Nov. 2 (Bloomberg) -- Loews Corp. Chief Executive Officer Jim Tisch, who warned that securities tied to subprime loans weren’t “for the faint of heart,” said his company is benefiting from purchases of the bonds made as the market collapsed.

“Those securities that we purchased have pretty much worked out well for us,” Tisch said today in an interview after Loews and its majority-owned insurance company CNA Financial Corp. reported profits for a second straight quarter. “Chances are if we had waited a little longer we could have bought them at cheaper prices.”

Insurers in the U.S. have reported more than $200 billion in writedowns and credit losses tied to the collapse of the subprime mortgage market after some borrowers failed to meet payments on their loans. The company said in April 2008 it added to subprime holdings to take advantage of falling prices. The securities didn’t reach their lows until March 2009.

“Do not try this at home,” Tisch said in a Loews conference call last year. “If you’re going to invest in the subprime market, you have to have on your staff people who are highly trained in analyzing mortgage-backed securities. It is not for the faint of heart.”

Loews was among investors that purchased the securities and other asset-backed holdings for their better-than-average yields as banks dumped them last year. The insurer holds mortgage- backed and asset-backed securities valued at $7.83 billion, which comprised 19 percent of CNA’s invested assets as of Sept. 30. The insurer valued its holdings of the securities at $8.79 billion a year earlier.

Shrinking Portfolio

“We view the non-agency residential portfolio as being a portfolio that will continue to shrink over time,” Richard Scott, Loews chief investment officer, said today in a conference call.

Some U.S. home-loan bonds reached prices almost double their March lows after a rally in the third quarter. Typical prices for so-called Alt-A securities rose to 60 cents on the dollar from 35 cents in mid-March, according to Barclays Capital data.

“I don’t have the exact return numbers but I know that the investments were very profitable for us,” Tisch said today.

CNA’s unrealized losses on asset-backed securities have narrowed 43 percent to $1.08 billion during the six months ended Sept. 30, regulatory filings show. The insurer, which is 90 percent owned by Loews, has posted $1.65 billion in realized investment losses since 2007 from the sale or writedown of holdings.

Misinterpreting Losses

Tisch said accounting rules that track investment values as unrealized losses and gains, rather than as part of the income statement, should be retained. Accounting shouldn’t penalize insurers for market declines, he said.

“If unrealized gains or losses go through the income statement, many investors will totally misinterpret the meaning of it,” Tisch said. “I want our income statement to show how management did in the quarter, not how financial markets did in the quarter.”

CNA reported net income of $263 million today, reversing a year-ago loss on fewer hurricane claims and improved investment results. Writedowns and the sale of securities that declined in value cost CNA $67 million in the three months ended Sept. 30, the 11th straight quarter of realized investment losses. The unit needed a $1.25 billion injection from Loews last year at the height of the credit crisis.

Loews’s book value, a measure of assets minus liabilities, rose 14 percent to $39.54 a share from the end of the second quarter on the rising value of CNA’s fixed-income securities.

Stock Rises

Loews earned $468 million in the quarter compared with a loss of $137 million in the same period a year earlier. The New York-based company also owns a chain of hotels, HighMount Exploration & Production, a natural gas and oil exploration unit, and the majority of both oil-driller Diamond Offshore Drilling Inc. and natural-gas transportation and storage company Boardwalk Pipeline Partners LP.

Loews rose 80 cents, or 2.4 percent, to $33.90 at 4:01 p.m. in New York Stock Exchange composite trading. The stock has climbed 20 percent this year, compared with the 15 percent increase in the Standard & Poor’s 500 Index. CNA rose 42 cents, or 1.9 percent, to $22.19.

Brothers Laurence Tisch and Preston Robert Tisch started Loews when they bought a New Jersey hotel in 1946. The family owns about 25 percent of the company, according to Bloomberg data. Jim Tisch is Laurence’s son.

To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net

Last Updated: November 2, 2009 16:10 EST