Loews Corp. said it will pump $1.25 billion into CNA Financial, its commercial insurance subsidiary. It cited adverse effects on CNA from the credit-market turmoil as the reason for the move, which didn’t sit well with investors: CNA’s stock plunged nearly 25 percent on the news, while Loews’ stock dropped more than 11 percent.

The capital infusion will be through Loews’ purchase of a new series of CNA non-voting cumulative senior preferred stock. To get it, CNA agreed to suspend the dividend on its existing common stock while the new preferred stock is outstanding.

The dividend on the preferred will accrue at the rate of 10 percent per year, payable quarterly for the first five years after issuance. The dividend rate will be reset on each subsequent five-year anniversary to the higher of 10 percent or the 10-year U.S. Treasury rate at the time plus 7 percent.

CNA will use $1 billion of the proceeds to increase the statutory surplus of Continental Casualty Co., CNA’s largest subsidiary.

Loews, a conglomerate controlled by the Tisch family, expects to complete the purchase of the preferred stock during the fourth quarter.

The company also said its board of directors approved the purchase of up to $1 billion of equity securities from its Boardwalk Pipeline subsidiary to fund the completion of pipeline expansion projects. Loews said it would provide the equity capital to the extent that external funds are not available to Boardwalk Pipeline on acceptable terms.

Boardwalk figures to use a portion of the capital before year-end and the balance during the first half of 2009, according to the announcement.