Mortgage insurer Genworth MI Canada is up for sale as the company's U.S. parent is trying to streamline its operations as it works on being bought out itself by a Chinese buyer.

Virginia-based Genworth Financial Inc. is currently trying to hammer out the details of a deal that will see Chinese company China Oceanwide Holdings Group Co. Ltd. take over the financial services conglomerate.

One of Genworth's holdings is a controlling interest in Genworth MI Canada, which insures mortgages. It is the second largest mortgage insurer in Canada, behind the government-owned Canada Mortgage and Housing Corporation.

Genworth wants to sell off its Canadian business largely to rid itself of regulatory headaches and make it easier to be taken over by its Chinese suitor, in a deal it has been trying to get over the finish line since 2016.

Numerous U.S. regulatory bodies have already given their OK to the deal, but Canada's banking regulator, the Office of the Superintendent of Financial Institutions, has yet to give its blessing.

"The parties have repeatedly inquired of the Canadian authorities regarding the status of their review, but to date have not received any substantive guidance or likely timeframe for the completion of their review," Genworth said in a statement on Monday.

So against the backdrop of more delays, Genworth and its Chinese buyer are trying to cut the Canadian business out of the deal entirely.

A way around Canadian regulators

"MI Canada is one of our top-performing businesses," CEO Tom McInerney said. "However, the lack of transparent feedback or guidance from Canadian regulators about their review left us no choice but to look at strategic alternatives for MI Canada that would eliminate the need for Canadian regulatory approval of the Oceanwide transaction."

If Genworth can find a buyer for its Canadian business, it would be free to sell itself to its Chinese buyer without any interference from Canadian regulatory bodies.

While it's controlled by the U.S. parent, Genworth MI Canada went partially public in an IPO in 2009 and shares in the company currently trade on the Toronto Stock Exchange.

It's not clear who might be interested in buying the Canadian business. At current prices, Genworth's Canadian business is worth about $3.6 billion, although the U.S. parent still controls the company and owns almost 57 per cent of the shares, according to Bloomberg data.

"We look forward to closing the transaction as soon as possible so that we can bring certainty to Genworth stockholders and begin to realize the benefits of our merger," Oceanwide chairman Lu Zhiqiang said.

Toronto-Dominion Bank analyst Graham Ryding says being hived off from the U.S. parent could be good for Genworth Canada in the long run. "This could allow Genworth MI Canada to trade, and be valued, more according to its own fundamentals and not be influenced by Genworth Financial's merger uncertainty," he said in a note to clients on Tuesday.

As for who might buy the business, Ryding says he thinks there would be interest in the company from large Canadian institutional investors, and says some sort of sale is "likely."