<PAGE> 1

                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549


                                 FORM 10-Q

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


For Quarter Ended March 31, 1994        Commission file number 0-10175



                   POLICY MANAGEMENT SYSTEMS CORPORATION
           (Exact name of registrant as specified in its charter)



     South Carolina                                           57-0723125    
(State or other jurisdiction                               (I.R.S. Employer  
 of incorporation)                                        Identification No.)


One PMS Center (P.O. Box Ten)
Blythewood, S.C. (Columbia, S.C.)                             29016 (29202)
(Address of principal executive                                 (Zip Code) 
  offices)


Registrant's telephone number, including area code (803) 735-4000
 
     Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.

Yes           No   X   

     Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.

  22,637,021 Common shares, $.01 par value, as of April 29, 1994



The information furnished herein reflects all adjustments which are,
in the opinion of management, necessary for the fair presentation of
the results for the periods reported.  Such information should be
read in conjunction with the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.

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                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                   INDEX


PART I. FINANCIAL INFORMATION                                          PAGE

  Item 1. Financial Statements

          Consolidated Statements of Income for 
            the three months ended March 31, 1994 and 1993.... 3 

          Consolidated Balance Sheets as of 
            March 31, 1994 and December 31, 1993.............. 4 

          Consolidated Statements of Cash Flows for
            the three months ended March 31, 1994 and 1993.... 5

          Notes to Consolidated Financial Statements.......... 6

  Item 2. Management's Discussion and Analysis of
            Financial Condition and Results of
            Operations........................................ 8


PART II. OTHER INFORMATION


  Item 1. Legal Proceedings.................................. 17

  Item 6. Exhibits and Reports on Form 8-K................... 17

Signatures................................................... 18

Exhibit Index................................................ 19


<PAGE> 3

                                  PART I
                           FINANCIAL INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                     CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)

                                        Three Months Ended
                                             March 31, 
                                          1994      1993 
                                                  (Restated-
                                                    Note 1)  
                                          (In Thousands,  
                                        Except Per Share Data)
Revenues:
  Licensing............................ $ 16,470   $ 19,855
  Services.............................   99,472     99,360
                                         115,942    119,215
Costs and Expenses: 
  Employee compensation and 
    benefits...........................   44,970     39,597
  Computer and communications 
    expense............................   11,197     10,877
  Information services and data
    acquisition costs..................   34,456     26,928
  Other operating costs and expenses...   17,502     26,496
                                         108,125    103,898

Operating income.......................    7,817     15,317

Other Income and Expenses:
  Investment income....................    1,823      3,329
  Gain/(loss) on sale of 
    marketable securities..............      (17)     2,936
  Interest expense and other charges...     (895)      (339)
                                             911      5,926

Income before income taxes.............    8,728     21,243 

Income taxes...........................    3,160      7,618
   
Net income............................. $  5,568   $ 13,625
  
Net income per share................... $    .25   $    .58

Weighted average number of shares......   22,637     23,534

See accompanying notes.

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<TABLE>

                      POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<CAPTION>

                                                       (Unaudited)    
                                                         March 31,    December 31,
                                                           1994           1993   
                                                             (In Thousands,
                                                           Except Share Data)
<S>                                                       <C>          <C> 
Assets
Current assets:
  Cash and equivalents................................... $ 15,805     $ 24,122
  Marketable securities..................................  130,312      132,650
  Receivables, net of allowance for uncollectible 
     amounts of $1,822 ($1,817 at 1993)..................   97,220       92,975
  Income tax receivable..................................   19,422       18,764
  Deferred income taxes..................................    7,649        9,491
  Other..................................................   10,507        9,735
     Total current assets................................  280,915      287,737

Property and equipment, at cost less accumulated
     depreciation and amortization of $109,161
     ($102,623 at 1993)..................................  136,959      139,029
Receivables..............................................      954        4,716
Goodwill and other intangible assets.....................   83,224       85,969
Capitalized software costs...............................  121,465      117,513
Deferred income taxes....................................   15,037       21,585
Investments..............................................    5,710          -
Other....................................................    3,905        3,254
        Total assets..................................... $648,169     $659,803

Liabilities
Current liabilities:
  Accounts payable and accrued expenses.................. $ 39,510     $ 42,256
  Accrued restructuring and lease termination costs......    1,329        9,521
  Accrued contract termination costs.....................    1,941        2,714
  Current portion of long-term debt......................    6,505        6,986
  Unearned revenues......................................   21,808       19,121
  Other..................................................      192          383
     Total current liabilities...........................   71,285       80,981

Long-term debt...........................................    4,278        5,655
Deferred income taxes....................................   68,881       74,151
Accrued restructuring and lease termination costs........   20,026       19,735
Other....................................................    2,284        2,309
     Total liabilities...................................  166,754      182,831
 
Commitments and contingencies (Note 3)

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares 
   authorized............................................     -             -
Common stock, $.01 par value, 75,000,000 shares 
   authorized, 22,637,021 shares issued and 
   outstanding (22,637,021 at 1993)......................      226          226
Additional paid-in capital...............................  262,167      262,167
Retained earnings........................................  222,200      216,632
Unrealized holding loss on marketable securities.........   (1,474)         -
Foreign currency translation adjustment..................   (1,704)      (2,053)
     Total stockholders' equity..........................  481,415      476,972
        Total liabilities and stockholders' equity....... $648,169     $659,803

<FN>

See accompanying notes.

</TABLE>

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                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)
                                                Three Months Ended
                                                     March 31,
                                                  1994       1993 
                                                           (Restated-
                                                             Note 1)  
Operating Activities                               (In Thousands) 
  Net income.................................. $  5,568    $ 13,625 
  Adjustments to reconcile net income to net           
   cash provided by operating activities:     
    Depreciation and amortization.............   14,246      15,892
    Deferred income taxes.....................    2,902         211 
    Loss/(Gain) on sale of marketable  
      securities..............................       17      (2,936)
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termintion costs........................   (7,901)       -
    Receivables...............................     (413)     (5,911)
    Income taxes receivable...................     (658)       -    
    Accounts payable and accrued expenses.....   (2,792)      5,863
    Income taxes payable......................      -           510
  Other, net..................................     (119)     (5,552)
       Cash provided by operations............   10,850      21,702
  
Investing Activities
  Proceeds from sales/maturities of marketable
   securities, net............................   25,487     187,465
  Purchases of marketable securities, net.....  (30,302)    (99,219)
  Acquisition of property and equipment.......   (4,976)    (25,028)
  Capitalized internal software development 
    costs.....................................   (8,230)     (5,532)
  Purchased software..........................      (32)     (1,235)
  Proceeds from disposal of property & 
    equipment.................................      276       6,950
  Business acquisitions.......................     -         (2,840)
       Cash (used for) provided by investing 
         activities...........................  (17,777)     60,561 

Financing Activities
  Payments on long-term debt..................   (1,525)     (3,673)
  Issuance of common stock under stock 
    option plans..............................     -            663
       Cash used for financing activities.....   (1,525)     (3,010)

Effect of exchange rate changes on cash.......      135        (155)
Net (decrease) increase in cash & equivalents.   (8,317)     79,098 
Cash and equivalents at beginning of period...   24,122      31,959
Cash and equivalents at end of period......... $ 15,805    $111,057

Noncash Activities
  Long-term debt arising from and assumed in           
   connection with business acquisition....... $   -       $  2,987

Supplemental Information
  Interest paid...............................      853         278
  Income taxes paid...........................      937       6,535

 See accompanying notes.

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                   POLICY MANAGEMENT SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              March 31, 1994


NOTE 1. RESTATEMENT OF PRIOR YEAR RESULTS OF OPERATIONS

  In August 1993, the Company engaged independent accountants to
conduct a special audit of the Company's balance sheet as of
December 31, 1992 and its consolidated financial statements as of
and for the six months ended June 30, 1993.  As a result of this
audit, the Company determined that retained earnings previously
reported as of December 31, 1992 required adjustment.  These
adjustments were due to errors in the application of accounting
principles and subsequent discovery of facts existing at February
26, 1993, the date of the predecessor auditor's report (See Note 2
of Notes to Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993). 

  The Company is in the process of determining the specific periods
affected by the adjustments prior to December 31, 1992.  Once
determined, the Company intends to restate the financial statements
for such periods.  The consolidated statements of income and cash
flows for the three months ended March 31, 1993 are restated to
reflect adjustments, related to deferral of revenues due to changes
in timing of revenue recognition, reserve for losses on certain
contracts and a reduction of expenses due to capitalization of
certain software costs, that the Company determined were necessary
as a result of the special audit.


NOTE 2. MARKETABLE SECURITIES

  Effective January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," ("FAS
115").  In accordance with the provisions of FAS 115, the Company
has classified debt securities (primarily municipal bonds) either
as available-for-sale, which are carried at fair market value and
shown as Marketable Securities, or as held-to-maturity, which are
carried at amortized costs and shown as Investments.  Unrealized
gains and losses on securities classified as available-for-sale are
reported net and are included in Stockholders' Equity. 


NOTE 3.  CONTINGENCIES

  In April 1993, litigation was commenced against the Company and
certain of its present and former officers and directors in the
United States District Court for the District of South Carolina,
Columbia Division.  In the litigation, which purports to be a class 

<PAGE> 7

action on behalf of purchasers of the Company's common stock
between March 18, 1992 and July 8, 1993, the plaintiffs allege that
the Company failed to prepare its financial statements in
accordance with generally accepted accounting principles and
omitted to disclose certain information regarding, among other
things, its business and prospects in violation of the Federal
securities laws, the South Carolina Code and common law.  The
Company believes it has meritorious defenses to the claims and is
vigorously defending the litigation.  The plaintiffs seek
unspecified compensatory damages, legal fees and litigation costs.
The Company is unable to predict the outcome or the potential
financial impact of this litigation. 

  In June 1993, the Securities and Exchange Commission ("SEC")
commenced a formal investigation into possible violations of the
Federal securities laws in connection with the Company's public
reports and financial statements, as well as trading in the
Company's securities.  The SEC has issued a formal order of
investigation which provides the SEC staff with the power to
subpoena documents and to compel testimony in connection with their
investigation. The Company is cooperating with the SEC in
connection with the investigation.


NOTE 4. INCOME TAXES

  In 1992, the Internal Revenue Service completed an examination
of the Company's consolidated federal income tax returns for the
years 1985 through 1988 and has proposed certain adjustments to
income and credits that result in proposed tax deficiencies in the
amount of $17,785,000 for those years.  The Company believes that
its judgment in the areas for which adjustments have been proposed
has been appropriate and is contesting the proposed adjustments. 
The Company believes that adequate amounts of federal income taxes
are provided in the consolidated financial statements.


NOTE 5. SUBSEQUENT EVENT

  On April 27, 1994, the Company announced that it had agreed with
IBM to repurchase 2,278,537 of the 3,797,561 shares of the
Company's common stock held by IBM and that the remainder of the
Company's shares owned by IBM will be purchased by the General
Atlantic Partners group, a New York-based private investment firm. 
All of these shares will be purchased at a price of $24.77 per
share.  The shares being repurchased by the Company represent
approximately 10% of its total shares outstanding prior to the
repurchase.  After these transactions, General Atlantic Partners
will own approximately 7.5% of the Company's outstanding shares.

<PAGE> 8

                   POLICY MANAGEMENT SYSTEMS CORPORATION

                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS


  The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding
of the Company's consolidated results of operations and financial
condition.  The discussion should be read in conjunction with the
consolidated financial statements and notes thereto contained in 
Part I of this report on Form 10-Q and with the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.

RESULTS OF OPERATIONS

  Set forth below are certain operating items expressed as a
percentage of revenues and the percent increase (decrease) for
those items between the periods presented:

                                                   Percent
                                Percentage         Increase
                                of Revenues       (Decrease) 
                               Three Months      Three Months
                              Ended March 31,   Ended March 31,
                              1994       1993    1994 VS 1993
Revenues:
  Licensing.................  14.2       16.7       (17.0)
  Services..................  85.8       83.3          .1
                             100.0      100.0        (2.7)
Costs and Expenses:
  Employee compensation
    and benefits............  38.8       33.2        13.6
  Computer & communication
    expense.................   9.7        9.2         2.9 
  Information services &
    data acquisition costs..  29.7       22.6        28.0
  Other operating costs
    and expenses............  15.1       22.2       (33.9)
                              93.3       87.2         4.1

Operating income............   6.7       12.8       (49.0)
Other Income and Expenses...    .8        5.0       (84.6)

Income before income
  taxes.....................   7.5       17.8       (58.9)

Income taxes................   2.7        6.4       (58.5)

Net income.................    4.8       11.4       (59.1)

<PAGE> 9

  A comparison of revenues and operating income for each line of
business and geographic market for the periods presented is as
follows:

                                                               Operating
                                             Operating        Income as a
                            Revenues          Income         % of Revenue  
                          Three Months      Three Months      Three Months
                         Ended March 31,   Ended March 31,   Ended March 31,
                          1994     1993    1994     1993      1994     1993
                                        (Dollars in Millions)
  Line of Business   
Property & Casualty      $81.1    $90.1   $ 9.6    $18.3      11.8     20.3
Life                      25.6     16.1     (.8)     (.8)     (3.1)    (5.0)
Health                     9.2      9.2     2.4     (2.9)     26.1    (31.5)


  Geographic Market  
United States           $ 99.2   $100.9   $ 9.6    $12.4       9.7     12.3
Europe                     8.4      6.4      -        .2        -       3.1
Canada                     4.3      4.0     1.0      1.4      23.3     35.0
Asia/Pacific               4.0      4.1      .6       .6      15.0     14.6


  The above table does not include an allocation of revenues and
costs associated with corporate activities such as equipment sales,
financial services, legal and other general corporate activities. 
Revenues related to equipment sales amounted to $3.8 million for
the first quarter of 1993.  There were no equipment sales during
the first quarter of 1994.  Costs associated with these corporate
activities amounted to $3.4 million and $3.1 million for the three
months ended March 31, 1994 and 1993, respectively.  The results of
operations for the three months ended March 31, 1993 have been
restated (See Note 1 of Notes to Consolidated Financial
Statements).

REVENUES

  Total licensing revenues for the three months ended March 31,
1994 decreased $3.4 million (17.0%) compared to the corresponding
period in 1993, due primarily to a decrease of $4.6 million (55.9%)
in initial license revenues attributable to a reduction in the
number of systems licensed.  The reduction in  systems licensed was
primarily related to the property and casualty business in the
United States ($5.8 million), partially offset by  systems licensed
for life products in Europe ($1.5 million).  Revenues from
continuing monthly license charges for maintenance, enhancements
and services availability ("MESA") and for continuing right-to-use
licenses increased $1.2 million (10.3%) to $12.8 million for the 
first quarter in 1994 from $11.6 million for the corresponding
quarter in 1993.

<PAGE> 10

  Total services revenues for the three months ended March 31, 1994
increased $.1 million (.1%) compared to the corresponding period in
1993.  The total services revenue increase was affected by
activities in professional, outsourcing and information services,
as described more fully below.

  Revenues from professional services increased $4.3 million
(25.4%)  to $21.4 million for the  first quarter in 1994 from $17.1
million for the corresponding quarter in 1993, due primarily to
additional services of $3.1 million from  CYBERTEK Corporation, a
life software and services business acquired in August 1993, and
$2.4 million from new services relating to life insurance services
business in Europe.

  Revenues from outsourcing services amounted to $29.0 million for
the first quarter in 1994 and reflect a decrease of $6.4 million
(18.2%) compared to the corresponding quarter in 1993.  The
decrease was primarily attributable to the wind-down of the New
Jersey Market Transition Facility (MTF) project, where revenues
from this property and casualty business decreased from $9.6
million for the  first quarter in 1993 to $.9 million for the first
quarter in 1994, and to the termination of a facilities management
and processing contract in September 1993, representing $3.5
million of life insurance services business in Europe for the three
months ended March 31, 1993.  Revenues from outsourcing services,
excluding revenues from the MTF project and the terminated European
facilities management and processing contract for the 1993 first
quarter, would have resulted in an increase of $6.7 million for the
first quarter of 1994, as compared to the corresponding quarter in
1993.  This increase is primarily attributable to an increase of
$2.7 million in new outsourcing services relating to life insurance
services in Europe and an increase of $3.5 million in servicing
existing and new contracts with property and casualty insurance
companies and residual markets.

  Revenues from information services were $49.0 million for the 
first quarter in 1994 as compared with $42.9 million for  the
corresponding quarter in 1993.  This $6.1 million increase (14.2%) 
is primarily attributable to an increase in business associated
with property and casualty information services of $6.9 million
(motor vehicle driving records, undisclosed driver information and
driver mileage verification) and life and health information
services of $.8 million (physician statements and medical history
reports).  These increases, however, were partially offset by a
reduction in property and casualty information services revenue of
$1.8 million associated with risk services (inspections, premium
audits and personnel investigations).





<PAGE> 11

COSTS AND EXPENSES

  Employee compensation and benefits increased $5.4 million for the
first quarter in 1994 compared to the corresponding quarter in
1993, primarily as a result of increased costs ($4.8 million)
associated with the acquisition of CYBERTEK Corporation in August
1993, and the acquisition of a data center, including its
workforce, in Bergen, Norway.

  Information services and data acquisition costs increased $7.5
million for the first quarter in 1994 compared to the corresponding
quarter in 1993, due primarily to an increase in the volume of
state fees ($6.8 million) for motor vehicle reports, resulting from
new business in the property and casualty information services
business.

  Other operating costs and expenses for the first quarter in 1994
decreased $9.0 million when compared to the corresponding quarter
in 1993.  The decrease is primarily attributable to a reduction in
the cost of equipment sold of $3.5 million, a decrease in costs
associated with the wind-down of the MTF project amounting to $4.3
million, and increased credits of $2.7 million associated with the
capitalization of costs for the internal development of the
Company's software systems.


OPERATING INCOME

   Operating income was $7.8 million for the three months ended
March 31, 1994, as compared with $15.3 million for the
corresponding period in 1993.  Operating income as a percentage of
revenues declined to 6.7% for the  first quarter of 1994 from 12.8%
for the comparable quarter in 1993, primarily as a result of
decreased outsourcing services revenues ($6.4 million), a decrease
in initial license revenues ($4.6 million), principally in the
property and casualty business, and to increased operating costs
associated with the acquisition of CYBERTEK Corporation in August
1993, and the acquisition of a data center, including its
workforce, in Bergen, Norway.  

  These factors were partially offset by the improvement in the
Company's health insurance services business operating margin.  The
improvement in this business results from a reduction in current
operating costs associated with amortization charges for certain
identifiable intangible assets and goodwill, which were written-off
at June 30, 1993, a reduction in rental expense ($.3 million)
related to a lease termination and compensation and other benefits
costs ($1.7 million) through the downsizing of staff.  The Company
recorded, at June 30, 1993, special impairment and restructuring
charges to reduce the carrying value of certain identifiable
intangible assets and goodwill and to recognize as a loss the
planned future abandonment of certain facilities and employee
severance and outplacement costs related to its health insurance
services business.  The reduction in annual amortization related to
these intangibles is approximately $6.3 million.

<PAGE> 12

  The property and casualty insurance software and services
business experienced a lower level of revenue and operating income
primarily from decreased licensing activities and outsourcing
services during the three months ended March 31, 1994 than in the
first quarter of 1993.  Outsourcing services for property and
casualty insurers did not meet expectations due to several
contracts not closing or ramping up as fast as anticipated.  The
Company believes that this and the slow down in licensing was
largely due to the Company's efforts to complete a special audit of
the operating results for the first half of  1993; the delay in
releasing the results of that audit; and having available audited
financial statements.  

  The Company has not been able to reduce its operating expenses,
associated with the wind-down of the MTF project, as quickly as the
reduction in revenue from the MTF occurred because of ongoing
contractual obligations.  However, as a result of an increased role
in servicing additional new contracts with insurance companies and
residual markets, the Company is replacing revenues lost from the
MTF project, during the first half of 1994.  Margins, however, will
be reduced during the early phases of these contracts due to start-
up costs.

  The information services business for both the property and
casualty and the life and health businesses produced lower
operating profits for the three months ended March 31, 1994 
compared to the corresponding quarter in 1993.  Margins in the
property and casualty information services business were lower
primarily as a result of an overall decline in inspection usage,
while margins in the life and health information services business
were adversely affected by higher costs associated with providing
attending physician statements.  The Company is attempting to
direct more of its information services business into database
products and life and health information services where margins are
generally higher.  The Company typically realizes a lower gross
margin from property and casualty information services than from
software products and related services.  

   The Company's decision to develop new releases of certain of its
life systems based on the business functions of CYBERTEK software
and the process of integrating CYBERTEK functionality into certain
existing Series III applications continues to significantly reduce 
the operating margin from the life insurance services business. 
However, total revenues for the Company's life business were 59%
higher ($9.5 million) for the three months ended March 31, 1994,
compared to the corresponding period in 1993, due primarily to the
acquisition of CYBERTEK Corporation in August 1993 and the addition
of a new outsourcing contract in Europe during December 1993.

  Investment income, decreased $1.5 million as a result of a lower
level of investable funds, resulting from large cash expenditures
for the acquisition of CYBERTEK Corporation ($59.7 million) in 

<PAGE> 13

August 1993 and the repurchase in April 1993 of 970,668 shares of
the Company's common stock ($48.7 million) and to a decrease in
interest income related to a reduction in long-term accounts
receivable.

  Interest expense and other charges increased $.5 million for the
first quarter in 1994 when compared to the corresponding quarter in
1993, primarily as a result of the amortization of discounts ($.4
million) associated with long-term restructuring liabilities
recorded at June 30, 1993.  These liabilities are part of
restructuring charges established to recognize as a loss the
planned future abandonment of certain facilities and employee
severance and outplacement costs relating to the restructuring of
the Company's health insurance services business (see Note 13 of
Notes to Consolidated Financial Statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).

  As part of the Company's plan to repurchase 2,278,537 of the
3,797,561 shares of its common stock held by IBM, at a price of
$24.77 per share, the Company will liquidate a portion of its
marketable securities.  The Company estimates that it will incur a
loss on the sale of securities of approximately $800,000 to
$900,000 during the second quarter of 1994 (see Note 5 of Notes to
Consolidated Financial Statements).

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 36.2% and 35.9% for the three
months ended March 31, 1994 and 1993, respectively.  The increase
in the effective rate between the periods is due primarily to the
impact of the increase (1%) in the highest marginal corporate tax
rate resulting from the enactment of the Omnibus Budget
Reconciliation Act of 1993, which was partially offset by
nontaxable investment income representing a greater portion of
pretax income in the first quarter in 1994. 

<PAGE> 14

LIQUIDITY AND CAPITAL RESOURCES 

                                        March 31,    December 31,
                                          1994            1993   
                                             (In Millions)
Cash and equivalents, marketable
  securities, and investments           $151.8         $156.8
Current assets                           280.9          287.7
Current liabilities                       71.3           81.0
Working capital                          209.6          206.7

                                        March 31,      March 31,
                                          1994           1993   
                                             (In Millions)

Cash provided by operations             $ 10.9         $ 21.7
Cash (used for) provided by 
  investing activities                   (17.8)          60.6
Cash used for financing activities       ( 1.5)          (3.0)

  The Company's financial condition remained strong at March 31,
1994.  Working capital was $209.6 million, including cash, cash
equivalents and marketable securities of $146.1 million, and
excluding $5.7 million of long-term investments.  Cash, cash
equivalents, marketable securities and investments were $151.8
million at March 31, 1994 as compared to $156.8 million at December
31, 1993, a net decrease of $5.0 million, resulting primarily from
a decrease in cash generated by operations and to a lesser extent
unrealized holding losses on marketable securities.

  The decrease in net cash generated by operations of $10.9 million
for the first quarter in 1994 compared with the corresponding
quarter in 1993 was primarily attributable to lower net income
($8.1 million), a reduction in accrued restructuring costs  ($7.9
million) and a reduction in accounts payable and accrued expenses
($2.8 million).

  The Company recorded, at June 30, 1993, impairment charges to
reduce the carrying value of certain identifiable intangible assets
and goodwill related to its health insurance services business of
$54.9 million.  Due to this impairment and write-down, the Company
decided to restructure this business and take a restructuring
charge of $25.2 million as of June 30, 1993.  Costs to restructure
the health business are composed of $5.2 million associated with
employee severance and outplacement, and $20.0 million related to
an ongoing lease obligation and/or termination for the planned
future abandonment of certain leased office facilities (see Note 13
of Notes to Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993). 
Cash outlays with respect to the restructuring charges were $7.9
million for the first quarter of 1994.  Cash outlays are expected
to be approximately $8.3 million for the remainder of 1994.

<PAGE> 15

  Excluding short-term investments, net cash used for investing
activities declined in the first quarter in 1994, compared with the
corresponding quarter in 1993.  During the first quarter in 1994,
net cash used for investments included $3.8 million compared to
$23.4 million for the first quarter of 1993 that was invested in
data processing, communications equipment and office furniture and
equipment.  Approximately $21.4 million of the amount expended in
1993 was for upgrading data processing and communications
equipment.  Amounts capitalized for internal software development
increased $2.7 million (48.8%) to $8.2 million for the first
quarter in 1994 compared to $5.5 million for the corresponding
period in 1993, due primarily to the development of life systems
based on the business functions of CYBERTEK software and the
process of integrating CYBERTEK functionality into certain existing
Series III applications.
           
  Significant expenditures anticipated for the remainder of 1994,
excluding any possible business acquisitions, are as follows: 
acquisition of data processing, communications equipment and office
furniture, fixtures and equipment ($9,600,000); costs relating to
the internal development of software systems ($24,700,000) and;
debt payments relating to past business acquisitions ($3,044,000)
and; payments for the repurchase of 2,278,537 shares of the
Company's stock held by IBM at a price of $24.77 per share ($56.4
million) (see Note 5 of Notes to Consolidated Financial
Statements).

  The Company has historically used the cash generated from
operations for the following:  development and acquisition of new
products, acquisition of businesses and repurchase of the Company's
stock.  The Company anticipates that it will continue to use its
cash for all of these purposes in the future and that projected
cash from operations and cash and investment reserves will be able
to meet presently anticipated needs;  however, the Company may also
consider incurring debt as needed to accomplish specific objectives
in these areas and for other general corporate purposes.


FACTORS THAT MAY AFFECT FUTURE RESULTS

  The Company's future operating results may be affected by a
number of factors, including uncertainties relative to economic
conditions; industry factors; the Company's ability to develop and
sell its products profitably; the Company's ability to successfully
increase market share in its core business while expanding its
product base into other markets; and the Company's ability to
effectively manage expense growth relative to revenue growth in
anticipation of continued pressure on gross margins.  The Company's
operating results could be adversely affected should the Company be
unable to anticipate customer demand accurately, to introduce new
products on a timely basis, or to effectively manage the impact on
the Company of changes in the insurance marketplace.

<PAGE> 16

  Contracts with governmental agencies involve a variety of special
risks, including the risk of early contract termination by the
governmental agency and changes associated with newly elected state
administrations or newly appointed regulators.

  A significant portion of both the Company's revenue and its
operating income is derived from initial licensing charges received
as part of the Company's software licensing activities.  Because a
substantial portion of these revenues are recorded at the time new
systems are licensed, there can be significant fluctuations from
period to period in the revenues and operating income derived from
licensing activities based upon the timing of the licensing of new
systems.

  Because of the foregoing factors, as well as other factors
affecting the Company's operating results, past financial
performance should not be considered to be a reliable indicator of
future performance, and investors should not use historical trends
to anticipate results or trends in future periods.  
















<PAGE> 17
    
                              PART II
                             OTHER INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION


Items 2, 3, 4, and 5 are not applicable

Item 1. Legal Proceedings

        See Note 3, "Contingencies" of Notes to the Consolidated
        Financial Statements.

Item 6. Exhibits and Reports on Form 8-K.

Exhibits

  Exhibits required to be filed with this Quarterly Report on Form
10-Q are listed in the following Exhibit Index. 

Reports on Form 8-K

  The Company did not file any reports on Form 8-K during the
quarter ended March 31, 1994.









<PAGE> 18

                   POLICY MANAGEMENT SYSTEMS CORPORATION


                                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.


                   POLICY MANAGEMENT SYSTEMS CORPORATION
                               (Registrant)



                                        
Date:  May 9, 1994                 By:  Timothy V. Williams
                                        Executive Vice President
                                        (Chief Financial Officer)
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1

                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549

                                 FORM 10-Q

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

For Quarter Ended March 31, 1994        Commission file number 0-10175

                   POLICY MANAGEMENT SYSTEMS CORPORATION
           (Exact name of registrant as specified in its charter)

     South Carolina                                           57-0723125    
(State or other jurisdiction                               (I.R.S. Employer  
 of incorporation)                                        Identification No.)

One PMS Center (P.O. Box Ten)
Blythewood, S.C. (Columbia, S.C.)                             29016 (29202)
(Address of principal executive                                 (Zip Code) 
  offices)

Registrant's telephone number, including area code (803) 735-4000
 
     Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.

Yes           No   X   

     Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.

  22,637,021 Common shares, $.01 par value, as of April 29, 1994

The information furnished herein reflects all adjustments which are,
in the opinion of management, necessary for the fair presentation of
the results for the periods reported.  Such information should be
read in conjunction with the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
2

                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                   INDEX

PART I. FINANCIAL INFORMATION                                          PAGE

  Item 1. Financial Statements

          Consolidated Statements of Income for 
            the three months ended March 31, 1994 and 1993.... 3 

          Consolidated Balance Sheets as of 
            March 31, 1994 and December 31, 1993.............. 4 

          Consolidated Statements of Cash Flows for
            the three months ended March 31, 1994 and 1993.... 5

          Notes to Consolidated Financial Statements.......... 6

  Item 2. Management's Discussion and Analysis of
            Financial Condition and Results of
            Operations........................................ 8

PART II. OTHER INFORMATION

  Item 1. Legal Proceedings.................................. 17

  Item 6. Exhibits and Reports on Form 8-K................... 17

Signatures................................................... 18

Exhibit Index................................................ 19
3

                                  PART I
                           FINANCIAL INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                     CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)

                                        Three Months Ended
                                             March 31, 
                                          1994      1993 
                                                  (Restated-
                                                    Note 1)  
                                          (In Thousands,  
                                        Except Per Share Data)
Revenues:
  Licensing............................ $ 16,470   $ 19,855
  Services.............................   99,472     99,360
                                         115,942    119,215
Costs and Expenses: 
  Employee compensation and 
    benefits...........................   44,970     39,597
  Computer and communications 
    expense............................   11,197     10,877
  Information services and data
    acquisition costs..................   34,456     26,928
  Other operating costs and expenses...   17,502     26,496
                                         108,125    103,898

Operating income.......................    7,817     15,317

Other Income and Expenses:
  Investment income....................    1,823      3,329
  Gain/(loss) on sale of 
    marketable securities..............      (17)     2,936
  Interest expense and other charges...     (895)      (339)
                                             911      5,926

Income before income taxes.............    8,728     21,243 

Income taxes...........................    3,160      7,618
   
Net income............................. $  5,568   $ 13,625
  
Net income per share................... $    .25   $    .58

Weighted average number of shares......   22,637     23,534

See accompanying notes.
4

                      POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
(Unaudited)    
                                                         March 31,    December 31,
                                                           1994           1993   
                                                             (In Thousands,
                                                           Except Share Data)
Assets
Current assets:
  Cash and equivalents................................... $ 15,805     $ 24,122
  Marketable securities..................................  130,312      132,650
  Receivables, net of allowance for uncollectible 
     amounts of $1,822 ($1,817 at 1993)..................   97,220       92,975
  Income tax receivable..................................   19,422       18,764
  Deferred income taxes..................................    7,649        9,491
  Other..................................................   10,507        9,735
     Total current assets................................  280,915      287,737

Property and equipment, at cost less accumulated
     depreciation and amortization of $109,161
     ($102,623 at 1993)..................................  136,959      139,029
Receivables..............................................      954        4,716
Goodwill and other intangible assets.....................   83,224       85,969
Capitalized software costs...............................  121,465      117,513
Deferred income taxes....................................   15,037       21,585
Investments..............................................    5,710          -
Other....................................................    3,905        3,254
        Total assets..................................... $648,169     $659,803

Liabilities
Current liabilities:
  Accounts payable and accrued expenses.................. $ 39,510     $ 42,256
  Accrued restructuring and lease termination costs......    1,329        9,521
  Accrued contract termination costs.....................    1,941        2,714
  Current portion of long-term debt......................    6,505        6,986
  Unearned revenues......................................   21,808       19,121
  Other..................................................      192          383
     Total current liabilities...........................   71,285       80,981

Long-term debt...........................................    4,278        5,655
Deferred income taxes....................................   68,881       74,151
Accrued restructuring and lease termination costs........   20,026       19,735
Other....................................................    2,284        2,309
     Total liabilities...................................  166,754      182,831
 
Commitments and contingencies (Note 3)

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares 
   authorized............................................     -             -
Common stock, $.01 par value, 75,000,000 shares 
   authorized, 22,637,021 shares issued and 
   outstanding (22,637,021 at 1993)......................      226          226
Additional paid-in capital...............................  262,167      262,167
Retained earnings........................................  222,200      216,632
Unrealized holding loss on marketable securities.........   (1,474)         -
Foreign currency translation adjustment..................   (1,704)      (2,053)
     Total stockholders' equity..........................  481,415      476,972
        Total liabilities and stockholders' equity....... $648,169     $659,803
See accompanying notes.
5

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)
                                                Three Months Ended
                                                     March 31,
                                                  1994       1993 
                                                           (Restated-
                                                             Note 1)  
Operating Activities                               (In Thousands) 
  Net income.................................. $  5,568    $ 13,625 
  Adjustments to reconcile net income to net           
   cash provided by operating activities:     
    Depreciation and amortization.............   14,246      15,892
    Deferred income taxes.....................    2,902         211 
    Loss/(Gain) on sale of marketable  
      securities..............................       17      (2,936)
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termintion costs........................   (7,901)       -
    Receivables...............................     (413)     (5,911)
    Income taxes receivable...................     (658)       -    
    Accounts payable and accrued expenses.....   (2,792)      5,863
    Income taxes payable......................      -           510
  Other, net..................................     (119)     (5,552)
       Cash provided by operations............   10,850      21,702
  
Investing Activities
  Proceeds from sales/maturities of marketable
   securities, net............................   25,487     187,465
  Purchases of marketable securities, net.....  (30,302)    (99,219)
  Acquisition of property and equipment.......   (4,976)    (25,028)
  Capitalized internal software development 
    costs.....................................   (8,230)     (5,532)
  Purchased software..........................      (32)     (1,235)
  Proceeds from disposal of property & 
    equipment.................................      276       6,950
  Business acquisitions.......................     -         (2,840)
       Cash (used for) provided by investing 
         activities...........................  (17,777)     60,561 

Financing Activities
  Payments on long-term debt..................   (1,525)     (3,673)
  Issuance of common stock under stock 
    option plans..............................     -            663
       Cash used for financing activities.....   (1,525)     (3,010)

Effect of exchange rate changes on cash.......      135        (155)
Net (decrease) increase in cash & equivalents.   (8,317)     79,098 
Cash and equivalents at beginning of period...   24,122      31,959
Cash and equivalents at end of period......... $ 15,805    $111,057

Noncash Activities
  Long-term debt arising from and assumed in           
   connection with business acquisition....... $   -       $  2,987

Supplemental Information
  Interest paid...............................      853         278
  Income taxes paid...........................      937       6,535

 See accompanying notes.
6

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              March 31, 1994

NOTE 1. RESTATEMENT OF PRIOR YEAR RESULTS OF OPERATIONS

  In August 1993, the Company engaged independent accountants to
conduct a special audit of the Company's balance sheet as of
December 31, 1992 and its consolidated financial statements as of
and for the six months ended June 30, 1993.  As a result of this
audit, the Company determined that retained earnings previously
reported as of December 31, 1992 required adjustment.  These
adjustments were due to errors in the application of accounting
principles and subsequent discovery of facts existing at February
26, 1993, the date of the predecessor auditor's report (See Note 2
of Notes to Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993). 

  The Company is in the process of determining the specific periods
affected by the adjustments prior to December 31, 1992.  Once
determined, the Company intends to restate the financial statements
for such periods.  The consolidated statements of income and cash
flows for the three months ended March 31, 1993 are restated to
reflect adjustments, related to deferral of revenues due to changes
in timing of revenue recognition, reserve for losses on certain
contracts and a reduction of expenses due to capitalization of
certain software costs, that the Company determined were necessary
as a result of the special audit.

NOTE 2. MARKETABLE SECURITIES

  Effective January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," ("FAS
115").  In accordance with the provisions of FAS 115, the Company
has classified debt securities (primarily municipal bonds) either
as available-for-sale, which are carried at fair market value and
shown as Marketable Securities, or as held-to-maturity, which are
carried at amortized costs and shown as Investments.  Unrealized
gains and losses on securities classified as available-for-sale are
reported net and are included in Stockholders' Equity. 

NOTE 3.  CONTINGENCIES

  In April 1993, litigation was commenced against the Company and
certain of its present and former officers and directors in the
United States District Court for the District of South Carolina,
Columbia Division.  In the litigation, which purports to be a class
7

action on behalf of purchasers of the Company's common stock
between March 18, 1992 and July 8, 1993, the plaintiffs allege that
the Company failed to prepare its financial statements in
accordance with generally accepted accounting principles and
omitted to disclose certain information regarding, among other
things, its business and prospects in violation of the Federal
securities laws, the South Carolina Code and common law.  The
Company believes it has meritorious defenses to the claims and is
vigorously defending the litigation.  The plaintiffs seek
unspecified compensatory damages, legal fees and litigation costs.
The Company is unable to predict the outcome or the potential
financial impact of this litigation. 

  In June 1993, the Securities and Exchange Commission ("SEC")
commenced a formal investigation into possible violations of the
Federal securities laws in connection with the Company's public
reports and financial statements, as well as trading in the
Company's securities.  The SEC has issued a formal order of
investigation which provides the SEC staff with the power to
subpoena documents and to compel testimony in connection with their
investigation. The Company is cooperating with the SEC in
connection with the investigation.

NOTE 4. INCOME TAXES

  In 1992, the Internal Revenue Service completed an examination
of the Company's consolidated federal income tax returns for the
years 1985 through 1988 and has proposed certain adjustments to
income and credits that result in proposed tax deficiencies in the
amount of $17,785,000 for those years.  The Company believes that
its judgment in the areas for which adjustments have been proposed
has been appropriate and is contesting the proposed adjustments. 
The Company believes that adequate amounts of federal income taxes
are provided in the consolidated financial statements.

NOTE 5. SUBSEQUENT EVENT

  On April 27, 1994, the Company announced that it had agreed with
IBM to repurchase 2,278,537 of the 3,797,561 shares of the
Company's common stock held by IBM and that the remainder of the
Company's shares owned by IBM will be purchased by the General
Atlantic Partners group, a New York-based private investment firm. 
All of these shares will be purchased at a price of $24.77 per
share.  The shares being repurchased by the Company represent
approximately 10% of its total shares outstanding prior to the
repurchase.  After these transactions, General Atlantic Partners
will own approximately 7.5% of the Company's outstanding shares.
8

                   POLICY MANAGEMENT SYSTEMS CORPORATION

                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding
of the Company's consolidated results of operations and financial
condition.  The discussion should be read in conjunction with the
consolidated financial statements and notes thereto contained in 
Part I of this report on Form 10-Q and with the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.

RESULTS OF OPERATIONS

  Set forth below are certain operating items expressed as a
percentage of revenues and the percent increase (decrease) for
those items between the periods presented:

                                                   Percent
                                Percentage         Increase
                                of Revenues       (Decrease) 
                               Three Months      Three Months
                              Ended March 31,   Ended March 31,
                              1994       1993    1994 VS 1993
Revenues:
  Licensing.................  14.2       16.7       (17.0)
  Services..................  85.8       83.3          .1
                             100.0      100.0        (2.7)
Costs and Expenses:
  Employee compensation
    and benefits............  38.8       33.2        13.6
  Computer & communication
    expense.................   9.7        9.2         2.9 
  Information services &
    data acquisition costs..  29.7       22.6        28.0
  Other operating costs
    and expenses............  15.1       22.2       (33.9)
                              93.3       87.2         4.1

Operating income............   6.7       12.8       (49.0)
Other Income and Expenses...    .8        5.0       (84.6)

Income before income
  taxes.....................   7.5       17.8       (58.9)

Income taxes................   2.7        6.4       (58.5)

Net income.................    4.8       11.4       (59.1)
9

  A comparison of revenues and operating income for each line of
business and geographic market for the periods presented is as
follows:

                                                               Operating
                                             Operating        Income as a
                            Revenues          Income         % of Revenue  
                          Three Months      Three Months      Three Months
                         Ended March 31,   Ended March 31,   Ended March 31,
                          1994     1993    1994     1993      1994     1993
                                        (Dollars in Millions)
  Line of Business   
Property & Casualty      $81.1    $90.1   $ 9.6    $18.3      11.8     20.3
Life                      25.6     16.1     (.8)     (.8)     (3.1)    (5.0)
Health                     9.2      9.2     2.4     (2.9)     26.1    (31.5)

  Geographic Market  
United States           $ 99.2   $100.9   $ 9.6    $12.4       9.7     12.3
Europe                     8.4      6.4      -        .2        -       3.1
Canada                     4.3      4.0     1.0      1.4      23.3     35.0
Asia/Pacific               4.0      4.1      .6       .6      15.0     14.6

  The above table does not include an allocation of revenues and
costs associated with corporate activities such as equipment sales,
financial services, legal and other general corporate activities. 
Revenues related to equipment sales amounted to $3.8 million for
the first quarter of 1993.  There were no equipment sales during
the first quarter of 1994.  Costs associated with these corporate
activities amounted to $3.4 million and $3.1 million for the three
months ended March 31, 1994 and 1993, respectively.  The results of
operations for the three months ended March 31, 1993 have been
restated (See Note 1 of Notes to Consolidated Financial
Statements).

REVENUES

  Total licensing revenues for the three months ended March 31,
1994 decreased $3.4 million (17.0%) compared to the corresponding
period in 1993, due primarily to a decrease of $4.6 million (55.9%)
in initial license revenues attributable to a reduction in the
number of systems licensed.  The reduction in  systems licensed was
primarily related to the property and casualty business in the
United States ($5.8 million), partially offset by  systems licensed
for life products in Europe ($1.5 million).  Revenues from
continuing monthly license charges for maintenance, enhancements
and services availability ("MESA") and for continuing right-to-use
licenses increased $1.2 million (10.3%) to $12.8 million for the 
first quarter in 1994 from $11.6 million for the corresponding
quarter in 1993.
10

  Total services revenues for the three months ended March 31, 1994
increased $.1 million (.1%) compared to the corresponding period in
1993.  The total services revenue increase was affected by
activities in professional, outsourcing and information services,
as described more fully below.

  Revenues from professional services increased $4.3 million
(25.4%)  to $21.4 million for the  first quarter in 1994 from $17.1
million for the corresponding quarter in 1993, due primarily to
additional services of $3.1 million from  CYBERTEK Corporation, a
life software and services business acquired in August 1993, and
$2.4 million from new services relating to life insurance services
business in Europe.

  Revenues from outsourcing services amounted to $29.0 million for
the first quarter in 1994 and reflect a decrease of $6.4 million
(18.2%) compared to the corresponding quarter in 1993.  The
decrease was primarily attributable to the wind-down of the New
Jersey Market Transition Facility (MTF) project, where revenues
from this property and casualty business decreased from $9.6
million for the  first quarter in 1993 to $.9 million for the first
quarter in 1994, and to the termination of a facilities management
and processing contract in September 1993, representing $3.5
million of life insurance services business in Europe for the three
months ended March 31, 1993.  Revenues from outsourcing services,
excluding revenues from the MTF project and the terminated European
facilities management and processing contract for the 1993 first
quarter, would have resulted in an increase of $6.7 million for the
first quarter of 1994, as compared to the corresponding quarter in
1993.  This increase is primarily attributable to an increase of
$2.7 million in new outsourcing services relating to life insurance
services in Europe and an increase of $3.5 million in servicing
existing and new contracts with property and casualty insurance
companies and residual markets.

  Revenues from information services were $49.0 million for the 
first quarter in 1994 as compared with $42.9 million for  the
corresponding quarter in 1993.  This $6.1 million increase (14.2%) 
is primarily attributable to an increase in business associated
with property and casualty information services of $6.9 million
(motor vehicle driving records, undisclosed driver information and
driver mileage verification) and life and health information
services of $.8 million (physician statements and medical history
reports).  These increases, however, were partially offset by a
reduction in property and casualty information services revenue of
$1.8 million associated with risk services (inspections, premium
audits and personnel investigations).
11

COSTS AND EXPENSES

  Employee compensation and benefits increased $5.4 million for the
first quarter in 1994 compared to the corresponding quarter in
1993, primarily as a result of increased costs ($4.8 million)
associated with the acquisition of CYBERTEK Corporation in August
1993, and the acquisition of a data center, including its
workforce, in Bergen, Norway.

  Information services and data acquisition costs increased $7.5
million for the first quarter in 1994 compared to the corresponding
quarter in 1993, due primarily to an increase in the volume of
state fees ($6.8 million) for motor vehicle reports, resulting from
new business in the property and casualty information services
business.

  Other operating costs and expenses for the first quarter in 1994
decreased $9.0 million when compared to the corresponding quarter
in 1993.  The decrease is primarily attributable to a reduction in
the cost of equipment sold of $3.5 million, a decrease in costs
associated with the wind-down of the MTF project amounting to $4.3
million, and increased credits of $2.7 million associated with the
capitalization of costs for the internal development of the
Company's software systems.

OPERATING INCOME

   Operating income was $7.8 million for the three months ended
March 31, 1994, as compared with $15.3 million for the
corresponding period in 1993.  Operating income as a percentage of
revenues declined to 6.7% for the  first quarter of 1994 from 12.8%
for the comparable quarter in 1993, primarily as a result of
decreased outsourcing services revenues ($6.4 million), a decrease
in initial license revenues ($4.6 million), principally in the
property and casualty business, and to increased operating costs
associated with the acquisition of CYBERTEK Corporation in August
1993, and the acquisition of a data center, including its
workforce, in Bergen, Norway.  

  These factors were partially offset by the improvement in the
Company's health insurance services business operating margin.  The
improvement in this business results from a reduction in current
operating costs associated with amortization charges for certain
identifiable intangible assets and goodwill, which were written-off
at June 30, 1993, a reduction in rental expense ($.3 million)
related to a lease termination and compensation and other benefits
costs ($1.7 million) through the downsizing of staff.  The Company
recorded, at June 30, 1993, special impairment and restructuring
charges to reduce the carrying value of certain identifiable
intangible assets and goodwill and to recognize as a loss the
planned future abandonment of certain facilities and employee
severance and outplacement costs related to its health insurance
services business.  The reduction in annual amortization related to
these intangibles is approximately $6.3 million.
12

  The property and casualty insurance software and services
business experienced a lower level of revenue and operating income
primarily from decreased licensing activities and outsourcing
services during the three months ended March 31, 1994 than in the
first quarter of 1993.  Outsourcing services for property and
casualty insurers did not meet expectations due to several
contracts not closing or ramping up as fast as anticipated.  The
Company believes that this and the slow down in licensing was
largely due to the Company's efforts to complete a special audit of
the operating results for the first half of  1993; the delay in
releasing the results of that audit; and having available audited
financial statements.  

  The Company has not been able to reduce its operating expenses,
associated with the wind-down of the MTF project, as quickly as the
reduction in revenue from the MTF occurred because of ongoing
contractual obligations.  However, as a result of an increased role
in servicing additional new contracts with insurance companies and
residual markets, the Company is replacing revenues lost from the
MTF project, during the first half of 1994.  Margins, however, will
be reduced during the early phases of these contracts due to start-
up costs.

  The information services business for both the property and
casualty and the life and health businesses produced lower
operating profits for the three months ended March 31, 1994 
compared to the corresponding quarter in 1993.  Margins in the
property and casualty information services business were lower
primarily as a result of an overall decline in inspection usage,
while margins in the life and health information services business
were adversely affected by higher costs associated with providing
attending physician statements.  The Company is attempting to
direct more of its information services business into database
products and life and health information services where margins are
generally higher.  The Company typically realizes a lower gross
margin from property and casualty information services than from
software products and related services.  

   The Company's decision to develop new releases of certain of its
life systems based on the business functions of CYBERTEK software
and the process of integrating CYBERTEK functionality into certain
existing Series III applications continues to significantly reduce 
the operating margin from the life insurance services business. 
However, total revenues for the Company's life business were 59%
higher ($9.5 million) for the three months ended March 31, 1994,
compared to the corresponding period in 1993, due primarily to the
acquisition of CYBERTEK Corporation in August 1993 and the addition
of a new outsourcing contract in Europe during December 1993.

  Investment income, decreased $1.5 million as a result of a lower
level of investable funds, resulting from large cash expenditures
for the acquisition of CYBERTEK Corporation ($59.7 million) in
13

August 1993 and the repurchase in April 1993 of 970,668 shares of
the Company's common stock ($48.7 million) and to a decrease in
interest income related to a reduction in long-term accounts
receivable.

  Interest expense and other charges increased $.5 million for the
first quarter in 1994 when compared to the corresponding quarter in
1993, primarily as a result of the amortization of discounts ($.4
million) associated with long-term restructuring liabilities
recorded at June 30, 1993.  These liabilities are part of
restructuring charges established to recognize as a loss the
planned future abandonment of certain facilities and employee
severance and outplacement costs relating to the restructuring of
the Company's health insurance services business (see Note 13 of
Notes to Consolidated Financial Statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).

  As part of the Company's plan to repurchase 2,278,537 of the
3,797,561 shares of its common stock held by IBM, at a price of
$24.77 per share, the Company will liquidate a portion of its
marketable securities.  The Company estimates that it will incur a
loss on the sale of securities of approximately $800,000 to
$900,000 during the second quarter of 1994 (see Note 5 of Notes to
Consolidated Financial Statements).

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 36.2% and 35.9% for the three
months ended March 31, 1994 and 1993, respectively.  The increase
in the effective rate between the periods is due primarily to the
impact of the increase (1%) in the highest marginal corporate tax
rate resulting from the enactment of the Omnibus Budget
Reconciliation Act of 1993, which was partially offset by
nontaxable investment income representing a greater portion of
pretax income in the first quarter in 1994.
14

LIQUIDITY AND CAPITAL RESOURCES 

                                        March 31,    December 31,
                                          1994            1993   
                                             (In Millions)
Cash and equivalents, marketable
  securities, and investments           $151.8         $156.8
Current assets                           280.9          287.7
Current liabilities                       71.3           81.0
Working capital                          209.6          206.7

                                        March 31,      March 31,
                                          1994           1993   
                                             (In Millions)

Cash provided by operations             $ 10.9         $ 21.7
Cash (used for) provided by 
  investing activities                   (17.8)          60.6
Cash used for financing activities       ( 1.5)          (3.0)

  The Company's financial condition remained strong at March 31,
1994.  Working capital was $209.6 million, including cash, cash
equivalents and marketable securities of $146.1 million, and
excluding $5.7 million of long-term investments.  Cash, cash
equivalents, marketable securities and investments were $151.8
million at March 31, 1994 as compared to $156.8 million at December
31, 1993, a net decrease of $5.0 million, resulting primarily from
a decrease in cash generated by operations and to a lesser extent
unrealized holding losses on marketable securities.

  The decrease in net cash generated by operations of $10.9 million
for the first quarter in 1994 compared with the corresponding
quarter in 1993 was primarily attributable to lower net income
($8.1 million), a reduction in accrued restructuring costs  ($7.9
million) and a reduction in accounts payable and accrued expenses
($2.8 million).

  The Company recorded, at June 30, 1993, impairment charges to
reduce the carrying value of certain identifiable intangible assets
and goodwill related to its health insurance services business of
$54.9 million.  Due to this impairment and write-down, the Company
decided to restructure this business and take a restructuring
charge of $25.2 million as of June 30, 1993.  Costs to restructure
the health business are composed of $5.2 million associated with
employee severance and outplacement, and $20.0 million related to
an ongoing lease obligation and/or termination for the planned
future abandonment of certain leased office facilities (see Note 13
of Notes to Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993). 
Cash outlays with respect to the restructuring charges were $7.9
million for the first quarter of 1994.  Cash outlays are expected
to be approximately $8.3 million for the remainder of 1994.
15

  Excluding short-term investments, net cash used for investing
activities declined in the first quarter in 1994, compared with the
corresponding quarter in 1993.  During the first quarter in 1994,
net cash used for investments included $3.8 million compared to
$23.4 million for the first quarter of 1993 that was invested in
data processing, communications equipment and office furniture and
equipment.  Approximately $21.4 million of the amount expended in
1993 was for upgrading data processing and communications
equipment.  Amounts capitalized for internal software development
increased $2.7 million (48.8%) to $8.2 million for the first
quarter in 1994 compared to $5.5 million for the corresponding
period in 1993, due primarily to the development of life systems
based on the business functions of CYBERTEK software and the
process of integrating CYBERTEK functionality into certain existing
Series III applications.
           
  Significant expenditures anticipated for the remainder of 1994,
excluding any possible business acquisitions, are as follows: 
acquisition of data processing, communications equipment and office
furniture, fixtures and equipment ($9,600,000); costs relating to
the internal development of software systems ($24,700,000) and;
debt payments relating to past business acquisitions ($3,044,000)
and; payments for the repurchase of 2,278,537 shares of the
Company's stock held by IBM at a price of $24.77 per share ($56.4
million) (see Note 5 of Notes to Consolidated Financial
Statements).

  The Company has historically used the cash generated from
operations for the following:  development and acquisition of new
products, acquisition of businesses and repurchase of the Company's
stock.  The Company anticipates that it will continue to use its
cash for all of these purposes in the future and that projected
cash from operations and cash and investment reserves will be able
to meet presently anticipated needs;  however, the Company may also
consider incurring debt as needed to accomplish specific objectives
in these areas and for other general corporate purposes.

FACTORS THAT MAY AFFECT FUTURE RESULTS

  The Company's future operating results may be affected by a
number of factors, including uncertainties relative to economic
conditions; industry factors; the Company's ability to develop and
sell its products profitably; the Company's ability to successfully
increase market share in its core business while expanding its
product base into other markets; and the Company's ability to
effectively manage expense growth relative to revenue growth in
anticipation of continued pressure on gross margins.  The Company's
operating results could be adversely affected should the Company be
unable to anticipate customer demand accurately, to introduce new
products on a timely basis, or to effectively manage the impact on
the Company of changes in the insurance marketplace.
16

  Contracts with governmental agencies involve a variety of special
risks, including the risk of early contract termination by the
governmental agency and changes associated with newly elected state
administrations or newly appointed regulators.

  A significant portion of both the Company's revenue and its
operating income is derived from initial licensing charges received
as part of the Company's software licensing activities.  Because a
substantial portion of these revenues are recorded at the time new
systems are licensed, there can be significant fluctuations from
period to period in the revenues and operating income derived from
licensing activities based upon the timing of the licensing of new
systems.

  Because of the foregoing factors, as well as other factors
affecting the Company's operating results, past financial
performance should not be considered to be a reliable indicator of
future performance, and investors should not use historical trends
to anticipate results or trends in future periods.
17
    
                              PART II
                             OTHER INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION

Items 2, 3, 4, and 5 are not applicable

Item 1. Legal Proceedings

        See Note 3, "Contingencies" of Notes to the Consolidated
        Financial Statements.

Item 6. Exhibits and Reports on Form 8-K.

Exhibits

  Exhibits required to be filed with this Quarterly Report on Form
10-Q are listed in the following Exhibit Index. 

Reports on Form 8-K

  The Company did not file any reports on Form 8-K during the
quarter ended March 31, 1994.
18

                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                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.

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                               (Registrant)

                                        
Date:  May 9, 1994                 By:  Timothy V. Williams
                                        Executive Vice President
                                        (Chief Financial Officer)