PHILADELPHIA - Radian Group Inc. has a definitive agreement to buy Enhance Financial Services Group Inc. of New York for $540 million in stock.

Enhance stockholders are to receive 0.22 shares of Radian common stock for each share of Enhance.

Radian is in primary mortgage insurance, while Enhance insures and reinsures municipal and corporate-backed obligations and enhances the credit deals of asset-backed securities.

The purchase would advance Radian's "long-term plan to diversify across the credit enhancement spectrum," said Frank P. Filipps, chairman and chief executive officer. Enhance Financial's clients, which include large corporate and municipal bond insurers, investment banks, and issuers, "will benefit from Radian's stronger balance sheet" and expertise in the financial guaranty business, he said.

The deal was announced Tuesday and is expected to close next quarter.

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