Shares in

J.C. Penney

(JCP) - Get Report

rose 13% Tuesday on news that the big retailing chain might sell its insurance business.

Penney said it had hired investment bank

Credit Suisse First Boston

to explore strategic alternatives for its Direct Marketing Services subsidiary, which sells medical and life insurance, and memberships to groups such as automotive road-side assistance and travel-related services.

The company said a sale or possible joint venture would free up resources so that the company could focus on its core department store and catalog business.

Investors reacted by bidding up the shares 1 5/16 to 16 5/8 by late afternoon. J.C. Penney closed Tuesday regular trading up 1 7/8, or 13%, at 16 9/16.

In a news release, Penney chief executive James Oesterreicher said the insurance business had performed well, with 12 years of growth, but "we believe that an exploration of strategic alternatives is a logical continuation of our ongoing efforts to focus on our core businesses."

Oesterreicher framed a possible sale of the insurance business as part of the company's effort to restructure. Last October, the company sold its credit card operations to

GE Capital

, and took internal steps to bring in new senior management, closed underperforming stores, and overhauled its merchandising process.

The company said it will use any proceeds from a full or partial sale of the insurance division, along with proceeds from the planned stock sale for its drugstore subsidary

Eckerd

, to buy back stock and pay off debt.

All of the company's restructuring efforts have been aimed at turning around a flagging performance. The company's fourth-quarter 1999 operating earnings plunged to 45 cents a diluted share from 72 cents a diluted share a year earlier. Analysts surveyed by

First Call/Thomson

expect earnings to have fallen further in the first quarter to 23 cents a share, vs. 61 cents a diluted share a year earlier.

More recently, J.C. Penny reported that its March same-store sales fell 9.5% from a year earlier, which is considered a large decline.

Based in Plano, Texas, J.C. Penney operates 1,140 department stores and more than 2,600 Eckerd stores.