Allstate Corp. said yesterday that it will buy American Heritage Life Investment Corp. for $1.1 billion in a bid to diversify its core business of property and casualty insurance.

American Heritage shareholders would receive $32.25 a share in Allstate stock or cash. American Heritage shares rose $4.12 1/2 yesterday to $31.06 1/4. Allstate shares closed up 50 cents at 37.31 1/4.

"The acquisition provides us with the opportunity to expand into a rapidly growing segment of the life insurance business," said Edward M. Liddy, Allstate chairman, president and chief executive.

American Heritage is the parent company of American Heritage Life Insurance Co., the third-largest distributor of life, disability and health insurance to employees at their workplace.

Allstate is the largest publicly held personal insurance company in the United States; its personal property and casualty business insures 14 million households.

The deal comes on the heels of Allstate's purchase of CNA Financial Corp.'s personal auto and home insurance operations in June.

Analysts said the latest acquisition will not lead to significant growth in the company's premiums revenue.

"The deal is good, but not big enough to spur revenues or earnings," said Bijan Moazami, analyst with Friedman, Billings, Ramsey Group Inc.

Allstate, like its peers, has been losing market share in auto insurance to direct marketers, and analysts said the acquisition does not address that problem. "It will take at least two years for Allstate to realize any significant growth from this deal," said Peter Streit, associate analyst at Warburg Dillon Read.

In the property-casualty business, Allstate faces fierce competition and wafer-thin profit margins. Not surprisingly, Allstate shares have trailed the market.

But Liddy said the merger would enable the two companies to leverage for greater growth. The existing management of American Heritage will continue to run the business under the present brand name, and the headquarters will remain in Jacksonville, Fla.

Allstate said it intends to repurchase in the open market a number of shares equal to those to be issued for the acquisition. As of June 30, Allstate had spent $820 million in its planned $2 billion repurchase program.