ALLIANZ GROUP 22 We have learned the lessons from last year’s loss and adapted our  strategy to the new market and risk situation. The result is our “Three Plus One” program. It continues the earlier Allianz initiatives for securing and increasing profits, makes them more  precise and defines the framework for our actions until 2005. It is designed to sharpen the focus of the  Group’s business activities, boost its competitiveness and strengthen its orientation towards the sustainable creation of value. The “Three Plus One” program comprises four mutually com- plementary, cross-linked initiatives that are implemented si- multaneously. The first three are aimed at restoring the known financial strength and performance of Allianz in all relevant en- trepreneurial dimensions. The fourth point, the “Plus One,” goes beyond these initiatives. Its purpose is to make sure that our future competitiveness is the key driver in the implemen- tation of all these measures. The four strategic concepts of “Three Plus One” are the fol- lowing:  The “Three” stands for protecting and strengthening our capi- tal base, for a significant boost of our operating profitability and for a focused portfolio – and thus a reduction of complexity. That is the program with which we will fortify the foundation of our business activity. In the “Plus One” concept, we are fo- cusing on the fundamental strengthening of our competitive- ness and increasing value. What stands behind this program and what progress has already been achieved? 1 Protecting and strengthening our capital base If we want to remain a reliable business partner for our cus- tomers and be able to implement our ambitious growth and profitability plans, we must have adequate equity and risk cap- ital. That was the purpose of our substantial capital increase in April 2003. We are pressing ahead with the extension of a com- pany-wide risk management system that protects the capital base by setting risk standards and limits that are applicable worldwide. At the same time, all business activities are brought into line with our internal risk capital model, which places par- ticular emphasis on diversification. This is based on the fact that the risk capital required for an entire risk portfolio is less than the sum of the capital needs of all the individual risks it con- tains, because the probability that various worst-case scenarios will occur at the same time is extremely low. To limit our ex- posure to stock market fluctuations, we scaled down share- holdings such as those in Beiersdorf and Munich Re, which  concentrated risk because of their size, and reduced the over- all share of stocks in our investment portfolio from 19 to 16.4 percent. At the same time, the proceeds from these transactions and from the sale of sub-critical activities strengthened our shareholders’ equity. Overall, our equity capital grew by 6.9 bil- lion euros to 28.6 billion euros.  Here, it is a matter of making sure that Allianz operates and grows profitably. We adjusted the prices and conditions in the insurance business to the actual risk situation, exposed our- selves to fewer additional capital market risks, continually ramped up the efficiency of our operations and eliminated those risks from our existing portfolio which were not matched by an adequate profit potential. The major successes in the reporting year were the acceleration and deepening of the turnaround programs at Fireman’s Fund, Allianz Global Risks, AGF and Dresdner Bank, as well as the improvement of the combined ra- tio in property and casualty insurance from 105.7 to 97.0 per- cent. In Life insurance, we brought down the expense ratio, and we reduced the cost-income ratio in asset management and at Dresdner Bank. These indicators are the most effective levers for improving operating income. Important prerequisites were rigorous cost management in all segments, especially in life insurance, and, where necessary, a radical reform of our business models with a clear profitabil- ity target. Having already completed this work in the U.S.A., Australia and Austria, we continued to pursue it vigorously in 2 Significant boost of our operating profitability