Aviva said it was abandoning what would have been the insurance sector’s biggest ever deal because it had failed to win over Prudential’s board and because it was not in its own shareholders’ interests to improve its proposal.

Prudential shares fell as much as 7 percent following the news, while Aviva’s stock climbed on relief among investors that it would not increase its proposed offer.

Aviva said it reserved the right to make an offer if Prudential changed its mind over its proposal, or if a third party announced a firm intention to bid for Prudential.

But Aviva Chief Executive Richard Harvey told a conference call he saw little chance of a deal in the future.

"It is impossible without constructive engagement and the Prudential have made it very clear that they are fundamentally opposed to that. Therefore the possibility has to be very low," he said.

"We didn’t think it was in our shareholders’ interest to make any material changes (to the bid)," Harvey said, adding Aviva decided to walk away just five days after the bid proposal was made public because "we wanted to be clear and decisive on the matter so we could get back to business as usual."

"I’m not surprised they walked away so quickly. I think they listened to what their shareholders were saying," said a fund manager who is among the top 20 shareholders in both insurers.