Espirito Santo Financial Group Announces 2004 Results of Insurance Sub

Espirito Santo Financial Group Announces 2004 Results of Insurance Subsidiaries

    Business Editors

    LUXEMBOURG & PORTUGAL--(BUSINESS WIRE)--Jan. 31, 2005--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 year end 2004.

    HIGHLIGHTS

--	25.0% growth in net profits combined with considerable decline in costs and premium growth above market at Tranquilidade;
--	ES Seguros posts a 50.0% increase in profits before taxes, 10.0% increase in net profits and a good performance in the combined ratio;
--	In spite of an 8.8% growth in technical results, Tranquilidade Vida's net profits were down by 16.9% in 2004, due to lower yields in the capital markets. Good performance in costs;
--	Combined net profits for the three companies reached 49.5 million Euros, up from 48.5 million Euros in 2003, despite the low yields in the capital markets.

    TRANQUILIDADE

    Tranquilidade's net profits for December 2004 reached 25.0 million Euros corresponding to an increase of 25.0% against the comparable results for the same period in 2003, thus continuing to show a strong operational performance and the consolidation of the three year turnaround showed over the previous periods.
    Premiums grew 5.5% to 336.0 million Euros, above budget estimates, with very strong growth in strategic products, such as Health (+17.7%) and Personal Accidents (+42.0%).
    Technical results have decreased 10.2% from 86.3 million Euros in December 2003 to 77.5 million Euros in 2004, a totally anticipated result, given the extraordinary reinsurance recoveries and unexpired risk reserve release registered in 2003, which did not occur in 2004
    General costs and non-technical costs continued to show a very positive evolution, decreasing 14.4% year on year, with the costs to premiums ratio decreasing from 30.1% in December 2003 to 24.4% in December 2004.
    Tranquilidade's statutory combined ratio at the end of December 2004 was 99.1%, reflecting a slight deterioration over the level of 97.4% reached at the end of 2003, and explained by the lesser reinsurance recoveries in 2004.
    On December 31, ESIA - Inter Atlantico, a small Espirito Santo Financial Group owned non-life insurance company, merged with Tranquilidade, enhancing its portfolio base.

Main Operating Indicators and Variables

EUR millions Dec. 2003 Dec. 2004 Var. Balance Sheet*

Investments 492.8 545.2 10.6% Net assets 770.5 786.9 2.1% Shareholders' funds 146.9 155.7 6.0% Unearned premium reserve 85.7 98.1 14.5% Claims reserves (gross) 404.2 441.7 9.3% Claims reserves (net of reinsurance) 377.5 412.0 9.1% Technical reserves (gross) 497.6 546.1 9.7%

Profit and Loss Account

Gross written premiums (GWP) 318.5 336.0 5.5% Net written premiums (NWP) 278.4 291.8 4.8% Costs of claims (gross)** 208.4 216.1 3.7% General costs 82.2 79.3 -3.5% Net operating costs 93.2 92.2 -1.1% Technical results*** 86.3 77.5 -10.2% Net profits 20.0 25.0 25.0% Claims ratio (gross)** 65.0% 64.6% -0.4 p.p. Claims ratio (net of reinsurance)** 67.3% 70.0% 2.7 p.p.

Productivity

Number of Policies 985,346 1,030,092 4.5% GWP/Number of Employees 0.373 0.408 9.4% General costs/GWP 25.8% 23.6% -2.2 p.p. General costs/Number of Employees 0.096 0.096 0.0%

Other

Number of Employees (excluding employees transferred from ESIA) 853 823 -3.5%

*Dec.2004 numbers are estimates of latest figures after taking into account ESIA's merger on the balance sheet, effective on Dec.31.

**With allocated claims' handling expenses

***Net earned premiums - Net claims costs - Commissions - Variation of technical reserves and Results Participation

    ESPIRITO SANTO SEGUROS

    ES Seguros's profits before taxes increased 50.0 %, whilst net profits increased only 10.0% in December 2004, to 3.3 million Euros as this was the first year when the company paid corporate tax.
    Gross written premiums grew 17.3%, from 50.3 million Euros in December 2003 to 59.0 million Euros in December 2004, Net written premiums increased by 17.9% to 55.3 million Euros and net operating costs increased by 7.0% to 12.3 million Euros, representing, at the end of December 2004, 20.8% of gross written premiums, down from 22.9% in December 2003. Consequently, the combined ratio improved slightly from 94.8% down to 94.1% over the same time period.

Main Operating Indicators and Variables EUR Millions

Dec. 2003 Dec. 2004 Var. Balance Sheet

Investments 42.2 58.2 37.9% Net assets 48.9 65.9 34.8% Shareholders' funds 14.4 17.7 22.9% Unearned premium reserve 14.9 16.9 13.4% Claims reserves (gross) 15.8 24.2 53.2% Claims reserves (net of reinsurance) 14.5 21.2 46.2% Technical reserves (gross) 31.1 41.6 33.8%

Profit and Loss Account

Gross written premium (GWP) 50.3 59.0 17.3% Net written premium (NWP) 46.9 55.3 17.9% Cost of claims (gross)* 31.4 39.6 26.1% General costs 6.4 6.9 7.8% Net operating costs 11.5 12.3 7.0% Net profits 3.0 3.3 10.0% Claims ratio (gross)* 66.6% 69.8% 3.2 p.p. Claims ratio (net of reinsurance)* 70.1% 71.2% 1.1 p.p.

Productivity

Number of Policies 314,373 339,115 7.9% GWP/Number of Employees 1.093 1.204 10.2% General costs/GWP 12.7% 11.7% -1.0 p.p. General costs/Number of Employees 0.139 0.141 1.2%

Other

Number of Employees 46 49 6.5%

*With allocated claims' handling expenses

    TRANQUILIDADE VIDA

    Net income decreased 16.9% to 21.2 million Euros in 2004, compared to 2003, due to the effects of lower yields in the capital markets. Total premium income increased by 4.6% to 898.7 million Euros against the comparable period in 2003. In respect of premiums subscribed in the Portuguese market, all three main product categories continued to develop positively.
    In the PPR segment (private pension plans), Tranquilidade Vida continued to be the leader, with a market share of 27.4% and an increase of premiums of 4.2% compared to 2003.
    Capitalization products increased 5.3% over the same time period of last year, strongly influenced by the renewal of policies, notwithstanding their lower guaranteed rates.
    Term products also continued to develop in 2004 in line with expectations with total premiums increasing by 4.2% against 2003.
    As a result of these developments, technical results grew 8.8%. Total investment income increased by 2.6% compared to the same time period in 2003, explained by the lower interest rate environment during 2004.
    The decrease in total claims of 11.0% when compared to the same time period in 2003 is explained by the fact that Tranquilidade Vida had a large amount of single premium policies maturing in 2003, which were not as significant in 2004.
    Finally, total operating costs showed a decrease of 6.2%, mainly due to the cost control measures implemented at the beginning of the year.

Main Operating Indicators and Variables EUR Millions

Dec 2003 Dec 2004 Var.

Balance Sheet

Investments 5,197.9 5,762.3 10.9% Net Assets 5,703.6 5,826.7 2.2% Shareholders' Funds 256.8 288.2 12.2% Underwriting provisions -direct business 4,864.8 5,395.5 10.9%

Profit and loss account

Premiums written - direct business 859.4 898.7 4.6% Earnings on financial operations 230.8 236.7 2.6% Mathematical provisions -direct business (variation) 411.4 530.7 29.0% Provision for profit sharing - direct business 28.2 22.1 -21.6% Cost of Claims - direct business 575.6 512.2 -11.0% Technical results 22.8 24.8 8.8% Net profit 25.5 21.2 -16.9%

Profitability/Productivity

Net profits/Premiums - direct business 2.97% 2.36% -0.6 p.p. Net profits/Shareholders' Funds 9.93% 7.36% -2.6 p.p. Profit/(loss)/Net Asset 0.45% 0.36% -0.1 p.p. Net profits/No. employees (thousand euros) 315 262 16.9%

Other

Number of employees 81 81 0.0%

    The Espirito Santo Financial Group provides, through its subsidiaries, a global and diversified range of financial services to its clients including Commercial banking, Insurance, Merchant banking, Stock-brokerage and Asset management in Portugal and internationally.

--30--ZW/lo*

CONTACT: Espirito Santo Financial Group Manuel Villas-Boas, +44-20-7332-4350 or Taylor Rafferty, London Paul Scott, +44-20-7614-2900 or Taylor Rafferty, New York James P Prout, +1-212-889-4350

KEYWORD: PORTUGAL INTERNATIONAL EUROPE INDUSTRY KEYWORD: BANKING EARNINGS SOURCE: Espirito Santo Financial Group S.A.

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