July 28 (Bloomberg) -- CNA Financial Corp., the commercial insurer majority-owned by Loews Corp., is buying more securities backed by subprime debt and said it's made an 8 percent return on the riskiest home-loan holdings purchased this year.

``We continue to find a limited number of attractive opportunities in the subprime market,'' CNA Chief Financial Officer Craig Mense said today on a conference call. The company wrote down its subprime holdings by $64 million in the period.

Loews Chief Executive Officer Jim Tisch, 55, affirmed in April the insurer's strategy of seeking mortgage assets after the collapse of the subprime market. ``It's not for the faint of heart,'' Tisch said after Chicago-based CNA added $550 million in subprime and Alt-A investments in the first three months of the year. Tisch said CNA purchased $163 million in subprime holdings in the second quarter.

The insurer's shares declined 61 cents, or 2.4 percent, to $24.36 in New York Stock Exchange composite trading at 4:15 p.m. The company has dropped 44 percent in the past year amid investment losses and declining insurance rates.

Second-quarter net income fell 17 percent to $181 million from $217 million, CNA said in a statement today. Excluding investment losses, the insurer earned 93 cents a share, compared with the 92-cent estimate of six analysts surveyed by Bloomberg.

New CEO

The company said in May that Chief Executive Officer Stephen Lilienthal, 58, will step down next year after more than $1 billion in writedowns tied to the slumping housing market in five quarters through March 31. Thomas Motamed, 59, who worked more than 30 years at Chubb Corp., will be the new CEO.

CNA had about $1.6 billion in subprime asset-backed securities and $41 billion in total investments as of June 30. The portfolio included $10.7 billion in mortgage-backed securities, collateralized mortgage obligations, asset-backed securities and collateralized debt obligations.

The largest insurers in the U.S. and Bermuda have recorded more than $77 billion in writedowns tied to the slumping housing market in the five quarters ended March 31.

Competition among business insurers is holding down premiums for CNA and its competitors, with Travelers Cos. and Chubb reporting smaller profits in the period ended June 30. Commercial coverage prices in the U.S. dropped 13 percent in the quarter, extending a decline that began in 2004, according to a survey by the Council of Insurance Agents and Brokers.

CNA's second-quarter policy sales at its property and casualty business fell 3.7 percent to $1.71 billion.

``Rates continue to drop slowly but consistently,'' Lilienthal said on a conference call. ``We expect these conditions to continue through 2008 and into 2009.''

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net.

Last Updated: July 28, 2008 16:24 EDT