<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 June 30, 1996         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.

  18,178,869 Common shares, $.01 par value, as of August 13, 1996

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, 1995.



<PAGE>2
                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                   INDEX




PART I. FINANCIAL INFORMATION                              PAGE

  Item 1. Financial Statements

          Consolidated Statements of Income for 
            the three and six months ended June 30, 1996 
            and 1995.......................................... 3

          Consolidated Balance Sheets as of 
            June 30, 1996 and December 31, 1995............... 4

          Consolidated Statements of Cash Flows for
            the six months ended June 30, 1996 and 1995....... 5

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

  Item 2. Management's Discussion and Analysis of
            Financial Condition and Results of
            Operations........................................ 9


PART II. OTHER INFORMATION


  Item 1. Legal Proceedings...................................23

  Item 4. Submission of Matters to a Vote
            of Security Holders...............................24
  
  Item 6. Exhibits and Reports on Form 8-K....................24 

Signatures....................................................25 






  


<PAGE>
<PAGE>3
                                  PART I
                    FINANCIAL INFORMATION
<TABLE>
                   POLICY MANAGEMENT SYSTEMS CORPORATION
                     CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)
<CAPTION>
                                         Three Months         Six Months
                                         Ended June 30,      Ended June 30,
                                         1996      1995      1996      1995  
                                        (In Thousands, Except Per Share Data)
<S>                                   <C>       <C>       <C>       <C> 
Revenues
  Licensing.......................... $ 25,838  $ 22,737  $ 50,133  $ 48,280
  Services...........................  111,494   110,766   220,382   218,642
                                       137,332   133,503   270,515   266,922
Operating expenses 
 Cost of revenues
  Employee compensation & benefits...   42,405    39,276    84,331    78,047
  Computer and communications   
    expenses.........................    8,096     7,573    16,071    14,193
  Information services and                                      
    data acquisition costs...........   29,871    29,470    57,909    61,367
  Depreciation and amortization of   
    property, equipment and  
    capitalized software costs.......   11,839    12,388    22,973    24,067
  Other costs & expenses.............    9,186     9,874    15,674    19,571
 Selling, general and administrative
   expenses..........................   17,611    16,062    34,668    32,037
 Amortization of goodwill and
   other intangibles.................    2,617     2,343     5,160     4,385
 Litigation settlement and               
   expenses, net.....................   (9,358)    7,866    (9,422)    6,216
 Gain on sale of Health business
   and related assets................      -      (8,116)      -      (8,116)
 Impairment and restructuring 
   credits, net......................      -        (246)      -        (246)
                                       112,267   116,490   227,364   231,521

Operating income ....................   25,065    17,013    43,151    35,401 

Other income and expenses
  Investment income..................      926       535     1,522       958
  Interest expense and other charges.   (1,358)     (827)   (2,069)   (1,518)
                                          (432)     (292)     (547)     (560)

Income before income taxes...........   24,633    16,721    42,604    34,841
Income taxes ........................    8,830     4,631    15,173    11,431

Net income .......................... $ 15,803  $ 12,090  $ 27,431  $ 23,410

Net income per share................. $    .85  $    .62  $   1.44  $   1.21

Weighted average number of shares....   18,604    19,363    19,034    19,363
<FN>
See accompanying notes.

</TABLE>

<PAGE>4

<TABLE>
                                        
                     POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                        (Unaudited)    (Audited)
                                                          June 30,    December 31,
                                                            1996          1995    
                                                             (In Thousands,
                                                           Except Share Data)
<S>                                                       <C>           <C>
Assets                                                     
Current assets
  Cash and equivalents................................... $ 17,890      $ 35,094
  Marketable securities..................................    2,799         4,615 
  Receivables, net of allowance for uncollectible 
     amounts of $1,115 ($2,042 at 1995)..................  105,907        95,740 
  Income tax receivable..................................   24,897        25,089
  Deferred income taxes..................................    6,489        10,261
  Other..................................................   17,260        17,833
     Total current assets................................  175,242       188,632

Property and equipment, at cost less accumulated
  depreciation and amortization of $113,217
  ($103,568 at 1995).....................................  110,257       109,183
Receivables..............................................    4,155         5,885
Goodwill and other intangible assets, net................   83,490        89,319
Capitalized software costs, net..........................  160,285       145,982
Deferred income taxes....................................    1,584         2,335
Investments..............................................    4,186         4,905
Other....................................................    5,483         5,492
        Total assets..................................... $544,682      $551,733

Liabilities
Current liabilities
  Accounts payable and accrued expenses.................. $ 48,643      $ 70,673 
  Accrued restructuring charges..........................    6,460         9,456
  Accrued contract termination costs.....................      546         1,154
  Current portion of long-term debt......................   30,000         1,766
  Income taxes payable...................................    5,704            10
  Unearned revenues......................................    8,231        11,350 
     Total current liabilities...........................   99,584        94,409
Long-term debt...........................................   37,000        14,873
Deferred income taxes....................................   60,039        52,701
Accrued restructuring charges............................    2,051         4,439
Other....................................................    3,826         2,639
     Total liabilities...................................  202,500       169,061

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares 
   authorized............................................      -             -
Common stock, $.01 par value, 75,000,000 shares 
   authorized, 18,177,735 shares issued and 
   outstanding (19,436,114  at December 31, 1995)........      182           194
Additional paid-in capital...............................  106,067       173,402
Retained earnings........................................  237,544       210,113
Foreign currency translation adjustment..................   (1,611)       (1,037) 
     Total stockholders' equity..........................  342,182       382,672
        Total liabilities and stockholders' equity....... $544,682      $551,733
<FN>
See accompanying notes.

</TABLE>
<PAGE>
<PAGE>5

<TABLE>

<CAPTION>
                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)

                                                      Six Months Ended
                                                    June 30,    June 30,
                                                      1996        1995  
                                                      (In Thousands) 
<S>                                                 <C>         <C>
Operating Activities                                   
  Net income......................................  $ 27,431    $ 23,410
  Adjustments to reconcile net income to 
   net cash provided by operating activities:     
    Depreciation and amortization.................    29,596      29,566
    Deferred income taxes.........................    12,106       5,050
    Provision for uncollectible accounts..........       148         534
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termination costs...........................    (5,384)     (3,180)
    Receivables...................................    (8,585)     (2,727)
    Income taxes receivable.......................       192       2,878 
    Accounts payable and accrued expenses.........   (21,677)     (1,428)
    Income taxes payable..........................     5,449       2,224  
  Other, net......................................    (1,889)     (3,594)
       Cash provided by operations................    37,387      52,733
  
Investing Activities
  Proceeds from sales/maturities of marketable
   securities, net................................     2,450       3,000
  Acquisition of property and equipment...........   (12,897)    (11,919)
  Capitalized internal software development  
   costs..........................................   (26,718)    (20,394)
  Purchased software..............................    (1,040)       (250)
  Proceeds from disposal of property & equipment..       685         709
  Contract acquisition costs......................       -       (10,000)
       Cash used for investing activities.........   (37,520)    (38,854)

Financing Activities
  Payments on long-term debt......................   (63,393)     (7,155)
  Proceeds from long-term debt....................   113,500         -
  Repurchase of common stock......................   (73,595)        -  
  Issuance of common stock under stock 
   option plans...................................     6,248         159   
       Cash used for financing activities.........   (17,240)     (6,996)

Effect of exchange rate changes on cash...........       169        (179)
Net (decrease) increase in cash and equivalents...   (17,204)      6,704  
Cash and equivalents at beginning of period.......    35,094      17,686
Cash and equivalents at end of period.............  $ 17,890    $ 24,390

Noncash Activities
Supplemental Information
  Interest paid...................................  $  1,116    $  1,160
  Income taxes (refunds received) paid, net.......    (3,425)      1,105
<FN>
See accompanying notes.

</TABLE>
<PAGE>
<PAGE>6

                     POLICY MANAGEMENT SYSTEMS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 June 30, 1996

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.

  The Company is involved in a lawsuit with Security Life of Denver
("SLD") alleging, among other things, breach of a life insurance joint
development contract. The Company is also presently involved in
litigation with Liberty Life Insurance Company arising out of the
Company's change in the direction of its future life software systems
development following the acquisition of CYBERTEK. The Company has
asserted various affirmative defenses, claims and counterclaims and is
vigorously pursuing  prompt resolutions of these matters through all
available legal processes (see Item 3, Legal Proceedings, of Part I
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).

  In November 1993, the California State Automobile Association Inter-
Insurance Bureau and the California State Automobile Association
("CSAA") brought suit against the Company in the United States District
Court for the Northern District of California (see Item 3, Legal
Proceedings, of Part I contained in the Company s Annual Report on Form
10-K for the year ended December 31, 1995). In May 1996, after nine
weeks of trial, the parties agreed that CSAA would dismiss its claim
against the Company in return for the Company dismissing its
counterclaim against CSAA. The agreement also resolves a collateral
proceeding by the Company against CSAA and Computer Sciences Corporation
which is pending in another jurisdiction and arose out of the agreement
which was the basis of the California proceeding.

  Based upon the allegations raised in the CSAA and SLD lawsuits, the
Company s insurer, St. Paul Mercury Insurance Company ("St. Paul"),
commenced a declaratory judgment action 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 the
CSAA and SLD matters, coverage for damages, if any, awarded in those
matters, and consequential and punitive damages (see Item 3, Legal
Proceedings, of Part I contained in the Company s Annual Report on Form
10-K for the year ended December 31, 1995).







<PAGE>7

  In connection with the Company reaching an agreement with CSAA for the
dismissal of the CSAA matter, St. Paul and the Company agreed to dismiss
with prejudice all claims against each other with respect to the CSAA
matter, and St. Paul agreed to reimburse the Company for the Company s
legal fees in the CSAA matter (in excess of its deductible) with
interest.  As a result of this recovery, the Company recorded a gain of
$9.4 million  in the second quarter of 1996.  This agreement resolves
the Company s and St. Paul s claims related to the CSAA matter; however,
the action will continue 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.

  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. REPURCHASE OF COMMON STOCK

  During the second quarter of 1996, pursuant to its previously
announced authorizations to repurchase shares of its outstanding common
stock, the Company repurchased 759,512 shares of its common stock from
GAP Coinvestment Partners and General Atlantic Partners 14 L.P. and
645,500 shares of its common stock on the open market.


NOTE 3.   NEW ACCOUNTING STANDARDS

  On January 1, 1996, the Company formally adopted Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Assets to be Disposed of  ( SFAS 121"). The
Statement requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
expected future cash flows of those assets are less than the assets 
carrying amount. SFAS 121 also addresses the accounting for long-lived
assets that are expected to be sold or discarded. As the Company s
accounting policies prior to the adoption of SFAS 121 have provided for
similar accounting treatment, the effect of adoption was not material to
the Company s financial condition or results of operations.

  Also on January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123,  Accounting for Stock-Based Compensation .
The Statement requires that companies with stock-based compensation
plans either recognize compensation expense based on new fair value
accounting methods or continue to apply the provisions of Accounting
Principles Board Opinion No. 25 ( APB 25") and disclose pro forma net
income and earnings per share assuming the fair value method had been
applied. The Company has elected to adopt the disclosure alternative in
its annual financial statements and continue accounting for its stock-
based compensation plans in accordance with APB 25.

<PAGE>8

NOTE 4.  SUBSEQUENT EVENT

  On August 9, 1996, the Company purchased certain assets of Co-Cam Pty
Ltd. and related entities ("Co-Cam") for approximately $6 million. Co-
Cam, whose software and services include superannuation and pension
administration systems, operates in Australia, New Zealand, the United
Kingdom and certain Southeast Asian nations. During the prior fiscal
year, Co-Cam had net revenues of approximately $18 million. The
acquisition will be accounted for using the purchase method of
accounting.

NOTE 5.  RECLASSIFICATION     

  Certain prior year amounts have been reclassified to conform to
current year presentation. 
<PAGE>
<PAGE>9
                     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, 1995.

                             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:

<TABLE>
       
<CAPTION> 
                                                                  1996   vs   1995
                                                                   Percent Increase
                                                                       (Decrease)    
                                 Percentage         Percentage      Three      Six 
                                 of Revenues        of Revenues     Months    Months
                                 Three Months        Six Months     Ended     Ended 
                                Ended June 30,     Ended June 30,  June 30,  June 30,
                               1996      1995     1996      1995     
<S>                             <C>       <C>      <C>       <C>     <C>        <C>
Revenues
 Licensing....................  18.8%     17.0%    18.5%     18.1%   13.6%      3.8% 
 Services.....................  81.2      83.0     81.5      81.9      .7        .8 
                               100.0     100.0    100.0     100.0     2.9       1.3
Operating expenses
 Cost of revenues
 Employee compensation
   and benefits...............  30.9      29.4     31.2      29.2     8.0       8.1 
 Computer & communications
   expenses...................   5.9       5.7      5.9       5.3     6.9      13.2
 Information services & data
   acquisition costs..........  21.8      22.1     21.4      23.0     1.4      (5.6)
 Depreciation and amortization
   of property, equipment and
   capitalized software costs.   8.6       9.3      8.5       9.0    (4.4)     (4.5)
 Other costs & expenses.......   6.7       7.4      5.8       7.3    (7.0)    (19.9)
Selling, general & 
  administrative expenses.....  12.8      12.0     12.8      12.0     9.6       8.2
Amortization of goodwill and
  other intangibles...........   1.9       1.8      1.9       1.7    11.7      17.7
Litigation settlement and 
    expenses, net.............  (6.8)      5.9     (3.4)      2.3  (219.0)   (251.6)
Gain on sale of Health 
    business and related
    assets....................    -       (6.1)      -       (3.0) (100.0)   (100.0)
Impairment and restructuring
    credits, net..............    -        (.2)      -        (.1) (100.0)   (100.0)
                                81.8      87.3     84.1      86.7    (3.6)     (1.8)

Operating income..............  18.2      12.7     15.9      13.3    47.3      21.9 
Other income and expenses.....   (.3)      (.2)     (.2)      (.2)   47.9      (2.3)
Income before income taxes....  17.9      12.5     15.7      13.1    47.3      22.3
Income taxes..................   6.4       3.5      5.6       4.3    90.7      32.7
Net income....................  11.5%      9.0%    10.1%      8.8%   30.7%     17.2%

</TABLE>

<PAGE>10

THREE MONTHS COMPARISON

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

<TABLE>

<CAPTION>                                         
                                   Revenues    
                                 Three Months  
                                Ended June 30, 
                                1996     1995       Change
                                (Dollars in Millions)          
<S>                           <C>      <C>           <C>        
   Line of Business    
Property & Casualty....       $ 93.9   $ 95.9        (2.1)%
Life...................         43.5     33.3        30.6
Health.................           *       4.0          *

   Geographic Market   
United States..........       $102.7   $103.2        (0.5)% 
International..........         34.7     30.0        15.7

<FN>

* The Company s Health Insurance Systems business was divested June
30, 1995. 

</TABLE>

REVENUES
<TABLE>

<CAPTION>
                                   Three             Three
                                Months Ended      Months Ended
  Licensing                     June 30,1996      June 30,1995        Change   
                                       (Dollars in Millions)   
<S>                                <C>               <C>              <C>      
Initial charges................... $12.0             $ 9.5            26.3%
Monthly charges...................  13.8              13.2             4.5    
                                   $25.8             $22.7            13.6%   

Percentage of revenues............  18.8%             17.0%                   

</TABLE>

  Initial license revenues increased $2.5 million from the second
quarter of 1995 to the second quarter of 1996, due principally to
increased domestic life insurance initial license charges.

  Life insurance initial licensing revenues more than doubled from
second quarter 1995 to second quarter 1996 (increase of $4.0
million). These were offset in part by a modest property and
casualty licensing quarter, as overall property and casualty
initial licensing revenues decreased 18.4% ($1.4 million). The
property and casualty decrease was principally in the European and
Asia-Pacific areas, but was offset in part by $.9 million in
initial licensing revenues of micado, acquired October 1, 1995. The
Company is currently investing in its international sales force
through the realignment and integration of existing operations and 
expansion into new foreign markets. Domestic property and casualty
initial licensing revenues decreased slightly from second quarter
1995 to second quarter 1996. Second quarter 1996 initial license
charges include $1.7 million for right-to-use charges (licenses
without MESA obligations or benefits), compared to $.3 million for
the 1995 quarter. There were no termination charges generally
(related to the buy-out of monthly license agreements) included in
the 1996 results for the second quarter versus $.3 million for the
same period in 1995.

<PAGE>11

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

<TABLE>

<CAPTION>
                               1996              1995                1994   
                             2nd  1st    4th   3rd   2nd*  1st*   4th*  3rd*
                                          (Dollars In Millions)                
<S>                         <C>   <C>   <C>    <C>  <C>   <C>    <C>   <C>
Property and Casualty
Initial license revenues    $6.0  $7.3  $13.8  $8.1  $7.3  $8.0   $5.6  $7.4   
Total revenues               4.4%  5.5%   9.9%  6.2%  5.5%  6.0%   4.5%  5.8%  
          
Life
Initial license revenues    $6.0  $3.1  $ 2.3  $3.2  $2.1  $3.7   $1.6  $3.4
Total revenues               4.4%  2.3%   1.7%  2.4%  1.6%  2.8%   1.3%  2.7%

<FN>

*Excludes licensing activity of the Company's Health Insurance Systems
business, sold June 30, 1995. First and second quarter 1995 licensing revenues
(initial and monthly licensing charges) related to the Health business were
$.6 million and $.3 million, respectively.

</TABLE>

<TABLE>
<CAPTION>
                                Three             Three
                              Months Ended      Months Ended
  Services                    June 30,1996      June 30,1995         Change   
                                    (Dollars In Millions)      
<S>                             <C>               <C>               <C>  
Professional and outsourcing... $ 70.6            $ 65.5              7.8 %
Information....................   40.0              44.5            (10.1) 
Other..........................     .9                .8             12.5     
                                $111.5            $110.8               .6 %   

Percentage of revenues.........   81.2%             83.0%                     
  
</TABLE>

  Overall second quarter 1996 professional and outsourcing services
revenues  increased by 7.8% when compared to the second quarter of
1995. However, when revenues of the health insurance systems
business (sold on June 30, 1995) of $3.7 million are excluded from
the comparison, the increase is 14.2%. 

  Property and casualty professional and outsourcing services
revenues increased 8.4% ($4.1 million) in the aggregate. Domestic
property and casualty professional and outsourcing services
revenues were relatively flat from second quarter 1995 to the same
quarter of 1996. However, domestic property and casualty
professional and outsourcing services revenues, excluding total
policy management revenues, increased 21.3% ($3.9 million)
principally due to increases in the volume of services provided to
new and existing customers. Second quarter 1996 total policy
management revenues decreased 27.6% ($4.2 million). The total
policy management business was adversely affected by the change
from 12 month to 6 month policies of the Florida Joint Underwriting
Authority and a decrease in nongovernmental revenues principally
from the depopulation of certain assigned risk pools serviced by
the Company. International property and casualty professional and
outsourcing services revenues increased 25.6% ($3.9 million),
principally due to services activity of micado, acquired October 1,
1995, and increases in the volume of services provided to new and
existing customers.

<PAGE>12   

  The Company experienced a record life insurance professional and
outsourcing services revenue quarter, with these revenues
increasing 36.5% ($4.7 million) over second quarter 1995. Domestic
life insurance professional and outsourcing services revenues
increased 60.1% ($3.8 million), while international life insurance
professional and outsourcing services revenues increased 13.0% ($.9
million), due principally to increased volumes of services to new
and existing customers.

  Information services revenues decreased 10.1% from the second
quarter of 1995 to the second quarter of 1996. However, when risk
information services (ceased  and abandoned operations in the
fourth quarter of 1995) are excluded from the comparison,
information services revenues increased 3.8%. This increase is due
to an 8% ($1.3 million) increase in life insurance information
services principally comprised of attending physician statements
and Infinity information services. Property and casualty
information services revenues, which consist principally of fees
for domestic motor vehicle reports, were relatively flat, although,
these revenues have increased 20.9% from fourth quarter 1995 levels
as a result of the Company's November 1995 alliance with a leading
database information enterprise.


OPERATING EXPENSES
  
Cost of Revenues

  Overall employee compensation and benefits increased 8.0% from
second quarter 1995 to second quarter 1996, principally due to the
increases in international  development and services staffing and
the Company's acquisition on October 1, 1995 of micado. The effect
of the Company's divestitures of its health and risk information
services businesses in June 1995 and December 1995, respectively,
was to lower compensation and benefits expense by approximately
$6.7 million. However, this effect was offset in part by
compensation expense related to increased domestic development and
professional services staffing. 

  Computer and communications expenses increased 6.9% principally
due to lease expense associated with leases entered into as part of
the Company's fourth quarter 1995 restructure of its data
processing facilities. As part of this restructuring, the Company
entered into 2 and 4 year renewable lease agreements for certain
data processing equipment, which are intended to enable the Company
to make use of the latest technology in this area and improve the
quality of service to its customers while allowing the Company to
benefit from projected decreases in unit costs of this technology.
The lease expense resulting from the restructuring was offset by
the decrease in depreciation expense discussed below.

  Information services and data acquisition costs increased 1.4%,
due principally to increases in the volume of attending physician
statements related to the provision of certain life insurance
information services. Property and casualty information and data
acquisition costs, principally state fees for motor vehicle
reports, were relatively flat when compared to second quarter 1995
levels, consistent with the trend in property and casualty
information services revenues as discussed in Revenues above.

<PAGE>13

  Depreciation and amortization of property, equipment and
capitalized software costs decreased 4.4%. This decrease is
principally due to lower depreciation expense resulting from the
Company's fourth quarter 1995 restructuring of its data processing
facilities. This decrease in depreciation expense was offset in
part by increased amortization resulting principally from the March 
1996 release of the latest version of the CyberLife  client/server
life insurance software.

  Other costs and expenses decreased 7.0%. 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 increased use of outside
resources in the continued enhancement and development of the
Company's Series III property and casualty insurance software and
CyberLife life insurance software as well as other ongoing
development projects, and decreased costs associated with the
depopulation of certain assigned risk pools serviced by the
Company's total policy management business.

Selling, general and administrative expenses

  Selling, general and administrative expenses increased 9.6%,
principally related to the Company's investment in its
international sales force and infrastructure.

Litigation settlement and expenses, net

  In May 1996, the Company resolved its litigation with the
California State Automobile Association Inter-Insurance Bureau and
the California State Automobile Association ( CSAA ), concluding
with an agreement for the mutual dismissal of all related claims
and counterclaims as well as the Company s recovery of certain
defense costs incurred relative to the CSAA matter, with interest.
As a result, the Company recorded a $9.4 million gain for this
recovery during the second quarter.

  The Company, during the second quarter of 1995, provided for $7.9
million in estimated litigation costs arising from certain
litigation to which the Company was both a defendant and counter-
claimant. The costs provided for included, but were not limited to,
fees paid or anticipated to be paid to external counsel and other
costs related to the Company's defense and claims regarding these
matters.

Gain on sale of Health business and related assets

  On June 30, 1995, the Company completed the sale of its Health
Insurance Systems Division for a total consideration of $9.3
million in cash.  After selling expense and other accrued costs,
the Company recorded a pre-tax gain of $8.1 million.

Amortization of goodwill and other intangibles

  The 11.7% increase in amortization of goodwill and other
intangibles is principally the result of amortization of intangible
assets related to the acquisition of micado on October 1, 1995.

<PAGE>14

OPERATING INCOME

  Operating income decreased 4.9% ($.8 million), before the effects
of the litigation recovery credit recorded during second quarter
1996, and the gain on the sale of the health business, provision
for litigation costs and restructuring credits recorded during the
second quarter of 1995. This decline has largely 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.
Offsetting this effect, in part, was the increase in the percentage
of total revenues represented by initial license charges from 7.1%
of total revenues for second quarter 1995 to 8.8% of total revenues
for second quarter 1996.


OTHER INCOME AND EXPENSES

  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 second quarter was 6.05%.

  The increased interest costs were offset in part by a $.4 million
increase in investment income, principally related to a higher
average level of interest-bearing cash equivalents during second
quarter 1996 as compared to second quarter 1995.


INCOME TAXES

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 35.8% and 27.7% for the three
months ended June 30, 1996 and 1995, respectively. The  effective
rate for the second quarter of 1996 is higher than the federal
statutory rate due principally to the effect of state and local
income taxes; however, the effect of state and local income taxes
has been offset in part by the effect of the Company s expensing,
during 1996 for tax purposes, certain intangible assets related to
the abandonment of certain of the Company s domestic property and
casualty risk information services activities. The effective rate
for 1995 was significantly lower than the federal statutory rate
due principally to goodwill, deducted for tax purposes, relating to
the sale of the Company's Health Insurance Systems Division as
discussed above. 
 










<PAGE>15

SIX MONTHS COMPARISON

  A comparison of revenues for each line of business and geographic
market for the periods presented is as follows:
                                        
<TABLE>

<CAPTION>
                                        
                               Revenues    
                              Six Months  
                            Ended June 30, 
                             1996    1995     Change
                            (Dollars In Millions)         
<S>                        <C>     <C>         <C> 
   Line of Business   
Property & Casualty...     $187.6  $193.7      (3.2)%
Life..................       83.1    65.0      27.9
Health................         *      7.9        *

   Geographic Market  
United States.........     $200.1  $207.3      (3.5)% 
International.........       70.5    59.3      18.9

<FN>

*The Company s Health Insurance Systems business was divested June
30, 1995.

</TABLE>

REVENUES

<TABLE>

<CAPTION>

                                     Six              Six  
                                Months Ended     Months Ended
  Licensing                     June 30,1996     June 30,1995       Change  
                                    (Dollars in Millions) 
<S>                                 <C>              <C>              <C>
Initial charges...................  $22.4            $21.5            4.2%
Monthly charges...................   27.7             26.8            3.3   
                                    $50.1            $48.3            3.7%   

Percentage of revenues............   18.5%            18.1%                 

</TABLE>

  Initial license charges increased 4.2% ($.9 million), principally
due to increases in domestic life insurance licensing activity. 

  Life insurance initial license charges increased 58.0% ($3.3
million). Property and casualty initial license charges decreased
13.1% ($2.0 million), however, initial license charges for the
first six months of 1995 included a $4.0 million non-recurring
source code license agreement with a cross-industry vendor and $4.1
million related to joint marketing and distribution arrangements
with NCR Corporation, formerly AT&T Global Information Solutions.
These revenues were replaced in part by a large Series III license
executed during the first quarter of 1996, and $1.7 million in
initial license charge revenues of micado, acquired October 1,
1995. Initial license charges for the first six months of 1996
include right-to-use charges of $2.8 million compared to $4.5
million (inclusive of the $4.0 million source code license referred
to above) for the first six months of 1995. Initial license charges
for the period also include termination charges of $0 and $1.1
million for the first six months of 1996 and 1995, respectively. 




<PAGE>16
<TABLE>

<CAPTION>

                                 Six               Six
                              Months Ended      Months Ended
  Services                    June 30,1996      June 30,1995        Change 
                                 (Dollars in Millions)
<S>                             <C>               <C>               <C>
Professional and outsourcing... $140.1            $126.6             10.7 %
Information....................   78.8              91.0            (13.4) 
Other..........................    1.5               1.0             50.0  
                                $220.4            $218.6               .8 %

Percentage of revenues.........   81.5%             81.9%                   
  
</TABLE>

  Overall professional and outsourcing services revenues increased
10.7%; however, when revenues of the Company's health business
(sold June 30, 1995) are excluded from the comparison, the increase
is 17.1%. 

  Property and casualty professional and outsourcing services
revenues increased 11.2% ($10.5 million). Domestic professional and
outsourcing services revenues increased 2.4%; however, excluding
total policy management revenues, domestic professional and
outsourcing services revenues increased 16.8% ($6.3 million)
principally due to increased volumes of professional and
outsourcing services to new and existing customers. This increase
was offset in part by the effects of depopulation of certain
assigned risk pools serviced by the Company's total policy
management business and the change to six month policies from
twelve month policies of the Florida Joint Underwriting Authority. 
International professional and outsourcing services revenues
increased 30.5% ($9.0 million), principally as a result of the
October 1, 1995 acquisition of micado and increased services
activity to new and existing customers in other areas of Europe.

  Life insurance professional and outsourcing services revenues
increased 39.0% ($10.0 million). Domestic life insurance
professional and outsourcing services revenues increased 70.9%
($8.5 million)  principally as a result of an increase in the
volume of domestic professional and outsourcing services provided
to new and existing customers, including implementation services
and total policy administration services. International life
insurance professional and outsourcing services revenues increased
10.7% ($1.5 million), principally in the European and Nordic
regions.

  Information services revenues decreased 13.4%; however, excluding
risk information services revenues (ceased and abandoned in the
fourth quarter 1995), information services revenues remained
relatively flat. Domestic property and casualty automobile
information services revenues are 6.9% lower than the same revenues
for the first six months of 1995, although, principally as a result
of the Company's 1995 alliance with a leading database information
enterprise, these second quarter 1996 revenues are approximately
20.9% higher than fourth quarter 1995 levels. Life insurance
information services revenues have increased 7.9%, principally due
to revenue associated with the Company's Infinity services.



<PAGE>17

OPERATING EXPENSES

Cost of Revenues

  Overall employee compensation and benefits increased 8.1% from
the first six months of 1995 to the first six months of 1996,
principally due to increases in international development and
services staffing and the October 1, 1995 acquisition of micado.
The effect of the Company's divestitures of its health and risk
information services businesses in June 1995 and December 1995,
respectively, was to lower compensation and benefits expense by
approximately $12.2 million. However, this effect was offset by
compensation expense associated with increased domestic development
and professional services staffing. 

  Computer and communications expenses increased 13.2%, resulting
principally from the effect of licensing expense related to the
Company's long-term license and maintenance agreement (entered into
March 27, 1995) to acquire rights to certain operating system
management software products for use in the Company's worldwide
data center operations,  and the effect of lease expense associated
with leases entered into as part of the Company's restructuring of
its data processing facilities discussed in the three month
Operating Expense discussion above. 

  Information services and data acquisition costs decreased 5.6%,
due principally to a 9.0% decrease in state fees for motor vehicle
reports associated with the Company's domestic property and
casualty information services, similar to the trend discussed in
Revenues above. This decrease was offset in part by an increase in
the volume of expenses for attending physician statements related
to the provision of certain life insurance information services. 

  Depreciation and amortization of property, equipment and
capitalized software costs decreased 4.5%. This decrease is
principally due to lower depreciation expense resulting from the
Company's fourth quarter 1995 restructure of its data processing
facilities. This decrease in depreciation expense was offset in
part by increased amortization resulting principally from the March 
1996 release of the latest version of CyberLife client/server life
insurance software.

  Other costs and expenses decreased 19.9%. 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 increased use of outside
resources in the continued enhancement and development of the
Company's Series III property and casualty insurance software and
CyberLife life insurance software as well as other ongoing
development projects, and decreased costs associated with the
depopulation of certain assigned risk pools serviced by the
Company's total policy management business.

<PAGE>18

Selling, general and administrative expenses

  Selling, general and administrative expenses increased 8.2%,
principally due to the Company's investment in its international
sales force and infrastructure.

Litigation settlement and expenses, net

  In May 1996, the Company resolved its litigation with the
California State Automobile Association Inter-Insurance Bureau and
the California State Automobile Association ( CSAA ), concluding
with an agreement for the mutual dismissal of all related claims
and counterclaims as well as the Company s recovery of certain
defense costs incurred relative to the CSAA matter, with interest.
As a result, the Company recorded a $9.4 million gain for this
recovery during the second quarter.

  During the first quarter of 1995, the Company and its insurance
carrier agreed to settle amounts contested related to the
reimbursement of certain costs incurred by the Company in
connection with the 1994 settlement of its securities class action. 
Accordingly, the Company recorded a credit of $1.7 million, in the
first quarter of 1995, as a further adjustment to the estimated
costs of settling the securities class action which had previously
been recorded in the fourth quarter of 1994.  

  The Company, during the second quarter of 1995, provided for $7.9
million in estimated litigation costs arising from certain pending
litigation to which the Company was both a defendant and counter-
claimant. The costs provided for included, but were not limited to,
fees paid or anticipated to be paid to external counsel and other
costs related to the Company's defense and claims regarding these
matters.

Gain on sale of Health business and related assets

  On June 30, 1995, the Company completed the sale of its Health
Insurance Systems Division for a total consideration of $9.3
million in cash.  After selling expense and other accrued costs the
Company recorded a pre-tax gain of $8.1 million.

Amortization of goodwill and other intangibles

  The 17.7% increase in amortization of goodwill and other
intangibles is principally the result of amortization of intangible
assets related to the acquisition of micado on October 1, 1995.

OPERATING INCOME

  Operating income increased 1.4% ($.5 million), before the effects
of the litigation recovery credit recorded during the first half of
1996, and the gain on the sale of the health business, net
provision for litigation costs and restructuring credits recorded
during the same period of 1995.International expenses grew at a
rate 50% greater than related revenues as the Company invested in
necessary infrastructure and integration.  

<PAGE>19

  The effect of the Company's international operations was offset
in part by the increase of professional and outsourcing services
revenues as a percentage of total revenues from 47.4% of total
revenues for the first six months of 1995 to 51.8% for the same
period of 1996. At the same time, information services, which
generally produce smaller margins than professional and outsourcing
services, decreased as a percentage of total revenues from 34.1% of
total revenues for the first six months of 1995 to 29.1% for the
same period in 1996.


OTHER INCOME AND EXPENSES

  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 half was 6.08%.

  The increased interest costs were offset by a $.5 million
increase in investment income, principally related to a higher
average level of interest-bearing cash equivalents during the first
six months of 1996 as compared to the same period of 1995.


INCOME TAXES

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 35.6% and 32.8% for the six
months ended June 30, 1996 and 1995, respectively. The effective
rate for the 1996 period is higher than the federal statutory rate
due principally to the effect of state and local income taxes;
however, the effect of state and local income taxes has been offset
in part by the effect of the Company's expensing, during 1996 for
tax purposes, certain intangible assets related to the  abandonment
of certain of the Company's domestic property and casualty risk
information services activities. The effective rate for 1995 was
significantly lower than the federal statutory rate due principally
to goodwill, deducted for tax purposes, relating to the sale of the
Company's Health Insurance Systems Division as discussed above.


<PAGE>
<PAGE>20
                                     
              LIQUIDITY AND CAPITAL RESOURCES 

                                        June 30,     December 31,
                                          1996          1995    
Cash and equivalents, marketable         (Dollars in Millions)
  securities, and investments.......... $ 24.9         $ 44.6    
Current assets.........................  175.2          188.6
Current liabilities....................   99.6           94.4
Working capital........................   75.6           94.2
Long-term debt.........................   37.0           14.9

                                           Six months ended 
                                        June 30,       June 30,
                                          1996           1995    
                                         (Dollars in Millions)
Cash provided by operations............ $ 37.4         $ 52.7
Cash used for investing activities.....  (37.5)         (38.9)
Cash used for financing activities.....  (17.2)          (7.0)

  The Company remained well-capitalized at June 30, 1996, with a
current ratio (current assets divided by current liabilities) of
1.76, which management believes is sufficient to provide for day-
to-day operating needs and the flexibility to take advantage of
investment opportunities. The Company also has available under its
credit facilities (net of amounts outstanding at June 30, 1996)
$80.0 million under its 364 day $100.0 million facility (renewed
August 9, 1996) and $53.0 million under its 3 year $100.0 million
facility (dated August 11, 1995), 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 decreased $15.3 million. During the
first six months of 1996, the Company paid a significant amount of
costs previously accrued in 1995 related to its ongoing legal
proceedings. Although the Company had reached an agreement with its
insurance carrier during the second quarter of 1996 for the Company
to be reimbursed for approximately $9.4 million of these costs, the
Company did not actually receive payment for this reimbursement
until July 1996. Additionally, the Company made cash payments of
$5.3 million against its restructuring reserves (which included $.3
million in discount amortization; restructuring reserves were also
reduced by a write-off of $.4 million, principally consisting of
abandoned assets of the Risk business), as well as other accrued
items in the normal course of business.

  During the six months ended June 30, 1996, the Company
capitalized $26.7 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 ) and CyberLife object-oriented
client/server life insurance software, as well as other ongoing
projects for other domestic as well as international products.
Also, during the second quarter of 1996, the Company repurchased
1.4 million of its outstanding common shares at an aggregate cost
of $73.6 million.  

<PAGE>21

  Significant expenditures anticipated for the remainder of 1996,
excluding any possible business acquisitions or common share
repurchases, are as follows: acquisition of data processing,
communications equipment and office furniture, fixtures and
equipment ($12.0 million); costs relating to the internal
development of software systems ($28.0 million); and payments
relating to past business acquisitions ($6.2 million). 

  The Company has historically used the cash generated from
operations for: 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 and amounts available
under the Company's credit facilities will be able to meet
presently anticipated needs;  however, the Company may also
consider incurring additional debt as needed to accomplish specific
objectives in these areas and for other general corporate purposes.



                  FACTORS THAT MAY AFFECT FUTURE RESULTS

  The Company's 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;

<PAGE>22

- - 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.


  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 to 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>
<PAGE>23

                                  PART II
                             OTHER INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION

Item 1. Legal Proceedings

  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.

  The Company is involved in a lawsuit with Security Life of Denver
("SLD") alleging, among other things, breach of a life insurance
joint development contract. The Company is also presently involved
in litigation with Liberty Life Insurance Company arising out of
the Company's change in the direction of its future life software
systems development following the acquisition of CYBERTEK. The
Company has asserted various affirmative defenses, claims and
counterclaims and is vigorously pursuing  prompt resolutions of
these matters through all available legal processes (see Item 3,
Legal Proceedings, of Part I contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).

  In November 1993, the California State Automobile Association
Inter-Insurance Bureau and the California State Automobile
Association ("CSAA") brought suit against the Company in the
United States District Court for the Northern District of
California (see Item 3, Legal Proceedings, of Part I contained in
the Company s Annual Report on Form 10-K for the year ended
December 31, 1995). In May 1996, after nine weeks of trial, the
parties agreed that CSAA would dismiss its claim against the
Company in return for the Company dismissing its counterclaim
against CSAA. The agreement also resolves a collateral proceeding
by the Company against CSAA and Computer Sciences Corporation which
is pending in another jurisdiction and arose out of the agreement
which was the basis of the California proceeding.

  Based upon the allegations raised in the CSAA and SLD lawsuits,
the Company s insurer, St. Paul Mercury Insurance Company ("St.
Paul"), commenced a declaratory judgment action 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 the CSAA and SLD matters, coverage
for damages, if any, awarded in those matters, and consequential
and punitive damages (see Item 3, Legal Proceedings, of Part I
contained in the Company s Annual Report on Form 10-K for the year
ended December 31, 1995).



<PAGE>24

  In connection with the Company reaching an agreement with CSAA
for the dismissal of the CSAA matter, St. Paul and the Company
agreed to dismiss with prejudice all claims against each other with
respect to the CSAA matter, and St. Paul agreed to reimburse the
Company for the Company s legal fees in the CSAA matter (in excess
of its deductible) with interest.  As a result of this recovery,
the Company recorded a gain of $9.4 million in the second quarter
of 1996.  This agreement resolves the Company s and St. Paul s
claims related to the CSAA matter; however, the action will
continue 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 is vigorously pursuing 
prompt resolutions of these matters through all available legal
processes.

  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.


Item 4. Submission of Matters to a Vote of Security Holders

  At the Company s Annual Meeting of Stockholders, held on May 28,
1996, the Company s stockholders approved: (i) the election of two
directors, Dr. John M. Palms (16,794,209 votes for and 55,578
abstentions) and John P. Seibels (16,794,477 votes for and 55,310
abstentions) to serve a term of three years; (ii) the ratification
of the selection of independent auditors (16,836,778 votes for,
9,866 votes against and 3,143 abstentions).

  The following directors' terms continued through the Annual
Meeting of Stockholders, held on May 28, 1996: G. Larry Wilson
(Chairman of the Board), Roy L. Faulks, Frederick B. Karl, Joseph
D. Sargent and Richard G. Trub.


Items 2, 3, 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

  The Company did not file any reports on Form 8-K during the
quarter ended June 30, 1996.


<PAGE>

<PAGE>25
                   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: August 13, 1996              By:  Timothy V. Williams
                                   Executive Vice President
                                   (Chief Financial Officer)      
                                
<PAGE>
<PAGE>26

                   Policy Management Systems Corporation


                               Exhibit Index



Exhibit
Number
10. MATERIAL CONTRACTS

  A.    Stock Option/Non-Compete Form Agreement for named
        executive officers together with schedule identifying
        particulars for each named executive officer

  B.    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

  C.    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

  D.    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

  E.    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

  F.    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

  G.    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


11.     STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS


27.     FINANCIAL DATA SCHEDULE
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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 June 30, 1996         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.

  18,178,869 Common shares, $.01 par value, as of August 13, 1996

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, 1995.
2
                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                   INDEX

PART I. FINANCIAL INFORMATION                              PAGE

  Item 1. Financial Statements

          Consolidated Statements of Income for 
            the three and six months ended June 30, 1996 
            and 1995.......................................... 3

          Consolidated Balance Sheets as of 
            June 30, 1996 and December 31, 1995............... 4

          Consolidated Statements of Cash Flows for
            the six months ended June 30, 1996 and 1995....... 5

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

  Item 2. Management's Discussion and Analysis of
            Financial Condition and Results of
            Operations........................................ 9

PART II. OTHER INFORMATION

  Item 1. Legal Proceedings...................................23

  Item 4. Submission of Matters to a Vote
            of Security Holders...............................24
  
  Item 6. Exhibits and Reports on Form 8-K....................24 

Signatures....................................................25
3
                                  PART I
                    FINANCIAL INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                     CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)
Three Months         Six Months
                                         Ended June 30,      Ended June 30,
                                         1996      1995      1996      1995  
                                        (In Thousands, Except Per Share Data)
Revenues
  Licensing.......................... $ 25,838  $ 22,737  $ 50,133  $ 48,280
  Services...........................  111,494   110,766   220,382   218,642
                                       137,332   133,503   270,515   266,922
Operating expenses 
 Cost of revenues
  Employee compensation & benefits...   42,405    39,276    84,331    78,047
  Computer and communications   
    expenses.........................    8,096     7,573    16,071    14,193
  Information services and                                      
    data acquisition costs...........   29,871    29,470    57,909    61,367
  Depreciation and amortization of   
    property, equipment and  
    capitalized software costs.......   11,839    12,388    22,973    24,067
  Other costs & expenses.............    9,186     9,874    15,674    19,571
 Selling, general and administrative
   expenses..........................   17,611    16,062    34,668    32,037
 Amortization of goodwill and
   other intangibles.................    2,617     2,343     5,160     4,385
 Litigation settlement and               
   expenses, net.....................   (9,358)    7,866    (9,422)    6,216
 Gain on sale of Health business
   and related assets................      -      (8,116)      -      (8,116)
 Impairment and restructuring 
   credits, net......................      -        (246)      -        (246)
                                       112,267   116,490   227,364   231,521

Operating income ....................   25,065    17,013    43,151    35,401 

Other income and expenses
  Investment income..................      926       535     1,522       958
  Interest expense and other charges.   (1,358)     (827)   (2,069)   (1,518)
                                          (432)     (292)     (547)     (560)

Income before income taxes...........   24,633    16,721    42,604    34,841
Income taxes ........................    8,830     4,631    15,173    11,431

Net income .......................... $ 15,803  $ 12,090  $ 27,431  $ 23,410

Net income per share................. $    .85  $    .62  $   1.44  $   1.21

Weighted average number of shares....   18,604    19,363    19,034    19,363
See accompanying notes.
4

                                        
                     POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
(Unaudited)    (Audited)
                                                          June 30,    December 31,
                                                            1996          1995    
                                                             (In Thousands,
                                                           Except Share Data)
Assets                                                     
Current assets
  Cash and equivalents................................... $ 17,890      $ 35,094
  Marketable securities..................................    2,799         4,615 
  Receivables, net of allowance for uncollectible 
     amounts of $1,115 ($2,042 at 1995)..................  105,907        95,740 
  Income tax receivable..................................   24,897        25,089
  Deferred income taxes..................................    6,489        10,261
  Other..................................................   17,260        17,833
     Total current assets................................  175,242       188,632

Property and equipment, at cost less accumulated
  depreciation and amortization of $113,217
  ($103,568 at 1995).....................................  110,257       109,183
Receivables..............................................    4,155         5,885
Goodwill and other intangible assets, net................   83,490        89,319
Capitalized software costs, net..........................  160,285       145,982
Deferred income taxes....................................    1,584         2,335
Investments..............................................    4,186         4,905
Other....................................................    5,483         5,492
        Total assets..................................... $544,682      $551,733

Liabilities
Current liabilities
  Accounts payable and accrued expenses.................. $ 48,643      $ 70,673 
  Accrued restructuring charges..........................    6,460         9,456
  Accrued contract termination costs.....................      546         1,154
  Current portion of long-term debt......................   30,000         1,766
  Income taxes payable...................................    5,704            10
  Unearned revenues......................................    8,231        11,350 
     Total current liabilities...........................   99,584        94,409
Long-term debt...........................................   37,000        14,873
Deferred income taxes....................................   60,039        52,701
Accrued restructuring charges............................    2,051         4,439
Other....................................................    3,826         2,639
     Total liabilities...................................  202,500       169,061

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares 
   authorized............................................      -             -
Common stock, $.01 par value, 75,000,000 shares 
   authorized, 18,177,735 shares issued and 
   outstanding (19,436,114  at December 31, 1995)........      182           194
Additional paid-in capital...............................  106,067       173,402
Retained earnings........................................  237,544       210,113
Foreign currency translation adjustment..................   (1,611)       (1,037) 
     Total stockholders' equity..........................  342,182       382,672
        Total liabilities and stockholders' equity....... $544,682      $551,733
See accompanying notes.
5
POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)

                                                      Six Months Ended
                                                    June 30,    June 30,
                                                      1996        1995  
                                                      (In Thousands)
Operating Activities                                   
  Net income......................................  $ 27,431    $ 23,410
  Adjustments to reconcile net income to 
   net cash provided by operating activities:     
    Depreciation and amortization.................    29,596      29,566
    Deferred income taxes.........................    12,106       5,050
    Provision for uncollectible accounts..........       148         534
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termination costs...........................    (5,384)     (3,180)
    Receivables...................................    (8,585)     (2,727)
    Income taxes receivable.......................       192       2,878 
    Accounts payable and accrued expenses.........   (21,677)     (1,428)
    Income taxes payable..........................     5,449       2,224  
  Other, net......................................    (1,889)     (3,594)
       Cash provided by operations................    37,387      52,733
  
Investing Activities
  Proceeds from sales/maturities of marketable
   securities, net................................     2,450       3,000
  Acquisition of property and equipment...........   (12,897)    (11,919)
  Capitalized internal software development  
   costs..........................................   (26,718)    (20,394)
  Purchased software..............................    (1,040)       (250)
  Proceeds from disposal of property & equipment..       685         709
  Contract acquisition costs......................       -       (10,000)
       Cash used for investing activities.........   (37,520)    (38,854)

Financing Activities
  Payments on long-term debt......................   (63,393)     (7,155)
  Proceeds from long-term debt....................   113,500         -
  Repurchase of common stock......................   (73,595)        -  
  Issuance of common stock under stock 
   option plans...................................     6,248         159   
       Cash used for financing activities.........   (17,240)     (6,996)

Effect of exchange rate changes on cash...........       169        (179)
Net (decrease) increase in cash and equivalents...   (17,204)      6,704  
Cash and equivalents at beginning of period.......    35,094      17,686
Cash and equivalents at end of period.............  $ 17,890    $ 24,390

Noncash Activities
Supplemental Information
  Interest paid...................................  $  1,116    $  1,160
  Income taxes (refunds received) paid, net.......    (3,425)      1,105
See accompanying notes.
6

                     POLICY MANAGEMENT SYSTEMS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 June 30, 1996

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.

  The Company is involved in a lawsuit with Security Life of Denver
("SLD") alleging, among other things, breach of a life insurance joint
development contract. The Company is also presently involved in
litigation with Liberty Life Insurance Company arising out of the
Company's change in the direction of its future life software systems
development following the acquisition of CYBERTEK. The Company has
asserted various affirmative defenses, claims and counterclaims and is
vigorously pursuing  prompt resolutions of these matters through all
available legal processes (see Item 3, Legal Proceedings, of Part I
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).

  In November 1993, the California State Automobile Association Inter-
Insurance Bureau and the California State Automobile Association
("CSAA") brought suit against the Company in the United States District
Court for the Northern District of California (see Item 3, Legal
Proceedings, of Part I contained in the Company s Annual Report on Form
10-K for the year ended December 31, 1995). In May 1996, after nine
weeks of trial, the parties agreed that CSAA would dismiss its claim
against the Company in return for the Company dismissing its
counterclaim against CSAA. The agreement also resolves a collateral
proceeding by the Company against CSAA and Computer Sciences Corporation
which is pending in another jurisdiction and arose out of the agreement
which was the basis of the California proceeding.

  Based upon the allegations raised in the CSAA and SLD lawsuits, the
Company s insurer, St. Paul Mercury Insurance Company ("St. Paul"),
commenced a declaratory judgment action 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 the
CSAA and SLD matters, coverage for damages, if any, awarded in those
matters, and consequential and punitive damages (see Item 3, Legal
Proceedings, of Part I contained in the Company s Annual Report on Form
10-K for the year ended December 31, 1995).
7

  In connection with the Company reaching an agreement with CSAA for the
dismissal of the CSAA matter, St. Paul and the Company agreed to dismiss
with prejudice all claims against each other with respect to the CSAA
matter, and St. Paul agreed to reimburse the Company for the Company s
legal fees in the CSAA matter (in excess of its deductible) with
interest.  As a result of this recovery, the Company recorded a gain of
$9.4 million  in the second quarter of 1996.  This agreement resolves
the Company s and St. Paul s claims related to the CSAA matter; however,
the action will continue 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.

  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. REPURCHASE OF COMMON STOCK

  During the second quarter of 1996, pursuant to its previously
announced authorizations to repurchase shares of its outstanding common
stock, the Company repurchased 759,512 shares of its common stock from
GAP Coinvestment Partners and General Atlantic Partners 14 L.P. and
645,500 shares of its common stock on the open market.

NOTE 3.   NEW ACCOUNTING STANDARDS

  On January 1, 1996, the Company formally adopted Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Assets to be Disposed of  ( SFAS 121"). The
Statement requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
expected future cash flows of those assets are less than the assets 
carrying amount. SFAS 121 also addresses the accounting for long-lived
assets that are expected to be sold or discarded. As the Company s
accounting policies prior to the adoption of SFAS 121 have provided for
similar accounting treatment, the effect of adoption was not material to
the Company s financial condition or results of operations.

  Also on January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123,  Accounting for Stock-Based Compensation .
The Statement requires that companies with stock-based compensation
plans either recognize compensation expense based on new fair value
accounting methods or continue to apply the provisions of Accounting
Principles Board Opinion No. 25 ( APB 25") and disclose pro forma net
income and earnings per share assuming the fair value method had been
applied. The Company has elected to adopt the disclosure alternative in
its annual financial statements and continue accounting for its stock-
based compensation plans in accordance with APB 25.
8

NOTE 4.  SUBSEQUENT EVENT

  On August 9, 1996, the Company purchased certain assets of Co-Cam Pty
Ltd. and related entities ("Co-Cam") for approximately $6 million. Co-
Cam, whose software and services include superannuation and pension
administration systems, operates in Australia, New Zealand, the United
Kingdom and certain Southeast Asian nations. During the prior fiscal
year, Co-Cam had net revenues of approximately $18 million. The
acquisition will be accounted for using the purchase method of
accounting.

NOTE 5.  RECLASSIFICATION     

  Certain prior year amounts have been reclassified to conform to
current year presentation.
9
                     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, 1995.

                             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:
1996   vs   1995
                                                                   Percent Increase
                                                                       (Decrease)    
                                 Percentage         Percentage      Three      Six 
                                 of Revenues        of Revenues     Months    Months
                                 Three Months        Six Months     Ended     Ended 
                                Ended June 30,     Ended June 30,  June 30,  June 30,
                               1996      1995     1996      1995
Revenues
 Licensing....................  18.8%     17.0%    18.5%     18.1%   13.6%      3.8% 
 Services.....................  81.2      83.0     81.5      81.9      .7        .8 
                               100.0     100.0    100.0     100.0     2.9       1.3
Operating expenses
 Cost of revenues
 Employee compensation
   and benefits...............  30.9      29.4     31.2      29.2     8.0       8.1 
 Computer & communications
   expenses...................   5.9       5.7      5.9       5.3     6.9      13.2
 Information services & data
   acquisition costs..........  21.8      22.1     21.4      23.0     1.4      (5.6)
 Depreciation and amortization
   of property, equipment and
   capitalized software costs.   8.6       9.3      8.5       9.0    (4.4)     (4.5)
 Other costs & expenses.......   6.7       7.4      5.8       7.3    (7.0)    (19.9)
Selling, general & 
  administrative expenses.....  12.8      12.0     12.8      12.0     9.6       8.2
Amortization of goodwill and
  other intangibles...........   1.9       1.8      1.9       1.7    11.7      17.7
Litigation settlement and 
    expenses, net.............  (6.8)      5.9     (3.4)      2.3  (219.0)   (251.6)
Gain on sale of Health 
    business and related
    assets....................    -       (6.1)      -       (3.0) (100.0)   (100.0)
Impairment and restructuring
    credits, net..............    -        (.2)      -        (.1) (100.0)   (100.0)
                                81.8      87.3     84.1      86.7    (3.6)     (1.8)

Operating income..............  18.2      12.7     15.9      13.3    47.3      21.9 
Other income and expenses.....   (.3)      (.2)     (.2)      (.2)   47.9      (2.3)
Income before income taxes....  17.9      12.5     15.7      13.1    47.3      22.3
Income taxes..................   6.4       3.5      5.6       4.3    90.7      32.7
Net income....................  11.5%      9.0%    10.1%      8.8%   30.7%     17.2%
10

THREE MONTHS COMPARISON

  A comparison of revenues for each line of business and geographic
market for the periods presented is as follows:
Revenues    
                                 Three Months  
                                Ended June 30, 
                                1996     1995       Change
                                (Dollars in Millions)
Line of Business    
Property & Casualty....       $ 93.9   $ 95.9        (2.1)%
Life...................         43.5     33.3        30.6
Health.................           *       4.0          *

   Geographic Market   
United States..........       $102.7   $103.2        (0.5)% 
International..........         34.7     30.0        15.7
* The Company s Health Insurance Systems business was divested June
30, 1995.
REVENUES
Three             Three
                                Months Ended      Months Ended
  Licensing                     June 30,1996      June 30,1995        Change   
                                       (Dollars in Millions)
Initial charges................... $12.0             $ 9.5            26.3%
Monthly charges...................  13.8              13.2             4.5    
                                   $25.8             $22.7            13.6%   

Percentage of revenues............  18.8%             17.0%
Initial license revenues increased $2.5 million from the second
quarter of 1995 to the second quarter of 1996, due principally to
increased domestic life insurance initial license charges.

  Life insurance initial licensing revenues more than doubled from
second quarter 1995 to second quarter 1996 (increase of $4.0
million). These were offset in part by a modest property and
casualty licensing quarter, as overall property and casualty
initial licensing revenues decreased 18.4% ($1.4 million). The
property and casualty decrease was principally in the European and
Asia-Pacific areas, but was offset in part by $.9 million in
initial licensing revenues of micado, acquired October 1, 1995. The
Company is currently investing in its international sales force
through the realignment and integration of existing operations and 
expansion into new foreign markets. Domestic property and casualty
initial licensing revenues decreased slightly from second quarter
1995 to second quarter 1996. Second quarter 1996 initial license
charges include $1.7 million for right-to-use charges (licenses
without MESA obligations or benefits), compared to $.3 million for
the 1995 quarter. There were no termination charges generally
(related to the buy-out of monthly license agreements) included in
the 1996 results for the second quarter versus $.3 million for the
same period in 1995.
11

  Because a significant portion of initial license charges are
recorded at the time new systems are licensed, there can be
significant fluctuations in revenue between quarters. Set forth
below is a comparison of initial license revenues for the preceding
eight quarters expressed as a percentage of total revenues for each
of the periods presented:
1996              1995                1994   
                             2nd  1st    4th   3rd   2nd*  1st*   4th*  3rd*
                                          (Dollars In Millions)
Property and Casualty
Initial license revenues    $6.0  $7.3  $13.8  $8.1  $7.3  $8.0   $5.6  $7.4   
Total revenues               4.4%  5.5%   9.9%  6.2%  5.5%  6.0%   4.5%  5.8%  
          
Life
Initial license revenues    $6.0  $3.1  $ 2.3  $3.2  $2.1  $3.7   $1.6  $3.4
Total revenues               4.4%  2.3%   1.7%  2.4%  1.6%  2.8%   1.3%  2.7%
*Excludes licensing activity of the Company's Health Insurance Systems
business, sold June 30, 1995. First and second quarter 1995 licensing revenues
(initial and monthly licensing charges) related to the Health business were
$.6 million and $.3 million, respectively.
Three             Three
                              Months Ended      Months Ended
  Services                    June 30,1996      June 30,1995         Change   
                                    (Dollars In Millions)
Professional and outsourcing... $ 70.6            $ 65.5              7.8 %
Information....................   40.0              44.5            (10.1) 
Other..........................     .9                .8             12.5     
                                $111.5            $110.8               .6 %   

Percentage of revenues.........   81.2%             83.0%
Overall second quarter 1996 professional and outsourcing services
revenues  increased by 7.8% when compared to the second quarter of
1995. However, when revenues of the health insurance systems
business (sold on June 30, 1995) of $3.7 million are excluded from
the comparison, the increase is 14.2%. 

  Property and casualty professional and outsourcing services
revenues increased 8.4% ($4.1 million) in the aggregate. Domestic
property and casualty professional and outsourcing services
revenues were relatively flat from second quarter 1995 to the same
quarter of 1996. However, domestic property and casualty
professional and outsourcing services revenues, excluding total
policy management revenues, increased 21.3% ($3.9 million)
principally due to increases in the volume of services provided to
new and existing customers. Second quarter 1996 total policy
management revenues decreased 27.6% ($4.2 million). The total
policy management business was adversely affected by the change
from 12 month to 6 month policies of the Florida Joint Underwriting
Authority and a decrease in nongovernmental revenues principally
from the depopulation of certain assigned risk pools serviced by
the Company. International property and casualty professional and
outsourcing services revenues increased 25.6% ($3.9 million),
principally due to services activity of micado, acquired October 1,
1995, and increases in the volume of services provided to new and
existing customers.
12   

  The Company experienced a record life insurance professional and
outsourcing services revenue quarter, with these revenues
increasing 36.5% ($4.7 million) over second quarter 1995. Domestic
life insurance professional and outsourcing services revenues
increased 60.1% ($3.8 million), while international life insurance
professional and outsourcing services revenues increased 13.0% ($.9
million), due principally to increased volumes of services to new
and existing customers.

  Information services revenues decreased 10.1% from the second
quarter of 1995 to the second quarter of 1996. However, when risk
information services (ceased  and abandoned operations in the
fourth quarter of 1995) are excluded from the comparison,
information services revenues increased 3.8%. This increase is due
to an 8% ($1.3 million) increase in life insurance information
services principally comprised of attending physician statements
and Infinity information services. Property and casualty
information services revenues, which consist principally of fees
for domestic motor vehicle reports, were relatively flat, although,
these revenues have increased 20.9% from fourth quarter 1995 levels
as a result of the Company's November 1995 alliance with a leading
database information enterprise.

OPERATING EXPENSES
  
Cost of Revenues

  Overall employee compensation and benefits increased 8.0% from
second quarter 1995 to second quarter 1996, principally due to the
increases in international  development and services staffing and
the Company's acquisition on October 1, 1995 of micado. The effect
of the Company's divestitures of its health and risk information
services businesses in June 1995 and December 1995, respectively,
was to lower compensation and benefits expense by approximately
$6.7 million. However, this effect was offset in part by
compensation expense related to increased domestic development and
professional services staffing. 

  Computer and communications expenses increased 6.9% principally
due to lease expense associated with leases entered into as part of
the Company's fourth quarter 1995 restructure of its data
processing facilities. As part of this restructuring, the Company
entered into 2 and 4 year renewable lease agreements for certain
data processing equipment, which are intended to enable the Company
to make use of the latest technology in this area and improve the
quality of service to its customers while allowing the Company to
benefit from projected decreases in unit costs of this technology.
The lease expense resulting from the restructuring was offset by
the decrease in depreciation expense discussed below.

  Information services and data acquisition costs increased 1.4%,
due principally to increases in the volume of attending physician
statements related to the provision of certain life insurance
information services. Property and casualty information and data
acquisition costs, principally state fees for motor vehicle
reports, were relatively flat when compared to second quarter 1995
levels, consistent with the trend in property and casualty
information services revenues as discussed in Revenues above.
13

  Depreciation and amortization of property, equipment and
capitalized software costs decreased 4.4%. This decrease is
principally due to lower depreciation expense resulting from the
Company's fourth quarter 1995 restructuring of its data processing
facilities. This decrease in depreciation expense was offset in
part by increased amortization resulting principally from the March 
1996 release of the latest version of the CyberLife  client/server
life insurance software.

  Other costs and expenses decreased 7.0%. 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 increased use of outside
resources in the continued enhancement and development of the
Company's Series III property and casualty insurance software and
CyberLife life insurance software as well as other ongoing
development projects, and decreased costs associated with the
depopulation of certain assigned risk pools serviced by the
Company's total policy management business.

Selling, general and administrative expenses

  Selling, general and administrative expenses increased 9.6%,
principally related to the Company's investment in its
international sales force and infrastructure.

Litigation settlement and expenses, net

  In May 1996, the Company resolved its litigation with the
California State Automobile Association Inter-Insurance Bureau and
the California State Automobile Association ( CSAA ), concluding
with an agreement for the mutual dismissal of all related claims
and counterclaims as well as the Company s recovery of certain
defense costs incurred relative to the CSAA matter, with interest.
As a result, the Company recorded a $9.4 million gain for this
recovery during the second quarter.

  The Company, during the second quarter of 1995, provided for $7.9
million in estimated litigation costs arising from certain
litigation to which the Company was both a defendant and counter-
claimant. The costs provided for included, but were not limited to,
fees paid or anticipated to be paid to external counsel and other
costs related to the Company's defense and claims regarding these
matters.

Gain on sale of Health business and related assets

  On June 30, 1995, the Company completed the sale of its Health
Insurance Systems Division for a total consideration of $9.3
million in cash.  After selling expense and other accrued costs,
the Company recorded a pre-tax gain of $8.1 million.

Amortization of goodwill and other intangibles

  The 11.7% increase in amortization of goodwill and other
intangibles is principally the result of amortization of intangible
assets related to the acquisition of micado on October 1, 1995.
14

OPERATING INCOME

  Operating income decreased 4.9% ($.8 million), before the effects
of the litigation recovery credit recorded during second quarter
1996, and the gain on the sale of the health business, provision
for litigation costs and restructuring credits recorded during the
second quarter of 1995. This decline has largely 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.
Offsetting this effect, in part, was the increase in the percentage
of total revenues represented by initial license charges from 7.1%
of total revenues for second quarter 1995 to 8.8% of total revenues
for second quarter 1996.

OTHER INCOME AND EXPENSES

  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 second quarter was 6.05%.

  The increased interest costs were offset in part by a $.4 million
increase in investment income, principally related to a higher
average level of interest-bearing cash equivalents during second
quarter 1996 as compared to second quarter 1995.

INCOME TAXES

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 35.8% and 27.7% for the three
months ended June 30, 1996 and 1995, respectively. The  effective
rate for the second quarter of 1996 is higher than the federal
statutory rate due principally to the effect of state and local
income taxes; however, the effect of state and local income taxes
has been offset in part by the effect of the Company s expensing,
during 1996 for tax purposes, certain intangible assets related to
the abandonment of certain of the Company s domestic property and
casualty risk information services activities. The effective rate
for 1995 was significantly lower than the federal statutory rate
due principally to goodwill, deducted for tax purposes, relating to
the sale of the Company's Health Insurance Systems Division as
discussed above.
15

SIX MONTHS COMPARISON

  A comparison of revenues for each line of business and geographic
market for the periods presented is as follows:
Revenues    
                              Six Months  
                            Ended June 30, 
                             1996    1995     Change
                            (Dollars In Millions)
Line of Business   
Property & Casualty...     $187.6  $193.7      (3.2)%
Life..................       83.1    65.0      27.9
Health................         *      7.9        *

   Geographic Market  
United States.........     $200.1  $207.3      (3.5)% 
International.........       70.5    59.3      18.9
*The Company s Health Insurance Systems business was divested June
30, 1995.
REVENUES
Six              Six  
                                Months Ended     Months Ended
  Licensing                     June 30,1996     June 30,1995       Change  
                                    (Dollars in Millions)
Initial charges...................  $22.4            $21.5            4.2%
Monthly charges...................   27.7             26.8            3.3   
                                    $50.1            $48.3            3.7%   

Percentage of revenues............   18.5%            18.1%
Initial license charges increased 4.2% ($.9 million), principally
due to increases in domestic life insurance licensing activity. 

  Life insurance initial license charges increased 58.0% ($3.3
million). Property and casualty initial license charges decreased
13.1% ($2.0 million), however, initial license charges for the
first six months of 1995 included a $4.0 million non-recurring
source code license agreement with a cross-industry vendor and $4.1
million related to joint marketing and distribution arrangements
with NCR Corporation, formerly AT&T Global Information Solutions.
These revenues were replaced in part by a large Series III license
executed during the first quarter of 1996, and $1.7 million in
initial license charge revenues of micado, acquired October 1,
1995. Initial license charges for the first six months of 1996
include right-to-use charges of $2.8 million compared to $4.5
million (inclusive of the $4.0 million source code license referred
to above) for the first six months of 1995. Initial license charges
for the period also include termination charges of $0 and $1.1
million for the first six months of 1996 and 1995, respectively.
16
Six               Six
                              Months Ended      Months Ended
  Services                    June 30,1996      June 30,1995        Change 
                                 (Dollars in Millions)
Professional and outsourcing... $140.1            $126.6             10.7 %
Information....................   78.8              91.0            (13.4) 
Other..........................    1.5               1.0             50.0  
                                $220.4            $218.6               .8 %

Percentage of revenues.........   81.5%             81.9%
Overall professional and outsourcing services revenues increased
10.7%; however, when revenues of the Company's health business
(sold June 30, 1995) are excluded from the comparison, the increase
is 17.1%. 

  Property and casualty professional and outsourcing services
revenues increased 11.2% ($10.5 million). Domestic professional and
outsourcing services revenues increased 2.4%; however, excluding
total policy management revenues, domestic professional and
outsourcing services revenues increased 16.8% ($6.3 million)
principally due to increased volumes of professional and
outsourcing services to new and existing customers. This increase
was offset in part by the effects of depopulation of certain
assigned risk pools serviced by the Company's total policy
management business and the change to six month policies from
twelve month policies of the Florida Joint Underwriting Authority. 
International professional and outsourcing services revenues
increased 30.5% ($9.0 million), principally as a result of the
October 1, 1995 acquisition of micado and increased services
activity to new and existing customers in other areas of Europe.

  Life insurance professional and outsourcing services revenues
increased 39.0% ($10.0 million). Domestic life insurance
professional and outsourcing services revenues increased 70.9%
($8.5 million)  principally as a result of an increase in the
volume of domestic professional and outsourcing services provided
to new and existing customers, including implementation services
and total policy administration services. International life
insurance professional and outsourcing services revenues increased
10.7% ($1.5 million), principally in the European and Nordic
regions.

  Information services revenues decreased 13.4%; however, excluding
risk information services revenues (ceased and abandoned in the
fourth quarter 1995), information services revenues remained
relatively flat. Domestic property and casualty automobile
information services revenues are 6.9% lower than the same revenues
for the first six months of 1995, although, principally as a result
of the Company's 1995 alliance with a leading database information
enterprise, these second quarter 1996 revenues are approximately
20.9% higher than fourth quarter 1995 levels. Life insurance
information services revenues have increased 7.9%, principally due
to revenue associated with the Company's Infinity services.
17

OPERATING EXPENSES

Cost of Revenues

  Overall employee compensation and benefits increased 8.1% from
the first six months of 1995 to the first six months of 1996,
principally due to increases in international development and
services staffing and the October 1, 1995 acquisition of micado.
The effect of the Company's divestitures of its health and risk
information services businesses in June 1995 and December 1995,
respectively, was to lower compensation and benefits expense by
approximately $12.2 million. However, this effect was offset by
compensation expense associated with increased domestic development
and professional services staffing. 

  Computer and communications expenses increased 13.2%, resulting
principally from the effect of licensing expense related to the
Company's long-term license and maintenance agreement (entered into
March 27, 1995) to acquire rights to certain operating system
management software products for use in the Company's worldwide
data center operations,  and the effect of lease expense associated
with leases entered into as part of the Company's restructuring of
its data processing facilities discussed in the three month
Operating Expense discussion above. 

  Information services and data acquisition costs decreased 5.6%,
due principally to a 9.0% decrease in state fees for motor vehicle
reports associated with the Company's domestic property and
casualty information services, similar to the trend discussed in
Revenues above. This decrease was offset in part by an increase in
the volume of expenses for attending physician statements related
to the provision of certain life insurance information services. 

  Depreciation and amortization of property, equipment and
capitalized software costs decreased 4.5%. This decrease is
principally due to lower depreciation expense resulting from the
Company's fourth quarter 1995 restructure of its data processing
facilities. This decrease in depreciation expense was offset in
part by increased amortization resulting principally from the March 
1996 release of the latest version of CyberLife client/server life
insurance software.

  Other costs and expenses decreased 19.9%. 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 increased use of outside
resources in the continued enhancement and development of the
Company's Series III property and casualty insurance software and
CyberLife life insurance software as well as other ongoing
development projects, and decreased costs associated with the
depopulation of certain assigned risk pools serviced by the
Company's total policy management business.
18

Selling, general and administrative expenses

  Selling, general and administrative expenses increased 8.2%,
principally due to the Company's investment in its international
sales force and infrastructure.

Litigation settlement and expenses, net

  In May 1996, the Company resolved its litigation with the
California State Automobile Association Inter-Insurance Bureau and
the California State Automobile Association ( CSAA ), concluding
with an agreement for the mutual dismissal of all related claims
and counterclaims as well as the Company s recovery of certain
defense costs incurred relative to the CSAA matter, with interest.
As a result, the Company recorded a $9.4 million gain for this
recovery during the second quarter.

  During the first quarter of 1995, the Company and its insurance
carrier agreed to settle amounts contested related to the
reimbursement of certain costs incurred by the Company in
connection with the 1994 settlement of its securities class action. 
Accordingly, the Company recorded a credit of $1.7 million, in the
first quarter of 1995, as a further adjustment to the estimated
costs of settling the securities class action which had previously
been recorded in the fourth quarter of 1994.  

  The Company, during the second quarter of 1995, provided for $7.9
million in estimated litigation costs arising from certain pending
litigation to which the Company was both a defendant and counter-
claimant. The costs provided for included, but were not limited to,
fees paid or anticipated to be paid to external counsel and other
costs related to the Company's defense and claims regarding these
matters.

Gain on sale of Health business and related assets

  On June 30, 1995, the Company completed the sale of its Health
Insurance Systems Division for a total consideration of $9.3
million in cash.  After selling expense and other accrued costs the
Company recorded a pre-tax gain of $8.1 million.

Amortization of goodwill and other intangibles

  The 17.7% increase in amortization of goodwill and other
intangibles is principally the result of amortization of intangible
assets related to the acquisition of micado on October 1, 1995.

OPERATING INCOME

  Operating income increased 1.4% ($.5 million), before the effects
of the litigation recovery credit recorded during the first half of
1996, and the gain on the sale of the health business, net
provision for litigation costs and restructuring credits recorded
during the same period of 1995.International expenses grew at a
rate 50% greater than related revenues as the Company invested in
necessary infrastructure and integration.
19

  The effect of the Company's international operations was offset
in part by the increase of professional and outsourcing services
revenues as a percentage of total revenues from 47.4% of total
revenues for the first six months of 1995 to 51.8% for the same
period of 1996. At the same time, information services, which
generally produce smaller margins than professional and outsourcing
services, decreased as a percentage of total revenues from 34.1% of
total revenues for the first six months of 1995 to 29.1% for the
same period in 1996.

OTHER INCOME AND EXPENSES

  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 half was 6.08%.

  The increased interest costs were offset by a $.5 million
increase in investment income, principally related to a higher
average level of interest-bearing cash equivalents during the first
six months of 1996 as compared to the same period of 1995.

INCOME TAXES

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 35.6% and 32.8% for the six
months ended June 30, 1996 and 1995, respectively. The effective
rate for the 1996 period is higher than the federal statutory rate
due principally to the effect of state and local income taxes;
however, the effect of state and local income taxes has been offset
in part by the effect of the Company's expensing, during 1996 for
tax purposes, certain intangible assets related to the  abandonment
of certain of the Company's domestic property and casualty risk
information services activities. The effective rate for 1995 was
significantly lower than the federal statutory rate due principally
to goodwill, deducted for tax purposes, relating to the sale of the
Company's Health Insurance Systems Division as discussed above.
20
                                     
              LIQUIDITY AND CAPITAL RESOURCES 

                                        June 30,     December 31,
                                          1996          1995    
Cash and equivalents, marketable         (Dollars in Millions)
  securities, and investments.......... $ 24.9         $ 44.6    
Current assets.........................  175.2          188.6
Current liabilities....................   99.6           94.4
Working capital........................   75.6           94.2
Long-term debt.........................   37.0           14.9

                                           Six months ended 
                                        June 30,       June 30,
                                          1996           1995    
                                         (Dollars in Millions)
Cash provided by operations............ $ 37.4         $ 52.7
Cash used for investing activities.....  (37.5)         (38.9)
Cash used for financing activities.....  (17.2)          (7.0)

  The Company remained well-capitalized at June 30, 1996, with a
current ratio (current assets divided by current liabilities) of
1.76, which management believes is sufficient to provide for day-
to-day operating needs and the flexibility to take advantage of
investment opportunities. The Company also has available under its
credit facilities (net of amounts outstanding at June 30, 1996)
$80.0 million under its 364 day $100.0 million facility (renewed
August 9, 1996) and $53.0 million under its 3 year $100.0 million
facility (dated August 11, 1995), 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 decreased $15.3 million. During the
first six months of 1996, the Company paid a significant amount of
costs previously accrued in 1995 related to its ongoing legal
proceedings. Although the Company had reached an agreement with its
insurance carrier during the second quarter of 1996 for the Company
to be reimbursed for approximately $9.4 million of these costs, the
Company did not actually receive payment for this reimbursement
until July 1996. Additionally, the Company made cash payments of
$5.3 million against its restructuring reserves (which included $.3
million in discount amortization; restructuring reserves were also
reduced by a write-off of $.4 million, principally consisting of
abandoned assets of the Risk business), as well as other accrued
items in the normal course of business.

  During the six months ended June 30, 1996, the Company
capitalized $26.7 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 ) and CyberLife object-oriented
client/server life insurance software, as well as other ongoing
projects for other domestic as well as international products.
Also, during the second quarter of 1996, the Company repurchased
1.4 million of its outstanding common shares at an aggregate cost
of $73.6 million.
21

  Significant expenditures anticipated for the remainder of 1996,
excluding any possible business acquisitions or common share
repurchases, are as follows: acquisition of data processing,
communications equipment and office furniture, fixtures and
equipment ($12.0 million); costs relating to the internal
development of software systems ($28.0 million); and payments
relating to past business acquisitions ($6.2 million). 

  The Company has historically used the cash generated from
operations for: 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 and amounts available
under the Company's credit facilities will be able to meet
presently anticipated needs;  however, the Company may also
consider incurring additional debt as needed to accomplish specific
objectives in these areas and for other general corporate purposes.

                  FACTORS THAT MAY AFFECT FUTURE RESULTS

  The Company's 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;
22

- - 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.

  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 to 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.
23

                                  PART II
                             OTHER INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION

Item 1. Legal Proceedings

  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.

  The Company is involved in a lawsuit with Security Life of Denver
("SLD") alleging, among other things, breach of a life insurance
joint development contract. The Company is also presently involved
in litigation with Liberty Life Insurance Company arising out of
the Company's change in the direction of its future life software
systems development following the acquisition of CYBERTEK. The
Company has asserted various affirmative defenses, claims and
counterclaims and is vigorously pursuing  prompt resolutions of
these matters through all available legal processes (see Item 3,
Legal Proceedings, of Part I contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).

  In November 1993, the California State Automobile Association
Inter-Insurance Bureau and the California State Automobile
Association ("CSAA") brought suit against the Company in the
United States District Court for the Northern District of
California (see Item 3, Legal Proceedings, of Part I contained in
the Company s Annual Report on Form 10-K for the year ended
December 31, 1995). In May 1996, after nine weeks of trial, the
parties agreed that CSAA would dismiss its claim against the
Company in return for the Company dismissing its counterclaim
against CSAA. The agreement also resolves a collateral proceeding
by the Company against CSAA and Computer Sciences Corporation which
is pending in another jurisdiction and arose out of the agreement
which was the basis of the California proceeding.

  Based upon the allegations raised in the CSAA and SLD lawsuits,
the Company s insurer, St. Paul Mercury Insurance Company ("St.
Paul"), commenced a declaratory judgment action 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 the CSAA and SLD matters, coverage
for damages, if any, awarded in those matters, and consequential
and punitive damages (see Item 3, Legal Proceedings, of Part I
contained in the Company s Annual Report on Form 10-K for the year
ended December 31, 1995).
24

  In connection with the Company reaching an agreement with CSAA
for the dismissal of the CSAA matter, St. Paul and the Company
agreed to dismiss with prejudice all claims against each other with
respect to the CSAA matter, and St. Paul agreed to reimburse the
Company for the Company s legal fees in the CSAA matter (in excess
of its deductible) with interest.  As a result of this recovery,
the Company recorded a gain of $9.4 million in the second quarter
of 1996.  This agreement resolves the Company s and St. Paul s
claims related to the CSAA matter; however, the action will
continue 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 is vigorously pursuing 
prompt resolutions of these matters through all available legal
processes.

  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.

Item 4. Submission of Matters to a Vote of Security Holders

  At the Company s Annual Meeting of Stockholders, held on May 28,
1996, the Company s stockholders approved: (i) the election of two
directors, Dr. John M. Palms (16,794,209 votes for and 55,578
abstentions) and John P. Seibels (16,794,477 votes for and 55,310
abstentions) to serve a term of three years; (ii) the ratification
of the selection of independent auditors (16,836,778 votes for,
9,866 votes against and 3,143 abstentions).

  The following directors' terms continued through the Annual
Meeting of Stockholders, held on May 28, 1996: G. Larry Wilson
(Chairman of the Board), Roy L. Faulks, Frederick B. Karl, Joseph
D. Sargent and Richard G. Trub.

Items 2, 3, 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

  The Company did not file any reports on Form 8-K during the
quarter ended June 30, 1996.
25
                   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: August 13, 1996              By:  Timothy V. Williams
                                   Executive Vice President
                                   (Chief Financial Officer)
26

                   Policy Management Systems Corporation

                               Exhibit Index

Exhibit
Number
10. MATERIAL CONTRACTS

  A.    Stock Option/Non-Compete Form Agreement for named
        executive officers together with schedule identifying
        particulars for each named executive officer

  B.    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

  C.    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

  D.    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

  E.    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

  F.    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

  G.    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

11.     STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS

27.     FINANCIAL DATA SCHEDULE