<PAGE> 1

                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549


                                 FORM 10-Q

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


For Quarter Ended March 31, 1995        Commission file number 0-10175



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



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


One PAS 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.

  19,362,984 Common shares, $.01 par value, as of March 2, 1995



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, 1994.

<PAGE> 2

                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                   INDEX


PART I. FINANCIAL INFORMATION                                          PAGE

  Item 1. Financial Statements

          Consolidated Statements of Income for
            the three months ended March 31, 1995 and 1994....  3

          Consolidated Balance Sheets as of 
            March 31, 1995 and December 31, 1994..............  4

          Consolidated Statements of Cash Flows for
            the three months ended March 31, 1995 and 1994....  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................................... 19

  Item 6. Exhibits and Reports on Form 8-K.................... 20

Signatures.................................................... 21

Exhibit Index................................................. 22



<PAGE> 3

<TABLE>

                                 PART I
                    FINANCIAL INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                     CONSOLIDATED STATEMENTS OF INCOME

<CAPTION>

                                            Three Months Ended
                                                 March 31,
                                            1995          1994 
                                              (In Thousands, 
                                          Except Per Share Data)

<S>                                      <C>           <C>
Revenues:
  Licensing............................. $ 25,543      $ 16,470
  Services..............................  107,876        99,472
                                          133,419       115,942
Costs and Expenses: 
  Employee compensation and
    benefits............................   47,580        44,970
  Computer and communications 
    expense.............................    7,049         6,103
  Information services and data         
    acquisition costs...................   31,897        34,456
  Litigation settlement and
    expenses, net.......................   (1,650)          -  
  Depreciation and amortization of
    property, equipment and intangibles.   14,193        13,873
  Other operating costs and expenses....   15,962         8,723
                                          115,031       108,125

Operating income........................   18,388         7,817

Other Income and Expenses:
  Investment income.....................      423         1,823
  Gain/(loss) on sale of 
    marketable securities...............      -             (17)
  Interest expense and other charges....     (691)         (895)
                                             (268)          911

Income before income taxes..............   18,120         8,728

Income taxes............................    6,800         3,160 

Net income.............................. $ 11,320      $  5,568 

Net income per share.................... $    .58      $    .25 

Weighted average number of shares.......   19,363        22,637

<FN>

See accompanying notes.

</TABLE>



<PAGE> 4

<TABLE>
                     POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<CAPTION>

                                                        (Unaudited)  
                                                          March 31,    December 31,
                                                            1995          1994    
                                                             (In Thousands,
                                                           Except Share Data)
<S>                                                       <C>          <C>
Assets
Current assets:
  Cash and equivalents................................... $  8,598     $ 17,686
  Marketable securities..................................    8,931       11,051
  Receivables, net of allowance for uncollectible 
     amounts of $1,478 ($1,024 at 1994)..................   93,898       90,474
  Income tax receivable..................................   16,111       31,072
  Deferred income taxes..................................   16,952        6,644
  Other..................................................   14,378       10,798
     Total current assets................................  158,868      167,725

Property and equipment, at cost less accumulated
     depreciation and amortization of $114,755
     ($125,601 at 1994)..................................  135,946      136,503
Receivables..............................................      490          500
Goodwill and other intangible assets.....................   76,284       77,763
Capitalized software costs...............................  123,097      118,621
Deferred income taxes....................................   15,252       12,453
Investments..............................................    5,554        5,567
Other....................................................    5,383        4,899
        Total assets..................................... $520,874     $524,031

Liabilities
Current liabilities:
  Accounts payable and accrued expenses.................. $ 38,784     $ 50,231
  Accrued restructuring charges..........................    5,548        5,648
  Accrued contract loss reserve..........................    1,464        1,819
  Current portion of long-term debt......................    1,919        4,734
  Income taxes payable...................................    3,517        2,279
  Unearned revenues......................................   10,318       11,930
  Other..................................................      106          215
     Total current liabilities...........................   61,656       76,856

Long-term debt...........................................    2,479        4,162
Deferred income taxes....................................   58,177       54,671
Accrued restructuring charges............................    9,092       10,796
Other....................................................      947          624
     Total liabilities...................................  132,351      147,109
 
Commitments and contingencies (Note 1)

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares 
   authorized............................................     -             -
Common stock, $.01 par value, 75,000,000 shares 
   authorized, 19,362,984 shares issued and 
   outstanding (19,362,984 at 1994)......................      194          194
Additional paid-in capital...............................  170,323      170,323
Retained earnings........................................  218,294      206,974
Unrealized holding loss on marketable securities.........     (181)        (451)
Foreign currency translation adjustment..................     (107)        (118)
     Total stockholders' equity..........................  388,523      376,922
        Total liabilities and stockholders' equity....... $520,874     $524,031

<FN>

See accompanying notes.

</TABLE>



<PAGE> 5

<TABLE>

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>

                                                     Three Months Ended
                                                          March 31,
                                                      1995       1994  
                                                      (In Thousands)
<S>                                                 <C>        <C>
Operating Activities
  Net income......................................  $ 11,320   $  5,568 
  Adjustments to reconcile net income to 
   net cash provided by operating activities:     
    Depreciation and amortization.................    13,907     14,246
    Deferred income taxes.........................     1,107      2,902 
    Loss on sale of marketable  
      securities..................................      -            17
    Provision for uncollectible accounts..........       454          5
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termination costs...........................    (1,559)    (7,901)
    Receivables...................................    (3,868)      (413)
    Income taxes receivable.......................     4,373       (658) 
    Accounts payable and accrued expenses.........   (11,447)    (2,792)
    Income taxes payable..........................     1,118        -
  Other, net......................................    (5,953)      (124)
       Cash provided by operations................     9,452     10,850
  
Investing Activities
  Proceeds from sales/maturities of available-
   for-sale securities............................     2,000     25,487
  Purchases of available-for-sale securities......       -      (30,302)
  Acquisition of property and equipment...........    (6,272)    (4,976)
  Capitalized internal software development  
   costs..........................................    (9,692)    (8,230)
  Purchased software..............................       (57)       (32)
  Proceeds from disposal of property and 
   equipment......................................        12        276
       Cash used for investing activities.........   (14,009)   (17,777) 

Financing Activities
  Payments on long-term debt......................    (4,431)    (1,525)
       Cash used for financing activities.........    (4,431)    (1,525)

Effect of exchange rate changes on cash...........      (100)       135
Net decrease in cash and equivalents..............    (9,088)    (8,317) 
Cash and equivalents at beginning of period.......    17,686     24,122
Cash and equivalents at end of period.............  $  8,598   $ 15,805

Supplemental Information
  Interest paid...................................  $    516   $    853
  Income taxes paid...............................       217        937

<FN>

See accompanying notes.

</TABLE>


<PAGE> 6

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              March 31, 1995


NOTE 1. COMMITMENTS AND CONTINGENCIES

Commitments

  On March 27, 1995, the Company entered into a long-term license
and maintenance agreement in order to acquire rights to certain
operating system management software products for use in the
Company's worldwide data center operations.  The agreement, which
has an initial term of ten years, may be renewed and extended for
an additional period of five years, subject to mutual agreement and
other modifications.  The March 27, 1995 agreement replaces three
five-year term agreements executed in 1993, and other related
agreements (see Management's Discussion & Analysis).  Minimum
contract payments by the Company over the initial ten year term
aggregate $33.0 million payable in specified annual installments
which escalate over the ten year period.  The first annual
installment due March 31, 1995 was reduced by $1.5 million to
reflect the application of a pre-payment credit relating to a prior
agreement which was terminated.  In addition to minimum contract
payments, the Company will pay an annual supplemental revenue fee
(beginning 1997 for the 1996 annual period) equal to a specified
annual percentage of the Company's applicable annual gross
revenues, less the specified annual installment for such period. 
Minimum contract payments will be expensed on a straight-line basis
over the initial ten year term.  Annual supplemental revenue fees,
if any, will be accrued in the period in which determined.


Contingencies - Legal Proceedings

  In December 1994, the Company reached an agreement, subject to
court approval, to settle its shareholder class action.  The
settlement of $31 million will be paid by the Company's Directors'
and Officers' Liability Insurance Carrier, the Company's former
accountants and the Company.  The Company's portion of the
settlement and associated litigation costs resulted in a special
one-time charge of $34.2 million ($21.3 million after tax) in the
fourth quarter of 1994.  This represents the Company's portion of
the total settlement, plus the Company's litigation costs of $18.1
million ($11.2 million after tax), less the recovery from the
insurance company.  In March 1995, the Company and its insurance
carrier signed an agreement to settle amounts contested and the
carrier agreed to pay an additional amount of $1.7 million in full
settlement of the Company's claims.  Accordingly, the Company
recorded a credit of $1.7 million as a further adjustment to the
estimated costs of settling the securities class action.

<PAGE> 7

  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 United States Attorney for the District of
South Carolina also is conducting an investigation into certain of
these matters.  The Company is cooperating with these
investigations.

  The Company is involved in two lawsuits alleging, among other
things, breach of a life insurance joint development contract and
breach of a contract concerning an early version of its Series III
property and casualty software.  The Company believes it has
meritorious defenses, is vigorously defending its position in these
matters and is pursuing counterclaims against the plaintiffs (see
Item 1, Legal Proceedings, of Part II contained in this report on
Form 10-Q for the quarter ended March 31, 1995).

  In addition to the litigation described above, the Company is
presently involved in two contract disputes arising out of the
Company's change in the direction of its future life software
systems development following the acquisition of CYBERTEK.  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. IMPAIRMENT AND RESTRUCTURING CHARGES

  The Company recorded, at October 1, 1994, impairment charges to
write-off the carrying value of certain identifiable assets ($7.7
million), goodwill ($13.9 million) and acquired software ($11.5
million), principally related to its property and casualty
information services business acquisitions and certain software
product acquisitions licensed in the property and casualty market
(see Note 12 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).

  The Company established reserves of $2.0 million at December 31,
1994, in connection with the acquisition of Creative Group 

<PAGE> 8

Holdings, Limited, to provide for the costs of terminating the
Company's existing lease obligations in the United Kingdom and
relocation and severance costs associated with consolidating its
existing operations (see Note 2 of Notes to Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).

<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, 1994.

                           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>
                                                                   Percent    
                                             Percentage           Increase
                                             of Revenues         (Decrease)     
                                            Three Months         Three Months
                                           Ended March 31,     Ended March 31,   
                                           1995       1994      1995 VS 1994
<S>                                       <C>        <C>          <C>
Revenues:
Licensing................................  19.1       14.2          55.5
Services.................................  80.9       85.8           8.4 
                                          100.0      100.0          15.1 
Costs and Expenses:
Employee compensation
    and benefits.........................  35.6       38.8           5.8
Computer and communications expense......   5.3        5.3          15.5
Information services and data
    acquisition costs....................  23.9       29.7          (7.4) 
Litigation settlement and expense, net...  (1.2)       -             -
Depreciation and amortization
    of property, equipment and
    intangibles..........................  10.6       12.0           2.3
Other operating costs
    and expenses.........................  12.0        7.5          83.0
                                           86.2       93.3           6.4

Operating income ........................  13.8        6.7         135.2 
Other income and expenses................   (.2)        .8        (129.4)  

Income before income
    taxes................................  13.6        7.5         107.6     

Income taxes ............................   5.1        2.7         115.2

Net income ..............................   8.5        4.8         103.3

</TABLE>


<PAGE> 10

  The Company's revenues are generated principally by licensing
standardized insurance software systems and providing automation
and administrative support and information services to the
worldwide insurance industry.  Licensing revenues are provided for
under the terms of nonexclusive and nontransferable license
agreements, which generally have a noncancelable minimum term of
six years and provide for an initial license charge and a monthly
license charge.  Services revenues are derived from professional
support services, which include implementation and integration
assistance, consulting and education services, information and
outsourcing services ranging from making available software
licensed from the Company on a remote processing basis from the
Company's data centers, to complete systems management, processing,
administration support and automated information services through
the Company's nationwide telecommunications network using the
Company's database products.

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

<TABLE>

<CAPTION>
                                                                Operating 
                                              Operating        Income as a
                             Revenues          Income         % of Revenue  
                           Three Months      Three Months      Three Months
                          Ended March 31,   Ended March 31,   Ended March 31,
                          1995     1994     1995     1994     1995     1994
                                        (Dollars in Millions)
<S>                     <C>      <C>      <C>      <C>        <C>      <C>
  Line of Business   
Property & Casualty     $ 96.6   $ 79.5   $ 15.6   $ 9.2      16.2     11.6
Life                      32.9     27.2      7.7     2.1      23.4      7.7 
Health                     3.8      9.2       .1     2.5       2.6     27.2

  Geographic Market  
United States           $104.1   $ 96.5   $ 15.0   $ 9.4      14.4      9.7
International             29.2     19.4      8.4     4.4      28.8     22.7

</TABLE>

  The above table does not include an allocation of revenues and
costs associated with corporate activities such as equipment sales,
financial services, legal and other general corporate activities. 
Revenues related to equipment sales amounted to $.1 million for the
first quarter of 1995.  There were no equipment sales during the
first quarter of 1994.  Costs associated with these corporate
activities amounted to $5.0 million and $6.0 million for the three
months ended March 31, 1995 and 1994, respectively.

<PAGE> 11

REVENUES

<TABLE>

<CAPTION>
                                   Three             Three
                                Months Ended      Months Ended
  Licensing                     March 31,1995     March 31,1994      Change 
                                          (Dollars In Millions)
<S>                                <C>               <C>              <C>
Initial charges................... $11.9             $ 3.6            230.6%
Monthly charges...................  13.6              12.8              6.3%
                                   $25.5             $16.4             55.5% 

Percentage of revenues............  19.1%             14.2%                 

</TABLE>

  Initial license revenues for the three months ended March 31,
1995 increased $8.3 million (230.6%) compared to the corresponding
period in 1994.  The increase is principally related to a source
code license agreement with a cross-industry vendor, which resulted
in the recognition of $4.0 million in non-recurring revenue and an
increase in new systems licensed by life and property and casualty
insurers of $4.5 million.  These increases were slightly offset by
a decline in licensing activity related to the health insurance
market of $.1 million.  The cross-industry vendor source code
license agreement relates to a software productivity and utility
system developed by the Company to enhance computer resource
management and control.  This system allows for the expansion of
computer capability without the associated overhead costs.  Under
the license agreement there is no ongoing obligation by the Company
to maintain this system and accordingly, no monthly license
revenues will be recognized.  The Company also entered into a long-
term license and maintenance agreement with this same vendor
covering certain operating system management software products for
use in the Company's worldwide data center operations (see Note 1
of Notes to Consolidated Financial Statements).  This agreement
replaces three previous five-year term agreements executed in 1993,
and other related agreements.  The Company expects to realize
substantial savings under the new agreement compared to the
previous agreements.  Licensing activities in the property and
casualty insurance market include $1.5 million relating to a
distribution agreement with AT&T Global Information Solutions (AT&T
Global).  During the first quarter of 1994, the Company recognized
licensing revenue of $1.0 million from AT&T Global.  Under this
distribution agreement, which is part of the Company's joint
marketing arrangement with AT&T Global to market the Company's
Series III systems worldwide to insurance companies implementing
AT&T Global's UNIX-based solutions, the Company could potentially
recognize up to an additional $2.5 million in licensing revenue. 
There are no monthly license revenues under this distribution
agreement with AT&T Global. The Company's current joint marketing
agreement with AT&T Global is subject to extension in September
1996.  Increased licensing activities in the life insurance market
primarily reflect continuing customer interest in the Company's 

<PAGE> 12

CK/4 Enterprise software system and the March 31, 1995 initial
release of its CYBERLife software system solution.  Licensing of
property and casualty systems resulted principally from activities
in the United States, Canadian and European markets.

  Revenues from continuing monthly license charges ("MLC") for
Maintenance, Enhancements and Services Availability ("MESA")
increased $.8 million (6.3%) for the period and principally reflect
an increase of $1.2 million in MLC associated with increased
licensing activities in the domestic and international property and
casualty and life insurance markets which occurred during the last
half of 1994, including the acquisition of Creative Group Holdings,
Limited at December 31, 1994.  This increase was offset by a
decline in MLC ($.5 million) associated with a reduction in
licensing activity in the health insurance marketplace.


<TABLE>

<CAPTION>
                                 Three             Three
                              Months Ended      Months Ended
  Services                    March 31,1995     March 31,1994       Change 
                                           (Dollars In Millions)
<S>                             <C>                <C>              <C>
Professional and outsourcing... $ 61.2             $50.4             21.5 %
Information....................   46.5              49.0             (5.1)%
Other..........................     .2                .1            100.0 %
                                $107.9             $99.5              8.4 %

Percentage of revenues.........   80.9%             85.8%                  

</TABLE>

  Professional and outsourcing services for the three months ended
March 31, 1995 increased $10.8 million (21.5%) compared to the same
period in 1994.  This increase was principally related to an
increase in services from new and existing contracts with property
and casualty insurance companies of $12.7 million and $2.9 million
from life insurance companies and was partially offset by a decline
in revenues from the health insurance market of $4.8 million. 
Increased revenues from property and casualty insurance companies
relate principally to an increase in domestic services of $7.6
million resulting from new professional services contracts with
insurance companies and a continuing increase in the residual
markets for total policy management outsourcing services.
Additionally, the Company's international services increased $5.1
million as a result of the acquisition of Creative Group Holdings,
Limited ("Creative") at December 31, 1994 and new services
contracts in the Asia/Pacific region.  Creative, headquartered in
the United Kingdom, is a British holding company whose wholly-owned
subsidiaries, located in England, Australia and Southeast Asia,
provide software consulting development, licensing and financing
services to medium-sized general insurance companies.  Professional
and outsourcing services in the life insurance market increased
principally as a result of new services and outsourcing contracts 

<PAGE> 13

with increases in both the United States ($1.2 million) and
international markets ($1.7 million).  These increases were
partially offset by a decline in professional services revenues
from the health insurance market of $4.8 million, reflecting the
continued reluctance of health insurers to make major system
decisions.  Furthermore, the Company has not been aggressively
marketing these services in light of the uncertainty and
restructuring of the country's healthcare system from indemnity to
managed care products and pending decisions regarding the Company's
future direction in this market.  For a further discussion of the
health industry see Item 7 of Part II and Note 12 of Notes to
Consolidated Financial Statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.

  Revenues from information services were $46.5 million for the
first quarter in 1995 as compared with $49.0 million for the
corresponding quarter in 1994.  This $2.5 million decrease (5.1%)
is primarily attributable to a decline in revenues associated with
the Company's domestic property and casualty automobile and risk
information services business ($3.1 million).  This decline relates
principally to significant changes in the property and casualty
insurance industry, as described more fully in Item 7 of Part II
and Note 12 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1994.  The decrease in revenues associated with the property
and casualty information services business is partially offset by
an increase in life information services of $.8 million
(principally attending physician statements and medical history
reports).


COSTS AND EXPENSES

  Employee compensation and benefits increased $2.6 million for the
first quarter in 1995 compared to the corresponding quarter in
1994, primarily as a result of increased costs associated with the
acquisition of Creative Group Holdings, Limited, in December 1994,
an increase in professional services staffing in the property and
casualty insurance services business and additional performance
bonus expense.  These increases were partially offset by a
reduction in compensation and other benefits costs of $1.7 million
related to the Company's continued downsizing in its health
insurance services staff from 333 at the end of the first quarter
of 1994 to 170 at the end of the first quarter of 1995.  As a
percentage of revenues, employee compensation and benefits expense
decreased from 38.8% to 35.7%.

  Computer and communications expenses increased $.9 million
(15.5%) for the first quarter in 1995 compared to the corresponding
quarter in 1994, due principally to increased equipment maintenance
and data circuit costs, but remained unchanged as a percentage of
revenues.

<PAGE> 14

  Information services and data acquisition costs decreased $2.6
million in absolute terms, and also as a percentage of revenues,
for the first quarter in 1995 compared to the corresponding quarter
in 1994, due principally to a decrease in the volume of state fees
for motor vehicle reports, associated with the property and
casualty automobile information services business (see Revenue
discussion above).

  On March 20, 1995, the Company and its Directors' and Officers'
Liability Insurance Carrier signed an agreement to settle amounts
contested and the carrier agreed to pay an additional amount of
$1.7 million in full settlement of the Company's claims. 
Accordingly, the Company recorded a credit of $1.7 million as a
further adjustment to the estimated costs of settling the
securities class action which were recorded in the fourth quarter
of 1994 (see Note 1 of Notes to Consolidated Financial Statements
and Note 8 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).  The Company also incurred certain litigation, bonus,
and bad debt expenses of a non-recurring nature.  These items are
reflected in other operating costs and expenses.

  Although depreciation and amortization expense remained
relatively unchanged between the first quarter of 1995 and the
corresponding quarter in 1994, the Company did experience an
increase in amortization charges of $1.2 million associated with
its internally developed software costs, which was partially offset
by decreased depreciation and amortization charges of $.9 million,
principally related to the impairment of certain identifiable
intangible assets, goodwill and software products relating to the
Company's property and casualty information services business and
certain retirements of data processing equipment.

  Other operating costs and expenses for the first quarter in 1995
increased $7.2 million in absolute terms, and also as a percentage
of revenues, when compared to the corresponding quarter in 1994.
The increase is principally attributable to the increased use of
outside consultants and independent contractors of $4.0 million
relating primarily to an increase in professional services.  In
addition, operating costs associated with providing total policy
management outsourcing services for new customers increased $1.2
million and travel and other general and administrative expenses
increased $3.5 million.  These increases were partially offset by
an increase in amounts capitalized of $1.5 million, principally
relating to the internal development of the Company's life software
systems.


OPERATING INCOME

  Operating income was $18.4 million for the three months ended
March 31, 1995, compared with $7.8 million for the corresponding
period in 1994.  Operating income as a percentage of revenues 

<PAGE> 15

increased to 13.8% for the first quarter of 1995 from 6.7% for the
comparable quarter in 1994, primarily as a result of increased
initial license revenues ($8.3 million) and an increase in
professional and outsourcing services revenues ($10.8 million),
principally in the property and casualty business.

  A significant portion of both the Company's revenues and its
operating income is derived from initial licensing charges received
as part of the Company's software licensing activities.  Because a
substantial portion of these revenues are recorded at the time new
systems are licensed, there can be significant fluctuations from
quarter-to-quarter in the revenues and operating income derived
from licensing activities.  This is attributable principally to the
timing of customers' decisions to enter into license agreements
with the Company, which the Company is unable to control.

  The property and casualty insurance systems and services business
experienced a higher level of revenues and operating income due
principally to increased licensing activities of $2.4 million in
initial license revenues (including the AT&T Global
license/relicense agreement) and $1.2 million in monthly license
charges and a $12.7 million increase in professional and
outsourcing revenues.  These increases reflect growth in the number
of new domestic and international customers licensing the Company's
integrated systems technology and the desire of new and existing
customers to obtain professional and outsourcing services.  The
operating margin for the property and casualty insurance business
increased from 11.5% in 1994 to 16.1% in 1995. 

  The Company's information services business for the property and
casualty market continues to show a loss with $.8 and $.9 million
in losses for the three months ended March 31, 1995 and 1994,
respectively.  These losses were principally the result of the
continued decline in transactions and orders, due principally to
price increases and competitive market conditions.

  The life insurance systems and services business continues to
experience a higher level of revenues and operating income due
primarily to increases in initial license revenues of $2.0 million
and a $2.9 million increase in professional and outsourcing
services.  These increases reflect continued growth in both the
domestic and international life markets.  The operating margin
increase is due principally to increased licensing activities and
professional and outsourcing services revenues. The Company's
information services business for the life insurance market
remained relatively unchanged with revenues of $14.3 and $13.6
million for the three months ended March 31, 1995 and 1994,
respectively.

  The Company's health insurance systems business revenues
continued to decline by $4.8 million.  Operating costs have and are
expected to continue to decline as services obligations are
completed and the Company continues to downsize its health staff. 

<PAGE> 16

The Company has engaged an investment banking firm to assist in
evaluating its health insurance systems business.

  Investment income decreased $1.4 million as a result of a lower
level of investable funds, resulting from large cash expenditures
for the acquisition of Creative Group Holdings, Limited ($19.9
million), in December 1994, the repurchase in May 1994 of 2,278,537
of the 3,797,561 shares of common stock held by IBM ($56.6
million), the repurchase during the last half of 1994 of 995,500
shares of the Company's outstanding common stock on the open market
($35.3 million) under its 2.5 million share repurchase
authorization and payments to settle the shareholder class action
and related expenses made principally during the fourth quarter of
1994.

  Interest expense and other charges decreased $.2 million for the
first quarter in 1995 when compared to the corresponding quarter in
1994, primarily as a result of a reduction in long-term debt. 

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 37.5% and 36.2% for the three
months ended March 31, 1995 and 1994, respectively.  The  increase
in the effective rate between the periods is due primarily to the
reduction in non-taxable investment income resulting from the sale
of tax-exempt bonds in 1994.


                      LIQUIDITY AND CAPITAL RESOURCES

                                    March 31,   December 31,
                                     1995           1994        
                                    (Dollars In Millions)
Cash and equivalents, 
  marketable securities
  and investments.................. $ 23.1        $ 34.3
Current assets.....................  158.9         167.7
Current liabilities................   61.7          76.8   
Working capital....................   97.2          90.9
Long-term debt.....................    2.5           4.2


                                    March 31,     March 31,
                                     1995           1994        
                                    (Dollars In Millions)

Cash provided by operations........ $  9.5        $ 10.9  
Cash used by investing activities..  (14.0)        (17.8) 
Cash used by financing activities..   (4.4)         (1.5)   


  The Company's financial condition remained strong at  March 31,
1995.  Working capital increased to $97.2 million, including cash,
cash equivalents and marketable securities of $17.5 million, and 

<PAGE> 17

excluding $5.6 million of long-term investments.  Cash, cash
equivalents, marketable securities and investments were $23.1
million at March 31, 1995 as compared to $34.3 million at December
31, 1994, a net decrease of $11.2 million, resulting primarily from 
a reduction in accounts payable and accrued expenses, acquisition
of property and equipment and repayments of long-term debt.

  The decrease in net cash generated by operations of $1.4 million
for the first quarter in 1995 compared with the corresponding
quarter in 1994 was primarily attributable to a reduction in
accounts payable and accrued expenses ($11.5 million), an increase
in accounts receivable ($3.9 million), offset by higher net income
($5.8 million), a decrease in income taxes receivable ($4.4
million) and a decrease in deferred taxes ($1.1 million).

  Excluding short-term investments, net cash used for investing
activities decreased in the first quarter in 1995, compared with
the corresponding quarter in 1994.  During the first quarter in
1995, net cash used for investments included $4.5 million compared
to $3.8 million for the first quarter of 1994 that was invested in
data processing, communications equipment and office furniture and
equipment. Amounts capitalized for internal software development
increased $1.5 million (17.8%) to $9.7 million for the first
quarter in 1995 compared to $8.2 million for the corresponding
period in 1994, due primarily to the development of life systems
based on the business functions of CYBERTEK software and the
process of integrating CYBERTEK functionality into certain existing
Series III applications.
           
  Significant expenditures anticipated for the remainder of 1995,
excluding any possible business acquisitions, are as follows: 
acquisition of data processing, communications equipment and office
furniture, fixtures and equipment ($5 million); costs relating to
the internal development of software systems ($30 million) and;
debt payments relating to past business acquisitions ($2 million). 

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


FACTORS THAT MAY AFFECT FUTURE RESULTS

  The Company's future operating results may be affected by a
number of factors, including uncertainties relative to economic 

<PAGE> 18

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

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

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

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


<PAGE> 19

                                  PART II
                             OTHER INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION


Item 1. Legal Proceedings

  In December 1994, the Company reached an agreement, subject to
court approval, to settle its shareholder class action.  The
settlement of $31 million will be paid by the Company's Directors'
and Officers' Liability Insurance Carrier, the Company's former
accountants and the Company.  The Company's portion of the
settlement and associated litigation costs resulted in a special
one-time charge of $34.2 million ($21.3 million after tax) in the
fourth quarter of 1994.  This represents the Company's portion of
the total settlement, plus the Company's litigation costs of $18.1
million ($11.2 million after tax), less the recovery from the
insurance company.  In March 1995, the Company and its insurance
carrier signed an agreement to settle amounts contested and the
carrier agreed to pay an additional amount of $1.7 million in full
settlement of the Company's claims.  Accordingly, the Company
recorded a credit of $1.7 million as a further adjustment to the
estimated costs of settling the securities class action.

  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 United States Attorney for the District of
South Carolina also is conducting an investigation into certain of
these matters.  The Company is cooperating with these
investigations.

  In March 1994, Security Life of Denver Insurance Company brought
suit against the Company in the United States District Court for
the District of Colorado alleging breach of a life insurance joint
development contract, unfair trading practices and fraud.  Despite
the fact that the plaintiff expressly agreed by contract to exclude
from any dispute all indirect and/or consequential damages, they
now assert claims for direct, indirect, consequential and punitive
damages alleged to be in excess of $80 million.  The Company
believes this lawsuit is without merit, legally insufficient and
factually unsupported.  The Company has asserted various
affirmative defenses and is vigorously pursuing a prompt resolution
through all available legal processes.  The Company is also
vigorously pursuing counterclaims against Security Life of Denver
Insurance Company for fraud, breach of contract and failure to pay, 

<PAGE> 20

unauthorized use of the Company's software systems,
misappropriation of trade secrets, unfair trade practices,
conversion of the Company's systems, unjust enrichment and
fraudulent concealment.  The Company is seeking in excess of $80
million against Security Life of Denver Insurance Company.  The
Company is also seeking an injunction prohibiting Security Life of
Denver Insurance Company from continuing unauthorized use of
certain of the Company's systems and unauthorized use of the
Company's trade secrets.

  In November 1993, the California State Automobile Association
Inter-Insurance Bureau and the California State Automobile
Association brought suit against the Company in the United States
District Court for the Northern District of California alleging
breach of contract and implied covenants of good faith and fair
dealing, as well as fraud and negligent misrepresentation
concerning certain early versions of systems licensed by the
Company.  Despite the fact that the plaintiffs contractually agreed
to exclude from any dispute all indirect and/or consequential
damages, they now assert claims for direct, indirect, consequential
and punitive damages alleged to be in excess of $200 million.  The
Company believes this lawsuit is without merit, legally improper
and lacking in factual support.  The Company has asserted various
affirmative defenses and is vigorously pursuing a prompt resolution
through all available legal processes.  The Company is also
vigorously pursuing counterclaims against the plaintiffs for in
excess of $190 million.  The Company's claims against the
plaintiffs are for breach of contract, failure to pay, and
recoupment.


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

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

Exhibits

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

Reports on Form 8-K

  The Company did not file any reports on Form 8-K during the
quarter ended March 31, 1995.


<PAGE> 21

                   POLICY MANAGEMENT SYSTEMS CORPORATION


                                SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.


                   POLICY MANAGEMENT SYSTEMS CORPORATION
                               (Registrant)



                                        
Date:  May 15, 1995                By:  Timothy V. Williams
                                        Executive Vice President
                                        (Chief Financial Officer)
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1

                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549

                                 FORM 10-Q

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

For Quarter Ended March 31, 1995        Commission file number 0-10175

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

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

One PAS 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.

  19,362,984 Common shares, $.01 par value, as of March 2, 1995

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, 1994.
2

                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                   INDEX

PART I. FINANCIAL INFORMATION                                          PAGE

  Item 1. Financial Statements

          Consolidated Statements of Income for
            the three months ended March 31, 1995 and 1994....  3

          Consolidated Balance Sheets as of 
            March 31, 1995 and December 31, 1994..............  4

          Consolidated Statements of Cash Flows for
            the three months ended March 31, 1995 and 1994....  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................................... 19

  Item 6. Exhibits and Reports on Form 8-K.................... 20

Signatures.................................................... 21

Exhibit Index................................................. 22
3

                                 PART I
                    FINANCIAL INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                     CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
                                                 March 31,
                                            1995          1994 
                                              (In Thousands, 
                                          Except Per Share Data)
Revenues:
  Licensing............................. $ 25,543      $ 16,470
  Services..............................  107,876        99,472
                                          133,419       115,942
Costs and Expenses: 
  Employee compensation and
    benefits............................   47,580        44,970
  Computer and communications 
    expense.............................    7,049         6,103
  Information services and data         
    acquisition costs...................   31,897        34,456
  Litigation settlement and
    expenses, net.......................   (1,650)          -  
  Depreciation and amortization of
    property, equipment and intangibles.   14,193        13,873
  Other operating costs and expenses....   15,962         8,723
                                          115,031       108,125

Operating income........................   18,388         7,817

Other Income and Expenses:
  Investment income.....................      423         1,823
  Gain/(loss) on sale of 
    marketable securities...............      -             (17)
  Interest expense and other charges....     (691)         (895)
                                             (268)          911

Income before income taxes..............   18,120         8,728

Income taxes............................    6,800         3,160 

Net income.............................. $ 11,320      $  5,568 

Net income per share.................... $    .58      $    .25 

Weighted average number of shares.......   19,363        22,637
See accompanying notes.
4

                     POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
(Unaudited)  
                                                          March 31,    December 31,
                                                            1995          1994    
                                                             (In Thousands,
                                                           Except Share Data)
Assets
Current assets:
  Cash and equivalents................................... $  8,598     $ 17,686
  Marketable securities..................................    8,931       11,051
  Receivables, net of allowance for uncollectible 
     amounts of $1,478 ($1,024 at 1994)..................   93,898       90,474
  Income tax receivable..................................   16,111       31,072
  Deferred income taxes..................................   16,952        6,644
  Other..................................................   14,378       10,798
     Total current assets................................  158,868      167,725

Property and equipment, at cost less accumulated
     depreciation and amortization of $114,755
     ($125,601 at 1994)..................................  135,946      136,503
Receivables..............................................      490          500
Goodwill and other intangible assets.....................   76,284       77,763
Capitalized software costs...............................  123,097      118,621
Deferred income taxes....................................   15,252       12,453
Investments..............................................    5,554        5,567
Other....................................................    5,383        4,899
        Total assets..................................... $520,874     $524,031

Liabilities
Current liabilities:
  Accounts payable and accrued expenses.................. $ 38,784     $ 50,231
  Accrued restructuring charges..........................    5,548        5,648
  Accrued contract loss reserve..........................    1,464        1,819
  Current portion of long-term debt......................    1,919        4,734
  Income taxes payable...................................    3,517        2,279
  Unearned revenues......................................   10,318       11,930
  Other..................................................      106          215
     Total current liabilities...........................   61,656       76,856

Long-term debt...........................................    2,479        4,162
Deferred income taxes....................................   58,177       54,671
Accrued restructuring charges............................    9,092       10,796
Other....................................................      947          624
     Total liabilities...................................  132,351      147,109
 
Commitments and contingencies (Note 1)

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares 
   authorized............................................     -             -
Common stock, $.01 par value, 75,000,000 shares 
   authorized, 19,362,984 shares issued and 
   outstanding (19,362,984 at 1994)......................      194          194
Additional paid-in capital...............................  170,323      170,323
Retained earnings........................................  218,294      206,974
Unrealized holding loss on marketable securities.........     (181)        (451)
Foreign currency translation adjustment..................     (107)        (118)
     Total stockholders' equity..........................  388,523      376,922
        Total liabilities and stockholders' equity....... $520,874     $524,031
See accompanying notes.
5

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
                                                          March 31,
                                                      1995       1994  
                                                      (In Thousands)
Operating Activities
  Net income......................................  $ 11,320   $  5,568 
  Adjustments to reconcile net income to 
   net cash provided by operating activities:     
    Depreciation and amortization.................    13,907     14,246
    Deferred income taxes.........................     1,107      2,902 
    Loss on sale of marketable  
      securities..................................      -            17
    Provision for uncollectible accounts..........       454          5
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termination costs...........................    (1,559)    (7,901)
    Receivables...................................    (3,868)      (413)
    Income taxes receivable.......................     4,373       (658) 
    Accounts payable and accrued expenses.........   (11,447)    (2,792)
    Income taxes payable..........................     1,118        -
  Other, net......................................    (5,953)      (124)
       Cash provided by operations................     9,452     10,850
  
Investing Activities
  Proceeds from sales/maturities of available-
   for-sale securities............................     2,000     25,487
  Purchases of available-for-sale securities......       -      (30,302)
  Acquisition of property and equipment...........    (6,272)    (4,976)
  Capitalized internal software development  
   costs..........................................    (9,692)    (8,230)
  Purchased software..............................       (57)       (32)
  Proceeds from disposal of property and 
   equipment......................................        12        276
       Cash used for investing activities.........   (14,009)   (17,777) 

Financing Activities
  Payments on long-term debt......................    (4,431)    (1,525)
       Cash used for financing activities.........    (4,431)    (1,525)

Effect of exchange rate changes on cash...........      (100)       135
Net decrease in cash and equivalents..............    (9,088)    (8,317) 
Cash and equivalents at beginning of period.......    17,686     24,122
Cash and equivalents at end of period.............  $  8,598   $ 15,805

Supplemental Information
  Interest paid...................................  $    516   $    853
  Income taxes paid...............................       217        937
See accompanying notes.
6

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              March 31, 1995

NOTE 1. COMMITMENTS AND CONTINGENCIES

Commitments

  On March 27, 1995, the Company entered into a long-term license
and maintenance agreement in order to acquire rights to certain
operating system management software products for use in the
Company's worldwide data center operations.  The agreement, which
has an initial term of ten years, may be renewed and extended for
an additional period of five years, subject to mutual agreement and
other modifications.  The March 27, 1995 agreement replaces three
five-year term agreements executed in 1993, and other related
agreements (see Management's Discussion & Analysis).  Minimum
contract payments by the Company over the initial ten year term
aggregate $33.0 million payable in specified annual installments
which escalate over the ten year period.  The first annual
installment due March 31, 1995 was reduced by $1.5 million to
reflect the application of a pre-payment credit relating to a prior
agreement which was terminated.  In addition to minimum contract
payments, the Company will pay an annual supplemental revenue fee
(beginning 1997 for the 1996 annual period) equal to a specified
annual percentage of the Company's applicable annual gross
revenues, less the specified annual installment for such period. 
Minimum contract payments will be expensed on a straight-line basis
over the initial ten year term.  Annual supplemental revenue fees,
if any, will be accrued in the period in which determined.

Contingencies - Legal Proceedings

  In December 1994, the Company reached an agreement, subject to
court approval, to settle its shareholder class action.  The
settlement of $31 million will be paid by the Company's Directors'
and Officers' Liability Insurance Carrier, the Company's former
accountants and the Company.  The Company's portion of the
settlement and associated litigation costs resulted in a special
one-time charge of $34.2 million ($21.3 million after tax) in the
fourth quarter of 1994.  This represents the Company's portion of
the total settlement, plus the Company's litigation costs of $18.1
million ($11.2 million after tax), less the recovery from the
insurance company.  In March 1995, the Company and its insurance
carrier signed an agreement to settle amounts contested and the
carrier agreed to pay an additional amount of $1.7 million in full
settlement of the Company's claims.  Accordingly, the Company
recorded a credit of $1.7 million as a further adjustment to the
estimated costs of settling the securities class action.
7

  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 United States Attorney for the District of
South Carolina also is conducting an investigation into certain of
these matters.  The Company is cooperating with these
investigations.

  The Company is involved in two lawsuits alleging, among other
things, breach of a life insurance joint development contract and
breach of a contract concerning an early version of its Series III
property and casualty software.  The Company believes it has
meritorious defenses, is vigorously defending its position in these
matters and is pursuing counterclaims against the plaintiffs (see
Item 1, Legal Proceedings, of Part II contained in this report on
Form 10-Q for the quarter ended March 31, 1995).

  In addition to the litigation described above, the Company is
presently involved in two contract disputes arising out of the
Company's change in the direction of its future life software
systems development following the acquisition of CYBERTEK.  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. IMPAIRMENT AND RESTRUCTURING CHARGES

  The Company recorded, at October 1, 1994, impairment charges to
write-off the carrying value of certain identifiable assets ($7.7
million), goodwill ($13.9 million) and acquired software ($11.5
million), principally related to its property and casualty
information services business acquisitions and certain software
product acquisitions licensed in the property and casualty market
(see Note 12 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).

  The Company established reserves of $2.0 million at December 31,
1994, in connection with the acquisition of Creative Group
8

Holdings, Limited, to provide for the costs of terminating the
Company's existing lease obligations in the United Kingdom and
relocation and severance costs associated with consolidating its
existing operations (see Note 2 of Notes to Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
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, 1994.

                           RESULTS OF OPERATIONS

  Set forth below are certain operating items expressed as a
percentage of revenues and the percent increase (decrease) for
those items between the periods presented:
Percent    
                                             Percentage           Increase
                                             of Revenues         (Decrease)     
                                            Three Months         Three Months
                                           Ended March 31,     Ended March 31,   
                                           1995       1994      1995 VS 1994
Revenues:
Licensing................................  19.1       14.2          55.5
Services.................................  80.9       85.8           8.4 
                                          100.0      100.0          15.1 
Costs and Expenses:
Employee compensation
    and benefits.........................  35.6       38.8           5.8
Computer and communications expense......   5.3        5.3          15.5
Information services and data
    acquisition costs....................  23.9       29.7          (7.4) 
Litigation settlement and expense, net...  (1.2)       -             -
Depreciation and amortization
    of property, equipment and
    intangibles..........................  10.6       12.0           2.3
Other operating costs
    and expenses.........................  12.0        7.5          83.0
                                           86.2       93.3           6.4

Operating income ........................  13.8        6.7         135.2 
Other income and expenses................   (.2)        .8        (129.4)  

Income before income
    taxes................................  13.6        7.5         107.6     

Income taxes ............................   5.1        2.7         115.2

Net income ..............................   8.5        4.8         103.3
10

  The Company's revenues are generated principally by licensing
standardized insurance software systems and providing automation
and administrative support and information services to the
worldwide insurance industry.  Licensing revenues are provided for
under the terms of nonexclusive and nontransferable license
agreements, which generally have a noncancelable minimum term of
six years and provide for an initial license charge and a monthly
license charge.  Services revenues are derived from professional
support services, which include implementation and integration
assistance, consulting and education services, information and
outsourcing services ranging from making available software
licensed from the Company on a remote processing basis from the
Company's data centers, to complete systems management, processing,
administration support and automated information services through
the Company's nationwide telecommunications network using the
Company's database products.

  A comparison of revenues and operating income for each line of
business and geographic market for the periods presented is as
follows:
Operating 
                                              Operating        Income as a
                             Revenues          Income         % of Revenue  
                           Three Months      Three Months      Three Months
                          Ended March 31,   Ended March 31,   Ended March 31,
                          1995     1994     1995     1994     1995     1994
                                        (Dollars in Millions)
Line of Business   
Property & Casualty     $ 96.6   $ 79.5   $ 15.6   $ 9.2      16.2     11.6
Life                      32.9     27.2      7.7     2.1      23.4      7.7 
Health                     3.8      9.2       .1     2.5       2.6     27.2

  Geographic Market  
United States           $104.1   $ 96.5   $ 15.0   $ 9.4      14.4      9.7
International             29.2     19.4      8.4     4.4      28.8     22.7
The above table does not include an allocation of revenues and
costs associated with corporate activities such as equipment sales,
financial services, legal and other general corporate activities. 
Revenues related to equipment sales amounted to $.1 million for the
first quarter of 1995.  There were no equipment sales during the
first quarter of 1994.  Costs associated with these corporate
activities amounted to $5.0 million and $6.0 million for the three
months ended March 31, 1995 and 1994, respectively.
11

REVENUES
Three             Three
                                Months Ended      Months Ended
  Licensing                     March 31,1995     March 31,1994      Change 
                                          (Dollars In Millions)
Initial charges................... $11.9             $ 3.6            230.6%
Monthly charges...................  13.6              12.8              6.3%
                                   $25.5             $16.4             55.5% 

Percentage of revenues............  19.1%             14.2%
Initial license revenues for the three months ended March 31,
1995 increased $8.3 million (230.6%) compared to the corresponding
period in 1994.  The increase is principally related to a source
code license agreement with a cross-industry vendor, which resulted
in the recognition of $4.0 million in non-recurring revenue and an
increase in new systems licensed by life and property and casualty
insurers of $4.5 million.  These increases were slightly offset by
a decline in licensing activity related to the health insurance
market of $.1 million.  The cross-industry vendor source code
license agreement relates to a software productivity and utility
system developed by the Company to enhance computer resource
management and control.  This system allows for the expansion of
computer capability without the associated overhead costs.  Under
the license agreement there is no ongoing obligation by the Company
to maintain this system and accordingly, no monthly license
revenues will be recognized.  The Company also entered into a long-
term license and maintenance agreement with this same vendor
covering certain operating system management software products for
use in the Company's worldwide data center operations (see Note 1
of Notes to Consolidated Financial Statements).  This agreement
replaces three previous five-year term agreements executed in 1993,
and other related agreements.  The Company expects to realize
substantial savings under the new agreement compared to the
previous agreements.  Licensing activities in the property and
casualty insurance market include $1.5 million relating to a
distribution agreement with AT&T Global Information Solutions (AT&T
Global).  During the first quarter of 1994, the Company recognized
licensing revenue of $1.0 million from AT&T Global.  Under this
distribution agreement, which is part of the Company's joint
marketing arrangement with AT&T Global to market the Company's
Series III systems worldwide to insurance companies implementing
AT&T Global's UNIX-based solutions, the Company could potentially
recognize up to an additional $2.5 million in licensing revenue. 
There are no monthly license revenues under this distribution
agreement with AT&T Global. The Company's current joint marketing
agreement with AT&T Global is subject to extension in September
1996.  Increased licensing activities in the life insurance market
primarily reflect continuing customer interest in the Company's
12

CK/4 Enterprise software system and the March 31, 1995 initial
release of its CYBERLife software system solution.  Licensing of
property and casualty systems resulted principally from activities
in the United States, Canadian and European markets.

  Revenues from continuing monthly license charges ("MLC") for
Maintenance, Enhancements and Services Availability ("MESA")
increased $.8 million (6.3%) for the period and principally reflect
an increase of $1.2 million in MLC associated with increased
licensing activities in the domestic and international property and
casualty and life insurance markets which occurred during the last
half of 1994, including the acquisition of Creative Group Holdings,
Limited at December 31, 1994.  This increase was offset by a
decline in MLC ($.5 million) associated with a reduction in
licensing activity in the health insurance marketplace.
Three             Three
                              Months Ended      Months Ended
  Services                    March 31,1995     March 31,1994       Change 
                                           (Dollars In Millions)
Professional and outsourcing... $ 61.2             $50.4             21.5 %
Information....................   46.5              49.0             (5.1)%
Other..........................     .2                .1            100.0 %
                                $107.9             $99.5              8.4 %

Percentage of revenues.........   80.9%             85.8%
Professional and outsourcing services for the three months ended
March 31, 1995 increased $10.8 million (21.5%) compared to the same
period in 1994.  This increase was principally related to an
increase in services from new and existing contracts with property
and casualty insurance companies of $12.7 million and $2.9 million
from life insurance companies and was partially offset by a decline
in revenues from the health insurance market of $4.8 million. 
Increased revenues from property and casualty insurance companies
relate principally to an increase in domestic services of $7.6
million resulting from new professional services contracts with
insurance companies and a continuing increase in the residual
markets for total policy management outsourcing services.
Additionally, the Company's international services increased $5.1
million as a result of the acquisition of Creative Group Holdings,
Limited ("Creative") at December 31, 1994 and new services
contracts in the Asia/Pacific region.  Creative, headquartered in
the United Kingdom, is a British holding company whose wholly-owned
subsidiaries, located in England, Australia and Southeast Asia,
provide software consulting development, licensing and financing
services to medium-sized general insurance companies.  Professional
and outsourcing services in the life insurance market increased
principally as a result of new services and outsourcing contracts
13

with increases in both the United States ($1.2 million) and
international markets ($1.7 million).  These increases were
partially offset by a decline in professional services revenues
from the health insurance market of $4.8 million, reflecting the
continued reluctance of health insurers to make major system
decisions.  Furthermore, the Company has not been aggressively
marketing these services in light of the uncertainty and
restructuring of the country's healthcare system from indemnity to
managed care products and pending decisions regarding the Company's
future direction in this market.  For a further discussion of the
health industry see Item 7 of Part II and Note 12 of Notes to
Consolidated Financial Statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.

  Revenues from information services were $46.5 million for the
first quarter in 1995 as compared with $49.0 million for the
corresponding quarter in 1994.  This $2.5 million decrease (5.1%)
is primarily attributable to a decline in revenues associated with
the Company's domestic property and casualty automobile and risk
information services business ($3.1 million).  This decline relates
principally to significant changes in the property and casualty
insurance industry, as described more fully in Item 7 of Part II
and Note 12 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1994.  The decrease in revenues associated with the property
and casualty information services business is partially offset by
an increase in life information services of $.8 million
(principally attending physician statements and medical history
reports).

COSTS AND EXPENSES

  Employee compensation and benefits increased $2.6 million for the
first quarter in 1995 compared to the corresponding quarter in
1994, primarily as a result of increased costs associated with the
acquisition of Creative Group Holdings, Limited, in December 1994,
an increase in professional services staffing in the property and
casualty insurance services business and additional performance
bonus expense.  These increases were partially offset by a
reduction in compensation and other benefits costs of $1.7 million
related to the Company's continued downsizing in its health
insurance services staff from 333 at the end of the first quarter
of 1994 to 170 at the end of the first quarter of 1995.  As a
percentage of revenues, employee compensation and benefits expense
decreased from 38.8% to 35.7%.

  Computer and communications expenses increased $.9 million
(15.5%) for the first quarter in 1995 compared to the corresponding
quarter in 1994, due principally to increased equipment maintenance
and data circuit costs, but remained unchanged as a percentage of
revenues.
14

  Information services and data acquisition costs decreased $2.6
million in absolute terms, and also as a percentage of revenues,
for the first quarter in 1995 compared to the corresponding quarter
in 1994, due principally to a decrease in the volume of state fees
for motor vehicle reports, associated with the property and
casualty automobile information services business (see Revenue
discussion above).

  On March 20, 1995, the Company and its Directors' and Officers'
Liability Insurance Carrier signed an agreement to settle amounts
contested and the carrier agreed to pay an additional amount of
$1.7 million in full settlement of the Company's claims. 
Accordingly, the Company recorded a credit of $1.7 million as a
further adjustment to the estimated costs of settling the
securities class action which were recorded in the fourth quarter
of 1994 (see Note 1 of Notes to Consolidated Financial Statements
and Note 8 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).  The Company also incurred certain litigation, bonus,
and bad debt expenses of a non-recurring nature.  These items are
reflected in other operating costs and expenses.

  Although depreciation and amortization expense remained
relatively unchanged between the first quarter of 1995 and the
corresponding quarter in 1994, the Company did experience an
increase in amortization charges of $1.2 million associated with
its internally developed software costs, which was partially offset
by decreased depreciation and amortization charges of $.9 million,
principally related to the impairment of certain identifiable
intangible assets, goodwill and software products relating to the
Company's property and casualty information services business and
certain retirements of data processing equipment.

  Other operating costs and expenses for the first quarter in 1995
increased $7.2 million in absolute terms, and also as a percentage
of revenues, when compared to the corresponding quarter in 1994.
The increase is principally attributable to the increased use of
outside consultants and independent contractors of $4.0 million
relating primarily to an increase in professional services.  In
addition, operating costs associated with providing total policy
management outsourcing services for new customers increased $1.2
million and travel and other general and administrative expenses
increased $3.5 million.  These increases were partially offset by
an increase in amounts capitalized of $1.5 million, principally
relating to the internal development of the Company's life software
systems.

OPERATING INCOME

  Operating income was $18.4 million for the three months ended
March 31, 1995, compared with $7.8 million for the corresponding
period in 1994.  Operating income as a percentage of revenues
15

increased to 13.8% for the first quarter of 1995 from 6.7% for the
comparable quarter in 1994, primarily as a result of increased
initial license revenues ($8.3 million) and an increase in
professional and outsourcing services revenues ($10.8 million),
principally in the property and casualty business.

  A significant portion of both the Company's revenues and its
operating income is derived from initial licensing charges received
as part of the Company's software licensing activities.  Because a
substantial portion of these revenues are recorded at the time new
systems are licensed, there can be significant fluctuations from
quarter-to-quarter in the revenues and operating income derived
from licensing activities.  This is attributable principally to the
timing of customers' decisions to enter into license agreements
with the Company, which the Company is unable to control.

  The property and casualty insurance systems and services business
experienced a higher level of revenues and operating income due
principally to increased licensing activities of $2.4 million in
initial license revenues (including the AT&T Global
license/relicense agreement) and $1.2 million in monthly license
charges and a $12.7 million increase in professional and
outsourcing revenues.  These increases reflect growth in the number
of new domestic and international customers licensing the Company's
integrated systems technology and the desire of new and existing
customers to obtain professional and outsourcing services.  The
operating margin for the property and casualty insurance business
increased from 11.5% in 1994 to 16.1% in 1995. 

  The Company's information services business for the property and
casualty market continues to show a loss with $.8 and $.9 million
in losses for the three months ended March 31, 1995 and 1994,
respectively.  These losses were principally the result of the
continued decline in transactions and orders, due principally to
price increases and competitive market conditions.

  The life insurance systems and services business continues to
experience a higher level of revenues and operating income due
primarily to increases in initial license revenues of $2.0 million
and a $2.9 million increase in professional and outsourcing
services.  These increases reflect continued growth in both the
domestic and international life markets.  The operating margin
increase is due principally to increased licensing activities and
professional and outsourcing services revenues. The Company's
information services business for the life insurance market
remained relatively unchanged with revenues of $14.3 and $13.6
million for the three months ended March 31, 1995 and 1994,
respectively.

  The Company's health insurance systems business revenues
continued to decline by $4.8 million.  Operating costs have and are
expected to continue to decline as services obligations are
completed and the Company continues to downsize its health staff.
16

The Company has engaged an investment banking firm to assist in
evaluating its health insurance systems business.

  Investment income decreased $1.4 million as a result of a lower
level of investable funds, resulting from large cash expenditures
for the acquisition of Creative Group Holdings, Limited ($19.9
million), in December 1994, the repurchase in May 1994 of 2,278,537
of the 3,797,561 shares of common stock held by IBM ($56.6
million), the repurchase during the last half of 1994 of 995,500
shares of the Company's outstanding common stock on the open market
($35.3 million) under its 2.5 million share repurchase
authorization and payments to settle the shareholder class action
and related expenses made principally during the fourth quarter of
1994.

  Interest expense and other charges decreased $.2 million for the
first quarter in 1995 when compared to the corresponding quarter in
1994, primarily as a result of a reduction in long-term debt. 

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 37.5% and 36.2% for the three
months ended March 31, 1995 and 1994, respectively.  The  increase
in the effective rate between the periods is due primarily to the
reduction in non-taxable investment income resulting from the sale
of tax-exempt bonds in 1994.

                      LIQUIDITY AND CAPITAL RESOURCES

                                    March 31,   December 31,
                                     1995           1994        
                                    (Dollars In Millions)
Cash and equivalents, 
  marketable securities
  and investments.................. $ 23.1        $ 34.3
Current assets.....................  158.9         167.7
Current liabilities................   61.7          76.8   
Working capital....................   97.2          90.9
Long-term debt.....................    2.5           4.2

                                    March 31,     March 31,
                                     1995           1994        
                                    (Dollars In Millions)

Cash provided by operations........ $  9.5        $ 10.9  
Cash used by investing activities..  (14.0)        (17.8) 
Cash used by financing activities..   (4.4)         (1.5)   

  The Company's financial condition remained strong at  March 31,
1995.  Working capital increased to $97.2 million, including cash,
cash equivalents and marketable securities of $17.5 million, and
17

excluding $5.6 million of long-term investments.  Cash, cash
equivalents, marketable securities and investments were $23.1
million at March 31, 1995 as compared to $34.3 million at December
31, 1994, a net decrease of $11.2 million, resulting primarily from 
a reduction in accounts payable and accrued expenses, acquisition
of property and equipment and repayments of long-term debt.

  The decrease in net cash generated by operations of $1.4 million
for the first quarter in 1995 compared with the corresponding
quarter in 1994 was primarily attributable to a reduction in
accounts payable and accrued expenses ($11.5 million), an increase
in accounts receivable ($3.9 million), offset by higher net income
($5.8 million), a decrease in income taxes receivable ($4.4
million) and a decrease in deferred taxes ($1.1 million).

  Excluding short-term investments, net cash used for investing
activities decreased in the first quarter in 1995, compared with
the corresponding quarter in 1994.  During the first quarter in
1995, net cash used for investments included $4.5 million compared
to $3.8 million for the first quarter of 1994 that was invested in
data processing, communications equipment and office furniture and
equipment. Amounts capitalized for internal software development
increased $1.5 million (17.8%) to $9.7 million for the first
quarter in 1995 compared to $8.2 million for the corresponding
period in 1994, due primarily to the development of life systems
based on the business functions of CYBERTEK software and the
process of integrating CYBERTEK functionality into certain existing
Series III applications.
           
  Significant expenditures anticipated for the remainder of 1995,
excluding any possible business acquisitions, are as follows: 
acquisition of data processing, communications equipment and office
furniture, fixtures and equipment ($5 million); costs relating to
the internal development of software systems ($30 million) and;
debt payments relating to past business acquisitions ($2 million). 

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

FACTORS THAT MAY AFFECT FUTURE RESULTS

  The Company's future operating results may be affected by a
number of factors, including uncertainties relative to economic
18

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

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

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

  Because of the foregoing factors, as well as other factors
affecting the Company's operating results, past financial
performance should not be considered to be a reliable indicator of
future performance, and investors should not use historical trends
to anticipate results or trends in future periods.
19

                                  PART II
                             OTHER INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION

Item 1. Legal Proceedings

  In December 1994, the Company reached an agreement, subject to
court approval, to settle its shareholder class action.  The
settlement of $31 million will be paid by the Company's Directors'
and Officers' Liability Insurance Carrier, the Company's former
accountants and the Company.  The Company's portion of the
settlement and associated litigation costs resulted in a special
one-time charge of $34.2 million ($21.3 million after tax) in the
fourth quarter of 1994.  This represents the Company's portion of
the total settlement, plus the Company's litigation costs of $18.1
million ($11.2 million after tax), less the recovery from the
insurance company.  In March 1995, the Company and its insurance
carrier signed an agreement to settle amounts contested and the
carrier agreed to pay an additional amount of $1.7 million in full
settlement of the Company's claims.  Accordingly, the Company
recorded a credit of $1.7 million as a further adjustment to the
estimated costs of settling the securities class action.

  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 United States Attorney for the District of
South Carolina also is conducting an investigation into certain of
these matters.  The Company is cooperating with these
investigations.

  In March 1994, Security Life of Denver Insurance Company brought
suit against the Company in the United States District Court for
the District of Colorado alleging breach of a life insurance joint
development contract, unfair trading practices and fraud.  Despite
the fact that the plaintiff expressly agreed by contract to exclude
from any dispute all indirect and/or consequential damages, they
now assert claims for direct, indirect, consequential and punitive
damages alleged to be in excess of $80 million.  The Company
believes this lawsuit is without merit, legally insufficient and
factually unsupported.  The Company has asserted various
affirmative defenses and is vigorously pursuing a prompt resolution
through all available legal processes.  The Company is also
vigorously pursuing counterclaims against Security Life of Denver
Insurance Company for fraud, breach of contract and failure to pay,
20

unauthorized use of the Company's software systems,
misappropriation of trade secrets, unfair trade practices,
conversion of the Company's systems, unjust enrichment and
fraudulent concealment.  The Company is seeking in excess of $80
million against Security Life of Denver Insurance Company.  The
Company is also seeking an injunction prohibiting Security Life of
Denver Insurance Company from continuing unauthorized use of
certain of the Company's systems and unauthorized use of the
Company's trade secrets.

  In November 1993, the California State Automobile Association
Inter-Insurance Bureau and the California State Automobile
Association brought suit against the Company in the United States
District Court for the Northern District of California alleging
breach of contract and implied covenants of good faith and fair
dealing, as well as fraud and negligent misrepresentation
concerning certain early versions of systems licensed by the
Company.  Despite the fact that the plaintiffs contractually agreed
to exclude from any dispute all indirect and/or consequential
damages, they now assert claims for direct, indirect, consequential
and punitive damages alleged to be in excess of $200 million.  The
Company believes this lawsuit is without merit, legally improper
and lacking in factual support.  The Company has asserted various
affirmative defenses and is vigorously pursuing a prompt resolution
through all available legal processes.  The Company is also
vigorously pursuing counterclaims against the plaintiffs for in
excess of $190 million.  The Company's claims against the
plaintiffs are for breach of contract, failure to pay, and
recoupment.

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

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

Exhibits

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

Reports on Form 8-K

  The Company did not file any reports on Form 8-K during the
quarter ended March 31, 1995.
21

                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                               (Registrant)

                                        
Date:  May 15, 1995                By:  Timothy V. Williams
                                        Executive Vice President
                                        (Chief Financial Officer)