<PAGE> 1

                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549


                                 FORM 10-Q

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


For Quarter Ended September 30, 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 PMS Center (P.O. Box Ten)
Blythewood, S.C. (Columbia, S.C.)                             29016 (29202)
(Address of principal executive                                 (Zip Code) 
  offices)


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

Yes   X       No       

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

  19,435,697 Common shares, $.01 par value, as of November 13, 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 and nine months ended September 30, 
            1995 and 1994..................................... 3

          Consolidated Balance Sheets as of 
            September 30, 1995 and December 31, 1994.......... 4

          Consolidated Statements of Cash Flows for
            the nine months ended September 30, 1995 and 1994. 5

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

  Item 2. Management's Discussion and Analysis of
            Financial Condition and Results of
            Operations........................................10


PART II. OTHER INFORMATION


  Item 1. Legal Proceedings...................................27 

  Item 6. Exhibits and Reports on Form 8-K....................27 

Signatures....................................................28






  


<PAGE> 3

<TABLE>

<CAPTION>

                                 PART I
                    FINANCIAL INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                     CONSOLIDATED STATEMENTS OF INCOME

                                         Three Months         Nine Months
                                      Ended September 30,  Ended September 30,
                                        1995      1994       1995      1994  
                                          (Unaudited)          (Unaudited)    
                                        (In Thousands, Except Per Share Data)

<S>                                   <C>       <C>        <C>       <C>
Revenues:
  Licensing.......................... $ 24,518  $ 27,027   $ 72,798  $ 67,018
  Services...........................  106,704    99,966    325,346   300,658
                                       131,222   126,993    398,144   367,676
 
Costs and Expenses: 
  Employee compensation & benefits...   47,622    43,656    143,067   133,498
  Computer and communications 
    expenses.........................    7,562     6,412     22,714    18,819
  Information services and                     
    data acquisition costs...........   26,806    33,039     88,173   100,865
  Depreciation and amortization......   15,418    15,054     44,985    45,184
  Other operating costs & expenses...   16,690    15,952     48,826    36,658
  Litigation settlement and 
    expenses, net....................      -         -        6,216       -  
  Gain on sale of Health business
    and related assets...............      -         -       (8,116)      -  
  Impairment and restructuring 
    charges (credits), net...........        6    (1,746)      (240)   (3,461)
                                       114,104   112,367    345,625   331,563

Operating income ....................   17,118    14,626     52,519    36,113 

Other Income and Expenses:
  Investment income..................      654     1,282      1,612     4,954
  Loss on sale of marketable       
    securities.......................      -      (1,010)       -      (1,829)
  Interest expense and other
    charges..........................     (658)     (605)    (2,176)   (2,324)
                                            (4)     (333)      (564)      801

Income before income taxes...........   17,114    14,293     51,955    36,914 

Income taxes.........................    5,520     4,570     16,951    13,025 

Net income........................... $ 11,594  $  9,723   $ 35,004  $ 23,889 

Net income per share................. $    .60  $    .49   $   1.81  $   1.12 

Weighted average number of shares....   19,401    19,975     19,376    21,360

<FN>

See accompanying notes.

</TABLE>



<PAGE> 4

<TABLE>

<CAPTION>

                     POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                                                        (Unaudited)     (Audited)
                                                        September 30,  December 31,
                                                            1995          1994    
                                                             (In Thousands,
                                                           Except Share Data)

<S>                                                       <C>           <C>
Assets
Current assets:
  Cash and equivalents................................... $ 56,377      $ 17,686
  Marketable securities..................................    7,415        11,051
  Receivables, net of allowance for uncollectible 
     amounts of $1,133 ($1,024 at 1994)..................   95,083        90,474
  Income tax receivable..................................   26,539        31,072
  Deferred income taxes..................................    4,848         6,644
  Other..................................................   14,305        10,798
     Total current assets................................  204,567       167,725

Property and equipment, at cost less accumulated
     depreciation and amortization of $111,794
     ($125,601 at 1994)..................................  132,489       136,503
Receivables..............................................      617           500
Goodwill and other intangibles, net......................   82,112        77,763
Capitalized software costs, net..........................  134,482       118,621
Deferred income taxes....................................   12,976        12,453
Investments..............................................    5,121         5,567  
Other....................................................    5,077         4,899
        Total assets..................................... $577,441      $524,031

Liabilities
Current liabilities:
  Accounts payable and accrued expenses.................. $ 44,030      $ 50,231
  Accrued restructuring charges..........................    5,845         5,648
  Accrued contract termination costs.....................      943         1,819
  Current portion of long-term debt......................    1,706         4,734
  Income taxes payable...................................    3,123         2,279
  Unearned revenues......................................    9,054        11,930
  Other..................................................       86           215
     Total current liabilities...........................   64,787        76,856

Long-term debt...........................................   27,923         4,162
Deferred income taxes....................................   62,738        54,671
Accrued restructuring charges............................    5,804        10,796
Other....................................................    1,536           624
     Total liabilities...................................  162,788       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, 19,430,666 shares issued and 
   outstanding (19,362,984 at December 31, 1994).........      194           194
Additional paid-in capital...............................  173,186       170,323
Retained earnings........................................  241,978       206,974
Unrealized holding loss on marketable securities.........      (15)         (118)
Foreign currency translation adjustment..................     (690)         (451)
     Total stockholders' equity..........................  414,653       376,922
        Total liabilities and stockholders' equity....... $577,441      $524,031

<FN>

See accompanying notes.

</TABLE>


<PAGE> 5

<TABLE>

<CAPTION>

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

                                                        Nine Months
                                                     Ended September 30,
                                                      1995        1994  
                                                      (In Thousands)

<S>                                                 <C>        <C>
Operating Activities
  Net income......................................  $ 35,004   $ 23,889 
  Adjustments to reconcile net income to net
   cash provided by operating activities:     
    Depreciation and amortization.................    44,985     45,184
    Deferred income taxes.........................     8,790      2,560 
    Loss on sale of marketable securities.........       -        1,829 
    Provision for uncollectible accounts..........       262        730
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termination costs...........................    (4,795)   (10,436)
    Receivables...................................    (4,988)    (5,295)
    Income taxes receivable.......................     4,533        427 
    Accounts payable and accrued expenses.........    (6,201)    (2,535)
    Income taxes payable..........................     1,394        -  
  Other, net......................................    (8,300)       377 
       Cash provided by operations................    70,684     56,730
  
Investing Activities
  Proceeds from sales/maturities of marketable    
   securities.....................................     7,778    225,840
  Purchases of marketable securities..............    (3,694)  (153,033)
  Acquisition of property and equipment...........   (17,579)   (14,514)
  Capitalized internal software development  
   costs..........................................   (32,621)   (25,914)
  Purchased software..............................      (250)      (418)
  Proceeds from disposal of property and
   equipment......................................       827       (437)
  Contract acquisition costs......................   (10,000)       -  
       Cash (used) provided by investing 
         activities...............................   (55,539)    31,524  

Financing Activities
  Payments on long-term debt......................    (6,945)    (4,599)
  Proceeds from borrowing under credit facility...    27,678        -  
  Issuance of common stock under stock 
   option plans...................................     2,863        -
  Repurchase of common stock......................       -      (89,551)
       Cash provided (used) by financing 
         activities...............................    23,596    (94,150)

Effect of exchange rate changes on cash...........       (50)    (1,073)
Net increase (decrease) in cash and 
  equivalents.....................................    38,691     (6,969)
Cash and equivalents at beginning of period.......    17,686     24,122
Cash and equivalents at end of period.............  $ 56,377   $ 17,153

Supplemental Information
  Interest paid...................................     1,555      1,719
  Income taxes paid...............................     1,456     10,126

<FN>

See accompanying notes.

</TABLE>


<PAGE> 6

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            September 30, 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.  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.  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.

  On April 7, 1995, the Company finalized certain terms of a ten-
year agreement with an insurance holding company and its
subsidiaries, initially entered into in November 1994.  The Company
is to provide certain data processing and other professional
services as required.  The minimum contractual processing revenues
are expected to be in excess of $60 million over the term of the
agreement.  The Company incurred costs of $10 million related to
this agreement in the second quarter of 1995 ($5 million in the
fourth quarter of 1994), which have been deferred as contract
acquisition costs and are being expensed on a straight-line basis
over the term of the agreement. 

Contingencies - Legal Proceedings

  In December 1994, the Company reached an agreement, which was
subsequently approved on May 26, 1995 by the United States District
Court for the District of South Carolina, to settle its shareholder
class action.  The settlement of $31 million was 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 

<PAGE> 7

in full settlement of the Company's claims.  Accordingly, the
Company recorded a credit of $1.7 million, in the first quarter of
1995, as a further adjustment to the estimated costs of settling
the securities class action.  

  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 the Company's
report on Form 10-Q for the quarter ended March 31, 1995).  The
Company was informed by its insurer that based upon the allegations
raised in these two lawsuits, the insurer does not believe it would
be obligated under the Company's insurance policies to reimburse
defense costs or indemnify the Company for any payments relating to
these claims.  The Company disagrees with this conclusion and on
June 20, 1995 the Company's insurer commenced a declaratory
judgment action to determine the insurer's obligations related to
defense costs and indemnity related to these two lawsuits.  As a
result of this action, the Company determined it was probable the
Company would incur litigation expenses for certain actual expenses
previously incurred and for estimated future litigation expenses
arising from these matters through their conclusion, over the next
twelve months, of $7.9 million, which estimate was provided for as
of June 30, 1995 based upon the Company's prior experience in these
matters. 

  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 

<PAGE> 8

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
Holdings, Limited (Creative), 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).


NOTE 3. CREDIT AGREEMENT

  On August 11, 1995, the Company entered into two unsecured credit
facilities of $100 million each with a syndicate of financial
institutions for general corporate purposes. The first $100 million
facility bears a term of 364 days. The second $100 million facility
bears a term of 3 years.  Borrowings under the facilities bear
interest payable at rates based upon the Morgan Guaranty Trust
Company's Prime Rate, the Federal Funds Rate, the London Interbank
Offering Rate or the yield on certain certificates of deposit as
appropriate, plus a spread above certain of these rates. The
Company is subject to certain covenants including, but not limited
to, the maintenance of certain operating ratios and levels of
tangible net worth. 


NOTE 4. CERTAIN TRANSACTIONS

  On June 30, 1995, the Company sold its Health Insurance Systems
Division for a total consideration of $9.3 million in cash. After
selling expenses of $.5 million, the net book value of assets sold
of $.5 million, liabilities resulting from the sale, including
severance liabilities for certain employees and other reserves of
$1.5 million, and the present value of a sublease executed by the
purchaser for certain office space of $1.3 million, the Company 

<PAGE> 9

recorded at June 30, 1995 a pre-tax gain of $8.1 million, which is
included under "Costs and Expenses" in the Consolidated Statement
of Income for the nine months ended September 30, 1995 (see
Management's Discussion and Analysis of Financial Condition and
Results of Operations).

  On September 13, 1995, the Company signed a letter of intent to
purchase 100% of the share capital of SOCS Groupe, a Paris, France-
based software and services company (SOCS), subject to due
diligence, execution of a definitive agreement and appropriate
legal authorizations. SOCS is a provider of application development
tools, life insurance solutions and professional services
principally for European insurance companies. The acquisition is
expected to be completed during the fourth quarter of 1995.

  On October 1, 1995, the Company acquired micado Beteiligungs und
Vurwalttungs GmbH (micado), a software and services provider to
German insurance and financial services companies, for
approximately $24.9 million in cash and the settlement of
approximately $6.0 million in debt. Under the terms of the purchase
agreement, payment of approximately $6.2 million of the purchase
price has been deferred and is payable at certain intervals over
the year subsequent to the date of acquisition. The acquisition 
will be accounted for under the purchase method.


NOTE 5.  INCOME TAXES

  The Company's effective tax rate for the third quarter of 1995
was 32.3% compared with 32.0% for the third quarter of 1994. The
Company's annual effective income tax rate (income taxes expressed
as a percentage of pre-tax income) was 32.6% and 35.3% for the nine
months ended September 30, 1995 and 1994, respectively. The
effective rate for 1995 is lower due principally to the higher tax
basis than book basis of the assets divested relating to the sale
of the Company's Health Insurance Systems Division (see Note 4
above).


<PAGE> 10

                   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>
                                                                    1995   vs   1994
                                                                    Percent Increase
                                                                        (Decrease)   
                              Percentage           Percentage         Three     Nine
                             of Revenues          of Revenues        Months    Months
                             Three Months         Nine Months         Ended     Ended 
                          Ended September 30,  Ended September 30,     September 30, 
Revenues:                    1995      1994       1995      1994     
<S>                         <C>       <C>        <C>       <C>       <C>      <C>
Licensing..................  18.7      21.3       18.3      18.2       (9.3)     8.6 
Services...................  81.3      78.7       81.7      81.8        6.7      8.2 
                            100.0     100.0      100.0     100.0        3.3      8.3
Costs and Expenses:
Employee compensation
 and benefits..............  36.3      34.4       35.9      36.3        9.1      7.2
Computer & communication
 expenses..................   5.8       5.0        5.7       5.1       17.9     20.7 
Information services & data
 acquisition costs.........  20.4      26.0       22.1      27.4      (18.9)   (12.6)
Depreciation and 
 amortization..............  11.7      11.9       11.3      12.3        2.4      (.4)
Other operating costs
 and expenses..............  12.8      12.5       12.3      10.0        4.6     33.2
Litigation settlement and
 expenses, net.............     -         -        1.6         -          -   (100.0)
Gain on sale of Health 
 business and related 
 assets....................     -         -       (2.0)        -          -    100.0 
Impairment and restructuring
 charges (credits), net....     -      (1.3)       (.1)      (.9)    (100.3)   (93.1)
                             87.0      88.5       86.8      90.2        1.5      4.2 

Operating income...........  13.0      11.5       13.1       9.8       17.0     45.4 
Other income and expenses..     -       (.3)       (.1)       .2      (98.8)  (170.4)
Income before income 
    taxes..................  13.0      11.2       13.0      10.0       19.7     40.7

Income taxes...............   4.2       3.6        4.2       3.5       20.8     30.1

Net income.................   8.8       7.6        8.8       6.5       19.2     46.5

</TABLE>

<PAGE> 11

  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 worldwide telecommunications network using the
Company's database products.


THREE MONTHS COMPARISON

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

                                    Three Months  
                                 Ended September 30, 
                                    1995     1994  
   Line of Business             (Dollars in Millions)
Property & Casualty....           $ 96.0   $ 88.2 
Life...................             35.2     29.8 
Health.................               *       8.9 

   Geographic Market   
United States..........           $ 98.7   $110.7 
International..........             32.5     16.2 


*Health Division divested June 30, 1995.


Revenues

<TABLE>

<CAPTION>
                                Three                 Three
                             Months Ended          Months Ended 
  Licensing                September 30,1995     September 30,1994    Change 
                                  (Dollars in Millions)
<S>                             <C>                   <C>             <C>
Initial charges................ $11.3                 $ 14.3          (21.0)%
Monthly charges................  13.2                   12.7            3.9 %
                                $24.5                  $27.0           (9.3)%

Percentage of revenues.........  18.7%                  21.3%                

</TABLE>

<PAGE 12>

  Initial license revenues for the three months ended September 30,
1995 decreased $3.0 million (21.0%) compared to the corresponding
period in 1994.  The decrease is principally the result of a $3.5
million decrease in health insurance license activity (see Note 4
of Notes to Consolidated Financial Statements).  Although property
and casualty licensing activity increased $.7 million (9.3%) for
the three months comparison, there were significant fluctuations in
both the domestic and international property and casualty markets. 
Initial license revenues in the international market increased $4.8
million, while domestic initial licensing revenue decreased $4.1
million.  The increase in international licensing activity resulted
principally from the execution of a large Series III license
agreement in Europe and from licensing activity of the Creative
Group Holdings, Limited, which was acquired by the Company in
December 1994.  The variance in initial license revenues between
quarters for both the domestic and international property and
casualty insurance markets continues to reflect the timing of
customers' decisions to enter into large license agreements (see
table below).

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

<TABLE>

<CAPTION>
                                  1995                        1994           
                         Third   Second    First    Fourth    Third   Second 
                        Quarter  Quarter  Quarter   Quarter  Quarter  Quarter
                                         (Dollars in Millions)

<S>                      <C>      <C>      <C>       <C>      <C>      <C>
 Property and Casualty 
Initial license 
  revenues.............  $ 8.1    $ 7.3    $ 8.0     $ 5.6    $ 7.4    $ 6.4 
Total revenues.........    6.2%     5.5%     6.0%      4.5%     5.8%     5.2%

         Life          
Initial license 
  revenues.............  $ 3.2    $ 2.1    $ 3.7     $ 1.6    $ 3.4    $ 3.6 
Total revenues.........    2.4%     1.6%     2.8%      1.3%     2.7%     2.8%

        Health         
Initial license 
  revenues.............     *     $  .1    $  .2     $ 2.5    $ 3.5    $  .4 
Total revenues.........     *        -        .1%      2.0%     2.8%      .3%

       Combined        
Initial license 
  revenues.............  $11.3    $ 9.5    $11.9     $ 9.7    $14.3    $10.4 
Total revenues.........    8.6%     7.1%     8.9%      7.8%    11.3%     8.4%

<FN>

*Health Division divested June 30, 1995.

</TABLE>

<PAGE> 13

  Revenues from continuing monthly license charges ("MLC") for
Maintenance, Enhancements and Services Availability ("MESA")
remained relatively unchanged for the third quarter of 1995
compared to the corresponding quarter of 1994.

<TABLE>

<CAPTION>
                                 Three              Three
                              Months Ended       Months Ended
  Services                 September 30,1995  September 30,1994      Change   
                                           (Dollars In Millions)
<S>                             <C>               <C>               <C>
Professional and outsourcing... $ 64.7            $ 51.6             25.4 %
Information....................   41.6              47.8            (13.0)%
Other..........................     .4                .6            (33.3)%   
                                $106.7            $100.0              6.7 %   

Percentage of revenues.........   81.3%             78.7%                     
  
</TABLE>

  Professional and outsourcing services revenues for the three
months ended September 30, 1995 compared to the same period in 1994 
increased $13.1 million (25.4%).  This increase is principally
related to services from both new and existing contracts amounting
to $13.8 million for property and casualty insurance business and
$4.2 million for life insurance business, and was partially offset
by the decrease in revenues from the health insurance market of
$4.9 million (see Note 4 of Notes to Consolidated Financial
Statements).  The increase in the property and casualty business
resulted principally from the acquisition of Creative at December
31, 1994, new services contracts in the European and Asia/Pacific
regions and an increase in volume related to the governmental and
residual markets for total policy management outsourcing services
and new and existing professional and outsourcing services
contracts.  Services in the life insurance market increased
principally as a result of a new large outsourcing agreement and a
new agreement for total policy administration.  These increases
were offset by a $4.9 million decrease in health insurance
professional services (see Note 4 of Notes to Consolidated
Financial Statements).

  Revenues from information services were $41.6 million for the
third quarter in 1995 compared with $47.8 million for the
corresponding quarter in 1994.  This $6.2 million decrease (13.0%)
is principally attributable to a decline in revenue associated with
the Company's domestic property and casualty automobile and risk
information services business of $6.5 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 the property and casualty
information services business was partially offset by a $.3 million
increase in life information services revenues.

<PAGE> 14

Costs and Expenses

  Employee compensation and benefits increased $4.0 million (9.1%)
for the third quarter of 1995 compared to the corresponding quarter
in 1994, principally as a result of increased salaries and related
costs associated with the acquisition of Creative in December 1994,
and increased costs associated with the growth in staffing for
additional outsourcing and professional services activities. These
increases were partially offset by a decrease in the Company's
provision for performance bonus expense, the decreased use of
temporary help, and a reduction in compensation and other benefits
related to the sale of the Health Insurance Systems Division on
June 30, 1995 (see Note 4 of Notes to Consolidated Financial
Statements).

  The increase in computer and communications expense was due
principally to expenses for certain operating system management
software products (see Note 1 of Notes to Consolidated Financial
Statements), and increased communications, data circuit and
maintenance costs associated with the growth of the Company's
domestic and international outsourcing operations.

  The decrease in information services and data acquisition costs
is principally attributable to a continued decrease in the volume
of state fees for motor vehicle reports associated with the
domestic property and casualty automobile and risk information
services business (see Revenues).

  Although depreciation and amortization expense remained
relatively unchanged for the three months ended September 30, 1995
compared to the same period in 1994, amortization of internally
developed software costs increased $1.7 million, due principally to
amortization associated with a new release of the Company's
property and casualty insurance Series III client/server software
system and the initial release of its life insurance CYBERLife
client/server software system, both of which became generally
available during the first quarter of 1995. These increases were
offset by a $1.0 million decrease in amortization charges resulting
from the impairment of certain identifiable intangible assets,
goodwill and software products relating to the Company's property
and casualty information services business (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) and lower
depreciation charges due to certain retirements of data processing
equipment.

  Other operating costs and expenses for the third quarter of 1995
increased $.7 million (4.6%) compared to the same period in 1994. 
This increase relates principally to additional costs relating to
outside consultants and independent contractors resulting from
increased professional services activities and the acquisition of
Creative at December 31, 1994, as well as additional costs 

<PAGE> 15

associated with increased total policy management outsourcing
services activities (see Revenues).  These increases were offset in
part by amounts capitalized, which relate principally to the
internal development of the Company's property and casualty and
life insurance client/server software systems, and by progress made
towards the completion of certain contract obligations, for which
provisions were made during the third quarter of 1994.

  During the third quarter of 1994, the Company recorded a $1.8
million credit associated with the termination of a lease at
amounts less than those previously provided for in certain
restructuring reserves associated with the planned abandonment of
certain leased office facilities related to its health insurance
services business (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). 


Operating Income    

  Operating income was $17.1 million for the three months ended
September 30, 1995, compared with $14.6 million for the
corresponding period in 1994, representing a 17.1% increase, after
the effect of impairment and restructuring credits (see Costs and
Expenses) for the three months ended September 30, 1994.  Operating
income, excluding the credits for the third quarter of 1994
increased 32.9% and as a percentage of revenues increased to 13.0%
for the third quarter of 1995 from 10.1% for the comparable quarter
in 1994.  The increase in operating income (28.7%), excluding the
restructuring credits, results principally from the increase in
professional and outsourcing services revenues provided under new
and existing contracts with property and casualty insurance
companies and residual markets of $13.8 million and an increase in
new professional and outsourcing services revenues from life
insurers of $4.2 million (see Revenues).

  Professional and outsourcing services revenues increased 21.4%,
as a percentage of income to 49.3% for the third quarter of 1995,
compared to 40.6% for the same quarter of 1994.  The property and
casualty information services business continued to produce an
operating loss, however slightly less than that experienced in the
second quarter of 1995.  The property and casualty information
services business has continued to decline as a percentage of total
revenues from 26.2% for the third quarter of 1994 to 20.4% for the
same quarter of 1995.

  Because professional and outsourcing services activities for both
the property and casualty and life businesses generally produce
higher margins than property and casualty information services
activities, the change in the Company's revenue mix had the effect
of enhancing the Company's operating margin.

<PAGE> 16

  Licensing revenues decreased as a percentage of total revenues
to 18.7% for the third quarter in 1995 compared to 21.3% for the
same quarter in 1994, partially offsetting the effect of the
services revenue mix.  Excluding the effect of $3.8 million in
licensing revenues from the Company's Health Division for the third
quarter of 1994, licensing revenues as a percentage of revenues
would have remained relatively unchanged.  Because a substantial
portion of initial licensing 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 (see table
above).

Other Income and Expense

  Investment income decreased $.6 million (48.9%) as a result of
a lower level of investable funds, resulting from large cash
expenditures for the acquisition of Creative ($19.9 million) in
December 1994, 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.

  As part of the Company's open market repurchase of its common
stock, the Company liquidated a portion of its marketable
securities portfolio and incurred a loss on the sale of securities
of approximately $1.0 million, related directly to this liquidation
in the third quarter of 1994.

Income Taxes

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 32.3% and 32.0% for the three
months ended September 30, 1995 and 1994, respectively. The
effective tax rate for the three months ended September 30, 1995 is
lower than statutory rates due principally to the higher tax basis
than book basis of the assets divested relating to the sale of the
Company's Health Insurance Systems Division during the second
quarter of 1995 (see Notes 4 and 5 of Notes to Consolidated
Financial Statements). The effective tax rate for the three months
ended September 30, 1994 was lower than statutory rates principally
as a result of a reduction in state income taxes, which are based
on gross income and capital of the Company.

<PAGE> 17

NINE MONTHS COMPARISON

  A comparison of revenues for each line of business and geographic
market for the periods presented is as follows:
                                        
                              Nine Months  
                          Ended September 30, 
                             1995    1994  
                         (Dollars in Millions)
   Line of Business   
Property & Casualty...     $288.0  $256.0 
Life..................      101.9    86.9 
Health................        7.9*   24.7 

  Geographic Market   
United States.........     $306.3  $317.2 
International.........       91.8    50.4 

*Health Division divested June 30, 1995.


Revenues

<TABLE>

<CAPTION>
                                    Nine                Nine  
                                 Months Ended        Months Ended
  Licensing                   September 30,1995   September 30,1994    Change 
                                    (Dollars in Millions)
<S>                                 <C>                 <C>             <C>
Initial charges...................  $32.7               $28.3           15.5%
Monthly charges...................   40.1                38.7            3.6% 
                                    $72.8               $67.0            8.7% 

Percentage of revenues............   18.3%               18.2%                

</TABLE>

  Initial license revenues for the nine months ended September 30,
1995 increased $4.4 million (15.5%) due principally to an increase
in property and casualty insurance licensing activity of $8.0
million. This increase is the result of a $9.3 million increase in
international licensing activity, resulting principally from the
execution of a large Series III license agreement in Europe and
licensing activity of Creative, acquired at December 31, 1994. 
(see table below). Property and casualty insurance licensing
revenues for the nine months ended September 30, 1995 include $3.3
million relating to a distribution agreement, and $1.5 million
relating to an exclusive marketing arrangement, both with AT&T
Global Information Solutions (AT&T Global).  During the nine months
ended September 30, 1994, the Company recognized licensing revenues
of $3.0 million from AT&T Global.  The increase in property and
casualty initial license revenues was offset in part by a $3.9
million decrease in health insurance initial licensing revenue (see
Note 4 of Notes to Consolidated Financial Statements). 

  Because a significant portion of initial licensing revenues are
recorded at the time new systems are licensed, there can be 

<PAGE> 18

significant fluctuations in revenue from period to period. Set
forth below is a comparison of initial license revenues for the
nine months ended September 30, 1995 and 1994, expressed as a
percentage of total revenues for each of the periods presented:

                        Nine Months Ended     Nine Months Ended
                        September 30, 1995    September 30, 1994
                                 (Dollars in Millions)
 Property and Casualty 
Initial license 
  revenues.............       $23.4                $15.4
Total revenues.........         5.9%                 4.2%

         Life          
Initial license 
  revenues.............       $ 9.0                $ 8.6
Total revenues.........         2.3%                 2.3%

        Health         
Initial license 
  revenues.............       $  .3                $ 4.3
Total revenues.........          *                   1.2%

       Combined        
Initial license 
  revenues.............       $32.7                $28.3
Total revenues.........         8.2%                 7.7%

*Health Division divested June 30, 1995.

  Revenues from continuing monthly license charges ("MLC") for
Maintenance, Enhancements and Services Availability ("MESA")
remained relatively unchanged for the nine months ended September
30, 1995, compared to the corresponding period in 1994.

<TABLE>

<CAPTION>

                                 Nine                Nine
                              Months Ended        Months Ended
  Services                 September 30,1995   September 30,1994     Change 
                                        (Dollars in Millions)
<S>                             <C>                  <C>              <C>
Professional and outsourcing... $191.3               $153.2           24.9 %
Information....................  132.6                146.1           (9.2)%
Other..........................    1.4                  1.4             -   
                                $325.3               $300.7            8.2 %

Percentage of revenues.........   81.7%                81.8%                

</TABLE>

  Professional and outsourcing services revenues for the nine
months ended September 30, 1995 increased $38.1 million (24.9%)
compared to the same period in 1994. This increase was principally
related to services from both new and existing contracts amounting
to $39.9 million for property and casualty insurance business and
$9.8 million for life insurance business, and was partially offset
by the decrease in revenues from the health insurance market of 

<PAGE> 19

$11.4 million (see Note 4 of Notes to Consolidated Financial
Statements). The increase in property and casualty business was 
the result of increased services in both the domestic and
international markets. The increase in the domestic market was the
result of an $11.1 million increase in volume related to new and
existing professional and outsourcing services contracts and a $9.5
million increase in volume related to the governmental and residual
markets for total policy management outsourcing services, while the
increase in the international market of $19.3 million was
principally due to the acquisition of Creative at December 31,
1994, and new services contracts in the European, Canadian and
Asia-Pacific regions. The increase in life insurance business is
principally the result of volume increases relating to both new and
existing outsourcing contracts and a new agreement for total policy
administration services in the domestic market, and to an increase
in the volume of professional and outsourcing services related to
new contracts in Europe.

  Information services revenues decreased $13.5 million (9.2%) from
the 1994 period to the 1995 period, due principally to a $15.2
million decrease in revenues related to the Company's domestic
property and casualty automobile and risk information services
business. This decrease is principally the result of 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 was partially offset by a $1.9 million (4.4%)
increase in life information services revenues (principally
attending physician statements and medical history reports).

Costs and Expenses

  Employee compensation and benefits for the nine months ended
September 30, 1995, compared to the same period in 1994, increased
$9.6 million (7.2%) principally as a result of increased salaries
and related costs of Creative, acquired at December 31, 1994, and
increased costs associated with the growth in staffing for
additional professional and outsourcing services activities. These
increases were offset in part by the decrease in compensation and
other benefits related to the Company's sale of its Health
Insurance Systems Division on June 30, 1995 (see Note 4 of Notes to
Consolidated Financial Statements) and decreased use of temporary
employees. 

  Computer and communications expense increased $3.9 million, due
principally to expenses for certain operating system management
software products utilized in the Company's worldwide data center
operations (see Note 1 of Notes to Consolidated Financial
Statements), and increased communications, data circuit and
maintenance costs associated with the growth of the Company's 

<PAGE> 20

domestic and international operations and additions of new
outsourcing business.

  The $12.7 million decrease in information services and data
acquisition costs is principally related to a continued decrease in
the volume of state fees for motor vehicle reports associated with
the domestic property and casualty automobile and information
services business (see Revenues).

  Although depreciation and amortization expense remained
relatively unchanged for the nine months ended September 30, 1995
compared to the same period in 1994, amortization of internally
developed software costs increased $3.6 million, due principally to
amortization associated with a new release of the Company's
property and casualty insurance Series III client/server software
system and the initial release of its life insurance CYBERLife
client/server software system, both of which became generally
available during the first quarter of 1995. These increases were
offset by a $2.8 million decrease in amortization charges resulting
principally from the impairment of certain identifiable intangible
assets, goodwill and software products relating to the Company's
property and casualty information services business (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) and $1.1
million in lower depreciation charges due principally to certain
retirements of data processing equipment.

  Other operating costs and expenses increased $12.2 million
(33.2%) principally due to an increase in the Company's use of
outside consultants and independent contractors relating to
increased professional services activities and costs of Creative,
acquired at December 31, 1994. Additionally, the Company
experienced increased operating costs associated with additional
total policy management outsourcing services activity (see
Revenues). These increases were offset in part by an increase in
amounts capitalized, which relate principally to the internal
development of the Company's property and casualty and life
insurance client/server software systems, by a decrease in general
legal costs and by decreased commissions paid to third parties. 

  The Company, as of September 30, 1995, provided for $7.9 million
in estimated litigation costs arising from two lawsuits to which
the Company is both a defendant and counter-claimant.  The costs
provided for include, but are not limited to, fees paid or
anticipated to be paid to external counsel and other costs related
to the Company's defense and claims regarding these matters (see
Item 1, Legal Proceedings, of Part II contained in the Company's
report on Form 10-Q for the quarter ended September 30, 1995).  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 the first quarter of 1995, in full settlement of 

<PAGE> 21

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).  

  On June 30, 1995, the Company completed the sale of its Health
Insurance Systems Division for a total consideration of $9.3
million in cash.  After selling expense and other accrued costs,
the Company recorded a pre-tax gain of $8.1 million (see Note 4 of
Notes to Consolidated Financial Statements).

  In June 1995, the Company reduced certain of its restructuring
reserves by $.4 million for the balances remaining, as of June 30,
1995, as a result of completing certain restructuring activities
for its life and health insurance businesses. 

  During June 1994, the Company, as a result of new events
occurring, changed its estimates and reduced its restructuring
reserves by $1.7 million, which were established at June 30, 1993
for employee severance and outplacement costs in connection with
the downsizing of its health insurance services staff. During
September 1994, the Company recorded a $1.8 million credit
resulting from the termination of a lease at amounts less than
those previously provided for in certain restructuring reserves
associated with the planned abandonment of certain leased office
facilities related to its health insurance services business (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). 

Operating Income

  Operating income, after the effects of the gain from the sale of
the Health Division and special charges, was $52.5 million for the
nine months ended September 30, 1995, compared with $36.1 million
for the corresponding period in 1994.  The Company on June 30, 1995
recorded a gain from the sale of the Company's Health Division of
approximately $8.1 million (see Note 4 of Notes to Consolidated
Financial Statements).  Special charges aggregating $6.0 million
for the nine months ended September 30, 1995 relate to litigation
settlement and other legal expenses, net ($6.2 million) and
impairment and restructuring credits ($.2 million).  Special
charges for the nine months ended September 30, 1994 of $3.5
million relate to impairment and restructuring credits (see Costs
and Expenses).

  Operating income, excluding the gain and special charges, was
$50.4 million for the nine months ended September 30, 1995,
compared with $32.7 million for the corresponding period in 1994. 

<PAGE> 22

Operating income, excluding the gain and special charges, as a
percentage of revenues increased to 12.7% for the first nine months
of 1995 from 8.9% for the comparable period in 1994.  The increase
in operating income, excluding the gain and special charges
(54.3%), results principally from the increase in professional and
outsourcing services revenues provided under new and existing
contracts with property and casualty insurance companies and
residual markets of $39.9 million, an increase in new professional
and outsourcing services revenues from life insurers of $9.8
million and an increase in initial license revenues of $4.4 million
from both property and casualty and life insurers (see Revenues).

  Revenues from professional and outsourcing services activities
increased, as a percentage of total revenues, from 41.7% for the
nine months ended September 30, 1994 to 48.1% for the same period
in 1995. The property and casualty information services business
continued to produce an operating loss, however, information
services revenues, as a percentage of total revenues, decreased
from 39.7% for the 1994 period to 33.3% for the 1995 period.

  Licensing revenues, as a percentage of total revenues, remained
relatively unchanged, representing 18.3% for the nine months ended
September 30, 1995 compared to 18.2% for the same period in 1994.
Excluding the effect of licensing revenues from the Company's
health division of $.9 million for the nine months ended September
30, 1995 and $6.2 million for the same period of 1994, licensing
revenues as a percentage of total revenues increased from 16.8% for
the nine month period in 1994 to 18.1% for the same period in 1995.
Because a substantial portion of initial licensing 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. 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 (see table above).

Other Income and Expense

  During 1994, the Company made large cash expenditures for the
acquisition of Creative ($19.9 million) in December 1994, the
repurchase of 2,278,537 of the 3,797,561 shares of common stock
held by IBM ($56.6 million) in May 1994, 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. Consequently, the Company
maintained a lower level of investable funds during the first nine
months of 1995, resulting in a decrease in investment income of
$3.3 million.

<PAGE> 23

  As part of the Company's repurchase of its common stock during
the first nine months of 1994, the Company liquidated a portion of
its marketable securities portfolio and incurred a loss on the sale
of securities of approximately $1.8 million related directly to
this liquidation.

Income Taxes

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) for the nine months ended September
30, 1995 and 1994, was 32.6% and 35.3%, respectively. The effective
rate for 1995 was significantly lower due principally to the higher
tax basis than book basis of the assets divested relating to the
sale of the Company's Health Insurance Systems Division (see Notes
4 and 5 of Notes to Consolidated Financial Statements). 

<PAGE> 24

                     LIQUIDITY AND CAPITAL RESOURCES 


                                     September 30,   December 31,
                                         1995           1994     
Cash and equivalents, marketable         (Dollars in Millions)
  securities, and investments.........  $ 68.9         $ 34.3    
Current assets........................   204.6          167.7
Current liabilities...................    64.8           76.8
Working capital.......................   139.8           90.9
Current portion of long-term debt.....     1.7            4.7
Long-term debt........................    27.9            4.2

                                      Nine months    Nine months
                                         ended          ended
                                     September 30,  September 30,
                                         1995           1994    
                                         (Dollars in Millions)
Cash provided by operations...........  $ 70.7         $ 56.7
Cash (used) provided by          
  investing activities................   (55.5)          31.5
Cash provided (used) by 
  financing activities................    23.6          (94.2)


  The Company's financial condition remained strong at September
30, 1995. The increase in cash and equivalents, marketable
securities and investments compared to December 31, 1994 is due
principally to cash flows generated by operations, and proceeds
from the Company's unsecured credit facilities (discussed below).

  During the nine months ended September 30, 1995, the Company
reduced its liabilities for accrued restructuring charges and
employee severance and outplacement costs by $4.8 million ($6.4
million in cash outlays, less $.7 in non-cash discount
amortization, and $.9 million associated with revised estimates of
lease termination and severance costs).

  During the nine months ended September 30, 1994, as part of the
Company's repurchase of 3.2 million shares of its common stock for
$89.3 million, the Company liquidated a portion of its marketable
securities and had net positive cash flow from marketable
securities sales/purchasing activity of $72.8 million.  The Company
did not repurchase any of its outstanding common shares during the
nine months ended September 30, 1995, and had no significant
sales/purchases of securities during this period.  During the
second quarter of 1995, the Company expended $10.0 million to
acquire a significant outsourcing contract, (see Note 1 of Notes to
Consolidated Financial Statements).

  On August 11, 1995 the Company entered into two unsecured credit
facilities of $100 million each with a syndicate of financial 

<PAGE> 25

institutions.  These lines of credit may be used for general
corporate purposes (see Note 3 of Notes to Consolidated Financial
Statements). During the third quarter of 1995, the Company utilized
these facilities to fund, in part, certain acquisitions anticipated
to be completed during the fourth quarter of 1995 (see Note 6 of
Notes to Consolidated Financial Statements).

  Significant expenditures anticipated for the remainder of 1995,
excluding any possible business and/or contract acquisitions and
stock repurchases, are as follows: acquisition of data processing,
communications equipment and office furniture, fixtures and
equipment ($5.0 million) and costs relating to the internal
development of software systems ($13.0 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 operating needs;  however, the
Company may also consider incurring debt as needed to accomplish
specific objectives in these areas and for other general corporate
purposes.


                  FACTORS THAT MAY AFFECT FUTURE RESULTS

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

  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 

<PAGE> 26

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> 27

                                  PART II
                             OTHER INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION


Item 1. Legal Proceedings

  The Company is involved in lawsuits with Security Life of Denver
Insurance Company and with the California State Automobile Inter-
Insurance Bureau and the California State Automobile Association
(see Item 1, Legal Proceedings, of Part II contained in the
Company's report on Form 10-Q for the quarter ended March 31,
1995).  The Company was informed by its insurer that based upon the
allegations raised in these two lawsuits, the insurer does not
believe it would be obligated under the Company's insurance
policies to reimburse defense costs or indemnify the Company for
any payments relating to these claims.  The Company disagrees with
this conclusion and on June 20, 1995 the Company's insurer 
commenced a declaratory judgment action to determine the insurer's
obligations related to defense costs and indemnity related to these
two lawsuits.  As a result of this action, the Company determined
it was probable the Company would incur litigation expenses for
certain actual expenses previously incurred and for estimated
future litigation expenses arising from these matters through their
conclusion, over the next twelve months, of $7.9 million, which
estimate was provided for as of June 30, 1995 based upon the
Company's prior experience in these matters.

  See Note 1, "Commitments and Contingencies" of Notes to
Consolidated Financial Statements.

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

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

Exhibits

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

Reports on Form 8-K

  The Company did not file any reports on Form 8-K during the
quarter ended September 30, 1995.

<PAGE> 28


                   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:  November 14, 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 September 30, 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 PMS Center (P.O. Box Ten)
Blythewood, S.C. (Columbia, S.C.)                             29016 (29202)
(Address of principal executive                                 (Zip Code) 
  offices)

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

Yes   X       No       

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

  19,435,697 Common shares, $.01 par value, as of November 13, 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 and nine months ended September 30, 
            1995 and 1994..................................... 3

          Consolidated Balance Sheets as of 
            September 30, 1995 and December 31, 1994.......... 4

          Consolidated Statements of Cash Flows for
            the nine months ended September 30, 1995 and 1994. 5

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

  Item 2. Management's Discussion and Analysis of
            Financial Condition and Results of
            Operations........................................10

PART II. OTHER INFORMATION

  Item 1. Legal Proceedings...................................27 

  Item 6. Exhibits and Reports on Form 8-K....................27 

Signatures....................................................28
3
PART I
                    FINANCIAL INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                     CONSOLIDATED STATEMENTS OF INCOME

                                         Three Months         Nine Months
                                      Ended September 30,  Ended September 30,
                                        1995      1994       1995      1994  
                                          (Unaudited)          (Unaudited)    
                                        (In Thousands, Except Per Share Data)
Revenues:
  Licensing.......................... $ 24,518  $ 27,027   $ 72,798  $ 67,018
  Services...........................  106,704    99,966    325,346   300,658
                                       131,222   126,993    398,144   367,676
 
Costs and Expenses: 
  Employee compensation & benefits...   47,622    43,656    143,067   133,498
  Computer and communications 
    expenses.........................    7,562     6,412     22,714    18,819
  Information services and                     
    data acquisition costs...........   26,806    33,039     88,173   100,865
  Depreciation and amortization......   15,418    15,054     44,985    45,184
  Other operating costs & expenses...   16,690    15,952     48,826    36,658
  Litigation settlement and 
    expenses, net....................      -         -        6,216       -  
  Gain on sale of Health business
    and related assets...............      -         -       (8,116)      -  
  Impairment and restructuring 
    charges (credits), net...........        6    (1,746)      (240)   (3,461)
                                       114,104   112,367    345,625   331,563

Operating income ....................   17,118    14,626     52,519    36,113 

Other Income and Expenses:
  Investment income..................      654     1,282      1,612     4,954
  Loss on sale of marketable       
    securities.......................      -      (1,010)       -      (1,829)
  Interest expense and other
    charges..........................     (658)     (605)    (2,176)   (2,324)
                                            (4)     (333)      (564)      801

Income before income taxes...........   17,114    14,293     51,955    36,914 

Income taxes.........................    5,520     4,570     16,951    13,025 

Net income........................... $ 11,594  $  9,723   $ 35,004  $ 23,889 

Net income per share................. $    .60  $    .49   $   1.81  $   1.12 

Weighted average number of shares....   19,401    19,975     19,376    21,360
See accompanying notes.
4
POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                                                        (Unaudited)     (Audited)
                                                        September 30,  December 31,
                                                            1995          1994    
                                                             (In Thousands,
                                                           Except Share Data)
Assets
Current assets:
  Cash and equivalents................................... $ 56,377      $ 17,686
  Marketable securities..................................    7,415        11,051
  Receivables, net of allowance for uncollectible 
     amounts of $1,133 ($1,024 at 1994)..................   95,083        90,474
  Income tax receivable..................................   26,539        31,072
  Deferred income taxes..................................    4,848         6,644
  Other..................................................   14,305        10,798
     Total current assets................................  204,567       167,725

Property and equipment, at cost less accumulated
     depreciation and amortization of $111,794
     ($125,601 at 1994)..................................  132,489       136,503
Receivables..............................................      617           500
Goodwill and other intangibles, net......................   82,112        77,763
Capitalized software costs, net..........................  134,482       118,621
Deferred income taxes....................................   12,976        12,453
Investments..............................................    5,121         5,567  
Other....................................................    5,077         4,899
        Total assets..................................... $577,441      $524,031

Liabilities
Current liabilities:
  Accounts payable and accrued expenses.................. $ 44,030      $ 50,231
  Accrued restructuring charges..........................    5,845         5,648
  Accrued contract termination costs.....................      943         1,819
  Current portion of long-term debt......................    1,706         4,734
  Income taxes payable...................................    3,123         2,279
  Unearned revenues......................................    9,054        11,930
  Other..................................................       86           215
     Total current liabilities...........................   64,787        76,856

Long-term debt...........................................   27,923         4,162
Deferred income taxes....................................   62,738        54,671
Accrued restructuring charges............................    5,804        10,796
Other....................................................    1,536           624
     Total liabilities...................................  162,788       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, 19,430,666 shares issued and 
   outstanding (19,362,984 at December 31, 1994).........      194           194
Additional paid-in capital...............................  173,186       170,323
Retained earnings........................................  241,978       206,974
Unrealized holding loss on marketable securities.........      (15)         (118)
Foreign currency translation adjustment..................     (690)         (451)
     Total stockholders' equity..........................  414,653       376,922
        Total liabilities and stockholders' equity....... $577,441      $524,031
See accompanying notes.
5
POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)

                                                        Nine Months
                                                     Ended September 30,
                                                      1995        1994  
                                                      (In Thousands)
Operating Activities
  Net income......................................  $ 35,004   $ 23,889 
  Adjustments to reconcile net income to net
   cash provided by operating activities:     
    Depreciation and amortization.................    44,985     45,184
    Deferred income taxes.........................     8,790      2,560 
    Loss on sale of marketable securities.........       -        1,829 
    Provision for uncollectible accounts..........       262        730
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termination costs...........................    (4,795)   (10,436)
    Receivables...................................    (4,988)    (5,295)
    Income taxes receivable.......................     4,533        427 
    Accounts payable and accrued expenses.........    (6,201)    (2,535)
    Income taxes payable..........................     1,394        -  
  Other, net......................................    (8,300)       377 
       Cash provided by operations................    70,684     56,730
  
Investing Activities
  Proceeds from sales/maturities of marketable    
   securities.....................................     7,778    225,840
  Purchases of marketable securities..............    (3,694)  (153,033)
  Acquisition of property and equipment...........   (17,579)   (14,514)
  Capitalized internal software development  
   costs..........................................   (32,621)   (25,914)
  Purchased software..............................      (250)      (418)
  Proceeds from disposal of property and
   equipment......................................       827       (437)
  Contract acquisition costs......................   (10,000)       -  
       Cash (used) provided by investing 
         activities...............................   (55,539)    31,524  

Financing Activities
  Payments on long-term debt......................    (6,945)    (4,599)
  Proceeds from borrowing under credit facility...    27,678        -  
  Issuance of common stock under stock 
   option plans...................................     2,863        -
  Repurchase of common stock......................       -      (89,551)
       Cash provided (used) by financing 
         activities...............................    23,596    (94,150)

Effect of exchange rate changes on cash...........       (50)    (1,073)
Net increase (decrease) in cash and 
  equivalents.....................................    38,691     (6,969)
Cash and equivalents at beginning of period.......    17,686     24,122
Cash and equivalents at end of period.............  $ 56,377   $ 17,153

Supplemental Information
  Interest paid...................................     1,555      1,719
  Income taxes paid...............................     1,456     10,126
See accompanying notes.
6

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            September 30, 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.  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.  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.

  On April 7, 1995, the Company finalized certain terms of a ten-
year agreement with an insurance holding company and its
subsidiaries, initially entered into in November 1994.  The Company
is to provide certain data processing and other professional
services as required.  The minimum contractual processing revenues
are expected to be in excess of $60 million over the term of the
agreement.  The Company incurred costs of $10 million related to
this agreement in the second quarter of 1995 ($5 million in the
fourth quarter of 1994), which have been deferred as contract
acquisition costs and are being expensed on a straight-line basis
over the term of the agreement. 

Contingencies - Legal Proceedings

  In December 1994, the Company reached an agreement, which was
subsequently approved on May 26, 1995 by the United States District
Court for the District of South Carolina, to settle its shareholder
class action.  The settlement of $31 million was 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
7

in full settlement of the Company's claims.  Accordingly, the
Company recorded a credit of $1.7 million, in the first quarter of
1995, as a further adjustment to the estimated costs of settling
the securities class action.  

  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 the Company's
report on Form 10-Q for the quarter ended March 31, 1995).  The
Company was informed by its insurer that based upon the allegations
raised in these two lawsuits, the insurer does not believe it would
be obligated under the Company's insurance policies to reimburse
defense costs or indemnify the Company for any payments relating to
these claims.  The Company disagrees with this conclusion and on
June 20, 1995 the Company's insurer commenced a declaratory
judgment action to determine the insurer's obligations related to
defense costs and indemnity related to these two lawsuits.  As a
result of this action, the Company determined it was probable the
Company would incur litigation expenses for certain actual expenses
previously incurred and for estimated future litigation expenses
arising from these matters through their conclusion, over the next
twelve months, of $7.9 million, which estimate was provided for as
of June 30, 1995 based upon the Company's prior experience in these
matters. 

  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
8

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
Holdings, Limited (Creative), 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).

NOTE 3. CREDIT AGREEMENT

  On August 11, 1995, the Company entered into two unsecured credit
facilities of $100 million each with a syndicate of financial
institutions for general corporate purposes. The first $100 million
facility bears a term of 364 days. The second $100 million facility
bears a term of 3 years.  Borrowings under the facilities bear
interest payable at rates based upon the Morgan Guaranty Trust
Company's Prime Rate, the Federal Funds Rate, the London Interbank
Offering Rate or the yield on certain certificates of deposit as
appropriate, plus a spread above certain of these rates. The
Company is subject to certain covenants including, but not limited
to, the maintenance of certain operating ratios and levels of
tangible net worth. 

NOTE 4. CERTAIN TRANSACTIONS

  On June 30, 1995, the Company sold its Health Insurance Systems
Division for a total consideration of $9.3 million in cash. After
selling expenses of $.5 million, the net book value of assets sold
of $.5 million, liabilities resulting from the sale, including
severance liabilities for certain employees and other reserves of
$1.5 million, and the present value of a sublease executed by the
purchaser for certain office space of $1.3 million, the Company
9

recorded at June 30, 1995 a pre-tax gain of $8.1 million, which is
included under "Costs and Expenses" in the Consolidated Statement
of Income for the nine months ended September 30, 1995 (see
Management's Discussion and Analysis of Financial Condition and
Results of Operations).

  On September 13, 1995, the Company signed a letter of intent to
purchase 100% of the share capital of SOCS Groupe, a Paris, France-
based software and services company (SOCS), subject to due
diligence, execution of a definitive agreement and appropriate
legal authorizations. SOCS is a provider of application development
tools, life insurance solutions and professional services
principally for European insurance companies. The acquisition is
expected to be completed during the fourth quarter of 1995.

  On October 1, 1995, the Company acquired micado Beteiligungs und
Vurwalttungs GmbH (micado), a software and services provider to
German insurance and financial services companies, for
approximately $24.9 million in cash and the settlement of
approximately $6.0 million in debt. Under the terms of the purchase
agreement, payment of approximately $6.2 million of the purchase
price has been deferred and is payable at certain intervals over
the year subsequent to the date of acquisition. The acquisition 
will be accounted for under the purchase method.

NOTE 5.  INCOME TAXES

  The Company's effective tax rate for the third quarter of 1995
was 32.3% compared with 32.0% for the third quarter of 1994. The
Company's annual effective income tax rate (income taxes expressed
as a percentage of pre-tax income) was 32.6% and 35.3% for the nine
months ended September 30, 1995 and 1994, respectively. The
effective rate for 1995 is lower due principally to the higher tax
basis than book basis of the assets divested relating to the sale
of the Company's Health Insurance Systems Division (see Note 4
above).
10

                   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:
1995   vs   1994
                                                                    Percent Increase
                                                                        (Decrease)   
                              Percentage           Percentage         Three     Nine
                             of Revenues          of Revenues        Months    Months
                             Three Months         Nine Months         Ended     Ended 
                          Ended September 30,  Ended September 30,     September 30, 
Revenues:                    1995      1994       1995      1994
Licensing..................  18.7      21.3       18.3      18.2       (9.3)     8.6 
Services...................  81.3      78.7       81.7      81.8        6.7      8.2 
                            100.0     100.0      100.0     100.0        3.3      8.3
Costs and Expenses:
Employee compensation
 and benefits..............  36.3      34.4       35.9      36.3        9.1      7.2
Computer & communication
 expenses..................   5.8       5.0        5.7       5.1       17.9     20.7 
Information services & data
 acquisition costs.........  20.4      26.0       22.1      27.4      (18.9)   (12.6)
Depreciation and 
 amortization..............  11.7      11.9       11.3      12.3        2.4      (.4)
Other operating costs
 and expenses..............  12.8      12.5       12.3      10.0        4.6     33.2
Litigation settlement and
 expenses, net.............     -         -        1.6         -          -   (100.0)
Gain on sale of Health 
 business and related 
 assets....................     -         -       (2.0)        -          -    100.0 
Impairment and restructuring
 charges (credits), net....     -      (1.3)       (.1)      (.9)    (100.3)   (93.1)
                             87.0      88.5       86.8      90.2        1.5      4.2 

Operating income...........  13.0      11.5       13.1       9.8       17.0     45.4 
Other income and expenses..     -       (.3)       (.1)       .2      (98.8)  (170.4)
Income before income 
    taxes..................  13.0      11.2       13.0      10.0       19.7     40.7

Income taxes...............   4.2       3.6        4.2       3.5       20.8     30.1

Net income.................   8.8       7.6        8.8       6.5       19.2     46.5
11

  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 worldwide telecommunications network using the
Company's database products.

THREE MONTHS COMPARISON

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

                                    Three Months  
                                 Ended September 30, 
                                    1995     1994  
   Line of Business             (Dollars in Millions)
Property & Casualty....           $ 96.0   $ 88.2 
Life...................             35.2     29.8 
Health.................               *       8.9 

   Geographic Market   
United States..........           $ 98.7   $110.7 
International..........             32.5     16.2 

*Health Division divested June 30, 1995.

Revenues
Three                 Three
                             Months Ended          Months Ended 
  Licensing                September 30,1995     September 30,1994    Change 
                                  (Dollars in Millions)
Initial charges................ $11.3                 $ 14.3          (21.0)%
Monthly charges................  13.2                   12.7            3.9 %
                                $24.5                  $27.0           (9.3)%

Percentage of revenues.........  18.7%                  21.3%
Initial license revenues for the three months ended September 30,
1995 decreased $3.0 million (21.0%) compared to the corresponding
period in 1994.  The decrease is principally the result of a $3.5
million decrease in health insurance license activity (see Note 4
of Notes to Consolidated Financial Statements).  Although property
and casualty licensing activity increased $.7 million (9.3%) for
the three months comparison, there were significant fluctuations in
both the domestic and international property and casualty markets. 
Initial license revenues in the international market increased $4.8
million, while domestic initial licensing revenue decreased $4.1
million.  The increase in international licensing activity resulted
principally from the execution of a large Series III license
agreement in Europe and from licensing activity of the Creative
Group Holdings, Limited, which was acquired by the Company in
December 1994.  The variance in initial license revenues between
quarters for both the domestic and international property and
casualty insurance markets continues to reflect the timing of
customers' decisions to enter into large license agreements (see
table below).

  Because a significant portion of initial licensing revenues are
recorded at the time new systems are licensed, there can be
significant fluctuations in revenue from quarter to quarter.  Set
forth below is a comparison of initial license revenues for the
preceding six quarters expressed as a percentage of total revenues
for each of the periods presented:
1995                        1994           
                         Third   Second    First    Fourth    Third   Second 
                        Quarter  Quarter  Quarter   Quarter  Quarter  Quarter
                                         (Dollars in Millions)
Property and Casualty 
Initial license 
  revenues.............  $ 8.1    $ 7.3    $ 8.0     $ 5.6    $ 7.4    $ 6.4 
Total revenues.........    6.2%     5.5%     6.0%      4.5%     5.8%     5.2%

         Life          
Initial license 
  revenues.............  $ 3.2    $ 2.1    $ 3.7     $ 1.6    $ 3.4    $ 3.6 
Total revenues.........    2.4%     1.6%     2.8%      1.3%     2.7%     2.8%

        Health         
Initial license 
  revenues.............     *     $  .1    $  .2     $ 2.5    $ 3.5    $  .4 
Total revenues.........     *        -        .1%      2.0%     2.8%      .3%

       Combined        
Initial license 
  revenues.............  $11.3    $ 9.5    $11.9     $ 9.7    $14.3    $10.4 
Total revenues.........    8.6%     7.1%     8.9%      7.8%    11.3%     8.4%
*Health Division divested June 30, 1995.
13

  Revenues from continuing monthly license charges ("MLC") for
Maintenance, Enhancements and Services Availability ("MESA")
remained relatively unchanged for the third quarter of 1995
compared to the corresponding quarter of 1994.
Three              Three
                              Months Ended       Months Ended
  Services                 September 30,1995  September 30,1994      Change   
                                           (Dollars In Millions)
Professional and outsourcing... $ 64.7            $ 51.6             25.4 %
Information....................   41.6              47.8            (13.0)%
Other..........................     .4                .6            (33.3)%   
                                $106.7            $100.0              6.7 %   

Percentage of revenues.........   81.3%             78.7%
Professional and outsourcing services revenues for the three
months ended September 30, 1995 compared to the same period in 1994 
increased $13.1 million (25.4%).  This increase is principally
related to services from both new and existing contracts amounting
to $13.8 million for property and casualty insurance business and
$4.2 million for life insurance business, and was partially offset
by the decrease in revenues from the health insurance market of
$4.9 million (see Note 4 of Notes to Consolidated Financial
Statements).  The increase in the property and casualty business
resulted principally from the acquisition of Creative at December
31, 1994, new services contracts in the European and Asia/Pacific
regions and an increase in volume related to the governmental and
residual markets for total policy management outsourcing services
and new and existing professional and outsourcing services
contracts.  Services in the life insurance market increased
principally as a result of a new large outsourcing agreement and a
new agreement for total policy administration.  These increases
were offset by a $4.9 million decrease in health insurance
professional services (see Note 4 of Notes to Consolidated
Financial Statements).

  Revenues from information services were $41.6 million for the
third quarter in 1995 compared with $47.8 million for the
corresponding quarter in 1994.  This $6.2 million decrease (13.0%)
is principally attributable to a decline in revenue associated with
the Company's domestic property and casualty automobile and risk
information services business of $6.5 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 the property and casualty
information services business was partially offset by a $.3 million
increase in life information services revenues.
14

Costs and Expenses

  Employee compensation and benefits increased $4.0 million (9.1%)
for the third quarter of 1995 compared to the corresponding quarter
in 1994, principally as a result of increased salaries and related
costs associated with the acquisition of Creative in December 1994,
and increased costs associated with the growth in staffing for
additional outsourcing and professional services activities. These
increases were partially offset by a decrease in the Company's
provision for performance bonus expense, the decreased use of
temporary help, and a reduction in compensation and other benefits
related to the sale of the Health Insurance Systems Division on
June 30, 1995 (see Note 4 of Notes to Consolidated Financial
Statements).

  The increase in computer and communications expense was due
principally to expenses for certain operating system management
software products (see Note 1 of Notes to Consolidated Financial
Statements), and increased communications, data circuit and
maintenance costs associated with the growth of the Company's
domestic and international outsourcing operations.

  The decrease in information services and data acquisition costs
is principally attributable to a continued decrease in the volume
of state fees for motor vehicle reports associated with the
domestic property and casualty automobile and risk information
services business (see Revenues).

  Although depreciation and amortization expense remained
relatively unchanged for the three months ended September 30, 1995
compared to the same period in 1994, amortization of internally
developed software costs increased $1.7 million, due principally to
amortization associated with a new release of the Company's
property and casualty insurance Series III client/server software
system and the initial release of its life insurance CYBERLife
client/server software system, both of which became generally
available during the first quarter of 1995. These increases were
offset by a $1.0 million decrease in amortization charges resulting
from the impairment of certain identifiable intangible assets,
goodwill and software products relating to the Company's property
and casualty information services business (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) and lower
depreciation charges due to certain retirements of data processing
equipment.

  Other operating costs and expenses for the third quarter of 1995
increased $.7 million (4.6%) compared to the same period in 1994. 
This increase relates principally to additional costs relating to
outside consultants and independent contractors resulting from
increased professional services activities and the acquisition of
Creative at December 31, 1994, as well as additional costs
15

associated with increased total policy management outsourcing
services activities (see Revenues).  These increases were offset in
part by amounts capitalized, which relate principally to the
internal development of the Company's property and casualty and
life insurance client/server software systems, and by progress made
towards the completion of certain contract obligations, for which
provisions were made during the third quarter of 1994.

  During the third quarter of 1994, the Company recorded a $1.8
million credit associated with the termination of a lease at
amounts less than those previously provided for in certain
restructuring reserves associated with the planned abandonment of
certain leased office facilities related to its health insurance
services business (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). 

Operating Income    

  Operating income was $17.1 million for the three months ended
September 30, 1995, compared with $14.6 million for the
corresponding period in 1994, representing a 17.1% increase, after
the effect of impairment and restructuring credits (see Costs and
Expenses) for the three months ended September 30, 1994.  Operating
income, excluding the credits for the third quarter of 1994
increased 32.9% and as a percentage of revenues increased to 13.0%
for the third quarter of 1995 from 10.1% for the comparable quarter
in 1994.  The increase in operating income (28.7%), excluding the
restructuring credits, results principally from the increase in
professional and outsourcing services revenues provided under new
and existing contracts with property and casualty insurance
companies and residual markets of $13.8 million and an increase in
new professional and outsourcing services revenues from life
insurers of $4.2 million (see Revenues).

  Professional and outsourcing services revenues increased 21.4%,
as a percentage of income to 49.3% for the third quarter of 1995,
compared to 40.6% for the same quarter of 1994.  The property and
casualty information services business continued to produce an
operating loss, however slightly less than that experienced in the
second quarter of 1995.  The property and casualty information
services business has continued to decline as a percentage of total
revenues from 26.2% for the third quarter of 1994 to 20.4% for the
same quarter of 1995.

  Because professional and outsourcing services activities for both
the property and casualty and life businesses generally produce
higher margins than property and casualty information services
activities, the change in the Company's revenue mix had the effect
of enhancing the Company's operating margin.
16

  Licensing revenues decreased as a percentage of total revenues
to 18.7% for the third quarter in 1995 compared to 21.3% for the
same quarter in 1994, partially offsetting the effect of the
services revenue mix.  Excluding the effect of $3.8 million in
licensing revenues from the Company's Health Division for the third
quarter of 1994, licensing revenues as a percentage of revenues
would have remained relatively unchanged.  Because a substantial
portion of initial licensing 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 (see table
above).

Other Income and Expense

  Investment income decreased $.6 million (48.9%) as a result of
a lower level of investable funds, resulting from large cash
expenditures for the acquisition of Creative ($19.9 million) in
December 1994, 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.

  As part of the Company's open market repurchase of its common
stock, the Company liquidated a portion of its marketable
securities portfolio and incurred a loss on the sale of securities
of approximately $1.0 million, related directly to this liquidation
in the third quarter of 1994.

Income Taxes

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 32.3% and 32.0% for the three
months ended September 30, 1995 and 1994, respectively. The
effective tax rate for the three months ended September 30, 1995 is
lower than statutory rates due principally to the higher tax basis
than book basis of the assets divested relating to the sale of the
Company's Health Insurance Systems Division during the second
quarter of 1995 (see Notes 4 and 5 of Notes to Consolidated
Financial Statements). The effective tax rate for the three months
ended September 30, 1994 was lower than statutory rates principally
as a result of a reduction in state income taxes, which are based
on gross income and capital of the Company.
17

NINE MONTHS COMPARISON

  A comparison of revenues for each line of business and geographic
market for the periods presented is as follows:
                                        
                              Nine Months  
                          Ended September 30, 
                             1995    1994  
                         (Dollars in Millions)
   Line of Business   
Property & Casualty...     $288.0  $256.0 
Life..................      101.9    86.9 
Health................        7.9*   24.7 

  Geographic Market   
United States.........     $306.3  $317.2 
International.........       91.8    50.4 

*Health Division divested June 30, 1995.

Revenues
Nine                Nine  
                                 Months Ended        Months Ended
  Licensing                   September 30,1995   September 30,1994    Change 
                                    (Dollars in Millions)
Initial charges...................  $32.7               $28.3           15.5%
Monthly charges...................   40.1                38.7            3.6% 
                                    $72.8               $67.0            8.7% 

Percentage of revenues............   18.3%               18.2%
Initial license revenues for the nine months ended September 30,
1995 increased $4.4 million (15.5%) due principally to an increase
in property and casualty insurance licensing activity of $8.0
million. This increase is the result of a $9.3 million increase in
international licensing activity, resulting principally from the
execution of a large Series III license agreement in Europe and
licensing activity of Creative, acquired at December 31, 1994. 
(see table below). Property and casualty insurance licensing
revenues for the nine months ended September 30, 1995 include $3.3
million relating to a distribution agreement, and $1.5 million
relating to an exclusive marketing arrangement, both with AT&T
Global Information Solutions (AT&T Global).  During the nine months
ended September 30, 1994, the Company recognized licensing revenues
of $3.0 million from AT&T Global.  The increase in property and
casualty initial license revenues was offset in part by a $3.9
million decrease in health insurance initial licensing revenue (see
Note 4 of Notes to Consolidated Financial Statements). 

  Because a significant portion of initial licensing revenues are
recorded at the time new systems are licensed, there can be
18

significant fluctuations in revenue from period to period. Set
forth below is a comparison of initial license revenues for the
nine months ended September 30, 1995 and 1994, expressed as a
percentage of total revenues for each of the periods presented:

                        Nine Months Ended     Nine Months Ended
                        September 30, 1995    September 30, 1994
                                 (Dollars in Millions)
 Property and Casualty 
Initial license 
  revenues.............       $23.4                $15.4
Total revenues.........         5.9%                 4.2%

         Life          
Initial license 
  revenues.............       $ 9.0                $ 8.6
Total revenues.........         2.3%                 2.3%

        Health         
Initial license 
  revenues.............       $  .3                $ 4.3
Total revenues.........          *                   1.2%

       Combined        
Initial license 
  revenues.............       $32.7                $28.3
Total revenues.........         8.2%                 7.7%

*Health Division divested June 30, 1995.

  Revenues from continuing monthly license charges ("MLC") for
Maintenance, Enhancements and Services Availability ("MESA")
remained relatively unchanged for the nine months ended September
30, 1995, compared to the corresponding period in 1994.
Nine                Nine
                              Months Ended        Months Ended
  Services                 September 30,1995   September 30,1994     Change 
                                        (Dollars in Millions)
Professional and outsourcing... $191.3               $153.2           24.9 %
Information....................  132.6                146.1           (9.2)%
Other..........................    1.4                  1.4             -   
                                $325.3               $300.7            8.2 %

Percentage of revenues.........   81.7%                81.8%
Professional and outsourcing services revenues for the nine
months ended September 30, 1995 increased $38.1 million (24.9%)
compared to the same period in 1994. This increase was principally
related to services from both new and existing contracts amounting
to $39.9 million for property and casualty insurance business and
$9.8 million for life insurance business, and was partially offset
by the decrease in revenues from the health insurance market of
19

$11.4 million (see Note 4 of Notes to Consolidated Financial
Statements). The increase in property and casualty business was 
the result of increased services in both the domestic and
international markets. The increase in the domestic market was the
result of an $11.1 million increase in volume related to new and
existing professional and outsourcing services contracts and a $9.5
million increase in volume related to the governmental and residual
markets for total policy management outsourcing services, while the
increase in the international market of $19.3 million was
principally due to the acquisition of Creative at December 31,
1994, and new services contracts in the European, Canadian and
Asia-Pacific regions. The increase in life insurance business is
principally the result of volume increases relating to both new and
existing outsourcing contracts and a new agreement for total policy
administration services in the domestic market, and to an increase
in the volume of professional and outsourcing services related to
new contracts in Europe.

  Information services revenues decreased $13.5 million (9.2%) from
the 1994 period to the 1995 period, due principally to a $15.2
million decrease in revenues related to the Company's domestic
property and casualty automobile and risk information services
business. This decrease is principally the result of 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 was partially offset by a $1.9 million (4.4%)
increase in life information services revenues (principally
attending physician statements and medical history reports).

Costs and Expenses

  Employee compensation and benefits for the nine months ended
September 30, 1995, compared to the same period in 1994, increased
$9.6 million (7.2%) principally as a result of increased salaries
and related costs of Creative, acquired at December 31, 1994, and
increased costs associated with the growth in staffing for
additional professional and outsourcing services activities. These
increases were offset in part by the decrease in compensation and
other benefits related to the Company's sale of its Health
Insurance Systems Division on June 30, 1995 (see Note 4 of Notes to
Consolidated Financial Statements) and decreased use of temporary
employees. 

  Computer and communications expense increased $3.9 million, due
principally to expenses for certain operating system management
software products utilized in the Company's worldwide data center
operations (see Note 1 of Notes to Consolidated Financial
Statements), and increased communications, data circuit and
maintenance costs associated with the growth of the Company's
20

domestic and international operations and additions of new
outsourcing business.

  The $12.7 million decrease in information services and data
acquisition costs is principally related to a continued decrease in
the volume of state fees for motor vehicle reports associated with
the domestic property and casualty automobile and information
services business (see Revenues).

  Although depreciation and amortization expense remained
relatively unchanged for the nine months ended September 30, 1995
compared to the same period in 1994, amortization of internally
developed software costs increased $3.6 million, due principally to
amortization associated with a new release of the Company's
property and casualty insurance Series III client/server software
system and the initial release of its life insurance CYBERLife
client/server software system, both of which became generally
available during the first quarter of 1995. These increases were
offset by a $2.8 million decrease in amortization charges resulting
principally from the impairment of certain identifiable intangible
assets, goodwill and software products relating to the Company's
property and casualty information services business (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) and $1.1
million in lower depreciation charges due principally to certain
retirements of data processing equipment.

  Other operating costs and expenses increased $12.2 million
(33.2%) principally due to an increase in the Company's use of
outside consultants and independent contractors relating to
increased professional services activities and costs of Creative,
acquired at December 31, 1994. Additionally, the Company
experienced increased operating costs associated with additional
total policy management outsourcing services activity (see
Revenues). These increases were offset in part by an increase in
amounts capitalized, which relate principally to the internal
development of the Company's property and casualty and life
insurance client/server software systems, by a decrease in general
legal costs and by decreased commissions paid to third parties. 

  The Company, as of September 30, 1995, provided for $7.9 million
in estimated litigation costs arising from two lawsuits to which
the Company is both a defendant and counter-claimant.  The costs
provided for include, but are not limited to, fees paid or
anticipated to be paid to external counsel and other costs related
to the Company's defense and claims regarding these matters (see
Item 1, Legal Proceedings, of Part II contained in the Company's
report on Form 10-Q for the quarter ended September 30, 1995).  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 the first quarter of 1995, in full settlement of
21

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).  

  On June 30, 1995, the Company completed the sale of its Health
Insurance Systems Division for a total consideration of $9.3
million in cash.  After selling expense and other accrued costs,
the Company recorded a pre-tax gain of $8.1 million (see Note 4 of
Notes to Consolidated Financial Statements).

  In June 1995, the Company reduced certain of its restructuring
reserves by $.4 million for the balances remaining, as of June 30,
1995, as a result of completing certain restructuring activities
for its life and health insurance businesses. 

  During June 1994, the Company, as a result of new events
occurring, changed its estimates and reduced its restructuring
reserves by $1.7 million, which were established at June 30, 1993
for employee severance and outplacement costs in connection with
the downsizing of its health insurance services staff. During
September 1994, the Company recorded a $1.8 million credit
resulting from the termination of a lease at amounts less than
those previously provided for in certain restructuring reserves
associated with the planned abandonment of certain leased office
facilities related to its health insurance services business (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). 

Operating Income

  Operating income, after the effects of the gain from the sale of
the Health Division and special charges, was $52.5 million for the
nine months ended September 30, 1995, compared with $36.1 million
for the corresponding period in 1994.  The Company on June 30, 1995
recorded a gain from the sale of the Company's Health Division of
approximately $8.1 million (see Note 4 of Notes to Consolidated
Financial Statements).  Special charges aggregating $6.0 million
for the nine months ended September 30, 1995 relate to litigation
settlement and other legal expenses, net ($6.2 million) and
impairment and restructuring credits ($.2 million).  Special
charges for the nine months ended September 30, 1994 of $3.5
million relate to impairment and restructuring credits (see Costs
and Expenses).

  Operating income, excluding the gain and special charges, was
$50.4 million for the nine months ended September 30, 1995,
compared with $32.7 million for the corresponding period in 1994.
22

Operating income, excluding the gain and special charges, as a
percentage of revenues increased to 12.7% for the first nine months
of 1995 from 8.9% for the comparable period in 1994.  The increase
in operating income, excluding the gain and special charges
(54.3%), results principally from the increase in professional and
outsourcing services revenues provided under new and existing
contracts with property and casualty insurance companies and
residual markets of $39.9 million, an increase in new professional
and outsourcing services revenues from life insurers of $9.8
million and an increase in initial license revenues of $4.4 million
from both property and casualty and life insurers (see Revenues).

  Revenues from professional and outsourcing services activities
increased, as a percentage of total revenues, from 41.7% for the
nine months ended September 30, 1994 to 48.1% for the same period
in 1995. The property and casualty information services business
continued to produce an operating loss, however, information
services revenues, as a percentage of total revenues, decreased
from 39.7% for the 1994 period to 33.3% for the 1995 period.

  Licensing revenues, as a percentage of total revenues, remained
relatively unchanged, representing 18.3% for the nine months ended
September 30, 1995 compared to 18.2% for the same period in 1994.
Excluding the effect of licensing revenues from the Company's
health division of $.9 million for the nine months ended September
30, 1995 and $6.2 million for the same period of 1994, licensing
revenues as a percentage of total revenues increased from 16.8% for
the nine month period in 1994 to 18.1% for the same period in 1995.
Because a substantial portion of initial licensing 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. 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 (see table above).

Other Income and Expense

  During 1994, the Company made large cash expenditures for the
acquisition of Creative ($19.9 million) in December 1994, the
repurchase of 2,278,537 of the 3,797,561 shares of common stock
held by IBM ($56.6 million) in May 1994, 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. Consequently, the Company
maintained a lower level of investable funds during the first nine
months of 1995, resulting in a decrease in investment income of
$3.3 million.
23

  As part of the Company's repurchase of its common stock during
the first nine months of 1994, the Company liquidated a portion of
its marketable securities portfolio and incurred a loss on the sale
of securities of approximately $1.8 million related directly to
this liquidation.

Income Taxes

  The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) for the nine months ended September
30, 1995 and 1994, was 32.6% and 35.3%, respectively. The effective
rate for 1995 was significantly lower due principally to the higher
tax basis than book basis of the assets divested relating to the
sale of the Company's Health Insurance Systems Division (see Notes
4 and 5 of Notes to Consolidated Financial Statements).
24

                     LIQUIDITY AND CAPITAL RESOURCES 

                                     September 30,   December 31,
                                         1995           1994     
Cash and equivalents, marketable         (Dollars in Millions)
  securities, and investments.........  $ 68.9         $ 34.3    
Current assets........................   204.6          167.7
Current liabilities...................    64.8           76.8
Working capital.......................   139.8           90.9
Current portion of long-term debt.....     1.7            4.7
Long-term debt........................    27.9            4.2

                                      Nine months    Nine months
                                         ended          ended
                                     September 30,  September 30,
                                         1995           1994    
                                         (Dollars in Millions)
Cash provided by operations...........  $ 70.7         $ 56.7
Cash (used) provided by          
  investing activities................   (55.5)          31.5
Cash provided (used) by 
  financing activities................    23.6          (94.2)

  The Company's financial condition remained strong at September
30, 1995. The increase in cash and equivalents, marketable
securities and investments compared to December 31, 1994 is due
principally to cash flows generated by operations, and proceeds
from the Company's unsecured credit facilities (discussed below).

  During the nine months ended September 30, 1995, the Company
reduced its liabilities for accrued restructuring charges and
employee severance and outplacement costs by $4.8 million ($6.4
million in cash outlays, less $.7 in non-cash discount
amortization, and $.9 million associated with revised estimates of
lease termination and severance costs).

  During the nine months ended September 30, 1994, as part of the
Company's repurchase of 3.2 million shares of its common stock for
$89.3 million, the Company liquidated a portion of its marketable
securities and had net positive cash flow from marketable
securities sales/purchasing activity of $72.8 million.  The Company
did not repurchase any of its outstanding common shares during the
nine months ended September 30, 1995, and had no significant
sales/purchases of securities during this period.  During the
second quarter of 1995, the Company expended $10.0 million to
acquire a significant outsourcing contract, (see Note 1 of Notes to
Consolidated Financial Statements).

  On August 11, 1995 the Company entered into two unsecured credit
facilities of $100 million each with a syndicate of financial
25

institutions.  These lines of credit may be used for general
corporate purposes (see Note 3 of Notes to Consolidated Financial
Statements). During the third quarter of 1995, the Company utilized
these facilities to fund, in part, certain acquisitions anticipated
to be completed during the fourth quarter of 1995 (see Note 6 of
Notes to Consolidated Financial Statements).

  Significant expenditures anticipated for the remainder of 1995,
excluding any possible business and/or contract acquisitions and
stock repurchases, are as follows: acquisition of data processing,
communications equipment and office furniture, fixtures and
equipment ($5.0 million) and costs relating to the internal
development of software systems ($13.0 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 operating needs;  however, the
Company may also consider incurring debt as needed to accomplish
specific objectives in these areas and for other general corporate
purposes.

                  FACTORS THAT MAY AFFECT FUTURE RESULTS

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

  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
26

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.
27

                                  PART II
                             OTHER INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION

Item 1. Legal Proceedings

  The Company is involved in lawsuits with Security Life of Denver
Insurance Company and with the California State Automobile Inter-
Insurance Bureau and the California State Automobile Association
(see Item 1, Legal Proceedings, of Part II contained in the
Company's report on Form 10-Q for the quarter ended March 31,
1995).  The Company was informed by its insurer that based upon the
allegations raised in these two lawsuits, the insurer does not
believe it would be obligated under the Company's insurance
policies to reimburse defense costs or indemnify the Company for
any payments relating to these claims.  The Company disagrees with
this conclusion and on June 20, 1995 the Company's insurer 
commenced a declaratory judgment action to determine the insurer's
obligations related to defense costs and indemnity related to these
two lawsuits.  As a result of this action, the Company determined
it was probable the Company would incur litigation expenses for
certain actual expenses previously incurred and for estimated
future litigation expenses arising from these matters through their
conclusion, over the next twelve months, of $7.9 million, which
estimate was provided for as of June 30, 1995 based upon the
Company's prior experience in these matters.

  See Note 1, "Commitments and Contingencies" of Notes to
Consolidated Financial Statements.

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

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

Exhibits

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

Reports on Form 8-K

  The Company did not file any reports on Form 8-K during the
quarter ended September 30, 1995.
28

                   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:  November 14, 1995           By:  Timothy V. Williams
                                        Executive Vice President
                                        (Chief Financial Officer)