The tie-up would have created a juggernaut in one of the most important regions for the global insurance industry. Instead, the U.K. insurer will continue to compete with the larger, more established AIA Group Ltd., as the AIG unit is known, at a time when smaller companies and insurance sold through banks are chipping away at market share.
AIA agents in much of Asia weren't eager to tie up with Prudential, while managers and agents of the U.K. insurer appeared to take the news in stride.
"The merger situation doesn't worry us, but I think it is good it didn't happen," said Kanjana Chungkasemsook, an AIA agent in Bangkok who handles life, travel, accident and other kinds of insurance. "We have a strong brand and strong market here, and the money generated by the company in Thailand stays in Thailand. We've been doing this work for many years, and our service is very strong. We have good products and a good customer base."
Agatha Tam, an agent for AIA in Hong Kong, said agents in this traditional center of AIA strength had been watching the Prudential deal closely, but went about their business as usual. "What happens with Prudential is something for the big executives to worry about. We're small potatoes; none of this is up to us," she said.
Ms. Tam said her team was adaptable, and would have welcomed a merger with Prudential as akin to "having a new sister." Now that the deal is dead, "in my personal opinion, we're happier keeping the family together," Ms. Tam said. "Our agency force here is much bigger than theirs, and our business has been growing."
Prudential managers and agents also appeared unperturbed. "We won't be affected," said Elsa Sambalillo, who has been with Prudential in the Philippines for 11 years. "PruLife can stand without AIA."
Some analysts saw a lost opportunity for both sides. Lance Burbidge, an insurance-industry analyst at Redburn Partners in London, wrote in a note to clients Tuesday that the tie-up, if executed properly, "could deliver unassailable economies of scale," with a commanding presence in less-developed markets where Prudential's bundled unit-linked contracts and AIA's network would have been a strong combination.
Joseph Mangadap, a sales agent at an AIA unit in the Philippines, was a believer in the merger's potential. "The deal should be pursued so there's a bigger market share," said Mr. Mangadap, who works for Philippine American Life and General Insurance Co., or Philamlife.
Others weren't convinced of the virtues of merging. Arlyen Cheng, a Philamlife agent in Manila, said joining forces with Prudential would add only about 5% to the AIA unit's market share in the Philippines, where it is by far the dominant provider. "We're already a stable company," she said. "The merger would just provide an additional product."
In Indonesia, Prudential agent Buyung Shakti Hamel didn't think the failed merger talks would hurt his business. A supervisor since 2004, Mr. Hamel oversees 60 agents with about 1,200 customers.
"Prudential is a market leader for unit-linked policies in Indonesia, and AIA has some products we don't have. A merger could help differentiate the combined company from the others," Mr. Hamel said. "But we are doing good, and I can't see how the decision [to pull out of the merger] matters."
The two insurers will be competing in an environment that has seen larger global insurers weakened in some Asian markets after the financial crisis. In markets like Singapore and Hong Kong, both insurers have seen their market share eroded by local companies and retail banks, according to consultancy Celent, part of Oliver Wyman Group.