Allstate, based in Northbrook, Ill., has agreed to pay $700 million plus the tangible net value of businesses being acquired. It estimates the total price would be about $1 billion.

Stephen Applebaum, a senior P&C industry analyst for Aite Group, commented on what the move means for Allstate.

“This is a significant acquisition for Allstate, not in terms of any immediate market share growth, but because it will—in time—enhance Allstate's ability to support multiple distribution channels and offer an independent auto quote service to better compete with Progressive and GEICO,” says Applebaum. ”It should also improve their level of overall innovation through the use of emerging technologies in direct online sales and in claims, and allow them to increase market share in auto, property and life insurance with the important, younger 'millennial' demographic,” he continues.

“Allstate has been gradually losing auto insurance market share over the past few years and now holds about a 10.5 percent share of the auto insurance market, with about 12 million policyholders and 18 million vehicles. Esurance holds under a 0.2 percent share,” says Applebaum.

White Mountains shares rose $40.31, or 11.7 percent, to $383.94 in morning trading Wednesday. Allstate shares slipped 11 cents to $32.31.

According to Highline Data, White Mountains is the 24th largest insurer of personal auto lines, with 2010 direct premiums written of $986.6 million. Allstate is the second largest personal auto lines insurer in the country, with 2010 direct written premiums of $17.0 billion.