UPDATE 2-Delphi Financial Q2 operating profit beats Street view

(Recasts; adds details, analyst comments)

By Supantha Mukherjee

BANGALORE, July 22 (Reuters) - Employee-insurance provider Delphi Financial Group Inc (DFG.N) posted a lower quarterly profit as it was hurt by investment losses, but operating earnings edged past market estimates, helped by higher underwriting profits in its insurance businesses.

"The economy is creating some headwinds for the top line but they continue to enjoy pretty good margins," said Jukka Lipponen, an analyst at Keefe, Bruyette & Woods. He has an "outperform" rating on the stock.

Operating earnings, which excludes investment gains and losses, for the second quarter fell slightly to 81 cents a share, from 82 cents in the prior-year period.

Analysts on average expected the company to earn 80 cents a share, before special items, according to Reuters Estimates.

Combined ratio -- costs and claims as a percentage of premiums -- in group employee benefits insurance was down to 91.8 percent in the quarter from 92.4 percent a year ago. A lower combined ratio means a company earned more money.

The company posted a second-quarter net profit of $26.9 million, or 55 cents a share, compared with $42.9 million, or 83 cents a share, a year ago.

Premium and fee income rose to $340.8 million from $324.3 million a year ago.