James L. Gammon, a senior vice president and senior portfolio manager at Loews/CNA Holdings, is expected to resign, according to market sources.

Officials at Loews/CNA declined to comment, but are expected to make an announcement tomorrow regarding Gammon's status with the company officials at Loews Corp., the company's parent, in New York could not be reached for comment.

Gammon, reached at the Four Seasons Olympic Hotel in Seattle, said, "I can't say anything. I can say absolutely nothing" until Friday. The hotel is the site of the National Federation of Municipal Analysts' annual conference, which Gammon is attending.

Loews/CNA has traditionally been a major municipal market player. But during the past few years, the company has been restructuring and reducing the size of its municipal portfolio, several traders, salesmen, and portfolio managers said. The firm has been selling a lot of long-term municipal issues while purchasing bonds with maturities ranging from three to five years.

Previously, Gammon was known as a dominant player in the New York market, often purchasing sizeable chunks of offerings and leaving few bonds available for other buyers.

"We all used to say we'd been ~Gammonized' because we couldn't get any bonds," one portfolio manager said.

His practices at times angered some traders who believed that Gammon often offered sizable blocks of New Yorks bonds prior to a new issue, hoping to depress prices and raise yields on the upcoming deal.

"Several years ago he was a very important factor in the market and very successful," one municipal analyst said. "His ability to buy things correctly was uncanny. I think he went wherever there was value."

In February at a buyers' conference in Arizona, Gammon announced that Loews/CNA Holdings was planning to sell approximately $2.4 billion of housing bonds to raise quality to offset asbestos-related losses. The losses stemmed from asbestos liability claims against the Continental Casualty Co., a subsidiary of CNA Financial Corp.

Earlier that month, Loews Corp. announced that it would take a fourth-quarter charge for 1992 of $567 million stemming from $1.5 billion addition to its reserves to cover the asbestos-related losses. Loews, a New York-based firm, has an 83% ownership stake in Chicago-based CNA financial, a multiline insurer.

After the sale of the $2.4 billion of bonds, the firm was expected to have municipal holdings of approximately $6.7 billion, Gammon said at that time. However, he anticipated that the firm could pump about $5 billion into municipal purchases in 1994.

Market sources say much of the $2.4 billion has been sold, with portions structured as derivative securities. Loews officials have declined to comment on the transactions.

During the early part of the municipal trading session yesterday, rumors circulated about whether Gammon was resigning voluntarily or had been asked to leave his post.

Some market sources speculated that Gammon may have decided to leave Loews voluntarily because the reduction in the firm's municipal holdings may have left little work for him and his staff.

"The obvious reason for the departure is that his firm is not active in municipals," said a portfolio manager, who asked that his name not be used.

"They're concentrating on the short end of the yield curve versus the long end, where he used to be a major player."

Others speculated that Gammon may be leaving to start his own investment management company.

Some market players expressed concerns that the unexpected exit could be due to overvaluation of Loews/CNA's portfolio, which could unsettle the market. A devaluation of such a large chunk of securities could depress prices of similar issues elsewhere in the market.

According to Gammon, Loews/CNA is one of the top five holders of municipals among property and casualty insurers.

Gammon was hired by Loews/CNA in March 1984 to run its municipal bond portfolio.

Prior to accepting the Loews offer, he was reportedly considering a move to a mutual fund company in Boston, Massachusetts Financial Services, some market sources said. Previously, Gammon spent more than 20 years at General Electric Co., where he managed its municipal portfolio.

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