<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 June 30, 1994         Commission file number 0-10175



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



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


One PMS Center (P.O. Box Ten)
Blythewood, S.C. (Columbia, S.C.)                             29016 (29202)
(Address of principal executive                                 (Zip Code) 
  offices)


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

Yes           No   X   

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

  20,358,484 Common shares, $.01 par value, as of July 31, 1994



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, 1993.

<PAGE> 2
                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                   INDEX


PART I. FINANCIAL INFORMATION                                PAGE

  Item 1. Financial Statements

          Consolidated Statements of Operations for 
            the three and six months ended June 30, 1994 
            and 1993.......................................... 3

          Consolidated Balance Sheets as of 
            June 30, 1994 and December 31, 1993............... 4

          Consolidated Statements of Cash Flows for
            the six months ended June 30, 1994 and 1993....... 5

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

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


PART II. OTHER INFORMATION


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

  Item 6. Exhibits and Reports on Form 8-K....................23 

Signatures....................................................24 






  


<PAGE> 3
                                   PART I
                           FINANCIAL INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF OPERATIONS

                                         Three Months          Six Months
                                         Ended June 30,       Ended June 30,
                                        1994       1993       1994      1993  
                                          (Unaudited)     (Unaudited) (Note 1)
                                        (In Thousands, Except Per Share Data)
Revenues:
  Licensing.......................... $ 23,521  $ 23,100   $ 39,991  $ 42,955
  Services...........................  101,220    93,608    200,692   192,968
                                       124,741   116,708    240,683   235,923
 
Costs and Expenses: 
  Employee compensation & benefits...   44,872    44,658     89,842    84,255
  Computer and communications 
    expenses.........................   11,515    10,044     22,712    20,921
  Information services and                                      
    data acquisition costs...........   33,370    35,091     67,826    62,019
  Other operating costs & expenses...   23,029    43,647     40,531    70,143
  Impairment and restructuring 
    charges (credits)................   (1,715)   80,733     (1,715)   80,733
                                       111,071   214,173    219,196   318,071

Operating income (loss)..............   13,670   (97,465)    21,487   (82,148)

Other Income and Expenses:
  Investment income..................    1,849     2,376      3,672     5,705
  Gain/(loss) on sale of marketable
    securities.......................     (802)       97       (819)    3,033
  Interest expense and other
    charges..........................     (824)     (458)    (1,719)     (797)
                                           223     2,015      1,134     7,941

Income (loss) before income tax
  (benefit)..........................   13,893   (95,450)    22,621   (74,207)

Income taxes (benefit)...............    5,295   (21,402)     8,455   (13,784)

Net income (loss).................... $  8,598  $(74,048)  $ 14,166 $ (60,423)

Net income (loss) per share.......... $    .40  $(  3.27)  $    .64 $ (  2.62)

Weighted average number of shares....   21,498    22,662     22,067    23,098


See accompanying notes.




<PAGE> 4

<TABLE>

                     POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<CAPTION>

                                                        (Unaudited)    (Audited)
                                                          June 30,    December 31,
                                                            1994          1993   
                                                             (In Thousands,
                                                           Except Share Data)
<S>                                                       <C>          <C>
Assets
Current assets:
  Cash and equivalents................................... $ 22,484     $ 24,122
  Marketable securities..................................   83,624      132,650
  Receivables, net of allowance for uncollectible 
     amounts of $1,509 ($1,817 at 1993)..................   90,044       92,975
  Income tax receivable..................................   20,586       18,764
  Deferred income taxes..................................    7,352        9,491
  Other..................................................   11,310        9,735
     Total current assets................................  235,400      287,737

Property and equipment, at cost less accumulated
     depreciation and amortization of $116,681
     ($102,623 at 1993)..................................  132,922      139,029
Receivables..............................................      105        4,716
Goodwill and other intangible assets.....................   81,046       85,969
Capitalized software costs...............................  124,750      117,513
Deferred income taxes....................................   14,727       21,585
Investments..............................................    6,500         -           
Other....................................................    3,939        3,254
        Total assets..................................... $599,389     $659,803

Liabilities
Current liabilities:
  Accounts payable and accrued expenses.................. $ 43,590     $ 42,256
  Accrued restructuring charges..........................    1,188        9,521
  Accrued contract termination costs.....................    1,147        2,714
  Current portion of long-term debt......................    4,088        6,986
  Income taxes payable...................................    2,728         -
  Unearned revenues......................................   16,152       19,121
  Other..................................................      216          383
     Total current liabilities...........................   69,109       80,981

Long-term debt...........................................    4,341        5,655
Deferred income taxes....................................   70,890       74,151
Accrued restructuring charges............................   18,517       19,735
Other....................................................    2,151        2,309
     Total liabilities...................................  165,008      182,831
 
Commitments and contingencies (Note 3)

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares 
   authorized............................................     -             -
Common stock, $.01 par value, 75,000,000 shares 
   authorized, 20,358,484 shares issued and 
   outstanding (22,637,021 at 1993)......................      203          226
Additional paid-in capital...............................  205,635      262,167
Retained earnings........................................  230,798      216,632
Unrealized holding loss on marketable securities.........     (937)         -
Foreign currency translation adjustment..................   (1,318)      (2,053)
     Total stockholders' equity..........................  434,381      476,972
        Total liabilities and stockholders' equity....... $599,389     $659,803

<FN>

See accompanying notes.

</TABLE>

<PAGE> 5

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                     Six Months Ended
                                                    June 30,    June 30,
                                                      1994        1993
                                                  (Unaudited)  (Audited)
Operating Activities                                  (In Thousands) 
  Net income/(loss)...............................  $ 14,166   $(60,423)
  Adjustments to reconcile net income/(loss) to 
   net cash provided by operating activities:     
    Depreciation and amortization.................    31,374     33,947
    Deferred income taxes.........................     5,736    (13,776)
    Loss/(gain) on sale of marketable  
      securities..................................       819     (3,034)
    Provision for uncollectible accounts..........       280      1,067
    Impairment charges............................       -       54,890
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termination costs...........................    (8,803)    25,843
    Receivables...................................     7,262     10,048
    Income taxes receivable.......................    (1,822)   (13,426)
    Accounts payable and accrued expenses.........     1,334      4,881
    Income taxes payable..........................     2,728        -
  Other, net......................................    (5,756)    (1,670)
       Cash provided by operations................    47,318     38,347
  
Investing Activities
  Proceeds from sales/maturities of marketable
   securities, net................................   126,710    230,849
  Purchases of marketable securities, net.........   (87,873)  (142,672)
  Acquisition of property and equipment...........    (7,961)   (32,923)
  Capitalized internal software development  
   costs..........................................   (17,890)   (11,544)
  Purchased software..............................      (157)    (3,275)
  Proceeds from disposal of property & equipment..       304      8,935
  Business acquisitions...........................       -       (2,840)
       Cash provided by investing activities......    13,133     46,530 

Financing Activities
  Payments on long-term debt......................    (4,597)    (3,678)
  Issuance of common stock under stock 
    option plans..................................       -          674
  Issuance of common stock to employee             
    benefit plan..................................       -          579
  Repurchase of common stock......................   (56,555)   (48,660)
       Cash used for financing activities.........   (61,152)   (51,085)

Effect of exchange rate changes on cash...........      (937)       174
Net (decrease) increase in cash & equivalents.....    (1,638)    33,966 
Cash and equivalents at beginning of period.......    24,122     31,959
Cash and equivalents at end of period.............  $ 22,484   $ 65,925

Noncash Activities
  Long-term debt arising from and assumed in           
   connection with business acquisition...........  $    -     $  2,987
Supplemental Information
  Interest paid...................................     1,390        381
  Income taxes paid...............................     2,099     11,688

See accompanying notes.



<PAGE> 6

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               June 30, 1994


NOTE 1. RESTATEMENT OF PRIOR YEAR RESULTS OF OPERATIONS

  In August 1993, the Company engaged independent accountants to
conduct a special audit of the Company's balance sheet as of
December 31, 1992 and its consolidated financial statements as of
and for the six months ended June 30, 1993.  As a result of this
audit, the Company determined that retained earnings previously
reported as of December 31, 1992 required adjustment.  These
adjustments were due to errors in the application of accounting
principles and subsequent discovery of facts existing at February
26, 1993, the date of the predecessor auditor's report (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, 1993). 

  The Company is in the process of determining the specific periods
affected by the adjustments prior to December 31, 1992.  Once
determined, the Company intends to restate the financial statements
for such periods.  The consolidated financial statements as of and
for the six months ended June 30, 1993 reflect adjustments, related
to deferral of revenues due to changes in timing of revenue
recognition, reserve for losses on certain contracts and a
reduction of expenses due to capitalization of certain software
costs, that the Company determined were necessary as a result of
the special audit.


NOTE 2. MARKETABLE SECURITIES

  Effective January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," ("FAS
115").  In accordance with the provisions of FAS 115, the Company
has classified debt securities (primarily municipal bonds) either
as available-for-sale, which are carried at fair market value and
shown as Marketable Securities, or as held-to-maturity, which are
carried at amortized cost and shown as Investments.  Unrealized
gains and losses on securities classified as available-for-sale are
reported net and are included in Stockholders' Equity. 

<PAGE> 7

NOTE 3.  CONTINGENCIES

  In April 1993, litigation was commenced against the Company and
certain of its present and former officers and directors in the
United States District Court for the District of South Carolina,
Columbia Division.  In the litigation, which purports to be a class
action on behalf of purchasers of the Company's common stock
between March 18, 1992 and July 8, 1993, the plaintiffs allege that
the Company failed to prepare its financial statements in
accordance with generally accepted accounting principles and
omitted to disclose certain information regarding, among other
things, its business and prospects in violation of the Federal
securities laws, the South Carolina Code and common law.  The
Company believes it has meritorious defenses to the claims and is
vigorously defending the litigation.  The plaintiffs seek
unspecified compensatory damages, legal fees and litigation costs.
The Company is unable to predict the outcome or the potential
financial impact of this litigation. The maximum insurance
coverage related to these claims is $15 million under the
directors' and officers' insurance.

  In June 1993, the Securities and Exchange Commission ("SEC")
commenced a formal investigation into possible violations of the
Federal securities laws in connection with the Company's public
reports and financial statements, as well as trading in the
Company's securities.  The SEC has issued a formal order of
investigation which provides the SEC staff with the power to
subpoena documents and to compel testimony in connection with their
investigation. The Company is cooperating with the SEC in
connection with the investigation.

  In addition to the litigation noted above, the Company is
presently involved in litigation and a contract dispute arising out
of the Company's change in the direction of its future life
software systems development following the acquisition of CYBERTEK. 
The Company believes it has meritorious defenses and is vigorously
defending this litigation.  The Company is unable to predict the
ultimate outcome or the potential financial impact of this
litigation.  While the resolution of these matters could affect the
results of operations in a future period, the Company does not
expect these matters to have a material adverse effect on its
consolidated financial position.

NOTE 4. INCOME TAXES

  In 1992, the Internal Revenue Service completed an examination
of the Company's consolidated federal income tax returns for the
years 1985 through 1988 and has proposed certain adjustments to
income and credits that result in proposed tax deficiencies in the
amount of $17,785,000 for those years.  The Company believes that

<PAGE> 8

its judgment in the areas for which adjustments have been proposed
has been appropriate and is contesting the proposed adjustments. 
The Company believes that adequate amounts of federal income taxes
are provided in the consolidated financial statements.

NOTE 5.  IMPAIRMENT AND RESTRUCTURING

  The Company recorded, at June 30, 1993, impairment charges to
reduce the carrying value of certain identifiable intangible assets
and goodwill related to its health insurance services business of
$54.9 million and restructuring charges of $25.2 million associated
with employee severance and outplacement ($5.2 million), and 
related to an ongoing lease obligation and/or termination for the
planned future abandonment of certain leased office facilities
($20.0 million) (see Note 13 of Notes to Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993).  At June 30, 1994 the Company reduced its
restructuring reserves by $1.7 million, which were established for
employee severance and outplacement costs in connection with the
downsizing of its health staff.

NOTE 6. OTHER MATTERS

  The Company recently received a decision from an international
arbitration tribunal relating to a contract termination dispute, 
finding that both parties were responsible. The Company has not
determined whether it will appeal this decision but has made
provision for satisfaction of this award in the amount of $1.9
million.

  As previously reported, the Company announced on April 27, 1994, 
that it had agreed with IBM to repurchase 2,278,537 of the
3,797,561 shares of the Company's common stock held by IBM and that
the remainder of the Company's shares owned by IBM would be
purchased by the General Atlantic Partners group, a New York-based
private investment firm.  The Company completed the repurchase of
these shares at a share price of $24.77, which approximated an
aggregate cash expenditure of $56.5 million, during the second
quarter of 1994.  The shares repurchased by the Company represent
10% of its total shares outstanding prior to the repurchase.

  Pursuant to a stock repurchase program approved by the Board of
Directors in June 1994, the Company may purchase from time to time
up to 2.5 million shares of its issued and outstanding common
stock.  This program is flexible as to the timing and method of
acquisition of these shares.

<PAGE> 9

                   POLICY MANAGEMENT SYSTEMS CORPORATION

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

  The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding
of the Company's consolidated results of operations and financial
condition.  The discussion should be read in conjunction with the
consolidated financial statements and notes thereto contained in 
Part I of this report on Form 10-Q and with the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.

                           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>
                                                                    1994   vs   1993
                                                                    Percent Increase
                                                                       (Decrease)    
                                Percentage         Percentage       Three      Six 
                               of Revenues        of Revenues       Months    Months
                               Three Months        Six Months       Ended     Ended 
                              Ended June 30,     Ended June 30,    June 30,  June 30,
                              1994      1993     1994      1993     
<S>                          <C>       <C>      <C>       <C>      <C>       <C>
Revenues:
Licensing...................  18.9      19.8     16.6      18.2      1.8      (6.9)
Services....................  81.1      80.2     83.4      81.8      8.1       4.0 
                             100.0     100.0    100.0     100.0      6.9       2.0
Costs and Expenses:
Employee compensation
    and benefits............  36.0      38.3     37.3      35.7       .5       6.6
Computer & communication
    expense.................   9.2       8.6      9.5       8.9     14.6       8.6
Information services & data
    acquisition costs.......  26.7      30.0     28.2      26.3     (4.9)      9.4 
Other operating costs
    and expenses............  18.5      37.4     16.8      29.7    (47.2)    (42.2) 
Impairment and restructuring
    charges (credits).......  (1.4)     69.2      (.7)     34.2   (102.1)   (102.1)
                              89.0     183.5     91.1     134.8     47.6      30.7

Operating income (loss).....  11.0     (83.5)     8.9     (34.8)   114.0     126.2 
Other income and expenses...    .1       1.7       .5       3.4    (88.9)    (85.7)

Income (loss) before income
    tax (benefit)...........  11.1     (81.8)     9.4     (31.4)   114.6     130.5

Income taxes (benefit)......   4.2      18.3      3.5       5.8    124.7     161.3

Net income (loss)...........   6.9     (63.5)     5.9     (25.6)   111.6     123.4


</TABLE>


<PAGE> 10

THREE MONTHS COMPARISON

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

                                                                Operating 
                                             Operating         Income as a
                             Revenues         Income          % of Revenue  
                           Three Months     Three Months       Three Months
                          Ended June 30,   Ended June 30,     Ended June 30,
                          1994     1993    1994     1993      1994     1993
                                        (Dollars in Millions)
  Line of Business   
Property & Casualty     $ 88.2   $ 92.7   $13.5    $14.9      15.3     16.0
Life                      30.0     14.9     2.8     (5.0)      9.3    (31.5)
Health                     6.5      9.1     1.3     (3.1)     19.4    (34.4)

  Geographic Market  
United States           $107.2   $102.8   $16.1    $ 4.5      15.0      4.4
International             17.5     13.9     1.5      2.3       8.8     16.5 

  The above table does not include an allocation of revenues and
costs associated with corporate activities such as equipment sales,
financial services, legal and other general corporate activities. 
There were no equipment sales during the three months ended June
30, 1994 or 1993. Costs associated with these corporate activities
amounted to $3.9 million and $6.0 million, excluding special
charges, for the three months ended June 30, 1994 and 1993,
respectively (see Costs and Expenses below).

Revenues

  Total licensing revenues for the three months ended June 30, 1994
increased $.4 million (1.8%) compared to the corresponding period
in 1993, due primarily to a $4.4 million increase in initial
license revenues attributable to new systems licensed by life
insurers and by increased revenues from continuing monthly license
charges for maintenance, enhancements and services availability
("MESA") and for continuing right-to-use licenses of $1.9 million
(17.0%).  These increases were partially offset by a reduction in
initial license revenues, compared with the 1993 second quarter,
related to the property and casualty business in the United States.

  Total services revenues for the three months ended June  30, 1994
increased $7.6 million (8.1%) compared to the corresponding period
in 1993.  The total services revenue increase was affected by
activities in professional, outsourcing and information services,
as described more fully below.

  Revenues from professional services increased $5.4 million
(39.0%) to $19.2 million for the three months ended June 30, 1994
from $13.8 million for the corresponding period in 1993, due 
primarily to additional services ($5.0 million) generated by the

<PAGE> 11

life insurance services business.

  Revenues from outsourcing services amounted to $32.0 million for
the three months ended June 30, 1994, an increase of $1.4 million
(4.7%) compared to the corresponding period in 1993.  Revenues from
outsourcing services increased $9.5 million as a result of new
outsourcing services relating to life insurance services in Europe
and servicing existing and new contracts with property and casualty
insurance companies and residual markets.  These increases were
partially offset by the wind-down of the New Jersey Market
Transition Facility (MTF) project, where revenues from this
property and casualty contract decreased from $5.5 million for the
three months ended June 30, 1993 to $.7 million for the three
months ended June 30, 1994, and to the termination of a facilities
management and processing contract in September 1993, representing
$3.3 million of life insurance services business in Europe for the
three months ended June 30, 1993.  

  Revenues from information services were $49.4 million for the
three months ended June 30, 1994 as compared with $50.0 million 
for  the corresponding period in 1993.  This $.6 million decrease
is attributable to a decrease in business associated with
automobile property and casualty information services, principally
as a result of a sale of a small non-strategic division.  These
decreases, however, were partially offset by  an increase in life
and health information services.

Costs and Expenses

  Computer and communications expenses increased $1.5 million for
the three months ended June 30, 1994 compared to the corresponding
period in 1993, primarily as a result of increased costs associated
with the acquisition of CYBERTEK Corporation in August 1993, and
the acquisition of a data center, including its workforce, in
Bergen, Norway in December 1993.

  Information services and data acquisition costs decreased $1.7
million for the three months ended June 30, 1994 compared to the
corresponding period in 1993, due primarily to a decrease in the
volume of state fees for motor vehicle reports, which is part of
the Company's property and casualty information services business.

  Other operating costs and expenses for the three months ended
June 30, 1994 decreased $20.6 million when compared to the
corresponding period in 1993. The decrease is primarily
attributable to one-time charges in 1993 related to early project
terminations, the deductible under the Company's Directors' and
Officers' liability insurance policy in response to shareholder
litigation, cost overruns on certain projects and other charges
arising from the Company's previously disclosed internal 
investigation of its accounting practices.  Certain of these

<PAGE> 12

charges, $16.0 million, were recorded during the three months ended
June 30, 1993.  In addition to these charges, other operating costs
and expenses declined as a result of a decrease in costs associated
with the wind-down of the New Jersey MTF project, a decrease
associated with the recovery of certain receivables previously
written off, and an increase in amounts capitalized principally
related to the internal development of the Company's life software
systems.  These decreases were partially offset by increases in
operating costs associated with providing total policy management
outsourcing services for new customers. 

  Other operating costs and expenses include a charge of $1.9
million associated with the recent settlement of a contract
dispute, which was decided through an international arbitration
tribunal (see Note 6 of Notes to Consolidated Financial
Statements).

  At June 30, 1994 the Company reduced its restructuring reserves
by $1.7 million, which were established for employee severance and
outplacement costs in connection with the downsizing of its health
staff.  The Company recorded, at June 30, 1993, impairment charges
to reduce the carrying value of certain identifiable intangible
assets and goodwill related to its health insurance services
business of $54.9 million and restructuring charges of $25.2
million associated with employee severance and outplacement ($5.2
million), and related to an ongoing lease obligation and/or
termination for the planned future abandonment of certain leased
office facilities ($20.0 million) (see Note 13 of Notes to
Consolidated Financial Statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 1993).  

Operating Income

    Operating income was $13.7 million for the three months ended
June 30, 1994, compared with an operating loss of $97.5 million for
the corresponding period in 1993.  The operating loss for the three
months ended June 30, 1993 was after giving effect to special
charges of $98.3 million relating to impairment and restructuring
charges ($80.7 million) and charges principally arising from the
Company's previously disclosed internal investigation of its
accounting practices ($17.6 million).

  Operating income, excluding impairment and restructuring charges
(credits) and other special charges, as a percentage of revenues
increased to 9.6% for the three months ended June 30, 1994 from .7%
for the comparable period in 1993.  This increase resulted
primarily from an increase in life insurance services in Europe,
professional and outsourcing services provided under existing and
new contracts with property and casualty insurance companies and
residual markets, and to an increase in initial license revenues 
from the Company's life insurance systems business.

<PAGE> 13

  The Company's health insurance services business continues to
show some improvement.  Improvements result from a reduction in
operating costs associated with the reduction in amortization
charges for certain identifiable intangible assets and goodwill,
which were written-off at June 30, 1993, a reduction in rental
expense related to a lease termination and compensation and other
benefits costs through the downsizing of staff.

  The property and casualty insurance software and services
business experienced a lower level of revenue primarily from
decreased licensing activities and information services during the
three months ended June 30, 1994 compared to the corresponding
period of 1993.  However, operating income improved from the first
quarter of 1994 as a result of improvement in outsourcing revenues
related to total policy management services.

  Although the Company has not been able to reduce its operating
expenses, associated with the wind-down of the MTF project, as
quickly as the reduction in revenue from the MTF occurred, 
operating income from services provided under additional new
outsourcing contracts with insurance companies and residual markets
have started to replace operating income lost from the MTF project. 
Revenues for the three months ended June 30, 1994 increased $2.6
million compared to the corresponding period in 1993; however,
margins will be reduced during the early phases of these contracts
due to start-up costs.

  The information services business for both the property and
casualty and the life and health businesses produced improved
operating results for the three months ended June 30, 1994 
compared with the corresponding period in 1993.  The Company is
attempting to direct more of its information services business into
database products and life and health information services where
margins are generally higher.  The Company typically realizes a
lower gross margin from property and casualty information services
than from software products and related services.  

  In August 1993, the Company completed its acquisition of CYBERTEK
Corporation. The Company continues to focus on integrating
CYBERTEK's products with the Company's Series III applications and
technology.  The Company has also completed the combination of
CYBERTEK with the Company's life insurance software and services
organization to eliminate redundancies.  Although ongoing expenses
of combination continued at a high level in the second quarter,
total revenues and operating income for the Company's life business
increased $15.1 million and $12.4 million, respectively, for the
three months ended June 30, 1994, compared to the corresponding
period in 1993, due primarily to the CYBERTEK acquisition, the
addition of a new outsourcing contract in Europe during December
1993, and to increased initial license revenues.

  Investment income decreased $.5 million during the three months
ended June 30, 1994, compared to the corresponding period in 1993,

<PAGE> 14

as a result of a lower level of investable funds resulting from
large cash expenditures for the acquisition of CYBERTEK Corporation
($59.7 million) in August 1993,  the repurchase in April 1993 of
970,668 shares of the Company's common stock ($48.7 million), the
repurchase in May 1994 of 2,278,537 of the 3,797,561 shares of
common stock held by IBM ($56.5 million), and to a decrease in
interest income related to long-term accounts receivable.

  As part of the Company's repurchase of 2,278,537 of the 3,797,561
shares of its common stock held by IBM, at a price of $24.77 per
share, the Company liquidated a portion of its marketable
securities.  The Company incurred a loss on the sale of securities
of approximately $.8 million related directly to the repurchase
during the second quarter of 1994 (see Note 6 of Notes to
Consolidated Financial Statements).

  Interest expense and other charges increased $.4 million for the
three months ended June 30, 1994 when compared to the corresponding
period in 1993, primarily as a result of the amortization of
discounts associated with long-term restructuring liabilities
recorded at June 30, 1993.  These liabilities are part of
restructuring charges established to recognize as a loss the
planned future abandonment of certain facilities relating to the
restructuring of the Company's health insurance services business
(see Note 13 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).

  The effective income tax (benefit) rate (income taxes expressed
as a percentage of pre-tax income) was 38.1% and (22.4)% for the
three months ended June 30, 1994 and 1993, respectively.  The 
effective income tax benefit rate for the 1993 period does not
include the impact of the increase in the highest marginal
corporate tax rate resulting from the enactment of the Omnibus
Budget Reconciliation Act of 1993, since the enactment date (August
10, 1993) was subsequent to June 30, 1993.  The effective tax
benefit rate would have been significantly higher (38.2%) were it
not for the write off of goodwill ($39.4 million) related to the
impairment of the Company's health insurance systems business (see
Note 13 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).  The effective tax rate for the three months ended June
30, 1994 includes the impact of the increase (1%) in the highest
marginal corporate tax rate.

<PAGE> 15

SIX MONTHS COMPARISON

  A comparison of revenues and operating income for each line of
business and geographic market for the periods presented is as
follows:
                                                               Operating
                                             Operating        Income as a
                            Revenues          Income          % of Revenue 
                           Six Months        Six Months        Six Months
                         Ended June 30,    Ended June 30,    Ended June 30, 
                          1994     1993    1994      1993    1994      1993
                                       (Dollars in Millions)
  Line of Business   
Property & Casualty     $167.8   $179.8   $20.7     $30.8    12.4      17.2
Life                      57.1     33.7     3.4      (5.3)    6.0     (15.7)
Health                    15.8     18.6     3.8      (5.2)   23.8     (28.0)


  Geographic Market  
United States           $206.5   $203.7   $24.8     $15.8    12.0       7.8
International             34.2     28.4     3.1       4.5     9.2      14.2

  The above table does not include an allocation of revenues and
costs associated with corporate activities such as equipment sales,
financial services, legal and other general corporate activities. 
Revenues related to equipment sales amounted to $3.8 million for
the six months ended June 30, 1993.  There were no equipment sales
during the corresponding period of 1994.  Costs associated with
these corporate activities amounted to $6.4 million and $7.4
million, excluding special charges, for the six months ended June
30, 1994 and 1993, respectively (see Costs and Expenses below).

Revenues

  Total licensing revenues for the six months ended June 30, 1994
decreased $3.0 million (6.9%) compared to the corresponding period
in 1993, due primarily to a $6.1 million decrease in initial
license revenues.  The reduction in  systems licensed was primarily
related to the property and casualty business in the United States,
partially offset by systems licensed by life insurers. The
reduction in initial license revenues was partially offset by
increased revenues from continuing monthly license charges for
maintenance, system enhancements and services availability ("MESA")
and for continuing right-to-use licenses of $3.1 million (13.6%)
compared to the corresponding period in 1993. 

  Total services revenues for the six months ended June  30, 1994
increased $7.7 million (4.0%) compared to the corresponding period
in 1993.  The total services revenue increase was primarily
affected by activities in professional, outsourcing and information
services, as described more fully below.

  Revenues from professional services increased $9.7 million
(31.5%)  to $40.6 million for the  six months ended June 30, 1994 

<PAGE> 16

from $30.9 million for the corresponding period in 1993, due
primarily to additional services ($8.9 million) generated by the
life insurance services business.

  Revenues from outsourcing services were $61.0 million for the six
months ended June 30, 1994, a decrease of $5.0 million (7.6%)
compared to the corresponding period in 1993.  The decrease was
primarily attributable to the wind-down of the New Jersey Market
Transition Facility (MTF) project, where revenues from this
property and casualty business decreased from $15.1 million for the 
first six months in 1993 to $1.6 million for the first six months
in 1994, and to the termination of a facilities management and
processing contract in September 1993, representing $6.8 million of
life insurance services revenue in Europe for the six months ended
June 30, 1993.  These decreases were partially offset by an
increase of $15.3 million, resulting primarily from an increase of
$5.1 million in new outsourcing services relating to life insurance
services in Europe and an increase of $9.0 million in servicing
existing and new contracts with property and casualty insurance
companies and residual markets.

  Revenues from information services were $98.4 million for the six
months ended June 30, 1994 as compared with $92.9 million for  the
corresponding period in 1993.  This $5.5 million increase is
primarily attributable to an increase in business associated with
automobile property and casualty information services and life and
health information services.  These increases, however, were
partially offset by a reduction in property and casualty
information services revenue associated with risk services.

Costs And Expenses

  Employee compensation and benefits increased $5.6 million for the
six months ended June 30, 1994 compared to the corresponding period
in 1993, primarily as a result of increased costs ($9.8 million)
associated with the acquisition of CYBERTEK Corporation in August
1993, and the acquisition of a data center, including its
workforce, in Bergen, Norway.  The increase in costs associated
with these acquisitions was partially offset by a reduction in
compensation and other benefits resulting from a downsizing in the
Company's health insurance services staff from 437 at June 30, 1993
to approximately 288 at June 30, 1994.  These scheduled staff
reductions are part of the Company's restructuring of its health
business (see Note 13 of Notes to Consolidated Financial Statements
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993).

   Computer and communications expenses increased $1.8 million for
the six months ended June 30, 1994 compared to the corresponding
period in 1993, primarily as a result of increased costs associated
with the acquisition of CYBERTEK Corporation in August 1993, and
the acquisition of a data center, including its workforce, in
Bergen, Norway.

<PAGE> 17

  Information services and data acquisition costs increased $5.8
million for the six months ended June 30, 1994 compared to the
corresponding period in 1993, due primarily to an increase in the
volume of state fees for motor vehicle reports, which is part of
the Company's property and casualty information services business.

  Other operating costs and expenses for the six months ended June
30, 1994 decreased $29.6 million when compared to the corresponding
period in 1993.  The decrease is primarily attributable to charges
related to early project terminations, the deductible under the
Company's Directors' and Officers' liability insurance policy in
response to shareholder litigation, cost overruns on certain
projects and other charges arising from the Company's previously
disclosed internal investigation of its accounting practices. 
These charges, $16.4 million, were recorded during the six months
ended June 30, 1993.  In addition to these charges, other operating
costs and expenses declined as a result of a reduction in the cost
of equipment sold of $3.5 million, a decrease in costs associated
with the wind-down of the New Jersey MTF project, a decrease
associated with the recovery of certain receivables previously
written off, and an increase in amounts capitalized principally
related to the internal development of the Company's life software
systems.  These decreases were partially offset by an increase in
operating costs associated with providing total policy management
outsourcing services for new customers.

  Other operating costs and expenses include a charge of $1.9
million associated with the recent settlement of a contract
dispute, which was decided through an international arbitration
tribunal (see Note 6 of Notes to Consolidated Financial
Statements).

  At June 30, 1994 the Company reduced its restructuring reserves
by $1.7 million, which were established for employee severance and
outplacement costs in connection with the downsizing of its health
staff (see Note 13 of Notes to Consolidated Financial Statements in
the Company's Annual Report on Form 10-K for the year ended
December 31, 1993).

Operating Income

   Operating income was $21.5 million for the six months ended June
30, 1994, compared with an operating loss of $82.1 million for the
corresponding period in 1993.  The operating loss for the six
months ended June 30, 1993 resulted after giving effect to the
special charges of $98.8 million relating to impairment and
restructuring charges ($80.7 million) and other special charges 
($18.1 million).

  Operating income, excluding impairment and restructuring charges 
(credits) and other special charges, as a percentage of revenues
increased to 8.2% for the six months ended June 30, 1994 from 7.0%
for the comparable period in 1993.  This increase resulted 

<PAGE> 18

primarily from an increase in outsourcing services related to life
insurance services in Europe, professional and outsourcing services
provided under existing and new contracts with property and
casualty insurance companies and residual markets, and to an
increase in initial license revenues from the Company's life
insurance systems business.

  The Company's health insurance services business continues to
show some improvement over the prior year's first six month
results.  Improvements result from a reduction in operating costs
associated with amortization charges for certain identifiable
intangible assets and goodwill, which were written-off at June 30,
1993, a reduction in rental expense related to a lease termination
and compensation and other benefits costs through the downsizing of
staff.  

  The property and casualty insurance software and services
business experienced a lower level of revenue and operating income
primarily from decreased licensing activities and outsourcing
services during the six months ended June 30, 1994 than in the
corresponding periods of 1993.  Outsourcing services for property
and casualty insurers have not met expectations due to several
contracts not closing or ramping up as fast as anticipated  and the
Company has not been able to reduce its operating expenses,
associated with the wind-down of the MTF project, as quickly as the
reduction in revenue from the MTF occurred.  However, as a result
of an increased role in servicing additional new contracts with
insurance companies and residual markets, the Company is beginning
to replace revenues lost from the MTF project, during the six
months ended June 30, 1994.  Margins have improved but will be
reduced during the early phases of these contracts due to start-up
costs.

  The information services business for both the property and
casualty and the life and health businesses produced lower
operating results for the six months ended June 30, 1994  compared
with the corresponding period in 1993.  Margins in the property and
casualty information services business were lower primarily as a
result of an overall decline in inspection usage, while margins in
the life and health information services business were adversely
affected by higher costs.  The Company is attempting to direct more
of its information services business into database products and
life and health information services where margins are generally
higher.  The Company typically realizes a lower gross margin from
property and casualty information services than from software
products and related services.  

  One time costs of integrating CYBERTEK with the Company's life
insurance systems business continued at a high level in the first
six months of 1994; however, total revenues for the Company's life
business were 67.2% higher ($22.6 million) for the six months ended
June 30, 1994, compared to the corresponding period in 1993, due
primarily to the CYBERTEK acquisition, the addition of a new
outsourcing contract in Europe during December 1993, and to
increased initial license revenues.

<PAGE> 19

  Investment income decreased $2.0 million for the six months ended
June 30, 1994 compared to the corresponding period in 1993, as a
result of a lower level of investable funds, resulting from large
cash expenditures for the acquisition of CYBERTEK Corporation
($59.7 million) in August 1993,  the repurchase in April 1993 of
970,668 shares of the Company's common stock ($48.7 million), the
repurchase in May 1994 of 2,278,537 of the 3,797,561 shares of
common stock held by IBM ($56.5 million), and to a decrease in
interest income related to long-term accounts receivable.

  As part of the Company's repurchase of 2,278,537 of the 3,797,561
shares of its common stock held by IBM, at a price of $24.77 per
share, the Company liquidated a portion of its marketable
securities.  The Company incurred a loss on the sale of securities
of approximately $.8 million related directly to the repurchase
during May 1994 (see Note 6 of Notes to Consolidated Financial
Statements).

  Interest expense and other charges increased $.9 million for the
six months ended June 30, 1994 when compared to the corresponding
period in 1993, primarily as a result of the amortization of
discounts associated with long-term restructuring liabilities
recorded at June 30, 1993.  These liabilities are part of
restructuring charges established to recognize as a loss the
planned future abandonment of certain facilities relating to the
restructuring of the Company's health insurance services business
(see Note 13 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).

  The effective income tax (benefit) rate (income taxes expressed
as a percentage of pre-tax income) was 37.4% and (18.6%) for the
six months ended June 30, 1994 and 1993, respectively.  The
effective income tax benefit rate for the 1993 period does not
include the impact of the increase in the highest marginal
corporate tax rate resulting from the enactment of the Omnibus
Budget Reconciliation Act of 1993, since the enactment date (August
10, 1993) was subsequent to June 30, 1993.  The effective tax
benefit rate would have been significantly higher (39.6%) were it
not for the write off of goodwill ($39.4 million) related to the
impairment of the Company's health insurance systems business (see
Note 13 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).  The effective tax rate for the six months ended June
30, 1994 includes the impact of the increase (1%) in the highest
marginal corporate tax rate.

<PAGE> 20

                     LIQUIDITY AND CAPITAL RESOURCES 

                                        June 30,     December 31,
                                          1994            1993   
Cash and equivalents, marketable             (In Millions)
  securities, and investments           $112.6         $156.8
Current assets                           235.4          287.7
Current liabilities                       69.1           81.0
Working capital                          166.3          206.7

                                         June 30,      June 30,
                                          1994           1993   
                                             (In Millions)
Cash provided by operations             $ 47.3         $ 38.3
Cash provided by investing  
  activities                              13.1           46.5
Cash used for financing activities       (61.2)         (51.1)

  The Company's financial condition remained strong at  June 30,
1994.  Working capital was $166.3 million, including cash, cash
equivalents and marketable securities of $106.1 million, and
excluding $6.5 million of long-term investments.  Cash, cash
equivalents, marketable securities and investments were $112.6
million at June 30,  1994 as compared to $156.8 million at December
31, 1993, a net decrease of $44.2 million, resulting primarily from 
the repurchase in May 1994 of 2,278,537 of the 3,797,561 shares of
common stock held by IBM for $56.5 million, and to a lesser extent
unrealized holding losses on marketable securities.  The decreases
were partially offset by an increase in cash generated by
operations.

  The increase in net cash generated by operations of $9.0 million
for the six months ended June 30, 1994 compared with the
corresponding period in 1993 was primarily attributable to a
decrease of $9.6 million in income taxes paid.

  The Company recorded, at June 30, 1993, impairment charges to
reduce the carrying value of certain identifiable intangible assets
and goodwill related to its health insurance services business of
$54.9 million.  Due to this impairment and write-down, the Company
decided to restructure this business and take a restructuring
charge of $25.2 million as of June 30, 1993.  Costs to restructure
the health business are composed of $5.2 million associated with
employee severance and outplacement, and $20.0 million related to
an ongoing lease obligation and/or termination for the planned
future abandonment of certain leased office facilities (see Note 13
of Notes to Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993). 
Cash outlays with respect to the restructuring charges were $8.8
million for the six months ended June 30, 1994.  Cash outlays are
expected to be approximately $3.5 million for the remainder of
1994.

  During the six months ended June 30, 1994, the Company reduced
its liabilities for accrued restructuring charges by $7.5 million 

<PAGE> 21

($8.3 million in cash outlays, less $.8 million in non-cash
discount amortization) for a lease termination and $.3 million
(primarily cash) for employee severance and outplacement costs. 
Additionally, the Company adjusted its restructuring liability
established for employee severance and outplacement costs downward
by $1.7 million.  This decrease resulted from changes in the
planned downsizing of its health staff.

  Excluding short-term investments, net cash provided by investing
activities declined in the first six months of 1994 compared with
the corresponding period in 1993.  During the first six months of
1994, net cash used for investments included $6.1 million compared
to $29.6 million for the first six months of 1993 that was invested
in data processing, communications equipment and office furniture
and equipment.  Approximately $25.3 million of the amount expended
in 1993 was for upgrading data processing and communications
equipment.  Amounts capitalized for internal software development
increased $6.4 million (55.7%) to $17.9 million for the first six
months of 1994 compared to $11.5 million for the corresponding
period in 1993, due primarily to the development of life systems
based on the business functions of CYBERTEK software and the
process of integrating CYBERTEK functionality into certain existing
Series III applications.
           
  Significant expenditures anticipated for the remainder of 1994,
excluding any possible business acquisitions and stock repurchases,
are as follows:  acquisition of data processing, communications
equipment and office furniture, fixtures and equipment ($7.3
million); costs relating to the internal development of software
systems ($17.9 million); and debt payments relating to past
business acquisitions ($2.4 million).

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



<PAGE> 22
                  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
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> 23

                                  PART II
                             OTHER INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION


Item 1. Legal Proceedings

        See Note 3, "Contingencies" of Notes to the 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 June 30, 1994.

<PAGE> 24

                   POLICY MANAGEMENT SYSTEMS CORPORATION


                                SIGNATURES


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


                   POLICY MANAGEMENT SYSTEMS CORPORATION
                               (Registrant)



                                        
Date:  August 4, 1994                  By:  Timothy V. Williams
                                            Executive Vice President
                                            (Chief Financial Officer)
[{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 59817}]
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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 June 30, 1994         Commission file number 0-10175

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

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

One PMS Center (P.O. Box Ten)
Blythewood, S.C. (Columbia, S.C.)                             29016 (29202)
(Address of principal executive                                 (Zip Code) 
  offices)

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

Yes           No   X   

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

  20,358,484 Common shares, $.01 par value, as of July 31, 1994

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, 1993.
2
                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                   INDEX

PART I. FINANCIAL INFORMATION                                PAGE

  Item 1. Financial Statements

          Consolidated Statements of Operations for 
            the three and six months ended June 30, 1994 
            and 1993.......................................... 3

          Consolidated Balance Sheets as of 
            June 30, 1994 and December 31, 1993............... 4

          Consolidated Statements of Cash Flows for
            the six months ended June 30, 1994 and 1993....... 5

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

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

PART II. OTHER INFORMATION

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

  Item 6. Exhibits and Reports on Form 8-K....................23 

Signatures....................................................24
3
                                   PART I
                           FINANCIAL INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF OPERATIONS

                                         Three Months          Six Months
                                         Ended June 30,       Ended June 30,
                                        1994       1993       1994      1993  
                                          (Unaudited)     (Unaudited) (Note 1)
                                        (In Thousands, Except Per Share Data)
Revenues:
  Licensing.......................... $ 23,521  $ 23,100   $ 39,991  $ 42,955
  Services...........................  101,220    93,608    200,692   192,968
                                       124,741   116,708    240,683   235,923
 
Costs and Expenses: 
  Employee compensation & benefits...   44,872    44,658     89,842    84,255
  Computer and communications 
    expenses.........................   11,515    10,044     22,712    20,921
  Information services and                                      
    data acquisition costs...........   33,370    35,091     67,826    62,019
  Other operating costs & expenses...   23,029    43,647     40,531    70,143
  Impairment and restructuring 
    charges (credits)................   (1,715)   80,733     (1,715)   80,733
                                       111,071   214,173    219,196   318,071

Operating income (loss)..............   13,670   (97,465)    21,487   (82,148)

Other Income and Expenses:
  Investment income..................    1,849     2,376      3,672     5,705
  Gain/(loss) on sale of marketable
    securities.......................     (802)       97       (819)    3,033
  Interest expense and other
    charges..........................     (824)     (458)    (1,719)     (797)
                                           223     2,015      1,134     7,941

Income (loss) before income tax
  (benefit)..........................   13,893   (95,450)    22,621   (74,207)

Income taxes (benefit)...............    5,295   (21,402)     8,455   (13,784)

Net income (loss).................... $  8,598  $(74,048)  $ 14,166 $ (60,423)

Net income (loss) per share.......... $    .40  $(  3.27)  $    .64 $ (  2.62)

Weighted average number of shares....   21,498    22,662     22,067    23,098

See accompanying notes.
4

                     POLICY MANAGEMENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
(Unaudited)    (Audited)
                                                          June 30,    December 31,
                                                            1994          1993   
                                                             (In Thousands,
                                                           Except Share Data)
Assets
Current assets:
  Cash and equivalents................................... $ 22,484     $ 24,122
  Marketable securities..................................   83,624      132,650
  Receivables, net of allowance for uncollectible 
     amounts of $1,509 ($1,817 at 1993)..................   90,044       92,975
  Income tax receivable..................................   20,586       18,764
  Deferred income taxes..................................    7,352        9,491
  Other..................................................   11,310        9,735
     Total current assets................................  235,400      287,737

Property and equipment, at cost less accumulated
     depreciation and amortization of $116,681
     ($102,623 at 1993)..................................  132,922      139,029
Receivables..............................................      105        4,716
Goodwill and other intangible assets.....................   81,046       85,969
Capitalized software costs...............................  124,750      117,513
Deferred income taxes....................................   14,727       21,585
Investments..............................................    6,500         -           
Other....................................................    3,939        3,254
        Total assets..................................... $599,389     $659,803

Liabilities
Current liabilities:
  Accounts payable and accrued expenses.................. $ 43,590     $ 42,256
  Accrued restructuring charges..........................    1,188        9,521
  Accrued contract termination costs.....................    1,147        2,714
  Current portion of long-term debt......................    4,088        6,986
  Income taxes payable...................................    2,728         -
  Unearned revenues......................................   16,152       19,121
  Other..................................................      216          383
     Total current liabilities...........................   69,109       80,981

Long-term debt...........................................    4,341        5,655
Deferred income taxes....................................   70,890       74,151
Accrued restructuring charges............................   18,517       19,735
Other....................................................    2,151        2,309
     Total liabilities...................................  165,008      182,831
 
Commitments and contingencies (Note 3)

Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares 
   authorized............................................     -             -
Common stock, $.01 par value, 75,000,000 shares 
   authorized, 20,358,484 shares issued and 
   outstanding (22,637,021 at 1993)......................      203          226
Additional paid-in capital...............................  205,635      262,167
Retained earnings........................................  230,798      216,632
Unrealized holding loss on marketable securities.........     (937)         -
Foreign currency translation adjustment..................   (1,318)      (2,053)
     Total stockholders' equity..........................  434,381      476,972
        Total liabilities and stockholders' equity....... $599,389     $659,803
See accompanying notes.
5

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                     Six Months Ended
                                                    June 30,    June 30,
                                                      1994        1993
                                                  (Unaudited)  (Audited)
Operating Activities                                  (In Thousands) 
  Net income/(loss)...............................  $ 14,166   $(60,423)
  Adjustments to reconcile net income/(loss) to 
   net cash provided by operating activities:     
    Depreciation and amortization.................    31,374     33,947
    Deferred income taxes.........................     5,736    (13,776)
    Loss/(gain) on sale of marketable  
      securities..................................       819     (3,034)
    Provision for uncollectible accounts..........       280      1,067
    Impairment charges............................       -       54,890
  Changes in assets and liabilities:
    Accrued restructuring and lease
      termination costs...........................    (8,803)    25,843
    Receivables...................................     7,262     10,048
    Income taxes receivable.......................    (1,822)   (13,426)
    Accounts payable and accrued expenses.........     1,334      4,881
    Income taxes payable..........................     2,728        -
  Other, net......................................    (5,756)    (1,670)
       Cash provided by operations................    47,318     38,347
  
Investing Activities
  Proceeds from sales/maturities of marketable
   securities, net................................   126,710    230,849
  Purchases of marketable securities, net.........   (87,873)  (142,672)
  Acquisition of property and equipment...........    (7,961)   (32,923)
  Capitalized internal software development  
   costs..........................................   (17,890)   (11,544)
  Purchased software..............................      (157)    (3,275)
  Proceeds from disposal of property & equipment..       304      8,935
  Business acquisitions...........................       -       (2,840)
       Cash provided by investing activities......    13,133     46,530 

Financing Activities
  Payments on long-term debt......................    (4,597)    (3,678)
  Issuance of common stock under stock 
    option plans..................................       -          674
  Issuance of common stock to employee             
    benefit plan..................................       -          579
  Repurchase of common stock......................   (56,555)   (48,660)
       Cash used for financing activities.........   (61,152)   (51,085)

Effect of exchange rate changes on cash...........      (937)       174
Net (decrease) increase in cash & equivalents.....    (1,638)    33,966 
Cash and equivalents at beginning of period.......    24,122     31,959
Cash and equivalents at end of period.............  $ 22,484   $ 65,925

Noncash Activities
  Long-term debt arising from and assumed in           
   connection with business acquisition...........  $    -     $  2,987
Supplemental Information
  Interest paid...................................     1,390        381
  Income taxes paid...............................     2,099     11,688

See accompanying notes.
6

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               June 30, 1994

NOTE 1. RESTATEMENT OF PRIOR YEAR RESULTS OF OPERATIONS

  In August 1993, the Company engaged independent accountants to
conduct a special audit of the Company's balance sheet as of
December 31, 1992 and its consolidated financial statements as of
and for the six months ended June 30, 1993.  As a result of this
audit, the Company determined that retained earnings previously
reported as of December 31, 1992 required adjustment.  These
adjustments were due to errors in the application of accounting
principles and subsequent discovery of facts existing at February
26, 1993, the date of the predecessor auditor's report (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, 1993). 

  The Company is in the process of determining the specific periods
affected by the adjustments prior to December 31, 1992.  Once
determined, the Company intends to restate the financial statements
for such periods.  The consolidated financial statements as of and
for the six months ended June 30, 1993 reflect adjustments, related
to deferral of revenues due to changes in timing of revenue
recognition, reserve for losses on certain contracts and a
reduction of expenses due to capitalization of certain software
costs, that the Company determined were necessary as a result of
the special audit.

NOTE 2. MARKETABLE SECURITIES

  Effective January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," ("FAS
115").  In accordance with the provisions of FAS 115, the Company
has classified debt securities (primarily municipal bonds) either
as available-for-sale, which are carried at fair market value and
shown as Marketable Securities, or as held-to-maturity, which are
carried at amortized cost and shown as Investments.  Unrealized
gains and losses on securities classified as available-for-sale are
reported net and are included in Stockholders' Equity.
7

NOTE 3.  CONTINGENCIES

  In April 1993, litigation was commenced against the Company and
certain of its present and former officers and directors in the
United States District Court for the District of South Carolina,
Columbia Division.  In the litigation, which purports to be a class
action on behalf of purchasers of the Company's common stock
between March 18, 1992 and July 8, 1993, the plaintiffs allege that
the Company failed to prepare its financial statements in
accordance with generally accepted accounting principles and
omitted to disclose certain information regarding, among other
things, its business and prospects in violation of the Federal
securities laws, the South Carolina Code and common law.  The
Company believes it has meritorious defenses to the claims and is
vigorously defending the litigation.  The plaintiffs seek
unspecified compensatory damages, legal fees and litigation costs.
The Company is unable to predict the outcome or the potential
financial impact of this litigation. The maximum insurance
coverage related to these claims is $15 million under the
directors' and officers' insurance.

  In June 1993, the Securities and Exchange Commission ("SEC")
commenced a formal investigation into possible violations of the
Federal securities laws in connection with the Company's public
reports and financial statements, as well as trading in the
Company's securities.  The SEC has issued a formal order of
investigation which provides the SEC staff with the power to
subpoena documents and to compel testimony in connection with their
investigation. The Company is cooperating with the SEC in
connection with the investigation.

  In addition to the litigation noted above, the Company is
presently involved in litigation and a contract dispute arising out
of the Company's change in the direction of its future life
software systems development following the acquisition of CYBERTEK. 
The Company believes it has meritorious defenses and is vigorously
defending this litigation.  The Company is unable to predict the
ultimate outcome or the potential financial impact of this
litigation.  While the resolution of these matters could affect the
results of operations in a future period, the Company does not
expect these matters to have a material adverse effect on its
consolidated financial position.

NOTE 4. INCOME TAXES

  In 1992, the Internal Revenue Service completed an examination
of the Company's consolidated federal income tax returns for the
years 1985 through 1988 and has proposed certain adjustments to
income and credits that result in proposed tax deficiencies in the
amount of $17,785,000 for those years.  The Company believes that
8

its judgment in the areas for which adjustments have been proposed
has been appropriate and is contesting the proposed adjustments. 
The Company believes that adequate amounts of federal income taxes
are provided in the consolidated financial statements.

NOTE 5.  IMPAIRMENT AND RESTRUCTURING

  The Company recorded, at June 30, 1993, impairment charges to
reduce the carrying value of certain identifiable intangible assets
and goodwill related to its health insurance services business of
$54.9 million and restructuring charges of $25.2 million associated
with employee severance and outplacement ($5.2 million), and 
related to an ongoing lease obligation and/or termination for the
planned future abandonment of certain leased office facilities
($20.0 million) (see Note 13 of Notes to Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993).  At June 30, 1994 the Company reduced its
restructuring reserves by $1.7 million, which were established for
employee severance and outplacement costs in connection with the
downsizing of its health staff.

NOTE 6. OTHER MATTERS

  The Company recently received a decision from an international
arbitration tribunal relating to a contract termination dispute, 
finding that both parties were responsible. The Company has not
determined whether it will appeal this decision but has made
provision for satisfaction of this award in the amount of $1.9
million.

  As previously reported, the Company announced on April 27, 1994, 
that it had agreed with IBM to repurchase 2,278,537 of the
3,797,561 shares of the Company's common stock held by IBM and that
the remainder of the Company's shares owned by IBM would be
purchased by the General Atlantic Partners group, a New York-based
private investment firm.  The Company completed the repurchase of
these shares at a share price of $24.77, which approximated an
aggregate cash expenditure of $56.5 million, during the second
quarter of 1994.  The shares repurchased by the Company represent
10% of its total shares outstanding prior to the repurchase.

  Pursuant to a stock repurchase program approved by the Board of
Directors in June 1994, the Company may purchase from time to time
up to 2.5 million shares of its issued and outstanding common
stock.  This program is flexible as to the timing and method of
acquisition of these shares.
9

                   POLICY MANAGEMENT SYSTEMS CORPORATION

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

  The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding
of the Company's consolidated results of operations and financial
condition.  The discussion should be read in conjunction with the
consolidated financial statements and notes thereto contained in 
Part I of this report on Form 10-Q and with the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.

                           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:
1994   vs   1993
                                                                    Percent Increase
                                                                       (Decrease)    
                                Percentage         Percentage       Three      Six 
                               of Revenues        of Revenues       Months    Months
                               Three Months        Six Months       Ended     Ended 
                              Ended June 30,     Ended June 30,    June 30,  June 30,
                              1994      1993     1994      1993
Revenues:
Licensing...................  18.9      19.8     16.6      18.2      1.8      (6.9)
Services....................  81.1      80.2     83.4      81.8      8.1       4.0 
                             100.0     100.0    100.0     100.0      6.9       2.0
Costs and Expenses:
Employee compensation
    and benefits............  36.0      38.3     37.3      35.7       .5       6.6
Computer & communication
    expense.................   9.2       8.6      9.5       8.9     14.6       8.6
Information services & data
    acquisition costs.......  26.7      30.0     28.2      26.3     (4.9)      9.4 
Other operating costs
    and expenses............  18.5      37.4     16.8      29.7    (47.2)    (42.2) 
Impairment and restructuring
    charges (credits).......  (1.4)     69.2      (.7)     34.2   (102.1)   (102.1)
                              89.0     183.5     91.1     134.8     47.6      30.7

Operating income (loss).....  11.0     (83.5)     8.9     (34.8)   114.0     126.2 
Other income and expenses...    .1       1.7       .5       3.4    (88.9)    (85.7)

Income (loss) before income
    tax (benefit)...........  11.1     (81.8)     9.4     (31.4)   114.6     130.5

Income taxes (benefit)......   4.2      18.3      3.5       5.8    124.7     161.3

Net income (loss)...........   6.9     (63.5)     5.9     (25.6)   111.6     123.4
10

THREE MONTHS COMPARISON

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

                                                                Operating 
                                             Operating         Income as a
                             Revenues         Income          % of Revenue  
                           Three Months     Three Months       Three Months
                          Ended June 30,   Ended June 30,     Ended June 30,
                          1994     1993    1994     1993      1994     1993
                                        (Dollars in Millions)
  Line of Business   
Property & Casualty     $ 88.2   $ 92.7   $13.5    $14.9      15.3     16.0
Life                      30.0     14.9     2.8     (5.0)      9.3    (31.5)
Health                     6.5      9.1     1.3     (3.1)     19.4    (34.4)

  Geographic Market  
United States           $107.2   $102.8   $16.1    $ 4.5      15.0      4.4
International             17.5     13.9     1.5      2.3       8.8     16.5 

  The above table does not include an allocation of revenues and
costs associated with corporate activities such as equipment sales,
financial services, legal and other general corporate activities. 
There were no equipment sales during the three months ended June
30, 1994 or 1993. Costs associated with these corporate activities
amounted to $3.9 million and $6.0 million, excluding special
charges, for the three months ended June 30, 1994 and 1993,
respectively (see Costs and Expenses below).

Revenues

  Total licensing revenues for the three months ended June 30, 1994
increased $.4 million (1.8%) compared to the corresponding period
in 1993, due primarily to a $4.4 million increase in initial
license revenues attributable to new systems licensed by life
insurers and by increased revenues from continuing monthly license
charges for maintenance, enhancements and services availability
("MESA") and for continuing right-to-use licenses of $1.9 million
(17.0%).  These increases were partially offset by a reduction in
initial license revenues, compared with the 1993 second quarter,
related to the property and casualty business in the United States.

  Total services revenues for the three months ended June  30, 1994
increased $7.6 million (8.1%) compared to the corresponding period
in 1993.  The total services revenue increase was affected by
activities in professional, outsourcing and information services,
as described more fully below.

  Revenues from professional services increased $5.4 million
(39.0%) to $19.2 million for the three months ended June 30, 1994
from $13.8 million for the corresponding period in 1993, due 
primarily to additional services ($5.0 million) generated by the
11

life insurance services business.

  Revenues from outsourcing services amounted to $32.0 million for
the three months ended June 30, 1994, an increase of $1.4 million
(4.7%) compared to the corresponding period in 1993.  Revenues from
outsourcing services increased $9.5 million as a result of new
outsourcing services relating to life insurance services in Europe
and servicing existing and new contracts with property and casualty
insurance companies and residual markets.  These increases were
partially offset by the wind-down of the New Jersey Market
Transition Facility (MTF) project, where revenues from this
property and casualty contract decreased from $5.5 million for the
three months ended June 30, 1993 to $.7 million for the three
months ended June 30, 1994, and to the termination of a facilities
management and processing contract in September 1993, representing
$3.3 million of life insurance services business in Europe for the
three months ended June 30, 1993.  

  Revenues from information services were $49.4 million for the
three months ended June 30, 1994 as compared with $50.0 million 
for  the corresponding period in 1993.  This $.6 million decrease
is attributable to a decrease in business associated with
automobile property and casualty information services, principally
as a result of a sale of a small non-strategic division.  These
decreases, however, were partially offset by  an increase in life
and health information services.

Costs and Expenses

  Computer and communications expenses increased $1.5 million for
the three months ended June 30, 1994 compared to the corresponding
period in 1993, primarily as a result of increased costs associated
with the acquisition of CYBERTEK Corporation in August 1993, and
the acquisition of a data center, including its workforce, in
Bergen, Norway in December 1993.

  Information services and data acquisition costs decreased $1.7
million for the three months ended June 30, 1994 compared to the
corresponding period in 1993, due primarily to a decrease in the
volume of state fees for motor vehicle reports, which is part of
the Company's property and casualty information services business.

  Other operating costs and expenses for the three months ended
June 30, 1994 decreased $20.6 million when compared to the
corresponding period in 1993. The decrease is primarily
attributable to one-time charges in 1993 related to early project
terminations, the deductible under the Company's Directors' and
Officers' liability insurance policy in response to shareholder
litigation, cost overruns on certain projects and other charges
arising from the Company's previously disclosed internal 
investigation of its accounting practices.  Certain of these
12

charges, $16.0 million, were recorded during the three months ended
June 30, 1993.  In addition to these charges, other operating costs
and expenses declined as a result of a decrease in costs associated
with the wind-down of the New Jersey MTF project, a decrease
associated with the recovery of certain receivables previously
written off, and an increase in amounts capitalized principally
related to the internal development of the Company's life software
systems.  These decreases were partially offset by increases in
operating costs associated with providing total policy management
outsourcing services for new customers. 

  Other operating costs and expenses include a charge of $1.9
million associated with the recent settlement of a contract
dispute, which was decided through an international arbitration
tribunal (see Note 6 of Notes to Consolidated Financial
Statements).

  At June 30, 1994 the Company reduced its restructuring reserves
by $1.7 million, which were established for employee severance and
outplacement costs in connection with the downsizing of its health
staff.  The Company recorded, at June 30, 1993, impairment charges
to reduce the carrying value of certain identifiable intangible
assets and goodwill related to its health insurance services
business of $54.9 million and restructuring charges of $25.2
million associated with employee severance and outplacement ($5.2
million), and related to an ongoing lease obligation and/or
termination for the planned future abandonment of certain leased
office facilities ($20.0 million) (see Note 13 of Notes to
Consolidated Financial Statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 1993).  

Operating Income

    Operating income was $13.7 million for the three months ended
June 30, 1994, compared with an operating loss of $97.5 million for
the corresponding period in 1993.  The operating loss for the three
months ended June 30, 1993 was after giving effect to special
charges of $98.3 million relating to impairment and restructuring
charges ($80.7 million) and charges principally arising from the
Company's previously disclosed internal investigation of its
accounting practices ($17.6 million).

  Operating income, excluding impairment and restructuring charges
(credits) and other special charges, as a percentage of revenues
increased to 9.6% for the three months ended June 30, 1994 from .7%
for the comparable period in 1993.  This increase resulted
primarily from an increase in life insurance services in Europe,
professional and outsourcing services provided under existing and
new contracts with property and casualty insurance companies and
residual markets, and to an increase in initial license revenues 
from the Company's life insurance systems business.
13

  The Company's health insurance services business continues to
show some improvement.  Improvements result from a reduction in
operating costs associated with the reduction in amortization
charges for certain identifiable intangible assets and goodwill,
which were written-off at June 30, 1993, a reduction in rental
expense related to a lease termination and compensation and other
benefits costs through the downsizing of staff.

  The property and casualty insurance software and services
business experienced a lower level of revenue primarily from
decreased licensing activities and information services during the
three months ended June 30, 1994 compared to the corresponding
period of 1993.  However, operating income improved from the first
quarter of 1994 as a result of improvement in outsourcing revenues
related to total policy management services.

  Although the Company has not been able to reduce its operating
expenses, associated with the wind-down of the MTF project, as
quickly as the reduction in revenue from the MTF occurred, 
operating income from services provided under additional new
outsourcing contracts with insurance companies and residual markets
have started to replace operating income lost from the MTF project. 
Revenues for the three months ended June 30, 1994 increased $2.6
million compared to the corresponding period in 1993; however,
margins will be reduced during the early phases of these contracts
due to start-up costs.

  The information services business for both the property and
casualty and the life and health businesses produced improved
operating results for the three months ended June 30, 1994 
compared with the corresponding period in 1993.  The Company is
attempting to direct more of its information services business into
database products and life and health information services where
margins are generally higher.  The Company typically realizes a
lower gross margin from property and casualty information services
than from software products and related services.  

  In August 1993, the Company completed its acquisition of CYBERTEK
Corporation. The Company continues to focus on integrating
CYBERTEK's products with the Company's Series III applications and
technology.  The Company has also completed the combination of
CYBERTEK with the Company's life insurance software and services
organization to eliminate redundancies.  Although ongoing expenses
of combination continued at a high level in the second quarter,
total revenues and operating income for the Company's life business
increased $15.1 million and $12.4 million, respectively, for the
three months ended June 30, 1994, compared to the corresponding
period in 1993, due primarily to the CYBERTEK acquisition, the
addition of a new outsourcing contract in Europe during December
1993, and to increased initial license revenues.

  Investment income decreased $.5 million during the three months
ended June 30, 1994, compared to the corresponding period in 1993,
14

as a result of a lower level of investable funds resulting from
large cash expenditures for the acquisition of CYBERTEK Corporation
($59.7 million) in August 1993,  the repurchase in April 1993 of
970,668 shares of the Company's common stock ($48.7 million), the
repurchase in May 1994 of 2,278,537 of the 3,797,561 shares of
common stock held by IBM ($56.5 million), and to a decrease in
interest income related to long-term accounts receivable.

  As part of the Company's repurchase of 2,278,537 of the 3,797,561
shares of its common stock held by IBM, at a price of $24.77 per
share, the Company liquidated a portion of its marketable
securities.  The Company incurred a loss on the sale of securities
of approximately $.8 million related directly to the repurchase
during the second quarter of 1994 (see Note 6 of Notes to
Consolidated Financial Statements).

  Interest expense and other charges increased $.4 million for the
three months ended June 30, 1994 when compared to the corresponding
period in 1993, primarily as a result of the amortization of
discounts associated with long-term restructuring liabilities
recorded at June 30, 1993.  These liabilities are part of
restructuring charges established to recognize as a loss the
planned future abandonment of certain facilities relating to the
restructuring of the Company's health insurance services business
(see Note 13 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).

  The effective income tax (benefit) rate (income taxes expressed
as a percentage of pre-tax income) was 38.1% and (22.4)% for the
three months ended June 30, 1994 and 1993, respectively.  The 
effective income tax benefit rate for the 1993 period does not
include the impact of the increase in the highest marginal
corporate tax rate resulting from the enactment of the Omnibus
Budget Reconciliation Act of 1993, since the enactment date (August
10, 1993) was subsequent to June 30, 1993.  The effective tax
benefit rate would have been significantly higher (38.2%) were it
not for the write off of goodwill ($39.4 million) related to the
impairment of the Company's health insurance systems business (see
Note 13 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).  The effective tax rate for the three months ended June
30, 1994 includes the impact of the increase (1%) in the highest
marginal corporate tax rate.
15

SIX MONTHS COMPARISON

  A comparison of revenues and operating income for each line of
business and geographic market for the periods presented is as
follows:
                                                               Operating
                                             Operating        Income as a
                            Revenues          Income          % of Revenue 
                           Six Months        Six Months        Six Months
                         Ended June 30,    Ended June 30,    Ended June 30, 
                          1994     1993    1994      1993    1994      1993
                                       (Dollars in Millions)
  Line of Business   
Property & Casualty     $167.8   $179.8   $20.7     $30.8    12.4      17.2
Life                      57.1     33.7     3.4      (5.3)    6.0     (15.7)
Health                    15.8     18.6     3.8      (5.2)   23.8     (28.0)

  Geographic Market  
United States           $206.5   $203.7   $24.8     $15.8    12.0       7.8
International             34.2     28.4     3.1       4.5     9.2      14.2

  The above table does not include an allocation of revenues and
costs associated with corporate activities such as equipment sales,
financial services, legal and other general corporate activities. 
Revenues related to equipment sales amounted to $3.8 million for
the six months ended June 30, 1993.  There were no equipment sales
during the corresponding period of 1994.  Costs associated with
these corporate activities amounted to $6.4 million and $7.4
million, excluding special charges, for the six months ended June
30, 1994 and 1993, respectively (see Costs and Expenses below).

Revenues

  Total licensing revenues for the six months ended June 30, 1994
decreased $3.0 million (6.9%) compared to the corresponding period
in 1993, due primarily to a $6.1 million decrease in initial
license revenues.  The reduction in  systems licensed was primarily
related to the property and casualty business in the United States,
partially offset by systems licensed by life insurers. The
reduction in initial license revenues was partially offset by
increased revenues from continuing monthly license charges for
maintenance, system enhancements and services availability ("MESA")
and for continuing right-to-use licenses of $3.1 million (13.6%)
compared to the corresponding period in 1993. 

  Total services revenues for the six months ended June  30, 1994
increased $7.7 million (4.0%) compared to the corresponding period
in 1993.  The total services revenue increase was primarily
affected by activities in professional, outsourcing and information
services, as described more fully below.

  Revenues from professional services increased $9.7 million
(31.5%)  to $40.6 million for the  six months ended June 30, 1994
16

from $30.9 million for the corresponding period in 1993, due
primarily to additional services ($8.9 million) generated by the
life insurance services business.

  Revenues from outsourcing services were $61.0 million for the six
months ended June 30, 1994, a decrease of $5.0 million (7.6%)
compared to the corresponding period in 1993.  The decrease was
primarily attributable to the wind-down of the New Jersey Market
Transition Facility (MTF) project, where revenues from this
property and casualty business decreased from $15.1 million for the 
first six months in 1993 to $1.6 million for the first six months
in 1994, and to the termination of a facilities management and
processing contract in September 1993, representing $6.8 million of
life insurance services revenue in Europe for the six months ended
June 30, 1993.  These decreases were partially offset by an
increase of $15.3 million, resulting primarily from an increase of
$5.1 million in new outsourcing services relating to life insurance
services in Europe and an increase of $9.0 million in servicing
existing and new contracts with property and casualty insurance
companies and residual markets.

  Revenues from information services were $98.4 million for the six
months ended June 30, 1994 as compared with $92.9 million for  the
corresponding period in 1993.  This $5.5 million increase is
primarily attributable to an increase in business associated with
automobile property and casualty information services and life and
health information services.  These increases, however, were
partially offset by a reduction in property and casualty
information services revenue associated with risk services.

Costs And Expenses

  Employee compensation and benefits increased $5.6 million for the
six months ended June 30, 1994 compared to the corresponding period
in 1993, primarily as a result of increased costs ($9.8 million)
associated with the acquisition of CYBERTEK Corporation in August
1993, and the acquisition of a data center, including its
workforce, in Bergen, Norway.  The increase in costs associated
with these acquisitions was partially offset by a reduction in
compensation and other benefits resulting from a downsizing in the
Company's health insurance services staff from 437 at June 30, 1993
to approximately 288 at June 30, 1994.  These scheduled staff
reductions are part of the Company's restructuring of its health
business (see Note 13 of Notes to Consolidated Financial Statements
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993).

   Computer and communications expenses increased $1.8 million for
the six months ended June 30, 1994 compared to the corresponding
period in 1993, primarily as a result of increased costs associated
with the acquisition of CYBERTEK Corporation in August 1993, and
the acquisition of a data center, including its workforce, in
Bergen, Norway.
17

  Information services and data acquisition costs increased $5.8
million for the six months ended June 30, 1994 compared to the
corresponding period in 1993, due primarily to an increase in the
volume of state fees for motor vehicle reports, which is part of
the Company's property and casualty information services business.

  Other operating costs and expenses for the six months ended June
30, 1994 decreased $29.6 million when compared to the corresponding
period in 1993.  The decrease is primarily attributable to charges
related to early project terminations, the deductible under the
Company's Directors' and Officers' liability insurance policy in
response to shareholder litigation, cost overruns on certain
projects and other charges arising from the Company's previously
disclosed internal investigation of its accounting practices. 
These charges, $16.4 million, were recorded during the six months
ended June 30, 1993.  In addition to these charges, other operating
costs and expenses declined as a result of a reduction in the cost
of equipment sold of $3.5 million, a decrease in costs associated
with the wind-down of the New Jersey MTF project, a decrease
associated with the recovery of certain receivables previously
written off, and an increase in amounts capitalized principally
related to the internal development of the Company's life software
systems.  These decreases were partially offset by an increase in
operating costs associated with providing total policy management
outsourcing services for new customers.

  Other operating costs and expenses include a charge of $1.9
million associated with the recent settlement of a contract
dispute, which was decided through an international arbitration
tribunal (see Note 6 of Notes to Consolidated Financial
Statements).

  At June 30, 1994 the Company reduced its restructuring reserves
by $1.7 million, which were established for employee severance and
outplacement costs in connection with the downsizing of its health
staff (see Note 13 of Notes to Consolidated Financial Statements in
the Company's Annual Report on Form 10-K for the year ended
December 31, 1993).

Operating Income

   Operating income was $21.5 million for the six months ended June
30, 1994, compared with an operating loss of $82.1 million for the
corresponding period in 1993.  The operating loss for the six
months ended June 30, 1993 resulted after giving effect to the
special charges of $98.8 million relating to impairment and
restructuring charges ($80.7 million) and other special charges 
($18.1 million).

  Operating income, excluding impairment and restructuring charges 
(credits) and other special charges, as a percentage of revenues
increased to 8.2% for the six months ended June 30, 1994 from 7.0%
for the comparable period in 1993.  This increase resulted
18

primarily from an increase in outsourcing services related to life
insurance services in Europe, professional and outsourcing services
provided under existing and new contracts with property and
casualty insurance companies and residual markets, and to an
increase in initial license revenues from the Company's life
insurance systems business.

  The Company's health insurance services business continues to
show some improvement over the prior year's first six month
results.  Improvements result from a reduction in operating costs
associated with amortization charges for certain identifiable
intangible assets and goodwill, which were written-off at June 30,
1993, a reduction in rental expense related to a lease termination
and compensation and other benefits costs through the downsizing of
staff.  

  The property and casualty insurance software and services
business experienced a lower level of revenue and operating income
primarily from decreased licensing activities and outsourcing
services during the six months ended June 30, 1994 than in the
corresponding periods of 1993.  Outsourcing services for property
and casualty insurers have not met expectations due to several
contracts not closing or ramping up as fast as anticipated  and the
Company has not been able to reduce its operating expenses,
associated with the wind-down of the MTF project, as quickly as the
reduction in revenue from the MTF occurred.  However, as a result
of an increased role in servicing additional new contracts with
insurance companies and residual markets, the Company is beginning
to replace revenues lost from the MTF project, during the six
months ended June 30, 1994.  Margins have improved but will be
reduced during the early phases of these contracts due to start-up
costs.

  The information services business for both the property and
casualty and the life and health businesses produced lower
operating results for the six months ended June 30, 1994  compared
with the corresponding period in 1993.  Margins in the property and
casualty information services business were lower primarily as a
result of an overall decline in inspection usage, while margins in
the life and health information services business were adversely
affected by higher costs.  The Company is attempting to direct more
of its information services business into database products and
life and health information services where margins are generally
higher.  The Company typically realizes a lower gross margin from
property and casualty information services than from software
products and related services.  

  One time costs of integrating CYBERTEK with the Company's life
insurance systems business continued at a high level in the first
six months of 1994; however, total revenues for the Company's life
business were 67.2% higher ($22.6 million) for the six months ended
June 30, 1994, compared to the corresponding period in 1993, due
primarily to the CYBERTEK acquisition, the addition of a new
outsourcing contract in Europe during December 1993, and to
increased initial license revenues.
19

  Investment income decreased $2.0 million for the six months ended
June 30, 1994 compared to the corresponding period in 1993, as a
result of a lower level of investable funds, resulting from large
cash expenditures for the acquisition of CYBERTEK Corporation
($59.7 million) in August 1993,  the repurchase in April 1993 of
970,668 shares of the Company's common stock ($48.7 million), the
repurchase in May 1994 of 2,278,537 of the 3,797,561 shares of
common stock held by IBM ($56.5 million), and to a decrease in
interest income related to long-term accounts receivable.

  As part of the Company's repurchase of 2,278,537 of the 3,797,561
shares of its common stock held by IBM, at a price of $24.77 per
share, the Company liquidated a portion of its marketable
securities.  The Company incurred a loss on the sale of securities
of approximately $.8 million related directly to the repurchase
during May 1994 (see Note 6 of Notes to Consolidated Financial
Statements).

  Interest expense and other charges increased $.9 million for the
six months ended June 30, 1994 when compared to the corresponding
period in 1993, primarily as a result of the amortization of
discounts associated with long-term restructuring liabilities
recorded at June 30, 1993.  These liabilities are part of
restructuring charges established to recognize as a loss the
planned future abandonment of certain facilities relating to the
restructuring of the Company's health insurance services business
(see Note 13 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).

  The effective income tax (benefit) rate (income taxes expressed
as a percentage of pre-tax income) was 37.4% and (18.6%) for the
six months ended June 30, 1994 and 1993, respectively.  The
effective income tax benefit rate for the 1993 period does not
include the impact of the increase in the highest marginal
corporate tax rate resulting from the enactment of the Omnibus
Budget Reconciliation Act of 1993, since the enactment date (August
10, 1993) was subsequent to June 30, 1993.  The effective tax
benefit rate would have been significantly higher (39.6%) were it
not for the write off of goodwill ($39.4 million) related to the
impairment of the Company's health insurance systems business (see
Note 13 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).  The effective tax rate for the six months ended June
30, 1994 includes the impact of the increase (1%) in the highest
marginal corporate tax rate.
20

                     LIQUIDITY AND CAPITAL RESOURCES 

                                        June 30,     December 31,
                                          1994            1993   
Cash and equivalents, marketable             (In Millions)
  securities, and investments           $112.6         $156.8
Current assets                           235.4          287.7
Current liabilities                       69.1           81.0
Working capital                          166.3          206.7

                                         June 30,      June 30,
                                          1994           1993   
                                             (In Millions)
Cash provided by operations             $ 47.3         $ 38.3
Cash provided by investing  
  activities                              13.1           46.5
Cash used for financing activities       (61.2)         (51.1)

  The Company's financial condition remained strong at  June 30,
1994.  Working capital was $166.3 million, including cash, cash
equivalents and marketable securities of $106.1 million, and
excluding $6.5 million of long-term investments.  Cash, cash
equivalents, marketable securities and investments were $112.6
million at June 30,  1994 as compared to $156.8 million at December
31, 1993, a net decrease of $44.2 million, resulting primarily from 
the repurchase in May 1994 of 2,278,537 of the 3,797,561 shares of
common stock held by IBM for $56.5 million, and to a lesser extent
unrealized holding losses on marketable securities.  The decreases
were partially offset by an increase in cash generated by
operations.

  The increase in net cash generated by operations of $9.0 million
for the six months ended June 30, 1994 compared with the
corresponding period in 1993 was primarily attributable to a
decrease of $9.6 million in income taxes paid.

  The Company recorded, at June 30, 1993, impairment charges to
reduce the carrying value of certain identifiable intangible assets
and goodwill related to its health insurance services business of
$54.9 million.  Due to this impairment and write-down, the Company
decided to restructure this business and take a restructuring
charge of $25.2 million as of June 30, 1993.  Costs to restructure
the health business are composed of $5.2 million associated with
employee severance and outplacement, and $20.0 million related to
an ongoing lease obligation and/or termination for the planned
future abandonment of certain leased office facilities (see Note 13
of Notes to Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993). 
Cash outlays with respect to the restructuring charges were $8.8
million for the six months ended June 30, 1994.  Cash outlays are
expected to be approximately $3.5 million for the remainder of
1994.

  During the six months ended June 30, 1994, the Company reduced
its liabilities for accrued restructuring charges by $7.5 million
21

($8.3 million in cash outlays, less $.8 million in non-cash
discount amortization) for a lease termination and $.3 million
(primarily cash) for employee severance and outplacement costs. 
Additionally, the Company adjusted its restructuring liability
established for employee severance and outplacement costs downward
by $1.7 million.  This decrease resulted from changes in the
planned downsizing of its health staff.

  Excluding short-term investments, net cash provided by investing
activities declined in the first six months of 1994 compared with
the corresponding period in 1993.  During the first six months of
1994, net cash used for investments included $6.1 million compared
to $29.6 million for the first six months of 1993 that was invested
in data processing, communications equipment and office furniture
and equipment.  Approximately $25.3 million of the amount expended
in 1993 was for upgrading data processing and communications
equipment.  Amounts capitalized for internal software development
increased $6.4 million (55.7%) to $17.9 million for the first six
months of 1994 compared to $11.5 million for the corresponding
period in 1993, due primarily to the development of life systems
based on the business functions of CYBERTEK software and the
process of integrating CYBERTEK functionality into certain existing
Series III applications.
           
  Significant expenditures anticipated for the remainder of 1994,
excluding any possible business acquisitions and stock repurchases,
are as follows:  acquisition of data processing, communications
equipment and office furniture, fixtures and equipment ($7.3
million); costs relating to the internal development of software
systems ($17.9 million); and debt payments relating to past
business acquisitions ($2.4 million).

  The Company has historically used the cash generated from
operations for the following:  development and acquisition of new
products, acquisition of businesses and repurchase of the Company's
stock.  The Company anticipates that it will continue to use its
cash for all of these purposes in the future and that projected
cash from operations and cash and investment reserves will be able
to meet presently anticipated needs;  however, the Company may also
consider incurring debt as needed to accomplish specific objectives
in these areas and for other general corporate purposes.
22
                  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
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.
23

                                  PART II
                             OTHER INFORMATION

                   POLICY MANAGEMENT SYSTEMS CORPORATION

Item 1. Legal Proceedings

        See Note 3, "Contingencies" of Notes to the 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 June 30, 1994.
24

                   POLICY MANAGEMENT SYSTEMS CORPORATION

                                SIGNATURES

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

                   POLICY MANAGEMENT SYSTEMS CORPORATION
                               (Registrant)

                                        
Date:  August 4, 1994                  By:  Timothy V. Williams
                                            Executive Vice President
                                            (Chief Financial Officer)