I had a friend like that too. Knew him since we were kids, for a while we were high school sweethearts. I didn't want to cut him off, as I'd known him for ages. But he was behaving just like your friend. Very offensive. I started giving him one-word, uninteresting replies and stopped sharing any stories from my life. He quickly lost interest in calling me after that.

So yes, you can speak to him directly and say you don't wish to communicate with him anymore. But do remember not to feel hurt if he gets angry at your decision and begins to insult you even further. You can also become as dull as a grey rock so that he will leave you alone. Do whatever is more suited to your personality.

Also, I don't think you are being overly sensitive or anything. You are quite justified in feeling upset over the things he has said. If you felt hurt and informed your friend and he still persisted in his behaviour, I think that is reason enough to stop communicating with him.