ESFG Announces Results of Insurance Subsidiaries

ESPIRITO SANTO FINANCIAL GROUP ANNOUNCES THE RESULTS OF ITSINSURANCE SUBSIDIARIES FOR THE FIRST NINE MONTHS OF 2005

Espirito Santo Financial Group S.A. ("ESFG") (NYSE:ESF)(EURONEXT:ESF), announced today the un-audited results, according toIAS, 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 September 2005.

HIGHLIGHTS

-- Tranquilidade's net profits grow 34.1% while claims ratio (netof reinsurance) reduces to 69.3% and market share grows to 8.5%;

-- ES Seguros posts a 48.2% growth in net profits and its combinedratio improves to 91.3%;

-- Tranquilidade Vida's net profits increase 276.2% with growth inall segments, costs reduction and enhanced financial income;

-- Combined net profits for the three companies reached 52.0million Euros in September 2005, presenting a 92.6% increase over thesame period in 2004;

(a) All figures quoted in accordance with IFRS

NEW ACCOUNTING FRAMEWORK

Although the three above mentioned insurance companies are notrequired by Portuguese regulators to present their accounts inaccordance with IFRS, it has been decided that their March 2005accounts should be prepared and presented in accordance with IFRS, asthey are materially relevant to ESFG's own consolidated results andESFG, as a company which has shares admitted to trading on a regulatedmarket of a Member State of the European Union, prepares itsconsolidated accounts for each financial year starting on or after 1stJanuary 2005, in a accordance with IFRS.

The IAS 39 and IFRS 4 standards were adopted by Tranquilidade, ESSeguros and Tranquilidade Vida on 1st January 2005, as permitted byIFRS 1. The other standards, which have a lesser impact, were adoptedon 1st January 2004. The transition adjustments for the conversion ofGenerally Accepted Accounting Principles in Portugal (the localprinciples) to IFRS have been accounted for in Shareholders' Funds on1st January 2005. However, because the transition adjustments mustconform with accounting standards in force on 31st December 2005, thequantification effects of such a transition must be consideredprovisional and subject to changes which, depending on the actualstandards, could be material.

Thus, the comparison between the first nine months results for2005 and those of the previous year are difficult. In order tosomewhat facilitate this comparison, the 2004 accounts have beenreclassified in accordance with IFRS, although the numbers have beencalculated in accordance with the local principles except for the IFRSstandards mentioned in the above paragraph.

TRANQUILIDADE

Tranquilidade's good operational performance was reaffirmed in thethird quarter of 2005, as shown by un-audited net profits forSeptember 2005 of 18.5 million Euros, 34.1% above September 2004 netprofits of 13.8 million Euros.

Gross written premiums grew 10.6% to 276.6 million Euros, abovemarket average (enabling Tranquilidade to increase its market sharefrom 7.9% to 8.5%), with very strong growth in strategic products,such as Health (20.2% growth), Personal Accidents (30.8% growth) andFire and Other Perils (9.4% growth). These premiums include thoseoriginating from the portfolio of ESIA Inter-Atlantico, which wasmerged with Tranquilidade in December 2004. However, Tranquilidade'sgross written premiums would still have shown an above market growthof 6.2%, even if ESIA's portfolio had been excluded. Total number ofpolicies grew by 6.0 % over the same period of 2004.

An improvement to 69.3% in the claims ratio net of reinsurancefrom an already outstanding performance of 70.2% in September 2004,was achieved in spite of a lesser use of reinsurance, due to a lowerlevel of claims registered in the branches with most use ofreinsurance, compared with the same period of the previous year.

Tranquilidade's general costs were kept under control, with thecosts to gross written premiums ratio decreasing slightly to the 23.7%level. The absolute increase in general costs of 10.3% is explained bythree factors: (i) a new agent incentive plan launched in early 2005,that increased acquisition costs for the first months of 2005, whichis expected to even out in the last quarter (ii) an additionalrestructuring provision of 2.0 million Euros, set aside for a moreaggressive workforce reduction plan in the second half of 2005, and(iii) the merger with ESIA Inter-Atlantico, that resulted in theincorporation in Tranquilidade's workforce of 54 additional employees.

Tranquilidade's statutory combined ratio at the end of September2005 was 100.8%, slightly above the level reached in September 2004,this being mainly explained by the above mentioned concentration ofcosts in the first months of 2005 and reflecting an improvement in theloss ratio.

TRANQUILIDADE

Main Operating Indicators and Variables EUR millions
------------------------------------------ ---------------------------
Balance Sheet DEC.2004 SEP.2005 VAR.
--------------------------------------- -- ---------------------------
Investments 568.7 594.0 4.4%
------------------------------------------ ---------------------------
Net Assets 826.8 867.3 4.9%
------------------------------------------ ---------------------------
Shareholders' funds 171.2 184.9 8.0%
------------------------------------------ ---------------------------
Unearned premium reserve 97.8 100.2 2.5%
------------------------------------------ ---------------------------
Claims reserves (gross) 448.1 485.9 8.4%
------------------------------------------ ---------------------------
Claims reserves (net of reinsurance) 416.1 449.8 8.1%
------------------------------------------ ---------------------------
Technical reserves (gross) 552.2 589.8 6.8%
------------------------------------------ ---------------------------


------------------------------------------ ---------------------------
Profit and Loss Account SEP.2004 SEP.2005 VAR.
------------------------------------------ ---------------------------
Gross written premiuns (GWP) 250.1 276.6 10.6%
------------------------------------------ ---------------------------
Net written premiums (NWP) 217.4 239.9 10.3%
------------------------------------------ ---------------------------
Costs of claims (gross) 159.4 177.1 11.1%
------------------------------------------ ---------------------------
General costs 59.4 65.5 10.3%
------------------------------------------ ---------------------------
Net operating costs 78.2 86.8 11.0%
------------------------------------------ ---------------------------
Net profits 13.8 18.5 34.1%
------------------------------------------ ---------------------------
Claims ratio (gross) 64.8% 64.6% -0.2
------------------------------------------ ---------------------------
Claims ratio (net of reinsurance) 70.2% 69.3% -0.9
------------------------------------------ ---------------------------
Combined ratio 99.3% 100.8% 1.5
------------------------------------------ ---------------------------


------------------------------------------ ---------------------------
Productivity SEP.2004 SEP.2005 VAR.
------------------------------------------ ---------------------------
Nr. Policies 1,021,030 1,081,829 6.0%
------------------------------------------ ---------------------------
GWP / Nr. Employees' years 0.400 0.431 7.8%
------------------------------------------ ---------------------------
General costs / GWP 23.8% 23.7% -0.1
------------------------------------------ ---------------------------
General costs / Nr. Employees' years 0.095 0.102 7.4%
------------------------------------------ ---------------------------

------------------------------------------ ---------------------------
Other SEP.2004 SEP.2005 VAR.
------------------------------------------ ---------------------------
Nr Employees (b) 834 855 2.5%
------------------------------------------ ---------------------------

------------------------------------------ ---------------------------
Other DEC.2004 SEP.2005 VAR.
------------------------------------------ ---------------------------
Solvency 273% 303% 30.0
------------------------------------------ --------------------------- (b) Including employees transferred from ESIA in 2005.ESPIRITO SANTO SEGUROS

ES Seguros' un-audited net profits for the first nine months of2005 grew 48.2% against those of the same period in 2004, reaching 4.0million Euros. This is mainly due to a combination of good technicalresults and strict control of operational costs.

Gross written premiums at ES Seguros reached 46.1 million Euros inthe third quarter of 2005, reflecting an increase of 5.5% against thecorresponding period of the previous year, and the number of policiesgrew 0.2% in the same period.

Gross claims, including handling costs grew by 5.2% reaching 30.3million Euros in September 2005 and the combined ratio (net ofreinsurance) improved from 93.3% in September 2004 to 91.3% inSeptember 2005.

ES Seguros' shareholder's equity grew by 26.3 to 22.6 millionEuros in September 2005 and its solvency ratio increased from 177% inSeptember 2004 to 217% in September 2005.

ES SEGUROS

Main Operating Indicators and Variables

EUR millions

------------------------------------- ---------- -------- ------
Balance Sheet DEC.2004 SEP.2005 VAR.
------------------------------------------ ---------- -------- ------
Investments 58.2 68.2 17.2%
------------------------------------------ ---------- -------- ------
Net assets 66.1 77.7 17.5%
------------------------------------------ ---------- -------- ------
Shareholders' funds 17.9 22.6 26.3%
------------------------------------------ ---------- -------- ------
Unearned premium reserve 16.9 17.4 3.0%
------------------------------------------ ---------- -------- ------
Claims reserves (gross) 24.2 30.3 25.2%
------------------------------------------ ---------- -------- ------
Claims reserves (net of reinsurance) 21.2 26.6 25.5%
------------------------------------------ ---------- -------- ------
Technical reserves (gross) 41.6 48.1 15.6%
-------------------------------------- --- ---------- -------- ------


------------------------------------- ---------- -------- ------
Profit and Loss Account SEP.2004 SEP.2005 VAR.
------------------------------------------ ---------- -------- ------
Gross written premiums (GWP) 43.7 46.1 5.5%
------------------------------------------ ---------- -------- ------
Net written premiums (NWP) 41.0 42.8 4.4%
------------------------------------------ ---------- -------- ------
Cost of claims (gross) 28.8 30.3 5.2%
------------------------------------------ ---------- -------- ------
General costs 7.3 7.0 -4.1%
------------------------------------------ ---------- -------- ------
Net operating costs 9.2 9.0 -2.2%
------------------------------- ---------- ---------- -------- ------
Net profits 2.7 4.0 48.2%
------------------------------------------ ---------- -------- ------
Claims ratio (gross) 69.0% 66.4% -2.6
-------------------- --------------------- ---------- -------- ------
Claims ratio (net of reinsurance) 70.3% 69.2% -1.1
------------------------------------------ ---------- -------- ------
Combined ratio 93.3% 91.3% -2.0
------------------------------------------ ---------- -------- ------

------------------------------------- ---------- -------- ------
Productivity SEP.2004 SEP.2005 VAR.
------------------------------------------ ---------- -------- ------
Nr. Policies 336.101 336.707 0.2%
------------------------------------------ ---------- -------- ------
Premiums/Nr.Employees 1,858 2,005 7.9%
------------------------------------------ ---------- -------- ------
General costs/GWP 16.7% 15.2% -1.5
------------------------------------------ ---------- -------- ------
General costs/Nr.Employees 0.309 0.304 -1.6%
------------------------------------------ ---------- -------- ------

------------------------------------- ---------- -------- ------
Other SEP.2004 SEP.2005 VAR.
------------------------------------------ ---------- -------- ------
Nr.Employees 47 46 -1
------------------------------------------ ---------- -------- ------

------------------------------------------ ---------- -------- ------
Other DEC.2004 SEP.2005 VAR.
------------------------------------------ ---------- -------- ------
Solvency 177% 217% 40.0
------------------------------------------ ---------- -------- ------

TRANQUILIDADE VIDA

Tranquilidade Vida's un-audited net profits for the first ninemonths of 2005 reached 39.5 million Euros, corresponding to andincrease of 276.2% over those of the same period in 2004.

When analyzing the premium performance, it is important to notethat the insurance contracts with significant risk as well as theproducts with profit sharing have been treated in accordance with IFRS4, whilst the other products (such as unit linked products andproducts without profit sharing), are treated in accordance with IAS39. The premiums, claims and changes in mathematical provisionsrelated to the products treated under IAS 39 are not included asrevenues and costs, but included, for their net value, underInvestment Contracts.

Thus, at 31th December 2004, technical provisions were notreclassified in accordance with IAS/IFRS, meaning that they are notdifferentiated between insurance contracts and investment contracts.

Amounts received from clients under IAS 39 (unit linked productsand products without profits sharing) increased 73.9% to 476.8 millionEuros in the nine months to September 2005, against the same period in2004. Amounts received under IFRS 4 (products with a significant riskcontent or products with profits sharing) increased 24.3% in the sameperiod, to 419.4 million Euros.

In order to facilitate comparisons with the rest of the Portuguesemarket which does not report under IAS/IFRS, the following analysiswill add up both these amounts.

Total premiums increased 46.6% in the nine months to September2005, to reach 896.2 million Euros. Nevertheless, Tranquilidade Vida'smarket share declined from 14.4% in September 2004 to 13.1% inSeptember 2005. this was due to an unusually strong growth in thePortuguese market (+58.2%), namely in the area of capitalisationproducts. In this area, Tranquilidade Vida posted a 99.9% growth inpremiums (against total market growth of 110.6%), with particularemphasis on unit linked products which had a 67.1% weight in September2005 against a 45.6% weight in September 2004.

In the area of traditional products, Tranquilidade Vida's premiumsgrew 10.4%, corresponding to a 10.0% market share in September 2005.In the private pension plan ("PPR") segment Tranquilidade Vida'spremiums increased 34.0%, corresponding to a leading 29.7% marketshare. This was achieved through a particularly intensive marketingeffort centred on PPRs with periodic payments.

Tranquilidade Vida's financial results increased 26.2% in the ninemonths to September 2005, as the good returns from equity investmentsmore than compensated the effects of low interest rates. In PPRs,guaranteed minimum rates were reduced from 3.35% in September 2004, to3.05% in September 2005 and in capitalisation products, from 3.47% to3.10% in the same period, following a deliberately establishedstrategy.

The aggregate claims arising from insurance products accounted forunder IFRS 4 and IAS 39 reached 605.7 million Euros in September 2005,corresponding to a 66.5% increase over the same period in thepreceding year. This was mostly due to a significantly higher level ofmaturities in 2005.

Operational costs decreased 19.0%, reflecting policies establishedover recent years and the renegotiation of asset management contracts.

The 4.4% reduction in Tranquilidade Vida's equity reflects theadjustments resulting from the conversion into IFRS at the beginningof 2005 which had a 50.0 million Euros impact partially compensated byprofits at September 2005 and unrealized capital gains in theinvestment portfolio.

Tranquilidade Vida's solvency ratio increased from 186.2% inSeptember 2004 to 192.6% in September 2005.

TRANQUILIDADE VIDA

Main Operating Indicators and Variables

EUR millions
------------------------------------------- -------- -------- -------
Balance Sheet DEC.2004 SEP.2005 VAR.
------------------------------------------- -------- -------- -------
Investments 5,756.2 6,069.7 5.4%
------------------------------------------- -------- -------- -------
Net Assets 5,827.4 6,217.2 6.7%
------------------------------------------- -------- -------- -------
Shareholders' funds 288.2 275.5 -4.4%
------------------------------------------- -------- -------- -------
Technical provisions 5,395.6 4,075.7 -24.5%
------------------------------------------- -------- -------- -------
Investment contracts 1,742.4
------------------------------------------- -------- -------- -------

------------------------------------------- -------- -------- -------
Profit and Loss Account SEP.2004 SEP.2005 VAR.
------------------------------------------- -------- -------- -------
Premiums written-direct business 611.5 419.4 -31.4%
------------------------------------------- -------- -------- -------
Costs of claims 363.7 486.5 33.8%
------------------------------------------- -------- -------- -------
Mathematical provisions (variation) 187.3 -14.8 -107.9%
------------------------------------------- -------- -------- -------
Share in results 15.2 13.8 -9.2%
------------------------------------------- -------- -------- -------
Results from investment contracts 0.0 3.4
------------------------------------------- -------- -------- -------
Financial results 150.4 189.8 26.2%
------------------------------------------- -------- -------- -------
Operational costs 13.7 11.1 -19.0%
------------------------------------------- -------- -------- -------
Other income 1.9 4.1 115.8%
------------------------------------------- -------- -------- -------
Net profit 10.5 39.5 276.2%
------------------------------------------- -------- -------- -------

------------------------------------------- -------- -------- -------
Profitability/Productivity(c) SEP.2004 SEP.2005 VAR.
------------------------------------------- -------- -------- -------
Net profits / Shareholders' funds 5.1% 19.1% 14.0pp
------------------------------------------- -------- -------- -------
Net profits / Net assets 0.2% 0.8% 0.6pp
------------------------------------------- -------- -------- -------
Net profits / Number of employees (thousand
Euros) 128 506 295.3%
------------------------------------------- -------- -------- -------

------------------------------------------- -------- -------- -------
Other SEP.2004 SEP.2005 VAR.
------------------------------------------- -------- -------- -------
Number of Employees 82 78 -4.9%
------------------------------------------- -------- -------- -------
Solvency ratio (local criteria) 186.2% 192.6% 6.4pp
------------------------------------------- -------- -------- -------

------------------------------------------- -------- -------- -------
Amounts delivered IAS 39 274.2 476.8 73.9%
------------------------------------------- -------- -------- -------
Premiums IFRS 4 337.3 419.4 24.3%
------------------------------------------- -------- -------- -------
Total premiums in Portugal 611.5 896.2 46.6%
------------------------------------------- -------- -------- ------- (c) - Net profit annualised - Sharehold's funds and net assets at end September both year

The Espirito Santo Financial Group provides, through itssubsidiaries, a global and diversified range of financial services toits clients including Commercial banking, Insurance, Investmentbanking, Stock-brokerage and Asset management in Portugal andinternationally. For additional information on Espirito SantoFinancial Group, its subsidiaries, operations and results, pleasevisit the Company's website on www.esfg.com.