Equitable Life was accused of "the biggest climbdown in English legal history" after it formally abandoned its multimillion-pound High Court claim against its former auditor, Ernst & Young.
The claim was made by Mark Hapgood QC, representing Ernst & Young, after Mr Justice Langley was told by Iain Milligan QC, for Equitable, that the claim had been settled on terms that the action is discontinued and the parties bear their own costs.
Legal experts said the total legal bill for the case, which began in April, was expected to be about £60 million.
Mr Milligan also asked the judge that the separate £1.7 billion claim by Equitable against 15 former directors be adjourned for a week. Mr Hapgood said: "At the end of this very long and costly and utterly pointless piece of litigation, which has culminated in the biggest climbdown in English legal history, there is a salutary lesson to be learned for those thinking of suing auditors."
Two months ago the troubled mutual insurer abandoned part of its High Court action against E&Y, reducing the original £2 billion claim to £700 million. The decision to scrap the original claim against E&Y left Equitable facing a £10 million bill for the legal costs thrown away.
Equitable was plunged into difficulties after the holders of guaranteed annuity rate (GAR) policies won a test case against the society in the House of Lords, leaving it with a £1.5 billion liability.
Nick Land, chairman of E&Y, said: "The news is a complete vindication for us. This was an ill-conceived and badly prepared action which we have said all along should never have been brought."
Vanni Treves, chairman of Equitable Life, said: "We launched this hugely technical and complex litigation after careful deliberation, having taken expert audit and actuarial guidance and having received clear legal advice.
"We had a duty to bring the claim against Ernst & Young. Not to have launched this action would have been a dereliction of our responsibilities to continuing policyholders."