Allstate, the largest publicly traded U.S. home and auto insurer, dropped a lawsuit in which it accused Citigroup of fraudulently selling hundreds of millions of dollars of mortgage-backed securities.

Allstate sued Citigroup in New York State Supreme Court in Manhattan in 2011, along with banks including Deutsche Bank, Bank of America and Morgan Stanley.

The Northbrook, Illinois-based insurer, which said in the suit that it bought more than $200 million of securities from New York-based Citigroup that were backed by residential mortgages, voluntarily discontinued the case, according to a court filing dated yesterday.

Justice Eileen Bransten in March denied bids by Morgan Stanley, Deutsche Bank and Bank of America to dismiss Allstate's suits. In the case against Morgan Stanley, Bransten rejected an argument that the lender is shielded from liability because offering materials disclosed that representations about the loans were based on information from originators.

Daniel L. Brockett, an attorney with Quinn Emanuel Urquhart & Sullivan representing Allstate, declined by e-mail to comment on the filing. A Citigroup spokesman, Scott Helfman, declined to comment in a telephone interview.

The case is Allstate Insurance Co. v. Citimortgage Inc., 650432/2011, New York State Supreme Court, New York County (Manhattan).

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