ZURICH (Bloomberg) ? Swiss Reinsurance Co., the world?s second-largest reinsurer, agreed to buy General Electric Co.?s reinsurance business for $6.8 billion in cash and stock, in the company?s biggest acquisition ever.

Swiss Re, which is also assuming $1.7 billion of debt, will sell as much as $7.5 billion of securities to fund the purchase of GE Insurance Solutions, the Zurich-based company said in a statement on Friday. General Electric will own more than ten percent of Swiss Re?s stock after the sale.

The acquisition gives Swiss Re an additional $6.2 billion of annual net premiums, vaulting it ahead of Munich Re as the world?s biggest reinsurer.

It also coincides with an increase in insurance rates after a record US hurricane season.

?Now is a good time to buy reinsurers,? said Florian Esterer a Zurich-based fund manager at Swisscanto Asset Management AG, which oversees $43 billion, including about 1.8 million Swiss Re shares. ?Premium prices will rise over the next two years.?

General Electric chief executive officer Jeffrey Immelt is selling insurance businesses to focus on faster-growing areas such as consumer finance. The Fairfield, Connecticut-based company on Friday raised its earnings forecast, boosted the quarterly dividend and increased a share buyback programme following the sale.

Shares of Swiss Re rose as much as 3.3 percent to 95.9 francs and traded at 93.75 francs as in Zurich on Friday, giving the company a market value of 30.7 billion francs ($23 billion). Shares of General Electric rose 82 cents, or 2.4 percent, to $35.48.

The purchase of Kansas City, Missouri-based GE Insurance Solutions, the world?s fifth-biggest reinsurer, will add to earnings per share and return on equity beginning in 2007, Swiss Re said.

The takeover will also add assets of $41.5 billion, giving Swiss Re a total of 265 billion francs.

?Scale does matter in our business,? said Jacques Aigrain, 51, who takes over as CEO of Swiss Re from John Coomber on January 1. ?A strong balance sheet and absolute scale allows us to serve the industry and to serve the final clients better and with more capital efficiencies, especially in view of major catastrophes.?

Swiss Re, which last month said it will miss a 2005 profit target after the hurricanes, in August picked Aigrain, a former mergers banker at JPMorgan Chase & Co., to help revive earnings growth.

Swiss Re, which helps reinsurers shoulder risk, had losses in 2001 and 2002 after claims from the September 11 terrorist attacks and as declining stock markets eroded the value of investments.

Hurricanes along the US Gulf Coast this year will probably lead reinsurers to raise catastrophe premium rates by an average of 20 percent to 30 percent next year, according to Michael Huttner, an analyst at JPMorgan Chase & Co. Swiss Re said on November 4 there?s a ?clear expectation in the US that prices will go up.?

Swiss Re is buying the GE unit at a price about 40 percent below the average price-to-book value of similar companies, according to data compiled by Bloomberg. It?s paying 76 percent of the unit?s $8.9 billion book value, compared with an average price- to-book ratio of 127 percent among the world?s 34 largest publicly traded reinsurance companies monitored by Bloomberg.

?I?d say it?s a fair price,? said Dieter Buchholz, who helps oversee about $3 billion at BNP Paribas Private Bank in Zurich.

GE Insurance Solutions, which mainly reinsures property, casualty and life policies sold by other insurers, has 2,500 employees in 22 countries. Its units include Employers Reinsurance Corp., GE Frankona RE Ltd. in the U.K., GE Reinsurance Corp., Westport Insurance Corp. and First Specialty Insurance Corp.

Of the $3.7 billion in policies the unit booked in the first half of this year, $2.9 billion was from reinsurance.

The acquisition is the biggest by Swiss Re since Bloomberg started tracking merger data in 1998. Takeovers involving insurance companies more than doubled to $97.7 billion this year, the highest since 2001.

MetLife Inc.?s $11.5 billion purchase of Citigroup Inc.?s Travelers Life & Annuity and most of its international insurance business is the industry?s largest deal this year.

Swiss Re expects annual pretax savings of $300 million from the takeover, beginning 18 months after the purchase is closed by mid-2006.

The company expects a charge of $250 million tied to the acquisition and there will be ?some? job cuts, Aigrain said.

GE, the world?s largest company by market value, in May said the company would keep ?whittling down? insurance after selling businesses to Berkshire Hathaway Inc. and American International Group Inc. The company sold shares in its life and mortgage insurer Genworth Financial Inc. in an initial public offering in May, 2004.

The sale of GE Insurance Solutions ?allows us to enter 2006 with the fastest-growing, highest-return set of businesses we have had for many years?, Immelt said in the statement. ?We will have a better mix of growth, higher return on equity financial services businesses and faster-growing industrial businesses.?

Swiss Re will sell as much as $5.5 billion of shares and mandatory convertibles to fund the purchase, of which GE has agreed to buy between $3 billion and $3.8 billion. The rest will be sold to existing shareholders in a rights offering. The company also plans to raise $2 billion selling hybrid debt securities.

Swiss Re was removed from Standard & Poor?s credit rating watch list on optimism the company will ?perform better in its non-life operations? and has better pricing and conditions than some of its peers.