Harare: OLD Mutual Zimbabwe is sharpening its focus on customer acquisition, underserved market segments and higher-yield business as the financial services group seeks to sustain growth and strengthen profitability amid increasing pressure on margins.

The group is also targeting greater diversification across its businesses, while expanding its support for key economic sectors and scaling newer operations towards profitability, chief executive Mr Samuel Matsekete said.

Presenting the group’s half-year performance to analysts, Mr Matsekete said the strategy for 2026 remained anchored on generating “real growth” through acquiring new customers, increasing product uptake and expanding into market segments that have historically been underserved.

“We are focusing on real growth. Real growth means acquiring new customers,” Mr Matsekete said.

“In that we are also saying, which segments have we not been serving well, and we need to increase our penetration into those spaces. That’s a focus area.”

He said the group was seeking sustainable growth in its customer base and transaction volumes by extending its reach through its digital financial services platform OMARI, as well as its traditional businesses.

Mr Matsekete said the underserved market did not necessarily refer to low-income customers, with Old Mutual also identifying high-net-worth individuals as a segment requiring more sophisticated financial products.

“Underserved segments doesn’t mean low income, because we also believe the high net worth segment in this market is underserved,” he said.

“We have also developed propositions that would appeal more strongly to high net worth individuals at the bank and in the investment group.”

The group’s growth strategy comes against a backdrop of margin compression across the financial services sector, with banks facing pressure on lending margins while fees are also being squeezed by competition and regulatory requirements.

Mr Matsekete said Old Mutual was responding by strengthening its value propositions, growing transaction volumes and diversifying towards higher-yield segments.

“We are trying to attend to yields and margins. Margin compression, you will actually see it variously,” he said.

“If you look at banking, there is margin compression as the customers themselves are more demanding, and the cost of finance, especially if you are relying on lines of credit, is not necessarily responding as fast.”

He said the group was also seeing pressure on fee margins, making volumes increasingly important to sustaining profitability.

“So we need to be attending to the volumes,” Mr Matsekete said. “But we are also needing to adopt our propositions so we can give more value for money within those propositions.”

The strategy appears to be gaining traction, with deposits at the banking business increasing 17 percent year-on-year while net loans and advances rose 32 percent.

Interest income increased 30 percent, broadly reflecting the expansion of the loan book, although the slower growth relative to advances reflected margin compression.

Mr Matsekete said the quality of the loan book remained strong, with the non-performing loan ratio at 1,1 percent.

“We are proud to have a loan book that still has preserved its quality and yields at 1,1 percent, which is something that we believe is better than the average in the market from what we have seen in the industry reports from the Reserve Bank,” he said.

The bank’s growth in lending has also been directed towards sectors Old Mutual considers resilient, helping to contain credit risk while supporting economic activity.

“The loans and advances growth has been into key economic sectors that we believe are resilient, which is why the NPL ratio is also quite low,” Mr Matsekete said.

However, despite the strong growth in loans and deposits, profit before tax at the banking business declined 14 percent during the period, reflecting fee reviews and increased investment in growth initiatives.

Mr Matsekete said the group was deliberately accepting some near-term pressure on costs as it invested in systems and capabilities expected to support future growth.

“The operating expense base for the six months has been higher, not quite in proportion to the revenues because of those investments we have made,” he said.

“But we believe those investments will support growth that’s stronger into the future.”

He said the group would seek to restore margins by increasing exposure to higher-yielding segments and growing transaction volumes.

“We just need to make sure we work harder at opening margins,” Mr Matsekete said.

The group’s non-funded income increased 24 percent, which management attributed partly to stronger transaction volumes and investments in digital platforms.

Old Mutual has continued upgrading its internet banking platforms and other technology systems, with the chief executive saying digital transformation remained an ongoing priority.

“This is an agenda you cannot stop,” he said. “I think there is always a new thing that will always deliver additional value.”

The group is also seeking to improve convenience for customers by integrating access to its various products and services.

Mr Matsekete said the ultimate objective was to enable customers to access a broader range of Old Mutual services through fewer channels.

“If they can enter through one door and access the full range of what we offer, that’s the ultimate objective,” he said.

Meanwhile, newer businesses, including the group’s online operation and funeral services business, are progressing towards breakeven ahead of their original business cases.

“We would like to get them to breakeven. They are within the business case that we had. They are actually ahead,” Mr Matsekete said.

“We are happy that they are checking very well towards breakeven in the cycle of their scaling up.”

The group also completed the restructuring of its legacy debt during the period, a move Mr Matsekete said had materially strengthened the balance sheet and improved Old Mutual’s capacity to invest.

“We are happy to say that was concluded within this,” he said.

“The significance and importance of that is our balance sheet becomes more resilient. The albatross of the debts in terms of how much free cash flow do you have, how much can you invest in new projects or expansion, is now off the neck.”

He said the stronger balance sheet would allow the group to pursue planned expansion and new investment opportunities with greater flexibility.

In life insurance, Old Mutual recorded strong growth in new business, with annual premium equivalent sales more than doubling, while pension contributions increased 11 percent.

Net new money increased 33 percent, supported by higher pension contributions and growth in the number of lives covered.

Policyholder funds increased to US$1,1 billion from US$929 million during the comparable period, reflecting positive client cash flows and investment returns.

Profit before tax in the life business more than doubled.

Mr Matsekete said the performance demonstrated the importance of customer acquisition to the group’s growth strategy.

“Pension contributions are up 11 percent, and that has been coming from new business primarily, which we have acquired, again attesting to new customers being a source of the performance we are looking for,” he said.

The general insurance business also delivered strong growth, with gross written premiums increasing 23 percent as Old Mutual continued diversifying away from its traditional concentration in large corporates.

The group has been deliberately expanding its retail and small and medium enterprise customer base, with Mr Matsekete saying the diversification strategy was beginning to produce results.

“We needed to diversify into retail because we saw that the opportunity of investment in that line was quite strong,” he said.

The underwriting margin improved to 15 percent from 11 percent, while market share increased to 24 percent from about 20 percent previously.

Profit before tax in the general insurance business more than doubled.

Mr Matsekete attributed the improvement to a stronger business mix, disciplined underwriting and better claims performance.

“Containing claims for us does not mean not paying legitimate claims,” he said.

“If it’s a legitimate claim, we believe that we actually have a very strong payment record, but it means that we are underwriting quite strongly.”

He said Old Mutual was also maintaining discipline on premium pricing in a market where insurers often compete by undercutting one another.

The group’s retention rate remained high at between 91 percent and 93 percent, while insurance service results more than doubled.

In asset management, funds under management increased 23 percent year-on-year, supported by positive client cash flows and investment returns.

The group recorded a US-dollar portfolio return of 19,3 percent, while occupancy in its property portfolio improved to 81 percent from 78 percent.

Collections also increased to 89 percent from 81 percent, pointing to improved performance among tenants.

Old Mutual is seeking to further diversify its investment portfolio through alternative assets, private equity and investments in sectors such as energy, hospitality, tourism, infrastructure and distribution.

“We are looking to continue to increase alternative assets in private equity and run into sectors and projects that have good energy, hospitality and tourism for us alongside some infrastructure and distribution,” Mr Matsekete said.

The group has also increased its participation in property development and infrastructure projects, with some developments already completed and brought to market.

Mr Matsekete said the combination of stronger client cash flows, improved investment performance and higher property occupancy was supporting the asset management business, whose profit before tax more than doubled during the period.

Overall he said the group’s focus remained on building a more diversified and resilient business capable of generating sustainable growth despite pressure on margins.

The strategy, he said, was ultimately about increasing the number of customers, improving the value offered to them and ensuring that Old Mutual could participate more meaningfully in areas of economic activity with long-term growth potential.

“We seek to continue to diversify wherever it aligns,” Mr Matsekete said. “Part of that is to respond to how we think the market is on pricing of products, but also to ensure that we can build in more resilience.”