The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with our consolidated condensed financial statements included under Part I, Item 1, Financial Statements (Unaudited), of this Quarterly Report on Form 10-Q and our audited consolidated financial statements for the year ended December 31, 2008, included in our Annual Report on Form 10-K.

For a more complete understanding of our business and current period results, please read the following MD&A in conjunction with our latest Annual Report on Form 10-K and other filings with the United States Securities and Exchange Commission (the "SEC").

Certain reclassifications have been made in the previously reported financial statements and accompanying notes to make the prior period amounts comparable to those of the current period. Such reclassifications had no effect on previously reported net income or shareowners' equity.

FORWARD-LOOKING STATEMENTS - CAUTIONARY LANGUAGE

This report reviews our financial condition and results of operations including our liquidity and capital resources. Historical information is presented and discussed and where appropriate, factors that may affect future financial performance are also identified and discussed. Certain statements made in this report include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that may predict, forecast, indicate or imply future results, performance or achievements instead of historical facts and may contain words like "believe," "expect," "estimate," "project," "budget," "forecast," "anticipate," "plan," "will," "shall," "may," and other words, phrases, or expressions with similar meaning. Forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from the results contained in the forward-looking statements, and we cannot give assurances that such statements will prove to be correct. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. For more information about the risks, uncertainties and other factors that could affect our future results, please see Part I, Item II, Risks and Uncertainties and Part II, Item 1A, Risk Factors, of this report, as well as Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

OVERVIEW

Our business

We are a holding company headquartered in Birmingham, Alabama, with subsidiaries that provide financial services through the production, distribution, and administration of insurance and investment products. Founded in 1907, Protective Life Insurance Company ("PLICO") is our largest operating subsidiary. Unless the context otherwise requires, "Company," "we," "us," or "our" refers to the consolidated group of Protective Life Corporation and our subsidiaries.

We operate several business segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. We periodically evaluate our operating segments, as prescribed in the Accounting Standards Codification ("ASC") Segment Reporting Topic, and make adjustments to our segment reporting as needed.

Our operating segments are Life Marketing, Acquisitions, Annuities, Stable Value Products, Asset Protection, and Corporate and Other.

† Life Marketing - We market level premium term insurance ("traditional"), universal life ("UL"), variable universal life, and bank-owned life insurance ("BOLI") products on a national basis primarily through networks of independent insurance agents and brokers, stockbrokers, and independent marketing organizations.

† Acquisitions - We focus on acquiring, converting, and servicing policies acquired from other companies. The segment's primary focus is on life insurance policies and annuity products sold to individuals. In the ordinary course of business, the Acquisitions segment regularly considers

acquisitions of blocks of policies or insurance companies. The level of the segment's acquisition activity is predicated upon many factors, including available capital, operating capacity, and market dynamics. Policies acquired through the Acquisition segment are "closed" blocks of business (no new policies are being marketed). Therefore, earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.

† Annuities - We market and support fixed and variable annuity products. These products are primarily sold through broker-dealers, financial institutions and independent agents and brokers.

† Stable Value Products - We sell guaranteed funding agreement ("GFAs") to special purpose entities that in turn issue notes or certificates in smaller, transferable denominations. The segment also markets fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, institutional investors, bank trust departments, and money market funds. Additionally, the segment markets guaranteed investment contracts ("GICs") to 401(k) and other qualified retirement savings plans.

† Asset Protection - We primarily market extended service contracts and credit life and disability insurance to protect consumers' investments in automobiles, watercraft, and recreational vehicles. In addition, the segment markets a guaranteed asset protection ("GAP") product.

† Corporate and Other - This segment primarily consists of net investment income, including the impact of carrying excess liquidity, and expenses not attributable to the segments above (including net investment income on capital and interest on debt) and a trading portfolio that was previously part of a variable interest entity. This segment also includes earnings from several non-strategic lines of business (primarily cancer insurance, residual value insurance, surety insurance, and group annuities), various investment-related transactions, and the operations of several small subsidiaries.

EXECUTIVE SUMMARY

Our core operating fundamentals contributed to our continued success in the third quarter and to a positive net income of $140.5 million and solid operating income in our business segments for the nine months ended September 30, 2009. While we are encouraged by our underlying business model, we continue to see challenges ahead given the current environment, and therefore have a continued focus on our overall capital strategy. Our strategy is designed to weather the current economic climate and includes shifting our focus to products that are less capital intensive, implementing pricing initiatives, maintaining a strong distribution network, and reducing sales with less attractive spread levels. In addition, during the second quarter of 2009, we issued 15.5 million shares of common stock through a public offering. This offering generated approximately $132.8 million of net proceeds to the Company.

During the nine months ended September 30, 2009, our pre-tax operating earnings increased $17.9 million compared to the nine months ended September 30, 2008, primarily as a result of $106.6 million of favorable fair value changes recorded on our trading portfolio, equity indexed annuity product line and embedded derivatives associated with the variable annuity GMWB rider, compared to the prior year's quarter.

The following table reflects a reconciliation of after-tax operating income to net income (loss) for the periods presented:

                                          For the                For the
                                     Nine Months Ended      Nine Months Ended
(Dollars In Thousands; Net Of
Income Tax)                         September 30, 2009     September 30, 2008        Variance
After-tax Operating Income          $           190,335    $           183,178    $        7,157
Realized investment gains
(losses) and related
amortization
Investments                                      85,417               (319,432 )         404,849
Derivatives                                    (135,275 )              110,312          (245,587 )
Net Income (Loss)                   $           140,477    $           (25,942 )  $      166,419

For more information regarding our realized investment and derivative gains (losses), refer to the "Realized Gains and Losses" discussion on page 81.

During the third quarter of 2009, we experienced significant improvement in our net unrealized loss position. As of September 30, 2009, our net unrealized loss position was $476.8 million, prior to tax and deferred acquisition costs ("DAC") offsets and $305.7 million, after tax and DAC offsets. This improvement was caused by spread tightening during the quarter.

Subsequent to the third quarter of 2009, we issued $800 million of senior notes and used the net proceeds to purchase $800 million of newly-issued surplus notes from Golden Gate Captive Insurance Company ("Golden Gate"). Golden Gate concurrently purchased at a discount $800 million of its floating rate surplus notes held by third parties. The repurchase transactions are expected to result in an estimated pre-tax gain of $126 million, or $0.94 per diluted share, to be recognized in the fourth quarter of 2009. For more information regarding this transaction, refer to Note 14, Subsequent Events.

Significant financial information related to each of our segments is included in "Results of Operations".

RISKS AND UNCERTAINTIES

The factors which could affect our future results include, but are not limited to, general economic conditions and the following risks and uncertainties:

General

† exposure to the risks of natural disasters, pandemics, malicious and terrorist acts that could adversely affect our operations and results;

† computer viruses, network security breaches, disasters or other unanticipated events could affect our data processing systems or those of our business partners and could damage our business and adversely affect our financial condition and results of operations;

† actual experience may differ from management's assumptions and estimates and negatively affect our results;

† we may not realize our anticipated financial results from our acquisitions strategy;

† we are dependent on the performance of others;

† our risk management policies and procedures could leave us exposed to unidentified or unanticipated risk, which could negatively affect our business or result in losses;

Financial environment

†

† interest rate fluctuations could negatively affect our spread income or otherwise impact our business;

† our investments are subject to market, credit, legal, and regulatory risks, which could be heightened during periods of extreme volatility or disruption in the financial and credit markets;

†          equity market volatility could negatively impact our business;

†          credit market volatility or disruption could adversely impact our
financial condition or results from operations;

†          our ability to grow depends in large part upon the continued
availability of capital;

†          we could be adversely affected by a ratings downgrade or other
negative action by a ratings organization;

†          a loss of policyholder confidence in our insurance subsidiaries could
lead to higher than expected levels of policyholder surrenders and withdrawal of
funds;

†          we could be forced to sell investments at a loss to cover

† disruption of the capital and credit markets could negatively affect our ability to meet our liquidity and financing needs;

† difficult conditions in the economy generally could adversely affect our business and results from operations;

† continued deterioration of general economic conditions could result in a severe and extended economic recession, which could materially adversely affect our business and results from operations;

† there can be no assurance that the actions of the United States Government or other governmental and regulatory bodies for the purpose of stabilizing the financial markets will achieve their intended effect;

† we may be required to establish a valuation allowance against our deferred tax assets, which could materially adversely affect our results of operations, financial condition, and capital position;

†          we could be adversely affected by an inability to access our credit
facility;

†          results that differ from expectations or assumptions could adversely

† the amount of statutory capital we have and must hold to maintain our financial strength and credit ratings and meet other requirements can vary significantly and is sensitive to a number of factors;

† we are a holding company and depend on the ability of our subsidiaries to transfer funds to us to meet our obligations and pay dividends;

Industry

†

† insurance companies are highly regulated and subject to numerous legal restrictions and regulations;

† changes to tax law or interpretations of existing tax law could adversely affect our ability to compete with non-insurance products or reduce the demand for certain insurance products;

† financial services companies are frequently the targets of litigation, including class action litigation, which could result in substantial judgments;

† publicly held companies in general and the financial services industry in particular are sometimes the target of law enforcement investigations and the focus of increased regulatory scrutiny;

† new accounting rules, changes to existing accounting rules, or the grant of permitted accounting practices to competitors could negatively impact