Espirito Santo Financial Group Announces the Results of Its Insurance Subsidiaries for the First Nine Months of 2004

Business Wire, Oct 28, 2004

LUXEMBOURG & PORTUGAL -- Espirito Santo Financial Group S.A. ("ESFG") (Euronext Lisbon and NYSE: ESF)

--Tranquilidade's net profits up 49.4% on a comparable basis, statutory total operating costs decline 8.8%

--Espirito Santo Seguros' net profits up 13.0% and premiums increase 19.1%

--Tranquilidade Vida's net profits up 13.9% while technical results grow 20.5%

Espirito Santo Financial Group S.A. ("ESFG") (Euronext Lisbon and NYSE: ESF), announced today the non-audited results of its insurance subsidiaries Companhia de Seguros Tranquilidade ("Tranquilidade") (non-life), Espirito Santo Seguros ("ES Seguros") (non-life bancassurance) and Companhia de Seguros Tranquilidade Vida ("Tranquilidade Vida") (life), for the first nine months of 2004.

Tranquilidade

Tranquilidade's un-audited adjusted net profits for the first nine months of 2004 increased 49.4% against comparable results for the same period in 2003, thus continuing to show a strong operational performance and the consolidation of the turnaround showed over the previous periods.

In September 2003 net profits reached 22.0 million Euros, of which approximately 13.5 million Euros constituted positive non recurrent extraordinary contributions from releases of unexpired risk reserves and recoveries from reinsurance treaties, resulting in an adjusted net profit of 8.5 million Euros. Tranquilidade's September 2004 net profits of 14.5 million Euros, similarly adjusted, result in adjusted net profits of 12.7 million Euros, which compare with adjusted net profits of 8.5 million Euros in September 2003.

Premiums grew 3.3% to 250.1 million Euros, in line with budget estimates, with very strong growth in strategic products, such as Health ( 16.7%) and Personal Accidents ( 35.1%).

Technical results have decreased 12.8% from 69.7 million Euros in September 2003 to 60.8 million Euros in September 2004, a totally anticipated result given the already mentioned non-recurrent extraordinary results of 2003.

Statutory total operating costs (general costs plus other non-technical costs) continued to show a very positive evolution, decreasing 8.8% year on year, with the costs to premiums ratio decreasing from 27.6% in September 2003 to 24.4% in September 2004.

Tranquilidade's statutory combined ratio at the end of September 2004 was 98.9%, reflecting a deterioration over the level of 97.4% reached at the end of 2003, and against an exceptional 93.7% in September 2003.

Fitch Ratings has recently assigned Tranquilidade an Insurer Financial Strength rating of A-, Outlook Stable.

Tranquilidade
                      Main Operating Indicators

                                               Sep.     Sep.     Var.
                                               2003     2004
                                                EUR millions
Balance Sheet
 Investments                                   622.5    583.8   -6.2%
 Net assets                                    796.0    755.8   -5.1%
 Shareholders' funds                           141.5    162.8   15.1%
 Underwriting provisions direct business       511.0    515.5    0.9%
 Claims reserves (gross)                       418.0    416.2   -0.4%
 Claims reserves (net of reinsurance)          391.6    388.3   -0.8%
 Technical reserves (gross)                    511.0    515.5    0.9%
Profit and Loss Account
 Gross written premiums                        242.0    250.1    3.3%
 Net written premiums                          211.5    217.4    2.8%
 Cost of claims (gross)                        160.4    158.5   -1.2%
 General costs                                  57.4     57.9    0.9%
 Net profits                                    22.0     14.5  -34.1%
 Adjusted net profits                            8.5     12.7   49.4%
 Claims ratio (gross)*                          66.3     64.5   -2.7%
 Claims ratio (net of reinsurance)*             67.3     69.8    3.7%
Productivity
 Number of Policies                          988,330  984,058   -0.4%
 Premiums/Number of Employees                  0.278    0.299    7.6%
 General costs/GWP                                24%      23%  -4.2%
 General costs/Number of Employees             0.066    0.070    6.1%
Other
 Number of Employees                             869      834   -4.0%

* With allocated claims' handling expenses

Espirito Santo Seguros

ES Seguros continued to perform positively with premium growth of 19.1%, from 36.7 to 43.7 million Euros and an increase in net income of 13.0% to 2.6 million Euros in September 2004, which compares with 2.3 million Euros in September 2003.

Net written premiums increased by 18.8% to 41.0 million Euros and net operating costs decreased by 0.6% to 9.2 million Euros. These represented 21.1% of total gross premium income at September 2004, which compares with 25.2% at September 2003. Consequently, the combined ratio decreased from 94.2% down to 93.3% from September 2003 to September 2004.

Fitch Ratings has recently assigned ES Seguros an Insurer Financial Strength rating of A-, Outlook Stable.