretary      Vice President, Senior Associate
                                                           Counsel, and Secretary
Nichols, Lizabeth Reynolds        Director, Chief          Vice President and Senior Associate
                                  Compliance Officer,      Counsel
                                  Assistant Secretary
Milligan, Doretta                 President/CEO, Director  None
Bielen, Richard J.                Vice President           Vice President, Investments
Ballard, Michael B.               Director                 Vice President, Individual Life
                                                           Marketing
Merrill, Lawrence G.              Director                 None
Ardrey, J. Kelly                  Treasurer                None
<FN>
- ------------------------
*    Unless  otherwise indicated, principal business address is 2801 Highway 280
     South, Birmingham, Alabama, 35223.
</TABLE>

Item 30. LOCATION OF ACCOUNTS AND RECORDS.

    All accounts and records required to  be maintained by Section 31(c) of  the
Investment Company Act of 1940 and the rules thereunder are maintained either by
Protective Life Insurance Company at 2801 Highway 280 South, Birmingham, Alabama
35223.

Item 31. MANAGEMENT SERVICES.

    All management contracts are discussed in Part A or Part B.

Item 32. UNDERTAKINGS.

    (a)Registrant  hereby undertakes to file  a post-effective amendment to this
       registration statement as frequently as  is necessary to ensure that  the
       audited financial statements in the registration statement are never more
       than  sixteen (16) months old for so  long as payments under the variable
       annuity contracts may be accepted.

    (b)Registrant hereby  undertakes  to  include  either (1)  as  part  of  any
       application  to purchase  a contract offered  by the  Prospectus, a space
       that an  applicant  can  check  to  request  a  Statement  of  Additional
       Information,  or (2) a postcard  or similar written communication affixed
       to or included in  the Prospectus that the  applicant can remove to  send
       for a Statement of Additional Information; and

    (c)Registrant  hereby  undertakes  to deliver  any  Statement  of Additional
       Information and any  financial statement  required to  be made  available
       under this Form promptly upon written or oral request.

    (d)The  Company  represents  that in  connection  with its  offering  of the
       Contracts  as  funding   vehicles  for  retirement   plans  meeting   the
       requirements of Section 403(b) of the Internal

                                      C-6
<PAGE>
       Revenue  Code of 1986, it is relying on a no-action letter dated November
       28, 1988, to the  American Council of Life  Insurance (Ref. No.  IP-6-88)
       regarding  Sections 22(e), 27(c)(1), and  27(d) of the Investment Company
       Act of 1940, and that paragraphs numbered (1) through (4) of that  letter
       will be complied with.

                                      C-7
<PAGE>
                                   SIGNATURES

   
    Pursuant  to  the  requirements  of  the  Securities  Act  of  1933  and the
Investment Company  Act of  1940, the  Registrant, Protective  Variable  Annuity
Separate  Account, certifies  that it meets  the requirements  of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has duly caused
this Registration  Statement to  be signed  on its  behalf by  the  undersigned,
thereunto  duly authorized, in the City of  Birmingham, State of Alabama on June
6, 1995.
    

                                          PROTECTIVE VARIABLE ANNUITY
                                          SEPARATE ACCOUNT

   
                                          By: /s/      DRAYTON NABERS, JR.
    

                                          --------------------------------------
                                          Its: President

                                          PROTECTIVE LIFE INSURANCE COMPANY

   
                                          By: /s/      DRAYTON NABERS, JR.
    

                                          --------------------------------------
                                                     Drayton Nabers, Jr.
                                          Its: President

    Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed by the following persons in the capacities and on  the
dates indicated:

   
<TABLE>
<CAPTION>
                              SIGNATURE                                    TITLE                       DATE
           -----------------------------------------------  -----------------------------------  ----------------

<S>        <C>                                              <C>                                  <C>
(i)        Principal Executive Officer

                    /s/       DRAYTON NABERS, JR.
                -------------------------------------                    President                 June 6, 1995
                         Drayton Nabers, Jr.

(ii)       Principal Financial Officer

                     /s/          JOHN D. JOHNS
                -------------------------------------       Executive Vice President and Chief     June 6, 1995
                            John D. Johns                            Financial Officer

(iii)      Principal Accounting Officer

                     /s/         JERRY W. DEFOOR
                -------------------------------------       Vice President and Controller, and     June 6, 1995
                           Jerry W. DeFoor                        Chief Accounting Officer

(iv)       Board of Directors:

                    /s/       DRAYTON NABERS, JR.
                -------------------------------------                    Director                  June 6, 1995
                         Drayton Nabers, Jr.

                     /s/          JOHN D. JOHNS
                -------------------------------------                    Director                  June 6, 1995
                            John D. Johns

                                  *
                -------------------------------------                    Director                  June 6, 1995
                          Ormond L. Bentley
</TABLE>
    
<PAGE>
   
<TABLE>
<CAPTION>
                              SIGNATURE                                    TITLE                       DATE
           -----------------------------------------------  -----------------------------------  ----------------

<S>        <C>                                              <C>                                  <C>
                                  *
                -------------------------------------                    Director                  June 6, 1995
                          R. Stephen Briggs

                                  *
                -------------------------------------                    Director                  June 6, 1995
                          Jim E. Massengale

                                  *
                -------------------------------------                    Director                  June 6, 1995
                          Wayne E. Stuenkel

                                  *
                -------------------------------------                    Director                  June 6, 1995
                         A. S. Williams III

                                  *
                -------------------------------------                    Director                  June 6, 1995
                          Steven A. Schultz

                                  *
                -------------------------------------                    Director                  June 6, 1995
                           Deborah A. Long

                -------------------------------------                    Director                  June 6, 1995
                            Carolyn King

*By:                /s/      LIZABETH R. NICHOLS
                -------------------------------------
                         Lizabeth R. Nichols
                          ATTORNEY-IN-FACT
</TABLE>
    
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<C>       <S>
    (10)(a) Consent of Sutherland, Asbill & Brennan

    (10)(b) Consent of Coopers & Lybrand L.L.P.
</TABLE>


<PAGE>

                       SUTHERLAND, ASBILL & BRENNAN
Tel: (202) 383-0100   1275 PENNSYLVANIA AVENUE, N.W.                ATLANTA
Fax: (202) 637-3593     WASHINGTON, D.C. 20004-2404                  AUSTIN
                                                                   NEW YORK
                                                                 WASHINGTON



                              June 6, 1995


Board of Directors
Protective Life Insurance Company
2801 Highway 201 South
Birmingham, Alabama 35223


Directors:

     We hereby consent to the reference to our name under the caption "Legal
Matters" in the statement of additional information filed as part of
post-effective amendment number 3 to the Registration Statement on Form N-4
filed by Protective Life Insurance Company and Protective Variable Annuity
Account with the Securities and Exchange Commission. In giving this consent,
we do not admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.

                                     Very truly yours,

                                     SUTHERLAND, ASBILL & BRENNAN



                                     By: /s/ Stephen E. Roth
                                        -------------------------
                                             Stephen E. Roth




<PAGE>
                       CONSENT OF INDEPENDENT ACCOUNTANTS

   
    We  consent to the inclusion, in this  Post-Effective Amendment No. 3 to the
Registration Statement under  the Investment  Company Act of  1940, as  amended,
filed  on Form  N-4 of  our report  dated February  13, 1995,  which includes an
explanatory paragraph  with  respect to  changes  in Protective  Life  Insurance
Company's  methods  of accounting  for certain  investments  in debt  and equity
securities in 1993 and postretirement benefits  other than pensions in 1992,  on
our  audits of  the financial  statements and  financial statement  schedules of
Protective Life  Insurance Company  and  subsidiaries. We  also consent  to  the
inclusion  of our  report dated  March 20,  1995 on  our audit  of the financial
statements of the Protective Variable Annuity Separate Account. We also  consent
to the reference to our Firm under the caption "Experts".
    

COOPERS & LYBRAND L.L.P.

   
Birmingham, Alabama
June 6, 1995
    


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