Market Sector Update

• Global equity markets experienced a strong recovery during the quarter after the sharp sell-off that occurred in late 2018. The increased likelihood of a trade resolution between the U.S. and China, the U.S. Federal Reserve pausing plans for additional rate hikes as well as improving economic data out of Europe and China helped drive the market rally in both developed and emerging markets.
• In a continuation of recent trends, growth stocks outperformed value stocks, though both styles generated doubledigit returns during the quarter. Emerging markets generally outperformed developed markets during the period. In particular, China performed well as it regained part of prior losses. The U.S. led developed market performance, while Japan was a laggard. Performance in Europe was mixed, with outperformance from the U.K. (on a timeline extension of Brexit) and underperformance from Germany.
• On a sector basis, information technology was particularly strong, up almost 20% for the quarter. The real estate, energy and industrials sectors also performed well, while the health care and financials sectors underperformed.

Portfolio Strategy

• The Portfolio outperformed the benchmark for the period with stock selection driving relative outperformance. Selection was notably strong in the industrials, consumer staples and communication services sectors.
• The Portfolio’s exposure to the health care sector was the largest relative detractor to performance. The Portfolio's overweight allocation to the relatively poor-performing sector as well as exposure to U.S. health care services stocks that disproportionately performed poorly on fears stemming from political rhetoric/concerns contributed to the decline. As political pressure continued through the quarter, we materially reduced our overweight allocation to U.S. health care services stocks on fears of continued political and regulatory concerns between now and the 2020 presidential election.
• Top individual contributors to performance in the period included Airbus SE (benefitting from Boeing safety issues), Ping An Insurance Group Co. of China Ltd., and Ferrari N.V. Top individual detractors included CME Group, Inc., Cigna Corp., UnitedHealth Group, Inc. and HCA Holdings, Inc.
• The Portfolio’s largest sector overweights include consumer discretionary, followed by industrials and information technology. The Portfolio’s largest sector underweights include communication services and materials.

Outlook

• In our view, the most meaningful risk to equity markets is the on-going U.S.-China trade war. While a resolution is widely expected by markets today, a formal resolution of trade issues would be positive. We believe it would allow equity markets to focus on economic and business fundamentals, which have generally been showing signs of improvement. (Corporate earnings growth is still likely to slow for most global markets, particularly the U.S. where sizeable 2018 corporate tax cuts are having less impact). However, economic data in China, Europe and the U.S. looks better today than it did as we finished 2018.
• Going forward, we are focusing on holdings we believe can succeed under a range of scenarios. We continue to look for perceived opportunities where secular growth stocks have been oversold on fears and are pricing in unrealistically negative scenarios. We are focused on competitively advantaged growth stocks that we believe can outperform in this environment.

The opinions expressed are those of the Portfolio’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March 31, 2019, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

Top 10 holdings as a percent of net assets include: Airbus SE 5.7%, Amazon.com, Inc. 4.6%, Microsoft Corp. 3.2%, Visa Inc. Class A 3.2%, CME Group, Inc. 3.1%, Dollar General Corp. 3.0%, HCA Holdings, Inc. 3.0%, Cognizant Technology Solutions Corp., Class A 2.7%, Thermo Fisher Scientific, Inc. 2.6% and Ping An Insurance (Group) Co. of China Ltd., H Shares 2.5%.

Risk factors: The value of the Portfolio's shares will change, and you could lose money on your investment. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Prices of growth stocks may be more sensitive to changes in current or expected earnings than the prices of other stocks. Growth stocks may be more volatile or not perform as well as value stocks or the stock market in general. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets The Portfolio typically holds a limited number of stocks (generally 45 to 70). As a result, the appreciation or depreciation of any one security held by the Portfolio may have a greater impact on the Portfolio’s net asset value than it would if the Portfolio invested in a larger number of securities. These and other risks are more fully described in the Portfolio's prospectus.

Annuities are long-term financial products designed for retirement purposes. Annuity and life insurance guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. The guarantees have no bearing on the performance of a variable investment option. Variable investment options are subject to market risk, including loss of principal. There are charges and expenses associated with annuities and variable life insurance products, including mortality and expense risk charges, management fees, administrative fees, expenses for optional riders and deferred sales charges for early withdrawals. Withdrawals before age 59 1/2 may be subject to a 10% IRS tax penalty and surrender charges may apply.