Italy's Generali has pulled out of the bidding for Royal Bank of Scotland's insurance arm just hours ahead of a first bid deadline on Wednesday, prompting speculation that interest in the asset is fading.
RBS had been expected to get interest from at least seven bidders on Wednesday, with Zurich Financial Services seen as the front-runner.
Generali, with its hefty acquisition treasure chest, was also seen as a strong candidate.
"Generali confirms it is withdrawing from the sale process," a Generali spokeswoman said.
The Italian giant's decision to withdraw -- just days after its managers said they were studying an offer -- comes after the withdrawal of another high-profile suitor, Warren Buffett's Berkshire Hathaway and is likely to trigger fresh debate over the price and conditions of the sale.
RBS, which put the unit on the block last month as it seeks to rebuild its capital base, hopes to raise between 6 billion and 7.5 billion pounds ($11.9 billion-$14.8 billion).
However, despite reported interest from European and U.S. bidders and one suitor from Asia, a shortage of cash among financial firms, volatile markets and the size of the deal in the competitive and mature UK insurance market may cool serious interest in the auction.
Generali has long flirted with the idea of taking a foothold in the competitive UK market and has up to 5 billion euros ($7.9 billion) to spend on acquisitions.
Chairman Antoine Bernheim favors blockbuster deals and hopes to bulk up to a size similar to rivals like Allianz and AXA.
His ambitions, however, have met with opposition within the group, where others prefer niche deals in the United States and growth markets of central and eastern Europe.
Zurich is seen as the single strongest contender as it has financial firepower while rivals are under pressure.
A deal would make it a serious player in the UK motor market.
Zurich already has a growing UK presence and hired RBS Insurance's former head, Annette Court, two years ago.
Other possible bidders are Allianz from Europe; Allstate , Travelers and AIG from the United States; and China's Ping An, according to people familiar with the situation.
Ping An, under the constraints of Chinese rules of financial investment abroad, and Allianz, however, are expected to have only lukewarm interest, while U.S. groups will be hampered by the strength of the British pound.
None is currently present in the ultra-competitive UK market.
Bidders had been expected to submit offers by late Wednesday afternoon, but the deadline is seen as flexible.