Genworth soars on possible spin off

Mortgage insurer Genworth Financial Inc. said Tuesday that it is considering various strategic alternatives for its U.S. mortgage-insurance business including a possible spin off, sending shares sharply higher in premarket activity.

"We have demonstrated that, in the current stressed U.S. housing environment, our U.S. Mortgage Insurance business continues to operate from a more sound financial position and lower risk profile than any other U.S. mortgage insurer," said Michael D. Fraizer, chairman and chief executive, in a statement.

"At the same time, progress in our international, wealth management, retirement, life and long-term care insurance businesses has been overshadowed by concerns about the future of U.S. mortgage insurance," he added.

Commercial paper
Genworth (GNW, Fortune 500) said it has reduced its commercial paper borrowings to $79 million, and maintains more than $800 million in cash and cash equivalents at the holding company.

The company also carries nearly $4 billion of cash and cash equivalents in its operating companies, and maintains substantial credit facilities, Genworth said.

Over the past couple of weeks, Genworth's stock has been hit hard by concerns about its mortgage exposure in the wake of the collapse of American International Group Inc.

Earlier this month, the government stepped in and provided AIG with a two-year $85 billion loan to help keep it in business. As one of the world's largest insurers, AIG teetered on the brink of bankruptcy as it looked for fresh cash to help shore up its balance sheet, which was facing a liquidity crunch amid the continued downturn in the credit markets.

Reinsurance business
Last week, Genworth management provided an update regarding its U.S. mortgage insurance business. The company is considering reinsurance transactions, asset transfers from outside the U.S. and joint ventures to boost capital, management said on a call with analysts.

Shares of Genworth spiked $1.49, or 30%, to $6.49 in premarket activity. The stock, which finished Monday's trading at $5, has ranged from $3.51 to $32.33 over the past year.