Market Sector Update

• Global equity markets continued to show strength in the first quarter of 2021, with global markets up nearly 5%. Developed markets outperformed emerging markets. COVID-19 infection rates and vaccine penetration rates played a role in equity returns as investors anticipate recovering economic activity based on COVID-19 containment. Brazil, along with other parts of Latin America, have struggled with increasing COVID-19 outbreaks, leading to hospitalizations throughout the country and equity markets have struggled as a result. Value significantly outperformed growth in the quarter, extending a trend that began in fourth quarter of 2020.
• Energy was a standout performer after having been a significant laggard for much of 2020. Financials also performed well as government bond yields continued to rise in the period, notably U.S. Treasuries. Industrials, communication services and materials also outperformed. Consumer staples, utilities, health care and information technology all underperformed. Generally, businesses geared towards economic recovery did well in the period.

Portfolio Strategy

• The Portfolio underperformed its benchmark index for the period. Stock selection was the primary detractor to performance along with the Portfolio’s relative higher weighting to growth stocks. Weak stock selection in financials, consumer staples and industrials more than offset the strong stock selection in health care. Poor individual stock performers in the period included Ferrari N.V., Ubisoft Entertainment S.A., Alimentation Couche-Tard, Inc. and Daikin Industries Ltd. Strong selection came from opening up restaurant trades Brinker International, Inc. and Darden Restaurants, Inc., along with energy holdings Canadian Natural Resources Ltd. and ConocoPhillips.
• We remain overweight cyclicals in both industrials as well as consumer discretionary on the belief that the opening of trade, particularly in the U.S., will be strong and more persistent than expected given pent up demand and savings. We remain overweight information technology (although to a lesser degree than in the past) and remain overweight in financials and energy as well. We are underexposed to consumer staples, health care, real estate and utilities on the view the economy will be more pro cyclical in the coming months.

Outlook

• We expect the impact from COVID-19, which continues to vary significantly depending on the country and region, will have the largest impact on near-term growth and portfolio positioning. We believe the U.S. consumer will be the strongest driver of short-term growth given the relatively high rate of vaccinations in the U.S. versus the rest of the world as well as massive government stimulus in the U.S. that put money directly into consumers pockets. We also think the U.S. Federal Reserve will be very slow to temper inflationary concerns in the initial stages of recovery.
• We believe Europe will be slower to recover, but also will have improving growth over time. We view valuations in some parts of the European market as more attractive than in the U.S., and we continue to focus on looking for opportunities in sustainable growth businesses that may be undervalued by the market. While we remain overweight emerging markets, the bulk of our emerging-market exposure is concentrated in China at the moment, which is not having the issues of uncontrolled COVID-19 cases that other emerging markets such as Brazil and India are experiencing.

The opinions expressed are those of the Fund’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, 3021, 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 equity holdings as a percent of net assets as of 03/31/2021: Amazon.com, Inc. 4.3%; Microsoft Corp. 3.5%; Apple, Inc. 3.3%; PayPal, Inc. 2.8%; Ferrari N.V. 2.8%; Schneider Electric S.A. 2.7%; Airbus SE 2.7%; Taiwan Semiconductor Manufacturing Co. Ltd. ADR 2.6%; Brinker International, Inc. 2.6%; and Darden Restaurants, Inc. 2.4%.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

MSCI World is an unmanaged index comprised of securities that represent the securities markets around the world. It is not possible to invest directly in an index.

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 50 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.