By Jessica Hall and Paritosh Bansal

PHILADELPHIA/NEW YORK (Reuters) - Diversified insurer Liberty Mutual Group said on Wednesday it would buy Safeco Corp (SAF.N: Quote, Profile, Research) for $6.2 billion in a deal that would make Liberty Mutual the fifth-largest U.S. property and casualty insurer.

Each share of Safeco will be exchanged for $68.25 cash, nearly a 51 percent premium to Safeco's closing stock price of $45.23 on Tuesday. Safeco shares jumped 45.7 percent, or $20.69, to $65.92 in afternoon trading on the New York Stock Exchange.

Liberty Mutual sells a range of insurance products, including automobile, homeowners, general liability, surety, workers compensation, assumed reinsurance and fire.

Safeco, which provides insurance for individuals and for small- and mid-sized businesses, would become part of Liberty Mutual's agency markets business unit. Combined, the organization would have about 15,000 independent agencies.

"Safeco's operations and product mix complement our existing agency markets operations," said Liberty Mutual Chairman Edmund Kelly.

"They are very strong West of the Mississippi and we are very strong east of the Mississippi and have an international presence, as well," Kelly said.

Liberty Mutual is the sixth-largest property and casualty insurer in the United States, based on its 2007 direct written premium of $20.2 billion. Safeco had 2007 direct written premium of $5.9 billion.

The deal follows Liberty Mutual's acquisition of Ohio Casualty last year. Liberty Mutual said it would continue to look at other acquisition opportunities.