US life insurance company American General has called off its £18 billion merger with the Prudential, Britain'ssecond biggest insurer.
The announcement follows speculation that the deal was in doubt after American General received a rival proposal from American International Group.
American General has now made an immediate payment to Prudential of the full termination fee of $600 million.
In March, Prudential said the acquisition of Houston-based American General would have created a "top-tier" international financial services business, with leading positions in the US, Britain and Asia.
The company had planned to integrate its US operations, Jackson National Life and PPM America, into the American General business.
Prudential shareholders would have owned 50.5 per cent of the combined group. Many analysts now expect Prudential to do a deal with other US companies instead.
A spokeswoman for Prudential said the group was "disappointed" but that there would be no knee-jerk reaction.
She said: "It was a good deal but it was about positioning the group three, four, five years down the line. We have strong businesses in three regions of the world (UK, US and Asia) and we will carry on.
"There are other fish in the ocean but there will no knee-jerk reaction."
PA