Sanlam has finally settled a long-running dispute over R175-million in pension fund surpluses that were withheld from members of three of its subsidiary funds.

The funds in question are Datakor Group Pension Fund and Retirement Fund, Cortech Pension Fund and Picbel Groepvoorsorgfonds. All are under curatorship and Picbel is also in liquidation.

In the early '90s, when it was legally possible for an employer to share in the surplus of a pension fund established for its employees, an "illegal" scheme - which became known as the Ghavalas option - was established.

The purpose of the option - created by Peter Ghavalas, a former Nedcor senior executive - was to strip the surpluses from the above-mentioned pension funds.

Some of the executives of these funds entered into plea bargains with the state in a bid to evade prison for their roles in stealing from pensioners. Ghavalas was ordered to pay back R18.6-million and given a suspended 15-year prison sentence.

During that period Sanlam controlled Datakor through its now obsolete subsidiary and investment arm, Sankorp. Through this link Sanlam realised a dividend payment of R44.1-million.

Sanlam, which claims it is innocent, said it had unconditionally paid R106-million to the curators of the Datakor and Cortech funds in December 2006 in respect of the R44.1-million. This amount represents the capital amount of the dividend plus interest thereon from November 1997 to the date of payment.

Separately this week, Sanlam reported a 5% drop in interim earnings. SA's second-largest insurer said customers bought fewer investment products while some existing clients' policies had lapsed.

The strong local currency also had a negative impact on the group, said group chief executive Johan van Zyl.

He said: "The group performed well despite challenging business conditions during the first six months of 2010."

Normalised headline earnings per share were 2% higher at 80.5c versus 78.9c a year earlier.

Net results from financial services per share shot up 14% - driven largely by short-term insurer Santam's good performance.

Nedgroup Securities portfolio manager Grant Davids said that, overall, the insurance sector seemed to be doing better than the banking sector.

Last week Sanlam competitor Metropolitan reported a 13% rise in first-half profit while Discovery, SA's largest health insurer, posted a 23% surge in full-year profit.