UPDATE 2-Discovery to take stake in China Ping An Health JV

* Discovery to pay $29 mln for a 20 pct stake in Ping An JV

* Will launch key products in China next year

* Ping An eyes more investment in infrastructure projects

(Adds detail, background, quotes)

BEIJING, Aug 24 (Reuters) - South Africa's largest health insurer, Discovery Holdings (DSYJ.J), plans to pay about 200 million yuan ($29 million) for a 20 percent stake in a joint venture with Ping An Insurance (2318.HK) (601318.SS).

Health insurance coverage is very low in China, which has been stepping up efforts to expand its social safety net. Premiums are expected to exceed 120 billion yuan in 2015.

Discovery estimates that 55 percent of health care spending in China is private spending, and only 7 percent of that is insured, creating an attractive opportunity for health insurers to expand, said Adrian Gore, Discovery's chief executive.

"There's a massive kind of gap that needs to be covered over time," Gore said.

"When you put all these factors together it is a very, very large emerging market, and for us that makes it very appealing."

Discovery had initially said it would take a 25 percent stake in the insurance joint venture but had to cut its target to 20 percent because of Chinese regulatory limits. The deal still requires regulatory approval. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Reuters Insider interview link.reuters.com/quv76n ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

The joint venture will launch a Discovery product in China next year. The South African insurer would also send executives to China to manage product development and risk control, said Ping An Health chairman Lu Min, adding that Discovery's "Vitality" product would be adapted to the Chinese market.

Premiums at Ping An Health expanded at an annual rate of 490 percent over the past three years on the back of China's growing public and private spending on medical insurance, said Ren Huichuan, chairman and CEO of Ping An Property and Casualty Insurance Co of China Ltd.

Ping An founded its health business in 2005 with a registered capital of about 500 million yuan ($73 million).

Discovery has already invested in the UK and United States.

PING AN'S CHOICE

Parent Ping An Group is China's second-biggest insurer and has been in focus recently as talk swirled over whether Chinese firms might buy into AIA, the Asian life insurance business of American International Group Ltd (AIG.N).

Ren declined to comment on whether Ping An had any interest.

He said the firm's focus was on the domestic market, where it preferred to invest more in infrastructure projects, which usually offer stable returns.

"We are more familiar with this market and it has a lot of investment opportunities," he said.

According to the latest guidelines, Chinese insurers can now invest up to 10 percent of their assets in the infrastructure sector and a maximum of 15 percent in overseas markets.

Bailed out insurer AIG is planning to list AIA later this year in Hong Kong, and could raise about $15 billion, sources have previously told Reuters.

A consortium of leading Chinese companies, including China Life (2628.HK) (601628.SS) and Industrial and Commercial Bank of China Ltd (1398.HK)(601398.SS), plans to bid for a 30 percent stake in AIA, a Chinese paper reported last week. [ID:nTOE67F047] (Reporting by Benjamin Kang Lim, Langi Chiang, Lucy Hornby and Xie Heng; Editing by Ken Wills and Simon Jessop)