PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT (Form: 485BPOS, Received: 06/26/2015 13:48:13)

As Filed with the Securities and Exchange Commission on June 26, 2015

Registration File No. 333-194115
811-7337

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-6

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 o

PRE-EFFECTIVE AMENDMENT NO. o

POST-EFFECTIVE AMENDMENT NO. 2 x

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 o

Amendment No. 54 x

(Check appropriate box or boxes)

Protective Variable Life 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)

(800) 265-1545

Depositor's Telephone Number, including Area Code

MAX BERUEFFY, Esq.

2801 Highway 280 South

Birmingham, Alabama 35223

(Name and address of agent for service)

Copy to:

STEPHEN E. ROTH, Esq.

THOMAS E. BISSET, Esq.

Sutherland Asbill & Brennan LLP

700 Sixth Street, N.W., Suite 700

Washington, DC 20001-3980

It is proposed that this filing will become effective:

o Immediately upon filing pursuant to paragraph (b) of Rule 485

x On June 29, 2015 pursuant to paragraph (b) of Rule 485

o 60 days after filing pursuant to paragraph (a) of Rule 485

o On June 29, 2015 pursuant to paragraph (a) of Rule 485

Title of Securities Being Registered: Interests in Individual

Flexible Premium Variable and Fixed Life Insurance Policies

Supplement dated June 29, 2015 to
Prospectus dated May 1, 2015 for
Protective Investors Choice VUL

Issued by
Protective Life Insurance Company
Protective Variable Life Separate Account

This Supplement amends certain information contained in your Prospectus. Please read this Supplement carefully and keep it with your Prospectus for future reference.

On June 29, 2015, the following Funds (the "New Funds") will be available as additional investment choices under your variable universal life policy. Please refer to your Prospectus dated May 1, 2015 for other investment choices available under your policy. For more information regarding the New Funds, please refer to the prospectus for each of the New Funds listed below.

The New Funds:

American Funds Insurance Series

Asset Allocation Fund ^SM , Class 2
The fund's investment objective is to provide you with high total return (including income and capital gains) consistent with preservation of capital over the long term.

Blue Chip Income and Growth Fund ^SM , Class 2
The fund's investment objectives are to produce income exceeding the average yield on U.S. stocks generally and to provide an opportunity for growth of principal consistent with sound common stock investing.

Global Growth Fund ^SM , Class 2
The fund's investment objective is to provide you with long-term growth of capital.

Global Small Capitalization Fund ^SM , Class 2
The fund's investment objective is to provide you with long-term growth of capital.

Growth Fund ^SM , Class 2
The fund's investment objective is to provide you with growth of capital.

International Fund ^SM , Class 2
The fund's investment objective is to provide you with long-term growth of capital.

New World Fund ^SM , Class 2
The fund's investment objective is long-term capital appreciation.

Goldman Sachs Variable Insurance Trust

Core Fixed Income Fund, Service Class
This Fund seeks a total return consisting of capital appreciation and income that exceeds the total return of the Barclays U.S. Aggregate Bond Index (the "Index").

The Investment Advisor

Each of the New Funds listed above is an investment portfolio of one of the following investment companies: (i) American Funds Insurance Series, managed by Capital Research and Management Company, or (ii) Goldman Sachs Variable Insurance Trust, managed by Goldman Sachs Asset Management, L.P.

Allocation by Investment Category

The following Allocation by Investment Category guidelines specify the minimum and maximum percentages of your Policy Value that must be allocated to each of the three categories of Sub-Accounts listed below (unless you are fully invested in a Benefit Allocation Model, as described below). The New Funds have been added to the Investment Categories. You can select the percentage of Policy Value to allocate to individual Sub-Accounts within each Investment Category, but the total investment for all Sub-Accounts in an Investment Category must comply with the specified minimum and maximum percentages for that Investment Category.

These Allocation by Investment Category guidelines may not be consistent with an aggressive investment strategy. You should consult with your registered representative to determine if they are consistent with your investment objectives.

Allocation by Investment Category
Category 1
Minimum Allocation: 35%
Maximum Allocation: 100%

Fidelity VIP Investment Grade Bond				PIMCO VIT Low Duration
Franklin U.S. Government Securities VIP				PIMCO VIT Real Return
Lord Abbett Bond- Debenture				PIMCO VIT Short-Term
MFS VIT Research Bond				PIMCO VIT Total Return
Oppenheimer Global Strategic Income				Invesco V.I. Government Securities
Oppenheimer Money				Templeton Global Bond VIP
PIMCO VIT Long-Term US Government				Goldman Sachs VIT Core Fixed Income

Category 2
Minimum Allocation: 0%
Maximum Allocation: 65%

Franklin Income VIP				MFS VIT II Massachusetts Investors Growth Stock
MFS VIT Total Return				MFS VIT Investors Trust
Fidelity VIP Contrafund				MFS VIT Value
Fidelity VIP Index 500				Oppenheimer Main Street
Franklin Rising Dividends VIP				Invesco V.I. Comstock
Goldman Sachs VIT Strategic Growth				Invesco V.I. Growth and Income
Lord Abbett Calibrated Dividend Growth				Invesco V.I. Equity and Income
Lord Abbett Classic Stock				MFS VIT Growth
Lord Abbett Fundamental Equity				Franklin Mutual Shares VIP
American Funds Asset Allocation

Category 3
Minimum Allocation: 0%
Maximum Allocation: 30%

Fidelity VIP Mid Cap				MFS VIT II International Value
Franklin Flex Cap Growth VIP				Oppenheimer Capital Appreciation
Franklin Small Cap Value VIP				Oppenheimer Global
Franklin Small-Mid Cap Growth VIP				PIMCO VIT All Asset
Goldman Sachs VIT Growth Opportunities				Royce Capital Micro-Cap
Goldman Sachs VIT Mid Cap Value				Royce Capital Small-Cap
Goldman Sachs VIT Strategic Intl. Equity				Templeton Developing Markets VIP
Legg Mason Clearbridge Variable Mid Cap Core				Templeton Foreign VIP
Legg Mason Clearbridge Variable Small Cap Growth				Templeton Growth VIP
Lord Abbett Growth Opportunities				Invesco V.I. Mid Cap Growth
Lord Abbett Mid-Cap Stock				Invesco V.I. Global Real Estate
MFS VIT New Discovery				Invesco V.I. International Growth
MFS VIT Research Series				Invesco V.I. Small Cap Equity
Invesco V.I. American Value				MFS VIT Utilities
MFS VIT II Emerging Markets Equity				American Funds Blue Chip Income and Growth
American Funds Growth Fund				American Funds Global Growth
American Funds Global Small Capitalization Fund				American Funds International
				American Funds New World Fund

How to Change Your Allocation Instructions

If you would like to change your allocation instructions, please take one of the following actions:

1. Online: Access your account at www.myaccount.protective.com .

2. By phone: 800.456.6330.

EXPLANATORY COMMENT

The prospectus and the statement of additional information included in the Post-Effective Amendment No.1 to the Registration Statement on Form N-6 (333-194115 and 811-7337) filed on April 24, 2015 pursuant to paragraph (b) of Rule 485 are incorporated herein by reference.

INDEX TO FINANCIAL STATEMENTS

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
Report of Independent Registered Public Accounting Firm				F-2
Statement of Assets and Liabilities as of December 31, 2014				F-3
Statement of Operations for the year ended December 31, 2014				F-12
Statement of Changes in Net Assets for the year ended December 31, 2014				F-21
Statement of Changes in Net Assets for the year ended December 31, 2013				F-30
Notes to Financial Statements				F-39
PROTECTIVE LIFE INSURANCE COMPANY
Report of Independent Registered Public Accounting Firm				F-61
Consolidated Statements of Income for the years ended December 31, 2014, 2013 and 2012				F-62
Consolidated Balance Sheets as of December 31, 2014 and 2013				F-64
Consolidated Statements of Share-Owner's Equity for the years ended December 31, 2014, 2013, and 2012				F-65
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012				F-66
Notes to Consolidated Financial Statements				F-67
Financial Statement Schedules:
Schedule III — Supplementary Insurance Information				S-1
Schedule IV — Reinsurance				S-2
Schedule V — Valuation Accounts				S-3

All other schedules to the consolidated financial statements required by Article 7 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted.

F-1

Report of Independent Registered Public Accounting Firm

To the Policy Owners of the Protective Variable Life Separate Account
and the Board of Directors of Protective Life Insurance Company:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of each of the subaccounts listed in Note 1 of the Protective Variable Life Separate Account (the "Separate Account") at December 31, 2014, and the results of each of their operations for the year then ended and the changes in each of their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the management of Protective Life Insurance Company. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments at December 31, 2014 by correspondence with the transfer agents of the investee mutual funds, provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Birmingham, Alabama
April 24, 2015

F-2

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 2014
($ in thousands, except Fair Value per Share)

	Goldman Sachs Variable Insurance Trust
	Goldman Sachs Large Cap Value		Goldman Sachs Strategic International Equity		Goldman Sachs US Equity Insights		Goldman Sachs Small Cap Equity Insights		Goldman Sachs Strategic Growth		Goldman Sachs Mid Cap Value		Goldman Sachs Strategic Growth SC		Goldman Sachs Large Cap Value Fund SC		Goldman Sachs Strategic International Equity SC		Goldman Sachs Small Cap Equity Insights SC
Assets
Investments in subaccounts at fair value	$	14,379	$	6,777	$	10,883	$	7,459	$	11,385	$	3,087	$	2,469	$	2,486	$	1,411	$	422
Receivable from Protective Life Insurance Company		—		—		—		—		—		—		—		—		—		—
Total Assets		14,379		6,777		10,883		7,459		11,385		3,087		2,469		2,486		1,411		422
Liabilities
Payable to Protective Life Insurance Company		59		—		60		—		34		—		—		—		—		—
Net Assets	$	14,320	$	6,777	$	10,823	$	7,459	$	11,351	$	3,087	$	2,469	$	2,486	$	1,411	$	422
Units Outstanding		443,466		338,547		275,658		153,725		263,962		107,396		135,540		165,561		138,918		21,547
Shares Owned in each Portfolio		1,262,398		731,817		600,619		545,671		704,522		177,121		153,054		218,483		152,017		31,055
Fair Value per Share	$	11.39	$	9.26	$	18.12	$	13.67	$	16.16	$	17.43	$	16.13	$	11.38	$	9.28	$	13.60
Investment in Portfolio shares, at Cost	$	13,944	$	9,336	$	9,045	$	7,468	$	9,351	$	2,860	$	1,822	$	2,112	$	1,274	$	280

The accompanying notes are an integral part of these financial statements.
F-3

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES , CONTINUED
As of December 31, 2014
($ in thousands, except Fair Value per Share)

	Goldman Sachs Variable Insurance Trust						Calvert Variable Series, Inc.		MFS Variable Insurance Trust
	Goldman Sachs US Equity Insights SC		Goldman Sachs VIT Growth Opportunities SC		Goldman Sachs Mid Cap Value SC		Calvert VP SRI Balanced		MFS Growth Series IC		MFS Research IC		MFS Investors Trust IC		MFS Total Return IC		MFS New Discovery IC		MFS Utilities IC
Assets
Investments in subaccounts at fair value	$	149	$	1,531	$	1,522	$	59	$	9,501	$	8,648	$	8,890	$	18,884	$	4,725	$	5,252
Receivable from Protective Life Insurance Company		—		—		—		—		—		—		—		—		—		—
Total Assets		149		1,531		1,522		59		9,501		8,648		8,890		18,884		4,725		5,252
Liabilities
Payable to Protective Life Insurance Company		—		—		2		—		10		2		34		38		—		2
Net Assets	$	149	$	1,531	$	1,520	$	59	$	9,491	$	8,646	$	8,856	$	18,846	$	4,725	$	5,250
Units Outstanding		8,391		69,798		82,262		2,307		271,307		283,879		304,474		575,909		126,065		117,836
Shares Owned in each Portfolio		8,201		199,111		87,241		28,697		239,008		297,069		292,344		776,779		289,524		154,643
Fair Value per Share	$	18.17	$	7.69	$	17.45	$	2.05	$	39.75	$	29.11	$	30.41	$	24.31	$	16.32	$	33.96
Investment in Portfolio shares, at Cost	$	76	$	1,384	$	1,426	$	62	$	7,339	$	6,166	$	6,262	$	15,134	$	4,551	$	3,630

The accompanying notes are an integral part of these financial statements.
F-4

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES , CONTINUED
As of December 31, 2014
($ in thousands, except Fair Value per Share)

	MFS Variable Insurance Trust						MFS Variable Insurance Trust II						Oppenheimer Variable Account Funds
	MFS Investors Growth Stock IC		MFS VIT Research Bond SC		MFS VIT Value SC		MFS VIT II Emerging Markets Equity SC		MFS VIT II International Value SC		Oppenheimer Money Fund/VA		Oppenheimer Discovery Mid Cap Growth Fund/VA		Oppenheimer Capital Appreciation Fund/VA		Oppenheimer Main Street Fund/VA
Assets
Investments in subaccounts at fair value	$	3,834	$	8,825	$	8,917	$	357	$	3,437	$	7,097	$	4,037	$	10,987	$	9,281
Receivable from Protective Life Insurance Company		—		—		—		—		—		—		—		—		—
Total Assets		3,834		8,825		8,917		357		3,437		7,097		4,037		10,987		9,281
Liabilities
Payable to Protective Life Insurance Company		2		—		—		—		—		10		2		26		57
Net Assets	$	3,832	$	8,825	$	8,917	$	357	$	3,437	$	7,087	$	4,035	$	10,961	$	9,224
Units Outstanding		279,283		688,653		444,470		40,010		250,553		4,511,357		148,879		328,382		333,160
Shares Owned in each Portfolio		239,005		664,518		444,726		26,985		160,330		7,096,798		51,223		169,369		276,130
Fair Value per Share	$	16.04	$	13.28	$	20.05	$	13.24	$	21.44	$	1.00	$	78.82	$	64.87	$	33.61
Investment in Portfolio shares, at Cost	$	2,740	$	8,680	$	6,765	$	387	$	3,330	$	7,097	$	3,668	$	7,182	$	5,825

The accompanying notes are an integral part of these financial statements.
F-5

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES , CONTINUED
As of December 31, 2014
($ in thousands, except Fair Value per Share)

	Oppenheimer Variable Account Funds				Invesco Variable Insurance Funds
	Oppenheimer Global Strategic Income Fund/VA		Oppenheimer Global Fund/VA		Invesco VI American Franchise I		Invesco VI Comstock I		Invesco VI Growth & Income I		Invesco VI Mid-Cap Growth II		Invesco VI Equity and Income II		Invesco VI American Value II		Invesco VI Balanced Risk Allocation II
Assets
Investments in subaccounts at fair value	$	12,144	$	17,266	$	5,040	$	36,795	$	28,969	$	3,039	$	20,402	$	2,106	$	423
Receivable from Protective Life Insurance Company		—		—		—		—		—		—		—		—		—
Total Assets		12,144		17,266		5,040		36,795		28,969		3,039		20,402		2,106		423
Liabilities
Payable to Protective Life Insurance Company		36		—		—		39		72		—		7		—		—
Net Assets	$	12,108	$	17,266	$	5,040	$	36,756	$	28,897	$	3,039	$	20,395	$	2,106	$	423
Units Outstanding		445,233		457,752		507,410		1,158,447		1,053,478		280,354		781,264		95,306		28,780
Shares Owned in each Portfolio		2,291,237		437,126		91,830		1,920,404		1,151,855		529,396		1,081,766		106,617		34,724
Fair Value per Share	$	5.30	$	39.50	$	54.88	$	19.16	$	25.15	$	5.74	$	18.86	$	19.75	$	12.17
Investment in Portfolio shares, at Cost	$	11,424	$	12,786	$	3,462	$	23,663	$	21,028	$	1,975	$	14,818	$	1,915	$	410

The accompanying notes are an integral part of these financial statements.
F-6

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES , CONTINUED
As of December 31, 2014
($ in thousands, except Fair Value per Share)

	Invesco Variable Insurance Funds						The Universal Institutional Funds, Inc.						Lord Abbett Series Fund, Inc.
	Invesco VI Government Securities II		Invesco VI International Growth II		Invesco VI Global Real Estate II		Invesco VI Small Cap Equity II		UIF Global Real Estate II		Lord Abbett Growth & Income VC		Lord Abbett Bond Debenture VC		Lord Abbett Mid Cap Stock VC		Lord Abbett Growth Opportunities VC
Assets
Investments in subaccounts at fair value	$	4,759	$	4,024	$	424	$	857	$	609	$	17,763	$	16,835	$	17,111	$	3,585
Receivable from Protective Life Insurance Company		—		—		—		—		—		—		—		—		—
Total Assets		4,759		4,024		424		857		609		17,763		16,835		17,111		3,585
Liabilities
Payable to Protective Life Insurance Company		13		—		—		—		—		23		11		27		—
Net Assets	$	4,746	$	4,024	$	424	$	857	$	609	$	17,740	$	16,824	$	17,084	$	3,585
Units Outstanding		427,962		333,785		31,814		60,536		43,917		858,779		654,320		692,366		119,382
Shares Owned in each Portfolio		408,890		116,922		25,229		37,329		57,572		499,805		1,415,922		657,606		277,706
Fair Value per Share	$	11.64	$	34.42	$	16.79	$	22.97	$	10.57	$	35.54	$	11.89	$	26.02	$	12.91
Investment in Portfolio shares, at Cost	$	4,766	$	3,814	$	396	$	846	$	467	$	11,795	$	16,589	$	12,501	$	3,796

The accompanying notes are an integral part of these financial statements.
F-7

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES , CONTINUED
As of December 31, 2014
($ in thousands, except Fair Value per Share)

	Lord Abbett Series Fund, Inc.								Fidelity Variable Insurance Products
	Lord Abbett Calibrated Dividend Growth VC		Lord Abbett International Opportunities VC		Lord Abbett Classic Stock VC		Lord Abbett Series Fundamental Equity VC		Fidelity Index 500 Portfolio SC		Fidelity Growth Portfolio SC		Fidelity Contrafund Portfolio SC		Fidelity Mid Cap SC		Fidelity Equity Income SC		Fidelity Investment Grade Bonds SC
Assets
Investments in subaccounts at fair value	$	10,219	$	1,153	$	704	$	2,521	$	8,581	$	1,725	$	21,513	$	10,379	$	2,386	$	2,970
Receivable from Protective Life Insurance Company		—		—		—		—		—		—		—		—		—		—
Total Assets		10,219		1,153		704		2,521		8,581		1,725		21,513		10,379		2,386		2,970
Liabilities
Payable to Protective Life Insurance Company		6		—		—		—		21		2		—		—		—		—
Net Assets	$	10,213	$	1,153	$	704	$	2,521	$	8,560	$	1,723	$	21,513	$	10,379	$	2,386	$	2,970
Units Outstanding		345,195		91,167		44,685		131,193		430,654		105,810		776,192		338,317		118,170		181,228
Shares Owned in each Portfolio		657,169		142,849		49,727		135,473		41,357		27,237		577,851		277,224		98,671		234,575
Fair Value per Share	$	15.55	$	8.07	$	14.15	$	18.61	$	207.49	$	63.32	$	37.23	$	37.44	$	24.18	$	12.66
Investment in Portfolio shares, at Cost	$	9,347	$	1,154	$	581	$	2,564	$	6,001	$	860	$	14,973	$	8,606	$	2,331	$	2,929

The accompanying notes are an integral part of these financial statements.
F-8

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES , CONTINUED
As of December 31, 2014
($ in thousands, except Fair Value per Share)

	Fidelity Variable Insurance Products				Franklin Templeton Variable Insurance Products Trust
	Fidelity Freedom Fund - 2015 Maturity SC		Fidelity Freedom Fund - 2020 Maturity SC		Franklin Flex Cap Growth VIP CL 2		Franklin Income VIP CL 2		Franklin Rising Dividend VIP CL 2		Franklin Small-Mid Cap Growth VIP CL 2		Franklin Small Cap Value VIP CL 2		Franklin US Government Securities VIP CL 2		Templeton Growth VIP CL 2
Assets
Investments in subaccounts at fair value	$	401	$	625	$	2,925	$	16,593	$	13,725	$	3,424	$	2,230	$	7,557	$	13,449
Receivable from Protective Life Insurance Company		—		—		—		—		—		—		—		—		—
Total Assets		401		625		2,925		16,593		13,725		3,424		2,230		7,557		13,449
Liabilities
Payable to Protective Life Insurance Company		—		—		—		1		3		—		—		—		—
Net Assets	$	401	$	625	$	2,925	$	16,592	$	13,722	$	3,424	$	2,230	$	7,557	$	13,449
Units Outstanding		27,659		43,338		167,488		950,024		737,519		185,923		109,125		564,455		978,812
Shares Owned in each Portfolio		31,950		49,081		176,099		1,037,034		472,285		145,350		99,899		593,618		920,511
Fair Value per Share	$	12.56	$	12.74	$	16.61	$	16.00	$	29.06	$	23.56	$	22.32	$	12.73	$	14.61
Investment in Portfolio shares, at Cost	$	327	$	471	$	2,279	$	15,639	$	9,223	$	2,951	$	1,755	$	7,665	$	11,447

The accompanying notes are an integral part of these financial statements.
F-9

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES , CONTINUED
As of December 31, 2014
($ in thousands, except Fair Value per Share)

	Franklin Templeton Variable Insurance Products Trust						Legg Mason Partners Variable Equity Trust						PIMCO Variable Insurance Trust
	Templeton Foreign VIP CL 2		Templeton Global Bond VIP Fund CL 2		Templeton Developing Markets VIP CL 2		Franklin Mutual Shares VIP CL 2		ClearBridge Variable Mid Cap Core II		ClearBridge Variable Small Cap Growth II		PIMCO VIT Long-Term US Government Advisor		PIMCO VIT Low Duration Advisor		PIMCO VIT Real Return Advisor
Assets
Investments in subaccounts at fair value	$	7,740	$	7,941	$	203	$	29,903	$	800	$	665	$	156	$	989	$	2,277
Receivable from Protective Life Insurance Company		—		—		—		—		—		—		—		—		—
Total Assets		7,740		7,941		203		29,903		800		665		156		989		2,277
Liabilities
Payable to Protective Life Insurance Company		—		2		—		3		—		—		—		—		—
Net Assets	$	7,740	$	7,939	$	203	$	29,900	$	800	$	665	$	156	$	989	$	2,277
Units Outstanding		576,363		432,918		22,361		1,886,861		37,611		27,465		10,298		86,633		183,444
Shares Owned in each Portfolio		514,308		441,436		22,081		1,323,150		42,901		30,532		12,914		93,465		177,732
Fair Value per Share	$	15.05	$	17.99	$	9.20	$	22.60	$	18.65	$	21.78	$	12.05	$	10.58	$	12.81
Investment in Portfolio shares, at Cost	$	7,707	$	7,931	$	217	$	22,998	$	707	$	624	$	156	$	989	$	2,416

The accompanying notes are an integral part of these financial statements.
F-10

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES , CONTINUED
As of December 31, 2014
($ in thousands, except Fair Value per Share)

	PIMCO Variable Insurance Trust						Royce Capital Fund
	PIMCO VIT Short-Term Advisor		PIMCO VIT Total Return Advisor		PIMCO VIT All Asset Advisor		Royce Capital Fund Micro-Cap SC		Royce Capital Fund Small-Cap SC
Assets
Investments in subaccounts at fair value	$	506	$	10,110	$	170	$	706	$	2,010
Receivable from Protective Life Insurance Company		—		—		—		—		—
Total Assets		506		10,110		170		706		2,010
Liabilities
Payable to Protective Life Insurance Company		—		—		—		—		—
Net Assets	$	506	$	10,110	$	170	$	706	$	2,010
Units Outstanding		47,410		807,175		15,660		46,693		108,093
Shares Owned in each Portfolio		49,319		902,675		16,282		62,857		161,541
Fair Value per Share	$	10.26	$	11.20	$	10.47	$	11.23	$	12.44
Investment in Portfolio shares, at Cost	$	506	$	10,170	$	183	$	719	$	1,853

The accompanying notes are an integral part of these financial statements.
F-11

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF OPERATIONS
For the Year Ended December 31, 2014
($ in thousands)

	Goldman Sachs Variable Insurance Trust
	Goldman Sachs Large Cap Value			Goldman Sachs Strategic International Equity			Goldman Sachs US Equity Insights		Goldman Sachs Small Cap Equity Insights			Goldman Sachs Strategic Growth			Goldman Sachs Mid Cap Value			Goldman Sachs Strategic Growth SC			Goldman Sachs Large Cap Value Fund SC			Goldman Sachs Strategic International Equity SC			Goldman Sachs Small Cap Equity Insights SC
Investment Income
Dividend income	$	196		$	268		$	146	$	56		$	41		$	30		$	3		$	27		$	51		$	2
Net Realized and Unrealized Gains (Losses) on Investments
Net realized gain (loss) on redemption of investment shares		67			(94	)		289		4			98			19			1			6			—			—
Capital gain distributions		2,594			—			465		1,051			2,118			502			458			449			—			60
Net realized gain (loss) on investments		2,661			(94	)		754		1,055			2,216			521			459			455			—			60
Net unrealized appreciation (depreciation) on investments		(1,158	)		(722	)		676		(629	)		(857	)		(168	)		(177	)		(199	)		(166	)		(36	)
Net realized and unrealized gain (loss) on investments		1,503			(816	)		1,430		426			1,359			353			282			256			(166	)		24
Net Increase (Decrease) in Net Assets Resulting from Operations	$	1,699		$	(548	)	$	1,576	$	482		$	1,400		$	383		$	285		$	283		$	(115	)	$	26

The accompanying notes are an integral part of these financial statements.
F-12

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Goldman Sachs Variable Insurance Trust								Calvert Variable Series, Inc.		MFS Variable Insurance Trust
	Goldman Sachs US Equity Insights SC		Goldman Sachs VIT Growth Opportunities SC			Goldman Sachs Mid Cap Value SC			Calvert VP SRI Balanced		MFS Growth Series IC			MFS Research IC		MFS Investors Trust IC		MFS Total Return IC		MFS New Discovery IC			MFS Utilities IC
Investment Income
Dividend income	$	2	$	—		$	11		$	1	$	9		$	69	$	76	$	343	$	—		$	106
Net Realized and Unrealized Gains (Losses) on Investments
Net realized gain (loss) on redemption of investment shares		1		3			—			—		(1	)		35		—		37		—			12
Capital gain distributions		6		289			238			4		584			627		619		477		949			187
Net realized gain (loss) on investments		7		292			238			4		583			662		619		514		949			199
Net unrealized appreciation (depreciation) on investments		12		(135	)		(87	)		1		166			77		163		644		(1,302	)		290
Net realized and unrealized gain (loss) on investments		19		157			151			5		749			739		782		1,158		(353	)		489
Net Increase (Decrease) in Net Assets Resulting from Operations	$	21	$	157		$	162		$	6	$	758		$	808	$	858	$	1,501	$	(353	)	$	595

The accompanying notes are an integral part of these financial statements.
F-13

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	MFS Variable Insurance Trust						MFS Variable Insurance Trust II						Oppenheimer Variable Account Funds
	MFS Investors Growth Stock IC		MFS VIT Research Bond SC		MFS VIT Value SC		MFS VIT II Emerging Markets Equity SC			MFS VIT II International Value SC			Oppenheimer Money Fund/VA			Oppenheimer Discovery Mid Cap Growth Fund/VA			Oppenheimer Capital Appreciation Fund/VA		Oppenheimer Main Street Fund/VA
Investment Income
Dividend income	$	19	$	202	$	104	$	1		$	50		$	1		$	—		$	47	$	75
Net Realized and Unrealized Gains (Losses) on Investments
Net realized gain (loss) on redemption of investment shares		2		—		—		—			—			—			(4	)		218		218
Capital gain distributions		200		—		244		—			—			—			—			256		182
Net realized gain (loss) on investments		202		—		244		—			—			—			(4	)		474		400
Net unrealized appreciation (depreciation) on investments		169		138		423		(29	)		(43	)		(1	)		226			995		448
Net realized and unrealized gain (loss) on investments		371		138		667		(29	)		(43	)		(1	)		222			1,469		848
Net Increase (Decrease) in Net Assets Resulting from Operations	$	390	$	340	$	771	$	(28	)	$	7		$	—		$	222		$	1,516	$	923

The accompanying notes are an integral part of these financial statements.
F-14

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Oppenheimer Variable Account Funds						Invesco Variable Insurance Funds
	Oppenheimer Global Strategic Income Fund/VA			Oppenheimer Global Fund/VA			Invesco VI American Franchise I		Invesco VI Comstock I		Invesco VI Growth & Income I			Invesco VI Mid-Cap Growth II		Invesco VI Equity and Income II		Invesco VI American Value II			Invesco VI Balanced Risk Allocation II
Investment Income
Dividend income	$	516		$	189		$	2	$	479	$	496		$	—	$	310	$	4		$	—
Net Realized and Unrealized Gains (Losses) on Investments
Net realized gain (loss) on redemption of investment shares		4			6			99		89		23			2		4		—			—
Capital gain distributions		—			771			—		—		3,225			—		957		148			23
Net realized gain (loss) on investments		4			777			99		89		3,248			2		961		148			23
Net unrealized appreciation (depreciation) on investments		(180	)		(574	)		300		2,626		(1,060	)		217		366		(5	)		—
Net realized and unrealized gain (loss) on investments		(176	)		203			399		2,715		2,188			219		1,327		143			23
Net Increase (Decrease) in Net Assets Resulting from Operations	$	340		$	392		$	401	$	3,194	$	2,684		$	219	$	1,637	$	147		$	23

The accompanying notes are an integral part of these financial statements.
F-15

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Invesco Variable Insurance Funds										The Universal Institutional Funds, Inc.		Lord Abbett Series Fund, Inc.
	Invesco VI Government Securities II		Invesco VI International Growth II			Invesco VI Global Real Estate II		Invesco VI Small Cap Equity II			UIF Global Real Estate II		Lord Abbett Growth & Income VC		Lord Abbett Bond Debenture VC			Lord Abbett Mid Cap Stock VC		Lord Abbett Growth Opportunities VC
Investment Income
Dividend income	$	141	$	50		$	6	$	—		$	4	$	122	$	802		$	73	$	—
Net Realized and Unrealized Gains (Losses) on Investments
Net realized gain (loss) on redemption of investment shares		1		1			—		—			11		172		3			162		6
Capital gain distributions		—		—			—		64			—		—		446			—		747
Net realized gain (loss) on investments		1		1			—		64			11		172		449			162		753
Net unrealized appreciation (depreciation) on investments		37		(78	)		33		(33	)		65		995		(569	)		1,570		(542	)
Net realized and unrealized gain (loss) on investments		38		(77	)		33		31			76		1,167		(120	)		1,732		211
Net Increase (Decrease) in Net Assets Resulting from Operations	$	179	$	(27	)	$	39	$	31		$	80	$	1,289	$	682		$	1,805	$	211

The accompanying notes are an integral part of these financial statements.
F-16

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Lord Abbett Series Fund, Inc.												Fidelity Variable Insurance Products
	Lord Abbett Calibrated Dividend Growth VC			Lord Abbett International Opportunities VC			Lord Abbett Classic Stock VC			Lord Abbett Series Fundamental Equity VC			Fidelity Index 500 Portfolio SC		Fidelity Growth Portfolio SC		Fidelity Contrafund Portfolio SC		Fidelity Mid Cap SC		Fidelity Equity Income SC		Fidelity Investment Grade Bonds SC
Investment Income
Dividend income	$	170		$	16		$	5		$	11		$	132	$	2	$	180	$	16	$	65	$	64
Net Realized and Unrealized Gains (Losses) on Investments
Net realized gain (loss) on redemption of investment shares		29			—			—			—			2		26		70		—		20		3
Capital gain distributions		1,327			162			82			431			8		—		421		214		33		1
Net realized gain (loss) on investments		1,356			162			82			431			10		26		491		214		53		4
Net unrealized appreciation (depreciation) on investments		(434	)		(249	)		(30	)		(286	)		824		145		1,634		353		86		83
Net realized and unrealized gain (loss) on investments		922			(87	)		52			145			834		171		2,125		567		139		87
Net Increase (Decrease) in Net Assets Resulting from Operations	$	1,092		$	(71	)	$	57		$	156		$	966	$	173	$	2,305	$	583	$	204	$	151

The accompanying notes are an integral part of these financial statements.
F-17

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Fidelity Variable Insurance Products				Franklin Templeton Variable Insurance Products Trust
	Fidelity Freedom Fund - 2015 Maturity SC		Fidelity Freedom Fund - 2020 Maturity SC		Franklin Flex Cap Growth VIP CL 2			Franklin Income VIP CL 2			Franklin Rising Dividend VIP CL 2		Franklin Small-Mid Cap Growth VIP CL 2			Franklin Small Cap Value VIP CL 2			Franklin US Government Securities VIP CL 2		Templeton Growth VIP CL 2
Investment Income
Dividend income	$	6	$	10	$	—		$	831		$	164	$	—		$	12		$	171	$	182
Net Realized and Unrealized Gains (Losses) on Investments
Net realized gain (loss) on redemption of investment shares		—		—		2			2			—		(1	)		—			—		1
Capital gain distributions		6		10		375			—			242		616			148			—		—
Net realized gain (loss) on investments		6		10		377			2			242		615			148			—		1
Net unrealized appreciation (depreciation) on investments		5		7		(201	)		(102	)		681		(381	)		(135	)		42		(576	)
Net realized and unrealized gain (loss) on investments		11		17		176			(100	)		923		234			13			42		(575	)
Net Increase (Decrease) in Net Assets Resulting from Operations	$	17	$	27	$	176		$	731		$	1,087	$	234		$	25		$	213	$	(393	)

The accompanying notes are an integral part of these financial statements.
F-18

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Franklin Templeton Variable Insurance Products Trust											Legg Mason Partners Variable Equity Trust						PIMCO Variable Insurance Trust
	Templeton Foreign VIP CL 2			Templeton Global Bond VIP Fund CL 2			Templeton Developing Markets VIP CL 2			Franklin Mutual Shares VIP CL 2		ClearBridge Variable Mid Cap Core II			ClearBridge Variable Small Cap Growth II			PIMCO VIT Long-Term US Government Advisor			PIMCO VIT Low Duration Advisor			PIMCO VIT Real Return Advisor
Investment Income
Dividend income	$	152		$	367		$	2		$	585	$	1		$	—		$	3		$	9		$	26
Net Realized and Unrealized Gains (Losses) on Investments
Net realized gain (loss) on redemption of investment shares		—			(1	)		—			11		—			(2	)		(12	)		—			—
Capital gain distributions		—			—			—			152		56			68			—			—			—
Net realized gain (loss) on investments		—			(1	)		—			163		56			66			(12	)		—			—
Net unrealized appreciation (depreciation) on investments		(1,109	)		(249	)		(15	)		1,196		(7	)		(38	)		41			(2	)		23
Net realized and unrealized gain (loss) on investments		(1,109	)		(250	)		(15	)		1,359		49			28			29			(2	)		23
Net Increase (Decrease) in Net Assets Resulting from Operations	$	(957	)	$	117		$	(13	)	$	1,944	$	50		$	28		$	32		$	7		$	49

The accompanying notes are an integral part of these financial statements.
F-19

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	PIMCO Variable Insurance Trust								Royce Capital Fund
	PIMCO VIT Short-Term Advisor			PIMCO VIT Total Return Advisor		PIMCO VIT All Asset Advisor			Royce Capital Fund Micro-Cap SC			Royce Capital Fund Small-Cap SC
Investment Income
Dividend income	$	4		$	200	$	8		$	—		$	—
Net Realized and Unrealized Gains (Losses) on Investments
Net realized gain (loss) on redemption of investment shares		1			—		—			1			—
Capital gain distributions		1			—		—			56			233
Net realized gain (loss) on investments		2			—		—			57			233
Net unrealized appreciation (depreciation) on investments		(1	)		166		(10	)		(79	)		(168	)
Net realized and unrealized gain (loss) on investments		1			166		(10	)		(22	)		65
Net Increase (Decrease) in Net Assets Resulting from Operations	$	5		$	366	$	(2	)	$	(22	)	$	65

The accompanying notes are an integral part of these financial statements.
F-20

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 2014
($ in thousands)

	Goldman Sachs Variable Insurance Trust
	Goldman Sachs Large Cap Value			Goldman Sachs Strategic International Equity			Goldman Sachs US Equity Insights			Goldman Sachs Small Cap Equity Insights			Goldman Sachs Strategic Growth			Goldman Sachs Mid Cap Value			Goldman Sachs Strategic Growth SC			Goldman Sachs Large Cap Value Fund SC			Goldman Sachs Strategic International Equity SC			Goldman Sachs Small Cap Equity Insights SC
From Operations
Net investment income (loss)	$	196		$	268		$	146		$	56		$	41		$	30		$	3		$	27		$	51		$	2
Net realized gain (loss) on investments		2,661			(94	)		754			1,055			2,216			521			459			455			—			60
Net unrealized appreciation (depreciation) on investments		(1,158	)		(722	)		676			(629	)		(857	)		(168	)		(177	)		(199	)		(166	)		(36	)
Net increase (decrease) in net assets resulting from operations		1,699			(548	)		1,576			482			1,400			383			285			283			(115	)		26
From Variable Life Policy Transactions
Policy owners' net payments		647			425			412			400			565			125			237			175			135			32
Mortality and expense risk charges		(72	)		(34	)		(30	)		(27	)		(40	)		(21	)		(8	)		(9	)		(4	)		(2	)
Cost of insurance and administrative charges		(500	)		(317	)		(384	)		(261	)		(450	)		(102	)		(92	)		(81	)		(60	)		(18	)
Surrenders		(421	)		(341	)		(339	)		(212	)		(399	)		(178	)		(64	)		(60	)		(20	)		(5	)
Death benefits		(328	)		(60	)		(235	)		(55	)		(158	)		(17	)		—			—			—			(3	)
Net policy loan repayments (withdrawals)		(64	)		(51	)		(36	)		(21	)		(92	)		(33	)		(10	)		(13	)		(4	)		(3	)
Transfer (to) from other portfolios		(220	)		126			(288	)		(17	)		(241	)		(36	)		75			(59	)		126			—
Net increase (decrease) in net assets resulting from variable life policy transactions		(958	)		(252	)		(900	)		(193	)		(815	)		(262	)		138			(47	)		173			1
Total increase (decrease) in net assets		741			(800	)		676			289			585			121			423			236			58			27
Net Assets
Beginning of period		13,579			7,577			10,147			7,170			10,766			2,966			2,046			2,250			1,353			395
End of period	$	14,320		$	6,777		$	10,823		$	7,459		$	11,351		$	3,087		$	2,469		$	2,486		$	1,411		$	422

The accompanying notes are an integral part of these financial statements.
F-21

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Goldman Sachs Variable Insurance Trust									Calvert Variable Series, Inc.			MFS Variable Insurance Trust
	Goldman Sachs US Equity Insights SC			Goldman Sachs VIT Growth Opportunities SC			Goldman Sachs Mid Cap Value SC			Calvert VP SRI Balanced			MFS Growth Series IC			MFS Research IC			MFS Investors Trust IC			MFS Total Return IC			MFS New Discovery IC			MFS Utilities IC
From Operations
Net investment income (loss)	$	2		$	—		$	11		$	1		$	9		$	69		$	76		$	343		$	—		$	106
Net realized gain (loss) on investments		7			292			238			4			583			662			619			514			949			199
Net unrealized appreciation (depreciation) on investments		12			(135	)		(87	)		1			166			77			163			644			(1,302	)		290
Net increase (decrease) in net assets resulting from operations		21			157			162			6			758			808			858			1,501			(353	)		595
From Variable Life Policy Transactions
Policy owners' net payments		5			151			96			—			697			570			485			873			346			275
Mortality and expense risk charges		(1	)		(4	)		(3	)		—			(25	)		(19	)		(24	)		(94	)		(13	)		(22	)
Cost of insurance and administrative charges		(3	)		(58	)		(43	)		(2	)		(389	)		(389	)		(330	)		(656	)		(167	)		(207	)
Surrenders		—			(68	)		(12	)		(1	)		(259	)		(166	)		(202	)		(578	)		(201	)		(199	)
Death benefits		—			(13	)		(8	)		(14	)		(39	)		(105	)		(187	)		(321	)		(11	)		(5	)
Net policy loan repayments (withdrawals)		—			(19	)		(4	)		—			(82	)		(144	)		(47	)		(60	)		(29	)		(12	)
Transfer (to) from other portfolios		(6	)		16			243			—			953			57			950			515			220			199
Net increase (decrease) in net assets resulting from variable life policy transactions		(5	)		5			269			(17	)		856			(196	)		645			(321	)		145			29
Total increase (decrease) in net assets		16			162			431			(11	)		1,614			612			1,503			1,180			(208	)		624
Net Assets
Beginning of period		133			1,369			1,089			70			7,877			8,034			7,353			17,666			4,933			4,626
End of period	$	149		$	1,531		$	1,520		$	59		$	9,491		$	8,646		$	8,856		$	18,846		$	4,725		$	5,250

The accompanying notes are an integral part of these financial statements.
F-22

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	MFS Variable Insurance Trust									MFS Variable Insurance Trust II						Oppenheimer Variable Account Funds
	MFS Investors Growth Stock IC			MFS VIT Research Bond SC			MFS VIT Value SC			MFS VIT II Emerging Markets Equity SC			MFS VIT II International Value SC			Oppenheimer Money Fund/VA			Oppenheimer Discovery Mid Cap Growth Fund/VA			Oppenheimer Capital Appreciation Fund/VA			Oppenheimer Main Street Fund/VA
From Operations
Net investment income (loss)	$	19		$	202		$	104		$	1		$	50		$	1		$	—		$	47		$	75
Net realized gain (loss) on investments		202			—			244			—			—			—			(4	)		474			400
Net unrealized appreciation (depreciation) on investments		169			138			423			(29	)		(43	)		(1	)		226			995			448
Net increase (decrease) in net assets resulting from operations		390			340			771			(28	)		7			—			222			1,516			923
From Variable Life Policy Transactions
Policy owners' net payments		184			805			819			40			335			858			264			557			368
Mortality and expense risk charges		(8	)		(31	)		(27	)		(1	)		(11	)		(26	)		(8	)		(28	)		(27	)
Cost of insurance and administrative charges		(117	)		(330	)		(315	)		(13	)		(134	)		(575	)		(192	)		(409	)		(305	)
Surrenders		(170	)		(81	)		(146	)		—			(9	)		(580	)		(118	)		(375	)		(379	)
Death benefits		(26	)		—			(25	)		(1	)		—			(16	)		(29	)		(98	)		(231	)
Net policy loan repayments (withdrawals)		(14	)		(4	)		(50	)		—			(4	)		105			(39	)		(120	)		(37	)
Transfer (to) from other portfolios		415			3,336			1,506			152			1,840			376			(130	)		(447	)		(111	)
Net increase (decrease) in net assets resulting from variable life policy transactions		264			3,695			1,762			177			2,017			142			(252	)		(920	)		(722	)
Total increase (decrease) in net assets		654			4,035			2,533			149			2,024			142			(30	)		596			201
Net Assets
Beginning of period		3,178			4,790			6,384			208			1,413			6,945			4,065			10,365			9,023
End of period	$	3,832		$	8,825		$	8,917		$	357		$	3,437		$	7,087		$	4,035		$	10,961		$	9,224

The accompanying notes are an integral part of these financial statements.
F-23

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Oppenheimer Variable Account Funds						Invesco Variable Insurance Funds
	Oppenheimer Global Strategic Income Fund/VA			Oppenheimer Global Fund/VA			Invesco VI American Franchise I			Invesco VI Comstock I			Invesco VI Growth & Income I			Invesco VI Mid-Cap Growth II			Invesco VI Equity and Income II			Invesco VI American Value II			Invesco VI Balanced Risk Allocation II
From Operations
Net investment income (loss)	$	516		$	189		$	2		$	479		$	496		$	—		$	310		$	4		$	—
Net realized gain (loss) on investments		4			777			99			89			3,248			2			961			148			23
Net unrealized appreciation (depreciation) on investments		(180	)		(574	)		300			2,626			(1,060	)		217			366			(5	)		—
Net increase (decrease) in net assets resulting from operations		340			392			401			3,194			2,684			219			1,637			147			23
From Variable Life Policy Transactions
Policy owners' net payments		845			1,275			259			1,874			1,563			212			1,140			192			22
Mortality and expense risk charges		(51	)		(74	)		(11	)		(184	)		(119	)		(13	)		(117	)		(8	)		(2	)
Cost of insurance and administrative charges		(519	)		(620	)		(169	)		(1,205	)		(921	)		(104	)		(673	)		(78	)		(15	)
Surrenders		(582	)		(423	)		(202	)		(980	)		(679	)		(91	)		(396	)		(11	)		(7	)
Death benefits		(198	)		(119	)		—			(355	)		(407	)		—			(162	)		(5	)		—
Net policy loan repayments (withdrawals)		(94	)		(148	)		4			(235	)		(156	)		(21	)		(198	)		(3	)		—
Transfer (to) from other portfolios		491			98			(83	)		356			937			93			739			761			84
Net increase (decrease) in net assets resulting from variable life policy transactions		(108	)		(11	)		(202	)		(729	)		218			76			333			848			82
Total increase (decrease) in net assets		232			381			199			2,465			2,902			295			1,970			995			105
Net Assets
Beginning of period		11,876			16,885			4,841			34,291			25,995			2,744			18,425			1,111			318
End of period	$	12,108		$	17,266		$	5,040		$	36,756		$	28,897		$	3,039		$	20,395		$	2,106		$	423

The accompanying notes are an integral part of these financial statements.
F-24

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Invesco Variable Insurance Funds												The Universal Institutional Funds, Inc.			Lord Abbett Series Fund, Inc.
	Invesco VI Government Securities II			Invesco VI International Growth II			Invesco VI Global Real Estate II			Invesco VI Small Cap Equity II			UIF Global Real Estate II			Lord Abbett Growth & Income VC			Lord Abbett Bond Debenture VC			Lord Abbett Mid Cap Stock VC			Lord Abbett Growth Opportunities VC
From Operations
Net investment income (loss)	$	141		$	50		$	6		$	—		$	4		$	122		$	802		$	73		$	—
Net realized gain (loss) on investments		1			1			—			64			11			172			449			162			753
Net unrealized appreciation (depreciation) on investments		37			(78	)		33			(33	)		65			995			(569	)		1,570			(542	)
Net increase (decrease) in net assets resulting from operations		179			(27	)		39			31			80			1,289			682			1,805			211
From Variable Life Policy Transactions
Policy owners' net payments		337			427			48			106			35			661			822			854			184
Mortality and expense risk charges		(33	)		(14	)		(2	)		(3	)		(2	)		(89	)		(82	)		(93	)		(23	)
Cost of insurance and administrative charges		(199	)		(155	)		(16	)		(38	)		(18	)		(561	)		(571	)		(578	)		(127	)
Surrenders		(125	)		(46	)		—			(3	)		(22	)		(614	)		(495	)		(589	)		(156	)
Death benefits		(79	)		(3	)		—			—			(3	)		(325	)		(293	)		(208	)		(18	)
Net policy loan repayments (withdrawals)		(16	)		(21	)		—			(2	)		—			(48	)		(90	)		(65	)		(36	)
Transfer (to) from other portfolios		209			1,478			161			421			(30	)		(285	)		1,386			(57	)		(14	)
Net increase (decrease) in net assets resulting from variable life policy transactions		94			1,666			191			481			(40	)		(1,261	)		677			(736	)		(190	)
Total increase (decrease) in net assets		273			1,639			230			512			40			28			1,359			1,069			21
Net Assets
Beginning of period		4,473			2,385			194			345			569			17,712			15,465			16,015			3,564
End of period	$	4,746		$	4,024		$	424		$	857		$	609		$	17,740		$	16,824		$	17,084		$	3,585

The accompanying notes are an integral part of these financial statements.
F-25

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Lord Abbett Series Fund, Inc.												Fidelity Variable Insurance Products
	Lord Abbett Calibrated Dividend Growth VC			Lord Abbett International Opportunities VC			Lord Abbett Classic Stock VC			Lord Abbett Series Fundamental Equity VC			Fidelity Index 500 Portfolio SC			Fidelity Growth Portfolio SC			Fidelity Contrafund Portfolio SC			Fidelity Mid Cap SC			Fidelity Equity Income SC			Fidelity Investment Grade Bonds SC
From Operations
Net investment income (loss)	$	170		$	16		$	5		$	11		$	132		$	2		$	180		$	16		$	65		$	64
Net realized gain (loss) on investments		1,356			162			82			431			10			26			491			214			53			4
Net unrealized appreciation (depreciation) on investments		(434	)		(249	)		(30	)		(286	)		824			145			1,634			353			86			83
Net increase (decrease) in net assets resulting from operations		1,092			(71	)		57			156			966			173			2,305			583			204			151
From Variable Life Policy Transactions
Policy owners' net payments		438			85			54			194			595			86			1,313			911			140			154
Mortality and expense risk charges		(68	)		(4	)		(2	)		(7	)		(31	)		(8	)		(116	)		(46	)		(16	)		(15	)
Cost of insurance and administrative charges		(335	)		(37	)		(29	)		(76	)		(316	)		(77	)		(726	)		(370	)		(107	)		(108	)
Surrenders		(327	)		(49	)		(11	)		(20	)		(240	)		(35	)		(685	)		(314	)		(115	)		(114	)
Death benefits		(197	)		—			(4	)		(2	)		(64	)		—			(186	)		(79	)		(86	)		(1	)
Net policy loan repayments (withdrawals)		(40	)		(2	)		(4	)		2			(89	)		(1	)		(186	)		(63	)		(17	)		(4	)
Transfer (to) from other portfolios		(56	)		157			46			441			1,193			(1	)		195			1,142			15			326
Net increase (decrease) in net assets resulting from variable life policy transactions		(585	)		150			50			532			1,048			(36	)		(391	)		1,181			(186	)		238
Total increase (decrease) in net assets		507			79			107			688			2,014			137			1,914			1,764			18			389
Net Assets
Beginning of period		9,706			1,074			597			1,833			6,546			1,586			19,599			8,615			2,368			2,581
End of period	$	10,213		$	1,153		$	704		$	2,521		$	8,560		$	1,723		$	21,513		$	10,379		$	2,386		$	2,970

The accompanying notes are an integral part of these financial statements.
F-26

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Fidelity Variable Insurance Products						Franklin Templeton Variable Insurance Products Trust
	Fidelity Freedom Fund - 2015 Maturity SC			Fidelity Freedom Fund - 2020 Maturity SC			Franklin Flex Cap Growth VIP CL 2			Franklin Income VIP CL 2			Franklin Rising Dividend VIP CL 2			Franklin Small-Mid Cap Growth VIP CL 2			Franklin Small Cap Value VIP CL 2			Franklin US Government Securities VIP CL 2			Templeton Growth VIP CL 2
From Operations
Net investment income (loss)	$	6		$	10		$	—		$	831		$	164		$	—		$	12		$	171		$	182
Net realized gain (loss) on investments		6			10			377			2			242			615			148			—			1
Net unrealized appreciation (depreciation) on investments		5			7			(201	)		(102	)		681			(381	)		(135	)		42			(576	)
Net increase (decrease) in net assets resulting from operations		17			27			176			731			1,087			234			25			213			(393	)
From Variable Life Policy Transactions
Policy owners' net payments		16			20			187			955			907			238			186			553			1,113
Mortality and expense risk charges		(3	)		(3	)		(10	)		(101	)		(59	)		(17	)		(6	)		(32	)		(81	)
Cost of insurance and administrative charges		(10	)		(16	)		(90	)		(620	)		(469	)		(120	)		(73	)		(280	)		(529	)
Surrenders		—			(1	)		(45	)		(333	)		(263	)		(192	)		(24	)		(169	)		(207	)
Death benefits		—			—			(7	)		(125	)		(15	)		—			(25	)		(23	)		(84	)
Net policy loan repayments (withdrawals)		—			(10	)		(20	)		(70	)		(49	)		(10	)		(13	)		(32	)		(54	)
Transfer (to) from other portfolios		29			43			383			567			1,180			214			297			1,686			601
Net increase (decrease) in net assets resulting from variable life policy transactions		32			33			398			273			1,232			113			342			1,703			759
Total increase (decrease) in net assets		49			60			574			1,004			2,319			347			367			1,916			366
Net Assets
Beginning of period		352			565			2,351			15,588			11,403			3,077			1,863			5,641			13,083
End of period	$	401		$	625		$	2,925		$	16,592		$	13,722		$	3,424		$	2,230		$	7,557		$	13,449

The accompanying notes are an integral part of these financial statements.
F-27

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	Franklin Templeton Variable Insurance Products Trust												Legg Mason Partners Variable Equity Trust						PIMCO Variable Insurance Trust
	Templeton Foreign VIP CL 2			Templeton Global Bond VIP Fund CL 2			Templeton Developing Markets VIP CL 2			Franklin Mutual Shares VIP CL 2			ClearBridge Variable Mid Cap Core II			ClearBridge Variable Small Cap Growth II			PIMCO VIT Long-Term US Government Advisor			PIMCO VIT Low Duration Advisor			PIMCO VIT Real Return Advisor
From Operations
Net investment income (loss)	$	152		$	367		$	2		$	585		$	1		$	—		$	3		$	9		$	26
Net realized gain (loss) on investments		—			(1	)		—			163			56			66			(12	)		—			—
Net unrealized appreciation (depreciation) on investments		(1,109	)		(249	)		(15	)		1,196			(7	)		(38	)		41			(2	)		23
Net increase (decrease) in net assets resulting from operations		(957	)		117			(13	)		1,944			50			28			32			7			49
From Variable Life Policy Transactions
Policy owners' net payments		628			514			24			2,258			78			72			8			57			149
Mortality and expense risk charges		(43	)		(36	)		(1	)		(156	)		(2	)		(2	)		—			(4	)		(7	)
Cost of insurance and administrative charges		(295	)		(269	)		(9	)		(1,106	)		(24	)		(13	)		(7	)		(31	)		(72	)
Surrenders		(146	)		(143	)		—			(620	)		(1	)		(1	)		—			(11	)		(20	)
Death benefits		(17	)		(16	)		(4	)		(117	)		—			(5	)		—			—			—
Net policy loan repayments (withdrawals)		(45	)		(19	)		—			(142	)		—			(13	)		—			(1	)		(5	)
Transfer (to) from other portfolios		526			1,275			132			1,374			174			222			(73	)		124			403
Net increase (decrease) in net assets resulting from variable life policy transactions		608			1,306			142			1,491			225			260			(72	)		134			448
Total increase (decrease) in net assets		(349	)		1,423			129			3,435			275			288			(40	)		141			497
Net Assets
Beginning of period		8,089			6,516			74			26,465			525			377			196			848			1,780
End of period	$	7,740		$	7,939		$	203		$	29,900		$	800		$	665		$	156		$	989		$	2,277

The accompanying notes are an integral part of these financial statements.
F-28

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)

	PIMCO Variable Insurance Trust									Royce Capital Fund
	PIMCO VIT Short-Term Advisor			PIMCO VIT Total Return Advisor			PIMCO VIT All Asset Advisor			Royce Capital Fund Micro-Cap SC			Royce Capital Fund Small-Cap SC
From Operations
Net investment income (loss)	$	4		$	200		$	8		$	—		$	—
Net realized gain (loss) on investments		2			—			—			57			233
Net unrealized appreciation (depreciation) on investments		(1	)		166			(10	)		(79	)		(168	)
Net increase (decrease) in net assets resulting from operations		5			366			(2	)		(22	)		65
From Variable Life Policy Transactions
Policy owners' net payments		42			923			5			50			214
Mortality and expense risk charges		(5	)		(35	)		(1	)		(2	)		(5	)
Cost of insurance and administrative charges		(26	)		(379	)		(6	)		(19	)		(68	)
Surrenders		(747	)		(103	)		—			(3	)		(10	)
Death benefits		—			(69	)		—			—			(3	)
Net policy loan repayments (withdrawals)		8			(80	)		—			—			(5	)
Transfer (to) from other portfolios		852			1,515			66			106			206
Net increase (decrease) in net assets resulting from variable life policy transactions		124			1,772			64			132			329
Total increase (decrease) in net assets		129			2,138			62			110			394
Net Assets
Beginning of period		377			7,972			108			596			1,616
End of period	$	506		$	10,110		$	170		$	706		$	2,010

The accompanying notes are an integral part of these financial statements.
F-29

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 2013
($ in thousands)

	Goldman Sachs Variable Insurance Trust
	Goldman Sachs Large Cap Value			Goldman Sachs Strategic International Equity			Goldman Sachs Structured US Equity			Goldman Sachs Structured Small Cap Equity			Goldman Sachs Strategic Growth			Goldman Sachs Mid Cap Value			Goldman Sachs Strategic Growth SC			Goldman Sachs Large Cap Value Fund SC			Goldman Sachs Strategic International Equity SC			Goldman Sachs Structured Small Cap Equity SC
From Operations
Net investment income (loss)	$	154		$	131		$	104		$	65		$	40		$	23		$	3		$	20		$	20		$	3
Net realized gain (loss) on investments		1,454			(219	)		207			869			423			234			72			268			1			48
Net unrealized appreciation (depreciation) on investments		1,939			1,606			2,581			1,014			2,270			511			408			290			233			55
Net increase (decrease) in net assets resulting from operations		3,547			1,518			2,892			1,948			2,733			768			483			578			254			106
From Variable Life Policy Transactions
Policy owners' net payments		694			453			452			387			591			131			227			179			119			35
Mortality and expense risk charges		(77	)		(36	)		(30	)		(33	)		(42	)		(20	)		(7	)		(9	)		(4	)		(2	)
Cost of insurance and administrative charges		(521	)		(341	)		(388	)		(287	)		(452	)		(110	)		(84	)		(81	)		(58	)		(21	)
Surrenders		(462	)		(448	)		(513	)		(251	)		(606	)		(104	)		(40	)		(26	)		(29	)		(4	)
Death benefits		(119	)		(20	)		(112	)		(24	)		(84	)		(46	)		—			(83	)		—			—
Net policy loan repayments (withdrawals)		(57	)		(53	)		(54	)		(42	)		(24	)		(19	)		(28	)		(13	)		(11	)		(7	)
Transfer (to) from other portfolios		(550	)		(108	)		(147	)		(158	)		(153	)		(80	)		18			(74	)		49			(10	)
Net increase (decrease) in net assets resulting from variable life policy transactions		(1,092	)		(553	)		(792	)		(408	)		(770	)		(248	)		86			(107	)		66			(9	)
Total increase (decrease) in net assets		2,455			965			2,100			1,540			1,963			520			569			471			320			97
Net Assets
Beginning of period		11,124			6,612			8,047			5,630			8,803			2,446			1,477			1,779			1,033			298
End of period	$	13,579		$	7,577		$	10,147		$	7,170		$	10,766		$	2,966		$	2,046		$	2,250		$	1,353		$	395

The accompanying notes are an integral part of these financial statements.
F-30

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2013
($ in thousands)

	Goldman Sachs Variable Insurance Trust									Calvert Variable Series, Inc.			MFS Variable Insurance Trust
	Goldman Sachs Structured US Equity SC			Goldman Sachs VIT Growth Opportunities SC			Goldman Sachs Mid Cap Value SC			Calvert VP SRI Balanced			MFS Growth Series IC			MFS Research IC			MFS Investors Trust IC			MFS Total Return IC			MFS New Discovery IC			MFS Utilities IC
From Operations
Net investment income (loss)	$	1		$	—		$	6		$	1		$	16		$	24		$	70		$	295		$	—		$	100
Net realized gain (loss) on investments		1			84			82			6			53			65			4			27			39			80
Net unrealized appreciation (depreciation) on investments		35			224			139			3			1,971			1,910			1,661			2,524			1,367			587
Net increase (decrease) in net assets resulting from operations		37			308			227			10			2,040			1,999			1,735			2,846			1,406			767
From Variable Life Policy Transactions
Policy owners' net payments		6			148			70			—			549			608			360			922			322			320
Mortality and expense risk charges		(1	)		(3	)		(1	)		—			(19	)		(18	)		(18	)		(100	)		(12	)		(20	)
Cost of insurance and administrative charges		(3	)		(54	)		(32	)		(2	)		(321	)		(372	)		(276	)		(669	)		(170	)		(197	)
Surrenders		—			(8	)		—			—			(230	)		(419	)		(289	)		(540	)		(132	)		(104	)
Death benefits		—			—			—			—			(19	)		(14	)		(37	)		(217	)		(5	)		(13	)
Net policy loan repayments (withdrawals)		—			(9	)		(1	)		—			(48	)		(19	)		30			(87	)		(37	)		(19	)
Transfer (to) from other portfolios		(4	)		107			232			—			708			—			575			422			275			262
Net increase (decrease) in net assets resulting from variable life policy transactions		(2	)		181			268			(2	)		620			(234	)		345			(269	)		241			229
Total increase (decrease) in net assets		35			489			495			8			2,660			1,765			2,080			2,577			1,647			996
Net Assets
Beginning of period		98			880			594			62			5,217			6,269			5,273			15,089			3,286			3,630
End of period	$	133		$	1,369		$	1,089		$	70		$	7,877		$	8,034		$	7,353		$	17,666		$	4,933		$	4,626

The accompanying notes are an integral part of these financial statements.
F-31

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2013
($ in thousands)

	MFS Variable Insurance Trust									MFS Variable Insurance Trust II						Oppenheimer Variable Account Funds
	MFS Investors Growth Stock IC			MFS VIT Research Bond SC			MFS VIT Value SC			MFS VIT II Emerging Markets Equity SC			MFS VIT II International Value SC			Oppenheimer Money Fund/VA			Oppenheimer Discovery Mid Cap Growth Fund/VA			Oppenheimer Capital Appreciation Fund/VA			Oppenheimer Main Street Fund/VA
From Operations
Net investment income (loss)	$	17		$	42		$	52		$	2		$	12		$	1		$	—		$	90		$	89
Net realized gain (loss) on investments		90			17			16			—			—			—			(13	)		101			168
Net unrealized appreciation (depreciation) on investments		625			(88	)		1,373			(1	)		146			—			1,121			2,214			1,987
Net increase (decrease) in net assets resulting from operations		732			(29	)		1,441			1			158			1			1,108			2,405			2,244
From Variable Life Policy Transactions
Policy owners' net payments		191			402			620			12			104			996			252			585			396
Mortality and expense risk charges		(8	)		(15	)		(17	)		(1	)		(3	)		(28	)		(9	)		(29	)		(30	)
Cost of insurance and administrative charges		(112	)		(177	)		(234	)		(5	)		(51	)		(562	)		(193	)		(400	)		(311	)
Surrenders		(121	)		(25	)		(61	)		—			(3	)		(1,333	)		(161	)		(597	)		(480	)
Death benefits		—			—			—			—			—			(2	)		(9	)		(7	)		(150	)
Net policy loan repayments (withdrawals)		(17	)		(22	)		(30	)		—			—			(50	)		(43	)		(25	)		(43	)
Transfer (to) from other portfolios		112			2,277			1,196			175			1,053			1,904			(14	)		160			137
Net increase (decrease) in net assets resulting from variable life policy transactions		45			2,440			1,474			181			1,100			925			(177	)		(313	)		(481	)
Total increase (decrease) in net assets		777			2,411			2,915			182			1,258			926			931			2,092			1,763
Net Assets
Beginning of period		2,401			2,379			3,469			26			155			6,019			3,134			8,273			7,260
End of period	$	3,178		$	4,790		$	6,384		$	208		$	1,413		$	6,945		$	4,065		$	10,365		$	9,023

The accompanying notes are an integral part of these financial statements.
F-32

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2013
($ in thousands)

	Oppenheimer Variable Account Funds						Invesco Variable Insurance Funds
	Oppenheimer Global Strategic Income Fund/VA			Oppenheimer Global Fund/VA			Invesco VI American Franchise			Invesco VI Comstock			Invesco VI Growth & Income			Invesco VI Mid-Cap Growth II			Invesco VI Equity and Income II			Invesco VI American Value II			Invesco VI Balanced Risk Allocation II
From Operations
Net investment income (loss)	$	585		$	206		$	18		$	514		$	349		$	5		$	251		$	5		$	5
Net realized gain (loss) on investments		7			13			60			324			252			4			26			—			10
Net unrealized appreciation (depreciation) on investments		(607	)		3,388			1,340			8,496			6,045			711			3,352			166			(10	)
Net increase (decrease) in net assets resulting from operations		(15	)		3,607			1,418			9,334			6,646			720			3,629			171			5
From Variable Life Policy Transactions
Policy owners' net payments		901			1,328			264			1,911			1,415			205			1,059			70			71
Mortality and expense risk charges		(54	)		(72	)		(14	)		(187	)		(118	)		(12	)		(117	)		(3	)		(2	)
Cost of insurance and administrative charges		(547	)		(643	)		(169	)		(1,248	)		(888	)		(98	)		(672	)		(34	)		(13	)
Surrenders		(829	)		(469	)		(119	)		(1,093	)		(877	)		(76	)		(488	)		(16	)		(50	)
Death benefits		(244	)		(62	)		(12	)		(215	)		(196	)		(8	)		(100	)		—			—
Net policy loan repayments (withdrawals)		(59	)		(43	)		(81	)		(159	)		(28	)		(13	)		(80	)		(2	)		(1	)
Transfer (to) from other portfolios		980			(32	)		(28	)		(868	)		624			92			592			642			(16	)
Net increase (decrease) in net assets resulting from variable life policy transactions		148			7			(159	)		(1,859	)		(68	)		90			194			657			(11	)
Total increase (decrease) in net assets		133			3,614			1,259			7,475			6,578			810			3,823			828			(6	)
Net Assets
Beginning of period		11,743			13,271			3,582			26,816			19,417			1,934			14,602			283			324
End of period	$	11,876		$	16,885		$	4,841		$	34,291		$	25,995		$	2,744		$	18,425		$	1,111		$	318

The accompanying notes are an integral part of these financial statements.
F-33

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2013
($ in thousands)

	Invesco Variable Insurance Funds												The Universal Institutional Funds, Inc.			Lord Abbett Series Fund, Inc.
	Invesco VI Government Securities II			Invesco VI International Growth II			Invesco VI Global Real Estate II			Invesco VI Small Cap Equity II			UIF Global Real Estate II			Lord Abbett Growth & Income			Lord Abbett Bond Debenture			Lord Abbett Mid Cap Stock			Lord Abbett Growth Opportunities
From Operations
Net investment income (loss)	$	145		$	20		$	6		$	—		$	19		$	93		$	762		$	62		$	—
Net realized gain (loss) on investments		(1	)		—			—			2			4			71			307			69			606
Net unrealized appreciation (depreciation) on investments		(270	)		282			(7	)		44			(4	)		4,802			93			3,734			411
Net increase (decrease) in net assets resulting from operations		(126	)		302			(1	)		46			19			4,966			1,162			3,865			1,017
From Variable Life Policy Transactions
Policy owners' net payments		343			212			13			31			57			732			792			871			192
Mortality and expense risk charges		(32	)		(8	)		—			—			(2	)		(106	)		(87	)		(100	)		(24	)
Cost of insurance and administrative charges		(207	)		(75	)		(6	)		(13	)		(19	)		(606	)		(564	)		(609	)		(129	)
Surrenders		(93	)		(19	)		—			(1	)		(2	)		(681	)		(563	)		(541	)		(61	)
Death benefits		(78	)		(4	)		—			—			(1	)		(198	)		(212	)		(150	)		(47	)
Net policy loan repayments (withdrawals)		(48	)		(3	)		—			—			(2	)		(72	)		(41	)		(59	)		(5	)
Transfer (to) from other portfolios		506			1,009			176			254			28			(839	)		718			(438	)		(251	)
Net increase (decrease) in net assets resulting from variable life policy transactions		391			1,112			183			271			59			(1,770	)		43			(1,026	)		(325	)
Total increase (decrease) in net assets		265			1,414			182			317			78			3,196			1,205			2,839			692
Net Assets
Beginning of period		4,208			971			12			28			491			14,516			14,260			13,176			2,872
End of period	$	4,473		$	2,385		$	194		$	345		$	569		$	17,712		$	15,465		$	16,015		$	3,564

The accompanying notes are an integral part of these financial statements.
F-34

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2013
($ in thousands)

	Lord Abbett Series Fund, Inc.												Fidelity Variable Insurance Products
	Lord Abbett Calibrated Dividend Growth			Lord Abbett International Opportunities			Lord Abbett Classic Stock			Lord Abbett Series Fundamental Equity VC			Fidelity Index 500 Portfolio SC			Fidelity Growth Portfolio SC			Fidelity Contrafund Portfolio SC			Fidelity Mid Cap SC			Fidelity Equity Income SC			Fidelity Investment Grade Bonds SC
From Operations
Net investment income (loss)	$	150		$	18		$	5		$	4		$	106		$	3		$	174		$	32		$	53		$	60
Net realized gain (loss) on investments		1,047			91			59			210			58			44			20			976			177			32
Net unrealized appreciation (depreciation) on investments		1,009			146			71			202			1,309			395			4,439			1,125			320			(140	)
Net increase (decrease) in net assets resulting from operations		2,206			255			135			416			1,473			442			4,633			2,133			550			(48	)
From Variable Life Policy Transactions
Policy owners' net payments		457			78			40			148			456			82			1,312			712			141			166
Mortality and expense risk charges		(72	)		(4	)		(2	)		(4	)		(29	)		(9	)		(108	)		(38	)		(15	)		(15	)
Cost of insurance and administrative charges		(357	)		(37	)		(26	)		(56	)		(272	)		(75	)		(706	)		(308	)		(120	)		(119	)
Surrenders		(328	)		(62	)		(8	)		(15	)		(190	)		(65	)		(484	)		(138	)		(41	)		(85	)
Death benefits		(263	)		(5	)		—			—			(2	)		(56	)		(40	)		(4	)		(113	)		(3	)
Net policy loan repayments (withdrawals)		(14	)		(3	)		—			(6	)		(16	)		(42	)		(22	)		(14	)		(25	)		(6	)
Transfer (to) from other portfolios		(42	)		89			30			333			646			28			331			803			(54	)		220
Net increase (decrease) in net assets resulting from variable life policy transactions		(619	)		56			34			400			593			(137	)		283			1,013			(227	)		158
Total increase (decrease) in net assets		1,587			311			169			816			2,066			305			4,916			3,146			323			110
Net Assets
Beginning of period		8,119			763			428			1,017			4,480			1,281			14,683			5,469			2,045			2,471
End of period	$	9,706		$	1,074		$	597		$	1,833		$	6,546		$	1,586		$	19,599		$	8,615		$	2,368		$	2,581

The accompanying notes are an integral part of these financial statements.
F-35

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2013
($ in thousands)

	Fidelity Variable Insurance Products						Franklin Templeton Variable Insurance Products Trust
	Fidelity Freedom Fund - 2015 Maturity SC			Fidelity Freedom Fund - 2020 Maturity SC			Franklin Flex Cap Growth Securities			Franklin Income Securities			Franklin Rising Dividend Securities			Franklin Small-Mid Cap Growth Securities			Franklin Small Cap Value Securities CL 2			Franklin US Government Fund			Templeton Growth Securities
From Operations
Net investment income (loss)	$	6		$	9		$	—		$	863		$	146		$	—		$	20		$	139		$	299
Net realized gain (loss) on investments		5			7			7			3			1			191			28			(1	)		13
Net unrealized appreciation (depreciation) on investments		31			59			611			946			2,267			670			421			(246	)		2,724
Net increase (decrease) in net assets resulting from operations		42			75			618			1,812			2,414			861			469			(108	)		3,036
From Variable Life Policy Transactions
Policy owners' net payments		15			20			192			941			826			235			187			485			1,108
Mortality and expense risk charges		(2	)		(2	)		(9	)		(89	)		(48	)		(16	)		(4	)		(23	)		(70	)
Cost of insurance and administrative charges		(10	)		(15	)		(81	)		(591	)		(413	)		(114	)		(67	)		(233	)		(528	)
Surrenders		—			(10	)		(14	)		(258	)		(162	)		(82	)		(15	)		(296	)		(149	)
Death benefits		—			—			—			(15	)		(13	)		—			—			(2	)		(33	)
Net policy loan repayments (withdrawals)		—			—			(12	)		(58	)		(63	)		(30	)		(12	)		(15	)		(76	)
Transfer (to) from other portfolios		4			23			126			1,358			1,270			1			121			1,322			105
Net increase (decrease) in net assets resulting from variable life policy transactions		7			16			202			1,288			1,397			(6	)		210			1,238			357
Total increase (decrease) in net assets		49			91			820			3,100			3,811			855			679			1,130			3,393
Net Assets
Beginning of period		303			474			1,531			12,488			7,592			2,222			1,184			4,511			9,690
End of period	$	352		$	565		$	2,351		$	15,588		$	11,403		$	3,077		$	1,863		$	5,641		$	13,083

The accompanying notes are an integral part of these financial statements.
F-36

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2013
($ in thousands)

	Franklin Templeton Variable Insurance Products Trust												Legg Mason Partners Variable Equity Trust						PIMCO Variable Insurance Trust
	Templeton Foreign Securities			Templeton Global Bond Securities Fund II			Templeton Developing Markets Sec CL2			Mutual Shares Securities			ClearBridge Variable Mid Cap Core II			ClearBridge Variable Small Cap Growth II			PIMCO VIT Long-Term US Government Advisor			PIMCO VIT Low Duration Advisor			PIMCO VIT Real Return Advisor
From Operations
Net investment income (loss)	$	165		$	282		$	1		$	493		$	—		$	—		$	4		$	9		$	30
Net realized gain (loss) on investments		10			67			—			2			33			25			7			—			13
Net unrealized appreciation (depreciation) on investments		1,314			(256	)		(1	)		5,134			76			66			(40	)		(10	)		(197	)
Net increase (decrease) in net assets resulting from operations		1,489			93			—			5,629			109			91			(29	)		(1	)		(154	)
From Variable Life Policy Transactions
Policy owners' net payments		651			464			9			2,148			40			30			27			121			151
Mortality and expense risk charges		(40	)		(30	)		—			(132	)		(1	)		(1	)		—			(2	)		(5	)
Cost of insurance and administrative charges		(299	)		(236	)		(3	)		(1,045	)		(13	)		(7	)		(8	)		(25	)		(65	)
Surrenders		(82	)		(79	)		—			(253	)		(1	)		(1	)		(4	)		(1	)		—
Death benefits		(13	)		(4	)		—			(176	)		—			—			(11	)		—			(19	)
Net policy loan repayments (withdrawals)		(1	)		(24	)		—			(172	)		(1	)		—			(6	)		—			(6	)
Transfer (to) from other portfolios		231			852			54			1,080			202			147			(20	)		241			531
Net increase (decrease) in net assets resulting from variable life policy transactions		447			943			60			1,450			226			168			(22	)		334			587
Total increase (decrease) in net assets		1,936			1,036			60			7,079			335			259			(51	)		333			433
Net Assets
Beginning of period		6,153			5,480			14			19,386			190			118			247			515			1,347
End of period	$	8,089		$	6,516		$	74		$	26,465		$	525		$	377		$	196		$	848		$	1,780

The accompanying notes are an integral part of these financial statements.
F-37

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2013
($ in thousands)

	PIMCO Variable Insurance Trust									Royce Capital Fund
	PIMCO VIT Short-Term Advisor			PIMCO VIT Total Return Advisor			PIMCO VIT All Asset Advisor			Royce Capital Fund Micro-Cap SC			Royce Capital Fund Small-Cap SC
From Operations
Net investment income (loss)	$	2		$	148		$	4		$	2		$	14
Net realized gain (loss) on investments		—			67			—			18			82
Net unrealized appreciation (depreciation) on investments		(1	)		(362	)		(4	)		78			266
Net increase (decrease) in net assets resulting from operations		1			(147	)		—			98			362
From Variable Life Policy Transactions
Policy owners' net payments		55			827			2			66			161
Mortality and expense risk charges		(1	)		(27	)		—			(2	)		(3	)
Cost of insurance and administrative charges		(12	)		(326	)		(3	)		(17	)		(51	)
Surrenders		(1	)		(101	)		—			—			(2	)
Death benefits		—			(5	)		—			—			(1	)
Net policy loan repayments (withdrawals)		(7	)		(25	)		—			2			(1	)
Transfer (to) from other portfolios		60			1,839			106			37			303
Net increase (decrease) in net assets resulting from variable life policy transactions		94			2,182			105			86			406
Total increase (decrease) in net assets		95			2,035			105			184			768
Net Assets
Beginning of period		282			5,937			3			412			848
End of period	$	377		$	7,972		$	108		$	596		$	1,616

The accompanying notes are an integral part of these financial statements.
F-38

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

1. ORGANIZATION

The Protective Variable Life Separate Account ("Separate Account") was established by Protective Life Insurance Company ("Protective Life") under the provisions of Tennessee law and commenced operations on June 19, 1996. Protective Life is a wholly owned subsidiary of Protective Life Corporation ("PLC"). On February 1, 2015, PLC and its subsidiaries became wholly owned subsidiaries of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan. The Separate Account is an investment account to which assets are allocated to support the benefits payable under flexible premium variable life insurance policies ("Policies") issued by Protective Life. The following is a list of each variable life product funded by the Separate Account:

Premiere I				Survivor
Executive				Provider
Premiere II				Preserver
Premiere II (2003)				Protector
Transitions				Premiere III
Single Premium Plus				Protective Investors Choice VUL

Protective Life has structured the Separate Account into a unit investment trust form registered with the U.S. Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended. The Separate Account follows the accounting and reporting guidance in ASC Topic 946, "Financial Services — Investment Companies".

During the years ended December 31, 2014 and 2013, assets were invested in eighty subaccounts:

Subaccounts

Goldman Sachs Large Cap Value

Goldman Sachs Strategic International Equity

Goldman Sachs US Equity Insights(b)

Goldman Sachs Small Cap Equity Insights(b)

Goldman Sachs Strategic Growth

Goldman Sachs Mid Cap Value(a)

Goldman Sachs Strategic Growth SC

Goldman Sachs Large Cap Value Fund SC(a)

Goldman Sachs Strategic International Equity SC

Goldman Sachs Small Cap Equity Insights SC(b)

Goldman Sachs US Equity Insights SC(b)

Goldman Sachs VIT Growth Opportunities SC

Goldman Sachs Mid Cap Value SC

Calvert VP SRI Balanced(a)

MFS Growth Series IC

MFS Research IC

MFS Investors Trust IC

MFS Total Return IC

MFS New Discovery IC

MFS Utilities IC

MFS Investors Growth Stock IC

MFS VIT Research Bond SC

MFS VIT Value SC

MFS VIT II Emerging Markets Equity SC

MFS VIT II International Value SC

Oppenheimer Money Fund/VA

Oppenheimer Discovery Mid Cap Growth Fund/VA

Oppenheimer Capital Appreciation Fund/VA

Oppenheimer Main Street Fund/VA

Oppenheimer Global Strategic Income Fund/VA

Oppenheimer Global Fund/VA

Invesco VI American Franchise I

Invesco VI Comstock I

Invesco VI Growth & Income I

Invesco VI Mid-Cap Growth II

Invesco VI Equity and Income II

Invesco VI American Value II

Invesco VI Balanced Risk Allocation II(a)

Invesco VI Government Securities II

Invesco VI International Growth II

Invesco VI Global Real Estate II

Invesco VI Small Cap Equity II

UIF Global Real Estate II(a)

Lord Abbett Growth & Income VC(a)

Lord Abbett Bond Debenture VC

F-39

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

1. ORGANIZATION — (Continued)

Subaccounts — continued

Lord Abbett Mid Cap Stock VC

Lord Abbett Growth Opportunities VC

Lord Abbett Calibrated Dividend Growth VC

Lord Abbett International Opportunities VC(a)

Lord Abbett Classic Stock VC

Lord Abbett Series Fundamental Equity VC

Fidelity Index 500 Portfolio SC

Fidelity Growth Portfolio SC

Fidelity Contrafund Portfolio SC

Fidelity Mid Cap SC

Fidelity Equity Income SC

Fidelity Investment Grade Bonds SC

Fidelity Freedom Fund — 2015 Maturity SC

Fidelity Freedom Fund — 2020 Maturity SC

Franklin Flex Cap Growth VIP CL 2(b)

Franklin Income VIP CL 2(b)

Franklin Rising Dividend VIP CL 2(b)

Franklin Small-Mid Cap Growth VIP CL 2(b)

Franklin Small Cap Value VIP CL 2(b)

Franklin US Government Securities VIP CL 2(b)

Templeton Growth VIP CL 2(b)

Templeton Foreign VIP CL 2(b)

Templeton Global Bond VIP Fund CL 2(b)

Templeton Developing Markets VIP CL 2(b)

Franklin Mutual Shares VIP CL 2(b)

ClearBridge Variable Mid Cap Core II

ClearBridge Variable Small Cap Growth II

PIMCO VIT Long-Term US Government Advisor

PIMCO VIT Low Duration Advisor

PIMCO VIT Real Return Advisor

PIMCO VIT Short-Term Advisor

PIMCO VIT Total Return Advisor

PIMCO VIT All Asset Advisor

Royce Capital Fund Micro-Cap SC

Royce Capital Fund Small-Cap SC

(a) Not available for new policies.

(b) Subaccount name changed. See below.

Subaccount Name Changes in 2014

Old Subaccount Name				New Subaccount Name
Goldman Sachs Structured US Equity				Goldman Sachs US Equity Insights
Goldman Sachs Structured Small Cap Equity				Goldman Sachs Small Cap Equity Insights
Goldman Sachs Structured Small Cap Equity SC				Goldman Sachs Small Cap Equity Insights SC
Goldman Sachs Structured US Equity SC				Goldman Sachs US Equity Insights SC
Franklin Flex Cap Growth Securities				Franklin Flex Cap Growth VIP CL 2
Franklin Income Securities				Franklin Income VIP CL 2
Franklin Rising Dividend Securities				Franklin Rising Dividend VIP CL 2
Franklin Small-Mid Cap Growth Securities				Franklin Small-Mid Cap Growth VIP CL 2
Franklin Small Cap Value Securities CL 2				Franklin Small Cap Value VIP CL 2
Franklin US Government Fund				Franklin US Government Securities VIP CL 2
Templeton Growth Securities				Templeton Growth VIP CL 2
Templeton Foreign Securities				Templeton Foreign VIP CL 2
Templeton Global Bond Securities Fund II				Templeton Global Bond VIP Fund CL 2
Templeton Developing Markets Sec CL 2				Templeton Developing Markets VIP CL 2
Franklin Mutual Shares Securities				Franklin Mutual Shares VIP CL 2

Gross premiums from the Policies are allocated to the subaccounts in accordance with policy owner instructions and are recorded as variable life policy transactions in the statement of changes in net assets. Such amounts are used to provide account funds to pay policy values under the Policies. The Separate Account's assets are the property of Protective Life and are segregated from Protective Life's other assets.

F-40

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

1. ORGANIZATION — (Continued)

Policy owners may allocate some or all of the applicable gross premiums or transfer some or all of the policy value to the Guaranteed 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. The Guaranteed Account's balance as of December 31, 2014 was approximately $30.4 million.

2. SIGNIFICANT ACCOUNTING POLICIES

Investment Valuation

Investments are made and measured in shares and are valued at the net asset values of the respective fund portfolios ("Funds"), whose investments are stated at fair value. The net assets of each subaccount of the Separate Account reflect the investment management fees and other operating expenses incurred by the Funds. Transactions with the Funds are recorded on the trade date.

Net Realized Gains and Losses on Investments

Net realized gains and losses on investments include gains and losses on redemptions of the Funds' shares (determined for each product using the last-in-first-out (LIFO) basis) and capital gain distributions from the Funds.

Dividend Income and Capital Gain Distributions

Dividend income and capital gain distributions are recorded on the ex-dividend date and are reinvested in additional shares of the portfolio. Ordinary dividend and capital gain distributions are from net investment income and net realized gains, respectively, as recorded in the financial statements of the underlying investment company.

Accumulation Unit Value

The Accumulation Unit Value for each class of Accumulation Units in a subaccount at the end of every Valuation Date is the Accumulation Unit value for that class at the end of the previous Valuation Date times the net investment factor as defined in the underlying product prospectuses.

Net transfers (to) from Affiliate or Subaccounts

Net transfers (to) from affiliate or subaccounts include transfers of all or part of the contract owner's interest to or from another subaccount or to the general account of Protective Life.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make various estimates and assumptions that affect the reported amounts of assets and liabilities, at the date of the financial statements, as well as the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

Federal Income Taxes

The results of the operations of the Separate Account are included in the federal income tax return of PLC. Under the provisions of the policies, Protective Life has the right to charge the Separate Account

F-41

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

2. SIGNIFICANT ACCOUNTING POLICIES — (Continued)

for federal income tax attributable to the Separate Account. No charge has been made against the Separate Account for such tax during the year ended December 31, 2014. Management will periodically review the application of this policy in the event of changes in tax law. Accordingly, a change may be made in future years to consider charges for any federal income taxes that would be attributable to the policies.

Risks and Uncertainties

The Separate Account provides for various subaccount investment options in any combination of mutual funds, each of which bears exposure to the market, credit and liquidity risks of the underlying portfolio in which it invests. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the value of investments, it is at least reasonably possible that changes in risks in the near term could materially affect investment balances, the amounts reported in the statement of assets and liabilities and the amounts reported in the statements of changes in net assets. Accordingly, these financial statements should be read in conjunction with the financial statements and footnotes of the underlying mutual funds identified in Note 1.

3. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Separate Account determines the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Separate Account has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy as outlined within the applicable guidance. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. As there are no level 2 or level 3 assets in any period presented, disclosure of transfers between levels or disclosure of a reconciliation of level 3 assets is not required. In addition, there are no other financial assets or assets valued on a non-recurring basis.

Financial assets recorded at fair value in the Statement of Assets and Liabilities are categorized as follows:

Level 1: Unadjusted quoted prices for identical assets in an active market.

Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:

a) Quoted prices for similar assets in active markets

b) Quoted prices for identical or similar assets in non-active markets

c) Inputs other than quoted market prices that are observable

d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

F-42

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

3. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management's own assumptions about the assumptions a market participant would use in pricing the asset.

Determination of fair values

The valuation methodologies used to determine the fair values of assets and liabilities under the FASB guidance referenced in the Fair Value Measurements and Disclosures Topic reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Separate Account determines the fair values of certain financial assets based on quoted market prices. All of the investments in the subaccounts of the Separate Account are classified as Level 1 in the fair value hierarchy and consist of open-ended mutual funds. Participants may, without restriction, transact at the daily net asset value ("NAV") of the mutual funds. The NAV represents the daily per share value based on the fair value of the underlying portfolio of investments of the respective mutual funds.

4. CHANGES IN UNITS OUTSTANDING

The change in units outstanding for the years ended December 31, 2014 and 2013 were as follows:

(in thousands)	2014								2013
Subaccount	Units Issued		Units Redeemed			Net Increase (Decrease)			Units Issued		Units Redeemed			Net Increase (Decrease)
Goldman Sachs Large Cap Value		11		(42	)		(31	)		7		(50	)		(43	)
Goldman Sachs Strategic International Equity		12		(24	)		(12	)		7		(35	)		(28	)
Goldman Sachs US Equity Insights		4		(28	)		(24	)		4		(30	)		(26	)
Goldman Sachs Small Cap Equity Insights		6		(11	)		(5	)		3		(13	)		(10	)
Goldman Sachs Strategic Growth		5		(26	)		(21	)		6		(29	)		(23	)
Goldman Sachs Mid Cap Value		4		(14	)		(10	)		4		(15	)		(11	)
Goldman Sachs Strategic Growth SC		18		(10	)		8			16		(10	)		6
Goldman Sachs Large Cap Value Fund SC		8		(11	)		(3	)		10		(18	)		(8	)
Goldman Sachs Strategic International Equity SC		20		(4	)		16			18		(11	)		7
Goldman Sachs Small Cap Equity Insights SC		2		(2	)		—			3		(3	)		—
Goldman Sachs US Equity Insights SC		—		—			—			—		—			—
Goldman Sachs VIT Growth Opportunities SC		9		(9	)		—			15		(5	)		10
Goldman Sachs Mid Cap Value SC		21		(5	)		16			20		(1	)		19
Calvert VP SRI Balanced		—		(1	)		(1	)		—		—			—
MFS Growth Series IC		37		(11	)		26			36		(13	)		23
MFS Research IC		17		(24	)		(7	)		18		(27	)		(9	)
MFS Investors Trust IC		40		(15	)		25			32		(17	)		15

F-43

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

4. CHANGES IN UNITS OUTSTANDING — (Continued)

(in thousands)	2014								2013
Subaccount	Units Issued		Units Redeemed			Net Increase (Decrease)			Units Issued		Units Redeemed			Net Increase (Decrease)
MFS Total Return IC		28		(41	)		(13	)		32		(39	)		(7	)
MFS New Discovery IC		17		(13	)		4			16		(9	)		7
MFS Utilities IC		11		(10	)		1			16		(10	)		6
MFS Investors Growth Stock IC		41		(20	)		21			23		(19	)		4
MFS VIT Research Bond SC		307		(13	)		294			211		(10	)		201
MFS VIT Value SC		106		(12	)		94			102		(9	)		93
MFS VIT II Emerging Markets Equity SC		19		(1	)		18			20		(1	)		19
MFS VIT II International Value SC		148		(2	)		146			92		(3	)		89
Oppenheimer Money Fund/VA		1,650		(1,553	)		97			2,216		(1,628	)		588
Oppenheimer Discovery Mid Cap Growth Fund/VA		5		(15	)		(10	)		7		(14	)		(7	)
Oppenheimer Capital Appreciation Fund/VA		8		(37	)		(29	)		21		(33	)		(12	)
Oppenheimer Main Street Fund/VA		11		(36	)		(25	)		18		(40	)		(22	)
Oppenheimer Global Strategic Income Fund/VA		40		(43	)		(3	)		53		(49	)		4
Oppenheimer Global Fund/VA		26		(26	)		—			29		(29	)		—
Invesco VI American Franchise I		19		(40	)		(21	)		16		(37	)		(21	)
Invesco VI Comstock I		46		(70	)		(24	)		26		(102	)		(76	)
Invesco VI Growth & Income I		57		(52	)		5			69		(68	)		1
Invesco VI Mid-Cap Growth II		25		(17	)		8			30		(19	)		11
Invesco VI Equity and Income II		44		(31	)		13			54		(47	)		7
Invesco VI American Value II		41		(1	)		40			41		(5	)		36
Invesco VI Balanced Risk Allocation II		9		(3	)		6			8		(9	)		(1	)
Invesco VI Government Securities II		48		(39	)		9			59		(27	)		32
Invesco VI International Growth II		155		(19	)		136			107		(5	)		102
Invesco VI Global Real Estate II		16		(1	)		15			16		—			16
Invesco VI Small Cap Equity II		37		(1	)		36			22		—			22
UIF Global Real Estate II		11		(14	)		(3	)		11		(5	)		6
Lord Abbett Growth & Income VC		13		(82	)		(69	)		12		(115	)		(103	)
Lord Abbett Bond Debenture VC		55		(34	)		21			58		(53	)		5
Lord Abbett Mid Cap Stock VC		18		(54	)		(36	)		16		(64	)		(48	)
Lord Abbett Growth Opportunities VC		7		(14	)		(7	)		7		(20	)		(13	)
Lord Abbett Calibrated Dividend Growth VC		10		(31	)		(21	)		13		(39	)		(26	)
Lord Abbett International Opportunities VC		16		(5	)		11			23		(18	)		5
Lord Abbett Classic Stock VC		6		(3	)		3			8		(6	)		2
Lord Abbett Series Fundamental Equity VC		33		(4	)		29			32		(7	)		25
Fidelity Index 500 Portfolio SC		116		(58	)		58			63		(27	)		36
Fidelity Growth Portfolio SC		9		(11	)		(2	)		9		(20	)		(11	)
Fidelity Contrafund Portfolio SC		56		(71	)		(15	)		60		(46	)		14

F-44

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

4. CHANGES IN UNITS OUTSTANDING — (Continued)

(in thousands)	2014								2013
Subaccount	Units Issued		Units Redeemed			Net Increase (Decrease)			Units Issued		Units Redeemed			Net Increase (Decrease)
Fidelity Mid Cap SC		59		(19	)		40			50		(10	)		40
Fidelity Equity Income SC		6		(15	)		(9	)		7		(21	)		(14	)
Fidelity Investment Grade Bonds SC		35		(20	)		15			26		(15	)		11
Fidelity Freedom Fund - 2015 Maturity SC		3		(1	)		2			1		(1	)		—
Fidelity Freedom Fund - 2020 Maturity SC		4		(2	)		2			3		(2	)		1
Franklin Flex Cap Growth VIP CL 2		35		(10	)		25			21		(6	)		15
Franklin Income VIP CL 2		63		(47	)		16			116		(34	)		82
Franklin Rising Dividend VIP CL 2		98		(27	)		71			119		(28	)		91
Franklin Small-Mid Cap Growth VIP CL 2		33		(27	)		6			28		(27	)		1
Franklin Small Cap Value VIP CL 2		23		(6	)		17			20		(7	)		13
Franklin US Government Securities VIP CL 2		151		(22	)		129			137		(42	)		95
Templeton Growth VIP CL 2		89		(36	)		53			81		(53	)		28
Templeton Foreign VIP CL 2		76		(35	)		41			72		(38	)		34
Templeton Global Bond VIP Fund CL 2		86		(15	)		71			77		(24	)		53
Templeton Developing Markets VIP CL 2		17		(2	)		15			7		(1	)		6
Franklin Mutual Shares VIP CL 2		162		(65	)		97			166		(58	)		108
ClearBridge Variable Mid Cap Core II		13		(2	)		11			16		(2	)		14
ClearBridge Variable Small Cap Growth II		15		(4	)		11			11		(2	)		9
PIMCO VIT Long-Term US Government Advisor		11		(17	)		(6	)		3		(5	)		(2	)
PIMCO VIT Low Duration Advisor		25		(13	)		12			42		(12	)		30
PIMCO VIT Real Return Advisor		46		(10	)		36			59		(12	)		47
PIMCO VIT Short-Term Advisor		87		(75	)		12			14		(5	)		9
PIMCO VIT Total Return Advisor		167		(23	)		144			217		(38	)		179
PIMCO VIT All Asset Advisor		6		—			6			10		—			10
Royce Capital Fund Micro-Cap SC		12		(3	)		9			12		(6	)		6
Royce Capital Fund Small-Cap SC		27		(8	)		19			31		(5	)		26

5. PURCHASES AND SALES OF INVESTMENTS

The cost of purchases and proceeds from sales of investments, including distributions received and reinvested, for the year ended December 31, 2014 are as follows:

(in thousands)	2014
Subaccount	Purchases		Sales
Goldman Sachs Large Cap Value	$	3,129	$	1,276
Goldman Sachs Strategic International Equity		527		530
Goldman Sachs US Equity Insights		748		993
Goldman Sachs Small Cap Equity Insights		1,365		467
Goldman Sachs Strategic Growth		2,336		998
Goldman Sachs Mid Cap Value		630		359

F-45

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

5. PURCHASES AND SALES OF INVESTMENTS — (Continued)

(in thousands)	2014
Subaccount	Purchases		Sales
Goldman Sachs Strategic Growth SC	$	767	$	169
Goldman Sachs Large Cap Value Fund SC		580		152
Goldman Sachs Strategic International Equity SC		263		39
Goldman Sachs Small Cap Equity Insights SC		96		37
Goldman Sachs US Equity Insights SC		11		8
Goldman Sachs VIT Growth Opportunities SC		464		169
Goldman Sachs Mid Cap Value SC		612		91
Calvert VP SRI Balanced		5		17
MFS Growth Series IC		1,815		356
MFS Research IC		1,175		672
MFS Investors Trust IC		1,781		407
MFS Total Return IC		1,692		1,275
MFS New Discovery IC		1,592		497
MFS Utilities IC		779		455
MFS Investors Growth Stock IC		730		246
MFS VIT Research Bond SC		4,061		165
MFS VIT Value SC		2,340		229
MFS VIT II Emerging Markets Equity SC		186		9
MFS VIT II International Value SC		2,083		16
Oppenheimer Money Fund/VA		2,596		2,444
Oppenheimer Discovery Mid Cap Growth Fund/VA		133		382
Oppenheimer Capital Appreciation Fund/VA		558		1,149
Oppenheimer Main Street Fund/VA		537		944
Oppenheimer Global Strategic Income Fund/VA		1,613		1,169
Oppenheimer Global Fund/VA		1,947		998
Invesco VI American Franchise I		184		383
Invesco VI Comstock I		1,858		2,126
Invesco VI Growth & Income I		5,214		1,357
Invesco VI Mid-Cap Growth II		255		178
Invesco VI Equity and Income II		2,371		782
Invesco VI American Value II		1,020		22
Invesco VI Balanced Risk Allocation II		157		51
Invesco VI Government Securities II		660		430
Invesco VI International Growth II		1,941		226
Invesco VI Global Real Estate II		211		15
Invesco VI Small Cap Equity II		554		8
UIF Global Real Estate II		150		185
Lord Abbett Growth & Income VC		373		1,603
Lord Abbett Bond Debenture VC		2,662		871
Lord Abbett Mid Cap Stock VC		485		1,240
Lord Abbett Growth Opportunities VC		941		393
Lord Abbett Calibrated Dividend Growth VC		1,763		870

F-46

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

5. PURCHASES AND SALES OF INVESTMENTS — (Continued)

(in thousands)	2014
Subaccount	Purchases		Sales
Lord Abbett International Opportunities VC	$	397	$	69
Lord Abbett Classic Stock VC		177		41
Lord Abbett Series Fundamental Equity VC		1,047		75
Fidelity Index 500 Portfolio SC		2,311		1,100
Fidelity Growth Portfolio SC		141		175
Fidelity Contrafund Portfolio SC		2,048		1,851
Fidelity Mid Cap SC		1,982		579
Fidelity Equity Income SC		222		309
Fidelity Investment Grade Bonds SC		625		322
Fidelity Freedom Fund - 2015 Maturity SC		58		13
Fidelity Freedom Fund - 2020 Maturity SC		75		21
Franklin Flex Cap Growth VIP CL 2		950		177
Franklin Income VIP CL 2		1,929		827
Franklin Rising Dividend VIP CL 2		2,114		475
Franklin Small-Mid Cap Growth VIP CL 2		1,198		468
Franklin Small Cap Value VIP CL 2		615		112
Franklin US Government Securities VIP CL 2		2,166		295
Templeton Growth VIP CL 2		1,452		517
Templeton Foreign VIP CL 2		1,274		515
Templeton Global Bond VIP Fund CL 2		1,952		277
Templeton Developing Markets VIP CL 2		166		22
Franklin Mutual Shares VIP CL 2		3,230		1,012
ClearBridge Variable Mid Cap Core II		322		40
ClearBridge Variable Small Cap Growth II		400		73
PIMCO VIT Long-Term US Government Advisor		152		221
PIMCO VIT Low Duration Advisor		293		149
PIMCO VIT Real Return Advisor		607		132
PIMCO VIT Short-Term Advisor		932		803
PIMCO VIT Total Return Advisor		2,260		288
PIMCO VIT All Asset Advisor		77		5
Royce Capital Fund Micro-Cap SC		240		52
Royce Capital Fund Small-Cap SC		713		150

6. FINANCIAL HIGHLIGHTS

Protective Life sells a number of variable life products that are funded by the Separate Account. These products have unique combinations of features and fees that are charged against the policy owner's account. These expenses, primarily mortality, expense and administrative charges, are variable in nature and are assessed as a direct reduction in units versus as a reduction in unit value. As such charges are assessed as a reduction in units, there would not be a range of unit values or total return ratios.

F-47

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

6. FINANCIAL HIGHLIGHTS — (Continued)

The following tables disclose the units, unit fair value, net assets, investment income ratio and total return ratio for each applicable subaccount for the years ended December 31, 2014, 2013, 2012, 2011 and 2010 respectively.

	As of December 31, 2014						For the Year Ended December 31, 2014
Subaccount	Units (000's)		Unit Fair Value		Net Assets (000's)		Investment Income Ratio*			Total Return**
Goldman Sachs Large Cap Value		443	$	32.42	$	14,320		1.41	%		12.94	%
Goldman Sachs Strategic International Equity		339	$	20.02	$	6,777		3.66	%		–7.54	%
Goldman Sachs US Equity Insights		276	$	39.48	$	10,823		1.41	%		16.37	%
Goldman Sachs Small Cap Equity Insights		154	$	48.52	$	7,459		0.79	%		6.93	%
Goldman Sachs Strategic Growth		264	$	43.13	$	11,351		0.38	%		13.64	%
Goldman Sachs Mid Cap Value		107	$	28.75	$	3,087		1.00	%		13.57	%
Goldman Sachs Strategic Growth SC		136	$	18.21	$	2,469		0.13	%		13.38	%
Goldman Sachs Large Cap Value Fund SC		166	$	15.02	$	2,486		1.14	%		12.61	%
Goldman Sachs Strategic International Equity SC		139	$	10.16	$	1,411		3.62	%		–7.70	%
Goldman Sachs Small Cap Equity Insights SC		22	$	19.60	$	422		0.54	%		6.69	%
Goldman Sachs US Equity Insights SC		8	$	17.76	$	149		1.20	%		16.18	%
Goldman Sachs VIT Growth Opportunities SC		70	$	21.94	$	1,531		0.00	%		11.10	%
Goldman Sachs Mid Cap Value SC		82	$	18.51	$	1,520		0.87	%		13.29	%
Calvert VP SRI Balanced		2	$	25.52	$	59		1.50	%		9.60	%
MFS Growth Series IC		271	$	35.02	$	9,491		0.11	%		8.94	%
MFS Research IC		284	$	30.46	$	8,646		0.84	%		10.20	%
MFS Investors Trust IC		304	$	29.20	$	8,856		0.96	%		11.01	%
MFS Total Return IC		576	$	32.79	$	18,846		1.87	%		8.50	%
MFS New Discovery IC		126	$	37.48	$	4,725		0.00	%		–7.26	%
MFS Utilities IC		118	$	44.57	$	5,250		2.09	%		12.73	%
MFS Investors Growth Stock IC		279	$	13.73	$	3,832		0.54	%		11.45	%
MFS VIT Research Bond SC		689	$	12.81	$	8,825		2.94	%		5.62	%
MFS VIT Value SC		444	$	20.06	$	8,917		1.40	%		10.20	%
MFS VIT II Emerging Markets Equity SC		40	$	8.93	$	357		0.47	%		–6.99	%
MFS VIT II International Value SC		251	$	13.72	$	3,437		2.05	%		1.13	%
Oppenheimer Money Fund/VA		4,511	$	1.57	$	7,087		0.01	%		0.00	%
Oppenheimer Discovery Mid Cap Growth Fund/VA		149	$	27.12	$	4,035		0.00	%		5.78	%
Oppenheimer Capital Appreciation Fund/VA		328	$	33.46	$	10,961		0.45	%		15.41	%
Oppenheimer Main Street Fund/VA		333	$	27.86	$	9,224		0.83	%		10.70	%
Oppenheimer Global Strategic Income Fund/VA		445	$	27.27	$	12,108		4.25	%		2.84	%
Oppenheimer Global Fund/VA		458	$	37.72	$	17,266		1.10	%		2.29	%
Invesco VI American Franchise I		507	$	9.93	$	5,040		0.04	%		8.44	%
Invesco VI Comstock I		1,158	$	31.76	$	36,756		1.35	%		9.39	%
Invesco VI Growth & Income I		1,053	$	27.50	$	28,897		1.82	%		10.28	%
Invesco VI Mid-Cap Growth II		280	$	10.84	$	3,039		0.00	%		7.69	%
Invesco VI Equity and Income II		781	$	26.11	$	20,395		1.60	%		8.77	%
Invesco VI American Value II		95	$	22.09	$	2,106		0.23	%		9.48	%
Invesco VI Balanced Risk Allocation II		29	$	14.68	$	423		0.00	%		5.71	%
Invesco VI Government Securities II		428	$	11.12	$	4,746		2.94	%		3.88	%
Invesco VI International Growth II		334	$	12.06	$	4,024		1.59	%		0.09	%
Invesco VI Global Real Estate II		32	$	13.31	$	424		1.67	%		14.34	%
Invesco VI Small Cap Equity II		61	$	14.16	$	857		0.00	%		2.09	%
UIF Global Real Estate II		44	$	13.86	$	609		0.75	%		13.85	%
Lord Abbett Growth & Income VC		859	$	20.68	$	17,740		0.70	%		7.65	%
Lord Abbett Bond Debenture VC		654	$	25.73	$	16,824		4.89	%		4.35	%
Lord Abbett Mid Cap Stock VC		692	$	24.71	$	17,084		0.45	%		11.53	%
Lord Abbett Growth Opportunities VC		119	$	30.03	$	3,585		0.00	%		6.07	%
Lord Abbett Calibrated Dividend Growth VC		345	$	29.60	$	10,213		1.72	%		11.54	%

F-48

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

6. FINANCIAL HIGHLIGHTS — (Continued)

	As of December 31, 2014						For the Year Ended December 31, 2014
Subaccount	Units (000's)		Unit Fair Value		Net Assets (000's)		Investment Income Ratio*			Total Return**
Lord Abbett International Opportunities VC		91	$	12.64	$	1,153		1.43	%		–5.76	%
Lord Abbett Classic Stock VC		45	$	15.75	$	704		0.76	%		9.14	%
Lord Abbett Series Fundamental Equity VC		131	$	19.22	$	2,521		0.52	%		7.14	%
Fidelity Index 500 Portfolio SC		431	$	19.93	$	8,560		1.77	%		13.46	%
Fidelity Growth Portfolio SC		106	$	16.30	$	1,723		0.09	%		11.19	%
Fidelity Contrafund Portfolio SC		776	$	27.72	$	21,513		0.88	%		11.82	%
Fidelity Mid Cap SC		338	$	30.68	$	10,379		0.18	%		6.20	%
Fidelity Equity Income SC		118	$	20.19	$	2,386		2.68	%		8.65	%
Fidelity Investment Grade Bonds SC		181	$	16.39	$	2,970		2.35	%		5.75	%
Fidelity Freedom Fund - 2015 Maturity SC		28	$	14.51	$	401		1.74	%		4.63	%
Fidelity Freedom Fund - 2020 Maturity SC		43	$	14.43	$	625		1.70	%		4.66	%
Franklin Flex Cap Growth VIP CL 2		167	$	17.46	$	2,925		0.00	%		6.11	%
Franklin Income VIP CL 2		950	$	17.47	$	16,592		4.98	%		4.62	%
Franklin Rising Dividend VIP CL 2		738	$	18.61	$	13,722		1.32	%		8.72	%
Franklin Small-Mid Cap Growth VIP CL 2		186	$	18.42	$	3,424		0.00	%		7.47	%
Franklin Small Cap Value VIP CL 2		109	$	20.43	$	2,230		0.61	%		0.57	%
Franklin US Government Securities VIP CL 2		564	$	13.39	$	7,557		2.59	%		3.38	%
Templeton Growth VIP CL 2		979	$	13.74	$	13,449		1.34	%		–2.81	%
Templeton Foreign VIP CL 2		576	$	13.43	$	7,740		1.85	%		–11.13	%
Templeton Global Bond VIP Fund CL 2		433	$	18.34	$	7,939		5.02	%		1.83	%
Templeton Developing Markets VIP CL 2		22	$	9.08	$	203		1.46	%		–8.39	%
Franklin Mutual Shares VIP CL 2		1,887	$	15.85	$	29,900		2.06	%		7.12	%
ClearBridge Variable Mid Cap Core II		38	$	21.27	$	800		0.10	%		7.82	%
ClearBridge Variable Small Cap Growth II		27	$	24.21	$	665		0.00	%		3.79	%
PIMCO VIT Long-Term US Government Advisor		10	$	15.11	$	156		2.14	%		23.89	%
PIMCO VIT Low Duration Advisor		87	$	11.41	$	989		1.05	%		0.75	%
PIMCO VIT Real Return Advisor		183	$	12.41	$	2,277		1.28	%		2.99	%
PIMCO VIT Short-Term Advisor		47	$	10.67	$	506		0.61	%		0.61	%
PIMCO VIT Total Return Advisor		807	$	12.53	$	10,110		2.16	%		4.17	%
PIMCO VIT All Asset Advisor		16	$	10.89	$	170		5.82	%		0.46	%
Royce Capital Fund Micro-Cap SC		47	$	15.12	$	706		0.00	%		–3.84	%
Royce Capital Fund Small-Cap SC		108	$	18.59	$	2,010		0.00	%		2.92	%

*These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude expenses such as mortality and expense charges. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying funds in which the subaccount invests.

**These amounts represent the total return for the period indicated, including changes in the value of the underlying fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date of that investment option in the variable account. The presentation of an expense ratio, which would include mortality and expense risk charges as described below in the Summary of Charges Assessed to the Separate Account, has been excluded from this financial highlights table. Such expenses are assessed through a direct charge to policy owners' accounts and are included in the Statement of Changes in Net Assets. Total returns for periods of less than one year are not annualized.

F-49

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

6. FINANCIAL HIGHLIGHTS — (Continued)

	As of December 31, 2013						For the Year Ended December 31, 2013
Subaccount	Units (000's)		Unit Fair Value		Net Assets (000's)		Investment Income Ratio*			Total Return**
Goldman Sachs Large Cap Value		474	$	28.71	$	13,579		1.23	%		33.23	%
Goldman Sachs Strategic International Equity		351	$	21.65	$	7,577		1.88	%		24.20	%
Goldman Sachs Structured US Equity		300	$	33.93	$	10,147		1.14	%		37.52	%
Goldman Sachs Structured Small Cap Equity		158	$	45.38	$	7,170		1.00	%		35.62	%
Goldman Sachs Strategic Growth		285	$	37.95	$	10,766		0.41	%		32.42	%
Goldman Sachs Mid Cap Value		117	$	25.31	$	2,966		0.85	%		32.89	%
Goldman Sachs Strategic Growth SC		127	$	16.06	$	2,046		0.17	%		32.00	%
Goldman Sachs Large Cap Value Fund SC		169	$	13.34	$	2,250		0.96	%		32.93	%
Goldman Sachs Strategic International Equity SC		123	$	11.00	$	1,353		1.68	%		23.73	%
Goldman Sachs Structured Small Cap Equity SC		22	$	18.37	$	395		0.75	%		35.38	%
Goldman Sachs Structured US Equity SC		9	$	15.29	$	133		0.93	%		37.23	%
Goldman Sachs VIT Growth Opportunities SC		69	$	19.75	$	1,369		0.00	%		32.20	%
Goldman Sachs Mid Cap Value SC		67	$	16.34	$	1,089		0.73	%		32.56	%
Calvert VP SRI Balanced		3	$	23.28	$	70		1.06	%		18.00	%
MFS Growth Series IC		245	$	32.14	$	7,877		0.24	%		36.85	%
MFS Research IC		291	$	27.64	$	8,034		0.33	%		32.28	%
MFS Investors Trust IC		280	$	26.30	$	7,353		1.11	%		32.05	%
MFS Total Return IC		589	$	30.22	$	17,666		1.79	%		19.05	%
MFS New Discovery IC		122	$	40.41	$	4,933		0.00	%		41.52	%
MFS Utilities IC		117	$	39.53	$	4,626		2.38	%		20.52	%
MFS Investors Growth Stock IC		258	$	12.32	$	3,178		0.62	%		30.29	%
MFS VIT Research Bond SC		395	$	12.13	$	4,790		1.23	%		–1.29	%
MFS VIT Value SC		351	$	18.20	$	6,384		1.06	%		35.59	%
MFS VIT II Emerging Markets Equity SC		22	$	9.60	$	208		2.03	%		–5.40	%
MFS VIT II International Value SC		104	$	13.57	$	1,413		1.66	%		27.63	%
Oppenheimer Money Fund/VA		4,415	$	1.57	$	6,945		0.01	%		0.01	%
Oppenheimer Discovery Mid Cap Growth Fund/VA		159	$	25.64	$	4,065		0.01	%		35.98	%
Oppenheimer Capital Appreciation Fund/VA		358	$	28.99	$	10,365		0.98	%		29.74	%
Oppenheimer Main Street Fund/VA		359	$	25.16	$	9,023		1.09	%		31.77	%
Oppenheimer Global Strategic Income Fund/VA		448	$	26.52	$	11,876		4.97	%		–0.13	%
Oppenheimer Global Fund/VA		458	$	36.87	$	16,885		1.38	%		27.31	%
Invesco VI American Franchise		529	$	9.16	$	4,841		0.44	%		40.14	%
Invesco VI Comstock		1,183	$	29.04	$	34,291		1.67	%		35.97	%
Invesco VI Growth & Income		1,049	$	24.94	$	25,995		1.51	%		34.08	%
Invesco VI Mid-Cap Growth II		273	$	10.06	$	2,744		0.23	%		36.60	%
Invesco VI Equity and Income II		768	$	24.01	$	18,425		1.51	%		24.89	%
Invesco VI American Value II		55	$	20.18	$	1,111		0.73	%		33.93	%
Invesco VI Balanced Risk Allocation II		23	$	13.89	$	318		1.51	%		1.42	%
Invesco VI Government Securities II		419	$	10.71	$	4,473		3.34	%		–2.85	%
Invesco VI International Growth II		198	$	12.05	$	2,385		1.30	%		18.72	%
Invesco VI Global Real Estate II		17	$	11.64	$	194		5.78	%		2.44	%
Invesco VI Small Cap Equity II		25	$	13.87	$	345		0.00	%		37.08	%
UIF Global Real Estate II		47	$	12.17	$	569		3.62	%		2.63	%
Lord Abbett Growth & Income		928	$	19.21	$	17,712		0.57	%		35.90	%
Lord Abbett Bond Debenture		633	$	24.66	$	15,465		5.14	%		8.17	%
Lord Abbett Mid Cap Stock		728	$	22.16	$	16,015		0.42	%		30.32	%
Lord Abbett Growth Opportunities		126	$	28.31	$	3,564		0.00	%		37.08	%
Lord Abbett Calibrated Dividend Growth		367	$	26.54	$	9,706		1.66	%		27.93	%
Lord Abbett International Opportunities		80	$	13.42	$	1,074		2.00	%		31.70	%
Lord Abbett Classic Stock		41	$	14.43	$	597		1.05	%		29.85	%
Lord Abbett Series Fundamental Equity VC		102	$	17.94	$	1,833		0.28	%		35.76	%
Fidelity Index 500 Portfolio SC		373	$	17.56	$	6,546		1.99	%		32.11	%
Fidelity Growth Portfolio SC		108	$	14.66	$	1,586		0.19	%		36.20	%
Fidelity Contrafund Portfolio SC		791	$	24.79	$	19,599		1.02	%		31.14	%

F-50

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

6. FINANCIAL HIGHLIGHTS — (Continued)

	As of December 31, 2013						For the Year Ended December 31, 2013
Subaccount	Units (000's)		Unit Fair Value		Net Assets (000's)		Investment Income Ratio*			Total Return**
Fidelity Mid Cap SC		298	$	28.89	$	8,615		0.46	%		36.06	%
Fidelity Equity Income SC		127	$	18.58	$	2,368		2.35	%		28.01	%
Fidelity Investment Grade Bonds SC		167	$	15.50	$	2,581		2.41	%		–1.89	%
Fidelity Freedom Fund - 2015 Maturity SC		25	$	13.87	$	352		1.79	%		14.24	%
Fidelity Freedom Fund - 2020 Maturity SC		41	$	13.79	$	565		1.78	%		15.95	%
Franklin Flex Cap Growth Securities		143	$	16.46	$	2,351		0.00	%		37.48	%
Franklin Income Securities		934	$	16.69	$	15,588		6.23	%		13.94	%
Franklin Rising Dividend Securities		666	$	17.12	$	11,403		1.54	%		29.69	%
Franklin Small-Mid Cap Growth Securities		180	$	17.14	$	3,077		0.00	%		38.15	%
Franklin Small Cap Value Securities CL 2		92	$	20.32	$	1,863		1.31	%		36.24	%
Franklin US Government Fund		436	$	12.95	$	5,641		2.73	%		–2.24	%
Templeton Growth Securities		926	$	14.14	$	13,083		2.65	%		30.82	%
Templeton Foreign Securities		535	$	15.11	$	8,089		2.34	%		22.97	%
Templeton Global Bond Securities Fund II		362	$	18.01	$	6,516		4.75	%		1.63	%
Templeton Developing Markets Sec CL2		7	$	9.92	$	74		2.05	%		–0.92	%
Mutual Shares Securities		1,790	$	14.79	$	26,465		2.14	%		28.26	%
ClearBridge Variable Mid Cap Core II		27	$	19.73	$	525		0.05	%		37.05	%
ClearBridge Variable Small Cap Growth II		16	$	23.33	$	377		0.05	%		46.62	%
PIMCO VIT Long-Term US Government Advisor		16	$	12.20	$	196		2.27	%		–13.04	%
PIMCO VIT Low Duration Advisor		75	$	11.33	$	848		1.30	%		–0.23	%
PIMCO VIT Real Return Advisor		148	$	12.05	$	1,780		1.95	%		–9.31	%
PIMCO VIT Short-Term Advisor		36	$	10.61	$	377		0.65	%		0.47	%
PIMCO VIT Total Return Advisor		663	$	12.02	$	7,972		2.14	%		–2.06	%
PIMCO VIT All Asset Advisor		10	$	10.84	$	108		6.87	%		0.11	%
Royce Capital Fund Micro-Cap SC		38	$	15.72	$	596		0.41	%		20.65	%
Royce Capital Fund Small-Cap SC		89	$	18.06	$	1,616		1.16	%		34.44	%

F-51

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

6. FINANCIAL HIGHLIGHTS — (Continued)

	As of December 31, 2012						For the Year Ended December 31, 2012
Subaccount	Units (000's)		Unit Fair Value		Net Assets (000's)		Investment Income Ratio*			Total Return**
Goldman Sachs Large Cap Value		517	$	21.55	$	11,124		1.42	%		19.13	%
Goldman Sachs Strategic International Equity		379	$	17.43	$	6,612		2.14	%		21.23	%
Goldman Sachs Structured US Equity		326	$	24.67	$	8,047		1.81	%		14.46	%
Goldman Sachs Structured Small Cap Equity		168	$	33.46	$	5,630		1.16	%		12.83	%
Goldman Sachs Strategic Growth		308	$	28.66	$	8,803		0.69	%		19.89	%
Goldman Sachs Mid Cap Value		128	$	19.05	$	2,446		1.19	%		18.47	%
Goldman Sachs Strategic Growth SC		121	$	12.17	$	1,477		0.48	%		19.63	%
Goldman Sachs Large Cap Value Fund SC		177	$	10.03	$	1,779		1.20	%		18.82	%
Goldman Sachs Strategic International Equity SC		116	$	8.89	$	1,033		2.06	%		20.89	%
Goldman Sachs Structured Small Cap Equity SC		22	$	13.57	$	298		0.94	%		12.51	%
Goldman Sachs Structured US Equity SC		9	$	11.14	$	98		1.64	%		14.14	%
Goldman Sachs VIT Growth Opportunities SC		59	$	14.94	$	880		0.00	%		19.43	%
Goldman Sachs Mid Cap Value SC		48	$	12.32	$	594		1.10	%		18.19	%
Calvert VP SRI Balanced		3	$	19.73	$	62		1.14	%		10.51	%
MFS Growth Series IC		222	$	23.49	$	5,217		0.00	%		17.39	%
MFS Research IC		300	$	20.90	$	6,269		0.80	%		17.27	%
MFS Investors Trust IC		265	$	19.92	$	5,273		0.88	%		19.18	%
MFS Total Return IC		596	$	25.39	$	15,089		2.73	%		11.26	%
MFS New Discovery IC		115	$	28.56	$	3,286		0.00	%		21.22	%
MFS Utilities IC		111	$	32.80	$	3,630		6.67	%		13.48	%
MFS Investors Growth Stock IC		254	$	9.45	$	2,401		0.45	%		16.97	%
MFS VIT Research Bond SC		194	$	12.29	$	2,379		2.64	%		7.06	%
MFS VIT Value SC		258	$	13.43	$	3,469		1.48	%		15.88	%
MFS VIT II Emerging Markets Equity SC		3	$	10.15	$	26		0.58	%		3.57	%(a)
MFS VIT II International Value SC		15	$	10.63	$	155		0.48	%		6.55	%(a)
Oppenheimer Money Fund/VA		3,827	$	1.57	$	6,019		0.01	%		0.00	%
Oppenheimer Small & Mid Cap Fund/VA		166	$	18.85	$	3,134		0.00	%		16.45	%
Oppenheimer Capital Appreciation Fund/VA		370	$	22.35	$	8,273		0.65	%		14.12	%
Oppenheimer Main Street Fund/VA		381	$	19.10	$	7,260		0.95	%		16.87	%
Oppenheimer Global Strategic Income Fund/VA		444	$	26.56	$	11,743		5.85	%		13.53	%
Oppenheimer Global Securites Fund/VA		458	$	28.97	$	13,271		2.14	%		21.26	%
Oppenheimer High Income Fund/VA		—	$	—	$	—		16.97	%		12.85	%(b)
Invesco Van Kampen VI American Franchise		550	$	6.54	$	3,582		0.00	%		13.73	%
Invesco Van Kampen VI Comstock		1,259	$	21.35	$	26,816		1.75	%		19.23	%
Invesco Van Kampen VI Growth & Income		1,048	$	18.60	$	19,417		1.54	%		14.63	%
Invesco Van Kampen VI Mid-Cap Growth II		262	$	7.37	$	1,934		0.00	%		11.63	%
Invesco Van Kampen VI Equity and Income II		761	$	19.23	$	14,602		1.81	%		12.39	%
Invesco Van Kampen VI American Value II		19	$	15.07	$	283		0.70	%		17.08	%
Invesco VI Balanced Risk Allocation II		24	$	13.70	$	324		0.99	%		10.64	%
Invesco VI Government Securities II		387	$	11.02	$	4,208		2.98	%		2.22	%
Invesco VI International Growth II		96	$	10.15	$	971		1.41	%		15.25	%
Invesco VI Global Real Estate II		1	$	11.37	$	12		0.40	%		10.93	%(a)
Invesco VI Small Cap Equity II		3	$	10.12	$	28		0.00	%		2.46	%(a)
UIF Global Real Estate II		41	$	11.86	$	491		0.52	%		29.94	%
Lord Abbett Growth & Income		1,031	$	14.14	$	14,516		0.99	%		12.09	%
Lord Abbett Bond Debenture		628	$	22.79	$	14,260		5.78	%		12.53	%
Lord Abbett Mid Cap Stock		776	$	17.00	$	13,176		0.68	%		14.55	%
Lord Abbett Growth Opportunities		139	$	20.65	$	2,872		0.00	%		14.10	%
Lord Abbett Capital Structure		393	$	20.75	$	8,119		3.05	%		12.46	%
Lord Abbett International Opportunities		75	$	10.19	$	763		2.02	%		20.38	%
Lord Abbett Classic Stock		39	$	11.11	$	428		1.24	%		15.09	%
Lord Abbett Series Fundamental Equity VC		77	$	13.21	$	1,017		0.64	%		10.58	%
Fidelity Index 500 Portfolio SC		337	$	13.29	$	4,480		2.12	%		15.81	%
Fidelity Growth Portfolio SC		119	$	10.76	$	1,281		0.49	%		14.54	%

F-52

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

6. FINANCIAL HIGHLIGHTS — (Continued)

	As of December 31, 2012						For the Year Ended December 31, 2012
Subaccount	Units (000's)		Unit Fair Value		Net Assets (000's)		Investment Income Ratio*			Total Return**
Fidelity Contrafund Portfolio SC		777	$	18.90	$	14,683		1.28	%		16.31	%
Fidelity Mid Cap SC		258	$	21.23	$	5,469		0.57	%		14.75	%
Fidelity Equity Income SC		141	$	14.52	$	2,045		3.12	%		17.19	%
Fidelity Investment Grade Bonds SC		156	$	15.79	$	2,471		2.35	%		5.77	%
Fidelity Freedom Fund - 2015 Maturity SC		25	$	12.14	$	303		2.00	%		12.13	%
Fidelity Freedom Fund - 2020 Maturity SC		40	$	11.89	$	474		1.97	%		13.19	%
Franklin Flex Cap Growth Securities		128	$	11.97	$	1,531		0.00	%		9.26	%
Franklin Income Securities		852	$	14.65	$	12,488		6.41	%		12.65	%
Franklin Rising Dividend Securities		575	$	13.20	$	7,592		1.61	%		11.96	%
Franklin Small-Mid Cap Growth Securities		179	$	12.40	$	2,222		0.00	%		10.85	%
Franklin Small Cap Value Securities CL 2		79	$	14.91	$	1,184		0.77	%		18.39	%
Franklin US Government Fund		341	$	13.25	$	4,511		2.58	%		1.89	%
Templeton Growth Securities		898	$	10.81	$	9,690		2.05	%		21.07	%
Templeton Foreign Securities		501	$	12.29	$	6,153		2.99	%		18.23	%
Templeton Global Bond Securities Fund II		309	$	17.72	$	5,480		6.28	%		15.07	%
Templeton Developing Markets Sec CL2		1	$	10.01	$	14		0.00	%		2.50	%(a)
Mutual Shares Securities		1,682	$	11.53	$	19,386		2.10	%		14.24	%
Legg Mason ClearBridge Variable Mid Cap Core II		13	$	14.40	$	190		0.75	%		17.61	%
Legg Mason ClearBridge Variable Small Cap Growth II		7	$	15.91	$	118		0.12	%		18.96	%
PIMCO VIT Long-Term US Government Advisor		18	$	14.03	$	247		2.06	%		4.33	%
PIMCO VIT Low Duration Advisor		45	$	11.36	$	515		1.79	%		5.75	%
PIMCO VIT Real Return Advisor		101	$	13.29	$	1,347		0.92	%		8.64	%
PIMCO VIT Short-Term Advisor		27	$	10.56	$	282		0.78	%		2.67	%
PIMCO VIT Total Return Advisor		484	$	12.28	$	5,937		2.47	%		9.49	%
PIMCO VIT All Asset Advisor		—	$	10.82	$	3		6.65	%		7.18	%(a)(c)
Royce Capital Fund Micro-Cap SC		32	$	13.03	$	412		0.00	%		7.45	%
Royce Capital Fund Small-Cap SC		63	$	13.44	$	848		0.03	%		12.22	%

(a) Start date May 1, 2012

(b) Closed October 26, 2012

F-53

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

6. FINANCIAL HIGHLIGHTS — (Continued)

	As of December 31, 2011						For the Year Ended December 31, 2011
Subaccount	Units (000's)		Unit Fair Value		Net Assets (000's)		Investment Income Ratio*			Total Return**
Goldman Sachs Large Cap Value		561	$	18.09	$	10,140		1.21	%		–7.05	%
Goldman Sachs Strategic International Equity		408	$	14.38	$	5,863		3.29	%		–15.05	%
Goldman Sachs Structured US Equity		354	$	21.56	$	7,622		1.71	%		4.05	%
Goldman Sachs Structured Small Cap Equity		188	$	29.66	$	5,560		0.79	%		0.67	%
Goldman Sachs Strategic Growth		332	$	23.91	$	7,947		0.44	%		–2.62	%
Goldman Sachs Mid Cap Value		137	$	16.08	$	2,202		0.74	%		–6.38	%
Goldman Sachs Strategic Growth SC		114	$	10.17	$	1,161		0.24	%		–2.86	%
Goldman Sachs Large Cap Value Fund SC		170	$	8.44	$	1,436		1.12	%		–7.27	%
Goldman Sachs Strategic International Equity SC		105	$	7.36	$	770		3.37	%		–15.16	%
Goldman Sachs Structured Small Cap Equity SC		21	$	12.06	$	255		0.58	%		0.41	%
Goldman Sachs Structured US Equity SC		9	$	9.76	$	85		1.58	%		3.90	%
Goldman Sachs VIT Growth Opportunities SC		55	$	12.51	$	687		0.00	%		–3.97	%
Goldman Sachs Mid Cap Value SC		35	$	10.43	$	369		0.74	%		–6.59	%
Calvert VP SRI Balanced		4	$	17.85	$	74		1.31	%		4.56	%
MFS Growth Series IC		221	$	20.01	$	4,415		0.19	%		–0.32	%
MFS Research IC		298	$	17.82	$	5,314		0.86	%		–0.45	%
MFS Investors Trust IC		279	$	16.71	$	4,665		0.92	%		–2.18	%
MFS Total Return IC		623	$	22.82	$	14,212		2.62	%		1.77	%
MFS New Discovery IC		121	$	23.56	$	2,856		0.00	%		–10.27	%
MFS Utilities IC		115	$	28.91	$	3,315		3.19	%		6.78	%
MFS Investors Growth Stock IC		271	$	8.08	$	2,190		0.54	%		0.58	%
MFS VIT Research Bond SC		124	$	11.48	$	1,419		2.68	%		6.48	%
MFS VIT Value SC		170	$	11.59	$	1,965		1.36	%		–0.47	%
Oppenheimer Money Fund/VA		3,793	$	1.57	$	5,965		0.01	%		0.00	%
Oppenheimer Small & Mid Cap Fund/VA		184	$	16.19	$	2,979		0.00	%		1.10	%
Oppenheimer Capital Appreciation Fund/VA		397	$	19.58	$	7,781		0.37	%		–1.15	%
Oppenheimer Main Street Fund/VA		420	$	16.34	$	6,860		0.86	%		–0.01	%
Oppenheimer Global Strategic Income Fund/VA		420	$	23.39	$	9,832		3.35	%		0.85	%
Oppenheimer Global Securites Fund/VA		445	$	23.89	$	10,617		1.25	%		–8.29	%
Oppenheimer High Income Fund/VA		200	$	4.37	$	876		8.80	%		–2.34	%
Invesco Van Kampen VI Capital Growth		634	$	5.75	$	3,641		0.00	%		–6.18	%
Invesco Van Kampen VI Comstock		1,325	$	17.91	$	23,736		1.62	%		–1.84	%
Invesco Van Kampen VI Growth & Income		1,062	$	16.22	$	17,228		1.27	%		–2.01	%
Invesco Van Kampen VI Mid-Cap Growth II		251	$	6.60	$	1,655		0.00	%		–9.36	%
Invesco Van Kampen VI Equity and Income II		781	$	17.11	$	13,357		1.75	%		–1.30	%
Invesco Van Kampen VI Government II		—	$	—	$	—		12.97	%		1.06	%(b)
Invesco Van Kampen VI Global Tactical Asset Alloc II		—	$	—	$	—		1.42	%		3.58	%(b)
Invesco Van Kampen VI International Growth Equity II		—	$	—	$	—		10.42	%		9.47	%(b)
Invesco Van Kampen VI Mid Cap Value II		10	$	12.87	$	133		0.71	%		0.83	%
Invesco VI Balanced Risk Allocation II		11	$	12.38	$	138		0.00	%		6.78	%(a)
Invesco VI Government Securities II		394	$	10.78	$	4,251		0.00	%		6.63	%(a)
Invesco VI International Growth II		70	$	8.80	$	619		0.00	%		–15.10	%(a)
UIF Global Real Estate II		34	$	9.13	$	307		3.43	%		–10.15	%
Lord Abbett Growth & Income		1,061	$	12.61	$	13,387		0.72	%		–6.08	%
Lord Abbett Bond Debenture		629	$	20.26	$	12,734		5.65	%		4.38	%
Lord Abbett Mid Cap Value		800	$	14.84	$	11,878		0.20	%		–4.01	%
Lord Abbett Growth Opportunities		141	$	18.10	$	2,546		0.00	%		–10.05	%
Lord Abbett Capital Structure		411	$	18.45	$	7,589		2.72	%		0.19	%
Lord Abbett International Opportunities		78	$	8.46	$	660		1.11	%		–15.72	%
Lord Abbett Classic Stock		29	$	9.65	$	281		0.74	%		–8.15	%
Lord Abbett Series Fundamental Equity VC		50	$	11.95	$	599		0.28	%		–4.49	%
Fidelity Index 500 Portfolio SC		334	$	11.48	$	3,834		1.99	%		1.93	%
Fidelity Growth Portfolio SC		125	$	9.40	$	1,175		0.24	%		0.14	%
Fidelity Contrafund Portfolio SC		785	$	16.25	$	12,759		0.93	%		–2.64	%

F-54

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

6. FINANCIAL HIGHLIGHTS — (Continued)

	As of December 31, 2011						For the Year Ended December 31, 2011
Subaccount	Units (000's)		Unit Fair Value		Net Assets (000's)		Investment Income Ratio*			Total Return**
Fidelity Mid Cap SC		230	$	18.50	$	4,249		0.16	%		–10.72	%
Fidelity Equity Income SC		143	$	12.39	$	1,767		2.43	%		0.86	%
Fidelity Investment Grade Bonds SC		153	$	14.93	$	2,282		3.23	%		7.21	%
Fidelity Freedom Fund - 2015 Maturity SC		24	$	10.82	$	264		2.09	%		–0.41	%
Fidelity Freedom Fund - 2020 Maturity SC		41	$	10.50	$	435		1.96	%		–1.12	%
Franklin Flex Cap Growth Securities		116	$	10.96	$	1,266		0.00	%		–4.80	%
Franklin Income Securities		809	$	13.01	$	10,525		5.68	%		2.38	%
Franklin Rising Dividend Securities		518	$	11.79	$	6,101		1.52	%		6.00	%
Franklin Small-Mid Cap Growth Securities		170	$	11.19	$	1,902		0.00	%		–4.83	%
Franklin Small Cap Value Securities CL 2		59	$	12.60	$	744		0.65	%		–3.76	%
Franklin US Government Fund		263	$	13.00	$	3,417		3.17	%		5.68	%
Templeton Growth Securities		831	$	8.93	$	7,416		1.33	%		–6.97	%
Templeton Foreign Securities		449	$	10.39	$	4,671		1.72	%		–10.63	%
Templeton Global Bond Securities Fund II		277	$	15.40	$	4,263		5.65	%		–0.87	%
Mutual Shares Securities		1,580	$	10.10	$	15,951		2.41	%		–1.04	%
Legg Mason ClearBridge Variable Mid Cap Core II		10	$	12.24	$	125		0.00	%		–4.14	%
Legg Mason ClearBridge Variable Small Cap Growth II		6	$	13.37	$	84		0.00	%		1.01	%
PIMCO VIT Long-Term US Government Advisor		17	$	13.44	$	224		2.58	%		27.71	%
PIMCO VIT Low Duration Advisor		53	$	10.74	$	574		1.54	%		1.01	%
PIMCO VIT Real Return Advisor		71	$	12.23	$	869		1.84	%		11.56	%
PIMCO VIT Short-Term Advisor		15	$	10.28	$	151		0.84	%		0.41	%
PIMCO VIT Total Return Advisor		368	$	11.21	$	4,125		2.54	%		3.50	%
Royce Capital Fund Micro-Cap SC		26	$	12.13	$	310		3.00	%		–12.26	%
Royce Capital Fund Small-Cap SC		40	$	11.97	$	483		0.39	%		–3.55	%

(a) Start date May 2, 2011

(b) Closed April 29, 2011

F-55

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

6. FINANCIAL HIGHLIGHTS — (Continued)

	As of December 31, 2010						For the Year Ended December 31, 2010
Subaccount	Units (000's)		Unit Fair Value		Net Assets (000's)		Investment Income Ratio*			Total Return**
Goldman Sachs Large Cap Value		606	$	19.46	$	11,773		0.81	%		11.20	%
Goldman Sachs Strategic International Equity		436	$	16.92	$	7,365		1.53	%		10.36	%
Goldman Sachs Structured US Equity		385	$	20.72	$	7,972		1.49	%		12.84	%
Goldman Sachs Structured Small Cap Equity		213	$	29.46	$	6,273		0.56	%		30.12	%
Goldman Sachs Strategic Growth		364	$	24.55	$	8,937		0.43	%		10.74	%
Goldman Sachs Mid Cap Value		148	$	17.17	$	2,546		0.70	%		25.00	%
Goldman Sachs Strategic Growth SC		95	$	10.47	$	997		0.23	%		10.50	%
Goldman Sachs Large Cap Value Fund SC		153	$	9.10	$	1,390		0.70	%		10.89	%
Goldman Sachs Strategic International Equity SC		89	$	8.67	$	768		1.47	%		10.09	%
Goldman Sachs Structured Small Cap Equity SC		21	$	12.01	$	258		0.33	%		29.86	%
Goldman Sachs Structured US Equity SC		9	$	9.39	$	82		1.28	%		12.60	%
Goldman Sachs VIT Growth Opportunities SC		21	$	13.02	$	275		0.00	%		19.36	%
Goldman Sachs Mid Cap Value SC		8	$	11.16	$	88		1.84	%		8.64	%(a)
Calvert VP SRI Balanced		4	$	17.07	$	73		1.24	%		11.59	%
MFS Growth Series IC		233	$	20.07	$	4,659		0.12	%		15.34	%
MFS Research IC		293	$	17.90	$	5,227		0.91	%		15.90	%
MFS Investors Trust IC		309	$	17.09	$	5,279		1.19	%		11.10	%
MFS Total Return IC		656	$	22.42	$	14,695		2.72	%		9.93	%
MFS New Discovery IC		124	$	26.25	$	3,251		0.00	%		36.34	%
MFS Utilities IC		112	$	27.07	$	3,023		3.17	%		13.81	%
MFS Investors Growth Stock IC		293	$	8.03	$	2,355		0.44	%		12.47	%
MFS VIT Research Bond SC		82	$	10.78	$	888		1.75	%		7.20	%
MFS VIT Value SC		84	$	11.64	$	979		0.58	%		11.22	%
Oppenheimer Money Fund/VA		3,995	$	1.57	$	6,284		0.03	%		0.03	%
Oppenheimer Small & Mid Cap Fund/VA		204	$	16.01	$	3,257		0.00	%		27.46	%
Oppenheimer Capital Appreciation Fund/VA		441	$	19.81	$	8,713		0.18	%		9.42	%
Oppenheimer Main Street Fund/VA		470	$	16.34	$	7,625		1.09	%		16.11	%
Oppenheimer Global Strategic Income Fund/VA		458	$	23.19	$	10,613		8.31	%		14.97	%
Oppenheimer Global Securites Fund/VA		448	$	26.05	$	11,654		1.36	%		15.96	%
Oppenheimer High Income Fund/VA		201	$	4.47	$	901		6.18	%		14.81	%
Invesco Van Kampen VI Capital Growth		749	$	6.13	$	4,580		0.00	%		19.85	%
Invesco Van Kampen VI Comstock		1,423	$	18.25	$	25,936		0.13	%		15.98	%
Invesco Van Kampen VI Growth & Income		1,091	$	16.56	$	18,050		0.10	%		12.51	%
Invesco Van Kampen VI Mid-Cap Growth II		243	$	7.28	$	1,768		0.00	%		27.27	%
Invesco Van Kampen VI Equity and Income II		797	$	17.33	$	13,815		1.98	%		12.03	%
Invesco Van Kampen VI Government II		325	$	12.75	$	4,146		0.20	%		4.88	%
Invesco Van Kampen VI Global Tactical Asset Alloc II		7	$	11.19	$	83		0.01	%		9.32	%
Invesco Van Kampen VI International Growth Equity II		63	$	8.50	$	534		1.37	%		9.89	%
Invesco Van Kampen VI Mid Cap Value II		4	$	12.77	$	53		0.74	%		22.18	%
UIF Global Real Estate II		18	$	10.16	$	186		8.62	%		22.32	%
Lord Abbett Growth & Income		1,140	$	13.43	$	15,312		0.57	%		17.41	%
Lord Abbett Bond Debenture		660	$	19.41	$	12,807		6.06	%		12.31	%
Lord Abbett Mid Cap Value		867	$	15.47	$	13,383		0.40	%		25.43	%
Lord Abbett Growth Opportunities		140	$	20.12	$	2,811		0.00	%		22.92	%
Lord Abbett Capital Structure		437	$	18.41	$	8,042		2.90	%		14.77	%
Lord Abbett International Opportunities		57	$	10.04	$	569		0.96	%		21.22	%
Lord Abbett Classic Stock		27	$	10.51	$	287		0.48	%		14.12	%
Lord Abbett Series Fundamental Equity VC		22	$	12.51	$	272		0.66	%		19.03	%
Fidelity Index 500 Portfolio SC		309	$	11.26	$	3,455		1.92	%		14.91	%
Fidelity Growth Portfolio SC		153	$	9.38	$	1,425		0.18	%		24.06	%
Fidelity Contrafund Portfolio SC		776	$	16.69	$	12,939		1.15	%		17.11	%
Fidelity Mid Cap SC		219	$	20.72	$	4,544		0.27	%		28.70	%
Fidelity Equity Income SC		146	$	12.28	$	1,799		1.72	%		15.09	%
Fidelity Invest Grade Bonds SC		157	$	13.93	$	2,193		3.74	%		7.68	%

F-56

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

6. FINANCIAL HIGHLIGHTS — (Continued)

	As of December 31, 2010						For the Year Ended December 31, 2010
Subaccount	Units (000's)		Unit Fair Value		Net Assets (000's)		Investment Income Ratio*			Total Return**
Fidelity Freedom Fund - 2015 Maturity SC		23	$	10.87	$	254		3.13	%		13.00	%
Fidelity Freedom Fund - 2020 Maturity SC		47	$	10.62	$	494		2.57	%		14.52	%
Franklin Flex Cap Growth Securities		94	$	11.51	$	1,087		0.00	%		16.19	%
Franklin Income Securities		750	$	12.70	$	9,526		6.59	%		12.67	%
Franklin Rising Dividend Securities		445	$	11.12	$	4,949		1.57	%		20.64	%
Franklin Small-Mid Cap Growth Securities		156	$	11.76	$	1,829		0.00	%		27.62	%
Franklin Small Cap Value Securities CL 2		29	$	13.09	$	375		0.47	%		28.22	%
Franklin US Government Fund		237	$	12.30	$	2,917		3.21	%		5.28	%
Templeton Growth Securities		749	$	9.60	$	7,190		1.34	%		7.39	%
Templeton Foreign Securities		378	$	11.63	$	4,400		1.89	%		8.41	%
Templeton Global Bond Securities Fund II		236	$	15.54	$	3,668		1.39	%		14.14	%
Mutual Shares Securities		1,423	$	10.20	$	14,514		1.65	%		11.19	%
Legg Mason ClearBridge Variable Mid Cap Core II		5	$	12.77	$	67		0.00	%		22.06	%
Legg Mason ClearBridge Variable Small Cap Growth II		3	$	13.24	$	35		0.00	%		24.73	%
PIMCO VIT Long-Term US Government Advisor		12	$	10.53	$	129		3.20	%		11.50	%
PIMCO VIT Low Duration Advisor		15	$	10.63	$	156		1.75	%		5.18	%
PIMCO VIT Real Return Advisor		22	$	10.96	$	240		1.20	%		8.00	%
PIMCO VIT Short-Term Advisor		6	$	10.24	$	59		0.79	%		2.01	%
PIMCO VIT Total Return Advisor		184	$	10.83	$	1,996		2.32	%		8.00	%
Royce Capital Fund Micro-Cap SC		13	$	13.82	$	180		4.95	%		29.90	%
Royce Capital Fund Small-Cap SC		19	$	12.41	$	238		0.29	%		20.26	%

(a) Start date May 3, 2010

F-57

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

7. EXPENSES

The following is a summary of separate account expense charges which are assessed either as a direct reduction in unit values or through a redemption of units for all policies contained within the Separate Account:

Expense Type				Range
Mortality and Expense Risk Charge To compensate Protective Life for the mortality risks it assumes which is that the cost of insurance charges are insufficient to meet actual death benefits claims and is deducted through the redemption of units. The monthly charge is based on the policy value and the policy issue year.				0.000% - 0.075% of policy value per month
Cost of Insurance Charge (COI) A fee is assessed to compensate Protective Life for the cost of providing the death benefit. The fee is assessed on the Monthly Anniversary Day. The fee is assessed through the redemption of units and is assessed based on the net amount at risk under the policy or as an asset-based charge. The charge depends on a number of variables, including issue age, policy duration, sex and insurance rate classification, and will fluctuate with each individual policy and as time inforce elapses.				$.01 - $333.33 per thousand of net amount at risk per month or 0.046% to 0.057% of policy value per month up to a maximum of the guaranteed COI.
Policy Expense Charge A monthly fee is assessed to reimburse Protective Life for sales not covered by the contingent deferred sales charge and its administrative expenses not covered by the annual maintenance fee. The charge is assessed through the redemption of units and is based upon the policy value.				0.000% - 0.058% of policy value per month
Annual Maintenance Fee This annual charge is assessed through the redemption of units and is waived when the policy value equals or exceeds $50,000.				$ 0 - $35
Surrender Charge (Contingent Deferred Sales Charge) and Premium Tax Recovery Charge This charge is assessed as a percent of the amount withdrawn, surrendered or lapsed in excess of the annual withdrawal amount allowed under the Policy. The purpose of these charges are to reimburse Protective Life for some of the expenses incurred in the distribution of the policies and the premium tax paid on each premium. The percentage charged is assessed through the redemption of units and is based upon the number of full years which have elapsed between the date the policy was purchased and the surrender date.				$0 - $58 per thousand at surrender or 0.0% - 27% of 1st year premiums at surrender

F-58

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

7. EXPENSES — (Continued)

Expense Type				Range
Transfer Fee Currently, there is no fee charged for transfers; however, Protective Life has reserved the right to charge for each transfer after the first 12 transfers in any policy year as a redemption of units.				$ 25
Monthly Standard Administration Charge A monthly administration charge is assessed as a redemption of units to compensate for issuance and administrative costs.				$ 3 - $8 per month
Monthly Administrative Charge for Face Value Increase A monthly administrative charge is assessed as a redemption of units for the first twelve months after a face value increase to compensate for related administrative costs.				$0.08 - $1.75 per thousand per month or $23.50 + $0.06 per thousand per month up to a maximum of $250 per month
Monthly Administrative Charge for Initial Face Value A monthly administrative charge is assessed as a redemption of units for the first twelve months after the initial purchase to compensate for related administrative costs.				$0.00 - $3.28 per thousand per month
Riders Monthly fees are charged as a redemption of units for the costs of various rider options and are assessed against policy value or rider coverage amount.				0.0125% of policy value up to a maximum of $31.25 or 0.01% of policy value $1.50 - $24.33 per $100 or $0.02 - $108.93 per thousand of rider coverage amount

8. RELATED PARTY TRANSACTIONS

Policy owners' net payments represent premiums received from policyholders less certain deductions made by Protective Life in accordance with the policy terms. These deductions include, where appropriate, tax, surrender, cost of insurance protection and administrative charges. These deductions

F-59

THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

December 31, 2014

8. RELATED PARTY TRANSACTIONS — (Continued)

are made to the individual policies in accordance with the terms governing each policy as set forth in the Policy.

Protective Life offers a loan privilege to certain policy owners. Such policy owners may obtain loans using the Policy as the only security for the loan. Loans may be subject to provisions of The Internal Revenue Code of 1986, as amended. Loans outstanding were approximately $18.3 million at December 31, 2014.

Investment Distributors, Inc., a wholly owned subsidiary of PLC, is the principal underwriter for the Separate Account.

9. SUBSEQUENT EVENTS

The Separate Account has evaluated the effects of events subsequent to December 31, 2014, and through the financial statement issuance date. All accounting and disclosure requirements related to subsequent events are included in our financial statements.

F-60

Report of Independent Registered Public Accounting Firm

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

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Protective Life Insurance Company and its subsidiaries at December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. The Company's management is responsible for these financial statements and financial statement schedules. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 5 to the consolidated financial statements, the Company's parent, Protective Life Corporation, was acquired on February 1, 2015 by The Dai-ichi Life Insurance Company, Limited. After completion of the acquisition, the Company is an ultimate wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited.

/s/ PricewaterhouseCoopers LLP

Birmingham, Alabama
March 24, 2015

F-61

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF INCOME

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Thousands)
Revenues
Premiums and policy fees	$	3,283,069		$	2,967,322		$	2,799,390
Reinsurance ceded		(1,395,743	)		(1,387,437	)		(1,310,097	)
Net of reinsurance ceded		1,887,326			1,579,885			1,489,293
Net investment income		2,098,013			1,836,188			1,789,338
Realized investment gains (losses):
Derivative financial instruments		(13,492	)		82,161			(227,816	)
All other investments		205,302			(121,537	)		232,836
Other-than-temporary impairment losses		(2,589	)		(10,941	)		(67,130	)
Portion recognized in other comprehensive income (before taxes)		(4,686	)		(11,506	)		8,986
Net impairment losses recognized in earnings		(7,275	)		(22,447	)		(58,144	)
Other income		294,333			250,420			230,553
Total revenues		4,464,207			3,604,670			3,456,060
Benefits and expenses
Benefits and settlement expenses, net of reinsurance ceded: (2014 — $1,223,804; 2013 — $1,207,781; 2012 — $1,228,897)		2,786,463			2,473,988			2,317,121
Amortization of deferred policy acquisition costs and value of business acquired		308,320			154,660			192,183
Other operating expenses, net of reinsurance ceded: (2014 — $199,824 ; 2013 — $199,079; 2012 — $200,442 )		630,635			553,523			487,177
Total benefits and expenses		3,725,418			3,182,171			2,996,481
Income before income tax		738,789			422,499			459,579
Income tax (benefit) expense
Current		181,763			(18,298	)		81,006
Deferred		65,075			149,195			70,037
Total income tax expense		246,838			130,897			151,043
Net income	$	491,951		$	291,602		$	308,536

See Notes to Consolidated Financial Statements
F-62

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Thousands)
Net income	$	491,951		$	291,602		$	308,536
Other comprehensive income (loss):
Change in net unrealized gains (losses) on investments, net of income tax: (2014 — $529,838; 2013 — $(673,302); 2012 — $392,372)		983,985			(1,250,416	)		728,692
Reclassification adjustment for investment amounts included in net income, net of income tax: (2014 — $(23,903); 2013 — $(15,396); 2012 — $(3,317))		(44,391	)		(28,594	)		(6,163	)
Change in net unrealized gains (losses) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2014 — $1,883; 2013 — $2,472 ; 2012 — $16,227)		3,498			4,591			30,136
Change in accumulated (loss) gain — derivatives, net of income tax: (2014 — $(1); 2013 — $395 ; 2012 — $1,108)		(2	)		734			2,058
Reclassification adjustment for derivative amounts included in net income, net of income tax: (2014 — $622; 2013 — $822 ; 2012 — $1,120)		1,155			1,527			2,080
Total other comprehensive income (loss)		944,245			(1,272,158	)		756,803
Total comprehensive income (loss)	$	1,436,196		$	(980,556	)	$	1,065,339

See Notes to Consolidated Financial Statements
F-63

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

	As of December 31,
	2014			2013
	(Dollars In Thousands)
Assets
Fixed maturities, at fair value (amortized cost: 2014 — $33,716,848; 2013 — $33,648,298)	$	36,756,240		$	34,804,919
Fixed maturities, at amortized cost (fair value: 2014 — $485,422; 2013 — $335,676)		435,000			365,000
Equity securities, at fair value (cost: 2014 — $735,297; 2013 — $632,652)		756,790			602,388
Mortgage loans (2014 and 2013 includes: $455,250 and $627,731 related to securitizations)		5,133,780			5,493,492
Investment real estate, net of accumulated depreciation (2014 — $246; 2013 — $937)		5,918			16,873
Policy loans		1,758,237			1,815,744
Other long-term investments		491,282			424,481
Short-term investments		246,717			133,025
Total investments		45,583,964			43,655,922
Cash		268,286			345,579
Accrued investment income		474,095			461,838
Accounts and premiums receivable, net of allowance for uncollectible amounts (2014 — $3,465; 2013 — $4,211 )		81,137			101,324
Reinsurance receivables		5,907,662			6,008,010
Deferred policy acquisition costs and value of business acquired		3,155,046			3,476,622
Goodwill		77,577			80,675
Property and equipment, net of accumulated depreciation (2014 — $116,688; 2013 — $110,080)		51,760			51,071
Other assets		398,574			501,302
Income tax receivable		1,648			12,399
Assets related to separate accounts
Variable annuity		13,157,429			12,791,438
Variable universal life		834,940			783,618
Total assets	$	69,992,118		$	68,269,798
Liabilities
Future policy benefits and claims	$	29,944,477		$	29,771,958
Unearned premiums		1,515,001			1,500,394
Total policy liabilities and accruals		31,459,478			31,272,352
Stable value product account balances		1,959,488			2,559,552
Annuity account balances		10,950,729			11,125,253
Other policyholders' funds		1,430,325			1,214,380
Other liabilities		1,178,962			945,911
Deferred income taxes		1,611,864			1,041,420
Non-recourse funding obligations		1,527,752			1,495,448
Repurchase program borrowings		50,000			350,000
Liabilities related to separate accounts
Variable annuity		13,157,429			12,791,438
Variable universal life		834,940			783,618
Total liabilities		64,160,967			63,579,372
Commitments and contingencies — Note 13
Shareowner's equity
Preferred Stock; $1 par value, shares authorized: 2,000; Liquidation preference: $2,000		2			2
Common Stock, $1 par value, shares authorized and issued: 2014 and 2013 — 5,000,000		5,000			5,000
Additional paid-in-capital		1,437,787			1,433,258
Retained earnings		2,905,151			2,713,200
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on investments, net of income tax: (2014 — $796,488; 2013 — $290,553)		1,479,192			539,598
Net unrealized (losses) gains relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2014 — $2,208; 2013 — $325)		4,101			603
Accumulated loss — derivatives, net of income tax: (2014 — $(45); 2013 — $(666))		(82	)		(1,235	)
Total shareowner's equity		5,831,151			4,690,426
Total liabilities and shareowner's equity	$	69,992,118		$	68,269,798

See Notes to Consolidated Financial Statements
F-64

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF SHAREOWNER'S EQUITY

	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareowner's Equity
	(Dollars In Thousands)
Balance, December 31, 2011	$	2	$	5,000	$	1,361,734	$	2,456,293		$	1,054,321		$	4,877,350
Net income for 2012								308,536						308,536
Other comprehensive income											756,803			756,803
Comprehensive income for 2012														1,065,339
Capital contributions						1,524								1,524
Dividends paid to the parent company								(257,000	)					(257,000	)
Balance, December 31, 2012	$	2	$	5,000	$	1,363,258	$	2,507,829		$	1,811,124		$	5,687,213
Net income for 2013								291,602						291,602
Other comprehensive loss											(1,272,158	)		(1,272,158	)
Comprehensive loss for 2013														(980,556	)
Capital contributions						70,000								70,000
Dividends paid to the parent company								(86,231	)					(86,231	)
Balance, December 31, 2013	$	2	$	5,000	$	1,433,258	$	2,713,200		$	538,966		$	4,690,426
Net income for 2014								491,951						491,951
Other comprehensive income											944,245			944,245
Comprehensive income for 2014														1,436,196
Capital contributions						4,529								4,529
Dividends paid to the parent company								(300,000	)					(300,000	)
Balance, December 31, 2014	$	2	$	5,000	$	1,437,787	$	2,905,151		$	1,483,211		$	5,831,151

See Notes to Consolidated Financial Statements
F-65

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Thousands)
Cash flows from operating activities
Net income	$	491,951		$	291,602		$	308,536
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Realized investment losses (gains)		(184,535	)		61,823			53,124
Amortization of deferred policy acquisition costs and value of business acquired		308,320			154,660			192,183
Capitalization of deferred policy acquisition costs		(293,612	)		(345,885	)		(311,960	)
Depreciation expense		7,401			6,595			7,378
Deferred income tax		65,075			149,195			70,037
Accrued income tax		10,751			70,749			359
Interest credited to universal life and investment products		824,418			875,180			962,678
Policy fees assessed on universal life and investment products		(1,038,180	)		(894,176	)		(794,825	)
Change in reinsurance receivables		100,348			97,523			(140,424	)
Change in accrued investment income and other receivables		14,332			(34,551	)		580
Change in policy liabilities and other policyholders' funds of traditional life and health products		92,823			95,421			300,523
Trading securities:
Maturities and principal reductions of investments		114,793			179,180			276,659
Sale of investments		353,250			256,938			454,150
Cost of investments acquired		(320,928	)		(380,836	)		(585,618	)
Other net change in trading securities		(69,641	)		38,999			(56,615	)
Change in other liabilities		197,442			(78,240	)		(22,009	)
Other income — gains on repurchase of non-recourse funding obligations		(7,393	)		(15,379	)		(29,344	)
Other, net		(22,961	)		13,679			11,220
Net cash provided by operating activities		643,654			542,477			696,632
Cash flows from investing activities
Maturities and principal reductions of investments, available-for-sale		1,198,690			1,094,862			1,169,563
Sale of investments, available-for-sale		2,273,909			3,241,559			2,535,708
Cost of investments acquired, available-for-sale		(3,602,600	)		(5,079,971	)		(4,228,755	)
Change in investments, held-to-maturity		(70,000	)		(65,000	)		(300,000	)
Mortgage loans:
New lendings		(925,910	)		(583,697	)		(346,435	)
Repayments		1,285,489			861,562			739,402
Change in investment real estate, net		13,032			(10,356	)		4,927
Change in policy loans, net		57,507			17,181			14,428
Change in other long-term investments, net		(87,522	)		(231,653	)		(123,401	)
Change in short-term investments, net		(71,015	)		147,477			(82,282	)
Net unsettled security transactions		30,212			7,373			37,169
Purchase of property and equipment		(8,088	)		(10,275	)		(6,157	)
Payments for business acquisitions, net of cash acquired		(906	)		(471,714	)		—
Net cash provided by (used in) investing activities		92,798			(1,082,652	)		(585,833	)
Cash flows from financing activities
Issuance (repayment) of non-recourse funding obligations		32,348			46,000			198,300
Repurchase program borrowings		(300,000	)		200,000			150,000
Capital contributions from PLC		4,529			70,000			—
Dividends paid to the parent company		(300,000	)		(44,963	)		(257,000	)
Investment product deposits and change in universal life deposits		2,576,727			3,219,561			3,716,553
Investment product withdrawals		(2,827,305	)		(2,874,426	)		(3,818,845	)
Other financing activities, net		(44	)		—			—
Net cash (used in) provided by financing activities		(813,745	)		616,172			(10,992	)
Change in cash		(77,293	)		75,997			99,807
Cash at beginning of period		345,579			269,582			169,775
Cash at end of period	$	268,286		$	345,579		$	269,582

See Notes to Consolidated Financial Statements
F-66

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Basis of Presentation

Protective Life Insurance Company (the "Company"), a stock life insurance company, was founded in 1907. The Company is a wholly owned subsidiary of Protective Life Corporation ("PLC"), an insurance holding company. On February 1, 2015, PLC became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan ("Dai-ichi Life"), when DL Investment (Delaware), Inc. a wholly owned subsidiary of Dai-ichi Life, merged with and into PLC. Prior to February 1, 2015, and for the periods this report presents, PLC's stock was publicly traded on the New York Stock Exchange. PLC is a holding company with subsidiaries that provide financial services through the production, distribution, and administration of insurance and investment products.

The Company markets individual life insurance, credit life and disability insurance, guaranteed investment contracts, guaranteed funding agreements, fixed and variable annuities, and extended service contracts throughout the United States. The Company also maintains a separate segment devoted to the acquisition of insurance policies from other companies.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Such accounting principles differ from statutory reporting practices used by insurance companies in reporting to state regulatory authorities (see also Note 21, Statutory Reporting Practices and Other Regulatory Matters ).

The operating results of companies in the insurance industry have historically been subject to significant fluctuations due to changing competition, economic conditions, interest rates, investment performance, insurance ratings, claims, persistency, and other factors.

Reclassifications

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

Entities Included

The consolidated financial statements include the accounts of Protective Life Insurance Company and its affiliate companies in which the Company holds a majority voting or economic interest. Intercompany balances and transactions have been eliminated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates include those used in determining deferred policy acquisition costs ("DAC") and related amortization periods, goodwill recoverability, value of business acquired ("VOBA"), investment and certain derivatives fair values, other-than-temporary impairments, future policy benefits, pension and other postretirement benefits, provisions for income taxes, reserves for contingent liabilities, reinsurance risk transfer assessments, and reserves for losses in connection with unresolved legal matters.

F-67

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Significant Accounting Policies

Valuation of Investment Securities

The Company determines the appropriate classification of investment securities at the time of purchase and periodically re-evaluates such designations. Investment securities are classified as either trading, available-for-sale, or held-to-maturity securities. Investment securities classified as trading are recorded at fair value with changes in fair value recorded in realized gains (losses). Investment securities purchased for long term investment purposes are classified as available-for-sale and are recorded at fair value with changes in unrealized gains and losses, net of taxes, reported as a component of other comprehensive income (loss). Investment securities are classified as held-to-maturity when the Company has the intent and ability to hold the securities to maturity and are reported at amortized cost. Interest income on available-for-sale and held-to-maturity securities includes the amortization of premiums and accretion of discounts and are recorded in investment income.

The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a "waterfall" approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information as outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations, which are considered to have no significant unobservable inputs. When using non- binding independent broker quotations, the Company obtains one quote per security, typically from the broker from which the Company purchased the security. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party service or an independent broker quotation. Included in the pricing of other asset-backed securities, collateralized mortgage obligations ("CMOs"), and mortgage-backed securities ("MBS") are estimates of the rate of future prepayments of principal and underlying collateral support over the remaining life of the securities. Such estimates are derived based on the characteristics of the underlying structure and rates of prepayments previously experienced at the interest rate levels projected for the underlying collateral. The basis for the cost of securities sold was determined at the Committee on Uniform Securities Identification Procedures ("CUSIP") level. The committee supplies a unique nine-character identification, called a CUSIP number, for each class of security approved for trading in the U.S., to facilitate clearing and settlement. These numbers are used when any buy and sell orders are recorded.

F-68

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Each quarter the Company reviews investments with unrealized losses and tests for other-than-temporary impairments. The Company analyzes various factors to determine if any specific other-than-temporary asset impairments exist. These include, but are not limited to: 1) actions taken by rating agencies, 2) default by the issuer, 3) the significance of the decline, 4) an assessment of the Company's intent to sell the security (including a more likely than not assessment of whether the Company will be required to sell the security) before recovering the security's amortized cost, 5) the duration of the decline, 6) an economic analysis of the issuer's industry, and 7) the financial strength, liquidity, and recoverability of the issuer. Management performs a security by security review each quarter in evaluating the need for any other-than-temporary impairments. Although no set formula is used in this process, the investment performance, collateral position, and continued viability of the issuer are significant measures considered, and in some cases, an analysis regarding the Company's expectations for recovery of the security's entire amortized cost basis through the receipt of future cash flows is performed. Once a determination has been made that a specific other-than-temporary impairment exists, the security's basis is adjusted and an other-than-temporary impairment is recognized. Equity securities that are other-than-temporarily impaired are written down to fair value with a realized loss recognized in earnings. Other-than- temporary impairments to debt securities that the Company does not intend to sell and does not expect to be required to sell before recovering the security's amortized cost are written down to discounted expected future cash flows ("post impairment cost") and credit losses are recorded in earnings. The difference between the securities' discounted expected future cash flows and the fair value of the securities on the impairment date is recognized in other comprehensive income (loss) as a non-credit portion impairment. When calculating the post impairment cost for residential mortgage-backed securities ("RMBS"), commercial mortgage-backed securities ("CMBS"), and other asset-backed securities (collectively referred to as asset-backed securities or "ABS"), the Company considers all known market data related to cash flows to estimate future cash flows. When calculating the post impairment cost for corporate debt securities, the Company considers all contractual cash flows to estimate expected future cash flows. To calculate the post impairment cost, the expected future cash flows are discounted at the original purchase yield. Debt securities that the Company intends to sell or expects to be required to sell before recovery are written down to fair value with the change recognized in earnings.

Cash

Cash includes all demand deposits reduced by the amount of outstanding checks and drafts. As a result of the Company's cash management system, checks issued from a particular bank but not yet presented for payment may create negative book cash balances with the bank. Such negative balances are included in other liabilities and were immaterial as of December 31, 2014 and $41.3 million as of December 31, 2013, respectively. The Company has deposits with certain financial institutions which exceed federally insured limits. The Company has reviewed the creditworthiness of these financial institutions and believes there is minimal risk of a material loss.

Deferred Policy Acquisition Costs

The incremental direct costs associated with successfully acquired insurance policies, are deferred to the extent such costs are deemed recoverable from future profits. Such costs include commissions and other costs of acquiring traditional life and health insurance, credit insurance, universal life insurance, and investment products. DAC are subject to recoverability testing at the end of each accounting

F-69

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

period. Traditional life and health insurance acquisition costs are amortized over the premium-payment period of the related policies in proportion to the ratio of annual premium income to the present value of the total anticipated premium income. Credit insurance acquisition costs are being amortized in proportion to earned premium. Acquisition costs for universal life and investment products are amortized over the lives of the policies in relation to the present value of estimated gross profits before amortization.

The Company makes certain assumptions regarding the mortality, persistency, expenses, and interest rates (equal to the rate used to compute liabilities for future policy benefits, currently 1.0% to 6.65%) the Company expects to experience in future periods when determining the present value of estimated gross profits. These assumptions are best estimates and are periodically updated whenever actual experience and/or expectations for the future change from that assumed. Additionally, 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 our universal life and investment products had been realized. Acquisition costs for stable value contracts are amortized over the term of the contracts using the effective yield method.

Value of Businesses Acquired

In conjunction with the acquisition of a block of insurance policies or investment contracts, a portion of the purchase price is allocated to the right to receive future gross profits from cash flow and earnings of the acquired insurance policies or investment contracts. This intangible asset, called VOBA, represents the actuarially estimated present value of future cash flows from the acquired policies. The estimated present value of future cash flows used in the calculation of the VOBA is based on certain assumptions, including mortality, persistency, expenses, and interest rates that the Company expects to experience in future years. These assumptions are best estimates and are periodically updated whenever actual experience and/or expectations for the future change from that assumed. The Company amortizes VOBA in proportion to gross premiums for traditional life products, in proportion to expected gross profits ("EGPs") for interest sensitive products, including accrued interest credited to account balances of up to approximately 8.75% and in proportion to estimated gross margin for policies within the Closed Block that was acquired as part of the MONY acquisition. VOBA is subject to annual recoverability testing.

Property and Equipment

The Company reports land, buildings, improvements, and equipment at cost, including interest capitalized during any acquisition or development period, less accumulated depreciation. The Company depreciates its assets using the straight-line method over the estimated useful lives of the assets. The Company's home office building is depreciated over a thirty-nine year useful life, furniture is depreciated over a ten year useful life, office equipment and machines are depreciated over a five year useful life, and software and computers are depreciated over a three year useful life. 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.

F-70

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Property and equipment consisted of the following:

	As of December 31,
	2014			2013
	(Dollars In Thousands)
Home office building	$	75,109		$	74,313
Data processing equipment		40,568			35,789
Other, principally furniture and equipment		52,771			51,049
		168,448			161,151
Accumulated depreciation		(116,688	)		(110,080	)
Total property and equipment	$	51,760		$	51,071

Separate Accounts

The separate account assets represent funds for which the Company does not bear the investment risk. These assets are carried at fair value and are equal to the separate account liabilities, which represent the policyholder's equity in those assets. The investment income and investment gains and losses on the separate account assets accrue directly to the policyholder. These amounts are reported separately as assets and liabilities related to separate accounts in the accompanying consolidated financial statements. Amounts assessed against policy account balances for the costs of insurance, policy administration, and other services are included in premiums and policy fees in the accompanying consolidated statements of income.

Stable Value Product Account Balances

The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the Federal Home Loan Bank ("FHLB"), and markets guaranteed investment contracts ("GICs") to 401(k) and other qualified retirement savings plans. GICs are contracts which specify a return on deposits for a specified period and often provide flexibility for withdrawals at book value in keeping with the benefits provided by the plan. Additionally, the Company has contracts outstanding pursuant to a funding agreement-backed notes program registered with the United States Securities and Exchange Commission (the "SEC") which offered notes to both institutional and retail investors.

The segment's products complement the Company's overall asset/liability management in that the terms may be tailored to the needs of the Company as the seller of the contracts. Stable value product account balances include GICs and funding agreements the Company has issued. As of December 31, 2014 and 2013, the Company had $39.8 million and $0.2 billion, respectively, of stable value product account balances marketed through structured programs. Most GICs and funding agreements the Company has written have maturities of one to ten years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

As of December 31, 2014, future maturities of stable value products were as follows:

Year of Maturity	Amount
	(Dollars In Millions)
2015	$	624.3
2016-2017		791.4
2018-2019		488.0
Thereafter		55.8

Derivative Financial Instruments

The Company records its derivative financial instruments in the consolidated balance sheet in "other long-term investments" and "other liabilities" in accordance with GAAP, which requires that all derivative instruments be recognized in the balance sheet at fair value. The change in the fair value of derivative financial instruments is reported either in the statement of income or in the other comprehensive income (loss), depending upon whether the derivative instrument qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists. For cash flow hedges, the effective portion of their gain or loss is reported as a component of other comprehensive income (loss) and reclassified into earnings in the period during which the hedged item impacts earnings. Any remaining gain or loss, the ineffective portion, is recognized in current earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. Effectiveness of the Company's hedge relationships is assessed on a quarterly basis. The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship in earnings. Changes in the fair value of derivatives that are recognized in current earnings are reported in "Realized investment gains (losses) — Derivative financial instruments". For additional information, see Note 23, Derivative Financial Instruments .

Insurance Liabilities and Reserves

Establishing an adequate liability for the Company's obligations to policyholders requires the use of certain assumptions. Estimating liabilities for future policy benefits on life and health insurance products requires the use of assumptions relative to future investment yields, mortality, morbidity, persistency, and other assumptions based on the Company's historical experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Determining liabilities for the Company's property and casualty insurance products also requires the use of assumptions, including the projected levels of used vehicle prices, the frequency and severity of claims, and the effectiveness of internal processes designed to reduce the level of claims. The Company's results depend significantly upon the extent to which its actual claims experience is consistent with the assumptions the Company used in determining its reserves and pricing its products. The Company's reserve assumptions and estimates require significant judgment and, therefore, are inherently uncertain. The Company cannot determine with precision the ultimate amounts that it will pay for actual claims or the timing of those payments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Guaranteed Minimum Withdrawal Benefits

The Company also establishes reserves for guaranteed minimum withdrawal benefits ("GMWB") on its variable annuity ("VA") products. The GMWB is valued in accordance with FASB guidance under the ASC Derivatives and Hedging Topic which utilizes the valuation technique prescribed by the ASC Fair Value Measurements and Disclosures Topic, which requires the liability to be recorded at fair value using current implied volatilities for the equity indices. The methods used to estimate the liabilities employ assumptions about mortality, lapses, policyholder behavior, equity market returns, interest rates, and market volatility. The Company assumes age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, with attained age factors varying from 44.5% to 100%. Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. The Company reinsures certain risks associated with the GMWB to Shades Creek Captive Insurance ("Shades Creek"), a direct wholly owned insurance subsidiary of PLC. As of December 31, 2014, the Company's net GMWB liability held, including the impact of reinsurance was $25.9 million.

Goodwill

Accounting for goodwill requires an estimate of the future profitability of the associated lines of business to assess the recoverability of the capitalized acquisition goodwill. The Company evaluates the carrying value of goodwill at the segment (or reporting unit) level at least annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: 1) a significant adverse change in legal factors or in business climate, 2) unanticipated competition, or 3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company first determines through qualitative analysis whether relevant events and circumstances indicate that it is more likely than not that segment goodwill balances are impaired as of the testing date. If it is determined that it is more likely than not that impairment exists, the Company compares its estimate of the fair value of the reporting unit to which the goodwill is assigned to the reporting unit's carrying amount, including goodwill. The Company utilizes a fair value measurement (which includes a discounted cash flows analysis) to assess the carrying value of the reporting units in consideration of the recoverability of the goodwill balance assigned to each reporting unit as of the measurement date. The Company's material goodwill balances are attributable to certain of its operating segments (which are each considered to be reporting units). The cash flows used to determine the fair value of the Company's reporting units are dependent on a number of significant assumptions. The Company's estimates, which consider a market participant view of fair value, are subject to change given the inherent uncertainty in predicting future results and cash flows, which are impacted by such things as policyholder behavior, competitor pricing, capital limitations, new product introductions, and specific industry and market conditions. As of December 31, 2014, the Company performed its annual evaluation of goodwill and determined that no adjustment to impair goodwill was necessary. As of December 31, 2014, the Company had goodwill of $77.6 million.

Income Taxes

The Company is included in the consolidated federal income tax return of PLC. The Company utilizes the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

The method of allocation of current income taxes between the affiliates is subject to a written agreement under which the Company incurs a liability to PLC to the extent that a separate return calculation indicates that the Company has a federal income tax liability. If the Company has an income tax benefit, the benefit is recorded currently to the extent it can be carried back against prior years' separate company income tax expense. Any amount not carried back is carried forward on a separate company basis (generally without a time limit), and the tax benefit is reflected in future periods when the Company generates taxable income. Income taxes recoverable (payable) are recorded in income taxes receivable (payable), respectively, and are settled periodically, per the tax sharing agreement. In general, income tax provisions are based on the income reported for financial statement purposes. Deferred income taxes arise from the recognition of temporary differences between the basis of assets and liabilities determined for financial reporting purposes and the basis determined for income tax purposes. Such temporary differences are principally related to net unrealized gains (losses), deferred policy acquisition costs and value of business acquired, and future policy benefits and claims.

The Company analyzes whether it needs to establish a valuation allowance on each of its deferred tax assets. In performing this analysis, the Company first considers the need for a valuation allowance on each separate deferred tax asset. Ultimately, it analyzes this need in the aggregate in order to prevent the double-counting of expected future taxable income in each of the foregoing separate analyses.

Variable Interest Entities

The Company holds certain investments in entities in which its ownership interests could possibly be considered variable interests under Topic 810 of the FASB ASC (excluding debt and equity securities held as trading, available-for-sale, or held-to-maturity). The Company reviews the characteristics of each of these applicable entities and compares those characteristics to applicable criteria to determine whether the entity is a Variable Interest Entity ("VIE"). If the entity is determined to be a VIE, the Company then performs a detailed review to determine whether the interest would be considered a variable interest under the guidance. The Company then performs a qualitative review of all variable interests with the entity and determines whether the Company is the primary beneficiary. ASC 810 provides that an entity is the primary beneficiary of a VIE if the entity has 1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, and 2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. For more information on the Company's investment in a VIE refer to Note 6, Investment Operations, to the consolidated financial statements.

Policyholder Liabilities, Revenues, and Benefits Expense

Traditional Life, Health, and Credit Insurance Products

Traditional life insurance products consist principally of those products with fixed and guaranteed premiums and benefits, and they include whole life insurance policies, term and term-like life insurance policies, limited payment life insurance policies, and certain annuities with life contingencies. Traditional life insurance premiums are recognized as revenue when due. Health and credit 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

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

means of the provision for liabilities for future policy benefits and the amortization of DAC and VOBA. Gross premiums in excess of net premiums related to immediate annuities are deferred and recognized over the life of the policy.

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 the Company's experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Reserve investment yield assumptions on December 31, 2014, range from approximately 2.0% to 7.5%. The liability for future policy benefits and claims on traditional life, health, and credit insurance products includes estimated unpaid claims that have been reported to us and claims incurred but not yet reported. Policy claims are charged to expense in the period in which the claims are incurred.

Activity in the liability for unpaid claims for life and health insurance is summarized as follows:

	As of December 31,
	2014		2013			2012
	(Dollars In Thousands)
Balance beginning of year	$	334,450	$	326,633		$	312,799
Less: reinsurance		117,502		155,341			161,450
Net balance beginning of year		216,948		171,292			151,349
Incurred related to:
Current year		1,075,005		698,028			702,555
Prior year		102,936		68,396			62,926
Total incurred		1,177,941		766,424			765,481
Paid related to:
Current year		1,017,193		682,877			664,744
Prior year		121,966		85,146			80,794
Total paid		1,139,159		768,023			745,538
Other changes:
Acquisition and reserve transfers		—		47,255	(1)		—
Net balance end of year		255,730		216,948			171,292
Add: reinsurance		163,671		117,502			155,341
Balance end of year	$	419,401	$	334,450		$	326,633

(1) This amount represents the net liability, before reinsurance, for unpaid claims as of December 31, 2013 for MONY Life Insurance Company. The claims activity from the acquisition date of October 1, 2013 through December 31, 2013 for MONY Life Insurance Company is not reflected in this chart.

Universal Life and Investment Products

Universal life and investment products include universal life insurance, guaranteed investment contracts, guaranteed funding agreements, deferred annuities, and annuities without life contingencies. Premiums and policy fees for universal life and investment products consist of fees that have been assessed against policy account balances for the costs of insurance, policy administration, and

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

surrenders. Such fees are recognized when assessed and earned. 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 rates credited to universal life products ranged from 1.0% to 8.75% and investment products ranged from 0.2% to 10% in 2014.

The Company establishes liabilities for fixed indexed annuity ("FIA") products. These products are deferred fixed annuities with a guaranteed minimum interest rate plus a contingent return based on equity market performance. The FIA product is considered a hybrid financial instrument under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC" or "Codification") Topic 815 — Derivatives and Hedging which allows the Company to make the election to value the liabilities of these FIA products at fair value. This election was made for the FIA products issued prior to 2010 as the policies were issued. These products are no longer being marketed. The changes in the fair value of the liability for these FIA products are recorded in Benefit and settlement expenses with the liability being recorded in Annuity account balances . For more information regarding the determination of fair value of annuity account balances please refer to Note 22, Fair Value of Financial Instruments . Premiums and policy fees for these FIA products consist of fees that have been assessed against the policy account balances for surrenders. Such fees are recognized when assessed and earned.

During 2013, the Company began marketing a new FIA product. These products are also deferred fixed annuities with a guaranteed minimum interest rate plus a contingent return based on equity market performance and are considered hybrid financial instruments under the FASB's ASC Topic 815 — Derivatives and Hedging . The Company did not elect to value these FIA products at fair value. As a result the Company accounts for the provision that provides for a contingent return based on equity market performance as an embedded derivative. The embedded derivative is bifurcated from the host contract and recorded at fair value in Other liabilities. Changes in the fair value of the embedded derivative are recorded in Realized investment gains (losses) — Derivative financial instruments . For more information regarding the determination of fair value of the FIA embedded derivative refer to Note 22, Fair Value of Financial Instruments . The host contract is accounted for as a debt instrument in accordance with ASC Topic 944 — Financial Services — Insurance and is recorded in Annuity account balances with any discount to the minimum account value being accreted using the effective yield method. Benefits and settlement expenses include accreted interest and benefit claims incurred during the period.

During 2014, the Company began marketing a new indexed universal life ("IUL") product. These products are universal life products with a guaranteed minimum interest rate plus a contingent return based on equity market performance and are considered hybrid financial instruments under the FASB's ASC Topic 815 — Derivatives and Hedging . The Company did not elect to value these IUL products at fair value. As a result the Company accounts for the provision that provides for a contingent return based on equity market performance as an embedded derivative. The embedded derivative is bifurcated from the host contract and recorded at fair value in Other liabilities . Changes in the fair value of the embedded derivative are recorded in Realized investment gains (losses) — Derivative financial instruments . For more information regarding the determination of fair value of the IUL embedded derivative refer to Note 22, Fair Value of Financial Instruments . The host contract is accounted for as a

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

debt instrument in accordance with ASC Topic 944 — Financial Services — Insurance and is recorded in Future policy benefits and claims with any discount to the minimum account value being accreted using the effective yield method. Benefits and settlement expenses include accreted interest and benefit claims incurred during the period.

The Company's accounting policies with respect to variable universal life ("VUL") and VA are identical except that policy account balances (excluding account balances that earn a fixed rate) are valued at fair value and reported as components of assets and liabilities related to separate accounts.

The Company establishes liabilities for guaranteed minimum death benefits ("GMDB") on its VA products. The methods used to estimate the liabilities employ assumptions about mortality and the performance of equity markets. The Company assumes age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, with attained age factors varying from 49% — 80%. Future declines in the equity market would increase the Company's GMDB liability. Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. Our GMDB as of December 31, 2014, are subject to a dollar for dollar reduction upon withdrawal of related annuity deposits on contracts issued prior to January 1, 2003. The Company reinsures certain risks associated with the GMDB to Shades Creek. As of December 31, 2014, the GMDB reserve, including the impact of reinsurance was $21.7 million.

Property and Casualty Insurance Products

Property and casualty insurance products include service contract business, surety bonds, and guaranteed asset protection ("GAP). Premiums for service contracts and GAP products are recognized based on expected claim patterns. For all other products, premiums are generally recognized over the terms of the contract on a pro-rata basis. Fee income from providing administrative services is recognized as earned when the related services are performed. Unearned premium reserves are maintained for the portion of the premiums that is related to the unexpired period of the policy. Benefit reserves are recorded when insured events occur. Benefit reserves include case basis reserves for known but unpaid claims as of the balance sheet date as well as incurred but not reported ("IBNR") reserves for claims where the insured event has occurred but has not been reported to the Company as of the balance sheet date. The case basis reserves and IBNR are calculated based on historical experience and on assumptions relating to claim severity and frequency, the level of used vehicle prices, and other factors. These assumptions are modified as necessary to reflect anticipated trends.

Reinsurance

The Company uses reinsurance extensively in certain of its segments and accounts for reinsurance and the recognition of the impact of reinsurance costs in accordance with the ASC Financial Services — Insurance Topic. The following summarizes some of the key aspects of the Company's accounting policies for reinsurance.

Reinsurance Accounting Methodology — Ceded premiums of the Company's traditional life insurance products are treated as an offset to direct premium and policy fee revenue and are recognized when due to the assuming company. Ceded claims are treated as an offset to direct benefits and settlement expenses and are recognized when the claim is incurred on a direct basis.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Ceded policy reserve changes are also treated as an offset to benefits and settlement expenses and are recognized during the applicable financial reporting period. Expense allowances paid by the assuming companies which are allocable to the current period are treated as an offset to other operating expenses. Since reinsurance treaties typically provide for allowance percentages that decrease over the lifetime of a policy, allowances in excess of the "ultimate" or final level allowance are capitalized. Amortization of capitalized reinsurance expense allowances representing recovery of acquisition costs is treated as an offset to direct amortization of DAC or VOBA. Amortization of deferred expense allowances is calculated as a level percentage of expected premiums in all durations given expected future lapses and mortality and accretion due to interest.

The Company utilizes reinsurance on certain short duration insurance contracts (primarily issued through the Asset Protection segment). As part of these reinsurance transactions the Company receives reinsurance allowances which reimburse the Company for acquisition costs such as commissions and premium taxes. A ceding fee is also collected to cover other administrative costs and profits for the Company. As a component of reinsurance costs, reinsurance allowances are accounted for in accordance with the relevant provisions of ASC Financial Services — Insurance Topic, which state that reinsurance costs should be amortized over the contract period of the reinsurance if the contract is short-duration. Accordingly, reinsurance allowances received related to short-duration contracts are capitalized and charged to expense in proportion to premiums earned. Ceded unamortized acquisition costs are netted with direct unamortized acquisition costs in the balance sheet.

Ceded premiums and policy fees on the Company's fixed universal life ("UL"), VUL, bank-owned life insurance ("BOLI"), and annuity products reduce premiums and policy fees recognized by the Company. Ceded claims are treated as an offset to direct benefits and settlement expenses and are recognized when the claim is incurred on a direct basis. Ceded policy reserve changes are also treated as an offset to benefits and settlement expenses and are recognized during the applicable valuation period.

Since reinsurance treaties typically provide for allowance percentages that decrease over the lifetime of a policy, allowances in excess of the "ultimate" or final level allowance are capitalized. Amortization of capitalized reinsurance expense allowances are amortized based on future expected gross profits. Assumptions regarding mortality, lapses, and interest rates are continuously reviewed and may be periodically changed. These changes will result in "unlocking" that changes the balance in the ceded deferred acquisition cost and can affect the amortization of DAC and VOBA. Ceded unearned revenue liabilities are also amortized based on expected gross profits. Assumptions are based on the best current estimate of expected mortality, lapses and interest spread.

The Company has also assumed certain policy risks written by other insurance companies through reinsurance agreements. Premiums and policy fees as well as Benefits and settlement expenses include amounts assumed under reinsurance agreements and are net of reinsurance ceded. Assumed reinsurance is accounted for in accordance with ASC Financial Services — Insurance Topic.

Reinsurance Allowances — Long-Duration Contracts — Reinsurance allowances are intended to reimburse the ceding company for some portion of the ceding company's commissions, expenses, and taxes. The amount and timing of reinsurance allowances (both first year and renewal allowances) are contractually determined by the applicable reinsurance contract and do not necessarily bear a relationship to the amount and incidence of expenses actually paid by the ceding company in any given year.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Ultimate reinsurance allowances are defined as the lowest allowance percentage paid by the reinsurer in any policy duration over the lifetime of a universal life policy (or through the end of the level term period for a traditional life policy). Ultimate reinsurance allowances are determined during the negotiation of each reinsurance agreement and will differ between agreements.

The Company determines its "cost of reinsurance" to include amounts paid to the reinsurer (ceded premiums) net of amounts reimbursed by the reinsurer (in the form of allowances). As noted within ASC Financial Services — Insurance Topic, "The difference, if any, between amounts paid for a reinsurance contract and the amount of the liabilities for policy benefits relating to the underlying reinsured contracts is part of the estimated cost to be amortized." The Company's policy is to amortize the cost of reinsurance over the life of the underlying reinsured contracts (for long-duration policies) in a manner consistent with the way in which benefits and expenses on the underlying contracts are recognized. For the Company's long-duration contracts, it is the Company's practice to defer reinsurance allowances as a component of the cost of reinsurance and recognize the portion related to the recovery of acquisition costs as a reduction of applicable unamortized acquisition costs in such a manner that net acquisition costs are capitalized and charged to expense in proportion to net revenue recognized. The remaining balance of reinsurance allowances are included as a component of the cost of reinsurance and those allowances which are allocable to the current period are recorded as an offset to operating expenses in the current period consistent with the recognition of benefits and expenses on the underlying reinsured contracts. This practice is consistent with the Company's practice of capitalizing direct expenses (e.g. commissions), and results in the recognition of reinsurance allowances on a systematic basis over the life of the reinsured policies on a basis consistent with the way in which acquisition costs on the underlying reinsured contracts would be recognized. In some cases reinsurance allowances allocable to the current period may exceed non-deferred direct costs, which may cause net other operating expenses (related to specific contracts) to be negative.

Amortization of Reinsurance Allowances — Reinsurance allowances do not affect the methodology used to amortize DAC and VOBA, or the period over which such DAC and VOBA are amortized. Reinsurance allowances offset the direct expenses capitalized, reducing the net amount that is capitalized. DAC and VOBA on traditional life policies are amortized based on the pattern of estimated gross premiums of the policies in force. Reinsurance allowances do not affect the gross premiums, so therefore they do not impact traditional life amortization patterns. DAC and VOBA on universal life products are amortized based on the pattern of estimated gross profits of the policies in force. Reinsurance allowances are considered in the determination of estimated gross profits, and therefore do impact amortization patterns.

Reinsurance Assets and Liabilities — Claim liabilities and policy benefits are calculated consistently for all policies in accordance with GAAP, regardless of whether or not the policy is reinsured. Once the claim liabilities and policy benefits for the underlying policies are estimated, the amounts recoverable from the reinsurers are estimated based on a number of factors including the terms of the reinsurance contracts, historical payment patterns of reinsurance partners, and the financial strength and credit worthiness of reinsurance partners and recorded as Reinsurance receivables on the balance sheet. Liabilities for unpaid reinsurance claims are produced from claims and reinsurance system records, which contain the relevant terms of the individual reinsurance contracts. The Company monitors claims due from reinsurers to ensure that balances are settled on a timely basis. Incurred but not reported claims are reviewed by the Company's actuarial staff to ensure that appropriate amounts are ceded.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

The Company analyzes and monitors the credit worthiness of each of its reinsurance partners to minimize collection issues. For newly executed reinsurance contracts with reinsurance companies that do not meet predetermined standards, the Company requires collateral such as assets held in trusts or letters of credit.

Components of Reinsurance Cost — The following income statement lines are affected by reinsurance cost:

Premiums and policy fees ("reinsurance ceded" on the Company's financial statements) represent consideration paid to the assuming company for accepting the ceding company's risks. Ceded premiums and policy fees increase reinsurance cost.

Benefits and settlement expenses include incurred claim amounts ceded and changes in ceded policy reserves. Ceded benefits and settlement expenses decrease reinsurance cost.

Amortization of deferred policy acquisition cost and VOBA reflects the amortization of capitalized reinsurance allowances representing recovery of acquisition costs. Ceded amortization decreases reinsurance cost.

Other expenses include reinsurance allowances paid by assuming companies to the Company less amounts representing recovery of acquisition costs. Reinsurance allowances decrease reinsurance cost.

The Company's reinsurance programs do not materially impact the other income line of the Company's income statement. In addition, net investment income generally has no direct impact on the Company's reinsurance cost. However, it should be noted that by ceding business to the assuming companies, the Company forgoes investment income on the reserves ceded to the assuming companies. Conversely, the assuming companies will receive investment income on the reserves assumed which will increase the assuming companies' profitability on business assumed from the Company.

Accounting Pronouncements Not Yet Adopted

Accounting Standards Update ("ASU") No. 2014-08 — Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity. This Update changes the requirements for reporting discontinued operations and related disclosures. The Update limits the definition of a discontinued operation to disposals that represent "strategic shifts" that will have a major effect on an entity's operation and financial results. Additionally, the Update requires enhanced disclosures about the components of discontinued operations and the financial effects of the disposal. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2014. The Company is reviewing the additional disclosures required by the Update, and will apply the revised guidance to any disposals occurring after the effective date.

ASU No. 2014-09 — Revenue from Contracts with Customers (Topic 606). This Update provides for significant revisions to the recognition of revenue from contracts with customers across various industries. Under the new guidance, entities are required to apply a prescribed 5-step process to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting for revenues associated with insurance products is not within the scope of this Update. The Update is effective for annual and interim periods beginning after December 15, 2016. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

ASU No. 2014-11 — Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. This Update changes the requirements for classification of certain repurchase agreements, and will expand the use of secured borrowing accounting for repurchase-to-maturity transactions. In addition, the Update requires additional disclosures for repurchase agreements accounted for both as sales and as secured borrowings. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2014. The Update is not expected to impact the Company's financial position or results of operations, and the Company has reviewed its policies and processes to ensure compliance with the additional disclosure requirements.

ASU No. 2014-15 — Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. This Update will require management to assess an entity's ability to continue as a going concern, and will require footnote disclosures in certain circumstances. Under the updated guidance, management should consider relevant conditions and evaluate whether it is probable that the entity will be unable to meet its obligations within one year after the issuance date of the financial statements. The Update is effective for annual periods ending December 31, 2016 and interim periods thereafter, with early adoption is permitted. The amendments in this Update will not impact the Company's financial position or results of operations. However, the new guidance will require a formal assessment of going concern by management based on criteria prescribed in the new guidance. The Company is reviewing its policies and processes to ensure compliance with the new guidance.

ASU No. 2014-17 — Business Combinations (Topic 805). This Update relates to "pushdown accounting", which refers to pushing down the acquirer's accounting and reporting basis (which is recognized in conjunction with its accounting for a business combination) to the acquiree's standalone financial statements. The new guidance makes pushdown accounting optional for an acquiree that is a business or nonprofit activity when there is a change-in- control event (e.g., the acquirer in a business combination obtains control over the acquiree). In addition, the staff of the SEC released Staff Accounting Bulletin ("SAB") No. 115, which rescinds SAB Topic 5J, "New Basis of Accounting Required in Certain Circumstances" (the SEC staff's pre-existing guidance on pushdown accounting) and conforms SEC guidance on pushdown accounting to the FASB's new guidance. The new pushdown accounting guidance became effective upon its issuance on November 18, 2014. Although now optional, the Company expects to apply pushdown accounting to its standalone financial statements effective with the Company becoming a wholly owned subsidiary of Dai-ichi Life on February 1, 2015.

ASU No. 2015-02 — Consolidation — Amendments to the Consolidation Analysis. This Update makes several targeted changes to generally accepted accounting principles, including a) eliminating the presumption that a general partner should consolidate a limited partnership and b) eliminating the consolidation model specific to limited partnerships. The amendments also clarify when fees and related party relationships should be considered in the consolidation of variable interest entities. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2015. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SIGNIFICANT ACQUISITIONS

On October 1, 2013 the Company completed the acquisition contemplated by the master agreement (the "Master Agreement") dated April 10, 2013. Pursuant to that Master Agreement with AXA Financial, Inc. ("AXA") and AXA Equitable Financial Services, LLC ("AEFS"), the Company acquired the stock of MONY Life Insurance Company ("MONY") from AEFS and entered into a reinsurance agreement (the "Reinsurance Agreement") pursuant to which it reinsured on a 100% indemnity reinsurance basis certain business (the "MLOA Business") of MONY Life Insurance Company of America ("MLOA"). The final aggregate purchase price of MONY was $689 million. The ceding commission for the reinsurance of the MLOA Business was $370 million. Together, the purchase of MONY and reinsurance of the MLOA Business are hereto referred to as (the "MONY acquisition"). The MONY acquisition allowed the Company to invest its capital and increase the scale of its Acquisitions segment. The MONY acquisition business is comprised of traditional and universal life insurance policies and fixed and variable annuities, most of which were written prior to 2004.

The MONY acquisition was accounted for under the acquisition method of accounting under ASC Topic 805. In accordance with ASC 805-20-30, all identifiable assets acquired and liabilities assumed were measured at fair value as of the acquisition date. Within one year of the acquisition date, as a result of new information obtained about facts and circumstances that existed as of the acquisition date, the Company recorded certain measurement period adjustments to fixed maturities, mortgage loans, cash, accounts and premiums receivable, VOBA, other assets, deferred income taxes, future policy benefits and claims, other policyholders' funds, and other liabilities. These were customary adjustments that occurred during the normal course of reviewing and integrating the MONY acquisition. The net result on the amount of VOBA recorded by the Company in relation to the MONY acquisition was to decrease VOBA by approximately $14.0 million. This impact has been revised in the comparative consolidated balance sheet presented as of December 31, 2013. The Company has determined that the impact on amortization and other related amounts within the comparative interim and annual periods from that previously presented in the annual or interim consolidated condensed statements of income is immaterial. The amounts presented in the following table related to the MONY acquisition (presented as of the acquisition date of October 1, 2013) have been retrospectively revised for the aforementioned measurement period adjustments.

The following table summarizes the consideration paid for the acquisition and the determination of the fair value of assets acquired and liabilities assumed at the acquisition date:

	Fair Value As of October 1, 2013
	(Dollars In Thousands)
Assets
Fixed maturities, at fair value	$	6,557,853
Equity securities, at fair value		108,413
Mortgage loans		830,415
Policy loans		967,534
Short-term investments		130,963
Total investments		8,595,178

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SIGNIFICANT ACQUISITIONS — (Continued)

	Fair Value As of October 1, 2013
	(Dollars In Thousands)
Cash	$	216,164
Accrued investment income		114,695
Accounts and premiums receivable, net of allowance for uncollectible amounts		26,055
Reinsurance receivables		422,692
Value of business acquired		205,767
Other assets		5,104
Income tax receivable		21,197
Deferred income taxes		188,142
Separate account assets		195,452
Total assets	$	9,990,446
Liabilities
Future policy benefits and claims	$	7,645,969
Unearned premiums		3,066
Total policy liabilities and accruals		7,649,035
Annuity account balances		752,163
Other policyholders' funds		636,448
Other liabilities		66,124
Non-recourse funding obligation		2,548
Separate account liabilities		195,344
Total liabilities		9,301,662
Net assets acquired	$	688,784

The following (unaudited) pro forma condensed consolidated results of operations assumes that the aforementioned acquisition was completed as of January 1, 2012:

	Unaudited For The Year Ended December 31,
	2013			2012
	(Dollars In Thousands)
Revenue	$	4,245,388	(1)	$	4,330,935
Net income		325,783	(2)		365,204

(1) Includes $203.8 million of revenue recognized in the Company's net income for the year ended December 31, 2013.

(2) Includes $27.9 million of pre-tax net income recognized by the Company for the year ended December 31, 2013.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. MONY CLOSED BLOCK OF BUSINESS

In 1998, MONY converted from a mutual insurance company to a stock corporation ("demutualization"). In connection with its demutualization, an accounting mechanism known as a closed block (the "Closed Block") was established for certain individuals' participating policies in force as of the date of demutualization. Assets, liabilities, and earnings of the Closed Block are specifically identified to support its participating policyholders. The Company acquired the Closed Block in conjunction with the MONY acquisition as discussed in Note 3, Significant Acquisitions .

Assets allocated to the Closed Block inure solely to the benefit of each Closed Block's policyholders and will not revert to the benefit of MONY or the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of MONY's general account, any of MONY's separate accounts or any affiliate of MONY without the approval of the Superintendent of The New York State Insurance Department (the "Superintendent"). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the general account.

The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in accumulated other comprehensive income (loss) ("AOCI")) at the acquisition date represented the estimated maximum future post-tax earnings from the Closed Block that would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. In connection with the acquisition of MONY, the Company has developed an actuarial calculation of the expected timing of MONY's Closed Block's earnings as of October 1, 2013.

If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in the Company's net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block.

Many expenses related to Closed Block operations, including amortization of VOBA, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. MONY CLOSED BLOCK OF BUSINESS — (Continued)

Summarized financial information for the Closed Block as of December 31, 2013 and December 31, 2014 is as follows:

	As of December 31,
	2014		2013
	(Dollars In Thousands)
Closed block liabilities
Future policy benefits, policyholders' account balances and other	$	6,138,505	$	6,261,819
Policyholder dividend obligation		366,745		190,494
Other liabilities		53,838		1,259
Total closed block liabilities		6,559,088		6,453,572
Closed block assets
Fixed maturities, available-for-sale, at fair value		4,524,037		4,113,829
Equity securities, available-for-sale, at fair value		5,387		5,223
Mortgage loans on real estate		448,855		601,959
Policy loans		771,120		802,013
Cash and other invested assets		30,984		140,577
Other assets		221,270		206,938
Total closed block assets		6,001,653		5,870,539
Excess of reported closed block liabilities over closed block assets		557,435		583,033
Portion of above representing accumulated other comprehensive income:
Net unrealized investments gains (losses) net of deferred tax benefit of $0 and $1,074 net of policyholder dividend obligation of $106,886 and $12,720		—		(1,994	)
Future earnings to be recognized from closed block assets and closed block liabilities	$	557,435	$	581,039

Reconciliation of the policyholder dividend obligation for the years ending December 31, 2013 and 2014 is as follows:

	For The Year Ended December 31,
	2014			2013
	(Dollars In Thousands)
Policyholder dividend obligation, beginning balance	$	190,494		$	213,350
Applicable to net revenue (losses)		(910	)		(10,136	)
Change in net unrealized investment gains (losses) allocated to policyholder dividend obligation		177,161			(12,720	)
Policyholder dividend obligation, end of period	$	366,745		$	190,494

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. MONY CLOSED BLOCK OF BUSINESS — (Continued)

Closed Block revenues and expenses were as follows:

	For The Year Ended December 31,
	2014		2013
	(Dollars In Thousands)
Revenues
Premiums and other income	$	212,765	$	64,171
Net investment income		239,028		51,141
Net investment gains		10,528		9,252
Total revenues		462,321		124,564
Benefits and other deductions
Benefits and settlement expenses		417,667		113,564
Other operating expenses		674		548
Total benefits and other deductions		418,341		114,112
Net revenues before income taxes		43,980		10,452
Income tax expense		20,377		3,658
Net revenues	$	23,603	$	6,794

5. DAI-ICHI MERGER

On February 1, 2015 PLC, subsequent to required approvals from PLC's shareholders and relevant regulatory authorities, became a wholly owned subsidiary as contemplated by the Agreement and Plan of Merger (the "Merger Agreement") with Dai-ichi Life and DL Investment (Delaware), Inc., a Delaware corporation and wholly owned subsidiary of Dai-ichi Life, which provides for the merger of DL Investment (Delaware), Inc. with and into PLC (the "Merger"), with PLC surviving the Merger as a wholly owned subsidiary of Dai-ichi Life. On February 1, 2015 each share of PLC's common stock outstanding was converted into the right to receive $70 per share, without interest, (the "Per Share Merger Consideration"). The aggregate cash consideration to be paid in connection with the Merger for the outstanding shares of common stock was approximately $5.6 billion.

The Merger resulted in the Company recognizing certain contingent or transaction related costs. Subsequent to the Merger, the Company will apply "pushdown" accounting by applying the guidance allowed by ASC 805, Business Combinations, including the initial recognition of most of the Company's assets and liabilities at fair value as of the acquisition date, and similarly goodwill calculated and recognized based on the terms of the transaction and the new basis of net assets of the Company. The new basis of accounting will be the basis of the accounting records in the preparation of future financial statements and related disclosures.

Treatment of Benefit Plans

At or immediately prior to the Merger, each stock appreciation right with respect to shares of PLC's Common Stock granted under any Stock Plan (each, a "SAR") that was outstanding and unexercised immediately prior to the Merger and that had a base price per share of Common Stock underlying such SAR (the "Base Price") that was less than the Per Share Merger Consideration (each such SAR, an

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. DAI-ICHI MERGER — (Continued)

"In-the-Money SAR"), whether or not exercisable or vested, was cancelled and converted into the right to receive an amount in cash less any applicable withholding taxes, determined by multiplying (i) the excess of the Per Share Merger Consideration over the Base Price of such In-the-Money SAR by (ii) the number of shares of PLC's Common Stock subject to such In- the-Money SAR (such amount, the "SAR Consideration").

At or immediately prior to the effective time of the merger, each restricted stock unit with respect to a share of Common Stock granted under any Stock Plan (each, a "RSU") that was outstanding immediately prior to the Merger, whether or not vested, was cancelled and converted into the right to receive an amount in cash, without interest, less any applicable withholding taxes, determined by multiplying (i) the Per Share Merger Consideration by (ii) the number of RSUs.

The number of performance shares earned for each award of performance shares granted under any Stock Plan will be calculated by determining the number of performance shares that would have been paid if the subject award period had ended on the December 31 immediately preceding the Merger (based on the conditions set for payment of performance share awards for the subject award period), provided that the number of performance shares earned for each award were not less than the aggregate number of performance shares at the target performance level. Each performance share earned that was outstanding immediately prior to the Merger, whether or not vested, was cancelled and converted into the right to receive an amount in cash, without interest, less any applicable withholding taxes, determined by multiplying (i) the Per Share Merger Consideration by (ii) the number of Performance Shares.

6. INVESTMENT OPERATIONS

Major categories of net investment income are summarized as follows:

	For The Year Ended December 31,
	2014		2013		2012
	(Dollars In Thousands)
Fixed maturities	$	1,711,722	$	1,508,924	$	1,453,018
Equity securities		41,533		26,735		20,740
Mortgage loans		360,778		333,093		349,845
Investment real estate		4,483		3,555		3,289
Short-term investments		109,592		72,433		62,887
		2,228,108		1,944,740		1,889,779
Other investment expenses		130,095		108,552		100,441
Net investment income	$	2,098,013	$	1,836,188	$	1,789,338

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. INVESTMENT OPERATIONS — (Continued)

Net realized investment gains (losses) for all other investments are summarized as follows:

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Thousands)
Fixed maturities	$	75,074		$	63,161		$	67,669
Equity securities		495			3,276			(45	)
Impairments on fixed maturity securities		(7,275	)		(19,100	)		(58,144	)
Impairments on equity securities		—			(3,347	)		—
Modco trading portfolio		142,016			(178,134	)		177,986
Other investments		(12,283	)		(9,840	)		(12,774	)
Total realized gains (losses) — investments	$	198,027		$	(143,984	)	$	174,692

For the year ended December 31, 2014, gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $76.7 million and gross realized losses were $8.1 million, including $6.9 million of impairment losses. For the year ended December 31, 2013, gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $72.6 million and gross realized losses were $27.9 million, including $21.7 million of impairment losses. For the year ended December 31, 2012, gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $73.2 million and gross realized losses were $60.3 million, including $54.7 million of impairment losses.

For the year ended December 31, 2014, the Company sold securities in an unrealized gain position with a fair value (proceeds) of $1.7 billion. The gain realized on the sale of these securities was $76.7 million. For the year ended December 31, 2013, the Company sold securities in an unrealized gain position with a fair value (proceeds) of $2.3 billion. The gain realized on the sale of these securities was $72.6 million. For the year ended December 31, 2012, the Company sold securities in an unrealized gain position with a fair value (proceeds) of $1.6 billion. The gain realized on the sale of these securities was $73.2 million.

For the year ended December 31, 2014, the Company sold securities in an unrealized loss position with a fair value (proceeds) of $22.9 million. The loss realized on the sale of these securities was $1.2 million. The Company made the decision to exit these holdings in conjunction with our overall asset liability management process.

For the year ended December 31, 2013, the Company sold securities in an unrealized loss position with a fair value (proceeds) of $398.2 million. The loss realized on the sale of these securities was $6.2 million. The Company made the decision to exit these holdings in conjunction with our overall asset liability management process.

For the year ended December 31, 2012, the Company sold securities in an unrealized loss position with a fair value (proceeds) of $38.0 million. The loss realized on the sale of these securities was $5.6 million. The Company made the decision to exit these holdings in order to reduce its European financial exposure.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. INVESTMENT OPERATIONS — (Continued)

The amortized cost and fair value of the Company's investments classified as available-for-sale as of December 31, are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI(1)
	(Dollars In Thousands)
2014
Fixed maturities:
Bonds
Residential mortgage-backed securities	$	1,374,141	$	56,381	$	(12,264	)	$	1,418,258	$	6,404
Commercial mortgage-backed securities		1,119,979		59,637		(2,364	)		1,177,252		—
Other asset-backed securities		857,365		17,961		(35,950	)		839,376		(95	)
U.S. government-related securities		1,394,028		44,149		(9,282	)		1,428,895		—
Other government-related securities		16,939		3,233		—			20,172		—
States, municipals, and political subdivisions		1,391,526		296,594		(431	)		1,687,689		—
Corporate bonds		24,744,050		2,760,703		(138,975	)		27,365,778		—
		30,898,028		3,238,658		(199,266	)		33,937,420		6,309
Equity securities		713,813		35,646		(14,153	)		735,306		—
Short-term investments		151,572		—		—			151,572		—
	$	31,763,413	$	3,274,304	$	(213,419	)	$	34,824,298	$	6,309
2013
Fixed maturities:
Bonds
Residential mortgage-backed securities	$	1,435,349	$	34,255	$	(24,536	)	$	1,445,068	$	979
Commercial mortgage-backed securities		963,461		26,900		(19,705	)		970,656		—
Other asset-backed securities		926,396		15,135		(69,548	)		871,983		(51	)
U.S. government-related securities		1,529,818		32,150		(54,078	)		1,507,890		—
Other government-related securities		49,171		2,257		(1	)		51,427		—
States, municipals, and political subdivisions		1,315,457		103,663		(8,291	)		1,410,829		—
Corporate bonds		24,630,156		1,510,233		(391,813	)		25,748,576		—
		30,849,808		1,724,593		(567,972	)		32,006,429		928
Equity securities		611,473		6,068		(36,332	)		581,209		—
Short-term investments		80,582		—		—			80,582		—
	$	31,541,863	$	1,730,661	$	(604,304	)	$	32,668,220	$	928

(1) These amounts are included in the gross unrealized gains and gross unrealized losses columns above.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. INVESTMENT OPERATIONS — (Continued)

The amortized cost and fair value of the Company's investments classified as held-to-maturity as of December 31, 2014 are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI
2014
Fixed maturities:
Other	$	435,000	$	50,422	$	—		$	485,422	$	—
	$	435,000	$	50,422	$	—		$	485,422	$	—
2013
Fixed maturities:
Other	$	365,000	$	—	$	(29,324	)	$	335,676	$	—
	$	365,000	$	—	$	(29,324	)	$	335,676	$	—

During the year ended December 31, 2014 and 2013, the Company did not record any other-than-temporary impairments on held-to-maturity securities. The Company's held-to-maturity securities did not have any gross unrecognized holding losses for the year ended December 31, 2014 and $29.3 million for the year ended December 31, 2013. The Company does not consider these unrecognized holding losses to be other-than-temporary based on certain positive factors associated with the securities which include credit ratings, financial health of the issuer, continued access of the issuer to capital markets and other pertinent information.

As of December 31, 2014 and 2013, the Company had an additional $2.8 billion and $2.8 billion of fixed maturities, $21.5 million and $21.2 million of equity securities, and $95.1 million and $52.4 million of short-term investments classified as trading securities, respectively.

The amortized cost and fair value of available-for-sale and held-to-maturity fixed maturities as of December 31, 2014, by expected maturity, are shown below. Expected maturities of securities without a single maturity date are allocated based on estimated rates of prepayment that may differ from actual rates of prepayment.

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars In Thousands)				(Dollars In Thousands)
Due in one year or less	$	1,033,959	$	1,045,159	$	—	$	—
Due after one year through five years		7,084,156		7,547,483		—		—
Due after five years through ten years		6,203,383		6,519,436		—		—
Due after ten years		16,576,530		18,825,342		435,000		485,422
	$	30,898,028	$	33,937,420	$	435,000	$	485,422

During the year ended December 31, 2014, the Company recorded pre-tax other-than-temporary impairments of investments of $2.6 million, all of which were related to fixed maturities. Credit impairments recorded in earnings during the year ended December 31, 2014, were $7.3 million. During the year ended December 31, 2014, $4.7 million of non-credit losses previously recorded in other comprehensive income were recorded in earnings as credit losses. There were no other-than-temporary

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. INVESTMENT OPERATIONS — (Continued)

impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell for the year ended December 31, 2014.

During the year ended December 31, 2013, the Company recorded pre-tax other-than-temporary impairments of investments of $10.9 million, of which $7.6 million were related to fixed maturities and $3.3 million were related to equity securities. Credit impairments recorded in earnings during the year ended December 31, 2013, were $22.4 million. During the year ended December 31, 2013, $11.5 million of non-credit losses previously recorded in other comprehensive income were recorded in earnings as credit losses. There were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell for the year ended December 31, 2013.

During the year ended December 31, 2012, the Company recorded pre-tax other-than-temporary impairments of investments of $67.1 million all of which were related to fixed maturities. Of the $67.1 million of impairments for the year ended December 31, 2012, $58.1 million were recorded in earnings and $9.0 million were recorded in other comprehensive income (loss). There were no impairments related to equity securities. For the year ended December 31, 2012, there were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell.

The following chart is a rollforward of available-for-sale credit losses on fixed maturities held by the Company for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss):

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Thousands)
Beginning balance	$	41,674		$	121,237		$	69,476
Additions for newly impaired securities		—			3,516			26,544
Additions for previously impaired securities		2,263			12,066			25,217
Reductions for previously impaired securities due to a change in expected cash flows		(28,474	)		(87,908	)		—
Reductions for previously impaired securities that were sold in the current period		—			(7,237	)		—
Other		—			—			—
Ending balance	$	15,463		$	41,674		$	121,237

The following table includes the gross unrealized losses and fair value of the Company's investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. INVESTMENT OPERATIONS — (Continued)

length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2014:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars In Thousands)
Residential mortgage- backed securities	$	165,877	$	(9,547	)	$	67,301	$	(2,717	)	$	233,178	$	(12,264	)
Commercial mortgage- backed securities		49,908		(334	)		102,529		(2,030	)		152,437		(2,364	)
Other asset-backed securities		108,665		(6,473	)		537,488		(29,477	)		646,153		(35,950	)
U.S. government-related securities		231,917		(3,868	)		280,803		(5,414	)		512,720		(9,282	)
Other government-related securities		—		—			—		—			—		—
States, municipalities, and political subdivisions		1,905		(134	)		10,481		(297	)		12,386		(431	)
Corporate bonds		1,657,103		(76,285	)		776,863		(62,690	)		2,433,966		(138,975	)
Equities		17,430		(218	)		129,509		(13,935	)		146,939		(14,153	)
	$	2,232,805	$	(96,859	)	$	1,904,974	$	(116,560	)	$	4,137,779	$	(213,419	)

RMBS have a gross unrealized loss greater than twelve months of $2.7 million as of December 31, 2014. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

CMBS have a gross unrealized loss greater than twelve months of $2.0 million as of December 31, 2014. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

The other asset-backed securities have a gross unrealized loss greater than twelve months of $29.5 million as of December 31, 2014. This category predominately includes student-loan backed auction rate securities, the underlying collateral, of which is at least 97% guaranteed by the Federal Family Education Loan Program ("FFELP"). These unrealized losses have occurred within the Company's auction rate securities ("ARS") portfolio since the market collapse during 2008. At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.

The U.S. government-related category has gross unrealized losses greater than twelve months of $5.4 million as of December 31, 2014. These declines were entirely related to changes in interest rates.

The corporate bonds category has gross unrealized losses greater than twelve months of $62.7 million as of December 31, 2014. The aggregate decline in market value of these securities was deemed

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. INVESTMENT OPERATIONS — (Continued)

temporary due to positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

The equities category has a gross unrealized loss greater than twelve months of $14.0 million as of December 31, 2014. The aggregate decline in market value of these securities was deemed temporary due to factors supporting the recoverability of the respective investments. Positive factors include credit ratings, the financial health of the issuer, the continued access of the issuer to the capital markets, and other pertinent information.

The Company does not consider these unrealized loss positions to be other-than-temporary, based on the aggregate factors discussed previously and because the Company has the ability and intent to hold these investments until the fair values recover, and does not intend to sell or expect to be required to sell the securities before recovering the Company's amortized cost of the securities.

The following table includes the gross unrealized losses and fair value of the Company's investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2013:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars In Thousands)
Residential mortgage- backed securities	$	332,812	$	(14,050	)	$	209,818	$	(10,486	)	$	542,630	$	(24,536	)
Commercial mortgage- backed securities		429,228		(18,467	)		13,840		(1,238	)		443,068		(19,705	)
Other asset-backed securities		175,846		(14,555	)		497,512		(54,993	)		673,358		(69,548	)
U.S. government-related securities		891,698		(53,508	)		6,038		(570	)		897,736		(54,078	)
Other government-related securities		10,161		(1	)		—		—			10,161		(1	)
States, municipalities, and political subdivisions		172,157		(8,113	)		335		(178	)		172,492		(8,291	)
Corporate bonds		7,480,163		(353,069	)		271,535		(38,744	)		7,751,698		(391,813	)
Equities		376,776		(27,861	)		21,764		(8,471	)		398,540		(36,332	)
	$	9,868,841	$	(489,624	)	$	1,020,842	$	(114,680	)	$	10,889,683	$	(604,304	)

RMBS had a gross unrealized loss greater than twelve months of $10.5 million as of December 31, 2013. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

CMBS had a gross unrealized loss greater than twelve months of $1.2 million as of December 31, 2013. Factors such as the credit enhancement within the deal structure, the average life of the

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. INVESTMENT OPERATIONS — (Continued)

securities, and the performance of the underlying collateral support the recoverability of these investments.

The other asset-backed securities had a gross unrealized loss greater than twelve months of $55.0 million as of December 31, 2013. This category predominately includes student-loan backed auction rate securities, the underlying collateral, of which is at least 97% guaranteed by the FFELP. These unrealized losses have occurred within the Company's ARS portfolio since the market collapse during 2008. At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.

The corporate bonds category had gross unrealized losses less than and greater than twelve months of $353.1 million and $38.7 million, respectively, as of December 31, 2013. The aggregate decline in market value of these securities was deemed temporary due to positive factor supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

The equities category had a gross unrealized loss greater than twelve months of $8.5 million as of December 31, 2013. The aggregate decline in market value of these securities was deemed temporary due to factors supporting the recoverability of the respective investments. Positive factors include credit ratings, the financial health of the issuer, the continued access of the issuer to the capital markets, and other pertinent information.

As of December 31, 2014, the Company had securities in its available-for-sale portfolio which were rated below investment grade of $1.6 billion and had an amortized cost of $1.6 billion. In addition, included in the Company's trading portfolio, the Company held $315.1 million of securities which were rated below investment grade. Approximately $360.1 million of the below investment grade securities were not publicly traded.

The change in unrealized gains (losses), net of income tax, on fixed maturity and equity securities, classified as available-for-sale is summarized as follows:

	For The Year Ended December 31,
	2014		2013			2012
	(Dollars In Thousands)
Fixed maturities	$	1,224,248	$	(1,269,277	)	$	819,152
Equity securities		33,642		(20,899	)		8,484

The Company held $9.0 million of non-income producing securities for the year ended December 31, 2014.

Included in the Company's invested assets are $1.8 billion of policy loans as of December 31, 2014. The interest rates on standard policy loans range from 3.0% to 13.64%. The collateral loans on life insurance policies have an interest rate of 13.64%.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. INVESTMENT OPERATIONS — (Continued)

Variable Interest Entities

Based on this analysis, the Company had an interest in one wholly owned subsidiary, Red Mountain, LLC ("Red Mountain"), that continued to be classified as a VIE as of December 31, 2014 and December 31, 2013. The activity most significant to Red Mountain is the issuance of a note in connection with a financing transaction involving Golden Gate V Vermont Captive Insurance Company ("Golden Gate V") and the Company in which Golden Gate V issued non-recourse funding obligations to Red Mountain and Red Mountain issued the note to Golden Gate V. Credit enhancement on the Red Mountain Note is provided by an unrelated third party. For details of this transaction, see Note 9, Debt and Other Obligations . The Company had the power, via its 100% ownership through an affiliate, to direct the activities of the VIE, but did not have the obligation to absorb losses related to the primary risks or sources of variability to the VIE. The variability of loss would be borne primarily by the third party in its function as provider of credit enhancement on the Red Mountain Note. Accordingly, it was determined that the Company is not the primary beneficiary of the VIE. The Company's risk of loss related to the VIE is limited to its investment of $10,000. Additionally, PLC has guaranteed the VIE's payment obligation for the credit enhancement fee to the unrelated third party provider. As of December 31, 2014 no payments have been made or required related to this guarantee.

7. MORTGAGE LOANS

Mortgage Loans

The Company invests a portion of its investment portfolio in commercial mortgage loans. As of December 31, 2014, the Company's mortgage loan holdings were approximately $5.1 billion. The Company has specialized in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers and apartments. The Company's underwriting procedures relative to its commercial loan portfolio are based, in the Company's view, on a conservative and disciplined approach. The Company concentrates on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). The Company believes that these asset types tend to weather economic downturns better than other commercial asset classes in which it has chosen not to participate. The Company believes that this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout its history. The majority of the Company's mortgage loans portfolio was underwritten and funded by the Company. From time to time, the Company may acquire loans in conjunction with an acquisition.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. MORTGAGE LOANS — (Continued)

The Company's commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts and prepayment fees are reported in net investment income.

The following table includes a breakdown of the Company's commercial mortgage loan portfolio by property type as of December 31, 2014:

Type	Percentage of Mortgage Loans on Real Estate
Retail		61.7	%
Office Buildings		13.3
Apartments		9.6
Warehouses		7.8
Other		7.6
		100.0	%

The Company specializes in originating mortgage loans on either credit-oriented or credit-anchored commercial properties. No single tenant's exposure represents more than 2.2% of mortgage loans. Approximately 71.8% of the mortgage loans are on properties located in the following states:

State	Percentage of Mortgage Loans on Real Estate
Texas		10.1	%
Alabama		8.2
Georgia		8.0
Florida		7.3
Tennessee		6.6
South Carolina		4.8
North Carolina		4.5
Utah		4.2
New York		4.2
Ohio		4.0
California		4.0
Virginia		3.0
Michigan		2.9
		71.8	%

During 2014, the Company funded approximately $869.7 million of new loans, with an average loan size of $5.8 million. The average size mortgage loan in the portfolio as of December 31, 2014, was $2.8 million, and the weighted-average interest rate was 5.72%. The largest single mortgage loan was $50.0 million.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. MORTGAGE LOANS — (Continued)

Many of the mortgage loans have call options or interest rate reset options between 3 and 10 years. However, if interest rates were to significantly increase, we may be unable to exercise the call options or increase the interest rates on our existing mortgage loans commensurate with the significantly increased market rates. Assuming the loans are called at their next call dates, approximately $243.6 million would become due in 2015, $961.8 million in 2016 through 2020, $392.6 million in 2021 through 2025, and $120.8 million thereafter.

The Company offers a type of commercial mortgage loan under which the Company will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of December 31, 2014 and December 31, 2013, approximately $553.6 million and $666.6 million, respectively, of the Company's mortgage loans have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the year ended December 31, 2014 and 2013, the Company recognized $16.7 million and $17.9 million of participating mortgage loan income, respectively.

As of December 31, 2014, approximately $24.5 million, or 0.05%, of invested assets consisted of nonperforming, restructured or mortgage loans that were foreclosed and were converted to real estate properties. The Company does not expect these investments to adversely affect its liquidity or ability to maintain proper matching of assets and liabilities. During the year ended December 31, 2014, certain mortgage loan transactions occurred that were accounted for as troubled debt restructurings under Topic 310 of the FASB ASC. For all mortgage loans, the impact of troubled debt restructurings is generally reflected in our investment balance and in the allowance for mortgage loan credit losses. Transactions accounted for as troubled debt restructurings during the year ended December 31, 2014 included either the acceptance of assets in satisfaction of principal at a future date or the recognition of permanent impairments to principal, and were the result of agreements between the creditor and the debtor. During the year ended December 31, 2014, the Company accepted or agreed to accept assets of $33.0 million in satisfaction of $41.7 million of principal. The Company also identified one loan whose principal of $12.6 million was permanently impaired to a value of $7.3 million. These transactions resulted in realized losses of $10.3 million and a decrease in the Company's investment in mortgage loans net of existing allowances for mortgage loans losses. Of the mortgage loan transactions accounted for as troubled debt restructurings, $23.3 million remain on the Company's balance sheet as of December 31, 2014.

The Company's mortgage loan portfolio consists of two categories of loans: 1) those not subject to a pooling and servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As of December 31, 2014, $24.5 million of mortgage loans not subject to a pooling and servicing agreement were nonperforming, restructured, or foreclosed and converted to real estate. Of the restructured loans, $1.5 million were nonperforming during the year ended December 31, 2014. The Company foreclosed on $1.2 million of nonperforming loans not subject to a pooling and servicing agreement during the year ended December 31, 2014.

As of December 31, 2014, none of the loans subject to a pooling and servicing agreement were nonperforming. The Company did not foreclose on any nonperforming loans subject to pooling and servicing agreement during the year ended December 31, 2014.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. MORTGAGE LOANS — (Continued)

As of December 31, 2014 and 2013, the Company had an allowance for mortgage loan credit losses of $5.7 million and $3.1 million, respectively. Due to the Company's loss experience and nature of the loan portfolio, the Company believes that a collectively evaluated allowance would be inappropriate. The Company believes an allowance calculated through an analysis of specific loans that are believed to have a higher risk of credit impairment provides a more accurate presentation of expected losses in the portfolio and is consistent with the applicable guidance for loan impairments in ASC Subtopic 310. Since the Company uses the specific identification method for calculating the allowance, it is necessary to review the economic situation of each borrower to determine those that have higher risk of credit impairment. The Company has a team of professionals that monitors borrower conditions such as payment practices, borrower credit, operating performance, and property conditions, as well as ensuring the timely payment of property taxes and insurance. Through this monitoring process, the Company assesses the risk of each loan. When issues are identified, the severity of the issues are assessed and reviewed for possible credit impairment. If a loss is probable, an expected loss calculation is performed and an allowance is established for that loan based on the expected loss. The expected loss is calculated as the excess carrying value of a loan over either the present value of expected future cash flows discounted at the loan's original effective interest rate, or the current estimated fair value of the loan's underlying collateral. A loan may be subsequently charged off at such point that the Company no longer expects to receive cash payments, the present value of future expected payments of the renegotiated loan is less than the current principal balance, or at such time that the Company is party to foreclosure or bankruptcy proceedings associated with the borrower and does not expect to recover the principal balance of the loan.

A charge off is recorded by eliminating the allowance against the mortgage loan and recording the renegotiated loan or the collateral property related to the loan as investment real estate on the balance sheet, which is carried at the lower of the appraised fair value of the property or the unpaid principal balance of the loan, less estimated selling costs associated with the property:

	As of December 31,
	2014			2013
	(Dollars In Thousands)
Beginning balance	$	3,130		$	2,875
Charge offs		(675	)		(6,838	)
Recoveries		(2,600	)		(1,016	)
Provision		5,865			8,109
Ending balance	$	5,720		$	3,130

It is the Company's policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is the Company's general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. For loans subject to a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and as such, these loans may have different attributes and/or circumstances affecting the status of delinquency or

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. MORTGAGE LOANS — (Continued)

categorization of those in nonperforming status. An analysis of the delinquent loans is shown in the following chart as of December 31:

	30-59 Days Delinquent		60-89 Days Delinquent		Greater than 90 Days Delinquent		Total Delinquent
	(Dollars In Thousands)
2014
Commercial mortgage loans	$	8,972	$	—	$	1,484	$	10,456
Number of delinquent commercial mortgage loans		4		—		1		5
2013
Commercial mortgage loans	$	14,368	$	—	$	2,208	$	16,576
Number of delinquent commercial mortgage loans		8		—		1		9

The Company's commercial mortgage loan portfolio consists of mortgage loans that are collateralized by real estate. Due to the collateralized nature of the loans, any assessment of impairment and ultimate loss given a default on the loans is based upon a consideration of the estimated fair value of the real estate. The Company limits accrued interest income on impaired loans to ninety days of interest. Once accrued interest on the impaired loan is received, interest income is recognized on a cash basis. For information regarding impaired loans, please refer to the following chart as of December 31:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
	(Dollars In Thousands)
2014
Commercial mortgage loans:
With no related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded		19,632		20,603		5,720		3,272		1,224		1,280
2013
Commercial mortgage loans:
With no related allowance recorded	$	2,208	$	2,208	$	—	$	2,208	$	31	$	—
With an allowance recorded		21,288		21,281		3,130		5,322		304		304

Mortgage loans that were modified in a troubled debt restructuring were as follows:

	Number of contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars In Thousands)
2014
Troubled debt restructuring:
Commercial mortgage loans		6	$	28,648	$	19,593

F-99

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED

Deferred policy acquisition costs

The balances and changes in DAC are as follows:

	As of December 31,
	2014			2013
	(Dollars In Thousands)
Balance, beginning of period	$	2,720,604		$	2,493,729
Capitalization of commissions, sales, and issue expenses		293,672			345,885
Amortization		(194,517	)		(112,117	)
Change in unrealized investment gains and losses		(166,694	)		(6,893	)
Balance, end of period	$	2,653,065		$	2,720,604

Value of Business Acquired

The balances and changes in VOBA are as follows:

	As of December 31,
	2014			2013
	(Dollars In Thousands)
Balance, beginning of period	$	756,018		$	731,627
Acquisitions(1)		—			49,643
Amortization		(113,803	)		(42,543	)
Change in unrealized gains and losses		(140,234	)		17,291
Balance, end of period	$	501,981		$	756,018

(1) Includes VOBA associated with the MONY acquisition of $205.7 million, offset by $156.1 million ceded to reinsurers.

As of February 1, 2015, the existing DAC and VOBA balance was written off in conjunction with the merger previously disclosed in Note 5, Dai-ichi Merger and in accordance with ASC Topic 805 — Business Combinations . Therefore, the disclosure of the expected amortization of VOBA over the next five years was excluded.

9. GOODWILL

The changes in the carrying amount of goodwill by segment are as follows:

	Acquisitions			Asset Protection		Total Consolidated
	(Dollars In Thousands)
Balance as of December 31, 2012	$	35,615		$	48,158	$	83,773
Tax benefit of excess tax goodwill		(3,098	)		—		(3,098	)
Balance as of December 31, 2013		32,517			48,158		80,675
Tax benefit of excess tax goodwill		(3,098	)		—		(3,098	)
Balance as of December 31, 2014	$	29,419		$	48,158	$	77,577

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. GOODWILL — (Continued)

During the year ended December 31, 2014 and 2013, the Company decreased its goodwill balance by approximately $3.1 million and $3.1 million, respectively. The decreases were due to an adjustment in the Acquisitions segment related to tax benefits realized during 2014 and 2013 on the portion of tax goodwill in excess of GAAP basis goodwill. See Note 2, Summary of Significant Accounting Policies for additional information.

10. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS

The Company issues variable universal life and VA products through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder. The Company also offers, for our VA products, certain GMDB. The most significant of these guarantees involve 1) return of the highest anniversary date account value, or 2) return of the greater of the highest anniversary date account value or the last anniversary date account value compounded at 5% interest or 3) return of premium. The GMWB rider provides the contract holder with protection against certain adverse market impacts on the amount they can withdrawal and is classified as an embedded derivative and is carried at fair value on the Company's balance sheet. The VA separate account balances subject to GMWB were $9.7 billion as of December 31, 2014. For more information regarding the valuation of and income impact of GMWB, please refer to Note 2, Summary of Significant Accounting Policies, Note 22, Fair Value of Financial Instruments, and Note 23, Derivative Financial Instruments .

The GMDB reserve is calculated by applying a benefit ratio, equal to the present value of total expected GMDB claims divided by the present value of total expected contract assessments, to cumulative contract assessments. This amount is then adjusted by the amount of cumulative GMDB claims paid and accrued interest. Assumptions used in the calculation of the GMDB reserve were as follows: mean investment performance of 6.18%, age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience with attained age factors varying from 49% — 80%, lapse rates ranging from 2.2% — 33% (depending on product type and duration), and an average discount rate of 6.0%. Changes in the GMDB reserve are included in benefits and settlement expenses in the accompanying consolidated statements of income.

The VA separate account balances subject to GMDB were $13.0 billion as of December 31, 2014. The total GMDB amount payable based on VA account balances as of December 31, 2014, was $108.6 million (including $93.1 million in the Annuities segment and $15.5 million in the Acquisitions segment) with a GMDB reserve of $21.4 million and $0.3 million in the Annuities and Acquisitions segment, respectively. The average attained age of contract holders as of December 31, 2014 for the Company was 69.

These amounts exclude certain VA business which has been 100% reinsured to Commonwealth Annuity and Life Insurance Company (formerly known as Allmerica Financial Life Insurance and Annuity Company) ("CALIC"), under a Modco agreement. The guaranteed amount payable associated with the annuities reinsured to CALIC was $11.6 million and is included in the Acquisitions segment. The average attained age of contract holders as of December 31, 2014, was 65.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS — (Continued)

Activity relating to GMDB reserves (excluding those 100% reinsured under the Modco agreement) is as follows:

	For The Year Ended December 31,
	2014		2013			2012
	(Dollars In Thousands)
Beginning balance	$	13,608	$	19,606		$	9,798
Incurred guarantee benefits		10,130		(3,133	)		14,087
Less: Paid guarantee benefits		2,043		2,865			4,279
Ending balance	$	21,695	$	13,608		$	19,606

Account balances of variable annuities with guarantees invested in variable annuity separate accounts are as follows:

	As of December 31,
	2014		2013
	(Dollars In Thousands)
Equity mutual funds	$	7,834,480	$	7,984,198
Fixed income mutual funds		5,137,312		4,606,093
Total	$	12,971,792	$	12,590,291

Certain of the Company's fixed annuities and universal life products have a sales inducement in the form of a retroactive interest credit ("RIC"). In addition, certain annuity contracts provide a sales inducement in the form of a bonus interest credit. The Company maintains a reserve for all interest credits earned to date. The Company defers the expense associated with the RIC and bonus interest credits each period and amortizes these costs in a manner similar to that used for DAC.

Activity in the Company's deferred sales inducement asset was as follows:

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Thousands)
Deferred asset, beginning of period	$	146,651		$	143,949		$	125,527
Amounts deferred		18,302			15,274			23,362
Amortization		(9,803	)		(12,572	)		(4,940	)
Deferred asset, end of period	$	155,150		$	146,651		$	143,949

11. REINSURANCE

The Company reinsures certain of its risks with (cedes), and assumes risks from, other insurers under yearly renewable term, coinsurance, and modified coinsurance agreements. Under yearly renewable term agreements, the Company reinsures only the mortality risk, while under coinsurance the Company reinsures a proportionate share of all risks arising under the reinsured policy. Under coinsurance, the reinsurer receives a proportionate share of the premiums less commissions and is liable for a corresponding share of all benefit payments. Modified coinsurance is accounted for in a

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. REINSURANCE — (Continued)

manner similar to coinsurance except that the liability for future policy benefits is held by the ceding company, and settlements are made on a net basis between the companies.

Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to us under the terms of the reinsurance agreements. The Company monitors the concentration of credit risk the Company has with any reinsurer, as well as the financial condition of its reinsurers. As of December 31, 2014, the Company had reinsured approximately 51% of the face value of its life insurance in-force. The Company has reinsured approximately 22% of the face value of its life insurance in-force with the following three reinsurers:

• Security Life of Denver Insurance Co. (currently administered by Hanover Re)

• Swiss Re Life & Health America Inc.

• The Lincoln National Life Insurance Co. (currently administered by Swiss Re Life & Health America Inc.)

The Company has not experienced any credit losses for the years ended December 31, 2014, 2013, or 2012 related to these reinsurers. The Company has set limits on the amount of insurance retained on the life of any one person. In 2005, the Company increased its retention for certain newly issued traditional life products from $500,000 to $1,000,000 on any one life. During 2008, the Company increased its retention limit to $2,000,000 on certain of its traditional and universal life products.

Reinsurance premiums, commissions, expense reimbursements, benefits, and reserves related to reinsured long-duration contracts are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. The cost of reinsurance related to short-duration contracts is accounted for over the reinsurance contract period. Amounts recoverable from reinsurers, for both short-and long-duration reinsurance arrangements, are estimated in a manner consistent with the claim liabilities and policy benefits associated with reinsured policies.

The following table presents the net life insurance in-force:

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Millions)
Direct life insurance in-force	$	721,036		$	726,697		$	706,416
Amounts assumed from other companies		43,237			46,752			30,470
Amounts ceded to other companies		(388,890	)		(416,809	)		(444,951	)
Net life insurance in-force	$	375,383		$	356,640		$	291,935
Percentage of amount assumed to net		12	%		13	%		10	%

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. REINSURANCE — (Continued)

The following table reflects the effect of reinsurance on life, accident/health, and property and liability insurance premiums written and earned:

	Gross Amount		Ceded to Other Companies		Assumed from Other Companies		Net Amount			Percentage of Amount Assumed to Net
	(Dollars In Thousands)
For The Year Ended December 31, 2014:
Premiums and policy fees:
Life insurance	$	2,603,956	$	1,279,908	$	349,934	$	1,673,982	(1)		20.9
Accident/health insurance		81,037		42,741		20,804		59,100			35.2
Property and liability insurance		218,663		73,094		8,675		154,244			5.6
Total	$	2,903,656	$	1,395,743	$	379,413	$	1,887,326
For The Year Ended December 31, 2013:
Premiums and policy fees:
Life insurance	$	2,371,871	$	1,299,631	$	306,921	$	1,379,161	(1)		22.3
Accident/health insurance		45,262		20,011		24,291		49,542			49.0
Property and liability insurance		211,000		67,795		7,977		151,182			5.3
Total	$	2,628,133	$	1,387,437	$	339,189	$	1,579,885
For The Year Ended December 31, 2012:
Premiums and policy fees:
Life insurance	$	2,226,614	$	1,228,444	$	281,711	$	1,279,881	(1)		22.0
Accident/health insurance		38,873		12,065		29,413		56,221			52.3
Property and liability insurance		216,014		69,588		6,765		153,191			4.4
Total	$	2,481,501	$	1,310,097	$	317,889	$	1,489,293

(1) Includes annuity policy fees of $92.8 million, $88.7 million, and $103.8 million for the years ended December 31, 2014, 2013, and 2012, respectively.

As of December 31, 2014 and 2013, policy and claim reserves relating to insurance ceded of $5.9 billion and $6.0 billion, respectively, are included in reinsurance receivables. Should any of the reinsurers be unable to meet its obligation at the time of the claim, the Company would be obligated to pay such claims. As of December 31, 2014 and 2013, the Company had paid $120.5 million and $79.7 million, respectively, of ceded benefits which are recoverable from reinsurers. In addition, as of December 31, 2014 and 2013, the Company had receivables of $65.8 million and $66.1 million, respectively, related to insurance assumed.

The Company's third party reinsurance receivables amounted to $5.9 billion and $6.0 billion as of December 31, 2014 and 2013, respectively. These amounts include ceded reserve balances and

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. REINSURANCE — (Continued)

ceded benefit payments. The ceded benefit payments are recoverable from reinsurers. The following table sets forth the receivables attributable to our more significant reinsurance partners:

As of December 31,

2014

2013

Reinsurance
Receivable

A.M. Best
Rating

Reinsurance
Receivable

A.M. Best
Rating

(Dollars In Millions)

Security Life of Denver Insurance
Company

842.1

819.3

Swiss Re Life & Health America, Inc.

820.9

A+

823.0

A+

Lincoln National Life Insurance Co.

556.3

A+

553.7

A+

Transamerica Life Insurance Co.

497.7

A+

531.1

A+

RGA Reinsurance Company

412.4

A+

419.1

A+

SCOR Global Life USA Reinsurance
Company

411.8

402.7

American United Life Insurance
Company

336.1

A+

342.2

A+

Scottish Re (U.S.), Inc.

298.0

305.1

Centre Reinsurance (Bermuda) Ltd

260.9

281.6

Employers Reassurance Corporation

254.3

A-

289.2

A-

The Company's reinsurance contracts typically do not have a fixed term. In general, the reinsurers' ability to terminate coverage for existing cessions is limited to such circumstances as material breach of contract or non-payment of premiums by the ceding company. The reinsurance contracts generally contain provisions intended to provide the ceding company with the ability to cede future business on a basis consistent with historical terms. However, either party may terminate any of the contracts with respect to future business upon appropriate notice to the other party.

Generally, the reinsurance contracts do not limit the overall amount of the loss that can be incurred by the reinsurer. The amount of liabilities ceded under contracts that provide for the payment of experience refunds is immaterial.

12. DEBT AND OTHER OBLIGATIONS

Under a revolving line of credit arrangement that was in effect until February 2, 2015 (the "Credit Facility"), the Company and PLC had the ability to borrow on an unsecured basis up to an aggregate principal amount of $750 million. The Company had the right in certain circumstances to request that the commitment under the Credit Facility be increased up to a maximum principal amount of $1.0 billion. Balances outstanding under the Credit Facility accrued interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC's senior unsecured long-term debt ("Senior Debt"), or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent's prime rate, (y) 0.50% above the Federal Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC's Senior Debt. The Credit Facility also provided for a facility fee at a rate, 0.175%, that could vary with the ratings of PLC's Senior Debt and that was calculated on the aggregate amount of commitments under the Credit Facility, whether used or unused. The Credit Facility provided that PLC was liable for the full amount of any obligations for

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. DEBT AND OTHER OBLIGATIONS — (Continued)

borrowings or letters of credit, including those of the Company, under the Credit Facility. The maturity date of the Credit Facility was July 17, 2017. The Company is not aware of any non-compliance with the financial debt covenants of the Credit Facility as of December 31, 2014. The Company did not have an outstanding balance under the Credit Facility as of December 31, 2014. PLC had an outstanding balance of $450.0 million bearing interest at a rate of LIBOR plus 1.20% under the Credit Facility as of December 31, 2014. As of December 31, 2014, the Company had used $55.0 million of borrowing capacity by executing a Letter of Credit under the Credit Facility for the benefit of an affiliated captive reinsurance subsidiary of the Company. This Letter of Credit had not been drawn upon as of December 31, 2014.

On February 2, 2015, the Company and PLC amended and restated the Credit Facility (the "2015 Credit Facility"). Under the 2015 Credit Facility, the Company has the ability to borrow on an unsecured basis up to an aggregate principal amount of $1.0 billion. The Company has the right in certain circumstances to request that the commitment under the 2015 Credit Facility be increased up to a maximum principal amount of $1.25 billion. Balances outstanding under the 2015 Credit Facility accrue interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC's Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent's prime rate, (y) 0.50% above the Federal Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC's Senior Debt. The 2015 Credit Facility also provided for a facility fee at a rate that varies with the ratings of PLC's Senior Debt and that is calculated on the aggregate amount of commitments under the 2015 Credit Facility, whether used or unused. The facility fee rate was 0.15% on February 2, 2015, and was adjusted to 0.125% upon our subsequent ratings upgrade on February 2, 2015. The 2015 Credit Facility provides that PLC is liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the 2015 Credit Facility. The maturity date of the 2015 Credit Facility is February 2, 2020. The Company is not aware of any non-compliance with the financial debt covenants of the Credit Facility or the 2015 Credit Facility as of February 2, 2015. PLC had an outstanding balance of $390.0 million bearing interest at a rate of LIBOR plus 1.20% when the Credit Facility was amended and restated by the 2015 Credit Facility on February 2, 2015. The $55.0 million Letter of Credit, which the Company executed under the Credit Facility for the benefit of an affiliated captive reinsurance subsidiary of the Company, remained undrawn as of February 2, 2015.

Non-Recourse Funding Obligations

Golden Gate Captive Insurance Company

Golden Gate Captive Insurance Company ("Golden Gate"), a South Carolina special purpose financial captive insurance company and wholly owned subsidiary, had three series of non-recourse funding obligations with a total outstanding balance of $800 million as of December 31, 2014. PLC holds the entire outstanding balance of non-recourse funding obligations. The Series A1 non-recourse funding obligations have a balance of $400 million and accrue interest at a fixed rate of 7.375%, the Series A2 non-recourse funding obligations have a balance of $100 million and accrue interest at a fixed rate of 8%, and the Series A3 non-recourse funding obligations have a balance of $300 million and accrue interest at a fixed rate of 8.45%.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. DEBT AND OTHER OBLIGATIONS — (Continued)

Golden Gate II Captive Insurance Company

Golden Gate II Captive Insurance Company ("Golden Gate II"), a South Carolina special purpose financial captive insurance company and wholly owned subsidiary, had $575 million of non-recourse funding obligations outstanding as of December 31, 2014. These outstanding non-recourse funding obligations were issued to special purpose trusts, which in turn issued securities to third parties. Certain of our affiliates own a portion of these securities. As of December 31, 2014, securities related to $144.9 million of the outstanding balance of the non-recourse funding obligations were held by external parties, securities related to $145.3 million of the non-recourse funding obligations were held by nonconsolidated affiliates, and $284.8 million were held by consolidated subsidiaries of the Company. PLC has entered into certain support agreements with Golden Gate II obligating it to make capital contributions or provide support related to certain of Golden Gate II's expenses and in certain circumstances, to collateralize certain of PLC's obligations to Golden Gate II. These support agreements provide that amounts would become payable by PLC to Golden Gate II if its annual general corporate expenses were higher than modeled amounts or if Golden Gate II's investment income on certain investments or premium income was below certain actuarially determined amounts. As of December 31, 2014, no payments have been made under these agreements and no amounts are collateralized by PLC under these agreements. Re-evaluation and, if necessary, adjustments of any support agreement collateralization amounts occurs annually during the first quarter pursuant to the terms on the support agreement. There are no support agreements between the Company and Golden Gate II.

Golden Gate V Vermont Captive Insurance Company

On October 10, 2012, Golden Gate V Vermont Captive Insurance Company ("Golden Gate V"), a Vermont special purpose financial insurance company and Red Mountain, LLC ("Red Mountain"), both wholly owned subsidiaries, entered into a 20-year transaction to finance up to $945 million of "AXXX" reserves related to a block of universal life insurance policies with secondary guarantees issued by the Company and its subsidiary, West Coast Life Insurance Company ("WCL"). Golden Gate V issued non-recourse funding obligations to Red Mountain, and Red Mountain issued a note with an initial principal amount of $275 million, increasing to a maximum of $945 million in 2027, to Golden Gate V for deposit to a reinsurance trust supporting Golden Gate V's obligations under a reinsurance agreement with WCL, pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of the Company. Through the structure, Hannover Life Reassurance Company of America ("Hannover Re"), the ultimate risk taker in the transaction, provides credit enhancement to the Red Mountain note for the 20-year term in exchange for a fee. The transaction is "non-recourse" to Golden Gate V, Red Mountain, WCL, PLC, and the Company, meaning that none of these companies are liable for the reimbursement of any credit enhancement payments required to be made. As of December 31, 2014, the principal balance of the Red Mountain note was $435 million. In connection with the transaction, PLC has entered into certain support agreements under which PLC guarantees or otherwise supports certain obligations of Golden Gate V or Red Mountain. Future scheduled capital contributions to prefund credit enhancement fees amount to approximately $139.6 million and will be paid in annual installments through 2031. The support agreements provide that amounts would become payable by PLC if Golden Gate V's annual general corporate expenses were higher than modeled amounts or in the event write-downs due to other-than-temporary impairments on assets held in certain accounts exceed defined threshold levels. Additionally, PLC has entered into separate

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. DEBT AND OTHER OBLIGATIONS — (Continued)

agreements to indemnify Golden Gate V with respect to material adverse changes in non-guaranteed elements of insurance policies reinsured by Golden Gate V, and to guarantee payment of certain fee amounts in connection with the credit enhancement of the Red Mountain note. As of December 31, 2014, no payments have been made under these agreements.

In connection with the transaction outlined above, Golden Gate V had a $435 million outstanding non-recourse funding obligation as of December 31, 2014. This non-recourse funding obligation matures in 2037, has scheduled increases in principal to a maximum of $945 million, and accrues interest at a fixed annual rate of 6.25%.

Non-recourse funding obligations outstanding as of December 31, 2014, on a consolidated basis, are shown in the following table:

Issuer	Balance		Maturity Year		Year-to-Date Weighted-Avg Interest Rate
	(Dollars In Thousands)
Golden Gate Captive Insurance Company(1)	$	800,000		2037		7.86	%
Golden Gate II Captive Insurance Company		290,248		2052		1.13	%
Golden Gate V Vermont Captive Insurance Company(1)		435,000		2037		6.25	%
MONY Life Insurance Company(1)		2,504		2024		6.63	%
Total	$	1,527,752

(1) Fixed rate obligations

During 2014, consolidated subsidiaries of the Company repurchased $37.7 million of its outstanding non-recourse funding obligations, at a discount. These repurchases resulted in a $7.4 million pre-tax gain for the Company. For the year ended December 31, 2013, consolidated subsidiaries of the Company repurchased $68.5 million of its outstanding non-recourse funding obligations, at a discount. These repurchases resulted in a $15.4 million pre-tax gain for the Company. These gains are recorded in other income in the consolidated statements of income.

Letters of Credit

Golden Gate III Vermont Captive Insurance Company ("Golden Gate III"), a Vermont special purpose financial insurance company and wholly owned subsidiary, is party to a Reimbursement Agreement (the "Reimbursement Agreement") with UBS AG, Stamford Branch ("UBS"), as issuing lender. Under the original Reimbursement Agreement, dated April 23, 2010, UBS issued a letter of credit (the "LOC") in the initial amount of $505 million to a trust for the benefit of WCL. The Reimbursement Agreement was subsequently amended and restated effective November 21, 2011 (the "First Amended and Restated Reimbursement Agreement"), to replace the existing LOC with one or more letters of credit from UBS, and to extend the maturity date from April 1, 2018, to April 1, 2022. On August 7, 2013, Golden Gate III entered into a Second Amended and Restated Reimbursement Agreement with UBS (the "Second Amended and Restated Reimbursement Agreement"), which amended and restated the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. DEBT AND OTHER OBLIGATIONS — (Continued)

First Amended and Restated Reimbursement Agreement. Under the Second and Amended and Restated Reimbursement Agreement a new LOC in an initial amount of $710 million was issued by UBS in replacement of the existing LOC issued under the First Amended and Restated Reimbursement Agreement. The term of the LOC was extended from April 1, 2022 to October 1, 2023, subject to certain conditions being satisfied including scheduled capital contributions being made to Golden Gate III by one of its affiliates. The maximum stated amount of the LOC was increased from $610 million to $720 million in 2015 if certain conditions are met. On June 25, 2014, PLC entered into a Third Amended and Restated Reimbursement Agreement with UBS (the "Third Amended and Restated Reimbursement Agreement"), which amended and restated the Second Amended and Restated Reimbursement Agreement. Under the Third Amended and Restated Reimbursement Agreement, a new LOC in an initial amount of $915 million was issued by UBS in replacement of the existing LOC issued under the Second Amended and Restated Reimbursement Agreement. The term of the LOC was extended from October 1, 2023 to April 1, 2025, subject to certain conditions being satisfied including scheduled capital contributions being made to Golden Gate III by one of its affiliates. The maximum stated amount of the LOC was increased from $720 million to $935 million in 2015 if certain conditions are met. The LOC is held in trust for the benefit of WCL, and supports certain obligations of Golden Gate III to WCL under an indemnity reinsurance agreement originally effective April 1, 2010, as amended and restated on November 21, 2011, and as further amended and restated on August 7, 2013 and on June 25, 2014 to include additional blocks of policies, and pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of the Company. The LOC balance was $930 million as of December 31, 2014. Subject to certain conditions, the amount of the LOC will be periodically increased up to a maximum of $935 million in 2015. The term of the LOC is expected to be approximately 15 years from the original issuance date. This transaction is "non-recourse" to WCL, PLC, and the Company, meaning that none of these companies other than Golden Gate III are liable for reimbursement on a draw of the LOC. PLC has entered into certain support agreements with Golden Gate III obligating PLC to make capital contributions or provide support related to certain of Golden Gate III's expenses and in certain circumstances, to collateralize certain of PLC's obligations to Golden Gate III. Future scheduled capital contributions amount to approximately $122.5 million and will be paid in three installments with the last payment occurring in 2021, and these contributions may be subject to potential offset against dividend payments as permitted under the terms of the Third Amended and Restated Reimbursement Agreement. The support agreements provide that amounts would become payable by PLC to Golden Gate III if its annual general corporate expenses were higher than modeled amounts or if specified catastrophic losses occur during defined time periods with respect to the policies reinsured by Golden Gate III. Pursuant to the terms of an amended and restated letter agreement with UBS, PLC has continued to guarantee the payment of fees to UBS as specified in the Third Amended and Restated Reimbursement Agreement. As of December 31, 2014, no payments have been made under these agreements.

Golden Gate IV Vermont Captive Insurance Company ("Golden Gate IV"), a Vermont special purpose financial insurance company and wholly owned subsidiary, is party to a Reimbursement Agreement with UBS AG, Stamford Branch, as issuing lender. Under the Reimbursement Agreement, dated December 10, 2010, UBS issued an LOC in the initial amount of $270 million to a trust for the benefit of WCL. The LOC balance increased, in accordance with the terms of the Reimbursement Agreement, during each quarter of 2014 and was $750 million as of December 31, 2014. Subject to certain

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. DEBT AND OTHER OBLIGATIONS — (Continued)

conditions, the amount of the LOC will be periodically increased up to a maximum of $790 million in 2016. The term of the LOC is expected to be 12 years from the original issuance date (stated maturity of December 30, 2022). The LOC was issued to support certain obligations of Golden Gate IV to WCL under an indemnity reinsurance agreement, pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of the Company. This transaction is "non-recourse" to WCL, PLC, and the Company, meaning that none of these companies other than Golden Gate IV are liable for reimbursement on a draw of the LOC. PLC has entered into certain support agreements with Golden Gate IV obligating PLC to make capital contributions or provide support related to certain of Golden Gate IV's expenses and in certain circumstances, to collateralize certain of PLC's obligations to Golden Gate IV. The support agreements provide that amounts would become payable by PLC to Golden Gate IV if Golden Gate IV's annual general corporate expenses were higher than modeled amounts or if specified catastrophic losses occur during defined time periods with respect to the policies reinsured by Golden Gate IV. PLC has also entered into a separate agreement to guarantee the payments of LOC fees under the terms of the Reimbursement Agreement. As of December 31, 2014, no payments have been made under these agreements.

Repurchase Program Borrowings

While the Company anticipates that the cash flows of its operations and its operating subsidiaries will be sufficient to meet its investment commitments and operating cash needs in a normal credit market environment, the Company recognizes that investment commitments scheduled to be funded may, from time to time, exceed the funds then available. Therefore, the Company has established repurchase agreement programs for certain of its insurance subsidiaries to provide liquidity when needed. The Company expects that the rate received on its investments will equal or exceed its borrowing rate. Under this program, the Company may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are for a term less than 90 days. The market value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities, and the agreements provided for net settlement in the event of default or on termination of the agreements. As of December 31, 2014, the fair value of securities pledged under the repurchase program was $55.1 million and the repurchase obligation of $50.0 million was included in the Company's consolidated balance sheets (at an average borrowing rate of 16 basis points). During the year ended December 31, 2014, the maximum balance outstanding at any one point in time related to these programs was $633.7 million. The average daily balance was $470.4 million (at an average borrowing rate of 11 basis points) during the year ended December 31, 2014. As of December 31, 2013, the Company had a $350.0 million outstanding balance related to such borrowings. During 2013, the maximum balance outstanding at any one point in time related to these programs was $815.0 million. The average daily balance was $496.9 million (at an average borrowing rate of 11 basis points) during the year ended December 31, 2013.

Other Obligations

The Company 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.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. DEBT AND OTHER OBLIGATIONS — (Continued)

Interest Expense

Interest expense on non-recourse funding obligations, letters of credit, and other temporary borrowings was $118.6 million, $111.4 million, and $92.9 million in 2014, 2013, and 2012, respectively. The $7.2 million unfavorable variance was primarily due to increased interest expense on the Golden Gate V non-recourse funding obligation of $4.2 million and $3.0 million increased interest expense primarily on Golden Gate III and Golden Gate IV letters of credit.

13. COMMITMENTS AND CONTINGENCIES

The Company leases administrative and marketing office space in approximately 19 cities including 24,090 square feet in Birmingham (excluding the home office building), with most leases being for periods of three to ten years. The Company had rental expense of $10.8 million, $11.2 million, and $11.2 million for the years ended December 31, 2014, 2013, and 2012, respectively. The aggregate annualized rent was approximately $6.5 million for the year ended December 31, 2014. The following is a schedule by year of future minimum rental payments required under these leases:

Year	Amount
	(Dollars In Thousands)
2015	$	5,911
2016		4,942
2017		2,750
2018		2,111
2019		1,879
Thereafter		7,488

Additionally, the Company leases a building contiguous to its home office. The lease was renewed in December 2013 and was extended to December 2018. At the end of the lease term the Company may purchase the building for approximately $75 million. Monthly rental payments are based on the current LIBOR rate plus a spread. The following is a schedule by year of future minimum rental payments required under this lease:

Year		Amount
		(Dollars In Thousands)
	2015	$	1,233
	2016		1,236
	2017		1,233
	2018		76,208

As of December 31, 2014 and 2013, the Company had outstanding mortgage loan commitments of $537.7 million at an average rate of 4.61% and $322.8 million at an average rate of 4.93%, respectively.

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. In addition, from time to time, companies may be asked to contribute amounts beyond prescribed limits. Most insurance guaranty fund laws provide that an assessment may be excused or deferred if it would threaten an insurer's own financial strength. The Company does not believe its insurance guaranty

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. COMMITMENTS AND CONTINGENCIES — (Continued)

fund assessments will be materially different from amounts already provided for in the financial statements.

A number of civil jury verdicts have been returned against insurers, broker dealers and other providers of financial services involving sales, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or persons with whom the insurer does business, and other matters. Often these lawsuits have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive and non-economic compensatory damages. In some states, juries, judges, and arbitrators have substantial discretion in awarding punitive non-economic compensatory damages which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review. In addition, in some class action and other lawsuits, companies have made material settlement payments. Publicly held companies in general and the financial services and insurance industries in particular are also sometimes the target of law enforcement and regulatory investigations relating to the numerous laws and regulations that govern such companies. Some companies have been the subject of law enforcement or regulatory actions or other actions resulting from such investigations. The Company, in the ordinary course of business, is involved in such matters.

The Company establishes liabilities for litigation and regulatory actions when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no liability is established. For such matters, the Company may provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company reviews relevant information with respect to litigation and regulatory matters on a quarterly and annual basis and updates its established liabilities, disclosures and estimates of reasonably possible losses or range of loss based on such reviews.

Although the Company cannot predict the outcome of any litigation or regulatory action, the Company does not believe that any such outcome will have an impact, either individually or in the aggregate, on its financial condition or results of operations that differs materially from the Company's established liabilities. Given the inherent difficulty in predicting the outcome of such matters, however, it is possible that an adverse outcome in certain such matters could be material to the Company's financial condition or results of operations for any particular reporting period.

The Company was audited by the IRS and the IRS proposed favorable and unfavorable adjustments to the Company's 2003 through 2007 reported taxable income. The Company protested certain unfavorable adjustments and sought resolution at the IRS' Appeals Division. The case has followed normal procedure and is now under review at Congress' Joint Committee on Taxation. The Company believes the matter will conclude within the next twelve months. If the IRS prevails on every issue that it identified in this audit, and the Company does not litigate these issues, then the Company will make an income tax payment of approximately $136,000. However, this payment, if it were to occur, would not materially impact the Company or its effective tax rate.

Through the acquisition of MONY by the Company certain income tax credit carryforwards, which arose in MONY's pre-acquisition tax years, transferred to the Company. This transfer was in accordance with the applicable rules of the Internal Revenue Code and the related Regulations. In spite of this transfer, AXA, the former parent of the consolidated income tax return group in which

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. COMMITMENTS AND CONTINGENCIES — (Continued)

MONY was a member, retains the right to utilize these credits in the future to offset future increases in its 2010 through 2013 tax liabilities. The Company had determined that, based on all information known as of the acquisition date and through the March 31, 2014 reporting date, it was probable that a loss of the utilization of these carryforwards had been incurred. Due to indemnification received from AXA during the quarter ending June 30, 2014, the probability of loss of these carryforwards has been eliminated. Accordingly, in the table summarizing the fair value of net assets acquired from the Acquisition, the amount of the deferred tax asset from the credit carryforwards is no longer offset by a liability.

Certain of the Company's insurance subsidiaries, as well as certain other insurance companies for which the Company has coinsured blocks of life insurance and annuity policies, are under audit for compliance with the unclaimed property laws of a number of states. The audits are being conducted on behalf of the treasury departments or unclaimed property administrators in such states. The focus of the audits is on whether there have been unreported deaths, maturities, or policies that have exceeded limiting age with respect to which death benefits or other payments under life insurance or annuity policies should be treated as unclaimed property that should be escheated to the state. The Company is presently unable to estimate the reasonably possible loss or range of loss that may result from the audits due to a number of factors, including uncertainty as to the legal theory or theories that may give rise to liability, the early stages of the audits being conducted, and, with respect to one block of life insurance policies that is co-insured by a subsidiary of the Company, uncertainty as to whether the Company or other companies are responsible for the liabilities, if any, arising in connection with such policies. The Company will continue to monitor the matter for any developments that would make the loss contingency associated with the audits probable or reasonably estimable.

Certain of the Company's subsidiaries are under a targeted multi-state examination with respect to their claims paying practices and their use of the U.S. Social Security Administration's Death Master File or similar databases (a "Death Database") to identify unreported deaths in their life insurance policies, annuity contracts and retained asset accounts. There is no clear basis in previously existing law for requiring a life insurer to search for unreported deaths in order to determine whether a benefit is owed, and substantial legal authority exists to support the position that the prevailing industry practice was lawful. A number of life insurers, however, have entered into settlement or consent agreements with state insurance regulators under which the life insurers agreed to implement procedures for periodically comparing their life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, and escheating the benefits and interest as well as penalties to the state if the beneficiary could not be found. It has been publicly reported that the life insurers have paid administrative and/or examination fees to the insurance regulators in connection with the settlement or consent agreements. The Company believes it is reasonably possible that insurance regulators could demand from the Company administrative and/or examination fees relating to the targeted multi-state examination. Based on publicly reported payments by other life insurers, the Company estimates the range of such fees to be from $0 to $3.5 million.

14. SHAREOWNER'S EQUITY

PLC owns all of the 2,000 shares of non-voting preferred stock issued by the Company's subsidiary, Protective Life and Annuity Insurance Company ("PL&A"). The stock pays, when and if declared,

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. SHAREOWNER'S EQUITY — (Continued)

noncumulative participating dividends to the extent PL&A's statutory earnings for the immediately preceding fiscal year exceeded $1.0 million. In 2014, 2013, and 2012, PL&A paid no dividends to PLC on its preferred stock.

15. STOCK-BASED COMPENSATION

Since 1973, PLC has had stock-based incentive plans to motivate management to focus on its long-range performance through the awarding of stock-based compensation. Under plans approved by shareowners in 1997, 2003, 2008, and 2012, up to 9.5 million shares may be issued in payment of awards. Due to an existing change in control provision, the awards outstanding immediately prior to the Merger will be cancelled and converted into the right to receive an amount in cash. For more information refer to Note 5, Dai-ichi Merger .

Performance Shares

The criteria for payment of the 2014 performance awards is based on PLC's average operating return on average equity ("ROE") over a three- year period. If PLC's ROE is below 10.5%, no award is earned. If PLC's ROE is at or above 12.0%, the award maximum is earned.

The criteria for payment of the 2013 performance awards is based on PLC's average operating ROE over a three-year period. If PLC's ROE is below 10.0%, no award is earned. If PLC's ROE is at or above 11.5%, the award maximum is earned.

Performance shares are equivalent in value to one share of PLC's common stock times the award earned percentage payout. Performance share awards of 203,295 were issued during the year ended December 31, 2014 and 298,500 performance share awards were issued during the year ended December 31, 2013.

Performance share awards and the estimated fair value of the awards at grant date are as follows:

Year Awarded		Performance Shares		Estimated Fair Value
				(Dollars In Thousands)
	2014		203,295	$	10,484
	2013		298,500		9,328
	2012		306,100		8,608
	2011		191,100		5,433

Stock Appreciation Rights

Stock appreciation rights ("SARs") of PLC have been granted to certain officers to provide long-term incentive compensation based solely on the performance of PLC's common stock. The SARs are exercisable either five years after the date of grant or in three or four equal annual installments beginning one year after the date of grant (earlier upon the death, disability, or retirement of the officer,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. STOCK-BASED COMPENSATION — (Continued)

or in certain circumstances, of a change in control of PLC) and expire after ten years or upon termination of employment. The SARs activity as well as weighted-average base price is as follows:

	Weighted-Average Base Price per share		No. of SARs
Balance at December 31, 2011	$	22.27		2,274,229
SARs exercised / forfeited		22.60		(633,062	)
Balance at December 31, 2012	$	22.15		1,641,167
SARs exercised / forfeited		18.54		(336,066	)
Balance at December 31, 2013	$	23.08		1,305,101
SARs exercised / forfeited / expired		22.07		(1,147,473	)
Balance at December 31, 2014	$	30.41		157,628

The outstanding SARs as of December 31, 2014, were at the following base prices:

Base Price		SARs Outstanding		Remaining Life in Years		Currently Exercisable
$	41.05		10,000		1		10,000
	43.46		22,300		3		22,300
	38.59		52,000		4		52,000
	3.50		46,110		5		46,110
	18.36		27,218		6		27,218

There were no SARs issued for the years ended December 31, 2014, 2013, and 2012. These fair values were estimated using a Black-Scholes option pricing model. The assumptions used in this pricing model varied depending on the vesting period of awards. Assumptions used in the model for the 2010 SARs granted (the simplified method under the ASC Compensation-Stock Compensation Topic was used for the 2010 awards) were as follows: an expected volatility of 69.4%, a risk-free interest rate of 2.6%, a dividend rate of 2.4%, a zero percent forfeiture rate, and expected exercise date of 2016.

Restricted Stock Units

Restricted stock units are awarded to participants and include certain restrictions relating to vesting periods. PLC issued 98,700 restricted stock units for the year ended December 31, 2014 and 166,850 restricted stock units for the year ended December 31, 2013. These awards had a total fair value at grant date of $5.1 million and $5.5 million, respectively. Approximately half of these restricted stock units vest after three years from grant date and the remainder vest after four years.

PLC recognizes all stock-based compensation expense over the related service period of the award, or earlier for retirement eligible employees. The expense recorded by PLC for its stock-based compensation plans was $25.9 million, $15.7 million, and $10.3 million in 2014, 2013, and 2012, respectively. The Company recognized expense associated with PLC's stock-based compensation plans for compensations awarded to its employees of $6.5 million, $4.5 million, and $3.9 million in 2014, 2013, and 2012, respectively. PLC's obligations of its stock-based compensation plans that are expected to be settled in shares of PLC's common stock are reported as a component of shareowners'

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. STOCK-BASED COMPENSATION — (Continued)

equity, net of deferred taxes. As of December 31, 2014, the total compensation cost related to non-vested stock-based compensation not yet recognized was $27.0 million. Due to the Merger, the unrecognized stock compensation expense will be accelerated as of the date of the merger due to an existing change in control provision.

The following table provides information as of December 31, 2014, about equity compensation plans under which PLC's common stock is authorized for issuance:

Securities Authorized for Issuance under Equity Compensation Plans

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights as of December 31, 2014(a)			Weighted-average exercise price of outstanding options, warrants and rights as of December 31, 2014(b)			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) as of of December 31, 2014(c)
Equity compensation plans approved by shareowners		1,960,959	(1)	$	22.07	(3)		4,092,546	(4)
Equity compensation plans not approved by shareowners		193,720	(2)	Not applicable			Not applicable(5)
Total		2,154,679		$	22.07			4,092,546

(1) Includes the following number of shares: (a) 102,458 shares issuable with respect to outstanding SARs (assuming for this purpose that one share of common stock will be payable with respect to each outstanding SAR); (b) 907,487 shares issuable with respect to outstanding performance share awards (assuming for this purpose that the awards are payable based on estimated performance under the awards as of September 30, 2014); (c) 313,199 shares issuable with respect to outstanding restricted stock units (assuming for this purpose that shares will be payable with respect to all outstanding restricted stock units); (d) 475,386 shares issuable with respect to stock equivalents representing previously earned awards under the LTIP that the recipient deferred under PLC's Deferred Compensation Plan for Officers; and (e) 162,429 shares issuable with respect to stock equivalents representing previous awards under PLC's Stock Plan for Non-Employee Directors that the recipient deferred under PLC's Deferred Compensation Plan for Directors Who Are Not Employees of PLC.

(2) Includes the following number of shares of common stock: (a) 152,709 shares issuable with respect to stock equivalents representing (i) stock awards to PLC's Directors before June 1, 2004 that the recipient deferred pursuant to PLC's Deferred Compensation Plan for Directors Who Are Not Employees of PLC and (ii) cash retainers and fees that PLC's Directors deferred under PLC's Deferred Compensation Plan for Directors Who Are Not Employees of PLC, and (b) 41,011 shares issuable with respect to stock equivalents pursuant to PLCs Deferred Compensation Plan for Officers.

(3) Based on exercise prices of outstanding SARs.

(4) Represents shares of common stock available for future issuance under the LTIP and PLC's Stock Plan for Non-Employee Directors.

(5) The plans listed in Note (2) do not currently have limits on the number of shares of common stock issuable under such plans. The total number of shares of common stock that may be issuable under such plans will depend upon, among other factors, the deferral elections made by the plans' participants.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plan and Unfunded Excess Benefit Plan

PLC sponsors a defined benefit pension plan covering substantially all of its employees, including those of the Company. Benefits are based on years of service and the employee's compensation.

Effective January 1, 2008, PLC made the following changes to its defined benefit pension plan. These changes have been reflected in the computations within this note.

• Employees hired after December 31, 2007, will receive benefits under a cash balance plan.

• Employees active on December 31, 2007, with age plus vesting service less than 55 years will receive a final pay-based pension benefit for service through December 31, 2007, plus a cash balance benefit for service after December 31, 2007.

• Employees active on December 31, 2007, with age plus vesting service equaling or exceeding 55 years, will receive a final pay-based pension benefit for service both before and after December 31, 2007, with a modest reduction in the formula for benefits earned after December 31, 2007.

• All participants terminating employment on or after December of 2007 may elect to receive a lump sum benefit.

PLC's funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act ("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.

Under the Pension Protection Act of 2006 ("PPA"), a plan could be subject to certain benefit restrictions if the plan's adjusted funding target attainment percentage ("AFTAP") drops below 80%. Therefore, PLC may make additional contributions in future periods to maintain an AFTAP of at least 80%. In general, the AFTAP is a measure of how well the plan is funded and is obtained by dividing the plan's assets by the plan's funding liabilities. AFTAP is based on participant data, plan provisions, plan methods and assumptions, funding credit balances, and plan assets as of the plan valuation date. Some of the assumptions and methods used to determine the plan's AFTAP may be different from the assumptions and methods used to measure the plan's funded status on a GAAP basis.

In July of 2012, the Moving Ahead for Progress in the 21st Century Act ("MAP-21"), which includes pension funding stabilization provisions, was signed into law. These provisions establish an interest rate corridor which is designed to stabilize the segment rates used to determine funding requirements from the effects of interest rate volatility. In August of 2014, the Highway and Transportation Funding Act of 2014 ("HATFA") was signed into law. HAFTA extends the funding relief provided by MAP-21 by delaying the interest rate corridor expansion. The funding stabilization provisions of MAP-21 and HATFA reduced PLC's minimum required defined benefit plan contributions for the 2013 and 2014 plan years. PLC is evaluating the impact these changes will have on funding requirements in future years. Since the funding stabilization provisions of MAP-21 and HATFA do not apply for Pension Benefit Guaranty Corporation ("PBGC") reporting purposes, PLC may also make additional contributions in future periods to avoid certain PBGC reporting triggers.

During the twelve months ended December 31, 2014, PLC contributed $9.0 million to its defined benefit pension plan for the 2013 plan year and $6.5 million to its defined benefit pension plan for the 2014

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16. EMPLOYEE BENEFIT PLANS — (Continued)

plan year. In addition, during January of 2015, PLC made a $2.2 million contribution to the defined benefit pension plan for the 2014 plan year. PLC has not yet determined what amount it will fund for the remainder of 2015, but estimates that the amount will be between $1 million and $10 million.

PLC also sponsors an unfunded excess benefit plan, which is a nonqualified plan that provides defined pension benefits in excess of limits imposed on qualified plans by federal tax law.

PLC uses a December 31 measurement date for all of its plans. The following table presents the benefit obligation, fair value of plan assets, and the funded status of PLC's defined benefit pension plan and unfunded excess benefit plan as of December 31. This table also includes the amounts not yet recognized as components of net periodic pension costs as of December 31:

	Defined Benefit Pension Plan						Unfunded Excess Benefit Plan
	2014			2013			2014			2013
	(Dollars In Thousands)
Accumulated benefit obligation, end of year	$	249,453		$	207,999		$	47,368		$	36,306
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	219,152		$	223,319		$	39,679		$	42,971
Service cost		9,411			9,345			954			1,037
Interest cost		10,493			8,985			1,696			1,387
Amendments		—			—			—			—
Actuarial (gain) loss		38,110			(8,172	)		9,153			(1,505	)
Benefits paid		(9,835	)		(14,325	)		(1,907	)		(4,211	)
Projected benefit obligation at end of year		267,331			219,152			49,575			39,679
Change in plan assets:
Fair value of plan assets at beginning of year		180,173			152,187			—			—
Actual return on plan assets		17,921			33,368			—			—
Employer contributions(1)		15,513			8,943			1,907			4,211
Benefits paid		(9,835	)		(14,325	)		(1,907	)		(4,211	)
Fair value of plan assets at end of year		203,772			180,173			—			—
After reflecting FASB guidance:
Funded status		(63,559	)		(38,979	)		(49,575	)		(39,679	)
Amounts recognized in the balance sheet:
Other liabilities		(63,559	)		(38,979	)		(49,575	)		(39,679	)
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss/(gain)		80,430			54,897			20,983			13,346
Prior service cost/(credit)		(1,033	)		(1,425	)		24			36
Total	$	79,397		$	53,472		$	21,007		$	13,382

(1) Employer contributions disclosed are based on PLC's fiscal filing year

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16. EMPLOYEE BENEFIT PLANS — (Continued)

Weighted-average assumptions used to determine benefit obligations as of December 31 are as follows:

	Defined Benefit Pension Plan						Unfunded Excess Benefit Plan
	2014			2013			2014			2013
Discount rate		3.95	%		4.86	%		3.65	%		4.30	%
Rate of compensation increase		4.75 3.75 % for age 40 and above	% prior to age 40		3.0			4.75 3.75 % for age 40 and above	% prior to age 40		4.0
Expected long-term return on plan assets		7.5			7.5			N/A			N/A

Weighted-average assumptions used to determine the net periodic benefit cost for the year ended December 31 are as follows:

	Defined Benefit Pension Plan									Unfunded Excess Benefit Plan
	2014			2013			2012			2014			2013			2012
Discount rate		4.86	%		4.07	%		4.62	%		4.30	%		3.37	%		4.07	%
Rates of compensation increase		3.0			3.0			2.5 - 3.0			4.0			4.0			3.5 - 4.0
Expected long-term return on plan assets		7.5			7.5			7.75			N/A			N/A			N/A

The assumed discount rates used to determine the benefit obligations were based on an analysis of future benefits expected to be paid under the plans. The assumed discount rate reflects the interest rate at which an amount that is invested in a portfolio of high-quality debt instruments on the measurement date would provide the future cash flows necessary to pay benefits when they come due.

To determine an appropriate long-term rate of return assumption, PLC obtained 25 year annualized returns for each of the represented asset classes. In addition, PLC received evaluations of market performance based on PLC's asset allocation as provided by external consultants. A combination of these statistical analytics provided results that PLC utilized to determine an appropriate long-term rate of return assumption.

Components of the net periodic benefit cost for the year ended December 31 are as follows:

	Defined Benefit Pension Plan									Unfunded Excess Benefit Plan
	2014			2013			2012			2014		2013		2012
	(Dollars In Thousands)
Service cost — benefits earned during the period	$	9,411		$	9,345		$	9,145		$	954	$	1,037	$	867
Interest cost on projected benefit obligation		10,493			8,985			8,977			1,696		1,387		1,473
Expected return on plan assets		(12,166	)		(11,013	)		(10,916	)		—		—		—
Amortization of prior service cost/(credit)		(392	)		(392	)		(392	)		12		12		12
Amortization of actuarial losses(1)		6,821			9,631			7,749			1,516		1,792		1,300
Preliminary net periodic benefit cost		14,167			16,556			14,563			4,178		4,228		3,652
Settlement/curtailment expense(2)		—			—			—			—		928		—
Total net periodic benefit cost	$	14,167		$	16,556		$	14,563		$	4,178	$	5,156	$	3,652

(1) 2014 average remaining service period used is 8.10 years and 7.51 years for the defined benefit pension plan and unfunded excess benefit plan, respectively.

(2) The unfunded excess pension plan triggered settlement accounting for the year ended December 31, 2013 since the total lump sum payments exceeded the settlement threshold of service cost plus interest cost.

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16. EMPLOYEE BENEFIT PLANS — (Continued)

The estimated net actuarial loss/(gain), prior service cost/(credit), and transition obligation/(asset) for these plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2015 is as follows:

	Defined Benefit Pension Plan			Unfunded Excess Benefit Plan
	(Dollars In Thousands)
Net actuarial loss/(gain)	$	7,603		$	1,901
Prior service cost/(credit)		(392	)		12
Transition obligation/(asset)		—			—

The amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the Plan.

Allocation of plan assets of the defined benefit pension plan by category as of December 31 are as follows:

Asset Category	Target Allocation for 2015			2014			2013
Cash and cash equivalents		2	%		4	%		2	%
Equity securities		60			62			64
Fixed income		38			34			34
Total		100	%		100	%		100	%

PLC's target asset allocation is designed to provide an acceptable level of risk and balance between equity assets and fixed income assets. The weighting towards equity securities is designed to help provide for an increased level of asset growth potential and liquidity.

Prior to July 1999, upon an employee's retirement, a distribution from pension plan assets was used to purchase a single premium annuity from the Company in the retiree's name. Therefore, amounts shown above as plan assets exclude assets relating to such retirees. Since July 1999, retiree obligations have been fulfilled from pension plan assets. The defined benefit pension plan has a target asset allocation of 60% domestic equities, 38% fixed income, and 2% cash. When calculating asset allocation, PLC includes reserves for pre- July 1999 retirees.

PLC's investment policy includes various guidelines and procedures designed to ensure assets are invested in a manner necessary to meet expected future benefits earned by participants. The investment guidelines consider a broad range of economic conditions. Central to the policy are target allocation ranges (shown above) by major asset categories. The objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed the plans' actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies.

The plan's equity assets are in a Russell 3000 index fund that invests in a domestic equity index collective trust managed by Northern Trust Corporation and in a Spartan 500 index fund managed by Fidelity. The plan's cash is invested in a collective trust managed by Northern Trust Corporation. The plan's fixed income assets are invested in a group deposit administration annuity contract with the Company.

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16. EMPLOYEE BENEFIT PLANS — (Continued)

Plan assets of the defined benefit pension plan by category as of December 31, are as follows:

	As of December 31,
Asset Category	2014		2013
	(Dollars In Thousands)
Cash and cash equivalents	$	7,968	$	3,052
Equity securities:
Collective Russell 3000 equity index fund		79,660		74,753
Fidelity Spartan 500 index fund		51,848		45,632
Fixed income		64,296		56,736
Total investments		203,772		180,173
Employer contribution receivable		2,165		2,314
Total	$	205,937	$	182,487

The valuation methodologies used to determine the fair values reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The following is a description of the valuation methodologies used for assets measured at fair value. The Plan's group deposit administration annuity contract with the Company is recorded at contract value, which, by utilizing a long-term view, PLC believes approximates fair value. Contract value represents contributions made under the contract, plus interest at the contract rate, less funds used to purchase annuities. Units in collective short-term and collective investment funds are valued at the unit value, which approximates fair value, as reported by the trustee of the collective short-term and collective investment funds on each valuation date. These methods of valuation may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while PLC believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Collective short-term investment fund	$	7,968	$	—	$	—	$	7,968
Collective investment funds:
Equity index funds		51,848		79,660		—		131,508
Group deposit administration annuity contract		—		—		64,296		64,296
Total investments	$	59,816	$	79,660	$	64,296	$	203,772

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16. EMPLOYEE BENEFIT PLANS — (Continued)

The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Collective short-term investment fund	$	3,052	$	—	$	—	$	3,052
Collective investment funds:
Equity index funds		45,632		74,753		—		120,385
Group deposit administration annuity contract		—		—		56,736		56,736
Total investments	$	48,684	$	74,753	$	56,736	$	180,173

For the year ended December 31, 2014, $4.5 million was transferred into Level 3 from Level 2. For the year ended December 31, 2013, $4.0 million was transferred into Level 3 from Level 2. These transfers were made to maintain an acceptable asset allocation as set by PLC's investment policy.

For the year ended December 31, 2014 and 2013, there were no transfers between Level 1 and Level 2.

The following table summarizes the Plan investments measured at fair value based on NAV per share as of December 31, 2014 and 2013, respectively:

Name

Fair Value

Unfunded
Commitments

Redemption
Frequency

Redemption
Notice Period

(Dollars In Thousands)

As of December 31, 2014:

Collective short-term investment
fund

7,968

Not Applicable

Daily

1 day

Collective Russell 3000 index
fund(1)

79,660

Not Applicable

Daily

1 day

Fidelity Spartan 500 index fund

51,848

Not Applicable

Daily

1 day

As of December 31, 2013:

Collective short-term investment
fund

3,052

Not Applicable

Daily

1 day

Collective Russell 3000 index
fund(1)

74,753

Not Applicable

Daily

1 day

Fidelity Spartan 500 index fund

45,632

Not Applicable

Daily

1 day

(1) Non-lending collective trust that does not publish a daily NAV but tracks the Russell 3000 index and provides a daily NAV to the Plan.

A reconciliation of the beginning and ending balances for the fair value measurements for which significant unobservable inputs (Level 3) have been used is as follows:

	As of December 31,
	2014		2013
	(Dollars In Thousands)
Balance, beginning of year	$	56,736	$	50,032
Interest income		3,060		2,704
Transfers from collective short-term investments fund		4,500		4,000
Transfers to collective short-term investments fund		—		—
Balance, end of year	$	64,296	$	56,736

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16. EMPLOYEE BENEFIT PLANS — (Continued)

The following table represents the Plan's Level 3 financial instrument, the valuation technique used, and the significant unobservable input and the ranges of values for that input as of December 31, 2014:

Instrument

Fair Value

Principal
Valuation
Technique

Significant
Unobservable
Inputs

Range of
Significant Input
Values

(Dollars In Thousands)

Group deposit administration
annuity contract

64,296

Contract Value

Contract Rate

5.28

% - 5.47%

Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect the amounts reported.

Estimated future benefit payments under the defined benefit pension plan are as follows:

Years	Defined Benefit Pension Plan			Unfunded Excess Benefit Plan
			(Dollars In Thousands)
2015	$	15,055		$	4,016
2016		15,243			4,036
2017		16,957			5,610
2018		16,515			4,005
2019		19,014			4,303
2020-2024		97,137			17,800

Other Postretirement Benefits

In addition to pension benefits, PLC provides limited healthcare benefits to eligible retired employees until age 65. This postretirement benefit is provided by an unfunded plan. As of December 31, 2014 and 2013, the accumulated postretirement benefit obligation associated with these benefits was $0.2 million and $0.4 million, respectively.

The change in the benefit obligation for the retiree medical plan is as follows:

	As of December 31,
	2014			2013
	(Dollars In Thousands)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	447		$	788
Service cost		2			4
Interest cost		4			5
Actuarial (gain)/loss		30			29
Plan participant contributions		254			289
Benefits paid		(490	)		(668	)
Benefit obligation, end of year	$	247		$	447

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16. EMPLOYEE BENEFIT PLANS — (Continued)

For the retiree medical plan, PLC's discount rate assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2014, is 1.27% and 1.26%, respectively.

For a closed group of retirees over age 65, PLC provides a prescription drug benefit. As of December 31, 2014 and 2013, PLC's liability related to this benefit was less than $0.1 million. PLC's obligation is not materially affected by a 1% change in the healthcare cost trend assumptions used in the calculation of the obligation.

PLC also offers life insurance benefits for retirees from $10,000 up to a maximum of $75,000 which are provided through the payment of premiums under a group life insurance policy. This plan is partially funded at a maximum of $50,000 face amount of insurance. The accumulated postretirement benefit obligation associated with these benefits is as follows:

	As of December 31,
	2014			2013
	(Dollars In Thousands)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	8,653		$	10,070
Service cost		97			144
Interest cost		416			405
Actuarial (gain)/loss		694			(1,620	)
Benefits paid		(572	)		(346	)
Benefit obligation, end of year	$	9,288		$	8,653

For the postretirement life insurance plan, PLC's discount rate assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2014, is 4.21% and 5.05%, respectively.

PLC's expected long-term rate of return assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2014, is 3.14% and 3.13%, respectively. To determine an appropriate long-term rate of return assumption, PLC utilized 20 year average and annualized return results on the Barclay's short treasury index.

Investments of PLC's group life insurance plan are held by Wells Fargo Bank, N.A. Plan assets held by the Custodian are invested in a money market fund.

The fair value of each major category of plan assets for PLC's postretirement life insurance plan is as follows:

	For The Year Ended December 31,
Category of Investment	2014		2013		2012
	(Dollars In Thousands)
Money Market Fund	$	5,925	$	6,156	$	6,174

Investments are stated at fair value and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The money market funds are valued based on historical cost, which represents fair value, at year end. This method of valuation may produce a fair value calculation that may not be reflective of future fair values. Furthermore, while PLC believes its valuation method is appropriate and consistent with other market participants, the use of

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16. EMPLOYEE BENEFIT PLANS — (Continued)

different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Money Market Fund	$	5,925	$	—	$	—	$	5,925

The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Money Market Fund	$	6,156	$	—	$	—	$	6,156

For the year ended December 31, 2014 and 2013, there were no transfers between levels.

Investments are exposed to various risks, such as interest rate and credit risks. Due to the level of risk associated with investments and the level of uncertainty related to credit risks, it is at least reasonably possible that changes in risk in the near term could materially affect the amounts reported.

401(k) Plan

PLC sponsors a 401(k) Plan which covers substantially all employees. Employee contributions are made on a before-tax basis as provided by Section 401(k) of the Internal Revenue Code or as after-tax "Roth" contributions. Employees may contribute up to 25% of their eligible annual compensation to the 401(k) Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Service ($17,500 for 2014). The Plan also provides a "catch-up" contribution provision which permits eligible participants (age 50 or over at the end of the calendar year), to make additional contributions that exceed the regular annual contribution limits up to a limit periodically set by the Internal Revenue Service ($5,500 for 2014). PLC matches the sum of all employee contributions dollar for dollar up to a maximum of 4% of an employee's pay per year per person. All matching contributions vest immediately.

Prior to 2009, employee contributions to PLC's 401(k) Plan were matched through use of an ESOP established by PLC. Beginning in 2009, PLC adopted a cash match for employee contributions to the 401(k) plan. For the year ended December 31, 2014 and 2013, PLC recorded an expense of $6.3 million and $6.0 million, respectively.

Effective as of January 1, 2005, PLC adopted a supplemental matching contribution program, which is a nonqualified plan that provides supplemental matching contributions in excess of the limits imposed on qualified defined contribution plans by federal tax law. The first allocations under this program were made in early 2006, with respect to the 2005 plan year. The expense recorded by PLC for this employee benefit was $0.4 million, $0.5 million, and $0.4 million, respectively, in 2014, 2013, and 2012.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. EMPLOYEE BENEFIT PLANS — (Continued)

Deferred Compensation Plan

PLC has established deferred compensation plans for directors, officers, and others. Compensation deferred is credited to the participants in cash, mutual funds, common stock equivalents, or a combination thereof. PLC may, from time to time, reissue treasury shares or buy in the open market shares of common stock to fulfill its obligation under the plans. As of December 31, 2014, the plans had 1,109,595 common stock equivalents credited to participants. PLC's obligations related to its deferred compensation plans are reported in other liabilities, unless they are to be settled in shares of its common stock, in which case they are reported as a component of shareowners' equity. On February 1, 2015, PLC became a wholly subsidiary of Dai-ichi Life and PLC's stock ceased to be publicly traded. Thus, any common stock equivalents within the plans converted into rights to receive the merger consideration of $70.00 per common stock equivalent.

17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) ("AOCI") as of December 31, 2014 and 2013.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Unrealized Gains and Losses on Investments(2)			Accumulated Gain and Loss Derivatives			Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2013	$	540,201		$	(1,235	)	$	538,966
Other comprehensive income (loss) before reclassifications		983,985			(2	)		983,983
Other comprehensive income (loss) relating to other- than-temporary impaired investments for which a portion has been recognized in earnings		3,498			—			3,498
Amounts reclassified from accumulated other comprehensive income (loss)(1)		(44,391	)		1,155			(43,236	)
Net current-period other comprehensive income (loss)		943,092			1,153			944,245
Ending Balance, December 31, 2014	$	1,483,293		$	(82	)	$	1,483,211

(1) See Reclassification table below for details.

(2) These balances were offset by the impact of DAC and VOBA by $198.1 million and $397.5 million as of December 31, 2013 and 2014, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) — (Continued)

Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Unrealized Gains and Losses on Investments(2)			Accumulated Gain and Loss Derivatives			Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2012	$	1,814,620		$	(3,496	)	$	1,811,124
Other comprehensive income (loss) before reclassifications		(1,250,416	)		734			(1,249,682	)
Other comprehensive income (loss) relating to other- than-temporary impaired investments for which a portion has been recognized in earnings		4,591			—			4,591
Amounts reclassified from accumulated other comprehensive income (loss)(1)		(28,594	)		1,527			(27,067	)
Net current-period other comprehensive income (loss)		(1,274,419	)		2,261			(1,272,158	)
Ending Balance, December 31, 2013	$	540,201		$	(1,235	)	$	538,966

(1) See Reclassification table below for details.

(2) These balances were offset by the impact of DAC and VOBA by $204.9 million and $198.1 million as of December 31, 2012 and 2013, respectively.

The following table summarizes the reclassifications amounts out of AOCI for the year ended December 31, 2014 and 2013.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Statements of Income
	(Dollars In Thousands)
For The Year Ended December 31, 2014
Gains and losses on derivative instruments
				Benefits and settlement expenses, net of
Net settlement (expense)/benefit(1)	$	(1,777	)	reinsurance ceded
		(1,777	)	Total before tax
		622		Tax (expense) or benefit
	$	(1,155	)	Net of tax
Unrealized gains and losses on available-for-sale securities
				Realized investment gains (losses):
Net investment gains/losses	$	75,569		All other investments
Impairments recognized in earnings		(7,275	)	Net impairment losses recognized in earnings
		68,294		Total before tax
		(23,903	)	Tax (expense) or benefit
	$	44,391		Net of tax

(1) See Note 23, Derivative Financial Instruments for additional information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) — (Continued)

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Statements of Income
	(Dollars In Thousands)
For The Year Ended December 31, 2013
Gains and losses on derivative instruments
				Benefits and settlement expenses, net of
Net settlement (expense)/benefit(1)	$	(2,349	)	reinsurance ceded
		(2,349	)	Total before tax
		822		Tax (expense) or benefit
	$	(1,527	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains/losses	$	66,437		Realized investment gains (losses): All other investments
Impairments recognized in earnings		(22,447	)	Net impairment losses recognized in earnings
		43,990		Total before tax
		(15,396	)	Tax (expense) or benefit
	$	28,594		Net of tax

(1) See Note 23, Derivative Financial Instruments for additional information.

18. INCOME TAXES

The Company's effective income tax rate related to continuing operations varied from the maximum federal income tax rate as follows:

	For The Year Ended December 31,
	2014			2013			2012
Statutory federal income tax rate applied to pre-tax income		35.0	%		35.0	%		35.0	%
State income taxes		0.5			0.4			0.4
Investment income not subject to tax		(2.7	)		(4.4	)		(3.1	)
Uncertain tax positions		0.5			0.1			0.2
Other		0.1			(0.1	)		0.4
		33.4	%		31.0	%		32.9	%

The annual provision for federal income tax in these financial statements differs from the annual amounts of income tax expense reported in the respective income tax returns. Certain significant revenues and expenses are appropriately reported in different years with respect to the financial statements and the tax returns.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. INCOME TAXES — (Continued )

The components of the Company's income tax are as follows:

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Thousands)
Current income tax expense:
Federal	$	176,238		$	(18,076	)	$	78,510
State		5,525			(222	)		2,496
Total current	$	181,763		$	(18,298	)	$	81,006
Deferred income tax expense:
Federal	$	65,566		$	149,288		$	66,375
State		(491	)		(93	)		3,662
Total deferred	$	65,075		$	149,195		$	70,037

The components of the Company's net deferred income tax liability are as follows:

	As of December 31,
	2014			2013
	(Dollars In Thousands)
Deferred income tax assets:
Premium receivables and policy liabilities	$	154,720		$	275,355
Loss and credit carryforwards		35,642			104,530
Deferred compensation		104,117			104,062
Invested assets (other than unrealized gains)		2,960			—
Valuation allowance		(791	)		(780	)
		296,648			483,167
Deferred income tax liabilities:
Deferred policy acquisition costs and value of business acquired		1,073,499			1,034,614
Invested assets (other than unrealized gains)		—			147,446
Net unrealized gains (losses) on investments		798,529			290,062
Other		36,484			52,465
		1,908,512			1,524,587
Net deferred income tax liability	$	(1,611,864	)	$	(1,041,420	)

The Company's income tax returns, except for MONY which files separately, are included in PLC's consolidated U.S. income tax return.

The deferred tax assets reported above include certain deferred tax assets related to nonqualified deferred compensation and other employee benefit liabilities. These liabilities were assumed by AXA; they were not acquired by the Company in connection with the acquisition of MONY discussed in Note 3, Significant Acquisitions . The future tax deductions stemming from these liabilities will be claimed by the Company on MONY's tax returns in its post-acquisition periods. These deferred tax assets have been estimated as of the MONY Acquisition date (and through the December 31, 2014

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. INCOME TAXES — (Continued )

reporting date) based on all available information. However, it is possible that these estimates may be adjusted in future reporting periods based on actuarial changes to the projected future payments associated with these liabilities. Any such adjustments will be recognized by the Company as an adjustment to income tax expense during the period in which they are realized.

In management's judgment, the gross deferred income tax asset as of December 31, 2014, will more likely than not be fully realized. The Company has recognized a valuation allowance of $1.2 million and $1.2 million as of December 31, 2014 and 2013, respectively, related to state-based loss carryforwards that it has determined are more likely than not to expire unutilized. Since there was no change in the valuation allowance, there were no impact to state income tax expense in 2014.

As of December 31, 2014 and 2013, some of the Company's fixed maturities were reported at an unrealized loss. If the Company were to realize a tax-basis net capital loss for a year, then such loss could not be deducted against that year's other taxable income. However, such a loss could be carried back and forward against prior year or future year tax-basis net capital gains. Therefore, the Company has relied upon a prudent and feasible tax-planning strategy regarding its fixed maturities that were reported at an unrealized loss. The Company has the ability and the intent to either hold such fixed maturities to maturity, thereby avoiding a realized loss, or to generate an offsetting realized gain from unrealized gain fixed maturities if such unrealized loss fixed maturities are sold at a loss prior to maturity. As of December 31, 2014, the Company recorded a net unrealized gain on its fixed maturities.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	As of December 31,
	2014			2013			2012
	(Dollars In Thousands)
Balance, beginning of period	$	85,846		$	74,335		$	4,318
Additions for tax positions of the current year		57,392			7,464			9,465
Additions for tax positions of prior years		34,371			6,787			64,050
Reductions of tax positions of prior years:
Changes in judgment		(9,533	)		(2,740	)		(3,498	)
Settlements during the period		—			—			—
Lapses of applicable statute of limitations		—			—			—
Balance, end of period	$	168,076		$	85,846		$	74,335

Included in the balance above, as of December 31, 2014 and 2013, are approximately $157.3 million and $78.5 million of unrecognized tax benefits, respectively, for which the ultimate deductibility is certain but for which there is uncertainty about the timing of such deductions. Other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective income tax rate but would accelerate to an earlier period the payment of cash to the taxing authority. The total amount of unrecognized tax benefits, if recognized, that would affect the effective income tax rate is approximately $10.7 million and $7.4 million as of December 31, 2014 and as of December 31, 2013, respectively.

Any accrued interest related to the unrecognized tax benefits have been included in income tax expense. There were no amounts included in 2014, 2013 or 2012, as the parent company maintains responsibility for the interest on unrecognized tax benefits. The Company has no accrued interest

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. INCOME TAXES — (Continued )

associated with unrecognized tax benefits as of December 31, 2014 and 2013 (before taking into consideration the related income tax benefit that is associated with such an expense).

During 2012, an IRS audit concluded in which the IRS proposed favorable and unfavorable adjustments to the Company's 2003 through 2007 reported taxable incomes. The Company protested certain unfavorable adjustments and sought resolution at the IRS' Appeals Division. In January 2014, the Appeals Division completed its analysis and sent the Company's case to Congress' Joint Committee on Taxation for routine review. Although it cannot be certain, the Company believes this review process may conclude within the next 12 months. In addition, an examination of tax years 2008 through 2011 is currently underway. The Company believes that this examination may conclude within the next 12 months. It is possible, therefore, that in the next 12 months approximately $98.4 million of the unrecognized tax benefits on the above chart will be reduced due to the expected closure of the aforementioned Appeals process, the closing of the 2008 through 2011 examination, and the lapsing of various tax years' statutes of limitations. In general, these reductions would represent the Company's possible successful negotiation of certain issues, coupled with its payment of the assessed taxes on other issues. This possible scenario includes an assumption that the Company would pay the IRS-asserted deficiencies on issues that it loses at Appeals rather than litigating such issues. These assumed tax payments would not materially impact the Company or its effective tax rate.

During the 12 months ended December 31, 2014 and 2013, discussions with the IRS, related to their ongoing examination of tax years 2008 through 2011 prompted the Company overall to revise upward its measurement of unrecognized tax benefits. These changes underlying this overall increase were almost entirely related to timing issues. Therefore, aside from the cost of interest, such changes did not result in any impact on the Company's effective tax rate. In addition, during the 12 months ended December 31, 2013, the Company's uncertain tax position liability decreased in the amount of $2.7 million. This was caused by the interaction of certain limitations regarding the dividends-received deduction and changes to taxable income caused by other uncertain tax positions resulting from new technical guidance, etc. This led the Company to conclude that the full amount of the associated tax benefit was more than 50% likely to be realized.

In general, the Company is no longer subject to U.S. federal, state and local income tax examinations by taxing authorities for tax years that began before 2003.

19. SUPPLEMENTAL CASH FLOW INFORMATION

The following table sets forth supplemental cash flow information:

	For The Year Ended December 31,
	2014		2013			2012
	(Dollars In Thousands)
Cash paid / (received) during the year:
Interest expense	$	117,776	$	110,301		$	92,175
Income taxes		159,724		(54,370	)		77,665

20. RELATED PARTY TRANSACTIONS

The Company leases furnished office space and computers to affiliates. Lease revenues were $4.9 million, $4.9 million, and $4.7 million for the years ended December 31, 2014, 2013, and 2012,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. RELATED PARTY TRANSACTIONS — (Continued)

respectively. The Company purchases data processing, legal, investment, and management services from affiliates. The costs of such services were $206.3 million, $170.9 million, and $154.7 million for the years ended December 31, 2014, 2013, and 2012, respectively. In addition, the Company has an intercompany payable with affiliates as of December 31, 2014 and 2013 of $19.5 million and $27.6 million, respectively. There was no intercompany receivable with affiliates balance as of December 31, 2014 or December 31, 2013.

Certain corporations with which PLC's directors were affiliated paid us premiums and policy fees or other amounts for various types of insurance and investment products, interest on bonds we own and commissions on securities underwritings in which our affiliates participated. Such amounts totaled $33.4 million, $40.0 million, and $59.1 million in 2014, 2013, and 2012, respectively. The Company and/or PLC paid commissions, interest on debt and investment products, and fees to these same corporations totaling $16.5 million, $16.4 million, and $13.0 million in 2014, 2013, and 2012, respectively.

Prior to the Merger, PLC and the Company had no related party transactions with Dai-ichi Life.

PLC has guaranteed the Company's obligations for borrowings or letters of credit under the revolving line of credit arrangement to which PLC is also a party. PLC has also issued guarantees, entered into support agreements and/or assumed a duty to indemnify its indirect wholly owned captive insurance companies in certain respects. In addition, as of December 31, 2014, PLC is the sole holder of the $800 million balance of outstanding surplus notes issued by one such wholly owned captive insurance company, Golden Gate.

As of February 1, 2000, PLC guaranteed the obligations of the Company under a synthetic lease entered into by the Company, as lessee, with a non-affiliated third party, as lessor. Under the terms of the synthetic lease, financing of $75 million was available to the Company for construction of a new office building and parking deck. The synthetic lease was amended and restated as of January 11, 2007, and again on December 19, 2013, wherein as of December 31, 2014, PLC continues to guarantee the obligations of the Company thereunder.

The Company has agreements with certain of its subsidiaries under which it provides administrative services for a fee. These services include but are not limited to accounting, financial reporting, compliance, policy administration, reserve computations, and projections. In addition, the Company and its subsidiaries pay PLC for investment, legal and data processing services.

The Company and/or certain of its affiliates have reinsurance agreements in place with companies owned by PLC. These agreements relate to certain portions of our service contract business which is included within the Asset Protection segment. These transactions are eliminated at the PLC consolidated level.

The Company has reinsured GMWB and GMDB riders related to our variable annuity contracts to Shades Creek, a wholly owned insurance subsidiary of PLC. Also during 2012, PLC entered into an intercompany capital support agreement with Shades Creek which provides through a guarantee that PLC will contribute assets or purchase surplus notes (or cause an affiliate or third party to contribute assets or purchase surplus notes) in amounts necessary for Shades Creek's regulatory capital levels to equal or exceed minimum thresholds as defined by the agreement. Under this support agreement, the Company issued a $55 million Letter of Credit on December 31, 2014. No borrowings under this agreement were outstanding as of December 31, 2014. As of December 31, 2014, Shades Creek

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. RELATED PARTY TRANSACTIONS — (Continued)

maintained capital levels in excess of the required minimum thresholds. The maximum potential future payment amount which could be required under the capital support agreement will be dependent on numerous factors, including the performance of equity markets, the level of interest rates, performance of associated hedges, and related policyholder behavior.

As of December 31, 2012, Shades Creek was a direct wholly owned insurance subsidiary of the Company. On April 1, 2013, the Company paid to its parent, PLC, a dividend that consisted of all outstanding stock of Shades Creek. The Company will continue to reinsure guaranteed minimum withdrawal benefits ("GMWB") and guaranteed minimum death benefits ("GMDB") riders to Shades Creek, which include a funds withheld account that is considered a derivative. For more information related to the derivative, refer to Note 22, Fair Value of Financial Instruments and Note 23, Derivative Financial Instruments . For cash flow purposes, portions of the dividend were treated as non-cash transactions.

The following balances from Shades Creek's balance sheet as of March 31, 2013 with the exception of cash, were excluded from the Company's cash flow statement for the year ended December 31, 2013:

	As of March 31, 2013
	(Dollars In Thousands)
Assets
Other long-term investments	$	34,093
Short-term investments		745
Total investments		34,838
Cash		44,963
Accounts and premiums receivable		16,036
Deferred policy acquisition cost		123,847
Other assets		48,953
Total assets	$	268,637
Liabilities
Future policy benefits and claims	$	1,626
Other liabilities		178,321
Deferred income taxes		2,459
Total liabilities		182,406
Total equity		86,231
Total liabilities and equity	$	268,637

21. STATUTORY REPORTING PRACTICES AND OTHER REGULATORY MATTERS

The Company's insurance subsidiaries prepare statutory financial statements for regulatory purposes in accordance with accounting practices prescribed by the NAIC and the applicable state insurance department laws and regulations. These financial statements vary materially from GAAP. Statutory accounting practices include publications of the NAIC, state laws, regulations, general administrative rules as well as certain permitted accounting practices granted by the respective state insurance department. Generally, the most significant differences are that statutory financial statements do not reflect 1) deferred acquisition costs, 2) benefit liabilities that are calculated using Company estimates of expected mortality, interest, and withdrawals, 3) deferred income taxes that are not subject to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. STATUTORY REPORTING PRACTICES AND OTHER REGULATORY MATTERS — (Continued)

statutory limits, 4) recognition of realized gains and losses on the sale of securities in the period they are sold, and 5) fixed maturities recorded at fair values, but instead at amortized cost.

Statutory net income for the Company was $554.2 million, $165.5 million, and $376.3 million for the year ended December 31, 2014, 2013 and 2012, respectively. Statutory capital and surplus for the Company was $3.5 billion and $2.9 billion as of December 31, 2014 and 2013, respectively.

The Company's insurance subsidiaries are subject to various state statutory and regulatory restrictions on the insurance subsidiaries' ability to pay dividends to Protective Life Corporation. In general, dividends up to specified levels are considered ordinary and may be paid thirty days after written notice to the insurance commissioner of the state of domicile unless such commissioner objects to the dividend prior to the expiration of such period. Dividends in larger amounts are considered extraordinary and are subject to affirmative prior approval by such commissioner. The maximum amount that would qualify as ordinary dividends to the Company from our insurance subsidiaries in 2015 is approximately $138.4 million. Additionally, as of December 31, 2014, approximately $730.1 million of consolidated shareowner's equity, excluding net unrealized gains on investments, represented restricted net assets of the Company's insurance subsidiaries needed to maintain the minimum capital required by the insurance subsidiaries' respective state insurance departments.

State insurance regulators and the National Association of Insurance Commissioners ("NAIC") have adopted risk-based capital ("RBC") requirements for life insurance companies to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks. The requirements provide a means of measuring the minimum amount of statutory surplus appropriate for an insurance company to support its overall business operations based on its size and risk profile.

A company's risk-based statutory surplus is calculated by applying factors and performing calculations relating to various asset, premium, claim, expense and reserve items. Regulators can then measure the adequacy of a company's statutory surplus by comparing it to the RBC. Under specific RBC requirements, regulatory compliance is determined by the ratio of a company's total adjusted capital, as defined by the insurance regulators, to its company action level of RBC (known as the RBC ratio), also as defined by insurance regulators. As of December 31, 2014, the Company's total adjusted capital and company action level RBC was $3.9 billion and $687.8 million, respectively, providing an RBC ratio of approximately 562%.

Additionally, the Company has certain assets that are on deposit with state regulatory authorities and restricted from use. As of December 31, 2014, the Company's insurance subsidiaries had on deposit with regulatory authorities, fixed maturity and short-term investments with a fair value of approximately $45.3 million.

The states of domicile of the Company's insurance subsidiaries have adopted prescribed accounting practices that differ from the required accounting outlined in NAIC Statutory Accounting Principles ("SAP"). The insurance subsidiaries also have certain accounting practices permitted by the states of domicile that differ from those found in NAIC SAP.

Certain prescribed and permitted practices impact the statutory surplus of the Company. These practices include the non-admission of goodwill as an asset for statutory reporting and the reporting of Bank Owned Life Insurance ("BOLI") separate account amounts at book value rather than at fair value.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. STATUTORY REPORTING PRACTICES AND OTHER REGULATORY MATTERS — (Continued)

The favorable (unfavorable) effects of the Company's statutory surplus, compared to NAIC statutory surplus, from the use of these prescribed and permitted practices were as follows:

	As of December 31,
	2014			2013
	(Dollars In Millions)
Non-admission of goodwill	$	(310	)	$	(311	)
Total (net)	$	(310	)	$	(311	)

The Company also has certain prescribed and permitted practices which are applied at the subsidiary level and do not have a direct impact on the statutory surplus of the Company. These practices include permission to follow the actuarial guidelines of the domiciliary state of the ceding insurer for certain captive reinsurers, accounting for the face amount of all issued and outstanding letters of credit, and a note issued by an affiliate as an asset in the statutory financial statements of certain wholly owned subsidiaries that are considered "Special Purpose Financial Captives", and a reserve difference related to a captive insurance company.

The favorable (unfavorable) effects on the statutory surplus of the Company's insurance subsidiaries, compared to NAIC statutory surplus, from the use of these prescribed and permitted practices were as follows:

	As of December 31,
	2014			2013
	(Dollars In Millions)
Accounting for Letters of Credit as admitted assets	$	1,735		$	1,415
Accounting for Red Mountain Note as admitted asset	$	435		$	365
Reserving based on state specific actuarial practices	$	112		$	105
Reserving difference related to a captive insurance company	$	(87	)	$	(22	)

22. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determined the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company has adopted the provisions from the FASB guidance that is referenced in the Fair Value Measurements and Disclosures Topic for non-financial assets and liabilities (such as property and equipment, goodwill, and other intangible assets) that are required to be measured at fair value on a periodic basis. The effect on the Company's periodic fair value measurements for non-financial assets and liabilities was not material.

The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized as follows:

• Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market.

• Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:

a) Quoted prices for similar assets or liabilities in active markets

b) Quoted prices for identical or similar assets or liabilities in non-active markets

c) Inputs other than quoted market prices that are observable

d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

• Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management's own assumptions about the assumptions a market participant would use in pricing the asset or liability.

The following table presents the Company's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities — available-for-sale Residential mortgage-backed securities	$	—	$	1,418,255	$	3	$	1,418,258
Commercial mortgage-backed securities		—		1,177,252		—		1,177,252
Other asset-backed securities		—		275,415		563,961		839,376
U.S. government-related securities		1,165,188		263,707		—		1,428,895
State, municipalities, and political subdivisions		—		1,684,014		3,675		1,687,689
Other government-related securities		—		20,172		—		20,172
Corporate bonds		132		26,039,963		1,325,683		27,365,778
Total fixed maturity securities — available-for-sale		1,165,320		30,878,778		1,893,322		33,937,420

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Fixed maturity securities — trading Residential mortgage-backed securities	$	—	$	288,114	$	—	$	288,114
Commercial mortgage-backed securities		—		151,111		—		151,111
Other asset-backed securities		—		105,118		169,461		274,579
U.S. government-related securities		245,563		4,898		—		250,461
State, municipalities, and political subdivisions		—		325,446		—		325,446
Other government-related securities		—		57,032		—		57,032
Corporate bonds		—		1,447,333		24,744		1,472,077
Total fixed maturity securities — trading		245,563		2,379,052		194,205		2,818,820
Total fixed maturity securities		1,410,883		33,257,830		2,087,527		36,756,240
Equity securities		590,832		99,267		66,691		756,790
Other long-term investments(1)		119,997		106,079		44,625		270,701
Short-term investments		243,436		3,281		—		246,717
Total investments		2,365,148		33,466,457		2,198,843		38,030,448
Cash		268,286		—		—		268,286
Assets related to separate accounts
Variable annuity		13,157,429		—		—		13,157,429
Variable universal life		834,940		—		—		834,940
Total assets measured at fair value on a recurring basis	$	16,625,803	$	33,466,457	$	2,198,843	$	52,291,103
Liabilities:
Annuity account balances(2)	$	—	$	—	$	97,825	$	97,825
Other liabilities(1)		62,146		61,046		506,343		629,535
Total liabilities measured at fair value on a recurring basis	$	62,146	$	61,046	$	604,168	$	727,360

(1) Includes certain freestanding and embedded derivatives.

(2) Represents liabilities related to fixed indexed annuities.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

The following table presents the Company's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities — available-for-sale Residential mortgage-backed securities	$	—	$	1,445,040	$	28	$	1,445,068
Commercial mortgage-backed securities		—		970,656		—		970,656
Other asset-backed securities		—		326,175		545,808		871,983
U.S. government-related securities		1,211,141		296,749		—		1,507,890
State, municipalities, and political subdivisions		—		1,407,154		3,675		1,410,829
Other government-related securities		—		51,427		—		51,427
Corporate bonds		107		24,198,529		1,549,940		25,748,576
Total fixed maturity securities — available-for-sale		1,211,248		28,695,730		2,099,451		32,006,429
Fixed maturity securities — trading Residential mortgage-backed securities		—		310,877		—		310,877
Commercial mortgage-backed securities		—		158,570		—		158,570
Other asset-backed securities		—		93,278		194,977		288,255
U.S. government-related securities		191,332		4,906		—		196,238
State, municipalities, and political subdivisions		—		260,892		—		260,892
Other government-related securities		—		57,097		—		57,097
Corporate bonds		—		1,497,362		29,199		1,526,561
Total fixed maturity securities — trading		191,332		2,382,982		224,176		2,798,490
Total fixed maturity securities		1,402,580		31,078,712		2,323,627		34,804,919
Equity securities		483,482		50,927		67,979		602,388
Other long-term investments(1)		56,469		54,965		98,886		210,320
Short-term investments		131,422		1,603		—		133,025
Total investments		2,073,953		31,186,207		2,490,492		35,750,652
Cash		345,579		—		—		345,579
Other assets		—		—		—		—
Assets related to separate accounts
Variable annuity		12,791,438		—		—		12,791,438
Variable universal life		783,618		—		—		783,618
Total assets measured at fair value on a recurring basis	$	15,994,588	$	31,186,207	$	2,490,492	$	49,671,287
Liabilities:
Annuity account balances(2)	$	—	$	—	$	107,000	$	107,000
Other liabilities(1)		30,241		191,182		233,738		455,161
Total liabilities measured at fair value on a recurring basis	$	30,241	$	191,182	$	340,738	$	562,161

(1) Includes certain freestanding and embedded derivatives.

(2) Represents liabilities related to fixed indexed annuities.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

Determination of Fair Values

The valuation methodologies used to determine the fair values of assets and liabilities reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Company determines the fair values of certain financial assets and financial liabilities based on quoted market prices, where available. The Company also determines certain fair values based on future cash flows discounted at the appropriate current market rate. Fair values reflect adjustments for counterparty credit quality, the Company's credit standing, liquidity, and where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments as listed in the above table.

The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a "waterfall" approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Third party pricing services price approximately 90% of the Company's available-for-sale and trading fixed maturity securities. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations, which are considered to have no significant unobservable inputs. When using non-binding independent broker quotations, the Company obtains one quote per security, typically from the broker from which we purchased the security. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party pricing service or an independent broker quotation.

The pricing matrix used by the Company begins with current spread levels to determine the market price for the security. The credit spreads, assigned by brokers, incorporate the issuer's credit rating, liquidity discounts, weighted-average of contracted cash flows, risk premium, if warranted, due to the issuer's industry, and the security's time to maturity. The Company uses credit ratings provided by nationally recognized rating agencies.

For securities that are priced via non-binding independent broker quotations, the Company assesses whether prices received from independent brokers represent a reasonable estimate of fair value through an analysis using internal and external cash flow models developed based on spreads and, when available, market indices. The Company uses a market-based cash flow analysis to validate the reasonableness of prices received from independent brokers. These analytics, which are updated daily, incorporate various metrics (yield curves, credit spreads, prepayment rates, etc.) to determine the valuation of such holdings. As a result of this analysis, if the Company determines there is a more

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. The Company did not adjust any quotes or prices received from brokers during the year ended December 31, 2014.

The Company has analyzed the third party pricing services' valuation methodologies and related inputs and has also evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs that is in accordance with the Fair Value Measurements and Disclosures Topic of the ASC. Based on this evaluation and investment class analysis, each price was classified to Level 1, 2, or 3. Most prices provided by third party pricing services are classified into Level 2 because the significant inputs used in pricing the securities are market observable and the observable inputs are corroborated by the Company. Since the matrix pricing of certain debt securities includes significant non-observable inputs, they are classified as Level 3.

Asset-Backed Securities

This category mainly consists of residential mortgage-backed securities, commercial mortgage-backed securities, and other asset-backed securities (collectively referred to as asset-backed securities or "ABS"). As of December 31, 2014, the Company held $3.4 billion of ABS classified as Level 2. These securities are priced from information provided by a third party pricing service and independent broker quotes. The third party pricing services and brokers mainly value securities using both a market and income approach to valuation. As part of this valuation process they consider the following characteristics of the item being measured to be relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, and 7) credit ratings of the securities.

After reviewing these characteristics of the ABS, the third party pricing service and brokers use certain inputs to determine the value of the security. For ABS classified as Level 2, the valuation would consist of predominantly market observable inputs such as, but not limited to: 1) monthly principal and interest payments on the underlying assets, 2) average life of the security, 3) prepayment speeds, 4) credit spreads, 5) treasury and swap yield curves, and 6) discount margin. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

As of December 31, 2014, the Company held $733.4 million of Level 3 ABS, which included $564.0 million of other asset-backed securities classified as available-for-sale and $169.4 million of other asset-backed securities classified as trading. These securities are predominantly ARS whose underlying collateral is at least 97% guaranteed by the FFELP. As a result of the ARS market collapse during 2008, the Company prices its ARS using an income approach valuation model. As part of the valuation process the Company reviews the following characteristics of the ARS in determining the relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, 7) credit ratings of the securities, 8) liquidity premium, and 9) paydown rate.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

Corporate Bonds, U.S. Government-Related Securities, States, Municipals, and Political Subdivisions, and Other Government Related Securities

As of December 31, 2014, the Company classified approximately $29.8 billion of corporate bonds, U.S. government-related securities, states, municipals, and political subdivisions, and other government-related securities as Level 2. The fair value of the Level 2 bonds and securities is predominantly priced by broker quotes and a third party pricing service. The Company has reviewed the valuation techniques of the brokers and third party pricing service and has determined that such techniques used Level 2 market observable inputs. The following characteristics of the bonds and securities are considered to be the primary relevant inputs to the valuation: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) seniority, and 4) credit ratings. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

The brokers and third party pricing service utilize valuation models that consist of a hybrid income and market approach to valuation. The pricing models utilize the following inputs: 1) principal and interest payments, 2) treasury yield curve, 3) credit spreads from new issue and secondary trading markets, 4) dealer quotes with adjustments for issues with early redemption features, 5) liquidity premiums present on private placements, and 6) discount margins from dealers in the new issue market.

As of December 31, 2014, the Company classified approximately $1.4 billion of bonds and securities as Level 3 valuations. Level 3 bonds and securities primarily represent investments in illiquid bonds for which no price is readily available. To determine a price, the Company uses a discounted cash flow model with both observable and unobservable inputs. These inputs are entered into an industry standard pricing model to determine the final price of the security. These inputs include: 1) principal and interest payments, 2) coupon rate, 3) sector and issuer level spread over treasury, 4) underlying collateral, 5) credit ratings, 6) maturity, 7) embedded options, 8) recent new issuance, 9) comparative bond analysis, and 10) an illiquidity premium.

Equities

As of December 31, 2014, the Company held approximately $166.0 million of equity securities classified as Level 2 and Level 3. Of this total, $66.0 million represents Federal Home Loan Bank ("FHLB") stock. The Company believes that the cost of the FHLB stock approximates fair value. The remainder of these equity securities is primarily investments in preferred stock.

Other Long-Term Investments and Other Liabilities

Other long-term investments and other liabilities consist entirely of free-standing and embedded derivative financial instruments. Refer to Note 23, Derivative Financial Instruments for additional information related to derivatives. Derivative financial instruments are valued using exchange prices, independent broker quotations, or pricing valuation models, which utilize market data inputs. Excluding embedded derivatives, as of December 31, 2014, 78.8% of derivatives based upon notional values were priced using exchange prices or independent broker quotations. The remaining derivatives were priced by pricing valuation models, which predominantly utilize observable market data inputs. Inputs used to value derivatives include, but are not limited to, interest swap rates, credit spreads, interest rate

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

and equity market volatility indices, equity index levels, and treasury rates. The Company performs monthly analysis on derivative valuations that includes both quantitative and qualitative analyses.

Derivative instruments classified as Level 1 generally include futures and options, which are traded on active exchange markets.

Derivative instruments classified as Level 2 primarily include interest rate and inflation swaps, options, and swaptions. These derivative valuations are determined using independent broker quotations, which are corroborated with observable market inputs.

Derivative instruments classified as Level 3 were embedded derivatives and include at least one significant non-observable input. A derivative instrument containing Level 1 and Level 2 inputs will be classified as a Level 3 financial instrument in its entirety if it has at least one significant Level 3 input.

The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instruments may not be classified within the same fair value hierarchy level as the associated assets and liabilities. Therefore, the changes in fair value on derivatives reported in Level 3 may not reflect the offsetting impact of the changes in fair value of the associated assets and liabilities.

The embedded derivatives are carried at fair value in "other long-term investments" and "other liabilities" on the Company's consolidated balance sheet. The changes in fair value are recorded in earnings as "Realized investment gains (losses) — Derivative financial instruments". Refer to Note 23, Derivative Financial Instruments for more information related to each embedded derivatives gains and losses.

The fair value of the GMWB embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using multiple risk neutral stochastic equity scenarios and policyholder behavior assumptions. The risk neutral scenarios are generated using the current swap curve and projected equity volatilities and correlations. The projected equity volatilities are based on a blend of historical volatility and near-term equity market implied volatilities. The equity correlations are based on historical price observations. For policyholder behavior assumptions, expected lapse and utilization assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, with attained age factors varying from 44.5% — 100%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR plus a credit spread (to represent the Company's non-performance risk). As a result of using significant unobservable inputs, the GMWB embedded derivative is categorized as Level 3. These assumptions are reviewed on a quarterly basis.

The balance of the FIA embedded derivative is impacted by policyholder cash flows associated with the FIA product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the FIA embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the 1994 Variable Annuity MGDB mortality table modified for

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

company experience, with attained age factors varying from 49% — 80%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company's non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the FIA embedded derivative is categorized as Level 3.

The balance of the indexed universal life ("IUL") embedded derivative is impacted by policyholder cash flows associated with the IUL product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the IUL embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the SOA 2008 VBT Primary Tables modified for company experience, with attained age factors varying from 37% — 74%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company's non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the IUL embedded derivative is categorized as Level 3.

The Company has assumed and ceded certain blocks of policies under modified coinsurance agreements in which the investment results of the underlying portfolios inure directly to the reinsurers. As a result, these agreements contain embedded derivatives that are reported at fair value. Changes in their fair value are reported in earnings. The investments supporting these agreements are designated as "trading securities"; therefore changes in their fair value are also reported in earnings. The fair value of the embedded derivative is the difference between the statutory policy liabilities (net of policy loans) of $2.5 billion and the fair value of the trading securities of $2.8 billion. As a result, changes in the fair value of the embedded derivatives are largely offset by the changes in fair value of the related investments and each are reported in earnings. The fair value of the embedded derivative is considered a Level 3 valuation due to the unobservable nature of the policy liabilities.

Certain of the Company's subsidiaries have entered into interest support, a yearly renewable term ("YRT") premium support, and portfolio maintenance agreements with PLC. These agreements meet the definition of a derivative and are accounted for at fair value and are considered Level 3 valuations. The fair value of these derivatives as of December 31, 2014 was $6.1 million and is included in Other long-term investments . For information regarding realized gains on these derivatives please refer to Note 23, Derivative Financial Instruments .

The Interest Support Agreement provides that PLC will make payments to Golden Gate II if actual investment income on certain of Golden Gate II's asset portfolios falls below a calculated investment income amount as defined in the Interest Support Agreement. The calculated investment income amount is a level of investment income deemed to be sufficient to support certain of Golden Gate II's obligations under a reinsurance agreement with the Company, dated July 1, 2007. The derivative is valued using an internal valuation model that assumes a conservative projection of investment income under an adverse interest rate scenario and the probability that the expectation falls below the calculated investment income amount. This derivative had a fair value of $4.2 million as of December 31, 2014. The

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

assessment of required payments from PLC under the Interest Support Agreement occurs annually. As of December 31, 2014, no payments have been triggered under this agreement.

The YRT Premium support agreement provides that PLC will make payments to Golden Gate II in the event that YRT premium rates increase. The derivative is valued using an internal valuation model. The valuation model is a probability weighted discounted cash flow model. The value is primarily a function of the likelihood and severity of future YRT premium increases. The fair value of this derivative as of December 31, 2014 was $1.7 million. As of December 31, 2014, no payments have been triggered under this agreement.

The portfolio maintenance agreements provide that PLC will make payments to Golden Gate V and WCL in the event of other-than-temporary impairments on investments that exceed defined thresholds. The derivatives are valued using an internal discounted cash flow model. The significant unobservable inputs are the projected probability and severity of credit losses used to project future cash flows on the investment portfolios. The fair value of the portfolio maintenance agreements as of December 31, 2014, was approximately $0.1 million. As of December 31, 2014, no payments have been triggered under this agreement.

The Funds Withheld derivative results from a reinsurance agreement with Shades Creek where the economic performance of certain hedging instruments held by the Company is ceded to Shades Creek. The value of the Funds Withheld derivative is directly tied to the value of the hedging instruments held in the funds withheld account. The hedging instruments predominantly consist of derivative instruments the fair values of which are classified as a Level 2 measurement; as such, the fair value of the Funds Withheld derivative has been classified as a Level 2 measurement. The fair value of the Funds Withheld derivative as of December 31, 2014, was a liability of $57.3 million.

Annuity Account Balances

The Company records certain of its FIA reserves at fair value. The fair value is considered a Level 3 valuation. The FIA valuation model calculates the present value of future benefit cash flows less the projected future profits to quantify the net liability that is held as a reserve. This calculation is done using multiple risk neutral stochastic equity scenarios. The cash flows are discounted using LIBOR plus a credit spread. Best estimate assumptions are used for partial withdrawals, lapses, expenses and asset earned rate with a risk margin applied to each. These assumptions are reviewed at least annually as a part of the formal unlocking process. If an event were to occur within a quarter that would make the assumptions unreasonable, the assumptions would be reviewed within the quarter.

The discount rate for the fixed indexed annuities is based on an upward sloping rate curve which is updated each quarter. The discount rates for December 31, 2014, ranged from a one month rate of 0.30%, a 5 year rate of 2.37%, and a 30 year rate of 3.67%. A credit spread component is also included in the calculation to accommodate non-performance risk.

Separate Accounts

Separate account assets are invested in open-ended mutual funds and are included in Level 1.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

Valuation of Level 3 Financial Instruments

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

Fair Value
As of
December 31,
2014

Valuation
Technique

Unobservable
Input

Range
(Weighted Average)

(Dollars In
Thousands)

Assets:

Other asset-backed
securities

$ 563,752

Discounted cash flow

Liquidity premium
Paydown rate

0.39 % - 1.49% (0.69%)
9.70 % - 15.80%
(12.08 %)

Corporate bonds

1,282,864

Discounted cash flow

Spread over
treasury

0.33 % - 7.50% (2.19%)

Liabilities:

Embedded
derivatives —
GMWB(1)

$ 25,927

Actuarial cash flow
model

Mortality
Lapse

44.5 % to 100% of 1994
MGDB
table 0.25% - 17%, depending on
product/duration/funded
status of guarantee

Utilization

97 % - 101%

Nonperformance
risk

0.12 % - 0.96%

Annuity account
balances(2)

97,825

Actuarial cash flow
model

Asset earned rate

3.86 % - 5.92%

Expenses

$ 88 - $102 per policy

Withdrawal rate

2.20 %

Mortality
Lapse

49 % to 80% of 1994
MGDB
table 2.2% - 33.0%, depending on
duration/surrender
charge period

Return on assets

1.50 % - 1.85%
depending on surrender
charge period

Nonperformance
risk

0.12 % - 0.96%

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

Fair Value
As of
December 31,
2014

Valuation
Technique

Unobservable
Input

Range
(Weighted Average)

(Dollars In
Thousands)

Embedded
derivative — FIA

$ 124,465

Actuarial cash flow
model

Expenses

$ 83 - $97 per policy

Withdrawal rate

1.1 % - 4.5% depending
on duration and tax
qualification

Mortality
Lapse

49 % - 80% of 1994
MGDB
table 2.5% - 40.0%, depending on
duration/surrender
charge period

Nonperformance
risk

0.12 % - 0.96%

Embedded
derivative — IUL

6,691

Actuarial cash flow
model

Mortality
Lapse

37 % - 74% of 2008 VBT
Primary Tables
0.5% - 10.0%, depending on
duration/distribution
channel and smoking
class

Nonperformance
risk

0.12 % - 0.96%

(1) The fair value for the GMWB embedded derivative is presented as a net liability. Excludes modified coinsurance agreements.

(2) Represents liabilities related to fixed indexed annuities.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and those which book value approximates fair value.

The Company has considered all reasonably available quantitative inputs as of December 31, 2014, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $237.2 million of financial instruments being classified as Level 3 as of December 31, 2014. Of the $237.2 million, $169.7 million are other asset-backed securities and $67.5 million are corporate bonds.

In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2014, the Company held $70.4 million of financial instruments where book value approximates fair value. Of the $70.4 million, $66.7 million represents equity securities, which are predominantly FHLB stock, and $3.7 million of other fixed maturity securities.

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

Fair Value
As of
December 31,
2013

Valuation
Technique

Unobservable
Input

Range
(Weighted Average)

(Dollars In
Thousands)

Assets:

Other asset-backed
securities

$ 545,808

Discounted cash flow

Liquidity premium
Paydown rate

1.00 % - 1.68%% (1.08%)
8.57 % - 16.87%
(12.05 %)

Corporate bonds

1,555,898

Discounted cash flow

Spread over
treasury

0.11 % - 6.75% (2.06%)

Embedded
derivatives —
GMWB(1)

93,939

Actuarial cash flow
model

Mortality
Lapse

49 % to 80% of 1994
MGDB table 0% - 24%,
depending on
product/duration/funded
status of guarantee

Utilization

97 % - 103%

Nonperformance
risk

0.15 % - 1.06%

Liabilities:

Annuity account
balances(2)

$ 107,000

Actuarial cash flow
model

Asset earned rate

5.37 %

Expenses

$ 88 - $102 per policy

Withdrawal rate

2.20 %

Mortality
Lapse

49 % to 80% of 1994
MGDB
table 2.2% - 33.0%, depending on
duration/surrender
charge period

Return on assets

1.50 % - 1.85%
depending on surrender
charge period

Nonperformance
risk

0.15 % - 1.06%

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

Fair Value
As of
December 31,
2013

Valuation
Technique

Unobservable
Input

Range
(Weighted Average)

(Dollars In
Thousands)

Embedded
derivative — FIA

$ 25,324

Actuarial cash flow
model

Expenses

$ 83 - $97 per policy

Withdrawal rate

1.1 % to 4.5% depending
on duration and tax
qualification

Mortality
Lapse

49 % to 80% of 1994
MGDB
table 2.5% - 40.0%, depending on
duration/surrender
charge period

Nonperformance
risk

0.15 % - 1.06%

(1) The fair value for the GMWB embedded derivative is presented as a net asset. Excludes modified coinsurance arrangements.

(2) Represents liabilities related to fixed indexed annuities.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and those which book value approximates fair value.

The Company has considered all reasonably available quantitative inputs as of December 31, 2013, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $216.0 million of financial instruments being classified as Level 3 as of December 31, 2013. Of the $216.0 million, $195.0 million are other asset backed securities and $21.0 million are corporate bonds.

In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2013, the Company held $73.9 million of financial instruments where book value approximates fair value. Of the $73.9 million, $68.0 million represents equity securities, which are predominantly FHLB stock, and $3.7 million of other fixed maturity securities, and $2.2 million of other corporate bonds.

The asset-backed securities classified as Level 3 are predominantly ARS. A change in the paydown rate (the projected annual rate of principal reduction) of the ARS can significantly impact the fair value of these securities. A decrease in the paydown rate would increase the projected weighted average life of the ARS and increase the sensitivity of the ARS' fair value to changes in interest rates. An increase in the liquidity premium would result in a decrease in the fair value of the securities, while a decrease in the liquidity premium would increase the fair value of these securities.

The fair value of corporate bonds classified as Level 3 is sensitive to changes in the interest rate spread over the corresponding U.S. Treasury rate. This spread represents a risk premium that is impacted by company specific and market factors. An increase in the spread can be caused by a

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PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

perceived increase in credit risk of a specific issuer and/or an increase in the overall market risk premium associated with similar securities. The fair values of corporate bonds are sensitive to changes in spread. When holding the treasury rate constant, the fair value of corporate bonds increases when spreads decrease, and decreases when spreads increases.

The fair value of the GMWB embedded derivative is sensitive to changes in the discount rate which includes the Company's nonperformance risk, volatility, lapse, and mortality assumptions. The volatility assumption is an observable input as it is based on market inputs. The Company's nonperformance risk, lapse, and mortality are unobservable. An increase in the three unobservable assumptions would result in a decrease in the fair value and conversely, if there is a decrease in the assumptions the fair value would increase. The fair value is also dependent on the assumed policyholder utilization of the GMWB where an increase in assumed utilization would result in an increase in the liability and conversely, if there is a decrease in the assumption, the liability would decrease.

The fair value of the FIA account balance liability is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The fair value of the IUL embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the IUL embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

F-149

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2014, for which the Company has used significant unobservable inputs (Level 3):

			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	28	$	—	$	—	$	—		$	(1	)
Commercial mortgage-backed securities		—		—		—		—			—
Other asset-backed securities		545,808		—		36,395		(248	)		(8,033	)
U.S. government-related securities		—		—		—		—			—
States, municipals, and political subdivisions		3,675		—		—		—			—
Other government-related securities		—		—		—		—			—
Corporate bonds		1,549,940		1,183		67,955		(2	)		(33,553	)
Total fixed maturity securities — available-for-sale		2,099,451		1,183		104,350		(250	)		(41,587	)
Fixed maturity securities — trading
Residential mortgage-backed securities		—		11		—		—			—
Commercial mortgage-backed securities		—		—		—		—			—
Other asset-backed securities		194,977		9,507		—		(5,508	)		—
U.S. government-related securities		—		—		—		—			—
States, municipals and political subdivisions		—		—		—		—			—
Other government-related securities		—		—		—		—			—
Corporate bonds		29,199		1,294		—		(1,098	)		—
Total fixed maturity securities — trading		224,176		10,812		—		(6,606	)		—
Total fixed maturity securities		2,323,627		11,995		104,350		(6,856	)		(41,587	)
Equity securities				67,979		—		1,192			—
Other long-term investments(1)		98,886		4,979		—		(59,240	)		—
Short-term investments		—		—		—		—			—
Total investments		2,490,492		16,974		105,542		(66,096	)		(41,848	)
Total assets measured at fair value on a recurring basis	$	2,490,492	$	16,974	$	105,542	$	(66,096	)	$	(41,848	)
Liabilities:
Annuity account balances(2)	$	107,000	$	—	$	—	$	(4,307	)	$	—
Other liabilities(1)		233,738		22,547		—		(295,152	)		—
Total liabilities measured at fair value on a recurring basis	$	340,738	$	22,547	$	—	$	(299,459	)	$	—

(1) Represents certain freestanding and embedded derivatives.

(2) Represents liabilities related to fixed indexed annuities.

For the year ended December 31, 2014, $31.0 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of December 31, 2014.

F-150

																				Total Gains (losses) included in Earnings related to
	Purchases			Sales			Issuances			Settlements		Transfers in/out of Level 3			Other			Ending Balance		Instruments still held at the Reporting Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	—		$	(24	)	$	—		$	—	$	—		$	—		$	3	$	—
Commercial mortgage-backed securities		—			—			—			—		—			—			—		—
Other asset-backed securities		—			(10,064	)		—			—		—			103			563,961		—
U.S. government-related securities		—			—			—			—		—			—			—		—
States, municipals, and political subdivisions		—			—			—			—		—			—			3,675		—
Other government-related securities		—			—			—			—		—			—			—		—
Corporate bonds		139,029			(226,073	)		—			—		(162,236	)		(10,560	)		1,325,683		—
Total fixed maturity securities — available-for-sale		139,029			(236,161	)		—			—		(162,236	)		(10,457	)		1,893,322		—
Fixed maturity securities — trading
Residential mortgage-backed securities		842			—			—			—		(853	)		—			—		—
Commercial mortgage-backed securities		—			—			—			—		—			—			—		—
Other asset-backed securities		—			(30,462	)		—			—		—			947			169,461		1,083
U.S. government-related securities		—			—			—			—		—			—			—		—
States, municipals and political subdivisions		—			—			—			—		—			—			—		—
Other government-related securities		—			—			—			—		—			—			—		—
Corporate bonds		5,839			(10,770	)		—			—		4			276			24,744		(121	)
Total fixed maturity securities — trading		6,681			(41,232	)		—			—		(849	)		1,223			194,205		962
Total fixed maturity securities		145,710			(277,393	)		—			—		(163,085	)		(9,234	)		2,087,527		962
Equity securities		(261	)		9,551			(1,119	)		—		—			(10,651	)		66,691		—
Other long-term investments(1)		—			—			—			—		—			—			44,625		(54,261	)
Short-term investments		—			—			—			—		—			—			—		—
Total investments		155,261			(278,512	)		—			—		(173,736	)		(9,234	)		2,198,843		(53,299	)
Total assets measured at fair value on a recurring basis	$	155,261		$	(278,512	)	$	—		$	—	$	(173,736	)	$	(9,234	)	$	2,198,843	$	(53,299	)
Liabilities:
Annuity account balances(2)	$	—		$	—		$	685		$	14,167	$	—		$	—		$	97,825	$	—
Other liabilities(1)		—			—			—			—		—			—			506,343		(272,605	)
Total liabilities measured at fair value on a recurring basis	$	—		$	—		$	685		$	14,167	$	—		$	—		$	604,168	$	(272,605	)

For the year ended December 31, 2014, $204.7 million of securities were transferred out of Level 3. This amount was transferred to Level 2. These transfers resulted from securities that were previously valued using an internal model that utilized significant unobservable inputs but were valued internally or by independent pricing services or brokers, utilizing no significant unobservable inputs. All transfers are recognized as of the end of the reporting period.

For the year ended December 31, 2014, there were no transfers from Level 2 to Level 1.

For the year ended December 31, 2014, there were no transfers from Level 1.

F-151

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2013, for which the Company has used significant unobservable inputs (Level 3):

			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	4	$	—	$	1,310	$	—		$	(338	)
Commercial mortgage-backed securities				—		—		—			—
Other asset-backed securities				596,143		—		44,620			(58,937	)
U.S. government-related securities		—		—		—		—			—
States, municipals, and political subdivisions		4,275		—		—		—			—
Other government-related securities		20,011		—		2		—			(3	)
Corporate bonds		167,892		116		8,310		—			(20,118	)
Total fixed maturity securities — available-for-sale		788,325		116		54,242		—			(79,396	)
Fixed maturity securities — trading		—		—		—		(1	)		—
Residential mortgage-backed securities
Commercial mortgage-backed securities		—		—		—		—			—
Other asset-backed securities		70,535		8,785		—		(5,947	)		—
U.S. government-related securities		—		—		—		—			—
States, municipals and political subdivisions		—		—		—		(123	)		—
Other government-related securities		—		—		—		—			—
Corporate bonds		115		1		—		(102	)		—
Total fixed maturity securities — trading		70,650		8,786		—		(6,173	)		—
Total fixed maturity securities		858,975		8,902		54,242		(6,173	)		(79,396	)
Equity securities				65,527		—		—			—
Other long-term investments(1)		48,655		100,441		—		(16,117	)		—
Short-term investments		—		—		—		—			—
Total investments		973,157		109,343		54,242		(22,290	)		(79,396	)
Total assets measured at fair value on a recurring basis	$	973,157	$	109,343	$	54,242	$	(22,290	)	$	(79,396	)
Liabilities:
Annuity account balances(2)	$	129,468	$	—	$	—	$	(8,029	)	$	—
Other liabilities(1)		611,437		295,910		—		(52,716	)		—
Total liabilities measured at fair value on a recurring basis	$	740,905	$	295,910	$	—	$	(60,745	)	$	—

(1) Represents certain freestanding and embedded derivatives.

(2) Represents liabilities related to fixed indexed annuities.

For the year ended December 31, 2013, $771.6 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of December 31, 2013.

F-152

																		Total Gains (losses) included in Earnings related to
	Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance		Instruments still held at the Reporting Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	14,349	$	(23	)	$	—	$	—	$	(15,287	)	$	13		$	28	$	—
Commercial mortgage-backed securities		—		—			—		—		—						—		—
Other asset-backed securities		24,931		(62,760	)		—		—		1,227			584			545,808		—
U.S. government-related securities		—		—			—		—		—			—			—		—
States, municipals, and political subdivisions		—		(600	)		—		—		—			—			3,675		—
Other government-related securities		—		(20,000	)		—		—		—			(10	)		—		—
Corporate bonds		736,012		(67,431	)		—		—		726,760			(1,601	)		1,549,940		—
Total fixed maturity securities — available-for-sale		775,292		(150,814	)		—		—		712,700			(1,014	)		2,099,451		—
Fixed maturity securities — trading		1,582		(72	)		—		—		(1,494	)		(15	)		—		—
Residential mortgage-backed securities
Commercial mortgage-backed securities		—		—			—		—		—			—			—		—
Other asset-backed securities		147,224		(29,344	)		—		—		2,210			1,514			194,977		3,588
U.S. government-related securities		—		—			—		—		—						—		—
States, municipals and political subdivisions		3,500		—			—		—		(3,377	)		—			—		—
Other government-related securities		—		—			—		—		—			—			—		—
Corporate bonds		4,880		(17	)		—		—		24,312			10			29,199		(5	)
Total fixed maturity securities — trading		157,186		(29,433	)		—		—		21,651			1,509			224,176		3,583
Total fixed maturity securities		932,478		(180,247	)		—		—		734,351			495			2,323,627		3,583
Equity securities		—		2,452			—		—		—			—			67,979		—
Other long-term investments(1)		—		—			—		—		—			(34,093	)		98,886		84,324
Short-term investments		—		—			—		—		—			—			—		—
Total investments		934,930		(180,247	)		—		—		734,351			(33,598	)		2,490,492		87,907
Total assets measured at fair value on a recurring basis	$	934,930	$	(180,247	)	$	—	$	—	$	734,351		$	(33,598	)	$	2,490,492	$	87,907
Liabilities:
Annuity account balances(2)	$	—	$	—		$	406	$	30,903	$	—		$	—		$	107,000	$	—
Other liabilities(1)		—		—			—		—		—			134,505			233,738		242,411
Total liabilities measured at fair value on a recurring basis	$	—	$	—		$	406	$	30,903	$	—		$	134,505		$	340,738	$	242,411

For the year ended December 31, 2013, $37.2 million of securities were transferred out of Level 3. This amount was transferred into Level 2. These transfers resulted from securities that were previously valued using an internal model that utilized significant unobservable inputs but were valued internally or by independent pricing services or brokers, utilizing no significant unobservable inputs. All transfers are recognized as of the end of the reporting period.

For the year ended December 31, 2013, there were no transfers from Level 2 to Level 1.

For the year ended December 31, 2013, there were no transfers from Level 1.

F-153

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

Total realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either realized investment gains (losses) within the consolidated statements of income (loss) or other comprehensive income (loss) within shareowners' equity based on the appropriate accounting treatment for the item.

Purchases, sales, issuances, and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily relates to purchases and sales of fixed maturity securities and issuances and settlements of fixed indexed annuities.

The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. The asset transfers in the table(s) above primarily related to positions moved from Level 3 to Level 2 as the Company determined that certain inputs were observable.

The amount of total gains (losses) for assets and liabilities still held as of the reporting date primarily represents changes in fair value of trading securities and certain derivatives that exist as of the reporting date and the change in fair value of fixed indexed annuities.

Estimated Fair Value of Financial Instruments

The carrying amounts and estimated fair values of the Company's financial instruments as of the periods shown below are as follows:

			As of December 31,
			2014				2013
	Fair Value Level		Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
	(Dollars In Thousands)
Assets:
Mortgage loans on real estate		3	$	5,133,780	$	5,524,059	$	5,493,492	$	5,956,133
Policy loans		3		1,758,237		1,758,237		1,815,744		1,815,744
Fixed maturities, held-to-maturity(1)		3		435,000		458,422		365,000		335,676
Liabilities:
Stable value product account balances		3	$	1,959,488	$	1,973,624	$	2,559,552	$	2,566,209
Annuity account balances		3		10,950,729		10,491,775		11,125,253		10,639,637
Debt:
Non-recourse funding obligations(2)		3	$	1,527,752	$	1,753,183	$	1,495,448	$	1,272,425

Except as noted below, fair values were estimated using quoted market prices.

(1) Security purchased from unconsolidated subsidiary, Red Mountain LLC.

(2) Of this carrying amount $435.0 million, fair value of $461.4 million, as of December 31, 2014, and $365.0 million, fair value of $321.5 million, as of December 31, 2013, relates to non-recourse funding obligations issued by Golden Gate V.

F-154

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)

Fair Value Measurements

Mortgage Loans on Real Estate

The Company estimates the fair value of mortgage loans using an internally developed model. This model includes inputs derived by the Company based on assumed discount rates relative to the Company's current mortgage loan lending rate and an expected cash flow analysis based on a review of the mortgage loan terms. The model also contains the Company's determined representative risk adjustment assumptions related to credit and liquidity risks.

Policy Loans

The Company believes the fair value of policy loans approximates book value. Policy loans are funds provided to policy holders in return for a claim on the policy. The funds provided are limited to the cash surrender value of the underlying policy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of repayments, the Company believes the fair value of policy loans approximates carrying value.

Fixed Maturities, Held-to-Maturity

The Company estimates the fair value of its fixed maturity, held-to-maturity using internal discounted cash flow models. The discount rates used in the model were based on a current market yield for similar financial instruments.

Stable Value Product and Annuity Account Balances

The Company estimates the fair value of stable value product account balances and annuity account balances using models based on discounted expected cash flows. The discount rates used in the models were based on a current market rate for similar financial instruments.

Non-Recourse Funding Obligations

The Company estimates the fair value of its non-recourse funding obligations using internal discounted cash flow models. The discount rates used in the model were based on a current market yield for similar financial instruments.

23. DERIVATIVE FINANCIAL INSTRUMENTS

Types of Derivative Instruments and Derivative Strategies

The Company utilizes a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to certain risks, including but not limited to, interest rate risk, inflation risk, currency exchange risk, volatility risk, and equity market risk. These strategies are developed through the Company's analysis of data from financial simulation models and other internal and industry sources, and are then incorporated into the Company's risk management program.

F-155

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)

Derivative instruments expose the Company to credit and market risk and could result in material changes from period to period. The Company attempts to minimize its credit risk by entering into transactions with highly rated counterparties. The Company manages the market risk by establishing and monitoring limits as to the types and degrees of risk that may be undertaken. The Company monitors its use of derivatives in connection with its overall asset/liability management programs and risk management strategies. In addition, all derivative programs are monitored by our risk management department.

Derivatives Related to Interest Rate Risk Management

Derivative instruments that are used as part of the Company's interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps, and interest rate swaptions. The Company's inflation risk management strategy involves the use of swaps that requires the Company to pay a fixed rate and receive a floating rate that is based on changes in the Consumer Price Index ("CPI").

Derivatives Related to Risk Mitigation of Variable Annuity Contracts

The Company may use the following types of derivative contracts to mitigate its exposure to certain guaranteed benefits related to VA contracts and fixed indexed annuities:

• Foreign Currency Futures

• Variance Swaps

• Interest Rate Futures

• Equity Options

• Equity Futures

• Credit Derivatives

• Interest Rate Swaps

• Interest Rate Swaptions

• Volatility Futures

• Volatility Options

• Funds Withheld Agreement

• Total Return Swaps

Other Derivatives

The Company and certain of its subsidiaries have derivatives with PLC. These derivatives consist of an interest support agreement, a YRT premium support agreement, and portfolio maintenance agreements with PLC.

The Company has a funds withheld account that consists of various derivative instruments held by us that is used to hedge the GMWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

F-156

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)

Accounting for Derivative Instruments

The Company records its derivative financial instruments in the consolidated condensed balance sheet in "other long-term investments" and "other liabilities" in accordance with GAAP, which requires that all derivative instruments be recognized in the balance sheet at fair value. The change in the fair value of derivative financial instruments is reported either in the statement of income or in other comprehensive income (loss), depending upon whether it qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists.

For a derivative financial instrument to be accounted for as an accounting hedge, it must be identified and documented as such on the date of designation. For cash flow hedges, the effective portion of their realized gain or loss is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged item impacts earnings. Any remaining gain or loss, the ineffective portion, is recognized in current earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain attributable to the hedged risk of the hedged item is recognized in current earnings. Effectiveness of the Company's hedge relationships is assessed on a quarterly basis.

The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship through earnings in the period of change. Changes in the fair value of derivatives that are recognized in current earnings are reported in "Realized investment gains (losses) — Derivative financial instruments".

Derivative Instruments Designated and Qualifying as Hedging Instruments

Cash-Flow Hedges

• In connection with the issuance of inflation-adjusted funding agreements, the Company has entered into swaps to essentially convert the floating CPI-linked interest rate on these agreements to a fixed rate. The Company pays a fixed rate on the swap and receives a floating rate primarily determined by the period's change in the CPI. The amounts that are received on the swaps are almost equal to the amounts that are paid on the agreements.

Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments

The Company uses various other derivative instruments for risk management purposes that do not qualify for hedge accounting treatment. Changes in the fair value of these derivatives are recognized in earnings during the period of change.

Derivatives Related to Variable Annuity Contracts

• The Company uses equity, interest rate, currency, and volatility futures to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products. In general, the cost of such benefits varies with the level of equity and interest rate markets, foreign currency levels, and overall volatility. No volatility future positions were held as of December 31, 2014.

• The Company uses equity options, volatility swaps, and volatility options to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products. In general, the cost of such benefits varies with the level of equity markets and overall volatility. No volatility option positions were held as of December 31, 2014.

F-157

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)

• The Company uses interest rate swaps and interest rate swaptions to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products.

• The Company markets certain VA products with a GMWB rider. The GMWB component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.

• The Company has a funds withheld account that consists of various derivative instruments held by the Company that are used to hedge the GMWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

Derivatives Related to Fixed Annuity Contracts

• The Company uses equity and volatility futures to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity and overall volatility.

• The Company uses equity options to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity markets.

• The Company markets certain fixed indexed annuity products. The FIA component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.

Derivatives Related to Indexed Universal Life Contracts

• The Company uses equity futures and options to mitigate the risk within its IUL contracts. In general, the cost of such benefits varies with the level of equity markets.

• The Company markets certain IUL products. The IUL component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.

Other Derivatives

• The Company uses certain interest rate swaps to mitigate the price volatility of fixed maturities. None of these positions were held as of December 31, 2014.

• The Company and certain of its subsidiaries have an interest support agreement, YRT premium support agreement, and two portfolio maintenance agreements with PLC.

• The Company uses various swaps and other types of derivatives to manage risk related to other exposures.

• The Company is involved in various modified coinsurance which contain embedded derivatives. Changes in their fair value are recorded in current period earnings. The investment portfolios that support the related modified coinsurance reserves had fair value changes which substantially offset the gains or losses on these embedded derivatives.

F-158

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)

The following table sets forth realized investments gains and losses for the periods shown:

Realized investment gains (losses) — derivative financial instruments

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Thousands)
Derivatives related to variable annuity contracts:
Interest rate futures — VA	$	27,801		$	(31,216	)	$	21,138
Equity futures — VA		(26,104	)		(52,640	)		(50,797	)
Currency futures — VA		14,433			(469	)		(2,763	)
Volatility futures — VA		—			—			(132	)
Variance swaps — VA		(744	)		(11,310	)		(11,792	)
Equity options — VA		(41,216	)		(95,022	)		(37,370	)
Volatility options — VA		—			(115	)		—
Interest rate swaptions — VA		(22,280	)		1,575			(2,260	)
Interest rate swaps — VA		214,164			(157,408	)		3,264
Embedded derivative — GMWB		(119,844	)		162,737			(22,120	)
Funds withheld derivative		47,792			71,862			—
Total derivatives related to variable annuity contracts		94,002			(112,006	)		(102,832	)
Derivatives related to FIA contracts:
Embedded derivative — FIA		(16,932	)		(942	)		—
Equity futures — FIA		870			173			—
Volatility futures — FIA		20			(5	)		—
Equity options — FIA		9,906			1,866			—
Total derivatives related to FIA contracts		(6,136	)		1,092			—
Derivatives related to IUL contracts:
Embedded derivative- IUL		(8	)		—			—
Equity futures — IUL		15			—			—
Equity options — IUL		150			—			—
Total derivatives related to IUL contracts		157			—			—
Embedded derivative — Modco reinsurance treaties		(105,276	)		205,176			(132,816	)
Interest rate swaps		—			2,985			(87	)
Interest rate caps		—			—			(2,666	)
Derivatives with PLC(1)		4,085			(15,072	)		10,664
Other derivatives		(324	)		(14	)		(79	)
Total realized gains (losses) — derivatives	$	(13,492	)	$	82,161		$	(227,816	)

(1) These derivatives include an interest support, YRT premium support, and portfolio maintenance agreements between certain of the Company's subsidiaries and PLC.

F-159

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)

The following table sets forth realized investments gains and losses for the Modco trading portfolio that is included in realized investment gains (losses) — all other investments:

Realized investment gains (losses) — all other investments

	For The Year Ended December 31,
	2014		2013			2012
	(Dollars In Thousands)
Modco trading portfolio(1)	$	142,016	$	(178,134	)	$	177,986

(1) The Company elected to include the use of alternate disclosures for trading activities.

The following tables present the components of the gain or loss on derivatives that qualify as a cash flow hedging relationship:

Gain (Loss) on Derivatives in Cash Flow Relationship

	Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives			Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)			Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives
	(Effective Portion)			(Effective Portion)			(Ineffective Portion)
				Benefits and settlement expenses			Realized investment gains (losses)
	(Dollars In Thousands)
For The Year Ended December 31, 2014
Inflation	$	(4	)	$	(1,777	)	$	(223	)
Total	$	(4	)	$	(1,777	)	$	(223	)
For The Year Ended December 31, 2013
Inflation	$	1,130		$	(2,349	)	$	(190	)
Total	$	1,130		$	(2,349	)	$	(190	)

F-160

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)

The table below presents information about the nature and accounting treatment of the Company's primary derivative financial instruments and the location in and effect on the consolidated financial statements for the periods presented below:

	As of December 31,
	2014				2013
	Notional Amount		Fair Value		Notional Amount		Fair Value
	(Dollars In Thousands)
Other long-term investments
Derivatives not designated as hedging instruments:
Interest rate swaps	$	1,550,000	$	50,743	$	200,000	$	1,961
Derivatives with PLC(1)		1,497,010		6,077		1,464,164		1,993
Embedded derivative — Modco reinsurance treaties		25,760		1,051		80,376		1,517
Embedded derivative — GMWB		1,302,895		37,497		1,921,443		95,376
Interest rate futures		27,977		938
Equity futures		26,483		427		3,387		111
Currency futures		197,648		2,384		14,338		321
Equity options		1,921,167		163,212		1,376,205		78,277
Interest rate swaptions		625,000		8,012		625,000		30,291
Other		242		360		425		473
	$	7,174,182	$	270,701	$	5,685,338	$	210,320
Other liabilities
Cash flow hedges:
Inflation	$	40,469	$	142	$	182,965	$	1,865
Derivatives not designated as hedging instruments:
Interest rate swaps		275,000		3,599		1,230,000		153,322
Variance swaps		—		—		1,500		1,744
Embedded derivative — Modco reinsurance treaties		2,562,848		311,727		2,578,590		206,918
Funds withheld derivative		1,233,424		57,305		991,568		34,251
Embedded derivative — GMWB		1,702,899		63,460		104,180		1,496
Embedded derivative — FIA		749,933		124,465		244,424		25,324
Embedded derivative — IUL		12,019		6,691		—		—
Interest rate futures		—		—		322,902		5,221
Equity futures		385,256		15,069		164,595		6,595
Currency futures		—		—		118,008		840
Equity options		699,295		47,077		257,065		17,558
Other		—		—		230		27
	$	7,661,143	$	629,535	$	6,196,027	$	455,161

(1) These derivatives include an interest support, YRT premium support, and portfolio maintenance agreements between certain of the Company's subsidiaries and PLC.

Based on the expected cash flows of the underlying hedged items, the Company expects to reclassify $0.1 million out of accumulated other comprehensive income (loss) into earnings during the next twelve months.

24. OFFSETTING OF ASSETS AND LIABILITIES

Certain of the Company's derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Company and a counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements associated with each master netting arrangement provide that the Company will receive or pledge financial collateral in the event either minimum thresholds, or in certain cases ratings

F-161

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)

levels, have been reached. Additionally, certain of the Company's repurchase agreements provide for net settlement on termination of the agreement. Refer to Note 12, Debt and Other Obligations for details of the Company's repurchase agreement programs.

The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2014:

	Gross		Gross Amounts Offset in the		Net Amounts of Assets Presented in the		Gross Amounts Not Offset in the Statement of Financial Position
	Amounts of Recognized Assets		Statement of Financial Position		Statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
	(Dollars In Thousands)
Offsetting of Derivative Assets
Derivatives:
Free-Standing derivatives	$	225,716	$	—	$	225,716	$	53,612	$	73,935	$	98,169
Total derivatives, subject to a master netting arrangement or similar arrangement		225,716		—		225,716		53,612		73,935		98,169
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative — Modco reinsurance treaties		1,051		—		1,051		—		—		1,051
Embedded derivative — GMWB		37,497		—		37,497		—		—		37,497
Derivatives with PLC		6,077		—		6,077		—		—		6,077
Other		360		—		360		—		—		360
Total derivatives, not subject to a master netting arrangement or similar arrangement		44,985		—		44,985		—		—		44,985
Total derivatives		270,701		—		270,701		53,612		73,935		143,154
Total Assets	$	270,701	$	—	$	270,701	$	53,612	$	73,935	$	143,154

F-162

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)

	Gross		Gross Amounts Offset in the		Net Amounts of Liabilities Presented in the		Gross Amounts Not Offset in the Statement of Financial Position
	Amounts of Recognized Liabilities		Statement of Financial Position		Statement of Financial Position		Financial Instruments		Cash Collateral Paid		Net Amount
	(Dollars In Thousands)
Offsetting of Derivative Liabilities
Derivatives:
Free-Standing derivatives	$	65,887	$	—	$	65,887	$	53,612	$	12,258	$	17
Total derivatives, subject to a master netting arrangement or similar arrangement		65,887		—		65,887		53,612		12,258		17
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative — Modco reinsurance treaties		311,727		—		311,727		—		—		311,727
Funds withheld derivative		57,305		—		57,305		—		—		57,305
Embedded derivative — GMWB		63,460		—		63,460		—		—		63,460
Embedded derivative — FIA		124,465		—		124,465		—		—		124,465
Embedded derivative — IUL		6,691		—		6,691		—		—		6,691
Total derivatives, not subject to a master netting arrangement or similar arrangement		563,648		—		563,648		—		—		563,648
Total derivatives		629,535		—		629,535		53,612		12,258		563,665
Repurchase agreements(1)		50,000		—		50,000		—		—		50,000
Total Liabilities	$	679,535	$	—	$	679,535	$	53,612	$	12,258	$	613,665

(1) Borrowings under repurchase agreements are for a term less than 90 days.

F-163

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)

The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2013.

	Gross		Gross Amounts Offset in the		Net Amounts of Assets Presented in the		Gross Amounts Not Offset in the Statement of Financial Position
	Amounts of Recognized Assets		Statement of Financial Position		Statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
	(Dollars In Thousands)
Offsetting of Derivative Assets
Derivatives:
Free-Standing derivatives	$	110,983	$	—	$	110,983	$	52,487	$	10,700	$	47,796
Embedded derivative — Modco reinsurance treaties		1,517		—		1,517		—		—		1,517
Embedded derivative — GMWB		95,376		—		95,376		—		—		95,376
Total derivatives, subject to a master netting arrangement or similar arrangement		207,876		—		207,876		52,487		10,700		144,689
Total derivatives, not subject to a master netting arrangement or similar arrangement		2,444		—		2,444		—		—		2,444
Total derivatives		210,320		—		210,320		52,487		10,700		147,133
Total Assets	$	210,320	$	—	$	210,320	$	52,487	$	10,700	$	147,133

F-164

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)

	Gross		Gross Amounts Offset in the		Net Amounts of Liabilities Presented in the		Gross Amounts Not Offset in the Statement of Financial Position
	Amounts of Recognized Liabilities		Statement of Financial Position		Statement of Financial Position		Financial Instruments		Cash Collateral Paid		Net Amount
	(Dollars In Thousands)
Offsetting of Derivative Liabilities
Derivatives:
Free-Standing derivatives	$	187,172	$	—	$	187,172	$	52,487	$	98,359	$	36,326
Embedded derivative — Modco reinsurance treaties		206,918		—		206,918		—		—		206,918
Funds withheld derivative		34,251		—		34,251		—		—		34,251
Embedded derivative — GMWB		1,496		—		1,496		—		—		1,496
Embedded derivative — FIA		25,324		—		25,324		—		—		25,324
Total derivatives, subject to a master netting arrangement or similar arrangement		455,161		—		455,161		52,487		98,359		304,315
Total derivatives, not subject to a master netting arrangement or similar arrangement		—		—		—		—		—		—
Total derivatives		455,161		—		455,161		52,487		98,359		304,315
Repurchase agreements(1)		350,000		—		350,000		—		—		350,000
Total Liabilities	$	805,161	$	—	$	805,161	$	52,487	$	98,359	$	654,315

(1) Borrowings under repurchase agreements are for a term less than 90 days.

25. OPERATING SEGMENTS

The Company has several operating segments each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company periodically evaluates its operating segments, as prescribed in the ASC Segment Reporting Topic, and makes adjustments to its segment reporting as needed. A brief description of each segment follows.

• The Life Marketing segment markets fixed UL, IUL, VUL, BOLI, and level premium term insurance ("traditional") products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, and independent marketing organizations.

F-165

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25. OPERATING SEGMENTS — (Continued)

• The Acquisitions segment focuses on acquiring, converting, and servicing policies acquired from other companies. The segment's primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment's acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where 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.

• The Annuities segment markets fixed and VA products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

• The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the FHLB, and markets GICs to 401(k) and other qualified retirement savings plans. Additionally, the Company has contracts outstanding pursuant to a funding agreement-backed notes program registered with the SEC which offered notes to both institutional and retail investors.

• The Asset Protection segment markets extended service contracts and credit life and disability insurance to protect consumers' investments in automobiles and recreational vehicles. In addition, the segment markets a guaranteed asset protection ("GAP") product. GAP coverage covers the difference between the loan pay-off amount and an asset's actual cash value in the case of a total loss.

• The Corporate and Other segment primarily consists of net investment income not assigned to the segments above (including the impact of carrying liquidity) and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, various investment-related transactions, the operations of several small subsidiaries, and the repurchase of non-recourse funding obligations.

The Company uses the same accounting policies and procedures to measure segment operating income (loss) and assets as it uses to measure consolidated net income and assets. Segment operating income (loss) is income before income tax, excluding realized gains and losses on investments and derivatives net of the amortization related to DAC, VOBA, and benefits and settlement expenses. Operating earnings exclude changes in the GMWB embedded derivatives (excluding the portion attributed to economic cost), realized and unrealized gains (losses) on derivatives used to hedge the VA product, actual GMWB incurred claims and the related amortization of DAC attributed to each of these items.

Segment operating income (loss) represents the basis on which the performance of the Company's business is internally assessed by management. Premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC/VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. During the year ended December 31, 2013, the Company began allocating realized gains and losses to certain of its segments to better reflect the economics of the investments supporting those segments.

F-166

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25. OPERATING SEGMENTS — (Continued)

This change had no impact to segment operating income. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.

There were no significant intersegment transactions during the year ended December 31, 2014, 2013, and 2012.

The following tables summarize financial information for the Company's segments:

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Thousands)
Revenues
Life Marketing	$	1,421,795		$	1,324,409		$	1,233,654
Acquisitions		1,720,179			1,186,579			1,064,295
Annuities		785,176			569,004			610,489
Stable Value Products		127,708			122,974			123,274
Asset Protection		305,396			296,782			294,146
Corporate and Other		103,953			104,922			130,202
Total revenues	$	4,464,207		$	3,604,670		$	3,456,060
Segment Operating Income (Loss)
Life Marketing	$	116,875		$	106,812		$	102,114
Acquisitions		254,021			154,003			171,060
Annuities		204,015			166,278			117,778
Stable Value Products		73,354			80,561			60,329
Asset Protection		26,274			20,148			9,765
Corporate and Other		(99,048	)		(74,620	)		1,119
Total segment operating income		575,491			453,182			462,165
Realized investment (losses) gains — investments(1)		151,035			(140,236	)		188,729
Realized investment (losses) gains — derivatives		12,263			109,553			(191,315	)
Income tax expense		(246,838	)		(130,897	)		(151,043	)
Net income	$	491,951		$	291,602		$	308,536
Investment gains (losses)(2)	$	198,027		$	(143,984	)	$	174,692
Less: amortization related to DAC/VOBA and benefits and settlement expenses		46,992			(3,748	)		(14,037	)
Realized investment gains (losses) — investments	$	151,035		$	(140,236	)	$	188,729
Derivative gains (losses)(3)	$	(13,492	)	$	82,161		$	(227,816	)
Less: VA GMWB economic cost		(25,755	)		(27,392	)		(36,501	)
Realized investment gains (losses) — derivatives	$	12,263		$	109,553		$	(191,315	)
Net investment income
Life Marketing	$	553,006		$	521,219		$	486,374
Acquisitions		874,653			617,298			550,334
Annuities		465,849			468,329			504,342
Stable Value Products		107,170			123,798			128,239
Asset Protection		18,830			19,046			19,698
Corporate and Other		78,505			86,498			100,351
Total net investment income	$	2,098,013		$	1,836,188		$	1,789,338

F-167

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25. OPERATING SEGMENTS — (Continued)

	For The Year Ended December 31,
	2014		2013		2012
	(Dollars In Thousands)
Amortization of DAC and VOBA
Life Marketing	$	175,807	$	25,774	$	45,079
Acquisitions		60,031		72,762		77,251
Annuities		47,448		31,498		45,319
Stable Value Products		380		398		947
Asset Protection		24,169		23,603		22,569
Corporate and Other		485		625		1,018
Total amortization of DAC and VOBA	$	308,320	$	154,660	$	192,183

(1) Includes credit related other-than-temporary impairments of $7.3 million, $22.4 million, and $58.1 million for the year ended December 31, 2014, 2013, and 2012, respectively.

(2) Includes realized investment gains (losses) before related amortization.

(3) Includes realized gains (losses) on derivatives before the VA GMWB economic cost.

	Operating Segment Assets As of December 31, 2014
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	13,858,491	$	19,858,284	$	20,678,948	$	1,958,867
Deferred policy acquisition costs and value of business acquired		1,973,156		600,482		539,965		621
Goodwill		—		29,419		—		—
Total assets	$	15,831,647	$	20,488,185	$	21,218,913	$	1,959,488
	Asset Protection		Corporate and Other		Adjustments		Total Consolidated
Investments and other assets	$	832,887	$	9,557,226	$	14,792	$	66,759,495
Deferred policy acquisition costs and value of business acquired		40,503		319		—		3,155,046
Goodwill		48,158		—		—		77,577
Total assets	$	921,548	$	9,557,545	$	14,792	$	69,992,118
	Operating Segment Assets As of December 31, 2013
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	13,135,914	$	20,188,321	$	20,029,310	$	2,558,551
Deferred policy acquisition costs and value of business acquired		2,071,470		799,255		554,974		1,001
Goodwill		—		32,517		—		—
Total assets	$	15,207,384	$	21,020,093	$	20,584,284	$	2,559,552

F-168

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25. OPERATING SEGMENTS — (Continued)

	Operating Segment Assets As of December 31, 2013
	(Dollars In Thousands)
	Asset Protection		Corporate and Other		Adjustments		Total Consolidated
Investments and other assets	$	777,387	$	8,006,256	$	16,762	$	64,712,501
Deferred policy acquisition costs and value of business acquired		49,276		646		—		3,476,622
Goodwill		48,158		—		—		80,675
Total assets	$	874,821	$	8,006,902	$	16,762	$	68,269,798

26. CONSOLIDATED QUARTERLY RESULTS — UNAUDITED

The Company's unaudited consolidated quarterly operating data for the year ended December 31, 2014 and 2013 is presented below. In the opinion of management, all adjustments (consisting only of normal recurring items) necessary for a fair statement of quarterly results have been reflected in the following data. It is also management's opinion, however, that quarterly operating data for insurance enterprises are not necessarily indicative of results that may be expected in succeeding quarters or years. In order to obtain a more accurate indication of performance, there should be a review of operating results, changes in shareowners' equity, and cash flows for a period of several quarters.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	(Dollars In Thousands)
2014
Premiums and policy fees	$	812,323		$	848,183		$	755,300		$	867,263
Reinsurance ceded		(333,506	)		(348,255	)		(283,104	)		(430,878	)
Net of reinsurance ceded		478,817			499,928			472,196			436,385
Net investment income		514,037			525,576			532,861			525,539
Realized investment gains (losses)		30,981			42,386			39,299			71,869
Other income		65,514			71,296			72,404			85,119
Total revenues		1,089,349			1,139,186			1,116,760			1,118,912
Total benefits and expenses		937,738			966,571			932,640			888,469
Income before income tax		151,611			172,615			184,120			230,443
Income tax expense		49,062			56,572			62,287			78,917
Net income	$	102,549		$	116,043		$	121,833		$	151,526

F-169

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

26. CONSOLIDATED QUARTERLY RESULTS — (Continued)

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	(Dollars In Thousands)
2013
Premiums and policy fees	$	723,200		$	752,752		$	653,664		$	837,706
Reinsurance ceded		(325,840	)		(396,777	)		(277,628	)		(387,192	)
Net of reinsurance ceded		397,360			355,975			376,036			450,514
Net investment income		439,012			447,064			434,772			515,340
Realized investment gains (losses)		(5,223	)		(47,636	)		4,263			(13,227	)
Other income		54,434			60,638			65,523			69,825
Total revenues		885,583			816,041			880,594			1,022,452
Total benefits and expenses		775,769			737,114			767,239			902,049
Income before income tax		109,814			78,927			113,355			120,403
Income tax expense		35,936			25,923			37,107			31,931
Net income	$	73,878		$	53,004		$	76,248		$	88,472

27. SUBSEQUENT EVENTS

On February 1, 2015, PLC announced the completion of the acquisition of PLC by Dai-ichi Life in accordance with the terms of the previously announced Agreement and Plan of Merger dated June 3, 2014, among PLC, Dai-ichi Life, and DL Investment (Delaware), Inc., a wholly owned subsidiary of Dai-ichi Life. As a result of the merger, each outstanding share of common stock of PLC was converted into the right to receive the Per Share Merger Consideration in cash, and PLC has become a wholly owned subsidiary of Dai-ichi Life, see also Note 5, Dai-ichi Merger . PLC's common stock has ceased trading, and was delisted from the New York Stock Exchange on February 13, 2015.

The Company has evaluated the effects of events subsequent to December 31, 2014, and through the date we filed our consolidated financial statements with the United States Securities and Exchange Commission. All accounting and disclosure requirements related to subsequent events are included in our consolidated financial statements.

F-170

SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION

PROTECTIVE LIFE CORPORATION AND SUBSIDIARIES

Segment	Deferred Policy Acquisition Costs and Value of Businesses Acquired		Future Policy Benefits and Claims		Unearned Premiums		Stable Value Products, Annuity Contracts and Other Policyholders' Funds		Net Premiums and Policy Fees		Net Investment Income(1)		Benefits and Settlement Expenses		Amortization of Deferred Policy Acquisitions Costs and Value of Businesses Acquired		Other Operating Expenses(1)		Premiums Written(2)
	(Dollars In Thousands)
For The Year Ended December 31, 2014:
Life Marketing	$	1,973,156	$	14,077,360	$	772,880	$	349,698	$	854,186	$	553,006	$	1,075,386	$	175,807	$	47,688	$	151
Acquisitions		600,482		14,740,562		3,473		4,770,181		772,020		874,653		1,247,836		60,031		122,349		35,857
Annuities		539,965		1,015,928		120,850		7,190,908		75,446		465,849		314,488		47,448		115,643		—
Stable Value Products		621		—		—		1,959,488		—		107,170		35,559		380		1,413		—
Asset Protection		40,503		46,963		616,908		—		169,212		18,830		93,193		24,169		161,760		160,948
Corporate and Other		319		63,664		890		70,267		16,462		78,505		20,001		485		181,782		16,388
Total	$	3,155,046	$	29,944,477	$	1,515,001	$	14,340,542	$	1,887,326	$	2,098,013	$	2,786,463	$	308,320	$	630,635	$	213,344
For The Year Ended December 31, 2013:
Life Marketing	$	2,071,470	$	13,504,869	$	812,929	$	311,290	$	796,109	$	521,219	$	1,143,132	$	25,774	$	46,263	$	173
Acquisitions		799,255		15,112,574		4,680		4,734,487		519,477		617,298		851,386		72,762		78,244		24,781
Annuities		554,974		1,037,348		102,734		7,228,119		80,343		468,329		318,173		31,498		110,266		—
Stable Value Products		1,001		—		—		2,559,552		—		123,798		41,793		398		1,805		—
Asset Protection		49,276		49,362		578,755		1,556		165,807		19,046		97,174		23,603		155,857		157,629
Corporate and Other		646		67,805		1,296		64,181		18,149		86,498		22,330		625		161,088		18,141
Total	$	3,476,622	$	29,771,958	$	1,500,394	$	14,899,185	$	1,579,885	$	1,836,188	$	2,473,988	$	154,660	$	553,523	$	200,724
For The Year Ended December 31, 2012:
Life Marketing	$	2,001,708	$	12,733,602	$	698,862	$	277,919	$	743,361	$	486,374	$	1,054,645	$	45,079	$	31,816	$	161
Acquisitions		679,746		7,666,423		8,367		3,514,838		459,835		550,334		716,893		77,251		51,714		29,874
Annuities		491,184		1,102,577		103,316		7,372,471		97,902		504,342		369,622		45,319		100,848		—
Stable Value Products		1,399		—		—		2,510,559		—		128,239		64,790		947		2,174		—
Asset Protection		50,253		51,279		540,766		1,790		168,656		19,698		91,778		22,569		170,034		159,927
Corporate and Other		1,066		72,184		1,561		58,430		19,539		100,351		19,393		1,018		130,591		19,456
Total	$	3,225,356	$	21,626,065	$	1,352,872	$	13,736,007	$	1,489,293	$	1,789,338	$	2,317,121	$	192,183	$	487,177	$	209,418

(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.

(2) Excludes Life Insurance

S-1

SCHEDULE IV — REINSURANCE

PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES

	Gross Amount		Ceded to Other Companies		Assumed from Other Companies		Net Amount			Percentage of Amount Assumed to Net
	(Dollars In Thousands)
For The Year Ended December 31, 2014:
Life insurance in-force	$	721,036,332	$	388,890,060	$	43,237,358	$	375,383,630			11.5	%
Premiums and policy fees:
Life insurance		2,603,956		1,279,908		349,934		1,673,982	(1)		20.9
Accident/health insurance		81,037		42,741		20,804		59,100			35.2
Property and liability insurance		218,663		73,094		8,675		154,244			5.6
Total	$	2,903,656	$	1,395,743	$	379,413	$	1,887,326
For The Year Ended December 31, 2013:
Life insurance in-force	$	726,697,151	$	416,809,287	$	46,752,176	$	356,640,040			13.1	%
Premiums and policy fees:
Life insurance		2,371,871		1,299,631		306,921		1,379,161	(1)		22.3
Accident/health insurance		45,262		20,011		24,291		49,542			49.0
Property and liability insurance		211,000		67,795		7,977		151,182			5.3
Total	$	2,628,133	$	1,387,437	$	339,189	$	1,579,885
For The Year Ended December 31, 2012:
Life insurance in-force	$	706,415,969	$	444,950,866	$	30,470,432	$	291,935,535			10.4	%
Premiums and policy fees:
Life insurance		2,226,614		1,228,444		281,711		1,279,881	(1)		22.0
Accident/health insurance		38,873		12,065		29,413		56,221			52.3
Property and liability insurance		216,014		69,588		6,765		153,191			4.4
Total	$	2,481,501	$	1,310,097	$	317,889	$	1,489,293

(1) Includes annuity policy fees of $92.8 million, $88.7 million, and $103.8 million for the years ended December 31, 2014, 2013, and 2012, respectively.

S-2

SCHEDULE V — VALUATION AND QUALIFYING ACCOUNTS

PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES

			Additions
Description	Balance at beginning of period		Charged to costs and expenses		Charges to other accounts		Deductions			Balance at end of period
	(Dollars In Thousands)
2014
Allowance for losses on commercial mortgage loans	$	3,130	$	3,265	$	—	$	(675	)	$	5,720
2013
Allowance for losses on commercial mortgage loans	$	2,875	$	7,093	$	—	$	(6,838	)	$	3,130
2012
Allowance for losses on commercial mortgage loans	$	4,975	$	6,240	$	—	$	(8,340	)	$	2,875

S-3

PART C

OTHER INFORMATION

Item 27. Exhibits.

1. Certified resolutions of the board of directors of Protective Life Insurance Company establishing Protective Variable Life Separate Account. (1)

2. Custodian Agreements — None.

3. (a) Form of Underwriting Agreement among Protective Life Insurance Company, Investment Distributors, Inc. and Protective Variable Life Separate Account. (2)

(a)(1) Amendment I to the Underwriting Agreement. (4)

(a)(2) Second Amended Distribution Agreement between Protective Life Insurance Company and Investment Distributors, Inc. (17)

(b) Form of Distribution Agreement between Investment Distributors, Inc. and selling broker-dealers. (2)

4. (a) Protective Investors Choice VUL Contract. (19)

(b) Children's term life rider. (1)

(d) Disability benefit rider. (1)

(e) Terminal Illness Accelerated Death Benefit Endorsement. (19)

(f) Lapse Protection Endorsement. (19)

(g) Allocation by Investment Category Endorsement (19)

(h) Overloan Protection Endorsement (19)

(i) Policy Loan Endorsement. (7)

(j) Arbitration Endorsement. (11)

(k) ExtendCare Chronic Illness Accelerated Death Benefit Rider. (19)

(l) Income Provider Option Pre-Determined Death Benefit Payout Endorsement. (19)

5. (a) Contract Application. (19)

(b) Alternate Contract Application. (19)

6. (a) Charter of Protective Life Insurance Company. (1)

(b) By-Laws of Protective Life Insurance Company. (1)

(d) Amended and Restated Bylaws of Protective Life Insurance Company (10)

(e) 2011 Amended and Restated Charter of Protective Life Insurance Company (15)

(f) 2011 Amended and Restated Bylaws of Protective Life Insurance Company (15)

7. (a) Form of Automatic and Facultative Yearly Renewable Term Agreement. (7)

(b) Form of Yearly Renewable Term Reinsurance Agreement. (13)

8. (a) Participation/Distribution Agreement. (2)

(a)(1) Amendment I to the Participation/Distribution Agreement. (4)

(b) Participation Agreement (Oppenheimer Variable Account Funds). (3)

(d) Form of Participation Agreement (Fidelity Variable Insurance Products Funds). (5)

(e) Participation Agreement (Lord Abbett Series Fund, Inc.). (6)

(f) Participation Agreement (Goldman Sachs Variable Insurance Trust) (8)

(i) Amendment to Participation Agreement re Summary Prospectus (Goldman Sachs Variable Insurance Trust) (14)

(g) Participation Agreement (Franklin Templeton Variable Insurance Products Trust) (9)

(h) Amended and Restated Participation Agreement (Fidelity Variable Insurance Products Funds). (9)

(i) Amendment to Participation Agreement re Summary Prospectus (Franklin Templeton Variable Insurance Products Trust) (14)

(i) Rule 22c-2 Shareholder Information Agreement (Fidelity Variable Insurance Products) (10)

(j) Rule 22c-2 Shareholder Information Agreement (Franklin Templeton Variable Insurance Products Trust) (10)

(k) Rule 22c-2 Shareholder Information Agreement (Goldman Sachs Variable Insurance Trust) (10)

(l) Rule 22c-2 Shareholder Information Agreement (Lord Abbett Series Fund) (10)

(m) Rule 22c-2 Shareholder Information Agreement (MFS Variable Insurance Trust) (10)

(n) Rule 22c-2 Shareholder Information Agreement (Oppenheimer Variable Account Funds) (10)

(o) Participation Agreement (Legg Mason) (12)

(p) Participation Agreement (PIMCO) (12)

(i) Form of Novation of and Amendment to Participation Agreement (PIMCO Variable Insurance Trust) (14)

(ii) Form of Amendment to Participation Agreement re Summary Prospectuses (PIMCO Variable Insurance Trust) (14)

(q) Participation Agreement (Royce Capital) (12)

C-1

(aa) Rule 22c-2 Information Sharing Agreement (Royce Capital) (12)

(bb) Participation Agreement (AIM Variable Insurance Funds (Invesco Variable Insurance Funds)) (14)

(cc) Form of Participation Agreement (MFS Variable Insurance Trust II) (16)

(dd) Participation Agreement (American Funds) (21)

9. Administrative Contracts — Not applicable.

10. Other Material Contracts. Not Applicable.

11. Opinion and consent of Max Berueffy, Esq. (18)

12. Actuarial Opinion. Not applicable.

13. Calculations. Not applicable.

14. Other Opinions.

(a) Consent of Sutherland Asbill & Brennan LLP. (21)

(b) Consent of PricewaterhouseCoopers, LLP. (21)

15. Omitted Financial Statements. No Financial Statements are omitted from Item 24.

16. Initial Capital Agreements. Not applicable.

17. Redeemability Exemption.

(a) Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) describing issue, transfer and redemption procedures. (19)

18. Power of Attorney (20)

(1) Incorporated herein by reference to the initial filing of the Form S-6 Registration Statement, (File No. 33-61599) as filed with the Commission on August 4, 1995.

(2) Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement, (File No. 33-61599) as filed with the Commission on December 22, 1995.

(3) Incorporated herein by reference to Post-Effective Amendment No. 5 to the Form N-4 Registration Statement (File No. 33-70984) as filed with the Commission on April 30, 1997.

(4) Incorporated herein by reference to Pre-Effective Amendment Number 1 to the Form S-6 Registration Statement (File No. 333-45963) filed with the Commission on June 3, 1998.

(5) Incorporated herein by reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement (File No. 33-61599) as filed with the Commission on April 20, 2001.

(6) Incorporated herein by reference to Post-Effective Amendment No. 3 to the Form N-4 Registration Statement (File No. 333-94047) as filed with the Commission on April 25, 2002.

(7) Incorporated herein by reference to Post-Effective Amendment No. 7 to the Form N-6 Registration Statement (File No. 333-52215) as filed with the Commission on April 30, 2003.

(8) Incorporated herein by reference to the initial Registration Statement on Form N-4 (File No. 333-112892), filed with the Commission on February 17, 2004.

(9) Incorporated herein by reference to Post-Effective Amendment No. 2 to the Form N-4 Registration Statement (File No. 333-116813) as filed with the Commission on April 28, 2006.

(10) Incorporated herein by reference to Post-Effective Amendment No. 17 to the Form N-4 Registration Statement (File No. 33-70984) as filed with the Commission on April 27, 2007.

(11) Incorporated herein by reference to Post-Effective Amendment No. 14 to the Form N-6 Registration Statement (333-52215) as filed with the Commission on August 15, 2008.

(12) Incorporated herein by reference to Post-Effective Amendment No. 15 to the Form N-4 Registration Statement (333-113070) as filed with the Commission on October 28, 2009.

(13) Incorporated herein by reference to Post-Effective Amendment No. 17 to the Form N-6 Registration Statement (333-52215) as filed with the Commission on April 27, 2009.

(14) Incorporated herein by reference to Post-Effective Amendment No. 19 to the Form N-4 Registration Statement (333-113070) as filed with the Commission on April 25, 2011.

(15) Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement (File No. 333-176657), filed with the Commission on September 2, 2011.

(16) Incorporated herein by reference to Post-Effective Amendment No. 2 to the Form N-4 Registration Statement (File No. 333-176657), as filed with the Commission on April 24, 2012.

(17) Incorporated herein by reference to Post-Effective Amendment No. 2 to the Form N-4 Registration Statement (File No. 333-190294) as filed with the Commission on April 25, 2014.

(18) Incorporated herein by reference to the initial filing of the Form N-6 Registration Statement (File No. 333-194115) as filed with the Commission on February 25, 2014.

(19) Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Form N-6 Registration Statement (File No. 333-194115) as filed with the Commission on July 7, 2014.

(20) Incorporated herein by reference to Post-Effective Amendment No. 1 to the Form N-6 Registration Statement (File No. 333-194115) as filed with the Commission on April 24, 2015.

(21) Filed herein.

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Item 28. Directors and Officers of Depositor.

Name and Principal Business Address*				Position and Offices with Depositor
John D. Johns				President, Chairman of the Board, Chief Executive Officer, President and Director
Deborah J. Long				Executive Vice President, General Counsel and Secretary
Michael G. Temple				Executive Vice President and Chief Risk Officer
Scott M. Karchunas				Senior Vice President, Asset Protection Division
Wayne E. Stuenkel				Senior Vice President and Chief Actuary
Richard J. Bielen				Vice Chairman and Chief Financial Officer and Director
Carl S. Thigpen				Executive Vice President, Chief Investment Officer, and Director
John Sawyer				Senior Vice President and Chief Distribution Officer
Steven G. Walker				Senior Vice President, Controller and Chief Accounting Officer
Nancy Kane				Senior Vice President, Acquisitions and Corporate Development
Robert R. Bedwell, III				Senior Vice President, Mortgage Loans
Lance Black				Senior Vice President and Treasurer
Phil Passafiume				Senior Vice President and Director, Fixed Income
Frank Sottosanti				Senior Vice President and Chief Marketing Officer
Mark Cyphert				Senior Vice President and Chief Information and Operations Officer
Stephane Goyer				Senior Vice President and Head of Insurance Risk
Aaron C. Seurkamp				Senior Vice President, Life Sales
Steve M. Callaway				Senior Vice President and Senior Associate Counsel
David M. Loper				Senior Vice President and Senior Associate Counsel
Barrie B. Stokes				Senior Vice President and Senior Associate Counsel
Richard J. Kurtz				Senior Vice President, Dealer Sales, APD
Wade V. Harrison				Senior Vice President and Chief Product Actuary
Kevin B. Borie				Senior Vice President and Chief Valuation Actuary
Matthew Riebel				Senior Vice President, IDG Sales and Marketing Administration
K. Todd Thompson				Senior Vice President, BD National Annuity Sales Manager
Paul R. Wells				Senior Vice President, LAD Chief Financial Officer

* Unless otherwise indicated, principal business address is 2801 Highway 280 South, Birmingham, Alabama 35223.

Item 29. 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 their controlling persons (where applicable), are set forth in Exhibit 21 to Form 10-K of Protective Life Corporation for the fiscal year ended December 31, 2014 (File No. 001-11339) filed with the Commission on February 26, 2015.

Item 30. Indemnification.

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

C-3

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 may be against public policy as expressed in the Act and may be, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than 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.

Item 31. Principal Underwriter.

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

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

Name and Principal Business Address*	Position and Offices	Position and Offices with Registrant
Edwin V. Caldwell	President and Director	Vice President, New Business Operations, Life and Annuity Division
Letitia Morsch	Assistant Secretary	Second Vice President, Annuity and VUL Administration
Julena Johnson	Assistant Compliance Officer	Senior Compliance Analyst II
Barry K. Brown	Assistant Secretary	Second Vice President, LCC Commissions
Lawrence J. Debnar	Assistant Financial Officer	Vice President, Financial Reporting

C-4

Name and Principal Business Address*	Position and Offices	Position and Offices with Registrant
Steve M. Callaway	Chief Compliance Officer, Secretary and Director	None
Carol Majewski	Assistant Compliance Officer	Assistant Compliance Officer
Joseph F. Gilmer	Chief Financial Officer and Director	Assistant Vice President — Annuity Financial Reporting
Rayburn Tennent	Assistant Financial Officer	None

* Unless otherwise indicated, principal business address is 2801 Highway 280 South, Birmingham, Alabama, 35223.

(c) Compensation From the Registrant. The following commissions were received by each principal underwriter, directly or indirectly, from the Registrant during the Registrant's last fiscal year:

(1) Name of Principal
Underwriter

(2) Net Underwriting
Discounts and Commissions

(3) Compensation on
Redemption

(4) Brokerage
Commissions

(5) Other
Compensation

Investments Distributors, Inc.

None

N/A

Item 32. Location of Accounts and Records.

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

Item 33. Management Services.

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

Item 34. Fee Representation.

Protective Life hereby represents that the fees and charges deducted under the variable life insurance policies described herein are, in the aggregate, reasonable in relation to the services rendered, the expenses expected to be incurred and the risks assumed by it under such policies.

C-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Protective Variable Life 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 Post-Effective Amendment to the Registration Statement on Form N-6 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Birmingham, State of Alabama on June 26, 2015.

PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)

By: *

  John D. Johns, Chairman of the Board and
  Chief Executive Officer
  Protective Life Insurance Company

PROTECTIVE LIFE INSURANCE COMPANY
(Depositor)

By: *

  John D. Johns, Chairman of the Board and
  Chief Executive Officer
  Protective Life Insurance Company

As required by the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement on Form N-6 has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
* John D. Johns	Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)	June 26, 2015
* Richard J. Bielen	Vice Chairman, Chief Financial Officer and Director (Principal Financial Officer)	June 26, 2015
* Steven G. Walker	Senior Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer)	June 26, 2015
* Carl S. Thigpen	Director	June 26, 2015
BY: /S/ MAX BERUEFFY Max Berueffy Attorney-in-Fact*		June 26, 2015

Exhibits

8. (dd) Participation Agreement (American Funds)

14. (a) Consent of Sutherland Asbill & Brennan LLP.

(b) Consent of PricewaterhouseCoopers, LLP.

Exhibit 99.8(dd)

FUND PARTICIPATION AND SERVICE AGREEMENT

Protective Life Insurance Company (“Insurance Company”), for itself and on behalf of one or more separate accounts of the Insurance Company (“Separate Accounts”), American Funds Distributors, Inc. (“AFD”), American Funds Service Company (“Transfer Agent”), Capital Research and Management Company (“CRMC”), and the American Funds Insurance Series (the “Series”), an open-end investment company for which AFD, CRMC and Transfer Agent provide services and which is divided into funds (hereinafter collectively called the “Funds” and, individually, a “Fund”), for good and valuable consideration, hereby agree on this 18 th day of June 2015, that Class 2 shares of the Funds and Class 4 shares of the Funds (“Class 2 or 4 Shares” together , the “shares”) shall be made available to serve as underlying investment media for certain variable annuity contracts (hereinafter called “Contract(s)”; holders of such Contracts hereinafter called “Contractholder(s)”) to be offered by the Insurance Company subject to the following provisions:

1. Authorization; Services .

a. As distributor of the Series, AFD agrees to make Class 2 shares and Class 4 shares of the Funds that offer such share classes available to the Insurance Company for itself and on behalf of the Separate Accounts on the attached Exhibit A pursuant to the terms of this Agreement. Exhibit B lists the initial Funds that will be made available as underlying investment options to the Contracts. Insurance Company agrees to give the Series and CRMC at least (thirty) 30 days’ notice prior to adding any additional Funds or share classes of a Fund as underlying investment options to the Contracts. AFD reserves the right to approve any such addition. The Insurance Company will offer shares of the Funds in connection with the sale of Contracts to Contractholders. Fund shares to be made available to Separate Accounts for the Contracts shall be sold by the Series and purchased by the Insurance Company for a given account in accordance with the provisions of this Agreement and at the net asset value of the respective class of the respective Fund (without the imposition of a sales load) computed in accordance with the provisions of the then current Prospectus of the Series. This Agreement is in all respects subject to statements regarding the sale and repurchase or redemption of shares made in the offering prospectuses of the Funds, and to the applicable Rules of FINRA, which shall control and override any provision to the contrary in this Agreement.

b. Transfer Agent hereby appoints Insurance Company as limited agent and designee with respect to shares of the Funds purchased, held, and redeemed by the Separate Accounts solely for purposes of the provisions of this Agreement, and Insurance Company accepts such appointment, on the terms set forth herein.

c. During the term of this Agreement, Insurance Company shall perform the administrative services (“Services”) set forth on Exhibit C hereto, as such exhibit may be amended from time to time by mutual consent of the parties, in respect of

Separate Accounts holding Class 4 shares of each Fund. In consideration of Insurance Company performing the Services, the Series agrees to pay Insurance Company an administrative services fee of % of the average daily net asset value of all Class 4 shares of the Funds held by each Separate Account, payable quarterly, in arrears pursuant to an Insurance Administrative Services Plan adopted by the Series. The Series shall pay all fees within forty-five (45) days following the end of each calendar quarter for fees accrued during that quarter. The fee will be calculated as the product of (a) the average daily net asset value of all Class 4 shares, as applicable, of the Funds held by each Separate Account during the quarter; (b) the number of days in the quarter; and (c) the quotient of divided by 365. The Series shall not be responsible for payment of fees for Services more than six (6) months in arrears in respect of accounts that were not timely identified by Company as eligible for compensation pursuant to this Agreement. CRMC will evaluate periodically Insurance Company’s service levels, including compliance with established NSCC guidelines, transaction errors, compliance with the prospectus and complaints from Contract owners, in determining whether to continue making payments under the Insurance Administrative Services Plan. Insurance Company represents to the Series and CRMC that it will not receive compensation for the Services from contractholder fees or any other source.

The Insurance Company, directly or through subcontractors (including a designated affiliate), shall provide the certain services described in this Agreement in respect of Separate Accounts holding Class 2 shares on behalf of AFD, Transfer Agent and the Funds in connection with the sale and servicing of the Contracts. The services to be provided by the Insurance Company to its Separate Accounts include, (i) mailing and otherwise making available to Contractholders, shareholder communications including, without limitation, prospectuses, proxy materials, shareholder reports, unaudited semi-annual and audited annual financial statements, and other notices; (ii) handling general questions regarding the Funds from Contractholders including, without limitation, advising as to performance, yield being earned, dividends declared, and providing assistance with other questions concerning the Funds; (iii) preparing and mailing periodic account statements showing the total number of Separate Account units owned by the Contractholder in that account, the value of such units, and purchases, redemptions, dividends, and distributions in the account during the period covered by the statement; and (iv) preparing and mailing IRS Form 1099-R, IRS Form W-2 and/or other IRS forms as required by applicable Internal Revenue Service rules and regulations. Administrative services to Contractholders shall be the responsibility of the Insurance Company and shall not be the responsibility of AFD, Transfer Agent or any of their affiliates.

d. Insurance Company shall transmit to Transfer Agent or the Funds (or to any agent designated by either of them) such information in the possession of Insurance Company concerning the Contractholders as shall reasonably be necessary for Transfer Agent to provide services as transfer agent for the Funds and as any

Fund shall reasonably conclude is necessary to enable that Fund to comply with applicable state Blue Sky laws or regulations.

2. The Insurance Company will be entitled to a Rule 12b-1 distribution fee paid by the Series, to be accrued daily and paid monthly at an annual rate of % of the average daily net assets of the Class 2 and Class 4 shares of each Fund attributable to the Contracts for as long as the Series’ Plans of Distribution pursuant to Rule 12b-1 under the 1940 Act for such share class remains in effect.

3. Compliance with Laws; Reliance on Instructions .

a. AFD and CRMC acknowledge and agree that Insurance Company is not responsible for: (i) any information contained in any prospectus, registration statement, annual report, proxy statement, or item of advertising or marketing material prepared by AFD and/or CRMC, which relates to any Fund; (ii) registration or qualification of any shares of any Fund under any federal or state laws; or (iii) compliance by AFD, CRMC and the Funds with all applicable federal and state laws, rules and regulations, the rules and regulations of any self-regulatory organization with jurisdiction (the foregoing laws, rules and regulations are collectively referred to herein as “Applicable Law”) over AFD, CRMC or Funds, and the provisions of the Funds’ prospectus and statement of additional information.

b. Insurance Company acknowledges and agrees that it is responsible for (i) any representations concerning the Funds made by Insurance Company or its agents that are not included in the prospectuses, statements of additional information or advertising or marketing material relating to the Funds and prepared or approved in writing by AFD; (ii) satisfying prospectus delivery requirements, to the extent required by law; and (iii) in connection with the services performed in connection with this Agreement, the compliance or failure to comply with any Applicable Law with jurisdiction over Insurance Company.

c. Insurance Company and its affiliates shall make no representations concerning the Funds’ shares except those contained in the then current Prospectus of the Series, in such printed information subsequently issued on behalf of the Series or other funds managed by CRMC as supplemental to the Series’ Prospectus, in information published on the Series’ or CRMC’s internet site, or in materials approved by AFD, as provided in the Business Agreement in effect among Insurance Company , Investment Distributors, Inc., AFD and CRMC dated September 2018, as amended October 17, 2014 and June 18, 2015 (the “Business Agreement”).

d. Each party is entitled to rely on any written records or instructions provided to it by responsible persons of the other party(ies).

4. Insurance Company Representations and Warranties .

a. The Insurance Company represents and warrants that:

(i) it has the corporate power and the authority to enter into and perform all of its duties and obligations under this Agreement;

(ii) this Agreement constitutes its legal, valid and binding obligation, enforceable against each above-named party in accordance with its terms;

(iii) no consent or authorization of, filing with, or other act by or in respect of any governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement;

(iv) it will or has established the Separate Accounts as separate accounts under Tennessee Insurance law;

(v) it has registered the Separate Accounts as unit investment trusts under the Investment Company Act of 1940, as amended (the “1940 Act”), to serve as investment vehicles for certain Contracts or, alternatively, has not registered one or more of the Separate Accounts in proper reliance upon an exclusion from registration under the 1940 Act;

(vi) the Contracts are or will be and at the time of issuance will be treated as annuity contracts and life insurance policies, as applicable, under applicable provisions of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “Code”), that Insurance Company will maintain such treatment and that it will notify the Series immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future;

(vii) the offer of the Contracts has been registered with the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), or it is properly exempt from registration under the 1933 Act, and each such registration statement and any further amendments or supplements thereto will, when they become effective, conform in all material respects to the requirements of the 1933 Act, and the rules and regulations of the SEC thereunder, and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statement or omission made in reliance upon and in conformity with the information furnished in writing to Insurance Company by AFD, Transfer Agent, CRMC or the Series expressly for use therein;

(viii) the Contracts provide for the allocation of net amounts received by the

Insurance Company to the Separate Accounts, for investment in the shares of specified investment companies selected among those companies available through the Separate Accounts to act as underlying investment media;

(ix) (a) it, or its affiliate, is a properly registered or licensed broker or dealer under applicable federal laws and regulations and is complying with and will continue to comply with all applicable federal laws, rules and regulations, (b) it, or its affiliate, is a member of FINRA, and (c) its, or its affiliate’s, membership with FINRA is not currently suspended or terminated. Insurance Company agrees to notify AFD immediately in writing if any of the foregoing representations ceases to be true to a material extent.

(x) any information furnished in writing by Insurance Company for use in the registration statement or annual report of the Series will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, nor result in the Series’ registration statement’s failing to materially conform in all respects to the requirements of the 1933 Act and 1940 Act and the rules and regulations thereunder;

(xi) investment by each Separate Account in a Fund is in reliance on and consistent with the terms of the Series’ Mixed and Shared Funding Order; and

(xiii) the Separate Accounts invest in the Funds in reliance on the status of each Separate Account as a “Permitted Investor” within the meaning of Section 817(h)(4)(A) of the Internal Revenue Code of 1986, as amended.

5. Representations and Warranties of AFD, Transfer Agent, CRMC and the Series .

a. AFD and Transfer Agent each represents and warrants (as applicable) that:

(i) this Agreement constitutes its legal, valid and binding obligation, and is enforceable against it in accordance with its terms;

(ii) no consent or authorization of, filing with, or other act by or in respect of any governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement;

(iii) the execution, performance and delivery of this Agreement by it will not result in its violating any Applicable Law or breaching or otherwise impairing any of its contractual obligations;

(iv) AFD represents that the Funds are registered as investment companies under the 1940 Act and Fund shares sold by the Funds are, and will be, registered under the Securities Act of 1933, as amended;

(v) AFD represents that it is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, and may properly cause Fund shares to be made available for the purposes of this Agreement;

(vi) Shares of the Series may be offered to separate accounts of various insurance companies in addition to Insurance Company. AFD represents, warrants and covenants that no shares of the Series shall be sold to the general public in contravention of Section 817 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “Code”).

(vii) it has the corporate power and the authority to enter into and perform all of its duties and obligations under this Agreement;

(viii) AFD and its affiliates are solely responsible for information contained in any prospectus, registration statement, annual report, proxy statement, or item of advertising or marketing material prepared by AFD relating to any Fund; and

(ix) AFD represents that prospectuses, other materials concerning the Funds are complete and accurate in all material respects and do not contain any material omission or misstatement of a material fact necessary to make the information not misleading or untrue.

b. CRMC and the Series represent and warrant that:

(i) the Series is, and shall be at all times while this Agreement is in force, lawfully organized, validly existing, and properly qualified as an open-end management investment company in accordance with the laws of the Commonwealth of Massachusetts;

(ii) a registration statement under the 1933 Act and under the 1940 Act with respect to the Series has been filed with the SEC in the form previously delivered to Insurance Company and the Series’ registration statement and any further amendments thereto will, when they become effective, and all definitive prospectuses and statements of additional information and any further supplements thereto (the “Prospectus”) shall, conform in all material respects to the requirements of the 1933 Act and the 1940 Act and the rules and regulations of the SEC thereunder, and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statement therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to CRMC or the Series by Insurance Company expressly for use therein.

(iii) Each Fund has complied and will comply with the diversification requirements of Section 817 and the regulations issued thereunder and shall maintain its qualification as a “regulated investment company” (“RIC”) under the

Code. CRMC and the Funds will provide to Insurance Company upon request certifications of compliance with these diversification requirements within 60 days of such request.

(iv) The Series makes no representation or warranty as to whether any aspect of its operations (including but not limited to fees expenses and investment policies) complies or will comply with the insurance laws or regulations of the various states.

6. Omnibus Accounts . The Funds recognize that the Insurance Company, for itself or on behalf of the Separate Accounts, will be the sole shareholder of shares of the Funds issued pursuant to the Contracts, and that the Insurance Company intends to establish one or more omnibus accounts per Fund. Such arrangement will result in aggregated share orders. In the event that the aggregate Contractholder accounts maintained by the Insurance Company do not balance with the omnibus accounts maintained by the Transfer Agent, neither the Transfer Agent, any of its affiliates nor the Funds shall be liable to the Contractholders for any shortfall, provided that such shortfall is not a result of an error or omission on the part of the Transfer Agent, its affiliates or the Funds.

7. Pricing Information . The Series or the Transfer Agent will compute the closing net asset value, and any distribution information (including the applicable ex-date, record date, payable date, distribution rate per share, income accrual and capital gains information) for each Fund as of the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on each day the New York Stock Exchange is open for business (a “Business Day”) or at such other time as the net asset value of a Fund is calculated, as disclosed in the relevant Funds’ current prospectuses. The Series or the Transfer Agent will use their best efforts to communicate to the Insurance Company such information by 6:30 p.m. Eastern Time on each Business Day. Such information shall be accurate and true in all respects and updated continuously.

8. Pricing Adjustments .

a. In the event an adjustment is made to the computation of the net asset value of Fund shares as reported to Insurance Company under paragraph 7, (1) the correction will be handled in a manner consistent with SEC guidelines and the Investment Company Act of 1940, as amended and (2) the Funds or Transfer Agent shall notify Insurance Company as soon as practicable after discovering the need for any such adjustment. Notification may be made in the following manner:

Method of Communication

(i) Fund/SERV Transactions . If Insurance Company uses the National Securities Clearing Corporation’s Mutual Fund Settlement, Entry and Registration Verification (“Fund/SERV”) system, any corrections to the fund prices for the

prior trade date may be submitted through the Mutual Fund Profile in Fund/SERV with the correct fund prices and applicable date.

(ii) Manual Transactions . If the parties are not able to transmit or receive information through Fund/SERV, any corrections to the fund prices should be communicated by facsimile or by electronic transmission acceptable to Transfer Agent, and will include for each day on which an adjustment has occurred the incorrect Fund price, the correct price, and, to the extent communicated to the applicable Fund’s shareholders, the reason for the adjustment. Funds and Transfer Agent agree that the Insurance Company may send this notification or a derivation thereof (so long as such derivation is approved in advance by Funds or AFD, as applicable) to Contractholders whose accounts are affected by the adjustment.

b. To the extent a price adjustment results in a deficiency or excess to a Contractholder’s account, Insurance Company and Transfer Agent agree to evaluate the situation together on a case-by-case basis with the goal towards pursuing an appropriate course of action. To the extent the price adjustment was due to Transfer Agent’s error, Transfer Agent shall reimburse Contractholder’s account. Any administrative costs incurred for correcting Contractholder accounts will be at Insurance Company’s expense.

9. Purchases and Redemption Orders; Settlement of Transactions

a. Manual Transactions . Insurance Company may submit orders for purchase or redemption of shares by means of manual transactions via facsimile or other electronic transmission acceptable to Transfer Agent In the event manual transactions are used, the following provisions shall apply:

(i) Next Day Transmission of Orders. The Insurance Company will notify the Transfer Agent by 9:30 a.m. Eastern Time, on the next Business Day the aggregate amounts of purchase orders and redemption orders, that were placed by Contractholders in each Separate Account by 4:00 p.m. Eastern time on the prior Business Day (the “Trade Date”). Insurance Company represents that orders it receives after 4:00 p.m. Eastern time on any given Business Day will be transmitted to the Transfer Agent using the following Business Day’s net asset value. Transfer Agent may process orders it receives after the 9:30 a.m. deadline using the net asset value next determined.

(ii) Purchases . All orders received by Insurance Company by 4:00 p.m. on a Business Day and communicated to the Transfer Agent by the 9:30 a.m. deadline shall be treated by the Transfer Agent as if received as of the close of trading on the Trade Date and the Transfer Agent will therefore execute orders at the net asset values determined as of the close of trading on the Trade Date. Insurance Company will initiate payment by wire transfer to a custodial account designated

by the Funds for the aggregate purchase amounts prior to 4:00 p.m. Eastern time on the next Business Day following Trade Date.

(iii) Redemptions . Aggregate orders for redemption of shares of the Funds will be paid in cash and wired from the Funds’ custodial account to an account designated by the Insurance Company. Transfer Agent will initiate payment by wire to Insurance Company or its designee proceeds of such redemptions two (2) Business Days following the Trade Date (T+2).

b. Fund/SERV Transactions . If the parties mutually agree to use the Fund/SERV system, the following provisions shall apply:

(i) Without limiting the generality of the following provisions of this section, the Insurance Company and Transfer Agent each will perform any and all duties, functions, procedures and responsibilities assigned to it and as otherwise established by the NSCC applicable to Fund/SERV and the Networking Matrix Level utilized.

(ii) Any information transmitted through the NSCC’s Networking system (“Networking”) by any party to the other and pursuant to this Agreement will be accurate, complete, and in the format prescribed by the NSCC. Each party will adopt, implement and maintain procedures reasonably designed to ensure the accuracy of all transmissions through Networking and to limit the access to, and the inputting of data into, Networking to persons specifically authorized by such party.

(iii) Same Day Trades . On each Business Day, the Insurance Company shall aggregate and calculate the purchase orders and redemption orders for each Separate Account received by the Insurance Company prior to 4:00 p.m. Eastern time. The Insurance Company shall communicate to Transfer Agent for that Trade Date, by Fund/SERV, the aggregate purchase orders and redemption orders (if any) for each Separate Account received by 4:00 p.m. Eastern time on such Trade Date by no later than the NSCC’s Defined Contribution Clearance & Settlement (“DCC&S”) Cycle 8 (generally, 6:30 a.m. Eastern time) on the following Business Day. Transfer Agent shall treat all trades communicated to Transfer Agent in accordance with the foregoing as if received prior to 4:00 p.m. Eastern time on the Trade Date. All orders received by the Insurance Company after 4:00 p.m. Eastern time on a Business Day shall not be transmitted to NSCC prior to the conclusion of the DCC&S Cycle 8 on the following Business Day, and Insurance Company represents that orders it receives after 4:00 p.m. Eastern time on any given Business Day will be transmitted to the Transfer Agent using the following Business Day’s net asset value. Transfer Agent may process orders it receives after the DCC&S Cycle 8 deadline using the net asset value next determined.

(iv) When transmitting instructions for the purchase and/or redemption of shares of the Funds, Insurance Company shall submit one order for all contractholder purchase transactions and one order for all contractholder redemption transactions, unless otherwise agreed to by the Insurance Company and the Transfer Agent.

c. Procedures . Insurance Company represents and warrants that it has policies and procedures in place to ensure that only those orders received by it by 4:00 p.m. Eastern time on any Business Day will be submitted with that business day’s net asset value.

d. Contingencies . All orders are subject to acceptance by Transfer Agent and become effective only upon confirmation by Transfer Agent. Upon confirmation, the Transfer Agent will verify total purchases and redemptions and the closing share position for each fund/account. In the case of delayed settlement, Transfer Agent and Insurance Company shall make arrangements for the settlement of redemptions by wire no later than the time permitted for settlement of redemption orders by the Investment Company Act of 1940. Such wires for Insurance Company should be sent to:

Such wires for Transfer Agent should be sent to:

e. Processing Errors . Processing errors which result from any delay or error caused by Insurance Company may be adjusted through the NSCC System by Insurance Company by the necessary transactions on a current basis.

f. Coding . If applicable, orders for the purchase of Fund shares shall include the appropriate coding to enable Transfer Agent to properly calculate commission payments to any broker-dealer firm assigned to the Separate Account.

g. Reconciliation . Insurance Company shall reconcile share positions with respect to each Fund for each Separate Account daily as reflected on its records to those reflected on statements from Transfer Agent and shall, on request, certify that each Separate Account’s share positions with respect to each Fund reported by Transfer Agent reconcile with Insurance Company’s share positions for that

Separate Account. Insurance Company shall promptly inform Transfer Agent of any record differences and shall identify and resolve all non-reconciling items within five (5) business days.

h. Verification . Within a reasonable period of time after receipt of a confirmation relating to an instruction, Insurance Company shall verify its accuracy in terms of such instruction and shall notify Transfer Agent of any errors appearing on such confirmation.

i. Order Processing . Any order by Insurance Company for the purchase of shares of the respective Funds through AFD shall be accepted at the time when it is received by AFD/Transfer Agent (or any clearinghouse agency that AFD/Transfer Agent may designate from time to time), and at the offering and sale price determined in accordance with this Agreement, unless rejected by AFD, Transfer Agent or the respective Funds. In addition to the right to reject any order, the Funds have reserved the right to withhold shares from sale temporarily or permanently. AFD/Transfer Agent will not accept any order from Insurance Company that is placed on a conditional basis or subject to any delay or contingency prior to execution. The procedure relating to the handling of orders shall be subject to instructions that AFD shall forward from time to time. The shares purchased will be issued by the respective Funds only against receipt of the purchase price, in collected New York or Los Angeles Clearing House funds. If payment for the shares purchased is not received within three (3) days after the date of confirmation, the sale may be cancelled by AFD or by the respective Funds without any responsibility or liability on the part of AFD or the Funds, and AFD and/or the respective Funds may hold the Insurance Company responsible for any loss, expense, liability or damage, including loss of profit suffered by AFD and/or the respective Funds, resulting from Insurance Company’s delay or failure to make payment as aforesaid.

j. Dividends and Distributions . The Transfer Agent shall furnish notice promptly to the Insurance Company of any dividend or distribution payable on any Funds held by the Separate Accounts. The Insurance Company hereby elects to receive all such dividends and distributions as are payable on shares of a Fund recorded in the title for the corresponding Separate Account in additional shares of that Fund. The Series shall notify the Insurance Company of the number of shares so issued. All such dividends and distributions shall be automatically reinvested at the ex-dividend date net asset value. The Insurance Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash.

k. Right to Suspend . The Series reserves the right to temporarily suspend sales if the Board of Trustees of the Series, acting in good faith and in light of its fiduciary duties under federal and any applicable state laws, deems it appropriate and in the best interests of shareholders or in response to the order of an appropriate regulatory authority. Insurance Company shall abide by requirements of the

Funds’ frequent trading policy as described in the Series’ prospectus and statement of additional information.

l. Book Entry . Transfer of the Series’ shares will be by book entry only. No stock certificates will be issued to the Separate Accounts. Shares ordered from a particular Fund will be recorded by the Series as instructed by Insurance Company in an appropriate title for the corresponding Separate Account.

m. Limitations on Redemptions . The Insurance Company shall not redeem Fund shares attributable to the Contracts (as opposed to Fund shares attributable to the Insurance Company’s assets held in the Account) except (i) as necessary to implement Contractholder-initiated transactions, or (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (a “Legally Required Redemption”). Upon request, the Insurance Company will promptly furnish to the Series and AFD an opinion of counsel for the Insurance Company (which counsel shall be reasonably satisfactory to the Series and AFD) to the effect that any redemption pursuant to clause (ii) above is a Legally Required Redemption.

10. Account Activity . Upon request, the Transfer Agent shall send to the Insurance Company, (i) confirmations of activity in each Separate Account within five (5) Business Days after each Trade Date on which a purchase or redemption of shares of a Fund is effected for a Separate Account; (ii) statements detailing activity in each Separate Account no less frequently than quarterly; and (iii) such other information as may reasonably be requested by Insurance Company and agreed upon by Transfer Agent.

11. Expenses . All expenses incident to each party’s performance of this Agreement shall be paid by the respective party.

The Funds shall pay the cost of registration of their shares with the SEC, preparation of the Fund’s prospectuses, proxy materials and reports, or the preparation of other related statements and notices required by Applicable Law. The Funds shall pay the cost of qualifying Fund shares in states where required.

12. Proxy and Other Communication Materials. The Funds shall distribute to the Insurance Company their proxy material and periodic Fund reports to shareholders. AFD, Transfer Agent or the Funds shall provide the Insurance Company with a reasonable quantity of the Funds’ prospectuses and sales literature upon request to be used for the Separate Accounts in connection with the transactions contemplated by this Agreement. AFD, Transfer Agent or the Funds shall provide to Insurance Company, or its authorized representative, at no expense to Insurance Company, the following Contractholder communication materials prepared for circulation to Contractholders in quantities reasonably requested by Insurance Company which are sufficient to allow mailing thereof by Insurance Company, to the extent required by Applicable Law, to all Contractholders in the Separate Accounts: proxy or information statements, annual reports, semi-annual reports, and all updated prospectuses, supplements and amendments

thereof. AFD, Transfer Agent or the Funds shall provide Insurance Company with other documents and materials as Insurance Company may reasonably request from time to time.

AFD will provide Insurance Company on a timely basis with investment performance information for each Fund, including (a) the top ten portfolio holdings on a quarterly basis; and (b) on a monthly basis, average annual total return for the prior one-year, three year, five-year, ten-year and life of the Fund. AFD will endeavor to provide the information in clause (a) to Insurance Company within twenty (20) business days after the end of each quarter, and will endeavor to provide the information in clause (b) to Insurance Company within five (5) business days after the end of each month.

13. Proxy Materials/Voting . The Insurance Company will distribute all proxy material furnished by the Funds to the extent required by Applicable Law. For so long as the SEC interprets the 1940 Act to require pass-through voting by insurance companies whose separate accounts are registered as investment companies under the 1940 Act (“Registered Separate Accounts”), the Insurance Company shall vote shares of the Funds held in Registered Separate Accounts at shareholder meetings of the Funds in accordance with instructions timely received by the Insurance Company (or its designated agent) from owners of Contracts funded by such Registered Separate Accounts having a voting interest in the Funds. The Insurance Company shall vote shares of the Funds held in Registered Separate Accounts that are attributable to the Contracts as to which no timely instructions are received, as well as shares held in such Registered Separate Account that are not attributable to the Contracts and owned beneficially by the Insurance Company (resulting from charges against the Contracts or otherwise), in the same proportion as the votes cast by owners of the Contracts funded by the Registered Separate Account having a voting interest in the Funds from whom instructions have been timely received. The Insurance Company shall vote shares of the Funds held in its general account or in any Separate Account that is not registered under the 1940 Act, if any, in its discretion.

14. Future Registration of Separate Account(s) . If Insurance Company registers a Separate Account as a unit investment trust under the 1940 Act, Insurance Company will provide to each Fund, as appropriate, at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no action letters, and all amendments to any of the above, that relate to the Contracts or any Separate Account contemporaneously with the filing of such document with the SEC, FINRA or other regulatory authority.

15. Independent Contractor Status. The Insurance Company shall, for all purposes herein, be deemed to be an independent contractor and shall have, unless otherwise expressly provided or authorized, no authority to act for or represent AFD or the Funds in any way or otherwise be deemed an agent of AFD or the Funds.

16. Termination . At the terminating party’s election and the other party’s concurrence,

termination of this Agreement may be limited solely as to new Contracts. This Agreement shall terminate:

a. at the option of the Insurance Company, AFD, Transfer Agent, CRMC or the Series upon ninety (90) days’ advance written notice to the other parties;

b. at any time by giving thirty (30) days’ written notice to the other party in the event of a material breach of this Agreement by the other party that is not cured during such 30-day period;

c. at the option of the Insurance Company, CRMC, AFD or the Series, upon institution of formal proceedings relating to (i) the marketing of the Contracts, (ii) the Separate Accounts, (iii) the Insurance Company, (iv) AFD or (v) the Funds by FINRA, the SEC or any other regulatory body;

d. at the option of Insurance Company immediately upon written notice, if the Series or CRMC fails to meet the requirements for either diversification under Section 817 or RIC status under the Code;

e. at the option of any party upon termination of CRMC’s investment advisory agreement with the Series. Notice of such termination shall be promptly furnished. This paragraph (e) shall not be deemed to apply if, contemporaneously with such termination, a new contract of substantially similar terms is entered into between CRMC and the Series;

f. except for Insurance Company’s delegation of its duties to a subcontractor or to an affiliate, upon assignment of this Agreement, at the option of any party not making the assignment, unless made with the written consent of the other parties;

g. in the event interests in the Separate Accounts, the Contracts, or Fund shares are not registered, issued or sold in conformity with Applicable Law or such Applicable Law precludes the use of Fund shares as an underlying investment medium of Contracts issued or to be issued by the Insurance Company. Prompt notice shall be given by the terminating party to the other parties in the event the conditions of this provision occur;

h. for Registered Separate Accounts, they may terminate upon a decision by the Insurance Company, in accordance with regulations of the SEC for Registered Separate Accounts, to substitute Fund shares with the shares of another investment company for Contracts for which the Fund shares have been selected to serve as the underlying investment medium for Registered Separate Accounts, in which case the following provisions shall apply:

(i) The Insurance Company will give sixty (60) days’ written notice to the applicable Fund and AFD upon the occurrence of the earlier of the following

actions taken for the purpose of substituting shares of the Fund: (1) an application made to the SEC, (2) a proposed Contractholder vote, or (3) the Insurance Company’s determination to substitute Fund shares with the shares of another investment company; and

(ii) The Funds or AFD will in no way recommend action in connection with, or oppose or interfere with any application made to the SEC by the Insurance Company with regard to the substitution of Fund shares with shares of another investment company or seek in any manner to oppose or interfere with a proposed Contractholder vote; or

i. upon such shorter notice as is required by law, order or instruction by a court of competent jurisdiction or a regulatory body or self-regulatory organization with jurisdiction over the terminating party.

Upon termination and at the request of the requesting party, the other party shall deliver to the requesting party, any records which the requesting party may be required by law or regulations to have access to or to maintain.

17. Notices . All notices under this Agreement, unless otherwise specified in the Agreement shall be given in writing and delivered via overnight delivery (postage prepaid, return receipt requested), facsimile transmission or registered or certified mail, as follows:

If to the Insurance Company:

Todd Thompson, Senior Vice President, Annuities

Protective Life Insurance Company

2801 Highway 280 South

Birmingham, AL 35223

with a copy to:

Senior Associate Counsel — Variable Products

Protective Life Corporation

2801 Highway 280 South

Birmingham, AL 35223

If to AFD, Transfer Agent, CRMC or to the Series:

Kenneth R. Gorvetzian

Capital Research and Management Company

333 South Hope Street

55 th Floor

Los Angeles, CA 90071

with a copy to:

Stephen T. Joyce

American Funds Distributors, Inc.

333 South Hope Street

55 th Floor

Los Angeles, CA 90071

And:

American Funds Service Company

Attn: Contract Administration

3500 Wiseman Blvd.

San Antonio, TX 78251-4321

phone: 800/421-5475, ext. 8

facsimile: 210/474-4088

or to such other address or person as may be specified in a written notice given to the other parties. The date of service of any notice shall be the date it is received by the recipient.

18. Books and Records . Each party hereto shall cooperate with the other parties and all appropriate governmental authorities and shall permit authorities reasonable access to its books and records upon proper notice in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. Each party shall maintain and preserve all records in its possession as required by law to be maintained and preserved in connection with the provision of the services contemplated hereunder. Upon the request of a party, the other party shall provide copies of all records as may be necessary to (a) monitor and review the performance of either party’s activities, (b) assist either party in resolving disputes, reconciling records or responding to auditor’s inquiries, (c) comply with any request of a governmental body or self-regulatory organization, (d) verify compliance by a party with the terms of this Agreement, (e) make required regulatory reports, or (f) perform general customer service. The parties agree to cooperate in good faith in providing records to one another under this provision.

19. Indemnification.

a. Insurance Company shall indemnify and hold harmless AFD, Transfer Agent, CRMC, the Series, each of the Funds, and each of their affiliates, directors, officers, employees and agents and each person who controls them within the meaning of the 1933 Act, from and against any and all losses, claims, damages, liabilities and expenses, including reasonable attorneys’ fees (“Losses”), they may incur, insofar as such Losses arise out of or are based upon (i) Insurance Company’s negligence or willful misconduct in the performance of its duties and obligations under this Agreement, (ii) Insurance Company’s violation of any

Applicable Law in connection with the performance of its duties and obligations under this Agreement, and (iii) any breach by Insurance Company of any provision of this Agreement, including any representation, warranty or covenant made in the Agreement. Insurance Company shall also reimburse AFD, Transfer Agent, CRMC, the Series, the Funds and their respective affiliates for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending against such Losses. This indemnity provision is in addition to any other liability which Insurance Company may otherwise have to AFD, the Transfer Agent, CRMC, the Series, the Funds or their respective affiliates.

b. AFD, Transfer Agent or CRMC, as applicable, shall indemnify and hold harmless, Insurance Company and its directors, officers, employees and agents and each person who controls them within the meaning of the 1933 Act, from and against any and all Losses they may incur, insofar as such Losses arise out of or are based upon (i) AFD’s, Transfer Agent’s or CRMC’s negligence or willful misconduct in the performance of its duties and obligations under this Agreement, (ii) AFD’s, Transfer Agent’s or CRMC’s violation of any Applicable Law in connection with the performance of its duties and obligations under this Agreement, and (iii) any breach by AFD, Transfer Agent or CRMC of any provision of this Agreement, including any representation, warranty or covenant made in the Agreement by AFD, Transfer Agent or the Series. AFD, Transfer Agent or CRMC, as applicable, shall also reimburse Insurance Company for any legal or other expenses reasonably incurred in connection with investigating or defending against such Losses. This indemnity provision is in addition to any other liability which AFD, Transfer Agent or CRMC may otherwise have to Insurance Company.

c. Promptly after receipt by a party entitled to indemnification under this paragraph 19 (an “Indemnified Party”) of notice of the commencement of an investigation, action, claim or proceeding, such Indemnified Party will, if a claim in respect thereof is to be made against the indemnifying party under this paragraph 19, notify the indemnifying party of the commencement thereof. The indemnifying party will be entitled to assume the defense thereof, with counsel satisfactory to the Indemnified Party. After notice from the indemnifying party of its intention to assume the defense of an action and the appointment of satisfactory counsel, Indemnified Party shall bear the expenses of any additional counsel obtained by it, and the indemnifying party shall not be liable to such Indemnified Party under this paragraph for any legal expenses subsequently incurred by such Indemnified Party in connection with the defense thereof other than reasonable costs of investigation. The indemnifying party shall not, without the prior written consent of the Indemnified Party, settle or compromise the liability of the Indemnified Party; provided, however, that in the event that the Indemnified Party fails to provide its written consent, the indemnifying party shall thereafter be liable to provide indemnification only to the extent of the amount for which the action could otherwise have been settled or compromised.

20. Governing Law . This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York exclusive of conflicts of laws.

21. Subchapter M . CRMC will endeavor to have each Fund comply with Subchapter M of the Internal Revenue Code of 1986, as amended, and the regulations thereunder and shall qualify as a regulated investment company thereunder.

22. Entire Agreement/Amendments . This Agreement (together with the Business Agreement) contains the entire understanding and agreement among the parties with respect to the subject matter of this Agreement and supersedes any and all prior agreements, understandings, documents, projections, financial data, statements, representations and warranties, oral or written, express or implied, between the parties hereto and their respective affiliates, representatives and agents in respect of the subject matter hereof. This agreement may not be amended except by written agreement of the parties. If there should be any conflict between the terms of this Agreement and those of the Business Agreement, the terms of this Agreement shall govern.

23. Assignability . This Agreement shall extend to and be binding upon the Insurance Company, the Series, AFD, CRMC and the Transfer Agent and their respective successors and assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person or corporation, other than the parties hereto and their respective successors and permitted assigns, any legal or equitable right, remedy or claim in respect of this Agreement or any provision herein contained. Neither this Agreement nor any rights, privileges, duties or obligations of the parties hereto may be assigned by any party without the prior written consent of the other parties or as expressly contemplated by this Agreement; provided, however, that a merger of, reinsurance arrangement by, or change of control of a party shall not be deemed to be an assignment for purposes of this Agreement.

24. Proprietary Information . AFD and the Funds agree that the names, addresses, and other information relating to the Contractholders or prospects for the sale of the Contracts developed by Insurance Company are the exclusive property of the Insurance Company and may not be used by AFD, Transfer Agent, CRMC or the Funds without the written consent of the Insurance Company except for carrying out the terms of this Agreement or as otherwise provided for in this Agreement and any amendments thereto. Each party to this Agreement agrees to maintain the confidentiality of all information (including personal financial information of the customers of either party) received from the other party pursuant to this Agreement. Each party agrees not to use any such information for any purpose, or disclose any such information to any person, except as permitted or required by applicable laws, rules and regulations, including applicable state privacy laws and the Gramm-Leach-Bliley Act and any regulations promulgated thereunder. This provision, to the extent permissible by applicable law, shall not be construed to limit the parties’ obligation to comply with paragraph 19, above.

AFD, the Transfer Agent, CRMC and the Series hereby consent to the Insurance

Company’s use of the names of the Series, the Funds, AFD, the Transfer Agent and CRMC in connection with marketing the Funds and Contracts, subject to the terms of this Agreement and the Business Agreement. Insurance Company acknowledges and agrees that AFD, CRMC and/or their affiliates own all right, title and interest in and to the names American Funds, American Funds Distributors, American Funds Insurance Series, American Funds Service Company and Capital Research and Management Company and covenants not, at any time, to challenge the rights of AFD, CRMC and/or its affiliates to such name or design, or the validity or distinctiveness thereof. AFD, the Transfer Agent, CRMC and the Series hereby consent to the use of any trademark, trade name, service mark or logo used by AFD, the Transfer Agent, CRMC and the Series, subject to AFD, the Transfer Agent, CRMC or the Series approval of such use and in accordance with reasonable requirements of that party. Such consent will terminate with the termination of this Agreement. The Insurance Company agrees and acknowledges that all use of any designation comprised in whole or in part of the name, trademark, trade name, service mark and logo under this Agreement shall inure to the benefit of AFD, the Transfer Agent, CRMC and/or the Series.

25. Severability . If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby.

26. No Waiver . No waiver of any provision of this Agreement will be binding unless in writing and executed by the party granting such waiver. Any valid waiver of a provision set forth herein shall not constitute a waiver of any other provision of this Agreement. In addition, any such waiver shall constitute a present waiver of such provision and shall not constitute a permanent future waiver of such provision.

27. No Joint Venture, Etc. Neither the execution nor performance of this Agreement shall be deemed to create a partnership or joint venture by and among Insurance Company, Transfer Agent, AFD, CRMC and the Funds.

28. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. Neither this Agreement nor any amendment shall become effective until all counterparts have been fully executed and delivered.

29. Survival . The provisions of paragraphs 4, 5, 19 and 24 survive termination of this Agreement. If this Agreement terminates, the Series, at Insurance Company’s option, will continue to make additional shares of the Funds available for all existing Contracts as of the effective date of termination (under the same terms and conditions as were in effect prior to termination of this Agreement with respect to existing Contractholders), unless the applicable Fund liquidates or applicable laws prohibit further sales.

30. Non-exclusivity . Each of the parties acknowledges and agrees that this Agreement and the arrangements described herein are intended to be non-exclusive and that each of the parties is free to enter into similar agreements and arrangements with other entities.

31. Insurance . At all times Insurance Company shall maintain insurance coverage that is reasonable and customary in light of all its responsibilities hereunder. Such coverage shall insure for losses resulting from the criminal acts or errors and omissions of Insurance Company’s employees and agents.

32. Oversight of Insurance Company . Insurance Company will permit Transfer Agent or its representative to have reasonable access to Insurance Company’s personnel and records pertaining to this Agreement in order to facilitate the monitoring of the quality of the services performed by Insurance Company under this Agreement.

33. Independent Audit . In the event Transfer Agent determines, based on a review of complaints received in accordance with paragraph 18, above, that Insurance Company is not processing Contractholder transactions accurately, Transfer Agent reserves the right to require that Insurance Company’s data processing activities as they relate to this Agreement be subject to an audit by an independent accounting firm to ensure the existence of, and adherence to, proper operational controls. Insurance Company shall make available upon Transfer Agent’s request a copy of any report by such accounting firm as it relates to said audit. Insurance Company shall immediately notify Transfer Agent in the event of a material breach of operational controls.

34. Arbitration . In the event of a dispute between the parties with respect to this Agreement, and in the event the parties are unable to resolve the dispute between them, such dispute shall be settled by arbitration; one arbitrator to be named by each party to the disagreement and a third arbitrator to be selected by the two arbitrators named by the parties. The decision of a majority of the arbitrators shall be final and binding on all parties to the arbitration. The expenses of such arbitration shall be paid by the non-prevailing party.

35. No Recourse . The obligations of the Series under this Agreement are not binding upon any of the Trustees, officers, employees or shareholders (except CRMC if it is a shareholder) of the Series individually, but bind only the Series’ assets. When seeking satisfaction for any liability of the Series in respect of this Agreement, Insurance Company and the Account agree not to seek recourse against said Trustees, officers, employees or shareholders, or any of them, or any of their personal assets for such satisfaction.

36. Conflicts . The parties to this Agreement recognize that due to differences in tax treatment or other considerations, the interests of various Contractholders participating in one or more Funds might, at some time, be in conflict. Each party shall report to the other party any potential or existing conflict of which it becomes aware. The Board of Trustees of the Series shall promptly notify Insurance Company of the existence of irreconcilable material conflict and its implications. If such a conflict exists, Insurance Company will, at its own expense, take whatever action it deems necessary to remedy such conflict; in any case, Contractholders will not be required to bear such expenses.

37. Mixed and Shared Funding . The Series hereby notifies Insurance Company that it may be appropriate to include in the Prospectus pursuant to which a Contract is offered disclosure regarding the risks of mixed and shared funding.

38. Shareholder Information Agreement . The Insurance Company has executed or will execute an agreement with Transfer Agent pursuant to Rule 22c-2 under the Investment Company Act of 1940, under which the Insurance Company is required, upon request, to provide the Funds with certain account information and to prohibit transactions that violate the policies established by the Funds for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Funds.

39. Confidentiality of Holdings Information . The Insurance Company may receive certain holdings information (the “Holdings Information”) related to the Funds on a daily, weekly, monthly or other periodic basis from the Series, CRMC or one of their designees in order to help evaluate the Funds for inclusion in the Contracts and to evaluate and coordinate with Insurance Company’s internal hedging program (the “Purpose”). Insurance Company agrees that the Holdings Information is confidential and may only be used by Insurance Company for the Purpose. Insurance Company agrees that it (a) will hold any and all Holdings Information it obtains in strictest confidence; (b) may disclose or provide access to its employees who have a need to know and may make copies of Holdings Information only to the extent reasonably necessary to carry out the Purpose; (c) currently has, and in the future will maintain in effect and enforce, rules and policies to protect against access to or use or disclosure of Holdings Information other than in accordance with this Agreement, including without limitation written instruction to and agreements with employees and agents who are bound by an obligation of confidentiality no less stringent than set forth in this Agreement to ensure that such employees and agents protect the confidentiality of Holdings Information; (d) will instruct its employees and agents not to disclose Holdings Information to third parties, including without limitation customers, sub-contractors or consultants; and (e) will notify the Series and CRMC immediately of any unauthorized disclosure or use, and will cooperate with them in taking action to ensure that the Holdings Information is not used by such receiving party.Without limiting the foregoing, Insurance Company shall use at least the same degree of care, but no less than reasonable care, to avoid disclosure or use of this Holdings Information as it employs with respect to its own confidential information of a like importance.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

PROTECTIVE LIFE INSURANCE COMPANY,
for itself and on behalf of the Separate Accounts


By:	/s/ Todd Thompson
Name:		Todd Thompson
Title:		Senior Vice President


AMERICAN FUNDS DISTRIBUTORS, INC.


By:	/s/ Timothy W. McHale
Name:		Timothy W. McHale
Title:		Secretary


AMERICAN FUNDS INSURANCE SERIES


By:	/s/ Steven I. Koszalka
Name:		Steven I. Koszalka
Title:		Secretary


AMERICAN FUNDS SERVICE COMPANY


By:	/s/ Angele M. Mitchell
Name:		Angele M. Mitchell
Title:		Secretary


CAPITAL RESEARCH AND MANAGEMENT COMPANY


By:	/s/ Michael J. Downer
Name:		Michael J. Downer
Title:		Senior Vice President and Secretary

EXHIBIT A

Insurance Company Accounts

Protective Variable Annuity Separate Account

Protective Variable Life Separate Account.

EXHIBIT B — Initial Funds

	Class 2 :
	American Funds IS Asset Allocation Fund
	American Funds IS Blue Chip Income and Growth Fund
American Funds Insurance Series	American Funds IS Global Growth Fund
	American Funds IS Global Small Capitalization Fund
	American Funds IS Growth Fund
	American Funds IS International Fund
	American Funds IS New World Fund

	Class 4 :
	American Funds IS Asset Allocation Fund
	American Funds IS Blue Chip Income and Growth Fund
American Funds Insurance Series	American Funds IS Global Growth Fund
	American Funds IS Global Small Capitalization Fund
	American Funds IS Growth Fund
	American Funds IS International Fund
	American Funds IS New World Fund

EXHIBIT C

Administrative Services

1. Periodic Reconciliation . The Insurance Company shall provide the Funds with sufficient information to allow for the periodic reconciliation of outstanding units of Insurance Company separate accounts and shares of the Funds.

2. Record Maintenance . To facilitate the reconciliation activities described in paragraph 1, the Insurance Company shall maintain with respect to each Separate Account holding the Funds’ Class 4 Shares and each Contract owner for whom such shares are beneficially owned the following records:

a. Number of shares;

b. Date, price and amount of purchases and redemptions (including dividend reinvestments) and dates and amounts of dividends paid for at least the current year to date;

c. Name and address and taxpayer identification numbers;

d. Records of distributions and dividend payments; and

e. Any transfers of shares.

3. Fund Information . The Insurance Company shall respond to inquiries from Contract owners regarding the Funds, including questions about the Funds’ objectives and investment strategies.

4. Shareholder Communications . The Insurance Company shall provide for the delivery of certain Fund-related materials as required by applicable law or as requested by Contract owners. The Fund related materials shall consist of updated prospectuses and any supplements and amendments thereto, statements of additional information, annual and other periodic reports, proxy or information statements and other appropriate shareholder communications. The Insurance Company shall respond to inquiries from Contract owners relating to the services provided by it and inquiries relating to the Funds.

5. Transactional Services . The Insurance Company shall (a) communicate to the Funds’ transfer agent, purchase, redemption and exchange orders; and (b) communicate to the Separate Accounts and Contract owners, mergers, splits and other reorganization activities of the Funds.

6. Other Information . The Insurance Company shall provide to the Separate Accounts and Contract owners such other information as shall be required under applicable law and regulations.

Exhibit 99.14(a)

[SUTHERLAND ASBILL & BRENNAN LLP]

THOMAS E. BISSET

DIRECT LINE: 202.383.0118

E-mail: thomas.bisset@sutherland.com

June 26, 2015

Board of Directors

Protective Life Insurance Company

2801 Highway 280 South

Birmingham, Alabama 35223

RE: Protective Investors Choice VUL Policy

Post-Effective Amendment No. 2

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 No. 2 to the Registration Statement on Form N-6 (File No. 333-194115) by Protective Life Insurance Company and Protective Variable Life Separate 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.

	Sincerely,

	SUTHERLAND ASBILL & BRENNAN LLP


	By:	/s/ Thomas E. Bisset
		Thomas E. Bisset

Exhibit 99.14(b)

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form N-6 (File No. 333-194115) of our report dated March 24, 2015, relating to the consolidated financial statements and financial statement schedules of Protective Life Insurance Company and subsidiaries, which appears in such Registration Statement. We also consent to the use in this Registration Statement on Form N-6 (File No. 333-194115) of our report dated April 24, 2015, relating to the financial statements of Protective Variable Life Separate Account, which appears in such Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Birmingham, Alabama

June 26, 2015