(Bloomberg) -- Zurich Insurance Group AG is “prepared to shrink” some of its businesses after being caught off guard by the scale of claims it had to absorb last year, according to Cecilia Reyes, the company’s chief risk officer.

"We were surprised, obviously, by the poor underwriting results in the general insurance business,” she said in an interview at the company’s headquarters in Zurich. “We need to either re-price or, if we cannot get the right level of compensation to the risk, we should walk away from some risks.”

Reyes switched to chief risk officer from chief investment officer in July, shortly before unusually high claims pushed the company’s general insurance unit to a third-quarter loss of $183 million and prompted it to drop a bid for Britain’s RSA Insurance Group Plc. Zurich is bringing back Mario Greco, who oversaw general insurance before he left in 2012, this time as chief executive officer starting in May to replace Martin Senn who stepped down in December.

“We prided ourselves on that reputation for underwriting excellence, but we didn’t understand our exposure to potential losses,” Reyes said. “We have already taken actions to improve that.”

Zurich’s general insurance unit has been one of the worst performers among its peers in the 35-member STOXX Europe 600 Insurance Index for the last two years, measured by the combined ratio, or what it pays out in claims and expenses compared with premiums it collects. It had the fourth-highest ratio in 2014, the last full year for which data are available.

“In each region where Zurich operates its combined ratio is higher than of its peers on average,” said Andreas Schaefer, an analyst at Bankhaus Lampe in Germany.

Greco, who became head of Italian insurer Assicurazioni Generali SpA after leaving Zurich in 2012, hasn’t commented on his plans for the company.

Zurich reviewed its general-insurance portfolios after the unit posted losses and identified 15 that were lagging, including auto liability and construction liability, according to a presentation in September. Reyes said the company needs to make better use of reinsurance to manage volatility.

The underperforming portfolios, representing about 15.7% of the premiums earned in the General Insurance unit in the first 9 months of last year, had an average combined ratio of 143% compared with 94% for the rest, the company said. A ratio above 100% means the company is paying out more in claims than receives from premiums.

A surge in U.S. auto accidents and the biggest man-made disaster in Chinese history pushed Zurich’s general insurance business to the third-quarter loss. The company predicted a fourth-quarter loss of $100 million after having to pay out $275 million to cover damage claims from storms in the U.K.

Reyes said the company is “cautiously optimistic” that it has taken the right steps to meet its targets this year. “We will deliver in 2016 on our targets; our strategy remains unchanged.”

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Zurich Insurance ready to shrink to cut claims, risk chief says

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