Prudential is to acquire the US insurance company American General for £17.5bn in a deal which will make it the sixth largest insurance group in the world.
The all-share acquisition is part of Prudential's US strategy and is likely to have little impact on the UK general insurance business. The company writes around £300m a year of general insurance in the UK.
It is paying a 28% premium for the US company, valuing its shares at $49.52 (£33.85). The new company will be worth around £31bn, based on recent share prices.
Shares in Prudential slumped by more than 14% on the London Stock Exchange after the deal was announced on Monday, but Prudential denied that it had paid too much for the company.
Under the deal Prudential will own 50.5% of the merged group.
Shareholders were concerned that that the company had offered up almost half of its equity in the combined group to secure American General at a time when US economic growth was slowing.
Jonathan Bloomer, chief executive of Prudential, will be chief executive of the new company. He said the two companies had a good fit.
“We have highly complementary business operations,” he said.
American General specialises in life insurance, annuities and consumer finance.