ABSTRACT
Total immunization gives the most stable bonus, but changes in experience only emerge gradually, and one generation of policyholders may in effect subsidize another to a considerable extent. A uniform rate of bonus would be declared in practice, and this would adapt itself to the new conditions more quickly than under total immunization. Some redistribution of surplus between policies would still be required. The mean term for paid-up immunization cannot be found from the combination rule; it needs a special calculation. Immunization theory merely provides a very rough guide to investment policy— a norm against which the reality can be assessed. Finally it must be stressed that there is no substitute for strength in a life office— adequate premiums and free reserves. Although earlier writers realized the importance of matching assets and liabilities, the mathematical basis of the theory of immunization was developed by F. M. Redington in 1952 in a paper of compelling brilliance reviewing the principles of life office valuations.
