8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 6, 2005

AMBAC FINANCIAL GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware	1-10777	13-3621676
(State of incorporation)	(Commission file number)	(I.R.S. employer identification no.)

One State Street Plaza, New York, New York 10004

(Address of principal executive offices) (Zip Code)

(212) 668-0340

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c))

Item 1.01 Entry into a Material Definitive Agreement.

The form and amount of compensation paid to Ambac Financial Group, Inc.’s non-employee directors is reviewed from time to time by the Governance Committee of Ambac’s Board of Directors (the “Board”) to consider, among other things, market trends relating to director compensation. The last increase in Board compensation was effective as of January 1, 2004.

On December 6, 2005, upon the recommendation of the Governance Committee, the Board approved changes to the cash compensation of the non-employee directors, effective as of January 1, 2006. The changes are as follows:

Cash Compensation	Effective as of January 1, 2006	Prior to change
Annual Retainer	$80,000	$45,000
Annual Fee for Serving on Audit and Risk Assessment Committee	Eliminated	$10,000
Annual Fee for Serving on Other committees	Eliminated	$5,000 per committee
Annual Retainer for Lead Director	$25,000	0
Annual Retainer for Chair of Audit and Risk Assessment Committee	$20,000	$10,000
Annual Retainer for Other Committee Chairs	$10,000	$10,000

A chart reflecting the total cash and equity compensation to be received by each non-employee director of Ambac is filed as an exhibit and is incorporated in its entirety by reference.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits.

Exhibit Number	Item
10.04	Directors’ Compensation Table (effective as of January 1, 2006)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Ambac Financial Group, Inc.
	(Registrant)
Dated: December 9, 2005
	By:	/s/ Anne Gill Kelly
		Anne Gill Kelly
		Managing Director, Secretary and Assistant General Counsel

INDEX TO EXHIBITS

Exhibit Number	Description of Exhibit
10.04	Directors’ Compensation Table (effective as of January 1, 2006)*.

* Management contract or compensatory plan, contract or arrangement required to be filed as an exhibit pursuant to Item 15( c ) of Form 10-K.

EX-10.04

Exhibit 10.04

AMBAC FINANCIAL GROUP, INC.

2006 DIRECTORS COMPENSATION TABLE *

EFFECTIVE AS OF JANUARY 1, 2006

TYPE OF FEE	AMOUNT	MANNER OF PAYMENT
Annual Fees/Awards
•      Annual fee for serving as a director of Ambac Financial Group, Inc.	$80,000**	$80,000 payable quarterly in arrears in cash
•      Annual fee for serving as a director of Ambac Assurance Corporation	None
•      Annual fee for chairing the Audit and Risk Assessment Committee of Ambac Financial Group, Inc.	$20,000	Payable quarterly in arrears in cash
•      Annual fee for chairing the Compensation Committee or Governance Committee of Ambac Financial Group, Inc.	$10,000	Payable quarterly in arrears in cash
•      Annual fee for serving as Lead Director of Ambac Financial Group, Inc.	$25,000	Payable quarterly in arrears in cash
Non-Executive Chairman Retainer Fee
•      Annual retainer fee for the Chairman of the Board	$250,000	Payable quarterly in arrears in cash
Travel and Related Expenses
•      Travel and related expenses incurred in attending a stockholder, board or committee meeting	100% of expenses incurred	Payable in cash promptly upon submission of receipts to the Ambac Financial Group, Inc.

* Directors who are employees of Ambac Financial Group, Inc. and its affiliates are not paid any fees or other compensation for serving as directors, but are reimbursed for travel and related expenses incurred in attending meetings.

** The cash portion of the annual fee is prorated to reflect service on the Board of less than one full year prior to the relevant annual meeting of stockholders.

AMBAC FINANCIAL GROUP, INC.

DIRECTORS COMPENSATION TABLE

EFFECTIVE AS OF MAY 4, 2004

(CONTINUED PAGE 2 OF 2)

TYPE OF FEE	AMOUNT	MANNER OF PAYMENT
Stock Awards
•      Annual Award of Restricted Units of Common Stock (RSUs)	Value of $60,000 RSUs on date of the Annual Meeting	•      The value of $60,000 of RSUs will be awarded annually on the date of the annual meeting of stockholders. The number of RSUs shall be equal to $60,000 divided by the average of the high and low selling price of Ambac’s Common Stock on the NYSE on the date of the Annual Meeting. •      The RSUs vest on the first anniversary of the grant
•      Five-year Award of RSUs	Value of $210,000 RSUs on date of Annual Meeting (only granted once every 5 years)	•      The value of $210,000 of RSUs are awarded on the date of the annual meeting of stockholders coincident with, or first succeeding the director’s election to the Ambac Financial Group, Inc. Board. The number of RSUs shall be equal to $210,000 divided by the average of the high and low selling price of Ambac’s Common Stock on the NYSE on the date of the Annual Meeting. •      These RSUs vest on the date of the annual meeting held in the fifth year following the date of grant •      Assuming the director remains on the Board following vesting, he or she will be awarded an additional $210,000 in RSUs •      RSUs are awarded under the 1997 Non-Employee Directors Plan, as amended

OTHER BENEFITS	DESCRIPTION
•      Deferred compensation	Under the Deferred Compensation Plan for Outside Directors and Eligible Senior Officers, non-employee directors may elect to defer all or part of their director compensation (including both annual and meeting fees) that is paid in cash
•      Health and welfare	Each non-employee director is permitted to enroll (without paying any premium) in the Ambac Financial Group, Inc. medical and dental plan and is eligible to receive a $50,000 term life insurance policy (without paying any premium)