UPDATE 2-Liberty Q3 lapse rate in line with H1, lags peers

* Investment earnings from foreign and local equity mkts up

* Q3 BEE normalised group embedded value 80 rand/share

* Q3 lapses broadly in line with H1 (Adds analyst comment, share price)

By Serena Chaudhry

JOHANNESBURG, Nov 27 (Reuters) - South African insurer Liberty Holdings (LBHJ.J) was profitable in its third quarter, but is lagging its peers as the lapse rate at its units remains in line with its first-half.

Liberty, majority-owned by Standard Bank (SBKJ.J), Africa's biggest bank by assets, said an increase in investment into equity markets had helped business in the quarter, after it reported in August it had swung to a first-half loss.

However, the insurer said on Friday its life business, which was hit hard in the first half due to rising policy lapses, remained under strain as consumers with lower disposable income struggle to keep up with payments.

"The general improvement is in line. Bit concerned that the lapse turnaround isn't happening yet as we've seen with the other insurers," one Johannesburg-based insurance analyst said.

"In the sales, the retail side looks good, but the corporate business continues to struggle, which is a bit of a concern."