UPDATE 2-EMC Insurance Q2 profit misses Street, cuts FY outlook

* Cuts FY10 oper EPS view to $1.65-$1.90

* Q2 EPS $0.29 vs est. $0.37

* Sees soft market conditions till 2012 (Adds segment details, quotes)

July 29 (Reuters) - EMC Insurance Group (EMCI.O) posted a second-quarter profit that was below market expectations, hurt by heavy losses from the Midwest storms, and slashed its earnings forecast for the year.

The company expects operating earnings of $1.65 to $1.90 a share for 2010, compared with its prior forecast of $1.90 to $2.15 a share, and said it sees soft market conditions to continue into 2012.

For the second quarter, operating income was $3.8 million, or 29 cents a share, compared with $6.4 million, or 48 cents a share, a year ago.

Analysts on average were expecting earnings of 37 cents a share, according to Thomson Reuters I/B/E/S.

"Midwest storms had a big impact on second-quarter earnings," Chief Executive Bruce Kelley said.

"We had six storms that each generated losses in excess of $1.4 million. None of the storm losses were large enough to trigger our reinsurance coverage, so we retained all the losses." the CEO said.

Premiums earned were almost flat at $96.4 million.

Segment-wise, premium earned from property and casualty insurance decreased 1 percent to $75.8 million, while premium earned from reinsurance rose 5 percent to $20.5 million.

The company said competition remained very strong in the commercial lines of business, but it has been able to implement moderate rate increases in its personal lines of business.

"We will continue to implement commercial lines rate increases where they are warranted, but we do not expect to see overall rate levels improve until the economy recovers," said Kelley.

Catastrophe and storm losses rose 69 percent to $16.6 million.

Shares of the company were down 1 percent at $22.00 Thursday on Nasdaq. (Reporting by Rachel Chitra in Bangalore; Editing by Vinu Pilakkott)