Mortgage insurer

Radian Group

(RDN) - Get Report

said Tuesday it has agreed to buy municipal bond insurer

Enhance Financial Services Group

(EFS)

for about $540 million in stock.

Under the terms of the deal, Radian will exchange 0.22 Radian shares for each share of Enhance, which values Enhance at about $14.12 per share.

Philadelphia-based Radian said the deal "accelerates Radian's long-term, strategic plan to diversify across the credit enhancement spectrum."