<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 September 30, 1993    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 March 11, 1994



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                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                   INDEX


PART I.   FINANCIAL INFORMATION                                        PAGE

     Item 1.   Financial Statements

               Consolidated Statements of Operations for 
                 the nine and three months ended 
                 September 30, 1993..........................            3 

               Consolidated Balance Sheets as of 
                 September 30, 1993 and December 31, 1992....            4 

               Consolidated Statement of Cash Flows for
                 the nine months ended 
                 September 30, 1993..........................            5 

               Notes to Consolidated Financial Statements....            6 

     Item 2.   Management's Discussion and Analysis of
                 Financial Condition and Results of
                 Operations.................................. 11 


PART II.  OTHER INFORMATION


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

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

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

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

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                                  PART I
                           FINANCIAL INFORMATION

<TABLE>

                   POLICY MANAGEMENT SYSTEMS CORPORATION
             CONSOLIDATED STATEMENTS OF INCOME AND OPERATIONS
                                (Unaudited)

<CAPTION>

                                         Nine Months Ended    Three Months Ended
                                         September 30, 1993   September 30, 1993
                                                      (In Thousands,  
                                                  Except Per Share Data)
<S>                                           <C>                  <C>
Revenues:
  Licensing...............................    $ 58,621             $ 15,666
  Services................................     286,187               93,219
                                               344,808              108,885
 
Costs and Expenses: 
  Employee compensation and benefits......     126,293               42,038
  Computer and communications expense.....      31,016               10,095
  Information services and data 
    acquisition costs.....................      96,300               34,281
  Other operating costs and expenses......      91,862               21,719
  Impairment and restructuring charges....      80,733                 -   
                                               426,204              108,133

Operating income (loss)...................     (81,396)                 752

Investment income, net....................       9,274                1,333

Income (loss) before income 
  taxes (benefit).........................     (72,122)               2,085

Income taxes (benefit)....................     (12,045)               1,739
                                                                              
Net income (loss).........................    $(60,077)            $    346

  
Net income (loss) per share...............    $(  2.62)            $    .02


Weighted average number of shares.........      22,933               22,604

<FN>

See accompanying notes.


</TABLE>







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<TABLE>

                      POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<CAPTION>

                                                                             (Unaudited)       (Audited)
                                                                             September 30,    December 31,
                                                                                1993             1992       
                                                                                      (In Thousands,
                                                                                    Except Share Data) 	
<S>                                                                            <C>             <C>         
Assets    
Current assets:
  Cash and equivalents.....................................................    $ 31,292        $  31,959
  Marketable securities....................................................     123,124          206,562
  Receivables, net of allowance for uncollectible amounts
     of $1,597 ($1,630 at 1992)............................................      90,119           86,684
  Income tax receivable....................................................      10,232            2,891
  Deferred income taxes....................................................       6,742            8,083
  Other....................................................................      10,551            9,659
     Total current assets..................................................     272,060          345,838

Property and equipment, at cost less accumulated depreciation
     and amortization of $95,412 ($83,730 at 1992).........................     139,217          131,696
Receivables................................................................       5,257           22,252
Goodwill and other intangible assets.......................................      87,650          100,792
Capitalized software costs.................................................     110,697           99,414
Deferred income taxes......................................................      10,836            2,580
Other......................................................................       3,128            6,295
     Total assets..........................................................    $628,845         $708,867

Liabilities
Current liabilities:
  Accounts payable and accrued expenses....................................    $ 44,899         $ 36,151
  Accrued restructuring and lease termination costs........................      10,090             -   
  Accrued contract termination costs.......................................       5,380            5,030
  Current portion of long-term debt........................................       4,515            3,670
  Income taxes payable.....................................................       1,693             -   
  Unearned revenues........................................................      11,763           11,361
  Other....................................................................       1,161            3,646
     Total current liabilities.............................................      79,501           59,858

Long-term debt.............................................................       5,496            6,001
Deferred income taxes......................................................      49,730           56,112
Accrued restructuring and lease termination costs..........................      19,417             -  
Other......................................................................       2,521            7,820
     Total liabilities.....................................................     156,665          129,791
 
Commitments and contingencies (Note 5)

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares authorized.................         -               -    
Common stock, $.01 par value, 75,000,000 shares authorized,
   22,617,353 shares issued and outstanding (23,524,197 at 1992)...........         226              235
Additional paid-in capital.................................................     261,635          307,906
Retained earnings..........................................................     212,689          272,766
Foreign currency translation adjustment....................................      (2,370)          (1,831)

     Total stockholders' equity............................................     472,180          579,076
 
        Total liabilities and stockholders' equity.........................    $628,845         $708,867

<FN>

See accompanying notes.

</TABLE>

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<TABLE>

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENT OF CASH FLOWS
                                (Unaudited)

<CAPTION>

                                                            Nine Months Ended
                                                            September 30, 1993 
                                                             (In Thousands)

<S>                                                             <C>    
Operating Activities                                          
  Net loss..........................................            $(60,077)           
  Adjustments to reconcile net loss to net                                           
   cash provided by operating activities:     
    Depreciation and amortization...................              47,214             
    Deferred income taxes...........................             (20,763)              
    Gain on sale of marketable securities...........              (3,053)
    Provision for uncollectible accounts............               1,500 
    Impairment charges..............................              54,890
  Changes in assets and liabilities:
    Restructuring charges...........................              25,843
    Receivables.....................................              21,344
    Income tax receivable...........................              (7,341)
    Accounts payable and accrued expenses...........               1,822
    Income taxes payable............................               3,009
  Other, net........................................              (3,848)              
       Cash provided by operations..................              60,540              
  
Investing Activities
  Proceeds from sales/maturities of marketable
   securities, net..................................             364,443
  Purchases of marketable securities, net...........            (269,112)
  Acquisition of property and equipment.............             (35,242)            
  Capitalized internal software development costs...             (17,591)             
  Purchased software................................              (3,928)            
  Proceeds from disposal of property and equipment..               9,123             
  Business acquisitions.............................             (59,097)              
       Cash used for investing activities...........             (11,404)              

Financing Activities
  Payments on long-term debt........................              (3,680)    
  Issuance of common stock under stock      
   option plans.....................................                 690      
  Issuance of common stock to employee benefit plan.               1,328
  Repurchase of outstanding common stock............             (48,660)  
       Cash used for financing activities...........             (50,322)   

Effect of exchange rate changes on cash.............                 519           
Net increase in cash and equivalents................                (667)     
Cash and equivalents at beginning of period.........              31,959  
Cash and equivalents at end of period...............            $ 31,292

Noncash Activities
  Long-term debt arising from and assumed in           
   connection with business acquisition.............            $  4,187   

Supplemental Information
  Interest paid.....................................               1,037    
  Income taxes paid.................................              12,158  

<FN>

 See accompanying notes.

</TABLE>

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                   POLICY MANAGEMENT SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            September 30, 1993
                                (Unaudited)

NOTE 1.   BASIS OF PRESENTATION

     The financial information included in Part I, Item 1 consists
of an unaudited consolidated balance sheet as of September 30,
1993, an audited consolidated balance sheet as of December 31,
1992, unaudited consolidated statement of operations for the three
months and nine months ended September 30, 1993 and an unaudited
consolidated statement of cash flows for the nine months ended
September 30, 1993.  Comparable unaudited statements of operations
and of cash flows for the periods ended September 30, 1992 are
currently unavailable and therefore are not included herein.  The
unaudited information reflects all adjustments which, in the
opinion of management, are necessary for a fair statement of
financial position, results of operations and cash flows as of and
for the periods ended September 30, 1993, with the exception of the
items described in Note 4, since adjustments are considered to be
normal and recurring.  Further, all material intercompany balances
and transactions have been eliminated.


NOTE 2.  ACQUISITION

     On August 24, 1993, the Company consummated the acquisition of
all of the outstanding stock of CYBERTEK Corporation ("CYBERTEK")
of Dallas, Texas for an aggregate consideration of $59,727,000 in
cash.  CYBERTEK has over 20 years of experience in serving the data
processing needs of the life insurance industry by designing and
delivering a combination of data processing services, consulting
services and software.

     The acquisition has been recorded using the purchase method of
accounting.  Accordingly, the unaudited consolidated statements of
operations of the Company for the three months and nine months
ended September 30, 1993 include the results of operations of
CYBERTEK only from the date of acquisition.  The cost of
acquisition was determined, and assigned to assets acquired, as
follows:
                                            (In Thousands)
     Total consideration paid.................  $58,152
     Direct costs of acquisition..............    1,575 
     Total cost to be assigned to net
       assets acquired........................   59,727
     Add - Liabilities assumed................   13,876
     Less - Cost assigned to tangible and 
       identifiable intangible assets 
       acquired (including $10,623 
       purchased software cost)...............   47,338
     Cost assigned to goodwill................  $26,265 

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<PAGE> 7

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
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.   IMPAIRMENT & RESTRUCTURING CHARGES

     During the first half of 1993, the Company experienced
markedly decreased revenues from its health insurance services
business unit.  Near the end of the second quarter of 1993, the
Company projected that its annual health insurance services
business revenues would drop by approximately 50% from the revenue
recorded in 1992 to approximately $30,000,000 for all of 1993, and
that trend of decline would continue into 1994.  To better
understand both the cause and the anticipated duration of this
decline, the Company then undertook an assessment of the potential
impact on its health insurance services business of proposed health
care legislation, rapidly evolving and significant changes in the
relationship of health care providers and insurers and the
resultant changes in health insurers' software and service needs.

     After meetings with its financial advisors, health care
professionals and customers, the Company determined that it did not 
have some of the systems to respond to the most likely future
initiatives in the health care insurance industry and that many of
the Company's existing health products, primarily those acquired in 

 7
<PAGE> 8

business acquisitions, would require substantial modification or
complete reformation.  This determination and the continuing
adverse impact of operating losses led to the conclusion that the
current carrying value of the assets of the health business unit,
principally intangibles, was not fully recoverable through sale or
continuing operations.  Accordingly, the Company recorded an
impairment charge of $54,890,000 at June 30, 1993 to reduce the
carrying value of certain long-lived identifiable intangible assets
($6,320,000 - customer lists, covenants not to compete and
assembled workforce), acquired software ($9,150,000) and goodwill
($39,420,000) related to its health insurance services business.

     The Company applied its methodology for determining impairment
of intangibles by discounting the expected future cash flows from
this business.  In this case, the present value of the expected
cash flows was determined using a discount rate of 17% which the
Company considers to be commensurate with the risk involved.  This
rate was determined using the Capital Asset Pricing Model which
reflects the return the Company should achieve on its investments. 
An additional risk premium was included in the rate to recognize
the uncertainty associated with the health insurance services
business.

     Additionally, as a result of the impairment of its health
insurance services business, the Company decided to restructure
this business and recorded a restructuring charge of $25,189,000 at
June 30, 1993.  Costs to restructure the health business are
composed of $5,211,000 associated with employee severance and
outplacement, and $19,978,000 related to an ongoing lease
obligation and/or termination for the planned future abandonment of
certain leased office facilities.  The Company also recorded other
pre-tax restructuring charges of $655,000 at June 30, 1993.  It is
anticipated that these restructurings will be completed during
1994.


NOTE 5.   CHANGES IN ESTIMATED USEFUL LIVES

     For all years through December 31, 1992, the Company had
amortized goodwill over an estimated useful life of 25 years.  As
a result of its most recent evaluation, the Company has revised its
estimates of the period of future benefit for goodwill. 
Consequently, effective January 1, 1993, the Company began to
amortize goodwill over an estimated life of 15 years for goodwill
related to information and computer services company acquisitions
and 10 years for goodwill related to software company acquisitions. 
The Company believes these new lives more appropriately reflect the
current economic circumstances for such businesses and the related
period of future benefit.  Longer lives will be used for future
business acquisitions only where independent third party studies
support such lives.  The effect of this change in accounting 

 8
<PAGE> 9

estimate was to increase amortization expense by $343,000 ($.01 per
share) and $2,283,000 ($.08 per share) during the three months and
nine months ended September 30, 1993, respectively.  Also as part
of this evaluation, the net book value of intangible assets related
to the Company's health insurance services business of $45,740,000,
most of which was goodwill, was written off during the first half
of 1993.

     For all years through December 31, 1992, the Company amortized
internally developed software on a straight-line basis over an
estimated useful life of four years.  The Company's recent
experience indicates that an estimated useful life of five years
would more appropriately reflect the actual useful life of such
software.  Accordingly, commencing January 1, 1993, the Company
began to amortize such software on a straight-line basis over five
years.  Amortization charged to expense was $5,421,000 and
$16,193,000 for the three months and nine months ended September
30, 1993, respectively.  As a result of this change in estimated
life,  amortization expense was $428,000 ($.01 per share) and
$1,311,000 ($.03 per share) less than it would have been using the
previous four-year life for the three months and nine months ended
September 30, 1993, respectively.

     In addition to the impairment and restructuring charges
relating to its health insurance services business described in
Note 4, the Company wrote off $1,368,000 relating to the
nonrecoverability of certain deferred life insurance systems
development costs at June 30, 1993.


NOTE 6.   INCOME TAXES

     On August 10, 1993 the Omnibus Budget Reconciliation Act of
1993 was signed into law.  This Act increased the highest marginal
federal income tax rate from 34 percent to 35 percent.  Under the
provisions of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes", deferred tax liabilities and assets
are adjusted for the effect of a change in tax laws or rates. 
Furthermore, the effect should be included in the income tax
provision for the reporting period that includes the enactment
date.  Therefore, the effect of the rate change is included in the
income tax provision for the three and nine months ended September
30, 1993.

     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.


 9
<PAGE> 10

NOTE 7.  STOCK REPURCHASE

     On April 7 and 8, 1993 the Company repurchased, on the open
market, all of the 970,668 shares of the Company's common stock
authorized under a previously approved stock repurchase program for
a total consideration of $48,660,000.

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<PAGE> 11

                   POLICY MANAGEMENT SYSTEMS CORPORATION

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


     DUE TO THE UNAVAILABILITY OF FINANCIAL INFORMATION FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1992, THE COMPANY IS
CURRENTLY UNABLE TO COMPARE THE RESULTS OF OPERATIONS FOR THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 1993 WITH THE PRIOR PERIODS.

Liquidity and Capital Resources
     During the nine months ended September 30, 1993, the Company
generated cash flow from operations of $60,540,000, $11,404,000
used for investing activities and $50,322,000 used for financing
activities.  Cash and equivalents and marketable securities
aggregated $154,416,000 at September 30, 1993 as compared to
$238,521,000 at December 31, 1992, a net decrease of $84,105,000. 
The principal factors affecting such net decrease were the
acquisition of CYBERTEK Corporation in August 1993 for total
consideration of $59,727,000 and the repurchase in April 1993 of
970,668 shares of the Company's common stock for total
consideration of $48,660,000.  Other significant expenditures
during the period included the acquisition of data processing and
communications equipment, support software and office furniture and
equipment ($32,304,000); software product acquisitions and debt and
contingency payments relating to past business acquisitions
($10,632,000) and completion of construction of additional office
and dining facilities at the Company's corporate headquarters
($1,693,000).

     Significant expenditures anticipated for the remainder of
1993, excluding business acquisitions, are as follows:  acquisition
of data processing and communications equipment, support software
and office furniture, fixtures and equipment ($3,600,000); and
completion of construction of additional dining facilities at the
Company's corporate headquarters ($300,000).  The Company is also
anticipating that it will expend approximately $7,100,000 of
capitalizable costs relating to the internal development of its 
software systems and approximately $453,000 on the purchase of
software for resale, during the remainder of 1993.  

     In August 1993, the Company completed its previously announced
acquisition of CYBERTEK Corporation for total cash consideration of
$59,727,000.  As a result of acquiring CYBERTEK's broad based life
insurance software systems, the Company changed certain development
plans and, accordingly, $1,368,000 of related deferred life
insurance systems' costs were written-off for the nine months ended
September 30, 1993.  The Company is currently enhancing and
integrating the business functions of CYBERTEK products with the
Company's Series III life insurance applications and its Integrated
Application Platform architecture.  The Company expects this effort
to continue through 1996 with the anticipated initial release of 

 11
<PAGE> 12

the integrated applications being made generally available in late
1994 or early 1995 with subsequent releases to follow.  Total
expenditures related to this effort are expected to approximate
$34,000,000, of which $1,300,000 and $8,500,000 are anticipated for
the remainder of 1993 and for all of 1994, respectively.  The
Company expects to generate savings through the closing of
CYBERTEK's data center operations and other cost reductions.

     As described more fully below, the Company decided to
restructure its health insurance services business and take a
restructuring charge of $25,189,000 at June 30, 1993.  Cash outlays
with respect to the restructuring  charges are expected to be
approximately $745,000 during the remainder of 1993, approximately
$16,241,000 during 1994, and approximately $7,458,000 in future
years.

     The Company completed, or intends to complete, the
expenditures referred to above for 1993, including the repurchase
of its shares and the acquisition for cash of CYBERTEK Corporation,
without incurring any indebtedness.  The Company believes that cash
and equivalents and investment reserves at September 30, 1993
together with future cash flow from operations will be sufficient
to satisfy presently anticipated operating and capital resource
needs. 

Results of Operations
     Consolidated revenues for the three and nine months ended
September 30, 1993 were adversely affected by lower than planned
revenues from the Company's health and life insurance services
businesses.  The Company recognized revenues of $7,217,000 and
$25,227,000 for the three and nine months ended September 30, 1993,
respectively, and incurred operating losses of $4,464,000 and
$14,211,000 for the three and nine months ended September 30, 1993,
respectively, from its health insurance services business.  These
losses were before the effects of certain special charges described
below.  

     Near the end of the second quarter of 1993, the Company
projected that its annual health insurance services business
revenues would drop by approximately 50% from the revenue recorded
in 1992 to approximately $33,000,000 for all of 1993.  The
Company's original forecast for 1993 health insurance services
annual revenues was approximately $78,000,000.  To better
understand both the cause and the anticipated duration of this
decline, the Company then undertook an assessment of the potential
impact on its health insurance services business of proposed health
care legislation, rapidly evolving and significant changes in the
relationship between health care providers and insurers and the
resultant changes in health insurers' software and service needs.

     As a result of its evaluation, the Company determined that
there was no market demand for many of its health insurance systems
and automation support services, principally designed for and 

 12
<PAGE> 13

suited to traditional health indemnity insurance plans.  Near the
end of the second quarter of 1993, it was becoming clear that
significant restructuring of the country's health care system would
occur, whether by government action or economic circumstances, and
consequently, insurers would be unwilling to make commitments for
any significant new systems until the uncertainty regarding the
ultimate outcome of reform was resolved.  Furthermore, it seemed
most likely that traditional indemnity plans would not meet the
future needs of most employers and their insurers after such
changes.

     After meetings in the second quarter and early third quarter
with its financial advisors, health care professionals and
customers, the Company determined that it did not currently have
some of the systems to respond to the most likely future
initiatives in the health care insurance industry and that many of
the Company's existing health insurance products, primarily those
acquired in business acquisitions, would require substantial
modification or complete reformation.  This determination and the
continuing adverse impact of operating losses in its health
insurance services business led the Company to the conclusion that
the current carrying value of certain assets of the health
insurance services business unit, principally intangibles
associated with traditional health indemnity insurance plan
services, was not fully recoverable through sale or continuing
operations.

     As a consequence of these factors, the Company recorded at
June 30, 1993, special impairment and restructuring charges to
reduce the carrying value of certain long-lived identifiable
intangible assets and goodwill and to recognize as a loss the
planned future abandonment of certain facilities and employee
severance and outplacement costs.  As part of the Company's non-
cash impairment charges, acquired software amounting to $9,150,000
was written-off. Principal products that supported traditional
health indemnity insurance plans that were written-off included:
(1) a claims administration and payment system; (2) an
administrative system for membership, billing, collections and
receivables; and (3) a provider administration and reimbursement
system. The reduction in annual amortization related to these
software systems is approximately $2,551,000. Additionally, the
Company recorded other non-cash impairment charges in June 1993 to
write-off the carrying value of certain other identifiable
intangibles ($6,320,000) and goodwill ($39,420,000) which will
result in future amortization reductions of approximately
$3,796,000 on an annual basis.  


 13
<PAGE> 14

     The Company, as part of its restructuring charges, decided to
downsize its health staff from 437 at June 30, 1993 to
approximately 388 by the end of 1993, with additional reductions in
staff scheduled to take place during 1994.  At September 30, 1993
the Company had 404 employees in its health group.  These scheduled 
reductions are estimated to reduce compensation and other benefits
cost by approximately $17,500,000 on an annual basis.  The health
business is expected to continue to generate operating losses for
the remainder of 1993.

     The Company, however, will continue to market and invest in
the internal development of its systems for managed care
applications.  The Company believes these systems are suited for
larger, managed care plans and other health care payers.

     The Company completed its acquisition of CYBERTEK Corporation
on August 24, 1993.  CYBERTEK's revenues and net income for the
last full year prior to acquisition were $30,720,000 and
$3,059,000, respectively.  For the three and nine months ended
September 30, 1993, the Company recognized revenues of $22,132,000
and $58,498,000 and operating losses of $2,077,000 and $11,735,000,
respectively, from its life insurance services business, including
the results of CYBERTEK since the date of acquisition.  Of the
loss, $437,000 was attributable to amortization of intangible
assets arising from the CYBERTEK acquisition.  Also, 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 had the effect of significantly reducing
revenues and the operating loss from the life insurance services
business in the short term.

     The information services business produced lower than expected
operating profits for both the three and nine month periods.  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 information services than from
software products and related services.  

     Revenues from total policy management outsourcing services
were adversely affected by the previously announced wind-down of
the New Jersey Market Transition Facility (MTF) project.  Prior to
the wind-down of the MTF, annual revenues in 1992 were
approximately $68,380,000.  The Company expects such revenues to be
no more than $19,730,000 for 1993.  The Company was not able to
reduce its operating expenses as quickly as the reduction in
revenue occurred because of ongoing contractual obligations.  As a
result of an increased role in servicing additional new contracts
with insurance companies and residual markets, the Company should
start to replace revenues, lost from the New Jersey MTF project, 

 14
<PAGE> 15

during the first half of 1994.  Margins, however, will be reduced
during the early phases of these contracts due to start-up costs.

     The Company has identified several states where it can
potentially offer similar total policy management services.  After 
evaluating the potential operating and economic risks of each
opportunity the Company will decide whether these services should
be marketed to the appropriate governmental agency.  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.

     The Company, in December 1993, signed one of the largest
outsourcing agreements in its history.  The Company contracted to
provide data processing services for Vital Forsikring A.S., a life
insurance company in Bergen, Norway; this contract together with
other outsourcing contract opportunities in Scandinavia is expected
to generate revenues of approximately $150 million over the seven-
year term of the agreement based on expected services utilization. 
Additionally, the Company, during the last half of 1993, entered
into several significant contracts with property and casualty and
life insurance companies for software licensing and related
implementation and consulting services. 

     The property and casualty insurance software and services
business achieved increased levels of revenue and operating income
primarily from licensing activities.  This operating income more
than offset the losses in the health and life insurance services
businesses.  The commitments by customers for new products were
greater than the Company's anticipation for this business, although
lower in the second half 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 second half
licensing was largely due to the Company's delay in releasing the
results of its special audit and having available audited financial
statements.  The operating profit margin maintained a level similar
to that experienced historically for property and casualty systems
and services.
     
     The Company in June 1993 recorded charges related to early
project terminations, the deductible under the Company's Directors'
and Officers' liability insurance policy in response to shareholder
litigation, cost overruns on certain projects and other charges
arising from the Company's previously disclosed internal
investigation of its accounting practices.  These charges totaled
$18,100,000 (after tax $11,200,000) for the nine months ended
September 30, 1993.

 15
<PAGE> 16

     Effective January 1, 1993, the Company revised its estimate of
the period of future benefit for goodwill and certain other
acquired intangible assets.  The effect of this change in
accounting estimate was to increase amortization expense by
$343,000 ($.01 per share) and $2,283,000 ($.08 per share) during
the three and nine months ended September 30, 1993, respectively. 
Commencing January 1, 1993, the Company revised the period over
which it will amortize its internally developed software.  The
effect of this change in estimated life was to decrease
amortization expense by $428,000 ($.01 per share) and $1,311,000
($.03 per share), during the three and nine months ended September
30, 1993.  

     Investment income, net of interest and other charges for the
three and nine months ended September 30, 1993 were $1,333,000 and
$9,274,000 respectively.  Realized gains on the sale of marketable
equity securities of $3,053,000 are included in the nine month
period ended September 30, 1993.

     The effective income tax benefit rate (income taxes expressed
as a percentage of pre-tax income) was 16.7% for the nine months
ended September 30, 1993.  The foregoing effective income tax
benefit rate includes the impact of the increase in the highest
marginal corporate tax rate resulting from the enactment of the
Revenue Reconciliation Act of 1993.  The effective tax benefit rate
would have been significantly higher (38%) were it not for the
write off of goodwill ($39,420,000) related to the impairment of
the Company's health insurance systems business in June 1993.

 16
<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

     There are no exhibits required to be filed with this Quarterly
Report on Form 10-Q. 

Reports on Form 8-K

     The Company filed a report on Form 8-K, dated August 9, 1993
under Item 5.  Other Events, relating to Arthur Andersen & Co.'s
withdrawal of its audit report on the Company's financial
statements for the year ended December 31, 1992.  Additionally, the
Company filed a report on Form 8-K, dated August 17, 1993 under
Item 4.  Changes in Registrant's Certifying Accountants, relating
to the change in the Company's principal independent auditor.









 17
<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:  April 6, 1994               By:  Timothy V. Williams
                                        Executive Vice President
                                        (Chief Financial Officer)<PAGE>
18



 18
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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 September 30, 1993    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 March 11, 1994
2
                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                   INDEX

PART I.   FINANCIAL INFORMATION                                        PAGE

     Item 1.   Financial Statements

               Consolidated Statements of Operations for 
                 the nine and three months ended 
                 September 30, 1993..........................            3 

               Consolidated Balance Sheets as of 
                 September 30, 1993 and December 31, 1992....            4 

               Consolidated Statement of Cash Flows for
                 the nine months ended 
                 September 30, 1993..........................            5 

               Notes to Consolidated Financial Statements....            6 

     Item 2.   Management's Discussion and Analysis of
                 Financial Condition and Results of
                 Operations.................................. 11 

PART II.  OTHER INFORMATION

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

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

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

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

 2
3
                                  PART I
                           FINANCIAL INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION
             CONSOLIDATED STATEMENTS OF INCOME AND OPERATIONS
                                (Unaudited)
Nine Months Ended    Three Months Ended
                                         September 30, 1993   September 30, 1993
                                                      (In Thousands,  
                                                  Except Per Share Data)
Revenues:
  Licensing...............................    $ 58,621             $ 15,666
  Services................................     286,187               93,219
                                               344,808              108,885
 
Costs and Expenses: 
  Employee compensation and benefits......     126,293               42,038
  Computer and communications expense.....      31,016               10,095
  Information services and data 
    acquisition costs.....................      96,300               34,281
  Other operating costs and expenses......      91,862               21,719
  Impairment and restructuring charges....      80,733                 -   
                                               426,204              108,133

Operating income (loss)...................     (81,396)                 752

Investment income, net....................       9,274                1,333

Income (loss) before income 
  taxes (benefit).........................     (72,122)               2,085

Income taxes (benefit)....................     (12,045)               1,739
                                                                              
Net income (loss).........................    $(60,077)            $    346

  
Net income (loss) per share...............    $(  2.62)            $    .02

Weighted average number of shares.........      22,933               22,604
See accompanying notes.
3
4

                      POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
(Unaudited)       (Audited)
                                                                             September 30,    December 31,
                                                                                1993             1992       
                                                                                      (In Thousands,
                                                                                    Except Share Data)
Assets    
Current assets:
  Cash and equivalents.....................................................    $ 31,292        $  31,959
  Marketable securities....................................................     123,124          206,562
  Receivables, net of allowance for uncollectible amounts
     of $1,597 ($1,630 at 1992)............................................      90,119           86,684
  Income tax receivable....................................................      10,232            2,891
  Deferred income taxes....................................................       6,742            8,083
  Other....................................................................      10,551            9,659
     Total current assets..................................................     272,060          345,838

Property and equipment, at cost less accumulated depreciation
     and amortization of $95,412 ($83,730 at 1992).........................     139,217          131,696
Receivables................................................................       5,257           22,252
Goodwill and other intangible assets.......................................      87,650          100,792
Capitalized software costs.................................................     110,697           99,414
Deferred income taxes......................................................      10,836            2,580
Other......................................................................       3,128            6,295
     Total assets..........................................................    $628,845         $708,867

Liabilities
Current liabilities:
  Accounts payable and accrued expenses....................................    $ 44,899         $ 36,151
  Accrued restructuring and lease termination costs........................      10,090             -   
  Accrued contract termination costs.......................................       5,380            5,030
  Current portion of long-term debt........................................       4,515            3,670
  Income taxes payable.....................................................       1,693             -   
  Unearned revenues........................................................      11,763           11,361
  Other....................................................................       1,161            3,646
     Total current liabilities.............................................      79,501           59,858

Long-term debt.............................................................       5,496            6,001
Deferred income taxes......................................................      49,730           56,112
Accrued restructuring and lease termination costs..........................      19,417             -  
Other......................................................................       2,521            7,820
     Total liabilities.....................................................     156,665          129,791
 
Commitments and contingencies (Note 5)

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares authorized.................         -               -    
Common stock, $.01 par value, 75,000,000 shares authorized,
   22,617,353 shares issued and outstanding (23,524,197 at 1992)...........         226              235
Additional paid-in capital.................................................     261,635          307,906
Retained earnings..........................................................     212,689          272,766
Foreign currency translation adjustment....................................      (2,370)          (1,831)

     Total stockholders' equity............................................     472,180          579,076
 
        Total liabilities and stockholders' equity.........................    $628,845         $708,867
See accompanying notes.
4
5

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENT OF CASH FLOWS
                                (Unaudited)
Nine Months Ended
                                                            September 30, 1993 
                                                             (In Thousands)
Operating Activities                                          
  Net loss..........................................            $(60,077)           
  Adjustments to reconcile net loss to net                                           
   cash provided by operating activities:     
    Depreciation and amortization...................              47,214             
    Deferred income taxes...........................             (20,763)              
    Gain on sale of marketable securities...........              (3,053)
    Provision for uncollectible accounts............               1,500 
    Impairment charges..............................              54,890
  Changes in assets and liabilities:
    Restructuring charges...........................              25,843
    Receivables.....................................              21,344
    Income tax receivable...........................              (7,341)
    Accounts payable and accrued expenses...........               1,822
    Income taxes payable............................               3,009
  Other, net........................................              (3,848)              
       Cash provided by operations..................              60,540              
  
Investing Activities
  Proceeds from sales/maturities of marketable
   securities, net..................................             364,443
  Purchases of marketable securities, net...........            (269,112)
  Acquisition of property and equipment.............             (35,242)            
  Capitalized internal software development costs...             (17,591)             
  Purchased software................................              (3,928)            
  Proceeds from disposal of property and equipment..               9,123             
  Business acquisitions.............................             (59,097)              
       Cash used for investing activities...........             (11,404)              

Financing Activities
  Payments on long-term debt........................              (3,680)    
  Issuance of common stock under stock      
   option plans.....................................                 690      
  Issuance of common stock to employee benefit plan.               1,328
  Repurchase of outstanding common stock............             (48,660)  
       Cash used for financing activities...........             (50,322)   

Effect of exchange rate changes on cash.............                 519           
Net increase in cash and equivalents................                (667)     
Cash and equivalents at beginning of period.........              31,959  
Cash and equivalents at end of period...............            $ 31,292

Noncash Activities
  Long-term debt arising from and assumed in           
   connection with business acquisition.............            $  4,187   

Supplemental Information
  Interest paid.....................................               1,037    
  Income taxes paid.................................              12,158
See accompanying notes.
5
6

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            September 30, 1993
                                (Unaudited)

NOTE 1.   BASIS OF PRESENTATION

     The financial information included in Part I, Item 1 consists
of an unaudited consolidated balance sheet as of September 30,
1993, an audited consolidated balance sheet as of December 31,
1992, unaudited consolidated statement of operations for the three
months and nine months ended September 30, 1993 and an unaudited
consolidated statement of cash flows for the nine months ended
September 30, 1993.  Comparable unaudited statements of operations
and of cash flows for the periods ended September 30, 1992 are
currently unavailable and therefore are not included herein.  The
unaudited information reflects all adjustments which, in the
opinion of management, are necessary for a fair statement of
financial position, results of operations and cash flows as of and
for the periods ended September 30, 1993, with the exception of the
items described in Note 4, since adjustments are considered to be
normal and recurring.  Further, all material intercompany balances
and transactions have been eliminated.

NOTE 2.  ACQUISITION

     On August 24, 1993, the Company consummated the acquisition of
all of the outstanding stock of CYBERTEK Corporation ("CYBERTEK")
of Dallas, Texas for an aggregate consideration of $59,727,000 in
cash.  CYBERTEK has over 20 years of experience in serving the data
processing needs of the life insurance industry by designing and
delivering a combination of data processing services, consulting
services and software.

     The acquisition has been recorded using the purchase method of
accounting.  Accordingly, the unaudited consolidated statements of
operations of the Company for the three months and nine months
ended September 30, 1993 include the results of operations of
CYBERTEK only from the date of acquisition.  The cost of
acquisition was determined, and assigned to assets acquired, as
follows:
                                            (In Thousands)
     Total consideration paid.................  $58,152
     Direct costs of acquisition..............    1,575 
     Total cost to be assigned to net
       assets acquired........................   59,727
     Add - Liabilities assumed................   13,876
     Less - Cost assigned to tangible and 
       identifiable intangible assets 
       acquired (including $10,623 
       purchased software cost)...............   47,338
     Cost assigned to goodwill................  $26,265 

 6
7

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
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.   IMPAIRMENT & RESTRUCTURING CHARGES

     During the first half of 1993, the Company experienced
markedly decreased revenues from its health insurance services
business unit.  Near the end of the second quarter of 1993, the
Company projected that its annual health insurance services
business revenues would drop by approximately 50% from the revenue
recorded in 1992 to approximately $30,000,000 for all of 1993, and
that trend of decline would continue into 1994.  To better
understand both the cause and the anticipated duration of this
decline, the Company then undertook an assessment of the potential
impact on its health insurance services business of proposed health
care legislation, rapidly evolving and significant changes in the
relationship of health care providers and insurers and the
resultant changes in health insurers' software and service needs.

     After meetings with its financial advisors, health care
professionals and customers, the Company determined that it did not 
have some of the systems to respond to the most likely future
initiatives in the health care insurance industry and that many of
the Company's existing health products, primarily those acquired in 

 7
8

business acquisitions, would require substantial modification or
complete reformation.  This determination and the continuing
adverse impact of operating losses led to the conclusion that the
current carrying value of the assets of the health business unit,
principally intangibles, was not fully recoverable through sale or
continuing operations.  Accordingly, the Company recorded an
impairment charge of $54,890,000 at June 30, 1993 to reduce the
carrying value of certain long-lived identifiable intangible assets
($6,320,000 - customer lists, covenants not to compete and
assembled workforce), acquired software ($9,150,000) and goodwill
($39,420,000) related to its health insurance services business.

     The Company applied its methodology for determining impairment
of intangibles by discounting the expected future cash flows from
this business.  In this case, the present value of the expected
cash flows was determined using a discount rate of 17% which the
Company considers to be commensurate with the risk involved.  This
rate was determined using the Capital Asset Pricing Model which
reflects the return the Company should achieve on its investments. 
An additional risk premium was included in the rate to recognize
the uncertainty associated with the health insurance services
business.

     Additionally, as a result of the impairment of its health
insurance services business, the Company decided to restructure
this business and recorded a restructuring charge of $25,189,000 at
June 30, 1993.  Costs to restructure the health business are
composed of $5,211,000 associated with employee severance and
outplacement, and $19,978,000 related to an ongoing lease
obligation and/or termination for the planned future abandonment of
certain leased office facilities.  The Company also recorded other
pre-tax restructuring charges of $655,000 at June 30, 1993.  It is
anticipated that these restructurings will be completed during
1994.

NOTE 5.   CHANGES IN ESTIMATED USEFUL LIVES

     For all years through December 31, 1992, the Company had
amortized goodwill over an estimated useful life of 25 years.  As
a result of its most recent evaluation, the Company has revised its
estimates of the period of future benefit for goodwill. 
Consequently, effective January 1, 1993, the Company began to
amortize goodwill over an estimated life of 15 years for goodwill
related to information and computer services company acquisitions
and 10 years for goodwill related to software company acquisitions. 
The Company believes these new lives more appropriately reflect the
current economic circumstances for such businesses and the related
period of future benefit.  Longer lives will be used for future
business acquisitions only where independent third party studies
support such lives.  The effect of this change in accounting 

 8
9

estimate was to increase amortization expense by $343,000 ($.01 per
share) and $2,283,000 ($.08 per share) during the three months and
nine months ended September 30, 1993, respectively.  Also as part
of this evaluation, the net book value of intangible assets related
to the Company's health insurance services business of $45,740,000,
most of which was goodwill, was written off during the first half
of 1993.

     For all years through December 31, 1992, the Company amortized
internally developed software on a straight-line basis over an
estimated useful life of four years.  The Company's recent
experience indicates that an estimated useful life of five years
would more appropriately reflect the actual useful life of such
software.  Accordingly, commencing January 1, 1993, the Company
began to amortize such software on a straight-line basis over five
years.  Amortization charged to expense was $5,421,000 and
$16,193,000 for the three months and nine months ended September
30, 1993, respectively.  As a result of this change in estimated
life,  amortization expense was $428,000 ($.01 per share) and
$1,311,000 ($.03 per share) less than it would have been using the
previous four-year life for the three months and nine months ended
September 30, 1993, respectively.

     In addition to the impairment and restructuring charges
relating to its health insurance services business described in
Note 4, the Company wrote off $1,368,000 relating to the
nonrecoverability of certain deferred life insurance systems
development costs at June 30, 1993.

NOTE 6.   INCOME TAXES

     On August 10, 1993 the Omnibus Budget Reconciliation Act of
1993 was signed into law.  This Act increased the highest marginal
federal income tax rate from 34 percent to 35 percent.  Under the
provisions of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes", deferred tax liabilities and assets
are adjusted for the effect of a change in tax laws or rates. 
Furthermore, the effect should be included in the income tax
provision for the reporting period that includes the enactment
date.  Therefore, the effect of the rate change is included in the
income tax provision for the three and nine months ended September
30, 1993.

     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.

 9
10

NOTE 7.  STOCK REPURCHASE

     On April 7 and 8, 1993 the Company repurchased, on the open
market, all of the 970,668 shares of the Company's common stock
authorized under a previously approved stock repurchase program for
a total consideration of $48,660,000.

 10
11

                   POLICY MANAGEMENT SYSTEMS CORPORATION

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

     DUE TO THE UNAVAILABILITY OF FINANCIAL INFORMATION FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1992, THE COMPANY IS
CURRENTLY UNABLE TO COMPARE THE RESULTS OF OPERATIONS FOR THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 1993 WITH THE PRIOR PERIODS.

Liquidity and Capital Resources
     During the nine months ended September 30, 1993, the Company
generated cash flow from operations of $60,540,000, $11,404,000
used for investing activities and $50,322,000 used for financing
activities.  Cash and equivalents and marketable securities
aggregated $154,416,000 at September 30, 1993 as compared to
$238,521,000 at December 31, 1992, a net decrease of $84,105,000. 
The principal factors affecting such net decrease were the
acquisition of CYBERTEK Corporation in August 1993 for total
consideration of $59,727,000 and the repurchase in April 1993 of
970,668 shares of the Company's common stock for total
consideration of $48,660,000.  Other significant expenditures
during the period included the acquisition of data processing and
communications equipment, support software and office furniture and
equipment ($32,304,000); software product acquisitions and debt and
contingency payments relating to past business acquisitions
($10,632,000) and completion of construction of additional office
and dining facilities at the Company's corporate headquarters
($1,693,000).

     Significant expenditures anticipated for the remainder of
1993, excluding business acquisitions, are as follows:  acquisition
of data processing and communications equipment, support software
and office furniture, fixtures and equipment ($3,600,000); and
completion of construction of additional dining facilities at the
Company's corporate headquarters ($300,000).  The Company is also
anticipating that it will expend approximately $7,100,000 of
capitalizable costs relating to the internal development of its 
software systems and approximately $453,000 on the purchase of
software for resale, during the remainder of 1993.  

     In August 1993, the Company completed its previously announced
acquisition of CYBERTEK Corporation for total cash consideration of
$59,727,000.  As a result of acquiring CYBERTEK's broad based life
insurance software systems, the Company changed certain development
plans and, accordingly, $1,368,000 of related deferred life
insurance systems' costs were written-off for the nine months ended
September 30, 1993.  The Company is currently enhancing and
integrating the business functions of CYBERTEK products with the
Company's Series III life insurance applications and its Integrated
Application Platform architecture.  The Company expects this effort
to continue through 1996 with the anticipated initial release of 

 11
12

the integrated applications being made generally available in late
1994 or early 1995 with subsequent releases to follow.  Total
expenditures related to this effort are expected to approximate
$34,000,000, of which $1,300,000 and $8,500,000 are anticipated for
the remainder of 1993 and for all of 1994, respectively.  The
Company expects to generate savings through the closing of
CYBERTEK's data center operations and other cost reductions.

     As described more fully below, the Company decided to
restructure its health insurance services business and take a
restructuring charge of $25,189,000 at June 30, 1993.  Cash outlays
with respect to the restructuring  charges are expected to be
approximately $745,000 during the remainder of 1993, approximately
$16,241,000 during 1994, and approximately $7,458,000 in future
years.

     The Company completed, or intends to complete, the
expenditures referred to above for 1993, including the repurchase
of its shares and the acquisition for cash of CYBERTEK Corporation,
without incurring any indebtedness.  The Company believes that cash
and equivalents and investment reserves at September 30, 1993
together with future cash flow from operations will be sufficient
to satisfy presently anticipated operating and capital resource
needs. 

Results of Operations
     Consolidated revenues for the three and nine months ended
September 30, 1993 were adversely affected by lower than planned
revenues from the Company's health and life insurance services
businesses.  The Company recognized revenues of $7,217,000 and
$25,227,000 for the three and nine months ended September 30, 1993,
respectively, and incurred operating losses of $4,464,000 and
$14,211,000 for the three and nine months ended September 30, 1993,
respectively, from its health insurance services business.  These
losses were before the effects of certain special charges described
below.  

     Near the end of the second quarter of 1993, the Company
projected that its annual health insurance services business
revenues would drop by approximately 50% from the revenue recorded
in 1992 to approximately $33,000,000 for all of 1993.  The
Company's original forecast for 1993 health insurance services
annual revenues was approximately $78,000,000.  To better
understand both the cause and the anticipated duration of this
decline, the Company then undertook an assessment of the potential
impact on its health insurance services business of proposed health
care legislation, rapidly evolving and significant changes in the
relationship between health care providers and insurers and the
resultant changes in health insurers' software and service needs.

     As a result of its evaluation, the Company determined that
there was no market demand for many of its health insurance systems
and automation support services, principally designed for and 

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13

suited to traditional health indemnity insurance plans.  Near the
end of the second quarter of 1993, it was becoming clear that
significant restructuring of the country's health care system would
occur, whether by government action or economic circumstances, and
consequently, insurers would be unwilling to make commitments for
any significant new systems until the uncertainty regarding the
ultimate outcome of reform was resolved.  Furthermore, it seemed
most likely that traditional indemnity plans would not meet the
future needs of most employers and their insurers after such
changes.

     After meetings in the second quarter and early third quarter
with its financial advisors, health care professionals and
customers, the Company determined that it did not currently have
some of the systems to respond to the most likely future
initiatives in the health care insurance industry and that many of
the Company's existing health insurance products, primarily those
acquired in business acquisitions, would require substantial
modification or complete reformation.  This determination and the
continuing adverse impact of operating losses in its health
insurance services business led the Company to the conclusion that
the current carrying value of certain assets of the health
insurance services business unit, principally intangibles
associated with traditional health indemnity insurance plan
services, was not fully recoverable through sale or continuing
operations.

     As a consequence of these factors, the Company recorded at
June 30, 1993, special impairment and restructuring charges to
reduce the carrying value of certain long-lived identifiable
intangible assets and goodwill and to recognize as a loss the
planned future abandonment of certain facilities and employee
severance and outplacement costs.  As part of the Company's non-
cash impairment charges, acquired software amounting to $9,150,000
was written-off. Principal products that supported traditional
health indemnity insurance plans that were written-off included:
(1) a claims administration and payment system; (2) an
administrative system for membership, billing, collections and
receivables; and (3) a provider administration and reimbursement
system. The reduction in annual amortization related to these
software systems is approximately $2,551,000. Additionally, the
Company recorded other non-cash impairment charges in June 1993 to
write-off the carrying value of certain other identifiable
intangibles ($6,320,000) and goodwill ($39,420,000) which will
result in future amortization reductions of approximately
$3,796,000 on an annual basis.  

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14

     The Company, as part of its restructuring charges, decided to
downsize its health staff from 437 at June 30, 1993 to
approximately 388 by the end of 1993, with additional reductions in
staff scheduled to take place during 1994.  At September 30, 1993
the Company had 404 employees in its health group.  These scheduled 
reductions are estimated to reduce compensation and other benefits
cost by approximately $17,500,000 on an annual basis.  The health
business is expected to continue to generate operating losses for
the remainder of 1993.

     The Company, however, will continue to market and invest in
the internal development of its systems for managed care
applications.  The Company believes these systems are suited for
larger, managed care plans and other health care payers.

     The Company completed its acquisition of CYBERTEK Corporation
on August 24, 1993.  CYBERTEK's revenues and net income for the
last full year prior to acquisition were $30,720,000 and
$3,059,000, respectively.  For the three and nine months ended
September 30, 1993, the Company recognized revenues of $22,132,000
and $58,498,000 and operating losses of $2,077,000 and $11,735,000,
respectively, from its life insurance services business, including
the results of CYBERTEK since the date of acquisition.  Of the
loss, $437,000 was attributable to amortization of intangible
assets arising from the CYBERTEK acquisition.  Also, 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 had the effect of significantly reducing
revenues and the operating loss from the life insurance services
business in the short term.

     The information services business produced lower than expected
operating profits for both the three and nine month periods.  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 information services than from
software products and related services.  

     Revenues from total policy management outsourcing services
were adversely affected by the previously announced wind-down of
the New Jersey Market Transition Facility (MTF) project.  Prior to
the wind-down of the MTF, annual revenues in 1992 were
approximately $68,380,000.  The Company expects such revenues to be
no more than $19,730,000 for 1993.  The Company was not able to
reduce its operating expenses as quickly as the reduction in
revenue occurred because of ongoing contractual obligations.  As a
result of an increased role in servicing additional new contracts
with insurance companies and residual markets, the Company should
start to replace revenues, lost from the New Jersey MTF project, 

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15

during the first half of 1994.  Margins, however, will be reduced
during the early phases of these contracts due to start-up costs.

     The Company has identified several states where it can
potentially offer similar total policy management services.  After 
evaluating the potential operating and economic risks of each
opportunity the Company will decide whether these services should
be marketed to the appropriate governmental agency.  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.

     The Company, in December 1993, signed one of the largest
outsourcing agreements in its history.  The Company contracted to
provide data processing services for Vital Forsikring A.S., a life
insurance company in Bergen, Norway; this contract together with
other outsourcing contract opportunities in Scandinavia is expected
to generate revenues of approximately $150 million over the seven-
year term of the agreement based on expected services utilization. 
Additionally, the Company, during the last half of 1993, entered
into several significant contracts with property and casualty and
life insurance companies for software licensing and related
implementation and consulting services. 

     The property and casualty insurance software and services
business achieved increased levels of revenue and operating income
primarily from licensing activities.  This operating income more
than offset the losses in the health and life insurance services
businesses.  The commitments by customers for new products were
greater than the Company's anticipation for this business, although
lower in the second half 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 second half
licensing was largely due to the Company's delay in releasing the
results of its special audit and having available audited financial
statements.  The operating profit margin maintained a level similar
to that experienced historically for property and casualty systems
and services.
     
     The Company in June 1993 recorded charges related to early
project terminations, the deductible under the Company's Directors'
and Officers' liability insurance policy in response to shareholder
litigation, cost overruns on certain projects and other charges
arising from the Company's previously disclosed internal
investigation of its accounting practices.  These charges totaled
$18,100,000 (after tax $11,200,000) for the nine months ended
September 30, 1993.

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16

     Effective January 1, 1993, the Company revised its estimate of
the period of future benefit for goodwill and certain other
acquired intangible assets.  The effect of this change in
accounting estimate was to increase amortization expense by
$343,000 ($.01 per share) and $2,283,000 ($.08 per share) during
the three and nine months ended September 30, 1993, respectively. 
Commencing January 1, 1993, the Company revised the period over
which it will amortize its internally developed software.  The
effect of this change in estimated life was to decrease
amortization expense by $428,000 ($.01 per share) and $1,311,000
($.03 per share), during the three and nine months ended September
30, 1993.  

     Investment income, net of interest and other charges for the
three and nine months ended September 30, 1993 were $1,333,000 and
$9,274,000 respectively.  Realized gains on the sale of marketable
equity securities of $3,053,000 are included in the nine month
period ended September 30, 1993.

     The effective income tax benefit rate (income taxes expressed
as a percentage of pre-tax income) was 16.7% for the nine months
ended September 30, 1993.  The foregoing effective income tax
benefit rate includes the impact of the increase in the highest
marginal corporate tax rate resulting from the enactment of the
Revenue Reconciliation Act of 1993.  The effective tax benefit rate
would have been significantly higher (38%) were it not for the
write off of goodwill ($39,420,000) related to the impairment of
the Company's health insurance systems business in June 1993.

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                                  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

     There are no exhibits required to be filed with this Quarterly
Report on Form 10-Q. 

Reports on Form 8-K

     The Company filed a report on Form 8-K, dated August 9, 1993
under Item 5.  Other Events, relating to Arthur Andersen & Co.'s
withdrawal of its audit report on the Company's financial
statements for the year ended December 31, 1992.  Additionally, the
Company filed a report on Form 8-K, dated August 17, 1993 under
Item 4.  Changes in Registrant's Certifying Accountants, relating
to the change in the Company's principal independent auditor.

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                   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:  April 6, 1994               By:  Timothy V. Williams
                                        Executive Vice President
                                        (Chief Financial Officer)
18

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