The key to our proof was to bundle the product back up and to look at
the guaranteed future benefits.
When we did this, we made some interesting discoveries. Perhaps the most
important was that the role of the account value and mortality and interest
guarantees _s to define what the policy's guaranteed death and endowment
benefits are at any time. These elements form what we called the cost
structure of the policy: In order to obtain a certain pattern of guaranteed
benefits, how much does the policyholder have to put in his account value?
If a company decides to charge mortality rates twice those of 1980 CSO, a
larger account value is required to generate a given pattern of guaranteed
benefits than would be the case if the company charges 1980 CSO rates. In
other words, one product would be more expensive than the other. MICHAEL F. DAVLIN
1983, Universal Life, Society of Actuaries