By Jonathan Stempel
CNA suspended its common stock dividend in exchange for the injection, after losing $331 million, or $1.23 per share, in the third quarter.
Loews, based in New York, lost $137 million, or 31 cents per share, in the period. The company owns 90 percent of Chicago-based CNA, which typically accounts for more than half of Loews' revenue.
"Our third-quarter results no doubt disappoint all of us," Loews Chief Executive James Tisch said on a conference call. He nevertheless said "Loews is in a strong position to withstand these dysfunctional markets" and plans "to be 100 percent sure CNA has all the capital it needs."
Shares of both companies tumbled, with Loews falling as much as 14.6 percent and CNA as much as 23.6 percent.
CNA will sell preferred stock to Loews that carries an initial 10 percent dividend for five years. The seventh-largest U.S. commercial insurer will use $1 billion of proceeds to bolster its main insurance unit, Continental Casualty Co.
"It is bad for CNA investors because it dilutes existing shareholders," said Drew Woodbury, an analyst at Morningstar Inc. "It is bad for Loews investors in that it signifies that CNA, traditionally Loews' largest source of revenue, continues to perform poorly." He also said it will leave Loews with less cash to make acquisitions.
CNA operating profit excluding investments fell 61 percent to $83 million, or 31 cents per share. On that basis, analysts expected 69 cents per share, according to Reuters Estimates.
Results were hurt by falling prices on insurance policies and the worst U.S. hurricane season since 2005, including storms Gustav and Ike. Other insurers face similar pressures.
CNA also suffered $423 million of investment losses, including on securities issued by mortgage financiers Fannie Mae
CNA's third-quarter net loss compared with a year-earlier profit of $174 million, or 64 cents per share. Loews' net loss compared with a year-earlier profit of $555 million, or 77 cents per share.
LOEWS TO INJECT MONEY INTO BOARDWALK
CNA joins Hartford Financial Services Group Inc
The Treasury Department is examining whether to let insurers take part in its $700 billion financial industry bailout, two people familiar with the matter said Friday.
Separately, Loews plans to buy up to $1 billion of equity securities from Boardwalk Pipeline Partners LP
Moody's Investors Service affirmed the credit ratings of Loews and CNA, though senior credit officer Janice Hofferber said the support of CNA and Boardwalk will "meaningfully reduce" Loews' financial flexibility.
Separately, CNA said Chief Executive Stephen Lilienthal will step down at year-end, five months earlier than planned.
Lilienthal will be succeeded by Thomas Motamed, once the chief operating officer at the insurer Chubb Corp
Boardwalk on Monday said quarterly profit rose 84 percent to $73.6 million. Profit more than doubled to $47 million at HighMount Exploration & Production LLC, a natural gas unit that Loews wholly owns. Loews Hotels had a $6 million profit.
Houston-based Diamond Offshore Drilling Inc
The July-to-September period was the first full quarter to reflect the June split-off of Loews' cigarette unit, Lorillard Inc
Loews is run by James Tisch and Co-Chairmen Andrew Tisch and Jonathan Tisch. Andrew and James Tisch's late father, Laurence Tisch, and Jonathan Tisch's late father, Preston Robert Tisch, were also Loews chairmen.
In MIDDAY trading, CNA shares fell $3.90, or 22.1 percent, to $13.76 after earlier falling to $13.50; Loews fell $4.19, or 13.4 percent, to $27.12 after earlier falling to $26.74. Boardwalk fell 94 cents, or 4.5 percent, to $20.13.
(Editing by John Wallace)