American Funds
Insurance Series®
Annual report
for the year ended December 31, 2022
Investing in global companies for the long term
American Funds Insurance Series, by Capital Group, is the underlying investment vehicle for many variable annuities and insurance products. For over 90 years, Capital Group has invested with a long-term focus based on thorough research and attention to risk.
Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com/afis. For information about your insurance contract and month-end results, go to the website of the company that issued your contract.
Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. Investing in small-capitalization stocks can involve greater risk than is customarily associated with investing in stocks of larger, more established companies. The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. High-yield bonds are subject to greater fluctuations in value and risk of loss of income and principal than investment-grade bonds. Bond ratings, which typically range from AAA/Aaa (highest) to D (lowest), are assigned by credit rating agencies such as Standard & Poor’s, Moody’s and/or Fitch as an indication of an issuer’s creditworthiness. The use of derivatives involves a variety of risks, which may be different from, or greater than, the risks associated with investing in traditional cash securities, such as stocks and bonds. Hedge instruments, including exchange-traded futures contracts and exchange-traded put options, may not provide an effective hedge of the underlying securities because changes in the prices of such instruments may not track those of the securities they are intended to hedge. In addition, the managed risk strategy may not effectively protect the funds from market declines and will limit the funds’ participation in market gains. The use of the managed risk strategy could cause the funds’ returns to lag those of the underlying funds in certain market conditions. Refer to the funds’ prospectuses and the Risk Factors section of this report for more information on these and other risks associated with investing in the funds.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Contents
1Letter to investors
4Fund reviews
Investment portfolios
46 Global Growth Fund
51Global Small Capitalization Fund
58Growth Fund
65International Fund
70New World Fund®
84Washington Mutual Investors Fund
89Capital World Growth and Income Fund®
97 Growth-Income Fund
103International Growth and Income Fund
109Capital Income Builder®
127Asset Allocation Fund
160American Funds® Global Balanced Fund
176The Bond Fund of America®
206Capital World Bond Fund®
226American High-Income Trust®
245American Funds Mortgage Fund®
252Ultra-Short Bond Fund
254U.S. Government Securities Fund®
263Managed Risk Growth Fund
265Managed Risk International Fund
Fellow investors:
It is our pleasure to present the annual report for American Funds Insurance Series® for the year ended December 31, 2022.
Regarding the investment environment, global stocks fell sharply, pressured by rising interest rates, slowing economic growth and inflationary pressures not seen since the 1980s. Several key benchmark indexes fell into bear market territory at times and all but one sector declined in the MSCI All Country World Index1. Communication services, consumer discretionary and information technology stocks suffered the biggest losses. Meanwhile, energy stocks surged amid higher oil and gas prices. Late in the year, signs that inflation may have peaked in the U.S., Europe and elsewhere sparked a rally that erased some of the losses.
U.S. equities had their worst year since 2008 as the S&P 500 Index2 fell 18.11%. Growth stocks had the sharpest declines, including several tech giants that had been market leaders over the last decade. On the upside, energy was the top S&P 500 sector for the second straight year, climbing 66%. Crude oil prices spiked in March after Russia’s invasion of Ukraine upended global oil flows. Despite consecutive quarters of negative gross domestic product growth in the first half,
a strong labor market helped inflation to persist.
European stocks declined as record-high inflation, rising interest rates and the Ukraine invasion combined to hammer the eurozone economy. Gross domestic product growth in the 19-member eurozone decelerated throughout the year, falling to 0.3% in the third quarter from 0.6% in the first quarter. Political turmoil also weighed on markets amid contentious leadership changes in Italy and the United Kingdom. Despite a strong fourth-quarter rally in European stocks, the MSCI Europe Index3 finished the full year down by 15.06%.
Emerging markets stocks tumbled, undercut by China’s economic slowdown, interest rate hikes and the growing strength of the U.S. dollar. Rising inflation in developing countries that spurred monetary tightening, as well as rolling lockdowns in China to suppress COVID- 19, also weighed on equity prices. Overall, the MSCI Emerging Markets Index4 slid 20.09%.
Bonds fell in the face of rising inflation, and the Federal Reserve hiked its policy rate 425 basis points over seven policy meetings in an attempt to tame it. The Bloomberg U.S. Treasury Index5 lost 12.46% in one of the worst bond market
267Managed Risk Washington Mutual Investors Fund
269Managed Risk Growth-Income Fund
271Managed Risk Asset Allocation Fund
273 Financial statements
Past results are not predictive of results in future periods.
All market returns referenced in this report are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. Country returns are based on MSCI indexes, which reflect reinvestment of distributions and dividends net of withholding taxes. Source: MSCI.
1Source: MSCI. MSCI ACWI is a free float-adjusted market capitalization-weighted index that is designed to measure equity market results in the global developed and emerging markets, consisting of more than 40 developed and emerging market country indexes. Results reflect dividends net of withholding taxes.
2Source: S&P Dow Jones Indices LLC. S&P 500 Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks.
3Source: MSCI. MSCI Europe Index is a free float-adjusted market capitalization-weighted index that is designed to measure results of more than 10 developed equity markets in Europe. Results reflect dividends net of withholding taxes.
4Source: MSCI. MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market results in the global emerging markets, consisting of more than 20 emerging market country indexes. Results reflect dividends net of withholding taxes.
5Source: Bloomberg Index Services Ltd. Bloomberg U.S. Treasury Index measures the performance of public obligations of the U.S. Treasury.
American Funds Insurance Series 1
declines in history. The Federal Reserve and European Central Bank, among others, aggressively raised interest rates in an attempt to bring inflation back to a target of roughly 2%, down from 7% to 10% in many economies. U.S. Treasury yields rose across the curve, which ended the year inverted as shorter dated bonds sold off sharply. The 10-year Treasury yield rose 237 basis points to 3.88%. In this environment, investment-grade (BBB/ Baa and above) corporate bonds saw the worst returns. The Bloomberg U.S. Corporate Investment Grade Index6 was down 15.76%, and spreads widened by 38 basis points. Elsewhere, the Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index7 fell by 11.18%, while the Bloomberg Municipal Bond Index8 declined 8.53%.
In foreign exchange markets a strong U.S. dollar grew stronger for much of the year, particularly as the Fed raised rates at a faster pace than some other central banks, though there was some reversal of its strength in the last two months of the year. The dollar posted gains of 6.6% and 14.6% against the euro and the yen, respectively.
Looking ahead
Big questions remain about how the U.S. economy will do in 2023. It is possible
that the delayed impact of higher rates will keep growth slow, or even cause a mild recession. However, we have confidence in the long-term trajectory of the economy, and the stock market has likely digested much of the potential bad news already, given the decline this year. Investors have reason for hope, as we’ve already taken a measure of pain, in both stocks and bonds. Inflation may persist above the levels we’ve been used to the past decade, but is likely to gently decline over the coming year from the 6.5% mark, published in January 2023. That would be good news on its own, and would also lighten the upward pressure we’ve seen on interest rates this past year. The global negative impact of COVID-19 has already persisted longer than anyone predicted back in early 2020, but should also decline with time, particularly as China has decided to end lockdowns. That will eventually help economic growth.
Thus, as 2023 progresses we may see, out of many fears, a reason for optimism. The ongoing war in Ukraine remains a wild card, and we hope it does not spill over into a larger conflict. That may be the biggest risk to a mildly positive outlook for stocks. There can still be bumps in the road, but with our world-class research, we will continue to focus on finding those companies with the best fundamentals
and the best risk-versus-return tradeoffs. We believe that we will find plenty of attractive securities for the long term in this environment. In the event of periods of volatility, we remain committed to our process, and will look for opportunities at that time as well.
Our time-tested process is based on extensive research, a long-term framework and close attention to valuation, and has resulted in superior outcomes for investors over time. As always, we thank you for your continued support of our efforts and we look forward to reporting to you again in six months.
Sincerely,
Donald D. O’Neal
Co-President
Alan N. Berro
Co-President
February 13, 2023
Past results are not predictive of results in future periods.
6Source: Bloomberg Index Services Ltd. Bloomberg U.S. Corporate Investment Grade Index represents the universe of investment-grade, publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity and quality requirements.
7Source: Bloomberg Index Services Ltd. Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index covers the universe of fixed-rate, non-investment-grade debt. The index limits the maximum exposure of any one issuer to 2%.
8Source: Bloomberg Index Services Ltd. Bloomberg Municipal Bond Index is a market-value-weighted index designed to represent the long-term investment- grade tax-exempt bond market.
2 American Funds Insurance Series
About the series
Unless otherwise indicated, American Funds Insurance Series investment results are for Class 1 shares (Class P1 shares for managed risk funds). Class 1A shares began operations on January 6, 2017. Class 2 shares began operations on April 30, 1997. Class 3 shares began operations on January 16, 2004. Class 4 shares began operations on December 14, 2012. Results encompassing periods prior to those dates assume a hypothetical investment in Class 1 shares and include the deduction of additional annual expenses (0.25% for Class 1A shares, 0.25% for Class 2 shares, 0.18% for Class 3 shares and 0.50% for Class 4 shares).
The variable annuities and life insurance contracts that use the series’ funds contain certain fees and expenses not reflected in this report. Investment results assume all distributions are reinvested and reflect applicable fees and expenses. When applicable, results reflect fee waivers and/or expense reimbursements, without which they would have been lower. Visit capitalgroup.com/afis for more information.
The investment adviser is currently waiving a portion of its management fee for Global Growth Fund, Global Small Capitalization Fund, New World Fund, Washington Mutual Investors Fund, Capital World Growth and Income Fund, International Growth and Income Fund, Capital Income Builder, American Funds Global Balanced Fund, The Bond Fund of America, Capital World Bond Fund, American High-Income Trust, American Funds Mortgage Fund and U.S. Government Securities Fund. The waivers will be in effect through at least May 1, 2023. The waivers may only be modified or terminated with the approval of the series’ board. Applicable fund results shown reflect the waivers, without which results would have been lower. Refer to the Financial Highlights tables in this report for details.
For the managed risk funds, the investment adviser is currently waiving a portion of its management fee equal to 0.05% of each fund’s net assets. In addition, the investment adviser is currently reimbursing a portion of other expenses for Managed Risk International Fund. The waivers and reimbursement will be in effect through at least May 1, 2023, unless modified or terminated by the series’ board. After that time, the investment adviser may elect to extend, modify or terminate the reimbursement. The waivers may only be modified or terminated with the approval of the series’ board. Applicable fund results shown reflect the waivers and reimbursement, without which results would have been lower. Refer to the Financial Highlights tables in this report for details.
The Managed Risk Growth Fund pursues its objective by investing in shares of American Funds Insurance Series® — Growth Fund and American Funds Insurance Series® — The Bond Fund of America. The Managed Risk International Fund pursues its objective by investing in shares of American Funds Insurance Series® — International Fund and American Funds Insurance Series® — The Bond Fund of America. The Managed Risk Washington Mutual Investors Fund pursues its objective by investing in shares of American Funds Insurance Series® — Washington Mutual Investors Fund and American Funds Insurance Series® — U.S. Government Securities Fund. The Managed Risk Growth-Income Fund pursues its objective by investing in shares of American Funds Insurance Series® — Growth-Income Fund and American Funds Insurance Series® — The Bond Fund of America. The Managed Risk Asset Allocation Fund pursues its objective by investing in shares of American Funds Insurance Series® — Asset Allocation Fund. The funds seek to manage portfolio volatility and provide downside protection, primarily through the use of exchange-traded futures. The benefit of the funds’ managed risk strategy should be most apparent during periods of high volatility and in down markets. In steady or rising markets, the funds’ results can be expected to lag those of the underlying fund.
Funds are listed in the report as follows: equity, balanced, fixed income and managed risk.
American Funds Insurance Series 3
Global Growth Fund
Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com/afis. For information about your insurance contract and month-end results, go to the website of the company that issued your contract.
Global Growth Fund declined 24.54% for the 12 months ended December 31, 2022, compared with a decrease of 18.36% in its benchmark index, MSCI ACWI (All Country World Index),¹ a free float-adjusted market capitalization-weighted index that is designed to measure equity market results in the global developed and emerging markets, consisting of more than 40 developed and emerging market country indexes.
Global stocks fell sharply, pressured by rising interest rates, slowing economic growth and inflationary pressures not seen since the 1980s. The war in Ukraine also weighed on investors throughout the year. Several key benchmark indexes fell into bear market territory at times and all but one sector declined in the MSCI ACWI. Within that index, communication services, consumer discretionary and information technology stocks suffered the biggest losses. Meanwhile, energy stocks surged amid higher oil and gas prices. Late in the year, signs that inflation may have peaked in the U.S., Europe and elsewhere sparked a rally that erased some of the losses.
Within the fund, stock selection in the consumer discretionary sector was the top contributor to relative returns. A larger-than-index position in health care firm Cigna was among the top individual contributors to the fund, with returns that outpaced the broader market. On the downside, stock selections within the information technology sector weighed on results. Netherlands-based payments firm Adyen was among the top individual detractors, with returns that lagged the broader market in a weak sector overall.
On a geographic basis, stocks of companies domiciled in Hong Kong and France were among the top contributors to results, while stocks of companies based in the United States and the Netherlands were among the top detractors.
The fund’s portfolio managers are optimistic they will continue to find good companies globally that offer high- quality products and services, and whose values are not yet fully reflected in their share prices.
4 American Funds Insurance Series
Global Growth Fund (continued)
How a hypothetical | $40,000 |
$10,000 investment has grown
$26,965 Global Growth Fund, Class 1
$21,545
MSCI ACWI1
10,000 |
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8,000 |
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Total returns based on For periods ended December 31, 20222 |
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a $1,000 investment |
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| Class 1 |
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| 10.43% |
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| 9.57% |
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| 0.52% | 0.41% | ||||||
| Class 1A |
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| –24.73 |
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| 7.07 |
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| 10.16 |
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| 9.30 |
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| Class 2 |
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| –24.74 |
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| 7.06 |
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| 10.15 |
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| 9.30 |
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| Class 4 |
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| 6.80 |
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| 9.92 |
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| 9.04 |
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| 1.02 |
| 0.91 |
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The investment adviser is currently waiving a portion of its management fee. This waiver will be in effect through at least May 1, 2023. The waiver may only be modified or terminated with the approval of the fund’s board. Net expense ratios reflect the waiver, without which they would have been higher. When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Visit capitalgroup.com/afis for more information. Expense ratios are as of the fund’s prospectus dated May 1, 2023 (unaudited). Refer to the Financial Highlights table in this report for details.
Past results are not predictive of results in future periods.
Any market index shown is unmanaged and, therefore, has no expenses. Investors cannot invest directly in an index.
1Source: MSCI. The MSCI index results reflect dividends net of withholding taxes and reinvestment of distributions. ²Periods greater than one year are annualized.
Percent of net assets
Where the fund’s |
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assets were |
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invested as of |
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| The Americas 50.4% |
December 31, 2022 |
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| Europe 30.5% |
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Asia/Pacific Basin 15.2%
Short-term securities & other assets less liabilities 3.9%
American Funds Insurance Series 5
Global Small Capitalization Fund
Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com/afis. For information about your insurance contract and month-end results, go to the website of the company that issued your contract.
Global Small Capitalization Fund declined 29.37% for the 12 months ended December 31, 2022. Its benchmark, the MSCI All Country World Small Cap Index,¹ a free float-adjusted market capitalization-weighted index designed to measure equity market results of smaller capitalization companies in both developed and emerging markets, declined 18.67%.
Global stocks fell sharply, pressured by rising interest rates, slowing economic growth and inflationary pressures not seen since the 1980s. The war in Ukraine also weighed on investors throughout the year. Several key benchmark indexes fell into bear market territory at times and all but one sector declined in the MSCI All Country World Index. Within that index, communication services, consumer discretionary and information technology stocks suffered the biggest losses. Meanwhile, energy stocks surged amid higher oil and gas prices. Late in the year, signs that inflation may have peaked in the U.S., Europe and elsewhere sparked a rally that erased some of the losses.
Regarding the fund, stock selection within the health care sector was a positive contributor to relative returns. A larger-than-index investment in medical technology firm Haemonetics was among the fund’s top individual contributors over the period. On the downside, stock selection within the information technology sector weighed on returns. Within individual securities, India-based cloud platform provider Tanla Platforms was a top detractor, as its stock lagged the broader market.
Geographically, investments in companies domiciled in Hong Kong and Korea were overall additive to returns, while investments in those domiciled in China and the United States were detractors, overall.
In a turbulent year for markets across the board, the fund’s results for the past 12 months have been disappointing. However, with analysts’ full-time return to the road after COVID-19-related pauses, fund managers remain confident in the primary research capabilities underpinning investment decisions, and optimistic for the outlook ahead. While cognizant of the possibility of recession in the short term, managers remain committed to investing in companies with long-term potential.
6 American Funds Insurance Series
Global Small Capitalization Fund (continued)
How a hypothetical | $30,000 |
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has grown | $20,987 | |||
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| Small Cap1 |
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| $19,857 |
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| Global Small |
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10,000 |
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8,000 |
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Total returns based on For periods ended December 31, 20222 |
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a $1,000 investment |
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| Lifetime |
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| Class 1 |
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| –29.37% |
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| 3.05% |
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| 7.10% |
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| 8.39% |
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| Class 1A |
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| –29.54 |
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| 2.80 |
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| 6.84 |
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| 8.13 |
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| Class 2 |
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| –29.55 |
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| 2.79 |
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| 6.84 |
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| 8.13 |
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| Class 4 |
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| –29.69 |
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| 2.54 |
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| 6.58 |
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| 7.86 |
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| 1.20 |
| 1.16 |
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The investment adviser is currently waiving a portion of its management fee. This waiver will be in effect through at least May 1, 2023. The waiver may only be modified or terminated with the approval of the fund’s board. Net expense ratios reflect the waiver, without which they would have been higher. When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Visit capitalgroup.com/afis for more information. Expense ratios are restated to reflect current fees and are as of the fund’s prospectus dated May 1, 2023 (unaudited). Refer to the Financial Highlights table in this report for details.
Past results are not predictive of results in future periods.
Any market index shown is unmanaged and, therefore, has no expenses. Investors cannot invest directly in an index.
1Source: MSCI. The MSCI index results reflect dividends net of withholding taxes and reinvestment of distributions. ²Periods greater than one year are annualized.
Where the fund’s assets were invested as of December 31, 2022
Asia/Pacific Basin 31.6%
Europe 21.1%
Other regions .8%
Percent of net assets
The Americas 43.7%
Short-term securities
&other assets less liabilities 2.8%
American Funds Insurance Series 7
Growth Fund
Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com/afis. For information about your insurance contract and month-end results, go to the website of the company that issued your contract.
Growth Fund declined 29.75% for the 12 months ended December 31, 2022, compared with a decrease of 18.11% in its benchmark index, S&P 500 Index,¹ a market capitalization-weighted index based on the results of approximately 500 widely held common stocks.
U.S. equities had their worst year since 2008, as persistently high inflation and aggressive rate hikes stoked recession fears. S&P 500 Index entered its first bear market since 2020. Energy was the top S&P 500 sector for the second straight year, climbing 66%. Crude oil prices spiked in March after Russia’s invasion of Ukraine upended global oil flows. Growth stocks had the sharpest declines, including several tech giants that had been market leaders over the last decade. Despite consecutive quarters of negative gross domestic product growth in the first half, a strong labor market helped inflation to persist.
Regarding the fund, stock selection within the materials sector was the top contributor to relative returns. A position in energy industry firm Halliburton buoyed results as its stock outpaced the broader industry. On the downside, investments within the communication services sector weighed on results. A position in Tesla was the top individual detractor to returns.
The overall uncertain economic environment and challenges of inflation are very real concerns. The fund’s managers believe it is well-positioned for the road ahead and continue to focus on capital appreciation and selecting companies best suited for this challenging economic environment. Portfolio managers remain confident their time-tested investment approach, based on thorough research and robust debate with an eye on valuation, can continue to deliver superior outcomes for investors over the long-term.
8 American Funds Insurance Series
Growth Fund (continued)
How a hypothetical | $60,000 |
$10,000 investment has grown
10,000
8,000
‘12 | ’13 | ‘14 | ’15 | ‘16 | ’17 | ‘18 | ‘19 | ’20 | ’21 | ’22 |
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| Year ended December 31 |
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$36,843 Growth Fund, Class 1
$32,654 S&P 5001
Total returns based on For periods ended December 31, 20222 |
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a $1,000 investment |
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| Lifetime | Expense | |
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| 1 year | 5 years | 10 years (since February 8, 1984) | ratio | |
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| Class 1 | –29.75% | 11.42% | 13.93% | 12.65% | 0.34% |
| Class 1A | –29.93 | 11.14 | 13.65 | 12.37 | 0.59 |
| Class 2 | –29.94 | 11.14 | 13.64 | 12.37 | 0.59 |
| Class 3 | –29.89 | 11.22 | 13.72 | 12.45 | 0.52 |
| Class 4 | –30.11 | 10.86 | 13.38 | 12.09 | 0.84 |
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Visit capitalgroup.com/afis for more information. Expense ratios are as of the fund’s prospectus dated May 1, 2023 (unaudited). Refer to the Financial Highlights table in this report for details.
Past results are not predictive of results in future periods.
Any market index shown is unmanaged and, therefore, has no expenses. Investors cannot invest directly in an index.
1Source: S&P Dow Jones Indices LLC. ²Periods greater than one year are annualized.
Percent of net assets
Where the fund’s
assets were
invested as ofHealth care 17.3% December 31, 2022
Consumer discretionary 16.9%
Communication services 12.9% |
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| Other sectors 18.1% | |||||
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Industrials 10.9% |
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Other securities .3% |
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| & other assets | ||
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| less liabilities 3.6% |
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American Funds Insurance Series 9
International Fund
Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com/afis. For information about your insurance contract and month-end results, go to the website of the company that issued your contract.
International Fund declined 20.57% for the 12 months ended December 31, 2022. Its benchmark index, MSCI ACWI (All Country World Index) ex USA,¹ a free float-adjusted market capitalization-weighted index that is designed to measure equity market results in the global developed and emerging markets (consisting of more than 40 developed and emerging market country indexes, excluding the U.S.), fell 16.00%.
Global stocks fell sharply, pressured by rising interest rates, slowing economic growth and inflationary pressures not seen since the 1980s. The war in Ukraine also weighed on investors throughout the year. Several key benchmark indexes fell into bear market territory at times and all but one sector declined in the MSCI All Country World Index. Within that index, communication services, consumer discretionary and information technology stocks suffered the biggest losses. Meanwhile, energy stocks surged amid higher oil and gas prices. Late in the year, signs that inflation may have peaked in the U.S., Europe and elsewhere sparked a rally that erased some of the losses.
Within the portfolio, stock selection within the energy sector boosted relative returns. Within individual securities, a higher-than-index position in Petroleo Brasileiro was a top contributor as the stock significantly outpaced the market overall. On the downside, stock selection within the information technology sector dragged on returns. A larger-than-index position in South Korean chipmaker SK Hynix was among the top individual detractors.
Looking ahead, the market continues to focus on global inflation levels as a key determinant for interest-rate and asset-price movement. There are signs that the worst of the inflation surge, due in part to rising oil prices and supply-chain issues during the COVID-19 pandemic, seems to be behind us. However, there is still uncertainty about how wage increases – as seen in many developed markets – could impact the continuation of high inflation. As a result of tighter monetary conditions, economies around the world are seeing growth moderate. Meanwhile, contributors to a turbulent macro environment in 2022, such as the war in Ukraine and U.S.-China tensions, have not subsided. In this uncertain environment, the fund’s managers endeavor to maintain a portfolio with a healthy balance of well-managed companies across sectors.
10 American Funds Insurance Series
International Fund (continued)
How a hypothetical | $20,000 |
$10,000 investment has grown
$15,058 International Fund, Class 1
$14,520
MSCI ACWI ex USA1
10,000
8,000 |
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| Year ended December 31 |
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Total returns based on For periods ended December 31, 20222 |
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a $1,000 investment |
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| Lifetime | Expense | |||
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| 1 year |
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| 5 years |
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| 10 years | (since May 1, 1990) | ratio | ||||||
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| Class 1 |
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| –20.57% |
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| –0.78% |
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| 4.18% |
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| 7.07% | 0.53% | |||||
| Class 1A |
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| –20.80 |
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| –1.03 |
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| 3.92 |
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| 6.80 | 0.78 | ||||
| Class 2 |
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| –20.79 |
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| –1.03 |
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| 3.92 |
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| 6.80 | 0.78 | ||||
| Class 3 |
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| –20.76 |
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| –0.97 |
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| 3.98 |
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| 6.87 | 0.71 | ||||
| Class 4 |
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| –21.02 |
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| –1.29 |
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| 3.67 |
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| 6.54 | 1.03 |
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Visit capitalgroup.com/afis for more information. Expense ratios are restated to reflect current fees and are as of the fund’s prospectus dated May 1, 2023 (unaudited). Refer to the Financial Highlights table in this report for details.
Past results are not predictive of results in future periods.
Any market index shown is unmanaged and, therefore, has no expenses. Investors cannot invest directly in an index.
1Source: MSCI. The MSCI index result reflects dividends net of withholding taxes and reinvestment of distributions. ²Periods greater than one year are annualized.
Where the fund’s assets were invested as of December 31, 2022
Europe 30.2%
The Americas 15.3%
Other regions 1.2%
Percent of net assets
Asia/Pacific Basin 49.2%
Short-term securities
&other assets less liabilities 4.1%
American Funds Insurance Series 11
New World Fund®
Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com/afis. For information about your insurance contract and month-end results, go to the website of the company that issued your contract.
New World Fund was down 21.86% for the 12 months ended December 31, 2022. Its benchmark index, MSCI ACWI (All Country World Index),¹ a free float-adjusted market capitalization-weighted index that is designed to measure equity market results in the global developed and emerging markets (consisting of more than 40 developed and emerging market country indexes), declined 18.36%. The MSCI Emerging Markets (EM) Index,¹ a free float-adjusted market capitalization-weighted index that is designed to measure equity market results in the global emerging markets (consisting of more than 20 emerging market country indexes), fell by 20.09%.
Global stocks fell sharply, pressured by rising interest rates, slowing economic growth and inflationary pressures not seen since the 1980s. The war in Ukraine also weighed on investors throughout the year. Several key benchmark indexes fell into bear market territory at times and all but one sector declined in the MSCI All Country World Index. Within that index, communication services, consumer discretionary and information technology stocks suffered the biggest losses. Meanwhile, energy stocks surged amid higher oil and gas prices. Late in the year, signs that inflation may have peaked in the U.S., Europe and elsewhere sparked a rally that erased some of the losses.
Emerging markets stocks tumbled, undercut by China’s economic slowdown, the Federal Reserve’s aggressive interest rate hikes and the growing strength of the U.S. dollar. Rising inflation in developing countries that spurred monetary tightening, as well as rolling lockdowns in China to suppress COVID-19, also weighed on equity prices. However, a few countries, including Brazil, were able to separate from the group by benefiting from some stronger fundamentals.
Within the portfolio, a higher-than-benchmark position in the materials sector was beneficial to the fund’s relative returns. Brazilian mining company Vale was a top individual contributor, as its stock saw returns that outpaced the broader market. Indian energy company Reliance Industries was also a relative contributor. On the downside, stock selection within the health care sector dragged on relative returns. Among individual securities, a larger-than-benchmark position in Singapore-based Sea Ltd. was a top detractor to results.
The investment environment has become much more challenging over the last year, with a wide range of uncertainties affecting equity prices – including global shifts in monetary policy, elevated geopolitical tensions and the potential for widespread recession. The portfolio managers believe the fund’s flexibility in seeking investments in both the developed world and emerging markets will provide significant opportunities in these periods of volatility. They remain confident that on-the-ground research, a cornerstone of their investment process, will provide highly differentiated investment insights leading to potentially superior outcomes over the long term.
12 American Funds Insurance Series
New World Fund® (continued)
How a hypothetical | $30,000 |
$10,000 investment has grown
$21,545
MSCI ACWI1
$15,573 New World Fund, Class 1
10,000 |
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8,000 |
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| Year ended December 31 |
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Total returns based on For periods ended December 31, 20222 |
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a $1,000 investment |
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| Lifetime |
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| Gross | Net | ||||
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| 1 year |
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| 5 years |
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| 10 years (since June 17, 1999) | expense ratio | expense ratio | ||||||||||
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| Class 1 |
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| –21.86% |
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| 2.58% |
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| 4.53% |
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| 7.45% |
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| 0.64% | 0.57% | ||||||
| Class 1A |
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| –22.09 |
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| 2.32 |
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| 4.27 |
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| 7.18 |
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| 0.89 | 0.82 | |||
| Class 2 |
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| –22.10 |
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| 2.32 |
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| 4.27 |
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| 7.18 |
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| 0.89 | 0.82 | |||
| Class 4 |
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| –22.25 |
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| 2.07 |
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| 4.02 |
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| 6.92 |
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| 1.14 | 1.07 |
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The investment adviser is currently waiving a portion of its management fee. This waiver will be in effect through at least May 1, 2023. The waiver may only be modified or terminated with the approval of the fund’s board. Net expense ratios reflect the waiver, without which they would have been higher. When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Visit capitalgroup.com/afis for more information. Expense ratios are restated to reflect current fees and are as of the fund’s prospectus dated May 1, 2023 (unaudited). Refer to the Financial Highlights table in this report for details.
Past results are not predictive of results in future periods.
Any market index shown is unmanaged and, therefore, has no expenses. Investors cannot invest directly in an index.
1Source: MSCI. The MSCI index result reflects dividends net of withholding taxes and reinvestment of distributions. ²Periods greater than one year are annualized.
Where the fund’s assets were invested as of December 31, 2022
The Americas 34.8%
Europe 20.6%
Other regions 2.9%
Percent of net assets
Asia/Pacific Basin 36.4%
Short-term securities
&other assets less liabilities 5.3%
American Funds Insurance Series 13
Washington Mutual Investors Fund
Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com/afis. For information about your insurance contract and month-end results, go to the website of the company that issued your contract.
Washington Mutual Investors Fund declined 8.28% for the 12 months ended December 31, 2022. Its benchmark index, S&P 500 Index,¹ a market capitalization-weighted index based on the results of approximately 500 widely held common stocks, fell by 18.11%.
U.S. equities had their worst year since 2008, as persistently high inflation and aggressive rate hikes stoked recession fears. S&P 500 Index entered its first bear market since 2020. Energy was the top S&P 500 sector for the second straight year, climbing 66%. Crude oil prices spiked in March after Russia’s invasion of Ukraine upended global oil flows. Growth stocks had the sharpest declines, including several tech giants that had been market leaders over the last decade. Despite consecutive quarters of negative gross domestic product growth in the first half, a strong labor market helped inflation to persist.
Regarding the fund, stock selections in the consumer discretionary and information technology sectors were additive to relative returns. Among individual securities, a higher-than-benchmark position in Unitedhealth Group was a top contributor, as the stock outpaced the broader market. On the downside, security selections within the financials and real estate sectors were top detractors. A lower-than-index position in Exxon Mobil weighed on relative returns as the stock outpaced the market overall.
Looking ahead, the fund’s portfolio managers are keeping a close watch on monetary policy, inflation, and other global issues, along with the resulting implications for the U.S. economy. Portfolio managers continue to favor well-managed, high-quality companies that are capable of paying dividends in myriad economic environments. We remain optimistic that this focus, supported by our global research, will help us to identify attractive long- term investment opportunities.
14 American Funds Insurance Series
Washington Mutual Investors Fund (continued) |
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How a hypothetical $40,000 |
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| |
$10,000 investment |
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has grown |
| $32,654 | |
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| S&P 5001 |
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| $29,888 | |
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| Washington Mutual |
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| Investors Fund, |
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| Class 1 |
10,000 |
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8,000 |
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| ‘12 | ’13 | ‘14 | ’15 | ‘16 | ’17 | ‘18 | ‘19 | ’20 | ’21 | ’22 |
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| Year ended December 31 |
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Total returns based on For periods ended December 31, 20222 |
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a $1,000 investment |
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| Lifetime |
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| Gross | Net | ||||
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| 1 year |
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| 5 years |
|
| 10 years | (since July 5,2001) | expense ratio | expense ratio | |||||||||
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| Class 1 |
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| –8.28% |
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| 7.37% |
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| 11.57% |
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| 6.97% |
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| 0.40% | 0.25% | ||||||
| Class 1A |
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| –8.45 |
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| 7.11 |
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| 11.30 |
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| 6.71 |
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| 0.65 | 0.50 | ||||||
| Class 2 |
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| –8.45 |
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| 7.11 |
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| 11.30 |
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| 6.70 |
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| 0.65 | 0.50 | ||||||
| Class 4 |
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| –8.69 |
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| 6.84 |
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| 11.08 |
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| 6.47 |
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| 0.90 | 0.75 |
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The investment adviser is currently waiving a portion of its management fee. This waiver will be in effect through at least May 1, 2023. The waiver may only be modified or terminated with the approval of the fund’s board. Net expense ratios reflect the waiver, without which they would have been higher. When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Visit capitalgroup.com/afis for more information. Expense ratios are restated to reflect current fees and are as of the fund’s prospectus dated May 1, 2023 (unaudited). Refer to the Financial Highlights table in this report for details.
Past results are not predictive of results in future periods.
Any market index shown is unmanaged and, therefore, has no expenses. Investors cannot invest directly in an index.
1Source: S&P Dow Jones Indices LLC. ²Periods greater than one year are annualized.
Where the fund’s assets were
invested as of Information technology 17.6% December 31, 2022
Financials 13.7%
Industrials 11.2%
Percent of net assets
Health care 22.0%
Other sectors 22.8%
Short-term securities
&other assets less liabilities 4.3%
Other securities .3%
American Funds Insurance Series 15