Randolph Brown: Hi, Gabriel. It’s Randy Brown, thank you for the question. So let’s take a step back for a moment on commercial real estate. We’ve seen very strong growth in the sector over the last couple of years broadly. Although you did see within that weak weakness in office and retail because of the whole shift in office because it was exacerbated by the pandemic. With that said, the total return of our portfolio in Q4 was positive. So what you’re seeing come through is the deviation relative to the long term expectation of what we would earn. Right. And if so it within that, though, very, the sectors broadly performed in line. So we weren’t seeing a major deviation between the various sub sectors. So that’d be one, one point.
The second point would be as you think about real estate as we go forward, yes, we do expect some cap rate decompression given the speed of risk free rates increasing. And we’re seeing that. Now in some sectors, it’s been offset by fairly robust rental inflation, think industrial multifamily, in others weakness in rent growth, think office. With that said we had talked about a pretty major repositioning of our real estate portfolio over the last number of years anticipating a downturn and so to give you an example, our office portfolio went from 39% to 24% over the last, from basically the beginning of 2019, to the end of €˜22. The majority of that coming early in that transition. At the same time, our industrial portfolio more than doubled.
So we are positioned well within the real estate portfolio for what we believe may be coming.
Gabriel Dechaine: And just, you praise a quarter of the portfolio a quarter, like you don’t do it all in one shot, right.
Randolph Brown: Right. It’s a rolling appraisal. So everything gets externally appraised periodically and then we will reappraise using those benchmarks we’ll use internal appraisals on everything every quarter.
Operator: Thank you. Our next question comes from Doug Young with Desjardins. Your line is open.
Doug Young: Good morning, maybe this is for Dan DentaQuest. I mean, if I look at the dental operation, and I know it’s got the legacy business in there, but there was a loss of 22 million if we back out the acquisition related costs in the U.S. which I assume is all related to DentaQuest. And I can triangulate back to 33 million of earnings. And I know there’s going to be a little bit in there for again, the legacy business. Just curious is the math correct. And then I’ve got a follow up on the U.S.
Daniel Fishbein: Yes, Doug, I think that is a good way of looking at. I think you’re thinking about that the right way. The integration expense you’re seeing there is virtually all, is all related to dental class. And I can share in the quarter that the legacy commercial Sun Life business generated about $3 million in after tax underlying earnings. So the balance would be from DentaQuest.
Doug Young: And then just looking at the U.S. group businesses as a whole. You’ve expressed a margin target of around 7% for the quarter, I know, last 12 months was 8.4%. But for the quarter, it was 10.4%. I guess my question, Dan, what causes the margin to migrate down to 7%? Or is there a need to push this 7% target higher? And you see more comfort in the outlook for that group business over the coming years?
