Daniel Fishbein: Yes. I mean that’s what — obviously, some of those things are nonrecurring, which is good news. But yes, there was nothing fundamental about the business. In fact, as Kevin mentioned, we remain very optimistic about the Dental business. As I mentioned, there’s another $400 million of business sold that’s yet to go on the books, a great pipeline. We’re meeting or exceeding all of the integration synergy targets. The momentum with the business and the performance of the business is actually really strong and we would expect it to meet or exceed our acquisition expectations.
Doug Young: And then just a question on the ACMA, I guess, more Kevin Morrissey. But I just want to understand the [ last ] and the lapse impact on reported earnings, but also on the CSM and I guess you had — can you talk a little bit about what drove this? And I guess the way I think of lapse is always, it typically goes through the CSM, but there was an earnings hit as well this quarter. And so I don’t know if that was just because lapse was going through on businesses where there was no CSM? Just hoping to understand and what really drove the negative lapse?
Kevin Morrissey: Yes. Thanks for that question. Doug, this is Kevin Morrissey. You’re right. For the general model method, where we have individual wealth and protection products, normally changes in lapse assumptions do go through the CSM. So that’s kind of the normal place you would see them. However, we did have some impacts related to a block in Asia, the international business where we updated some of the financial risk assumptions. It was related to lapse, but it was specific to the yield curve inversion. And because financial risk assumptions on the — method that does go through net income. So it’s a bit of a unique circumstance where — when you have these types of products, normally, it goes it goes through CSM, as you said, except where the CSM has been depleted. That is not the case. In this case, it’s really specific to that financial risk assumption that was updated that, that was part of the overall lapse assumption set.
Doug Young: That’s clear. And then just on the lapse charge that went through the CSM, can you unpack a bit about what were the main drivers there?
Kevin Morrissey: Yes, sure. So on the CSM, the lapse impact, as noted, was significantly negative. There was really two sources, and we saw the reductions in CSM, both in Canada and Asia. In Canada, there were two product groups that were impacted was term products where renewals were lower than expected. And in some of the lapse supported universal life products, the lapses were lower than expected as well. So we had some reductions CSM there from Canada. And in Asia, we updated the Vietnamese lapse assumption for that business. You’ve heard us talk about low persistency as part of our ACMA review this year. We fully reflected the current level of experience in our ACMA update despite the fact we are taking actions to improve persistency, we felt it was prudent to fully reflect our current level of first year lapses in the ACMA — and so there was a reduction to the CSM in Asia from that component as well.
Operator: Thank you. And I show our next question comes from the line of Paul Holden from CIBC. Your line is open.
Paul Holden: Thank you. Good morning. First question is related to the real estate experienced during the quarter. Wondering if you can give us an update on how much you’ve changed cap rates sort of on average across the board year-to-date? And if you’re expecting potentially more movement going forward on real estate valuations?
Randolph Brown: Sure. Thank you for the question. Paul, it’s Randy Brown. So we look at several measures when looking at changing valuations on real estate. So let me start kind of overall with the comment that the total return on the real estate portfolio was essentially flat this quarter. Valuations were down by less than 1% and largely offset by income. So the negative that you’ve seen, as Manjit mentioned, is the difference between the long-term expected return in the actual economic return on the quarter. But as Manjit also said, our real estate portfolio has outperformed our long-term expectations and — so we remain quite comfortable with the assumption. So in terms of — specifically on your question, we look at cap rates, but we also look at yields, cap rate being more of a spot measure and yield being more of a life of the property.
And so we’ve seen 25 to 50 basis point increases in cap rates and 50 to 75 basis point increases in yields in the portfolio. So we have, frankly, fared better than the broader market because of the very significant repositioning that I had mentioned on prior calls. So we were well positioned for this type of market with significant overweight relative to the opportunity set in industrial and residential and much lower allocations to office and retail.
Paul Holden: Got it. And then a question for Dan, usually this time of year, you might give us a little bit of an update or your thoughts around the upcoming pricing and negotiations for stop-offs and U.S. group benefits given it’s been a pretty strong quarter for or quarter, strong year for margins, are you seeing increased competition or I guess, really what is your view for 2024 pricing renegotiation?
Daniel Fishbein: Yes. Thank you. We’re in the midst of selling season for really all our products, but especially for stop loss, this is like the playoffs and the Super Bowl rolled into one. Most of the sales occurred during the fourth quarter, and we’re actually quite optimistic about the outlook. We’ve been holding to our pricing. You’ve seen the loss ratio normalize back towards our pricing targets as we’ve signaled for quite a while that, that would happen. And we are seeing some intensified competition, which always seems to happen especially this time of year. But our team is performing quite well, and we’re optimistic about sales results for the quarter, while holding to our pricing targets.
Operator: Thank you. And I show our next question comes from the line of Nigel D’Souza from Veritas Investment Research. Please go ahead.
Nigel D’Souza: Thank you. Good morning. My first question was on the other expenses line, both in Canada and Asia. I noticed that expense line has picked up meaningfully year-to-date, and there was a step-up this quarter. Just wondering what’s driving higher expenses in both those segments? Or if there’s any outliers or nonrecurring items we should be aware of?
