<PAGE>1

                          UNITED STATES
                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, 1997     Commission file number 1-10557



                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 PMSC 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   X       No       

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

  18,179,401 Common shares, $.01 par value, as of May 15,1997 


     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, 1996.
<PAGE>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, 
            1997 and 1996..................................... 3

          Consolidated Balance Sheets as of 
            March 31, 1997 and December 31, 1996.............. 4

          Consolidated Statements of Cash Flows for
            the three months ended March 31, 1997 and 1996.... 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
<PAGE>3





  


<PAGE>
                             PART I
           FINANCIAL INFORMATION
<TABLE>
              POLICY MANAGEMENT SYSTEMS CORPORATION
                CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
                                                   Three Months      
                                                  Ended March 31,     
                                                1997         1996       
                                                   (Unaudited)          
                                      (In Thousands, Except Per Share Data)
<S>                                           <C>          <C>  
Revenues
  Licensing................................   $ 26,218     $ 24,295   
  Services.................................    129,038      108,888  
                                               155,256      133,183 
Operating expenses 
 Cost of revenues 
  Employee compensation & benefits.........     51,297       41,925   
  Computer and communications         
    expenses...............................      8,515        7,975    
  Information services and                     
    data acquisition costs.................     30,514       28,037   
  Depreciation and amortization of                                  
    property, equipment and
    capitalized software costs.............     14,059       11,134      
  Other costs & expenses...................      8,283        6,561    
 Selling, general and administrative
   expenses................................     23,253       17,058   
 Amortization of goodwill and
   other intangibles.......................      2,682        2,543   
 Litigation settlement and 
    expenses, net..........................        -            (63)    
 Business acquisition charges..............         71          (73)  
                                               138,674      115,097  

Operating income ..........................     16,582       18,086   

Minority interest income...................        369          -

Other Income and Expenses
  Investment income........................        427          596      
  Interest expense and other
    charges................................     (1,217)        (711) 
                                                (  790)        (115) 
Income before income taxes.................     16,161       17,971  
Income taxes...............................      6,069        6,343 

Net income.................................   $ 10,092     $ 11,628    

Net income per share.......................   $    .56     $    .60  
Weighted average number of shares..........     18,179       19,463    
<FN>
See accompanying notes
</TABLE>
<PAGE>4<PAGE>
<TABLE>
POLICY MANAGEMENT SYSTEMS CORPORATION
                       CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                        (Unaudited)    (Audited)
                                                          March 31,   December 31,
                                                            1997          1996    
                                                             (In Thousands,
<S>                                                       <C>           <C>
Assets                                                     Except Share Data)
Current assets
  Cash and equivalents................................... $  9,993      $ 22,121
  Marketable securities..................................    2,492         2,234
  Receivables, net of allowance for uncollectible 
     amounts of $1,402 ($883 at 1996)....................  119,996       116,113
  Income tax receivable..................................    1,355         1,383
  Deferred income taxes..................................   16,222        15,343
  Other..................................................   17,651        15,840
     Total current assets................................  167,709       173,034

Property and equipment, at cost less accumulated
     depreciation and amortization of $127,879
     ($122,462 at 1996)..................................  116,188       115,757
Receivables..............................................    4,374         4,866
Income tax receivable....................................    4,041         4,041
Goodwill and other intangibles assets, net...............   78,999        83,363
Capitalized software costs, net..........................  183,161       177,875
Deferred income taxes....................................    2,146         1,560
Investments..............................................    6,125         6,483  
Other....................................................    4,557         5,239
        Total assets..................................... $567,300      $572,218

Liabilities
Current liabilities
  Accounts payable and accrued expenses.................. $ 50,586      $ 61,435
  Accrued restructuring charges..........................    2,081         2,478
  Accrued contract termination costs.....................      825           407
  Current portion of long-term debt......................   29,991        31,222
  Income taxes payable...................................   10,240         6,623
  Unearned revenues......................................   12,322         9,840
  Other..................................................      413           631
     Total current liabilities...........................  106,458       112,636

Long-term debt...........................................   27,281        34,268
Deferred income taxes....................................   60,159        58,370
Accrued restructuring charges............................      568         1,340
Other....................................................    2,209         2,352
     Total liabilities...................................  196,675       208,966
 
Commitments and contingencies (Note 1)

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares 
   authorized............................................     -              -
Common stock, $.01 par value, 75,000,000 shares 
   authorized, 18,179,401 shares issued and 
   outstanding (18,179,186 at December 31, 1996).........      182           182
Additional paid-in capital...............................  106,111       106,104
Retained earnings........................................  266,202       256,110
Foreign currency translation adjustment..................   (1,870)          856 
     Total stockholders' equity..........................  370,625       363,252
        Total liabilities and stockholders' equity....... $567,300      $572,218
<FN>
See accompanying notes
</TABLE>
<PAGE>5<PAGE>
<TABLE>
              POLICY MANAGEMENT SYSTEMS CORPORATION
              CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (Unaudited)
<CAPTION>
                                                        Three Months
                                                       Ended March 31,
                                                      1997        1996  
Operating Activities                                  (In Thousands) 
<S>                                                 <C>        <C>  
  Net income......................................  $ 10,092   $ 11,628 
  Adjustments to reconcile net income to net
   cash provided by operating activities:     
    Depreciation and amortization.................    17,530     14,376
    Deferred income taxes.........................       320      7,226 
    Provision for uncollectible accounts..........   (   742)        65
    Impairment and restructuring charges..........       444        -
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termination costs...........................   ( 1,170)   ( 3,823)
    Receivables...................................   ( 2,649)     4,188 
    Income taxes receivable.......................        27    (   241)
    Accounts payable and accrued expenses.........   (10,849)   (18,231)
    Income taxes payable..........................     3,618      3,475
  Other, net......................................     1,163    ( 2,669)
       Cash provided by operations................    17,784     15,994
  
Investing Activities
  Proceeds from sales/maturities of marketable    
   securities.....................................       250      1,000
  Acquisition of property and equipment...........   ( 7,717)   ( 4,208)
  Capitalized internal software development  
   costs..........................................   (14,368)   (13,276)
  Purchased software..............................       -      ( 1,040)
  Earnings from minority interest.................   (   154)       -
  Proceeds from disposal of property and
   equipment......................................       130        409
        Cash (used) by investing 
         activities...............................   (21,859)   (17,115) 
 
Financing Activities
  Payments on long-term debt......................   (23,456)   (16,939)
  Proceeds from borrowing under credit facility...    15,238        -  
  Issuance of common stock under stock 
   option plans...................................         7      2,260
        Cash (used) by financing 
         activities...............................   ( 8,211)   (14,679)

Effect of exchange rate changes on cash...........       158        180 
Net (decrease)increase in cash and 
  equivalents.....................................   (12,128)   (15,620)
Cash and equivalents at beginning of period.......    22,121     35,094
Cash and equivalents at end of period.............  $  9,993   $ 19,474

Supplemental Information
  Interest paid...................................  $  1,182   $    497
  Income taxes paid(refunded).....................     1,305    ( 4,325)
<FN>
See accompanying notes
</TABLE>
<PAGE>6<PAGE>
              POLICY MANAGEMENT SYSTEMS CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          March 31, 1997



NOTE 1. CONTINGENCIES

  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 this investigation.

   In March 1994, Security Life of Denver Insurance Company ("SLD") brought suit
against the Company in the United States District Court for the District of
Colorado alleging breach of a life insurance joint development contract, unfair
trade practices, and fraud. SLD sought direct, indirect, consequential, and
punitive damages in excess of $80 million. In February 1997 following a jury
trial, the Court and jury entered judgments in favor of the Company against SLD
on the claims of fraud and unfair trade practices. A verdict and judgment was
returned against the Company for breach of contract and damages of $3.5 million,
together with pre-judgment interest. In addition the jury found that SLD was
using the Company's trade secrets without permission.  As a result of post trial
motions, the judgment was amended to delete the award of pre-judgment interest
and SLD was ordered to return the Company's systems. Both the Company and SLD
have appealed to the United States Court of Appeals. Changes in the status of
this proceeding could result in a change in subsequent periods in the Company's
estimate of anticipated liability for the estimated costs associated with these
matters.

  The Company is also presently involved in litigation which commenced in
January of 1996 in the Circuit Court in Greenville County, South Carolina with
Liberty Life Insurance Company and certain of its affiliates ("Liberty") arising
out of the parties' prior contractual relationship related to the development 
and licensing of Series III life insurance systems and the subsequent licensing 
of the Company's Cybertek life insurance systems. Liberty's complaint alleges 
breach of contract, breach of express and implied warranties, fraudulent 
inducement, breach of contract accompanied by a fraudulent act, and recission. 
Liberty has alleged actual and consequential damages of approximately $30 
million and also seeks treble and punitive damages. The Company has asserted 
various affirmative defenses and is pursuing counterclaims against Liberty for 
breach of contract, recoupment, breach of good faith and fair dealing, and 
breach of contract accompanied by a fraudulent act. The Company is seeking 
equitable relief, including injunctive relief, and currently unspecified 
actual, compensatory and consequential damages.

  Based upon the allegations raised in a prior lawsuit  and the SLD lawsuit, the
Company's insurer, St. Paul Mercury Insurance Company ("St. Paul"),in June 1995 

<PAGE>7
commenced a declaratory judgment action in the United States District Court for
the District of South Carolina against the Company to determine St. Paul's
obligation for defense costs and to indemnify the Company for any payment 
related to these claims. The Company filed a counterclaim against St. Paul 
seeking to recover the Company's defense costs in both matters, coverage for 
damages, if any, awarded in those matters, and consequential and punitive 
damages.

  In connection with the dismissal of the prior lawsuit, St. Paul and the
Company agreed to dismiss with prejudice all claims against each other with
respect to the matter, and St. Paul agreed to reimburse the Company for the
Company's legal fees. The action continues as to the parties claims related to
insurance coverage for the SLD matter.

   In addition to the litigation described above, there are also various other
litigation proceedings and claims arising in the ordinary course of business. 
The Company believes it has meritorious defenses and is vigorously defending 
these matters.

  The Company is currently involved in a contract dispute with a customer over
the terms and billings rates contained therein. The Company believes that the
dispute will be resolved without any significant financial impact, however at 
the present time the maximum financial exposure is $1.5 million.

  While the resolution of any of the above matters could have a material adverse
effect on the results of operations in future periods, the Company does not
expect these matters to have a material adverse effect on its consolidated
financial position. The Company, however, is unable to predict the ultimate
outcome or the potential financial impact of these matters.



NOTE 2. NEW ACCOUNTING STANDARDS  

  In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("FAS 128"), was issued. FAS 128 is designed to improve the
earnings per share information provided in financial statements by simplifying
the existing computational guidelines, revising the disclosure requirements, and
increasing the comparability of earnings per share data on an international
basis. FAS 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods, earlier application is not
permitted. The Company will adopt FAS 128 on its effective date. Proforma
earnings per share of the Company computed using FAS 128 is not different from
earnings per share computed using existing standards and guidelines. 


NOTE 3. RECLASSIFICATION

  Certain prior year amounts have been reclassified to conform to current year
presentation.
<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, 1996.
<TABLE>
                          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:                                
                                
<CAPTION>                                                                       
                                                               Percent    
                                         Percentage           Increase    
                                         of Revenues         (Decrease)      
                                        Three Months        Three Months     
                                       Ended March 31,     Ended March 31,
<S>                                    <C>       <C>             <C>
Revenues                               1997      1996      1997   VS  1996     
 Licensing......................       16.9%     18.2%            7.9%        
 Services.......................       83.1      81.8            18.5         
                                      100.0     100.0            16.6   
Operating expenses
 Cost of revenues
  Employee compensation           
   and benefits.................       33.0      31.5            22.3         
  Computer & communication            
   expenses.....................        5.5       6.0             6.8      
  Information services & data
   acquisition costs............       19.6      21.0             8.8           
  Depreciation & amortization
   of property, equipment &
   capitalized software costs...        9.1       8.4            26.3            
  Other costs & expenses........        5.3       5.0            26.2            
 Selling, general &
   administrative expenses......       15.0      12.8            36.3            
 Amortization of goodwill and
   other intangibles............        1.7       1.9             5.5            
 Litigation settlement and
   expenses, net................         -        (.1)             -             
 Business acquisition charges...         .1       (.1)             -          
                                       89.3      86.4            20.5            
Operating income................       10.7      13.6           ( 8.3)    
Minority interest income........         .2        -
Other income and expenses.......        (.5)      (.1)             -    
Income before income taxes......       10.4      13.5           (10.1)       
Income taxes....................        3.9       4.8           ( 4.3)      
Net income......................        6.5%      8.7%          (13.2)%         
</TABLE>
<PAGE>9
THREE MONTHS COMPARISON


        Comparisons of revenues, operating income and margins for each business
unit for the periods presented are as follows:

<TABLE>
<CAPTION>
                                           Three Months  
                                          Ended March 31, 
   Revenues                              1997       1996      Change 
                                      (Dollars in Millions)
<S>                                     <C>        <C>           <C>
Enterprise Software and Services
 Property & Casualty.............       $ 56.5     $ 47.3        19.5% 
 Life............................         23.3       15.8        47.2
Information Services
 Property & Casualty.............         23.4       22.6         3.6
 Life............................         13.2       13.0         1.8  
  Total U.S.revenues.............        116.4       98.7        18.0
International ...................         38.8       34.5        12.6 
    Total revenues                      $155.2     $133.2              

   
   Operating income                                                    
Enterprise Software and Services
 Property & Casualty.............       $ 16.2     $ 15.1         7.3% 
 Life............................          4.2        2.3        79.5
Information Services
 Property & Casualty.............           .1         .2       (39.1)
 Life............................           .6         .5        20.7
Corporate........................         (6.1)      (5.6)        9.1 
  Total U.S.operating income.....         15.0       12.5        19.6
International ...................          1.6        5.6       (71.4)
    Total operating income              $ 16.6     $ 18.1              
   

   Operating income as percentage of revenue                           
Enterprise Software and Services
 Property & Casualty.............         28.7%      31.9%        
 Life............................         18.0       14.7      
Information Services
 Property & Casualty.............           .6        1.1       
 Life............................          4.7        4.0             
  Total U.S......................         12.9       12.7       
International ...................          4.1       16.2             
    Total                                 10.7%      13.6%             

</TABLE>
<PAGE>10



Revenues
<TABLE>
<CAPTION>
                                Three                 Three
                             Months Ended          Months Ended 
  Licensing                 March 31,1997         March 31,1996        Change    
                                  (Dollars in Millions)
<S>                             <C>                   <C>
Initial charges................ $ 11.3                $ 10.4             8.6 %
Monthly charges................   14.9                  13.9             7.2     
                                $ 26.2                $ 24.3             7.8 %   

Percentage of revenues.........   16.9%                 18.2%                    

</TABLE>
  Initial license revenues increased $.9 million from the first quarter of 1996 
to the first quarter of 1997.

  Domestic life insurance initial licensing revenues increased 234.2% ($2.8
million) from first quarter 1996 to first quarter 1997. International initial
licensing revenues increased  slightly by 1.7%. This was offset by lower 
domestic property and casualty  licensing revenues, as initial licensing 
revenues declined by $2.0 million from the first quarter of 1996 to the first 
quarter of 1997. Property and casualty licensing revenues in the United States 
are being impacted by various market factors including by many insurance 
companies focusing on their year 2000 projects and the need for certain "open" 
systems architectures in the Company's property and casualty products. The 
Company has initiatives underway to address these issues including a Windows 
release of Series III, and new releases of Insure 90, Point and Capsil and 
programs to assist prospective customers with near-term year 2000 solutions.
  
  Initial license charges for the first quarter of 1997 include right-to-use
charges (licenses excluding further MESA obligations) of $1.2 million compared 
to $1.1 million for the same period of 1996. Initial license charges for the 
first quarter of 1997 also include termination charges (related to the buyout of
monthly license charges) of $.2 million.  

  Monthly license charges increased $1.0 million from the first quarter of 1996
to the first quarter of 1997.

  Domestic life insurance monthly license charges increased 44.2% ($.9 million) 
and international monthly license charges increased 27.6% ($.7 million). This 
increase is principally related to an increase in licensing activities due to 
the acquisition of Co-Cam in August 1996. These increases were offset by a 
decrease in domestic property and casualty insurance monthly license charges of 
4.9% ($.5 million).

<PAGE>11







  Because a significant portion of initial licensing revenues are recorded at 
the time new systems are licensed, there can be significant fluctuations in 
revenue from quarter to quarter.  Set forth below is a comparison of initial 
license revenues for the current and preceding seven quarters expressed as a 
percentage of total revenues for each of the periods presented:

<TABLE>
<CAPTION>
                           1997             1996                       1995         
                           1st      4th    3rd    2nd   1st      4th    3rd   2nd*  
                                     (Dollars in Millions)
<S>                       <C>     <C>    <C>    <C>    <C>      <C>    <C>    <C>
Initial license revenues  $11.3   $19.4  $10.1  $12.0  $10.4    $16.1  $11.3  $9.5    
Total revenues              7.3%   11.8%   6.9%   8.8%   7.8%    11.6%   8.6%  7.1%  

<FN>
*Excludes licensing activity of the Company's Health Insurance Systems business,
 sold  June 30, 1995. Second quarter 1995 licensing revenues (initial and 
 monthly licensing charges) related to the Health business were $.3 million.

</TABLE>
<TABLE>
<CAPTION>
                                 Three              Three
                              Months Ended       Months Ended
  Services                   March 31,1997      March 31,1996      Change   
                                   (Dollars In Millions)
<S>                             <C>               <C>                <C>
Professional and outsourcing... $ 87.3            $ 69.5             25.6 %
Information....................   40.2              38.8              3.6 
Other..........................    1.5                .6            166.7   
                                $129.0            $108.9             18.5 % 

Percentage of revenues.........   83.1%             81.8%                   
</TABLE>
  
  Domestic property and casualty professional and outsourcing services revenues
increased 33.1% ($10.8 million) due to increases in implementation services and
increases in processing volumes in the outsourcing areas related to new and 
existing customers. International property and casualty professional and 
outsourcing services revenues increased 13.5% ($3.6 million), principally due to
services activity of Co-Cam, acquired August 1996 and increases in the volume of
services provided to new and existing customers. 

  The domestic life insurance professional and outsourcing services increased 
33.0% ($3.4 million) from the first quarter 1996 to the 1997 first quarter, due
principally to increased volumes of implementation services to new and existing
domestic customers.
<PAGE>12

  Information services revenues increased $1.1 million from the 1996 first 
quarter to the 1997 first quarter.  This increase is due to an increase of 
$.2 million in life insurance information services principally comprised of 
attending physician statements and application processing services. Also 
contributing to this increase is an increase in property and casualty 
information services revenues of $.8 million which consists principally of fees 
for domestic motor vehicle reports.


OPERATING EXPENSES  


Cost of Revenues

  Employee compensation and benefits increased 22.3% for the first quarter 1997
compared with the first quarter of 1996, principally the result of increased
salaries and related costs associated with the acquisition of Co-Cam in August 
1996, and increased costs associated with the growth in staffing for additional
professional and outsourcing services. Compensation and benefits increased 61% 
($5.9 million) internationally, while domestic increased 11.7% ($4.3 million).  
 
 Computer and communications expenses increased 6.8%($.5 million) principally as
a result of increased communications, data circuit and maintenance costs 
associated with the growth of the Company's domestic and international 
outsourcing operations.

  Information services and data acquisition costs increased 8.8%, due 
principally to increases of $1.8 million in property and casualty information 
costs arising from increased volume of motor vehicle reports and $.7 million in 
life insurance information services, arising from increased  volume of attending
physician statements. 

  Depreciation and amortization of property, equipment and capitalized software
costs increased 26.3%. This increase is principally due to higher amortization
expense resulting from the March 1996 release of the latest version of 
CyberLife client/server life insurance software and the October 1996 release of 
the Company's property and casualty insurance Series III (Release 8) 
client/server software systems. In addition depreciation expense increased 
principally due to Company's increased investment in its information technology 
equipment. 

  Other operating costs and expenses increased 26.2%. Fees related to the use of
consultants and independent contractors increased, principally the result of
training costs in new technologies and the satisfaction of staffing needs for
certain development and services activities. These increases were offset by an
increase in amounts capitalized principally related to the continued 
enhancement and development of the Company's Series III property and casualty 
insurance software, CyberLife life insurance software and Insure Plus 
international property and casualty software solution, and decreased costs 
associated with the depopulation of certain assigned risk polls serviced by the 
Company's total policy management business.  


Selling, general and administrative expenses

  Selling, general and administrative expenses increased 36.3% for the first
quarter 1997 compared with the first quarter of 1996, principally because of the
Company's investment in its international sales force and infrastructure 
mainly as a result of the August 1996 acquisition of Co-Cam. However when 
compared to the fourth quarter of 1996 the increase was only 2.0%.
<PAGE>13

Amortization of goodwill and other intangibles

  The 5.5% increase in amortization of goodwill and other intangibles is
principally the result of amortization of intangible assets related to the
acquisition of Co-Cam in August 1996.



OPERATING INCOME

  First quarter 1997 operating income decreased 8.3% ($1.5 million) compared 
with the 1996 first quarter. This decline is largely the result of increased 
expenses in the international operations. International operating income 
decreased $4.0 million with revenues increasing by 12.6% and expenses increasing
by 28.8% for the first quarter 1997 when compared to the same period in 1996. 
The decline has been caused by the current period increase in expenditures in 
the Company's international infrastructure, including its sales force, 
professional services organization and product development areas. The decline in
the operating income in the international operations was offset in part by an 
increase in both domestic life and property and casualty insurance business 
operating income. Domestic life insurance operating income increased 79.5% and 
property and casualty insurance business increased 7.3%. 


OTHER INCOME AND EXPENSE

  As a result of a higher average level of borrowed funds, principally 
borrowings under the Company's credit facilities, interest expense increased 
$.5 million. The average nominal interest rate applicable to borrowings under 
these facilities during the first quarter was 5.9%.


INCOME TAXES

  The effective income tax rate (income taxes expressed as a percentage of 
pre-tax income) was 37.6% and 35.3% for the three months ended March 31, 1997 
and 1996, respectively. The effective rate for the first quarter of 1997 is 
higher than the federal statutory rate principally due to the effect of state 
and local income taxes.

<PAGE>14










                  LIQUIDITY AND CAPITAL RESOURCES 

                                                  March 31,    December 31,
                                                    1997           1996         
Cash and equivalents, marketable                   (Dollars in Millions)
  securities, and investments....................  $ 18.6         $ 30.8  
Current assets...................................   167.7          173.0
Current liabilities..............................   106.4          112.6
Working capital..................................    61.3           60.4
Long-term debt...................................    27.3           34.3


                                                    Three months ended
                                                  March 31,      March 31,
                                                    1997           1996         
                                                   (Dollars in Millions)
Cash provided by operations......................  $ 17.8         $ 16.0
Cash used for investing activities...............   (21.9)         (17.1)
Cash used for financing activities...............    (8.2)         (14.7)


  The Company's current ratio (current assets divided by current liabilities) 
stood at 1.6 at March 31, 1997, which management believes is sufficient when 
combined with the available credit facilities to provide for day-to-day 
operating needs and the flexibility to take advantage of investment 
opportunities. The Company  has available under its credit facilities (net of 
amounts outstanding at March 31, 1997) $77.0 million under its 364 day $100.0 
million facility and $75.0 million under its 3 year $100.0 million facility, 
should management choose debt financing for any of the Company's operating, 
investing or financing activities. Also, the Company has available an 
uncommitted $10.0 million operating line of credit with which it may 
choose to fund temporary operating cash needs.

  Cash provided by operations increased $1.8 million from March 31, 1996 to 
March 31, 1997. This increase was principally due to a smaller year over year 
reduction in accounts payable resulting from payments of amounts accrued during 
the quarter in the normal course of business.

  During the three months ended March 31, 1997 the Company capitalized software
development costs of $14.4 million principally related to the development of its
Series III client/server property and casualty software (including the 
incorporation of object-oriented technology and support for Microsoft Windows), 
CyberLife object-oriented client/server life insurance software, an Insure Plus 
international property and casualty solution as well as other ongoing projects 
for other domestic as well as international products. 

  Significant expenditures anticipated for the remainder of 1997, excluding any
possible business acquisitions or common share  repurchases, are as follows:
acquisition of data processing, communications equipment and office furniture,
fixtures and equipment ($23.1 million); and costs relating to the internal
development of software systems ($43.2 million).
<PAGE>15
  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,  cash and investment reserves along with 
amounts available under the Company's debt facilities will be sufficient to meet
presently anticipated operating needs and to accomplish specific objectives in 
these areas and for other general corporate purposes.


               FACTORS THAT MAY AFFECT FUTURE RESULTS

  The Company's operating results and financial condition can be impacted by a
number of factors, including, but not limited to, the following, any of which 
could cause actual results to vary materially from current and historical 
results or the Company's anticipated future results:

-  Currently, the Company's business is focused principally within the global  
   property and casualty and life insurance industries;

-  There is increasing competition for the Company's products and     services;

-  The market for the Company's products and services is characterized by rapid 
   changes in technology;

-  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 timing and amount of the Company's revenues are subject to a number of   
   factors, including, but not limited to, the timing of customers' decisions 
   to enter into large license agreements with the Company;

-  Unforeseen events or adverse economic or business trends may significantly   
   increase cash demands beyond those currently anticipated or affect the 
   Company's  ability to generate/raise cash to satisfy financing needs;

-  The Company's operations have not proven to be significantly seasonal, 
   although  quarterly revenues and net income could be expected to vary at 
   times;

-  Although the Company cannot accurately determine the amounts attributable    
   thereto, the Company has been affected by inflation through increased 
   costs of  employee compensation and other operating expenses.

-  Many of the Company's current and potential customers are or will spend      
   significant amounts of money to make their existing information systems 
   capable of handling the year 2000.

<PAGE>16

  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of 
contingent assets and liabilities at the date of the financial statements, as 
well as the reported amounts of revenues and expenses during the reporting 
period. Changes in the status of certain matters or facts or circumstances 
underlying these estimates could result in material changes in these estimates, 
and actual results could differ from these estimates.

  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.  


                            
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:Statements in this report that are not descriptions of historical facts may
be forward-looking statements that are subject to risks and uncertainties, 
including economic, competitive and technological factors affecting the 
Company's operations, markets, products, services and prices, as well as other 
specific factors discussed in the Company's fillings with the Securities and 
Exchange Commission. These and other factors may cause actual results to differ 
materially from those anticipated. 
<PAGE>17

<PAGE>
                              PART II
                         OTHER INFORMATION

               POLICY MANAGEMENT SYSTEMS CORPORATION


Item 1. Legal Proceedings

  See Note 1, Contingencies, of Notes to the Consolidated Financial Statements,
which is incorporated by reference in this Item.



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



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

  On February 7, 1997 the Company filed a report on Form 8-K  to report the 
results of the verdict that was rendered in the Security Life of Denver lawsuit.

<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 15, 1997                 By:  Timothy V. Williams
                                   Executive Vice President
                                   (Chief Financial Officer)               
                       
<PAGE>19

              POLICY MANAGEMENT SYSTEMS CORPORATION


                          EXHIBIT INDEX



Exhibit
Number

 3.    ARTICLES OF INCORPORATION AND BY-LAWS

   A.  Bylaws of the Company, as amended through July 19, 1994 incorporating
       all amendments thereto subsequent to December 31, 1993 (filed as an 
       Exhibit to Form 10-K for the year ended December 31, 1994, and is 
       incorporated herein by reference)

   B.  Articles of Incorporation of the Company, as amended through October
       13, 1994, incorporating all amendments thereto subsequent to December 31,
       1993 (filed as an Exhibit to Form 10-K for the year ended December 31, 
       1994, and is incorporated herein  by reference)

 4.    INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
       INDENTURES

    A. Specimen forms of certificates for Common Stock of the Company (filed
       as an Exhibit to Registration Statement No. 2-74821, dated December 16, 
       1981, and is incorporated herein by reference)

   B.  Articles of Incorporation of the Company, as amended through October
       13, 1994, incorporating all amendments thereto subsequent to December 31,
       1993 (filed as an Exhibit to Form 10-K for the year ended December 31, 
       1994, and is incorporated herein  by reference)

10.    MATERIAL CONTRACTS

   A.  Policy Management Systems Corporation 1986 Stock Option Plan (filed as
       an Exhibit to Form 10-K for the year ended December 31, 1986, and is 
       incorporated herein by  reference)

   B.  Conformed copy of Development and Marketing Agreement between
       International Business Machines Corporation and Policy Management 
       Systems Corporation, dated July 26, 1989 (File No. 0-10175 - filed under 
       cover of Form SE filed on September 29, 1989, and is incorporated 
       herein by reference)

   C.  Policy Management Systems Corporation 1989 Stock Option Plan (File No.
       0-10175 - filed under cover of Form SE on March 22, 1991, and is 
       incorporated herein by reference)

   D.  Deferred Compensation Agreement with G. Larry Wilson (filed as an
       Exhibit to Form 10-K for the year ended December 31, 1993, and is 
       incorporated herein by reference)
<PAGE>20
   E.  Executive Compensation Agreement with G. Larry Wilson (filed as an
       Exhibit to Form 10-K for the year ended December 31, 1993, and is 
       incorporated herein by reference)

   F.  Employment Agreement with Stephen G. Morrison (filed as an Exhibit to
       Form 10-Q for the quarter ended March 31, 1994, and is incorporated 
       herein by reference)

   G.  Stock Option/Non-Compete Agreement with Stephen G. Morrison (filed as
       an Exhibit to Form 10-Q for the quarter ended March 31, 1994, and is 
       incorporated herein by reference)

   H.  Shareholders' Agreement, dated April 26, 1994, among Policy Management
       Systems Corporation, General Atlantic Partners 14, L.P. and GAP 
       Coinvestment Partners (filed as an Exhibit to Form 10-Q for the quarter 
       ended September 30, 1994, and is incorporated  herein by reference)

   I.  Registration Rights Agreement, dated April 26, 1994 among Policy
       Management Systems  Corporation, General Atlantic Partners 14, L.P. and 
       GAP Coinvestment Partners (filed as an Exhibit to Form 10-Q for the 
       quarter ended September 30, 1994, and is incorporated herein by 
       reference)

   J.  Employment Agreement with Timothy V. Williams (filed as an Exhibit to
       Form 10-K for the year ended December 31, 1994, and is incorporated 
       herein by reference)

   K.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to Form 10-Q for the quarter ended 
       September 30, 1992, and is incorporated herein by  reference)

   L.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to Form 10-Q for the quarter ended 
       September 30, 1994, and is incorporated herein by reference)

   M.  Stock Option (Non-Compete Form Agreement for named executive officers
       together with schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to Form 10-K for the year ended December 31,
       1994, and is incorporated herein by  reference)

   N.  Policy Management Systems Corporation 1993 Long-Term Incentive Plan for
       Executives (filed as an Exhibit to Form 10-K for the year ended December
       31, 1994, and is  incorporated herein by reference)

   O.  First Amendment to the Policy Management Systems Corporation 1989 Stock
       Option Plan (filed as an Exhibit to Form 10-K for the year ended December
       31, 1994, and is incorporated herein by reference)

   P.  Fourth Amendment to the Policy Management Systems Corporation 1989
       Stock Option Plan (filed as an Exhibit to Form 10-Q for the quarter 
       ending March 31, 1995, and is incorporated herein by reference)
<PAGE>21

   Q.  Second and Third Amendments to the Policy Management Systems
       Corporation 1989 Stock Option Plan (filed as an Exhibits and to Form 
       10-Q for the quarter ended June 30, 1995, and is incorporated herein by 
       reference)

   R.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with  schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to  Form 10-Q for the quarter ended June 
       30, 1995, and is incorporated herein by reference)

   S.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to  Form 10-K for year ended December 31,
       1995, and is incorporated herein by reference)

   T.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with schedule identifying particulars for each named executive 
        officer (filed as an Exhibit to Form 10-K for year ended December 31, 
       1995, and is incorporated herein by reference)

   U.  Stock Option/Non-Compete Agreement Amendment No. 1 dated November 8,
       1995 to Stock Option/Non-Compete Agreement dated July 20, 1995 with 
       Paul R. Butare (filed as  an Exhibit to Form 10-K for year ended 
       December 31, 1995, and is incorporated herein  by reference)

   V.  Stock Option/Non-Compete Agreement with Timothy V. Williams dated
       February 1,  1994 (filed as an Exhibit to Form 10-K for year ended 
       December 31, 1995, and is incorporated herein by reference)

   W.  Stock Option/Non-Compete Agreement with Timothy V. Williams dated May
       10, 1995 (filed as an Exhibit to Form 10-K for year ended December 31, 
       1995, and is incorporated  herein by reference)

   X.  Registration Rights Agreement, dated March 8, 1996, between Policy
       Management  Systems Corporation and Continental Casualty Company 
       (filed as an Exhibit to Form 10-Q for the quarter ended March 31, 1996, 
       and is incorporated herein by reference)

   Y.  Shareholders Agreement dated March 8, 1996 between Policy Management
       Systems Corporation and Continental Casualty Company (filed as an 
       Exhibit to  Form 10-Q for the quarter ended March 31, 1996, and is 
       incorporated herein by reference)

   Z.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with  schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to Form 10-Q for the quarter ended June 30, 
       1996, and is incorporated herein by reference)

   AA.  364-Day Credit Agreement dated as of August 11, 1995 among Policy
        Management Systems Corporation, the Guarantors Party thereto, the Banks 
        Listed therein and Morgan Guaranty Trust Company of New York as Agent 
        (filed as an Exhibit to Form for the quarter ended June 30, 1996, and 
        is  incorporated herein by reference) 

   BB.  Three-Year Credit Agreement dated as of August 11, 1995 among Policy
        Management  Systems Corporation, the Guarantors Party thereto, the 
        Banks Listed therein and Morgan  Guaranty Trust Company of New York as 
        Agent (filed as an Exhibit to Form 10-Q for 
<PAGE>22
        the quarter ended June 30, 1996, and is incorporated herein by
reference)

   CC.  Amendment No. 1 to 364-Day Credit Agreement dated September 29, 1995
among
        Policy Management Systems Corporation and Morgan Guaranty Trust
Company of New
        York (filed as an Exhibit to Form 10-Q for the quarter ended June 30,
1996, and is
        incorporated herein by reference)

   DD.  Amendment No. 1 to Three-Year Credit Agreement dated September 29,
1995 among
        Policy Management Systems Corporation and Morgan Guaranty Trust
Company of 
        New York (filed as an Exhibit to Form 10-Q for the quarter ended June
30, 1996, and
        is incorporated herein by reference)

   EE.  Amendment No. 2 to 364-Day Credit Agreement dated March 29, 1996 among
Policy
        Management Systems Corporation and Morgan Guaranty Trust Company of 
New York
        (filed as an Exhibit to Form 10-Q for the quarter ended June 30, 1996,
and is
        incorporated herein by reference)

   FF.  Amendment No. 2 to Three-Year Credit Agreement dated March 29, 1996
among Policy
        Management Systems Corporation and Morgan Guaranty Trust Company of
New York
        (filed as an Exhibit to Form 10-Q for the quarter ended June 30, 1996,
and is
        incorporated herein by reference)

   GG.  Amendment No. 3 to 364-Day Credit Agreement dated August 9, 1996 among
Policy
        Management Systems Corporation and Morgan Guaranty Trust Company of
New York
        (filed as an Exhibit to Form 10-Q for the quarter ended September 30,
1996, and is
        incorporated herein by reference)

   HH.  Amendment No. 3 to Three-Year Credit Agreement dated August 9, 1996
among Policy
        Management Systems Corporation and Morgan Guaranty Trust Company of
New York 
        (filed as an Exhibit to Form 10-K for year ended December 31, 1996,
and is
        incorporated herein by reference) 

   II.  Employment Agreement Form dated November 7, 1996 for Messrs. Butare,
Morrison
        and Williams together with a schedule identifying particulars for each
executive officer
        (filed as an Exhibit to Form 10-K for year ended December 31, 1996,
and is
        incorporated herein by reference) 

   JJ.  Stock Option/Non-Compete Agreement with Stephen G. Morrison dated
October 22,
        1996 (filed as an Exhibit to Form 10-K for year ended December 31,
1996, and is
        incorporated herein by reference) 

   KK.  Stock Option/Non-Compete Form Agreement dated January 8, 1997 for
named
        executive officers together with schedule identifying particulars for
each executive
        officer (filed herewith)
        
   LL.  Annual Bonus Program for Executive Officers (filed herewith)

<PAGE>23
11.    STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS

   A.  Filed herewith


27.    FINANCIAL DATA SCHEDULE

   A.  Filed herewith
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1

                          UNITED STATES
                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, 1997     Commission file number 1-10557

                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 PMSC 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   X       No       

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

  18,179,401 Common shares, $.01 par value, as of May 15,1997 

     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, 1996.
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, 
            1997 and 1996..................................... 3

          Consolidated Balance Sheets as of 
            March 31, 1997 and December 31, 1996.............. 4

          Consolidated Statements of Cash Flows for
            the three months ended March 31, 1997 and 1996.... 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
3
PART I
           FINANCIAL INFORMATION

              POLICY MANAGEMENT SYSTEMS CORPORATION
                CONSOLIDATED STATEMENTS OF INCOME
Three Months      
                                                  Ended March 31,     
                                                1997         1996       
                                                   (Unaudited)          
                                      (In Thousands, Except Per Share Data)
Revenues
  Licensing................................   $ 26,218     $ 24,295   
  Services.................................    129,038      108,888  
                                               155,256      133,183 
Operating expenses 
 Cost of revenues 
  Employee compensation & benefits.........     51,297       41,925   
  Computer and communications         
    expenses...............................      8,515        7,975    
  Information services and                     
    data acquisition costs.................     30,514       28,037   
  Depreciation and amortization of                                  
    property, equipment and
    capitalized software costs.............     14,059       11,134      
  Other costs & expenses...................      8,283        6,561    
 Selling, general and administrative
   expenses................................     23,253       17,058   
 Amortization of goodwill and
   other intangibles.......................      2,682        2,543   
 Litigation settlement and 
    expenses, net..........................        -            (63)    
 Business acquisition charges..............         71          (73)  
                                               138,674      115,097  

Operating income ..........................     16,582       18,086   

Minority interest income...................        369          -

Other Income and Expenses
  Investment income........................        427          596      
  Interest expense and other
    charges................................     (1,217)        (711) 
                                                (  790)        (115) 
Income before income taxes.................     16,161       17,971  
Income taxes...............................      6,069        6,343 

Net income.................................   $ 10,092     $ 11,628    

Net income per share.......................   $    .56     $    .60  
Weighted average number of shares..........     18,179       19,463
See accompanying notes
4
POLICY MANAGEMENT SYSTEMS CORPORATION
                       CONSOLIDATED BALANCE SHEETS
(Unaudited)    (Audited)
                                                          March 31,   December 31,
                                                            1997          1996    
                                                             (In Thousands,
Assets                                                     Except Share Data)
Current assets
  Cash and equivalents................................... $  9,993      $ 22,121
  Marketable securities..................................    2,492         2,234
  Receivables, net of allowance for uncollectible 
     amounts of $1,402 ($883 at 1996)....................  119,996       116,113
  Income tax receivable..................................    1,355         1,383
  Deferred income taxes..................................   16,222        15,343
  Other..................................................   17,651        15,840
     Total current assets................................  167,709       173,034

Property and equipment, at cost less accumulated
     depreciation and amortization of $127,879
     ($122,462 at 1996)..................................  116,188       115,757
Receivables..............................................    4,374         4,866
Income tax receivable....................................    4,041         4,041
Goodwill and other intangibles assets, net...............   78,999        83,363
Capitalized software costs, net..........................  183,161       177,875
Deferred income taxes....................................    2,146         1,560
Investments..............................................    6,125         6,483  
Other....................................................    4,557         5,239
        Total assets..................................... $567,300      $572,218

Liabilities
Current liabilities
  Accounts payable and accrued expenses.................. $ 50,586      $ 61,435
  Accrued restructuring charges..........................    2,081         2,478
  Accrued contract termination costs.....................      825           407
  Current portion of long-term debt......................   29,991        31,222
  Income taxes payable...................................   10,240         6,623
  Unearned revenues......................................   12,322         9,840
  Other..................................................      413           631
     Total current liabilities...........................  106,458       112,636

Long-term debt...........................................   27,281        34,268
Deferred income taxes....................................   60,159        58,370
Accrued restructuring charges............................      568         1,340
Other....................................................    2,209         2,352
     Total liabilities...................................  196,675       208,966
 
Commitments and contingencies (Note 1)

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares 
   authorized............................................     -              -
Common stock, $.01 par value, 75,000,000 shares 
   authorized, 18,179,401 shares issued and 
   outstanding (18,179,186 at December 31, 1996).........      182           182
Additional paid-in capital...............................  106,111       106,104
Retained earnings........................................  266,202       256,110
Foreign currency translation adjustment..................   (1,870)          856 
     Total stockholders' equity..........................  370,625       363,252
        Total liabilities and stockholders' equity....... $567,300      $572,218
See accompanying notes
5
POLICY MANAGEMENT SYSTEMS CORPORATION
              CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (Unaudited)
Three Months
                                                       Ended March 31,
                                                      1997        1996  
Operating Activities                                  (In Thousands)
Net income......................................  $ 10,092   $ 11,628 
  Adjustments to reconcile net income to net
   cash provided by operating activities:     
    Depreciation and amortization.................    17,530     14,376
    Deferred income taxes.........................       320      7,226 
    Provision for uncollectible accounts..........   (   742)        65
    Impairment and restructuring charges..........       444        -
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termination costs...........................   ( 1,170)   ( 3,823)
    Receivables...................................   ( 2,649)     4,188 
    Income taxes receivable.......................        27    (   241)
    Accounts payable and accrued expenses.........   (10,849)   (18,231)
    Income taxes payable..........................     3,618      3,475
  Other, net......................................     1,163    ( 2,669)
       Cash provided by operations................    17,784     15,994
  
Investing Activities
  Proceeds from sales/maturities of marketable    
   securities.....................................       250      1,000
  Acquisition of property and equipment...........   ( 7,717)   ( 4,208)
  Capitalized internal software development  
   costs..........................................   (14,368)   (13,276)
  Purchased software..............................       -      ( 1,040)
  Earnings from minority interest.................   (   154)       -
  Proceeds from disposal of property and
   equipment......................................       130        409
        Cash (used) by investing 
         activities...............................   (21,859)   (17,115) 
 
Financing Activities
  Payments on long-term debt......................   (23,456)   (16,939)
  Proceeds from borrowing under credit facility...    15,238        -  
  Issuance of common stock under stock 
   option plans...................................         7      2,260
        Cash (used) by financing 
         activities...............................   ( 8,211)   (14,679)

Effect of exchange rate changes on cash...........       158        180 
Net (decrease)increase in cash and 
  equivalents.....................................   (12,128)   (15,620)
Cash and equivalents at beginning of period.......    22,121     35,094
Cash and equivalents at end of period.............  $  9,993   $ 19,474

Supplemental Information
  Interest paid...................................  $  1,182   $    497
  Income taxes paid(refunded).....................     1,305    ( 4,325)
See accompanying notes
6
POLICY MANAGEMENT SYSTEMS CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          March 31, 1997

NOTE 1. CONTINGENCIES

  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 this investigation.

   In March 1994, Security Life of Denver Insurance Company ("SLD") brought suit
against the Company in the United States District Court for the District of
Colorado alleging breach of a life insurance joint development contract, unfair
trade practices, and fraud. SLD sought direct, indirect, consequential, and
punitive damages in excess of $80 million. In February 1997 following a jury
trial, the Court and jury entered judgments in favor of the Company against SLD
on the claims of fraud and unfair trade practices. A verdict and judgment was
returned against the Company for breach of contract and damages of $3.5 million,
together with pre-judgment interest. In addition the jury found that SLD was
using the Company's trade secrets without permission.  As a result of post trial
motions, the judgment was amended to delete the award of pre-judgment interest
and SLD was ordered to return the Company's systems. Both the Company and SLD
have appealed to the United States Court of Appeals. Changes in the status of
this proceeding could result in a change in subsequent periods in the Company's
estimate of anticipated liability for the estimated costs associated with these
matters.

  The Company is also presently involved in litigation which commenced in
January of 1996 in the Circuit Court in Greenville County, South Carolina with
Liberty Life Insurance Company and certain of its affiliates ("Liberty") arising
out of the parties' prior contractual relationship related to the development 
and licensing of Series III life insurance systems and the subsequent licensing 
of the Company's Cybertek life insurance systems. Liberty's complaint alleges 
breach of contract, breach of express and implied warranties, fraudulent 
inducement, breach of contract accompanied by a fraudulent act, and recission. 
Liberty has alleged actual and consequential damages of approximately $30 
million and also seeks treble and punitive damages. The Company has asserted 
various affirmative defenses and is pursuing counterclaims against Liberty for 
breach of contract, recoupment, breach of good faith and fair dealing, and 
breach of contract accompanied by a fraudulent act. The Company is seeking 
equitable relief, including injunctive relief, and currently unspecified 
actual, compensatory and consequential damages.

  Based upon the allegations raised in a prior lawsuit  and the SLD lawsuit, the
Company's insurer, St. Paul Mercury Insurance Company ("St. Paul"),in June 1995
7
commenced a declaratory judgment action in the United States District Court for
the District of South Carolina against the Company to determine St. Paul's
obligation for defense costs and to indemnify the Company for any payment 
related to these claims. The Company filed a counterclaim against St. Paul 
seeking to recover the Company's defense costs in both matters, coverage for 
damages, if any, awarded in those matters, and consequential and punitive 
damages.

  In connection with the dismissal of the prior lawsuit, St. Paul and the
Company agreed to dismiss with prejudice all claims against each other with
respect to the matter, and St. Paul agreed to reimburse the Company for the
Company's legal fees. The action continues as to the parties claims related to
insurance coverage for the SLD matter.

   In addition to the litigation described above, there are also various other
litigation proceedings and claims arising in the ordinary course of business. 
The Company believes it has meritorious defenses and is vigorously defending 
these matters.

  The Company is currently involved in a contract dispute with a customer over
the terms and billings rates contained therein. The Company believes that the
dispute will be resolved without any significant financial impact, however at 
the present time the maximum financial exposure is $1.5 million.

  While the resolution of any of the above matters could have a material adverse
effect on the results of operations in future periods, the Company does not
expect these matters to have a material adverse effect on its consolidated
financial position. The Company, however, is unable to predict the ultimate
outcome or the potential financial impact of these matters.

NOTE 2. NEW ACCOUNTING STANDARDS  

  In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("FAS 128"), was issued. FAS 128 is designed to improve the
earnings per share information provided in financial statements by simplifying
the existing computational guidelines, revising the disclosure requirements, and
increasing the comparability of earnings per share data on an international
basis. FAS 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods, earlier application is not
permitted. The Company will adopt FAS 128 on its effective date. Proforma
earnings per share of the Company computed using FAS 128 is not different from
earnings per share computed using existing standards and guidelines. 

NOTE 3. RECLASSIFICATION

  Certain prior year amounts have been reclassified to conform to current year
presentation.
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, 1996.

                          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,
Revenues                               1997      1996      1997   VS  1996     
 Licensing......................       16.9%     18.2%            7.9%        
 Services.......................       83.1      81.8            18.5         
                                      100.0     100.0            16.6   
Operating expenses
 Cost of revenues
  Employee compensation           
   and benefits.................       33.0      31.5            22.3         
  Computer & communication            
   expenses.....................        5.5       6.0             6.8      
  Information services & data
   acquisition costs............       19.6      21.0             8.8           
  Depreciation & amortization
   of property, equipment &
   capitalized software costs...        9.1       8.4            26.3            
  Other costs & expenses........        5.3       5.0            26.2            
 Selling, general &
   administrative expenses......       15.0      12.8            36.3            
 Amortization of goodwill and
   other intangibles............        1.7       1.9             5.5            
 Litigation settlement and
   expenses, net................         -        (.1)             -             
 Business acquisition charges...         .1       (.1)             -          
                                       89.3      86.4            20.5            
Operating income................       10.7      13.6           ( 8.3)    
Minority interest income........         .2        -
Other income and expenses.......        (.5)      (.1)             -    
Income before income taxes......       10.4      13.5           (10.1)       
Income taxes....................        3.9       4.8           ( 4.3)      
Net income......................        6.5%      8.7%          (13.2)%
9
THREE MONTHS COMPARISON

        Comparisons of revenues, operating income and margins for each business
unit for the periods presented are as follows:
Three Months  
                                          Ended March 31, 
   Revenues                              1997       1996      Change 
                                      (Dollars in Millions)
Enterprise Software and Services
 Property & Casualty.............       $ 56.5     $ 47.3        19.5% 
 Life............................         23.3       15.8        47.2
Information Services
 Property & Casualty.............         23.4       22.6         3.6
 Life............................         13.2       13.0         1.8  
  Total U.S.revenues.............        116.4       98.7        18.0
International ...................         38.8       34.5        12.6 
    Total revenues                      $155.2     $133.2              

   
   Operating income                                                    
Enterprise Software and Services
 Property & Casualty.............       $ 16.2     $ 15.1         7.3% 
 Life............................          4.2        2.3        79.5
Information Services
 Property & Casualty.............           .1         .2       (39.1)
 Life............................           .6         .5        20.7
Corporate........................         (6.1)      (5.6)        9.1 
  Total U.S.operating income.....         15.0       12.5        19.6
International ...................          1.6        5.6       (71.4)
    Total operating income              $ 16.6     $ 18.1              
   

   Operating income as percentage of revenue                           
Enterprise Software and Services
 Property & Casualty.............         28.7%      31.9%        
 Life............................         18.0       14.7      
Information Services
 Property & Casualty.............           .6        1.1       
 Life............................          4.7        4.0             
  Total U.S......................         12.9       12.7       
International ...................          4.1       16.2             
    Total                                 10.7%      13.6%
10

Revenues
Three                 Three
                             Months Ended          Months Ended 
  Licensing                 March 31,1997         March 31,1996        Change    
                                  (Dollars in Millions)
Initial charges................ $ 11.3                $ 10.4             8.6 %
Monthly charges................   14.9                  13.9             7.2     
                                $ 26.2                $ 24.3             7.8 %   

Percentage of revenues.........   16.9%                 18.2%
Initial license revenues increased $.9 million from the first quarter of 1996 
to the first quarter of 1997.

  Domestic life insurance initial licensing revenues increased 234.2% ($2.8
million) from first quarter 1996 to first quarter 1997. International initial
licensing revenues increased  slightly by 1.7%. This was offset by lower 
domestic property and casualty  licensing revenues, as initial licensing 
revenues declined by $2.0 million from the first quarter of 1996 to the first 
quarter of 1997. Property and casualty licensing revenues in the United States 
are being impacted by various market factors including by many insurance 
companies focusing on their year 2000 projects and the need for certain "open" 
systems architectures in the Company's property and casualty products. The 
Company has initiatives underway to address these issues including a Windows 
release of Series III, and new releases of Insure 90, Point and Capsil and 
programs to assist prospective customers with near-term year 2000 solutions.
  
  Initial license charges for the first quarter of 1997 include right-to-use
charges (licenses excluding further MESA obligations) of $1.2 million compared 
to $1.1 million for the same period of 1996. Initial license charges for the 
first quarter of 1997 also include termination charges (related to the buyout of
monthly license charges) of $.2 million.  

  Monthly license charges increased $1.0 million from the first quarter of 1996
to the first quarter of 1997.

  Domestic life insurance monthly license charges increased 44.2% ($.9 million) 
and international monthly license charges increased 27.6% ($.7 million). This 
increase is principally related to an increase in licensing activities due to 
the acquisition of Co-Cam in August 1996. These increases were offset by a 
decrease in domestic property and casualty insurance monthly license charges of 
4.9% ($.5 million).
11

  Because a significant portion of initial licensing revenues are recorded at 
the time new systems are licensed, there can be significant fluctuations in 
revenue from quarter to quarter.  Set forth below is a comparison of initial 
license revenues for the current and preceding seven quarters expressed as a 
percentage of total revenues for each of the periods presented:
1997             1996                       1995         
                           1st      4th    3rd    2nd   1st      4th    3rd   2nd*  
                                     (Dollars in Millions)
Initial license revenues  $11.3   $19.4  $10.1  $12.0  $10.4    $16.1  $11.3  $9.5    
Total revenues              7.3%   11.8%   6.9%   8.8%   7.8%    11.6%   8.6%  7.1%
*Excludes licensing activity of the Company's Health Insurance Systems business,
 sold  June 30, 1995. Second quarter 1995 licensing revenues (initial and 
 monthly licensing charges) related to the Health business were $.3 million.
Three              Three
                              Months Ended       Months Ended
  Services                   March 31,1997      March 31,1996      Change   
                                   (Dollars In Millions)
Professional and outsourcing... $ 87.3            $ 69.5             25.6 %
Information....................   40.2              38.8              3.6 
Other..........................    1.5                .6            166.7   
                                $129.0            $108.9             18.5 % 

Percentage of revenues.........   83.1%             81.8%
Domestic property and casualty professional and outsourcing services revenues
increased 33.1% ($10.8 million) due to increases in implementation services and
increases in processing volumes in the outsourcing areas related to new and 
existing customers. International property and casualty professional and 
outsourcing services revenues increased 13.5% ($3.6 million), principally due to
services activity of Co-Cam, acquired August 1996 and increases in the volume of
services provided to new and existing customers. 

  The domestic life insurance professional and outsourcing services increased 
33.0% ($3.4 million) from the first quarter 1996 to the 1997 first quarter, due
principally to increased volumes of implementation services to new and existing
domestic customers.
12

  Information services revenues increased $1.1 million from the 1996 first 
quarter to the 1997 first quarter.  This increase is due to an increase of 
$.2 million in life insurance information services principally comprised of 
attending physician statements and application processing services. Also 
contributing to this increase is an increase in property and casualty 
information services revenues of $.8 million which consists principally of fees 
for domestic motor vehicle reports.

OPERATING EXPENSES  

Cost of Revenues

  Employee compensation and benefits increased 22.3% for the first quarter 1997
compared with the first quarter of 1996, principally the result of increased
salaries and related costs associated with the acquisition of Co-Cam in August 
1996, and increased costs associated with the growth in staffing for additional
professional and outsourcing services. Compensation and benefits increased 61% 
($5.9 million) internationally, while domestic increased 11.7% ($4.3 million).  
 
 Computer and communications expenses increased 6.8%($.5 million) principally as
a result of increased communications, data circuit and maintenance costs 
associated with the growth of the Company's domestic and international 
outsourcing operations.

  Information services and data acquisition costs increased 8.8%, due 
principally to increases of $1.8 million in property and casualty information 
costs arising from increased volume of motor vehicle reports and $.7 million in 
life insurance information services, arising from increased  volume of attending
physician statements. 

  Depreciation and amortization of property, equipment and capitalized software
costs increased 26.3%. This increase is principally due to higher amortization
expense resulting from the March 1996 release of the latest version of 
CyberLife client/server life insurance software and the October 1996 release of 
the Company's property and casualty insurance Series III (Release 8) 
client/server software systems. In addition depreciation expense increased 
principally due to Company's increased investment in its information technology 
equipment. 

  Other operating costs and expenses increased 26.2%. Fees related to the use of
consultants and independent contractors increased, principally the result of
training costs in new technologies and the satisfaction of staffing needs for
certain development and services activities. These increases were offset by an
increase in amounts capitalized principally related to the continued 
enhancement and development of the Company's Series III property and casualty 
insurance software, CyberLife life insurance software and Insure Plus 
international property and casualty software solution, and decreased costs 
associated with the depopulation of certain assigned risk polls serviced by the 
Company's total policy management business.  

Selling, general and administrative expenses

  Selling, general and administrative expenses increased 36.3% for the first
quarter 1997 compared with the first quarter of 1996, principally because of the
Company's investment in its international sales force and infrastructure 
mainly as a result of the August 1996 acquisition of Co-Cam. However when 
compared to the fourth quarter of 1996 the increase was only 2.0%.
13

Amortization of goodwill and other intangibles

  The 5.5% increase in amortization of goodwill and other intangibles is
principally the result of amortization of intangible assets related to the
acquisition of Co-Cam in August 1996.

OPERATING INCOME

  First quarter 1997 operating income decreased 8.3% ($1.5 million) compared 
with the 1996 first quarter. This decline is largely the result of increased 
expenses in the international operations. International operating income 
decreased $4.0 million with revenues increasing by 12.6% and expenses increasing
by 28.8% for the first quarter 1997 when compared to the same period in 1996. 
The decline has been caused by the current period increase in expenditures in 
the Company's international infrastructure, including its sales force, 
professional services organization and product development areas. The decline in
the operating income in the international operations was offset in part by an 
increase in both domestic life and property and casualty insurance business 
operating income. Domestic life insurance operating income increased 79.5% and 
property and casualty insurance business increased 7.3%. 

OTHER INCOME AND EXPENSE

  As a result of a higher average level of borrowed funds, principally 
borrowings under the Company's credit facilities, interest expense increased 
$.5 million. The average nominal interest rate applicable to borrowings under 
these facilities during the first quarter was 5.9%.

INCOME TAXES

  The effective income tax rate (income taxes expressed as a percentage of 
pre-tax income) was 37.6% and 35.3% for the three months ended March 31, 1997 
and 1996, respectively. The effective rate for the first quarter of 1997 is 
higher than the federal statutory rate principally due to the effect of state 
and local income taxes.
14

                  LIQUIDITY AND CAPITAL RESOURCES 

                                                  March 31,    December 31,
                                                    1997           1996         
Cash and equivalents, marketable                   (Dollars in Millions)
  securities, and investments....................  $ 18.6         $ 30.8  
Current assets...................................   167.7          173.0
Current liabilities..............................   106.4          112.6
Working capital..................................    61.3           60.4
Long-term debt...................................    27.3           34.3

                                                    Three months ended
                                                  March 31,      March 31,
                                                    1997           1996         
                                                   (Dollars in Millions)
Cash provided by operations......................  $ 17.8         $ 16.0
Cash used for investing activities...............   (21.9)         (17.1)
Cash used for financing activities...............    (8.2)         (14.7)

  The Company's current ratio (current assets divided by current liabilities) 
stood at 1.6 at March 31, 1997, which management believes is sufficient when 
combined with the available credit facilities to provide for day-to-day 
operating needs and the flexibility to take advantage of investment 
opportunities. The Company  has available under its credit facilities (net of 
amounts outstanding at March 31, 1997) $77.0 million under its 364 day $100.0 
million facility and $75.0 million under its 3 year $100.0 million facility, 
should management choose debt financing for any of the Company's operating, 
investing or financing activities. Also, the Company has available an 
uncommitted $10.0 million operating line of credit with which it may 
choose to fund temporary operating cash needs.

  Cash provided by operations increased $1.8 million from March 31, 1996 to 
March 31, 1997. This increase was principally due to a smaller year over year 
reduction in accounts payable resulting from payments of amounts accrued during 
the quarter in the normal course of business.

  During the three months ended March 31, 1997 the Company capitalized software
development costs of $14.4 million principally related to the development of its
Series III client/server property and casualty software (including the 
incorporation of object-oriented technology and support for Microsoft Windows), 
CyberLife object-oriented client/server life insurance software, an Insure Plus 
international property and casualty solution as well as other ongoing projects 
for other domestic as well as international products. 

  Significant expenditures anticipated for the remainder of 1997, excluding any
possible business acquisitions or common share  repurchases, are as follows:
acquisition of data processing, communications equipment and office furniture,
fixtures and equipment ($23.1 million); and costs relating to the internal
development of software systems ($43.2 million).
15
  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,  cash and investment reserves along with 
amounts available under the Company's debt facilities will be sufficient to meet
presently anticipated operating needs and to accomplish specific objectives in 
these areas and for other general corporate purposes.

               FACTORS THAT MAY AFFECT FUTURE RESULTS

  The Company's operating results and financial condition can be impacted by a
number of factors, including, but not limited to, the following, any of which 
could cause actual results to vary materially from current and historical 
results or the Company's anticipated future results:

-  Currently, the Company's business is focused principally within the global  
   property and casualty and life insurance industries;

-  There is increasing competition for the Company's products and     services;

-  The market for the Company's products and services is characterized by rapid 
   changes in technology;

-  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 timing and amount of the Company's revenues are subject to a number of   
   factors, including, but not limited to, the timing of customers' decisions 
   to enter into large license agreements with the Company;

-  Unforeseen events or adverse economic or business trends may significantly   
   increase cash demands beyond those currently anticipated or affect the 
   Company's  ability to generate/raise cash to satisfy financing needs;

-  The Company's operations have not proven to be significantly seasonal, 
   although  quarterly revenues and net income could be expected to vary at 
   times;

-  Although the Company cannot accurately determine the amounts attributable    
   thereto, the Company has been affected by inflation through increased 
   costs of  employee compensation and other operating expenses.

-  Many of the Company's current and potential customers are or will spend      
   significant amounts of money to make their existing information systems 
   capable of handling the year 2000.
16

  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of 
contingent assets and liabilities at the date of the financial statements, as 
well as the reported amounts of revenues and expenses during the reporting 
period. Changes in the status of certain matters or facts or circumstances 
underlying these estimates could result in material changes in these estimates, 
and actual results could differ from these estimates.

  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.  

                            
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:Statements in this report that are not descriptions of historical facts may
be forward-looking statements that are subject to risks and uncertainties, 
including economic, competitive and technological factors affecting the 
Company's operations, markets, products, services and prices, as well as other 
specific factors discussed in the Company's fillings with the Securities and 
Exchange Commission. These and other factors may cause actual results to differ 
materially from those anticipated.
17
PART II
                         OTHER INFORMATION

               POLICY MANAGEMENT SYSTEMS CORPORATION

Item 1. Legal Proceedings

  See Note 1, Contingencies, of Notes to the Consolidated Financial Statements,
which is incorporated by reference in this Item.

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

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

  On February 7, 1997 the Company filed a report on Form 8-K  to report the 
results of the verdict that was rendered in the Security Life of Denver lawsuit.
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 15, 1997                 By:  Timothy V. Williams
                                   Executive Vice President
                                   (Chief Financial Officer)
19

              POLICY MANAGEMENT SYSTEMS CORPORATION

                          EXHIBIT INDEX

Exhibit
Number

 3.    ARTICLES OF INCORPORATION AND BY-LAWS

   A.  Bylaws of the Company, as amended through July 19, 1994 incorporating
       all amendments thereto subsequent to December 31, 1993 (filed as an 
       Exhibit to Form 10-K for the year ended December 31, 1994, and is 
       incorporated herein by reference)

   B.  Articles of Incorporation of the Company, as amended through October
       13, 1994, incorporating all amendments thereto subsequent to December 31,
       1993 (filed as an Exhibit to Form 10-K for the year ended December 31, 
       1994, and is incorporated herein  by reference)

 4.    INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
       INDENTURES

    A. Specimen forms of certificates for Common Stock of the Company (filed
       as an Exhibit to Registration Statement No. 2-74821, dated December 16, 
       1981, and is incorporated herein by reference)

   B.  Articles of Incorporation of the Company, as amended through October
       13, 1994, incorporating all amendments thereto subsequent to December 31,
       1993 (filed as an Exhibit to Form 10-K for the year ended December 31, 
       1994, and is incorporated herein  by reference)

10.    MATERIAL CONTRACTS

   A.  Policy Management Systems Corporation 1986 Stock Option Plan (filed as
       an Exhibit to Form 10-K for the year ended December 31, 1986, and is 
       incorporated herein by  reference)

   B.  Conformed copy of Development and Marketing Agreement between
       International Business Machines Corporation and Policy Management 
       Systems Corporation, dated July 26, 1989 (File No. 0-10175 - filed under 
       cover of Form SE filed on September 29, 1989, and is incorporated 
       herein by reference)

   C.  Policy Management Systems Corporation 1989 Stock Option Plan (File No.
       0-10175 - filed under cover of Form SE on March 22, 1991, and is 
       incorporated herein by reference)

   D.  Deferred Compensation Agreement with G. Larry Wilson (filed as an
       Exhibit to Form 10-K for the year ended December 31, 1993, and is 
       incorporated herein by reference)
20
   E.  Executive Compensation Agreement with G. Larry Wilson (filed as an
       Exhibit to Form 10-K for the year ended December 31, 1993, and is 
       incorporated herein by reference)

   F.  Employment Agreement with Stephen G. Morrison (filed as an Exhibit to
       Form 10-Q for the quarter ended March 31, 1994, and is incorporated 
       herein by reference)

   G.  Stock Option/Non-Compete Agreement with Stephen G. Morrison (filed as
       an Exhibit to Form 10-Q for the quarter ended March 31, 1994, and is 
       incorporated herein by reference)

   H.  Shareholders' Agreement, dated April 26, 1994, among Policy Management
       Systems Corporation, General Atlantic Partners 14, L.P. and GAP 
       Coinvestment Partners (filed as an Exhibit to Form 10-Q for the quarter 
       ended September 30, 1994, and is incorporated  herein by reference)

   I.  Registration Rights Agreement, dated April 26, 1994 among Policy
       Management Systems  Corporation, General Atlantic Partners 14, L.P. and 
       GAP Coinvestment Partners (filed as an Exhibit to Form 10-Q for the 
       quarter ended September 30, 1994, and is incorporated herein by 
       reference)

   J.  Employment Agreement with Timothy V. Williams (filed as an Exhibit to
       Form 10-K for the year ended December 31, 1994, and is incorporated 
       herein by reference)

   K.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to Form 10-Q for the quarter ended 
       September 30, 1992, and is incorporated herein by  reference)

   L.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to Form 10-Q for the quarter ended 
       September 30, 1994, and is incorporated herein by reference)

   M.  Stock Option (Non-Compete Form Agreement for named executive officers
       together with schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to Form 10-K for the year ended December 31,
       1994, and is incorporated herein by  reference)

   N.  Policy Management Systems Corporation 1993 Long-Term Incentive Plan for
       Executives (filed as an Exhibit to Form 10-K for the year ended December
       31, 1994, and is  incorporated herein by reference)

   O.  First Amendment to the Policy Management Systems Corporation 1989 Stock
       Option Plan (filed as an Exhibit to Form 10-K for the year ended December
       31, 1994, and is incorporated herein by reference)

   P.  Fourth Amendment to the Policy Management Systems Corporation 1989
       Stock Option Plan (filed as an Exhibit to Form 10-Q for the quarter 
       ending March 31, 1995, and is incorporated herein by reference)
21

   Q.  Second and Third Amendments to the Policy Management Systems
       Corporation 1989 Stock Option Plan (filed as an Exhibits and to Form 
       10-Q for the quarter ended June 30, 1995, and is incorporated herein by 
       reference)

   R.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with  schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to  Form 10-Q for the quarter ended June 
       30, 1995, and is incorporated herein by reference)

   S.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to  Form 10-K for year ended December 31,
       1995, and is incorporated herein by reference)

   T.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with schedule identifying particulars for each named executive 
        officer (filed as an Exhibit to Form 10-K for year ended December 31, 
       1995, and is incorporated herein by reference)

   U.  Stock Option/Non-Compete Agreement Amendment No. 1 dated November 8,
       1995 to Stock Option/Non-Compete Agreement dated July 20, 1995 with 
       Paul R. Butare (filed as  an Exhibit to Form 10-K for year ended 
       December 31, 1995, and is incorporated herein  by reference)

   V.  Stock Option/Non-Compete Agreement with Timothy V. Williams dated
       February 1,  1994 (filed as an Exhibit to Form 10-K for year ended 
       December 31, 1995, and is incorporated herein by reference)

   W.  Stock Option/Non-Compete Agreement with Timothy V. Williams dated May
       10, 1995 (filed as an Exhibit to Form 10-K for year ended December 31, 
       1995, and is incorporated  herein by reference)

   X.  Registration Rights Agreement, dated March 8, 1996, between Policy
       Management  Systems Corporation and Continental Casualty Company 
       (filed as an Exhibit to Form 10-Q for the quarter ended March 31, 1996, 
       and is incorporated herein by reference)

   Y.  Shareholders Agreement dated March 8, 1996 between Policy Management
       Systems Corporation and Continental Casualty Company (filed as an 
       Exhibit to  Form 10-Q for the quarter ended March 31, 1996, and is 
       incorporated herein by reference)

   Z.  Stock Option/Non-Compete Form Agreement for named executive officers
       together with  schedule identifying particulars for each named executive 
       officer (filed as an Exhibit to Form 10-Q for the quarter ended June 30, 
       1996, and is incorporated herein by reference)

   AA.  364-Day Credit Agreement dated as of August 11, 1995 among Policy
        Management Systems Corporation, the Guarantors Party thereto, the Banks 
        Listed therein and Morgan Guaranty Trust Company of New York as Agent 
        (filed as an Exhibit to Form for the quarter ended June 30, 1996, and 
        is  incorporated herein by reference) 

   BB.  Three-Year Credit Agreement dated as of August 11, 1995 among Policy
        Management  Systems Corporation, the Guarantors Party thereto, the 
        Banks Listed therein and Morgan  Guaranty Trust Company of New York as 
        Agent (filed as an Exhibit to Form 10-Q for
22
        the quarter ended June 30, 1996, and is incorporated herein by
reference)

   CC.  Amendment No. 1 to 364-Day Credit Agreement dated September 29, 1995
among
        Policy Management Systems Corporation and Morgan Guaranty Trust
Company of New
        York (filed as an Exhibit to Form 10-Q for the quarter ended June 30,
1996, and is
        incorporated herein by reference)

   DD.  Amendment No. 1 to Three-Year Credit Agreement dated September 29,
1995 among
        Policy Management Systems Corporation and Morgan Guaranty Trust
Company of 
        New York (filed as an Exhibit to Form 10-Q for the quarter ended June
30, 1996, and
        is incorporated herein by reference)

   EE.  Amendment No. 2 to 364-Day Credit Agreement dated March 29, 1996 among
Policy
        Management Systems Corporation and Morgan Guaranty Trust Company of 
New York
        (filed as an Exhibit to Form 10-Q for the quarter ended June 30, 1996,
and is
        incorporated herein by reference)

   FF.  Amendment No. 2 to Three-Year Credit Agreement dated March 29, 1996
among Policy
        Management Systems Corporation and Morgan Guaranty Trust Company of
New York
        (filed as an Exhibit to Form 10-Q for the quarter ended June 30, 1996,
and is
        incorporated herein by reference)

   GG.  Amendment No. 3 to 364-Day Credit Agreement dated August 9, 1996 among
Policy
        Management Systems Corporation and Morgan Guaranty Trust Company of
New York
        (filed as an Exhibit to Form 10-Q for the quarter ended September 30,
1996, and is
        incorporated herein by reference)

   HH.  Amendment No. 3 to Three-Year Credit Agreement dated August 9, 1996
among Policy
        Management Systems Corporation and Morgan Guaranty Trust Company of
New York 
        (filed as an Exhibit to Form 10-K for year ended December 31, 1996,
and is
        incorporated herein by reference) 

   II.  Employment Agreement Form dated November 7, 1996 for Messrs. Butare,
Morrison
        and Williams together with a schedule identifying particulars for each
executive officer
        (filed as an Exhibit to Form 10-K for year ended December 31, 1996,
and is
        incorporated herein by reference) 

   JJ.  Stock Option/Non-Compete Agreement with Stephen G. Morrison dated
October 22,
        1996 (filed as an Exhibit to Form 10-K for year ended December 31,
1996, and is
        incorporated herein by reference) 

   KK.  Stock Option/Non-Compete Form Agreement dated January 8, 1997 for
named
        executive officers together with schedule identifying particulars for
each executive
        officer (filed herewith)
        
   LL.  Annual Bonus Program for Executive Officers (filed herewith)
23
11.    STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS

   A.  Filed herewith

27.    FINANCIAL DATA SCHEDULE

   A.  Filed herewith