Johannesburg - Discovery Holdings on Tuesday said it has agreed to acquire up to a 24.99% share in its wholly owned health insurance subsidiary, Ping An Health Insurance of China.

Without disclosing the purchase price, Discovery said the consideration would be subject to certain closing adjustments but was not expected to exceed of 5% of Discovery's market capitalisation.

Discovery said in 2007, China spent approximately 4.5% of GDP on healthcare.

It said despite the increase in the proportion of the population covered by the state run Social Health Insurance (SHI) system, deductibles, co-payments and low benefit limits under SHI result in financial shortfalls for covered patients.

A defined schedule of treatments, drugs and service facilities and locations of service covered by SHI further limits the extent of protection provided by the SHI system.

"As a result, it is currently estimated that between 50% and 60% of the total expenditure on healthcare in China is paid for out-of-pocket by the patient," said Discovery, adding that only 6% of this out-of-pocket spend is covered by commercial health insurance.

The Ping An Group, founded in 1988, was the first financial conglomerate to be established in China with insurance as its core business.

With the a growing need for health insurance products focused on providing cover outside of the SHI schedule of benefits, including cover for foreign invested facilities which provide international standard healthcare, Ping An Health was founded in June, 2005.

It is a specialist health insurance company owned by Ping An Group of China with a registered capital of 500 million remnimbi.

"Ping An Health provides a range of health insurance and ancillary services. In the past three years, sales at Ping An Health have increased more than 400%, demonstrating a sustained and strong growth momentum," said Discovery.

The company said the transaction would see Ping An Health draw on Discovery's extensive health product intellectual property, and risk management structures and expertise while the Ping An Group's comprehensive distribution network infrastructure and brand would give Discovery increased access to the Chinese market.

The deal is still subject to several conditions including the securing of requisite approval from the China Insurance Regulatory Commission; and obtaining the requisite approval from the South African Reserve Bank.

- I-Net Bridge