Delaware		13-3621676
(State of incorporation)		(I.R.S. employer identification no.)

One State Street Plaza
New York, New York		10004
(Address of principal executive offices)		(Zip code)

				PAGE
PART I    FINANCIAL INFORMATION
Item 1.		Financial Statements of Ambac Financial Group, Inc. and Subsidiaries
		Consolidated Balance Sheets — June 30, 2002 and December 31, 2001		3
		Consolidated Statements of Operations — three and six months ended June 30, 2002 and 2001		4
		Consolidated Statements of Stockholders’ Equity — six months ended June 30, 2002 and 2001		5
		Consolidated Statements of Cash Flows — three and six months ended June 30, 2002 and 2001		6
		Notes to Consolidated Unaudited Financial Statements		7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		24
PART II    OTHER INFORMATION
Item 4.		Submission of Matters to a Vote of Security Holders		26
Item 6.		Exhibits and Reports on Form 8-K		26
SIGNATURES				28
INDEX TO EXHIBITS				29

		June 30, 2002			December 31, 2001
		(unaudited)
ASSETS
Investments:
Fixed income securities, at fair value (amortized cost of $10,204,539 in 2002 and $8,355,596 in 2001)		$	10,456,533		$	8,469,157
Fixed income securities pledged as collateral, at fair value (amortized cost of $939,509 in 2002 and $1,393,193 in 2001)			948,177			1,401,528
Short-term investments, at cost (approximates fair value)			220,426			415,002
Other			2,633			2,163
Total investments			11,627,769			10,287,850
Cash			27,713			76,580
Cash pledged as collateral			9,418			—
Securities purchased under agreements to resell			14,005			11,200
Receivable for investment agreements			169			4,101
Receivable for securities sold			8,649			8,922
Investment income due and accrued			156,133			144,463
Reinsurance recoverable			1,894			2,259
Prepaid reinsurance			272,946			267,655
Deferred acquisition costs			170,345			163,477
Loans			932,213			901,194
Other assets			648,212			399,994
Total assets		$	13,869,466		$	12,267,695
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Unearned premiums		$	1,869,659		$	1,780,272
Losses and loss adjustment expense reserve			161,497			152,352
Ceded reinsurance balances payable			9,831			10,146
Obligations under investment and payment agreements			5,220,984			4,089,777
Obligations under investment repurchase agreements			1,190,564			1,422,151
Securities sold under agreement to repurchase			409,000			425,000
Deferred income taxes			183,214			123,077
Current income taxes			18,750			98,145
Debentures			612,472			619,315
Accrued interest payable			78,630			84,225
Other liabilities			595,637			416,632
Payable for securities purchased			158,027			62,915
Total liabilities			10,508,265			9,284,007
Stockholders’ equity:
Preferred stock			—			—
Common stock			1,062			1,060
Additional paid-in capital			549,509			538,135
Accumulated other comprehensive income			158,746			62,476
Retained earnings			2,652,042			2,403,473
Common stock held in treasury at cost			(158)			(21,456)
Total stockholders’ equity			3,361,201			2,983,688
Total liabilities and stockholders’ equity		$	13,869,466		$	12,267,695

		Three Months Ended June 30,								Six Months Ended June 30,
		2002				2001				2002				2001
Revenues:
Financial Guarantee:
Gross premiums written		$	195,683			$	236,668			$	345,044			$	346,335
Ceded premiums written			(24,705	)			(23,767	)			(44,254	)			(36,468	)
Net premiums written		$	170,978			$	212,901			$	300,790			$	309,867
Net premiums earned		$	113,630			$	93,412			$	217,284			$	178,528
Other credit enhancement fees			6,576				4,995				12,864				9,648
Net premiums earned and other credit enhancement fees			120,206				98,407				230,148				188,176
Net investment income			73,593				65,058				146,140				129,534
Net securities (losses) gains			(4,510	)			1,350				(9,081	)			(3,588	)
Other income			800				2,284				2,114				3,416
Financial Services:
Revenue			10,966				11,767				27,557				26,226
Net securities gains			408				—				766				438
Other:
Revenue			956				678				1,685				2,307
Net securities losses			(444	)			—				(444	)			—
Total revenues			201,975				179,544				398,885				346,509
Expenses:
Financial Guarantee:
Losses and loss adjustment expenses			5,900				4,800				11,600				9,400
Underwriting and operating expenses			18,603				17,426				37,164				34,069
Financial Services			5,699				5,973				10,835				11,604
Interest			10,816				9,485				21,482				18,968
Other			2,015				1,714				3,481				3,451
Total expenses			43,033				39,398				84,562				77,492
Income before income taxes			158,942				140,146				314,323				269,017
Provision for income taxes			39,181				32,509				77,610				63,865
Net income		$	119,761			$	107,637			$	236,713			$	205,152
Net income per share:
Basic		$	1.13			$	1.02			$	2.23			$	1.94
Diluted		$	1.09			$	0.99			$	2.17			$	1.88
Weighted average number of common shares outstanding: